SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) June 3, 1996
DIXIE YARNS, INC.
(Exact Name of Registrant as specified in its Charter)
Tennessee 0-2585 62-0183370
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
1100 SOUTH WATKINS STREET, CHATTANOOGA, TN 37404
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (423) 698-2501
Item 2. Acquisition or Disposition of Assets
On June 3, 1996, Dixie Yarns, Inc. ("DIXIE"), sold to American & Efird,
Inc. ("A & E"), substantially all of the assets employed by Dixie's Threads
USA Division in its industrial sewing threads business ("the BUSINESS"),
including real estate, plant, property and equipment, raw materials,
supplies, in-process inventories and the trade name "Threads USA" and
certain other trade names, corporate names and trademarks used in the
Business, but excluding cash, accounts receivable, greige yarn and finished
goods inventory, computer mainframe equipment and other systems and assets
used by Dixie on a company-wide basis. Dixie's Threads USA Division was
operated by subsidiaries T-C Threads, Inc. d/b/a Threads USA, Threads of
Puerto Rico, Inc., Productos Para la Industria de la Maquila, S. A. Prima
and Hilos Y Accessorios, S. A. de C. V. (collectively "THREADS"). There is
no material relationship between A & E and Dixie or any of Dixie's
affiliates, directors or officers or any of their associates.
A & E has agreed to sell the finished goods inventory of Threads, for the
account of Dixie in the ordinary course of business for a period following
the closing as defined in the agreement and to produce and sell products of
Threads USA during that period of time. Additionally, A & E has agreed to
purchase the greige yarn inventory of Threads, as determined at closing,
for the manufacture of Threads USA products sold during such period. A & E
has also agreed to assist Dixie in collecting the outstanding accounts
receivable of Threads during a period following the closing, as defined in
the agreement.
Dixie agreed not to solicit for employment nor hire any person employed by
A & E as a nonhourly worker nor to directly or indirectly compete with
A & E in the business formerly conducted by the Threads USA Division for a
period of five (5) years from the date of the sale.
The purchase price for the assets sold at closing was paid in cash and was
approximately $27,347,000. Net proceeds from the transaction, including
the ongoing transactions discussed above, are anticipated to be
approximately $50,000,000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro Forma Financial Information
PRO FORMA CONDENSED BALANCE SHEET
The following unaudited Pro Forma Condensed Balance Sheet as of March 30,
1996 gives effect to the sale of substantially all of the operating assets
of Threads USA and the assumed subsequent sale of greige yarn and finished
goods and the assumed collection of outstanding accounts receivable for
aggregate proceeds of approximately $50,000,000. The Company's historical
consolidated balance sheet has been adjusted to reflect the deletion of the
operating assets and liabilities of Threads USA as described in the
accompanying notes as if these transactions had been completed on March 30,
1996.
<TABLE>
<CAPTION>
DIXIE YARNS, INC.
PRO FORMA CONDENSED BALANCE SHEET
(dollars in thousands)
(unaudited)
PRO FORMA
Historical Dixie Yarns,
Dixie Yarns, Inc. without
Inc. Threads USA
March 30, March 30,
1996 Adjustments 1996
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,788 $ 3,788
Accounts receivable - -net 30,383 (1) $(13,902) 16,481
Inventories 101,292 (2) (20,494) 80,798
Assets held for sale 21,669 (3) (21,669) --
Other current assets 7,152 (4) (2,230) 4,922
TOTAL CURRENT ASSETS 164,284 (58,295) 105,989
PROPERTY, PLANT AND EQUIPMENT - NET 191,226 (5) (123) 191,103
INTANGIBLE ASSETS - NET 35,509 35,509
OTHER ASSETS 11,131 (6) (65) 11,066
TOTAL ASSETS $402,150 $(58,483) $343,667
<FN>
See notes to Pro Forma Condensed Balance Sheet (Unaudited).
<CAPTION>
PRO FORMA
Historical Dixie Yarns,
Dixie Yarns, Inc. without
Inc. Threads USA
March 30, March 30,
1996 Adjustments 1996
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 27,342 (7) $ (2,253) $ 25,089
Accrued expenses 25,041 (8) (2,703) 22,338
Current portion of long-term debt 2,168 2,168
TOTAL CURRENT LIABILITIES 54,551 (4,956) 49,595
LONG-TERM DEBT
Senior indebtedness 95,062 (9) (51,109) 43,953
Subordinated notes 50,000 50,000
Convertible subordinated debentures 44,782 44,782
TOTAL LONG-TERM DEBT 189,844 (51,109) 138,735
OTHER LIABILITIES 11,351 11,351
DEFERRED INCOME TAXES 29,083 (10) (2,418) 26,665
STOCKHOLDERS' EQUITY
Common Stock 41,608 41,608
Class B Common Stock 2,206 2,206
Additional paid-in capital 131,620 131,620
Retained earnings 1,456 1,456
Minimum pension liability adjustment (4,116) (4,116)
172,774 172,774
Less Common Stock in treasury at cost 55,453 55,453
TOTAL STOCKHOLDERS' EQUITY 117,321 117,321
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $402,150 $(58,483) $343,667
<FN>
See notes to Pro Forma Condensed Balance Sheet (Unaudited).
</TABLE>
NOTES TO PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
(1) Adjusted to reflect the collection of outstanding accounts
receivable of Threads.
(2) Adjusted to reflect the subsequent sale of all Threads greige
yarn and finished goods inventories.
(3) Adjusted to reflect the sale of property, plant and equipment
classified as assets held for sale at Threads.
(4) Adjusted to reflect the elimination of other current assets at
Threads and the reclassification of deferred taxes.
(5) Adjusted to reflect the sale of property, plant and equipment
at Threads not previously classified as "Assets held for sale."
(6) Adjusted to reflect the collection of deposits classified in
other assets at Threads.
(7) Adjusted to reflect the payment of outstanding accounts
payable at Threads.
(8) Adjusted to reflect the payment of outstanding accrued
expenses at Threads.
(9) Adjusted to reflect the reduction in outstanding borrowings
by the amount of net cash proceeds.
(10) Adjusted to reflect the reclassification of deferred taxes.
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
The following unaudited Pro Forma Condensed Statements of Operations for
the year ended December 30, 1995 and the quarter ended March 30, 1996 give
effect to the sale of substantially all of the operating assets of Threads
USA and the assumed subsequent sale of greige yarn and finished goods and
the assumed collection of outstanding accounts receivable for aggregate
proceeds of approximately $50,000,000. The Company's historical
consolidated results of operations have been adjusted to reflect the
deletion of the operating results of Threads USA as described in the
accompanying notes. The Pro Forma results are presented as if the
transactions had occured as of the beginning of the periods presented and
are not necessarily indicative of the results which would have occured had
the sale been effective at the beginning of such periods or of future
results of operations of the Company.
<TABLE>
<CAPTION>
DIXIE YARNS, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
PRO FORMA
Historical Dixie Yarns,
Dixie Yarns, Inc. without
Inc. Threads USA
Year Ended Year Ended
December 30, December 30,
1995 Adjustments 1995
<S> <C> <C> <C> <C>
Net sales $670,842 (A) $(94,572) $576,270
Cost of sales 572,762 (B) (79,093) 493,669
GROSS PROFIT 98,080 (15,479) 82,601
Selling and administrative expenses 82,624 (C) (13,391) 69,233
Asset valuation losses 63,425 (D) (41,480) 21,945
Other (income) expense - net 1,112 (E) (1,849) (737)
INCOME (LOSS) BEFORE INTEREST AND TAXES (49,081) 41,241 (7,840)
Interest expense 15,591 (F) (3,525) 12,066
INCOME (LOSS) BEFORE INCOME TAXES (64,672) 44,766 (19,906)
Income tax provision (benefit) (12,493) (G) 7,325 (5,168)
NET INCOME (LOSS) $(52,179) $ 37,441 $(14,738)
Net income (loss) per common
and common equivalent share $ (4.44) $ (1.25)
Weighted average number of common and
common equivalent shares outstanding 11,744 11,744
<FN>
See notes to Pro Forma Condensed Statements of Operations (Unaudited).
DIXIE YARNS, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
<CAPTION>
PRO FORMA
(H) Historical Dixie Yarns,
Dixie Yarns, Inc. without
Inc. Threads USA
Quarter Ended Quarter Ended
March 30, March 30,
1996 (H) Adjustments 1996
<S> <C> <C> <C> <C>
Net sales $161,520 (I) $(23,882) $137,638
Cost of sales 137,260 (J) (19,415) 117,845
GROSS PROFIT 24,260 (4,467) 19,793
Selling and administrative expenses 20,806 (K) (3,099) 17,707
Other (income) expense - net 693 (L) 8 701
INCOME (LOSS) BEFORE INTEREST AND TAXES 2,761 (1,376) 1,385
Interest expense 3,977 (M) (828) 3,149
INCOME (LOSS) BEFORE INCOME TAXES (1,216) (548) (1,764)
Income tax provision (benefit) (225) (N) (201) (426)
NET INCOME (LOSS) $ (991) $ (347) $ (1,338)
Net income (loss) per common
and common equivalent share $ (0.09) $ (0.12)
Weighted average number of common and
common equivalent shares outstanding 11,196 11,196
<FN>
See notes to Pro Forma Condensed Statements of Operations (Unaudited).
</TABLE>
NOTES TO PRO FORMA CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(A) Net sales has been adjusted to eliminate the sales made by Threads.
(B) Cost of sales has been adjusted to elimate the cost of Threads sales.
(C) Selling and administrative expenses have been adjusted to eliminate
the selling and administrative expenses of Threads and to reflect an
estimated reduction in the level of corporate expenses remaining after
the sale of Threads.
(D) Asset valuation losses have been adjusted to eliminate the valuation
losses attributable to Threads.
(E) Other (income) expense - net has been adjusted to eliminate the other
expenses of Threads.
(F) Interest expense has been adjusted to reflect estimated interest
savings (at 7.05%, the historical incremental borrowing rate paid
by the Company) due to the assumed reduction in outstanding long-term
debt of $50,000,000.
(G) Income tax provision (benefit) has been adjusted to reflect the tax
deductible portion of the pro forma adjustments at the approximate
combined Federal and State income tax rates for the period presented
The overall effective income tax rate applicable to the pro forma
adjustments differs from the statuatory income tax rate due primarily
to the non-deductibe write-off of intangible assets included in the
asset valuation losses.
(H) Under the provisions of FAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
depreciation expense is not recorded for assets held for sale during
the holding period. Accordingly, the historical results of operations
and the pro forma adjustments for the quarter ended March 30, 1996
excluded depreciation expense of approximately $1,321,000 and
therefore are not necessarily indicative of results from continuing
operations.
(I) Net sales has been adjusted to eliminate the sales made by Threads.
(J) Cost of sales has been adjusted to elimate the cost of Threads sales.
(K) Selling and administrative expenses have been adjusted to eliminate
the selling and administrative expenses of Threads and to reflect an
estimated reduction in the level of corporate expenses remaining after
the sale of Threads.
(L) Other (income) expense - net has been adjusted to eliminate the other
income of Threads.
(M) Interest expense has been adjusted to reflect estimated interest
savings (at 6.62%, the historical incremental borrowing rate paid
by the Company) due to the assumed reduction in outstanding long-term
debt of $50,000,000.
(N) Income tax provision (benefit) has been adjusted to reflect the tax
deductible portion of the pro forma adjustments at the approximate
combined Federal and State income tax rates for the period presented.
(c) Exhibits
Exhibits (2a), (2b), (2d) and (2e) listed below omit certain
schedules and exhibits, which are listed therein. The
Registrant hereby undertakes to furnish a copy of any such
omitted schedule or exhibit supplementally upon request of the
Commission's Staff.
(1) Exhibits Incorporated by Reference:
None.
(2) Exhibits Filed with this Report:
(2a) Asset Purchase Agreement dated May 23, 1996, by
and among T-C Threads, Inc. d/b/a Threads USA,
Threads of Puerto Rico, Inc., Productos para la
Industria de la Maquila, S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
(2b) Amendment, dated May 31, 1996, to Asset Purchase
Agreement dated May 23, 1996, by and among T-C
Threads, Inc. d/b/a Threads USA, Threads of Puerto
Rico, Inc., Productos para la Industria de la
Maquila, S. A., PRIMA, Hilos y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc. and American & Efird,
Inc.
(2c) Second Amendment, dated June 3, 1996, to Asset
Purchase Agreement dated May 23, 1996, by and among
T-C Threads, Inc. d/b/a Threads USA, Threads of
Puerto Rico, Inc., Productos para la Industria de la
Maquila, S. A., PRIMA, Hilos y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc. and American & Efird,
Inc.
(2d) Yarn and Finished Goods Agreement dated as of June 3,
1996, by and among T-C Threads, Inc. d/b/a Threads
USA, Threads of Puerto Rico, Inc., Productos para la
Industria de la Maquila, S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
(2e) Accounts Receivable Agreement dated as of June 3,
1996, by and among T-C Threads, Inc. d/b/a Threads
USA, Threads of Puerto Rico, Inc., Productos para la
Industria de la Maquila, S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
(2f) Noncompetition Agreement dated as of June 3, 1996, by
and among T-C Threads, Inc. d/b/a Threads USA,
Threads of Puerto Rico, Inc., Productos para la
Industria de la Maquila, S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
DIXIE YARNS, INC.
_________________________
(Registrant)
By:/s/D. EUGENE LASATER
______________________
D. Eugene Lasater
Controller
Date: June 17, 1996
____________________
DIXIE YARNS, INC.
CURRENT REPORT ON FORM 8-K
EXHIBIT INDEX
Exhibit No. Description
(2a) Asset Purchase Agreement dated May 23, 1996, by and
among T-C Threads, Inc. d/b/a Threads USA, Threads of
Puerto Rico, Inc., Productos para la Industria de la
Maquila, S. A., PRIMA, Hilos y Accessorios, S. A. de
C.V., and Dixie Yarns, Inc. and American & Efird, Inc.
(2b) Amendment, dated May 31, 1996, to Asset Purchase
Agreement dated May 23, 1996, by and among T-C Threads,
Inc. d/b/a Threads USA, Threads of Puerto Rico, Inc.,
Productos para la Industria de la Maquila, S. A.,
PRIMA, Hilos y Accessorios, S. A. de C. V., and Dixie
Yarns, Inc. and American & Efird, Inc.
(2c) Second Amendment, dated June 3, 1996, to Asset Purchase
Agreement dated May 23, 1996, by and among T-C Threads,
Inc., d/b/a Threads USA, Threads of Puerto Rico, Inc.,
Productos para la Industria de la Maquila, S. A.,
PRIMA, Hilos y Accessorios, S. A. de C. V., and Dixie
Yarns, Inc. and American & Efird, Inc.
(2d) Yarn and Finished Goods Agreement dated as of June 3,
1996, by and among T-C Threads, Inc. d/b/a Threads USA,
Threads of Puerto Rico, Inc., Productos para la
Industria de la Maquila, S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V., and Dixie Yarns, Inc. and
American & Efird, Inc.
(2e) Accounts Receivable Agreement dated as of June 3, 1996,
by and among T-Threads, Inc. d/b/a Threads USA, Threads
of Puerto Rico, Inc., Productos para la Industria de la
Maquila, S. A., PRIMA, Hilos y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc. and American & Efird, Inc.
(2f) Noncompetition Agreement dated as of June 3, 1996, by
and among T-C Threads, Inc. d/b/a Threads USA, Threads
of Puerto Rico, Inc., Productos para la Industria de la
Maquila, S. A., PRIMA, Hilos y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc. and American & Efird, Inc.
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") dated as of May 23,
1996, by and among T-C THREADS, INC. d/b/a THREADS USA, a Tennessee
corporation ("TUSA"), THREADS OF PUERTO RICO, INC., a North Carolina
corporation ("TPR"), PRODUCTOS PARA LA INDUSTRIA DE LA MAQUILA, S.A. PRIMA,
a Honduras corporation ("Prima"), HILOS Y ACCESORIOS, S.A. DE C.V., a
Mexico corporation ("Hilos") and DIXIE YARNS, INC., a Tennessee corporation
("Dixie") (TUSA, TPR, Prima and Hilos are sometimes collectively referred
to herein as "Threads" and TUSA, TPR, Prima, Hilos and Dixie are sometimes
referred to herein individually as the "Seller" and collectively as the
"Sellers") and AMERICAN & EFIRD, INC., a North Carolina corporation (the
"Buyer").
W I T N E S S E T H:
WHEREAS, Threads is engaged in the business of manufacturing and
selling industrial sewing thread and greige yarn and distributing notions
and other related products and supplies (the "Business"); and
WHEREAS, certain assets used in connection with the Business are owned
by Dixie; and
WHEREAS, the Sellers desire to sell, assign, transfer, convey and
deliver to the Buyer and the Buyer desires to purchase all of the Sellers'
right, title and interest in and to certain of the Sellers' assets related
to the Business, as more particularly set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. PURCHASE OF ASSETS. At the Closing (as defined in Section 17 herein),
the Sellers shall bargain, sell, assign, convey and transfer to the Buyer
and the Buyer shall purchase and acquire from the Sellers (i) all of the
Sellers' right, title and interest in and to all of the assets of Threads
owned by Threads on the Closing Date (as defined in Section 17 herein) and
(ii) those assets of Dixie which are used primarily in connection with the
Business, other than as to both clause (i) and clause (ii), the Excluded
Assets (as defined in Section 6 herein). The assets of the Sellers to be
purchased hereunder shall include:
(a) All of the Sellers' right, title and interest in the parcels of land
described in Schedule 1(a) (the "Land"), together with all of the Sellers'
right, title and interest in (i) improvements, fixtures, equipment
(including without limitation all plumbing, electrical, heating and air
conditioning systems) and each and every type of other physical improvement
located at, on or affixed to the Land to the full extent such items
constitute, or are or may be construed as, realty under the laws of the
jurisdiction in which the land is located (the "Improvements"); (ii) all
oil, gas, water, and mineral rights; (iii) all easements, rights of way and
any and all other rights appurtenant thereto; (iv) all transferable
licenses, permits, appurtenances, drawings, plans, specifications,
development rights, certificates of occupancy, records and all other items
used in the ownership and/or operation of the Real Property (as hereinafter
defined). The Land and Improvements, and such other rights, easements,
rights of way and other items as described above are hereinafter
collectively referred to as the "Real Property";
(b) All of Sellers' rights, title and interest in and to the real property
leases which the Buyer has agreed to accept, which leases are set forth in
Schedule 1(b) (the "Leases"). The parcels of land and all improvements,
fixtures and attachments thereon under tenancy as set forth in the Leases
and the Moonachie Sublease (as hereinafter defined) are hereinafter
referred to as the "Leased Property";
(c) All of (i) Dixie's tangible assets located on the Real Property, the
Leased Property and the Irving Property (as hereinafter defined) and (ii)
all of Threads' tangible assets (excluding as to both clause (i) and clause
(ii) tangible assets that are Excluded Assets), including but not limited
to all assets located on the Real Property, the Leased Property and the
Irving Property (that certain "Dixie Yarns, Inc. Property Listing" dated
February 16, 1996, marked to reflect the items thereon that were found by
Buyer during an inventory taken February 26, 1996 through March 31, 1996 is
attached hereto as Schedule 1(c)) (all such assets are hereinafter
collectively referred to as the "Fixed Assets");
(d) All of Threads' owned motor vehicles and trailers listed on Schedule
1(d) attached hereto (the "Motor Vehicles");
(e) All of Threads' customer lists, as set forth on the reports listed on
Schedule 1(e)(i) (the "Customers") attached hereto (which reports contain
aggregate sales information with respect to each Customer for the periods
indicated), and all records (including, without limitation, credit files
and excluding records subject to confidentiality restrictions imposed by
third parties). A list of such excluded records relating to customers
having outstanding balances with Threads of $10,000 or more as of May 13,
1996 is set forth on Schedule 1(e)(ii) (the "Excluded Customer Reports");
(f) All of Threads' owned intangible assets, including but not limited to
(i) the rights to software developed by or for Threads for use on the local
area network of Threads' Gastonia facilities, including the source code and
all related documentation, as such rights and software are described in the
Computer Systems and Administrative Services Agreement (as hereinafter
defined), (ii) the rights under computer software license agreements
permitted to be assigned under the terms of such agreements, as such rights
and software are described in the Computer Systems and Administrative
Services Agreement, (iii) all agreements not to compete with Threads which
are transferable by the terms thereof, (iv) all nondisclosure agreements
with Threads which are transferable by the terms thereof (including without
limitation those agreements entered into with prospective purchasers of the
Assets), and (v) any and all claims or causes of action Sellers have or may
have against any party that has caused any damage or injury to the Real
Property including, but not limited to, claims or causes of action arising
out of or resulting from the release, threatened release, discharge,
disposal, spill, leak or emission of any Hazardous Materials or Other
Materials (as such terms are hereinafter defined) (the "Intangibles");
excluding, however, any and all of Threads' employment agreements and
agreements pertaining to Threads' employee welfare benefit plans, stock
option plans or bonus plans or any other similar benefit, bonus or
compensation plans or similar items;
(g) Whether or not reflected on the Sellers' books and records (i) all of
TUSA's rights in the name "Threads USA," which, except as otherwise
provided herein, TUSA will cease using as of the Closing; all of TUSA's
rights in the name "T-C Threads, Inc.," all of TPR's rights in the name
"Threads of Puerto Rico, Inc.," all of Prima's rights in the name
"Productos Para La Industria de la Maquila, S.A. Prima" and all of Hilos'
rights in the name "Hilos y Accesorios," all of which names will be changed
immediately following the Closing in accordance with Section 7 below; and
all of the Sellers' rights in any corporate names, trademarks, tradenames,
copyrights, or service marks currently or historically used in connection
with the Business, all of which are listed on Schedule 1(g)(i) attached
hereto (the "Trademarks and Tradenames"), and the goodwill of the Business
in connection therewith (the "Goodwill"), (ii) the going concern value of
the Business (the "Going Concern Value") and (iii) all of the Sellers'
rights in the patents, patent registrations and applications, inventions,
trade secrets, secret processes, formulae, know-how and other proprietary
data and information, intellectual property and licenses thereof relating
solely to the Business, all of which are listed on Schedule 1(g)(iii)
attached hereto (the "Rights");
(h) All of Threads' business records relating to the Business that the
Buyer considers useful, including, but not limited to, all personnel files
with respect to the Employees (as hereinafter defined) employed by the
Buyer, supplier lists and files, sales listings, advertising and
promotional materials, files, records and inventory records (the
"Records"); provided, however, that Threads may retain a copy (or, if
required, may retain the original and provide a copy to the Buyer) of such
documents as needed for legal or business purposes;
(i) All of Threads' rights under all material contracts, personal property
leases, licenses and other agreements (including without limitation the
Railroad Agreements (as listed on Schedule 1(i)) pertaining to the Business
(each of which is to be assumed by the Buyer pursuant to Section 8(a)
hereof unless excluded pursuant to Section 8(d) hereof), as set forth on
Schedule 1(i) attached hereto (the "Contracts") to the extent such
Contracts are assignable by the terms thereof or consent to assignment is
obtained prior to the Closing;
(j) All of Threads' unemployment tax reserves held by any applicable state
and ratings relating to the Business to the extent assignment thereof to
the Buyer is permitted by applicable law and the Buyer requests that they
be assigned (the "Tax Reserves");
(k) All of Threads' federal, state and local licenses required for the
conduct of the Business (including, but not limited to, environmental
discharge permits) to the extent assignment thereof to the Buyer is
permitted by applicable law (the "Licenses");
(l) All of the Sellers' rights to all of their telephone numbers and
facsimile numbers, and to the post office boxes set forth on Schedule 1(l)
attached hereto (the "Telephone Numbers, Etc.");
(m) All other assets of Threads other than the Excluded Assets, used or
useful in the Business and whether or not reflected on Sellers' books and
records;
(n) Dixie's rights to computer software and under the computer software
license agreements as such rights and software are described in the
Computer Systems and Administrative Service Agreement;
(o) All other assets of Dixie used primarily in connection with the
Business, which assets are listed on the "Dixie Yarns Property Listing
Threads USA" attached hereto as Schedule 1(o) (collectively, the "Other
Dixie Assets"); and
(p) Contract rights of the Sellers' expressly assumed by the Buyer
pursuant to Section 8(a).
