-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SdIPVXmMR1WyHtGTDR3NsVCbm2nRJ537jqcOXDjPNRkLN0q/gDq/caU32zcmvefi i6oIAYw7iP7uAaPI8IgsJQ== 0000912057-96-029863.txt : 19961223 0000912057-96-029863.hdr.sgml : 19961223 ACCESSION NUMBER: 0000912057-96-029863 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961220 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAGGAR CORP CENTRAL INDEX KEY: 0000892533 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 752187001 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-20850 FILM NUMBER: 96683935 BUSINESS ADDRESS: STREET 1: 6311 LEMMON AVE CITY: DALLAS STATE: TX ZIP: 75209 BUSINESS PHONE: 2143528481 MAIL ADDRESS: STREET 1: 6311 LEMMON AVENUE CITY: DALLAS STATE: TX ZIP: 75209 10-K405 1 FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________. COMMISSION FILE NUMBER: 0-20850 HAGGAR CORP. (Exact name of registrant as specified in the charter) NEVADA 75-2187001 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 6113 LEMMON AVENUE DALLAS, TEXAS 75209 (Address of principal executive offices) Registrant's telephone number, including area code: (214) 352-8481 Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS REGISTERED Common stock Nasdaq National Market System ($0.10 par value per share) Securities registered pursuant to Section 12(g) of the Act: NONE. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] As of December 2, 1996 there were 8,551,382 shares of common stock outstanding. The aggregate market value of the 7,401,702 shares of the common stock of Haggar Corp. held by nonaffiliates on such date (based on the closing price of these shares on the Nasdaq National Market System) was approximately $131,380,210. DOCUMENTS INCORPORATED BY REFERENCE The information required by Part III is incorporated by reference from the Registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report. THIS PAGE INTENTIONALLY LEFT BLANK. 2 PART I ITEM 1. BUSINESS INTRODUCTION. Haggar Corp., together with its subsidiaries (collectively the "Company"), designs, manufactures, imports and markets casual and dress men's apparel products including pants, shorts, suits, sportcoats and shirts. Products are offered in a wide variety of styles, fabrics, colors and sizes. The Company's products are sold primarily through approximately 7,000 retail stores operated by its customers, which include major department stores, specialty stores and mass market retailers throughout the United States. The Company offers its premium apparel products under the "Haggar" brand name, and also offers a more moderately priced line of products under its "Reed St. James" brand name through its mass market retailer division, The Horizon Group. The Company owns several other trademarks under which it markets or has marketed its products. In addition, the Company's specialty label division offers retailers quality products bearing the retailer's own label. In each of the last three fiscal years the Company has derived approximately 99% of its revenues from sales of men's apparel products. Additional income is derived from the licensing of certain trademarks to other manufacturers. In 1995, as part of its strategic growth objectives, the Company began opening and operating retail stores located in retail outlet malls throughout the United States. As of September 30, 1996, the Company had opened 28 such stores which market first quality Company products to the general public. These stores also serve as a retail marketing laboratory for the Company. The Company was established in 1926 by J. M. Haggar, Sr., and has built its reputation by offering high quality, "ready to wear" men's apparel at affordable prices through innovations in product design, marketing and customer service. Haggar Clothing Co. is the primary operating subsidiary. Both Haggar Corp. and Haggar Clothing Co. are incorporated in Nevada. PRODUCTS AND MAJOR BRANDS. The Company's apparel products are manufactured with a wide array of fabrics that emphasize style, comfort, fit and performance. The Company is well known for its use of "performance fabrics" that maintain a fresh, neat appearance. The Company's product lines are currently dominated by natural fiber (wool or cotton) and blended (polyester/wool or polyester/rayon) fabrics, although the Company also produces some apparel using a single synthetic (polyester or rayon) fabric. A significant portion of the Company's apparel lines consists of basic, recurring styles, which the Company believes are less susceptible to "fashion obsolescence", as compared with higher fashion apparel lines. Thus, while the Company strives to offer current fashions and styles, the bulk of its product lines change relatively little from year to year. This consistency in product lines enables the Company to operate on a cost-efficient basis and to more accurately forecast the demand for particular products. HAGGAR. The Company's Haggar brands represented 80.4% of total apparel sales in fiscal 1996. These brands receive widespread recognition among United States consumers for high quality, affordable men's apparel. The full range of products offered by the Company is marketed under these brands, including dress and casual pants, sportcoats, suits, shirts and shorts. The Company has developed specific product lines under these brands, intended to keep the Company in the forefront of the trend among men toward more casual clothing, while maintaining the Company's traditional strength in men's dress apparel. Examples of these lines include Haggar Wrinkle-Free Cottons-Registered Trademark- and Haggar City Casuals-TM-. Haggar Wrinkle-Free Cottons-Registered Trademark- offer all the comfort features of 100% cotton pants and maintain their neat appearance, without the need for ironing or dry cleaning. Haggar City Casuals-TM- is a fashionable line of coordinated coats, vests, pants and shirts designed to meet the need for 3 "business casual" and casual social dressing. The Haggar brand is also licensed to manufacturers of related apparel in categories outside of the core product lines of the Company. Haggar branded products are sold nationwide primarily in major department stores, including J.C. Penney, Mercantile Department Stores, May Department Stores, Federated Department Stores, Mervyn's California, Belk Department Stores and Kohl's Department Stores. The Company also markets its Haggar branded men's clothing through its own retail stores located in 28 outlet malls throughout the United States. THE HORIZON GROUP. The Company's mass retailer division, The Horizon Group, markets Reed St. James branded products including dress pants, casual pants, shorts, suits, sportcoats and shirts. Reed St. James products, which are offered at lower price points than Haggar brand products, are generally sold to mass market retailers, such as Wal-Mart, Bradlees and Venture. The Horizon Group also markets Mustang-Registered Trademark- brand jeans (featuring basic and fashion cotton jeans and shorts) and Reed Stretch Jeans. Additionally, the Horizon Group manages the licensing of products bearing the Reed St. James brand. SPECIALTY LABELS. In addition to manufacturing products under its own labels, the Company also manufactures men's apparel for certain of its customers under the individual store's proprietary label. The specialty label division generally offers a similar array of products as offered under the Company's own labels. The Company's specialty label products are primarily sold to major department stores and mass market merchandisers, including J.C. Penney and Sears. INTRODUCTION OF NEW PRODUCTS. The Company is emphasizing the introduction of new products in order to capitalize on its brand name recognition and retailer relationships. While the Company has offered casual products in the past, it has increased its efforts in this category through aggressive marketing and expansion of its line of Haggar Wrinkle-Free Cottons-Registered Trademark-, including its Ultimate Pant-TM-, as well as Haggar City Casuals-TM-. The Company continues to emphasize its lines of shirts designed to complement its casual product lines. While there is substantial competition in these markets, the Company believes that it is well-positioned to take advantage of these market opportunities. Although the Company introduced a line of boyswear during fiscal 1994, the Company has decided to refocus those resources toward further developing its men's clothing lines. After entering the boyswear category with Haggar Wrinkle-Free Cottons-Registered Trademark-, the Company determined that the opportunities for growth in this category of branded products was limited and that margins were not attainable in keeping with the Company's requirements. DEPENDENCE ON KEY CUSTOMERS. The number of major apparel retailers has decreased in recent years, and the retail apparel industry continues to undergo consolidation. The Company's five largest customers accounted for 50.8%, 50.7% and 49.7% of net sales during the fiscal years ending September 30, 1996, 1995 and 1994, respectively. The Company's largest current customer, J.C. Penney Company, Inc., accounted for 26.3%, 28.7% and 27.6% of the Company's net sales during the fiscal years ending September 30, 1996, 1995 and 1994, respectively. No other customer accounted for more than 10% of consolidated revenues. The loss of the business of one or more of the Company's largest customers could have a material adverse effect on the Company's results of operations. The Company has no long-term commitments or contracts with any of its customers. COMPETITION. The apparel industry is highly competitive due to its fashion orientation, its mix of large and small producers, the flow of imported merchandise and a wide variety of retailing methods. Competition has been exacerbated by consolidations and closings of major department store groups. The Company has many diverse competitors, some of whom have greater marketing and financial resources than the Company. Intense competition in the apparel industry can result in significant discounting and lower gross margins. 4 The Company is the market leader in sales of men's dress pants, custom-fit suits (separately sized pants and matching jackets which may be purchased together to form a suit requiring little or no alteration) and sportcoats, and holds the number two market share in men's casual pants. The principal elements of competition in the apparel industry include style, quality and price of products, brand loyalty, customer service and advertising. The Company's product innovations such as Haggar Wrinkle-Free Cottons-Registered Trademark- and Ultimate Pant-TM- as well as value-added services such as floor-ready merchandise, electronic data interchange, fixturing and concept shops position it to compete as a market leader. The Company also believes that its brand recognition, merchandise with relatively low vulnerability to changing fashion trends and affordable pricing enhance its competitive position in the apparel industry. Additionally, it feels its national advertising campaign promotes consumer demand for its products and enhances its brand and Company image. DESIGN AND MANUFACTURING. With limited exceptions, products sold by the Company's various divisions are manufactured to the designs and specifications (including fabric selections) of designers employed by those divisions. During fiscal 1996, approximately 29% of the Company's products (measured in units) were produced in the United States, with the balance manufactured in foreign countries. Facilities operated by the Company accounted for approximately 93% of its domestic-made products with the remaining 7% being produced by a domestic contract manufacturer. During the second half of fiscal 1996 the Company terminated its agreement with this contractor. A portion of all product lines manufactured by the Company are produced domestically with the exception of shirts. Approximately 27% of the Company's foreign-made products were manufactured by facilities owned by the Company in Mexico and the Dominican Republic, with the remaining 73% manufactured by unaffiliated companies in the Far East, Asia, South America, Central America, Mexico and the Dominican Republic. On October 28, 1996, the Company announced its plans to restructure its worldwide manufacturing capacity by consolidating its three Texas sewing operations into one facility and shifting a portion of the production to off-shore locations. This restructuring is expected to begin in 1997 and to be fully implemented in 1998. It is anticipated that this restructuring will result in approximately 15% of the Company's products being manufactured in the United States, with the other 85% manufactured in foreign countries. (See Item 7.- Managements Discussion and Analysis of Financial Condition and Results of Operations). The Company's foreign sourcing operations are subject to various risks of doing business abroad, including currency fluctuations, quotas and other regulations relating to imports, natural disasters and, in certain parts of the world, political or economic instability. Although the Company's operations have not been materially adversely affected by any of such factors to date, any substantial disruption of its relationships with its foreign suppliers could adversely affect its operations. Some of the Company's imported merchandise is subject to United States Customs duties. In addition, bilateral agreements between the major exporting countries and the United States impose quotas which limit the amounts of certain categories of merchandise that may be imported into the United States. Any material increase in duty levels, material decrease in quota levels or material decrease in available quota allocations could adversely affect the Company's operations. RAW MATERIALS. Raw materials used in manufacturing operations consist mainly of fabrics made from cotton, wool, synthetics and blends of synthetics with cotton and wool. These fabrics are purchased principally from major textile producers located in the United States. In addition, the Company purchases such items as buttons, thread, zippers and trim from a large number of other suppliers. Five vendors supplied approximately 57% of the Company's fabric and trim requirements during the fiscal year ended September 30, 1996. The Company has no long-term contracts with any of its suppliers, but does not anticipate substantial shortages of raw materials in 1997. 5 TRADEMARKS. The Company owns many federal trademark registrations and has pending several other trademark applications in the United States Patent and Trademark Office. The Company has also registered or applied for registration of a number of trademarks for use on a variety of apparel items in various foreign countries. The Company regards its trademarks and other proprietary rights as valuable assets and believes that they have significant value in the manufacturing and marketing of its products. The Company seeks to capitalize on consumer recognition and acceptance of both the Haggar and Reed St. James brands by licensing, both domestically and internationally, the use of these trademarks on a variety of products. Typically, the licensee's agreement with the Company gives it the right to produce, market and sell specified products in a particular country or region under one of the Company's trademarks. For example, the Company has granted exclusive domestic licenses to unaffiliated manufacturers for the production and marketing of men's leather goods, neckwear, sweaters, hosiery and eyewear under the "Haggar" trademark. SEASONALITY. Historically, the Company's business has been seasonal, with higher sales and income during its second and fourth quarters, just prior to and during the two peak retail selling seasons for spring and fall merchandise (see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Seasonality). BACKLOG. A substantial portion of the Company's net sales is based on orders for immediate delivery, or so-called "soft-planning orders", submitted by apparel retailers (which do not constitute purchase commitments). An analysis of backlog is not, therefore, necessarily indicative of future net sales. Retailers' use of such soft-planning orders increases the difficulty of forecasting demand for the Company's products. EMPLOYEES. The Company employs approximately 4,300 persons domestically and 1,700 persons in foreign countries. In 1996, approximately 4,600 employees were engaged in manufacturing operations and the remainder were employed in executive, marketing, wholesale and retail sales, product design, engineering, accounting, distribution and purchasing activities. However, the Company has announced its decision to consolidate its three Texas sewing operations into one facility, which may result in the termination of the employment of a number of its employees engaged in manufacturing operations. None of its domestic employees are covered by a collective bargaining agreement with any union. While the Company is not a party to any collective bargaining agreements covering its foreign employees, applicable labor laws may dictate minimum wages, fringe benefit requirements and certain other obligations. The Company believes that relations with its employees are good. ENVIRONMENTAL REGULATIONS. Current environmental regulations have not had and, in the opinion of the Company, assuming the continuation of present conditions, will not have any material effect on the business, capital expenditures, earnings or competitive position of the Company. FINANCIAL INSTRUMENT DERIVATIVES. The Company does not utilize financial instrument derivatives. 6 ITEM 2. PROPERTIES The Company's principal executive offices are located at 6113 Lemmon Avenue, Dallas, Texas 75209. The general location, use, approximate size and information with respect to the ownership or lease of the Company's principal properties currently in use are set forth below: Approximate Owned/ Lease Location Use Square Footage Leased Expiration - -------------------------------------------------------------------------------- Dallas, Texas (1) Headquarters 443,000 Owned & Distribution Dallas, Texas (1) Warehouse & Distribution 157,000 Leased 1998 Fort Worth, Texas Warehouse & Distribution 660,000 Owned Dallas, Texas Storage 60,000 Owned Dallas, Texas Design & Marking 12,000 Owned Weslaco, Texas Fabric Cutting 115,000 Owned Weslaco, Texas Manufacturing 95,000 Leased 1999 Weslaco, Texas Warehouse 137,000 Owned Edinburg, Texas Fabric Cutting & Manufacturing 121,000 Owned Brownsville, Texas Manufacturing 95,000 Leased 2002 Leon, Mexico Manufacturing 39,000 Owned La Romana, Dom. Rep. Manufacturing 41,000 Leased 2001 Higuey, Dom. Rep. Manufacturing 13,000 Leased 2011 Robstown (2) Excess Facility 68,000 Owned Oklahoma City (2) Excess Facility 95,000 Leased 2001 Waxahachie (2) Excess Facility 17,000 Owned Various (29 locations) (3) Retail Sales 90,000 Leased 1997 - 2003 (1) As part of the transition to the CSC, the distribution portion of the headquarters and distribution building was vacated. Management is currently evaluating potential uses for that space. In addition, a portion of the operations performed in the leased facility located in Dallas will be transferred to the CSC during fiscal 1997. (2) These properties were previously used by the Company as manufacturing plants but are no longer utilized by the Company. The Company is profitably subleasing the property in Oklahoma City, Oklahoma to the U.S. Postal Service. (3) These properties are the Company's 28 retail stores located in outlet malls throughout the United States and one outlet store which sells second quality products. The retail stores range in size from approximately 2,700 to 4,400 square feet. All of the properties owned by the Company are free from material encumbrances, except the Company's fabric cutting facility located at Weslaco, Texas, which is subject to a lien securing an industrial revenue bond financing in the amount of $3.0 million. The Company believes that its existing facilities are well maintained, in good operating condition and adequate for its present and anticipated levels of operations. Future manufacturing needs are anticipated to be met through owned facilities and through the use of outside contractors. The Company's new Customer Service Center (CSC) in Fort Worth, Texas began to be fully utilized in the third quarter of fiscal 1996 and is expected to meet the Company's distribution requirements for the foreseeable future. 7 ITEM 3. LEGAL PROCEEDINGS The Company has been named as a defendant in several legal actions arising from its normal business activities, including actions brought by certain terminated employees. Although the amount of any liability that could arise with respect to these actions cannot be accurately predicted, the claims and damages alleged, the progress of the litigation date, and past experience with similar litigation leads the Company to believe that any liability resulting from these actions will not individually or collectively have a material adverse effect on the financial position of the Company. Further, the Company maintains general liability, workers' compensation, and employer's liability insurance. The Company intends to pass back the costs associated with lawsuits to its insurance carriers, under the applicable policies, if any, subject to the deductible limits and other provisions of those policies. An additional party seeks to intervene as a plaintiff in the suit filed on August 31, 1995, in the 103rd Judicial District Court of Cameron County, Texas, by Ernest Jaramillo, et al. The intervening party, Brian Riley, who alleges he is the husband of Lynnice W. Henry-Riley, seeks unspecified actual and punitive damages allegedly resulting from her death during the storm and roof collapse on May 5, 1995. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the Nasdaq National Market System under the symbol "HGGR." The following table sets forth, for the fiscal quarters indicated, the high and low prices for the Common Stock as reported by the Nasdaq National Market System and the dividends paid per common share. 1996 FISCAL QUARTER ----------------------------------------- 1st 2nd 3rd 4th ----------------------------------------- High 18 3/4 19 16 1/4 14 7/8 Low 15 3/4 11 1/2 12 5/8 12 1/2 Dividend $0.05 $0.05 $0.05 $0.05 1996 FISCAL QUARTER ----------------------------------------- 1st 2nd 3rd 4th ----------------------------------------- High 27 3/4 26 1/4 22 1/4 20 3/4 Low 20 1/2 19 17 3/4 18 Dividend $0.05 $0.05 $0.05 $0.05 As of November 15, 1996, the Company had approximately 250 stockholders of record and approximately 3,200 beneficial owners. 9 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial information below should be read in conjunction with the consolidated financial statements of the Company and notes thereto and "Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations." The selected consolidated financial information for the five years ended September 30, 1996, is derived from financial statements of the Company which have been audited by Arthur Andersen LLP, independent public accountants. Year Ended September 30, 1996 1995 1994 1993 1992 --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Net sales $ 437,942 $ 448,532 $ 491,235 $ 394,059 $ 380,770 Cost of goods sold 315,351 324,699 345,846 285,540 279,127 Restructuring charge (1) 8,680 1,244 - - 1,151 --------- --------- --------- --------- --------- Gross profit 113,911 122,589 145,389 108,519 100,492 Selling, general and administrative expenses (113,037) (110,432) (106,258) (87,473) (81,682) Restructuring charge (1) (5,320) - - - - Gain from storm damage (2) 1,140 4,807 - - - Royalty income 2,630 3,049 2,655 2,512 2,034 --------- --------- --------- --------- --------- Operating income (loss) (676) 20,013 41,786 23,558 20,844 Other income, net 1,563 786 1,510 1,238 2,683 Interest expense (4,293) (4,995) (1,273) (1,506) (3,998) --------- --------- --------- --------- --------- Income (loss) from operations before provision for income taxes (3,406) 15,804 42,023 23,290 19,529 Provision (benefit) for income taxes (986) 5,995 16,342 8,278 7,097 --------- --------- --------- --------- --------- Net income (loss) (3) (2,420) 9,809 25,681 15,012 12,432 Less: cumulative preferred stock dividends - - - - (1,117) --------- --------- --------- --------- --------- Net income (loss) to common stockholders $ (2,420) $ 9,809 $ 25,681 $ 15,012 $ 11,315 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Net income (loss) per common share (4) $ (0.28) $ 1.14 $ 2.95 $ 1.88 $ 1.95 Cash dividends declared per common share $ 0.20 $ 0.20 $ 0.20 $ 0.10 $ - Weighted average number of common shares (4) 8,552 8,623 8,700 7,956 5,805 BALANCE SHEET DATA (AT PERIOD END): Working capital $ 136,172 $ 178,849 $ 130,644 $ 111,679 $ 96,969 Total assets 278,334 315,352 257,298 206,253 170,483 Long-term debt 42,112 78,585 15,032 5,455 28,154 Stockholders' equity 162,482 166,406 158,002 133,399 80,268
(1) The Company decided to restructure its worldwide manufacturing capacity, which resulted in $14.0 million in nonrecurring charges in the 1996 fiscal year. During fiscal years 1995 and 1992, the Company elected to close certain operating plants, which resulted in $1.2 million in nonrecurring charges in both fiscal years. (2) During fiscal year 1995, the Company recognized a gain from the recording of an insurance claim, net of direct costs, where the insurance claim arose out of damage to the Company's main distribution center caused by a severe thunderstorm on May 5, 1995. During fiscal 1996, the Company recognized an additional $1.1 million gain from storm damage as a result of collections of insurance proceeds in excess of the September 30, 1995 recorded receivable. (3) Certain nonrecurring events, including one of the plant closings described in Note 1 above, the termination of the Company's performance plan, the gain on the sales of assets, and the recovery of state administrative sales taxes, had the net effect of increasing fiscal year 1992 net income after taxes by approximately $60,000. (4) Based upon the weighted average common shares and share equivalents outstanding as of the end of each period. In October 1992, the Company's Board of Directors and stockholders approved a two-for-three reverse common stock split. Accordingly, all references with regard to numbers of common shares, related dividends, and per share data prior to fiscal 1993 have been restated to reflect the reverse stock split on a retroactive basis. 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the consolidated results of operations and financial condition of Haggar Corp. should be read in conjunction with the accompanying consolidated financial statements and related notes contained in "Item 8, Financial Statements and Supplementary Data" to provide additional information concerning the Company's financial activities and condition. RESULTS OF OPERATIONS. The following table sets forth certain financial data expressed as a percentage of net sales for each of the fiscal years ended September 30, 1996, 1995 and 1994. Year Ended September 30, 1996 1995 1994 ----- ----- ----- Net sales 100.0% 100.0% 100.0% Cost of goods sold 72.0 72.4 70.4 Restructuring charge 2.0 0.3 - ----- ----- ----- Gross profit 26.0 27.3 29.6 Selling, general and administrative expenses (25.8) (24.6) (21.6) Restructuring charge (1.2) - - Gain from storm damage 0.2 1.1 - Royalty income 0.6 0.7 0.5 ----- ----- ----- Operating income (loss) (0.2) 4.5 8.5 Other income, net 0.4 0.1 0.3 Interest expense (1.0) (1.1) (0.3) ----- ----- ----- Income (loss) from operations before provision (benefit) for income taxes (0.8) 3.5 8.5 Provision (benefit) for taxes (0.2) 1.3 3.3 ----- ----- ----- Net income (loss) (0.6)% 2.2% 5.2% ----- ----- ----- ----- ----- ----- FISCAL 1996 COMPARED TO FISCAL 1995. Net sales decreased 2.4% to $437.9 million in fiscal 1996 compared to net sales of $448.5 million in fiscal 1995. The decrease in net sales during fiscal 1996 reflects a 1.4% increase in unit sales offset by a 3.7% decrease in average sales price. During the first half of fiscal 1996, net sales were adversely affected by decreased holiday sales at retail and severe weather conditions in the Eastern U.S. which slowed efforts to clear post-holiday inventories. By comparison, net sales for the first six months of fiscal 1995 were the highest in the Company's history. During the second half of fiscal 1996 net sales exceeded the net sales during the same period in 1995. However, net sales for the second half of fiscal 1995 were unusually low due to the May 5, 1995 storm damage. Sales volume in the second half of fiscal 1996 was below expectations because of shipping difficulties incurred in the Company's new CSC. Despite acceptable initial test results, under operational conditions the automated shipping systems within the CSC were unable to accommodate the level of shipment volume needed. However, the Company was able to overcome most of the shipping difficulties experienced during the transition into the new CSC during the fourth quarter of fiscal 1996. Gross profit as a percent of net sales decreased to 26.0% in 1996 compared to 27.3% in 1995. The decrease in gross profit as a percent of net sales was primarily due to the manufacturing restructuring charge of $8.7 million which was recorded in the fourth quarter of fiscal 1996. Absent the manufacturing restructuring charges taken in both years, gross profit in 1996 would have improved to 28%, as compared to 27.6% in fiscal 11 1995. However, gross profit in both years was adversely impacted by inventory and sales price markdowns caused as a resulting from the Company's efforts to reduce excess inventories. The manufacturing restructuring charge is the result of the Company's decision to pursue a strategic move intended to improve gross margins and profitability in 1997 and beyond by consolidating its three Texas sewing operations into one facility. When fully implemented, this restructuring plan will potentially reduce manufacturing costs at current production levels by $12.0 million to $14.0 million annually. The restructuring charge was recorded in the fourth quarter of fiscal 1996 and included an $8.7 million charge to cost of sales related principally to severance costs for manufacturing employees and a $5.3 million charge to selling, general and administrative expenses related principally to costs to resolve various legal issues in connection with the restructuring and prior plant closings as well as severance for non-manufacturing employees. Cost savings and other benefits from the announced restructuring of the Company's manufacturing operations are dependent on the successful and timely closure of two Texas sewing facilities, successful consolidation of certain of the operations of the closed plants into the remaining Texas sewing facility and successful transfer of other operations of the closed plants to foreign facilities. This restructuring plan could be impeded by delays in receiving and analyzing information necessary to identify the facilities to be closed, governmental intervention, changes in regulatory framework and labor disruptions. Further, the amount of savings expected to be realized assumes manufacturing production at or above current levels which, in turn, is dependent upon the demand for the Company's products and continued improvement of the receiving, inventory control and shipping functions of the CSC at high volumes. Selling, general and administrative expenses as a percent of net sales increased to 25.8% in fiscal 1996 from 24.6% in fiscal 1995. Actual selling, general and administrative expenses increased $2.6 million to $113.0 million in 1996 compared to $110.4 million in 1995. The primary reasons for the increase in selling, general and administrative expenses during fiscal 1996 were (i) an increase in depreciation expense of approximately $2.0 million related to the new CSC, (ii) an approximate $8.2 million increase in distribution costs in 1996 resulting from the use of additional labor in temporary distribution facilities pending completion of the CSC, and (iii) an approximate $5.0 million increase in expenses related to the opening and operations of 20 new retail stores during fiscal 1996. The Company partially offset these increases by decreasing advertising costs by approximately $6.5 million and decreasing other costs attributable to sales. Although the Company has overcome most of the shipping difficulties experienced during the transition into the new CSC, certain systems require further improvement and the facility has not yet been subjected to the demands of operations at peak capacity. Achieving higher shipment levels and the cost efficiencies expected from the CSC will require continued improvement of the receiving, inventory control and shipping functions of the CSC. There can be no assurance that remaining issues will not be compounded or that new difficulties will not be encountered as utilization of the CSC is increased. The Company has executed leases for 12 new retail stores opened or to be opened in fiscal 1997. The Company intends to continue to evaluate the growth potential for retail outlet malls and may open additional retail stores as opportunities arise. The gain from storm damage recorded in fiscal 1995 was the result of the Company recording a $24.0 million charge in the third quarter of fiscal 1995 to cover the costs of damage caused by the May 5, 1995, storm. These costs included the write-down of damaged inventory to its salvage value, damages to the Company's building and equipment and disaster recovery charges. In the fourth quarter of fiscal 1995, the Company recorded an additional $10.2 million of expense related to the write-off of salvage value of inventory and additional distribution costs. The Company settled its insurance claim related to inventory damaged during the storm for $35.0 million. The Company recorded $4.0 million for additional claims related to real and personal property damage suffered on May 5, 1995. The net result recorded in fiscal 1995 was a $4.8 million gain from storm damage. During fiscal 1996, the Company received insurance proceeds in the final settlement of substantially all claims with the Company's insurance carrier related to the Company's damaged distribution center and warehouse resulting in an additional $1.1 million gain from storm damage. 12 Other income increased in fiscal 1996 to $1.6 million from $0.8 million in fiscal 1995, primarily as the result of an approximate $1.6 million gain from the sale of two buildings during 1996. The Company sold these buildings to dispose of surplus facilities caused by the consolidation of the shipping operations into the CSC. FISCAL 1995 COMPARED TO FISCAL 1994. Net sales decreased 8.7% to $448.5 million in fiscal 1995 compared to net sales of $491.2 million in fiscal 1994. The decrease was primarily the result of an 8.4% decrease in the number of units shipped. The decrease in units shipped was primarily the result of the Company's inability to ship orders as a result of a severe thunderstorm that struck the Dallas - Fort Worth metropolitan area on May 5, 1995, causing widespread damage. During the high winds and heavy rains caused by the thunderstorm, a portion of the roof over the Company's main distribution center collapsed, which resulted in the loss of finished goods inventory and other property damage at that location. The roof collapse hindered the Company's ability to ship product during the remainder of the year. Additionally, sales for the third and fourth quarters of fiscal 1995 were affected by a soft retail environment. Gross profit as a percent of net sales decreased to 27.3% in 1995 compared to 29.6% in 1994. The decrease in gross profit was primarily due to a $3.0 million markdown on sport shirts and a $1.2 million charge the Company recorded as a result of closing its Robstown, Texas, manufacturing facility attributable to severance and related expenses and the fixed costs absorbed as a result of reducing workdays in the Company's domestic manufacturing plants. Selling, general and administrative expenses as a percent of net sales increased to 24.6% in fiscal 1995 from 21.6% in fiscal 1994. Actual selling, general and administrative expenses increased $4.1 million to $110.4 million in 1995 compared to $106.3 million in 1994. This increase in expenditures was primarily the result of additional advertising expense of $1.5 million and additional distribution costs of $1.6 million. As a result of the May 5, 1995, storm damage, some of the Company's warehousing and distribution operations were relocated. While relocation of these operations had allowed the Company to achieve pre-storm warehousing and distribution capacity, the fragmenting and decentralizing of the warehousing and distribution operations resulted in inefficiencies and additional costs. During the third quarter of 1995, the Company recorded a $24.0 million charge to cover the costs of damage caused by the May 5, 1995, storm. These costs included the write-down of damaged inventory to its salvage value, damages to the Company's building and equipment and disaster recovery charges. In the fourth quarter of fiscal 1995, the Company recorded an additional $10.2 million of expense related to the write off of salvage value of inventory and additional distribution costs. The Company settled its insurance claim related to inventory damaged during the storm for $35.0 million. The Company recorded $4.0 million for additional claims related to real and personal property damage suffered on May 5, 1995. The net result recorded in fiscal 1995 was a $4.8 million gain from storm damage. Other income decreased in fiscal 1995 to $0.8 million from $1.5 million in fiscal 1994. The decrease in other income was the result of lower dividend and interest income in the 1995 fiscal year. Interest expense increased from $1.3 million in fiscal 1994 to $5.0 million in fiscal 1995. The increase in interest expense was attributable to higher average debt outstanding as the result of additional borrowing required to fund the construction of the Company's new CSC, increased levels of inventory and other working capital requirements. INCOME TAXES. The Company's income tax benefit, as a percent of loss from operations before income tax, was 28.9% in fiscal 1996. Comparatively, the Company's income tax provision, as a percent of income from operations before income tax, was 37.9% and 38.9% in fiscal 1995 and 1994, respectively. For fiscal 1996, 1995 13 and 1994 the effective income tax rates differed from the statutory rates because of state income taxes, tax credits utilized and certain permanent tax differences. Permanent tax differences in 1994 included a taxable gain on the sale of certain officer's life insurance policies. SEASONALITY. Historically, the Company's business has been seasonal, with slightly higher sales and income in the second and fourth quarters, just prior to and during the two peak retail selling seasons for spring and fall merchandise, which reflects the buying patterns of the Company's customers. The quarterly data for fiscal 1995 was adversely affected in the third and fourth quarters by the May 5, 1995, storm damage. The following table presents certain data for each of the Company's last twelve fiscal quarters. The quarterly data is unaudited, but gives effect to all adjustments (consisting of normal recurring adjustments) necessary, in the opinion of management of the Company, to present fairly the data for such periods (in thousands, except per share data). First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- (1) (1)(2) Net sales 1996 $ 98,418 $110,840 $103,769 $124,915 1995 121,033 121,118 85,182 121,199 1994 110,233 118,270 120,188 142,544 Gross profit 1996 27,084 30,100 28,933 27,794 1995 35,353 31,030 21,931 34,275 1994 33,260 36,437 34,611 41,081 Selling, general and administrative expenses 1996 26,629 26,999 26,667 32,742 1995 27,047 27,001 28,794 27,590 1994 24,918 23,928 27,231 30,181 Income (loss) before income taxes 1996 1,614 2,553 1,762 (9,335) 1995 8,607 3,620 (31,116) 34,693 1994 8,501 12,730 8,977 11,815 Net income (loss) 1996 1,004 1,584 1,082 (6,090) 1995 5,336 2,167 (19,737) 22,043 1994 4,452 8,044 5,689 7,496 Net income (loss) per common share and common share equivalent 1996 $0.12 $0.19 $0.13 $(0.71) 1995 $0.62 $0.25 $(2.30) $2.57 1994 $0.51 $0.92 $0.65 $0.86
(1) In the third quarter of fiscal 1995 the Company recorded a $24.0 million loss related to the storm damage incurred at the distribution facility on May 5, 1995. During the fourth quarter of fiscal 1995 the Company recorded a gain of $28.8 million due to insurance proceeds received and expected to be received as a result of the storm damage. These amounts are included in Gain from Storm Damage in the 1995 statement of operations. (2) During the fourth quarter of fiscal 1996 the Company recorded restructuring charges of $14.0 million related to the decision to restructure its manufacturing capacity through consolidation of three Texas sewing facilities into one operation. The restructuring charges were $8.7 million included as a component of cost of sales and $5.3 million included as operating expenses. 14 LIQUIDITY AND CAPITAL RESOURCES. The Company's trade accounts receivable potentially expose the Company to concentrations of credit risks as all of its customers are in the retail apparel industry. The Company performs ongoing credit evaluations of its customers' financial condition and establishes an allowance for doubtful accounts based upon factors related to the credit risk of specific customers, historical trends and other information. The Company's days sales outstanding remained consistent at 45 days on September 30, 1996 and 1995. Inventories at the end of fiscal 1996 decreased to $116.4 million from $138.9 million at the end of fiscal 1995. During fiscal year 1995, the combination of increased production in anticipation of higher sales and the decrease in sales actually experienced as a result of the May 5, 1995 disaster and a softening retail environment resulted in abnormally high inventory levels as of September 30, 1995. The reduction in inventory levels during fiscal 1996 reflects the Company's ongoing efforts to decrease inventory to a level commensurate with projected sales. The Company's ongoing external financing needs are met through an unsecured revolving credit facility (the "Facility") with certain banks. The Facility provides the Company with a $100.0 million line of credit. The amount available under the Facility is limited to the lesser of $100.0 million minus any letter of credit exposure or the borrowing base as defined in the Facility. During the current fiscal year the Company amended the Facility to extend the expiration date of the Facility to December 31, 1998. As of September 30, 1996, the Company had $13.0 million outstanding under the Facility and had additional borrowing capacity of $77.0 million. The Company's Haggar UK subsidiary maintains a $2.1 million line of credit with a bank in the United Kingdom to fund its operating activities. At September 30, 1996, approximately $2.1 million was outstanding under this line of credit. The line of credit has been partially collateralized by an approximate $1.6 million letter of credit from the Company and is payable upon demand. Interest under the line is payable at 1% above the bank's base rate. Subsequent to September 30, 1996, the Company reached an agreement in principle with its joint venturer, Coats Viyella Plc, to dissolve and wind-up the joint venture of the two firms in the United Kingdom. The Company intends to continue to market Haggar-Registered Trademark- apparel in the United Kingdom, including Northern Ireland, and the Republic of Ireland. In the first quarter of fiscal 1995, the Company completed the sale and issuance of $25.0 million in senior notes. The proceeds from the notes were used to partially fund the construction of the Company's new CSC. Significant terms of the senior notes include a maturity date of ten years from the date of issuance, interest payable semi-annually and annual principal payments beginning in the fourth year. The interest rate on the senior notes is fixed at 8.49%. The terms and conditions of the note purchase agreement governing the senior notes include restriction on the sale of assets, limitations on additional indebtedness and the maintenance of certain net worth requirements. The balance of the approximately $37.2 million cost of the CSC was financed with internally generated funds and bank borrowings. The Company sold all of its investments in preferred stock and equity securities during the second quarter of fiscal 1996 for approximately $5.0 million. The proceeds from the sale were used to reduce borrowings under the Company's line of credit. The sale of these securities resulted in realized losses of $0.5 million. The Company provided cash from operating activities for the fiscal year ended September 30, 1996 of $45.6 million, primarily as a result of the reduction in inventory of $22.6 million, as well as the collection of insurance proceeds of $23.9 million related to the damage from the May 5, 1995 storm. Additionally, the Company used cash in investing activities of $7.1 million during fiscal 1996, the result of purchases of property, plant, and equipment of $16.1 million primarily in conjunction with the opening of retail stores during the fiscal year. The Company had 28 retail stores open at the end of the 1996 fiscal year compared to eight at the end of fiscal 1995. Furthermore, cash flows used in financing activities of $37.8 million for the 1996 fiscal year were 15 primarily the result of a net reduction in long-term debt of $36.4 million. Comparatively, the Company used cash in operating activities of $35.4 million for the fiscal year ended September 30, 1995, primarily due to the increase in insurance receivable of $24.0 million and increase in inventory of $21.3 million, both a result of the May 5, 1995 storm damage to its facilities. During fiscal 1995, the Company used cash in investing activities of $27.6 million primarily resulting from the purchase of $30.6 million in property, plant, and equipment as the construction of the CSC was nearing completion. Additionally, cash flows provided by financing activities of $62.6 million were due to a net increase in long-term debt of $63.6 million during fiscal 1995. For the fiscal year ended September 30, 1994, the Company used $6.4 million in operating activities primarily the result of a $41.5 million increase in inventory, perpetuated by increased sales and offset by a $19.0 million increase in accounts payable. Furthermore, during fiscal 1994, the Company used cash in investing activities of $18.7 million by purchasing $15.4 million in property, plant, and equipment and net purchases of $8.8 million in marketable securities. Cash flows provided by financing activities of $9.8 million during fiscal 1994 were primarily the result of a net increase in long-term debt of $9.5 million. The Company believes that the cash flow generated from operations and the funds available under the foregoing credit facilities will be adequate to meet its working capital and related financing needs for the foreseeable future. Inflation did not materially impact the Company in 1996, 1995 or 1994. NEW ACCOUNTING STANDARDS. In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation." As a result of this statement, the Company will begin to provide additional disclosures related to its stock based compensation plans in its 1997 financial statements. Adoption of SFAS No. 123 will not have a material effect on the Company's financial position or results of operations. The Company adopted the provisions of SFAS No. 121, "Accounting for the Impairment of Long-lived Assets," in 1995 which did not have a material effect on the Company's financial position or results of operations. MANAGEMENT INFORMATION SYSTEM. The Company is planning to modify its current management information systems with a software system that will be used to manage, among other things, customer service, order allocation, billing to customers and calculations of commissions for the Company's sales associates. The Company expects this system to improve operational efficiencies and facilitate future growth. The new management information software is presently being tested and implementation is currently scheduled for the last half of December 1996 or during the second quarter of fiscal year 1997. However, implementation could be postponed to facilitate further testing, if required. Although the Company has tested and will continue to test the system prior to implementation, testing alone cannot provide assurance that the system will perform in all aspects as anticipated in an operational environment. The Company's operations could be disrupted if the transition to the system is not completed smoothly or if the system does not perform as expected. 16 FORWARD LOOKING STATEMENTS. This report contains certain forward-looking statements. In addition, from time to time the Company may issue press releases and other written communications, and representatives of the Company may make oral statements, which contain forward-looking information. Except for historical information, matters discussed in such oral and written communications are forward-looking statements that involve risks and uncertainties which could cause actual results to differ materially from those in such forward-looking statements. Risks and uncertainties inherent to the Company's line of business include such factors as natural disasters, general economic conditions, the performance of the retail sector in general and the apparel industry in particular, the competitive environment, consumer acceptance of new products, and the success of advertising, marketing and promotional campaigns. Additional risks and uncertainties which could cause the Company's actual results to differ from those contained in any forward-looking statements are discussed elsewhere herein. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Report of Independent Public Accountants, Financial Statements and Notes to Financial Statements follow. 17 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Haggar Corp.: We have audited the accompanying consolidated balance sheets of Haggar Corp. (a Nevada corporation) and subsidiaries as of September 30, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended September 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Haggar Corp. and subsidiaries as of September 30, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1996, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP ----------------------------------- Arthur Andersen LLP Dallas, Texas November 1, 1996 18 HAGGAR CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Year Ended September 30, ---------------------------------------- 1996 1995 1994 ---------- ---------- ---------- Net sales $ 437,942 $ 448,532 $ 491,235 Cost of goods sold 315,351 324,699 345,846 Restructuring charge 8,680 1,244 - ---------- ---------- ---------- Gross profit 113,911 122,589 145,389 Selling, general and administrative expenses (113,037) (110,432) (106,258) Restructuring charge (5,320) - - Gain from storm damage 1,140 4,807 - Royalty income 2,630 3,049 2,655 ---------- ---------- ---------- Operating income (loss) (676) 20,013 41,786 Other income, net 1,563 786 1,510 Interest expense (4,293) (4,995) (1,273) ---------- ---------- ---------- Income (loss) from operations before provision (benefit) for income taxes (3,406) 15,804 42,023 Provision (benefit) for income taxes (986) 5,995 16,342 ---------- ---------- ---------- Net income (loss) to common stockholders $ (2,420) $ 9,809 $ 25,681 ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss) per common share and common share equivalent $ (0.28) $ 1.14 $ 2.95 ---------- ---------- ---------- ---------- ---------- ---------- Weighted average number of common shares and common share equivalents outstanding 8,552 8,623 8,700 ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these consolidated financial statements. 19 HAGGAR CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) September 30, ----------------------- 1996 1995 ---------- --------- ASSETS Current assets: Cash and cash equivalents $ 2,944 $ 2,230 Accounts receivable, net 74,556 66,967 Inventories 116,356 138,907 Deferred tax benefit 12,410 12,828 Insurance receivable 100 23,990 Other current assets 3,546 4,288 ---------- --------- Total current assets 209,912 249,210 Property, plant, and equipment, net 65,760 56,616 Marketable securities -- 4,630 Other assets 2,662 4,896 ---------- --------- $ 278,334 $ 315,352 ---------- --------- ---------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 23,596 $ 26,448 Accrued liabilities 34,524 27,776 Accrued wages and other employee compensation 3,447 3,343 Accrued workers' compensation expense 5,895 7,233 Accrued health insurance expense 2,541 2,708 Federal income taxes payable 1,189 771 Short-term borrowings 2,067 1,635 Current portion of long-term debt 481 447 ---------- --------- Total current liabilities 73,740 70,361 Long-term debt 42,112 78,585 ---------- --------- Total liabilities 115,852 148,946 Stockholders' equity: Common stock - par value $0.10 per share; 25,000,000 shares authorized and 8,560,636 shares issued in 1996 and 1995 856 856 Additional paid-in capital 41,641 41,641 Unrealized loss on marketable securities -- (206) Retained earnings 119,986 124,116 ---------- --------- 162,483 166,407 Less - Treasury stock, 9,254 shares at par value (1) (1) ---------- --------- Total stockholders' equity 162,482 166,406 ---------- --------- $ 278,334 $ 315,352 ---------- --------- ---------- --------- The accompanying notes are an integral part of these consolidated financial statements. 20 HAGGAR CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Common Stock Unrealized ------------------ Additional Loss on Total $0.10 Par Value Paid-In Marketable Retained Treasury Stockholders' Shares $ Capital Securities Earnings Stock Equity ------------------ ---------- ---------- -------- -------- ------------ BALANCE, September 30, 1993 8,507,736 $851 $40,514 $ - $ 92,035 $ (1) $133,399 Common stock issuance 38,369 4 857 - - - 861 Common stock dividends declared ($0.20 per share) - - - - (1,700) - (1,700) Unrealized loss on marketable securities - - - (239) - - (239) Net income - - - - 25,681 - 25,681 ------------------------------------------------------------------------------------ BALANCE, September 30, 1994 8,546,105 855 41,371 (239) 116,016 (1) 158,002 Common stock issuance 14,531 1 270 - - - 271 Common stock dividends declared ($0.20 per share) - - - - (1,709) - (1,709) Recovery of unrealized loss on marketable securities - - - 33 - - 33 Net income - - - - 9,809 - 9,809 ------------------------------------------------------------------------------------ BALANCE, September 30, 1995 8,560,636 856 41,641 (206) 124,116 (1) 166,406 Common stock dividends declared ($0.20 per share) - - - - (1,710) - (1,710) Realized loss on marketable securities - - - 206 - - 206 Net loss - - - - (2,420) - (2,420) ------------------------------------------------------------------------------------ BALANCE, September 30, 1996 8,560,636 $856 $41,641 $ - $119,986 $ (1) $162,482 ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 21 HAGGAR CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Year Ended September 30, ------------------------------------------- 1996 1995 1994 --------- --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (2,420) $ 9,809 $ 25,681 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 6,839 3,268 3,158 (Gain) loss on disposal of property, plant, and equipment (1,608) 144 (190) Net (gain) loss on sale of marketable securities 542 (117) 179 Changes in assets and liabilities - Accounts receivable, net (7,589) 13,117 (9,097) Inventories 22,551 (21,343) (41,541) Insurance receivable 23,890 (23,990) - Current deferred tax benefit 288 (1,872) (274) Other current assets 148 (23) (91) Accounts payable (2,852) (12,403) 18,956 Accrued liabilities and federal income taxes payable 6,999 1,448 (2,339) Accrued wages and other employee compensation 104 (3,259) 45 Accrued workers' compensation expense (1,338) (214) (813) Minority interest - - (32) --------- --------- -------- Net cash provided by (used in) operating activities 45,554 (35,435) (6,358) --------- --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant, and equipment, net (16,070) (30,613) (15,448) Proceeds from sale of property, plant, and equipment, net 1,695 - - Purchases of marketable securities - - (22,020) Proceeds from the sale of marketable securities 5,018 3,156 13,243 Proceeds from the sale of officers' life insurance policies - - 4,856 (Increase) decrease in other assets 2,234 (130) 650 --------- --------- -------- Net cash used in investing activities (7,123) (27,587) (18,719) --------- --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from short-term borrowings 432 501 1,134 Proceeds from issuance of long-term debt 422,000 517,000 51,000 Payments on long-term debt (458,439) (453,423) (41,509) Payments of cash dividends (1,710) (1,709) (1,700) Net proceeds from the issuance of common stock - 271 861 --------- --------- -------- Net cash provided by (used in) financing activities (37,717) 62,640 9,786 --------- --------- -------- Increase (decrease) in cash and cash equivalents 714 (382) (15,291) Cash and cash equivalents, beginning of period 2,230 2,612 17,903 --------- --------- -------- Cash and cash equivalents, end of period $ 2,944 $ 2,230 $ 2,612 --------- --------- -------- --------- --------- -------- Supplemental disclosure of cash flow information Cash paid (received) for: Interest, net of amounts capitalized $ 3,350 $ 3,275 $ 549 Income taxes, net $ (1,359) $ 9,236 $ 20,544
