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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report: September 30, 1995
EMERGENT GROUP, INC.
(Exact name of registrant as specified in its charter)
South Carolina 0-8909 57-0513287
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
Suite 750, 15 South Main Street, Greenville, South Carolina 29601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (803) 235-8056
The Exhibit Index appears on page 4 hereof.
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Item 5. Other Events
On September 30, 1995, Emergent Group, Inc. (the "Company")
entered into a Stock Purchase Agreement dated as of September 30,
1995 (the "Agreement") by and among the Company and fifteen
individuals (the "Buyers") who comprise the management of Young
Generations, Inc. ("YGI"), a wholly owned subsidiary of the Company.
Fifty-one percent of the stock was purchased by Joshua E. Varat,
President of YGI.
Pursuant to the Agreement, the Buyers shall pay to the Company,
pro rata in accordance with their share ownership, a purchase price
of $600,000, payable at closing through a nonrecourse promissory
note (the "Note"). Under the terms of the Note, the principal shall
be payable in full on September 30, 2000. Interest on the principal
balance shall accrue at 10% per annum and shall be payable in full
on September 30, 2000.
The Company also entered into a Loan and Security Agreement
(the "Loan") dated September 30, 1995. Under the terms of the Loan,
the Company may loan to YGI an amount not to exceed $3,548,000, of
which $2,848,000 was outstanding at September 30, 1995. Any
additional advances are determined by the projected monthly negative
cash flow as evidenced by the projections prepared by YGI and made a
part of the Loan. The Loan bears an interest rate of 10% per annum
and is payable monthly. Principal payments on the Loan are
determined by the cash flow of YGI and the Loan is due in full no
later than September 30, 2000.
The Note principal amount shall be reduced to the extent that
the Loan is repaid in full on or before the dates as set forth in
the table made a part of the Note.
The Stock Purchase Agreement and the Loan and Security
Agreement, attached hereto as exhibits, are incorporated herein by
reference. The Company will provide to the Commission, upon
request, any other documents entered into in connection with the
above described transaction and referenced either in the Loan or the
Note.
Item 7. Financial Statements and Exhibits.
A. Financial Statements of the Business Acquired. Not
applicable.
B. Pro Forma Financial Information - As this report is being
filed pursuant to Item 5, pro forma financial information is not
applicable.
C. Exhibits
10.1 Stock Purchase Agreement dated as of September 30,
1995 By and Among Emergent Group, Inc. and The Individuals Set Forth
On the Signature Page Thereof.
10.2 Loan and Security Agreement entered into as of
September 30, 1995 by and between Emergent Group, Inc. and Young
Generations, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed and on
its behalf by the undersigned hereto duly authorized.
EMERGENT GROUP, INC.
October 16, 1995 BY: /s/Robert S. Davis
ROBERT S. DAVIS, VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
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STOCK PURCHASE AGREEMENT
By And Among
EMERGENT GROUP, INC.
AND
THE INDIVIDUALS SET FORTH
ON THE SIGNATURE PAGE HEREOF
September 30, 1995
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING INCLUDING THE
MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
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THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered
into as of the 30th day of September, 1995, by and among Emergent
Group, Inc., a South Carolina corporation ("Seller") and the
individuals set forth on the signature page hereof (individually, a
"Buyer," and collectively, the "Buyers").
P R E A M B L E
WHEREAS Young Generations, Inc., a North Carolina
corporation (the "Company"), is a wholly-owned subsidiary of Seller
engaged in the children's apparel business;
WHEREAS the Buyers are officers and/or key employees of the
Company and have determined that it is in the best interest of the
Company that it cease to be a wholly-owned subsidiary of Seller;
WHEREAS Seller is willing to sell to the Buyers all
outstanding shares of common stock of the Company (the "Shares")
pursuant to the terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties herein contained, the parties
hereto agree as follows:
SECTION 1. PURCHASE AND SALE
1.1 Purchase and Sale of Shares. Subject to the terms and
conditions hereof, Seller agrees to sell, assign and transfer (the
"Sale") the Shares to the Buyers at Closing (as defined in Section 1(c)
hereof), free and clear of any liens, encumbrances, or adverse claims,
which Shares shall be evidenced by certificates duly endorsed in
blank, or accompanied by stock transfer powers duly executed in blank,
with all necessary transfer tax stamps affixed. Subject to the
terms and conditions hereof, at Closing, the Buyers shall purchase the
Shares in such amounts as is set forth below:
<TABLE>
<CAPTION>
Name Class A Common Stock Class B Common Stock
<S> <C> <C>
Joshua E. Varat 140,092 21,676
Leroy Carpenter 13,733 2,127
David Davis 13,733 2,127
Garnetta Woodard 13,733 2,127
Rhonda McMurray 8,491 1,313
Keith Horton 8,491 1,313
Joyce Hill 8,491 1,313
Jack Levi 8,491 1,313
Karen Roberts 8,491 1,313
Susan Goldsmith 8,491 1,313
Melanie Palmer 8,491 1,313
June Horne 8,491 1,313
Linda Rice 8,491 1,313
Dianne LaGrange 8,491 1,313
Dot Marshal 8,491 1,313
---------- ---------
274,692 42,500
</TABLE>
1.2 Purchase Price. In consideration of the Sale, the
Buyers shall pay to Seller, pro rata in accordance with their Share
ownership a purchase price equal to $600,000, payable at Closing
through
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a promissory note, a form of which is attached hereto as Exhibit A (the
"Note").
1.3 The Closing. The Closing of the transaction (the
"Closing") shall occur on or before September 30, 1995 (the "Closing
Date") at the offices of Wyche, Burgess, Freeman & Parham, P.A.,
Greenville, South Carolina; provided, however, that in the event that
Closing has not occurred by the Closing Date, either the Seller or
Buyers purchasing a majority of the Shares (a "Majority of the
Buyers") shall have the right to terminate this Agreement, except that
if such failure to close is the result of the breach or nonperformance
of a representation, warranty or covenant hereunder, only the
aggrieved party shall have the right to terminate this Agreement; and
provided, further, that in the event that the Closing has not
occurred by December 31, 1995, this Agreement shall be terminated,
without prejudice to any parties' rights hereunder.
1.4 Offer of Shares to the Company. (a) In the event that
any of the Buyers leaves the employment of the Company for any
reason (including death) prior to September 30, 2000 (such date being a
"Departure Date"), such departing Buyer or his personal
representative (a "Departing Buyer") shall offer all of his Shares (the
"Proffered Shares") first to the Company at a purchase price equal to
$1.89 per share, plus the per share increase (if any) in the net book
value of the Company from the date hereof through the end of the month
immediately preceding the Departure Date (the "Sale Price"). If the
Company does not elect to purchase all of the Proffered Shares within
10 business days after receiving notice of such offer, the Departing
Buyer shall offer at the Sale Price all of the Proffered Shares not
purchased by the Company to the other Buyers (the "Remaining Buyers")
pro rata in accordance with their respective percentage of Company stock
owned among themselves. If the Remaining Buyers do not elect to
purchase all of the remaining Proffered Shares within 10 business days
after receiving notice of such offer, the Departing Buyer shall offer at
the Sale Price all of the Proffered Shares not purchased by the
Company or the Remaining Buyers to Emergent, which shall have the right
to purchase such remaining Proffered Shares within 10 business days
after receiving notice of such offer. Notwithstanding the
foregoing, unless all of the Proffered Shares are purchased pursuant
to this Section 1.4, a Departing Buyer shall have no obligation to sell
any of the Proffered Shares.
(b) The Company, the Buyers and/or Emergent, if purchasing all
or a portion of the Proffered Shares, shall be hereinafter referred
to individually as a "Purchasing Party," or collectively, as the
"Purchasing Parties." In connection with the purchase of all or
a portion of the Proffered Shares, the Purchasing Parties shall assume
(pro rata in accordance with their respective number of Proffered Shares
purchased) all of the Departing Buyer's obligations under the Note
(in partial payment of the Sales Price) and shall pay (pro rata in
accordance with their respective number of Proffered Shares purchased)
the balance of the Sales Price in cash.
