-----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, HwUPVaDxIq6/BKeFrV1r+CdiZ371qf9BCx2VyCppVhTb4PUCw/6kPnfY9gWzcCPh KS5YNWRGs0u8kb1nwiVPGw== 0001047469-97-008289.txt : 19971222 0001047469-97-008289.hdr.sgml : 19971222 ACCESSION NUMBER: 0001047469-97-008289 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971219 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: SEC FILE NUMBER: 000-20850 FILM NUMBER: 97740991 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 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, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________. COMMISSION FILE NUMBER: 0-20850 HAGGAR CORP. (Exact name of registrant as specified in the charter) NEVADA 75-2187001 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 6113 LEMMON AVENUE DALLAS, TEXAS 75209 (Address of principal executive offices) Registrant's telephone number, including area code: (214) 352-8481 Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS REGISTERED ---------------------------- --------------------------------- Common stock Nasdaq National Market System ($0.10 par value per share) Securities registered pursuant to Section 12(g) of the Act: NONE. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of December 15, 1997 there were 8,551,382 shares of common stock outstanding. The aggregate market value of the 7,472,820 shares of the common stock of Haggar Corp. held by nonaffiliates on such date (based on the closing price of these shares on the Nasdaq National Market System) was approximately $119,565,120. DOCUMENTS INCORPORATED BY REFERENCE The information required by Part III is incorporated by reference from the Registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report. 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-Registered Trademark- brand name and offers a more moderately priced line of products under its Reed St. James-Registered Trademark- brand name through its mass market retailer division, The Horizon Group. The Company owns several other trademarks under which it markets or has marketed its products. In addition, the Company offers retailers quality products bearing the retailer's own label. In each of the last three fiscal years the Company has derived approximately 99% of its income from the sale of men's apparel products. Additional income is derived from the licensing of certain trademarks to other manufacturers. In 1995, as part of its strategic growth objectives, the Company began opening and operating retail stores located in retail outlet malls throughout the United States. As of September 30, 1997, the Company had opened 41 such stores which market first quality Company products to the general public. These stores also serve as a retail marketing laboratory for the Company. The Company was established in 1926 by J. M. Haggar, Sr., and has built its reputation by offering high quality, "ready to wear" men's apparel at affordable prices through innovations in product design, marketing and customer service. Haggar Clothing Co. is the primary operating subsidiary. Both Haggar Corp. and Haggar Clothing Co. are incorporated in Nevada. PRODUCTS AND MAJOR BRANDS. The Company's apparel products are manufactured with a wide array of fabrics that emphasize style, comfort, fit and performance. The Company is well known for its use of "performance fabrics" that maintain a fresh, neat appearance. The Company's product lines are currently dominated by natural fiber (wool or cotton) and blended (polyester/wool or polyester/rayon) fabrics, although the Company also produces some apparel using a single synthetic (polyester or rayon) fabric. A significant portion of the Company's apparel lines consist of basic, recurring styles, which the Company believes are less susceptible to "fashion obsolescence", as compared with higher fashion apparel lines. Thus, while the Company strives to offer current fashions and styles, the bulk of its product lines change relatively little from year to year. This consistency in product lines enables the Company to operate on a cost-efficient basis and to more accurately forecast the demand for particular products. HAGGAR-REGISTERED TRADEMARK-. The Company's Haggar brands represented 77.3% of total apparel sales in fiscal 1997. These brands receive widespread recognition among United States consumers for high quality, affordable men's apparel. The full range of products offered by the Company is marketed under these brands, including dress and casual pants, sportcoats, suits, shirts and shorts. The Company has developed specific product lines under these brands, intended to keep the Company in the forefront of the trend among men toward more casual clothing, while maintaining the Company's traditional strength in men's dress apparel. Examples of these lines include Haggar Wrinkle-Free Cottons-Registered Trademark- and Haggar City CasualsTM. Haggar Wrinkle-Free Cottons-Registered Trademark- offer all the comfort features of 100% cotton pants and maintain their neat appearance, without the need for ironing or dry cleaning. Haggar City CasualsTM is a fashionable line of coordinated coats, vests, pants and shirts designed to meet the need for "business casual" and casual social dressing. The Haggar brand is also licensed to manufacturers of related apparel in categories outside of the core product lines of the Company. 3 Haggar branded products are sold nationwide primarily in major department stores, including J.C. Penney, Mercantile Department Stores, May Department Stores, Federated Department Stores, Mervyn's California, Belk Department Stores and Kohl's Department Stores. The Company also markets its Haggar branded men's clothing through its own retail stores located in 41 outlet malls throughout the United States. THE HORIZON GROUP. The Company's mass retailer division, The Horizon Group, markets Reed St. James-Registered Trademark- products including dress pants, casual pants, shorts, suits, sportcoats and shirts. Reed St. James products, which are offered at lower price points than Haggar brand products, have been generally sold to mass market retailers, such as Wal-Mart, Bradlees and Venture. The Horizon Group markets Mustang-Registered Trademark- brand jeans (featuring basic and fashion cotton jeans and shorts) and Reed Stretch Jeans. Additionally, the Horizon Group manages the licensing of products bearing the Reed St. James brand. In addition to manufacturing products under its own labels, the Company also manufactures men's apparel for certain of its customers under the individual store's proprietary label. The Company's private label products are primarily sold to major department stores and mass market merchandisers, including J.C. Penney, Wal-Mart and Sears. INTRODUCTION OF NEW PRODUCTS. The Company is emphasizing the introduction of new products in order to capitalize on its brand name recognition and retailer relationships. While the Company has offered casual products in the past, it has increased its efforts in this category through aggressive marketing and expansion of its line of Haggar Wrinkle-Free Cottons-Registered Trademark-, including its Ultimate Pant-TM-, as well as Haggar City Casuals-TM-. The Company has further expanded its product base in 1997 through the release of the Black Label-TM- and Cotton Flex-TM- products. The Company continues to emphasize its lines of shirts designed to complement its casual product lines. While there is substantial competition in these markets, the Company believes that it is well-positioned to take advantage of these market opportunities. DEPENDENCE ON KEY CUSTOMERS. The number of major apparel retailers has decreased in recent years, and the retail apparel industry continues to undergo consolidation. The Company's five largest customers accounted for 49.4%, 50.8%, and 50.7% of net sales during the fiscal years ending September 30, 1997, 1996 and 1995, respectively. The Company's largest current customer, J.C. Penney Company, Inc., accounted for 27.3%, 26.3% and 28.7% of the Company's net sales during the fiscal years ending September 30, 1997, 1996 and 1995, respectively. No other customer accounted for more than 10% of consolidated revenues. The loss of the business of one or more of the Company's largest customers could have a material adverse effect on the Company's results of operations. The Company has no long-term commitments or contracts with any of its customers. COMPETITION. The apparel industry is highly competitive due to its fashion orientation, its mix of large and small producers, the flow of imported merchandise and a wide variety of retailing methods. Competition has been exacerbated by consolidations and closings of major department store groups. The Company has many diverse competitors, some of whom have greater marketing and financial resources than the Company. Intense competition in the apparel industry can result in significant discounting and lower gross margins. The Company is the market leader in sales of men's dress pants, custom-fit suits (separately sized pants and matching jackets which may be purchased together to form a suit requiring little or no alteration) and sport coats, and holds the number two market share in men's casual pants. 4 The principal elements of competition in the apparel industry include style, quality and price of products, brand loyalty, customer service and advertising. The Company's product innovations such as Haggar Wrinkle-Free Cottons-Registered Trademark- and Ultimate Pant-TM- as well as value-added services such as floor-ready merchandise, electronic data interchange, fixturing and concept shops position it to compete as a market leader. The Company also believes that its brand recognition, merchandise with relatively low vulnerability to changing fashion trends and affordable pricing enhance its competitive position in the apparel industry. Additionally, it feels its national advertising campaign promotes consumer demand for its products and enhances its brand and Company image. DESIGN AND MANUFACTURING. With limited exceptions, products sold by the Company's various divisions are manufactured to the designs and specifications (including fabric selections) of designers employed by those divisions. During fiscal 1997, approximately 25% of the Company's products (measured in units) were produced in the United States, with the balance manufactured in foreign countries. Facilities operated by the Company accounted for all of its domestic-made products. A portion of all product lines manufactured by the Company are produced domestically with the exception of shirts. Approximately 22% of the Company's foreign-made products were manufactured by facilities owned by the Company in Mexico and the Dominican Republic, with the remaining 78% manufactured by unaffiliated companies in the Far East, Asia, South America, Central America, Mexico and the Dominican Republic. In 1996, the Company announced its plans to restructure its worldwide manufacturing capacity by consolidating its three Texas sewing operations into one facility and shifting a portion of the production to off-shore locations. This restructuring was completed in fiscal 1997. It is anticipated that the restructuring will result in approximately 15% of the Company's products being manufactured in the United States during fiscal 1998, with the other 85% manufactured in foreign countries. (See Item 7.- Management's Discussion and Analysis of Financial Condition and Results of Operations). The Company's foreign sourcing operations are subject to various risks of doing business abroad, including currency fluctuations, quotas and other regulations relating to imports, natural disasters and, in certain parts of the world, political or economic instability. Although the Company's operations have not been materially adversely affected by any of such factors to date, any substantial disruption of its relationships with its foreign suppliers could adversely affect its operations. Some of the Company's imported merchandise is subject to United States Customs duties. In addition, bilateral agreements between the major exporting countries and the United States impose quotas which limit the amounts of certain categories of merchandise that may be imported into the United States. Any material increase in duty levels, material decrease in quota levels or material decrease in available quota allocations could adversely affect the Company's operations. RAW MATERIALS. Raw materials used in manufacturing operations consist mainly of fabrics made from cotton, wool, synthetics and blends of synthetics with cotton and wool. These fabrics are purchased principally from major textile producers located in the United States. In addition, the Company purchases such items as buttons, thread, zippers and trim from a large number of other suppliers. Five vendors supplied approximately 56% of the Company's fabric and trim requirements during the fiscal year ended September 30, 1997. The Company has no long-term contracts with any of its suppliers, but does not anticipate substantial shortages of raw materials in 1998. 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 or more of the Company's trademarks. For example, the Company has granted exclusive domestic licenses to unaffiliated manufacturers for the production and marketing of men's leather goods, neckwear, sweaters, hosiery and eyewear under the "Haggar" trademark. SEASONALITY. Historically, the Company's business has been seasonal, with higher sales and income during its second and fourth quarters, just prior to and during the two peak retail selling seasons for spring and fall merchandise. (See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Seasonality.) BACKLOG. A substantial portion of the Company's net sales is based on orders for immediate delivery, or so-called "soft-planning orders", submitted by apparel retailers (which do not constitute purchase commitments). An analysis of backlog is not, therefore, necessarily indicative of future net sales. Retailers' use of such soft-planning orders increases the difficulty of forecasting demand for the Company's products. EMPLOYEES. The Company employs approximately 2,600 persons domestically and 1,700 persons in foreign countries. In 1997, approximately 3,300 employees were engaged in manufacturing operations and the remainder were employed in executive, marketing, wholesale and retail sales, product design, engineering, accounting, distribution and purchasing activities. The Company consolidated its three Texas sewing operations into one facility in 1997, which resulted in the termination of the employment of a number of its employees engaged in manufacturing operations. None of its domestic employees are covered by a collective bargaining agreement with any union. While the Company is not a party to any collective bargaining agreements covering its foreign employees, applicable labor laws may dictate minimum wages, fringe benefit requirements and certain other obligations. The Company believes that relations with its employees are good. ENVIRONMENTAL REGULATIONS. Current environmental regulations have not had and, in the opinion of the Company, assuming the continuation of present conditions, will not have any material effect on the business, capital expenditures, earnings or competitive position of the Company. FINANCIAL INSTRUMENT DERIVATIVES. The Company does not utilize financial instrument derivatives. 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 are set forth below:
Approximate Owned/ Lease Location Use Square Footage Leased Expiration ------------------------------------------------------------------------------------------------------ Dallas, Texas Headquarters 443,000 Owned Dallas, Texas Warehouse 157,000 Leased 1998 Fort Worth, Texas Warehouse & Distribution 660,000 Owned Dallas, Texas Storage 60,000 Owned Weslaco, Texas Fabric Cutting 115,000 Owned Weslaco, Texas (1) Excess Facility 95,000 Leased 1999 Weslaco, Texas Warehouse 137,000 Owned Edinburg, Texas Fabric Cutting & Manufacturing 121,000 Owned Leon, Mexico Manufacturing 39,000 Owned La Romana, Dom. Rep. Manufacturing 41,000 Leased 2001 Higuey, Dom. Rep. Manufacturing 13,000 Leased 2011 Robstown, Texas (1) Excess Facility 68,000 Owned Oklahoma City (1) Excess Facility 95,000 Leased 2001 Various (42 locations) (2) Retail Sales 90,000 Leased 1997 - 2003
(1) These properties were previously used by the Company as manufacturing plants but are no longer utilized by the Company. The Company is profitably subleasing the property in Oklahoma City, Oklahoma to the U.S. Postal Service. (2) These properties are the Company's 41 retail stores located in outlet malls throughout the United States and one outlet store which sells second quality products. The retail stores range in size from approximately 2,700 to 4,400 square feet. All of the properties owned by the Company are free from material encumbrances, except the Company's fabric cutting facility located at Weslaco, Texas, which is subject to a lien securing an industrial revenue bond financing in the amount of $2.8 million. The Company believes that its existing facilities are well maintained, in good operating condition and adequate for its present and anticipated levels of operations. Future manufacturing needs are anticipated to be met through owned facilities and through the use of outside contractors. The Company's Customer Service Center (CSC) in Fort Worth, Texas is expected to meet the Company's distribution requirements for the foreseeable future. 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 to date, and past experience with similar litigation leads the Company to believe that any liability resulting from these actions will not individually or collectively have a material adverse effect on the financial position of the Company. In addition, the Company has been named as a defendant in two legal actions arising out of the collapse of the roof of the Company's warehouse during the storm of May 5, 1995. Although the amount of any liability that could arise with respect to such actions cannot be accurately predicted, the Company does not believe any such liability will have a material adverse effect on the financial position of the Company. The Company maintains general liability, workers' compensation, and employers liability insurance. The Company intends to pass the costs associated with lawsuits to its insurance carriers, under the applicable policies, if any, subject to the deductible limits and other provisions and exclusions of those policies. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 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. 1997 FISCAL QUARTER ------------------------------------------------------------- 1st 2nd 3rd 4th ------------------------------------------------------------- High 18 3/4 17 3/4 15 15 1/2 Low 14 1/2 11 7/8 11 1/2 11 5/8 Dividend $0.05 $0.05 $0.05 $0.05 1996 FISCAL QUARTER ------------------------------------------------------------- 1st 2nd 3rd 4th ------------------------------------------------------------- High 18 3/4 19 16 1/4 14 7/8 Low 15 3/4 11 1/2 12 5/8 12 1/2 Dividend $0.05 $0.05 $0.05 $0.05 As of November 15, 1997, the Company had approximately 250 stockholders of record and approximately 3,600 beneficial owners. 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, 1997, is derived from financial statements of the Company which have been audited by Arthur Andersen LLP, independent public accountants.
Year Ended September 30, 1997 1996 1995 1994 1993 ----------- ------------ ----------- ----------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Net sales $ 406,030 $ 437,942 $ 448,532 $ 491,235 $ 394,059 Cost of goods sold 287,434 315,351 324,699 345,846 285,540 Restructuring charge (1) - 8,680 1,244 - - ----------- ------------ ----------- ----------- ---------- Gross profit 118,596 113,911 122,589 145,389 108,519 Selling, general and administrative expenses (113,061) (113,037) (110,432) (106,258) (87,473) Restructuring charge (1) - (5,320) - - - Gain from storm damage (2) - 1,140 4,807 - - Royalty income 2,076 2,630 3,049 2,655 2,512 ----------- ------------ ----------- ----------- ---------- Operating income (loss) 7,611 (676) 20,013 41,786 23,558 Other income, net 1,954 1,563 786 1,510 1,238 Interest expense (3,525) (4,293) (4,995) (1,273) (1,506) ----------- ------------ ----------- ----------- ---------- Income (loss) from operations before provision (benefit) for income taxes 6,040 (3,406) 15,804 42,023 23,290 Provision (benefit) for income taxes 2,297 (986) 5,995 16,342 8,278 ----------- ------------ ----------- ----------- ---------- Net income (loss) $ 3,743 $ (2,420) $ 9,809 $ 25,681 $ 15,012 ----------- ------------ ----------- ----------- ---------- ----------- ------------ ----------- ----------- ---------- Net income (loss) per common share $ 0.44 $ (0.28) $ 1.14 $ 2.95 $ 1.88 Cash dividends declared per common share $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.10 Weighted average number of common shares 8,555 8,552 8,623 8,700 7,956 BALANCE SHEET DATA (AT PERIOD END): Working capital $ 126,554 $ 136,172 $ 178,849 $ 130,644 $ 111,679 Total assets 262,053 278,334 315,352 257,298 206,253 Long-term debt 31,800 42,112 78,585 15,032 5,455 Stockholders' equity 164,514 162,482 166,406 158,002 133,399
(1) The Company decided to restructure its worldwide manufacturing capacity, which resulted in $14.0 million in nonrecurring charges in the 1996 fiscal year. During fiscal year 1995, the Company elected to close certain operating plants, which resulted in a $1.2 million nonrecurring charge. (2) During fiscal year 1995, the Company recognized a gain from the recording of an insurance claim, net of direct costs, where the insurance claim arose out of damage to the Company's main distribution center caused by a severe thunderstorm on May 5, 1995. During fiscal 1996, the Company recognized an additional $1.1 million gain from storm damage as a result of collections of insurance proceeds in excess of the September 30, 1995 recorded receivable. 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, 1997, 1996 and 1995. Year Ended September 30, 1997 1996 1995 ------- ------- ------- Net sales 100.0% 100.0% 100.0% Cost of goods sold (70.8) (72.0) (72.4) Restructuring charge - (2.0) (0.3) ------- ------- ------- Gross profit 29.2 26.0 27.3 Selling, general and administrative expenses (27.8) (25.8) (24.6) Restructuring charge - (1.2) - Gain from storm damage - 0.2 1.1 Royalty income 0.5 0.6 0.7 ------- ------- ------- Operating income (loss) 1.9 (0.2) 4.5 Other income, net 0.5 0.4 0.1 Interest expense (0.9) (1.0) (1.1) ------- ------- ------- Income (loss) from operations before provision (benefit) for income taxes 1.5 (0.8) 3.5 Provision (benefit) for taxes 0.6 (0.2) 1.3 ------- ------- ------- Net income (loss) 0.9% (0.6)% 2.2% ------- ------- ------- FISCAL 1997 COMPARED TO FISCAL 1996. Net sales decreased 7.3% to $406.0 million in fiscal 1997 compared to net sales of $437.9 million in fiscal 1996. The decrease in net sales during fiscal 1997 reflects a 9.9% decrease in unit sales offset by a 2.4% increase in average sales price. Net sales for 1997 decreased from the 1996 level mainly due to two major product conversions for two of the Company's more significant customers. Net sales were also less than expected in 1997 mainly related to shipping difficulties as a result of the implementation of a new order fulfillment system. The order fulfillment system is currently operating substantially as intended. Gross profit as a percent of net sales increased to 29.2% in 1997 compared to 26.0% in 1996. The increase in gross profit as a percent of net sales was due in part to a reduction in manufacturing costs as a result of the consolidation of manufacturing operations completed in 1997. Selling, general and administrative expenses as a percent of net sales increased to 27.8% in fiscal 1997 from 25.8% in fiscal 1996. Selling, general and administrative expenses remained constant at $113.0 million for 1997 and 1996. The consistency in selling, general and administrative expenses during fiscal 1997 was primarily the cumulative result of (i) an increase in depreciation expense of approximately $2.6 million related to the Customer Service Center ("CSC"), (ii) a decrease of approximately $7.2 million in distribution costs in 1997 resulting from reduced labor required to operate the CSC in 1997, (iii) severance costs of $2.4 million resulting from a reorganization of the Company's sales force and a reduction in corporate personnel, (iv) a 11 decrease of $2.3 million in commissions due to decreased sales, and (v) an increase of approximately $4.4 million in expenses related to the opening and operations of 13 new retail stores during fiscal 1997 and a full year of operations for stores opened in fiscal 1996. The Company is currently negotiating leases for 11 new retail outlet stores which are planned to be opened in fiscal 1998. The Company intends to continue to evaluate the growth potential for retail outlet malls and may open additional retail stores as opportunities arise. Other income, net, increased in fiscal 1997 to $2.0 million from $1.6 million in fiscal 1996, primarily as the result of an approximate $1.0 million recovery of historical losses from the dissolution of the Company's joint venture in the United Kingdom with Coats Viyella, Plc. FISCAL 1996 COMPARED TO FISCAL 1995. Net sales decreased 2.4% to $437.9 million in fiscal 1996 compared to net sales of $448.5 million in fiscal 1995. The decrease in net sales during fiscal 1996 reflects a 1.4% increase in unit sales offset by a 3.7% decrease in average sales price. During the first half of fiscal 1996, net sales were adversely affected by decreased holiday sales at retail and severe weather conditions in the Eastern U.S. which slowed efforts to clear post-holiday inventories. By comparison, net sales for the first six months of fiscal 1995 were the highest in the Company's history. During the second half of fiscal 1996 net sales exceeded the net sales during the same period in 1995. However, net sales for the second half of fiscal 1995 were unusually low due to the May 5, 1995 storm damage. Sales volume in the second half of fiscal 1996 was below expectations because of shipping difficulties incurred in the Company's new CSC. Despite acceptable initial test results, under operational conditions the automated shipping systems within the CSC were unable to accommodate the level of shipment volume needed. The Company has been able to overcome the shipping difficulties experienced during the transition into the new CSC during the fourth quarter of fiscal 1996. Gross profit as a percent of net sales decreased to 26.0% in 1996 compared to 27.3% in 1995. The decrease in gross profit as a percent of net sales was primarily due to the manufacturing restructuring charge of $8.7 million which was recorded in the fourth quarter of fiscal 1996. Absent the manufacturing restructuring charges taken in both years, gross profit in 1996 would have improved to 28%, as compared to 27.6% in fiscal 1995. However, gross profit in both years was adversely impacted by inventory and sales price markdowns resulting from the Company's efforts to reduce excess inventories. The manufacturing restructuring charge was the result of the Company's decision to pursue a strategic move intended to improve gross margins and profitability in 1997 and beyond by consolidating its three Texas sewing operations into one facility. The restructuring charge was recorded in the fourth quarter of fiscal 1996 and included an $8.7 million charge to cost of sales related principally to severance costs for manufacturing employees and a $5.3 million charge to selling, general and administrative expenses related principally to costs to resolve various legal issues in connection with the restructuring and prior plant closings as well as severance for non-manufacturing employees. 12 Selling, general and administrative expenses as a percent of net sales increased to 25.8% in fiscal 1996 from 24.6% in fiscal 1995. Actual selling, general and administrative expenses increased $2.6 million to $113.0 million in 1996 compared to $110.4 million in 1995. The primary reasons for the increase in selling, general and administrative expenses during fiscal 1996 were (i) an increase in depreciation expense of approximately $2.0 million related to the new CSC, (ii) an approximate $8.2 million increase in distribution costs in 1996 resulting from the use of additional labor in temporary distribution facilities pending completion of the CSC, and (iii) an approximate $5.0 million increase in expenses related to the opening and operations of 20 new retail stores during fiscal 1996. The Company partially offset these increases by decreasing advertising costs by approximately $6.5 million and decreasing other costs attributable to sales. The gain from storm damage recorded in fiscal 1995 was the result of the Company recording a $24.0 million charge in the third quarter of fiscal 1995 to cover the costs of damage caused by the May 5, 1995, storm. These costs included the write-down of damaged inventory to its salvage value, damages to the Company's building and equipment and disaster recovery charges. In the fourth quarter of fiscal 1995, the Company recorded an additional $10.2 million of expense related to the write-off of salvage value of inventory and additional distribution costs. The Company settled its insurance claim related to inventory damaged during the storm for $35.0 million. The Company recorded $4.0 million for additional claims related to real and personal property damage suffered on May 5, 1995. The net result recorded in fiscal 1995 was a $4.8 million gain from storm damage. During fiscal 1996, the Company received insurance proceeds in the final settlement of substantially all claims with the Company's insurance carrier related to the Company's damaged distribution center and warehouse resulting in an additional $1.1 million gain from storm damage. Other income, net, increased in fiscal 1996 to $1.6 million from $0.8 million in fiscal 1995, primarily as the result of an approximate $1.6 million gain from the sale of two buildings during 1996. The Company sold these buildings to dispose of surplus facilities caused by the consolidation of the shipping operations into the CSC. INCOME TAXES. The Company's income tax provision, as a percent of income from operations before income tax, was 38.0% in fiscal 1997. Comparatively, the Company's income tax provision/benefit, as a percent of income/loss from operations before income tax, was 28.9% and 37.9% in fiscal 1996 and 1995, respectively. For fiscal 1997, 1996 and 1995 the effective income tax rates differed from the statutory rates because of state income taxes, tax credits utilized and certain permanent tax differences. SEASONALITY. Historically, the Company's business has been seasonal, with slightly higher sales and income in the second and fourth quarters, just prior to and during the two peak retail selling seasons for spring and fall merchandise, which reflects the buying patterns of the Company's customers. The quarterly data for fiscal 1995 was adversely affected in the third and fourth quarters by the May 5, 1995, storm damage. The following table presents certain data for 13 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) (2) (2),(3) Net sales 1997 $104,157 $98,608 $87,996 $115,269 1996 98,418 110,840 103,769 124,915 1995 121,033 121,118 85,182 121,199 Gross profit 1997 $30,738 $28,424 $24,504 $34,930 1996 27,084 30,100 28,933 27,794 1995 35,353 31,030 21,931 34,275 Selling, general and administrative expenses 1997 $27,797 $28,485 $27,550 $29,229 1996 26,629 26,999 26,667 32,742 1995 27,047 27,001 28,794 27,590 Income (loss) before income taxes 1997 $2,295 $746 $(3,213) $6,212 1996 1,614 2,553 1,762 (9,335) 1995 8,607 3,620 (31,116) 34,693 Net income (loss) 1997 $1,383 $440 $(1,926) $3,846 1996 1,004 1,584 1,082 (6,090) 1995 5,336 2,167 (19,737) 22,043 Net income (loss) per common share and 1997 $0.16 $0.06 $(0.23) $0.45 common share equivalent 1996 0.12 0.19 0.13 (0.71) 1995 0.62 0.25 (2.30) 2.57
