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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Sections 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of Earliest Event Reported) March 31, 1995
Texfi Industries, Inc.
(Exact Name of Registrant as Specified on its Charter)
Delaware 1-6797 56-0795032
(State or Other Jurisdiction (Commission File IRS Employer
of Incorporation) Number) Identifi-
cation No.
5400 Glenwood Avenue, Suite 215, Raleigh, North Carolina 27612
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (919) 783-4736
N/A
(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets
On March 31, 1995, the Registrant sold the assets of its Marion
Fabrics greige goods facility located in Marion, North Carolina to
Decotech, L.C., a privately held South Carolina limited liability
company ("Decotech"). The aggregate purchase price for the facility
was approximately $10.7 million, subject to certain post-closing
adjustments, and consisted of approximately $8.4 million in cash and
promissory notes in the principal amounts of $2,000,000 and
$300,000. The principal amount of the $2,000,000 note is due and
payable in three equal monthly installments beginning on July 29,
1995. The note is noninterest bearing until July 1, 1995 from which
time the unpaid balance will bear interest at the rate of 10% per
annum. The principal of the $300,000 note is due the earlier of
April 30, 1995 or the date of the post-closing adjustments and the
note is noninterest bearing. Both notes are subordinated to other
borrowings of Decotech used to finance the purchase. Post-closing
adjustments are expected to reduce the net proceeds of the sale by
approximately $649,000.
The purchase price and other terms of the transaction were
arrived at through private negotiation. The Registrant's former
chairman, chief executive officer and president, L. Terrell Sovey,
Jr. is a principal owner and manager of Decotech.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements of Business Acquired. Not Applicable.
(b) Pro Forma Financial Information. The following pro forma
financial information is filed with this report on the pages
indicated:
Page
Introductory Statement 5
Unaudited Pro Forma Consolidated Balance Sheet
as of January 27, 1995 6
Note to Unaudited Pro Forma Consolidated
Balance Sheet 7
Unaudited Pro Forma Statement of Consolidated
Operations for the thirteen weeks ended
January 27, 1995 8
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Unaudited Pro Forma Statement of Consolidated
Operations for the fiscal year ended
October 28, 1994 9
Notes to Unaudited Pro Forma Statements of
Consolidated Operations 10
(c) The Exhibits furnished in connection with this report are as
follows:
2(a) Asset Purchase Agreement dated as of February 10, 1995 by
and between Marion, Inc. and Registrant. The following
schedules to such agreement have been omitted. The
Registrant hereby undertakes to furnish supplementally a
Registrant hereby undertakes to furnish supplementally a
copy of any such omitted schedule to the Commission upon
request.
Schedule 1.1(a): Assumed Contracts
Schedule 1.1(b): Excluded Assets
Schedule 1.1(c): Knowledge
Schedule 1.1(d): Prepaid Items
Schedule 1.1(e): Real Property
Schedule 1.1(f): Vehicles
Schedule 2.3: Purchase Price and Adjustments
Schedule 5.1: Organization
Schedule 5.3: No Conflict or Violation
Schedule 5.4: Title to Assets
Schedule 5.5: Real Property Liens
Schedule 5.6: Leased Property
Schedule 5.7: Intellectual Property
Schedule 5.8: Contracts and Commitments
Schedule 5.9: Liabilities
Schedule 5.10: Litigation
Schedule 5.12: Compliance with Laws; Permits
Schedule 5.14: Environmental Matters
Schedule 5.15: Insurance
Schedule 5.17: Fixed Asset List
Schedule 8.4: Bill and Hold Inventory
Schedule 8.5: Employees Not to be Retained
2(b) Amendment to Asset Purchase Agreement dated as of February
10, 1995.
2(c) Assignment and Assumption of Asset Purchase Agreement
dated as of March 31, 1995 by and between Marion, Inc. and
Decotech, L.C.
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2(d) Subordinated Promissory Note dated March 31, 1995 from
Decotech, Inc. in the principal amount of $2,000,000.
2(e) Subordinated Promissory Note dated March 31, 1995 from
Decotech, Inc. in the principal amount of $300,000.
2(f) Subordination Agreement dated as of March 31, 1995 by and
between BNY Financial Corporation, Decotech, Inc. and
Registrant with respect to $2,000,000 promissory note.
2(g) Subordination Agreement dated as of March 31, 1995 by and
between BNY Financial Corporation, Decotech, Inc. and
Registrant with respect to $300,000 promissory note.
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following pro forma consolidated financial information
consists of an unaudited pro forma balance sheet as of January 27,
1995 and unaudited pro forma consolidated statements of income for
the thirteen weeks ended January 27, 1995 and for the fiscal year
ended October 28, 1994. These pro forma statements give effect to
the Registrant's sale of the assets of its Marion greige fabrics
facility as described in Item 2 hereof. The pro forma balance
sheet gives effect to the sale as if it had occurred on January 27,
1995. The pro forma consolidated statements of income give effect
to the sale as if it had occurred at the beginning of the periods
presented.
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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
January 27, 1995
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
ASSETS Actual Adjustments(1) Pro Forma
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 564 $ $ 564
Receivables:
Trade 742 742
Due from factor 6,210 2,411 (2) 8,621
Other 298 2,000 (3) 2,298
Inventories 43,124 (5,759)(4) 37,365
Prepaid expenses 3,292 (56)(5) 3,236
Total 54,230 (1,404) 52,826
PROPERTY, PLANT AND EQUIPMENT
- Net 70,130 (7,606)(6) 62,524
OTHER ASSETS 4,615 4,615
$128,975 $(9,010) $119,965
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt $ 11,595 $ $ 11,595
Accounts payable 27,118 (25)(7) 27,093
Other liabilities 8,784 8,784
Federal and state income
taxes 70 70
Total 47,567 (25) 47,542
LONG-TERM DEBT 22,184 (5,696)(8) 16,488
SUBORDINATED DEBENTURES 45,127 45,127
OTHER LONG-TERM
OBLIGATIONS 1,862 1,862
COMMON STOCKHOLDERS'
EQUITY:
Common stock, $1.00 par
value 8,651 8,651
Additional paid-in capital 25,087 25,087
Retained earnings (21,503) (3,289)(9) (24,792)
Total 12,235 (3,289) 8,946
$128,975 $(9,010) $119,965
</TABLE>
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NOTE TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
1) To reflect the net proceeds of approximately $10,107 and related
use thereof from the sale of the Registrant's Marion Fabrics greige
goods facility to Decotech, L.C. ("Decotech"). The net proceeds consist
of approximately $7,807 in cash, after the net settlement of post-closing
adjustments and remittance by Decotech of the $300,000 promissory
note and recognition of the note receivable from Decotech in the
principal amount of $2,000,000.
2) Application of a portion of the sale's net proceeds towards funds
advanced on factored receivables.
3) $2,000,000 promissory note received from Decotech.
4) January 27, 1995 book value of inventories sold.
5) Book value of prepaid expenses sold.
6) January 27, 1995 net book value of real property, leasehold improvements,
fixtures and equipment sold.
7) Prorated accrual for various taxes.
8) Application of a portion of the sale's net proceeds towards various
term loans.
9) Loss on sale arising from difference in January 27, 1995 net book
value of assets sold and purchase price.
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Weeks Ended January 27, 1995
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Actual Adjustments(1) Pro Forma
<S> <C> <C> <C>
Net Sales $63,247 $(10,642) $52,605
Cost and Expenses:
Cost of goods sold 56,537 (9,971) 46,566
Selling, general and admin. 4,530 (776)(2) 3,754
Total 61,067 (10,747) 50,320
Operating Income (Loss) 2,180 105 2,285
Other Expense (Income):
Interest 3,137 (335)(3) 2,802
Other, net (10) (10)
Total 3,127 (335) 2,792
Net Income (Loss) from
Continuing Operations $ (947) $ 440 $ (507)
Loss per Share from
continuing operations: (4) $ (.11) $ (.06)
</TABLE>
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Year Ended October 28, 1994
(Dollar amounts in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma
Adjustments Pro Forma
Actual (Unaudited)(1) (Unaudited)
<S> <C> <C> <C>
Net Sales $282,907 $(36,289) $246,618
Cost and Expenses:
Cost of goods sold 262,648 (33,947) 228,701
Selling, general and
administrative 19,228 (3,000)(2) 16,228
Total 281,876 (36,947) 244,929
Operating Income 1,031 (658) 1,689
Other Expense (Income):
Interest 10,804 (1,194)(3) 9,610
Other, net (1,545) 1 (1,544)
Total 9,259 (1,193) (8,066)
Net Income (Loss) From
Continuing Operations $ (8,228)(5) $ (1,851) $(6,377)
Earnings (Loss) Per Share from
continuing operations: (4) $ (1.03) $ (.79)
</TABLE>
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NOTE TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollar amounts in thousands)
(1) To eliminate historical operating results for the Registrant's
Marion Fabrics greige goods facility.
(2) Direct selling, general and administration expenses of Marion
Fabrics less corporate overhead allocation.
(3) Interest expense adjustment to reflect application of cash proceeds
towards various term loans and funds advanced on factored receivables:
Thirteen Weeks Fiscal Year Ended
Ended January 27, 1995 October 28, 1994
$5,000 reduction in term
loan, variable interest rate $102 $ 288
$696 reduction in term loans,
6.75% 12 56
$2,411 reduction in funds
advanced on factor receivables,
prime plus 1% 54 181
Elimination of funds advanced
on factor receivables generated
by historical operating results,
prime plus 1% interest income
on $2,000 promissory note 167 669
$335 $1,194
(4) Average number of shares of common stock and common stock equivalents,
both primary and fully diluted, totaled 8,652,599, and 8,107,507,
as of January 27, 1995 and October 28, 1994 respectively.
(5) Includes the operations of the Company's Jefferson Greige Goods
and Highland yarns facilities which were discontinued during the
first quarter of fiscal 1995.
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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.
TEXFI INDUSTRIES, INC.
(Registrant)
Date: April 17, 1995 By: /s/ Dane L. Vincent
Dane L. Vincent
Vice President, Finance, Treasurer
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of
February 10, 1995, by and between MARION, INC., a South Carolina
corporation ("Buyer"), and TEXFI INDUSTRIES, INC., a Delaware corporation
("Seller").
W I T N E S S E T H:
WHEREAS, Seller, through its Textile Division, operates and owns
the "Marion Fabrics Business" (as hereafter defined); and
WHEREAS, Buyer desires to acquire a greige fabrics manufacturing
operation; and
WHEREAS, Seller desires to transfer, sell and assign to Buyer,
and Buyer desires to purchase and acquire from Seller, subject to the terms
and conditions set forth herein, the Marion Fabrics Business and
substantially all of the assets thereof and certain liabilities relating
thereto;
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have
the following meanings. Any of these terms, unless the context otherwise
requires, may be used in the singular or plural depending upon the
reference.
"Affiliate" shall mean, with respect to any Person, any other
Person which, directly or indirectly, owns or controls, on an aggregate
basis, at least fifty-one percent (51%) of the outstanding shares of
capital stock having ordinary voting power to elect the board of directors
of such Person, or which controls, is controlled by, or is under common
control with such Person. For the purposes hereof, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies, whether through ownership of voting
securities, by contract or otherwise.