(c) Emergent hereby consents to the assignment of a Departing
Buyer of his obligations under the Note to the Company or any of the
Remaining Buyers in any transaction meeting the terms of this Section
1.4.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF ALL PARTIES
Each of the parties hereto represent and warrant to each of
the other parties that the matters set forth below are true and correct
in all material respects.
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2.1 Organization, Powers and Capitalization of the
Company. The Company is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of
the State of North Carolina and has the corporate power to carry on
its business as such business is now being conducted and to own, lease
or operate the properties and assets it now owns leases or operates.
The authorized capital stock of the Company consists of 400,000 shares
of common stock, par value $1.00, of which 274,692 shares of Class A
common stock and 42,500 shares of Class B common stock are validly
issued and outstanding, and 12,000 shares of preferred stock, none of
which is outstanding. All shares of common stock issued and outstanding
are fully paid and nonassessable. There are no existing options,
warrants, contracts, calls, commitments, demands or other agreements
of any character to which the Company is a party relating to the
authorized and issued or unissued capital stock of the Company.
2.2 Financial Statements. The Company has delivered to the
Seller and the Buyers an audited balance sheet, statement of
operations, statement of stockholders' equity and statement of cash
flows of the Company as of and for the years ended December 31, 1993
and 1994, all as prepared by Elliott, Davis & Company, LLP and an
unaudited balance sheet, statement of operations, statement of
stockholders' equity and statement of cash flows of the Company as of
and for the six months ended June 30, 1995, (the "Financial
Statements"). To the best of each party's knowledge, each of the
Financial Statements has been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout
the respective periods, and the balance sheets present fairly the
financial condition of the Company as of the respective dates thereof
and the statements of operations, statements of stockholders'
equity and statements of cash flows present fairly the results of
operations and cash flows of the Company for the respective periods set
forth therein.
2.3 No Material Adverse Change. To the best of the
parties' knowledge, since the date of the Financial Statements, there
has been no material adverse change in the financial condition or
operations of the Company nor has there been any event which has
occurred on or prior to the date hereof which in any way has materially
impaired or which will materially impair the ability of Buyer to
carry on the business conducted by the Company substantially as such
business is conducted on the date hereof.
2.4 Books and Records. To the best of the parties'
knowledge, the books and records of the Company fairly and in all
material respects reflect the assets, liabilities and operations of the
Company and the Financial Statements are in material conformity
therewith.
2.5 Absence of Undisclosed Liabilities. To the best of the
parties' knowledge, there are no material liabilities (contingent or
otherwise) of the Company which are not either known to the parties or
disclosed in the Financial Statements.
2.6 Absence of Certain Changes or Events. Since
December 31, 1994, neither the Seller nor the Buyers have acted on
behalf of the Company in a manner which did not constitute the
ordinary course of business or which was not known by or to the
other party. Since December 31, 1994 and except for the termination of
the lease on its retail outlet store in Las Vegas, Nevada and the
entry into a lease with respect to its retail outlet store in
Vicksburg, MS or as known to the other party, the Company (through
either the Seller or the Buyers) has not:
(i) incurred any indebtedness for money borrowed or
any noncurrent indebtedness for the purchase price of any
fixed or capital asset;
(ii) except in the ordinary course of business, made
(A) any change in its properties and
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assets or in its liabilities, (B) any commitment for any
capital expenditure or (C) any sale, lease or other
disposition of any capital asset;
(iii) (a) authorized any shares of its common stock
for issuance, (b) issued any shares of its previously
authorized but unissued shares of common stock, (c) granted,
issued or made any option or commitment relating to its
common stock, or (d) purchased, redeemed or otherwise acquired
any outstanding shares of its common stock;
(iv) declared or paid any dividend, made any other
distribution or payment, or set aside any amount for payment
with respect to any shares of its common stock;
(v) amended, made or entered into any agreement
with any employee, agent, consultant, advisor or sales or
other representative of the Company;
(vi) amended any material contract, lease or agreement
of the Company; or
(vii) voluntarily incurred any material obligation or
liability, absolute or contingent, except in the ordinary
course of business or pursuant to existing contracts and
agreements described in this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER
Seller represents and warrants that the matters set forth
below are true and correct in all material respects.
3.1 Organization, Powers and Capitalization of the
Seller. The Seller is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of
the State of South Carolina and has the corporate power to carry on
its business as such business is now being conducted and to own, lease
or operate the properties and assets it now owns leases or operates.
3.2 Title to the Shares. Seller has valid and full legal
title to the Shares, free and clear of any liens, encumbrances, pledge
or adverse claims. Seller has full right, power and authority to sell,
transfer and deliver such Shares to the Buyers, and upon the
delivery of and payment of the Purchase Price for the Shares, Seller
will have transferred to the Buyers valid and full legal title to such
Shares free and clear of any liens, encumbrances, equities and adverse
claims of any kind or nature which arise through the Seller.
3.3 Corporate Authority. The execution, delivery and
performance of this Agreement have been duly authorized by the Board of
Directors of Seller. No other corporate acts or proceedings on the part
of Seller are required or necessary to authorize this Agreement.
3.4 Binding Effect. When executed, this Agreement will
constitute a valid and legally binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to the relief of
debtors generally, and general principles of equity.
3.5 Non-Contravention and Defaults; No Liens. Neither the
execution or delivery of this Agreement, nor the fulfillment of, or
compliance with, the terms and provisions hereof, will (i) result in a
breach of the terms, conditions or provisions of, or constitute
a default under, or result in a violation of, termination of or
acceleration of the performance provided by the terms of, any agreement
to which
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Seller is a party or by which it may be bound, (ii) violate any
provision of any law, rule or regulation, or (iii) violate any
provisions of Seller's Articles of Incorporation or Bylaws.
3.6 Necessary Approvals. No consent, approval, authorization,
registration, or filing with or by any governmental authority, foreign
or domestic, is required on the part of Seller in connection with
the execution and delivery of this Agreement or the consummation
by Seller of the transactions contemplated hereby.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BUYERS
The Buyers, severally, but not jointly, represent and
warrant with respect to themselves (but not with respect to other
Buyers) that the matters set forth below are true and correct in all
material respects.
4.1 Authorization and Execution of Documents. This Agreement
constitutes a valid and legally binding obligation of the Buyers
enforceable against the Buyers in accordance with its terms. The
execution and delivery of this Agreement and the consummation of the
transaction contemplated hereby (1) will not result in any breach of
the terms and conditions of or constitute a default under any
instrument, agreement or obligation to which the Buyers are now a
party or by which the Buyers or their respective properties or assets
may be bound and (2) will not violate any existing order, writ,
injunction or decree of any court, administrative agency or
governmental body, or any contract, agreement, indenture or instrument
to which the Buyers are a party or by which they are bound. No
consents of third parties are required on behalf of the Buyers in
connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby.
4.2 Certain Securities-related Matters. Each Buyer, on his
own behalf (but not with respect to the other Buyers) hereby represents
as follows:
(a) Each Buyer acknowledges that he has received the
Financial Statements and all other information that he has requested
regarding the Company (the "Information"). Each Buyer hereby
acknowledges and understands that:
(i) No federal or state agency has made any finding or
determination as to the fairness of the offering of Shares
for investment, or any recommendation or endorsement of the
Shares. Seller has made available to each Buyer at a
reasonable time prior to this investment the opportunity to
ask questions and receive answers concerning the terms and
conditions of this Agreement and to obtain any additional
information which Seller possesses or can acquire without
unreasonable effort or expense that is necessary to verify the
information provided in the Information.
(ii) The Shares have not been registered under the
Securities Act or under the securities laws of any state
and thus each Buyer must bear the economic risk of the
investment indefinitely because the Shares may not be sold
unless subsequently registered under the Securities Act and
under any applicable state securities laws or exemptions from
such registration requirements are available. The Buyers
consent to the placement on the certificates representing the
Shares of any appropriate securities legend.
(iii) While any business plans containing
production schedules or other forecasts, and financial data
containing projections, which have been given to the Buyers by
the Company,
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were based on assumptions deemed reasonable by management
when made, no assurance is given that actual results will
correspond with the results contemplated in such plans or
data.
(iv) Because there will be no immediate public market
for the Shares, the Buyers may not be able to sell, transfer,
assign, exchange, or otherwise dispose of the Shares for an
indefinite period of time.
