<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994 Commission File Number 0-3772
ROCKY MOUNT UNDERGARMENT CO., INC.
(Name of small business issuer as specified in its charter)
Delaware 56-1385522
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1536 Boone Street
Rocky Mount, NC 27803
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (919) 446-6161
Securities registered under Section 12 (b) of the Exchange Act:
None
Securities registered under Section (g) of the Exchange Act:
Common Stock, $.0001 par value
------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act of 1934 during the prior 12 months
(or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes No X .
----- -----
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year - $9,672,188
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 1, 1995 was $1,199,248. Affiliates include
executive officers, directors, shareholders known to own 5% or more of the
registrants common stock and Joan Greenberg, for a total of 6,293,903
shares. The market value is based upon the mean of the low bid ($1/4) and
the high ask ($7/8) as of March 1, 1995 which was ($9/16).
As of March 1, 1995, the issuer had outstanding 8,425,900 shares of common
stock ($.0001 par value).
<PAGE>
PART I
Item 1. BUSINESS
Introduction and Products
Rocky Mount Undergarment Co., Inc. a Delaware corporation and
subsidiaries (the "Company") manufactures and markets intimate
apparel for women and children. The Company's products are women's
and girl's tops, sleepwear, loungewear, bras and coordinated
daywear panties, children's underwear and thermals, and women's
lightweight control briefs. The Company considers itself to be in
a single line of business covering all women's intimate and
children's apparel, which business is not deemed to be seasonal.
The Company markets basic and fashion garments featuring various
styles, colors, laces and trims. The business was established in
1959.
The Company markets its products under its own tradenames (Rocky
Mount, R.M. International, Marion Rohr, Silks, Stretch-Mates,
Blossom Nite-T's and Blossom Creations) and trademarks
(Blossoms(R), Cotton Blossom(R) and Orange Blossom(R)), under a
licensed trademark (Capezio(R)-which expired December 31, 1994)
and under the private labels or tradenames of its customers. See
"Trademarks and Licenses".
Sales of the Company's products were approximately $9,511,000 in
1994 and $13,100,000 in 1993 (for financial information on the
Company's business, see the consolidated financial statements and
notes thereto, set forth in item 7 herein).
Proceedings Under Chapter 11
On January 26, 1993 (the "Petition Date"), Rocky Mount
Undergarment Co., Inc., the parent company, but not its
subsidiaries, filed a voluntary petition for reorganization under
Chapter 11 of Title 11 of the United States Bankruptcy Code
("Chapter 11") in the United States Bankruptcy Court for the
Southern District of New York ("Bankruptcy Court"). The Company
operated its business as a debtor-in-possession for the remainder
of 1993, subject to the supervision of the Bankruptcy Court. The
Chapter 11 filing was the result of a cash shortfall due to
difficulties associated with the December 1991 acquisition of
Marion Rohr Corp., higher than anticipated costs associated with
the continuing development of a line of fashion daywear and
continuing operating losses.
On January 13, 1994 (the "Confirmation Date"), the Bankruptcy
Judge signed an order which approved the Company's Amended Plan of
Reorganization ("Plan") ending the Company's status as a
debtor-in-possession.
The reorganization plan provided that unsecured creditors receive
20% of their allowed claims. In addition, the unsecured creditors
were to receive a pro-rata distribution based upon 50% of the net
recovery by the Company, if any, upon a claim of trademark
infringement with respect to the Company's Blossoms(R) trademark,
if such recovery occurs within two years after the initial payment
of claims. No such action occurred during 1994 or is deemed likely
by the management of the Company during 1995.
<PAGE>
Funding of the Plan was consummated by the receipt during the
first quarter of 1994 of $675,000 from the following sources:
(a) Herbert Greenberg, a former officer of the Company (see Note
16a) purchased 495,000 shares of stock for $150,000.
(b) Joseph Pascal, the current President and Chief Operating
Officer of the Company (see Note 16c) purchased 660,000
shares of stock for $200,000.
(c) Rosenthal & Rosenthal, Inc. the Company's factor, loaned the
Company $300,000 secured by a lien on land and building at
the Company's main operating facility, in Rocky Mount, North
Carolina and
(d) Mary Beth Greenberg, a stockholder, loaned the Company
$25,000 repayable in monthly installments of $1,100
(including interest at 9% per annum) through April 1996.
A final decree and bankruptcy closing report was granted by the
Court in October 1994. Substantially all pre-petition liabilities
were settled during the year and an extraordinary gain on
extinguishment of debt aggregating approximately $2,275,000 was
recognized.
Restructuring
On February 13, 1995, subsequent to the balance sheet date, the
Company sold 4,250,000 shares of its common stock (constituting
50.5% of the outstanding stock) for $400,000 to LMA Ltd. ("LMA")
an Isle of Man Corporation. Of these shares 200,000 were issued to
Ms. Lynda Rose McQueen. Simultaneously, Paul Sutton, a British
citizen, assumed the position of Chairman of the Board and Chief
Executive Officer of the Company. Concurrently with this event,
David Greenberg, Joan Greenberg, and Herbert Greenberg resigned as
directors and officers of the Company, but retained their
shareholdings and option rights that were in place, subject to
certain voting restrictions and rights, as described below.
The payment of the $400,000 purchase price by LMA to the Company,
included the immediate cash payment of $200,000 and a
non-negotiable Promissory Note ("Promissory Note") for the
balance. The value of the Promissory Note may be reduced to zero
under certain performance provisions as follows:
(a) Within 120 days of the closing, replacement of the factor's
over-advance by an equivalent or better credit line of
$850,000 and a release of the Deed of Trust on the Rocky
Mount, NC plant securing the factor's over-advance,
(b) Within 365 days after the closing effect a new mortgage on
the property to total not less than the equivalent of 60% of
the appraised current value of the property, and
<PAGE>
(c) The total additional financing to be made available to the
Company as a result of (a) and (b) above, or otherwise by
way of equity, subordinate debt or a credit line, shall not
be less than $800,000. If an amount not less than $800,000
is achieved before February 9, 1996 then the entire
liability for the Promissory Note will be discharged. If a
minimum of only $400,000 of new financing for the Company is
achieved, then the amount due under the promissory note
shall be reduced by 50%. If less than $400,000 of new
financing is achieved for the Company then the note shall be
payable in full.
Related Events:
In connection with the re-structuring, the entire former Board of
Directors of the Company resigned, except Joseph Pascal. Mr.
Richard Wynn was reelected (as nominee for the Greenbergs)
effective February 13, 1995.
On February 13, 1995 David Greenberg, Herbert Greenberg and Joan
Greenberg each resigned their positions as executive officers of
the Company and each entered into a non-competition and consulting
agreement with provisions as detailed below.
(a) Payment of $500 per day plus out of pocket expenses for
consulting services when provided,
(b) A covenant not to compete with the Company which restricts
any competition with the Company for a period of three years
commencing March 1, 1995, subject to the terms of the
agreement. As compensation for this covenant, they will be
paid the following:
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3
---------- --------- ----------
<S> <C> <C> <C>
David Greenberg $ 60,000 $ 60,000 $ 60,000
Joan Greenberg 115,000 115,000 115,000
Herbert Greenberg 75,000 75,000 75,000
</TABLE>
The portion of the payments through August 31, 1996 are
guaranteed by both LMA and Paul Sutton.
(c) The above payments are to be net of any interest due from
the former officers on their outstanding indebtedness to the
Company from the date of this agreement until December 31,
1997 (calculated at 8% per annum.) It is further agreed that
subject to the former officers compliance with the covenants
of non-competition and provision of non-interference (a
period of 10 years) the principal and interest accruing from
January 1, 1998 thru December 31, 2007 shall be excused in
10 equal annual installments over the same period.
<PAGE>
The outstanding indebtedness of the officers as of the date of the
agreement was as follows:
David Greenberg $49,500
Joan Greenberg 49,500
Herbert Greenberg 60,000
(d) At their own cost both David and Joan Greenberg have the
option to participate in the Company's medical plan for the
period of this agreement. Any costs associated with their
continued medical coverage will be deducted from their
non-competition payments. The Company will continue to pay
the medical costs for Herbert Greenberg for the first 18
months of this agreement at which time he can elect to pay
his own costs for the remainder of the agreement.
(e) All stock options held by the Greenberg's expired upon their
resignation from the Company. New options, for a term of
five years, were issued at an exercise price of $.33 per
share.
Expired Newly Issued
------- ------------
David Greenberg 375,000 350,000
Joan Greenberg 551,110 450,000
Herbert Greenberg 316,000 300,000
(f) Ownership of Joan Greenberg's Company car was transferred to
her. Herbert Greenberg has the option to purchase two cars
from the Company. One at book value, the other at 1/2 of
book value.
(g) At closing, the former officers/directors granted an option
and right of first refusal which gave LMA the right to
purchase 1,558,880 shares of their stock at $1.50 per share
through March 31, 1996. All voting rights to 1,631,980
shares owned by these former officer/shareholders were
transferred to LMA for the same term as the right of first
refusal.
Subsequent Event - New Financing:
On March 31, 1995 the Company concluded a new financing agreement
with Finova Capital Corporation (formerly Ambassador Factors).
Under the terms of this agreement the Company is entitled to
receive an 85% advance on eligible accounts receivable and an
over-advance not to exceed $600,000 (based on 50% of certain
inventory).
This agreement is collateralized by accounts receivable,
inventory, equipment and the personal guarantees of two of the
Company's principal officers, Paul Sutton and Joseph Pascal.
The Company also expects to close a mortgage term loan on its
Rocky Mount property, in the near term.
<PAGE>
MANUFACTURING, RAW MATERIALS AND SUPPLIERS
Manufacturing
The Company cuts, sews, and packages its intimate apparel at its
facility in North Carolina. The Company also utilizes independent
sewing contractors in the Caribbean basin to manufacture daywear
and other women's and children's garments.
Imported Garments
Imported garments are made to Company specifications to fill
orders or meet specifications of certain customers. The imported
garments enable the Company to fill customer demand for garments
at price levels not available through domestic production.
Approximately 40% of all 1994 sales were of imported garments. A
majority of these imports have been received from Turkey with a
lesser amount coming from the Far East. The Company does not
export any goods out of the U.S.A.
Raw Materials and Suppliers
The Company's primary raw material in its intimate apparel
products is knitted fabric made from cotton, synthetics (nylon,
acetate, and polyester) or blends (cotton and nylon or polyester,
and Lycra(R) spandex and nylon or cotton). Garments are trimmed
with various laces, elastics, decorative items and various types
of packaging materials are also purchased.
Knitted cotton fabrics are purchased complete or are produced to
Company specifications by contract knitters and finishers from
cotton yarn purchased by the Company. Other fabric and materials
are purchased from a variety of suppliers. The Company does not
have long-term agreements with any of these suppliers and the
Company is not dependent on any one supplier for a material amount
of raw material. Adequate supplies of raw materials are presently
available from numerous sources and the Company believes that it
can replace any of its existing suppliers, without a material
adverse effect on its operations. However, as a matter of business
policy, the Company purchases its raw materials from a few
selected firms in order to obtain better quality, pricing and
delivery.
Sales Organization
During 1994, the Company sold its products throughout the United
States through three salaried and five commissioned salespersons,
some of whom are independent manufacturers' sales representatives.
With the resolution of the Chapter 11 proceedings, the Company is
actively seeking additional sales persons to market the Company's
products throughout the United States and appointed a veteran of
the undergarment industry, as the new head of Marketing beginning
in March 1995.
As of the present date the Company has two salaried and three
commissioned salespersons on an exclusive basis.
Customers
The Company sells its products to general merchandise chain
stores, mass merchandisers, mail-order companies and to a lesser
extent, department stores, military post exchanges, off-price
retailers and supermarket and drugstore chains.
<PAGE>
In 1994, the Company's four largest customers were JC Penney
Company, Sears Roebuck & Co., Sizes Unlimited, and Family Dollar.
In 1994 these customers accounted for approximately 72% of the
Company's net sales. Individually, sales to these customers
aggregated 32%, 18%, 12%, and 10%, respectively. No other customer
accounted for more than 10% of the Company's net sales.
The Company believes that the loss of any customer that accounts
for 10% or more of the Company's net sales could have a materially
adverse effect on its business. As is customary in the industry,
the Company does not have a significant number of long-term sales
agreements with its customers, however, it believes that it enjoys
excellent relationships with its customers. The Company follows
customary industry practices regarding terms of sale and does not
provide extended payment terms to any significant extent.
Competition
The Company's business is highly competitive. Competition most
often presents itself in the pricing of products, especially in a
soft retail market with the financial problems of the retailers.
The Company competes with numerous other companies, many of which
have greater financial resources or are more vertically integrated
than the Company, and with garments imported from other countries.
The Company's competition, from both domestic and foreign sources,
is based on quality, style, service and price. The Company
believes that its continued success will depend upon its ability
to remain competitive in these areas, particularly in relation to
its own basic products and brands and those of "fashion" or
"trend" intimate apparel.
The Company considers itself to be only an insignificant part of
the apparel industry.
Trademarks and Licenses
The Company sells its products predominantly under its tradenames
Rocky Mount, R.M. International, Marion Rohr, Silks and Stretch
Mates (for lightweight control briefs), Blossom Nite-T's (for
sleepwear) and Blossom Creations and Intimates (for daywear), as
well as the private labels or tradenames of its customers and its
own trademarks, Blossoms(R), Cotton Blossom(R) and Orange
Blossom(R).
The Company had a license from the United States Shoe Corporation
to use the trademark Capezio(R) on women's and girls'
undergarments through December 31, 1994. This license has not been
renewed.
The Company believes that certain trademarks are an important
factor in marketing its undergarments. The loss of its own or any
licensed trademark, or a decrease of their effectiveness, could
have an adverse effect on the sale of the Company's undergarments.
<PAGE>
Backlog
The backlog of firm orders at March 15, 1995 for the purchase of
the Company's products was approximately $1,704,000, compared to
approximately $650,000 at March 19, 1994. The Company believes
that its current backlog will be filled during 1995.
Employees
As of March 31, 1995 the Company employed 203 people of whom 188
were engaged in manufacturing and 15 were executive, management,
administrative and sales persons. None of the Company's employees
are covered by a collective bargaining agreement. The Company has
never experienced interruption of its operations because of a work
stoppage and the Company considers its relations with its
employees to be satisfactory.
Environmental Laws
Compliance with environmental protection legislation is generally
not a problem in the garment manufacturing industry, and the
Company has experienced no compliance difficulties or significant
expenses therefor.
<PAGE>
Item 2. PROPERTIES
The following table sets forth a description of all of the
facilities owned or leased by the Company as of December 31, 1994
(see Note 15 of notes to consolidated financial statements). In
the opinion of management, all of the facilities are adequate for
their purpose.
<TABLE>
<CAPTION>
Annualized
Owned or Approx. Current Expiration of
Leased Sq. Feet Rent Lease Term
--------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Rocky Executive offices,
Mount, manufacturing and
NC administration Owned 71,700 - -
Distribution and
warehousing Leased 30,800 $59,760 05/31/97
Storage Owned 4,600 - -
Storage Owned 1,200 - -
Storage Owned 900 - -
Offices Owned 900 - -
Rental property Owned 1,000 - -
New York, Sales offices and
NY Showroom Leased 1,900 47,675(1) 03/31/96
</TABLE>
(1) Subject to acceleration for cost of living adjustments.
Item 3. LEGAL PROCEEDINGS
On January 26, 1993, Rocky Mount Undergarment Co., Inc., the
parent company, but not its subsidiaries, filed a voluntary
petition for reorganization under Chapter 11 of Title 11 of the
United States Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York, case number 93 B
40418, and operated its business as a debtor-in-possession,
subject to the supervision of the Bankruptcy Court. On January 13,
1994, Bankruptcy Judge Prudence Beatty Abram signed an order which
approved the Company's Amended Plan of Reorganization. For
additional information concerning this matter, see Proceedings
Under Chapter 11 in Item 1. On August 8, 1994, the Bankruptcy
Court entered an order closing the case.
The Internal Revenue Service (the "IRS") issued a report dated
August 5, 1992 to the Company proposing adjustments to the
Company's federal income tax returns filed for the years 1979,
1980, 1981, 1982, 1986 and 1987. In a petition dated October 30,
1992, the Company sought relief in United States Tax Court docket
number 24326-92 Titled Rocky Mount Undergarment Co., Inc., et al,
petitioner, versus Commissioner of Internal Revenue, respondent.
The case in the United States Tax Court was stayed by the
bankruptcy proceedings and the Company moved, on April 13, 1994,
<PAGE>
to bring the case within the jurisdiction of the Bankruptcy Court.
In August 1994, tax counsel for the Company, Counsel for the IRS
and the United States attorney's office executed and filed with
the Bankruptcy Court a stipulation of agreed total tax liability
of approximately $340,000 to be treated as a Class 7 general
unsecured claim, payable at 20% or approximately $68,000. The
agreed order was entered by the Bankruptcy Court on September 7,
1994 and a decision based on the stipulation was entered by the
Tax Court on November 2, 1994.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1994.
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
(a) Market Information
Since the Company's Chapter 11 filing on January 26, 1993, the
Company's common stock (the Company's sole class of common
equity) has been traded over-the-counter by market makers
listed in the National Quotation Bureau "pink sheets".
The following table is based upon information supplied by the
National Quotation Bureau. The quotations represent prices
between dealers and do not include retail markup, markdown or
commissions. They do not represent actual transactions. For
the period January 3, 1993 through March 19, 1993, the
quotations were obtained by the National Quotation Bureau from
NASDAQ.
<TABLE>
<CAPTION>
1993
----
Closing Bid Closing Ask
High Low High Low
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Jan 3 through 7/16 3/8 5/8 1/2
Mar 19
Balance of 1993 Unpriced Unpriced
1994
----
Bid Prices Ask Prices
High Low High Low
---- --- ---- ---
1st quarter Unpriced Unpriced
2nd quarter .23 1/8 .63 3/8
3rd quarter 1/4 1/8 .63 3/8
4th quarter 1/4 1/8 9/16 .30
</TABLE>
(b) Holders
As of January 24, 1995, the number of holders of record of the
Company's stock (including Cede & Co. and other nominees), was
approximately 1,230.
(c) Dividends
The Company has not paid cash dividends on its common stock
during the five years ended December 31, 1994. Any future
dividends will be subject to the discretion of the Board of
Directors and will depend upon, among other factors, the
Company's operations, financial condition and requirements and
general business conditions. The Company has no present
intention to declare any cash dividends.
<PAGE>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations 1994 vs. 1993:
Net sales decreased from $13,100,000 to $9,511,000 when comparing
1993 to 1994, a decrease of $3,589,000 or approximately 27%.
Management of the Company attributes the decrease primarily to a
lack of working capital and the effects of the bankruptcy
proceeding.
The Company's gross profit margins were 13 1/2% and 11% when
comparing 1994 to 1993. This increase in margins was primarily due
to higher sales of imported goods at greater gross profit margins
than sales of products produced domestically.
Selling, general and administrative costs decreased from
$2,497,000 in 1993 to $2,334,000 in 1994, a decrease of $163,000
or approximately 7%. This decrease in operating costs was
primarily due to payroll cuts and layoffs instituted by the
Company upon emerging from Chapter 11 in 1994.
Overall financing costs (interest, factoring fees, etc.) decreased
from $512,000 in 1993 to $452,000 for 1994 primarily due to lower
average borrowings based on lower sales volume during 1994.
The Company reflected a loss from operations of $1,343,751 for
1994 as compared to $1,523,110 for 1993. The loss in 1994 was
primarily caused by the 27% decrease in net sales as mentioned
above.
During 1994 the Company reflected a net extraordinary gain of
approximately $2,207,000 as compared to an extraordinary loss of
approximately $631,000 for 1993. The gain in 1994 resulted from
the extinguishment of debt which arose as a result of the
emergence from a Chapter 11 bankruptcy (see Note 1 of Notes to
financial statements) net of the applicable reorganization
administrative costs. The extraordinary loss for 1993 consisted
solely of reorganization administrative costs.
The Company reflected net income of $863,000 ($.22 per share) for
1994 as compared to a loss of $2,154,000 ($.74 per share) for
1993. The net income in 1994 was primarily the result of the
extraordinary gain due to the emergence from bankruptcy as
described above.
Liquidity and Capital Resources:
The Company's 1994 balance sheet reflects cash of $142,000,
working capital of $14,000, a current ratio of 1:1 and net worth
of $744,000. This financial position, while marginal, is an
improvement over the 1993 balance sheet which was prepared using
the accounting treatment required for a debtor-in-possession. The
improvement was principally a result of the extinguishment of debt
and resulting net income as mentioned previously.
During 1994, although the Company reflected net income, a
significant portion of this income was a gain from extinguishment
of debt, a non cash item.
<PAGE>
As a result the Company utilized approximately $800,000 of cash
for operating activities in 1994 as compared to the generation of
$129,000 of cash during 1993.
During 1994, cash of approximately $711,000 was provided from
investing activities primarily due to the sale of common stock
(see Note 12 of notes to consolidated financial statements) and
the proceeds from the sale of fixed assets.
Financing activities produced an additional $184,000 of cash. This
increase in cash was due to a reduction in the amount due to a
factor, net of payments of debt.
During both 1994 and 1993 the Company made no material capital
expenditures and no material expenditures are contemplated for
1995.
During 1995, the Company went through a restructuring of ownership
and management and also obtained a new financing agreement (see
Note 16 of notes to consolidated financial statements). While the
Company's financial statements contain a going concern
qualification from its' auditors, management believes that the
restructuring and new financing arrangement will be sufficient to
allow the Company to operate for at least the next twelve month
period.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statement Schedules
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Independent Auditors' Report F - 1
Consolidated Balance Sheet F - 2
Consolidated Statements of Operations F - 3
Consolidated Statements of Changes in Stockholders' Equity (Deficit) F - 4
Consolidated Statements of Cash Flows F - 5
Notes to the Consolidated Financial Statements F - 7
</TABLE>
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE:
None
<PAGE>
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
(a) The directors and executive officers of the Company as of the
filing of this report are as follows:
<TABLE>
<CAPTION>
Director
Name Age(1) Position and Office(2) Since
---- ----- ---------------------- --------
<S> <C> <C> <C>
Paul Sutton 38 Chief Executive Officer, 1995
Chairman of the Board
and Secretary
Joseph Pascal 50 President and Director 1994
Peter Gibb 46 Chief Financial Officer,
Vice President - Finance
Samuel McCormack 50 Director 1995
Terence Allan Riches 47 Director 1995
Richard Wynn 58 Director 1994(3)
Paul Adest 45 Director 1995
David Michael 57 Director 1995
</TABLE>
-----------
(1) As of April 17, 1995.
(2) Directors will continue in office until the next annual
meeting of shareholders and until their successors are chosen.
The annual meeting has not yet been scheduled, but is expected
to take place within the next three months.
(3) Resigned and was reelected February 13, 1995 as a director.
The following sets forth the business experience during the
past five (5) years for each of the above named:
Paul Sutton was elected Chief Executive Officer, Chairman of
the Board and Secretary on February 13, 1995. He has been
involved in various real estate investments.
Joseph Pascal became Senior Vice President, Chief Operating
Officer and Director of the Company on March 4, 1994. He
became president of the Company on February 13, 1995. He has
been employed by the Company since January 1994. He was a
co-founder in 1984 and an executive officer and director of
Ilio, Inc., a supplier of women's leisure and career wear
until 1993. Shares of Ilio, Inc. were traded on NASDAQ, but
Ilio, Inc. filed a Chapter 11 petition in December 1992 and
was liquidated after conversion to Chapter 7 in February 1993.
From 1993 through 1994 he sold women's leisure and career wear
under the name of East-West, Inc.
<PAGE>
Peter Gibb became Chief Financial Officer and Vice President -
Finance during 1994. He was a vice president with Westgate
Corp. of Hoboken, New Jersey, a purchase order financing and
factoring partnership from 1992 to 1994. In 1992, Mr. Gibb
founded Capital Release, Inc., a purchase order financing and
turn-around consulting firm in New York. From 1990 to 1993,
Mr. Gibb was an associate partner with Davis International
Corp., a boutique investment bank.
Samuel McCormack became a Director of the Company on February
13, 1995. He and his wife are the beneficial owners of the
outstanding shares of LMA, Ltd., a company engaged in
investments and a principal shareholder of the Company. He is
a director of Anglo Irish Bank Corp. (Isle of Mann) Ltd, a
bank.
Terence Allan Riches became a Director on February 13, 1995.
He has served as manager of corporate banking for the London,
England Branch of Alpha Credit Bank AE.
Richard Wynn was reelected director on February 13, 1995. Mr.
Wynn is a private investor who has been actively involved in
real estate investments for his own account.
Paul Adest became a Director on February 13, 1995. He is a
Certified Public Accountant and a partner in the firm of
Michael Adest & Blumenkratz located in New York City.
David Michael became a director on February 13, 1995. He is a
Certified Public Accountant and a partner in the firm of
Michael Adest & Blumenkratz located in New York City. He is
also a director of Del Electronics Corp., a company whose
shares are listed on the American Stock Exchange.
(b) Not Applicable.
(c) There exists no family relationships among any of the above
named directors and executive officers.
Compliance with Section 16(a) of the Securities Exchange Act
of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers and directors and persons who
beneficially own more than 10% of the Company's Common Stock,
to file initial reports of ownership and report of changes in
ownership with the Securities and Exchange Commission ("SEC".)
Executive officers, directors and greater than 10% beneficial
shareholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
The Company has made a review of its records and filings with
the SEC and believes that all reports required to be filed
were timely filed except as follows. Joseph Pascal's initial
Form 3 due March 14, 1994 and Form 4 due April 10, 1994 were
received by the SEC April 13, 1994. Mr. Pascal also received
an option under the companies incentive stock option plan in
August 1994 to purchase up to 300,000 shares (a Form 5 was not
filed however this will be done when the next Form 4 is filed
with the SEC). Richard Wynn's Form 3 due March 14, 1994 was
received by the SEC on April 13, 1994. Peter Gibb's (a
director at the time) initial Form 3 due March 14, 1994 and
Form 4 due April 10, 1994 were received by the SEC April 13,
1994. Mary Wells Greenberg's (a beneficial owner of 10% or
more of the Company's Common Stock at the time) Form 4 due
February 10, 1994 was received by the SEC on February 14,
1994.
<PAGE>
Item 10. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
the compensation earned during each of the fiscal years ended
December 31, 1994, 1993 and 1992 by the Chief Executive
Officer and each of the other four most highly compensated
executive officers of the Company whose annual salary and
bonus exceeded $100,000:
<TABLE>
Long-Term Compensation
-----------------------
Annual Compensation Awards Payments
------------------------------------ ---------------------------- ---------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted Securities
Name and Compen- Stock Underlying LTIP All other
Principal Salary Bonus sation Award(s) Options/ Payouts Compensa-
Position Year ($) ($) ($) (1) ($) SARs (#) ($) tion ($) (2)
- --------- ------ --------- -------- ---------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David Greenberg
Chairman & Pres. 1994 $112,469 $ - $ 4,506 $ - 200,000 $ - $ 144
(Chief Executive 1993 142,700 - 10,400 - - - 276
Officer) 1992 151,600 - 15,680 - - - 1,961
Joan Greenberg
(Executive Vice 1994 66,560 - 36,000 - 200,000 - 17
President 1993 87,188 - - - - - 276
& Secretary) 1992 160,166 - - - - - 276
</TABLE>
(1) Includes consulting fees and auto allowance
(2) Includes premium payment for excess life insurance
<PAGE>
Stock Options
The following table contains information relating to stock
options:
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
(Individual Grants)
<TABLE>
<CAPTION>
Percent of total
options/SARs Exercise or
granted to base price
Options/SARs employees in Expiration
Name granted (#) fiscal year ($/Sh) date
- ---- ------------ ------------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Charles Kralick 25,000 5.5% $0.303 03/13/04
Joseph Pascal 300,000 65.9% $0.33 08/30/04
</TABLE>
- -----------
(1) Does not include the grant of options to acquire 200,000 shares to
each David Greenberg, Herbert Greenberg and Joan Greenberg on August
31, 1994 at $0.33 per share, which options were canceled during
February 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Options/SARs In-The-Money
at FY-End (#) Options/SAR at
Shares Acquired on Exercisable/ FY-End ($)
Name Exercise (#) Value Realized ($) Unexercisable Exercisable/Unexercisable
- ---- ------------------ ------------------ ------------- --------------------------
<S> <C> <C> <C> <C>
Joseph Pascal -0- -0- 300,000/-0-
Herbert Greenberg -0- -0- 316,000/-0-
David Greenberg -0- -0- 375,000/-0-
Joan Greenberg -0- -0- 451,110/-0-
</TABLE>
<PAGE>
Compensation of Directors
Outside directors are paid $500 per director/per meeting for
their services as directors.
Employment Contracts
All prior employment agreements with David Greenberg, Joan
Greenberg and Herbert Greenberg terminated February 13, 1995. See
Item 1 Business-Related Events regarding the terms of consulting
agreements and non-competition agreements with the foregoing.
Effective March 1, 1995 the Company entered into an employment
agreement with Paul Sutton which expires December 31, 1997. Mr.
Sutton is to receive an annualized minimum salary of $25,000
together with such bonuses and increases as the board of directors
may determine. In addition, the officer is to receive options to
purchase 240,000 shares of the Company's stock under its 1990
stock option plan and $30,000 per year as an unaccounted expense
allowance. He is also entitled to group life and medical
insurance.
On February 1, 1995, subsequent to the balance sheet date, the
Company signed an employment agreement with its current President
and Chief Operating Officer. The terms of the agreement are from
March 1, 1995 through December 31, 1997 at an annualized minimum
salary of $210,000. In addition, the officer is to receive options
to purchase 240,000 shares of the Company's stock under its 1990
stock option plan, $30,000 per year as an unaccountable expense
allowance and continued participation in Company benefit plans
such as life and medical insurance.
<PAGE>
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
(a) The following sets forth the name of each person who is known
to the Company to be the beneficial owner of more than 5% of
the Company's Common Stock, $.0001 par value, the only class
of stock of the Company as of March 1, 1995:
<TABLE>
<CAPTION>
Name and address Amount and nature Percent
of beneficial owner of beneficial owner of Class
------------------- ------------------- ----------
<S> <C> <C>
Paul Sutton 2,042,000 (1) 22.3%
Rocky Mount Undergarment Co., Inc.
350 Fifth Avenue
New York, New York
Joseph Pascal 1,200,000 (2) 13.4%
Rocky Mount Undergarment Co., Inc.
350 Fifth Avenue
New York, New York
LMA, Ltd. 5,681,980 (3) 67.5%
Ballarose
Hillery Green
Douglas 1M2 6DE
Isle of Man
Herbert Greenberg 1,198,587 (4) 13.7%
212 Kimberly-Jo Drive
PO Box 7305
Rocky Mount, NC 27804
David Greenberg 849,748 (5) 9.7%
219 Hillcrest Lane
Oyster Bay, NY 11771
Joan Greenberg 635,568 (6) 7.2%
219 Hillcrest Lane
Oyster Bay, NY 11771
</TABLE>
----------
(1) Includes 240,000 shares issuable upon the exercise of options,
also includes 1,302,430 shares over which LMA have an irrevocable
proxy described in note 3 below and upon which Paul Sutton is
named as agent for LMA.
(2) Includes 660,000 shares in the name of Rossette Pascal, wife of
Joseph Pascal and 540,000 shares issuable upon exercise of
options.
<PAGE>
(3) Includes 4,050,000 shares owned directly and 1,302,430 shares
owned directly in the names of Herbert Greenberg, David Greenberg
and Joan Greenberg over which LMA, has an irrevocable proxy until
February 10, 2000. Paul Sutton is named as an agent of LMA, with
respect to this proxy. Also includes an option to acquire the
foregoing shares and 329,550 other shares owned by affiliates of
the Greenbergs, until March 31, 1996 at $1.50 per share and a
right of first refusal until February 13, 1997 with respect to the
foregoing shares.
(4) Herbert Greenberg is the brother of David Greenberg. Includes
783,948 shares owned directly, pro-rata ownership being 114,639
shares owned by certain affiliates and 300,000 shares issuable
upon the exercise of options. Does not include right of first
refusal to acquire the above shares of LMA, in a private
transaction until February 13, 2000.
(5) David Greenberg is the brother of Herbert Greenberg and husband of
Joan Greenberg. Includes 497,978 shares owned directly, pro-rata
ownership being 1,770 shares owned by a certain affiliate and
350,000 shares issuable upon the exercise of options. Does not
include the right of first refusal to acquire the above shares of
LMA, in a private transaction until February 13, 2000 or shares
owned by Joan Greenberg or Herbert Greenberg.
(6) Joan Greenberg is the wife of David Greenberg. Includes 20,504
shares owned directly, pro-rata ownership being 165,064 shares
owned by an affiliate and 450,000 shares issuable upon the
exercise of options. Does not include the right of first refusal
to acquire the above shares of LMA in a private transaction until
February 13, 2000 or shares owned by David Greenberg or Herbert
Greenberg.
(b) The following sets forth the ownership of the Company's Common
Stock $.0001 par value the only class of stock of the Company
as of March 1, 1995 by the following directors and the
directors and officers of the Company as a group.
<TABLE>
<CAPTION>
Name and address Amount and nature Percent
of beneficial owner of beneficial owner of Class
------------------- ------------------- ---------
<S> <C> <C>
Paul Sutton 2,042,430 (1) 22.3%
Rocky Mount Undergarment Co., Inc.
350 Fifth Avenue
New York, New York
Joseph Pascal 1,200,000 (2) 13.4%
Rocky Mount Undergarment Co., Inc.
350 Fifth Avenue
New York, New York
Samuel McCormack 5,681,980 (3) 67.5%
Rocky Mount Undergarment Co., Inc.
350 Fifth Avenue
New York, New York
Terence Allan Riches - *
Rocky Mount Undergarment Co., Inc.
350 Fifth Avenue
New York, New York
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name and address Amount and nature Percent
of beneficial owner of beneficial owner of Class
------------------- ------------------- ---------
<S> <C> <C>
Richard Wynn 100 *
Rocky Mount Undergarment Co., Inc.
350 Fifth Avenue
New York, New York
Paul Adest - *
Rocky Mount Undergarment Co., Inc.
350 Fifth Avenue
New York, New York
David Michael - *
Rocky Mount Undergarment Co., Inc.
350 Fifth Avenue
New York, New York
Officers and directors as a group 7,222,080 78.5%
(8 persons)
</TABLE>
-----------
(1) See Note 1 under Item 11(a) above.
(2) See Note 2 under Item 11(a) above.
(3) Has voting control over LMA. See Note 3 under Item 11(a) above.
* Less than one percent
(c) Changes in Contract.
Reference is made to the discussion contained in Item 1
under Restructuring and Related Events to the transfer of
control of the Company to LMA.
<PAGE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to Item 1 Business with reference to each of the
following:
(a) Purchase by Herbert Greenberg during the first quarter of 1994 of
495,000 shares of the Company for $150,000.
(b) Purchase by Joseph Pascal during 1994 of 660,000 shares of the
Company for $200,000.
(c) Sale of 4,050,000 shares of the Company (and 200,000 shares to
Lynda Rose McQueen for $400,000 to LMA. The agreement had
originally been signed by Paul Sutton and then assigned by him to
LMA.
(d) Consulting and restrictive covenant agreements between the Company
and David Greenberg, Herbert Greenberg and Joan Greenberg
effective February, 1995.
(e) Termination of previously granted stock options and issuance of a
total of 1,100,000 options to David Greenberg, Herbert Greenberg
and Joan Greenberg.
Reference is made to the Notes 14 and 15 to the consolidated
financial statements with reference to each of the following:
(a) During 1994, the Company's president and chief operating officer,
Joseph Pascal, had made available to the Company, a letter of
credit facility of an unrelated entity, of which he is also the
President. The Company deposited $75,000 with this entity as
collateral against unpaid letters of credit. Shipments made under
this facility aggregated approximately $1,780,000 for 1994. Fees
charged to the Company for the use of this facility aggregated
approximately $43,000 of which approximately $16,000 was paid in
cash and $27,000 was applied against the deposit.
(b) At December 31, 1994 loans receivable from several
directors/officers of the Company were as follows:
Mr. David Greenberg $49,500
Mrs. Joan Greenberg $49,500
Mr. Herbert Greenberg $60,000
Interest at the prime rate for the year ended December 31, 1994
was waived by the Company. Subsequent to the balance sheet date
the above directors/officers resigned as officers and directors of
the Company. Their indebtedness can be forgiven pending certain
provisions detailed in their new consulting agreements.
(c) The Company leases a building for $4,980 per month from a
Partnership in which three of its principal stockholders are
partners. The current term of the lease expires in May 1997. Rent
expense under this lease was $59,760 in 1994 and 1993. The Company
has the right of first refusal to acquire the property in the
event that the Partnership desires to sell. The Company is a
co-guarantor of a $320,000 mortgage on the property which was due
in July 1992, but was extended on a month to month basis by the
Resolution Trust Corporation ("RTC") as holder of the loan.
<PAGE>
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Method of Filing
- ------ ------ ----------------
<C> <S> <S>
2. Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession
2.1 Assets Purchase Agreement, dated Incorporated by reference to
November 18, 1991, among ASBK, Exhibit 2.1 to the Company's
Inc., 18 North Main Street, Inc., Annual Report on Form 10-K
Westfield Manufacturing for the year ended December 31,
Corporation, Marion Rohr 1991 (the "1991 Form 10-K").
Corporation and HMC
Acquisition Corp.
2.2 Amended Plan of Reorganization Incorporated by reference to
dated December 16, 1993, of Rocky Exhibit to the Company's Report on
Mount Undergarment Co., Inc. Form 8-K dated January 27, 1994.
3. Articles of Incorporation and By-Laws
3.1 Certificate of Incorporation Incorporated by reference to Exhibits 3.1
through 3.3 to the Company's
Registration Statement on Form S-1
(#2-87477), dated May 11, 1984
("1984 Registration Statement") and
Exhibit 3.4 to the Company's
Registration Statement on Form S-1
(#2-98478), dated July 16, 1985
("1985 Registration Statement"),
except for Article 11, adopted on
June 24, 1987, incorporated by
reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K
for the year ended December 31, 1987
(the "1987 Form 10-K"), and except
for Article 4, adopted on May 14,
1990, incorporated by reference to
the Company's Annual Report on Form
10-K for the year ended December 31,
1990 (the "1990 Form 10-K")
3.2 By-laws
Incorporated by reference to Exhibit 3.2 of the 1987
Form 10-K.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <S>
3.3 Certificates of Amendment of Certificate Incorporated by reference to Exhibits
of Incorporation filed April 21, 1994 on Item 6(a) to Form 10-Q for the
and June 1, 1994. period ended July 3, 1994.
10. Material Contracts
10.1 Factoring Agreement dated January 29, Incorporated by reference to Exhibit
1993, as amended, between Rosenthal to the Company's Report on Form 10-Q
& Rosenthal, Inc. and the Company. for the period ended April 4, 1993.
10.2 Second Amendment to Lease between Incorporated by reference to Exhibit
Rocky Mount Undergarment Co., Inc. 10.17 to 1984 Registration Statement;
and Searington Realty dated October 14, Second Amendment thereto, dated
1981 and January 1, 1982, as amended October 1, 1988, incorporated by
on September 2, 1983, as further reference to Exhibit 10.9 to the 1988
amended on October 1, 1988. Form 10-K.
10.3 Third Amendment to Lease between Incorporated by reference to Exhibit
Rocky Mount Undergarment Co., Inc.. 10.8 to the Company's Annual Report
and Searington Realty, dated January 21, on Form 10-K for the year ended
1989. December 31, 1989 (the "1989 Form 10-K").
10.4 Letter Agreement dated July 21, 1989, Incorporated by reference to Exhibit
between Searington Realty and Rocky 10.9 to the 1989 Form 10-K.
Mount Undergarment Co., Inc.
10.5 License Agreement, dated June 1, 1989 Incorporated by reference to Exhibit
between the United States Shoe 10.11 to the 1989 Form 10-K;
Corporation and Rocky Mount Amendment thereto dated January 29,
Undergarment Co., Inc., as renewed 1992 incorporated by reference to
and Amended on January 29, 1992 Exhibit 10.9 to the Company's
and August 18, 1993. Annual Report on Form 10-K for the
year ended December 31, 1992 (the
"1992 Form 10-K"); Amendment
thereto dated August 10, 1993, filed
herewith.
10.6 1990 Stock Option Plan Incorporated by reference to
Exhibit 4(A) to the Company's
Registration Statement on Form S-8,
dated June 8, 1990.
10.7 Agreement dated as of December , Incorporated by reference to Exhibit
1993, among Rocky Mount Under- 10.14 to the Company's Form 10-K
garment Co., Inc., David Greenberg for the year ended December 31, 1993
and Joseph Pascal, as amended. (the "1993 Form 10-K").
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <S>
10.8 Form of Agreement dated as of Incorporated by reference to Exhibit
December 15, 1993 between Rocky 10.15 to the 1993 Form 10-K.
Mount Undergarment Co., Inc., and
Peter Gibb.
10.9 Deed of Trust, Assignment of Rents Incorporated by reference to Exhibit
and Leases, Security Agreement and 10.18 to the 1993 Form 10-K.
Fixture Filing from Rocky Mount
Undergarment Co., Inc., to Richard T.
Fountain, Jr., Trustee, dated February 28,
1994.
10.10 Stock Purchase Agreement made as of Filed herewith.
January 19, 1995 between the Company
and Paul Sutton.
10.11 Amendment to Stock Purchase Agreement Filed herewith.
made February 10, 1995 between the
Company and LMA, Ltd.
10.12 Assignment and assumption agreement Filed herewith.
between Paul Sutton, LMA Ltd. and
Lynda Rose McQueen, amended
January 24, 1995.
10.13 Option and Right of First Refusal Agreement Filed herewith.
of David Greenberg, Joan Greenberg, and
Herbert Greenberg to Paul Sutton with
assignment to LMA, Ltd. dated February 13,
1995.
10.14 Non-Competition and Consultant Agreement Filed herewith.
between the Company and David Greenberg
made as of February 13, 1995.
10.15 Non-Competition and Consultant Agreement Filed herewith.
between the Company and Joan Greenberg
made as of February 13, 1995.
10.16 Non-Competition and Consultant Agreement Filed herewith.
between the Company and Herbert Greenberg
made as of February 13, 1995.
10.17 Inducement agreement with transfer to Filed herewith.
LMA, Ltd. made as of January 19, 1995.