The accompanying notes are an integral part of these consolidated financial statements. 22 HAGGAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996, 1995 AND 1994 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Haggar Corp. and subsidiaries (the "Company") designs, manufactures, imports, and markets men's apparel products including pants, shorts, suits, sportcoats, and shirts. The Company's products are sold to retail stores throughout the United States including major department stores, specialty stores and mass market retailers. The Company offers its premium apparel products under the "Haggar" brand name, and also offers a more moderately priced line of products under its "Reed St. James" brand name through its mass market retailer division, The Horizon Group. In addition, the Company's specialty label division offers retailers quality products bearing the retailer's own label. The Company's Haggar Direct, Inc. subsidiary was formed in 1995 for the purpose of developing and operating retail stores located in retail outlet malls throughout the United States. The Company's foreign operations are conducted through Haggar UK, which markets the Company's branded products in Europe. Additionally, the Company derives royalty income from the use of its "Haggar" and "Reed St. James" trademarks by manufacturers of various products that the Company does not produce. The Company is headquartered in Dallas, Texas, with manufacturing facilities in Texas, Mexico and the Dominican Republic. The consolidated financial statements include the accounts of Haggar Corp., Haggar Clothing Co. ("Clothing Co."), which is the main operating subsidiary, Haggar Direct, Inc., Haggar UK, and all other subsidiaries of Clothing Co. All significant intercompany transactions and balances have been eliminated in consolidation. The accompanying consolidated financial statements reflect the application of certain accounting policies as described below and in the remaining notes. CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. ALLOWANCE FOR DOUBTFUL ACCOUNTS Accounts receivable are net of allowances for doubtful accounts of $900,000 and $1,201,000 at September 30, 1996 and 1995, respectively. CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially expose the Company to concentrations of credit risk, as defined by SFAS No. 105, "Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk," consist primarily of trade accounts receivable. The Company's customers are not concentrated in any specific geographic region but are concentrated in the apparel industry. One customer accounted for 26.3%, 28.7% and 27.6% of the Company's net sales during the year ended September 30, 1996, 1995 and 1994, respectively. No other customer accounted for more than 10% of consolidated revenues. The loss of the business of one or more of the Company's largest customers could have a material adverse effect on the Company's results of operations. The Company performs ongoing credit evaluations of its customers' financial condition. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. 23 INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market, and consisted of the following at September 30, 1996 and 1995 (in thousands): 1996 1995 -------- -------- Piece goods $ 23,335 $ 22,260 Trimming and supplies 5,991 11,808 Work-in-process 13,248 27,614 Finished garments 73,782 77,225 -------- -------- $116,356 $138,907 -------- -------- -------- -------- Work-in-process and finished garments inventories consisted of materials, labor and manufacturing overhead. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment, stated at cost, consisted of the following at September 30, 1996 and 1995 (in thousands): 1996 1995 -------- -------- Land $ 3,428 $ 3,476 Buildings 29,878 11,902 Furniture, fixtures and equipment 80,786 55,205 Leasehold improvements 11,856 9,015 Construction in progress 369 31,198 -------- -------- Total 126,317 110,796 Less: Accumulated depreciation and amortization (60,557) (54,180) -------- -------- Net property, plant, and equipment $ 65,760 $ 56,616 -------- -------- -------- -------- During 1995, the Company adopted SFAS No. 121, "Accounting for Impairment of Long-lived Assets." The adoption of SFAS No. 121 has not had a significant impact on the Company's financial position or results of operations. DEPRECIATION AND AMORTIZATION The Company provides for depreciation and amortization using accelerated and straight-line methods by charges to operations in amounts which allocate the cost of the assets over their estimated useful lives, as follows: Estimated Asset Classification Useful Life -------------------- ----------- Buildings 15-40 Furniture, fixtures, and equipment 5-7 Leasehold improvements Life of Lease 24 FINANCIAL INSTRUMENTS The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial Instruments," which requires the disclosure of the fair market value of off- and on-balance sheet financial instruments. The carrying value of all financial instruments, including marketable securities, long-term debt, and cash and temporary cash investments, approximates their fair value at year-end. The FASB issued SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which addresses the accounting and reporting requirements for both investments in equity securities that have readily determinable fair values and for all investments in debt securities. During the second quarter of fiscal 1996, the Company sold all of its investments in preferred stock and equity securities. The proceeds from the sale were used to reduce borrowings under the Company's line of credit. Comparatively, the Company had net investments in preferred stocks of approximately $5,224,000, as of September 30, 1995. These investments were classified as available-for-sale securities and were reported at their fair value as of September 30, 1995, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity, net of tax. Realized gains and losses on investments in preferred stocks are determined on a specific identification basis. During fiscal 1996 the Company recognized realized losses of $542,000. During fiscal 1995 realized losses of $6,000 were offset by realized gains of $123,000. The net effect of these gains and losses is reflected in Other income, net in the accompanying Consolidated Statements of Operations. There were no gross unrealized losses as of September 30, 1996. Gross unrealized losses as of September 30, 1995, were approximately $335,000. Accordingly, the Company established a valuation allowance to reduce stockholders' equity as of September 30, 1995, by $206,000, net of a $129,000 deferred income tax benefit during fiscal 1995. The Company earned $167,000, $621,000, and $1,166,000 in dividend and interest income during fiscal 1996, 1995, and 1994, respectively, on marketable securities and other investments. OTHER ASSETS Other assets consisted of the following at September 30, 1996 and 1995 (in thousands): 1996 1995 ------ ------ Cash surrender value of life insurance $ 780 $2,837 Long-term deferred tax benefit 594 546 Equipment projects-in-progress 123 658 Other 1,165 855 ------ ------ Total other assets $2,662 $4,896 ------ ------ ------ ------ MINORITY INTEREST In September 1993, the Company established a subsidiary, Haggar UK, for the purpose of expanding its operations in the United Kingdom. The Company contributed approximately $30,000 to obtain a 51% interest in the subsidiary. The assets and liabilities of Haggar UK have been reflected in the consolidated financial statements as of September 30, 1996, and September 30, 1995. As cumulative net losses from the initial operations of the subsidiary have exceeded contributed capital, there has been no minority interest reflected in the consolidated balance sheets as of September 30, 1996 and 1995. During fiscal 1994, the Haggar UK subsidiary established a line of credit with a bank to fund operating activities. Available borrowing capacity under the line of credit is approximately $2,100,000, and approximately $2,067,000 and $1,635,000 was outstanding as of September 30, 1996 and 1995, respectively. 25 Interest is payable at 1% above the bank's base rate, as defined (6.75% at September 30, 1996). The line of credit has been partially collateralized by an approximate $1.6 million letter of credit from the Company and is payable upon demand. REVENUE RECOGNITION Revenue is recognized upon product shipment to customers. ADVERTISING Production costs of commercials and programming are charged to operations in the year first aired. The costs of other advertising, promotion and marketing programs are charged to operations in the year incurred. OTHER INCOME Other income consisted of the following for the years ended September 30, 1996, 1995 and 1994 (in thousands): 1996 1995 1994 ------ ----- ------ Gain (loss) on sale of assets, net $1,608 $(144) $ 190 Interest income 61 81 328 Investment income (loss), net (436) 657 659 Other 330 192 333 ------ ----- ------ Total other income, net $1,563 $ 786 $1,510 ------ ----- ------ ------ ----- ------ NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT Net income per common share and common share equivalent is calculated by dividing net income applicable to common stock by the weighted average shares of common stock and common stock equivalents outstanding. Common stock equivalents represent the effect, if any, of the assumed purchase of common shares, using the treasury stock method, pursuant to a stock repurchase agreement and common stock options issued under a long-term incentive plan. Common stock equivalents have been determined in 1996, 1995 and 1994 using a common stock market price of $14.50, $21.26 and $28.32, respectively, per share. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. INCOME TAXES The components of the provision (benefit) for income taxes are as follows for the years ended September 30, 1996, 1995 and 1994 (in thousands): 1996 1995 1994 ----- ------- ------- Current federal income tax $(347) $ 7,473 $14,994 Deferred federal income tax (595) (2,212) (274) State income tax (44) 734 1,622 ----- ------- ------- Provision (benefit) for income taxes $(986) $ 5,995 $16,342 ----- ------- ------- ----- ------- ------- 26 Temporary differences and carryforwards which give rise to a significant portion of net deferred income tax assets are as follows (in thousands): 1996 1995 ------- ------- Deferred income tax assets: Workers' compensation accrual $ 2,063 $ 2,531 Inventory cost capitalization and valuation 3,741 6,080 Allowances for accounts receivable 315 420 Health and life insurance accrual 982 1,236 Accrual for system development - 560 Interest capitalization 915 490 Reserve for reorganization 4,900 - Other 1,388 3,357 ------- ------- 14,304 14,674 Less - Valuation allowance (250) (250) ------- ------- 14,054 14,424 Deferred income tax liability: Prepaid insurance (1,050) (1,050) ------- ------- Net deferred income tax asset 13,004 13,374 Less - Current deferred tax benefit 12,410 12,828 ------- ------- Long-term deferred tax benefit $ 594 $ 546 ------- ------- ------- ------- The provision (benefit) for income taxes was different than the amount computed using the statutory federal income tax rate for the reasons set forth in the following table (in thousands): 1996 1995 1994 ------- ------ ------- Tax computed at the statutory rate $(1,045) $5,531 $14,708 State income taxes (44) 734 1,622 Tax credits utilized (96) (491) (449) Gain on sale of life insurance policies - - 791 ------- ------ ------- Other 199 221 (330) ------- ------ ------- $ (986) $5,995 $16,342 ------- ------ ------- ------- ------ ------- 3. INSURANCE RECEIVABLE On May 5, 1995, a severe thunderstorm struck the Dallas - Fort Worth metropolitan area causing widespread damage. During the high winds and heavy rains caused by these thunderstorms, a portion of the roof over the Company's main distribution center collapsed. The Company has received a $35,000,000 insurance settlement related to the inventory and approximately $5,100,000 related to real and personal property damaged during the storm. As of September 30, 1995, the Company had received $15,000,000 of the $35,000,000 insurance inventory claim. At that point in time, the claims for real and other personal property damage had not yet been submitted to the insurance carrier. Accordingly, a receivable of $20,000,000 related to the uncollected portion of the inventory claim and approximately $4,000,000 related to the estimated real and other personal property claim is reflected in the accompanying balance sheet as of September 30, 1995. The insurance proceeds received and expected to be received in 1995 as a result of the storm damage are included in Gain from Storm Damage in the accompanying 1995 statement of operations. Such proceeds have been offset by approximately $34,000,000 in expenses related specifically to the storm damage, including approximately $24,000,000 of damaged inventory, $4,000,000 of additional distribution costs, and $6,000,000 of property and equipment damage and other disaster recovery costs. Collections in excess of the recorded receivable 27 resulted in a $1,100,000 gain from the settlement of the real and other personal property claims for the year ended September 30, 1996. 4. LONG-TERM DEBT Long-term debt consisted of the following at September 30, 1996 and 1995 (in thousands): 1996 1995 ------- ------- Borrowings under revolving credit line $13,000 $49,000 Industrial Development Revenue Bonds with interest at a rate equal to that of high-quality, short-term, tax-exempt obligations, as defined (3.85% at September 30, 1996), payable in annual installments of $100 to $200, and a final payment of $2,000 in 2005, secured by certain buildings and equipment 2,900 3,000 Allstate notes 25,000 25,000 Other 1,693 2,032 ------- ------- 42,593 79,032 Less - Current portion 481 447 ------- ------- $42,112 $78,585 ------- ------- ------- ------- Net assets mortgaged or subject to lien under the Industrial Development Revenue Bonds totaled approximately $1,400,000 at September 30, 1996. As of September 30, 1996, the Company had a revolving credit line agreement (the "Agreement") with certain banks. During 1996, the Agreement was amended to extend the maturity date to December 31, 1998. The Company had additional available borrowing capacity of approximately $77,000,000 under this Agreement at September 30, 1996. The Company incurred approximately $211,000 in commitment fees related to the available borrowing capacity during the year ended September 30, 1996. The interest rates for the year ended September 30, 1996, ranged from 6.03% to 8.75%, and the weighted average interest rate for the year was 7.7%. The facility will mature December 31, 1998, with a one year renewal at the option of the banks and is unsecured, except that the Company is prohibited from pledging its accounts receivables and inventories during the term of the Agreement. The Agreement contains limitations on incurring additional indebtedness and requires the maintenance of certain financial ratios. In addition, the Agreement requires the Company and Clothing Co., the Company's main operating subsidiary, to maintain tangible net worth, as defined, in excess of $149,000,000 and $55,000,000, respectively, as of September 30, 1996. For fiscal years after 1996, the Agreement requires the Company to maintain a tangible net worth in excess of the tangible net worth of the preceding fiscal year plus 50% of the Company's consolidated net income. The Agreement prohibits the payment of any dividend if either a default exists or the fixed charge ratio, as defined, is less than 1.10 to 1.00 after giving effect to such a dividend. In the first quarter of fiscal 1995, the Company completed the sale and issuance of $25,000,000 in senior notes (the "Allstate notes"). Proceeds from the notes were used to partially fund the construction of the Company's new CSC. Significant terms of the senior notes include a maturity date of ten years from the date of issuance, interest payable semi-annually and annual principal payments beginning in the fourth year. The interest rate on the senior notes is fixed at 8.49%. The terms and conditions of the note purchase agreement governing the senior notes include restriction on the sale of assets, limitations on additional indebtedness, and the maintenance of certain net worth requirements. 28 Principal payments due during the next five years on debt are as follows (in thousands): Years Ending September 30, Amount -------------------------- ------- 1997 $ 481 1998 322 1999 16,854 2000 3,870 2001 3,888 Thereafter 17,178 ------- $42,593 ------- ------- 5. LEASES AND OTHER COMMITMENTS OPERATING LEASES The Company leases certain of its manufacturing, computer and automotive equipment under agreements which expire at various dates through 2010 and which contain options to renew at various terms. The following is a schedule of future minimum rental payments required under operating leases at September 30, 1996 (in thousands): Years Ending September 30, Amount -------------------------- ------- 1997 $ 6,031 1998 4,479 1999 3,549 2000 2,395 2001 1,557 Thereafter 1,414 ------- $19,425 ------- ------- Rental expense was $6,410,000, $4,896,000 and $4,316,000 in the years ended September 30, 1996, 1995 and 1994, respectively. COMMITMENTS AND CONTINGENCIES The Company had approximately $17,378,000 in outstanding letters of credit at September 30, 1996, primarily in connection with certain self-insurance agreements and certain inventory purchases of the Company. The Company is involved in various claims and lawsuits incidental to its business. In the opinion of management, these claims and suits in the aggregate will not have a material adverse effect on the Company's financial position or the results of operations of the future periods. 6. RELATED PARTY TRANSACTIONS The Company paid $136,000, $327,000 and $298,000 to certain stockholders primarily for rent on a building in the years ended September 30, 1996, 1995 and 1994, respectively. 29 7. RESTRUCTURING CHARGES The Company decided to restructure its worldwide manufacturing capacity, including consolidation of its three Texas sewing operations into one facility. The cost of this restructure, recorded in the year ended September 30, 1996, was estimated to be $14,000,000 of which $8,680,000 is included in cost of sales and consisting principally of severance costs for manufacturing employees and $5,320,000 is included in operating expenses related principally to costs to resolve various legal issues in connection with the restructuring and prior plant closings as well as severance for non-manufacturing employees. This restructuring is expected to begin in 1997 and be fully implemented in 1998. In fiscal 1995, the Company closed its Robstown, Texas, manufacturing plant. The cost of closing this plant, recorded in the year ended September 30, 1995, was approximately $1,244,000, which is included in cost of sales in the accompanying Statements of Operations in the year ended September 30, 1995. 8. EMPLOYEE BENEFIT PLANS The Company provides a Profit Sharing and Savings Plan (the "Plan") to substantially all eligible employees of the Company, as defined. Discretionary profit sharing contributions, made by the Company, are allocated to eligible plan participants based on their respective compensation. The profit sharing contributions vest according to a defined vesting schedule. Full vesting occurs at the end of seven years of service or upon retirement, death, or disability of plan participants. Participants may contribute from 1% to 10% of their compensation to the Plan under Internal Revenue Code Section 401(k) ("401(k) Contributions"). The Company may make discretionary matching contributions in an amount equal to 50% of each participant's 401(k) Contribution. Participant 401(k) Contributions and the Company's matching 401(k) Contributions are 100% vested at the date they are contributed. The Company contributed approximately $700,000, $2,000,000 and $2,000,000 for each of the years ended September 30, 1996, 1995 and 1994, respectively. The Company also has an Employee Benefits Trust (the "Trust") to provide eligible employees of the Company, as defined, with certain welfare benefits. Trust contributions are made by the Company as defined by the trust agreement. The Company contributed approximately $10,378,000, $9,100,000 and $8,939,000 to the Trust for the years ended September 30, 1996, 1995 and 1994, respectively. In December 1990, SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," was issued to establish standards of financial accounting and reporting for an employer that provides postretirement benefits other than pensions to its employees. Although the Company provides welfare benefits to a limited number of eligible retired employees, as defined, such benefits have been insignificant for the years ended September 30, 1996, 1995 and 1994. Additionally, such benefits are expected to be insignificant in future years. On June 28, 1993, the Company established a noncompensatory employee stock purchase plan to provide employees with a convenient way to acquire Company stock through payroll deductions. Substantially all employees meeting limited employment qualifications may participate in the stock purchase plan. 30 LONG-TERM INCENTIVE PLAN The Company, during the first quarter of fiscal 1993, adopted a long-term incentive plan which authorizes the grant of stock options to key employees. The options vest over a period of three to five years and expire ten years from the date of grant. The options are issued at an exercise price not less than the fair market value of the Company's common stock on the date of the grant. The long-term incentive plan allows for 1,300,000 shares to be granted. The following table summarizes the changes in common stock options in fiscal 1996, 1995 and 1994: Shares Range of prices -------- ---------------- Options outstanding as of September 30, 1993 383,000 $16.50 to $19.25 Options granted 304,000 $18.25 to $37.88 Options exercised (10,000) $16.50 to $18.25 Options canceled (9,600) $16.50 -------- ---------------- Options outstanding as of September 30, 1994 667,400 $16.50 to $37.88 Options granted 244,000 $21.50 to $23.00 Options exercised (14,531) $19.25 to $24.13 Options canceled (32,401) $16.50 to $21.50 -------- ---------------- Options outstanding as of September 30, 1995 864,468 $16.50 to $37.88 Options granted 109,000 $12.13 to $16.50 Options canceled (7,000 $16.50 to $18.25 -------- ---------------- Options outstanding as of September 30, 1996 966,468 $12.13 to $37.88 -------- ---------------- -------- ---------------- Options available for grant as of September 30, 1996 309,001 Options exercisable as of September 30, 1996 466,770 9. SUBSEQUENT EVENTS Subsequent to September 30, 1996, the Company declared a cash dividend of $0.05 per share payable to the stockholders of record on October 28, 1996. The dividend of approximately $428,000 was paid on November 11, 1996. Also subsequent to September 30, 1996, the Company reached an agreement in principle with its joint venturer, Coats Viyella Plc, to dissolve and wind-up the joint venture of the two firms in the United Kingdom. The Company intends to continue to market Haggar-Registered Trademark- apparel in the United Kingdom, including Northern Ireland, and the Republic of Ireland. 31 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Haggar Corp.: We have audited in accordance with generally accepted auditing standards the consolidated financial statements of Haggar Corp. (a Nevada corporation) and subsidiaries included in this Form 10-K and have issued our report thereon dated November 1, 1996. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedules I and II are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP ------------------------------ Arthur Andersen LLP Dallas, Texas November 1, 1996 32 SCHEDULE I Page 1 of 2 HAGGAR CORP. AND SUBSIDIARIES CONDENSED FINANCIAL INFORMATION OF REGISTRANT HAGGAR CORP. (PARENT COMPANY) BALANCE SHEETS AS OF SEPTEMBER 30, 1996 AND 1995 (IN THOUSANDS) 1996 1995 ---------- ---------- ASSETS: Investment in subsidiaries $ 65,545 $ 72,840 Due from subsidiaries - 4,129 Note receivable from Haggar Clothing Co. 100,632 92,706 ---------- ---------- $ 166,177 $ 169,675 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Dividend payable and other current liabilities $ 3,052 $ 3,063 Due to subsidiaries 643 - ---------- ---------- Total current liabilities 3,695 3,063 STOCKHOLDERS' EQUITY: Common stock 856 856 Additional paid-in capital 41,641 41,641 Retained earnings 119,986 124,116 Less - treasury stock (1) (1) ---------- ---------- Total stockholders' equity 162,482 166,612 ---------- ---------- $ 166,177 $ 169,675 ---------- ---------- ---------- ---------- 33 SCHEDULE I Page 2 of 2 HAGGAR CORP. AND SUBSIDIARIES CONDENSED FINANCIAL INFORMATION OF REGISTRANT HAGGAR CORP. (PARENT COMPANY) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994 (IN THOUSANDS) 1996 1995 1994 ------- ------- -------- Equity in earnings of subsidiaries $(7,296) $ 5,011 $ 22,258 Interest income 7,928 7,497 5,349 Income tax expense (3,052) (2,699) (1,926) ------- ------- -------- Net income $(2,420) $ 9,809 $ 25,681 ------- ------- -------- ------- ------- -------- 34 SCHEDULE II HAGGAR CORP. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AS OF SEPTEMBER 30, 1996, 1995 AND 1994 (IN THOUSANDS) Balance at Charges to Balance at Beginning of Costs and Deductions End of Period Expenses (1) Period ------------ ---------- ---------- ---------- September 30, 1996: Allowance for doubtful accounts $1,201 $(686) $ 385 $ 900 September 30, 1995: Allowance for doubtful accounts 1,284 792 (875) 1,201 September 30, 1994: Allowance for doubtful accounts 1,156 640 (512) 1,284
(1) Amounts deemed uncollectible and recoveries of previously reserved amounts. 35 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required by Part III, Item 10 is incorporated by reference from the Registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report. ITEM 11. EXECUTIVE COMPENSATION The information required by Part III, Item 11 is incorporated by reference from the Registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Part III, Item 12 is incorporated by reference from the Registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Part III, Item 13 is incorporated by reference from the Registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report. 36 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) (1) FINANCIAL STATEMENTS Pages Report of Independent Public Accountants. 18 Consolidated Statements of Operations, Years Ended September 30, 1996, 1995 and 1994. 19 Consolidated Balance Sheets, at September 30, 1996 and 1995. 20 Consolidated Statements of Stockholders' Equity, Years Ended September 30, 1996, 1995 and 1994. 21 Consolidated Statements of Cash Flows, Years Ended September 30, 1996, 1995 and 1994. 22 Notes to Consolidated Financial Statements. 23-31 (2) FINANCIAL STATEMENT SCHEDULES Report of Independent Public Accountants. 32 Schedule I - Condensed Financial Information of Registrant - Haggar Corp. (Parent Company). 33-34 Schedule II - Valuation and Qualifying Accounts. 35 Schedules not included with this additional financial data have been omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto. (3) EXHIBITS 3(a) Third Amended and Fully Restated Articles of Incorporation. (Incorporated by reference from Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 [File No. 0-20850].) 3(b) Bylaws of the Company, as amended. (Incorporated by reference from Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994 [File No. 0-20850].) 4(a) Specimen Certificate evidencing Common Stock (and Preferred Stock Purchase Right). (Incorporated by reference from Exhibit 4(a) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994 [File No. 0-20850].) 4(b) Form of Stockholders' Rights Agreement. (Incorporated by reference from Exhibit 4(b) to the Company's Pre-Effective Amendment No. 1 to Form S-1, filed with the Security and Exchange Commission on November 16, 1992 [Registration No. 33-52704].) 4(c) Note Purchase Agreement dated December 22, 1994, among Haggar Apparel Company, Haggar Corp. and Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 37 4(d) Note No. 1 dated December 22, 1994, in original principal amount of $10,500,000 executed by Haggar Apparel Company, as maker, and Haggar Corp., as guarantor, payable to Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 4(e) Note No. 2 dated December 22, 1994, in original principal amount of $6,500,000 executed by Haggar Apparel Company, as maker, and Haggar Corp., as guarantor, payable to Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 4(f) Note No. 3 dated December 22, 1994, in original principal amount of $4,800,000 executed by Haggar Apparel Company, as maker, and Haggar Corp., as guarantor, payable to Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 4(g) Note No. 4 dated December 22, 1994, in original principal amount of $2,200,000 executed by Haggar Apparel Company, as maker, and Haggar Corp., as guarantor, payable to Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 4(h) Note No. 5 dated December 22, 1994, in original principal amount of $1,000,000 executed by Haggar Apparel Company, as maker, and Haggar Corp., as guarantor, payable to Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(f) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 10(a) 1992 Long Term Incentive Plan. (Incorporated by reference from Exhibit 10(a) to the Company's Pre-Effective Amendment No. 1 to Form S-1, filed with the Security and Exchange Commission on November 16, 1992 [Registration No. 33-52704].) 10(b) Management Incentive Plan. (Incorporated by reference from Exhibit 10(b) to the Company's Registration Statement on Form S-1, filed with the Security and Exchange Commission on October 1, 1992 [Registration No. 33-52704].) 10(c) Master Letter of Credit Agreement between Philadelphia National Bank and Haggar Apparel Company. (Incorporated by reference from Exhibit 10(n) to the Company's Registration Statement on Form S-1, filed with the Security and Exchange Commission on October 1, 1992 [Registration No. 33-52704].) 10(d) Articles of Association of Haggar UK Limited. (Incorporated by reference from Exhibit 10(n) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 [File No. 0-20850].) 10(e) Subscription and Shareholders Agreement relating to Haggar UK Limited. (Incorporated by reference from Exhibit 10(o) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 [File No. 0-20850].) 10(f) Trade mark License Agreement between Haggar Apparel Company and Haggar UK Limited. (Incorporated by reference from Exhibit 10(l) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994 [File No. 0-20850].) 38 10(g) First Amendment to the 1992 Long-term Incentive Plan. (Incorporated by reference from Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994 [File No. 0-20850 ].) 10(h) Standard Form of Agreement Between Owner and Contractor dated as of April 25, 1994, between Haggar Apparel Company and Bob Moore Construction, Inc. regarding construction of customer service center. (Incorporated by reference from Exhibit 10(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 [File No. 0-20850].) 10(i) Agreement dated as of April 26, 1994, between Haggar Apparel Company and Kosan Crisplant USA, Inc. regarding tilt tray sortation system for the customer service center. (Incorporated by reference from Exhibit 10(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 [File No. 0-20850].) 10(j) Agreement by and between Haggar Apparel Company and Babcock Industries Inc., regarding a material conveying system. (Incorporated by reference from Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 [File No. 0-20850].) 10(k) First Amended and Restated Credit Agreement between the Company and Texas Commerce Bank, as agent for a bank syndicate. 10(l) Commercial Contract of Sale dated effective March 28, 1996, between Haggar Clothing Co. and Fred's Foreign Car Service, Inc. regarding land and storage building, together with First Amendment to Commercial Contract of Sale dated effective April 8, 1996. 10(m) Commercial Contract of Sale dated effective March 28, 1996, between Haggar Clothing Co. and R.H.A. Partnership regarding land and storage building, together with Amendment to Contract of Sale dated April 22, 1996, Second Amendment to Commercial Contract of Sale dated effective April 29, 1996, and Third Amendment to Commercial Contract of Sale dated effective May 10, 1996. 11 Statement Regarding Computation of Net Income (Loss) Per Common Share. 21 Significant Subsidiary of the Company. (Incorporated by reference from Exhibit 22 to the Company's Registration Statement on Form S-1, filed with the Security and Exchange Commission on October 1, 1992 [Registration No. 33-52704].) 23 Consent of independent public accountants. (b) REPORTS ON FORM 8-K There were no reports on Form 8-K filed with the Commission during the fourth quarter of fiscal 1996. 39 THIS PAGE INTENTIONALLY LEFT BLANK. 40 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HAGGAR CORP. (Registrant) By: /s/ RALPH A. BEATTIE ----------------------------------- Ralph A. Beattie, December 20, 1996 (EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date - ------------------------ ---------------------------------- ----------------- /s/ J. M. HAGGAR, III Chairman and December 20, 1996 - ------------------------ Chief Executive Officer J. M. Haggar, III (Principal Executive Officer) /s/ FRANK D. BRACKEN Director, President and December 20, 1996 - ------------------------ Chief Operating Officer Frank D. Bracken /s/ RALPH A. BEATTIE Director, Executive Vice President December 20, 1996 - ------------------------ and Chief Financial Officer Ralph A. Beattie (Principal Financial and Accounting Officer) /s/ NORMAN E. BRINKER Director December 20, 1996 - ------------------------ Norman E. Brinker 41 HAGGAR CORP. AND SUBSIDIARIES INDEX TO ATTACHED EXHIBITS EXHIBIT PAGES 10(k) First Amended and Restated Credit Agreement between the Company and Texas Commerce Bank, as Agent for a bank syndicate. 10(l) Commercial Contract of Sale between the Company and Fred's Foreign Car Service Inc. and First Amendment to Contract of Sale. 10(m) Commercial Contract of Sale between the Company and R.H.A. Partnership, Amendment to Contract of Sale, and Second Amendment to Commercial Contract of Sale and Third Amendment to Commercial Contract of Sale. 11 Statement Regarding Computation of Net Income (Loss) Per Common Share. 23 Consent of Independent Public Accountants 42 EX-10.(K) 2 EXHIBIT 10(K) $100,000,000 FIRST AMENDED AND RESTATED CREDIT AGREEMENT AMONG HAGGAR CLOTHING CO., A NEVADA CORPORATION, HAGGAR CORP., A NEVADA CORPORATION, TEXAS COMMERCE BANK NATIONAL ASSOCIATION, INDIVIDUALLY AND AS AGENT, AND THE BANKS LISTED HEREIN DATED AS OF SEPTEMBER 18, 1996 TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . 1 1.1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 1 1.2. GENDER AND NUMBER. . . . . . . . . . . . . . . . . . . . 18 1.3. REFERENCES TO AGREEMENT. . . . . . . . . . . . . . . . . 18 ARTICLE 2 THE CREDITS . . . . . . . . . . . . . . . 18 2.1. ADVANCES AND LETTERS OF CREDIT . . . . . . . . . . . . . 18 2.2. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 19 2.3. OPTIONAL PRINCIPAL PAYMENTS. . . . . . . . . . . . . . . 19 2.4. REDUCTION OR TERMINATION OF COMMITMENTS. . . . . . . . . 19 2.5. FEES.. . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.6. METHODS OF BORROWING AND APPLICATION AND ISSUANCE OF LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . 20 2.7. METHOD OF SELECTING RATE OPTIONS AND INTEREST PERIODS; CALCULATION OF INTEREST.. . . . . . . . . . . . 24 2.8. BORROWING BASE AND BORROWING BASE CERTIFICATE. . . . . . 25 2.9. METHOD OF PAYMENT. . . . . . . . . . . . . . . . . . . . 25 2.10. NOTES; TELEPHONIC NOTICES. . . . . . . . . . . . . . . . 26 2.11. INTEREST PAYMENT DATES; INTEREST BASIS.. . . . . . . . . 26 2.12 MANDATORY PRINCIPAL PAYMENTS.. . . . . . . . . . . . . . 27 2.13. NOTIFICATION OF LOANS, INTEREST RATES, PREPAYMENTS AND COMMITMENT REDUCTIONS. . . . . . . . . . . . . . . . 27 2.14. MAXIMUM INTEREST; HIGHEST LAWFUL RATE. . . . . . . . . . 27 2.15. INTEREST RECAPTURE.. . . . . . . . . . . . . . . . . . . 28 ARTICLE 3 CHANGE IN CIRCUMSTANCES; INDEMNIFICATION . . . . . . . . 28 3.1. YIELD PROTECTION.. . . . . . . . . . . . . . . . . . . . 28 3.2. AVAILABILITY OF INTEREST RATE. . . . . . . . . . . . . . 30 3.3 DISCRETION OF BANKS AS TO MANNER OF FUNDING. . . . . . . 30 3.4. FAILURE TO PAY OR BORROW ON CERTAIN DATES. . . . . . . . 30 3.5. BANK CERTIFICATES; SURVIVAL OF INDEMNITY.. . . . . . . . 31 i ARTICLE 4 CONDITIONS PRECEDENT . . . . . . . . . . . . . 31 4.1. AMENDMENT AND RESTATEMENT. . . . . . . . . . . . . . . . 31 4.2. EACH ADVANCE.. . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE 5 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . 33 5.1. CORPORATE EXISTENCE AND AUTHORITY. . . . . . . . . . . . 33 5.2. COMPLIANCE WITH LAWS.. . . . . . . . . . . . . . . . . . 34 5.3. LITIGATION.. . . . . . . . . . . . . . . . . . . . . . . 34 5.4. COMPLIANCE WITH LAWS AND CONTRACTS.. . . . . . . . . . . 34 5.5. FINANCIAL STATEMENTS.. . . . . . . . . . . . . . . . . . 34 5.6. MATERIAL ADVERSE EFFECT. . . . . . . . . . . . . . . . . 34 5.7. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 34 5.8. GOVERNMENT REGULATION. . . . . . . . . . . . . . . . . . 35 5.9. PROPERTIES; LIENS. . . . . . . . . . . . . . . . . . . . 35 5.10. LEASES.. . . . . . . . . . . . . . . . . . . . . . . . . 35 5.11. SUBSIDIARIES.. . . . . . . . . . . . . . . . . . . . . . 35 5.12. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 35 5.13. DEFAULTS.. . . . . . . . . . . . . . . . . . . . . . . . 35 5.14. ACCURACY OF INFORMATION. . . . . . . . . . . . . . . . . 35 5.15. USE OF PROCEEDS, MARGIN STOCK. . . . . . . . . . . . . . 36 5.16. NO FINANCING OF CORPORATE TAKEOVERS. . . . . . . . . . . 36 5.17. INSIDER. . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE 6 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . 37 6.1. FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . 37 6.2. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 38 6.3. NOTICE OF DEFAULT, ETC.. . . . . . . . . . . . . . . . . 38 6.4. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.5. PAYMENT AND PREPAYMENT OF OBLIGATIONS. . . . . . . . . . 38 6.6. MAINTENANCE OF CORPORATE EXISTENCE, ASSETS, BUSINESS AND INSURANCE. . . . . . . . . . . . . . . . . . . . . . 38 6.7. INSPECTION.. . . . . . . . . . . . . . . . . . . . . . . 39 6.8. COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . 39 6.9. ERISA COMPLIANCE.. . . . . . . . . . . . . . . . . . . . 39 ii ARTICLE 7 NEGATIVE COVENANTS. . . . . . . . . . . . . . 39 7.1. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . 40 7.2. LINES OF BUSINESS. . . . . . . . . . . . . . . . . . . . 40 7.3. INDEBTEDNESS.. . . . . . . . . . . . . . . . . . . . . . 40 7.4. MERGERS AND ACQUISITIONS.. . . . . . . . . . . . . . . . 40 7.5. AFFILIATES.. . . . . . . . . . . . . . . . . . . . . . . 41 7.6. FIXED CHARGE REQUIREMENT.. . . . . . . . . . . . . . . . 41 7.7. FUNDED DEBT LIMITATION.. . . . . . . . . . . . . . . . . 41 7.8 TANGIBLE NET WORTH.. . . . . . . . . . . . . . . . . . . 41 7.9. INVENTORY TURN.. . . . . . . . . . . . . . . . . . . . . 42 7.10. SALE OF ASSETS.. . . . . . . . . . . . . . . . . . . . . 42 7.11. SUBSIDIARIES.. . . . . . . . . . . . . . . . . . . . . . 43 7.12. FOREIGN SUBSIDIARIES.. . . . . . . . . . . . . . . . . . 43 7.13. DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . 43 7.14. INTERCOMPANY INDEBTEDNESS. . . . . . . . . . . . . . . . 43 ARTICLE 8 DEFAULTS . . . . . . . . . . . . . . . . 44 8.1. REPRESENTATION OR WARRANTY . . . . . . . . . . . . . . . 44 8.2. NONPAYMENT.. . . . . . . . . . . . . . . . . . . . . . . 45 8.3. PREPAYMENT.. . . . . . . . . . . . . . . . . . . . . . . 45 8.4. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 45 8.5. OTHER. . . . . . . . . . . . . . . . . . . . . . . . . 45 8.6. MATERIAL INDEBTEDNESS. . . . . . . . . . . . . . . . . 45 8.7. INSOLVENCY. . . . . . . . . . . . . . . . . . . . . . . 45 8.8. RECEIVER. . . . . . . . . . . . . . . . . . . . . . . . 46 8.9. APPROPRIATION. . . . . . . . . . . . . . . . . . . . . 46 8.10. JUDGMENTS. . . . . . . . . . . . . . . . . . . . . . . 46 8.11. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 46 8.12. MATERIAL AGREEMENT. . . . . . . . . . . . . . . . . . . 46 8.13. CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . 46 ARTICLE 9 ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES. . . . . . . 46 9.1. REMEDIES UPON DEFAULT. . . . . . . . . . . . . . . . . . 46 9.2. REMEDIES UPON UNMATURED DEFAULT. . . . . . . . . . . . . 47 9.3. AMENDMENTS AND WAIVERS.. . . . . . . . . . . . . . . . . 48 9.4. PRESERVATION OF RIGHTS.. . . . . . . . . . . . . . . . . 48 9.5. PERFORMANCE BY LENDER. . . . . . . . . . . . . . . . . . 49 9.6. RIGHTS OF SETOFF.. . . . . . . . . . . . . . . . . . . . 49 9.7. REMEDIES CUMULATIVE, CONCURRENT AND NON-EXCLUSIVE. . . . 49 iii ARTICLE 10 GENERAL PROVISIONS. . . . . . . . . . . . . . 50 10.1. BENEFIT OF AGREEMENT.. . . . . . . . . . . . . . . . . . 50 10.2. ASSIGNMENTS AND PARTICIPATIONS.. . . . . . . . . . . . . 50 10.3. SURVIVAL OF REPRESENTATIONS. . . . . . . . . . . . . . . 52 10.4. GOVERNMENT REGULATION. . . . . . . . . . . . . . . . . . 52 10.5. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 53 10.6. CHOICE OF LAW. . . . . . . . . . . . . . . . . . . . . . 53 10.7. HEADINGS.. . . . . . . . . . . . . . . . . . . . . . . . 53 10.8. ENTIRETY; WRITTEN AGREEMENT. . . . . . . . . . . . . . . 53 10.9. ACCOUNTING.. . . . . . . . . . . . . . . . . . . . . . . 53 10.10. SEVERAL OBLIGATIONS . . . . . . . . . . . . . . . . . . 53 10.11. EXPENSES; INDEMNIFICATION. . . . . . . . . . . . . . . . 53 10.12. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . 54 10.13. CHOICE OF FORUM. . . . . . . . . . . . . . . . . . . . . 54 10.14. REVOLVING CREDIT . . . . . . . . . . . . . . . . . . . . 54 10.15. PRIOR AGREEMENT. . . . . . . . . . . . . . . . . . . . . 54 ARTICLE 11 THE AGENT. . . . . . . . . . . . . . . . 55 11.1. APPOINTMENT AND POWERS.. . . . . . . . . . . . . . . . . 55 11.2. POWERS.. . . . . . . . . . . . . . . . . . . . . . . . . 55 11.3. POSSESSION OF INSTRUMENTS BY THE AGENT.. . . . . . . . . 55 11.4. DEBTOR-CREDITOR RELATIONSHIP.. . . . . . . . . . . . . . 55 11.5. GENERAL IMMUNITY.. . . . . . . . . . . . . . . . . . . . 56 11.6. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC.. . . . . . . 56 11.7. RIGHT TO INDEMNITY.. . . . . . . . . . . . . . . . . . . 56 11.8. ACTION ON INSTRUCTIONS OF THE BANKS. . . . . . . . . . . 56 11.9. EMPLOYMENT OF THE AGENT AND COUNSEL. . . . . . . . . . . 56 11.10. RELIANCE ON DOCUMENTS; COUNSEL. . . . . . . . . . . . . 57 11.11. MAY TREAT PAYEE AS OWNER . . . . . . . . . . . . . . . . 57 11.12. THE AGENT'S REIMBURSEMENT. . . . . . . . . . . . . . . . 57 11.13. RIGHTS AS A LENDER. . . . . . . . . . . . . . . . . . . 57 11.14. BANK CREDIT DECISION . . . . . . . . . . . . . . . . . . 57 11.15. SUCCESSOR AGENT. . . . . . . . . . . . . . . . . . . . . 57 11.16. DISTRIBUTION OF INFORMATION. . . . . . . . . . . . . . 58 11.17. NON-ADVANCING BANKS. . . . . . . . . . . . . . . . . . . 58 11.18. BENEFIT OF THE BANKS . . . . . . . . . . . . . . . . . . 59 iv ARTICLE 12 RATABLE PAYMENTS . . . . . . . . . . . . . . 59 12.1. RATABLE PAYMENTS.. . . . . . . . . . . . . . . . . . . . 59 ARTICLE 13 NOTICES . . . . . . . . . . . . . . . . 59 13.1. GIVING NOTICE. . . . . . . . . . . . . . . . . . . . . . 59 13.2. CHANGE OF ADDRESS. . . . . . . . . . . . . . . . . . . . 59 ARTICLE 14 COUNTERPARTS . . . . . . . . . . . . . . . 60 SCHEDULES Schedule 1 - Current Members of the Boards of Directors of Haggar and the Company Schedule 2 - Existing Standby Letters of Credit Schedule 3 - Domestic and Foreign Subsidiaries Schedule 4 - Current Obligations Schedule 5 - Pending Litigation Schedule 6 - Existing Affiliate Transactions Schedule 7 - Capacity Adjustment Costs EXHIBITS Exhibit A - Form of Application for Standby Letter of Credit Exhibit B - Form of Borrowing Base Certificate Exhibit C - Form of Note Exhibit D - Consent of Haggar Exhibit E - Subsidiary Guaranty Exhibit F - Consent of Domestic Subsidiaries Exhibit G - Compliance Certificate v FIRST AMENDED AND RESTATED CREDIT AGREEMENT This First Amended and Restated Credit Agreement is entered into as of September 18, 1996, by and among Haggar Clothing Co., a Nevada corporation, Haggar Corp., a Nevada corporation, the Banks listed on the signature pages of this Agreement and Texas Commerce Bank National Association, a national banking association, individually and as Agent for the Banks. R E C I T A L S : A. The Parties and Texas Commerce Bank, National Association entered into that certain Credit Agreement dated as of September 14, 1992, which Credit Agreement was amended by (i) First Amendment to Credit Agreement dated as of March 31, 1993, (ii) Second Amendment to Credit Agreement dated as of April 20, 1994, (iii) Third Amendment to Credit Agreement dated as of November 9, 1994, (iv) Fourth Amendment to Credit Agreement dated as of March 17, 1995, and (v) Fifth Amendment to Credit Agreement dated as of December 31, 1995 (such Credit Agreement, as amended, the "Prior Agreement"). B. The Parties desire to amend the Prior Agreement and restate it in its entirety as hereinafter provided. In consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, and subject to the terms of all the Loan Documents, the Parties hereby agree as follows: ARTICLE 1 DEFINITIONS 1.1. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: "Advance" means a Eurodollar Advance, a Fixed CD Rate Advance or a Floating Rate Advance. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 1 "Affiliate" means any Person directly or indirectly controlling, controlled by or under direct or indirect common control with any other Person. A Person shall be deemed to control another Person if the controlling Person owns ten percent (10%) or more of any class of stock of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Agent" means Texas Commerce Bank National Association, in its capacity as agent for the Banks (but not in its capacity as a Bank), and any successor Agent appointed pursuant to Section 11.15. "Agreement" means this First Amended and Restated Credit Agreement, as it may be further amended or modified from time to time. "Alternate Base Rate" means, for any date, a rate per annum (rounded upwards, if necessary, to the next higher 1/100%) equal to the greater of (a) the Prime Rate in effect on such day or (b) the Fed Funds Rate in effect for such day plus one-half percent (1/2%). Any change in the Alternate Base Rate due to a change in the Prime Rate or the Fed Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Fed Funds Rate. If for any reason the Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Fed Funds Rate for any reason, including the inability or failure of the Agent to obtain sufficient bids or publications in accordance with the terms hereof, the Alternate Base Rate shall be the Prime Rate until the circumstances giving rise to such inability no longer exist. "Application" means any Application and Agreement for Standby Letter of Credit delivered to the Agent for or in connection with any Standby Letter of Credit, and substantially in the form attached hereto as EXHIBIT A. "Assessment Rate" means, for any CD Interest Period, the net assessment rate per annum payable to the Federal Deposit Insurance Corporation (or any successor) for the insurance of domestic deposits of the Agent, in its capacity as a Bank, during the calendar year in which the first day of such CD Interest Period falls, as reasonably estimated by the Agent on the first day of such CD Interest Period. "Authorized Officer" means the Chief Executive Officer, President, Chief Financial Officer, any Senior Vice President of Finance, any Vice President of Finance or the Treasurer, in each case acting singly. "Banks" means the banks listed on the signature pages of this Agreement (including Texas Commerce Bank National Association in its capacity as a Bank but not in its capacity as the Agent), and their respective successors and assigns. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 2 "Base Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Eurodollar Interest Period, the rate determined by the Agent as the rate at which deposits in U.S. Dollars are offered to the Agent in the interbank Eurodollar market where the Agent (or its Affiliates) conducts foreign exchange and currency operations, at or before 10:00 a.m. (Dallas, Texas time) two (2) Business Days prior to the first day of such Eurodollar Interest Period, in the approximate amount of such Eurodollar Advance and having a maturity approximately equal to such Eurodollar Interest Period, for delivery in immediately available funds on the first day of such Eurodollar Interest Period. "Base Fixed CD Rate" means, with respect to a Fixed CD Rate Advance for the relevant CD Interest Period, the rate determined by the Agent as the prevailing bid rate for the purchase at face value at or before 10:00 a.m. (Dallas, Texas time) on the first day of such CD Interest Period by three (3) certificate of deposit dealers in New York, New York of recognized standing selected by the Agent (or its Affiliates) of certificates of deposit of the Agent in the approximate amount of such Fixed CD Rate Advance and having a maturity approximately equal to such CD Interest Period. "Borrowing Base" means an amount calculated as of the last day of each fiscal month, equal to the sum of (i) eighty percent (80%) of Eligible Receivables, and (ii) fifty percent (50%) of Eligible Inventory (each of [i] and [ii] as determined pursuant to the most recent Borrowing Base Certificate delivered by the Company to the Agent pursuant to Sections 2.8 or 6.1[d]); PROVIDED, HOWEVER, that the portion of the Borrowing Base attributable to Eligible Inventory shall not be greater than fifty percent (50%) of the Borrowing Base, other than in the months of January, June, July and December, when such Eligible Inventory may constitute up to sixty percent (60%) of the Borrowing Base. "Borrowing Base Availability" means at any time the amount by which the Borrowing Base exceeds the sum of the principal amount of all outstanding Advances. "Borrowing Base Certificate" means a certificate substantially in the form of EXHIBIT B to this Agreement, duly executed by the Chief Financial Officer of the Company. "Borrowing Base Deficiency" means the amount, if any, by which the sum of the outstanding principal balance of all Notes exceeds the Borrowing Base in effect on such date. "Borrowing Date" means a date, which shall be a Business Day, on which an Advance is made hereunder. "Business Day" means (a) with respect to borrowing, payment or rate selection of Eurodollar Advances, a day on which banks are open for business in Dallas, Texas and London, England and on which dealings in U.S. Dollars are carried on in the interbank Eurodollar market where Agent (or its Affiliates) conducts foreign exchange and currency operations, and (b) for all other purposes, a day on which banks are open for business in Dallas, Texas, and New York, New York. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 3 "Capacity Adjustment Costs" means amounts not to exceed $14,000,000 in the aggregate which are accrued or expensed by the Company after June 30, 1996, and prior to July 1, 1997, in connection with the adjustment by the Company Group of its manufacturing capacity, which Capacity Adjustment Costs shall be comprised of the items reflected on SCHEDULE 7 attached hereto. Capacity Adjustment Costs shall not include amounts accrued or expensed in connection with the closing of the Company Group's Bowie, Olney and Robstown facilities unless such amounts are expensed or accrued during or after the fiscal quarter in which Capacity Adjustment Costs are accrued or expensed with respect to the adjustment of its manufacturing capacity at its remaining domestic facilities. "Capital Expenditures" means capital expenditures according to GAAP LESS the amount thereof financed by any long-term Indebtedness, the terms of which are acceptable to the Banks. "Capitalized Lease Obligations" means any obligation, as lessee or guarantor, to pay rent under a lease of real or personal property, which obligation is required to be capitalized on a balance sheet of the lessee or guarantor prepared in accordance with GAAP. As used herein, a principal payment on a Capitalized Lease Obligation shall mean the portion of any payment which is treated as a principal payment on the financial statements of the lessee or guarantor, prepared in accordance with GAAP. "CD Interest Period" means, with respect to a Fixed CD Rate Advance, a period of thirty (30), sixty (60), ninety (90) or one hundred eighty (180) days (and, if all of the Banks elect in their sole discretion to offer a longer period, then a longer period of days) commencing on a Business Day selected by the Company pursuant to Section 2.7; provided that in no event shall any CD Interest Period extend beyond the Termination Date. If such CD Interest Period would end on a day that is not a Business Day, such CD Interest Period shall end on the next succeeding Business Day. "CD Margin" means (a) at any time when the Funded Debt Ratio is equal to or less than 1.50 to 1, five-eighths of one percent (5/8%) per annum, (b) at any time when the Funded Debt Ratio is greater than 1.50 to 1 but less than or equal to 2.00 to 1, three-quarters of one percent (3/4%) per annum, (c) at any time when the Funded Debt Ratio is greater than 2.00 to 1 but less than or equal to 2.50 to 1, seven-eighths of one percent (7/8%) per annum, (d) at any time when the Funded Debt Ratio is greater than 2.50 to 1 but less than or equal to 3.00 to 1, one percent (1%) per annum, (e) at any time when the Funded Debt Ratio is greater than 3.00 to 1 but less than or equal to 3.50 to 1, one and one-quarter percent (1 1/4%) per annum, and (f) at any time when the Funded Debt Ratio is greater than 3.50 to 1, one and one-half percent (1 1/2%) per annum. Each adjustment to the previously calculated CD Margin shall be effective five (5) Business Days following the Agent's receipt of the reports to be delivered by the Company pursuant to Sections 6.1(a), (b) and (c). FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 4 A "Change in Control" shall be deemed to have occurred in any of the following circumstances: (a) if, at any time, any one (1) Person or any one (1) group (within the meaning of Rule 13d-5 promulgated by the Securities and Exchange Commission as in effect on the date hereof), other than a Person or group consisting of (A) Existing Shareholders or their Affiliates, (B) members of the Family Group, or (C) Persons who/which are not required to file a Schedule 13D by virtue of Rule 13d-1(b)(1) promulgated by the Securities and Exchange Commission, shall own, directly or indirectly, beneficially or of record, in the aggregate shares representing more than twenty percent (20%) of the voting power represented by the issued and outstanding capital stock of the Company or Haggar or which upon the occurrence of an event or passage of time or both could be converted into or could exercise twenty percent (20%) of such aggregate voting power; or (b) if, at any time, the individuals who are members of the Board of Directors of Haggar or the Company, respectively, as of the date of this Agreement, being those individuals listed in Schedule 1 attached hereto, or any lesser combination thereof, do not constitute a majority of the respective Boards of Directors of Haggar or the Company. "Chief Financial Officer" means the officer of the Company or other entity designated as such, or in absence of such designation, the President, Chief Executive Officer or Senior Vice President - Finance of the same. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commitment" means, for any Bank, the amount set forth opposite such Bank's signature hereto, as such amount may be reduced pursuant to Section 2.4. "Commitments" means the aggregate of such amounts for all of the Banks. "Company" means Haggar Clothing Co., a Nevada corporation. "Company Group" means, at any time, Haggar, the Company, and their respective Subsidiaries. "Compliance Certificate" means a certificate substantially in the form of EXHIBIT G to this Agreement and Annexes thereto, duly executed by the Chief Financial Officer of the Company. "Consent of Haggar" and "Consent of Domestic Subsidiaries" have, respectively, the meanings ascribed thereto in the definitions of Parent Guaranty and Subsidiary Guaranty. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 5 "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control that, together with the Company, are treated as a single employer under Section 414(b) or 414(c) of the Code. "Customer Service and Distribution Center" means a facility in Fort Worth, Texas, to be operated by the Company as a customer service and distribution facility, for which the costs of construction and equipment shall be approximately $38,000,000. "Dated Invoice" means an invoice having an effective date later than the date of the sale and delivery of the Inventory or services giving rise to such invoice. "Debtor Relief Laws" means the Bankruptcy Code of the United States, as amended from time to time, and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief Laws from time to time in effect affecting the rights of creditors generally. "Default" means an event described in Article 8. "Default Rate" means the lesser of (a) the Highest Lawful Rate or (b) the Alternate Base Rate plus five percent (5%) per annum. "Distributions" of any Person means (a) with respect to any stock issued by such Person, the retirement, redemption, purchase or other acquisition for value of any such stock (other than pursuant to contractual obligations existing as of the date of this Agreement to repurchase the outstanding shares of the stock of Haggar from any holder thereof which is an officer, director or employee of any member of the Company Group), (b) the declaration or payment of any dividend or other distribution on or with respect to such stock, (c) any loan or advance by such Person to, or other investment by such Person in, the holder of any such stock (other than advances to shareholders reflected as accounts receivable, to the extent that the aggregate amounts thereof do not exceed the greater of (i) the amounts permitted be made pursuant to the provisions of Section 7.13, or (ii) $250,000, after deducting therefrom all loans or advances due and owing by the Company Group, in the aggregate, to its shareholders, in the aggregate), and (d) any other payment (other than salaries of employees or advances made in the ordinary course of business to employees for travel and other expenses incurred in the ordinary course of business, including, but not limited to, premiums for policies of insurance) by such Person with respect to such stock. "Dollars" and the "$" symbol refer to currency of the United States of America. "Domestic Subsidiaries" means any Subsidiary which is organized under the laws of a State of, or maintains its principal operations in, the United States of America. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 6 "Eligible Inventory" means Inventory as to which the Company furnished to the Agent the information required under Sections 2.8 or 6.1.(c) and (d), and that strictly complies with all of the Company's representations, warranties and covenants contained herein with respect thereto; provided, however, that Eligible Inventory shall not include any Inventory subject to any Lien. "Eligible Receivables" means Receivables as to which the Company furnished to the Agent the information required under Sections 2.8 or 6.1.(d), and that strictly complies with all of the Company's representations, warranties and covenants contained herein with respect thereto; provided, however, that Eligible Receivables shall not include the following: (a) Receivables that represent amounts due from Affiliates or employees of the Company; (b) Receivables that remain unpaid more than ninety (90) days after the date of the original invoice (or the effective date of Dated Invoices, provided that no more than five percent [5%] of Eligible Receivables shall arise from Dated Invoices) giving rise to the Receivable or Receivables which are known to be uncollectible or the subject of dispute; (c) Receivables that are subject to any Lien; and (d) Receivables with respect to which goods are placed on consignment, guaranteed sale or other terms by reason of which the payment obligation of the account debtor may be conditional, but only to the extent that such Receivables equal or exceed $500,000 in the aggregate. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurodollar Advance" means that portion of the aggregate Loans made by the Banks bearing interest at a particular Eurodollar Rate for a particular Eurodollar Interest Period. "Eurodollar Interest Period" means, with respect to a Eurodollar Advance, a period of one (1), two (2), three (3) or six (6) months (and, if all of the Banks elect in their sole discretion to offer a longer period, then a longer period of months) commencing on a Business Day selected by the Company pursuant to Section 2.7; provided that in no event shall any Eurodollar Interest Period extend beyond the Termination Date. A month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month. If there is no such numerically corresponding day in the calendar month in which a Eurodollar Interest Period ends, such Eurodollar Interest Period shall end on the last Business Day of such calendar month. If a Eurodollar Interest Period would otherwise end on a day that FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 7 is not a Business Day, such Eurodollar Interest Period shall end on the next succeeding Business Day; provided, however, that if said next succeeding Business Day falls in a new calendar month, such Eurodollar Interest Period shall end on the immediately preceding Business Day. "Eurodollar Margin" means (a) at any time when the Funded Debt Ratio is equal to or less than 1.50 to 1, one-half of one percent (1/2%) per annum, (b) at any time when the Funded Debt Ratio is greater than 1.50 to 1 but less than or equal to 2.00 to 1, five-eighths of one percent (5/8%) per annum, (c) at any time when the Funded Debt Ratio is greater than 2.00 to 1 but less than or equal to 2.50 to 1, three-quarters of one percent (3/4%) per annum, (d) at any time when the Funded Debt Ratio is greater than 2.50 to 1 but less than or equal to 3.00 to 1, seven-eighths of one percent (7/8%) per annum, (e) at any time when the Funded Debt Ratio is greater than 3.00 to 1 but less than or equal to 3.50 to 1, one and one-eighth percent (1-1/8%) per annum, and (f) at any time when the Funded Debt Ratio is greater than 3.50 to 1, one and three-eighths percent (1-3/8%) per annum. Each adjustment to the previously calculated Eurodollar Margin shall be effective five (5) Business Days following Agent's receipt of the reports to be delivered by the Company pursuant to Sections 6.1(a), (b) and (c). "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Eurodollar Interest Period, a rate of interest per annum, calculated on the basis of a three hundred sixty (360) day year, equal to the sum of (a) the Base Eurodollar Rate applicable to that Eurodollar Interest Period, plus (b) the applicable Eurodollar Margin; provided that in no event shall the Eurodollar Rate exceed the Highest Lawful Rate. "Existing Shareholders" means those Persons that are shareholders of Haggar or the Company on the date of this Agreement. "Existing Standby Letters of Credit" means those Letters of Credit more particularly described on SCHEDULE 2 attached hereto. "Family Group" means E. R. Haggar, J. M. Haggar, Jr. and Rosemary Haggar Vaughan, and their respective spouses, children, children's spouses, grandchildren, grandchildren's spouses, and any trust existing or established for the benefit of any of the foregoing. "Fed Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three (3) federal funds brokers of recognized standing selected by it. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 8 "Fixed CD Rate" means, with respect to a Fixed CD Rate Advance for the relevant CD Interest Period, a rate of interest per annum, calculated on the basis of a three hundred sixty (360) day year, equal to the sum of (a) the Base Fixed CD Rate applicable to that CD Interest Period, plus (b) the Assessment Rate applicable to that CD Interest Period, plus (c) the applicable CD Margin; provided that in no event shall the Fixed CD Rate exceed the Highest Lawful Rate. "Fixed CD Rate Advance" means that portion of the aggregate Loans made by the Banks bearing interest at a particular Fixed CD Rate for a particular CD Interest Period. "Fixed Charge Ratio" means the ratio of Operating Cash Flow to Fixed Charges as measured in accordance with Section 7.6 and as measured at the end of each fiscal quarter. "Fixed Charges" means, for the Company Group on a consolidated basis for any period, in accordance with GAAP, the sum of (a) all interest on and principal of Indebtedness (not including employee severance payments) that is paid or required to be paid or accrued during such period, (b) all dividends paid in cash during such period with respect to the securities of any member of the Company Group to any recipient other than a member of the Company Group, and (c) all cash payments made during such period for Capital Expenditures (but not including (i) expenditures of up to $38,000,000 attributable to the Customer Service and Distribution Center, and (ii) expenditures for the purchase of a corporate headquarters [to the extent such expenditures in the aggregate do not exceed the net cash amount realized by the Company from any sale of its existing headquarters situated at 6113 Lemmon Avenue, Dallas Texas]). "Fixed Rate" means the Fixed CD Rate or the Eurodollar Rate. "Fixed Rate Advance" means a Eurodollar Advance or a Fixed CD Rate Advance. "Floating Rate Advance" means that portion of the aggregate Loans made by the Banks bearing interest at the Alternate Base Rate for the applicable period outstanding. "Funded Debt" means, for the Company Group on a consolidated basis for any period, all amounts advanced and outstanding with respect to any Indebtedness (excluding, however, any Indebtedness of the type described in clause (f) of the definitions of such term) of any member of the Company Group, including, without limitation, the Obligations. "Funded Debt Ratio" means the ratio, as measured at the end of each fiscal quarter, of Funded Debt as of the end of such quarter to Operating Cash Flow for the preceding twelve (12) month period. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 9 "GAAP" means generally accepted accounting principles in the United States of America consistently applied as in effect at the time of application of the provisions hereof; provided, however, that to the extent any such generally accepted accounting principle conflicts with any applicable enforceable rule of the Securities and Exchange Commission, if any, then such enforceable rule shall control; and provided further, however, that wherever in this Agreement principles of consolidation different from those required by generally accepted accounting principles are specified, the principles of consolidation specified in this Agreement shall govern. "Guarantors" means Haggar and each of the Company's now or hereafter existing Domestic Subsidiaries, including, without limitation, those Subsidiaries listed on SCHEDULE 3 attached to this Agreement as Domestic Subsidiaries. "Guarantee" of any Person means any obligation, contingent or otherwise, directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions, by "comfort letter" or other similar undertaking of support or otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Haggar" means Haggar Corp., a Nevada corporation. "Highest Lawful Rate" means the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Loans under the Laws of the United States and the Laws of the State of Texas as may be applicable thereto that are presently in effect or, to the extent allowed by Law under such applicable Laws of the United States and the Laws of the State of Texas, which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable Laws now allow. To the extent, if any, that Chapter One of Title 79, Texas Revised Civil Statutes, 1925, as amended (the "Act") establishes the highest nonusurious rate, the Highest Lawful Rate shall be the "indicated rate ceiling," as defined in the Act in effect from time to time, calculated on the basis of a 365/366 day year; provided, however, that to the extent permitted by the Act, the Banks at their election may substitute for the "indicated rate ceiling" the "annual ceiling" or the "quarterly ceiling," as these terms are defined in the Act, upon the giving of the notices provided for by the Act and effective upon the giving of such notices, such substitution to have the effect provided for in Section (h)(1) of the Act and to be automatically renewable for additional periods as therein provided. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 10 "Indebtedness" for any Person means any and all (a) obligations for borrowed money, whether or not evidenced by a note or other similar instrument or agreement, (b) obligations representing the deferred purchase price of property or services other than accounts payable arising in the ordinary course of business and in accordance with past practice, (c) obligations, whether or not assumed, secured by Liens on or payable out of the proceeds or production from specified property now or hereafter owned or acquired by such Person, (d) obligations that are evidenced by notes, acceptances or other instruments or agreements, including, but not limited to, employee severance agreements (but not including non-capitalized lease obligations), (e) Capitalized Lease Obligations and (f) obligations under any Guarantee. "Intercompany Indebtedness" means, at any time, any Indebtedness owing from one member of the Company Group to another member of the Company Group. "Interest Period" means a CD Interest Period or a Eurodollar Interest Period. "Inventory" means, at any time, goods, merchandise or other personal property held for sale in the ordinary course of business of the Company Group on a consolidated basis. "Laws" means all applicable statutes, laws, rules, ordinances, regulations, orders, writs, judgments, awards, injunctions or decrees of any Tribunal. "Letter of Credit Commitment" means, for any Bank, the lesser of (a) such Bank's Ratable Share of $30,000,000, or (b) such Bank's Ratable Share of the Total Commitments if the Total Commitments are less than $30,000,000. "Letter of Credit Exposure" means the aggregate amount of all issued and outstanding Letters of Credit. "Letter of Credit Facility" means the aggregate of all Letter of Credit Commitments. "Letters of Credit" means Standby Letters of Credit. "Lien" means any security interest, mortgage, pledge, lien, charge, encumbrance, title retention agreement, lessor's interest under a Capitalized Lease Obligation or other similar interest in, of or on any property of the Company or any Subsidiary of the Company. "Litigation" means any proceeding, claim, lawsuit and/or investigation conducted or threatened in writing (and known to the Person in question) by or before any Tribunal. "Loan" means any loan made under this Agreement. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 11 "Loan Documents" means this Agreement, each of the Notes, the Parent Guaranty, the Subsidiary Guaranty, the Applications and all other documents executed or delivered (or to be executed or delivered) pursuant to any of the foregoing documents. "Material Adverse Effect" means any set of circumstances or event that (a) would have any adverse effect whatsoever upon the validity or enforceability of any of the Loan Documents, (b) is or, upon the passage of time or the happening of an event will be, material and adverse to the consolidated financial position or business operations of the Company Group, or (c) would materially impair the ability of the members of the Company Group, taken as a whole, to fulfill the obligations of the Loan Documents. "Material Indebtedness" means any Indebtedness (excluding Intercompany Indebtedness) in an amount equal to or exceeding $5,000,000. "Net Worth" means, as of any date, the total shareholder's equity (including common and preferred stock, additional paid-in capital and retained earnings after deducting treasury stock) which would appear on a consolidated balance sheet of the Company Group, or on a balance sheet of the Company, as the case may be, prepared as of such date in accordance with GAAP. "Note" means each promissory note in substantially the form of EXHIBIT C to this Agreement, duly executed and delivered to the Agent by the Company and payable to the order of a Bank in the amount of its Commitment, including any amendment, modification, renewal or replacement of such promissory note. "Obligations" means all unpaid principal and accrued and unpaid interest under the Notes, all accrued and unpaid fees hereunder, and all other obligations of the Company and each Guarantor to the Banks or to any Bank or the Agent arising under the Loan Documents, including, but not limited to, the Parent Guaranty and the Subsidiary Guaranty. "Operating Cash Flow" means, for any period, (a) the net income of the Company Group on a consolidated basis (before accounting for the gains and losses on the sale of capital assets, discontinued operations and other like extraordinary or nonrecurring events, including all Capacity Adjustment Costs), plus (b) depreciation or amortization, plus (c) interest expense, plus (d) federal and state income taxes, as set forth on the financial statements of the Company and its Subsidiaries and as determined in accordance with GAAP. In no event shall Operating Cash Flow include any income or loss attributable to any changes in the accounting for pension, profit sharing or employee benefits. "Parties" means the Company, Haggar, the Banks and the Agent. "Parent Guaranty" means that certain continuing guaranty, dated of even date with the Prior Agreement, executed by Haggar, pursuant to which Haggar unconditionally guaranteed the FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 12 full payment of the obligations described therein together with that certain Consent of Haggar (herein so called), dated of even date with this Agreement, executed by Haggar, in the form of EXHIBIT D attached hereto. "Payment Date" means each March 31, June 30, September 30 and December 31 during the term of this Agreement. "Permitted Indebtedness" means the obligations of the Company Group listed on SCHEDULE 4 hereto, together with any obligations of a same or similar character incurred in the ordinary course of business which, when taken together with the outstanding amount of the obligations listed on SCHEDULE 4 hereof, do not exceed, in the aggregate, the amount of $40,140,692, plus any or all of the following Indebtedness: (a) obligations to reimburse advances made under commercial letters of credit or similar instruments incurred in the ordinary course of business but only to the extent that the aggregate outstanding amount thereof does not exceed $30,000,000; (b) obligations to reimburse advances made under standby letters of credit (other than Standby Letters of Credit) incurred in the ordinary course of business but only to the extent that the aggregate outstanding amount thereof does not exceed $2,000,000; (c) obligations (i) to advance monies for the repurchase of the outstanding shares of the stock of Haggar from any holder thereof which is an officer, director or employee of any member of the Company Group, or (ii) to pay any sum or sums of money as a settlement of existing or future compensation expectations or agreements with any such officer, director or employee, in each case in connection with the resignation, severance or termination of such relationship, but only to the extent that the aggregate amount payable over any twelve (12) month period does not exceed $2,500,000.00 (not including the amount of any severance compensation paid to hourly wage employees) and the aggregate amount of all such obligations payable over their respective terms does not exceed $10,000,000; (d) Indebtedness incurred in the ordinary course of business, purchase money obligations and Capitalized Lease Obligations to the extent that the aggregate outstanding amounts thereof do not exceed the sum of $2,000,000 plus (i) $2,000,000 TIMES (ii) the number of fiscal years of the Company ending during the period in which this Agreement has been in effect; (e) Intercompany Indebtedness, which shall be subordinate to the Obligations in all respects (other than Intercompany Indebtedness with Subsidiaries other than Domestic Subsidiaries incurred in the ordinary course of business); FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 13 (f) accounts payable and other obligations to officers and directors of the Company Group; (g) the amount of any Guarantee to the extent the Indebtedness guaranteed thereby constitutes Permitted Indebtedness of any member of the Company Group; (h) the amount of any Guarantee by the Company or Haggar of real property leases for retail premises in favor of Haggar Direct, Inc. provided that (i) the remaining liability under such Guarantee does not exceed the rental payable during one lease year, or (ii) the aggregate remaining liability in excess of the rental payable during one lease year under all such Guarantees does not exceed (w) the sum of $1,000,000 for the period from the date hereof through September 30, 1996, (x) the sum of $2,000,000 for the period October 1, 1996, through September 30, 1997, (y) the sum of $4,000,000 for the period October 1, 1997, through September 30, 1998, and (z) the sum of $6,000,000 for the period October 1, 1998, through the Termination Date; and (i) the Obligations. "Permitted Liens" means (a) Liens for Taxes not yet due and payable, mechanic's Liens and materialman's, shipper's or warehouseman's Liens for services or materials and landlord's Liens for rental amounts for which payment is not yet due or that are being contested in good faith and their enforcement stayed by appropriate proceedings, (b) Liens securing any purchase money Indebtedness if such Liens do not encumber any property other than the property for which such purchase money Indebtedness was incurred, (c) the currently existing Liens described in SCHEDULE 4 to this Agreement, if any, and renewals thereof if the principal amounts secured thereby are not increased and the renewed Lien does not cover any assets which are not covered by the existing Lien renewed thereby, (d) pledges or deposits made to secure payment of worker's compensation, or to participate in any fund in connection with worker's compensation, unemployment insurance, pensions, or other social security programs, (e) good-faith pledges or deposits made to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, not in excess of twenty percent (20%) of the aggregate amount due thereunder, or to secure statutory obligation, surety or appeal bonds, or indemnity, performance, or other similar bonds in the ordinary course of business, (f) encumbrances consisting of zoning restrictions, easements or other restrictions on the use of real property, none of which materially impair the operation by the Company Group (taken as a whole) of their business, and none of which is violated by existing or proposed structures or land use that materially impair the operation by the Company Group (taken as a whole), and (g) the following, if (i) the validity or amount thereof is being contested in good faith and by appropriate and lawful proceedings and so long as levy and execution thereon have been stayed and continue to be stayed, or (ii) they do not in the aggregate materially detract from the value of any material assets or the operation by the Company Group of their respective businesses: claims and Liens for Taxes due and payable; any attachment of personal or real property or FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 14 other legal process prior to adjudication of a dispute on the merits; adverse judgments on appeal; and Liens. "Person" means any corporation, natural person, firm, joint venture, partnership, trust, unincorporated organization, government or any department or agency of any government. "Plan" means an employee pension benefit plan that is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (a) maintained by the Company or any member of the Controlled Group for employees of the Company or any member of the Controlled Group (a "Single Employer Plan") or (b) maintained pursuant to a collective bargaining agreement or any other arrangement to which the Company or any member of the Controlled Group is a party under which more than one employer makes contributions (a "Multi-Employer Plan"). "Prime Rate" means, as of a particular date, the prime rate most recently announced by the Agent, automatically fluctuating upward and downward with and at the time specified in each such announcement without special notice to the Company or any other Person, which prime rate may not necessarily represent the lowest or best rate actually charged to a customer. "Prior Agreement" has the meaning ascribed thereto in Recital A hereof. "Ratable Share" of any Bank means that percentage which the Commitment of such Bank bears to the Total Commitments. "Rate Option" means the Eurodollar Rate, the Fixed CD Rate or the Alternate Base Rate. "Receivables" means the unpaid principal portion of the obligation, as stated on the respective invoice, of any customer of the Company or any of its Domestic Subsidiaries, to pay money arising out of or related to the sale of Inventory or services by the Company and/or its Domestic Subsidiaries on a consolidated basis in the ordinary course of business, net of any credits, rebates or offsets owed to such customer and also net of any commissions payable by the Company or such Domestic Subsidiary to third parties, other than commissions payable with respect to sales of finished goods. "Regulation D", "Regulation G", "Regulation U" and "Regulation X" means respectively Regulation D, Regulation G, Regulation U and Regulation X of the Board of Governors of the Federal Reserve System from time to time in effect and shall include any successor or other regulation or official interpretation of said Board of Governors. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA, other than a reportable event for which the ERISA notice requirement has been waived. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 15 "Required Banks" means (a) Banks in the aggregate holding at least sixty percent (60%) of the sum of (i) the aggregate unpaid principal amount of the outstanding Loans plus (ii) the Letter of Credit Exposure, or (b) if no Loans or Letters of Credit are outstanding, Banks in the aggregate having at least sixty percent (60%) of the Commitments. "Reserve Requirement" means, with respect to a Eurodollar Interest Period or a CD Interest Period, the maximum aggregate reserve requirement imposed on the Agent (including all basic, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements during such Interest Period) that is imposed under Regulation D on non-personal time deposits of $100,000 or more with a maturity equal to that of the CD Interest Period (in the case of Fixed CD Rate Advances) or on Eurocurrency liabilities with a maturity equal to that of the Eurodollar Interest Period (in the case of Eurodollar Advances). "Section" or "Article" means a numbered section or article of this Agreement, unless another document or Law is specifically referenced. "Shortfall" shall have the meaning ascribed thereto in Section 2.9(b). "Standby Letter of Credit" means a standby letter of credit issued by the Agent for the account of the Company, and all renewals, extensions or replacements thereof, and includes an Existing Standby Letter of Credit. "Subsidiary" means any corporation or other entity, more than fifty percent (50%) of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by any Person, including, but not limited to, any foreign business organization that is so owned or controlled. "Subsidiary Guaranty" means those certain continuing guaranties, executed by each of the Company's Domestic Subsidiaries, pursuant to which the Company's Domestic Subsidiaries unconditionally guaranteed the full payment of the obligations described therein, together with (a) each and every other continuing guaranty which is hereafter executed and delivered pursuant to the provisions of Section 7.11, in each case substantially in the form of EXHIBIT E attached hereto, and (b) that certain Consent of Domestic Subsidiaries (herein so called), dated of even date with this Agreement, executed by each of the Company's Domestic Subsidiaries in the form attached hereto as EXHIBIT F. "Tangible Net Worth" means, at any time, an amount equal to Net Worth LESS the following (without duplication of deductions in respect of items already deducted in arriving at surplus and retained earnings): (a) the book value of all assets that would be treated as intangibles in accordance with GAAP, including, without limitation, goodwill, trademarks, trade names, copyrights, patents, unamortized debt discount and expense, unamortized organization FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 16 and reorganization expense and costs in excess of the net asset value of acquired property or Persons; (b) all amounts representing any write-up in the book value of any assets of the Company Group resulting from the revaluation thereof, but only to the extent any such write-up exceeds the original cost of such asset; and (c) the aggregate amount of accounts receivable and other assets of the Company Group relating to loans or advances due and owing from officers and directors of the Company Group, unless such obligations have been secured by collateral approved by the Required Banks, as evidenced by their written consent thereto, but only in the event that such amount exceeds $1,000,000, in the aggregate, after deducting therefrom all loans or advances due and owing from the Company Group, in the aggregate, to their respective officers and directors, in the aggregate. "Taxes" means all taxes, assessments, filing or other fees, levies, imposts, duties, deductions, withholdings, stamp taxes, interest equalization taxes, capital transaction taxes, foreign exchange taxes or charges, or other similar charges from time to time or at any time imposed by any Law or Tribunal. "Termination Date" means December 31, 1998, unless the Commitments are terminated prior to such date pursuant to Sections 2.4 or 9.1; provided, however, if the Agent receives written notice from the Company by April 30, 1997, and each April 30 thereafter, of its intention to extend for one (1) additional year (and the Company receives notice from the Agent by June 15, 1997, and each June 15 thereafter, of the election of all the Banks to so extend), then the Termination Date shall be extended for one (1) additional year, unless the Commitments are terminated prior to such extended date pursuant to Sections 2.4 or 9.1. "Total Commitments" means the aggregate Commitments of all the Banks. "Total Liabilities" means the total of all amounts that would be treated as liabilities on a consolidated balance sheet of the Company Group prepared in accordance with GAAP, including, without limitation, accrued taxes and accrued expenses. "Tribunal" means any relevant court or government department, commission, board, bureau, agency or instrumentality of or any state, commonwealth, nation, territory, possession, county, parish or municipality, whether now or hereafter constituted or existing. "Unfunded Liabilities" means (a) in the case of Single Employer Plans, the amount (if any) by which the present value of all vested non-forfeitable benefits under such Plan exceeds the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, and (b) in the case of Multi-Employer Plans, the withdrawal liability of the Company Group. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default; provided, however, that the failure to maintain any FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 17 of the financial ratios set forth in Sections 7.6, 7.7 and 7.9 as of a specific point in time prior to the end of a fiscal quarter shall not constitute an Unmatured Default unless the Required Banks reasonably determine that it is likely that at the end of such fiscal quarter a Default will exist with respect to any of the financial ratios set forth in Section 7.6, 7.7 or 7.9, as applicable. 1.2. GENDER AND NUMBER. Words of any gender used in this Agreement shall be held and construed to include any other gender; and, words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise. 1.3. REFERENCES TO AGREEMENT. Use of the words "herein", "hereof", "hereinabove", and the like are and shall be construed as references to this Agreement. ARTICLE 2 THE CREDITS 2.1. ADVANCES AND LETTERS OF CREDIT. (a) Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make Advances to the Company from time to time prior to the Termination Date, in amounts not to exceed in the aggregate at any one time outstanding the amount of its Commitment, which Advances shall be each Bank's Ratable Share of such amounts as the Company may request up to, but not exceeding, a total principal amount equal to the lesser of (i) the Total Commitments MINUS any Letter of Credit Exposure, or (ii) the Borrowing Base; provided, however, that no Bank shall be obligated to make any Advance pursuant to a particular Rate Option at any time when such Rate Option exceeds the Highest Lawful Rate. Subject to the terms of this Agreement, the Company may borrow, repay and reborrow at any time prior to the Termination Date. Such loans may be Floating Rate Advances, Fixed CD Rate Advances or Eurodollar Advances, or a combination thereof, determined in accordance with Section 2.7. Each Advance shall bear interest at one of the Rate Options selected in accordance with Section 2.7 or otherwise as provided in Section 2.7, and shall be paid in full by the Company on the Termination Date. (b) Each Bank severally agrees, on the terms and conditions set forth in this Agreement and each Application, that the Agent shall, and the Agent agrees on behalf of the Banks to the extent of their Ratable Share to, issue Standby Letters of Credit from time to time, as requested by the Company and otherwise in accordance with Subsection 2.6(c). The Existing Standby Letters of Credit are and shall constitute Standby Letters of Credit issued under this Agreement on behalf of the Banks in their Ratable Share. Upon the issuance of each Standby Letter of Credit (and contemporaneously herewith as FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 18 to Existing Standby Letters of Credit), each Bank shall automatically acquire a participation in the liability of the Agent thereunder equal to such Bank's Ratable Share thereof, as the same may be reduced, increased, renewed, extended or replaced from time to time in accordance with this Agreement. 2.2. USE OF PROCEEDS. The proceeds of the Advances shall be used by the Company in compliance with Section 5.15 hereof, for working capital and general corporate purposes, in compliance with Section 7.2 in all respects and in the ordinary course of its business. Proceeds of the Advances may also be used to fund the repurchase of shares of the common stock of Haggar on the open market or through privately negotiated transactions; provided, however, that proceeds used for such purpose, in the aggregate over the term of the Obligations, shall not exceed $25,000,000. The provisions of this Section 2.2 are subject to, and shall not limit, modify or otherwise affect, the other covenants and agreements contained in this Agreement, including, without limitation, the covenants contained in Article 7 hereof. 2.3. OPTIONAL PRINCIPAL PAYMENTS. The Company may from time to time pay all outstanding Advances or, in a minimum aggregate amount of $1,000,000 (or any integral multiple thereof), any portion of the outstanding Advances (a) at any time, in the case of a Floating Rate Advance, and (b) upon one (1) Business Day's notice to the Agent, in the case of a Fixed Rate Advance; PROVIDED, HOWEVER, that each Fixed Rate Advance may be paid only on the last day of its applicable Interest Period, whether in connection with a total or a partial prepayment. 2.4. REDUCTION OR TERMINATION OF COMMITMENTS. The Commitments may or shall be reduced as follows: (a) The Company may permanently reduce the Commitments, in whole or in part, ratably among the Banks in integral multiples of $1,000,000, upon at least thirty (30) Business Days' prior notice to the Agent, which written notice shall specify the amount of any such reduction; provided, however, that the Commitments may not be reduced below the sum of (i) the outstanding principal amount of the Advances plus (ii) any Letter of Credit Exposure. (b) Any reduction of the Commitments shall first reduce the Commitments other than the Letter of Credit Commitments prior to any reduction in the Letter of Credit Facility. 2.5. FEES. The Company shall pay to the Agent for the account of the Banks in their respective Ratable Shares (except as set forth in subsection [b][i] below), from the date of this Agreement to and including the Termination Date, the following fees: FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 19 (a) On each Payment Date and on the Termination Date, a commitment fee equal to a fluctuating percentage of the average daily amount of the Total Commitments minus the sum of (i) the outstanding principal amount of all Advances and (ii) the Letter of Credit Exposure during the quarter ending on and including such Payment Date, or such shorter period ending on and including the Termination Date, as the case may be. The percentage shall be equal to the following: (a) at any time when the Funded Debt Ratio is equal to or less than 1.50 to 1, three-sixteenths of one percent (3/16%) per annum, (b) at any time when the Funded Debt Ratio is greater than 1.50 to 1 but less than or equal to 2.00 to 1, one-fifth of one percent (1/5%) per annum, (c) at any time when the Funded Debt Ratio is greater than 2.00 to 1 but less than or equal to 3.50 to 1, one-quarter of one percent (1/4%) per annum, and (d) at any time when the Funded Debt Ratio is greater than 3.50 to 1, three-eighths of one percent (3/8%) per annum. Each adjustment to the percentage used to calculate the Commitment Fee shall be effective five (5) Business Days following Agent's receipt of the reports to be delivered by the Company pursuant to Sections 6.1(a), (b) and (c); (b) On each Payment Date and on the Termination Date, (i) a Letter of Credit issuance fee payable to the Agent (which issuance fee shall not be shared with the Banks), in an amount equal to one-eighth of one percent (1/8%) of the Letter of Credit Exposure during the quarter ending on and including such Payment Date, or such shorter period ending on and including the Termination Date, as the case may be, calculated on the number of days in such quarterly or shorter period, as the case may be, and (ii) a Letter of Credit fee equal to the Eurodollar Margin then in effect TIMES the Letter of Credit Exposure during the quarter ending on and including such Payment Date, or such shorter period ending on and including the Termination Date, as the case may be, calculated on the number of days in such quarterly or shorter period, as the case may be; provided, however, if the Commitments are terminated in their entirety prior to the Termination Date as provided herein, all accrued and unpaid commitment fees shall be payable on the effective date of such termination, and, notwithstanding the termination of the Commitments, the Letter of Credit commitment fees referred to in clause (b) above shall continue to accrue and be due and payable as set forth therein until the extinguishment in full of any Letter of Credit Exposure. All such fees shall be calculated on the basis of a year consisting of three hundred sixty (360) days and, except as set forth in this Section 2.5, of four (4) quarterly periods of ninety (90) days each. 2.6. METHODS OF BORROWING AND APPLICATION AND ISSUANCE OF LETTERS OF CREDIT. (a) With respect to the making of any Advance requested by the Company, the Company shall give to the Agent its notice of such request for Advance in accordance with the provisions of Section 2.7 and, subject to the terms and conditions set forth herein, each Bank shall make available its Ratable Share of the Advance or Advances to FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 20 be made on a Borrowing Date (as determined in accordance with the provisions of Section 2.7[a] below) not later than the day of such Borrowing Date, in Dollars immediately available in Dallas, Texas, to the Agent at its address specified pursuant to Article 13; PROVIDED, HOWEVER, that the Agent shall advise such Bank not later than 1:00 p.m. (Dallas, Texas time) on the date of its receipt of any notice of borrowing timely given by the Company pursuant to Subsection 2.7(a). The Agent will make the funds so received from the Banks available to the Company within two (2) hours of receipt by it. (b) The Agent may (unless notified to the contrary by a Bank prior to a Borrowing Date) assume that each Bank has made available to the Agent on such Borrowing Date such Bank's Ratable Share of the Advance or Advances to be made on such Borrowing Date pursuant to Subsection 2.6(a) above, and the Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Company a corresponding amount. The Agent shall notify the Company by telephone or telecopy to the treasurer or another Authorized Officer of the Company of the failure of any Bank to make available to the Agent its Ratable Share on such Borrowing Date if such failure continues for a period of two (2) Business Days and the Agent has made available to the Company an amount corresponding to such Bank's Ratable Share, or, if the Agent has not made available such corresponding amount, promptly after the account officer of the Agent with responsibility for the Company's account obtains actual knowledge of such failure. If and to the extent that such Bank shall not have so made such Ratable Share available to the Agent and the Agent shall have made available such corresponding amount to the Company, such Bank agrees to pay the same to the Agent with interest at a rate equal to the Fed Funds Rate with respect to such corresponding amount forthwith on, and as specified in, the Agent's demand, and if such Bank shall fail to do so the Company agrees to pay to the Agent within three (3) Business Days after demand, an amount equal to such corresponding amount, together with interest thereon at the rate per annum applicable to the Advance or Advances made on such Borrowing Date for each day from the date the Agent shall make such amount available to the Company until the date such amount is paid or repaid to the Agent, PROVIDED, HOWEVER, that until and unless such payment has been made in full by the Company, such Bank shall remain liable to the Agent for the full amount of such payment, including interest as set forth above. (c) With respect to the issuance of any Standby Letter of Credit requested by the Company, the Company shall give to the Agent its notice of such request at least two (2) Business Days in advance of the date of its issuance by delivery of a duly executed and completed Application in the form of EXHIBIT A attached hereto. Each Standby Letter of Credit (i) shall be in form acceptable to the Agent and the Company, (ii) shall be dated the date of issuance and (iii) shall expire on such date as may be requested by the Company, but in no event later than the earlier of (1) three hundred sixty-five (365) FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 21 days after its issuance date or (2) the Termination Date. Notwithstanding anything herein or in any other Loan Documents to the contrary, in no event shall the Company be entitled to the issuance of a Standby Letter of Credit if the issuance of such Letter of Credit would cause the Letter of Credit Exposure (including the requested Letter of Credit) to exceed the LESSER of (A) the Letter of Credit Facility, or (B) the Total Commitments MINUS the aggregate amount of all outstanding Advances. (d) With respect to the issuance by the Agent of Letters of Credit, the Agent shall provide to each of the Banks, as of the last day of each calendar month and within twenty (20) days thereafter, a written report setting forth all issued and outstanding Letters of Credit, their respective amounts, issuance dates, expiration dates, identifying numbers, and beneficiaries. (e) All the terms and provisions of any and all Applications executed and delivered pursuant to this Section 2.6 are incorporated herein by reference; provided, however, that in the event of a conflict between the provisions of this Agreement and any Application, the provisions of this Agreement shall control. Without limitation of the foregoing, the repayment of Advances occasioned by drawings under Letters of Credit, interest to accrue thereon and remedies of the Banks in the event of nonpayment of such Advances when due shall be governed by the terms of this Agreement notwithstanding contrary terms in any Application. The Company shall pay to the Agent on demand an amount equal to the face amount of each draft drawn or purporting to be drawn under a Letter of Credit in accordance with the terms of the Application. The Agent may debit the Company's account with the Agent in order to pay each such draft, which the Agent may do in reliance on the assumption that sufficient funds have been made available to such account by the Company on the date when such drafts are payable, PROVIDED that the Agent shall not be required to effect any such debit if it determines insufficient funds exist in such account for the payment in full of any such amounts. If the Company's account has insufficient funds with which to pay such draft and if payment thereof is not otherwise made or provided for on the maturity date of the draft, the face amount of the maturing draft shall automatically be deemed to be an Advance, payable by each of the Banks to the Agent in accordance with their Ratable Share, in immediately available funds, not later than 2:00 p.m., Dallas, Texas time, on the day specified in the demand of the Agent to each Bank. Such Advance shall be confirmed to the Agent by the Company in writing not later than five (5) Business Days following the date the draft matured. The failure of the Company to transmit such written confirmation shall not affect the Company's obligation to repay the amount of such Advance, which shall be deemed to be a Floating Rate Advance. (f) Notwithstanding any other provision of this Agreement to the contrary, each Bank shall be unconditionally and irrevocably liable, without regard to the occurrence of a Default or Unmatured Default or any other fact or circumstance which FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 22 would entitle such Bank to withhold, abate, reduce or offset the making of an Advance hereunder, to advance to or reimburse the Agent, in accordance with the demand of the Agent, such Bank's Ratable Share of the amount of each draft under a Letter of Credit payable or paid by the Agent to the extent that such amount has not been reimbursed by the Company pursuant to the provisions of Section 2.6(e) above. The Agent may make the proceeds of any such draft under a Letter of Credit available to the beneficiary thereof prior to its receipt of such funds from the Banks in reliance on the assumption that each Bank will make available to the Agent its Ratable Share on the date such amount has been demanded for payment. If the Agent is required at any time (whether before or after the expiration date of any Letter of Credit) to return to the Company or to a trustee, receiver, liquidator, custodian or other similar official any portion of the payments made by or on behalf of the Company to the Agent in reimbursement of payments made by the Agent under any Letter of Credit and interest thereon, each Bank shall, upon demand of the Agent, forthwith pay over to the Agent such Bank's Ratable Share of such amount. All amounts payable by any Bank under this Section 2.6(f) shall include interest thereon from the day the applicable draft is made (or the date such Bank was to have made such reimbursement payment, as appropriate), to but not including the date such amount is paid by such Bank to the Agent, at a rate equal to the Agent's Fed Funds Rate with respect to such amount as specified in the Agent's demand. The obligations of Banks under this Section 2.6(f) shall continue after the Termination Date and survive any termination of this Agreement. (g) The Agent agrees with each Bank that it will exercise and give the same care and attention to each Letter of Credit as it gives to its other letters of credit. Other than complying with the terms of the Letter of Credit and/or this Agreement, including any drafts, certificates and other documents required thereby, each Bank and the Company agrees that, in paying any draft, the Agent shall not have any responsibility to obtain any document or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the person delivering any such document. Subject to the terms of the foregoing sentence, none of the Agent and its representatives, directors, officers, employees, attorneys or agents shall be liable to any Bank or the Company for (i) any action taken or omitted in connection herewith at the request or with the approval of any Bank, (ii) any action taken or omitted in the absence of gross negligence and the absence of willful misconduct (it being the intention hereby that no liability shall result from a negligent action or omission), (iii) any recitals, statements, representations or warranties contained in any document distributed to any Bank, (iv) the creditworthiness of the Company or (v) the execution, effectiveness, genuineness, validity or enforceability of any Loan Documents or any other document contemplated hereby or thereby. The Agent and its officers, directors, employees, attorneys and agents shall be entitled to rely and shall be fully protected in relying on any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype message, statement, order, or other document or conversation believed by it or them to be genuine FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 23 and correct and to have been signed or made by the proper person and, with respect to legal matters, upon opinions of counsel selected by the Agent. 2.7. METHOD OF SELECTING RATE OPTIONS AND INTEREST PERIODS; CALCULATION OF INTEREST. (a) The Company shall give the Agent irrevocable notice not later than 10:00 a.m. (Dallas, Texas time) on the Borrowing Date of each Floating Rate Advance, at least one (1) Business Day before the Borrowing Date of each Fixed CD Rate Advance and at least three (3) Business Days before the Borrowing Date for each Eurodollar Advance specifying: (i) the Borrowing Date of such Advance; (ii) the aggregate amount of such Advance; (iii) the Rate Option selected for the Advance; and (iv) in the case of each Fixed Rate Advance, the Interest Period applicable thereto, the information provided to the Agent in such notice to be confirmed to the Agent in writing not later than five (5) Business Days following the Borrowing Date The unpaid principal amount of each Fixed Rate Advance shall bear interest from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the Fixed Rate applicable to such Fixed Rate Advance. Floating Rate Advances shall bear interest at the Alternate Base Rate, and the interest rate on any Floating Rate Advances shall change when and as the Alternate Base Rate changes. Each Advance shall be in the minimum amount of $1,000,000 (and in integral multiples of $1,000,000 if in excess thereof). The Company may, at the expiration of any Interest Period, or at any time with respect to a Floating Rate Advance, select an Interest Period and/or Rate Option to apply to any Advance, or any portion or combination thereof, by the delivery to the Agent of notice of such election in the same manner as is provided in this Section 2.7 (a) with respect to the making of an Advance, subject to the notice and minimum Advance amount provisions applicable to the Rate Option selected. Notwithstanding the foregoing, in no event shall the Company have more than seven (7) Fixed Rate Advances outstanding at any one time, and the last day of a chosen Interest Period shall not be later than the Termination Date. Any Advance not paid at maturity, whether by acceleration or otherwise, shall bear interest until paid in full at the Default Rate, except that in the case of a Fixed Rate Advance whose Interest Period has not yet expired, the same shall bear interest at the higher of the rate otherwise in effect for the existing Interest Period plus five percent (5%) per annum or the Alternate Base Rate plus five percent (5%) per annum, not to exceed, however, the Highest Lawful Rate. The Company may not select a Fixed Rate for an Advance if there exists a Default or Unmatured Default hereunder. (b) Prior to the termination of each Interest Period with respect to any Fixed Rate Advance, the Company shall notify the Agent whether it desires to renew such Fixed Rate Advance and specifying in accordance with Section 2.7(a) above the Rate Option and Interest Period to be applicable thereto. Absent the delivery of such a notice, then, upon the expiration of the Interest Period applicable to such Fixed Rate Advance, FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 24 the Company shall be deemed to have selected the Alternate Base Rate to be applicable to the outstanding principal amount thereof. 2.8. BORROWING BASE AND BORROWING BASE CERTIFICATE. In no event shall the Banks be required to make any Advance or the Agent be required to issue any Letter of Credit hereunder if the making of such Advance or drawing under such Letter of Credit (assumed for these purposes to be an Advance) would create a Borrowing Base Deficiency. The Borrowing Base shall be initially computed as of the date of this Agreement. Thereafter the Borrowing Base shall be recomputed as of the last day of each fiscal month utilizing the required Borrowing Base Certificate, which shall be furnished to the Agent within twenty (20) days after the end of such fiscal or calendar month and certified as to correctness by an Authorized Officer of the Company. If the Banks shall reasonably object to the form or contents of, or any calculations made in, any Borrowing Base Certificate, the Banks shall not be required to make any Advance hereunder until such objection is resolved to the Banks' satisfaction. 2.9. METHOD OF PAYMENT. (a) All payments of principal, interest and fees hereunder shall be made in immediately available funds to the Agent at the Agent's address specified pursuant to Article 13 by noon (Dallas, Texas time) on the date when due. Each payment shall be distributed by the Agent ratably among the Banks in the proportion by which the Commitment of each Bank bears to the Commitments. On or before the time a principal payment is made on any of the Loans, the Company shall inform the Agent as to the proportionate application of such payment to the Floating Rate Advances and Fixed Rate Advances. In the absence of such direction, such payment shall be applied first to repay Floating Rate Advances then outstanding and thereafter in such fashion as the Agent shall determine. Each payment delivered to the Agent for the account of any Bank shall be delivered promptly by the Agent to such Bank in the same type of funds that the Agent received at its address specified pursuant to Article 13. (b) The Agent is authorized to cause the delivery of payments of principal, interest or fees owing to the Banks and/or the Agent by charging the Company's account with the Agent, which the Agent may do in reliance on the assumption that sufficient funds have been made available to such account by the Company on the date when such payments are due or have been directed by the Company to be made, PROVIDED THAT the Agent shall have no obligation to cause such delivery if it determines insufficient funds exist in such account for the payment of any such amounts. If and to the extent that the Company fails to provide sufficient funds in its account to cover the amount of any charges made for the payment of principal, interest or fees charged to such account and delivered by the Agent pursuant to this Section 2.9(b), the Company shall immediately pay to the Agent the amount by which such payment(s) so charged exceed the amount on deposit in such account (the "SHORTFALL"), together with interest thereon at the Default FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 25 Rate from the date of such charge to the date such amount is repaid to the Agent. Nothing contained herein shall be construed to extend the date of payment of any amount due by the Company to the Agent, the Banks, or any of them, and in no event shall the delivery of any amount by the Agent to itself or any Bank pursuant to this Section 2.9(b) be effective as a payment by or on behalf of the Company absent the Company's delivery to the Agent of such amount to the Agent on the date when due in accordance with the terms of this Agreement. If and to the extent that the Company continues to fail to provide the amount of such Shortfall and accrued interest thereon, as required pursuant to the immediately preceding sentence, for a period of three (3) Business Days following the Agent's demand therefor, each Bank agrees to advance to the Agent, under the Note held by it, its pro rata portion of the Shortfall, together with interest at a rate equal to the Fed Funds Rate with respect to such amount, forthwith on, and as specified in, the Agent's demand. 2.10. NOTES; TELEPHONIC NOTICES. The Advances shall be evidenced by the Notes. Each Bank is hereby authorized to record the principal amount of each Advance and each repayment on the schedule attached to its Note, whereupon such schedule shall constitute a part of the Note for all purposes. Any such recording shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded; PROVIDED, HOWEVER, that the absence or inaccuracy of such schedule or any notation thereon shall not limit or otherwise affect the Obligations. The Company hereby authorizes each Bank and the Agent to extend Loans and effect Rate Option selections based on telephonic notices made by any person or persons the Agent or such Bank in good faith believes to be acting on behalf of the Company. The Company shall promptly confirm to the Agent any telephonic notice by written confirmation signed by an Authorized Officer of the Company as provided in Section 2.7. If the written confirmation differs in any material respect from the action taken by the Agent and the Banks, the records of the Agent and the Banks shall govern absent manifest error. 2.11. INTEREST PAYMENT DATES; INTEREST BASIS. Interest accrued and unpaid on the outstanding principal of all Advances shall be due and payable on the last day of each calendar quarter, on the Termination Date, and additionally with respect to each Fixed Rate Advance, on the last day of the Interest Period applicable to each Fixed Rate Advance. Interest shall be calculated for actual days elapsed on the basis of a three hundred sixty (360) day year or, if such a calculation would result in an amount which exceeds the Highest Lawful Rate, then on the basis of the actual number of days contained in such year. Interest shall be payable for the day a Loan is made but not for the day of any payment on the amount paid if payment is received prior to noon (Dallas, Texas time) at the place of payment. If any payment of principal of or interest on a Loan or any other amount due hereunder shall become due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 26 2.12 MANDATORY PRINCIPAL PAYMENTS. In the event (a) of the existence of a Borrowing Base Deficiency (as set forth in the Borrowing Base Certificate due pursuant to Section 6.1[d]), or (b) that the outstanding principal amount of all Advances made by any Bank plus its Ratable Share of any Letter of Credit Exposure exceeds the Commitment of such Bank (as the same may be reduced from time to time in accordance with the provisions of Section 2.4), the Company shall immediately make principal reductions on the Notes or furnish cash to the Agent in the manner hereafter described to the extent necessary to reduce the Borrowing Base Deficiency to zero or to reduce such Obligations to an amount equal to or less than the amount of such Commitment LESS the amount of its Ratable Share of any Letter of Credit Exposure, as the case may be. Each payment under this Section 2.12 shall be applied in reduction of any outstanding Floating Rate Advances, and then against the outstanding Advances designated by the Company in a notice accompanying such payment. In the event the Company fails to make such designation, such payment shall be applied first against Fixed Rate Advances in the order of the expiration of the Interest Periods applicable thereto. In the event that a payment is required of the Company pursuant to this Section 2.12 solely by virtue of Letter of Credit Exposure, such that there are no outstanding Advances, the Company shall, within one (1) Business Day after becoming aware of the occurrence of such Borrowing Base Deficiency or excess in the Advances plus Letter of Credit Exposure as to the Total Commitments, remit to the Agent a cash amount equal to the payment which is required of it, to be held by the Agent for the benefit of the Banks in their Ratable Share as collateral for the Obligations (with rights of offset). The Company agrees to execute and deliver any and all pledge, assignment or other security documents as the Agent shall deem necessary or desirable to further evidence or perfect the pledge, assignment or grant of a security interest in such cash deposit pursuant to this Section 2.12. 2.13. NOTIFICATION OF LOANS, INTEREST RATES, PREPAYMENTS AND COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Agent will notify each Bank of the contents of each Commitment reduction notice, notice contemplated by Section 2.7, and repayment notice received hereunder. The Agent will notify each Bank of the interest rate applicable to each Fixed Rate Advance promptly upon determination of such interest rate and will give each Bank prompt notice of each change in the Alternate Base Rate. 2.14. MAXIMUM INTEREST; HIGHEST LAWFUL RATE. The parties hereto intend to conform strictly to the usury Laws in force that apply to this transaction. Accordingly, all agreements among the parties hereto (including, without limitation, the Notes), whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of the Loans or otherwise, shall the interest (and all other sums that are deemed to be interest) contracted for, charged or received by the Banks with respect to the Loans and the Loan Documents, whether separately or in the aggregate, exceed the Highest Lawful Rate. If, from any circumstance whatsoever, interest under the Loans and/or Loan Documents would otherwise be payable in excess of the Highest Lawful Rate, and if from any circumstance any of the Banks shall ever receive anything of value deemed interest by applicable Law in excess of the Highest Lawful Rate, such Bank's receipt FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 27 of such excess interest shall be deemed a mistake and the same shall, so long as no Default shall be continuing, at the option of the Company, either be repaid to the Company or credited to the unpaid principal of the Notes; PROVIDED, HOWEVER, that if a Default shall have occurred and be continuing, and any of the Banks shall receive an amount which, but for this Section 2.14, would constitute excess interest during such period, the Banks shall have the option of either crediting such excess amount to principal or refunding such excess amount to the Company. If the Loans are prepaid or the maturity of the Loans is accelerated by reason of an election of the Required Banks, unearned interest, if any, shall be canceled and, if theretofore paid, shall either be refunded to the Company or credited on the Loans as the Required Banks elect. All interest paid or agreed to be paid to the Banks shall, to the extent allowed by applicable Law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal (including the period of any renewal or extension) so that the interest for such full period shall not exceed the Highest Lawful Rate. Notwithstanding that the parties hereto in good faith deem each and every fee provided by this Agreement to be bona fide fees for services rendered and to be rendered separate and apart from the lending of money or the provision of credit, if any such fee is ever determined by a Tribunal of competent jurisdiction or by the Banks to constitute interest, then the treatment of such fee for usury purposes shall be controlled by the provisions of this Section. 