(1) In the second quarter of fiscal 1997, the Company had decreased sales due to product conversions and to shipment delays commencing in the month of March as a result of problems encountered during the implementation of an upgraded customer service, order processing and billing software system. The Company has addressed the implementation issues and improved the system's functionality. Internal changes to the system continue to be made to improve its operational efficiencies and ease of use. (2) In the third quarter of fiscal 1995 the Company recorded a $24.0 million loss related to the storm damage incurred at the distribution facility on May 5, 1995. During the fourth quarter of fiscal 1995 the Company recorded a gain of $28.8 million due to insurance proceeds received and expected to be received as a result of the storm damage. These amounts are included in Gain from Storm Damage in the 1995 statement of operations. (3) During the fourth quarter of fiscal 1996 the Company recorded restructuring charges of $14.0 million related to the decision to restructure its manufacturing capacity through consolidation of three Texas sewing facilities into one operation. The restructuring charges were $8.7 million included as a component of cost of sales and $5.3 million included as operating expenses. 14 LIQUIDITY AND CAPITAL RESOURCES. The Company's trade accounts receivable potentially expose the Company to concentrations of credit risks as all of its customers are in the retail apparel industry. The Company performs ongoing credit evaluations of its customers' financial condition and establishes an allowance for doubtful accounts based upon factors related to the credit risk of specific customers, historical trends and other information. The Company's days sales outstanding improved to 43 days on September 30, 1997, down from 45 as of September 30, 1996. Inventories at the end of fiscal 1997 decreased to $105.2 million from $116.4 million at the end of fiscal 1996. The reduction in inventory levels during fiscal 1997 reflects the Company's ongoing efforts to manage inventory. The Company's external financing needs are met through an unsecured revolving credit facility (the "Facility") with certain banks. The Facility provides the Company with a $100.0 million line of credit. The amount available under the Facility is limited to the lesser of $100.0 million minus any letter of credit exposure or the borrowing base as defined in the Facility. During the current fiscal year the Company amended the Facility to extend the expiration date of the Facility to December 31, 1999. As of September 30, 1997, the Company had $3.0 million outstanding under the Facility and had additional borrowing capacity of $84.0 million. The Company's Haggar UK subsidiary maintains a $3.2 million line of credit with a bank in the United Kingdom to fund its operating activities. At September 30, 1997, approximately $2.4 million was outstanding under this line of credit. The line of credit is collateralized by an approximate $3.2 million letter of credit from the Company and is payable upon demand. Interest under the line is payable at 1% above the bank's base rate. In 1997, the Company reached an agreement with its joint venturer, Coats Viyella Plc, to dissolve and wind-up the joint venture of the two firms in the United Kingdom. The Company intends to continue to market Haggar-Registered Trademark- apparel in the United Kingdom, including Northern Ireland and the Republic of Ireland. In 1995, the Company completed the sale and issuance of $25.0 million in senior notes. The proceeds from the notes were used to partially fund the construction of the Company's new CSC. Significant terms of the senior notes include a maturity date of ten years from the date of issuance, interest payable semi-annually and annual principal payments beginning in the fourth year. The interest rate on the senior notes is fixed at 8.49%. The terms and conditions of the note purchase agreement governing the senior notes include restriction on the sale of assets, limitations on additional indebtedness and the maintenance of certain net worth requirements. The balance of the approximately $38.0 million cost of the CSC was financed with internally generated funds and bank borrowings. The Company sold all of its investments in preferred stock and equity securities in fiscal 1996 for approximately $5.0 million. The proceeds from the sale were used to reduce borrowings under the Company's line of credit. The sale of these securities resulted in realized losses of $0.5 million. The Company provided cash from operating activities for the fiscal year ended September 30, 1997 of $23.4 million, as a result of the reduction in inventory of $11.1 million, net income, and depreciation and amortization offset by a decrease in accrued liabilities of $12.0 million. Additionally, the Company used cash in investing activities of $12.3 million during fiscal 1997, the result of purchases of property, plant, and equipment of $15.0 million primarily in connection with the opening of retail stores during the fiscal year. The Company had 41 retail stores open at the end of the 1997 fiscal year compared to 28 at the end of fiscal 1996. Furthermore, cash flows used in financing activities of $11.9 million for the 1997 fiscal year were primarily the result of a net reduction in long-term debt of $10.5 million. Comparatively, the Company provided cash from operating activities of $45.6 million for the fiscal year ended September 30, 1996, primarily as a result of the reduction in inventory of $22.5 million, as well as the collection of insurance proceeds of $23.9 million related to the damage from the May 5, 1995 storm. Additionally, the Company used cash in investing activities of $7.1 million during fiscal 1996, the result of purchases of property, plant, and equipment of $16.1 million primarily in connection with the opening of retail stores during the fiscal year. The Company had 28 retail stores open at the end of the 1996 fiscal year compared to eight at the end of fiscal 1995. Furthermore, 15 cash flows used in financing activities of $37.8 million for the 1996 fiscal year were primarily the result of a net reduction in long-term debt of $36.4 million. The Company believes that the cash flow generated from operations and the funds available under the foregoing credit facilities will be adequate to meet its working capital and related financing needs for the foreseeable future. Inflation did not materially impact the Company in 1997, 1996 or 1995. NEW ACCOUNTING STANDARD. The Company will adopt the provisions of SFAS No. 128, "Earnings per share," in the first quarter of fiscal 1998. SFAS No. 128 replaces the primary earnings per share calculation with a basic earnings per share calculation and modifies the calculation of diluted earnings per share. Had the Company adopted the provisions of SFAS No. 128 during fiscal 1997, the Company would have reported both basic and diluted earnings per share of $0.44 per share, the same as the actual net income per share reported of $0.44 per share. YEAR 2000 CONSIDERATIONS The Company is taking actions to determine that its computer systems are capable of processing periods for the year 2000 and beyond. The Company has assessed and continues to assess the impact of the year 2000 on its operations, including the development of cost estimates for and the extent of programming changes required to address the issue, and to date has determined the costs related thereto would not have a material impact on its ongoing results of operations. Also, the Company is assessing the impact of their customers' and vendors' compliance to year 2000 and what the impact will be on the Company's ongoing results of operation. FORWARD LOOKING STATEMENTS. This report contains certain forward-looking statements. In addition, from time to time the Company may issue press releases and other written communications, and representatives of the Company may make oral statements, which contain forward-looking information. Except for historical information, matters discussed in such oral and written communications are forward-looking statements that involve risks and uncertainties which could cause actual results to differ materially from those in such forward-looking statements. Risks and uncertainties inherent to the Company's line of business include such factors as natural disasters, general economic conditions, the performance of the retail sector in general and the apparel industry in particular, the competitive environment, consumer acceptance of new products, and the success of advertising, marketing and promotional campaigns. Additional risks and uncertainties which could cause the Company's actual results to differ from those contained in any forward-looking statements are discussed elsewhere herein. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Report of Independent Public Accountants, Financial Statements and Notes to Financial Statements follow. 16 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Haggar Corp.: We have audited the accompanying consolidated balance sheets of Haggar Corp. (a Nevada corporation) and subsidiaries as of September 30, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended September 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Haggar Corp. and subsidiaries as of September 30, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1997, in conformity with generally accepted accounting principles. Arthur Andersen LLP Dallas, Texas October 31, 1997 17 HAGGAR CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year Ended September 30, ------------------------------------------ 1997 1996 1995 ----------- ---------- ------------ Net sales $406,030 $437,942 $448,532 Cost of goods sold 287,434 315,351 324,699 Restructuring charge - 8,680 1,244 ----------- ---------- ------------ Gross profit 118,596 113,911 122,589 Selling, general and administrative expenses (113,061) (113,037) (110,432) Restructuring charge - (5,320) - Gain from storm damage - 1,140 4,807 Royalty income 2,076 2,630 3,049 ----------- ---------- ------------ Operating income (loss) 7,611 (676) 20,013 Other income, net 1,954 1,563 786 Interest expense (3,525) (4,293) (4,995) ----------- ---------- ------------ Income (loss) from operations before provision (benefit) for income taxes 6,040 (3,406) 15,804 Provision (benefit) for income taxes 2,297 (986) 5,995 ----------- ---------- ------------ Net income (loss) $ 3,743 $ (2,420) $ 9,809 ----------- ---------- ------------ ----------- ---------- ------------ Net income (loss) per common share and common share equivalent $ 0.44 $ (0.28) $ 1.14 ----------- ---------- ------------ ----------- ---------- ------------ Weighted average number of common shares and common share equivalents outstanding 8,555 8,552 8,623 ----------- ---------- ------------ ----------- ---------- ------------
The accompanying notes are an integral part of these consolidated financial statements. 18 HAGGAR CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) September 30, -------------------------- 1997 1996 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 2,176 $ 2,944 Accounts receivable, net 70,969 74,556 Inventories 105,242 116,356 Deferred tax benefit 10,073 12,410 Other current assets 3,833 3,646 ----------- ----------- Total current assets 192,293 209,912 Property, plant, and equipment, net 68,697 65,760 Other assets 1,063 2,662 ----------- ----------- Total assets $ 262,053 $ 278,334 ----------- ----------- ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 28,423 $ 23,596 Accrued liabilities 26,195 38,254 Accrued wages and other employee compensation 3,481 3,447 Accrued workers' compensation 4,948 5,895 Short-term borrowings 2,362 2,067 Current portion of long-term debt 330 481 ----------- ----------- Total current liabilities 65,739 73,740 Long-term debt 31,800 42,112 ----------- ----------- Total liabilities 97,539 115,852 Stockholders' equity: Common stock - par value $0.10 per share; 25,000,000 shares authorized and 8,560,636 shares issued in 1997 and 1996 856 856 Additional paid-in capital 41,641 41,641 Retained earnings 122,018 119,986 ----------- ----------- 164,515 162,483 Less - Treasury stock, 9,254 shares at par value (1) (1) ----------- ----------- Total stockholders' equity 164,514 162,482 ----------- ----------- Total liabilities and stockholders' equity $ 262,053 $ 278,334 ----------- ----------- ----------- ----------- The accompanying notes are an integral part of these consolidated financial statements. 19 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, 1994 8,546,105 $855 $41,371 $(239) $116,016 $ (1) $158,002 Common stock issuance 14,531 1 270 - - - 271 Common stock dividends declared ($0.20 per share) - - - - (1,709) - (1,709) Unrealized loss on marketable securities - - - 33 - - 33 Net income - - - - 9,809 - 9,809 ------------------------------------------------------------------------------------------------- BALANCE, September 30, 1995 8,560,636 856 41,641 (206) 124,116 (1) 166,406 Common stock dividends declared ($0.20 per share) - - - - (1,710) - (1,710) Recovery of unrealized loss on marketable securities - - - 206 - - 206 Net loss - - - - (2,420) - (2,420) ------------------------------------------------------------------------------------------------- BALANCE, September 30, 1996 8,560,636 856 41,641 - 119,986 (1) 162,482 Common stock dividends declared ($0.20 per share) - - - - (1,711) - (1,711) Net income - - - - 3,743 - 3,743 ------------------------------------------------------------------------------------------------- BALANCE, September 30, 1997 8,560,636 $856 $41,641 $ - $122,018 $ (1) $164,514 -------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 20 HAGGAR CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Year Ended September 30, ------------------------------------------ 1997 1996 1995 ---------- ----------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 3,743 $ (2,420) $ 9,809 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 11,447 6,839 3,268 (Gain) loss on disposal of property, plant, and equipment (480) (1,608) 144 Net (gain) loss on sale of marketable securities - 542 (117) Changes in assets and liabilities - Accounts receivable, net 3,587 (7,589) 13,117 Inventories 11,114 22,551 (21,343) Insurance receivable - 23,890 (23,990) Current deferred tax benefit 2,337 288 (1,872) Other current assets (187) 148 (23) Accounts payable 4,827 (2,852) (12,403) Accrued liabilities (12,059) 6,999 1,448 Accrued wages and other employee compensation 34 104 (3,259) Accrued workers' compensation expense (947) (1,338) (214) ---------- ----------- ------------ Net cash provided by (used in) operating activities 23,416 45,554 (35,435) ---------- ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant, and equipment, net (14,989) (16,070) (30,613) Proceeds from sale of property, plant, and equipment, net 1,085 1,695 - Proceeds from the sale of marketable securities - 5,018 3,156 (Increase) decrease in other assets 1,599 2,234 (130) ---------- ----------- ------------ Net cash used in investing activities (12,305) (7,123) (27,587) ---------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from short-term borrowings 295 432 501 Proceeds from issuance of long-term debt 61,000 422,000 517,000 Payments on long-term debt (71,463) (458,439) (453,423) Payments of cash dividends (1,711) (1,710) (1,709) Net proceeds from the issuance of common stock - - 271 ---------- ----------- ------------ Net cash provided by (used in) financing activities (11,879) (37,717) 62,640 ---------- ----------- ------------ Increase (decrease) in cash and cash equivalents (768) 714 (382) Cash and cash equivalents, beginning of period 2,944 2,230 2,612 ---------- ----------- ------------ Cash and cash equivalents, end of period $ 2,176 $ 2,944 $ 2,230 ---------- ----------- ------------ ---------- ----------- ------------ Supplemental disclosure of cash flow information Cash paid (received) for: Interest, net of amounts capitalized $ 3,806 $ 3,350 $ 3,275 Income taxes, net $ (589) $ (1,359) $ 9,236
The accompanying notes are an integral part of these consolidated financial statements. 21 HAGGAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997, 1996 AND 1995 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Haggar Corp. and subsidiaries (the "Company") designs, manufactures, imports, and markets men's apparel products including pants, shorts, suits, sportcoats, and shirts. The Company's products are sold to retail stores throughout the United States including major department stores, specialty stores and mass market retailers. The Company offers its premium apparel products under the Haggar-Registered Trademark- brand name, and also offers a more moderately priced line of products under its Reed St. James-Registered Trademark- brand name through its mass market retailer division, The Horizon Group. In addition, the Company offers retailers quality products bearing the retailer's own label. The Company's Haggar Direct, Inc. subsidiary was formed in 1995 for the purpose of developing and operating retail stores located in retail outlet malls throughout the United States. The Company's foreign operations are conducted through Haggar Apparel Limited, which markets the Company's branded products in Europe. Additionally, the Company derives royalty income from the use of its Haggar-Registered Trademark- and Reed St. James-Registered Trademark-trademarks by manufacturers of various products that the Company does not produce. The Company is headquartered in Dallas, Texas, with manufacturing facilities in Texas, Mexico and the Dominican Republic. The consolidated financial statements include the accounts of Haggar Corp., Haggar Clothing Co. ("Clothing Co."), which is the main operating subsidiary, Haggar Direct, Inc., Haggar Apparel Limited, and all other subsidiaries of Clothing Co. All significant intercompany transactions and balances have been eliminated in consolidation. The accompanying consolidated financial statements reflect the application of certain accounting policies as described below and in the remaining notes. CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. ALLOWANCE FOR DOUBTFUL ACCOUNTS Accounts receivable are net of allowances for doubtful accounts of $931,000 and $900,000 at September 30, 1997 and 1996, respectively. CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially expose the Company to concentrations of credit risk, as defined by Statement of Financial Accounting Standards (SFAS) No. 105, "Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk," consist primarily of trade accounts receivable. The Company's customers are not concentrated in any specific geographic region but are concentrated in the apparel industry. One customer accounted for 27.3%, 26.3% and 28.7% of the Company's net sales during the year ended September 30, 1997, 1996 and 1995, respectively. No other customer accounted for more than 10% of consolidated revenues. The loss of the business of one or more of the Company's largest customers could have a material adverse effect on the Company's results of operations. The Company performs ongoing credit evaluations of its customers' financial condition. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. 22 INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market, and consisted of the following at September 30, 1997 and 1996 (in thousands): 1997 1996 ---------- ---------- Piece goods $ 17,455 $ 23,335 Trimming and supplies 3,841 5,991 Work-in-process 16,162 13,248 Finished garments 67,784 73,782 ---------- ---------- Total inventories $ 105,242 $ 116,356 ---------- ---------- ---------- ---------- Work-in-process and finished garments inventories consisted of materials, labor and manufacturing overhead. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment, stated at cost, consisted of the following at September 30, 1997 and 1996 (in thousands): 1997 1996 ---------- --------- Land $ 3,428 $ 3,428 Buildings 29,880 29,878 Furniture, fixtures and equipment 76,931 80,786 Leasehold improvements 13,143 11,856 Construction in progress 3,526 369 ---------- --------- Total 126,908 126,317 Less: Accumulated depreciation and amortization (58,211) (60,557) ---------- --------- Net property, plant, and equipment $ 68,697 $ 65,760 ---------- --------- ---------- --------- DEPRECIATION AND AMORTIZATION The Company provides for depreciation and amortization using accelerated and straight-line methods by charges to operations in amounts which allocate the cost of the assets over their estimated useful lives, as follows: Estimated Asset Classification Useful Life -------------------- ----------- Buildings 15-40 Furniture, fixtures, and equipment 3-7 Leasehold improvements Life of Lease 23 FINANCIAL INSTRUMENTS SFAS No. 107, "Disclosure about Fair Value of Financial Instruments," requires the disclosure of the fair market value of off- and on-balance sheet financial instruments. The carrying value of all financial instruments, including long-term debt and cash and temporary cash investments, approximates their fair value at year-end. Realized gains and losses on investments in preferred stocks are determined on a specific identification basis. During the second quarter of fiscal 1996, the Company sold all of its investments in preferred stock and equity securities. These investments had been classified as available-for-sale securities and were reported at their fair values with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity, net of tax. The Company had no realized gains or losses in fiscal 1997 and recognized realized losses of $542,000 in 1996. During fiscal 1995 realized losses of $6,000 were offset by realized gains of $123,000. The net effect of these gains and losses is reflected in Other income, net, in the accompanying Consolidated Statements of Operations. There were no gross unrealized losses as of September 30, 1997 and 1996. MINORITY INTEREST In 1993, the Company established a subsidiary, Haggar UK, for the purpose of expanding its operations in the United Kingdom. The Company held a 51% interest in the subsidiary and its partner owned the remaining 49% interest. The assets and liabilities of Haggar UK have been reflected in the consolidated financial statements as of September 30, 1996. As cumulative net losses from the initial operations of the subsidiary have exceeded contributed capital, there has been no minority interest reflected in the consolidated balance sheets as of September 30, 1996. In 1997, the Company dissolved the joint venture with its partner, Coats Viyella, Plc., and the Company received $1,050,000 from Coats Viyella, Plc. for payment of historical losses. The payment is recorded in Other income, net. In conjunction with the dissolution of the joint venture, the Company obtained the remaining 49% interest in the subsidiary's assets and liabilities. Consequently, the subsidiary's financial position and results of operations have been consolidated and included in the Company's financial statements for fiscal 1997. Also, the remaining entity changed it's name to Haggar Apparel, Limited. The Haggar UK subsidiary established lines of credit with banks to fund operating activities. Available borrowing capacity at September 30, 1997 was approximately $800,000 with approximately $2,400,000 and $2,067,000 outstanding as of September 30, 1997 and 1996, respectively. Interest is payable at 1% above the bank's base rate, as defined (7.25% at September 30, 1997). The lines of credit are collateralized by an approximate $3.2 million letter of credit from the Company and is payable upon demand. REVENUE RECOGNITION Revenue is recognized upon product shipment to customers. ADVERTISING Production costs of commercials and programming are charged to operations in the year first aired. The costs of other advertising, promotion and marketing programs are charged to operations in the year incurred. For fiscal years 1997, 1996, and 1995 total advertising expense was $22.9 million, $21.5 million and $28.0 million, respectively. 24 OTHER INCOME Other income consisted of the following for the years ended September 30, 1997, 1996 and 1995 (in thousands): 1997 1996 1995 ------ ------ ----- Gain (loss) on sale of assets, net $ 480 $1,608 $(144) Interest income 218 61 81 Dissolution of Haggar UK joint venture 1,050 - - Investment income (loss), net - (436) 657 Other 206 330 192 ------ ------ ----- Total Other income, net $1,954 $1,563 $ 786 ------ ------ ----- ------ ------ ----- NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT Net income per common share and common share equivalent is calculated by dividing net income by the weighted average shares of common stock and common stock equivalents outstanding. Common stock equivalents represent the effect, if any, of the assumed purchase of common shares, using the treasury stock method, pursuant to common stock options issued under a long-term incentive plan. Common stock equivalents have been determined in 1997, 1996 and 1995 using a common stock market price of $14.88, $14.50 and $21.26, respectively, per share. The Company will adopt the provisions of SFAS No. 128, "Earnings Per Share," in the first quarter of fiscal 1998. SFAS No. 128 replaces the primary earnings per share calculation with a basic earnings per share calculation and modifies the calculation of diluted earnings per share. Had the Company adopted the provisions of SFAS No. 128 during fiscal 1997, the Company would have reported both basic and diluted earnings per share of $0.44 per share, the same as the actual net income per share reported of $0.44 per share. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. INCOME TAXES The components of the provision (benefit) for income taxes are as follows for the years ended September 30, 1997, 1996 and 1995 (in thousands): 1997 1996 1995 -------- -------- -------- Current federal income tax $ (116) $ (347) $ 7,473 Deferred federal income tax 2,366 (595) (2,212) State income tax 47 (44) 734 -------- -------- -------- Provision (benefit) for income taxes $ 2,297 $ (986) $ 5,995 -------- -------- -------- -------- -------- -------- 25 Temporary differences and carryforwards which give rise to a significant portion of net deferred income tax assets are as follows (in thousands): 1997 1996 -------- -------- Deferred income tax assets: Workers' compensation accrual $ 1,731 $ 2,063 Inventory cost capitalization and valuation 5,460 3,741 Allowances for accounts receivable - 1,237 Health and life insurance accrual 947 982 Reserve for reorganization 2,643 4,900 Other 1,107 2,396 -------- -------- 11,888 15,319 Less - Valuation allowance (250) (250) -------- -------- 11,638 15,069 Deferred income tax liability: Property, plant, and equipment, net (2,202) (1,015) Prepaid insurance (561) (1,050) -------- -------- Net deferred income tax asset 8,875 13,004 Less - Current deferred tax benefit 10,073 12,410 -------- -------- Long-term deferred tax (liability) benefit $ (1,198) $ 594 -------- -------- -------- -------- The provision (benefit) for income taxes was different than the amount computed using the statutory federal income tax rate for the reasons set forth in the following table (in thousands): 1997 1996 1995 ------ ------- ------ Tax computed at the statutory rate $2,053 $(1,158) 5,531 State income taxes 47 (44) 734 Tax credits utilized (186) (96) (491) Other 383 312 221 ------ ------- ------ $2,297 $ (986) $5,995 ------ ------- ------ ------ ------- ------ 3. INSURANCE RECEIVABLE On May 5, 1995, a severe thunderstorm struck the Dallas - Fort Worth metropolitan area causing widespread damage. During the high winds and heavy rains caused by these thunderstorms, a portion of the roof over the Company's main distribution center collapsed. The Company received a $35,000,000 insurance settlement related to the inventory and approximately $5,100,000 related to real and personal property damaged during the storm. The insurance proceeds received in 1995 as a result of the storm damage were included in Gain from Storm Damage in the accompanying 1995 statement of operations. Such proceeds have been offset by approximately $34,000,000 in expenses related specifically to the storm damage, including approximately $24,000,000 of damaged inventory, $4,000,000 of additional distribution costs, and $6,000,000 of property and equipment damage and other disaster recovery costs. Collections in excess of the recorded receivable resulted in a $1,100,000 gain from the settlement of the real and other personal property claims for the year ended September 30, 1996. As of September 30, 1997, no insurance receivable exists related to the storm damage. 