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EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
PILLOWTEX CORPORATION
Pursuant to the provisions of Article 4.07 of the Texas Business
Corporation Act (the "Act"), Pillowtex Corporation (the "Corporation") hereby
adopts Restated Articles of Incorporation, which accurately copy the Articles
of Incorporation and all amendments thereto that are in effect to date, as
further amended by these Restated Articles of Incorporation, and which contain
no other change in any provision thereof.
ARTICLE ONE. The name of the Corporation is Pillowtex Corporation.
ARTICLE TWO. The following amendments to the Articles of
Incorporation were adopted by the unanimous written consent of the shareholders
of the Corporation as of January 18, 1993:
Article V of the Articles of Incorporation is hereby amended to read
in its entirety as follows:
"ARTICLE V
The aggregate number of shares which the corporation
is authorized to issue is 50,000,000 shares consisting of
30,000,000 shares of Common Stock, having a par value of $0.01
per share and 20,000,000 shares of Preferred Stock, having a
par value of $0.01 per share.
The following is a statement of the relative rights,
preferences and limitations with respect to the shares of each
class of capital stock of the corporation, insofar as the same
are fixed in these Articles of Incorporation, and of the
authority expressly vested in the Board of Directors of the
corporation to divide the Preferred Stock into series and to
fix and determine the variations in the relative rights and
preferences as between series:
A. Preferred Stock
1. The Preferred Stock may, from time
to time, be divided into and issued in one or more
series. The shares of each series may have such
designations, preferences, limitations and relative
rights, including voting rights, as are stated herein
and in one or more resolutions providing for the
issue of such series adopted by the Board of
Directors as hereinafter provided.
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2. To the extent that these Articles of
Incorporation do not fix and determine the variations
in the relative rights and preferences of the
Preferred Stock, both in relation to the Common Stock
and as between series of Preferred Stock, the Board
of Directors of the corporation is expressly vested
with the authority to divide the Preferred Stock into
one or more series and, within the limitations set
forth in these Articles of Incorporation, to fix and
determine the designation, preferences, limitations
and relative rights of the shares of any series so
established, and, with respect to each such series,
to fix by one or more resolutions providing for the
issue of such series, the following:
(a) The maximum number of shares to
constitute such series and the distinctive
designation thereof;
(b) The annual dividend rate, if
any, on the shares of such series and the
date or dates from which dividends shall
commence to accrue or accumulate as herein
provided, and whether dividends shall be
cumulative;
(c) The price at and the terms and
conditions on which the shares of such series
may be redeemed, including, without
limitation, the time during which shares of
the series may be redeemed, the premium, if
any, over and above the par value thereof and
any accumulated dividends thereon that the
holders of shares of such series shall be
entitled to receive upon the redemption
thereof, which premium may vary at different
dates and may also be different with respect
to shares redeemed through the operation of
any retirement or sinking fund;
(d) The liquidation preference, if
any, over and above the par value thereof,
and any accumulated dividends thereon, that
the holders of shares of such series shall be
entitled to receive upon the voluntary or
involuntary liquidation, dissolution or
winding up of the affairs of the corporation;
(e) Whether or not the shares of
such series shall be subject to the operation
of a retirement or sinking fund, and, if so,
the extent and manner in which any such
retirement
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or sinking fund shall be applied to the
purchase or redemption of the shares of such
series for retirement or for other corporate
purposes, and the terms and provisions
relative to the operations of such retirement
or sinking fund;
(f) The terms and conditions, if
any, on which the shares of such series shall
be convertible into, or exchangeable for,
shares of any other class or classes of
capital stock of the corporation or any
series of any other class or classes, or of
any other series of the same class, including
the price or prices or the rate or rates of
conversion or exchange and the method, if
any, of adjusting the same, provided that
shares of such series may not be convertible
into shares of a series or class that has
prior or superior rights and preferences as
to dividends or distribution of assets of the
corporation upon voluntary or involuntary
liquidation, dissolution or winding up of the
affairs of the corporation;
(g) The voting rights, if any, on
the shares of such series; and
(h) Any or all other preferences
and relative, participating, optional or
other special rights, or qualifications,
limitations or restrictions thereof, as shall
not be inconsistent with the law or with this
Article V.
3. All shares of any one series of
Preferred Stock shall be identical with each other in
all respects, except that shares of any one series
issued at different times may differ as to the dates
from which dividends thereon, if any, shall be
cumulative; and all series shall rank equally and be
identical in all respects, except as provided in
Paragraph 1 of this Section A and except as permitted
by the provisions of Paragraph 2 of this Section A.
4. Except to the extent restricted or
otherwise provided in the resolution or resolutions
adopted by the Board of Directors providing for the
issue of any series of Preferred Stock, no dividends
(other than dividends payable in Common Stock) on any
class or classes of capital stock of the corporation
ranking, with respect to dividends,
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junior to the Preferred Stock, or any series thereof,
shall be declared, paid or set apart for payment,
until and unless the holders of shares of Preferred
Stock of each senior series shall have been paid, or
there shall have been set apart for payment, cash
dividends, when and as declared by the Board of
Directors out of funds of the corporation legally
available therefor, at the annual rate, and no more,
fixed in the resolution or resolutions adopted by the
Board of Directors providing for the issue of such
series.
5. To the extent provided in the
resolution or resolutions adopted by the Board of
Directors providing for the issue of any series of
Preferred Stock, upon the voluntary or involuntary
liquidation, dissolution or winding up of the affairs
of the corporation, before any payment or
distribution of the assets of the corporation
(whether capital or surplus) shall be made to or set
apart for the holders of any class or classes of
capital stock of the corporation ranking junior, as
to liquidation rights, to the Preferred Stock, or any
series thereof, the holders of the shares of the
Preferred Stock shall be entitled to receive payment
at the rate fixed in the resolution or resolutions
adopted by the Board of Directors providing for the
issue of the respective series. Unless otherwise
provided in the resolution or resolutions adopted by
the Board of Directors providing for the issue of any
series of Preferred Stock, for the purposes of this
Paragraph 5 and Paragraph 2(d) of this Section A,
neither the consolidation nor merger of the
corporation with one or more other corporations shall
be deemed to be a liquidation, dissolution or winding
up.
6. The corporation, at the option of
the Board of Directors, may redeem, unless otherwise
provided in the resolution establishing a series of
Preferred Stock, at such time as is fixed (and if not
so fixed, at any time) in the resolution or
resolutions adopted by the Board of Directors
providing for the issue of a series, the whole or,
from time to time, any part of the Preferred Stock of
any series then outstanding, at the par value
thereof, plus in every case an amount equal to all
accumulated dividends, if any (whether or not earned
or declared), with respect to each share so redeemed
and, in addition thereto, the amount of the premium,
if any, payable upon such redemption fixed in the
resolution or resolutions adopted by
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the Board of Directors providing for the issue of
such series. The Board of Directors shall have full
power and authority, subject to the limitations and
provisions contained herein and in the Texas Business
Corporation Act, to prescribe the terms and
conditions upon which the Preferred Stock shall be
redeemed from time to time.
7. Shares of Preferred Stock that have
been redeemed, purchased or otherwise acquired by the
corporation or that, if convertible or exchangeable,
have been converted into or exchanged for shares of
capital stock of any other class or classes or any
series of any other class or classes or of any other
series of the same class, shall be cancelled and such
shares may not under any circumstances thereafter be
reissued as Preferred Stock, and the corporation
shall from time to time cause all such acquired
shares of Preferred Stock to be cancelled in the
manner provided by law.
8. Nothing herein contained shall limit
any legal right of the corporation to purchase any
shares of the Preferred Stock.
B. Common Stock
1. Shares of Common Stock may be issued
by the corporation from time to time for such
consideration as may lawfully be fixed by the Board
of Directors.
2. The Common Stock shall be entitled
to one vote per share on all matters. Cumulative
voting for directors shall not be permitted and is
hereby expressly denied.
3. Subject to the prior rights and
preferences of the Preferred Stock set forth in this
Article V, or in any resolution or resolutions
providing for the issuance of a series of Preferred
Stock, and to the extent permitted by the laws of the
State of Texas, the holders of Common Stock shall be
entitled to receive such cash dividends as may be
declared and made payable by the Board of Directors.
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4. After payment shall have been made
in full to the holders of any series of Preferred
Stock having preferred liquidation rights, upon any
voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the corporation, the
remaining assets and funds of the corporation shall
be distributed among the holders of the Common Stock
according to their respective shares."
Article VIII of the Articles of Incorporation is hereby amended to read in its
entirety as follows:
"ARTICLE VIII
The number of directors shall be fixed in the manner
provided in the Bylaws of the corporation. The current Board
of Directors consists of four directors, and the names and
addresses of the persons who are serving as directors until
their successors are elected and qualified are:
Name Address
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Mary R. Silverthorne 10640 Lennox Lane
Dallas, Texas 75229
Charles M. Hansen, Jr. 4111 Mint Way
Dallas, Texas 75237
Scott E. Shimizu 4111 Mint Way
Dallas, Texas 75237
Philip J. Souza 4111 Mint Way
Dallas, Texas 75237"
Article IX of the Articles of Incorporation is hereby amended to read in its
entirety as follows:
"ARTICLE IX
The corporation may purchase, directly or indirectly,
its own shares to the extent of the surplus of the
corporation."
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Article X of the Articles of Incorporation is hereby amended to read in its
entirety as follows:
"ARTICLE X
A. Approval of Certain Business Combinations. A Business
Combination (as hereinafter defined) shall require (i) only such
affirmative vote as is required by law and any other provision of
these Articles of Incorporation, if all of the conditions specified in
either of Paragraph 1 or Paragraph 2 of this Section A are met or (ii)
in addition to any affirmative vote required by law or these Articles
of Incorporation, the affirmative vote of the holders of at least 80%
of the voting power of the then outstanding shares of capital stock of
the corporation entitled to vote generally in the election of
directors (referred to in this Article X as the "Voting Stock"),
voting together as a single class (it being understood that for the
purposes of this Article X, each share of the Voting Stock shall have
the number of votes granted to it pursuant to Article V of these
Articles of Incorporation). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law.
1. Approval by Disinterested Directors.
The Business Combination shall have been approved by a
majority of the Disinterested Directors (as
hereinafter defined).
2. Price and Procedure Requirements.
All of the following conditions shall have been met:
(a) The aggregate amount of the
cash and the Fair Market Value (as
hereinafter defined) as of the date of the
consummation of the Business Combination of
consideration other than cash to be received
per share by holders of shares of Common
Stock in such Business Combination shall be
at least equal to the higher of the
following:
(i) (if applicable) the
highest price per share (including any
brokerage commissions, transfer
taxes and soliciting dealers' fees)
paid by the Interested Shareholder
(as hereinafter defined) for any
shares of Common Stock or the common
stock of any Predecessor Corporation
(as hereinafter defined) acquired by
it (1) within the two-year
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period immediately prior to the first
public announcement of the terms of the
proposed Business Combination (the
"Announcement Date") or (2) in the
transaction in which it became an
Interested Shareholder, whichever is
higher; and
(ii) the Fair Market Value
per share of Common Stock on the
Announcement Date or on the date on
which the Interested Shareholder
became an Interested Shareholder
(such later date is referred to in
this Article X as the "Determination
Date"), whichever is higher.
(b) The aggregate amount of the
cash and the Fair Market Value as of the date
of the consummation of the Business
Combination of consideration other than cash
to be received per share by holders of shares
of any class of outstanding Voting Stock
other than Common Stock shall be at least
equal to the highest of the following (it
being intended that the requirements of this
Paragraph 2(b) shall be required to be met
with respect to every class of outstanding
Voting Stock, whether or not the Interested
Shareholder has previously acquired any
shares of a particular class of Voting
Stock);
(i) (if applicable) the
highest price per share (including any
brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by
the Interested Shareholder for any
shares of such class of Voting Stock or
a substantially identical class of
stock of any Predecessor Corporation
acquired by it (1) within the two-year
period immediately prior to the
Announcement Date or (2) in the
transaction in which it became an
Interested Shareholder, whichever is
higher;
(ii) (if applicable) the
highest preferential amount per share
to which the holders of shares of such
class of Voting Stock are entitled in
the event of any voluntary or
involuntary liquidation,
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dissolution or winding up of the
corporation; and
(iii) the Fair Market Value
per share of such class of Voting Stock
on the Announcement Date or on the
Determination Date, whichever is
higher.
(c) The consideration to be
received by holders of a particular class of
outstanding Voting Stock (including Common
Stock) shall be in cash or in the same form
as the Interested Shareholder has previously
paid for shares of such class of Voting Stock
or stock of a Predecessor Corporation. If the
Interested Shareholder has paid for shares of
any class of Voting Stock or stock of a
Predecessor Corporation with varying forms of
consideration, the form of consideration for
such class of Voting Stock shall be either
cash or the form used to acquire the largest
number of shares of such class of Voting
Stock or stock of a Predecessor Corporation
previously acquired by it. The price
determined in accordance with Paragraphs 2(a)
and 2(b) of this Section A shall be subject
to appropriate adjustment in the event of any
special dividend or other disposition of
material assets other than in the ordinary
course of business, stock dividend, stock
split, combination of shares or similar
event. Whether specific consideration
satisfies this subsection shall be determined
by vote of a majority of the Disinterested
Directors.
(d) After such Interested
Shareholder has become an Interested
Shareholder and prior to the consummation of
such Business Combination: (i) except as
approved by a majority of the Disinterested
Directors, there shall have been no failure
to declare and pay at the regular date
therefor any full quarterly dividends
(whether or not cumulative) on any
outstanding stock having preference over the
Common Stock as to dividends or upon
liquidation; (ii) there shall have been (1)
no reduction in the annual rate of dividends
paid on the Common Stock (except as necessary
to reflect any subdivision of the Common
Stock), except as approved by a majority of
the Disinterested Directors, and (2) an
increase in such annual
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rate of dividends as necessary to reflect any
reclassification (including any reverse stock
split), recapitalization, reorganization or
any similar transaction that has the effect
of reducing the number of outstanding shares
of the Common Stock, unless the failure so to
increase such annual rate is approved by a
majority of the Disinterested Directors; and
(c) such Interested Shareholder shall not
have become the beneficial owner of any
additional shares of Voting Stock except as
part of the transaction that results in such
Interested Shareholder becoming an Interested
Shareholder.
(e) After such Interested
Shareholder has become an Interested
Shareholder, such Interested Shareholder
shall not have received the benefit, directly
or indirectly (except proportionately as a
shareholder), of any loans, advances,
guaranties, pledges or other financial
assistance or any tax credits or other tax
advantages provided to or by the corporation,
whether in anticipation of or in connection
with such Business Combination or otherwise.
(f) A proxy or information
statement describing the proposed Business
Combination and complying with the
requirements of the Securities Exchange Act
of 1934 and the rules and regulations
thereunder (or any subsequent provisions
replacing such Act, rules or regulations)
shall have been mailed to public shareholders
of the corporation at least 30 days prior to
the consummation of such Business Combination
(whether or not such proxy or information
statement is required to be mailed pursuant
to such Act or subsequent provisions).