"Assumed Contracts" shall mean (a) all customer
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contracts and yarn orders relating to the Marion Fabrics Business,
including, without limitation, those set forth on Schedule 1.1(a)
attached hereto, and all customer contracts and yarn orders entered into
by Seller and relating to the Marion Fabrics Business from the date of
said schedule to and including the Closing Date, less contracts that
have been fully performed during such period, (b) all those operating
leases relating to the Vamatex looms, slasher equipment and other leased
equipment set forth on Schedule 1.1(a) attached hereto with respect to
which required consents to assignment or sublease ny Seller to Buyer
have been received as of the Closing Date, (c) those real property
leases set forth on Schedule 1.1(a), (d) contracts with suppliers
relating to the Marion Fabrics Business, including, without limitation,
those set forth on Schedule 1.1(a) and all such contracts with suppliers
from the date of said schedule to and including the Closing Date, less
contracts that have been fully performed during such period, (e) the
possession of and obligation to store and arrange for transportation or
delivery of all Bill and Hold Inventory located at a Purchased Location
on the date hereof and all Bill and Hold Inventory located at a
Purchased Location from the date hereof to and including the Closing
Date, less Bill and Hold Inventory that has been delivered to the
customer during such period, (f) those agreements with Hathaway Fabrics
("Hathaway"), Raymond M. Franco Associates ("Franco"), Pola-Torros, Inc.
("Pola-Torros") and Createx, Inc. ("Createx") and; (g) all those
licenses and other intellectual property agreements set forth on
Schedule 1.1(a). "Assumed Contract" shall mean any one of such Assumed
Contracts.
"Assumed Liabilities" shall mean only those liabilities,
obligations and commitments payable or required to be performed after the
Closing Date with respect to any Assumed Contract (except to the extent
otherwise specifically agreed to herein).
"Authority" shall mean any court, arbitrator or arbitral
body, or any foreign or federal, state, municipal or other government or
governmental agency, authority, department or commission.
"Bill and Hold Inventory" shall mean all Inventory which has
been sold by Seller on or prior to the Closing Date but which remains at
any Purchased Location on or subsequent to the Closing Date.
"Books and Records" shall mean all books and records relating
to the Marion Fabrics Business, the Purchased Assets, and the Assumed
Liabilities, whether on any computer program or otherwise, including,
without limitation, all records relating to customers of the Marion Fabrics
Business, all financial,
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operating, inventory and legal records relating to the Marion Fabrics
Business, and records relating to the Real Property and Leased Property.
"Business Day" shall mean any day other than Saturday, Sunday
or any day when banks in Raleigh, North Carolina, are required or
permitted to close.
"Closing Date" shall have the meaning set forth in Section
4.1 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as the
same may be amended from time to time.
"Contract" or "Contracts" shall mean any of the agreements,
contracts, leases, notes, loans, evidences of indebtedness, purchase
orders, letters of credit, distributor agreements, franchise agreements,
undertakings, covenants not to compete, employment agreements, licenses,
instruments, obligations, commitments, policies, purchase and sales orders,
quotations and other executory commitments to which Seller is a party which
relate to the Marion Fabrics Business or to which any of the assets of the
Marion Fabrics Business are subject, whether oral or written, express or
implied.
"Contract Rights" shall mean all of Seller's rights and
obligations under the Assumed Contracts.
"Employee Plan: shall mean any employee benefit plan, program
or arrangement, whether oral or written, which Seller maintains,
participates in or contributes to, and which covers and provides benefits
for any employee currently or formerly employed by Seller in the Marion
Fabrics Business.
"Encumbrances" shall mean any claim, lien, pledge, option,
charge, easement, security interest, right-of-way, encumbrance or other
right of third parties.
"Excluded Assets" shall mean the following rights, properties
and assets as the same shall exist as of the Closing Date:
a) All rights, properties and assets used by Seller or any
subsidiary of Seller primarily in a business other than the
Marion Fabrics Business;
b) All rights, properties and assets of Seller used in the
Marion Fabrics Business which shall have been transferred or
disposed of by Seller prior to the
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Closing Date in transactions conducted in the ordinary
course of business and not in breach of this Agreement;
c) The name and trademark "Texfi" or any derivations
thereof;
d) The accounts receivable of Seller with regard to the
Marion Fabrics Business;
e) Title to the Bill and Hold Inventory; provided, however,
that Seller will deliver possession of the Bill and Hold
Inventory to Buyer on the Closing Date;
f) All cash, commercial paper, certificates of deposit and
other bank deposits, treasury bills and other cash
equivalents;
g) Such other specific assets, rights properties as set
forth on Schedule 1.1(b) attached hereto.
"Excluded Liabilities" shall mean any and all liabilities or
obligations of Seller other than the Assumed Liabilities, whether such
liabilities or obligations are actual or contingent, matured or unmatured,
liquidated or unliquidated, or known or unknown, whether arising out of
occurrences prior to, at or after the date hereof, which shall include,
without limitation:
a) All liabilities and obligations incurred by Seller in
connection with the conduct of any business other than the
Marion Fabrics Business;
b) Any liabilities of Seller in respect to injury to or
death of any person or damage to or destruction of any
property, whether based on negligence, breach of warranty,
strict liability, enterprise liability or any other legal or
equitable theory, including, without limitation, any such
liabilities relating to the Marion Fabrics Business or any
Product sold by the Marion Fabrics Business or the Seller on
or prior to the Closing Date;
(c) Except as otherwise provided in this Agreement, any
liabilities to or in respect of any current or former
employees of Seller or any Affiliate of Seller to the extent
the basis for any claim, liability, damages or penalty shall
have arisen on or prior to the Closing Date, including,
without limitation, (i) any claim by any current or former
employee of the Marion Fabrics
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Business for compensation, bonus, severance, vacation or
holiday compensation or other employment or
post-employment benefits, (ii) any liability arising under
or with respect to any written employment agreement
(including termination or incentive arrangements with
employees) between Seller, the Marion Fabrics Business or
any Affiliate of Seller and any employee, (iii) any
liability under or which respect to any Employee Plan,
program or arrangement, whether or not written, at any
time maintained or contributed to by Seller or any
Affiliate of Seller, or under which Seller or such
Affiliate may incur liability, or any liability with
respect to Seller's or any such Affiliates's withdrawal or
partial withdrawal from or termination of any such plan,
program or arrangement, and (iv) any claim of an unfair
labor practice, or any claim under any state unemployment
compensation law or regulation, whether or not such
liabilities are described, listed or referred to on any
Schedule or Exhibit hereto;
d) Any liability or obligation of Seller or any Affiliate of
Seller in respect of any income, sales, use, franchise,
employment and any and all other taxes of any kind relating
to any taxable years (or portions thereof) of Seller ending
on or prior to the Closing Date, whether or not such
liabilities are described, listed or referred to on any
Schedule or Exhibit hereto;
e) Any claim or cause of action asserted against Seller or
any Affiliate of Seller and that shall have been asserted on
or prior to the Closing Date;
f) Any liabilities or obligations of Seller or any Affiliate
of Seller, relating to any breach of contract, defective
Product claim, or any warranty made with respect to any
Product(s) manufactured or sold by Seller or any Affiliate of
Seller prior to the Closing Date, whether or not such claim,
liability or obligation is described, listed or referred to
on any Schedule or Exhibit hereto;
g) Any liabilities or obligations of Seller or any Affiliate
of Seller, directly or indirectly resulting from or arising
out of entering into, performing its obligations pursuant to,
or consummating the transactions contemplated by, this
Agreement (including, without limitation, all legal and other
professional fees of Seller relating to the preparation of
this Agreement and the consummation of the transactions
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contemplated hereby), whether or not such liabilities or
obligations are described, listed or referred to on any
Schedule or Exhibit hereto;
h) Any Contracts of the Seller which are not Assumed
Contracts or any liability or obligation in respect of or
pursuant to any such Contracts;
i) Any liabilities, claims, costs or expenses relating to
the litigation or claims set forth on Schedule 5.10.
j) All trade payables and accounts payable (including all
commissions payable to Hathaway, Franco, Pola-Torros and
Createx for sales made on or prior to the Closing Date)
incurred by Seller in connection with the Marion Fabrics
Business, other than Assumed Liabilities
"Exhibit" shall mean any document which this Agreement
indicates has been previously agreed to by the parties hereto and initialed
by the parties hereto to indicate such agreement.
"Firestone Inventory" shall mean all inventory, whether in a
finished of greige state of completion, wherever located, purchased or
finished by Seller for Seller's customer Firestone Financial Corporation.
"Fixed Asset List" shall mean a list of all of the Fixed
Assets of the Marion Fabrics Business, together with their respective net
book values, as of December 30, 1994.
"Fixed Assets" shall mean all of the following assets of the
Marion Fabrics Business: (a) the Real Property; (b) all Leasehold
Improvements; and (c) all Fixtures and Equipment as such assets existed on
December 30, 1994 and all such assets that have been acquired since
December 30, 1994.
"Fixtures and Equipment" shall mean all of the furniture,
fixtures, furnishings, machinery and equipment, Vehicles and other tangible
personal property owned by Seller, which are used primarily by the Marion
Fabrics Business and are located in, at or upon the Purchased Locations.
"GAAP" shall mean generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board,
as in effect on the date hereof.
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"Inventory" shall mean (a) all of the Marion Fabrics
Business' inventories located at the Purchased Locations, including,
without limitation, all raw materials, work-in-process, spare parts,
supplies, finished products, wrapping, supply and packaging items and
similar items of the Marion Fabrics Business held for or in connection with
resale in the ordinary course of the Marion Fabrics Business to the Marion
Fabrics Business' customers and distributors; (b) all office supplies and
similar materials of the Marion Fabrics Business located at the Purchased
Locations; (c) all "long-life" supplies of the Marion Fabrics Business,
notwithstanding that such supplies have been previously expensed by Seller;
and (d) all of the Firestone Inventory.
"Knowledge" any reference in this Agreement or in any
certificate delivered pursuant hereto to Seller's "knowledge" (whether to
"the best of Seller's knowledge", to "the Seller's knowledge" or other
similar expressions relating to the knowledge or awareness of Seller) shall
mean all matters actually known by any of Seller's officers listed on
Schedule 1.1(c) attached hereto.
"Laws" shall mean any law, statute, rule, regulation,
ordinance, standard, requirement, code, order, judgment, decision, writ,
injunction, decree, award or other governmental restriction including,
without limitation, policy or procedure issued or enforced by any
Authority.
"Leased Property" shall mean all real property leased by
Seller in connection with the Marion Fabrics Business listed on Schedule
5.6.
"Leasehold Estates" shall mean all of the Seller's rights and
obligations as lessee of the Leased Property.
"Leasehold Improvements" shall mean all of the Seller's
leasehold improvements situated in or on the Leased Property.
"Marion Fabrics Business" shall mean that certain business of
the Seller's Textile Division which conducts its operations at the
Purchased Locations and engages in the design, manufacture and marketing of
piece dyed and yarn dyed greige fabrics for both the apparel and home
furnishing trade using flax, polyester, rayon and cotton and blends
thereof.
"Permits" shall mean all material licenses, permits and other
governmental authorizations necessary to carry on the business of the
Marion Fabrics Business as presently conducted.
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"Person" shall mean a corporation, partnership, joint
venture, trust or unincorporated organization, joint stock company or other
similar organization, an individual, a government or political subdivision
thereof, or a court or any other legal entity, whether acting in an
individual, fiduciary or other capacity.
"Personnel" shall mean individuals employed by Seller at the
Purchased Locations.
"Prepaid Items" shall mean the prepaid and deferred items or
credits and deposits of Seller relating to the Marion Fabrics Business set
forth on Schedule 1.1(d) attached hereto.
"Product" or "Products" shall mean all product(s) produced,
manufactured, sold or distributed by Seller in connection with the Marion
Fabrics Business, including, but not limited to, any natural or synthetic
fabrics or blends thereof.
"Purchased Assets" shall mean all of Seller's right, title
and interest in and to all of the following assets and property, whether
tangible or intangible, real or personal, located at the Purchased
Locations or used primarily in connection with the Marion Fabrics Business:
a) all prepaid expenses and deposits to the extent
transferable to Buyer and not included in Excluded Assets;
b) all Contract Rights relating to Assumed Contracts;
c) all Fixed Assets including, without limitation, all Fixed
Assets on the Fixed Asset List;
d) all Leasehold Estates;
e) all Inventory, other than Bill and Hold Inventory;
f) all Books and Records;
g) all Intellectual Property Rights, to the extent
assignable without payment by Seller; and
h) all Permits, to the extent assignable without payment by
Seller;
but excluding the Excluded Assets and any assets disposed of by Seller in
the ordinary course of its operation of the Marion Fabrics Business.