26 4. LONG-TERM DEBT Long-term debt consisted of the following at September 30, 1997 and 1996 (in thousands): 1997 1996 --------- --------- Borrowings under revolving credit line $ 3,000 $ 13,000 Industrial Development Revenue Bonds with interest at a rate equal to that of high-quality, short-term, tax-exempt obligations, as defined (4.20% at September 30, 1997), payable in annual installments of $100 to $200, and a final payment of $2,000 in 2005, secured by certain buildings and equipment 2,800 2,900 Allstate notes 25,000 25,000 Other 1,330 1,693 --------- --------- 32,130 42,593 Less - Current portion 330 481 --------- --------- Total Long-Term Debt $ 31,800 $ 42,112 --------- --------- --------- --------- Net assets mortgaged or subject to lien under the Industrial Development Revenue Bonds totaled approximately $1,200,000 at September 30, 1997. As of September 30, 1997, the Company had a revolving credit line agreement (the "Agreement") with certain banks subject to certain borrowing base limitations. During 1997, the Agreement was amended to extend the maturity date to December 31, 1999. The Company had additional available borrowing capacity of approximately $84,000,000 under this Agreement at September 30, 1997. The Company incurred approximately $170,000 in commitment fees related to the available borrowing capacity during the year ended September 30, 1997. The interest rates for the year ended September 30, 1997, ranged from 6.03% to 8.50%, and the weighted average interest rate for the year was 8.13%. The facility will mature December 31, 1999, with a one year renewal at the option of the banks and is unsecured, except that the Company is prohibited from pledging its accounts receivables and inventories during the term of the Agreement. The Agreement contains limitations on incurring additional indebtedness and requires the maintenance of certain financial ratios. In addition, the Agreement requires the Company and Clothing Co., the Company's main operating subsidiary, to maintain tangible net worth, as defined, in excess of $151,000,000 and $55,000,000, respectively, as of September 30, 1997. For fiscal years after 1997, the Agreement requires the Company to maintain a tangible net worth in excess of the tangible net worth of the preceding fiscal year plus 50% of the Company's consolidated net income. The Agreement prohibits the payment of any dividend if a default exists after giving effect to such a dividend. In 1995, the Company completed the sale and issuance of $25,000,000 in senior notes (the "Allstate notes"). Proceeds from the notes were used to partially fund the construction of the Company's CSC. Significant terms of the senior notes include a maturity date of ten years from the date of issuance, interest payable semi-annually and annual principal payments beginning in the fourth year. The interest rate on the senior notes is fixed at 8.49%. The terms and conditions of the note purchase agreement governing the senior notes include restriction on the sale of assets, limitations on additional indebtedness, and the maintenance of certain net worth requirements. 27 Principal payments due during the next five years on debt are as follows (in thousands): Years Ending September 30, Amount -------------------------- ------- 1998 $ 330 1999 3,854 2000 6,870 2001 3,888 2002 3,908 Thereafter 13,280 ------- Total $32,130 ------- ------- 5. LEASES AND OTHER COMMITMENTS OPERATING LEASES The Company leases certain of its manufacturing, computer and automotive equipment under agreements which expire at various dates through 2010 and which contain options to renew at various terms. The following is a schedule of future minimum rental payments required under operating leases at September 30, 1997 (in thousands): Years Ending September 30, Amount -------------------------- ------- 1998 $ 6,149 1999 5,147 2000 4,031 2001 2,676 2002 951 Thereafter 1,079 ------- $20,033 ------- ------- Rental expense was $6,910,000, $6,410,000 and $4,896,000 in the years ended September 30, 1997, 1996 and 1995, respectively. COMMITMENTS AND CONTINGENCIES The Company had approximately $20,485,000 in outstanding letters of credit at September 30, 1997, primarily in connection with certain self-insurance agreements and certain inventory purchases of the Company. The Company is involved in various claims and lawsuits incidental to its business. In the opinion of management, these claims and suits in the aggregate will not have a material adverse effect on the Company's financial position or the results of operations of the future periods. 6. RELATED PARTY TRANSACTIONS The Company paid $136,000 and $327,000 to certain stockholders primarily for rent on a building in the fiscal years ended September 30, 1996 and 1995, respectively. No related party payments were made in fiscal 1997. 7. RESTRUCTURING CHARGES In 1996, the Company decided to restructure its worldwide manufacturing capacity, including consolidation of its three Texas sewing operations into one facility. The cost of this restructure, recorded in the year ended September 30, 1996, was estimated to be $14,000,000 of which $8,680,000 was included in cost of sales and consisting 28 principally of severance costs for manufacturing employees and $5,320,000 was included in operating expenses related principally to costs to resolve various legal issues in connection with the restructuring and prior plant closings as well as severance for non-manufacturing employees. The consolidation of the three Texas sewing operations was completed in 1997. As of September 30, 1997, approximately $8.8 million (primarily severance and professional fees) of such restructuring costs have been paid or otherwise charged against the $14 million accrual. The remaining obligations are currently recorded in accrued liabilities and are expected to be substantially paid by September 30, 1998. The amounts disclosed represent management's best estimate of the costs to be incurred. The actual amounts incurred could vary from these estimates if future developments differ from the underlying assumptions used by management in developing the accrual. In fiscal 1995, the Company closed its Robstown, Texas, sewing operation. The cost of closing this plant, recorded in the year ended September 30, 1995, was approximately $1,244,000, which is included in cost of sales in the accompanying Statements of Operations in the year ended September 30, 1995. 8. EMPLOYEE BENEFIT PLANS The Company provides a Profit Sharing and Savings Plan (the "Plan") to substantially all eligible employees of the Company, as defined. Discretionary profit sharing contributions, made by the Company, are allocated to eligible plan participants based on their respective compensation. The profit sharing contributions vest according to a defined vesting schedule. Full vesting occurs at the end of seven years of service or upon retirement, death, or disability of plan participants. Participants may contribute from 1% to 10% of their compensation to the Plan under Internal Revenue Code Section 401(k) ("401(k) Contributions"). The Company may make discretionary matching contributions in an amount equal to 50% of each participant's 401(k) Contribution. Participant 401(k) Contributions and the Company's matching 401(k) Contributions are 100% vested at the date they are contributed. The Company contributed approximately $800,000, $700,000 and $2,000,000 for each of the years ended September 30, 1997, 1996 and 1995, respectively. The Company also has an Employee Benefits Trust (the "Trust") to provide eligible employees of the Company, as defined, with certain welfare benefits. Trust contributions are made by the Company as defined by the trust agreement. The Company contributed approximately $7,785,000, $10,378,000 and $9,100,000 to the Trust for the years ended September 30, 1997, 1996 and 1995, respectively. In 1990, SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," was issued to establish standards of financial accounting and reporting for an employer that provides postretirement benefits other than pensions to its employees. Although the Company provides welfare benefits to a limited number of eligible retired employees, as defined, such benefits have been insignificant for the years ended September 30, 1997, 1996 and 1995. Additionally, such benefits are expected to be insignificant in future years. The Company has a noncompensatory employee stock purchase plan to provide employees with a convenient way to acquire Company stock through payroll deductions. Substantially all employees meeting limited employment qualifications may participate in the stock purchase plan. 29 LONG-TERM INCENTIVE PLAN The Company has a long-term incentive plan ("Incentive Plan") which authorizes the grant of stock options to key employees. The options vest over a period of three to five years and expire ten years from the date of grant. The options are issued at an exercise price not less than the fair market value of the Company's common stock on the date of the grant. The long-term incentive plan allows for 1,300,000 shares to be granted. The following table summarizes the changes in common stock options in fiscal 1997, 1996 and 1995: Weighted Average ---------------- Shares Exercise Option Price -------- --------------------- Options outstanding as of September 30, 1994 667,400 $17.50 Options granted 244,000 21.63 Options exercised (14,531) 21.37 Options canceled (32,401) 18.33 ------- ------ Options outstanding as of September 30, 1995 864,468 18.64 Options granted 109,000 16.26 Options canceled (7,000) 17.50 ------- ------ Options outstanding as of September 30, 1996 966,468 18.38 Options granted 514,938 13.51 Options canceled (716,469) 18.15 ------- ------ Options outstanding as of September 30, 1997 764,937 $15.32 ------- ------ Options available for grant as of September 30, 1997 510,532 Options exercisable as of September 30, 1997 196,932 $18.73 ------ The range of option prices for the options outstanding as of September 30, 1997, was $12.13 to $37.88 with a weighted average remaining contractual life of approximately 6 years. The number of stock options exercisable in fiscal 1996 and 1995 are 466,770 and 233,716, respectively. The weighted average exercise option prices for 1996 and 1995 were $18.16 and $17.39. During fiscal 1997, the Company canceled 521,134 options and reissued 423,938 options in place of the original options at a reduced option price of $13.50 which was the fair market value on the date of the reissuance. The Company accounts for the stock option plan under Accounting Principles Board Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for these options been determined consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have been reduced to the following pro forma amounts (in thousands, except per share amounts): 1997 1996 ------- -------- Net Income: As reported $ 3,743 ($2,420) Pro Forma $ 3,098 ($2,575) Primary EPS: As reported $ 0.44 ($ 0.28) Pro Forma $ 0.36 ($ 0.30) Because SFAS No. 123 method of accounting has not been applied to options granted prior to October 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The fair value of each option grant of $4.64 and $6.94 is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for 1997 and 1996, respectively: risk-free interest rates of 6.0% and 6.4%; expected lives of 5 years; expected volatility of 44 percent; expected dividend rate of $0.20. 30 The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require input of highly subjective assumptions including stock price volatility. Since the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. 31 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Haggar Corp.: We have audited in accordance with generally accepted auditing standards the consolidated financial statements of Haggar Corp. (a Nevada corporation) and subsidiaries included in this Form 10-K and have issued our report thereon dated October 31, 1997. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedules I and II are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. Arthur Andersen LLP Dallas, Texas October 31, 1997 32 SCHEDULE I Page 1 of 2 HAGGAR CORP. AND SUBSIDIARIES CONDENSED FINANCIAL INFORMATION OF REGISTRANT HAGGAR CORP. (PARENT COMPANY) BALANCE SHEETS AS OF SEPTEMBER 30, 1997 AND 1996 (IN THOUSANDS) 1997 1996 ---- ---- ASSETS: Investment in subsidiaries $ 64,018 $ 65,545 Note receivable from Haggar Clothing Co. 109,200 100,632 ---------- ---------- Total Assets $ 173,218 $ 166,177 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Dividend payable and other current liabilities $ 6,359 $ 3,052 Due to subsidiaries 2,345 643 ---------- ---------- Total current liabilities 8,704 3,695 STOCKHOLDERS' EQUITY: Common stock 856 856 Additional paid-in capital 41,641 41,641 Retained earnings 122,018 119,986 Less - treasury stock (1) (1) ---------- ---------- Total stockholders' equity 164,514 162,482 ---------- ---------- Total Liabilities and Stockholders' Equity $ 173,218 $ 166,177 ---------- ---------- ---------- ---------- 33 SCHEDULE I Page 2 of 2 HAGGAR CORP. AND SUBSIDIARIES CONDENSED FINANCIAL INFORMATION OF REGISTRANT HAGGAR CORP. (PARENT COMPANY) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995 (IN THOUSANDS) 1997 1996 1995 --------- ---------- --------- Equity in earnings of subsidiaries $ (1,526) $ (7,296) $ 5,011 Interest income 8,568 7,928 7,497 Income tax expense (3,299) (3,052) (2,699) --------- ---------- --------- Net income (loss) $ 3,743 $ (2,420) $ 9,809 --------- ---------- --------- --------- ---------- --------- 34 SCHEDULE II HAGGAR CORP. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AS OF SEPTEMBER 30, 1997, 1996 AND 1995 (IN THOUSANDS)
Balance at Charges to Balance at Beginning of Costs and Deductions End of Period Expenses (1) Period ------------ ---------- ----------- ----------- September 30, 1997: Allowance for doubtful accounts $ 900 $ (380) $ 411 $ 931 September 30, 1996 Allowance for doubtful accounts 1,201 (686) 385 900 September 30, 1995: Allowance for doubtful accounts 1,284 792 (875) 1,201 (1) Amounts deemed uncollectible and recoveries of previously reserved amounts.
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. 17 Consolidated Statements of Operations, Years Ended September 30, 1997, 1996 and 1995. 18 Consolidated Balance Sheets, at September 30, 1997 and 1996. 19 Consolidated Statements of Stockholders' Equity, Years Ended September 30, 1997, 1996 and 1995. 20 Consolidated Statements of Cash Flows, Years Ended September 30, 1997, 1996 and 1995. 21 Notes to Consolidated Financial Statements. 22-31 (2) FINANCIAL STATEMENT SCHEDULES Report of Independent Public Accountants. 32 Schedule I - Condensed Financial Information of Registrant - Haggar Corp. (Parent Company). 33-34 Schedule II - Valuation and Qualifying Accounts. 35 Schedules not included with this additional financial data have been omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto. (3) EXHIBITS 3(a) Third Amended and Fully Restated Articles of Incorporation. (Incorporated by reference from Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 [File No. 0-20850].) 3(b) Bylaws of the Company, as amended. (Incorporated by reference from Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994 [File No. 0-20850].) 4(a) Specimen Certificate evidencing Common Stock (and Preferred Stock Purchase Right). (Incorporated by reference from Exhibit 4(a) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994 [File No. 0-20850].) 4(b) Form of Stockholders' Rights Agreement. (Incorporated by reference from Exhibit 4(b) to the Company's Pre-Effective Amendment No. 1 to Form S-1, filed with the Security and Exchange Commission on November 16, 1992 [Registration No. 33-52704].) 4(c) Note Purchase Agreement dated December 22, 1994, among Haggar Apparel Company, Haggar Corp. and Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 37 4(d) Note No. 1 dated December 22, 1994, in original principal amount of $10,500,000 executed by Haggar Apparel Company, as maker, and Haggar Corp., as guarantor, payable to Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 4(e) Note No. 2 dated December 22, 1994, in original principal amount of $6,500,000 executed by Haggar Apparel Company, as maker, and Haggar Corp., as guarantor, payable to Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 4(f) Note No. 3 dated December 22, 1994, in original principal amount of $4,800,000 executed by Haggar Apparel Company, as maker, and Haggar Corp., as guarantor, payable to Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 4(g) Note No. 4 dated December 22, 1994, in original principal amount of $2,200,000 executed by Haggar Apparel Company, as maker, and Haggar Corp., as guarantor, payable to Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 4(h) Note No. 5 dated December 22, 1994, in original principal amount of $1,000,000 executed by Haggar Apparel Company, as maker, and Haggar Corp., as guarantor, payable to Allstate Life Insurance Company. (Incorporated by reference from Exhibit 4(f) to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 [File No. 0-20850].) 10(a) 1992 Long Term Incentive Plan. (Incorporated by reference from Exhibit 10(a) to the Company's Pre-Effective Amendment No. 1 to Form S-1, filed with the Security and Exchange Commission on November 16, 1992 [Registration No. 33-52704].) 10(b) Management Incentive Plan. (Incorporated by reference from Exhibit 10(b) to the Company's Registration Statement on Form S-1, filed with the Security and Exchange Commission on October 1, 1992 [Registration No. 33-52704].) 10(c) Master Letter of Credit Agreement between Philadelphia National Bank and Haggar Apparel Company. (Incorporated by reference from Exhibit 10(n) to the Company's Registration Statement on Form S-1, filed with the Security and Exchange Commission on October 1, 1992 [Registration No. 33-52704].) 10(d) First Amendment to the 1992 Long-term Incentive Plan. (Incorporated by reference from Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994 [File No. 0-20850 ].) 38 10(e) First Amended and Restated Credit Agreement between the Company and Texas Commerce Bank, as agent for a bank syndicate. (Incorporated by reference from Exhibit 10(k) to the Company's Annual Report on Form 10-K for the year ended September 30, 1996 [File No. 0-2850].) 10(f) First Amendment to First Amended and Restated Credit Agreement dated December 31, 1996, between the Company and Texas Commerce Bank, as agent for a bank syndicate. 10(g) Second Amendment to First Amended and Restated Credit Agreement dated June 30, 1997, between the Company and Texas Commerce Bank, as agent for a bank syndicate. 10(h) Third Amendment to First Amended and Restated Credit Agreement dated December 15, 1997, between the Company and Texas Commerce Bank, as agent for a bank syndicate. 10(i) Commercial Contract of Sale dated effective October 21, 1996, between Haggar Clothing Co. and Bruce L. Wilson regarding land and storage building. 10(j) Commercial Contract of Sale dated effective January 28, 1997, between Haggar Clothing Co. and National Fibernet, Inc. regarding land and manufacturing building. 11 Statement Regarding Computation of Net Income (Loss) Per Common Share. 23 Consent of independent public accountants. (b) REPORTS ON FORM 8-K There were no reports on Form 8-K filed with the Commission during the fourth quarter of fiscal 1997. 39 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/ DAVID M. TEHLE -------------------------------------------- David M. Tehle, December 19, 1997 (SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date - --------------------------- ------------------------------- ---------------------- /s/ J. M. HAGGAR, III Chairman and December 19, 1997 - ---------------------------- Chief Executive Officer J. M. Haggar, III (Principal Executive Officer) /s/ FRANK D. BRACKEN Director, President and December 19, 1997 - ---------------------------- Chief Operating Officer Frank D. Bracken /s/ DAVID M. TEHLE Senior Vice President December 19, 1997 - ---------------------------- and Chief Financial Officer (Principal David M. Tehle Financial and Accounting Officer) /s/ NORMAN E. BRINKER Director December 19, 1997 - ---------------------------- Norman E. Brinker
41 HAGGAR CORP. AND SUBSIDIARIES INDEX TO ATTACHED EXHIBITS EXHIBIT PAGES 10(f) First Amendment to First Amended and Restated Credit Agreement dated December 31, 1996, between the Company and Texas Commerce Bank, as Agent for a bank syndicate. 10(g) Second Amendment to First Amended and Restated Credit Agreement dated June 30, 1997, between the Company and Texas Commerce Bank, as agent for a bank syndicate. 10(h) Third Amendment to First Amended and Restated Credit Agreement dated December 15, 1997, between the Company and Texas Commerce Bank, as agent for a bank syndicate. 10(i) Commercial Contract of Sale dated effective October 21, 1996, between Haggar Clothing Co. and Bruce L. Wilson regarding land and storage building. 10(j) Commercial Contract of Sale dated effective January 28, 1997, between Haggar Clothing Co. and National Fibernet, Inc., regarding land and manufacturing building. 11 Statement Regarding Computation of Net Income (Loss) Per Common Share. 23 Consent of Independent Public Accountants 42 EX-10.(F) 2 EXHIBIT 10(F) FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT This FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this "AGREEMENT") is entered into as of December 31, 1996, by and among Haggar Clothing Co., a Nevada corporation, f/k/a Haggar Apparel Company (the "COMPANY"), Haggar Corp., a Nevada corporation ("HAGGAR"), the banks listed on the signature pages of this Agreement (collectively, the "BANKS"), Texas Commerce Bank National Association, a national banking association, individually and as agent (the "AGENT") for the Banks, and is consented to by Haggar and the domestic subsidiaries of the Company listed on the signature pages of this Agreement (collectively, the "SUBSIDIARIES"). R E C I T A L S: WHEREAS, pursuant to that certain First Amended and Restated Credit Agreement (the "CREDIT AGREEMENT") dated as of September 18, 1996, executed by and among the Company, Haggar, the Banks and the Agent, the Banks agreed to make advances to the Company on certain terms and conditions set forth therein (each capitalized term used but not defined herein shall have the meaning given to such term in the Credit Agreement as amended); and WHEREAS, the Company has requested that the Credit Agreement be amended to change the definition of the term "Fixed Charges" as set forth in Section 1.1 thereof; and WHEREAS, the Agent and the Banks are agreeable to such request under the present circumstances. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Company, Haggar, the Banks and the Agent hereby agree as follows: A G R E E M E N T: 1. AMENDMENT TO DEFINITION. The definition of the term "Fixed Charges" is hereby amended in its entirety to read as follows: FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 1 "Fixed Charges" means, for the Company Group on a consolidated basis for any period, in accordance with GAAP, the sum of (a) all interest on and principal of Indebtedness (not including employee severance payments) that is paid or required to be paid or accrued during such period, (b) all dividends paid in cash during such period with respect to the securities of any member of the Company Group to any recipient other than a member of the Company Group, and (c) all cash payments made during such period for Capital Expenditures (but not including (i) expenditures of up to $38,000,000 attributable to the Customer Service and Distribution Center, and (ii) expenditures for the remodeling and refurbishment of and additions to its existing corporate headquarters situated at 6113 Lemmon Avenue, Dallas, Texas [to the extent such expenditures in the aggregate do not exceed the sum of (A) $2,721,000, (B) additional insurance proceeds which may be recovered due to prior building damage up to $406,000, and (C) the net cash amount realized by the Company from any sale of the "G.M." and "Cedar Springs" buildings situated, respectively, at 6007 Peeler Street and 6020 Cedar Springs, Dallas, Texas])." 2. CERTIFICATES. This Agreement shall be effective as of the date first above written when executed by all parties hereto and consented to by the Guarantors as provided on the signature pages hereto, and upon receipt by the Agent of the following, each in form, substance and bearing a date satisfactory to the Agent and its counsel: (a) A certificate of the Secretary or Assistant Secretary of the Company and the Guarantors, respectively, certifying (i) that, except as indicated therein, there has been no change to the articles of incorporation or bylaws of the Company or the Guarantors since the same were furnished to the Agent in connection with the execution of the Credit Agreement, and (ii) as to the name and title of the officers of the Company and the Guarantors and the authority of such officers to execute this Agreement. (b) A certificate, signed by the Treasurer of the Company or the Chief Financial Officer of the Company, stating that as of the date of this Agreement and after giving effect to this Agreement the statements set forth in Sections 4.2(a), (b) and (g) of the Credit Agreement are true and correct. 3. EFFECTIVENESS OF DOCUMENTS. Except as expressly modified hereby, all terms, provisions, representations, warranties, covenants and agreements of the Company and Haggar related to the Loans, whether contained in the Notes, the Credit Agreement as amended and/or any of the other Loan Documents, are hereby ratified and confirmed by the Company and Haggar, and all such agreements shall be and shall remain in full force and effect, enforceable in accordance with their terms. FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 2 4. NO CLAIMS OR DEFENSES. Each of the Company and Haggar, by the execution of this Agreement, hereby declares that it has no offsets, claims, counterclaims, defenses or other causes of action against the Agent or the Banks related to any Loan, the Credit Agreement as amended, any of the other Loan Documents or the modification of the Credit Agreement pursuant to this Agreement. 5. AUTHORITY. Each of the Company and Haggar represents and warrants that all requisite corporate action necessary for it to enter into this Agreement has been taken. 6. BINDING AGREEMENT. This Agreement shall be binding upon, and shall inure to the benefit of, each party hereto and such party's legal representatives, successors and assigns. 7. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS AMONG THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO. 8. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 9. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. EXECUTED as of the date first above written. HAGGAR CLOTHING CO., a Nevada corporation, f/k/a Haggar Apparel Company By: /s/ J.M. Haggar, III ---------------------------------------- J.M. Haggar, III Chief Executive Officer FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 3 HAGGAR CORP., a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------------- J.M. Haggar, III Chief Executive Officer TEXAS COMMERCE BANK National Association, successor by merger to Texas Commerce Bank, National Association, Individually, as the Agent By: /s/ John P. Dean ---------------------------------------- John P. Dean Senior Vice President NATIONSBANK OF TEXAS, N.A. By: /s/ Sharon Ellis ---------------------------------------- Sharon Ellis Vice President COMERICA BANK - TEXAS By: /s/ G. Christopher Jones ---------------------------------------- G. Christopher Jones Senior Vice President NBD BANK By: /s/ Jenny A. Gilpin ---------------------------------------- Jenny A. Gilpin Vice President FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 4 THE BANK OF TOKYO-MITSUBISHI, LTD., DALLAS OFFICE By: /s/ John M. Mearns ---------------------------------------- John M. Mearns Vice President/Manager BANK OF SCOTLAND By: /s/ Catherine M. Oniffrey ---------------------------------------- Catherine M. Oniffrey Vice President NATIONAL CITY BANK, KENTUCKY, f/k/a First National Bank of Louisville By: /s/ Donald R. Pullen, Jr. ---------------------------------------- Donald R. Pullen, Jr. Vice President FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 5 CONSENT OF HAGGAR Haggar hereby (a) acknowledges its consent to this Agreement, (b) ratifies and confirms all terms and provisions of the Parent Guaranty, (c) agrees that the Parent Guaranty is and shall remain in full force and effect, (d) acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the terms and provisions of and the obligations created and evidenced by the Parent Guaranty, (e) reaffirms all agreements and obligations under the Parent Guaranty with respect to the Loans, the Notes, the Credit Agreement as amended and all other documents, instruments or agreements governing, securing or pertaining to the Loans, as the same may be modified by this Agreement, and (f) represents and warrants that all requisite corporate action necessary for it to execute this Agreement has been taken. HAGGAR CORP., a Nevada corporation By: /s/ J.M. Haggar, III --------------------------------------- J.M. Haggar, III Chief Executive Officer Dated as of December 31, 1996. FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 6 CONSENT OF DOMESTIC SUBSIDIARIES Each of the undersigned Subsidiaries hereby (a) acknowledges its consent to this Agreement, (b) ratifies and confirms all terms and provisions of the Subsidiary Guaranty to which it is a signatory, (c) agrees that the Subsidiary Guaranty to which it is a signatory is and shall remain in full force and effect, (d) acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the terms and provisions of and the obligations created and evidenced by the Subsidiary Guaranty to which it is a signatory, (e) reaffirms all agreements and obligations under the Subsidiary Guaranty to which it is a signatory with respect to the Loans, the Notes, the Credit Agreement as amended and all other documents, instruments or agreements governing, securing or pertaining to the Loans, as the same may be modified by this Agreement, and (f) represents and warrants that all requisite corporate action necessary for it to execute this Agreement has been taken. BOWIE MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer CORSICANA COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer DALLAS PANT MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 7 GREENVILLE PANT MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer MCKINNEY PANT MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer OLNEY MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer WAXAHACHIE GARMENT COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 8 LA ROMANA MANUFACTURING CORPORATION, a Nevada corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer HAGGAR SERVICES, INC., a Texas corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer AIRHAGGAR, INC., f/k/a HAGAIR, INC., a Texas corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer DUNCAN MANUFACTURING COMPANY, an Oklahoma corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 9 WESLACO CUTTING, INC., a Nevada corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer WESLACO SEWING, INC., a Nevada corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer HAGGAR DIRECT, INC., a Nevada corporation By: /s/ J.M. Haggar, III ----------------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer Dated as of December 31, 1996. FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 10 EX-10.