B. Certain Definitions. For purposes of this
Article X:
1. "Business Combination" shall mean
any transaction that is referred to in any
one or more of the following clauses (a)
through (e):
(a) any merger or consolidation of
the corporation or any Subsidiary (as
hereinafter defined) with (i) any Interested
Shareholder or (ii) any other corporation
(whether or not
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itself an Interested Shareholder) that is, or
after such merger or consolidation would be,
an Affiliate (as hereinafter defined) of an
Interested Shareholder; or
(b) any sale, lease, exchange,
mortgage, pledge, transfer or other
disposition (in one transaction or a series
of transactions) to or with any Interested
Shareholder or any Affiliate of any
Interested Shareholder of any assets of the
corporation or any Subsidiary having an
aggregate Fair Market Value of $5,000,000 or
more; or
(c) the issuance or transfer by the
corporation or any Subsidiary (in one
transaction or series of transactions) of any
securities of the corporation or any
Subsidiary to any Interested Shareholder or
any Affiliate of any Interested Shareholder
in exchange for cash, securities or other
property (or a combination thereof) having an
aggregate Fair Market Value of $5,000,000 or
more; or
(d) the adoption of any plan or
proposal for the liquidation or dissolution
of the corporation proposed by or on behalf
of any Interested Shareholder or any
Affiliate of any Interested Shareholder; or
(e) any reclassification of
securities (including any reverse stock
split) or recapitalization of the
corporation, or any merger or consolidation
of the corporation with any of its
Subsidiaries or any other transaction
(whether or not with or into or otherwise
involving an Interested Shareholder) that has
the effect, directly or indirectly, of
increasing the proportionate share of the
outstanding shares of any class of Equity
Security (as hereinafter defined) of the
corporation or any Subsidiary that is
directly or indirectly owned by any
Interested Shareholder or any Affiliate of
any Interested Shareholder.
2. "Person" shall mean any individual,
firm, corporation or other entity.
3. "Interested Shareholder" shall mean
any Person (other than the corporation or any
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Subsidiary or employee benefit plan of the
corporation or any Subsidiary) that:
(a) is the beneficial owner,
directly or indirectly, of 10% or more of the
voting power of the outstanding Voting Stock;
or
(b) at any time within the two-year
period immediately prior to the date in
question was the beneficial owner, directly
or indirectly, of 10% or more of the voting
power of the then outstanding Voting Stock;
or
(c) is an assignee of or has
otherwise succeeded to any shares of Voting
Stock or of capital stock of any Predecessor
Corporation that were at any time within the
two-year period immediately prior to the date
in question beneficially owned by any
Interested Shareholder, if such assignment or
succession shall have occurred in the course
of a transaction or series of transactions
not involving a public offering within the
meaning of the Securities Act of 1933.
4. A person shall be a "beneficial
owner" of any stock that:
(a) such Person or any of its
Affiliates or Associates (as hereinafter
defined) beneficially owns directly or
indirectly; or
(b) such Person or any of its
Affiliates or Associates has (i) the right to
acquire (whether such right is exercisable
immediately or only after the passage of
time), pursuant to any agreement, arrangement
or understanding or upon the exercise of
conversion rights, exchange rights, warrants
or options, or otherwise, or (ii) the right
to vote pursuant to any agreement,
arrangement or understanding; or
(c) is beneficially owned, directly
or indirectly, by any other Person with which
such Person or any of its Affiliates or
Associates has any agreement, arrangement or
understanding for the purpose of acquiring,
holding, voting or disposing of any shares of
such stock.
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5. For the purpose of determining
whether a Person is an Interested Shareholder
pursuant to Paragraph 3 of this Section B, the number
of shares of Voting Stock deemed to be outstanding
shall include shares deemed owned through application
of Paragraph 4 of this Section B but shall not
include any other shares of Voting Stock that may be
issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
6. "Affiliate" and "Associate" shall
have the meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on
January 1, 1993.
7. "Subsidiary" means any corporation
of which a majority of any class of Equity security
is owned, directly or indirectly, by the corporation,
provided, however, that for purposes of the
definition of Interested Shareholder set forth-in
Paragraph 3 of this Section B, the term "Subsidiary"
shall mean only a corporation of which a majority of
each class of Equity Security is owned, directly or
indirectly, by the corporation.
8. "Disinterested Director" means any
member of the Board of Directors who is unaffiliated
with the Interested Shareholder and was a member of
the Board of Directors immediately before the time
that the Interested Shareholder became an Interested
Shareholder, and any successor of a Disinterested
Director who is unaffiliated with the Interested
Shareholder and is recommended to succeed a
Disinterested Director by a majority of Disinterested
Directors then on the Board of Directors.
9. "Fair Market Value" means: (a) in
the case of stock, (i) the highest closing sale price
of a share of stock during the 30-day period
immediately preceding the date in question on the
principal United States securities exchange
registered under the Securities Exchange Act of 1934
on which such stock is listed, or (ii) if such stock
is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such
stock during the 30-day period immediately preceding
the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System
or any similar system
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then in use, or (iii) if no such quotations are
available, the fair market value on the date in
question of a share of such stock as determined by a
majority of the Disinterested Directors in good
faith; or (b) in the case of property other than cash
or stock, the fair market value of such property on
the date in question as determined by a majority of
the Disinterested Directors in good faith.
10. In the event of any Business
combination in which the corporation survives, the
phrase "consideration other than cash to be received"
as used in Paragraphs 2 (a) and 2 (b) of Section A of
this Article X shall include the shares of Common
Stock and the shares of any other class of
outstanding Voting Stock retained by the holders of
such shares.
11. "Equity Security" shall have the
meaning ascribed to such term in Section 3(a)(11) of
the Securities Exchange Act of 1934, as in effect on
January 1, 1993.
12. A "Predecessor Corporation" includes
any corporation of which the corporation was at one
time a wholly-owned subsidiary, or of which the
corporation would be deemed to be a legal successor
in interest (by contract or by merger or other
operation of law).
C. Powers of the Board of Directors. A majority
of the Disinterested Directors shall have the power and duty
to determine for the purposes of this Article X, on the basis
of information known to them after reasonable inquiry, (1)
whether a Person is an Interested Shareholder, (2) the number
of shares of Voting Stock beneficially owned by any Person,
(3) whether a Person is an Affiliate or Associate of another,
(4) whether the assets that are the subject of any Business
Combination have, or the consideration to be received for the
issuance or transfer of securities by the corporation or any
subsidiary in any Business Combination has, an aggregate Fair
Market Value of $5,000,000 or more. A majority of the
Disinterested Directors shall have the further power to
interpret all of the terms and provisions of this Article X.
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D. No Effect on Fiduciary Obligations of
Interested Shareholders. Nothing contained in this Article X
shall be construed to relieve any Interested Shareholder from
any fiduciary obligation imposed by law.
E. Amendment of Article X. Notwithstanding any
other provisions of these Articles of Incorporation or the
Bylaws of the corporation (and notwithstanding the fact that a
lesser percentage may be specified by law, these Articles of
Incorporation or the Bylaws of the corporation), the
affirmative vote of the holders of 80% or more of the
outstanding Voting Stock, voting together as a single class,
shall be required to amend or repeal, or adopt any provision
inconsistent with, this Article X or any provision hereof."
A new Article XI is hereby added to the Articles of Incorporation to read in
its entirety as follows:
"ARTICLE XI
All actions of the shareholders must be taken at an annual or
special meeting of shareholders and may not be taken by a consent or
consents in writing."
A new Article XII is hereby added to the Articles of Incorporation to read in
its entirety as follows:
"ARTICLE XII
Special meetings of shareholders of the corporation may be
called only by the Chief Executive Officer or the Board of Directors
of the corporation or by the holders of at least 50% of all shares
entitled to vote at the proposed meeting."
A new Article XIII is hereby added to the Articles of Incorporation to read in
its entirety as follows:
"ARTICLE XIII
The Board of Directors of the corporation only shall have the
power to make, alter or repeal the Bylaws of the corporation."
A new Article XIV is hereby added to the Articles of Incorporation to read in
its entirety as follows:
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"ARTICLE XIV
To the fullest extent permitted by Texas statutory or
decisional law, as the same exists or may hereafter be amended or
interpreted, a director of the corporation shall not be liable to the
corporation or its shareholders for any act or omission in such
director's capacity as a director. Any repeal or amendment of this
Article XIV, or adoption of any other provision of these Articles of
Incorporation inconsistent with this Article XIV by the shareholders
of the corporation shall be prospective only and shall not adversely
affect any limitation on the liability to the corporation or its
shareholders of a director of the corporation existing at the time of
such repeal, amendment or adoption of an inconsistent provision."
A new Article XV is hereby added to the Articles of Incorporation to read in
its entirety as follows:
"ARTICLE XV
No contract or other transactions between the corporation and
any other corporation, firm or individual shall be affected or
invalidated by the fact that any one or more of the directors or
officers of the corporation is or are interested in or is a director
or officer of such other corporation, or a member of such firm, and
any director or officer, individually or jointly, may be a party to or
may be interested in any contract or transaction with the corporation,
or in which the corporation is interested, and no contract, act or
transaction of the corporation with any person or persons, firms or
corporations, shall be affected or invalidated by the fact that any
director or officer of the corporation is a party to or interested in
such contract, act or transaction, or is in any way connected with
such person or persons, firms or corporations, and each and every
person who may become a director or officer of the corporation is
hereby relieved from any liability that might otherwise exist from
contracting with the corporation for the benefit of himself or any
firm or corporation in which he may be in any way interested."
ARTICLE THREE. Each amendment to the Articles of Incorporation made
by these Restated Articles of Incorporation has been effected in conformity
with the provisions of the Act.
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ARTICLE FOUR. The number of shares of Common Stock of the Corporation
outstanding and entitled to vote was 6,611 at the time of adoption of these
Restated Articles of Incorporation.
ARTICLE FIVE. The holders of all of the shares of Common Stock
outstanding and entitled to vote have signed a written consent to the adoption
of these Restated Articles of Incorporation.
ARTICLE SIX. The Articles of Incorporation and all amendments and
supplements thereto are hereby superseded by the following Restated Articles of
Incorporation:
ARTICLE I
The name of the corporation is Pillowtex Corporation.
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The purpose for which the corporation is organized is to transact any
and all lawful business for which corporations may be incorporated under the
Texas Business Corporation Act.
ARTICLE IV
The address of the initial registered office of the corporation is
4111 Mint Way, Dallas, Texas 75237, and the name of the initial registered
agent of the corporation at such address is Jeffrey D. Cordes.
ARTICLE V
The aggregate number of shares which the corporation is authorized to
issue is 50,000,000 shares consisting of 30,000,000 shares of Common Stock,
having a par value of $0.01 per share and 20,000,000 shares of Preferred Stock,
having a par value of $0.01 per share.
The following is a statement of the relative rights, preferences and
limitations with respect to the shares of each class of capital stock of the
corporation, insofar as the same are fixed in these Articles of Incorporation,
and of the authority expressly vested in the Board of Directors of the
corporation to
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divide the Preferred Stock into series and to fix and determine the variations
in the relative rights and preferences as between series:
A. Preferred Stock
1. The Preferred Stock may, from time to time, be
divided into and issued in one or more series. The shares of each
series may have such designations, preferences, limitations and
relative rights, including voting rights, as are stated herein and in
one or more resolutions providing for the issue of such series adopted
by the Board of Directors as hereinafter provided.
2. To the extent that these Articles of Incorporation do
not fix and determine the variations in the relative rights and
preferences of the Preferred Stock, both in relation to the Common
Stock and as between series of Preferred Stock, the Board of Directors
of the corporation is expressly vested with the authority to divide
the Preferred Stock into one or more series and, within the
limitations set forth in these Articles of Incorporation, to fix and
determine the designation, preferences, limitations and relative
rights of the shares of any series so established, and, with respect
to each such series, to fix by one or more resolutions providing for
the issue of such series, the following:
(a) The maximum number of shares to constitute
such series and the distinctive designation thereof;
(b) The annual dividend rate, if any, on the
shares of such series and the date or dates from which
dividends shall commence to accrue or accumulate as herein
provided, and whether dividends shall be cumulative;
(c) The price at and the terms and conditions on
which the shares of such series may be redeemed, including,
without limitation, the time during which shares of the series
may be redeemed, the premium, if any, over and above the par
value thereof and any accumulated dividends thereon that the
holders of shares of such series shall be entitled to receive
upon the redemption thereof, which premium may vary at
different dates and may also be different with respect to
shares redeemed through the operation of any retirement or
sinking fund;
(d) The liquidation preference, if any, over and
above the par value thereof, and any accumulated dividends
thereon, that the holders of shares of such series shall be
entitled to receive upon the voluntary or
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involuntary liquidation, dissolution or winding up of the
affairs of the corporation;
(e) Whether or not the shares of such series
shall be subject to the operation of a retirement or sinking
fund, and, if so, the extent and manner in which any such
retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such series for retirement or for
other corporate purposes, and the terms and provisions
relative to the operations of such retirement or sinking fund;
(f) The terms and conditions, if any, on which
the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of
capital stock of the corporation or any series of any other
class or classes, or of any other series of the same class,
including the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting
the same, provided that shares of such series may not be
convertible into shares of a series or class that has prior or
superior rights and preferences as to dividends or
distribution of assets of the corporation upon voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the corporation;
(g) The voting rights, if any, on the shares of
such series; and
(h) Any or all other preferences and relative,
participating, optional or other special rights, or
qualifications, limitations or restrictions thereof, as shall
not be inconsistent with the law or with this Article V.
3. All shares of any one series of Preferred Stock shall
be identical with each other in all respects, except that shares of
any one series issued at different times may differ as to the dates
from which dividends thereon, if any, shall be cumulative; and all
series shall rank equally and be identical in all respects, except as
provided in Paragraph 1 of this Section A and except as permitted by
the foregoing provisions of Paragraph 2.
4. Except to the extent restricted or otherwise provided
in the resolution or resolutions adopted by the Board of Directors
providing for the issue of any series of Preferred Stock, no dividends
(other than dividends payable in Common Stock) on any class or classes
of capital stock of the corporation ranking, with respect to
dividends, junior to the Preferred Stock, or any series thereof, shall
be declared,
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paid or set apart for payment, until and unless the holders of shares
of Preferred Stock of each senior series shall have been paid, or
there shall have been set apart for payment, cash dividends, when and
as declared by the Board of Directors out of funds of the corporation
legally available therefor, at the annual rate, and no more, fixed in
the resolution or resolutions adopted by the Board of Directors
providing for the issue of such series.
5. To the extent provided in the resolution or
resolutions adopted by the Board of Directors providing for the issue
of any series of Preferred Stock, upon the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
corporation before any payment or distribution of the assets of the
corporation (whether capital or surplus) shall be made to or set apart
for the holders of any class or classes of capital stock of the
corporation ranking junior, as to liquidation rights, to the Preferred
Stock, or any series thereof, the holders of the shares of the
Preferred Stock shall be entitled to receive payment at the rate fixed
in the resolution or resolutions adopted by the Board of Directors
providing for the issue of the respective series. Unless otherwise
provided in the resolution or resolutions adopted by the Board of
Directors providing for the issue of any series of Preferred Stock,
for the purposes of this Paragraph 5 and Paragraph 2(d) of this
Section A, neither the consolidation nor merger of the corporation
with one or more other corporations shall be deemed to be a
liquidation, dissolution or winding up.