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"Purchase Locations" shall mean those facility locations of
the Marion Fabrics Business located (a) in Marion, North Carolina, (b) the
Etowah Property, and (c) at 111 West 40th Street, New York, New York 10018.
"Real Property" shall mean all real property and improvements
owned by Seller, used in the Marion Fabrics Business and set forth on
Schedule 1.1(e) attached hereto.
"Representative" shall mean with respect to any person or
entity any officer, director, employee, affiliate, principal, accountant,
attorney, agent, or other representative of such person or entity.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
Subordinated Promissory Note" shall mean that Subordinated
Promissory Note, substantially in the form previously agreed to by the
parties hereto and initialed by the parties hereto to indicate such
agreement, executed by Buyer in favor of Seller and dated as of the Closing
Date.
"Trade Accounts Payable" shall mean all of Seller's current
liabilities to vendors or suppliers for goods delivered or services
rendered (including all commissions payable to Hathaway, Franco,
Pola-Torros or Createx for sales made on or prior to the Closing Date and
amounts payable to Greenwood Mills, Inc. with respect to the Firestone
Inventory) that are outstanding on the Closing Date.
"Vehicles" shall mean all automobiles and other vehicles
owned or leased by Seller, used in the Marion Fabrics Business and set
forth on Schedule 1.1(f) attached hereto.
1.2 Other Defined Terms. In addition to the terms defined in
the Recitals to this Agreement and Section 1.1, the following terms shall
have the meanings defined for such terms in the Section set forth below:
Term Section
Actions ......................................... 5.13
Cash Payment .................................... 2.3
Closing ......................................... 4.1
Closing Date Inventory Value..................... 3.3
Etowah Property ................................. 5.6
Intellectual Property Rights .................... 5.7
Purchase Price .................................. 2.3
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Statement of Inventory Value..................... 3.3
Statement of Trade Accounts Payable.............. 3.3
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Transfer of Assets; Assumption of Certain Liabilities. Upon
the terms and subject to the conditions herein set forth, on the Closing
Date:
a) Seller shall sell, convey, transfer, assign and deliver
to Buyer, and Buyer shall purchase from Seller, the Purchased
Assets (the Real Property, Leasehold Improvements, Fixtures
and Equipment and Inventory are to be sold, conveyed,
transferred and assigned to Buyer on an "as is, where is"
basis); and
b) Buyer shall assume from Seller the Assumed Liabilities.
2.2 Excluded Liabilities. Notwithstanding any other provision
of this Agreement, Buyer shall not assume or be liable for any Excluded
Liabilities.
2.3 Amount and Payment of Purchase Price. In consideration of
the sale, conveyance, transfer, assignment and delivery of all of the
Purchased Assets by Seller to Buyer on the Closing Date, and in reliance
upon the representations, warranties, covenants and agreements made herein
by Seller, in full payment therefor, (i) Buyer shall pay to Seller by wire
transfer to the banks and accounts specified by Seller on Schedule 2.3
attached hereto, cash (the "Cash Payment") in an amount equal to (A)
$8,725,000, plus (B) an amount equal to Buyer's prorated portion of the
Prepaid Items as set forth on Schedule 1.1(d), less (C) an amount equal to
Seller's prorated portion of 1995 ad valorem, real estate and other taxes
on the Purchased Assets and utilities (prorated in accordance with Section
3.1 hereof); (ii) Buyer shall deliver to Seller a 90 day, noninterest
bearing Subordinated Promissory Note in the original principal amount of
$2,000,000; and (iii) Buyer shall assume all of the Assumed Liabilities and
shall deliver to Seller instruments of assumption reasonably satisfactory
to Seller evidencing Buyer's assumption thereof (collectively, the
"Purchase Price"); provided, however, that Buyer and Seller acknowledge and
agree that payment of the Purchase Price is subject to a post-Closing
adjustment pursuant to the provisions Section 3.2 hereof. It is understood
and agreed by Seller and Buyer that the Cash Payment shall be paid at
Seller's direction to those creditors of Seller set forth on
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Schedule 2.3 hereto, in amounts specified by Seller to Buyer, as a
reduction of the loans or other obligations owed to such creditors by
Seller and as an inducement to such creditors to release their liens on
the Purchased Assets.
ARTICLE III
POST-CLOSING MATTERS
3.1 Closing Costs; Transfer and other Taxes. Seller shall be
responsible for any documentary transfer taxes and any applicable sales
taxes imposed by reason of the transfer of the Purchased Assets to Buyer as
provided hereunder and any deficiency, interest or penalty asserted with
respect thereto. Buyer shall pay the fees and costs of recording or filing
all applicable conveyancing instruments described in Section 4.2(b).
Seller shall be responsible for its portion of all real estate, ad valorum
and other taxes and of all utilities payable with respect to the period
prior to the Closing Date. All such taxes shall be prorated at Closing
based on the current property tax bills for such Purchased Assets, if then
available, or, if not, on the basis of the latest available tax figures and
information, and such utilities shall be prorated based on the number of
days in the applicable billing period each party had possession of the
Purchased Assets. Seller's portion of such taxes shall be subtracted from
the Purchase Price in accordance with Section 2.3(C) hereof and Seller's
portion of such utilities shall be paid by Seller to Buyer promptly upon
Buyer's written request for payment thereof. Buyer shall assume the
responsibility of paying such taxes and utilities to the extent not
previously paid. Should any proration of taxes be based on such latest
available tax figures and information and prove to be inaccurate on receipt
of the tax bills for any Purchased Assets for the year of Closing, either
Seller or Buyer, as the case may be, may demand at any time after Closing a
payment from the other correcting such malapportionment. In addition, if
after Closing there is an adjustment or reassessment by any governmental
authority with respect to, or affecting, any taxes for any Purchased Assets
for the year of Closing or any prior year, any additional tax payment for
any Purchased Assets required to be paid with respect to the year of
Closing shall be prorated between Buyer and Seller and Seller shall pay its
prorated portion of any such additional tax payment to Buyer within ten
(10) days after receipt of written notice from Buyer. If any reduction in
any taxes occurs, Buyer will likewise refund to Seller its pro rata portion
of such reduction. This Agreement shall expressly survive the Closing.
3.2 Adjustment for Inventory Value; Statement of Trade
Accounts Payable.
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(a) Seller and/or Seller's accountant shall perform a physical
count of the Inventory as of the Closing Date and Buyer and Buyer's
Accountant will have the opportunity to observe such physical inventory.
Within ten business days of completion of said physical inventory, Seller
shall prepare an unaudited Statement of Inventory Value based on said
physical inventory stating the aggregate dollar amount of the Inventory on
the Closing Date (the "Statement of Inventory Value"). The Statement of
Inventory Value shall be prepared in a manner consistent with the
accounting principals used prior to the Closing with respect to the Marion
Fabrics Business. In the event that the aggregate dollar amount of the
Inventory outstanding as at the close of business on the day immediately
preceding the Closing Date as shown on the Statement of Inventory Value
(the "Closing Date Inventory Value") is more than $6,328,000, Buyer shall
pay to Seller an amount equal to the excess by wire transfer within five
days of Buyer's and Seller's acceptance of, or the final resolutions of all
disputes with respect to, the Statement of Inventory Value. In the event
that the aggregate amount of the Closing Date Inventory Value is less than
$6,328,000, Seller shall pay to Buyer an amount equal to the difference by
wire transfer within five days of Buyer's and Seller's acceptance of, or
the final resolution of all disputes with respect to, the Statement of
Inventory Value. Buyer shall have the right to observe all steps taken by
Seller in connection with the preparation of the Statement of Inventory
Value and to review fully all invoices, work papers and other materials
relating thereto. If Buyer believes that any adjustment should be made to
the Statement of Inventory Value, Buyer shall give Seller written notice of
such adjustments within five days after delivery of the Statement of
Inventory Value to Buyer; otherwise, the Statement of Inventory Value as
prepared by Seller shall be deemed to have been accepted by Buyer and
Seller. If Seller agrees with the adjustments proposed by Buyer, the
adjustments shall be made to the Statement of Inventory Value. If there
are any proposed adjustments which are disputed by Seller, then Buyer and
Seller shall negotiate in good faith to resolve all disputed adjustments.
If, after a period of fifteen days following the date on which Buyer gives
Seller written notice of any proposed adjustments, any such adjustments
still remain disputed, then the Raleigh, North Carolina office of Ernst &
Young shall be engaged to resolve any remaining disputed adjustments and
the decision of such firm shall be final and binding on the parties hereto.
All expenses of Ernst & Young in connection with such resolution shall be
shared equally by Buyer and Seller.
(b) As promptly as possible following the Closing Date, but in
no event more than ten days thereafter, Buyer will prepare and deliver to
Seller an unaudited statement of Trade Accounts
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Payable setting forth the aggregate dollar amount of Trade Accounts
Payable outstanding on the Closing Date and indicating whether any such
Trade Accounts Payable were attributable to Inventory not listed on the
Statement of Inventory Value (the "Statement of Trade Accounts
Payable"). The Statement of Trade Accounts Payable shall be prepared in
a manner consistent with the accounting principals used prior to the
Closing with respect to the Marion Fabrics Business.
3.3 Allocation of Purchase Price. At least thirty (30) days
prior to the date that Internal Revenue Service Form 8594 is required to be
filed with respect to the transactions contemplated hereby, Buyer and
Seller shall mutually agree on an allocation of the Purchase Price among
the Purchased Assets based upon the fair market value of the Purchased
Assets in accordance with Section 1060 of the Code. Each of Buyer and
Seller agrees that, at its own cost and expense, it (a) will prepare all
required tax returns and reports in a manner that is consistent with such
allocation, (b) will file Internal Revenue Service Form 8594 in such
manner, and (c) will not voluntarily take any position inconsistent
therewith upon examination of any such tax return, in any refund claim, in
any litigation or otherwise with respect to such income tax returns.
ARTICLE IV
CLOSING
4.1 Closing. Upon the terms and subject to the conditions set
forth herein, the closing of the transactions contemplated herein (the
"Closing") shall be held at 10:00 a.m. local time on March 16, 1995 (the
"Closing Date") at the offices of Schell Bray Aycock Abel & Livingston
L.L.P., 230 North Elm Street, Greensboro, North Carolina 27401, unless the
parties hereto shall otherwise agree.
