<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission File Number 33-27038
JPS INDUSTRIES, INC.
(Formerly JPS Textile Group, Inc.)
(Exact name of registrant as specified in its charter)
Delaware 57-0868166
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
555 North Pleasantburg Drive, Suite 202, Greenville, South Carolina 29607
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (864) 239-3900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 10,000,000 shares of the
Company's Common Stock were outstanding as of September 9, 1999.
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<PAGE> 2
JPS INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION Number
<S> <C>
Item 1. Condensed Consolidated Balance Sheets
July 31, 1999 (Unaudited) and October 31, 1998............................... 3
Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended July 31, 1999 and
August 1, 1998 (Unaudited)................................................... 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended July 31, 1999 and
August 1, 1998 (Unaudited)................................................... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................... 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................... 19
PART II. OTHER INFORMATION ............................................................... 20
</TABLE>
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<PAGE> 3
Item 1. Financial Statements
JPS INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
--------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,087 $ 1,549
Accounts receivable 46,755 62,556
Inventories (Note 2) 49,119 46,836
Prepaid expenses and other (Note 5) 3,975 4,101
Net assets of discontinued operations (Note 4) 1,496 15,406
Net assets held for sale 955 9,652
--------- ---------
Total current assets 103,387 140,100
Property, plant and equipment, net 86,279 87,890
Reorganization value in excess of amounts
allocable to identifiable assets 31,498 36,532
Other assets 5,971 3,141
--------- ---------
Total assets $ 227,135 $ 267,663
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,787 $ 19,890
Accrued interest 1,035 1,055
Accrued salaries, benefits and withholdings 6,020 6,835
Other accrued expenses 8,357 10,274
Current portion of long-term debt (Note 3) 964 1,047
--------- ---------
Total current liabilities 30,163 39,101
Long-term debt (Note 3) 91,642 98,693
Other long-term liabilities 18,108 20,341
--------- ---------
Total liabilities 139,913 158,135
--------- ---------
Shareholders' equity:
Common stock 100 100
Additional paid-in capital 123,820 123,230
Accumulated other comprehensive loss (5,855) (5,855)
Accumulated deficit (30,843) (7,947)
--------- ---------
Total shareholders' equity 87,222 109,528
--------- ---------
Total liabilities and shareholders' equity $ 227,135 $ 267,663
========= =========
</TABLE>
Note: The condensed consolidated balance sheet at October 31, 1998 has been
extracted from the audited financial statements (as reclassified for
discontinued operations, see Note 4).
See notes to condensed consolidated financial statements.
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<PAGE> 4
JPS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- --------------------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 69,467 $ 74,724 $ 212,137 $ 249,133
Cost of sales 59,046 62,171 179,702 207,083
------------ ------------ ------------ ------------
Gross profit 10,421 12,553 32,435 42,050
Selling, general and administrative
expenses 8,002 9,029 26,728 28,126
Other income (expense), net 105 (62) 10 (3)
Charges for plant closing and
restructuring costs -- -- (3,718) --
------------ ------------ ------------ ------------
Operating profit 2,524 3,462 1,999 13,921
Interest expense 1,880 1,808 5,655 5,622
------------ ------------ ------------ ------------
Income (loss) before income taxes
and discontinued operations 644 1,654 (3,656) 8,299
Provision (benefit) for income taxes 947 936 (303) 3,799
------------ ------------ ------------ ------------
Income (loss) before discontinued
operations (303) 718 (3,353) 4,500
Discontinued operations (net of taxes):
Income (loss) from discontinued
operations -- 221 (898) 1,001
Net income (loss) on disposal of
discontinued operations 3,833 -- (18,645) --
------------ ------------ ------------ ------------
Net income (loss) $ 3,530 $ 939 $ (22,896) $ 5,501
============ ============ ============ ============
Basic and diluted earnings (loss) per
common share:
Income (loss) before discontinued
operations $ (0.03) $ 0.07 $ (0.34) $ 0.45
Discontinued operations, net of taxes:
Income (loss) from discontinued
operations -- 0.02 (0.09) 0.10
Net income (loss) on disposal of
discontinued operations 0.38 -- (1.86) --
------------ ------------ ------------ ------------
Net income (loss) $ 0.35 $ 0.09 $ (2.29) $ 0.55
============ ============ ============ ============
Number of shares used in per share calculation:
Basic 10,000,000 10,000,000 10,000,000 10,000,000
Diluted 10,000,000 10,052,158 10,000,000 10,022,188
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 5
JPS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------
July 31, August 1,
1999 1998
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(22,896) $ 5,501
-------- ---------
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization, except amounts included
in interest expense 8,831 8,957
Interest accretion and debt issuance cost amortization 283 249
Other, net (10,219) (581)
Charges for plant closing and restructuring costs 3,718 --
Loss (income) from discontinued operations 898 (1,215)
Loss on disposal of discontinued operations 18,645 --
Changes in assets and liabilities:
Accounts receivable 15,528 19,401
Inventories (1,798) (14,969)
Prepaid expenses and other assets 2,460 1,889
Accounts payable (6,227) (2,768)
Accrued expenses and other liabilities (7,986) (3,159)
-------- --------
Total adjustments 24,133 7,804
-------- --------
Net cash provided by operating activities 1,237 13,305
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES
Property and equipment additions (4,151) (18,787)
Proceeds from sale of assets 10,391 --
-------- --------
Net cash provided by (used in) investing activities 6,240 (18,787)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Financing costs incurred (731) (146)
Revolving credit facility borrowings (repayments), net (6,905) 5,072
Repayments of other long-term debt (304) (554)
-------- --------
Net cash provided by (used in) financing activities (7,940) 4,372
-------- --------
Net decrease in cash (463) (1,110)
Cash at beginning of period 1,549 3,888
-------- --------
Cash at end of period $ 1,086 $ 2,778
======== ========
Supplemental cash flow information:
Interest paid $ 5,392 $ 4,728
Income taxes paid 533 869
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 6
JPS INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Effective June 24, 1999, JPS Textile Group, Inc. changed its name to
JPS Industries, Inc. to reflect its changing strategic direction.
Unless the context otherwise requires, the terms "JPS" and the
"Company", as used in these condensed consolidated financial
statements, mean JPS Industries, Inc. and JPS Industries, Inc.
together with its subsidiaries, respectively.
The Company has prepared, without audit, the interim condensed
consolidated financial statements and related notes. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows at July 31, 1999 and for all
periods presented have been made.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1998. The results of operations for the interim period are
not necessarily indicative of the operating results for the full year.
Certain amounts have been reclassified to conform to the current
presentation.
2. Inventories (in thousands):
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
--------- -----------
<S> <C> <C>
Raw materials and supplies $ 9,237 $ 10,382
Work-in-process 12,904 16,690
Finished goods 26,978 19,764
--------- ---------
Total $ 49,119 $ 46,836
========= =========
</TABLE>
3. Long-Term Debt (in thousands):
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
--------- -----------
<S> <C> <C>
Senior credit facility, revolving line of credit $ 86,967 $ 94,095
Equipment financing 1,251 2,249
Capital lease obligation 4,388 3,396
--------- ---------
Total 92,606 99,740
Less current portion (964) (1,047)
--------- ---------
Long-term portion $ 91,642 $ 98,693
========= =========
</TABLE>
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<PAGE> 7
4. Discontinued Operations and Certain Other Charges
In the quarter ended May 1, 1999, management of the Company
recommended, and the Board of Directors of the Company approved, a
plan to exit the Company's cotton commercial products and yarn sales
segments. Accordingly, a charge for loss on disposal of discontinued
operations of approximately $22.5 million, net of a tax benefit of
approximately $1.2 million on the discontinued operations, was
recorded in the quarter ended May 1, 1999 reflecting the writedown of
plant assets to estimated net realizable value, employee severance
costs, plant run-out costs and other exit costs. On July 23, 1999, the
Company completed the sale of its Stanley Plant, thereby exiting the
yarn sales segment. Pursuant to an Asset Purchase Agreement dated July
2, 1999, between JPS Converter and Industrial Corp. ("C&I"), a
wholly-owned subsidiary of the Company, and Belding Hausman,
Incorporated, the consideration for the Stanley sale consisted of
approximately $2.0 million in cash, subject to a post-closing
adjustment based on the amount of inventories transferred. On August
27, 1999, the Company completed the sale of its Borden Plant, thereby
exiting its cotton commercial products segment. Pursuant to an Asset
Purchase Agreement dated June 24, 1999, as amended, between JPS, C&I
and Chiquola Fabrics, LLC, the consideration for the Borden sale
consisted of approximately $3.2 million in cash, subject to a
post-closing adjustment based on the amount of inventories
transferred, and a $2.0 million subordinated promissory note.
As a result of these transactions, in the quarter ended July 31, 1999,
the Company recorded a reduction to the loss on disposal of
discontinued operations of approximately $3.8 million, net of taxes of
approximately $1.2 million, principally representing the excess of
proceeds over the carrying value of the Stanley Plant assets sold and
changes in the estimates of the net realizable value of the Borden
Plant assets, employee severance costs, plant run-out costs and other
exit costs. Due to uncertainties regarding the ability of the Company
to utilize the remaining losses from discontinued operations, no tax
benefit is recorded in the accumulated net loss from discontinued
operations.
The results of operations for all periods presented have been
reclassified to reflect the cotton commercial products and yarn sales
segments as discontinued operations. Net sales from the discontinued
operations of these segments were approximately $8.2 million and $27.8
million in the three months and nine months ended July 31, 1999,
respectively, and $12.3 million and $40.0 million in the three months
and nine months ended August 1, 1998. The net assets of the
discontinued segments are classified as "net assets of discontinued
operations" on the accompanying condensed consolidated balance sheets.
On February 10, 1999, the Company announced that it would close its
Angle Plant located in Rocky Mount, Virginia, as a result of the
Company's assessment of the market conditions for apparel products
constructed primarily of filament yarns. As a result of this decision,
the results of operations for Fiscal 1998 included a "charge for
writedown of certain long-lived assets" of approximately $4.3 million
representing the loss on impairment of assets (approximately $2.7
million) for the excess of the carrying value of the plant over its
estimated net realizable value (as determined by independent appraisal
or quoted prices from used equipment dealers) and the writeoff of
approximately $1.6 million of related reorganization value in excess
of amounts allocable to identifiable assets in accordance with SFAS
No. 121. In the quarter ended May 1, 1999, the Company recorded an
additional "charge for plant closing" of approximately $1.8 million
principally for employee severance related to the Angle shutdown. This
plant closing was completed in the quarter ended July 31, 1999 and the
Company sold the remaining plant facility on September 3, 1999.
Also, in the quarter ended May 1, 1999, the Company recorded other
non-recurring restructuring charges of approximately $1.9 million
related principally to employee severance and the buy-out of lease
commitments on certain permanently idled equipment.
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<PAGE> 8
5. Contingencies
The Company has provided for all estimated future costs associated
with certain roofing products including those sold by the Predecessor
Stevens Division operations. The liability for future costs associated
with these roofing products is subject to management's best estimate,
including factors such as expected future claims by geographic region
and roofing compound applied; expected costs to repair or replace such
roofing products; estimated remaining length of time that such claims
will be made by customers; and the estimated costs to litigate and
settle certain claims now in litigation. The liability for such
products was approximately $2.4 million at July 31, 1999 and $2.8
million at October 31, 1998. The Company records the costs of meeting
these obligations as a reduction of the balance of the recorded
liability and, accordingly, such costs are not reflected in results of
operations. Management updates its assessment of the adequacy of the
remaining reserve for these roofing products quarterly and if it is
deemed that an adjustment to the reserve is required, it will be
charged to operations in the period in which such determination is
made.
At July 31, 1999, the Company had net operating loss carryforwards for
regular federal income tax purposes of approximately $35 million
(subject to adjustment by the Internal Revenue Service). The net
operating loss carryforwards expire in years 2004 through 2013. The
Company also has federal alternative minimum tax net operating loss
carryforwards of approximately $41 million (subject to adjustment)
which expire in 2004 through 2013. In addition, the Company has
alternative minimum tax credits of approximately $1.8 million that can
be carried forward indefinitely and used as a credit against regular
federal taxes, subject to limitation. The Company generated
approximately $11 million of net operating loss carryforwards for
regular federal income tax purposes during the nine month period ended
July 31, 1999.
The Company's ability to utilize its net operating loss carryforwards
realized prior to completion of the Plan of Reorganization is limited
under the income tax laws as a result of the change in the ownership
of the Company's stock occurring as a part of the Plan of
Reorganization. The effect of such an ownership change is to limit the
annual utilization of the net operating loss carryforwards to an
amount equal to the value of the Company immediately after the time of
the change (subject to certain adjustments) multiplied by the Federal
long-term tax exempt rate. Due to the Company's operating history, it
is uncertain that it will be able to utilize all deferred tax assets,
including tax benefits that may be realized upon the disposition of
discontinued operations. Therefore, a valuation allowance of
approximately $35 million has been provided.
The Company is exposed to a number of asserted and unasserted
potential claims encountered in the normal course of business. Except
as discussed below, management believes that none of this litigation,
if determined unfavorable to the Company, would have a material
adverse effect on the financial condition or results of operations of
the Company.
In June 1997, Sears Roebuck and Co. ("Sears") filed a multi-count
complaint against JPS Elastomerics Corp. ("Elastomerics"), a
wholly-owned subsidiary of JPS, and two other defendants alleging an
unspecified amount of damages in connection with the alleged premature
deterioration of the Company's roofing membrane installed on
approximately 150 Sears stores. The Company believes it has
meritorious defenses to the claims and intends to defend the lawsuit
vigorously. Management, however, cannot determine the outcome of the
lawsuit or estimate the range of loss, if any, that may occur.
Accordingly, no provision has been made for any loss which may result.
An unfavorable resolution of the actions could have a material adverse
effect on the business, results of operations or financial condition
of the Company.
-8-
<PAGE> 9
6. Comprehensive Income
Effective November 1, 1998, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of
changes in equity during a period from transactions and other events
from nonowner sources. The statement requires certain items such as
minimum pension liability adjustments, unrealized gains or losses on
available-for-sale securities and foreign currency translation
adjustments to be included in other comprehensive income. In the
periods ended July 31, 1999 and August 1, 1998 there were no
components of other comprehensive income. The accumulated other
comprehensive loss is comprised of an additional minimum pension
liability recorded in the fourth quarter of Fiscal 1998.
7. Segment Reporting
Effective in Fiscal 1999, the Company adopted SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information."
The Company's reportable segments are Elastomerics, Glass, and
Apparel. The reportable segments were determined using the Company's
method of internal reporting, which divides and analyzes the business
by the nature of the products manufactured and sold. The customer
base, manufacturing process and method of distribution does vary
significantly by product. The Elastomerics segment principally
manufactures and markets extruded products including high performance
roofing products, environmental-geomembranes and various polyurethane
products. The Glass segment produces and markets specialty substrates
woven from fiberglass and other specialty fibers for a variety of
applications such as printed circuit boards, filtration, advanced
composites, building products, defense and aerospace. The Apparel
segment produces and markets unfinished woven fabrics for use in a
broad range of consumer apparel products for use in the women's dress
and sportswear markets.
During the process of implementing SFAS No. 131, the Company
identified two other segments which met its criteria as reportable
segments. These two segments are the cotton commercial products
segment and the yarn sales segment. As discussed in Note 4, the
Company has exited these segments. Such segments are reported in the
accompanying condensed consolidated financial statements as
discontinued operations and are not included in the segment
information below or in Item 2 contained herein.
The Company evaluates the performance of its reportable segments and
allocates resources principally based on the segment's operating
profit, defined as earnings before interest and taxes. The following
table presents certain information regarding the business segments:
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended Nine Months Ended
------------------------ -------------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales:
Elastomerics $ 20,355 $ 21,926 $ 59,241 $ 59,907
Glass 20,331 18,417 60,944 56,986
Apparel 30,513 37,276 98,694 138,217
-------- --------- --------- ---------
71,199 77,619 218,879 255,110
Less intersegment sales (1) (1,732) (2,895) (6,742) (5,977)
-------- --------- --------- ---------
Net sales $ 69,467 $ 74,724 $ 212,137 $ 249,133
======== ========= ========= =========
</TABLE>
-9-
<PAGE> 10
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended Nine Months Ended
------------------------ -------------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
Operating profit:
Elastomerics $ 2,825 $ 2,977 $ 6,782 $ 6,099
Glass 1,382 1,692 3,214 5,620
Apparel (2) (204) 139 (1,448) 6,248
Indirect corporate
expenses, net (3) (1,479) (1,346) (6,549) (4,046)
-------- --------- --------- ---------
Operating profit (loss) 2,524 3,462 1,999 13,921
Interest expense (1,880) (1,808) (5,655) (5,622)
-------- --------- --------- ---------
Income (loss) before income taxes
and discontinued operations $ 644 $ 1,654 $ (3,656) $ 8,299
======== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
--------- -----------
<S> <C> <C>
Identifiable assets:
Elastomerics $ 45,533 $ 46,764
Glass 51,641 54,133
Apparel 88,496 109,008
--------- ---------
Total segments 185,670 209,905
Corporate and other 39,969 42,352
Net assets of discontinued operations 1,496 15,406
--------- ---------
Total assets $ 227,135 $ 267,663
========= =========
</TABLE>
(1) Intersegment sales consist primarily of the transfer of certain
scrim products manufactured by the Glass segment to the Elastomerics
segment. All intersegment revenues and profits are eliminated in the
accompanying condensed consolidated financial statements.
(2) The operating loss for the Apparel segment in the nine months
ended July 31, 1999 includes plant closing costs of approximately $1.8
million and other restructuring charges of approximately $0.6 million.
(3) Indirect corporate expenses for the nine months ended July 31,
1999 include other restructuring charges of approximately $1.3
million.
8. Earnings Per Share
In Fiscal 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share" which requires the
presentation of basic and diluted earnings per share, as defined.
Basic earnings per share for the periods ended July 31, 1999 and
August 1, 1998, was computed by dividing net income by the weighted
average number of shares of common stock outstanding during the
period. The presentation of diluted earnings per share was not
required for the periods ended July 31, 1999 since the inclusion of
additional shares assuming the exercise of stock options and warrants
is antidilutive.
For the three months and nine months ended August 1, 1998, the
denominator for diluted earnings per share includes 52,158 and 22,188
incremental shares, respectively, for the dilutive effect of
outstanding stock options.
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<PAGE> 11
9. Stock Option Repricing
On May 12, 1999 the Compensation Committee of the Board of Directors
approved a plan to reprice stock options held by certain employees and
directors. Effective on that date, 274,150 options with an exercise
price of $12.33 per share were repriced. The new exercise price is
$4.375 per share. The Financial Accounting Standards Board has
proposed an interpretation that will require repriced options to be
treated as variable options and as such compensation expense, measured
by the increase in the fair market value of the stock over the option
price, must be recognized in a company's financial statements. These
proposed rules will be effective upon issuance of the interpretation.
For the three months and nine months ended July 31, 1999, no
compensation expense is associated with the repriced options.
-11-
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This quarterly report on Form 10-Q contains forward-looking information
statements that involve risks and uncertainties. Such forward looking
statements include, but are not limited to, statements regarding the Company's
expectations of the impact of the year 2000 issue on results of operations and
any other specific factors set forth herein. The Company's actual results,
performance or achievements could differ materially from the results expressed
in, or implied by, these forward-looking statements, which are made only as of
the date hereof.
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing in Item 7
of the Company's Annual Report on Form 10-K for the fiscal year ended October
31, 1998. As discussed in Note 7 of the Notes to Condensed Consolidated
Financial Statements included in Item 1 herein, effective in the quarter ended
May 1, 1999, the Company adopted SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information". Accordingly, segment information for prior
periods has been restated to conform to the current presentation.
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended Nine Months Ended
------------------------ -------------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales:
Elastomerics $ 20,355 $ 21,926 $ 59,241 $ 59,907
Glass 20,331 18,417 60,944 56,986
Apparel 30,513 37,276 98,694 138,217
--------- --------- --------- ---------
71,199 77,619 218,879 255,110
Less intersegment sales (1,732) (2,895) (6,742) (5,977)
--------- --------- --------- ---------
Net sales $ 69,467 $ 74,724 $ 212,137 $ 249,133
========= ========= ========= =========
Operating profit:
Elastomerics $ 2,825 $ 2,977 $ 6,782 $ 6,099
Glass 1,382 1,692 3,214 5,620
Apparel (204) 139 (1,448) 6,248
Indirect corporate expenses, net (1,479) (1,346) (6,549) (4,046)
--------- --------- --------- ---------
Operating profit 2,524 3,462 1,999 13,921
Interest expense (1,880) (1,808) (5,655) (5,622)
--------- --------- --------- ---------
Income (loss) before income taxes
and discontinued operations $ 644 $ 1,654 $ (3,656) $ 8,299
========= ========= ========= =========
</TABLE>
INTRODUCTION
The Company has repositioned itself from one that was largely textile oriented
to a diversified manufacturing and marketing company that is focused on a broad
array of industrial applications. This has been accomplished by successfully
streamlining the ongoing apparel fabric business and exiting three other
textile businesses, while intensifying its focus on the two businesses with
growth potential, JPS Glass and JPS Elastomerics. On March 2, 1999, the Company
sold its Boger City manufacturing plant, thereby exiting the home fashions
woven fabrics business. The Company closed its Angle manufacturing facility in
the third quarter and sold the remaining plant on September 3, 1999, thereby
streamlining the apparel business. On July 23, 1999, the Company sold its
Stanley manufacturing plant, thereby exiting its yarn sales segment. On August
27, 1999, the Company sold its Borden manufacturing plant, thereby exiting its
cotton commercial products segment. The yarn sales and cotton commercial
products segments are reported in the accompanying condensed consolidated
financial statements
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<PAGE> 13
as discontinued operations. In addition, the Company has taken action to
substantially reduce costs in the remaining businesses, including general &
administrative support. The Company changed its name to JPS Industries, Inc.
and is now focusing solely on improving the performance and profitability of
its remaining core businesses, JPS Elastomerics, JPS Glass and JPS Apparel.
RESULTS OF OPERATIONS
Three Months Ended July 31, 1999 (the "1999 Third Quarter") Compared to the
Three Months Ended August 1, 1998 (the "1998 Third Quarter")
Consolidated net sales decreased $5.3 million, or 7.0%, from $74.7 million in
the 1998 third quarter to $69.5 million in the 1999 third quarter. Operating
profit decreased $0.9 million from $3.4 million in the 1998 third quarter to
$2.5 million in the 1999 third quarter.
Net sales in the 1999 third quarter in the Elastomerics segment, which includes
single-ply roofing, environmental membrane and extruded urethane products,
decreased $1.6 million, or 7.2%, from $21.9 million in the 1998 third quarter
to $20.4 million in the 1999 third quarter. This decrease is primarily
attributable to the roofing products market that is characterized by more
intense competition via new entrants into this arena. The Company is addressing
this factor by instituting more aggressive pricing strategies, strengthening
its sales management in key territories, and taking aggressive action to reduce
costs. Importantly, new roofing products that will allow the Company to compete
in two additional market sectors are being field tested this Fall with expected
commercialization by Spring 2000. Sales of extruded urethane products were
higher in the 1999 third quarter as a result of higher demand for certain of
the Company's extruded sheet products.
Operating profit in the 1999 third quarter for the Elastomerics segment
decreased $0.2 million from $3.0 million in the 1998 third quarter to $2.8
million in the 1999 third quarter. This decrease resulted principally from
decreased roofing sales volume, offset in part by increased extruded urethane
sales volume.
Net sales in the Glass segment, which includes woven substrates constructed of
synthetics and fiberglass for lamination, insulation and filtration
applications, increased $1.9 million, or 10.4%, from $18.4 million in the 1998
third quarter to $20.3 million in the 1999 third quarter. The electronics
industry represents the largest customer base for the Company's fiberglass
products. In Fiscal 1998, global consumer demand for electronic products did
not meet expectations and, combined with other factors, including the weakness
in Asian economies, led to a slowdown in demand for certain fiberglass fabrics
used in the manufacture of electrical circuit boards. In view of this market
softness, the Company took a number of actions to broaden its customer base in
electronic substrates and increase its market share in building products. These
actions led to improved sales in the 1999 third quarter compared to the 1998
third quarter. The Company has also taken actions to reduce costs, improve
manufacturing productivity and improve the quality of its products and
services.
Operating profit in the 1999 third quarter for the Glass segment decreased $.3
million from $1.7 million in the 1998 third quarter to $1.4 million in the 1999
third quarter. This decrease resulted from continued pricing pressures from the
Asian economic situation and the global supply imbalance for electronic
products. In addition, 1999 third quarter profits were adversely impacted by
the effect of production curtailments to reduce inventories to targeted levels
by fiscal year end 1999.
Net sales in the Apparel segment, which includes unfinished woven apparel
fabrics primarily for women's wear, decreased $6.8 million, or 18.1%, from
$37.3 million in the 1998 third quarter to $30.5 million in the 1999 third
quarter. The apparel fabrics are produced chiefly from yarns consisting of
acetate, rayon, and Tencel(R) fibers. Market conditions for these apparel
fabrics weakened significantly during the 1998 third quarter, adversely
affecting unit volumes and selling prices. This trend has continued through the
1999 third quarter, because high
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<PAGE> 14
levels of apparel imports continue to have a negative impact on demand for
domestically produced fabrics. The Company has consummated plans to streamline
the apparel business by closure and sale of the Angle manufacturing facility
along with other actions to better match apparel production capacity with
market demand, and has taken actions that have resulted in substantial cost
reductions.
Operating profit in the 1999 third quarter for the Apparel segment decreased
$0.3 million from an operating profit of $0.1 million in the 1998 third quarter
to an operating loss of $0.2 million in the 1999 third quarter. This decrease
is primarily attributable to lower sales volume, lower unit prices and the
effects of production curtailment to reduce inventories to targeted levels by
fiscal year end 1999.
Intersegment sales consist primarily of the transfer of certain scrim products
manufactured by the Glass segment to the Elastomerics segment. All intersegment
sales and profits are eliminated in the accompanying condensed consolidated
financial statements.
Indirect corporate expenses increased $0.1 million in the 1999 third quarter
compared to the 1998 third quarter due to higher stock option expense.
Interest expense in the 1999 third quarter was consistent with the 1998 third
quarter.
Nine Months Ended July 31, 1999 (the "1999 Nine-Month Period") Compared to the
Nine Months Ended August 1, 1998 (the "1998 Nine-Month Period")
Consolidated net sales decreased $37.0 million, or 14.9%, from $249.1 million
in the 1998 nine-month period to $212.1 million in the 1999 nine-month period.
Operating profit decreased $11.9 million from an operating profit of $13.9
million in the 1998 nine-month period to $2.0 million in the 1999 nine-month
period. The 1999 nine-month period includes charges for plant closing and
restructuring costs of approximately $3.7 million. Excluding such charges for
comparative purposes, operating profit in the 1999 nine-month period was $5.7
million compared to $13.9 million in the 1998 nine-month period.
Net sales in the 1999 nine-month period in the Elastomerics segment was
comparable to 1998 nine-month period levels, decreasing $0.7 million, or 1.1%,
to $59.2 million from $59.9 million in the 1998 nine-month period.
Operating profit in the 1999 nine-month period for the Elastomerics segment
increased $0.7 million to $6.8 million from $6.1 million in the 1998 nine-month
period. This increase is due to lower costs in the 1999 nine-month period.
Net sales in the Glass segment increased $4.0 million, or 7.0%, to $60.9
million from $56.9 million in the 1998 nine-month period. The Company's actions
to broaden its customer base in electronic substrates and increase its market
share in building products, as described in the above third quarter comments,
led to improved sales in the 1999 nine-month period.
Operating profit in the 1999 nine-month period for the Glass segment decreased
$2.4 million from $5.6 million in the 1998 nine-month period to $3.2 million in
the 1999 nine-month period. This decrease resulted from continued pricing
pressures from the Asian economic situation and the global supply imbalance for
electronic products. Additionally, the Glass segment's operating results were
negatively impacted by approximately $2.0 million for inventory valuation and
reduction and quality issues related to the start-up of new equipment and
changes in product mix.
Net sales in the Apparel segment decreased $39.5 million, or 28.6%, from $138.2
million in the 1998 nine-month period to $98.7 million in the 1999 nine-month
period. Market conditions for apparel fabrics has weakened significantly since
the 1998 nine-month period, which was exceptionally strong during the first six
months of 1998, with unit volumes and selling prices well below prior-year
levels. The high levels of apparel imports
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<PAGE> 15
continue to have a negative impact on demand for domestically produced fabrics.
Operating profit in the 1999 nine-month period for the Apparel segment
decreased $7.7 million from an operating profit of $6.2 million in the 1998
nine-month period to an operating loss of $1.5 million in the 1999 nine-month
period. The 1999 nine-month period includes charges for plant closing and
restructuring costs totaling approximately $2.4 million. Excluding such charges
for comparative purposes, operating profit in the 1999 nine-month period was
$0.9 million compared to $6.2 million in the 1998 nine-month period. This
decrease is primarily attributable to lower sales volume, lower unit prices,
and the effects of production curtailment to better manage inventory levels.
Intersegment sales consist of the transfer of certain scrim products
manufactured by the Glass segment to the Elastomerics segment. All intersegment
sales and profits are eliminated in the accompanying condensed consolidated
financial statements.
Indirect corporate expenses increased $2.5 million in the 1999 nine-month
period compared to the 1998 nine-month period due to approximately $1.3 million
of employee severance and other restructuring costs, higher legal and
professional fees, and higher stock option expense.
Interest expense in the 1999 nine-month period was consistent with the 1998
nine-month period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity for operations and expansion are
funds generated internally and borrowings under its Revolving Credit Facility
(as defined below). On October 9, 1997, Elastomerics and C&I (the "Borrowing
Subsidiaries") and JPS entered into the Credit Facility Agreement, (the "Credit
Agreement"), by and among the financial institutions party thereto, Citibank,
as agent, and NationsBank, N.A., as co-agent. The Credit Agreement, as amended,
provides for a revolving credit loan facility and letters of credit (the
"Revolving Credit Facility") in a maximum principal amount equal to the lesser
of (a) $133 million and (b) a specified borrowing base (the "Borrowing Base"),
which is based upon eligible receivables, eligible inventory and a specified
dollar amount (currently $41,503,000 (subject to reduction) based on fixed
assets of the Borrowing Subsidiaries), except that (i) no Borrowing Subsidiary
may borrow an amount greater than the Borrowing Base attributable to it (less
any reserves as specified in the Credit Agreement) and (ii) letters of credit
may not exceed $20 million in the aggregate. The Credit Agreement contains
restrictions on investments, acquisitions and dividends unless, among other
things, the Company satisfies a specified pro forma fixed charge coverage ratio
and maintains a specified minimum availability under the Revolving Credit
Facility for a stated period of time, and no default exists under the Credit
Agreement. The Credit Agreement also restricts, among other things,
indebtedness, liens, affiliate transactions, operating leases, fundamental
changes and asset sales other than the sale of up to $35 million of fixed
assets, subject to the satisfaction of certain conditions. The Credit Agreement
contains financial covenants relating to minimum levels of EBITDA, minimum
interest coverage ratio, minimum fixed charge coverage ratio and maximum
capital expenditures. The maturity date of the Revolving Credit Facility is
October 9, 2002. On October 30, 1998, April 30, 1999 and July 12, 1999, the
Credit Agreement was amended to, among other things (i) modify the financial
covenants relating to minimum levels of EBITDA, minimum interest coverage
ratio, minimum fixed charge coverage ratio and maximum capital expenditures
(ii) modify the interest rate margin and unused commitment fees, and (iii)
modify the maximum principal amount allowed under the Revolving Credit
Facility. As of July 31, 1999, the Company was in compliance with these
restrictions and all financial covenants, as amended. All loans outstanding
under the Revolving Credit Facility, as amended, bear interest at either the
Eurodollar Rate (as defined in the Credit Agreement) or the Base Rate (as
defined in the Credit Agreement) plus an applicable margin (the "Applicable
Margin") based upon the Company's fixed charge coverage ratio (which margin
will not exceed 2.50% for
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<PAGE> 16
Eurodollar Rate borrowings and 1.00% for Base Rate borrowings). The weighted
average interest rate at July 31, 1999 is approximately 7.5%. The Company pays
an unused commitment fee of .375% per annum but declining to .25% per annum if
a specified fixed charge coverage ratio is satisfied and a letter of credit fee
equal to the Applicable Margin for Eurodollar Rate borrowings. Borrowings under
the Revolving Credit Facility are made or repaid on a daily basis in amounts
equal to the net cash requirements or proceeds for that business day. As of
July 31, 1999, unused and outstanding letters of credit totaled $1,526,000. The
outstanding letters of credit reduce the funds available under the Revolving
Credit Facility. At July 31, 1999, the Company had approximately $18.8 million
available for borrowing under the Revolving Credit Facility.
In Fiscal 1998, the Company entered into a seven-year lease agreement
(classified as capital lease) for certain machinery and equipment. The total
cost of the assets to be covered by the lease is limited to approximately $5.0
million. The total cost of assets under lease at July 31, 1999 was
approximately $5.0 million. The lease provides for an early buyout option at
the end of six years and includes purchase and renewal options at fair market
value at the end of the lease term.
During the 1999 nine months ended July 31, 1999, cash provided by operating
activities was $1.2 million. Working capital decreased from $101.0 million at
October 31, 1998 to $73.2 million at July 31, 1999. Net assets of discontinued
operations decreased by $13.9 million as a result of closure on sale of the
Stanley manufacturing plant. Net assets held for sale decreased by $8.7 million
as a result of closure on sale of the Boger City manufacturing plant. Accounts
receivable decreased by $15.8 million from October 31, 1998 to July 31, 1999
due to lower sales in July 31, 1999 compared to October 1998. Inventories
increased by $2.3 million, primarily in finished goods, during the 1999 third
quarter as a result of the lower sales volume in that period. Accounts payable
decreased by $6.1 million from October 31, 1998 to July 31, 1999 primarily as a
result of the slowdown in sales volume in July 31, 1999 compared to October
1998 and the corresponding decrease in production requirements. Other accrued
expenses decreased $1.9 million due to lower accrued employee compensation.
The principal use of cash in the 1999 third quarter was for capital
expenditures of $4.2 million and net repayment of borrowings under the
Revolving Credit Facility of $6.9 million. As of July 31, 1999, the Company had
commitments of $0.7 million for capital expenditures. The Company anticipates
making capital expenditures in Fiscal 1999 of approximately $6.2 million and
expects such amounts to be funded by cash from operations, bank and other
equipment financing services.