(G) 3 EXHIBIT 10(G) SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT This SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this "AGREEMENT") is entered into as of June 30, 1997, by and among Haggar Clothing Co., a Nevada corporation, f/k/a Haggar Apparel Company (the "COMPANY"), Haggar Corp., a Nevada corporation ("HAGGAR"), the banks listed on the signature pages of this Agreement (collectively, the "BANKS"), Texas Commerce Bank National Association, a national banking association, individually and as agent (the "AGENT") for the Banks, and is consented to by Haggar and the domestic subsidiaries of the Company listed on the signature pages of this Agreement (collectively, the "SUBSIDIARIES"). RECITALS: WHEREAS, pursuant to that certain First Amended and Restated Credit Agreement (as heretofore and herein amended, the "CREDIT AGREEMENT") dated as of September 18, 1996, executed by and among the Company, Haggar, the Banks and the Agent, the Banks agreed to make advances to the Company on certain terms and conditions set forth therein (each capitalized term used but not defined herein shall have the meaning given to such term in the Credit Agreement as amended); and WHEREAS, the First Amended and Restated Credit Agreement was amended by First Amendment to First Amended and Restated Credit Agreement dated as of December 31, 1996, and pursuant to Article I thereof, the Termination Date was extended to December 31, 1999, by notice from the Company dated April 25, 1997, and written concurrence by the Banks dated April 30, 1997; and WHEREAS, the Company has requested that Sections 7.6 and 7.13 of the Credit Agreement be amended as set forth below; and WHEREAS, the Agent and the Banks are agreeable to such request under the present circumstances. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Company, Haggar, the Banks and the Agent hereby agree as follows: SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 1 A G R E E M E N T: 1. AMENDMENT TO SECTION 7.6. Section 7.6 is hereby amended in its entirety to read as follows: 7.6 FIXED CHARGE REQUIREMENT. Permit the ratio of Operating Cash Flow to Fixed Charges for the prior twelve (12) months, as measured at the end of each fiscal quarter, to be or become less than 1.10 to 1.0, except for the fiscal quarters ending June 30, 1997, and September 30, 1997, at which time the ratio shall not be or become less than 0.9 to 1.0. 2. AMENDMENT TO SECTION 7.13. Section 7.13 is hereby amended in its entirety to read as follows: 7.13 DISTRIBUTIONS. Make or agree to make any Distribution (other than a Distribution of a Subsidiary of the Company to the Company) in any fiscal year of the Company if a Default or Unmatured Default exists at the time of such Distribution or, after giving effect to any such Distribution, a Default or Unmatured Default would occur. 3. CERTIFICATES. This Agreement shall be effective as of the date first above written when executed by all parties hereto and consented to by the Guarantors as provided on the signature pages hereto, and upon receipt by the Agent of the following, each in form, substance and bearing a date satisfactory to the Agent and its counsel: (a) A certificate of the Secretary or Assistant Secretary of the Company and the Guarantors, respectively, certifying (i) that, except as indicated therein, there has been no change to the articles of incorporation or bylaws of the Company or the Guarantors since the same were furnished to the Agent in connection with the execution of the Credit Agreement, and (ii) as to the name and title of the officers of the Company and the Guarantors and the authority of such officers to execute this Agreement. (b) A certificate, signed by the Treasurer of the Company or the Chief Financial Officer of the Company, stating that as of the date of this Agreement and after giving effect to this Agreement the statements set forth in Sections 4.2(a), (b) and (g) of the Credit Agreement are true and correct. 4. EFFECTIVENESS OF DOCUMENTS. Except as expressly modified hereby, all terms, provisions, representations, warranties, covenants and agreements of the Company and Haggar SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 2 related to the Loans, whether contained in the Notes, the Credit Agreement and/or any of the other Loan Documents, are hereby ratified and confirmed by the Company and Haggar, and all such agreements shall be and shall remain in full force and effect, enforceable in accordance with their terms. 5. NO CLAIMS OR DEFENSES. Each of the Company and Haggar, by the execution of this Agreement, hereby declares that it has no offsets, claims, counterclaims, defenses or other causes of action against the Agent or the Banks related to any Loan, the Credit Agreement, any of the other Loan Documents or the modification of the Credit Agreement pursuant to this Agreement. 6. AUTHORITY. Each of the Company and Haggar represents and warrants that all requisite corporate action necessary for it to enter into this Agreement has been taken. 7. BINDING AGREEMENT. This Agreement shall be binding upon, and shall inure to the benefit of, each party hereto and such party's legal representatives, successors and assigns. 8. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS AMONG THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO. 9. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 10. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. EXECUTED as of the date first above written. HAGGAR CLOTHING CO., a Nevada corporation, f/k/a Haggar Apparel Company By: /s/ J. M. Haggar, III ----------------------- J. M. Haggar, III Chief Executive Officer SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 3 HAGGAR CORP., a Nevada corporation By: /s/ J. M. Haggar, III ------------------------ J. M. Haggar, III Chief Executive Officer TEXAS COMMERCE BANK National Association, successor by merger to Texas Commerce Bank, National Association, Individually, as the Agent By: /s/ Mae Kantipong ------------------------ Mae Kantipong Vice President NATIONSBANK OF TEXAS, N.A. By: /s/ Sharon Ellis ------------------------ Sharon Ellis Vice President COMERICA BANK - TEXAS By: /s/ G. Christopher Jones ------------------------ G. Christopher Jones Senior Vice President NBD BANK By: /s/ Jenny A. Gilpin ------------------------ Jenny A. Gilpin Vice President SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 4 THE BANK OF TOKYO-MITSUBISHI, LTD., DALLAS OFFICE By: /s/ John M. Mearns ------------------------- John M. Mearns Vice President/Manager BANK OF SCOTLAND By: /s/ Annie Chin-Tac ------------------------- Annie Chin-Tac Vice President NATIONAL CITY BANK, KENTUCKY, f/k/a First National Bank of Louisville By: /s/ Donald R. Pullen, Jr. ------------------------- Donald R. Pullen, Jr. Vice President SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 5 CONSENT OF HAGGAR Haggar hereby (a) acknowledges its consent to this Agreement, (b) ratifies and confirms all terms and provisions of the Parent Guaranty, (c) agrees that the Parent Guaranty is and shall remain in full force and effect, (d) acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the terms and provisions of and the obligations created and evidenced by the Parent Guaranty, (e) reaffirms all agreements and obligations under the Parent Guaranty with respect to the Loans, the Notes, the Credit Agreement and all other documents, instruments or agreements governing, securing or pertaining to the Loans, as the same may be modified by this Agreement, and (f) represents and warrants that all requisite corporate action necessary for it to execute this Agreement has been taken. HAGGAR CORP., a Nevada corporation By: /s/ J.M Haggar, III ----------------------- J.M Haggar, III Chief Executive Officer Dated as of June 30, 1997. SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 6 CONSENT OF DOMESTIC SUBSIDIARIES Each of the undersigned Subsidiaries hereby (a) acknowledges its consent to this Agreement, (b) ratifies and confirms all terms and provisions of the Subsidiary Guaranty to which it is a signatory, (c) agrees that the Subsidiary Guaranty to which it is a signatory is and shall remain in full force and effect, (d) acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the terms and provisions of and the obligations created and evidenced by the Subsidiary Guaranty to which it is a signatory, (e) reaffirms all agreements and obligations under the Subsidiary Guaranty to which it is a signatory with respect to the Loans, the Notes, the Credit Agreement and all other documents, instruments or agreements governing, securing or pertaining to the Loans, as the same may be modified by this Agreement, and (f) represents and warrants that all requisite corporate action necessary for it to execute this Agreement has been taken. BOWIE MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer CORSICANA COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer DALLAS PANT MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 7 GREENVILLE PANT MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer MCKINNEY PANT MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer OLNEY MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer WAXAHACHIE GARMENT COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 8 LA ROMANA MANUFACTURING CORPORATION, a Nevada corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer HAGGAR SERVICES, INC., a Texas corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer AIRHAGGAR, INC., f/k/a HAGAIR, INC., a Texas corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer DUNCAN MANUFACTURING COMPANY, an Oklahoma corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 9 WESLACO CUTTING, INC., a Nevada corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer WESLACO SEWING, INC., a Nevada corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer HAGGAR DIRECT, INC., a Nevada corporation By: /s/ J.M. Haggar, III -------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer Dated as of June 30, 1997. SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 10 EX-10.(H) 4 EXHIBIT 10(H) THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT This THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this "AGREEMENT") is entered into as of December 15, 1997, by and among Haggar Clothing Co., a Nevada corporation, f/k/a Haggar Apparel Company (the "COMPANY"), Haggar Corp., a Nevada corporation ("HAGGAR"), the banks listed on the signature pages of this Agreement (collectively, the "BANKS"), Texas Commerce Bank National Association, a national banking association, individually and as agent (the "AGENT") for the Banks, and is consented to by Haggar and the domestic subsidiaries of the Company listed on the signature pages of this Agreement (collectively, the "SUBSIDIARIES"). R E C I T A L S: WHEREAS, pursuant to that certain First Amended and Restated Credit Agreement (as heretofore and herein amended, the "CREDIT AGREEMENT") dated as of September 18, 1996, executed by and among the Company, Haggar, the Banks and the Agent, the Banks agreed to make advances to the Company on certain terms and conditions set forth therein (each capitalized term used but not defined herein shall have the meaning given to such term in the Credit Agreement as amended); and WHEREAS, the Credit Agreement was amended by First Amendment to First Amended and Restated Credit Agreement dated as of December 31, 1996, and pursuant to Article I thereof, the Termination Date was extended to December 31, 1999, by notice from the Company dated April 25, 1997, and written concurrence by the Banks dated April 30, 1997; and WHEREAS, the Credit Agreement was further amended by Second Amendment to First Amended and Restated Credit Agreement dated as of June 30, 1997; WHEREAS, the Company has requested that certain financial covenants be modified as set forth below; and WHEREAS, the Agent and the Banks are agreeable to such request under the present circumstances and in consideration of certain additional amendments to the Credit Agreement as set forth below. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Company, Haggar, the Banks and the Agent hereby agree as follows: THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 1 A G R E E M E N T: 1. NEW DEFINITION. The following definition is hereby added to SECTION 1.1 of the Credit Agreement: "Maintenance Capital Expenditures" means, for the twelve (12) month period immediately preceding the date of determination, the aggregate capital expenditures of the Company Group on a consolidated basis for maintenance of existing property, equipment and facilities which shall, for the purposes of this definition, be deemed to be $5,000,000 for each twelve (12) month reporting period." 2. AMENDMENT TO DEFINITIONS. The following definitions are hereby amended in their entirety to read as follows: "CD Margin" means (a) at any time when the Funded Debt Ratio is equal to or less than 1.50 to 1, five-eighths of one percent (5/8%) per annum, (b) at any time when the Funded Debt Ratio is greater than 1.50 to 1 but less than or equal to 2.00 to 1, three-quarters of one percent (3/4%) per annum, (c) at any time when the Funded Debt Ratio is greater than 2.00 to 1 but less than or equal to 2.50 to 1, seven-eighths of one percent (7/8%) per annum, (d) at any time when the Funded Debt Ratio is greater than 2.50 to 1 but less than or equal to 3.00 to 1, one percent (1%) per annum, and (e) at any time when the Funded Debt Ratio is greater than 3.00 to 1, one and one-quarter percent (1 1/4%) per annum. Each adjustment to the previously calculated CD Margin shall be effective five (5) Business Days following the Agent's receipt of the reports to be delivered by the Company pursuant to Sections 6.1(a), (b)and (c). "Eurodollar Margin" means (a) at any time when the Funded Debt Ratio is equal to or less than 1.50 to 1, one-half of one percent (1/2%) per annum, (b) at any time when the Funded Debt Ratio is greater than 1.50 to 1 but less than or equal to 2.00 to 1, five-eighths of one percent (5/8%) per annum, (c) at any time when the Funded Debt Ratio is greater than 2.00 to 1 but less than or equal to 2.50 to 1, three-quarters of one percent (3/4%) per annum, (d) at any time when the Funded Debt Ratio is greater than 2.50 to 1 but less than or equal to 3.00 to 1, seven-eighths of one percent (7/8%) per annum, and (e) at any time when the Funded Debt Ratio is greater than 3.00 to 1, one and one-eighth percent (1 1/8%) per annum. Each adjustment to the previously calculated Eurodollar Margin shall be effective five (5) Business Days following Agent's receipt of the reports to be delivered by the Company pursuant to Sections 6.1(a), (b) and (c). "Fixed Charge Ratio" means the ratio of (i) Operating Cash Flow minus federal and state income taxes, as determined in accordance with GAAP to (ii) Fixed Charges, in each case, as measured in accordance with SECTION 7.6 and as measured at the end of each fiscal quarter. THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 2 "Fixed Charges" means, for the Company Group on a consolidated basis for any period, in accordance with GAAP, the sum of (a) all interest on and principal of Indebtedness (not including employee severance payments) that is paid or required to be paid or accrued during such period, (b)all dividends paid in cash during such period with respect to the securities of any member of the Company Group to any recipient other than a member of the Company Group, and (c) Maintenance Capital Expenditures. "Highest Lawful Rate" means the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Loans under the Laws of the United States and the Laws of the State of Texas as may be applicable thereto that are presently in effect or, to the extent allowed by Law under such applicable Laws of the United States and the Laws of the State of Texas, which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable Laws now allow. To the extent, if any, that Chapter 303, Texas Financial Code, as amended (the "Act") establishes the highest nonusurious rate, the Highest Lawful Rate shall be the "weekly ceiling," as defined in the Act in effect from time to time, calculated on the basis of a 365/366 day year; provided, however, that to the extent permitted by the Act, the Banks at their election may substitute for the "weekly ceiling" the "annual ceiling" or the "quarterly ceiling," as these terms are defined in the Act, upon the giving of the notices provided for by the Act and effective upon the giving of such notices, such substitution to have the effect provided for in the Act and to be automatically renewable for additional periods as therein provided. "Loan Documents" means this Agreement, each of the Notes, the Parent Guaranty, the Subsidiary Guaranty, the Applications and all other documents executed or delivered (or to be executed or delivered) pursuant to any of the foregoing documents, and any amendments, modifications, supplements or restatements of any of the foregoing. 3. AMENDMENT TO SECTION 2.5(a). Section 2.5(a) is hereby amended in its entirety to read as follows: (a) On each Payment Date and on the Termination Date, a commitment fee equal to a fluctuating percentage of the average daily amount of the Total Commitments minus the sum of (i) the outstanding principal amount of all Advances and (ii) the Letter of Credit Exposure during the quarter ending on and including such Payment Date, or such shorter period ending on and including the Termination Date, as the case may be. The percentage shall be equal to the following: (a) at any time when the Funded Debt Ratio is equal to or less than 1.50 to 1, three-sixteenths of one percent (3/16%) per annum, (b) at any time when the Funded Debt Ratio is greater than 1.50 to 1 but less than or equal to 2.00 to 1, one-fifth of one percent (1/5%) per annum, and (c) at any time when the Funded Debt Ratio is greater than 2.00 to 1, one-quarter of one percent (1/4%) per annum. Each adjustment to the percentage used to calculate the Commitment Fee shall be effective five (5) Business Days following Agent's receipt of the reports to be delivered by the Company pursuant to Sections 6.1(a), (b) and (c); THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 3 4. AMENDMENT TO SECTION 7.6. Section 7.6 is hereby amended for the specified periods to read as follows: 7.6 FIXED CHARGE REQUIREMENT. Commencing with the fiscal quarter ending December 31, 1997, and for each fiscal quarter thereafter, permit the ratio of (i) Operating Cash Flow minus federal and state income taxes, as determined in accordance with GAAP to (ii) Fixed Charges, in each case, for the prior twelve (12) months as measured at the end of each fiscal quarter to be or become less than 1.25 to 1.00. 5. AMENDMENT TO SECTION 7.7. Section 7.7 is hereby amended for the specified periods to read as follows: 7.7 FUNDED DEBT LIMITATION. Commencing with the fiscal quarter ending December 31, 1997, and for each fiscal quarter thereafter, permit the Funded Debt Ratio, as measured at the end of each fiscal quarter, to be or become greater than 3.5 to 1.0. 6. CAPITAL EXPENDITURES LIMITATION. The following SECTION 7.15 is hereby added to the Credit Agreement: 7.15 CAPITAL EXPENDITURES LIMITATION. Make or agree to make Capital Expenditures in excess of (i) during the Company's fiscal year commencing on October 1, 1997, $18,000,000.00 and (ii) during each fiscal year thereafter, an amount equal to ten percent (10%) of the Company's Net Worth; provided that (i) expenditures for remodeling and refurbishment of and additions to its existing corporate headquarters situated at 6113 Lemmon Avenue, Dallas, Texas (to the extent such expenditures in the aggregate do not exceed the sum of (A) $2,721,000 and (B) the net cash amount realized by the Company from any sale of the "G.M." and "Cedar Springs" buildings situated, respectively, at 6007 Peeler Street and 6020 Cedar Springs, Dallas, Texas) and (ii) expenditures for the repair or replacement of property with insurance proceeds (to the extent such expenditures do not exceed the net cash amount of such insurance proceeds) shall not be included in Capital Expenditures for purposes of the foregoing calculation. 7. AMENDMENT TO SECTION 10.14. Section 10.14 is hereby amended in its entirety to read as follows: 10.14. REVOLVING CREDIT. Pursuant to Section 346.004 of Chapter 346 of the Texas Finance Code, the provisions of Chapter 346 shall not govern or in any manner apply to this Agreement or the Loan. 8. ASSIGNMENT. Pursuant to Section 10.2 of the Credit Agreement and to the same effect as if an assignment agreement had been executed complying with Section 10.3 of the Credit Agreement, NBD Bank hereby assigns its interests, rights and obligations of a Bank under the Credit Agreement to its affiliate, The First National Bank of Chicago, which shall from and after THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 4 the date hereof be a party to the Credit Agreement and have the rights and obligations of a Bank thereunder. 9. AMENDMENT FEE. On or before the date hereof, the Company shall pay to each of the Banks which consent to the amendments contained herein, which consent shall be evidenced by such Bank's execution of this Agreement, an amendment fee in the amount one-tenth of one percent (.01%) of such Bank's Commitment under the Credit Agreement. 10. CERTIFICATES. This Agreement shall be effective as of the date first above written when executed by all parties hereto and consented to by the Guarantors as provided on the signature pages hereto, and upon receipt by the Agent of the following, each in form, substance and bearing a date satisfactory to the Agent and its counsel: a. A certificate of the Secretary or Assistant Secretary of the Company and the Guarantors, respectively, certifying (i) that, except as indicated therein, there has been no change to the articles of incorporation or bylaws of the Company or the Guarantors since the same were furnished to the Agent in connection with the execution of the Credit Agreement, and (ii) as to the name and title of the officers of the Company and the Guarantors and the authority of such officers to execute this Agreement. b. A certificate, signed by the Treasurer of the Company or the Chief Financial Officer of the Company, stating that as of the date of this Agreement and after giving effect to this Agreement the statements set forth in Sections 4.2(a), (b) and (g) of the Credit Agreement are true and correct. 11. EFFECTIVENESS OF DOCUMENTS. Except as expressly modified hereby, all terms, provisions, representations, warranties, covenants and agreements of the Company and Haggar related to the Loans, whether contained in the Notes, the Credit Agreement and/or any of the other Loan Documents, are hereby ratified and confirmed by the Company and Haggar, and all such agreements shall be and shall remain in full force and effect, enforceable in accordance with their terms. 12. NO CLAIMS OR DEFENSES. Each of the Company and Haggar, by the execution of this Agreement, hereby declares that it has no offsets, claims, counterclaims, defenses or other causes of action against the Agent or the Banks related to any Loan, the Credit Agreement, any of the other Loan Documents or the modification of the Credit Agreement pursuant to this Agreement. 13. AUTHORITY. Each of the Company and Haggar represents and warrants that all requisite corporate action necessary for it to enter into this Agreement has been taken. 14. BINDING AGREEMENT. This Agreement shall be binding upon, and shall inure to the benefit of, each party hereto and such party's legal representatives, successors and assigns. THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 5 15. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS AMONG THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO. 16. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 17. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. [SEE SIGNATURES ON ATTACHED PAGES] THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 6 EXECUTED as of the date first above written. HAGGAR CLOTHING CO., a Nevada corporation, f/k/a Haggar Apparel Company By: /s/ J.M. Haggar, III ------------------------------------- J.M. Haggar, III Chief Executive Officer HAGGAR CORP., a Nevada corporation By: /s/ J.M. Haggar, III ------------------------------------- J.M. Haggar, III Chief Executive Officer TEXAS COMMERCE BANK National Association, successor by merger to Texas Commerce Bank, National Association, Individually, as the Agent By: /s/ Mae Kantipong ------------------------------------- Mae Kantipong Vice President NATIONSBANK OF TEXAS, N.A. By: /s/ Barbara Gilley ------------------------------------- Barbara Gilley Vice President THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 7 COMERICA BANK - TEXAS By: /s/ G. Cristopher Jones ------------------------------------- G. Cristopher Jones Senior Vice President NBD BANK By: /s/ Jenny A. Gilpin ------------------------------------- Jenny A. Gilpin Vice President THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Jay A. Gilpin ------------------------------------- Jay A. Gilpin Vice President THE BANK OF TOKYO-MITSUBISHI, LTD., DALLAS OFFICE By: /s/ John M. Mearns ------------------------------------- John M. Mearns Vice President/Manager BANK OF SCOTLAND By: /s/ Annie Chin-Tac ------------------------------------- Annie Chin-Tac Vice President THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 8 NATIONAL CITY BANK, KENTUCKY, f/k/a First National Bank of Louisville By: /s/ Don R. Pullen, Jr. ------------------------------------- Don R. Pullen, Jr. Vice President THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 9 CONSENT OF HAGGAR Haggar hereby (a) acknowledges its consent to this Agreement, (b) ratifies and confirms all terms and provisions of the Parent Guaranty, (c) agrees that the Parent Guaranty is and shall remain in full force and effect, (d) acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the terms and provisions of and the obligations created and evidenced by the Parent Guaranty, (e) reaffirms all agreements and obligations under the Parent Guaranty with respect to the Loans, the Notes, the Credit Agreement and all other documents, instruments or agreements governing, securing or pertaining to the Loans, as the same may be modified by this Agreement, and (f) represents and warrants that all requisite corporate action necessary for it to execute this Agreement has been taken. HAGGAR CORP., a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chief Executive Officer Dated as of December 15, 1997. THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 10 CONSENT OF DOMESTIC SUBSIDIARIES Each of the undersigned Subsidiaries hereby (a) acknowledges its consent to this Agreement, (b) ratifies and confirms all terms and provisions of the Subsidiary Guaranty to which it is a signatory, (c) agrees that the Subsidiary Guaranty to which it is a signatory is and shall remain in full force and effect, (d) acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the terms and provisions of and the obligations created and evidenced by the Subsidiary Guaranty to which it is a signatory, (e) reaffirms all agreements and obligations under the Subsidiary Guaranty to which it is a signatory with respect to the Loans, the Notes, the Credit Agreement and all other documents, instruments or agreements governing, securing or pertaining to the Loans, as the same may be modified by this Agreement, and (f) represents and warrants that all requisite corporate action necessary for it to execute this Agreement has been taken. BOWIE MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer CORSICANA COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer DALLAS PANT MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 11 GREENVILLE PANT MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer MCKINNEY PANT MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer OLNEY MANUFACTURING COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer WAXAHACHIE GARMENT COMPANY, a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 12 LA ROMANA MANUFACTURING CORPORATION, a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer HAGGAR SERVICES, INC., a Texas corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer AIRHAGGAR, INC., f/k/a HAGAIR, INC., a Texas corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer DUNCAN MANUFACTURING COMPANY, an Oklahoma corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 13 WESLACO CUTTING, INC., a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer WESLACO SEWING, INC., a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer HAGGAR DIRECT, INC., a Nevada corporation By: /s/ J.M. Haggar, III ---------------------------------- J.M. Haggar, III Chairman/Chief Executive Officer Dated as of December 15, 1997. THIRD AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT Page 14 EX-10.