4.2 Deliveries and Payments at Closing.
a) Payment of Purchase Price. At the Closing, Buyer shall
deliver to Seller the Purchase Price (the Cash, the
Subordinated Promissory Note and documents evidencing
assumption of the Assumed Liabilities by Buyer) to be paid
pursuant to Section 2.3 hereof.
b) Instruments and Possession. To effect the transfers
referred to in Section 2.1 hereof, Seller shall, on the
Closing Date, execute and/or deliver to Buyer:
(i) a bill of sale, substantially in the form
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previously agreed to by the parties hereto and initialed
by the parties hereto to indicate such agreement,
conveying in the aggregate all personal property
included in the Purchased Assets;
(ii) an Assignment and Assumption of Leases with
respect to any Leased Property (for which any required
consent has been obtained) substantially in the form
previously agreed to by the parties hereto and initialed
by the parties hereto to indicate such agreement;
(iii) assignments of all Contract Rights included in
the Purchased Assets;
(iv) assignments of all Intellectual Property Rights
constituting Purchased Assets, in recordable form to the
extent necessary to assign such rights;
(v) a deed conveying the Real Property included in the
Purchased Assets, substantially in the form previously
agreed to by the parties hereto and initialed by the
parties hereto to indicate such agreement;
(vi) the Books and Records, except as otherwise
provided in Section 8.9 hereof;
(vii) all title documents with respect to any Vehicles
or other equipment with titles owned by Seller and
included in the Purchased Assets, duly executed by
Seller;
(viii) such keys, lock and safe combinations and other
similar items in the possession of Seller as Buyer shall
require to obtain full occupation, possession and
control of the Purchased Locations; and
(ix) such other instruments as shall be reasonably
requested by Buyer to vest in Buyer good and valid title
in and to the Purchased Assets in accordance with the
provisions hereof.
c) Form of Instruments. All of the foregoing instruments
shall be in the form and substance, and shall be executed and
delivered in a manner, reasonably satisfactory to Seller and
Buyer.
d) Consents to Assignment. Notwithstanding anything in
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this Agreement to the contrary, this Agreement shall not
constitute an agreement to assign any Assumed Contract or
Permit or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted
assignment thereof, without the consent of a third party
thereto, would constitute a breach thereof or in any way
affect the respective rights of Buyer or Seller
thereunder. If a required consent to the assignment of an
Assumed Contract or Permit is not obtained, or if any
attempted assignment thereof without such a consent would
be ineffective or would affect the rights thereunder so
that Buyer would not receive all such rights, Seller will
cooperate with Buyer, in all reasonable respects, to cause
Buyer to be provided with the benefits under any such
Assumed Contract or Permit, including, without limitation,
enforcement for the benefit of Buyer of any and all rights
of Seller against a third party thereto, arising out of
the breach or cancellation by such third party or
otherwise; and any transfer or assignment to Buyer of any
property or property rights or any Assumed Contract or
Permit that shall require the consent or approval of any
third party shall be made subject to such consent or
approval being obtained.
e) Assumption Documents. Upon the terms and subject to the
conditions contained herein, on the Closing Date, Buyer shall
deliver to Seller (i) an Assumption of Lease with respect to
the Leased Property (for which any required consent has been
obtained) substantially in the form previously agreed to by
the parties hereto and initialed by the parties hereto to
indicate such agreement, and (ii) such other instruments of
assumption evidencing Buyer's assumption, pursuant to
Section 2.1(b) hereof, of the Assumed Liabilities, as Seller
shall deem reasonably necessary or desirable.
f) Certificates; Opinions. At the Closing, Buyer and Seller
shall deliver the certificates, opinions of counsel and other
items described in Articles 9 and 10.
g) Other Closing Transactions. At the Closing, each of the
parties shall take such other actions required hereby to be
performed by it prior to or on the Closing Date including,
without limitation, satisfying the conditions set forth in
Articles 9 and 10.
4.3 Marion Product Names. Immediately after the Closing Date,
Seller agrees to cease using the name "Marion", "Marion
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Fabrics", any other trade name, logo or design that includes or
represents "Marion" or "Marion Fabrics", or any other trademark or trade
name, logo or design utilized by the Marion Fabrics Business to the
Closing Date, except to the extent reasonably necessary to wind up
Seller's operation of the Marion Fabrics Business, collect the accounts
receivable of Seller with regard to the Marion Fabrics Business and
consummate transactions with respect to the Bill and Hold Inventory.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that the following
representations and warranties are true and correct as of the date hereof
and will be true and correct as of the Closing Date except for changes in
the ordinary course of Seller's business and other changes which are not
material, either individually or in the aggregate:
5.1 Organization. Seller is duly organized, validly existing
and in good standing under the laws of the State of Delaware, has full
corporate power and authority to conduct its business as it is presently
being conducted and to own and lease its properties and assets, including
the Purchased Assets. Seller is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
nature of Seller's activities or properties owned or leased in connection
with the Marion Fabrics Business makes qualification as a foreign
corporation necessary. Each jurisdiction in which Seller is so qualified
to do business as a foreign corporation in connection with the Marion
Fabrics Business is listed on Schedule 5.1.
5.2 Authorization. Seller has all necessary corporate power
necessary to execute and deliver this Agreement, to consummate the
transactions contemplated hereby and to perform its obligations hereunder.
This Agreement has been duly executed and delivered by Seller and is the
legal, valid and binding obligations of Seller enforceable against it in
accordance with its terms except as such enforceability may be limited by
(i) bankruptcy, insolvency, moratorium, reorganization and other similar
laws affecting creditors' rights generally and (ii) the general principles
of equity, regardless of whether asserted in a proceeding in equity or at
law.
5.3 No Conflict or Violation; Consents. Except as set forth on
Schedule 5.3, neither the execution, delivery or performance of this
Agreement nor the consummation of the transactions
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contemplated hereby will result in (a) a violation of or a conflict with
any provisions of the Certificate of Incorporation or bylaws of Seller,
(b) to the best of Seller's knowledge, a breach of, or a default under,
or the creation of any right of any party to accelerate, terminate or
cancel, any Assumed Contract, Permit, authorization or concession
relating to the Marion Fabrics Business to which Seller is a party or by
which any of the Purchased Assets are bound, (c) a violation by Seller
of any Laws which violation could have an adverse effect on the
transactions contemplated hereby, or (d) an imposition of any material
Encumbrance, restriction or charge on the Marion Fabrics Business or an
any of the Purchased Assets. Except as set forth on Schedule 5.3, to the
best of Seller's knowledge, no consent, approval or authorization of, or
declaration, filing or registration with, any Authority, 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 and the consummation of the transactions contemplated hereby.
5.4 Title to Assets. Except as set forth on Schedule 5.4
hereto, and except for liens arising from current taxes not yet due and
payable, Seller has good and marketable title to all of the Purchased
Assets free and clear of any Encumbrances. Except for this Agreement,
contracts relating to the sale of Inventory in the ordinary course of
business, or as otherwise described on Schedule 5.4, Seller is not a party
to any contract or obligation whereby an absolute or contingent right to
purchase, obtain or acquire any rights in any of the Purchased Assets or
the Marion Fabrics Business has been granted to anyone. To the best of
Seller's knowledge, the Purchased Assets constitute and include all the
property, assets and rights necessary to conduct the Marion Fabrics
Business in the ordinary course, consistent with past practice. Upon
consummation of the transactions contemplated hereby, Buyer will acquire
good title to all of the Purchased Assets owned by Seller, free and clear
of any Encumbrances, except for Encumbrances included in the Assumed
Liabilities or which are specifically identified on Schedule 5.4.
5.5 Real and Leased Property. Schedule 5.5 sets forth a
complete and correct list and brief description as of the date hereof of
all Real Property and the zoning applicable to such Real Property. To the
best of Seller's knowledge, Seller has received no notice of any pending
levies, liens or special assessments to be made against the Real Property
by any Authority. There are no sale contracts, lease agreements, options
to purchase or rights of first refusal with respect to any aspect of the
Real Property now in effect between the Seller and any party other than the
Buyer. If any Real Property contains any improvements, the Real Property
is insured against
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fire and other casualties in an amount not less than the full
replacement value of such improvements and Seller shall maintain or
cause to be maintained such insurance in full force and effect until and
including the Closing Date. There are no taxes, assessments or levies
of any type whatsoever arising out of or in connection with the Real
Property or the operation thereof, other than those for the calendar
year of the Closing, which are past due or delinquent. To the best of
Seller's knowledge, all Permits which are necessary to permit the use of
all Real Property as it is currently used and in accordance with this
Agreement have been obtained and are in full force and effect. Except
as set forth on Schedule 5.5, Seller owns good and marketable fee simple
title to the Real Property free and clear of all liens, easements,
restrictions, encumbrances, covenants and agreements or other
limitations and the improvements located on the Real Property, if any,
do not encroach upon the land of others.
5.6 Leased Property. Schedule 5.6 sets forth a complete and
correct list and brief description of Leased Property. Each of the leases
listed on Schedule 5.6 hereto is in full force and effect and constitutes a
legal, valid and binding obligation of the Seller. Each lease which
requires the consent or authorization of the lessor in order to affect the
assignment or transfer of such lease of Lease Property to the Buyer is
identified on Schedule 5.6 hereto. There is not, nor has there been, under
any lease of Leased Property, any material default of the Seller, or, to
the best of Seller's knowledge, of any other parties thereto (or any event
or condition which will with notice or lapse of time or both would
constitute a default) and to the best of Seller's knowledge, Seller has in
all material respects performed substantially all of the obligations
required to be performed by it through the date hereof with respect to the
Leased Property. Such Leased Property constitutes all leases, subleases or
other occupancy agreements pursuant to which Seller occupies or uses Real
Property in connection with the Marion Fabrics Business. Seller enjoys
peaceful and undisturbed possession of all the Leased Property. With
respect to each such Leased Property:
a) Seller will transfer to Buyer at the Closing of its
interest in each Leased Property, subject to obtaining any
required consent with respect thereto;
b) To the best of Seller's knowledge, there are no pending
or threatened condemnation proceedings with respect to the
Leased Property, or pending or threatened litigation or
administrative actions relating to the Leased Property;
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c) There are no subleases, licenses, options, rights,
concessions or other agreements or arrangements, written or
oral, pursuant to which Seller has granted to any person the
right to use or occupy such Leased Property or any portion
thereof or interest therein;
d) To the best of Seller's knowledge, Seller has not
received notice of any special assessment relating to the
Leased Property and there is no pending or threatened special
assessment;
e) To the best of Seller's knowledge, the Leased Property
has received all material approvals required in connection
with Seller's use of the Leased Property from all Authorities
(including licenses and Permits and a certificate of
occupancy or other evidence of lawful occupancy of each such
Lease Property) and has been operated and maintained by the
Seller in all material respects in accordance with applicable
laws, rules and regulations.
In connection with the Leased Property located at Marion, North
Carolina, known as the Etowah warehouse, as more particularly described in
that Lease Agreement between Seller and Etowah Warehouse, Inc. dated
February 6, 1992 (the "Etowah Property"), the lessor of that property prior
to the Closing shall havereviewed the present condition of the improvements
at the Etowah Property and confirmed in writing to Seller and Buyer that
there are no maintenance obligations in connection with that property based
on its present condition.
5.7 Intellectual Property Rights. Schedule 5.7 sets forth
(including, where applicable, the federal registration number and the date
of registration or application for registration and the name in which
registration was applied for) information concerning (a) all of Seller's
trademarks, trade names and service marks used in the conduct of the Marion
Fabric Business, all of Seller's registrations of trademarks and of other
marks, trade names or other trade rights used in the conduct of the Marion
Fabrics Business, and all pending applications therefor used in connection
with the Marion Fabrics Business, and (b) all other trademarks and other
marks, trade names and logos and designs whether or not registered,
including, without limitation, all rights of Seller to the names "Marion",
"Marion Fabrics" and any and all other names associated with, derived from
or used in connection with the distribution of any Product and all goodwill
associated therewith (all of the items referred to as "Intellectual
Property Rights"). Seller owns (or, as set forth on Schedule 5.7,
possesses licenses or other rights to use) all
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Intellectual Property Rights now used in the Marion Fabrics Business and
has taken all appropriate action it deemed reasonably necessary to
protect the Intellectual Property Rights of the Marion Fabrics Business.
To Seller's knowledge, Schedule 5.7 also sets forth all computer
software used by Seller in the conduct of the Marion Fabric Business
and/or offered by the Marion Fabric Business to its customers for use in
connection with or as part of any product now or previously sold by the
Marion Fabrics Business, including, without limitation, all computer
software licensed to Seller and used in the Marion Fabrics Business and
all computer software licenses and rights pursuant to the computer
software licenses related to such licensed computer software.
