REEVES HOLDINGS INC, S-1/A, 1994-06-09

REEVES HOLDINGS INC
S-1/A, 1994-06-09

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1994

REGISTRATION NO. 33-52919

AMENDMENT NO. 1
TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
REEVES HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3069 57-0994551
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

HIGHWAY 29 SOUTH
P.O. BOX 1898
SPARTANBURG, SOUTH CAROLINA 29304
(803) 576-1210
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

AUGUSTUS I. DUPONT, ESQ.

1120 BOSTON POST ROAD
DARIEN, CONNECTICUT 06820
(203) 655-6855
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------
COPIES TO:

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<S> <C>
Louis J. Bevilacqua, Esq. John J. Schuster, Esq.
Frederick C. Rieck, Esq. Cahill Gordon & Reindel
Cadwalader, Wickersham & Taft 80 Pine Street
100 Maiden Lane New York, New York 10005
New York, New York 10038 (212) 701-3000
(212) 504-6000
</TABLE>

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. / /
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT 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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<CAPTION>
S-1 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
- ----------------------------------------------------------------- ------------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside Facing Page; Outside Front Cover Page
Front Cover Page of Prospectus.......................
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages
Prospectus...........................................
3. Summary Information, Risk Factors and Ratio of Prospectus Summary; Investment Considerations; The
Earnings to Fixed Charges............................ Issuer and the Company; Selected Consolidated
Financial Data
4. Use of Proceeds....................................... Use of Proceeds
5. Determination of Offering Price....................... Not Applicable
6. Dilution.............................................. Not Applicable
7. Selling Security Holders.............................. Not Applicable
8. Plan of Distribution.................................. Underwriting
9. Description of Securities to be Registered............ Outside Front Cover Page; Prospectus Summary;
Description of Debentures
10. Interests of Named Experts and Counsel................ Not Applicable
11. Information with Respect to the Registrant............ Prospectus Summary; Investment Considerations; The
Issuer and the Company; Capitalization; Selected
Consolidated Financial Data; Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Business; Management; Description of
Other Indebtedness; Consolidated Financial State-
ments
12. Disclosure of Commission Position on Indemnification Not Applicable
for Securities Act Liabilities.......................
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute 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.
<PAGE>

SUBJECT TO COMPLETION, DATED JUNE 9, 1994

PROSPECTUS
, 1994

$___________

REEVES HOLDINGS, INC.
% SENIOR DISCOUNT DEBENTURES DUE 2006
The % Senior Discount Debentures due 2006 (the "Debentures") offered
hereby are being issued by Reeves Holdings, Inc., a Delaware corporation (the
"Issuer"). The Issuer was recently formed to hold the capital stock of Reeves
Industries, Inc., a Delaware corporation ("Reeves" or the "Company") and to
issue the Debentures.

The Debentures will mature on , 2006. The Debentures will be
issued at a substantial discount (approximately __%) to their aggregate
principal amount to generate gross proceeds of approximately $100,000,000. See
"Description of Debentures" and "Certain Federal Income Tax Considerations
Concerning The Debentures." The Debentures will accrete at a rate of %,
compounded semi-annually, to an aggregate principal amount of $ by
, 1999. Interest will not accrue on the Debentures prior to
, 1999. Thereafter, interest on the Debentures will accrue at the
rate of % per annum and will be payable in cash semi-annually on
and , commencing , 1999.

The Debentures are not redeemable prior to , 1999, except that
during the first 36 months after the offering the Issuer may redeem up to
one-half in aggregate face amount of the Debentures at the premium to Accreted
Value (as defined) set forth herein with the proceeds of certain issuances of
capital stock; PROVIDED that at least one-half of the aggregate face amount of
Debentures initially issued remains outstanding. After , 1999, the
Debentures will be redeemable at any time at the option of the Issuer, in whole
or in part, at the redemption prices set forth herein, together with accrued
interest, to the date of redemption.

The Debentures will be senior unsecured obligations of the Issuer and will
rank PARI PASSU in right of payment with all senior unsecured indebtedness which
the Issuer may incur. Upon a Change of Control (as defined), holders of the
Debentures will have the right to require the Issuer to repurchase their
Debentures at 101% of the Accreted Value thereof, plus, if occurring after
, 1999, accrued interest, if any, to the date of purchase. There can be
no assurance that the Issuer would have sufficient funds to repurchase the
Debentures upon a Change of Control or be able to obtain sufficient financing to
do so in the capital markets or under its existing credit facilities. See
"Description of Debentures -- Change of Control."

Although the Debentures are titled "Senior," the Issuer has not issued, and
does not have any current arrangements to issue, any indebtedness to which the
Debentures would be senior. All of the Issuer's operating assets are held
through its subsidiaries. As indebtedness of the Issuer, the Debentures will be
effectively subordinated to all indebtedness and other obligations of the
Issuer's subsidiaries. As of April 3, 1994, after giving effect to the repayment
of approximately $11 million of indebtedness with the proceeds of the offering,
consolidated obligations of such subsidiaries, consisting of certain outstanding
indebtedness, trade payables and accrued liabilities, but excluding intercompany
obligations, would have been approximately $172.7 million. See "Description of
Debentures." The Issuer does not intend to apply for listing of the Debentures
on any securities exchange.

SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS WHICH
PROSPECTIVE INVESTORS SHOULD CONSIDER.
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.

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- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNDERWRITING
PRICE DISCOUNTS PROCEEDS
TO THE AND TO THE
PUBLIC(1) COMMISSIONS(2) ISSUER(3)
- ---------------------------------------------------------------------------------------
Per Debenture.......................... % % %
Total.................................. $ $ $
- ---------------------------------------------------------------------------------------
<FN>
(1) PLUS ACCRUED AMORTIZATION OF ORIGINAL ISSUE DISCOUNT, IF ANY, FROM THE DATE
OF ISSUANCE.
(2) SEE "UNDERWRITING" FOR INDEMNIFICATION ARRANGEMENTS WITH THE UNDERWRITERS.
(3) THE ISSUER WILL BE REQUIRED TO PAY EXPENSES OF THE OFFERING ESTIMATED AT
$ .
</TABLE>

The Debentures are offered by the Underwriters, subject to prior sale, when,
as and if delivered to and accepted by the Underwriters and subject to various
prior conditions, including their right to reject orders in whole or in part. It
is expected that delivery of the Debentures will be made in New York, New York
on or about , 1994.

DONALDSON, LUFKIN & JENRETTE MERRILL LYNCH & CO.
SECURITIES CORPORATION
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Issuer has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a registration statement on Form S-1
(together with all amendments, exhibits and schedules thereto, hereinafter
referred to as the "Registration Statement") under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Debentures offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the Rules and Regulations of the Commission. For further
information with respect to the Issuer, the Company and the Debentures offered
hereby, reference is made to the Registration Statement. The Company is, and the
Issuer will be, subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files, or will file, periodic and current reports and other
information with the Commission. The Registration Statement, as well as such
reports and other information, may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and should also be available for inspection and copying
at the regional offices of the Commission located at 500 West Madison Street,
14th Floor, Chicago, Illinois 60661 and 7 World Trade Center, New York, New York
10048. Copies may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.

2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO)
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES,
REFERENCES TO THE "ISSUER" IN THIS PROSPECTUS REFER TO REEVES HOLDINGS, INC.
TOGETHER WITH ITS SUBSIDIARIES AND REFERENCES TO "REEVES" OR THE "COMPANY" REFER
TO REEVES INDUSTRIES, INC. TOGETHER WITH ITS SUBSIDIARIES. ALL OF THE
OUTSTANDING CAPITAL STOCK OF REEVES WILL BE TRANSFERRED TO THE ISSUER PRIOR TO
THE ISSUANCE OF THE DEBENTURES. SINCE REEVES WILL BE THE SOLE SUBSIDIARY OF THE
ISSUER, THE CONSOLIDATED FINANCIAL DATA OF THE ISSUER ARE THOSE OF REEVES.
THE ISSUER AND THE COMPANY

The Issuer, through its subsidiary, Reeves, is a diversified industrial
company with operations in two principal business segments, industrial coated
fabrics, conducted through its Industrial Coated Fabrics Group ("ICF"), and
apparel textiles, conducted through its Apparel Textile Group ("ATG"). In 1993,
ICF contributed approximately 49.6% of the Company's net sales and approximately
73.6% of its operating income and ATG contributed approximately 50.4% of the
Company's net sales and approximately 26.4% of its operating income (in each
case, excluding unallocable corporate expenses). Throughout its businesses, the
Company emphasizes specialty products, product quality, technological
innovation, and rapid responses to the changing needs of its customers.

ICF specializes in the coating of various substrate fabrics with a variety
of products, such as synthetic rubber, vinyl, neoprene, urethane and other
elastomers, to produce a diverse line of products for industrial applications.
ICF's principal products include: (1) a complete line of printing blankets used
in offset lithography, (2) coated automotive airbag materials, (3) specialty
coated fabrics, including fluid control diaphragm materials, tank seals, ducting
materials and coated fabric materials used for military and commercial life
rafts and vests, aircraft escape slides, flexible fuel tanks and general
aviation products, and (4) coated fabrics used in industrial coverings,
including fabrics coated with rubber and vinyl which are used to make
tarpaulins, loading dock shelters and other industrial products.
The Company believes that ICF is one of the world's leading producers of
offset printing blankets and that ICF has the leading share of the domestic
market for coated automotive airbag materials. The Company also believes that
ICF is a leading domestic producer of specialty coated fabrics used for a broad
range of industrial applications. ICF's products generally involve significant
amounts of technological expertise and precise production tolerances. The
Company believes that ICF's product development, formulation and production
methods are among the most sophisticated in the coated fabrics industry.
ATG manufactures, processes and sells specialty textile fabrics to apparel
and other manufacturers. Through its Greige Goods Division, ATG processes raw
materials into greige goods (I.E., undyed woven fabrics). Through its Finished
Goods Division, ATG functions as a converter and commission finisher, purchasing
greige goods from the Greige Goods Division and others and contracting to have
the goods dyed and finished for use in various end-products or dyeing and
finishing the goods itself.
The Company believes that ATG has developed strong positions in niche
markets in the apparel textile industry by offering unique custom-designed
fabrics to leading apparel and specialty garment manufacturers. ATG emphasizes
"short-run" product orders and targets market segments in which its
manufacturing flexibility, rapid response time, superior service and quality and
ability to supply exclusive blends are key competitive factors.
The Company's business strategy has focused on the sale of higher-margin
niche products and the establishment of leading positions in its principal
markets. The Company believes that this strategy, combined with its diverse
product and customer base, the development of new products and substantial
capital investment, has helped the Company increase its sales and profitability
in spite of adverse economic conditions in its U.S. and European markets during
1990-1993.

3
<PAGE>

Since 1991, the Company has significantly increased its level of capital
investment in its businesses to modernize and expand capacity, reduce its
overall cost structure, increase productivity and enhance its competitive
position. The Company intends to substantially increase its capital investment
in its businesses to approximately $140 million during the 1994-1997 period. In
addition, as opportunities arise, the Issuer may seek to augment its growth
through strategic acquisitions, joint ventures and investments in other
industrial companies where the Issuer believes that it can apply its
professional management techniques to enhance a company's operating performance.
The Company regularly reviews acquisition opportunities but is not currently a
party to any agreement, or involved in negotiation of an agreement, with respect
to any material acquisition, joint venture or investment.

THE OFFERING

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<S> <C>
Securities Offered............ $ aggregate principal amount of % Senior Discount
Debentures due 2006.
Maturity Date................. , 2006.
Interest Rate................. The Debentures will accrete at a rate of %, compounded
semi-annually, to an aggregate principal amount of $ by
, 1999. Interest will not accrue on the
Debentures prior to , 1999. Commencing , 1999,
interest on the Debentures will accrue at the rate of %
per annum, payable in cash semi-annually on and
, commencing , 1999.
Original Issue Discount....... For federal income tax purposes, the Debentures will be
treated as having been issued with "original issue discount"
equal to the difference between the issue price of the
Debentures and the sum of all cash payments (whether
denominated as principal or interest) to be made thereon.
Each holder of a Debenture must include in gross income for
federal income tax purposes a portion of such original issue
discount for each day during each taxable year in which a
Debenture is held, whether or not cash interest payments are
made. See "Certain Federal Income Tax Considerations
Concerning the Debentures."
Optional Redemption........... The Debentures will not be redeemable prior to ,
1999, except that during the first 36 months after the
offering made hereby (the "Offering"), the Issuer may redeem
up to one-half in aggregate face amount of the Debentures at
% of Accreted Value with the net proceeds of public
sales of common stock by the Issuer (or of its parent, Hart
Holding Company Incorporated ("Hart Holding"), to the extent
such net proceeds are contributed as a capital contribution
in exchange for capital stock of the Issuer). The Debentures
will be redeemable at the option of the Issuer, in whole or
in part, after , 1999, at the premiums set forth
herein, together with accrued interest, if any, to the date
of redemption.
</TABLE>

4
<PAGE>

<TABLE>
<S> <C>
Ranking....................... The Debentures will be senior unsecured indebtedness of the
Issuer and will rank PARI PASSU in right of payment with all
senior unsecured indebtedness which the Issuer may incur and
senior to any subordinated indebtedness which the Issuer may
incur. The Debentures will be effectively subordinated to
claims of the creditors of the Issuer's subsidiaries,
including the $122.5 million principal amount of 11% Senior
Notes due 2002 of Reeves (the "11% Senior Notes"). As of
April 3, 1994, after giving effect to the repayment of
indebtedness with the proceeds of the Offering, consolidated
obligations of the Issuer's subsidiaries, consisting of
certain indebtedness, trade payables and accrued
liabilities, but excluding intercompany obligations, would
have been approximately $172.7 million.
Change of Control............. Upon a Change of Control (as defined), holders of the
Debentures will have the right to require the Issuer to
purchase the Debentures at a price of 101% of the Accreted
Value thereof, plus, if occurring after , 1999,
accrued interest, if any, to the date of purchase.
Certain Restrictions.......... The indenture pursuant to which the Debentures are issued
(the "Indenture") will restrict the Issuer's ability to
pledge subsidiary stock and, subject to certain exceptions,
the ability of the Issuer and its subsidiaries to incur
additional indebtedness, pay dividends, redeem capital
stock, make certain investments, enter into transactions
with affiliates, merge or consolidate with any other person,
or sell, transfer or lease all or substantially all of their
assets. See "Description of Debentures -- Certain
Covenants."
Use of Proceeds............... Proceeds of the Offering will be used to redeem Reeves'
outstanding 13 3/4% Subordinated Debentures due 2001 (the
"Subordinated Debentures") in the approximate aggregate
principal amount of $11 million. The Issuer intends to use
the balance of the proceeds to fund anticipated capital
expenditures and make investments in other businesses which
may include strategic acquisitions, joint ventures and
investments in other industrial companies. The Company
regularly reviews acquisition opportunities but is not
currently a party to any agreement, or involved in
negotiation of an agreement, with respect to any material
acquisition, joint venture or investment. A portion of the
proceeds may be used from time to time to repay bank debt of
the Company. See "Use of Proceeds."
</TABLE>

5
<PAGE>
REEVES HOLDINGS, INC.
SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, ----------------------
----------------------------------------------------------- MARCH 28, APRIL 3,
1989(1) 1990 1991 1992 1993 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT RATIOS)
STATEMENT OF
OPERATIONS DATA:
Net sales............ $ 257,348 $ 257,859 $ 269,559 $ 271,104 $ 283,653 $ 63,780 $ 72,997
Operating income..... 29,810 24,666 25,626 25,767 28,094 5,810 7,428
Interest expense, net
(2)................. 17,227 18,199 20,709 17,198 16,236 4,122 4,067
Income from
continuing
operations.......... 6,100 5,757 4,544 5,976 7,857 1,388 2,237
Ratio of earnings to
fixed charges (3)... 1.6x 1.3x 1.2x 1.5x 1.7 x 1.4 x 1.8x
OTHER DATA:
EBITDA (4)........... $ 36,040 $ 31,303 $ 32,734 $ 33,883 $ 38,125 $ 8,000 $ 9,736
Capital expenditures
(5)................. 6,718 7,007 11,015 15,788 16,506 2,051 5,686
Depreciation......... 5,090 5,497 5,951 6,776 7,204 1,855 1,973
Ratio of EBITDA to
interest expense,
net................. 2.1x 1.7x 1.6x 2.0x 2.3 x 1.9 x 2.4x
PRO FORMA DATA: (6)
Cash interest
expense, net (7).... $ 10,390 $ 2,599
Interest expense, net
(7)................. 24,001 5,917
Ratio of EBITDA to
cash interest
expense, net........ 3.7 x 3.7x
Ratio of EBITDA to
interest expense,
net................. 1.6 x 1.6x
Ratio of net debt to
EBITDA (8).......... 3.3 x 3.4x
</TABLE>

<TABLE>
<CAPTION>
APRIL 3, 1994
--------------------------
ACTUAL AS ADJUSTED(9)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................... $ 4,829 $ 90,056
Total assets................................................... 208,487 296,899
Total debt (10)................................................ 138,402 227,475
Stockholder's equity........................................... 24,865 24,455
<FN>
- ------------------------
(1) The year ended December 31, 1989 has been restated to reflect the exclusion
of the discontinued operations of the ARA Automotive Group. See Note 3 to
the Consolidated Financial Statements.
</TABLE>

6
<PAGE>

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<S> <C>
(2) Interest expense, net deducts interest income but includes amortization of
financing costs and debt discounts of $1,382, $1,227, $1,280, $1,031 and
$728 for the years ended December 31, 1989, 1990, 1991, 1992 and 1993,
respectively, and $181 and $188 for the quarters ended March 28, 1993 and
April 3, 1994, respectively.
(3) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes,
plus fixed charges. Fixed charges consist of interest on all indebtedness,
which includes amortization of financing costs and debt discounts, and
one-third of all rentals, which is considered representative of the
interest portion included therein, after adjustments for amounts related to
discontinued operations.
(4) EBITDA is income from continuing operations before interest expense, net,
income taxes, depreciation, amortization, and, in 1993, facility
restructuring charges of $1,003 and a reserve for costs related to a
discontinued plant included in corporate expenses of $484. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Issuer has included information concerning EBITDA herein
because it understands that such information is used by certain investors
as one measure of an issuer's historical ability to service debt. EBITDA
should not be considered as an alternative to, or more meaningful than,
earnings from operations or other traditional indications of the Issuer's
operating performance.
(5) Does not include the cost of equipment (leased under operating leases) of
$3.0 million and $5.8 million in 1992 and 1993, respectively.
(6) As adjusted to give effect to the sale of the Debentures offered hereby and
the application of the proceeds to redeem the Subordinated Debentures, pay
related premiums and reinvest the balance of such proceeds in three-month
U. S. Treasury bills (at 4.23%, the rate borne by such instruments as of
May 23, 1994) as if such transactions had occurred as of January 1, 1993
and January 1, 1994.
(7) The following table presents a reconciliation of pro forma interest
expense, net and cash interest expense, net:
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
DECEMBER 31, APRIL 3,
1993 1994
<S> <C> <C>
Historical interest expense and amortization of financing costs and debt
discounts................................................................ $ 16,394 $ 4,085
Historical interest income................................................. (158) (18)
------------- -------
Interest expense, net...................................................... 16,236 4,067
------------- -------
Plus: Amortization of original issue discount and financing costs on the
Debentures......................................................... 12,945 3,145
Less: Interest expense and amortization of financing costs and debt
discount on the Subordinated Debentures............................ (1,575) (394)
Less: Interest income on reinvestment of excess proceeds from the sale of
the Debentures..................................................... (3,605) (901)
------------- -------
Total pro forma adjustments.......................................... 7,765 1,850
------------- -------
Pro forma interest expense, net............................................ $ 24,001 $ 5,917
------------- -------
------------- -------
Less: Amortization of original issue discount and financing costs on the
Debentures......................................................... (12,945) (3,145)
Less: Amortization of financing costs and debt discounts on existing
debt.................................................................... (666) (173)
------------- -------
Pro forma cash interest expense, net....................................... $ 10,390 $ 2,599
------------- -------
------------- -------
<FN>
(8) Net debt is defined as total debt less cash and cash equivalents, in each
case, as adjusted for the use of proceeds from the Offering. For the period
ended April 3, 1994, EBITDA is calculated using the four quarters ended as
of such date. The Issuer has included information concerning the ratio of
EBITDA to net debt herein because it understands that such information is
used by certain
</TABLE>

7
<PAGE>

<TABLE>
<S> <C>
investors as another measure of an issuer's liquidity and its ability to
repay its debt obligations.
This ratio should not be considered as an alternative to, or more
meaningful than, other measures of leverage or liquidity.
(9) As adjusted to give effect to the sale of the Debentures offered hereby,
and the application of the proceeds to redeem the Subordinated Debentures
and pay related premiums as if such transactions had occurred as of April
3, 1994. The adjustments to stockholder's equity consist of the payment of
premiums of $303 and the write-off of financing costs and debt discounts of
$358, net of an income tax benefit of $251 related to the redemption of the
Subordinated Debentures.
(10) Total debt consists of long-term debt, including current portion and
borrowings under the Company's bank loan agreement, as amended (the "Bank
Credit Agreement").
</TABLE>

8
<PAGE>
INVESTMENT CONSIDERATIONS

EFFECT OF HOLDING COMPANY STRUCTURE ON ISSUER'S ABILITY TO FUND DEBT SERVICE
REQUIREMENTS

The Issuer is a holding company which currently derives all of its operating
income from its subsidiaries. The Issuer owns all of the issued capital stock of
Reeves (90% on a fully diluted basis, see "Controlling Stockholder"), which is
its only subsidiary. The Issuer must ultimately rely upon distributions from the
Company or other investments to generate the funds necessary to meet its
obligations, including the payment of principal and interest on the Debentures.
The Bank Credit Agreement and the indenture pursuant to which the 11% Senior
Notes were issued (the "11% Senior Note Indenture") contain restrictions that
could prevent the payment of dividends or other distributions by Reeves to the
Issuer. In addition, the ability of Reeves to make such payments will be subject
to, among other things, applicable state laws. Reeves cannot currently make any
distributions to the Issuer.

The Issuer's status as an intermediate holding company may give rise to
various conflicts of interest inherent in such a structure. The Company may,
subject to applicable law and the operative documents governing Reeves' and the
Issuer's indebtedness, take various actions which might have the effect of
favoring the Company, or creditors of the Company, over creditors of the Issuer,
including holders of the Debentures. For example, any indebtedness incurred by
the Company would be effectively senior to the Debentures. The Company could,
within the foregoing constraints, elect to retain or reinvest earnings in the
Company rather than paying such funds as dividends to the Issuer.

Claims of creditors of the Issuer's subsidiaries, including trade creditors,
will generally have priority as to the subsidiaries' assets over the claims of
the Issuer and the holders of the Issuer's indebtedness. Consequently, the
Debentures are effectively subordinated to the creditors of such subsidiaries.
As of April 3, 1994, after giving effect to the repayment of indebtedness with
the proceeds of the Offering, the consolidated obligations of the Issuer's
subsidiaries, consisting of certain indebtedness, trade payables and accrued
liabilities, but excluding intercompany obligations, would have been
approximately $172.7 million.

EFFECT OF LEVERAGE ON COMPANY'S ABILITY TO FUND DEBT SERVICE REQUIREMENTS

After giving effect to the Offering and the application of the proceeds
therefrom, the Issuer's total consolidated indebtedness on April 3, 1994 would
have been $227.5 million, its stockholder's equity would have been $24.5 million
and its cash and cash equivalents would have been $90.1 million. The degree to
which the Issuer is leveraged could have important consequences to the holders
of the Debentures. Such consequences include the following, any of which could
affect the ability of the Issuer's subsidiaries to make distributions to the
Issuer and the Issuer's ability to make payments with respect to the Debentures:
(1) the Issuer's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or general corporate
purposes may be impaired; (2) a substantial portion of the Issuer's consolidated
cash flow from operations must be dedicated to the payment of interest on
indebtedness; and (3) the Issuer's leverage may make it more vulnerable to
economic downturns and may limit its ability to withstand competitive pressures.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The Indenture will, among other
things, limit the incurrence of additional indebtedness by the Issuer and its
subsidiaries and the issuance of preferred stock by the Issuer's subsidiaries.
However, these limitations are subject to a number of important qualifications.

ABILITY OF CONTROLLING STOCKHOLDER TO ELECT DIRECTORS AND EFFECT CORPORATE
DECISIONS

Hart Holding currently owns 100% of the issued and outstanding common stock
of the Issuer. Therefore, Hart Holding controls all actions requiring
stockholder approval, including the election of directors, ensuring its ability
to control the future direction and management of the Issuer, including
effecting a change of control. James W. Hart beneficially owns 94.6% of Hart
Holding's common stock and holds an option to acquire approximately 10% of the
Company's common stock. See "Management -- Ownership of Common Stock of the
Issuer and Reeves."

9
<PAGE>
CHANGE OF CONTROL

The Indenture will provide that, upon the occurrence of any Change of
Control, the Issuer will be required to make an offer (a "Change of Control
Offer") to purchase all of the Debentures issued and then outstanding under the
Indenture at a purchase price equal to 101% of the Accreted Value thereof on the
date of purchase, plus, if such Change of Control occurs after ,
1999, accrued and unpaid interest thereon to the date of purchase. Due to
restrictions in the Bank Credit Agreement, the 11% Senior Note Indenture and
certain equipment leases, the Company may not be able to distribute funds to the
Issuer to fulfill this requirement. The lenders under the Bank Credit Agreement,
the holders of the 11% Senior Notes and certain equipment lessors have a right
to demand repayment upon a "Change of Control" as such term is defined in the
applicable documents. Upon a Change of Control, such persons would be entitled
to receive payment of all outstanding obligations under their respective
agreements before any of the Debentures tendered in a Change of Control Offer
could be purchased. There can be no assurance that the Issuer would have
sufficient funds to repurchase the Debentures upon a Change of Control or be
able to obtain sufficient financing to do so in the capital markets or under its
existing credit facilities. See "Description of Debentures" and "Description of
Other Indebtedness."

The Issuer could, in the future, enter into certain significant
transactions, including business combinations, that would not constitute a
Change of Control as defined in the Indenture. Furthermore, the Change of
Control provisions of the Indenture will have limited applicability to
transactions in which members of the Control Group (as defined in the Indenture)
and their affiliates participate. However, certain of such business combinations
cannot be effected except in compliance with other provisions of the Indenture.
See "Description of Debentures -- Change of Control."

ABSENCE OF PUBLIC MARKET FOR THE DEBENTURES
There is no existing market for the Debentures and there can be no assurance
as to the liquidity of any markets that may develop for the Debentures, the
ability of the holders of the Debentures to sell their Debentures or the price
at which such holders would be able to sell their Debentures. If such a market
were to develop, the Debentures could trade at prices that might be higher or
lower than the initial offering price thereof depending upon many factors,
including prevailing interest rates, the Company's operating results and the
markets for similar securities. The Underwriters have advised the Issuer that
they currently intend to make a market in the Debentures; however, they are not
obligated to do so and any market making may be discontinued at any time without
notice. The Issuer does not intend to apply for listing of the Debentures on any
securities exchange.

ORIGINAL ISSUE DISCOUNT CONSEQUENCES TO HOLDERS

The Debentures will be considered to bear original issue discount for
federal income tax purposes. As a result, the holders will be required to
include in income original issue discount as it accrues on a yield-to-maturity
basis, whether or not cash payments of interest or principal are made and
regardless of the holder's method of accounting. See "Certain Federal Income Tax
Considerations Concerning the Debentures."
If a bankruptcy case is commenced by or against the Issuer under the United
States Bankruptcy Code after the issuance of the Debentures, the claim of a
holder of the Debentures with respect to the principal amount thereof may be
limited to an amount equal to the sum of (i) the initial public offering price
and (ii) that portion of the original issue discount which is not deemed to
constitute "unmatured interest" for purposes of the United States Bankruptcy
Code. Any original issue discount that was not amortized as of any such
bankruptcy filing would constitute "unmatured interest."

10
<PAGE>
THE ISSUER AND THE COMPANY

The Issuer, through its subsidiary, Reeves, is a diversified industrial
company with operations in two principal business segments, industrial coated
fabrics, conducted through its Industrial Coated Fabrics Group ("ICF"), and
apparel textiles, conducted through its Apparel Textile Group ("ATG"). In 1993,
ICF contributed approximately 49.6% of the Company's net sales and approximately
73.6% of its operating income and ATG contributed approximately 50.4% of the
Company's net sales and approximately 26.4% of its operating income (in each
case, excluding unallocable corporate expenses). Throughout its businesses, the
Company emphasizes specialty products, product quality, technological innovation
and rapid responses to the changing needs of its customers.

11
<PAGE>
The Issuer is a recently formed, wholly-owned subsidiary of Hart Holding.
All of the Issuer's and Reeves' operations are conducted through Reeves
Brothers, Inc. ("Reeves Brothers"), a wholly-owned subsidiary of Reeves. Upon
completion of the Offering, the Issuer intends to cause Reeves and Reeves
Brothers to be merged.
The principal executive offices of the Issuer, the Company and Reeves
Brothers are located at Highway 29 South, P.O. Box 1898, Spartanburg, South
Carolina 29304. Telephone: (803) 576-1210.
USE OF PROCEEDS

The net proceeds to the Issuer from the issuance of the Debentures are
expected to be $___ million. The Issuer will use approximately $11.3 million of
such proceeds to redeem all of Reeves' outstanding Subordinated Debentures
(including the payment of redemption premiums of approximately $.3 million). The
Issuer intends to use the balance of the proceeds of the Offering to (i) fund
anticipated capital expenditures (estimated to be approximately $40 million in
1994 and $100 million between 1995 and 1997), primarily to increase capacity and
effect cost reductions and productivity improvements in the coated fabrics
sector of the Company's business, to develop weaving capacity for the Company's
automotive airbag materials business and to complete the modernization and
selectively increase the capacity of ATG's finished goods operations; and (ii)
make investments which may include strategic acquisitions, joint ventures and
investments in other industrial companies where the Issuer believes that it can
apply its professional management techniques to enhance a company's operating
performance. A portion of the proceeds may also be used from time to time to
repay bank debt of the Company.

The Company regularly reviews acquisition opportunities but is not currently
a party to any agreement, or involved in the negotiation of an agreement, with
respect to a material acquisition, joint venture or investment. The Company
believes, however, that there are significant opportunities for growth through
acquisitions in the coated fabrics industry, particularly in the airbag sector
and in the international marketplace, which it is currently reviewing. In
addition, the Company is reviewing possible acquisition candidates in the
apparel textile industry where rationalization of overhead and capital
expenditures could improve the Company's return on investment in its existing
operations. The Company also believes that there may be attractive opportunities
to acquire other industrial companies. There can be no assurance that the
Company will find appropriate acquisition candidates or be able to effect an
acquisition.

The Company continually reviews its capital expenditure program and
acquisition opportunities and, based upon such review, may revise its strategy
with respect thereto.

12
<PAGE>
CAPITALIZATION

The following table sets forth the cash and cash equivalents and
capitalization of the Issuer as of April 3, 1994 and as adjusted to give effect
to the issuance of the Debentures and the application of the proceeds therefrom.
See "Use of Proceeds." This table should be read in conjunction with the
Consolidated Financial Statements and related notes thereto.

<TABLE>
<CAPTION>
APRIL 3, 1994
---------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................................ $ 4,829 $ 90,056(1)
----------- --------------
Long-term debt:
Bank Credit Agreement of Reeves (2)................................................ $ 5,700 $ 5,700
11% Senior Notes due 2002 of Reeves................................................ 121,775 121,775
13 3/4% Subordinated Debentures due 2001 of Reeves................................. 10,927 --
% Senior Discount Debentures due 2006 of the Issuer.............................. -- 100,000
----------- --------------
Total long-term debt............................................................. 138,402 227,475
Stockholder's equity................................................................. 24,865 24,455(3)
----------- --------------
Total capitalization................................................................. $ 163,267 $ 251,930
----------- --------------
----------- --------------
</TABLE>

- ------------------------

(1)_Adjustments to cash and cash equivalents reflect the addition of $100
million in gross proceeds from the Debentures, less underwriting commissions
and offering expenses, estimated at $3.5 million, and payments of $11
million in principal amount and $.3 million in premiums with respect to the
redemption of the Subordinated Debentures.

(2)_The Company has a $35 million line of credit under the Bank Credit Agreement
which expires on December 31, 1995. At April 3, 1994, in addition to
borrowings made, $1.4 million was also drawn under standby letters of
credit. See "Description of Other Indebtedness -- Bank Credit Agreement."

(3)_The adjustment to stockholder's equity consists of the payment of a premium
of $.3 million and the write-off of financing costs and debt discount of $.4
million, net of an income tax benefit of $.3 million related to the
redemption of the Subordinated Debentures.