Based upon the Company's ability to generate working capital through its
operations and its Revolving Credit Facility, the Company believes that it has
the financial resources necessary to pay its capital obligations and implement
its business plan.
YEAR 2000 COMPLIANCE
Description of Year 2000 Issue
As a result of the existence of computer programs and chips embedded in process
control equipment that use two digits rather than four to define the applicable
year, a concern commonly known as "Year 2000" has arisen globally. Computer
programs and equipment having time-sensitive software or imbedded processors
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in system failures or miscalculations causing disruptions of
operations, such as production shutdowns, or a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
Mission-critical applications which could be impacted include purchasing and
inventory management, production control, general ledger accounting, billing,
payroll and disbursements.
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<PAGE> 17
The Company's Plan
In Fiscal 1997, the Company conducted a comprehensive review of its computer
systems to identify those systems that could be affected by the Year 2000 issue.
The Company has developed and is currently implementing its plan to address the
Year 2000 issue. Task teams led by senior executives identified six project
phases including (i) inventory of systems and process exposure, (ii) risk
assessment and prioritization, (iii) remediation of non-compliant systems, (iv)
testing and development of compliant systems, (v) maintenance once compliance is
achieved and (vi) contingency planning. The Company has substantially completed
remediation and testing phases for all critical IT and process systems, and is
currently developing contingency plans for critical systems, suppliers,
customers and service providers. To preserve compliance of remediated and tested
systems, testing of IT and process systems will continue through the calendar
year-end. Remediation involved repair of existing systems and equipment, and, in
some cases, complete replacement with purchased systems and equipment that are
Year 2000 compliant. Replaced and modified systems have been subjected to
rigorous testing in a non-production environment in parallel with production
data and, once deployed, are continually monitored for compliance. Activities to
maintain such compliance include monitoring of reprogrammed systems once back in
production, internal and 3rd party audits of critical systems, vendor compliance
certifications and testing of contingency plans. Management has also reviewed
production equipment used in its operations and has performed a written survey
of its equipment vendors to certify that the systems imbedded in sophisticated
production equipment are Year 2000 compliant. In addition, all new equipment
purchases are screened for Year 2000 compliance. The Company expects that the
contingency planning phase will be substantially completed by the end of October
1999. However, testing and maintenance will continue throughout 1999.
The Company has corresponded and met with critical vendors and service
providers to discern their Year 2000 compliance status and testing procedures.
Most of these vendors and service providers supply raw materials and equipment
to the Company. The majority of responses have been received, with some
requiring additional follow-up which is to be completed by October 1999.
The Company is currently developing contingency plans for its mission-critical
applications. The contingency plans will address (i) the development of a
contingency planning framework, including common approaches and criteria, (ii)
clear assignment of accountability for executing the contingency planning
framework, (iii) monitoring of results and (iv) testing and validation. It is
anticipated the contingency plans will enable the business to continue in the
event there are any system interruptions.
Costs Associated with Year 2000 Compliance
The incremental cost of addressing the Year 2000 issue will be substantially
absorbed in the normal budget for improvement in management information systems
and by normal costs for administrative and technical employees. The Company,
however, retains contract programmers to work on discrete projects and will
continue this practice into the foreseeable future. The incremental cost of
addressing the Year 2000 issue is estimated at $150,000, with $113,000 having
been spent as of July 31, 1999. Most of these expenditures have been for
remediation or replacement of existing systems. Management believes that the
cost of Year 2000 modifications will not have a material effect on results of
operations. The estimated cost of the Year 2000 project and the dates on which
the Company believes it will be completed are based on management's best
estimate. There can be no assurances that these estimates will not change.
Specific factors that could cause material differences with actual results
include, but are not limited to, the results of testing and the timeliness and
effectiveness of remediation efforts of third parties.
Risks Presented by Year 2000 Issues
There can be no assurance given that any or all of the Company's systems are or
will be Year 2000 compliant.
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<PAGE> 18
A failure by the Company to resolve a material Year 2000 issue could result in
an interruption in, or failure of, normal business operations and could
materially and adversely affect the Company's financial condition. In addition,
due to the uncertainties inherent in the Year 2000 problem, the Company cannot
insure that its most important vendors, customers and service providers will be
Year 2000 compliant on time. The failure of critical third parties to timely
correct their Year 2000 problems could materially and adversely affect the
Company's operations and financial condition, even resulting in an interruption
in normal business operations if a critical supplier is unable to meet
commitments in a timely manner. However, as a result of the activities
described above, and assuming the remaining project phases are completed in
satisfactory manner, management believes that the Year 2000 issue will not pose
significant operational problems for the Company's computer or process systems.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures About
Pensions and Other Postretirement Benefits - an Amendment of FASB Statements
No. 87, 88 and 106". SFAS No. 132 revises disclosures about pension and other
postretirement benefit plans, but it does not change the measurement or
recognition of those plans and therefore will not have a significant impact on
the Company's financial position, results of operations or cash flows. SFAS No.
132 is effective for the Company in Fiscal 1999.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires companies to
record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. SFAS No. 133 will be effective for
the Company in Fiscal 2000. Management of the Company has not yet evaluated the
effects of this statement on the Company's financial position, results of
operations or cash flows.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use", which provides guidance on
accounting for the costs of computer software developed or obtained for
internal use. SOP 98-1 requires external and internal indirect costs of
developing or obtaining internal-use software to be capitalized as a long-lived
asset and also requires training costs included in the purchase price of
computer software and costs associated with research and development to be
expensed as incurred. SOP 98-1 is effective for the Company in Fiscal 1999.
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<PAGE> 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk. The Company has exposure to interest rate changes primarily
relating to interest rate changes under its Revolving Credit Facility. The
Company's Revolving Credit Facility bears interest at rates which vary with
changes in (i) the London Interbank Offered Rate (LIBOR) or (ii) a rate of
interest announced publicly by Citibank in New York, New York. The Company does
not speculate on the future direction of interest rates. As of July 31, 1999,
approximately $81.9 million of the Company's debt bore interest at variable
rates. The Company believes that the effect, if any, of reasonably possible
near-term changes in interest rates on the Company's consolidated financial
position, results of operations or cash flows would not be significant.
Commodity price risk. A portion of the Company's raw materials are staple goods
that are affected by commodity pricing and are, therefore, subject to price
volatility caused by weather, production problems, delivery difficulties and
other factors which are outside the control of the Company. In most cases,
essential raw materials are available from several sources. For several raw
materials, however, branded goods or other circumstances may prevent such
diversification and an interruption of the supply of these raw materials could
have a significant impact on the Company's ability to produce certain products.
The Company has established long-term relationships with key suppliers and may
enter into purchase contracts or commitments of one year or less for certain
raw materials. Such agreements generally include a pricing schedule for the
period covered by the contract or commitment. The Company believes that any
changes in commodity pricing which cannot be adjusted for by changes in its
product pricing or other strategies, would not be significant.
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<PAGE> 20
JPS INDUSTRIES, INC.
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
ITEM
- ----
<S> <C>
1. Legal Proceedings None
2. Changes in Securities None
3. Defaults Upon Senior Securities None
4. Submission of Matters to a Vote of Security Holders None
5. Other Information
Effective June 23, 1999, the Company changed its name to JPS Industries, Inc.
from JPS Textile Group, Inc.
6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
(3) Certificate of Incorporation of JPS Industries, Inc.
(10.1) Third amendment to the Credit Facility Agreement, dated as of
July 12, 1999, by and among JPS, C&I, Elastomerics, the
financial institutions listed on the signature pages thereto,
and the agent and co-agent thereto.
(10.2) Asset Purchase Agreement, dated as of July 2, 1999, by and
between C&I and Belding Hausman Incorporated.
(10.3) Asset Purchase Agreement, dated as of June 24, 1999, by and
between C&I and Chiquola Fabrics, LLC.
(11) Statement re: Computation of Per Share Earnings - not
required since such computation can be clearly determined
from the material contained herein.
(27) Financial Data Schedule (for SEC use only)
(b) Current Reports on Form 8-K: None
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JPS INDUSTRIES, INC.
Date: September 14, 1999 /s/ John W. Sanders, Jr.
------------------------------------
John W. Sanders, Jr.
Executive Vice President - Finance &
Chief Financial Officer
<PAGE> 1
EXHIBIT 3
CERTIFICATE OF INCORPORATION
OF
JPS INDUSTRIES, INC.
JPS INDUSTRIES, INC. (the "Corporation"), a corporation incorporated
under and by virtue of the General Corporation Law of the State of Delaware,
which was originally incorporated under the name Grambling, Inc. IV on December
31, 1986, and which filed (i) Certificates of Amendment with the Secretary of
State of Delaware on March 14, 1988, April 7, 1988 and May 12, 1988, (ii) a
Restated Certificate of Incorporation with the Secretary of State of Delaware
on April 1, 1991, (iii) a Certificate of Correction with the Secretary of State
of Delaware on April 2, 1991, (iv) a Restated Certificate of Incorporation
made and filed pursuant to the order, dated September 9, 1997, of the United
States Bankruptcy Court (the "Bankruptcy Court"), Southern District of New York
in In re JPS Textile Group, Inc., No. 97-45133 (CB), and the Plan of
Reorganization filed on August 1, 1997 confirmed therein (the "Plan of
Reorganization") in connection with the reorganization of the Corporation under
Title 11 of the United States Code, and (v) a Certificate of Ownership and
Merger with the Secretary of State of Delaware on June 23, 1999, does hereby
certify as follows:
FIRST: The name of the Corporation is:
JPS INDUSTRIES, INC.
SECOND: The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as from time to time amended.
FOURTH: (a) The total number of shares of capital stock which the
Corporation shall have authority to issue is 25,000,000 shares. Of these, (i)
22,000,000 shares shall be shares of Common Stock having a par value of $0.01
per share (the "Common Stock"), and (ii) 3,000,000 shares shall be shares of
Preferred Stock, having a par value of $0.01 per share (the "Preferred Stock").
Except as otherwise provided by law, the shares of capital stock of the
Corporation regardless of class, may be issued by the Corporation from time to
time in such amounts, for such lawful consideration and for such corporate
purpose(s) as the Board of Directors may from time to time determine.
(b) Preferred Stock may be issued in one or more series as may be
determined from time to time by the Board of Directors. Authority is hereby
expressly granted to the
<PAGE> 2
Board of Directors to authorize the issuance of one or more series of Preferred
Stock, and, subject to Article FIFTH, to fix by resolution or resolutions
providing for the issue of each such series the voting powers, designations,
preferences, and relative, participating, optional, redemption, conversion,
exchange or other special rights, qualifications, limitations or restrictions
of such series, and the number of shares in each series, to the full extent now
or hereafter permitted by law.
FIFTH: The Corporation shall not create, designate, authorize or
cause to be issued any class or series of nonvoting stock. For purposes of this
Article FIFTH, any class or series of stock, including any series of Preferred
Stock, that has only such voting rights as are mandated by the General
Corporation Law of the State of Delaware, shall be deemed to be nonvoting stock
subject to the restrictions of this Article FIFTH.
SIXTH: In furtherance and not in limitation of the powers conferred
by law, subject to any limitations contained elsewhere in this Restated
Certificate, by-laws of the Corporation may be adopted, amended or repealed by
a majority of the board of directors of the Corporation, but any by-laws
adopted by the board of directors may also be amended or repealed by the
stockholders entitled to vote thereon. Election of directors need not be by
written ballot.
SEVENTH: (a) Without the approval of the Board of Directors and the
approval, given by written consent or by vote at any regular or special meeting
of stockholders, of the holders of record of not less than 100% of the shares
of Common Stock at the time outstanding, voting together as a single class, the
Corporation shall not enter into any single transaction or series of related
transactions, or take any other action that would have the effect of, whether
directly or indirectly, prohibiting, restricting, delaying or otherwise
hindering the payment of any and all amounts due under the Contingent Notes (as
defined below) issued by JPS Capital Corp. ("Capital") in accordance with the
terms thereof. Notwithstanding the foregoing, nothing contained in this Restated
Certificate of Incorporation shall restrict (i) the actions taken by the
Corporation or its Tax Affiliates (as defined below) in connection with the
resolution of their liabilities (if any) for Taxes (as defined below) or (ii) a
sale of the Corporation.
(b) Until after the occurrence of the later of (i) the Maturity Date
(as defined below), and (ii) the payment in full of the obligations of Capital
arising under the Contingent Notes, the Corporation shall not Transfer (as
defined below) or permit the Transfer of all or any portion of the outstanding
shares of capital stock of Capital owned by the Corporation to any person or
entity.
(c) For purposes of this Restated Certificate of Incorporation, the
following terms are defined as follows:
(i) "Contingent Note Indenture" means the indenture, dated as
of October 9, 1997, among Capital, the Corporation and First Trust
National Association as trustee (the "Trustee");
2
<PAGE> 3
(ii) "Contingent Notes" means the Contingent Payment Notes
due on the Maturity Date issued pursuant to the Contingent Note Indenture;
(iii) "Maturity Date," "Tax Affiliate," and "Taxes" have the
meanings ascribed to such terms in the Contingent Note Indenture; and
(iv) "Transfer" means (A) any direct or indirect, whether
voluntary or involuntary, knowing or unknowing, by operation of law or
otherwise, disposition of any assets or property, whether by sale, exchange,
merger, consolidation, transfer, conveyance, distribution, inheritance, gift or
otherwise, or (B) any consensual security interest in, pledge or assignment of,
mortgage of, encumbrance upon, lien in or any other preferential arrangement
with respect to, any assets or property. Notwithstanding any understandings or
agreements to which a holder of Capital's capital stock is a party, any
arrangement, the effect of which is to Transfer any or all of the rights
arising from ownership of Capital's capital stock, shall be treated as a
Transfer of such capital stock for purposes of this Article SEVENTH.
EIGHTH: (a) A director of the Corporation shall not be personally
liable either to the Corporation or to any of its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability for
(i) any breach of the director's duty of loyalty to the Corporation or its
stockholders, or (ii) acts or omissions which are not in good faith or which
involve intentional misconduct or knowing violation of the law, or (iii) any
matter in respect of which such director shall be liable under Section 174 of
Title 8 of the General Corporation Law of the State of Delaware or any
amendment thereto or successor provision thereto, or (iv) any transaction from
which the director shall have derived an improper personal benefit. Neither
amendment nor repeal of this paragraph (a) nor the adoption of any provision of
the Restated Certificate of Incorporation inconsistent with this paragraph (a)
shall eliminate or reduce the effect of this paragraph (a) in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
paragraph (a) of this Article EIGHTH, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision. If the General
Corporation Law of Delaware is hereafter amended to permit further elimination
or limitation of the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of Delaware as so amended.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to, or testifies in, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter, a "proceeding"), other than an
action by or in the right of the Corporation, by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise (hereinafter, an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as
such a director, officer, employee or agent. The indemnitee shall be
indemnified and held harmless by the Corporation to the full extent
3
<PAGE> 4
authorized by the General Corporation Law of Delaware, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), or by other applicable law as then in effect, against all
expense, liability and loss (including attorneys' fees, judgments, fines,
excise taxes under the Employee Retirement Income Security Act of 1974, as
amended from time to time ("ERISA"), penalties and amounts to be paid in
settlement) actually and reasonably incurred or suffered by such indemnitee in
connection therewith. The Corporation may adopt By-laws or enter into
agreements with any such person for the purpose of providing for such
indemnification.
(c) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to, or testifies in, any proceeding by or
in the right of the Corporation to procure a judgment in its favor by reason of
the fact that such person is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation, provided that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(d) Any indemnification under this Article EIGHTH (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the present or former director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in the General Corporation Law
of Delaware, as the same exists or hereafter may be amended (but, in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment). Such determination shall
be made with respect to a person who is a director or officer at the time of
such determination (A) by a majority vote of the directors who were not parties
to such action, suit or proceeding (the "Disinterested Directors"), even though
less than a quorum, or (B) by a committee of Disinterested Directors designated
by a majority vote of such directors, even though less than a quorum or (C) if
there are no Disinterested Directors or if the Disinterested Directors so
direct, by independent legal counsel in a written opinion, or (D) by the
stockholders.
(e) Costs, charges and expenses (including attorneys' fees) incurred
by a director, officer, employee or agent of the Corporation in defending a
civil or criminal action, suit
4
<PAGE> 5
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay all
amounts so advanced in the event that it shall ultimately be determined that
such director, officer, employee or agent is not entitled to be indemnified by
the Corporation as authorized in this Article EIGHTH. The majority of the
Disinterested Directors may, in the manner set forth above, and upon approval
of such director, officer, employee or agent of the Corporation, authorize the
Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
(f) Any indemnification or advance of costs, charges and expenses
under this Article EIGHTH shall be made promptly, and in any event within 60
days upon the written request of the director, officer, employee or agent. The
right to indemnification or advances as granted by this Article EIGHTH shall be
enforceable by the director, officer, employee or agent, as the case may be, in
any court of competent jurisdiction, if the Corporation denies such request, in
whole or in part, or if no disposition thereof is made within 60 days. Such
person's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in any
such action shall also be indemnified by the Corporation. It shall be a defense
to any such action (other than an action brought to enforce a claim for the
advance of costs, charges and expenses under this Article EIGHTH where the
required undertaking has been received by the Corporation) that the claimant
has not met the standard of conduct set forth in the General Corporation Law of
Delaware, as the same exists or hereafter may be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), but the burden of proving
such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, its independent legal counsel
and its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law of Delaware, as the same exists or hereafter may be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights
than said law permitted the Corporation to provide prior to such amendment),
nor the fact that there has been an actual determination by the Corporation
(including its Board of Directors, its independent legal counsel and its
stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(g) The indemnification and advancement of expenses provided by this
Article EIGHTH shall not be deemed exclusive of any other rights to which a
person seeking indemnification or advancement of expenses may be entitled under
any law (common or statutory), by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding office or while
employed by or acting as agent for the Corporation, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and
5
<PAGE> 6
shall inure to the benefit of the estate, heirs, executors and administrators
of such person. All rights to indemnification under this Article EIGHTH shall
be deemed to be a contract between the Corporation and each director, officer,
employee or agent of the Corporation who serves or served in such capacity at
any time while this Article EIGHTH is in effect. Any repeal or modification of
this Article EIGHTH shall not in any way diminish any rights to indemnification
of such director, officer, employee or agent or the obligations of the
Corporation arising hereunder with respect to any action, suit or proceeding
arising out of, or relating to, any actions, transactions or facts occurring
prior to the final adoption of such modification or repeal. For the purposes of
this Article EIGHTH, references to "the Corporation" include all constituent
corporations absorbed in a consolidation or merger as well as the resulting or
surviving corporation, so that any person who is or was a director, officer,
employee or agent of such a constituent corporation or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under the provisions of this
Article EIGHTH, with respect to the resulting or surviving corporation, as he
or she would if he or she had served the resulting or surviving corporation in
the same capacity.
(h) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or her or
on his or her behalf in any such capacity, or arising out of his or her status
as such, whether or not the Corporation would have the power to indemnify him
or her against such liability under the provisions of this Article EIGHTH,
provided, however, that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the Board of Directors.
(i) If this Article EIGHTH or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Corporation
shall nevertheless indemnify each person entitled to indemnification under the
first paragraph of this Article EIGHTH as to all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes, penalties and
amounts to be paid in settlement) actually and reasonably incurred or suffered
by such person and for which indemnification is available to such person
pursuant to this Article EIGHTH to the full extent permitted by any applicable
portion of this Article EIGHTH that shall not have been invalidated and to the
full extent permitted by applicable law.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation in
the manner now or hereafter prescribed by statute, and all rights conferred by
the stockholders herein are granted subject to this reservation.
Notwithstanding the foregoing, none of the provisions of Article SEVENTH of
this Restated Certificate of Incorporation or this sentence of Article NINTH
may be amended, altered, changed or repealed without the prior approval
6
<PAGE> 7
of the Bankruptcy Court pursuant to a Final Order (as defined in the Plan of
Reorganization).
TENTH: The Corporation expressly elects not to be governed by
Section 203 of the General Corporation Law of the State of Delaware.
7
<PAGE> 8
IN WITNESS WHEREOF, JPS Industries, Inc. does hereby execute this
Certificate of Incorporation this 14th day of September 1999.
JPS INDUSTRIES, INC.
By /s/ John Sanders
---------------------------------------------
Name: John Sanders
Title: Executive Vice President -
Finance and Chief Financial Officer
8
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
THIRD AMENDMENT TO CREDIT FACILITY AGREEMENT
THIS THIRD AMENDMENT TO CREDIT FACILITY AGREEMENT dated as of July 12,
1999 (this "Third Amendment") is entered into among JPS Industries, Inc. (the
"Company"), JPS Elastomerics Corp. and JPS Converter and Industrial Corp.
(together, the "Borrowing Subsidiaries"), Citibank, N.A. ("Citibank"), as agent
and collateral agent (the "Agent"), NationsBank, N.A., as co-agent (the
"Co-Agent"), and the Lenders, and relates to that certain Credit Facility
Agreement dated as of October 9, 1997 (as amended, restated, supplemented or
modified from time to time, the "Credit Agreement") among the Company, the
Borrowing Subsidiaries, the Agent, the Co-Agent and the Lenders.
W I T N E S S E T H
WHEREAS, the Company and the Borrowing Subsidiaries have requested that
the Lenders, the Agent and the Co-Agent agree to amend the Credit Agreement as
provided for herein;
NOW, THEREFORE, in consideration of the above premises, the Company, the
Borrowing Subsidiaries, the Agent, the Co-Agent and the Lenders agree as
follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
have the meanings assigned to them in the Credit Agreement.
2. Amendments to the Credit Agreement. Upon the "Third Amendment
Effective Date" (as defined in Section 4 below), the Credit Agreement is hereby
amended as follows:
2.1 Section 1.01. Section 1.01 of the Credit Agreement is amended as
follows:
(a) The definition of "Fixed Asset Portion" is amended to read in full as
follows:
"'Fixed Asset Portion' shall mean $55,000,000; provided, however, the
amount of the Fixed Asset Portion shall be reduced by the aggregate
amount of each of the following: (i) the amount of any cash proceeds
from sales of assets (other than Inventory) sold in the ordinary course
of business that exceed Two Million Dollars ($2,000,000) in the
aggregate in any Fiscal Year, net of (A) the costs of sale, lease,
assignment or other disposition, (B) any income, franchise, transfer or
other tax liability arising from such transaction and (C) amounts
applied to the repayment of Indebtedness (other than the Obligations)
secured by a Lien on the asset disposed of; (ii) in the event of the
sale of all or substantially all of the capital stock or assets of any
Borrowing Subsidiary (to the extent
<PAGE> 2
otherwise permitted hereunder), the amount of the Fixed Asset Value of
such Borrowing Subsidiary plus fifty percent (50%) of the amount, if
any, by which the Net Cash Proceeds from such sale exceed such Fixed
Asset Value; (iii) in the event of a Permitted Disposition, an amount
equal to fifty percent (50%) of the Net Cash Proceeds from such
disposition; (iv) the amount of Net Cash Proceeds from sales of assets
(other than in connection with a Permitted Disposition); (v) in the
event of the receipt by any Loan Party of any Net Cash Proceeds of
Equity Issuances, the lesser of (A) the amount of such Net Cash
Proceeds and (B) $25,000,000 and (vi) $1,000,000 on the Third
Amendment Effective Date and $1,000,000 on August 1, 1999 provided
that the requirement that the Fixed Asset Portion be reduced by
$833,000 on the last day of each fiscal month ending during Fiscal
Year 1999 will be credited in order of maturity by the $1,000,000
reduction made on August 1, 1999; and provided further, however, the
Fixed Asset Portion shall be reduced on the last day of each fiscal
quarter of the Company ending during each Fiscal Year set forth below
by one-fourth of the amount set forth opposite such period:
<TABLE>
<CAPTION>
Fiscal Year Annual Amount
----------- -------------
<S> <C>
Fiscal Year 1998 $3,000,000
Fiscal Year 1999 4,000,000
Fiscal Year 2000 5,000,000
Fiscal Year 2001 6,000,000
Fiscal Year 2002 7,000,000
</TABLE>
and provided, further, however, in addition to the reduction in the
Fixed Asset Portion contemplated by the preceding provisos, the Fixed
Asset Portion shall be further reduced by $833,000 on the last day of
each fiscal month of the Company ending during Fiscal Year 1999
commencing with the fiscal month ending on December 5, 1998; and
provided, further, however, in the event that a Borrowing Subsidiary
receives any cash proceeds or Net Cash Proceeds referred to in clauses
(i) through (iv) above during any fiscal month, the amount of such
cash proceeds and Net Cash Proceeds shall, to the extent that the
Fixed Asset Portion is reduced by such amount pursuant to said
clauses, be deducted from the amount of reductions in the Fixed Asset
Portion specified in the two immediately preceding provisos, which
deductions from such specified amounts of reductions in said provisos
shall be made in the direct order of the dates, beginning in such
fiscal month, specified for such reductions in said provisos."
(b) The definition of "Revolving Credit Facility" is amended to read in
full as follows:
-2-
<PAGE> 3
"'Revolving Credit Facility' shall mean the revolving credit facility
provided for in Section 2.03 not to exceed, in the aggregate at any
time outstanding, One Hundred Thirty-Four Million Dollars
($134,000,000) until July 31, 1999 and One Hundred Thirty-Three
Million Dollars ($133,000,000) thereafter, less all reductions in such
amount effected pursuant to Sections 2.03 and 2.06."
3. Representations and Warranties. Each of the Borrowers hereby
represents and warrants to each Lender, the Agent and the Co-Agent that, as of
the Third Amendment Effective Date and after giving effect to this Third
Amendment:
(a) Each of the representations and warranties contained in this Third
Amendment, the Credit Agreement as amended hereby and the other Loan Documents
are true and correct in all material respects on and as of the Third Amendment
Effective Date, as if then made, other than representations and warranties
which expressly speak as of a different date; and
(b) No Default or Event of Default has occurred and is continuing.
4. Third Amendment Effective Date. This Third Amendment shall become
effective as of the date hereof (the "Third Amendment Effective Date") when the
Agent shall have received, by facsimile, counterparts of this Third Amendment
executed by the Company, each Borrowing Subsidiary, the Agent, the Co-Agent and
the Requisite Lenders, and acknowledged by each of JCC, JPS Auto and
International Fabrics.
5. Reference to and Effect on the Loan Documents.
(a) On and after the Third Amendment Effective Date, each reference in
the Credit Agreement as amended hereby to "this Agreement", "hereunder",
"hereof" or words of like import, and each reference in the other Loan
Documents to the Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended hereby.
(b) Except as specifically amended above, all of the terms of the Credit
Agreement and all other Loan Documents shall remain unchanged and in full force
and effect.
(c) The execution, delivery and effectiveness of this Third Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any Lender, the Agent or the Co-Agent under the
Credit Agreement or any of the Loan Documents, nor constitute a waiver of any
provision of the Credit Agreement or any of the Loan Documents.
6. Costs and Expenses. The Company and the Borrowing Subsidiaries
jointly and severally agree to pay upon demand in accordance with the terms of
Section 11.03 of the Credit Agreement all reasonable costs and expenses of the
Agent in connection with the preparation, reproduction, negotiation, execution
and delivery of this Third Amendment and all other Loan Documents entered into
in connection herewith, including, without limitation, the
-3-
<PAGE> 4
reasonable fees, expenses and disbursements of legal counsel for the Agent with
respect to any of the foregoing.
7. Miscellaneous. The headings herein are for convenience of reference
only and shall not alter or otherwise affect the meaning hereof.
8. Counterparts. This Third Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered by facsimile shall be an original, but
all of which shall together constitute one and the same instrument.
9. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO AND TO THE CREDIT AGREEMENT AS
AMENDED HEREBY DETERMINED, IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the Agent, the Co-Agent, the Lenders, the Company and
the Borrowing Subsidiaries have caused this Third Amendment to be executed by
their respective officers thereunto duly authorized as of the date first above
written.
JPS INDUSTRIES, INC.
By: /s/ John W. Sanders, Jr.
---------------------------
Title: EVP & CFO
JPS CONVERTER AND INDUSTRIAL CORP.
By: /s/ John W. Sanders, Jr.
---------------------------
Title: VP
JPS ELASTOMERICS CORP.
By: /s/ John W. Sanders, Jr.
---------------------------
Title: VP
-4-
<PAGE> 5
IN WITNESS WHEREOF, the Agent, the Co-Agent, the Lenders, the Company and
the Borrowing Subsidiaries have caused this Third Amendment to be executed by
their respective officers thereunto duly authorized as of the date first above
written.
JPS TEXTILE GROUP, INC.
By: /s/ John W. Sanders, Jr.
-----------------------------------
Title: EVP & CFO
JPS CONVERTER AND INDUSTRIAL CORP.
By: /s/ John W. Sanders, Jr.
-----------------------------------
Title: VP
JPS ELASTOMERICS CORP.
By: /s/ John W. Sanders, Jr.
-----------------------------------
Title: VP
CITIBANK, N.A., as Agent, as Issuing Bank and as a Lender
By: /s/ Brenda M. Cotsen
-----------------------------------
Title: Vice President
NATIONSBANK, N.A., as Co-Agent and as a Lender
By: /s/ Robert Dysart
-----------------------------------
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Charles Chiodo
-----------------------------------
Title: Duly Authorized Signatory
HELLER FINANCIAL, INC.
By: /s/ John M. Szwalek
-----------------------------------
Title: Vice President
BNY FINANCIAL CORPORATION
BANKBOSTON, N.A.
By: /s/ John K. Hood
-----------------------------------
Title: Managing Director
-5-
<PAGE> 6
ACKNOWLEDGMENT
Reference is hereby made to (i) the Guaranty dated as of March 18, 1993
executed by JPS Carpet Corp., (ii) the Guaranty dated as of March 18, 1993
executed by JPS Auto Inc., and (iii) the Guaranty dated as of August 5, 1993
executed by International Fabrics, Inc., each as amended as of October 9, 1997
(each, as so amended, a "Guaranty") in favor of the Agent and the Lenders. Each
of the undersigned hereby consents to the terms of the foregoing Third
Amendment to Credit Facility Agreement, and agrees that the terms thereof shall
not affect in any way its obligations and liabilities under each such Guaranty
or any other Loan Document (as defined therein), all of which obligations and
liabilities shall remain in full force and effect and each of which is hereby
reaffirmed.
JPS CARPET CORP.
By: /s/ John W. Sanders, Jr.
------------------------------------
Title: VP
JPS AUTO INC.
By: /s/ John W. Sanders, Jr.
------------------------------------
Title: VP
INTERNATIONAL FABRICS, INC.
By: /s/ John W. Sanders, Jr.
------------------------------------
Title: VP
-6-
<PAGE> 1
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
Dated as of July 2, 1999
by and between
JPS CONVERTER AND INDUSTRIAL CORP.
as Seller
and
BELDING HAUSMAN INCORPORATED
as Purchaser
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS.......................................................................................................1
Defined Terms............................................................................................1
Terms Defined Elsewhere in the Agreement.................................................................6
Other Definitional Provisions............................................................................7
PURCHASE AND SALE OF ASSETS.......................................................................................7
Sale of Assets; Assumption of Liabilities................................................................7
Purchase Price...........................................................................................8
Adjustments to Purchase Price............................................................................8
CLOSING..........................................................................................................10
Closing.................................................................................................10
Conveyances at Closing..................................................................................10
Other Deliveries at Closing.............................................................................11
Certain Business Information............................................................................12
REPRESENTATIONS AND WARRANTIES OF SELLER.........................................................................12
Organization............................................................................................12
Corporate Authorization.................................................................................13
Personal Property Leases................................................................................13
Title to Owned Real Property............................................................................13
Title to Owned Personal Property........................................................................13
Contracts and Commitments...............................................................................13
Litigation, Proceedings and Applicable Law..............................................................14
Compliance with Law.....................................................................................14
Taxes...................................................................................................14
No Conflict or Violation................................................................................15
Consents and Approvals..................................................................................15
Insurance...............................................................................................15
Employee Benefit Plans..................................................................................15
Labor Relations.........................................................................................16
Permits.................................................................................................17
Brokers.................................................................................................17
Stanley Plant...........................................................................................17
Environmental Matters...................................................................................17
Condition of Fixed Assets...............................................................................17
Books and Records.......................................................................................18
Customers...............................................................................................18
Product Warranties......................................................................................18
Absence of Certain Changes..............................................................................18
Certain Payments........................................................................................18
Financial Statements....................................................................................18
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Computer Software.......................................................................................18
REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................................................19
Organization............................................................................................19
Corporate Authorization.................................................................................19
No Conflict or Violation................................................................................19
Consents and Approvals..................................................................................19
Litigation..............................................................................................20
Brokers.................................................................................................20
COVENANTS OF SELLER AND PURCHASER................................................................................20
Employees...............................................................................................20
Further Assurances; Cooperation and Assistance..........................................................22
Nondisclosure...........................................................................................23
Non-Competition.........................................................................................23
Sums Received in Respect of Business....................................................................24
Maintenance of the Business Prior to Closing............................................................24
Consents................................................................................................25
Public Announcements....................................................................................26
Pre-Closing Sales Tax Liabilities.......................................................................26
CONDITIONS TO SELLER'S OBLIGATIONS...............................................................................26
Representations, Warranties and Covenants...............................................................26
Certificates............................................................................................26
Corporate Documents.....................................................................................27
Legal Opinion...........................................................................................27
Consents................................................................................................27
No Governmental Proceedings or Litigation...............................................................27
CONDITIONS TO PURCHASER'S OBLIGATIONS............................................................................27
Representations, Warranties and Covenants...............................................................27
Certificates............................................................................................27
Section 1445 Certificate................................................................................27
Corporate Documents.....................................................................................28
Legal Opinion...........................................................................................28
Consents................................................................................................28
Delivery of Documents...................................................................................28
Good Standing Certificates..............................................................................28
Release of Liens........................................................................................28
No Governmental Proceedings or Litigation...............................................................28
Termination of Supply Agreement.........................................................................28
Transitional Services Agreement.........................................................................29
JPS Agreement...........................................................................................29
Lender Approvals........................................................................................29
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
CERTAIN ACTIONS BY SELLER AND PURCHASER AFTER THE CLOSING........................................................29
- ---------------------------------------------------------
Books and Records.......................................................................................29
Indemnification.........................................................................................29
Tax Matters.............................................................................................34
Mail Received After Closing.............................................................................34
MISCELLANEOUS....................................................................................................35
Termination.............................................................................................35
Survival of Representations and Warranties..............................................................35
Assignment..............................................................................................35
Notices.................................................................................................36
Choice of Law...........................................................................................37
Entire Agreement; Amendments and Waivers................................................................37
Multiple Counterparts...................................................................................37
Expenses................................................................................................37
Invalidity..............................................................................................37
Titles..................................................................................................37
Confidential Transaction Information....................................................................37
Third Parties...........................................................................................38
Neutral Construction....................................................................................38
Revisions to Certain Schedules..........................................................................38
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A -- Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit B -- Excluded Assets
Exhibit C -- Financial Statements
Exhibit D -- Reserved
Exhibit E -- Form of Opinion of Jackson Walker L.L.P., Counsel to Purchaser
Exhibit F -- Form of Opinion of Jones, Day Reavis & Pogue Counsel to Seller
Exhibit G -- Supply Agreement
Exhibit H -- Transitional Services Agreement
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 1.1(a) - Fixed Assets
Schedule 1.1(b) - Exceptions to Title
Schedule 3.4(a) - Employees
Schedule 3.4(b) - Backlog
Schedule 4.3 - Person Property Leases
Schedule 4.4 - Owned Real Property
Schedule 4.5 - Exceptions to Title to Owned Person Property
Schedule 4.6 - Contracts
Schedule 4.7 - Seller's Legal Proceedings
Schedule 4.8 - Exceptions to Seller's Legal Compliance
Schedule 4.9 - Taxes
Schedule 4.10 - Seller's Conflicts or Violations
Schedule 4.11 - Seller's Consents and Approvals
Schedule 4.12 - Insurance
Schedule 4.13(a) - Employee Benefit Plans
Schedule 4.14(a) - Compensation
Schedule 4.14(c) - Employee Manuals
Schedule 4.14(d) - Labor Relations
Schedule 4.15 - Permits
Schedule 4.17 - Material Changes
Schedule 4.18 - Environmental Matters
Schedule 4.19 - Inoperable Fixed Assets
Schedule 4.21 - Customers
Schedule 4.22 - Product Warranties
Schedule 4.23 - Certain Changes
Schedule 5.3 - Purchaser's Conflicts or Violations
Schedule 5.4 - Purchaser's Consents and Approvals
Schedule 5.6 - Brokers
Schedule 6.1(c) - Seller's Severance and Layoff Benefits
Schedule 6.1(e) - Vacation Policy
Schedule 6.4(a) - Non-Compete
Schedule 6.4(b) - Key Employees
Schedule 6.6(b) - Employees and Business Relationships
Schedule 7.5 - Seller's Consents
Schedule 8.6 - Purchaser's Consents
</TABLE>
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<PAGE> 6
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of July 2,
1999, is by and between JPS Converter and Industrial Corp., a Delaware
corporation ("Seller"), and Belding Hausman Incorporated, a Delaware
corporation ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is engaged in the business of manufacturing a variety
of yarns at Seller's Stanley Plant (the "Stanley Plant") located in Stanley,
North Carolina (the "Business"), which yarns are marketed by Seller to other
end users for textile plants; and
WHEREAS, Seller desires to sell, and Purchaser desires to purchase,
substantially all of the properties, rights and assets used by Seller in the
conduct of the Business upon the terms and subject to the conditions
hereinafter set forth;
WHEREAS, JPS (as defined herein) and Purchaser are simultaneously
herewith executing the JPS Agreement (as defined herein), pursuant to which
JPS, among other matters, shall guarantee the due and punctual performance and
discharge by Seller of all of Seller's obligations under this Agreement; and
WHEREAS, Seller and Purchaser are simultaneously herewith executing
(i) the Supply Agreement (as defined herein), pursuant to which Purchaser shall
sell to Seller Yarn (as defined therein), subject to the terms and conditions
contained therein, which shall be effective only upon Closing and (ii) the
Transitional Services Agreement (as defined herein), pursuant to which Seller
shall provide certain transitional services to Purchaser, subject to the terms
and conditions contained therein, which shall be effective only upon Closing;
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties contained herein and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
I.1 Defined Terms. Unless otherwise defined herein, the following
terms as used herein shall have the following respective meanings:
"Affiliate" means, with respect to any Person, any Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.