2. RAW MATERIALS, SUPPLIES, MACHINERY PARTS AND IN-PROCESS INVENTORIES.
(a) In addition to the assets to be purchased pursuant to Section 1 above,
at the Closing Threads shall bargain, sell, assign, convey and transfer to
the Buyer and the Buyer shall purchase and acquire from Threads all of
Threads' right, title and interest in and to Threads' raw materials
(excluding greige yarn), supplies, machinery parts ("Parts") and in-process
inventories as the same exist as of the Closing Date (the "Raw Materials,
Supplies, Parts and In-Process Inventories"); provided, however, that the
Buyer, upon inspection, may, at the Buyer's sole discretion, exclude from
the items to be purchased pursuant to this Section 2, any and all Raw
Materials, Supplies, Parts and In-Process Inventories (i) which are
defective or obsolete, (ii) which are more than three months old (as
measured from the date of manufacture or purchase by Threads, whichever is
applicable), (iii) which are not used or useful in the Business or the
business of Buyer, (iv) which are of unacceptable quality or (v) to the
extent such items, as of the Closing Date, exist in quantities greater than
a three months supply (based on the usage of Threads in the ordinary course
of business during the three full fiscal months prior to the Closing Date).
Only Parts for machinery that is still being used by Threads in its current
operations as of the Closing Date shall be included as a Part purchased
hereunder, and such Parts may not be excluded from purchase hereunder by
the Buyer on the basis that such Parts are more than three months old or
that the quantity of such Parts constitutes more than a three month supply.
The unit prices to be used for each item purchased hereunder (other than
in-process inventories) will be the lesser of (i) the historical purchase
price of the same as reflected in the books and records of Threads
(substantiated by vendor invoices) or (ii) the market value of such items
as of the Closing Date plus ten percent (10%). The valuation for in-
process inventories will be determined in accordance with Schedule 2(a)
("In-Process Inventory Valuation"). A joint physical inventory of the Raw
Materials, Supplies, Parts and In-Process Inventories shall be conducted by
the parties prior to the Closing Date at times to be agreed to by the
parties.
(b) Notwithstanding anything contained herein to the contrary, the Buyer
in its sole discretion may elect to purchase at any time during the first
three (3) months following the Closing Date, and Dixie shall be obligated
to sell following a two-week delivery notice from Buyer up to that number
of cotton bales set forth on Schedule 2(b) ("Cotton Bales") provided that
such cotton is necessary to allow Buyer to continue operations without a
major disruption in terms of supply. All purchases and sales of cotton
hereunder shall be at the market price as determined by the average of
quotes from the vendors set forth on Schedule 2(b) attached hereto as of
the date of any purchase order submitted by the Buyer to Dixie as its two-
week delivery notice.
3. NOTIONS. In addition to the assets to be purchased pursuant to
Sections 1 and 2 above, at the Closing, Threads shall bargain, sell,
assign, convey and transfer to the Buyer and the Buyer shall purchase and
acquire from Threads all of Threads' right, title and interest in and to
all notions finished goods at the Seller's Kaplan, Illinois facility (the
"Notions Finished Goods"); provided, however, that the Buyer may, at the
Buyer's sole discretion, exclude any item (a) that is defective or
obsolete, (b) that is more than six months old (as measured from the date
of purchase), (c) that is not in the Buyer's or Threads' line of business,
(d) that is of uncertain quality or (e) to the extent that such item exists
in an amount exceeding a six month supply (based on the average of sales by
TUSA of such item during the six month period immediately preceding the
Closing Date). The unit prices to be used for each item purchased
hereunder shall be the lesser of the actual historical cost (substantiated
by vendor invoices) or fair market value. A joint physical inventory of
the Notions Finished Goods shall be conducted by the parties prior to the
Closing Date at times to be agreed to by the parties.
The assets listed in Section 1, Raw Materials, Supplies, Parts, In-
Process Inventories, and Notions Finished Goods are hereinafter
collectively referred to as the "Assets".
4. GREIGE YARN; FINISHED GOODS. On the Closing Date, the Buyer and
Sellers shall enter into a separate agreement governing the purchase, sale
or other disposition of greige yarn and finished goods, excluding the
Notions Finished Goods referred to in Section 3 hereinabove, owned by
Threads as of the Closing Date, which agreement shall be substantially in
the form of Exhibit A attached hereto (the "Yarn and Finished Goods
Agreement").
5. ACCOUNTS RECEIVABLE. On the Closing Date, the Buyer and Sellers shall
enter into a separate agreement governing the rights and responsibilities
of the parties with respect to the accounts receivable of Threads existing
as of the Closing Date, which agreement shall be substantially in the form
of Exhibit B attached hereto (the "Accounts Receivable Agreement").
6. EXCLUDED ASSETS. The assets to be purchased and sold hereunder, and
the term "Assets" as used herein, shall not include the following assets of
the Sellers (the "Excluded Assets"):
(a) cash and cash equivalents, wherever located;
(b) all tax and general corporate records;
(c) accounts receivable;
(d) inventory of greige yarn;
(e) finished goods thread inventory;
(f) Employee Benefit Plans (as defined in Section 11(aa)), including any
accounts, trusts, or other assets held in connection therewith by the
Sellers; and
(g) those certain assets of Dixie or Threads set forth in Schedule 6(g)
(the "Other Excluded Assets") hereto.
7. ABSENCE OF LIENS; INSTRUMENTS OF CONVEYANCE AND TRANSFER; CHANGE OF
SELLER'S NAME. All of the Assets will be conveyed to the Buyer free and
clear of all liens, encumbrances, security interests, charges and
liabilities except (i) for liens of taxes and assessments not yet due and
payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings; (ii) for unfiled materialmen's, mechanics and
similar liens incurred in connection with the ordinary course of operating,
repairing and maintaining the Assets, which do not exceed $5,000 with
respect to the Real Property or $5,000 with respect to the Fixed Assets and
the Vehicles; (iii) for such state of facts that are shown by the current
surveys of the Real Property; (iv) for other defects and encumbrances which
do not materially affect the usefulness of the Real Property for the
purposes for which it is presently being utilized, which are listed as
exceptions in the title insurance policy obtained by the Buyer with respect
to the Real Property and which are in all respects reasonably acceptable to
the Buyer ("Permitted Liens"); and (v) Permitted Exceptions (defined
hereinafter). On the Closing Date, the Sellers shall deliver to the Buyer
such certificates, bills of sale, documents of title and other instruments
of conveyance and transfer, in a form satisfactory to the Buyer, as shall
be reasonably necessary and effective to vest in the Buyer good and
marketable title in and to any property sold, transferred, conveyed or
delivered under this Agreement.
TUSA agrees that within five (5) days after the Closing, it will change
its corporate name to a name approved by the Buyer, it will terminate all
assumed name or similar certificates for "Threads USA" and except as
otherwise provided in the Related Documents will cease using "T-C Threads",
"Threads USA" or any assumed name. TPR agrees that within five (5) days
after the closing, it will change its corporate name to a name approved by
the Buyer and except as otherwise provided in the Related Documents cease
using all currently used assumed names, corporate name or brand names.
Prima agrees that immediately after the Closing, it will proceed to change
its corporate name to a name approved by the Buyer and except as otherwise
provided in the Related Documents cease using all currently used assumed
names, corporate name or brand names. Hilos agrees that immediately after
the Closing, it will proceed to change its corporate name to a name
approved by the Buyer and except as otherwise provided in the Related
Documents cease using all currently used assumed names, corporate name or
brand names. The Sellers agree not to use Threads USA in any assumed name,
corporate name or brand name except as otherwise provided in the Related
Documents.
8. ASSUMPTION OF LIABILITIES.
(a) Buyer assumes none of the liabilities of Sellers of any kind
whatsoever, whether known or unknown, contingent or otherwise, except:
(i) liability occurring on or after the Closing Date for those certain
real estate leases, equipment leases, contracts and other liabilities of
Threads, as set forth on Schedule 8(a) attached hereto (the "Assumed
Liabilities");
(ii) as otherwise provided in the Assignment and Assumption Agreement,
which agreement shall be in substantially the form attached hereto as
Exhibit C (the "Assignment and Assumption Agreement");
(iii) open sales and supply orders of Threads incurred in the ordinary
course of business, which provide for the purchase or sale of goods at
reasonable prices and in reasonable quantities and, except as otherwise set
forth on Schedule 8(a), which do not impose obligations on the part of the
Buyer beyond sixty (60) days following the Closing Date; provided, however,
that if the assumption of any such sales or supply order imposes upon the
Buyer the obligation to sell goods at a price that is more than ten percent
(10%) less than the Buyer's average selling price for comparable goods
during the same period or to purchase goods at a price that is more than
ten percent (10%) greater than the Buyer's average purchase price for
comparable goods during the same period, the Sellers, upon presentation by
the Buyer of reasonable evidence of such occurrence, shall pay to the Buyer
an amount equal to the sum of (A) the aggregate amount by which such sales
were more than ten percent (10%) less than such average selling price plus
(B) the aggregate amount by which purchases were more than ten percent
(10%) more than such average purchase price; provided further that if the
goods are greige yarn or finished goods subject to the Yarn and Finished
Goods Agreement, then instead of the foregoing the Sellers shall pay to the
Buyer twenty-five percent (25%) of the amount by which such sales were more
than ten percent (10%) less than such average selling price; and
(iv) the obligation to effect any environmental remediation required
after the Closing with respect to the Real Property, other than with
respect to the Environmental Remedial Actions listed on Schedule 16(k).
(b) Sellers shall indemnify and hold Buyer harmless with respect to any
liabilities not assumed by Buyer hereunder subject to the provisions of
Section 20 hereof. Buyer agrees that it will fully pay, perform, observe
the terms, satisfy, and/or discharge each, every, and all liabilities of
Sellers arising from and after the Closing Date on those specific items it
assumes under this Section 8. Buyer will use its best efforts to effect a
novation of the items listed on Schedule 1(b) and Schedule 8(a) to
substitute Buyer in place of Sellers as the contracting party.
(c) The Sellers and the Buyer will pay their own expenses, including legal
and accounting expenses in connection herewith; provided one-half of the
fees and expenses of the Collier, Shannon, Rill & Scott law firm related to
regulatory filings and approvals required in connection with the
transaction contemplated herein shall be paid by the Buyer and one-half by
the Sellers.
(d) By written notice to the Sellers given not less than five (5) days
prior to the Closing Date (or, with respect to the computer software
licenses referenced in Schedule 1(i), by written notice given prior to the
Closing), the Buyer may exclude from the Assets purchased hereunder and the
liabilities assumed hereunder any of the Contracts listed or referenced on
Schedule 1(i).
9. PURCHASE PRICE.
(a) Amount. The purchase price to be paid by the Buyer at Closing shall
be the sum of the following:
(i) for the assets set forth in Section 1 herein, Twenty-Three Million
and 00/100 Dollars ($23,000,000);
(ii) for the Raw Materials, Supplies, Parts and In-Process Inventories,
the aggregate purchase price as determined in accordance with Section 2
herein, but not to exceed Five Million Three Hundred Sixty-Seven Thousand
and 00/100 Dollars ($5,367,000), of which amount the portion paid for Parts
shall not exceed Five Hundred Seventy-Five Thousand and 00/100 Dollars
($575,000); and
(iii) for the Notions Finished Goods, the aggregate purchase price as
determined in accordance with Section 3 hereof, but not to exceed Four
Hundred Thousand and 00/100 Dollars ($400,000).
The total of all the purchase prices set forth hereunder shall be
collectively referred to as the "Purchase Price", and shall be paid by the
Buyer at Closing as full payment for the Assets.
(b) Allocation. The allocation of the Purchase Price shall be established
by the Buyer and shall be delivered to the Sellers within six (6) months
following the Closing (the "Purchase Price Allocation"). The Buyer and the
Sellers agree to use such allocation for all federal income tax purposes,
including without limitation on Internal Revenue Service Form 8954 (Asset
Acquisition Statement under Internal Revenue Code Section 1060) which form
each of the Buyer and the Sellers is required to file in connection with
the transactions contemplated hereby and which form each of
the Buyer and the Sellers hereby covenant and agree to timely and properly
file with its federal income tax return, provided that such allocation is
in accordance with Internal Revenue Code Section 338(b)(5).
(c) Payment of Purchase Price. The Purchase Price shall be paid by Buyer
in immediately available funds on the Closing Date as follows:
(i) One Million Five Hundred Thousand Dollars ($1,500,000) shall be
delivered by Buyer to a mutually acceptable escrow agent ("Escrow Agent"),
said sum to be held in an escrow fund ("Escrow Fund") pursuant to the terms
of an escrow agreement substantially in the form of Exhibit D hereto
("Escrow Agreement"). The Escrow Fund shall serve as the initial source
for payment of indemnification claims of Buyer as provided in Section 20
hereof. All payments or distributions shall be made from the Escrow Fund
in accordance with the terms of the Escrow Agreement. All income earned on
the Escrow Fund shall be distributed in accordance with the terms of the
Escrow Agreement; and
(ii) The balance of the Purchase Price shall be transferred to an
account designated by Sellers pursuant to wire transfer instructions
provided to Buyer prior to the Closing.
10. RISK OF LOSS. Until the Closing, all risk of loss or damage to the
Assets to be transferred to the Buyer shall be borne by the Sellers.
11. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Sellers, jointly
and severally, hereby represent and warrant to the Buyer:
(a) Each of the Sellers is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
incorporated. Each of the Sellers is qualified and authorized to do
business in, and is in good standing as a foreign corporation in,
each jurisdiction in which such qualification or authorization is necessary
for the conduct of the business in which each such Seller is now engaged
and in which the failure to qualify would have a material adverse effect on
the operations and financial condition of such Seller. Each of the Sellers
has legal authority to enter into and perform this Agreement and all other
agreements contemplated herein, and each has duly authorized the execution,
delivery and performance of this Agreement and the other agreements and
transactions contemplated herein.
(b) This Agreement has been validly executed and delivered by each of the
Sellers and constitutes the valid and binding agreement and obligation of
each of the Sellers, enforceable in accordance with its terms. At the
Closing, the Yarn and Finished Goods Agreement, the Accounts Receivable
Agreement, the Bill of Sale (as hereinafter defined), the Real Estate
Instruments (as hereinafter defined), the Escrow Agreement, the
Noncompetition Agreement (as hereinafter defined) and all other instruments
or documents delivered in connection herewith or therewith (collectively,
the "Related Documents") will each have been validly executed and delivered
by each of the Sellers party thereto and will be the valid and binding
agreements and obligations of such Sellers, enforceable in accordance with
their terms except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditor's rights, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceedings therefor may be brought forth.
(c) The execution and delivery of this Agreement and the Related
Documents, the consummation of the transactions contemplated hereby and
thereby and the fulfillment and compliance with the terms and provisions
hereof and thereof by the Sellers do not and will not violate, conflict
with or constitute a breach of or default under or require any consent
pursuant to any law or regulation presently applicable to the Sellers,
their respective articles of incorporation or bylaws or any order of any
court, regulatory body or arbitral tribunal or any agreement or instrument
to which any of the Sellers is a party or by which they or any of their
property is bound.
(d) Each of the Sellers has good marketable title to all the Assets, free
and clear of all claims, charges, liens, security interests, conditional
sales agreements or other encumbrances other than Permitted Exceptions.
The Sellers have provided the Buyer with the reports identified on Schedule
11(d)(i) ("1995 Property Adjustment Reports"), which reports together
constitute a true and correct list of all additions, deletions, transfers
and modifications that have been made during the period January 1, 1995
through December 30, 1995. Except as disclosed on Schedule 11(d)(ii)
("1996 Property Adjustment Reports"), no Fixed Assets have been deleted,
sold or transferred during the period from December 30, 1995 through the
date hereof. The Assets are currently in the possession of the Sellers
and, to the extent listed on Schedule 1(c) or Schedule 11(d)(ii), are
located at the Sellers' facilities as set forth on such schedules.
(e) None of the Sellers is in default of the terms of any contract for the
delivery of any merchandise and, except as set forth on Schedule 11(e)
("Customer and Supplier Relationships"), none of the Sellers has knowledge
(i) that any Customer intends to terminate its current business
relationship with any of the Sellers or would terminate such relationship
upon the sale of the Assets of the Sellers described herein or (ii) that
any of Threads' 100 largest Customers has any material dispute with
Threads. Sellers have not entered into any contract relating to the Assets
or their Customers other than contracts in the normal course of business.
Each of the Sellers' relationships with its suppliers is reasonably
satisfactory and, except as set forth on Schedule 11(e), none of the
Sellers has knowledge that any supplier would refuse to do business with
the Buyer.
(f) Except as set forth on Schedule 11(f) hereto ("Special Arrangements"),
none of the Sellers (other than Dixie) has any volume incentive programs,
rebate programs or consignment or special return arrangements with any
Customer.
(g) Attached as Schedule 11(g) hereto (the "Sales Information") is a list
of the total sales volume of each product sold by Threads during the fiscal
year ended December 31, 1995.
(h) Each of the Sellers is solvent and has paid and intends to pay its
creditors in the ordinary and normal course.
(i) To Sellers' knowledge, all of the Fixed Assets have been maintained
according to Threads' normal business practices and no material adverse
change to the Fixed Assets has occurred since February 26, 1996.
(j) Except as set forth on Schedule 11(j) ("Out of the Ordinary Course
Transactions"), Threads has conducted its business in the ordinary and
normal course since December 30, 1995.
(k) Attached as Schedule 11(k) ("Customer Complaints Summary") is a
summary of Threads' compilation of Customer complaints listed according to
type of complaint (which complaints have been deemed valid by Threads) made
by Customers during the fiscal year ended December 30, 1995.
(l) Attached as Schedule 11(l) ("Blanket/Future Purchase Orders") is, to
the Sellers' knowledge, a complete list of all blanket and future purchase
orders from customers effective as of May 21, 1996.
(m) Except as set forth on Schedule 11(m) attached hereto ("Pending
Lawsuits"), (i) there is no action, suit or proceeding at law or in equity
or by or before any governmental instrumentality, agency or arbitral body
now pending or, to the knowledge of any of the Sellers, threatened against
or affecting Threads or any of the Assets and (ii) the Sellers do not know
of any fact that could form the basis of a product liability, tort or other
claim against or affecting Threads or any of the Assets in an amount in
excess of $15,000 for any single claim.
(n) Except as indicated on Schedule 11(n) attached hereto ("Required
Consents"), to the best of the Sellers' knowledge, no approval, consent or
authorization of or registration, declaration or filing with any
governmental body or agency which has not already been obtained is required
in connection with the execution, delivery or performance by the Sellers of
this Agreement or the Related Documents.
(o) None of the employees of Threads is employed under a contract which is
not terminable at will. Threads has not entered into any agreement of any
kind with any local, national or international labor union, nor to the best
of Threads' knowledge is any election with respect thereto pending or
threatened. Except as set forth in Schedule 11(o) ("Employment
Discrimination and Other Claims"), Threads is not a party to any employment
discrimination or other labor related charge, claim, investigation,
agreement or proceeding nor is any such action pending or threatened. All
obligations, responsibilities, liabilities for unpaid wages, payroll
expenses, benefits, severance, employment taxes or any other employment
related obligations to both Employees (as hereinafter defined) or taxing
authorities incurred prior to the Closing are the sole responsibility and
obligation of Threads.
(p) Each of the exhibits and schedules attached hereto is incorporated
herein by reference and is true, correct and complete in all material
respects with respect to each item thereof.
(q) Except as set forth on Schedule 11(q) ("Customer and Supplier
Contracts"), Threads has no contract with any Customer or supplier (except
for purchase orders received or issued in the ordinary course of business)
and is not subject to any license or franchise agreement with any customer
or supplier. No consent of any supplier is required in order for the Buyer
to distribute such supplier's merchandise to the Customers.
(r) None of the Sellers is in default nor has any Seller received any
notice of default under any of the Contracts. Except as noted on Schedule
11(r) ("Assignable upon Consent Contracts"), all Contracts are assignable
to the Buyer without the consent of the third party.