(v) The Information does not have all of the
disclosure required by Regulation D of the Rules and
Regulations of the Securities Act of 1933, as amended, for
offerings made to non-accredited investors.
(b) Each Buyer represents that the Shares are being purchased
for his own account for investment, and not with a view to, or for sale
in connection with, any distribution thereof, nor with any present
intention of distributing or selling the Shares; and Buyer has no
present or contemplated agreement, arrangement or commitment providing
for the disposition of the Shares.
(c) Each Buyer, either alone or with his advisors (if
any), has such knowledge and experience in financial and business
matters that it or they are capable of evaluating the merits and
risks of the investment in the Shares.
(d) Each Buyer is a resident of the state set forth under his
signature on the Signature Page hereof.
SECTION 5. CONDITIONS PRECEDENT TO CLOSING OF THE BUYERS
Unless waived by a Majority of the Buyers, the obligations
of the Buyers under this Agreement are subject to the fulfillment, prior
to or at Closing, of each of the following conditions:
5.1 Representations and Warranties True at Closing. The
several warranties and representations of the Seller and the Company
contained herein shall be construed to be continuous and continuing from
the date of this Agreement to the Closing Date, and shall be
true at the time of Closing as though such representations and
warranties were made at and as of such time, and shall not be
affected by any investigation, verification or approval by any party
hereto or by anyone on behalf of any of such parties.
5.2 Performance. The Seller and the Company shall have
performed and complied with all agreements, covenants and conditions
required by this Agreement to be performed or complied with by either or
both prior to or at Closing.
5.3 Delivery of Documents. The Seller shall have
delivered to the Buyers and/or the Company all documents and other
information required to be provided to the Seller on or before
Closing as set forth herein. The following additional documents shall
be delivered to the Buyers and/or the Company on or before Closing:
(1) A certificate signed by the Seller stating that all
the warranties and representations made by it herein
remain true and correct on the Closing Date and
that all covenants and agreements required herein to
have been performed by it by Closing have been
performed;
(2) Certificates representing the Shares, endorsed in
blank or with stock powers which authorize the transfer
of the Shares; and
(3) Any and all other instruments and documents that may
be reasonably necessary to effectuate the obligations
of the Seller and the Company hereunder.
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SECTION 6. CONDITIONS PRECEDENT TO CLOSING OF SELLER
Unless waived by Seller, the obligations of Seller
under this Agreement are subject to the fulfillment, prior to or at
Closing, of each of the following conditions:
6.1 Representations and Warranties True at Closing. The
several warranties and representations of the Buyers and the Company
contained herein shall be construed to be continuous and continuing from
the date of this Agreement to the Closing Date, and shall be
true at the time of Closing as though such representations and
warranties were made at and as of such time, and shall not be
affected by any investigation, verification or approval by any party
hereto or by anyone on behalf of any of such parties.
6.2 Performance. The Buyers and the Company shall have
performed and complied with all agreements, covenants and conditions
required by this Agreement to be performed or complied with by either or
both prior to or at Closing.
6.3 Delivery of Documents. The Buyers and the Company shall
have delivered to Seller all documents and other information required
to be provided to Seller on or before Closing as set forth herein.
The following additional documents shall be delivered to Seller at or
before Closing:
(1) The Purchase Price;
(2) A certificate signed by the Buyers stating that all
the warranties and representations made by them
herein remain true and correct on the Closing
Date and that all covenants and agreements required
herein to have been performed by them by Closing have
been performed; and
(3) Any and all other instruments and documents that may
be reasonably necessary to effectuate the obligations
of the Buyers and the Company hereunder.
SECTION 7. INDEMNIFICATION
7.1 Indemnification of Buyers. Seller shall indemnify and
hold the Buyers harmless against any and all loss, cost or expense
(including costs and expenses, including reasonable counsel fees,
incident to any and all actions, suits, demands, assessments or
judgments relating to any claim made hereunder) resulting from any
error or misrepresentation or breach of warranty or agreement of Seller
contained herein or in any certificate, instrument or schedule delivered
pursuant hereto.
7.2 Indemnification of Seller. Each Buyer shall indemnify
and hold Seller harmless against any and all loss, cost or expense
(including costs and expenses, including reasonable counsel fees,
incident to any and all actions, suits, demands, assessments or
judgments relating to any claim made hereunder) resulting from any
error or misrepresentation or breach of warranty or agreement of
such Buyer (but not the other Buyers) contained herein or in any
certificate, instrument or schedule delivered pursuant hereto.
SECTION 8. PLEDGE OF STOCK
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8.1 Pledge of Stock. To secure the payment of all amounts
owed under the Note, and the prompt and complete performance by the
Buyers under the Note and under this Agreement (collectively, the
"Obligations"), each Buyer on his own behalf, hereby grants to
Seller a security interest in all Shares purchased by him hereunder
(the "Pledged Stock"). Certificates representing the Pledged Stock
shall be delivered to Seller upon execution hereof, duly endorsed
in blank or together with stock powers duly endorsed in blank.
Notwithstanding the pledge of the Pledged Stock or anything to the
contrary herein, the Buyers shall not be personally liable for the
obligations under the Note (except to the extent of the Pledged Stock).
8.2 Covenants Regarding the Pledged Stock. In addition
to all covenants and agreements of the Company contained herein, the
Buyers agree as follows:
(a) Preservation of Pledged Stock. To do all acts that may be
necessary to maintain, preserve, and protect Buyer's and Seller's
interest in the Pledged Stock.
(b) Defense of Litigation. To appear in and defend any
action or proceeding that may affect its title to or Buyer's interest in
the Pledged Stock.
(c) Possession of Pledged Stock. Not to surrender or lose
possession of, sell, encumber, lease, rent, or otherwise dispose of
or transfer any Pledged Stock or right or interest therein except
as hereinafter provided, and to keep the Pledged Stock or right
or interest therein except as hereinafter provided, free of all levies
and security interests or other liens or charges.
SECTION 9. MISCELLANEOUS
9.1 Survival of Representations, Warranties and
Agreements. All representations, warranties, covenants and
agreements of the parties hereto shall survive the execution, delivery
and performance of this Agreement for one year. As used in this
Section, any reference to a representation, warranty or covenant
contained in any Section of this Agreement shall include the schedule
relating to such Section.
9.2 Termination. (a) This Agreement may be terminated at
any time prior to the Closing Date as follows:
(i) by the mutual consent of (i) a Majority of the
Buyers and (ii) the Seller;
(ii) as set forth in Section 1.3 hereof; or
(iii) by the aggrieved party, if a material default
has occurred with respect to covenants, representations or
warranties contained herein, and such default shall not have
been cured within 15 days after receipt of notice
specifying particularly such default, provided that if such
default shall not have been cured, but such fifteen (15) day
period shall not have expired, on or prior to the Closing Date,
the Closing Date shall be extended accordingly.
9.3 Waiver or Modification of Agreement. No provision of
this Agreement may be amended, waived or otherwise modified except by
an instrument in writing signed by the parties hereto; provided,
however, that any party hereto which is entitled to the benefits
of this Agreement may, and has the right to, waive or modify in
writing any term or condition hereof for his or its benefit at any time
on or prior to the Closing Date.
9.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of South Carolina.
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9.5 Notices. All notices, requests, demands and other
communications hereunder shall be given in writing (which includes
telex, telegraph and other wire transmission):
(a) if to Seller, to: Emergent Group, Inc.
Post Office Box 17526
Greenville, South Carolina 29606
Attn: John M. Sterling, Jr.
(tel) 803-232-6198 (fax) 803-271-8374
(b) if to Buyers, to: Joshua E. Varat
Young Generations, Inc.
Post Office Box 2060
Hendersonville, North Carolina 28793
(tel) 704-693-8623 (fax) 704-693-8765
Leroy Carpenter
Young Generations, Inc.
Post Office Box 2060
Hendersonville, North Carolina 28793
(tel) 704-693-8623 (fax) 704-693-8765
(or to such other address as such person shall specify by notice
hereunder), and shall be deemed to be effective when actually
received (as evidenced by reasonable proof thereof). Messrs. Varat
and Carpenter shall forward any notices received hereunder to the
other Buyers in a reasonably prompt manner at such addresses as shall be
provided by the other Buyers to Messrs. Varat and Carpenter in writing.