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"Agreement" shall have the meaning set forth in the recitals hereto.
"Ancillary Agreements" means the other agreements, instruments and
documents executed or to be executed by Seller or Purchaser or their respective
Affiliates, as the case may be, in connection with this Agreement, including,
without limitation, the special warranty deed, the Bill of Sale, Assignment and
Assumption Agreement and the Transitional Services Agreement.
"Assets" means all of Seller's rights, title and interests in and to
all of the properties, assets and rights constituting the Business (other than
the Excluded Assets) on the Closing Date, consisting of the following:
(a) all Contract Rights;
(b) all Owned Real Property;
(c) all Fixed Assets;
(d) all of Seller's rights and obligations under the Personal
Property Leases;
(e) all Inventory;
(f) to the extent transferable, all Permits; and
(g) all Books and Records, including books of account, records,
files, invoices, manuals, sales, marketing and advertising materials, customer
and supplier files, personnel files, equipment maintenance records, equipment
warranty information, material, specifications and drawings, equipment
drawings, customer specifications, sales, distribution and purchase
correspondence, trade association memberships and all other similar data,
manuals and property, in each case relating solely to the Business;
provided, however, that the Assets shall also include all other assets located
at the Stanley Plant as of the Closing Date (other than the Excluded Assets).
"Assumed Liabilities" shall mean the following liabilities and
obligations of Seller: (i) all duties and obligations under the contracts and
commitments set forth on Schedule 4.6 to the extent that such duties and
obligations accrue after the Closing Date, (ii) liabilities described in
Section 6.1 hereof in respect of the Transferred Employees, and (iii) all
Environmental Costs and Liabilities at the Stanley Plant not attributable to
Seller or any prior owner or operator of the Business or which were not
violations of Environmental Laws in effect as of or prior to the Closing.
"Bill of Sale, Assignment and Assumption Agreement" means the Bill of
Sale, Assignment and Assumption Agreement made as of the Closing Date by Seller
in the form of Exhibit A hereto.
"Books and Records" means all books and records relating solely to the
Business or relating solely to the Assets and the customers and suppliers
thereof.
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<PAGE> 8
"Business" shall have the meaning set forth in the recitals hereto.
"Closing Date" means the date which is the business day after all the
conditions to Closing set forth in Articles VII and VIII have been satisfied or
waived, or such other date as Purchaser and Seller shall mutually agree;
provided, however, that the parties shall use their good faith efforts to close
the transactions contemplated hereby by July 15, 1999.
"Closing Statement" means the audited statement which shall set forth
Inventory as of the Closing Date, net of appropriate reserves and allowances,
calculated in accordance with GAAP and on a basis consistent with the Financial
Statements.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract Rights" means all of the rights, duties and obligations of
Seller under the contracts and commitments set forth on Schedule 4.6 hereto and
all of Seller's right, title and interest in and to all contracts, agreements,
leases, notes, purchase orders, sales orders and other commitments of Seller
relating solely to the Business.
"Employees" means all persons who are employed as current employees of
the Business employed at the Stanley Plant on the Closing Date (or, for
purposes of Section 3.4 only, on the dates specified therein), including but
not limited to, all Employees on vacation, a leave of absence, layoff or
receiving benefits under any disability plan of Seller.
"Encumbrance" means any lien, mortgage, pledge, security interest,
charge or encumbrance of any nature whatsoever or any right or interest
whatsoever of any third party, including, without limitation, a lien, claim or
other interest of a Governmental Agency or municipality for Taxes, assessments
and other such charges.
"Environmental Costs and Liabilities" means any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, actions,
claims, costs and expenses (including, without limitation, fees, disbursements
and expenses of legal counsel, experts, engineers and consultants and the costs
of investigation and feasibility studies, monitoring or other studies or the
costs to cleanup, removal or otherwise treat any Hazardous Material) arising
from or under any Environmental Law or order.
"Environmental Laws" means all applicable federal, state, local or
foreign laws (including common law), statute, rule, regulation or other legal
requirement relating to the environment, natural resources or employee health
and safety including, without limitation, the Comprehensive Environmental
Resource, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.)
("CERCLA"), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801 et
seq.) ("RCRA"), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air
Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act, as amended
(15 U.S.C. ss. 2601 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. ss. 136 et seq.), the Emergency Planning and
Community Right-to-Know Act (42 U.S.C. ss. 11001 et seq.), the Safe Drinking
Water Act (42 U.S.C. ss. 201 and ss. 300( et seq.), the Oil Pollution Act (33
U.S.C. ss. 2701 et seq.) and the Occupational Safety and Health Act (29 U.S.
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<PAGE> 9
ss. 651 et seq.), as such laws have been amended or supplemented from time to
time, and all regulations, rules or ordinances duly promulgated pursuant
thereto and any analogous state, local or foreign laws, in each case as in
effect as of the date hereof and as of the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means the properties and assets of the Business
listed on Exhibit B hereto and which are not being acquired by Purchaser
hereunder.
"Excluded Liabilities" means all liabilities of Seller other than the
Assumed Liabilities.
"Financial Statements" means that certain unaudited statement of
Seller's Yarn Sales Division for the twelve months ending November 3, 1998 and
November 1, 1997 and the seven months ending June 5, 1999 which is attached
hereto as Exhibit C.
"Fixed Assets" means all of the furniture, fixtures, furnishings,
machinery, tools, equipment and other personal property owned by Seller and
used in connection with the Business, and located in, at or upon the Owned Real
Property as of the Closing Date and which are necessary to the Business,
including all warranties and licenses received from manufacturers and sellers
of the aforesaid items to the extent assignable by Seller to Purchaser and any
related claims, credits and rights of recovery with respect to such items, as
set forth on Schedule 1.1(a) attached hereto.
"GAAP" means U.S. generally accepted accounting principles applicable
to financial statements which omit complete footnotes and schedules,
consistently applied throughout the periods involved.
"Governmental Agency" means (a) any international, foreign, federal,
state, county, local or municipal government or administrative agency or
political subdivision thereof, (b) any governmental agency, authority, board,
bureau, commission, department or instrumentality, (c) any court or
administrative tribunal, (d) any non-governmental agency, tribunal or entity
that is vested by a governmental agency with applicable jurisdiction, or (e)
any arbitration tribunal or other non-governmental authority with applicable
jurisdiction.
"Hazardous Material" means any substance, material or waste whether in
a solid, liquid or gaseous state which is classified, regulated or otherwise
characterized by any Governmental Agency as hazardous, toxic, contaminant, or
pollutant or words of similar meaning or regulatory effect, including, but not
limited to, petroleum, petroleum products, asbestos, urea, formaldehyde and
polychlorinated biphenyls.
"Inventory" means all of (i) the inventory relating solely to the
Business held for sale to customers in the ordinary course of the Business as
of the Closing Date, (ii) the raw materials, work in process, finished
products, wrapping, supply and packaging items, and similar items relating
solely to the Business as of the Closing Date and (iii) related claims and
rights of recovery with respect to the items listed in clauses (i) and (ii)
hereto to the extent assignable.
"JPS" means JPS Industries, Inc., a Delaware corporation.
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<PAGE> 10
"JPS Agreement" means that certain letter agreement of even date
herewith, by and between Purchaser and JPS.
"Knowledge of Seller" shall mean the actual knowledge of any of the
following individuals: Michael L. Fulbright, the Chairman and Chief Executive
Officer, John Sanders, the Chief Financial Officer and Monnie L. Broome, the
Vice President - Human Resources (solely in respect of human resources and
employee benefit matters) of JPS or Reid A. McCarter, the President of JPS
Apparel (a division of Seller), Charles O'Mahoney, the Chief Financial Officer
of JPS Apparel (a division of Seller) and Carl Rosen, the President of
Marketing , David Edward Eaker, the Plant Manager of the Stanley Plant, Tom
Lind, Sales Manager, or Edward Yanney, the Major Accounts Executive.
"Material Adverse Effect" means any event, change, effect, occurrence
or state of facts that has had or is reasonably expected to have a material
adverse effect on the business, results of operations or the financial
condition of the Business taken as a whole; provided, however, that any adverse
effect arising out of or resulting from (a) an event or series of events or
circumstances affecting (i) the yarn and textile industry generally in the
United States or (ii) the United States economy generally or (b) the entering
into of this Agreement, shall not, in and of itself, constitute a Material
Adverse Effect.
"Owned Real Property" means the real property relating solely to the
Business and owned by Seller, as listed on Schedule 4.4.
"Permissible Liens" means, with respect to any Asset, (i) the
exceptions to title identified on Schedule 1.1(b) hereto, (ii) taxes not yet
due and payable as set forth on Schedule 1.1(b), (iii) such matters as set
forth on the surveys (if any) delivered by Seller to Purchaser with respect to
the Owned Real Property, (iv) laws and governmental regulations that affect the
use and maintenance of the Owned Real Property, provided that they are not
violated by the buildings and improvements constituting the Owned Real
Property, (v) the consents for the erection of any structures on, under or
above any streets on which the Owned Real Property abuts as set forth on
Schedule 1.1(b), (vi) the notices of violation of law or municipal ordinances,
orders or requirements issued by any Governmental Agency as set forth on
Schedule 1.1(b), (vii) liens for Taxes, assessments, water and sewer rents not
yet due and payable as set forth on Schedule 1.1(b) (viii) utility lines, sewer
lines and railroad rights of way affecting the Owned Real Property as set forth
on Schedule 1.1(b); and (ix) minor imperfections of title, if any, none of
which is substantial in amount, materially detracts from the value or impairs
the use of the Owned Real Property or impairs the operations of the Business.
"Permits" means all of Seller's licenses, permits, certificates and
other public, governmental and private third party authorizations and approvals
reasonably necessary to carry on the Business as presently conducted, in each
case relating solely to the Business, as listed on Schedule 4.15.
"Person" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization or a government or
political subdivision thereof.
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<PAGE> 11
"Personal Property Leases" means all of the leases of personal
property relating solely to the Business listed on Schedule 4.3.
"Purchaser" shall have the meaning set forth in the recitals hereto.
"Release" means any release, spill, emission, leaking, pumping,
emptying, dumping, injection, abandonment, deposit, disposal, discharge,
dispersal, leaching or migration on or into the indoor or outdoor environment
or on, into, above or beneath any property.
"Seller" shall have the meaning set forth in the recitals hereto.
"Seller Credit Agreement" means the Credit Facility Agreement, dated
as of October 9, 1997, as amended, supplemented, modified, restated or
refinanced from time to time, among JPS, Seller, JPS Elastomerics Corp., the
financial institutions party thereto (the "Lenders"), Citibank, N.A,, in its
capacity as agent and collateral agent for the Lenders, and NationsBank, N.A.,
in its capacity as co-agent for the Lenders, and all guarantees, collateral or
security agreements and related agreements entered into in connection therewith
and pursuant thereto.
"Stanley Plant" shall have the meaning set forth in the recitals
hereto.
"Supply Agreement" means that certain Supply Agreement in the form
attached hereto as Exhibit G by and between Seller and Purchaser.
"Taxes" means all federal, state, local and foreign taxes, charges,
fees, levies, imposts, duties or other assessments, including, without
limitation, income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
environmental (including taxes under Code Section 59A), premium, federal
highway use, commercial rent, customs duties, capital stock, paid up capital,
profits, withholding, Social Security, single business and unemployment,
disability, real property, personal property, registration, ad valorem,
value-added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United States or any state, local, foreign government or subdivision or
agency thereof, including any interest penalties or additions thereto.
"Transferred Employees" means all Employees who commence employment
with Purchaser pursuant to Section 6.1(a) hereof.
"Transitional Services Agreement" means that certain Transitional
Services Agreement in the form attached hereto as Exhibit H by and between
Seller and Purchaser.
I.2 Terms Defined Elsewhere in the Agreement. For purposes of
this Agreement, the following terms have the meanings set forth in the sections
indicated:
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<PAGE> 12
<TABLE>
<CAPTION>
Term Section
---- ---------
<S> <C>
Action 9.2 (c)
Asset Transfer Date 6.1 (g)
Arbitrator 2.3 (c)
Cash Compensation 4.14(a)
CIT Agreement 6.6 (g)
Closing 3.1
Collateral Agent 10.3
Consenting Party 3.4 (c)
Contracts 4.6
Damages 9.2 (a)
Dispute Notice 2.3 (c)
Employees Policies and Procedures 4.14(c)
JPS Flex Plan 6.1 (h)
Pension Plan 6.1 (f)
Plans 4.13(a)
Purchase Order Confirmation 4.26
Purchase Price 2.2
Purchaser Flex Plan 6.1 (h)
Purchaser's Savings Plan 6.1 (g)
Seller's Savings Plan 6.1 (g)
</TABLE>
I.3 Other Definitional Provisions.
(a) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States dollars.
ARTICLE II
PURCHASE AND SALE OF ASSETS
II.1 Sale of Assets; Assumption of Liabilities. On the Closing
Date, in reliance upon the covenants, representations and warranties contained
herein and subject to the terms and conditions hereof:
(a) Seller hereby agrees to sell, convey, transfer, assign, and
deliver to Purchaser, and Purchaser hereby agrees to purchase from Seller, the
Assets.
(b) Purchaser hereby agrees to assume and pay, perform and
discharge as and when due the Assumed Liabilities. Purchaser expressly shall
not assume or pay for any Excluded Liabilities including, without limitation,
liabilities relating to (A) the Excluded Assets, (B) income or franchise
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<PAGE> 13
Taxes imposed on net income or sales or real property taxes incurred by Seller
or relating to the Assets for any taxable period ending on or prior to the
Closing Date, (C) any liability for purchase money debt, debt for borrowed
money or a guaranty in respect thereof, and (D) (1) liabilities assumed by
Seller pursuant to Section 6.1 hereof and (2) liabilities incurred or accrued
on or prior to the Closing Date under any employee benefit plan, policy and
arrangement covering or providing benefits to the Employees.
II.2 Purchase Price.
(a) On the Closing Date, as consideration for the sale,
conveyance, transfer, assignment and delivery of the Assets Purchaser shall pay
to Seller in cash an amount equal to $2,000,000 (the "Purchase Price"), subject
to adjustment as provided in Section 2.3 hereof; and (ii) Purchaser shall
assume the Assumed Liabilities.
(b) At the election of Seller, the Purchase Price shall be paid
at the Closing by either (i) wire transfer of immediately available funds to an
account designated in writing by Seller or (ii) federal funds check.
(c) Within fifteen (15) days of the determination of the final
adjustments to Purchase Price described below, Seller shall prepare and deliver
to Purchaser a schedule which shall set forth the allocation of the Purchase
Price among the Assets. Such allocation shall be subject to Purchaser's
approval (which shall not be unreasonably withheld). Subject to the
requirements of any applicable Tax law, all Tax returns filed by Purchaser and
Seller shall be prepared consistently with such allocation and with the
treatment of the transaction pursuant to this Agreement as a purchase and sale
of the Assets. In the event of any Purchase Price adjustment pursuant to
Section 2.3 hereof, Purchaser and Seller agree to adjust such allocation to
reflect such Purchase Price adjustment and, subject to the requirements of any
applicable Tax laws, to file consistently any Tax returns required as a result
of such Purchase Price adjustment. In the event no such agreement is reached,
the parties hereto shall resolve such disagreement pursuant to the provisions
provided for under Section 2.3(c) of this Agreement.
II.3 Adjustments to Purchase Price.
(a) The Purchase Price shall be increased or decreased (on a
dollar for dollar basis, as limited below), as the case may be, for any
increase or decrease in Inventory as set forth on the Closing Statement, if the
aggregate value of Inventory as of the Closing Date (net of appropriate
reserves and allowances, calculated in accordance with GAAP and on a basis
consistent with the Financial Statements) is: (A) greater than $2,164,000, then
Purchaser shall pay to Seller the amount of such excess up to $800,000; (B)
less than $2,164,000, then Seller shall pay to Purchaser the amount of such
difference; or (C) equal to $2,164,000, then neither Seller nor Purchaser shall
owe any amount to the other pursuant to this Section 2.3(a).
(b) As soon as is reasonably practicable following the Closing
Date (but no later than 45 days following the Closing Date), Seller shall
prepare and deliver to Purchaser the Closing Statement which shall set forth
the Purchase Price adjustments to be made, if any, in accordance with Section
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<PAGE> 14
2.3(a). In connection with the preparation of the Closing Statement, Purchaser
shall grant Seller and its accountants, counsel and other representatives, full
and complete access to all of the Books and Records. The Closing Statement
shall be audited by Seller's accountants and shall include a schedule reviewed
by such accountants showing the computation of Inventory as of the Closing Date
(net of appropriate reserves and allowances, calculated in accordance with GAAP
and on a basis consistent with the Financial Statements), computed in
accordance with the definitions of such terms set forth herein. Concurrently
with their delivery of the Closing Statement to Purchaser, Seller shall cause
reasonable access to be granted to Purchaser to the work papers, schedules and
other documents prepared or used by Seller and its accountants in connection
with the preparation of the Closing Statement. Seller shall pay all fees and
expenses of its accountants in connection with the preparation of the Closing
Statement and the computation of Inventory as of the Closing Date.
(c) Unless Purchaser, within 30 days after receipt of the Closing
Statement, gives Seller a notice (the "Dispute Notice") (i) objecting in good
faith to the Closing Statement, (ii) setting forth in reasonable detail the
items being disputed and the reasons therefor, and (iii) specifying that
Purchaser's calculation of Inventory as of the Closing Date is in an amount
which differs from that reflected in such Closing Statement (the entire amount
of such difference being hereinafter referred to as the "Adjusted Amount"), the
Inventory as of the Closing Date as set forth in the Closing Statement and the
Purchase Price adjustment set forth therein shall be binding and final upon the
parties. If a Dispute Notice is given by Purchaser, the parties shall negotiate
in good faith with a view to agreeing upon the Inventory as of the Closing Date
and the corresponding amount of the adjustment required by paragraph (a) of
this Section 2.3. If negotiations between Purchaser and Seller fail to resolve
all disputed items within 30 days after the Dispute Notice was given to Seller,
the remaining disputed items shall be submitted to KPMG Peat Marwick LLP (the
"Arbitrator"). After affording each of Seller and Purchaser and their
accountants the opportunity to present its position as to such determination
(which opportunity shall not extend for more than 30 days from the date the
independent public accountants are retained), the accounting firm selected
pursuant to this paragraph shall determine the adjustment pursuant to paragraph
(a) of this Section 2.3 and such determination shall be final and binding. Each
party shall pay its own costs and expenses in connection with the foregoing.
The fees, costs and expenses of the Arbitrator shall be borne equally by Seller
and Purchaser.
(d) The amount of any Purchase Price adjustment required under
this Section 2.3 shall be delivered to Seller or Purchaser, as the case may be,
with interest thereon (calculated on the basis of a 360-day year comprised of
twelve 30-day months), from and including the Closing Date until paid at an
annual rate equal to the base rate of interest of Citibank, N.A. (as such base
rate is publicly announced from time to time as the base rate of such bank), at
such place in the United States as the party receiving such amount shall
designate in writing to the other party and shall be paid in immediately
available funds within 30 days after the final determination of such Purchase
Price adjustment.
(e) At the Closing (or after the Closing, to the extent the
necessary calculations cannot be made at the Closing), real property taxes,
water charges, sewer rents and other utility charges in respect of the Business
shall be prorated as of the Closing Date with Seller being responsible for such
items relative to periods prior to the Closing Date and Purchaser being
responsible for such
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<PAGE> 15
items relative to periods commencing on or subsequent to the Closing Date. If
the Closing shall occur before a new tax rate is fixed, the apportionment of
real property taxes shall be upon the basis of the old tax rate for the
preceding period applied to the latest assessed valuation.
ARTICLE III
CLOSING
III.1 Closing. The Closing of the transactions contemplated hereby
(the "Closing") shall be held at 10:00 a.m. local time on the Closing Date at
the offices of Jones, Day, Reavis & Pogue, Atlanta, Georgia, or at such other
time, date or place as the parties hereto may otherwise agree; provided,
however, that the conditions to the obligations of Seller and Purchaser to
consummate the transactions contemplated hereby shall have been at such time
satisfied or waived.
III.2 Conveyances at Closing.
(a) Instruments and Possession. To effect the sale referred to in
Section 2.1 hereof, Seller shall, on the Closing Date, execute and deliver to
Purchaser, in such form as to transfer to Purchaser, good title to the Assets,
subject to no Encumbrances, imperfections of title, covenants, restrictions,
easements, encroachments or any state of facts which would be reflected on a
current ALTA survey, other than, in the case of Owned Real Property,
Permissible Liens:
(i) a special warranty deed, in proper form for
recording and mutually and reasonably acceptable to Purchaser and
Seller, conveying good title (other than Permissible Liens) to all
Owned Real Property included in the Assets as such Owned Real Property
is described in a current ALTA survey obtained by Purchaser;
(ii) the Bill of Sale, Assignment and Assumption
Agreement conveying all of the owned personal property included in the
Assets, the Personal Property Leases and the Contract Rights;
(iii) such other instruments as shall be reasonably
requested by Purchaser to vest in Purchaser good title (other than, in
the case of Owned Real Property, Permissible Liens) in and to the
Assets in accordance with the provisions hereof;
(iv) such affidavits, certificates or filings as may be
required to convey the Assets to Purchaser or as may be reasonably
requested by Purchaser's title company and agreed to by Seller in
connection with the issuance of the title policies with respect to the
Owned Real Property, all costs, charges and premiums of which, shall
be paid by Purchaser;
(v) an affidavit, in a form reasonably satisfactory to
Purchaser, of Seller stating under penalties of perjury Seller's
United States taxpayer identification number and that Seller is not a
foreign person within the meaning of Section 1445(b)(2) of the Code;
and
(vi) physical possession and control of the Assets.
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<PAGE> 16
(b) Form of Instruments. All of the foregoing instruments shall
be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to Purchaser.
(c) Consents to Assignment. Anything in this Agreement to the
contrary notwithstanding, and subject to the provisions concerning Personal
Property Leases set forth in Section 3.3(b) hereof, this Agreement shall not
constitute an assignment of, or an agreement to assign, Assets, consisting of
any claim, contract, license, lease commitment, sales order, purchase order or
any claim or right or any benefit arising thereunder or resulting therefrom if
an attempted assignment thereof, without the consent of the other party
thereto, would constitute a breach thereof; provided, however, that if Seller
fails to obtain any consent set forth in Part II of Schedule 8.6 on or prior to
the Closing Date, Purchaser shall, in accordance with Article 8 hereof, be
under no obligation to consummate the transactions provided for hereby. If such
consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights thereunder so that Purchaser would not
receive all such rights, then, in accordance with Section 3.3(b) hereof, Seller
will thereafter take all reasonable actions in order to provide to Purchaser
the benefits under any such claim, contract, license, lease commitment, sales
order or purchase order, including, without limitation, enforcement for the
benefit of Purchaser (at Seller's expense) of any and all rights of Seller
against such other party thereto arising out of the breach or cancellation by
such other party or otherwise; and any transfer or assignment to Purchaser of
any property or property rights or any contract or agreement which shall
require the consent or approval of any such other party shall be made subject
to such consent or approval being obtained; provided, further, however, that if
Seller fails to obtain any consent set forth in Part II of Schedule 8.6 on or
prior to the Closing Date, Purchaser shall, in accordance with Article 8
hereof, be under no obligation to consummate the transactions provided for
hereby. Nothing contained in this Section 3.2(c) shall be deemed to require
Seller to make any payments to obtain a consent or approval from any third
party to the assignment by Seller to Purchaser. In addition, Seller shall not
obtain any consent that will affect Purchaser to its economic detriment unless
Purchaser expressly approves the obtaining of such consent.
(d) Assumption Documents. Upon the terms and subject to the
conditions contained herein, on the Closing Date, Purchaser and Seller shall
execute and deliver the Bill of Sale, Assignment and Assumption Agreement.
III.3 Other Deliveries at Closing. In addition to the foregoing
matters, at the Closing:
(a) Certificates; Opinions. Purchaser and Seller shall deliver
the certificates, opinions and other instruments described in Articles VII and
VIII hereof.
(b) Personal Property Leases and Other Third-Party Consents. To
the extent any of the Personal Property Leases or any other Contract Right may
not be assigned by Seller without the written consent of any lender or other
third party (collectively, a "Consenting Party"), Seller shall use its
reasonable efforts to secure and deliver the required consents to Purchaser
within 90 days after the Closing Date; provided, however, that no modification
of any such Personal Property Leases or Contract Right shall be made without
Purchaser's prior written consent, which consent shall not be unreasonably
withheld; provided, further, however, that to the extent such consents are not
obtained within 90 days of the Closing Date then Seller shall have no further
obligations hereunder
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and such Personal Property Leases or Contract Rights shall be deemed to not be
a part of the Assets; provided, further, however, that if Seller fails to
obtain any consent set forth in Part II of Schedule 8.6 on or prior to the
Closing Date, Purchaser shall, in accordance with Article 8 hereof, be under no
obligation to consummate the transactions provided for hereby. Purchaser shall
cooperate as reasonably necessary or desirable to secure the consent of any
Consenting Party, including, without limitation, providing to such Consenting
Party financial information, operating history and information regarding
Purchaser's intended use or disposition of any Asset.
(c) Supply Agreement and the Transitional Services Agreement.
Purchaser and Seller shall deliver the Supply Agreement and the Transitional
Services Agreement.
(d) JPS Agreement. JPS shall deliver the JPS Agreement.
III.4 Certain Business Information. Attached hereto (a) as Schedule
3.4(a) is a true and correct list of the Employees as of the date hereof (which
list shall, in respect of each Employee, contain the information set forth in
Section 4.14(a) hereof) and (b) as Schedule 3.4(b) is a true and correct list
of the backlog of the Business as of the date hereof, derived from Seller's
internal records of backlog of unfilled firm orders for products sold by Seller
in respect of the Business. No earlier than two (2) business days prior to the
Closing, Seller shall provide Purchaser with (x) updated versions of the lists
described in (a) and (b) above and (y) a list of standard prices of the
Business and any applicable discounts by customer name, in each case certified
by an officer of Seller as being true and correct in all material respects as
of the date delivered to Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser (as of the date
hereof and as of the Closing Date as if made on the Closing Date) as follows:
IV.1 Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to carry on its business as it is now being
conducted and to own and lease all of its properties and assets. Seller is duly
qualified to do business and is in good standing in each jurisdiction in which
the ownership of its properties or the conduct of its business requires such
qualification, except where the failure so to qualify would not have a Material
Adverse Effect.
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IV.2 Corporate Authorization. Seller has all necessary corporate
power and authority and has taken all corporate action necessary to enter into
this Agreement and the Ancillary Agreements, to consummate the transactions
contemplated on its part hereby and thereby and to perform its obligations
hereunder and thereunder. This Agreement and the Ancillary Agreements have been
duly executed and delivered by Seller and, assuming the due execution and
delivery thereof by Purchaser, each is a valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratoriums or other similar laws now or hereafter in
effect relating to creditors, rights generally and by general principles of
equity (whether considered in an action at law or in equity) and the discretion
of the court before which any proceeding therefor may be brought.
IV.3 Personal Property Leases. Schedule 4.3 hereto contains a
complete and correct list of all Personal Property Leases relating to the
Business. Each Personal Property Lease listed on Schedule 4.3 is in full force
and effect. There are no asserted or unasserted defaults thereunder, except for
(i) defaults which would not, individually or in the aggregate, have a Material
Adverse Effect or (ii) defaults of a party to any such Personal Property Lease
which have been consented to or waived in writing by the other party thereto.
IV.4 Title to Owned Real Property. Schedule 4.4 hereto contains a
complete and correct list of all Owned Real Property. Except as set forth on
Schedule 4.4, Seller has good and insurable fee title to all Owned Real
Property, free and clear of any and all Encumbrances, imperfections of title,
covenants, restrictions, easements or encroachments except for Permissible
Liens. Upon the consummation of the transactions contemplated hereby, Purchaser
shall receive good and insurable title to such Owned Real Property, free and
clear of all Encumbrances except for Permissible Liens.
Other than Permissible Liens or as set forth on Schedule 4.4, Seller
has not granted any purchase options or rights of first refusal or first offer
with respect to the Owned Real Property and the Owned Real Property is not
subject to any such options or rights.
IV.5 Title to Owned Personal Property. Except as set forth on
Schedule 4.5 hereto, Seller has good title to all of the personal property
owned by Seller and included in the Assets, free and clear of any and all
Encumbrances, except for Permissible Liens. Upon the consummation of the
transactions contemplated hereby, Purchaser shall receive good title to such
Owned Personal Property, free and clear of all Encumbrances except for
Permissible Liens.
IV.6 Contracts and Commitments. Schedule 4.6 hereto lists all of
the contracts, commitments, arrangements and understandings, both oral and
written, which pertain or relate primarily to the conduct, operations and
prospects of the Business, except for those contracts included in the Excluded
Assets (collectively, the "Contracts"). To the Knowledge of Seller, there are
no existing defaults, events of default or events, occurrences, acts or
omissions that, with the giving of notice or lapse of time or both, would
constitute defaults by Seller thereunder, and, except as described on Schedule
4.6, no penalties have been incurred nor, to the Knowledge of Seller, are any
amendments pending with respect to the Contracts. Each Contract is in full
force and effect and, assuming the due authorization, execution and delivery
thereof by the other party thereto, each is a
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valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratoriums or
other similar laws now or hereafter in effect relating to creditors' rights
generally and by general principles of equity (whether considered in an action
at law or in equity) and the discretion of the court before which any
proceeding therefor may be brought, and no defenses, off-sets or counterclaims
have been asserted or, to the Knowledge of Seller, may be made by any party
thereto, nor has Seller waived any material rights thereunder, except as
described in Schedule 4.6. Since December 31, 1998, Seller has not received
written notice of any default with respect to any Contract. Except as
contemplated hereby, Seller has not received actual notice of any plan or
intention of any other party to any Contract to exercise any right to cancel or
terminate any Contract, and, to the Knowledge of Seller, no fact that would
justify the exercise of such a right exists. Except as listed in Schedule 4.6,
none of the customers or suppliers of Seller has refused, or communicated that
it will or may refuse, to purchase or supply goods or services, as the case may
be, nor have the suppliers of Seller communicated that they will or may
substantially reduce the amounts of goods or services that they are willing to
purchase from, or sell to, Seller.
IV.7 Litigation, Proceedings and Applicable Law. Except as set
forth on Schedule 4.7 hereto, there are no claims, actions, suits or
proceedings pending or, to the Knowledge of Seller, threatened, against or
affecting the Business which would have, individually or in the aggregate, an
adverse effect on the Business or the Assets or impair Seller's ability to
consummate the transactions contemplated hereby, or which question or challenge
the validity of this Agreement or any actions to be taken by Seller hereunder
or in connection with any of the transactions contemplated hereby. Except as
set forth on Schedule 4.7 hereto, Seller is not subject to any judgment, order,
writ, injunction or decree of any court or Governmental Agency, and there are
no unsatisfied judgments against Seller or the Business.