13
<PAGE>
REEVES HOLDINGS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below with respect to the
years ended December 31, 1989, 1990, 1991, 1992 and 1993 and at the end of such
periods has been derived from the consolidated financial statements of the
Company which have been audited by Price Waterhouse, independent accountants.
The selected consolidated financial data set forth below with respect to the
quarters ended March 28, 1993 and April 3, 1994 and at the end of such periods,
are unaudited but have been prepared on a basis substantially consistent with
the audited financial statements and, in the opinion of management, contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation. The results of operations for the quarter ended April 3, 1994
are not necessarily indicative of results to be expected for the full year. All
of the outstanding capital stock of Reeves will be transferred to the Issuer
prior to the issuance of the Debentures. Since Reeves will be the sole
subsidiary of the Issuer, the consolidated financial data of the Issuer are
those of Reeves. The financial data set forth below is qualified by and should
be read in conjunction with the Consolidated Financial Statements and the
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
QUARTER
ENDED
YEAR ENDED DECEMBER 31, -----------
----------------------------------------------------- MARCH 28,
1989(1) 1990 1991 1992 1993 1993
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales:
Industrial Coated Fabrics Group.......................... $ 114,313 $ 119,749 $ 121,264 $ 126,576 $ 140,735 $ 31,066
Apparel Textile Group.................................... 143,035 138,110 148,295 144,528 142,918 32,714
--------- --------- --------- --------- --------- -----------
Total net sales............................................ $ 257,348 $ 257,859 $ 269,559 $ 271,104 $ 283,653 $ 63,780
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Operating income:
Industrial Coated Fabrics Group.......................... $ 24,715 $ 23,250 $ 23,940 $ 24,732 $ 29,287 $ 6,641
Apparel Textile Group.................................... 11,513 10,059 10,121 10,693 11,583 1,841
Corporate expenses....................................... (5,278) (7,503) (7,278) (8,318) (10,433) (2,337)
Goodwill amortization.................................... (1,140) (1,140) (1,157) (1,340) (1,340) (335)
Facility restructuring charges (2)....................... -- -- -- -- (1,003) --
--------- --------- --------- --------- --------- -----------
Total operating income................................. 29,810 24,666 25,626 25,767 28,094 5,810
Interest expense, net (3).................................. (17,227) (18,199) (20,709) (17,198) (16,236) (4,122)
--------- --------- --------- --------- --------- -----------
Income from continuing operations before income taxes,
extraordinary item and cumulative effect of a change in
accounting principle...................................... 12,583 6,467 4,917 8,569 11,858 1,688
Income taxes............................................... 6,483 710 373 2,593 4,001 300
--------- --------- --------- --------- --------- -----------
Income from continuing operations.......................... $ 6,100 $ 5,757 $ 4,544 $ 5,976 $ 7,857 $ 1,388
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Ratio of earnings to fixed charges (4)..................... 1.6x 1.3x 1.2x 1.5x 1.7x 1.4x
OTHER DATA:
EBITDA (5)................................................. $ 36,040 $ 31,303 $ 32,734 $ 33,883 $ 38,125 8,000
Capital expenditures (6)................................... 6,718 7,007 11,015 15,788 16,506 2,051
Depreciation............................................... 5,090 5,497 5,951 6,776 7,204 1,855
Amortization............................................... 2,522 2,367 2,437 2,370 2,068 517
Ratio of EBITDA to interest expense, net................... 2.1x 1.7x 1.6x 2.0x 2.3x 1.9x
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents.................................. $ 11,824 $ 22,013 $ 20,992 $ 4,165 $ 12,015 5,826
Total assets............................................... 246,910 228,256 214,987 192,931 203,025 201,621
Total long-term debt....................................... 149,863 148,837 148,960 132,576 132,677 139,927
Stockholder's equity....................................... 40,890 13,195 20,477 15,565 21,411 15,218

APRIL 3,
1994

<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales:
Industrial Coated Fabrics Group.......................... $ 37,264
Apparel Textile Group.................................... 35,733
---------
Total net sales............................................ $ 72,997
---------
---------
Operating income:
Industrial Coated Fabrics Group.......................... $ 6,651
Apparel Textile Group.................................... 3,004
Corporate expenses....................................... (1,892)
Goodwill amortization.................................... (335)
Facility restructuring charges (2)....................... --
---------
Total operating income................................. 7,428
Interest expense, net (3).................................. (4,067)
---------
Income from continuing operations before income taxes,
extraordinary item and cumulative effect of a change in
accounting principle...................................... 3,361
Income taxes............................................... 1,124
---------
Income from continuing operations.......................... $ 2,237
---------
---------
Ratio of earnings to fixed charges (4)..................... 1.8x
OTHER DATA:
EBITDA (5)................................................. 9,736
Capital expenditures (6)................................... 5,686
Depreciation............................................... 1,973
Amortization............................................... 523
Ratio of EBITDA to interest expense, net................... 2.4x
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents.................................. 4,829
Total assets............................................... 208,487
Total long-term debt....................................... 138,402
Stockholder's equity....................................... 24,865
<FN>
- ------------------------------
(1) The year ended December 31, 1989 has been restated to reflect the
exclusion of the discontinued operations of the ARA Automotive Group. See
Note 3 to the Consolidated Financial Statements.
(2) Facility restructuring charges in 1993 relate primarily to the cessation
of weaving activities at the Company's Woodruff, South Carolina plant.
(3) Interest expense, net deducts interest income but includes amortization of
financing costs and debt discounts of $1,382, $1,227, $1,280, $1,031 and
$728 for the years ended December 31, 1989, 1990, 1991, 1992 and 1993,
respectively, and $181 and $188 for the quarters ended March 28, 1993 and
April 3, 1994, respectively.
</TABLE>

14
<PAGE>

<TABLE>
<S> <C>
(4) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes,
plus fixed charges. Fixed charges consist of interest on all indebtedness,
which includes amortization of financing costs and debt discounts, and
one-third of all rentals, which is considered representative of the
interest portion included therein, after adjustments for amounts related
to discontinued operations.
(5) EBITDA is income from continuing operations before interest expense, net,
income taxes, depreciation, amortization, and, in 1993, facility
restructuring charges of $1,003 and a reserve for costs related to a
discontinued plant included in corporate expenses of $484. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations." The Issuer has included information concerning EBITDA
herein because it understands that such information is used by certain
investors as one measure of an issuer's historical ability to service
debt. EBITDA should not be considered as an alternative to, or more
meaningful than, earnings from operations or other traditional indications
of the Issuer's operating performance.
(6) Excludes the cost of equipment (leased under operating leases) of $3.0
million and $5.8 million in 1992 and 1993, respectively.
</TABLE>

15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Issuer is a newly formed entity which is a wholly-owned subsidiary of
Hart Holding. The Issuer's principal assets consist of its ownership of 100% of
the stock of Reeves (approximately 90% on a fully-diluted basis) and, after the
Offering, will include the excess proceeds remaining after the sale of the
Debentures and the application of the proceeds therefrom. See "Use of Proceeds."
The Issuer currently derives all of its operating income from Reeves. It must
ultimately rely upon distributions from Reeves or other investments to generate
funds sufficient to meet the debt service requirements of the Debentures.
Hart Holding acquired Reeves in 1986. Under the direction of Hart Holding's
management, the Company's operations have benefited from new product
developments and a series of productivity improvements, including improved
manufacturing processes and information systems, work force reductions and
technological upgrading of facilities and production methods. Between 1991 and
1993, the Company invested approximately $52.1 million in its businesses,
including the cost of equipment leased under operating leases of $8.8 million,
in order to modernize and expand capacity, reduce its overall cost structure,
increase productivity and enhance its competitive position. Between 1990 and
1993, Reeves' sales and operating income increased from $257.9 million to $283.7
million and from $24.7 million to $29.6 million (before facility restructuring
charges of $1.0 million and other charges of $.5 million in 1993), respectively.
The Company's operating results have improved primarily due to increased sales
and profits related to coated automotive airbag materials and productivity
improvements achieved through increased capital investment. These results have
been achieved despite the continuation of recessionary influences which have
adversely affected sales of Reeves' apparel textile and printing blanket
products in its U.S. and European markets.

RESULTS OF OPERATIONS (1991-1993 AND QUARTERS ENDED MARCH 28, 1993 AND APRIL 3,
1994)

SALES

Consolidated sales increased from $269.6 million in 1991 to $283.7 million
in 1993 (5.2%) due to increased sales of the Industrial Coated Fabrics Group
(16.0%) related primarily to growth in coated automotive airbag materials,
partially offset by a decline in sales of the Apparel Textile Group (3.6%) due
to a shift to basic, lower margin products, price competition, adverse
recessionary influences affecting domestic textile markets and the cessation of
ATG's weaving operations at its Woodruff, South Carolina facility in 1993.
Consolidated sales increased $9.2 million (14.5%) in the first quarter of 1994
as compared to the first quarter of 1993, due to growth in sales of coated
automotive airbag materials and apparel textiles.

INDUSTRIAL COATED FABRICS GROUP. ICF's sales were $121.3 million, $126.6
million and $140.7 million in 1991, 1992 and 1993, respectively. The 16.0%
increase during the period was due to increased sales of specialty coated
fabrics, primarily coated automotive airbag materials, partially offset by a
decline in offset printing blanket volume. The increase in coated automotive
airbag materials sales was due to an increase in unit volume caused by the
increased use of driver-side airbags primarily in cars manufactured in the
United States. The decline in domestic printing blanket sales was primarily due
to reduced demand as a result of the slowdown in the printing industry. Sales of
Reeves' Italian subsidiary ("Reeves S.p.A.") fluctuated during the period
primarily due to movements in foreign currency exchange rates. ICF's net sales
increased $6.2 million (20.0%) during the first quarter of 1994 as compared to
the first quarter of 1993. ICF's net sales increased primarily due to higher
unit volume for specialty coated fabric materials, primarily coated automotive
airbag materials. This increase was partially offset by a decrease in other
coated fabrics product lines, principally domestic printing blankets, continuing
the trend experienced in 1992 and 1993.

APPAREL TEXTILE GROUP. ATG's sales were $148.3 million, $144.5 million and
$142.9 million in 1991, 1992 and 1993, respectively. The 2.6% sales decline in
1992 as compared to 1991 was evenly distributed between ATG's greige and
finishing divisions. The decline in each division was primarily

16
<PAGE>

due to unusually strong sales in 1991 to the U.S. military as a result of
Operation Desert Storm and, to a lesser extent, the economic recession in the
United States in 1992. ATG's products experienced both a decline in unit volume
as well as a shift to more basic, lower margin products in 1992 as compared to
1991. The 1.1% decline experienced in 1993 as compared to 1992 resulted from a
decrease in greige goods sales as a result of the cessation of weaving
operations at the Woodruff, South Carolina facility due to declining sales to
the U.S. military, offset partially by increased sales of finished goods due to
greater demand for higher quality and more varied product offerings and styles.
ATG's net sales increased $3.0 million (9.2%) during the first quarter of 1994
as compared to the first quarter of 1993. ATG's net sales increase reflects
growth in unit volume due to stronger customer demand in the finished goods
division, partially offset by lower greige goods volume due to the elimination
of weaving capacity at the Woodruff, South Carolina facility.

OPERATING INCOME

Consolidated operating income was $25.6 million, $25.8 million and $28.1
million in 1991, 1992 and 1993, respectively. The 9.8% increase between 1991 and
1993 resulted primarily from increased profits contributed by ICF's specialty
materials products (predominantly coated automotive airbag materials) and to a
lesser extent, increased profits contributed by ATG (in spite of reduced sales
volume) as a result of cost reductions and productivity gains achieved during
the period related to its capital investment program. The operating income
increase experienced during the period was partially offset by increased
corporate expenses and, in 1993, by facility restructuring charges of $1.0
million. Operating income, as a percentage of sales, increased from 9.5% in 1991
and 1992 to 9.9% in 1993. Operating income for the first quarter of 1994 was
$7.4 million compared to $5.8 million for the first quarter of 1993. As a
percentage of net sales, operating income increased to 10.2% of net sales for
the first quarter of 1994 compared to 9.1% in the same period of 1993. Operating
income growth was primarily due to higher sales volume and cost reductions
implemented at ATG in 1993 and, to a lesser extent, lower corporate expenses.

INDUSTRIAL COATED FABRICS GROUP. ICF's operating income was $23.9 million,
$24.7 million and $29.3 million in 1991, 1992 and 1993, respectively, and
represented 19.7%, 19.5% and 20.8% of ICF's sales in such years. Operating
income growth in 1992 as compared to 1991 was due primarily to increased sales
of coated automotive airbag materials and, to a lesser extent, the elimination
of certain lower-margin specialty coated fabric products. The 18.6% increase in
operating income in 1993 as compared to 1992 was primarily due to the benefits
of economies of scale realized in connection with increased sales of coated
automotive airbag materials. Operating income from printing blankets declined in
1992 and 1993 reflecting the worldwide slowdown in the printing industry
partially offset by efficiencies experienced by Reeves S.p.A. primarily related
to increased material yields. ICF's operating income for the first quarter of
1994 was essentially unchanged from the first quarter of 1993 but, as a
percentage of sales, decreased to 17.8% from 21.4%. Increases in operating
income generated by sales of coated automotive airbag materials were offset by:
(i) lower operating income from printing blankets due to significant development
and other costs associated with the introduction of new products, (ii) foreign
currency exchange losses resulting from the strengthening of the Italian lira
against certain other currencies and (iii) lower volume and higher development
costs related to other coated fabrics product lines.

APPAREL TEXTILE GROUP. ATG's operating income was $10.1 million, $10.7
million and $11.6 million in 1991, 1992 and 1993, respectively, and represented
6.8%, 7.4% and 8.1% of ATG's sales in such years. The operating income and
margin improvement experienced during the period was achieved in spite of an
overall 3.6% sales decline reflecting the benefits of cost reductions and
productivity improvements realized from ATG's capacity modernization program
initiated at its Chesnee and Bishopville, South Carolina facilities. ATG's
operating income for the first quarter of 1994 increased by $1.2 million (63.2%)
as compared to the first quarter of 1993, primarily as a result of

17
<PAGE>

increased sales volume in the finished goods division and manufacturing cost
reductions. The manufacturing cost reductions resulted principally from
completion of the Chesnee facility modernization in the first quarter of 1994
and the transfer of greige goods capacity from the Woodruff facility to Chesnee.
Operating income as a percentage of sales increased to 8.4% from 5.6%.

CORPORATE EXPENSES. Corporate expenses were $7.3 million, $8.3 million and
$10.4 million in 1991, 1992 and 1993, respectively, and represented 2.7%, 3.1%
and 3.7% of consolidated sales in such years. The increase in corporate expenses
during the period related primarily to increased staffing and compensation
expense necessary to support corporate development activities. In 1993,
corporate expenses included a provision for costs related to the Company's
discontinued Buena Vista, Virginia facility of $.5 million. Corporate expenses
decreased $.5 million (16.7%) during the first quarter of 1994 as compared to
the first quarter of 1993. The decrease resulted primarily from a gain arising
from the settlement of a pension obligation related to a discontinued pension
plan.

GOODWILL AMORTIZATION AND FACILITY RESTRUCTURING CHARGES. The Company
recorded provisions for goodwill amortization of $1.2 million in 1991 and $1.3
million in 1992 and 1993. In 1993, Reeves also recorded facility restructuring
charges of $1.0 million. The one-time charges related primarily to the cessation
of weaving activities at the Company's Woodruff, South Carolina facility due to
declining sales to the U.S. military, the conversion of that facility into a
captive yarn mill and consolidation of weaving capacity at ATG's remaining
facilities. Prior to restructuring, the Company conducted weaving operations at
its Woodruff, Osage and Chesnee plants. The Woodruff facility's looms were
deemed to be technologically outdated. As part of the restructuring, the Company
added an additional shift at its Osage facility and installed 53
state-of-the-art looms at its Chesnee facility. As a result, the weaving
capacity at the Woodruff facility was eliminated.

Restructuring costs incurred consisted primarily of: employee severance and
other related costs ($.3 million), equipment modifications, relocations and
other related costs ($.2 million) and facility charges related to the shut-down
of the weaving operations ($.5 million). The Company does not expect to incur
additional costs related to this restructuring.

INTEREST EXPENSE, NET

Interest expense, net consists of consolidated interest expense plus
amortization of financing costs and debt discounts less interest income on
investments. Interest expense, net was $20.7 million, $17.2 million and $16.2
million in 1991, 1992 and 1993, respectively, and $4.1 million in each of the
first quarters of 1993 and 1994. Included in such net amounts are provisions for
the amortization of financing costs and debt discounts totaling $1.3 million,
$1.0 million and $.7 million in 1991, 1992 and 1993, respectively and $.2
million in each of the first quarters of 1993 and 1994. The decline in interest
expense, net during the period resulted primarily from the repayment of bank
debt, the refinancing of Reeves' long-term debt in 1992 with proceeds from the
sale of the 11% Senior Notes and the repurchase of a portion of the Subordinated
Debentures.

INCOME TAXES
The Company's effective income tax rate on income from continuing operations
before income taxes for 1991, 1992 and 1993 was 7.6%, 30.3% and 33.7%,
respectively. The effective income tax rate on income from continuing operations
for 1991 and 1992 differed from the federal statutory rate of 34% primarily due
to the impact of goodwill amortization and Reeves S.p.A.'s lower effective tax
rate. The higher effective income tax rate in 1992 as compared to 1991 was
primarily due to an increase in domestic taxable income which is taxed at a
higher rate than income earned at Reeves S.p.A., a new Italian tax affecting
Reeves S.p.A.'s tax liability and the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109").
During 1993, Reeves established a $.8 million valuation reserve against the
Company's deferred tax assets reflecting estimated utilization of foreign tax
credits. The Company has foreign tax credit carryforwards of $1.9 million of
which $1.7 million expire in 1994 and $.2 million expire at varying

18
<PAGE>
dates through 1997. The valuation reserve was established based on the Company's
estimate of foreign source taxable income expected to be received from Reeves
S.p.A. during the foreign tax credit carryover period.
INCOME FROM CONTINUING OPERATIONS

Income from continuing operations was $4.5 million, $6.0 million and $7.9
million in 1991, 1992 and 1993, respectively, and $1.4 million and $2.2 million
in the first quarters of 1993 and 1994, respectively. Income from continuing
operations excluded (i) a gain on disposal of discontinued operations, net of
taxes, aggregating $2.8 million in 1991, (ii) an extraordinary loss of $6.1
million in 1992 from the write-off of financing costs and debt discounts related
to the early extinguishment of long-term debt in the Company's 1992 refinancing
and (iii) a gain of $3.2 million in 1992 related to the cumulative effect of
adopting a change in accounting principle (FAS 109).

LIQUIDITY AND CAPITAL RESOURCES
CAPITAL EXPENDITURES
The Company has made substantial capital investments in its businesses
(approximately $83 million) since its acquisition by Hart Holding in 1986.
Commencing in 1991, the Company began significantly increasing its levels of
capital investment in its businesses in order to modernize and expand capacity,
reduce its overall cost structure, increase productivity and enhance its
competitive position. Between 1991 and 1993, the Company invested approximately
$52.1 million in aggregate ($11.0 million in 1991, $15.8 million in 1992, $16.5
million in 1993 and $8.8 million, representing the cost of manufacturing
equipment leased under operating leases, in 1992 and 1993).
Between 1991 and 1993, the Company invested approximately $13 million in
ICF's domestic facilities in order to purchase new production equipment,
increase productivity and expand capacity in its traditional lines of business
as well as to enter the coated automotive airbag materials market. In addition,
ICF spent approximately $12 million in its Reeves S.p.A. facilities to construct
an 80,000 square foot addition and purchase related equipment. Such investment
increased capacity to manufacture offset printing blankets and installed coated
fabrics capacity in Europe to meet anticipated demand for sophisticated
specialty materials. Between 1991 and 1993, the Company invested approximately
$24.2 million in ATG's facilities at Chesnee and Bishopville, South Carolina to
increase productivity and manufacturing flexibility, expand capacity for more
sophisticated fabrics and allow more rapid response to market demand and a
broader product offering. Of such $24.2 million, approximately $8.8 million
represents the cost of manufacturing equipment leased under operating leases.

The Company intends to substantially increase its capital investment in its
existing businesses during the 1994-1997 period. In the first quarter of 1994,
the Company spent $5.7 million as compared to $2.1 million in the first quarter
of 1993. The Company currently anticipates in excess of $40 million of capital
expenditures in 1994 and in excess of $100 million of aggregate spending between
1995 and 1997. In 1994, the Company anticipates spending approximately $17
million to construct, furnish and equip a state-of-the-art plant in Spartanburg,
South Carolina to weave automotive airbag materials, approximately $5 million to
complete the capacity expansion of ATG's Chesnee, South Carolina plant and
approximately $16 million to expand the capacity of and improve productivity at
ICF's worldwide coated fabrics and offset printing blanket facilities. Projected
capital expenditures beyond 1994 are expected to complete ATG's modernization
and expansion of its textile capacity, expand ICF's automotive airbag materials
capacity in response to anticipated domestic and international market
requirements and enhance the profitability and competitive position of ICF's
printing blanket and traditional coated fabrics businesses through additional
spending for cost reductions and productivity improvements.

As a result of the nature of the Company's business and its substantial
expenditures for capital improvements over the last several years, current and
future capital expenditure requirements are flexible as to both timing and
amount of capital required. In the event that cash flow proves inadequate to
fund currently projected expenditures, such expenditures can be adjusted so as
not to exceed available funds.

19
<PAGE>
LIQUIDITY

The Company's EBITDA (before facility restructuring and other charges) was
$32.7 million, $33.9 million and $38.1 million in 1991, 1992 and 1993,
respectively, and $8.0 million and $9.7 million in the first quarters of 1993
and 1994, respectively. The Company's net cash provided by operating activities
increased from $7.6 million in 1991 to $15.2 million in 1992 and $25.2 million
in 1993. The improvement in net cash provided by operating activities resulted
from higher levels of income from continuing operations and significant
improvements in working capital management. The Company had a cash deficit from
operations of $(7.4) million in the first quarter of 1994 as compared to a
deficit of $(4.7) million in the first quarter of 1993, due to increased working
capital requirements necessary to support higher sales volumes.

The Company anticipates that it will be able to meet its projected working
capital, capital expenditure and debt service requirements through internally
generated funds, borrowings available under its existing $35 million Bank Credit
Agreement, funds available through an equipment leasing facility and a portion
of the net proceeds from the sale of the Debentures.

In August 1992, in conjunction with the refinancing of the Company's bank
and institutional indebtedness, the Company entered into the Bank Credit
Agreement which provides the Company with an aggregate $35 million revolving
line of credit and letter of credit facility. The Bank Credit Agreement expires
on December 31, 1995 and is secured by accounts receivable and inventories. As
of April 3, 1994, the Company had available borrowing capacity (net of $1.4
million of outstanding letters of credit) of $27.9 million under the Bank Credit
Agreement.

In May 1994, the Company received a commitment from an equipment lessor to
finance up to $12.0 million of capital equipment pursuant to long-term operating
leases, of which $3.1 million was utilized in May 1994. The Company believes
that a substantial portion of the balance will be utilized in 1994.

The Company enters into foreign exchange forward contracts to limit risk of
changes in foreign currency exchange rates associated with certain assets and
future foreign currency transactions, primarily cash flows from accounts
receivable and firm purchase commitments. Gains and losses on these contracts
are deferred until the underlying hedge transaction is completed. The cash flows
from the forward contracts are classified consistent with the cash flows from
the transactions being hedged. To the extent that they are matched with
underlying sale transactions, these contracts do not subject the Company to risk
from foreign exchange rate movements, because gains and losses on the contracts
offset losses and gains on the transactions being hedged.

At April 3, 1994 the Company had foreign currency hedge contracts
outstanding, equivalent to $11.1 million to exchange various currencies,
including the U.S. dollar, Japanese yen, pound sterling, Deutsche mark, and
French franc into Italian lire. The contracts mature during 1994. The April 3,
1994 fair value of these foreign currency hedge contracts was $11.2 million.

IMPACT OF INFLATION
The Company does not believe that its financial results have been materially
impacted by the effects of inflation.
OTHER MATTERS
In February 1992, the Company received approximately $17 million from the
federal government in payment of a tax refund. The refund resulted from the
Company carrying back tax operating losses generated in 1991, primarily related
to the disposal of the ARA Automotive Group, to offset previous years' taxable
income.
In 1992, Reeves adopted FAS 109 effective as of the beginning of 1992. Under
FAS 109, in the year of adoption, previously reported results of operations for
the year are restated to reflect the effects of applying FAS 109, and the
cumulative effect of adoption on prior years' results of operations is shown in
the income statement in the year of change. The cumulative effect of this change
in accounting principle increased net income by $3.2 million in 1992.

20
<PAGE>
BUSINESS
GENERAL

The Issuer, through its subsidiary, Reeves, is a diversified industrial
company with operations in two principal business segments, industrial coated
fabrics, conducted through its Industrial Coated Fabrics Group, and apparel
textiles, conducted through its Apparel Textile Group. In 1993, ICF contributed
approximately 49.6% of the Company's net sales and approximately 73.6% of its
operating income, and ATG contributed approximately 50.4% of the Company's net
sales and approximately 26.4% of its operating income (in each case, excluding
unallocable corporate expenses). Throughout its businesses, the Company
emphasizes specialty products, product quality, technological innovation and
rapid responses to the changing needs of its customers.

ICF specializes in the coating of various substrate fabrics with a variety
of products such as synthetic rubber, vinyl, neoprene, urethane and other
elastomers, to produce a diverse line of products for industrial applications.
ICF's principal products include: (1) a complete line of printing blankets used
in offset lithography, (2) coated automotive airbag materials, (3) specialty
coated fabrics and (4) coated fabrics used in industrial coverings.
The Company believes that ICF is one of the world's leading producers of
offset printing blankets and that ICF has the leading share of the domestic
market for coated automotive airbag materials. The Company also believes that
ICF is a leading domestic producer of specialty coated fabrics used for a broad
range of industrial applications. ICF's products generally involve significant
amounts of technological expertise and precise production tolerances. The
Company believes that ICF's product development, formulation and production
methods are among the most sophisticated in the coated fabrics industry.
ATG manufactures, processes and sells specialty textile fabrics to apparel
and other manufacturers. Through its Greige Goods Division, ATG processes raw
materials into griege goods (I.E., undyed woven fabrics). Through its Finished
Goods Division, ATG functions as a converter and commission finisher, purchasing
greige goods (from the Griege Goods Division and others) and contracting to have
the goods dyed and finished or dyeing and finishing the goods itself. The dyed
and finished goods are then sold for use in a variety of end-products.
The Company believes that ATG has developed strong positions in niche
markets in the apparel textile industry by offering unique, custom-designed
fabrics to leading apparel and specialty garment manufacturers. ATG emphasizes
"short-run" product orders and targets market segments in which its
manufacturing flexibility, rapid response time, superior service and quality and
the ability to supply exclusive blends are key competitive factors.
The Company's business strategy has focused on the sale of higher-margin
niche products and the establishment of leading positions in its principal
markets. The Company believes that this strategy, combined with its diverse
product and customer base, the development of new products and substantial
capital investment, has helped the Company increase its sales and profitability
in spite of adverse economic conditions in its U.S. and European markets during
1990-1993.
Since 1991, the Company has significantly increased its level of capital
investment in its businesses to modernize and expand capacity, reduce its
overall cost structure, increase productivity and enhance its competitive
position. The Company intends to substantially increase its capital investment
in its businesses to approximately $140 million during the 1994-1997 period. In
addition, as opportunities arise, the Issuer may seek to augment its growth
through strategic acquisitions, joint ventures and investments in other
industrial companies where the Issuer believes that it can apply its
professional management techniques to enhance a company's operating performance.

21
<PAGE>
The following table shows the amount of total revenue contributed by product
lines which accounted for 10% or more of the Company's consolidated revenues in
any of the last three fiscal years.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1991 1992 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Industrial Coated Fabrics Group:
Specialty Materials............................................ $ 55,581 $ 61,684 $ 78,151
Graphic Arts................................................... 65,683 64,892 62,584
----------- ----------- -----------
$ 121,264 $ 126,576 $ 140,735
----------- ----------- -----------
----------- ----------- -----------
Apparel Textile Group:
Finished Goods and Dyeing and Finishing........................ $ 74,893 $ 72,977 $ 77,416
Greige Goods................................................... 73,402 71,551 65,502
----------- ----------- -----------
$ 148,295 $ 144,528 $ 142,918
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

INDUSTRIAL COATED FABRICS GROUP
The Industrial Coated Fabrics Group specializes in the coating of various
substrate fabrics with a variety of products, such as synthetic rubber, vinyl,
neoprene, urethane, and other elastomers, to produce a diverse line of products
for industrial applications.
ICF's products comprise four categories: (1) a complete line of printing
blankets used in offset lithography, (2) coated automotive airbag materials, (3)
specialty coated fabrics, including fluid control diaphragm materials, tank
seals, ducting materials and coated fabric materials used for military and
commercial life rafts and vests, aircraft escape slides, flexible fuel tanks and
general aviation products, and (4) coated fabrics used in industrial coverings,
including fabrics coated with rubber and vinyl which are used to make
tarpaulins, loading dock shelters and other industrial products.
ICF's products require significant amounts of technological expertise and
the Company believes that ICF's product development, formulation and production
methods are among the most sophisticated in the coated fabrics industry. Since
1990, ICF has been awarded six patents with respect to polyurethane coatings and
has nine pending patent applications relating to printing blankets, airbag
fabric and specialty coatings. Approximately eight other patent applications are
in process.

ICF generally manufactures specialty coated fabrics according to a
production backlog. ICF's products, other than printing blankets and coated
automotive airbag material, involve relatively short runs and custom
manufacturing. Printing blankets are sold primarily to distributors and dealers.
ICF's other products are sold directly to end users and fabricators by its
direct sales force. No customer of ICF represented 10% or more of the Company's
consolidated sales in 1993.

PRINTING BLANKETS
The Company believes that ICF is one of the world's leading producers of
printing blankets used in offset lithography, the predominant printing process
for the commercial, financial, publication and industrial printing markets.
Offset printing blankets are used in the printing process to transfer a
printed image from a metal printing plate onto paper or other printing material.
ICF markets a complete line of conventional, compressible and sticky-back
blankets under the VULCAN-R- name. The Company's line includes the 714-R-, the
first compressible printing blanket, the 2,000-R- PLUS, an advanced general
purpose blanket, the VISION SR-TM-, a premium blanket targeted at the sheet-fed
market, and the MARATHON-R-, a blanket targeted to the high-speed web press
market. Each blanket in the product line is designed for a specific printing
need and ICF sells an appropriate blanket for most types of commercial,
financial, publication and industrial printing applications.

22
<PAGE>
The Company believes that ICF's blankets consistently offer high performance
and quality. This performance is due to a number of proprietary features of the
blankets, many of which are the subject of pending patent applications.
Distinctive characteristics of ICF's blankets include unique printing surface
compounds, improved composition and placement of compressible layers, surface
buffing and water and solvent-resistant back plies.
Purchasers of ICF's blankets include commercial, financial and industrial
printers and publishers of newspapers and magazines. ICF's blankets are sold to
over 10,000 U.S. printers and more than 15,000 foreign printers, in 64 countries
worldwide.
ICF has established a network of over 60 distributors and 125 dealers in the
United States, Canada and Latin America to market its printing blankets. In
addition, ICF is represented by a distributor in most of the other countries in
which it does business. The Company's distributors typically purchase rolls of
uncut blankets from ICF and then cut, finish and package the blankets prior to
delivery to dealers or end-users. Internationally, ICF's relationships with
distributors tend to be long-standing and exclusive, with most distributors
dealing only in ICF's printing blankets and ICF selling only to such
distributors in their respective territories. Domestic distributors tend to
carry printing blankets from a number of manufacturers. Dealers generally
purchase finished blankets from distributors for resale. ICF services all of its
customers, and its direct sales force actively markets and promotes ICF's
printing blankets.
AUTOMOTIVE AIRBAG MATERIALS
Reeves believes that ICF has the leading share of the domestic market for
coated automotive airbag materials. ICF is a significant supplier of such
material to TRW, Inc. ("TRW") and the Safety Restraints Division of
Allied-Signal, Inc. ("Allied-Signal"). Allied-Signal supplies Morton
International ("Morton") with airbag components. TRW and Morton are two of four
major domestic manufacturers of airbag systems and, together with Allied-Signal,
supply all of the domestic automobile manufacturers and many of the European and
Japanese automobile manufacturers. The Company believes that TRW and Morton
account for in excess of 50% of the worldwide market for airbag systems.
National Highway Traffic Safety Administration regulations currently mandate
the use of both driver-side and passenger-side airbags for all 1998 model year
passenger cars and 1999 model year light trucks, vans and multipurpose vehicles
("LTVs"). A phase-in schedule establishes that at least 95% of a manufacturer's
passenger cars built on or after September 1, 1996 for sale in the United
States, must be equipped with an airbag at the driver's and the right front
passenger's seating positions. All LTVs built after September 1, 1997, must have
some form of automatic occupant protection, and at least 80% must have either
driver-side or driver-side and passenger-side airbags.
Due to market demand for airbag-equipped vehicles, automobile manufacturers
have been installing airbags (primarily driver-side) more extensively than
required by the foregoing regulations. The Company expects sales of airbag
systems and coated airbag fabric to increase substantially in future years and
believes that ICF is well-positioned to benefit from such growth.
Following the lead of the U.S. automobile manufacturers, European and Asian
automobile manufacturers have begun installation of automobile airbags. No
legislation or regulation presently requires the installation of airbags outside
of the United States market. Reeves S.p.A. has sufficient capacity for
production of coated airbag material if demand develops outside of the United
States for such products.
Company participation in the airbag market to date has been through the use
of coated airbag fabric in driver-side applications where coated airbag fabric
offers certain advantages such as greater thermal insulation to withstand the
rapid inflation of the airbag by means of hot gases and impermeability to
prevent the escape of gases. Side-impact airbags (presently offered on certain
models of Volvo and Mercedes Benz) are expected to use coated airbag fabric.

23
<PAGE>
Most passenger-side airbags are currently designed to use uncoated fabrics.
Passenger-side airbags deploy more slowly than driver-side airbags.
Consequently, they can be manufactured at a lower cost using uncoated fabric.
The Company does not presently produce an uncoated airbag fabric. Although there
can be no assurance that it will be able to do so, the Company plans to
participate in the growth of passenger-side applications through an expansion
program capitalizing on its textile expertise and research and development
efforts. As part of this program, the Company is constructing an approximately
100,000 square foot facility in Spartanburg, South Carolina for weaving both
coated and uncoated airbag fabric. The facility is expected to be operational by
the end of 1994.
Through its research and development activities, the Company is continuously
working to develop new proprietary fabric technologies and procedures for the
next generation of driver-side and passenger-side airbags. Airbag fabrics must
meet rigorous specifications, testing and certification requirements and airbag
fabric contracts tend to be awarded several years in advance. These factors may
deter the entry of other manufacturers into this business.
SPECIALTY COATED FABRICS
The Company believes that ICF is a leading domestic producer of specialty
coated fabrics used for a broad range of industrial applications. ICF's
specialty coated fabrics business is largely customer or "job shop" oriented. In
1993, more than 90% of ICF's sales of specialty coated fabrics were derived from
fabrics manufactured to meet particular customers' specifications.
Specialty coated fabrics generally consist of a fabric base, or substrate
layer, and an elastomer coating (I.E., coating consisting of an elastic
substance, such as rubber) which is applied to the fabric base. The Company
believes that ICF's line of elastomer-fabric combinations is the most
comprehensive in the industry, enabling it to design products to satisfy its
customers' needs. Fabric bases used in ICF's specialty coated fabrics include
polyester, nylon, cotton, fiberglass and silk. ICF's elastomers include natural
rubber, nitrile, THIOKOL-R-, NEOPRENE-R-, silicone, HYPALON-R-, VITON-R- and
polyurethane.
ICF sells its specialty coated fabrics under the registered trademark
REEVECOTE-R-. The Company believes that ICF has established a reputation for
quality and product innovation in specialty coated fabrics by virtue of ICF's
technological capability, advanced plant and equipment, research and development
facilities and specialized chemists and engineers.
ICF's specialty coated fabrics are separated into five product lines:
GENERAL PURPOSE GOODS. This product line includes air cells, tank seals,
gaskets, compressor valves, aerosol seals and washers and coated fabrics used by
other manufacturers in the production of insulation materials, soundproofing and
inflatable "lifting bags" used to jack up automobiles or trucks.
GAS METER DIAPHRAGMS. ICF manufactures a line of rubber diaphragm material
for use in gas meters which are the primary mechanisms in gas meters for
controlling gas flow. ICF's products are sold to most of the major manufacturers
of gas meters.
SYNTHETIC DIAPHRAGMS. The Company's synthetic diaphragms are used in
carburetors, controls, meters, compressors, fuel pumps and other applications.
SPECIALTY PRODUCTS. ICF manufactures a large number of miscellaneous
specialty coated products, including v-cups for oil rig drills, expansion joints
and urethane specialty items, such as fuel containers, commercial diaphragms and
desiccant bags.
MILITARY, MARINE AND AEROSPACE PRODUCTS. ICF produces coated fabrics used
in truck and equipment covers, waterproof duffel bags, pneumatic air mattresses,
collapsible tanks for fuel and water storage, temporary shelters, rafts,
inflatable boats, various types of safety devices, pneumatic and electrical
plane de-icers, specialty molded aircraft parts, aerospace fuel cells, aircraft
evacuation slides, helicopter floats, surveillance balloons and miscellaneous
items. A portion of ICF's work in this area is performed as a subcontractor on
United States government contracts.