9.6 Section and Paragraph Headings. The section and
paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.8 Successors and Assigns. The respective rights and
obligations of the parties hereto shall not be assignable without the
prior written consent of the other parties. This Agreement shall be
binding upon and inure to the benefit of the heirs, distributees,
successors and assigns of the parties hereto. Nothing herein contained
is intended to confer upon any person, other than the parties hereto
and their respective permitted successors, assigns and nominees,
any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
NEXT PAGE IS SIGNATURE PAGE
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
_____________________ EMERGENT GROUP, INC.
_____________________ By: _____________________________
President
JOSHUA E. VARAT LEROY CARPENTER
_____________________ _____________________________
A South Carolina resident A South Carolina resident
DAVID DAVIS GARNETTA WOODARD
_____________________ _____________________________
A North Carolina resident A North Carolina resident
RHONDA MCMURRAY KEITH HORTON
_____________________ _____________________________
A North Carolina resident A North Carolina resident
JOYCE HILL JACK LEVI
_____________________ _____________________________
A North Carolina resident A North Carolina resident
KAREN ROBERTS SUSAN GOLDSMITH
_____________________ _____________________________
A North Carolina resident A South Carolina resident
MELANIE PALMER JUNE HORNE
_____________________ _____________________________
A North Carolina resident A North Carolina resident
LINDA RICE DIANNE LAGRANGE
_____________________ _____________________________
A North Carolina resident A North Carolina resident
DOROTHY MARSHALL
_____________________________
A North Carolina resident
11
<PAGE>
EXHIBIT A
NONRECOURSE NOTE
$600,000 September 30, 1995
FOR VALUE RECEIVED, the undersigned individuals,
(hereinafter collectively referred to as the "Makers"), pro rata in
accordance with their stock ownership set forth below, promise to pay to
the order of Emergent Group, Inc. (hereinafter referred to as the
"Holder"), at Holder's principal executive offices in Greenville, South
Carolina or at such other place as Holder may from time to time
designate in writing, the principal sum of Six Hundred Thousand Dollars
(U.S. $600,000) in lawful money of the United States.
Principal shall be payable in full on September 30,
2000. Interest on the principal balance outstanding hereunder shall
accrue at a rate of 10% per annum (calculated on a simple interest
basis)and shall be payable in full on September 30, 2000. In no
contingency or event whatsoever shall the interest rate charged
pursuant to the terms of this Note exceed the highest rate
permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto. In the event
that such a court determines that Holder has received interest
hereunder in excess of the highest applicable rate, Holder shall
promptly refund such excess interest to Maker.
This Note is given in connection with the transactions
contemplated in that certain Stock Purchase Agreement, dated as of
September 30, 1995 and entered into by and among the Makers, Young
Generations, Inc., and the Holder (the "Stock Purchase Agreement"),
the terms of which are incorporated herein. Payment of this Note is
secured by the "Pledged Stock" (as such term is defined in the Stock
Purchase Agreement).
Capitalized terms, not otherwise defined herein, shall have
the meaning ascribed to such terms in the Stock Purchase Agreement.
Amounts owed hereunder shall be reduced as set forth below to
the extent that the full principal of the Initial Loan (as that term
is defined in that certain Loan and Security Agreement dated as of
September 30, 1995 and entered into between the Holder and the Company)
is repaid on or before the date indicated:
<TABLE>
<CAPTION>
Repayment of all principal Percentage of principal and accrued
of Initial Loan on or before: interest thereon of this Note forgiven:
<S> <C>
September 30, 1996 100%
September 30, 1997 80%
September 30, 1998 60%
September 30, 1999 40%
September 30, 2000 20%
</TABLE>
A Maker shall be in default under this Note on the
happening of any of the following events or conditions, in which case,
all amounts owed hereunder by the breaching party shall become
immediately due and payable:
(a) The failure in the payment or performance of
any obligation, covenant, or liability contained or referred
to herein, or default in any other obligation, covenant, or
liability of a Maker to Emergent (including, without
limitation, any such default of a Maker under the Stock
Purchase Agreement); provided, however, that a Maker shall
have ten (10) business days after written or oral notice to
cure any such default, including a default in a payment
demanded under this Note.
(b) Dissolution, termination of existence,
insolvency, business failure, appointment of a receiver of any
part of the property of, assignment for the benefit of
creditors by, or commencement
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<PAGE>
of any proceeding under any bankruptcy or insolvency laws by,
or against a Maker.
(c) Entry of any judgment against a Maker which
results in any levy on, or seizure or attachment of the Pledged
Stock.
All Makers shall be in default under this Note upon the
happening of any of the following events or conditions, in which case,
all amounts owed hereunder by the Makers shall become immediately due
and payable:
(a) upon the occurrence of an "Event of Default,"
as defined in Section 6 of that certain Loan and Security
Agreement dated as of September 30, 1995 and entered into
between the Company and Holder;
(b) upon the occurrence of any event of default
under any agreement of the Company which results in an
acceleration event of any obligation of the Company in excess
of $100,000 (including, without limitation, the Company's
borrowings with Carolina First Bank); or
(c) upon the dissolution, termination of
existence, insolvency, business failure, appointment of a
receiver of any part of the property of, assignment for the
benefit of creditors by, or commencement of any proceeding
under any bankruptcy or insolvency laws by, or against the
Company (or any guarantor or surety for the Company).
In the event that all or any portion of the indebtedness
evidenced hereby shall be collected by or through an attorney-at-law,
Holder shall be entitled to collect from Makers all costs of
collection, including reasonable attorneys' fees.
Notwithstanding anything to the contrary herein, so long as a
particular Maker is not in default of his obligations under this
Note (regardless of whether other Makers are in default or whether
Holder has taken possession of other Maker's Shares as a result
of any default), Maker shall be entitled to retain ownership of his
Shares.
This Note shall be nonrecourse to the Makers and
notwithstanding anything to the contrary contained herein or in any
document executed by the Makers on the date hereof in connection
herewith, Maker shall have no personal monetary liability for the
$600,000 principal amount owed hereunder and any interest owed
thereon, except to the extent of the Maker's Pledged Stock.
The Makers hereby waive presentment, demand for payment,
protest and notice of protest, notice of dishonor and all other notices
in connection with this Note. This Note shall be payable without right
of set off, any defense of want or failure of consideration,
nonperformance of any condition precedent, nondelivery or delivery for a
special purpose or any other defense of any nature whatsoever.
This Note and the rights and obligations of the parties
hereunder and thereunder, shall be governed by, and construed in
accordance with, the laws of the state of South Carolina (without regard
to principles of conflicts of law).
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<PAGE>
IN WITNESS WHEREOF, the undersigned Makers have caused this
Note to be executed as of the day and year first written above.
______________________ __________________________ ________________________
Joshua E. Varat Leroy Carpenter David Davis
161,768 shares 15,860 shares 15,860 shares
______________________ __________________________ ________________________
Garnetta Woodard Rhonda McMurray Keith Horton
15,860 shares 9,804 shares 9,804 shares
______________________ __________________________ ________________________
Joyce Hill Jack Levi Karen Roberts
9,804 shares 9,804 shares 9,804 shares
______________________ __________________________ ________________________
Susan Goldsmith Melanie Palmer June Horne
9,804 shares 9,804 shares 9,804 shares
______________________ __________________________ ________________________
Linda Rice Dianne LaGrange Dot Marshall
9,804 shares 9,804 shares 9,804 shares
14
<PAGE>
WAIVER OF CONDITION
The undersigned, the Buyers and Seller under that certain
Stock Purchase Agreement entered into as of September 30, 1995 by and
among the undersigned, hereby take the following action as of September
30, 1995:
The undersigned waive the requirement that the certificates
required by Sections 5.3(1) and 6.3(2) be delivered at closing.
EMERGENT GROUP, INC.