6. The corporation, at the option of the Board of
Directors, may redeem, unless otherwise provided in the resolution
establishing a series of Preferred Stock, at such time as is fixed
(and if not so fixed, at any time) in the resolution or resolutions
adopted by the Board of Directors providing for the issue of a series,
the whole or, from time to time, any part of the Preferred Stock of
any series then outstanding, at the par value thereof, plus in every
case an amount equal to all accumulated dividends, if any (whether or
not earned or declared), with respect to each share so redeemed and,
in addition thereto, the amount of the premium, if any, payable upon
such redemption fixed in the resolution or resolutions adopted by the
Board of Directors providing for the issue of such series. The Board
of Directors shall have full power and authority, subject to the
limitations and provisions contained herein and in the Texas Business
Corporation Act, to prescribe the terms and conditions upon which the
Preferred Stock shall be redeemed from time to time.
7. Shares of Preferred Stock that have been redeemed,
purchased or otherwise acquired by the corporation or that, if
convertible or exchangeable, have been converted into or
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exchanged for shares of capital stock of any other class or classes or
any series of any other class or classes or of any other series of the
same class, shall be cancelled and such shares may not under any
circumstances thereafter be reissued as Preferred Stock, and the
corporation shall from time to time cause all such acquired shares of
Preferred Stock to be cancelled in the manner provided by law.
8. Nothing herein contained shall limit any legal right
of the corporation to purchase any shares of the Preferred Stock.
B. Common Stock
1. Shares of Common Stock may be issued by the
corporation from time to time for such consideration as may lawfully
be fixed by the Board of Directors.
2. The Common Stock shall be entitled to one vote per
share on all matters. Cumulative voting for directors shall not be
permitted and is hereby expressly denied.
3. Subject to the prior rights and preferences of the
Preferred Stock set forth in this Article V, or in any resolution or
resolutions providing for the issuance of a series of Preferred Stock,
and to the extent permitted by the laws of the State of Texas, the
holders of Common Stock shall be entitled to receive such cash
dividends as may be declared and made payable by the Board of
Directors.
4. After payment shall have been made in full to the
holders of any series of Preferred Stock having preferred liquidation
rights, upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the corporation, the remaining assets and
funds of the corporation shall be distributed among the holders of the
Common Stock according to their respective shares.
ARTICLE VI
No shareholder of the corporation will by reason of his holding shares
of stock of the corporation have any preemptive or preferential rights to
purchase or subscribe to any shares of any class of stock of the corporation,
or any notes, debentures, bonds, warrants, options or other securities of the
corporation, now or hereafter to be authorized.
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ARTICLE VII
The corporation will not commence business until it has received for
the issuance of its shares consideration of the value of one Thousand Dollars
($1,000.00), consisting of money paid, labor done or property actually received.
ARTICLE VIII
The number of directors shall be fixed in the manner provided in the
Bylaws of the corporation. The current Board of Directors consists of four
directors, and the names and addresses of the persons who are serving as
directors until their successors are elected and qualified are:
Name Address
---- -------
[S] [C]
Mary R. Silverthorne 10640 Lennox Lane
Dallas, Texas 75229
Charles M. Hansen, Jr. 4111 Mint Way
Dallas, Texas 75237
Scott E. Shimizu 4111 Mint Way
Dallas, Texas 75237
Philip J. Souza 4111 Mint Way
Dallas, Texas 75237
ARTICLE IX
The corporation may purchase, directly or indirectly, its own shares
to the extent of the surplus of the corporation.
ARTICLE X
A. Approval of Certain Business Combinations. A Business
Combination (as hereinafter defined) shall require (i) only such affirmative
vote as is required by law and any other provision of these Articles of
Incorporation, if all of the conditions specified in either of Paragraph 1 or
Paragraph 2 of this Section A are met or (ii) in addition to any affirmative
vote required by law or these Articles of Incorporation, the affirmative vote
of the holders of at least 80% of the voting power of the then outstanding
shares of capital stock of the corporation entitled to vote generally in the
election of directors (referred to in this Article X as the "Voting Stock"),
voting together as a single class (it being understood that for the purposes of
this Article X, each share of the Voting Stock shall have the number of votes
granted to
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it pursuant to Article V of these Articles of Incorporation). Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law.
1. Approval by Disinterested Directors. The Business
Combination shall have been approved by a majority of the
Disinterested Directors (as hereinafter defined).
2. Price and Procedure Requirements. All of the
following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair
Market Value (as hereinafter defined) as of the date of the
consummation of the Business Combination of consideration
other than cash to be received per share by holders of shares
of Common Stock in such Business Combination shall be at least
equal to the higher of the following:
(i) (if applicable) the highest price
per share (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by
the Interested Shareholder (as hereinafter defined)
for any shares of Common Stock or the common stock of
any Predecessor Corporation (as hereinafter defined)
acquired by it (1) within the two-year period
immediately prior to the first public announcement of
the terms of the proposed Business Combination (the
"Announcement Date") or (2) in the transaction in
which it became an Interested Shareholder, whichever
is higher; and
(ii) the Fair Market Value per share of
Common Stock on the Announcement Date or on the date
on which the Interested Shareholder became an
Interested Shareholder (such later date is referred
to in this Article X as the "Determination Date"),
whichever is higher.
(b) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by holders of shares of any class of
outstanding Voting Stock other than Common Stock shall be at
least equal to the highest of the following (it being intended
that the requirements of this Paragraph 2(b) shall be required
to be met with respect to every class of outstanding Voting
Stock, whether or not the Interested Shareholder has
previously acquired any shares of a particular class of Voting
Stock);
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(i) (if applicable) the highest price per share (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Shareholder for any shares of such
class of Voting Stock or a substantially identical class of stock
of any Predecessor Corporation acquired by it (1) within the
two-year period immediately prior to the Announcement Date or (2)
in the transaction in which it became an Interested Shareholder,
whichever is higher;
(ii) (if applicable) the highest preferential amount per share
to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the corporation; and
(iii) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date,
whichever is higher.
(c) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common Stock)
shall be in cash or in the same form as the Interested Shareholder has
previously paid for shares of such class of Voting Stock or stock of a
Predecessor Corporation. If the Interested Shareholder has paid for
shares of any class of Voting Stock or stock of a Predecessor
Corporation with varying forms of consideration, the form of
consideration for such class of Voting Stock shall be either cash or
the form used to acquire the largest number of shares of such class of
Voting Stock or stock of a Predecessor Corporation previously acquired
by it. The price determined in accordance with Paragraphs 2(a) and
2(b) of this Section A shall be subject to appropriate adjustment in
the event of any special dividend or other disposition of material
assets other than in the ordinary course of business, stock dividend,
stock split, combination of shares or similar event. Whether specific
consideration satisfies this subsection shall be determined by vote of
a majority of the Disinterested Directors.
(d) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such Business
Combination: (i) except as approved by a majority of the Disinterested
Directors, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not
cumulative) on any outstanding stock having preference over the Common
Stock as to dividends or upon liquidation; (ii) there shall have been
(1) no reduction
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in the annual rate of dividends paid on the Common Stock (except as
necessary to reflect any subdivision of the Common Stock), except as
approved by a majority of the Disinterested Directors, and (2) an
increase in such annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction that has
the effect of reducing the number of outstanding shares of the Common
Stock, unless the failure so to increase such annual rate is approved
by a majority of the Disinterested Directors; and (c) such Interested
Shareholder shall not have become the beneficial owner of any
additional shares of Voting Stock except as part of the transaction
that results in such Interested Shareholder's becoming an Interested
Shareholder.
(e) After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guaranties, pledges or other
financial assistance or any tax credits or other tax advantages
provided to or by the corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall have been mailed to public stockholders of the
corporation at least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions).
B. Certain Definitions. For purposes of this Article X:
1. "Business Combination" shall mean any transaction that is
referred to in any one or more of the following clauses (a) through (e):
(a) any merger or consolidation of the corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested
Shareholder or (ii) any other corporation (whether or not itself an
Interested Shareholder) that is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an Interested
Shareholder; or
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(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to
or with any Interested Shareholder or any Affiliate of any Interested
Shareholder of any assets of the corporation or any Subsidiary having
an aggregate Fair Market Value of $5,000,000 or more; or
(c) the issuance or transfer by the corporation or any
Subsidiary (in one transaction or series of transactions) of any
securities of the corporation or any Subsidiary to any Interested
Shareholder or any Affiliate of any Interested Shareholder in exchange
for cash, securities or other property (or a combination thereof)
having an aggregate Fair Market Value of $5,000,000 or more; or
(d) the adoption of any plan or proposal for the liquidation
or dissolution of the corporation proposed by or on behalf of any
Interested Shareholder or any Affiliate of any Interested Shareholder;
or
(e) any reclassification of securities (including any reverse
stock split) or recapitalization of the corporation, or any merger or
consolidation of the corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Shareholder) that has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of Equity Security (as hereinafter defined) of the
corporation or any Subsidiary that is directly or indirectly owned by
any Interested Shareholder or any Affiliate of any Interested
Shareholder.
2. "Person" shall mean any individual, firm, corporation or other entity.
3. "Interested Shareholder" shall mean any Person (other than the
corporation or any Subsidiary or employee benefit plan of the corporation or
any Subsidiary) that:
(a) is the beneficial owner, directly or indirectly, of 10%
or more of the voting power of the outstanding Voting Stock; or
(b) at any time within the two-year period immediately prior
to the date in question was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the then outstanding
Voting Stock; or
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(c) is an assignee of or has otherwise succeeded to any shares
of Voting Stock or of capital stock of any Predecessor Corporation
that were at any time within the two-year period immediately prior to
the date in question beneficially owned by any Interested Shareholder,
if such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
4. A person shall be a "beneficial owner" of any stock that:
(a) such Person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns directly or indirectly; or
(b) such Person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (ii) the right to vote pursuant to any agreement, arrangement or
understanding; or
(c) is beneficially owned, directly or indirectly, by any
other Person with which such Person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
such stock.
5. For the purpose of determining whether a Person is an Interested
Shareholder pursuant to Paragraph 3 of this Section B, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of Paragraph 4 of this Section B but shall not include
any other shares of Voting Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
6. "Affiliate" and "Associate" shall have the meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on January 1, 1993.
7. "Subsidiary" means any corporation of which a majority of any
class of Equity Security is owned, directly or indirectly, by the
corporation, provided, however, that for purposes of the definition of
Interested Shareholder set forth in Paragraph 3 of this Section B, the term
"Subsidiary" shall
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mean only a corporation of which a majority of each class of Equity
Security is owned, directly or indirectly, by the corporation.
8. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Shareholder and was a
member of the Board of Directors immediately before the time that the
Interested Shareholder became an Interested Shareholder, and any successor
of a Disinterested Director who is unaffiliated with the Interested
Shareholder and is recommended to succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board of Directors.
9. "Fair Market Value" means: (a) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date
in question of a share of stock (i) on the principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which such stock is listed, or (ii) if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of such
stock during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations
System or any similar system then in use, or (iii) if no such quotations
are available, the fair market value on the date in question of a share of
such stock as determined by a majority of the Disinterested Directors in
good faith; or (b) in the case of property other than cash or stock, the
fair market value of such property on the date in question as determined by
a majority of the Disinterested Directors in good faith.
10. In the event of any Business Combination in which the corporation
survives, the phrase "consideration other than cash to be received" as used
in Paragraphs 2(a) and 2(b) of Section A of this Article X shall include
the shares of Common Stock and the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
11. "Equity Security" shall have the meaning ascribed to such term in
Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on
January 1, 1993.
12. A "Predecessor Corporation" includes any corporation of which the
corporation was at one time a wholly-owned subsidiary, or of which the
corporation would be deemed to be a legal successor in interest (by
contract or by merger or other operation of law).
C. Powers of the Board of Directors. A majority of the Disinterested
Directors shall have the power and duty to determine for the purposes of this
Article X, on the basis of information
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known to them after reasonable inquiry, (1) whether a Person is an Interested
Shareholder, (2) the number of shares of Voting Stock beneficially owned by any
Person, (3) whether a Person is an Affiliate or Associate of another, (4)
whether the assets that are the subject of any Business combination have, or
the consideration to be received for the issuance or transfer of securities by
the corporation or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value of $5,000,000 or more. A majority of the Disinterested
Directors shall have the further power to interpret all of the terms and
provisions of this Article X.
D. No Effect on Fiduciary Obligations of Interested Shareholders. Nothing
contained in this Article X shall be construed to relieve any Interested
Shareholder from any fiduciary obligation imposed by law.
E. Amendment of Article X. Notwithstanding any other provisions of these
Articles of Incorporation or the Bylaws of the corporation (and notwithstanding
the fact that a lesser percentage may be specified by law, these Articles of
Incorporation or the Bylaws of the corporation), the affirmative vote of the
holders of 80% or more of the outstanding Voting Stock, voting together as a
single class, shall be required to amend or repeal, or adopt any provision
inconsistent with, this Article X or any provision hereof.
ARTICLE XI
All actions of the shareholders must be taken at an annual or special
meeting of shareholders and may not be taken by a consent or consents in
writing.
ARTICLE XII
Special meetings of shareholders of the corporation may be called only by
the Chief Executive Officer or the Board of Directors of the corporation or by
the holders of at least 50% of all shares entitled to vote at the proposed
meeting.
ARTICLE XIII
The Board of Directors of the corporation only shall have the power to make,
alter or repeal the Bylaws of the corporation.
ARTICLE XIV
To the fullest extent permitted by Texas statutory or decisional law, as the
same exists or may hereafter be amended or
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interpreted, a director of the corporation shall not be liable to the
corporation or its shareholders for any act or omission in such director's
capacity as a director. Any repeal or amendment of this Article XIV, or adoption
of any other provision of these Articles of Incorporation inconsistent with
this Article XIV, by the shareholders of the corporation shall be prospective
only and shall not adversely affect any limitation on the liability to the
corporation or its shareholders of a director of the corporation existing at
the time of such repeal, amendment or adoption of an inconsistent provision.
ARTICLE XV
No contract or other transactions between the corporation and any other
corporation, firm or individual shall be affected or invalidated by the fact
that any one or more of the directors or officers of the corporation is or are
interested in or is a director or officer of such other corporation, or a
member of such firm, and any director or officer, individually or jointly, may
be a party to or may be interested in any contract or transaction with the
corporation, or in which the corporation is interested, and no contract, act or
transaction of the corporation with any person or persons, firms or
corporations, shall be affected or invalidated by the fact that any director or
officer of the corporation is a party to or interested in such contract, act or
transaction, or is in any way connected with such person or persons, firms or
corporations, and each and every person who may become a director or officer of
the corporation is hereby relieved from any liability that might otherwise
exist from contracting with the corporation for the benefit of himself or any
firm or corporation in which he may be in any way interested.
IN WITNESS WHEREOF, the undersigned Corporation has caused these Restated
Articles of Incorporation to be executed as of January 18, 1993.
PILLOWTEX CORPORATION
By: /s/ CHARLES M. HANSEN, JR.
-----------------------------
Charles M. Hansen, Jr.
President
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STATEMENT OF
CANCELLATION OF TREASURY SHARES
To the Secretary of State of the State of Texas:
Pursuant to the provisions of Article 4.11 of the Texas Business
Corporation Act, the undersigned corporation submits the following statement of
cancellation by resolution of its board of directors of shares of the
corporation reacquired by it, other than redeemable shares redeemed or
purchased:
1. The name of the corporation is Pillowtex Corporation.
2. A resolution was duly adopted by all necessary action on the
part of the corporation on February 10, 1993, authorizing the cancellation of
12,545 shares of Common Stock, $0.01 par value per share, held as Treasury
Stock of the corporation.