(s) Except as identified in the inventory reports to be provided to the
Buyer in connection with the physical inventories described in Sections 2
and 3 hereof, all Raw Materials, Supplies, Parts and In-Process Inventories
and all Notions Finished Goods are unused and undamaged. To the extent
that such inventory reports state the number and type of items reported to
be in a container, such information shall be accurate.
(t) Schedule 11(t) (the "Consigned Stock Locations") contains a list of
all consigned stock locations at which consigned inventory of the Sellers
is located as of the Closing Date.
(u) To the Sellers' knowledge, Threads has available to it on the Real
Property, Leased Property, and Irving Property (as hereinafter defined)
sufficient power, fuel oil, natural gas and water supplies and adequate
sewage and waste disposal systems for the operation of the Business as
presently conducted, and, to the best of Threads' knowledge, all such
supplies and systems will be available after the Closing.
(v) Except as set forth on Schedule 11(v) ("Real Property Compliance and
Repairs"), to Sellers' knowledge, the Real Property, the Leased Property
and the Irving Property comply in all material respects with all applicable
restrictions, building ordinances and zoning ordinances and all regulations
of the applicable health and fire departments, and no material alteration,
repair, improvement or other work has been performed in respect of such
Improvements within the last 120 days. The Real Property, Leased Property
and Irving Property and Threads' continued use, occupancy and operation of
the Real Property, Leased Property and Irving Property as currently used,
occupied and operated is not prohibited under any law, code, ordinance,
rule, regulation or order affecting such Real Property, Leased Property and
Irving Property, and, to Sellers' knowledge, except for certain
infringements on railroad easements, rights of way or real property, the
continued existence, use, occupancy and operation on the Real Property,
Leased Property and Irving Property, and the right and ability to repair
and/or rebuild improvements on the Real Property, Leased Property and
Irving Property in the event of casualty, is not dependent on any special
permit, exception, approval or variance. Each Improvement on the Real
Property, Leased Property and Irving Property has direct access, adequate
for the operation of the business of Threads in the ordinary course, to a
public street adjoining such Real Property, Leased Property and Irving
Property on which such improvement is situated, and, except as shown on
surveys prepared in connection with the transactions contemplated by this
Agreement, no existing way of access to any improvement crosses or
encroaches upon any property or property interest not leased or owned by
Threads. There is no condemnation proceeding pending or, to the best of
the Sellers' knowledge, threatened with respect to any parcel of the Real
Property, Leased Property or Irving Property.
(w) (i) Except as set forth in those reports identified on Schedule
11(w)(i) ("Environmental Reports"), Sellers have no knowledge of any
release, threatened release, application, spill, leak, discharge or
emission of any Hazardous Material or Other Material (as such terms are
hereinafter defined) to the air, surface water, groundwater or soil of the
Real Property, Leased Property and Irving Property which must be reported
to any governmental agency pursuant to, or which is a violation of, any of
the Environmental Laws or Health and Safety Laws (as such terms are
hereinafter defined).
(ii) Except as set forth in those reports identified on Schedule
11(w)(i) and Schedule 11(w)(ii) ("Environmental Exceptions"), Sellers, to
their knowledge, have duly complied in all material respects with, and the
Real Property, Leased Property and Irving Property are in compliance with,
the Environmental Laws and Health and Safety Laws.
(iii) Except for the reports identified on Schedule 11(w)(i), Sellers
have no other documents or information relating to or disclosing any
release, threatened release, application, spill, leak, discharge or
emission of any Hazardous Material or Other Material to the air, surface
water, groundwater or soil of the Real Property, Leased Property or Irving
Property, or relating to the material violation of any Environmental Law or
any Health and Safety Law at the Real Property, Leased Property or Irving
Property.
(iv) Sellers have provided the Buyer with true, accurate and complete
information, to the extent of Sellers' knowledge and to the extent that
such information is material, pertaining to the environmental history of
the Real Property, Leased Property and Irving Property.
(v) Sellers, to their knowledge, have been issued or have applied for
all permits, licenses, certificates and approvals required by the
Environmental Laws and Health and Safety Laws for the operation of the
Business (the "Permits"), a complete list of which is set forth on Schedule
11(w)(v). To the extent permissible, Sellers shall maintain such Permits,
even after the Closing, until Buyer can secure similar Permits in its name,
provided that the Buyer acts with diligence to secure such Permits
promptly.
(vi) Except as set forth in those reports identified on Schedule
11(w)(i), Sellers have received no notice of, and do not know of or
suspect, any facts which, as of the Closing, would constitute a violation
of the Environmental Laws or any material violation of Health and Safety
Laws with respect to the Real Property, Leased Property or Irving Property.
(vii) Except as disclosed in Schedule 11(w)(vii) (the "Environmental
Complaints"), Sellers have no knowledge of any complaint, order, directive,
claim, citation, notice, information request or investigation by any
governmental authority or any other person or entity with respect to (i)
any release, threatened release, application, spill, leak, discharge or
emission of any Hazardous Material or Other Material to the air, surface
water, groundwater or soil of the Real Property, Leased Property and Irving
Property, or (ii) any violation or alleged violation of any Environmental
Laws or Health and Safety Laws at the Real Property, Leased Property or
Irving Property.
(viii) To Sellers' knowledge, there has never been a 3,000 gallon
underground storage tank as identified on a site map as being located near
the concrete ramp at Seller's Synthetics Plant.
(ix) Except as set forth in those reports identified on Schedule
11(w)(i), to Sellers' knowledge, non-hazardous solid waste materials have
not been disposed of or buried at the Real Property, Leased Property or
Irving Property.
For the purposes of this Agreement, the following definitions shall
apply:
"Hazardous Materials" means and includes any hazardous or toxic substance
or waste or any contaminant or pollutant, including, but not limited to,
"hazardous substances" as defined by the Comprehensive Environmental
Response Compensation and Liability Act, as amended ("CERCLA"), a
"hazardous waste" as defined by the Resource Conservation and Recovery Act
("RCRA"), as amended, PCBs, petroleum products, solvents, waste oil and
grease.
"Other Materials" means asbestos-containing materials and lead-based
paint.
"Environmental Laws" means and includes all applicable federal, state and
local statutes, regulations, ordinances, rules, and orders which pertain to
(i) the protection of the environment; (ii) the release, threatened
release, spill, leak, discharge or emission of any Hazardous Material to
the air, surface water, groundwater or soil; (iii) the storage, treatment,
disposal or handling of any Hazardous Materials or (iv) the construction,
operation, maintenance, repair or closing of aboveground or underground
storage tanks or impoundments containing or which previously contained
Hazardous Materials.
"Health and Safety Laws" means and includes all applicable federal, state
and local statutes, regulations, ordinances, rules and orders which pertain
to the protection of human health or safety, including but not limited to,
the Occupational Health and Safety Act, as amended ("OSHA"), its
implementing regulations, and any similar state laws and regulations.
(x) The Leases, as set forth in Schedule 1(b), are valid, in full force
and effect and enforceable. The copies of the Leases delivered to the
Buyer by the Sellers constitute all of the lease agreements affecting the
Leased Property and are true, correct and complete in all respects. None
of the Sellers is in default under the Leases, nor have they received any
notice of default under the Leases, nor has any event occurred in which the
passage of time would result in an event of default by the Sellers under
the Leases. The Leases are assignable to Buyer and shall be assigned to
the Buyer by the Sellers as of the Closing Date.
(y) Attached as Schedule 11(y) ("Quality Standards") is a summary of the
Sellers' quality standards.
(z) Attached as Schedule 11(z) ("Summary of Insurance Policies") is a
summary of Sellers' insurance policies covering the Fixed Assets, Real
Property, Leased Property and Irving Property and the Motor Vehicles. All
policies are occurrence policies. Sellers currently maintain commercial
general liability and product liability coverage for the Business.
(aa) Except as set forth in Schedule 11(aa)(i) ("Pension Plans"), Sellers
do not maintain, are not required to contribute to, have not maintained nor
been required to contribute to within the past five years, any employee
pension benefit plan within the meaning of Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or any multi-
employer plan within the meaning of Section 3(37) of ERISA which provides
or is designed to provide benefits for employees or former employees of
Threads (or certain employees of Dixie identified by name in Schedule
11(aa)(iii) ("Selected Dixie Employees")) or their dependents or
beneficiaries. As of the Closing Date, except as set forth in Schedule
11(aa)(ii) ("Welfare Plans"), Sellers do not maintain, and have not
maintained nor been required to contribute to within the past five years,
any employee welfare benefit plan within the meaning of Section 3(1) of
ERISA for which an employer is required to file an Annual Report (Form
5500) or if such plan had more then 100 participants would have been
required to file an Annual Report (Form 5500) for such plan and which
provides or is designed to provide benefits for employees or former
employees of Threads (or the Selected Dixie Employees) or their dependents
or beneficiaries. To the best of Seller's knowledge, as of the Closing
Date, each of the employee benefit plans set forth in Schedule 11(aa)(i)
and (ii) (collectively, the "Employee Benefit Plans") is in material
compliance with, and has been administered in material compliance with, the
provisions of ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"). In connection with each Employee Benefit Plan:
(i) Sellers have provided to the Buyer true, complete and correct copies
of (A) each Employee Benefit Plan (or, in the case of any unwritten
Employee Benefit Plan, a description thereof), (B) each trust agreement and
group annuity contract, if any, relating to any Employee Benefit Plan, (C)
the most recent Annual Report (Form 5500) filed for each Employee Benefit
Plan for which such a filing is required, and there has been no material
change or amendment to any of such documents or filings relating to the
Employee Benefit Plans as of the Closing Date.
(ii) Each Employee Benefit Plan intended to be a qualified plan under
Section 401(a) of the Code has received or applied for a favorable
determination letter to that effect within the last two years, and nothing
has occurred since the issuance of, or application for, such letter that
would adversely affect the tax qualification of any such Employee Benefit
Plan.
(iii) There are no pending or, to the knowledge of Sellers, threatened
claims (other than routine claims for benefits) against any of the Employee
Benefit Plans or otherwise involving any such Employee Benefit Plan.
(iv) None of the Employee Benefit Plans or any trust established
thereunder has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived,
as of the last day of the most recent fiscal year of each of the Employee
Benefit Plans. No contribution failure has occurred with respect to any
Employee Benefit Plan sufficient to give rise to a lien under Section
302(f) of ERISA. All material contributions, premiums or other payments
due with respect to each Employee Benefit Plan for any period ending on or
before the Closing Date which are not yet due will have been paid or
accrued on or prior to the Closing Date.
(v) Sellers have not engaged in a transaction in connection with which
Threads could be subject to either a liability or civil penalty assessed
pursuant to Sections 409, 502(i) or 502(1) of ERISA (as defined herein) or
a tax imposed pursuant to Sections 4971, 4972, 4974, 4975 or 4976 of the
Code.
(vi) Neither the Sellers, nor any member of a controlled group with the
Sellers under Section 4001(a)(14) of ERISA or Section 414(b),(c),(m) or (o)
of the Code or any organization to which any of the Sellers is a successor
or parent corporation within the meaning of Section 4069(b) of ERISA, has
engaged in any transaction, within the meaning of Section 4069 of ERISA.
(vii) Except as described in Schedule 11(aa)(vii) ("Reportable Events"),
within the past five years there has been no partial or complete
termination or "reportable event" (as such term is defined in Section 4043
of ERISA) with respect to any Employee Benefit Plan that is an employee
pension benefit plan within the meaning of Section 3(2) of ERISA which
would require the giving of notice or any event requiring disclosure under
Section 4041(c)(3)(C) or 4063(a) of ERISA.
(viii) Each Employee Benefit Plan that is a group health plan, as such
term is defined in Section 5000(b)(1) of the Code, complies in all material
respects with the applicable requirements of Section 4980B(f) of the Code.
Except as described in Schedule 11(aa)(viii) ("Post-Retirement Life or
Health Benefits"), none of the Employee Benefit Plans which are employee
welfare benefit plans within the meaning of Section 3(1) of ERISA provide
post-retirement life or health insurance benefits or coverage for any
participant or any beneficiary of a participant.
(ix) Except as described in Schedule 11(aa)(ix) ("Acceleration") neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby or thereby will (a) result in any payment
becoming due to any person by reason of such person's employment by any of
the Sellers, (b) increase any benefit otherwise payable under any Employee
Benefit Plan, or (c) result in the acceleration of the time of payment or
vesting of any such benefits.
(x) None of the Sellers has any contract, plan or commitment, whether
legally binding or not, to create any additional employee benefit plan to
provide or designed to provide benefits for employees of Threads (or the
Selected Dixie Employees) or their dependents or beneficiaries or to modify
any existing Employee Benefit Plan except with respect to changes required
by ERISA, the Code or other applicable law.
(xi) Schedule 11(aa)(xi)(A) ("Eligible Employees-Defined Benefit") sets
forth a complete and correct list of employees of Threads (including the
Selected Dixie Employees) who as of or immediately following the Closing
Date will be entitled under the terms of the plan to receive a benefit from
the Dixie Yarns, Inc. Defined Benefit Plan, the aggregate lump sum value of
such individuals' benefits and the assumptions upon which such value is
based; Schedule 11(aa)(xi)(B) ("Eligible Employees-Nonqualified
Contribution") sets forth a complete and correct list of employees of
Threads (including the Selected Dixie Employees) who as of or immediately
following the Closing Date will be entitled under the terms of the plan to
receive a benefit from the Dixie Yarns, Inc. Nonqualified Defined
Contribution Plan and the aggregate lump sum value of such individuals'
benefits; and Schedule 11(aa)(xi)(C) ("Eligible Employees-Nonqualified
Savings") sets forth a complete and correct list of employees of Threads
(including the Selected Dixie Employees) who as of or immediately following
the Closing Date will be entitled under the terms of the plan to receive a
benefit from the Dixie Yarns, Inc. Nonqualified Employee Savings Plan and
the aggregate lump sum value of such individuals' benefits.
(bb) Except as set forth on Schedule 11(bb) (the "Nontransferable
Permits"), to Sellers' knowledge, all licenses and permits held by the
Sellers and used in connection with the Business are transferable to the
Buyer.
12. REPRESENTATION AND WARRANTIES OF THE BUYER. The Buyer hereby
represents and warrants to the Sellers:
(a) The Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of North Carolina, has legal
authority to enter into and perform this Agreement and the Related
Documents and has duly authorized the execution, delivery and performance
of this Agreement and the Related Documents.
(b) The execution and delivery of this Agreement and the Related
Documents, the consummation of the transactions contemplated hereby and
thereby, and the fulfillment and compliance with the terms and conditions
hereof and thereof, do not and will not violate, conflict with or
constitute a breach of or default under or require any consent pursuant to
any law or regulation presently applicable to the Buyer, its articles of
incorporation or bylaws or any order of any court, regulatory body or
arbitral tribunal or any agreement or instrument to which the Buyer or any
of its affiliates is a party or by which any of such entities or any of its
property is bound.
(c) There has not been incurred any obligation on behalf of the Buyer to
pay any commission, finders' fee or similar charge in connection with this
transaction and the Buyer shall indemnify the Sellers with respect to any
claim by any person or entity claiming such fee.
(d) This Agreement and the Related Documents, upon execution and delivery
thereof by the respective parties, will be the legal, valid and binding
agreements of the Buyer enforceable against the Buyer in accordance with
their respective terms except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditor's rights, and (ii) the
remedy of specific performance in injunction and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought forth.
13. NONCOMPETITION AGREEMENT. At the Closing, the Sellers shall enter
into a noncompetition agreement with the Buyer (the "Noncompetition
Agreement") substantially in the form of Exhibit E attached hereto.
14. COMPUTER SYSTEMS AND ADMINISTRATIVE SERVICES AGREEMENT. At the
Closing, the Sellers shall enter into an agreement providing for post-
Closing computer systems and administrative services to the Buyer (the
"Computer Systems and Administrative Services Agreement") substantially in
the form of Exhibit F attached hereto.
15. REAL PROPERTY.
(a) Delivery of Preliminary Information. The Sellers have delivered to
Buyer copies of the items described in clause (i), (ii) and (iii) directly
relating to the Real Property and the items described in clause (iii) with
respect to the Leased Property and the Irving Property (the "Preliminary
Information") that are in Sellers' possession or control:
(i) Surveys. To the extent the same is presently in the Sellers'
possession, the most recently dated surveys for each parcel of the Real
Property;
(ii) Title Policies. The most recently issued title insurance policies
presently in the Sellers' possession with respect to the title for each
parcel of the Real Property as set forth in Schedule 1(a); and
(iii) Environmental Reports. All environmental studies, environmental
reports, reports
of remediation work or repairs relating to the handling and disposal of
waste or any other records, reports or memoranda relating to environmental
issues with regard to the Real Property, and a list of all contractors and
agents used by the Seller with regard to the same.
(b) Title Search; Survey. The Buyer shall (i) conduct a title search of
the property (the "Initial Title Search") and obtain a commitment or binder
for issuance of a title insurance policy issued by the title insurance
insurer for each parcel of the Real Property; (ii) cause a local licensed
surveyor to prepare an accurate and adequate survey of each parcel of the
Real Property; and (iii) provide to the Sellers within five (5) days
thereafter a copy of the survey and title commitment or binder letter
setting forth all of the Buyer's objections to the Sellers' title to each
parcel of the Real Property other than general utility easements, rights of
way abutting each parcel of the Real Property, unviolated restrictive
covenants that do not materially affect the value of any parcel of the real
property; and applicable zoning and building laws or ordinances provided
they do not prohibit the use of each parcel of the Real Property and
Improvements thereon for the Buyer's intended use and so long as each
parcel of the Real Property is in compliance with the same. After the
receipt of such letter, the Seller shall have until the Closing Date to
correct or make arrangements as are reasonably satisfactory to the Buyer to
correct such defects in title objected to by the Buyer; provided, however,
that the Sellers shall have no obligation to correct defects in title
relating to the encroachment of Improvements onto any easement, right of
way or real property of Norfolk Southern Railway, except to take reasonable
steps to assist Buyer in procuring the licenses described in Section
18(a)(xx). If the Sellers are unwilling or unable to correct or make
arrangements for such defects on or before the Closing Date, the Buyer will
have the option to waive such defects or terminate this Agreement without
further liability of the Sellers to the Buyer. Title exceptions not
specifically objected to by the Buyer and all acceptable exceptions as set
forth above shall be deemed and referred to as "Permitted Exceptions";
provided, however, the Buyer may object to such exceptions to title, other
than the Permitted Exceptions, as are discovered after the initial title
search but prior to Closing.
(c) Closing. At the Closing, the Sellers shall deliver or cause to be
delivered to the Buyer the following items (all documents will be duly
executed and acknowledged as required) (collectively, "Real Estate
Instruments"):
(i) Warranty Deed. A general warranty deed for each parcel of the Real
Property executed by the appropriate Seller conveying to the Buyer good and
marketable fee simple title to each parcel of the Real Property, free and
clear of all liens, restrictions and encumbrances except and subject only
to the Permitted Exceptions.
(ii) Owner's Affidavit. An affidavit in the form acceptable to the
title insurer certifying that each parcel of the Real Property is free from
claims for mechanics', materialmen's and laborers' liens.
(iii) Non-Foreign Affidavit. An affidavit, in the form and substance
satisfactory to the Buyer, stating the Seller's U.S. Taxpayer's
Identification Number, that the Seller and all persons holding beneficial
interest in the Real Property are "United States Persons" as defined by
Section 1445(f)(3) and Section 7701(g) of the Internal Revenue Code of
1986, as amended.
(iv) Closing Affidavit. An affidavit, in form acceptable to the Buyer,
stating that there are no other parties entitled to possession of any
parcel of the Real Property other than the Buyer as of the Closing Date.
(v) Other Documents. Any and all documents and papers solely in
conformity with the terms of this Agreement which may be reasonably
necessary in connection with the consummation of the transaction
contemplated by this Agreement, including evidence of authority to execute
each deed.
(d) Closing Costs For Real Property. The Sellers shall pay for up to
$25,000 of the amount of all state, county, city or other transfer taxes
and for the cost of preparation of each deed for each parcel of the Real
Property. The Buyer shall pay the premiums for the issuance of the owner's
title insurance policies, the cost of recording each deed for each parcel
of the Real Property and any other instruments under the terms of this
Agreement with respect to the Real Property and all costs to obtain the
surveys of each parcel of the Real Property.
(e) Adjustments and Prorations. General real estate taxes for the
calendar year in which the Closing takes place shall be prorated through
the Closing Date on a calendar year basis and the Buyer shall receive a
credit against the Purchase Price for all unpaid real estate taxes up to
and including the Closing Date. If the tax amount has not been determined
as of the Closing Date, taxes shall be prorated using the tax amount for
the prior year and the Sellers and the Buyer agree, from and after the
Closing Date and upon written demand of either party, to promptly remit to
the other party such additional amounts as are necessary to discharge its
pro rata share of such taxes when the tax rate for the calendar year in
which the Closing occurs has been determined. This obligation to adjust
the taxes shall survive the Closing. All utility charges and operating
expenses of the Real Property shall be prorated based on the number of
calendar days in the relevant billing periods before and after the Closing
Date.
(ii) Damage, Destruction and Condemnation. If any of the Improvements
located on any parcel of the Real Property are damaged by fire or other
casualty before the Closing Date to such extent that the damages result in
a reduction in production capacity of more than thirty percent (30%) at the
Synthetics Plant or of more than ten percent (10%) at any of the Sellers'
manufacturing facilities other than the Synthetics Plant, then, unless such
damage is repaired by Sellers within a five (5) day period, the Buyer shall
have the right to terminate this Agreement by delivering written notice to
the Seller of such desire to terminate within five (5) days following the
determination of the production capacity reduction. Should the Buyer not
elect to terminate this Agreement within said five (5) day period, Sellers
shall either repair the damage prior to the Closing or reduce the Purchase
Price by an amount equal to the estimated cost of repairs as determined by
a mutually acceptable appraiser. The Sellers will maintain all insurance
coverage currently existing and covering the Real Property in full force
and effect through the Closing.