24
<PAGE>
ICF's direct sales force sells primarily to fabricators who use ICF's
specialty coated fabrics in products sold to end-users.
INDUSTRIAL COVERINGS FABRICS
ICF sells coated fabrics to customers that produce a wide variety of
industrial coverings, including truck tarpaulins, trailer covers, cargo covers,
agricultural covers, hangar curtains, industrial curtains, boat covers, athletic
field covers, temporary shelters, semi-bulk containers and specialized flotation
devices used for the containment of oil spills and other environmental
pollutants. ICF's industrial coverings fabrics are produced by the same methods
as its specialty coated fabrics and are sold under the COVERLIGHT-R- registered
trademark.
The industrial coverings fabrics business also includes coated fabric for
loading dock shelters, which are pads or bumpers placed around the exterior of a
loading dock door for weathersealing. ICF sells to manufacturers of loading dock
shelter systems and believes it is the leading supplier of loading dock shelter
material produced with rubber and other special elastomers.
ICF's sales force sells primarily to fabricators of industrial coverings who
in turn sell to end-users. Sales personnel concentrate on the largest producers
of industrial coverings and loading dock shelter systems in the United States.
COMPETITION

ICF's competitive environment varies by product line. For graphic arts
products (in which the Company believes it is one of the three leading firms),
the Company's principal competitors are Day International and W.R. Grace. To a
lesser extent, the Company also competes with a number of other firms, including
David M, Kinyo, Zippy, Sumitomo, DYC and Meiji. In its specialty materials
product line, except for airbag materials, the Company produces numerous
products and competes in a number of highly fragmented market segments where
competition varies by product. In the United States, competition comes from
Chemprene, Archer Rubber, Seaman Corp., Cooley, Fairprene and selected foreign
suppliers. The Company's coated automotive airbag materials compete against
those of Milliken and Highland Industries as well as several other small
manufacturers. The Company believes its share of the coated automotive airbag
materials market is in excess of 50%. Quality, compliance with exacting product
specifications, delivery terms and price are important factors in competing
effectively in ICF's markets.

APPAREL TEXTILE GROUP

The Apparel Textile Group consists of two divisions, Greige Goods and
Finished Goods. ATG concentrates on segments of the market where its
manufacturing flexibility, rapid response time, superior service, quality and
the ability to supply customers with exclusive blends are key competitive
factors. No customer of ATG represented 10% or more of the Company's
consolidated sales in 1993.

ATG's Greige Goods Division processes raw materials into undyed woven
fabrics known as greige goods. The Greige Goods Division manufactures greige
goods of synthetic fibers, wool, silk, flax and various combinations of these
fibers. Products of the Greige Goods Division are primarily utilized for apparel
and the Greige Good Division's most significant customers are outside converters
and, to a lesser extent, ATG's Finished Goods Division.
The Company believes that the Greige Goods Division is distinguished from
its competitors by its ability to efficiently manufacture small yardage runs,
its rapid response time, the high quality of its products and its ability to
produce samples rapidly on demand. ATG's greige goods plants engage principally
in short production runs producing specialty fabrics requiring a variety of
blends and textures. Fabrics are produced by the Greige Goods Division according
to an order backlog and are typically "sold ahead" three to four months in
advance. Most of the Greige Goods Division's sales are sold under firm
contracts. In comparison to manufacturers of large volume commodity fabrics such
as print cloth, corduroy and denim, the Greige Goods Division has been less
adversely affected in recent years by foreign imports because of its position as
a small quantity, specialty fabric producer.

25
<PAGE>
ATG's Finished Goods Division functions as a converter and commission
finisher. The Finished Goods Division purchases greige goods from the Greige
Goods Division and other greige suppliers and either contracts to have such
goods converted into finished fabrics of varying weights, colors, designs and
finishes or converts them itself. The dyed and finished fabrics are used in
various end-products and sold primarily to apparel manufacturers in the women's
wear, rainwear/outerwear, men's/boys' wear and career apparel markets.
The Company believes that ATG's Finished Goods Division is one of the most
flexible operations of its kind in the United States due to the variety of
products it can finish and the broad range of dyeing processes and finishes it
is able to offer. The Finished Goods Division focuses on high value-added
fabrics with unique colors and specialty finishes. The Finished Goods Division's
fabrics are currently being used by a number of the leading men's and women's
sportswear manufacturers and its dyeing and finishing services are sold to major
domestic converters.
A wide variety of fabrics can be woven at the Greige Goods Division's two
weaving plants. The dyeing and finishing plant of the Finished Goods Division is
equipped to do a variety of piece dyeing, as well as to provide specialty
finishings. This manufacturing flexibility increases ATG's ability to respond
rapidly to changes in market demand.

Substantially all of the Apparel Textile Group's products are sold directly
to customers through its own sales force. The balance is sold through brokers
and agents.

COMPETITION
The textile industry is highly competitive. While there are a number of
integrated textile companies, many larger than ATG, no single company dominates
the United States market. Competition from imported fabrics and garments
continues to be a significant factor adversely affecting much of the domestic
textile industry. Because of the nature of ATG's markets, the Company believes
it is less susceptible to foreign imports than the industry as a whole and is
more insulated from the risk of foreign imports than high-volume commodity
producers. The most important factors in competing effectively in ATG's product
markets are service, price, quality, styling, texture, pattern design and color.
ATG seeks to maintain its market position in the industry through a high degree
of manufacturing flexibility, product quality and competitive pricing policies.
The Greige Goods Division distinguishes itself from its competitors by its
ability to manufacture runs as small as 40,000 square yards, its rapid response
time and the high quality of the products manufactured. The Greige Goods
Division has extensive proprietary technical knowledge in the structure of its
spinning and weaving operations, which the Company believes represents a
significant competitive advantage.
The Finished Goods Division is capable of finishing a wide variety of
products and offers a broad range of dyeing processes and finishes. This
manufacturing flexibility increases the Finished Goods Division's ability to
respond rapidly to changes in market demand, which the Company believes enhances
its competitive position.
RAW MATERIALS, MANUFACTURERS AND SUPPLIERS
The principal raw materials used by ICF include polymeric resins, natural
and synthetic elastomers, organic and inorganic pigments, aromatic and aliphatic
solvents, polyurethanes, polyaramids and calendered fabrics. ATG principally
utilizes wool, flax, specialty yarn, man-made fibers, including acrylics,
polyesters, acetates, rayon and nylon and a wide variety of dyes and chemicals.
Such raw materials are largely purchased in domestic markets and are available
from a variety of sources. The Company is not presently experiencing any
difficulty in obtaining raw materials. However, the Company has from time to
time experienced difficulty in obtaining the substrate fabric that it uses to
produce coated automotive airbag materials. The Company anticipates that the
completion of its new weaving facility in Spartanburg, South Carolina may reduce
the risk of such supply shortages. Airbag fabric produced by the new facility
will be subject to rigorous testing and certification before it will be
available for production.

26
<PAGE>
FOREIGN OPERATIONS
All of Reeves' foreign operations are conducted through Reeves S.p.A., a
wholly-owned subsidiary located in Lodi Vecchio, Italy. Reeves S.p.A. forms a
part of Reeves' ICF Group. The financial data of Reeves S.p.A. is as follows :

<TABLE>
<CAPTION>
1991 1992 1993
<S> <C> <C> <C>
(IN THOUSANDS)
Sales................................................ $ 35,437 $ 38,444 $ 36,932
Net income........................................... 6,808 9,165 7,446
Assets............................................... 33,011 31,608 33,092
</TABLE>

The financial results of Reeves S.p.A. do not include any allocations of
corporate expenses or consolidated interest expense.
BACKLOG

The following is a comparison of open order backlogs at December 31 of each
year presented:

<TABLE>
<CAPTION>
1991 1992 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Industrial Coated Fabrics Group...................... $ 16,942 $ 16,824 $ 17,072
Apparel Textile Group................................ 47,129 32,994 39,390
--------- --------- ---------
Totals........................................... $ 64,071 $ 49,818 $ 56,462
--------- --------- ---------
--------- --------- ---------
</TABLE>

The increase in ICF's backlog from 1992 to 1993 is due to growth in the
coated automotive airbag materials business. The decrease in the Apparel Textile
Group backlog from 1991 to 1992 was the result of a decrease in military sales,
which were unusually strong in 1991 as a result of Operation Desert Storm and
reduced orders due to market uncertainty. The increase in the ATG backlog from
1992 to 1993 is due to the addition of several new customers in the Finished
Goods Division.

The backlog as of December 31, 1993 for the Industrial Coated Fabrics Group
and the Apparel Textile Group is reasonably expected to be filled in 1994. Under
certain circumstances, orders may be canceled at the Company's discretion prior
to the commencement of manufacturing. Any significant decrease in backlog
resulting from lost customers could adversely affect future operations if these
customers are not replaced in a timely manner.

ENVIRONMENTAL MATTERS
The Company is subject to a number of federal, state and local laws and
regulations pertaining to air emissions, water discharges, waste handling and
disposal, workplace exposure and release of chemicals. During 1993, expenditures
in connection with the Company's compliance with federal, state and local
environmental laws and regulations did not have a material adverse effect on its
earnings, capital expenditures or competitive position. Although the Company
cannot predict what laws, regulations and policies may be adopted in the future,
based on current regulatory standards, the Company does not expect such
expenditures to have a material adverse effect on its operations.
EMPLOYEES

On April 3, 1994, the Company employed approximately 2,273 people, of whom
1,829 were in production, 188 were in general and administrative functions, 53
were in sales and 203 were at Reeves S.p.A. At such date, ICF had approximately
848 employees and ATG had approximately 1,371 employees, with the remainder of
the Company's employees in general and administrative positions.

27
<PAGE>
PROPERTIES
The Company's principal facilities, their primary functions and their
locations are as follows:

<TABLE>
<CAPTION>
SIZE (SQ. FT.)
----------------------
LOCATION FUNCTION OWNED LEASED
<S> <C> <C> <C>
MANUFACTURING FACILITIES
Industrial Coated Fabrics
Group
Rutherfordton, NC Specialty Materials............. 215,000
Spartanburg, SC Graphic Arts.................... 308,364
Lodi Vecchio, Italy Graphic Arts and Specialty
Materials...................... 160,000 4,900
--------- -----------
Subtotal........................ 683,364 4,900
--------- -----------
Apparel Textile Group
Woodruff, SC Greige Goods.................... 368,587
Chesnee, SC Greige Goods.................... 303,100
Bessemer City, NC Greige Goods.................... 218,992
Bishopville, SC Finished Goods.................. 226,684 2,400
Bishopville, SC Warehouse....................... 72,650
--------- -----------
Subtotal........................ 1,117,363 75,050
--------- -----------
Total Manufacturing Facilities.............................. 1,800,727 79,950
--------- -----------
NON-MANUFACTURING FACILITIES
New York, NY Administrative and Sales........ 12,000
Spartanburg, SC Administrative and Sales........ 43,000
Darien, CT Administrative.................. 6,800
--------- -----------
Total Non-Manufacturing Facilities.......................... 43,000 18,800
--------- -----------
TOTAL........................................................... 1,843,727 98,750
--------- -----------
--------- -----------
</TABLE>

The Company is a party to facility leases with terms ranging from
month-to-month to fifteen years, with rental expense aggregating $.5 million for
the twelve months ended December 31, 1993. The Company believes that all of its
facilities are suitable and adequate for the current conduct of its operations.

LEGAL PROCEEDINGS
The Issuer believes that there are no legal proceedings, other than ordinary
routine litigation incidental to the business of the Company, to which the
Issuer or any of its subsidiaries is a party. Management is of the opinion that
the ultimate outcome of existing legal proceedings would not have a material
adverse effect on the Issuer's consolidated financial position or results of
operations.

28
<PAGE>
MANAGEMENT
DIRECTOR AND EXECUTIVE OFFICERS
The sole director of the Issuer, Reeves and Reeves Brothers is James W.
Hart. The following table sets forth the name, age, positions with the Issuer,
Reeves and Reeves Brothers and principal business experience during the past
five years of each executive officer of the Issuer, Reeves and Reeves Brothers.
Any executive officer, unless otherwise stated, holds the identical position or
positions in the Issuer, Reeves and Reeves Brothers.

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Anthony L. Cartagine 59 Vice President of Reeves and Reeves Brothers; President --
Apparel Textile Group
Augustus I. duPont 42 Vice President and General Counsel
Jennifer H. Fray 29 Secretary and Assistant General Counsel
Douglas B. Hart 31 Senior Vice President -- Operations
James W. Hart 60 Chairman of the Board
James W. Hart, Jr. 40 President, Chief Executive Officer and Chief Operating
Officer
Steven W. Hart 37 Executive Vice President, Chief Financial Officer and
Treasurer
V. William Lenoci 58 Vice President of Reeves and Reeves Brothers; President and
Chief Executive Officer -- Industrial Coated Fabrics Group
Joseph P. O'Brien 53 Vice President -- Finance
Patrick M. Walsh 53 Vice President -- Administration of Reeves and Reeves
Brothers
</TABLE>

Mr. Cartagine has been with Reeves Brothers since 1964. He was named
President-Greige Goods Division of the Apparel Textile Group in 1984 and
President of the Apparel Textile Group in 1986. He was named Vice President of
Reeves and Reeves Brothers in 1988.

Mr. duPont joined Reeves and Reeves Brothers in May 1994 as Vice President
and General Counsel, and became Vice President and General Counsel of the Issuer
in June 1994. From 1987 to 1992, Mr. duPont served as Vice President, General
Counsel and Secretary of Sprague Technologies, Inc. ("STI"), a manufacturer of
electronic components, and during 1993 he served as Vice President, General
Counsel and Secretary of American Annuity Group, Inc., an insurance holding
company and successor by merger to STI.

Ms. Fray joined Hart Holding, Reeves and Reeves Brothers in September 1992
as Assistant General Counsel. In 1992, she was named Secretary of Hart Holding,
Reeves and Reeves Brothers. She became Secretary and Assistant General Counsel
of the Issuer in March 1994 and General Counsel of Hart Holding in June 1994.
From 1990 to 1992, Ms. Fray was engaged in studies leading to a Master of Laws
Degree in Taxation from Boston University, from 1990 to 1991 she was employed as
a Tax Associate at Coopers & Lybrand, certified public accountants, in Boston,
Massachusetts and from 1987 to 1990 she was engaged in studies leading to a
Juris Doctor Degree from Suffolk University.

Mr. Douglas B. Hart served as a Director of Reeves and Reeves Brothers from
1991 to 1992. He was named Vice President -- Real Estate in 1989, Senior Vice
President in 1991 and Senior Vice President -- Operations in 1992 of Reeves and
Reeves Brothers. He became Senior Vice President of the Issuer in March 1994.
Mr. Hart served as a Director of Hart Holding from 1991 to 1992, as Vice
President -- Real Estate of Hart Holding from 1989 to 1991 and as Senior Vice
President of Hart Holding from 1991 to 1992. In 1992, Mr. Hart became President,
Chief Executive Officer and Chief Operating Officer of Hart Investment
Properties Corporation, a wholly-owned diversified corporate investment entity
of Hart Holding, with current holdings in real estate. Prior to 1989, Mr. Hart
was an

29
<PAGE>
Assistant Vice President at Sentinel Real Estate Corporation in New York, an
owner/developer of malls, shopping centers, office buildings and single family
residential communities throughout the United States.
Mr. James W. Hart has been a Director of Reeves and Reeves Brothers since
1986 and became Chairman of the Board in 1987. He was named Chairman of the
Board of the Issuer in March 1994. Mr. Hart served as President and Chief
Executive Officer of Reeves and Reeves Brothers from 1988 until 1992. Mr. Hart
has been a Director, President, Chief Executive Officer and Chairman of the
Board of Hart Holding since 1975 and became Chief Operating Officer and Chief
Financial Officer of Hart Holding in 1992.
Mr. James W. Hart, Jr. served as a Director of Reeves and Reeves Brothers
from 1986 to 1992. Mr. Hart became Vice President of Reeves and Reeves Brothers
in 1987 and was named Senior Vice President -- Operations in 1988 and Executive
Vice President and Chief Operating Officer in 1989. In 1992, he was named
President, Chief Executive Officer and Chief Operating Officer of Reeves and
Reeves Brothers. He became President, Chief Executive Officer and Chief
Operating Officer of the Issuer in March 1994. Mr. Hart served as a Director of
Hart Holding from 1984 to 1992. He served as Vice President of Hart Holding from
1984 to 1992, Senior Vice President -- Operations of Hart Holding from 1988 to
1992 and as Executive Vice President and Chief Operating Officer of Hart Holding
from 1989 to 1992.

Mr. Steven W. Hart served as a Director of Reeves and Reeves Brothers from
1986 to 1992. He became Vice President of Reeves and Reeves Brothers in 1987 and
was named Senior Vice President and Chief Financial Officer in 1988, Executive
Vice President and Chief Financial Officer in 1989 and Treasurer in 1994. He
became Executive Vice President and Chief Financial Officer of the Issuer in
March 1994 and Treasurer in June 1994. Mr. Hart served as a Director, Treasurer
and Chief Financial Officer of Hart Holding from 1984 to 1992, Vice President of
Hart Holding from 1984 to 1988, Senior Vice President of Hart Holding from 1988
to 1989 and Executive Vice President of Hart Holding from 1989 to 1992. Mr. Hart
joined Hart Holding in 1983 as Vice President -- Strategic Planning.

Mr. Lenoci has been with Reeves since 1967. He was named President --
Industrial Coated Fabrics Group in 1986 and Vice President of Reeves and Reeves
Brothers in 1988. In 1990 he became Chief Executive Officer of the Industrial
Coated Fabrics Group.
Mr. O'Brien joined Reeves and Reeves Brothers in 1993 as Vice President --
Finance. He became Vice President -- Finance of the Issuer in March 1994. From
1980 to 1993, Mr. O'Brien served as Vice President -- Finance of Howmet
Corporation, an integrated manufacturer of components for gas turbine jet
engines and aircraft structural parts.
Mr. Walsh has been with Reeves since 1987, as Director of Human Resources.
In 1990, he was elected Vice President -- Administration of Reeves Brothers and,
in 1993, Vice President -- Administration of Reeves.
Mr. James W. Hart is the father of Ms. Fray and Messrs. Douglas B. Hart,
James W. Hart, Jr. and Steven W. Hart.
Directors of the Issuer, Reeves and Reeves Brothers are elected at each
annual meeting of the stockholders. The term of office of each director is from
the time of his election and qualification until the next annual meeting of
stockholders and until his successor shall have been duly elected and qualified,
unless such director shall have earlier been removed. Executive officers serve
at the discretion of the Boards of Directors of the Issuer, Reeves and Reeves
Brothers.
EXECUTIVE COMPENSATION
The Issuer has not heretofore paid or accrued any compensation for any of
its officers, directors or other employees. The following table sets forth
information concerning the cash compensation and

30
<PAGE>
cash equivalent remuneration paid or accrued by the Company for the years ended
December 31, 1993, 1992 and 1991 for those persons who were at December 31, 1993
(i) the chief executive officer and (ii) the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL
----------------------------------- OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION
<S> <C> <C> <C> <C>
Anthony L. Cartagine 1993 $ 256,357 $ 92,000 --
Vice President; President -- 1992 235,144 100,000 --
Apparel Textile Group 1991 205,430 112,500 --
Douglas B. Hart 1993 204,500 125,000 --
Senior Vice President -- 1992 -- 100,000 --
Operations 1991 -- 70,000 --
James W. Hart, Jr. 1993 398,750 380,000 --
President, Chief Executive 1992 365,000 200,000 --
Officer and Chief 1991 355,000 185,000 --
Operating Officer
Steven W. Hart 1993 398,750 230,000 --
Executive Vice President, 1992 365,000 200,000 $ 31,819(2)
Chief Financial Officer and 1991 355,000 185,000 --
Treasurer
V. William Lenoci 1993 293,750 142,000 --
Vice President; President and 1992 240,249 105,000 --
Chief Executive Officer -- 1991 204,079 87,500 19,272(3)
Industrial Coated Fabrics Group
<FN>
- ------------------------
(1) Annual bonus amounts are earned and accrued under the Management Incentive
Bonus Plan during the years indicated and paid subsequent to the end of
each year except for a portion of those amounts awarded and paid to the
executive officers during 1993. Also, a portion of those amounts awarded
during 1992 for James W. Hart, Jr., Steven W. Hart and Anthony L.
Cartagine were paid in 1992.
(2) Represents reimbursement of certain moving expenses.
(3) Represents the payment of certain life insurance premiums.
</TABLE>

EMPLOYMENT CONTRACTS
Reeves Brothers entered into employment agreements with Messrs. Cartagine
and Lenoci during 1991 that provide for base compensation and participation in
the Management Incentive Bonus Plan, plus certain other benefits.
DIRECTORS' COMPENSATION
The Issuer, Reeves and Reeves Brothers pay no remuneration to directors for
serving as such.

31
<PAGE>
PENSION PLANS
ANNUAL PENSION AT AGE 65 AFTER YEARS OF SERVICE

<TABLE>
<CAPTION>
REMUNERATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$125,000 $21,357 $30,732 $40,107 $49,482 $58,857
150,000 26,982 38,232 49,482 60,732 71,982
175,000 32,607 45,732 58,857 71,982 85,107
200,000 38,232 53,232 68,232 83,232 98,232
225,000 43,857 60,732 77,607 94,482 111,357
250,000 49,482 68,232 86,982 105,732 118,800
300,000 60,732 83,232 105,732 118,800 118,800
350,000 71,982 98,232 118,800 118,800 118,800
<FN>
- ------------------------
Notes to Pension Plan Table
(A)(1) Compensation covered by the tax-qualified salaried employees pension
plan each year is generally all compensation reported on a participant's Form
W-2. The plan's formula is based on average compensation for the participant's
highest five consecutive calendar years. However, except in the cases of Messrs.
Cartagine and Lenoci, compensation for any year is limited by the compensation
cap for that year under section 401(a)(17) of the Internal Revenue Code. For
1993, that limit is $235,840. A supplemental plan provides Messrs. Cartagine and
Lenoci the benefits limited under the tax-qualified plan.
(2) Starting in 1994, the maximum annual compensation that may be taken into
account is $150,000. Participants in the pension plan prior to 1994 may have
accrued higher benefits than those shown in the table to the extent their
average highest compensation exceeded $150,000. Those higher accrued benefits
are preserved by law.
(3) For 1994, the maximum benefit under the pension plan is $118,800.
(B) Years of service for named executive officers:
OFFICER YEARS OF SERVICE
Anthony L. Cartagine 30.02
Douglas B. Hart 4.42
James W. Hart, Jr. 9.68
Steven W. Hart 10.59
V. William Lenoci 26.63
(C) Benefits are computed on the basis of a straight life annuity and are reduced by 50%
of the participant's primary Social Security benefit.
</TABLE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Issuer's, Reeves' and Reeves Brothers' Boards of Directors do not have
compensation committees, and all final compensation decisions are made by the
respective Boards of Directors. The Reeves Brothers Salary Compensation
Committee, which is comprised of Douglas B. Hart, James W. Hart, Jr., Steven W.
Hart and Patrick M. Walsh, all of whom are officers of Reeves Brothers, advises
Reeves Brothers' Board with respect to compensation. See "Certain Transactions"
regarding transactions involving Douglas B. Hart, James W. Hart (as sole
director and principal stockholder of Hart Holding) and Steven W. Hart.
OWNERSHIP OF COMMON STOCK OF THE ISSUER AND REEVES

The Issuer is a wholly-owned subsidiary of Hart Holding. The following table
sets forth certain information at April 3, 1994 with respect to ownership of
Reeves and Hart Holding common stock by each person who is known to own
beneficially, or who may be deemed to own beneficially, more than

32
<PAGE>
5% of the outstanding shares of common stock, directors, the chief executive
officer, the other four most highly compensated executive officers and all
directors and executive officers as a group. Unless otherwise stated, common
stock is directly owned.

<TABLE>
<CAPTION>
REEVES
-----------------------------
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ---------------------------------------------------------------------------------- ------------------ ---------
<S> <C> <C>
Hart Holding Company Incorporated................................................. 35,021,666 100%
1120 Boston Post Road
Darien, CT 06820
Anthony L. Cartagine (1).......................................................... -- --
104 West 40th Street
New York, NY 10018
Douglas B. Hart................................................................... -- --
1120 Boston Post Road
Darien, CT 06820
James W. Hart (2)................................................................. 36,421,666 100%
1120 Boston Post Road
Darien, CT 06820
James W. Hart, Jr. (3)............................................................ -- --
1120 Boston Post Road
Darien, CT 06820
Steven W. Hart (4)................................................................ -- --
1120 Boston Post Road
Darien, CT 06820
V. William Lenoci (5)............................................................. -- --
Highway 29 South
Spartanburg, SC 29304
Directors and Executive Officers as a Group (6)................................... 36,421,666 100%
<FN>
- ------------------------
(1) As of April 3, 1994, Anthony L. Cartagine is the indirect beneficial owner
of 1,000 shares of Hart Holding's common stock, representing less than 1%
of such outstanding common stock.
(2) On January 26, 1994, James W. Hart was granted an option to purchase up to
3,800,000 shares of common stock of Reeves, which has an expiration date
of December 31, 2023. The option is exercisable at $.56 per share for
1,400,000 shares (exercisable immediately), $.75 per share for 1,400,000
shares (exercisable one year from grant date) and $1.00 per share for
1,000,000 shares (exercisable two years from grant date). Mr. James W.
Hart and Hart Holding may be deemed to be controlling persons of the
Issuer.
As of April 3, 1994, James W. Hart is the beneficial owner of 13,623,507
shares of Hart Holding common stock (94.6%), of which (i) 12,123,507
shares are owned directly, and (ii) 1,500,000 shares are subject to a
presently exercisable option (the "Hart Holding Option") issued in
November 1993. The Hart Holding Option expires on December 31, 2028 and
provides for the issuance of up to 4,000,000 shares upon exercise of
options as follows: 1,500,000 immediately exercisable at $2.25 per share;
1,500,000 exercisable one year from grant date at $2.50 per share; and
1,000,000 exercisable two years from grant date at $2.75 per share.
(3) As of April 3, 1994, James W. Hart, Jr. is the beneficial owner of 60,300
shares of Hart Holding common stock (representing less than 1% of such
outstanding common stock), of which 300 shares are owned directly and the
balance is subject to a presently exercisable option.
(4) As of April 3, 1994, Steven W. Hart is the beneficial owner of 240,300
shares of Hart Holding common stock (1.9%), of which 180,300 shares are
owned directly and the balance is subject to a presently exercisable
option.
</TABLE>

33
<PAGE>

<TABLE>
<S> <C>
(5) As of April 3, 1994, V. William Lenoci is the beneficial owner of 5,000
shares of Hart Holding common stock, representing less than 1% of such
outstanding common stock.
(6) As of April 3, 1994, the directors and executive officers of Hart Holding
as a group beneficially own an aggregate of 13,930,107 shares of Hart
Holding common stock (96%).
</TABLE>

CERTAIN TRANSACTIONS
In connection with the acquisition of the Company, Hart Holding, the
Company, Reeves Brothers and three subsidiaries of Reeves Brothers entered into
a Tax Allocation Agreement dated as of May 1, 1986, which has been amended and
restated from time to time including to add the Issuer as a party (the "Tax
Agreement"). The Tax Agreement provides that Hart Holding and its subsidiaries
will file consolidated federal income tax returns as long as they remain members
of the same affiliated group. The Issuer also may be included in certain state
and local tax returns of Hart Holding. Pursuant to the Tax Agreement, the
Company and its subsidiaries generally will pay to the Issuer amounts equal to
the taxes that the Company and its subsidiaries would otherwise have to pay if
they were to file separate federal, state or local income tax returns but for
the use of tax deductible items of the Issuer.
Hart Holding charges a management fee and allocates portions of its
corporate expenses to Reeves on a monthly basis. The management fee and expense
allocation aggregated $1.2 million, $1.9 million and $1.8 million for the years
ended December 31, 1991, 1992 and 1993, respectively.
Effective December 31, 1991, Hart Holding exchanged its 1,000 shares of
Reeves' Series I Preferred Stock, par value $1.00 per share, valued in the
aggregate at $9,410,000, for 18,820,000 shares of Reeves' common stock, valued
at $.50 per share. This transaction resulted in Hart Holding's percentage
ownership in Reeves' common stock increasing from 86.7% to 93.5%.
During 1992, Reeves purchased from three officers of Reeves, Ms. Fray,
Douglas B. Hart, and Steven W. Hart, their residences for $215,000, $225,000 and
$575,000, respectively. In each case, the price paid was less than a current
appraisal on such property or, in the case of Ms. Fray, less than the cost of
such property in 1990 plus the cost of improvements. The Board of Directors
determined at the time that the price for each residence was not greater than
the fair market value for such property. During 1993, two of the residences were
sold by the Company and the remaining residence which has a carrying value of
$244,000 at December 31, 1993, is presently being marketed for sale.
Effective October 25, 1993, HHCI, Inc., a newly formed, wholly-owned
subsidiary of Hart Holding, merged with and into Reeves with Reeves surviving
the merger. HHCI, Inc. was formed as a shell corporation (no operations) with a
$300,000 capital contribution from Hart Holding. As a result of this merger,
Hart Holding obtained ownership of 100% of the outstanding shares of common
stock of Reeves and the other stockholders of Reeves received $.56 in cash for
each share held by such stockholders.
In November 1993, James W. Hart was granted the Hart Holding Option. The
Hart Holding Option grants Mr. Hart the right to purchase up to 4,000,000 shares
of Hart Holding's common stock and is exercisable (i) immediately, with respect
to 1,500,000 shares at an exercise price of $2.25 per share; (ii) from and after
November 1994, with respect to 1,500,000 shares at an exercise price of $2.50
per share; and (iii) from and after November 1995, with respect to 1,000,000
shares at an exercise price of $2.75 per share. The Hart Holding Option expires
on December 31, 2028. The Hart Holding Option was granted in consideration of
cancellation of outstanding options entitling Mr. Hart to purchase an aggregate
of 3,050,000 shares of common stock at an exercise price of $.375 per share for
2,000,000 shares exercisable through June 13, 2000 and an exercise price of
$1.88 per share for 1,050,000 shares exercisable through December 31, 2002. The
Hart Holding Option was the only stock option granted by Hart Holding during
1993. Hart Holding does not believe that it is possible to determine a
meaningful market price of its common stock as of the date of grant of the Hart
Holding Option or any subsequent date.

The Issuer and the Company believe that all of the foregoing transactions
were conducted, and it is the policy of the Issuer and the Company to conduct
all related party transactions, on terms as favorable to the Issuer and the
Company as could be expected from unaffiliated parties.

34
<PAGE>
DESCRIPTION OF DEBENTURES
The Debentures are to be issued under an indenture dated as of , 1994
(the "Indenture") between the Issuer and The First National Bank of Boston, as
Trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following summary
of certain provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture. Wherever particular
sections or defined terms of the Indenture are referred to, such sections or
defined terms are incorporated herein by reference. Capitalized terms not
otherwise defined below or elsewhere in this Prospectus have the meanings given
to them in the Indenture.
GENERAL
The Debentures will represent senior unsecured obligations of the Issuer and
rank PARI PASSU with all senior debt obligations which the Issuer may incur and
senior to all subordinated debt obligations which the Issuer may incur and be
limited to $ in aggregate principal amount at maturity ($100 million
initially, fully accreting to face amount on , 1999).

All of the Issuer's assets are held through its subsidiaries, and the
Debentures will be effectively subordinated to all rights of third party
creditors of the Issuer's subsidiaries. As of April 3, 1994, after giving effect
to the Offering and the application of the proceeds therefrom as described in
"Use of Proceeds", the amount of obligations of the Issuer's subsidiaries,
excluding intercompany obligations, would have been approximately $172.7
million. The Indenture will contain certain limitations on the ability of the
Issuer and its Restricted Subsidiaries to incur additional Indebtedness.

The Debentures will mature on , 2006. Although for federal income tax
purposes a significant amount of original issue discount, taxable as ordinary
income, will be recognized by a holder of Debentures, no cash interest will be
payable with respect to the Debentures prior to , 1999. See "Certain
Federal Income Tax Considerations Concerning The Debentures." Commencing
, 1999, interest on the Debentures will be payable in cash semi-annually,
in arrears, on each and (each an "Interest Payment Date") to the
persons in whose names the Debentures are registered at the close of business on
the preceding and , respectively. Interest will accrue from the
most recent Interest Payment Date to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for, from
, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Debentures will bear interest until maturity at the
rate set forth on the cover page of the Prospectus.

The Debentures are issuable only in registered form, without coupons.
Principal and premium, if any, and interest on each Debenture will be payable,
and the Debentures may be presented for transfer or exchange, at the office or
agency of the Issuer maintained for such purpose. At the option of the Issuer,
payment of interest may be made by check mailed to registered holders of the
Debentures at the addresses set forth on the registry books maintained by the
Trustee, who will initially act as registrar for the Debentures. No service
charge will be made for any exchange or registration of transfer of Debentures,
but the Issuer may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Unless otherwise designated
by the Issuer, the Issuer's office or agency will be the Corporate Trust Office
of the Trustee.