The amount of stated capital represented by the shares to be cancelled is
One Hundred Twenty-Five and Forty-Five Hundredths Dollars ($125.45).
3. The aggregate number of issued shares, itemized by classes and series
and par value, if any, after giving effect to such cancellation is 19,155
itemized as follows:
Class Par Value Number of Shares
----- --------- ----------------
Common Stock $0.01 19,155
4. The amount of the stated capital of the corporation, after giving
effect to such cancellation, is $191.55.
Dated: February 10, 1993
PILLOWTEX CORPORATION
By: /s/ CHARLES M. HANSEN, JR.
--------------------------------
Charles M. Hansen, Jr.
President
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ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PILLOWTEX CORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business Corporation
Act, Pillowtex Corporation (the "Company"), hereby adopts the following
Articles of Amendment to its Articles of Incorporation.
ARTICLE ONE. The name of the corporation is Pillowtex Corporation.
ARTICLE TWO. The following amendments to the Amended and Restated Articles
of Incorporation was adopted by the shareholders of the Company as of February
15, 1993:
(a) Article X of the Amended and Restated Articles of
Incorporation be amended to read in its entirety as follows:
"ARTICLE X
A. Approval of Certain Business Combinations. A Business
Combination (as hereinafter defined) during the three-year period
immediately following the date that a shareholder became an Interested
Shareholder (as hereinafter defined) shall require (i) only such
affirmative vote as is required by law and any other provision of
these Articles of Incorporation, if all of the conditions specified in
Paragraph 1, 2, 3 or 4 of this Section A are met, or (ii) in addition
to any affirmative vote required by law or these Articles of
Incorporation, the affirmative vote of the holders of at least 66-2/3%
of the voting power of the then outstanding shares of capital stock of
the corporation that are entitled to vote generally in the election of
directors (referred to in this Article X as the "Voting Stock") and
that are not owned by the Interested Shareholder, voting together as a
single class (it being understood that for the purposes of this
Article X, each share of the Voting Stock shall have the number of
votes granted to it pursuant to Article V of these Articles of
Incorporation). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law.
1. Approval by Disinterested Directors. The Business
Combination or the transaction that resulted in the
shareholder becoming an Interested Shareholder shall
33
have been approved by a majority of the Disinterested Directors
(as hereinafter defined).
2. Price and Procedure Requirements. All of the following
conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value
(as hereinafter defined) as of the date of the consummation of the
Business Combination of consideration other than cash to be received
per share by holders of shares of Common Stock in such Business
Combination shall be at least equal to the higher of the following:
(i) (if applicable) the highest price per share
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Shareholder
(as hereinafter defined) for any shares of Common Stock
acquired by it (1) within the three-year period immediately
prior to the first public announcement of the terms of the
proposed Business Combination (the "Announcement Date") or
(2) in the transaction in which it became an Interested
Shareholder, whichever is higher; and
(ii) the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (such later date
is referred to in this Article X as the "Determination Date"),
whichever is higher.
(b) The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business Combination
of consideration other than cash to be received per share by holders
of shares of any class of outstanding Voting Stock other than Common
Stock shall be at least equal to the highest of the following (it
being intended that the requirements of this Paragraph 2(b) shall be
required to be met with respect to every class of outstanding Voting
Stock, whether or not the Interested Shareholder has previously
acquired any shares of a particular class of Voting Stock);
(i) (if applicable) the highest price per share (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested
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34
Shareholder for any shares of such class of Voting stock
acquired by it (1) within the three-year period immediately prior
to the Announcement Date or (2) in the transaction in which it
became an Interested Shareholder, whichever is higher;
(ii) (if applicable) the highest preferential amount per share
to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the corporation; and
(iii) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date,
whichever is higher.
(c) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common Stock)
shall be in cash or in the same form as the Interested Shareholder has
previously paid for shares of such class of Voting Stock. If the
Interested Shareholder has paid for shares of any class of Voting
Stock with varying forms of consideration, the form of consideration
for such class of Voting Stock shall be either cash or the form used
to acquire the largest number of shares of such class of Voting Stock
previously acquired by it. The price determined in accordance with
Paragraphs 2(a) and 2(b) of this Section A shall be subject to
appropriate adjustment in the event of any special dividend or other
disposition of material assets other than in the ordinary course of
business, stock dividend, stock split, combination of shares or
similar event. Whether specific consideration satisfies this
subsection shall be determined by vote of a majority of the
Disinterested Directors.
(d) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such Business
combination: (i) except as approved by a majority of the Disinterested
Directors, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not
cumulative) on any outstanding stock having preference over the Common
Stock as to dividends or upon liquidation; (ii) there shall have been
(1) no
3
35
reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of the Common Stock) ,
except as approved by a majority of the Disinterested Directors, and
(2) an increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction that has
the effect of reducing the number of outstanding shares of the Common
Stock, unless the failure so to increase such annual rate is approved
by a majority of the Disinterested Directors; and (c) such Interested
Shareholder shall not have become the beneficial owner of any
additional shares of Voting Stock except as part of the transaction
that results in such Interested Shareholder's becoming an Interested
Shareholder.
(e) After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guaranties, pledges or other
financial assistance or any tax credits or other tax advantages
provided to or by the corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall have been mailed to public stockholders of the
corporation at least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions).
3. Acquisition of 85% of Voting Stock. Upon consummation of the
transaction that resulted in the shareholder becoming an Interested
Shareholder, the Interested Shareholder owned at least 85% of the Voting
Stock outstanding at the time such transaction commenced.
4. Previously Proposed Business Combinations. The Business
Combination is proposed prior to the consummation or abandonment of and
subsequent to the earlier of the public announcement or the notice required
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36
hereunder of a proposed transaction that (i) constitutes one of the
transactions described in the second sentence of this Paragraph; (ii) is
with or by a person who either was not an Interested Shareholder during the
previous three years or who became an Interested Shareholder with the
approval of the corporation's Board of Directors; and (iii) is approved or
not opposed by a majority of the Disinterested Directors then in office
(but not less than one) . The proposed transactions referred to in the
preceding sentence are limited to (x) a merger or consolidation of the
corporation; (y) a sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions), whether
as part of a dissolution or otherwise, of assets of the corporation or of
any Subsidiary (as hereinafter defined) (other than to any wholly-owned
Subsidiary or to the corporation) having an aggregate Fair Market Value
equal to 50% or more of either the aggregate Fair Market Value of all of
the assets of the corporation determined on a consolidated basis or the
aggregate Fair Market Value of all the outstanding stock of the
corporation; or (z) a proposed tender or exchange offer for 50% or more of
the outstanding Voting Stock. The corporation shall give not less than 20
days notice to all Interested Shareholders prior to the consummation of any
of the transactions described in clauses (x) or (y) of the second sentence
of this Paragraph.
B. Certain Definitions. For purposes of this Article X:
1. "Business Combination" shall mean any transaction that is referred to
in any one or more of the following clauses (a) through (e):
(a) any merger or consolidation of the corporation or any
Subsidiary with (i) any Interested Shareholder or (ii) any other
corporation (whether or not itself an Interested Shareholder) that is,
or after such merger or consolidation would be, an Affiliate (as
hereinafter defined) of an Interested Shareholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or
with any Interested Shareholder or any Affiliate of any Interested
Shareholder of any assets of the corporation or any Subsidiary having
an aggregate Fair Market Value equal to 10% or more of either the Fair
Market Value of all the assets of the corporation determined on a
consolidated basis or
5
37
the aggregate Fair Market Value of all the outstanding stock of the
corporation; or
(c) the issuance or transfer by the corporation or any
Subsidiary (in one transaction or series of transactions) of any
securities of the corporation or any Subsidiary to any interested
Shareholder or any Affiliate of any Interested Shareholder in
exchange for cash, securities or other property (or a combination
thereof), except (i) pursuant to the exercise, exchange or conversion
of securities exercisable for, exchangeable for or convertible into
stock of the corporation or any Subsidiary, which securities were
outstanding prior to the time that the Interested Shareholder became
such, (ii) pursuant to a dividend or distribution paid or made, or the
exercise, exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of the corporation or any
Subsidiary, which security is distributed, pro rata, to all holders of
a class or series of stock of the corporation subsequent to the time
the Interested Shareholder became such, (iii) pursuant to an exchange
offer by the corporation to purchase stock made on the same terms to
all holders of such stock, or (iv) any issuance or transfer of stock
by the corporation, provided however, that in no case under (i)
through (iv) shall there be an increase in the Interested
Shareholder's proportionate share of the stock of any class or series
of the corporation or of the Voting Stock; or
(d) the adoption of any plan or proposal for the liquidation
or dissolution of the corporation proposed by or on behalf of any
Interested Shareholder or any Affiliate of any Interested Shareholder;
or
(e) any reclassification of securities (including any reverse
stock split) or recapitalization of the corporation, or any merger or
consolidation of the corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Shareholder) that has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of Equity Security (as hereinafter
6
38
defined) of the corporation or any Subsidiary that is directly or
indirectly owned by any Interested Shareholder or any Affiliate of any
Interested Shareholder.
2. "Person" shall mean any individual, firm, corporation or other entity.
3. "Interested Shareholder" shall mean any Person (other than the
corporation or any Subsidiary or employee benefit plan of the corporation or
any Subsidiary) that:
(a) is the beneficial owner, directly or indirectly, of 15% or
more of the outstanding Voting Stock; or
(b) is an assignee of or has otherwise succeeded to any shares
of Voting Stock that were at any time within the three-year period
immediately prior to the date in question beneficially owned by any
Interested Shareholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act
of 1933.
4. A person shall be a "beneficial owner" of any stock that:
(a) such Person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns directly or indirectly; or
(b) such Person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding; or
(c) is beneficially owned, directly or indirectly, by any
other Person with which such Person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
such stock.
7
39
5. For the purpose of determining whether a Person is an Interested
Shareholder pursuant to Paragraph 3 of this Section B, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of Paragraph 4 of this Section B but shall not include
any other shares of Voting Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
6. "Affiliate" and "Associate" shall have the meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on January 1, 1993.
7. "Subsidiary" means any corporation of which a majority of any
class of Equity Security is owned, directly or indirectly, by the
corporation, provided, however, that for purposes of the definition of
Interested Shareholder set forth in Paragraph 3 of this Section B, the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of Equity Security is owned, directly or indirectly, by the
corporation.
8. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Shareholder and was a
member of the Board of Directors immediately before the time that the
Interested Shareholder became an Interested Shareholder, and any successor
of a Disinterested Director who is unaffiliated with the Interested
Shareholder and is recommended to succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board of Directors.
9. "Fair Market Value" means: (a) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date
in question of a share of stock (i) on the principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which such stock is listed, or (ii) if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of such
stock during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations
System or any similar system then in use, or (iii) if no such quotations
are available, the fair market value on the date in question of a share of
such stock as determined by a majority of the Disinterested Directors in
good faith; or (b) in the
8
40
case of property other than cash or stock, the fair market value of such
property on the date in question as determined by a majority of the
Disinterested Directors in good faith.
10. In the event of any Business Combination in which the corporation
survives, the phrase "consideration other than cash to be received" as used
in Paragraphs 2(a) and 2(b) of Section A of this Article X shall include
the shares of Common Stock and the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
11. "Equity Security" shall have the meaning ascribed to such term in
Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on
January 1, 1993.
12. "Announcement Date" shall have the meaning set forth in Section
A(2)(a)(i) of this Article X.
13. "Determination Date" shall have the meaning set forth in Section
A(2)(a)(ii) of this Article X.
14. "Voting Stock" shall have the meaning set forth in the first
paragraph of Section A of this Article X.
C. Powers of the Board of Directors. A majority of the Disinterested
Directors shall have the power and duty to determine for the purposes of this
Article X, on the basis of information known to them after reasonable inquiry,
(1) whether a Person is an Interested Shareholder, (2) the number of shares of
Voting Stock beneficially owned by any Person, (3) whether a Person is an
Affiliate or Associate of another, (4) whether the assets that are the subject
of any Business Combination have an aggregate Fair Market Value equal to 10% or
more of either the Fair Market Value of all the assets of the corporation
determined on a consolidated basis or the aggregate Fair Market Value of all
the outstanding stock of the corporation. A majority of the Disinterested
Directors shall have the further power to interpret all of the terms and
provisions of this Article X.
D. No Effect on Fiduciary Obligations of Interested Shareholders. Nothing
contained in this Article X shall be construed to relieve any Interested
Shareholder from any fiduciary obligation imposed by law.
E. Amendment of Article X. Notwithstanding any other provisions of these
Articles of Incorporation or the Bylaws of
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41
the corporation (and notwithstanding the fact that a lesser percentage
may be specified by law, these Articles of Incorporation or the Bylaws
of the corporation), the affirmative vote of the holders of 80% or more of
the outstanding Voting Stock, voting together as a single class, shall be
required to amend or repeal, or adopt any provision inconsistent with, this
Article X or any provision hereof."
(b) Article XIII of the Amended and Restated Articles of Incorporation
be amended to read in its entirety as follows:
"ARTICLE XIII
The Bylaws of the corporation may be amended or repealed or new Bylaws may
be adopted by the affirmative vote of either (a) the holders of at least
80% of the voting power of the then outstanding shares of capital stock of
the corporation entitled to vote generally in the election of directors, or
(b) the majority of the directors present at any meeting of the Board of
Directors of the corporation at which a quorum is present.
Notwithstanding any other provisions of these Articles of Incorporation or
the Bylaws of the corporation (and notwithstanding that a lesser percentage
may be specified by law, these Articles of Incorporation or the Bylaws of
the corporation), the affirmative vote of the holders of at least 80% of
the outstanding capital stock of the corporation, voting together as a
single class, shall be required to amend or repeal, or adopt any provision
inconsistent with, this Article XIII or any provision hereof."
ARTICLE THREE. The number of shares of Common Stock of the Company
outstanding and entitled to vote was 6,505,224 at the time of the adoption of
this amendment.
ARTICLE FOUR. The holders of all of the shares of Common Stock
outstanding and entitled to vote have signed a written consent to the adoption
of this amendment.
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DATED as of the 15th day of February, 1993.
PILLOWTEX CORPORATION
By: /s/ CHARLES M. HANSEN, JR.
-------------------------------
Charles M. Hansen, Jr.,
President
11
43
ARTICLES OF CORRECTION
TO THE
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
PILLOWTEX CORPORATION
Pursuant to Article 1302-7.01 et seq of the Texas Miscellaneous
Corporation Laws Act, these Articles of Correction are adopted to correct a
document which is an inaccurate record of corporate action, contains an
inaccurate or erroneous statement, or was defectively or erroneously executed,
sealed, acknowledged, or verified.
ARTICLE ONE
The name of the corporation is Pillowtex Corporation.
ARTICLE TWO
The document to be corrected is the Articles of Amendment to the Amended and
Restated Articles of Incorporation of Pillowtex Corporation filed in the Office
of the Secretary of State of Texas on February 17, 1993.
ARTICLE THREE
The Articles are erroneous, inaccurate, or incomplete because they
erroneously state in Article Four that holders of all of the shares of Common
Stock outstanding and entitled to vote have signed a written consent to the
adoption of the Articles of Amendment.
ARTICLE FOUR
These Articles of Correction correct the Articles of Amendment by
substituting the following for Article Four in its entirety:
"ARTICLE FOUR. At a special meeting of shareholders called for the
purpose of voting on adoption of this amendment, the holders of
6,284,808 shares of Common Stock outstanding and entitled to vote
voted for this amendment and the holders of -0- shares of Common Stock
outstanding and entitled to vote voted against this amendment."