2.15. INTEREST RECAPTURE. If at any time and from time to time the rate of interest calculated pursuant to the Rate Option applicable to an Advance would exceed the Highest Lawful Rate but for provisions limiting the same to the Highest Lawful Rate, then, notwithstanding the foregoing, the rate of interest accruing on such Advance shall continue to be the Highest Lawful Rate until the total amount of interest accrued on such Advance equals the amount of interest that would have accrued on such Advance but for provisions limiting the same to the Highest Lawful Rate. ARTICLE 3 CHANGE IN CIRCUMSTANCES; INDEMNIFICATION 3.1. YIELD PROTECTION. (a) If any existing or future Law (whether or not having the force of law) or compliance of any Bank with such, (i) subjects any Bank to any Tax, duty, charge or withholding on or from payments due from the Company (excluding U.S. taxation of the overall net income of any Bank) or changes the basis of taxation of payments to any Bank in respect of its Loans or other amounts due hereunder; FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 28 (ii) imposes or increases or deems applicable any reserve (other than reserves included in the Reserve Requirement with respect to Fixed Rate Advances), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank; or (iii) imposes any other condition the result of which is to increase the cost to any Bank of making, funding or maintaining Dollar loans or reduces any amount receivable by any Bank in connection with Dollar loans, or requires any Bank or any applicable lending office to make any payment calculated by reference to the amount of loans held or interest received by it, by an amount deemed material by such Bank; then, within fifteen (15) days of demand and the submission of reasonable evidence in support thereof by such Bank, the Company shall pay such Bank that portion of such increased expense incurred or the amount of reduction in an amount received which such Bank reasonably determines is attributable to making, funding and maintaining its Fixed Rate Advances. The determination of any amount to be paid by the Company shall take into consideration the policies of such Bank, or any corporation controlling such Bank, and shall be based upon any reasonable averaging, attribution and allocation methods. (b) If any Bank shall reasonably determine that the application or adoption after the date hereof of any law, rule, regulation, directive, interpretation, treaty or guideline regarding capital adequacy, or any change therein or in the interpretation or administration thereof after the date hereof, whether or not having the force of law increases the amount of capital required or expected to be maintained by such Bank, or any corporation controlling such Bank, and such increase is based upon the existence of such Bank's obligations hereunder by an amount reasonably determined by such Bank, then from time to time, within fifteen (15) days of demand and the submission of reasonable evidence in support thereof by such Bank, such Bank may adjust the amount of the Commitment Fee thereafter payable to it by an amount as will fairly compensate such Bank for such increased capital requirement. The determination of any amount to be paid by the Company shall take into consideration the policies of such Bank, or any corporation controlling such Bank, and shall be based upon any reasonable averaging, attribution and allocation methods. (c) In the event that any Bank assesses against the Company any of the costs contemplated in Sections 3.1 (a) and (b) preceding, the Company may, at its option, prepay the amount of the Obligation owing with respect to any Bank assessing such costs, without premium or penalty except as provided in Section 3.4 hereof, terminate the Commitment of such Bank, and cause one or more banking institutions reasonably FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 29 acceptable to the Agent and the Required Banks (not taking into account the interest of the assessing Bank) to unconditionally offer in writing to collectively purchase and assume, on a specified date not more than thirty (30) days from the date on which such costs were due, all of such Bank's rights hereunder and principal and interest in the Loans owing to such Bank on the date of such proposed purchase, without recourse to such Bank. If the assessing Bank fails to accept the proposed purchase offer, the Company shall not be obligated to pay the costs so assessed by such Bank for the period following the date of such purchase offer. If the assessing Bank accepts the proposed purchase, and the proposed purchasing bank(s) consummates the purchase of such rights and interest and assumes such obligations on the specified date in accordance with the terms of such offer, then such purchasing bank(s) shall be substituted for such Bank as to all or any portion of such Bank's Commitment, in which event this Agreement shall be modified and amended to reflect such substitution and, if applicable, reduction in Commitment. Such substitution, however, shall not relieve the Company of its obligation to reimburse any Bank for the costs enumerated in Sections 3.1(a) and (b) incurred prior to the date of the substitution of another banking institution. 3.2. AVAILABILITY OF INTEREST RATE. If any Bank determines that maintenance of its portion of the Eurodollar Advances would violate any applicable Law, whether or not having the force of law, or if the Required Banks reasonably determine that (a) deposits of a type and maturity appropriate to "match fund" Fixed Rate Advances are not generally available or (b) a Fixed Rate does not accurately reflect the cost of making or maintaining a Fixed Rate Advance, then the Agent shall suspend the availability of the affected Rate Option and require any Fixed Rate Advances outstanding under an affected Rate Option to be converted to an unaffected Rate Option. Subject to the provisions of Article 2, the Company may select any unaffected Rate Option to apply to such affected Advances. If the Company fails to select a new Rate Option, the affected Advances shall be Floating Rate Advances. 3.3 DISCRETION OF BANKS AS TO MANNER OF FUNDING. Notwithstanding any provision of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Bank had actually funded and maintained each Fixed Rate Advance during the Interest Period for such Advance through the purchase of deposits having a maturity corresponding to the last day of such Interest Period and bearing an interest rate equal to the Fixed Rate for such Interest Period. 3.4. FAILURE TO PAY OR BORROW ON CERTAIN DATES. If any payment of a Fixed Rate Advance occurs on a date that is not the last day of the applicable Interest Period, or a Fixed Rate Advance is not made on the date specified by the Company for any reason other than default by the Banks, the Company will indemnify each Bank for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost (exclusive of any loss of FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 30 profit) in liquidating or employing deposits acquired to fund or maintain such Fixed Rate Advance. 3.5. BANK CERTIFICATES; SURVIVAL OF INDEMNITY. To the extent reasonably possible, each Bank shall designate an alternate lending office with respect to its Fixed Rate Advances to reduce any liability of the Company to such Bank under Section 3.1 or to avoid the unavailability of a Rate Option under Section 3.2, so long as such designation is not disadvantageous to such Bank. A certificate of a Bank as to the amount due under Sections 3.1 or 3.4 shall be final, conclusive and binding on the Company in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Fixed Rate Advance shall be calculated as though each Bank funded its portion of the Fixed Rate Advance through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Fixed Rate applicable to such Advance. Unless otherwise provided herein, the amount specified in any such certificate shall be payable on demand after receipt by the Company of such certificate. The obligations of the Company under Sections 3.1 and 3.4 shall survive payment of the Loans and termination of this Agreement. ARTICLE 4 CONDITIONS PRECEDENT 4.1. AMENDMENT AND RESTATEMENT. The Banks shall not be required to amend and restate the Prior Agreement unless the Company has furnished to the Agent: (a) Copies of the Articles of Incorporation of the Company and the Guarantors, together with all amendments, certified by the Secretary of State of the State of their incorporation, and a certificate of good standing of the Company, and the Guarantors, certified by the appropriate office of the State of their incorporation; (b) Copies, certified by the Secretary or Assistant Secretary of the Company, of its Bylaws and of its Board of Directors resolutions authorizing the execution of the Loan Documents; (c) Copies, certified by the Secretary or Assistant Secretary of the Guarantors, of their Bylaws and of their Board of Directors resolutions authorizing the execution of the Consent of Haggar or the Consent of Domestic Subsidiaries, as applicable; (d) An incumbency certificate, executed by the Secretary or Assistant Secretary of the Company and the Guarantors which shall identify by name and title and bear the signature of the officers of the Company and the Guarantors authorized to sign FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 31 the respective Loan Documents and to make borrowings hereunder, upon which certificate the Banks shall be entitled to rely until informed in writing of any change; (e) A written opinion of the Company's and the Guarantors' counsel, addressed to the Banks in form acceptable to the Agent and its counsel; (f) A certificate, signed by the Treasurer of the Company or the Chief Financial Officer of the Company, stating that as of the effective date of this Agreement no Default or Unmatured Default has occurred and is continuing; (g) A Note payable to the order of each Bank in the amount of its Commitment; (h) The Consent of Haggar, executed by Haggar; and (i) The Consent of Domestic Subsidiaries, executed by each of the Company's Domestic Subsidiaries. 4.2. EACH ADVANCE. The Banks shall not be required to make any Advance, except as otherwise contemplated by Sections 2.6(f) and (g), unless on the relevant Borrowing Date: (a) There exists no Default or Unmatured Default and no Default or Unmatured Default will result from the requested Borrowing; (b) The representations and warranties contained in Article 5 are true and correct in all material respects as of such Borrowing Date except for changes in the Schedules to this Agreement reflecting transactions permitted by this Agreement; (c) The sum of (i) the principal balance of the outstanding Loans made by the Banks, (ii) the amount of the requested Advance, (iii) the amount of any Advance previously requested and in process, and (iv) any Letter of Credit Exposure (excluding any amounts thereof attributable to an Advance then requested and in process), is equal to or less than the Total Commitments; (d) The sum of (i) the principal balance of the outstanding Loans made by the Banks, (ii) the amount of the requested Advance, and (iii) the amount of any Advance previously requested and in process, is equal to or less than the Borrowing Base Availability; (e) The Agent has received from the Company a notice that complies in all respects with the requirements of Section 2.7; FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 32 (f) As of the date of the making of such Advance, no change that would cause or result in a Material Adverse Effect has occurred since the date of the financial statements delivered pursuant to Section 5.5; (g) The most recent financial statements of the Company Group delivered to the Banks pursuant to Section 6.1 are true, correct and complete in all material respects, fairly represent the financial condition of the Company and the Guarantors and have been prepared on a basis consistent with prior periods. As of the date of such Advance, there are no obligations, liabilities or Material Indebtedness (including contingent and indirect liabilities and obligations or unusual forward or long-term commitments) of the Company or the Guarantors which, separately or in the aggregate, are material and which are not reflected or otherwise disclosed in such financial statements; and (h) All legal matters incident to the making of such Advance shall be reasonably satisfactory to the Banks and their respective counsel. Each request for an Advance hereunder shall be deemed to be a representation and warranty by the Company to the Banks, as of the applicable Borrowing Date, as to each of the matters specified in this Section 4.2. ARTICLE 5 REPRESENTATIONS AND WARRANTIES To induce the Banks to enter into this Agreement and the other Loan Documents and to make the Loans, the Company represents and warrants to the Banks as follows: 5.1. CORPORATE EXISTENCE AND AUTHORITY. The Company and each of the Guarantors (a) is a corporation duly incorporated, validly existing, and in good standing under the Laws of its jurisdiction of incorporation, (b) is duly qualified to transact business as a foreign corporation in each jurisdiction where the nature or extent of its business and properties require the same, except in such jurisdictions where the failure so to qualify would not reasonably be expected to cause a Material Adverse Effect and (c) possesses all requisite authority and power and material licenses, permits and franchises to execute, deliver and comply with the terms of the Loan Documents, which have been duly authorized and approved by all necessary corporate action, for which no material approval or consent of any Person or Tribunal is required which has not or will not have been obtained prior to the date of this Agreement, and each of the Loan Documents constitutes the legal, valid and binding obligation of the Company and the Guarantors (to the extent each of them is a party to the same) enforceable against the Company and the Guarantors in accordance with its terms. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 33 5.2. COMPLIANCE WITH LAWS. Neither the Company nor any of the Guarantors is in violation of (a) any Laws, other than such violations that, collectively, could not reasonably be expected to cause a Material Adverse Effect, (b) the terms of any material agreement, contract, document or instrument to which the Company or any of the Guarantors is a party or by which it or any of its assets is bound, other than such violations that, collectively, could not reasonably be expected to cause a Material Adverse Effect, or (c) its respective Articles of Incorporation or Bylaws in any material respect. 5.3. LITIGATION. There is no Litigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of the Guarantors other than that listed on SCHEDULE 5 attached hereto, and none of such Litigation, collectively or individually, has or could reasonably be expected to result in a Material Adverse Effect. 5.4. COMPLIANCE WITH LAWS AND CONTRACTS. Neither the execution and delivery by the Company of the Loan Documents, the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will materially violate any material Law binding on the Company or any of the Guarantors or the Company's or any of the Guarantors' Articles of Incorporation or Bylaws, or the provisions of any indenture, instrument or agreement to which the Company or any of the Guarantors is a party or is subject, or by which it or its property is bound, or materially conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien (other than a Permitted Lien) pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any Tribunal is required to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, any of the Loan Documents. 5.5. FINANCIAL STATEMENTS. The June 30, 1996, unaudited consolidated financial statements of the Company Group heretofore delivered to the Banks were prepared in accordance with historical practice, and the September 30, 1995, consolidated financial statements of the Company Group audited by Arthur Andersen & Co. heretofore delivered to the Banks were prepared in accordance with GAAP in effect on the respective dates, such statements were prepared and fairly present the consolidated financial condition and operations of the Company Group at such dates and the consolidated results of their operations for the respective periods then ended. 5.6. MATERIAL ADVERSE EFFECT. No Material Adverse Effect has occurred since the date of the financial statements referred to in Section 5.5. 5.7. TAXES. To the best of the Company's knowledge, all tax returns of the Company Group required to be filed (unless such filing dates have been validly extended) by any Tribunal have been or will be filed prior to the date such returns were or are due, and all Taxes imposed upon the Company Group by any Tribunal in respect of periods ending on or before the initial FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 34 Borrowing Date which are due and owing unless subject to a good faith contest by appropriate legal proceedings for which adequate reserves have been established in accordance with GAAP, will be paid by the Company Group on or before the initial Borrowing Date. 5.8. GOVERNMENT REGULATION. Neither the Company nor any of the Guarantors nor any Affiliate of any of them is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Investment Company Act of 1940, the Interstate Commerce Act (as any of the preceding acts have been amended) , or any other Law (other than Regulation X of the Board of Governors of the Federal Reserve System) that regulates the incurring by the Company of Indebtedness, including, without limitation, Laws relating to common or contract carriers or the sale of electricity, gas, steam, water or other public utility services. 5.9. PROPERTIES; LIENS. Each of the Company and each Guarantor has good and indefeasible title to all of its real and personal properties and fixtures reflected on its balance sheet, subject to no defects in title thereto which would reasonably be expected, collectively, to cause a Material Adverse Effect, and there are no Liens on any material asset of the Company or any of the Guarantors other than Permitted Liens. 5.10. LEASES. All material leases under which the Company or any of the Guarantors is lessee or tenant are in full force and effect, and there does not exist any default thereunder on the part of the Company or any of the Guarantors or, to the best of the Company's knowledge, on the part of any other party thereto which in either case could reasonably be expected to cause a Material Adverse Effect. 5.11. SUBSIDIARIES. SCHEDULE 3 to this Agreement contains an accurate list of all of the presently existing Subsidiaries of the Company, setting forth their respective jurisdictions of incorporation and the percentage of their respective capital stock owned by the Company Group; all of the issued and outstanding shares of capital stock of the Domestic Subsidiaries of the Company have been duly authorized and issued and are fully paid and non-assessable. 5.12. ERISA. Each Plan complies in all material respects with all applicable requirements of Law, no Reportable Event which could result in a Material Adverse Effect has occurred with respect to any Plan, neither the Company nor any of the Guarantors has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to terminate any Plan. On the date of this Agreement, no Unfunded Liabilities exist. 5.13. DEFAULTS. No Default or Unmatured Default has occurred and is continuing. 5.14. ACCURACY OF INFORMATION. No information, exhibit or report furnished by the Company or any of the Guarantors to the Agent in connection with the negotiation of the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 35 fact necessary to make the statements contained therein not misleading, in light of the circumstances under which furnished. There is no material fact that the Company has not disclosed to the Agent which would have a Material Adverse Effect. 5.15. USE OF PROCEEDS, MARGIN STOCK. The proceeds of the Advances will be used by the Company solely for the purposes specified in this Agreement. Except as expressly provided in Section 2.2, none of such proceeds will be used for the purpose of purchasing or carrying any "margin stock" as defined in Regulation U, Regulation X, or Regulation G, or for the purpose of reducing or retiring any Debt that was originally incurred to purchase or carry a "margin stock" or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of Regulation U, Regulation X, or Regulation G. The Company is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stocks. Neither the Company nor any Person acting on behalf of the Company has taken or will take any action which might cause the Note or any of the other Loan Documents, including this Agreement, to violate Regulation U, Regulation X, or Regulation G or any other regulations of the Board of Governors of the Federal Reserve System or to violate Section 8 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect. Except as permitted by Section 2.2, the Company owns no "margin stock" except for that described in the financial statements referred to in Section 5.5 hereof and, the aggregate value of all "margin stock" owned by the Company does not exceed twenty-five percent (25%) of the value of all of the Company's assets. 5.16. NO FINANCING OF CORPORATE TAKEOVERS. No proceeds of the Advances will be used to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, including, without limitation, Sections 13(d) and 14(d) thereof, except (a) for the purchases of shares of the Company Group or any of them, and (b) to the extent permitted under Section 7.4 hereof. 5.17. INSIDER. Except as to any circumstances which the Company has previously disclosed to the Agent in writing, the Company is not, and no Person having "control" (as that term is defined in 12 U.S.C. Section 375(b)(5) or in regulations promulgated pursuant thereto) of the Company is, an "executive officer," "director," or "principal shareholder" (as those terms are defined in 12 U.S.C. Section 375(b) or in regulations promulgated pursuant thereto) of the Banks, of a bank holding company of which any Bank is a subsidiary, or of any bank holding company of which any Bank is a subsidiary, or of any bank at which any Bank maintains a "correspondent account" (as such term is defined in such statute or regulations), or of any bank which maintains a correspondent account with any Bank. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 36 ARTICLE 6 AFFIRMATIVE COVENANTS To induce the Banks to enter into this Agreement and the other Loan Documents and to make the Loans, Haggar and the Company covenant and agree that, on behalf of themselves and the Company Group, during the term of this Agreement and as long as all or any part of any Advances is outstanding, they will do or cause to be done the following (unless the prior written consent of the Required Banks is otherwise obtained): 6.1. FINANCIAL REPORTING. Maintain a system of accounting established and administered in accordance with GAAP, and the Company, on behalf of the Company Group, will furnish and deliver to the Agent, which will deliver to the Banks: (a) Within ninety (90) days after the close of each fiscal year commencing with the fiscal year ending September 30, 1996, an audited consolidated and consolidating balance sheet of the Company Group, a consolidated and consolidating statement of income and retained earnings of the Company Group and a consolidated statement of cash flows of the Company Group, each set forth in comparative form with corresponding figures from the immediately preceding fiscal year, in each case such statements to be furnished in reasonable detail and prepared in accordance with GAAP, and to be accompanied by an unqualified opinion of independent certified public accountants of nationally recognized standing acceptable to the Banks. (b) Within forty-five (45) days after the close of each of the first three (3) quarters of each fiscal year, a consolidated and consolidating statement of income of the Company Group for the period from the beginning of such fiscal year to the end of the quarter thereof, and a consolidated and consolidating balance sheet of the Company Group as of the end of such quarter, together with schedules detailing depreciation, amortization, dividends, scheduled payments of principal on Indebtedness, all outstanding letters of credit, and all capital expenditures, setting forth in reasonable detail and prepared in accordance with historical practice, which shall be certified by the Chief Financial Officer of the Company as complete and correct in all material respects to the best knowledge and belief of such officer after diligent inquiry. (c) Together with the financial statements required hereunder, a Compliance Certificate. The Compliance Certificate for the fiscal quarter in which Capital Adjustment Costs are accrued or expensed and the Compliance Certificate to be delivered for the succeeding four (4) fiscal quarters shall include as an annex thereto the information contained on SCHEDULE 7 hereof. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 37 (d) Within twenty (20) days after the end of each month, a Borrowing Base Certificate. (e) Within one hundred eighty (180) days after the close of each fiscal year, a statement of the Unfunded Liabilities of each Plan, if any, certified as correct by an actuary enrolled under ERISA. (f) As soon as possible and in any event within ten (10) days after the Company knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the Chief Financial Officer or Treasurer of the Company, describing said Reportable Event and the action which the Company proposes to take with respect thereto. (g) Such other material and pertinent information (including non-financial information) as the Agent or the Banks, through the Agent, may, from time to time, reasonably request. 6.2. USE OF PROCEEDS. Use all proceeds of the Advances for the purposes set forth in Section 2.2. 6.3. NOTICE OF DEFAULT, ETC. Give prompt notice in writing to the Agent of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, that has a substantial likelihood of a Material Adverse Effect. 6.4. TAXES. Promptly pay when due any and all Taxes due and owing by it, except Taxes that (a) are being contested in good faith by appropriate legal proceedings and for which a reserve has been established in an amount determined in accordance with GAAP and (b) do not, in the aggregate, materially detract from the value of the properties of the Company and the Guarantors (taken as a whole), materially impair the operation of their businesses (taken as a whole) or give rise to any Lien other than a Permitted Lien. 6.5. PAYMENT AND PREPAYMENT OF OBLIGATIONS. Promptly pay or renew and extend all of its Material Indebtedness for the payment of money as the same become due, except for any such Material Indebtedness being contested in good faith by appropriate legal proceedings, for which a reserve for the payment thereof has been established in an amount determined in accordance with GAAP. 6.6. MAINTENANCE OF CORPORATE EXISTENCE, ASSETS, BUSINESS AND INSURANCE. Except as otherwise permitted by Section 7.4, maintain (a) its corporate existence and authority to transact business and good standing in its jurisdiction of incorporation and in all other jurisdictions where the failure to so maintain could reasonably be expected to cause a Material Adverse Effect, (b) all material licenses, permits and franchises necessary for its business except such as could not FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 38 in the aggregate reasonably be expected to cause a Material Adverse Effect, (c) to the extent consistent with prudent business practices, all of its assets which are useful and necessary in its business in good working order and condition and make all necessary repairs and replacements thereto or thereof and (d) insurance with such insurers, in such types and amounts, and covering such casualties, contingencies and risks, as is customary in its industry including, without limitation, worker's compensation insurance (unless the Company maintains self-insurance with respect to such risk of loss which is satisfactory to the Banks in all respects), liability insurance, adequate business interruption insurance, and insurance on its properties, assets and business, now owned or hereafter acquired. 6.7. INSPECTION. Permit the Agent, by its representatives and agents, to inspect the properties, corporate books and financial records of the Company Group, to examine and make copies of such of its books of accounts and other financial records, and to discuss its affairs, finances and accounts with, and to be advised as to the same by, its officers as shall be reasonably requested at such reasonable times and intervals as the Agent may designate upon reasonable notice. Each Bank agrees to treat all such information received by it (except such information which is generally available or has been made available to the public from sources other than the Banks or their respective officers, employees or representatives) as confidential; provided, however, nothing in this Section shall prohibit any Bank or the Agent from, or subject any Bank or the Agent to liability for, disclosing any such information to any Tribunal, or any representative thereof, to whose jurisdiction any Bank or the Agent may be subject and to the extent required thereby. 6.8. COMPLIANCE WITH LAW. Shall, and shall cause each member of the Company Group to comply with all laws applicable to it or any of its property, business operations or transactions, a breach of which could have a Material Adverse Effect. 6.9. ERISA COMPLIANCE. Shall (i) at all times, make, and cause to be made prompt payment of all contributions required under all Plans, if any, and required to meet the minimum funding standard set forth in ERISA with respect to the Plans of each of such entities, and (ii) furnish to the Agent, upon request, such additional information concerning any Plans as may be reasonably requested. ARTICLE 7 NEGATIVE COVENANTS To induce the Banks to enter into this Agreement and the other Loan Documents and to make the Loans, Haggar and the Company covenant and agree that, on behalf of themselves and the Company Group, during the term of this Agreement, they will not, nor permit or suffer any FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 39 member of the Company Group to, do any of the following (unless the prior written consent of the Required Banks is otherwise obtained): 7.1. LIENS. Directly or indirectly, create, incur or suffer or permit to be created or incurred or to exist any Lien upon any of the assets (now owned or hereafter acquired) of the Company Group, including, without limitation, the Inventory and Receivables, except for Permitted Liens. 7.2. LINES OF BUSINESS. Directly or indirectly, engage in any lines of business other than those in which they are presently engaged or reasonable expansions or extensions thereof. 7.3. INDEBTEDNESS. Create, incur or suffer to exist any Indebtedness other than Permitted Indebtedness. 7.4. MERGERS AND ACQUISITIONS. (a) Dissolve or liquidate, or permit any Subsidiary of the Company to dissolve or liquidate, provided that any Subsidiary of the Company may dissolve or liquidate so long as the assets of such Subsidiary are distributed to a member of the Company Group; (b) Become or permit any Subsidiary of the Company to become, a party to any merger or consolidation with or into any other Person, provided that any Subsidiary may discontinue its operations or may merge or consolidate with or into any member of the Company Group, provided that in the event of a merger with the Company, the Company is the legally surviving entity; (c) Acquire, or permit any Subsidiary of the Company to acquire, by purchase, lease or otherwise, all or substantially all of the assets or capital stock of any Person, provided that such acquisitions which, when added to any other acquisitions since the effective date of this Agreement and any permitted investments made pursuant to Section 7.4(d), do not exceed $15,000,000 in the aggregate (including all consideration given in connection with such acquisition), may be made so long as the assets or Person acquired is involved with the same line of business, or an integral part thereof, as is currently pursued by the Company Group; or (d) Invest or acquire an ownership interest in, or permit any Subsidiary of the Company to invest or acquire an ownership interest in, any joint venture, partnership, corporation or other entity which is not an Affiliate of any member of the Company Group, or otherwise invest in any new business venture, provided that such investments which, when added to any investments since the effective date of this Agreement and any permitted acquisitions made pursuant to Section 7.4(c), do not exceed $15,000,000 in the aggregate, may be made so long as no member of the Company Group has any legal or FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 40 contractual liability or obligation in excess of such investment, and the business venture in which the investment is made involves the same line of business, or an integral part thereof, as is currently pursued by the Company Group. 7.5. AFFILIATES. Enter into any material transaction (including, without limitation, the purchase or sale of any property or service) with, or make any material payment or transfer to, any Affiliate of the Company Group (other than the Company or any Guarantor) or member of the Family Group except (a) in the ordinary course of business and pursuant to the reasonable requirements of the business of the Company Group and upon fair and reasonable terms no less favorable than those that would result from a comparable arms-length transaction, (b) those transactions set forth on SCHEDULE 6 hereof, (c) repurchases of shares of the common stock of Haggar upon fair and reasonable terms no less favorable than those that would result from a comparable arms- length transaction, (d) the incurrence of Indebtedness which constitutes Permitted Indebtedness; and (e) dividends paid by the Company Group in the ordinary course of business. 7.6. FIXED CHARGE REQUIREMENT. Permit the ratio of Operating Cash Flow to Fixed Charges for the prior twelve (12) months, as measured at the end of each fiscal quarter, to be or become less than 1.10 to 1.0. 7.7. FUNDED DEBT LIMITATION. Permit the Funded Debt Ratio, as measured at the end of each fiscal quarter, to be or become greater than 4.0 to 1.0. 7.8 TANGIBLE NET WORTH. (a) Permit Tangible Net Worth of the Company Group to be or become less than: (i) for the period through September 30, 1996, $155,000,000; and (ii) beginning October 1, 1996 and thereafter (if measured at a specific point in time), an amount equal to the sum of (1) $155,000,000, plus (2) fifty percent (50%) of the cumulative net income of the Company Group, on a consolidated basis, for the fiscal year ended September 30, 1996, and each subsequently completed fiscal year, plus (3) in the event Haggar or the Company shall make a registered public offering of its capital stock, sixty-six and two-thirds percent (66-2/3%) of that portion of the net proceeds from such offering attributable to the primary issuance of new shares (but not the secondary issuance of existing shares). FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 41 Notwithstanding the foregoing, the Tangible Net Worth requirement of the Company Group may be reduced by the amount of any sums used for the repurchase of shares of common stock of Haggar, whether pursuant to Advances as contemplated in Section 2.2 or otherwise (so long as such stock repurchase is made in compliance with all covenants and agreements contained in this Agreement); PROVIDED, HOWEVER, that the maximum cumulative reduction in such requirement attributable to stock repurchases, whether pursuant to Advances as contemplated in Section 2.2 or otherwise, shall not exceed $10,000,000 over the term of the Obligations. In addition, during the fiscal quarter in which the Company Group accrues or expenses Capacity Adjustment Costs, the Tangible Net Worth requirement of the Company Group shall be reduced by an amount equal to the lesser of (1) the net loss of the Company Group, on a consolidated basis, for such fiscal quarter; or (2) sixty-two percent (62%) of the Capacity Adjustment Cost accrued or expensed in that fiscal quarter. (b) Permit Tangible Net Worth of the Company to be or become less than $55,000,000. (c) Notwithstanding the foregoing, in the event that Tangible Net Worth is less than the amount required hereby, the Company shall have a period of ten (10) days from the earlier of the date on which Tangible Net Worth is disclosed to the Agent or is to be disclosed to the Agent under Section 6.1 in which to cause Tangible Net Worth to be in compliance with the terms hereof. Cumulative net income shall be determined by reference to the statements of income described in Section 6.1(a) and shall not be decreased by any losses occurring during any fiscal year. 7.9. INVENTORY TURN. Permit the quotient, as measured for the Company Group on a consolidated basis at the end of each fiscal quarter, with reference to the financial statements described in Section 6.1, of (a) the cost of goods sold during the prior twelve (12) months divided by (b) the Dollar amount of the cost of Inventory at the end of such fiscal quarter, to be (if measured at a specific point in time) or become less than 2.0. 7.10. SALE OF ASSETS. Sell, lease, transfer or otherwise dispose of, in a single transaction or in a series of transactions, more than ten percent (10%) of the assets of the Company Group other than (a) to a member of the Company Group, and (b) sales of Inventory in the ordinary course of business; PROVIDED, HOWEVER, that the provisions of this Agreement shall not prohibit the Company or any other member of the Company Group from selling any of its capital stock in a registered public offering, so long as such offering is in compliance with all Laws and does not result in a Default under Section 8.13 hereof. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 42 7.11. SUBSIDIARIES. Create, nor permit any member of the Company Group to create, any Domestic Subsidiary unless, contemporaneously therewith, such Domestic Subsidiary executes and delivers to the Agent, for the benefit of the Banks, a Subsidiary Guaranty. 7.12. FOREIGN SUBSIDIARIES. Permit more than ten percent (10%) of Net Worth to be attributable at any time to Subsidiaries of the Company which are not Domestic Subsidiaries unless (a) such Subsidiary has executed a Guaranty which is legal, valid and enforceable against such Subsidiary in all respects under the laws of any jurisdiction applicable to such Subsidiary, and (b) the Agent has received from counsel to the Company a legal opinion as to such matter and other matters as the Agent shall request, such counsel and opinion to be satisfactory to the Agent and the Required Banks in all respects. 7.13. DISTRIBUTIONS. Make or agree to make any Distribution (other than a Distribution of a Subsidiary of the Company to the Company) in any fiscal year of the Company (a) unless the Fixed Charge Ratio is equal to or greater than 1.10 to 1.00 (calculated by giving effect to any such Distribution), or (b) if a Default or Unmatured Default exists at the time of such Distribution or, after giving effect to any such Distribution, a Default or Unmatured Default would occur. 7.14. INTERCOMPANY INDEBTEDNESS. Incur or permit to exist any Intercompany Indebtedness which is not subordinate in right of payment to the prior payment in full of the Obligations; any and all of such Intercompany Indebtedness, whether now or hereafter owed, being hereby so subordinated in right of payment to the prior payment in full of the Obligations. In connection therewith, each member of the Company Group hereby agrees that: (a) No member of the Company Group shall, after a Default (or an Unmatured Default, in the case of payments or distributions made outside the ordinary course of its business): (i) demand, sue for, take, or accept or receive, directly or indirectly, any payment of principal or interest with respect to such Intercompany Indebtedness, whether in cash or other property; (ii) claim any offset or other reduction of the Obligations because of any such Intercompany Indebtedness; or (iii) take any other action to make it the same. (b) Any payments or distributions upon or with respect to the Intercompany Indebtedness subordinated hereby which are received by any member of the Company Group following a Default (or an Unmatured Default, in the case of payments or distributions made outside the ordinary course of business) shall be collected, enforced FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 43 and received by such member of the Company Group as trustee for the Banks and paid over to the Agent on account of the Obligations. (c) In the event of any distribution of all or any of the assets of any member of the Company Group to its creditors upon the dissolution, winding up, liquidation, arrangement, reorganization, adjustment, protection or relief of any member of the Company Group or its debts, whether in any bankruptcy, insolvency, arrangement, reorganization, receivership, relief or similar proceedings, or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of any member of the Company Group, any payment or distribution of any kind (whether in cash, property, or securities) which otherwise would be payable or deliverable upon or with respect to the Intercompany Indebtedness subordinated hereby shall be paid or delivered directly to the Agent for the benefit of the Banks for application to (in the case of cash) or as collateral for (in the case of non-cash property or securities) the payment of the Obligations until the Obligations shall have been paid in full. (d) If any proceeding referred to in subsection (c) above is commenced by or against any member of the Company Group, the Agent is hereby irrevocably authorized and empowered (in its own name or in the name of such member of the Company Group), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution referred to in subsection (c) above, and give acquittance therefor, and to file claims and proofs of claim and take such other action (including, without limitation, voting the Intercompany Indebtedness subordinated hereby or enforcing any security interest or lien securing its payment) as it may deem necessary or advisable for the exercise or enforcement of any of the rights of the Agent and Banks hereunder. (e) The Agent and/or the Banks are hereby authorized to demand specific performance of the provisions of this Section 7.14 at any time when any member of the Company Group shall have failed to comply with any of the provisions hereof. ARTICLE 8 DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: 8.1. REPRESENTATION OR WARRANTY. Any representation or warranty made by or on behalf of the Company or any of the Guarantors to the Banks under or in connection with any Loan Document shall be materially false as it relates to the operations of the Company Group taken as a whole as of the date on which made or deemed to be made. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 44 8.2. NONPAYMENT. Nonpayment of any Obligation (other than a nonpayment of the nature described in Section 8.3) when the same becomes due and payable and, with respect to any nonpayment when due of the Obligation constituting accrued interest, the continuance thereof for a period of five (5) Business Days. 8.3. PREPAYMENT. The failure of the Company or any of the Guarantors to make the mandatory prepayment or cash deposit required by Section 2.12 and the continuance thereof for a period of ten (10) days from the date on which the Borrowing Base Certificate which would disclose the obligation to make such prepayment or cash deposit is delivered or to be delivered pursuant to Section 6.1(d). 8.4. COVENANTS. The breach by the Company or any of the Guarantors of any of the terms or provisions of Sections 6.2, 6.3, 6.5, 6.6, 6.7, 6.8, 6.9 or Article 7. 8.5. OTHER. The breach by the Company or any of the Guarantors (other than a breach which constitutes a Default under Sections 8.1, 8.2, 8.3 or 8.4) of (a) Section 6.1(d) that continues unremedied for a period of ten (10) days, or (b) any other term or provision of this Agreement that continues unremedied within thirty (30) days after written notice from the Agent or any Bank specifying such breach. 8.6. MATERIAL INDEBTEDNESS. The default by the Company or any of the Guarantors in the performance of any term, provision or condition contained in any agreement under which any such Material Indebtedness was created or is governed, the effect of which is to cause such Material Indebtedness to become due prior to its stated maturity, or any such Material Indebtedness shall be required to be prepaid prior to the stated maturity thereof. 8.7. INSOLVENCY. Any member of the Company Group shall (a) have an order for relief entered with respect to it under any Debtor Relief Laws, (b) not pay, or admit in writing its inability to pay, its debts generally as they become due, (c) make an assignment for the benefit of creditors, (d) apply for, seek, consent to or acquiesce in the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property, (e) institute any proceeding seeking an order for relief under any Debtor Relief Laws or seeking to adjudicate it as bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any Debtor Relief Laws or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (f) take any corporate action to authorize or effect any of the foregoing actions set forth in this Section or (g) fail to contest in good faith any appointment or proceeding described in Section 8.8; PROVIDED, HOWEVER, that the foregoing as to any member of the Company Group other than Haggar or the Company shall not constitute a Default if such an event would not constitute a Material Adverse Effect. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 45 8.8. RECEIVER. A receiver, trustee, examiner, liquidator or similar official shall be appointed for any member of the Company Group or any substantial part of their respective property, or a proceeding described in Section 8.7(e) shall be instituted against the Company or any of the Guarantors and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of sixty (60) consecutive days; PROVIDED, HOWEVER, that the foregoing as to any member of the Company Group other than Haggar or the Company shall not constitute a Default if such an event would not constitute a Material Adverse Effect. 8.9. APPROPRIATION. Any Tribunal shall condemn, seize or otherwise appropriate, or take custody or control of all or any substantial portion of the property of the Company Group taken as a whole. 8.10. JUDGMENTS. The Company or any of the Guarantors shall fail within thirty (30) days to pay, bond or otherwise discharge any judgment or order for the payment of money in excess of $1,000,000 which is not stayed on appeal or otherwise being appropriately contested in good faith. 8.11. ERISA. Any member of the Company Group shall fail to meet the minimum funding requirements required by the provisions of Section 412 of the Code and Section 302 of ERISA with respect to any Plan, if applicable, or any Reportable Event causing a Material Adverse Effect shall occur in connection with any Plan. 8.12. MATERIAL AGREEMENT. The occurrence of a default (including the passage of any applicable period of grace or cure) under any other material agreement, document or instrument to which the Company or any of the Guarantors is a party or by which any of their respective assets are bound, the effect of which would constitute a Material Adverse Effect. 8.13. CHANGE IN CONTROL. A Change in Control shall occur. Any notice that may be required hereunder need be delivered to the Company only, and no other Person shall be entitled to receive any notices whatsoever under this Agreement, regardless of whether the action, inaction, default or other matter to which such notice relates is by or concerning a Person other than the Company. ARTICLE 9 ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 9.1. REMEDIES UPON DEFAULT. If any Default described in Section 8.7 or 8.8 occurs, the Commitments of the Banks to make Advances hereunder shall automatically terminate and FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 46 the Obligations shall immediately become due and payable without any election or action on the part of the Agent or any Bank. If any other Default occurs and is continuing, the Required Banks shall have and may exercise any one or more of the following rights and remedies, and any other remedies provided in any of the Loan Documents: (a) terminate the Commitments of the Banks to make Advances hereunder; (b) declare the Obligations to be due and payable, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest, notice of default, notice of intention to accelerate or of acceleration, or other notice of any kind, all of which are hereby expressly waived, anything contained herein or in any of the Loan Documents to the contrary notwithstanding; (c) reduce any claim to judgment; and/or (d) without notice of default or demand, exercise, pursue or enforce any of the Banks' rights and remedies under the Loan Documents or pursuant to applicable law. 9.2. REMEDIES UPON UNMATURED DEFAULT. If any Unmatured Default occurs and is continuing, the Required Banks may exercise, on behalf of the Banks, any one or more of the following rights and remedies at their option: (a) to the fullest extent permitted by law, restrict any payment or withdrawals from any or all deposits and other sums at any time credited by or due from such Banks, to Haggar or the Company (other than deposits and other sums being held by such Bank(s) on behalf of Haggar or the Company as fiduciary for or in trust for other Persons), without notice or demand and without liability, for so long as and until such time as such Unmatured Default and any other Unmatured Default is cured; PROVIDED, HOWEVER, that, the foregoing shall in no way be construed to limit such Bank's right of setoff provided to it under Section 9.6 hereof; and/or (b) require the Company, on the next succeeding Business Day, to deposit with the Agent cash in such amounts as the Agent may request, up to a maximum amount equal to the aggregate existing Letter of Credit Exposure of all the Banks. Any amounts so deposited shall be held by the Agent for the ratable benefit of all the Banks as security for the outstanding Letter of Credit Exposure and the other Obligations, and the Company will, in connection therewith, execute and deliver such security agreements in form and substance satisfactory to the Agent which it may reasonably require. As drafts or demands for payment are presented under any Letter of Credit, the Agent shall apply such cash to satisfy such drafts or demands. When either (i) all Letters of Credit have expired and drawings thereunder satisfied by the Company, or (ii) all Defaults and Unmatured Defaults have been waived in writing by the Required Banks or cured to the FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 47 satisfaction of the Required Banks, the Agent shall release to the Company any remaining cash deposited under this SECTION 9.2. In addition, as the aggregate existing Letter of Credit Exposure is reduced, the Company may receive, upon its request, return of a portion of such cash deposit equal to the amount of the reduction. Whenever the Company is required to make deposits under SECTIONS 2.12 AND 9.2 and fails to do so on the day such deposit is due, the Agent or any Bank may, without notice to the Company, make such deposit (whether by application of proceeds of any collateral for the Obligations, by transfers from other accounts maintained with any Bank, by Advances or otherwise) using any funds then available to any Bank of the Company or Haggar; and/or (c) seek such equitable relief to which the Banks may be entitled. 9.3. AMENDMENTS AND WAIVERS. Subject to the provisions of this Section 9.3, the Required Banks (or the Agent with the consent in writing of the Required Banks), the Company and each of the Guarantors may enter into agreements supplemental hereto for the purpose of adding any provisions to this Agreement or changing in any manner the rights of the Banks or the Company hereunder or waiving any Default or Unmatured Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of all of the Banks: (a) Change the maturity of any Note or the principal amount thereof, or change the rate or the time of payment of interest thereon or of any fees due hereunder, or waive any non-payment of principal, interest or fees then existing; (b) Reduce the percentage specified in the definition of Required Banks; (c) Permit the Company to assign its rights under this Agreement; (d) Release the Parent Guaranty; or (e) Amend this Section. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. 9.4. PRESERVATION OF RIGHTS. No delay or omission of the Banks or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Banks required pursuant to Section 9.3, and then only to the extent specifically set forth in such writing. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 48 9.5. PERFORMANCE BY LENDER. Should the Company or any other Person fail to perform any covenant, duty or agreement contained herein or in any of the Loan Documents, the Agent or any Bank may perform or attempt to perform such covenant, duty or agreement on behalf of the Company or such other Person. In such event, the Company shall, at the request of the Agent or any Bank, promptly pay any amount expended by the Agent or any Bank in such performance or attempted performance to the Agent or any Bank at its principal office as specified herein, together with interest thereon at the Default Rate from the date of such expenditure until paid. Notwithstanding the foregoing, the Agent and the Banks do not assume any liability or responsibility for the performance of any duties of the Company or any other Person hereunder or under any of the Loan Documents or other control over the management and affairs of the Company or any other Person. 9.6. RIGHTS OF SETOFF. Haggar and the Company hereby expressly grant to the Banks the right of setoff against all deposits and other sums at any time credited by or due from the Banks, or any of them, to Haggar or the Company (other than deposits and other sums being held by the Banks on behalf of Haggar or the Company as fiduciary for or in trust for other Persons) in accordance with the provisions of this Section 9.6. The rights of the Banks under this Section 9.6 are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Banks, or any of them, may have under law or equity or by agreement. Upon the occurrence and during the continuance of any Default, the Banks are hereby authorized at any time and from time to time, to the fullest extent permitted by law, at their option, without notice or demand and without liability, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Banks to or for the credit or the account of Haggar or the Company against any and all of their respective Obligations now or hereafter existing under this Agreement, the Notes and the other Loan Documents, in such order and manner as the Banks may determine in their sole discretion, irrespective of whether the Banks shall have made any demand under this Agreement or the Notes and although such Obligations may be unmatured. 9.7. REMEDIES CUMULATIVE, CONCURRENT AND NON-EXCLUSIVE. The Banks shall have all rights, options, remedies and recourses granted in the Loan Documents and available at law or equity and same (a) shall be cumulative and concurrent, (b) may be pursued separately, successively or concurrently against the Company or any other Person obligated under the Loan Documents or against any one or more of them, at the sole discretion of the Banks, (c) may be exercised as often as the occasion therefor shall arise, it being agreed by the Company that the exercise or failure to exercise any of same shall in no event be construed as a waiver or release thereof or of any other right, remedy or recourse, and (d) are intended to be, and shall be, non-exclusive. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 49 ARTICLE 10 GENERAL PROVISIONS 10.1. BENEFIT OF AGREEMENT. The terms and provisions of this Agreement and the Notes shall be binding upon and inure to the benefit of the Company and the Banks and their permitted successors and assigns. The Company shall not have the right to assign any of its rights or transfer any of its obligations under this Agreement. The Banks may assign only such of their rights under this Agreement as is provided in Section 10.2. 10.2. ASSIGNMENTS AND PARTICIPATIONS. (a) A Bank may sell, to any Person with a Standard & Poor's rating of "A" or better, a participation consisting of all of its interests, rights and obligations under this Agreement (including, without limitation, all of its Commitment and the Note held by it), or may sell, to any Person at least fifty percent (50%) owned by the selling Bank, or by a common parent of both, or to another Bank, one or more participations in all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the corresponding portion of the Note held by it); PROVIDED, HOWEVER, that other than in the case of a participation sold to a Person at least fifty percent (50%) owned by the selling Bank, or by a common parent of both, or to another Bank, the Agent and the Company must give their respective prior written consent, which consent will not be unreasonably withheld. Prior to consenting to such participation, the Company shall be afforded a period not to exceed sixty (60) days in which it may identify a participant acceptable to it and reasonably acceptable to the selling Bank. In the event any Bank shall sell any participation, (i) the Company, the Agent and the other Banks shall continue to deal solely and directly with such selling Bank in connection with such selling Bank's rights and obligations under the Loan Documents (including the Note held by such selling Bank); (ii) such Bank shall retain the sole right and responsibility to enforce the obligations of the Company and the Guarantors relating to the Loans, including the right to approve any amendment, modification or waiver of any provision of this Agreement other than amendments, modifications or waivers with respect to (1) any fees payable hereunder to the Banks, and (2) the amount of principal or the rate of interest payable on, or the dates fixed for the scheduled repayment of principal of, the Loans and other sums to be paid to the Banks hereunder, and (iii) the Company and Haggar agree, to the fullest extent they may effectively do so under applicable law, that any participant of a Bank may exercise all rights of set-off, bankers' lien, counterclaim or similar rights with respect to such participation as fully as if such participant were a direct holder of Loans if such Bank has previously given notice of such participation to the Company. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 50 (b) Each Bank may assign, to any Person with a Standard & Poor's rating of "A" or better, all of its interests, rights and obligations under this Agreement (including all of its Commitment and the related Note held by it); PROVIDED, HOWEVER, that (i) other than in the case of an assignment to a Person at least fifty percent (50%) owned by the assignor Bank, or by a common parent of both, or to another Bank, the Agent and the Company must give their respective prior written consent, which consent will not be unreasonably withheld; (ii) the assigning Bank shall contemporaneously assign to such assignee the assigning Bank's Letter of Credit Commitment; and (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in its records, an assignment agreement, together with the Note subject to such assignment and a processing fee of $2,000 (for which the Company shall have no liability). Prior to consenting to such assignment, the Company shall be afforded a period not to exceed sixty (60) days in which it may identify an assignee acceptable to it and reasonably acceptable to the assigning Bank. Upon such execution, delivery and acceptance, from and after the effective date specified in each assignment agreement, (1) the assignee thereunder shall be a party hereto and shall have the rights and obligations of a Bank hereunder and (2) the Bank thereunder shall be released from its obligations under this Agreement and such Bank shall cease to be a party hereto. (c) By executing and delivering an assignment agreement providing for the assignment of all or a portion of the interests, rights and obligations of a Bank under this Agreement, the Bank assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby, such assignor Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document; (ii) such assignor Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company of any of its obligations under any Loan Document; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements of the Company previously delivered in accordance herewith and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such an assignment agreement; (iv) such assignee will, independently and without reliance upon the Agent, such assignor Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents; (v) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto, and (vi) such assignee agrees that it will perform in FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 51 accordance with their terms all obligations that by the terms of the Loan Documents are required to be performed by it as a Bank. (d) The Agent shall maintain at its office a copy of each assignment agreement delivered to it and a record of the names and addresses of the Banks and the Commitments of, and principal amount of the Loans owing to, each Bank from time to time. The entries in such record shall be conclusive, in the absence of manifest error, and the Company, the Agent and the Banks may treat each Person the name of which is recorded therein as a Bank hereunder for all purposes of the Loan Documents. Such records shall be available for inspection by the Company or any Bank at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an assignment agreement executed by an assigning Bank and the assignee thereunder together with the Note subject to such assignment, the written consent to such assignment and the fee payable in respect thereto, the Agent shall, (i) accept such assignment agreement; (ii) record the information contained therein in its records, and (iii) give prompt notice thereof to the Company. Contemporaneously with the receipt by the Agent of an assignment agreement, the Company, at its own expense, shall execute and deliver to the Agent in exchange for each surrendered Note a new Note payable to the order of such assignee in an amount equal to the Commitment and/or Loans assumed by it pursuant to such assignment agreement. Such new Note shall be in an aggregate principal amount equal to the principal amount of each surrendered Note, shall be dated the effective date of such assignment agreement and shall otherwise be in substantially the form of the surrendered Note. Thereafter, each surrendered Note shall be marked canceled and returned to the Company. (f) After the sixty (60) day period set forth in Sections 10.2(a) and (b) above, as applicable, or with the prior written approval of the Company, any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Company furnished to such Bank by or on behalf of the Company. 