5.8 Contracts and Commitments. Except as set forth on
Schedule 5.8 hereto, to Seller's knowledge the Assumed Contracts include
all Contracts which are material to the Marion Fabrics Business and except
for the Assumed Contracts and those Contracts set forth on Schedule 5.8
hereto, Seller was not a party to or bound by on December 30, 1994, or is
not currently a party to or bound by, any material Contract of any kind to
be performed after the Closing Date which relates to or is used in the
conduct of the Marion Fabrics Business. Except as set forth on Schedule
5.8, (a) the Assumed Contracts are legal, valid, binding, enforceable in
every material respect against Seller and, to the knowledge of Seller,
against each other party thereto (except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium, reorganization and other
similar laws affecting creditors' rights generally and (ii) the general
principles of equity, regardless of whether asserted in a proceeding in
equity or at Law) and in full force and effect; (b) to the knowledge of
Seller, except for required consents to the assignment thereof which have
not been obtained, the Assumed Contracts will continue to be legal,
binding, enforceable in every material respect (except as such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting creditors' rights generally
and (ii) the general principles of equity, regardless of whether asserted
in a proceeding in equity or at law) and in full force and effect on
identical terms following the Closing Date. To Seller's knowledge, Seller
has provided Buyer with a copy of all Assumed Contracts that are not
located at a Purchased Location.
5.9 Liabilities. Except as set forth on Schedule 5.9, with
regard to the Marion Fabrics Business, Seller to its knowledge has no
material liabilities or obligations (absolute, accrued, contingent or
otherwise) except (i) liabilities that are reflected and reserved against
on the Books and Records that have not been paid or discharged since the
date thereof, (ii)
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liabilities incurred since December 30, 1994 in the ordinary course of
business consistent with past practice and in accordance with this
Agreement, and (iii) liabilities referred to in the Schedules hereto.
5.10 Litigation. To the knowledge of Seller, except as set
forth on Schedule 5.10, there is no charge, complaint, action, order, writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, labor dispute, arbitral action or any investigation
(collectively, "Actions") pending or threatened or anticipated against,
relating to or affecting (i) the Marion Fabrics Business, the Purchased
Assets, or the operation of the Marion Fabrics Business as currently
operated, or (ii) the transactions contemplated by this Agreement or before
or by any Authority, any of which would reasonably be expected to have a
material adverse effect on the Purchased Assets. Seller is not in default
with respect to any judgment, order, writ, injunction or decree of any
Authority relating to the Marion Fabrics Business, and there are no
unsatisfied judgments against Seller with respect or relating to the Marion
Fabrics Business.
5.11 Labor Matters. There are no collective bargaining
agreements with any labor organization, group or association to which
Seller is a party covering or affecting any employees of the Marion Fabrics
Business.
5.12 Compliance with Law; Permits. Except as otherwise
specifically identified in Section 5.14 and the Schedules thereto and on
Schedule 5.10 and Schedule 5.12, (i) to Seller's knowledge Seller is in
compliance in all material respects with all applicable Laws relating to
the Marion Fabrics Business the failure to comply with which could result
in any material liability being imposed on Seller or Buyer and (ii) Seller,
with respect to the Marion Fabrics Business has not, to its knowledge,
received any written notice to the effect that, or otherwise been advised
that, it is not in compliance with any of such Laws, and Seller has no
knowledge of any currently existing circumstances that are likely to result
in violations of any such Laws which could, in any one case or in the
aggregate, have a material adverse effect on the Marion Fabrics Business or
the Purchased Assets. To Seller's knowledge, it has all Permits,
authorizations and approvals, each of which is currently valid and in full
force and effect, necessary to carry on the Marion Fabrics Business, which
Permits, authorizations and approvals are set forth on Schedule 5.12.
5.13 Taxes. All federal, state, local, foreign and any other
taxes, assessments, fees and other governmental charges with respect to the
employees, properties, assets, income or
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franchises of the Seller relating to the Marion Fabrics Business shown
on such returns and reports to be due and payable, or which, to Seller's
knowledge, are otherwise due and payable, have been paid by Seller or
accrued or reserved against on Seller's financial statements or will be
properly accrued or reserved against on the books and records of Seller
as of the date of Closing. None of the Purchased Assets are property
which directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code. None of the Purchased
Assets are "tax-exempt use property" within the meaning of Section
168(h) of the Code.
5.14 Environmental Matters. Except as set forth in Schedule
5.14:
a) With respect to its ownership, use, maintenance and
operation of the Real Property and the conduct of the Marion
Fabrics Business, Seller, to its knowledge is in compliance
with and has not violated any applicable federal, state,
county or local statutes, laws, regulations, rules,
ordinances, codes, or Permits relating to environmental
matters, including by way of illustration and not by way of
limitation (i) the Clean Air Act, the Clean Water Act, the
Federal Water Pollution Control Act of 1972, the Resource
Conservation and Recovery Act of 1976, the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, the Toxic Substances Control Act (and any amendments or
extensions of any of them).
b) Without limiting the generality of Section 5.14(a),
Seller, to its knowledge, (i) has operated the Real Property,
and has at all time received, handled, used, stored, treated,
shipped and disposed of all hazardous substances, petroleum
products and wastes, in compliance with all applicable
environmental, health or safety statutes, ordinances,
orders, rules, regulations, permits and requirements, and
(ii) has removed from the Real Property, including the
subsurface, all hazardous substances, petroleum products
and wastes and any contamination to the Real Property
resulting therefrom.
c) There are no statutes, orders, rules, regulations or
Permits relating to environmental matters requiring any
material work, repairs, construction or capital expenditures
with respect to the Real Property.
d) Seller agrees to cooperate with Buyer, prior to and after
Closing, and to execute and file any all
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assignments, permit transfer applications and notices to
governmental agencies, reasonably necessary to transfer
environmental Permits currently in effect with respect to
the Real Property or keep such Permits in full force and
effect after the Closing under this Agreement.
e) There are not now any underground storage tanks located
on any Real Property and all such underground storage tanks
previously located on any Real Property were removed in
accordance with all applicable environmental laws and
regulations.
5.15 Insurance. Schedule 5.15 contains a complete and
accurate list of all policies or binders of fire, liability, title,
worker's compensation and other form of insurance (showing as to each
policy or binder the carrier, policy number, coverage limits, expiration
dates, and a general description of the type of coverage provided)
maintained by Seller and issued by any unaffiliated third party carrier
relating to the Marion Fabrics Business, the Purchased Assets, or
Personnel. All of such policies are sufficient for compliance with all
requirements of law relating to the Marion Fabrics Business. Seller is not
in default under any of such policies or binders, and Seller has not failed
to give any notice or to present any claim under any such policy or binder
in a due and timely fashion. Such policies and binders provide sufficient
coverage, in the reasonable opinion of Seller, for the risks insured
against, are in full force and effect on the date hereof and shall be kept
in full force and effect by Seller through the Closing Date.
5.16 Locations of Purchased Assets. The chief executive
office from which the Marion Fabrics Business is conducted is located in
Marion, North Carolina, the additional office from which such business is
conducted in located in New York, New York, and no Purchased Assets are
located anywhere other than at the Purchased Locations, except for the
Firestone Inventory, which is located at Seller's facility in Jefferson,
Georgia and at the facility of Greenwood Fabrics, Inc., and other Inventory
located at customer facilities or which is in transit.
5.17 Fixed Asset List. The Fixed Asset List attached hereto
as Schedule 5.17 sets forth a true and complete listing of all Fixed Assets
of the Marion Fabrics Business and their respective net book values as of
December 30, 1994. All of the Fixed Assets set forth on the Fixed Asset
List shall be included in the Purchased Assets and transferred to Buyer on
the Closing Date.
ARTICLE VI
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REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller are true and
correct as of the date hereof and will be true and correct as of the
Closing Date:
6.1 Organization of Buyer. Buyer is duly organized, validly
existing and in good standing under the laws of the State of South
Carolina, has full corporate power and authority to conduct its business as
it is presently being conducted and to own and lease its properties and
assets.
6.2 Authorization. Buyer has all necessary corporate power and
authority and has taken all corporate action necessary to enter into this
Agreement, to execute the Subordinated Promissory Note, to consummate the
transactions contemplated hereby and to perform its obligations hereunder,
and no other proceedings on the part of Buyer are necessary to authorize
this Agreement and the transactions contemplated hereby. This Agreement,
the Subordinated Promissory Note and the other documents to be executed by
Buyer in connection herewith have been duly executed and delivered by Buyer
and are legal, valid and binding obligation of Buyer, enforceable against
it in accordance with their respective terms, except as such enforceability
may be limited by (i) bankruptcy, insolvency, moratorium, reorganization
and other similar laws affecting creditors' rights generally and (ii) the
general principles of equity, regardless of whether asserted in a
proceeding in equity or at law.
6.3 No Conflict or Violation. Neither the execution, delivery
or performance of this Agreement, the Subordinated Promissory Note nor the
consummation of the transactions contemplated hereby will result in (a) a
violation of or a conflict with any provision of the Articles of
Incorporation or bylaws of Buyer, (b) a breach of, or a default under, any
term or provision of any contract, agreement, indebtedness, lease,
commitment, license, franchise, permit, authorization or concession to
which Buyer is a party, which breach or default would have a material
adverse effect on the business or financial condition of Buyer, taken as a
whole, or its ability to consummate the transactions contemplated hereby
or (c) a violation by Buyer of any Laws, which violation would have a
material adverse effect on the business or financial condition of Buyer,
taken as a whole, or its ability to consummate the transactions
contemplated hereby.
6.4 Consents and Approvals. Except as set forth on Schedule
8.2, no consent, approval or authorization of, or declaration,
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filing or registration with, any governmental or Authority, or any other
person or entity, is required to be made or obtained by Buyer in
connection with the execution, delivery and performance of this
Agreement, the Subordinated Note and the consummation of the
transactions contemplated hereby.
6.5 Brokers. Except for Bainbridge, Connolly & Leopold, Inc.,
the fees for which are to be paid by Buyer, Buyer has no retained any
broker, finder, investment banker, or financial advisor in connection with
this Agreement or any transaction contemplated hereby, to which Seller may
be held liable for any fees or other compensation.
ARTICLE VII
CONDUCT OF BUSINESS PENDING CLOSING
Except as expressly otherwise provided herein or as approved in
writing by Buyer, Seller covenants and agrees that, between the date hereof
and the Closing Date:
7.1 Conduct of Business. Seller shall use its best efforts to
carry on the Marion Fabrics Business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent with such business, use reasonable efforts to preserve
intact its present business organization, keep available the services of
its present officers and employees (other than Robert J. Tisdale), and
preserve its goodwill and its relationships with customers, suppliers,
lenders and other having business dealings with it.
7.2 Maintenance of Properties. Seller will use its best efforts
to maintain the properties and assets of the Marion Fabrics Business in
good operating condition, consistent with its prior business practices,
ordinary wear and tear excepted.
7.3 Insurance. Seller will maintain and keep in full force and
effect all of the insurance set forth on Schedule 5.15 hereof or other
insurance equivalent thereto in all material respects.
7.4 Amendment of Charter; Corporate Existence. Seller will not
amend its Certificate of Incorporation or Bylaws relating to the sale of
any Purchased Assets, and Seller will maintain its corporate existence and
powers.
7.5 Disposition of Assets. Seller will not sell, mortgage,
lease, transfer or dispose of any of the Purchased Assets or any interest
therein other than Inventory in the ordinary course of business or sell or
transfer, mortgage, pledge or subject to any
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lien, charge or other encumbrance, any of the Purchased Assets.
7.6 Books and Records. The books and records of Seller relating
to the Marion Fabrics Business will be maintained in the usual, regular and
ordinary course of business on a basis consistent with prior years.