44
IN WITNESS WHEREOF, these Articles of Correction are dated as of March 12, 1993.
PILLOWTEX CORPORATION
By: /s/ STEPHEN P. RICHMAN
-------------------------------
Stephen P. Richman,
Vice President
2
45
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PILLOWTEX CORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business Corporation
Act, Pillowtex Corporation (the "Company"), hereby adopts the following
Articles of Amendment to its Articles of Incorporation.
ARTICLE ONE. The name of the corporation is Pillowtex corporation.
ARTICLE TWO. The following amendments to the Amended and Restated Articles
of Incorporation were adopted by the shareholders of the Company as of March
12, 1993:
(a) Article XI of the Amended and Restated Articles of
Incorporation be amended to read in its entirety as follows:
"ARTICLE XI
[INTENTIONALLY LEFT BLANK]"
(b) Article XII of the Amended and Restated Articles of
Incorporation be amended to read in its entirety as follows:
"ARTICLE XII
Special meetings of shareholders of the corporation may be called
only by the Chief Executive Officer, the President or the Board of
Directors of the corporation or by the holders of at least 50% of all
shares entitled to vote at the proposed meeting."
ARTICLE THREE. The number of shares of Common Stock of the Company
outstanding and entitled to vote was 6,505,224 at the time of the adoption of
this amendment.
ARTICLE FOUR. At a special meeting of shareholders called for the
purpose of voting on adoption of this amendment, the holders of 6,284,808
shares of Common Stock outstanding and entitled to vote voted for this
amendment and the holders of -0- shares of Common Stock outstanding and entitled
to vote voted against this amendment.
46
IN WITNESS WHEREOF, these Articles of Amendment are dated as of March 12, 1993.
PILLOWTEX CORPORATION
By: /s/ STEPHEN P. RICHMAN
------------------------------------
Stephen P. Richman,
Vice President
2
47
STATEMENT 0F
CANCELLATION OF TREASURY SHARES
To the Secretary of State of the State of Texas:
Pursuant to the provisions of Article 4.11 of the Texas Business
Corporation Act, the undersigned corporation submits the following statement of
cancellation by resolution of its board of directors of shares of the
corporation reacquired by it, other than redeemable shares redeemed or
purchased:
1. The name of the corporation is Pillowtex Corporation.
2. A resolution was duly adopted by all necessary action on
the part of the corporation on March 25, 1993, authorizing the cancellation of
12,343,296 shares of Common Stock, $0.01 par value per share, held as Treasury
Stock of the corporation.
The amount of stated capital represented by the shares to be cancelled is
One Hundred Twenty-Three Thousand Four Hundred Thirty-Two and Ninety-Six
Hundredths Dollars ($123,432.96).
3. The aggregate number of issued shares, itemized by classes and
series and par value, if any, after giving effect to such cancellation is
10,590,224 itemized as follows:
Class Par Value Number of Shares
----- --------- ----------------
Common Stock $0.01 10,590,224
4. The amount of the stated capital of the corporation, after
giving effect to such cancellation, is $105,902.24
Dated: March 25, 1993
PILLOWTEX CORPORATION
By: /s/ CHARLES M. HANSEN, JR.
----------------------------------
Charles M. Hansen, Jr.
President
48
STATEMENT OF RESOLUTION
FOR
SERIES A REDEEMABLE CONVERTIBLE
PREFERRED STOCK
OF
PILLOWTEX CORPORATION
PURSUANT TO ARTICLE 2.13 OF THE TEXAS
BUSINESS CORPORATION ACT
I, Jeffrey D. Cordes, President of Pillowtex Corporation, a
corporation organized and existing under the Texas Business Corporation Act
(the "Company"), DO HEREBY CERTIFY that at a meeting of the Board of Directors
on December 15, 1997, at which meeting a quorum was present, the following
resolution was adopted:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Company in accordance with the provisions of Article V of the
Company's Restated Articles of Incorporation, as amended, a series of Preferred
Stock, par value $0.01 per share, of the Company be, and hereby is, created,
and the designations, preferences, and relative rights of the shares of such
series, and the qualifications, limitations or restrictions thereof, be, and
hereby are, as follows:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series A Redeemable Convertible Preferred Stock" (the
"Preferred Stock") and the number of shares constituting such series initially
shall be 200,000.
Section 2. Definitions. For purposes of this Statement of
Resolution, the following definitions shall apply:
"1999 EPS" shall mean EPS for the twelve month fiscal year of the
Company ending January 1, 2000.
"1999 Pro Forma EPS" shall mean 1999 EPS calculated on a pro forma
basis assuming (i) the dividend rate on the Preferred Stock for calendar 1997
(if applicable) and calendar 1998 was the Adjusted 1998 Dividend Rate; (ii) the
dividend rate on the Preferred Stock for calendar 1999 was (a) 10.0% of Stated
Value per annum if 1999 EPS is less than $2.35, (b) 7.0% of Stated Value per
annum if 1999 EPS is greater than, or equal to, $2.35 but less than $2.70, and
(c) 3.0% of Stated Value per annum if 1999 EPS is greater than, or equal to,
$2.70; and (iii) any incremental dividends included pursuant to clauses (i) and
(ii) which were not paid when due (in either cash or shares of Preferred Stock)
were paid in additional shares of Preferred Stock (including the effect of all
dividends earned on unpaid dividends).
"Adjusted 1998 Dividend Rate" shall mean (i) if 1999 EPS is equal to,
or greater than, $2.35 (as adjusted pursuant to Section 3), 3% of Stated Value
per annum, or (ii) if 1999 EPS is less than $2.35 (as adjusted pursuant to
Section 3), 10% of Stated Value per annum.
49
"Affiliate" of any specified Person shall mean:
(a) any other Person which, directly or indirectly, is in
control of, is controlled by or is under common control with such
specified Person; or
(b) any other Person which beneficially owns or holds ten
percent or more of any class of the share capital normally entitled to
vote in the election of directors of such specified Person; or
(c) any other Person of which ten percent or more of the
share capital normally entitled to vote in the election of directors
of such Person is beneficially owned or held by such specified Person
or a subsidiary of such specified Person; or
(d) any other Person who is a director or officer (i) of
such specified Person; (ii) of any Subsidiary of such specified Person
or (iii) of any Person described in paragraph (a) above; and
for purposes of this definition, "control" of a Person means the power, direct
or indirect, to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Aggregate Dividends Owed" shall mean the aggregate amount of
dividends which would have been paid on the Preferred Stock from the Issue Date
through and including the last Dividend Payment Date prior to the Final
Determination Date assuming (i) the dividend rate on the Preferred Stock for
calendar 1997 (if applicable) and calendar 1998 was (a) 3.0% of Stated Value
per annum if 1999 Pro Forma EPS is equal to, or greater than, $2.35 (as
adjusted pursuant to Section 3), or (b) 10.0% of Stated Value per annum if 1999
Pro Forma EPS is less than $2.35 (as adjusted pursuant to Section 3); (ii) the
dividend rate on the Preferred Stock for calendar 1999 was the Applicable
Dividend Rate; and (iii) any incremental dividends included in calculating
dividends pursuant to clauses (i) and (ii) which were not paid when due (in
either cash or shares of Preferred Stock) were paid in additional shares of
Preferred Stock (including the effect of all dividends earned on unpaid
dividends).
"Aggregate Dividends Paid" shall mean the aggregate amount of
dividends actually paid (whether in cash or additional shares of Preferred
Stock) from the Issue Date through and including the last Dividend Payment Date
prior to the Final Determination Date, including amounts actually paid in cash
pursuant to Section 3(c).
"Applicable Dividend Rate" shall have the meaning assigned to it in
Section 3.
"Asset Sales" shall mean the sale or conveyance of assets in one or a
series of related transactions (other than inventory sold in the ordinary
course of business) having a fair market value in excess of $1,000,000.
A "Bankruptcy Event" shall be deemed to have occurred with respect to
a Person if such Person shall:
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50
(i) generally fail to pay, or admit in writing its
inability to pay, its debts as they become due;
(ii) apply for, consent to or acquiesce in, the
appointment of a liquidator, trustee, receiver,
sequestrator or other custodian for itself or any of
its material Subsidiaries or any property of any
thereof, or make a general assignment for the benefit
of creditors;
(iii) in the absence of such application, consent or
acquiescence, permit or suffer to exist the
appointment of a liquidator, trustee, receiver,
sequestrator or other custodian for itself or any of
its material Subsidiaries or for a substantial part
of the property of any thereof and such appointment
shall not be discharged within 30 days;
(iv) commence, or permit or suffer to exist the
commencement of, any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of
such Person or any of its material Subsidiaries, and,
if such case or proceeding is not commenced by such
Person or any such Subsidiaries, such case or
proceeding shall be consented to or acquiesced in by
such Person or any of its material Subsidiaries or
shall result in the entry of any order for relief or
shall remain for 30 days undismissed; or
(v) take any action to authorize any of the foregoing.
"Board" shall mean the Board of Directors of the Company.
"Business Day" means any day which is neither a Saturday or
Sunday nor a legal holiday on which banks are authorized or required
to be closed in New York, New York.
"Capital Stock" shall mean any class or series of capital
stock of the Company.
"Catch Up Dividend" shall have the meaning set forth in
Section 3(d).
"Change of Control" shall have the meaning assigned to it in
the Indenture except that any transaction or series of transactions in
which the Apollo Purchasers (as defined in the Purchase Agreement) or
their Affiliates or any transferees of any of the foregoing (either
individually or as part of a "group" as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended) acquire 50% or more
of the Company's capital stock shall not be deemed a Change of
Control.
"Company" shall mean Pillowtex Corporation, a Texas
corporation.
"Common Stock" shall mean the Common Stock, par value $0.01,
of the Company.
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"Common Stock's Fair Market Value" shall mean (i) if the
Common Stock is listed on a national securities exchange, the closing
sale price per share on the principal exchange on which the Common
Stock is listed as reported by such exchange, (ii) if the Common Stock
is quoted in the National Market System, the closing sale price per
share as reported by NASDAQ or (iii) if the Common Stock is traded in
the over-the- counter market but not quoted in the National Market
System, the average of the closing bid and asked quotations per share
as reported by NASDAQ, or any other nationally accepted reporting
medium if NASDAQ quotations shall be unavailable.
"Control Notice" shall have the meaning assigned to it in
Section 6(c)(ii).
"Conversion Date" shall have the meaning assigned to it in
Section 7(c).
"Conversion Price" shall mean $24.00 per share; provided that
if the Determination Price is less than $23.00 then the Conversion
Price shall equal the Determination Price plus $1.00; provided
further, that the Conversion Price shall, in any event, be subject to
adjustment from time to time as provided in Section 7.
"Determination Price" shall mean the average of the closing
sales prices of the Company's Common Stock as reported on the New York
Stock Exchange Composite Transactions List for each of the 20
consecutive trading days immediately preceding the fifth trading day
prior to the Closing Date (as defined in the Agreement and Plan of
Merger dated September 10, 1997 among the Company, a Company
Subsidiary and the Target).
"Dividend Adjustment Amount" shall mean the difference between
(i) the Aggregate Dividends Owed and (ii) the Aggregate Dividends
Paid.
"Dividend Increase" shall have the meaning assigned to it in
Section 3.
"Dividend Payment Date" means each of March 31, June 30,
September 30 and December 31 upon which quarterly dividend payments
are due.
"EPS" for any fiscal year shall mean the Company's diluted
earnings per share (as calculated based on Financial Accounting
Standard Board Statement No. 128) as included in the Company's audited
financial statements for such fiscal year, as adjusted to exclude the
following items set forth, included or reflected in such audited
statements (a) the after-tax effect of any changes in GAAP from
September 5, 1997, other than the effects of Financial Accounting
Standards Board Statement No. 128, (b) the after-tax effect of any
extraordinary gains or losses, and (c) the after-tax effect of gains
on Asset Sales.
"Event of Noncompliance" shall have the meaning assigned to it
in Section 10.
"Final Determination Date" shall have the meaning assigned to
it in Section 3.
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"GAAP" shall mean generally acceptable accounting principles
consistently applied in the United States, unless any other
jurisdiction is specified, in which case it shall be the equivalent
set of accounting principles for such jurisdiction.
"Indenture" means the Indenture dated as of November 12, 1996,
between the Company, certain guarantors described therein and Bank
One, Columbus, N.A., as trustee, relating to the Series A and Series B
10% Senior Subordinated Notes of the Company.
"Issue Date" shall mean the date of original issuance of the
Preferred Stock.
"Junior Securities" shall mean Capital Stock of the Company
that, with respect to dividend distributions and distributions upon
the liquidation, winding up or dissolution of the Company, rank junior
to the Preferred Stock.
"Liquidation Preference" shall have the meaning assigned to it
in Section 4.
"Majority of the Preferred Stock" shall mean more than 50% of
the outstanding shares of Preferred Stock.
"Mandatory Redemption Date" shall have the meaning assigned to
it in Section 5(b).
"Mandatory Redemption Price" shall have the meaning assigned
to it in Section 5(b).
"Optional Redemption Date" shall have the meaning assigned to
it in Section 5(a)(i).
"Optional Redemption Price" shall have the meaning assigned to
it in Section 5(a)(i).
"Parity Securities" shall mean Capital Stock of the Company
that, with respect to dividend distributions and distributions upon
the liquidation, winding-up or dissolution of the Company, ranks on a
parity with the Preferred Stock and has a mandatory redemption date on
or after the Mandatory Redemption Date.
"Participating Holder" shall have the meaning assigned to it
in Section 6(c)(ii).
"Permitted Indebtedness" shall mean (i) term loans issued
pursuant to the Company's senior credit facilities contemplated in
Section 9.8(b) of the Purchase Agreement, (ii) the subordinated debt
contemplated in Section 9.8(c) of the Purchase Agreement, (iii) $22
million of the Company's and the Target's industrial revenue bonds,
(iv) approximately $125 million of the Company's 10% Senior
Subordinated Notes due 2006 under the Indenture and (v) approximately
$117.8 million principal amount of the Target's 6% Convertible
Subordinated Debentures due 2012 ("6% Notes") (reduced to the extent
such 6% Notes have theretofore been converted in accordance with their
terms).
"Person" shall include all natural persons, corporations,
business trusts, associations, companies, partnerships, joint ventures
and other entities and governments and agencies and political
subdivisions.
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"Preferred Stock" shall mean the Series A Redeemable
Convertible Preferred Stock of the Company.
"Purchase Agreement" shall mean the Purchase Agreement dated
as of September 10, 1997 among the Company and the purchasers named
therein pursuant to which 65,000 shares of Preferred Stock are to be
issued, including all schedules and exhibits thereto, as such Purchase
Agreement may be from time to time amended, modified or supplemented.
"Reclassification" shall mean any capital reorganization of
the Company, any reclassification of the Common Stock, the
consolidation of the Company with or the merger of the Company with or
into any other Person, a statutory share exchange having an effect
similar to a merger or consolidation, the sale, lease or other
transfer of all or substantially all of the assets of the Company to
any other Person or any similar transaction. The subdivision or
combination of shares of Common Stock issuable upon conversion of
shares of Preferred Stock at any time outstanding into a greater or
lesser number of shares of Common Stock (whether with or without par
value) shall not be deemed to be a "Reclassification" of the Common
Stock for the purposes of Section 7(d)(iv).