10.3. SURVIVAL OF REPRESENTATIONS. All representations and warranties of the Company and the Guarantors contained in this Agreement and the other Loan Documents shall survive delivery of the Notes and the making of the Loans. 10.4. GOVERNMENT REGULATION. Anything contained in this Agreement to the contrary notwithstanding, no Bank shall be obligated to extend credit to the Company in violation of any limitation or prohibition provided by any applicable Law. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 52 10.5. TAXES. Any Taxes (excluding income or other Taxes payable with respect to the assets or income of a bank generally) payable or ruled payable by any Tribunal in respect of the Loan Documents shall be paid by the Company, together with interest and penalties, if any. 10.6. CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 10.7. HEADINGS. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 10.8. ENTIRETY; WRITTEN AGREEMENT. (A) THE CONFIDENTIALITY LETTER AGREEMENTS ENTERED INTO PRIOR TO THE DATE HEREOF, IN EACH CASE BETWEEN THE AGENT AND A BANK, (B) THE LETTER DATED JUNE 24, 1996, BETWEEN THE COMPANY AND THE AGENT, AND (C) THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 10.9. ACCOUNTING. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations herein shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with, GAAP as in effect from time to time, applied on a consistent basis. Compliance with Sections 7.6, 7.7, 7.8, and 7.9 shall be determined on a consolidated basis for the Company Group, in accordance with GAAP. 10.10. SEVERAL OBLIGATIONS. The respective obligations of the Banks hereunder are several and not joint and no Bank shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Bank to perform any of its obligations hereunder shall not relieve any other Bank from any of its obligations hereunder. 10.11. EXPENSES; INDEMNIFICATION. The Company shall reimburse the Banks for any and all reasonable costs and out-of-pocket expenses (including attorneys' fees) paid or incurred by the Banks in connection with the preparation, execution and delivery of this Agreement and the amendment, modification, enforcement of and collection under the Loan Documents. The Company agrees to indemnify the Agent and each Bank, and its or their directors, officers and employees against all losses, claims, damages, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent or any FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 53 Bank is a party to such litigation) that may be imposed on, incurred by or asserted against any of them in any way relating to, or arising out of, the Loan Documents or any of the transactions contemplated, therein, but only to the extent that such loss, claim, damage, liability or expense is occasioned by or arises out of the action, failure to act or default of any member of the Company Group. Each Bank against which an adverse judgment is entered agrees to reimburse the Company (on a pro rata basis in accordance with their respective Commitments to the extent that more than one Bank should be liable to the Company therefor pursuant to this Section 10.11), for its expenses of litigation or preparation therefor in any action against such Bank to enforce the performance of its obligations hereunder, but only in the event that the judgment in such action is adverse to such Bank. The obligations of the Company under this Section shall survive the termination of this Agreement and the payment of the Obligations. 10.12. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or invalidity without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. 10.13. CHOICE OF FORUM. HAGGAR AND THE COMPANY, ON BEHALF OF THEMSELVES AND THEIR SUBSIDIARIES, ACKNOWLEDGE AND AGREE THAT ALL OBLIGATIONS HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS ARE FULLY PERFORMABLE IN DALLAS COUNTY, TEXAS. ANY SUIT, ACTION OR PROCEEDING AGAINST ANY MEMBER OF THE COMPANY GROUP, THE BANKS OR ANY OTHER PERSON WITH RESPECT TO THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN DOCUMENT, OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF, SHALL BE BROUGHT EITHER IN THE COURTS OF THE STATE OF TEXAS, COUNTY OF DALLAS, OR IN THE UNITED STATES COURTS LOCATED IN THE STATE OF TEXAS, NORTHERN DISTRICT, AND HAGGAR AND THE COMPANY, ON BEHALF OF THEMSELVES AND THEIR SUBSIDIARIES, AND THE BANKS, HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF ANY SUCH SUIT, ACTION OR PROCEEDING. 10.14. REVOLVING CREDIT. The Company and the Banks hereby agree that, except for Section 15.10(b) thereof, the provisions of Article 5069-15.01 et seq. of the Revised Civil Statutes of Texas, as amended (regulating certain revolving credit loans and revolving triparty accounts) shall not govern or in any manner apply to this Agreement or the Loan. 10.15. PRIOR AGREEMENT. On the date the conditions set forth in Section 4.1 are satisfied, the Prior Agreement shall be of no further force and effect, except as evidence of the obligations renewed hereunder and evidenced by this Agreement and the Notes and except as to rights acquired by the Banks prior to such date. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 54 ARTICLE 11 THE AGENT 11.1. APPOINTMENT AND POWERS. The Agent shall continue as the Agent hereunder, and each of the Banks irrevocably authorizes the Agent to act as the agent of such Bank. The Agent agrees to act as such upon the express conditions contained in this Article. The duties of the Agent shall be administrative in nature and the Agent shall not have a fiduciary relationship in respect of any Bank by reason of this Agreement. 11.2. POWERS. The Agent shall have and may exercise such powers hereunder and under the other Loan Documents as are specifically delegated to the Agent by the terms hereof or by any other writing signed by the Required Banks, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Banks, or any obligation to the Banks to take any action hereunder or exercise any right or remedy with respect to any Unmatured Default or Default, except as specifically provided by this Agreement or requested by the Required Banks. 11.3. POSSESSION OF INSTRUMENTS BY THE AGENT. The Agent shall exercise all rights and remedies under the Notes and the Loan Documents and take all actions with respect thereto in accordance with the request or direction of the Required Banks, or otherwise as and to the extent provided herein or in the other Loan Documents; provided, however, that the Agent may take such actions in its name without the joinder of the Banks, and all third parties shall be entitled to rely on the actions taken by the Agent with respect to the Notes and the execution by the Agent of any and all agreements, financing statements, affidavits, notices or any other type of document or instrument pertaining thereto, including, without limitation, in connection with the exercise of any rights or remedies of the Banks under the Loan Documents (and specifically including any legal proceedings), and the same shall be binding upon all the Banks as to any third party relying on such actions of the Agent. Notwithstanding anything to the contrary expressed or implied herein or in the Notes or any other Loan Document, each Bank shall be deemed a holder of each Note and a separate payee, with a separate right to payment thereunder to the extent of its pro rata part of payments to be made thereunder in accordance with the terms of this Agreement. 11.4. DEBTOR-CREDITOR RELATIONSHIP. Each Bank has and shall maintain a direct creditor-debtor relationship with the Company and/or any of the Guarantors and will have direct recourse, singly or in the aggregate, against the Company and/or any of the Guarantors. Notwithstanding the foregoing, any right, remedy, action, omission or waiver respecting this Agreement, the Notes and the other Loan Documents shall only be exercised, made, taken, or permitted by the Agent, acting upon the direction of the Required Banks, as the agent for all the Banks; provided, that in the event of any bankruptcy proceedings or other legal proceedings FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 55 relating to this Agreement against the Company or any of the Guarantors, each Bank shall be entitled, at its option, to bring or join in such proceedings in its own name. 11.5. GENERAL IMMUNITY. Neither the Agent nor any of its respective directors, officers, agents or employees shall be liable to the Banks or any Bank for any action taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct, it being the intention of the Banks that such parties shall not be liable for the consequences of their own negligence (other than gross negligence). 11.6. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. The Agent shall not be responsible to the Banks for any recitals, reports, statements, warranties or representations herein or any Loans or be bound to ascertain or inquire as to the performance or observance of any of the terms of this Agreement. 11.7. RIGHT TO INDEMNITY. Each of the Banks shall, ratably in accordance with the percentage of its Commitment, indemnify the Agent (to the extent not reimbursed by the Company) for and against any cost, expense (including attorney's fees and disbursements), claim, demand, action, loss or liability (except such as result from the Agent's gross negligence or willful misconduct) that the Agent may suffer or incur in connection with this Agreement or any action taken or omitted by the Agent hereunder, in its capacity as the Agent, including, without limitation, matters arising out of the Agent's own negligence (other than its gross negligence). The Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be indemnified to its satisfaction by the Banks pro rata against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. 11.8. ACTION ON INSTRUCTIONS OF THE BANKS. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with written instructions signed by the Required Banks, except as to those matters enumerated in Section 9.3 as to which the consent of all of the Banks is required, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Banks and on all holders of Notes. 11.9. EMPLOYMENT OF THE AGENT AND COUNSEL. The Agent may execute any of its respective duties as the Agent hereunder by or through employees, agents and attorneys-in-fact and shall not be answerable to the Banks, except as to money or securities received by it or them or its or their authorized agents, for the default or misconduct of any such employees, agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning all matters pertaining to the agency hereby created and its respective duties hereunder. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 56 11.10. RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent. 11.11. MAY TREAT PAYEE AS OWNER. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been received by the Agent. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the holder of any Note, shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor. 11.12. THE AGENT'S REIMBURSEMENT. Each Bank agrees to reimburse the Agent in proportion to such Bank's ratable share of the Commitments for any expenses not reimbursed by the Company (a) for which the Agent is entitled to reimbursement by the Company under the Loan Documents and (b) for any other expenses incurred by the Agent on behalf of the Banks, including those in connection with the amendment, modification, enforcement of, and collection under the Loan Documents, but specifically excluding those in connection with their preparation, execution or delivery. 11.13. RIGHTS AS A LENDER. With respect to its Commitment, Loans made by it and the Note issued to it, the Agent shall have the same rights and powers hereunder as any Bank and may exercise or refrain from exercising the same as though it were not the Agent and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent may accept deposits from, lend money to and generally engage in any kind of banking or trust business with Haggar, the Company or any of the Guarantors as if it were not the Agent. 11.14. BANK CREDIT DECISION. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank and based on the financial statements referred to in Section 5.5 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. 11.15. SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof, no later than thirty (30) days prior to the date such resignation will become effective, to the Banks, the Company and the Guarantors, and may be removed at any time with or without cause by the Required Banks. Upon any such resignation or removal, the Required Banks shall have the right, with the consent of the Company, which consent shall not be unreasonably withheld, to appoint, on behalf of the Company and the Banks, a successor Agent. If no successor Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving notice of resignation, then the Company may appoint, with the consent of the Required Banks, which shall not be unreasonably withheld, on behalf of the Banks, a successor agent. If no FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 57 successor agent shall have been so appointed by the Company and shall have accepted such appointment within sixty (60) days after the retiring Agent's giving notice of resignation, then the retiring Agent may appoint, on behalf of the Company and the Banks, a successor Agent. Such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as the Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as the Agent, the provisions of this Article shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as an Agent hereunder. 11.16. DISTRIBUTION OF INFORMATION. Subject to the provisions of Section 6.7, the Company authorizes the Agent to discuss with and furnish to the Banks all financial statements, audit reports and other information pertaining to the Company and the Guarantors whether such information was provided by the Company or prepared or obtained by such Agent and whether or not such information was requested by the Agent or the Banks. Neither the Agent nor any of its employees, officers, directors or agents makes any representation or warranty regarding any audit reports or other analyses of the Company's and the Guarantors' condition that the Agent distributes, whether such information was provided by the Company or the Guarantors or was prepared or obtained by the Agent, nor shall the Agent or any of its employees, officers, directors or agents be liable to any Person or entity receiving a copy of such reports or analyses for any inaccuracy or omission contained in or relating thereto. 11.17. NON-ADVANCING BANKS. In the absence of an occurrence of a Default and in the event that any Bank shall fail or refuse to advance its pro rata portion of any Advance, as required hereunder, the Agent shall notify the other Banks of such failure and such remaining Banks shall advance such non-advancing Bank's portion but only to the extent that such additional amount would not cause the outstanding principal balance of each such Bank's Note to exceed its Commitment. Upon making any such Advance, and notwithstanding anything to the contrary expressed or implied herein or in the Notes or any of the Loan Documents, all subsequent payments made on the Loans or from the exercise of right of setoff or other remedies under the Loan Documents, shall be paid to only the Banks other than the non-advancing Bank (and the non-advancing Bank shall not be entitled to receive the same), to be applied pro rata in accordance with the amounts advanced by each such advancing Bank, until the amounts advanced by such Banks on behalf of the non-advancing Bank have been repaid in full. In addition, any Banks that advance funds on behalf of a non-advancing Bank pursuant to this Section 11.17 shall have a claim against such non-advancing Bank for the amounts so advanced and shall be entitled to all rights and remedies at law or in equity to recover any unpaid FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 58 amounts. In the event of the foregoing, the Agent will use reasonable efforts to suggest to the Company an alternative bank to replace such non-advancing Bank, without any assurances in such connection that any alternative bank may be amenable to becoming a Bank. 11.18. BENEFIT OF THE BANKS. Other than Section 11.15 and 11.17, all terms, conditions and agreements set forth in this Article 11 are for the sole and exclusive benefit of the Banks, and neither the Company, the Guarantors nor any other Person shall be entitled to rely on or seek the benefit of such provisions. ARTICLE 12 RATABLE PAYMENTS 12.1. RATABLE PAYMENTS. In case at any time any Bank, whether by setoff or otherwise, has payment made to it upon its Note in a greater proportion than received by any other Bank upon its Note, such Bank so receiving such greater proportionate payment agrees to purchase a portion of the Advances held by the other Banks so that after such purchase each Bank will hold its ratable proportion of the Advances. In case any such payment is disturbed by legal process or otherwise, appropriate further adjustments shall be made. Any Bank executing this Agreement may, to the fullest extent permitted by Law, exercise all of its rights of payment as if such Bank were the direct creditor of the Company (but without affecting in any way the provisions of Article 9 hereof). ARTICLE 13 NOTICES 13.1. GIVING NOTICE. Any notice required or permitted to be given under this Agreement may be given, and shall be deemed to be received, when deposited in the United States mail, postage prepaid, by facsimile transmission or telex when delivered to the appropriate office for transmission, charges prepaid, or by private delivery service when delivery is receipted for, addressed to the Company, the Banks or the Agent at the addresses indicated below their signatures to the Agreement; provided, however, that notices given pursuant to Section 8.4 shall be given by certified mail, return receipt requested. 13.2. CHANGE OF ADDRESS. The Company, the Banks and the Agent may each change the address for service of notice upon it by a notice in writing to the other parties hereto. FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 59 ARTICLE 14 COUNTERPARTS This Agreement may be executed in any number counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Company, the Agent and the Banks and each party has notified the Agent by telex or telephone, confirmed in writing, that it has taken such action. EXECUTED as of the date first above written. HAGGAR CLOTHING CO., a Nevada corporation f/k/a Haggar Apparel Company By: /s/ J. M. HAGGAR, III -------------------------------------- J. M. Haggar, III Chief Executive Officer 6113 Lemmon Avenue Dallas, Texas 75209 Attn: Robert Qualls Telephone: (214) 956-4233 Telecopy: (214) 956-4334 HAGGAR CORP., a Nevada corporation By: /s/ J. M. HAGGAR, III -------------------------------------- J. M. Haggar, III Chief Executive Officer 6113 Lemmon Avenue Dallas, Texas 75209 Attn: Robert Qualls Telephone: (214) 956-4233 Telecopy: (214) 956-4334 FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 60 $22,222,222.22 NATIONSBANK OF TEXAS, N.A. By: /s/ TODD SHIPLEY -------------------------------------- Todd Shipley Senior Vice President NationsBank of Texas, N.A. 901 Main Street, 67th Floor Dallas, Texas 75202 Telephone: (214)508-0907 Telecopy: (214)508-0980 $14,814,814.81 COMERICA BANK - TEXAS By: /s/ MELINDA A. CHAUSSE -------------------------------------- Melinda A. Chausse Vice President Comerica Bank - Texas 8828 Stemmons Freeway, Suite 441 Dallas, Texas 75247 Telephone: (214) 841-1587 Telecopy: (214) 263-9837 FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 61 $14,814,814.81 THE BANK OF TOKYO-MITSUBISHI, LTD. Dallas Office By: /s/ JOHN M. MEARNS -------------------------------------- John M. Mearns Vice President/Manager The Bank of Tokyo-Mitsubishi, Ltd. Suite 3150 LB 118 Trammell Crow Center 2001 Ross Avenue Dallas, Texas 75201 Telephone: (214) 954-1200 Telecopy: (214) 954-1007 $11,111,111.12 NBD BANK, N.A. By: /s/ WILLIAM J. MCCAFFREY -------------------------------------- William J. McCaffrey Vice President NBD Bank, N.A. 611 Woodward Detroit, Michigan 48226 Telephone: (313)225-3444 Telecopy: (313)225-2649 FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 62 $7,407,407.41 BANK OF SCOTLAND By: /s/ Catherine M. Oniffrey --------------------------------------- Catherine M. Oniffrey Vice President Bank of Scotland 565 Fifth Avenue New York, New York 10017 Telephone: (212) 490-8030 Copies to: Janna Blanter Bank of Scotland Citicorp Center 1200 Smith Street, Suite 2660 Houston, Texas 77002 Telephone: (713)651-1870 Telecopy: (713)651-9714 $7,407,407.41 NATIONAL CITY BANK, KENTUCKY By: /s/ DONALD R. PULLEN, JR. --------------------------------------- Donald R. Pullen, Jr. Vice President National City Bank, Kentucky 101 S. Fifth Street Louisville, Kentucky 40202 Telephone: (502)581-6352 Telecopy: (502)581-5122 FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 63 COMMITMENT $22,222,222.22 TEXAS COMMERCE BANK National Association, successor by merger to Texas Commerce Bank, National Association, Individually and as the Agent By: /s/ JOHN P. DEAN --------------------------------------- John P. Dean Senior Vice President 2200 Ross Avenue, P-1 Level, Suite 10 Dallas, Texas 75201 Post Office Box 660197 Dallas, Texas 75266-0197 Attn: John P. Dean Telephone: (214) 965-2466 Telecopy: (214) 965-2044 WIRING INSTRUCTIONS: Texas Commerce Bank National Association, ABA #113000609 for Credit to Account #7001-20730-7800 Attn: Loan Syndication Services Gale Manning Reference: (As Applicable) FUNDS MANAGEMENT ADDRESS: Gale Manning, Manager Phone: (713) 750-2784 Fax: (713) 750-3810 Loan Syndication Services Texas Commerce Bank National Association P. O. Box 2558 1111 Fannin Street 9th Floor, Mail Station 46 Houston, Texas 77252 FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 64 SCHEDULE 1 CURRENT MEMBERS OF THE BOARDS OF DIRECTORS OF HAGGAR AND THE COMPANY HAGGAR CORP. HAGGAR CLOTHING CO. ------------ ------------------- J.M. HAGGAR, III J. M. HAGGAR,III FRANK BRACKEN FRANK BRACKEN RALPH BEATTIE RALPH BEATTIE NORMAN BRINKER RICHARD HEATH RAE EVANS CARLOS CANTU SCHEDULE 2 STANDBY LETTERS OF CREDIT OUTSTANDING JUNE 30, 1996 BENEFICIARY LC# MATURITY AMO0UNT - ------------------------------------------------------------------------------ NATIONAL UNION FIRE INSURANCE D424918 09/30/96 $7,934,093 COMPANY OF PITTSBURG, PA TRAVELERS INSURANCE COMPANY D418099 12/31/96 $1,509,765 ---------- $9,443,858 ---------- ---------- SCHEDULE 3 SUBSIDIARIES COMPANY NAME & ADDRESS SITUS OF INCORPORATION - ---------------------- ---------------------- DOMESTIC - -------- Bowie Manufacturing Company Nevada 6113 Lemmon Avenue, Dallas, TX 75209 Corsicana Company Nevada 6113 Lemmon Avenue, Dallas, TX 75209 Dallas Pant Manufacturing Company Nevada 6113 Lemmon Avenue, Dallas, TX 75209 Greenville Pant Manufacturing Company Nevada 6113 Lemmon Avenue, Dallas, TX 75209 McKinney Pant Manufacturing Company Nevada 6113 Lemmon Avenue, Dallas, TX 75209 Olney Manufacturing Company Nevada 6113 Lemmon Avenue, Dallas, TX 75209 Waxahachie Garment Company Nevada 6113 Lemmon Avenue, Dallas, TX 75209 La Romana Manufacturing Corporation Nevada 6113 Lemmon Avenue, Dallas, TX 75209 Haggar Services, Inc. Texas 6113 Lemmon Avenue, Dallas, TX 75209 AirHaggar Texas 6113 Lemmon Avenue, Dallas, TX 75209 Duncan Manufacturing Company Oklahoma 6113 Lemmon Avenue, Dallas, TX 75209 Haggar Corp. (Parent) Nevada 6113 Lemmon Avenue, Dallas, TX 75209 Haggar Clothing Co. Nevada 6113 Lemmon Avenue, Dallas, TX 75209 Weslaco Sewing, Inc. Nevada 6113 Lemmon Avenue, Dallas, TX 75209 Weslaco Cutting, Inc. Nevada 6113 Lemmon Avenue, Dallas, TX 75209 Haggar Direct, Inc. Nevada 6113 Lemmon Avenue, Dallas, TX 75209 SCHEDULE 3 SUBSIDIARIES COMPANY NAME & ADDRESS SITUS OF INCORPORATION - ---------------------- ---------------------- FOREIGN - ------- Haggar Mex. S.A. de C.V. Mexico 6113 Lemmon Avenue, Dallas, TX 75209 Haggar Apparel Ltd. United Kingdom 6113 Lemmon Avenue, Dallas, TX 75209 SCHEDULE 4 CURRENT OBLIGATIONS APPROXIMATE AMOUNT AT SECURED OWED BY 6/30/96 NOTEHOLDER BY GUARANTOR - ------------------------------------------------------------------------------------------------------------ AirHaggar $167,596 Bank of Boston Leasing Airplane Haggar Corp. Bowie Mfg. Co. $2,900,000 TCB - I.R.B. Buildings/Equip. Haggar Clothing Co. Bowie Mfg. Co. $175,826 City of Weslaco Equipment N/A Haggar Clothing Co. $25,000,000 Allstate Life Insur. Co. N/A Haggar Corp. Haggar Clothing Co. $9,469,070 National Life of VT C.V. of Life Insur. N/A Haggar Clothing Co. $1,411,623 Texas Stadium Platinum Suite N/A Haggar Direct, Inc. $1,016,577 Retail Lease Guar. (curr.> 12 mos.) Haggar Clothing Co. ----------- $40,140,692 ----------- -----------
September 16, 1996 SCHEDULE 5 PENDING LITIGATION CLAIMANT DESCRIPTION HAGGAR ATTORNEY CURRENT - -------- ----------- --------------- STATUS ------- PENDING CLAIMS - -------------- Elizabeth Rodriguez Intentional infliction of Steve Kardell, Jr. Pending emotional distress (termination Baker & McKenzie allegedly due to pregnancy) 2001 Ross Avenue and invasion of privacy. Suite 4500 Dallas, Texas 75201 Estella Rodriguez Wrongful termination in Steve Kardell, Jr. Pending violation of Workers Baker & McKenzie Trial - 11/4/96 Compensation Act, Article 2001 Ross Avenue 8307c. Suite 4500 Dallas, Texas 75201 Ana Cecilia Barragan Wrongful termination in Steve Kardell, Jr. Pending violation of the Workers Baker & McKenzie Compensation Act, Article 2001 Ross Avenue 8307c, and intentional Suite 4500 infliction of emotional distress. Dallas, Texas 75201 Maria P. Jasso Wrongful termination in Steve Kardell, Jr. Pending violation of Workers Baker & McKenzie Compensation Act, Chapter 2001 Ross Avenue 451 of the Texas Labor Code Suite 4500 (f/k/a Article 8307c), Texas Dallas, Texas 75201 Commission of Human Rights Act, age discrimination, and intentional infliction of emotional distress. Consuelo G. Valdez Wrongful termination and Steve Kardell, Jr. Pending intentional infliction of Baker & McKenzie emotional distress. 2001 Ross Avenue Suite 4500 Dallas, Texas 75201 Altagracia Hernandez Wrongful termination in Steve Kardell, Jr. Pending violation of the Workers Baker & McKenzie Compensation Act, Article 2001 Ross Avenue 8307c, intentional infliction of Suite 4500 emotional distress. Dallas, Texas 75201 Maria P. Andrae Wrongful termination in Steve Kardell, Jr. Pending violation of the Workers Baker & McKenzie Compensation Act, Article 2001 Ross Avenue 8307c. Suite 4500 Dallas, Texas 75201 Martha Cedillo Wrongful termination in Steve Kardell, Jr. Pending violation of Workers Baker & McKenzie Compensation Act, Article 2001 Ross Avenue 8307c, and intentional Suite 4500 infliction of emotional distress. Dallas, Texas 75201 Hilda Espinoza Breach of Contract, intentional Steve Kardell, Jr. Pending infliction of emotional distress, Baker & McKenzie and invasion of privacy. 2001 Ross Avenue Suite 4500 Dallas, Texas 75201 Patricia Espinoza Wrongful termination in Steve Kardell, Jr. Pending violation of Workers Baker & McKenzie Compensation Act, Article 2001 Ross Avenue 8307c, and intentional Suite 4500 infliction of emotional distress. Dallas, Texas 75201 Maria O. Leal Wrongful termination in Steve Kardell, Jr. Pending violation of Workers Baker & McKenzie Compensation Act, Article 2001 Ross Avenue 8307c, intentional infliction of Suite 4500 emotional distress, and age Dallas, Texas 75201 discrimination in violation of Texas Commission on Rights Act. Connie Garcia Wrongful termination in Steve Kardell, Jr. Pending violation of article 8307c, Baker & McKenzie Trial - 11/18/96 intentional infliction of 2001 Ross Avenue emotional distress and Suite 4500 negligent hiring and retention. Dallas, Texas 75201 Amy Padilla Wrongful termination in Steve Kardell, Jr. Pending violation of Article 8307c of Baker & McKenzie the Workers Compensation Act 2001 Ross Avenue and intentional infliction of Suite 4500 emotional distress. Dallas, Texas 75201 Dominga Vasquez Wrongful termination in Steve Kardell, Jr. Dismissed on violation of the Workers Baker & McKenzie summary Compensation Act, Article 2001 Ross Avenue judgment on 8307c, and intentional Suite 4500 9/9/96. infliction of emotional distress. Dallas, Texas 75201 Consuelo Gonzalez Wrongful termination in Steve Kardell, Jr. Pending Norma E. Cano violation of Workers Baker & McKenzie Maria J. Hernandez Compensation Act, Article 2001 Ross Avenue Amado Torres 8307c, negligent hiring and Suite 4500 retention, and violation of Dallas, Texas 75201 Texas Commission on Human Rights Act (Norma E. Cano, only). Maria R. Leal Intentional infliction of Steve Kardell, Jr. Pending emotional distress. Baker & McKenzie 2001 Ross Avenue Suite 4500 Dallas, Texas 75201 Francis Creek, et al Class Action for severance pay Steve Kardell, Jr. Pending v. (breach of contract and Baker & McKenzie (Class Action) Haggar Apparel Co. d/b/a promissory estoppel) 2001 Ross Avenue 97th Judicial Olney & Bowie Mfg Suite 4500 District Court, Dallas, Texas 75201 Montague County, Texas Trial - 12/3/96 Joe Trejo, et al 351 former employees Steve Kardell, Jr. Pending v. claiming fraud and Baker & McKenzie Haggar Apparel Co. misrepresentation regarding 2001 Ross Avenue methods of pay and plant Suite 4500 closure, intentional infliction of Dallas, Texas 75201 emotional distress, violation of the Fair Labor Standards Act Roland Leon and Texas Workers Thornton, Summers, Compensation Act, and Biechlim Dunham discrimination under the 711 North Carancahua, Americans with Disability Act Suite 600 Corpus Christi, Texas 78745-1401
SCHEDULE 5 (CONTINUED) Carlos Riser Sexual harassment and Barbara M. G. Lynn Pending discrimination based on sex, Carrington, Coleman, Trial 2/3/97 retaliation for complaining of Sloman & Blumenthal harassment and discrimination, 200 Crescent Court intentional infliction of Suite 1500 emotional distress, negligent Dallas, Texas 75201 retention, assault and battery, invasion of privacy, and constructive termination. Patrick Arterberry Personal injuries allegedly Stephen Schoettmer Pending Calvin Joe Wiley arising as a result of roof Thompson & Knight P.C. Gail Roberson collapse on 5/5/95. 3300 First City Center, 1700 Pacific Avenue Dallas, Texas 75201 PLAINTIFFS: Allegations of negligence, Stephen Schoettmer Pending Ernest Jaramillo gross negligence, wrongful Thompson & Knight P.C. Gilbert deaths and personal injuries 3300 First City Center, Jaramillo, Diana arising as a result of roof 1700 Pacific Avenue Quezada, Jerry collapse on 5/5/95 Dallas, Texas 75201 Jaramillo, Begnigna E. Gonzales, Individually and as Representatives of the Estate of Bessie Espinoza, Deceased; INTERVENORS: Annie V. Coleman, Individually and as next Friend of Valencia Henry, Christopher, Henry, Ira H. Jeffrey, Minors, and as Representative of the Estate of Lynnice W. Henry Ira J. Miller Personal Injury arising out of Joseph P. Wohrle Dismissed with product defect or product 300 Corporate Pointe prejudice liability, negligence, breach of Suite 310 warranty ($10,000 actual Culver City, California damages, $14,000 punitive 90230-7635 damages)
-4- SCHEDULE 5 (CONTINUED) Max Griffin, as father of Wrongful death as a result of Michael S. Burroughs Pending Jerry Lee Griffin, a collision between tractor Phelps, Jenkins, Gibson minor, deceased trailer and deceased's vehicle. & Fowler 1201 Greensboro Avenue Tuscaloosa, Alabama 35401 Gayla Spencer Personal injury arising out of Stephen Schoettmer Pending negligence--Claimant claims Thompson & Knight P.C. to have been struck by 3300 First City Center, conveyor truck. 1700 Pacific Avenue Dallas, Texas 75201 Daltex Services, Inc. Breach of contract, quantum James A. Ellis, Jr. Settled meruit, and sworn account Carrington, Coleman, --Plaintiff claims non-payment Sloman & Blumenthal of $211,476.65 for clean-up 200 Crescent Court services allegedly performed Suite 1500 after roof collapse. Dallas, Texas 75201 Maria De La Luz a/ka Wrongful termination in Steve Kardell, Jr. Pending Luz E. Calles violation of Article 8307c of Baker & McKenzie Filed: 8/16/96 the Workers Compensation Act 4500 Trammel Crow Ctr and intentional infliction of 2001 Ross Avenue emotional distress. Dallas, TX 75201 Cristela Ayala Wrongful termination in Steve Kardell, Jr. Pending Filed: 8/24/96 violation of Article 8307c of Baker & McKenzie the Workers Compensation 4500 Trammel Crow Ctr Act. 2001 Ross Avenue Dallas, TX 75201
E E O C Bernice Childress Sex discrimination No attorney Pending Edgardo Hernandez Failure to hire under ADA No attorney Pending Annette Ramirez Harassment under ADA No attorney Pending Robert Serra Discrimination based on No attorney Pending national origin Stacy L. Williams Discrimination based on race No attorney Pending
-5- SCHEDULE 5 (CONTINUED) Rosie M. Carroll Discrimination based on race No attorney Pending Filed: 7/8/96 received after 7/17/96 Tomasa Nunez Discrimination under No attorney Pending Filed: 7/1/96 Americans with Disabilities received after 7/17/96 Act
-6- SCHEDULE 6 EXISTING AFFILIATE TRANSACTIONS 1. Continue existing Shiloh Road lease between Company, as lessee, and new, non-family owner following the sale of property by E.R. Hagger, J.M. Haggar, Jr., and Rosemary Haggar Vaughan. 2. Split Dollar Life Insurance Policies. The Company owns part of policy and family member beneficiaries own part. 3. Haggar Clothing Co. makes available use of the Company Plane at a fixed cost, Health Insurance, use of Product, and use of the New York Apartment to Ed Haggar and J.M. Haggar, Jr. and an office for Ed Haggar. 4. Haggar Clothing Co. has granted the use of the "Edmond McGrath" label to James Joseph Haggar. SCHEDULE 7 CAPACITY ADJUSTMENT COSTS FISCAL QUARTER ENDING ________________, 199___ TOTAL PAID THIS CUMULATIVELY ACCRUAL QUARTER PAID ------- ------- ---- CLOSE (2) PLANTS Severance Pay Vacation Extended Benefits Workers Comp Claims Unemployment Costs Outplacement Relocation and Setup Legal Costs/Defense/Settlement Lease Buyouts Other Related OBTAIN ADDITIONAL MEXICO CAPACITY Start-Up Costs Training Costs Other Related LEGAL COSTS Defense and Settlements Robstown Bowie/Olney Closed (2) Plants TOTAL ------- ------- ------- EXHIBIT A [Logo] APPLICATION AND AGREEMENT FOR IRREVOCABLE STANDBY LETTER OF CREDIT / / WITHOUT RENEWALS / / WITH RENEWALS Renewable until _______________________. To: TEXAS COMMERCE BANK NATIONAL ASSOCIATION FOR BANK USE ONLY LATEST DATE P.O. Box 2558 ---------------------------------------------- Houston, Texas 77252-8300 Date: | L/C No.: Date of this Application ________________________ ---------------------------------------------- Applicant No.: ---------------------------------------------- Beneficiary No.: ---------------------------------------------- Advising Bank No.: ---------------------------------------------- Gentlemen: The undersigned Applicant(s) hereby request(s) you to establish an irrevocable Standby Letter of Credit as set forth below in such language as you may deem appropriate, with such variations from such terms as you may in your discretion determine are necessary and are not materially inconsistent with this Application and Agreement, and forward the same by: / / Cable/telex (full details) / / Airmail / / Brief Cable/telex / / Other __________________ / / Through your correspondent for delivery to the beneficiary or advised through ________________________ / / Directly to beneficiary All banking charges other than the issuing Bank's are for / / Beneficiary / / Applicant(s) - ---------------------------------------------------------------------------------------------------------- Liability of | on Behalf of (as to appear on Letter of Credit) | | | | | | | __________ In favor of (Beneficiary) _______________ | __________________________________________________ | | | In figures: | | | | In words: | | | - ---------------------------------------------------------------------------------------------------------- Partial drawings: / / Allowed / / Not Allowed | Expiring at the close of business on If drawings are allowed in installments within | given periods and no drawing is made for an | installment within the applicable period, the | credit | | _________________________________________________ / / Shall / / Shall not be available for | At your counters, unless otherwise indicated, for subsequent installments | Sight Payment - ---------------------------------------------------------------------------------------------------------- To be available by drafts at sight drawn on you duly signed and endorsed, or specify any other drawee: _________________________________________ And accompanied by documents as specified below: Beneficiary's manually signed statement on its letterhead reading exactly as follows: - ---------------------------------------------------------------------------------------------------------- (Complete only when the beneficiary's bank or correspondent is to issue its undertaking based on the issued Standby Letter of Credit) / / Request beneficiary's bank to issue and deliver their (specify type of undertaking, bid or performance bond, or other) ____________________________________________________________ In favor of: ____________________________________________________________ For an amount not exceeding that specified above, effective immediately and expiring at their office on _______________________________________________ (30 days prior to expiry date above) relative to _______________________________________. THE OPENING OF THIS CREDIT IS SUBJECT TO THE TERMS AND CONDITIONS AS SET FORTH ON THE FOLLOWING PAGES, TO WHICH TERMS AND CONDITIONS WE AGREE Please date and sign this Application and Agreement on page 4 hereof. - ---------------------------------------------------------------------------------------------------------- Page 1 of 4
TERMS AND CONDITIONS FOR STANDBY LETTER OF CREDIT In consideration of the issuance of the letter of credit and all renewals, extensions, replacements and amendments thereof (herein called the "Credit") by Bank in accordance with the Application and Agreement (this "Agreement"), the undersigned (hereinafter called "Applicants," whether one or more) jointly and severally agree to the following terms and conditions: 1. Applicants promise to pay to Bank on demand at its office shown on front, in United States currency as follows: A. As to drafts, draws, demands, or other evidence of amounts drawn under or purporting to be drawn under the Credit which are payable in United States currency, the amount paid thereon, or, if so demanded by Bank, to pay Bank at its office in advance the amount required to pay such drafts, draws, demands or other evidence of amounts drawn under or purporting to be drawn under the Credit; B. As to drafts, draws, demands, or other evidence of amounts drawn under or purporting to be drawn under the Credit which are payable in currency other than United States currency, either (i) the amount paid in the currency of the Credit at the bank of Bank's choice in the country of such currency, or (ii) the equivalent of the amount paid, in United States currency, at Bank's then current selling rate for such currency; C. All taxes, levies, imposts, duties, charges, fees, deductions or withholdings of any nature whatsoever and by whomsoever and wherever imposed in connection with this Agreement, the Credit or any transactions hereunder or thereunder; and D. Interest on all amounts owing to Bank hereunder at the maximum nonusurious rate of interest permitted by applicable laws of the United States of America or the State of Texas, from time to time in effect, whichever shall permit the highest lawful rate (hereinafter called "the Highest Lawful Rate"). At all times, if any, that Chapter One of Title 79, Texas Revised Civil Statutes, 1925, as amended, establishes the Highest Lawful Rate, the Highest Lawful Rate shall be the "indicated" rate ceiling (as defined therein) from time to time in effect. It is the intention of Applicants and Bank to conform strictly to applicable usury laws. It is therefore agreed that: (i) if, for any reason, the interest received for the actual period of the existence of any loan by Bank hereunder exceeds the Highest Lawful Rate, Bank shall refund to applicants the amount of the excess or shall credit the amount of the excess against amounts owing hereunder and shall not be subject to any of the penalties provided by law for contracting for, charging, or receiving interest in excess of the Highest Lawful Rate, (ii) the aggregate of all interest and other charges constituting interest under applicable law and contracted for, chargeable or receivable under this Agreement or otherwise in connection with this Agreement or the Credit, shall not for the actual period of the existence of any loan hereunder exceed the maximum amount of interest, nor produce a rate in excess of the Highest Lawful Rate, (iii) if, for any reason, usurious interest is contracted for, charged or received, then the sole remedy of Applicants shall be to receive a refund thereof or a credit on the accrued and unpaid interest and unpaid principal under this Agreement equal to the usurious interest, it being agreed that usurious interest shall mean the amount by which the total interest contracted for, charged or received exceeds the amount of interest allowed by applicable law; and this Agreement shall be automatically deemed reformed so as to permit only the collection of the Highest Lawful Rate of interest, and (iv) determination of the rate of interest on any loan evidenced hereby shall be made by amortizing, prorating, allocating, and spreading, in equal parts during the period of the full stated term of such loan, all interest at any time contracted for, charged or received from Applicants in connection with such loan. E. Applicants assume all risks (political, economic or otherwise) of disruptions or interruptions in currency exchange with respect to any demand payable in other than United States currency, and if there is no then prevailing exchange rate, Bank may obtain the non-United States currency from any commercially reasonable source, in which case Applicants shall pay Bank's cost therefor, inclusive of all expenses, in United States currency. F. Demand, for all purposes of this Agreement, shall be considered made at the time Bank mails, telephones or otherwise sends notification to Applicants. G. Applicants agree to pay to Bank, any Member and/or Correspondent (as hereinafter defined), or its correspondents, annually in advance not later than forty-five (45) days prior to the then current expiration date of the Credit, all fees and commissions owing to or which become owing in respect of the Credit. Such fees and commissions shall be payable at the then current rate charged by Bank and/or such other entity(ies). Payment of such fees or commissions in advance shall not affect the Bank's absolute right not to renew the Credit; however, should bank decide in its sole and absolute discretion not to renew the Credit, Bank shall refund such advance payment to Applicants. 2. Applicants agree that if because of any law or regulation, or because of any change in any existing law or regulation, or in the interpretation thereof by any official authority, whether or not having the force of law, which comes into effect after the date of this Agreement, (a) Bank or Applicants should, with respect to this Agreement, the Credit or any transactions hereunder or thereunder, be subject any tax, charge, fee, insurance premium, deduction or withholding of any kind whatsoever, or (b) reserve requirements, or changes in existing reserve requirements, should be imposed on Bank with respect to this Agreement or the Credit or any transactions hereunder or thereunder, and if any of the above-mentioned measures, or any other similar measure, should result in (i) any increase in the cost to Bank of issuing and maintaining the Credit pursuant to this Agreement or of any transaction under or in connection with the Credit or this Agreement, or (ii) any reduction in the payment or deposit of any amount (principal, interest, fee, commission or otherwise) receivable by Bank in respect of the Credit or this Agreement or of any transaction under the credit or this Agreement, then Applicants shall pay to Bank upon demand such increased cost or reduction, including such additional amounts as may be necessary so that every net payment or deposit, after deduction or withholding for or on account of such payment or deposit (including any taxes levied on additional amounts paid pursuant to this paragraph), will not be less than the corresponding amount provided for under the Credit or this Agreement before giving effect to such increased costs or reduction; provided that in no event shall any additional amounts which constitute interest exceed what is considered, together with other interest payments, the Highest Lawful Rate. 3. Availments under the Credit may be effected through Bank or any advising or confirming bank (the "Payor") at the then current buying rate of the Payor for banker's sight drafts at the place from which the Payor is to receive reimbursement under the terms of the Credit, it being understood and further agreed: (a) that the amount(s) disbursed to the beneficiary(ies) relative thereto may be in the currency local to the site of the Payor, and may be reduced by any taxes and/or other charges whether of the Payor or otherwise, and (b) that an advice of an availment under the Credit from the Payor shall be sufficient evidence to Bank of an availment under the Credit, and such evidence thereof shall be binding upon Applicants for the purposes of this Agreement. 4. If at any time(s) any funds and/or securities are paid to or deposited with or under the control of Bank, not as payment under paragraph 1 hereof, but to be held relative hereto, same shall be held as collateral security for the Obligations (as hereinafter defined) and without Applicants having any right to dispose of the same while any Obligations (as hereinafter defined) exist under this Agreement, but with the discretionary right in Bank to release or surrender all or any part of said funds and/or securities to or upon the order of Applicants. If any such funds are available to Bank at its office in the currency of the Credit at time after any payment may become due hereunder, Bank may (acting in each instance in its discretion and without being required to make any prior demand for payment hereunder) apply all or any part thereof at any time(s) on account of the Obligations (as hereinafter defined), irrespective of the then current rate of exchange. Should the aggregate market value of any such funds and/or securities at any time(s) suffer any decline, or should any such property be unavailable at any time for any reason to Bank at its office or fail to conform to legal requirements, Applicants will, upon demand, make such payment(s) on account of the aforesaid Obligations, or as additional collateral therefor, will deposit and pledge with Bank additional property that is satisfactory to Bank. If any such funds as aforesaid be other than United States dollars and occasion arises for a refund by Bank of all or any portion thereof, it shall be optional with Bank as to whether refund will be made (a) in United States Dollars at the buying rate for the foreign currency on the date of refund, or (b) in the amount and kind of the foreign currency on the date of refund, or (c) by instructing a branch or correspondent of Bank to hold the refundable amount of foreign currency for Applicants' account and risk. 5. Applicants hereby pledge, assign and hypothecate to Bank as security for any and all of the obligations and liabilities of Applicants with respect to the Credit, the Application portion of this Agreement (the "Application") and this Agreement, whether hereinbefore or hereinafter referred to, now or hereafter existing (herein called the "Obligations"), any and all property of Applicants now or at any time(s) hereafter in Bank's possession or control or in the possession or control of any third party acting in Bank's behalf, whether for the express purpose of being used by Bank as collateral security or for safekeeping or for any other or different purpose, including such property as may be in transit by mail or carrier to or from Bank, a lien and security interest being hereby given Bank upon and in any and all such property for the aggregate amount of the Obligations; and Applicants authorize Bank, at Bank's option, at any time(s), whether or not the property then held by Bank as security hereunder is deemed by Bank to be adequate, to appropriate and apply to or upon any and all of the Obligations, whether or not then due, any and all monies now or hereafter with Bank on deposit or otherwise to the credit of or belonging to Applicants and in Bank's discretion, to hold any such monies as security for any such Obligations until the exact amount thereof, if any, shall have been definitely ascertained by Bank. Bank's rights, liens and security interest hereunder shall continue unimpaired, and Applicants shall be and remain obligated in accordance with the terms and provisions hereof, notwithstanding the release or substitution of any property which may be held as collateral hereunder at any time(s) or of any rights or interest therein, or any delay, extension of time, renewal, compromise or other indulgence granted by Bank in reference to any of the Obligations, or any promissory note, draft, bill of exchange or other instrument given Bank in connection with any of the Obligations, Applicants, and each of them individually, hereby waiving notice of any such delay, extension, release, substitution, renewal, compromise or other indulgence, and hereby consenting to be bound thereby as fully and effectually as if Applicants had expressly agreed thereto in advance. 6. Applicants agree at any time and from time to time, on demand, (i) to deliver, convey, transfer or assign to Bank, as security for any and all of the Obligations, and also for any and all other obligations and/or liabilities, absolute or contingent, due or to become due, which are now, or may at any time hereafter, be owing by Applicants to Bank, additional security of a value and character satisfactory to Bank, or (ii) to make such cash payment(s) in partial or full satisfaction of the Obligations of such other obligations or liabilities as Bank in its sole discretion may require. 7. Bank is hereby authorized, at its option and without any obligation to do so, to transfer to and/or register in the name(s) of Bank's nominee(s) all or any part of the property which may be held by it as security at any times(s) hereunder, and to do so before or after the maturity of any of the Obligations and with or without notice to Applicants. 8. The word "property" as used herein includes goods and merchandise (as well as any and all documents relative thereto), securities, funds, monies (whether United States currency or otherwise), choses in action and any and all other forms of property, whether real, personal or mixed, tangible or intangible, and any right or interest of Applicants, or any one or more of them, therein or thereto. Bank is authorized, at its option, to file financing statement(s) and continuation statement(s) without the signature of Applicants with respect to any of the property, and Applicants jointly and severally agree to pay the cost of any such filing and to sign upon request any instruments, documents or other papers which Bank may require to perfect its security interest in the property. A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement. Page 2 of 4 9. No proceeds of the Credit will be used for any purpose which would constitute the Credit a "purpose credit" when the meaning of Regulation U of the Board of Governors of the Federal Reserve System. 10. Applicants jointly and severally represent and warrant that (a) each of them which is not a natural person is duly organized in good standing and validly existing with full power and authority to execute this Agreement; (b) the execution of this Agreement has been duly authorized by all necessary action on the part of all Applicants and does not violate or contravene any law, regulation, order or decree or the articles of incorporation, bylaws, partnership agreement or any other organizational document of any Applicant; (c) all requisite licenses, permits and franchises for the operation of Applicant's business are in full force and effect; (d) any financial statements delivered to Bank in connection herewith fairly present the financial condition and results of operations of the subject or subjects thereof as of the dates and for the periods indicated therein, and no material adverse change has occurred in the financial condition of the subject or subjects thereof since the dates thereof; (e) except as disclosed in writing to Bank in connection herewith, no litigation or administrative proceeding is pending or threatened against any Applicant; and (f) each Applicant has filed all tax returns required to have been filed and paid all taxes shown thereon to be due. Applicants further represent and warrant to Bank that Applicants are not now in violation of any applicable limitations on the aggregate amount of loans that may be made to a borrower by any lender and that issuance of the Credit by Bank will not be, or cause the aggregate credit outstanding to any or all Applicants to exceed such limitations, and Applicants covenant and agree that Applicants will at all times during the term of this Agreement fully comply with and fully advise Bank and Member, if any, of all circumstances relevant to, all applicable lending limits. 11. Upon the non-performance of any of the promises to pay herein set forth, or upon the non-payment of any of the Obligations or other obligations or liabilities of Applicants herein, or upon the failure of Applicants to furnish satisfactory additional collateral or to make payments on account as hereinabove agreed, or to perform or comply with any of the other terms or provisions of this Agreement, or in the event of default under any security agreement or guaranty or other document securing or guaranteeing Applicants' payment and performance of the Obligations, or should any information supplied on behalf of Applicants prove to be incorrect, false or misleading, or in the event of the death, insolvency, business failure, dissolution or termination of existence of any Applicant, or in case any petition in bankruptcy is filed by or against any Applicant, or any proceeding is commenced for the relief or readjustment of any indebtedness of any Applicant, either through reorganization, composition, extension or otherwise, or if any Applicant should make an assignment for the benefit of creditors or take advantage of any insolvency law, or if a receiver for any property of any Applicant should be appointed at any time, and in each case any of the foregoing is initiated under laws or regulations of any jurisdiction relating to the relief of debtors, then upon such occurrence, any or all of the Obligations shall, at Bank's option, become due and payable immediately, without demand or notice, notice of acceleration and of intention to accelerate being hereby expressly waived by each Applicant. 12. Upon Applicants' failure to pay any Obligation when due, as aforesaid, or upon the occurrence of any of the events described in paragraph 11 above, Bank shall have, in addition to all other rights and remedies allowed by law, the right immediately, without demand for performance and without notice of intention to sell or of the time or place of sale or of redemption or other notice or demand whatsoever to any Applicant, all of which are hereby expressly waived, and without advertisement, to sell at any broker's board, or at public or private sale, or to grant options to purchase, or otherwise to realize upon the whole or from time to time any part of the collateral upon which Bank shall have a security interest or lien as aforesaid, or any interest which Applicants may have therein, and after deducting from the proceeds of sale or other disposition of the said collateral all expenses (including but not limited to reasonable attorneys' fees for legal services of every kind and other expenses as set forth below) shall apply the residue of such proceeds toward the payment of any of the Obligations, in such order as Bank shall elect, and whether then due or not due, Applicants remaining liable for any deficiency remaining unpaid after such application. If notice of any sale or other disposition is required by law to be given, each Applicant hereby agrees that a notice sent at least two (2) days before the time of any intended public sale or of the time after which any private sale or other disposition of the said collateral is to be made, shall be reasonable notice of such sale or other disposition. Applicants also agree to assemble the said collateral at such place or places as Bank designates by written notice. At any such sale or other disposition, Bank may itself purchase the whole or any part of the said collateral sold, free from any right of redemption on the part of Applicants and free of any right to require sale in inverse order of alienation, which rights are hereby waived and released. Applicants agree that the said collateral secures, and further agree to pay on demand, whether or not any default by Applicants has occurred, all expenses (including but not limited to, reasonable attorneys' fees for legal services of every kind, the cost of any insurance and the payment of all taxes or other charges) of, or incidental to, the custody, care, appraisal, sale or collection of, or realization upon, any of the said collateral or in any way relating to the enforcement or protection of Bank's rights hereunder. Where applicable, Bank shall have, to the maximum extent permitted by applicable law, in addition to and cumulative of the rights hereinabove provided, all of the rights and remedies provided to a secured party by the Uniform Commercial Code in effect in the State of Texas on the date of this Agreement. 13. No delay on the part of Bank in exercising any power of sale, lien, option or other right hereunder, and no notice or demand which may be given or made upon Applicants by Bank with respect to any power of sale, lien or other right hereunder, shall constitute a waiver thereof or limit or impair the right of Bank to take any action or to exercise any power of sale, lien, option or any other right hereunder, without demand or notice or prejudice to the rights of Bank as against Applicants in any respect. Any and all rights and liens of Bank hereunder shall continue unimpaired, and Applicants shall be and remain obligated in accordance with the terms and provisions hereof, notwithstanding the release or substitution of any property as referred to herein, or of any rights or interests therein, or any delay, extension of time, renewal, compromise or other indulgence granted by Bank in reference to any of the Obligations, Applicants each hereby waiving notice of any such delay, extension, release, substitution, renewal, compromise or other indulgence, and each hereby consenting to be bound thereby as fully and effectually as if Applicants had expressly and specifically agreed thereto. 