10.18 Employment Agreement between the Filed herewith.
Company and Joseph Pascal made as
of February 1, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <S>
10.19 Employment Agreement between the Filed herewith.
Company and Paul Sutton made as of
March 1, 1995.
10.20 Escrow Agreement for the shares of Filed herewith.
David Greenberg, Joan Greenberg and
Herbert Greenberg made as of February 10,
1995.
10.21 Limited Continuing Guarantee signed by Filed herewith.
LMA, Ltd. and Paul Sutton dated February
10, 1995.
10.22 Irrevocable proxy by Herbert Greenberg Filed herewith.
dated February 1995.
10.23 Irrevocable proxy by Joan Greenberg Filed herewith.
dated February 10, 1995.
10.24 Irrevocable proxy by David Greenberg Filed herewith.
dated February 10, 1995.
10.25 Promissory Note for $200,000 dated Filed herewith.
February 10, 1995.
10.26 Factoring agreement with Finova Capital Filed herewith.
Corporation dated March 31, 1995
22. List of Subsidiaries
Name of Subsidiary State of Incorporation
Searington Sales Corp. New York
Marion Rohr Corp. (formerly known as HMC
Acquisition Corp.) New York
Hornell Properties, Inc. New York
Front Street Properties, Inc. New York
Van Emmons Properties, Inc. Pennsylvania
J.C. Reed, Ltd. Delaware
</TABLE>
(b) No reports were filed during the last quarter of the fiscal year
on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ROCKY MOUNT UNDERGARMENT CO., INC.
Date: May 11, 1995 /s/ Joseph Pascal
-------------------- ---------------------------------------------
Joseph Pascal
President
Date: May 11, 1995 /s/ Paul Sutton
-------------------- ---------------------------------------------
Paul Sutton
Chief Executive Officer and Secretary
Date: May 17, 1995 /s/ Peter Gibb
-------------------- ---------------------------------------------
Peter Gibb
Chief Financial Officer and Vice President Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following Directors on behalf of the Company on the
dates indicated:
Date: May 11, 1995 /s/ Paul Sutton
-------------------- ---------------------------------------------
Paul Sutton
Date: May 11, 1995 /s/ Joseph Pascal
-------------------- ---------------------------------------------
Joseph Pascal
Date:
-------------------- ---------------------------------------------
Samuel McCormack
Date: May 12, 1995 /s/ Terence Allan Riches
-------------------- ---------------------------------------------
Terence Allan Riches
Date: May 13, 1995 /s/ Richard Wynn
-------------------- ---------------------------------------------
Richard Wynn
Date: May 17, 1995 /s/ Paul Adest
-------------------- ---------------------------------------------
Paul Adest
Date: May 17, 1995 /s/ David Michael
-------------------- ---------------------------------------------
David Michael
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Stockholders and Directors
Rocky Mount Undergarment Co., Inc.
Rocky Mount, North Carolina
We have audited the accompanying consolidated balance sheet of Rocky Mount
Undergarment Co., Inc. and subsidiaries as of December 31, 1994 and the related
consolidated statements of operations, changes in shareholders' equity (deficit)
and cash flows for the two years in the period then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rocky Mount
Undergarment Co., Inc. and subsidiaries at December 31, 1994, and the results of
their operations and their cash flows for the two years in the period then ended
in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that Rocky Mount Undergarment Co., Inc. and subsidiaries will continue as a
going concern. As discussed in Note 1 to the consolidated financial statements,
Rocky Mount Undergarment Co., Inc. and subsidiaries have suffered recurring
losses from operations, experienced cash flow difficulties, and on January 26,
1993 Rocky Mount Undergarment Co., Inc. filed for reorganization under Chapter
11 of the U.S. Bankruptcy Code. On January 13, 1994, the Bankruptcy Judge signed
an order which approved the Company's amended plan of reorganization, however,
continued operating losses and cash flow difficulties raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are described in Note 16. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
As explained in Note 2h to the financial statements, the Company adopted SFAS
No. 109, Accounting For Income Taxes effective January 1, 1993.
/s/ LAZAR, LEVINE & COMPANY LLP
------------------------------------------
LAZAR, LEVINE & COMPANY LLP
New York, New York
March 17, 1995 except as to
Note 16b, the date of which
is March 31, 1995
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1994
<TABLE>
- ASSETS (Note 7) -
<CAPTION>
<S> <C> <C>
CURRENT ASSETS:
Cash $ 42,391
Restricted cash (Note 3) 100,000
Accounts receivable - net of allowance for uncollectible
accounts of $50,000 24,630
Note receivable - current portion (Note 5) 3,560
Inventories (Notes 2b and 4) 1,440,792
Prepaid expenses and other current assets 135,977
------------
TOTAL CURRENT ASSETS 1,747,350
FIXED ASSETS:
Property, plant and equipment, net of accumulated depreciation
and amortization (Notes 2c, 6 and 9) 548,432
OTHER ASSETS:
Note receivable - net of current portion (Note 5) $ 46,440
Loans receivable - officers (Note 14b) 159,000
Other assets 13,496 218,936
---------- -----------
$2,514,718
===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Due to factor (Note 7) $ 399,033
Current portion of long-term debt (Note 9) 40,673
Accounts payable 1,080,213
Accrued liabilities (Note 8) 133,401
Income taxes payable (Notes 2h and 10) 79,440
------------
TOTAL CURRENT LIABILITIES 1,732,760
LONG-TERM DEBT - NET OF CURRENT PORTION (Note 9) 37,831
COMMITMENTS AND CONTINGENCIES (Notes 10, 11, 13, 14 and 15)
SHAREHOLDERS' EQUITY (Notes 1, 12 and 16):
Common stock, par value $.0001 - Authorized
10,000,000 shares; Issued, 4,675,900 shares $ 468
Additional paid-in capital 7,686,150
Deficit in retained earnings (6,017,464)
Treasury stock, at cost, 522,500 shares (925,027) 744,127
------------ -----------
$2,514,718
===========
</TABLE>
See notes to consolidated financial statements and auditors' report.
F - 2
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1994 1993
------------- -------------
(See Note 1)
<S> <C> <C>
REVENUES:
Net sales $ 9,510,753 $13,099,532
Other income 161,435 36,080
------------- -------------
9,672,188 13,135,612
------------- -------------
COSTS AND EXPENSES:
Cost of sales 8,229,696 11,649,768
Selling, general and administrative expenses 2,334,417 2,496,876
Financing costs 451,826 512,078
------------- ------------
11,015,939 14,658,722
------------- -------------
LOSS BEFORE EXTRAORDINARY ITEMS AND
PROVISION FOR INCOME TAXES (1,343,751) (1,523,110)
Provision for income taxes (Notes 2h and 10) - -
------------- -------------
LOSS BEFORE EXTRAORDINARY ITEMS (1,343,751) (1,523,110)
------------- -------------
EXTRAORDINARY ITEMS (Net of Taxes - Note 10):
Gain on extinguishment of debt (Note 1) 2,274,663 -
Professional fees - reorganization (67,435) (630,792)
-------------- ------------
2,207,228 (630,792)
------------- ------------
NET INCOME (LOSS) $ 863,477 $(2,153,902)
============= ===========
INCOME (LOSS) PER SHARE (Note 2d):
Loss from operations $ (.34) $ (.52)
Extraordinary items .56 (.22)
------------- ------------
$ .22 $ (.74)
============= ============
WEIGHTED AVERAGE SHARES OUTSTANDING (Note 2d) 3,926,468 2,898,400
========= =========
</TABLE>
See notes to consolidated financial statements and auditors' report.
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
Common Stock Treasury Stock Total
------------------------- Additional Retained ------------------------ Shareholders'
Number Paid-in Earnings Number Equity
of Shares Amount Capital (Deficit) of Shares Amount (Deficit)
--------- ---------- ------------ ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1992 3,420,900 $ 34,209 $7,272,109 $(4,727,039) 522,500 $(925,027) $1,654,252
Net loss - - - (2,153,902) - - (2,153,902)
--------- --------- ---------- ----------- ------- ---------- ----------
Balance,
December 31, 1993 3,420,900 34,209 7,272,109 (6,880,941) 522,500 (925,027) (499,650)
Sale of stock
(Note 12b) 1,155,000 11,550 338,450 - - - 350,000
Issuance of
stock for
finders fee
(Note 12b) 100,000 1,000 29,300 - - - 30,300
Adjustment due to
change in par value
of common stock
(Note 12b) - (46,291) 46,291 - - - -
Net Income - - - 863,477 - - 863,477
----------- ----------- ------------ --------- --------- --------- -----------
BALANCE,
DECEMBER 31, 1994 4,675,900 $ 468 $7,686,150 $(6,017,464) 522,500 $(925,027) $ 744,127
========= ======== ========== =========== ======= ========= ===========
</TABLE>
See notes to consolidated financial statements and auditors' report.
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS Page 1 of 2
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1994 1993
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 863,477 $(2,153,902)
Adjustments to reconcile net income (loss) to net cash (used in) provided
by operating activities:
Depreciation 169,565 239,347
(Decrease) in inventory obsolescence reserve (59,000) (570,000)
(Decrease) in restructuring reserves (186,000) (181,942)
Stock issuance for finders fee 30,300 -
Increase (decrease) in bad debt provision 57,042 (10,000)
(Gain) on extinguishment of debt (2,274,663) -
(Gain) loss on sale/abandonment of property and equipment (114,572) 105,615
Changes in assets and liabilities:
Accounts receivable (26,385) (28,661)
Inventories 357,768 2,458,789
Prepaid expenses (82,793) 25,831
Other assets 5,749 58,001
Accounts payable 882,914 (45,713)
Accrued liabilities (435,038) 231,866
Income taxes payable 11,440 -
----------- ------------
Net cash (used in) provided by operating activities (800,196) 129,231
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (12,683) (42,260)
Proceeds from sale of stock 350,000 -
Proceeds from sale of property, plant and equipment 373,600 42,439
------------ -------------
Net cash provided by investing activities 710,917 179
------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net reduction of amount due to/from factor 742,670 30,686
Principal borrowing (payments) on note payable 125,000 (38,761)
Principal payments of long-term debt (343,427) (32,384)
Payments of liabilities subject to compromise (340,711) (46,036)
------------ --------------
Net cash provided by (used in) financing activities 183,532 (86,495)
------------ --------------
NET INCREASE IN CASH 94,253 42,915
CASH, BEGINNING OF YEAR 48,138 5,223
------------- -------------
CASH, END OF YEAR $ 142,391 $ 48,138
============ ============
See notes to consolidated financial statements and auditors' report.
</TABLE>
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS Page 2 of 2
Years Ended December 31,
--------------------------
1994 1993
---- ----
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $237,627 $273,135
Income taxes paid 11,849 -
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
In 1994 a capital lease obligation reduction of $60,410 was recorded as a result
of the Company returning various computer equipment under a capital lease.
During 1994, the Company transferred certain real and personal property to a
bank in consideration for full release from all obligations under its mortgage
which aggregated approximately $454,000. During 1993 the book value of the
assets representing the collateral for this mortgage were written down to the
amount of the existing debt.
During 1993, the Company filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. Liabilities subject to compromise in the amount of $2,729,410
were reclassified from their usual categories on the balance sheet until they
were settled under the ultimate plan of reorganization. Priority payments of
$46,036 were made during 1993.
See notes to consolidated financial statements and auditors' report.
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
NOTE 1 - GENERAL DESCRIPTION:
The Company is a Delaware corporation organized in 1959, which
manufactures and markets intimate apparel for women and children.
Proceedings Under Chapter 11
On January 26, 1993 (the "Petition Date"), Rocky Mount
Undergarment Co., Inc., the parent company but not its
subsidiaries, filed a voluntary petition for reorganization under
Chapter 11 of Title 11 of the United States Bankruptcy Code
("Chapter 11") in the United States Bankruptcy Court for the
Southern District of New York ("Bankruptcy Court") and operated
its business as a debtor-in-possession for the remainder of 1993,
subject to the supervision of the Bankruptcy Court. The Chapter 11
filing was the result of a cash shortfall due to difficulties
associated with the December 1991 acquisition of Marion Rohr
Corp., higher than anticipated costs associated with the
continuing development of a line of fashion daywear and continuing
operating losses.
On January 13, 1994 (the "Confirmation Date"), the Bankruptcy
Judge signed an order which approved the Company's Amended Plan of
Reorganization ("Plan") ending the Company's status as a
debtor-in-possession.
The reorganization plan provided that unsecured creditors receive
20% of their allowed claims. In addition, the unsecured creditors
would receive a pro-rata distribution based upon 50% of the net
recovery by the Company, if any, upon a claim of trademark
infringement with respect to the Company's Blossoms(R) trademark,
if such recovery occurs within two years after the initial payment
of claims. No such action occurred during 1994 or is deemed likely
by the management of the Company during 1995.
Funding of the Plan was consummated by the receipt during the
first quarter of 1994 of $675,000 from the following sources:
(a) Herbert Greenberg, a former officer of the Company (see Note 16a)
purchased 495,000 shares of stock for $150,000,
(b) Joseph Pascal, the current President and Chief Operating Officer
of the Company (see Note 16c) purchased 660,000 shares of stock
for $200,000,
(c) Rosenthal & Rosenthal Inc., the Company's factor, loaned the
Company $300,000 secured by a lien on the land and building at the
Company's main operating facility in Rocky Mount, North Carolina,
and
(d) Mary Beth Greenberg, a stockholder, loaned the Company $25,000
repayable in monthly installments of $1,100 (including interest at
9% per annum) through April 1996.
A final decree and bankruptcy closing report was granted by the
Court in October 1994. Substantially all pre-petition liabilities
were settled during the year and an extraordinary gain on
extinguishment of debt aggregating approximately $2,275,000 was
recognized.
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's accounting policies are in accordance with generally
accepted accounting principles. Outlined below are those policies
considered particularly significant.
(a) Basis of Consolidation:
The consolidated financial statements include the accounts of
Rocky Mount Undergarment Co., Inc. and its subsidiaries all of
which are wholly-owned. All material intercompany balances and
transactions have been eliminated in consolidation.
(b) Inventories:
Inventories are stated at the lower of cost or market, determined
on a first-in, first-out basis.
(c) Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Depreciation is
computed by applying the straight-line method over the estimated
useful lives of the assets as follows:
Land improvements 10 years
Building and building improvements 15 - 20 years
Machinery and equipment 5 - 8 years
Leasehold improvements 8 - 10 years
Major renewals and betterments are capitalized, while maintenance
and repairs are expensed as incurred.
(d) Income (Loss) Per Share:
Net income (loss) per share has been computed based upon the
weighted average number of common and common equivalent shares
outstanding during each period presented.
The following average shares were used for the computation of
earnings per share:
1994 1993
----------- ---------
3,926,468 2,898,400
(e) Post Retirement Benefits:
On December 31, 1990, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 106
"Employers' Accounting for Post Retirement Benefits Other Than
Pensions". SFAS No. 106 requires that companies recognize the cost
of providing post retirement health care and other non-pension
benefits over an employee's service periods, rather than as the
benefits are paid. The Company does not provide any non-pension
post retirement benefits at the present time.
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(f) Postemployment Benefits:
In November 1992, the Financial Accounting Standards Board issued
Statement No. 112, "Employers' Accounting for Postemployment
Benefits" which became effective for fiscal years beginning after
December 15, 1993. This standard requires the expensing, on an
accrual basis, of all benefits provided to former or inactive
employees and their beneficiaries after employment but before
retirement. The Company does not provide any postemployment
benefits at this time.
(g) Statements of Cash Flows:
For purposes of the statements of cash flows, the Company
considers all investments purchased with an original maturity of
three months or less to be cash.
(h) Income Taxes:
The Company has elected to file a consolidated federal income tax
return with its subsidiaries. The Company adopted Financial
Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes" ("SFAS 109"), for the year ended December 31, 1993.
SFAS 109 requires recognition of deferred tax liabilities and
assets for expected future tax consequences of events that have
been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined
based upon the difference between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect
for the year in which the difference is expected to reverse. Under
SFAS 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date. The effect of the adoption of SFAS
109 was not material. (See Note 10)
(i) Reclassifications:
Certain items on the 1993 financial statements have been
reclassified to conform with the current years reporting format.
(j) Going Concern Uncertainty:
The accompanying consolidated financial statements have been
prepared on a going concern basis, in conformity with generally
accepted accounting principles, which contemplates continuity of
operations, realization of assets and liquidation of liabilities
in the ordinary course of business. The Company has experienced
recurring losses from operations and ongoing cash flow
difficulties. Continued difficulties would raise substantial doubt
about the Company's ability to continue as a going concern. The
Company has undergone several significant restructuring changes
subsequent to the balance sheet date (see Note 16) which it
believes will allow the Company to continue as a going concern.
The consolidated financial statements do not include any
adjustments that might result from the outcome of his uncertainty.
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
NOTE 3 - RESTRICTED CASH:
The Company has a $100,000 cash deposit with it's factor as
security against monies loaned the Company in conjunction with its
emergence from Chapter 11. This cash is being held in an interest
bearing escrow account (see Note 7).
NOTE 4 - INVENTORIES:
Inventories at December 31, 1994 consist of the following:
Finished goods $ 763,171
Work in process 214,621
Raw materials 463,000
----------
$1,440,792
==========
NOTE 5 - NOTE RECEIVABLE - SALE OF PROPERTY:
During 1994 the Company sold one of its manufacturing facilities
for approximately $419,000 and recorded a gain on this sale of
approximately $132,000. At closing, the Company paid off two
existing mortgages on the property totalling approximately
$253,000 and received proceeds (net of closing costs) of
approximately $133,000 which included a $50,000 promissory note
dated November 15, 1994 bearing interest at the prime rate (but
not to exceed 10%) per annum. This note is to be paid in 35
consecutive monthly installments of principal and interest (using
a 10 year amortization schedule) with the remaining balance due in
full on November 15, 1997. At December 31, 1994, $50,000 was still
due on this note.
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT:
At December 31, 1994, fixed assets consisted of the following:
Land and land improvements $ 155,077
Buildings and building improvements 598,103
Machinery and equipment 2,886,919
Leasehold improvements 36,062
----------
3,676,161
Less: accumulated depreciation 3,127,729
----------
$ 548,432
==========
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
NOTE 7 - FACTORING AGREEMENTS:
The Company's non-recourse factoring agreements provide for
advances of up to 85% of eligible accounts receivable (80% prior
to October, 1994) placed with the factor. The minimum factoring
charge is 1% of gross sales subject to escalation based on the
credit worthiness of certain customers and the dating of sales
invoices. Interest on advances accrues at the prime rate plus 2
1/2% per annum. Collateral for the factoring and over-advance
agreements include substantially all of the Company's assets,
including accounts receivable, inventories, property, plant and
equipment (except those assets collateralizing long-term debt) and
cash held in escrow (see Note 3). See also Note 16b regarding
subsequent new financing arrangement.
NOTE 8 - ACCRUED LIABILITIES:
Accrued expenses at December 31, 1994 consisted of the following:
Professional fees $35,078
Salaries and wages 81,542
Other 16,781
--------
$133,401
========
NOTE 9 - LONG-TERM DEBT:
(a) Obligations Under Capital Leases:
The assets and liabilities under capital leases are recorded at
the lower of the present value of the minimum lease payments or
the fair market value of the asset.
The Company has a capital lease for computer equipment with a cost
of $107,551 and accumulated depreciation as of December 31, 1994
of $62,960. Depreciation expense relating to this capital lease
aggregated $30,873 and $39,847 for 1994 and 1993, respectively.
The present value of future minimum lease payments having
remaining non-cancelable terms of one year or more at December 31,
1994 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1995 $41,849
1996 35,596
1997 5,933
-------
Total minimum lease payments 83,378
Less amounts representing interest and maintenance 23,477
-------
Present value of minimum capital lease payments 59,901
Less current portion of obligation under capital lease 27,170
-------
Obligation under capital lease, excluding current portion $32,731
=======
</TABLE>
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
NOTE 9 - LONG-TERM DEBT (Continued):
(b) Note payable, originally aggregating $25,000, to a shareholder for
monies lent to the Company in conjunction with its bankruptcy
reorganization, due in monthly installments of $1,100 through
April 1996 including interest at 9% per annum
The following are the principal payments required
for each of the next two years:
1995 $13,503
1996 5,100
--------
$18,603
========
Total interest expense associated with above debt was
approximately $13,000 for 1994.
NOTE 10 - INCOME TAXES:
The Company's federal income tax returns for the years 1979, 1980,
1981, 1982, 1986 and 1987 have been under examination. In
connection with these examinations, the Internal Revenue Service
(the "IRS") raised several issues relating to the deductibility of
certain expenses.
The IRS issued to the Company a report dated August 5, 1992,
proposing adjustments to the Company's federal income tax returns
filed for the years 1979, 1980, 1981, 1982, 1986 and 1987. In a
petition dated October 30, 1992, the Company sought relief in the
United States Tax Court (Docket Number 24326-92). The case was
stayed by the Bankruptcy proceedings (see Note 1) and having been
brought under the jurisdiction of the Bankruptcy Court, a tax
liability of approximately $340,000 was made, to be treated and
paid as a Class 7 general unsecured claim to the IRS of $68,000.
The Company is currently negotiating a payment plan with the IRS
for the $68,000 liability.
The tax effects of the temporary differences that give rise to the
deferred tax assets and liabilities as of December 31, 1994 are as
follows:
Fixed assets $ 16,000
Accounts receivable 2,000
Inventory 14,000
---------
32,000
Valuation allowance (32,000)
---------
Deferred tax asset $ -0-
=========
The Company had available at December 31, 1994 unused net
operating loss carryforwards and other tax credits of
approximately $8,000,000 and $474,000, respectively which may be
applied against future taxable income expiring in various years
through 2008. At an assumed tax rate of 34% these carryforwards
may result in a deferred tax asset of approximately $2,900,000.
Since there is no assurance that the Company will generate future
taxable income to utilize this asset, a valuation allowance of
$2,900,000 has been provided as of December 31, 1994.
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
NOTE 10 - INCOME TAXES (Continued):
Subsequent to the balance sheet date, a new investor purchased
approximately 50.5% of the outstanding stock of the corporation.
According to I.R.C. Section 382, if an ownership change of a loss
corporation occurs, the taxable income of that loss corporation
for any post-change tax year can be offset by existing net
operating loss carryovers only to the extent of the fair market
value of the old loss corporations stock multiplied by the
long-term tax exempt bond rate. On the date of the change in
ownership the estimated amount of net operating loss carryovers
that still exist is still to be determined.
NOTE 11 - RETIREMENT BENEFIT PLAN:
During 1991, the Company adopted a 401(K) tax deferred savings
plan. The plan covers substantially all full-time employees who
are at least 21 years of age with one or more years of service.
The plan provides for discretionary matching of participating
employees contributions and a discretionary profit sharing
contribution. No discretionary contributions were made by the
Company in 1994 or 1993.
NOTE 12 - COMMON STOCK / OPTIONS:
(a) The Company has a stock option plan through which it may grant
incentive and non-qualified stock options to management and other
key employees, to purchase shares of the Company's common stock.
Options which may be granted through April 2000 under the plan
become exercisable at the date of grant and expire no later than
10 years after the date of grant. The exercise price of options
must be fixed at no less than 100% (110% with respect to optionees
owning more than 10% of the stock of the Company) of the fair
market value of the common stock at the date of grant.
In March 1994, 155,000 stock options were granted to various
employees from the Company's stock option plan. All options have
an exercise price of $.30 per share. As of December 31, 1994,
45,000 options were forfeited while the remaining 110,000 have not
yet been exercised. Also in March 1994, the Company reset all
options that were currently granted and exercisable under the
stock option plan to an exercise price of $.30 per share (except
for insiders, for whom the exercise price was reset to $.33 per
share).
In August 1994, 900,000 stock options were granted to four
officers of the Company. All options are exercisable at a price of
$.33 per share. David Greenberg, Joan Greenberg and Herbert
Greenberg each received 200,000 options and Joseph Pascal received
300,000 options. All of these options are exercisable through
August 1999 and at December 31, 1994 all 900,000 options remained
outstanding. Subsequent to the balance sheet date, David
Greenberg, Joan Greenberg and Herbert Greenberg resigned as
officers of the Company. Upon their resignation, all stock options
held by them expired. New options, 350,000, 450,000 and 300,000,
respectively, were issued to purchase shares of stock in the
Company at an exercise price of $.33 per share (see Note 16(a)).
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
NOTE 12 - COMMON STOCK / OPTIONS (Continued):
The aggregate number of shares of common stock reserved for
issuance under these stock option plans is 3,000,000. The
following is a summary of stock option activity in the Plans:
<TABLE>
<CAPTION>
Shares Options
Reserved Outstanding Option
for and Price Range
Options Exercisable Per Share
--------- ----------- -------------
<S> <C> <C> <C>
Balance, 12/31/92 324,330 675,670 $.30 - $.33
Cancelled 83,475 (83,475) .30 - .33
--------- --------- -----------
Balance, 12/31/93 407,805 592,195 .30 - .33
Increase in reserved shares 2,000,000 -
Granted (1,055,000) 1,055,000 .30 - .33
Cancelled 74,200 (74,200) .30
---------- ---------- -----------
Balance, 12/31/94 1,427,005 1,572,995 $.30 - $.33
========= ========= ===========
</TABLE>
A former financial officer of the Company has a non-qualified
stock option agreement to purchase up to 50,000 shares of common
stock, which are currently exercisable at $3.125 per share through
August 24, 1996.
(b) In March 1994, the Company sold 1,155,000 shares of its stock to
two individuals at a price of $.30 per share aggregating $350,000
(see Note 1).
Also in March 1994, the Company issued 100,000 shares as a finders
fee to an individual who assisted in the Company's emergence from
bankruptcy. The Company reflected the issuance of these shares as
a charge to operations in the amount of $30,300.
During 1994, the Company filed an amendment to its certificate of
incorporation increasing the number of authorized shares of common
stock to 10,000,000 shares; and lowering the par value of said
shares to $.0001 per share.
NOTE 13 - ECONOMIC DEPENDENCY:
Four customers accounted for 32%, 18%, 12% and 10% of net sales
during 1994. In 1993, three customers accounted for 23%, 14% and
11% of net sales. Accounts receivable (including accounts
receivable factored) from these customers were approximately
$296,000, $123,000, $209,000 and $221,000, respectively in 1994
and $241,000, $184,000 and $140,000, respectively in 1993.
One vendor accounted for approximately $1,035,000 of net purchases
during the 1994. Accounts payable to this vendor was approximately
$207,000 at December 31, 1994.
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
NOTE 14 - RELATED PARTY TRANSACTIONS:
(a) During 1994, the Company's president and chief operating officer,
Joseph Pascal, had made available to the Company, a letter of
credit facility of an unrelated entity, of which he is also the
President. The Company deposited $75,000 with this entity as
collateral against unpaid letters of credit. Shipments made under
this facility aggregated approximately $1,780,000 for 1994. Fees
charged to the Company for the use of this facility aggregated
approximately $43,000 of which approximately $16,000 was paid in
cash and $27,000 was applied against the deposit.
(b) At December 31, 1994 loans receivable from several
directors/officers of the Company were as follows:
Mr. David Greenberg $49,500
Mrs. Joan Greenberg $49,500
Mr. Herbert Greenberg $60,000
Interest at the prime rate for the year ended December 31, 1994
was waived by the Company. Subsequent to the balance sheet date
the above directors/officers resigned as officers and directors of
the Company. Their indebtedness can be forgiven pending certain
provisions detailed in their new consulting agreements (see Note
16a).
See also - Note 15 concerning rental of building from former
officers/directors.
NOTE 15 - COMMITMENTS AND CONTINGENCIES:
The Company leases certain facilities under operating leases with
terms of up to five remaining years. Rent expense under such
leases was approximately $119,000 and $137,000 in 1994 and 1993,
respectively. Certain leases contain cancellation options, renewal
options, and escalation clauses.
The Company leases a building for $4,980 per month from a
Partnership in which three of its principal stockholders are
partners. The current term of the lease expires in May 1997. Rent
expense under this lease was $59,760 in 1994 and 1993. The Company
has the right of first refusal to acquire the property in the
event that the Partnership desires to sell. The Company is a
co-guarantor of a $320,000 mortgage on the property which was due
in July 1992, but was extended on a month to month basis by the
Resolution Trust Corporation ("RTC") as holder of the loan.
Subsequent to the balance sheet date, as part of a new investors
purchase agreement of 50.5% of the outstanding stock of the
Company (see Note 16a), the Partnership forgave the Company the
rent due in arrears and gave the deed to the property to the
Company subject to the existing mortgage. The new investor has
agreed to hold the prior owners harmless with respect to said
mortgage debt. The Company entered into negotiations with the loan
servicer, RTC, with the intent to acquire the property free and
clear of the encumbrances previously mentioned.
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
NOTE 16 - SUBSEQUENT EVENTS:
(a) Restructuring:
On February 13, 1995, subsequent to the balance sheet date, the
Company sold 4,250,000 shares of its common stock (constituting
50.5% of the outstanding stock) to LMA Ltd., an Isle of Man
Corporation, for $200,000 cash and a promissory note for $200,000
payable with interest at 9% per annum in February 1996. The
obligation under this note may be reduced to either 50% or zero
depending upon certain additional financing arrangements to be
negotiated between the Company and outside lenders which may
include changed factoring agreements, new real estate mortgages,
equity, subordinated debt or a bank financing agreement.
Concurrently, with this event, Paul Sutton a principal of LMA
Ltd., assumed the position of Chairman of the Board and Chief
Executive Officer of the Company. Also, David Greenberg, Joan
Greenberg and Herbert Greenberg, officers and directors of the
Company, resigned their positions but retained their stockholdings
and certain option rights. Each of the three resigning officers
entered into a three year consulting agreement with the Company
commencing March 1, 1995. Remuneration to these individuals will
include consulting fees of $500 per day when services are rendered
and payments under non-compete agreements which aggregate $60,000,
$115,000 and $75,000, respectively on an annual basis for three
years.
As of the date of this agreement, the Company has outstanding
receivables from these three individuals aggregating $49,500,
$49,500 and $60,000, respectively. Subject to the former officers'
compliance with certain provisions of the non-compete and
non-interference, included in their consulting contracts, the
principal and interest (at 8% per annum) amounts of these
outstanding receivables can be excused in 10 equal annual
installments from January 1, 1998 through December 31, 2007.
One of the officers will be entitled to continued health benefits
for the first 18 months of his agreement. Two of the officers will
be entitled to ownership of their Company autos for certain
minimal payments.
Upon their resignation, all stock options held by the former
officers/directors expired. New options, 350,000, 450,000 and
300,000, respectively, were issued to purchase shares of stock in
the Company at an exercise price of $.33 per share.
At closing, the former officers also signed an option and right of
first refusal, which gave to LMA Ltd. the right to purchase their
stock at $1.50 per share through March 31, 1996. All voting rights
to these shares were transferred to LMA Ltd. for the term of the
right of first refusal.
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
NOTE 16 - SUBSEQUENT EVENTS (Continued):
(b) New Financing Agreement:
On March 31, 1995 the Company concluded a new financing agreement
with Finova Capital Corporation (formerly Ambassador Factors).
Under the terms of this agreement the Company is entitled to
receive an 85% advance on eligible accounts receivable and an
over-advance not to exceed $600,000 (based on 50% of certain
inventory).
The Company also expects to close a mortgage term loan on its
Rocky Mount property in the near future.
(c) Employment Contracts:
On February 1, 1995, subsequent to the balance sheet date, the
Company signed an employment agreement with its current President
and Chief Operating Officer. The terms of the agreement are from
March 1, 1995 through December 31, 1997 at an annualized minimum
salary of $210,000. In addition, the officer is to receive options
to purchase 240,000 shares of the Company's stock under its 1990
stock option plan, $30,000 per year as an unaccountable expense
allowance and continued participation in Company benefit plans
such as life and medical insurance.
Effective March 1, 1995 the Company entered into an employment
agreement with Paul Sutton which expires December 31, 1997. Mr.
Sutton is to receive an annualized minimum salary of $25,000
together with such bonuses and increases as the board of directors
may determine. In addition, the officer is to receive options to
purchase 240,000 shares of the Company's stock under its 1990
stock option plan and $30,000 per year as an unaccountable
expense allowance. He is also entitled to group life and medical
insurance.
<PAGE>
ROCKY MOUNT UNDERGARMENT CO., INC.
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
For the Years Ended
---------------------------------
December 31, December 31,
1994 1993
------------ ------------
<S> <C> <C>
PRIMARY EARNINGS:
Net loss from operations $(1,343,751) $(1,523,110)
=========== ===========
Extraordinary items $ 2,207,228 $ (630,792)
=========== ============
SHARES:
Weighted average number of common shares and
common share equivalents outstanding 3,926,468 2,898,400
----------- -----------
PRIMARY EARNINGS PER COMMON SHARES:
Net loss from operations $ (.34) $ (.52)
Extraordinary items .56 (.22)
------------ -----------
$ .22 $ (.74)
============ ==========
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, made as of the 19th day of January, 1995, between
ROCKY MOUNT UNDERGARMENT CO., INC., a Delaware corporation ("Rocky Mount" or the
"Company") and PAUL SUTTON, residing at 32 Rose Avenue, South Woodford, London
E18, England ("Sutton").
W I T N E S S E T H
WHEREAS, Rocky Mount desires to sell to Sutton, and Sutton desires to
purchase from Rocky Mount, 4,250,000 shares of the common stock, $.0001 per
share, par value, of Rocky Mount (the "Stock"); and
WHEREAS, the parties hereto desire to memorialize certain other agreements
relating to the Stock.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. On the Closing Date (as hereinafter defined), and subject to the terms
and conditions of closing set forth herein, Rocky Mount hereby agrees to sell,
assign, transfer and convey to Sutton and Sutton hereby agrees to purchase from
Rocky Mount, 4,250,000 shares of the Stock (the "Sutton Stock"), of which
500,000 shares shall be from Treasury Stock and the balance shall be newly
issued shares. The Sutton Stock shall constitute 50.5% of the outstanding stock
following such issuance.
2. The purchase price for the Sutton Stock is $400,000.00 payable as
follows:
a. $50,000.00 upon execution of this Agreement ("Good Faith Deposit"),
to be deposited into escrow with Blodnick Abramowitz & Blodnick and held
pending closing.
b. $150,000.00 on or before February 9, 1995 (the "Closing Date"),
following completion of Sutton's continuing due diligence investigation into the
business and affairs of the Company; and
c. $200,000.00 by a full recourse, non-negotiable promissory note.
3. In the event that Sutton shall determine not to proceed with the
transaction and shall so notify the Company in writing on or before February 9,
1995, Sutton shall be entitled to the return of the Good Faith Deposit, and this
Agreement shall be null and void, with neither party having any rights against,
or any obligations to, the other, except for the prompt return of the Good Faith
Deposit.
4. The obligation of Sutton to consummate the transactions contemplated
hereunder shall be subject to, and conditioned upon:
a. The execution and delivery to Sutton of the following documents:
<PAGE>
(1) an Option and First Refusal Agreement by David Greenberg,
Joan Greenberg and Herb Greenberg to Sutton, substantially in the form annexed
hereto as Exhibit "1";
(2) Non-competition Agreements between the Company and each of
David Greenberg, Joan Greenberg and Herb Greenberg substantially in the forms
annexed hereto as Exhibits "2", "3" and "4";
(3) an Employment Agreement between the Company and Joseph
Pascal, substantially in the form annexed hereto as Exhibit "5";
(4) an opinion of counsel of Blodnick Abramowitz & Blodnick
concerning the Sutton Stock, reasonably satisfactory to Sutton's counsel; and
b. Tendered resignations from the Board of Directors of the Company of
all Directors except Messrs. Pascal and Wynn, and the election to the Board of
Directors of Sutton and not less than four of his nominees.
5. The obligation of Rocky Mount to consummate the transactions
contemplated hereunder shall be subject to, and conditioned upon:
a. The payment of the Purchase Price by Sutton to the Company,
including the execution and delivery of the Promissory Note; and
b. a waiver of any finders' fee from the Company by Peter Gibb.
6. Sutton shall execute and deliver to Rocky Mount his full recourse,
non-negotiable, promissory note for the sum of $200,000.00 plus interest at 9%,
in substantially the form annexed hereto as Exhibit "A" (the "Note"), payable on
the 365th day following issuance, except as hereinafter provided.
7. The Note shall be payable on or about February 9, 1996 (the "Fulfillment
Date"). On or before the Fulfillment Date, Sutton shall effect the following
actions, as specified:
a. Prior to the Fulfillment Date, Sutton shall use his best efforts to
effect with Rocky Mount's factor, Rosenthal & Rosenthal, Inc. ("R&R"), an
agreement by which David Greenberg is released from all liability as Guarantor
of Rocky Mount's obligations to R&R.
b. Within 120 days after the Closing Date, Sutton shall effect an
agreement by which Rocky Mount's R&R credit line of $500,000 is replaced by an
equivalent or better credit line of $850,000, and effecting the release of the
Deed of Trust on Rocky Mount's plant in Rocky Mount, North Carolina (the
"Property") currently securing the R&R credit line.
C. Within 365 days after the Closing Date, Sutton shall effect a new
mortgage on the Property to total not less than the equivalent of 60% of the
appraised current value of the Property.
d. The total additional financing to be made available to Rocky Mount
as a result of "b" and "c" herein or otherwise, by way of equity, subordinated
debt or a credit line, shall not be less than $800,000.00. If Sutton shall
achieve new financing for Rocky Mount of not less than $800,000.00 on or before
the Fulfillment Date, then the parties agree that Sutton shall be discharged and
released from his liability under the Note. If Sutton shall effect a minimum of
$400,000 of new financing for Rocky Mount, then the parties agree that the
amount due and owing under the Note shall be reduced by 50% and enforceable by
Rocky Mount. If Sutton shall not effect at least $400,000 of new financing for
Rocky Mount, then the Note shall be payable in full and enforceable by David
Greenberg on behalf of Rocky Mount.
<PAGE>
8. On the Closing Date, Rocky Mount shall issue in the name of Sutton or a
company controlled by him a certificate for the Sutton Stock and the purchase
price for the Sutton Stock shall be released to Rocky Mount. The date of such
issuance and release is hereinafter referred to as the "Issuance Date."
9. Sutton acknowledges that the Sutton Stock has not and will not, at the
time of acquisition by Sutton, be registered under the Securities Act of 1933
(the "Securities Act"), that Sutton is required to acquire the Sutton Stock for
investment without any view to the distribution thereof, and that the Sutton
Stock must be held by Sutton unless the Sutton Stock is subsequently registered
under the Securities Act or unless an exemption from such registration is
available, including an exemption under Rule 144 promulgated under the
Securities Act. Sutton further acknowledges and agrees that "stop transfer"
instructions shall be placed against the Sutton Stock on the transfer books of
Rocky Mount and that the stock certificate representing the Sutton Stock (and
any certificates for stock which may be issued in the name of Sutton upon
breakup of said stock certificate) shall bear the following legend:
"The shares evidenced by this certificate have not been registered
under the Securities Act of 1933 (the "Securities Act") and may not be
offered for sale, sold or otherwise disposed of unless a registration
statement has become effective with respect to such shares under the
Securities Act or pursuant to an opinion of counsel reasonably satisfactory
to the Company that there is an applicable exemption from the registration
requirements of the Securities Act and applicable state securities laws."
Rocky Mount shall, in order to facilitate any offer or sale of the Sutton Stock
as to which Rocky Mount shall have been furnished an opinion of its counsel or
such other counsel reasonably acceptable to Rocky Mount that such legend is no
longer required, instruct its transfer agent to issue and deliver, in exchange
for legended certificates evidencing the Sutton Stock, new certificates which do
not bear such legend. Rocky Mount has no intent, and will take no affirmative
action to restrict the sale of the Sutton Stock by Sutton, except as such sale
may be restricted under the Securities Act and the regulations promulgated under
said Securities Act. In the event that there is public offering of Stock, Sutton
shall have the right to include his Stock in said public offering at Rocky
Mount's expense. The parties to this Agreement agree that if market conditions
are appropriate they will pursue the possibilities of a public offering of the
Stock under such terms and conditions as will be appropriate in the market place
at that time. However, nothing herein contained shall restrict Sutton from
pledging the Sutton Stock, provided he receives an appropriate undertaking and
acknowledgement from the secured party as to the necessity for compliance with
the requirements of the Securities Act with respect to any subsequent
disposition which may be made of the Sutton Stock.
10. Sutton agrees to serve as a Director of Rocky Mount. Rocky Mount shall
use its best efforts to obtain, and once obtained to continue in force, and
name Sutton as a named insured with respect to, directors and officers liability
insurance in such amount as is customary for companies the size of Rocky Mount.
11. Rocky Mount represents and warrants to Sutton that:
<PAGE>
(a) Rocky Mount is, and at the Issuance Date will be, a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware, with all requisite corporate power and authority to conduct
its business and operations as presently conducted and to execute, deliver and
perform this Agreement and other instruments and documents required hereby to be
executed and delivered by Rocky Mount, and has taken all action required to duly
authorize said execution, delivery and performance. This Agreement is, and any
other instruments and documents to be executed and delivered by Rocky Mount
pursuant hereto on or prior to the Issuance Date will be, legal, valid and
binding obligations of Rocky Mount, enforceable in accordance with their
respective terms, except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, or by principles governing the availability of
equitable remedies.
(b) The authorized capital stock of Rocky Mount is 10 million common
shares, $.0001 par value. As of the close of business on January 3, 1995, there
were outstanding 4,153,400 shares of Stock, and 522,500 issued Treasury shares
of Stock. All of the issued and outstanding shares of Stock are, and upon
consummation of the transaction contemplated by this Agreement, including the
Sutton Stock, will be, duly authorized, validly issued, fully paid and
nonassessable. Other than as stated in the chart of outstanding Stock Options
annexed hereto as Exhibit "B", there are no existing option, warrant, call,
commitment or other agreements to which Rocky Mount is a party or bound
requiring, and there are no convertible securities of Rocky Mount outstanding
which upon conversion would require, the issuance of any additional Stock or
other securities convertible into Stock or the purchase or redemption of any
shares of Stock.
(c) Rocky Mount's financial statements as contained in their most
recent Forms 10-K and 10-Q (including the related notes and schedules) present
fairly the consolidated financial position of Rocky Mount as of their respective
dates, the results of operations, retained earnings and changes in financial
position, as the case may be, of Rocky Mount and its subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to the
omission of certain notes not ordinarily accompanying such unaudited financial
statements, and to normal year-end audit adjustments which are not material in
amount or effect), in each case in accordance with GAAP consistently applied
during the periods involved. Since the date of the financial statements, there
have been material adverse changes in the assets and the business, financial
condition, liabilities or prospects of Rocky Mount, in that Rocky Mount has
continued to suffer losses from continuing operations.