ARTICLE VIII
COVENANTS AND ADDITIONAL AGREEMENTS
Each of Seller and Buyer covenant and agree with each other as
follows:
8.1 Investigation of Buyer. Between the date of this Agreement
and the Closing. Seller, in its sole discretion, shall (i) allow Buyer and
its Representatives, during regular business hours, to make such inspection
of the Purchased Assets and to inspect and make copies of Books and records
or other information requested by Buyer and related to the operation of the
business of the Marion Fabrics Business, including historical financial
information concerning the Marion Fabrics Business and (ii) furnish to
Buyer upon request (a) all such additional documents and information with
respect to the affairs of the Marion Fabrics Business, or (b) access to
Personnel, customers and suppliers of the Marion Fabrics Business and to
the Marion Fabrics Business' Accountant and its Representatives.
8.2 Consents and Best Efforts. As soon as practicable, the
parties hereto will commence all reasonable action and shall use their best
efforts to obtain all applicable Permits, consents, approvals and
agreements of, and to give all notices and make all filings with, any third
parties or Authorities as may be necessary to authorize, approve or permit
the consummation of the transactions provided for hereby on or prior to the
Closing Date. Seller shall pay, if necessary, any reasonable fees required
to obtain any consent of the lessors to the assignment or sublease of any
of the leases listed on Schedule 1.1(d) (excluding the lease with respect
to the Etowah Property).
8.3 Publicity. Unless this Agreement is sooner terminated
pursuant hereto, from and after execution of this Agreement until Closing,
no press release, public statement or announcement with respect to the
transactions contemplated by this Agreement shall be made except by Seller
or with Seller's prior written approval.
8.4 Bill and Hold Inventory. All Bill and Hold Inventory shall
be shipped by Buyer to customers that are purchasers
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thereof F.O.B. from the Purchased Location at which such Bill and Hold
Inventory is located as instructed by said customers. Schedule 8.4
hereto sets forth a true and complete list of all Bill and Hold
Inventory of Seller as of February 6, 1995 (Schedule 8.4 shall be
updated as of the Closing Date), together with the identity of the
purchaser thereof, and Seller will transfer possession of all Bill and
Hold Inventory, other than that which has been duly delivered to the
appropriate customer, to Buyer on the Closing Date. Buyer agrees that
(i) it shall keep the Bill and Hold Inventory free from any damage or
loss, whether caused by fire, water, theft or otherwise, (ii) as between
Buyer and Seller, it shall assume the risk of loss with respect to the
Bill and Hold Inventory, and (iii) it shall indemnify and hold Seller
harmless from and against any claims, liability, loss, damage, or
expense, including, without limitation, any attorney's fees, incurred or
suffered by Seller on account of any damage to or loss of the Bill and
Hold Inventory. No later than the tenth business day of each month after
the Closing Date, Buyer will deliver a report to Seller, in a form
reasonably acceptable to Seller, stating the date, amount and
destination of Bill and Hold Inventory shipped during the preceding
month and the amount of Bill and Hold Inventory remaining in Buyer's
possession with respect to each customer.
8.5 Employee Matters. Seller shall permit Buyer to employ any
employee previously employed by Seller in the operation of the Marion
Fabrics Business, but Buyer shall have no obligation to employ any such
person. Seller shall pay when due to all employees of the Marion Fabrics
Business, all compensation, bonus, severance, vacation and holiday
compensation, worker's compensation or other employment benefits which have
accrued to such employees prior to the Closing Date and which Seller is
legally obligated to pay; provided, however, that any liability for (i)
severance compensation that arises out of Buyer's failure to employ any
person employed by Seller in the operation of the Marion Fabrics Business
as of the Closing Date, except with respect to those individuals listed on
Schedule 8.5 attached hereto, (ii) any separation agreement with any person
employed by Seller in the operation of the Marion Fabrics Business who will
not be offered employment by Buyer entered into after November 11, 1994
that provides for payments in excess of Seller's standard separation policy
or (iii) any liability arising under or with respect to any employment
agreement not listed on Schedule 1.1(a) or 5.8 shall be a liability of
Buyer and shall be deemed an Assumed Liability.
8.6 No Mergers, Consolidations, Sale of Assets. Prior to the
earlier to occur of the Closing Date or the termination of this Agreement
pursuant to Section 11.1 hereof, Seller agrees
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that (i) it will not enter into or conduct any discussions or
negotiations, directly or indirectly, with any other potential purchaser
of the Purchased Assets or any material portion thereof, or furnish any
information to any other potential purchaser with respect to the
acquisition of the Purchased Assets or any portion thereof, (ii) it will
not take any action, directly or indirectly, designed to solicit,
initiate or encourage the submission of any proposal relating to the
acquisition of the Purchased assets or any material portion thereof by
any other party, and (iii) in the event that Seller receives an
unsolicited offer for such a transaction or obtains information that
such an offer is likely to be made, Seller will immediately provide
Buyer with notice thereof as soon as practical after receipt, including
the identity of the prospective purchaser or soliciting party and the
terms of any such offer. Seller will instruct its Representatives and
Affiliates to refrain from engaging in any of the activities or
discussions described above.
8.7 Further Assurances. Buyer and the Seller shall use
commercially reasonable efforts to take all action and to do all things
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this agreement (including, without limitation,
satisfying the closing conditions set forth in Articles 8 and 9 hereof).
Following the Closing, the parties hereto shall furnish to each other and
their respective Representatives such necessary and available information
as may reasonably be requested in connection with tax, accounting and
similar matters relating to the Purchased Assets or the business of the
Marion Fabrics Business prior to or after the Closing. In addition, each
of the parties agrees to execute such documents and take such actions as
may be reasonably requested by the other party or its Representatives and
otherwise cooperate with the other party and its Representatives in
connection with any filings required to be made with the Securities
Exchange Commission or in order to register any trademarks or trade names
used by the Marion Fabrics Business or otherwise as a consequence of the
transactions contemplated by this Agreement. Seller agrees to promptly
deliver or remit to Buyer any assets that are Purchased Assets that Seller
may have, or that may come into the possession of Seller after the Closing,
including, but not limited to, any payments received by Seller in respect
of deposits or prepaid items that are Purchased Assets pursuant to this
Agreement. Buyer agrees to deliver or remit promptly to Seller any
payments, with respect to accounts receivable or otherwise, not included in
the Purchased Assets that may be delivered to Buyer after the Closing.
Each party agrees that any cash or other assets required to be delivered or
remitted to the other party pursuant to this Section 8.7 shall be
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held in trust by such party until they are so delivered or remitted and
shall not be deemed assets of such party for any purpose, or commingled
with other assets of such party until so delivered or remitted.
8.8 Bulk Sales. It may not be practicable to comply or attempt
to comply with the procedures of the "Bulk Sales Act" or similar law of any
or all of the states in which the Purchased Assets are situated or of any
other state which may be asserted to be applicable to the transactions
contemplated hereby. Accordingly, to induce Buyer to waive any
requirements for compliance with any or all of such laws, Seller hereby
agrees to reimburse Buyer for any costs or damages incurred by Buyer
arising out of or resulting from the failure of Buyer or Seller to comply
with any such laws or any similar law or that may be asserted to be
applicable and shall such obligation shall survive until the expiration of
any applicable statute of limitations.
8.9 Books and Records. Buyer and Seller agree that with the
exception of certain records that are necessary to be retained in the tax
records of Seller or for the collection of accounts receivable by Seller,
copies of which shall be provided to Buyer, all original Books and Records
shall be retained at the Purchased Locations. Seller and Buyer agree that
each will cooperate with and make available to the other party, during
normal business hours, all Books and Records, information and Personnel
(without substantial disruption of employment) retained and remaining in
existence after the Closing Date that are necessary or useful in connection
with any tax return, inquiry, the collection of accounts receivable by
Seller, audit, 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. Without limiting the
foregoing, Buyer and Seller shall retain, until the applicable statutes of
limitations (including any extensions) have expired, copies of Books and
Records related to taxes for all tax periods or portions thereof ending
before or including the Closing Date and shall not destroy or otherwise
dispose of any such records without first providing the other party with a
reasonable opportunity to review and copy the same. The party requesting
any such Books and Records or other information shall bear all of the
out-of-pocket costs and expenses (but excluding reimbursement for salaries
and employee benefits) reasonably incurred in connection with providing
such Books and Records or other information.
8.10 Nondisclosure Agreement. That certain Nondisclosure
Agreement of even date herewith, between Buyer and Seller shall remain in
full force and effect in accordance with its terms from
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and after the execution of this Agreement.
ARTICLE IX
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 of which may be waived by
Seller:
9.1 Representations, Warranties and Covenants. All
representations and warranties of Buyer contained in this Agreement shall
be true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing Date as though made on the Closing
Date, and Buyer shall have performed in all material respects all
agreements and covenants required hereby to be performed by it prior to or
at the Closing Date.
9.2 Consents. All material consents, approvals and waivers from
Authorities and other parties necessary to permit the consummation of the
transactions contemplated hereby shall have been obtained and Seller's
Board of Directors shall have authorized the execution of this Agreement by
Seller and the consummation by Seller of the transactions contemplated
hereby.
9.3 No Governmental Proceedings or Litigation. No Actions by
any Authority shall have been instituted or threatened for the purpose of
enjoining or preventing the transactions contemplated by this Agreement or
that questions the validity or legality of the transactions contemplated
hereby.
9.4 Certificates and Other Documents. Buyer will furnish Seller
with such certificates of its officers and others to evidence compliance
with the conditions set forth in this Article 9 as may be reasonably
requested by Seller, which shall include, but not be limited to:
a) A certificate executed by the Secretary or an Assistant
Secretary of Buyer certifying as of the Closing Date (i) a
true and complete copy of the bylaws of Buyer, (ii) a true
and complete copy of the resolutions of the board of
directors of Buyer authorizing the execution, delivery and
performance of this Agreement by Buyer and the consummation
of the transactions contemplated hereby, and (iii) incumbency
matters; and
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b) A copy of the Certificate of Incorporation of Buyer and
all amendments thereto, certified as of a recent date by the
Secretary of State of South Carolina.
9.5 Opinion of Counsel. Buyer shall have delivered to Seller an
opinion of Demo & Rainey, counsel to Buyer, dated as of the Closing Date,
in form and substance substantially the same as previously agreed to by the
parties hereto and initialed by the parties hereto to indicate such
agreement.
ARTICLE X
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate any of the transactions
provided for hereby are subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions each of which may be
waived by Buyer:
10.1 Representations, Warranties and Covenants. All
representations and warranties of Seller contained in this Agreement shall
be true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing Date as though made on the Closing
Date, except for changes in the ordinary course of business and other
changes which are not material, either individually or in the aggregate,
and Seller shall have performed in all material respects all agreements and
covenants required hereby to be performed by Seller prior to or at the
Closing Date.
10.2 Financing. Buyer shall have received a commitment for the
financing of the Purchase Price upon terms substantially similar to, or
more favorable to Buyer than, those set forth in that letter to Buyer from
BNY Financial Corporation dated February 1, 1995.
10.3 Consents. All material consents, approvals and waivers
from Authorities necessary to permit the consummation of the transactions
contemplated hereby shall have been obtained. Seller shall have taken all
corporate action necessary to execute and deliver this Agreement, to
consummate the transactions contemplated hereby and to perform its
obligations hereunder.
10.4 No Governmental Proceedings or Litigation. No Action by
any Authority shall have been instituted or threatened for the purpose of
enjoining or preventing the transactions contemplated by this Agreement or
that questions the validity or legality of the transactions contemplated
hereby.
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10.5 Opinion of Seller's Counsel. Seller shall have delivered
to Buyer an opinion of Schell Bray Aycock Abel & Livingston L.L.P., counsel
to Seller, dated as of the Closing Date, in form and substance
substantially the same as previously agreed to by the parties hereto and
initialed by the parties hereto to indicate such agreement.