By: _____________________________
President
Joshua E. Varat Leroy Carpenter
_____________________ _____________________________
A South Carolina Resident A South Carolina Resident
David Davis Garnetta Woodard
_____________________ _____________________________
A North Carolina Resident A North Carolina Resident
Rhonda Mcmurray Keith Horton
_____________________ _____________________________
A North Carolina Resident A North Carolina Resident
Joyce Hill Jack Levi
_____________________ _____________________________
A North Carolina Resident A North Carolina Resident
Karen Roberts Susan Goldsmith
_____________________ _____________________________
A North Carolina Resident A South Carolina Resident
Melanie Palmer June Horne
_____________________ _____________________________
A North Carolina Resident A North Carolina Resident
Linda Rice Dianne Lagrange
_____________________ _____________________________
A North Carolina Resident A North Carolina Resident
Dorothy Marshall
_____________________________
A North Carolina Resident
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this Loan and Security
Agreement, together with any schedules, exhibits, and other documents
attached hereto or executed in connection herewithwith, as such may be
amended from time to time, being hereinafter referred to as this "Loan
Agreement") is entered into as of this 30th day of September, 1995 by
and between Emergent Group, Inc., a South Carolina corporation
("Emergent") and Young Generations, Inc., a North Carolina corporation
("YGI").
WHEREAS prior to the date hereof, YGI has been a wholly-owned
subsidiary of Emergent;
WHEREAS it is in the best interest of YGI that Emergent sell a
controlling interest in the YGI stock to certain purchasers (the
"Purchasers"), insofar as such sale will increase management's
commitment to YGI and will provide YGI management with significant
incentive to improve the operating performance of YGI;
WHEREAS, as of the date hereof, Emergent has entered
into a Stock Purchase Agreement with the Purchasers, pursuant to which
it has sold 100% of the outstanding shares of YGI (the "Stock Sale");
WHEREAS YGI owes Emergent the principal amount of $2,848,055
(the "Receivable"), which Receivable is payable by YGI upon demand by
Emergent; WHEREAS, in order to improve cash flow stability and to
lengthen the period of time over which YGI's debt must be repaid,
the Purchasers have made it a condition to the consummation of the
Stock Sale that the Receivable be repaid and that a new credit
arrangement in the approximate amount of $3,548,055 be entered into
between YGI and Emergent, all as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
warranties contained herein and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS
Section 1.1 Definitions. The following defined terms shall
have the following meanings when used in this Loan Agreement.
"Borrowing Availability" shall mean (i) from the date hereof
through October 7, 1995, the amount of the Initial Loan, and (ii) at
any date thereafter, the sum of the principal amount unpaid with
respect to the Initial Loan and the amount, up to $700,000, calculated
in accordance with the schedule set forth on Exhibit A.
"Cash Flow" shall mean, for the relevant period of time,
an amount equal to (a) YGI's net profit (loss) for such period, less
(b) scheduled principal payments paid with respect to the loans of
Carolina First Bank and First Factors Corporation, and other
obligations currently existing or existing in the future (if consented
to by Emergent) for such period, plus (c) YGI's depreciation and
amortization for financial reporting purposes for such period, as
each such item is computed in accordance with generally accepted
accounting principles applied on a consistent basis. After the first
monthly period in which YGI has Positive Cash Flow, Cash Flow shall be
calculated on a cumulative basis beginning with such first month of
Positive Cash Flow.
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<PAGE>
"Default" shall mean the occurrence of any event or
condition which, after satisfaction of any requirement for the giving of
notice or the lapse of time, or both, would become an Event of Default.
"Event of Default" shall mean any of the events set forth in
Section 6 hereof.
"Initial Loan" shall mean a Loan in the amount of $2,848,055,
which Initial Loan shall be requested by YGI and made by Emergent
immediately upon the execution hereof, and the proceeds of which shall
be utilized as set forth in Section 2.4 below.
"Lien" shall mean any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien,
charge, claim, security interest, easement or encumbrance, or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing
statement perfecting a security interest under the UCC or comparable law
of any jurisdiction).
"Permitted Indebtedness" shall mean (i) the currently existing
indebtedness of Carolina First Bank and First Factors Corporation,
(ii) trade payables arising in the ordinary course of business and
which are not more than 60 days past due.
"Permitted Liens" shall mean (i) the currently existing Liens
of Carolina First Bank and First Factors Corporation, except that the
amount set forth in the currently existing note or notes secured by such
existing Liens shall not be increased except upon the consent of
Emergent and (ii) such additional Liens as may be approved in writing by
Emergent.
"Positive Cash Flow" shall mean, for the relevant period of
time, Cash Flow which is a positive number.
"Termination Date" shall mean September 30, 2000.
SECTION 2. THE LOANS
2.1 Loans. Subject to the terms and conditions hereof and
provided that there exists no Default or Event of Default, Emergent
agrees to make loans (each a "Loan" and collectively the "Loans"), as
requested by YGI from time to time in writing, to YGI from time to
time on and after the date hereof and up to, but not including, the
Termination Date in an aggregate principal amount which will not
exceed at any one time outstanding an amount equal to the lesser of (i)
the Borrowing Availability or (ii) $3,548,055. The Loans shall be
evidenced by a promissory note, substantially in the form of Exhibit B
attached hereto, payable to Emergent in the principal face amount
of $3,548,055 (together with any and all amendments,
modifications and supplements thereto, the "Note"). The Note shall be
construed to be a separate instrument and may be modified or
renegotiated by Emergent without in any way releasing YGI or the
Collateral (as defined below). Loans may be borrowed, repaid and
reborrowed in accordance with the terms hereof.
2.2 Interest and Principal Payments. Interest on the Loans
shall be payable as set forth in the Note. Unless and until there is
Positive Cash Flow, no principal amounts owed under the Loans shall be
payable until the Termination Date. To the extent of Positive Cash
Flow, payments of principal on the
2
<PAGE>
Loans shall be made monthly in an amount equal to the sum of (i)
1/120th of the then outstanding principal amount of the Loans (except
for such principal amount as shall have resulted from accrued but
unpaid interest) and (ii) all interest accrued but unpaid on the Loans
as of the date of such payment; provided that on the Termination Date,
all principal and other amounts owed under the Note shall be paid in
full. Any principal payments made prior to the Termination Date
shall be allocated, first to the extent of any amounts owed above the
amount of the Initial Loan and second, to the extent of the Initial
Loan.
2.3 Loan Account; Statements of Account. Emergent will
maintain one or more loan accounts for YGI to which Emergent will
charge all amounts advanced to or for the benefit of YGI hereunder and
to which Emergent will credit all amounts collected hereunder from or
on behalf of YGI. Emergent will account to YGI periodically with a
statement of charges and payments made pursuant to this Agreement. The
unpaid principal amount of the Loans, the unpaid interest accrued
thereon, the interest rate or rates applicable to such unpaid principal
amount, and the accrued and unpaid fees, premiums and other
amounts due hereunder shall at all times be ascertained from the
records of Emergent and such records shall constitute prima facie
evidence of the amounts so due and payable.
2.4 Use of Proceeds. The Initial Loan shall be used to pay
in full the Receivable. The proceeds of other Loans shall be used for
YGI's general working capital needs, consistent with good business
practices. No portion of the proceeds of any Loan may be used
to "purchase" or "carry," as such terms are defined in Regulations G,
T, U or X of the Board of Governors of the Federal Reserve System,
any margin stock, or to extend credit for the purpose of purchasing or
carrying margin stocks.
2.5 Origination Fee. In the event that any funds are
advanced by Emergent to YGI under this Loan Agreement (and
irrespective of when or whether any such amounts are repaid), YGI
hereby agrees to pay to Emergent an amount equal to 30% of the
increase, if any, in YGI's retained earnings from September 30, 1995 to
September 30, 2000, which amount shall be payable in full on or
before November, 30, 2000. YGI's retained earnings shall be
calculated in accordance with generally accepted accounting
principals on a consistently applied basis. YGI shall always employ
as its independent accountants any of Elliott, Davis and Company, LLP or
one of the "Big Six" accounting firms.