(iii) If the damage results in less than a thirty percent (30%)
reduction in production capacity at the Synthetics Plant or in less than a
ten percent (10%) reduction in production capacity at any of Sellers' other
manufacturing facilities, then the Sellers shall either repair the damage
prior to the Closing or reduce the Purchase Price by an amount equal to the
estimated cost of repairs as determined by a mutually acceptable appraiser.
(iv) If Sellers elect to reduce the Purchase Price by the amount of the
estimated cost of repairs, then sixty (60) days following the completion of
the repairs, the Sellers shall pay to the Buyer the amount by which the
actual cost of repairs exceeded the estimated cost of repairs or, if
applicable, the Buyer shall pay to the Sellers the amount by which the
actual cost of repairs was less than the estimated cost of repairs.
(v) If after the date hereof and prior to the Closing Date, the Sellers
receive official government notice of the commencement or impending
commencement of eminent domain or other like proceedings against the Real
Property or any portion thereof which is likely to result in a taking of
Real Property in excess of $100,000 in value, the Sellers shall notify the
Buyer. In such event, the Buyer shall, within five (5) days of the receipt
of such notice from the Sellers, have the option to (i) terminate this
Agreement or (ii) close this transaction contemplated hereby in accordance
with its terms but subject to such proceedings, in which event the Purchase
Price shall not be reduced, and the Sellers shall assign to the Buyer, the
Sellers' rights in any condemnation award or proceeds.
16. ACTIVITIES AND CONDUCT PENDING CLOSING. The Sellers covenant and
agree, between the date hereof and the Closing Date, that Sellers shall use
their best efforts to cause each of the Sellers to conduct its business as
follows:
(a) Going Business. The business of each of the Sellers will be conducted
diligently and only in the ordinary course as a going business and
consistent with past practices. Each of the Sellers will exercise its best
efforts to preserve for the Buyer the contractual and other relationships
and goodwill with all suppliers and Customers.
(b) Mechanics' Liens. Each of the Sellers will pay all claims for labor,
materials, supplies or other property which, if unpaid, might by law become
a lien or charge upon the Assets, before the same shall become delinquent.
(c) Access by the Buyer. At all such times as will not cause unreasonable
interference with the business of a Seller, the Buyer and its authorized
agents and representatives, including its legal counsel, accountants,
auditors and engineers, shall have full and complete access to all of the
Assets of each Seller and may make such examination and take such excerpts
therefrom as they may deem necessary or desirable. The Sellers will
furnish to the Buyer (certified as to authentication by the Sellers, if
reasonably requested by the Buyer) such documents, records, contracts and
commitments related to the Assets and the Business as the Buyer from time
to time may reasonably request. With the prior approval of the Sellers in
each instance, the Buyer shall have the right to communicate with any past
or present client, employee, debtor, supplier, creditor or other contractor
of the Sellers and any other party who has conducted or is conducting or is
believed to be conducting business with the Sellers or on its behalf, in
order to verify any facts or circumstances which may be reasonably deemed
material by the Buyer in connection with this Agreement or the consummation
of the transactions contemplated hereby.
(d) Liens and Encumbrances. None of the Sellers will create or assume any
mortgage, pledge, lien, encumbrance or charge of any kind (including
vendor's rights under conditional sales agreements or other title retention
agreements) upon the Assets or the Real Property, whether owned or
hereafter acquired, except such mortgages, liens, pledges, encumbrances or
charges, if any, as are consented to in writing by the Buyer in advance.
(e) Insurance. The Sellers shall maintain their existing insurance
policies in full force and effect.
(f) No Other Negotiations. None of the Sellers, or any shareholders,
officers, directors or agents of the Sellers shall enter into any
negotiations with any other party for the sale or other disposition of the
Assets, the Greige Yarn and Finished Goods or the Accounts Receivable other
than in the ordinary course of business or as otherwise contemplated herein
unless this Agreement is terminated.
(g) Announcements. The Sellers will take all steps reasonably requested
by the Buyer to announce the transaction described herein, to facilitate
the transfer of the Assets and to promote the advantages of this
transaction to Threads' employees, Selected Dixie Employees and Customers.
As a part of such process, (i) the Seller will cooperate with the Buyer in
the preparation of customer letters, press releases and other announcements
of such transaction and (ii) the parties will keep the Purchase Price and
terms of the transaction confidential, to the extent possible considering
their business needs and legal requirements. All public announcements or
press releases by the parties concerning this transaction must be discussed
by the parties prior to release.
(h) Governmental Approvals. The Sellers shall assist and cooperate in all
endeavors to obtain any necessary governmental approvals.
(i) Real Property and Environmental Analysis. The Sellers will allow the
Buyer and its employees, agents, servants, representatives and contractors
to enter upon the Real Property, Leased Property and Irving Property at
reasonable times and in a reasonable manner for purposes of making or
performing such tests, borings, surveys, studies, environmental samplings
or tests, general inspections and such other customary and/or reasonable
studies, inspections and tests thereon as agreed upon by the Buyer and the
Sellers.
(j) Compliance With Laws. At all times prior to the Closing Date, the
Sellers will use reasonable efforts to comply with (i) Environmental Laws
and Health and Safety Laws, and (ii) the terms and conditions of all
Permits.
(k) Environmental Remedial Actions. The Sellers shall use their
reasonable best efforts to accomplish as soon as possible the actions set
forth on Schedule 16(k) ("Environmental Remedial Actions").
(l) Fixed Assets. The Sellers shall not sell, transfer or dispose of any
of the Fixed Assets following the date hereof without the prior consent of
the Buyer.
17. CLOSING DATE. The closing of the transactions contemplated herein
(the "Closing") shall be held at the offices of Smith Helms Mulliss &
Moore, L.L.P. at a date and time mutually agreeable to the parties (the
"Closing Date"), which Closing Date is intended to be no later than June 3,
1996, and in no event shall be later than June 24, 1996.
18. BUYER'S CONDITIONS OF CLOSING. Each and every obligation of the Buyer
to consummate the transactions described in this Agreement and any and all
liability of the Buyer to the Sellers under this Agreement shall be subject
to the fulfillment, on or before the Closing Date, of the following
conditions precedent:
(a) The Sellers shall have delivered, or caused to be delivered, to the
Buyer at the Closing each of the following, in form and substance
reasonably satisfactory to the Buyer:
(i) Certified copies of each of the charter and bylaws of each of TUSA,
TPR, Prima, Hilos and Dixie;
(ii) Certificates of Existence or Good Standing as to each of TUSA, TPR,
Prima, Hilos and Dixie issued by the Secretaries of State (or other
appropriate official) of the respective jurisdictions in which each was
incorporated, all of a recent date;
(iii) Certificates of Qualification issued by the Secretaries of State
(or other appropriate official) of the respective jurisdictions in which
Assets are located and Threads is required to so qualify in order to
conduct business and in which the failure to so qualify would result in a
material adverse effect on the operations and financial condition of
Threads, all of a recent date;
(iv) Certificates as to the Good Standing of each of TUSA, TPR, Prima,
Hilos and Dixie issued by the Department of Revenue (or other appropriate
office) of such jurisdictions in which each was incorporated, all of a
recent date;
(v) Certified copies of resolutions of the Board of Directors and, to
the extent required, the shareholders of each of TUSA, TPR, Prima, Hilos
and Dixie approving the transactions set forth herein;
(vi) A signature and incumbency certificate for each of TUSA, TPR,
Prima, Hilos and Dixie;
(vii) A Bill of Sale substantially in the form of Exhibit G attached
hereto (the "Bill of Sale"), and such other bills of sale, assignments of
the Contracts or other certificates necessary to transfer title to the
Assets to the Buyer;
(viii) A duly executed Noncompetition Agreement;
(ix) A duly executed Escrow Agreement;
(x) Duly executed Real Estate Instruments;
(xi) A duly executed Yarn and Finished Goods Agreement;
(xii) A duly executed Accounts Receivable Agreement;
(xiii) A duly executed Computer Systems and Administrative Services
Agreement;
(xiv) A listing setting forth all Fixed Assets purchased, sold or
transferred during the period from May 21, 1996 through the Closing Date;
(xv) Certificates of title to those Motor Vehicles listed on Schedule
1(d);
(xvi) The favorable opinion, dated as of the Closing Date, of Witt,
Gaither & Whitaker, P.C., counsel to the Seller, to the effect that, except
as otherwise disclosed to the Buyer:
(1) each of TUSA, TPR, Prima, Hilos and Dixie is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdictions in which each was organized, each has adequate corporate
power to carry on the businesses in which it is now engaged, and each is
qualified and authorized to do business and each is in good standing as a
foreign corporation in which each is required to be qualified to do
business and the failure to so qualify would result in a material adverse
effect on the operations and financial conditions of Threads;
(2) the execution, delivery and performance by each of TUSA, TPR,
Prima, Hilos and Dixie of this Agreement and the Related Documents to which
each of the Sellers is a party have been duly authorized by all necessary
corporate and stockholder action, and this Agreement and the Related
Documents to which each of the Sellers is a party have been duly executed
and delivered by each of the Sellers, and constitute the legal, valid and
binding agreements of the Sellers, enforceable against each of them in
accordance with their respective terms except that (i) such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditor's rights, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought forth;
(3) the execution, delivery and performance of this Agreement and the
Related Documents to which each of the Sellers is a party will not violate
any provision of the Articles of Incorporation or Bylaws of TUSA, TPR,
Prima, Hilos or Dixie, any law or regulation applicable to the Sellers or
any material provision of, or obligation under, any agreement, indenture,
instrument, lease, contract or other material undertaking of which such
counsel has knowledge and to which any of the Sellers is currently a party
or by which it is currently bound. No consent, approval or authorization
of any governmental authority or regulatory body is required except as set
forth in Section 18(i) for any of the Sellers to execute, deliver and
perform the Agreement or the Related Documents to which any of the Sellers
is a party; and
(4) to such counsel's best knowledge, there is no litigation,
proceeding or governmental investigation pending or threatened against or
relating to any of the Sellers, the Assets or the transactions contemplated
by this Agreement;
(xvii) Evidence that the Sellers have paid the 1995 ad valorem taxes
levied on the Assets;
(xviii) A list of all prospective purchasers of the Assets who entered
into nondisclosure agreements with the Sellers, together with a copy of
each such nondisclosure agreement;
(xix) A written certification executed by a duly authorized officer of
the Sellers that the representations and warranties of the Sellers
contained in this Agreement, are true on and as of the Closing Date with
the same effect as if such representations and warranties had been made on
and as of such date, and that each of the conditions to be performed or
observed by the Sellers on or before the Closing Date pursuant to the terms
hereof has been performed or observed or waived in writing by the Buyer;
and
(xx) A written certification executed by a duly authorized officer of
Dixie that the Sellers have no reason to believe that Norfolk Southern
Railway will not, within thirty (30) days following the Closing, enter into
licenses allowing the Buyer to use and enjoy the Improvements that encroach
upon any easement or right of way of or real property owned by Norfolk
Southern Railway.
(b) All Assets shall have been effectively assigned and transferred to the
Buyer, including the receipt of all necessary third party consents,
waivers, estoppel certificates, notices and acknowledgements as required by
the Buyer.
(c) The receipt or assurance of receipt by the Buyer of all necessary
material governmental licenses, permits and approvals to acquire the Assets
and conduct the Business.
(d) The Sellers and the Buyer shall have entered into a lease
substantially in the form attached hereto as Exhibit H (the "Irving Lease")
pursuant to which the Buyer will lease that certain facility located in
Irving, Texas (the "Irving Property") more particularly described in
Exhibit H.
(e) The Sellers and the Buyer shall have entered into a sublease
substantially in the form attached hereto as Exhibit I (the "Moonachie
Sublease") pursuant to which the Buyer will sublease that certain facility
located in Moonachie, New Jersey, more particularly described in Exhibit I.
(f) The Sellers, at their sole costs and expense, shall have addressed and
resolved all environmental conditions and matters set forth on Schedule
16(k) except for the Third Environmental Matter, the Fifth Environmental
Matter and the First Environmental Health and Safety Matter, which will be
resolved within the time periods set forth therein.
(g) The Buyer shall have no reason to believe that Norfolk Southern
Railway will not, within thirty (30) days following the Closing, enter into
licenses allowing the Buyer to use and enjoy the Improvements that encroach
upon any easement or right of way of or real property owned by Norfolk
Southern Railway.
19. SELLERS' CONDITIONS OF CLOSING. Each and every obligation of the
Sellers to consummate the transactions described in this Agreement and any
and all liability of the Sellers to the Buyer under this Agreement shall be
subject to the fulfillment, on or before the Closing Date, of the following
conditions precedent:
(a) The Buyer shall have satisfied and paid the Purchase Price at the
Closing.
(b) The Buyer shall have delivered or caused to be delivered to the Seller
at the Closing each of the following, in form and substance reasonably
satisfactory to the Sellers:
(i) Articles of incorporation and bylaws of the Buyer;
(ii) Certificate of Good Standing and a Certificate of Existence for the
Buyer issued by the Secretary of State of the State of North Carolina;
(iii) Certified copies of resolutions adopted by the Buyer's Board of
Directors approving the transactions set forth herein;
(iv) A signature and incumbency certificate for the Buyer;
(v) A duly executed Escrow Agreement;
(vi) A duly executed Yarn and Finish Goods Agreement;
(vii) A duly executed Accounts Receivable Agreement;
(viii) A duly executed Computer Systems and Administrative Services
Agreement;
(ix) An opinion, dated as of the Closing Date, of Smith Helms Mulliss &
Moore, L.L.P., counsel to the Buyer, to the effect that:
(1) the Buyer is a corporation duly organized and validly existing
under the laws of the State of North Carolina;
(2) the execution, delivery and performance of this Agreement and the
Related Documents have been duly authorized by all necessary corporate
action and this Agreement and the Related Documents to which the Buyer is a
party have been duly executed and delivered by the Buyer and constitute the
legal, valid and binding agreements of the Buyer, enforceable against the
Buyer in accordance with their respective terms except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditor's rights, and (ii) the remedy of specific performance in
injunction and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought forth; and
(3) the execution, delivery and performance of this Agreement and the
Related Documents will not violate any provision of the articles of
incorporation or the bylaws of the Buyer, any law or regulation applicable
to the Buyer, or any material provision of, or obligation under, any
agreement, indenture, instrument, lease, contract or other material
undertaking of which such counsel has knowledge and to which the Buyer is
currently a party or by which it is currently bound. No consent, approval
or authorization of any governmental authority or regulatory body or other
third party is required for the Buyer to execute, deliver and perform this
Agreement and the Related Documents.
(x) A certificate of the Buyer to the effect that the Buyer has no
knowledge that (a) any representation or warranty of the Sellers made
herein is materially incorrect and (b) the Sellers have violated any of
their covenants contained herein; and
(xi) A written certification executed by a duly authorized officer of
the Buyer that the representations and warranties of the Buyer contained
in this Agreement, are true on and as of the Closing Date with the same
effect as if such representations and warranties had been made on and as of
such date, and that each of the conditions to be performed or observed by
the Buyer on or before the Closing Date pursuant to the terms hereof has
been performed or observed or waived in writing by the Sellers.
20. NONCOMPLIANCE WITH BULK TRANSFER LAWS; INDEMNIFICATION.
(a) The Buyer has waived the Sellers' compliance with the bulk transfer
statutes in force in the jurisdictions in which the Assets are located. As
a result, the Sellers, jointly and severally, hereby agree to indemnify and
hold harmless the Buyer against any and all claims, loss, costs or
expenses, including reasonable attorneys' fees, which the Buyer may sustain
as a result of any payment which may be required to be made or any
liability of any kind which may be imposed upon the Buyer as a result of
any claim, loss, cost or expense or reasonable attorneys' fees which may be
required of or incurred by the Buyer whatsoever arising out of
noncompliance with any bulk transfer laws.
(b) The Sellers, jointly and severally, hereby agree to indemnify and hold
harmless the Buyer, and the Buyer hereby agrees to indemnify and hold
harmless the Sellers, against any and all liability, claims, damages,
losses, costs or expenses, including reasonable attorneys' fees ("Losses"),
relating to (i) any claims by any person for any commissions, broker's or
finder's fee relating to this Agreement or the purchase and sale of Assets
contemplated herein; (ii) any breach of, noncompliance with or
misrepresentation contained in any representation, warranty or covenant
contained herein or in the Related Documents and (iii) without regard to
any limitation as to the Sellers' knowledge, the inaccuracy of any
representation contained in Section 11(w) with respect to the Irving
Property and the Leased Property.
(c) The Sellers hereby agree to defend, indemnify and hold harmless the
Buyer from and against any and all Losses, which the Buyer may sustain as a
result of any claims, actions or damages of any nature whatsoever relating
to (i) the Sellers' operation of the Business or use of the Assets prior to
the Closing Date (except as otherwise provided pursuant to Section 8(a)
hereof), (ii) goods manufactured and/or sold by Sellers prior to the
Closing Date (iii) the existence of any lien, encumbrance or security
interest in the Assets, (iv) the treatment, storage, disposal, release,
threatened release, application, spill, leak, discharge or emission of any
Hazardous Material or Other Material at any property or site other than the
Real Property to the extent such Hazardous Material or Other Material
originated from or was generated by Sellers or their facilities or
operations, except this provision shall not apply to any release of any
Hazardous Material or Other Material on the Real Property which then
migrated from the Real Property onto land contiguous to the Real Property,
(v) the release, threatened release, application, spill, leak, discharge or
emission of any Hazardous Material or Other Material to the air, surface
water, groundwater or soil of the Leased Property or Irving Property,
except to the extent caused by Buyer or its activities and operations, or
(vi) the Sellers' failure to satisfy or perform those actions required of
them as set forth on Schedule 16(k) or as otherwise provided in this
Agreement.
(d) The Buyer hereby agrees to defend, indemnify, and hold the Sellers
harmless from and against any and all Losses which the Sellers may sustain
as a result of any claims, actions or damages of any nature whatsoever
relating to (i) the Buyer's operation of the Business or use of the Assets
on and after the Closing Date including, but not limited to, any breach of
warranty claims relating to products manufactured, sold, or distributed by
the Buyer subsequent to the Closing Date (except for products manufactured
or purchased by Seller prior to the Closing Date or for products which are
Assets) and all general liability claims arising out of or relating to
occurrences of any nature relating to the Buyer's business subsequent to
the Closing Date; (ii) the failure of the Buyer to pay, perform, and
discharge when due and owing any of the assumed obligations described in
Section 8(a) hereof; and (iii) any tax filing or return (including without
limitation, federal tax returns) or payment made, or position taken, by the
Buyer that any governmental authority challenges.
(e) In the event that prior to Closing the Buyer has knowledge that any
representation or warranty of the Sellers contained herein was incorrect
when made or that the Sellers have violated any covenant contained herein,
the Buyer shall by such action have conclusively waived any claim for
indemnification under this Section 20 because of such incorrect
representation or warranty, breach of warranty or violation of covenant.
(f) Notwithstanding anything contained herein to the contrary, the Sellers
shall not be required to indemnify the Buyer pursuant to this Section 20
for any breach of or noncompliance with any representation, warranty or
covenant made herein until the aggregate amount of all Losses exceeds
Seventy-Five Thousand Dollars ($75,000) in which event the entire aggregate
amount and all amounts thereafter shall be paid by the Sellers. Further,
Sellers shall not be required to indemnify Buyer unless Sellers receive
notice from Buyer prior to the expiration of the applicable representation,
warranty or covenant (as set forth in Section 24 hereof) of any such claim
or potential claim, which claim must be "probable" as defined by FASB No.
5. Except as otherwise provided therein, Sellers shall in no event be
liable for any incidental or consequential damages including loss of
profits or punitive damages.
(g) (i) Immediately upon receipt by the Buyer of any claim against it as
described in subsections (a), (b) or (c) above (the "Buyer's Third Party
Claims"), it shall advise the Sellers in writing of such claim and provide
a copy of the complaint or other document or documents asserting the claim,
and within fifteen (15) days of receipt of such notice, the Sellers shall
(i) pay the same or (ii) notify the Buyer in a writing executed by the
Sellers that it disputes such claim and intends to defend against it, and
thereafter so defend and pay, any adverse final judgment or award of
settlement amount in regard thereto. During such fifteen (15) day period,
the Buyer, after consultation with the Sellers, may take any action with
respect to said claim which is necessary to protect against further damage
or default. The cost of such defense shall be borne by the Sellers. If
the Sellers fail to take action within fifteen (15) days as set forth
above, then the Buyer shall have the right to pay, compromise or defend any
such Buyer's Third Party Claims; provided that the Buyer has delivered a
notice to the Sellers of its intention to take such action at least five
(5) days prior to taking such action. The Sellers shall promptly pay or
reimburse the Buyer in respect of any amount of payment plus costs of
defense incurred by the Buyer hereunder. The Buyer and the Sellers shall
cooperate with each other in the defense of any Buyer's Third Party Claims
brought hereunder.
(ii) With respect to any matter under subsections (a), (b) or (c) above
other than the Buyer's Third Party Claims, the Buyer shall give written
notice to the Sellers outlining with reasonable particularity the nature
and amount of such claim. The Sellers shall have fifteen (15) days from
receipt of the Buyer's notice of such claim to notify the Buyer of the
Sellers' objection to the nature or amount of the proposed claim for
indemnification, specifying the grounds for such objection. If no such
notice of objection is given by the Seller within fifteen (15) days as set
forth above, the Buyer shall be entitled to immediate indemnification
hereunder. If objection is given within fifteen (15) days as set forth
above, the dispute may be resolved by arbitration or by agreement between
the parties. The parties to any such arbitration shall be entitled to
indemnification for its reasonable attorneys' fees and filing fees to the
extent such indemnification is awarded by the arbitrator or arbitrators.