10.6 Certificates and other Documents. Seller will furnish
Buyer with such certificates of its officers and others to evidence
compliance with the conditions set forth in this Article X as may be
reasonably requested by Buyer, which shall include, but not be limited to:
a) A certificate executed by the Secretary or an Assistant
Secretary of Seller certifying as of the Closing Date (i) a
true and complete copy of the bylaws of Seller; (ii) a true
and correct copy of the resolutions of the board of directors
of Seller authorizing the execution, delivery and performance
of this Agreement by Seller and the consummation of the
transactions contemplated hereby; and (iii) incumbency
matters;
b) A copy of the Certificate of Incorporation of Seller and
all amendments thereto, certified as of a recent date by the
Secretary of State of the State of Delaware;
c) A certificate of the applicable Secretary of State
certifying the good standing of Seller in its state of
incorporation and all states where it is qualified to do
business with respect to the Marion Fabrics Business; and
d) A certificate of non-foreign status with respect to
Seller that Seller is in compliance with Section 1445 of the
Code.
10.7 Release of Liens. Seller shall have delivered evidence of
the release of (or that upon the Closing that there will be a release of)
all Encumbrances on any of the Purchased Assets, other than (a) Assumed
Liabilities; (b) Encumbrances expressly referred to in the form of the Deed
for the Real Property which has been approved by Buyer as evidencing only
permitted title exceptions; and (c) liens for property for ad valorem taxes
not yet due.
10.8 Title Insurance. Buyer shall have made a good faith effort
to receive and shall have received a commitment, dated as of the Closing
Date, for title insurance pursuant to which title
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insurance company(s) agree(s) to insure Buyer, as owner (and any lenders
to Buyer, as applicable and requested by Buyer, as mortgagee) of good
and marketable fee title to each parcel of the Real Property, providing
coverage for each parcel of the Real Property in an amount equal to
Buyer's estimate of the fair market value thereof (or, for mortgagee
coverage, such greater amount as may be required by a lender to Buyer).
Seller shall execute and deliver such standard affidavits of title as
may be required by the title insurance company(s) for the issuance of
such title insurance policies.
10.9 Environmental Audit. The enviromental audit of the Real
Property prepared on behalf Buyer's lender prior to the Closing shall not
state that there is any material environmental contamination or liability
with respect to the Real Property.
ARTICLE XI
MISCELLANEOUS
11.1 Termination. This Agreement may be terminated (i) by
Seller and Buyer at any time upon written agreement signed by both parties,
(ii) by Seller if the requirements of Article 9 hereof have not been
satisfied on or prior to the Closing Date, (iii) by Buyer if the
requirements of Article 10 hereof have not been satisfied on or prior to
the Closing Date, or (iv) by written notice of either Buyer or Seller if
the Closing has not occurred on or before April 1, 1995.
11.2 Actions Upon Termination. In the event of any termination
of this Agreement:
a) Delivery of Documents. Each party will redeliver all
documents, work papers and other material of any other party
relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party
furnishing the same;
b) Expenses. Each party hereto shall pay its own (and its
respective Representatives') fees and expenses incurred in
connection with the negotiation, preparation, execution and
delivery of this Agreement and any other documents
contemplated hereby.
11.3 Survival of Representations. All statements contained in
any Exhibit, Schedule, certificate or instrument of conveyance delivered by
or on behalf of the parties pursuant to this Agreement or in connection
with the transactions contemplated hereby shall be deemed to be
representations and warranties by
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the parties delivering the same hereunder. The representations,
warranties, covenants and agreements of Seller and Buyer contained
herein and as provided in the preceding sentence shall survive the
Closing Date until the first anniversary of the Closing Date, without
regard to any investigation made by any of the parties hereto.
11.4 Assignment. Neither party to this Agreement may assign any
rights or obligations to any other party without the prior written consent
of the other party hereto. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.5 Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by
telecopy, receipt confirmed, electronic or digital transmission method; the
day after it is sent, if sent for next day delivery to a domestic address
by recognized overnight delivery service (e.g., Federal Express); and upon
receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent:
If to Buyer, addressed to:
Marion, Inc.
367 South Pine Street
Spartanburg, South Carolina 29302
Attention: Bernelle Demo
Telecopy: (803) 573-9803
with a copy to:
Bainbridge, Connally & Leopold
149 Lenox Place
Athens, Georgia 30606
Attention: Steve Stephens
Telecopy: (706) 369-7493
If to Seller, addressed to:
Texfi Industries, Inc.
5400 Glenwood Avenue
Suite 215
Raleigh, North Carolina 27612
Attention: Vice President-Finance
Telecopy: (919) 783-4739
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With copies to:
Mr. William L. Remley
Mentmore Holdings Corporation
1430 Broadway, 13th Floor
New York, New York 10018
Telecopy: (212) 391-1393
and
Schell Bray Aycock Abel & Livingston L.L.P.
1500 West Elm Street
Greensboro, North Carolina 27401
Attention: Doris R. Bray, Esq.
Telecopy: (910) 370-8830
or to such other place and with such other copies as either party may
designate as to itself by written notice to the others.
11.6 Governing Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the
internal laws of the State of North Carolina without reference to its
choice of law provisions.
11.7 Entire Agreement; Amendments and Waivers. This Agreement,
together with all Exhibits and Schedules hereto, constitutes 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. 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.
11.8 Expenses. Each party hereto shall pay its own legal,
accounting, out-of-pocket and other expenses incident to this Agreement and
to any action taken by such party in preparation for carrying this
Agreement into effect; provided, however, that, except as otherwise
specified herein, Buyer agrees that its expenses shall include (a) any
additional environmental surveys on any of the Purchased Locations, and (c)
any fees and expenses of Bainbridge, Connally & Leopold, Inc.
11.9 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 invalid, illegal or unenforceable
in any respect, then to the maximum extent
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permitted by law, such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement or any other such
instrument.
11.10 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.
11.11 Cumulative Remedies. All rights and remedies of either
party hereto are cumulative of each other and of every other right or
remedy such party may otherwise have at law or in equity, and the exercise
of one or more rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of other rights or remedies.
11.12 Reliance on Representations and Warranties. Seller
understands that Buyer, and for purposes of certain opinions to be
delivered at the Closing, Schell Bray Aycock Abel & Livingston L.L.P. and
Demo & Rainey, will rely upon the accuracy and truth of the representations
and warranties set forth in Article 5 and it hereby consents to such
reliance. Buyer understands that Seller, and for purpose of certain
opinions to be delivered at the Closing, Schell Bray Aycock Abel &
Livingston L.L.P. and Demo & Rainey, will rely upon the accuracy and truth
of the representations and warranties set forth in Article 6 and it hereby
consents to such reliance.
11.13 References. Whenever reference is made in this Agreement
to any Article, Section, Schedule or Exhibit, such reference shall be
deemed to apply to the specified Article or Section of this Agreement, the
specified Schedule to this Agreement or any Exhibit previously agreed to by
the parties hereto and initialed by the parties hereto to indicate such
agreement. All Schedules and Exhibits referenced in this Agreement shall
be deemed to be incorporated herein by reference.
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, all as of the day and year first above
written.
MARION, INC.
By: /S/ L. Terrell Sovey, Jr.
Title: President
-36-
<PAGE>
[CORPORATE SEAL]
Attest:
/S/ Bernelle Demo
Secretary
TEXFI INDUSTRIES, INC.
By: /S/ William L. Remley
Title: Vice Chairman and CEO
[CORPORATE SEAL]
Attest:
/S/ Braxton Schell
Assistant Secretary
-37-
AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT TO ASSET PURCHASE AGREEMENT, made and entered into
as of March 31, 1995, (the "Amendment") between TEXFI INDUSTRIES, INC.
("Texfi") and DECOTECH, L.C. (the "Buyers"), amending that Asset Purchase
Agreement between Texfi and Buyer (by assignment from Marion, Inc.) dated
as of February 10, 1995 (the "Asset Purchase Agreement").
WHEREAS, Texfi and Buyer have agreed to amend the Asset Purchase
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00)
and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agrees as follows:
1. The Asset Purchase Agreement is hereby amended by deleting
Subsection 2.3(ii) thereon in its entirety and substituting therefor the
following:
"(ii) Buyer shall deliver to Seller the Subordinated
Promissory Note in the original principal amount of $2,000,000;"
2. The Asset Purchase Agreement is hereby amended by deleting
Section 4.1 thereof in its entirety and substituting therefor the
following:
"4.1 Closing. Upon the terms and subject to the conditions
set forth herein, the closing of the transactions contemplated
herein (the "Closing") shall be held as of 5:00 P.M. local time
on March 31, 1995 (the "Closing Date") at the offices of Schell
Bray Aycock Abel & Livingston L.L.P., 230 North Elm Street,
Greensboro, North Carolina 27401, unless the parties hereto shall
otherwise agree. All proceedings to be taken and all documents
to be executed and delivered by the parties at the Closing shall
be deemed to have been taken and executed simultaneously, and no
proceeding shall be deemed taken nor any document executed and
delivered until all have been taken, executed and delivered."
3. The Asset Purchase Agreement is hereby amended by deleting
Section 4.2(b)(iii) thereof in its entirety and substituting therefor the
following:
"(iii) assignments of all Contract Rights included in the
Purchase Assets and subleases of equipment under certain
operating leases described in subsection (b) of the definition of
"Assumed Contracts."
4. Except as hereby modified or amended, the Asset Purchase
<PAGE>
Agreement shall continue in full force and effect unchanged.
5. This Amendment shall be construed in accordance with the laws
of the State of North Carolina and shall be binding upon and adhere to the
benefit of any assignee or successor in interest to the respective parties
hereto.
IN WITNESS WHEREOF, Texfi and Buyer have caused this Amendment to
be duly executed as of the date first above written.
TEXFI INDUSTRIES, INC.
By: /S/ Dane L. Vincent
Title: Vice President Finance,
Treasurer
DECOTECH, L.C.
By: Management Advisory
Services, Inc., Manager
By: /S/ L. Terrell Sovey, Jr.
Title: President
-2-
ASSIGNMENT AND ASSUMPTION OF ASSET PURCHASE AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF ASSET PURCHASE AGREEMENT (the
"Assignment") made and entered into as of the 31st day of March, 1995, by
and between Marion, Inc., a South Carolina corporation ("Marion") and
Decotech, L.C., a South Carolina limited liability company ("Assignee").
WHEREAS, Marion and Texfi Industries, Inc., a Delaware
corporation ("Texfi") are parties to that Asset Purchase Agreement dated
February 10, 1995 (the "Purchase Agreement"; capitalized terms used herein
and not otherwise defined shall have the meanings assigned thereto in the
Purchase Agreement); and
WHEREAS, Marion desires to assign, in connection with the winding
up and dissolution of its business, all of its rights and obligations under
the Purchase Agreement to Assignee, and Assignee desires to acquire the
rights and assume and perform the obligations and duties of Marion
thereunder; and
WHEREAS, pursuant to Section 11.4 of the Purchase Agreement, the
consent of Texfi is required in order for Marion to assign its rights and
obligations under the Purchase Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Marion hereby transfers and assigns to Assignee all of
Marion's rights, and delegates to Assignee all of Marion's obligations,
under the Purchase Agreement.
2. Assignee hereby accepts the assignment from Marion of all of
Marion's rights under the Purchase Agreement and hereby agrees to perform
all of Marion's obligations and assume all of Marion's liabilities arising
under the Purchase Agreement, as though Assignee had been named as "Buyer"
thereunder, including, without limitation, those set forth in Article VIII
of the Purchase Agreement.
3. Assignee makes the following representations and warranties
to Texfi:
(a) Organization of Assignee. Assignee is duly organized,
validly existing and in good standing under the laws of the State
of South Carolina, has full power and authority to conduct its
business as it is presently being conducted and to own and lease
its properties and assets.