(d) Other than as listed on the annexed Exhibit "C", Rocky Mount is
not a party to any other material contracts.
(e) Other than as listed in the annexed Exhibit "D", Rocky Mount is
not a party to any material litigation involving claims in excess of $10,000,
and is not aware of any such threatened litigation.
(f) Rocky Mount is not aware of any environmental violations that may
incur any State or Federal civil or criminal penalties.
(g) Rocky Mount is not a party to any union or collective bargaining
agreement, and is not aware of any claims of employment discrimination action
against it.
<PAGE>
(h) Rocky Mount has filed all required Federal tax returns through the
year ended December 31, 1993, and is not delinquent with respect to any Federal
tax payment schedules. Pursuant to that certain Order and Decision of the United
States Tax Court dated November 2, 1994, asserted Federal tax liabilities for
the years 1979 through 1982 and 1984 through 1987 were settled as an unsecured
claim in the amount of $339,844.00, which is to be paid in an amount of
$67,968.80 pursuant to a schedule which has yet to be determined between Rocky
Mount and the Internal Revenue Service.
(i) Rocky Mount is the registered owner of the trademarks and
tradenames listed on the annexed Exhibit "E."
(j) Attached as Exhibit "F" hereto is a list of subsidiaries of Rocky
Mount.
(k) None of the representations made by Rocky Mount contains any
untrue statement of a material fact or omitted any material fact required to be
stated therein in order to to make the statements made, in light of the
circumstances in which they were made, not misleading.
12. Any controversy, dispute or question arising out of or with respect to
this Agreement, or its interpretation, the performance or non-performance by any
party or any alleged breach thereof, shall be determined by litigation in the
Supreme Court, County of Nassau, or in the United States District Court for the
Eastern District of New York. Nothing contained herein shall in any way deprive
any party of his or its right to obtain injunctive or other equitable relief
where necessary or appropriate to protect his or its rights.
13. Each of the parties hereto agrees to take such further action and
execute and deliver such other documents and instruments as may be reasonably
necessary to effectuate the purposes of this Agreement.
14. This Agreement constitutes the entire agreement among the parties
hereto and there are no representations, warranties, agreements or
understandings other than as expressly contained or described herein. No
termination, alteration, modification, variation or waiver of this Agreement or
any of the provisions hereof shall be effective unless in writing executed by
the parties hereto or, in the case of a waiver, by the party or parties waiving
compliance.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which taken together shall constitute one
document. A party to this Agreement shall also be bound hereby upon such party's
execution of the signature page hereof and transmission via facsimile of such
executed signature page to the other parties hereto.
IN WITNESS WHEREOF, this Agreement has been made and executed as of the day
and year first above written.
ROCKY MOUNT UNDERGARMENT CO., INC.
By: /s/ Joseph Pascal
------------------
Name: Joseph Pascal
Title: Sr. Vice President
/s/ Paul Sutton
----------------------
PAUL SUTTON
Agreed as to paragraph 2(a).
Blodnick Abramowitz & Blodnick
/s/ Stuart Thalblum
- ---------------------------
Stuart Thalblum
<PAGE>
AMENDMENT TO CONTRACT DATED JANUARY 19, 1995
BETWEEN ROCKY MOUNT UNDERGARMENT CO., INC.
AND PAUL SUTTON
WHEREAS Paragraph 7(d) of the aforesaid agreement refers to
"additional financing" and "new financing"; and
WHEREAS the parties wish to avoid any confusion over those
terms, it is
AGREED that for the purpose of clarifying the provisions of
said paragraph 7(d), "additional financing" and "new financing" shall be
defined as any increase in the existing credit line of Rosenthal &
Rosenthal over the current level of $500,000.00 and, in addition, shall
also include any other financing or investment monies or loans made
available to Rocky Mount whether by Pual Sutton, LMA, Ltd. or any other
affiliated or unaffiliated party or parties.
Should the $500,000.00 line of Rosenthal & Rosenthal be
replaced in whole or in part by a new credit line, any amount over
$500,000.00 of the replacement line shall be deened "new" or "additional"
financing.
Dated: 2/10/95
--------------------------
ROCKY MOUNT UNDERGARMENT CO., INC.
By:
-----------------------------------
LMA LTD.
By:
-----------------------------------
/s/ PAUL SUTTON
-----------------------------------
PAUL SUTTON
<PAGE>
ASSIGNMENT AND ASSUMPTION
WHEREAS, PAUL SUTTON, residing at 32 Rose Avenue, South
Woodford, London E18, England ("Sutton") has the right to
purchase 4,250,000 shares of the common stock of ROCKY MOUNT
UNDERGARMENT CO., INC., a Delaware corporation ("Rocky Mount" or
the "Company") (the "Sutton Stock"), pursuant to that certain
STOCK PURCHASE AGREEMENT dated as of the 19th day of January,
1995 (the "Agreement") between Rocky Mount and Sutton; and
WHEREAS, Sutton has at all times during the course of
dealings with respect to the Sutton Stock, been acting on behalf
of, and as an agent for, LMA Ltd., a corporation organized under
the laws of the Isle of Man, whose address is:
LMA Ltd., Ballarose, Hillbury Green, Douglas, Isle of Man,
British Isies IM26DE.
NOW, THEREFORE, Sutton does hereby assign, convey and
transfer to LMA Ltd., all of his rights and privileges under the
Agreement, and LMA Ltd. does accept such assignment and agree to
undertake all of Sutton's obligations with respect thereto as set
forth in the Agreement, except that the right to receive 200,000
shares of the Sutton Stock is assigned to Lynda Rose McQueen.
There shall be no release of Sutton with respect to any
of his obligations under the Agreement, including specifically
<PAGE>
those obligations under the Securities Act of 1933, as amended,
contained in Paragraph 9 of the Agreement.
LMA Ltd. and Lynda Rose McQueen each acknowledge that
the Sutton Stock has not and will not, at the time of acquisition
by Sutton, be registered under the Securities Act of 1933 (the
"Securities Act"), that LMA Ltd. and Lynda Rose McQueen each are
required to acquire the Sutton Stock for investment without any
view to the distribution thereof, and that the Sutton Stock must
be held by LMA Ltd. and Lynda Rose McQueen unless the Sutton
Stock is subsequently registered under the Securities Act or
unless an exemption from such registration is available,
including an exemption under Rule 144 promulgated under the
Securities Act.
IN WITNESS WHEREOF, Sutton has executed and delivered
this Assignment and each of LMA Ltd. and Lynda Rose McQueen have
accepted this Assignment and assumed the obligations specified
therein, all as of this 24th day of January, 1995.
/s/ PAUL SUTTON
-------------------------------------
PAUL SUTTON
Assignment agreed to and accepted:
LMA Ltd.
By: --------------------------------
Name:
Title:
/s/ LYNDA ROSE McQUEEN
-------------------------------------
LYNDA ROSE McQUEEN
2
<PAGE>
Assignment consented to:
ROCKY MOUNT UNDERGARMENT CO., INC.
By: /s/ JOSEPH PASCAL
--------------------------------
Name: Joseph Pascal
Title: Vice-President
STATE OF New York )
Nassau ) ss.:
COUNTY OF New York )
On the 10th day of February, 1995, before me came Paul
Sutton, who, being by me duly sworn, did depose and say that he
resides at 32 Rose Avenue, South Woodford, London E18, England to
me known and known to me to be the individual mentioned and he
acknowledged to me that he executed the within instrument.
STUART THALBLUM
----------------------------------
Notary Public
STUART THALBLUM
Notary Public, State of New York
STATE OF NEW YORK ) No. 41-4789938
)ss.: Qualified in Queens County
COUNTY OF NASSAU ) Commission Expires June 30, 1995
On this 10th day of February, 1995, before me personally came Paul
Sutton, who, being by me duly sworn, did depose and say that he has offices
at Ballarose, Hillbury Green, Douglas, Isle of Man British Isles; that he
is the Asett of LMA Ltd., a corporation organized under the laws of the
Isle of Man; and that he executed this instrument and signed his name
thereto on behalf of said corporation in the capacity therein stated,
pursuant to the order of the Board of Directors of such corporation.
STUART THALBLUM
----------------------------------
Notary Public
STUART THALBLUM
Notary Public, State of New York
No. 41-4789938
Qualified in Queens County
Commission Expires June 30, 1995
3
David Greenberg EXECUTION COPY
Joan Greenberg
Herb Greenberg
February 13, 1995
Paul Sutton
c/o: Barry Ross, Esq.
Hollenberg, Levin, Solomon, Ross & Belsky
585 Stewart Avenue
Garden City, NY 11530
Re: Rocky Mount Undergarment Co. Inc.
Option and Right of First Refusal
Dear Paul:
1. Introduction.
Each of us, David Greenberg ("David"), Joan Greenberg ("Joan"), and
Herb Greenberg ("Herb") is an officer and director of Rocky Mount
Undergarment Co. Inc. ("Rocky Mount" or the "Company") David, Joan and Herb
are sometimes referred to herein as "We". For reasons relating in part to
David's recent disability, We have decided to resign as officers and
directors of the Company, provided (i) that new management could be found
for the Company, and further provided (ii) that such new management was
capable of providing to the Company certain financial assistance
and assurances.
Accordingly, at our direction and with our concurrence, the Company
has recently entered into an agreement with Paul Sutton ("You") selling to
You a majority of the outstanding and issued shares of the Company's Common
Stock in exchange for cash and certain assurances of financial support to
the Company.
<PAGE>
2. Unconditional Option to Purchase Pledged Stock.
Each of us is the owner, beneficially and of record, of those shares
of the common stock of the Company listed on Schedule A annexed hereto (the
"Pledged Stock"). We hereby grant to you an option (the "Option") to
purchase all or any portion of the Pledged Stock, other than that which is
previously sold by us, or any of us, in accordance with this Agreement.
Your option shall be exercisable at a price of One Dollar and Fifty-Cents
($1.50) per share (the "Strike Price"). The Strike Price shall be adjusted
on account of any stock dividend, stock split or similar recapitalization.
The Option may be exercised at any time during the period commencing as of
the date hereof and ending on March 31, 1996 ("Option End Date").
To exercise the Option, you are required to give us written notice
prior to the Option End Date by certified mail to us, at c/o: D. David
Cohen, Esq., Expressway Plaza Two, Roslyn Heights, NY 11577 or such other
address as we shall provide you in writing stating the number of shares
proposed to be purchased. If less than all of the Pledged Stock is to be
purchased, the transaction shall be allocated proportionately among us, in
relation to the number of shares of Pledged Stock then held by each of us.
In the event You shall exercise your option hereunder, You shall close on
the purchase of such Pledged Stock on or before the thirtieth (30th) day
following such notice (the "Closing Date"), at Mr. Cohen's offices, at
which time you shall tender to us, in federal funds or by certified or
-2-
<PAGE>
bank cashier's check, the aggregate Strike Price for all of the Pledged
Stock which You have elected to purchase.
In the event You fail to give us notice prior to the Option End Date,
as hereinbefore defined, or, in the event You give us such notice, but fail
to close on or before 5:00 P.M. on the thirtieth (30th) day following any
such notice, this Option shall terminate and be of no further force and
effect.
3. Right of First Refusal with respect to any Private Sales.
We hereby further grant to You a Right of First Refusal (the "Right of
First Refusal") to purchase any shares of the Pledged Stock which we intend
to sell in any bona fide private transaction at any time prior to the
second annual anniversary of the making of this Agreement (the "Second
Anniversary"). For purposes hereof, a "private transaction" shall mean a
sale to any one or limited number of purchasers, without a public offering
of such securities through the facilities of any securities exchange or
system of interdealer quotations.
In the event we receive a bona fide offer of private sale (the
"Offer") prior to the Second Anniversary, which we intend to accept, We
shall give You notice thereof with a copy of any written offer, at your
address set forth above, or such other address as you shall provide to us
in writing. Such notice shall set forth all the material facts concerning
-3-
<PAGE>
any such proposed sale, including the aggregate proposed purchase price,
the number of shares proposed to be sold, and the aggregate proposed
purchase price.
Your Right of First Refusal shall be deemed sufficiently exercised
if you give us written notice of the election to purchase the shares
subject to the offer by 5:00 P.M. on the tenth (10th) business day
following your receipt of any notice of the offer, and provided further you
have paid for such shares by 5:00 P.M. on the thirtieth (30th) business day
following your acceptance of any such offer. The price for such shares
shall be the same price as set forth in the Offer, payable in, the same
manner and with equivalent security as that set forth in the Offer. If You
do not notify us of your election to purchase and fail to close within the
period specified in the Offer, or if You decline to purchase the shares,
the Right of First Refusal shall be terminated as to the shares covered by
such Offer, but shall continue as to any other shares of the Pledged Stock
which remain owned by us or any of us.
4. Right of Refusal with respect to any Public Sale.
We hereby further grant to You and a market-maker of your choosing
(the "Market Maker") an unconditional Right of First Refusal to purchase
any shares of the Pledged Stock which we intend to sell in a public
transaction at any time prior to the Second Anniversary, and a conditional
right to purchase any such shares at any time thereafter. A public sale
shall mean any open market sale or other transaction which is not a private
transaction, as defined above.
-4-
<PAGE>
In the event We, or any of us, intend to initiate a public sale of any
portion of the Pledged Stock, We shall give you and the Market Maker notice
thereof at your address set forth above, or such other address or addresses
as you and the Market Maker shall provide to us in writing. Such notice
shall set forth the number of shares proposed to be sold in public
transactions and the currently prevailing market price in respect of the
shares. Currently prevailing market price shall mean as to the Shares the
average of the "bid" and "ask" prices quoted on the NASDAQ Bulletin Board
over the ten (10) trading days preceding such notice.
Your Right of First Refusal shall be deemed sufficiently exercised if
You or the Market Maker give us written notice of your election to purchase
the shares at the prevailing market price by 5:00 P.M. of the tenth (10th)
business day following your receipt of any such notice, and You or the
Market Maker, as the case may be, has paid for such shares by 5:00 P.M. on
the thirtieth (30th) business day following your acceptance of any such
offer. If neither You nor the Market Maker notifies us of your election to
purchase or if you fail to close within the period specified, or if You
decline to purchase the shares, the Right of First Refusal shall be
terminated as to the shares covered by such notice, provided the same are
sold in open market transactions within the following ninety (90) days, but
shall continue as to any other shares of the Pledged Stock which remain
owned by us or any of us.
-5-
<PAGE>
Notwithstanding anything else herein contained, after the Second
Anniversary and before the Fifth Anniversary:
(a) We may sell up to an aggregate of Fifty Thousand (50,000) shares
during each three (3) calendar months in any public sale, without the
same being subjected to any Rights of First Refusal in favor of You or
the Market Maker; and
(b) We may remove the Pledged Stock from the Escrow provided for
hereinafter and hypothecate all or any of the Pledged Stock with a
commercial lender, in which event the shares so hypothecated shall not
be subject to the restrictions herein contained with respect to any
subsequent sale or transfer of the Pledged Stock.
5. Legend on Pledged Shares.
The Greenbergs agree that the certificates representing the Pledged
Stock shall be imprinted with a legend which states:
The shares represented by this certificate are subject to certain
option and first refusal rights in favor of Paul Sutton. A copy of the
Agreement of Option and Right of First Refusal is on file with the Company.
Unless the agreement has been complied with, any purchaser of the shares
shall take them subject to the rights in favor of Mr. Sutton in accordance
with said Agreement.
6. Injunctive Relief.
The parties agree that you shall have the right to enforce this
Agreement by way of injunctive relief in aid of arbitration to prevent,
temporarily, pendente lite and/or permanently, any sale of the shares of
Pledged Stock, or any acquisition of the shares of Pledged Stock by any
party seeking or threatening to seek ownership rights, whether or not such
third party is claiming to act with or without the assistance of the
Greenbergs, or involuntarily over the objections of the Greenbergs,
-6-
<PAGE>
unless there has been compliance with the terms and condition of this
Agreement. Without limitation as to any of the foregoing rights, You shall
further have the right to acquire any Shares of Pledged Stock which may
come into the possession, custody or control of any third party
involuntarily enforcing alleged rights against the Greenbergs, or any of
them, by promptly tendering to such third party One Hundred and Five
Percent (105%) of any funds paid by such third party to gain possession,
custody or control of the Pledged Stock.
7. Early Termination
In the event the Company is purchased, merged into or otherwise
acquired, the Option and Rights of First Refusal provided for herein shall
terminate as to the Pledged Stock, and shall not apply to any securities or
other consideration received by us in exchange for the Pledged Stock.
8. Ownership of Common Stock Subject to this Agreement.
We hereby warrant and represent to you that we are the beneficial
owners of all shares of Common Stock registered in our names or the names
of the nominees for our benefit respectively as set forth in Schedule A
hereof, and we are not the beneficial owners of any other Common Stock of
the Company.
9. Consideration for option and Right of First Refusal.
In consideration of the Option and Right of First Refusal, You have
agreed:
-7-
<PAGE>
(a) To facilitate the acquisition by the Company from the Greenberg
partnership which owns the Searington property in North Carolina
leased to the Company. The Searington improved property shall be
deeded to the Company, subject only to the existing mortgage debt,
currently in default, of approximately Three Hundred Sixty Thousand
($360,000) Dollars, including interest and penalties to date, in
exchange for One Dollar ($1.00) and your contractual promise to cause
the Company to pay to Searington Realty, the partnership, or its
successors in interest, as their interests appear, one-half of the
excess, if any, of the value of the Searington property above such
mortgage debt as it exists on the date of transfer of the property to
the Company. The value of the Searington property shall be determined
on the earlier of (i) any bona fide sale thereof prior to March 1,
1998, or (ii) in the absence of any such sale, an appraisal as of
March 1, 1998 from an independent real estate brokerage firm (MAI
qualified) selected by Rocky Mount and the Greenbergs jointly, and
based in North Carolina. You shall indemnify and hold the owners of
Searington property harmless with respect to the Mortgage debt
applicable to the Searington property.
(b) To personally guarantee that, if the Company shall be in default
in its obligations to make payments due to David, Joan and Herb under
certain "Non-Competition" agreements of even date herewith. Your
personal obligation shall be limited to the payments due to each of
such persons for the period March 1, 1995 through August 31, 1996.
(c) For a period of five (5) years hereafter, not to sell any of your
shares in the Company other than by public sale in the open market, to
the extent permitted, without first offering to us the right to
participate in any such transaction on the same terms and conditions
as may be applicable to You, and to vote your shares of Rocky Mount in
favor of the election of at least one (i) person selected by the
Greenbergs, subject to reasonable approval of Sutton, to the Board of
Directors of the Company.
-8-
<PAGE>
The foregoing consideration shall be deemed to be of the essence with
respect to this transaction. If You shall fail or refuse to provide such
consideration, the Option and Rights of First Refusal provided for herein
shall terminate, in addition to any other rights and remedies which We may
have.
10. Attorneys' Fees and Costs of Collection.
In the event that either party defaults in any of its undertakings
hereunder, the parties hereto agree that in addition to any other remedies
which the successful party may have, such party shall be entitled to
recover its reasonable attorneys fee resulting from any such default, well
as the costs of collection to collect any amounts due to such party by
reason of the defaulting party's default.
11. Pledge of Securities and Proxy.
We shall deposit the Pledged Stock with the Company's counsel,
Blodnick Abramowitz and Blodnick, as escrow agent ("Escrow Agent"), to hold
as security for our performance hereunder, and under a certain Inducement
Agreement between the Greenbergs and Sutton, together with a continuing
irrevocable proxy in your favor to vote the Pledged Stock, other than that
which has been sold, until the sooner of the Fifth Annual Anniversary of
this Agreement, or any earlier termination of this Agreement.
-9-
<PAGE>
12. Arbitration.
Any disputes arising under this Agreement shall be resolved by
arbitration under the rules of the American Arbitration Association, and
judgment on any award rendered may be entered in any court having competent
jurisdiction. The place of arbitration shall be the office of the American
Arbitration Association in or nearest to Roslyn Heights, New York.
13. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
Kindly acknowledge your Agreement herewith by signing a copy hereof.
Yours very truly,
/s/ DAVID GREENBERG
----------------------------------
David Greenberg
/s/ JOAN GREENBERG
----------------------------------
Joan Greenberg
/s/ HERB GREENBERG
----------------------------------
Herb Greenberg
Accepted and Agreed this
14th day of January 1995
By: /s/ PAUL SUTTON
--------------------------
Paul Sutton
Agreed to as to Paragraph 9
BLODNICK ABRAMOWITZ & BLODNICK
By:___________________________
As Escrow Agent
Agreed as to paragraph 9(a)
Searington Realty, a partnership
By:___________________________
General Partner
<PAGE>
STOCK OWNERSHIP - DAVID, JOAN AND HERB GREENBERG
DAVID GREENBERG
<TABLE>
<CAPTION>
CERT. NO. NO. OF SHARES ISSUANCE DATE
-------- ------------- -------------
<S> <C> <C>
2365 100,000 2/21/85
2369 100,000 2/21/85
3895 1,000 10/2/85
3895 1,000 10/2/85
3896 1,000 10/2/85
3897 1,000 10/2/85
3898 1,000 10/2/85
3899 1,000 10/2/85
3900 1,000 10/2/85
3901 1,000 10/2/85
3902 1,000 10/2/85
3903 1,000 10/2/85
3904 1,000 10/2/85
3905 1,000 10/2/85
3906 1,000 10/2/85
3907 1,000 10/2/85
3908 1,000 10/2/85
3909 1,000 10/2/85
3910 1,000 10/2/85
3911 1,000 10/2/85
3913 1,000 10/2/85
3915 5,000 10/2/85
3917 5,000 10/2/85
3918 5,000 10/2/85
3919 5,000 10/2/85
3920 5,000 10/2/85
3921 5,000 10/2/85
3922 10,000 10/2/85
3923 10,000 10/2/85
3924 10,000 10/2/85
3925 10,000 10/2/85
3926 10,000 10/2/85
3927 10,000 10/2/85
3928 10,000 10/2/85
3929 10,000 10/2/85
3930 10,000 10/2/85
3931 10,000 10/2/85
3932 10,000 10/2/85
3933 10,000 10/2/85
3934 10,000 10/2/85
3935 10,000 10/2/85
3936 10,000 10/2/85
3937 10,000 10/2/85
3938 10,000 10/2/85
3940 10,000 10/2/85
3941 10,000 10/2/85
</TABLE>
<PAGE>
STOCK OWNERSHIP - DAVID, JOAN AND HERB GREENBERG
DAVID GREENBERG (Cont,d.)
CERT. NO. NO. OF SHARES ISSUANCE DATE
-------- ------------ -------------
4116 11,478 11/18/85
9862 200 11/25/92
N/A 42,300 IN SMITH BARNEY
SHEARSON IRA
ACOUNT
--------
TOTAL 497,978
JOAN GREENBERG
CERT. NO. NO. OF SHARES ISSUANCE DATE
-------- ------------ -------------
TO BE ISSUED 14,704 PURCHASED FROM
BERT W. GREEN
N/A 800 IN PAINE WEBBER
IRA ACCOUNT
N/A 5,000 IN BEAR,
STEARNS ACCOUNT
-------
TOTAL 20,504
HERB GREENBERG
CERT. NO. NO. OF SHARES ISSUANCE DATE
-------- ------------ -------------
TO BE SUPPLEMENTED 288,948 DISCLOSED IN
PROXY STMT.
-------
9997 495,000 3/ /94
TOTAL 783,948
ROMO MANAGEMENT GROUP, INC.
CERT. NO. NO. OF SHARES ISSUANCE DATE
-------- ------------ -------------
N/A 326,600 HEID IN PAINE,
WEBBER ACCOUNT
2
<PAGE>
SEARINGTON REALTY
CERT. NO. NO. OF SHARES ISSUANCE DATE
-------- ------------ -------------
TO BE SUPPLEMENTED 2,950 TO BE
SUPPLEMENTED
GRAND TOTAL HELD BY DAVID, JOAN, HERB GREENBERG AND AFFILIATES:
l,631,980 SHARES
3
EXECUTION COPY
AGREEMENT OF NON-COMPETITION
AND AVAILABILITY AS A CONSULTANT
This AGREEMENT made as of this 13 day of February, 1995 and between
Rocky Mount Undergarment Co. Inc., a Delaware corporation with offices at
1536 Boone Street, Rocky Mount, North Carolina 27802 (the "Company"), and
DAVID GREENBERG, an individual residing at 219 Hillcrest Lane, Oyster Bay,
NY 11771 ("Greenberg" or the "Consultant").
W I T N E S S E T H:
WHEREAS, the Consultant desires to resign as an officer and director
of the Company by reason of a recently suffered disability in order to
limit his involvement in the day to day operations of the Company; and
WHEREAS, the parties hereto have arrived at a mutual understanding
with respect to the terms and conditions of the Consultant's prospective
future relationship with the Company.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereto agree as follows:
1. Term: The term of this Agreement under this Agreement (the "Term")
shall begin as of the closing date of a certain Stock Purchase Agreement and
continue until the third annual anniversary thereof, unless sooner
terminated in accordance with the terms hereof, or otherwise extended by the
mutual agreement of the parties.
<PAGE>
2. Non-Competition: Consultant hereby agrees that, without the express
written consent of the Company, during the term of this Agreement, and for a
period of three (3) years following the date hereof, Consultant will not,
directly or indirectly, for himself or on behalf of any person, firm, entity
or other enterprise, be employed by, be a director or manager of, act as a
consultant for, be a partner in, or have a proprietary interest in, any
person, enterprise, partnership, association, corporation, joint venture or
other entity which is engaged, directly or indirectly, in the manufacture
for sale in the United States, or in the sale in the United States, of
ladies' or girls' panties or sets. This provision shall not be construed to
prohibit Consultant from owning up to 2% of the issued shares of any company
whose common stock is listed for trading on any national securities exchange
or on NASDAQ. Notwithstanding the foregoing, nothing in this Agreement shall
preclude the Consultant from being an owner, director, officer or employee
of an entity based in Haiti which is engaged in subcontracting the
manufacture of clothing, provided that such entity is not also engaged in
the manufacture, or subcontracting for Rocky Mount, or otherwise for sale in
the United States, of ladies' or girls' panties or sets.
3. Duties:
(a) Greenberg further agrees to devote a limited portion of his time to
his position as a consultant to, and executive goodwill ambassador for, the
Company. It is understood and agreed that Greenberg shall be requested to
perform only such duties appropriate to his position as may be assigned
<PAGE>
to him from time to time by the Chairman of the Board of Directors. Under
no circumstances will Greenberg be required to spend more than forty (40)
days per annum on the business and affairs of the Company, subject to his
availability and medical condition.
(b) Commencing on the dates hereof and continuing for a period of ten
(10) years, Greenberg agrees that he will not interfere in the business and
operations of Rocky Mount, and that he will not initiate, except at the
express direction of the Company, contacts with the Company's officers,
employees, customers and/or suppliers in regard to the affairs of Rocky
Mount.
4. Base Compensation, Stock Options, Medical Benefits, Expenses:
(a) The Company shall pay to Greenberg, and Greenberg shall accept
from the Company, as non-payroll compensation for the covenant of
non-competition set forth ih Section 2 hereof, the amounts set forth on
Schedule A hereto.
(b) The Company shall pay to Greenberg, and Greenberg shall accept
from the Company, as non-payroll compensation Five Hundred Dollars ($500)
per day for each day of actual service required by the Company, plus
reimbursement for any out of pocket expenses incurred in connection
therewith.
(c) Also annexed as Schedule B hereto is a list of stock options
currently held by Greenberg, all of which the parties hereto do hereby
agree to permit to expire, without exercise, within ninety (90) days of the
termination of his employment by the Company. As further consideration
<PAGE>
hereunder, the Company shall as promptly as practicable grant to Greenberg
upon expiration of the foregoing options five (5) year non-qualified options
to purchase 350,000 shares exercisable at the market price, determined by
the average of the "bid" and "ask" prices quoted on the NASDAQ Bulletin
Board over the ten (10) trading days following the announcement of the
closing of the Sutton transaction with the Company, but, in any event, not
less than $.10 per Share.
(d) During the term of this Agreement, Greenberg will also be
entitled to participate, at his own cost and expense, to the extent
eligible, in accordance with the provisions of any applicable medical and
dental insurance plans and arrangements, whether now existing or hereafter
instituted, available by the Company and to senior executives of the
Company, and without any discrimination as to Greenberg by reason of his
less than full time services to the Company during the term hereof.
(e) During the term of this Agreement, Greenberg shall also be
entitled to retain possession of the Company-leased automobile presently
used by him. Greenberg will pay the lease costs and all of the other costs
of operation thereof, including reimbursing the Company for its cost of
insuring the vehicle. At the end of the lease term, Greenberg shall return
the vehicle to the Company for return to the lessor, and Greenberg shall pay
any open charges due to the lessor.
<PAGE>
(f) Greenberg shall not be eligible for any bonus or other
incentive compensation programs, nor shall he be included in any other
Company fringe benefit plan or program.
5. Termination: Except as otherwise expressly provided therein, this
Agreement may be terminated by the Company only as follows: By the breach by
the Consultant of his covenant of non-competition or covenant of
non-interference contained herein, upon written notice by the Company to the
Consultant.
6. Termination Upon Certain Events:
(a) Notwithstanding any provision to the contrary contained
herein, the Consultant may terminate his obligations under Section 3(a)
hereof, upon the happening of any of the following events:
(i) A sale of all or substantially all of its assets to a
single purchaser or group of associated purchasers ("Sale");
(ii) A merger or consolidation of the Company with any other
company if the shareholders of the Company own or receive upon effectuation
of any such transaction less than fifty percent (50%) of the voting shares
of the surviving corporation ("Merger");
(iii) The acquisition by any person or group of associated
persons of thirty percent (30%) or more of the outstanding shares of the
Company (a "Takeover"); or
<PAGE>
(iv) The filing by the Company of a petition in Bankruptcy or
for reorganization pursuant to the Bankruptcy Laws ("Bankruptcy") or against
the Company, if not dismissed within ninety (90) days.
(b) (i) In the event of a Sale or Merger or Takeover as provided
for in subparagraph (a) of this Section 6, in which Paul Sutton is not a
control person, the Consultant shall promptly receive the discounted cash
value of the remaining payments due to him pursuant to Section 4(a) of this
Agreement; and
(ii) In the event of a Bankruptcy, the Consultant shall have
a claim for the full amount of the remaining payments due to him pursuant to
Section 4(a) of this Agreement, notwithstanding any other remedies which
Consultant may have.
7. Loan Amounts: The Consultant is indebted to the Company in the
amount of $49,500. The Company and the Consultant have agreed that an
interest rate of 8% per annum shall apply to such loan from this date
forward until December 31, 1997 and that the interest payments with respect
to the loan have been included in the amounts otherwise payable by the
Company to the Consultant hereunder. Subject only to the Consultant's
compliance with the covenant of non-competition herein contained and the
provision of non-interference contained in Section 3(b) hereof, the
principal and interest accruing from January 1, 1998 through December 31,
2007 shall be excused by the Company in ten (10) equal annual installments
pro rata over said period.
<PAGE>
8. Arbitration: Any disputes arising under this Agreement shall be
resolved by arbitration under the rules of the American Arbitration
Association, and judgment on any award rendered may be entered in any court
having competent jurisdiction. The place of arbitration shall be the office
of the American Arbitration Association in or nearest to Roslyn Heights, New
York. If the Company determines that it has Cause to terminate the
consultant's employment, the Company shall nonetheless be precluded from
asserting any such legal position, unless it continues to advance to the
Consultant the regular payments provided for herein, until a final
determination shall be rendered in the arbitration proceeding. The Company
may seek to recover the advances so made by it in the arbitration
proceeding.
9. No Assignment: This Agreement shall be binding upon the parties
hereto, their legal representatives, heirs, successors and assigns, and
neither party may assign this Agreement without the prior written consent of
the other party, except that the Company may assign to a successor by way of
merger.
10. No Waiver: Failure to insist upon strict compliance with any of
the terms, covenants or conditions of this Agreement shall not be deemed a
waiver or such term, covenant or condition, nor shall any waiver or
relinquishment of such right or power constitute a waiver or relinquishment
at any other term or terms.
11. Notices: Any notices required or permitted to be given hereunder to
either party shall be deemed given if delivered or sent by registered or
certified mail, return receipt requested, to such party at his or its
<PAGE>
address as hereinabove set forth, or to such other address as such party
may designate by notice similarly given. If any notice is sent to the
Company, it shall be sent to the attention of the President, with a
separate copy to Blodnick, Abramowitz & Blodnick.
12. Expenses: Each party shall pay its own expenses in connection with
the preparation, review and execution of this Agreement, except that the
Company shall reimburse the Consultant within 120 days after the execution
of this Agreement for his reasonable legal fees incurred in connection
herewith.
13. Headings: Section headings are used herein for convenience only
and shall not affect the meaning of any provision hereof.
14. Governing Law: This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York.
15. Remedies: In addition to any other rights or remedies the parties
may have under this Agreement or applicable law, the parties shall have the
right to enforce the terms of this Agreement by specific performance or
other equitable remedies.
16. Entire Agreement: This instrument contains the entire agreement
between the Company and Greenberg relating to Greenberg's services to the
Company. This Agreement may not be amended or terminated orally but may be
so amended by writing signed by both parties.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ROCKY MOUNT UNDERGARMENT Co., INC.
JOSEPH PASCAL
By: ______________________________________________
Senior Vice President & Chairman of the Board
DAVID GREENBERG
------------------------------------------------
DAVID GREENBERG
<PAGE>
DAVID GREENBERG
SCHEDULE A
1995-1996 $60,000
1996-1997 $60,000
1997-1998 $60,000
<PAGE>
EXECUTION COPY
AGREEMENT OF NON-COMPETITION
AND AVAILABILITY AS A CONSULTANT
--------------------------------
This AGREEMENT made as of this 13 day of February, 1995 and
between Rocky Mount Undergarment Co. Inc., a Delaware corporation
with offices at 1536 Boone Street, Rocky Mount, North Carolina 27802
(the "Company"), and JOAN GREENBERG, an individual residing at 219
Hillcrest Lane, Oyster Bay, NY 11771 ("Greenberg" or the
"Consultant").
W I T N E S S E T H:
WHEREAS, the Consultant desires to resign as an officer,
director and employee of the Company; and
WHEREAS, the parties hereto have arrived at a mutual
understanding with respect to the terms and conditions of the
Consultant's prospective future relationship with the Company.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Term: The term of this Agreement under this Agreement (the
"Term") shall begin as of March 1, 1995 and continue until February
28, 1998, unless sooner terminated in accordance with the terms
hereof, or otherwise extended by the mutual agreement of the parties.
2. Non-Competition: Consultant hereby agrees that, without the
express written consent of the Company, during the term of this
Agreement, and for a period of three (3) years following the date
hereof, Consultant will not, directly or indirectly, for herself or
on behalf of any person, firm, entity or other enterprise, be
<PAGE>
employed by, be a director or manager of, act as a consultant for, be
a partner in, or have a proprietary interest in, any person,
enterprise, partnership, association, corporation, joint venture or
other entity which is engaged, directly or indirectly, in the
manufacture for sale in the United States, or in the sale in the
United States, of ladies' or girls' panties or sets. This provision
shall not be construed to prohibit Consultant from owning up to 2% of
the issued shares of any company whose common stock is listed for
trading on any national securities exchange or on NASDAQ.
Notwithstanding the foregoing, nothing in this Agreement shall
preclude the Consultant from being an owner, director, officer or
employee of an entity based in Haiti which is engaged in
subcontracting the manufacture of clothing, provided that such entity
is not also engaged in the manufacture, or subcontracting for Rocky
Mount, or otherwise for sale in the United States, of ladies' or
girls' panties or sets.
3. Duties:
-------
(a) Greenberg further agrees to devote a limited portion of her
time to her position as a consultant to, and executive goodwill
ambassador for, the Company. It is understood and agreed that
Greenberg shall be requested to perform only such duties appropriate
to her position as may be assigned to her from time to time by the
Chairman of the Board of Directors. Under no circumstances will
Greenberg be required to spend more than forty (40) days per annum on
the business and affairs of the Company, subject to her availability.
-2-
<PAGE>
(b) Commencing on the dates hereof and continuing for a period
of ten (10) years, Greenberg agrees that she will not interfere in
the business and operations of Rocky Mount, and that she will not
initiate, except at the express direction of the Company, contacts
with the Company's officers, employees, customers and/or suppliers
in regard to the affairs of Rocky Mount.
4. Base Compensation, Stock Options, Medical Benefits, Expenses:
-------------------------------------------------------------
(a) The Company shall pay to Greenberg, and Greenberg shall
accept from the company; as non-payroll compensation for the covenant
of non-competition set forth in Section 2 hereof, the amounts set
forth on Schedule A hereto.
(b) The Company shall pay to Greenberg, and Greenberg shall
accept from the Company, as non-payroll compensation Five Hundred
Dollars ($500) per day for each day of actual service required by
the Company, plus reimbursement for any out of pocket expenses
incurred in connection therewith.
(c) Also annexed as Schedule B hereto is a list of stock options
currently held by Greenberg, all of which the parties hereto do
hereby agree to permit to expire, without exercise, within ninety
(90) days of the termination of her employment by the Company. As
further consideration hereunder, the Company shall as promptly as
practicable grant to Greenberg upon expiration of the foregoing
options five (5) year non-qualified options to purchase 450,000
shares exercisable at the market price, determined by the average of
the "bid" and "ask" prices quoted on the NASDAQ Bulletin Board over
the ten (10) trading days following the announcement of the closing
of the Sutton transaction with the Company, but, in any event, not
less than $.10 per Share.
-3-
<PAGE>
(d) During the term of this Agreement, Greenberg will also be
entitled to participate, at her own cost and expense, to the extent
eligible, in accordance with the provisions of any applicable medical
and dental insurance plans and arrangements, whether now existing or
hereafter instituted, available by the Company and to senior
executives of the Company, and without any discrimination as to
Greenberg by reason of her less than full time services to the
Company during the term hereof.
(a) The Company shall transfer by bill of sale the 1990 Pontiac
Grand Prix automobile presently used by her without charge or cost to
Greenberg.
(f) Greenberg shall not be eligible for any bonus or other
incentive compensation programs, nor shall she be included in any
other Company fringe benefit plan or program.
5. Termination:
------------
Except as otherwise expressly provided herein, this Agreement
may be terminated by the Company only as follows: By the breach by
the Consultant of her covenant of non-competition or covenant of
non-interference contained herein, upon written notice by the Company
to the Consultant.
6. Termination Upon Certain Events:
--------------------------------
(a) Notwithstanding any provision to the contrary contained
herein, the Consultant may terminate her obligations, under Section
3(a) hereunder upon the happening of any of the following events:
-4-
<PAGE>
(i) A sale of all or substantially all of its assets to a single
purchaser or group of associated purchasers ("Sale");
(ii) A merger or consolidation of the Company with any other
company if the shareholders of the Company own or receive upon
effectuation of any such transaction less than fifty percent (50%) of
the voting shares of the surviving corporation ("Merger");
(iii) The acquisition by any person or group of associated
persons of thirty percent (30%) or more of the outstanding shares of
the Company (a "Takeover"); or
(iv) The filing by the Company of a petition in Bankruptcy or
for reorganization pursuant to the Bankruptcy Laws ("Bankruptcy") or
against the Company, if not dismissed within ninety (90) days.
(b) (i) In the event of a Sale or Merger or Takeover as provided
for in subparagraph (a) of this Section 6, in which Paul Sutton is
not a control person of the surviving company, the Consultant shall
promptly receive the discounted cash value of the remaining payments
due to her pursuant to Section 4(a) of this Agreement; and
(ii) In the event of a Bankruptcy, the Consultant shall have a
claim for the full amount of the remaining payments due to her
pursuant to Section 4(a) of this Agreement, notwithstanding any other
remedies which Consultant may have.
-5-
<PAGE>
7. Loan Amounts:
-------------
The Consultant is indebted to the Company in the amount of
$49,500. The Company and the Consultant have agreed that an interest
rate of 8% per annum shall apply to such loan from this date forward
until December 31, 1997 and that the interest payments with respect
to the loan have been included in the amounts otherwise payable by
the Company to the Consultant hereunder. Subject only to the
Consultant's compliance with the covenant of non-competition herein
contained and the provision of non-interference contained in Section
3(b) hereof, the principal and interest accruing from January 1, 1998
through December 31, 2007 shall be excused by the Company in ten (10)
equal annual installments pro rata over said period.
8. Arbitration:
------------
Any disputes arising under this Agreement shall be resolved by
arbitration under the rules of the American Arbitration Association,
and judgment on any award rendered may be entered in any court having
competent jurisdiction. The place of arbitration shall be the office
of the American Arbitration Association in or nearest to Roslyn
Heights, New York. If the Company determines that it has Cause to
terminate the Consultant's employment, the Company shall nonetheless
be precluded from asserting any such legal position, unless it
continues to advance to the Consultant the regular payments provided
for herein, until a final determination shall be rendered in the
arbitration proceeding. The Company may seek to recover the advances
so made by it in the arbitration proceeding.
-6-
<PAGE>
9. No Assignment:
--------------
This Agreement shall be binding upon the parties hereto, their
legal representatives, heirs, successors and assigns, and neither
party may assign this Agreement without the prior written consent of
the other party, except that the Company may assign to a successor by
way of merger.
10. No Waiver:
----------
Failure to insist upon strict compliance with any of the terms,
covenants or conditions of this Agreement shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of such right or power constitute a waiver or
relinquishment at any other term or terms.
11. Notices:
--------
Any notices required or permitted to be given hereunder to
either party shall be deemed given if delivered or sent by registered
or certified mail, return receipt requested, to such party at her or
its address as hereinabove set forth, or to such other address as
such party may designate by notice similarly given. If any notice is
sent to the Company, it shall be sent to the attention of the
President, with a separate copy to Blodnick, Abramowitz & Blodnick.
12. Expenses:
---------
Each party shall pay its own expenses in connection with the
preparation, review and execution of this Agreement, except that the
Company shall reimburse the Consultant within 120 days after the
execution of this Agreement for her reasonable legal fees incurred in
connection herewith.
13. Headings:
---------
Section headings are used herein for convenience only and shall
not affect the meaning of any provision hereof.
-7-
<PAGE>
14. Governing Law:
--------------
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York.
15. Remedies:
---------
In addition to any other rights or remedies the parties may have
under this Agreement or applicable law, the parties shall have the
right to enforce the terms of this Agreement by specific performance
or other equitable remedies.