35
<PAGE>
OPTIONAL REDEMPTION
The Issuer, at its option, may redeem the Debentures as a whole, or from
time to time in part, on or after , 1999 at the redemption prices
(expressed as a percentage of the principal amount thereof) set forth below (in
each case together with accrued and unpaid interest to the redemption date):

<TABLE>
<CAPTION>
IF REDEEMED DURING THE 12-MONTH PERIOD
BEGINNING , REDEMPTION PRICE
<S> <C>
1999........................................................... %
2000........................................................... %
2001........................................................... %
2002 and thereafter............................................ 100.000%
</TABLE>

Notwithstanding the foregoing, during the first 36 months after the
completion of the Offering, the Issuer may redeem up to one-half of the
aggregate face amount of the Debentures with the net proceeds of public sales of
common stock of the Issuer (or of Hart Holding, to the extent the net proceeds
thereof are contributed as a capital contribution in exchange for common or
preferred stock of the Issuer) at a redemption price of % of the Accreted
Value thereof; PROVIDED that after giving effect thereto at least one-half of
the aggregate face amount of Debentures initially issued remains outstanding.
Notice of redemption will be sent, by first-class mail, postage prepaid, at
least 30 days and not more than 60 days prior to the date fixed for redemption
to each holder of Debentures to be redeemed at the last address for such holder
then shown on the registry books. On and after the redemption date, interest
will cease to accrue on the Debentures or part thereof called for redemption. In
case of a partial redemption, selection of the Debentures or portions thereof
for redemption shall be made by the Trustee by lot, pro rata or in such manner
as it shall deem appropriate and fair.
CERTAIN COVENANTS
The Indenture contains, among other things, the following covenants:
CHANGE OF CONTROL

Upon the occurrence of a Change of Control (as defined) (the "Change of
Control Date"), each holder of a Debenture will have the right to require the
repurchase of such holder's Debentures pursuant to the offer described in the
next paragraph (the "Change of Control Offer") at a purchase price equal to 101%
of the Accreted Value thereof, plus accrued and unpaid interest, if any, to the
date of purchase.

Within 30 days following a Change of Control Date, the Issuer will mail a
notice to each Debentureholder, with a copy to the Trustee, stating, among other
things: (1) that a Change of Control has occurred and that such holder has the
right to require the Issuer to repurchase such holder's Debentures at a
repurchase price in cash equal to 101% of the Accreted Value thereof, plus, if
occurring after , 1999, accrued and unpaid interest, if any, to the
date of repurchase; (2) the circumstances and relevant facts regarding such
Change of Control (including relevant information with respect to the
transaction giving rise to such Change of Control); (3) the repurchase date
specified by the Issuer (which shall be not earlier than 35 days or later than
60 days after the date such notice is mailed) (the "Repurchase Date"); and (4)
the instructions determined by the Issuer consistent with the Indenture that a
holder of Debentures must follow in order to have its Debentures repurchased.
Holders of Debentures will have the right to have their Debentures repurchased
by the Issuer if such Debentures are tendered for repurchase at any time prior
to the close of business on the second business day prior to the Repurchase
Date. Holders may withdraw their election, in whole or in part, at any time
prior to a date specified by the Issuer in such notice which shall be no earlier
than the close of business on the fifth business day prior to the applicable
Repurchase Date (or such shorter period as may be required by applicable law).

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"Change of Control" means the occurrence of an event whereby a Person or
group of Persons acting in concert as a partnership or other group (a "Group")
(other than the Control Group or an Affiliate of the Control Group) shall, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, have become the direct or indirect beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of
the Issuer, Reeves or Reeves Brothers (a) representing 50% or more of the
combined voting power of the then outstanding securities of the Issuer, Reeves
or Reeves Brothers ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors ("Voting
Securities") or (b) if the Control Group and its Affiliates shall beneficially
own less than 50% of the outstanding Voting Securities, representing a
percentage greater than the percentage of Voting Securities so owned by the
Control Group and its Affiliates. The "Control Group" will mean Jennifer H.
Fray, Douglas B. Hart, James W. Hart, James W. Hart, Jr., Steven W. Hart and
their respective heirs and Affiliates.

In the event a Change of Control occurs and any repurchase pursuant to the
foregoing constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act, the Issuer will comply with the requirements of Rule 14e-1 as then
in effect, to the extent applicable, and any other applicable securities laws or
regulations with respect to such repurchase.
The Issuer could, in the future, enter into certain significant transactions
that would not constitute a Change of Control with respect to the Change of
Control purchase feature of the Debentures. Among the transactions that would
not necessarily constitute a Change of Control are a merger or consolidation or
the sale or transfer of all or substantially all of the Issuer's assets. In
addition, the Change of Control provisions of the Indenture will have limited
applicability to transactions involving the members of the Control Group and
their Affiliates as participants. Accordingly, all of the Issuer's assets could
be sold, or the Issuer could be merged or consolidated with another Affiliate of
the members of the Control Group, without the Change of Control provisions being
triggered. Any such transaction could have an adverse effect on the holders of
the Debentures. However, certain of such transactions, including mergers,
consolidations and the sale of all or substantially all of the Issuer's assets
(other than such a transaction with a Restricted Subsidiary of the Issuer)
cannot be effected except in compliance with other provisions of the Indenture.
See "Limitation on Consolidation and Merger" and "Certain Definitions."
LIMITATION ON INDEBTEDNESS
The Indenture provides that the Issuer will not create, incur, assume,
guarantee or otherwise become liable for, and will not permit any of its
Restricted Subsidiaries to create, incur, assume, guarantee or otherwise become
liable for, any Indebtedness, except for Permitted Indebtedness; PROVIDED that
the accrual of interest and accretion of original issue discount shall not be
deemed an incurrence of Indebtedness.
Notwithstanding the foregoing, the Issuer and its Restricted Subsidiaries
may create, incur, assume, guarantee or otherwise become liable for Indebtedness
(other than guarantees of Indebtedness the incurrence of which would not be
permitted under the Indenture) if, at the time such Indebtedness is so created,
incurred or assumed and after giving effect thereto and the application of the
proceeds therefrom as reasonably anticipated by the Issuer, the Fixed Charge
Coverage Ratio of the Issuer for the four most recent fiscal quarters for which
financial information is available shall not be less than 1.6 to 1.0 in respect
of Indebtedness incurred prior to June 30, 1995 and 1.75 to 1.0 in respect of
Indebtedness incurred thereafter.
For purposes of calculating the Fixed Charge Coverage Ratio referred to
above, (i) if the Indebtedness to be created, incurred or assumed is
Indebtedness of an entity which is to be acquired by, and made a Restricted
Subsidiary of, the Issuer or of a Restricted Subsidiary (whether or not such
Indebtedness was incurred by such entity in connection with such acquisition),
or is Indebtedness incurred by the Issuer or any Restricted Subsidiary in
connection with such acquisition, then the Fixed Charge Coverage Ratio of the
Issuer shall be determined on a pro forma basis giving effect to

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both the Fixed Charges related to such additional Indebtedness as well as the
Consolidated Cash Flow of the entity to be acquired and (ii) there shall be
excluded from Fixed Charges any interest expense (including amortization of
original issue discount and non-cash interest payments or accruals) or dividend
expense related to any Indebtedness repaid during the pro forma period or at the
time of such acquisition and which is not outstanding at the time of such
calculation or is required to be repaid as a result of such transaction, other
than Fixed Charges related to Indebtedness incurred, created or assumed pursuant
to clause (i) of the definition of Permitted Indebtedness (but only with respect
to Indebtedness which may be incurred, created or assumed subsequent to the date
of the Indenture and as of the date of such calculation).
LIMITATION ON RESTRICTED PAYMENTS
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, make any Restricted Payment if, after giving
effect thereto (i) an Event of Default, or an event that through the passage of
time or the giving of notice, or both, would become an Event of Default, shall
have occurred and be continuing, (ii) the Issuer could not incur an additional
$1.00 of Indebtedness (other than Permitted Indebtedness) in accordance with the
"Limitation on Indebtedness" or (iii) the aggregate amount of all Restricted
Payments made and the amount of Investments then outstanding pursuant to clause
(vi)(y) under "Limitation on Investments" by the Issuer and its Restricted
Subsidiaries (the amount expended, distributed or invested for such purposes, if
other than in cash, to be determined in good faith by a resolution of the Board
of Directors of the Issuer) from and after the date of the Indenture shall
exceed the sum of (a) 50% of Consolidated Net Income of the Issuer accrued for
the period (taken as one accounting period) commencing with the date of the
Indenture to and including the date of such calculation (or, in the event
Consolidated Net Income is a deficit, then minus 100% of such deficit); and (b)
the aggregate net proceeds, including the fair market value of property other
than cash (as determined in good faith by a resolution of the Board of Directors
of the Issuer), received by the Issuer from the issuance or sale (other than to
a Subsidiary of the Issuer) of its capital stock (other than Redeemable Stock),
including the issuance of its capital stock upon conversion of securities other
than its capital stock, and options, warrants and rights to purchase its capital
stock (other than Redeemable Stock), from and after the date of the Indenture.

The foregoing clauses (ii) and (iii) will not prevent (x) the making of
Restricted Payments in an aggregate amount not in excess of $15,000,000 or (y)
Investments permitted to be made pursuant to clause (vi)(x) of the "Limitation
on Investments." The provisions of the foregoing paragraph will not prevent (a)
the payment of any dividend within 60 days after the date of its declaration if
such dividend could have been made on the date of its declaration in compliance
with the foregoing provisions, (b) the repurchase, redemption or retirement or
other acquisition of shares of capital stock of the Issuer or a Restricted
Subsidiary in exchange for or out of the proceeds of a substantially concurrent
issue and sale (other than to a Subsidiary) of other shares of capital stock
(other than Redeemable Stock) of such person, or (c) the repurchase, redemption,
retirement or other acquisition of Indebtedness of the Issuer with the proceeds
of Indebtedness of the Issuer incurred pursuant to and in accordance with the
"Limitation on Indebtedness"; PROVIDED that the Indebtedness incurred shall be
subordinated to the Debentures to the same extent as the Indebtedness being
repurchased, redeemed, retired or otherwise acquired, and shall not shorten the
maturity of such Indebtedness or provide that any such new Indebtedness shall
have an average life to maturity shorter than the remaining average life to
maturity of the Debentures. In the cases of clauses (b) and (c) above, the net
proceeds received shall not be included in the calculation of net proceeds in
clause (iii)(b) of the preceding paragraph and any repurchase, redemption,
retirement or other acquisition of Indebtedness permitted therein shall not
constitute a Restricted Payment.

LIMITATION ON LIENS
The Indenture provides that the Issuer will not, directly or indirectly,
create, incur, assume or permit to exist any Lien (including Liens on the
capital stock of Reeves) except for Permitted Liens upon or with respect to any
of its property, whether owned at the date of the Indenture or thereafter
acquired, or on any income or profits therefrom or assign or otherwise convey
any right to receive

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income, unless the Debentures are secured equally and ratably simultaneously
with or prior to the creation, incurrence or assumption of such Lien. This
provision does not preclude Liens on the assets of the Issuer's subsidiaries.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Issuer will not, and will not permit any
Restricted Subsidiary to, enter into any Sale and Leaseback Transaction unless
(i) the Issuer would be able to incur Indebtedness (other than Permitted
Indebtedness) in an amount equal to the Attributable Debt with respect to such
Sale and Leaseback Transaction or (ii) where the Issuer or such Restricted
Subsidiary receives consideration from such Sale and Leaseback Transaction at
least equal to the fair market value of the property subject thereto (which
shall be determined in good faith by a resolution of the Board of Directors) and
applies the Net Proceeds of such Sale and Leaseback Transaction in accordance
with the provisions set forth in "Limitation on Dispositions of Assets."
LIMITATION ON DISPOSITIONS OF ASSETS

The Indenture provides that the Issuer will not, and will not permit any
Restricted Subsidiary to, (i) sell, transfer, lease, convey or otherwise dispose
of any assets (other than (a) an asset disposition in the ordinary course of
business consistent with past practice or (b) permitted under "Limitation on
Consolidation and Merger" which constitutes a transfer, conveyance, sale, lease
or other disposition of all or substantially all of the Issuer's assets or (c) a
disposition of assets in exchange for assets of a like kind having an equivalent
value) or (ii) issue or sell Equity Interests in any of its Restricted
Subsidiaries other than sales of preferred stock permitted by "Limitation on
Indebtedness," in the case of either (i) or (ii) above, unless (A) the
consideration to be received by the Issuer (or the Restricted Subsidiary, as the
case may be), measured at the date of the execution of a definitive agreement
relating to such disposition, is at least equal to the fair market value of the
assets disposed of (which shall be determined in good faith by a resolution of
the Board of Directors of the Issuer), and (B) the consideration for such
disposition consists of at least 75% cash, PROVIDED, HOWEVER, that if, after
giving effect to such asset disposition and the anticipated use of the proceeds
thereof as reasonably determined by the Board of Directors, the Fixed Charge
Coverage Ratio of the Issuer is at least 3.5 to 1.0, at least 65% of the
consideration received is required to be in cash, and PROVIDED, FURTHER, that
for purposes of this provision the amount of any Indebtedness assumed by the
transferee and any notes or other obligations received by the Issuer or a
Restricted Subsidiary which are immediately converted into cash shall be deemed
to be "cash." Within 12 months from the date of such disposition, the Net
Proceeds thereof shall be (x) applied to capital expenditures of the Issuer and
the Restricted Subsidiaries, or committed to such use by a definitive contract,
and such Net Proceeds shall actually be so applied within 18 months from the
date of such disposition, (y) used by the Issuer or a Restricted Subsidiary to
acquire additional assets or to make an Investment in entities which, after
giving effect to such Investment, will become Restricted Subsidiaries, or
committed to any such use by a definitive contract, and such Net Proceeds shall
actually be so applied within 18 months from the date of such disposition, or
(z) applied to repurchase or redeem Indebtedness of the Issuer permitted by
clause (i) of the definition of Permitted Indebtedness or Indebtedness of a
Restricted Subsidiary. To the extent that Net Proceeds from such disposition are
not so applied, the Issuer (or the Restricted Subsidiary, as the case may be)
shall use the remaining Net Proceeds (less any amount of Net Proceeds used to
pay reasonable fees and expenses connected with an offer to purchase hereunder)
to make an offer to purchase Debentures (together with any bank or secured debt
which ranks PARI PASSU with the Debentures, on a pro rata basis) pursuant to an
offer to purchase at a price of not less than 100% of the Accreted Value
thereof, plus accrued and unpaid interest, if any. If at any time any non-cash
consideration received by the Issuer or a Restricted Subsidiary in respect of a
disposition of assets is converted into or sold or otherwise disposed of for
cash, then such cash shall constitute Net Proceeds for purposes of this
provision and shall be applied in accordance with the preceding two sentences.
No offer to purchase shall be required to be made in respect of an asset
disposition or series of related asset dispositions with Net Proceeds of
$2,500,000 or less.

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Notwithstanding the foregoing, if at the time an offer to purchase the
Debentures is required to be made by a Restricted Subsidiary, to the extent that
any or all of the Net Proceeds of any disposition of assets is prohibited (by
law or by contract) from being used to make such an offer, the portion of such
Net Proceeds so affected will not be required to be applied to such an offer
pursuant to this provision but may be retained for so long, but only for so
long, as such restriction exists (the Issuer will agree in the Indenture to
promptly take all reasonable actions, not involving undue burden or expense, to
remove such restriction), and once the use of any affected Net Proceeds is
permitted, such Net Proceeds will be applied in the manner set forth above as if
such disposition of assets had occurred on the date the restrictions were
removed.
LIMITATION ON RESTRICTING SUBSIDIARY DIVIDENDS
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, create, assume or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to pay dividends or make any other distributions in
respect of such Restricted Subsidiary's capital stock or otherwise transfer cash
or assets or make loans or advances to the Issuer or any other Restricted
Subsidiary, or pay Indebtedness owing to the Issuer or any other Restricted
Subsidiary except: (i) restrictions contained in Liens permitted by the
Indenture securing Indebtedness permitted by the Indenture to the extent such
restrictions restrict the transfer of property subject to such Liens; (ii) any
encumbrance or restriction consisting of customary non-assignment provisions in
leases to the extent such provisions restrict the transfer of the leases; (iii)
any encumbrance or restriction with respect to Indebtedness of the Issuer or any
Restricted Subsidiary that is no less favorable to the Issuer and its Restricted
Subsidiaries than those in effect on the date of the Indenture; or (iv)
consensual encumbrances or restrictions binding upon any person at the time such
person becomes a Restricted Subsidiary of the Issuer, if such encumbrance or
restriction is not created, incurred or assumed in contemplation of such person
becoming a Restricted Subsidiary of the Issuer. The 11% Senior Note Indenture
and the Bank Credit Agreement currently prohibit dividends and other
distributions to the Issuer. Consequently the Company and Restricted
Subsidiaries will be able to enter into encumbrances and restrictions that may
prevent or restrict the payment of dividends or other distributions to the
Issuer. See "Description of Other Indebtedness."
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, enter into transactions with Affiliates of the
Issuer (other than the Issuer and its Wholly-owned Restricted Subsidiaries)
except for Permitted Transactions, transactions in respect of Restricted
Payments made in accordance with the "Limitation on Restricted Payments" and
transactions the terms of which the Board of Directors of the Issuer (including
a majority, if any, of the disinterested directors) determines, by resolution,
are fair and reasonable to the Issuer or, if the Issuer is not a party to such
transaction, such Restricted Subsidiary, as the case may be, and are at least as
favorable as the terms which could be obtained by the Issuer or, if the Issuer
is not a party to such transaction, such Restricted Subsidiary, as the case may
be, in a comparable transaction made on an arm's length basis between
unaffiliated parties; PROVIDED that, with respect to the purchase or disposition
of assets of the Issuer or any of its Restricted Subsidiaries, other than the
purchase of inventory in the ordinary course of business, having a purchase
price in excess of $15 million, the Issuer shall, in addition to obtaining such
approval of its Board of Directors, obtain a written opinion of an Independent
Financial Advisor stating that the terms of such transaction are fair and
reasonable to the Issuer or its Restricted Subsidiary, as the case may be, and
are at least as favorable to the Issuer or such Restricted Subsidiary, as the
case may be, as could have been obtained on an arm's length basis between
unaffiliated parties.
LIMITATION ON INVESTMENTS
The Indenture provides that the Issuer will not, and will not permit any
Restricted Subsidiary to, make any Investments in any other person, except (i)
Investments in the Issuer or in any other Restricted Subsidiary by any
Restricted Subsidiary or by the Issuer in a Restricted Subsidiary;

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(ii) receivables owing to the Issuer or its Restricted Subsidiaries created in
the ordinary course of business and payable or dischargeable substantially in
accordance with customary trade terms; (iii) Permitted Transactions; (iv)
Investments made in Cash Equivalents; (v) Investments permitted to be made
pursuant to the "Limitation on Dispositions of Assets"; and (vi) Investments in
Unrestricted Subsidiaries (or an entity (or entities) which, after giving effect
to such Investment becomes an Unrestricted Subsidiary), or any partnership or
joint venture of which less than a majority of the equity ownership thereof is
directly or indirectly owned by the Issuer or a Restricted Subsidiary (or an
entity (or entities) which, after giving effect to such transaction, becomes
such a partnership or joint venture), not otherwise permitted by clauses (i)
through (v) above, in an aggregate amount not exceeding at any time outstanding
the sum of (x) $15,000,000 and (y) an amount which is equal to the amount of
Restricted Payments permitted at such time to be made pursuant to the
"Limitation on Restricted Payments."
LIMITATION ON CONSOLIDATION AND MERGER
The Indenture provides that the Issuer will not consolidate with or merge
with or into another person or directly or indirectly sell, transfer, lease or
convey all or substantially all of its assets to another person unless: (i)(a)
the Issuer is the continuing corporation in the case of a merger or (b) the
resulting, surviving or transferee entity (the "Surviving Entity") is a
corporation or partnership organized under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes by supplemental
indenture in a form reasonably satisfactory to the Trustee all of the
obligations of the Issuer under the Indenture and the Debentures; (ii) no Event
of Default (or event or condition which after notice or lapse of time or both
would become an Event of Default) shall have occurred and be continuing
immediately after giving effect to such transaction; (iii) the Consolidated Net
Worth of the Issuer or the Surviving Entity, as the case may be, on a pro forma
basis after giving effect to such consolidation, merger or sale, transfer, lease
or conveyance of assets (but prior to any purchase accounting adjustments
resulting from the transaction) is at least as great as the Consolidated Net
Worth of the Issuer immediately prior to the date of the transaction, and (iv)
immediately after giving effect to such transaction, the Issuer or the Surviving
Entity, as the case may be, would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the "Limitation on
Indebtedness" as if, in the case of the Surviving Entity, such Person were the
Issuer.
Notwithstanding the foregoing, clauses (iii) and (iv) shall not prohibit (i)
a transaction, the principal purpose of which is (as determined in good faith by
the Board of Directors of the Issuer and evidenced by a resolution thereof) to
change the state of incorporation of the Issuer, and such transaction does not
have as one of its purposes the evasion of the restrictions of this section; or
(ii) a merger or consolidation by the Issuer with or into, or sale of all or
substantially all of the assets of the Issuer to, a Restricted Subsidiary.
SUPPLEMENTAL INDENTURES
The Indenture permits the Issuer and the Trustee, without notice to or the
consent of the holders of the Debentures, to amend or supplement the Indenture
or the Debentures for certain specified purposes, including curing ambiguities,
defects or inconsistencies, providing for the assumption of the Issuer's
obligations to the holders under certain circumstances, providing for
uncertificated Debentures, to maintain compliance with the Trust Indenture Act
of 1939, as amended, and to make any change that does not adversely affect the
rights of the holders. Other amendments or supplements to the Indenture or the
Debentures may be made with the consent of the holders of not less than a
majority in principal amount of the Debentures at the time outstanding, and such
amendments or supplemental indentures will be binding on every holder whether or
not such holder has consented thereto, provided that no such modification,
amendment or supplemental indenture shall, without the consent of holders of all
Debentures then outstanding, (a) extend the final maturity of any Debenture, or
reduce the principal amount thereof (including the amount payable upon
redemption), reduce the rate or extend the time of payment of interest thereon,
or impair or affect the right of any holder of

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Debentures to institute suit for the payment of any of the Debentures or (b)
reduce the aforesaid percentage of Debentures, the consent of holders of which
is required for any such supplemental indenture.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as being: (a) any failure to pay
an installment of interest on the Debentures as and when the same becomes due
and payable and such failure continues for 30 days; (b) failure to pay all or
any part of the principal on the Debentures when and as the same shall become
due and payable at maturity, redemption or repurchase, by declaration or
otherwise; (c) failure by the Issuer duly to observe or perform any covenant or
agreement contained in the Debentures or the Indenture which failure continues
for a period of 30 days after written notice specifying such failure and
demanding that the Issuer remedy the same has been given to the Issuer by the
Trustee or to the Issuer and the Trustee by holders of at least 25% in aggregate
principal amount of Debentures then outstanding; (d) certain events of
bankruptcy, insolvency or reorganization in respect of the Issuer or any
Restricted Subsidiary; (e) any default in Indebtedness (whether such
Indebtedness now exists or is hereafter created) by the Issuer or a Restricted
Subsidiary if either (i) such default results from the failure to pay when due
(including upon acceleration) interest (after giving effect to any applicable
grace period provided for in such Indebtedness) or principal under any such
Indebtedness if such default has not been waived by or on behalf of the holders
of such Indebtedness or (ii) as a result of such default, the maturity of such
Indebtedness has been accelerated prior to its stated maturity and the
outstanding aggregate principal amount of all such defaulted or accelerated
Indebtedness exceeds $5,000,000 if such default has not been waived or such
acceleration has not been rescinded by or on behalf of the holders of such
Indebtedness; and (f) the rendering of final judgments not covered by insurance
aggregating in excess of $5,000,000 against the Issuer or any of its Restricted
Subsidiaries which are not stayed, satisfied or discharged within 60 days after
such judgments become final and nonappealable. The Indenture provides that if a
default (the term "default" for purposes of this provision being defined as any
event or condition which is, or with notice or lapse of time or both would be,
an Event of Default) occurs and is continuing and if it is known to the Trustee,
the Trustee must, within 90 days after the occurrence of such default, give to
the holders of Debentures notice of such default, PROVIDED that, except in the
case of a default in payment of principal or interest in respect of such
Debentures, the Trustee will be protected in withholding such notice if it in
good faith determines that the withholding of such notice is in the interests of
the holders of Debentures.

If an Event of Default shall occur and be continuing (other than an Event of
Default described in clause (d) of the preceding paragraph relating to the
Issuer), unless the principal of all the Debentures shall have already become
due and payable, either the Trustee or the holders of not less than 25% in
aggregate Accreted Value of the Debentures then outstanding, by notice in
writing to the Issuer (and to the Trustee if given by holders of Debentures),
may declare the Accreted Value of all Debentures and accrued and unpaid
interest, if any, thereon, to be due and payable immediately and upon any such
declaration the same shall become due and payable. If an Event of Default
specified in clause (d) above relating to the Issuer occurs, the Accreted Value
of and accrued and unpaid interest, if any, on all outstanding Debentures shall
become immediately due and payable without any declaration or other act on the
part of the Trustee or any holder of Debentures.

The provisions described in the preceding paragraph, however, are subject to
the condition that if, at any time after the Accreted Value of the Debentures
shall have been so declared due and payable, and before any judgment or decree
for the payment of the monies due shall have been obtained or entered, the
Issuer shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest, if any, upon all the Debentures and the
Accreted Value of any and all Debentures which shall have become due other than
by acceleration (with interest, if any, upon such Accreted Value and, to the
extent that payment of such interest is enforceable under applicable law, on
overdue installments of interest, at the rate borne by the Debentures, to the
date of such payment or deposit) and such amount as shall be sufficient to cover
reasonable compensation to the Trustee and

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each predecessor Trustee, their respective agents, attorneys and counsel, and
all other reasonable expenses and liabilities incurred, and all reasonable
advances made, by the Trustee and each predecessor Trustee and such agents,
attorneys and counsel except as a result of negligence or bad faith, and if any
and all Events of Default under the Indenture, other than the non-payment of the
Accreted Value of Debentures which shall have become due by acceleration, shall
have been cured, waived or otherwise remedied as provided in the Indenture, then
and in every such case, holders of a majority in aggregate principal amount of
the Debentures then outstanding, by written notice to the Issuer and the
Trustee, may waive all defaults or Events of Default and rescind and annul such
declaration and its consequences, but no such waiver or rescission and annulment
shall extend to or shall affect any subsequent default or impair any right
consequent thereon.

Prior to the declaration of acceleration of the maturity of the Debentures,
the holders of a majority in aggregate principal amount of the Debentures at the
time outstanding may waive on behalf of all the holders of Debentures any past
default, or Event of Default, except a default in the payment of principal of or
interest on any Debentures or a default with respect to any covenant or
provision which cannot be modified or amended without the consent of the holder
of each outstanding Debenture affected. The Trustee is under no obligation to
exercise any of its rights or powers under the Indenture at the request, order
or direction of any of the holders of Debentures unless such holders of
Debentures have offered to the Trustee adequate indemnity. Subject to all the
provisions of the Indenture and applicable law, the holders of a majority in
aggregate principal amount of the Debentures at the time outstanding have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee.

The Issuer is required to furnish the Trustee, promptly upon becoming aware
of any default under the Indenture, an officer's certificate specifying such
default and within 120 days after the end of each fiscal year, an officers'
certificate signed by its principal executive officer, principal financial
officer or principal accounting officer to the effect that such officers have
conducted, or supervised, a review of the activities of the Issuer and its
Restricted Subsidiaries and of performance under the Indenture and that, to the
best of such officers' knowledge, based on their review, the Issuer has
fulfilled all of its obligations under the Indenture, or, if there has been a
default, specifying each default known to them, its nature and its status.
DEFEASANCE
Under the terms of the Indenture and the Debentures, the Issuer, at its
option, (a) will be Discharged (as defined in the Indenture) from any and all
obligations in respect of the Debentures (except in each case for certain
obligations to register the transfer or exchange of Debentures, replace stolen,
lost or mutilated Debentures, maintain paying agencies and hold moneys for
payment in trust) or (b) need not comply with the covenants of the Indenture nor
be subject to the operation of the cross acceleration provisions described under
"Events of Default and Remedies," in each case, if the Issuer irrevocably
deposits with the Trustee, in trust, money or U.S. Government Obligations (as
defined in the Indenture) which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of and interest on the Debentures on the dates
such payments are due in accordance with the terms of the Debentures.
To exercise the option under clause (a) above, the Issuer is required to
deliver to the Trustee (i) an opinion of counsel, based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax law
occurring after the date of this Prospectus, that the holders of the Debentures
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, and (ii) an officers' certificate and opinion
of counsel stating that all conditions precedent to such defeasance have been
satisfied. No such opinion of counsel is required to effect a defeasance under
clause (b) above. Under current federal income tax law, it is possible that a
defeasance under clause (b) might be treated as a taxable exchange

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<PAGE>
of the Debentures for an interest in the trust. For a discussion of the federal
income tax consequences of such a deemed taxable exchange, see "Certain Federal
Income Tax Considerations Concerning The Debentures -- Sale, Exchange,
Redemption, Retirement, Defeasance or Other Disposition." Prospective investors
are urged to consult their own tax advisors as to the specific consequences of
such a defeasance.
In the event the Issuer exercises its option under clause (b) of the second
preceding paragraph and the Debentures are declared due and payable because of
the occurrence of any Event of Default (other than the cross acceleration
provisions described under "Events of Default and Remedies" which will be
inapplicable), the amount of money and U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Debentures at the
time of their stated maturity but may not be sufficient to pay amounts due on
the Debentures at the time of the acceleration resulting from such Event of
Default. However, the Issuer shall remain liable for such payments.
REPORTS
So long as the Debentures are outstanding, the Issuer will furnish to the
holders thereof such quarterly and annual consolidated financial reports as the
Issuer is required to file with the Commission under the Exchange Act or similar
reports in the event the Issuer is not at the time required to file such reports
with the Commission.
CERTAIN DEFINITIONS
In addition to the terms defined above, the Indenture contains, among other
things, the following definitions:
"Accreted Value" as of any date of determination (i) prior to , 1999
means the sum of (a) the initial offering price of each of the Debentures and
(b) the portion of the original issue discount per Debenture (which for this
purpose shall be deemed to be the excess of the principal amount over the
initial offering price) which shall be amortized with respect to such Debenture
through such date, such original issue discount to be so amortized at the rate
of % per annum (such percentage being expressed as a percentage of the sum
of the initial offering price plus previously amortized original issue discount)
using semi-annual compounding of such rate on each and ,
commencing , 1994, from the date of issuance of the Debentures through
the date of determination, and (ii) subsequent to , 1999, 100% of the
principal amount thereof.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such 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.
"Attributable Debt" in respect of a Sale and Leaseback Transaction means, at
the time of determination, the present value (discounted at the interest rate
implicit in the lease, compounded semiannually) of the obligation of the lessee
of the property subject to such Sale and Leaseback Transaction for rental
payments during the remaining term of the lease included in such transaction
including any period for which such lease has been extended or may, at the
option of the lessor, be extended or until the earliest date on which the lessee
may terminate such lease without penalty or upon payment of penalty (in which
case the rental payments shall include such penalty), after excluding all
amounts required to be paid on account of maintenance and repairs, insurance,
taxes, assessments, water, utilities and similar charges.
"Capitalized Lease Obligation" means Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with generally accepted accounting principles and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with such principles.

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"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) dollar and eurodollar
time deposits and certificates of deposit or bankers' acceptances of any
domestic commercial bank or domestic or foreign branch office or agency of a
foreign commercial bank of recognized standing having capital and surplus in
excess of $100,000,000 (a "Qualified Bank"), (iii) repurchase obligations with a
term of not more than 14 days for underlying securities of the types described
in clauses (i), (ii) and (iv) hereof entered into with any Qualified Bank, (iv)
commercial paper issued by any Qualified Bank and commercial paper of any other
issuer rated at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or at least P-2 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing within one year from the date of
acquisition, (v) bonds, notes, debentures or other forms of Indebtedness of any
person rated at least A or the equivalent thereof by Standard & Poor's
Corporation and at least A or the equivalent thereof by Moody's Investors
Service, Inc., (vi) investments in money market or mutual funds registered under
the Investment Company Act of 1940, as amended, whose sole investments are
comprised of securities and other instruments described in clauses (i) through
(v) above and (vii) with respect to foreign operations of the Issuer and its
Restricted Subsidiaries, deposits in the ordinary course of business with
foreign commercial banks and certificates of deposit or bankers' acceptances of
foreign commercial banks of recognized standing having capital and surplus in
excess of $250,000,000.
"Consolidated Cash Flow" of any person, for any period, means (i) the
Consolidated Net Income of such person plus, to the extent deducted in computing
Consolidated Net Income, (ii) the sum of (a) income taxes of such person and its
Restricted Subsidiaries, (b) Fixed Charges of such person and its Restricted
Subsidiaries, (c) depreciation and amortization expense of such person and its
Restricted Subsidiaries and (d) all other non-cash items deducted from net
revenues in determining Consolidated Net Income for such period (other than
reserves or expenses established in anticipation of future cash requirements
such as reserves for taxes and uncollectible accounts receivable) and less (iii)
any non-cash items added to net revenues in determining Consolidated Net Income
for such period, all determined on a consolidated basis in accordance with
generally accepted accounting principles.
"Consolidated Net Income" of any person, for any period, means the net
income (loss) of such person and its Restricted Subsidiaries for such period,
determined in accordance with generally accepted accounting principles, provided
that (i) the net income (determined as set forth above) of any Unrestricted
Subsidiary or any other person, other than a Restricted Subsidiary, in which
such person or any of its Restricted Subsidiaries has a joint interest with a
third party shall be included only to the extent of the amount of dividends or
distributions actually paid or other payments actually made for services to such
person or Restricted Subsidiary during such period, (ii) the net income (loss)
of any person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded and (iii) the net income
(loss) of such person shall be adjusted by excluding (to the extent otherwise
included) any extraordinary gains and extraordinary losses during any such
period. For purposes of any calculation of Consolidated Net Income of any person
to determine whether a Restricted Payment may be made pursuant to the
"Limitation on Restricted Payments" (other than for purposes of determining
whether an investment may be made pursuant to clause (vi)(y) of the "Limitation
on Investments"), the net income of any Restricted Subsidiary of such person
shall be excluded in whole or in part to the extent such Restricted Subsidiary
is prohibited, directly or indirectly, from distributing such net income or any
portion thereof to such person.
"Consolidated Net Worth" of any person, at any date, means the aggregate of
capital, surplus and retained earnings of such person and its Restricted
Subsidiaries as would be shown on a consolidated balance sheet of such person
and its Restricted Subsidiaries prepared in accordance with generally accepted
accounting principles.
"Eligible Accounts Receivable" means all accounts receivable which are not
more than 180 days past due under their normal payment terms.