14. The users and beneficiaries of the Credit shall be deemed Applicants' agents, and Applicants assume all risks of the acts or omissions of the users or beneficiaries of the Credit. Neither Bank nor its correspondents or affiliates shall assume any liability to anyone for failure to pay or accept if such failure is due to any restriction in force at the time and place of presentment, and Applicants agree to indemnify Bank from any consequences that may arise therefrom. Neither Bank nor Bank's correspondents or affiliates shall be liable or responsible in any respect for any (a) error, omission, interruption or delay in transmission, dispatch or delivery of any one or more messages or advices in connection with the Application or the Credit, whether transmitted by cable, radio, telegraph, twx, wireless, mail, electronic mail, telex, telefax, telecopy, SWIFT, or otherwise and despite any cipher or code which may be employed, or (b) errors in translation or for errors in interpretation of technical terms, or (c) action, inaction or omission which may be taken or suffered by it or them in good faith or through inadvertence in identifying or failing to identify any beneficiary(ies) or otherwise in connection with the Credit, or (d) validity, sufficiency or genuineness of document(s) even if such document(s) should in fact prove to be in any or all respects invalid or insufficient, fraudulent or forged, or (e) act, error, neglect or default, omission, insolvency or failure in business of any of Bank's correspondents. The happening of any one or more of the contingencies described above shall not affect, impair or prevent the vesting of any of Bank's rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions hereinbefore set forth, it is hereby further agreed that any action, inaction, or omission taken or suffered by Bank or by any of its correspondents under or in connection with the Credit or the relative drafts, demands, documents or property, if in good faith and in conformity with such foreign or domestic laws, customs or regulations as Bank or any of its correspondents may deem to be applicable thereto, shall be binding upon Applicants and shall not place Bank or any of its correspondents under any resulting liability to Applicants. If the Credit or this Agreement shall be terminated or revoked by operation of law as to any Applicant, or if any Applicant shall restrain the payment of the Credit by court order or any other means, or if this Agreement or the Credit are amended, modified, revoked or cancelled as provided for herein and any dispute, claim, demand or cause of action arises with respect thereto, Applicants will jointly and severally indemnify and save Bank harmless from any and all loss, cost, damage, expense, suit, claim, cause of action, judgment and attorneys' fees which may be suffered or incurred by Bank, whether caused in whole or in part by the negligence of Bank or any correspondent or affiliate of Bank. 15. The Credit and this Agreement may be amended, modified, cancelled or revoked only upon the receipt by Bank from all Applicants of a written request therefor, and then only upon such terms and conditions as Bank may prescribe and then only by a writing signed by all Applicants, the beneficiaries and Bank. Notwithstanding the foregoing, however, Bank may, upon receipt of a written request therefor, signed by all Applicants, extend the expiration date and/or increase the amount of the Credit without the written or oral acceptance or consent of any or all beneficiaries of the Credit. Bank is authorized without reference to or approval by any Applicant to set forth the terms appearing on the Application portion hereof in the Credit and to modify or alter such terms in such language as Bank may deem appropriate, with such variations from such terms as Bank may at its discretion determine (which determination shall be conclusive and binding upon Applicants) are necessary and are not materially inconsistent with such terms. 16. Notwithstanding anything herein (except paragraph 17) to the contrary, it is understood and agreed that, if the Credit is issued in favor of a sovereign or commercial entity which is to issue a commitment or guarantee on Applicants' behalf in connection herewith, each Applicant shall remain liable on the Credit until Bank is fully released in writing by such entity. Applicants jointly and severally agree to pay (a) all costs and expenses incurred by Bank in collection of amounts advanced under the Credit and any and all other amounts remaining unpaid hereunder through probate, reorganization, bankruptcy or any other proceeding and (b) reasonable attorneys' fees when and if collection of any such amount is placed in the hands of an attorney for collection after default. 17. Notwithstanding anything contained herein or in any other separate security agreement or other document executed heretofore, herewith or hereafter in connection with or related to this credit obligation, if this is a consumer credit obligation (as defined or described in 12 C.F.R. 227, Regulation AA, promulgated by the Federal Reserve Board), the security for this credit obligation shall not extend to any non-possessory security interest in household goods (as defined in said Regulation AA) other than a purchase money security interest, and no waiver of any notice contained herein or therein shall be construed under any circumstances to extend to any waiver of notice prohibited by Regulation AA. 18. This Agreement and the Credit are subject to and incorporate fully herein (except as expressly modified herein or in the Credit) the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, (hereinafter referred to as "the Uniform Customs"). THIS AGREEMENT AND THE RIGHTS OF APPLICANTS AND BANK HEREUNDER SHALL BE SUBJECT TO AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE RULES REGARDING CONFLICTS OF LAWS, EXCEPT WHEN THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS CONFLICT WITH THE UNIFORM CUSTOMS, IN WHICH EVENT THE PROVISIONS OF THE UNIFORM CUSTOMS SHALL GOVERN. Page 3 of 4 19. If the Credit is governed by the laws of a foreign jurisdiction, the Credit may require Bank to pay funds as Bank's primary obligation. In the event Bank is, or in good faith deems itself to be, obligated to advance funds to the beneficiary(ies) hereof. Applicants hereby expressly jointly and severally agree to reimburse Bank on demand for all such advances made, notwithstanding any expiration or cancellation of the Credit by Bank or under Texas law or the Uniform Customs and even though Applicants may have an unresolved controversy with a third party or the beneficiary(ies) related to the transaction for which the Credit is being sought, including the proper interpretation of the law of such foreign jurisdiction. In the event Applicants have a dispute with the beneficiary(ies) or a third party, Applicants are required to reimburse Bank on demand, and Applicants' remedy is to seek reimbursement from the beneficiary(ies) or the third party. Bank is expressly authorized to presume that all demands for payment made by the beneficiary(ies) hereof are made in accordance with such foreign law. 20. Unless otherwise expressly stated herein or in the Credit, neither the Credit nor this Agreement may be assigned by the beneficiary(ies) or any Applicant without the prior written consent of Bank. Bank may assign or transfer the Credit or this Agreement, or any instrument(s) evidencing all or any of the Obligations, and may deliver all or any of the property then held as security therefor, to the transferee(s) of Bank, who shall thereupon become vested with all of the powers and rights in respect thereof given to Bank herein or in the instrument(s) transferred, and Bank shall thereafter be forever relieved and fully discharged from any liabilities or responsibility with respect thereto, but Bank shall retain all rights and powers hereby given with respect to any and all instrument(s), rights or property not so transferred. 21. This Agreement, the Application and the Credit constitute the entire agreement among the parties hereto, except for such agreements executed in connection herewith which specifically refer to this Agreement, the Application or the Credit or which grant to Bank a lien or security interest to secure any debts or obligations of any Applicant, regardless of any reference or lack thereof to this Agreement, Application or the Credit. Terms used herein in the plural number shall be construed as singular as the context requires and vice versa. 22. Although the Credit may refer to a particular agreement or other obligation to the beneficiary(ies) executed by Applicants, the terms of such agreement are not in any manner incorporated herein. Bank shall therefore make payment upon demand under the Credit unless it appears that such demand, on its face, does not comply with the terms of the Credit. Such payment shall be made without regard to performance of any obligation by any contracting party under such agreement. 23. Applicants agree that at all times now and hereafter they will indemnify and save Bank harmless from and against all suits, judgments, liabilities, losses or damages to it arising in any manner, including negligence on the part of Bank in connection with the Credit or this Agreement, unless due to gross negligence or willful misconduct on the part of Bank, and from and against all costs, charges and expenses, including in connection with all legal proceedings, whether groundless or otherwise, attorneys' fees, it being the purpose of this Agreement to protect Bank fully in the premises. 24. Applicants agree that no acceptance or payment of overdrafts or irregular drafts or of drafts with irregular documents attached shall, if assented to or approved by any Applicant orally or in writing, or if Bank in good faith accepts an indemnity limited to the actual damage, if any, caused by such irregularity or discrepancy, impair any rights which Bank may have under this Agreement. In case of any variation between the documents called for by the Credit or this Agreement and the documents accepted by Bank or Bank's correspondents, Applicants shall each be deemed conclusively to have waived any right to object to such variation with respect to any action by Bank or Bank's correspondents relating to such documents and to have ratified and approved such action as having been taken on Applicants' direction, unless Applicants immediately upon receipt of such documents (and prior to receipt thereof by any beneficiary or user of the Credit) file objection with Bank in writing, or unless Bank has been provided with an indemnity, as aforesaid. Applicants acknowledge and agree that, the information in the Application portion of this Agreement may be transmitted to Bank and relied on by Bank in issuing the Credit by any means acceptable to Bank, including without limitation, SWIFT, electronic mail, telex, telephone, twx, telecopy or telefax. Applicants, Member and Correspondent (both as hereinafter defined) agree to hold Bank harmless from and against all claims, expenses, costs, liabilities, attorneys' fees, suits, judgments, and causes of action arising out of any discrepancy between the information in this Agreement, including without limitation, the Application, and that transmitted to, or received by, Bank. 25. Issuance by Bank of the Credit applied for herein shall constitute acceptance by Bank of this Agreement. 26. If this Agreement contains the signature of a bank which is a subsidiary of Texas Commerce Bancshares, Inc. (hereinafter referred to as the "Member") or of a correspondent bank of Bank (hereinafter referred to as the "Correspondent"), then this paragraph shall be applicable. In consideration of Bank's issuing the Credit at the request of Correspondent or Member, as applicable, Correspondent or Member as applicable, agrees that it is an Applicant hereunder with respect to Bank, and it agrees to reimburse Bank on demand and authorizes Bank, without demand or any notice whatsoever, to charge, setoff against and otherwise exercise any rights Bank may have with respect to, any monies now or hereafter on deposit with or otherwise to the credit of or belonging to Correspondent or Member, as applicable, at or with Bank for any and all Obligations hereunder, whether or not any demand has been made on Applicants hereunder. As an Applicant hereunder, each Correspondent or Member Bank, as applicable, makes the same representations, warranties, covenants and agreements to Bank as the Applicants in paragraph 10 hereof and otherwise provided in this Agreement; provided, however unless otherwise agreed to in writing, or stated herein neither Member nor Correspondent agrees to furnish any security for this Agreement or the Credit other than the aforementioned monies. Upon Member's or Correspondent's, as applicable, payment to Bank of all Obligations hereunder, Bank thereupon automatically, and without further action on the part of any party, assigns and transfers its rights hereunder to Correspondent or Member, as applicable, who shall be fully subrogated thereto, and Applicants agree to indemnify and hold Bank harmless from and against any claims, costs, expenses, suits or causes of action by Applicants or any beneficiary or user of the Credit. APPLICANTS HEREBY AGREE THAT CORRESPONDENT OR MEMBER, AS APPLICABLE, SHALL ALSO (IN ADDITION TO BANK) HAVE THE SAME RIGHTS, REMEDIES, SECURITY INTERESTS AND OTHER LIENS AS ARE STATED HEREIN, TO THE SAME EFFECT AS IF ADDITIONAL PARAGRAPHS WERE FULLY WRITTEN HEREIN CONTAINING THE SAME TERMS BUT SUBSTITUTING "CORRESPONDENT" OR "MEMBER" FOR "BANK" THROUGHOUT. ALL REFERENCES TO SECURED PARTY, BENEFICIARY OR OTHER SIMILAR TERM CONTAINED IN ANY DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT OR OTHER DOCUMENT OR INSTRUMENT EXECUTED CONTEMPORANEOUSLY HEREWITH OR PREVIOUSLY EXECUTED BY ANY OF THE APPLICANTS FOR THE BENEFIT OF MEMBER OR CORRESPONDENT SHALL BE DEEMED TO INCLUDE BANK AS WELL AS MEMBER OR CORRESPONDENT. ALL SUCH SECURITY AGREEMENTS, FINANCING STATEMENTS, DEEDS OF TRUST AND OTHER DOCUMENTS AND INSTRUMENTS ARE AMENDED TO THE EXTENT NECESSARY IN ORDER THAT THE OBLIGATIONS OF APPLICANTS HEREUNDER ARE SECURED THEREBY AND BY THE COLLATERAL DESCRIBED THEREIN ON A PARI PASSU BASIS WITH, AND IN ADDITION TO, ANY OTHER OBLIGATIONS SECURED THEREBY. 27. / / If this box is checked this paragraph is applicable. Applicants have requested Bank to issue a Credit which the Bank may, but is not required, to renew on an annual basis until the "latest date" indicated on the Application or such later date as any Applicant may hereafter request in writing. Applicants agree that Bank has made no commitment to any beneficiary or any Applicant, and that Bank has no obligation, to renew the Credit at or prior to the original or any subsequent expiration date. Except as expressly provided in the Credit, Bank shall have no liability to any beneficiary for the renewal of, or failure to renew, the Credit for any reason. Except as hereinafter agreed, the Bank shall not have any liability to Applicants due to the renewal of, or failure to renew, the Credit for any reason. Except to the extent any notice may be required in the Credit, Bank is not required to notify any beneficiary or Applicant of the renewal, or failure to renew, the Credit. Subject to the other conditions and indemnities in this Agreement, including negligence by Bank, Bank and Applicants agree that Bank will not renew the Credit if it receives, and an authorized officer of Bank acknowledges such receipt in writing, written notification from any Applicant at least 14 days and not more than 30 days prior to the earliest date on which, pursuant to the terms of the Credit, Bank must either renew or decline to renew the Credit or notify beneficiary(ies) of its decision to renew or not to renew the Credit. Such written notification must specify to the satisfaction of Bank the Credit, the then current expiration date, and such Applicant's request that the Credit not be renewed. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. APPLICANTS: ----------------------------------- Printed Name - ----------------------------------- Printed Name By: ------------------------------- By: Authorized Signature ------------------------------- Authorized Signature CORRESPONDENT/MEMBER BANK: - ----------------------------------- ----------------------------------- Printed Name Printed Name By: By: ------------------------------- ------------------------------- Authorized Signature Authorized Signature BANK ACCEPTANCE: The Bank's Acceptance evidenced by the undersigned authorized representative's signature is provided as its acknowledgement that this agreement represents the final agreement by the parties which may not be contradicted by evidence of prior contemporaneous, or subsequent oral agreements between the parties. TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: -------------------------------- Page 4 of 4 EXHIBIT B BORROWING BASE CERTIFICATE (FOR THE MONTH ENDING ___________________ OR AS OF ____________________) HAGGAR CLOTHING CO. TO: TEXAS COMMERCE BANK National Association 2200 Ross Avenue P. O. Box 660197 Dallas, Texas 75266 Attention: John P. Dean DATE: __________________, 199__ RE: First Amended and Restated Credit Agreement dated as of September 18, 1996 (the "Agreement"), by and among Haggar Clothing Co., Haggar Corp., Texas Commerce Bank National Association and the Banks Listed in the Agreement, as amended - ------------------------------------------------------------------------------- 1. RECEIVABLES A. Total Receivables $ ____________ B. LESS: (i) Receivables unpaid ($_________) after 90 days after date of invoice (or the effective date of Dated Invoices) (ii) all uncollectible ($____________) Receivables (iii) reserve for "discounts" ($____________) (iv) reserve for "build-ups" ($____________) (v) reserve for "deductions" ($____________) (vi) reserve for GMI discounts ($____________) (vii) other reserves ($____________) C. Total Eligible Receivables $____________ D. 80% of Eligible Receivables $____________ 2. INVENTORY A. Total Inventory per attached $____________ summary schedule B. less: ineligible Inventory ($____________) C. Total Eligible Inventory $____________ D. 50% of Eligible Inventory $____________ 3. BORROWING BASE A. (i) 80% of Eligible Receivables $____________ (ii) 50% of Eligible Inventory $____________ B. Borrowing Base Formula Sum $____________ C. less: amount by which (A)(ii) is greater than 50%* of the Borrowing Base Formula Sum ($__________) D. Borrowing Base $____________ 4. BORROWING BASE AVAILABILITY A. Borrowing Base $____________ B. less: Principal amount ($__________) outstanding under the Agreement C. Borrowing Base Availability $____________ 5. AVAILABLE COMMITMENT A. Total Commitments $100,000,000** B. less: (i) Principal amount ($__________) outstanding under the Agreement (ii) aggregate amount ($__________) of all issued and outstanding Letters of Credit C. Available Commitment $____________ _________________ * 60% in the months of January, June, July and December. ** Subject to reduction as provided in the Agreement. 6. AVAILABILITY A. Borrowing Base Availability $____________ B. Available Commitment $____________ C. Lesser of A or B $____________ I hereby certify that, to the best of my knowledge after appropriate inquiry, the foregoing is true and correct as of the last day of the month indicated. ---------------------------------- ---------------------------------- Printed Name and Title EXHIBIT C NOTE $__________________ _______________, 199__ FOR VALUE RECEIVED, Haggar Clothing Co., a Nevada corporation (the "Company"), promises to pay to the order of _________________ (the "Bank"), in accordance with the terms and provisions of that certain First Amended and Restated Credit Agreement dated as of September 18, 1996, executed by and among the Company, Haggar Corp., Texas Commerce Bank National Association, individually and as the Agent, and the other Banks named therein (as amended, supplemented or otherwise modified form time to time, the "Agreement"), the principal sum of ________________________ ($______________) or the aggregate unpaid principal amount of all Advances made by the Bank to the Company, whichever is less, in immediately available funds at the main office of the Agent, together with interest on the outstanding principal amount hereof at the rates and on the dates set forth in the Agreement. The Company shall pay each Advance in full on the dates set forth in the Agreement. All payments hereunder shall be made by the Company without setoff, counterclaim or deduction of any kind. This Note has been executed and delivered pursuant to, and shall be governed by, the terms and provisions of the Agreement. Each capitalized term used herein and not otherwise defined herein shall have the same meaning attributed to such term in the Agreement. If any Default described in the Agreement shall occur, the entire unpaid principal amount of this Note and all of the unpaid interest accrued thereon may become or be declared due and payable without notice or demand in the manner and with the effect provided in the Agreement. THIS WRITTEN NOTE, TOGETHER WITH THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE COMPANY AND THE BANK AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENT OF THE COMPANY AND THE BANK. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE COMPANY AND THE BANK. The Bank may, and is hereby authorized to, record on the schedule attached to this Note, or to otherwise record in accordance with its usual practice, the date and amount of each Advance and the date and amount of each payment of principal and/or interest on this Note, in the manner and with the effect provided in the Agreement. This Note has been executed and delivered in renewal of and substitution and replacement for the Note dated September 14, 1992, payable to the order of _______________ and originally delivered pursuant to the Prior Agreement. HAGGAR CLOTHING CO., a Nevada corporation By: ------------------------------- Name: ------------------------------- Title: ------------------------------- SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF HAGGAR CLOTHING CO., DATED___________, 199__ Principal Maturity Principal Amount of of Interest Amount Unpaid Date Advance Period Paid Balance - ---- --------- ----------- --------- ------- EXHIBIT D CONSENT OF HAGGAR Haggar hereby (a) agrees that the Parent Guaranty is and shall remain in full force and effect to the additional effect that the Obligations under the First Amended and Restated Credit Agreement (the "Agreement") to which this Consent of Haggar is attached are a part of the Obligations under the Parent Guaranty, (b) ratifies and confirms all terms and provisions of the Parent Guaranty, as amended hereby, (c) acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the terms and provisions of and the obligations created and evidenced by the Parent Guaranty, as amended hereby, (d) reaffirms all agreements and obligations under the Parent Guaranty, as amended hereby, with respect to the Loans, the Notes, the Agreement and all other documents, instruments or agreements governing, securing or pertaining to the Loans, and (e) represents and warrants that all requisite corporate action necessary for it to execute this Consent of Haggar has been taken. HAGGAR CORP., a Nevada corporation By: -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer Dated: ------------------------ EXHIBIT E GUARANTY OF DOMESTIC SUBSIDIARIES THIS GUARANTY (this "GUARANTY") is executed as of ____________________, 199___, by each of the corporations that are signatories hereto (collectively, the "GUARANTORS") in favor of TEXAS COMMERCE BANK National Association, a national banking association, as agent (in such capacity, the "AGENT") for the banks (the "BANKS") that are parties to the First Amended and Restated Credit Agreement described below. W I T N E S S E T H WHEREAS, HAGGAR CLOTHING CO., a Nevada corporation (the "COMPANY"), is a party to that certain First Amended and Restated Credit Agreement dated July __, 1996, with the Agent and the Banks (as the same may from time to time be amended, supplemented or otherwise modified, the "CREDIT AGREEMENT"); WHEREAS, pursuant to the terms of the Credit Agreement and the other Credit Documents (as hereinafter defined), the Banks have agreed to make certain Extensions of Credit (as hereinafter defined) to or for the benefit of the Company; WHEREAS, the Company owns directly or indirectly all of the issued and outstanding stock of each Guarantor; WHEREAS, the proceeds of Extensions of Credit will be used in part to enable the Company to make Valuable Transfers (as hereinafter defined) to some of the Guarantors in connection with the operation of their respective businesses; WHEREAS, the Company and the Guarantors are engaged in related businesses, and each Guarantor will derive substantial direct and indirect benefit from the making of the Extensions of Credit; and WHEREAS, the obligation of the Banks to make the Extensions of Credit is conditioned upon, among other things, the execution and delivery by the Guarantors of this Guaranty; NOW, THEREFORE, in consideration of the premises and to induce the Banks to enter into the Credit Agreement and to make Extensions of Credit, each Guarantor hereby agrees with and for the benefit of the Agent and the Banks as follows: 1. DEFINED TERMS. As used in this Guaranty, terms defined in the Credit Agreement are used herein as therein defined, and the following terms shall have the following meanings: "ADJUSTED NET WORTH" of any Guarantor shall mean, as of any date of determination thereof, the excess of (i) the amount of the "present fair saleable value" of the assets of such Guarantor as of the date of such determination, over (ii) the amount of all "liabilities of such Guarantor, contingent or otherwise", as of the date of such determination, as such quoted terms are determined in accordance with applicable Federal and state laws governing determinations of the insolvency of debtors. In determining the Adjusted Net Worth of any Guarantor for purposes of calculating the Maximum Guaranteed Amount for such Guarantor in respect of any Extension of Credit, the liabilities of such Guarantor to be used in such determination pursuant to clause (ii) of the preceding sentence shall in any event (a) include the liabilities of such Guarantor hereunder and under the other Credit Documents in respect of all Extensions of Credit other than the Extension of Credit in respect of which such calculation is being made and (b) exclude liabilities of such Guarantor owing to any member of the Company Group. "CREDIT DOCUMENTS" shall mean the Credit Agreement, the Notes and the other loan documents. "EXTENSION OF CREDIT" shall mean all loans or advances made to the Company under any Credit Document. "MAXIMUM GUARANTEED AMOUNT" for any Guarantor shall mean, as of any date of determination thereof, the lesser of (i) the outstanding amount of any Extension of Credit (or portion thereof) as of such date and (ii) the greater of (a) ninety-five percent (95%) of the Adjusted Net Worth of such Guarantor at the time of such Extension of Credit and (b) ninety-five percent (95%) of the Adjusted Net Worth of such Guarantor at the earliest of (x) such date, (y) the date of the commencement of a case under Title 11 of the United States Code in which such Guarantor is a debtor and (z) the date enforcement hereunder is sought. "OBLIGATIONS" shall mean the unpaid principal of and interest on the Notes and all other obligations and liabilities of the Company to the Agent or the Banks, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, the Notes, the other Credit Documents or any other document made, delivered or given in connection therewith, and each other obligation and liability, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, of the Company to the Agent or the Banks, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to the Agent or any Bank) or otherwise. "VALUABLE TRANSFER" shall mean, in respect of any Guarantor, (i) all loans, advances or capital contributions made to such Guarantor with proceeds of Extensions of Credit, (ii) all debt securities or other obligations of such Guarantor acquired from such Guarantor or retired by such Guarantor with proceeds of Extensions of Credit, (iii) the fair market value of all property acquired with proceeds for Extensions of Credit, and transferred, absolutely and not as collateral, to such Guarantor and (iv) all equity securities of such Guarantor acquired from such Guarantor with proceeds of Extensions of Credit. 2. GUARANTY. (a) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Agent and the Banks and their respective successors, endorsees, transferees and assigns, the prompt and complete payment by the Company when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations, and each Guarantor further agrees to pay any and all expenses (including, without limitation, all fees and disbursements of counsel) which may be paid or incurred by the Agent or any Bank in enforcing, or obtaining advice of counsel in respect of or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, such Guarantor under this Guaranty; PROVIDED, HOWEVER, that, anything herein or in any other Credit Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Credit Documents shall in no event exceed such Guarantor's Maximum Guaranteed Amount as determined at the earlier of the date of the commencement of a case under Title 11 of the United States Code in which such Guarantor is a debtor and the date enforcement hereunder is sought. (b) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the Maximum Guaranteed Amount of such Guarantor or of all of the Guarantors without impairing this Guaranty or affecting the rights and remedies of the Agent and the Banks hereunder. (c) No payment or payments made by the Company, any of the Guarantors, any other guarantor or any other Person or received or collected by the Agent or any Bank from the Company, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor. (d) Each Guarantor agrees that whenever, at any time, or from time to time, it shall make any payment to the Agent or any Bank on account of its liability hereunder, it will notify the Agent in writing that such payment is made under this Guaranty for such purpose. 3. RIGHT OF SET-OFF. Upon the occurrence of any Default specified in the Credit Agreement, each Guarantor hereby irrevocably authorizes each Bank at any time and from time to time without notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each Guarantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing to such Bank to or for the credit or the account of such Guarantor, or any part thereof in such amounts as such Bank may elect, against and on account of the obligations and liabilities of such Guarantor to such Bank hereunder and claims of every nature and description of such Bank against such Guarantor, in any currency, whether arising hereunder, under the Credit Agreement, the Notes, the other Credit Documents or otherwise, as such Bank may elect, whether or not the Agent or any Bank has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. Each Bank agrees to notify such Guarantor promptly of any such set-off and the application made by such Bank, PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Bank under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Bank may have. 4. NO SUBROGATION. Notwithstanding any payment or payments made by any of the Guarantors hereunder or any set-off or application of funds of any of the Guarantors by any Bank, no Guarantor shall be entitled to be subrogated to any of the rights of the Agent or any Bank against the Company or any other Guarantor or any collateral security or guarantee or right of offset held by any Bank for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any reimbursement from the Company or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Agent and the Banks by the Company on account of the Obligations are paid in full and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Agent and the Banks, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Agent and the Banks may determine. 5. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF RIGHTS. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by the Agent or any Bank may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Agent or any Bank (subject to any other applicable requirement relating to the taking of such action) and the Credit Agreement, the Notes, the other Credit Documents, any other collateral security document or other guarantee or document in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Agent and/or any Bank may deem advisable from time to time (subject to any other applicable requirement relating to the taking of such action), and any collateral security, guarantee or right of offset at any time held by the Agent or any Bank for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. When making any demand hereunder against any of the Guarantors, the Agent or any Bank may, but shall be under no obligation to, make a similar demand on the Company or any other Guarantor or guarantor, and any failure by the Agent or any Bank to make any such demand or to collect any payments from the Company or any such other Guarantor or guarantor or any release of the Company or such other Guarantor or guarantor shall not relieve any of the Guarantors in respect of which a demand or collection is not made or any of the Guarantors not so released of their several obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Agent or any Bank against any of the Guarantors. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 6. GUARANTY ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Agent or any Bank upon this Guaranty or acceptance of this Guaranty; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guaranty; and all dealings between the Company or any of the Guarantors and the Agent or any Bank shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guaranty. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Company or any of the Guarantors with respect to the Obligations. Each Guarantor understands and agrees that this Guaranty shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of the Credit Agreement, the Notes, any of the other Credit Documents, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Agent or any Bank (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Company against the Agent or any Bank, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Company or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Company for the Obligations, or of such Guarantor under this Guaranty, in bankruptcy or in any other instance. This Guaranty shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Guarantor and the successors and assigns thereof, and shall inure to the benefit of the Agent and the Banks, and their respective successors, endorsees, transferees and assigns, until all the Obligations and the obligations of each Guarantor under this Guaranty shall have been satisfied by payment in full and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Agreement the Company may be free from any Obligations. 7. REINSTATEMENT. This Guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Agent or any Bank upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. 8. PAYMENTS. Each Guarantor hereby guarantees that payments hereunder will be paid to the Agent without set-off or counterclaim in Dollars at the office of the Agent located at 2200 Ross Avenue, Dallas, Texas 75201. 9. SUBORDINATION. Each Guarantor hereby subordinates in right of payment with respect to any and all Intercompany Indebtedness now or hereafter owed to Guarantor to the prior payment in full of the Obligations, and agrees with the Agent and the Banks that: (a) Guarantor shall not, after a Default (or an Unmatured Default, in the case of payments or distributions made outside the ordinary course of its business): (i) demand, sue for, take, or accept or receive, directly or indirectly, any payment of principal or interest with respect to such Intercompany Indebtedness, whether in cash or other property; (ii) claim any offset or other reduction of Guarantor's obligations hereunder because of any such Intercompany Indebtedness; or (iii) take any other action to make it the same. (b) Any payments or distributions upon or with respect to the Indebtedness subordinated hereby which are received by such Guarantor following a Default (or an Unmatured Default, in the case of payments or distributions made outside the ordinary course of business) shall be collected, enforced and received by Guarantor as trustee for the Banks and paid over to the Agent on account of the Obligations. (c) In the event of any distribution of all or any of the assets of such Guarantor to its creditors upon the dissolution, winding up, liquidation, arrangement, reorganization, adjustment, protection or relief of such Guarantor or its debts, whether in any bankruptcy, insolvency, arrangement, reorganization, receivership, relief or similar proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of such Guarantor, any payment or distribution of any kind (whether in cash, property, or securities) which otherwise would be payable or deliverable upon or with respect to the Intercompany Indebtedness subordinated hereby shall be paid or delivered directly to the Agent for the benefit of the Banks for application to (in the case of cash) or as collateral for (in the case of non-cash property or securities) the payment of the Obligations until the Obligations shall have been paid in full. (d) If any proceeding referred to in subsection (c) above is commenced by or against such Guarantor, the Agent is hereby irrevocably authorized and empowered (in its own name or in the name of such Guarantor), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution referred to in subsection (c) above, and give acquittance therefor, and to file claims and proofs of claim and take such other action (including, without limitation, voting the Intercompany Indebtedness subordinated hereby or enforcing any security interest or lien securing its payment) as it may deem necessary or advisable for the exercise or enforcement of any of the rights of the Agent and Banks hereunder. (e) The Agent and/or the Banks are hereby authorized to demand specific performance of this Guaranty at any time when such Guarantor shall have failed to comply with any of the provisions of this Guaranty. 10. SEVERABILITY. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11. PARAGRAPH HEADINGS. The paragraph headings used in this Guaranty are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 12. NO WAIVER; CUMULATIVE REMEDIES. Neither the Agent nor any Bank shall by any act (except by a written instrument pursuant to paragraph 13 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Unmatured Default or Default (as such terms are defined in the Credit Agreement) or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Agent or any Bank, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Agent or any Bank of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Agent or such Bank would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. 13. INTEGRATION; WAIVERS AND AMENDMENTS AND SUCCESSORS AND ASSIGNS. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN EACH GUARANTOR AND THE AGENT AND THE BANKS AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT OF EACH GUARANTOR, THE AGENT AND THE BANKS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN EACH GUARANTOR, THE AGENT AND THE BANKS. There are no promises or representations by the Agent or any Bank relative to the subject matter hereof not reflected herein. None of the terms or provisions of this Guaranty may be waived, amended or supplemented or otherwise modified except by a written instrument executed by each Guarantor and the Agent, PROVIDED that any provision of this Guaranty may be waived by the Agent and the Banks in a letter or agreement executed by the Agent or by telex or facsimile transmission from the Agent. This Guaranty shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of the Agent and the Banks and their respective successors and assigns. 14. NOTICES. All notices, requests and demands to or upon the Guarantors or the Agent or any Bank to be effective shall be in writing or by facsimile or telex and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made as provided in Article 13 of the Credit Agreement, and shall be addressed to a party at the address provided for such party pursuant to SCHEDULE 1 hereto. 15. COUNTERPARTS. This Guaranty may be executed by one or more of the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 16. GOVERNING LAW. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS Of THE STATE OF TEXAS. 17. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR WITH RESPECT TO THIS GUARANTY OR OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF TEXAS, DALLAS COUNTY, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY, EACH GUARANTOR ACCEPTS, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS GUARANTY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. ANY GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH JURISDICTION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered by its duly authorized officer as of the day and year first above written. ---------------------------------------------, a --------------------------------------------- By: ---------------------------------------- ---------------------------------------- ---------------------------------------- EXHIBIT F CONSENT OF DOMESTIC SUBSIDIARIES Each of the undersigned Subsidiaries hereby (a) agrees that the Subsidiary Guaranty to which it is a signatory is and shall remain in full force and effect to the additional effect that the Obligations under the First Amended and Restated Credit Agreement (the "Agreement") to which this Consent of Domestic Subsidiaries is attached are a part of the Obligations under the respective Subsidiary Guaranty, (b) ratifies and confirms all terms and provisions of the Subsidiary Guaranty to which it is a signatory, as amended hereby, (c) acknowledges its consent to the Agreement, (d) acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the terms and provisions of and the obligations created and evidenced by the Subsidiary Guaranty to which it is a signatory, as amended hereby, (e) reaffirms all agreements and obligations under the Subsidiary Guaranty to which it is a signatory, as amended hereby, with respect to the Loans, the Notes, the Agreement and all other documents, instruments or agreements governing, securing or pertaining to the Loans, and (f) represents and warrants that all requisite corporate action necessary for it to execute this Consent of Domestic Subsidiaries has been taken. BOWIE MANUFACTURING COMPANY, a Nevada corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer CORSICANA COMPANY, a Nevada corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer DALLAS PANT MANUFACTURING COMPANY, a Nevada corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer GREENVILLE PANT MANUFACTURING COMPANY, a Nevada corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer MCKINNEY PANT MANUFACTURING COMPANY, a Nevada corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer OLNEY MANUFACTURING COMPANY, a Nevada corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer WAXAHACHIE GARMENT COMPANY, a Nevada corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer LA ROMANA MANUFACTURING CORPORATION, a Nevada corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer HAGGAR SERVICES, INC., a Texas corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer AIRHAGGAR, INC., f/k/a HAGAIR, INC., a Texas corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer DUNCAN MANUFACTURING COMPANY, an Oklahoma corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer WESLACO CUTTING, INC., a Nevada corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer WESLACO SEWING, INC., a Nevada corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer HAGGAR DIRECT, INC., a Nevada corporation By: ------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer Dated: ----------------------------- EXHIBIT G COMPLIANCE CERTIFICATE As of the date indicated below, the undersigned hereby certifies that (i) as reflected on the attached annexes, no Default or Unmatured Default (as defined in the Credit Agreement) has occurred and is continuing under that certain First Amended and Restated Credit Agreement (the "Credit Agreement") among Haggar Clothing Co., Haggar Corp., Texas Commerce Bank National Association and the Banks listed therein, and (ii) the value of all inventory (as defined in the Credit Agreement) as reflected in the Company's financial statements does not exceed its net realizable value. HAGGAR CLOTHING CO. By: ------------------------------------- Its: ------------------------------------ Dated: ---------------------------------- ANNEX TO COMPLIANCE CERTIFICATE Requirement Current Status ----------- -------------- Funded Debt Ratio - 4.00 to 1.00 ______________ Tangible Net Worth Company Group - $155,000,000 $_____________ Tangible Net Worth Company - $55,000,000 $_____________ Inventory Turns - 2.0 ______________ Fixed Change Ratio - 1.10 to 1 ______________ ANNEX TO COMPLIANCE CERTIFICATE HAGGAR CORP. FUNDED DEBT RATIO 12 MONTHS ENDED _____________, 199___ ($000'S) Funded Debt - ----------- Revolver $ Industrial Revenue Bonds + Other $ Notes $ Other Long Term Debt $______________ Subtotal $ Other Short Term Debt $______________ Total Funded Debt $ Operating Cash Flow - ------------------- Net Income $ - -Gains/+Losses Cap/Extr Event $ +Depreciation $ +Interest Expense $ +Taxes $______________ Operating Cash Flow $_____________ Funded Debt/Operating Cash Flow ______________ ANNEX TO COMPLIANCE CERTIFICATE HAGGAR CORP. INVENTORY TURNS ANALYSIS ($000'S) ________________, 199__ PRIOR 12 MONTHS' COST OF SALES MENSWEAR & R.S.J. 3rd Prior Quarter: _____________________ $ _____________________ $ _____________________ $_____________________ Total $ 2nd Prior Quarter: _____________________ $ _____________________ $ _____________________ $_____________________ Total $ Prior Quarter: _____________________ $ _____________________ $ _____________________ $_____________________ Total $ Current Quarter: _____________________ $ _____________________ $ _____________________ $_____________________ Total $ Total 12 Months $ Cost of Sales Inventory Level, ________________, 199__ $_____________________ Inventory Turns Rolling 12 Months, ______________, 199__ ______________________ ANNEX TO COMPLIANCE CERTIFICATE HAGGAR CORP. FIXED CHARGE RATIO 12 MONTHS ENDED ______________, 199__ ($OOO'S) 12 Months Qtr. Qtr. Qtr. Qtr. Ended Net Income [Gain Cap Sale]/Extr Evnt + Depreciation + Interest Expense + Taxes __________________________________________________ Total Cash Flow $ $ $ $ $ Interest Expense Req. Principal Payments Cash Dividends Cash Capital Expenses* __________________________________________________ Total Fixed Charges $ $ $ $ $ Fixed Charge Ratio ______________ - ------------------- * Excludes 38,000 CSC Construction Project ANNEX TO COMPLIANCE CERTIFICATE STANDBY LETTERS OF CREDIT OUTSTANDING _______________, 199__ LC# Maturity Amount $_____________ $_____________ ANNEX TO COMPLIANCE CERTIFICATE PERMITTED INDEBTEDNESS (a) Commercial Letters of Credit $ ($30,000,000 permitted) (b) Standby Letters of Credit (other than those issued by the Agent) $ ($2,000,000 permitted) (c) Share Repurchase Obligations $ Severance ($2,500,000 permitted) $10,000,000 total permitted (d) Indebtedness and Capitalized $ Lease Obligations ($_______________ permitted) (e) Intercompany Indebtedness (no amount to be indicated) (f) Accounts payable to officers, directors (no amount to be indicated) (g) Guarantees (no amount to be indicated) (h) Guarantees (Haggar Direct less than (no amount to one years rental) be indicated) Guarantees (Haggar Direct exceeding one years rental) $ ($2,000,000 initially permitted through 9/30/96 $3,000,000 permitted through 9/30/97 $5,000,000 permitted through 9/30/98) (i) Obligations $100,000,000 EX-10.(L) 3 EXHIBIT 10(L) NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark- COMMERCIAL CONTRACT OF SALE IN CONSIDERATION of the mutual terms, provisions, covenants and agreements contained in this Contract (the "Contract"), the parties hereto agree as follows. [CHECK ALL BOXES APPLICABLE TO THIS CONTRACT. BOXES NOT CHECKED DO NOT APPLY TO THIS CONTRACT.] 1. PARTIES. Haggar Clothing Company (the "Seller") shall sell and convey to Fred's Foreign Car Service, Inc. (the "Purchaser") and Purchaser shall buy and pay for the Property (defined below). 2. PROPERTY. Being an approximate 23,562 square foot building situated on approximately 1.5424 acres with an address of 5915 Peeler Street in the City of Dallas, Dallas County, Texas, further described as: being Lot 6 of Block 5716, as recorded in Volume 82026/1922 or as described in EXHIBIT A, SURVEY/LEGAL DESCRIPTION, and/or shown on EXHIBIT B, SITE PLAN, together with, all and singular, all improvements thereon and all rights and appurtenances pertaining thereto, including any right, title and interest of Seller in and to adjacent streets, alleys and rights-of-way. Such real estate, improvements, rights and appurtenances are collectively referred to herein as the "Property." / / The Property also includes fixtures and articles of personal property listed and described in ADDENDUM A, PERSONAL PROPERTY. 3. PURCHASE PRICE. The purchase price for the Property is $275,000.00 (the "Purchase Price"), payable as follows: / / A. The Purchase Price shall be adjusted up or down based upon the [STRIKE ONE] NET / GROSS land area of the Property determined by the Survey. The applicable land area shall be multiplied by $_______ per square foot and the product thereof shall become the Purchase Price at Closing. /X/ B. Cash payable at Closing: $275,000.00. / / C. The balance of the Purchase Price shall be payable according to the provisions in ADDENDUM B, FINANCING. 4. EARNEST MONEY. A. EARNEST MONEY DEPOSIT. Within two business days after the Effective Date of this Contract, Purchaser shall deposit earnest money in the form of a certified or cashier's check in the amount of $5,000.00 (the "Earnest Money") payable to American Title Company, Attention: Tim Hardin (the "Title Company"), in its capacity as escrow agent, to be held in escrow pursuant to the terms of this Contract. Seller's acceptance of this Contract is expressly conditioned upon Purchaser's timely deposit of the Earnest Money with the Title Company. If Purchaser fails to timely deposit the Earnest Money, Seller may, at Seller's option, terminate this Contract by delivering a written termination notice to Purchaser. Notwithstanding anything herein to the contrary, a portion of the Earnest Money in the amount of $100.00 shall be non-refundable and shall be distributed to Seller at Closing or other termination of this Contract as full payment and independent consideration for Seller's performance under this Contract. If this Contract is properly terminated by Purchaser pursuant to a right of termination granted to Purchaser by any provision of this Contract, or any attached Addenda, the Earnest Money, less the non-refundable portion, shall be promptly refunded to Purchaser, and the parties shall have no further rights or obligations under this Contract (except for those which may expressly survive the termination). The Earnest Money /X/ SHALL / / SHALL NOT be placed in an interest-bearing account by the Title Company, and any interest earned thereon shall become a part of the Earnest Money. At Closing the Earnest Money shall be applied to the Purchase Price. B. ESCROW. The Earnest Money is deposited with the Title Company with the understanding that the Title Company (1) is not responsible for the performance or non-performance of any party to this Contract, and (2) is not liable for interest on the funds held unless required in Paragraph 4.A. The Title Company shall deposit the Earnest Money in one or more fully insured accounts in one or more Federally insured banking or savings institutions. If both parties make demand for the payment of the Earnest Money, the Title Company has the right to require from all parties and Broker(s) a written release of liability of the Title Company which authorizes the disbursement of the Earnest Money. If only one party makes demand for payment of the refundable portion of the Earnest Money, the Title Company shall give notice to the other party of the demand. The Title Company is authorized and directed to honor the demand unless the other party delivers a written objection to the Title Company within ten (10) days after the Title Company's notice to that party. 5. SURVEY AND TITLE DOCUMENTS. A. SURVEY. As soon as reasonably possible, and in any event within twenty (20) days after the Effective Date, Seller shall, at Seller's expense, deliver or cause to be delivered to Purchaser a copy of a current or updated on-the-ground perimeter survey (the "Survey") of the Property prepared by a Registered Professional Land Surveyor reasonably acceptable to the Purchaser. The Survey shall show the location and size of all of the following on or adjacent to the Property, if any: buildings, building lines, improvements, streets, pavements, easements, rights-of-way, protrusions, encroachments, fences, 100-year flood plain, apparent public utilities, and recording information of easements. The Survey shall show the gross land area and the Net Land Area. The Survey shall be in a form and of a date acceptable to Purchaser and to the Title Company, and in acceptable form in order to allow the Title Company to delete the survey exception (except as to "shortages in area") from the Title Policy. The term "NET LAND AREA" means the gross land area of the Property less the land area included in utility easements, drainage easements, ingress/egress easements, rights-of-way, 100-year flood plain and encroachments on or across the Property. The area within the 100-year flood plain shall be as defined by the Federal Emergency Management Agency or other applicable governmental authority. If the transaction described in this Contract does not close through no fault of Seller or except as provided in Paragraph 16.C, in addition to the other rights of Seller, Purchaser shall pay for the Survey on demand. At Closing, the metes and bounds description of the Property reflected in the Survey shall be used in the warranty deed and any other documents requiring a legal description of the Property. B. TITLE COMMITMENT. As soon as reasonably possible, and in any event within twenty (20) days after the Effective Date, Seller shall, at Seller's expense, deliver or cause to be delivered to Purchaser (1) a title commitment (the "Title Commitment") covering the Property binding the Title Company to issue a Texas Owner Policy of Title Insurance (the "Title Policy") on the standard form prescribed by the Texas State Board of Insurance at the Closing, in the full amount of the Purchase Price, insuring Purchaser's fee simple title to the Property to be good and indefeasible, subject only to the Permitted Exceptions as defined below, and (2) the following documents (collectively, the "Title Documents") (a) true and legible copies of all recorded instruments affecting the Property and recited as exceptions in the Title Commitment, (b) a current tax certificate, and (c) written notices as required in Paragraph 5.C. C. SPECIAL ASSESSMENT DISTRICTS. If the Property is situated within a utility district or flood control district subject to the provisions of Section 50.301, Texas Water Code, then Seller shall give to Purchase as part of the Title Documents the required written notice and Purchaser agrees to acknowledge receipt of the notice in writing. The notice must set forth the current tax rate, the current bonded indebtedness and the authorized indebtedness of the district, and must comply with all other applicable requirements of the Texas Water Code. If the Property is subject to mandatory membership in a property owner's association, Seller shall notify Purchaser of the current annual budget of the property owners' association, and the current authorized fees, dues and/or assessments relating to the Property. D. ABSTRACT. At the time of the execution of this Contract, Purchaser acknowledges that the Broker(s) (defined below) have advised and hereby advise Purchaser, by this writing, that Purchaser should have the abstract covering the Property examined by an attorney of Purchaser's own selection or that Purchaser should be furnished with or obtain a policy of title insurance. - -C- Copyright 1995 NTCAR form 01 (1/95) Page 1 6. REVIEW OF TITLE DOCUMENTS. A. REVIEW PERIOD. Purchaser shall have ten (10) days (the "Review Period") after Purchaser's receipt of the last of (i) the Survey, (ii) the Title Commitment, (iii) the Title Documents, and (iv) all other documents required to be furnished by Seller as identified on ADDENDUM A, PERSONAL PROPERTY, and/or on ADDENDUM C, INSPECTION, to review them. If Purchaser has any objections to the Survey, Title Commitment or Title Documents, Purchaser may deliver the objections to Seller in writing within the Review Period. Any item to which Purchaser does not object shall be deemed a "Permitted Exception." Items that the Title Company identifies as to be released at closing will be deemed objections by Purchaser. Purchaser's failure to object within the time provided shall be a waiver of the right to object. If there are objections by Purchaser, or a third party lender, Seller shall make a good faith attempt to satisfy the objections within ten (10) days after receipt of Purchaser's objections (the "Cure Period"), but Seller is not required to incur any cost to do so. Zoning ordinances and the lien for current taxes are deemed to be Permitted Exceptions. B. CURE PERIOD. If Seller cannot satisfy the objection within the Cure Period, Seller shall deliver a written notice to Purchaser, prior to expiration of the Cure Period, stating whether Seller is committed to cure the objections at or before Closing. If Seller does not timely deliver the written notice, or does not commit in the written notice to fully cure all of the objections at or before Closing, then Purchaser may terminate this Contract by delivering a written notice to Seller on or before the earlier to occur of: (i) the date which is seven (7) days after the expiration of the Cure Period; or (ii) the scheduled Closing Date. If Purchaser properly and timely terminates this Contract, the refundable portion of the Earnest Money shall be immediately returned to Purchaser and thereafter neither party shall have any rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). If Purchaser does not properly and timely terminate this Contract, the Purchaser shall be deemed to have waived any uncured objections and must accept such title as Seller is able to convey as of Closing. 