"Senior Securities" shall mean Capital Stock of the Company
that, with respect to dividend distributions and distributions upon
the liquidation, winding-up or dissolution of the Company, ranks
senior to the Preferred Stock or Capital Stock that, with respect to
dividend distributions and distributions upon the liquidation,
winding-up or dissolution of the Company ranks on a parity with the
Preferred Stock and has a mandatory redemption date prior to the
Mandatory Redemption Date.
"Special Redemption Date" shall have the meaning assigned to
it in Section 5(a)(ii).
"Special Redemption Price" shall have the meaning assigned to
it in Section 5(a)(ii).
"Stated Value" shall be an amount equal to $1,000 per share of
Preferred Stock.
"Subsidiary" means, as to any Person, (a) any corporation 51%
or more of the outstanding shares of capital stock of which having
ordinary voting power for the election of directors is owned directly
or indirectly by such Person and (b) any partnership, association,
joint venture or other entity in which such Person and/or one or more
Subsidiaries of such Person has 51% or more of an equity interest at
the time.
"Target" shall mean Fieldcrest Cannon, Inc., a Delaware
corporation.
"Target Acquisition" shall have the meaning assigned to it in
the Purchase Agreement.
The foregoing definitions shall be equally applicable to both
the singular and plural forms of the defined terms.
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Section 3. Dividends. The holders of the outstanding shares of
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board, out of funds legally available therefor, distributions in the form of
dividends on each share of Preferred Stock as set forth below:
(a) Right to Dividends.
(i) Subject to the provisions of this Section 3,
beginning on the Issue Date through and including December 31, 1999, at a rate
per annum of 3% of Stated Value;
(ii) Beginning on January 1, 2000 through and including
the Mandatory Redemption Date, at a rate (the "Applicable Dividend Rate") per
annum based upon 1999 Pro Forma EPS as follows: (A) if 1999 Pro Forma EPS is
less than $2.35, then the dividend rate shall be 10.0% of Stated Value per
annum; (B) if 1999 Pro Forma EPS is greater than, or equal to, $2.35 but less
than $2.70, then the dividend rate shall be 7.0% of Stated Value per annum; and
(C) if 1999 Pro Forma EPS is greater than or equal to $2.70, then the dividend
rate shall be 3.0% of Stated Value per annum;
in each case subject to increase as set forth herein.
Each of the $2.35 and $2.70 targets for 1999 Pro Forma EPS set forth
above shall be (A) appropriately adjusted for (x) subdivisions and combinations
of shares of Common Stock, (y) Reclassifications and (z) dividends on Common
Stock payable in shares of Common Stock subsequent to the Issue Date and (B)
reduced by an amount equal to (rounded to the nearest hundredth) (x) 0.065
multiplied by (y)(i) $23.00 minus (ii) the Determination Price, but the
provisions of this clause (B) shall only be applicable if the Determination
Price is less than $23.00.
(b) Determination of 1999 EPS and 1999 Pro Forma EPS. The Company
will promptly (and in any event within 5 Business Days) after determination of
1999 EPS (which date of determination shall be no later than March 31, 2000),
determine 1999 Pro Forma EPS and send to each record holder of Preferred Stock
at its record address a written statement of its calculation of 1999 EPS and
1999 Pro Forma EPS (including each adjustment thereto for the items described
in clauses (a) through (c) of the definition of EPS in Section 2 hereof and any
adjustments pursuant to the definition of 1999 Pro Forma EPS in Section 2
hereof), and a negative assurance letter from the Company's auditors to the
effect that they have reviewed such 1999 EPS and 1999 Pro Forma EPS
calculations and that nothing has come to the auditors' attention that would
cause them to believe that 1999 EPS and 1999 Pro Forma EPS were not calculated
as required by this Statement of Resolution. In the event that the holders of
a Majority of the Preferred Stock disagree with the calculation of 1999 EPS
and/or 1999 Pro Forma EPS ("Disagreeing Holders"), such Disagreeing Holders (or
their duly appointed representative) shall notify the Company in writing of
such disagreement within 30 days after the applicable notice of such 1999 EPS
and 1999 Pro Forma EPS figures have been sent by the Company. Failure to send
such notice of disagreement within such time period shall be deemed acceptance
of the Company's 1999 EPS and 1999 Pro Forma EPS figures absent fraud. Upon
receipt of such notice of disagreement, the Company shall provide to the
Disagreeing Holders and their representatives (including accountants) access to
the books and records of the Company used to calculate such 1999 EPS and 1999
Pro Forma EPS figures during reasonable business hours, as well as the auditors
that reviewed such calculations and the work papers relating to the audit of
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the Company's financial statements and the review of the 1999 EPS and 1999 Pro
Forma EPS calculations. If, within 30 days of the Company's receipt of such
notice of disagreement, agreement as to the proper 1999 EPS and 1999 Pro Forma
EPS calculations cannot be reached, the calculation of such 1999 EPS and 1999
Pro Forma EPS figures shall be promptly determined by a "big-six" accounting
firm, which does not audit the Company and which is mutually acceptable to
holders of a majority of the shares held by the Disagreeing Holders and the
Company. The Company and such Disagreeing Holders shall promptly (and in any
event within 30 days after the expiration of the 30-day period described in the
preceding sentence) appoint such accounting firm, and such accounting firm
shall use its reasonable best efforts to calculate such 1999 EPS and 1999 Pro
Forma EPS figures within 30 days after its appointment and produce such
calculation in writing. The scope of such accounting firm's review of (i) the
1999 EPS calculation shall be limited to the items described in clauses (a)
through (c) of the definition of EPS in Section 2 hereof and (ii) the 1999 Pro
Forma EPS calculation shall be limited to any adjustments pursuant to the
definition of 1999 Pro Forma EPS in Section 2 hereof. Absent fraud, such
accounting firm's calculation of the 1999 EPS and 1999 Pro Forma EPS figures
shall be binding on the Company and all holders of Preferred Stock for all
purposes of this Statement of Resolution. If such accounting firm's
calculation of either of the 1999 EPS figure or the 1999 Pro Forma EPS figure
is lower than that calculated by the Company, the Company shall bear the fees
and expenses of such accounting firm. If such accounting firm's calculation of
both of the 1999 EPS figure and 1999 Pro Forma EPS figure is equal to or higher
than that calculated by the Company, the Disagreeing Holders shall bear the
fees and expenses of such accounting firm.
(c) Estimated Dividend Payments. Notwithstanding anything herein
to the contrary, the Company may at its option pay dividends in cash during
each quarterly period during calendar years 1998 and 1999 at a rate in excess
of 3% of Stated Value per annum.
(d) Dividend Adjustment. Following the date on which the final
determination of 1999 EPS and 1999 Pro Forma EPS is made ("Final Determination
Date"), as contemplated by Section 3(b), the Company will promptly (and in any
event within five Business Days) determine the Aggregate Dividends Paid and the
Aggregate Dividends Owed. If the Aggregate Dividends Paid is less than the
Aggregate Dividends Owed, the Company will, prior to the expiration of such
five-Business-Day period, pay to the holders of Preferred Stock a number of
additional shares of Preferred Stock (the "Catch Up Dividend") with a Stated
Value equal to the Dividend Adjustment Amount. In determining dividends
payable on the next succeeding Dividend Payment Date following the Final
Determination Date, the Company shall assume that the shares of Preferred Stock
outstanding at the prior Dividend Payment Date included all additional shares
issued in the Catch Up Dividend. If the Aggregate Dividends Paid is more than
the Aggregate Dividends Owed, then the Dividend Adjustment Amount shall be
offset against dividends payable on the next succeeding Dividend Payment Date
or Dividend Payment Dates, as the case shall be.
(e) Dividends Cumulative; Compounding. All dividends shall be
cumulative, whether or not declared, on a daily basis from the Issue Date and
shall be payable quarterly, in arrears, on each Dividend Payment Date
commencing December 31, 1997. Dividends (in the form of additional dividends
due) will compound quarterly on all unpaid dividends from the Dividend Payment
Date with respect thereto until the date of payment at the Applicable Dividend
Rate (as adjusted in accordance with this Section 3).
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(f) Payment in Kind; Fractional Shares. From the Issue Date
through the fifth anniversary of the Issue Date, dividends declared may be
paid, at the Company's option, either in cash or in additional shares of
Preferred Stock (other than the Catch Up Dividend, which shall be paid in
additional shares of Preferred Stock). Fractional shares of Preferred Stock
shall not be issued in certificated form, but shall be deemed outstanding on
the books of the Company and held of record by the appropriate stockholder for
all purposes, including the payment of dividends. Uncertificated fractional
shares held of record by a stockholder, when aggregating a whole share, shall
be issued in whole share increments. After the fifth anniversary of the Issue
Date, dividends are payable only in cash. The number of shares of Preferred
Stock to be issued in circumstances when dividends are paid in the form of
additional shares of Preferred Stock shall equal (x) the cash amount of the
dividend that would have been payable had the dividend in question been paid in
cash, divided by (y) the Stated Value, rounded to the nearest hundredth of a
full share.
(g) Increase in Rate. In the event that after the fifth
anniversary of the Issue Date, the Company shall fail to pay dividends in cash
on the Dividend Payment Date when due, the Applicable Dividend Rate applicable
to any period in which any such dividends remain unpaid shall be increased by
0.5% of Stated Value per quarter for each quarter in which any such dividends
remain unpaid (such rate increase, the "Dividend Increase"). The Applicable
Dividend Rate plus the Dividend Increase applicable to any period shall not
exceed the lesser of (i) 18.0% of Stated Value per annum and (ii) the maximum
rate permitted by applicable law. After a Dividend Increase, when the Company
pays all accrued and unpaid dividends, and upon the payment of dividends on the
next Dividend Payment Date at the rate in effect prior to giving effect to any
Dividend Increase, the annual dividend rate shall be decreased to the otherwise
Applicable Dividend Rate.
All dividends shall be paid pro rata to the holders entitled thereto.
Section 4. Liquidation Rights of Preferred. In the event of any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the holders of the Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Company available for distribution
to its shareholders, whether such assets are capital, surplus, or earnings,
before any payment or declaration and setting apart for payment of any amount
shall be made in respect of any other class of Capital Stock of the Company
(other than Parity Securities) whether currently authorized or hereafter
created, an amount equal to $1,000 per share plus an amount equal to all
accrued and unpaid dividends thereon, whether or not earnings are available in
respect of such dividends or such dividends have been declared, to and
including the date full payment shall be tendered to the holders of the
Preferred Stock with respect to such liquidation, dissolution or winding-up,
and no more (the "Liquidation Preference"). If upon any liquidation,
dissolution, or winding-up of the Company, whether voluntary or involuntary,
the assets to be distributed to the holders of the Preferred Stock, along with
the holders of Parity Securities, if any, shall be insufficient to permit the
payment to such shareholders of the full preferential amounts aforesaid, then
all of the assets of the Company shall be distributed ratably to the holders of
the Preferred Stock and such Parity Securities on the basis of the amount due
on such liquidation if there were sufficient assets held by each such
shareholder. Neither a consolidation or merger of the Company with or into any
other company nor a merger of any other company with or into the Company, nor a
sale or transfer of all or any part of the Company's assets for cash,
securities or other property, will be considered a liquidation, dissolution or
winding-up of the Company.
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Section 5. Redemptions.
(a) Optional Redemption.
(i) The Company may, at the option of the Board of
Directors, redeem, to the extent of funds legally available therefor, at any
time on or after the fourth anniversary of the Issue Date, in whole or in part,
in the manner provided for in Section 5(c) hereof, any or all of the shares of
the Preferred Stock, at a redemption price per share equal to (x) the
Liquidation Preference plus (y) (A) the Redemption Premium (as defined below)
multiplied by (B) the Liquidation Preference (minus any accrued and unpaid
dividends from the Dividend Payment Date prior to the Optional Redemption
Date). The "Redemption Premium" shall equal the Applicable Dividend Rate on
the Preferred Stock on the fourth anniversary of the Issue Date and shall
decline ratably (pursuant to the table attached hereto as Annex I) from the
fourth anniversary of the Issue Date to the Mandatory Redemption Date so that
at the Mandatory Redemption Date the Redemption Premium of the Preferred Stock
under this Section 5(a)(i) (y) shall be equal to zero. The redemption price
per share determined under this Section 5(a)(i) is referred to herein as the
"Optional Redemption Price" and the date fixed for redemption in accordance
with Section 5(c) below is the "Optional Redemption Date." In the event of a
redemption pursuant to this Section 5(a)(i) of only a portion of the then
outstanding shares of the Preferred Stock, the Company shall effect such
redemption on a pro rata basis according to the number of shares held by each
record holder of the Preferred Stock, except that the Company may redeem such
shares held by holders of fewer than 10 shares (or shares held by holders who
would hold less than 10 shares as a result of such pro rata redemption),
without regard to the pro rata requirements of this sentence.
(ii) To the extent a Change of Control has occurred and
the Company has received a Control Notice from Participating Holders, the
Company may, at the option of the Board, redeem, to the extent of funds legally
available therefor all, but not less than all, of the Preferred Stock held by
such Participating Holders on a date fixed by the Company, which date shall be
no less than 20 days nor more than 90 days after receipt of the Control Notice
or if the Control Notice is received more than 20 days prior to the date of the
Change of Control no later than the date of the Change of Control (the "Special
Redemption Date") in the manner provided for in Section 5(c) below at a
redemption price per share equal to 101% of the Liquidation Preference
(including, without limitation, an amount equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the Special
Redemption Date to the Special Redemption Date) (the "Special Redemption
Price").
(b) Mandatory Redemption. On June 30, 2008 (the "Mandatory
Redemption Date") the Company shall redeem, to the extent of funds legally
available therefor, in the manner provided for in Section 5(c) hereof, all of
the shares of the Preferred Stock then outstanding at a redemption price per
share equal to the Liquidation Preference (including, without limitation, an
amount equal to a prorated dividend for the period from the dividend payment
date immediately prior to the Mandatory Redemption Date to the Mandatory
Redemption Date) (the "Mandatory Redemption Price").
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(c) Procedures for Redemption.
(i) At least thirty (30) days and not more than sixty
(60) days prior to the date fixed for any redemption of the Preferred Stock in
accordance with Section 5(a)(i) or Section 5(b) and at least five days prior to
the Special Redemption Date for any redemption of the Preferred Stock in
accordance with Section 5(a)(ii), written notice (the "Redemption Notice")
shall be given by first class mail, postage prepaid, to each holder of record
on the mailing date of such notice at such holder's address as it appears on
the stock books of the Company (and by facsimile, if a record holder has
provided a facsimile contact); provided that no failure to give such notice nor
any deficiency therein shall affect the validity of the procedure for the
redemption of any shares of Preferred Stock to be redeemed except as to the
holder or holders to whom the Company has failed to give said notice or to whom
such notice was defective. Any holder of Preferred Stock may exercise its
conversion rights under Section 7(a) at any time up until 5:00 p.m. New York
City time on the Business Day prior to the date fixed for redemption in
accordance with this Section 5 (the "Redemption Date") and if not exercised
prior to such time, such redemption right shall expire unless the Company
defaults in making the payment due on redemption. The Redemption Notice shall
state:
(A) whether the redemption is pursuant to Section
5(a)(i), 5(a)(ii) or 5(b) hereof;
(B) the Optional Redemption Price, the Special
Redemption Price or Mandatory Redemption Price, as the case may be;
(C) whether all or less than all the outstanding
shares of the Preferred Stock are to be redeemed and the total number of shares
of the Preferred Stock being redeemed;
(D) the Redemption Date;
(E) that the holder is to surrender to the
Company or its transfer agent, in the manner, at the place or places and at the
price designated, his certificate or certificates representing the shares of
Preferred Stock to be redeemed; and
(F) that dividends on the shares of the Preferred
Stock to be redeemed shall cease to accumulate on such Redemption Date unless
the Company defaults in the payment of the Optional Redemption Price, the
Special Redemption Price or the Mandatory Redemption Price, as the case may be.