(h) (i) Immediately upon receipt by any of the Sellers of any claim
against it as described in subsections (b) and (d) above (the "Seller's
Third Party Claims"), it shall advise the Buyer in writing of such claim,
and provide a copy of the complaint or other document or documents
asserting the claim and within fifteen (15) days of receipt of such notice
the Buyer shall (i) pay the same or (ii) notify such Sellers in a writing
executed by the Buyer that it disputes such claim and intends to defend
against it, and thereafter so defend and pay, any adverse final judgment or
award of settlement amount in regard thereto. During such fifteen (15) day
period, the affected Seller, after consultation with the Buyer, may take
any action with respect to said claim which is necessary to protect against
further damage or default. The cost of such defense shall be borne by the
Buyer. If the Buyer fails to take action within fifteen (15) days as set
forth above, then the Seller shall have the right to pay, compromise or
defend any such Seller's Third Party Claims; provided that the affected
Seller has delivered a notice to the Buyer of its intention to take such
action at least five (5) days prior to taking such action. The Buyer shall
promptly pay or reimburse the affected Seller in respect of any amount of
payment plus costs of defense incurred by the Seller hereunder. The Buyer
and the affected Seller shall cooperate with each other in the defense of
any Seller's Third Party Claims brought hereunder.
(ii) With respect to any matter under subsection (b) above other than
the Seller's Third Party Claims, the affected Seller shall give written
notice to the Buyer outlining with reasonable particularity the nature and
amount of such claim. The Buyer shall have fifteen (15) days from receipt
of the Seller's notice of such claim to notify the Seller of the Buyer's
objection to the nature or amount of the proposed claim for
indemnification, specifying the ground for such objection. If no such
notice of objection is given by the Buyer within fifteen (15) days as set
forth above, the Seller shall be entitled to immediate indemnification
hereunder. If objection is given within fifteen (15) days as set forth
above, the dispute may be resolved by arbitration or by agreement between
the parties. The parties to any such arbitration shall be entitled to
indemnification for its reasonable attorneys' fees and filing fees to the
extent such indemnification is awarded by the arbitrator or arbitrators.
(i) Subject to the provisions of Section 20(f), the Buyer shall have the
right to set off against any obligation of the Buyer to the Sellers,
including any amounts due pursuant to the terms of this Agreement or the
Related Documents, any Losses, but only after such obligation has been
established through arbitration.
21. TERMINATION.
(a) The obligations of the parties with respect to the Closing may be
terminated:
(i) by mutual consent of the parties; or
(ii) at the election of the Sellers if the Closing Date shall not have
occurred on or prior to June 24, 1996 or it has become reasonably certain
that any condition specified in Section 19 hereof will not be satisfied
prior to such date and such condition has not been waived in writing by the
Sellers unless the failure of such occurrence shall be due to the failure
of the Sellers to perform or observe its agreements set forth herein; or
(iii) at the election of the Buyer if it has become reasonably certain
that any condition specified in Section 18 hereof will not be satisfied
prior to such date and such condition has not been waived in writing by the
Buyer unless the failure of such occurrence shall be due to the failure of
the Buyer to perform or observe its agreements set forth herein; or
(iv) at the election of either party in accordance with any rights such
party may have pursuant to Section 15(f) hereof.
(b) In the event of termination in accordance with this Section, this
Agreement shall become null and void and of no further force and effect,
each party shall pay all costs and expenses incurred by it in connection
with this Agreement and the transactions contemplated herein and no party
shall have any further liability to the other party because of the failure
to consummate the transactions contemplated hereby.
22. POST-CLOSING COVENANTS.
(a) Threads' Employees.
(i) The Buyer shall have the right to employ, on an individual basis, in
its sole discretion, after the Closing, any employees on Threads' payroll
and the Selected Dixie Employees (the "Employees"), other than the
Employees identified on Schedule 22(a) (the "Excluded Employees"). Any
Employees hired will receive benefits similar to those available to
similarly situated employees of the Buyer.
(ii) Subject to the provisions of Section 20, the Sellers shall be
responsible for and shall hold the Buyer harmless with respect to all
claims (including the costs of defense thereof) asserted against the Buyer
pursuant to the Worker Adjustment and Retraining Notification Act, 29
U.S.C. Section 2101-09 or similar state, local or foreign country laws or
regulations (collectively, "WARN Laws") by Employees of the Sellers who
Buyer does not hire and place on its payroll immediately following the
Closing.
(iii) In addition to liability under WARN Laws, the Sellers shall be
responsible for all other obligations and severance costs, if any, required
to be paid to Employees arising out of their employment by the Sellers or
the termination thereof, shall pay to all hourly Employees accrued vacation
pay through May 31, 1996 and shall pay to all salaried Employees hired by
the Buyer immediately following the Closing accrued vacation pay equal to
five-twelfths (5/12) of the total amount of vacation pay that would have
been paid if the Employee had been employed for the entire year, less any
amounts paid with respect to vacation days previously taken by the Employee
in 1996.
(b) Employee Benefit Plans.
(i) Except as provided in paragraph j below, the Sellers and the Buyer
agree that Buyer is not acquiring or succeeding to any obligations with
respect to the Seller's Employee Benefit Plans and that the Buyer is not
intended to be and is not a successor employer to Sellers for any purposes,
including with respect to COBRA, and that no benefit plan sponsored or
maintained by the Buyer is intended to be and no such benefit plan shall be
a successor plan to any of Sellers' Employee Benefit Plans. Sellers agree
that they will comply with COBRA after the Closing with respect to all
qualified beneficiaries who had a qualifying event as of or prior to the
Closing. Subject to the provisions of Section 20, Sellers agree to
indemnify and hold harmless the Buyer against and in respect of all claims,
losses, costs or expenses including reasonable attorneys' fees, which the
Buyer may sustain as a result of any claims, actions or damages of any
nature whatsoever relating to a breach of, noncompliance with or
misrepresentation contained in any representation and warranty contained in
Section 11(aa) or covenant of the Sellers contained in this Section 22(b).
"COBRA" shall mean the provisions for the continuation of health care
enacted by the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended as set forth in Section 4080B of the Code (and any amendments or
predecessor or successor provisions) and Sections 601 through 608 of ERISA
(and any amendments or predecessor or successor provisions), including any
regulations promulgated under the applicable provisions of the Code and
ERISA.
(ii) Sellers agree to provide to Buyer, no sooner than 150 days and no
later than 180 days following the Closing Date, an update of each of the
lists set forth in Schedules 11(aa)(xi)(A), (B) and (C), dated no later
than 14 days prior to the date delivered to the Buyer, each of which as of
its date completely and correctly sets forth for each individual whether or
not a lump sum payment has actually been made to each such individual, or
if a periodic distribution has commenced, the amount and duration of such
periodic payments, and the aggregate amount of the lump sum payments that
have been made to such individuals as of such date. In addition, Sellers
agree that at Buyer's request, a further update of each list described in
this subsection will be prepared and delivered to Buyer within a reasonable
time to set forth for each individual, as of the date which is one year
following the Closing Date, whether or not a lump sum payment has actually
been made to such individual, or if a periodic distribution has commenced,
the amount and duration of such periodic payments, and the aggregate amount
of the lump sum payments that have been made to such individuals as of such
date.
(c) Delivery of Mail, Etc. The Sellers will deliver promptly to the Buyer
any mail, documents or instruments received by a Seller after the Closing
Date pertaining to the post-Closing Date operations of the Buyer and the
Buyer will promptly deliver to the Sellers any mail, documents or
instruments received by it after the Closing Date pertaining to the pre-
Closing Date operations of the Sellers.
(d) Certain Assets of Dixie. The Sellers agree that if, following the
Closing, the parties identify any assets of Dixie used primarily in
connection with the Business which are not listed on Schedule 1(o) hereto,
the Sellers will take such action as is necessary to transfer title to such
assets to the Buyer without adjustment to the Purchase Price.
(e) Access to Records. The parties agree to maintain all records relating
to the Business in accordance with their existing records retention
policies and procedures (including, in the case of the Sellers, retention
of such records as if the Business were an on-going operation of the
Sellers) and to make such records available for inspection or copying by
the other parties hereto (or their attorneys, accountants, consultants or
agents) on reasonable notice and during normal business hours.
(f) Access to Certain Facilities.
(i) Sellers hereby grant to the Buyer the right to obtain access to the
Threads' facilities in Mexico and Honduras during the sixty (60) day
period, and Puerto Rico during the ninety (90) day period, beginning on the
Closing Date for the purpose of removing the Assets therefrom and
conducting other activities as contemplated by the Yarn and Finished Goods
Agreement. Dixie hereby grants to the Buyer the right to obtain access to
Dixie's Rex Plant and Dixie's Osceola Plant during the one hundred twenty
(120) day period beginning on the Closing Date for the purpose of removing
from the Rex Plant the spinning frames that constitute a portion of the
Assets and from the Osceola Plant drafting systems that constitutes a
portion of the Assets. The Buyer shall be responsible for and shall hold
Sellers harmless with respect to any damage to any of the facilities of the
Sellers or any damage to property or injury to persons caused by the Buyer
or its agents in connection with the activities contemplated by this
Section 22(f)(i).
(ii) The Buyer hereby grants to the Sellers the right to obtain access
to certain of the Real Property during the thirty (30) day period beginning
on the Closing Date for the purpose of removing therefrom Raw Materials,
Supplies, Parts and In-Process Inventories and Notions Finished Goods
excluded from the Assets pursuant to Sections 2 and 3 and certain of the
Other Excluded Assets. With respect to those Other Excluded Assets that
will remain in the possession of the Buyer for a period of time following
the Closing pursuant to Section 22(k), the Sellers shall have the right to
obtain access to certain of the Real Property during the thirty (30) day
period beginning on the termination of the Buyer's right to use such Other
Excluded Assets for the purpose of removing those Other Excluded Assets.
Subject to the provisions of Section 20, the Seller shall be responsible
for and shall hold the Buyer harmless with respect to any damage to any of
the Real Property or any damage to property or injury to persons caused by
the Sellers or their agents in connection with the activities contemplated
by this Section 22(f)(ii).
(g) Excluded Customer Reports. The Sellers shall provide to the Buyer
within thirty (30) days following the Closing Date a complete list of all
Customer records subject to confidentiality restrictions imposed by third
parties. In addition, the Sellers shall cooperate with the Buyer in
obtaining the consent of such third parties to the release by the Sellers
to the Buyer of such Customer records.
(h) Certain Employee Matters. The Sellers and the Buyer shall cooperate
with one another following the Closing in order to achieve a smooth
transition with respect to employment and payroll matters.
(i) Certain Health and Safety Matters. If, as a result of the inspection
conducted by OSHA at TUSA's Pinkney Plant on or about April 30, 1996 or any
follow-up inspection, the Sellers or the Buyer shall receive notice of any
required corrective action, the Sellers shall either promptly cause such
corrective action to be taken to the satisfaction of OSHA or shall
reimburse the Buyer for the cost of such corrective action and the Buyer
shall then promptly cause such corrective action to be taken to the
satisfaction of OSHA. Any fines or penalties arising about of such
inspection shall be the responsibility of the Sellers.
(j) 401(k) Plans Spinoff/Transfer. The Sellers and the Buyer agree that
on a mutually agreeable date within a reasonable time following the Closing
Date (the "Spinoff/ Transfer Date"), the Sellers will cause the assets and
liabilities (the "Spinoff Assets/Liabilities") of the Dixie Yarns, Inc.
401(k) Retirement Savings Plan and the Dixie Yarns, Inc. Salaried Exempt
Associates' Retirement Savings Plan (collectively, "Sellers' 401(k) Plans")
held with respect to Threads employees (including the Selected Dixie
Employees) employed by the Buyer on the Spinoff/Transfer Date to be spun
off from Sellers' 401(k) Plans and transferred to the Transferee Plan (as
hereinafter defined). The transferred Spinoff Assets/Liabilities will be
maintained either as a separate defined contribution plan established by
the Buyer or by merging the Spinoff Assets/Liabilities into an existing
defined contribution plan maintained by the Buyer or a parent or affiliate
corporation of the Buyer (the "Transferee Plan"). The Transferee Plan will
be maintained as a qualified plan under Section 401(a) of the Code and will
have received or applied for a favorable determination letter to that
effect within the last two years (or, in the case of a newly created plan,
will promptly apply for a favorable determination letter), and nothing will
have occurred since the issuance of, or application for, such letter that
would adversely affect the tax qualification of such Transferee Plan. The
Sellers agree to pay the Buyer within thirty (30) days following the
Spinoff/Transfer Date as consideration for accepting the Spinoff
Assets/Liabilities the sum of (i) Two Thousand Dollars ($2,000), plus (ii)
Ten Dollars ($10) for each participant account balance transferred from the
Sellers' 401(k) Plans to the Transferee Plan.
(k) Certain Other Excluded Assets. The Buyer shall be entitled to retain
possession of and continue to use those Other Excluded Assets listed in
Item 1 of the addendum to Schedule 6(g) until the Buyer's obligations under
the Accounts Receivable Agreement and the Yarn and Finished Goods Agreement
shall have terminated.
(l) Motor Vehicles. The Sellers agree to cause the Motor Vehicles
designated by the Buyers to be delivered to the Buyers immediately
following the Closing.
(m) Sewer Easement. The Sellers agree that within three (3) years
following the Closing Date they will either obtain all necessary easements
with respect to the sewer lines running from the Sellers' Pinkney Plant or
will pay to the Buyer the amount necessary for the Buyer to construct an
alternate sewer line to the nearest available sewer line not requiring
easements not obtained by the Sellers.
23. CONFIDENTIALITY. TUSA, TPR and Dixie agree that the obligations
imposed upon them pursuant to the letter agreement dated March 12, 1996
between them and the Buyer shall survive the Closing and remain in full
force and effect thereafter. In addition, the Sellers agree that all
nonpublic or proprietary information, and all information that constitutes
trade secrets pertaining to the Business, the Assets and the terms and
conditions of this Agreement and the Phase I Environmental Assessment
Reports listed on Schedule 11(w)(i) hereto (the "Confidential Information")
shall be deemed confidential and shall be kept by them in strict
confidence. The Sellers will not, without the prior written consent of the
Buyer, except as required by law, release or disclose any Confidential
Information. In the event that any of the Sellers receives a request to
disclose all or part of the Confidential Information (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, any information or formal investigation by any
government or governmental agency or authority or otherwise) such Seller
will (a) immediately notify the Buyer of the existence, terms and
circumstances surrounding such request, (b) consult with the Buyer on the
advisability of taking legally available steps to resist or narrow such
request and (c) if disclosure of such information is required, furnish only
that portion of the Confidential Information which, in the written opinion
of such Seller's counsel, such Seller is legally compelled to disclose, and
to cooperate with any action by the Buyer to obtain an appropriate
protective order or other reliable assurance that confidential treatment
will be accorded to such portion of the disclosed Confidential Information
which the Buyer so designates. The foregoing notwithstanding, the Sellers
may disclose the existence of this Agreement, the Purchase Price for the
Assets and other routine information required to be disclosed pursuant to
applicable federal and state securities laws. The Buyer agrees that it
will maintain the confidentiality of the Phase I Environmental Assessment
Reports listed on Schedule 11(w)(i) hereto and will not, without the prior
written consent of the Seller, except as required by law, release or
disclose any information contained in such reports, except that the reports
relating to the Real Property may be disclosed to any party who agrees to
maintain the confidentiality of such reports.
24. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties in this Agreement, in any Related Document
or in any exhibit, list, instrument or document delivered in connection
herewith or therewith shall survive the Closing for a period of three (3)
years thereafter; provided, however, that (a) representations, warranties
and covenants with respect to product liability matters and the matters
discussed in Section 22(a) shall survive the Closing for a period of five
(5) years thereafter and (b) representations and warranties with respect to
title to the Assets and with respect to environmental matters shall survive
the Closing without any limitation as to time.
25. NOTICES. Any and all notices, certificates, demands or other
communications permitted or required to be made under this Agreement shall
be in writing signed by the party giving such notice or demand, and
delivered personally, or sent by (i) facsimile transmission, (ii)
recognized overnight delivery service or (iii) registered or certified mail
to the other party at the address set forth below, or at such other address
as may be supplied in writing pursuant to the terms of this section. The
recipient of such notice shall be deemed to have received the notice (i) on
the date of delivery or the date of transmission if the notice was
personally delivered or sent by facsimile transmission on a Business Day
(or if not a Business Day then the next Business Day), (ii) on the Business
Day after dispatch if the notice was sent by recognized overnight delivery
service or (iii) five (5) days after dispatch if sent by registered or
certified mail. The rejection or inability to deliver because of a change
of address of which no notice has been given shall not effect the validity
of any notice or demand sent in accordance with the provisions hereof. For
purposes of this Agreement, notices shall be addressed as follows:
If to the Sellers at: Dixie Yarns, Inc.
1100 South Watkins Street
Chattanooga, Tennessee 37404
Attention: Chief Financial Officer
Facsimile No.: (423) 493-7442
with a required copy to: Witt, Gaither & Whitaker, P.C.
1100 SunTrust Bank Building
Chattanooga, Tennessee 37402
Attention: Ralph M. Killebrew, Jr.
Facsimile No.: (423) 266-4138
If to the Buyer at: American & Efird, Inc.
22 American Street
Mt. Holly, North Carolina 28120
Attention: President
Facsimile No.: (704) 827-0508
with a required copy to: Smith Helms Mulliss & Moore, L.L.P.
214 North Church Street
Charlotte, North Carolina 28202
Attention: Harrison L. Marshall, Jr.
Facsimile No.: (704) 334-8467
The Sellers and the Buyer may by notice given hereunder, designate from
time to time any further or different addresses to which subsequent
notices, certificates or other communications shall be sent.
26. KNOWLEDGE. For purposes of this Agreement, "knowledge" shall mean,
with respect to Sellers, to the knowledge of Daniel K. Frierson, Dave
Clarke, Glenn Grandin, Don Huffman, Ron McKinney, Larry McGee and Derek
Davis; and with respect to Buyer, Thomas W. Dickson, Craig Stover, Fred
Jackson and Ron Ensley.
27. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the Sellers and the Buyer and their respective
successors and assigns.
28. AMENDMENT, EXECUTION IN COUNTERPARTS. This Agreement may not be
amended, changed, modified, altered or terminated except by instrument in
writing signed by the parties to be charged. No provisions of this
Agreement may be changed, amended, modified, terminated or waived as a
result of any failure to enforce any provision or the waiver of any
specific breach or breaches thereof or any course of conduct of the
parties. This Agreement may be executed in several counterparts, each of
which shall be an original and all of which shall constitute but one and
the same instrument.
29. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of North Carolina.
30. SEVERABILITY. In the event any provision of this Agreement or any
instrument delivered in connection herewith shall be held invalid or
unenforceable by any arbitral body or court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provision
hereof or thereof.
31. HEADINGS, EXHIBITS AND SCHEDULES. The Section headings in this
Agreement are for convenience only, and they form no part of this Agreement
and shall not affect its interpretation. All exhibits and schedules
attached hereto are hereby incorporated by reference and made a part of
this Agreement.
32. PAYMENT OF EXPENSES; DEFAULT. Except as provided in Section 8(c),
each of the parties to this Agreement shall pay its own expenses, costs and
attorneys' fees associated with the negotiation, preparation, execution and
delivery of this Agreement and the documents related thereto and the
consummation of the transactions contemplated herein. In the event of a
default in the performance of any of the provisions of this Agreement or
any of the documents related thereto, the defaulting party shall pay the
reasonable attorneys' fees of the non-defaulting party associated with the
enforcement of any of the provisions of any such document or agreement.
33. ARBITRATION. Except as otherwise provided herein or in the Yarn and
Finished Goods Agreement or the Accounts Receivable Agreement, any
controversy, dispute or question arising out of, or in connection with, or
in relation to this Agreement or its interpretation, performance or non-
performance or any breach thereof shall be determined by arbitration
conducted in Charlotte, North Carolina in accordance with the then existing
rules of The American Arbitration Association and any decision rendered by
The American Arbitration Association shall be binding upon the parties
hereto. Any judgment upon any award, which may include an award of
damages, may be entered in the highest State or Federal court having
jurisdiction thereof. The expense of arbitration shall be borne equally by
the parties involved.
34. ENTIRE AGREEMENT. This Agreement and accompanying documents contain
the entire agreement between the parties with respect to the subject matter
hereof and all prior or contemporaneous written or oral agreements with
respect to the subject matter hereof are superseded hereby.
IN WITNESS WHEREOF, the Sellers and the Buyer have caused this
Agreement to be executed in their respective names by their duly authorized
officers and their respective seals to be hereunto affixed all as of the
day first above written.
SELLER:
T-C THREADS, INC.
ATTEST:
/s/GEOFFREY G. YOUNG By:/s/GLENN M. GRANDIN
Geoffrey G. Young, Glenn M. Grandin, President
Assistant Secretary
(CORPORATE SEAL)
THREADS OF PUERTO RICO, INC.
ATTEST:
/s/GEOFFREY G. YOUNG By:/s/GLENN M. GRANDIN
Geoffrey G. Young, Glenn M. Grandin, President
Assistant Secretary
(CORPORATE SEAL)
DIXIE YARNS, INC.
ATTEST:
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Gary A. Harmon, Treasurer Glenn M. Grandin, Senior
Vice President
(CORPORATE SEAL)
PRODUCTOS PARA LA INDUSTRIA DE
LA MAQUILA, S.A. PRIMA
ATTEST:
/s/GEOFFRREY G. YOUNG By:/s/GLENN M. GRANDIN
Geoffrey G. Young, Glenn M. Grandin, President
Assistant Secretary
(CORPORATE SEAL)
HILOS Y ACCESORIOS, S.A. DE
C.V.
ATTEST:
/s/GEOFFREY G. YOUNG By:/s/GLENN M. GRANDIN
Geoffrey G. Young, Glenn M. Grandin, President
Assistant Secretary
(CORPORATE SEAL)
BUYER:
AMERICAN & EFIRD, INC.
ATTEST:
/s/CRAIG G. STOVER By:/s/THOMAS W. DICKSON
Craig G. Stover, Secretary Thomas W. Dickson, President
(CORPORATE SEAL)
List of omitted schedules and exhibits
Exhibit A Yarn and Finished Goods Agreement
Exhibit B Accounts Receivable Agreement
Exhibit C Assignment and Assumption Agreement
Exhibit D Escrow Agreement
Exhibit E Noncompetition Agreement
Exhibit F Computer Systems and Administrative Services
Agreement
Exhibit G Bill of Sale
Exhibit H Irving Lease
Exhibit I Moonachie Sublease
Schedule 1(a) Land
Schedule 1(b) Leases
Schedule 1(c) Fixed Assets
Schedule 1(d) Motor Vehicles
Schedule 1(e)(i) Customers
Schedule 1(e)(ii) Excluded Customer Reports
Schedule 1(g)(i) Trademarks and Tradenames
Schedule 1(g)(iii) Rights
Schedule 1(I) Contracts
Schedule 1(l) Telephone Numbers, Etc.