(I) 5 EXHIBIT 10(I) NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark- COMMERCIAL CONTRACT OF SALE IN CONSIDERATION of the mutual terms, provisions, covenants and agreements contained in this Contract (the "Contract"), the parties hereto agree as follows. [CHECK ALL BOXES APPLICABLE TO THIS CONTRACT. BOXES NOT CHECKED DO NOT APPLY TO THIS CONTRACT.] 1. PARTIES. Haggar Clothing Co. (the "Seller") shall sell and convey to Bruce L. Wilson (the "Purchaser") and Purchaser shall buy and pay for the Property (defined below). 2. PROPERTY. Being an office/warehouse building with 12,300 sf of building on 44,631 sf of land with an address of 6020 Cedar Springs Road in the City of Dallas, Dallas County, Texas, further described in Exhibit A, SURVEY/LEGAL DESCRIPTION, and/or shown on Exhibit B, SITE PLAN, together with, all and singular, all improvements thereon and all rights and appurtenances pertaining thereto, including any right, title and interest of Seller in and to adjacent streets, alleys and rights-of-way. Such real estate, improvements, rights and appurtenances are collectively referred to herein as the "Property." /X/ The Property also includes fixtures and articles of personal property listed and described in Addendum A, PERSONAL PROPERTY. 3. PURCHASE PRICE. The purchase price for the Property is $300,000.00 (the "Purchase Price"), payable as follows: / / A. The Purchase Price shall be adjusted up or down based upon the [STRIKE ONE] Net/gross land area of the Property determined by the Survey. The applicable land area shall be multiplied by $ ________________________ per square foot and the product thereof shall become the Purchase Price at Closing. /X/ B. Cash payable at Closing: $300,000.00. /X/ C. The balance of the Purchase Price shall be payable according to the provisions in Addendum B, FINANCING. 4. EARNEST MONEY. A. EARNEST MONEY DEPOSIT. Within two business days after the Effective Date of this Contract, Purchaser shall deposit earnest money in the form of a certified or cashier's check in the amount of $ 5,000.00 (the "Earnest Money") payable to American Title Company, 3131 Turtle Creek, Dallas, TX. Ph. 528-8916 (the "Title Company"), in its capacity as escrow agent, to be held in escrow pursuant to the terms of this Contract. Seller's acceptance of this Contract is expressly conditioned upon Purchaser's timely deposit of the Earnest Money with the Title Company. If Purchaser fails to timely deposit the Earnest Money, Seller may, at Seller's option, terminate this Contract by delivering a written termination notice to Purchaser. Notwithstanding anything herein to the contrary, a portion of the Earnest Money in the amount of $ 100.00 shall be non-refundable and shall be distributed to Seller at Closing or other termination of this Contract as full payment and independent consideration for Seller's performance under this Contract. If this Contract is properly terminated by Purchaser pursuant to a right of termination granted to Purchaser by any provision of this Contract, or any attached Addenda, the Earnest Money, less the non-refundable portion, shall be promptly refunded to Purchaser, and the parties shall have no further rights or obligations under this Contract (except for those which may expressly survive the termination). The Earnest Money [ x ]SHALL [ ] SHALL NOT be placed in an interest bearing account by the Title Company, and any interest earned thereon shall become a part of the Earnest Money. At Closing the Earnest Money shall be applied to the Purchase Price. B. ESCROW. The Earnest Money is deposited with the Title Company with the understanding that the Title Company (1) is not responsible for the performance or non performance of any party to this Contract, and (2) is not liable for interest on the funds held unless required in Paragraph 4.A. The Title Company shall deposit the Earnest Money in one or more fully insured accounts in one or more Federally insured banking or savings institutions. If both parties make demand for the payment of the Earnest Money, the Title Company has the right to require from all parties and Broker(s) a written release of liability of the Title Company which authorizes the disbursement of the Earnest Money. If only one party makes demand for payment of the refundable portion of the Earnest Money, the Title Company shall give notice to the other party of the demand. The Title Company is authorized and directed to honor the demand unless the other party delivers a written objection to the Title Company within ten (10) days after the Title Company's notice to that party. 5. SURVEY AND TITLE DOCUMENTS. A. SURVEY. As soon as reasonably possible, and in any event within twenty (20) days after the Effective Date, Seller shall, at Seller's expense, deliver or cause to be delivered to Purchaser a copy of a current or updated on-the-ground perimeter survey (the "Survey") of the Property prepared by a Registered Professional Land Surveyor reasonably acceptable to the Purchaser. The Survey shall show the location and size of all of the following on or adjacent to the Property, if any: buildings, building lines, improvements, streets, pavements, easements, rights-of-way, protrusions, encroachments, fences, 100-year flood plain, apparent public utilities, and recording information of easements. The Survey shall show the gross land area and the Net Land Area. The Survey shall be in a form and of a date acceptable to Purchaser and to the Title Company, and in acceptable form in order to allow the Title Company to delete the survey exception (except as to "shortages in area") from the Title Policy. The term "Net Land Area" means the gross land area of the Property less the land area included in utility easements, drainage easements, ingress/egress easements, rights-of-way, 100-year flood plain and encroachments on or across the Property. The area within the 100-year flood plain shall be as defined by the Federal Emergency Management Agency or other applicable governmental authority. At Closing, the metes and bounds description of the Property reflected in the Survey shall be used in the warranty deed and any other documents requiring a legal description of the Property. B. TITLE COMMITMENT. As soon as reasonably possible, and in any event within twenty (20) days after the Effective Date, Seller shall, at Seller's expense, deliver or cause to be delivered to Purchaser (1) a title commitment (the "Title Commitment") covering the Property binding the Title Company to issue a Texas Owner Policy of Title Insurance (the "Title Policy") on the standard form prescribed by the Texas State Board of Insurance at the Closing, in the full amount of the Purchase Price, insuring Purchaser's fee simple title to the Property to be good and indefeasible, subject only to the Permitted Exceptions as defined below, and (2) the following documents (collectively, the "Title Documents")(a) true and legible copies of all recorded instruments affecting the Property and recited as exceptions in the Title Commitment, (b) a current tax certificate, and (c) written notices as required in Paragraph 5.C. C. SPECIAL ASSESSMENT DISTRICTS. If the Property is situated within a utility district or flood control district subject to the provisions of Section 50.301, Texas Water Code, then Seller shall give to Purchaser as part of the Title Documents the required written notice and Purchaser agrees to acknowledge receipt of the notice in writing. The notice must set forth the current tax rate, the current bonded indebtedness and the authorized indebtedness of the district, and must comply with all other applicable requirements of the Texas Water Code. If the Property is subject to mandatory membership in a property owner's association, Seller shall notify Purchaser of the current annual budget of the property owner's association, and the current authorized fees, dues and/or assessments relating to the Property. D. ABSTRACT. At the time of the execution of this Contract, Purchaser acknowledges that the Broker(s) (defined below) have advised and hereby advise Purchaser, by this writing, that Purchaser should have the abstract covering the Property examined by an attorney of Purchaser's own selection or that Purchaser should be furnished with or obtain a policy of title insurance. PAGE 1 6. REVIEW OF TITLE DOCUMENTS. A. REVIEW PERIOD. Purchaser shall have ten (10) days (the "Review Period") after Purchaser's receipt of the last of (i) the Survey, (ii) the Title Commitment, (iii) the Title Documents, and (iv) all other documents required to be furnished by Seller as identified on ADDENDUM A, PERSONAL PROPERTY, and/or on ADDENDUM C, INSPECTION, to review them. If Purchaser has any objections to the Survey, Title Commitment or Title Documents, Purchaser may deliver the objections to Seller in writing within the Review Period. Any item to which Purchaser does not object shall be deemed a "Permitted Exception." Items that the Title Company identifies as to be released at closing will be deemed objections by Purchaser. Purchaser's failure to object within the time provided shall be a waiver of the right to object. If there are objections by Purchaser, or a third party lender, Seller shall make a good faith attempt to satisfy the objections within ten (10) days after receipt of Purchaser's objections (the "Cure Period"), but Seller is not required to incur any cost to do so. Zoning ordinances and the lien for current taxes are deemed to be Permitted Exceptions. B. CURE PERIOD. If Seller cannot satisfy the objections within the Cure Period, Seller shall deliver a written notice to Purchaser, prior to expiration of the Cure Period, stating whether Seller is committed to cure the objections at or before Closing. If Seller does not timely deliver the written notice, or does not commit in the written notice to fully cure all of the objections at or before Closing, then Purchaser may terminate this Contract by delivering a written notice to Seller on or before the earlier to occur of: (i) the date which is seven (7) days after the expiration of the Cure Period; or (ii) the scheduled Closing Date. If Purchaser properly and timely terminates this Contract, the refundable portion of the Earnest Money shall be immediately returned to Purchaser and thereafter neither party shall have any rights or obligations under this Contract (except for those which may expressly survive the termination of this Contact). If Purchaser does not properly and timely terminate this Contract, then Purchaser shall be deemed to have waived any uncured objections and must accept such title as Seller is able to convey as of Closing. 7. SELLER'S WARRANTIES AND REPRESENTATIONS. A. STATEMENTS. Seller represents and warrants to Purchaser to the best of Seller's knowledge as follows: (1) TITLE. At the Closing, Seller will have the right to, and will, convey to Purchaser good and indefeasible fee simple title to the Property free and clear of any and all liens, assessments, unrecorded easements, security interests and other encumbrances except the Permitted Exceptions. Delivery of the Title Policy pursuant to Paragraph 12 below will be deemed to satisfy the obligation of Seller as to the sufficiency of title required under this Contract. However, delivery of the Title Policy will not release Seller from the warranties of title set forth in the warranty deed. (2) LEASES. There are no parties in possession of any portion of the Property as lessees, tenants at sufferance or trespassers except tenants under written leases delivered to Purchaser pursuant to this Contract. (3) NEGATIVE COVENANTS. Seller shall not further encumber the Property or allow an encumbrance upon the title to the Property, or modify the terms or conditions of any existing leases, contracts or encumbrances, if any, without the written consent of Purchaser. (4) LIENS AND DEBTS. There are no mechanic's liens, Uniform Commercial Code liens or unrecorded liens against the Property, and Seller shall not allow any such liens to attach to the Property prior to Closing, which will not be satisfied out of the Closing proceeds. All obligations of Seller arising from the ownership and operation of the Property and any business operated on the Property, including, but not limited to, taxes, leasing commissions, salaries, contracts, and similar agreements, have been paid or will be paid prior to Closing. Except for obligations for which provisions are made in this Contract for prorating at Closing and any indebtedness taken subject to or assumed, there will be no obligations of Seller with respect to the Property outstanding as of Closing. (5) LITIGATION. There is no pending or threatened litigation, condemnation, or assessment affecting the Property. Seller shall promptly advise Purchaser of any litigation, condemnation, or assessment affecting the Property which is instituted after the Effective Date. (8) OPERATION OF THE PROPERTY. After the Effective Date until the Closing Date, Seller shall (a) operate the Property in the same manner as the Property has been operated, and (b) maintain the Property in the same condition and in the same manner as existed on the Effective Date, except for ordinary wear and tear and any casualty loss. PAGE 2 INSERT A B. SURVIVAL. It is specifically acknowledged and agreed that representations and warranties made by Seller as set forth in this Contract, other than the special warranty as to title of the Property, shall survive the inspection or investigation made by or on behalf of Purchaser and the passage of title from the Seller to Purchaser at Closing for a period of one year after Closing and shall not be merged into or waived by the instruments executed at Closing. Additionally, all agreements and indemnities of Seller and Purchaser set forth in this Contract shall, to the extent not consummated at Closing, survive the Closing of the transaction contemplated by this Contract. Page 2 (a) 9. INSPECTION. [CHECK ONE] [X] A. INSPECTION DESIRED. Purchaser desires to inspect the Property and Seller grants to Purchaser the right to inspect the Property as described in ADDENDUM C, INSPECTION. [ ] B. INSPECTION NOT NECESSARY. Purchaser acknowledges that Purchaser has inspected the Property, including all buildings and improvements thereon, and is thoroughly familiar with their condition, and Purchaser hereby accepts the Property in its present condition, with such changes as may hereafter be caused by normal wear and tear prior to Closing, but without waiving Purchaser's rights by virtue of Seller's representations and warranties expressed in this Contract. 10. CASUALTY LOSS. All risk of loss to the Property shall remain upon Seller prior to the Closing. If, prior to the Closing, the Property is damaged or destroyed by fire or other casualty, to a Material Extent (defined below), Purchaser may either terminate this Contract by delivering a written termination notice to Seller within ten days after the damage occurs, or elect to close. If, prior to the Closing, the Property is damaged by fire or other casualty to less than a Material Extent, the parties shall proceed to Closing as provided herein. If the transaction is to proceed to Closing, despite any damage or destruction, there shall be no reduction in the Purchase Price and Seller shall, at Seller's option: (i) fully repair the damage prior to Closing, at Seller's expense; or (ii) reimburse Purchaser for the entire cost of repairing the Property by allowing Purchaser to deduct the cost from the cash payable to Seller at the Closing; or (iii) assign to Purchaser all of Seller's right and interest in any insurance proceeds resulting from the damage or destruction, plus an amount equal to any insurance deductible. The term "Material Extent" means damage or destruction if the cost of repairing and fully restoring the Property to its previous condition exceeds ten percent (10%) of the Purchase Price. If the extent of damage or the amount of insurance proceeds or the repairs are not able to be completed prior to the Closing Date, to be made available is not able to be determined prior to the Closing Date, either party may postpone the Closing Date by delivering a written notice to the other party specifying an extended Closing Date which is not more than thirty (30) days after the previously scheduled Closing Date. 11. ASSIGNMENT. [CHECK ONLY ONE] [ ] A. ASSIGNMENT PROHIBITED. Purchaser may not assign this Contract without Seller's prior written consent. [ ] B. ASSIGNMENT PERMITTED. Purchaser may assign this Contract provided the assignee assumes in writing all obligations and liabilities of Purchaser under this Contract, in which event Purchaser shall be relieved of any further liability hereunder. [X] C. LIMITED ASSIGNMENT. Except as allowed in Paragraph D of Addendum E, Purchaser may assign this Contract only to a related party, defined as (i) an entity in which Purchaser is an owner, partner or corporate officer, or (ii) a member of the immediate family of the Purchaser. Purchaser shall remain liable under this Contract after any assignment to related party. 12. CLOSING. A. CLOSING DATE. The closing of the transaction described in this Contract (the "Closing") shall be held at 10:00 a.m. [X] on December 16, 1996 (the "Closing Date") at the offices of the Title Company at its address stated below. B. SELLER'S CLOSING DOCUMENTS. At the Closing, Seller shall deliver to Purchaser at Seller's expense: (1) A duly executed [CHECK ONE] [ ] GENERAL WARRANTY DEED [ X ] SPECIAL WARRANTY DEED (with Vendor's Lien retained if not a cash purchase) conveying the Property in fee simple according to the legal description prepared by the surveyor as shown on the Survey, subject only to the Permitted Exceptions; (2) The Title Policy issued by the underwriter for the Title Company pursuant to the Title Commitment, subject only to the Permitted Exceptions, in the full amount of the Purchase Price, dated as of the date of Closing, and (at an additional premium cost) [CHECK IF APPLICABLE] [X] with the survey exception deleted except as to "shortages in area;" (3) A Bill of Sale conveying the personal property identified in Addendum A, PERSONAL PROPERTY, free and clear of liens, security interests and encumbrances, subject only to the Permitted Exceptions (to the extent applicable); (4) Possession of the Property, subject to valid existing leases and other applicable Permitted Exceptions; (5) A duly executed assignment of all leases; (6) A current rent roll certified by Seller to be complete and accurate; (7) Evidence of Seller's authority and capacity to close this transaction; (8) All other documents reasonably required by the Title Company to close this transaction. C. PURCHASER'S CLOSING DOCUMENTS. At the Closing, Purchaser shall deliver to Seller at Purchaser's expense: (1) The cash portion of the Purchase Price, with the Earnest Money being applied thereto; (2) The Note and the Deed of Trust, if any; (3) An Assumption Agreement in recordable form agreeing to pay all commissions payable under any lease of the Property; (4) Evidence of Purchaser's authority and capacity to close this transaction; (5) All other documents reasonably required by the Title Company to close this transaction. D. CLOSING COSTS. Each party shall pay its share of the closing costs which are customarily paid by a Seller or Purchaser in a transaction of this character in the county where the Property is located, or as otherwise agreed. E. PRORATIONS. Rents, lease commissions, interest, insurance premiums, maintenance expenses, operating expenses, and ad valorem taxes for the year of Closing shall be prorated at the Closing effective as of the date of Closing. Any security deposits held by Seller shall be delivered to Purchaser at the Closing. If the Closing occurs before the tax rate is fixed for the year of Closing, the apportionment of the taxes shall be upon the basis of the tax rate for the preceding year applied to the latest assessed valuation, but any difference between estimated taxes or the year of Closing the actual taxes paid by Purchaser shall be adjusted equitably between the parties upon proof of payment of the taxes by Purchaser. This provision shall survive the Closing. F. LOAN ASSUMPTION. If Purchaser assumes an existing mortgage loan at Closing, Purchaser shall pay (1) to the lender, any assumption fee charged by the lender, and (2) to Seller, a sum equal to the amount of any reserve accounts held by the lender for the payment of taxes and/or insurance. Purchaser shall execute, at the option and expense of Seller, a Deed of Trust to Secure Assumption. If consent to the assumption is required by the lender, Seller shall obtain the lender's consent in writing and deliver the consent to Purchaser at Closing. If Seller does not obtain the lender's written consent (if required) and deliver it to Purchaser at or before Closing, Purchaser may terminate this Contract by delivering a written termination notice to Seller whereupon the refundable portion of the Earnest Money will be promptly refunded to Purchaser and the parties shall have no further rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). G. ROLLBACK TAXES. If a change in use of the Property or denial of a special use valuation on the Property claimed by Seller results in the assessment after Closing of additional taxes for periods of Seller's ownership, the additional taxes plus any penalties and interest shall be paid by Purchaser. This obligation shall survive the Closing. H. FOREIGN PERSON NOTIFICATION. If Seller is a Foreign Person, as defined by the U.S. Internal Revenue Code, or if Seller fails to deliver to Purchaser a non-foreign affidavit pursuant to Section 1445 of the Internal Revenue Code, then Purchaser may withhold from the sales proceeds an amount sufficient to comply with applicable tax law and deliver the withheld proceeds to the Internal Revenue Service, together with appropriate tax forms. The required affidavit(s) from Seller(s) shall include (1) a statement that Seller is not a foreign person, (2) the U.S. taxpayer identification number(s) of Seller(s), and (3) other information required by Section 1445 of the Internal Revenue Code. PAGE 3 13. DEFAULT. A. PURCHASER'S REMEDIES. If Seller fails to close this Contract for any reason except Purchaser's default or the termination of this Contract pursuant to a right to terminate set forth in this Contract, Seller shall be in default and Purchaser may elect one of the following, as Purchaser's sole remedy [CHECK ALL THAT MAY APPLY]: [X] (1) Enforce specific performance of this Contract. [X] (4) Terminate and release Seller from this Contract and receive the refundable portion of the Earnest Money immediately. Seller's failure to satisfy Purchaser's objections under Paragraph 6 above shall not constitute a default by Seller. B. SELLER'S REMEDIES. If Purchaser fails to close this Contract for any reason except Seller's default or the termination of this Contract pursuant to a right to terminate set forth in this Contract, Purchaser shall be in default and Seller may elect one of the following, as Seller's sole remedy [CHECK ALL THAT MAY APPLY]: [ ] (1) Enforce specific performance of this Contract; [ ] (2) Bring suit for damages against Purchaser; [ ] (3) Enforce specific performance of this Contract and/or bring suit for damages against Purchaser; or [X] (4) Have the Earnest Money paid to Seller as liquidated damages for the Purchaser's breach of this Contract, thereby releasing Purchaser from this Contract. 14. AGENCY DISCLOSURE. A. AGENCY RELATIONSHIPS. The term "Broker(s)" refers to the Principal Broker and/or the Cooperating Broker, if applicable, as set forth on the signature page. Each Broker has fiduciary duties only to the party(s) the Broker represents as identified below. If either Broker is representing both Seller and Purchaser, then such representation is a dual agency and the dual agency disclosure and consent provisions apply as set forth below. [EACH BROKER CHECK ONLY ONE] (1) The Principal Broker is agent for: [X] the Seller only; or / / the Purchaser only; or / / both Purchaser and Seller. (2) The Cooperating Broker is agent for: [X] the Seller only; or / / the Purchaser only; or / / both Purchaser and Seller. B. OTHER BROKERS. Each party to this Contract represents and warrants to the other party that such party has had no dealings with any person, firm, agent or finder in connection with the negotiation of this Contract and/or the consummation of the purchase and sale contemplated herein, other than the Broker(s) named in this Contract, and no real estate broker, agent, attorney, person, firm or entity, other than the Broker(s) is entitled to any commission or finder's fee in connection with this transaction as the result of any dealings or acts of such party. Each party hereby agrees to indemnify, defend, protect and hold the other party harmless from and against any costs, expenses or liability for compensation, commission, fee, or charges which may be claimed by any agent, finder or other similar party, other than the named Broker(s), by reason of any dealings or acts of the indemnifying party. C. FEE SHARING. Each party acknowledges that the Principal Broker may pay a portion of the Fee (defined below) to the Cooperating Broker. Payment of a portion of the Fee by the Principal Broker to the Cooperating Broker shall not alter the fiduciary relationships between the parties and the Brokers. Seller is liable for payment of the Fee to the Principal Broker only. The Cooperating Broker shall have no claims directly against Seller. D. DUAL AGENCY. If either of the Brokers has indicated in Section 14.A above that Broker is representing both Purchaser and Seller, then Purchaser and Seller hereby consent to the dual agency, authorize the respective Broker(s) to represent more than one party to this transaction, and acknowledge that the source of an expected compensation to the Broker(s) will be the Seller, and the Broker(s) may also be paid a fee by Purchaser. IF THE BROKER(S) ARE ACTING IN A DUAL AGENCY CAPACITY, BROKER(S) SHALL: (1) NOT DISCLOSE TO PURCHASER THAT SELLER WILL ACCEPT A PRICE LESS THAN THE ASKING PRICE UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY SELLER; (2) NOT DISCLOSE TO SELLER THAT PURCHASER WILL PAY A PRICE GREATER THAN THE PRICE SUBMITTED IN A WRITTEN OFFER TO THE SELLER UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY THE PURCHASER; (3) NOT DISCLOSE ANY CONFIDENTIAL INFORMATION, OR ANY INFORMATION A PARTY SPECIFICALLY INSTRUCTS THE BROKER(S) IN WRITING NOT TO DISCLOSE, UNLESS OTHERWISE INSTRUCTED IN A SEPARATE WRITING BY THE RESPECTIVE PARTY OR REQUIRED TO DISCLOSE SUCH INFORMATION BY LAW; (4) TREAT ALL PARTIES TO THE TRANSACTION HONESTLY AND IMPARTIALLY SO AS NOT TO FAVOR ONE PARTY OR WORK TO THE DISADVANTAGE OF ANY PARTY. 15. PROFESSIONAL SERVICE FEE A. PAYMENT OF FEE. Seller agrees to pay the Principal Broker a professional service fee in cash (the "Fee") for procuring the Purchaser and for assisting in the negotiation of this Contract as follows: Six (6) percent of the purchase price specified in Paragraph 3 hereof with three (3) percent payable at Closing to Principal Broker and three (3) percent to Cooperating Broker. The fee shall be earned if, as and when the transaction contemplated by this Contract is closed and funded. The Fee shall be paid at the Closing of a sale of the Property by Seller pursuant to this Contract (as may be amended or assigned). The Title Company or other escrow agent is authorized and directed to pay the Fee to the Principal Broker out of the closing proceeds. 