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"Equity Interests" means capital stock and all warrants, options or other
rights to acquire capital stock or that are measured by the value of capital
stock (but excluding any Indebtedness that is convertible into or exchangeable
for capital stock).
"Fixed Charges" for any person, for any period, are the consolidated
interest expense, including amortization of original issue discount and non-cash
interest payments or accruals, the interest component of capital leases and
one-third of the rental expense attributable to operating leases, but excluding
the amortization of debt issuance costs plus the product of (x) the sum of (i)
cash dividends paid on any preferred stock of such person plus (ii) cash and the
fair market value (as determined by the Issuer's Board of Directors in good
faith) of any non-cash dividends paid on any preferred stock of any Restricted
Subsidiary (other than a Wholly-owned Restricted Subsidiary), times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective aggregate federal, state and local tax rate of
such person, expressed as a decimal. For purposes of this definition, interest
on a capital lease shall be deemed to accrue at the rate of interest implicit in
such capital lease in accordance with generally accepted accounting principles
(including Statement of Financial Accounting Standards No. 13 "Accounting for
Leases" of the FASB).
"Fixed Charge Coverage Ratio" means for any person, for any period, such
person's ratio of Consolidated Cash Flow to Fixed Charges for such period.
"Indebtedness" means, as to any person, without duplication, (a) all
obligations of such person, including accrued and unpaid interest, for borrowed
money (including any net overdraft in any bank which overdraft is not satisfied
within three consecutive business days from its occurrence), (b) all obligations
of such person evidenced by bonds (other than performance bonds issued in the
ordinary course of business), debentures, notes, letters of credit or
reimbursement agreements (other than letters of credit or reimbursement
agreements in respect of accounts payable to trade creditors incurred in the
ordinary course of business in connection with the obtaining of materials or
services) or similar instruments, (c) all obligations of such person to pay the
deferred purchase price of property or services (other than accounts payable to
trade creditors arising in the normal management of the Issuer's business), (d)
all Capitalized Lease Obligations of such person, (e) Indebtedness of others
secured by a Lien on any assets of such person, whether or not such Indebtedness
is assumed by such person or guaranteed by such person, (f) all Indebtedness of
others guaranteed by such person, (g) Attributable Debt of such person, (h)
preferred stock issued by a Subsidiary of such person, (i) Redeemable Stock
issued by such person, and (j) obligations under interest rate swaps and caps
and currency swaps or options and other derivative or hedging arrangements
(other than such arrangements entered into in the ordinary course of business);
and the amount of any such Indebtedness on the date of determination thereof
shall be the outstanding balance of any such unconditional obligations as
described above and the maximum liability of any such contingent obligation at
such date and, with respect to clauses (h) and (i), the amount of Indebtedness
shall equal the liquidation preference.
"Independent Financial Advisor" means, with respect to any person, a
nationally recognized investment banking firm (i) which does not (and whose
directors, officers and Affiliates do not) have a direct or indirect financial
interest in such person or any of its Restricted Subsidiaries that is material
to such person, any such Restricted Subsidiary or such investment banking firm,
(ii) which has not been and, at the time it is called upon to give independent
financial advice to such person or any such Restricted Subsidiary, as the case
may be, is not (and none of whose directors, officers, employees or Affiliates
is) a promoter, director or officer with respect to such person or any such
Restricted Subsidiary and (iii) which, in the judgment of the board of directors
of such person or the board of directors, general partner or partners or
individuals in the case of any such Restricted Subsidiary, is otherwise
qualified to serve as an independent financial advisor. Any such person may be
compensated and indemnified by such person and any such Restricted Subsidiary,
as the case may be, and such compensation and indemnity shall not of itself be
considered a direct material financial interest within the meaning of clause (i)
of the next preceding sentence.

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<PAGE>
"Investments" means, collectively, any direct or indirect loan, advance or
other extension of credit, capital contribution, transfer of cash, property or
other assets to, acquisitions of capital stock or equity interests, securities
or other evidences of Indebtedness including by way of guarantee or similar
arrangement of, any other person. Investments shall not include the obligations
described in clause (j) of the definition of "Indebtedness."
"Lien" means, with respect to any property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
property. The Issuer shall be deemed to own subject to a Lien any property 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 property.
"Net Proceeds" from any asset sale by any person means cash received
therefrom by such person, net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred and all federal,
state, provincial, foreign and local taxes required to be accrued as a liability
as a consequence of such asset sale, and (ii) all payments made by such person
on any Indebtedness which is secured by such asset in accordance with the terms
of any Lien upon or with respect to such assets or which must by the terms of
such Lien, or in order to obtain a necessary consent to such asset sale or by
applicable law, be repaid out of the proceeds from such asset sale.

"Permitted Indebtedness" means, without duplication, (i) Indebtedness
consisting of inventory or receivable-based financing in an aggregate principal
amount at any one time outstanding not to exceed the sum of 85% of Eligible
Accounts Receivable and 50% of the book value of the inventory (determined on a
first-in-first-out basis) of the Issuer and its Restricted Subsidiaries; (ii)
Indebtedness evidenced by the Debentures, the 11% Senior Notes and, from the
Closing Date to 120 days thereafter, Indebtedness evidenced by the Subordinated
Debentures; (iii) Indebtedness of the Issuer to any Restricted Subsidiary or of
any Restricted Subsidiary to the Issuer or to any other Restricted Subsidiary;
(iv) Indebtedness (x) evidenced by standby letters of credit which are issued in
the ordinary course of business in support of self-insurance obligations or
operating leases or (y) in an aggregate principal amount not to exceed
$5,000,000 at any time, evidenced by standby letters of credit (not covered by
(x)), industrial revenue bonds or agreements to reimburse the issuers of
industrial revenue bonds; (v) Indebtedness (A) in respect of Capitalized Lease
Obligations or (B) that is secured by a Lien on real or personal property, which
Indebtedness constitutes all or part of the purchase price of the property
subject thereto or is incurred prior to, at the time of or within 30 days after
the acquisition of such property for the purpose of financing all or any part of
the purchase price thereof, PROVIDED that such secured Indebtedness does not
exceed the purchase price of such property; PROVIDED, HOWEVER, that the
aggregate of all Indebtedness incurred under the foregoing clauses (A) and (B)
does not at any time exceed $10,000,000; (vi) Indebtedness, the net proceeds of
which will be used to repay, repurchase or redeem Debentures or other
Indebtedness of the Issuer or a Restricted Subsidiary incurred under clause (ii)
or (vii) hereof, PROVIDED that the Indebtedness incurred shall not increase the
principal amount of any Indebtedness then outstanding after giving effect to
such repayment, repurchase or redemption, and, if the Indebtedness to be repaid,
repurchased or redeemed is Indebtedness of the Issuer, the Indebtedness incurred
shall be incurred by the Issuer and shall not shorten the maturity of such
Indebtedness or provide that any such new Indebtedness shall have an average
life to maturity shorter than the remaining average life to maturity of the
Debentures; (vii) Attributable Debt in respect of Sale and Leaseback
Transactions engaged in pursuant to and in accordance with clause (ii) under
"Limitation on Sale and Leaseback Transactions"; and (viii) Indebtedness other
than Indebtedness permitted under clauses (i) through (vii) provided that the
aggregate amount of such Indebtedness may not exceed $20,000,000 at any time
outstanding.

"Permitted Liens" means (i) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, PROVIDED that adequate
reserves with respect thereto are maintained on the books of the Issuer, as the
case may be, in conformity with generally accepted accounting principles; (ii)
carrier's, warehouseman's, mechanics', materialmen's, repairmen's, or other like
Liens arising in the ordinary course of business and not overdue for a period of
more than 60 days or which are being contested in good faith by appropriate
proceedings; (iii) pledges or deposits in connection

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<PAGE>

with workers' compensation, unemployment insurance and other social security
legislation; (iv) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business; (v) easements, rights-of-way, restrictions
and other similar encumbrances and any title defects which do not, individually
or in the aggregate, materially detract from the value of the property subject
thereto or materially interfere with the ordinary course of business of the
Issuer; (vi) any attachment or judgment Lien, unless the judgment it secures
shall not, within 60 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay; (vii) any other Liens
imposed by operation of law which do not materially affect the Issuer's ability
to perform its obligations under the Debentures and the Indenture; (viii) Liens
existing on the date of the Indenture and renewals and extensions thereof; (ix)
Liens on accounts receivable and inventory in connection with Indebtedness
permitted to be incurred pursuant to clause (i) of "Permitted Indebtedness"; (x)
rights of banks to set off deposits against debts owed to said banks; (xi)
purchase money mortgages and purchase money security interests incurred in the
normal and ordinary course of the Issuer's and its Restricted Subsidiaries'
business to the extent related to Indebtedness incurred pursuant to clause (v)
of "Permitted Indebtedness"; (xii) Liens securing Indebtedness of any entity
existing at the time such assets are acquired by the Issuer, whether by merger,
consolidation, purchase of assets or otherwise (whether or not such Liens are
created, incurred or assumed in contemplation of the acquisition thereof by the
Issuer), PROVIDED such Liens do not extend to any other assets of the Issuer,
and Liens securing refinancings of such Indebtedness PROVIDED that such Liens do
not extend to any assets other than assets securing such Indebtedness to be
refinanced; (xiii) Liens securing standby letters of credit and industrial
revenue bonds and related reimbursement obligations, in each case incurred
pursuant to clause (iv) of "Permitted Indebtedness" and Liens securing trade
letters of credit and related reimbursement obligations to the extent excluded
from the definition of Indebtedness; (xiv) any customary retention of title of a
lessor under any capital lease obligation; (xv) Liens on initial deposits and
margin accounts and other Liens securing obligations arising out of interest
rate swaps and caps and currency swaps or options and other derivative or
hedging arrangements entered into in the ordinary course of business; and (xvi)
Liens other than those described above with respect to obligations not in excess
of $1,000,000 in the aggregate at any time.

"Permitted Transactions" means (i) reasonable and customary fees,
compensation and benefits paid to officers, directors, employees or consultants
of the Issuer or any Restricted Subsidiary or their respective Affiliates
(including Hart Holding) for services rendered to the Issuer or any Restricted
Subsidiary in the ordinary course of business consistent with past practice,
(ii) transfers of goods and services by or among the Issuer and its Restricted
Subsidiaries and their respective Affiliates in the ordinary course of business
consistent with past practice, PROVIDED that if any such transaction or series
of related transactions involves in excess of $1,500,000, the Board of Directors
of the Issuer shall determine in good faith by resolution that such transaction
is on terms fair and reasonable to the Issuer and (iii) payments made pursuant
to the Tax Agreement.
"Person" or "person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Redeemable Stock" means any series or class of capital stock of any Person
which by its terms is redeemable at the option of the holder or is subject to
mandatory redemption prior to the maturity of the Debentures.
"Restricted Payments" means, collectively, with respect to any person (i)
any dividend or other distribution on shares of such person's or a Restricted
Subsidiary's capital stock (except dividends or distributions in additional
shares of capital stock, other than Redeemable Stock, any dividend or
distribution on shares of capital stock of a Restricted Subsidiary to such
person or to one of its Wholly-owned Restricted Subsidiaries and any allocations
pursuant to the Tax Agreement), (ii) any payment

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<PAGE>
on account of the purchase, redemption, retirement or other acquisition of any
shares of such person's or a Restricted Subsidiary's capital stock or any
option, warrant or other right to acquire such shares, or (iii) any defeasance,
redemption, repurchase or other acquisition or retirement for value prior to
scheduled maturity, scheduled repayment, or scheduled sinking fund payment of
any Indebtedness of such person subordinate in right of payment to the
Debentures.
"Restricted Subsidiary" means (i) any Subsidiary of the Issuer which exists
on the date of the Indenture and (ii) any other such Subsidiary which the Issuer
has not classified as an Unrestricted Subsidiary. The Issuer by resolution of
its Board of Directors may classify a Subsidiary as an Unrestricted Subsidiary
until such time as the Issuer may, by further resolution of its Board of
Directors, classify such Subsidiary as a Restricted Subsidiary.
"Sale and Leaseback Transaction" of any person means an arrangement with any
lender or investor or to which such lender or investor is a party providing for
the leasing by such person of any property or asset of such person which has
been or is being sold or transferred by such person more than 270 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Subsidiary" means, with respect to any person, (i) any corporation or other
entity of which a majority of the total voting power of the shares of capital
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
is at the time owned directly or indirectly by such person or (ii) any
partnership or joint venture at least a majority of the voting power of which is
directly or indirectly owned by such person, whether in the form of membership,
general, special or limited partnership interests or otherwise.
"Unrestricted Subsidiary" means any Subsidiary of the Issuer which the
Issuer by resolution of its Board of Directors shall classify as an Unrestricted
Subsidiary and any such Subsidiary of an Unrestricted Subsidiary until such time
as (i) the Issuer may, by further resolution of its Board of Directors classify
such Subsidiary as a Restricted Subsidiary or (ii) the Issuer or any of its
Restricted Subsidiaries becomes directly or indirectly liable in respect of any
contractual obligation or Indebtedness of such Unrestricted Subsidiary. A
Subsidiary of the Issuer may only be classified as an Unrestricted Subsidiary if
immediately after such classification, there would not be a default or Event of
Default under the Indenture and the Issuer and its Restricted Subsidiaries would
have only Investments in such Subsidiary which would be permitted by the
"Limitation on Investments". An Unrestricted Subsidiary of the Issuer may only
be reclassified as a Restricted Subsidiary if immediately after giving effect to
such reclassification, there would be no default or Event of Default under the
Indenture and the Issuer could create, assume, guarantee or suffer to exist
$1.00 of additional Indebtedness (other than Permitted Indebtedness). No
Restricted Subsidiary may be reclassified as an Unrestricted Subsidiary. Any
valid classification shall be effective as of the date specified in the
applicable resolution of the Issuer's Board of Directors, which shall not be
prior to the date such resolution is made.
"Wholly-owned Restricted Subsidiary" means, with respect to any person, a
Restricted Subsidiary all of whose capital stock (other than directors'
qualifying shares) or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions and other equity interests are at the time owned directly or
indirectly by such person.
DESCRIPTION OF OTHER INDEBTEDNESS
After giving effect to the use of the proceeds of the Offering to repay
existing indebtedness as described under "Use of Proceeds," the Issuer's
consolidated long-term debt will be comprised of the

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Debentures and $122.5 million principal amount of the 11% Senior Notes. The
Company and Reeves Brothers are also party to the Bank Credit Agreement. The
following is a summary of certain provisions of the 11% Senior Notes and the
Bank Credit Agreement. This summary does not purport to be complete, and such
provisions, including definitions of certain terms are qualified in their
entirety by reference to the 11% Senior Note Indenture and the Bank Credit
Agreement. Copies of the 11% Senior Note Indenture and the Bank Credit Agreement
are exhibits to the Registration Statement of which this Prospectus is a part.
11% SENIOR NOTES
The 11% Senior Notes, $122.5 million aggregate principal amount of which are
outstanding, bear interest at the rate of 11% per year, payable on January 15
and July 15 of each year in arrears. The 11% Senior Notes mature July 15, 2002
and are not subject to any mandatory redemption or sinking fund requirement.
The Company, at its option, may redeem the 11% Senior Notes in whole, or
from time to time in part, on or after July 15, 1997 at the redemption prices
(expressed as a percentage of the principal amount thereof) set forth below (in
each case together with accrued and unpaid interest to the redemption date):

<TABLE>
<CAPTION>
IF REDEEMED DURING THE 12-MONTH PERIOD BEGINNING JULY 15, REDEMPTION PRICE
<S> <C>
1997........................................................................ 104.125%
1998........................................................................ 102.750%
1999........................................................................ 101.375%
2000 and thereafter......................................................... 100.000%
</TABLE>

The 11% Senior Notes are senior unsecured indebtedness of the Company,
ranking PARI PASSU with all existing and future senior unsecured indebtedness of
the Company and senior to any subordinated indebtedness. Upon a Change of
Control (as defined in 11% Senior Note Indenture, which definition is
substantially the same as that applicable to the Debentures), holders of the 11%
Senior Notes will have the right to require the Company to purchase their 11%
Senior Notes at 101% of the principal amount thereof, plus accrued interest, if
any, to the date of purchase. The 11% Senior Note Indenture contains numerous
financial covenants and prohibitions, some of which are, in some respects, more
restrictive than those in the Indenture.
BANK CREDIT AGREEMENT
In August 1992, the Company and Reeves Brothers entered into the Bank Credit
Agreement with a group of banks, which provides the Company and Reeves Brothers
with an aggregate $35,000,000 revolving line of credit (the "Revolving Loan")
and letter of credit facility. The Revolving Loan bears interest at the
Alternate Base Rate (as defined below) plus 1 1/2% or Eurodollar Rate plus
2 1/2%, at the election of the borrower. The Alternate Base Rate is defined as
the higher of the Prime Rate (6% at December 31, 1993), Base CD Rate plus 1%, or
the Federal Funds Effective Rate plus 1/2%. The applicable rates above the
Alternate Base Rate and Eurodollar Rate decline based on a ratio of earnings to
fixed charges, as defined. The Revolving Loan is due December 31, 1995. The
Revolving Loan is secured by, and availability of borrowings under the Revolving
Loan is based on, Reeves Brothers' accounts receivable and inventory. As of
December 31, 1993, the Company and Reeves Brothers had available borrowing
capacity, net of $1,415,000 of outstanding letters of credit, of $33,585,000. A
commitment fee of 1/2% per annum is required on the unused portion of the
Revolving Loan.
The Bank Credit Agreement contains certain restrictive covenants with
respect to the Company and Reeves Brothers including, among other things,
maintenance of working capital, limitations on the payments of dividends, the
incurrence of additional indebtedness and certain liens, restrictions on capital
expenditures, mergers or acquisitions, investments and transactions with
affiliates, and requires the maintenance of certain financial ratios and
compliance with certain financial tests and limitations.

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CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS CONCERNING THE DEBENTURES
The following discussion is a summary of certain federal income tax
considerations relevant to the purchase, ownership and disposition of the
Debentures by holders acquiring Debentures on original issue for cash, but does
not purport to be a complete analysis of all potential tax effects. The
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury Regulations promulgated and proposed thereunder
(including recently finalized Treasury Regulations interpreting the original
issue discount provisions of section 1271 through 1275 of the Code which were
published on February 2, 1994 (the "OID Regulations")), Internal Revenue Service
("IRS") rulings and pronouncements and judicial decisions now in effect, all of
which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a manner
that could adversely affect a holder of the Debentures. The discussion also
assumes that holders will hold the Debentures as "capital assets" within the
meaning of section 1221 of the Code.

The Issuer has not sought and will not seek any rulings from the IRS with
respect to the positions of the Issuer discussed below or obtained an opinion of
tax counsel or other expert. There can be no assurance that the IRS will not
take a different position concerning the tax consequences of the purchase,
ownership or disposition of the Debentures or that any such position would not
be sustained. Furthermore, the OID Regulations are subject to varying
interpretations and do not address all of the issues that could affect holders
of the Debentures.

The following is for general information only. The tax treatment of a holder
of Debentures may vary depending on such holder's particular situation or
status. Certain holders (including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers and foreign entities and
individuals) may be subject to special rules not discussed below. In addition,
the description does not consider the effect of any applicable foreign, state,
local or other tax laws.
PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE DEBENTURES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
AMOUNT OF ORIGINAL ISSUE DISCOUNT
The succeeding discussion, and the discussions under "Taxation of Original
Issue Discount" and "Effect of Offer to Redeem and Optional Redemption on
Original Issue Discount," constitute a general discussion of original issue
discount followed by a description of reasonable positions that will be taken by
the Issuer (or that may be taken by the IRS) in applying the original issue
discount provisions of the Code and the OID Regulations to the Debentures.
The Debentures will be issued with original issue discount for federal
income tax purposes. As a result, a holder who purchases a Debenture generally
will be required to include original issue discount in gross income, for federal
income tax purposes, as it accrues, in advance of the receipt of cash payments
on Debentures (regardless of whether the holder is a cash or accrual basis
taxpayer). See "Taxation of Original Issue Discount" below.
The aggregate amount of original issue discount with respect to each
Debenture will be the excess of the "stated redemption price at maturity" of
such Debenture over its "issue price." The "issue price" of each Debenture will
be the first price at which a substantial amount of the Debentures is sold for
money (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The "stated redemption price at maturity" of each Debenture will
include all cash payments (including principal and interest) required to be made
thereunder until maturity, and each Debenture will therefore be issued subject
to a substantial amount of original issue discount.

51
<PAGE>
TAXATION OF ORIGINAL ISSUE DISCOUNT
Each holder of a Debenture will be required to include in gross income an
amount equal to the sum of the "daily portions" of the original issue discount
of the Debenture for all days during the taxable year in which such Debenture is
held, including the purchase date and excluding the disposition date. The daily
portions of original issue discount required to be included in a holder's gross
income in a taxable year will be determined upon a constant interest rate basis
by allocating to each day during the taxable year in which the holder holds the
Debenture a PRO RATA portion of the original issue discount thereon which is
attributable to the "accrual period" in which such day is included. The amount
of the original issue discount attributable to each full accrual period will be
the product of the "adjusted issue price" of the Debenture at the beginning of
the accrual period and the yield to maturity of the Debenture (as determined by
semi-annual compounding). The adjusted issue price of a Debenture is the
original issue price of the Debenture plus the aggregate amount of original
issue discount that has previously accrued, and less any cash payments on the
Debenture. The yield to maturity is the discount rate that, when used in
computing the present value of all principal and interest payments to be made
under a Debenture, produces an amount equal to the issue price of the Debenture.
The "accrual periods" of a Debenture are each of the six-month periods
during the term of the Debenture that end on and of each year. The
initial accrual period of a Debenture is the short period beginning on the issue
date and ending on the day before the first day of the first full accrual
period. The amount of original issue discount attributable to such initial
accrual period may be computed under any reasonable method.
The Issuer is required to furnish certain information to the IRS, and will
furnish annually to record holders of the Debentures, information with respect
to original issue discount accruing during the calendar year (as well as
interest paid during that year). Because this information will be based upon the
adjusted issue price of the debt instrument as if the holder had purchased the
debt instrument on the issue date at the issue price, holders who purchase the
Debentures for an amount other than the adjusted issue price will be required to
determine for themselves the amount of original issue discount, if any, they are
required to report.
A subsequent purchaser of a Debenture having original issue discount will be
required to include annual accruals of original issue discount in gross income,
for federal income tax purposes, in accordance with the rules described above,
but the amount of the original issue discount or ordinary income required to be
reported may vary depending upon the amount paid for the debt instrument by the
subsequent purchaser. See "Acquisition Premium" and "Market Discount" below.
EFFECT OF OFFER TO REDEEM AND OPTIONAL REDEMPTION ON ORIGINAL ISSUE DISCOUNT
In the event of a Change of Control, the Issuer will be required to offer to
redeem all of the Debentures. The OID Regulations provide that the redemption of
the Debentures upon the occurrence of a Change of Control will not affect the
yield to maturity or the maturity date of the Debentures unless, based on all
the facts and circumstances as of the issue date, it is more likely than not
that a Change of Control giving rise to the redemption will occur. The Issuer
has no present intention of treating the redemption provisions of the Debentures
as affecting the computation of the yield to maturity of any Debenture.
The Issuer may redeem up to 50% of the Debentures at a premium above
Accreted Value under certain conditions during the first 36 months after the
Offering. Additionally, the Issuer may redeem the Debentures at any time on or
after , 1999. The Issuer has no present intention to exercise either
optional redemption right. The OID Regulations set forth special rules for
determining the "maturity date" and the "stated redemption price at maturity" of
a debt instrument that may be redeemed prior to its stated maturity date at the
option of the issuer. These rules should not apply to treat the Issuer as
exercising its optional redemption rights with respect to the Debentures and,
hence, should not affect the determination of the yield to maturity of any
Debenture.

52
<PAGE>
ACQUISITION PREMIUM
If a purchaser purchases a Debenture at a cost that is in excess of its
"adjusted issue price" (I.E., its original issue price increased by the portion
of original issue discount previously includible in the gross income of prior
holders (determined without regard to any reduction of original issue discount
attributable to any acquisition premium paid by prior holders) and decreased by
all payments previously made on the Debenture) immediately after the Debenture's
acquisition by the purchaser and less than the stated redemption price at
maturity of the Debenture, the includible original issue discount (as otherwise
determined) for a taxable period will be reduced by an amount equal to the sum
of the daily portions of original issue discount (as otherwise determined to be
includible) for such taxable period multiplied by a fraction (a) the numerator
of which is such excess and (b) the denominator of which is the excess of the
sum of all amounts payable on the Debenture after the purchase date over the
Debenture's adjusted issue price. The OID Regulations permit the holder of a
Debenture purchased at an acquisition premium to elect to compute original issue
discount accruals by treating the purchase as a purchase at original issue and
applying the constant yield method.
MARKET DISCOUNT
Purchasers of Debentures (other than original public purchasers purchasing
at the issue price) should be aware that the gain on sale with respect to such
securities may be affected by the market discount provisions of the Code. The
market discount rules generally provide that if a holder of a debt instrument
purchases it at a "market discount" and thereafter realizes gain upon a
disposition or a retirement of the debt instrument, the lesser of such gain or
the portion of the market discount that has accrued on a straight-line basis (or
on a constant interest rate basis, if such basis of accrual has been elected by
the holder under section 1276(b) of the Code) while the debt instrument was held
by such holder will be taxed as ordinary income at the time of such disposition.
"Market discount" with respect to a Debenture is the amount by which the
"revised issue price" of a Debenture (I.E., the issue price increased by the
portion of original issue discount previously included in the gross income of
prior holders (determined without regard to any reduction of original issue
discount attributable to any acquisition premium) and decreased by all payments
previously made on the Debentures) exceeds the holder's basis in the Debenture
immediately after acquisition (unless such excess is less than .25% of the
stated redemption price at maturity of the Debenture times the number of
complete years from the acquisition by such holder to maturity, in which case
there is no "market discount"). If a holder makes a gift of a Debenture, accrued
market discount, if any, will be recognized as if such holder had sold such
Debenture for a price equal to its fair market value. The disposition of a
Debenture at the death of a holder, however, should not result in the
recognition of income under the market discount rules. The market discount rules
also provide that a holder who acquires a Debenture at a market discount may be
required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or maintained to purchase or carry such
Debenture until the holder disposes of the Debenture in a taxable transaction.
The Debentures provide for optional redemption, in whole or in part, and, in
the case of a Change of Control mandatory offer to redeem, prior to maturity. If
the Debentures were redeemed, a holder generally would be required to include in
gross income as ordinary income, for federal income tax purposes, the portion of
the payment which is attributable to accrued market discount on the Debentures,
if any.
A holder of Debentures acquired at a market discount may elect to include
market discount in gross income, for federal income tax purposes, as the
discount accrues either on a straight-line basis or on a constant interest rate
basis. This current inclusion election, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent
of the IRS. If a holder of Debentures makes such an election, the foregoing
rules with respect to the recognition of ordinary income on sales and other
dispositions of such debt instruments, and with respect to the deferral of
interest deductions on indebtedness incurred or maintained to purchase or carry
such debt instruments, would not apply.

53
<PAGE>
SALE, EXCHANGE, REDEMPTION, RETIREMENT, DEFEASANCE OR OTHER DISPOSITION
In general, the holder of a Debenture will recognize gain or loss upon the
sale, exchange, redemption, retirement or other disposition of such debt
instrument measured by the difference between (a) the amount of cash and fair
market value of property received in exchange therefor and (b) the holder's
adjusted tax basis in such debt instrument.
A holder's initial tax basis in a Debenture will be equal to the price paid
by such holder for such Debenture. The holder's initial tax basis in a Debenture
will be increased from time to time by the portion of original issue discount
previously included in gross income to the date of disposition (and the accruals
of market discount, if any, which the holder has previously elected to include
in gross income on an annual basis) and decreased from time to time to reflect
the receipt of any payments on such Debenture.
If the Issuer exercises its right to defease its obligations under the
Debentures (as more fully described in "Description of the Debentures --
Defeasance"), but does not satisfy the requirements necessary to be Discharged
(as defined in the Indenture), it is possible that such a defeasance might be
treated for federal income tax purposes as a taxable exchange of the Debentures
for beneficial interests in the trust. If a taxable exchange is deemed to have
occurred, then each holder of a Debenture would recognize gain or loss equal to
the difference between (a) the holder's adjusted tax basis in the Debenture and
(b) the fair market value of the holder's interest in the trust, and thereafter
such holder would be required to include in income a pro rata share of the
income, gain and loss of the trust.
Any gain or loss on the sale, exchange, redemption, retirement, defeasance
or other disposition of a Debenture should be capital gain or loss (except as
discussed in "Market Discount" above), provided the Debenture was a capital
asset in the hands of the holder. Any capital gain or loss would be long-term
capital gain or loss if the debt instrument had been held for more than one year
and otherwise would be short-term capital gain or loss.
BACKUP WITHHOLDING
The backup withholding rules require a payor to deduct and withhold a tax if
(a) the payee fails to furnish a taxpayer identification number ("TIN") to the
payor, (b) the IRS notifies the payor that the TIN furnished by the payee is
incorrect, (c) the payee has failed to report properly the receipt of
"reportable payments" on several occasions and the IRS has notified the payor
that withholding is required, or (d) there has been a failure of the payee to
certify under the penalty of perjury that a payee is not subject to withholding
under section 3406 of the Code. As a result, if any one of the events discussed
above occurs, the Issuer, the Company, its paying agent or other withholding
agent will be required to withhold a tax equal to 31% of any "reportable
payment" made in connection with the Debentures. A "reportable payment"
includes, among other things, interest actually paid, original issue discount
and amounts paid through brokers in retirement of securities. Any amounts
withheld from a payment to a holder under the backup withholding rules will be
allowed as a refund or credit against such holder's federal income tax, provided
that the required information is furnished to the IRS. Certain holders
(including, among others, corporations and certain tax exempt organizations) are
not subject to the backup withholding and information reporting requirements.
HIGH YIELD DISCOUNT OBLIGATIONS

The deduction by the Issuer of original issue discount and interest payments
with respect to the Debentures would be limited by section 163(e)(5) of the Code
if the Debentures were "applicable high yield discount obligations," as defined
in section 163(i) of the Code. The Issuer anticipates that the Debentures will
not be applicable high yield discount obligations because it is expected that
the yield to maturity on the Debentures will be less than the sum of the
applicable federal long-term rate in effect at the time of issuance of the
Debentures (the "AFR," which is 7.38% for June 1994), plus five percentage
points. If the Debentures were applicable high yield discount obligations, then
no amount of the original issue discount on the Debentures would be deductible
by the Issuer until paid, and no deduction would be allowed for the portion of
the original issue discount that represents the excess of

54
<PAGE>
the yield to maturity of the Debentures over the sum of the AFR plus six
percentage points. For corporate holders, the non-deductible portion of the
original issue discount will be treated as a dividend for purposes of sections
243, 246 and 246A of the Code (relating to dividends received deductions) to the
extent that such amount would have been treated as a dividend if it had been a
distribution made by the Issuer with respect to its stock.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER. ACCORDINGLY,
PURCHASERS OF THE DEBENTURES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE
DEBENTURES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Issuer, the Company, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
and Merrill Lynch, Pierce, Fenner & Smith Incorporated (together with DLJ, the
"Underwriters"), the Underwriters severally have agreed to purchase from the
Issuer and the Issuer has agreed to sell to the Underwriters the following
respective principal amounts of the Debentures:

<TABLE>
<CAPTION>
UNDERWRITER
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......................... $
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................................................
-------------
Total................................................................... $
-------------
-------------
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
thereunder are subject to certain conditions precedent. The Underwriting
Agreement also provides that the Issuer and the Company will indemnify the
Underwriters against certain liabilities and expenses, including liabilities
under the Securities Act, or will contribute to payments that the Underwriters
may be required to make in respect thereof. The nature of the Underwriters'
obligations is such that they are committed to purchase all of the Debentures if
any Debentures are purchased.
The Underwriters propose to offer the Debentures directly to the public
initially at the public offering price of the Debentures set forth on the cover
page of this Prospectus. After the initial public offering of the Debentures,
the offering price and other selling terms may be changed by the Underwriters.
The Underwriters have advised the Issuer that sales of the Debentures may be
made to certain selected dealers at a concession not in excess of % of the
principal amount of Debentures and that the Underwriters may allow, and such
dealers may re-allow, concessions not to exceed % of the principal amount of
Debentures to certain other dealers.
The Underwriters have advised the Issuer that they do not intend to confirm
sales to accounts over which they exercise discretionary authority.
The Debentures will not be listed on any securities exchange nor will they
be qualified for inclusion on the National Association of Securities Dealers
Automated Quotation System. The Debentures will be tradable in the secondary
market, but any such trading may be limited and sporadic. The Underwriters have
advised the Issuer that they intend to act as market makers for the Debentures.
However, any such market-making may be discontinued by the Underwriters at any
time in the Underwriters' sole discretion. No assurance can be given as to the
liquidity of the trading market for the Debentures.
The Underwriters acted as underwriters for the public offering of the 11%
Senior Notes and may render other services to the Issuer and its subsidiaries
from time to time.

55
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the Debentures offered hereby will be
passed upon for the Issuer by Cadwalader, Wickersham & Taft, New York, New York
and for the Underwriters by Cahill Gordon & Reindel, a partnership including a
professional corporation, New York, New York.
EXPERTS

The balance sheet of Reeves Holdings, Inc. as of March 9, 1994 and the
consolidated financial statements of Reeves Industries, Inc. as of December 31,
1992 and 1993, and for each of the three years in the period ended December 31,
1993 included in this Prospectus have been so included in reliance on the report
of Price Waterhouse, independent accountants, given on the authority of said
firm as experts in auditing and accounting.