Schedule 1(o) Other Dixie Assets
Schedule 2(a) In-Process Inventory Valuation
Schedule 2(b) Cotton Bales
Schedule 6(g) Other Excluded Assets
Schedule 8(a) Assumed Liabilities
Schedule 11(d)(i) 1995 Property Adjustment Reports
Schedule 11(d)(ii) 1996 Property Adjustment Reports
Schedule 11(e) Customer and Supplier Relationships
Schedule 11(f) Special Arrangements
Schedule 11(g) Sales Information
Schedule 11(j) Out of the Ordinary Course Transactions
Schedule 11(k) Customer Complaints Summary
Schedule 11(l) Open/Blanket Purchase Orders
Schedule 11(m) Pending Lawsuits
Schedule 11(n) Required Consents
Schedule 11(o) Employment Discrimination and Other Claims
Schedule 11(q) Customer and Supplier Contracts
Schedule 11(r) Assignable Upon Consent Contracts
Schedule 11(t) Consigned Stock Locations
Schedule 11(v) Real Property Compliance and Repairs
Schedule 11(w)(i) Environmental Reports
Schedule 11(w)(ii) Environmental Exceptions
Schedule 11(w)(v) Permits
Schedule 11(w)(vii) Environmental Complaints
Schedule 11(y) Quality Standards
Schedule 11(z) Summary of Insurance Policies
Schedule 11(aa)(i) Pension Plans
Schedule 11(aa)(ii) Welfare Plans
Schedule 11(aa)(iii) Selected Dixie Employees
Schedule 11(aa)(vii) Reportable Events
Schedule 11(aa)(viii) Post-Retirement Life or Health Benefits
Schedule 11(aa)(ix) Acceleration
Schedule 11(aa)(xi)(A) Eligible Employees-Defined Benefit
Schedule 11(aa)(xi)(B) Eligible Employees-Nonqualified Contribution
Schedule 11(aa)(xi)(C) Eligible Employees-Nonqualified Savings
Schedule 11(bb) Nontransferable Permits
Schedule 16(k) Environmental Remedial Actions
Schedule 22(a) Excluded Employees
AMENDMENT
TO
ASSET PURCHASE AGREEMENT
This Amendment to Asset Purchase Agreement ("Amendment") is dated as
of May 31, 1996, by and among T-C Threads, Inc. d/b/a Threads USA, a
Tennessee corporation ("TUSA"), Threads of Puerto Rico, Inc., a North
Carolina corporation ("TPR"), Productos Para La Industria de la Maquila,
S.A. Prima, a Honduras corporation ("Prima"), Hilos Y Accesorios, S.A. de
C.V., a Mexico corporation ("Hilos") and Dixie Yarns, Inc., a Tennessee
corporation ("Dixie") (TUSA, TPR, Prima, and Hilos are sometimes
collectively referred to herein as "Threads" and TUSA, TPR, Prima, Hilos
and Dixie are sometimes collectively referred to herein as the "Sellers")
and American & Efird, Inc., a North Carolina corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer has agreed to purchase substantially all of the
assets of Threads used in its business as well as certain assets of Dixie
used primarily in Threads' business, excluding certain assets as agreed
upon by the parties, all as set forth in that certain Asset Purchase
Agreement between the parties hereto dated as of May 23, 1996 (the
"Purchase Agreement"); and
WHEREAS, certain provisions of the Purchase Agreement require
clarification, modification or exceptions to be made thereto and the
parties recognize that it is in their mutual interests to agree to such
modifications, clarifications and exceptions on the date hereof;
NOW, THEREFORE, without prejudice to any party and in consideration of
the mutual agreements set forth herein and other good and valuable
consideration, receipt of which is hereby acknowledged, and upon the terms
and subject to the conditions set forth herein and in the Purchase
Agreement, the parties hereto hereby agree as follows:
1. DEFINITIONS; ITALICS. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in the Purchase
Agreement. Italicized language contained herein shall signify actual text
remaining in, being deleted or being added to the Purchase Agreement, as
the case may be, as indicated herein.
2. ASSUMPTION OF LIABILITIES.
(a) Section 8(a)(i) is hereby deleted in its entirety and the following
language is inserted in lieu thereof:
(i) liability occurring from and after the Closing Date for those
certain real estate leases, equipment leases, contracts and other
liabilities of Threads, set forth on Schedule 8(a) (including the addendum
thereto contemplated thereby) attached hereto (the "Assumed Liabilities");
(b) Section 8(d) is hereby deleted in its entirety and the following
language is inserted in lieu thereof:
(d) By written notice to the Sellers given prior to May 31, 1996, the
Buyer may exclude from the Assets purchased hereunder and the liabilities
assumed hereunder any of the Contracts listed or referenced on Schedule
1(i).
(c) Buyer hereby agrees to reimburse Sellers for any expenses incurred by
Sellers in respect of services to be provided to or personal property or
rights to be used by Buyer during June, 1996 under such contracts or leases
of Sellers listed on Exhibit A which are not thereafter assumed by Buyer.
3. RISK OF LOSS. The text of Section 10 of the Purchase Agreement is
hereby deleted in its entirety and the following language shall be deemed
effective in lieu thereof:
All risk of loss or damage to the Assets to be transferred to the Buyer
shall be borne by the Sellers until 12:01 a.m. on the Closing Date,
whereupon the Buyer shall assume all risk of loss to the Assets.
4. REAL PROPERTY MATTERS.
(a) Title. Buyer acknowledges that it has conducted title searches and is
in receipt of surveys and title commitments described in Section 15(b).
Buyer hereby waives its right under Section 15(b) of the Purchase Agreement
to terminate the Purchase Agreement as a result of defects in the title of
any of the parcels of Real Property revealed in any of the following: (i)
the title search conducted in Gaston County, North Carolina on March 15,
1996, (ii) the title search conducted in El Paso, Texas on March 11, 1996,
(iii) the survey of the Gastonia, North Carolina Real Property dated May
31, 1996 or (iv) the survey of the El Paso, Texas Real Property dated April
1, 1996; provided, however, that if demand shall be made against the Buyer
as a result of the encroachment of the Sellers' Synthetics plant into the
right of way of N.C. Highway 274 (Bessemer City Highway) or the
encroachment of the chain link fence of the Sellers' El Paso, Texas
facility on the property of adjacent landowners, then the Sellers shall
either procure an easement or variance to permit the continued encroachment
or reimburse the Buyer for the reasonable costs incurred in making
necessary corrections to the encroachment.
(b) Adjustments and Prorations. The parties hereby acknowledge that the
last sentence of Section 15(e) of the Purchase Agreement is interpreted by
the parties to include the Closing Date as being included in the Buyer's
billing period for the purposes of determining the proration of utility
charges and operating expenses. With respect to (i) any amounts the
Sellers are obligated to pay to the Buyer pursuant to Section 15(e) of the
Purchase Agreement or (ii) the Sellers' prorated share of costs or other
payments required to be paid under Leases subject to Assignment, Assumption
and Release Agreements to which the Buyer and the Sellers are parties, the
Sellers shall promptly pay such amounts in full and without regard to the
$75,000 "basket" contained in Section 20(f) of the Purchase Agreement.
(c) Damage, Destruction and Condemnation. In Section 15(f) of the
Purchase Agreement, the words the Closing Date in the first sentence of (i)
and the first sentence of (iv) are hereby deleted and replaced by the words
12:01 a.m. on the Closing Date. In the last sentence of Section 15(f)(i),
the phrase through the Closing is hereby deleted and replaced by the phrase
prior to 12:01 a.m. on the Closing Date.
(d) Railroad Encroachments. In Section 18(a)(xx) and Section 18(g) of the
Purchase Agreement, the language thirty (30) days is hereby deleted and
replaced by ninety (90) days.
5. LEASED PROPERTY ASSIGNMENT. Buyer hereby waives the receipt of
assignments of the Miami and Des Plaines leases as conditions to its
obligation of Closing provided for under Section 18(b) of the Purchase
Agreement. If Buyer is unable to obtain an assignment of the Miami or Des
Plaines lease as currently written and if, as a result, Buyer is required
to pay increased rent for comparable space, Sellers will reimburse the
Buyer to the extent of such increase during the time period comprising the
remaining term of such lease. In addition, if either or both of such
leases have not been assigned by June 10, 1996, the Sellers immediately
will reimburse the Buyer the amount of lease deposits set forth on the
Closing Statement delivered at the Closing relating to such unassigned
lease or leases (all of which costs the Sellers warrant have been paid in
the amounts set forth in the Closing Statement). If Buyer should later
obtain the assignment of such lease or leases, Buyer will pay Sellers the
lesser of the amount of the lease deposit which the landlord(s) under such
lease or leases certifies as being paid in any estoppel certificate
received by Buyers or the amount of lease deposits set forth on the Closing
Statement pertaining to such lease or leases.
6. SELLERS' INSURANCE. Section 16(e) is hereby amended by adding the
phrase until at least 12:01 a.m. on the Closing Date after the word effect
at the end thereof.
7. MOTOR VEHICLE TITLES. The parties hereby acknowledge and agree that
the titles to the following motor vehicles will not be delivered at the
Closing but will be delivered by representatives of Sellers to
representatives of Buyer at the branches at which they are located upon
notification by the parties to such representatives that the Closing has
occurred:
Automobiles
Driver Vehicle I.D.# Plant
Medina, Tony 2GNHG35K9P4129336 Honduras
Romo, Alfredo 3G3AX54TXSS116710 Torreon
Salgado, Wilfredo 2G4WB55L7R1443750 Puerto Rico
Vasquez, Nilda 1MELM50U4PA654939 Puerto Rico
Cargo Vans
Plants Vehicle I.D.#
Puerto Rico 2FDLF47M4MCA78951
Honduras 2GTEG25H4L4503551
Mexico 3GCJC44K6SM113031
8. OPINION OF SELLERS' COUNSEL. Section 18(a)(xvi) is hereby amended by
deleting the phrase except as set forth in Section 18(i) in the last
sentence of opinion (3) contained therein.
9. ENVIRONMENTAL MATTERS.
(a) Caustic Spill. Section 18(f) is hereby amended by adding the
following sentence to the end thereof:
In addition, the Sellers shall have until the expiration of 30 days
following the Closing Date to procure from DEHNR the letter contemplated in
the second sentence of the Second Environmental Matter.
(b) Spill Prevention Control and Countermeasure Plan. Section 22 is
hereby amended by adding the following new subsection thereto:
(n) Spill Prevention Control and Countermeasure Plan. The Sellers
hereby agree to provide to the Buyer, at Sellers' expense, a Spill
Prevention Control and Countermeasure Plan, prepared in accordance with
applicable laws and regulations, for the Synthetics and Dyeing and
Finishing facilities on or before July 31, 1996.
10. BILL AND HOLD GOODS. No later than June 10, 1996, the Sellers, at
their expense, will remove from the Sellers' facilities all goods
previously sold to customers on a "bill and hold" basis.
11. MISSING PARTS TO SPINNING FRAMES AT REX PLANT. The issue relating to
missing drafting system parts to the spinning frames at the Rex Plant is
hereby resolved by the parties' agreement to reduce the Purchase Price by
Twenty-four Thousand Eighty-four dollars ($24,084).
12. SCHEDULE MODIFICATIONS. The Schedules to the Purchase Agreement are
hereby modified in the manner set forth and described in Exhibit B hereto.
13. COUNTERPARTS; GOVERNING LAW. This Amendment may be executed in
counterparts and shall be governed by the laws of the State of North
Carolina.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date set forth above.
SELLERS:
T-C Threads, Inc.
ATTEST:
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
Threads of Puerto Rico, Inc.
ATTEST:
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
Dixie Yarns, Inc.
ATTEST:
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Treasurer Glenn M. Grandin, Senior
Vice President
(CORPORATE SEAL)
Productos Para La Industria De La
Maquila, S.A. Prima
ATTEST:
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
Hilos Y Accesorios, S.A. DE C.V.
ATTEST:
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
BUYER:
American & Efird, Inc.
ATTEST:
/s/CRAIG STOVER By:/s/THOMAS W. DICKSON
Secretary Thomas W. Dickson, President
(CORPORATE SEAL)
List of omitted schedules and exhibits
Exhibit A List of Contracts and Leases
Exhibit B Schedule Modifications
SECOND AMENDMENT
TO
ASSET PURCHASE AGREEMENT
This Second Amendment to Asset Purchase Agreement ("Second Amendment")
is dated as of June 3, 1996, by and among T-C Threads, Inc. d/b/a Threads
USA, a Tennessee corporation ("TUSA"), Threads of Puerto Rico, Inc., a
North Carolina corporation ("TPR"), Productos Para La Industria de la
Maquila, S.A. Prima, a Honduras corporation ("Prima"), Hilos Y Accesorios,
S.A. de C.V., a Mexico corporation ("Hilos") and Dixie Yarns, Inc., a
Tennessee corporation ("Dixie") (TUSA, TPR, Prima, and Hilos are sometimes
collectively referred to herein as "Threads" and TUSA, TPR, Prima, Hilos
and Dixie are sometimes collectively referred to herein as the "Sellers'')
and American & Efird, Inc., a North Carolina corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer has agreed to purchase substantially all of the
assets of Threads used in its business as well as certain assets of Dixie
used primarily in Threads' business, excluding certain assets as agreed
upon by the parties, all as set forth in that certain Asset Purchase
Agreement between the parties hereto dated as of May 23, 1996 (as amended
by Amendment to Asset Purchase Agreement dated May 31, 1996, the "Purchase
Agreement"); and
WHEREAS, certain provisions of the Purchase Agreement require
clarification, modification or exceptions to be made thereto and the
parties recognize that it is in their mutual interests to agree to such
modifications, clarifications and exceptions on the date hereof;
NOW, THEREFORE, without prejudice to any party and in consideration of
the mutual agreements set forth herein and other good and valuable
consideration, receipt of which is hereby acknowledged, and upon the terms
and subject to the conditions set forth herein and in the Purchase
Agreement, the parties hereto hereby agree as follows:
1. DEFINITIONS; ITALICS. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in the Purchase
Agreement.
2. PERSONAL PROPERTY TAX ADJUSTMENTS AND PRORATIONS.
(a) Personal property taxes with respect to the Assets (other than motor
vehicles) for the calendar year in which the Closing takes place shall be
prorated through the Closing Date on a calendar year basis and the Buyer
shall receive a credit at the Closing for all unpaid personal property
taxes with respect to the Assets up to and including the Closing Date.
Because the tax amount has not been determined as of the Closing Date,
taxes have been prorated on the Closing Statement dated as of the date
hereof (the "Closing Statement") using the tax amount for the prior year
and the Sellers and the Buyer agree, from and after the Closing Date and
upon written demand of either party, to promptly remit to the other party
such additional amounts as are necessary to discharge its pro rata share of
such taxes when the taxes for the calendar year in which the Closing occurs
have been determined.
(b) Personal property taxes with respect to motor vehicles which are a
part of the Assets shall be prorated through the Closing Date on the basis
of the tax period which applies to each such motor vehicle. The tax amount
of each such motor vehicle has not been determined as of the Closing Date;
therefore, upon receipt of the tax bill related to each motor vehicle, the
party receiving such bill shall promptly remit the taxes therefor to the
appropriate taxing authority, and a copy thereof to the other party along
with a breakdown of the pro rata share of each party. Sellers and Buyer
hereby agree to promptly remit to the other party, as appropriate, such
amount as necessary to discharge its pro rata share of such taxes.
(c) Personal property taxes with respect to Finished Goods for the
calendar year in which the Closing takes place shall be the responsibility
of the Sellers. Because the tax amount has not been determined as of the
Closing Date, the full amount of taxes relating to Finished Goods paid by
TUSA during the prior year have been deducted from the amount payable to
the Sellers at Closing (as reflected on the Closing Statement). The
Sellers and the Buyer agree, from and after the Closing Date and upon
written demand of either party, to promptly remit to the other party such
additional amounts as are necessary to reflect the Sellers' obligations
with respect to such taxes for the calendar year in which the Closing
occurs when such taxes have been determined.
(d) The Sellers agree to be responsible for all personal property taxes
charged, laid, levied or imposed upon the personal property located at the
Sellers' Des Plaines facility prior to the Closing Date (which shall
include the second (final) installment for the 1995 tax year, the first
(estimated) installment for the 1996 tax year, prorated on a daily basis,
and any necessary adjustments to be made pursuant to the second (final)
installment of the 1996 tax year).
(e) Without limiting the effectiveness of the foregoing, the Sellers agree
to pay prior to becoming delinquent all 1996 and 1997 taxes levied on
personal property of any of the Sellers located in Gaston County, North
Carolina, except for personal property taxes being contested in good faith.
3. COUNTERPARTS; GOVERNING LAW. This Second Amendment may be executed in
counterparts and shall be governed by the laws of the State of North
Carolina.
SELLERS:
T-C THREADS, INC.
By:/s/Gary A. Harmon
Gary A. Harmon
Vice President
THREADS OF PUERTO RICO, INC.
By:/s/Gary A. Harmon
Gary A. Harmon
Vice President
DIXIE YARNS, INC.
By:/s/Gary A. Harmon
Gary A. Harmon
Treasurer
PRODUCTOS PARA LA INDUSTRIA
DE LA MAQUILA, S.A. PRIMA
By:/s/Gary A. Harmon
Gary A. Harmon
Vice President
HILOS Y ACCESORIOS, S.A. DE C.V.
By:/s/Gary A. Harmon
Gary A. Harmon
Vice President
BUYER:
AMERICAN & EFIRD, INC.
By:/s/Thomas W. Dickson
Thomas W. Dickson, President
YARN AND FINISHED GOODS AGREEMENT
THIS YARN AND FINISHED GOODS AGREEMENT (the "Agreement") dated as of
June 3, 1996 by and among T-C THREADS, INC., d/b/a THREADS USA ("TUSA"), a
Tennessee corporation, THREADS OF PUERTO RICO, INC. ("TPR"), a North
Carolina corporation, PRODUCTOS PARA LA INDUSTRIA DE LA MAQUILA, S.A.
PRIMA, a Honduras corporation ("Prima"), HILOS Y ACCESORIOS, S.A. DE C.V.,
a Mexico corporation ("Hilos") and DIXIE YARNS, INC. ("Dixie"), a Tennessee
corporation (TUSA, TPR, Prima and Hilos are sometimes collectively referred
to herein as "Threads") and AMERICAN & EFIRD, INC., a North Carolina
corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, Threads, the Buyer and Dixie have entered into that certain
Asset Purchase Agreement dated May 23, 1996 (the "Asset Purchase
Agreement") pursuant to which the Buyer has agreed to purchase and Threads
and Dixie have agreed to sell to the Buyer the Assets (as such capitalized
term is defined in Section 3 of the Asset Purchase Agreement); and
WHEREAS, pursuant to Section 4 of the Asset Purchase Agreement, the
parties hereto have agreed to enter into this Agreement for the purposes of
agreeing upon the disposition of certain assets of Threads, which were not
included as Assets to be transferred to the Buyer under the terms of the
Asset Purchase Agreement, as more particularly set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. TERMS. All terms used herein without definition, unless the context
clearly requires otherwise, shall have the meanings provided therefor in
the Asset Purchase Agreement.
2. DISPOSITION OF GREIGE YARN. All greige yarn owned by Threads (the
"Yarn") as of the Closing Date (the "Threads Yarn Inventory") will be
inventoried on a case controlled basis and remain the property of Threads.
The report of inventory taken as of the Closing Date by Threads and the
Buyer is identified and summarized on Schedule A (the "Yarn Inventory")
attached hereto and a copy of such inventory has been delivered to Threads
and the Buyer. For a period not to exceed six (6) months from the Closing
Date, the Buyer agrees to use the Yarn in the production of Threads USA
branded products (the "Threads Branded Products") as needed, and the Buyer
will use its best efforts, consistent with past practices of Threads, to
use the Yarn on a first in, first out ("FIFO") basis. To the extent
practicable, the Buyer agrees to use the Yarn in its manufacturing process
prior to its use of greige yarn acquired from other sources. The Buyer has
the right to exclude from the production of the Threads Branded Products
any Yarn that is (i) defective, (ii) obsolete, (iii) more than six (6)
months old as of the Closing Date, (iv) not in the Buyer's or Threads' line
of business, or (v) does not meet the Quality Standards, as such term is
defined in Section 11(y) of the Asset Purchase Agreement. The Buyer shall
provide Threads with prompt notice of the identification of any Yarn to be
excluded hereunder.
The Buyer shall, upon the request of Threads, dye and wind up to ten
percent (10%) of the Threads Yarn Inventory with all costs in connection
therewith to be borne by Threads at the Buyer's standard costs plus ten
percent (10%).
3. PAYMENT FOR YARN USED IN PRODUCTION OF THREADS BRANDED PRODUCTS.
(a) The Buyer agrees to pay Threads for all of the Yarn put in-process in
connection with the production of Threads Branded Products, or sold by the
Buyer, according to the greige yarn price schedule set forth on Schedule B
(the "Price Schedule").
(b) Any Yarn sold that is returned by a customer pursuant to mutual
agreement of the Buyer and Threads will be placed back into the Threads
Yarn Inventory. Accordingly, the Buyer will be entitled to a credit equal
to the amount the Buyer paid for the Yarn under the provisions of this
Paragraph 3 and the Buyer may deduct that credit from the Weekly Payment
(defined below) paid to Threads provided in subparagraph (c) herein.
(c) At the end of each accounting week of the Buyer ("Week"), the Buyer
will determine the total price (based on the Price Schedule) of all of the
Yarn put in-process or sold by the Buyer during the Week less the value of
the Yarn returned by customers and will pay the balance, if any, to Threads
within ten (10) days following the last day of the Week (the "Weekly
Payment"). All Weekly Payments shall be made by check payable to Dixie
Yarns, Inc. and sent by regular mail addressed to Threads at the address
provided in Paragraph 15 herein or such other address as may be provided in
writing to the Buyer (effective upon receipt by the Buyer of such change of
address).