16. MISCELLANEOUS PROVISIONS. A. EFFECTIVE DATE. The term "Effective Date" means the latter of the two dates on which this Contract is signed by Seller and Purchaser as indicated by their signatures below. If the last party to execute this Contract fails to complete the date of execution below that party's signature, the Effective Date shall be the date this fully executed Contract is delivered to the Title Company. B. NOTICES. All notices and other communications required or permitted under this Contract must be in writing and shall be deemed delivered, whether actually received or not, on the earlier of: (i) actual receipt, if delivered in person or by messenger with evidence of delivery, or (ii) receipt of an electronic facsimile transmission ("Fax"); or (iii) upon deposit in the United States Mail as required below. Notices may be transmitted by Fax to the Fax telephone numbers specified below, if any. Notices delivered by mail must be deposited in the U.S. Postal Service, first class postage prepaid, and properly addressed to the intended recipient at the address set forth below. Any party may change its address for notice purposes by delivering written notice of its new address to all other parties in the manner set forth above. Copies of all written notices should also be delivered to the Principal Broker and to the Title Company, but failure to notify the Principal Broker or the Title Company will not cause an otherwise properly delivered notice to be ineffective. PAGE 4 INSERT B against Seller unless Seller is in default hereunder as a result of a warranty or representation of Seller being untrue or inaccurate in any material respect and Seller had no knowledge that such warranty or representation was untrue or inaccurate in which case, Purchaser's sole and exclusive remedy shall be to terminate this Contract by written notice delivered to Seller at or prior to the Closing whereupon the refundable portion of the Earnest Money will be promptly returned by the Title Company to Purchaser and neither party will have any further rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). Page 4 (a) C. MUTUAL TERMINATION. If this Contract is terminated by agreement of both parties at any time prior to Closing, the obligations of each party under this Contract shall terminate, except that (1) Seller shall pay the cost of the Survey (if Survey costs ore incurred), (2) Purchaser shall pay the costs to repair any damage to the Property caused by Purchaser or its agents, (3) Purchaser shall deliver to Seller any reports or documents in Purchaser's possession concerning the Property, and (5) each party shall perform any other obligations which expressly survive the termination of this Contract. The obligations of this paragraph shall survive the termination of this Contract. D. FORMS. In case of a dispute as to the form of any document required under this Contract, the most recent form prepared by the State Bar of Texas, modified as necessary to conform to the requirements of this Contract, shall be deemed reasonable. E. ATTORNEYS FEES. The prevailing party in any legal proceeding brought in relation to this Contract or transaction shall be entitled to recover from the non-prevailing parties court costs, reasonable attorneys' fees and all other reasonable litigation expenses. F. INTEGRATION. This Contract contains the complete agreement between the parties with respect to the Property and cannot be varied except by written agreement. The parties agree that there are no oral or signed agreements, understandings, representations or warranties made by the parties which are not expressly set forth herein. G. SURVIVAL. Any warranty, representation, covenant, condition or obligation contained in this Contract not otherwise consummated at the Closing will survive the Closing of this transaction. H. BINDING EFFECT. This Contract shall inure to the benefit of and be binding upon the parties to this Contract and their respective heirs, legal representatives, successors and assigns. I. TIME FOR PERFORMANCE. Time is of the essence under each provision of this Contract. Strict compliance with the times for performance is required. J. RIGHT OF ENTRY. Upon reasonable advance notice and during normal business hours, Purchaser, Purchaser's representatives and the Brokers have the right to enter upon the Property prior to Closing for purposes of viewing, inspecting and conducting studies of the Property, so long as they do not unreasonably interfere with the use of the Property by Seller or any tenants, or cause undue damage to the Property. K. BUSINESS DAY. If any date of performance under this Contract falls on a Saturday, Sunday or Texas legal holiday, such date of performance shall be deferred to the next day which is not a Saturday, Sunday or Texas legal holiday. L. GOVERNING LAW. This Contract shall be construed under and governed by the laws of the State of Texas, and unless otherwise provided herein, all obligations of the parties created under this Contract are to be performed in the county where the Property is located. M. SEVERABILITY. If any provision of this Contract is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, the invalid, illegal or unenforceable provision shall not affect any other provisions, and this Contract shall be construed as if the invalid, illegal, or unenforceable provision is severed and deleted from this Contract. N. DISCLAIMER. Purchaser understands that a real estate broker is qualified to advise on matters concerning real estate and is not an expert in matters of law, tax, financing, surveying, hazardous materials, engineering, construction, safety, zoning, land planning, architecture, or the Americans with Disabilities Act. However, the Broker(s) will disclose to Purchaser any material factual knowledge which Broker may possess about the condition of the Property. Purchaser acknowledges that Purchaser has been advised by the Broker(s) to seek expert assistance on such matters. The Broker(s) do not investigate a property's compliance with building codes, governmental ordinances, statutes and laws that relate to the use or condition of the Property or its construction, or that relate to its acquisition. If the Broker(s) provide names of consultants or sources for advice or assistance, the Broker(s) do not warrant the services of the advisors or their products and cannot warrant the suitability of property to be acquired. The Broker(s) do not warrant that the Seller will disclose any or all property defects or other matters pertaining to the Property or its condition. O. COUNTERPARTS. This Contract may be executed in a number of identical counterparts. Each counterpart is deemed an original and all counterparts shall, collectively, constitute one agreement. P. GENDER; NUMBER. Unless the context requires otherwise, all pronouns used in this Contract shall be construed to include the other genders, whether used in the masculine, feminine or neuter gender. Words in the singular number shall be construed to include the plural, and words in the plural shall be construed to include the singular. Q. MEDIATION. If any dispute arises relating to this Contract (the "Dispute"), including but not limited to payment of the Fee, then any party may give written notice to the other party(s) requiring all involved parties to attempt to resolve the Dispute by mediation. Except in those circumstances when a party reasonably believes that an applicable statute of limitations period is about to expire, or a party requires injunctive or equitable relief, the parties are obligated to use this mediation procedure prior to initiating arbitration or any other action. Within seven (7) days after receiving the mediation notice, each party must deliver a written designation to all other parties stating the names of one or more individuals with authority to resolve the Dispute on such party's behalf. Within ten (10) days after the date of designation, the parties shall make a good faith effort to select a qualified mediator to mediate the Dispute. If the parties are unable to timely agree upon a mutually acceptable mediator, the parties shall request any State or Federal district judge to appoint a mediator. In consultation with the mediator, the parties shall promptly designate a mutually convenient time and place for the mediation, which is no later than thirty (30) days after selection of the mediator. In the mediation, each party shall be represented by persons with authority and discretion to negotiate a resolution of the Dispute, and may be represented by counsel. The mediation shall be governed by the provisions of Chapter 154 of the Texas Remedies and Practice Code, and such other rules as the mediator may prescribe. The fees and expenses of the mediator shall be shared equally by all parties. R. ARBITRATION. If the parties are unable to resolve any Dispute by mediation, then the parties agree to submit the Dispute to binding arbitration before a single arbitrator. The Dispute shall be decided by arbitration in accordance with the applicable arbitration statute and the then existing rules of the American Arbitration Association. Any party may initiate the arbitration procedure by delivering a written notice of demand for arbitration to the other parties. Within ten (10) days after the receipt by all parties of the written notice of demand of arbitration, the parties shall attempt to select a qualified arbitrator who is acceptable to all parties. If the parties are unable to agree upon an arbitrator who is acceptable to all parties, then upon application of any party a court of competent jurisdiction shall appoint an arbitrator. This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. S. CONSULT AN ATTORNEY. This document is an enforceable, legally binding agreement. Read it carefully. The Broker(s) involved in the negotiation of the transaction described in this Contract cannot give you legal advice. By law, the Broker(s) are limited to discussing factual and business details of the transaction. The parties to this Contract acknowledge that they have been advised by the Broker(s) to have this Contract reviewed by legal counsel before signing this Contract to discuss the legal effects of its terms and provisions. PAGE 5 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.]
/X/ Addendum A Personal Property /X/ Exhibit A Survey and/or Legal Description /X/ Addendum B Financing /X/ Addendum C Inspection / / Exhibit C _______________________________ / / Addendum D Disclosure Notice /X/ Addendum E Special Provisions
19. CONTRACT AS OFFER. The execution of this Contract by the first party to do so constitutes an offer to purchase or sell the Property. Unless within five (5) days from the date of execution of this Contract by the first party, this Contract is accepted by the other party by signing the offer and delivering a fully executed copy to the first party, the offer of this Contract shall be deemed automatically withdrawn and terminated, and the Earnest Money, if any, shall be promptly returned to Purchaser. EXECUTED on the dates stated below, to be effective on the Effective Date. SELLER PURCHASER HAGGAR CLOTHING CO. BRUCE L. WILSON - ---------------------------------------- ----------------------------------- By [SIGNATURE]: /s/ J.M. Haggar, III By [SIGNATURE]: /s/ Bruce L. Wilson -------------------------------------- --------------------------------- Name: J.M. HAGGAR, III Name: Bruce L. Wilson ----------------------------------- ------------------------------ Title: Chief Executive Officer Title: Owner ---------------------------------- ----------------------------- Address: 6113 Lemmon Avenue Address:1845 Woodall Rodgers, Suite -------------------------------- --------------------------- Dallas, Texas 75209 1600, LB-16 - ---------------------------------------- ----------------------------------- Dallas, Texas 75201 - ---------------------------------------- ----------------------------------- Telephone: 352-8481 Fax: 956-4446 Telephone: 871-2432 Ext. 205 ------------------------------ ------------------------- Fax: 871-0075 ------------------------------- Tax I.D. No: 75-0312650 Tax I.D. No: ###-##-#### ---------------------------- ----------------------- Date of Execution: 10-18-96 Date of Execution: 10/21/96 ---------------------- ----------------- PRINCIPAL BROKER COOPERATING BROKER The Staubach Co. - ---------------------------------------- ----------------------------------- By [SIGNATURE]: /s/ Paul A. Whitman By [SIGNATURE]: /s/ Bruce L. Wilson ------------------------- -------------------- Name: Paul A. Whitman Name: Bruce L. Wilson ----------------------------------- ------------------------------ Title: Sr. V.P. Title: ---------------------------------- ----------------------------- Address: 6750 LBJ, Suite 1100 Address: 1845 Woodall Rodgers, ------------------------------- -------------------------- Dallas, Texas 75240 Suite 1600, LB-16 - ---------------------------------------- ----------------------------------- Dallas, Texas 75201 - ---------------------------------------- ----------------------------------- - ---------------------------------------- ----------------------------------- Telephone: 972-960-4263 Fax: 385-8132 Telephone: 871-2432 Ext.205 ------------------------------ ----------------------------------- Fax: 871-0075 ------------------------------ TITLE COMPANY ACCEPTANCE. The Title Company acknowledges receipt of the Earnest Money on 10-21-96 and accepts the Earnest Money subject to the terms and conditions set forth in this Contract. TITLE COMPANY AMERICAN TITLE COMPANY By SIGNATURE: /s/ Bo Feagin ----------------------------- Name: Bo Feagin ------------------------------------ Title: Escrow Officer ------------------------------------ Address: 3131 Turtle Creek, Suite 101 ---------------------------------- Dallas, TX 75219 ---------------------------------- Telephone: 528-8916 Fax: 214-528-8927 --------------- ------------- PAGE 6 EXHIBIT "A" 6020 Cedar Springs Parcel BEING, a 1.025 acre tract of land located in City Block 5717, Dallas, Texas and being situated in the Miles Bennett Survey, Abstract No. 52, Dallas County, Texas; said tract being part of a 7.406 acre tract of land conveyed to THE HAGGAR COMPANY by deed recorded in Volume 82242, Page 2583, Deed Records, Dallas County, Texas; said 1.025 acre tract being more particularly described as follows: BEGINNING, at a 1/2-inch iron rod with "Pacheco Koch" cap found in the northeast right-of-way line of Cedar Springs Avenue (a 50 foot wide right-of-way); said point being South 45 deg. 00 min. 00 sec. East, a distance of 1080.70 feet from the intersection of the said northeast line of Cedar Springs Avenue and the southeast right-of-way line of Manor Way (a 50 foot wide right-of-way); said point also being the most southerly corner of said 7.406 acre tract; THENCE, North 45 deg. 00 min. 00 sec. West, along the said northeast line of Cedar Springs Avenue and the southwest line of said 7.406 acre tract, a distance of 130.50 feet to a "+" cut in concrete set for corner; THENCE, North 45 deg. 00 min. 00 sec. East, a distance of 342.00 feet to a "+" cut in concrete set for corner; THENCE, South 45 deg. 00 min. 00 sec. East, a distance of 130.50 feet to a "+" cut in concrete found for corner in the southeast line of said 7.406 acre tract; THENCE, South 45 deg. 00 min. 00 sec. West, along the said southeast line of said 7.406 acre tract, a distance of 342.00 feet to the POINT OF BEGINNING; CONTAINING, 44,631 square feet or 1.025 acres of land, more or less. NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark- ADDENDUM A TO CONTRACT OF SALE PERSONAL PROPERTY PROPERTY ADDRESS OR DESCRIPTION: 6020 CEDAR SPRINGS, DALLAS, TX. 75235 A. DOCUMENTS. Seller shall deliver to Purchaser within ten (10) days after the Effective Date complete and legible copies of the following: (1) All current leases pertaining to the Property, including all modifications, amendments, supplements and extensions thereof (including written descriptions of any oral agreements); (2) A current rent roll certified by Seller to be true, complete and accurate as of the date of delivery, including names of tenants, rents, expenses paid by the tenants and by Seller, commencement dates, terms of leases, renewal options, and other pertinent data; (3) A current inventory of all tangible personal property and fixtures owned by Seller and located on, attached to, or used in connection with the Property, to be sold with the Property, certified by Seller to be true and correct as of the date of delivery; (4) Any Note(s), Deed(s) of Trust and other loan documents pertaining to loan(s) assumed or taken subject to; (5) All service, maintenance, management, or other contracts relating to the ownership and operation of the Property; (6) All warranties and guaranties relating to the Property, or any part thereof, or to the tangible personal property and fixtures owned by Seller and located on, attached to, or used in connection with the Property, if available; (8) All of the real estate and personal property tax statements with respect to the Property for the previous two (2) years; (9) All leasing and other commission agreements with respect to the Property, which payments are being assumed by Purchaser; (10) The "as built" or other plans and specifications with respect to the Property, if available; (12) A true and correct statement of income and expenses for the Property from N/A to N/A. B. REVIEW OF DOCUMENTS. Purchaser shall have until the end of the Review Period set forth in Section 6 to review the information identified above. If Purchaser objects to any matters contained therein, in Purchaser's sole discretion, no matter how arbitrary, Purchaser may: (1) terminate this Contract by delivery of written notice to Seller prior to expiration of the Review Period, and the Earnest Money shall be promptly returned by the Title Company to Purchaser and neither party shall have any further obligation to the other under this Contract (except for those which may expressly survive the termination of this Contract); or (2) waive the objections and close the transaction. If Purchaser does not deliver a written termination notice to Seller prior to expiration of the Review Period, any and all objections as to the information provided by Seller pursuant to this Addendum shall be deemed to be waived by Purchaser for all purposes. D. OTHER PERSONAL PROPERTY. Seller shall convey to Purchaser, as part of the Property, all fixtures and articles of personal property on the Property and owned by Seller, including but not limited to: (1) Lighting fixtures, signs, decorative accessories, barriers, traffic control devices and similar equipment; (2) Refrigeration, heating, ventilating and air conditioning units and equipment; (3) Electronic security equipment and remote transmitter devices; (4) Tools, equipment, parts and supplies used only for the maintenance of the Property, for example hoses, ladders, mowers, scaffolds, and__________ __________________________________________________________________________ (5) Furnishings and decorations situated within common areas, for example rugs, artwork, lamps, plants, trash containers, window coverings, and raised flooring in the front portion of the building; (6) Operating manuals, service instructions and all records pertaining to the installation, operation, maintenance and repair of equipment and fixtures whether listed above as items of personal property or affixed as part of the real property; (7) Trade names and assumed names used in connection with the Property, including______________________________________________________________; (8) Telephone number(s) of the management office of the Property, including ___________________________________; (9) Licenses, permits, maintenance agreements, management agreements, plans and specifications, as-built drawings, shop drawings, warranties, guarantees, and any other agreements relating to the Property or any part thereof, if available. (10) Other items. ____________________________________________________. Initials: Seller JMH Purchaser BLW --- --- NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark- ADDENDUM B TO CONTRACT OF SALE FINANCING Property address or description: 6020 CEDAR SPRINGS, DALLAS, TX. 75235 [CHECK ALL BOXES WHICH APPLY AND COMPLETE ALL BLANKS WHICH APPLY TO THIS TRANSACTION. BOXES NOT CHECKED DO NOT APPLY TO THIS CONTRACT.] / / A. ASSUMPTION. Purchaser shall assume the unpaid principal balance of a first lien promissory note payable to _________dated ___________________, which unpaid balance at Closing will be approximately $__________________ , and those obligations imposed by the Deed of Trust which secures the promissory note being assumed. Purchaser's initial payment shall be the first payment due after Closing. The transaction described in this Contract / / is / / is not conditioned upon Seller's obtaining a release of liability under the first lien promissory note from the holder of the note. The cash payable at Closing shall be adjusted by the amount of any variance in the loan balance(s) stated above. However, if the total principal balance of all assumed loans varies at Closing from the total of the amount stated above by an amount greater than $ __________, either party may terminate this Contract and the Earnest Money shall be refunded to Purchaser. If the noteholder on assumption requires: (1) Purchaser to pay an assumption fee in excess of $_______ and Seller declines to pay such excess; or (2) an increase in the interest rate above ___________%; or (3) any other modification of the loan documents; then Purchaser may terminate this Contract (and the Earnest Money shall be refunded to Purchaser. The cash payable at Closing shall be adjusted by the amount of any variance from the loan balance shown above. NOTICE TO SELLER: You may still be liable for payment of the promissory note after assumption of the Note by Purchaser. Please check with your attorney or lender. / / B. SUBJECT TO. Purchaser shall take the Property subject to, but not assuming, the unpaid principal balance of a first lien promissory note payable to________________________________________________, dated ___________, which unpaid balance at Closing will be approximately $ _______________, and those obligations imposed by the Deed of Trust which secures the promissory note. Purchaser's initial payment shall be the first payment due after Closing. If the unpaid balance of the loan varies at Closing from the amount stated above by an amount greater than $______________________, either party may terminate this Contract and the refundable portion of the Earnest Money shall be refunded to Purchaser. If the existing interest rate is increased above _____________% or the terms of the loan documents are modified or Purchaser is required to pay a transfer fee in excess of $_____________ and Seller declines to pay such excess, Purchaser may terminate this Contract and the refundable portion of the Earnest Money shall be refunded to Purchaser. The cash payable at Closing shall be adjusted by the amount of any variance from the loan balance shown above. NOTICE TO SELLER: You may still be liable for payment of the promissory note after the Property is sold subject to the Note. Please check with your attorney or lender. /X/ C. THIRD PARTY FINANCING. This Contract is subject to approval for Purchaser of a third party first lien note in the amount of $230,000.00 payable at monthly intervals based on an amortization of not less than fifteen (15) years, with a payment term of not less than ten (10) years, and with the initial interest rate not to exceed nine (9)% per annum for the first five (5) year(s) of the loan. D. APPLICATION PERIOD. IF A, B, OR C ABOVE IS CHECKED, Purchaser shall apply for all third party financing or noteholder's waiver of any right to accelerate the note within ten (10) days after the Effective Date and shall make every reasonable effort to obtain the financing or waiver. If the financing or noteholder's waiver is not obtained within forty-five (45) days after the Effective Date, this Contract shall terminate and the refundable portion of the Earnest Money shall be refunded to Purchaser. NOTICE TO PURCHASER: Loan payments, interest rates or other terms of some loans may be adjusted after Closing. Before signing this Contract, Purchaser is advised to examine all notes and deeds of trust to determine their terms and the possibility of future adjustments. / / E. SELLER FINANCING. At Closing, Purchaser shall execute and deliver a promissory note (the "Note") from Purchaser to Seller in the amount of $ _______________________________ bearing _______ percent (____%) interest per annum, and payable upon the following terms and conditions: / / (1) In one payment due in full on _________________ together with accrued interest. / / (2) Amortized over _____________ year(s) in installments of $ _______________________, / / including interest / / plus interest, beginning __________________ after the date of the Note and continuing at regular ___________ intervals thereafter for _______ year(s) when the entire unpaid principal balance of the Note and the accrued unpaid interest shall then be due and payable. / / (3) Interest only in _________ installments beginning on the ___________ day after the date of the Note for the first __________________ year(s) and continuing thereafter until _____________________________, and thereafter in ______________ installments of $ __________________ / / including interest / / plus interest beginning ____________ after the date of the Note and continuing at regular __________________ intervals thereafter for _______________ year(s), when the entire unpaid principal balance of the Note and the accrued unpaid interest shall then be due and payable. The Note [CHECK ONE] / / SHALL CONTAIN / / SHALL NOT CONTAIN provisions which limit Purchaser's personal liability (non-recourse provisions). If personal liability is limited, the noteholder shall look only to the collateral provided by the Vendor's Lien, the Deed of Trust, and the Assignment of Leases to enforce the payment of the indebtedness and shall not seek a deficiency against Purchaser, except for: (i) failure to pay property taxes; (ii) misapplication of insurance or condemnation awards, to the extent not applied to restore the Property or pay the Note; (iii) misapplication of prepaid rents, to the extent not applied to pay operating expenses or to pay the Note; and (iv) security deposits. The Note shall be secured by a Vendor's Lien, a Deed of Trust and an Assignment of Leases. The Note may be prepaid in whole or in part at any time without penalty. Any prepayments are to be applied to the payment of the installments of principal last maturing and interest shall immediately cease on the prepaid principal. The lien securing payment of the Note will be inferior to any lien securing any other promissory note described in this Contract. If an Owner Policy of Title Insurance is furnished, Purchaser shall furnish Seller with a Mortgagee Title Policy, and the additional premium for simultaneous issuance of the mortgagee policy shall be paid by Purchaser. The Deed of Trust securing the Note shall include a provision that any act or occurrence which would constitute default under the terms of any superior lien shall constitute a default under the Deed of Trust securing the Note. The Deed of Trust shall contain provisions for acceleration of maturity in the event of default or, at the noteholder's option, in the event all or part of the Property is sold, transferred, or further encumbered without the prior written consent of the noteholder. The Deed of Trust shall include a provision for the payment of reasonable attorney's fees if the Note is placed in the hands of an attorney for collection. If any payments on the Note are not made when due, Seller may at Seller's option, impose a late fee on any payment which is more than five days (5) past due in an amount not to exceed five percent (5%) of the past due amount, but in any event not to exceed the maximum amount allowed by law. A late charge may be imposed only once on each past due payment. The Deed of Trust shall provide for Purchaser to deposit in escrow with the noteholder additional monthly amounts equal to one-twelfth (1/12) of the total annual costs of ad valorem taxes, casualty insurance premiums, property owners' association dues, and other assessments on the Property. Payments received by the noteholder shall be applied first to late fees, second to escrow payments due, third to accrued and unpaid interest, and last to the unpaid principal balance of the Note. Initials: Seller JMH Purchaser BLW NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark- ADDENDUM C TO CONTRACT OF SALE INSPECTION Property address or description: 6020 CEDAR SPRINGS, DALLAS, TX. 75235 A. INSPECTION PERIOD. Purchaser shall have a period of forty-five (45) days after the Effective Date (the "Inspection Period") to inspect the Property and to conduct feasibility studies regarding Purchaser's intended use of the Property. Purchaser's studies may include without limitation: (i) core borings; (ii) environmental and architectural tests and investigations; (iii) physical inspections of all improvements, fixtures, equipment, subsurface soils, structural members, and personal property; and (iv) examination of plans, specifications, manuals, and other documents relating to the construction and condition of the Property. Purchaser and Purchaser's agents, employees, consultants and contractors shall have the right of reasonable entry onto the Property during normal business hours, and upon reasonable advance notice to Seller and/or Seller's tenants, for purposes of the inspections, studies, tests and examinations deemed necessary by Purchaser. All inspections, studies, tests and examinations performed hereunder shall be at Purchaser's expense. B. REPORTS. / / (1) Within _______________________ ( ______ ) days after the Effective Date, Seller shall deliver to Purchaser a written report of an environmental assessment of the Property. The report shall be prepared, at Seller's expense, by a Registered Professional Engineer reasonably acceptable to Purchaser, who is proficient or certified in environmental risk assessment. The environmental assessment report must include a "Phase 1" investigation into the existence of Hazardous Materials (as defined in Paragraph 7.A.