IV.8 Compliance with Law. Except as set forth on Schedule 4.8
hereto, the Business has been operated in compliance with all applicable laws,
statutes, rules, regulations, ordinances, codes, orders, licenses, permits or
authorizations, as such now apply to the Business.
IV.9 Taxes. Except as set forth on Schedule 4.9 hereto:
(a) None of the Assets is: (1) property which Purchaser or Seller
are or will be required to treat as owned by another person
pursuant to the provisions of Section 168(f) of the Internal Revenue Code of
1954 (as in effect immediately prior to the Tax Reform Act of 1986); (2)
"Tax-exempt use property" within the meaning of Section 168(h)(1) of the Code;
or (3) "Tax-exempt bond financed property" within the meaning of Section
168(g)(5) of the Code.
(b) Seller is not a foreign person within the meaning of Section
1445(b)(2) of the Code.
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IV.10 No Conflict or Violation. Except as set forth on Schedule
4.10 hereto, neither the execution, delivery nor performance of this Agreement
or the Ancillary Agreements or any of the transactions contemplated hereby or
thereby will (a) violate or conflict with any provision of the Certificate of
Incorporation or By-laws of Seller, (b) conflict with or result in a breach of
or default (or an event which, with notice, lapse of time or both, would
constitute a breach or default) under, result in the termination of, accelerate
the performance required by, cause the acceleration of the maturity of any debt
or obligation pursuant to, or result in the creation or imposition of any lien
or encumbrance on any of the Assets under any provision of any contract,
agreement, lease, commitment, license, franchise, permit, authorization or
concession to which Seller is a party or bound and to which the Assets or the
Business is subject, (c) result in a violation by Seller of, or conflict with,
any statute, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree, or award (or an event which with notice, lapse of time, or
both, would result in any such violation) or (d) result in the creation of a
lien or encumbrance on the Assets other than a Permissible Lien.
IV.11 Consents and Approvals. Except as set forth on Schedule 4.11
hereto and other than real property recording and filing documents normally
required in connection with the conveyance of title, no notice to, consent,
approval or authorization of, or declaration, filing or registration with, any
Governmental Agency or any other person or entity, is required to be made or
obtained by Seller in connection with the execution, delivery and performance
of this Agreement or the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby.
IV.12 Insurance.
(a) Schedule 4.12 hereto contains a list of all policies of
title, liability, fire, workers, compensation and other forms of insurance
insuring the products, properties, assets and operations of the Business. At
Purchaser's request, Seller will provide Purchaser with true, correct and
complete copies of all such insurance policies. Except as set forth in Schedule
4.12, all such policies are in full force and effect.
(b) To the Knowledge of Seller, no actual notice of cancellation,
termination or reduction in coverage has been received by Seller with respect
to any policy listed in Schedule 4.12 hereto.
IV.13 Employee Benefit Plans.
(a) Schedule 4.13(a) sets forth a list of each employee benefit
plan, policy and arrangement which covers or provides benefits to the Employees
(the "Plans"), including a summary of the material terms of such Plans.
(b) Seller has complied in all material respects with the terms
of each Plan, and with any applicable provisions of ERISA and the Code.
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(c) With respect to the Amended and Restated Savings, Investment
and Profit Sharing Plan of JPS Industries, Inc., Seller has received a
favorable determination letter from the Internal Revenue Service that such plan
is qualified within the meaning of Section 401(a) of the Code and the trust
related thereto is exempt from tax under Section 501(a) of the Code, and no
proceedings exist or, to the Knowledge of Seller, have been threatened which
could reasonably be expected to result in the revocation of such favorable
determination letter.
IV.14 Labor Relations. (a) Schedule 4.14(a) contains a complete and
accurate list of the names, titles and cash compensation, including without
limitation wages, salaries, bonuses (discretionary and formula) and other cash
compensation (the "Cash Compensation") of all Employees who are currently
compensated at a rate in excess of $40,000 per year. In addition, Schedule
4.14(a) contains a complete and accurate description of (i) all increases in
Cash Compensation of Employees during the current fiscal year of Seller and
(ii) any scheduled increases in Cash Compensation of Employees that have not
yet been effected.
(b) Except as set forth on Schedule 4.14(b), none of the
Employees are covered by or participate in any Seller sponsored deferred
compensation, incentive, bonus or performance awards, and stock ownership or
stock options. There are no employment agreements to which Seller is a party
with respect to the Employees.
(c) Schedule 4.14(c) contains a complete and accurate list of all
employee manuals and all other material policies, procedures and work-related
rules (the "Employee Policies and Procedures") that apply to Employees. Seller
has provided Purchaser with a copy of all such Employee Policies and
Procedures.
(d) With respect to the Employees, except as set forth in
Schedule 4.14(d), (i) Seller has been and is in compliance with all laws,
rules, regulations and ordinances respecting employment and employment
practices, terms and conditions of employment and wages and hours, and Seller
has no liability for any arrears of wages or penalties for failure to comply
with any of the foregoing, and (ii) there are no (A) unfair labor practice
charges or complaints or racial, color, religious, sex, national origin, age or
handicap discrimination charges or complaints pending or, to the Knowledge of
Seller, threatened against Seller before any federal, state or local court,
board, department, commission or agency nor, to the Knowledge of Seller, does
any basis therefor exist or (B) existing or, to the Knowledge of Seller,
threatened labor strikes, disputes, grievances, controversies or other labor
troubles affecting Seller, nor to the Knowledge of Seller, does any basis
therefor exist, any of which could result in any material liability.
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(e) With respect to the Employees, Seller has never been a party
to any agreement with any union, labor organization or collective bargaining
unit, no employees are represented by any union, labor organization or
collective bargaining unit and, to the Knowledge of Seller, the Employees have
not threatened to organize or join a union, labor organization or collective
bargaining unit.
(f) To the Knowledge of Seller, all Employees are citizens of, or
are authorized to be employed in, the United States.
IV.15 Permits. Schedule 4.15 hereto sets forth a list of all
Permits required to conduct the Business (including, without limitation,
environmental permits required to construct, occupy, operate or use the
Assets), the dates such Permits were obtained, the date of renewals thereof and
the status of each Permit. Except as set forth on Schedule 4.15 there are no
administrative or judicial proceedings pending or, to the Knowledge of Seller,
threatened which seek to revoke, cancel or declare such Permits invalid in any
respect.
IV.16 Brokers. No Person has acted directly or indirectly as a
broker, finder or financial advisor for Seller in connection with the
negotiations relating to or the transactions contemplated by this Agreement and
no Person is entitled to any fee or commission or like payment in respect
thereof based in any way on agreements, arrangements or understanding made by
or on behalf of Seller.
IV.17 Stanley Plant. Except as set forth on Schedule 4.17 hereof,
there have been no material changes to the plant and equipment at the Stanley
Plant since October 31, 1998.
IV.18 Environmental Matters. Except as disclosed on Schedule 4.18
or in the environmental reports delivered to Purchaser prior to the Closing,
(a) the Business and the Assets are in compliance with all Environmental Laws
and any historic incidents of non-compliance have been corrected and any
required reports have been submitted by Seller to the appropriate governmental
authority; (b) there are no pending or, to the Knowledge of Seller, threatened,
investigations, inquiries or proceedings against the Assets by any governmental
authority under Environmental Laws; (c) neither the Business nor the Assets are
subject to any obligation to remediate contamination from Hazardous Materials
under any Environmental Laws; and (d) to the Knowledge of Seller, none of the
Assets are included on any federal or state "Superfund" list or subject to any
liens imposed pursuant to Environmental Laws.
IV.19 Condition of Fixed Assets. Except as set forth on Schedule
4.19, to the Knowledge of Seller, all of the plants, structures and equipment
included in the Assets are in good condition and repair for their intended use
in the ordinary course or business, subject to ordinary wear and tear, and
conform in all material respects with all applicable ordinances, regulations
and other laws.
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IV.20 Books and Records. The Books and Records of the Business have
been kept materially accurately by Seller in the ordinary course of business,
the transactions entered therein represent bona fide transactions and the
revenues, expenses, assets and liabilities of the Business have been properly
recorded in such Books and Records.
IV.21 Customers. Schedule 4.21 contains a complete and accurate
list of the 20 largest non-intercompany customers of the Business in terms of
sales for each of the last three fiscal years and the current fiscal year to
date, showing, with respect to each such customer, the name and address of such
customer.
IV.22 Product Warranties. Except as set forth on Schedule 4.22,
there is no claim against or liability of Seller on account of product
warranties or with respect to the manufacture, sale or rental of defective
products of the Business and, to the Knowledge of Seller, there is no basis for
any such claim on account of defective products manufactured, sold or rented by
Seller in respect of the Business since December 31, 1998, that is not fully
covered by insurance.
IV.23 Absence of Certain Changes. Except as set forth on Schedule
4.23, since October 31, 1998, Seller has not, in respect of the Business (a)
suffered any material adverse change, whether or not caused by any deliberate
act or omission of Seller, in the condition (financial or otherwise),
operations, assets or liabilities of the Business, (b) contracted for the
purchase of any capital asset having a cost in excess of $100,000 or paid any
capital expenditures in excess of $100,000, (c) suffered any damage or
destruction to or loss of any Asset (whether or not covered by insurance) that
has materially and adversely affected, or could materially and adversely
affect, the Business, (d) acquired or disposed of any Asset except in the
ordinary course of business, (e) written up or written down the carrying value
of any Asset, (f) changed the costing system or depreciation methods of
accounting for the Assets, (g) increased the compensation of any Employee
except in the ordinary course of business, (h) entered into any other
commitment or transaction or experienced any other event that is materially
adverse to this Agreement or to any of the Ancillary Agreements or the
transactions contemplated hereby or thereby, or that has materially and
adversely affected, or could materially and adversely affect, the condition
(financial or otherwise), operations, assets or liabilities of the Business.
IV.24 Certain Payments. To the Knowledge of Seller, with respect to
the Business, neither Seller nor any director, officer or employee of Seller
has paid or caused to be paid, directly or indirectly, to any government or
agency thereof or any agent of any supplier or customer any bribe, kick-back or
other similar payment.
IV.25 Financial Statements. To the Knowledge of Seller, the
Financial Statements have been prepared in accordance with the books and
records of Seller on a consistent basis with Seller's preparation of the same
information for prior periods.
IV.26 Computer Software. Seller makes no representations or
warranties regarding Year 2000 readiness or system performance regarding the
Assets.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller (as of the date
hereof and as of the Closing Date as if made on the Closing Date) as follows:
V.1 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
Purchaser has full corporate power and authority to conduct the Business as it
is now being conducted and to own and lease the Assets.
V.2 Corporate Authorization. Purchaser has all necessary
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party, to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Ancillary
Agreements and the consummation of the transactions described herein and
therein by Purchaser have been duly authorized by all requisite corporate
action. This Agreement and the Ancillary Agreements have been duly executed and
delivered by Purchaser and, assuming the due execution and delivery thereof by
Seller, each is a valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization and other similar laws now or hereafter in effect relating to
creditors, rights generally and by general principles of equity (whether
considered in an action at law or in equity) and the discretion of the court
before which any proceeding therefor may be brought.
V.3 No Conflict or Violation. Except as set forth on Schedule 5.3
hereto, neither the execution, delivery nor performance of this Agreement or
any of the transactions contemplated hereby will (a) violate or conflict with
any provision of the Certificate of Incorporation or Bylaws of Purchaser, (b)
result in a breach of or a default under any provision of any contract,
agreement, lease, commitment, license, franchise, permit, authorization or
concession to which either Purchaser is a party or bound or to which any
property or asset of either Purchaser is subject or an event which with notice,
lapse of time, or both, would result in any such breach or default, or (c)
result in a violation by Purchaser of any statute, rule, regulation, ordinance,
code, order, judgment, writ, injunction, decree, or award, or an event which
with notice, lapse of time, or both, would result in any such violation, which
breach, default or violation would have a material adverse effect on
Purchaser's ability to consummate the transactions contemplated hereby.
V.4 Consents and Approvals. Except as set forth on Schedule 5.4,
no consent, approval or authorization or declaration, filing or registration
with any Governmental Agency, or any other person or entity, is required to be
made or obtained by Purchaser in connection with the execution, delivery and
performance of this Agreement or the Ancillary Agreements and the consummation
of the transactions contemplated hereby and thereby.
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V.5 Litigation. There is no claim, action, suit, proceeding or
governmental investigation against Purchaser or any of Purchaser's subsidiaries
which (i) seeks to restrain or enjoin the consummation of the transactions
contemplated hereby or (ii) if adversely determined, could be expected to have
a material adverse effect on the ability of Purchaser to consummate the
transactions contemplated by this Agreement. Purchaser is not in violation of
any term of any judgment, decree, injunction or order outstanding against it,
which violation could reasonably be expected to have a material adverse effect
on the ability of Purchaser to consummate the transactions contemplated hereby.
V.6 Brokers. Except as set forth on Schedule 5.6, no Person has
acted directly or indirectly as a broker, finder or financial advisor for
Purchaser in connection with the negotiations relating to or the transactions
contemplated by this Agreement and no Person is entitled to any fee or
commission or like payment in respect thereof based in any way or agreements,
arrangements or understandings made by or on behalf of Purchaser.
ARTICLE VI
COVENANTS OF SELLER AND PURCHASER
Seller and Purchaser each covenant with the other as follows:
VI.1 Employees.
(a) Employment. Effective as of the Closing Date, Purchaser shall
offer employment to the Employees (other than those Employees on layoff, but
subject to any recall rights).
(b) Credited Service. The Transferred Employees shall be given
full credit by Purchaser for their years of service recognized under Seller's
benefit plans and vacation policy for purposes of eligibility and vesting in
all employee benefit plans of Purchaser and for purposes of calculating
benefits under severance and vacation policies of Purchaser.
(c) Severance. For one (1) year from the Closing Date, Purchaser
shall maintain severance or layoff benefits no less favorable in the aggregate
than those severance or layoff benefits maintained by Seller for the salaried
Employees immediately prior to the Closing (the terms of which are set forth on
Schedule 6.1(c)) and Purchaser shall indemnify Seller with respect to any such
severance or layoff liability for any salaried Employee terminated after the
Closing Date. Seller shall not be responsible and shall not pay severance or
layoff or any other similar arrangement with respect to any salaried Employee
terminated after the Closing Date.
(d) Health and Medical Plan Coverage. Effective as of the Closing
Date, Purchaser shall provide Transferred Employees and their beneficiaries
with group
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health and medical coverage that contains no (i) pre-existing condition
exclusions or limitations or (ii) eligibility waiting periods, applicable to
Transferred Employees other than any limitations or waiting periods that are
already in effect and have not been satisfied with respect to such employees.
With respect to such plans, Purchaser shall give each Transferred Employee
credit toward applicable deductibles and annual out-of-pocket limits for
expenses incurred prior to the Closing Date during the applicable plan year. If
an event causing a Transferred Employee to be eligible for health care benefits
under Part 6 of Title I of ERISA, 29 U.S.C. ss.ss. 1161 et. seq., as amended,
occurs after the Closing Date, Purchaser will be obligated to provide such
health care benefits. Purchaser shall not be responsible for any costs or
expenses incurred prior to the Closing with respect to Seller's health and
welfare plans, and Seller shall not be responsible for any costs or expenses
incurred after the Closing with respect to Purchaser's health and welfare
plans.
(e) Vacation. Purchaser shall pay each Transferred Employee the
vacation pay earned by such Transferred Employee in 1999 and payable in 1999
and 2000 in accordance with the terms, including both timing and amount of pay
earned, of Seller's vacation policy, which vacation payments are described in
Schedule 6.1(e); provided, however, that Seller shall reimburse Purchaser for
the cost of such vacation pay upon reasonable notice of actual payment(s) made
to such Transferred Employees. For calendar year 1999, Purchaser shall provide
a vacation policy and entitlement for Transferred Employees (based on such
employees', years of service with Seller), the terms of which are set forth on
Schedule 6.1(e).
(f) Pension Benefits. Seller shall cause the Retirement Pension
Plan for Employees of JPS Industries, Inc. (the "Pension Plan") to be amended
to provide Transferred Employees with full vesting as to any benefits accrued
under the Pension Plan as of the Closing Date.
(g) Savings Plan. Seller shall cause the accounts of the
Transferred Employees who participate in the Amended and Restated Savings,
Investment and Profit Sharing Plan of JPS Industries, Inc. ("Seller's Savings
Plan") to be valued as of a specified valuation date as soon as practicable
following the Closing (the "Asset Transfer Date"). Purchaser shall cause its
qualified 401(k) ("Purchaser's Savings Plan") to be amended to accommodate the
transfer of both before-tax and after-tax accounts from Seller's Savings Plan.
As of the Asset Transfer Date, assets equal in value, including any after-tax
amounts to the amount credited to each such employee's account under Seller's
Savings Plan will be transferred to a trust maintained pursuant to Purchaser's
Savings Plan; provided, however, that Purchaser provide to Seller a
determination letter or an opinion of counsel reasonably acceptable to Seller
that such trust and each plan
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associated therewith is qualified as to form under Sections 401(a) and 501(a)
of the Code. Such asset transfer shall include any outstanding participant
loans. As of the Asset Transfer Date, Purchaser shall be liable for the payment
of the benefits accrued by and transferred in respect of any Transferred
Employee who participated in Seller's Savings Plan and who was effected by such
transfer. Purchaser shall provide Transferred Employees who participate in
Purchaser's Savings Plan with matching contributions and discretionary
contributions at the same rate as Purchaser provides to its other Employees.
(h) Flex Plan. Effective as of the Closing Date, Purchaser shall
recognize salary reduction elections made by Transferred Employees under the
JPS Industries, Inc. Flexible Benefits Program ("JPS Flex Plan") as elections
made under Purchaser's Code Section 125 flexible benefits program ("Purchaser
Flex Plan") and no new benefit elections for 1999 will be allowed to the
Transferred Employees except as otherwise provided by the Purchaser Flex Plan
in the event of a change in family status. Effective as of the Closing Date,
Purchaser shall assume all obligations to pay all unpaid claims incurred in
1999 of the Transferred Employees participating in the Purchaser Flex Plan as
of the Closing Date. As soon as practicable following the Closing, Seller shall
transfer to Purchaser assets equal to the aggregate amount of 1999 salary
reductions related to Transferred Employees, elections under the JPS Flex Plan
withheld through the Closing Date (less the aggregate claims paid under the JPS
Flex Plan to Transferred Employees from January 1, 1999 through the Closing
Date).
(i) Transfer of or Access to Records. Purchaser shall, at
Seller's request, allow Seller reasonable access to all personnel and other
records reasonably related to any Transferred Employee.
(j) W-2 Matters. Pursuant to the alternate procedure prescribed
by Revenue Procedure 96-60, Purchaser shall assume Seller's entire obligation
to furnish Forms W-2 for the calendar year ending December 31, 1999 to
Transferred Employees. Seller shall provide Purchaser any information not
available to Purchaser relating to periods ending on the Closing Date necessary
for Purchaser to prepare and distribute Forms W-2 to Transferred Employees for
the year ending December 31, 1999, which Forms W-2 shall include all
remuneration earned by Transferred Employees from both Seller and Purchaser
during the year ending December 31, 1999, and Purchaser shall prepare and
distribute such Forms.
VI.2 Further Assurances; Cooperation and Assistance. From time to
time from and after the Closing Date, at Purchaser's reasonable request, Seller
will (and will cause its officers, directors, employees, affiliates and agents
to) execute and deliver such other instruments of conveyance and transfer and
take such other actions as Purchaser may reasonably request in order to (i)
perfect and
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record, if necessary, the sale, assignment, conveyance, transfer, and delivery
to Purchaser of the Assets and (ii) convey, transfer to and vest in Purchaser
and to put Purchaser in possession and operating control of all or any part of
the Assets, including, without limitation, cooperating with and assisting
Purchaser in the prosecution of any claims and in the collection or reduction
to possession of all the Assets. Seller hereby agrees that all out-of-pocket
expenses incurred in connection with the matters set forth in clause (ii) above
shall be borne by it, and all other costs incurred in clauses (i) and (ii)
shall be borne by Purchaser.
VI.3 Nondisclosure. (a) From and after the Closing Date, Seller
will not use, divulge, furnish or make accessible to anyone any knowledge or
information with respect to confidential or secret processes, inventions,
discoveries, improvements, formulae, plans, material, devices or ideas or
know-how, whether patentable or not, with respect to any proprietary, material
non-public, confidential or secret aspects of the Business, in each case
relating solely to the Business (including, without limitation, customer lists,
supplier lists and pricing and marketing arrangements with customers or
suppliers) and Seller will cooperate reasonably with Purchaser in preserving
such proprietary, confidential or secret aspects of the Business, in each case
relating solely to the Business; provided, however, that nothing herein shall
prohibit Seller from (i) complying with any order or decree of any court of
competent jurisdiction or governmental authority, but Seller will give
Purchaser timely notice of the receipt of any such order or decree, or (ii)
disclosing such information to the extent necessary to any lenders under any of
their credit documentation, as it relates to the Business, and provided,
further, that the foregoing provision shall not apply to any information which
is or becomes generally available to the public through no breach of this
Agreement.
VI.4 Non-Competition. (a) Seller (on behalf of itself and its
subsidiaries) and JPS agrees that for three (3) years from and after the
Closing Date, it shall not engage, directly or indirectly, or render any
consulting or advisory services to any person, firm or corporation that
engages, in the United States in the yarn sales business or own stock or
otherwise have an interest in or be affiliated with, any person, corporation,
firm, partnership or other entity engaged in such business (except as a
stockholder holding less than lot of the stock of a publicly-owned
corporation); provided, however, that it shall not be a violation of this
Section 6.4(a) for Seller to resell returned goods received from customers of
the Business (whether received by Seller before or after the Closing Date).
(b Seller (on behalf of itself and its subsidiaries) shall not
(i) for a period of three (3) years from the Closing Date with respect to any
Employees listed as "Key Employees" in Schedule 6.4(b) and (ii) for a period of
one (1) year from the Closing Date with respect to any other salaried Employee,
hire any such
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Employee, without the prior written consent of Purchaser, except as otherwise
required by court order or unless as otherwise agreed between the parties.
(c Seller (on behalf of itself and its subsidiaries) agrees that
a violation of Section 6.4(a) or 6.4(b) will cause irreparable injury to
Purchaser, and Purchaser will be entitled, in addition to any other rights and
remedies it may have at law or in equity, to apply for an injunction enjoining
and restraining Seller from doing or continuing to do any such act and any
other violations or threatened violations of this Section 6.4.
(d Seller (on behalf of itself and its subsidiaries)
acknowledges and agree that the covenants set forth in this Section 6.4 are
reasonable and valid in geographical and temporal scope and in all other
respects. If any of such covenants are found to be invalid or unenforceable by
a final determination of a court of competent jurisdiction (i) the remaining
terms and provisions hereof shall be unimpaired and (ii) the invalid or
unenforceable term or provision shall be deemed replaced by a term or provision
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision. In the event that,
notwithstanding the first sentence of this paragraph (d), any of the provisions
of this Section 6.4 relating to the geographic or temporal scope of the
covenants contained therein or the nature of the business restricted thereby
shall be declared by a court of competent jurisdiction to exceed the maximum
restrictiveness such court deems enforceable, such provision shall be deemed to
be replaced herein by the maximum restriction deemed enforceable by such court.
VI.5 Sums Received in Respect of Business. Seller shall pay or
cause to be paid over to Purchaser, promptly after the receipt thereof after
the Closing Date, all sums received in respect or on account of the Assets
relating to the Business and the consideration received by Seller as set forth
in Section 2.2 hereof.
VI.6 Maintenance of the Business Prior to Closing. Unless
otherwise consented to by Purchaser, from the date hereof until the Closing,
Seller shall:
(a carry on the Business in the ordinary course in accordance
with past practice and not take any action inconsistent therewith or with the
consummation of the transactions contemplated hereby;
(b except as set forth on Schedule 6.6(b), use its best efforts
to keep available generally the services of the present employees of the
Business, and
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preserve generally the present relationships with persons having business
dealings with the Business;
(c maintain all of the Assets in good repair, order and
condition (except for ordinary wear and tear and equipment breakdowns of a type
normally occurring which do not materially interfere with the operation of the
Business);
(d maintain the books, accounts and records in the ordinary
course consistent with past practice, and comply, in all material respects,
with all laws applicable to the conduct of the Business;
(e not materially change or enter into any agreement to
materially change the character of the Business;
(f not enter into any employment contract with any employee of
the Business or make any loan to, or enter into any material transaction of any
other nature with, any employee of the Business;
(g other than in accordance with the Seller Credit Agreement
and/or the Loan and Security Agreement, by and between JPS Converter and
Industrial Corp. and The CIT Group/Equipment Financing, Inc., dated as of May
31, 1991, as amended (the "CIT Agreement"), not sell or transfer any of the
Assets, except Inventory and Fixed Assets in the ordinary course of business,
and maintain Inventory at levels consistent with past practice ;
(h not terminate or modify any lease, license, Permit, Contract
or other agreement included in the Assets in a manner materially adverse to the
Business;
(i other than in accordance with the Seller Credit Agreement
and/or the CIT Agreement, not release, waive, sell or assign any debts, claims,
rights or other intangible rights included in the Assets; and
(j maintain insurance coverage in the usual manner consistent
with prior practices.
If, in accordance with the terms of the Seller Credit Agreement or the
CIT Agreement, any of the events described in (g) and (i) above occur, then
Seller shall promptly provide Purchaser with written notice of such occurrence.
VI.7 Consents. Purchaser and Seller, as applicable, will take all
reasonable action required hereunder to obtain all applicable Permits,
consents, approvals and agreements of, and to give all notices and make all
filings with, public and governmental authorities and third parties (at such
time as the parties
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mutually determine) as may be necessary to authorize, approve or permit the
full and complete sale, conveyance, assignment and transfer of the Assets to
Purchaser; provided, however, that nothing contained in this Section 6.7 shall
be deemed to require Seller to make any payments to obtain a consent or
approval from any third party.
VI.8 Public Announcements. Neither Seller (nor any of its
Affiliates) nor Purchaser (nor any of its Affiliates) shall make any public
statement, including, without limitation, any press release, with respect to
this Agreement and the transactions contemplated hereby, without the prior
written consent of the other party (which consent may not be unreasonably
withheld or delayed), except as may be required by law, regulation, legal
process or stock exchange rules, and except that following the issuance of
press releases by the parties hereto with respect to the transactions
contemplated hereby the parties may continue routine communications (including
discussions regarding the transactions contemplated hereby) with investors and
analysts.
VI.9 Pre-Closing Sales Tax Liabilities. Seller shall be
responsible for all sales taxes applicable to sales of merchandise made by the
Business prior to the Closing Date.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions provided for
hereby are subject to the satisfaction, on or prior to the Closing Date, of
each of the following conditions, any and all of which may be waived in whole
or in part by Seller:
VII.1 Representations, Warranties and Covenants. All
representations and warranties of Purchaser contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date, except
as affected by the transactions contemplated hereby, and Purchaser shall have
performed in all material respects all covenants and conditions contained in
this Agreement to be performed or complied with by it prior to or on the
Closing Date.
VII.2 Certificates. Purchaser shall have furnished Seller with such
certificates, dated the Closing Date, of Purchaser's officers, directors and
others to evidence compliance with the conditions set forth in this Article VII
as may be reasonably requested by Seller.
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VII.3 Corporate Documents. Seller shall have received from
Purchaser certified copies of the resolutions duly adopted by the board of
directors of Purchaser approving the execution and delivery of this Agreement
and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby, and such resolutions shall be in full force
and effect as of the Closing Date.
VII.4 Legal Opinion. Seller shall have received the opinion of
Jackson Walker L.L.P. counsel to Purchaser, in the form of Exhibit E hereto.
VII.5 Consents. All consents listed on Schedule 7.5 hereto shall
have been obtained.
VII.6 No Governmental Proceedings or Litigation. No suit, action,
investigation or other proceeding by any governmental authority or other person
or any other legal or administrative proceeding shall have been instituted or
threatened which would make illegal, or prevent, or question the validity or
legality of, the transactions contemplated hereby or which seeks material
damages in respect thereof.
ARTICLE VIII
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to consummate the transactions provided
for hereby are subject to the satisfaction, on or prior to the Closing Date, of
each of the following conditions, any or all of which may be waived in whole or
in part by Purchaser:
VIII.1 Representations, Warranties and Covenants. The
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date, and
Seller shall have performed in all material respects all covenants and
conditions contained in this Agreement to be performed or complied with by them
prior to or on the Closing Date.
VIII.2 Certificates. Seller shall have furnished Purchaser with such
certificates, dated the Closing Date, of Seller's officers, directors and
others to evidence compliance with the conditions set forth in this Article
VIII as may be reasonably requested by Purchaser.
VIII.3 Section 1445 Certificate. Seller shall have furnished
Purchaser with a certificate that such Seller is not a foreign person within
the meaning of
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Section 1445 of the Code, which certificate shall set forth all information
required by, and otherwise be executed in accordance with, Treasury Regulation
Section 1.1445-2(b).
VIII.4 Corporate Documents. Purchaser shall have received from
Seller certified copies of the resolutions duly adopted by the boards of
directors of Seller and JPS approving the execution and delivery of this
Agreement and the Ancillary Agreements and the JPS Agreement and the
consummation of the transactions contemplated hereby and thereby.
VIII.5 Legal Opinion. Purchaser shall have received the opinion of
Jones, Day, Reavis & Pogue, Atlanta, Georgia, counsel for Seller, in the form
of Exhibit F hereto.
VIII.6 Consents. All consents listed on Schedule 8.6 hereto shall
have been obtained.
VIII.7 Delivery of Documents. Seller shall have executed and
delivered to Purchaser at the Closing the Ancillary Agreements and executed
and/or delivered the other documents listed in Sections 3.2, 3.3 and 3.4
hereof.
VIII.8 Good Standing Certificates. Purchaser shall have received (i)
a certificate of the Secretary of State of the State of Delaware as to Seller's
good standing and legal existence dated as close as practicable to the Closing
Date and a bring-down notice dated as of the Closing Date as to Seller's good
standing and (ii) a certificate of the Secretary of State of the State of North
Carolina as to Seller's authority to do business in such state dated as close
as practicable to the Closing Date.
VIII.9 Release of Liens. Purchaser shall have received evidence
reasonably satisfactory to it that all liens of third parties in respect of the
Assets, other than Permitted Liens, shall have been released as of the Closing
Date.
VIII.10 No Governmental Proceedings or Litigation. No suit, action,
investigation or other proceeding by any governmental authority or other person
or any other legal or administrative proceeding shall have been instituted or
threatened which would make illegal, or prevents, or questions the validity or
legality of, the transactions contemplated hereby or which seeks material
damages in respect thereof.
VIII.11 Termination of Supply Agreement. The parties hereto shall
have terminated the existing Supply Agreement dated January 11, 1999 by and
between the parties.
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VIII.12 Transitional Services Agreement. Seller shall have executed
and delivered to Purchaser the Transitional Services Agreement.
VIII.13 JPS Agreement. JPS shall have executed and delivered to
Purchaser the JPS Agreement
VIII.14 Lender Approvals. Purchaser shall have received the consents
of its lenders to allow Purchaser to consummate the transactions contemplated
by this Agreement.
ARTICLE IX
CERTAIN ACTIONS BY SELLER AND PURCHASER AFTER THE CLOSING
IX.1 Books and Records. Each party agrees that it will cooperate
with and make available to the other party, subject to Section 10.11 hereof,
during normal business hours, all Books and Records, information and employees
(without substantial disruption of employment) retained and remaining in
existence after the Closing Date which are necessary or useful in connection
with any Tax inquiry, investigation or dispute, any litigation or investigation
or any other matter requiring any such Books and Records, information or
employees for any reasonable business purpose. The party requesting any such
Books and Records, information or employees shall bear all of the out-of-pocket
costs and expenses (including, without limitation, attorneys' fees) reasonably
incurred in connection with providing such Books and Records, information or
employees. Seller may require certain financial information relating to the
Business for periods prior to the Closing Date for the purpose of filing
federal, state, local and foreign tax returns and other governmental reports,
and Purchaser agrees to furnish such information to Seller at reasonable
request.
IX.2 Indemnification.
(a By Seller. Seller shall indemnify and hold harmless
Purchaser, its directors, officers, employees and each of their respective
successors and assigns from and against any and all demands, claims, actions or
causes of action, assessments, deficiencies, damages, losses, liabilities and
expenses (including, without limitation, reasonable expenses of investigation
and attorneys' fees and expenses in connection with any action, suit or
proceeding or investigation brought against Purchaser) (herein, the "Damages"),
incurred in connection with or arising out of or resulting from (i) any breach
of or inaccuracy in any representation or warranty made by Seller pursuant to
this Agreement and/or the Ancillary Agreements; (ii) the failure of Seller to
comply with any of the covenants contained in this Agreement or the Ancillary
Agreements which are required to be
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performed by Seller; (iii) any Excluded Liability; (iv) any Taxes which result
in a claim against Purchaser for any taxable period ending on or prior to the
Closing Date (other than taxes assumed by Purchaser hereunder); (v) any product
claim or warranty relating to products sold prior to the Closing and all
general liability claims arising out of events occurring prior to the Closing;
(vi) the non-compliance by Seller with applicable bulk sales statutes; and
(vii) the operation of the Business on or prior to the Closing Date.
(b By Purchaser. Purchaser shall indemnify and hold harmless
Seller, its directors, officers and employees and each of their respective
successors and assigns from and against any and all Damages incurred in
connection with or arising out of or resulting from (i) any breach of or
inaccuracy in any representation or warranty made by Purchaser pursuant to this
Agreement and/or the Ancillary Agreements; (ii) the failure of Purchaser to
comply with any of the covenants contained in this Agreement or in any of the
Ancillary Agreements which are required to be performed by Purchaser; (iii) the
operation of the Business (other than with respect to the Excluded Assets or
any Excluded Liabilities) from and after the Closing Date, including, without
limitation, any claim, liability, obligation or commitment of any nature in
respect of any Permits operated by Seller for the benefit of Purchaser from and
after the Closing Date pursuant to Section 3.2 hereof; and (iv) any liability
arising after the Closing Date relating to violations of the Worker Adjustment
and Retraining Notification Act (29 USC Sections 2101-2109) caused by
Purchaser's termination or layoff of Transferred Employees.