4. SHIPMENT OF YARN UPON REQUEST OF THREADS.
(a) At any time after the Closing Date, an authorized representative of
Threads may request in writing to a designated representative of the Buyer
that the Yarn be shipped to a specific customer, provided such customer is
fully informed and agreeable to the shipment of the Yarn. All shipments of
Yarn pursuant to this Paragraph 4 must be approved by the Buyer, which
approval shall not be unreasonably withheld and shall specifically not be
withheld due to the price of the Yarn exceeding the prices specified in
Section 3(a) hereof, unless the Buyer is willing to commit to purchase such
Yarn.
(b) All shipments of Yarn under this Paragraph 4 will be considered direct
sales from Threads to the customer. Threads will be responsible for the
billing, credit risk and freight costs associated with the shipment of the
Yarn to the customer. In connection with its services rendered in handling
and facilitating the shipment, the Buyer shall charge and receive from
Threads a storage and handling fee of five percent (5%) (the "Handling
Fee") of the price of the Yarn shipped as shown on the Price Schedule. The
Buyer shall invoice Threads for the Handling Fee and Threads shall pay the
Buyer within thirty (30) days from the invoice date (shipment date).
5. RETURN OR PURCHASE OF THE YARN. Six (6) months following the Closing
Date, the Buyer will return all of the unused Yarn to Threads at the
address provided in Paragraph 15 herein or to a location specified by
Threads (all costs, risk and freight incurred in the return of the Yarn is
to be borne by Threads) or pay for any unused Yarn in accordance with the
Price Schedule. Any Yarn returned to Threads hereunder may thereafter be
sold by Threads, and Threads shall be entitled to use the Threads USA name
for product identification purposes only with respect to any Yarn sold by
it.
6. DISPOSITION OF FINISHED GOODS.
(a) Threads will retain ownership of all thread finished goods (the
"Closing Finished Goods") inventoried by Threads and the Buyer as of the
Closing Date. The report of Closing Finished Goods inventory taken as of
the Closing Date by Threads and the Buyer is identified and summarized on
Schedule C attached hereto (the "Threads Finished Goods Inventory") and a
copy of such inventory has been delivered to the Buyer and Threads. All
such Closing Finished Goods shall be inventoried on a case controlled
basis. Sales representatives of the Buyer (including sales representatives
retained by the Buyer from Threads pursuant to Paragraph 9 herein), will
sell such Closing Finished Goods and all finished goods sold by Threads
prior to Closing and returned by Threads' customers thereafter (together
with the Closing Finished Goods, "Finished Goods") on an exclusive basis to
existing customers of Threads and new customers of the Buyer, making all
reasonable efforts to maintain sales proportions in existing channels of
distribution. The Buyer will maintain existing Threads products within
each product line until the earlier of six (6) months from the Closing Date
or until all Yarn and Finished Goods within such product line are sold,
returned to Threads or disposed of in accordance with the terms of this
Agreement. The Buyer will sell the Finished Goods to customers based on
market prices in effect from time to time (the "Finished Goods Selling
Price"). The Buyer will use its best efforts, consistent with past
practices of Threads, to sell the Finished Goods to customers on a FIFO
basis; provided, however, the Buyer has the right to exclude Finished Goods
that (i) do not meet the Quality Standards, (ii) are identified as damaged
prior to Closing or (iii) are over two (2) years old as of the Closing
Date. To the extent practicable, Buyer agrees to sell Finished Goods prior
to selling finished goods of the Buyer that are within Threads' existing
product line.
(b) All Finished Goods held under consignment arrangements at the
locations identified on Schedule D will continue to be owned by TUSA until
title is transferred pursuant to the terms of the consignment agreements
and consignment arrangements identified on such schedule (the "Consignment
Agreements"). TUSA hereby appoints the Buyer as its agent for the purpose
of shipping goods to consignees and conducting inspections of such goods,
all pursuant to the terms of the Consignment Agreements. Any purchase of
Finished Goods by a consignee pursuant to the terms of a Consignment
Agreement shall be deemed to be a sale of such Finished Goods within the
meaning of Paragraph 6(a) hereof. Threads and Dixie hereby authorize the
Buyer to continue to ship Finished Goods to the entities listed on Schedule
H hereto, notwithstanding the absence of a written agreement regarding such
shipments, on terms substantialy similar to those employed by Threads
and/or Dixie prior to the date hereof.
(c) Nothing contained herein shall require the Buyer to ship any
additional Finished Goods to Mexico or Honduras nor require the Buyer to
maintain for longer than the ninety (90) day period beginning on the
Closing Date the existing channels of distribution in Mexico or Honduras,
provided that upon the expiration of such ninety (90) day period, the
Buyer, at its sole cost and expense, shall ship all unsold Finished Goods
from Mexico and Honduras to one or more appropriate United States
facilities at which other Finished Goods are located.
7. PAYMENTS TO THREADS FOR FINISHED GOODS SOLD. At the end of each Week,
the Buyer will determine the total Finished Goods Selling Price of all
Finished Goods sold during such Week (net of discounts, if any), excluding
freight out, and deduct any returns or adjustments as provided in Paragraph
8(a)(i) and 8(b). The resulting sum is herein referred to as the "Net
Finished Goods Sales". The Buyer will submit the sales information and
results to Threads in the form of a Weekly Sales and Cost Report
substantially in the form of Schedule E (the "Weekly Sales and Cost
Report") attached hereto and pay to Threads on a 10 day basis from the end
of the Week an amount (such amount hereinafter referred to as the "Threads
Payment") equal to seventy-five percent (75%) of the Net Finished Goods
Sales, less the amount of (i) any returns or adjustments as provided in
Paragraph 8(a)(ii) and (ii) sales commissions as provided in Paragraph 9;
provided, however, that if the Threads Payment determined in accordance
with this Paragraph 7 is a negative number, then Threads shall pay to the
Buyer, within 10 days following the end of the Week, such amount (as if
such amount were a positive number).
8. DEDUCTIONS AND CREDITS RELATED TO THE BUYER SELLING THREADS FINISHED
GOODS AFTER THE CLOSING DATE.
(a) The Buyer shall issue credits for the return of Threads Finished Goods
("Return Credits") sold after the Closing Date (the "Returned Finished
Goods") and returned after the Closing Date by a customer on a basis
consistent with the policy used by the Buyer for returns of its own
finished goods. Notwithstanding this commitment by the Buyer, with respect
to such Finished Goods returned for customer accommodation (that is, where
there is no shipping error, order entry error, or quality problem
("Customer Accommodation")), the Buyer shall not accept such goods and
issue a return credit when the amount of such return credit would equal or
exceed $5,000 without the consent of Threads. In addition, should Customer
Accommodations, as reported on the Threads Sales Summary in the aggregate
exceed $200,000 subsequent to the Closing Date, the Buyer shall not accept
goods or issue a return credit when the amount of such return credit would
equal or exceed $2,500 without the consent of Threads. Further, should
Customer Accommodations, as reported on the Threads Sales Summary, in the
aggregate exceed $300,000 subsequent to the Closing Date, the Buyer shall
not accept goods or issue a return credit when the amount of such return
credit would equal or exceed $1,000 without the consent of Threads. In
each instance above, Threads' consent will not be unreasonably withheld.
If, subsequent to the Closing Date, the Buyer alters the reporting of
reason codes on the Threads Sales Summary (that is, no longer reports
customer accommodations separately), the Buyer and Threads will use best
efforts to accomplish the intent of this paragraph, and at a minimum, the
Buyer shall furnish Threads with copies of any return credits indicating
the reason for the return credit.
(i) Non-quality Related Returns. Finished Goods sold after the Closing
and returned to the Buyer without a quality problem will be returned to the
Threads Finished Goods Inventory. The credit issued to the customer will
be reflected as a negative sale and cost of goods on the Weekly Sales and
Cost Report in the manner provided in Paragraph 7 above.
(ii) Quality Related Returns. Finished Goods sold after the Closing and
returned to the Buyer with a quality problem will be returned to Threads or
to a location specified by Threads (freight collect). The cost of the
goods sold paid to Threads by the Buyer and freight paid (if any), will be
reflected as a deduction from the weekly Threads Payment in the Weekly
Sales and Cost Report in the manner provided in Paragraph 7 above.
(b) Price Adjustments: Any customer credit (or debit) invoice issued by
the Buyer to correct a unit price in the original invoice for sales of
Finished Goods sold after the Closing will be reflected as a negative (or
positive) sale and cost of goods on the Weekly Sales and Cost Report in the
manner provided in Paragraph 7 above.
9. SALES INCENTIVES; SALES OF FINISHED GOODS INVENTORY.
(a) The Buyer agrees to pay the Buyer's sales representatives (including
sales representatives retained by the Buyer from Threads) an additional
incentive commission for sales of specified Finished Goods not to exceed
2.25% over the regular commission (the "Additional Commission"), provided
that Threads shall pre-approve the amount of the Additional Commission and
shall specify the Finished Goods to which the Additional Commission applies
in advance of any sales. Fifty percent (50%) of the Additional Commission,
if any, will be paid by Threads and will be deducted in the manner provided
in Paragraph 7 above. Notwithstanding anything contained herein to the
contrary, the parties may from time to time agree to increase the
Additional Commission above 2.25% for specified Finished Goods.
(b) After the Closing Date, the Buyer will permit an authorized Threads
representative (the "Threads Representative") to assist the Buyer in
selling the remaining Threads Finished Goods Inventory; provided, however,
all direct contacts by Threads to the Buyer's customers or Threads
customers, and the terms of sale, must have the prior approval of the
Executive Vice President or President of the Buyer (which approval will not
be unreasonably withheld). Threads Representatives shall be allowed on
site only with the prior approval of the Buyer, which approval shall not be
unreasonably withheld. Threads agrees to make available a Threads
Representative for meetings (at least monthly) with the Buyer's Executive
Vice President to review the remaining Threads Finished Goods Inventory.
10. DISPOSAL AND RETURN OF FINISHED GOODS.
(a) At the end of one year from the Closing Date, the Buyer and Threads
will agree on a plan (not more than six months in duration) to dispose of
the remaining Threads Finished Goods Inventory. The Buyer agrees to
cooperate with additional processing of the Finished Goods to make the
Finished Goods more salable (by re-dyeing or re-packaging), with all costs
incurred by the Buyer to be borne by Threads at the Buyer's standard costs.
(b) All Finished Goods unsold at the end of eighteen (18) months after the
Closing Date, at the option of the Buyer, will be returned to Threads at
the address provided in Paragraph 15 herein (or to a location specified by
Threads in writing (with all freight costs to be borne by Threads)) or will
be purchased by the Buyer for an amount equal to seventy-five percent (75%)
of the average selling price to customers of the Buyer over the previous
eighteen (18) months. Any Finished Goods returned to Threads hereunder may
thereafter be sold by Threads, and Threads shall be entitled to use the
Threads USA name for product identification purposes only with respect to
any Finished Goods sold by it.
11. QUALITY COMPLAINTS AND CLAIMS. Threads will be responsible for all
out of pocket costs and expenses relating to any quality complaints or
claims regarding (a) the Yarn, either sold as is or processed as finished
goods by the Buyer and (b) the Finished Goods. The Buyer will not assert a
quality claim against Threads related to the Yarn if the Yarn meets the
"Quality Standards," a copy of which is attached hereto as Schedule F (the
"Quality Standards"). Threads warrants that it has not made any
representations to customers with respect to first quality Yarn
inconsistent with the Quality Standards attached hereto. All disputes
regarding quality complaints and claims shall be resolved in the manner
provided in Paragraph 21 herein.
12. TITLE TO YARN AND FINISHED GOODS. Threads represents and warrants as
of the Closing Date that the Yarn and Closing Finished Goods are free from
all liens and encumbrances of any nature whatsoever and that Threads has
good marketable title to the same. At all times prior to the sale of the
Yarn (as provided in Paragraph 2), the Yarn being put in-process by the
Buyer (as provided in Paragraph 3) or sale of the Finished Goods (as
provided in Paragraph 6), title shall remain with Threads, provided,
however, that upon a sale or putting in-process by the Buyer of Yarn or
Finished Goods to the Buyer, title to such Yarn and Finished Goods sold
shall be automatically vested in the Buyer.
13. STORAGE; RISK OF LOSS; INSURANCE.
(a) The Buyer agrees to provide Dixie with weekly, monthly and quarterly
reports relating to the Yarn and Finished Goods as set forth on Schedule G
(each of which reports listed on Schedule G the Sellers warrant is
currently being produced on such schedule on software listed in the
exhibits to the Computer Systems and Administrative Services Agreement)
within 5 days following the end of each reporting period from and after the
Closing Date and a quarterly physical inventory of the Yarn and Finished
Goods in its possession within 14 days following the end of each fiscal
quarter, commencing with the Buyer's fiscal year ending September 29, 1996.
It is agreed that at any time and from time to time during normal business
hours, representatives of Threads, including its independent public
accountants, shall be permitted reasonable access to the Buyer's books and
records regarding the Yarn and Finished Goods, and the Yarn and Finished
Goods protected area for the sole and limited purpose of observing,
inspecting and conducting a physical count of the Yarn and Finished Goods
and comparison to the Buyer's perpetual inventory. The Buyer agrees that
in the event a physical inspection indicates that there are shortages in
the Yarn and Finished Goods, the Buyer will be responsible therefor and
Threads will invoice the Buyer for such shortages as follows: (i) if the
shortage is of Yarn, Threads will invoice the Buyer based on the Price
Schedule and (ii) if the shortage is of Finished Goods, Threads will
invoice the Buyer at the amount equal to seventy-five percent (75%) of the
average selling price of such product to customers during the period from
the Closing Date through the date of the invoice, or, if there have been no
sales of such product since the Closing Date, the average selling price for
the last five (5) sales prior to the Closing. If the Buyer shall have made
a payment with respect to a shortage of goods and thereafter (but prior to
the expiration of the eighteen (18) month period beginning on the Closing
Date) the Buyer shall locate such goods, the Buyer shall return the goods
to the Threads Yarn Inventory or the Finished Goods Inventory, as
appropriate, and the Sellers, upon notice from the Buyer, shall promptly
reimburse the Buyer in an amount equal to the Buyer's prior payment with
respect to the shortage of such goods. The previous sentence
notwithstanding, the Buyer shall be responsible for shortages of Finished
Goods held pursuant to Consignment Agreements or at the other locations
identified on Schedule H (the "Other Inventory Locations") only to the
extent of seventy-five percent (75%) of the amounts paid by the consignees
or other third parties with respect to such shortages.
(b) Threads agrees to maintain casualty insurance on the Yarn and Finished
Goods in an amount not less than the full replacement value of such goods.
The Buyer may, but need not, maintain similar insurance coverage, naming
Threads as an additional insured. Any damage to or loss of the Yarn or
Finished Goods (other than shortages discussed in Paragraph 13(a)) shall be
the responsibility of Threads, provided, however, that in the event such
damage to or loss of the Yarn or Finished Goods is directly attributable to
the negligence or willful misconduct of the Buyer, then the Buyer shall be
responsible for the damage or loss less any insurance proceeds received by
Threads.
(c) The Buyer assumes sole responsibility and liability for death or
injury to any person and damage to or loss of property resulting from the
Buyer's storage or handling of the Yarn or Finished Goods and will further
defend, indemnify and hold Threads harmless from and against all claims,
damages and expenses arising out of, or related to the Buyer's storage or
handling of the Yarn; provided, however, that the Buyer shall not be
responsible for any death, injury, damage or loss caused by Threads or
Dixie.
14. ACCESS TO FACILITIES AND RECORDS. The Buyer agrees to allow the
Sellers reasonable access to its facilities and to its relevant business
records on reasonable notice and during normal business hours to the extent
necessary for the Sellers to verify the Buyer's compliance with its
obligation under this Agreement.
15. NOTICES. All notices, certificates or other communications hereunder
shall be deemed sufficiently given and shall be deemed given when delivered
by hand delivery or mailed by first class, postage pre-paid, registered or
certified mail, a return receipt requested, or faxed and addressed as
follows:
If to Threads or Dixie: Dixie Yarns, Inc.
1100 South Watkins Street
Chattanooga, Tennessee 37404
Attention: Chief Financial Officer
Facsimile No.: (423) 493-7442
If to the Buyer: American & Efird, Inc.
22 American Street
Mt. Holly, North Carolina 28120
Attention: Senior Vice President - Finance
Facsimile No.: (704) 827-0508
16. BINDING EFFECT. This Agreement shall inure to the benefit and shall
be binding upon Threads, Dixie and the Buyer and their respective
successors and assigns.
17. AMENDMENT, EXECUTION AND COUNTERPARTS. This Agreement may not be
amended, changed or modified, altered or terminated except by instrument in
writing signed by the parties to be charged. This Agreement may be
executed in several counterparts, each of which shall be an original and
all of which shall constitute but one and the same instrument.
18. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of North Carolina.
19. SEVERABILITY. In the event any provision of this Agreement or any
instrument delivered in connection herewith shall be held invalid or
unenforceable by any arbitral body or court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provision
hereof or thereof.
20. HEADINGS, EXHIBITS AND SCHEDULES. The paragraph headings in this
Agreement are for convenience only, and they form no part of this Agreement
and shall not effect its interpretation. All exhibits and schedules
attached hereto are hereby incorporated by reference and made a part of
this Agreement.
21. RESOLUTION OF QUALITY DISPUTES. Any controversy, dispute or question
arising out of, or in connection with, or in relation to this Agreement
with respect to the handling of quality complaints and claims related to
the Yarn or the Finished Goods shall be determined by Mr. Dame S. Hamby.
At the request of either party, the parties may mutually agree upon another
qualified individual to settle such disputes. The expense of Mr. Hamby's
or his successor's services shall be borne equally by the parties involved.
22. ARBITRATION. Except as otherwise provided in the preceding paragraph,
any controversy, dispute or question arising out of, or in connection with,
or in relation to this Agreement or its interpretation, performance or non-
performance or any breach thereof shall be determined by arbitration
conducted in Charlotte, North Carolina in accordance with the then existing
rules of The American Arbitration Association and any decision rendered by
The American Arbitration Association shall be binding upon the parties
hereto. Any judgment upon any award, which may include an award of
damages, may be entered in the highest State or Federal court having
jurisdiction thereof. The expense of arbitration shall be borne equally by
the parties involved.
23. ENTIRE AGREEMENT. This Agreement and the accompanying documents
contain the entire agreement between the parties with respect to the
subject matter hereof and all prior contemporaneous written or oral
agreements with respect to the subject matter hereof are superseded hereby.
IN WITNESS WHEREOF, Threads, Dixie and the Buyer have caused this
Agreement to be executed in their respective names by their duly authorized
officers and their respective seals to be hereunto affixed all as of the
day and year first above written.
ATTEST: T-C THREADS, INC.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: THREADS OF PUERTO RICO, INC.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: DIXIE YARNS, INC.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Treasurer Glenn M. Grandin, Senior
Vice President
(CORPORATE SEAL)
ATTEST: PRODUCTOS PARA LA INDUSTRIA DE LA
MAQUILA, S.A. PRIMA
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: HILOS Y ACCESORIOS, S.A. DE C.V.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: AMERICAN & EFIRD, INC.
/s/CRAIG G. STOVER By:/s/THOMAS W. DICKSON
Secretary Thomas W. Dickson, President
(CORPORATE SEAL)
List of omitted schedules and exhibits
SCHEDULE A Yarn Inventory
SCHEDULE B Price Schedule
SCHEDULE C Finished Goods Inventory
SCHEDULE D Consigned Stock Locations and Agreements
SCHEDULE E Weekly Sales and Cost Report
SCHEDULE F Quality Standards
SCHEDULE G Inventory Reports
SCHEDULE H Other Inventory Locations
ACCOUNTS RECEIVABLE AGREEMENT
THIS ACCOUNTS RECEIVABLE AGREEMENT (the "Agreement") is made and
entered into as of this 3rd day of June, 1996 by and among T-C THREADS,
INC. d/b/a THREADS USA, a Tennessee corporation ("TUSA"), THREADS OF PUERTO
RICO, INC., a North Carolina corporation ("TPR"), PRODUCTOS PARA LA
INDUSTRIA DE LA MAQUILA, S.A. PRIMA, a Honduras corporation ("Prima"),
HILOS Y ACCESORIOS, S.A. DE C.V., a Mexico corporation ("Hilos") and DIXIE
YARNS, INC., a Tennessee corporation ("Dixie") (TUSA, TPR, Prima and Hilos
are sometimes collectively referred to herein as "Threads") and AMERICAN &
EFIRD, INC., a North Carolina corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer, Threads and Dixie have entered into that certain
Asset Purchase Agreement dated as of May 23, 1996 (the "Asset Purchase
Agreement") pursuant to which the Buyer has agreed to purchase and Threads
and Dixie have agreed to sell the Assets (as such capitalized term is
defined in Section 3 of the Asset Purchase Agreement); and
WHEREAS, pursuant to Section 5 of the Asset Purchase Agreement the
parties have agreed to enter into this Agreement relating to the
disposition of Threads' accounts receivable in the manner more particularly
set forth herein.
NOW, THEREFORE, in consideration of these premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. TERMS. All terms used herein without definition, unless the context
clearly requires otherwise, shall have the meanings provided therefor in
the Asset Purchase Agreement.
2. COLLECTION OF ACCOUNTS RECEIVABLE.
(a) Commencing on the Closing Date and continuing thereafter for a period
of not more than six (6) months, the Buyer will use prompt, diligent and
reasonable efforts, consistent with the Buyer's regular collection
practices for its own accounts receivable, which practices are set forth in
Schedule A hereto, to assist in the collection of those Threads' accounts
receivable outstanding as of the Closing Date as set forth on Schedule B
attached hereto and incorporated by reference herein (the "Accounts
Receivable"), provided, that the Buyer will not attempt to collect or be
responsible for the collection of those Accounts Receivable for any
customer if all of such customer's accounts receivable balances are thirty
(30) days or more past due as of the Closing Date.