(7) of this Contract) on or around the Property. The environmental assessment must also include a land use history search, engineering inspections, studies and/or tests which may be necessary to discover the existence, past or present, of Hazardous Materials. /x/ (2) See Paragraph A(2) of Addendum E. /x/ (3) As soon as reasonably possible after they become available to Purchaser, Purchaser shall deliver to Seller, at Purchaser's expense, copies of all written reports, inspections, plats, drawings and studies made by Purchaser and Purchaser's agents, consultants and contractors. This provision shall survive the termination of this Contract. C. TERMINATION. If Purchaser determines, in Purchaser's sole discretion, no matter how arbitrary, that the Property is not in satisfactory condition or is not suitable for Purchaser's intended use or purpose, then Purchaser may terminate this Contract by delivering a written notice to Seller on or before the last day of the Inspection Period, and the refundable portion of the Earnest Money shall be promptly returned by the Title Company to Purchaser and neither party shall have any further rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). D. ACCEPTANCE. If Purchaser does not properly and timely terminate this Contract before the expiration of the Inspection Period (or if Purchaser accepts the Property in writing) then Purchaser will be deemed to have waived all objections to the Property under this Contract, except for any title objections which may be outstanding pursuant to Section 6 of this Contract. In that event, Purchaser agrees to purchase the Property in its current condition without any further representations or warranties of Seller, except any objections which Seller may expressly agree in writing to cure, and this Contract shall continue in full force and effect and the parties shall proceed to Closing. However, this provision does not limit or invalidate any express representations or warranties Seller has made in this Contract. E. RESTORATION. If the transaction described in this Contract does not close, through no fault of Seller, and the condition of the Property was altered due to tests and inspections performed by Purchaser or on Purchaser's behalf, Purchaser must restore the Property to its original condition. This provision will survive the termination of this Contract. Initials: Seller JMH Purchaser BLW ADDENDUM E SPECIAL PROVISIONS ADDENDUM PROPERTY: 6020 Cedar Springs, Dallas, Texas SELLER: Haggar Clothing Co PURCHASER: Bruce L. Wilson This Special Provisions Addendum (herein so called) is attached to and made a part of that one certain Contract of Sale (the "Contract"), by and between HAGGAR CLOTHING Co, as "Seller", and BRUCE L. WILSON, as "Purchaser." In the event a conflict arises between the provisions of this Special Provisions Addendum and any other part of this Contract, this Special Provisions Addendum shall modify and supersede such other part of this Contract to the extent necessary to eliminate any such conflict but no further. All terms which are defined in the Contract shall have the same meaning when used herein, unless otherwise defined herein. A. INSPECTION. In addition to the provisions set forth in Addendum C to the Contract, the following provisions shall apply: (1) All tests, studies and inspections are to be conducted in a manner as not to physically damage the Property or unreasonably interfere with the usual operation of the Property by Seller. Purchaser and its agents and representatives shall: (a) promptly pay when due the costs of all tests, investigations and examinations done with regard to the Property in connection with Purchaser's inspection; (b) not permit any liens to attach to the Property by reason of the exercise of Purchaser's rights hereunder; (c) restore the surface of the Property and any improvements thereon to the condition in which the same were found before any such inspections or tests were undertaken; and (d) not reveal or disclose any information obtained during the Inspection Period concerning the Property to anyone outside Purchaser's organization Purchaser hereby indemnifies and holds Seller harmless from and against any and all liens, claims, causes of action, and expenses (including reasonable attorneys' fees) arising out of any violation of the provisions of this Paragraph A of Addendum E. Notwithstanding any provision of this Contract, no termination of this Contract will terminate Purchaser's obligations pursuant to this paragraph, and the limitation of damages as set forth in Paragraph 13.B. of this Contract will not be applicable to any cause of action arising pursuant to this Paragraph A of Addendum E. (2) Within ten (10) days after the Effective Date, Seller agrees to allow Purchaser, its authorized agents or representatives, to inspect and make copies at its own expense of engineering investigations, tests and/or environmental studies in Seller's possession which have been made with respect to the Property within the one-year period prior to the Effective Date. Purchaser acknowledges that any and all of the studies are proprietary and confidential in nature, and will be made available to Purchaser solely to assist Purchaser in determining the feasibility of purchasing the Property. Purchaser agrees not to disclose the studies, or any of the provisions, terms or conditions thereof, to any party outside of Purchaser's organization, except as to its attorneys, accountants, lenders or investors. Purchaser shall return all of the studies, and any and all copies Purchaser has made of the studies, and all copies of any studies, reports or test results obtained by Purchaser in connection with its inspection of the Property, on the first to occur of (a) such time as Purchaser determines that it shall not acquire the Property, or (b) such time as this Contract is terminated for any reason. Purchaser hereby acknowledges that Seller has not made and does not make any warranty or representation regarding the truth or accuracy of the studies or the source thereof. Seller has not undertaken any independent investigation as to the truth or accuracy of the studies and is providing the studies solely as an accommodation to Purchaser. In permitting Purchaser to review such studies or information to assist Purchaser, no third-party benefits or relationships of any kind, either express or implied, have been offered, intended, or created by Seller, and any such claims are expressly rejected by Seller and waived by Purchaser. (3) Purchaser, at Purchaser's sole cost and expense, will obtain a Phase I environmental site assessment of the Property during Page 1 the Inspection Period. Purchaser will deliver a copy of the Phase I environmental site assessment to Seller as soon as such assessment becomes available to Purchaser. If Purchaser elects not to purchase the Property based on environmental concerns set forth in the Phase I environmental site assessment, Seller will reimburse Purchaser for the actual cost of the Phase I environmental site assessment up to a maximum of $2,500.00. Seller's reimbursement obligation set forth in the preceding sentence is contingent upon Seller's receipt of a copy of the Phase I environmental site assessment. B. CONDITIONS PRECEDENT TO CLOSING. (1) The obligation of Seller or Purchaser to consummate the transactions contemplated hereunder is conditioned upon the execution and delivery at Closing by Seller, as tenant, and Purchaser, as landlord, of a lease of the Property in form mutually satisfactory to Seller and Purchaser. The lease will provide for, among other things, the following: (i) Rental of $4,000.00 per month payable in advance; (ii) A term of 2 years from the Closing Date; however, Seller will have the right to terminate the lease during the lease term upon 120 days prior written notice to Purchaser; (iii) Purchaser will be responsible for property taxes, insurance and structural repairs and maintenance. Commencing December, 1997, Purchaser will be allowed to pass through property tax increases over base year 1996; (iv) No brokerage commission is owed by either Seller or Purchaser with respect to negotiation or execution of the lease; (v) Upon expiration or termination of the lease, Seller will (1) scrape and repaint the ceiling of the warehouse portion of the building to remove the peeling paint from the ceiling; and (2) remove the trash compactor from the south side of the building and repair the penetration in the south wall in a manner reasonably satisfactory to Purchaser (e.g., masonry, glass or other suitable material); and (vi) The lease will be on the NTCAR Commercial Lease Agreement form modified as agreed to by the parties. If Seller and Purchaser are not able to agree upon the terms of the lease prior to the Closing Date, either Seller or Purchaser will have the right to terminate this Contract at or prior to Closing, whereupon the refundable Earnest Money will be immediately returned to Purchaser and thereafter neither party shall have any rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). (2) Seller's obligation to consummate the transactions contemplated hereunder is conditioned upon receipt by Seller from R.H.A. Partnership at or prior to Closing, of an amendment to an Easement Agreement wherein the term of the Easement Agreement is extended as long as Seller is in possession or entitled to possession of the Property. If this condition is not satisfied at or prior to Closing, Seller will have the right to terminate this Contract at or prior to Closing, whereupon the refundable Earnest Money shall be immediately returned to Purchaser and thereafter neither party shall have any rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). C. AS-IS. Notwithstanding anything contained in this Contract to the contrary except for the representations and warranties set forth herein, Purchaser has examined and investigated or may examine or investigate the Property prior to the expiration of the Inspection Period, and Purchaser will rely solely on its own investigation of the Property and not on any information provided or to be provided by or on behalf of Seller except for the representations and warranties set forth herein. Except as expressly set forth herein, it is understood and agreed that Seller is making no representations or warranties, whether express or implied, by operation of law or otherwise with respect to (i) environmental matters of any nature or kind whatsoever relating to the Property or any portion thereof, including, without limitation, compliance with any environmental protection, underground storage tanks, pollution or land use laws, rules, regulations, orders or requirements and the existence in or on the Property of any hazardous or toxic materials; (ii) geological conditions, including, without limitation, subsidence, subsurface conditions, water table, underground water reservoirs, and limitations regarding withdrawal of water Page 2 therefrom; (iii) whether or not and to the extent to which the Property or any portion thereof is affected by any stream (surface or underground), body of water, floodprone area, flood plain, floodway or special flood hazard; (iv) drainage; (v) soil conditions; (vi) zoning to which the Property or any portion thereof may be subject; (vii) availability of any utilities to the Property or any portion thereof, including without limitation, water, sewage, gas and electric; (viii) usage of any adjoining property; (ix) access to the Property or any portion thereof; (x) the compliance or non-compliance of any of the Property with any applicable federal, state or local building codes, ordinances, laws, statutes, rules or regulations; (xi) the value, compliance with plans or specifications, location, use, merchantability, construction, workmanlike condition, order, repair, maintenance, design, quality, description, durability, operation or condition of the Property or any portion thereof; (xii) the quality of the labor and materials included in the Improvements; (xiii) the suitability of the Property or any portion thereof for Purchaser's purposes or fitness for any usage or purpose whatsoever; or (xiv) any other matter relating to the Property. Except as expressly provided herein, Purchaser hereby agrees that Purchaser is accepting the Property "AS IS, WHERE IS, WITH ALL FAULTS AND WITHOUT ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED", subject to all deficiencies or other matters whether known or unknown; however, none of the foregoing shall impair or further restrict the special warranty of title by which the Property is to be conveyed pursuant to this Contract or the representations and warranties set forth herein. D. EXCHANGE. Seller acknowledges that Purchaser desires to complete the acquisition of the Property in the form of a tax deferred like-kind exchange as permitted by the Internal Revenue Code. Accordingly, Seller agrees to cooperate with Purchaser in effecting such tax deferred like-kind exchange as long as no cost, expense or liability results to Seller. In connection with such tax deferred like-kind exchange, Purchaser may assign its rights under the Contract to a qualified intermediary provided that such assignment shall in no manner release Purchaser from its obligations under the Contract and it is understood that Purchaser shall remain liable for all of the obligations of the purchaser under the Contract. The intent of the parties is that after any such exchange, Purchaser shall be liable to Seller for all of the covenants, agreements and obligations of the purchaser as set forth in the Contract. If Purchaser is unable to effect and close an exchange on or prior to the date of Closing as set forth in this Contract, then Purchaser shall close the transaction contemplated by the Contract without further delay. SELLER: HAGGAR CLOTHING Co By: /s/ J.M. Haggar III ------------------------------- Name (Print): J.M. Haggar III --------------------- Title: CHIEF EXECUTIVE OFFICER ---------------------------- PURCHASER: /s/ Bruce L. Wilson ---------------------------------- Bruce L. Wilson Page 3 EX-10.(J) 6 EXHIBIT 10(J) NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS-Registered Trademark- COMMERCIAL CONTRACT OF SALE IN CONSIDERATION of the mutual terms, provisions, covenants and agreements contained in this Contract (the "Contract"), the parties hereto agree as follows. [CHECK ALL BOXES APPLICABLE TO THIS CONTRACT. BOXES NOT CHECKED DO NOT APPLY TO THIS CONTRACT.] 1. PARTIES. Waxahachie Garment Company - Nevada (the "Seller") shall sell and convey to National Fibernet, Inc. (the "Purchaser") and Purchaser shall buy and pay for the Property (defined below). 2. PROPERTY. Being a manufacturing facility situated on certain real property at I-35 and Five Points Road in the City of Waxahachie, Ellis County, Texas, further described as:________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ or as described in Exhibit A, SURVEY/LEGAL DESCRIPTION, together with, all and singular, all improvements thereon and all rights and appurtenances pertaining thereto, including any right, title and interest of Seller in and to adjacent streets, alleys and rights-of-way. Such real estate, improvements, rights and appurtenances are collectively referred to herein as the "Property." / / The Property also includes fixtures and articles of personal property listed and described in ADDENDUM A, PERSONAL PROPERTY. 3. PURCHASE PRICE. The purchase price for the Property is $90,000 (the "Purchase Price"), payable as follows: / / A. The Purchase Price shall be adjusted up or down based upon the [STRIKE ONE] Net/gross land area of the Property determined by the Survey. The applicable land area shall be multiplied by $ _______________ per square foot and the product thereof shall become the Purchase Price at Closing. /X/ B. Cash payable at Closing: $90,000. / / C. The balance of the Purchase Price shall be payable according to the provisions in ADDENDUM B, FINANCING. 4. EARNEST MONEY. ATTN: Judy Wallace A. EARNEST MONEY DEPOSIT. Within two business days after the Effective Date of this Contract, Purchaser shall deposit earnest money in the form of a certified or cashier's check in the amount of $5,000 (the "Earnest Money") payable to Trinity Abstract and Title Company, 613 Ferris Ave, Waxahachie, TX 75165 the ("Title Company"), in its capacity as escrow agent, to be held in escrow pursuant to the terms of this Contract. Seller's acceptance of this Contract is expressly conditioned upon Purchaser's timely deposit of the Earnest Money with the Title Company. If Purchaser fails to timely deposit the Earnest Money, Seller may, at Seller's option, terminate this Contract by delivering a written termination notice to Purchaser. Notwithstanding anything herein to the contrary, a portion of the Earnest Money in the amount of $100.00 shall be non-refundable and shall be distributed to Seller at Closing or other termination of this Contract as full payment and independent consideration for Seller's performance under this Contract. If this Contract is properly terminated by Purchaser pursuant to a right of termination granted to Purchaser by any provision of this Contract, or any attached Addenda, the Earnest Money, less the non-refundable portion, shall be promptly refunded to Purchaser, and the parties shall have no further rights or obligations under this Contract (except for those which may expressly survive the termination). The Earnest Money [ X ] SHALL [ ] SHALL NOT be placed in an interest-bearing account by the Title Company, and any interest earned thereon shall become a part of the Earnest Money. At Closing the Earnest Money shall be applied to the Purchase Price. B. ESCROW. The Earnest Money is deposited with the Title Company with the understanding that the Title Company (1) is not responsible for the performance or non-performance of any party to this Contract, and (2) is not liable for interest on the funds held unless required in Paragraph 4.A. The Title Company shall deposit the Earnest Money in one or more fully insured accounts in one or more Federally insured banking or savings institutions. If both parties make demand for the payment of the Earnest Money, the Title Company has the right to require from all parties and Broker(s) a written release of liability of the Title Company which authorizes the disbursement of the Earnest Money. If only one party makes demand for payment of the refundable portion of the Earnest Money, the Title Company shall give notice to the other party of the demand. The Title Company is authorized and directed to honor the demand unless the other party delivers a written objection to the Title Company within ten (10) days after the Title Company's notice to that party. 5. SURVEY AND TITLE DOCUMENTS. A. SURVEY. As soon as reasonably possible. and in any event within twenty (20) days after the Effective Date, Seller shall, at Seller's expense, deliver or cause to be delivered to Purchaser a copy of a current or updated on-the-ground perimeter survey (the "Survey") of the Property prepared by a Registered Professional Land Surveyor reasonably acceptable to the Purchaser. The Survey shall show the location and size of all of the following on or adjacent to the Property, if any: buildings, building lines, improvements, streets, pavements. easements, rights-of-way, protrusions, encroachments, fences, 100-year flood plain, apparent public utilities, and recording information of easements. The Survey shall show the gross land area and the Net Land Area. The Survey shall be in a form and of a date acceptable to Purchaser and to the Title Company, and in acceptable form in order to allow the Title Company to delete the survey exception (except as to "shortages in area") from the Title Policy. The term "NET LAND AREA" means the gross land area of the Property less the land area included in utility easements, drainage easements, ingress/egress easements, rights-of-way, 100-year flood plain and encroachments on or across the Property. The area within the 100-year flood plain shall be as defined by the Federal Emergency Management Agency or other applicable governmental authority. If the transaction described in this Contract does not close through no fault of Seller or except as provided in Paragraph 16.C, in addition to the other rights of Seller, Purchaser shall pay for the Survey on demand. At Closing, the metes and bounds description of the Property reflected in the Survey shall be used in the warranty deed and any other documents requiring a legal description of the Property. B. TITLE COMMITMENT. As soon as reasonably possible, and in any event within twenty (20) days after the Effective Date, Seller shall, at Seller's expense, deliver or cause to be delivered to Purchaser (1) a title commitment (the "Title Commitment") covering the Property binding the Title Company to issue a Texas Owner Policy of Title Insurance (the "Title Policy") on the standard form prescribed by the Texas State Board of Insurance at the Closing, in the full amount the Purchase Price, insuring Purchaser's fee simple title to the Property to be good and indefeasible, subject only to the Permitted Exceptions as defined below, and (2) the following documents (collectively, the "Title Documents") (a) true and legible copies of all recorded instruments affecting the Property and recited as exceptions in the Title Commitment, (b) a current tax certificate, and (c) written notices as required in Paragraph 5.C. C. SPECIAL ASSESSMENT DISTRICTS. If the Property is situated within a utility district or flood control district subject to the provisions of Section 50.301, Texas Water Code, then Seller shall give to Purchaser as part of the Title Documents the required written notice and Purchaser agrees to acknowledge receipt of the notice in writing. The notice must set forth the current tax rate, the current bonded indebtedness and the authorized indebtedness of the district, and must comply with all other applicable requirements of the Texas Water Code. If the Property is subject to mandatory membership in a property owner's association, Seller shall notify Purchaser of the current annual budget of the property owners' association, and the current authorized fees, dues and/or assessments relating to the Property. D. ABSTRACT. At the time of the execution of this Contract, Purchaser acknowledges that the Broker(s) (defined below) have advised and hereby advise Purchaser, by this writing, that Purchaser should have the abstract covering the Property examined by an attorney of Purchaser's own selection or that Purchaser should be furnished with or obtain a policy of title insurance. Page 1 6. REVIEW OF TITLE DOCUMENTS. A. REVIEW PERIOD. Purchaser shall have five (5) days (the "Review Period") after Purchaser's receipt of the last of (i) the Survey, (ii) the Title Commitment, (iii) the Title Documents, and (iv) all other documents required to be furnished by Seller as identified on ADDENDUM A, PERSONAL PROPERTY, and/or on ADDENDUM C, INSPECTION, to review them. If Purchaser has any objections to the Survey, Title Commitment or Title Documents, Purchaser may deliver the objections to Seller in writing within the Review Period. Any item to which Purchaser does not object shall be deemed a "Permitted Exception." Items that the Title Company identifies as to be released at closing will be deemed objections by Purchaser. Purchaser's failure to object within the time provided shall be a waiver of the right to object. If there are objections by Purchaser, or a third party lender, Seller shall make a good faith attempt to satisfy the objections within ten (10) days after receipt of Purchaser's objections (the "Cure Period"), but Seller is not required to incur any cost to do so. Zoning ordinances and the lien for current taxes are deemed to be Permitted Exceptions. B. CURE PERIOD. If Seller cannot satisfy the objections within the Cure Period, Seller shall deliver a written notice to Purchaser, prior to expiration of the Cure Period, stating whether Seller is committed to cure the objections at or before Closing. If Seller does not timely deliver the written notice, or does not commit in the written notice to fully cure all of the objections at or before Closing, then Purchaser may terminate this Contract by delivering a written notice to Seller on or before the earlier to occur of: (i) the date which is seven (7) days after the expiration of the Cure Period; or (ii) the scheduled Closing Date. If Purchaser properly and timely terminates this Contract, the refundable portion of the Earnest Money shall be immediately returned to Purchaser and thereafter neither party shall have any rights or obligations under this Contract (except for those which may expressly survive the termination of this Contact). If Purchaser does not properly and timely terminate this Contract, then Purchaser shall be deemed to have waived any uncured objections and must accept such title as Seller is able to convey as of Closing. 7. SELLER'S WARRANTIES AND REPRESENTATIONS. A. STATEMENTS. Seller represents and warrants to Purchaser to the best of Seller's knowledge as follows: (1) TITLE. At the Closing, Seller will have the right to, and will, convey to Purchaser good and indefeasible fee simple title to the Property free and clear of any and all liens, assessments, unrecorded easements, security interests and other encumbrances except the Permitted Exceptions. Delivery of the Title Policy pursuant to Paragraph 12 below will be deemed to satisfy the obligation of Seller as to the sufficiency of title required under this Contract. However, delivery of the Title Policy will not release Seller from the warranties of title set forth in the warranty deed. (2) LEASES. There are no parties in possession of any portion of the Property as lessees, tenants at sufferance or trespassers except tenants under written leases delivered to Purchaser pursuant to this Contract. (3) NEGATIVE COVENANTS. Seller shall not further encumber the Property or allow an encumbrance upon the title to the Property, or modify the terms or conditions of any existing leases, contracts or encumbrances, if any, without the written consent of Purchaser. (4) LIENS AND DEBTS. There are no mechanic's liens, Uniform Commercial Code liens or unrecorded liens against the Property, and Seller shall not allow any such liens to attach to the Property prior to Closing, which will not be satisfied out of the Closing proceeds. All obligations of Seller arising from the ownership and operation of the Property and any business operated on the Property, including, but not limited to, taxes, leasing commissions, salaries, contracts, and similar agreements, have been paid or will be paid prior to Closing. Except for obligations for which provisions are made in this Contract for prorating at Closing and any indebtedness taken subject to or assumed, there will be no obligations of Seller with respect to the Property outstanding as of Closing. (5) LITIGATION. There is no pending or to the current actual knowledge of Seller without duty of further inquiry, threatened litigation, condemnation, or assessment affecting the Property. Seller shall promptly advise Purchaser of any litigation, condemnation or assessment affecting the Property which is instituted after the Effective Date. (8) OPERATION OF THE PROPERTY. After the Effective Date until the Closing Date, Seller shall (a) operate the Property in the same manner as the Property has been operated, and (b) maintain the Property in the same condition and in the same manner as existed on the Effective Date, except for ordinary wear and tear and any casualty loss. Page 2 INSERT A B. SURVIVAL. It is specifically acknowledged and agreed that representations and warranties made by Seller as set forth in this Contract, other than the special warranty as to title of the Property, will merge into and will not survive the inspection or investigation made by or on behalf of Purchaser and the passage of title from Seller to Purchaser at Closing. Additionally, all agreements and indemnities of Seller and Purchaser set forth in this Contract shall, to the extent not consummated at Closing, survive the Closing of the transaction contemplated by this Contract. Page 2(a) 9. INSPECTION. [CHECK ONE] / / A. INSPECTION DESIRED. Purchaser desires to inspect the Property and Seller grants to Purchaser the right to inspect the Property as described in ADDENDUM C, INSPECTION. / / B. INSPECTION NOT NECESSARY. Purchaser acknowledges that Purchaser has inspected the Property, including all buildings and improvements thereon, and is thoroughly familiar with their condition, and Purchaser hereby accepts the Property in its present condition, with such changes as may hereafter be caused by normal wear and tear prior to Closing, but without waiving Purchaser's rights by virtue of Seller's representations and warranties expressed in this Contract. 10. CASUALTY LOSS. All risk of loss to the Property shall remain upon Seller prior to the Closing. If, prior to the Closing, the Property is damaged or destroyed by fire or other casualty, to a Material Extent (defined below), Purchaser may either terminate this Contract by delivering a written termination notice to Seller within ten days after the damage occurs, or elect to close. If, prior to the Closing, the Property is damaged by fire or other casualty to less than a Material Extent, the parties shall proceed to Closing as provided herein. If the transaction is to proceed to Closing, despite any damage or destruction, there shall be no reduction in the Purchase Price and Seller shall, at Seller's option: (i) fully repair the damage prior to Closing, at Seller's expense; or (ii) reimburse Purchaser for the entire cost of repairing the Property by allowing Purchaser to deduct the cost from the cash payable to Seller at the Closing; or (iii) assign to Purchaser all of Seller's right and interest in any insurance proceeds resulting from the damage or destruction, plus an amount equal to any insurance deductible. The term "Material Extent" means damage or destruction if the cost of repairing and fully restoring the Property to its previous condition exceeds ten percent (10%) of the Purchase Price. If the extent of damage or the amount of insurance proceeds to be made available is not able to be determined prior to the Closing Date, or the repairs are not able to be completed prior to the Closing Date, either party may postpone the Closing Date by delivering a written notice to the other party specifying an extended Closing Date which is not more than thirty (30) days after the previously scheduled Closing Date. 11. ASSIGNMENT. [CHECK ONLY ONE] / / A. ASSIGNMENT PROHIBITED. Purchaser may not assign this Contract without Seller's prior written consent. / / B. ASSIGNMENT PERMITTED. Purchaser may assign this Contract provided the assignee assumes in writing all obligations and liabilities of Purchaser under this Contract, in which event Purchaser shall be relieved of any further liability hereunder. /X/ C. LIMITED ASSIGNMENT. Purchaser may assign this Contract only to a related party, defined as (i) an entity in which Purchaser is an owner, partner or corporate officer, or (ii) a member of the immediate family of the Purchaser. Purchaser shall remain liable under this Contract after any assignment to a related party. 