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(c Claims by Third Parties. Promptly after receipt by an
indemnified party of written notice of the commencement of any investigation,
claim, proceeding or other action in respect of which indemnity may be sought
from the indemnitor (an "Action"), such indemnified party shall notify the
indemnitor in writing of the commencement of such Action; but the omission to
so notify the indemnitor shall not relieve it from any liability that it may
otherwise have to such indemnified party, except to the extent that the
indemnitor is materially prejudiced or forfeits substantive rights or defenses
as a result of such failure. In connection with any Action in which indemnitor
and any indemnified party are parties, the indemnitor shall be entitled to
participate therein, and may assume the defense thereof. Notwithstanding the
assumption of the defense of any such Action by the indemnitor, each
indemnified party shall have the right to employ separate counsel and to
participate in the defense of such Action, and the indemnitor shall bear the
reasonable fees, costs and expenses of such separate counsel to such
indemnified party if: (a) the indemnitor shall have agreed to the retention of
such separate counsel, (b) the indemnified party shall have concluded that
representation of such indemnified party and the indemnitor by the same counsel
would be inappropriate due to actual or, as reasonably determined by such
indemnified party's counsel, potential differing interests between them in the
conduct of the defense of such Action, or if there may be legal defenses
available to such indemnified party that are different from or additional to
those available to the other indemnified party or to the indemnitor, or (c) the
indemnitor shall have failed to employ counsel reasonably satisfactory to such
indemnified party within a reasonable period of time after notice of the
institution of such Action. If such indemnified party retains separate counsel
in cases other than as described in clauses (a), (b) or (c) above, such counsel
shall be retained at the expense of such indemnified party. Except as provided
above, it is hereby agreed and understood that the indemnitor shall not, in
connection with any Action in the same jurisdiction, be liable for the fees and
expenses of more than one counsel for all such indemnified parties (together
with appropriate local counsel). The party from whom indemnification is sought
shall not, without the written consent of the party seeking indemnification
(which consent shall not be unreasonably withheld), settle or compromise any
claim or consent to entry of any judgment that involves more than the payment
of money or that does not include an unconditional release of the party seeking
indemnification from all liabilities with respect to such claim.
(d Notwithstanding any other provision of this Agreement, none
of the parties hereto shall be entitled to indemnification pursuant to this
Section 9.2 for any Damages arising out of the breach of any representation or
warranty made by the other party in this Agreement except as follows: (i) with
respect to any Damages resulting from a breach of any of the representations
and warranties by either party, the other party shall be entitled to
indemnification for only those
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Damages which arise out of such breach and are in excess of $200,000 in the
aggregate (it being agreed that such other party shall bear the first $200,000
of Damages arising from such breaches or alleged breaches); and (ii) unless the
party seeking such indemnification shall make its claim therefor on or prior to
the date on which the relevant representation or warranty shall expire pursuant
to Section 10.2, except that if a claim arises under a representation or
warranty and a notice of such claim is given prior to the expiration of the
survival period, then such representation or warranty shall not terminate with
respect to such claim until indemnification thereof (if any is owing) shall
have been made in accordance with the provisions of this Agreement. In no event
will either party be liable under or with respect to this Agreement for any
Damages or any portion of any Damages arising out of the breach of any
representation or warranty in excess of $2,000,000 in the aggregate; provided,
however, that the foregoing limitations on liability for Damages arising out of
the breach of any representation or warranty shall not apply to claims of
Purchaser relating to the Excluded Liabilities or claims of Seller relating to
the Assumed Liabilities or to the representations or warranties set forth in
Section 4.2 or 5.2.
(e Each party hereto acknowledges and agrees that, after the
Closing Date, its sole and exclusive legal remedy with respect to any and all
claims relating to or arising out of a breach of any representation, warranty,
covenant or agreement made by the other party in this Agreement shall be
pursuant to the indemnification provisions set forth in this Section 9.2,
except in the case of actual fraud.
(f In calculating any amounts payable pursuant to this Section
9.2 or Section 9.4 by Seller or Purchaser, as the case may be, such amounts
shall be reduced by (i) any tax benefit actually realized by the Indemnified
Party as a result of the facts giving rise to the claim for indemnification and
(ii) any insurance recoveries received by the Indemnified Party. All amounts
paid pursuant to this Section 9.2 or Section 9.4 by one party to another party
shall be treated by such parties as an adjustment to the Purchase Price for the
Assets.
(g With respect to Remedial Activities (as defined in Section
9.2(g)(vi) below) for which Seller must indemnify Purchaser:
(i Purchaser shall notify Seller of any condition
requiring Remedial Activities for which Seller is responsible within 30
days of becoming aware that Remedial Activities are required. Purchaser
shall identify the conditions and the asserted grounds for
indemnification. Seller shall have 60 days from receipt of such notice
to commence an appropriate response, which may include investigation,
remediation, or response to and negotiation with regulatory
authorities, but need not involve actual Remedial Activities. Seller
shall promptly and diligently, consistent with clause (iii) below,
ascertain and
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complete all Remedial Activities required by Environmental
Laws and the governmental authorities responsible for
implementing those laws.
(ii Claims by third parties alleging personal injury or property
damage arising out of Hazardous Materials which do not arise
out of and will not involve Remedial Activities shall be
governed by subsection 9.2(c) of this section.
(iii Seller and Purchaser shall reasonably cooperate in all
decisions and activities related to Remedial Activities,
including without limitation, the timing, scope of work,
choice of consultant, choice of contractors, and remedy
selected; provided, however, that (a) Seller shall ensure that
all Remedial Activities are undertaken in a manner that does
not prevent or materially impair Purchaser from using the
Stanley Plant in a reasonable manner, (b) Seller shall comply
with all applicable laws and with all requirements imposed by
governmental authorities with responsibility for implementing
Environmental Laws, and (c) Seller may use the least stringent
criteria applicable to industrial property if such criteria
are acceptable to governmental authorities with jurisdiction
over the Remedial Activities. Seller shall provide Purchaser
with a written scope of work and the anticipated timeframe for
completion not less than 20 days before the commencement of
work. Purchaser shall have the right to review and to consult
with Seller with respect to finalization and implementation of
such plan and Seller, shall where reasonable, incorporate
Purchaser's comments to such plan.
(iv Purchaser shall provide Seller and its agents and
representatives, including its environmental consultants and
contractors, with access to the Stanley Plant and any portion
thereof on which Remedial Activities are to be performed, and
to water, telephone lines, electricity and other readily
available utilities. Purchaser shall cooperate with and assist
Seller in procuring required environmental permits and
authorizations and making required reports and filings.
Purchaser shall not be required to incur any out-of-pocket
expenses or extraordinary personnel or operating costs in
connection with such cooperation and assistance without
reasonable compensation.
(v If Seller fails for any reason to commence and complete all
required Remedial Activities in accordance with this
Agreement, then Purchaser shall, after reasonable notice, have
the right, but not the obligation, to perform such activities
as Purchaser, in its sole discretion, believes are required to
obtain compliance with Environmental Laws and Seller shall be
responsible under Section 9.2(a) for reimbursing all of
Purchaser's reasonable costs; provided, however, that
Purchaser shall use the least stringent clean-up criteria
applicable to industrial property.
(vi For purposes of this Section 9.2(g), Remedial Activities means
any actions specifically required by Environmental Laws to
cleanup, remove, treat, or in any other way address Hazardous
Materials located in, on or under the soil or groundwater at
the Stanley Plant at concentrations exceeding those allowed by
Environmental Laws. Remedial Activities shall not include any
action voluntarily undertaken to investigate or remediate
Hazardous Materials.
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(h)(i) Omissions, conduct or conditions that were not violations of
Environmental Laws in effect on the Closing Date, but which subsequently become
violations due to a change in law, shall be Assumed Liabilities, and omissions,
conduct or conditions that would have been violations of Environmental Laws in
effect on the Closing Date (had all of the facts and circumstances been known)
shall be Excluded Liabilities.
(ii) Conditions existing on or before Closing for which Remedial
Activities (as defined in Section 9.2(g)(vi)) were not required under
Environmental Laws in effect on the Closing Date, but which subsequently become
subject to a remedial requirement due to a change in law, shall be Assumed
Liabilities, and all other conditions existing on or before Closing for which
Remedial Activities would have been required under Environmental Laws in effect
on the Closing Date (had all of the facts and circumstances been known) shall
be Excluded Liabilities.
IX.3 Tax Matters. (a) Seller and Purchaser shall cooperate fully
with each other and make available or cause to be made available to each other
in a timely fashion such Tax data, prior Tax returns and filings and other
information as may be reasonably required for the preparation by Purchaser or
Seller of any Tax returns, elections, consents or certificates required to be
prepared and filed by Purchaser or Seller and any audit or other examination by
any taxing authority, or judicial or administrative proceeding relating to
liability for Taxes. Purchaser and Seller will each retain and provide to the
other party all records and other information which may be relevant to any such
Tax return, audit or examination, proceeding or determination, and will each
provide the other party with any final determination of any such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Tax return of the other party for any period. Each of Purchaser
and Seller will retain copies of all Tax returns, supporting work schedules and
other records relating to Tax periods or portions thereof ending prior to or on
the Closing Date.
(b Notwithstanding the provisions of Section 2.3(e) hereof (i)
any recording or other similar Taxes or fees imposed as a result of the sale of
the Owned Real Property to Purchaser pursuant to this Agreement shall be paid
by Purchaser and (ii) any sales, transfer, use or other similar Taxes or fees
imposed as a result of the sale of the Business to Purchaser pursuant to this
Agreement shall be paid by Seller. At the Closing, Seller and Purchaser shall
deliver to each other such properly completed resale exemption certificates and
other similar certificates or instruments as are necessary to claim available
exemptions from the payment of sales, transfer, use or other similar Taxes
under applicable law.
IX.4 Mail Received After Closing. (a) Following the Closing,
Purchaser may receive and open all mail and other communications addressed to
Seller and deal with the contents thereof in its discretion to the extent that
such mail relates to the Business; provided that Purchaser shall have no right
to deal with the contents of any mail or other communication to the extent that
the same are not in respect of the Assets or the Business and Purchaser shall
promptly notify Seller as to the receipt thereof and make appropriate
arrangements to deliver such materials promptly to Seller.
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(b Following the Closing, Seller shall promptly notify Purchaser
of all mail and other communications relating solely to the Business addressed
to Seller and received by Seller, and shall make appropriate arrangements to
deliver such materials promptly to Purchaser.
ARTICLE X
MISCELLANEOUS
X.1 Termination. This Agreement may be terminated: (a) by the
written agreement of Seller and Purchaser; (b) by either Seller or Purchaser if
there shall be in effect a non-appealable order of a court of competent
jurisdiction permanently prohibiting the consummation of the transactions
contemplated hereby; (c) by either Seller or Purchaser if the Closing shall not
have occurred on or before July 31, 1999 (it being understood that the parties
intend to use their reasonable good faith efforts to have the Closing occur by
July 15, 1999); and (d) by Purchaser if there is a material occurrence of an
event described in Sections 6.6 (g) or 6.6 (i) or a material change in any
schedule pursuant to Section 10.14 for which the Purchaser has withheld consent
and such consent was not unreasonably withheld. Upon any termination of this
Agreement pursuant to this Section 10.1, no party hereto shall thereafter have
any further liability or obligation hereunder, other than for liabilities to
the extent arising from a willful breach of this Agreement prior to the date of
such termination.
X.2 Survival of Representations and Warranties. The respective
representations and warranties made by Seller and Purchaser in this Agreement
(including those made in the Exhibits and Schedules hereto) or in any Ancillary
Agreement shall not be deemed waived or otherwise affected by any investigation
made by any party hereto. Each and every such representation and warranty of
Seller and Purchaser shall expire with, and be terminated and extinguished on,
the first anniversary of the Closing Date (other than in respect of the
representations and warranties set forth in (i) Sections 4.9. 4.13 and 4.18,
which shall survive for a period of three (3) years after the Closing Date or
(ii) Sections 4.2, 4.4, 4.5 or 5.2, which shall survive for a period equal to
the applicable statute of limitations) or the termination of this Agreement
pursuant to Section 10.1 hereof or otherwise.
X.3 Assignment. Neither this Agreement nor any right or
obligation hereunder or part hereof may be assigned by any party hereto without
the prior written consent of the other party hereto (and any attempt to do so
will be void). Notwithstanding the foregoing, (i) Purchaser hereby acknowledges
and agrees that Seller may collaterally assign its rights, title and interest
to any payments under this Agreement to Citibank, N.A., as collateral agent
pursuant to the Seller Credit Agreement, or to any successor collateral agent
thereunder (Citibank, N.A., in such capacity, or any such successor being the
"Collateral Agent"), and Purchaser hereby consents to such assignment and (ii)
Seller hereby acknowledges and agrees that Purchaser may collaterally assign
its rights, title and interest to any payments under this Agreement to any
financial institution providing financing to Purchaser in connection with the
transactions contemplated by this Agreement. Furthermore, Purchaser hereby
acknowledges and agrees that upon receipt of written notice from the Collateral
Agent that an "Event of Default" has occurred pursuant to the Seller Credit
Agreement, Purchaser will tender any payments due under this Agreement to the
Collateral Agent in accordance with the instructions set forth in such notice;
provided, however, in the event that
35
<PAGE> 41
Purchaser tenders payment to Seller, such payment shall be a complete discharge
of Purchaser's obligation to the Collateral Agent and Purchaser shall
thereafter have no further liability to the Collateral Agent with respect to
such payment.
X.4 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by either party to
the other shall be in writing and shall be deemed to have been duly given if
delivered by hand or sent by facsimile (with confirmation by facsimile answer
back) or mailed by certified or registered mail, postage prepaid, return
receipt requested (such mailed notice to be effective on the date such receipt
is acknowledged), as follows:
If to Seller, addressed to:
JPS Industries, Inc.
555 N. Pleasantburg Drive, Suite 202
Greenville, South Carolina 29607
Attention: John Sanders, Chief Financial Officer
Facsimile No.: (864) 271-9939
With a copy to:
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree Street
Atlanta, GA 30308-3242
Attention: Lizanne Thomas, Esq.
Facsimile No.: (404) 581-8330
If to Purchaser, addressed to:
Belding Hausman Incorporated
70 West 36th Street
Fifth Floor
New York, New York 10018
Attention: Nancy Zarin, President CEO
Facsimile No: (212) 239-8696
With a copy to:
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attention: Richard F. Dahlson, Esq.
Facsimile No: (214) 953-5822
36
<PAGE> 42
or to such other place with such other copies as either party may designate as
to itself by written notice to the others.
X.5 Choice of Law. The Agreement shall be construed and
interpreted, and the rights of the parties determined, in accordance with the
laws of the State of Delaware (without reference to the choice of law
provisions of Delaware law).
X.6 Entire Agreement; Amendments and Waivers. This Agreement and
the Ancillary Agreements, together with all Exhibits and Schedules hereto and
thereto, constitute the entire Agreement among the parties pertaining to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with
respect to the subject matter hereof. No supplement, modification or waiver of
this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided. No act, delay or omission or course of dealing on
the part of either party in exercising any right, power or remedy under this
Agreement or at law or in equity shall operate as a waiver thereof or otherwise
prejudice any of such party's rights, powers and remedies. All remedies,
whether at law or in equity, shall be cumulative and the election of any one or
more shall not constitute a waiver of the right to pursue other available
remedies.
X.7 Multiple Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
X.8 Expenses. Except as otherwise specified herein, each party
hereto shall pay its own legal, accounting, out-of-pocket and other expenses
incident to this Agreement; provided, however, with respect to costs, fees or
expenses paid in connection with transferring Permits or obtaining new Permits
to enable Purchaser to operate and continue to operate the Business, such costs
shall be borne solely by Purchaser.
X.9 Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument and, in lieu of any such provision held
to be invalid, illegal or unenforceable, the parties shall agree to amend the
Agreement to include a similar provision that is valid, legal and enforceable.
X.10 Titles. The titles, captions or headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
X.11 Confidential Transaction Information. The parties acknowledge
that the transactions described herein are of a confidential nature and shall
not be disclosed except as provided herein or as required by law, regulations,
legal process or stock exchange rules. Neither
37
<PAGE> 43
Seller, Purchaser nor their respective Affiliates shall make any public
disclosure of the specific terms of this Agreement without the prior written
consent of the other parties hereto, except as required by law or stock
exchange rules or to bankers, attorneys, accountants and other professional
advisors. In connection with the performance of obligations hereunder, each
party acknowledges that it will have access to confidential information
relating to the other parties. Each party hereto shall treat such information
as confidential, preserve the confidentiality thereof and not duplicate or
disclose such information in connection with the transactions contemplated
hereby, except to advisors, lenders, consultants and affiliates who also agree
to treat such information as confidential. Seller, at a time and in a manner
which it reasonably determines and after prior notice to and consultation with
Purchaser, may notify employees, unions, bargaining agents and the public at
large of the fact of the subject transaction.
X.12 Third Parties. Except as set forth in Section 10.3 hereof,
nothing expressed or implied herein is intended or shall be construed to confer
upon or give to any person or entity other than the parties hereto, and their
successors or permitted assigns, any rights or remedies under or by reason of
this Agreement (but in no event shall any of the Employees have any such
rights).
X.13 Neutral Construction. All of the parties to this Agreement
were represented by counsel, or had the opportunity to consult with counsel. No
party may rely on any drafts of this Agreement in any interpretation of this
Agreement. Each party to this Agreement has reviewed this Agreement and has
participated in its drafting and, accordingly, no party shall attempt to invoke
the normal rule of construction to the effect that ambiguities are to be
resolved against the drafting party in any interpretation of this Agreement.
X.14 Revisions to Certain Schedules. Notwithstanding anything to
the contrary in this Agreement, Seller may revise the schedules to this
Agreement (or the schedules to any exhibit to this Agreement) to reflect
operations of the Business in the ordinary course of business, as contemplated
by this Agreement, subject to the consent of Purchaser, which consent may not
be unreasonably withheld. Seller shall deliver to Purchaser any such revised
schedules prior to the Closing Date.
[SIGNATURE PAGE FOLLOWS]
38
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, in multiple originals, all as of the day and year
first above written.
JPS CONVERTER AND INDUSTRIAL CORP.
By /s/ John Sanders
---------------------------------------
Name: John Sanders
Title: Chief Financial Officer
BELDING HAUSMAN INCORPORATED
By /s/ Nancy Zarin
---------------------------------------
Name: Nancy Zarin
Title: President and CEO
39
<PAGE> 1
EXHIBIT 10.3
ASSET PURCHASE AGREEMENT
Between
CHIQUOLA FABRICS, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
"BUYER"
JPS CONVERTER & INDUSTRIAL CORP.,
A DELAWARE CORPORATION
"COMPANY"
JPS TEXTILE GROUP, INC.,
A DELAWARE CORPORATION,
THE SOLE SHAREHOLDER OF THE COMPANY
REGARDING THE SALE OF THE COMPANY'S
COTTON COMMERCIAL PRODUCTS SEGMENT
AND THE BORDEN PLANT IN KINGSPORT, TENNESSEE
DATED AS OF JUNE 24, 1999
<PAGE> 2
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
1. PURCHASE AND SALE OF ASSETS.......................................................................... 1
1.1 Definition of "Business"................................................................ 1
1.2 Assets to be Transferred................................................................ 2
1.3 Excluded Assets......................................................................... 3
2. ASSUMPTION OF LIABILITIES............................................................................ 4
2.1 Liabilities to be Assumed............................................................... 4
2.2 Liabilities Not to be Assumed........................................................... 5
3. PURCHASE PRICE -PAYMENT.............................................................................. 6
3.1 Purchase Price.......................................................................... 6
3.2 Illustration of Purchase Price Calculation Methodology.................................. 6
3.3 Payment of Purchase Price............................................................... 6
3.4 Determination of Net Asset Value........................................................ 7
3.5 Prorations.............................................................................. 9
3.6 Other Payments and Adjustments.......................................................... 9
3.7 Allocation of Purchase Price............................................................ 10
4. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDER............................................ 10
4.1 Corporate............................................................................... 10
4.2 Authority............................................................................... 11
4.3 No Violation............................................................................ 11
4.4 Financial Statements.................................................................... 11
4.5 Tax Matters............................................................................. 12
4.6 Inventory............................................................................... 12
4.7 Absence of Certain Changes.............................................................. 12
4.8 Absence of Undisclosed Liabilities...................................................... 13
4.9 No Litigation........................................................................... 14
4.10 Compliance With Laws and Orders......................................................... 14
4.11 Title to and Condition of Properties.................................................... 16
4.12 Insurance............................................................................... 17
4.13 Contracts and Commitments............................................................... 18
4.14 Labor Matters........................................................................... 19
4.15 Employee Benefit Plans.................................................................. 19
4.16 Employment Compensation................................................................. 21
4.17 Trade Rights............................................................................ 21
4.18 Major Customers and Suppliers........................................................... 21
4.19 Product Warranty and Product Liability.................................................. 22
4.20 Affiliates' Relationships to Company.................................................... 22
4.21 No Brokers or Finders................................................................... 22
4.22 Year 2000............................................................................... 22
4.23 Disclosure.............................................................................. 23
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
5. REPRESENTATIONS AND WARRANTIES OF BUYER.............................................................. 23
5.1 Corporate............................................................................... 23
5.2 Authority............................................................................... 23
5.3 No Brokers or Finders................................................................... 23
5.4 No Violation............................................................................ 23
5.5 No Litigation........................................................................... 24
5.6 Disclosure.............................................................................. 24
6. EMPLOYEES -EMPLOYEE BENEFITS......................................................................... 24
6.1 Affected Employees...................................................................... 24
6.2 Retained Responsibilities............................................................... 24
6.3 Payroll Tax............................................................................. 25
6.4 Termination Benefits.................................................................... 25
6.5 Employee Benefit Plans.................................................................. 25
6.6 Comparable Benefits..................................................................... 25
7. OTHER MATTERS........................................................................................ 25
7.1 Title Insurance......................................................................... 25
7.2 Surveys................................................................................. 26
7.3 Environmental Audits.................................................................... 26
7.4 Noncompetition; Confidentiality......................................................... 26
7.5 Use of Name............................................................................. 28
7.6 Sales Tax Matters....................................................................... 28
7.7 Unemployment Compensation............................................................... 28
7.8 Access to Information and Records....................................................... 28
7.9 Bulk Sales Compliance................................................................... 29
7.10 Company's Bill and Hold Inventory....................................................... 29
7.11 General Administrative Services......................................................... 29
7.12 Software................................................................................ 29
8. FURTHER COVENANTS OF COMPANY......................................................................... 30
8.1 Conduct of Business Pending the Closing................................................. 30
8.2 Consents................................................................................ 31
8.3 Other Action............................................................................ 31
8.4 Disclosure.............................................................................. 31
9. FURTHER COVENANTS OF THE BUYER....................................................................... 31
9.1 Assistance with Accounts Receivable..................................................... 31
9.2 Financial Records....................................................................... 31
9.3 No Distributions........................................................................ 31
10. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.......................................................... 32
10.1 Representations and Warranties True on the Closing Date................................. 32
10.2 Compliance With Agreement............................................................... 32
10.3 Absence of Litigation................................................................... 32
10.4 Consents and Approvals.................................................................. 32
10.5 Title Insurance......................................................................... 33
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
10.6 Estoppel Certificates................................................................... 33
10.7 Section 1445 Affidavit.................................................................. 33
10.8 Environmental Audit..................................................................... 33
10.9 Financing............................................................................... 33
10.10 Due Diligence Investigation............................................................. 33
11. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS........................................................ 34
11.1 Representations and Warranties True on the Closing Date................................. 34
11.2 Compliance With Agreement............................................................... 34
11.3 Absence of Litigation................................................................... 34
11.4 Satisfaction with Buyer's Financial Condition...........................................
12. INDEMNIFICATION...................................................................................... 34
12.1 By Company and Shareholder.............................................................. 34
12.2 By Buyer................................................................................ 35
12.3 Indemnification of Third-Party Claims................................................... 35
12.4 Payment................................................................................. 36
12.5 Indemnification for Environmental Matters............................................... 36
12.6 Limitations on Indemnification.......................................................... 37
12.7 No Waiver............................................................................... 38
13. CLOSING ........................................................................................ 38
13.1 Documents to be Delivered by Company.................................................... 38
13.2 Documents to be Delivered by Buyer...................................................... 39
14. TERMINATION.......................................................................................... 40
14.1 Right of Termination Without Breach..................................................... 40
14.2 Termination for Breach.................................................................. 40
15. RESOLUTION OF DISPUTES............................................................................... 41
15.1 Arbitration............................................................................. 41
15.2 Arbitrators............................................................................. 41
15.3 Procedures; No Appeal................................................................... 41
15.4 Authority............................................................................... 41
15.5 Entry of Judgment....................................................................... 42
15.6 Confidentiality......................................................................... 42
15.7 Continued Performance................................................................... 42
15.8 Tolling................................................................................. 42
16. MISCELLANEOUS........................................................................................ 42
16.1 Disclosure Schedule..................................................................... 42
16.2 Further Assurance....................................................................... 42
16.3 Disclosures and Announcements........................................................... 43
16.4 Assignment; Parties in Interest......................................................... 43
16.5 Law Governing Agreement................................................................. 43
16.6 Amendment and Modification.............................................................. 43
16.7 Notice.................................................................................. 43
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
16.8 Expenses................................................................................ 45
16.9 Entire Agreement........................................................................ 46
16.10 Counterparts............................................................................ 46
16.11 Headings................................................................................ 46
16.12 Glossary of Terms....................................................................... 46
</TABLE>
iv
<PAGE> 6
DISCLOSURE SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 1.2(a) - Owned Real Property
Schedule 1.2(b) - Leased Real Property
Schedule 1.2(e) - Personal Property Leases
Schedule 1.1(a) - Contracts
Schedule 2.1(a) - Assumed Contracts (Not Otherwise Scheduled)
Schedule 3.2 Methodology for Purchase Price Calculation
Schedule 3.4(a) Accounting Policies
Schedule 3.6 Accounting Policies Relating to Accruals for Vacation
Pay, Etc.
Schedule 3.7 - Purchase Price Allocation
Schedule 4.1(c) - Foreign Corporation Qualification
Schedule 4.3 - Violation, Conflict, Default
Schedule 4.4(a) - Company Financial Statements
Schedule 4.4(b) - Business Financial Statements
Schedule 4.6. - Inventory Off Premises
Schedule 4.7. - Certain Changes
Schedule 4.8. - Off-Balance Sheet Liabilities
Schedule 4.9. - Litigation Matters
Schedule 4.10(a) - Non-Compliance with Laws
Schedule 4.10(b) - Licenses and Permits
Schedule 4.10(c) - Environmental Matters (Exceptions to Representations)
Schedule 4.11(a)(i) - Pre-Closing Liens
Schedule 4.11(a)(ii) - Post-Closing Liens
Schedule 4.12. - Insurance
Schedule 4.13(d) Sales Commitments
Schedule 4.13(f) - Collective Bargaining Agreements
Schedule 4.13(i) - Material Contracts
Schedule 4.14. - Labor Matters
Schedule 4.15(a) - Employee Plans/Agreements
Schedule 4.16. - Employment Compensation
Schedule 4.17. - Trade Rights
Schedule 4.18(a) - Major Customers
Schedule 4.18(b) - Major Suppliers
Schedule 4.18(c) - Dealers and Distributors
Schedule 4.19. - Product Warranty, Warranty Expense and Liability Claims
Schedule 4.20(a) - Contracts with Affiliates
Schedule 6.1 Affected Employees
Schedule 6.4 Severance Policy
Schedule 7.11 - General Administrative Services
</TABLE>
v
<PAGE> 7
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement") dated June 24, 1999, by
and among Chiquola Fabrics, LLC, a Delaware limited liability company
("Buyer"), JPS Converter and Industrial Corp., a Delaware corporation
("Company") and JPS Textile Group, Inc., a Delaware corporation
("Shareholder").
RECITALS
A. The Company, through its "Cotton Commercial Products Segment,"
manufactures predominantly lightweight 100% cotton fabrics, polyester/cotton
blended fabrics and fabrics containing textured, continuous filament fillings
for industrial-end use, which products are sold primarily to the
apparel/pocketing, tapes, bookcloth, general industrial and high-pressure
laminate end-use markets (collectively, the "Cotton Commercial Products
Segment").
B. The Company conducts the Business at a manufacturing plant and
related facilities located on approximately 35 acres in Kingsport, Tennessee,
which is sometimes referred to as the "Borden Plant" (the "Facilities").
C. The Shareholder directly or indirectly owns all the
outstanding Stock of the Company.
D. The Buyer is a newly-formed Delaware limited liability
company.
E. Buyer desires to purchase from Company, and Company desires to
sell, and Shareholder desires to cause the Company to sell to Buyer, the
business and substantially all of the property and assets of the Company's
Cotton Commercial Products Segment and the Facilities, as set forth herein.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree
as follows.
1. PURCHASE AND SALE OF ASSETS
1.1 Definition of "Business".
As used herein, "Business" shall mean the manufacture, production,
marketing, distribution, exploitation, sale and related research and
development by Company and its affiliates of the Cotton Commercial Products
Segment. Such term shall include, without limitation and except as otherwise
specifically provided herein, all operations carried on by or primarily related
to products associated with the Cotton Commercial Products Segment which
includes all products manufactured by, and all assets located at, the
Facilities on the date hereof. Where the context allows, the term "Business"
shall also mean the Company insofar as the operation of the Business, as above
defined, is concerned.
<PAGE> 8
1.2 Assets to be Transferred.
Subject to the terms and conditions of this Agreement, on the
Closing Date (as hereinafter defined) Company shall sell, transfer, convey,
assign, and deliver to Buyer, and Buyer shall purchase and accept, all of the
business, rights, claims and assets (of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued,
contingent or otherwise, and wherever situated) of Company, used, held for use
or acquired or developed for use in the Business, or developed in the course of
conducting the Business by persons employed in the Business (collectively the
"Purchased Assets"). The Purchased Assets shall include, but not be limited to,
all the following assets or rights of the Company related to the Business, to
the extent so used, held, acquired or developed solely for the Business, except
for the Excluded Assets as set forth in Section 1.3 hereof:
(a) Owned Real Property. All of the real property,
including fixtures, buildings, improvements and all appurtenant
rights, owned by Company described on Schedule 1.2(a) (the "Owned Real
Property").
(b) Leased Real Property. All of the leases of real
property with respect to real property leased by Company (the "Real
Property Leases") described on Schedule 1.2(b) with respect to the
real property described thereon (the "Leased Real Property").
(c) Personal Property. All machinery, equipment,
vehicles, tools, supplies, spare parts, furniture and all other
personal property used solely in the Business and not included in
inventory (other than personal property leased pursuant to Personal
Property Leases as hereinafter defined).
(d) Inventory. All inventories of raw materials,
work-in-process and finished goods (including all such in transit) and
miscellaneous inventory on the Closing Date, together with related
packaging materials relating solely to the Business (collectively the
"Inventory").
(e) Personal Property Leases. All leases of machinery,
equipment, vehicles, furniture and other personal property leased by
Company (the "Personal Property Leases") described in Schedule 1.2(e).
(f) Trade Rights. All the Company's interest in the trade
name "Borden Plant" and "Borden Brand" and related "Borden" trademarks
and service marks. Notwithstanding the foregoing, Company makes no
representations or warranties regarding its legal rights or claims to
the "Borden" name.
(g) Contracts. All the Company's rights in, to and under
Company's vendor and customer supply agreements, including cotton
agreements which are specifically identified, and up to the amount
identified in Schedule 1.1(a), purchase orders, sales agreements or
sales orders relating solely to the Business (hereinafter
"Contracts"). To the extent that any Contract for which assignment to
Buyer is provided herein is not assignable without the consent of
another party, this Agreement shall not constitute an assignment or an
attempted assignment thereof if such assignment or attempted
assignment would constitute a breach thereof. Company and Buyer agree
to use their
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<PAGE> 9
reasonable, good faith efforts to obtain the consent of such other
party to the assignment of any such Contract to Buyer in all cases in
which such consent is or may be required for such assignment. If any
such consent shall not be obtained, Company agrees to cooperate with
Buyer in any reasonable arrangement designed to provide for Buyer the
benefits intended to be assigned to Buyer under the relevant Contract,
including enforcement at the cost and for the account of Buyer of any
and all rights of Company against the other party thereto arising out
of the breach or cancellation thereof by such other party or
otherwise. If and to the extent that such arrangement cannot be made,
Buyer, upon notice to Company, shall have no obligation pursuant to
Section 2.1 or otherwise with respect to any such Contract and any
such Contract shall not be deemed to be a Purchased Asset hereunder.
Nothing herein shall be deemed to require Company to make any payments
to obtain consents or approval from any third party to the assignment
by the Company to Buyer.
(h) Computer Software. All computer source codes, programs
and other software, including all machine readable code, printed
listings of code, documentation and related property and information
of Company, contingent upon Buyer negotiating, funding and making
satisfactory licensing arrangements with software providers; provided
Company shall not be responsible for the maintenance of such software,
provided Company makes no representations or warranties regarding Year
2000 readiness or system performance.
(i) Records and Files. All records, files, invoices,
customer lists, blueprints, specifications, designs, drawings,
accounting records, business records, operating data and other data,
relating in each case solely to the Business.
(j) Licenses; Permits. All licenses, permits and
approvals, to the extent transferable, relating solely to the
Business.
(k) Business Name. The name "Borden Plant," and all rights
to use or allow others to use such name, provided Company makes no
representation or warranty regarding its rights to such name.
(l) General Intangibles. All causes of action arising out
of occurrences before or after the Closing, and other intangible
rights and assets relating solely to the Business.
1.3 Excluded Assets.
Company shall retain all of its rights, claims and assets not
being acquired by Buyer hereunder not described in Section 1.1. Without
limiting the generality of the foregoing, and any contrary provisions of
Section 1.1 notwithstanding, Company shall not sell, transfer, assign, convey
or deliver to Buyer, and Buyer will not purchase or accept the following assets
of Company:
(a) Cash and Cash Equivalents. All cash and cash
equivalents, other than petty cash balances at facilities of the
Business.
-3-
<PAGE> 10
(b) Consideration. The consideration delivered by Buyer to
Company pursuant to this Agreement.
(c) Tax Credits and Records. Federal, state and local
income and franchise tax credits and tax refund claims and associated
returns and records. Buyer shall have reasonable access to such
records and may make excerpts therefrom and copies thereof.
(d) Notes and Accounts Receivable. Notes, drafts, accounts
receivable or other obligations for the payment of money.
(e) JPS Name. The name "JPS" and all rights to use or
allow others to use such name and all derivations thereof.
(f) Insurance Policies. The Company's insurance policies
covering the Business and any related pre-paid premiums.