SECTION 3. SECURITY INTEREST
3.1 Security Interest Granted by YGI. In consideration of (i)
the conversion of the Receivable from a demand note to the Initial Loan
(which is payable over five years), (ii) the execution of the Note in an
amount in excess of the amount necessary to repay the Receivable,
and (iii) the sale of the Emergent's controlling interest in YGI in
the Stock Sale, and to secure the payment of all amounts owed under the
Notes and all other present and future obligations of YGI to
Emergent, and the prompt and complete performance by YGI under the Notes
and this Loan Agreement (collectively, the "Obligations"), YGI hereby
grants and conveys to Emergent a security interest in all of its
current and future-acquired property, in whatever form, both tangible
and intangible, real and personal (the "Collateral"), including, without
limitation:
(a) all equipment, computers, office equipment, furniture and
fixtures and vehicles, together with all replacements thereof;
(b) all customer contracts, rights, lists, records,
billing and all other information relating to customers of YGI, and
other similar general intangibles;
(c) all accounts receivable;
(d) all inventory, supplies and clothing patterns;
(e) all real property;
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<PAGE>
(f) all corporate labels, trademarks, and names;
(g) all proceeds of and increases to (including interest on
such proceeds) and insurance payable on account of items (a) through (f)
immediately above.
3.2 Other Covenants Regarding the Collateral. In
addition to all covenants and agreements of YGI contained herein, YGI
agrees as follows:
(a) Preservation of Collateral. To do all acts that may
be necessary to maintain, preserve, and protect the Collateral.
(b) Use of Collateral. Not to use or permit any Collateral
to be used unlawfully or in violation of any provision of this Loan
Agreement, any other agreement with Emergent related hereto or any
applicable statute, regulation, or ordinance or any policy of insurance
covering the Collateral.
(c) Payment of Taxes, etc. To pay promptly when due all
taxes, assessments, charges, encumbrances and Liens now or hereafter
imposed upon or affecting any Collateral (except for Permitted Liens).
(d) Defense of Litigation. To appear in and defend any action
or proceeding that may affect its title to or Emergent's interest in the
Collateral.
(e) Possession of Collateral.
Not to surrender or lose possession of, sell, encumber, lease, rent, or
otherwise dispose of or transfer any Collateral or right or interest
therein except as hereinafter provided, and to keep the Collateral
or right or interest therein except as hereinafter provided, free of
all Liens except for Permitted Liens; provided that, unless an
Event of Default shall occur, YGI may, in the ordinary course of
business, sell or lease any Collateral consisting of inventory and may
sell any assets no longer used in the conduct of YGI's business which
have a value not in excess of $100,000.
(f) Compliance with Law. To comply with all laws,
regulations, and ordinances relating to the possession, operation,
maintenance, and control of the Collateral.
(h) Delivery of After Acquired Collateral. To account fully
for and promptly deliver to Emergent, in the form received, all
documents, chattel paper, instruments, and agreements, constituting
Collateral hereunder and all proceeds of the Collateral received,
all endorsed to Emergent or in blank, as requested by Emergent, and
accompanied by such stock powers as appropriate and until so
delivered all such documents, instruments, agreements, and proceeds
shall be held by YGI in trust for Emergent, separate from all other
property of YGI and identified as the property of Emergent.
(i) Maintenance of Records. To keep separate, accurate and
complete records of the Collateral and to provide Emergent with such
records and such other reports and information relating to the
Collateral as Emergent may request from time to time.
(j) Further Assurances. To procure, execute, and
deliver from time to time any indorsements, notifications,
registrations, assignments, financing statements, real property
mortgages, certificates of title, ship mortgages, aircraft mortgages,
copyright mortgages, assignments or mortgages of patents, and other
writings deemed necessary or appropriate by Emergent to perfect,
maintain, and protect its security interest in the Collateral
hereunder and the priority thereof; and to take such other actions as
Emergent may request to protect the value of the Collateral and of
Emergent's security interest in the Collateral, including, without
limitation, provision of assurances from third parties regarding
Emergent's access to, right to foreclose on or sell, Collateral and
right to realize the practical benefits of such foreclosure or sale.
YGI hereby appoints Emergent its attorney in fact to execute and to
file any such financing statements or other documents on YGI's behalf
and to execute and file any renewals, amendments, assignments,
modifications or releases thereof at any time hereafter.
(k) Payment of Emergent's Costs and Expenses. To reimburse
Emergent upon demand for any reasonable costs and expenses,
including, without limitation, attorney fees and disbursements,
Emergent may incur while exercising any right, power, or remedy
provided by this Loan Agreement or by law, all of which costs and
expenses are included in the Obligations.
(l) Notice of Changes. To give Emergent thirty (30) days
prior written notice of (i) any change
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<PAGE>
in YGI's residence or chief place of business or (ii) any change in
YGI's legal name or trade name from Young Generations, Inc..
(m) Location of Records. To keep the records concerning the
collateral at its chief place of business and not to remove such records
from such location(s) without the prior written consent of the Emergent.
(n) Purchase Money Agreement. If Emergent advances funds
to enable YGI to acquire rights in or the use of any Collateral which
would give rise to a purchase money security interest, to use such funds
for such purpose.
(o) Inspection by Emergent. At any reasonable time,
upon demand by Emergent, to exhibit to, and allow inspection by,
Emergent (or persons designated by Emergent) of the Collateral.
(p) Location of Collateral. To keep the Collateral at
the location(s) set forth below and not to remove the Collateral from
such location(s) without the prior written consent of Emergent.
(q) Insurance. To insure the Collateral, with Emergent named
as loss payee, in form and amounts, with companies, and against risks
and liabilities satisfactory to Emergent, and YGI hereby assigns the
policies to Emergent, agrees to deliver them to Emergent at its
request, and agrees that Emergent may make any claim thereunder, cancel
the insurance on default by YGI, collect and receive payment and
indorse any instrument in payment of loss or return premium or
other refund or return, and apply such amounts received, at Emergent's
election, to replacement of Collateral or to the Obligations.
SECTION 4. REPRESENTATIONS OF YGI
YGI warrants and represents to Emergent as follows:
4.1 Organization, Good-Standing and Conduct of
Business. YGI is a corporation, duly organized, validly existing and
in good standing under the laws of the state of North Carolina, and
has full power and authority and all necessary governmental and
regulatory authorization to own all of its properties and assets and to
carry on its business as it is presently being conducted, and is
properly licensed, qualified and in good standing as a foreign
corporation in all jurisdictions wherein the character of the
properties or the nature of the business transacted by YGI makes such
license or qualification necessary.
4.2 Corporate Authority. The execution, delivery and
performance of this Loan Agreement have been duly authorized by the
Board of Directors of YGI. No other corporate acts or proceedings on
the part of YGI are required or necessary to authorize this Loan
Agreement.
4.3 Binding Effect. When executed, this Loan Agreement
will constitute a valid and legally binding obligation of YGI,
enforceable against YGI in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to the relief of
debtors generally, and general principles of equity. Each document and
instrument contemplated by this Loan Agreement, when executed and
delivered by YGI in accordance with the provisions hereof, shall
be duly authorized, executed and delivered by YGI and enforceable
against YGI in accordance with its terms, subject to the exceptions in
the previous sentence.
4.3 Absence of Defaults. YGI is not in default under,
or in violation of, any provision of its Articles of Incorporation or
Bylaws. YGI is not in default under, or in violation of, any agreement
to which YGI is a party, the effect of which default or violation
would have a material adverse effect on YGI or its business operations
or prospects. YGI is not in violation of any applicable law, rule
or regulation, the effect of which would have a material adverse effect
on YGI or its business operations or prospects.
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<PAGE>
4.4 Non-Contravention and Defaults; No Liens. Neither
the execution or delivery of this Loan Agreement, nor the fulfillment
of, or compliance with, the terms and provisions hereof, will (i) result
in a breach of the terms, conditions or provisions of, or constitute
a default under, or result in a violation of, termination of or
acceleration of the performance provided by the terms of, any
agreement to which YGI is a party or by which it may be bound (except
for YGI's agreements with Carolina First Bank, for which a waiver has
been obtained), (ii) violate any provision of any law, rule or
regulation, (iii) result in the creation or imposition of any Lien
of any nature whatsoever on any asset of YGI, or (iv) violate any
provisions of YGI's Articles of Incorporation or Bylaws. To the best
of YGI's knowledge, no other party to any material agreement to which
YGI is a party is in default thereunder or in breach of any provision
thereof. To the best of YGI's knowledge, there exists no condition or
event which, after notice or lapse of time or both, would constitute a
default by any party to any such agreement.