12. CLOSING. A. CLOSING DATE. The closing of the transaction described in this Contract (the "Closing") shall be held at 10:00 a.m. on the later of [CHECK ONE]: / / ____ days after the Effective Date; or /x/ 5 days after the expiration of the Review Period or Inspection Period (whichever is later); or / / on ___________________________ (the "Closing Date") at the offices of the Title Company at its address stated below. However, if any objections which were properly and timely made by Purchaser pursuant to this Contract have not been cured on the scheduled Closing Date, then either party may postpone the date of the Closing by delivering a written notice to the other party specifying an extended Closing Date which is not more than thirty (30) days after the previously scheduled Closing Date. B. SELLER'S CLOSING DOCUMENTS. At the Closing, Seller shall deliver to Purchaser at Seller's expense: (1) A duly executed [CHECK ONE]: / / GENERAL WARRANTY DEED /X/ SPECIAL WARRANTY DEED (with Vendor's Lien retained if not a cash purchase) conveying the Property in fee simple according to the legal description prepared by the surveyor as shown on the Survey, subject only to the Permitted Exceptions; (2) The Title Policy issued by the underwriter for the Title Company pursuant to the Title Commitment, subject only to the Permitted Exceptions, in the full amount of the Purchase Price, dated as of the late of Closing, and (at an additional premium cost) [CHECK IF APPLICABLE] / / with the survey exception deleted except as to "shortages in area;" (3) A Bill of Sale conveying the personal property identified in Addendum A, PERSONAL PROPERTY, free and clear of liens, security interests and encumbrances, subject only to the Permitted Exceptions (to the extent applicable); (4) Possession of the Property, subject to valid existing leases and other applicable Permitted Exceptions; (5) A duly executed assignment of all leases; (6) A current rent roll certified by Seller to be complete and accurate; (7) Evidence of Seller's authority and capacity to close this transaction; (8) All other documents reasonably required by the Title Company to close this transaction. C. PURCHASER'S CLOSING DOCUMENTS. At the Closing, Purchaser shall deliver to Seller at Purchaser's expense: (1) The cash portion of the Purchase Price, with the Earnest Money being applied thereto; (2) The Note and the Deed of Trust, if any; (3) An Assumption Agreement in recordable form agreeing to pay all commissions payable under any lease of the Property; (4) Evidence of Purchaser's authority and capacity to close this transaction; (5) All other documents reasonably required by the Title Company to close this transaction. D. CLOSING COSTS. Each party shall pay its share of the closing costs which are customarily paid by a Seller or Purchaser in a transaction of this character in the county where the Property is located, or as otherwise agreed. E. PRORATIONS. Rents, lease commissions, interest, insurance premiums, maintenance expenses, operating expenses, and ad valorem taxes for the year of Closing shall be prorated at the Closing effective as of the date of Closing. Any security deposits held by Seller shall be delivered to Purchaser at the Closing. If the Closing occurs before the tax rate is fixed for the year of Closing, the apportionment of the taxes shall be upon the basis of the tax rate for the proceeding year applied to the latest assessed valuation, but any difference between estimated taxes for the year of Closing the actual taxes paid by Purchaser shall be adjusted equitably between the parties upon proof of payment of the taxes by Purchaser. This provision shall survive the Closing. F. LOAN ASSUMPTION. If Purchaser assumes an existing mortgage loan at Closing, Purchaser shall pay (1) to the lender, any assumption fee charged by the lender; and (2) to Seller, a sum equal to the amount of any reserve accounts held by the lender for the payment of taxes and/or insurance. Purchaser shall execute, at the option and expense of Seller, a Deed of Trust to Secure Assumption. If consent to the assumption is required by the lender, Seller shall obtain the lender's consent in writing and deliver the consent to Purchaser at Closing. If Seller does not obtain the lender's written consent (if required) and deliver it to Purchaser at or before Closing, Purchaser may terminate this Contract by delivering a written termination notice to Seller whereupon the refundable portion of the Earnest Money will be promptly refunded to Purchaser and the parties shall have no further rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). G. ROLLBACK TAXES. If a change in use of the Property or denial of a special use valuation on Property claimed by Seller results in the assessment after Closing of additional taxes for periods of Seller's ownership, the additional taxes plus any penalties and interest shall be paid by Purchaser. This obligation shall survive the Closing. H. FOREIGN PERSON NOTIFICATION. If Seller is a Foreign Person, as defined by the U.S. Internal Revenue Code, or if Seller fails to deliver to Purchaser a non-foreign affidavit pursuant to Section 1445 of the Internal Revenue Code, then Purchaser may withhold from the sales proceeds an amount sufficient to comply with applicable tax law and deliver the withheld proceeds to the Internal Revenue Service, together with appropriate tax forms. The required affidavit(s) from Seller(s) shall include (1) a statement that Seller is not a foreign person, 2) the U.S. taxpayer identification number(s) of Seller(s), and (3) other information required by Section 1445 of the Internal Revenue Code. Page 3 13. DEFAULT. A. PURCHASER'S REMEDIES. If Seller fails to close this Contract for any reason except Purchaser's default or the termination of this Contract pursuant to a right to terminate set forth in this Contract, Seller shall be in default and Purchaser may elect one of the following, as Purchaser's sole remedy [CHECK ALL THAT MAY APPLY]: [X] (1) Enforce specific performance of this Contract; See Insert B on Page 4(a) [ ] (2) Bring suit for damages against Seller; [ ] (3) Enforce specific performance of this Contract and/or bring suit for damages against Seller; or [ ] (4) Terminate and release Seller from this Contract and receive the refundable portion of the Earnest Money immediately. Seller's failure to satisfy Purchaser's objections under Paragraph 6 above shall not constitute a default by Seller. B. SELLER'S REMEDIES. If Purchaser fails to close this Contract for any reason except Seller's default or the termination of this Contract pursuant to a right to terminate set forth in this Contract, Purchaser shall be in default and Seller may elect one of the following, as Seller's sole remedy [CHECK ALL THAT MAY APPLY]: [ ] (1) Enforce specific performance of this Contract; [ ] (2) Bring suit for damages against Purchaser; [ ] (3) Enforce specific performance of this Contract and/or bring suit for damages against Purchaser; or [X] (4) Have the Earnest Money paid to Seller as liquidated damages for the Purchaser's breach of this Contract, thereby releasing Purchaser from this Contract. 15. PROFESSIONAL SERVICE FEE. 16. MISCELLANEOUS PROVISIONS. A. EFFECTIVE DATE. The term "Effective Date" means the latter of the two dates on which this Contract is signed by Seller and Purchaser, as indicated by their signatures below. If the last party to execute this Contract fails to complete the date of execution below that party's signature, the Effective Date shall be the date this fully executed Contract is delivered to the Title Company. B. NOTICES. All notices and other communications required or permitted under this Contract must be in writing and shall be deemed delivered, whether actually received or not, on the earlier of: (i) actual receipt, if delivered in person or by messenger with evidence of delivery; or (ii) receipt of an electronic facsimile transmission ("Fax"); or (iii) upon deposit in the United States Mail as required below. Notices may be transmitted by Fax to the Fax telephone numbers specified below, if any. Notices delivered by mail must be deposited in the U.S. Postal Service, first class postage prepaid, and properly addressed to the intended recipient at the address set forth below. Any party may change its address for notice purposes by delivering written notice of its new address to all other parties in the manner set forth above. Copies of all written notices should also be delivered to the Principal Broker and to the Title Company, but failure to notify the Principal Broker or the Title Company will not cause an otherwise properly delivered notice to be ineffective. Page 4 INSERT B against Seller unless Seller is in default hereunder as a result of a warranty or representation of Seller being untrue or inaccurate in any material respect and Seller had no knowledge that such warranty or representation was untrue or inaccurate in which case, Purchaser's sole and exclusive remedy shall be to terminate this Contract by written notice delivered to Seller at or prior to the Closing whereupon the refundable portion of the Earnest Money will be promptly returned by the Title Company to Purchaser and neither party will have any further rights or obligations under this Contract (except for those which may expressly survive the termination of this Contract). Page 4(a) C. MUTUAL TERMINATION. If this Contract is terminated by agreement of both parties at any time prior to Closing, the obligations of each party under this Contract shall terminate, except that (1) Seller and Purchaser shall each pay one-half of the cost of the Survey (if Survey costs are incurred), (2) Purchaser shall pay the costs to repair any damage to the Property caused by Purchaser or its agents, (3) Purchaser shall deliver to Seller any reports or documents in Purchaser's possession concerning the Property, (4) Seller shall pay the Fee owed to the Principal Broker, and (5) each party shall perform any other obligations which expressly survive the termination of this Contract. The obligations of this paragraph shall survive the termination of this Contract. D. FORMS. In case of a dispute as to the form of any document required under this Contract, the most recent form prepared by the State Bar of Texas, modified as necessary to conform to the requirements of this Contract, shall be deemed reasonable. E. ATTORNEYS FEES. The prevailing party in any legal proceeding brought in relation to this Contract or transaction shall be entitled to recover from the non-prevailing parties court costs, reasonable attorneys' fees and all other reasonable litigation expenses. F. INTEGRATION. This Contract contains the complete agreement between the parties with respect to the Property and cannot be varied except by written agreement. The parties agree that there are no oral or signed agreements, understandings, representations or warranties made by the parties which are not expressly set forth herein. G. SURVIVAL. Any warranty, representation, covenant, condition or obligation contained in this Contract not otherwise consummated at the Closing will survive the Closing of this transaction. H. BINDING EFFECT. This Contract shall inure to the benefit of and be binding upon the parties to this Contract and their respective heirs, legal representatives, successors and assigns. I. TIME FOR PERFORMANCE. Time is of the essence under each provision of this Contract. Strict compliance with the times for performance is required. J. RIGHT OF ENTRY. Upon reasonable advance notice and during normal business hours, Purchaser, Purchaser's representatives and the Brokers have the right to enter upon the Property prior to Closing for purposes of viewing, inspecting and conducting studies of the Property, so long as they do not unreasonably interfere with the use of the Property by Seller or any tenants, or cause undue damage to the Property. K. BUSINESS DAY. If any date of performance under this Contract falls on a Saturday, Sunday or Texas legal holiday, such date of performance shall be deferred to the next day which is not a Saturday, Sunday or Texas legal holiday. L. GOVERNING LAW. This Contract shall be construed under and governed by the laws of the State of Texas, and unless otherwise provided herein, all obligations of the parties created under this Contract are to be performed in the county where the Property is located. M. SEVERABILITY. If any provision of this Contract is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, the invalid, illegal or unenforceable provision shall not affect any other provisions, and this Contract shall be construed as if the invalid, illegal, or unenforceable provision is severed and deleted from this Contract. O. COUNTERPARTS. This Contract may be executed in a number of identical counterparts. Each counterpart is deemed an original and all counterparts shall, collectively, constitute one agreement. P. GENDER; NUMBER. Unless the context requires otherwise, all pronouns used in this Contract shall be construed to include the other genders, whether used in the masculine, feminine or neuter gender. Words in the singular number shall be construed to include the plural, and words in the plural shall be construed to include the singular. Q. MEDIATION. If any dispute arises relating to this Contract (the "Dispute"), including but not limited to payment of the Fee, then any party may give written notice to the other party(s) requiring all involved parties to attempt to resolve the Dispute by mediation. Except in those circumstances when a party reasonably believes that an applicable statute of limitations period is about to expire, or a party requires injunctive or equitable relief, the parties are obligated to use this mediation procedure prior to initiating arbitration or any other action. Within seven (7) days after receiving the mediation notice, each party must deliver a written designation to all other parties stating the names of one or more individuals with authority to resolve the Dispute on such party's behalf. Within ten (10) days after the date of designation, the parties shall make a good faith effort to select a qualified mediator to mediate the Dispute. If the parties are unable to timely agree upon a mutually acceptable mediator, the parties shall request any State or Federal district judge to appoint a mediator. In consultation with the mediator, the parties shall promptly designate a mutually convenient time and place for the mediation which is no later than thirty (30) days after selection of the mediator. In the mediation, each party shall be represented by persons with authority and discretion to negotiate a resolution of the Dispute, and may be represented by counsel. The mediation shall be governed by the provisions of Chapter 154 of the Texas Remedies and Practice Code, and such other rules as the mediator may prescribe. The fees and expenses of the mediator shall be shared equally by all parties. R. ARBITRATION. If the parties are unable to resolve any Dispute by mediation, then the parties agree to submit the Dispute to binding arbitration before a single arbitrator. The Dispute shall be decided by arbitration in accordance with the applicable arbitration statute and the then existing rules of the American Arbitration Association. Any party may initiate the arbitration procedure by delivering a written notice of demand for arbitration to the other parties. Within ten (10) days after the receipt by all parties of the written notice of demand for arbitration, the parties shall attempt to select a qualified arbitrator who is acceptable to all parties. If the parties are unable to agree upon an arbitrator who is acceptable to all parties, then upon application of any party a court of competent jurisdiction shall appoint an arbitrator. This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. S. CONSULT AN ATTORNEY. This document is an enforceable, legally binding agreement. Read it carefully. The Broker(s) involved in the negotiation of the transaction described in this Contract cannot give you legal advice. By law, the Broker(s) are limited to discussing factual and business details of the transaction. The parties to this Contract acknowledge that they have been advised by the Broker(s) to have this Contract reviewed by legal counsel before signing this Contract to discuss the legal effects of its terms and provisions. Page 5 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 / / Exhibit B Site Plan / / 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 (____) 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 Waxahachie Garment Company - Nevada National Fibernet, Inc. ---------------------------- ----------------------------------------- By [SIGNATURE]: Joe Haggar III By [SIGNATURE]: D.I. Cole --------------------------- -------------------------- Name: Joe Haggar III Name: D.I. Cole ------------------------------------ ----------------------------------- Title: Chairman/CEO Title: President ----------------------------------- ---------------------------------- Address: 6113 Lemmon Avenue Address: P.O. Box 1030 -------------------------------- -------------------------------- Dallas, Texas 75209 DeSoto, Texas 75123 - ----------------------------------------- ----------------------------------------- - ----------------------------------------- ----------------------------------------- Telephone: 214-352-8481 Fax:214-956-4446 Telephone: 972-224-1335 Fax: 972-228-8900 ------------ ------------- ------------ ------------ Tax I.D. No: 75 0641494 Tax I.D. No: ---------------------------- ----------------------------- Date of Execution: January 28, 1992 Date of Execution: ---------------------- ----------------------- PRINCIPAL BROKER COOPERATING BROKER None - ---------------------------------------- ----------------------------------------- By [SIGNATURE]: By [SIGNATURE]: -------------------------- -------------------------- Name: Name: ------------------------------------ ------------------------------------ Title: Title: ----------------------------------- ----------------------------------- Address: Address: --------------------------------- --------------------------------- - ----------------------------------------- ----------------------------------------- - ----------------------------------------- ----------------------------------------- Telephone: Fax: Telephone: Fax: ----------- --------------- ------------- -------------
TITLE COMPANY ACCEPTANCE. The Title Company acknowledges receipt of the Earnest Money on____________________ and accepts the Earnest Money subject to the terms and conditions set forth in this Contract. TITLE COMPANY Trinity Abstract and Title Company - ---------------------------------------- By [SIGNATURE:] -------------------------- Name: Judy Wallace ---------------------------------- Title: Executive Vice President --------------------------------- Address: 613 Ferris Avenue ------------------------------- Waxahachie, Texas 75165 - ---------------------------------------- Telephone: 972-938-7373 Fax: ------------ ----------- EXHIBIT "A" BEING all that certain lot, tract or parcel of land lying in the City of Waxahachie, Ellis County, Texas and being part of the J.C. ARMSTRONG SURVEY, A-6 and being part of a called 10.0 acre tract of land as conveyed by deed and recorded in Volume 454, Page 487, of the Deed Records of Ellis County, Texas, (DRECT) and including all of a called 0.56 acre tract of land as conveyed by deed and recorded in Volume 454, Page 488, DRECT, said two tracts being contiguous and hereinafter considered as one tract of land, and being more particularly described as follows: BEGINNING at a 1/2" steel rod set at the intersection of the south line of the Armstrong Survey with the northeast right of way line of I.H. 35-E, said point also being the southwest corner of the aforesaid 0.56 acre tract and being the same for this tract, said point also being the northwest corner of a called 8.00 acre tract as conveyed by deed and recorded in Volume 688, Page 1034. DRECT; THENCE N 34 DEG. 52'00" W, 399.04 feet (Record Reference Bearing, 398.7 feet) along said northeast line of I.H. 35-E to a 1/2" steel rod set for corner; THENCE N 01 DEG. 48'28" W, 84.91 feet (Deed - N 02 DEG. 25' W, 84.4 feet) to a 1/2" steel rod set at a fence corner in the south line of F.M. 876; THENCE N 30 DEG. 08'27" E, 752.06 feet (Deed - N 30 DEG. 01' E, 733.4 feet) along said south line of F.M. 876 to a 1/2" steel rod found for most northernmost corner of this tract, said point also being the west corner of a 0.0359 acre tract conveyed to the Waxahachie I.S.D. as recorded in Volume 781, Page 773 DRECT; THENCE S 59 DEG. 28'53" E, 74.85 feet (Deed - S 59 DEG. 59' E, 74.54 feet) to a 1/2" steel rod found for corner in the east line of the aforesaid 10.0 acre tract, said point also being the south corner of the aforesaid 0.0359 acre tract and also being in the west line of a 14.30 acre tract of land as conveyed by deed to the W.I.S.D. and recorded in Volume 745, Page 190 DRECT; THENCE S 30 DEG. 19'27" E, 779.06 feet (S 30 DEG. 35' E, 780.51 feet) along said east line of the 10.0 acre tract to a 1/2" steel rod found for the southwest comer of the W.I.S.D. and the north line of the aforesaid 8.0 acre tract; said point also being the southeast corner of the aforesaid 10.0 acre tract and being the same for this tract, said point also being in the south line of said J.C. Armstrong Survey; THENCE S 59 DEG. 46'56" W, 699.74 feet (Deed - S 59 DEG. 30' W, 684.5 feet) along the south line of the aforesaid 10.0 acre and 0.56 acre tracts and the south line of the Armstrong Survey to the POINT OF BEGINNING. ADDENDUM E SPECIAL PROVISIONS ADDENDUM PROPERTY: Manufacturing facility and land located in Waxahachie, Texas SELLER: Waxahachie Garment Company - Nevada PURCHASER: National Fibernet, Inc. This Special Provisions Addendum (herein so called) is attached to and made a part of that one certain Contract of Sale (the "Contract"), by and between Waxahachie Garment Company - Nevada, as "Seller", and National Fibernet, Inc. as "Purchaser." In the event a conflict arises between the provisions of this Special Provisions Addendum and any other part of this Contract, this Special Provisions Addendum shall modify and supersede such other part of this Contract to the extent necessary to eliminate any such conflict but no further. All terms which are defined in the Contract shall have the same meaning when used herein, unless otherwise defined herein. A. PROPERTY DESCRIPTION. The property described on EXHIBIT "A" attached hereto is an approximate description of the Property to be conveyed hereunder and is attached for reasonable identification of the Property. The exact description to be used for purposes of this Contract and the conveyance documents shall be the metes and bounds description set forth on the Survey, which description shall become a part of this Contract as the description of the Property and shall be incorporated herein by reference for all purposes. B. INSPECTION. Any tests, studies and inspections desired by Purchaser are to be conducted in a manner as not to physically damage the Property. Purchaser and its agents and representatives shall: (a) promptly pay when due the costs of all tests, investigations and examinations done with regard to the Property in connection with Purchaser's inspection; (b) not permit any liens to attach to the Property by reason of the exercise of Purchaser's rights hereunder; (c) restore the surface of the Property and any improvements thereon to the condition in which the same were found before any such inspections or tests were undertaken; and (d) not reveal or disclose any information obtained during Purchaser's inspections concerning the Property to anyone outside Purchaser's organization. Purchaser hereby indemnifies and holds Seller harmless from and against any and all liens, claims, causes of action, and expenses (including reasonable attorneys' fees) arising out of any violation of the provisions of this Paragraph B of Addendum E. Notwithstanding any provision of this Contract, no termination of this Contract shall terminate Purchaser's obligations pursuant to this paragraph, and the limitation of damages as set forth in Paragraph 13.B. of this Contract shall not be applicable to any cause of action arising pursuant to this Paragraph B of Addendum E. C. DISCLOSURE. Seller has informed Purchaser and Purchaser is aware that the Property has been vacant for approximately 10 years. D. AS-IS. Notwithstanding anything contained in this Contract to the contrary except for the representations and warranties set forth herein, Purchaser has examined and investigated or may examine or investigate the Property, and Purchaser will rely solely on its own investigation of the Property and not on any information provided or to be provided by or on behalf of Seller except for the representations and warranties set forth herein. Except as expressly set forth herein, it is understood and agreed that Seller is making no representations or warranties, whether express or implied, by operation of law or otherwise with respect to (i) environmental matters of any nature or kind whatsoever relating to the Property or any portion thereof, including, without limitation, compliance with any environmental protection, underground storage tank, pollution or land use laws, rules, regulations, orders or requirements and the existence in or on the Property of any hazardous or toxic materials; (ii) geological conditions, including, without limitation, subsidence, subsurface conditions, water table, underground water reservoirs, and limitations regarding withdrawal of water therefrom; (iii) whether or not and to the extent to which the Property or any portion thereof is affected by any stream (surface or underground), body of water, floodprone area, flood plain, floodway or special flood hazard; (iv) drainage; (v) soil conditions; (vi) zoning to which the Property or any portion thereof may be subject; (vii) availability of any utilities to the Property or any portion thereof, including without limitation, water, sewage, gas and electric; (viii) usage of any adjoining property; (ix) access to the Property or any portion thereof; (x) the compliance or non-compliance of any of the Property with any applicable federal, state or local building codes, ordinances, laws, statutes, rules or regulations; (xi) the value, compliance with plans or specifications, location, use, merchantability, construction, workmanlike condition, order, repair, maintenance, design, quality, description, durability, operation or condition of the Property or any portion thereof; (xii) the quality of the labor and materials included in the Improvements; (xiii) the suitability of the Property or any portion thereof for Purchaser's purposes or fitness for any usage or purpose whatsoever; or (xiv) any other matter relating to the Property. Except as expressly provided herein, Purchaser hereby agrees that Purchaser is accepting the Property "AS IS, WHERE Page 1 IS, WITH ALL FAULTS AND WITHOUT ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED", subject to all deficiencies or other matters whether known or unknown; however, none of the foregoing shall impair or further restrict the special warranty of title by which the Property is to be conveyed pursuant to this Contract or the representations and warranties set forth herein. SELLER: WAXAHACHIE GARMENT COMPANY - NEVADA By: Joe Haggar III ------------------------------- Name (Print): Joe Haggar III ---------------------- Title: Chairman/CEO ------------------------------ PURCHASER: NATIONAL FIBERNET, INC. By: D.I. Cole ------------------------------ D.I. Cole, President Page 2 EX-11 7 EXHIBIT 11 EXHIBIT 11 HAGGAR CORP. AND SUBSIDIARIES COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
1997 1996 1995 1994 1993 --------- ----------- --------- ---------- ---------- Net income (loss) $ 3,743 $ (2,420) $ 9,809 $ 25,681 $ 15,012 Weighted average common shares and common share equivalents outstanding 8,555 8,552 8,623 8,700 7,956 --------- ----------- --------- ---------- ---------- Net Income (loss) per common share and common share equivalent $ 0.44 $ (0.28) $ 1.14 $ 2.95 $ 1.88 --------- ----------- --------- ---------- ---------- --------- ----------- --------- ---------- ---------- Computation of weighted average common shares and Common share equivalents outstanding: Weighted average common shares outstanding 8,551 8,551 8,546 8,537 5,928 Share equivalents, due to stock options(1) 4 1 77 163 - Preferred shares converted to common shares - - - - 622 New common shares issued - - - - 1,406 --------- ----------- --------- ---------- ---------- 8,555 8,552 8,623 8,700 7,956 --------- ----------- --------- ---------- ---------- --------- ----------- --------- ---------- ----------
(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 8 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. Arthur Andersen LLP Dallas, Texas December 19, 1997 EX-27 9 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 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR SEP-30-1997 OCT-01-1996 SEP-30-1997 2,176 0 71,900 931 105,242 192,293 126,908 58,211 262,053 65,739 0 0 0 856 163,658 262,053 406,030 406,030 287,434 110,985 (1,954) 0 3,525 6,040 2,297 3,743 0 0 0 3,743 0.44 0.44
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