2. ASSUMPTION OF LIABILITIES
2.1 Liabilities to be Assumed.
As used in this Agreement, the term "Liability" shall mean
and include any direct or indirect indebtedness, guaranty, endorsement, claim,
loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, liquidated or unliquidated,
secured or unsecured. Subject to the terms and conditions of this Agreement, on
the Closing Date, Buyer shall assume and agree to perform and discharge the
following, and only the following, Liabilities of Company (collectively the
"Assumed Liabilities"):
(a) Certain Contractual Liabilities. Company's
Liabilities arising from and after the Closing Date under and pursuant
to the following Contracts:
(i) All Contracts described in any of Schedules
1.2(b), 1.2(e), and 1.2(g).
(ii) Every Contract entered into by Company in the
ordinary course of its business which does not involve
consideration or other expenditure by Company payable or
performable on or after the Closing Date in excess of $10,000
or performance over a period of more than three months.
The Contracts described in subsections 2.1(a)(i) and (ii)
above are hereinafter collectively described as the "Assumed Contracts" and set
forth on Schedule 2.1(a).
(b) Liabilities Under Permits and Licenses. Company's
Liabilities arising from and after the Closing Date under any permits
or licenses listed in Schedule 4.10(b) and assigned to Buyer at the
Closing.
(c) Liabilities Regarding Transferred Employees.
Liabilities assumed by Buyer pursuant to Sections 6.3, 6.4 and 6.6.
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<PAGE> 11
2.2 Liabilities Not to be Assumed.
Except as and to the extent specifically set forth in Section
2.1, Buyer is not assuming any Liabilities of Company and all such Liabilities
shall be and remain the responsibility of Company. The Company shall pay, and
the Shareholder shall cause the Company to pay, all Liabilities not
specifically assumed by Buyer. The Company and the Shareholder shall indemnify,
defend and hold the Buyer harmless against all costs and expenses (including,
without limitation, attorneys' fees, penalties and interest) arising from all
Company's Liabilities not specifically assumed by Buyer. Notwithstanding the
provisions of Section 2.1, Buyer is not assuming and Company shall not be
deemed to have transferred to Buyer the following Liabilities of Company:
(a) Taxes Arising from Transaction. Any taxes applicable
to, imposed upon or arising out of the sale or transfer of the
Purchased Assets to Buyer and the other transactions contemplated by
this Agreement, including but not limited to any income, transfer,
sales, use, gross receipts or documentary stamp taxes.
(b) Income and Franchise Taxes. Any Liability of Company
for Federal income taxes and any state or local income, profit or
franchise taxes (and any penalties or interest due on account
thereof).
(c) Insured Claims. Any Liability of Company insured
against, to the extent such Liability is or will be paid by an
insurer.
(d) Product Liability. Any Liability of Company arising
out of or in any way relating to or resulting from any product
manufactured, assembled or sold prior to the Closing Date (including
any Liability of Company for claims made for injury to person, damage
to property or other damage, whether made in product liability, tort,
breach of warranty or otherwise). The Company shall be responsible for
managing and defending product liability claims; provided, however,
Buyer shall reasonably and in good faith cooperate with Company in
such matters.
(e) Litigation Matters. Any Liability with respect to any
action, suit, proceeding, arbitration, investigation or inquiry,
whether civil, criminal or administrative ("Litigation") whether or
not described in Schedule 4.94.9 arising from or related to the
Business prior to the Closing Date.
(f) Infringements. Any Liability to a third party for
infringement of such third party's Trade Rights.
(g) Transaction Expenses. All Liabilities incurred by
Company in connection with this Agreement and the transactions
contemplated herein.
(h) Liability For Breach. Liabilities of Company for any
breach or failure to perform any of Company's covenants and agreements
contained in, or made pursuant to, this Agreement, or, prior to the
Closing, any other contract, whether or not assumed hereunder,
including breach arising from assignment of contracts hereunder
without consent of third parties.
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(i) Liabilities to Affiliates. Except as specified herein,
Liabilities of Company to its present or former Affiliates.
(j) Employee Benefits. All wages, benefits, retirement
plan contributions (including, without limitation, obligations
relating to the Shareholder's defined benefit plan and post-retirement
benefit plan) and all other obligations owed to employees arising
prior to the Closing Date.
(k) Violation of Laws or Orders. Liabilities of Company
for any violation of or failure to comply with any statute, law,
ordinance, rule or regulation (collectively, "Laws") or any order,
writ, injunction, judgment, plan or decree (collectively, "Orders") of
any court, arbitrator, department, commission, board, bureau, agency,
authority, instrumentality or other body, whether federal, state,
municipal, foreign or other (collectively, "Government Entities").
3. PURCHASE PRICE - PAYMENT
3.1 Purchase Price.
The purchase price (the "Purchase Price") for the Purchased
Assets shall be (i) the Net Asset Value (as hereinafter defined), (ii) minus
Two Million, Five Hundred Thousand Dollars ($2,500,000).
3.2 Illustration of Purchase Price Calculation Methodology.
Schedule 3.2 correctly illustrates the methodology which
shall be used to calculate the Purchase Price based on assumed numbers.
3.3 Payment of Purchase Price.
The Purchase Price shall be paid by Buyer as follows:
(a) Promissory Note. At the Closing, Buyer shall deliver
to Seller a promissory note (the "Note") in the original principal
amount of One Million Dollars ($1,000,000), payable interest only,
paid quarterly in the first year; and equal, consecutive, quarterly
payments of principal and interest in the second and third year,
bearing interest at the rate paid to Buyer's primary lender (fixed at
Closing based on estimated rate), which note shall be subordinated to
the Buyer's debt to its lender, pursuant to subordination terms
reasonably acceptable to Company and the lender.
(b) Cash to Company. At the Closing, Buyer shall deliver
to Company the Purchase Price less One Million Dollars ($1,000,000) in
cash.
(c) Adjustment of Final Cash Purchase Price. On or before
the fifth business day following the final determination of the Final
Business Closing Balance Sheet (as hereinafter defined) (such date
being hereinafter referred to as the "Settlement Date"), either (i)
Company shall pay to Buyer the amount, if any, by which the sum of the
amounts paid to the Company on the Closing Date exceeds the Purchase
Price as
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determined according to the Net Asset Value according to the Final Business
Closing Balance Sheet; or (ii) Buyer shall pay to Company the amount, if any,
by which the Purchase Price, as determined according to the Net Asset Value
according to the Final Business Closing Balance Sheet, exceeds the amount paid
to the Company on the Closing Date.
(d) Method of Payment. All payments under this Section 3.3 shall be
made in the form of certified or bank cashier's check payable to the order of
the recipient or, at the recipient's option, by wire transfer of immediately
available funds to an account designated by the recipient not less than 48
hours prior to the time for payment specified herein.
3.4 Determination of Net Asset Value.
(a) Definition of "Business Balance Sheet". The term "Business
Balance Sheet" as used herein shall mean a schedule in the form of a corporate
balance sheet showing the net book values of the assets being acquired by Buyer
at Closing set forth in the Recent Business Balance Sheet (as defined in
Section 4.4), but reflecting only the property, plant and equipment (net of
depreciation) and inventory (net of appropriate reserves) constituting
Purchased Assets. Each Business Balance Sheet shall be prepared in accordance
with the books and records of the Company and accounting policies (including
existing inventory reserve policy) of the Company and shall be in form and
level of detail as nearly as possible identical to, and in its accounting
principles and policies consistent in every respect with, the Recent Business
Balance Sheet, and accompanied by schedules setting forth in reasonable detail
all Purchased Assets included therein. Each Business Balance Sheet or its
accompanying schedules shall contain sufficient detail of the Purchased Assets
for the determination of Net Asset Value as defined (a) below. Schedule 3.4(a)
contains a statement of certain of the Company's accounting policies related to
plant, property and equipment and related depreciation and inventory and
related reserves.
(b) Definition of "Net Asset Value." The term "Net Asset Value"
shall mean the dollar amount of the tangible net book value of property, plant
and equipment (net of depreciation) and inventory (net of appropriate
reserves), both as reflected in the Final Closing Business Balance Sheet or
Estimated Closing Business Balance Sheet, as applicable. Only property, plant
and equipment (net of depreciation) and inventory (net of appropriate reserves)
shall be considered in the calculation of Net Asset Value.
(c) Estimated Closing Business Balance Sheet. For purposes of
determining the Net Asset Value and the Purchase Price payable by the Buyer at
the Closing, not less than two (2) business days prior to the Closing Date,
Company shall, in consultation with the Buyer, prepare and deliver to Buyer a
Business Balance Sheet as of the close of business on the business day
immediately prior to the Closing Date (hereinafter the "Effective Time") which
shall represent Company's reasonable estimate of the Final Closing Business
Balance Sheet. In the event Buyer shall object to any of the information set
forth on the Estimated Closing Business Balance Sheet or accompanying schedules
as presented by Company, the parties shall negotiate in good faith and agree on
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appropriate adjustments to the end that such balance sheet and accompanying
schedules reflect a reasonable estimate of the Final Closing Business Balance
Sheet and Net Asset Value (the estimated balance sheet as finally determined by
the parties pursuant to this subsection is herein referred to as the "Estimated
Closing Business Balance Sheet"). In connection with the determination of the
Estimated Closing Business Balance Sheet, Company shall provide to Buyer such
information and detail as Buyer shall reasonably request.
(d) Final Closing Business Balance Sheet. The Final Closing
Business Balance Sheet shall be prepared by Company as of the Effective Time
and reviewed by the Company's independent accountants ("Company's Accountants")
shall be prepared as follows:
(i) Within 15 days after the Closing Date, Company shall
deliver to Buyer a Business Balance Sheet as of the Effective Time.
Such Final Closing Business Balance Sheet shall be accompanied by
detailed schedules of the Purchased Assets and Assumed Liabilities and
by a report (1) setting forth the amount of Net Asset Value (as
defined above) reflected in the balance sheet, (2) stating that (a)
the examination of the balance sheet has been made in accordance with
generally accepted auditing standards and (b) the balance sheet has
been prepared in accordance the books and records and accounting
policies (including existing inventory reserve policy) of the Company,
on a basis consistent with the accounting principles theretofore
followed by Company, except as otherwise provided in this Section 3.4,
and (3) setting forth the amount of any adjustment to the Purchase
Price to be paid and by whom pursuant to Section 3.3(c) hereof.
(ii) Within 30 days following the delivery of the Business
Balance Sheet referred to in (i) above, Buyer or the Buyer's
independent accountants ("Buyer's Accountants") may object to any of
the information contained in said balance sheet or accompanying
schedules which could affect the necessity or amount of any payment by
Buyer or Company pursuant to Section 3.3(c) hereof. Any such objection
shall be made in writing and shall state Buyer's determination of the
amount of the Net Asset Value.
In the event of a dispute or disagreement relating to
the balance sheet or schedules which Buyer and Company are unable to
resolve, either party may elect to have all such disputes or
disagreements resolved by an accounting firm of nationally recognized
standing (the "Third Accounting Firm") to be mutually selected by
Company and Buyer or, if no agreement is reached, by Company's
Accountants and Buyer's Accountants. The Third Accounting Firm shall
make a resolution of the Business Balance Sheet as of the Effective
Time and the calculation of Net Asset Value, which shall be final and
binding for purposes of this Article 3. The Third Accounting Firm
shall be instructed to use every reasonable effort to perform its
services within 15 days of submission of the balance sheet to it and,
in any case, as soon as practicable after such submission.
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<PAGE> 15
(iii) Company agrees to permit Buyer, Buyer's
Accountants, and their respective representatives, during
normal business hours, to have reasonable access to, and to
examine and make copies of, all books and records of Company,
including but not limited to the books, records, schedules,
work papers and audit programs of Company and Company's
Accountants and access to representatives of Company's
Accountants, which documents and access are necessary to
review the Business Balance Sheet delivered by Company in
accordance with Section 3.4(d)(i). In addition, Buyer's
Accountants shall have the opportunity to observe the taking
of the inventory in connection with the preparation of such
balance sheet.
3.5 Prorations.
The following prorations relating to the Purchased Assets
will be made as of the Effective Time, with Company liable to the extent such
items relate to any time period up to and including the Effective Time and
Buyer liable to the extent such items relate to periods subsequent to the
Effective Time. Except as otherwise specifically provided herein, the net
amount of all such prorations will be settled and paid on the Settlement Date
as provided by Section 3.3(c) hereof:
(a) Personal property taxes, real estate taxes and
assessments and other taxes, if any, on or with respect to the
Purchased Assets; provided that special assessments for work actually
commenced or levied prior to the date of this Agreement shall be paid
by Company.
(b) Rents, additional rents, taxes and other items payable
by Company under any lease, license, permit, contract or other
agreement or arrangement to be assigned to or assumed by Buyer.
(c) The amount of rents, taxes and charges for sewer,
water, fuel, telephone, electricity and other utilities; provided that
if practicable, meter readings shall be taken at the Effective Time
and the respective obligations of the parties determined in accordance
with such readings.
(d) All other prepaid items normally adjusted in
connection with similar transactions.
If the actual expense of any of the above items for the
billing period within which the Effective Time falls is not known on the
Settlement Date, the proration shall be made based on the expense incurred in
the previous billing period, for expenses billed less often than quarterly, and
on the average expense incurred in the preceding three billing periods, for
expenses billed quarterly or more often. Company agrees to furnish Buyer with
such documents and other records as shall be reasonably requested in order to
confirm all proration calculations.
3.6 Other Payments and Adjustments.
The amount of wages and other remuneration due in respect of
periods to and including the Effective Time to employees of the Business and
the amount of bonuses due to
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<PAGE> 16
such employees for all such periods will be paid by Company directly to such
employees. Buyer shall receive an estimated credit at Closing and a "true-up"
credit on the Settlement Date in an amount equal to all vacation, holiday and
sick pay unpaid by Company as of the Effective Time accrued by the Company on
its books and records pursuant to Company policy. Schedule 3.6 describes
certain relevant Company accounting policies related to accruals for vacation
pay.
3.7 Allocation of Purchase Price.
The aggregate Purchase Price (including the assumption by
Buyer of the Assumed Liabilities) shall be allocated among the Purchased Assets
for tax purposes in accordance with Schedule 3.7. Company and Buyer will follow
and use such allocation in all tax returns, filings or other related reports
made by them to any governmental agencies. To the extent that disclosures of
this allocation are required to be made by the parties to the Internal Revenue
Service ("IRS") under the provisions of Section 1060 of the Internal Revenue
Code of 1986, as amended (the "Code") or any regulations thereunder, Buyer and
Company will disclose such reports to the other prior to filing with the IRS.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDER
Company and Shareholder, jointly and severally, make the following
representations and warranties to Buyer, each of which is true and correct on
the date hereof, shall remain true and correct to and including the Closing
Date, shall be unaffected by any investigation heretofore or hereafter made by
Buyer, or any knowledge of Buyer other than as specifically disclosed in the
Disclosure Schedule delivered to Buyer at the time of the execution of this
Agreement, and shall survive the Closing of the transactions provided for
herein.
4.1 Corporate.
(a) Organization. Company and Shareholder are corporations
duly organized, validly existing and in good standing under the laws
of the State of Delaware.
(b) Corporate Power. Company and Shareholder have all
requisite corporate power and authority to own, operate and lease its
properties, to carry on its business as and where such is now being
conducted, to enter into this Agreement and the other documents and
instruments to be executed and delivered by Company and Shareholder
pursuant hereto and to carry out the transactions contemplated hereby
and thereby.
(c) Qualification. Company is duly licensed or qualified
to do business as a foreign corporation, and is in good standing, in
each jurisdiction wherein the character of its properties which are
Purchased Assets or the nature of the Business makes such licensing or
qualification necessary, except where the failure to so qualify would
not be material to the Business; such jurisdictions are listed in
Schedule 4.1(c).
(d) No Subsidiaries. No portion of the Business is
conducted by the Company by means of any subsidiary or any other
interest in any corporation, partnership or other entity.
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4.2 Authority.
The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Company and
Shareholder pursuant hereto and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Company and Shareholder; provided that the Company shall obtain
Board of Directors approval prior to Closing. No other or further corporate act
or proceeding on the part of Company or the Shareholder is necessary to
authorize this Agreement or the other documents and instruments to be executed
and delivered by Company and/or the Shareholder pursuant hereto or the
consummation of the transactions contemplated hereby and thereby, and it is not
intended that Company be dissolved or its remaining operations terminated. This
Agreement constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by Company and Shareholder pursuant
hereto will constitute, valid binding agreements of Company and Shareholder,
enforceable in accordance with their respective terms, except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
4.3 No Violation.
Except as set forth on Schedule 4.3, neither the execution
and delivery of this Agreement or the other documents and instruments to be
executed and delivered by Company pursuant hereto, nor the consummation by
Company of the transactions contemplated hereby and thereby (a) will violate
any applicable Law or Order, (b) except for applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), will
require any authorization, consent, approval, exemption or other action by or
notice to any Government Entity (including, without limitation, under any
"plant-closing" or similar law), or (c) subject to obtaining the consents
referred to in Schedule 4.3, will violate or conflict with, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any Lien
(as defined in Section 4.11(a), upon any of the assets of Company under, any
term or provision of the Certificate of Incorporation or By-laws of Company or
of any material contract, commitment, understanding, arrangement, agreement or
restriction of any kind or character to which Company is a party or by which
Company or any of its assets or properties may be bound or affected.
4.4 Financial Statements.
(a) Shareholder Financial Statements. Included as Schedule
4.4(a) are true and complete copies of the Shareholder's most recent
10-K containing annual financial statements for the year ending
November 3, 1998 and 10-Qs for the first and second quarters of 1999.
The financial statements contained in such 10K and 10Qs fairly present
the assets, liabilities and financial position and the results of
operations of the Shareholder as of the dates and for the periods
indicated and are prepared in accordance with generally accepted
accounting principles, consistently applied; provided the financial
statements contained in the 10-Qs are subject to normal year-end
adjustments and do not contain footnotes as may be required by
generally accepted accounting principles.
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(b) Business Financial Statements. Included as Schedule
4.4(b) are financial statements of the Business (the "Business
Financial Statements"), consisting of (i) unaudited balance sheets of
the Business as of November 1, 1997 and November 3, 1998, and as of
June 5, 1999, (the latter such balance sheet sometimes referred to
herein as "Recent Business Balance Sheet"), and (ii) unaudited
statements of income and expense of the Business for the years ended
November 1, 1997 and November 3, 1998, and the six month period ended
June 5, 1999. All such financial statements are true and correct in
all material respects and are prepared from and are consistent in all
material respects with, such financial reports as have been prepared
and used by the Company in the ordinary course in managing the
Business and measuring and reporting its operating results and have
been prepared in accordance with the books and records of the Company
and accounting policies of the Company.
(c) Business Balance Sheets. Each Business Balance Sheet
shall be in accordance with the specifications set forth in Article 3.
The Final Closing Business Balance Sheet shall be true, complete and
accurate.
4.5 Tax Matters.
Shareholder, Company and all other members of their
affiliated group of corporations that file a consolidated tax return, have paid
or will pay all federal, state, foreign, county, local and other income, ad
valorem, excise, profits, franchise, occupation, property, payroll, sales, use,
gross receipts and other taxes (and any interest and penalties) and assessments
when due where the failure to pay such taxes could have an adverse impact on
the Purchased Assets or the Business.
4.6 Inventory.
All inventory of the Business reflected on the Recent
Business Balance Sheet consists of a quality and quantity usable and saleable
in the ordinary course of business. All inventory purchased or produced since
the date of such balance sheet consists of a quality and quantity usable and
saleable in the ordinary course of business. Except as set forth in Schedule
4.6, all inventory of the Business is located on premises at the Facility. All
work-in-process contained in inventory constitutes items in process of
production pursuant to the ordinary course of business for regular customers of
the Business. All work-in-process is of a quality ordinarily produced.
4.7 Absence of Certain Changes.
Except as and to the extent set forth in Schedule 4.7, since
the date of the Recent Business Balance Sheet there has not been:
(a) No Adverse Change. Any adverse change in the
financial condition, assets, Liabilities, business, prospects or
operations of the Business;
(b) No Damage. Any material loss, damage or destruction,
whether covered by insurance or not, in connection with or affecting
the Business or the Purchased Assets;
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<PAGE> 19
(c) No Increase in Compensation. Any increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of Company who is employed in the Business or whose
compensation is reflected in the Business Financial Statements
(including, without limitation, any increase or change pursuant to any
bonus, pension, profit sharing, retirement or other plan or
commitment), or any bonus or other employee benefit granted, made or
accrued, except in the ordinary course of business;
(d) No Labor Disputes. Any labor dispute or disturbance,
other than routine individual grievances which are not material to the
financial condition or results of operations of the Business;
(e) No Commitments. Any commitment or transaction by
Company in connection with or affecting the Business (including,
without limitation, any borrowing or capital expenditure) other than
in the ordinary course of business consistent with past practice;
(f) No Disposition of Property. Any sale, lease or other
transfer or disposition of any properties or assets of Company that
are Purchased Assets (or would have been Purchased Assets had no sale,
lease, transfer or disposition occurred), except for the sale of
inventory items in the ordinary course of business;
(g) No Liens. Any material Lien made on any of the
properties or assets of Company that are Purchased Assets (or would
become Purchased Assets if not sold, leased, transferred or disposed
of prior to the Closing Date);
(h) No Amendment of Contracts. Any entering into,
amendment or termination by Company of any contract in connection with
or affecting the Business, or any waiver of material rights
thereunder, other than in the ordinary course of business;
(i) Credit. Any grant of credit to any customer of the
Business or distributor of its products on terms or in amounts more
favorable than those which have been extended to such customer or
distributor in the past, any other change in the terms of any credit
heretofore extended, or any other change of Company's policies or
practices with respect to the granting of credit in connection with
the Business; or
(j) No Unusual Events. Any other material event or
condition not in the ordinary course of Company's operation of the
Business.
4.8 Absence of Undisclosed Liabilities.
Except as and to the extent specifically disclosed in the
Recent Balance Sheet, or in Schedule 4.8, Company does not have any
Liabilities, other than commercial liabilities and obligations incurred since
the date of the Recent Balance Sheet in the ordinary course of business and
consistent with past practice and none of which has or will have a material
adverse effect on the Business, financial condition or results of operations of
Company. Except as and to the extent described in the Recent Balance Sheet or
in Schedule 4.8, Company has no knowledge of any basis for the assertion
against Company of any liability which may give rise to Liabilities,
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except commercial liabilities and obligations incurred in the ordinary course
of Company's business and consistent with past practice.
4.9 No Litigation.
Except as set forth in Schedule 4.9 there is no Litigation
pending or to the Company's or Shareholder's knowledge threatened against
Company or the Shareholder that involves the Business or the Purchased Assets,
nor does Company know of any basis for any Litigation. Except as set forth in
Schedule 4.9, neither Company, the Purchased Assets nor the Assumed Liabilities
is subject to any Order of any Government Entity with respect to the Business.
4.10 Compliance With Laws and Orders.
(a) Compliance. Except as set forth in Schedule 4.10(a),
to the best knowledge of the Company and the Shareholder, the Business
(including each and all of its operations, practices, properties and
assets) is in material compliance with all applicable Laws and Orders,
including, without limitation, those applicable to discrimination in
employment, occupational safety and health, trade practices,
competition and pricing, product warranties, zoning, building and
sanitation, employment, retirement and labor relations, product
advertising and the Environmental Laws as hereinafter defined, except
where non-compliance would not have an adverse effect on the Business.
Except as set forth in Schedule 4.10(a), Company has not received
notice of any violation or alleged violation of, and is subject to no
Liability for past or continuing violation of, any Laws or Orders with
respect to the operations of the Business. All reports and returns
required to be filed by Company with any Government Entity have been
filed, and to the best of the Company's and the Shareholder's
knowledge were accurate and complete when filed. Without limiting the
generality of the foregoing:
(i) To the best of the Company's and the
Shareholder's knowledge, the operation of the Business as it
is now conducted does not, nor does any condition existing at
any of the Facilities, in any manner constitute a nuisance or
other tortious interference with the rights of any person or
persons in such a manner as to give rise to or constitute the
grounds for a suit, action, claim or demand by any such
person or persons seeking compensation or damages or seeking
to restrain, enjoin or otherwise prohibit any aspect of the
conduct of the Business or the manner in which it is now
conducted.
(ii) Company has made all required payments to its
unemployment compensation reserve accounts with the
appropriate governmental departments of the states where it
is required to maintain such accounts with respect to the
operations of the Business, and each of such accounts has a
positive balance.
(iii) Company has delivered to Buyer copies of all
reports of Company for the past five (5) years required under
the federal Occupational Safety and Health Act of 1970, as
amended, and under all other applicable health and safety
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laws and regulations, with respect to the operations of the
Business. The deficiencies, if any, noted on such reports
have been corrected.
(b) Licenses and Permits. To the best of the Company's and
Shareholder's knowledge, Company has all material licenses, permits,
approvals, authorizations and consents of all Government Entities and
all certification organizations required for the conduct of the
Business and the operation of the Facilities. All such licenses,
permits, approvals, authorizations and consents are described in
Schedule 4.10(b), are in full force and effect and are assignable to
Buyer in accordance with the terms hereof. Except as set forth in
Schedule 4.10(b), the Business (including its operations, properties
and assets) is and has been in compliance with all such permits and
licenses, approvals, authorizations and consents.
(c) Environmental Matters. The applicable Laws relating to
pollution or protection of the environment, including Laws relating to
emissions, discharges, generation, storage, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic,
hazardous or petroleum or petroleum-based substances or wastes
("Waste") into the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata)
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Waste
including, without limitation, the Clean Water Act, the Clean Air Act,
the Resource Conservation and Recovery Act, the Toxic Substances
Control Act and the Comprehensive Environmental Response Compensation
Liability Act ("CERCLA"), as amended, and their state and local
counterparts are herein collectively referred to as the "Environmental
Laws". Without limiting the generality of the foregoing provisions of
this Section 4.10, the Business is in full compliance with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulations, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder. Except as set forth in Schedule
4.10(c), there is no Litigation nor any demand, claim, hearing or
notice of violation pending or to the Company's and the Shareholder's
knowledge threatened against Company with respect to the Business
relating in any way to the Environmental Laws or any Order issued,
entered, promulgated or approved thereunder. Except as set forth in
Schedule 4.10(c), there are no past or present (or, to the best of
Company's knowledge, future) events, conditions, circumstances,
activities, practices, incidents, actions, omissions or plans which
may interfere with or prevent compliance or continued compliance with
the Environmental Laws or with any Order issued, entered, promulgated
or approved thereunder, or which may give rise to any Liability,
including, without limitation, Liability under CERCLA or similar state
or local Laws, or otherwise form the basis of any Litigation, hearing,
notice of violation, study or investigation, based on or related to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release
or threatened release into the environment, of any Waste.
(Notwithstanding the foregoing, Company shall not be deemed to have
breached the representations contained in this subsection as a result
of minor or technical violations of Environmental Laws which do not
have an adverse effect on the Purchased Assets or the
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<PAGE> 22
Business and which do not cost more than $10,000 in the aggregate to
correct and remediate.
4.11 Title to and Condition of Properties.
(a) Marketable Title. Company has good, and with respect
to the real property, marketable, title to all the Purchased Assets,
free and clear of all mortgages, liens (statutory or otherwise),
security interests, claims, pledges, licenses, equities, options,
conditional sales contracts, assessments, levies, easements,
covenants, reservations, restrictions, rights-of-way, exceptions,
limitations, charges or encumbrances of any nature whatsoever
(collectively, "Liens") except those described in Schedule 4.11(a)(i);
and, in the case of real property, Liens for taxes not yet due or
which are being contested in good faith by appropriate proceedings
(and which have been sufficiently accrued or reserved against in the
Recent Business Balance Sheet), municipal and zoning ordinances and
easements for public utilities, none of which interfere with the use
of the property as currently utilized and minor imperfections of
title, if any, none of which (individually or in the aggregate) is
substantial in amount, or materially detracts from the value or
impairs the use of the real property or impairs the operations of the
Business ("Permitted Real Property Liens"). Except as set forth in
Schedule 4.11(a)(ii), none of the Purchased Assets are subject to any
restrictions with respect to the transferability thereof. At Closing,
Buyer will receive good, and in the case of the real property,
marketable title to all the Purchased Assets, free and clear of all
Liens of any nature whatsoever except those described in Schedule
4.11(a)(ii) and Permitted Real Property Liens.
(b) Condition. All tangible assets (real and personal)
constituting Purchased Assets hereunder are in good operating
condition and repair; provided that the equipment not currently in
operation as part of the ordinary course of business shall not be
subject to this subsection. All buildings, plants and other structures
owned or otherwise utilized by Company in operating the Business are
in good condition and repair and have no structural defects or defects
affecting the plumbing, electrical, sewerage, or heating, ventilating
or air conditioning systems.
(c) Real Property. Schedules 1.2(a) and 1.2(b) set forth
all real property owned, used or occupied by Company solely for
operation of the Business (the "Real Property"), including a
description of all land, and all encumbrances, easements or rights of
way of record (or, if not of record, of which Company has notice or
knowledge) granted on or appurtenant to or otherwise affecting such
Real Property, the zoning classification thereof, and all plants,
buildings or other structures located thereon. Schedule 1.2(b) also
sets forth, with respect to each parcel of Real Property which is
leased, the material terms of such lease. There are now in full force
and effect duly issued certificates of occupancy permitting the Real
Property and improvements located thereon to be legally used and
occupied as the same are now constituted. All of the Real Property has
permanent rights of access to dedicated public highways. To the best
of the Company's and the Shareholder's knowledge, no fact or condition
exists which would prohibit or adversely affect the ordinary rights of
access to and from the Real Property from and to the existing highways
and roads and there is no pending or threatened
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<PAGE> 23
restriction or denial, governmental or otherwise, upon such ingress
and egress. There is not (i) to the best of the Company's and the
Shareholder's knowledge, any claim of adverse possession or
prescriptive rights involving any of the Real Property, (ii) any
structure located on any Real Property which encroaches on or over the
boundaries of neighboring or adjacent properties or (iii) any
structure of any other party which encroaches on or over the
boundaries of any of such Real Property. None of the Real Property is
located in a flood plain, flood hazard area, wetland or lakeshore
erosion area within the meaning of any Law. No public improvements
have been commenced and to Company's knowledge none are planned which
in either case may result in special assessments against or otherwise
materially adversely affect any Real Property. To the best of the
Company's and the Shareholder's knowledge, no portion of any of the
Real Property has been used as a landfill or for storage or landfill
of hazardous or toxic materials. Company has no notice or knowledge of
any (i) planned or proposed increase in assessed valuations of any
Real Property, (ii) Order requiring repair, alteration, or correction
of any existing condition affecting any Real Property or the systems
or improvements thereat, (iii) condition or defect which could give
rise to an order of the sort referred to in "(ii)" above, or (iv)
underground storage tanks, or any structural, mechanical, or other
defects of material significance affecting any Real Property or the
systems or improvements thereat (including, but not limited to,
inadequacy for normal use of mechanical systems or disposal or water
systems at or serving the Real Property).
(d) No Condemnation or Expropriation. Neither the whole
nor any portion of the Purchased Assets is subject to any Order to be
sold or is being condemned, expropriated or otherwise taken by any
Government Entity with or without payment of compensation therefor,
nor to the best of Company's knowledge has any such condemnation,
expropriation or taking been proposed.
(e) No Certified Survey Map Required. No certified survey
map or other state, municipal, or other governmental approval
regarding the division, platting, or mapping of real estate is
required as a prerequisite to the conveyance by Company to Buyer (or
as a prerequisite to the recording of any conveyance document) of any
Owned Real Property or Leased Real Property pursuant to the terms
hereof.
4.12 Insurance.
Set forth in Schedule 4.12 is a complete and accurate list
and description of all policies of fire, liability, product liability, workers
compensation, health and other forms of insurance presently in effect with
respect to the Business or the Purchased Assets, true and correct copies of
which have heretofore been delivered to Buyer. Schedule 4.12 indicates each
policy as to which (a) the coverage limit has been reached or (b) the total
incurred losses to date equal 75% or more of the coverage limit. No notice of
cancellation or termination has been received with respect to any such policy.
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4.13 Contracts and Commitments.
(a) Real Property Leases. Except as set forth in Schedule
1.2(b), Company has no leases of real property used or held solely for
use in connection with the Business or the Purchased Assets.
(b) Personal Property Leases. Except as set forth in
Schedule 1.2(e), Company has no leases of personal property used or
held solely for use in connection with the Business or the Purchased
Assets involving consideration or other expenditure in excess of Ten
Thousand Dollars ($10,000) or involving performance over a period of
more than twelve (12) months.
(c) Purchase Commitments. Other than contracts for the
purchase of raw materials, Company has no purchase commitments for
inventory items or supplies in connection with the Business in excess
of three (3) months normal usage, or which are at an excessive price.
(d) Sales Commitments. Schedule 4.13(d) contains all of
the sales contracts or commitments to customers or distributors in
connection with or affecting the Business or the Purchased Assets
which are more than $10,000.
(e) Powers of Attorney. The Company has not given a power
of attorney, which is currently in effect, to any person, firm or
corporation for any purpose whatsoever in connection with or affecting
the Business or the Purchased Assets.
(f) Collective Bargaining Agreements. Except as set forth
in Schedule 4.13(f), Company is not a party to any collective
bargaining agreements with any unions, guilds, shop committees or
other collective bargaining groups representing or purporting to
represent employees of the Business. Copies of any such agreements
have heretofore been delivered to Buyer.
(g) Contracts Subject to Renegotiation. Company is not a
party to any contract with any governmental body which is subject to
renegotiation in connection with or affecting the Business or the
Purchased Assets.
(h) Burdensome or Restrictive Agreements. Company is not a
party to nor is it bound by any agreement, deed, lease or other
instrument in connection with or affecting the Business or the
Purchased Assets which is so burdensome as to materially affect or
impair the operation of the Business. Without limiting the generality
of the foregoing, Company is not a party to nor is it bound by any
such agreement requiring Company to assign any interest in any trade
secret or proprietary information constituting Purchased Assets
hereunder, or prohibiting or restricting Company in its operation of
the Business from competing in any business or geographical area or
soliciting customers or otherwise restricting it from carrying on the
Business anywhere in the world.
(i) Other Material Contracts. Company has no lease,
license, contract or commitment of any nature affecting the Business
which is individually material to the
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<PAGE> 25
operations of the Business, except as explicitly described in Schedule
4.13(i) or in any other Schedule.
(j) No Default. Company is not in default under any lease,
license, contract or commitment in its operation of the Business, nor
has any event or omission occurred which through the passage of time
or the giving of notice, or both, would constitute a default
thereunder or cause the acceleration of any of Company's obligations
or result in the creation of any Lien on any Purchased Asset. To the
Company's and Shareholder's knowledge, no third party is in default
under any such lease, contract or commitment to which Company is a
party, nor has any event or omission occurred which, through the
passage of time or the giving of notice, or both, would constitute a
default thereunder, or give rise to an automatic termination, or the
right of discretionary termination thereof.