4.5 Necessary Approvals. YGI has obtained all
certificates of authority, licenses, permits, franchises,
registrations of foreign ownership or other regulatory approvals in
every jurisdiction necessary for the continuing conduct of its
business and ownership of its assets. Except for those which may be
renewed or extended in the ordinary course of business, no such
certificate, license, permit, franchise, registration or other
approval is about to expire, lapse, has been threatened to be
revoked or has otherwise become restricted by its terms which would,
upon such expiration, lapse, revocation or restriction, have a material
adverse effect on the financial circumstances of YGI. No consent,
approval, authorization, registration, or filing with or by any
governmental authority, foreign or domestic, is required on the part of
YGI in connection with the execution and delivery of this Loan
Agreement or the consummation by YGI of the transactions contemplated
hereby.
4.6 Financial Statements. The audited financial statements
of YGI for each of the fiscal years 1992, 1993 and 1994, the
unaudited financial statements of YGI at and for the six month period
ending June 30, 1995 and the unaudited monthly statements subsequent
to June 30, 1995 (the "YGI Financial Statements") all of which have
been provided to Emergent, are true, correct and complete in all
material respects and present fairly, in conformity with generally
accepted accounting principles consistently applied, the financial
position of YGI at the dates indicated and the results of its
operations for each of the periods indicated, except as otherwise set
forth in the notes thereto.
4.7 Undisclosed Liabilities. Except for the liabilities
which are disclosed in the YGI Financial Statements, YGI has no
material liabilities or material obligations of any nature, whether
absolute, accrued, contingent or otherwise, and whether due or to
become due. Since December 31, 1994, there has been (i) no material
adverse change in the business or operations of YGI, (ii) no incurrence
by or subjection of YGI to any obligation or liability (whether fixed,
accrued or contingent) or commitment material to YGI not referred to in
this Loan Agreement, except such obligations or liabilities as were
or may be incurred in the ordinary course of business and which are
reflected on the YGI Financial Statements at and for the periods
subsequent to December 31, 1994.
4.8 Rights of YGI in the Collateral. Except for the
security interest granted hereby and the Permitted Liens, YGI warrants
that it is the owner of the Collateral free from any adverse Lien. YGI
warrants and covenants that no financing statement covering any of
the Collateral, or any proceeds thereof, is on file in any public
office, except those filed with respect to Permitted Liens.
SECTION 5. REPRESENTATIONS OF EMERGENT
Emergent warrants and represents to YGI as follows:
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5.1 Organization, Good-Standing and Conduct of Business.
Emergent is a corporation, duly organized, validly existing and in
good standing under the laws of the state of South Carolina, and has
full power and authority and all necessary governmental and
regulatory authorization to own all of its properties and assets and to
carry on its business as it is presently being conducted, and is
properly licensed, qualified and in good standing as a foreign
corporation in all jurisdictions wherein the character of the
properties or the nature of the business transacted by Emergent makes
such license or qualification necessary.
5.2 Corporate Authority. The execution, delivery and
performance of this Loan Agreement have been duly authorized by the
Board of Directors of Emergent. No other corporate acts or proceedings
on the part of Emergent are required or necessary to authorize this Loan
Agreement.
5.3 Binding Effect. When executed, this Loan Agreement
will constitute a valid and legally binding obligation of Emergent,
enforceable against Emergent in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to the relief
of debtors generally, and general principles of equity. Each document
and instrument contem- plated by this Loan Agreement, when
executed and delivered by Emergent in accordance with the provisions
hereof, shall be duly authorized, executed and delivered by
Emergent and enforceable against Emergent in accordance with its terms,
subject to the exceptions in the previous sentence.
5.3 Absence of Defaults. Emergent is not in default under,
or in violation of, any provision of its Articles of Incorporation or
Bylaws. Emergent is not in default under, or in violation of, any
agreement to which Emergent is a party, the effect of which default
or violation would have a material adverse effect on Emergent or its
business operations or prospects. Emergent is not in violation of any
applicable law, rule or regulation, the effect of which would have a
material adverse effect on Emergent or its business operations or
prospects.
5.4 Non-Contravention and Defaults; No Liens. Neither
the execution or delivery of this Loan Agreement, nor the fulfillment
of, or compliance with, the terms and provisions hereof, will (i) result
in a breach of the terms, conditions or provisions of, or constitute
a default under, or result in a violation of, termination of or
acceleration of the performance provided by the terms of, any agreement
to which Emergent is a party or by which it may be bound, (ii) violate
any provision of any law, rule or regulation, (iii) result in the
creation or imposition of any Lien of any nature whatsoever on any
asset of Emergent, or (iv) violate any provisions of Emergent's
Articles of Incorporation or Bylaws. To the best of Emergent's
knowledge, no other party to any material agreement to which
Emergent is a party is in default thereunder or in breach of any
provision thereof. To the best of Emergent's knowledge, there exists
no condition or event which, after notice or lapse of time or both,
would constitute a default by any party to any such agreement.
SECTION 6. DEFAULT AND REMEDIES
6.1 Default. YGI shall be in default under this Security
Agreement on the happening of any of the following events or conditions
(each, an "Event of Default"):
(a) The failure in the payment or performance of any
obligation, covenant, or liability contained or referred to herein or
in the Notes, or the breach by YGI of any representation or warranty
contained herein, or a default in any other obligation, covenant, or
liability of YGI to Emergent, which default shall not have been cured
after ten (10) business days following such default.
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(b) Dissolution, termination of existence, insolvency,
business failure, appointment of a receiver of any part of the
property of, assignment for the benefit of creditors by, or
commencement of any proceeding under any bankruptcy or insolvency laws
by, or against YGI (or any guarantor or surety for YGI).
(c) Entry of any judgment against YGI which results in any
levy on, or seizure or attachment of the Collateral.
6.2 Remedies for Default. Emergent shall, in addition to
other remedies available at law or equity, have the following remedies
upon the occurrence of an Event of Default:
(a) On default hereunder and at any time thereafter,
Emergent may declare any or all of the Obligations immediately due
and payable and shall have the remedies of a secured party under
the Uniform Commercial Code or other applicable statutes of the
State of South Carolina. Emergent may require YGI to assemble the
Collateral and make it available to Emergent at a place to be
designated by Emergent that is reasonably convenient to both parties.
Emergent shall give YGI reasonable notice of the time and place of any
public sale thereof or of the time after which any private sale or any
other intended disposition thereof is to be made. The requirements of
reasonable notice shall be met if such notice is mailed, postage
prepaid, to the address of YGI shown in this Loan Agreement at
least ten (10) business days before the time of the sale or disposition.
(b) With respect to Collateral which is accounts
receivable, YGI hereby grants Emergent the right, upon default
hereunder by YGI, to instruct the account debtors of such accounts
receivable to pay all monies payable on such accounts receivable
directly to Emergent. YGI hereby irrevocably grants to Emergent a power
of attorney to execute and to file any such documents on YGI's
behalf as may be necessary to effectuate this subparagraph (b).
(c) YGI shall be liable to Emergent for all reasonable
expenses of Emergent incurred in connection with exercise or the
protection of its rights hereunder, including but not limited to
reasonable attorneys' fees and legal expenses incurred by
Emergent. After deducting all legal and other costs, expenses, and
charges, including reasonable attorneys' fees, incurred in the
collection, sale, delivery, or preservation of the Collateral, or any
part thereof, Emergent shall apply the residue of such sale proceeds to
the payment of the Obligations and the interest thereon. Should there
be any surplus of such proceeds, such surplus shall be paid to YGI.
YGI shall pay on demand to Emergent whatever balance may be due after
the sale of the Collateral and the application of the proceeds of such
sale as above provided.
SECTION 7. COVENANTS
7.1 Compensation. YGI shall not grant any increases in
compensation to any executive officer in excess of an amount equal to a
consumer price index increase without the consent of Emergent.
7.2 Directors. For so long as any amounts are owed by YGI
under this Loan Agreement and the Note, YGI shall have meetings of
its board of directors no less than on a quarterly basis, and YGI
shall permit a designee of Emergent to be present at all Board
meetings and shall make available to such designee all information
made available to the YGI board members (under the same conditions
as such information is made available to the YGI board members).