56
<PAGE>
EXPLANATORY NOTE:
All of the outstanding capital stock of Reeves will be transferred to the
Issuer prior to the issuance of the Debentures. Since Reeves will be the sole
subsidiary of the Issuer, the consolidated financial data of the Issuer are
those of Reeves.
REEVES HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
REEVES HOLDINGS, INC.
Report of Independent Accountants........................................................................ F-2
Balance Sheet at March 9, 1994........................................................................... F-3
Notes to Balance Sheet................................................................................... F-4
REEVES INDUSTRIES, INC.
Consolidated Financial Statements
Report of Independent Accountants........................................................................ F-5
Consolidated Balance Sheet at December 31, 1992 and 1993................................................. F-6
Consolidated Statement of Income for the years ended December 31, 1991, 1992 and 1993.................... F-7
Consolidated Statement of Changes in Stockholder's Equity for the years ended December 31, 1991, 1992 and
1993.................................................................................................... F-8
Consolidated Statement of Cash Flows for the years ended December 31, 1991, 1992 and 1993................ F-9
Notes to Consolidated Financial Statements............................................................... F-10
Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet as of December 31, 1993 and April 3, 1994........................... F-22
Condensed Consolidated Statement of Income for the quarters ended March 28, 1993 and April 3, 1994....... F-23
Condensed Consolidated Statement of Changes in Stockholder's Equity for the quarter ended April 3,
1994.................................................................................................... F-24
Condensed Consolidated Statement of Cash Flows for the quarters ended March 28, 1993 and April 3,
1994.................................................................................................... F-25
Notes to Condensed Consolidated Financial Statements..................................................... F-26
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Reeves Holdings, Inc.
In our opinion, the accompanying balance sheet presents fairly, in all material
respects, the financial position of Reeves Holdings, Inc. at March 9, 1994 in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Issuer's management; our responsibility
is to express an opinion on this financial statement based on our audit. We
conducted our audit in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Atlanta, Georgia
March 9, 1994, except as to Note 2,
which is as of March 31, 1994

F-2
<PAGE>
REEVES HOLDINGS, INC.
BALANCE SHEET
MARCH 9, 1994
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MARCH 9,
1994
-----------
<S> <C>
ASSETS
Cash.................................................................................................... $ 1,000
-----------
-----------
STOCKHOLDER'S EQUITY
Preferred stock, $.01 par value, 100,000 shares authorized
Common stock, $.01 par value, 1,000 shares authorized;
100 shares issued and outstanding...................................................................... $ 1
Capital in excess of par value.......................................................................... 999
-----------
Total stockholder's equity........................................................................ $ 1,000
-----------
-----------
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-3
<PAGE>
REEVES HOLDINGS, INC.
NOTES TO BALANCE SHEET
MARCH 9, 1994
- --------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
Reeves Holdings, Inc., (the "Issuer") a wholly-owned subsidiary of Hart
Holding Company Incorporated, is a Delaware corporation organized on March 9,
1994 through a capital contribution of $1,000 for the purpose of holding all of
the outstanding capital stock of Reeves Industries, Inc. Reeves Industries, Inc.
is a wholly-owned subsidiary of Hart Holding Company Incorporated whose
principal asset is the common stock of its wholly-owned subsidiary Reeves
Brothers, Inc. Reeves Brothers, Inc. is a diversified industrial company engaged
in two business segments; industrial coated fabrics and apparel textiles.
2. SUBSEQUENT EVENT
On March 31, 1994 the Issuer filed a Registration Statement on Form S-1
under the Securities Act of 1933, as amended, for the purpose of offering Senior
Discount Debentures due 2006 anticipated to yield proceeds of approximately
$100,000,000. As of March 31, 1994 the Reeves Industries, Inc.'s common stock
has not been contributed to the Issuer.

F-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Reeves Industries, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholder's equity and of
cash flows present fairly, in all material respects, the financial position of
Reeves Industries, Inc. and its subsidiary at December 31, 1992 and 1993, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1993, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Notes 2 and 8 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1992.
PRICE WATERHOUSE
Atlanta, Georgia
February 11, 1994, except as to Note 16,
which is as of March 31, 1994

F-5
<PAGE>
REEVES INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1992 1993
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents of $3,936 and $7,222..................................... $ 4,165 $ 12,015
Accounts receivable, less allowance for doubtful accounts of $1,570 and $1,467..... 38,876 45,925
Inventories (Note 4)............................................................... 35,310 33,969
Deferred income taxes (Note 8)..................................................... 6,477 5,442
Other current assets............................................................... 9,814 3,300
Investment in discontinued operations (Note 3)..................................... 2,466
----------- -----------
Total current assets............................................................. 97,108 100,651
Property, plant and equipment, at cost less accumulated depreciation (Note 5)........ 43,526 51,415
Unamortized financing costs, less accumulated amortization of $550 and $1,177........ 4,390 3,946
Goodwill, less accumulated amortization of $8,091 and $9,431......................... 44,697 43,357
Deferred income taxes (Note 8)....................................................... 1,951 2,153
Other assets......................................................................... 603 1,503
Investment in discontinued operations (Note 3)....................................... 656
----------- -----------
Total assets..................................................................... $ 192,931 $ 203,025
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable................................................................... $ 15,352 $ 22,810
Accrued expenses and other liabilities (Note 6).................................... 18,991 21,197
Liabilities related to discontinued operations (Note 3)............................ 3,367
----------- -----------
Total current liabilities........................................................ 37,710 44,007
Long-term debt (Note 7).............................................................. 132,576 132,677
Deferred income taxes (Note 8)....................................................... 4,505 4,367
Other liabilities.................................................................... 563
Liabilities related to discontinued operations (Note 3).............................. 2,575
----------- -----------
Total liabilities................................................................ 177,366 181,614
----------- -----------
Stockholder's equity (Note 10)
Common stock, $.01 par value, 50,000,000 shares authorized; 34,967,973 and
35,021,666 shares issued and outstanding.......................................... 350 350
Capital in excess of par value..................................................... 5,069 5,099
Retained earnings.................................................................. 12,107 19,964
Equity adjustments from translation................................................ (1,961) (4,002)
----------- -----------
Total stockholder's equity....................................................... 15,565 21,411
----------- -----------
Commitments and contingencies (Note 15)
----------- -----------
Total liabilities and stockholder's equity....................................... $ 192,931 $ 203,025
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>
REEVES INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1991 1992 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................................. $ 269,559 $ 271,104 $ 283,653
Cost of sales.............................................................. 216,179 216,043 222,016
----------- ----------- -----------
Gross profit on sales...................................................... 53,380 55,061 61,637
Selling, general and administrative expenses............................... 27,754 29,294 32,540
Facility restructuring charges (Note 3).................................... 1,003
----------- ----------- -----------
Operating income........................................................... 25,626 25,767 28,094
Other income (expense)
Other income, net........................................................ 1,068 435 158
Interest expense and amortization of financing costs and debt
discounts............................................................... (21,777) (17,633) (16,394)
----------- ----------- -----------
(20,709) (17,198) (16,236)
----------- ----------- -----------
Income from continuing operations before income taxes, extraordinary item
and cumulative effect of a change in accounting principle................. 4,917 8,569 11,858
Income taxes (Note 8)...................................................... 373 2,593 4,001
----------- ----------- -----------
Income from continuing operations.......................................... 4,544 5,976 7,857
Discontinued operations
Net gain on disposal of discontinued operations, less applicable income
tax provision of $1,732 (Note 3)........................................ 2,830
----------- ----------- -----------
2,830
----------- ----------- -----------
Income before extraordinary item and cumulative effect of a change in
accounting principle...................................................... 7,374 5,976 7,857
Extraordinary loss from early extinguishment of debt, less applicable
income tax benefits of $3,148 (Note 7).................................... (6,112)
Cumulative effect of a change in accounting for income taxes (Note 8)...... 3,221
----------- ----------- -----------
Net income................................................................. $ 7,374 $ 3,085 $ 7,857
----------- ----------- -----------
----------- ----------- -----------
Earnings per common share (Note 10)
Primary and fully diluted
Income from continuing operations...................................... $ .23 $ .16 $ .22
Income before extraordinary item and cumulative effect of a change in
accounting principle.................................................. .39 .16 .22
Cumulative effect of a change in accounting for income taxes........... .09
Net income............................................................. .39 .08 .22
Weighted average number of common shares outstanding
Primary and fully diluted................................................ 18,118 36,724 34,978
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-7
<PAGE>
REEVES INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CAPITAL
SERIES I IN
PREFERRED STOCK COMMON STOCK EXCESS EQUITY
$1.00 PAR VALUE $0.01 PAR VALUE OF ADJUSTMENTS
----------------- ----------------- PAR RETAINED FROM
SHARES AMOUNT SHARES AMOUNT VALUE EARNINGS TRANSLATION TOTAL
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990.................. 1 $5,001 18,066 $ 181 $1,608 $1,648 $4,757 $13,195
Net income.................................... 7,374 7,374
Exchange of preferred stock for common
stock........................................ (1) (5,001 ) 18,820 188 4,813
Translation adjustments....................... (92 ) (92)
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1991 36,886 369 6,421 9,022 4,665 20,477
Net income.................................... 3,085 3,085
Translation adjustments....................... (6,626 ) (6,626)
Purchase and cancellation of common stock..... (1,918) (19 ) (1,352 ) (1,371)
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1992 34,968 350 5,069 12,107 (1,961 ) 15,565
Net income.................................... 7,857 7,857
Translation adjustments....................... (2,041 ) (2,041)
Issuance of common stock...................... 535 5 295 300
Purchase and cancellation of common stock..... (481) (5 ) (265 ) (270)
------- ------- ------- ------- ------- ------- ------- -------
Balance at December 31, 1993.................. 35,022 $ 350 $5,099 $19,964 $(4,002) $21,411
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-8
<PAGE>
REEVES INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1991 1992 1993
--------- ------------ ----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income................................................................ $ 7,374 $ 3,085 $ 7,857
Adjustments to reconcile net income to net cash provided by operating
activities
Write-off of financing costs due to early extinguishment of debt........ 6,112
Cumulative effect of a change in accounting for income taxes............ (3,221)
Net gain on disposal of discontinued operations......................... (2,830)
Depreciation and amortization........................................... 8,388 9,146 9,272
Deferred income taxes................................................... 601 (112) 694
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable............................ 565 2,574 (7,049)
Decrease in inventories............................................... 486 4,200 1,341
(Increase) decrease in other current assets........................... (1,949) (9,167) 6,514
(Increase) decrease in other assets................................... (254) 134 (900)
Increase (decrease) in accounts payable............................... 492 (546) 7,458
(Decrease) increase in accrued expenses and other liabilities......... (4,920) 6,451 133
Equity adjustments from translation................................... (356) (3,450) (117)
--------- ------------ ----------
Net cash provided by operating activities................................. 7,597 15,206 25,203
--------- ------------ ----------
Cash flows from investing activities
Purchases of property, plant and equipment................................ (11,015) (15,788) (16,506)
Net proceeds (payments) from disposal of discontinued operations.......... 2,331 12,438 (536)
--------- ------------ ----------
Net cash used by investing activities..................................... (8,684) (3,350) (17,042)
--------- ------------ ----------
Cash flows from financing activities
Principal payments of long-term debt...................................... (56) (108,726)
Net payments on revolving loans........................................... (30,000)
Borrowings of long-term debt.............................................. 121,644
Debt issuance costs....................................................... (5,115)
Premium on early retirement of debt....................................... (4,876)
Purchases of common stock................................................. (1,075) (270)
Issuance of common stock.................................................. 300
--------- ------------ ----------
Net cash (used) provided by financing activities.......................... (56) (28,148) 30
--------- ------------ ----------
Effect of exchange rate changes on cash..................................... 122 (535) (341)
--------- ------------ ----------
(Decrease) increase in cash and cash equivalents............................ (1,021) (16,827) 7,850
Cash and cash equivalents, beginning of year................................ 22,013 20,992 4,165
--------- ------------ ----------
Cash and cash equivalents, end of year...................................... $ 20,992 $ 4,165 $ 12,015
--------- ------------ ----------
--------- ------------ ----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-9
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
Reeves Industries, Inc. ("Reeves" or the "Company"), a wholly-owned
subsidiary of Hart Holding Company Incorporated ("Hart Holding"), is a holding
company whose principal asset is the common stock of its wholly-owned
subsidiary, Reeves Brothers, Inc. ("Reeves Brothers"). The Company was acquired
by Hart Holding on May 6, 1986. Reeves Brothers is a diversified industrial
company engaged in two business segments: industrial coated fabrics and apparel
textiles.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Reeves Brothers. All significant intercompany
balances and transactions have been eliminated.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost for
approximately 29% and 27% of total inventories was determined on the last-in,
first-out (LIFO) method at December 31, 1992 and 1993, respectively. With
respect to the remainder of the inventories, cost is determined principally on
the first-in, first-out (FIFO) method. Market is determined on the basis of
replacement costs or selling prices less costs of disposal. The application of
Accounting Principles Board Opinion No. 16, "Business Combinations," for the
acquisition of Reeves caused the inventories in the accompanying consolidated
balance sheet to exceed inventories used for income tax purposes by
approximately $7,320,000 as of December 31, 1993.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Improvements which extend
the useful lives of the assets are capitalized while repairs and maintenance are
charged to operations as incurred. Depreciation is provided using primarily the
straight-line method for financial reporting purposes while accelerated methods
are used for income tax purposes. When assets are replaced or otherwise disposed
of, the cost and related accumulated depreciation are removed from the accounts
and any gain or loss is reflected in income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, accounts receivable, accounts payable and accrued expenses and other
liabilities are reflected in the financial statements at fair value because of
the short-term maturity of these instruments. The fair value of the Company's
debt instruments is determined based upon a recent market price quote and is
disclosed in Note 7. The fair value of the foreign exchange contracts (used for
hedging purposes) is estimated using quoted exchange rates and is disclosed in
Note 11.
FOREIGN CURRENCY EXCHANGE AND TRANSLATION
For Reeves Brothers' wholly-owned foreign subsidiary, the local currency of
the country of operation is used as the functional currency for purposes of
translating the local currency asset and liability accounts at current exchange
rates into the reporting currency. The resulting translation adjustments are
accumulated as a separate component of stockholder's equity reflected in the
equity adjustments from translation account in the accompanying consolidated
financial statements. Gains and losses resulting from translating asset and
liability accounts that are denominated in currencies other than the functional
currency are included in income.

F-10
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
AMORTIZATION POLICY
The Company is amortizing goodwill on a straight-line basis over forty
years. Financing costs and debt discounts are being amortized by the interest
method over the life of the respective debt securities. Pre-operating costs
associated with the start-up of significant new operations are deferred and
amortized over five years.
REVENUE RECOGNITION
Sales are generally recorded when the goods are shipped. At the customer's
request, shipment of the completed product is sometimes delayed. In such
instances, revenues are recognized when the customer acknowledges transfer of
title and accepts the related billing.
INCOME TAXES
The Company is a member of an affiliated group of which Hart Holding is the
common parent. Pursuant to a tax allocation agreement with Hart Holding, the
Company files a consolidated federal income tax return with Hart Holding. Under
the agreement, the Company's tax liability is determined on a separate return
basis and any taxes payable are remitted to Hart Holding.
During 1992, the Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (FAS 109). Income tax accounting
information is disclosed in Note 8 to the consolidated financial statements.
For the years ended December 31, 1992 and 1993, the provision for income
taxes was based on reported earnings before income taxes, and includes
appropriate provisions for deferred income taxes resulting from the tax effect
of the differences between the tax basis of assets and liabilities and their
carrying amounts for financial reporting purposes. Prior to January 1, 1992,
deferred income taxes arose from the reporting of certain expenses, principally
depreciation, pension costs and other expenses, differently for financial
reporting purposes than for income tax reporting purposes.
At December 31, 1993, unremitted earnings of Reeves Brothers' foreign
subsidiary were approximately $19,500,000. United States income taxes have not
been provided on these unremitted earnings as it is the Company's intention to
indefinitely reinvest these earnings. However, Reeves Brothers' foreign
subsidiary has, in previous years, remitted a portion of its current year
earnings as dividends and expects to continue this practice in the future.
PENSION PLANS
The Company has noncontributory pension plans covering all eligible domestic
employees (Note 9).
EARNINGS PER SHARE
Earnings per share are computed based on the weighted average number of
common and common equivalent shares, where dilutive, outstanding during each
period. A deduction has been made for cumulative preferred dividends earned
during such periods the preferred stock was outstanding even though such
dividends were not declared or paid. Fully diluted earnings per share are
computed assuming that outstanding warrants, where dilutive, were exercised at
the beginning of the period or date of issuance, if later. Supplemental earnings
per share data is provided giving effect to the exchange of preferred stock for
common stock as discussed in Note 10.
STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, cash equivalents are defined as
highly liquid investment securities with an original maturity of three months or
less.

F-11
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------

3. DISCONTINUED OPERATIONS AND FACILITY RESTRUCTURING CHARGES
During 1990 the Company elected to dispose of the operations of its ARA
Automotive Group. The Company has realized all of the significant assets and
continues to settle remaining estimated liabilities related to the discontinued
operation. The remaining estimated amounts to settle such liabilities have been
included in accrued expenses and other liabilities as of December 31, 1993.
During 1993, a facility restructuring plan was implemented to reduce the
Company's overall cost structure and to improve productivity. The Consolidated
Statement of Income includes a charge of approximately $1,003,000 related to
this plan. The plan included the cessation of weaving activities at one location
and conversion of that facility into a captive yarn mill, consolidating weaving
capacity at remaining facilities and implementing cost saving/state-of-the-art
finishing technology.
4. INVENTORIES
Inventories at December 31, 1992 and 1993, are comprised of the following
(in thousands):

<TABLE>
<CAPTION>
1992 1993
<S> <C> <C>
Raw materials....................................................... $ 7,084 $ 6,815
Work in process..................................................... 8,777 8,792
Manufactured and finished goods..................................... 19,449 18,362
--------- ---------
$ 35,310 $ 33,969
--------- ---------
--------- ---------
</TABLE>

If inventories had been calculated on a current cost basis, they would have
been valued higher by approximately $2,933,000 and $2,038,000 at December 31,
1992 and 1993, respectively.
5. PROPERTY, PLANT AND EQUIPMENT
The principal categories of property, plant and equipment at December 31,
1992 and 1993, are as follows (in thousands):

<TABLE>
<CAPTION>
1992 1993
<S> <C> <C>
Land and land improvements........................................ $ 794 $ 797
Buildings and improvements........................................ 14,355 16,654
Machinery and equipment........................................... 56,801 65,400
---------- ----------
71,950 82,851
Less -- Accumulated depreciation and amortization................. (28,424) (31,436)
---------- ----------
$ 43,526 $ 51,415
---------- ----------
---------- ----------
</TABLE>

F-12
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 and 1993
- --------------------------------------------------------------------------------

6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities at December 31, 1992 and 1993, are
comprised of the following (in thousands):

<TABLE>
<CAPTION>
1992 1993
<S> <C> <C>
Accrued salaries, wages and incentives.............................. $ 3,013 $ 3,145
Product claims reserve.............................................. 1,277 1,237
Interest payable.................................................... 6,493 6,512
Income taxes payable................................................ 530 548
Deferred compensation............................................... 1,322 1,187
Accrued costs related to discontinued operations.................... 145 1,390
Italian severance pay program....................................... 2,405 2,391
Other............................................................... 3,806 4,787
--------- ---------
$ 18,991 $ 21,197
--------- ---------
--------- ---------
</TABLE>

7. LONG-TERM DEBT
Long-term debt at December 31, 1992 and 1993, consists of the following (in
thousands):

<TABLE>
<CAPTION>
1992 1993
<S> <C> <C>
11% Senior Notes due July 15, 2002, net of unamortized discount
of $835 and $747................................................ $ 121,665 $ 121,753
13 3/4% Subordinated Debentures due May 1, 2000, net of
unamortized discount of $89 and $76............................. 10,911 10,924
----------- -----------
$ 132,576 $ 132,677
----------- -----------
----------- -----------
</TABLE>

In June 1992, the Company completed a public offering of $122,500,000 of 11%
Senior Notes due 2002 (the "Senior Notes"). Proceeds of the offering were used
to redeem all of the Company's then outstanding 12 1/2% Senior Notes and 13%
Senior Subordinated Debentures and to pay and terminate the revolving loan
outstanding under a prior loan agreement.
In connection with the liquidation of the 12 1/2% Senior Notes, the 13%
Senior Subordinated Debentures and the prior revolving loan, the Company paid
early payment premiums of $4,601,000 and wrote off related debt issuance costs
and debt discounts of $3,016,000. In addition, during 1992, the Company
purchased $5,000,000 face value of its 13 3/4% Subordinated Debentures for
$5,275,000. As a result of these transactions, the Company recognized an
extraordinary loss of $5,775,000 ($.16 per share), net of applicable income tax
benefits of $2,974,000.
The Company is required to make sinking fund payments with respect to the
remaining 13 3/4% Subordinated Debentures of $6,000,000 on May 1, 1999 and
$5,000,000 on May 1, 2000.
On August 7, 1992, the Company and Reeves Brothers entered into the Bank
Credit Agreement with a group of banks, which was amended in 1993, and which
provides the Company and Reeves Brothers with an aggregate $35,000,000 revolving
line of credit (the "Revolving Loan") and letter of credit facility. The
Revolving Loan bears interest at the Alternate Base Rate (defined below) plus
1 1/2% or Eurodollar Rate plus 2 1/2%, at the election of the borrower. The
Alternate Base Rate is defined as the higher of the Prime Rate (6% at December
31, 1993), Base CD Rate plus 1%, or the Federal Funds Effective Rate plus 1/2%.
The applicable rates above the Alternate Base Rate and Eurodollar Rate decline
based on a ratio of earnings to fixed charges, as defined. The Revolving Loan is
due December 31, 1995. The Revolving Loan is secured by Reeves Brothers'
accounts receivable and inventories.

F-13
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------

7. LONG-TERM DEBT (CONTINUED)
As of December 31, 1993, the Company and Reeves Brothers had available
borrowings, net of $1,415,000 of outstanding letters of credit, of $33,585,000.
A commitment fee of 1/2% per annum is required on the unused portion of the
Revolving Loan.
The Senior Notes, Revolving Loan, and 13 3/4% Subordinated Debentures
contain certain restrictive covenants with respect to Reeves and Reeves Brothers
including, among other things, maintenance of working capital, limitations on
the payments of dividends, the incurrence of additional indebtedness and certain
liens, restrictions on capital expenditures, mergers or acquisitions,
investments and transactions with affiliates, and require the maintenance of
certain financial ratios and compliance with certain financial tests and
limitations.
Interest paid amounted to $18,155,000, $12,350,000 and $15,306,000 in 1991,
1992 and 1993, respectively.
The estimated fair value of the Company's 11% Senior Notes and 13 3/4%
Subordinated Debentures at December 31, 1993 is $131,075,000 and $12,980,000,
respectively.
8. INCOME TAXES
During the third quarter of 1992, the Company adopted FAS 109 effective as
of the beginning of 1992. Under FAS 109, in the year of adoption, previously
reported results of operations for the year are restated to reflect the effects
of applying FAS 109, and the cumulative effect of adoption on prior years'
results of operations is shown in the income statement in the year of change.
The adoption of FAS 109 did not have a material effect on the Company's 1992
income from continuing operations before income taxes.
The provision (benefit) for income taxes from continuing operations is
comprised of the following (in thousands):

<TABLE>
<CAPTION>
1991 1992 1993
<S> <C> <C> <C>
Current
Federal..................................................... $ (2,698) $ (401) $ 1,278
Foreign..................................................... 354 954 811
State....................................................... 147 174 138
--------- --------- ---------
(2,197) 727 2,227
--------- --------- ---------
Deferred
Federal..................................................... 1,770 983 945
Foreign..................................................... 641 826
State....................................................... 800 242 3
--------- --------- ---------
2,570 1,866 1,774
--------- --------- ---------
$ 373 $ 2,593 $ 4,001
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-14
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------

8. INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes from continuing operations differs
from taxes computed using the statutory federal income tax rate as follows (in
thousands):

<TABLE>
<CAPTION>
1991 1992 1993
<S> <C> <C> <C>
Consolidated computed statutory taxes......................... $ 1,672 $ 2,914 $ 4,050
State income taxes, net of federal income tax benefit......... 412 275 93
Amortization of goodwill...................................... 393 456 456
Foreign tax rate less than statutory rate..................... (2,081) (868) (1,451)
Valuation reserve............................................. 800
Other, net.................................................... (23) (184) 53
--------- --------- ---------
$ 373 $ 2,593 $ 4,001
--------- --------- ---------
--------- --------- ---------
</TABLE>

In 1990, Reeves Brothers' foreign subsidiary implemented a reorganization
allowed under the applicable country's income tax laws. This transaction
resulted in the foreign subsidiary revaluing upward its net assets for income
tax purposes. Additional depreciation and amortization relating to this
revaluation is deductible in determining income tax expense for both financial
and income tax reporting. The effect of this revaluation resulted in the foreign
subsidiary's effective income tax rate declining from its statutory rate of
approximately 46% to 5% for 1991. Due to tax rate increases, other tax law
changes, and the adoption of FAS 109, the foreign subsidiary's effective income
tax rate for both 1992 and 1993 is approximately 22% versus the statutory rate
of 52.2%.
The provision from continuing operations for deferred federal income taxes
for 1991, the year prior to the effective date of adoption of FAS 109, is
comprised of timing differences related to provisions for items not deductible
until incurred, principally product claims, bad debts and insurance,
depreciation and amortization, compensation agreements and pension costs.
Deferred tax liabilities and assets under FAS 109 are comprised of the
following temporary differences (in thousands):

<TABLE>
<CAPTION>
1992 1993
<S> <C> <C>
Deferred tax liabilities
Inventories......................................................... $ 2,523 $ 2,584
Depreciation........................................................ 1,982 1,783
--------- ---------
Total deferred tax liabilities.................................... $ 4,505 $ 4,367
--------- ---------
--------- ---------
Deferred tax assets
Current
Tentative minimum tax credits..................................... $ 854 $ 854
Accrued expenses.................................................. 3,677 3,490
Foreign tax credit carryforwards.................................. 1,946 1,898
Valuation reserve................................................. (800)
--------- ---------
6,477 5,442
--------- ---------
Long-term
Depreciation on foreign subsidiary assets......................... 1,951 1,219
Foreign exchange.................................................. 934
--------- ---------
1,951 2,153
--------- ---------
Total deferred tax assets....................................... $ 8,428 $ 7,595
--------- ---------
--------- ---------
</TABLE>

F-15
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------

8. INCOME TAXES (CONTINUED)
In adopting FAS 109, the Company recorded deferred tax assets which included
foreign tax credit carryovers and the benefits of future depreciation related to
Reeves Brothers' foreign subsidiary. The realization of these deferred tax
assets is evaluated annually based on expected future taxable income and the
carryover period of the credits. During 1993, the Company established an
$800,000 valuation reserve against the benefit for utilization of foreign tax
credits. The Company has foreign tax credit carry forwards of $1,898,000 of
which $1,680,000 expire in 1994 and $218,000 expire at varying dates through
1997. The valuation reserve was established based on the Company's estimate of
foreign source taxable income expected to be received from Reeves Brothers'
foreign subsidiary during the foreign tax credit carryover period.
The sources of income (loss) from continuing operations before income taxes
are as follows (in thousands):

<TABLE>
<CAPTION>
1991 1992 1993
<S> <C> <C> <C>
Domestic..................................................... $ (2,245) $ 1,327 $ 2,774
Foreign...................................................... 7,162 7,242 9,084
--------- --------- ---------
$ 4,917 $ 8,569 $ 11,858
--------- --------- ---------
--------- --------- ---------
</TABLE>

Income taxes paid amounted to approximately $0, $2,406,000 and $1,686,000 in
1991, 1992 and 1993, respectively.
9. PENSION PLANS
The Company sponsors two noncontributory defined benefit pension plans
covering substantially all of its domestic salaried and hourly employees. The
Reeves Brothers salaried pension plan benefits are based on an employee's years
of accredited service. The Reeves Brothers hourly pension plan provides
benefits, exclusive of benefits related to former ARA Automotive Group
retirement plan participants, of stated amounts based on years of accredited
service. The Reeves Brothers hourly pension plan also provides benefits to both
the ARA union and non-union employees in accordance with their separate benefit
calculations. The ARA non-union plan was merged with the Reeves Brothers hourly
pension plan effective December 1990; the ARA union plan was merged with the
Reeves Brothers hourly pension plan effective April 1993. The Company's funding
policy is to fund at least the minimum amount required by the Employee
Retirement Income Security Act of 1974.

F-16
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------

9. PENSION PLANS (CONTINUED)
COMBINED DATA
The following table presents the combined funded status of the Company's
plans at December 31, 1992 and 1993 (in thousands):

<TABLE>
<CAPTION>
1992 1993
<S> <C> <C>
Actuarial present value of accumulated benefit obligation
Vested............................................................ $ 13,731 $ 19,300
Nonvested......................................................... 866 914
--------- ---------
Accumulated benefit obligation...................................... $ 14,597 $ 20,214
--------- ---------
--------- ---------
Plan assets at fair value........................................... $ 24,148 $ 25,450
Projected benefit obligation for services rendered to date.......... 19,129 24,553
--------- ---------
Plan assets greater than projected benefit obligation............... 5,019 897
Unrecognized net transition obligation.............................. 2,132 1,955
Unrecognized net gain subsequent to transition...................... (7,097) (3,696)
--------- ---------
Pension asset (liability) recognized in the consolidated balance
sheet.............................................................. $ 54 $ (844)
--------- ---------
--------- ---------
</TABLE>

Plan assets consist primarily of fixed income securities, equity securities,
and certificates of deposit.
Pension cost includes the following components (in thousands):

<TABLE>
<CAPTION>
1991 1992 1993
<S> <C> <C> <C>
Service cost -- benefits earned during the period........... $ 929 $ 942 $ 936
Interest cost on projected benefit obligation............... 1,409 1,456 1,643
Actual return on plan assets................................ (3,700) (2,961) (2,531)
Net amortization and deferral............................... 2,283 1,351 754
--------- --------- ---------
Pension cost................................................ $ 921 $ 788 $ 802
--------- --------- ---------
--------- --------- ---------
</TABLE>

A weighted average discount rate of 8.5% and 7.25%, and rate of increase in
future compensation of 5.5% and 5.0% were used in determining the actuarial
present value of the projected benefit obligation in 1992 and 1993,
respectively. The long-term expected rate of return on assets was 8.0% in both
1992 and 1993.
In December 1990, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (FAS 106), which requires accrual,
during an employee's active years of service, of the expected costs of providing
postretirement benefits to employees and their beneficiaries and dependents. The
Company adopted FAS 106 in 1992, the effect of which was not material to the
consolidated financial statements.
10. STOCKHOLDER'S EQUITY
CAPITAL STOCK
The capitalization of Reeves consists of one class of common stock, $.01 par
value (the "Common Stock"). The previously outstanding Series I Preferred Stock,
$1.00 par value with a stated value of $5,001,000 (the "Preferred Stock") was
wholly-owned by Hart Holding. Effective December 31, 1991,

F-17
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------

10. STOCKHOLDER'S EQUITY (CONTINUED)
the Company's Board of Directors approved the exchange of all the outstanding
Preferred Stock held by Hart Holding for 18,820,000 shares of the Company's
Common Stock. 250,000 shares of Preferred Stock remain authorized, with no
Preferred Stock currently outstanding.
SUPPLEMENTAL EARNINGS PER SHARE DATA
The following supplemental earnings per share data is presented for the year
ended December 31, 1991 as if the exchange of Preferred Stock for Common Stock
described above occurred on January 1, 1991:

<TABLE>
<CAPTION>
1991
<S> <C>
Income from continuing operations........................................ $ .12
Income before extraordinary item and cumulative effect of a change in
accounting principle.................................................... .20
Net income............................................................... .20
Weighted average number of common shares outstanding -- primary and fully
diluted (in thousands).................................................. 36,886
</TABLE>

SETTLEMENT OF LITIGATION
In November 1992, pursuant to a court ordered settlement of a lawsuit
brought by the Company against Drexel Burnham Lambert and certain of its
affiliates (collectively, the "Defendants"), Reeves received 1,918,132 shares of
its common stock from the Defendants which were subsequently canceled and
retired.
MERGER WITH HHCI, INC.
Effective October 25, 1993, HHCI, Inc., a newly formed, wholly-owned
subsidiary of Hart Holding, merged with and into the Company with the Company
surviving the merger. HHCI, Inc. was formed as a shell corporation (no
operations) with a $300,000 capital contribution from Hart Holding. As a result
of the merger, Hart Holding was issued 535,000 shares of the Company's common
stock and acquired the 481,307 shares of its common stock not held by Hart
Holding. These shares were subsequently canceled and retired. As a result of
this merger, Hart Holding obtained ownership of 100% of the outstanding shares
of the common stock of the Company and the other stockholders of Reeves received
$.56 per share in cash.
11. FOREIGN EXCHANGE

The Company enters into foreign exchange forward contracts to hedge risk of
changes in foreign currency exchange rates associated with certain assets and
future foreign currency transactions, primarily cash flows from accounts
receivable and firm purchase commitments. Gains and losses on these contracts
are deferred until the underlying hedged transaction is completed. The cash
flows from the forward contracts are classified consistent with the cash flows
from the transactions being hedged. To the extent that they are matched with
underlying sale transactions, these contracts do not subject the Company to risk
from foreign exchange rate movements, because gains and losses on these
contracts offset losses and gains on the transactions being hedged.

At December 31, 1993, the Company had foreign currency hedge contracts
outstanding, equivalent to $14,883,000, to exchange various currencies,
including the U.S. dollar, Japanese yen, pound sterling, Deutsche mark, and
French franc into Italian Lire. The contracts mature during 1994. The December
31, 1993 fair value of these foreign currency hedge contracts was $14,407,000.

F-18
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------

12. CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to trade receivables are limited
due to the wide variety of customers and markets into which the Company's
products are sold, as well as their dispersion across many different geographic
areas. As a result, at December 31, 1993, the Company does not consider itself
to have any significant concentrations of credit risk.
13. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1991, 1992 and 1993, the Company and its
subsidiary paid management fees to Hart Holding of $1,200,000, $1,910,000 and
$1,804,000, respectively.
During 1992, Reeves Brothers purchased the residences of three officers of
Reeves Brothers for an aggregate amount of $1,015,000. During 1993, the Company
recognized a loss of approximately $161,000 on the sale of two of the properties
including related expenses. The remaining residence, which has a carrying value
of $244,000 at December 31, 1993, is presently being marketed for sale.
14. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company, through Reeves Brothers, operates in two principal industry
segments: industrial coated fabrics and apparel textiles. The Industrial Coated
Fabrics Group manufactures newspaper and graphic art printing press blankets,
protective coverings, inflatable aerospace and survival equipment, diaphragms
for meters, pump and tank seals and material used in automotive airbags. The
Apparel Textiles Group manufactures, dyes and finishes greige goods.
The products of the Industrial Coated Fabrics Group and the Apparel Textiles
Group are sold in the United States and in certain foreign countries primarily
by Reeves Brothers' merchandising and sales personnel and through a network of
independent distributors to a variety of customers including converters, apparel
manufacturers, industrial users and contractors. Sales offices are maintained in
New York, New York, Dallas, Texas, Spartanburg, South Carolina and Milan, Italy.