16. Entire Agreement:
-----------------
This instrument contains the entire agreement between the
Company and Greenberg relating to Greenberg's services to the
Company. This Agreement may not be amended or terminated orally but
may be so amended by writing signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
ROCKY MOUNT UNDERGARMENT CO., INC.
By: JOSEPH PASCAL
---------------------------------
Vice-President
/s/ JOAN GREENBERG
--------------------------------
JOAN GREENBERG
-8-
<PAGE>
JOAN GREENBERG
SCHEDULE A
----------
1995-1996 $115,000
1996-1997 $115,000
1997-1998 $115,000
EXECUTION COPY
AGREEMENT OF NON-COMPETITION
AND AVAILABILITY AS A CONSULTANT
This AGREEMENT made as of this 13 day of February, 1995 and between
Rocky Mount Undergarment Co. Inc., a Delaware corporation with offices
at 1536 Boone Street, Rocky Mount, North Carolina 27802 (the
"Company"), and HERB GREENBERG, an individual residing at 212 Kimbelly
So. Drive, Rocky Mount, NC 27804 ("Greenberg" or the "Consultant").
W I T N E S S E T H:
WHEREAS, the Consultant desires to resign as an officer and
director of the Company in order to limit his involvement in the day to
day operations of the Company; and
WHEREAS, the parties hereto have arrived at a mutual understanding
with respect to the terms and conditions of the Consultant's
prospective future relationship with the Company.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Term: The term of this Agreement under this Agreement (the
"Term") shall begin as of March 1, 1995 and continue until February 28,
1998, unless sooner terminated in accordance with the terms hereof, or
otherwise extended by the mutual agreement of the parties. Greenberg's
pre-existing agreement with the Company shall terminate as of the
closing date of a certain Stock Purchase Agreement between the Company
and Paul Sutton.
<PAGE>
2. Non-Competition: Consultant hereby agrees that, without the
express written consent of the Company, during the term of this
Agreement, and for a period of three (3) years following the date
hereof, Consultant will not, directly or indirectly, for himself or on
behalf of any person, firm, entity or other enterprise, be employed by,
be a director or manager of, act as a consultant for, be a partner in,
or have a proprietary interest in, any person, enterprise,
partnership, association, corporation, joint venture or other entity
which is engaged, directly or indirectly, in the manufacture for sale
in,the United States, or in the sale in the United States, of ladies'
or girls' panties or sets. This provision shall not be construed to
prohibit Consultant from owning up to 2% of the issued shares of any
company whose common stock is listed for trading on any national
securities exchange or on NASDAQ. Notwithstanding the foregoing,
nothing in this Agreement shall preclude the Consultant from being an
owner, director, officer or employee of an entity based in Haiti which
is engaged in subcontracting the manufacture of clothing, provided that
such entity is not also engaged in the manufacture, or subcontracting
for Rocky Mount, or otherwise for sale in the United States, of ladies'
or girls' panties or sets. Further, nothing in this Agreement shall
preclude Greenberg from engaging in any direct-to-consumer marketing
program for ladies' or girls' panties or sets, provided that Rocky
Mount is first offered that opportunity and declines to undertake it.
<PAGE>
3 Duties:
(a) Greenberg further agrees to devote a limited portion of his
time to his position as a consultant to, and executive goodwill
ambassador for, the Company. It is understood and agreed that Greenberg
shall be requested to perform only such duties appropriate to his
position as may be assigned to him from time to time by the Chairman of
the Board of Directors. Under no circumstances will Greenberg be
required after August, 1995 to spend more than forty (40) days per
annum on the business and affairs of the Company, subject to
his, availability. No additional payments shall be required to be made
to Greenberg for services prior to August 1, 1995.
(b) Commencing on the dates hereof and continuing for a period of
ten (10) years, Greenberg agrees that he will not interfere in the
business and operations of Rocky Mount, and that he will not initiate,
except at the express direction of the Company, contacts with the
Company's officers, employees, customers and/or suppliers in regard
to the affairs of Rocky Mount.
4. Bass Compensation, Stock Options, Medical Benefits, Expenses:
(a) The Company shall pay to Greenberg, and Greenberg shall accept
from the Company, as non-payroll compensation for the covenant of
non-competition set forth in Section 2 hereof, the amounts set forth on
Schedule A hereto.
<PAGE>
(b) The Company shall pay to Greenberg, and Greenberg shall accept
from the Company, as non-payroll compensation Five Hundred Dollars
($500) per day for each day of actual service after August 1, 1995
required by the Company, plus reimbursement for any out of pocket
expenses incurred in connection therewith.
(c) Also annexed as Schedule B hereto is a list of stock options
currently held by Greenberg, all of which the parties hereto do hereby
agree to permit to expire, without exercise, within ninety (90) days of
the termination of his employment by the Company. As further
consideration hereunder, the Company shall as promptly as practicable
grant to Greenberg upon expiration of the foregoing options five (5)
year non-qualified options to purchase 300,000 shares exercisable at
the market price, determined by the average of the "bid" and "ask"
prices quoted on the NASDAQ Bulletin Board over the ten (10) trading
days following the announcement of the closing of the Sutton
transaction with the Company, but, in any event, not less than $.10 per
Share.
(d) During the term of this Agreement, Greenberg will also be
entitled to participate to the extent eligible, in accordance with the
provisions of any applicable medical and dental insurance plans and
arrangements, whether now existing or hereafter instituted, made
available by the Company to senior executives of the Company, and
without any discrimination as to Greenberg by reason of his less than
full time services to the Company during the term hereof. The Company
shall pay the full cost of such insurances for the initial eighteen
<PAGE>
(18) months of this Agreement. Greenberg, if he elects to
participate, shall pay his own cost of such insurance for the next
eighteen months.
(a) Greenberg shall also be entitled to purchase from the Company
two Company owned automobiles presently used by him. He shall have the
right to purchase his 1982 "Z" automobile at book value,, and his 1990
Surburban at one-half book value. He shall continue to use such
automobiles for the affairs of the Company without charge to the
Company for use thereof.
(f) Greenberg, shall not be eligible for any bonus or other
incentive compensation programs, nor shall he be included in any other
Company fringe benefit plan or program.
5. Termination: Except as otherwise expressly provided herein,
this Agreement may be terminated by the Company only as follows: By the
breach by the Consultant of his covenant of non-competition or
covenant of non-interference contained herein, upon written notice by
the Company to the Consultant.
6. Termination Upon Certain Events:
(a) Notwithstanding any provision to the contrary contained
herein, the Consultant may terminate his obligations, under Section
3(a) hereof, upon the happening of any of the following events:
(i) A sale of all or substantially all of assets to a single
purchaser or group of associated purchasers ("Sale");
<PAGE>
(ii) A merger or consolidation of the Company with any other
company if the shareholders of the Company own or receive upon
effectuation of any such transaction less than fifty percent (50%) of
the voting shares of the surviving corporation ("Merger");
(iii) The acquisition by any person or group of associated persons
of thirty percent (30%) or more of the outstanding shares of the
Company (a "Takeover"); or
(iv) The filing by the Company of a petition in Bankruptcy or for
reorganization pursuant to the Bankruptcy Laws ("Bankruptcy") or
against the Company, if not dismissed within ninety (90) days.
(b) (i) In the event of a Sale or Merger or Takeover as provided
for in subparagraph (a) of this Section 6 in which Paul Sutton is not
a control person of the surviving Company, the Consultant shall
promptly receive the discounted cash value of the remaining payments
due to him pursuant to Section 4(a) of this Agreement; and
(ii) In the event of a Bankruptcy, the Consultant shall have a
claim for the full amount of the remaining payments due to him pursuant
to Section 4(a) of this Agreement, notwithstanding any other remedies
which Consultant may have.
7. Loan Amounts: The Consultant is indebted to the Company in the
amount of $60,000. The Company and the Consultant have agreed that an
interest rate of 8% per annum shall apply to such loan from this date
forward until December 31, 1997 and that the interest payments with
respect to the loan have been included in the amounts otherwise
<PAGE>
payable by the Company to the Consultant hereunder. Subject only to the
Consultant's compliance with the covenant of non-competition herein
contained and the provision of non-interference contained in Section
3(b) hereof, the principal and interest accruing from January 1, 1998
through December 31, 2007 shall be excused by the Company in ten (10)
equal annual installments pro rata over said period.
8. Arbitration: Any disputes arising under this Agreement shall be
resolved by arbitration under the rules of the American Arbitration
Association, and judgment on any award rendered may be entered in any
court having competent jurisdiction. The place of arbitration shall be
the office of the American Arbitration Association in or nearest to
Roslyn Heights, New York. If the Company determines that it has Cause
to terminate the Consultant's employment, the Company shall nonetheless
be precluded from asserting any such legal position, unless it
continues to advance to the Consultant the regular payments provided
for herein, until a final determination shall be rendered in the
arbitration proceeding. The Company may seek to recover the advances so
made by it in the arbitration proceeding.
9. No Assigment: This Agreement shall be binding upon the parties
hereto, their legal representatives, heirs, successors and assigns, and
neither party may assign this Agreement without the prior written
consent of the other party, except that the Company may assign to a
successor by way of merger.
<PAGE>
10. No Waiver: Failure to insist upon strict compliance with any
of the terms, covenants or conditions of this Agreement shall not be
deemed a waiver or such term, covenant or condition, nor shall any
waiver or relinquishment of such right or power constitute a waiver
or relinquishment at any other term or terms.
11. Notices: Any notices required or permitted to be given
hereunder to either party shall be deemed given if delivered or sent by
registered or certified mail, return receipt requested, to such party
at his or its address as hereinabove set forth, or to such other
address as such party may designate by notice similarly given. If any
notice is sent to the Company, it shall be sent to the attention of the
President, with a separate copy to Blodnick, Abramowitz & Blodnick.
12. Expenses: Each party shall pay its own expenses in connection
with the preparation, review and execution of this Agreement, except
that the Company shall reimburse the Consultant within 120 days after
the execution of this Agreement for his reasonable legal fees incurred
in connection herewith.
13. Headings: Section headings are used herein for convenience
only and shall not affect the meaning of any provision hereof.
14. Governing Law: This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York.
<PAGE>
15. Remedies: In addition to any other rights or remedies the
parties may have under this Agreement or applicable law, the parties
shall have the right to enforce the terms of this Agreement by specific
performance or other equitable remedies.
16. Entire Agreement: This instrument contains the entire
agreement between the Company and Greenberg relating to Greenberg's
services to the Company. This Agreement may not be amended or
terminated orally but may be so amended by writing signed by both
parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
ROCKY MOUNT UNDERGARMENT CO., INC.
JOSEPH PASCAL
By: -----------------------------------------------------
Sr. Vice President & Chairman of the Board
HERB GREENBERG
------------------------------------------------------
HERB GREENBERG
<PAGE>
HERB GREENBERG
SCHEDULE A
1995-1996 $75,000
1996-1997 $75,000
1997-1998 $75,000
INDUCEMENT AGREEMENT EXECUTION COPY
This INDUCEMENT AGREEMENT made as of the 19th day of January
1995, by and among David Greenberg ("David"), Joan Greenberg
("Joan"), and Herb Greenberg ("Herb") (collectively, the
"Greenbergs"), Rocky Mount Undergarment Co., Inc. ("Rocky Mount" or
the "Company") and Paul Sutton ("Sutton").
WHEREAS, Rocky Mount has offered to sell a majority of the
outstanding and issued shares of the Company's Common Stock to Sutton
in exchange for cash and certain assurances of financial support to
the Company, all in order to permit the Company to continue its
business operations;
WHEREAS, the Greenbergs desire to induce Sutton to enter into an
Agreement to purchase 4,250,000 shares of the Common Stock, par value
$.0001 (the "Shares") from Rocky Mount, on the terms set forth in the
Company's proposed stock purchase agreement (the "Stock Purchase
Agreement") a copy of which is annexed hereto;
WHEREAS, Sutton has advised the Greenbergs that he will not enter
into the Stock Purchase Agreement with the Company, without certain
inducements from the Greenbergs; and
WHEREAS, the Greenbergs are willing to provide certain
inducements to Sutton, subject to Rocky Mount's agreement with, and
acquiescence in the terms and conditions hereof.
NOW, THEREFORE, the parties hereto do hereby agree and follows:
<PAGE>
1. Representations and Warranties of the Greenbergs.
The Greenbergs represent and warrant to Sutton that the
representations of the Company concerning the business and financial
condition of the Company, all as made in the Stock Purchase Agreement
dated January 19, 1995 between Rocky Mount and Sutton are true and
correct to the best of their knowledge, information and belief.
2. Representations of Warranties of Sutton.
Sutton represents and warrants to the Greenbergs
(a) That he is financially able to perform all of his obligations
in accordance with the terms and provisions of the Stock Purchase
Agreement.
(b) That there is no legal impediment or restriction known to him
which precludes or interferes with the performance of his obligations
in accordance with the terms and provisions of the Stock Purchase
Agreement, or his becoming and serving as an officer and director of a
publicly-owned company in the United States, trading in the securities
of which are regulated by the Securities and Exchange Commission
("SEC"); and
(c) That he has made all disclosures required to be made
concerning the transaction, and Sutton's business, professional and
financial background, and his sources(s) of funds for the Stock
Purchase Agreement to Rocky Mount for the filing by Rocky Mount or
Sutton of appropriate filings with the SEC.
<PAGE>
3. Arms-Length Agreement -- Adequacy of Consideration --
Indemnification.
(a) Rocky Mount represents and warrants to Sutton and to the
Greenbergs that, to the best of its knowledge and information, the
Stock Purchase Agreement (i) has been negotiated on an arms length
basis between Rocky Mount and Sutton and (ii) that the consideration
being paid by Sutton for the 4,250,000 shares is fair and sufficient,
under all of the business and financial circumstances presently
prevailing at Rocky Mount.
(b) The Greenbergs represent and warrant to Sutton that, to the
best of their knowledge and information the Stock Purchase Agreement
(i) has been negotiated on an arms length basis between Rocky Mount
and Sutton and (ii) that the consideration being paid by Sutton for
the 4,250,000 shares is fair and sufficient, under all of the business
and financial circumstances presently prevailing of Rocky Mount.
(c) Sutton represents and warrants to the Company, and to the
Greenbergs, that there are no undisclosed transactions or
considerations from him to the Company, or from the Company to him,
which have been involved in his making and entering into of the Stock
Purchase Agreement.
(d) In the event that any stockholder of the Company other than
persons who are officers and directors of the Company, or who are
associated with affiliates of Sutton (the "Excluded Persons")
individually or a member of any class or putative class, shall assert
any Claim or complaint about the terms or conditions of the
<PAGE>
Stock Purchase Agreement, the Company and the Greenbergs do hereby
agree to indemnify and hold Sutton harmless with respect to any such
complaint to the following extent:
(i) The Company shall be primarily charged with defending against
any such claim, and the Company shall pay and/or reimburse Sutton for
any and all costs and expenses, including reasonable attorneys fees,
incurred in connection with his legal defenses against any such claim
or complaint.
(ii) If Sutton, as a consequence of any legal judgment entered
against him or any negotiated compromise entered into by him with any
such claimant or complainant in full and final resolution thereof is
required to forego, abandon or return to the Company any portion of
the Shares of the Company's Common Stock being acquired by him
pursuant to the Stock Purchase Agreement (the "Foregone Shares"), then
the Greenbergs shall, each in proportion to their ownership of Shares
as set forth on Schedule A hereof transfer to Sutton, without further
consideration from him, that number of Shares which is equal to the
number of Foregone Shares multiplied by a fraction, the denominator of
which shall be the total Shares held by all shareholders other than
Sutton, and the numerator of which shall be the total shares owned by
each of the Greenbergs. For example, if all shareholders other than
Sutton own 4,000,000 Rocky Mount Shares, and David Greenberg owns
1,000,000 Rocky Mount Shares, then David shall be responsible to
transfer to Sutton 1/4 of any Foregone Shares.
<PAGE>
4. Non-Qualified Options.
(a) The Company has separately agreed in Section 4 (c) of
certain Consulting Agreements to grant to the Greenbergs an aggregate
of 1,100,000 Non-Qualified Options to purchase additional Shares
(the "Option Shares"), which options are exercisable for five (5)
years replacing options formerly held by them as Employees. Sutton has
advised the Greenbergs that he would not be interested in entering
into any transaction with Rocky Mount, unless he could be assured of
retaining majority control of the Company. Accordingly, the Greenbergs
shall and hereby do agree that if on or before October 1, 1997 they
exercise any of such stock options, they will promptly so notify
Sutton and offer him in writing the opportunity within thirty (30)
days thereafter to purchase one-half of any Option Shares so acquired
by them at the same Option Price, as was applicable to the Greenbergs.
Notwithstanding the foregoing, Sutton shall not acquire any Option
Shares from Joan, provided that at least 50% of the Option Shares are
available from David and Herb.
5. Cross-Option. In the event prior to October 1, 1997, Sutton
desires to sell all or any portion of his Shares in the Company, he
shall so notify the Greenbergs and after them the first opportunity,
within thirty (30) days from such notification, to purchase the Shares
from him at the then prevailing market price. Should Sutton fail or
refuse to abide by this provision, then Sutton's right to acquire
<PAGE>
the Option Shares shall terminate and be of no further force and
effort.In any event Sutton's right to purchase the Option Shares shall
terminate on October 1, 1997.
6. Arbitration. Any disputes arising under this Agreement shall
be resolved by arbitration under the rules of the American Arbitration
Association, and judgment on any award rendered may be entered in any
court having competent jurisdiction. The place of arbitration shall be
the office of the American Arbitration Association in or nearest to
Roslyn Heights, New York.
7. No Assignment. This Agreement shall be binding upon the
parties hereto, their legal representatives, heirs, successors and
assigns, and neither party may assign this Agreement without the prior
written consent of the other party.
8. No Waiver. Failure to insist upon strict compliance with any
of the terms, covenants or conditions of this Agreement shall not be
deemed a waiver or such term, covenant or condition, nor shall any
waiver or relinquishment of such right or power constitute a waiver
or relinquishment at any other term or terms.
9. Notices. Any notices required or permitted to be given
hereunder to either party shall be deemed given if delivered or sent
by registered or certified mail, return receipt requested, to such
party at his or its address as hereinabove set forth, or to such other
address as such party may designate by notice similarly given. If any
notice is sent to the Company, it shall be sent to the attention of
the President, with a separate copy to Blodnick Abramowitz & Blodnick.
<PAGE>
10. Expenses. Each party shall pay its own expenses in connection
with the preparation, review and execution of this Agreement.
11. Headings. Section headings are used hereinfor convenience
only and shall not affect the meaning of any provision hereof.
12. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York.
13. Remedies. In addition to any other rights or remedies the
parties may have under this Agreement or applicable law, the parties
shall have the right to enforce the terms of this Agreement by
specific performance or other equitable remedies.
14. Entire Agreement. This instrument contains the entire
agreement among the parties relating to the subject matter hereof.
DAVID GREENBERG
----------------------------------
David Greenberg
JOAN GREENBERG
----------------------------------
Joan Greenberg
HERB GREENBERG
----------------------------------
Herb Greenberg
Accepted and Agreed:
Rocky Mount Undergarment Co., Inc.
Joseph Pascal
By --------------------------------
-----------------------------------
Paul Sutton
<PAGE>
AMENDMENT TO THE INDUCEMENT AGREEMENT
WHEREAS, PAUL SUTTON, residing in Monte Carlo ("Sutton") has
the right to purchase 4,250,000 shares of the common stock of ROCKY
MOUNT UNDERGARMENT CO., INC., a Delaware corporation ("Rocky Mount"
or the "Company") (the "Sutton Stock"), pursuant to that certain
STOCK PURCHASE AGREEMENT dated as of the 19th day of January, 1995
(the "Stock Purchase Agreement") between Rocky Mount and Sutton;
and
WHEREAS, Sutton has at all times during the course of dealings
with respect to the Sutton Stock, been acting on behalf of, and as
an agent for, LMA Ltd., a corporation organized under the laws of
the Isle of Man, whose address is:
LMA Ltd., Ballarose, Hillbury Green, Douglas,
Isle of Man, British Isles IM26DE.
WHEREAS,, DAVID GREENBERG, JOAN GREENBERG, AND HERB GREENBERG
(collectively, the "Greenbergs"), Sutton and Rocky Mount have
entered into an INDUCEMENT AGREEMENT ("Inducement Agreement")
relating to the matters set forth in the Stock Purchase Agreement;
NOW, THEREFORE, the parties do hereby agree that:
The Inducement Agreement shall be and hereby is amended to
provide that LMA Ltd. shall have all of the rights, benefits and
responsibilities of Sutton as set forth in the Inducement
Agreement, as if the Inducement Agreement were initially made with
LMA Ltd.
<PAGE>
Notwithstanding the foregoing, there shall be no release of
Sutton with respect to his obligations under the Inducement
Agreement.
DAVID GREENBERG
----------------------------------
David Greenberg
JOAN GREENBERG
----------------------------------
Joan Greenberg
HERB GREENBERG
----------------------------------
Herb Greenberg
Accepted and Agreed:
ROCKY MOUNT UNDERGARMENT CO., INC.
Joseph Pascal
By --------------------------------
-----------------------------------
PAUL SUTTON
LMA LTD.
By --------------------------------
Authorized Signatory
<PAGE>
EMPLOYMENT AGREEMENT made as of the 1st day of February, 1995, by and
between ROCKY MOUNT UNDERGARMENT CO., INC., a Delaware corporation (the
"Company"), and JOSEPH PASCAL (the "Executive").
W I T N E S S E T H:
WHEREAS, it is in the best interests of the Company to secure the
services of the Executive for the period set forth in this Agreement and
the Executive is desirous of entering into the employ of the Company for
such period on the following terms and conditions:
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions contained in this Agreement, the parties, intending to be bound
by them, agree as follows:
1. EMPLOYMENT, DUTIES AND ACCEPTANCE.
1.1 The Company hereby employs the Executive, for the term (as
hereinafter defined), to render exclusive and full-time services to the
business and affairs of the Company as President and Chief Operating
Officer. Executive's responsibilities shall encompass all operations of the
Company. Executive shall report to the chief executive officer and the
Board of Directors of the Company, and shall have such additional or
different responsibilities as are reasonably assigned to the Executive by
the chief executive officer or directed by the Board of Directors of the
<PAGE>
Company. Executive hereby accepts such employment and agrees to use his
best efforts, skill and abilities to promote the interests of the Company.
1.2 During the course of his employment in such capacity, Executive
shall be a necessary co-signatory on all checks.
1.3 During the course of Executive's employment, he shall serve as and
stand for election as a Director of the Company. Executive agrees to do so
without additional compensation.
2. TERM OF EMPLOYMENT.
2.1 The term of the Executive's employment under this Agreement (the
"Executive Employment") shall commence on March 1, 1995 and shall end on
the 31st day of December 1997.
3. PLACE OF EMPLOYMENT.
3.1 The principal place of Executive's employment shall be New York,
New York, which shall not be changed without Executive's consent; provided,
however, that when required by Executive's duties and responsibilities,
Executive shall spend such time as is reasonably necessary at locations
outside New York, New York.
4. SALARY.
4.1 As compensation for the services performed by the Executive as
aforesaid, he shall receive an annualized minimum salary of $210,000 for
the period commencing March 1, 1995 and ending December 31, 1997 payable in
accordance with the Company's current practices.
<PAGE>
4.2 As additional consideration for this Agreement, Executive shall as
soon as practicable be awarded incentive stock options with respect to
240,000 shares of Company common stock under the Company's 1990 Stock
Option Plan, as it shall be amended from time to time.
5. FRINGE BENEFITS.
5.1 Life Insurance. The Company shall maintain group life insurance
coverage on the life of Executive through the Company's regular employee
insurance program, as the amount of such coverage may change from time to
time under the terms of said policy, initially in the same amounts as
previously.
5.2 Medical Insurance. The Company shall continue to provide its
current medical coverage for the benefit of the Executive.
5.3 Vacation. Executive shall be eligible for two (2) weeks paid
vacation per year.
6. EXPENSES.
6.1 The Company shall provide the Executive with a non-accountable
expense account in the amount of $30,000 per year.
6.2 In excess thereof, the Company shall in accordance with the
Company's policy for reimbursement pay or reimburse the Executive for all
reasonable expenses actually incurred or paid by him during the Term in the
performance of his services under this Agreement upon the presentation of
itemized vouchers therefor.
3
<PAGE>
7. TERMINATION.
7.1 Death. If the Executive shall die during the Term, this Agreement
shall terminate, except that the Executive's wife shall be entitled to
receive the salary provided for hereunder for 30 days after the date of
his death.
7.2 Disability. If during the Term the Executive shall become
physically or mentally disabled as determined by a New York State licensed
physician mutually agreeable to the Company and Executive (or his guardian
or legal representative), whether totally or partially, so that he is
unable substantially to perform his services hereunder for (i) a period of
three (3) consecutive months or (ii) for shorter periods aggregating six
(6) months during any fifteen (15) month period, the Company may at any
time after the last day of the three (3) consecutive months of disability
or the day on which the shorter periods of disability shall have equalled
an aggregate of six (6) months, by written notice to the Executive, or his
personal representative terminate the Executive's employment hereunder.
Notwithstanding such disability, up to and including the date of such
termination the Company shall continue to pay the Executive his salary and
fringe benefits, less such amounts as Executive receives pursuant to any
Disability Insurance policy or plan provided by the Company. For the
purpose of this Agreement, disability shall mean mental or physical illness
or condition rendering Executive incapable of performing his normal duties
with the Company. If the parties cannot agree on the selection of a
licensed physician, as hereinabove provided, then said physician shall be
selected by the American Arbitration Association.
4
<PAGE>
8. PROTECTION OF CONFIDENTTIAL INFORMATION, NON-DISCLOSURE AND COVENANT NOT
TO COMPETE.
8.1 Executive Agrees:
8.1.1 To keep secret all confidential matters of the Company, and not
to disclose them to anyone other than the Company, except with Company's
written consent; and
8.1.2 In the event that any action, suit or other proceeding in law or
in equity is brought to enforce the covenants contained in subparagraph
8.1.1 hereof or to obtain money damages for the breach thereof, and such
action results in the award of a judgment for money damages or in the
granting of a preliminary or permanent injunction in favor of the
Executive, or if the Company shall prevail, in such proceedings, all
expenses including reasonable attorneys' fees of the prevailing party in
such action, suit or other proceeding shall be paid by the party against
whom judgment is awarded.
8.1.3 Except for injunctive relief, the parties agree that any
dispute under this agreement shall be resolved by arbitration pursuant to
the rules of the American Arbitration Association and said arbitration is
to take place in New York City.
9. NOTICES.
All notices and other communications, required or permitted to be
given hereunder, shall be in writing and shall be deemed to have been duly
given if delivered personally or sent first-class, postage prepaid, by
registered or certified mail, return receipt requested, addressed to the
<PAGE>
parties at their respective addresses set forth below, or to such other
address as may be notified by the party in accordance with this paragraph.
Notice shall be deemed to have been given on the date sent.
9.1 Notices shall be addressed to the Executive:
Joseph Pascal
41 Flower Lane
Kings Point, New York 11024
9.2 Notices shall be addressed to the Company:
Rocky Mount undergarment Co., Inc.
1536 Boone Street
P.O. Box 1280
Rocky Mount, North Carolina 27802
and
Rocky Mount Undergarment Co., Inc.
c/o Blodnick Abramowitz & Blodnick
Expressway Plaza Two, Suite 200
Roslyn Heights, New York 1157
10. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written
or oral, relating to the subject matter hereof.
12. HEADINGS AND CAPTIONS. The section headings contained herein are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
6
<PAGE>
13. AMENDMENTS: NO WAIVER. This Agreement may be amended, modified,
superseded or canceled and the terms, covenants or conditions hereof may be
waived only by a written instrument executed by both parties hereto, or in
the case of a waiver, by the party waiving compliance. The failure by
either party at any time or times to require performance of any provision
hereof shall in no manner affect the right at a later time to enforce the
same. No waiver by either party of the breach of any term, condition or
covenant contained in this Agreement, whether by conduct or otherwise, in
any one or more instance, shall be deemed to be, or construed as, a
further or continuing waiver of any such breach, or a waiver of the breach
of any other term, condition or covenant contained in this Agreement.
14. SEVERABILITY. Should any part of this Agreement for any reason be
declared invalid or unenforceable such declaration shall not affect the
validity of any remaining portion, and such remaining portion shall
continue in full force and effect as if this Agreement had been executed
with the invalid or unenforceable portion eliminated.
15. OTHER AGREEMENTS. The Executive represents and warrants that his
execution of this Agreement does not violate any other agreement or
understanding to which he is a party and that he has not entered into any
other agreement or understanding which in any way will prevent full
compliance by him with the terms of this Agreement.
<PAGE>
16. ASSIGNMENT. This Agreement, and Executive's rights and obligations
hereunder, may not be assigned by Executive. The Company may assign its
rights, but only together with its obligations, hereunder in connection
with any sale, transfer or other disposition of all or substantially all of
its business or assets. Upon said assignment, the Company will be released
from all liability hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
AGREED AND ACCEPTED: ROCKY MOUNT UNDERGARMENT CO., INC.
/s/ JOSEPH PASCAL By: /s/ PAUL SUTTON
- ------------------------------ -------------------------------
JOSEPH PASCAL Name: PAUL SUTTON
Title: Chairman and Chief Executive
Officer
8
EMPLOYMENT AGREEMENT made as of the 1st day of March, 1995 by and
between ROCKY MOUNT UNDERGARMENT CO, INC., a Delaware corporation (the
"Company") and PAUL SUTTON (the "Executive") .
W I T N E S S E T H:
WHEREAS, it is in the best interests of the Company to secure the
services of the Executive for the period set forth in this Agreement, and
the Executive is desirous of entering into the employ of the Company for
such period on the following terms and conditions:
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions contained in this Agreement, the parties, intending to be bound
by them, agree as follows:
1. EMPLOYMENT, DUTIES AND ACCEPTANCE.
1.1 The Company hereby employs the Executive, for the term (as
hereinafter defined) to render exclusive and full-time
services to the business and affairs of the Company as
Chairman of the Board, Secretary and Chief Executive
Officer. Executive's responsibilities shall encompass all
operations of the Company including acting as liaison with
the Company's consultant, MINAR Establishment. Executive
shall report to the Board of Directors of the Company and
shall have such additional or different responsibilities as
<PAGE>
are reasonably assigned to the Executive by the Board of
Directors of the Company. Executive hereby accepts such
employment and agrees to use his best efforts, skill and
abilities to promote the interests of the Company.
1.2 During the course of his employment in such capacity,
Executive shall be a necessary co-signatory on all checks.
1.3 During the course of Executive's employment, he shall serve
as and stand for election as a Director of the Company.
Executive agrees to do so without additional compensation.
2. TERM OF EMPLOYMENT.
2.1 The term of the Executive's employment under this Agreement
(the "Executive Employment") shall commence on March 1, 1995
and shall end on the 31st day of December, 1997.
3. PLACE OF EMPLOYMENT.
3.1 The principal place of Executive's employment shall be such
place or places from which Executive feels he can reasonably
perform his function as the Company's Chief Executive
Officer.
4. SALARY.
4.1 As compensation for the services performed by the Executive
as aforesaid, he shall receive an annualized minimum salary
of $25,000.00 for the period commencing March 1, 1995
<PAGE>
and ending December 31, 1997 payable in accordance with the
Company's current practices.
4.2 Executive shall be entitled to such bonuses and increases in
compensation as the Board of Directors may, from
time-to-time, determine.
4.3 Executive is hereby awarded incentive stock options
exercisable at today's market value for a term of 10 years
from the date hereof for 240,000 shares of the Company
common stock under the Company's 1990 Stock Option Plan, as
it shall be amended from time-to-time.
5. FRINGE BENEFITS.
5.1 Life Insurance. The company shall maintain group life
insurance coverage on the life of Executive through the
Company's regular employee insurance program, as the amount
of such coverage may change from time-to-time under the
terms of said policy, initially in the same amounts as
previously.
5.2 Medical Insurance. The Company shall continue to provide
its current medical coverage for the benefit of the
Executive.
5.3 Vacation. Executive shall be entitled to six (6) weeks'
paid vacation per year.
6. EXPENSES.
6.1 The Company shall provide the Executive with a
non-accountable expense account in the amount of $30,000.00
per year.
<PAGE>
6.2 In excess thereof, the Company shall, in accordance with the
Company's policy for reimbursement, pay or reimburse the
Executive for all reasonable expenses actually incurred or
paid by him during the Term in the performance of his
services under this Agreement upon the presentation of
itemized vouchers therefor.
7. TERMINATION.
7.1 Death. If the Executive shall die during the Term, this
Agreement shall terminate except that the Executive's estate
shall be entitled to receive the salary provided for
hereunder for 60 days after the date of his death.
7.2 Disability. If during the Term the Executive shall become
physically or mentally disabled as determined by a New York
State licensed physician mutually agreeable to the Company
and Executive (or his guardian or legal representative),
whether totally or partially, so that he is unable
substantially to perform his services hereunder for (i) a
period of three (3) consecutive months or (ii) for shorter
periods aggregating six (6) months during any fifteen (15)
month period, the Company may, at any time after the last
<PAGE>
day of the three (3) consecutive months of disability or the
day on Which the shorter periods of disability shall have
equalled an aggregate of six (6) months, by written notice
to the Executive, or his personal representative, terminate
the Executive's employment hereunder. Notwithstanding such
disability, up to and including the date of such
termination, the Company shall continue to pay the Executive
his salary and fringe benefits, less such amounts as
Executive receives pursuant to any disability insurance
policy or plan provided by the Company. For the purpose of
this Agreement, disability shall mean mental or physical
illness or condition rendering Executive incapable of
performing his normal duties with the Company. If the
parties cannot agree on the selection of a licensed
physician, as hereinabove provided, then said physician
shall be selected by the American Arbitration Association.
8. PROTECTION OF CONFIDENTIAL INFORMATION, NON-DISCLOSURE
AND COVENANT NOT TO COMPETE.
8-1 Executive Agrees:
8.1.1 To keep secret all confidential matters of the
Company and not to disclose then to anyone other
than the Company except with Company's written
consent; and
8.1.2 In the event that any action, suit or other
proceeding in law or in equity is brought to
<PAGE>
enforce the covenants contained in subparagraph
8.1.1 hereof or to obtain money damages for the
breach thereof, and such action results in the
award of a judgment for money damages or in the
granting of a preliminary or permanent injunction in
favor of the Executive, or if the Company shall
prevail, in such proceedings, all expenses
including reasonable attorneys' fees of the
prevailing party in such action, suit or other
proceeding shall be paid by the party against whom
judgment is awarded.
8.1.3 Except for injunctive relief, the parties agree that
any dispute under this agreement shall be resolved
by arbitration pursuant to the rules of the American
Arbitration Association, and said arbitration is to
take place in New York City.
9. NOTICES.
All notices and other communications, required or permitted
to be given hereunder, shall be in writing and shall be
deemed to have been duly given if delivered personally or
sent first-class, postage pre-paid, by registered or
certified mail, return receipt requested, addressed to the
parties at their respective addresses set forth below, or to
such other address as may be notified by the party in
accordance with this paragraph.
<PAGE>
Notice shall be deemed to have been given on the date sent.
9.1 Notices shall be addressed to the Executive:
Paul Sutton
c/o Port of Monte Carlo
16 Quai Antoine
1 er MC98000
Monaco
or such other address as Executive shall, from
time-to-time, advise the Company is to be his
address for notices.
9.2 Notices shall be addressed to the Company:
Rocky Mount Undergarment Co., Inc.
1536 Boone Street
Post Office Box 1280
Rocky Mount, North Carolina 27802
or such other address as shall be the address
of the Company's main executive offices.
10. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York.
11. ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement and understanding
of the parties relating to the subject matter hereof and
supersedes all prior agreements, arrangements and understandings,
written or oral, relating to the subject matter hereof.
<PAGE>
12. HEADINGS AND CAPTIONS.
The section headings contained herein are for reference purposes
only and shall not, in any way, affect the meaning or
interpretation of this Agreement.
13. AMENDMENTS: NO WAIVER.
This Agreement may be amended, modified, superseded or canceled
and the terms, covenants or conditions hereof may be waived only
by a written instrument executed by both parties hereto, or in the
case of a waiver, by the party waiving compliance. The failure by
either party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later
time to enforce the same. No waiver by either party of the breach
of any term, condition or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instance,
shall be deemed to be, or construed as, a further or continuing
waiver of any such breach, or a waiver of the breach of any other
term, condition or covenant contained in this Agreement.
14. SEVERABILITY.
Should any part of this Agreement for any reason be declared
invalid or unenforceable, such declaration shall not affect the
validity of any remaining portion, and such remaining portion
shall continue in full force and effect as if this Agreement had
been executed with the invalid or unenforceable portion
eliminated.
<PAGE>
15. OTHER AGREEMENTS.
The Executive represents and warrants that his execution of this
Agreement does not violate any other agreement or understanding to
which he is a party and that he has not entered into any other
agreement or understanding which in any way will prevent full
compliance by him with the terms of this Agreement.
16. ASSIGNMENT.
This Agreement, and Executive's rights and obligations hereunder,
may not be assigned by Executive. The Company may assign its
rights but only together with its obligations hereunder in
connection with any sale, transfer or other disposition of all or
substantially all of its business or assets and subject to the
provisions of this agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
AGREED AND ACCEPTED: ROCKY MOUNT UNDERGARMENT CO., INC.
/s/ PAUL SUTTON JOSEPH PASCAL, PRESIDENT
------------------- By:-------------------------------------
PAUL SUTTON Name:
Title:
<PAGE>
SUTTON OPTIONS
Rocky Mount Undergarment Co., Inc. agrees that the Incentive Stock
Options issuable to Paul Sutton pursuant to his Employment Agreement have
been priced at $.33 per Share.
Dated: February 15, 1995
ROCKY MOUNT UNDERGARMENT CO., INC.
JOSEPH PASCAL, PRESIDENT
By:-------------------------------------
/s/ PAUL SUTTON
--------------------------------------
PAUL SUTTON
<PAGE>
ESCROW AGREEMENT, made as of this 10th day of February, 1995 by and
between Blodnick, Abramowitz and Blodnick, as Escrow Agent ("Escrow
Agent"), PAUL BUTTON ("Sutton") individually and as a representative of LMA
Ltd., ("LMA"), and DAVID GREENBERG ("David"), JOAN GREENBERG ("Joan") and
HERB GREENBERG ("Herb") (collectively the "Greenbergs").
WHEREAS, the parties hereto have entered into a letter agreement of
OPTION AND RIGHT OF FIRST REFUSAL (the "Option Agreement") relating to
Rocky Mount Undergarment Co., Inc. (the "Company"); and
WHEREAS, the parties hereto have also entered into an INDUCEMENT
AGREEMENT (the "Inducement Agreement");
WHEREAS, the Option Agreement provides, in part, for the escrow with
the Escrow Agent of the Pledged Stock, as defined in the Option Agreement
as security for the performance by the Greenbergs under the Option
Agreement and the Inducement Agreement; and
WHEREAS, the parties intend hereby to satisfy the provisions of escrow
provided for therein.
NOW, THEREFORE,
1. Escrow Agent acknowledges receipt of the certificates delivered by
the Greenbergs representing shares of the Common Stock of the Company, (the
"Shares") copies of which are attached hereto, aggregating 456,678 (Four
Hundred and Fifty-Six Thousand and Six Hundred and Seventy-Eight) Shares.
<PAGE>
2. Each of David, Joan and Herb agree to promptly search for the
certificates representing the balance of their Shares, and to exercise
their individual best efforts to obtain such certificates from third
parties, to the extent that the same are held in street name, and to turn
such additional certificates over to the Escrow Agent, as and when located,
and Escrow Agent shall acknowledge receipt of any such additional
certificates, as and when the same are received by such Escrow Agent.
3. Certificates held in IRA Accounts are not part of this Escrow
Agreement and shall not be deposited with the Escrow Agent.
4. The Escrow Agent shall hold any and all certificates deposited
with it in accordance with this Escrow Agreement, and as provided by the
terms and conditions of the Option Agreement.
5. Any certificates representing Shares which are held by the Escrow
Agent as of February 10, 2000 shall be returned to the Greenbergs, each
such certificate to the then registered owner thereof.
6. The Escrow Agent shall have no liability whatsoever to any party,
otherwise than as arising from its gross negligence, or its intentional
misconduct, in the distribution of any of the certificates representing the
Shares.
7. The parties may, on mutual written consent, appoint a successor
escrow agent. In addition, the parties agree that the Company shall have
<PAGE>
the right to appoint a successor escrow agent on consent of the parties,
which shall not be unreasonably withheld.
/s/ DAVID GREENGERG
-----------------------------------
DAVID GREENBERG
/s/ JOAN GREENBERG
-----------------------------------
JOAN GREENBERG
/s/ HERB GREENBERG
-----------------------------------
HERB GREENBERG
Accepted and Agreed this
10th day of February, 1995
By: /s/ PAUL SUTTON
-------------------------
PAUL SUTTON
LMA LTD.
By:
------------------------
Authorized Signatory
BLODNICK, ABRAMOWITZ & BLODNICK
By:
-------------------------
Escrow Agent
-3-
LIMITED CONTINUING GUARANTEE
WHEREAS, Rocky Mount Undergarment Co., Inc. ("Rocky Mount")
has certain obligations and responsibilities to David Greenberg,
Joan Greenberg and Herb Greenberg (the "Greenbergs");
WHEREAS, the Greenbergs are, as of this date, resigning as
officers and directors of Rocky Mount;
WHEREAS, LMA LTD. ("LMA") is, or will be upon consummation of
certain transactions scheduled to close this date, the principal
shareholder of Rocky Mount, and Paul Sutton ("Sutton") is, or will be on
consummation of certain transactions scheduled to close this date, a
controlling person of Rocky Mount; and
WHEREAS, IMA and Sutton have agreed to guarantee certain limited
obgliations of Rocky Mount to the Greenbergs in exchange for valuable
consideration heretofore in hand received.
NOW, THEREFORE, the undersigned hereby guarantee to the Greenbergs,
and each of them, as their interests appear,
(i) prompt payment of any and all liability of the Company to them
pursuant to certain Non-Competition Agreements dated as of the date
hereof with respect to any and all payments due to them during for the
eighteen (18) month period commencing March 1, 1995 and terminating on
August 31, 1996; and
(ii) to indemnify the Greenbergs and hold them harmless with
respect to any and all liability arising out of, or in connection with,
their obligations arising out of a certain mortgage and Deed of Trust,
currently in default, on a premise owned by Searington Realty, a North
Carolina general partnership ("Realty"), securing a debt in the original
principal amount of $320,000.000 in respect of which the Guarantors
have agreed that Rocky Mount shall have primary responsibility to the
Greenbergs, and Realty with respect to the Realty property, and such
mortgage debt.