(ii) Each holder of Preferred Stock shall surrender the
certificate or certificates representing such shares of Preferred Stock to the
Company, duly endorsed (or otherwise in proper form for transfer, as determined
by the Company), in the manner and at the place designated in the Redemption
Notice, and on the Redemption Date the full Optional Redemption Price, Special
Redemption Price or Mandatory Redemption Price, as the case may be, for such
shares shall be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
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(iii) On and after the Redemption Date, unless the Company
defaults in the payment of the applicable redemption price, dividends on the
Preferred Stock called for redemption shall cease to accumulate on the
Redemption Date, and all rights of the holders of redeemed shares shall
terminate with respect thereto on the Redemption Date, other than the right to
receive the Optional Redemption Price, Special Redemption Price or the
Mandatory Redemption Price, as the case may be, without interest.
Section 6. Voting Rights.
(a) General. The holders of Preferred Stock, except as otherwise
required under Texas law or as set forth in Sections 6(b) and 6(c) below, shall
not be entitled or permitted to vote on any matter required or permitted to be
voted upon by the shareholders of the Company.
(b) Amendments to Articles of Incorporation; Mergers and Similar
Transactions. So long as any shares of the Preferred Stock are outstanding,
the Company shall not (i) amend its Restated Articles of Incorporation
(including this Statement of Resolution) so as to: (A) affect adversely the
specified rights, preferences, privileges or voting rights of holders of shares
of Preferred Stock (including any adjustment to the Stated Value) or (B)
authorize the issuance of additional shares of any class of Senior Securities
(or amend the provisions of any existing class of Capital Stock to make such
class of Capital Stock Senior Securities) or (ii) merge, consolidate or enter
into any other Reclassification that would (A) materially affect adversely the
special or relative rights, preferences, privileges or voting rights of the
Preferred Stock (including any adjustment to the Stated Value), or (B) result
in a breach of any of the Company's obligations under this Statement of
Resolution, without, in any such case, the affirmative vote or consent of
holders of at least a Majority of the Preferred Stock, voting or consenting, as
the case may be, as one class, given in person or by proxy, either in writing
(to the extent permitted under the Company's Restated Articles of
Incorporation) or by resolution adopted at an annual or special meeting of
shareholders. Notwithstanding the foregoing, any amendment to the Restated
Articles of Incorporation (including this Statement of Resolution) that would
alter in any material respect the dividend rates, liquidation preference,
redemption rights or conversion rights of the Preferred Stock shall require the
affirmative vote or consent of each holder of Preferred Stock.
(c) Election of Directors.
(i) The foregoing notwithstanding, in the event of the
Company's failure to pay dividends in accordance with Section 3, or the
occurrence of one or more Events of Noncompliance, within 10 Business Days of
such failure or such event, as the case may be, the Company shall notify each
holder of Preferred Stock thereof in writing, and the number of directors
constituting the Board shall thereupon be automatically increased so that the
number of new directorships of the Board so created will constitute at least
25.0% (rounded up to the nearest whole number) of the entire Board, after
giving effect to such increase, and the holders of the Preferred Stock shall
have, in addition to the other voting rights provided herein, the exclusive and
special right, voting separately as a class, to elect directors to fill such
newly created directorships (and to fill any vacancy in such directorships
until such time as the special voting rights provided by this Section 6(c)(i)
shall terminate as set forth below). If the event giving rise to the special
voting rights was a failure to pay dividends or an Event of Noncompliance
described in Section 10(a)(iii), the special voting rights will continue until
all
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accrued and unpaid dividends have been paid in full or all Events of
Noncompliance have been cured, as the case may be, subject to revesting in the
event of any future failure to pay dividends in accordance with the terms
hereof or a subsequent Event of Noncompliance. Except as provided in the prior
sentence, the special voting rights provided by this Section 6(c)(i) shall
continue as long as any Preferred Stock is outstanding. If the special voting
rights provided by this Section 6(c)(i) terminate, the terms of the additional
directors elected by the holders of Preferred Stock pursuant to this Section
6(c)(i) shall terminate and the number of directors constituting the Board
shall then be decreased to such number as constituted the whole Board
immediately prior to the occurrence of the event giving rise to such special
voting rights. The special voting rights provided in this Section 6(c)(i)
shall not preclude or affect the exercise of any other rights or remedies
provided hereby or by agreement, by law or otherwise upon the occurrence of any
event giving rise to such special rights.
(ii) The foregoing notwithstanding, the Company will give
notice to each holder of Preferred Stock within five days after the Company
becomes aware of any Change of Control that has occurred or is reasonably
likely to occur and, if a Change of Control occurs, the holders of a Majority
of the Preferred Stock shall, by written notice to the Company and the other
holders of Preferred Stock delivered before or 15 days after the Change of
Control (a "Control Notice") have the right to elect a majority of the Board in
accordance with this Section 6(c)(ii), unless the Company has theretofore
redeemed shares of any holder of Preferred Stock participating in a Control
Notice (each, a "Participating Holder") in accordance with Section 5(a)(ii).
Any holder of Preferred Stock may, at any time within ten days after receipt of
the Control Notice, elect to become a Participating Holder by delivery of
written notice of such election to the Company and the other Participating
Holders. If a Control Notice is received by the Company and the Company has
not redeemed the shares of Preferred Stock held by all Participating Holders,
upon the later to occur of (i) the occurrence of such Change of Control and
(ii) the date that the Company's redemption rights under Section 5(a)(ii) shall
have expired, the number of directors constituting the Board shall thereupon be
automatically increased by such number as will be necessary to constitute a
majority of the total number of the members, after giving effect to such
increase, of such Board, and the holders of the Preferred Stock shall have, in
addition to the other voting rights provided herein, the exclusive, special and
continuing right, voting separately as a class, to elect directors to fill such
newly created directorships (and to fill any vacancy in such directorships) and
to continually elect at least a majority of the Board as long as any Preferred
Stock is outstanding.
(iii) The directors to be elected (or if such directors
have been previously elected and any vacancy shall exist, such vacancy to be
filled) by the holders of Preferred Stock (voting as a class) shall be elected
(or filled) at (i) annual meetings of the shareholders of the Company, or (ii)
a special meeting of the holders of Preferred Stock for the purpose of electing
such directors (or filling any such vacancy), to be called by the Secretary of
the Company upon the written request of the holders of record of 10% or more of
the number of shares of Preferred Stock then outstanding; provided, however,
that if the Secretary of the Company shall fail to call any such meeting within
10 days after any such request, such meeting may be called by any holder of
Preferred Stock designated for that purpose by the holders of record of 10% or
more of the number of shares of Preferred Stock then outstanding. At any
meeting or at any adjournment thereof held for the purpose of electing
directors at which the holders of shares of Preferred Stock shall have the
special voting right provided by this Section 6(c), the presence, in person or
by proxy, of the holders of the equivalent of a Majority of the Preferred Stock
shall be required to constitute a quorum for the election of any
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director by the holders of the Preferred Stock exercising such special right.
The special right of holders of shares of Preferred Stock under this Section
6(c) may be exercised by the written consent of the holders of shares of
Preferred Stock then outstanding in accordance with the law of the Company's
jurisdiction of incorporation at such time to the extent permitted by the
Company's Restated Articles of Incorporation.
(iv) The foregoing notwithstanding, in the case of any
vacancy in the office of a director occurring among the directors elected by
the holders of the Preferred Stock pursuant to Section 6(c), the remaining
director or directors so elected by the holders of the Preferred Stock may, by
affirmative vote of a majority thereof (or the remaining director so elected if
there is only one such director), elect a successor or successors to hold the
office for the unexpired term of the director or directors whose place or
places shall be vacant. Any director who shall have been elected by the
holders of the Preferred Stock, or any director so elected as provided in the
next preceding sentence hereof, shall be removed during the aforesaid term of
office, whether with or without cause, only by the affirmative vote of the
holders of a Majority of the Preferred Stock.
(v) The Company shall promptly take all necessary action
to facilitate the implementation of the rights of the holders of Preferred
Stock to appoint directors that are provided for under this Section 6.
Section 7. Conversion Rights.
The Preferred Stock shall be convertible into Common Stock as follows:
(a) Optional Conversion. Subject to and upon compliance with the
provisions of this Section 7, the holder of any shares of Preferred Stock shall
have the right at such holder's option, at any time or from time to time, to
convert any shares of Preferred Stock into the number of fully paid and
nonassessable shares of Common Stock set forth in Section 7(b).
(b) Conversion Price. Each share of Preferred Stock converted
pursuant to Section 7(a) shall be converted into such number of shares of
Common Stock as is determined by dividing (i) the sum of (A) $1,000 plus (B)
any dividends on such share of Preferred Stock which such holder is entitled to
receive, but has not yet received (including, without limitation, an amount
equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the Conversion Date to the Conversion Date), by (ii) the
Conversion Price in effect on the Conversion Date. The Conversion Price shall
be subject to adjustment as set forth in Section 7(d).
(c) Mechanics of Conversion. The holder of any shares of
Preferred Stock may exercise the conversion right specified in Section 7(a) as
to any part thereof by surrendering to the Company or any transfer agent of the
Company the certificate or certificates for the shares to be converted,
accompanied by written notice stating that the holder elects to convert all or
a specified portion of the shares represented thereby. Conversion shall be
considered to have been effected on the date when a holder of Preferred Stock
delivers notice of an election to convert shares of Preferred Stock to the
Company accompanied by certificates representing such shares, and such date is
referred to herein as the "Conversion Date." Subject to the provisions of
Section 7(d), as promptly as practicable thereafter (and after surrender of the
certificate or certificates evidencing the shares of Preferred
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Stock or delivery to the Company of an affidavit and indemnity with respect to
such certificates), the Company shall issue and deliver to or upon the written
order of such holder a certificate or certificates for the number of full
shares of Common Stock to which such holder is entitled and a check or cash
with respect to any fractional interest in a share of Common Stock as provided
in Section 7(h) hereof. Subject to the provisions of Section 7(d), the Person
in whose name the certificate or certificates for Common Stock are to be issued
shall be considered to have become a holder of record of such Common Stock on
the Conversion Date. Upon conversion of only a portion of the number of shares
covered by a certificate evidencing shares of Preferred Stock surrendered for
conversion, the Company shall issue and deliver to or upon the written order of
the holder of the certificate so surrendered for conversion, at the expense of
the Company, a new certificate covering the number of shares of Preferred Stock
representing the unconverted portion of the certificate so surrendered. The
Company will use its best efforts to deliver all stock certificates required by
this Section 7(c) within three business days after the Conversion Date.
(d) Conversion Price Adjustments. The Conversion Price shall be
subject to adjustment from time to time as follows:
(i) Stock Dividends. If the number of shares of Common
Stock outstanding at any time after the date of issuance of Preferred
Stock is increased by a stock dividend payable in shares of Common
Stock or by a subdivision or split-up of shares of Common Stock, then
immediately after the record date fixed for the determination of
holders of Common Stock entitled to receive such stock dividend or the
effective date of such subdivision or split-up, as the case may be,
the Conversion Price shall be appropriately reduced so that the holder
of any shares of Preferred Stock thereafter converted shall be
entitled to receive the number of shares of Common Stock of the
Company which he would have received immediately following such action
had such shares of Preferred Stock been converted immediately prior
thereto.
(ii) Combination of Stock. If the number of shares of
Common Stock outstanding at any time after the date of issuance of
Preferred Stock is decreased by a combination of the outstanding
shares of Common Stock, then immediately after the effective date of
such combination, the Conversion Price shall be appropriately
increased so that the holder of any shares of Preferred Stock
thereafter converted shall be entitled to receive the number of shares
of Common Stock which he would have received immediately following
such action had such shares of Preferred Stock been converted
immediately prior thereto.
(iii) Adjustments for Other Dividends and Distributions.
In the event the Company at any time or from time to time after the
Issue Date makes or issues, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in securities or other rights
of the Company other than a dividend or other distribution payable
solely in shares of Common Stock, then and in each such event
provision shall be made so that the holders of Preferred Stock shall
receive upon conversion thereof, in addition to the number of shares
of Common Stock receivable thereupon, the amount of securities or
other rights of the Company which they would have received had their
Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such
event to and including the Conversion Date, retained
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such securities or other rights receivable by them as aforesaid during
such period, subject to all other adjustments called for during such
period under this Section 7 with respect to the rights of the holders
of the Preferred Stock.
(iv) Reclassification, etc. In case of any
Reclassification, each share of Preferred Stock shall, after such
Reclassification, be convertible into the number of shares of stock or
other securities or property to which the holder of the Common Stock
issuable (at the time of such Reclassification) upon conversion of
such share of Preferred Stock would have been entitled upon such
Reclassification; and in any such case, if necessary, the provisions
set forth herein with respect to the rights and interests thereafter
of the holders of the shares of Preferred Stock shall be appropriately
adjusted so as to be applicable, as nearly as possible, to any shares
of stock or other securities or property thereafter deliverable on the
conversion of the shares of Preferred Stock. If the holders of Common
Stock have an election with respect to the stock, securities or other
property to be received upon a Reclassification, the same election
shall be afforded to the holders of Preferred Stock.
(v) Rounding of Calculations. All calculations under
this Section 7(d) shall be made to the nearest cent or to the nearest
one hundredth (1/100th) of a share, as the case may be.
(vi) Timing of Issuance of Additional Common Stock Upon
Certain Adjustments. In any case in which the provisions of this
Section 7(d) shall require that an adjustment shall become effective
immediately after a record date for an event, the Company may defer
until the occurrence of such event by (A) issuing to the holder of any
shares of Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by
such event over and above the shares of Common Stock issuable upon
such conversion before giving effect to such adjustment, and (B)
paying to such holder any amount of cash in lieu of a fractional share
of Common Stock pursuant to Section 7(h) hereof; provided, however,
that the Company upon request shall deliver to such holder a due bill
or other appropriate instrument evidencing such holder's right to
receive such additional shares and such cash upon the occurrence of
the event requiring such adjustment.
(e) Statement Regarding Adjustments. Whenever the Conversion
Price shall be adjusted as provided in Section 7(d), the Company shall
forthwith file, at the office of any transfer agent for such Preferred Stock
and at the principal office of the Company, a statement showing in detail the
facts requiring such adjustment and the Conversion Price that shall be in
effect after such adjustment, and the Company shall also cause a copy of such
statement to be sent by mail, first class postage prepaid, to each holder of
shares of Preferred Stock at the address appearing on the Company's records.
Each such statement shall be signed by the Company's independent public
accountants. Where appropriate, such copy may be given in advance and may be
included as part of a notice required to be mailed under the provisions of
Section 7(f).