F-19
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------

14. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS (CONTINUED)
The following table presents certain information concerning each segment (in
thousands):

<TABLE>
<CAPTION>
1991 1992 1993
<S> <C> <C> <C>
Net sales
Industrial coated fabrics............................ $ 121,264 $ 126,576 $ 140,735
Apparel textiles..................................... 148,295 144,528 142,918
----------- ----------- -----------
$ 269,559 $ 271,104 $ 283,653
----------- ----------- -----------
----------- ----------- -----------
Operating income
Industrial coated fabrics............................ $ 23,940 $ 24,732 $ 29,287
Apparel textiles..................................... 10,121 10,693 11,583
Corporate expenses................................... (8,435) (9,658) (11,773)
Facility restructuring charges....................... (1,003)
----------- ----------- -----------
Operating income................................... 25,626 25,767 28,094
Other income, net...................................... 1,068 435 158
Interest expense and amortization of financing costs... (21,777) (17,633) (16,394)
----------- ----------- -----------
Income from continuing operations before income taxes,
extraordinary item and cumulative effect of a change
in accounting principle............................... $ 4,917 $ 8,569 $ 11,858
----------- ----------- -----------
----------- ----------- -----------
Depreciation
Industrial coated fabrics............................ $ 2,598 $ 3,175 $ 3,632
Apparel textiles..................................... 2,983 2,913 3,465
Corporate............................................ 370 688 107
----------- ----------- -----------
$ 5,951 $ 6,776 $ 7,204
----------- ----------- -----------
----------- ----------- -----------
Capital expenditures
Industrial coated fabrics............................ $ 7,579 $ 6,353 $ 11,459
Apparel textiles..................................... 2,994 8,623 4,693
Corporate............................................ 442 812 354
----------- ----------- -----------
$ 11,015 $ 15,788 $ 16,506
----------- ----------- -----------
----------- ----------- -----------
Identifiable assets
Industrial coated fabrics............................ $ 68,403 $ 65,752 $ 75,625
Apparel textiles..................................... 60,410 65,111 63,822
Corporate, principally discontinued operations (in
1991 and 1992), goodwill and debt issuance costs.... 86,174 62,068 63,578
----------- ----------- -----------
$ 214,987 $ 192,931 $ 203,025
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

F-20
<PAGE>
REEVES INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1993
- --------------------------------------------------------------------------------

14. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS (CONTINUED)
Financial data of Reeves Brothers' foreign subsidiary is as follows (in
thousands):

<TABLE>
<CAPTION>
1991 1992 1993
<S> <C> <C> <C>
Sales.................................................... $ 35,437 $ 38,444 $ 36,932
Net income............................................... 6,808 9,165 7,446
Assets................................................... 33,011 31,608 33,092
</TABLE>

Intersegment sales are not material.
15. COMMITMENTS AND CONTINGENCIES
The Company leases certain operating facilities and equipment under
long-term operating leases. At December 31, 1993 future minimum rentals, related
to continuing operations, required by operating leases having initial or
remaining noncancellable lease terms in excess of one year are as follows:
1994-$1,853,000; 1995-$1,811,000; 1996-$1,800,000; 1997-$1,800,000;
1998-$1,800,000; thereafter-$2,945,000.
Rental expense charged to continuing operations was approximately
$1,187,000, $1,420,000 and $1,473,000 during the years ended December 31, 1991,
1992 and 1993, respectively.
There are various lawsuits and claims pending against the Company and its
subsidiary, including those relating to commercial transactions. The outcome of
these matters is not presently determinable but, in the opinion of management,
the ultimate resolution of these matters will not have a material adverse effect
on the results of operations and financial position of the Company.
16. SUBSEQUENT EVENTS
On January 26, 1994, the Board of Directors approved a non-qualified stock
option agreement between the Company and the Chairman of the Board of Directors.
The agreement grants an option to purchase up to 3,800,000 shares of common
stock of the Company, par value $.01 per share, and has an expiration date of
December 31, 2023. The option is exercisable at $.56 per share for 1,400,000
shares (exercisable immediately), $.75 per share for 1,400,000 shares
(exercisable one year from grant date) and $1.00 per share for 1,000,000 shares
(exercisable two years from grant date).
On March 9, 1994 Hart Holding organized Reeves Holdings, Inc. as a
wholly-owned subsidiary (the "Issuer") through a capital contribution of $1,000.
The Issuer was formed for the purpose of holding all of the outstanding common
stock of the Company. On March 31, 1994 the Issuer filed a Registration
Statement on Form S-1 under the Securities Act of 1933, as amended, for the
purpose of offering Senior Discount Debentures due 2006 anticipated to yield
proceeds of approximately $100,000,000. As of March 31, 1994 the Company's
common stock has not been contributed to the Issuer.

F-21
<PAGE>

REEVES INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
DECEMBER 31, APRIL 3,
1993 1994
------------ -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents of $7,222 and $380........................................ $ 12,015 $ 4,829
Accounts receivable, less allowance for doubtful accounts of $1,467 and $1,567...... 45,925 49,562
Inventories (Note 1)................................................................ 33,969 38,531
Deferred income taxes............................................................... 5,442 5,442
Other current assets................................................................ 3,300 4,463
------------ -----------
Total current assets.............................................................. 100,651 102,827
Property, plant and equipment, at cost less accumulated depreciation.................. 51,415 55,397
Unamortized financing costs, less accumulated amortization of $1,177 and $1,340....... 3,946 3,783
Goodwill, less accumulated amortization of $9,431 and $9,766.......................... 43,357 43,022
Deferred income taxes................................................................. 2,153 1,806
Other assets.......................................................................... 1,503 1,652
------------ -----------
Total assets...................................................................... $ 203,025 $ 208,487
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable.................................................................... $ 22,810 $ 21,212
Accrued expenses and other liabilities.............................................. 21,197 19,129
------------ -----------
Total current liabilities......................................................... 44,007 40,341
Long-term debt (Note 2)............................................................... 132,677 138,402
Deferred income taxes................................................................. 4,367 4,357
Other liabilities..................................................................... 563 522
------------ -----------
Total liabilities................................................................. 181,614 183,622
------------ -----------
Stockholder's equity (Note 3)
Common stock, $.01 par value, 50,000,000 shares authorized; 35,021,666 shares issued
and outstanding.................................................................... 350 350
Capital in excess of par value...................................................... 5,099 5,099
Retained earnings................................................................... 19,964 22,201
Equity adjustments from translation................................................. (4,002) (2,785)
------------ -----------
Total stockholder's equity........................................................ 21,411 24,865
------------ -----------
Total liabilities and stockholder's equity........................................ $ 203,025 $ 208,487
------------ -----------
------------ -----------
</TABLE>

See notes to condensed consolidated financial statements.

F-22
<PAGE>

REEVES INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------
MARCH 28, APRIL 3,
1993 1994
----------- ---------
<S> <C> <C>
Net sales.................................................................................. $ 63,780 $ 72,997
Cost of sales.............................................................................. 50,269 58,317
----------- ---------
Gross profit on sales...................................................................... 13,511 14,680
Selling, general and administrative expenses............................................... 7,701 7,252
----------- ---------
Operating income........................................................................... 5,810 7,428
Other income (expense)
Other income, net........................................................................ 22 18
Interest expense and amortization of financing costs and debt discounts.................. (4,144) (4,085)
----------- ---------
(4,122) (4,067)
----------- ---------
Income before income taxes................................................................. 1,688 3,361
Income taxes............................................................................... 300 1,124
----------- ---------
Net income................................................................................. $ 1,388 $ 2,237
----------- ---------
----------- ---------
Earnings per common share
Primary and fully diluted
Net income............................................................................. $ .04 $ .06
Weighted average number of common shares outstanding
Primary and fully diluted................................................................ 34,968 35,022
</TABLE>

See notes to condensed consolidated financial statements.

F-23
<PAGE>

REEVES INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED)
(IN THOUSANDS)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
COMMON STOCK
$0.01 PAR CAPITAL EQUITY
VALUE IN EXCESS ADJUSTMENTS
-------------- OF PAR RETAINED FROM
SHARES AMOUNT VALUE EARNINGS TRANSLATION TOTAL
------ ------ --------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993...................... 35,022 $ 350 $ 5,099 $ 19,964 $ (4,002) $21,411
Net income........................................ 2,237 2,237
Translation adjustments........................... 1,217 1,217
------ ------ --------- -------- ----------- -------
Balance at April 3, 1994.......................... 35,022 $ 350 $ 5,099 $ 22,201 $ (2,785) $24,865
------ ------ --------- -------- ----------- -------
------ ------ --------- -------- ----------- -------
</TABLE>

See notes to condensed consolidated financial statements.

F-24
<PAGE>

REEVES INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------
MARCH 28, APRIL 3,
1993 1994
--------- --------
<S> <C> <C>
Cash flows from operating activities
Net income...................................... $ 1,388 $ 2,237
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization................. 2,372 2,496
Changes in operating assets and liabilities... (7,717) (12,458)
Equity adjustments from translation........... (698) 327
--------- --------
Net cash used by operating activities........... (4,655) (7,398)
--------- --------
Cash flows from investing activities
Purchases of property, plant, and equipment..... (2,051) (5,686)
Other........................................... 892
--------- --------
Net cash used by investing activities........... (1,159) (5,686)
--------- --------
Cash flows from financing activities
Net borrowings on revolving loan................ 7,300 5,700
--------- --------
Net cash provided by financing activities....... 7,300 5,700
--------- --------
Effect of exchange rate changes on cash........... (175) 198
--------- --------
Increase (decrease) in cash and cash
equivalents...................................... 1,311 (7,186)
Cash and cash equivalents, beginning of period.... 4,515 12,015
--------- --------
Cash and cash equivalents, end of period.......... $ 5,826 $ 4,829
--------- --------
--------- --------
</TABLE>

See notes to condensed consolidated financial statements.

F-25
<PAGE>
REEVES INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

APRIL 3, 1994
- --------------------------------------------------------------------------------
GENERAL

Reeves Industries, Inc., incorporated in Delaware in 1982 ("Reeves"), a
wholly-owned subsidiary of Hart Holding Company Incorporated ("Hart Holding"),
is a holding company whose principal asset is the common stock of its
wholly-owned subsidiary, Reeves Brothers. Inc. ("Reeves Brothers"). Reeves
Brothers is a diversified industrial company with operations in two principal
business segments, industrial coated fabrics, conducted through its Industrial
Coated Fabrics Group ("ICF"), and apparel textiles, conducted through its
Apparel Textile Group ("ATG").

The accompanying unaudited condensed consolidated financial statements of
Reeves have been prepared in accordance with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. For such information, refer to the
consolidated financial statements and footnotes thereto included herein for the
year ended December 31, 1993. The condensed consolidated financial statements so
presented are, in the opinion of management, inclusive of all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of financial position as of April 3, 1994, and the results of
operations and cash flows for the quarters ended March 28, 1993 and April 3,
1994.
NOTE 1 -- INVENTORIES
Inventories at December 31, 1993 and April 3, 1994, were comprised of the
following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, APRIL 3,
1993 1994
------------ -----------
<S> <C> <C>
Raw materials......................................................................... $ 6,815 $ 7,833
Work in process....................................................................... 8,792 11,925
Manufactured and finished goods....................................................... 18,362 18,773
------------ -----------
$ 33,969 $ 38,531
------------ -----------
------------ -----------
</TABLE>

Approximately 27% and 25% of Reeves' inventories at December 31, 1993 and
April 3, 1994, are valued using the last-in, first-out ("LIFO") method. Interim
LIFO determinations, including those as of April 3, 1994, are based on
management's estimates of expected year end inventory levels and costs.

NOTE 2 -- LONG-TERM DEBT
Long-term debt at December 31, 1993 and April 3, 1994, consisted of the
following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, APRIL 3,
1993 1994
------------ -----------
<S> <C> <C>
Revolving loan payable to bank........................................................ $ 5,700
11% Senior Notes due July 15, 2002, net of unamortized discount of $747 and $725...... $ 121,753 121,775
13 3/4% Subordinated Debentures due May 1, 2000, net of unamortized discount of $76
and $73.............................................................................. 10,924 10,927
------------ -----------
$ 132,677 $ 138,402
------------ -----------
------------ -----------
</TABLE>

On August 7, 1992, Reeves and Reeves Brothers entered into a credit
agreement with a group of banks, which was amended in 1993, and which provides
Reeves and Reeves Brothers with an aggregate $35,000,000 revolving line of
credit (the "Revolving Loan") and letter of credit facility. The Revolving Loan
bears interest at the Alternative Base Rate (defined below) plus 1 1/2% or
Eurodollar Rate plus 2 1/2%, at the election of the borrower. The Alternative
Base Rate is defined as the higher of

F-26
<PAGE>
REEVES INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

APRIL 3, 1994
- --------------------------------------------------------------------------------

NOTE 2 -- LONG-TERM DEBT (CONTINUED)

the Prime Rate (6 1/4% at April 3, 1994), Base CD Rate plus 1%, or the Federal
Funds Effective Rate plus 1/2%. The applicable rates above the Alternative Base
Rate and Eurodollar Rate decline based on a ratio of earnings to fixed charges,
as defined. The Revolving Loan is due December 31, 1995. The Revolving Loan is
secured by Reeves Brothers' accounts receivable and inventories. As of April 3,
1994, Reeves had available borrowings, net of $1,389,000 of outstanding letters
of credit, of $27,911,000. A commitment fee of 1/2% per annum is required on the
unused portion of the Revolving Loan.

In June 1992, Reeves completed a public offering of $122,500,000 of 11%
Senior Notes due 2002 (the "Senior Notes"). Proceeds of the offering were used
to redeem all of Reeves' then outstanding 12 1/2% Senior Notes and 13% Senior
Subordinated Debentures and to pay and terminate the revolving loan outstanding
under a prior loan agreement.

Reeves is required to make sinking fund payments with respect to the
remaining 13 3/4% Subordinated Debentures of $6,000,000 on May 1, 1999 and
$5,000,000 on May 1, 2000.

The Senior Notes, Revolving Loan, and 13 3/4% Subordinated Debentures
contain certain restrictive covenants with respect to Reeves and Reeves Brothers
including, among other things, maintenance of working capital, limitations on
the payment of dividends, the incurrence of additional indebtedness and certain
liens, restrictions on capital expenditures, mergers or acquisitions,
investments and transactions with affiliates, and compliance with certain
financial tests and limitations.
NOTE 3 -- STOCKHOLDER'S EQUITY
On January 26, 1994, the Board of Directors approved a non-qualified stock
option agreement between Reeves and the Chairman of the Board of Directors. The
agreement grants an option to purchase up to 3,800,000 shares of common stock of
Reeves, par value $.01 per share, and has an expiration date of December 31,
2023. The option is exercisable at $.56 per share for 1,400,000 shares of common
stock (exercisable immediately), $.75 per share for 1,400,000 shares
(exercisable one year from grant date) and $1.00 per share for 1,000,000 shares
(exercisable two years from grant date).

On March 9, 1994, Hart Holding organized Reeves Holdings, Inc. (the
"Issuer") as a wholly-owned subsidiary through a capital contribution of $1,000.
The Issuer was formed for the purpose of holding all of the outstanding common
stock of Reeves. On March 31, 1994, the Issuer filed a Registration Statement on
Form S-1 under the Securities Act of 1933, as amended, for the purpose of
offering Senior Discount Debentures due 2006 anticipated to yield proceeds of
$100,000,000. As of May 17, 1994 Reeves' common stock has not been contributed
to the Issuer.

F-27
<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY ISSUER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION IN WHICH OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
---------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.......................... 2
Prospectus Summary............................. 3
Investment Considerations...................... 9
The Issuer and the Company..................... 11
Use of Proceeds................................ 12
Capitalization................................. 13
Selected Consolidated Financial Data........... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 16
Business....................................... 21
Management..................................... 29
Description of Debentures...................... 35
Description of Other Indebtedness.............. 49
Certain Federal Income Tax Considerations
Concerning the Debentures..................... 51
Underwriting................................... 55
Legal Matters.................................. 56
Experts........................................ 56
Index to Financial Statements.................. F-1
</TABLE>

UNTIL , 1994, (90 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

[REEVES-R-]
LOGO

REEVES HOLDINGS, INC.

% SENIOR
DISCOUNT DEBENTURES
DUE 2006

-----------------

P R O S P E C T U S

-----------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MERRILL LYNCH & CO.

, 1994

Lithographed from a Vulcan-R- Offset Printing Blanket manufactured
by the Industrial Coated Fabrics Group of Reeves Holdings, Inc.

- -------------------------------------------------------------
-------------------------------------------------------------
- -------------------------------------------------------------
-------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Company in
connection with the sale of the Debentures being registered hereby, other than
underwriting commissions. All the amounts shown are estimates, except for the
Commission registration fee and the fee for the National Association of
Securities Dealers, Inc. ("NASD").

<TABLE>
<CAPTION>
ITEM
- -----------------------------------------------------------------------------------
<S> <C>
Commission registration fee........................................................ $ 34,483
NASD fee........................................................................... 10,500
Blue Sky fees and expenses......................................................... *
Legal fees and expenses............................................................ *
Accountants' fees and expenses..................................................... *
Printing and engraving fees and expenses........................................... *
Trustee fees and expenses.......................................................... *
Miscellaneous...................................................................... *
---------
Total.......................................................................... $ *
---------
---------
<FN>
- ------------------------
*To be filed by amendment.
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is a Delaware corporation. Section 145 of the General
Corporation Law of Delaware empowers a corporation to indemnify, subject to the
standards set forth therein, any person who is a party in any action in
connection with any action, suit or proceeding brought or threatened by reason
of the fact that the person was a director, officer, employee or agent of such
corporation, or is or was serving as such with respect to another entity at the
request of such corporation. The General Corporation Law of Delaware also
provides that a corporation may purchase insurance on behalf of any such
director, officer, employee or agent.
Section VII of the Bylaws of the Registrant provides for the indemnification
by the registrant of each director and officer of the registrant to the fullest
extent permitted by applicable law. The Registrant maintains directors' and
officers' liability insurance.
The Underwriting Agreement provides for the indemnification of the
registrant's officers, directors and controlling persons under certain
circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with its organization, the Registrant issued 100 shares of its
common stock (constituting all of its outstanding capital stock) to Hart
Holding. The transaction was exempt from registration under Section 5 of the
Securities Act by virtue of Section 4(2) of the Securities Act.

II-1
<PAGE>
ITEM 16(A). EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
<S> <C>
1** Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Reeves Holdings, Inc.
3.2 Bylaws of Reeves Holdings, Inc.
4.1(2) Purchase Agreement, dated as of May 1, 1986, among Schick Acquisition Corp., A.R.A. Manufacturing
Company of Delaware, Inc. and each of the Purchasers named therein.
4.2(2) Subordinated Debenture Indenture, dated as of May 1, 1986, between Schick Acquisition Corp. and Fleet
National Bank, as Trustee (the "Subordinated Debenture Trustee").
4.3(2) First Supplemental Indenture, dated as of May 6, 1986, between Reeves Industries, Inc. and the
Subordinated Debenture Trustee.
4.4(2) Second Supplemental Indenture, dated as of October 15, 1986, between Reeves Industries, Inc. and the
Subordinated Debenture Trustee.
4.5(3) Third Supplemental Indenture, dated as of March 24, 1988, between Reeves Industries, Inc. and the
Subordinated Debenture Trustee.
4.6(4) Fourth Supplemental Indenture, dated as of May 7, 1991, between Reeves Industries, Inc. and the
Subordinated Debenture Trustee.
4.7(1) Fifth Supplemental Indenture, dated as of June 30, 1992, between Reeves Industries, Inc. and the
Subordinated Debenture Trustee.
4.8(2) Registration Rights Agreement, dated as of May 1, 1986, among Schick Acquisition Corp. and the
purchasers.
4.9(5) Senior Note Indenture, dated as of June 1, 1992, between Reeves Industries, Inc. and Chemical Bank, as
Trustee.
4.10** Form of Debenture Indenture (including Form of Debenture).
4.11 Equipment Lease Agreements entered into by Reeves Brothers, Inc. and guaranteed by Reeves Industries,
Inc. have not been filed as exhibits as the total amount of lease funding thereunder does not exceed
10% of the total assets of the Company. The Company undertakes to furnish a copy of such Equipment
Lease Agreements to the Commission upon request.
5** Opinion and consent of Cadwalader, Wickersham & Taft.
10.01(1) Credit Agreement, dated as of August 6, 1992 (the "Credit Agreement") among Reeves Brothers, Inc.,
Reeves Industries, Inc., the Banks signatory thereto and Chemical Bank, as Agent.
10.02(6) First Amendment, Waiver and Consent, dated as of October 25, 1993, to the Credit Agreement.
10.03 Second Amendment, dated as December 28, 1993, to the Credit Agreement.
10.04(7) Tax Allocation Agreement, effective as of January 1, 1992, by and among Hart Holding Company
Incorporated, Reeves Industries, Inc., Reeves Brothers, Inc., Fenchurch, Inc., Turner Trucking
Company, Reeves Penna, Inc., A.R.A. Manufacturing Company, Hart Investment Properties Corporation and
Hart Capital Corporation.
10.05(8) Reeves Corporate Management Incentive Bonus Plan.
10.06(4) Employment Agreement, dated July 1, 1991, between Reeves Brothers, Inc. and
Anthony L. Cartagine.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ------------------------------------------------------------------------------------------------------
<S> <C>
10.07* Employment Agreement, dated November 1, 1991 and amended May 18, 1993, between Reeves Brothers, Inc.,
and Vito W. Lenoci.
10.08* Reeves Brothers, Inc. 401(a)(17) Plan, effective January 1, 1989.
10.09* Non-Qualified Stock Option Agreement, dated as of January 26, 1994, between Reeves Industries, Inc.
and James W. Hart.
10.10(6) Agreement and Plan of Merger, dated as of October 22, 1993, between Reeves Industries, Inc. and HHCI,
Inc.
10.11(4) Lease Agreement, dated March 28, 1991, between Springs Industries, Inc. Lessor, and Reeves Brothers,
Inc., Lessee.
11 Calculation of earnings per common share.
12* Statement of Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of Reeves Holdings, Inc.
23.1** Consent of Cadwalader, Wickersham & Taft (filed as part of Exhibit 5).
23.2* Consent of Price Waterhouse.
25 Statement of Eligibility of The First National Bank of Boston, as Trustee.
<FN>
- ------------------------
(1) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated March 31, 1993, which is
incorporated by reference herein.
(2) Previously filed by Reeves Industries, Inc. as an exhibit to Newreeveco's
Registration Statement on Form S-1, Registration No. 33-8192, dated August
21, 1986, as amended October 20, 1986, which is incorporated by reference
herein.
(3) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated April 12, 1988, which is
incorporated by reference herein.
(4) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated March 30, 1992, which is
incorporated by reference herein.
(5) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Quarterly Report on Form 10-Q dated August 12, 1992, which is
incorporated by reference herein.
(6) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Quarterly Report on Form 10-Q dated November 10, 1993, which is
incorporated by reference herein.
(7) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Registration Statement on Form S-2, Registration No. 33-47254,
dated April 16, 1992, as amended May 28, 1992, which is incorporated by
reference herein.
(8) Previously filed by Reeves Industries, Inc. as an exhibit to Reeves
Industries' Annual Report on Form 10-K dated March 28, 1991, which is
incorporated by reference herein.
* Filed herewith.
** To be filed by amendment.
</TABLE>

ITEM 16(B). FINANCIAL STATEMENT SCHEDULES

<TABLE>
<S> <C> <C>
Schedule V -- Reeves Industries, Inc. -- Property, Plant and Equipment
Schedule VI -- Reeves Industries, Inc. -- Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
Reeves Industries, Inc. -- Analysis of the Allowance for Doubtful
Schedule VIII -- Accounts
Schedule IX -- Reeves Industries, Inc. -- Short-Term Borrowings
Schedule X -- Reeves Industries, Inc. -- Supplementary Income Statement Information
</TABLE>

II-3
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in response to Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant for expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized at Darien, Connecticut.

Dated: June 8, 1994

REEVES HOLDINGS, INC.
By: ________/s/ STEVEN W. HART________
Name: Steven W. Hart

Title: Executive Vice President,
Chief
Financial Officer and
Treasurer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSON IN THEIR
RESPECTIVE CAPACITIES WITH THE REGISTRANT ON THE DATES INDICATED.

<TABLE>
<C> <S> <C>
/s/ James W. Hart
- ---------------------------------- Director June 8, 1994
James W. Hart
/s/ James W. Hart, President, Chief Executive Officer
Jr. and Chief Operating Officer June 8, 1994
- ---------------------------------- (Principal Executive Officer)
James W. Hart, Jr.
/s/ Steven W. Hart Executive Vice President, Chief
- ---------------------------------- Financial Officer and Treasurer June 8, 1994
Steven W. Hart (Principal Financial Officer)
/s/ Joseph P. O'Brien Vice President -- Finance
- ---------------------------------- (Principal Accounting Officer) June 8, 1994
Joseph P. O'Brien
</TABLE>

II-5
<PAGE>
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
REEVES INDUSTRIES, INC. AND SUBSIDIARY
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE BALANCE
BEGINNING END
OF PERIOD ADDITIONS RETIREMENTS OTHER(1) OF PERIOD
--------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1991 Land and land improvements..................... $ 886 $ 39 $ 925
9,768 $ 1,548 $ (20) (52) 11,244
Buildings and improvements.....................
43,790 9,467 (2,275) (137) 50,845
Machinery and equipment........................
--------- --------- ----------- --------- ---------
$ 54,444 $ 11,015 $ (2,295) $ (150) $ 63,014
Total..........................................
--------- --------- ----------- --------- ---------
--------- --------- ----------- --------- ---------
1992 Land and land improvements..................... $ 925 $ 50 $ (181) $ 794
11,244 4,406 (1,295) 14,355
Buildings and improvements.....................
50,845 11,332 $ (2,397) $ (2,979) 56,801
Machinery and equipment........................
--------- --------- ----------- --------- ---------
$ 63,014 $ 15,788 $ (2,397) $ (4,455) $ 71,950
Total..........................................
--------- --------- ----------- --------- ---------
--------- --------- ----------- --------- ---------
1993 Land and land improvements..................... $ 794 $ 65 $ (62) $ 797
14,355 2,699 (400) 16,654
Buildings and improvements.....................
56,801 13,742 $ (2,973) (2,170) 65,400
Machinery and equipment........................
--------- --------- ----------- --------- ---------
$ 71,950 $ 16,506 $ (2,973) $ (2,632) $ 82,851
Total..........................................
--------- --------- ----------- --------- ---------
--------- --------- ----------- --------- ---------
</TABLE>

<TABLE>
<S> <C>
<FN>
- ------------------------
(1) Primarily a result of fluctuations in exchange rates.
</TABLE>

S-1
<PAGE>
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
REEVES INDUSTRIES, INC. AND SUBSIDIARY
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE BALANCE
BEGINNING END
OF PERIOD ADDITIONS RETIREMENTS OTHER(1) OF PERIOD
--------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1991 Buildings and improvements...................... $ 3,411 $ 639 $ (20) $ (29) $ 4,001
20,088 5,312 (2,275) (745) 22,380
Machinery and equipment.........................
--------- ----------- ----------- --------- ---------
$ 23,499 $ 5,951 $ (2,295) $ (774) $ 26,381
Total...........................................
--------- ----------- ----------- --------- ---------
--------- ----------- ----------- --------- ---------
1992 Buildings and improvements...................... $ 4,001 $ 660 $ (236) $ 4,425
22,380 6,116 $ (2,397) (2,100) 23,999
Machinery and equipment.........................
--------- ----------- ----------- --------- ---------
$ 26,381 $ 6,776 $ (2,397) $ (2,336) $ 28,424
Total...........................................
--------- ----------- ----------- --------- ---------
--------- ----------- ----------- --------- ---------
1993 Buildings and improvements...................... $ 4,425 $ 949 $ (199) $ 5,175
23,999 6,255 $ (2,973) (1,020) 26,261
Machinery and equipment.........................
--------- ----------- ----------- --------- ---------
$ 28,424 $ 7,204 $ (2,973) $ (1,219) $ 31,436
Total...........................................
--------- ----------- ----------- --------- ---------
--------- ----------- ----------- --------- ---------
</TABLE>

<TABLE>
<S> <C>
<FN>
- ------------------------
(1) Primarily a result of fluctuations in exchange rates.
</TABLE>

S-2
<PAGE>

SCHEDULE VIII -- ANALYSIS OF THE ALLOWANCE FOR DOUBTFUL ACCOUNTS
REEVES INDUSTRIES, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
COLUMN C
ADDITIONS COLUMN E
-------------------------------------- --------
CHARGED CHARGED COLUMN D BALANCE
COLUMN A BALANCE AT (CREDITED) TO TO OTHER --------- AT END
- -------------------------------------------------- BEGINNING OF COSTS AND ACCOUNTS -- DEDUCTIONS OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- -------------------------------------------------- ------------- ----------------- ------------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
December 31, 1990 Balance......................... $ 2,477
Provision......................................... $ (49)
Recoveries........................................ $110
Write-offs........................................ $(457)
------------- ------ ----- --------- --------
December 31, 1991 Balance......................... $ 2,477 $ (49) $110 $(457) $2,081
------------- ------ ----- --------- --------
------------- ------ ----- --------- --------
Provision......................................... $(148)
Recoveries........................................ $ 23
Write-offs........................................ $(386)
------------- ------ ----- --------- --------
December 31, 1992 Balance......................... $ 2,081 $(148) $ 23 $(386) $1,570
------------- ------ ----- --------- --------
------------- ------ ----- --------- --------
Provision......................................... $ 427
Recoveries........................................ $108
Write-offs........................................ $(638)
------------- ------ ----- --------- --------
December 31, 1993 Balance......................... $ 1,570 $ 427 $108 $(638) $1,467
------------- ------ ----- --------- --------
------------- ------ ----- --------- --------
</TABLE>

S-3
<PAGE>

SCHEDULE IX -- SHORT-TERM BORROWINGS
REEVES INDUSTRIES, INC. AND SUBSIDIARIES
(IN THOUSANDS)

<TABLE>
<CAPTION>
COLUMN F
COLUMN D COLUMN E -----------
COLUMN C ----------- ----------- WEIGHTED
COLUMN B ----------- MAXIMUM AVERAGE AVERAGE
COLUMN A ----------- WEIGHTED AMOUNT AMOUNT INTEREST
- -------------------------------------------------- BALANCE AT AVERAGE OUTSTANDING OUTSTANDING RATE
CATEGORY OF AGGREGATE END OF INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD PERIOD
- -------------------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Amounts payable to banks for borrowings in 1991... 30,000 7.69% 30,000 30,000 9.08 %
Amounts payable to banks for borrowings in 1992... 0 0.00 % 30,000 9,331 6.45 %
Amounts payable to banks for borrowings in 1993... 0 0.00 % 9,500 2,300 6.40 %
</TABLE>

S-4
<PAGE>
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
REEVES INDUSTRIES, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
COLUMN A
ITEM (1)
- ------------------------------------------------------------ COLUMN B
------------------
CHARGED TO
COSTS AND EXPENSES
------------------
(IN THOUSANDS)
<S> <C>
Maintenance and repairs
Year ended December 31, 1991.............................. $7,922
-------
-------
Year ended December 31, 1992.............................. $7,745
-------
-------
Year ended December 31, 1993.............................. $6,328
-------
-------
<FN>
- ------------------------
(1) Other items are less than 1% of revenues or not applicable.
</TABLE>

S-5

<PAGE>

EXHIBIT 10.07

REEVES INDUSTRIES, INC.

1120 POST ROAD
DARIEN, CT 06820

January 27, 1993

V.W. Lenoci
99 Stratford Road
Asheville, North Carolina 28804

Re: Employment Agreement

Dear Bill:

This will confirm that the Employment Agreement, dated as of November
1, 1991, between Reeves Brothers, Inc. and you, is amended in that Number 5,
Additional Fringe Benefits, will read as follows:

5. Financial and Tax Planning Costs up to $10,000,
including taxes.

All other terms of the Employment Agreement will remain the same.

Please indicate your agreement to the foregoing by executing the
attached copy of this letter and returning it to me.

Sincerely,

Agreed to:

- ---------------------
V.W. Lenoci

<PAGE>

[This page intentionally blank]

<PAGE>

EMPLOYMENT AGREEMENT

Vito W. Lenoci
EMPLOYMENT AGREEMENT dated as of November 1, 1991, between REEVES
BROTHERS, INC., a Delaware corporation having its principal place of business at
Highway 29 South, Post Office Box 1898, Spartanburg, S.C. 29304 (the "Employer")
and Vito W. Lenoci residing at 99 Stratford Road, Asheville, N.C. 28804 (the
"Employee").

WHEREAS, the Employer desires to obtain the services of the Employee
on the terms and conditions hereinafter stated, and the Employee is willing to
furnish his services on such terms and conditions;

NOW, THEREFORE, the parties agree as follows:

1. EMPLOYMENT. The Employer hereby employs the Employee in the
position designated in Paragraph 6, and the Employee hereby accepts such
employment on the terms and conditions hereinafter set forth.

2. TERM. Subject to the provisions for earlier termination as
hereinafter provided in Paragraph 7 of this Assessment, the term of this
Agreement shall be five (5) years, unless extended as set forth below,
commencing on November 1, 1991 and ending October 31, 1996. The Term or this
Agreement shall be automatically extended for two one-year periods unless on or
before a date 120 days prior to the end of the original termination date, or any
subsequent termination date, the Employer or Employee provides written notice to
the other party that they do not intend to extend the Agreement.

3. COMPENSATION. For all services rendered by the Employee under
this Agreement and for the agreements of the Employee contained in Paragraphs 8
and 9, the Employer shall during the Employment Term compensate the Employee as
follows:

(a) BASE SALARY. The Employer shall during the Employment Term pay
the Employee a base salary of $229,000 per year, payable in equal semi-monthly
installments on the fifteenth and last days of each month. Such Base Salary
shall be subject to adjustments pursuant to the Employer's salary administration
program.

(b) INCENTIVE COMPENSATION. In addition to the foregoing base
salary, the Employee shall receive additional compensation as provided under the
Employer's Management Incentive Bonus Plan of the Employer for its Corporate and
Divisional Officers, as in effect from time to time pursuant to

<PAGE>

resolutions adopted by the Board of Directors of the Employer, or any successor
thereto.

4. EXPENSES. The Employee shall be entitled to receive
reimbursement for reasonable out-of-pocket expenses incurred in connection with
the performance of the Employee's duties hereunder upon presentation from time
to time of itemized accounts of, and customary receipts for, such expenses.

5. BENEFITS. During the Employment Term, the Employee shall receive
benefits as described in Exhibit A hereto and such other general and specific
benefits which shall not be less than those generally provided to Employees in
the position and status of Employee by the Employer on November l, 1991. The
Employee shall be furnished office space, working facilities, secretarial and
other services and facilities suitable to his position and adequate for the
performance of his duties. The Employee shall be entitled each year during the
Employment Term to a vacation of four weeks, during which time his compensation
will be paid in full.