In the event of default by Rocky Mount with respect to the
payments due to the Greenbergs under the Non-Competition Agreements
during the period March 1, 1995 to August 31, 1996, and/or any
default in the indemnification of the Greenbergs with respect to the
Realty mortgage debt, the undersigned shall pay all sums due or to
become due to the Greenbergs, and still hold the Greenbergs harmless
in respect thereof.
IN WITHNESS WHEREOF, we have signed and sealed this guaranty on
February 10, 1995.
LMA Ltd.
By
--------------------------------------------
/s/ PAUL SUTTON
--------------------------------------------
PAUL SUTTON
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a shareholder of
Rocky Mount Undergarment Co., Inc. (the "Corporation") does hereby appoint
Paul Sutton, as agent for LMA Ltd., with power of substitution, as the true
and lawful attorney and proxy of the undersigned for and in (his) (her)
(its) name, place and stead to attend all meetings of the shareholders of
the Corporation, and to vote any and all shares of stock of said
Corporation which are (i) on deposit with Blodnick, Abramowitz & Blodnick,
as Escrow Agent, in connection with a certain Option and Right of First
Refusal Agreement; (ii) are owned as of the date hereof, and required to be
deposited with such Escrow Agent; or (iii) are owned as of the date hereof
in IRA accounts in respect of which the undersigned is the sole beneficial
owner, with the right to vote such shares.
This proxy is coupled with an interest and is irrevocable.
The term of this proxy shall be co-extensive with the Option and Right
of First Refusal Agreement, and shall terminate not later than February 10,
2000.
The undersigned hereby ratifies and confirms all that the proxy may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this ___ day of
February, 1995.
HERBERT GREENBERG
--------------------------
<PAGE>
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a shareholder
of Rocky Mount Undergarment Co., Inc. (the "Corporation") does hereby
appoint Paul Sutton, as agent for LMA Ltd., with power of substitution, as
the true and lawful attorney and proxy of the undersigned for and in (his)
(her) (its) name, place and stead to attend all meetings of the
shareholders of the Corporation, and to vote any and all shares of stock of
said Corporation which are (i) on deposit with Blodnick, Abramowitz &
Blodnick, as Escrow Agent, in connection with a certain Option and Right of
First Refusal Agreement; (ii) are owned as of the date hereof, and required
to be deposited with such Escrow Agent; or (iii) are owned as of the date
hereof in IRA accounts in respect of which the undersigned is the sole
beneficial owner, with the right to vote such shares.
This proxy is coupled with an interest and is irrevocable.
The term of this proxy shall be co-extensive with the Option and Right
of First Refusal Agreement, and shall terminate not later than February 10,
2000.
The undersigned hereby ratifies and confirms all that the proxy may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 10 day of
February, 1995.
JOAN A. GREENBERG
------------------------------
<PAGE>
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a shareholder of
Rocky Mount Undergarment Co., Inc. (the "Corporation") does hereby appoint
Paul Sutton, as agent for LMA Ltd., with power of substitution, as the true
and lawful attorney and proxy of the undersigned for and in (his) (her)
(its) name, place and stead to attend all meetings of the shareholders of
the Corporation, and to vote any and all shares of stock of said
Corporation which are (i) on deposit with Blodnick, Abramowitz & Blodnick,
as Escrow Agent, in connection with a certain Option and Right of First
Refusal Agreement; (ii) are owned as of the date hereof, and required to be
deposited with such Escrow Agent; or (iii) are owned as of the date hereof
in IRA accounts in respect of which the undersigned is the sole beneficial
owner, with the right to vote such shares.
This proxy is coupled with an interest and is irrevocable.
The term of this proxy shall be co-extensive with the Option and Right
of First Refusal Agreement, and shall terminate not later than February 10,
2000.
The undersigned hereby ratifies and confirms all that the proxy may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 10th day of
February, 1995.
David Greenberg
-----------------------------
<PAGE>
PROMISSORY NOTE
$200,000.00 New York, NY February 10, 1995
FOR VALUE RECEIVED, on February 9, 1996 (the "Maturity
Date"), the undersigned, LMA Ltd., an Isle of Man corporation
with offices at Ballarose, Hillbury Green, Douglas, Isle of Man,
British Isles IM26DE (the "Payor"), hereby promises to pay to the
order of ROCKY MOUNT UNDERGARMENT CO., INC. (the "PAYEE") at 350
Fifth Avenue, New York, NY 10118, or at such other place as may
be designated in writing by the Payee, the principal sum of TWO
HUNDRED THOUSAND AND 00/100 ($200,000.00) DOLLARS, in lawful
money of the United States of America at the time of payment,
together with interest on the unpaid principal hereof from time
to time outstanding from the date hereof until payment at the
rate of nine (9%) percent per annum.
If the entire principal owing hereon is not paid or
forgiven on or before the Maturity Date, the entire balance then
outstanding shall bear interest at a per annum rate equal to the
lessor of (a) the highest rate for which the undersigned may
legally contract under applicable laws or (b) twelve (12%)
percent per annum.
If this Note is not paid at maturity, and the same is
placed in the hands of any attorney for collection or if
collection by suit or through the probate court, bankruptcy
court, or by an other legal proceedings is sought, Payor agrees
to pay all expenses incurred, including reasonable attorneys'
fees, all of which shall become a part of the principal hereof.
Payor and each surety, guarantor, endorser, and other
party ever liable for payment of any sums of money payable on
this Note, jointly and severally waive notice, presentment and
demand for payment, protest, notice of protest and non-payment of
dishonor, diligence in collection, and grace, and consent to all
extensions without notice for any periods of time and partial
payments, before or after maturity, without prejudice to the
holder. The holder shall have the right to deal in any way, at
any time, with one or more of the foregoing parties without
notice to any other party, and to grant any party any extensions
of time for payment of any said indebtedness, or to grant any
other indulgences or forebearances whatsoever, without notice to
any other party and without in any way affecting the personal
liability of any party hereunder.
The invalidity, or unenforceability in particular
circumstances, of any provision of this Note shall not extend
beyond such provision or such circumstances and no other
provision of this instrument shall be affected thereby.
<PAGE>
This Note may be prepaid, in whole or in part, at any
time without penalty.
This Note and all the covenants, promises, and
agreements contained herein shall be binding upon and inure to
the benefit of the respective legal and personal representatives,
devisees, heirs, successors, and assigns of Payors and the holder
hereof.
This Note may not be assigned or negotiated by the
holder.
This Note is issued pursuant to, and subject to the
terms and conditions of that certain Stock Purchase Agreement
between ROCKY MOUNT UNDERGARMENT CO., INC., a Delaware
corporation ("Rocky Mount" or the "Company") and PAUL SUTTON,
residing at 32 Rose Avenue, South Woodford, London E18, England
("Sutton") dated as of January 19, 1995, as assigned and amended.
PAYOR:
LMA Ltd.
By: ---------------------------------
Name: Paul Sutton
Title: Auth. Agent
<PAGE>
This Note may be prepaid, in whole or in part, at any time without
penalty.
This Note and all the covenants, promises, and agreements contained
herein shall be binding upon and inure to the benefit of the respective
legal and personal representatives, devisees, heirs, successors, and
assigns of Payors and the holder hereof.
This Note is issued pursuant to, and subject to the terms and
conditions of that certain Stock Purchase Agreement between Payor and
Payee dated January 18, 1995.
PAYOR:
/s/ PAUL SUTTON
-------------------------------------
PAUL SUTTON
ROCKY MOUNT UNDERGARMENT CO., INC.
with
FINOVA CAPITAL CORPORATION
Hollenberg Levin Solomon Ross & Belsky
585 Stewart Avenue
Garden City, New York 11530
(516) 745-6000
<PAGE>
CLOSING STATEMENT
On March 31, 1995, Rocky Mount Undergarment Co., Inc. entered into a factoring
agreement with Finova Capital Corporation. This financing arrangement was closed
at the offices of Rosenthal & Rosenthal, 1370 Broadway, New York, New York
10018.
Present at the closing were the following:
For RKUC: Joseph Pascal, President
Paul Sutton, Secretary
Paul Larn, Director
Attorneys for RMUC: Hollenberg Levin Solomon Ross
& Belsky
By: N. Barry Ross, Esq.
For FCC: David Bobby
Joseph Dehler
Attorneys for FCC: Ruskin, Moscou, Evans &
Faltischek, P.C.
By: Joseph J. Moscou, Esq.
For Rosenthal &
Rosenthal: Irwin Pearl, Senior Vice
President
Charlie Scharf
Stanley Pollack
<PAGE>
I. THE TRANSACTION
Pursuant to the transaction, Rocky Mount Undergarment Co.,
Inc., who was previously factored by Rosenthal & Rosenthal,
entered into a factoring agreement with Finova Capital
Corporation. At the closing, Rocky Mount assigned to Finova
all funds now or hereafter payable to Rocky Mount by Rosenthal
& Rosenthal, and Rosenthal & Rosenthal terminated its
factoring relationship with Rocky Mount. This assignment and
transaction also pertained to accounts of Marion Rohr Corp.
Simultaneously, Rocky Mount entered into a factoring agreement
with Finova Capital Corporation. Pursuant to this agreement,
Rocky Mount sold to Finova its receivables at an 85% advance
rate. This sale was without recourse except for certain
conditions as more particularly set forth in the agreement. In
addition, Rocky Mount is to receive 50% on finished goods and
other inventories capped at $600,000.00.
This factoring arrangement was personally guaranteed by Paul
Sutton and Joseph Pascal. Attached hereto are copies of the
following documents denoted by exhibit numbers as follows:
1. Finova Capital Corp. factoring agreement and guarantee;
2. Trade style letter from Finova to Rocky Mount;
3. Letter from Finova to Rocky Mount with regard to special
risk accounts;
4. Assignment of factoring proceeds by Rocky Mount to
Finova;
5. Indemnity agreement from Finova to Rosenthal &
Rosenthal;
6. Letter from Rosenthal & Rosenthal to Trustee authorizing
the satisfaction of the deed of Trust on the property in
North Carolina;
7. Two security agreements from Rocky Mount to Finova
covering inventory, machinery and equipment; and
8. Cash collateral agreement with Rosenthal & Rosenthal.
In addition, there was $100,000.00 of cash collateral which
had been deposited with Rosenthal & Rosenthal by Edward
Blodnick on behalf of Rocky Mount. Attached is a copy of that
cash collateral agreement. A letter was faxed by Edward
Blodnick to Rosenthal & Rosenthal at the closing authorizing
the release of this cash collateral to Finova.
Respectfully submitted,
HOLLENBERG LEVIN SOLOMON
ROSS & BELSKY
By: N. Barry Ross
<PAGE>
Exhibit 1
<PAGE>
FINOVA CAPITAL CORPORATION
FACTORING AGREEMIENT
(Retail)
Rocky Mount Undergarment Co., Inc. New York, N.Y. March 31, 1995
350 Fifth Avenue
New York, New York
Gentlemen:
Upon your written acceptance, to be noted at the foot of this instrument,
the following shall constitute the entire agreement and understanding between us
pursuant to which you hereby appoint us your sole factor on the following basis:
1. You agree to, and do hereby, sell and assign to us all of your right,
title and interest in and to all of your accounts receivable, notes, bills,
acceptances, contract rights and other forms of obligation (as hereinafter
defined) and all security and guarantees therefore (herein collectively termed
"Receivables") arising out of all of your sales of goods or rendition of
services, whether now existing or hereafter created, together with title to any
merchandise represented by such Receivables which may be rejected or returned by
your customers for any reason whatsoever. During the term of this Agreement you
shall not sell, negotiate, pledge, assign or grant any security interest in any
Receivables or inventory of yours to anyone other than us.
2. Except as hereinafter set forth, we agree to purchase your Receivables
without recourse to you, provided that the sale of the merchandise represented
by the Receivables and the terms thereof have first been approved by us in
writing (such approval being sometimes referred to herein as "Credit Approval"),
and provided further that the merchandise represented by the Receivables is duly
delivered to and finally accepted and retained by your customer without dispute,
whether bona fide or not, as to price, terms of sale, delivery, quantity,
quality or otherwise. We reserve the right to revoke our Credit Approval at any
time prior to delivery to and acceptance by your customer. We shall be entitled
to collect and receive all proceeds of your sales and shall enjoy all the rights
and remedies of the seller of goods, including the right of stoppage in transit,
reclamation, replevin and any similar rights or remedies as may be available to
you. Our Credit Approval numbers shall be valid for a period of 30 days from the
date of such Credit Approval number or until 30 days after the delivery date set
forth in our approval sheet unless revoked by us. We shall not be liable in any
manner for refusing to give or for withdrawing Credit Approval or for exercising
our rights and remedies as set forth herein. No modifications or extensions may
be granted by you with respect to any Receivable which has our Credit Approval
without our prior written consent. In the event we shall give our written
consent as aforesaid, upon each and every such consent to your requested
modification or extension, whether as to terms, dates or otherwise, you shall
pay us a service fee in the amount of $10.00 which fee shall be due and
payable upon the issuance of our consent to your proposed modification or
extension. Receivables as to which we have not given our written Credit
Approval, either in whole or in part, shall nevertheless be deemed to have been
sold and assigned to us with full recourse to you to the extent and in the
respects and amounts not so approved. The credit risk on sales not approved by
us is assumed by you. Such sales shall be known as Department Risk (D.R.)
Receivables. All invoices in an amount less than $200.00 shall be deemed samples
and shall automatically be considered as D.R. Receivables. Each and every
assignment of D.R. Receivables hereunder shall be deemed to be a grant of a
security interest in our favor in and to any such D.R. Receivable.
3. (a) All of your sales shall be billed or invoiced by you at your expense
upon forms of bills or invoices acceptable to us and shall constitute
assignments to us of the Receivables represented thereby, irrespective of
whether you execute any other specific instrument of assignment in our favor or
otherwise. Each bill or invoice shall have imprinted thereon the following:
"THIS ACCOUNT HAS BEEN SOLD AND ASSIGNED TO, IS OWNED BY AND IS PAYABLE IN NEW
YORK FUNDS ONLY TO FINOVA CAPITAL CORPORATION, P.O. BOX 12082, NEWARK, N.J.
<PAGE>
07193-0282, TO WHOM PROMPT NOTICE MUST BE GIVEN OF ANY OBJECTIONS TO PAYMENT OF
THIS INVOICE AS RENDERED. GOODS RETURNABLE FOR ANY REASON SHALL BE RETURNED ONLY
UPON WRITTEN NOTICE TO FINOVA." We may request shipping and/or delivery receipts
covering any of your Receivables to be promptly delivered to us. You shall not
be entitled to any credit with respect to any Receivable until the relevant
shipping and/or delivery receipts have been delivered to us. You will supply us
with as many duplicate bills or invoices as we may from time to time require. At
our request, invoices to your customers shall be mailed by us at your expense.
(b) At the time of each sale you shall execute and deliver to us, in
form satisfactory to us, a written schedule and assignment of the Receivables
arising out of such sales, together with proof of delivery to your customer.
Notwithstanding your failure to execute and deliver any such written assignment
as aforesaid, each Receivable created by you shall be deemed assigned to us and
shall become our property immediately upon shipment of the merchandise. Billing
on your invoices, whether done by you or by us, shall constitute assignments to
us of the Receivables represented thereby, whether or not you execute any other
specific instrument of assignment in our favor, or otherwise.
(c) Copies of all credit memoranda as may be issued by you to any of
your account debtors shall be furnished to us for the sole purpose of notifying
us of the transmission of such credit memoranda to each such account debtor, it
being understood and agreed that only the account debtor to whom such credit or
allowance is issued shall be entitied thereto.
4. (a) The purchase price ("Purchase Price") which we shall pay to you for
Receivables accepted by us, as aforesaid, shall be the "Net Face Amount"
thereof, calculated at our option on any terms offered by you, less our
factoring commission, as set forth below. "Net Face Amount" shall be deemed to
mean the gross amount of the Receivable less all discounts. The Purchase Price
(less (a) any reserves which we may in our sole discretion determine to hold;
(b) any monies remitted, paid, or otherwise advanced by us to you or for your
account including any amounts which we may be obligated to pay in the future;
and (c) any other of our charges to your account as provided for in this
Agreement) shall be payable by us to you on the monthly average due date of the
Receivables so purchased, as calculated by us on the terms given to your
customer plus ten (10) working days for collection. We may, in our sole
discretion, advance to you from time to time sums up to eighty-five (85%)
percent of the Purchase Price on Receivables purchased by us.
(b) We may from time to time, in our sole and absolute discretion, make
loans, advances and other financial accommodations to or for your benefit of up
to 50% of your eligible inventory (as determined by us in our sole and absolute
discretion and priced at the lower of cost or market) up to the amount of
$600,000 (the "Inventory Loan"). Notwithstanding the foregoing, we reserve the
right at any time to demand and receive the immediate repayment of the entire
balance of the Inventory Loan in the event (a) of any default or termination
under this Agreement; (b) of any reduction in the value of your inventory; or
(c) that we, in our sole and absolute discretion, shall consider the Inventory
Loan insecure. All principal, interest, fees, commissions, charges, costs and
expenses incurred with or in respect of this Agreement or any supplement or
amendment hereto (all of which shall be cumulative and not exclusive) and any
and all Obligations shall be charged as an advance to Borrower's account as
maintained by us.
(c) Notwithstanding the foregoing, we shall withhold a reserve of sums
otherwise due you and, in our discretion, may revise the amount of such reserve
from time to time. We shall be entitled to hold all sums to your credit as
security for D.R. Receivables, outstanding claims and any and all Obligations
owing to us, our subsidiaries and affiliates by you, however arising. Further,
at our request you shall maintain a credit balance with us in such amount as
will, in our sole discretion, be commensurate with the volume and character
of the business conducted by you so as to protect us against all possible
returns, claims of your customers, indebtedness owing by you to us or any
other contingencies (your "Obligations"). Except in our sole discretion, the
aggregate amount of your Obligations at any time shall not exceed $ . You
shall repay to us on demand any Obligations and debit balance then in your
account.
<PAGE>
(d) In addition to our factoring commissions and to any other fees
provided for herein or otherwise, you shall pay all of our costs and expenses
for establishing the factoring arrangements provided for herein, including, but
not limited to, our legal fees and costs, internal and external audits expenses,
filing, recording and search expenses, appraisal fees and other out-of-pocket
expenses arising out of our entering into this factoring relationship with you,
which fee is payable on and shall be fully earned as of the date hereof, and
shall be included as part of the Obligations.
(e) If any taxes are imposed, or if we shall withhold or pay any tax or
penalty as a result of or in connection with any transaction or transactions
between us, you hereby indemify us and hold us harmless from and against all
claims of every kind and nature whatsoever in respect thereof. In addition, you
agree that any such payments made by us shall be charged to your account and
shall be included as part of your Obligations.
(f) We shall have the right and are hereby irrevocably authorized by you
to charge your account or accounts in the amount or amounts of any and all of
your Obligations. Notwithstanding the foregoing, we shall not he required at any
time, or to any extent, to have recourse to any collateral security given by you
to us to secure your Obligations and the exercise of our rights to look to any
such collateral shall be and remain in our sole and absolute discretion.
Accordingly, you shall at all times remain liable for the repayment, upon our
demand, of all of your Obligations owing to us.
5. We shall be entitled to hold and you hereby grant to us and to our
subsidiaries and affiliates, a continuing general lien and security interest in
and to all accounts, contract rights, documents, instruments, chattel paper,
general intangibles, reserves, credit balances, sums and all of your property at
any time in our possession, or in the possession of any of our subsidiaries or
affiliates, or upon or in which we may otherwise have a lien or security
interest as collateral security for any and all of your Obligations at any time
owing to us, our subsidiaries and affiliates, whether fixed or contingent, no
matter how or when arising, whether under this Agreement or otherwise, and
including all obligations incurred by you for purchases from any other person,
firm or corporation factored or financed by us, all of which shall be included
as part of your Obligations. In addition to the foregoing you hereby grant us a
general lien and security interest in and to all security and guarantees in your
favor and to all of your books and records. You agree to execute and deliver
financing statements and any and all instruments and documents that we may
request to perfect, protect, establish or enforce the security interests granted
hereunder and any other provisions hereof. You hereby authorize us to file such
financing statements in your name signed by us, or a reproduction of this
agreement to reflect the security interest granted hereunder.
6. (a) All disputes, claims or controversies relating to any Receivable
must be settled by you at your sole cost and expense. We shall have no
responsibility or liability of any kind or nature whatsoever with respect to any
Receivable, payment of which is refused or withheld by reason of any dispute,
bona fide or not, and whether before or after maturity date, as to price, terms,
delivery, quantity, quality or otherwise, nor where the customer claims release
from liability or inability to pay because of any act of God or a public enemy
or war or because of the requirements of law or of rules, orders or regulations
having the force of law (each, a "Dispute"). Upon our receipt of notice of the
existence of a Dispute, we shall have the right to immediately charge your
account for the entire amount of any Receivable as to which any such Dispute has
arisen whether such Dispute regards that Receivable or any other Receivable and
whether due or not due, and you agree to immediately pay the entire amount of
all such disputed Receivables to us upon our demand. You shall promptly advise
us in writing of the existence of each Dispute with your customers upon your
receipt of notice thereof and you shall forthwith transmit to us copies of any
and all chargeback notices, allowance requests, claims, correspondence and the
like received by you from your customer evidencing the existence of a Dispute.
(b) Notwithstanding anything to the contrary contained in subparagraph
(a) above and regardless of the date or dates upon which we charge back to you
the full amount of any Receivable where there is a Dispute, claim, offset,
defense or counterclaim, it is understood, agreed and acknowledge that
<PAGE>
immediately upon the occurrence of any such Dispute, claim, offset, defense or
counterclaim we shall no longer bear or be responsible for the credit risk
and/or loss, if any, with respect to any such Receivables due to the financial
inability of your customer to pay. Such risk and/or loss, if any, shall
immediately revert to and be deemed to have been assumed by you without any
further or other act upon our part. A chargeback shall not be deemed a
reassignment.
(c) All fees and expenses of any attorney or collection agency employed
by us or on our behalf to collect or sue upon any D.R. Receivable or upon any
Receivable with respect to which we have notice of a Dispute, claim, offset,
defense or counterclaim shall be charged to your account and shall be paid by
you and made a part of your Obligations.
(d) Immediately upon our request, you shall pay to us, or reimburse us
for, all sums, costs and expenses (which shall be and hereby are included as
part of the Obligations) which we may pay or incur in connection with or related
to this Agreement. In addition to those items set forth hereinabove and
hereafter, Obligations shall include: the negotiation, preparation,
consummation, administration and enforcement of this Agreement and all other
documents and instruments regarding this factoring arrangement and/or its
related financial accommodations, and the transactions contemplated hereunder;
any future proposed amendments, supplements, consents or modifications to this
Agreement (whether or not executed); all efforts made to advance, expand,
defend, protect or enforce the security interests or other rights granted to us
hereunder; enforcing payment of the Obligations; filing fees and taxes,
recording taxes, expenses for searches incurred by us from time to time,
periodic field examinations of our collateral or your operations (plus a charge
of $500 per person per day for our examiners in addition to the reimbursement
for their expenses); wire transfer fees, check dishonor fees, the fees and
disbursements of our counsel, all fees and expenses for the service and/or
filing of papers, premiums on bonds and undertakings, fees of marshals,
sheriffs, custodians or auctioneers and others, travel expenses and all court
costs and collection charges. All Obligations shall accrue interest after demand
thereof at the Interest Rate. A "demand" as used herein shall be deemed to have
been made upon posting any Obligation to your account. At our option, all
principal, interest, fees, commissions, costs, expenses or other charges with
respect to this Agreement may be charged directly to your account maintained by
us.
7. You represent and warrant: (a) that you are solvent; (b) that you have
paid and shall pay all taxes which have become or shall hereafter become due and
payable; (c) that there shall not be any judgments, assessments or liens filed
against you or against any of your property, real or personal during the term of
this Agreement and that there are no judgments, assessments or liens filed
against you or against any of your property, real or personal, at the time of
the execution of this Agreement except as may have been disclosed by you to us
in writing, the receipt of which has been confirmed by us to you in writing; (d)
that each Receivable is based upon your bona fide sale and actual delivery to
the customer of merchandise or rendition of services invoiced in the regular
course of your business; (e) that the customer, without qualification or
limitation, has made himself liable to pay by the maturity date of the invoice
the full amount of the Receivable indicated thereon without deduction, claim,
offset, defense or counterclaim; (f) that you have full title to all merchandise
sold; and (g) that your transfers and assignments to us are free and clear of
all encumbrances, liens and security interests and that you have full title in
and to all Receivables.
8. In the event of the rejection, return or recovery of any merchandise on
any Receivable you shall pay us the amount of such Receivable, either in cash or
by the assignment of new Receivables acceptable to us hereunder. We shall have
the right to the immediate possession of such merchandise which you shall hold
in trust for our benefit, segregated and identified by you as our property, and
we shall have a lien upon it, as well as the ownership of any Receivables
arising from the subsequent sale of such merchandise as security for the payment
of your Obligations. Upon our request, at your expense, you shall deliver such
merchandise, upon five (5) days written notice to you, at such places and upon
such terms as we may deem proper. In the event you fail to deliver such
merchandise as aforsaid, we shall have the right and are hereby authorized to
enter your premises to take immediate possession thereof and to sell such
merchandise, upon notice to you, at public or private sale, at which sale we may
be the purchaser, and at such price or prices and upon such terms as we, in our
sole discretion, may deem acceptable. Only the net proceeds of such sale, after
deduction for all costs and expenses thereof, shall he credited to your account.
<PAGE>
9. We reserve the right to limit the amount of D.R. Receivables, as well as
the amount of any advance thereon. Upon the insolvency of any of your D.R.
customers (as determined in our absolute discretion) or default in payment by
such D.R. customers at maturity, we shall have the right to immediately charge
such sale or sales to such D.R. customers to your account, and you agree to pay
the amount thereof to us on demand.
10. All checks, notes, remittances, acceptances, proceeds, other
instruments, or cash received by you with respect to any Receivable shall be our
property and if received by you shall be held in trust for us and immediately
turned over to us in kind without deduction. You hereby authorize and
irrevocably appoint us as your attorney-in-fact to endorse your name upon checks
or other instruments or documents received by you or us pertaining to
Receivables, and to make, execute and deliver in your name such further
instrument or instruments of assignment of Receivables to us in furtherance of
this Agreement and its purpose as we may from time to time deem necessary. It is
understood and agreed that we shall have the absolute right, but not the
obligation, to deposit all checks or other remittances received by us in payment
of Receivables irrespective of any deductions shown or taken by your customers
or any notifications or conditions as may appear thereon. We may charge back to
you or to your account any deductions or deficiencies therein, other than
deficiencies in the payment of Receivahles which have heretofore received our
Credit Approval and which deductions or deficiencies result solely from your
customer's financial inability to pay. Any charge back of your D.R. Receivables
or Disputed Receivables or any of them, shall not be deemed a reassignment
thereof, and title thereto and to the merchandise represented thereby shall
remain with and in us as security for your obligations until we shall have been
fully reimbursed.
11. You shall at all times maintain, at your sole cost and expense, books
and records showing all sales and all claims, allowances, Disputes and similar
information with respect to the Receivables and the goods and services relating
thereto. We, or our representative, shall have the right at any time during
normal business hours to examine all of your books which may pertain to
merchandise or Receivables. You agree that you will furnish to us, as soon as
available, but in any event not later than one hundred and twenty days (120)
after the close of each fiscal year, your audited financial statements for such
fiscal year (including balance sheets, statements of income and loss, statements
of cash flow and statements of shareholders' equity), and the accompanying notes
thereto, setting forth in each case, in comparative form, figures for the
previous fiscal year, all in reasonable detail, fairly representing the
financial position and the results of your operations as at the date thereof and
for the fiscal year then ended and prepared in accordance with generally
accepted accounting principles consistently applied. Such audited statements
shall be examined in accordance with generally accepted auditing practices by
(and accompanied by a report thereon unqualified as to scope of) independent
certified public accountants selected by you and acceptable to us. In addition,
as such time or times as we may request, you will furnish to us such quarterly
or monthly unaudited financial statements (including balance sheets, statements
of income and loss, statements of cash flows and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and results of your operation as at the date
thereof and for such period prepared in accordance with generally accepted
accounting principles consistently applied and such other information with
respect to your business, operations and condition (financial and otherwise) as
we amy from time to time reasonably request.
12. (a) Each of your Receivables shall be calculated as of the first of the
month following the date of the invoice to your customer at the net amount
thereof, less discounts, allowances or any other deductions. Interest shall be
charged at the Prime Rate plus 1.5% (the "Interest Rate") on Receivables
computed as follows: from the first day of the month to and including the
weighted average due date of such invoices plus ten working days for collection
and clearance of remittances. As used herein the term "Prime Rate" shall be
deemed to mean the prime commercial rate charged by members of the FINOVA
Capital Corporation or any of its bank subsidiaries in effect on the date hereof
and as same may be adjusted upwards or downwards from time to time. The Interest
Rate shall never be less than six (6%) per cent per annum nor greater than the
highest rate permitted by law. Any change in the Interest Rate shall become
effective on the first day of the month following the month in which the Prime
Rate shall have been increased or decreased, as the case may be. The Interest
Rate shall be calculated based on a three hundred sixty (360) day year for the
actual number of days elapsed and shall be charged to you on all Obligations
including, but not limited to, any debits due us and upon all monies remitted,
paid or otherwise advanced by us to you or for your account prior to the
<PAGE>
average due date as above described and shall he payable at the close of each
month. All interest charged or chargeable to your account shall be deemed as an
additional advance and shall become part of the Obligations. You will be charged
with interest on all sums advanced or charged under this Agreement and upon all
other sums owed by you to us of every kind and nature at the Interest Rate (as
such term is defined below) then in effect. In the event the amount of the sums
advanced or charged to you under this Agreement together with any other
agreement between us (collectively "This Agreement"), exceeds the amount
available to you pursuant to paragraph 4(a) of this Agreement (hereinafter
sometimes referred to as an "Overadvance") on each of ten (10) or more days in
any month the Interest Rate charged to you for that month shall be at the Prime
Rate plus 1.75% without regard as to whether any such Overadvance is made with
or without our knowledge or consent. On the first day of the following month, we
will credit you with interest on any net credit in your favor during such month
at the Interest Rate in effect hereunder for advances during such month except
that no credits shall bear interest subsequent to the weighted average due date
of the Receivables creating such credits. In addition, interest on advances
shall be charged from the date of the advance up to and including the last day
of the month.
(b) In no event shall the Interest Rate and any other charges
hereunder exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that a court determines that we have received interest and other
charges hereunder in excess of the highest rate permissible under law, such
excess shall be deemed received on account of, and shall automatically, be
applied to reduce, the Obligations arising under or in connection with this
Agreement other than interest, and the provisions hereof shall be deemed amended
(to provide for the highest permissible rate allowable under the law. If there
are no such Obligations outstanding, we shall refund any such excess to you.
13. On or about the 15th day of each month we shall render a statement to
you covering the activity in your account over the previous month. Each such
account as shall be rendered by us shall be deemed correct in all respects and
shall be deemed conclusive and binding upon you and shall be admissible and
conclusive in evidence in any action unless we are notified by you and confirmed
by us in writing to the contrary within thirty (30) days after the date of the
rendering of such statement. In the event of timely objection to any such
statement, only the items expressly objected to in your notice of objection
shall be deemed to be disputed by you. In the event that we provide to you or on
your behalf copies of additional statements, reports or accountings with respect
to the Receivables or otherwise in connection herewith, you shall pay to us an
additional fee in the amount of $50.00 for each such additional statement,
report or accounting, which fee is due and payable on the date of the issuance
by us of such additional statement, report or accounting, and which fee shall be
included as part of the Obligations.
14. You shall pay us a factoring commission for our services hereunder
which commission shall be and become due and payable to us on the 15th day of
each month in which we purchase your Receivables, such factoring commission to
be in an amount equal to 1 1/8 (1.125%) per cent of the amount of your gross
sales. The minimum factoring commission on each invoice in respect of any
Receivable shall be $5.00. The minimum aggregate factoring commissions payable
under this Agreement for each contract year hereof shall be $0 which to the
extent of any deficiency shall be chargeable to your account with us. Factoring
commissions payable to us hereunder are based upon your usual and regular terms
of sale which do not exceed 75 days. On all Receivables for which there is a
change of terms, in addition to any service fee for such change, our commission
thereon shall be increased at the rate of twenty-five (25%) per cent of the
basic commission rate for each additional thirty (30) days or fraction thereof
by which your regular terms are increased. No Credit Approval for such change in
terms, however, shall he granted without our prior written approval.
15. (a) We shall have the right to terminate this Agreement at any time
upon not less than sixty (60) days' prior written notice or immediately upon
any Default, as defined hereinbelow. This Agreement shall continue in effect
until one year from the date hereof and shall automatically be renewed from year
to year thereafter unless you notify us of your termination to be effective on
any anniversary of this Agreement by giving us not less than sixty (60) days'
prior written notice. Notice of termination, whether by you or by us, shall be
sent by certified mail, return receipt requested with postage prepaid. All of
our rights and your Obligations arising out of transactions having their
inception prior to termination shall not he affected thereby. Upon any
<PAGE>
termination of this Agreement all Obligations shall be deemed to be immediately
due and payable to us, and after such termination any credit balance in your
favor shall continue to he held by us, without interest, until a final
accounting is rendered unless you shall fumish us with an undertaking
satisfactory to us against any items chargeable to you hereunder.
(b) In the event of your early termination of this Agreement, whether by
virtue of a default hereunder or at your election as set forth hereinabove, you
agree to pay us in cash or other immediately available funds, and in addition to
all other Obligations, an early termination fee as and for our liquidated
damages resulting from such early termination in an amount equal to the greater
of the minimum commission as set forth in paragraph "14" hereof reduced by any
commissions already paid during that contract year or an amount equal to (i) the
percentage for our factoring commission as set forth in paragraph "14" herein
multiplied by the aggregate amount of your Receivables for the twelve (12) month
period immediately preceding the date of notice of such early termination, as
determined by us in our sole and absolute discretion; (ii) divided by twelve
(12); and (iii) multiplied by the number of months (or any part thereof)
remaining in the then current term. Such early termination fee shall be
conclusively presumed to be the amount of our damages sustained by the early
termination which fee you agree is reasonable and proper. The early termination
fee shall be and is included in the Obligations.
16. The occurrence of any one or more of the following shall constitute an
Event of Default hereunder and under any supplement hereto or other agreement by
you with, to, or in favor of us or of any of our subsidiaries or affiliates: (a)
you fail to pay or perform when due any of the Obligations; (b) you breach any
of the terms, covenants, conditions or provisions contained in this Agreement or
any other agreement between us; (c) any present or future representation,
warranty or statement of fact made by you or on your behalf (including any
representation, warranty or statement by any guarantor of your Obligations) to
us in this Agreement or any other agreement, schedule or instrument referred to
herein or therein or related hereto or thereto is false or misleading at any
time; (d) we in good faith believe that because of a change in the conditions or
affairs (financial or otherwise) of you or any guarantor of any of the
Obligations, either (i) the prospect of payment or performance of the
Obligations is impaired or (ii) the collateral is not sufficient to fully secure
the Obligations; and (e) the occurrence of any of the following with respect to
you or any guarantor of any of the Obligations: dissolution; a termination of
existence; insolvency; business cessation or suspension; calling of a meeting of
creditors; appointment of a receiver for any property; assignment for the
benefit of creditors; commencement of any voluntary or involuntary proceeding
under any bankruptcy or any other insolvency law; entry of any court order which
enjoins or restrains the conduct of business in the ordinary course. Upon the
occurrence of any Event of Default hereunder we shall have all the rights and
remedies of a secured party under the Uniform Commercial Code and other
applicable laws with respect to all collateral in which we have a security
interest. We may but are not obligated to sell or cause to be sold any or all
such collateral, in one or more sales or parcels, at such prices and upon such
terms as we may deem best, and for cash or on credit or for future delivery and
whether by public or private sale as we may deem appropriate. Unless the
collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, we shall give you reasonable
notice of the time and place of any public sale of collateral owned by you or of
the time after which any private sale or any other intended disposition thereof
is to be made. The requirements of reasonable notice shall be met if any such
notice is mailed, postage prepaid, to your address shown herein, at least five
(5) days before the time of the sale or disposition thereof. We may be the
purchaser at any such public sale. The proceeds of sale of such collateral shall
b e applied first to all costs and expenses of and incident to any such sale,
including our attorneys' fees and then to the payment, in such order as we may
elect, of all sums owing to us hereunder. We shall return any excess to you,
subject to the rights of third parties or as otherwise required by applicable
law, and you shall remain liable for any deficiency. In addition, upon any
default interest shall be charged on all Obligations at the "Default Rate" which
Default Rate shall be in the amount of 2% in excess of the Overadvance Rate.
17. Any delay or failure on our part to enforce, any right or privilege
hereunder, or our waiver of any default by you as to any term of this Agreement,
shall not constitute a waiver of our rights or privileges with regard to any
subsequent or continuing default and no waiver whatsoever shall be valid unless
in writing and signed by us and then only to the extent therein set forth.
<PAGE>
18. You shall not be entitled to pledge our credit upon or in connection
with any of your purchases, or for any other purpose whatsoever.
19. Each of the parties expressly submits and consents to the jurisdiction
of the Supreme Court of the State of New York with respect to any controversy
arising out of or relating to this Agreement or any supplement hereto or to any
transactions in connection herewith and hereby waives personal service of the
summons and complaint or other process or papers to be issued therein and hereby
agree that service of such summons and complaint or process may be made by
Registered or Certified Mail addressed to the other party at the address
appearing herein. Failure on the part of either party to appear or answer within
thirty (30) days after the mailing of such summons, complaint or process shall
constitute a default entitling the other party to enter a judgment or order as
demanded or prayed for therein.
20. All interest for slow payments by your customers will be charged
directly to your account.
21. You hereby indemnity us and hold us harmless from and against any loss,
liability, claim and expense of every kind and nature, including our attorneys'
fees and disbursements, arising from any claim, dispute, action and pricing by
or against you or against any of your customers or any other party with regard
to any Receivable or this Agreement.
22. From time to time we may designate certain account debtors as SPECIAL
RISK. We may notify you in writing at any time and from time to time of account
debtors as to which we have so designated. Receivables arising out of sales to
account debtors which we have notified you as being SPECIAL RISK shall he
subject to a surcharge of 2% in addition to the other charges set forth in this
Agreement.
23. This Agreement cannot he modified orally and can only be modified or
amended by a written instrument signed by you and by us. This Agreement
supersedes any prior agreement or agreements between us and neither of us shall
be bound by anything not expressed herein or in any other writing entered into
simultaneously herewith or subsequent to the date hereof.
24. This Agreement, made in the State of New York, shall be construed,
interpreted and enforced according to the laws of the State of New York and
shall be binding upon and inure to the benefit of the parties hereto, their
successors, executors, administrators and assigns. If in the event of litigation
between the parties over any matter connected with this Agreement or resulting
from transactions hereunder, the right to a trial by jury is hereby waived.
ACCEPTED AND AGREED: Very truly yours,
ROCKY MOUNT UNDERGARMENT CO., INC. FINOVA CAPITAL CORPORATION
/s/ JOSEPH PASCAL By: /s/ JOSEPH DEHLER
- ---------------------------------- -----------------------------
Joseph Pascal, President Joseph Dehler, Vice President
56-1385522
- ---------------------------------
Factored Client's Tax I.D. Number
CERTIFICATE OF CORPORATE RESOLUTIONS
I Paul Sutton, do hereby certify that I am Secretary of Rocky Mount
Undergarment Co., Inc., a corporation organized and existing in good standing
under the laws of the State of Delaware and that a special meeting of the Board
of Directors thereof, duly held on March 29, 1995, at which a quorum was
present, the following resolution was duly and unanimously adopted:
<PAGE>
"RESOLVED: That any officer or officers of this corporation be and they are
authorized and empowered to enter into and execute, on behalf of the
corporation, an agreement with FINOVA CAPITAL CORPORATION, relating to the sale,
assignment, negotiation and guarantee to said FINOVA CAPITAL CORPORATION of
accounts, chattel mortgages, notes, drafts, acceptances, bills and other
commercial receivables, collectively referred to as "receivables", and/or
relating to the consignment, security interest, pledge, mortgage, factor's lien,
or other hypothecation of merchandise or other property now or hereafter
belonging to or acquired by the corporation to or with FINOVA CAPITAL
CORPORATION, and from time to time to modify or supplement said agreement and to
make and modify or supplement arrangements with said FINOVA CAPITAL CORPORATION
as to the terms or conditions on which receivables are to be sold, assigned or
negotiated, and on which merchandise or other property, now or hereafter
belonging to or acquired by the corporation, may be consigned, pledged,
mortgaged, liened or otherwise hypothecated to or with FINOVA CAPITAL
CORPORATION, and/or with respect to which this corporation may grant FINOVA
CAPITAL CORPORATION a security interest; and they or any of them are hereby
further authorized and empowered from time to time to execute and deliver any
and all assignments, schedules, transfers, endorsements, drafts, guarantees,
agreements or other instruments granting a security interest, or of assignment
or receivables or pledge or hypothecation of merchandise and to execute and
deliver any and all instruments and powers of attorney and do and perform all
acts and things necessary, convenient, or proper to carry out, supplement or
modify and such agreement and arrangements made with FINOVA CAPITAL
CORPORATION; hereby ratifying, approving and confirming all that any said
officer has done or may do in the premises".
I further certify that the foregoing resolutions remain in full force, have
not been rescinded or modified, and conform with the charter and by-laws of the
corporation.
I WITNESS WHEREOF, I have hereunto set my hand as Secretary of said
corporation and affixed its corporate seal by order of its Board of Directors,
this 31st day of March, 1995.