(f) Notice to Holders. In the event the Company shall propose to
take any action of the type described in Section 7(d)(i), (ii), (iii), or (iv)
the Company shall give notice to each holder of shares of Preferred Stock
affected by such action in the manner set forth in this Section 7(f), which
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notice shall specify the record date, if any, with respect to any such action
and the approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the Conversion Price and the number,
kind or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of shares of Preferred Stock. In the case of any action which
would require the fixing of a record date, such notice shall be given at least
ten days prior to the date so fixed, and in the case of any other action, such
notice shall be given at least 15 days prior to the taking of such proposed
action. Failure to give such notice, or any defect therein, shall not affect
the legality or validity of any such action.
(g) Costs. The Company shall pay all documentary, stamp, transfer
or other transactional taxes attributable to the issuance or delivery of shares
of Common Stock of the Company upon conversion of any shares of Preferred
Stock; provided, however, that the Company shall not be required to pay any
taxes which may be payable in respect of any transfer involved in the issuance
or delivery of any certificate for such shares in a name other than that of the
holder of the shares of Preferred Stock in respect of which such shares are
being issued.
(h) Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of Preferred Stock. If more than one share of
Preferred Stock shall be surrendered for conversion at any one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
Preferred Stock so surrendered. In lieu of any fractional share to which the
holder would otherwise be entitled, the Company shall pay cash equal to the
product of such fraction multiplied by the Common Stock's Fair Market Value on
the date of conversion.
(i) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Preferred Stock,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(j) Notices. All notices and other communications required by the
provisions of this Section 7 shall be in writing and shall be deemed to have
been duly given if delivered personally, mailed by certified mail (return
receipt requested) or sent by overnight delivery service, cable, telegram,
facsimile transmission or telex to each holder of record at the address of such
holder appearing on the books of the Company. Notice so given shall, in the
case of notice so given by mail, be deemed to be given and received on the
fourth calendar day after posting, in the case of overnight delivery service,
on the date of actual delivery and, in the case of notice so given by cable,
telegram, facsimile transmission, telex or personal delivery, on the date of
actual transmission or, as the case may be, personal delivery.
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(k) No Dilution or Impairment. The Company shall not amend its
Articles of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Preferred Stock
against dilution or other impairment.
Section 8. Restrictions and Limitations.
(a) So long as any shares of Preferred Stock remain outstanding
and except as set forth below, the Company shall not, and shall not permit any
Subsidiary to, without the vote or written consent by the holders of a Majority
of the Preferred Stock:
(i) (A) Declare or pay any dividend or make any other
payment or distribution on account of the Equity Interests of the Company
(other than in respect of the Preferred Stock) or any of its Subsidiaries
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company or any of its Subsidiaries) or to the
direct or indirect holders of the Equity Interests of the Company or any of its
Subsidiaries in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Senior Securities or Parity Securities
(except that dividends payable on Parity Securities issued in accordance with
the provisions hereof solely in Parity Securities of the same class or series,
as the case may be, shall be permitted) of the Company, dividends or
distributions payable to the Company or any Subsidiary of the Company or
dividends or distributions made by a Subsidiary of the Company to all holders
of its Common Stock on a pro rata basis)); and
(B) Make any payment on or in respect of, or
purchase, redeem, defease or otherwise acquire or retire for value any Equity
Interests (other than the Preferred Stock in accordance with Section 5 or any
Equity Interests owned by the Company or any Subsidiary of the Company) except
at Stated Maturity.
All such payments and other actions set forth in clauses (A)
and (B) above shall be collectively referred to as "Restricted Payments".
Notwithstanding the foregoing, the Company shall be permitted
to make Restricted Payments if, at the time of and after giving effect to such
Restricted Payment:
(I) No Event of Noncompliance shall have occurred and be
continuing or would occur as a consequence thereof; and
(II) The Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 8 (a)(v); and
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(III) Such Restricted Payment, together with the aggregate
of all other Restricted Payments made by the Company and its
Subsidiaries after the Issue Date (excluding Restricted Payments
permitted by clauses (v) and (w) of the next succeeding paragraph), is
less than the sum of (i) 50% of the Consolidated Net Income of the
Company for the period (taken as one accounting period) commencing on
the Issue Date to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (ii)
100% of the aggregate net cash proceeds received by the Company from
the issue or sale since the Issue Date of Equity Interests of the
Company or of debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests (or
convertible debt securities) sold to a Subsidiary of the Company or
conversion of the 6% Notes) subject to the provisions of Section
8(a)(vii), plus (iii) $7.5 million.
The foregoing provisions will not prohibit (u) the payment of
any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of
this Section 8(a)(i); (v) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a Subsidiary
of the Company) of other Equity Interests of the Company (other than any Parity
Securities); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other acquisition
shall be excluded from clause (ii) of paragraph (III) above; (w) the
defeasance, redemption or repurchase of Junior Securities or Parity Securities
with the net cash proceeds from the substantially concurrent sale (other than
to a Subsidiary of the Company) of Equity Interests of the Company (other than
Parity Securities); provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (ii) of paragraph (III) above; (x)
the repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any Subsidiary of the Company held by any
member of the Company's (or any of its Subsidiaries') management pursuant to
any management equity subscription agreement or stock option agreement in
effect as of the Issue Date; provided that (A) the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $250,000 in any 12-month period plus the aggregate cash proceeds
received by the Company during such 12-month period from any reissuance of
Equity Interests by the Company to members of management of the Company and its
Subsidiaries, and (B) no Event of Noncompliance shall have occurred and be
continuing immediately after such transaction; and (y) so long as no Event of
Noncompliance shall have occurred and be continuing, ordinary dividends paid by
the Company in respect of its Common Stock in an aggregate amount not to exceed
$2.5 million since the Issue Date.
The amount of all Restricted Payments (other than cash) shall
be the fair market value (evidenced by a resolution of the Board of Directors
or a committee of the Board of Directors having at least one Independent
director set forth in an Officers' Certificate delivered to each holder of
Preferred Stock) on the date of the Restricted Payment of the asset(s) proposed
to be transferred by the Company or such Subsidiary, as the case may be,
pursuant to the Restricted Payment. Not later than the date of making any
Restricted Payment, the Company shall deliver to each holder of Preferred Stock
an Officers' Certificate stating that such Restricted Payment is permitted and
setting
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forth the basis upon which the calculations required by this Section 8(a)(i)
were computed, which calculations may be based upon the Company's latest
available financial statements.
For purposes of this Section 8(a)(i), capitalized terms used
and not defined herein shall have the meanings assigned to them in the
Indenture as in effect on the Issue Date.
(ii) Authorize or issue, or obligate itself to issue, any
Senior Securities;
(iii) Increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Preferred Stock;
(iv) Enter any agreement, contract or understanding or
otherwise incur any obligation which by its terms would violate, be in conflict
with, restrict or burden the rights of the holders of Preferred Stock, or the
Company's ability to perform its obligations hereunder;
(v) Directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Indebtedness) or issue any Parity Securities (other than as
contemplated by Section 3) unless the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Parity Securities are issued would
have been at least 1.75 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Parity Securities had been issued, as
the case may be, at the beginning of such four-quarter period.
The foregoing provisions will not apply to:
(A) the incurrence by the Company of Indebtedness
under the Credit Agreement (and guarantees thereof by the Guarantors)
in an aggregate principal amount at any time outstanding (with letters
of credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Subsidiaries thereunder)
not to exceed the greater of (x) $600.0 million and (y) the sum of (A)
80% of the Eligible Receivables and (B) 65% of Eligible Inventory,
less, in the case of each of clause (x) and clause (y), the aggregate
amount of all Net Proceeds of Asset Sales applied to permanently
reduce the commitments with respect to such Indebtedness pursuant to
Section 4.10 of the Indenture as in effect on the Issue Date;
(B) the incurrence by the Company of Permitted
Indebtedness;
(C) the incurrence by the Company or any of its
Subsidiaries of Indebtedness represented by Capital Lease Obligations
(whether or not incurred pursuant to sale and leaseback transactions),
mortgage financing or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or such Subsidiary, in
an aggregate principal amount not to exceed $15.0 million at any time
outstanding;
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(D) the incurrence by the Company or any of its
Subsidiaries of Indebtedness ("Refinancing Indebtedness") in exchange
for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund, Permitted Indebtedness or
Indebtedness that was permitted to be incurred hereunder, provided
that the principal amount (or accreted value, if applicable) of such
Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness extended,
refinanced, renewed, replaced, defeased or refunded;
(E) the incurrence by the Company or any of its
Wholly Owned Subsidiaries of intercompany Indebtedness between or
among the Company and any of its Wholly Owned Subsidiaries;
(F) the incurrence by the Company of Hedging
Obligations that are incurred in the ordinary course of business for
the purpose of fixing or hedging interest rate risk;
(G) the incurrence by the Company of Hedging
Obligation under commodity hedging and currency exchange agreements;
provided that, such agreements were entered into in the ordinary
course of business for the purpose of limiting risks that arise in the
ordinary course of business;
(H) the incurrence of Indebtedness of a guarantor
represented by guarantees of Indebtedness of the Company that has been
incurred in accordance with the terms hereof; and
(I) the incurrence by the Company of Indebtedness
or the issuance by the Company of Junior Securities or Parity
Securities (in addition to Indebtedness, Junior Securities or Parity
Securities permitted by any other clause of this Section 8(a)(v)) in
an aggregate principal amount (or accreted value, as applicable) at
any time outstanding not to exceed $20.0 million.
For purposes of this Section 8(a)(v), capitalized terms used
and not defined herein shall have the meanings assigned to them in the
Indenture as in effect on the Issue Date.
(vi) Make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(A) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Subsidiary than those that would have been obtained in
a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (B) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving the aggregate consideration in excess of $2.0
million, the Company delivers to each holder of Preferred Stock a resolution of
the Board of Directors set forth in an Officers' Certificate certifying that
such Affiliate Transaction complies with clause (A) above and that such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors and (C) with respect to an Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
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consideration in excess of $5.0 million, the Company delivers to each holder of
Preferred Stock an opinion as to the fairness to the holders of Preferred Stock
of such Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing; provided
that (w) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board of
Directors or the payment of fees and indemnities to directors of the Company
and its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practices of the Company or such Subsidiary, (x) loans
or advances to employees in the ordinary course of business, (y) transactions
between or among the Company and/or its Wholly Owned Subsidiaries and (z)
Restricted Payments that are permitted by the provisions of Section 8(a)(i), in
each case, shall not be deemed Affiliate Transactions.
For purposes of this Section 8(a)(vi), capitalized terms used
and not defined herein shall have the meanings assigned to them in the
Indenture as in effect on the Issue Date.
(vii) Make any Restricted Investment (as such term is
defined in the Indenture as in effect on the Issue Date) unless the Company
could borrow an additional $1.00 of Indebtedness under the Fixed Charge
Coverage Ratio in Section 8(a)(v) above; except that, notwithstanding the
foregoing, the Company shall be permitted to make a Restricted Investment if
(x) such Restricted Investment is made after the Issue Date and is sold for
cash or otherwise liquidated or repaid for cash, in an amount equal to the
lesser of (a) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition) and (b) the initial amount of such
Restricted Investment or (y) such Restricted Investment is in exchange for, or
out of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of Equity Interests of the Company (other than any
Senior Securities and Parity Securities); provided that the amount of any such
net cash proceeds that are utilized for any such Restricted Investment made
under (x) and (y) above shall be excluded from Section 8(a)(i)(III)(ii).
Section 9. No Reissuance of Preferred Stock.
No share or shares of Preferred Stock acquired by the Company by
reason of redemption, purchase, conversion or otherwise shall be reissued, and
all such shares shall be canceled, retired and eliminated from the shares which
the Company shall be authorized to issue.
Section 10. Events of Noncompliance.
(a) Definition. An Event of Noncompliance will be deemed to have
occurred if:
(i) the Company fails to make any redemption payment with
respect to the Preferred Stock which it is obligated to make hereunder, whether
or not such payment is legally permissible;
(ii) the Company breaches or otherwise fails to perform or
observe the provisions of Section 8;
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(iii) the Company breaches or otherwise fails to perform or
observe any other covenant or agreement set forth herein or any covenant or
agreement set forth in the Purchase Agreement (other than a covenant or
agreement set forth in Section 5.14 (the breach of which Section 5.14 shall not
be considered an Event of Noncompliance under this Section 10(a)(iii)) or in
Article 7 of the Purchase Agreement) and such breach or failure to perform or
observe continues for a period of 60 days after notice thereof from any holder
of Preferred Stock; or the Company breaches or otherwise fails to perform or
observe any covenant or agreement set forth in Article 7 of the Purchase
Agreement and such breach or failure to perform or observe continues for a
period of 30 days after notice thereof from any holder of Preferred Stock; or
(iv) a Bankruptcy Event occurs with respect to the Company
or any Subsidiary.
The Company shall promptly (and in any event within five days)
after learning of (x) any failure by the Company to observe any covenant or
agreement contained herein or in the Purchase Agreement or (y) any Event of
Noncompliance, give notice thereof to each holder of Preferred Stock.
(b) Consequences of Certain Events of Noncompliance.
(i) If an Event of Noncompliance (other than the failure
to pay timely dividends, which affects the dividend rate of the Preferred Stock
as provided in Section 3) has occurred, the dividend rate on the Preferred
Stock shall increase immediately to the lesser of (A) 18% per annum and (B) the
maximum rate permitted by applicable law, and shall remain at such rate as long
as any Preferred Stock is outstanding; provided, however, that if the Event of
Noncompliance is one under Section 10(a)(iii), upon the cure of such Event of
Noncompliance, the dividend rate shall be that which would otherwise be
applicable but for the application of this Section 10(b)(i).
(ii) If any Event of Noncompliance has occurred, each
holder of Preferred Stock will also have (A) rights pursuant to Section
6(c)(i), (B) any other rights which such holder may have been afforded under
any contract or agreement at any time and (C) any other rights which such
holder may have pursuant to applicable law.
Section 11. Waivers.
With the written consent of holders of a Majority of the
Preferred Stock (or each holder of Preferred Stock to the extent required
pursuant to the last sentence of Section 6(b)), the obligations of the Company
and the rights of the holders of the Preferred Stock under this Statement of
Resolution may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely). Upon the effectuation of each such waiver, the Company shall
promptly give written notice thereof to the holders of Preferred Stock who have
not previously consented thereto in writing.
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ANNEX 1
APPLICABLE DIVIDEND RATE
--------------------------------------------------------
REDEMPTION PREMIUM APPLICABLE DURING THE 3% 7% 10%
FOLLOWING YEARS AFTER THE ISSUE DATE: -- -- ---
1 Non-Call Non-Call Non-Call
2 Non-Call Non-Call Non-Call
3 Non-Call Non-Call Non-Call
4 Non-Call Non-Call Non-Call
5 3.000% 7.000% 10.000%
6 2.400% 5.600% 8.000%
7 1.800% 4.200% 6.000%
8 1.200% 2.800% 4.000%
9 0.600% 1.400% 2.000%
10 0.000% 0.000% 0.000%
To the extent a different Applicable Dividend Rate applies, a similar ratable
decline shall apply.
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I, THE UNDERSIGNED, being the President of Pillowtex Corporation, do
hereby execute this Statement of Resolution, declaring and certifying under
penalties of perjury that the facts herein stated are true, and accordingly
have hereunto set my hand this 18th day of December, 1997.
/s/ JEFFREY D. CORDES
----------------------------------------
Jeffrey D. Cordes
President
ATTEST:
/s/ BRENDA SANDERS
----------------------------------------
Brenda Sanders
Assistant Secretary
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