4.14 Labor Matters.
Except as set forth in Schedule 4.14, within the last five
years Company has not experienced any labor disputes, union organization
attempts or any work stoppage due to labor disagreements in connection with the
Business. In its operation of the Business, except to the extent set forth in
Schedule 4.14, (a) Company is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice; (b) there is
no unfair labor practice charge or complaint against Company pending or
threatened; (c) there is no labor strike, dispute, request for representation,
slowdown or stoppage actually pending or threatened against or affecting
Company nor any secondary boycott with respect to products of the Business; (d)
no question concerning representation has been raised or is threatened
respecting the employees of the Business; (e) no grievance which might have a
material adverse effect on the Business, nor any arbitration proceeding arising
out of or under collective bargaining agreements, is pending and no such claim
therefor exists; and (f) there are no administrative charges or court
complaints against Company concerning alleged employment discrimination or
other employment related matters pending or threatened before the U.S. Equal
Employment Opportunity Commission or any Government Entity.
4.15 Employee Benefit Plans.
(a) Disclosure. Schedule 4.15(a) sets forth all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other
bonus, medical, dental, life, accident insurance, benefit, employee
welfare, disability, group insurance, stock purchase, stock option,
stock appreciation, stock bonus, executive or deferred compensation,
hospitalization and other similar fringe or employee benefit plans,
programs and arrangements, and any employment or consulting contracts,
"golden parachutes," collective bargaining agreements, severance
agreements or plans, vacation and sick leave plans, programs,
arrangements and policies, including, without limitation, all
"employee benefit plans" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), which
are provided to, for the benefit of, or relate to, any persons
employed by Company in its operation of the Business ("Business
Employees") and summaries of the benefits provided thereunder. The
items described in the foregoing sentence are hereinafter sometimes
referred to collectively as "Employee
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Plans/Agreements," and each individually as an "Employee
Plan/Agreement." Each of the Employee Plans/Agreements is identified
on Schedule 4.15(a), to the extent applicable, as one or more of the
following: an "employee pension benefit plan" (as defined in Section
3(2) of ERISA), a "defined benefit plan" (as defined in Section 414 of
the Code), an "employee welfare benefit plan" (as defined in Section
3(1) of ERISA), and/or as a plan intended to be qualified under
Section 401 of the Code. No Employee Plan/Agreement is a
"multiemployer plan" (as defined in Section 4001 of ERISA), and
Company has never contributed nor been obligated to contribute to any
such multi-employer plan.
(b) Terminations, Proceedings, Penalties, etc. With
respect to each employee benefit plan (including, without limitation,
the Employee Plans/Agreements) that is subject to the provisions of
Title IV of ERISA and with respect to which the Company or any of its
assets may, directly or indirectly, be subject to any Liability,
contingent or otherwise, or the imposition of any Lien (whether by
reason of the complete or partial termination of any such plan, the
funded status of any such plan, any "complete withdrawal" (as defined
in Section 4203 of ERISA) or "partial withdrawal" (as defined in
Section 4205 of ERISA) by any person from any such plan, or
otherwise):
(i) no such plan has been terminated so as to
subject, directly or indirectly, any Purchased Assets to any
Liability or the imposition of any Lien under Title IV of
ERISA;
(ii) no proceeding has been initiated or threatened
by any person (including the Pension Benefit Guaranty
Corporation ("PBGC")) to terminate any such plan;
(iii) no condition or event currently exists or
currently is expected to occur that could subject, directly
or indirectly, any Purchased Assets to any Liability or the
imposition of any Lien under Title IV of ERISA, whether to
the PBGC or to any other person or otherwise on account of
the termination of any such plan;
(iv) none of the Purchased Assets or the Business
shall be subject to any Lien or Liability at any time after
the Closing Date as a result of such plans or of ERISA; and
(v) no such plan is a multiemployer plan or a plan
described in Section 4064 of ERISA.
(c) Payments and Compliance. With respect to each Employee
Plan/Agreement, (i) all payments due from Company to date have been
made and all amounts properly accrued to date as Liabilities of
Company which have not been paid have been properly recorded on the
books of Company and are reflected in the Recent Balance Sheet; (ii)
Company has complied with, and each such Employee Plan/Agreement
conforms in form and operation to, all applicable laws and
regulations, including but not limited to ERISA and the Code, in all
material respects and all reports
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and information relating to such Employee Plan/Agreement required to
be filed with any governmental entity have been timely filed; (iii)
all reports and information relating to the savings, investment and
profit sharing plan of Shareholder required to be disclosed or
provided to participants or their beneficiaries have been timely
disclosed or provided, where the failure to disclose or provide may
have an adverse effect on Buyer or the Purchased Assets and Business
after the Closing Date; (iv) each such Employee Plan/Agreement which
is intended to qualify under Section 401 of the Code has received a
favorable determination letter from the Internal Revenue Service with
respect to such qualification, its related trust has been determined
to be exempt from taxation under Section 501(a) of the Code, and
nothing has occurred since the date of such letter that has or is
likely to adversely affect such qualification or exemption; and (v)
there are no actions, suits or claims pending (other than routine
claims for benefits) or threatened with respect to such Employee
Plan/Agreement or against the assets of such Employee Plan/Agreement.
(d) Future Commitments. Company has no announced plan or
legally binding commitment to create any additional Employee
Plans/Agreements or to amend or modify any existing Employee
Plan/Agreement.
4.16 Employment Compensation.
Schedule 4.16 contains a true and correct list of all
Business Employees to whom the Company is paying compensation, including
bonuses and incentives, at an annual rate in excess of Ten Thousand Dollars
($10,000) for services rendered or otherwise; and in the case of salaried
employees such list identifies the current annual rate of compensation for each
employee and in the case of hourly or commission employees identifies certain
reasonable ranges of rates and the number of employees falling within each such
range.
4.17 Trade Rights.
In order to conduct the Business, as such is currently being
conducted, Company does not require any trademarks, service marks, copyrights,
patents or similar intellectual property rights that it does not already have.
Company is not infringing any such rights of another in the operation of the
Business.
4.18 Major Customers and Suppliers.
(a) Major Customers. Schedule 4.18(a) contains a list of
the 25 largest customers, including distributors, of the Business for
each of the two (2) most recent years (determined on the basis of the
total dollar amount of net sales) showing the total dollar amount of
net sales to each such customer during each such year. No present
customer listed on Schedule 4.18(a) which has made a purchase from the
Business in 1999 has advised the Company or Shareholder that it plans
to cease purchasing from the Business.
(b) Major Suppliers. Schedule 4.18(b) contains a list of
the 25 largest suppliers to the Business for each of the two (2) most
recent years (determined on the basis of the total dollar amount of
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purchases) showing the total dollar amount of purchases from each such
supplier during each such year. No present customer listed on Schedule
4.18(b) which has supplied the Business in 1999 has advised the
Company or Shareholder that it plans to cease supplying the Business.
(c) Dealers and Distributors. Schedule 4.18(c) contains a
list by product line of all sales representatives, dealers,
distributors and franchisees of the Business, together with
representative copies of all sales representative, dealer, distributor
and franchise contracts and policy statements, and a description of
all substantial modifications or exceptions.
4.19 Product Warranty and Product Liability.
Except as set forth in Schedule 4.19, there is no claim
against or liability of the Company on account of product warranties or with
respect to the manufacture, sale or rental or defective products of the
Business, and to the knowledge of the Company and the Shareholder, there is no
basis for any such claim on account of defective products manufactured, sold or
rented by the Company in respect of the Business since January 1, 1998 that is
not fully covered by insurance.
4.20 Affiliates' Relationships to Company.
(a) Contracts With Affiliates. All leases, contracts,
agreements or other arrangements concerning the Business between
Company and any Affiliate or between the Business and other business
units of the Company are described on Schedule 4.20(a).
(b) No Adverse Interests. No Affiliate has any direct or
indirect interest in (i) any entity which does business with Company
in connection with the operation of, or is competitive with, the
Business, or (ii) any property, asset or right which is used by
Company in the conduct of the Business.
4.21 No Brokers or Finders.
Neither Company nor any of its directors, officers,
employees, shareholders or agents have retained, employed or used any broker or
finder in connection with the transaction provided for herein or in connection
with the negotiation thereof.
4.22 Year 2000.
Except as expressly provided otherwise herein, neither
Company nor Shareholder make any warranty whatsoever regarding whether any
computer software is Year 2000 Compliant. As used herein, "Year 2000 Compliant"
shall mean (i) consistently and accurately handling and processing date and
time information and date with values before, during and after January 1, 2000,
(ii) functioning accurately and in accordance with its specifications without
interruptions, abnormal endings, degradation, change in operation or other
impact resulting from processing date or time date with values before, during
and after January 1, 2000, and (iii) responding to and processing two-digit
date input in a way that resolves any ambiguity as to century.
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4.23 Disclosure.
All statements and information contained in any certificate,
instrument, Disclosure Schedule or document delivered by or on behalf of
Company at Closing shall be deemed representations and warranties by Company.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Company
and Shareholder, each of which is true and correct on the date hereof, shall
remain true and correct to and including the Closing Date, shall be unaffected
by any investigation heretofore or hereafter made by Company or any notice to
Company, and shall survive the Closing of the transactions provided for herein.
5.1 Corporate.
(a) Organization. Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws
of the State of Delaware.
(b) Corporate Power. Buyer has all requisite corporate
power to enter into this Agreement and the other documents and
instruments to be executed and delivered by Buyer and to carry out the
transactions contemplated hereby and thereby.
5.2 Authority.
The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Buyer pursuant hereto
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by the members and Board of Directors of Buyer. No other
corporate act or proceeding on the part of Buyer or its members is necessary to
authorize this Agreement or the other documents and instruments to be executed
and delivered by Buyer pursuant hereto or the consummation of the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the other documents and instruments to be executed and delivered
by Buyer pursuant hereto will constitute, valid and binding agreements of
Buyer, enforceable in accordance with their respective terms, except as such
may be limited by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and by general equitable principles.
5.3 No Brokers or Finders.
Neither Buyer nor any of its members, directors, officers,
employees or agents have retained, employed or used any broker or finder in
connection with the transaction provided for herein or in connection with the
negotiation thereof.
5.4 No Violation.
To the knowledge of Buyer, neither the execution and delivery
of this Agreement or the other documents and instruments to be executed and
delivered by Buyer pursuant hereto, nor the consummation by Buyer of the
transactions contemplated hereby and thereby (a) will
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<PAGE> 30
violate any application Law or Order, (b) will require any authorization,
consent, approval, exempt or other action by or notice to any Governmental
Entity, or (c) will violate or conflict with, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or will result in the termination of, or accelerate the performance
required by, or result in the creation of any Lien upon any of the assets of
Buyer under any term or provision of the organization or governing documents of
Buyer or of any material contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which Buyer is a party or
by which Buyer or any of its assets or properties may be bound or affected.
5.5 No Litigation
There is no Litigation against Buyer which (i) seeks to
restrain or enjoin the consummation of the transactions contemplated hereby or
(ii) if adversely determined, could be expected to have a material adverse
effect on the ability of Buyer to consummate the transactions contemplated by
this Agreement. Buyer is not in violation of any term of any judgment, decree,
injunction or order outstanding against it, which violation could reasonably be
expected to have a material adverse effect on the ability of Buyer to
consummate the transactions contemplated hereby.
5.6 Disclosure.
All statements and information contained in any certificate,
instrument or document delivered by or on behalf of Buyer shall be deemed
representations and warranties by Buyer.
6. EMPLOYEES - EMPLOYEE BENEFITS
6.1 Affected Employees.
"Affected Employees" shall mean the hourly and salaried
employees at the Facility listed on Schedule 6.1 and the marketing personnel of
the Business listed on Schedule 6.1.
6.2 Retained Responsibilities.
Company agrees to satisfy, or cause its insurance carriers to
satisfy, all claims for benefits, whether insured or otherwise (including, but
not limited to, workers' compensation, life insurance, medical and disability
programs), under Company's employee benefit programs brought by, or in respect
of, Affected Employees and other employees and former employees of the Company,
which claims arise out of events occurring on or prior to the Closing Date, in
accordance with the terms and conditions of such programs or applicable
workers' compensation statutes. The Company and Shareholder further agree to
pay and perform, or cause to be paid and performed, all retirement obligations
(including without limitation all obligations under the Shareholder's defined
benefit retirement plan) to Affected Employees and former employees of the
Company which accrued or related to employment prior to the Effective Time.
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6.3 Payroll Tax.
Company agrees, unless the parties agree otherwise, to make a
clean cut-off of payroll and payroll tax reporting with respect to the Affected
Employees paying over to the federal, state and city governments those amounts
respectively withheld or required to be withheld for periods ending on or prior
to the Effective Time. Company also agrees to issue, by the date prescribed by
IRS Regulations, Forms W-2 for wages paid through the Effective Time. Except as
set forth in this Agreement, Buyer shall be responsible for all payroll and
payroll tax obligations after the Effective Time for Affected Employees.
6.4 Termination Benefits.
Buyer shall be solely responsible for, and shall pay or cause
to be paid, severance payments and other termination benefits, if any, to
Affected Employees who may become entitled to such benefits by reason of any
events occurring after Closing. If any action on the part of Company prior to
the Closing, or if the sale to Buyer of the Business and the Purchased Assets
pursuant to this Agreement or the transactions contemplated hereby, or if the
failure by Buyer to hire as a permanent employee of Buyer any employee of
Company (except employees on "lay-off" status will remain in such status
post-Closing with Buyer), shall directly or indirectly result in any Liability
(i) for severance payments or termination benefits or (ii) by virtue of any
state, federal or local "plant-closing" or similar law, such Liability shall be
the sole responsibility of Buyer, and Buyer shall indemnify Company against
such Liability arising out of or resulting from any actions by Buyer for one
(1) year from closing. Notwithstanding the foregoing, Buyer shall have no
liability to pay severance to the two salespeople based in Company's office in
Greenville, South Carolina if the salespeople are offered positions with Buyer
and they decline employment or subsequently voluntarily resign from Buyer.
Company's severance policy is described on Schedule 6.4.
6.5 Employee Benefit Plans.
Within 90 days after the Closing Date, Company shall vest and
make non-forfeitable as of the Closing Date the interest of each Affected
Employee in each employee pension benefit plan or similar defined contribution
plan in accordance with the guidelines and procedures of such plans. The
Company and Shareholder shall remain responsible for, and shall cause to be
paid, all amounts due with respect to such plans.
6.6 Comparable Benefits.
Buyer will maintain benefits comparable in the aggregate to
the existing benefits for Company employees, except Buyer shall not provide
defined pension benefit plan, post-retirement benefit plan or similar plans.
7. OTHER MATTERS
7.1 Title Insurance.
Not less than two (2) days prior to the Closing, Company, at
its expense, shall provide to Buyer title insurance commitments, issued by a
title insurance company or companies
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reasonably satisfactory to Buyer, agreeing to issue to Buyer standard form
owner's (or lessee's, as the case may be) policies of title insurance with
respect to all Owned Real Property and Leased Real Property, together with a
copy of each document to which reference is made in such commitments. In the
case of Owned Real Property, such policies shall be standard ALTA Form 1990
owner's policies in the full amount of that portion of the Purchase Price
allocated respectively to each subject parcel of Owned Real Property under
Section 3.7 hereof, insuring good and marketable title thereto (expressly
including all easements and other appurtenances). In the case of Leased Real
Property, such policies shall be upon standard ALTA Form 1990 leasehold owner's
policies and in such amounts as such shall be reasonably acceptable to Buyer.
In either case, all policies shall insure title in full accordance with the
representations and warranties set forth herein and shall be subject only to
such conditions and exceptions as shall be reasonably acceptable to Buyer, and
shall contain such endorsements as Buyer shall reasonably request (including,
but not limited to, an endorsement over rights of creditors, if requested by
Buyer or Buyer's lender).
7.2 Surveys.
Not less than two (2) days prior to the Closing, Company, at
its expense, shall provide to Buyer surveys of all Owned Real Property and all
Leased Real Property prepared in accordance with ALTA/ASCM standards, each
dated no more than ninety (90) days prior to the Closing and each detailing the
legal description, the perimeter boundaries, all improvements located thereon,
all easements and encroachments affecting each such parcel of Owned Real
Property and such other matters as may be reasonably requested by Buyer or the
title insurance companies, each containing a surveyor certificate reasonably
acceptable to Buyer and the title insurance companies, and each prepared by a
registered land surveyor satisfactory to Buyer.
7.3 Environmental Audits.
Buyer will promptly retain a firm engaged in the regular
business of environmental engineering to conduct such environmental audits of
Company's operations and the real estate occupied by Company as Buyer in its
discretion shall consider necessary or appropriate.
7.4 Noncompetition; Confidentiality.
Subject to the Closing, and as an inducement to Buyer to
execute this Agreement and complete the transactions contemplated hereby, and
in order to preserve the goodwill associated with the Business, and in addition
to and not in limitation of any covenants contained in any agreement executed
and delivered pursuant to Section 1.1 hereof, Company hereby covenants and
agrees as follows:
(a) Covenant Not to Compete. For a period of three (3)
years from the Closing Date, Company and Shareholder will not,
directly or indirectly (and Shareholder will prohibit its subsidiaries
or Affiliates from):
(i) engage in, continue in or carry on any business
which competes with the Business or is substantially similar
thereto, including owning or
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controlling any financial interest in any corporation,
partnership, firm or other form of business organization
which is so engaged;
(ii) consult with, advise or assist in any way,
whether or not for consideration, any corporation,
partnership, firm or other business organization which is now
or becomes a competitor of Buyer in any aspect with respect
to the Business or Purchased Assets which Buyer is acquiring
hereunder, including, but not limited to, advertising or
otherwise endorsing the products of any such competitor;
soliciting customers or otherwise serving as an intermediary
for any such competitor; loaning money or rendering any other
form of financial assistance (except as may arise from
collection of accounts receivable of the Business) to or
engaging in any form of business transaction on other than an
arms' length basis with any such competitor;
(iii) offer employment to an Affected Employee,
without the prior written consent of Buyer; or
(iv) engage in any practice the purpose of which is
to evade the provisions of this covenant not to compete or to
commit any act which adversely affects the Business,
Purchased Assets or Assumed Liabilities ;
provided, however, that the foregoing shall not prohibit the ownership
of securities of corporations which are listed on a national
securities exchange or traded in the national over-the-counter market
in an amount which shall not exceed 5% of the outstanding shares of
any such corporation. The parties agree that the geographic scope of
this covenant not to compete shall extend to the entire United States
of America. The parties agree that Buyer may sell, assign or otherwise
transfer this covenant not to compete, in whole or in part, to any
person, corporation, firm or entity that purchases all or part of the
Business or the Purchased Assets. In the event a court of competent
jurisdiction determines that the provisions of this covenant not to
compete are excessively broad as to duration, geographical scope or
activity, it is expressly agreed that this covenant not to compete
shall be construed so that the remaining provisions shall not be
affected, but shall remain in full force and effect, and any such over
broad provisions shall be deemed, without further action on the part
of any person, to be modified, amended and/or limited, but only to the
extent necessary to render the same valid and enforceable in such
jurisdiction.
(b) Covenant of Confidentiality. Company shall not at any
time subsequent to the Closing, except as explicitly requested by
Buyer, (i) use for any purpose, (ii) disclose to any person, or (iii)
keep or make copies of documents, tapes, discs or programs containing,
any confidential information concerning the Business, the Purchased
Assets or the Assumed Liabilities. For purposes hereof, "confidential
information" shall mean and include, without limitation, all Trade
Rights which are Purchased Assets, all customer lists and customer
information of the Business, and all other information concerning the
processes, apparatus, equipment, packaging, products, marketing and
distribution methods of the Business, not previously disclosed to the
public directly by Company.
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<PAGE> 34
(c) Equitable Relief for Violations. Company agrees that
the provisions and restrictions contained in this Section 7.4 are
necessary to protect the legitimate continuing interests of Buyer in
acquiring the Business through the purchase of the Purchased Assets
and the assumption of the Assumed Liabilities, and that any violation
or breach of these provisions will result in irreparable injury to
Buyer for which a remedy at law would be inadequate and that, in
addition to any relief at law which may be available to Buyer for such
violation or breach and regardless of any other provision contained in
this Agreement, Buyer shall be entitled to injunctive and other
equitable relief as a court may grant after considering the intent of
this Section 7.4.
7.5 Use of Name.
Following the Closing, Company grants Buyer the royalty-free
right to use and to permit others to use the name "JPS", but only in connection
with the sale by Buyer of the products of the type previously manufactured and
sold by the Company prior to Closing to use up the packaging on hand at
Closing; provided, however, that Buyer agrees to use "rubber stamps" or
"labels" bearing Buyer's name on all correspondence and other printed material
to differentiate Buyer from Company, and provided further that all such rights
granted to the name "JPS" to Buyer hereunder shall terminate three (3) months
from the Closing Date. Buyer acknowledges that except for the limited right
granted by this Section, it has no right or interest in the name "JPS".
7.6 Sales Tax Matters.
At or prior to the Closing, Company shall obtain a sales tax
clearance certificate from the Tennessee Department of Revenue.
7.7 Unemployment Compensation.
Company shall, upon the request of Buyer, cooperate with
Buyer in any efforts by Buyer to obtain the transfer of Company's portion of
the unemployment compensation fund(s) applicable to Affected Employees, to the
extent Buyer elects to transfer and assume such amounts. In connection
therewith, Company will execute such documents as Buyer may reasonably request
in order to effectuate such transfer.
7.8 Access to Information and Records.
(a) Prior to Closing. During the period prior to the
Closing, Company shall give Buyer, its counsel, accountants and other
representatives (i) access during normal business hours to all of the
properties, books, records, contracts and documents of Company
relating to the Business or the Purchased Assets or Assumed
Liabilities for the purpose of such inspection, investigation and
testing as Buyer deems appropriate (and Company shall furnish or cause
to be furnished to Buyer and its representatives all information with
respect to the Business Buyer may request); (ii) access to employees,
agents and representatives of the Business for the purpose of such
meetings and communications as Buyer reasonably desires; and (iii)
with the prior consent of Company in each instance (which shall not be
unreasonably withheld), access to vendors,
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customers, manufacturers of its machinery and equipment, and others
having business dealings with the Business.
(b) After Closing. After the Closing, each party will
afford the other party, its counsel, accountants and other
representatives, during normal business hours, reasonable access to
the books, records and other data in such party's possession relating
directly or indirectly to the properties, liabilities or operations of
the Business, with respect to periods prior to the Closing, and the
right to make copies and extracts therefrom, to the extent that such
access may be reasonably required by the requesting party for any
proper business purpose. Each party agrees for a period extending six
years after the Closing not to destroy or otherwise dispose of any
such records without first offering in writing to surrender such
records to the other party, which party shall have ten (10) days after
such offer to agree in writing to take possession thereof.
7.9 Bulk Sales Compliance.
The parties waive compliance with any Bulk Sales Law. The
Company and the Shareholder will indemnify, defend and hold Buyer harmless
against any and all costs, expenses or Liabilities arising from failure to
comply with any Bulk Sales Law.
7.10 Company's Bill and Hold Inventory.
After closing, Buyer will warehouse Company's bill and hold
inventories existing at Closing, and service customer releases on a weekly
basis for 12 months.
7.11 General Administrative Services.
Company and Shareholder will provide Buyer with the general
and administrative transition services outlined on Schedule 7.11 at no cost for
a period of nine (9) months following Closing and at a cost of $30,000 per
month for the subsequent three (3) months (months 10-12), if required by Buyer.
The Company and Shareholder shall have no obligation to provide any such
general and administrative transition services following such twelve month
period. Notwithstanding any other provision in this Agreement waiving Company's
responsibility for Year 2000 Compliance and readiness, the Company's and
Shareholder's obligation to provide administrative support services shall
include the obligation to act reasonably and in good faith to provide reports
and compute information after January 1, 2000, and Company and Shareholder
shall make the same efforts to correct any Year 2000 problem as Shareholder
makes in its other business units.
7.12 Software.
Seller agrees to use its reasonable good faith efforts to
make its software available to Buyer at no cost (or payment to Company),
conditioned on Buyer negotiating, funding and making satisfactory arrangements
with software providers on licensing of software. Company and Shareholder make
no representation regarding, and shall have no liability with respect to, Year
2000 Compliance or Year 2000 readiness or system performance.
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8. FURTHER COVENANTS OF COMPANY
Company covenants and agrees as follows:
8.1 Conduct of Business Pending the Closing.
From the date hereof until the Closing, except as otherwise
approved in writing by the Buyer:
(a) No Changes. Company will carry on the Business
diligently and in the same manner as heretofore and will not make or
institute any changes in its methods of purchase, sale, management,
accounting or operation.
(b) Maintain Organization. Company will take such action
as may be reasonably necessary to maintain, preserve, renew and keep
in favor and effect the existence, rights and franchises of the
Business and will use its reasonable best efforts to preserve the
Business intact, to keep available to Buyer the present officers and
employees of the Business, and to preserve for Buyer its present
relationships with suppliers and customers and others having business
relationships with the Business.
(c) No Breach. Company will not do or omit any act, or
permit any omission to act, which may cause a breach of any contract,
commitment or obligation material to the Business, or any breach of
any representation, warranty, covenant or agreement made by Company
herein, or which would have required disclosure on Schedule 4.7 had it
occurred after the date of the Recent Business Balance Sheet and prior
to the date of this Agreement.
(d) No Material Contracts. No contract or commitment will
be entered into, and no purchase of raw materials or supplies and no
sale of goods or services (real, personal, or mixed, tangible or
intangible) will be made, by or on behalf of Company in connection
with its operation of the Business, except contracts, commitments,
purchases or sales which are in the ordinary course of business and
consistent with past practice, and are not material to the Business
(individually or in the aggregate) and would not have been required to
be disclosed in the Disclosure Schedule had they been in existence on
the date of this Agreement.
(e) Maintenance of Insurance. Company shall, consistent
with past practices, maintain all of the insurance set forth in
Schedule 4.12 and shall procure such additional insurance with respect
to the Business or the Purchased Assets as shall be reasonably
requested by Buyer.
(f) Maintenance of Property. Company shall use, operate,
maintain and repair all property constituting Purchased Assets
hereunder in a normal business manner.
(g) No Negotiations. Until July 16, 1999, Company will not
directly or indirectly (through a representative or otherwise) solicit
or furnish any information to any prospective buyer, commence, or
conduct presently ongoing, negotiations with any other party or enter
into any agreement with any other party concerning the sale of the
Business
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or the Purchased Assets or any part thereof (an "acquisition
proposal"), and Company shall immediately advise Buyer of the receipt
of any acquisition proposal. Notwithstanding the foregoing, if Company
determines in good faith that Buyer is not making reasonably
satisfactory progress towards arranging financing, as of the close of
business on July 7, 1999, Company may negotiate with third parties
without restriction by this subsection.
8.2 Consents.
Company will use its reasonable efforts prior to Closing to
obtain all consents necessary for the consummation of the transactions
contemplated hereby.
8.3 Other Action.
Company shall use its reasonable efforts to cause the
fulfillment at the earliest practicable date of all of the conditions to the
parties' obligations to consummate the transactions contemplated in this
Agreement.
8.4 Disclosure.
Company shall have a continuing obligation to promptly notify
Buyer in writing with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Disclosure, but no such disclosure
shall cure any breach of any representation or warranty which is inaccurate.
9. FURTHER COVENANTS OF THE BUYER
The Buyer covenants and agrees as follows:
9.1 Assistance with Accounts Receivable.
Following the Closing, Buyer shall use reasonable good faith
efforts to assist Company in the collection of accounts receivable related to
the operation of the Business by the Company.
9.2 Financial Records.
In the event Buyer defaults on the Note and/or defaults on
its loan from its primary lender which were made in order to finance the
transaction described in this Agreement following the Closing, Buyer shall
provide to Shareholder interim monthly financial statements relating to its
business and other management reports as and when they are available.
9.3 No Distributions.
For so long as the Note remains unpaid, Buyer shall not make
distributions or dividends to its members or Affiliates, except for
distributions (i) to members in an amount reasonably and in good faith
calculated as necessary to pay income taxes arising as a result of Buyer's
"pass-through" tax status; (ii) reasonable, fair market value salaries for
services actually
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rendered; and (iii) with respect to Affiliates which are operating businesses,
the fair market value of goods and services actually provided to Buyer,
provided that such amount shall not exceed the price available from third party
vendors.
10. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
10.1 Representations and Warranties True on the Closing Date.
Each of the representations and warranties made by Company
and Shareholder in this Agreement, and the statements contained in the
Disclosure Schedule or in any instrument, list, certificate or writing
delivered by Company pursuant to this Agreement, shall be true and correct in
all material respects when made and shall be true and correct in all material
respects at and as of the Closing Date as though such representations and
warranties were made or given on and as of the Closing Date, except for any
changes permitted by the terms of this Agreement or consented to in writing by
Buyer.
10.2 Compliance With Agreement.
Company shall have in all material respects performed and
complied with all of its agreements and obligations under this Agreement which
are to be performed or complied with by Company prior to or on the Closing
Date, including the delivery of the closing documents specified in Section
13.1.
10.3 Absence of Litigation.
No Litigation shall have been commenced or threatened, and no
investigation by any Government Entity shall have been commenced, against
Buyer, Company or any of the affiliates, officers or directors of any of them,
with respect to the transactions contemplated hereby.
10.4 Consents and Approvals.
All approvals, consents and waivers that are required to
effect the transactions contemplated hereby shall have been received, and
executed counterparts thereof shall have been delivered to Buyer not less than
two business days prior to the Closing. Notwithstanding the foregoing, receipt
of the consent of any third party to the assignment of a Contract which is not
(and is not required to be) disclosed in the Disclosure Schedule shall not be a
condition to Buyer's obligation to close, provided that the aggregate of all
such Contracts does not represent a material portion of the sales or
expenditures of the Premises. After the Closing, Company will continue to use
its best effects to obtain any such consents or approvals, and Company shall
not hereby be relieved of any liability hereunder for failure to perform any of
its covenants or for the inaccuracy of any representation or warranty.
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10.5 Title Insurance.
Buyer shall have obtained good and valid title insurance
policies or, in final form, irrevocable title insurance binders, dated as of
the Effective Time, conforming to the specifications set forth in Section 7.1
hereof.
10.6 Estoppel Certificates.
Company shall have delivered to Buyer on or prior to the
Closing Date an estoppel certificate or status letter from the landlord under
each lease of real property to be assumed pursuant to this Agreement which
estoppel certificate or status letter will certify (i) the lease is valid and
in full force and effect; (ii) the amounts payable by Company under the lease
and the date to which the same have been paid; (iii) whether there are, to the
knowledge of said landlord, any defaults thereunder, and, if so, specifying the
nature thereof; and (iv) that the transactions contemplated by this Agreement
will not constitute default under the lease and that the landlord consents to
the assignment of the lease to Buyer.
10.7 Section 1445 Affidavit.
Company shall have delivered to Buyer an affidavit, in form
satisfactory to Buyer, to the effect that Company is not a "foreign person,"
"foreign corporation," "foreign partnership," "foreign trust," or "foreign
estate" under Section 1445 of the Code and containing all such other
information as is required to comply with the requirements of such Section.
10.8 Environmental Audit.
The results of the environmental audit conducted pursuant to
Section 7.3 shall not have disclosed any past or present condition, process or
practice with respect to the Business or any property owned, occupied or
operated by Company at any time in connection with its operation of the
Business which is not in full compliance with all applicable Environmental
Laws, if a reasonable estimate by Buyer of the cost of remediation, or the
potential liability to third persons (including statutory liability) arising
from such condition, process or practice, or the cost of bringing Company or
such property into full compliance with all applicable Environmental Laws,
would exceed $10,000 in the aggregate with respect to all matters described in
this Section.
10.9 Financing.
Buyer's obligation to close this transaction is contingent
upon Buyer obtaining satisfactory financing for the acquisition and operation
of the Business. Buyer shall use its reasonable, good faith efforts to obtain
satisfactory financing and to close on July 16, 1999 or one day after bank
approval, and to satisfactorily complete due diligence.
10.10 Due Diligence Investigation.
Buyer shall be satisfied, in Buyer's sole discretion, with
the results of Buyer's investigation of the condition and prospects of the
Business and related matters, which shall be
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completed on or before July 9, 1999. The Company shall provide Buyer with
reasonable access and assistance in connection with the due diligence
investigation.
11. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS
Each and every obligation of Company to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of the
following conditions:
11.1 Representations and Warranties True on the Closing Date.
Each of the representations and warranties made by Buyer in
this Agreement shall be true and correct in all material respects when made and
shall be true and correct in all material respects at and as of the Closing
Date as though such representations and warranties were made or given on and as
of the Closing Date.
11.2 Compliance With Agreement.
Buyer shall have in all material respects performed and
complied with all of Buyer's agreements and obligations under this Agreement
which are to be performed or complied with by Buyer prior to or on the Closing
Date, including the delivery of the closing documents specified in Section
13.2.
11.3 Absence of Litigation.
No Litigation shall have been commenced or threatened, and no
investigation by any Government Entity shall have been commenced, against
Buyer, Company or any of the affiliates, officers or directors of any of them,
with respect to the transactions contemplated hereby; provided that the
obligations of Company shall not be affected unless there is a reasonable
likelihood that as a result of such action, suit, proceeding or investigation
Company will be unable to retain substantially all the consideration to which
it is entitled under this Agreement.
11.4 RESERVED.
12. INDEMNIFICATION
12.1 By Company and Shareholder.
Subject to the terms and conditions of this Article 12,
Company and Shareholder, jointly and severally, hereby agree to indemnify,
defend and hold harmless Buyer, and its directors, officers, employees and
controlled and controlling persons (hereinafter "Buyer's affiliates"), from and
against all Claims asserted against, resulting to, imposed upon, or incurred by
Buyer, Buyer's affiliates, the Business or the Purchased Assets, directly or
indirectly, by reason of, arising out of or resulting from (a) the inaccuracy
or breach of any representation or warranty of Company contained in or made
pursuant to this Agreement (regardless of whether such breach is deemed
"material"); (b) the breach of any covenant of Company contained in this
Agreement (regardless of whether such breach is deemed "material"); or (c) any
Claim of or against Company, the Purchased Assets or the Business not
specifically assumed by Buyer
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pursuant hereto. As used in this Article 12, the term "Claim" shall include (i)
all Liabilities; (ii) all losses, damages (including, without limitation,
consequential damages), judgments, awards, settlements, costs and expenses
(including, without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and attorneys fees and expenses); and
(iii) all demands, claims, actions, costs of investigation, causes of action,
proceedings and assessments, whether or not ultimately determined to be valid.