7.3 Indebtedness. YGI shall not incur, assume, or suffer to
exist any indebtedness except (a) for the Obligations; (b) Permitted
Indebtedness; and (c) other indebtedness so long as the aggregate
principal amount incurred by YGI (including amounts made available to
YGI but not yet drawn) does not exceed $100,000.
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7.4 Guaranties. YGI shall not guarantee the obligations
of any other person or entity except by endorsement of negotiable
instruments for deposit or collection and similar transactions in the
ordinary course of business.
7.5 Investments. YGI shall not make any investment in any
person or entity except for investments in certificates of deposit
issued by commercial banks located in the United States and having a
maturity date within one year after the date such investment is made;
(B) readily marketable commercial paper of a domestic issuer rated at
least "A-1" by Standard & Poor's Rating Group or "P-1" by Moody's
Investors Service, Inc.; and (C) direct obligations of the United
States of America or agencies thereof or obligations fully guaranteed by
the United States of America.
7.6 Prohibition of Fundamental Changes. YGI shall not
enter into any transaction of merger or consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), form any subsidiary or make any
substantial change in the basic type of business conducted by YGI as of
the date hereof.
7.7 Issuance of Stock. YGI shall not issue any shares of
capital stock or other ownership interests.
7.8 Affiliate Transactions. YGI shall not enter into any
transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service or the payment of
management or other service fees, except upon the consent of Emergent.
7.9 Dividends. YGI shall not declare or pay any dividends
on, or make any distribution with respect to, the shares of any class
of its capital stock, redeem or retire any of its capital stock, or take
any action having an effect equivalent to the foregoing in any fiscal
year.
SECTION 8. MISCELLANEOUS
8.1 Waiver. Any waiver by Emergent of any default
hereunder shall not be a waiver of any other default or of the same
default on a future occasion.
8.2 Choice of Law. This Loan Agreement shall be governed by
the laws of the State of South Carolina.
8.3 Assignment. Emergent may assign this Loan Agreement
and, if assigned, the assignee shall be entitled, upon notifying YGI,
to performance of all of YGI's obligations and responsibilities and
shall further be entitled to all rights and remedies of Emergent
hereunder. All rights of Emergent hereunder shall inure to the benefit
of its successors and assigns, and all obligations of YGI shall
bind the heirs, executors, administrators, successors, or assigns of
YGI.
8.4 Prior Agreements. This is the entire agreement
of the parties and supersedes all prior agreements, written or oral,
between the parties with respect to the subject matter hereto.
8.5 Amendment. This Loan Agreement may be amended only by
instrument in writing signed by all the parties hereto and/or duly
authorized officers and agents.
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8.6 Notices. All notices hereunder shall be sent by
depositing the same in the United States mail in a sealed envelope,
with postage prepaid, marked confidential and addressed to YGI, the
Shareholders or Emergent at the following addresses, or at such other
address as shall be furnished in writing:
YGI: Young Generations, Inc.
Post Office Box 2060
Hendersonville, North Carolina 28793
Attention: Josh Varat
(tel) 704-693-8623 (fax) 704-693-8765
Emergent: Emergent Group, Inc.
Post Office Box 17526
Greenville, South Carolina 29606
Attention: John M. Sterling, Jr.
(tel) 803-232-6198 (fax) 803-271-8374
8.7 Headings. The headings of the sections of this
Loan Agreement are for the convenience of reference only and do not
form a part hereof and in no way modify, interpret or construe the
meanings of the parties.
8.8 Counterparts. This Loan Agreement may be signed in one
or more counterparts, each of which shall be construed to be an
original.
8.9 Severability. Each portion of this Loan Agreement is
severable, and if one portion shall prove to be invalid, unenforceable
or violative of any statute, regulation, ordinance or other law, the
remainder of the Agreement shall remain in full force and effect.
THE REMAINDER OF THE PAGE IS BLANK
SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands and seals the day and year first above written.
WITNESSES:
YOUNG GENERATIONS, INC.
__________________________ ___________________(SEAL)
Secretary Chief Executive Officer
EMERGENT GROUP, INC.
Secretary
_______________________ ___________________(SEAL)
President
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EXHIBIT A
Borrowing Availability Regarding $700,000
From October 7, 1995 through September 30, 1996, Emergent shall
be obligated to advance the amount of the projected monthly negative
cash flow set forth in the projections set forth below up to a maximum
of $700,000, unless the cumulative negative cash flow equals or
exceeds 150% of cumulative projected negative cash flow as set forth
below, in which case Emergent shall not be obligated to advance further
funds. Once the obligation to advance funds has ceased, Emergent
shall not be obligated to advance additional funds until the cumulative
negative cash flow is equal to or is less than 125% of cumulative
projected negative cash flow as set forth below (but in no event to
exceed $700,000).
After September 30, 1996, Emergent shall be obligated to advance such
additional funds (if any, up to a maximum of $700,000) as Emergent in
its sole discretion, deems appropriate.
Cash Flow Projections
See attached page
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EXHIBIT B
REVOLVING CREDIT NOTE
$3,548,055 September 30, 1995
FOR VALUE RECEIVED, the undersigned, YOUNG GENERATIONS, INC., a
North Carolina corporation (hereinafter referred to as "Maker"),
promises to pay to the order of Emergent Group, Inc. (hereinafter
referred to as the "Holder"), at Holder's principal executive
offices in Greenville, South Carolina or at such other place as Holder
may from time to time designate in writing, the principal sum of Three
Million, Five Hundred Forty-eight Thousand and Fifty-five United
States Dollars (U.S. $3,548,055) or, if less, the aggregate
outstanding principal amount of the Loans, as such term is defined in
the Loan Agreement referred to below, made or issued by Holder to
Maker, in lawful money of the United States, payable in full on the
Termination Date, as such term is defined in such Loan Agreement.
Interest on the principal balance from time to time
outstanding hereunder shall accrue at a rate of 10% per annum and shall
be payable monthly.
Principal shall be payable in the manner set forth
in that certain Loan and Security Agreement dated as of September 30,
1995 among Maker and the Holder (the "Loan Agreement"). In no
contingency or event whatsoever shall the interest rate charged
pursuant to the terms of this Note exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. In the event that such
a court determines that Holder has received interest hereunder in
excess of the highest applicable rate, Holder shall promptly refund such
excess interest to Maker.
The date and amount of each Loan, as such term is defined in
the Loan Agreement, made by the Holder to the Maker of this Note
under the Loan Agreement, and each payment of principal thereof, shall
be recorded by Holder on its books and, prior to any transfer of this
Note, endorsed by Holder on the Schedule attached hereto or on any
continuation thereof.
This Note is the "Note" referred to in the Loan
Agreement, and is subject to all of the terms and conditions of the
Loan Agreement, including, but not limited to, those related to the
acceleration of the indebtedness represented hereby upon the occurrence
of an Event of Default (as such term is defined in the Loan Agreement)
or upon the termination of the Commitment (as such term is defined in
the Loan Agreement). Payment of this Note is secured by the
"Collateral" (as such term is defined in the Loan Agreement).
In the event that all or any portion of the indebtedness
evidenced hereby shall be collected by or through an attorney-at-law,
Holder shall be entitled to collect from Maker all costs of collection,
including reasonable attorneys' fees.
The Maker hereby waives presentment, demand for payment,
protest and notice of protest, notice of dishonor and all other
notices in connection with this Note. This Note shall be payable
without right of set off, any defense of want or failure of
consideration, nonperformance of any condition precedent, nondelivery or
delivery for a special purpose or any other defense of any nature
whatsoever.
This Note and the rights and obligations of the parties
hereunder and thereunder, shall be governed by, and construed in
accordance with, the laws of the state of South Carolina (without
regard to principles of conflicts of law).
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this
Note to be executed under seal by its duly authorized officer as of the
day and year first written above.
"MAKER"
YOUNG GENERATIONS, INC.
By: _______________________________
Name: _____________________________
Title: ____________________________
Attest: ___________________________
Name: _____________________________
Title: ____________________________
<PAGE>
Schedule
to Promissory Note
Dated September 30, 1995
of Young Generations, Inc.
<TABLE>
<CAPTION>
Principal Amount Principal Amount Outstanding
Date of Loan Interest Rate of Payment Balance Notation By
<S> <C> <C> <C> <C> <C>
</TABLE>