7. SELLER'S WARRANTIES AND REPRESENTATIONS. A. STATEMENTS. Seller represents and warrants to Purchaser to the best of Seller's knowledge as follows: (1) TITLE. At the Closing, Seller will have the right to, and will, convey to Purchaser good and indefeasible fee simple title to the Property free and clear of any and all liens, assessments, unrecorded easements, security interests and other encumbrances except the Permitted Exceptions. Delivery of the Title Policy pursuant to Paragraph 12 below will be deemed to satisfy the obligation of Seller as to the sufficiency of title required under this Contract. However, delivery of the Title Policy will not release Seller from the warranties of title set forth in the warranty deed. (2) LEASES. There are no parties in possession of any portion of the Property as lessees, tenants at sufferance or trespassers except for Davis Material handling. (3) NEGATIVE COVENANTS. Seller shall not further encumber the Property or allow an encumbrance upon the title to the Property, or modify the terms or conditions of any existing leases, contracts or encumbrances, if any, without the written consent of Purchaser. (4) LIENS AND DEBTS. There are no mechanic's liens, Uniform Commercial Code liens or unrecorded liens against the Property, and Seller shall not allow any such lines to attach to the Property prior to Closing, which will not be satisfied out of the Closing proceeds. All obligations of Seller arising from the ownership and operation of the Property and any business operated on the Property, including, but not limited to, taxes, leasing commissions, salaries, contracts, and similar agreements, have been paid or will be paid prior to Closing. Except for obligations for which provisions are made in this Contract for prorating at Closing and any indebtedness taken subject to or assumed, there will be no obligations of Seller with respect to the Property outstanding as of Closing. (5) LITIGATION. There is no pending or threatened litigation, condemnation, or assessment affecting the Property. Seller shall promptly advise Purchase of any litigation, condemnation or assessment affecting the Property which is instituted after the Effective Date. (6) OPERATION OF THE PROPERTY. After the Effective Date until the Closing Date, Seller shall (a) operate the Property in the same manner as the Property has been operated, and (b) maintain the Property in the same condition and in the same manner as existed on the Effective Date, except for ordinary wear and tear and any casualty loss. B. SURVIVAL. It is specifically acknowledged and agreed that representations and warranties made by Seller as set forth in this Contract, other than the special warranty as to title of the Property, shall survive the inspection or investigation made by or on behalf of Purchaser and the passage of title from the Seller to Purchaser at Closing for a period of one year after Closing and shall not be merged into or waived by the instruments executed at Closing. Additionally, all agreements and indemnities of Seller and Purchaser set forth in this Contract shall, to the extent not consummated at Closing, survive the Closing of the transaction contemplated by this Contract. - -C- Copyright 1995 NTCAR form 01 (1/95) Page 2 9. INSPECTION. [CHECK ONE] /X/ A. INSPECTION DESIRED. Purchaser desires to inspect the Property and Seller grants to Purchaser the right to inspect the Property as described in ADDENDUM C. INSPECTION. / / INSPECTION NOT NECESSARY. Purchaser acknowledges that Purchaser has inspected the Property, including all buildings and improvements thereon, and is thoroughly familiar with their condition, and Purchaser hereby accepts the Property in its present condition, with such changes as may hereafter be caused by normal wear and tear prior to Closing, but without waiving Purchaser's rights by virtue of Seller's representations and warranties expressed in this Contract. 10. CASUALTY LOSS. All risk of loss to the Property shall remain upon Seller prior to the Closing. If, prior to the Closing, the Property is damaged or destroyed by fire or other casualty, to a Material Extent (defined below), Purchaser may either terminate this Contract by delivering a written termination notice to Seller within ten days after the damage occurs, or elect to close. If, prior to the Closing, the Property is damaged by fire or other casualty to less than a Material Extent, the parties shall proceed to Closing as provided herein. If the transaction is to proceed to Closing, despite any damage or destruction, there shall be no reduction in the Purchase Price and Seller shall, at Seller's option: (i) fully repair the damage prior to Closing, at Seller's expense; (ii) reimburse Purchaser for the entire cost of repairing the Property by allowing Purchaser to deduct the cost from the cash payable to Seller at the Closing; or (iii) assign to Purchaser all of Seller's right and interest in any insurance proceeds resulting from the damage or destruction, plus an amount equal to any insurance deductible. The term "Material Extent" means damage or destruction if the cost of repairing and fully restoring the Property to its previous condition exceeds ten percent (10%) of the Purchase Price. If the extent of damage or the amount of insurance proceeds to be made available is not able to be determined prior to the Closing Date, or the repairs are not able to be completed prior to the Closing Date, either party may postpone the Closing Date by delivering a written notice to the other party specifying an extended Closing Date which is not more than thirty (30) days after the previously scheduled Closing Date. 11. ASSIGNMENT. [CHECK ONLY ONE] / / A. ASSIGNMENT PROHIBITED. Purchaser may not assign this Contract without Seller's prior written consent. / / B. ASSIGNMENT PERMITTED. Purchaser may assign this Contract provided the assignee assumes in writing all obligations and liabilities of Purchaser under this Contract, in which event Purchaser shall be relieved of any further liability hereunder. /X/ C. LIMITED ASSIGNMENT. Purchaser may assign this Contract only to a related party, defined as (i) an entity in which Purchaser is an owner, partner or corporate officer, or (ii) a member of the immediate family of the Purchaser. Purchaser shall remain liable under this Contract after any assignment to a related party. 12. CLOSING. A. CLOSING DATE. The closing of the transaction described in this Contract (the "Closing") shall be held at 10:00 a.m. on the later of [CHECK ONE]: / / ______ days after the Effective Date; or / / ______ days after the expiration of the Review Period or Inspection Period (whichever is later); or /X/ on April 8, 1996 (the "Closing Date") at the offices of the Title Company at its address stated below. However, if any objections which were properly and timely made by Purchaser pursuant to this Contract have not been cured on the scheduled Closing Date, then either party may postpone the date of the Closing by delivering a written notice to the other party specifying an extended Closing Date which is not more than thirty (30) days after the previously scheduled Closing Date. B. SELLER'S CLOSING DOCUMENTS. At the Closing, Seller shall deliver to Purchaser at Seller's expense: (1) A duly executed [CHECK ONE] / / GENERAL WARRANTY DEED /X/ SPECIAL WARRANTY DEED (with Vendor's Lien retained if not a cash purchase) conveying the Property in fee simple according to the legal description prepared by the surveyor as shown on the Survey, subject only to the Permitted Exceptions; (2) The Title Policy issued by the underwriter for the Title Company pursuant to the Title Commitment, subject only to the Permitted Exceptions, in the full amount of the Purchase Price, dated as of the date of the Closing, and (at an additional premium cost) [CHECK IF APPLICABLE] / / with the survey exception deleted except as to "shortages in area;" (3) A Bill of Sale conveying the personal property identified in Addendum A, PERSONAL PROPERTY, free and clear of liens, security interests and encumbrances, subject only to the Permitted Exceptions (to the extent applicable); (4) Possession of the Property, subject to valid existing leases and other applicable Permitted Exceptions; (5) A duly executed assignment of all leases; (6) A current rent roll certified by Seller to be complete and accurate; (7) Evidence of Seller's authority and capacity to close this transaction; (8) All other documents reasonably required by the Title Company to close this transaction. C. PURCHASER'S CLOSING DOCUMENTS. At the Closing. Purchaser shall deliver to Seller at Purchaser's expense: (1) The cash portion of the Purchase Price, with the Earnest Money being applied thereto; (2) The Note and the Deed of Trust, if any; (3) An Assumption Agreement in recordable form agreeing to pay all commissions payable under any lease of the Property; (4) Evidence of Purchaser's authority and capacity to close this transaction; (5) All other documents reasonably required by the Title Company to close this transaction. D. CLOSING COSTS. Each party shall pay its share of the closing costs which are customarily paid by a Seller or Purchaser in a transaction of this character in the county where the Property is located, or as otherwise agreed. E. PRORATIONS. Rents, lease commissions, interest, insurance premiums, maintenance expenses, operating expenses, and ad valorem taxes for the year of Closing shall be prorated at the Closing effective as of the date of Closing. Any security deposits held by Seller shall be delivered to Purchaser at the Closing. If the Closing occurs before the tax rate is fixed for the year of Closing, the apportionment of the taxes shall be upon the basis of the tax rate for the preceding year applied to the latest assessed valuation, but any difference between estimated taxes for the year of Closing the actual taxes paid by Purchaser shall be adjusted equitably between the parties upon proof of payment of the taxes by Purchaser. This provision shall survive the Closing. F. LOAN ASSUMPTION. If Purchaser assumes an existing mortgage loan at Closing, Purchaser shall pay (1) to the lender, any assumption fee charged by the lender; and (2) to Seller, a sum equal to the amount of any reserve accounts held by the lender for the payment of taxes and/or insurance. Purchaser shall execute, at the option and expense of Seller, a Deed of Trust to Secure Assumption. If consent to the assumption is required by the lender, Seller shall obtain the lender's consent in writing and deliver the consent to Purchaser at Closing. If Seller does not obtain the lender's written consent (if required) and deliver it to Purchaser at or before Closing, Purchaser may terminate this Contract by delivering a written termination notice to Seller whereupon the refundable portion of the Earnest Money will be promptly refunded to Purchaser and the parties shall have no further rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). G. ROLLBACK TAXES. If a change in use of the Property or denial of a special use valuation on the Property claimed by Seller results in the assessment after Closing of additional taxes for periods of Seller's ownership, the additional taxes plus any penalties and interest shall be paid by Purchaser. This obligation shall survive the Closing. H. FOREIGN PERSON NOTIFICATION. If Seller is a Foreign Person, as defined by the U.S. Internal Revenue Code, or if Seller fails to deliver to Purchaser a non-foreign affidavit pursuant to Section 1445 of the Internal Revenue Code, then Purchaser may withhold from the sales proceeds an amount sufficient to comply with applicable tax law and deliver the withheld proceeds to the Internal Revenue Service, together with appropriate tax forms. The required affidavit(s) from Seller(s) shall include (1) a statement that Seller is not a foreign person, (2) the U.S. taxpayer identification number(s) of Seller(s), and (3) other information required by Section 1445 of the Internal Revenue Code. -C- Copyright 1995 NTCAR form 01(1/95) Page 3 13. DEFAULT. A. PURCHASER'S REMEDIES. If Seller fails to close this Contract for any reason except Purchaser's default or the termination of this Contract pursuant to a right to terminate set forth in this Contract, Seller shall be in default and Purchaser may elect one of the following as Purchaser's sole remedy [CHECK ALL THAT MAY APPLY]: /X/ (1) Enforce specific performance of this Contract against Seller unless Seller is in default hereunder as a result of a warranty or representation of Seller being untrue or inaccurate in any material respect and Seller had no knowledge that such warranty or representation was untrue or inaccurate in which case, Purchaser's sole and exclusive remedy shall be to terminate this Contract by written notice delivered to Seller at or prior to the Closing; / / (2) Bring suit for damages against Seller; / / (3) Enforce specific performance of this Contract and/or bring suit for damages against Seller; or / / (4) Terminate and release Seller from this Contract and receive the refundable portion of the Earnest Money immediately. Seller's failure to satisfy Purchaser's objections under Paragraph 6 above shall not constitute a default by Seller. B. SELLER'S REMEDIES. If Purchaser fails to close this Contract for any reason except Seller's default or the termination of this Contract pursuant to a right to terminate set forth in this Contract, Purchaser shall be in default and Seller may elect one of the following, as Seller's sole remedy [CHECK ALL THAT MAY APPLY]: / / (1) Enforce specific performance of this Contract; / / (2) Bring suit for damages against Purchaser; / / (3) Enforce specific performance of this Contract and/or bring suit for damages against Purchaser; or /X/ (4) Have the Earnest Money paid to Seller as liquidated damages for the Purchaser's breach of this Contract, thereby releasing Purchaser from this Contract. 14. AGENCY DISCLOSURE. A. AGENCY RELATIONSHIP. The term "Broker(s)" refers to the Principal Broker and/or the Cooperating Broker, if applicable, as set forth on the signature page. Each Broker has fiduciary duties only to the party(s) the Brokers represents as identified below. If either Broker is representing both Seller and Purchaser, then such representation is a dual agency and the dual agency disclosure and consent provisions apply as set forth below. [EACH BROKER CHECK ONE ONLY]. (1) The Principal Broker is agent for: /X/ the Seller only; or / / the Purchaser only; or / / both Purchaser and Seller. (2) The Cooperating Broker is agent for: / / the Seller only; or / / the Purchaser only; or / / both Purchaser and Seller. B. OTHER BROKERS. Each party to this Contract represents and warrants to the other party that such party has had no dealings with any person, firm, agent or finder in connection with the negotiation of this Contract and/or the consummation of the purchase and sale contemplated herein, other than the Broker(s) named in this Contract, and no real estate broker, agent, attorney, person, firm or entity, other than the Broker(s) is entitled to any commission or finder's fee in connection with this transaction as the result of any dealings or acts of such party. Each party hereby agrees to indemnify, defend, protect and hold the other party harmless from and against any costs, expenses or liability for compensation, commission, fee, or charges which may be claimed by any agent, finder or other similar party, other than the named Broker(s), by reason of any dealings or acts of the indemnifying party. C. FEE SHARING. Each party acknowledges that the Principal Broker may pay a portion (defined below) to the Cooperating Broker. Payment of a portion of the Fee by the Principal Broker to the Cooperating Broker shall not alter the fiduciary relationship between the parties and the Brokers. Seller is liable for payment of the Fee to the Principal Broker only. The Cooperating Broker shall have no claims directly against Seller. D. DUAL AGENCY. If either of the Brokers has indicated in Section 14.A above that Broker is representing both Purchaser and Seller, then Purchaser and Seller hereby consent to the dual agency, authorize the respective Broker(s) to represent more than one party to this transaction, and acknowledge that the source of any expected compensation to the Broker(s) will be the Seller, and the Broker(s) may also be paid a fee by Purchaser. IF THE BROKER(S) ARE ACTING IN A DUAL AGENCY CAPACITY, BROKER(S) SHALL: (1) NOT DISCLOSE TO PURCHASER THAT SELLER WILL ACCEPT A PRICE LESS THAN THE ASKING PRICE UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY SELLER; (2) NOT DISCLOSE TO SELLER THAT PURCHASER WILL PAY A PRICE GREATER THAN THE PRICE SUBMITTED IN A WRITTEN OFFER TO THE SELLER UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY THE PURCHASER; (3) NOT DISCLOSE ANY CONFIDENTIAL INFORMATION, OR ANY INFORMATION A PARTY SPECIFICALLY INSTRUCTS THE BROKER(S) IN WRITING NOT TO DISCLOSE, UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY THE RESPECTIVE PARTY OR REQUIRED TO DISCLOSE SUCH INFORMATION BY LAW; (4) TREAT ALL PARTIES TO THE TRANSACTION HONESTLY AND IMPARTIALLY SO AS NOT TO FAVOR ONE PARTY OR WORK TO THE DISADVANTAGE OF ANY PARTY. 15. PROFESSIONAL SERVICE FEE. The Fee shall be earned if, so and when the transaction contemplated by this Contract is closed and funded. A. PAYMENT OF FEE. Seller agrees to pay the Principal Broker a professional service fee in cash (the "Fee") for procuring the Purchaser and for asisting in the negotiation of this Contract as follows: six percent (6%) of the purchase price. The Fee shall be paid at the Closing of a sale of the Property by Seller pursuant to this Contract (as may be amended or assigned). The Title Company or other escrow agent is authorized and directed to pay the Fee to the Principal Broker out of the closing proceeds. 16. MISCELLANEOUS PROVISIONS. A. EFFECTIVE DATE. The term "Effective Date" means the latter of the two dates on which this Contract is signed by Seller and Purchaser, as indicated by their signatures below. If the last party to execute this Contract fails to complete the date of execution below that party's signature, the Effective Date shall be the date this fully executed Contract is delivered to the Title Company. B. NOTICES. All notices and other communications required or permitted under this Contract must be in writing and shall be deemed delivered, whether actually received or not, on the earlier of: (i) actual receipt, if delivered in person or by messenger with evidence of delivery; or (ii) receipt of an electronic facsimile transmission ("Fax"); or (iii) upon deposit in the United States Mail as required below. Notices may be transmitted by Fax to the Fax telephone numbers specified below, if any. Notices delivered by mail must be deposited in the U.S. Postal Service, first class postage prepaid, and properly addressed to the intended recipient at the address set forth below. Any party may change its address for notice purposes by delivering written notice of its new address to all other parties in the manner set forth above. Copies of all written notices should also be delivered to the Principal Broker and to the Title Company, but failure to notify the Principal Broker or the Title Company will not cause an otherwise properly delivered notice to be ineffective. -C- Copyright 1995 NTCAR form 01(1/95) Page 4 C. MUTUAL TERMINATION. If this Contract is terminated by agreement of both parties at any time prior to Closing, the obligations of each party under this Contract shall terminate, except that (1) Seller and Purchaser shall each pay one-half of the cost of the Survey (if Survey costs are incurred), (2) Purchaser shall pay the costs to repair any damage to the Property caused by Purchaser or its agents, (3) Purchaser shall deliver to Seller any reports or documents in Purchaser's possession concerning the Property, (4) Seller shall pay the Fee owned to the Principal Broker, and (5) each party shall perform any other obligations which expressly survive the termination of this Contract. The obligations of this paragraph shall survive the termination of this Contract. D. FORMS. In case of a dispute as to the form of any document required under this Contract, the most recent form prepared by the State Bar of Texas, modified as necessary to conform to the requirements of this Contract, shall be deemed reasonable. E. ATTORNEYS FEES. The prevailing party in any legal proceeding brought in relation to this Contract or transaction shall be entitled to recover from the non-prevailing parties court costs, reasonable attorneys' fees and all other reasonable litigation expenses. F. INTEGRATION. This Contract contains the complete agreement between the parties with respect to the Property and cannot be varied except by written agreement. The parties agree that there are no oral or signed agreements, understandings, representations or warranties made by the parties which are not expressly set forth herein. G. SURVIVAL. Any warranty, representation, covenant, condition or obligation contained in this Contract not otherwise consummated at the Closing will survive the Closing of this transaction. H. BINDING EFFECT. This Contract shall inure to the benefit of and be binding upon the parties to this Contract and their respective heirs, legal representatives, successors and assigns. I. TIME FOR PERFORMANCE. Time is of the essence under each provision of this Contract. Strict compliance with the times for performance is required. J. RIGHT OF ENTRY. Upon reasonable advance notice and during normal business hours, Purchaser, Purchasers' representatives and the Brokers have the right to enter upon the Property prior to Closing for purposes of viewing, inspecting and conducting studies of the Property, so long as they do not unreasonably interfere with the use of the Property by Seller or any tenants, or cause undue damage to the Property. K. BUSINESS DAY. If any date of performance under this Contract falls on a Saturday, Sunday or Texas legal holiday, such date of performance shall be deferred to the next day which is not a Saturday, Sunday or Texas legal holiday. L. GOVERNING LAW. This Contract shall be construed under and governed by the laws of the State of Texas, and unless otherwise provided herein, all obligations of the parties created under this Contract are to be performed in the county where the Property is located. M. SEVERABILITY. If any provision of this Contract is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, the invalid, illegal or unenforceable provision shall not affect any other provisions, and this Contract shall be construed as if the invalid, illegal, or unenforceable provision is severed and deleted from this Contract. N. DISCLAIMER. Purchaser understands that a real estate broker is qualified to advise on matters concerning real estate and is not an expert in matters of law, tax, financing, surveying, hazardous materials, engineering, construction, safety, zoning, land planning, architecture, or the Americans with Disabilities Act. However, the Broker(s) will disclose to Purchaser any material factual knowledge which Broker may possess about the condition of the Property. Purchaser acknowledges that Purchaser has been advised by the Broker(s) to seek expert assistance on such matters. The Broker(s) do not investigate a property's compliance with building codes, governmental ordinances, statutes and laws that relate to the use or condition of the Property or its construction, or that relate to its acquisition. If the Broker(s) provide names of consultants or sources for advice or assistance, the Broker(s) do not warrant the services of the advisors or their products and cannot warrant the suitability of property to be acquired. The Broker(s) do not warrant that the Seller will disclose any or all property defects or other matters pertaining to the Property or its condition. O. COUNTERPARTS. This Contract may be executed in a number of identical counterparts. Each counterpart is deemed an original and all counterparts shall, collectively, constitute one agreement. P. GENDER; NUMBER. Unless the context requires otherwise, all pronouns used in this Contract shall be construed to include the other genders, whether used in the masculine, feminine or neuter gender. Words in the singular number shall be construed to include the plural, and words in the plural shall be construed to include the singular. Q. MEDIATION. If any dispute arises relating to this Contract (the "Dispute"), including but not limited to payment of the Fee, then any party may give written notice to the other party(s) requiring all involved parties to attempt to Dispute by mediation. Except in those circumstances when a party reasonably believes that an applicable statute of limitations period is about to expire, or a party requires injunctive or equitable relief, the parties are obligated to use this mediation procedure prior to initiating arbitration or any other action. Within seven (7) days after receiving the mediation notice, each party must deliver a written designation to all other parties stating the names of one or more individuals with authority to resolve the Dispute on such party's behalf. Within ten (10) days after the date of designation, the parties shall make a good faith effort to select a qualified mediator to mediate the Dispute. If the parties are unable to timely agree upon a mutually acceptable mediator, the parties shall request any State or Federal district judge to appoint a mediator. In consultation with the mediator, the parties shall promptly designate a mutually convenient time and place for the mediation which is no later than thirty (30) days after selection of the mediator. In the mediation, each party shall be represented by persons with authority and discretion to negotiate a resolution of the Dispute, and may be represented by counsel. The mediation shall be governed by the provisions of Chapter 154 of the Texas Remedies and Practice Code, and such other rules as the mediator may prescribe. The fees and expenses of the mediator shall be shared equally by all parties. R. ARBITRATION. If the parties are unable to resolve any Dispute by mediation, then the parties agree to submit the Dispute to binding arbitration before a single arbitrator. The Dispute shall be decided by arbitration in accordance with the applicable arbitration statute and the then existing rules of the American Arbitration Association. Any party may initiate the arbitration procedure by delivering a written notice of demand for arbitration to the other parties. Within ten (10) days after the receipt by all parties of the written notice of demand for arbitration, the parties shall attempt to select a qualified arbitrator who is acceptable to all parties. If the parties are unable to agree upon an arbitrator who is acceptable to all parties, then upon application of any party a court of competent jurisdiction shall appoint an arbitrator. This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. S. CONSULT AN ATTORNEY. This document is an enforceable, legally binding agreement. Read it carefully. The Broker(s) involved in the negotiation of the transaction described in this Contract cannot give you legal advice. By law, the Broker(s) are limited to discussing factual and business details of the transaction. The parties to this Contract acknowledge that they have been advised by the Broker(s) to have this Contract reviewed by legal counsel before signing this Contract to discuss the legal effects of its terms and provisions. - -C- Copyright 1995 NTCAR form 01 (1/95) Page 5 17. ADDITIONAL PROVISIONS. [ADDITIONAL PROVISIONS AS DIRECTED BY SELLER OR PURCHASER MAY BE SET FORTH BELOW.] 18. EXHIBITS AND ADDENDA. All Exhibits and Addenda attached to this Contract are incorporated herein by reference and are made a part of this Contract for all purposes. [CHECK ALL THAT APPLY.] / / Addendum A Personal Property / / Exhibit A Survey and/or Legal Description / / Addendum B Financing /X/ Exhibit B Site Plan /X/ Addendum C Inspection / / Exhibit C _______________________________ / / Addendum D Disclosure Notice /X/ Addendum E Special Provisions Addendum
19. CONTRACT AS OFFER. The execution of this Contract by the first party to do so constitutes an offer to purchase or sell the Property. Unless within five (5) days from the date of execution of this Contract by the first party, this Contract is accepted by the other party by signing the offer and delivering a fully executed copy to the first party, the offer of this Contract shall be deemed automatically withdrawn and terminated, and the Earnest Money, if any, shall be promptly returned to Purchaser. EXECUTED on the dates stated below, to be effective on the Effective Date. SELLER PURCHASER Haggar Clothing Company Fred's Foreign Car Service, Inc. - ----------------------------------------- ------------------------------------------ By [SIGNATURE]: Frank D. Bracken By [SIGNATURE]: Jose Guevara -------------------------- --------------------------- Name: Frank D. Bracken Name: Jose Guevara ------------------------------------ ------------------------------------- Title: President & Chief Operating Officer Title: Owner ----------------------------------- ------------------------------------ Address: 6113 Lemmon Avenue Address: 5111 A West Lovers Lane --------------------------------- ---------------------------------- Dallas, Texas 75209 Dallas, Texas 75209 - ----------------------------------------- ------------------------------------------ - ----------------------------------------- ------------------------------------------ Telephone: 352-8481 Fax: 956-4446 Telephone: 350-6787 Fax: N/A -------------- ------------ -------------- ------------- Tax I.D. No: 75-0312650 Tax I.D. No: 75-1717760 ----------------------------- ------------------------------ Date of Execution: 3/28/96 Date of Execution: 3/25/96 ----------------------- ------------------------ PRINCIPAL BROKER COOPERATING BROKER The Staubach Company None - ----------------------------------------- ------------------------------------------ By [SIGNATURE]: Paul A. Whitman By [SIGNATURE]: -------------------------- --------------------------- Name: Paul A. Whitman, SIOR Name: ------------------------------------ ------------------------------------- Title: Senior Vice President Title: ----------------------------------- ------------------------------------ Address: Address: --------------------------------- ---------------------------------- - ----------------------------------------- ------------------------------------------ - ----------------------------------------- ------------------------------------------ Telephone: Fax: Telephone: Fax: -------------- ------------ -------------- -------------
TITLE COMPANY ACCEPTANCE. The Title Company acknowledges receipt of the Earnest Money on ________________________________ and accepts the Earnest Money subject to the terms and conditions set forth in this Contract. TITLE COMPANY American Title Company - --------------------------------------------- By [SIGNATURE]: ------------------------------ Name: Attention: Tim Hardin ---------------------------------------- Title: --------------------------------------- Address: ------------------------------------- - --------------------------------------------- - --------------------------------------------- Telephone: Fax: -------------- ------------ COPYRIGHT NOTICE: THIS FORM IS PROVIDED FOR THE USE OF MEMBERS OF THE NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS, INC. PERMISSION IS HEREBY GRANTED TO MAKE LIMITED COPIES OF THIS FORM FOR USE IN A PARTICULAR TEXAS REAL ESTATE TRANSACTION. CONTACT THE NTCAR OFFICE TO CONFIRM THAT YOU ARE USING THE CURRENT VERSION OF THIS FORM - -C- Copyright 1995 NTCAR form 01 (1/95) Page 6 EXHIBIT B [MAP] NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark- ADDENDUM C TO CONTRACT OF SALE INSPECTION PROPERTY ADDRESS OR DESCRIPTION: 5915 Peeler Street, Dallas, Texas A. INSPECTION PERIOD. Purchaser shall have a period of ten (10) days after the Effective Date (the "Inspection Period") to inspect the Property and to conduct feasibility studies regarding Purchaser's intended use of the Property. Purchaser's studies may include without limitation: (i) core borings; (ii) environmental and architectural tests and investigations; (iii) physical inspections of all improvements, fixtures, equipment, subsurface soils, structural members, and personal property; and (iv) examination of plans, specifications, manuals, and other documents relating to the construction and condition of the Property. Purchaser and Purchaser's agents, employees, consultants and contractors shall have the right of reasonable entry onto the Property during normal business hours, and upon reasonable advance notice to Seller and/or Seller's tenants, for purposes of the inspections, studies, tests and examinations deemed necessary by Purchaser. All inspections, studies, tests and examinations performed hereunder shall be at Purchaser's expense. B. REPORTS. / / (1) Within ________________ (____) days after the Effective Date, Seller shall deliver to Purchaser a written report of an environmental assessment of the Property. The report shall be prepared, at Seller's expense, by a Registered Professional Engineer reasonably acceptable to Purchaser, who is proficient or certified in environmental risk assessment. The environmental assessment report must include a "Phase I" investigation into the existence to Hazardous Materials (as defined in Paragraph 7.A.(7) of this Contract) on or around the Property. The environmental assessment must also include a land use history search, engineering inspections, studies and/or tests which may be necessary to discover the existence, past or present, of Hazardous Materials. /X/ (2) See paragraph B(2) of Addendum E. /X/ (3) As soon as reasonably possible after they become available to Purchaser, Purchaser shall deliver to Seller, at Purchaser's expense, copies of all written reports, inspections, plats, drawings and studies made by Purchaser and Purchaser's agents, consultants and contractors. This provision shall survive the termination of this Contract. C. TERMINATION. If Purchaser determines, in Purchaser's sole discretion, no matter how arbitrary, that the Property is not in satisfactory condition or is not suitable for Purchaser's intended use or purpose, then Purchaser may terminate this Contract by delivering a written notice to Seller on or before the last day of the Inspection Period, and the refundable portion of the Earnest Money shall be promptly returned by the Title Company to Purchaser and neither party shall have any further rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). D. ACCEPTANCE. If Purchaser does not properly and timely terminate this Contract before the expiration of the Inspection Period (or if Purchaser accepts the Property in writing) then Purchaser will be deemed to have waived all objections to the Property under this Contract, except for any title objections which may be outstanding pursuant to Section 6 of this Contract. In that event, Purchaser agrees to purchase the Property in its current condition without any further representations or warranties of Seller, except any objections which Seller may expressly agree in writing to cure, and this Contract shall continue in full force and effect and the parties shall proceed to Closing. However, this provision does not limit or invalidate any express representations or warranties Seller has made in this Contract. E. RESTORATION. If the transaction described in this Contract does not close, through no fault of Seller, and the condition of the Property was altered due to tests and inspections performed by Purchaser or on Purchaser's behalf, Purchaser must restore the Property to its original condition. This provision shall survive the termination of this Contract. ADDENDUM E SPECIAL PROVISIONS ADDENDUM --------------------------- PROPERTY: 5915 Peeler Street, Dallas, Texas SELLER: Haggar Clothing Company PURCHASER: Fred's Foreign Car Service, Inc. This Special Provisions Addendum (herein so called) is attached to and made a part of that one certain Contract of Sale (the "Contract"), by and between HAGGAR CLOTHING COMPANY, as "Seller", and FRED'S FOREIGN CAR SERVICE, INC., as "Purchaser." In the event a conflict arises between the provisions of this Special Provisions Addendum and any other part of this Contract, this Special Provisions Addendum shall modify and supersede such other part of this Contract to the extent necessary to eliminate any such conflict but no further. All terms which are defined in the Contract shall have the same meaning when used herein, unless otherwise defined herein. A. PROPERTY DESCRIPTION. The property described in EXHIBIT "B" attached hereto is an approximate description of the Property to be conveyed hereunder and is attached for reasonable identification of the Property. The exact description to be used for purposes of this Contract and the conveyance documents shall be the metes and bounds description set forth on the Survey, which description shall become a part of this Contract at the description of the Property and shall be incorporated herein by reference for all purposes. B. INSPECTION. In addition to the provisions set forth in Addendum C to the Contract, the following provisions shall apply: 1. All tests, studies and inspections are to be conducted in a manner as not to physically damage the Property or unreasonably interfere with the usual operation of the Property by Seller. Purchaser and its agents and representatives shall: (a) promptly pay when due the costs of all tests, investigations and examinations done with regard to the Property in connection with Purchaser's inspection; (b) not permit any liens to attach to the Property by reason of the exercise of Purchaser's rights hereunder; (c) restore the surface of the Property and any improvements thereon to the condition in which the same were found before any such inspections or tests were undertaken; and (d) not reveal or disclose any information obtained during the Inspection Period concerning the Property to anyone outside Purchaser's organization. Purchaser hereby indemnifies and holds Seller harmless from and against any and all liens, claims, causes of action, and expenses (including reasonable attorney's fees) arising out of any violation of the provisions of this Paragraph B of Addendum E. Notwithstanding any provision of this Contract, no termination of this Contract shall terminate Purchaser's obligations pursuant to this Paragraph 13.B. of this Contract shall not be applicable to any cause of action arising pursuant to this Paragraph B. of Addendum E. 2. Within two (2) business days after the Effective Date, Seller agrees to allow Purchaser, its authorized agents or representatives, to inspect and make copies at its own expense of engineering investigations, tests and/or environmental studies in Seller's possession which have been made with respect to the Property within the one-year period prior to the Effective Date. Purchaser acknowledges that any and all of the studies are proprietary and confidential in nature, and will be made available to Purchaser solely to assist Purchaser in determining the feasibility of purchasing the Property. Purchaser agrees not to disclose the studies, or any of the provisions, terms or conditions thereof, to any party outside of Purchaser's organization, except as to its attorneys, accountants, lenders or investors. Purchaser shall return all of the studies, and any and all copies Purchaser has made of the studies, and all copies of any studies, reports or test results obtained by Purchaser in connection with its inspection of the Property, on the first to occur of (a) such time as purchaser determines that it shall not acquire the Property, or (b) such time as this Contract is terminated for any reason. Purchaser hereby acknowledges that Seller has not made and does not make any warranty or representation regarding the truth or accuracy of the studies or the source thereof. Seller has not undertaken any independent investigation as to the truth or accuracy of the studies and is providing the studies solely as an accommodation to Purchaser. In permitting Purchaser to review such studies or information to assist Purchaser, no third-party benefits or relationships of any kind, either express or implied, have been offered, intended, or created by Seller, and any such claims are expressly rejected by Seller and waived by Purchaser. C. AS-IS. Notwithstanding anything contained in this Contract to the contrary except for the representations and warranties set forth herein, Purchaser has examined and investigated or may examine or investigate the Property prior to the expiration of the Inspection Period, and Purchaser will rely solely on its own investigation of the Property and not on any information provided or to be provided by or on behalf of Seller except for the representations and warranties set forth herein. Except as expressly set forth herein, it is understood and agreed that Seller is making no representations or warranties, whether express or implied, by operation of law or otherwise with respect to (i) environmental matters of any nature or kind whatsoever relating to the Property or any portion thereof, including, without limitation, compliance with any environmental protection, underground storage tanks, pollution or land use laws, rules, regulations, 2 orders or requirements and the existence in or on the Property of any hazardous or toxic materials; (ii) geological conditions, including, without limitation, subsidence, subsurface conditions, water table, underground water reservoirs, and limitations regarding withdrawal of water therefrom; (iii) whether or not and to the extent to which the Property or any portion thereof is affected by any stream (surface or underground), body of water, floodprone area, flood plain, floodway or special flood hazard; (iv) drainage; (v) soil conditions; (vi) zoning to which the Property or any portion thereof may be subject; (vii) availability of any utilities to the Property or any portion thereof, including without limitation, water, sewage, gas and electric; (viii) usage of any adjoining property; (ix) access to the Property or any portion thereof; (x) the compliance or non-compliance of any of the Property with any applicable federal, state or local building codes, ordinances, laws, statutes, rules or regulations; (xi) the value, compliance with plans or specifications, locations, use, merchantability, construction, workmanlike condition, order, repair, maintenance, design, quality, description, durability, operation or condition of the Property or any portion thereof; (xii) the quality of labor and materials included in the Improvements; (xiii) the suitability of the Property or any portion thereof for Purchaser's purposes or fitness for any usage or purpose whatsoever; or (xiv) any other matter relating to the Property. Except as expressly provided herein, Purchaser hereby agrees that Purchaser is accepting the Property "AS IS, WHERE IS, WITH ALL FAULTS AND WITHOUT ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED", subject to all deficiencies or other matters whether known or unknown; however, non of the foregoing shall impair or further restrict the special warranty of title by which the Property is to be conveyed pursuant to the Contract or the representations and warranties set forth herein. SELLER: HAGGAR CLOTHING COMPANY By: /s/ FRANK D. BRACKEN ----------------------------------------- Name (print): Frank D. Bracken ------------------------------- Title: President and Chief Operating Officer -------------------------------------- PURCHASER: FRED'S FOREIGN CAR SERVICE, INC. By: /s/ JOSE GUEVARA ----------------------------------------- Jose Guevara Owner 3 FIRST AMENDMENT TO COMMERCIAL CONTRACT OF SALE STATE OF TEXAS ) ) COUNTY OF DALLAS ) THIS FIRST AMENDMENT TO COMMERCIAL CONTRACT OF SALE (the "First Amendment") is made by and between Haggar Clothing Co., a Nevada corporation (the "Seller") and Fred's Foreign Car Service, Inc., a Texas corporation (the "Purchaser"). INTRODUCTORY PROVISIONS: The following provisions form a part of and are incorporated into this First Amendment: A. Seller and Purchaser have previously entered into that certain Commercial Contract of Sale dated effective March 28, 1996 (the "Contract"), which Contract is incorporated herein by reference, wherein Seller agreed to sell and convey to Purchaser, upon the terms and conditions therein contained, that certain property (the "Property") described in the Contract. B. Seller and Purchaser now desire to amend the Contract as set forth herein. NOW, THEREFORE, for and in consideration of the agreements set forth herein and the sum of Ten and No/100 Dollars ($10.00) paid by the Purchaser and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the parties hereby agree as follows: 1. CLOSING DATE. The Closing Date shall be extended from April 8, 1996 until April 30, 1996, or such earlier date as may be agreed to by Purchaser and Seller. 2. MISCELLANEOUS. (a) The terms of the Contract, as modified by this First Amendment, are valid, binding and in full force and effect. (b) Except as otherwise defined herein, all defined terms set forth herein shall have the same meaning as set forth in the Contract. The Contract, as amended by this First Amendment, embodies the entire agreement between the parties hereto, supersedes all prior agreements and understandings, if any, relating to the subject matter hereof, and may be amended or supplemented FIRST AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 1 only by an instrument in writing executed by the party against whom enforcement is sought. (c) This First Amendment shall be governed by and construed in accordance with the laws of the State of Texas. (d) This First Amendment shall be binding upon and shall inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, successors and assigns. (e) Each party is entitled to rely on a facsimile signature of any other party to this First Amendment upon receipt by facsimile transmission via telecopier. Any party initially providing his or her signature via telecopier shall deliver an original signature page to the other parties promptly after transmission of the facsimile. (f) This First Amendment may be executed in a number of identical counterparts, each of which constitute collectively one agreement; but in making proof of this First Amendment, it shall not be necessary to produce or account for more than one such counterpart. It is not necessary that each party execute the same counterpart so long as identical counterparts are executed by all parties. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to be effective as of the 8th day of April, 1996. SELLER: PURCHASER: - ------ --------- HAGGAR CLOTHING CO. FRED'S FOREIGN CAR SERVICE, INC. By: /s/ J.M. HAGGAR, III By: /s/ JOSE GUEVARA ---------------------------- ---------------------------- Name(Print): J.M. Haggar, III JOSE GUEVARA, President ------------------ Title: Chairman & CEO ------------------------ FIRST AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 2 EX-10.(M) 4 EXHIBIT 10(M) NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark- COMMERCIAL CONTRACT OF SALE IN CONSIDERATION of the mutual terms, provisions, covenants and agreements contained in this Contract (the "Contract"), the parties hereto agree as follows. [CHECK ALL BOXES APPLICABLE TO THIS CONTRACT. BOXES NOT CHECKED DO NOT APPLY TO THIS CONTRACT.] 1. PARTIES. Haggar Clothing Company (the "Seller") shall sell and convey to R. H. A. Partnership (the "Purchaser") and Purchaser shall buy and pay for the Property (defined below). 2. PROPERTY. Being a 103,500 square foot office and warehouse facility situated on 4.4424 Acre with an address of 6120 Peeler Street in the City of Dallas, Dallas County, Texas, further described as: _______________________ _________________________________________________ or as described in EXHIBIT A, SURVEY/LEGAL DESCRIPTION, and/or shown on EXHIBIT B, SITE PLAN, together with, all and singular, all improvements thereon and all rights and appurtenances pertaining thereto, including any right, title and interest of Seller in and to adjacent streets, alleys and rights-of-way. Such real estate, improvements, rights and appurtenances are collectively referred to herein as the "Property." / / The Property also includes fixtures and articles of personal property listed and described in ADDENDUM A, PERSONAL PROPERTY. 3. PURCHASE PRICE. The purchase price for the Property is $1,500,000.00 (the "Purchase Price"), payable as follows: / / A. The Purchase Price shall be adjusted up or down based upon the [STRIKE ONE] NET / GROSS land area of the Property determined by the Survey. The applicable land area shall be multiplied by $_______ per square foot and the product thereof shall become the Purchase Price at Closing. /X/ B. Cash payable at Closing: $1,500,000.00. / / C. The balance of the Purchase Price shall be payable according to the provisions in ADDENDUM B, FINANCING. 4. EARNEST MONEY. A. EARNEST MONEY DEPOSIT. Within two business days after the Effective Date of this Contract, Purchaser shall deposit earnest money in the form of a certified or cashier's check in the amount of $10,000.00 (the "Earnest Money") payable to Chicago Title Insurance Co. c/o Tim Hardin, 717 N. Harwood St., 2610 Maxus Energy Tower Dallas, TX 75201 969-5300 (the "Title Company"), in its capacity as escrow agent, to be held in escrow pursuant to the terms of this Contract. Seller's acceptance of this Contract is expressly conditioned upon Purchaser's timely deposit of the Earnest Money with the Title Company. If Purchaser fails to timely deposit the Earnest Money, Seller may, at Seller's option, terminate this Contract by delivering a written termination notice to Purchaser. Notwithstanding anything herein to the contrary, a portion of the Earnest Money in the amount of $100.00 shall be non-refundable and shall be distributed to Seller at Closing or other termination of this Contract as full payment and independent consideration for Seller's performance under this Contract. If this Contract is properly terminated by Purchaser pursuant to a right of termination granted to Purchaser by any provision of this Contract, or any attached Addenda, the Earnest Money, less the non-refundable portion, shall be promptly refunded to Purchaser, and the parties shall have no further rights or obligations under this Contract (except for those which may expressly survive the termination). The Earnest Money /X/ SHALL / / SHALL NOT be placed in an interest-bearing account by the Title Company, and any interest earned thereon shall become a part of the Earnest Money. At Closing the Earnest Money shall be applied to the Purchase Price. B. ESCROW. The Earnest Money is deposited with the Title Company with the understanding that the Title Company (1) is not responsible for the performance or non-performance of any party to this Contract, and (2) is not liable for interest on the funds held unless required in Paragraph 4.A. The Title Company shall deposit the Earnest Money in one or more fully insured accounts in one or more Federally insured banking or savings institutions. If both parties make demand for the payment of the Earnest Money, the Title Company has the right to require from all parties and Broker(s) a written release of liability of the Title Company which authorizes the disbursement of the Earnest Money. If only one party makes demand for payment of the refundable portion of the Earnest Money, the Title Company shall give notice to the other party of the demand. The Title Company is authorized and directed to honor the demand unless the other party delivers a written objection to the Title Company within ten (10) days after the Title Company's notice to that party. 5. SURVEY AND TITLE DOCUMENTS. A. SURVEY. As soon as reasonably possible, and in any event within twenty (20) days after the Effective Date, Seller shall, at Seller's expense, deliver or cause to be delivered to Purchaser a copy of a current or updated on-the-ground perimeter survey (the "Survey") of the Property prepared by a Registered Professional Land Surveyor reasonably acceptable to the Purchaser. The Survey shall show the location and size of all of the following on or adjacent to the Property, if any: buildings, building lines, improvements, streets, pavements, easements, rights-of-way, protrusions, encroachments, fences, 100-year flood plain, apparent public utilities, and recording information of easements. The Survey shall show the gross land area and the Net Land Area. The Survey shall be in a form and of a date acceptable to Purchaser and to the Title Company, and in acceptable form in order to allow the Title Company to delete the survey exception (except as to "shortages in area") from the Title Policy. The term "NET LAND AREA" means the gross land area of the Property less the land area included in utility easements, drainage easements, ingress/egress easements, rights-of-way, 100-year flood plain and encroachments on or across the Property. The area within the 100-year flood plain shall be as defined by the Federal Emergency Management Agency or other applicable governmental authority. If the transaction described in this Contract does not close through no fault of Seller or except as provided in Paragraph 16.C, in addition to the other rights of Seller, Purchaser shall pay for the Survey on demand. At Closing, the metes and bounds description of the Property reflected in the Survey shall be used in the warranty deed and any other documents requiring a legal description of the Property. B. TITLE COMMITMENT. As soon as reasonably possible, and in any event within twenty (20) days after the Effective Date, Seller shall, at Seller's expense, deliver or cause to be delivered to Purchaser (1) a title commitment (the "Title Commitment") covering the Property binding the Title Company to issue a Texas Owner Policy of Title Insurance (the "Title Policy") on the standard form prescribed by the Texas State Board of Insurance at the Closing, in the full amount of the Purchase Price, insuring Purchaser's fee simple title to the Property to be good and indefeasible, subject only to the Permitted Exceptions as defined below, and (2) the following documents (collectively, the "Title Documents") (a) true and legible copies of all recorded instruments affecting the Property and recited as exceptions in the Title Commitment, (b) a current tax certificate, and (c) written notices as required in Paragraph 5.C. C. SPECIAL ASSESSMENT DISTRICTS. If the Property is situated within a utility district or flood control district subject to the provisions of Section 50.301, Texas Water Code, then Seller shall give to Purchaser as part of the Title Documents the required written notice and Purchaser agrees to acknowledge receipt of the notice in writing. The notice must set forth the current tax rate, the current bonded indebtedness and the authorized indebtedness of the district, and must comply with all other applicable requirements of the Texas Water Code. If the Property is subject to mandatory membership in a property owner's association, Seller shall notify Purchaser of the current annual budget of the property owners' association, and the current authorized fees, dues and/or assessments relating to the Property. D. ABSTRACT. At the time of the execution of this Contract, Purchaser acknowledges that the Broker(s) (defined below) have advised and hereby advise Purchaser, by this writing, that Purchaser should have the abstract covering the Property examined by an attorney of Purchaser's own selection or that Purchaser should be furnished with or obtain a policy of title insurance. - -C- Copyright 1995 NTCAR form 01 (1/95) Page 1 6. REVIEW OF TITLE DOCUMENTS. A. REVIEW PERIOD. Purchaser shall have twenty (20) days (the "Review Period") after Purchaser's receipt of the last of (i) the Survey, (ii) the Title Commitment, (iii) the Title Documents, and (iv) all other documents required to be furnished by Seller as identified on ADDENDUM A, PERSONAL PROPERTY, and/or on ADDENDUM C, INSPECTION, to review them. If Purchaser has any objections to the Survey, Title Commitment or Title Documents, Purchaser may deliver the objections to Seller in writing within the Review Period. Any item to which Purchaser does not object shall be deemed a "Permitted Exception." Items that the Title Company identifies as to be released at closing will be deemed objections by Purchaser. Purchaser's failure to object within the time provided shall be a waiver of the right to object. If there are objections by Purchaser, or a third party lender, Seller shall make a good faith attempt to satisfy the objections within ten (10) days after receipt of Purchaser's objections (the "Cure Period"), but Seller is not required to incur any cost to do so. Zoning ordinances and the lien for current taxes are deemed to be Permitted Exceptions. B. CURE PERIOD. If Seller cannot satisfy the objection within the Cure Period, Seller shall deliver a written notice to Purchaser, prior to expiration of the Cure Period, stating whether Seller is committed to cure the objections at or before Closing. If Seller does not timely deliver the written notice, or does not commit in the written notice to fully cure all of the objections at or before Closing, then Purchaser may terminate this Contract by delivering a written notice to Seller on or before the earlier to occur of: (i) the date which is seven (7) days after the expiration of the Cure Period; or (ii) the scheduled Closing Date. If Purchaser properly and timely terminates this Contract, the refundable portion of the Earnest Money shall be immediately returned to Purchaser and thereafter neither party shall have any rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). If Purchaser does not properly and timely terminate this Contract, the Purchaser shall be deemed to have waived any uncured objections and must accept such title as Seller is able to convey as of Closing. 7. SELLER'S WARRANTIES AND REPRESENTATIONS. A. STATEMENTS. Seller represents and warrants to Purchaser to the best of Seller's knowledge as follows: (1) TITLE. At the Closing, Seller will have the right to, and will, convey to Purchaser good and indefeasible fee simple title to the Property free and clear of any and all liens, assessments, unrecorded easements, security interests and other encumbrances except the Permitted Exceptions. Delivery of the Title Policy pursuant to Paragraph 12 below will be deemed to satisfy the obligation of Seller as to the sufficiency of title required under this Contract. However, delivery of the Title Policy will not release Seller from the warranties of title set forth in the warranty deed. (2) LEASES. There are no parties in possession of any portion of the Property as lessees, tenants at sufferance or trespassers except tenants under written leases delivered to Purchaser pursuant to this Contract. (3) NEGATIVE COVENANTS. Seller shall not further encumber the Property or allow an encumbrance upon the title to the Property, or modify the terms or conditions of any existing leases, contracts or encumbrances, if any, without the written consent of Purchaser. (4) LIENS AND DEBTS. There are no mechanic's liens, Uniform Commercial Code liens or unrecorded liens against the Property, and Seller shall not allow any such liens to attach to the Property prior to Closing, which will not be satisfied out of the Closing proceeds. All obligations of Seller arising from the ownership and operation of the Property and any business operated on the Property, including, but not limited to, taxes, leasing commissions, salaries, contracts, and similar agreements, have been paid or will be paid prior to Closing. Except for obligations for which provisions are made in this Contract for prorating at Closing and any indebtedness taken subject to or assumed, there will be no obligations of Seller with respect to the Property outstanding as of Closing. (5) LITIGATION. There is no pending or further inquiry to the current actual knowledge of Seller without duty of threatened litigation, condemnation, or assessment affecting the Property. Seller shall promptly advise Purchaser of any litigation, condemnation or assessment affecting the Property which is instituted after the Effective Date. (6) OPERATION OF THE PROPERTY. After the Effective Date until the Closing Date, Seller shall (a) operate the Property in the same manner as the Property has been operated, and (b) maintain the Property in the same condition and in the same manner as existed on the Effective Date, except for ordinary wear and tear and any casualty loss. B. SURVIVAL. It is specifically acknowledged and agreed that representations and warranties made by Seller as set forth in this Contract, other than the special warranty as to title of the Property, shall survive the inspection or investigation made by or on behalf of Purchaser and the passage of title from the Seller to Purchaser at Closing for a period of one year after Closing and shall not be merged into or waived by the instruments executed at Closing. Additionally, all agreements and indemnities of Seller and Purchaser set forth in this Contract shall, to the extent not consummated at Closing, survive the Closing of the transaction contemplated by this Contract. - -C- Copyright 1995 NTCAR form 01 (1/95) Page 2 9. INSPECTION. [CHECK ONE] /X/ A. INSPECTION DESIRED. Purchaser desires to inspect the Property and Seller grants to Purchaser the right to inspect the Property as described in ADDENDUM C, INSPECTION. / / B. INSPECTION NOT NECESSARY. Purchaser acknowledges that Purchaser has inspected the Property, including all buildings and improvements thereon, and is thoroughly familiar with their condition, and Purchaser hereby accepts the Property in its present condition, with such changes as may hereafter be caused by normal wear and tear prior to Closing, but without waiving Purchaser's rights by virtue of Seller's representations and warranties expressed in this Contract. 