12.2 By Buyer.
Subject to the terms and conditions of this Article 12, Buyer
hereby agrees to indemnify, defend and hold harmless Company and Shareholder
and their directors, officers, employees and controlling persons, from and
against all Claims asserted against, resulting to, imposed upon or incurred by
any such person, directly or indirectly, by reason of or resulting from (a) the
inaccuracy or breach of any representation or warranty of Buyer contained in or
made pursuant to this Agreement (regardless of whether such breach is deemed
"material"); (b) the breach of any covenant of Buyer contained in this
Agreement (regardless of whether such breach is deemed "material"); or (c) all
Claims of or against Company specifically assumed by Buyer pursuant hereto.
12.3 Indemnification of Third-Party Claims.
The obligations and liabilities of any party to indemnify any
other under this Article 12 with respect to Claims relating to third parties
shall be subject to the following terms and conditions:
(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will give
the party from whom indemnification is sought (the "Indemnifying
Party") prompt written notice of any such Claim, and the Indemnifying
Party will undertake the defense thereof by representatives chosen by
it. Failure to give such notice shall not affect the Indemnifying
Party's duty or obligations under this Article 12, except to the
extent the Indemnifying Party is prejudiced thereby. So long as the
Indemnifying Party is defending any such Claim actively and in good
faith, the Indemnified Party shall not settle such Claim. The
Indemnified Party shall make available to the Indemnifying Party or
its representatives all records and other materials required by them
and in the possession or under the control of the Indemnified Party,
for the use of the Indemnifying Party and its representatives in
defending any such Claim, and shall in other respects give reasonable
cooperation in such defense. Notwithstanding the foregoing, the
Company and Shareholder shall have the sole right to undertake the
defense of any Claims against Buyer related to the inaccuracy or
breach of the representation and warranty contained in Section
4.10(c).
(b) Failure to Defend. If the Indemnifying Party, within a
reasonable time after notice of any such Claim, fails to defend such
Claim actively and in good faith, the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise or
settlement of such Claim or consent to the entry of a judgment with
respect to such Claim, on behalf of and for the account and risk of
the Indemnifying
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Party, and the Indemnifying Party shall thereafter have no right to
challenge the Indemnified Party's defense, compromise, settlement or
consent to judgment.
(c) Indemnified Party's Rights. Anything in this Section
12 to the contrary notwithstanding, (i) if there is a reasonable
probability that a Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other
money payments, the Indemnified Party shall have the right to defend,
compromise or settle such Claim, and (ii) the Indemnifying Party shall
not, without the written consent of the Indemnified Party, settle or
compromise any Claim or consent to the entry of any judgment which
does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party of a release from
all Liability in respect of such Claim.
12.4 Payment.
The Indemnifying Party shall promptly pay the Indemnified
Party any amount due under this Article 12, which payment may be accomplished
in whole or in part, at the option of the Indemnified Party, by the Indemnified
Party setting off any amount owed to the Indemnifying Party by the Indemnified
Party. To the extent set-off is made by an Indemnified Party in satisfaction or
partial satisfaction of an indemnity obligation under this Article 12 that is
disputed by the Indemnifying Party, upon a subsequent determination by final
judgment not subject to appeal that all or a portion of such indemnity
obligation was not owed to the Indemnified Party, the Indemnified Party shall
pay the Indemnifying Party the amount which was set off and not owed together
with interest from the date of set-off until the date of such payment at an
annual rate equal to the average annual rate in effect as of the date of the
set-off, on those three maturities of United States Treasury obligations having
a remaining life, as of such date, closest to the period from the date of the
set-off to the date of such judgment. Upon judgment, determination, settlement
or compromise of any third party Claim, the Indemnifying Party shall pay
promptly on behalf of the Indemnified Party, and/or to the Indemnified Party in
reimbursement of any amount theretofore required to be paid by it, the amount
so determined by judgment, determination, settlement or compromise and all
other Claims of the Indemnified Party with respect thereto, unless in the case
of a judgment an appeal is made from the judgment. If the Indemnifying Party
desires to appeal from an adverse judgment, then the Indemnifying Party shall
post and pay the cost of the security or bond to stay execution of the judgment
pending appeal. Upon the payment in full by the Indemnifying Party of such
amounts, the Indemnifying Party shall succeed to the rights of such Indemnified
Party, to the extent not waived in settlement, against the third party who made
such third party Claim.
12.5 Indemnification for Environmental Matters.
Without limiting the generality of the foregoing, Company
agrees to indemnify, reimburse, hold harmless and defend Buyer for, from, and
against all Claims asserted against, imposed on, or incurred by Buyer, directly
or indirectly, in connection with any pollution, threat to the environment, or
exposure to, or manufacture, processing, distribution, use, treatment,
generation, transport or handling, disposal, emission, discharge, storage or
release of, any pollutant, contaminant, chemical or industrial, petroleum or
petroleum-based, hazardous or toxic substances, that (A) is related in any way
to Company's or any previous owner's or operator's
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ownership, operation or occupancy of the Business and Facilities, properties
and assets being transferred to Buyer, and (B) in whole or in part occurred,
existed, arose out of conditions or circumstances that existed, or was caused
on or before the Closing Date.
12.6 Limitations on Indemnification.
Except for any willful or knowing breach or
misrepresentation, as to which claims may be brought without limitation as to
time or amount:
(a) Time Limitation. No claim or action shall be brought
under this Article 12 for breach of a representation or warranty after
the lapse of two (2) years following the Closing. Regardless of the
foregoing, however, or any other provision of this Agreement:
(i) There shall be no time limitation on claims on
actions brought for breach of any representation or warranty
made in or pursuant to Section 4.10(c) and Company hereby
waives all applicable statutory limitation periods with
respect thereto.
(ii) Any claim or action brought for breach of any
representation or warranty made in or pursuant to Section 4.5
may be brought at any time until the underlying tax
obligation is barred by the applicable period of limitation
under federal and state laws relating thereto (as such period
may be extended by waiver).
(iii) Any claim made by a party hereunder by a
demand for arbitration in accordance with Article 15 hereof
for breach of a representation or warranty prior to the
termination of the survival period for such claim shall be
preserved despite the subsequent termination of such survival
period.
(iv) If any act, omission, disclosure or failure to
disclosure shall form the basis for a claim for breach of
more than one representation or warranty, and such claims
have different periods of survival hereunder, the termination
of the survival period of one claim shall not affect a
party's right to make a claim based on the breach of
representation or warranty still surviving.
(b) Amount Limitation. Except with respect to claims for
breaches of representations or warranties contained in Sections 4.5
(Tax Matters), 4.10(c) (Environmental Matters), and 4.11(a) and (c)
(Title and Condition of Properties), an Indemnified Party shall not be
entitled to indemnification under this Article 12 for breach of a
representation or warranty unless the aggregate of the Indemnifying
Party's indemnification obligations to the Indemnified Party pursuant
to this Article 12 (but for this Section 12.6(b)) exceeds Seventy Five
Thousand Dollars ($75,000); but in such event, the Indemnified Party
shall be entitled to indemnification only to the extent the aggregate
indemnification obligations for all breaches of representations and/or
warranties and other matters exceed such $75,000 deductible threshold.
Notwithstanding any contrary provision in this Agreement, in no event
shall the collective liability of the Company and the Shareholder to
make indemnification payments hereunder exceed
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Three Million Dollars ($3,000,000), except there shall be no limit on
claims related to taxes, environmental or the Company's defined
benefit plans.
12.7 No Waiver.
The closing of the transactions contemplated by this
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of condition
constituting the basis of the Claim at or before the Closing, and regardless of
whether such breach, violation or failure is deemed to be "material".
13. CLOSING
The closing of this transaction ("the Closing") shall take place at
the offices of JPS Textile Group, Inc., 355 North Pleasantburg Drive, Suite
202, Greenville, South Carolina 29607, at 10 A.M. local time on July 16, 1999,
or at such other time and place as the parties hereto shall agree upon. Such
date is referred to in this Agreement as the "Closing Date".
13.1 Documents to be Delivered by Company.
At the Closing, Company shall deliver to Buyer the following
documents, in each case duly executed or otherwise in proper form:
(a) Deeds, Bills of Sale. Warranty deeds to real estate
and bills of sale and such other instruments of assignment, transfer,
conveyance and endorsement as will be sufficient in the opinion of
Buyer and its counsel to transfer, assign, convey and deliver to Buyer
the Purchased Assets as contemplated hereby.
(b) Compliance Certificate. A certificate signed by the
chief executive officer of Company that each of the representations
and warranties made by Company and Shareholder in this Agreement is
true and correct in all material respects on and as of the Closing
Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date
(except for any changes permitted by the terms of this Agreement or
consented to in writing by Buyer), and that Company has performed and
complied with all of Company's obligations under this Agreement which
are to be performed or complied with on or prior to the Closing Date.
(c) Opinion of Counsel. A written opinion of counsel to
Company, reasonably acceptable to Buyer, dated as of the Closing Date,
addressed to Buyer, in form reasonably acceptable to Buyer.
(d) Employment and Noncompetition Agreements. The
Employment and Noncompetition Agreements referred to in Section 1.1,
duly executed by the persons referred to in such Section.
(e) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors and the shareholders of Company
authorizing and approving this Agreement and the consummation of the
transactions contemplated by this Agreement.
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(f) Articles; By-laws. A copy of the By-laws of Company
and Shareholder certified by the secretary of Company and Shareholder,
and a copy of the Certificate of Incorporation of Company and
Shareholder certified by the Secretary of State of the state of
incorporation of Company and Shareholder.
(g) Incumbency Certificate. Incumbency certificates
relating to each person executing any document executed and delivered
to Buyer pursuant to the terms hereof.
(h) Other Documents. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing
pursuant to this Agreement and such other certificates of authority
and documents as Buyer may reasonably request.
13.2 Documents to be Delivered by Buyer.
At the Closing, Buyer shall deliver to Company the following
documents, in each case duly executed or otherwise in proper form:
(a) Cash Purchase Price. To Company a certified or bank
cashier's check (or wire transfer) as required by Section 3.3(b)
hereof, and the Note as required by Section 3.3(a) hereof.
(b) Compliance Certificate. A certificate signed by the
chief executive officer of Buyer that the representations and
warranties made by Buyer in this Agreement are true and correct on and
as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the
Closing Date (except for any changes permitted by the terms of this
Agreement or consented to in writing by Company), and that Buyer has
performed and complied with all of Buyer's obligations under this
Agreement which are to be performed or complied with on or prior to
the Closing Date.
(c) Opinion of Counsel. A written opinion of Foley &
Lardner, counsel to Buyer, dated as of the Closing Date, addressed to
Company, in form reasonably acceptable to the Company.
(d) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Buyer authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
(e) Promissory Note. The Promissory Note duly executed by
Buyer.
(f) Incumbency Certificate. Incumbency certificates
relating to each person executing any document executed and delivered
to Company by Buyer pursuant to the terms hereof.
(g) Other Documents. All other documents, instruments or
writings required to be delivered to Company at or prior to the
Closing pursuant to this Agreement and such other certificates of
authority and documents as Company may reasonably request.
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14. TERMINATION
14.1 Right of Termination Without Breach.
This Agreement may be terminated without further liability of
any party at any time prior to the Closing:
(a) by mutual written agreement of Buyer and Company, or
(b) by either Buyer or Company if the Closing shall not
have occurred on or before July 16, 1999, provided the terminating
party has not, through breach of a representation, warranty or
covenant, prevented the Closing from occurring on or before such date;
or
(c) by either party if the Buyer has not obtained a
commitment letter in form and content and form a lender all reasonably
acceptable to the parties, by 5:00 p.m. July 9, 1999.
14.2 Termination for Breach.
(a) Termination by Buyer. If (i) there has been a material
violation or breach by Company of any of the agreements,
representations or warranties contained in this Agreement which has
not been waived in writing by Buyer, or (ii) there has been a failure
of satisfaction of a condition to the obligations of Buyer which has
not been so waived, or (iii) Company shall have attempted to terminate
this Agreement under this Article 14 or otherwise without grounds to
do so, then Buyer may, by written notice to Company at any time prior
to the Closing that such violation, breach, failure or wrongful
termination attempt is continuing, terminate this Agreement with the
effect set forth in Section 14.2(c) hereof.
(b) Termination by Company. If (i) there has been a
material violation or breach by Buyer of any of the agreements,
representations or warranties contained in this Agreement which has
not been waived in writing by Company, or (ii) there has been a
failure of satisfaction of a condition to the obligations of Company
which has not been so waived, or (iii) Buyer shall have attempted to
terminate this Agreement under this Article 14 or otherwise without
grounds to do so, then Company may, by written notice to Buyer at any
time prior to the Closing that such violation, breach, failure or
wrongful termination attempt is continuing, terminate this Agreement
with the effect set forth in Section 14.2(c) hereof.
(c) Effect of Termination. Termination of this Agreement
pursuant to this Section 14.2 shall not in any way terminate, limit or
restrict the rights and remedies of any party hereto against any other
party which has violated, breached or failed to satisfy any of the
representations, warranties, covenants, agreements, conditions or
other provisions of this Agreement prior to termination hereof. In
addition to the right of any party under common law to redress for any
such breach or violation, each party whose breach or violation has
occurred prior to termination shall jointly and severally indemnify
each other party for whose benefit such representation, warranty,
covenant, agreement or
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<PAGE> 47
other provision was made ("indemnified party") from and against all
losses, damages (including, without limitation, consequential
damages), costs and expenses (including, without limitation, interest
(including prejudgment interest in any litigated matter), penalties,
court costs, and attorneys fees and expenses) asserted against,
resulting to, imposed upon, or incurred by the indemnified party,
directly or indirectly, by reason of, arising out of or resulting from
such breach or violation. Subject to the foregoing, the parties'
obligations under Section 16.8 of this Agreement shall survive
termination.
15. RESOLUTION OF DISPUTES
15.1 Arbitration.
Any dispute, controversy or claim arising out of or relating
to this Agreement or any contract or agreement entered into pursuant hereto or
the performance by the parties of its or their terms shall be settled by
binding arbitration held in Greenville, South Carolina in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect, except as specifically otherwise provided in this Article 15.
Notwithstanding the foregoing, Buyer may, in its discretion, apply to a court
of competent jurisdiction for equitable relief from any violation or threatened
violation of the covenants of Company and/or any Shareholder under Section 7.4
of this Agreement, or any covenants not to compete contained in any Employment
and Noncompetition Agreement delivered pursuant to Section 1.1 hereof.
15.2 Arbitrators.
If the matter in controversy (exclusive of attorney fees and
expenses) shall appear, as at the time of the demand for arbitration, to exceed
$600,000, then the panel to be appointed shall consist of three neutral
arbitrators; otherwise, one neutral arbitrator.
15.3 Procedures; No Appeal.
The arbitrator(s) shall allow such discovery as the
arbitrator(s) determine appropriate under the circumstances and shall resolve
the dispute as expeditiously as practicable, and if reasonably practicable,
within one hundred twenty (120) days after the selection of the arbitrator(s).
The arbitrator(s) shall give the parties written notice of the decision, with
the reasons therefor set out, and shall have thirty (30) days thereafter to
reconsider and modify such decision if any party so requests within ten (10)
days after the decision. Thereafter, the decision of the arbitrator(s) shall be
final, binding, and nonappealable with respect to all persons, including
(without limitation) persons who have failed or refused to participate in the
arbitration process.
15.4 Authority.
The arbitrator(s) shall have authority to award relief under
legal or equitable principles, including interim or preliminary relief, and to
allocate responsibility for the costs of the arbitration and to award recovery
of attorneys fees and expenses in such manner as is determined to be
appropriate by the arbitrator(s).
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<PAGE> 48
15.5 Entry of Judgment.
Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having in personam and subject matter jurisdiction.
Company, Buyer and each Shareholder hereby submit to the in personam
jurisdiction of the Federal and State courts in South Carolina, for the purpose
of confirming any such award and entering judgment thereon.
15.6 Confidentiality.
All proceedings under this Article 15, and all evidence given
or discovered pursuant hereto, shall be maintained in confidence by all
parties.
15.7 Continued Performance.
The fact that the dispute resolution procedures specified in
this Article 15 shall have been or may be invoked shall not excuse any party
from performing its obligations under this Agreement and during the pendency of
any such procedure all parties shall continue to perform their respective
obligations in good faith, subject to any rights to terminate this Agreement
that may be available to any party and to the right of setoff provided in
Section 12.4 hereof.
15.8 Tolling.
All applicable statutes of limitation shall be tolled while
the procedures specified in this Article 15 are pending. The parties will take
such action, if any, required to effectuate such tolling.
16. MISCELLANEOUS
16.1 Disclosure Schedule.
Information set forth in the Disclosure Schedule specifically
refers to the article and section of this Agreement to which such information
is responsive and such information shall not be deemed to have been disclosed
with respect to any other article or section of this Agreement or for any other
purpose. The Disclosure Schedule shall not vary, change or alter the language
of the representations and warranties contained in this Agreement and, to the
extent the language in the Disclosure Schedule does not conform in every
respect to the language of such representations and warranties, such language
shall be disregarded and be of no force or effect.
16.2 Further Assurance.
From time to time, at Buyer's request and without further
consideration, Company will execute and deliver to Buyer such documents and
take such other action as Buyer may reasonably request in order to consummate
more effectively the transactions contemplated hereby and to vest in Buyer
good, valid and marketable title to the business and assets being transferred
hereunder.
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<PAGE> 49
16.3 Disclosures and Announcements.
Both the timing and the content of all disclosure to third
parties and public announcements concerning the transactions provided for in
this Agreement by either Company or Buyer shall be subject to the approval of
the other in all essential respects, except that Buyer's approval shall not be
required as to any statements and other information which Shareholder may
submit to the Securities and Exchange Commission, or be required to make
pursuant to any rule or regulation of the Securities and Exchange Commission or
otherwise required by law.
16.4 Assignment; Parties in Interest.
(a) Assignment. Except as expressly provided herein, the
rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the
other party. Notwithstanding the foregoing, Buyer may, without consent
of the other party, cause one or more subsidiaries of Buyer to carry
out all or part of the transactions contemplated hereby; provided,
however, that Buyer shall, nevertheless, remain liable for all of its
obligations, and those of any such subsidiary, to Company hereunder.
(b) Parties in Interest. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the respective
successors and permitted assigns of the parties hereto. Nothing
contained herein shall be deemed to confer upon any other person any
right or remedy under or by reason of this Agreement.
16.5 Law Governing Agreement.
This Agreement may not be modified or terminated orally, and
shall be construed and interpreted according to the internal laws of the State
of Delaware, excluding any choice of law rules that may direct the application
of the laws of another jurisdiction.
16.6 Amendment and Modification.
Buyer and Company may amend, modify and supplement this
Agreement in such manner as may be agreed upon by them in writing.
16.7 Notice.
All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight mail courier service.
The respective addresses to be used for all such notices, demands or requests
are as follows:
(a) If to Buyer, to:
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<PAGE> 50
Chiquola Fabrics, LLC
Post Office Box 545
Honea Path, SC 29654
Attention: Kevin Cage
Facsimile: (864) 369-3028
(with a copy to)
Foley & Lardner
200 North Laura Street
Jacksonville, FL 32202
Attention: Gardner F. Davis
Facsimile: (904) 359-8700
and
Marvin B. Fuller
6821 Morningside Drive
Huntington Beach, DA 92648
Facsimile: (714) 969-9940
or to such other person or address as Buyer shall furnish to Company in
writing.
(b) If to Company, to:
JPS Textile Group, Inc.
555 North Pleasantburg Drive
Suite 202
Greenville, SC 29607
Attention: John W. Sanders, Jr.
Facsimile: (864) 271-9939
(with a copy to)
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Lizanne Thomas, Esq.
Facsimile: (404) 581-8330
or to such other person or address as Company shall furnish to Buyer in
writing.
If personally delivered, such communication shall be deemed
delivered upon actual receipt; if electronically transmitted pursuant to this
paragraph, such communication shall be deemed delivered the next business day
after transmission (and sender shall bear the burden of proof of delivery); if
sent by overnight courier pursuant to this paragraph, such communication shall
be deemed delivered upon receipt; and if sent by U.S. mail pursuant to this
paragraph, such
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<PAGE> 51
communication shall be deemed delivered as of the date of delivery indicated on
the receipt issued by the relevant postal service, or, if the addressee fails
or refuses to accept delivery, as of the date of such failure or refusal. Any
party to this Agreement may change its address for the purposes of this
Agreement by giving notice thereof in accordance with this Section.
16.8 Expenses.
Regardless of whether or not the transactions contemplated
hereby are consummated:
(a) Brokerage. Company and Buyer each represent and
warrant to each other that there is no broker involved or in any way
connected with the transfer provided for herein. Buyer agrees to hold
Company harmless from and against all other claims for brokerage
commissions or finder's fees incurred through any act of Buyer in
connection with the execution of this Agreement or the transactions
provided for herein. Company agrees to hold Buyer harmless from and
against all (other) claims for brokerage commissions or finder's fees
incurred through any act of Company in connection with the execution
of this Agreement or the transactions provided for herein.
(b) Expenses to be Paid by Company. Company shall pay, and
shall indemnify, defend and hold Buyer harmless from and against, each
of the following:
(i) Transfer Taxes. Any sales, use, excise,
transfer or other similar tax imposed with respect to the
transactions provided for in this Agreement, and any interest
or penalties related thereto.
(ii) Title Insurance Premiums. Fifty percent of all
premiums for the issuance of the title insurance policies
issued pursuant to Section 10.5 hereof, and fifty percent of
the cost of surveys performed pursuant to Section 7.2 (Buyer
shall the remaining amounts for title insurance policies and
surveys).
(iii) Professional Fees. All fees and expenses of
Company's legal, accounting, investment banking and other
professional counsel in connection with the transactions
contemplated hereby.
(c) Other. Except as otherwise provided herein, each of
the parties shall bear its own expenses and the expenses of its
counsel and other agents in connection with the transactions
contemplated hereby.
(d) Costs of Litigation or Arbitration. The parties agree
that (subject to the discretion, in an arbitration proceeding, of the
arbitrator as set forth in Section 15.4) the prevailing party in any
action brought with respect to or to enforce any right or remedy under
this Agreement shall be entitled to recover from the other party or
parties all reasonable costs and expenses of any nature whatsoever
incurred by the prevailing party in connection with such action,
including without limitation attorneys' fees and prejudgment interest.
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<PAGE> 52
16.9 Entire Agreement.
This instrument embodies the entire agreement between the
parties hereto with respect to the transactions contemplated herein, and there
have been and are no agreements, representations or warranties between the
parties other than those set forth or provided for herein.
16.10 Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
16.11 Headings.
The headings in this Agreement are inserted for convenience
only and shall not constitute a part hereof.
16.12 Glossary of Terms.
The following sets forth the location of definitions of
capitalized terms defined in the body of this Agreement:
"Affected Employees" - Section 6.1
"Affiliate" - Section 1.3(d)
"Assumed Contracts" - Section 2.1(a)
"Assumed Liabilities" - Section 2.1
"Business" - Section 1.1
"Business Balance Sheet" - Section 1.1(a)
"Business Employees" - Section 4.15(a)
"Business Financial Statements" - Section 4.4(a)
"Buyer's Accountants" - Section 3.4(d)
"Buyer's affiliates" - Section 12.1
"CERCLA" - Section 4.10(c)
"Claim" - Section 12.1
"Closing" - Preamble to Article 13
"Closing Date" - Section 13
"Closing Date Pension Liability" - Section 6.5
"Code" - Section 3.7
"Company's Accountants" - Section 3.4(d)(ii)
"Contracts" - Section 1.1(a)
"Disclosure Schedule" - Section 16.1
"Effective Time" - Section 3.4(c)
"Employee Plans/Agreements" - Section 4.15(a)
"Environmental Laws" - Section 4.10(c)
"ERISA" - Section 4.15(a)
"Estimated Closing Business Balance Sheet" - Section 3.4(c)
"Final Closing Business Balance Sheet" - Section 3.4(d)(iii)
"Government Entities" - Section 2.2(k)
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<PAGE> 53
"HSR Act" - Section 4.3
"IRS" - Section 3.7
"Indemnified Party" - Section 12.3(a)
"Indemnifying Party" - Section 12.3(a)
"Inventory" - Section 1.2(d)
"Laws" - Section 2.2(k)
"Leased Real Property" - Section 1.2(b)
"Liability" - Section 2.1
"Liens" - Section 4.11(a)
"Litigation" - Section 2.2(e)
"Net Asset Value" - Section 3.4(b)
"Orders" - Section 2.2(k)
"Owned Real Property" - Section 1.2(a)
"PBGC" - Section 4.15(b)(ii)
"Permitted Real Property Liens" - Section 4.11(a)
"Personal Property Leases" - Section 1.2(e)
"Products" - Section 4.19
"Purchased Assets" - Section 1.2
"Purchase Price" - Section 3.1
"Real Property" - Section 4.11(c)
"Real Property Leases" - Section 1.2(b)
"Recent Balance Sheet" - Section 4.4(a)
"Recent Business Balance Sheet" - Section 4.4(a)
"Settlement Date" - Section 3.3(c)
"Third Accounting Firm" - Section 3.4(d)(iii)
"Waste" - Section 4.10(c)
"Year 2000 Compliant" - Section 4.22
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
[The remainder of this page is intentionally left blank.]
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<PAGE> 54
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
CHIQUOLA FABRICS, LLC
By: Marvin B. Fuller
--------------------------------------------
Its: CEO
-------------------------------
JPS CONVERTER AND INDUSTRIAL CORP.
By: John W. Sanders, Jr.
--------------------------------------------
Its: VP
-------------------------------
JPS TEXTILE GROUP, INC.
By: John W. Sanders, Jr.
--------------------------------------------
Its: Executive Vice-President & CFO
-------------------------------
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<PAGE> 55
FIRST AMENDMENT
TO
ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement (this
"Amendment") is made and effective as of August 26, 1999 among CHIQUOLA
FABRICS, LLC, a Delaware limited liability company ("Buyer"), JPS CONVERTER &
INDUSTRIAL CORP., a Delaware corporation ("Company"), and JPS TEXTILE GROUP,
INC., a Delaware corporation ("Shareholder").
FACTUAL BACKGROUND
A. The parties entered into an Asset Purchase Agreement
dated June 24, 1999 (the "Original Agreement") regarding Buyer's purchase of
the business and substantially all the property and assets of the Company's
Cotton Commercial Products Segment and the Facilities.
B. The parties desire to amend certain provisions of the
Original Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, and for other good and valuable consideration, the parties
hereto agree that the Original Agreement is incorporated herein by this
reference and amended and supplemented as set forth herein, effective as of the
date hereof:
1. Definitions. Unless otherwise defined herein, terms
used in this Amendment shall have the meaning ascribed to them in the Original
Agreement.
2. New Excluded Assets Category - ICG Inventory (Section
1.3). Section 1.3 of the Original Agreement is amended to add the following,
additional subcategory at the end of Section 1.3:
(g) ICG Inventory. All inventory produced for ICG.
3. New Category of Liabilities Not to be Assumed - ICG
Contract (Section 2.2(l)). Section 2.2 of the Original Agreement is amended to
add the following, additional subcategory at the end of Section 2.2:
(l) ICG Supply Contracts. Liabilities of Company
under any supply contracts for ICG. However, Buyer agrees to
provide and sell to the Company the product necessary for the
Company to satisfy the Company's contracts with ICG. The
prices for the products sold from Buyer to Company for resale
to ICG shall be at the total of fixed and variable costs for
such products per the Company's cost system at the date of
Closing. Payment terms by Company to Buyer shall be Net 30
Days.
<PAGE> 56
4. Promissory Note (Section 3.3(a)). Section 3.3(a) of
the Original Agreement is amended and restated in its entirety as follows:
(a) Promissory Note. At the Closing, Buyer shall
deliver to Seller a promissory note (the "Note") in the
original principal amount of Two Million Dollars
($2,000,000.00), payable interest only, paid quarterly in the
first year; and equal, consecutive quarterly payments of
principal, together with accrued interest thereon in the
second, third and fourth year, bearing interest at the rate
paid to Buyer's primary lender (fixed at closing based on
estimated rate). If the "available to borrow" balance per the
Buyer's banking arrangements with LaSalle Business Credit
exceeds One Million, Four Hundred Thousand Dollars
($1,400,000.00), then Buyer shall pay the sum of One Hundred
Sixty-six Thousand, Six Hundred Sixty-six and 66/100 Dollars
($166,667.00) on each of January 31, 2000, February 29, 2000
and March 31, 2000, reducing the balance of the Promissory
Note in reverse order of future payments due. The Promissory
Note will be further reduced for the following:
(1) If Buyer reduces hourly head count
below 284 employees within 180 days after Closing,
the Company will reduce the Note for the costs of
wage, benefits and severance (including three months
medical insurance and any COBRA per employee)
incurred during the ninety (90) day period
immediately after closing for 40 or less employees
terminated by Buyer. The number of employees to be
reimbursed will be determined by the difference in
the number of employees at the 180th day versus 284.
The Note will be reduced as of the date such claim
for reduction is submitted, in reverse order of
future payments due.
(2) For the 63 days after Closing, until
and through October 30, 1999, to the extent the
Buyer does not attain $213,000 in favorable
manufacturing variances, calculated on a basis
consistent with past practice of the Company, then
the principal balance of the Note shall be reduced
by the shortfall up to the amount of $100,000, in
reverse order of payments due. This adjustment shall
be made as of October 30, 1999, and is subject to
review and audit by the Company. The Note will not
be adjusted if favorable variances for the period
exceed $213,000.
The Note shall be subordinated to the Buyer's debt
to its lender, pursuant to subordination terms reasonably
acceptable to
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<PAGE> 57
Company and its lender and shall grant a lien (junior to
lender) on such assets as may be agreed.
5. Cash at Closing (Section 3.3(b)). Section 3.3(b) of
the Original Agreement is amended and restated in its entirety as follows:
(b) Cash to Company. At the Closing, Buyer shall
deliver to Company the Purchase Price, less Two Million
Dollars ($2,000,000.00) in cash.
6. Termination Benefits (Section 6.4). Section 6.4 of the
Original Agreement is hereby amended to begin the section with the following
clause: "Except as provided in Section 6.7 hereof".
7. Severance Costs (New Section 6.7). The Original
Agreement is hereby amended to add the following new Section 6.7:
6.7 Company's Reimbursement of Certain Severance
Costs. In the event that the Buyer determines in its absolute
discretion that business conditions require further
reductions in force within 61 days following Closing, the
Company will promptly reimburse the Buyer, in cash, all
severance costs, including fringe benefits (e.g., medical
COBRA, etc.) for employees severed after Closing but before
the 61st day following Closing. The indemnification will be
for no more than 42 employees and will apply only to the
difference between the number of employees at Closing and
284. (This reimbursement obligation is separate and distinct
from the provision in the Note relating to reduction of head
count within 180 days after Closing. The provision in the
Note relates to further potential head count below 284.
8. General Administrative Services (Section 7.11). The
first sentence of Section 7.11 is hereby amended and restated in its entirety
as follows:
7.11 Company and Shareholder will provide Buyer with
the general and administrative transition services outlined
on Schedule 7.11 at no cost for a period of nine (9) months
following Closing and at a cost of $7,500 per week for the
three (3) months or weekly portion thereof (months 10-12), if
required by Buyer, and at the sole discretion of Buyer).
9. Software (Section 7.12). The first sentence of Section
7.12 of the Original Agreement is amended and restated in its entirety as
follows:
Seller agrees to use its reasonable good faith
efforts to make any of its software, either purchased or
developed by the
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<PAGE> 58
Company, available to Buyer at no cost (or payments to
Company), whether or not currently used at the Borden Plant,
conditioned on Buyer negotiating, funding and making
satisfactory arrangements with licensed software providers,
if any).
10. Closing (Article 13). The introductory sentence to
Article 13 is hereby amended and restated as follows:
The closing of this transaction (the "Closing") shall
take place at the offices of Hahn & Hessen, New York, New
York, at noon on August 26, 1999, or at such other time and
place as the parties hereto shall agree upon).
11. Termination; Extension of Date (Section 14.1(b)).
Section 14.1(b) is hereby amended to substitute "August 31, 1999" for "July 16,
1999."
12. Reaffirmation. Except to the extent modified herein,
all provisions of the Original Agreement shall remain in full force and effect.
In consideration of and as a material inducement to the parties' execution and
delivery of this Agreement, the parties hereby expressly reaffirm each and
every covenant, undertaking, agreement, waiver and consent set forth in the
Original Agreement to the same extent as if each and every of said covenants,
agreements, undertakings, waivers and consents were fully set forth in this
Agreement and made and entered into by the parties as of the date hereof,
except as expressly modified by this Amendment.
13. Counterparts. This Amendment may be executed by the
parties in separate counterparts, no one of which need be executed by all
parties. This Amendment shall be effective when executed and delivered by all
the parties. It may be delivered by telecopy.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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<PAGE> 59
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
CHIQUOLA FABRICS, LLC
By: Marvin B. Fuller
-----------------------------------------
Its: CEO
--------------------------------
JPS CONVERTER & INDUSTRIAL CORP.
By: John W. Sanders, Jr.
-----------------------------------------
Its: VP
--------------------------------
JPS INDUSTRIES, INC.
f/k/a JPS Textile Group, Inc.
By: John W. Sanders, Jr.
-----------------------------------------
Its: EVP & CFO
--------------------------------
-5-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JPS INDUSTRIES, INC. CONTAINED IN THE BODY OF THE
ACCOMPANYING FORM 10-Q FOR THE 9 MONTH PERIOD ENDED JULY 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-30-1999
<PERIOD-END> JUL-31-1999
<CASH> 1,087
<SECURITIES> 0
<RECEIVABLES> 47,968
<ALLOWANCES> 1,213
<INVENTORY> 49,119
<CURRENT-ASSETS> 103,387
<PP&E> 100,620
<DEPRECIATION> 14,341
<TOTAL-ASSETS> 227,135
<CURRENT-LIABILITIES> 30,163
<BONDS> 91,642
0
0
<COMMON> 100
<OTHER-SE> 87,102
<TOTAL-LIABILITY-AND-EQUITY> 227,135
<SALES> 212,137
<TOTAL-REVENUES> 212,137
<CGS> 179,702
<TOTAL-COSTS> 179,702
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,655
<INCOME-PRETAX> (3,656)
<INCOME-TAX> (303)
<INCOME-CONTINUING> (3,353)
<DISCONTINUED> (19,543)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,896)
<EPS-BASIC> (2.29)
<EPS-DILUTED> (2.29)
</TABLE>