(b) Representatives selected and compensated by Threads or Dixie (the
"Threads Representative") upon prior notification to the Buyer, may
participate in the collection of the Accounts Receivable, provided that all
Threads Representatives will work under the specific direction of the
Buyer's Director of Credit, Senior Vice President of Finance, or other
employees of the Buyer designated in writing by the Buyer. Notwithstanding
anything contained herein to the contrary, the Threads Representatives
involved in such collections shall be independent contractors of the Buyer,
subject to the general control and supervision of Threads. Nothing
contained herein shall be construed to create an employment, agency or
similar relationship between the Buyer and the Threads Representatives.
Threads shall be solely responsible for the compensation and expenses
related to the participation of the Threads Representatives in the
collection of the Accounts Receivable. Threads agrees to make available a
Threads Representative for meetings (at least monthly) with the Buyer's
President or Executive Vice President and Senior Vice President of Finance
or such other person as may be delegated with such authority by either of
them to review the status of the Accounts Receivable. Except as
specifically provided herein or upon the prior express written consent of
the Buyer's President or Executive Vice President, neither Threads nor the
Threads Representatives may contact any current customers of the Buyer or
any former customers of Threads or the Buyer, or any sales representatives
of the Buyer, regarding any aspect of the Accounts Receivable; provided,
however, Threads Representatives may contact such customers for the purpose
of collecting accounts receivable that are being collected solely by
Sellers.
(c) Notwithstanding anything to the contrary contained herein, the Buyer
shall have no obligation whatsoever to institute any action or other
litigation before any court, agency, arbitrator, or tribunal to collect, or
enforce any rights of Threads with respect to the Accounts Receivable. In
each instance where the institution of an action or lawsuit is appropriate,
Buyer will allow Threads and Dixie to collect such Accounts Receivable.
(d) Solely for purposes of evaluating and determining credit limits and
making decisions regarding shipments of products to customers, the Buyer
will consider all uncontested Accounts Receivable to be owed and payable to
the Buyer.
(e) Any payment received from any customer shall be applied to the invoice
specified by the customer. If the customer shall fail to specify the
invoice to which such payment shall be applied, the payment shall be
applied on the account generally until the customer can be contacted and
informs Buyer which invoices are to be paid.
(f) Under no circumstances will Buyer instruct a customer to remit payment
of an Account Receivable in a manner contrary to the instructions set forth
on the corresponding invoice, since to do so may constitute a violation of
the provisions of Dixie's accounts receivable financing arrangements.
3. CUSTOMER CREDITS.
(a) Threads warrants and represents that the list of all customer credits
issued by Threads prior to Closing Date set forth on Schedule C (the
"Customer Credits") attached hereto and incorporated by reference herein
contains all of the Customer Credits issued and outstanding as of the
Closing Date and all such Customer Credits are accurate and valid.
(b) The Buyer hereby agrees to accept Customer Credits in payment of the
Buyer's accounts receivable of such customers if there are no Threads
Accounts Receivable outstanding for that customer. The cash value of any
Customer Credits used by a customer in payment of the accounts receivable
of the Buyer will be deducted from the Accounts Receivable Payment made by
the Buyer to Threads as provided in Paragraph 5 below.
4. RETURNS OF FINISHED GOODS AND DEDUCTIONS AND CREDITS.
(a) The Buyer shall issue credits for the return of Threads Finished Goods
("Return Credits) sold prior to the Closing Date (the "Returned Finished
Goods") and returned after the Closing Date by a customer on a basis
consistent with the policy used by the Buyer for returns of its own
finished goods. Notwithstanding this commitment by the Buyer, with respect
to such Finished Goods returned for customer accommodation (that is, where
there is no shipping error, order entry error, or quality problem
("Customer Accommodation")), the Buyer shall not accept such goods or issue
a Return Credit when the amount of such Return Credit would equal or exceed
$5,000 without the consent of Threads. In addition, should Customer
Accommodations, as reported on the Threads Sales Summary, in the aggregate
exceed $200,000 subsequent to the Closing Date, the Buyer shall not accept
goods or issue a Return Credit when the amount of such Return Credit would
equal or exceed $2,500 without the consent of Threads. Further, should
Customer Accommodations, as reported on the Threads Sales Summary, in the
aggregate exceed $300,000 subsequent to the Closing Date, the Buyer shall
not accept goods or issue a Return Credit when the amount of such Return
Credit would equal or exceed $1,000 without the consent of Threads. In
each instance above, Threads' consent will not be unreasonably withheld.
If, subsequent to the Closing Date, the Buyer alters the reporting of
reason codes on the Threads Sales Summary (that is, no longer reports
Customer Accommodations separately), the Buyer and Threads will use best
efforts to accomplish the intent of this paragraph and, at a minimum, the
Buyer shall furnish Threads with copies of credits indicating the reason
for the Return Credit.
(b) Any Return Credits issued to a customer as a result of a return of
Returned Finished Goods (in whole or in part), including freight, shall be
credited first to any outstanding Accounts Receivable, and if none, then to
the Buyer's accounts receivable balance of that customer to the extent such
customer has a current outstanding accounts receivable balance with the
Buyer. Dixie or Threads shall reimburse the Buyer for the cash value of
all Return Credits within five (5) business days of receipt of a report
prepared by the Buyer listing the Return Credits issued.
(c) Returned Finished Goods returned without a quality problem will be
included with the Threads' Finished Goods Inventory. Finished Goods
returned with a quality problem will be returned to Threads or to a
location specified by Threads, with all freight and risk of loss to be
borne by Threads.
(d) Any customer credit (or debit) invoice issued by the Buyer to correct
a unit price or other dispute (including quantity) of an Accounts
Receivable ("Accounts Receivable Credit (Debit)") will be approved by
Threads (which approval will not be unreasonably withheld).
(i) Account Receivable Debits will be added to the Accounts Receivable.
(ii) Accounts Receivable Credits that are not sent to the Customer (used
only to zero an outstanding Accounts Receivable) will be sent to Threads.
(iii) Dixie shall reimburse the Buyer for the cash value of all Accounts
Receivable Credits that are sent to the Customer within five (5) days of
receipt of a report, prepared by the Buyer listing the Accounts Receivable
Credits issued.
5. PAYMENT OF ACCOUNTS RECEIVABLE.
(a) If Buyer shall receive payment in respect of any Account Receivable,
then Buyer shall provide Dixie with notice of the name of the customer, the
amount paid and the invoice number or other identifying information, such
notice to be transmitted to Dixie by telecopy by the end of each Day in
which any such payment is received.
(b) All payments received by Buyer during each business day ("Day") in
respect of Accounts Receivable will be (i) if by check payable to Dixie,
mailed to Dixie or to an address designated by Dixie, and (ii) otherwise
collected by Buyer and paid to Dixie (the "Accounts Receivable Payment")
the following Day net of (1) returned checks plus (2) Customer Credits used
in payment of Buyer's accounts receivable (collectively, the "Deductions").
Payment will be by ACH transfer to the designated bank account of Dixie.
In the event the sum of the Deductions exceeds the Accounts Receivable
collected by Buyer during any Day (such amount referred to herein as the
"Net Deficiency"), then such Net Deficiency shall be carried over to the
next Day. If a Net Deficiency shall continue to exist for five (5)
consecutive Days, Dixie shall reimburse Buyer for the Net Deficiency within
five (5) Days of receipt of a report prepared by Buyer detailing the Net
Deficiency, which report shall be subject to verification by Dixie.
6. RECEIPT OF ACCOUNTS RECEIVABLE.
(a) If Threads or Dixie shall receive payment in respect of any Accounts
Receivable, then Threads or Dixie, as appropriate, shall provide the Buyer
with notice of the name of the customer, the amount paid and the invoice
number or other identifying information, such notice to be transmitted to
the Buyer by telecopy by the end of each Day in which any such payment is
received.
(b) If Threads or Dixie shall receive payment in respect of any accounts
receivable of the Buyer, then Threads or Dixie, as appropriate, shall (a)
provide the Buyer with notice of the name of the customer, the amount paid,
and the invoice number or other identifying information, such notice to be
transmitted to the Buyer by telecopy by the end of each Day in which any
such payment is received and (b) transfer the amount of each such payment
to the Buyer by ACH transfer (without offset or deduction except for
returned checks and Buyer's credits used to pay Dixie or Threads, provided
such Buyer's credit is confirmed by Buyer) by the end of the Day following
the Day of receipt. In the event the sum of the returned checks and
Buyer's credits exceeds the amount of accounts receivable of the Buyer
received by Threads during any Day (such amount referred to herein as the
"Buyer's Net Deficiency"), then such Buyer's Net Deficiency shall be
carried over to the next Day following the Day of receipt. If a Buyer's
Net Deficiency shall continue to exist for five (5) consecutive Days, the
Buyer shall reimburse Threads for the Buyer's Net Deficiency within five
(5) Days of receipt of a report prepared by Threads, including photocopies
of all returned checks, detailing the Buyer's Net Deficiency, which report
shall be subject to verification by Buyer.
7. TERMINATION OF BUYER'S OBLIGATIONS; TERMINATION OF AGREEMENT.
Commencing thirty (30) days after the Closing Date, at Threads' request,
the Buyer shall turn over to Threads those Accounts Receivable (along with
a copy of the related credit file) for any customer of Threads if all of
such customer's Accounts Receivable owed to Threads are past due thirty
(30) days or more, provided, however, that upon request by Buyer, Threads
and/or Dixie may consent (which consent will not be unreasonably withheld)
to Buyer continuing assistance with respect to such account. All other
requests by Dixie for the Buyer to turn over to Threads other Accounts
Receivable will be promptly considered by the Buyer. Notwithstanding
anything contained herein to the contrary, on the first business day six
(6) months after the Closing Date (the "Termination Date") the Buyer shall
turn over all outstanding Accounts Receivable to Threads for collection by
Threads, at which time all of the Buyer's obligations hereunder shall cease
except the Buyer's obligation to make payments as provided under Paragraph
5.
8. ABSENCE OF CONFLICTS. Threads and Dixie represent and warrant that the
arrangements described herein including specifically the limitations
provided under Section 2(f) do not conflict with any loan agreement,
security agreement or other agreement to which it is a party or to which it
or its accounts receivable is subject.
9. ACCESS TO FACILITIES AND RECORDS. The parties agree to allow each
other reasonable access to their respective facilities and relevant
business records on reasonable notice and during normal business hours to
the extent necessary to verify such party's compliance with its obligations
under this Agreement.
10. NOTICES. All notices, certificates or other communications hereunder
shall be deemed sufficiently given and shall be deemed given when delivered
by hand-delivery, sent by overnight delivery, mailed by first class,
postage prepaid, registered or certified mail, return receipt requested, or
faxed and addressed
as follows:
If to Threads at: Dixie Yarns, Inc.
1100 South Watkins Street
Chattanooga, Tennessee 37404
Attn: Credit Department
Facsimile No.: (423) 493-7437
With copy to: Chief Financial Officer
Facsimile No.: (423) 493-7442
If to the Buyer at: American & Efird, Inc.
22 American Street
Mt. Holly, North Carolina 28120
Attn: Director of Credit
Facsimile No.: (704) 827-0508
With copy to: Senior Vice President-Finance
Threads and the Buyer may by notice given hereunder, designate from time
to time any further or different addresses to which subsequent notices,
certificates or other communications shall be sent.
11. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon Dixie, Threads and the Buyer and their respective
successors and assigns.
12. AMENDMENT, EXECUTION IN COUNTERPARTS. This Agreement may not be
amended, changed, modified, altered or terminated except by instrument in
writing signed by the parties to be charged. This Agreement may be
executed in several counterparts, each of which shall be an original and
all of which shall constitute but one and the same instrument.
13. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of North Carolina.
14. SEVERABILITY. In the event any provision of this Agreement or any
instrument delivered in connection herewith shall be held invalid or
unenforceable by any arbitral body or court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provision
hereof or thereof.
15. HEADINGS, EXHIBITS AND SCHEDULES. The paragraph headings in this
Agreement are for convenience only, and they form no part of this Agreement
and shall not affect its interpretation. All exhibits and schedules
attached hereto are hereby incorporated by reference and made a part of
this Agreement.
16. RESOLUTION OF QUALITY DISPUTES. Any controversy, dispute or question
arising out of, or in connection with, or in relation to this Agreement
with respect to the handling of quality complaints and claims related to
Finished Goods shall be determined by Mr. Dame S. Hamby. At the request of
either party, the parties may mutually agree upon another qualified
individual to settle such disputes. The expense of Mr. Hamby's or his
successor's services shall be borne equally by the parties involved.
17. ARBITRATION. Except as otherwise provided in the preceding paragraph,
any controversy, dispute or question arising out of, or in connection with,
or in relation to this Agreement or its interpretation, performance or non-
performance or any breach thereof shall be determined by arbitration
conducted in Charlotte, North Carolina in accordance with the then existing
rules of The American Arbitration Association and any decision rendered by
The American Arbitration Association shall be binding upon the parties
hereto. Any judgment upon any award, which may include an award of
damages, may be entered in the highest State or Federal court having
jurisdiction thereof. The expense of arbitration shall be borne equally by
the parties involved.
18. ENTIRE AGREEMENT. This Agreement and accompanying documents contain
the entire agreement between the parties with respect to the subject matter
hereof and all prior or contemporaneous written or oral agreements with
respect to the subject matter hereof are superseded hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their respective names by their duly authorized officers and
their respective seals to be hereunto affixed all as of the day first above
written.
ATTEST: T-C THREADS, INC.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: THREADS OF PUERTO RICO, INC.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: DIXIE YARNS, INC.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Treasurer Glenn M. Grandin,
Senior Vice President
(CORPORATE SEAL)
ATTEST: PRODUCTOS PARA LA INDUSTRIA DE
LA MAQUILA, S.A. PRIMA
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: HILOS Y ACCESORIOS, S.A. DE
C.V.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: AMERICAN & EFIRD, INC.
/s/CRAIG G. STOVER By:/s/THOMAS W. DICKSON
Secretary Thomas W. Dickson, President
(CORPORATE SEAL)
List of omitted schedules and exhibits
SCHEDULE A Buyer's Collection Practices
SCHEDULE B Accounts Receivable
SCHEDULE C Customer Credits
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is made and entered
into as of the 3rd day of June, 1996 by and among T-C THREADS, INC. d/b/a
THREADS USA, a Tennessee corporation ("TUSA"), THREADS OF PUERTO RICO,
INC., a North Carolina corporation ("TPR"), PRODUCTOS PARA LA INDUSTRIA DE
LA MAQUILA, S.A. PRIMA, a Honduras corporation ("Prima"), HILOS Y
ACCESORIOS, S.A. DE C.V., a Mexico corporation ("Hilos") and DIXIE YARNS,
INC., a Tennessee corporation ("Dixie") (TUSA, TPR, Prima and Hilos are
sometimes collectively referred to herein as "Threads" and TUSA, TPR,
Prima, Hilos and Dixie are sometimes referred to herein individually as the
"Seller" and collectively as the "Sellers") and AMERICAN & EFIRD, INC., a
North Carolina corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Sellers and the Buyer have entered into that certain
Asset Purchase Agreement dated May 23, 1996 (the "Asset Purchase
Agreement") pursuant to which the Buyer has agreed to purchase and Threads
and Dixie have agreed to sell to the Buyer all of Threads' right, title and
interest in and to Threads' Assets related to the business of Threads, and
Dixie's right, title and interest in and to certain real property related
to the business of Threads (as such capitalized terms are defined within
the Asset Purchase Agreement); and
WHEREAS, the Sellers heretofore engaged in the business of
manufacturing, distributing and selling industrial sewing thread and yarn
to be used in the manufacture of industrial sewing thread (collectively,
"Thread Products") and distributing notions and other related products and
supplies (the "Business") (for the purposes hereof, Thread Products, (a)
include (i) finished thread of any type, (ii) yarn of any fiber type,
whether for direct sale or for sale for further processing, in a dyed or
unfinished state, to be used in the manufacture of industrial sewing thread
(iii) all products identical or substantially similar to the thread
products currently sold by Threads and the Buyer, including but not limited
to special thread items (for example, tea bag thread and feminine personal
hygiene thread); and (b) exclude yarn manufactured, distributed or sold by
Dixie to be used in the manufacture of embroidery thread); and
WHEREAS, the Sellers acknowledge that the markets for the Buyer's
products are international and are highly competitive; and
WHEREAS, pursuant to Section 13 of the Asset Purchase Agreement the
parties hereto have agreed to enter into this Noncompetition Agreement; and
WHEREAS, the Buyer will not close and complete the Asset Purchase
Agreement without the execution of this Noncompetition Agreement by the
Sellers as such execution of this Noncompetition Agreement is a condition
of closing of the transaction, and the Sellers desire to have the Asset
Purchase Agreement closed and completed; and
WHEREAS, the Sellers are willing to agree to such noncompetition as
provided herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein for other good and valuable consideration, the receipt of
which is hereby acknowledged, the Buyer and Sellers hereby agree as
follows:
1. NONCOMPETITION. The Sellers agree that for a period of five (5) years
from the date hereof, Sellers shall comply with the following provisions:
a. Without the prior approval of the Buyer's President or Executive Vice
President, Sellers shall not, directly or indirectly, solicit for
employment, employees of the Buyer, and shall not, directly or indirectly,
hire any person who, within the preceding six months, was employed by the
Buyer other than as an hourly worker regardless of the reason for the
person's termination of employment with the Buyer.
b. Except as contemplated in Sections 5 and 10 of the Yarn and Finished
Goods Agreement dated as of the date hereof by and among the parties
hereto, within the Restricted Territory (as defined below), Sellers shall
not, either for Sellers or as agent, partner, significant investor (5% or
greater in ownership), consultant, or in any other capacity, directly or
indirectly, participate or engage in, or assist others in participating or
engaging in the Business or any other business which competes with the
Business. For purposes of this Noncompetition Agreement, the "Restricted
Territory" includes:
i. The World;
ii. North America, Central America and South America;
iii. North America; and
iv. The United States of America.
The sale of machinery by Sellers shall not constitute assisting others
in the participating or engaging in the Business, even if such machinery
could be used for the manufacturing of industrial sewing thread or yarn for
industrial sewing thread, unless Sellers assist in or consult with the
purchaser of such machinery in the conversion of the machinery to such
purpose.
c. Without limiting the restrictions contained in paragraph b above,
within the Restricted Territory, Sellers shall be allowed to sell yarn to a
customer that manufactures thread unless the Sellers have knowledge that
such yarn will be used in the manufacture of thread, and, in any event,
Sellers shall notify the Buyer promptly (and shall identify in such notice
the type of product sold) following a determination that such purchaser
manufactures thread.
d. The parties hereto agree that the restrictive covenants contained in
this paragraph 1 hereof (including the most extensive description of
"Restricted Territory" set forth above) are essential elements of this
Noncompetition Agreement and that this paragraph 1 shall be enforced as
written. If, however, any provision, or any part thereof is held to be
unreasonable, arbitrary, against public policy or otherwise unenforceable,
then the parties agree that the court in making such determination shall
have the power to reduce the duration and/or geographic area to one that is
otherwise reasonable, nonarbitrary, not against public policy and otherwise
enforceable against the Sellers, and in its reduced or modified form, this
provision shall then be enforceable. The parties hereto agree that the
provisions of this paragraph 1 are appropriate and reasonable when
considered in light of the nature and extent of the Business conducted by
the Buyer and that the restrictions in this paragraph 1 as to duration and
geographic area are reasonable and necessary for the protection of the
Buyer's respective legitimate interests.
2. FAILURE TO COMPLY. In the event of breach or threatened breach by the
Sellers of the provisions of paragraph 1, the Buyer shall have and may
exercise any and all rights and remedies available to the Buyer at law, in
equity or otherwise, including but not limited to obtaining an injunction
from a court of competent jurisdiction, enjoining and restraining the
Sellers from committing any such violation, and the Sellers hereby consent
to the issuance of such injunction without the requirement of the Buyer
posting bond.
3. SUCCESSORS AND ASSIGNS. This Noncompetition Agreement shall inure to
the benefit and be binding upon any successors of the Buyer which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets of the Buyer.
4. MODIFICATION AND WAIVER. This Noncompetition Agreement may not be
modified or amended except by an instrument in writing signed by the
parties hereto. No term or condition of this Noncompetition Agreement
shall be deemed to have been waived, nor shall there by any estoppel
against enforcement of any provision of this Agreement, except by written
instrument of the party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the specific
term and condition waived and shall not constitute a waiver of such terms
or conditions or as to any act other than that specifically waived.
5. GOVERNING LAW. This Agreement will be governed in all respects by the
internal laws (as opposed to the laws with respect to conflicts of law) of
the State of North Carolina.
6. SEVERABILITY. The provisions of this Noncompetition Agreement shall be
severable, and the invalidity or unenforceability of any provision shall
not affect the validity or unenforceability of the other provisions hereof.
7. HEADINGS. The paragraph headings in this Noncompetition Agreement are
for convenience only, and they form no part of this Noncompetition
Agreement and shall not affect its interpretation.
8. ENTIRE AGREEMENT. This Noncompetition Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
all prior or contemporaneous written or oral agreements with respect to the
subject matter hereof are superseded hereby.
IN WITNESS WHEREOF, the Sellers and the Buyer have caused this
Agreement to be executed in their respective names by their duly authorized
officers and their respective seals to be hereunto affixed all as of the
day and year first above-written.
ATTEST: T-C THREADS, INC.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: THREADS OF PUERTO RICO, INC.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: DIXIE YARNS, INC.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Treasurer Glenn M. Grandin, Senior
Vice President
(CORPORATE SEAL)
ATTEST: PRODUCTOS PARA LA INDUSTRIA DE
LA MAQUILA, S.A. PRIMA
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: HILOS Y ACCESORIOS, S.A. DE
C.V.
/s/GARY A. HARMON By:/s/GLENN M. GRANDIN
Assistant Secretary Glenn M. Grandin, President
(CORPORATE SEAL)
ATTEST: AMERICAN & EFIRD, INC.
/s/CRAIG G. STOVER By:/s/THOMAS W. DICKSON
Secretary Thomas W. Dickson, President
(CORPORATE SEAL)