Certificate approved:
/s/ Joseph Pascal
- ------------------------------- -------------------------------------
Joseph Pascal, President (Corporate Seal)
GUARANTY
New York March 31, 1995
1. In consideration of and in order to induce FINOVA Capital Corporation
("FINOVA"), its successors, endorsees or assigns to grant and continue to grant
such advances, loans or extensions of credit directly or indirectly to the
factored client which is a party to the annexed Factoring Agreement
(hereinafter, whether one or more, called "Borrower") and to grant to Borrower
such renewals, extensions, forbearances, releases of collateral or other
relinquishment of legal rights as FINOVA may deem advisable, and for other good
and valuable consideration, receipt of which is hereby duly acknowledged, the
undersigned Guarantor(s) (hereinafter, whether one or more, called "Guarantor",
who, if two or more in number, shall be jointly and severally bound) for the
undersigned Guarantor and for their heirs and personal representatives, or
successors, and assigns of the undersigned Guarantor, hereby absolutely and
unconditionally guarantees to FINOVA, its successors, endorsees and assigns, the
prompt and unconditional payment when due (whether at maturity, by acceleration
or otherwise) and at all times thereafter of any and all obligations or
liabilities of every kind, nature and character (including all renewals,
extensions and modifications thereof) of Borrower to FINOVA, its successors,
endorsees or assigns howsoever created or arising, whether or not represented by
negotiable instruments or other writings, whether now existing or hereafter
incurred, whether originally contracted with FINOVA or with another and assigned
<PAGE>
or transferred to FINOVA or otherwise acquired by FINOVA, whether contracted by
Borrower alone or jointly with others, and whether absolute or contingent,
secured or unsecured, matured or unmatured, including but not limited to any
and all sums, late charges, disbursements, expenses, legal fees and any
deficiency upon enforcement of collateral, agreements and contracts in
connection with all of such obligations.
2. Undersigned Guarantor consents that without notice to or further assent
by undersigned Guarantor, the obligation of Borrower or of any other party for
the liability hereby guaranteed may be renewed, extended, modified, prematured
or released by FINOVA as it my deem advisable in its sole and absolute
discretion, and that any security or securities which FINOVA holds may be
exchanged, sold, released, or surrendered by it, as it may deem advisable in its
sole and absolute discretion, without impairing or affecting the obligation of
undersigned Guarantor hereunder.
3. Undersigned Guarantor waives any and all notice of the acceptance of
this guaranty, or of the creation, renewal or accrual of any obligations or
liability of Borrower to FINOVA, present or future, or of the reliance of FINOVA
upon this guaranty. Any and every obligation or liability of Borrower to FINOVA
herein described shall conclusively be presumed to have been created, contracted
or incurred in reliance upon this guaranty, and all dealings between Borrower
and FINOVA shall likewise be presumed to be in reliance upon this guaranty.
Undersigned Guarantor waives protest, presentment, demand for payment, notice or
default or non-payment and notice of dishonor to or upon undersigned Guarantor,
Borrower or any other party liable for any of Borrower's obligations hereby
granted.
4. This guaranty shall he construed as an absolute and unconditional
guaranty of payment without regard to the validity, regularity or enforceability
of any obligation or purported obligation of Borrower. FINOVA shall have all of
its remedies under this guaranty without being obliged to resort first to any
security or to any other remedy or remedies to enforce payment or collection of
the obligations hereby guaranteed and may pursue all or any of its remedies at
one or at different times. FINOVA is hereby given a continuing lien for the
purposes and security of this guaranty as well as for any other obligation or
liability (present or future, absolute or contingent, due or not due) of
undersigned Guarantor to FINOVA upon all property and securities now or
hereafter given unto or left in the possession or custody of FINOVA for any
purpose (including property left in safekeeping or custody), by or for the
account of any undersigned Guarantor, and also upon any deposits with or any
credit or claim of any undersigned Guarantor against FINOVA existing from time
to time. FINOVA is hereby authorized and empowered, upon the occurrence of any
of the events set forth in the next succeeding paragraph, to appropriate and
apply to the payment and extinguishment of the liability of undersigned
Guarantor any and all such monies, property, securities, deposits or credit
balances without demand, advertisement or notice, all of which are hereby
expressly waived.
5. Upon the default of Borrower or any undersigned Guarantor with respect
to any obligations or liabilities of either of them to FINOVA or in the event
Borrower or any undersigned Guarantor shall die or become insolvent or make an
assignment for the benefit of creditors, or if a petition in bankruptcy be filed
by or against Borrower or any undersigned Guarantor, or in the event of the
appointment of a receiver (either at law or in equity) of Borrower or of any
undersigned Guarantor, or in the event that a judgment is obtained or warrant of
attachment issued against Borrower or any undersigned Guarantor, or in the event
that the financial or business condition of any of them shall so change as in
the opinion of FINOVA will materially impair its security or increase its risk,
all or any part of the obligations and liabilities of Borrower and/or of
undersigned Guarantor to FINOVA, whether direct or contingent, and of every kind
and description, shall, without notice or demand, become immediately due and
payable insofar as this guaranty is concerned, and shall be taken up forthwith
by undersigned Guarantor, and in any of such events, and whether or not the said
liabilities and obligations are due and payable, FINOVA may (in addition to, and
subject to its rights and remedies under the terms of any special contract with
Borrower), without demand of performance or advertisement or notice of intention
to sell or of time or place of sale, or to redeem, or other notice whatsoever to
undersigned Guarantor or to Borrower (all and each of which demands,
advertisements and notices being hereby expressly waived), sell any and all
collateral which it may hold for said obligations, or under this guaranty, in
one or more parcels, at public or private sale, at FINOVA's office or elsewhere,
at such prices as FINOVA may deem best, either for cash or credit, with the
<PAGE>
right of FINOVA at any such sale, public or private, to purchase the whole
or any part of said collateral free from any right or equity of redemption,
which right or equity is hereby expressly waived. FINOVA may, in its
uncontrolled discretion, apply the net proceeds of such sale or sales to payment
on account of the obligations or liabilities of Borrower and undersigned
Guarantor in such manner and order of priority as FINOVA may, in its absolute
and uncontrolled discretion, elect. If, in the opinion of the FINOVA, any
collateral deposited hereunder cannot be freely sold or disposed of at public or
private sale (because of any relationship between the owner and issuer thereof
or otherwise), FINOVA shall have the unqualified right (in addition to all other
rights hereunder) to sell the same, or any part thereof, to a purchaser or
purchasers, under investment letters, for a negotiated price or prices which,
under such circumstances, shall be deemed to be fair and equitable.
6. Any stocks, bonds or other securities held by FINOVA hereunder may,
whether or not Borrower or undersigned Guarantor is in default, be registered
and held in the name of FINOVA or its nominee, and FINOVA or said nominee may
exercise all voting and corporate rights relating thereto as if the absolute
owner thereof.
7. The term "Borrower" as used herein shall include the individual or
individuals, association, partnership or corporation named herein as Borrower,
and (a) any successor individual or individuals, association, partnership or
corporation to which all or substantially all of the business or assets of said
Borrower shall have been transferred, (b) in the case of a partnership Borrower,
any new partnership which shall have been created by reason of the admission of
any new partner or partners therein and/or the dissolution of the existing
partnership by the death, resignation, or other withdrawal of any partner, and
(c) in the case of a corporate Borrower, any other corporation into or with
which said Borrower shall have been merged, consolidated, reorganized, purchased
or absorbed. The right of the FINOVA to hold, deal with and dispose of the
property deposited by undersigned Guarantor hereunder, as herein provided, shall
continue unimpaired notwithstanding any invalidity or unenforceability of this
guaranty as against undersigned Guarantor personally.
8. FINOVA's books and records showing the account between FINOVA and
Borrower shall be admissible as evidence in any action or proceeding, shall be
binding upon the undersigned Guarantor for the purpose of establishing the items
therein set forth and shall constitute prima facie proof hereof. FINOVA's
monthly statements rendered to Borrower shall, to the extent to which no written
objection is made within thirty (30) days after the date thereof, constitute an
account stated between FINOVA and Borrower and be binding upon the undersigned
Guarantor.
9. The undersigned Guarantor waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which the
undersigned Guarantor may now or hereafter have against Borrower, or any person
other than a coguarantor directly or contingently liable for the obligations
guaranteed hereunder, or against or with respect to the Borrower's property
(including without limitation, property collateralizing the undersigned
Guarantor's obligations to FINOVA) arising from the existence or performance of
this guaranty. In furtherance and not in limitation of the preceding waiver, the
undersigned Guarantor agrees that any payment to FINOVA by the undersigned
Guarantor pursuant to this guaranty shall be deemed a contribution to the
capital of the Borrower or other obligated party, and any such payment shall not
constitute the undersigned Guarantor a creditor of any such party.
10. The undersigned Guarantor represents and warrants that there is no
existing indemnification agreement, whether qualified or unqualified, between
the undersigned and Borrower. The undersigned waives any right he may otherwise
have to seek a stay from any United States Bankruptcy Court, in which Borrower
may become a debtor, of any claim or cause of action hereinafter asserted
against the undersigned Guarantor on his guaranty, whether in an action
commenced against the undersigned as a guarantor prior to or instituted
following the filing a Chapter 11 petition by or against Borrower. The
undersigned Guarantor further acknowledges that this waiver hereinabove, is
specifically provided to FINOVA as an inducement to it to effect the financial
accommodations provided by FINOVA to Borrower.
<PAGE>
11. This guaranty shall, without further reference, pass to, and may be
relied upon and enforced by, any successor or assignee of FINOVA and any
transferee or subsequent holder of any of said liabilities or obligations of
Borrower. This guaranty may be terminated (but only insofar as it may relate to
obligations of Borrower arising subsequent to such termination) upon written
notice to that effect delivered by undersigned Guarantor to an officer of
FINOVA, such termination to be effective only upon the execution by such officer
of a written receipt therefor, and in the event of such termination, undersigned
Guarantor and his or their respective executors, administrators or successors
and assigns shall nevertheless remain liable with respect to obligations
incurred or arising theretofore, and with respect to such obligations and any
renewals, extensions or other liabilities arising out of same, this guaranty
shall continue in full force and effect, and FINOVA shall have all the rights
herein provided for as if no such termination had occurred.
12. The undersigned Guarantor does hereby waive any and all right to a
trial by jury in any action or proceeding based hereon. This guaranty and the
rights and obligations of FINOVA and of the undersigned Guarantor shall be
governed and construed in accordance with the laws of the State of New York. The
undersigned Guarantor hereby consents to the jurisdiction of the Supreme Court
of the State of New York for a determination of any dispute connected with this
guaranty and authorizes the service of process on the undersigned Guarantor by
registered or certified mail sent to the undersigned Guarantor at the address or
addresses of the undersigned Guarantor, as the case may be as herein set forth
or as set forth on any record maintained by FINOVA. This guaranty cannot be
changed or terminated orally, shall be interpreted according to the laws of the
State of New York, shall be binding upon the heirs, executors, administrators,
successors and assigns of the undersigned Guarantor and shall inure to the
benefit of FINOVA's successors and assigns.
13. Guarantor agrees that, whenever an attorney is used to obtain payment
under or otherwise enforce this guaranty or to enforce, declare or adjudicate
any rights or obligations under this guaranty or with respect to collateral,
whether by legal proceeding or by any other means whatsoever, FINOVA's
reasonable attorney's fee plus costs and expenses shall be payable by each
Guarantor against whom this guaranty or any obligation or right hereunder is
sought to be enforced, declared or adjudicated. Guarantor, if more than one,
shall be jointly and severally bound and liable hereunder and if any of the
undersigned is a partnership, also the members thereof individually. FINOVA and
Guarantor, in any litigation (whether or not arising out of or relating to
obligations, liabilities or collateral security or any of the matters contained
in this guaranty) in which FINOVA and any of them shall be adverse parties,
waive trial by jury. In addition, Guarantor waives the performance of each and
every condition precedent to which Guarantor might otherwise be entitled by law.
FINOVA shall have the right to fill in any blank spaces left in this guaranty
(including the name of "Borrower"), to date this guaranty and to correct patent
errors therein.
14. The Guarantor acknowledges that this guaranty and the Guarantor's
obligations under this guaranty are and shall at all times continue to be
absolute and unconditional in all respects and shall at all times be valid and
enforceable irrespective of any other agreements or circumstances of any kind or
nature whatsoever which might otherwise constitute a defense to this guaranty
and the obligations of the Guarantor under this guaranty or the obligations of
any other person or party (including, without limitation, the Borrower) relating
to this guaranty or the obligations of the Guarantor hereunder or otherwise with
respect to any transactions involving the Borrower and FINOVA. This Guaranty
sets forth the entire agreement and understanding of FINOVA and Guarantor and
Guarantor absolutely, unconditionally and irrevocably waives any and all right
to assert any defense, set-off, counterciaim or cross-claim of any nature
whatsoever (including, but not limited to, fraud in the inducement and
commercial disposition of collateral of the Guarantor or Borrower) with respect
to this Guaranty or the obligations of the Guarantor under this guaranty or the
obligations of any other person or party (including, without limitation,
Borrower) relating to this guaranty or the obligations of the Guarantor under
this guaranty or otherwise with respect to any transactions involving the
Borrower and FINOVA in any action or proceeding brought by its successors and
assigns, to collect the Debt or any portion thereof, or to enforce, the
obligations of the Guarantor under this guaranty. The Guarantor acknowledges
that no oral or other agreements, understandings, representations or warranties
exists with respect to this guaranty or with respect to the obligations of the
Guarantor under this guaranty, except as specifically set forth in this
guaranty.
<PAGE>
15. No executory agreement and no course of dealing between undersigned
Guarantor and FINOVA sha11 be effective to change or modify this guaranty in
whole or in part; nor shall any change, modification or waiver of any rights or
powers of FINOVA be valid or effective unless, in writing or signed by an
authorized officer of FINOVA.
IN WITNESS WHEREOF, the undersigned Guarantor has hereunto set his hand
and seal the day and year first above written.
/s/ JOSEPH PASCAL /s/ PAUL SUTTON
- -------------------------(L.S.) --------------------------------(L.S.)
Joseph Pascal, Guarantor Paul Sutton, Guarantor
41 Flower Lane Columbia Palace
Great Neck, NY 11024 Princess Grace Avenue
Monte Carlo, Monaco
###-##-#### NO.
- ------------------------- --------------------------------
Social Security Number Social Security Number
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK)
On this 31st day of March, 1995, before me personally appeared Joseph
Pascal and Paul Sutton to me known, and known to me to be the individuals
desribed in and who executed the foregoing instrument and they duly and
severally acknowledged to me that they executed the same.
--------------------------------
Notary Public
<PAGE>
Exhibit 2
<PAGE>
FINOVA CAPITAL CORPORATION
111 West 40th Street
New York, NY 10018
March 31, 1995
Rocky Mount Undergarment Co., Inc.
350 Fifth Avenue
New York, New York
Gentlemen:
We understand that you may be forwarding to us invoices in the names of
various divisions set forth on Schedule A set forth below (collectively, the
"Tradestyles"). We agree to receive your invoices in the names of the
Tradestyles for consideration of acceptability as collateral for advances under
the factoring agreement dated March 31, 1995 (the "Factoring Agreement"), based
upon your confirmation and agreement hereby made to us as follows:
1. Each of the Tradestyles is a tradename and style (and not the name of
any separate operating corporation or other legal entity) by which you
identify and sell certain of your products or provide certain services
and under which you conduct a portion of your business;
2. You do not, and you will not without prior written notification to us,
issue invoices therefor under any name other than your corporate name or
the Tradestyles;
3. All Accounts (as such term is defined in the Factoring Agreement),
proceeds thereof and returned merchandise which arise from the sale of
products or rendition of services invoiced under the Tradestyles or any
other trade name or style used by you hereafter shall be owned solely by
you and shall be subject to all the terms and conditions of the
Factoring Agreement;
4 Accordingly, all schedules of Accounts delivered to us by you which
include any sales or services invoiced under any of the Tradestyles or
any trade name or style used by you hereafter, shall show your actual
name as assignor; and we are authorized to receive, endorse and deposit
to your account with us all checks representing payment with respect to
such sales or services, including checks payable to any of the
Tradestyles or such other trade name or styles.
<PAGE>
SCHEDULE A - Tradestyles
of
Rocky Mount Undergarment Co., Inc.
Rocky Mount
Stretch Mates
Blossoms
Blossom Creations
Blosson Nite-T's
Cotton Blossom
Orange Blossom
Capezio
Marion Rohr
Silks
FINOVA Capital Corporation
By: /s/ Joseph Dehler
-------------------------------
Joseph Dehler, Vice President
AGREED:
ROCKY MOUNT UNDERGARMENT CO., INC.
By: /s/ Joseph Pascal
---------------------------
Joseph Pascal, President
<PAGE>
Exhibit 3
<PAGE>
FINOVA
March 31, 1995 FINOVA CAPITAL CORPORATION
FACTORING SERVICES
111 WEST 40TH STREET
Rocky Mount Undergarment Co., Inc. 14TH FLOOR
350 Fifth Avenue NEW YORK, NEW YORK 10018
New York, NY 10018
TEL 212 403 0700
FAX 212 403 0799
Gentlemen:
From time to time, our Credit Department will designate certain customers as
"Special Risk Accounts".
These accounts will be subject to a 2% surcharge and paragraph 3 of our
Factoring Agreement is hereby amended to reflect said surcharge.
At the present time, the following customers are designated as "Special Risk
Accounts".
Jay Jacobs Gantos
Bergners P.A. MGRE (Merry Go Round Ent.)
Bill's Dollar Stores Leslie Fay
Carlisle's McCrorys D.I.P.
National Merchandise Spitalnick Design Studios
Lamonts Roses Stores
No Name Mothercare
Broadway Store
In the future, additional names may be submitted to you designated as "Special
Risk Accounts" for your approval.
Please indicate your acceptance in the space provided below.
Very truly yours,
Joseph Dehler
Portfolio Manager
FINOVA CAPITAL CORPORATION
AGREED AND ACCEPTED
By:_________________________________
Title:
<PAGE>
Exhibit 4
<PAGE>
ASSIGNMENT OF FACTORING PROCEEDS
ROCKY MOUNT UNDERGARMENT CO., INC., a Delaware corporation having an
office located at 350 Fifth Avenue, New York, New York and Marian Rohr Corp., a
New York Corporation located at 350 Fifth Ave., New York, NY (collatively
("Client"), hereby assigns to FINOVA Capital Corporation, a Delaware
corporation, having an office and place of business located at 111 West 40th
Street, New York, New York 10018 ("Assignee"), all of the funds now or hereafter
payable to the Client by Rosenthal & Rosenthal, Inc,, a New York corporation,
having its principal place of business located at 1370 Broadway, New York, N.Y.
10018 ("Factor"), pursuant to the factoring agreement dated January 29, 1993
(Rocky Mount Undergarment Co., Inc.) and December 3, 1991 (Marion Rohr, Corp.),
between the Client and Factor ("Factoring Agreement").
Assignee understands and acknowledges that: (a) the amount of funds, if
any, that may be payble at any time pursuant to the Factoring Agreement is
uncertain; and (b) Client's account with Factor is subject to the rights of the
Factor to make various adjustments and charges, including without limitation the
Factor's rights to charge Client's account for any indebtedness of the Client
for purchases from any company whose accounts are also assigned to Factor, any
disputed accounts and other items and sums, and the right to retain any monies
which may otherwise be due Client until such time as all of the Client's
obligations to Factor have been indefeasibly paid in full. Any credit balance
shown on any statement of account is provisional only and is subject to such
charges.
Client hereby authorizes and directs Factor to pay to Assignee, and
Factor agrees to pay to Assignee, such sums as the Factor in its sole discretion
determines to be payable to the Client from time to time pursuant to the
Factoring Agreement Factor is hereby authorized to recognize Assignee's claim to
monies hereunder without investigating the reason for any action taken by
Assignee or the validity or the amount of the obligations of Client to Assignee.
Assignee warrants and represents to Factor that the aforementioned
assignment, transfer and security interest granted to it by Client has been or
shall be validly perfected in all respects pursuant to the Uniform Commercial
Code or other applicable law, and Assignee alone is entitled to receive all
amounts otherwise available to the Client, pursuant to the Factoring Agreement.
Assignee, therefore, hereby agrees to indemnity and to hold Factor harmless from
any and all liability or expense which arises out of any claims that may be
asserted by others by reason of Assignee's acceptance of this assignment and the
making of remittances as herein provided hereunder.
This Agreement cannot be amended or terminated without the prior written
consent of the Factor, the Client and the Assignee. Until this Agreement is
terminated pursuant to the preceding paragraph, the Client agrees that it will
not borrow from or obtain any loan, secured or unsecured, from the Factor, nor
take any advance or anticipated payment against any monies due under the
Factoring Agreement, or have the Factor guaranty any amount due or to become due
from the Client to any third party, or have the Factor open any Letters of
Credit on behalf of the Client. The Factor agrees to the provisions of this
paragraph. The validity, interpretation and enforcement of this Agreement shall
be governed by the laws of New York State. This Agreement shall bind and benefit
the parties and their respective successors and assigns.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement this 31st day of March, 1995.
ROCKY MOUNT UNDERGARMENT CO., INC.
By: /s/ JOSEPH PASCAL
----------------------------------
Joseph Pascal, President
ACCEPTED AND AGREED
FINOVA CAPITAL CORPORATION MARION ROHR CORP.
By: /s/ JOSEPH DEHLER /s/ JOSEPH PASCAL
- ---------------------------------- ----------------------------------
Joseph Dehler, Vice President Joseph Pascal, President
ROSENTHAL & ROSENTHAL, INC.
By:
---------------------------------
, Vice President
<PAGE>
Exhibit 5
<PAGE>
FINOVA CAPITAL CORPORATION
111 West 40th Street
New York, New York 10018
March 31, 1995
To: Rosenthal & Rosenthal Inc.
1370 Broadway
New York, NY 10018
Re: Rocky Mount Undergarment Co., Inc. and Marion Rohr Corp.
(FACTORED CLIENT, herein "the Company")
Gentlemen:
1. To induce you to terminate your factoring arrangements with the above named
Company as of March 31, 1995 (herein the "termination date"), and to limit
your security interest in the accounts receivable of the Company, all as
more fully set forth hereinafter, and in consideration of your doing the
following as of said termination date:
Transferring to us weekly any matured balance standing to the credit of the
Company on your books, and we agree to pay to you the balance of the
Company on your books which you estimate is approximately $1,657,500 and on
demand thereafter.
a. all amounts relating to accounts receivable factored by you on or prior
to the termination date, and all amounts of interest, fees, expenses
and any additions arising out of clerical errors and omissions, which
you are or may hereafter be entitled to charge to the Company in
accordance with your factoring contract with the Company;
b. all amounts paid by you after the termination date pursuant to the
guarantees, letters of credit and drafts, none of which may be amended
in any way without our prior written consent in each instance, listed
on the attached Schedule [none] (if none, so state); and
c. all amounts owing by the Company to you as of the termination date by
reason of the Company's purchases of goods or services from any concern
for whom you act as factor, as invoices therefore become due (herein
"ledger debt").
<PAGE>
Subject to the following provisions, your demands for any of the aforesaid
amounts shall be conclusive upon us.
2. Our obligations under this letter do not extend to:
a. any accounts receivable approved by you as to credit which remain
unpaid solely because of the financial inability of the customer to pay
at maturity; or
b. spurious accounts receivable which did not in fact arise from the
actual sale of merchandise or the rendering of services, provided,
however, that if you notify us promptly of any losses attributable to
your factoring of any such spurious accounts, we shall pay you the
amount thereof up to the amount of any credit balance transferred by
you to us, less any other payments made or to be made by us to you
under this letter.
3. This agreement is entered into by us in reliance upon your representations
that to your knowledge as of March 30, 1995; (a) outstanding accounts
receivable total approximately $1,162,500; (b) of these accounts,
approximately $55,000 are with full recourse to the Company; (c) of these
accounts approximately $0 represent known bill and hold sales and known
consignment, sale on approval, or sale or return transactions; and (d)
outstanding ledger debt does not exceed approximately $4,500. In addition,
you have further represented to us that to your knowledge (other than for
discounts permitted by the payment terms of the accounts receivable) all
disputes, claims, defenses, offsets or counterclaims which exist with
respect to the outstanding accounts receivable are routine in nature, do
not in any one instance involve more than $6,000 and do not exceed $6,000
in aggregate, except as listed on the attached Schedule [none] (if none, so
state).
4. You hereby release, as of the termination date, any and all security
interests and liens which have heretofore been granted to you by the
Company except as to accounts receivable factored by you on or prior to the
termination date, any merchandise represented thereby (delivered or
undelivered), and any proceeds thereof. Appropriate releases and
termination statements are delivered herewith.
5. You agree to remit to us any amounts which the Company may be entitled to
receive from you, from time to time, upon the adjustment of its account
with you. If we so request, you agree to assign to us, without recourse,
your rights in any accounts receivable for which we have made payment to
you hereunder and any merchandise represented thereby, and you will supply
us with appropriate supporting details thereof in your possession,
including but not limited to copies of invoices, proofs of shipment and
statements.
6. We agree to remit to you any collections that we may subsequently receive
on any accounts receivable factored by you on or prior to the termination
date; and you agree to remit to us any collections that you may
subsequently receive on any other accounts receivable. Furthermore, you
agree to remit to us any collections that you may subsequently receive on
<PAGE>
any accounts for which payment has been made by us to you. These
obligations shall be irrevocable and shall survive the date set forth in
Paragraph 8 below.
7. In the event that any payment which is the subject of remittance by one of
us (the "Remitter") to the other (the "Recipient") pursuant to Paragraph 6
above is sought to be recovered by the payor or a representative thereof
(including a trustee in bankruptcy or assignee for the benefit of
creditors) on the grounds of preference, then the Remitter shall promptly
so advise the Recipient in writng. Following the aforementioned written
notice, the Recipient shall have the exclusive right and obligation, at its
sole cost and expense, to contest, defend or settle such claim. The
Recipient hereby indemnifies and holds the Remitter harmless from any loss
or expense arising out of the assertion of such claim. This
indemnification shall be irrevocable and survive the date set forth in
paragraph 8 below.
8. Our liability hereunder shall embrace only claims in writing received by us
on or prior to December 31, 1995. Your monthly account current shall
constitute such claim provided that you shall furnish us with such
additional information and supporting details as we may reasonably request
with respect thereto.
If the above correctly sets forth our agreement, please sign the enclosed copy
of this Letter below to so indicate.
Very truly yours,
FINOVA CAPITAL CORPORATION
By: /s/ Joseph Dehler
--------------------------------
Joseph Dehler, Vice President
AGREED:
ROSENTHAL & ROSENTHAL, INC.
By:
------------------------
Title:
---------------------
<PAGE>
To: Finova Capital Corporation
In consideration of your executing and delivering to Rosenthal & Rosenthal
(hereinafter referred to as "Old Factor"), the aforesaid Letter substantially in
the form set forth above, or with such changes in form as may be required to
make it acceptable to Old Factor, we hereby agree to indemnify you and save you
harmless from any loss, claim or liability in connection therewith and to pay
you on demand any amount you pay pursuant to the provisions of such Letter. Your
obligation to make such payments shall be determined exclusively by you,
notwithstanding any judgment we may express to the contrary, and all such
payments shall be conclusive upon us insofar as you are concerned, but shall not
prejudice our rights against Old Factor should we question the propriety of any
demands made by it under the factoring contract or otherwise. Our signature
hereon will further authorize Old Factor to transfer to you: any balance
standing to our credit on its books, any assets of ours presently held by it and
any payments to which you are entitled pursuant to the Letter.
ROCKY MOUNT UNDERGARMENT CO., INC.
By: /s/ Joseph Pascal
------------------------------
Title: President
---------------------------
MARION ROHR CORP.
By: /s/ Joseph Pascal
------------------------------
Title: President
---------------------------
<PAGE>
Exhibit 6
<PAGE>
ROSENTHAL & ROSENTHAL INC.
Factors
1370 BROADWAY [LOGO] NEW YORK, N.Y. 10018
TEL: (212) 356-1400
FAX: (212) 356-0900
March 31, 1995
Richard T. Fountain, Jr., Esq.
Dill, Fountain, Hoyle & Pridgen
330 Sunset Avenue
Rocky Mount, NC 27802-1617
Re: Deed of Trust, Assignment of Rents and Leases, Security
Agreement and Fixture Filing, made as of February 28,
1994 executed by Rocky Mount Undergarment Co., Inc. to
Richard T. Fountain, Jr., Trustee, and Rosenthal &
Rosenthal, Inc., Beneficiary.
Dear Mr. Fountain:
Reference is made to the above-referenced Deed of Trust, Security Agreement
and Fixture Filing and the obligations secured by same, Please be advised that
the obligations have been paid in full and satisfied, and you are hereby
authorized and directed to file a Notice of Satisfaction with respect to the
Deed of Trust, Security Agreement and Fixture Filing.
In connection therewith, enclosed is the original Deed of Trust, Security
Agreement and Fixture Filing, which has been signed and dated in the portion
where "Satisfaction" is indicated.
If you have any questions or further requirements, please contact the
undersigned.
Very truly yours,
Rosenthal & Rosenthal Inc.
BY:
------------------------------
<PAGE>
Exhibit 7
<PAGE>
SECURITY AGREEMENT
[Inventory]
FINOVA CAPITAL CORPORATION March 31, 1995
111 W. 40th Street
New York, N.Y. 10018
Gentlemen:
This letter, when accepted by you, will become a security agreement
supplementing and forming part of the Security Agreement, [Accounts, Contract
Rights, etc.] as dated March 31, 1995:
1. We hereby grant a continuing Security interest in your favor upon all
of our present and hereafter acquired Inventory, and the products and proceeds
thereof. The term "Inventory" includes all our present raw materials,
components, work in process, finished merchandise, and packing and shipping
materials, wherever located; and all such chattels hereafter acquired by us by
way of substitution, replacement, return, repossession or otherwise; and all
additions and accessions thereto, and the resulting product or mass; and any
documents of title representing any thereof. Your Security Interest shall attach
to all of the foregoing without further act on your or our part. Upon your
request, we will from time to time at our expense pledge and deliver such
Inventory to you or to a third party as your bailee; or hold the same in trust
for your account; or store the same in warehouse in your name; or deliver to you
documents of title representing the same; or evidence your Security Interest in
some other acceptable manner. The advances made and to be made hereunder are
primarily to enable us to purchase raw materials and defray the cost of labor
and similar manufacturing expenses which add to the value and marketability of
the finished product manufactured, processed, or otherwise dealt in by us; and
since such advances will be used for the foregoing purposes, your Security
Interest shall be deemed to be a Purchase Money Security Interest.
2. Your said Security Interest shall secure (a) any advances which you
may make hereunder, and (b) any other indebtedness which we may from time to
time owe to you, fixed or contingent, whether arising under the aforesaid
Security Agreement or after the termination thereof, or otherwise arising or
acquired by you, and (c) all interest, charges, commissions, expenses (including
attorneys' frees and legal expenses) and other items chargeable against us by
reason of any of the foregoing. The term "advances" means moneys paid to us or
to others for our account, or obligations to third parties incurred by you at
our request.
3. We agree that the making of Inventory advances is always wholly
discretionary on your part, and that you shall be the sole judge of the amount
of such advances and of the total of such advances and of the total of such
advances to be outstanding at any particular time. All such advances shall be
repayable on demand, and shall bear interest at the same rate as specified in
the aforesaid Security Agreement.
4. We warrant, covenant, and agree that:
(a) All Inventory is and shall remain free from all purchase-money or
other liens or incumbrances except such as are held by you.
(b) You shall have the right at all times to immediately possession
of all Inventory and its products and proceeds, and to inspect the Inventory and
our records pertaining thereto.
(c) We shall insure and keep insured all Inventory for full value,
with such coverage and in such companies as you may approve, at our expense,
and the policies shall be duly endorsed in your favor and delivered to you.
If we default in this regard, you shall have the right to insure and charge the
cost to us. You assume no risk or responsibility in connection with the
payment or non-payment of losses, your only responsibility being to credit us
with any insurance payments received on account of losses.
<PAGE>
(d) All excise, floor, sales and any other taxes that may be assessed
upon or paid by you with respect to any of the Inventory shall be charged to and
paid by us, and we agree to indemnify you against loss by reason of any such
taxes. We will make due and timely payment or deposit of all Federal, State, and
local taxes, assessments or contributions required of us by law, and will
execute and deliver to you, on demand, appropriate Certificates attesting to the
payment or deposit thereof.
(e) None of the Inventory shall be removed or disposed of without
your written consent, except to bona fide purchasers thereof in the ordinary
course of our business and on orders approved by in writing. All our sales shall
be promptly reported to you, and the accounts or other proceeds thereof shall be
subject to your security interest in accordance with the aforesaid Security
Agreement.
(f) You shall not be liable or responsible in any way for the
safekeeping of any of the Inventory, or for any loss or damage thereto or for
any diminution in the value thereof, or for any act or default of warehousemen
or of any carrier, forwarding agency, or other person whomsoever, or for the
collection of any proceeds, but the same shall be at our sole risk at all times.
(g) You shall have the right (but shall not be obliged) to pay and to
charge as an advance to us hereunder any dyeing, finishing, processing, or
warehousing charges, landlord's bills, or other claims against, or liens upon
the Inventory.
5. Our default in the payment or performance of any obligation or
undertaking on our part hereunder, or the happening of any event specified as an
event of default in the aforesaid Security Agreement, shall be an event of
default hereunder. Upon the happening of such or any other event of default, you
shall have, in addition to all rights and remedies of a Secured Party under the
Uniform Commercial Code or other applicable stature or rule, the following
rights and remedies:
(a) You may peaceably by your own means or with judicial assistance
enter our or any other premises and take possession of the Inventory, and remove
or dispose of it on our premises, and we will not assist or interfere with such
action.
(b) You may require us to assemble all or any part of the Inventory
and make it available to you at any place designated by you and reasonably
convenient to both parties.
(c) We agree that a notice sent to us at least 5 days before the date
of any intended public sale or the date after which any private sale or other
intended disposition of the Inventory is to be made, shall be deemed to be
reasonable notice of such sale or other disposition. All notice is waived if the
Inventory is perishable or threatens to deceline speedily in value or is of a
type customarily sold on a recognized market.
(d) In the event of any such public or private sale or other
disposition, we will pay to you on demand any deficiency remaining after
crediting the net proceeds of sale, less all expenses of taking, handling, and
sale, including reasonable counsel fee. All rights of redemption are waived. You
shall account to us for any surplus.
<PAGE>
6. Until we shall notify you in writing to the contrary, you shall be
justified in assuming that our Inventory is and will continue to be principally
kept at our address specified below.
Very truly yours,
Rocky Mount Undergarment Co., Inc.
----------------------------------
(Name of Debtor)
----------------------------------
(Signature)
Joseph Pascal
-------------
(Typed or printed name of signatory)
President
---------
(Typed or printed name of signatory)
-----------------------------------
(Title of signatory)
-----------------------------------
(Address of Debtor)
-----------------------------------
Accepted at New York, N.Y.:
FINOVA CAPITAL CORPORATION
- -----------------------------------
(Name of Secured Party)
by X
-------------------------------
(signature)
- -----------------------------------
(typed or printed name of signatory)
<PAGE>
SECURITY AGREEMENT
(Equipment)
Rocky Mount Undergarment Co., Inc. 350 Fifth Avenue New York, NY 10118
........................................................................
(herein called "Debtor")
and
FINOVA Capital Corporation 111 West 40th Street New York, NY 10018
........................................................................
(herein called "Secured Party") hereby agree as follows:
1. Debtor grants to Secured Party a security interest in the following
Equipment (herein called "Collateral"):
A. All of Debtor's present machinery, equipment, furniture, tools,
dies, jigs, and attachments (including, but not limited to, the items
listed and described on the Schedule of Equipment annexed); and
B. All of Debtor's additional Equipment, of like or unlike nature, to
be acquired hereafter pursuant to this Security Agreement or otherwise, and
all replacements, accessions, and improvements to any of the foregoing.
2. Said security interest shall secure (1) the payment of Debtor's
indebtedness under a certain Factory Agreement dated March 31, 1995 between
the Secured Party and the Debtor; (2) all other existing debts and
liabilities of Debtor to Secured Party; (3) all future advances made by
Secured Party to or for the account of Debtor, including advances for
insurance, repairs to and maintenance of the Collateral, taxes, and discharge
of any other lien, security interest or encumbrance; (4) all other indebtedness,
however created, arising, or acquired by Secured Party, which Debtor may now
or hereafter owe to Secured Party; and (5) all costs and expenses incurred in
the collection of any of the foregoing, including reasonable attorneys' fees.
3. Until default hereunder, Debtor shall be entitled to possession of the
Collateral, which shall be kept only at
...............................................................................
(Street) (City) (County) (State)
and the following additional addresses (if any) See attached Schedule A
................................
...............................................................................
4. Debtor warrants, covenants and agrees that: (1) Debtor is the sole
owner of the Collateral free from any lien, security interest or encumbrance,
has the right to grant Secured Party a security interes therein, and will
defend the Collateral against the claims and demands of all persons; (2)
Debtor shall not sell, lease, encumber, remove, conceal or grant or permit any
further security interest in the Collateral, nor part with possession of any
thereof, nor permit the same to be used for hire not in violation of any law
or ordinance; (3) Debtor shall maintain the Collateral in good condition and
repair at Debtor's sole expense; (4) Debtor will pay all taxes levied on the
Collateral, and will make due and timely payment or deposit of all Federal,
State, and local taxes, assessments or contributions required by law and will
execute and deliver to Secured Party, on demand, appropriate Certificates
attesting to the payment or deposit thereof; (5) No financing statement
covering the Collateral, or any part thereof, is on file in any public office,
and Debtor's present or hereafter-acquired Collateral is and shall not be or
become subject to any purchase-money or other lien or security interest except
in favor of Secured Party; (6) Debtor shall procure and maintain insurance on
the Collateral for the full term of this security agreement, against the
risks of fire, theft and such other risks as Secured Party may require
<PAGE>
(including the risk of collision in case any part of the Collateral is a motor
vehicle) by insurers satisfactory to Secured Party, and shall deliver to
Secured Party a fully paid policy or policies of insurance properly endorsed in
favor of Secured Party; (7) Debtor will permit Secured Party to inspect the
Collateral at any time; (8) Loss, theft, damage, destruction or seizure of the
Collateral shall not relieve the Debtor from the payment of any indebtedness
secured hereby; (9) The Collateral is not now and will not hereafter be so
affixed to realty as to become a part thereof or a fixture; (10) The
execution and delivery hereof, if Debtor is a corporation, has been duly
authorized by all necessary action of Debtor's directors and shareholders;
(11) Secured Party is authorized to execute and file, at Debtor's cost, such
financing statements and other instruments or documents as may be necessary to
perfect and protect Secured Party's security interest; and (12) In case of
Debtor's default in performing any warranty, covenant, or undertaking hereunder,
Secured Party may (but shall not be obliged to) procure the performance thereof
and add the cost thereof, with interest, to the indebtedness secured hereby.
5. The occurrence of any of the following events or conditions shall, at
the option of Secured Party and without notice or demand, constitute an event
of default hereunder: (1) Defaults in the due payment of any indebtedness
secured hereby; or (2) Failure of Debtor to perform any covenant or
undertaking on Debtor's part herein; or (3) Breach of any warranty or falsity
of any representation made by Debtor to Secured Party; or (4) Attachment or
seizure of or levy upon the Collateral; or (5) Institution of any proceeding by
or against Debtor or Debtor's business under any bankruptcy or insolvency
statute, or Debtor's assignment for benefit of creditors, or the appointment of
a receiver for Debtor or the Collateral, or the filing of a tax lien notice
against Debtor by any taxing authority; or (6) Reasonable insecurity of
Secured Party; or (7) Loss, theft, substantial damage, destruction, sale,
encumbrances, concealment, removal, or forfeiture of the Collateral or any
material portion thereof.
6. Upon the occurrence of any event of default, Secured Party may declare
all Debtor's indebtedness secured hereby immediately due and payable, and
thereupon Secured Party shall have the right to take possession of the
Collateral and shall have all other rights and remedies of a Secured Party
under the Uniform Commercial Code. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Secured Party shall give Debtor reasonable notice of the
time and place of any public sale thereof or of the time after which any
private sale or other intended disposition thereof is to be made. Debtor agrees
that the requirements of reasonable notice shall be met if notice is mailed to
Debtor at the address of Debtor shown below not less than five (5) days prior
to the sale or other disposition. Expenses of retaking, holding, preparing for
sale, selling, or the like shall include Secured Party's reasonable attorneys'
fees and legal expenses. Secured Party may require Debtor to assemble the
Collateral and make it available to Secured Party at a place to be designated
by Secured Party which is reasonably convenient to both parties. Secured Party
is authorized to maintain, sell, or dispose of the Collateral on the premises
of the Debtor. Secured Party's rights and remedies shall be cumulative and not
alternative.
<PAGE>
7. This Security Agreement shall be construed and enforced according to the
laws of the State of New York. Waiver of any default shall not constitute
waiver of any subsequent or other default. All rights of Secured Party shall
inure to the benefit of its successors and assigns, and all obligations of
Debtor shall bind his or its heirs, executors, personal representatives,
successors and assigns.
Dated: March 31, 1995 Debtor: Rocky Mount Undergarment Co., Inc.
---------------- ---------------------------------------
by X Joseph Pascal
-----------------------------------------
signature
Joseph Pascal
-----------------------------------------
typed or printed name of Signatory
President
-----------------------------------------
Title of Signatory
Debtor's Mailing Address: 350 Fifth Avenue
-----------------------------------------
New York, NY 10118
-----------------------------------------
Secured Party: FINOVA Capital Corporation
-----------------------------------------
by X Joseph Behler
-----------------------------------------
signature
Joseph Behler
------------------------------------------
typed or printed name of Signatory
Vice President
------------------------------------------
Title of Signatory
Secured Party's Mailing Address: 111 West 40th Street
------------------------------------------
New York, NY 10018
------------------------------------------
<PAGE>
Exhibit 8
<PAGE>
Date: February 26, 1992
ROSENTHAL & ROSENTHAL, INC.
1451 BROADWAY
NEW YORK, NY 10036
In consideration of and in order to induce you to extend credit and other
financial accommodations to ROCKY MOUNT UNDERGARMENT CO., INC. (jointly and
severally, the "Obligor"), the undersigned hereby grants to you a security
interest in, a right of set-off with respect to, and pledges and delivers to
you, the sum of $100,000.00 (The "Subject Collateral") as security for all
liabilities and obligations of the Obligor to you whether now existing or
hereafter incurred, direct or indirect absolute or contingent.
You shall have the right at any time and from time to time, in your sole and
conclusive discretion, to apply all or any part of the Subject Collateral to the
obligations of the Obligor, whether or not any of the foregoing shall then be
due. The Subject Collateral need not be held by you in any specific account or
in any specific manner, and may be commingled by you with your own property.