6. DUTIES. The Employee shall be employed as President and Chief
Executive Officer of the Industrial Coated Fabrics Division of the Employer and
in such capacity as may be determined by the Board of Directors of Employer, and
shall have the authority and powers to perform all duties as are customary to
such offices, subject to the control and direction of the Board of Directors of
the Employer. The Employee shall also serve as a director of the Employer,
Reeves Industries, Inc. ("Reeves Industries") and any of their respective
subsidiaries, if elected by the shareholders or appointed by the Board of
Directors of the particular corporation. The Employee agrees to use his best
efforts, skill and experience in connection with his employment, shall devote
faithful service, including substantially all of his business time and
attention, to such employment and shall not engage in any activity of any nature
whatsoever which would in any way materially interfere with his so devoting his
service, business time and attention to his duties hereunder.

7. TERMINATION OF EMPLOYMENT PRIOR TO EXPIRATION OF THE EMPLOYMENT
TERM. This Agreement may be terminated prior to the end of the Employment Term,
as set forth below.

(a) DEATH. In the event of the Employee's death during the
Employment Term, all of the obligations of the Employer hereunder shall be
terminated as of the last day of the month in which death occurs, except that
Employer shall pay to the Employee's estate for one year from the date of death,
the Base Salary payable to the Employee pursuant to Paragraph 3(a) hereof (as
the same may have been adjusted from time to time).

-2-
<PAGE>

(b) DISABILITY. In the event that the Employee shall be unable to
perform his duties during the Employment Term by reason of any adjudicated
incompetency or permanent disability, the Employer may, on thirty (30) days'
written notice, terminate this Agreement. Permanent disability shall have the
meanings set forth in the definition of total permanent disability (or such term
having similar import) contained in any disability insurance policy purchased by
the Employer to cover the Employee and an Employee shall be considered
permanently disabled for purposes of this Agreement when so considered by the
insurance company obligated under such policy. In addition, regardless of
whether any such policy is in force at the applicable time, permanent disability
shall mean the inability of an Employee due to accident or illness to perform
full time active services on behalf of the Employer (x) for a continuous
one-year period or (y) if a medical doctor shall certify to the satisfaction of
the Board of Directors of the Employer that such inability shall continue for at
least one year after the date of such accident or illness. In the event of such
termination by reason of the Employee's illness or incapacity, the Employer
shall pay to the Employee or the Employee's estate for the shorter of (i) 215
days from the date of termination or (ii) the remainder of the Employment Term,
the Base Salary payable to the Employee pursuant to Paragraph 3(a) hereof (as
the same may have been adjusted from time to time). Any payment hereunder may be
funded by the Employer through disability insurance paid for by the Employer.

(c) ACTS NOT IN THE BEST INTERESTS OF THE EMPLOYER. The Employer
shall have the right to terminate this Agreement upon a finding by the
Employer's Board of Directors that the Employee has acted in a manner which is
not in the best interests of the Employer. In the event of such termination by
reason of the Employee's acting in a manner which is not in the best interests
of the Employer, the Employee shall receive no compensation or benefits (except
as required by law) after the date of termination.

(d) RIGHT OF THE EMPLOYER TO TERMINATE FOR OTHER REASONS. The
Employer shall have the right to terminate this Agreement for any other reason
in addition to those specified in subparagraphs (a), (b) and (c) of this
Paragraph 7 upon the giving of sixty (60) days' written notice to the Employee.
In the event of such termination by the Employer other than pursuant to
subparagraphs (a), (b) and (c) of this Paragraph 7, the Employer shall pay to
the Employee or the Employee's estate for the remainder of the Employment Term,
the Base Salary payable to the Employee pursuant to Paragraph 3(a) hereof (as
the same may have been adjusted from time to time), reduced by an amount equal
to any compensation received during such remainder of the Employment Term, as
the case may be, by the Employee in connection with any new employment.

-3-
<PAGE>

(e) RIGHT OF THE EMPLOYEE TO TERMINATE THIS AGREEMENT. Subject to
the provisions of paragraph 8 hereof, the Employee shall have the right to
terminate this Agreement for any reason upon the giving of sixty (60) days'
written notice to the Employer. In the event af such termination by the
Employee, the Employee shall be entitled to no further compensation or benefits
(except as required by law) under this Agreement after the date of termination.

8. RESTRICTIVE COVENANTS. During the Employment Term the Employee
shall not directly or indirectly own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation or control of any business other than the Employer or Reeves
Industries and their respective subsidiaries. The Employee may, without being
deemed to violate any provision hereof, serve during the Employment Term on the
boards of banks, charitable, civic or social organizations and acquire not more
than five percent (5%) of the outstanding shares of publicly-held corporations.
Notwithstanding anything to the contrary herein contained, the ownership,
management, control or operation of, employment by, participation in, or any
other connection with the ownership, management, operation or control of any
business by any member of the Employee's family shall not be deemed to cause
Employee to be in violation of any provision hereof. During a period of one year
following termination of Employee's employment under this Agreement, the
Employee shall not (i) directly or indirectly, as employee, officer, director,
stockholder, partner or otherwise, own, manage, operate, control, be employed
by, participate in, or be connected in any manner with, the ownership,
management, operation or control of any business or enterprise which is in
competition with any business carried on, or in active contemplation of being
carried on, by the Employer, Reeves Industries or any of their subsidiaries or
affiliates at such time; provided, however, that ownership of not more than five
percent (5%) of the outstanding shares of a publicly-held corporation shall not
be deemed to violate any provision hereof; (ii) directly or indirectly employ,
retain or negotiate with respect to employment or retention of any person whom
the Employer, Reeves Industries, or any of their subsidiaries or affiliates has
employed or retained; or (iii) directly or indirectly sell, offer to sell, or
negotiate with respect to orders or contracts for, any product or service
similar to a product or service now sold or offered by the Employer, Reeves
Industries, or any of their subsidiaries or affiliates to or with anyone with
whom the Employer, Reeves Industries, or any of their subsidiaries or affiliates
has so dealt. In connection with the foregoing restrictive covenant, Employer
shall continue to pay Employee the Base Salary payable to Employee pursuant to
paragraph 3(a) (as the same may have been adjusted from time to time).
Notwithstanding anything in the foregoing to the contrary, the aforesaid
restrictions on the Employee shall not apply for periods after termination of
employment if the

-4-
<PAGE>

Employee's termination resulted from wrongful discharge by the Employer or from
the Employee's resignation by reason of the Employer's material wrongful act or
material violation of this Agreement, provided that the Employer has not cured
such wrongful discharge, wrongful act or wrongful violation within thirty (30)
days after notice thereof by the Employee. The restrictive covenants of this
paragraph shall apply for one year after termination of employment without
payment of any compensation if Employee terminates his employment pursuant to
paragraph 7(e) or if Employee is terminated pursuant to paragraph 7(c). In the
event of an actual or threatened breach by the Employee of the provisions of
this paragraph, the Employer shall be entitled to an injunction restraining the
Employee from owning, managing, operating, controlling, being employed by,
participating in, or being in any way so connected with any such business or
from soliciting employees or customers of the Employer as herein provided.
Nothing herein stated shall be construed as prohibiting the Employer from
pursuing any other remedies available to the Employer for such breach or
threatened breach, including the recovery of damages from the Employee.

9. DISCLOSURE OF INFORMATION. The Employee recognizes and
acknowledges that the lists of the Employer's customers, suppliers, formulas,
processes and other confidential information (collectively "Confidential
Information") as they may exist from time to time, are valuable, special, and
unique assets of the Employer's business. The Employee agrees that he will not,
during or at any time after the Employment Term, intentionally disclose any
Confidential Information, to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, except as may be authorized by the
Employer's Board of Directors. In the event of a breach or threatened breach by
the Employee of the provisions of this paragraph, the Employer shall be entitled
to an injunction restraining the Employee from disclosing, in whole or in part,
any Confidential Information, or from rendering any services to any person,
firm, corporation, association or other entity to whom such Confidential
Information, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein shall be construed as prohibiting the Employer from
pursuing any other remedies available to the Employer for such breach or
threatened breach, including the recovery of damages from the Employee.

10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered mail to
the addresses of the parties set forth above or to such other addresses as may
subsequently be furnished in writing by one party to the other.

11. WAIVERS. The waiver by either party hereto of any breach or
requirement of any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any

-5-
<PAGE>

subsequent breach or requirement by such party, whether similar or different.

12. ASSIGNMENT. The rights and obligations of the Employer under
this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer. In the event of merger, consolidation or
liquidation of the Employer, or in the event of a sale or transfer of
substantially all the operating assets of the Employer to any other person,
firm, corporation, association or other entity, the provisions hereof shall
inure to the benefit of, and be binding upon, the surviving corporation or such
purchaser or transferee, as the case may be. Any assignment of this Agreement
by the Employer shall not relieve or release the Employer from any of its
obligations set forth herein.

13. ENTIRE AGREEMENT. This Agreement contains the entire agreement
of the parties with respect to the subject matter hereof, and all prior and
other agreements between them, oral or written, concerning the same subject
matter are merged into this Agreement. Any prior agreement relating to the
employment of Employee by Employer is terminated as of the effective date
hereof.

14. AMENDMENTS. This Agreement may not be amended or modified except
by a writing executed by the Employer and the Employee.

15. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of North Carolina.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.

REEVES BROTHERS, INC.

By:________________________________

___________________________________
Employee: Vito W. Lenoci

-6-
<PAGE>

Exhibit A to
Employment Agreement
of Vito W. Lenoci

ADDITIONAL FRINGE BENEFITS

1. Supplemental Executive Retirement Plan (SERP for 401(A)(17))

2. Annual Physical

3. Medical Reimbursements

4. Spouse Travel on Selected Business Trips

5. Financial and Tax Planning Costs up to $5000, including taxes

-7-

<PAGE>

EXHIBIT 10.08

THE REEVES BROTHERS, INC.
401(a)(17) PLAN

Effective January 1, 1989

<PAGE>

TABLE OF CONTENTS

Definitions. . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.01. Beneficiary . . . . . . . . . . . . . .1
Section 1.02. Board . . . . . . . . . . . . . . . . .1
Section 1.03. Code. . . . . . . . . . . . . . . . . .1
Section 1.04. Committee . . . . . . . . . . . . . . .1
Section 1.05. Company . . . . . . . . . . . . . . . .1
Section 1.06. Employee. . . . . . . . . . . . . . . .1
Section 1.07. ERISA . . . . . . . . . . . . . . . . .1
Section 1.08. Participating Affiliated Companies. . .2
Section 1.09. Pension Plan. . . . . . . . . . . . . .2
Section 1.10. Plan. . . . . . . . . . . . . . . . . .2
Section 1.11. Plan Year . . . . . . . . . . . . . . .2

Purpose of Plan. . . . . . . . . . . . . . . . . . . . . .3
Section 2.01. Purpose . . . . . . . . . . . . . . . .3

Eligibility. . . . . . . . . . . . . . . . . . . . . . . .4
Section 3.01. Eligibility . . . . . . . . . . . . . .4
Section 3.02. Limitation of Eligibility . . . . . . .4

Benefits . . . . . . . . . . . . . . . . . . . . . . . . .5
Section 4.01. Amount of Benefits. . . . . . . . . . .5
Section 4.02. Pension Plan Benefits . . . . . . . . .5
Section 4.03. Form and Time of Benefit Payments . . .6
Section 4.04. Beneficiary in the Event of Death . . .7
Section 4.05. Benefits Unfunded . . . . . . . . . . .7

Administration . . . . . . . . . . . . . . . . . . . . . .8
Section 5.01. Duties of Committee . . . . . . . . . .8
Section 5.02. Finality of Decisions . . . . . . . . .8

Amendment and Termination. . . . . . . . . . . . . . . . .9
Section 6.01. Amendment and Termination . . . . . . .9
Section 6.02. Contractual Obligation. . . . . . . . .9

Miscellaneous. . . . . . . . . . . . . . . . . . . . . . .10
Section 7.01. No Employment Rights. . . . . . . . . .10
Section 7.02. Assignment. . . . . . . . . . . . . . .10
Section 7.03. Law Applicable. . . . . . . . . . . . .10

<PAGE>

THE REEVES BROTHERS, INC.
401(a)(17) PLAN

ARTICLE I
DEFINITIONS

The words and phrases defined hereinafter shall have the following
meaning when capitalized unless the context otherwise requires:

SECTION 1.01. BENEFICIARY. The person or persons named under the
provisions of Section 4.04 of this Plan.

SECTION 1.02. BOARD. The Board of Directors of the Company.

SECTION 1.03. CODE. The Internal Revenue Code of 1986, as amended,
or as it may be amended from time to time.

SECTION 1.04. COMMITTEE. The Pension Committee described in Article
7 of the Pension Plan.

SECTION 1.05. COMPANY. Reeves Brothers, Inc., a Delaware
corporation, or any successor corporation which agrees to assume the duties of
the Company hereunder.

SECTION 1.06. EMPLOYEE. A participant in the Pension Plan who is
employed by the Company or one or more Participating Affiliated Companies.

SECTION 1.07. ERISA. The Employee Retirement Income Security Act of
1974, as amended, or as it may be amended.

<PAGE>

SECTION 1.08. PARTICIPATING AFFILIATED COMPANIES. Any affiliate of
the Company designated by the Board as a participating employer under the
Pension Plan.

SECTION 1.09. PENSION PLAN. The Reeves Brothers, Inc. Pension Plan
for Salaried Employees

SECTION 1.10. PLAN. The Reeves Brothers, Inc. 401(a)(17) Plan.

SECTION 1.11. PLAN YEAR. The calendar year.

-2-
<PAGE>

ARTICLE 2
PURPOSE OF PLAN

SECTION 2.01. PURPOSE. The purpose of this Plan is simply to restore
to employees of the Company the benefits they lose under the Pension Plan as a
result of the compensation limit in Section 401(a)(17) of the Code ("Section
401(a)(17)") and shall be construed accordingly.

-3-
<PAGE>

ARTICLE 3
ELIGIBILITY

SECTION 3.01. ELIGIBILITY. Any Employee or Beneficiary eligible to
receive benefits from the Pension Plan shall be eligible to receive benefits
under this Plan if (a) his or her benefits cannot be fully provided by the
Pension Plan because of provisions thereof implementing Section 401(a)(17) and
(b) they are designated in Appendix A.

SECTION 3.02. LIMITATION ON ELIGIBILITY. Notwithstanding Section
3.01, no benefits shall be paid an Employee or his or her Beneficiary unless the
Employee retires under the Normal Retirement, Early Retirement, Vested Deferred
or Disability Retirement Pension sections of the Pension Plan, or dies while
employed by the Company (or Participating Affiliated Companies) under
circumstances that entitle his Beneficiary to Death Benefits under the Pension
Plan.

-4-

<PAGE>

ARTICLE 4
BENEFITS

SECTION 4.01. AMOUNT OF BENEFITS. The benefit payable under this
Plan to an Employee (or his or her Beneficiary) will equal the benefit, if any,
which would have been payable to the Employee (or his or her Beneficiary, as the
case may be) under the terms of the Pension Plan, but for the restrictions of
Section 4Ol(a)(17) and Section 415 of the Code ("Section 415"), less the amounts
described in (b).

(a) Benefits under this Plan will only be paid to supplement benefit
payments actually made from the Pension Plan. If benefits are not
payable under a Pension Plan because the Employee has failed to vest,
or because the Pension Plan is terminated or for any other reason, no
payments will be made under this Plan with respect to such Pension
Plan.

(b) The benefits payable under this Plan will be reduced by the combined
amounts of "Pension Plan Benefits" described in Section 4.02 and the
amount of benefits which would have been payable to the Employee (or
his or her Beneficiary, as the case may be) under the terms of the
Pension Plan, but for the restrictions of Section 415.

SECTION 4.02. PENSION PLAN BENEFITS. The term "Pension Plan
Benefits" generally means the benefits actually payable to an Employee or
Beneficiary under the Pension Plan. However, this Plan is only intended to
remedy benefit reductions

-5-
<PAGE>

caused by the operation of Section 401(a)(17) and not reductions caused for any
other reason. In those instances where pension benefits are reduced for some
other reason, the term "Pension Plan Benefits" shall be deemed to mean the
benefits that would have been actually payable but for such other reason.

Examples or such other reasons include, but are not limited to, the
following:

(a) A reduction in pension benefits as a result of a distress termination
(as described in ERISA Section 4041(c) or any comparable successor
provision of law) of the Pension Plan. In such a case, the Pension
Plan Benefits will be deemed to refer to the payments that would have
been made from the Pension Plan had it terminated on a fully funded
basis as a standard termination (as described in ERISA Section 4041(b)
or any comparable successor provision of law).

(b) A reduction of accrued benefits as permitted under Section 412(c)(8)
of the Code, or any comparable successor provision of law.

(c) A reduction of pension benefits as a result of payment of all or a
portion of an Employee's benefits to a third party on behalf of or
with respect to an Employee.

SECTION 4.03. FORM AND TIME OF BENEFIT PAYMENTS. Benefits due under
this Plan shall be paid at such time or times following the Employee's
retirement or death as may be selected

-6-
<PAGE>

by the Committee in its sole discretion from among the options available under
the Pension Plan. In no event will benefits under this Plan be payable earlier
than benefits under the
Pension Plan.

SECTION 4.04. BENEFICIARY IN THE EVENT OF DEATH. Upon the death of
an Employee, any remaining benefits due under this Plan to an Employee shall be
distributed to (1) the Beneficiary designated by the Employee under the Pension
Plan, or if none, (2) the Beneficiary determined in accordance with Section 5.01
of the Pension Plan.

SECTION 4.05. BENEFITS UNFUNDED. Benefits payable under this Plan
shall be paid by the Company each year out of its general assets and shall not
be funded in any manner. The Company may enter into separate written agreements
to provide for the funding of all or part of the benefits under this Plan.

-7-
<PAGE>

ARTICLE 5
ADMINISTRATION

SECTION 5.01. DUTIES OF COMMITTEE. This Plan shall be administered
by the Committee in accordance with its terms and purposes. The Committee shall
have full discretionary authority to determine eligibility, to construe and
interpret the terms of the Plan, including the power to remedy possible
ambiguities, inconsistencies or omissions, and to determine the amount and
manner of payment of the benefits due to or on behalf of each Employee and/or
his or her Beneficiary from this Plan.

SECTION 5.02. FINALITY OF DECISIONS. The decisions made by and the
actions taken by the Committee in the administration of this Plan shall be final
and conclusive on all persons, and the members of the Committee shall not be
subject to individual liability with respect to this Plan. The Committee shall
provide for appeals of claim denials as required by ERISA Section 503.

-8-
<PAGE>

ARTICLE 6
AMENDMENT AND TERMINATION

SECTION 6.01. AMENDMENT AND TERMINATION. While the Company intends
to maintain this Plan in conjunction with the Pension Plan for as long as
necessary, the Company reserves the right to amend and/or terminate the Plan at
any time for whatever reasons it may deem appropriate.

SECOND 6.02. CONTRACTUAL OBLIGATION. Notwithstanding Section 6.01,
the Company intends to assume a contractual commitment to pay the benefits under
this Plan, to the extent they have accrued prior to amendment or termination
under Section 6.01, to the extent it is financially capable of meeting such
obligations.

-9-
<PAGE>

ARTICLE 7
MISCELLANEOUS

SECTION 7.01. NO EMPLOYMENT RIGHTS. Nothing contained in this Plan
shall be construed as a contract of employment between the Company or any
Participating Affiliated Companies and any Employee, or as a right of any
Employee to be continued in employment or as a limitation of the right of the
Company or any Participating Affiliated Companies to discharge any Employee
with or without cause.

SECTION 7.02. ASSIGNMENT. The benefits payable under this Plan may
not be assigned or alienated.

SECTION 7.03. LAW APPLICABLE. This Plan shall be governed by the
laws of the State of New York.

REEVES BROTHERS, INC.

By______________________

ATTEST:

______________________

-10-

<PAGE>

APPENDIX A

Vito W. Lenoci

Anthony L. Cartagine

-11-

<PAGE>

EXHIBIT 10-09

REEVES INDUSTRIES, INC.

Non-Qualified Stock Option Agreement

THIS AGREEMENT is entered into by and between REEVES INDUSTRIES, INC.,
a Delaware corporation (the "Company"), and JAMES W. HART (the "Optionee").

W I T N E S S E T H

WHEREAS, Optionee has provided continuous and valuable service to the
Company as an officer and/or director since 1986;

WHEREAS, Board of Directors of the Company has determined that it is
in the Company's best interest to issue to the Optionee and Option in
consideration of his continued service to the Company;

WHEREAS, to secure the continued loyal services of Optionee into the
future, the Board of Directors of the Company has granted to Optionee, effective
January 15, 1994 (the "Grant Date"), a non-qualified stock option (the "Option")
to purchase shares of the Common Stock, par value One Cent ($.01) per share (the
"Common Stock"), of the Company upon the terms and conditions hereinafter
stated;

WHEREAS, Optionee has agreed to continue to provide services to the
Company as Chairman of the Board and in such other capacity as requested by the
Board of Directors on such terms and conditions as are agreed to by Optionee and
the Company for three years following the Grant Date;

<PAGE>

NOW, THEREFORE, in consideration of the covenants herein set forth,
the parties agree as follows:

1. SHARES; PRICE. This Agreement hereby evidences the Option
granted to Optionee effective as of the Grant Date, to purchase, upon and
subject to the terms and conditions herein stated all or any part of an
aggregate of Three Million Eight Hundred Thousand (3,800,000) shares of Common
Stock of the Company. This Option shall (i) be immediately exercisable (in
whole or in part) for 1,400,000 shares at the exercise price of $.56; (ii) be
exercisable (in whole or in part) for an additional 1,400,000 shares on or after
the first anniversary of the Grant Date at the exercise price of $.75 per share;
and (iii) be exercisable (in whole or in part) for an additional 1,000,000
shares on or after the second anniversary of the Grant Date at the exercise
price of $1.00 per share.

2. TERM OF OPTION. This Option and all rights hereunder shall
expire on December 31, 2023.

3. Exercise. This Option may be exercised, as to any or all shares
covered by this Option, at any time after the exercise dates set forth in
Paragraph 1 above and prior to the expiration or termination of this Option by
delivery to the Company at its principal office of (a) written notice of
exercise of this Option, stating the number of shares then being purchased
hereunder; (b) a check or cash in the amount of the full purchase price of such
shares; (c) the written statement provided for in Section 7 hereof; and (d) such
other documents or instruments as

-2-
<PAGE>

may be required by any then applicable federal or state laws or regulations, or
regulatory agencies pertaining to this Option, any exercise thereof and/or any
offer, issue, sale or purchase of any shares covered by this Option. At the
time of the exercise of this Option, Optionee shall make arrangements which are
acceptable to the Board of Directors of the Company, in its sole discretion, for
the withholding of federal and state taxes required by law to be withheld with
respect to such exercise. Not less than 5,000 shares may be purchased at any
one time. After the Company has received all of the foregoing, the Company
shall proceed with reasonable promptness to issue the shares so purchased upon
such exercise of the Option.

4. TERMINATION OF EMPLOYMENT OR SERVICE. The Option granted
hereunder shall survive any termination of Optionee's employment or service with
the Company or a subsidiary and may be exercised by Optionee in accordance with
Section 3 hereof, notwithstanding such termination of employment or service, for
a period ending (i) ten years after such termination or until December 31, 2023,
whichever first occurs if such termination is prior to Optionee's 65th birthday
and (ii) December 31, 2023, if such termination is on or after Optionee's 65th
birthday; provided however, if Optionee shall quit the employ of the Company
without cause prior to the second anniversary of the Grant Date the total number
of shares of Common Stock subject to this Option shall be reduced to the number
of shares that the Option is exercisable for at the time of Optionee's
resignation.

-3-
<PAGE>

Notwithstanding any other provision contained herein, if Optionee shall die or
become unable to perform service for the Company as a result of a physical or
mental disability, this Option shall become immediately exercisable in its
entirety, and his personal representative or the person entitled to succeed to
his rights hereunder shall have the right, at any time prior to December 31,
2023, to exercise this Option in full. However, in no event shall this Option
extend beyond the period of its expiration or termination as described in
Section 2 hereof. No provision of this Option shall confer any right to
continue in the employ or service of the Company or any of its subsidiaries or
interfere in any way with the right of the Company and its subsidiaries to
terminate any employment or service at any time.

5. NO ASSIGNMENT. This Option shall not be assignable or
transferable except by will or by the laws of descent and distribution and shall
be exercisable during his lifetime only by Optionee.

6. NO RIGHTS AS STOCKHOLDER. Optionee shall have no right as a
stockholder with respect to the Common Stock covered by the Option until the
date of the issuance of a stock certificate or stock certificate to him. Except
as provided in Section 10 hereof, no adjustment will be made for dividends or
other rights for which the record date (or if there is no record date
established, then the date established for the distribution of such dividend or
right) is prior to the date such stock certificates are issued.

-4-
<PAGE>

7. SHARES PURCHASED FOR INVESTMENT. Optionee represents and agrees
that if he exercises this Option in whole or in part, he will acquire the shares
upon such exercise for the purpose of investment and not with a view to their
resale or distribution, and Optionee agrees that, if requested by the Company so
to do, upon each exercise of this Option, Optionee or any person or persons
entitled to exercise this Option pursuant to the provisions of Section 4 hereof
shall furnish to the Company a written statement that Optionee or such person or
persons are acquiring such shares upon exercise for purposes of investment and
not with a view to their resale or distribution. No shares shall be purchased
and the Company shall have no obligation to issue any shares, upon any exercise
of this Option unless and until: (a) any then applicable requirement of state
and federal laws and regulatory agencies pertaining to this Option, and exercise
thereof and/or the offer, issue, sale or purchase of any shares covered by this
Option shall have been fully complied with to the satisfaction of the Company
and its counsel; and (b) if requested by the Company so to do, upon each
exercise of this Option, Optionee or any person or persons entitled to exercise
this Option pursuant to the provisions of Section 4 hereof, shall have furnished
to the Company a written statement to the effect that such shares are being
acquired upon such exercise for the purpose of investment and not with a view to
their resale or distribution, such written statement to be satisfactory in form
and substance to the Company. The Company

-5-
<PAGE>

may, at its option, place a legend on each certificate representing shares
purchased upon exercise of this Option, stating, in effect, that such shares
have not been registered under the Securities Act of 1993, as amended (the
"Act"), and that the transferability thereof is restricted. If the shares
represented by this Option are registered under the Act, either before or after
any exercise of this Option (in whole or in part), the Board of Directors shall
relieve Optionee of the foregoing investment representations an agreements.

8. BONUS. In connection with the exercise of all or any part of
this Option pursuant to Section 3, Optionee or any person or persons entitled to
exercise this Option under Section 4 hereof may, in the discretion of the Board
of Directors, be paid a cash bonus equal to an amount up to the excess, if any,
of the fair market value per share of the Common Stock acquired pursuant to such
exercise. Such bonus shall be paid not later than 90 days after the date of the
exercise of the Option. The Company shall have the right to deduct all
applicable federal and state taxes required by law to be withheld from all
payments made hereunder with respect to such bonus. A bonus in such amount
shall, in the discretion of the Board of Directors, be paid in connection with
each exercise of this Option otherwise allowable hereunder.

9. MODIFICATIONS AND TERMINATION. The rights of Optionee are not
subject to modification and termination except

-6-
<PAGE>

with the written consent of the Optionee, or, after his death, his successor or
heir.

10. ANTI-DILUTION RIGHTS. In the event of any change in outstanding
Common Stock of the Company by reason of a stock dividend, recapitalization,
merger, consolidation, split-up, combination or exchange of shares, or the
issuance on a pro rata basis to stockholders of any rights, warrants or options
to acquire stock, or any other change in the capitalization of the Company, the
aggregate number of shares subject to this Option, and the Option price, shall
be appropriately adjusted by the Board of Directors of the Company, whose
determination shall be conclusive.

11. REGISTRATION RIGHTS. The holders of the shares issuable under
the Option shall have the registration rights set forth in Appendix 1 hereto
with respect to such shares.

12. PURPOSE OF THIS OPTION. The Company is of the opinion that the
granting of the Option to Optionee will stimulate the effort of Optionee,
strengthen his desire to remain in the active service of the Company and thereby
further the objective of the Company for the benefit of all the stockholders.

13. MISCELLANEOUS. Section and other headings are included herein
for reference purposes only and shall not be construed or interpreted as part of
this Agreement. Wherever and whenever the context of this Agreement shall so
require, the gender of any noun or pronoun shall include both the masculine

-7-
<PAGE>

and feminine and the singular shall include the plural and the plural shall
include the singular.

IN WITNESS WHEREOF, the parties hereto have executed the Agreement as
of the 26th day of January, 1994.

REEVES INDUSTRIES, INC.

By:________________________________
Title
OPTIONEE

___________________________________

-8-
<PAGE>

APPENDIX 1

REGISTRATION RIGHTS

A. OBLIGATIONS OF COMPANY. The Company shall use its best efforts
to cause a registration statement on Form S-8 (or any successor form ) to be
filed with the Securities and Exchange Commission (the "SEC") and declared
effective under the Securities Act of 1933, as amended (the "Act"), relating to
the shares underlying the Option to which these registration rights are attached
(the "Shares") prior to the expiration of the Option. The foregoing obligation
of the Company is not contingent upon a request from the holder (the "Holder")
of the Option (or the Shares, in the event the Option has been exercised) and
the Company shall give the Holder prompt notice of the filing and effectiveness
of the registration statement on From S-8. The Company's obligations under this
provision are subject to the other terms of this Appendix 1 including those
terms relating to expenses of registration.

B. PIGGY-BACK REGISTRATION RIGHTS. In the event that the Company,
following the exercise of the Option to which these rights apply, files a
registration statement under the Act relating to the offer of its common stock
for cash, except for offers in connection with an employee benefit plan of the
Company, an acquisition, merger or similar transaction, the Company shall give
the Holder of the Shares written notice of the proposed filing at least 15 days
in advance thereof and if, within 10 days after the Holder receives such notice,
the Company is notified in writing from the Holder that he wishes to include the
Shares in such registration statement for sale thereunder, the Company shall use
its best efforts to cause the Shares to be included in such registration
statement; provided, however, the Company shall have no such duty unless the
shares sought to be included in such registration statement equal not less than
50,000 shares. In connection with such underwriting agreement with the Company
and the principal underwriter.

C. OBLIGATION OF OPTIONEE. The Holder shall furnish to the Company
in writing all information required by the Act and the rules and regulations of
the SEC thereunder relating to the proposed distribution of the Holder's Shares
or any other matters required to be disclosed with respect to Holder in the
registration statement or prospectus.

D. TERMS AND CONDITIONS OF THE COMPANY'S OBLIGATIONS. The
obligations of the Company and Holder under this agreement shall be subject to
the following additional terms and conditions. The Company shall: (i) except
with respect to a registration statement on Form S-8 under Section A, not be
obligated to register shares if counsel for the Company renders a

<PAGE>

written opinion that registration of the shares is not required under the
provisions of the Act in connection with a public sale thereof; (ii) not be
obligated to keep any registration statement in effect for more than a
reasonable length of time following the effective date of any such registration
statement and in no event longer than 120 days from its effective date and may
deregister all or portion of the shares covered thereby after such time; and
(iii) be supplied by the Holder with any information regarding the Holder
required to be stated in the registration statement and in connection with sales
pursuant thereto. The registration rights set forth herein expire with respect
to Shares which are transferred by the Optionee as set forth in the Option
Agreement or any subsequent Holder upon the transfer of such Shares other than
by a private placement.

E. EXPENSES OF REGISTRATION. If shares are registered under this
agreement, the Holder shall, except with respect to a registration statement on
Form S-8 under Section A, pay its pro rata share of the fees (including filing
fees with any governmental or regulatory body), underwriting discounts and
commissions attributable to the shares included under the registration statement
pursuant to this agreement; provided, however, that if the registration
statement is withdrawn without the concurrence of the Holder, then such fees and
expenses shall be paid by the Company. To the extent permitted by state or
federal securities law, the Company shall pay all additional costs in preparing
and filing the registration statement, including fees of the Company's counsel
and auditors, the costs of printing and distribution.

F. CHANGE IN SEC PROCEDURES AND FORMS. In the event the SEC shall
adopt new procedures or forms which authorize or allow other amounts of
secondary distribution which may require action by the Company other than
registration under the Act, the Company and the Holder agree that the foregoing
provisions shall apply, as nearly as may be practicable, to such new procedures
or forms.

-2-

<PAGE>
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
REEVES INDUSTRIES, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
QUARTER ENDED
FISCAL YEAR ENDED DECEMBER 31, ----------------------
------------------------------------------------------------- MARCH 28, APRIL 3,
1989 1990 1991 1992 1993 1993 1994
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT RATIO)
<S> <C> <C> <C> <C> <C> <C> <C>
Income from continuing operations before
income taxes........................... $ 12,583 $ 6,467 $ 4,917 $ 8,569 $ 11,858 $ 1,688 $ 3,361
Plus fixed charges
Interest expense and amortization of
financing costs and debt discount.... 22,590 19,935 21,777 17,633 16,394 4,144 4,085
Interest portion of rent expense...... 358 213 396 476 491 64 178
--------- --------- --------- --------- --------- --------- ---------
Total fixed charges................. 22,948 20,148 22,173 18,109 16,885 4,208 4,263
--------- --------- --------- --------- --------- --------- ---------
Earnings plus fixed charges............. $ 35,531 $ 26,615 $ 27,090 $ 26,678 $ 28,743 $ 5,896 $ 7,624
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratio of earnings to fixed charges...... 1.6x 1.3x 1.2x 1.5x 1.7x 1.4 x 1.8x
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our reports dated March 9, 1994,
except as to Note 2 which is as of March 31, 1994, relating to the balance
sheet of Reeves Holdings, Inc. and February 11, 1994, except as to Note 16
which is as of March 31, 1994, relating to the financial statements of Reeves
Industries, Inc., which appear in such Prospectus. We also consent to the
application of such reports to the Financial Statement Schedules for the three
years ended December 31, 1993 listed under Item 16(b) of this Registration
Statement when such schedules are read in conjunction with the financial
statements referred to in our reports. The audits referred to in such reports
also included these schedules. We also consent to the references to us under the
headings "Experts" and "Selected Financial Data" in such Prospectus. However,
it should be noted that Price Waterhouse has not prepared or certified such
"Selected Financial Data."

PRICE WATERHOUSE

Atlanta, Georgia
June 9, 1994