10. CASUALTY LOSS. All risk of loss to the Property shall remain upon Seller prior to the Closing. If, prior to the Closing, the Property is damaged or destroyed by fire or other casualty, to a Material Extent (defined below), Purchaser may either terminate this Contract by delivering a written termination notice to Seller within ten days after the damage occurs, or elect to close. If, prior to the Closing, the Property is damaged by fire or other casualty to less than a Material Extent, the parties shall proceed to Closing as provided herein. If the transaction is to proceed to Closing, despite any damage or destruction, there shall be no reduction in the Purchase Price and Seller shall, at Seller's option: (i) fully repair the damage prior to Closing, at Seller's expense; (ii) reimburse Purchaser for the entire cost of repairing the Property by allowing Purchaser to deduct the cost from the cash payable to Seller at the Closing; or (iii) assign to Purchaser all of Seller's right and interest in any insurance proceeds resulting from the damage or destruction, plus an amount equal to any insurance deductible. The term "Material Extent" means damage or destruction if the cost of repairing and fully restoring the Property to its previous condition exceeds ten percent (10%) of the Purchase Price. If the extent of damage or the amount of insurance proceeds to be made available is not able to be determined prior to the Closing Date, or the repairs are not able to be completed prior to the Closing Date, either party may postpone the Closing Date by delivering a written notice to the other party specifying an extended Closing Date which is not more than thirty (30) days after the previously scheduled Closing Date. 11. ASSIGNMENT. [CHECK ONLY ONE] / / A. ASSIGNMENT PROHIBITED. Purchaser may not assign this Contract without Seller's prior written consent. / / B. ASSIGNMENT PERMITTED. Purchaser may assign this Contract provided the assignee assumes in writing all obligations and liabilities of Purchaser under this Contract, in which event Purchaser shall be relieved of any further liability hereunder. /X/ C. LIMITED ASSIGNMENT. Purchaser may assign this Contract only to a related party, defined as (i) an entity in which Purchaser is an owner, partner or corporate officer, or (ii) a member of the immediate family of the Purchaser. Purchaser shall remain liable under this Contract after any assignment to a related party. 12. CLOSING. A. CLOSING DATE. The closing of the transaction described in this Contract (the "Closing") shall be held at 10:00 a.m. on the later of [CHECK ONE]: / / ______ days after the Effective Date; or / / ______ days after the expiration of the Review Period or Inspection Period (whichever is later); or / / on August 1, 1996 (the "Closing Date") at the offices of the Title Company at its address stated below. However, if any objections which were properly and timely made by Purchaser pursuant to this Contract have not been cured on the scheduled Closing Date, then either party may postpone the date of the Closing by delivering a written notice to the other party specifying an extended Closing Date which is not more than thirty (30) days after the previously scheduled Closing Date. B. SELLER'S CLOSING DOCUMENTS. At the Closing, Seller shall deliver to Purchaser at Seller's expense: (1) A duly executed [CHECK ONE] / / GENERAL WARRANTY DEED /X/ SPECIAL WARRANTY DEED (with Vendor's Lien retained if not a cash purchase) conveying the Property in fee simple according to the legal description prepared by the surveyor as shown on the Survey, subject only to the Permitted Exceptions; (2) The Title Policy issued by the underwriter for the Title Company pursuant to the Title Commitment, subject only to the Permitted Exceptions, in the full amount of the Purchase Price, dated as of the date of the Closing, and (at an additional premium cost) [CHECK IF APPLICABLE] / / with the survey exception deleted except as to "shortages in area;" (3) A Bill of Sale conveying the personal property identified in Addendum A, PERSONAL PROPERTY, free and clear of liens, security interests and encumbrances, subject only to the Permitted Exceptions (to the extent applicable); (4) Possession of the Property, subject to valid existing leases and other applicable Permitted Exceptions; (5) A duly executed assignment of all leases; (6) A current rent roll certified by Seller to be complete and accurate; (7) Evidence of Seller's authority and capacity to close this transaction; (8) All other documents reasonably required by the Title Company to close this transaction. C. PURCHASER'S CLOSING DOCUMENTS. At the Closing, Purchaser shall deliver to Seller at Purchaser's expense: (1) The cash portion of the Purchase Price, with the Earnest Money being applied thereto; (2) The Note and the Deed of Trust, if any; (3) An Assumption Agreement in recordable form agreeing to pay all commissions payable under any lease of the Property; (4) Evidence of Purchaser's authority and capacity to close this transaction; (5) All other documents reasonably required by the Title Company to close this transaction. D. CLOSING COSTS. Each party shall pay its share of the closing costs which are customarily paid by a Seller or Purchaser in a transaction of this character in the county where the Property is located, or as otherwise agreed. E. PRORATIONS. Rents, lease commissions, interest, insurance premiums, maintenance expenses, operating expenses, and ad valorem taxes for the year of Closing shall be prorated at the Closing effective as of the date of Closing. Any security deposits held by Seller shall be delivered to Purchaser at the Closing. If the Closing occurs before the tax rate is fixed for the year of Closing, the apportionment of the taxes shall be upon the basis of the tax rate for the preceding year applied to the latest assessed valuation, but any difference between estimated taxes for the year of Closing the actual taxes paid by Purchaser shall be adjusted equitably between the parties upon proof of payment of the taxes by Purchaser. This provision shall survive the Closing. F. LOAN ASSUMPTION. If Purchaser assumes an existing mortgage loan at Closing, Purchaser shall pay (1) to the lender, any assumption fee charged by the lender; and (2) to Seller, a sum equal to the amount of any reserve accounts held by the lender for the payment of taxes and/or insurance. Purchaser shall execute, at the option and expense of Seller, a Deed of Trust to Secure Assumption. If consent to the assumption is required by the lender, Seller shall obtain the lender's consent in writing and deliver the consent to Purchaser at Closing. If Seller does not obtain the lender's written consent (if required) and deliver it to Purchaser at or before Closing, Purchaser may terminate this Contract by delivering a written termination notice to Seller whereupon the refundable portion of the Earnest Money will be promptly refunded to Purchaser and the parties shall have no further rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). G. ROLLBACK TAXES. If a change in use of the Property or denial of a special use valuation on the Property claimed by Seller results in the assessment after Closing of additional taxes for periods of Seller's ownership, the additional taxes plus any penalties and interest shall be paid by Purchaser. This obligation shall survive the Closing. H. FOREIGN PERSON NOTIFICATION. If Seller is a Foreign Person, as defined by the U.S. Internal Revenue Code, or if Seller fails to deliver to Purchaser a non-foreign affidavit pursuant to Section 1445 of the Internal Revenue Code, then Purchaser may withhold from the sales proceeds an amount sufficient to comply with applicable tax law and deliver the withheld proceeds to the Internal Revenue Service, together with appropriate tax forms. The required affidavit(s) from Seller(s) shall include (1) a statement that Seller is not a foreign person, (2) the U.S. taxpayer identification number(s) of Seller(s), and (3) other information required by Section 1445 of the Internal Revenue Code. -C- Copyright 1995 NTCAR form 01(1/95) Page 3 13. DEFAULT. A. PURCHASER'S REMEDIES. If Seller fails to close this Contract for any reason except Purchaser's default or the termination of this Contract pursuant to a right to terminate set forth in this Contract, Seller shall be in default and Purchaser may elect one of the following as Purchaser's sole remedy [CHECK ALL THAT MAY APPLY]: /X/ (1) Enforce specific performance of this Contract against Seller unless Seller is in default hereunder as a result of a warranty or representation of Seller being untrue or inaccurate in any material respect and Seller had no knowledge that such warranty or representation was untrue or inaccurate in which case, Purchaser's sole and exclusive remedy shall be to terminate this Contract by written notice delivered to Seller at or prior to the Closing; / / (2) Bring suit for damages against Seller; / / (3) Enforce specific performance of this Contract and/or bring suit for damages against Seller; or / / (4) Terminate and release Seller from this Contract and receive the refundable portion of the Earnest Money immediately. Seller's failure to satisfy Purchaser's objections under Paragraph 6 above shall not constitute a default by Seller. B. SELLER'S REMEDIES. If Purchaser fails to close this Contract for any reason except Seller's default or the termination of this Contract pursuant to a right to terminate set forth in this Contract, Purchaser shall be in default and Seller may elect one of the following, as Seller's sole remedy [CHECK ALL THAT MAY APPLY]: / / (1) Enforce specific performance of this Contract; / / (2) Bring suit for damages against Purchaser; / / (3) Enforce specific performance of this Contract and/or bring suit for damages against Purchaser; or /X/ (4) Have the Earnest Money paid to Seller as liquidated damages for the Purchaser's breach of this Contract, thereby releasing Purchaser from this Contract. 14. AGENCY DISCLOSURE. A. AGENCY RELATIONSHIP. The term "Broker(s)" refers to the Principal Broker and/or the Cooperating Broker, if applicable, as set forth on the signature page. Each Broker has fiduciary duties only to the party(s) the Broker represents as identified below. If either Broker is representing both Seller and Purchaser, then such representation is a dual agency and the dual agency disclosure and consent provisions apply as set forth below. [EACH BROKER CHECK ONE ONLY]. (1) The Principal Broker is agent for: /X/ the Seller only; or / / the Purchaser only; or / / both Purchaser and Seller. B. OTHER BROKERS. Each party to this Contract represents and warrants to the other party that such party has had no dealings with any person, firm, agent or finder in connection with the negotiation of this Contract and/or the consummation of the purchase and sale contemplated herein, other than the Broker(s) named in this Contract, and no real estate broker, agent, attorney, person, firm or entity, other than the Broker(s) is entitled to any commission or finder's fee in connection with this transaction as the result of any dealings or acts of such party. Each party hereby agrees to indemnify, defend, protect and hold the other party harmless from and against any costs, expenses or liability for compensation, commission, fee, or charges which may be claimed by any agent, finder or other similar party, other than the named Broker(s), by reason of any dealings or acts of the indemnifying party. C. FEE SHARING. Each party acknowledges that the Principal Broker may pay a portion of the Fee (defined below) to the Cooperating Broker. Payment of a portion of the Fee by the Principal Broker to the Cooperating Broker shall not alter the fiduciary relationships between the parties and the Brokers. Seller is liable for payment of the Fee to the Principal Broker only. The Cooperating Broker shall have no claims directly against Seller. D. DUAL AGENCY. If either of the Brokers has indicated in Section 14.A above that Broker is representing both Purchaser and Seller, then Purchaser and Seller hereby consent to the dual agency, authorize the respective Broker(s) to represent more than one party to this transaction, and acknowledge that the source of any expected compensation to the Broker(s) will be the Seller, and the Broker(s) may also be paid a fee by Purchaser. IF THE BROKER(S) ARE ACTING IN A DUAL AGENCY CAPACITY, BROKER(S) SHALL: (1) NOT DISCLOSE TO PURCHASER THAT SELLER WILL ACCEPT A PRICE LESS THAN THE ASKING PRICE UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY SELLER; (2) NOT DISCLOSE TO SELLER THAT PURCHASER WILL PAY A PRICE GREATER THAN THE PRICE SUBMITTED IN A WRITTEN OFFER TO THE SELLER UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY THE PURCHASER; (3) NOT DISCLOSE ANY CONFIDENTIAL INFORMATION, OR ANY INFORMATION A PARTY SPECIFICALLY INSTRUCTS THE BROKER(S) IN WRITING NOT TO DISCLOSE, UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY THE RESPECTIVE PARTY OR REQUIRED TO DISCLOSE SUCH INFORMATION BY LAW; (4) TREAT ALL PARTIES TO THE TRANSACTION HONESTLY AND IMPARTIALLY SO AS NOT TO FAVOR ONE PARTY OR WORK TO THE DISADVANTAGE OF ANY PARTY. 15. PROFESSIONAL SERVICE FEE. A. PAYMENT OF FEE. Seller agrees to pay the Principal Broker a professional service fee in cash (the "Fee") for procuring the Purchaser and for asisting in the negotiation of this Contract as follows: six percent (6%) of the first One Million Dollars ($1,000,000.00) of the purchase price and three percent (3%) of the remaining total purchase price. The Fee shall be earned if, so and when the transaction contemplated by this Contract is closed and funded. The Fee shall be paid at the Closing of a sale of the Property by Seller pursuant to this Contract (as may be amended or assigned). The Title Company or other escrow agent is authorized and directed to pay the Fee to the Principal Broker out of the closing proceeds. 16. MISCELLANEOUS PROVISIONS. A. EFFECTIVE DATE. The term "Effective Date" means the latter of the two dates on which this Contract is signed by Seller and Purchaser, as indicated by their signatures below. If the last party to execute this Contract fails to complete the date of execution below that party's signature, the Effective Date shall be the date this fully executed Contract is delivered to the Title Company. B. NOTICES. All notices and other communications required or permitted under this Contract must be in writing and shall be deemed delivered, whether actually received or not, on the earlier of: (i) actual receipt, if delivered in person or by messenger with evidence of delivery; or (ii) receipt of an electronic facsimile transmission ("Fax"); or (iii) upon deposit in the United States Mail as required below. Notices may be transmitted by Fax to the Fax telephone numbers specified below, if any. Notices delivered by mail must be deposited in the U.S. Postal Service, first class postage prepaid, and properly addressed to the intended recipient at the address set forth below. Any party may change its address for notice purposes by delivering written notice of its new address to all other parties in the manner set forth above. Copies of all written notices should also be delivered to the Principal Broker and to the Title Company, but failure to notify the Principal Broker or the Title Company will not cause an otherwise properly delivered notice to be ineffective. -C- Copyright 1995 NTCAR form 01(1/95) Page 4 C. MUTUAL TERMINATION. If this Contract is terminated by agreement of both parties at any time prior to Closing, the obligations of each party under this Contract shall terminate, except that (1) Seller and Purchaser shall each pay one-half of the cost of the Survey (if Survey costs are incurred), (2) Purchaser shall pay the costs to repair any damage to the Property caused by Purchaser or its agents, (3) Purchaser shall deliver to Seller any reports or documents in Purchaser's possession concerning the Property, (4) Seller shall pay the Fee owed to the Principal Broker, and (5) each party shall perform any other obligations which expressly survive the termination of this Contract. The obligations of this paragraph shall survive the termination of this Contract. D. FORMS. In case of a dispute as to the form of any document required under this Contract, the most recent form prepared by the State Bar of Texas, modified as necessary to conform to the requirements of this Contract, shall be deemed reasonable. E. ATTORNEYS FEES. The prevailing party in any legal proceeding brought in relation to this Contract or transaction shall be entitled to recover from the non-prevailing parties court costs, reasonable attorneys' fees and all other reasonable litigation expenses. F. INTEGRATION. This Contract contains the complete agreement between the parties with respect to the Property and cannot be varied except by written agreement. The parties agree that there are no oral or signed agreements, understandings, representations or warranties made by the parties which are not expressly set forth herein. G. SURVIVAL. Any warranty, representation, covenant, condition or obligation contained in this Contract not otherwise consummated at the Closing will survive the Closing of this transaction. H. BINDING EFFECT. This Contract shall inure to the benefit of and be binding upon the parties to this Contract and their respective heirs, legal representatives, successors and assigns. I. TIME FOR PERFORMANCE. Time is of the essence under each provision of this Contract. Strict compliance with the times for performance is required. J. RIGHT OF ENTRY. Upon reasonable advance notice and during normal business hours, Purchaser, Purchaser's representatives and the Brokers have the right to enter upon the Property prior to Closing for purposes of viewing, inspecting and conducting studies of the Property, so long as they do not unreasonably interfere with the use of the Property by Seller or any tenants, or cause undue damage to the Property. K. BUSINESS DAY. If any date of performance under this Contract falls on a Saturday, Sunday or Texas legal holiday, such date of performance shall be deferred to the next day which is not a Saturday, Sunday or Texas legal holiday. L. GOVERNING LAW. This Contract shall be construed under and governed by the laws of the State of Texas, and unless otherwise provided herein, all obligations of the parties created under this Contract are to be performed in the county where the Property is located. M. SEVERABILITY. If any provision of this Contract is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, the invalid, illegal or unenforceable provision shall not affect any other provisions, and this Contract shall be construed as if the invalid, illegal, or unenforceable provision is severed and deleted from this Contract. N. DISCLAIMER. Purchaser understands that a real estate broker is qualified to advise on matters concerning real estate and is not an expert in matters of law, tax, financing, surveying, hazardous materials, engineering, construction, safety, zoning, land planning, architecture, or the Americans with Disabilities Act. However, the Broker(s) will disclose to Purchaser any material factual knowledge which Broker may possess about the condition of the Property. Purchaser acknowledges that Purchaser has been advised by the Broker(s) to seek expert assistance on such matters. The Broker(s) do not investigate a property's compliance with building codes, governmental ordinances, statutes and laws that relate to the use or condition of the Property or its construction, or that relate to its acquisition. If the Broker(s) provide names of consultants or sources for advice or assistance, the Broker(s) do not warrant the services of the advisors or their products and cannot warrant the suitability of property to be acquired. The Broker(s) do not warrant that the Seller will disclose any or all property defects or other matters pertaining to the Property or its condition. O. COUNTERPARTS. This Contract may be executed in a number of identical counterparts. Each counterpart is deemed an original and all counterparts shall, collectively, constitute one agreement. P. GENDER; NUMBER. Unless the context requires otherwise, all pronouns used in this Contract shall be construed to include the other genders, whether used in the masculine, feminine or neuter gender. Words in the singular number shall be construed to include the plural, and words in the plural shall be construed to include the singular. Q. MEDIATION. If any dispute arises relating to this Contract (the "Dispute"), including but not limited to payment of the Fee, then any party may give written notice to the other party(s) requiring all involved parties to attempt to resolve the Dispute by mediation. Except in those circumstances when a party reasonably believes that an applicable statute of limitations period is about to expire, or a party requires injunctive or equitable relief, the parties are obligated to use this mediation procedure prior to initiating arbitration or any other action. Within seven (7) days after receiving the mediation notice, each party must deliver a written designation to all other parties stating the names of one or more individuals with authority to resolve the Dispute on such party's behalf. Within ten (10) days after the date of designation, the parties shall make a good faith effort to select a qualified mediator to mediate the Dispute. If the parties are unable to timely agree upon a mutually acceptable mediator, the parties shall request any State or Federal district judge to appoint a mediator. In consultation with the mediator, the parties shall promptly designate a mutually convenient time and place for the mediation which is no later than thirty (30) days after selection of the mediator. In the mediation, each party shall be represented by persons with authority and discretion to negotiate a resolution of the Dispute, and may be represented by counsel. The mediation shall be governed by the provisions of Chapter 154 of the Texas Remedies and Practice Code, and such other rules as the mediator may prescribe. The fees and expenses of the mediator shall be shared equally by all parties. R. ARBITRATION. If the parties are unable to resolve any Dispute by mediation, then the parties agree to submit the Dispute to binding arbitration before a single arbitrator. The Dispute shall be decided by arbitration in accordance with the applicable arbitration statute and the then existing rules of the American Arbitration Association. Any party may initiate the arbitration procedure by delivering a written notice of demand for arbitration to the other parties. Within ten (10) days after the receipt by all parties of the written notice of demand for arbitration, the parties shall attempt to select a qualified arbitrator who is acceptable to all parties. If the parties are unable to agree upon an arbitrator who is acceptable to all parties, then upon application of any party a court of competent jurisdiction shall appoint an arbitrator. This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. S. CONSULT AN ATTORNEY. This document is an enforceable, legally binding agreement. Read it carefully. The Broker(s) involved in the negotiation of the transaction described in this Contract cannot give you legal advice. By law, the Broker(s) are limited to discussing factual and business details of the transaction. The parties to this Contract acknowledge that they have been advised by the Broker(s) to have this Contract reviewed by legal counsel before signing this Contract to discuss the legal effects of its terms and provisions. - -C- Copyright 1995 NTCAR form 01 (1/95) Page 5 17. ADDITIONAL PROVISIONS. [ADDITIONAL PROVISIONS AS DIRECTED BY SELLER OR PURCHASER MAY BE SET FORTH BELOW.] 18. EXHIBITS AND ADDENDA. All Exhibits and Addenda attached to this Contract are incorporated herein by reference and are made a part of this Contract for all purposes. [CHECK ALL THAT APPLY.] / / Addendum A Personal Property /X/ Exhibit A Survey and/or Legal Description / / Addendum B Financing /X/ Exhibit B Site Plan /X/ Addendum C Inspection /X/ Exhibit C-1 Hazco Letter / / Addendum D Disclosure Notice /X/ Exhibit C-1 UST/Gas Pump Site Plan /X/ Addendum E Special Provisions Addendum
19. CONTRACT AS OFFER. The execution of this Contract by the first party to do so constitutes an offer to purchase or sell the Property. Unless within five (5) days from the date of execution of this Contract by the first party, this Contract is accepted by the other party by signing the offer and delivering a fully executed copy to the first party, the offer of this Contract shall be deemed automatically withdrawn and terminated, and the Earnest Money, if any, shall be promptly returned to Purchaser. EXECUTED on the dates stated below, to be effective on the Effective Date. SELLER PURCHASER Haggar Clothing Company R. H. A. Partnership - ----------------------------------------- ------------------------------------------ By [SIGNATURE]: Frank D. Bracken By [SIGNATURE]: Robert W. Ricketts, III -------------------------- --------------------------- Name: Frank D. Bracken Name: Robert W. Ricketts, III ------------------------------------ ------------------------------------- Title: President & Chief Operating Officer Title: Managing Partner ----------------------------------- ------------------------------------ Address: 6113 Lemmon Avenue Address: 9101 Chancellor Row --------------------------------- ---------------------------------- Dallas, Texas 75209 Dallas, Texas 75247 - ----------------------------------------- ------------------------------------------ - ----------------------------------------- ------------------------------------------ Telephone: 214-352-8481 Fax: 956-4446 Telephone: 214-905-0858 Fax: -------------- ------------ -------------- --------- Tax I.D. No: 75-0312650 Tax I.D. No: ----------------------------- ------------------------------ Date of Execution: 3/28/96 Date of Execution: 3/26/96 ----------------------- ------------------------ PRINCIPAL BROKER COOPERATING BROKER The Staubach Company None - ----------------------------------------- ------------------------------------------ By [SIGNATURE]: Paul A. Whitman By [SIGNATURE]: -------------------------- --------------------------- Name: Paul A. Whitman Name: ------------------------------------ ------------------------------------- Title: Senior Vice President Title: ----------------------------------- ------------------------------------ Address: 6750 LBJ Freeway, Suite 1100 Address: --------------------------------- ---------------------------------- Dallas, Texas 75240 - ----------------------------------------- ------------------------------------------ - ----------------------------------------- ------------------------------------------ Telephone: 214-385-0500 Fax: 214-385-8132 Telephone: Fax: -------------- ------------- -------------- -------------
TITLE COMPANY ACCEPTANCE. The Title Company acknowledges receipt of the Earnest Money on ________________________________ and accepts the Earnest Money subject to the terms and conditions set forth in this Contract. TITLE COMPANY - --------------------------------------------- By [SIGNATURE]: ------------------------------ Name: ---------------------------------------- Title: --------------------------------------- Address: ------------------------------------- - --------------------------------------------- - --------------------------------------------- Telephone: Fax: -------------- ------------ COPYRIGHT NOTICE: THIS FORM IS PROVIDED FOR THE USE OF MEMBERS OF THE NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS, INC. PERMISSION IS HEREBY GRANTED TO MAKE LIMITED COPIES OF THIS FORM FOR USE IN A PARTICULAR TEXAS REAL ESTATE TRANSACTION. CONTACT THE NTCAR OFFICE TO CONFIRM THAT YOU ARE USING THE CURRENT VERSION OF THIS FORM - -C- Copyright 1995 NTCAR form 01 (1/95) Page 6 EXHIBIT A SURVEY PLAT TO ALL PARTIES INTERESTED IN PREMISES SURVEYED: This is to certify that I have, this date, made a careful and accurate survey on the ground of property located at Peeler Street in the City of Dallas, Texas, described below: BEING a tract of land situated in the MILES BENNETT SURVEY, ABSTRACT NO. 52, Dallas County, Texas, and also a part of CITY BLOCK 5717 in the City of Dallas, Texas, and being more particularly described by metes and bounds as follows: BEGINNING at an iron rod for corner at the intersection of the Southeast line of Haggar Way (a 50' wide road) with the Southwest line of the M. K. & T. right-of-way (40' wide); THENCE South 43 degrees 30 minutes East along said Southwest line of the M.K.& T. Railway for a distance of 590.0 feet to an iron rod for corner in the Northwest line of Atwell Street (50' wide); THENCE South 46 degrees 44 minutes West along said Northwest line of Atwell Street for a distance of 300.9 feet to an iron rod for corner in the Northeast line of Peeler Street (50' wide); THENCE North 43 degrees 27 minutes 40 sec. W. along said Northeast line Peeler Street for a distance of 590.0 feet to an iron rod for corner in the Southeast line of Haggar Way; THENCE North 46 degrees 44 minutes East along said Southeast line of Haggar Way for a distance of 300.5 feet to the PLACE OF BEGINNING. CONTAINING 177,411.53 square feet or 4.07 acres of land. EXHIBIT "B" [MAP] EXHIBIT C-1 [LOGO] [LETTERHEAD] January 9, 1990 Texas Water Commission 1019 N. Duncanville Road Duncanville, Texas 75116-2201 Attn: Dixon Bunt Dear Mr. Bunt: In regards to Haggar Apparel, 6120 Peeler Street, Dallas, Texas, Dallas County. Hazco removed concrete in and around shop area where Haggar thought fuel storage tanks were on this property. Property was bought from another company. Haggar investigated people from the other company to try and locate the tank or tanks on above property to no avail. The reason for excavation was due to Haggar employees possibly remembering dispensing pump at location around old shop area. Due to the time laps involving this matter Haggar felt it necessary to explore area for tank or tanks. Hazco felt it necesarry to explore area for tank or tanks. Hazco investigated area by excavating and metal detectors. There is no sign of any tank or tanks or old excavation on above site. Hopefully Haggar and Hazco have demonstrated in good faith and effort this site has never been used or exposed to dispensing of petroleum products. If you have any further questions, please feel free to call. Regards, /s/ Jim McKee Jim McKee EXHIBIT C-2 [MAP] NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark- ADDENDUM C TO CONTRACT OF SALE INSPECTION PROPERTY ADDRESS OR DESCRIPTION: 6120 Peeler Street, Dallas, Texas A. INSPECTION PERIOD. Purchaser shall have a period of thirty (30) days after the Effective Date (the "Inspection Period") to inspect the Property and to conduct feasibility studies regarding Purchaser's intended use of the Property. Purchaser's studies may include without limitation: (i) core borings; (ii) environmental and architectural tests and investigations; (iii) physical inspections of all improvements, fixtures, equipment, subsurface soils, structural members, and personal property; and (iv) examination of plans, specifications, manuals, and other documents relating to the construction and condition of the Property. Purchaser and Purchaser's agents, employees, consultants and contractors shall have the right of reasonable entry onto the Property during normal business hours, and upon reasonable advance notice to Seller and/or Seller's tenants, for purposes of the inspections, studies, tests and examinations deemed necessary by Purchaser. All inspections, studies, tests and examinations performed hereunder shall be at Purchaser's expense. B. REPORTS. / / (1) Within ________________ (____) days after the Effective Date, Seller shall deliver to Purchaser a written report of an environmental assessment of the Property. The report shall be prepared, at Seller's expense, by a Registered Professional Engineer reasonably acceptable to Purchaser, who is proficient or certified in environmental risk assessment. The environmental assessment report must include a "Phase I" investigation into the existence to Hazardous Materials (as defined in Paragraph 7.A.(7) of this Contract) on or around the Property. The environmental assessment must also include a land use history search, engineering inspections, studies and/or tests which may be necessary to discover the existence, past or present, of Hazardous Materials. /X/ (2) See paragraph B(2) of Addendum E. /X/ (3) As soon as reasonably possible after they become available to Purchaser, Purchaser shall deliver to Seller, at Purchaser's expense, copies of all written reports, inspections, plats, drawings and studies made by Purchaser and Purchaser's agents, consultants and contractors. This provision shall survive the termination of this Contract. C. TERMINATION. If Purchaser determines, in Purchaser's sole discretion, no matter how arbitrary, that the Property is not in satisfactory condition or is not suitable for Purchaser's intended use or purpose, then Purchaser may terminate this Contract by delivering a written notice to Seller on or before the last day of the Inspection Period, and the refundable portion of the Earnest Money shall be promptly returned by the Title Company to Purchaser and neither party shall have any further rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). D. ACCEPTANCE. If Purchaser does not properly and timely terminate this Contract before the expiration of the Inspection Period (or if Purchaser accepts the Property in writing) then Purchaser will be deemed to have waived all objections to the Property under this Contract, except for any title objections which may be outstanding pursuant to Section 6 of this Contract. In that event, Purchaser agrees to purchase the Property in its current condition without any further representations or warranties of Seller, except any objections which Seller may expressly agree in writing to cure, and this Contract shall continue in full force and effect and the parties shall proceed to Closing. However, this provision does not limit or invalidate any express representations or warranties Seller has made in this Contract. E. RESTORATION. If the transaction described in this Contract does not close, through no fault of Seller, and the condition of the Property was altered due to tests and inspections performed by Purchaser or on Purchaser's behalf, Purchaser must restore the Property to its original condition. This provision shall survive the termination of this Contract. FDB - -C- Copyright 1995 NTCAR form 01(1/95) Initials: Seller______ Purchaser: RWR ADDENDUM E SPECIAL PROVISIONS ADDENDUM --------------------------- PROPERTY: 6120 Peeler Street, Dallas, Texas SELLER: Haggar Clothing Company PURCHASER: R.H.A. Partnership This Special Provisions Addendum (herein so called) is attached to and made a part of that one certain Contract of Sale (the "Contract"), by and between HAGGAR CLOTHING COMPANY, as "Seller", and R.H.A. PARTNERSHIP, as "Purchaser." In the event a conflict arises between the provisions of this Special Provisions Addendum and any other part of this Contract, this Special Provisions Addendum shall modify and supersede such other part of this Contract to the extent necessary to eliminate any such conflict but no further. All terms which are defined in the Contract shall have the same meaning when used herein, unless otherwise defined herein. A. PROPERTY DESCRIPTION. The property described in EXHIBIT "A" attached hereto is an approximate description of the Property to be conveyed hereunder and is attached for reasonable identification of the Property. The exact description to be used for purposes of this Contract and the conveyance documents shall be the metes and bounds description set forth on the Survey, which description shall become a part of this Contract at the description of the Property and shall be incorporated herein by reference for all purposes. B. INSPECTION. In addition to the provisions set forth in Addendum C to the Contract, the following provisions shall apply: 1. All tests, studies and inspections are to be conducted in a manner as not to physically damage the Property or unreasonably interfere with the usual operation of the Property by Seller. Purchaser and its agents and representatives shall: (a) promptly pay when due the costs of all tests, investigations and examinations done with regard to the Property in connection with Purchaser's inspection; (b) not permit any liens to attach to the Property by reason of the exercise of Purchaser's rights hereunder; (c) restore the surface of the Property and any improvements thereon to the condition in which the same were found before any such inspections or tests were undertaken; and (d) not reveal or disclose any information obtained during the Inspection Period concerning the Property to anyone outside Purchaser's organization. Purchaser hereby indemnifies and holds Seller harmless from and against any and all liens, claims, causes of action, and expenses (including reasonable attorney's fees) arising out of any violation of the provisions of this Paragraph B of Addendum E. Notwithstanding any provision of this Contract, no termination of this Contract shall terminate Purchaser's obligations pursuant to this Paragraph 13.B. of this Contract shall not be applicable to any cause of action arising pursuant to this Paragraph B of Addendum E. 2. Within ten (10) days after the Effective Date, Seller agrees to allow Purchaser, its authorized agents or representatives, to inspect and make copies at its own expense of engineering investigations, tests and/or environmental studies in Seller's possession which have been made with respect to the Property within the one-year period prior to the Effective Date. Purchaser acknowledges that any and all of the studies are proprietary and confidential in nature, and will be made available to Purchaser solely to assist Purchaser in determining the feasibility of purchasing the Property. Purchaser agrees not to disclose the studies, or any of the provisions, terms or conditions thereof, to any party outside of Purchaser's organization, except as to its attorneys, accountants, lenders or investors. Purchaser shall return all of the studies, and any and all copies Purchaser has made of the studies, and all copies of any studies, reports or test results obtained by Purchaser in connection with its inspection of the Property, on the first to occur of (a) such time as Purchaser determines that it shall not acquire the Property, or (b) such time as this Contract is terminated for any reason. Purchaser hereby acknowledges that Seller has not made and does not make any warranty or representation regarding the truth or accuracy of the studies or the source thereof. Seller has not undertaken any independent investigation as to the truth or accuracy of the studies and is providing the studies solely as an accommodation to Purchaser. In permitting Purchaser to review such studies or information to assist Purchaser, no third-party benefits or relationships of any kind, either express or implied, have been offered, intended, or created by Seller, and any such claims are expressly rejected by Seller and waived by Purchaser. C. AS-IS. Notwithstanding anything contained in this Contract to the contrary except for the representations and warranties set forth herein, Purchaser has examined and investigated or may examine or investigate the Property prior to the expiration of the Inspection Period, and Purchaser will rely solely on its own investigation of the Property and not on any information provided or to be provided by or on behalf of Seller except for the representations and warranties set forth herein. Except as expressly set forth herein, it is understood and agreed that Seller is making no representations or warranties, whether express or implied, by operation of law or otherwise with respect to (i) environmental matters of any nature or kind whatsoever relating to the Property or any portion thereof, including, without limitation, compliance with any environmental protection, underground storage tanks, pollution or land use laws, rules, regulations, orders or requirements and the existence in or on the Property of any hazardous or toxic materials; (ii) geological conditions, including, without limitation, subsidence, subsurface conditions, water table, underground water reservoirs, and limitations regarding withdrawal of water therefrom; (iii) whether or not and to the extent to which the Property or any portion thereof is affected by any stream (surface or underground), body of water, floodprone area, flood plain, floodway or special flood hazard; (iv) drainage; (v) soil conditions; (vi) zoning to which the Property or any portion thereof may be subject; (vii) availability of any utilities to the Property or any portion thereof, including without limitation, water, sewage, gas and electric; (viii) usage of any adjoining property; (ix) access to the Property or any portion thereof; (x) the compliance or non-compliance of any of the Property with any applicable federal, state or local building codes, ordinances, laws, statutes, rules or regulations; (xi) the value, compliance with plans or specifications, locations, use, merchantability, construction, workmanlike condition, order, repair, maintenance, design, quality, description, durability, operation or condition of the Property or any portion thereof; (xii) the quality of labor and materials included in the Improvements; (xiii) the suitability of the Property or any portion thereof for Purchaser's purposes or fitness for any usage or purpose whatsoever; or (xiv) any other matter relating to the Property. Except as expressly provided herein, Purchaser hereby agrees that Purchaser is accepting the Property "AS IS, WHERE IS, WITH ALL FAULTS AND WITHOUT ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED", subject to all ADDENDUM E Page 2 deficiencies or other matters whether known or unknown; however, non of the foregoing shall impair or further restrict the special warranty of title by which the Property is to be conveyed pursuant to this Contract or the representations and warranties set forth herein. D. DISCLOSURE-UNDERGROUND STORAGE TANKS. Attached to this Contract as EXHIBIT "C-1" is a letter dated January 9, 1990 from Hazco to the Texas Water Commission regarding the possible existence of underground storage tanks under the Property. Attached to this Contract as EXHIBIT "C-2" is an old site plan showing the possible existence at some point in time of gas pumps on the Property. Purchaser acknowledges and understands that (i) the letter and the site plan described in the preceding 2 sentences are provided to Purchaser as full and complete disclosure by Seller of all information in the possession of Seller in connection with the possible existence of underground storage tanks under the Property, and (ii) Seller is making no representation or warranty regarding the existence or non-existence of underground storage tanks under the Property. Purchaser has reviwed EXHIBITS "C-1" and "C-2" and Purchaser is entering into this Contract with knowledge of the disclosures made by Seller as set forth in this Paragraph D. SELLER: HAGGAR CLOTHING COMPANY By: /s/ FRANK D. BRACKEN ----------------------------------------- Name (Print): Frank D. Bracken ------------------------------- Title: President and Chief Operating Officer -------------------------------------- PURCHASER: R.H.A. PARTNERSHIP By: /s/ ROBERT W. RICKETTS, III ----------------------------------------- Robert W. Ricketts, III, Managing Partner ADDENDUM E Page 3 AMENDMENT TO CONTRACT OF SALE DATE: April 22, 1996 -------------------------- GF NO. 396506-S UP/cde DATE OF CONTRACT: March 28, 1996 SELLER: HAGGAR CLOTHING COMPANY PURCHASER: R.H.A. Partnership PROPERTY: 6120 Peeler Street, City of Dallas, Dallas County, Texas. (Item 4. A.) of the Earnest Money Contract shall be amended to read in its entirety: A. EARNEST MONEY DEPOSIT. Within two business days after the Effective Date of this Contract, Purchaser shall deposit earnest money in the form of a certified or cashier's check in the amount of $10,000.00 (the "Earnest Money") payable to American Title Company c/o Hardin & Hardin Associates, P. C. 717 North Harwood Street, 2610 Maxus Energy Tower, Dallas, Texas 75201 214/969-5300--214/969-5348 FAX (the "Title Company"), in its capacity as escrow agent, to be held in escrow pursuant to the terms of this Contract. Seller's acceptance of this contract is expressly conditioned upon Purchaser's timely deposit of the Earnest Money with the Title Company. If Purchaser fails to timely deposit the Earnest Money, Seller may, at Seller's option, terminate this Contract by delivering a written termination notice to Purchaser. Notwithstanding anything herein to the contrary, a portion of the Earnest Money in the amount of $100.00 shall be non-refundable and shall be distributed to Seller at Closing or other termination of this Contract as full payment and independent consideration for Seller's performance under this Contract. If this Contract is properly terminated by Purchaser pursuant to a right of termination granted to Purchaser by any provision of this Contract, or any attached Addenda, the Earnest Money, less the non-refundable portion, shall be promptly refunded to Purchaser, and the parties shall have no further rights or obligations under this Contract (except for those which may expressly survive the termination). The Earnest Money shall be placed in an interest-bearing account by the Title Company, and any interest earned thereon shall become a part of the Earnest Money. At Closing the Earnest Money shall be applied to the Purchase Price. The sole purpose of the amendment is to change the name of the Title Company from Chicago Title Insurance Company to American Title Company. All other provisions of the Contract of Sale shall remain unchanged. HAGGER CLOTHING COMPANY By: [Name Illegible] ----------------------------------- R.H.A. PARTNERSHIP By: ----------------------------------- SECOND AMENDMENT TO COMMERCIAL CONTRACT OF SALE STATE OF TEXAS ) ) COUNTY OF DALLAS ) THIS SECOND AMENDMENT TO COMMERCIAL CONTRACT OF SALE (the "Second Amendment") is made by and between Haggar Clothing Co., a Nevada corporation (the "Seller") and R.H.A. Partnership, a Texas general partnership (the "Purchaser"). INTRODUCTORY PROVISIONS: The following provisions form a part of and are incorporated into this Second Amendment: A. Seller and Purchaser have previously entered into that certain Commercial Contract of Sale dated effective March 28, 1996 (the "Contract"), which Contract is incorporated herein by reference, wherein Seller agreed to sell and convey to Purchaser, upon the terms and conditions therein contained, that certain real property (the "Property") described in the Contract. B. By Amendment to Contract of Sale dated April 22, 1996, Seller and Purchaser amended the Contract to change the name of Title Company. C. Seller and Purchaser now desire to further amend the Contract as set forth herein. NOW, THEREFORE, for and in consideration of the agreements set forth herein and the sum of Ten and No/100 Dollars ($10.00) paid by the Purchaser and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the parties hereby agree as follows: 1. INSPECTION PERIOD. The Inspection Period is extended from April 29, 1996 until May 10, 1996. 2. MISCELLANEOUS. a. The terms of the Contract, as modified by this Second Amendment, are valid, binding and in full force and effect. b. Except as otherwise defined herein, all defined terms set forth herein shall have the same meaning as set forth in the Contract. The Contract as amended by this Second Amendment, embodies the entire agreement between SECOND AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 1 the parties hereto, supersedes all prior agreements and understandings, if any, relating to the subject matter hereof, and may be amended or supplemented only by an instrument in writing executed by the party against whom enforcement is sought. (c) This Second Amendment shall be governed by and construed in accordance with the laws of the State of Texas. (d) This Second Amendment shall be binding upon and shall inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, successors and assigns. (e) Each party is entitled to rely on a facsimile signature of any other party to this Second Amendment upon receipt by facsimile transmission via telecopier. Any party initially providing his or her signature via telecopier shall deliver an original signature page to the other parties promptly after transmission of the facsimile. (f) This Second Amendment may be executed in a number of identical counterparts, each of which constitute collectively one agreement; but in making proof of this Second Amendment, it shall not be necessary to produce or account for more than one such counterpart. It is not necessary that each party execute the same counterpart so long as identical counterparts are executed by all parties. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to be effective as of the 29th day of April, 1996. SELLER: HAGGAR CLOTHING CO. By: /s/ FRANK D. BRACKEN ----------------------------------- Name (Print): Frank D. Bracken -------------------------- Title: President & CEO --------------------------------- PURCHASER: R.H.A. PARTNERSHIP By: /s/ ROBERT W. RICKETTS, III, ----------------------------------- ROBERT W. RICKETTS, III, Managing Partner SECOND AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 2 THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE STATE OF TEXAS ) ) COUNTY OF DALLAS ) THIS THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE (the "Third Amendment") is made by and between HAGGAR CLOTHING CO., a Nevada corporation (the "Seller") and R.H.A. PARTNERSHIP, a Texas general partnership (the "Purchaser"). INTRODUCTORY PROVISIONS: The following provisions form a part of and are incorporated into this Third Amendment: A. Seller and Purchaser have previously entered into that certain Commercial Contract of Sale dated effective March 28, 1996 (the "Original Contract"), which Original Contract is incorporated herein by reference, wherein Seller agreed to sell and convey to Purchaser, upon the terms and conditions therein contained, that certain real property (the "Property") described in the Original Contract. B. By Amendment to Contract of Sale dated April 22, 1996 (the "First Amendment"), Seller and Purchaser amended the Original Contract to change the name of Title Company. C. The Original Contract was further amended by that certain Second Amendment to Commercial Contract of Sale dated to be effective as of April 29, 1996 (the "Second Amendment") whereby Seller and Purchaser agreed to extend the Inspection Period (the Original Contract, the First Amendment and the Second Amendment are hereinafter collectively referred to as the "Contract"). D. Seller and Purchaser now desire to further amend the Contract as set forth herein. NOW, THEREFORE, for and in consideration of the agreements set forth herein and the sum of Ten and No/100 Dollars ($10.00) paid by the Purchaser and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the parties hereby agree as follows: 1. APPROVAL OF TITLE, SURVEY AND PROPERTY. Purchaser hereby acknowledges and agrees that, except as set forth in paragraph 2 below, the Title Commitment, the Survey and the Property are satisfactory to and are hereby approved by Purchaser. THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 1 Except as set forth in paragraph 2 below, Purchaser waives all contingencies set forth in the Contract. 2. APPRAISAL. Purchaser will have until the expiration of the Inspection Period, as extended in paragraph 3 below, to deliver to Comerica Bank (Purchaser's lender in connection with this transaction) an appraisal satisfactory to Comerica Bank. If Purchaser is not able to satisfy Comerica Bank regarding an appraisal of the Property, Purchaser shall have the right to terminate the Contract by written notice delivered to Seller, in which event the Earnest Money shall immediately be returned to Purchaser and the parties shall have no further obligation one to the other, except for those obligations which expressly survive the termination of the Contract. If Purchaser fails to timely terminate the Contract as described in the preceding sentence, Purchaser shall be deemed to have waived the contingency described in this paragraph 2 and Purchaser shall proceed to close the transaction as contemplated by the Contract. 3. INSPECTION PERIOD. The Inspection Period is extended from May 10, 1996 until June 7, 1996. 4. REMEDIATION WORK. Prior to Closing, Seller will remove the fire break panels containing asbestos as described in that certain Environmental Site Assessment and Limited Asbestos Survey dated April 22, 1996 prepared by Koos & Associates. Such remediation work will be done at Seller's sole cost and expense and will comply with all applicable laws, regulations and ordinances. Seller and Purchaser agree that the removal of the fire break panels in accordance with the terms set forth in this Paragraph 4 will be a condition precedent to Purchaser's obligation to consummate the transaction contemplated by the Contract. 5. WALKWAY, CONVEYOR AND CABLING. (a) Seller and Purchaser acknowledge and agree that an elevated walkway connects the building on the Property to another building owned by Seller located north of the Property at 6113 Lemmon Avenue, Dallas, Texas ("6113 Lemmon Avenue Property"). The elevated walkway is labeled "Overpass" and is shown on a survey of the Property dated April 24, 1996 prepared by Mark A. Pacheco, R.P.L.S. No. 4900. The elevated walkway is constituted of a pedestrian walkway, certain conveyor equipment and computer and telecommunication cabling. The cabling connects computer and telecommunications equipment in the 6113 Lemmon Avenue Property to computer and telecommunications equipment in the building owned by Seller at 6020 Cedar Springs, Dallas, Texas ("6020 Cedar Springs Property"). (b) At Closing, Seller and Purchaser shall execute and deliver an Easement Agreement which will include the following provisions: THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 2 (i) Purchaser grants to Seller a nonexclusive easement (the "Easement") allowing the cabling in the building on the Property to remain in its current location and allowing Seller access to the cabling for repairs and replacements. The Easement will also allow the elevated walkway to remain in its current location. (ii) the Easement will automatically terminate 30 days after the closing and funding of the sale by Seller of the 6020 Cedar Springs Property. (iii) Prior to the termination of the Easement, Seller, at Seller's expense, will remove from the Property, the walkway, the conveyor, and if desired by Purchaser, the cabling. (iv) the Easement Agreement will contain other provisions and be in form and content satisfactory to Seller and Purchaser. MISCELLANEOUS. (a) The terms of the Contract, as modified by this Third Amendment, are valid, binding and in full force and effect. (b) Except as otherwise defined herein, all defined terms set forth herein shall have the same meaning as set forth in the Contract. The Contract, as amended by this Third Amendment, embodies the entire agreement between the parties hereto, supersedes all prior agreements and understandings, if any, relating to the subject matter hereof, and may be amended or supplemented only by an instrument in writing executed by the party against whom enforcement is sought. (c) This Third Amendment shall be governed by and construed in accordance with the laws of the State of Texas. (d) This Third Amendment shall be binding upon and shall inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, successors and assigns. (e) Each party is entitled to rely on a facsimile signature of any other party to this Third Amendment upon receipt by facsimile transmission via telecopier. Any party initially providing his or her signature via telecopier shall deliver an original signature page to the other parties promptly after transmission of the facsimile. (f) This Third Amendment may be executed in a number of identical counterparts, each of which constitute collectively one agreement; but in making proof of this Third Amendment, it shall not be necessary to produce THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 3 or account for more than one such counterpart. It is not necessary that each party execute the same counterpart so long as identical counterparts are executed by all parties. IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment to be effective as of the 10th day of May, 1996. SELLER: HAGGAR CLOTHING CO. By: /s/ J.M. HAGGAR III ------------------------------------- Name (Print): J.M. Haggar III ---------------------------- Title: Chairman & CEO ---------------------------------- PURCHASER: R.H.A. PARTNERSHIP By: /s/ ROBERT W. RICKETTS, III, -------------------------------- ROBERT W. RICKETTS, III, Managing Partner THIRD AMENDMENT TO COMMERCIAL CONTRACT OF SALE Page 4 EX-11 5 EXHIBIT 11 EXHIBIT 11 HAGGAR CORP. AND SUBSIDIARIES COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE 1996 1995 1994 1993 1992 --------- -------- --------- --------- --------- Net income (loss) to common stockholders $ (2,420) $ 9,809 $ 25,681 $ 15,012 $ 11,315 Weighted average common shares and common share equivalents outstanding 8,552 8,623 8,700 7,956 5,805 --------- -------- --------- --------- --------- Net Income (loss) per common share and common share equivalent $ (0.28) $ 1.14 $ 2.95 $ 1.88 $ 1.95 --------- -------- --------- --------- --------- --------- -------- --------- --------- --------- Computation of net income (loss) to common stockholders: Net income (loss) $ (2,420) $ 9,809 $ 25,681 $ 15,012 $ 12,432 Cumulative preferred stock dividend - - - - (1,117) --------- -------- --------- --------- --------- $ (2,420) $ 9,809 $ 25,681 $ 15,012 $ 11,315 --------- -------- --------- --------- --------- --------- -------- --------- --------- --------- Computation of weighted average common shares and Common share equivalents outstanding: Weighted average common shares outstanding 8,551 8,546 8,537 5,928 5,805 Share equivalents, due to stock options(1) 1 77 163 - - Preferred shares converted to common shares - - - 622 - New common shares issued - - - 1,406 - --------- -------- --------- --------- --------- 8,552 8,623 8,700 7,956 5,805 --------- -------- --------- --------- --------- --------- -------- --------- --------- ---------
(1) Common share equivalents due to stock options have been calculated using the treasury stock method and the average stock price for both the primary and fully diluted earnings per share. EX-23 6 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K, into the Company's previously filed Registration Statement on Form S-8 File No. 33-75676. It should be noted that we have not audited any financial statements of the Company subsequent to September 30, 1996 or performed any audit procedures subsequent to the date of our report. /s/ ARTHUR ANDERSEN LLP ----------------------------- Arthur Andersen LLP Dallas, Texas December 20, 1996 EX-27 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME FILED AS PART OF THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K. 1,000 YEAR SEP-30-1996 OCT-01-1995 SEP-30-1996 2,944 0 75,456 900 116,356 209,912 126,317 60,557 278,334 73,740 0 0 0 856 161,626 278,334 437,942 437,942 315,351 324,031 8,680 (686) 4,293 (3,406) (986) (2,420) 0 0 0 (2,420) (0.28) (0.28)
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