*You shall not be required to pay any interest or other fee to the Undersigned
on the Subject Collateral, and, subject to any requirement of law that any part
thereof may be required to be returned or paid over to any other party, you
shall be obligated to return to the undersigned any portion thereof only upon
the discharge in full of the Obligations and the Liabilities, and the
termination of any obligation you may have to extend any financial
accommodations to the Obligor; provided that if, at the time you would otherwise
be required to return all or any part of the Subject Collateral, you are aware
of a claim which may be asserted against you for return of any payment
previously received by you with respect to the obligations of the Obligor,
including your receipt of collateral or realization of any proceeds thereof then
notwithstanding that the Obligations or the Liabilities may have been paid in
full, you may retain the Subject Collateral to the extent of such claim. The
undersigned shall have no right of subrogation.
* Except as set forth below,
The Undersigned irrevocably waives any defense to its obligations hereunder,
arising on account of your actions with respect to the Obligor or its
obligations, or any other circumstance which might constitute a legal or
equitable discharge of the obligations of the Undersigned hereunder, and without
limitation upon the foregoing, the Undersigned consents and agrees that at any
time and from time to time you may, without affecting in any way the obligations
of the undersigned hereunder or your rights hereunder:
(i) without the consent of or notice to the undersigned, extend, release or
modify in any way, or exercise or fail to exercise any rights with respect to,
any of the obligations of the Obligor, any security therefore, or any guaranty
or suretyship arrangement in your favor with respect thereto; and
(ii) settle or compromise any of the obligations of the Obligor or any
security therefor or any rights under any guaranty or suretyship arrangement
with respect thereto.
No validity or uneforceability of any of the obligations of Obligor or any
collateral therefor or third-party liability with respect thereto, shall affect
or be a defense to the obligations of the undersigned hereunder.
This agreement shall be governed and construed in accordance with the laws of
the State of New York, is binding upon the undersigned, and its executors,
administrators, successors and assigns, and shall inure to your benefit and the
benefit of your successors and assigns. This agreement may not be changed or
terminated except by a writing signed and subscribed by you. The undersigned, if
more than one, shall be jointly and severally liable hereunder, and the term
"undersigned" shall mean any one or more of them, if more than one.
You shall credit my account monthly with Very truly yours,
interest at a rate equal to 2% below the
Chase Manhattan Bank, N.A. prime rate ________________________________
then in effect from time to time on any EDWARD BLODNICK
"Subject Collateral"
________________________________
SS# ###-##-####
________________________________
<PAGE>
SECURED PROMISSORY NOTE
(Demand)
$600,000 New York, New York
April 27, 1995
FOR VALUE RECEIVED, the undersigned, Borrower, Rocky Mount
Undergarment Co., Inc., a Delaware corporation ("Borrower"), promises to
pay to the order of FINOVA Capital Corporation ("FINOVA"), at its offices
at 111 West 40th Street, New York, New York 10018, or at such other place
as FINOVA may from time to time appoint, in lawful monies of the United
States, the principal sum of SIX HUNDRED THOUSAND ($600,000) DOLLARS in
lawful money of the United State of America together with interest from the
date hereof at the rate of prime plus one and one-half (1.5%) percent per
annum calculated on the basis of a 360-day year for the actual number of
days elapsed as follows:
(a) commencing on the last day of May, 1995 and continuing on the last
day of each month thereafter, payment of all interest thereon then due and
owing pursuant to this Note;
(b) on December 31, 1995, the entire balance of principal and interest
thereon shall become immediately due and payable; or
(c) upon FINOVA's written demand to Borrower, all principal and
interest thereon shall immediately become due and payable.
Prepayments of the amount due hereunder, in whole or in part, shall be
permitted without payment of premium. Prepayments shall be applied to
installments becoming due in the inverse order of their maturity.
As used herein, the words "prime" or "rate of prime" shall be deemed
to mean the prime commercial rate charged by Citibank, N.A. in effect on
the date hereof (whether or not such rate is the lowest rate available at
such bank) and as the same may be adjusted upwards or downwards from time
to time, on the first day of the month following the month in which the
Citibank, N.A. prime rate shall have been increased or decreased, as the
case may be, to the date of payment in full of the principal and interest
due under this Note.
The indebtedness evidenced by this Note together with all other
liabilities of the undersigned is secured by (i) Borrower's receivable,
general intangibles, inventory and equipment, whether presently existing or
hereafter created, together with the proceeds and products thereof,
pursuant to the Factoring Agreement and Security Agreements (Inventory) and
(Equipment) each duly executed and delivered by and between Borrower and
FINOVA dated March 31, 1995 (collectively, the "Security Agreement"); and
(ii) that certain Deed of Trust dated April 27, 1995 in the principal sum
of $600,000 given by Borrower to James R. Bryant III, as trustee, for the
use and benefit of FINOVA, covering the fee estate of Borrower in those
premises more fully described on the annexed Schedule A (the "Deed of
Trust").
Upon the occurence of any of the following events, the principal
balance of this Note together with accrued interest shall become due and
payable immediately upon: default in the payment when due of any
<PAGE>
installment of the principal or of interest on this Note, which default
continues for more than fifteen (15) days; the filing by or against
Borrower of a petition under any bankruptcy law; and general assignment for
the benefit of creditors of Borrower; any other default under the Security
Agreement, the Deed of Trust or any of the other agreements entered into by
and between Borrower and FINOVA and any other obligations on the part of
the Borrower (the "Other Documents"); or if this Note is not paid in full
on demand. After default, interest on the unpaid balance of this Note shall
accrue and be payable at the maximum legal contract rate permitted by law.
In the event of any default, Borrower will pay the reasonable costs and
expenses of enforcement and collection of this Note including reasonable
attorneys' fees incurred by FINOVA in collecting or enforcing this Note.
This Note is transferrable by any holder by endorsement or assignment
in writing. Any holder of this Note may negotiate, assign and transfer this
Note.
No delay or failure on the part of FINOVA to exercise any power or
right shall operate as a waiver thereof, and such rights and powers shall
be deemed continuous, nor shall a partial exercise preclude full exercise
thereof, and no right or remedy of FINOVA shall be deemed
abridged or modified by any course of conduct, and no waiver thereof shall
be predicated thereon, nor shall failure to exercise any such power
or right subject FINOVA to any liability.
Borrower and any endoser or guarantor of this Note hereby severally
waive presentment for payment, demand for payment, notice of dishonor,
protest and notice of protest of this Note and waives trial by jury in any
action arising on, out of or by reason of this Note. Borrower agrees to
perform and comply with each of the terms, covenants and provision
contained in this Note, the Security Agreement, the Deed of Trust and the
Other Documents. No release of any security for the principal sum due under
this Note, or extension of time for payment of this Note, or any
installment hereof, and no alteration, amendment or waiver of any provision
of this Note, the Security Agreement, the Deed of Trust or the Other
Documents made by agreement between Borrower and FINOVA or any other person
or party shall release, discharge, modify, change or affect the liability
of Borrower under this Note, the Security Agreement, the Deed of Trust or
the Other Documents.
This Note is subject to the express condition that at no time shall
Borrower be obligated or required to pay interest at a rate which could
subject FINOVA to either civil or criminal liability as a result of being
in excess of the maximum rate which Borrower is permitted by law to
contract or agree to pay. If by the terms of this Note, Borrower is at any
time required or obligated to pay interest at a rate in excess of such
maximum rate, the rate of interest under this Note shall be deemed to be
immediately reduced to such maximum rate and interest payable hereunder
shall be computed at such maximum rate and the portion of all prior
interest payments in excess of such maximum rate shall be applied and shall
be deemed to have been payments in reduction of the principal balance due
under this Note.
If Borrower consists of more than one person or party, the obligations
and liabilities of each such person or party hereunder shall be joint and
several.
This Note is secured by the Deed of Trust, the Security Agreement and
the Other Documents.
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to
execute and deliver this Note and that the debt hereunder constitutes a
valid and binding obligation of the Borrower.
<PAGE>
This Note may not be changed or terminated orally. This Note is made
and delivered in the State of New York and shall be construed in accordance
with and governed by the laws of said state.
IN WITNESS WHEREOF, the undersigned has executed this Note on the date
first above written.
ROCKY MOUNT UNDERGARMENT CO., INC
By: /s/ Joseph Pascal
------------------------------
Joseph Pascal, President
ATTEST:
_________________________
, Secretary
STATE OF )
SS.:
COUNTY OF )
On the day of April, 1995, before me personally came
Joseph Pascal, to me known, who, being by me duly sworn, did depose and say
that he resides at No. , that he is the President of
Borrower, the corporation described in and which executed the foregoing
instruments and that he signed his name thereto by order of the board of
directors of said corporation.
----------------------------------
Notary Public
<PAGE>
ENDORSEMENT
FOR VALUE RECEIVED, the undersigned unconditionally endorses the
within Note and waives presentation and demand for payment, protest and
notice of protest, nonpayment or dishonor and notice of the sale of any
collateral security and consents without notice to any extension of time
for payment of the within Note, the release and exchange of any collateral
security and the making of compromises, releases and settlements in
connection therewith, all without releasing the liability of the
undersigned hereunder.
Dated: New York, New York
ROCKY MOUNT UNDERGARMENT CO., INC
By: /s/ Joseph Pascal
------------------------------
Joseph Pascal, President
<PAGE>
THIS INSTRUMENT PREPARED BY,
RECORDING REQUESTED BY AND
WHEN RECORDED, MAIL TO:
James R. Bryant, III
Womble Carlyle Sandridge & Rice, PLLC
3300 One First Union Center
301 South College Street
Charlotte, NC 28202-6025
NORTH CAROLINA DEED OF TRUST, SECURITY AGREEMENT AND
NASH COUNTY ASSIGNMENT OF RENTS (COLLATERAL IS OR
INCLUDES FIXTURES)
GRANTOR Rocky Mount Undergarment Co., Inc.
Mailing Address: 350 Fifth Avenue
New York, NY 10118
TRUSTEE: James R. Bryant, III
Mailing Address: Womble Carlyle Sandridge & Rice, PLLC
3300 One First Union Center
301 South College Street
Charlotte, NC 28202-6025
BENEFICIARY: FINOVA Capital Corporation
Mailing Address: 111 West 40th Street
New York, NY 10018
THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS (the
"Deed of Trust") is made as of April 27, 1995, between Grantor, Trustee and
Beneficiary.
IN CONSIDERATION OF TEN DOLLARS ($10.00) paid by Trustee to Grantor,
and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Grantor irrevocably grants, bargains,
sells, transfers, conveys and assigns to Trustee, in trust, with power of
sale, for the benefit and security of Beneficiary under and subject to the
terms and conditions set forth in this Deed of Trust, all rights, titles,
<PAGE>
interests, estates, powers and privileges that Grantor now has or may
hereafter acquire in or to the following property and property interests
(collectively, the "Trust Estate"):
THAT CERTAIN REAL PROPERTY located in Nash County, North Carolina,
more particularly described on attached Exhibit A and referred to in this
Deed of Trust as the "Property", together with all easements, rights of way
and other appurtenances ("Appurtenances"), all buildings and improvements
which are now or at any time constructed or placed on, or attached to, the
Property ("Improvements"), together with all furniture ("Furniture"), and
all machinery, equipment and fixtures ("Fixtures") which qualify under
applicable law as realty (the Property, Appurtenances, Improvements, and
Fixtures are collectively referred to as the "Premises"):
TOGETHER with all rights, privileges, entitlements, rents, issues and
prefits arising from the Premises, and all insurance policies and proceeds
insuring the Premises, all which are hereby assigned as additional and
further security; and
TOGETHER with any and all Condemnation Proceeds (as defined in this
Deed of Trust), including interest, and the right to receive such
Condemnation Proceeds.
TO HAVE AND TO HOLD the Trust Estate to Trustee, his or her heirs,
executors, successors and assigns, in fee simple absolute, subject only to
those exceptions disclosed on the loan policy of title insurance described
on attached Exhibit B, forever upon the trusts, terms and conditions and
for the uses, set forth in this Deed of Trust.
IN TRUST, nevertheless upon the agreement that if Grantor shall pay
the Note (as defined below), in accordance with its terms, together with
accrued interest, and any renewals or extensions in whole or in part, and
and all other sums accrued by this Deed of Trust and shall comply with all
of the covenants, terms and conditions of the Note and this Deed of Trust,
then this conveyance shall be null and void and may be cancelled of record
at the request and at the expense of Grantor.
IN ORDER TO EVIDENCE THE SECURITY GRANTED BY THIS DEED OF TRUST
GRANTOR MAKES THE AGREEMENTS AND COVENANTS SET OUT BELOW.
1. Obligations Secured By This Deed Of Trust.
(a) Payment of the principal amount of Six Hundred Thousand Dollars
($600,000.00), with any accrued interest and all other sums due or to
become due, according to the terms of a Secured Promissory Note dated April
27, 1995 ("Note") made by Grantor, payable to Beneficiary, or order, and
all modifications, extensions, replacements or renewals.
(b) Payment, performance and discharge of each and every obligation,
covenant and agreement of Grantor contained in Factoring Agreement dated
March 31, 1995 ("Factoring Agreement").
<PAGE>
(c) Payment of such additional amounts with interest (i) as may be
borrowed from Beneficiary by Grantor and evidenced by a promissory note
which recites that such promissory note is secured by this Deed of Trust;
or (ii) as may be paid out or advanced by Beneficiary, or as may otherwise
be due to Trustee or Beneficiary, under any provision of this Deed of
Trust, and all modifications, extension, replacements or renewals.
(d) Payment, performance and discharge of each and and every
obligation, covenant and agreement of Grantor contained in this Deed of
Trust and in any assignment of rents and leases, security agreement and any
and all other documents and instruments executed by Grantor for the purpose
of futher securing any indebtedness secured by this Deed of Trust, or any
future advances or laons of any sums made by Beneficiary to Grantor in the
future, or for the purpose of supplementing or amending this Deed of Trust
or any instrument secured by this Deed of Trust.
(e) This Deed of Trust, the Note, the Factoring Agreement and any
other promissory note, deed of trust, mortgage, security agreement,
assignment, guaranty or other instrument given to evidence or futher secure
the payment or performance of any obligations secured by this Deed of
Trust, are collectively referred to in this Deed of Trust as the "Loan
Documents."
2. Payment of Secured Obligations. Grantor shall pay when due all
amounts due to Beneficiary as provided in the Loan Documents, and interest
on any amount advanced in the future and secured by this Deed of Trust, and
all other amounts secured by this Deed of Trust, without notice, demand,
counterclaim, setoff, deduction or defense and without abatement,
suspension, deferment, diminution or reduction of any kind, and Grantor
waives all rights now or thereafter conferred by statute or otherwise to
any abatement, suspension, deferment, diminution or reduction of any sum
secured by this Deed of Trust and payable by Grantor.
3. Maintenance, Repair and Alterations. Grantor (i) shall maintain,
keep and preserve the Trust Estate in a good and safe condition and repair;
(ii) shall not remove, demolish or substantially alter any of the
Improvements, in whole or in part, without the prior written consent of
Beneficiary; (iii) shall comply with all applicable federal state,
municipal or governmental laws, regulations, codes, orders, ordinances,
rules and statutes, and all covenants, conditions and restrictions now or
hereafter affecting the Trust Estate or any part; (iv) shall not commit or
permit any waste or deterioration of the Trust Estate; (v) will not take,
or fail to take, any action, which if taken or not so taken, would increase
in any way the risk of fire or other hazard to or affecting the Premises;
(vi) shall not initiate, join in or consent to any change in any zoning
ordinance, general plan, specific plan, private restrictive covenant or
other public or private restriction limiting the uses which may be made of
the Premises by Grantor; (vii) shall not file a declaration of condominium
affecting any portion of the Property or take any other steps to convert
any portion of the Property to the jurisdiction of any applicable
condominium act or any successor statute; and (viii) except as otherwise
prohibited or restricted by the Loan Documents, or any of them, shall do
any and all other acts which may be reasonably necessary to protect and
preserve the value of the Trust Estate and the rights of Trustee and
Beneficiary. Grantor hereby agrees that Beneficiary may conduct from time
<PAGE>
to time, through representatives of its choice, such on-site inspections
and observations of the Trust Estate as Beneficiary deems to be necessary
or appropriate in order to monitor Grantor's compliance with the provisions
of this Deed of Trust, including, without limitation, environmental hazard
inspections, tests and studies of the Trust Estate.
4 Insurance. Grantor shall at all times provide, maintain and keep in
full force and effect, at no expense to Trustee or Beneficiary, policies of
insurance in form and substance satisfactory to Beneficiary, issued by
insurance companies satisfactory to Beneficiary, and covering such
casualties, risks, perils and liabilities as Beneficiary may reasonably
require. Without limiting the generality of the foregoing, Grantor shall
provide, maintain and keep in force, at no expense to Trustee or
Beneficiary, the types of insurance coverage listed on attached Exhibit C
("Insurance Policies"). All Insurance Policies required by the terms of
this Deed of Trust shall include a "lender's loss payable endorsement"
naming Beneficiary, its successors and assigns, as additional insured and
as loss payee, in form satisfactory to Beneficiary and shall contain both
an endorsement or agreement by the insurer that any loss shall be payable
in accordance with the terms of such policy notwithstanding any act or
negligence of Grantor which might otherwise result in forfeiture of such
insurance and the further agreement of the insurer waiving all rights of
setoff, counterclaim and deduction against Grantor. All Insurance Policies
shall contain a provision that such policies will not be cancelled, allowed
to lapse without renewal, surrendered or materially amended to reduce the
scope or limits of coverage without at least thirty (30) days' prior
written notice to each "named insured" including Grantor. Grantor shall
furnish Beneficiary with an original of all Insurance Policies required
under this paragraph setting forth such information as is required to
indicate that such policy complies with the requirements of this paragraph.
At least (30) days prior to the expiration of each required policy, Grantor
shall deliver to Beneficiary evidence satisfactory to Beneficiary of the
payment and the renewal or replacement of such policy. If Grantor fails to
provide, maintain, keep in force or deliver to Beneficiary the Insurance
Policies, Beneficiary may (but shall have no obligation to) procure such
insurance, or single interest insurance for such risks covering
Beneficiary's interests, and Grantor will pay all premiums promptly upon
demand by Beneficary, and until such payment is made by Grantor, the amount
of all such premiums, together with interest at the Default Rate, shall be
secured by this Deed of Trust.
5. Casualties. Grantor shall give prompt written notice to Beneficiary
after the occurrence of any casulaty to or in connection with the Trust
Estate. In the event of such casualty, all proceeds of insurance shall be
payable to Beneficiary. If Grantor receives any proceeds of insurance
resulting from such casualty, Grantor shall promptly pay over such proceeds
to Beneficiary. Beneficiary is hereby appointed by Grantor as Grantor's
attorney-in-fact, to make proof of loss, to appear in and prosecute any
action arising from any policy or policies of insurance, and to settle,
adjust, or compromise any claim for loss, damage or destruction under any
policy or policies of insurance. Grantor shall not settle, adjust or
compromise any claim for loss, damage or destruction of the Trust Estate
under any policy or policies of insurance without the prior written consent
of Beneficiary. In the event of any damage to or destruction of the
Premises, Beneficiary shall have the right to collect all insurance
proceeds as set forth above and apply all or any part of the insurance
proceeds to any or all sums to be paid and obligations to be performed
<PAGE>
arising under the Loan Documents, or to the restoration and repair of the
Trust Estate, as Beneficiary in its reasonable discretion shall determine
and direct. In the event Beneficiary elects to restore and repair the
Premises and the insurance proceeds are insufficient to restore and repair
such damage to or destruction of the Premises, Grantor shall pay to
Beneficiary, on demand, an amount equal to the difference between the cost
of restoration and repair of the Premises and the amount of the insurance
proceeds. In the event Beneficiary elects to apply the insurance proceeds
to the obligations arising under the Loan Documents and such proceeds are
not sufficient to pay the total amounts to be paid and obligations to be
performed, Grantor shall pay to Beneficiary, on demand, an amount equal to
the difference between the amounts due Beneficiary under the Loan Documents
and the amount of the insurance proceeds. The application or release by
Beneficiary of any insurance proceeds shall not cure or waive any default
or notice of default under this Deed of Trust or invalidate any act done
pursuant to such notice. Grantor waives any and all rights, if any, to
claim or recover against Beneficiary, its officers, employees, agents and
representatives, for loss of or damage to Grantor, the Trust Estate,
Grantor's property or the property of others under Grantor's control from
any cause whatsoever.
6. Taxes and lmpositions and Impounds. Grantor shall pay prior to
delinquency all real property taxes and assessments levied or charged by
any governmental authority and all other taxes, assessments, levies and
charges of any kind or nature whatsoever, whether levied by any
governmental authority or not, whether presently existing or created after
the date of this Deed of Trust, which create or appear to create a lien
upon the Trust Estate, or upon any personal property, equipment or other
facilities used in the operation or maintenance of the Trust Estate, or
which relate in any way to the indebtedness secured by this Deed of Trust
(all of such obligations are referred to in this Deed of Trust,
collectively, as "Impositions"). Upon Beneficiary's request, Grantor shall
pay monthly to Beneficiary an amount equal to one-twelfth (1/12th) of the
estimated annual cost of Impositions together with an amount equal to
one-twelfth (1/12th) of the estimated premiums for the Insurance Policies;
such impounded funds shall be released to Grantor for payment of taxes,
assessments and insurance premiums, or directly applied by Beneficiary for
payment of such amounts, at Beneficiary's option. No trust shall be
established by such impounded funds and any such impounded funds may be
commingled with other funds of Beneficiary, and, in the sole discretion of
Beneficiary, invested by Beneficiary for its account, without obligation to
pay the income or interest earned on such impounded funds to Grantor.
Grantor shall furnish to Beneficiary prior to the date upon which any
Imposition is delinquent official receipts of the appropriate taxing
authority evidencing the payment of such Imposition.
7. Litigation and Indemnification. Grantor shall give prompt written
notice to Beneficiary and Trustee of, and shall appear in and defend, any
action or proceeding purporting to affect the security of this Deed of
Trust, the other Loan Documents, any additional or other security for the
obligations secured by this Deed of Trust, the interest of the Beneficiary,
or the rights, powers or duties of Beneficiary or Trustee under this Deed
of Trust. Grantor shall pay all costs, fees and expenses, including costs
of evidence of title and trustees' fees and reasonable attorneys' fees,
paid or incurred in any action or proceeding in which Beneficiary and/or
Trustee may appear or be made a party, whether or not pursued to final
<PAGE>
judgment. If Beneficiary and/or Trustee elect to become a party to such
action or proceeding, or are made a party to such action or to any other
action or proceeding, of whatever kind or nature, concerning this Deed of
Trust, any of the Loan Documents, the Trust Estate, Grantor shall, and
hereby does, indemnify, defend, protect and hold harmless Beneficiary and
Trustee, and against any and all loss, cost, expense or liability incurred
in connection with any such action or proceeding, including, without
limitation, any and all claims or proceedings, whether brought by private
party or governmental agencies, for bodily injury, property damage,
environmental damage or impairment or any other injury or damage resulting
from or relating to any hazardous or toxic substance or contaminated
material located upon or migrating into, from or through the Premises,
regardless of cause, which Beneficiary may incur as a result of this Loan,
the exercise of any of its rights under the Loan Documents, or otherwise.
For purposes of this indemnity, hazardous or toxic substances or
contaminated material include, but are not limited to, asbestos, oil and
petroleum products and those substances within the scope of all federal
state, municipal or governmental environmental laws, regulations, codes,
orders, ordinances, rules and statutes, including, without limitation, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, and any amendments to the
foregoing. This indemnity shall survive foreclosure of, or sale at
trustee's sale under, this Deed of Trust, or conveyance in lieu of such
foreclosure or sale, and the discharge and release of this Deed of Trust
and the payment and satisfaction of all obligations secured by this Deed of
Trust immediately upon demand by Trustee or Beneficiary, Grantor shall pay
to Beneficiary an amount equal to Grantor's liability to such person under
this paragraph, together with interest from the date of expenditure until
paid at the Default Rate, and until paid, such amount shall be secured by
this Deed of Trust.
8. Actions by Beneficiary to Preserve Trust Estate. If Grantor fails
to make any payment or to do any act as and in the manner provided in any
of the Loan Documents, Beneficiary, without obligation so to do and without
releasing Grantor from any obligation, may make or do the same in such
manner and to such extent as Beneficiary may deem necessary to protect the
security hereof. In connection therewith (without limiting Beneficiary's
other powers, whether conferred herein, in any other Loan Instrument or by
law), Beneficiary shall have and is hereby given the right, but not the
obligation: (i) to enter upon and take possession of the Trust Estate; (ii)
to make additions, alterations, repairs and improvements to the Trust
Estate; (iii) to appear and participate in any action or proceeding
affecting or which may affect the security hereof or the rights or powers
of Beneficiary, (iv) to pay purchase, contest or compromise any claim or
matter which may affect or appears to affect the security afforded by any
of the Loan Documents; and (v) in exercising such powers, to pay necessary
costs and expenses. Grantor shall, immediately upon demand therefor by
Beneficiary, pay to Beneficiary an amount equal to all costs and expenses
incurred by it in connection with the exercise by Beneficiary of the
foregoing rights, including, without limitation, reasonable attorneys' fees
and costs, whether or not an action is actually commenced in connection
therewith, together with interest thereon from the date of such
expenditures until Beneficiary has been repaid such amount at the Default
Rate and, until paid, such amounts shall be secured by this Deed of Trust.
<PAGE>
9. Condemnation and Other Awards. Grantor shall notify Beneficiary
immediately upon receiving notice of the institution or the threatened
institution of any proceeding for the condemnation or other taking for
public, quasi-public, or private use of the Trust Estate, or if any part of
the Trust Estate be taken or damaged by reason of any public, quasi-public,
or private improvement or condemnation proceeding, or in any other manner,
or should Grantor receive any notice of other information regarding such
proceeding action, taking or damage. Grantor shall, if requested by
Beneficiary, file or defend its rights in such proceeding and prosecute the
same with due diligence to its final dispostiion and shall cause any award
or settlement to be paid over to Beneficiary for dispostiion pursuant to
the terms of this Deed of Trust, subject, however, to the limitations set
forth in Section 40A-68 of the North Carolina General Statutes. At
Beneficiary's option, Beneficiary shall be entitled, without regard to the
adequacy of its security, to participate in and to control the proceeding
and to be represented by counsel of its choice at Grantor's expense, and
Grantor will cooperate with Beneficiary in all respects to permit such
participation. If any part of the Trust Estate is taken or diminished in
value, or if a consent settlement is entered, by or under threat of such
proceeding, all money, compensation, awards, damages and rights of action
awarded by reason of such taking, diminution in value or consent settlement
("Condemnation Proceeds") shall be and hereby are assigned, transferred to
Beneficiary subject, however, to the limitations set forth in Section
4OA-68 of the North Carolina General Statutes. Any such Condemnation
Proceeds shall be first applied to reimburse Beneficiary for all costs and
expenses, including reasonable attorneys' fees, incurred in connection with
the collection of such award or settlement. The balance of such
Condemnation Proceeds may be applied to any or all obligations arising
under the Loan Documents or to restoration and repair of the Trust Estate
resulting from such condemnation, as the Beneficiary may determine and
direct in its sole and absolute discretion. Application or release of the
Condemnation Proceeds shall not cure or waive any default or notice of
default or invalidate any act done pursuant to such notice. If after
applying the award or settlement to the payment of the indebtedness as
secured by this Deed of Trust, Beneficiary reasonably determines the
remaining security to be inadequate to secure the remaining indebtedness,
Grantor shall upon written demand from Beneficiary, prepay as principal
such an amount as will reduce the remaining indebtedness to a balance for
which adequate security exists.
10. Liens. Grantor will not create, incur, assume, permit or suffer to
exist, any mortgage deed of trust, pledge, lien, security interest, or
other charge or encumbrance of any nature upon or with respect to the Trust
Estate without the prior written consent of Beneficiary, which consent may
be granted or withheld in Beneficiary's sole and absolute discretion.
Grantor shall pay and promptly discharge at Grantor's cost and expense, all
liens, encumbrances and charges upon any part of the Trust Estate, that
have not been consented to by Beneficiary.
11. No Waiver of Default. By accepting payment or performance of any
obligation secured by this Deed of Trust after the payment or performance
is due or after the filing of a notice of default and election to sell,
Beneficiary shall not have waived its right to require prompt payment or
performance, when due, of all other obligations secured by this Deed of
Trust, or to declare a default for failure so to pay or peform, or to
proceed with the sale under any notice of default and election to sell
<PAGE>
given by Beneficiary, or with respect to any unpaid balance of the
indebtedness and other obligations secured. The acceptance by Beneficiary
of any sum in an amount less than the sum then due shall not constitute a
waiver of the obligation of Grantor to pay the entire sum then due.
Grantor's failure to pay the entire sum then due shall continue to be a
default, notwithstanding the acceptance of partial payment, and, until the
entire sum then due shall have been paid, Beneficiary or Trustee shall at
all times be entitled to declare a default and to exercise all the remedies
herein conferred, and the right to proceed with a sale under any notice of
default and election to sell shall in no way be impaired, whether or not
such amounts are received prior or subsequent to such notice. No delay or
omission of Trustee or Beneficiary in the exercise of any right or power
shall impair such right or power or any other right or power or shall be
construed to be a waiver of any default or any acquiescence.
12. Transfer of Trust Estate by Grantor. Grantor agrees not to make or
permit any Transfer (as defined below) of the Trust Estate, without the
prior written consent of the Beneficiary. Consent to any one Transfer shall
not be deemed to be a waiver of the right to require consent to any future
or successive Transfer. The Beneficiary may grant or deny such consent in
its sole and absolute discretion and, if consent should be given, any such
Transfer shall be subject to this Deed of Trust. As a condition to such
Transfer, such transferee shall execute an instrument in form and substance
acceptable to Beneficiary pursuant to which such transferee shall assume
and agree to perform all obligations under this Deed of Trust and under the
Loan Documents and agree to be bound by all provisions contained herein and
therein, and pay to Beneficiary in current available funds an assumption
fee equal to the maximum amount that is permitted by applicable law,
together with all costs and expense incurred by Beneficiary in connection
with such Transfer, including, without limitation, reasonable attorneys'
fees, premiums for title insurance endorsements as may be desired by
Beneficiary and all escrow, recording and title search fees. Additionally,
Beneficiary hereby reserves the right to increase the Note Rate and the
Default Rate (as such terms are defined in the Note) upon any Transfer. No
assumption, however, shall release Grantor, any Guarantor or any other
obligor or guarantor under the Loan Documents from any of their respective
obligations, without the prior written consent of the Beneficiary;
provided, however, that any such release granted by Beneficiary shall in no
event relieve Grantor from its liability to Beneficiary arising from its
indemnification obigations hereunder or from a breach of any of Grantor's
representations and warranties contained in Article II hereof, including,
without limitation, indemnities, representations and warranties pertaining
to hazardous waste or other environmental matters. As used herein,
"Transfer" includes thc sale, transfer or conveyance of, or agreement to
sell, transfer or convey, the Trust Estate, or any portion thereof or
interest therein, whether voluntary, involuntary, by operation of law
(other than by condemnation or eminent domain) or otherwise, or the lease
of all or any portion of the Trust Estate to a single tenant or lessee for
a period of more than three (3) years. "Transfer" shall also mean any
transfer by way of security, including the placing or the permitting of the
placing of any mortgage, deed of trust, assignment of rents, security
interest or other security devise on the Premises. "Transfer" shall also
include (i) if Grantor is a corporation, the transfer, assignment or
conveyance, in the aggregate, of greater than five percent (5%) of the
issued and outstanding voting stock of Grantor, or any merger,
consolidation, liquidation or dissolution of Grantor or any stock
redemption, reclassification, stock split or other capital reorganization
<PAGE>
which effects a change in the control of Grantor, or (ii) if Grantor
is a partnership, the transfer or assignment of any interest in Grantor by
any general partner or any interest in any general partner of Grantor by
any general partner or the withdrawal of any general partner which effects
a change in the control of Grantor or any liquidation or dissolution of the
partnership.
13. Financial Statements. From time to time upon request of
Beneficiary, Grantor shall deliver to Beneficiary copies of certain
financial statements of Grantor as requested by Beneficiary, which
financial statements shall be in form and substance satisfactory to
Beneficiary and shall be certifed by an authorized representative of
Grantor to the effect that such financial statements were prepared in
accordance with generally accepted accounting principles and fairly and
accurately represent the financial condition of Grantor.
14. Leases. Each lease of all or any portion of the Premises ("Lease")
shall provide that in the event Beneficiary shall foreclose the lien of
this Deed of Trust and acquire title to the Premises, or if the Premises
shall be transferred to any other party by foreclosure, by sale at
trustee's sale or otherwise, the lessee shall recognize and attorn to such
successor in interest of Grantor, at such successor's option, and shall
continue to perform and be bound by all of the terms and conditions of such
lease. Upon Beneficiary's request, Grantor shall promptly deliver a copy of
each Lease to Beneficiary.
15. Representations and Warranties. Grantor hereby represents and
warrants to Trustee, Beneficiary and their successors and assigns that:
(a) Grantor holds good and marketable fee simple title to the
Premises, free and clear of all claims, liens, security interests and
encumbrances except as have been approved by Beneficiary in writing.
(b) The Insurance Policies required to be maintained pursuant to
paragraph 4 are in full force and effect, and all premiums due for each
such policy have been paid.
(c) The Loan Documents comply in all material respects with applicable
federal, state, municipal or governmental laws, regulations, codes, orders,
ordinances, rules and statutes, including, without limitation, usury laws
or other similar laws which impose limitations or restrictions on the
amount of interest or other charges or fees which a borrower is obligated
to pay in connection with the lending of money.
(d) To the best of Grantor's knowledge, the Trust Estate is free of
material damage and waste and is in good condition and repair.
(e) The Note, this Deed of Trust, each guaranty and all other Loan
Documents are genuine, do not violate or conflict with any applicable
federal, state, municipal or governmental laws, regulations, codes, orders,
ordinances, rules and statutes, and each is the legal, valid and binding
obligation of Grantor, and is enforceable against Grantor (or in the case
of a guaranty, against the Guarantor) in accordance with its terms.
<PAGE>
(f) The Note and this Deed of Trust are not subject to any right of
rescission, setoff, counterclaim or defense, nor will the operation of any
of the terms of the Note or this Deed of Trust, or the exercise by the
holder of any right or remedy, render the Note or this Deed of Trust
unenforceable, in whole or in part, or subject the Note or this Deed of
Trust to any right of rescission, setoff, counterclaim or defense which has
been asserted with respect to the Note or this Deed of Trust.
(g) The Trust Estate, including, without limitation, the Premises, is
not collateral security for any other loan except as may otherwise be
permitted on attached Exhibit B.
(h) This Deed of Trust constitutes a valid and enforceable first
priority lien or an estate in fee simple in the Premises, subject only to
those matters shown on attached Exhibit B.
(i) There are no delinquent taxes, assessments or other outstanding
charges affecting the Trust Estate.
(j) No proceedings been commenced, nor to Grantor's knowledge
threatened, for the condemnation of all or any part of the Trust Estate.
(k) There are no mechanics' liens or claims for work, labor or
material affecting the Trust Estate which are or may be a lien prior to, or
of equal priority with, the lien of this Deed of Trust, except those which
are fully insured against by an ALTA Policy of Title Insurance acceptable
to Beneficiary.
(l) All utilities that are required for the full and complete
occupancy and use of the Trust Estate, including, without limitation,
electricity, sanitary sewer, storm sewers and drainage, water, telephones
and similar systems are connected to and serve the Trust Estate and are in
good working order, normal wear and tear excepted.
(m) Grantor is the sole owner of all of the Trust Estate (including
all of the landlord's interest under all Leases) and has not assigned,
pledged, transferred, leased or othewise encumbered its interest therein
except pursuant to this Deed of Trust.
(n) No tenant under any Lease, or any other person or entity, has an
option to purchase the Trust Estate or any part thereof, or right of first
refusal as to any purchase of all or any part of the Trust Estate except as
otherwise disclosed to and approved by Beneficiary in writing.
(o) The Trust Estate does not encroach upon any adjacent real
property or easements, and no improvements located on adjacent real
property encroach upon any part of the Trust Estate, except as otherwise
disclosed to and approved by Beneficiary in writing.
<PAGE>
(p) To the best of Grantor's knowledge, the Trust Estate conforms to
all, and does not violate the provisions of any, applicable federal, state,
municipal or governmental laws, regulations, codes, orders, ordinances,
rules and statutes, including, without limitation, those currently relating
to fire safety, environmental protection, seismic design, conservation,
parking, architectural barriers to the handicapped, zoning and building,
and Grantor has not received any written notice of any violation.
(q) To the best of Grantor's knowledge, no hazardous substances, as
defined in 42 U.S.C. Section 9601(14) or pursuant to any other applicable
federal, state, municipal or governmental laws, regulations, codes, orders,
ordinances, rules and statutes, have been or are being generated, stored
or disposed of on, into or under the Trust Estate and there has been no
"release," as defined in 42 U.S.C. Section 9601(22), of a hazardous
substance into the environment from the Trust Estate or from any adjacent
property onto the Trust Estate; except, however, for the presence on the
Trust Estate of hazardous substances customarily used as office supplies,
maintenance and janitorial supplies, landscaping and pool maintenance
supplies.
(r) There are presently no underground storage tanks on the Trust
Estate, or if there are, all such tanks are in compliance with all
requirements imposed by 42 U.S.C. Section 6691 et seq. and regulations
promulgated thereunder, and by any other applicable federal, state,
municipal or governmental laws, regulations, codes, orders, ordinances,
rules and statutes and any amendments or superseding legislation, and, to
the best of Grantor's knowledge no releases are occurring or have occurred
from such tanks. If any underground storage tanks have been previously
present on the Trust Estate, any contamination which may have resulted from
any releases therefrom has been remediated to the extent that there remains
no threat of contamination to any groundwater.
(s) Except as otherwise disclosed to Beneficiary, there is no friable
asbestos on or at the Trust Estate. If any asbestos or asbestos-containing
material has been removed during the time the Grantor has owned the Trust
Estate, all removal and disposal of asbestos or asbestos-containing
materials was performed in compliance with all applicable federal, state,
municipal or governmental laws, regulations, codes, orders, ordinances,
rules and statutes including, without limitation, those regulations
promulgated by the U.S. Environmental Protection Agency and the U.S.
Occupational Safety and Hazard Administration applicable to asbestos,
asbestos materials and asbestos removal.
(t) In connection with the operation and use of the Trust Estate, and
except as previously disclosed to and approved by Beneficiary in writing,
there are no septic tanks or cesspools on the Trust Estate and all waste is
discharged into a public sanitary sewer system.
(u) The Trust Estate is not located in any conservation or historic
district, nor is it in an area that has been identified by the Secretary of
Housing and Urban Development as having special flood hazards, or, if the
Trust Estate is in an area which is a special flood hazard, a Flood
Insurance Policy acceptance to Beneficiary has been obtained as provided in
paragraph 4.
<PAGE>
(v) All parking facilities, access driveways and walkways required in
connection with the full and complete use of the Trust Estate are located
entirely within the property boundaries. Except as disclosed by Grantor to
Beneficiary in writing, Grantor has not granted or agreed to grant any
easement or license for the use of the Trust Estate for the benefit or
enjoyment of adjacent or nearby real property.
(w) There are no amenities, access routes or other related similar
items crucial to thc Trust Estate's value which are not under the direct
control of the Trustee.
(x) All Leases are binding on Grantor and the tenant named in each
Lease and are in full force and effect, have not been modified or
supplemented except as disclosed to Beneficiary in writing, and constitute
binding and enforceable agreements with the tenants under each Lease, and
there are no understandings, representations, warranties, allowances,
concessions or promises between the tenant, Grantor or their respective
predecessors in interest not fully set forth in the instruments which have
been provided to Beneficiary.
(y) To the best of Grantor's knowledge, no tenant under any of the
Leases has any claim, offset, right of recoupment or defense available
against Grantor, and Grantor is entitled to enforce and enjoy all rights
and benefits thereunder, including without limitation the collection of
rents and other sums payable thereunder by the tenant. Each tenant under
each respective Lease has accepted its demised premises, has commenced
occupancy, and is current as to the payment of rent and other charges
payable under each Lease.
(z) Grantor has provided Beneficiary true, complete and correct
copies of all Leases, and all other information regarding any Lease is
true, complete and correct.
(aa) To the best of Grantor's knowledge, the parking lot,
sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems,
fire protection systems, electrical systems, exterior sidings and doors,
landscaping, irrigation systems and all structural components of the Trust
Estate, are in good condition and where applicable, in good working order,
ordinary wear and tear excepted.
(ab) The information and data contained in the financial
statements delivered by Grantor to Beneficiary is accurate and complete in
all respects.
(ac) Grantor has not received notice of any adverse claims to all
or any part of the Trust Estate.
<PAGE>
(ad) Neither this Deed of Trust nor any of the Loan Documents nor
any of the other documents and information provided by Grantor to
Beneficiary, including documents originated or prepared by Grantor, nor any
information furnished by Grantor to Beneficiary, its representatives,
agents or employees, contains an untrue or incorrect statement of material
facts or omits to state a material fact necessary to make the statements
contained true, correct and not misleading.
(ae) Neither Grantor nor anyone else on Grantor's behalf within
the past one hundred and twenty (120) days has (i) performed any
construction on the Premises, (ii) purchased, contracted for or otherwise
brought upon the Premises any materials, specially fabricated for, or
otherwise to be incorporated into the Improvements, or (iii) made any oral
or written contract or arrangement of any kind, the performance of which by
the other party thereto would or could give rise to a lien or claim on any
portion of the Trust Estate.
16. Notice to Beneficiary of Incorrect Representations or Warranties. If
Grantor at any time discovers that any of the representations or warranties
contained in this Deed of Trust are false, incorrect or misleading, or if
Grantor obtains knowledge of any event or circumstances which would cause
Grantor to reasonably believe that any of such representations or
warranties are false, incorrect or misleading, Grantor shall promptly
deliver to Beneficiary a statement which (i) describes the event or
circumtances which caused, or may have caused, the representation or
warranty to be false, incorrect or misleading, and (ii) summarizing the
action, if any, which Grantor intends to take or cause to be taken to
assure that the representation or warranty is true, correct and not
misleading.
17. Indemnification and Survival. Grantor shall, and hereby does,
indemnify, defend, protect and hold harmless Beneficiary and Trustee, and
their respective directors, officers, employees and agents for, from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) imposed upon, asserted against or incurred by
Beneficiary and/or Trustee by reason of any false, incorrect or misleading
representation or warranty contained in this Deed of Trust. All
representations, warranties, covenants and indemnification obligations of
Grantor contained in this Deed of Trust or in any other Loan Documents or
agreements between Grantor and Beneficiary shall remain continuing
representations, warranties, covenants and indemnification obligations of
Grantor and shall survive the execution and delivery hereof and any
termination or expiration of this Deed of Trust, any foreclosure or
trustee's sale, or conveyance in lieu of any such sale, and the discharge
and release of this Deed of Trust and any repayment or other satisfaction
of the obligation secured, this Deed of Trust and shall inure to the
benefit of Beneficiary and its successors and assigns.
18. Assignment of Rents, Issues and Profits. Grantor hereby grants,
transfers and absolutely assigns to Beneficiary all Leases and all rents,
security deposits and other revenues, rignts, benefits, issues and profits
accruing to Grantor under the Leases (collectively, the "Rents"), and
hereby gives to and confers upon Beneficiary the right, power and authority
to collect such Rents. Grantor irrevocably appoints Beneficiary, at any
time and from time to time, to demand, receive and enforce payment, to
give receipts, releases and satisfactions, and to sue, in its name or in
the name of Grantor, for all such Rents, and apply the same to the
obligations secured this Deed of Trust. The foregoing power of attorney is
coupled with an interest and cannot be revoked while this Deed of Trust
remains in effect.
<PAGE>
(19) Security Agreement. Grantor hereby grants to Beneficiary and
Trustee, as their interests may appear, a continuing security interest in
all Fixtures and other personal property on the Premises which may now or
hereafter constitute Fixtures. Trustee and Beneficiary, as applicable, in
excercising any of their rights with respect to Fixtures under this Deed of
Trust, shall have all of the rights provided by the Uniform Commercial Code
under the laws of North Carolina, now in effect or hereafter enacted,
including without limitation the right to proceed under the provisions of
the Uniform Commercial Code of North Carolina governing default.
20. Events of Default. The occurrence of any of the following events
shall be deemed an event of default ("Event of Default") under this Deed of
Trust:
(a) The failure of Grantor to pay any installment due under the Note
within ten (10) days following the date such installment is due and
payable.
(b) The failure of Grantor to perform any obligation, covenant or
agreement under the Factoring Agreement.
(c) The failure of Grantor to pay any other amount under the Loan
Documents or any other amount secured by this Deed of Trust within ten (10)
days following the date such amount is due and payable.
(d) The failure of Grantor to perform or observe any obligation or
covenant to be performed or observed by it under this Deed of Trust on or
before the date required for such performance or observance, and the
continuation of such failure for a period of thirty (30) days after the
date of notice from Trustee or Beneficiary to Grantor of such default.
(e) The occurrence of any other event or circumstance which
constitutes a default under any of the other Loan Documents.
(f) The failure of Grantor to take and to complete within thirty (30)
days of receipt of notice from Trustee or Beneficiary such action as may be
necessary to render true any representation set forth in this Deed of Trust
which proves to be false or materially misleading.
(g) The filing of a voluntary or involuntary petition in bankruptcy
by or against Grantor or any Guarantor or the filing of any petition or
answer seeking or acquiescing in any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief for
Grantor or any Guarantor under any present or future federal, state or
other statute, law or regulation relating to bankruptcy, insolvency or
other relief for debtors; or if Grantor or any Guarantor shall seek or
consent to or acquiesce in the appointment of any trustee, receiver or
liquidator, or shall make any general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they become due.
<PAGE>
21. Acceleration Default and Additional Remedies. Upon the occurence of
an Event of Default, Beneficiary may, at its option declare all
indebtedness and obligations secured by this Deed of Trust to be
immediately due and payable without any presentment, demand, protest or
notice of any kind, and whether or not Beneficiary exercises said option,
Beneficiary or Trustee may, subject to and in the manner provided by
applicable law: (i) exercise the power of sale granted in this Deed of
Trust; (ii) commence judicial action to foreclose this Deed of Trust; (iii)
seek appointment of a receiver by an appropriate court; (iv) specifically
enforce any of the covenants contained in this Deed of Trust; or (v)
exercise all other rights and remedies provided in any Loan Instrument or
in any other document or agreement now or hereafter securing all or any
portion of the obligations secured, or provided by law. Additionally,
Beneficiary may, subject to applicable laws, either in person or by agent,
with or without bringing any action or proceeding, or by a receiver
appointed by a court and without regard to the adequacy of its security,
enter upon and take possession of the Trust Estate, or in its own name or
in the name of Trustee, and do any act which it deems necessary or
desirable to preserve the value, marketability or rentability of the Trust
Estate, increase (subject to existing Leases) the income of the Trust
Estate or protect the security of the Trust Estate and, with or without
taking possession of the Trust Estate, sue for or otherwise collect the
Rents including those past due and unpaid, and apply the same, less costs
and expenses of operation and collecting including, without limitation,
reasonable attorneys' fees upon any indebtedness secured, under this Deed
of Trust all in such order as Beneficiary may determine. The entering upon
and taking possession of the Trust Estate, the collection of such Rents,
and the application of such Rents, shall not cure or waive any default or
notice of default under this Deed of Trust or invalidate any act done in
response to such default or pursuant to such notice of default. The rights
and remedies of Beneficiary and Trustee as provided in this Deed of Trust
shall be cumulative and may be pursued singly, successively, or together
against the Grantor or the Trust Estate in the sole discretion of
Beneficiary or Trustee, respectively, as applicable.
22. Application of Funds After Default. Upon the occurrence of an Event
of Default under this Deed of Trust, Beneficiary may, at any time without
notice, apply any or all sums or amounts received or held by Beneficiary
from or on account of Grantor or the Trust Estate, or otherwise, upon any
indebtedness or obligation of Grantor secured by this Deed of Trust, in
such manner and order as Beneficiary may elect, notwithstanding that said
indebtedness or the performance of such obligation may not yet be due. The
receipt, use or application of any such sum or amount shall not be
construed to affect the maturity of any indebtedness secured by this Deed
of Trust, or any of the rights or powers of Beneficiary or Trustee under
the terms of the Loan Documents, or any of the obligations of Grantor under
Loan Documents, or to cure or waive any default or notice of default under
any of the Loan Documents; or to invalidate any act of Trustee or
Beneficiary.
<PAGE>
23. Costs of Enforcement. If any Event of Default occurs, Beneficiary
and Trustee, and each of them, may employ an attorney or attorneys to
exercise their rights under this Deed of Trust. Grantor promises to pay to
Beneficiary, on demand, the reasonable fees and expenses of such attorneys
and all other costs and expenses incurred by Beneficiary and Trustee, and
each of them, in connection with the enforcement of the obligations secured
by this Deed of Trust, whether or not such enforcement includes the filing
of a lawsuit. Until paid, such amounts shall be secured and shall bear
interest, from date of expenditure, at the Default Rate.
24. Remedies Not Exclusive. Neither the acceptance of this Deed of
Trust nor its enforcement, whether by court action or pursuant to the power
of sale or other powers contained in this Deed of Trust, shall prejudice or
in any manner affect Trustee's or Beneficiary's right to realize upon or
enforce any other security now or hereafter held by Trustee or Beneficiary,
it being agreed that Trustee and Beneficiary, and each of them, shall be
entitled to enforce this Deed of Trust and any other security now or
hereafter held by Beneficiary or Trustee in such order and manner as they
may in their absolute discretion determine. No remedy conferred upon or
reserved to Trustee or Beneficiary is intended to be exclusive of any other
remedy provided or permitted by law or this Deed of Trust, but each shall
be cumulative and shall be in addition to any other remedy. Every power or
remedy given by any of the Loan Documents to Trustee or Beneficiary or to
which either of them may be otherwise entitled may be exercised,
concurrently or independently, from time to time and as often as may be
deemed expedient by Trustee or Beneficiary, and either of them may pursue
remedies as each in their sole discretion shall deem appropriate. Grantor
may be joined in any action brought by Beneficiary to foreclose under or
otherwise enforce this Deed of Trust.
25. Trustee's Commission. In the event of a sale of the Trust Estate by
Trust pursuant to the power of sale contained in this Deed of Trust,
Trustee shall be entitled to collect a commission from the proceeds of a
sale equal to five percent (5%) of the gross proceeds. If the proceedings
are commenced by Trustee and a notice of sale has been advertised, but the
Trust Estate is not sold, then Trustee shall be entitled to a commission of
two and one-half percent (2.5%) of the outstanding balance of the Note. If
the Trustee has delivered notice to Grantor of such sale, but no further
proceedings are undertaken, then Trustee shall be entitled to a commission
equal to one and one-quarter percent (1.25%) of the outstanding balance of
the Note.
26. Amendments. This instrument cannot be waived, changed, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of any waiver, change, discharge or termination is
sought. A copy of such instrument shall be sent by such party to all other
parties at the addresses set forth in the first paragraph of this Deed of
Trust.
27. Invalidity of Certain Provisions. Every provision of this Deed of
Trust is intended to be severable. In the event any term or provision is
declared to be illegal, invalid or unenforceable for any reason whatsoever
by a court of competent jurisdiction, such illegality, invalidity, or
<PAGE>
unenforceability shall not affect the balance of the terms and
provisions, which terms and provisions shall remain binding and
enforceable.
28. No Merger of Lease. Upon the foreclosure of, or the exercise of the
power of sale with respect to, the lien created by this Deed of Trust on
the Trust Estate, any lease or sublease or rental agreement then existing
and affecting all or any portion of the Trust Estate shall not be destroyed
or terminated by application of the law of merger or as a matter of law or
as a result of such foreclosure or sale unless Beneficiary or any purchaser
at such foreclosure sale shall so elect. No act by or on behalf of
Beneficiary or any such purchase shall constitute a termination of any
lease or sublease unless Beneficiary or such purchaser shall give written
notice to such tenant or subtenant.
29. Governing Law. This Deed of Trust shall be governed by and construed
in accordance with the laws of North Carolina.
30. Further Assurances. Grantor, Beneficiary and Trustee agree to do or
to cause to be done such further acts and things and to execute and deliver
or to cause to be executed and delivered such additional assignments,
agreements, powers and instruments, as any of them may reasonably require
or deem advisable to keep valid and effective the charges and lien hereof,
to carry into effect the purposes of this Deed of Trust or to better assure
and confirm unto any of them their rights, powers and remedies hereunder;
and, upon request by Beneficiary, Grantor shall supply evidence of
fulfillment of each of the covenants contained in this Deed of Trust
concerning which a request for such evidence has been made.
31. Execution of Instruments by Trustee. At any time, and from time to
time, without liability and without notice, upon written request of
Beneficiary and without affecting the personal liability of any person for
payment of the indebtedness or the performance of any other obligation
secured hereby, Trustee may (i) reconvey any part of the Trust Estate; (ii)
consent in writing to the making of any map or plat; (iii) join in granting
any easement; (iv) join in any extension agreement, agreement subordinating
the lien or charge of this Deed of Trust, or other agreement or instrument
relating to this Deed of Trust or to any potion of the Trust Estate; or (v)
execute and cause to be recorded any amendment to Exhibit C as may be
necessary or appropriate to accurately evidence the identity and
participating in trusts of the lending institutions for which Beneficiary
serves as Agent under this Deed of Trust, but any failure to do so shall
not adversely affect any rights of any participant in this Deed of Trust.
32. Appointment of Successor Trustee. Trustee or any successor trustee
may resign and be discharged upon thirty (30) days written notice to
Beneficiary. Regardless of whether such resignation occurs, Beneficiary
may, from time to time, substitute a successor or successors to any trustee
in accordance with any statutory procedure fo such substitution.
33. Change of Law. In the event of the passage, after the date of this
Deed of Trust, of any law deducting from the value of the Trust Estate, for
the purposes of taxation, any lien or changing in any way the laws now in
force for the taxation of mortgages, deeds of trust, or debts secured by
mortgage or deed of trust (other than laws imposing taxes on income),
<PAGE>
or the manner of the collection of any such taxes so as to affect
adversely the rights of Beneficiary under this Deed of Trust, the
indebtedness secured by this Deed of Trust shall become due and payable at
the option of Beneficiary after thirty (30) days' notice to Grantor unless
Grantor, within such thirty (30) day period, shall, if permitted by law,
assume the payment of any tax or other charge so imposed upon Beneficiary
for the period remaining until full payment by Grantor of the indebtedness
secured by this Deed of Trust.
34. Usury. All agreements between the Grantor and Beneficiary, whether
now existing or hereafter arising and whether written or oral, are limited
so that in no contingency, whether by reason of acceleration of the
maturity of the Note or otherwise, shall the interest paid or agreed to be
paid to Beneficiary exceed the maximum rate permissible under applicable
law, then the interest payable to Beneficiary shall be reduced to the
maximum rate permitted under applicable law, and if from any circumstance
Beneficiary shall ever receive anything of value deemed interest by
applicable law, which would exceed interest at the highest lawful rate, an
amount equal to excessive interest shall be applied to the reduction of the
principal amount of the Note and not to the payment of interest, or if such
excessive interest shall exceed the unpaid principal of the Note, such
excess shall be refunded to Grantor. All interest paid or agreed to be paid
to Beneficiary shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full period until
payment in full of the principal so that the rate of interest under the
Note for such full period shall not exceed the maximum rate of interest
permitted to be charged by applicable law. This paragraph shall control all
agreements between the Grantor and Beneficiary.
35. Future Advances. This Deed of Trust secures all present and future
obligations of Grantor to Beneficiary evidenced by the Factoring Agreement
and any modifications, extensions and renewals of the Factoring Agreement.
The amount of present obligations secured by this Deed of Trust is Six
Hundred Thousand Dollars ($600,000.00), and the maximum principal amount,
including present and future obligations, which may be secured by this Deed
of Trust at any one time is Two Million Five Hundred Thousand Dollars
($2,500,000.00). The period within which such future obligations may be
incurred is fifteen years from the date of this Deed of Trust.
36. Revolving Credit Arrangement. This Deed of Trust secures a revolving
credit arrangement between Grantor and Beneficiary, and the parties intend
that the priority afforded such transactions by Section 45-69 of the North
Carolina General Statutes apply to the obligations secured hereby.
37. Sale of Participating Interests. Without affecting the rights or
obligations of the parties to this Deed of Trust, Beneficiary may sell
participating interests in the Loan to such other parties ("Participants")
as Beneficiary may, in its sole discretion, elect. Each Participant may
sell all or any portion of its participating interest in the Loan. No such
sale shall require amendment to this Deed of Trust by the selling
Paticipating or by the purchaser of the participating interest so sold.
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be
executed under seal by its duly authorized officers, agents or
representatives as of the date first above written.
ATTEST: ROCKY MOUNT UNDERGARMENT CO.,
INC.
_____________________ By:________________________________
Barry Russ, Esq. Joseph Pascal, President
(CORPORATE SEAL)
NEW YORK
NEW YORK COUNTY
I, Jeffrey A. Wurst, a Notary Public of Nassau County, certify that
Joseph Pascal personally appeared before me this day and acknowledged that
(s)he is President of ROCKY MOUNT UNDERGARMENT CO., INC. a Delaware
corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its
_______________ President, sealed with its corporate seal and attested by
him/her as its Attorney.
WITNESS my hand and official stamp or seal, this 27th day of April, 1995.
_________________________________
Notary Public
[STAMP/SEAL]
My commission expires: _____________________________
<PAGE>
Exhibit A
<PAGE>
IDENTIFICATION OF THE PROPERTY:
TRACT ONE: Manufacturing Plant located at 1506 Boone Street:
The subject property includes various tracts or parcels of land owned by Rocky
Mount Undergarment, Inc., which are legally described as follows:
PARCEL ONE:
KNOWN AS 1520-1524 Boone Road and adjoining lands, and more particularly
described as follows:
BEGINNING at a stake in the western property line of Boone Road 144.2 feet
southerly from its intersection with the southern property line of Arrington
Avenue; thence along Boone Road S. 4 deg. 55 min. W. 263 feet to a stake,
Rivenbark's corner; thence along the Rivenbark line N. 87 deg. 31 min. W. 197.06
feet to a stake; thence N. 4 deg. 55 min. E. 263 feet to a stake; thence S. 87
deg. 31 min. E. 197.06 feet to the point of beginning, as shown on plat of the
property of L. C. Parrish by Fred R. Dasher dated June 21, 1952, to which
reference is hereby made, together with all the right, title and interest of the
parties of the first part in that portion of Boone Road adjoining the said
property. Being the identical property conveyed by Peoples Bank & Trust company,
Trustee for Betsy B. Stranberg and D. O. Bullock, Jr., to Rocky Mount
Undergarment Co., Inc., by Deed dated October 31, 1958, recorded in Book 701,
Page 262, Nash County Registry.
PARCEL TWO:
BEGINING at an iron pipe in the western property line of Boone Street 73.6 feet
southerly of the intersection of the property line of Arrington Avenue with the
western property line of Boone Stree; thence N. 56 deg. 36 min. W. 192 feet to
an iron pipe cornering; thence S. 33 deg. 04 min. W. 85 feet to an iron pipe
cornering; thence along a line parallel with the first line S. 56 deg. 36 min.
E. 186.8 feet to an iron pipe in the line of the property of Rocky Mount
Undergarment Company, Inc., cornering; thence along the line of the property of
Rocky Mount Undergarment Company, Inc. S. 87 deg. 31 min. E. 44.7 feet to an
iron pipe in the western property line of Boone Street; thence along the western
property line of Boone Street N. 4 deg. 55 min. E. 70.6 feet to the beginning
and being Lots 10, 9, 8, and part of 7 in Block G as shown on Map of John Hunter
property recorded in Map Book 1, Page 125, Nash County Registry. Being the
identical property conveyed by W. O. Boone and wife, Sally B. Boone, to Rocky
Mount Undergarment Company, Inc. by Deed dated July, 1960, recorded in Book 711,
Page 187, Nash County Registry.
PARCEL THREE:
BEGINNING at a stake in the dividing line between Lots 12 and 13, Block G, said
stake being located S. 56 deg. 58 min. E. 100 feet from the corner of Lots 12
and 13 in the eastern property line of Fourth Street, as shown on map
<PAGE>
hereinafter referred to; thence along the dividing line between Lots 12 and 13,
S. 56 deg. 58 min. E. 104.3 feet to a stake, corner between Lots 12 and 13 in
the Rocky Mount Undergarment property line; thence along the dividing line
between Lots 11, 12 and Rocky Mount Undergarment property, S. 87 deg. 31 min. E.
95.86 feet to a stake, corner between Lots 10 and 11 in the Rocky Mount
Undergarment property line; thence with the dividing line between Lots 10 and
11, N. 56 deg. 36 min. W. 186.8 feet to a stake, a new corner for Alma W. Turner
Williamson; thence a new line for Williamson, S. 33 deg. 04 min. W. 44.9 feet to
the beginning and being a part of Lots 11 and 12, Block G, as shown on map of
the Kate W. Arrington land (John W. Hunter Property) recorded in Plat Book 1,
Page 160, Nash County Registry. Being a part of the property conveyed by W. L.
Thorp, Commissioner, to Alma Williams Turner (now Alma W. Turner Williamson), by
Deed dated September 24, 1928, recorded in Book 330, Page 437, Nash County
Registry. Being the identical property conveyed by Alma W. Turner Williamson and
husband, J. C. Williamson, to Rocky Mount Undergarment Company, Inc., by Deed
dated July 20, 1963, recorded in Book 768, Page 443, Nash County Registry.
The above description is taken from a survey and plat made by Dasher and Davis,
dated July 17 1963, plat entitled "Map of Property of Rocky Mount Undergarment
Corp."
PARCEL FOUR:
BEGINNING at a stake in the dividing line between Lots 12 and 13, said stake
being located S. 56 deg. 58 min. E. 100 feet from the corner of Lots 12 and 13
in the eastern property line of Fourth Street, as shown on map hereinafter
referred to; thence a new line for Wallace S. 29 deg. 39 min. E. 62.6 feet to a
stake, corner for Lots 13, 14, and Rocky Mount Undergarment property; thence
along the dividing line between Lot 13 and Rocky Mount Undergarment property S.
87 deg. 31 min. E. 56.5 feet to a stake, corner for Lots 12, 13, and Rocky Mount
Undergarment property; thence along the dividing line between Lots 12 and 13, N.
56 deg. 58 min. W. 104.3 feet to the beginning and being a part of Lot 13, Block
G, as shown on map of Kate W. Arrington land (John W. Hunter Property) recorded
in Plat Book 1, Page 160, Nash County Registry and being a part of the property
conveyed by Linwood L. Winbourne and wife, Sarah W. Winbourne, to Clarence J.
Wallace and wife, Joyce F. Wallace, by Deed dated October 21, 1959, recorded in
Book 706, Page 179, Nash County Registry. Being the identical property conveyed
by Clarence J. Wallace and wife, Joyce F. Wallace, and F. E. Winslow, Trustee,
and First Federal Savings and Loan Association of Rocky Mount, to Rocky Mount
Undergarment Company, Inc., by Deed dated July 18, 1963, recorded in Book 768,
Page 444, Nash County Registry.
The above description is taken from a survey and plat made by Dasher and Davis,
dated July 17, 1963, plat entitled "Map of Property of Rocky Mount Undergarment
Corp."
<PAGE>
PARCEL FIVE:
BEGINNING at a stake in the dividing line between Lots 14 and 15, said stake
being located S. 56 deg. 56 min. E. 100 feet from the corner of Lots 14 and 15
in the eastern property line of Cooper Street (formerly Fourth Street), as shown
on map hereinafter referred to; thence with the dividing line between Lots 14
and 15 S. 56 deg. 56 min. E. 66.93 feet to a stake, corner between Lots 14 and
15 in the line of Rocky Mount Undegarment Co. property; thence along the
dividing line between Lot 14 and Rocky Mount Undergarment Co. property N. 4 deg.
55 min. E. 23.9 feet to a stake, a corner between Lots 13 and 14 in the Rocky
Mount Undergarment Co. property line; thence N. 29 deg. 39 min. W. 62.6 feet to
a stake in the dividing line between Lots 12 and 13; thence a new line for
Clarence J. Wallace S. 33 deg. 04 min. W. 50 feet to a stake in the dividing
line between Lots 14 and 15, the point of beginning and being a part of Lots 13
and 14, Block G, John W. Hunter property of Kate W. Arrington, recorded in Plat
Book 1, Page 160, Nash County Registry, and being a part of the property
conveyed by Linwood L. Winbourne and wife, Sarah W. Winbourne, to Clarence J.
Wallace and wife, Joyce F. Wallace, by Deed dated October 21, 1958, recorded in
Book 706, Page 179, Nash County Registry. Being the identical property conveyed
by Clarence J. Wallace and wife, Joyce F. Wallace, and F. E. Winslow, Trustee,
and First Federal Savings and Loan Association of Rocky Mount, to Rocky Mount
Undergarment Co., Inc., by Deed dated March 15, 1966, recorded in Book 818, Page
251, Nash County Registry.
The above description is taken from a survey and plat made by Dasher and Davis,
dated February 8, 1966, plat entitled "Map of Property of Rocky Mount
Undergarment Corp."
PARCEL SIX:
BEGINNING at a stake in the northern property line of Cascade Avenue, said stake
being located 100 feet easterly from the intersection of the eastern property
line of Cooper Street (formerly Fourth Street) with the northern property line
of Cascade Avenue; thence with the northern property line of Cascade Avenue S.
56 deg. 56 min. E. 93.55 feet, to a stake in the Rocky Mount Undergarment Co.
property line; thence along the Rocky Mount Undergarment Co. property line N. 4
deg. 55 min. E. 56.7 feet to a stake, a corner between Lots 14 and 15 in the
Rocky Mount Undergarment Co. property line; thence along the dividing line
between Lots 14 and 15 N. 56 deg. 56 min. W. 66.93 feet to a stake, a new corner
in the dividing line between Lots 14 and 15, thence a new line S. 33 deg. 04
min. W. 50 feet to a stake in the northern property line of Cascade Avenue, the
point of beginning and being a part of Lot 15 and 16, Block G, John W. Hunter
property of Kate W. Arrington, recorded in Plat Book 1, Page 160, Nash County
Registry and being part of the property conveyed by Alma Turner Williamson and
husband, J. C. Williamson, to John James Baker and wife, Aileen C. Baker, by
Deed dated September 20, 1948, recorded in Book 530, Page 544, Nash County
Registry. Reference is also made to Quitclaim Deed from Vennie Baker et vir
to John James Baker et ux, dated March 21, 1950, recorded in Book 547, Page 473,
<PAGE>
Nash County Registry. Being the identical property conveyed by John James Baker
and wife, Aileen C. Baker, and F. E. Winslow, Trustee, and First Federal Savings
and Loan Association of Rocky Mount, to Rocky Mount Undergarment Co., Inc., by
Deed dated February 15, 1966, recorded in Book 815, Page 601, Nash County
Registry.
The above description is taken from a survey and plat made by Dasher and Davis,
dated February 8, 1966, plat entitled "Map of Property of Rocky Mount
Undergarment Corp."
PARCEL SEVEN:
Situate on the East side of Boone Street, Rocky Mount, Nash County, N.C.
BEGINNING at a stake in the eastern property line of Boone Street 60 feet
northerly of its intersection with the northern property line of Saint Paul
Street, Rebecca Joyner Estate Division corner; thence with the eastern property
line of Boone Street, N. 5 deg. 08 min. E. 237.6 feet to a stake, corner between
Tracts 13 and 14 as shown on plat hereinafter referred to; thence with the
dividing line between Tracts 13 and 14, N. 88 deg. 03 min. E. 637.9 feet to a
stake, cornering; thence S. 1 deg. 35 min. E. 234.3 feet to a stake, corner
between Tract 14 and the Rebecca Joyner Estate Division property; thence along
the Rebecca Joyner Estate line S. 87 deg. 55 min. W. 665.7 feet to a stake in
the eastern property line of Boone Street, the point of Beginning, together with
all right, title and interest in that portion of Boone Street adjoining the said
property, and being Tract 14 as shown on plat of property of O. L. Jackson
Heirs, dated December 15, 1894, and being the identical property conveyed by
Milton P. Fields, Commissioner, to Rocky Mount Undergarment Co., Inc., by Deed
dated May 29, 1964, recorded in Book 784, Page 405, Nash County Registry. See
Deed from Peoples Bank & Trust Company, judgment creditor, to Rocky Mount
Undergarment Company, Inc., dated June 4, 1964, recorded in Book 784, Page 439,
Nash County Registry.
This description is taken from a Map entitled "Map of Property of Rocky Mount
Undergarment Co., Inc., 1501 Boone Street & Eleanor Place, Rocky Mount, N.C.",
by Fred R. Dasher, dated February 12, 1972.
PARCEL EIGHT:
BEGINNING at a point in the northern property line of St. Paul Street at a point
523.1 feet easterly of its intersection with the eastern property line of Boone
Street; thence along the northern property line of St. Paul Street N. 87 deg. 49
min. E. 50. feet to a point; corner between Lots 18 and 19 as shown on map
hereinafter referred to; thence along the dividing line between Lots 18 and 19,
N. 1 deg. 49 min. W. 58.2 feet to a point in the line of Block 14 of the O. L.
Jackson Division; thence along the said line of the O. L. Jackson Division
<PAGE>
S. 87 deg. 55 min. W. 50 feet to a point; thence a new line S. 1 deg. 49 min. E.
58.4 feet, more or less, to the point of beginning and being the eastern 50 feet
of Lot 18 of the Rebecca Joyner Estate Division of J. J. Wells, C. E., dated May
10, 1920. Being a portion of the property conveyed by W. A. Sullivan, et ux, et
al, to Pearl F. Butler, widow, by Deed dated March 23, 1964, recorded in Book
793, Page 297, Nash County Registry. Being the identical property conveyed by
Pearl F. Butler, widow, to Rocky Mount Undergarment Co., Inc., dated March 12,
1974, recorded in Book 947, Page 647, Nash County Registry.
The above description is taken from a map entitled, "Map of Property of Rocky
Mount Undergarment Co., Boone Steet & Eleanor Place, Rocky Mount, N.C.", by Fred
R. Dasher, dated February 12, 1972, revised March 25, 1972.
TRACT TWO: Warehouse Building located at 150 Cooper Street
BEGINNING at a stake at the intersection of the eastern property line of Cooper
Street with the southern property line of Cascade Avenue (now closed); thence
along the eastern property line of Cooper Street S. 35 deg. 17 min. W. 150 feet
to a stake; thence S. 54 deg. 43 min. E. 150 feet to a stake; thence S. 35 deg.
17 min. W. 150 feet to a stake in the northern property line of Nelson Avenue;
thence along the northern property line of Nelson Avenue S. 54 deg. 43 min. E.
230.9 feet to a stake; thence N. 07 deg. 10 min. E. 362.06 feet to a stake in
Cascade Avenue (now closed); thence a new line N. 64 deg. 40 min. W. 111.96 feet
to a stake in the southern property line of Cascade Avenue (now closed); thence
N. 54 deg. 43 min. W. 100 feet to the point of Beginning and containing 1.582
acres as shown on map hereinafter referred to.
The above description is taken from a map entitled "Map of Property of Rocky
Mount Undergarment Co., Inc. - Leased to Gearington Realty, a partnership" by
Gay-Jarvis Associates, dated February 8, 1982, revised from an earlier map dated
April 23, 1979.
TRACT THREE: Vacant Parking Lot located at 1503 Boone Street
BEGINNING at a stake, corner of Lot No. 13 in M. Williford's line; thence with
the line of Lot No. 13, North 86 deg. 15 min. East 9 chains and 98 links to a
stake in Henry Davis' line; thence with said Davis line, South 3 deg. 15 min. E.
3 chains and 55 links to a stake, corner of Lot No. 15; thence with the line of
Lot No. 15 South 86 deg. 15 min. West, 10 chains and 41 links to a stake; thence
North 3 deg. 30 min. East, 3 chains and 60 links to the beginning, containing
3.61 acres and being Lot No. 14 as shown on plat of property of O. L. Jackson
Heirs, dated December 15, 1894, and drawn by Salley E. Joyner in the division of
the property of O. L. Jackson, see deed in Book 94, Page 1, Nash County
Registry.
TRACT FOUR: Single Family Home located at 1523 Boone Street
BEGINNING at a stake at the intersection of the eastern property line of Boone
<PAGE>
Street with the northern property of St. Paul Street; runs thence with the
eastern property line of Boone Street, N. 4 deg. 55 min. E. 59.75 feet to a
stake, old northwest corner of Lot 3 on map hereinafter referred to and common
corner of property of Rocky Mount Undergarment Co., Inc., N. 87 deg. 33 min. E.
82.4 feet to a stake, a new corner; thence S. 2 deg. 25 min. E. 59.3 feet to a
stake in the northern property line of St. Paul Street; thence with the northern
property line of St. Paul Street, S. 87 deg. 35 min. W. 90.1 feet to the point
of beginning, and being the western portion of Lot 3 on map of the Mrs. Rebecca
Joyner Division, of record in Book 293, Page 268, Nash County Registry, and
being the identical property conveyed by Dewey K. Butler and Wilson D. Butler,
Trustees, to Dewey K. Butler by Deed dated February 26, 1976, and recorded in
Book 984, Page 869, Nash County Registry.
The foregoing description is according to a plat entitled "Map of Property, of
Rocky Mount Undergarment Co., Inc., 1523 Boone St., Rocky Mount, N.C." dated
April 21, 1986 and prepared by Joyner, Keeny & Associates, Rocky Mount. N.C.
TRACT FIVE: Single Family Dwelling located at 444 St. Paul Street
KNOWN as 444 St. Paul Street, Rocky Mount, Nash County, North Carolina.
BEGINNING at a stake in the northern property line of St. Paul Street, 90.1 feet
easterly of its intersection with the eastern property line of Boone Street,
corner of other properties owned by Pearl Futch Butler; thence along the
northern property line of St. Paul Street, N. 87 deg. 35 min. E. 83 feet to a
stake, corner between Lots 3 and 15 as shown on map hereinafter referred to;
thence along the dividing line between Lots 3 and 15, N. 1 deg. 45 min. W. 59.1
feet to a stake, corner between Lots 3 and 15; thence S. 87 deg. 33 min. W. 83.7
feet to a stake, corner of other property owned by Butler; thence along Butler's
line, S. 2 deg. 25 min. E. 59.3 feet to a stake in the northern property line of
St. Paul Street, the point of beginning and being the eastern portion of Lot 3
as shown on map of the Mrs. Rebecca Joyner Division, recorded in Book 293, Page
268, Nash County Registry.
TRACT SIX: Warehouse located at 571 Nashville Road
BEGINNING at a stake at the intersection of the southern property line of
Nashville or River Road with the eastern property line of Boone Street; thence
in an easterly direction along the southern property line of Nashville or River
Road 50 feet to a stake; thence at right angles in an southerly direction and
parallel with Boone Street 100 feet to a stake; thence at right angles and in a
westerly direction, parallel with Nashville or River Road, 50 feet to a stake on
the eastern property line of Boone Street; thence in a northerly direction along
the eastern property line of Boone Street 100 feet to the point of beginning,
and being the identical property conveyed to H. K. Clark and wife, Lessie Mae
Clark by New Home Building and Loan Association by deed Dated September 30,
<PAGE>
1937, recorded in Book 419, Page 516, Nash County Registry. Being the identical
property conveyed by H. K. Clark and wife, Lessie Mae Clark to M. J. Duke and
wife, Rosabelle M. Duke, dated April 27, 1950, recorded in Book 549, Page 271,
Nash County Registry. Myrick Jordan Duke died testate on July 19, 1963, a
resident of Nash County, N.C., and said property passed by survivorship to his
wife, Rosabelle M. Duke. The said Rosabelle M. Duke died testate on February 25,
1977, a resident of Nash County, N.C. and devised the above described property
to her daughter, Joyce Duke Ryals.
TRACT SEVEN: Warehouse located at 567 Nashville Road
BEGINNING at a stake in the southern property line of Nashville or River Road 50
feet easterly from the intersection with the eastern property line of Boone
Street, Duke's corner (formerly Clark's corner); thence with the southern
property line of Nashville or River Road, S. 85 deg. 24 min. E. 60 feet to a
stake, B. W. Cockrell's corner (formerly W. T. Cockrell's corner); thence with
the Cockrell line S. 1 deg. 50 min. W. 214.6 feet to a stake in the northern
line of Eleanor Place; thence with the northern line of Eleanor Place S. 88 deg.
30 min. W. 124.2 feet to a stake in the eastern property line of Boone Street;
thence with the eastern property line of Boone Street N. 5 deg. 22 min. E. 127.6
feet to a stake, Duke's corner, thence with the Duke line S. 85 deg. 24 min. E.
50 feet to a stake, Duke's corner, thence continuing with Duke's line N. 5 deg.
22 min. E. 100 feet to the beginning, being the identical property conveyed to
Clarence W. Phillips by deed from W. T. Baker, recorded in Book 518, Page 144,
Nash County Registry. Being the same property conveyed by Clarence W. Phillips
to Percy O. Poole, by deed dated May 28, 1948; recorded in Book 524, Page 553,
Nash County Registry. Being the same property conveyed by Percy O. Poole and
wife, Amy Waters Poole to Lina Lee S. Stout et als, Trustees, by deed dated
October 6, 1960, recorded in Book 714, Page 580, Nash County Registry. SEE ORDER
APPROVING TRUSTEES BOND, recorded in Book 778, Page 574, and Book 778, Page 575,
Nash County Registry. Being the same property conveyed by Linda Lee S. Stout,
Taylor Hatcher, and A. M. Burroughs, Trustees, et als to Ben Greenberg and wife,
Sylvia Greenberg, by deed dated January 29, 1964, recorded in the Nash County
Registry.
TRACT EIGHT: Single family dwelling located at 1540 Boone Street
KNOWN as 1540 Boone Street.
BEGINNING at a stake in the western property line of Boone Street, said stake
being located 192.70 feet northerly of the intersection of the western property
line of Boone Street with the northern property line of Nelson Street; thence N.
88 deg. 27 min. 19 sec. W. 196 feet to a stake, cornering; thence N. 4 deg. 00
min. E. 50 feet to a stake, corner with (now or formerly) Rocky Mount
<PAGE>
Undergarment Co., Inc.; thence along the Rocky Mount Undergarment Co., Inc. line
S. 08 deg. 27 min. 19 sec. E. 195.55 feet to a stake in the western property
line of Boone Street; thence S. 88 deg. 27 min. 19 sec. E. 13.12 feet to a stake
or point in Boone Street, cornering; thence S. 4 deg. 00 min. W. 50 feet to a
point, cornering; thence N. 88 deg. 27 min. 19 sec. W. 12.67 feet to the point
of beginning. Being the identical property conveyed by D. V. Ingram, widower, to
B. G. Rivenbark, by Deed dated May 16, 1927, recorded in Book 311, Page 491,
Nash County Registry. See Deed from D. V. Ingram to B. G. Rivenbark, dated May
16, 1927, recorded in Book 322, Page 170, Nash County Registry. The said B. G.
Rivenbark died intestate on February 2, 1975, a resident of Nash County, North
Carolina and was survived by his widow, Mary Lewis Ingram Rivenbark, and his
children, Ben G. Rivenbark, Jr., and Jack E. Rivenbark, as his sole heirs at
law. The said Ben Graham Rivenbark, Jr., died intestate on August 31, 1980, a
resident of Nash County, North Carolina, and was survived by his wife, Marian E.
Rivenbark, and his children, Ben G. Rivenbark, III, and Judy Rivenbark Blais.
The said Mary Ingram Rivenbark died testate on March 19, 1990, a resident of
Nash County, North Carolina, and devised her property to her son, Jack E.
Rivenbark, and her grandchildren, Ben G. Rivenbark, III, and Judy Rivenbark
Blais.
The above description is taken from "Map of Property of Rocky Mount Undergarment
Co., Inc., Boone St., Rocky Mount, N.C." by Joyner, Keely & Associates, dated
January 24, 1991.
This conveyance is made subject to the right of way of Boone Street as shown on
the map hereinabove referred to.
TRACT NINE: Vacant residential lot located at 442 St. Paul Street
KNOWN as 442 St. Paul Street (as known as 540 Barnabas Street), Rocky Mount,
Nash County, North Carolina.
BEGINNING at a stake in the northern property line of Barnabas (same as St.
Paul) Street, 173.1 feet easterly of its intersection with the eastern property
line of Boone Street (formerly Germantown Road), southeast corner of Lot 3 on
map hereinafter referred to; thence along the northern property line of Barnabas
(same as St. Paul) Street, N. 87 deg. 55 min. E. 100 feet to a stake, southwest
corner of Lot 16; thence along the western line of Lot 16, N. 1 deg. 25 min. W.
58.8 feet to a stake; thence S. 88 deg. 05 min. W. 100 feet to a stake,
northeast corner of Lot 3; thence with the eastern line of Lot 3, S. 1 deg. 25
min. E. 59.1 feet to the point of beginning, and BEING Lot 15 on the plat of the
Mrs. Rebecca Joyner Division by John J. Wells, C. E. copy of said plat being on
file in Book 293, Page 268, Nash County Registry.
<PAGE>
EXHIBIT B
<PAGE>
List of Permitted Exceptions
1. Right of way to Carolina Telephone and Telegraph Company, recorded in
Book 685, Page 206, Nash County Registry. (As to Parcels One, Two, Three
and Four)
2. Easement to the City of Rocky Mount, North Carolina, recorded in Book
685, Page 235, Nash County Registry. (As to Parcels One, Two, Three and
Four)
3. Building restriction lines, easements and other matters as shown on
Plat recorded in Plat Book 1, Page 125, Nash County Registry. (As to Parcel
Two only)
4. Building restiction lines, easements and other matters as shown on
Plat recorded in Plat Book 1, Page 160, Nash County Registry. (As to
Parcels Three, Four, Five and Six)
5. Building restriction lines, easements and other matters as shown on
Plat recorded in Plat Book 293, Page 268, Nash County Registry. (As to
Parcel Eight, Tract Five and Tract Nine)
<PAGE>
EXHIBIT C
<PAGE>
Insurance Policies
The Insurance Policies required to be maintained pursuant to Section 1.3
of the Deed of Trust shall include, but not be limited to, the following:
1. "All risk" property insurance in an amount no less than the greater
of (A) one hundred percent (100%) of the "replacement cost" of the
Improvements, without deduction for physical depreciation or (B) the
outstanding principal balance of the Note, which has a deductible from loss
payable for any casualty in an amount not greater than Two Thousand Five
Hundred Dollars ($2,500.00), including an "inflation guard endorsement" and
such other riders or endorsements as Beneficiary may from time to time
reasonably require;
2. If the Premises are in an area which experiences special flood
hazard, flood insurance coverage issued in accordance with the Flood
Disaster Protection Act of 1973, as amended from time to time, or, if
replaced or amended, any superseding legislation governing similar
insurance coverage, or any other policy providing similar coverage against
loss of or damage to the Premises sustained by floods and flood-related
disasters, in an amount approved by Beneficiary;
3. "Combined business interruption and extra expense coverage," if the
Premises are owner-occupied, or "rental income coverage," if one or more
tenants occupy the Premises, in an amount not less than fifty percent (50%)
of the projected annual gross receipts from the business operated on the
Premises as to business interruption coverage, or one hundred percent
(100%) of the scheduled annual gross rents projected for the Premises as to
rental income coverage;
4. Comprehensive boiler and machinery coverage in an amount not less
than fifteen (15%) of the "replacement cost" of the Improvements, without
deduction for physical depreciation, accompanied by a "join loss
agreement," if the carrier providing such coverage is different than the
carrier providing the "all risk" property insurance referred to above;
5. A "1986 ISO Insurance Service Office" Commercial General Liability
Form insurance policy on an occurrence policy basis, with coverage for
products and completed operations (including products liability), if
applicable, and for third party damage resulting from bodily injury,
sickness, disease or death and injury to or destruction of third party
property, with limits of not less than One Million Dollars ($1,000,000.00)
per each occurrence, and, if the original principal balance of the Note is
equal to or less than Two Million Dollars ($2,000,000.00), then with a Two
Million Dollar ($2,000,000.00) general aggregate limit, or, if the original
principal balance of the Note is greater than Two Million Dollars
($2,000,000.00) then with a Three Million Dollar ($3,000,000.00) general
aggregate limit, and, if required by Beneficiary, an "Umbrella Liability
Policy" providing for "preferred form" coverage in such amount as may be
required by Beneficiary from time to time;
<PAGE>
6. If Grantor has employees, Workers' Compensation and Employer's
Liability Policy in such amount as is required by law; and
7. Such other insurance against risks or hazards, or other risks and
hazards, and in such amounts, as may from time to time be reasonably
required by Beneficiary, including, without limitation, policies insuring
against earthquakes, liquor liability or other specified hazards affecting
Beneficiary's security or as may be required by governmental regulations.