(b) Authorization. Assignee has all necessary power and
authority and has taken all action necessary to enter into
<PAGE>
this Agreement, to execute the Subordinate d Promissory Note, to
consummate the transaction s contemplate d by the Purchase Agreement and
to perform its obligations thereunder, and no other proceedings n the
part of Assignee are necessary to authorize this Agreement or the
transaction s contemplate d by the Purchase Agreement. This Agreement,
the Subordinate d Promissory Note and the other documents to be executed
by Assignee in connection with the Purchase Agreement have been or will
be duly executed and delivered by Assignee and said documents and the
Purchase Agreement are, or when duly executed will be, legal, valid and
binding obligations of Assignee, enforceable against it in accordance
with their respective terms, except as such enforceabil ity may be
limited by (i) bankruptcy, insolvency, moratorium, reorganization and
other similar laws affecting creditors' rights generally and (ii) the
general principles of equity, regardless of whether asserted in a
proceeding in equity or at law.
(c) No Conflict or Violation. Neither the execution,
delivery or performance of this Agreement, the Subordinated
Promissory Note nor the consummation of the transactions
contemplated by the Purchase Agreement will result in (i) a
violation of or a conflict with any provision of the Articles of
Organization or Operating Agreement of Assignee, (ii) a breach
of, or a default under, any term or provision of any contract,
agreement, indebtedness, lease, commitment, license, franchise,
permit, authorization or concession to which Assignee is a party,
which breach or default would have a material adverse effect on
the business or financial condition of Assignee, taken as a
whole, or its ability to consummate the transactions contemplated
by the Purchase Agreement or (iii) a violation by Assignee of any
Laws, which violation would have a material adverse effect on the
business or financial condition of Assignee, taken as a whole, or
its ability to consummate the transactions contemplated by the
Purchase Agreement.
(d) Consents and Approvals. No consent, approval or
authorization of, or declaration, filing or registration with,
any government or Authority, or any other person or entity, is
required to be made or obtained by Assignee in connection with
the execution, delivery and performance of this Agreement, the
Purchase Agreement, the Subordinated Promissory Note or the
consummation of the transactions contemplated by the Purchase
Agreement.
(e) Brokers. Except for Bainbridge, Connolly & Leopold,
Inc., the fees for which are to be paid by Marion or Assignee,
Assignee has not retained any broker, finder, investment banker,
or financial advisor in connection with this Agreement or the
Purchase Agreement or any transaction contemplated thereby, to
which Texfi may be held liable for any fees or other
compensation.
4. This Assignment shall be construed in accordance with the
2
<PAGE>
laws of the State of North Carolina and shall be binding upon and adhere
to the benefit of any assignee or successor to the respective parties
hereto.
IN WITNESS WHEREOF, the undersigned have caused this Assignment
to be executed by their duly authorized representatives as of the date
first above written.
MARION, INC.
By: /S/ L. Terrell Sovey, Jr.
L. Terrell Sovey, Jr.
Incorporator
DECOTECH, L.C.
By: Management Advisory Services,
Inc., Manager
By: /S/ L. Terrell Sovey, Jr.
L. Terrell Sovey, Jr.
President
Texfi hereby consents to the assignment of rights and obligations
under the Purchase Agreement from Marion to Assignee as provided herein.
TEXFI INDUSTRIES, INC.
By: /S/ Dane L. Vincent
Title: Vice President Finance,
Treasurer
3
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE MAKER AND THE PAYEE
HEREUNDER ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT SUBORDINATION
AGREEMENT AMONG TEXFI INDUSTRIES, INC. DECOTECH, L.C. AND BNY FINANCIAL
CORPORATION.
SUBORDINATED PROMISSORY NOTE
$2,000,000.00 March 31, 1995
FOR VALUE RECEIVED, DECOTECH, L.C., a South Carolina limited
liability company (the "Maker"), promises to pay to the order of TEXFI
INDUSTRIES, INC. (the "Payee"), the sum of Two Million and 00/100
($2,000,000.00) Dollars. Payments of principal in the amount of
$666,666.67 each shall be due and payable on July 29, 1995, August 28, 1995
and September 27, 1995, for a total of three payments. No interest shall
accrue on the unpaid principal under this Note from the date hereof until
July 1, 1995, except in the event of acceleration hereunder. From and
after July 1, 1995, the unpaid principal amount of this Note shall bear
interest at the fixed rate of ten percent (10%) per annum. Interest in
arrears shall be paid with each installment of principal.
Any remaining unpaid principal and interest hereunder shall be
due and payable on September 28, 1995.
All amounts due under this Note are payable at par in lawful
money of the United States of America, at Suite 215, 5400 Glenwood Avenue,
Raleigh, North Carolina 27612 or at such other address as the Payee may
direct.
Maker hereby covenants and agrees that, until all amounts due and
owing under this Note shall have been paid in full, it will duly observe
and perform the following covenants and agreements:
(i) No Dividends. Maker will not declare, pay or make any
dividend or distribution (in cash, property or obligations) on
any shares of stock (including any interest payment with respect
to dividends or other payments owing with respect to stock),
including any preferred stock (now or hereafter outstanding), of
Maker or apply any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of any
stock, including any preferred stock (now or hereafter
outstanding), of Maker.
(ii) Senior Debt. Except for that Promissory Note executed
by Maker in favor of First Union National Bank of North Carolina
in the original principal amount of $1,000,000, dated March ,
1995, that Promissory Note executed by Maker in favor of BNY
Financial Corporation ("BNY") in the original principal amount of
$8,000,000, dated March , 1995 and amounts owing by Maker to
BNY under that Factoring Agreement
<PAGE>
between Maker and BNY dated March , 1995 (collectively
referred to as the "Senior Indebtedness"), Maker will not
incur any indebtedness for borrowed money senior in right of
payment to this Note and the obligations of Maker hereunder.
The occurrence of any of the following shall constitute an Event
of Default under this Note (an "Event of Default"): (a) the failure of
Maker to make any payment of principal when due under this Note; (b) the
institution of proceedings by Maker under any state insolvency law or under
any federal bankruptcy law; (c) Maker seeks or consents to the appointment
of a receiver, liquidator, assignee, trustee, conservator, sequestrator,
legal custodian or other similar official for Maker or of any substantial
part of its property or Maker makes an assignment for the benefit of
creditors; (d) the institution of proceedings against Maker under any state
insolvency law or under any federal bankruptcy law, if such proceedings are
not dismissed within twenty (20) days; (e) the occurrence of any default or
event of default on the part of Maker that is not waived or cured
(including specifically, but without limitation, defaults due to
nonpayment) under the terms of any agreement, document or instrument
pursuant to which Maker has incurred any indebtedness, which default would
permit acceleration of such indebtedness; (f) Maker fails or neglects to
comply with any covenant contained in this Note; (g) a merger or
consolidation involving Maker in which Maker is not the surviving entity or
in which the common stock of Maker is converted or exchanged; (h) a sale or
other transfer of all or substantially all of the Maker's assets; (i) the
sale or other transfer of fifty percent (50%) or more of the common capital
stock of Maker; or (j) a public offering of capital stock of the Maker
pursuant to a registration statement filed under the Securities Act of
1933, as amended.
Upon the occurrence of an Event of Default, the Payee may, at its
option and without notice, declare all principal and interest provided for
under this Note to be immediately due and payable. The Payee may waive any
Event of Default before or after it occurs and may restore this Note in
full effect without impairing the right to declare it due for a subsequent
default, this right being a continuing one. Upon acceleration, the
remaining unpaid principal balance of the indebtedness evidenced hereby and
all expenses due the Payee shall bear interest at a rate equal to thirteen
percent (13%) per annum.
All amounts received for payment of this Note shall be first
applied to any expenses due the Payee under this Note, then to accrued
interest and finally to the reduction of principal. The indebtedness
evidenced by this Note may be prepaid in its entirety at any time without
notice, and without penalty, and may be prepaid in part in multiples of
$10,000 without notice and without penalty
-2-
<PAGE>
at any time from time to time. Any prepayments shall reduce the final
payment(s) and shall not reduce or defer installments next due.
Maker hereby consents to any and all renewals, waivers,
modifications, or extensions of time (of any duration) that may be granted
by the Payee with respect to this Note and waives demand, presentment,
protest, notice of dishonor, and all other notices that might otherwise be
required by law.
If the date of any business due hereunder would otherwise fall on
a non-Business Day, such payment or expiration date shall be extended to
the next following Business Day with interest payable at the applicable
rate specified herein during such extension. "Business Day" shall mean any
day other than a Saturday, Sunday, or any day which shall be in Raleigh,
North Carolina a legal holiday or a day on which banking institutions are
authorized by law to close.
Maker agrees to pay reasonable attorneys' fees and all court and
other costs and expenses that the Payee may incur in enforcing this Note.
From and at all times after the date of this Note, and in
addition to all of the Payee's other rights and remedies against Maker,
Maker agrees to indemnify and hold harmless the Payee and each director,
officer, employee, agent of the Payee against any and all claims, losses,
damages, liabilities, costs and expenses of any kind or nature whatsoever
(including without limitation reasonable attorneys' fees, costs and
expenses) incurred by or asserted against the Payee or any such director,
officer, employee or agent from and after the date hereof, whether direct,
indirect or consequential, as a result of or arising from or in any way
relating to any suit, action or proceeding (including any inquiry or
investigation) by any Person other than Maker, whether threatened or
initiated, asserting a claim for any legal or equitable remedy against any
Person under any statute or regulation, including, but not limited to, any
federal or state securities laws, or under any common law or equitable
cause or otherwise, arising from or in connection with the negotiation,
preparation, execution or performance of this Note, whether or not the
Payee or any such director, officer, employee, agent or affiliate is a
party to any such action, proceeding, suit or the target of any such
inquiry or investigation; provided, however, that no indemnified party
shall have the right to be indemnified hereunder for any liability
resulting from the gross negligence or willful misconduct of such
indemnified party. All of the foregoing losses, damages, costs and
expenses of the Payee shall be payable by Maker upon demand by the Payee
and shall be additional
-3-
<PAGE>
obligations hereunder. "Person" shall mean a corporation, an association,
a joint venture, a partnership, an organization, an individual or a government
or political subdivision thereof or any government agency.
The validity and construction of this Note shall be determined
according to the laws of the State of North Carolina applicable to
contracts executed and performed within that state. If any provisions of
this Note should for any reason be invalid or unenforceable, the remaining
provisions hereof shall remain in full effect.
The provisions of this Note shall be binding upon and inure to
the benefit of the Payee, Maker and their respective heirs, personal
representatives, successors and assigns (to the extent assignable under the
provisions hereof). The provisions of this Note may be amended or waived
only by instrument in writing signed by the Payee and Maker and attached to
this Note.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
sealed in its name by its duly authorized corporate officers as of the day
and year first above written.
DECOTECH, L.C.
By: Management Advisory
Services, Inc.
By: /S/ L. Terrell Sovey, Jr.
President
-4-
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE MAKER AND THE PAYEE
HEREUNDER ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT SUBORDINATION
AGREEMENT AMONG TEXFI INDUSTRIES, INC. DECOTECH, L.C. AND BNY FINANCIAL
CORPORATION.
SUBORDINATED PROMISSORY NOTE
$300,000.00 March 31, 1995
FOR VALUE RECEIVED, DECOTECH, L.C., a South Carolina limited
liability company (the "Maker"), promises to pay to the order of TEXFI
INDUSTRIES, INC. (the "Payee"), the sum of Three Hundred Thousand and
00/100 ($300,000.00) Dollars. No interest shall be payable on the unpaid
principal under this Note, except in the event of acceleration hereunder.
All unpaid principal hereunder shall be due and payable on the
earlier of (i) the date upon which the payment with respect to the
adjustment of the Purchase Price (as that term is defined in that Asset
Purchase Agreement between Maker (by assignment from Marion, Inc.) and
Payee dated as of February 10, 1995 (the "Purchase Agreement")) by Maker or
Payee, as appropriate, is due and payable pursuant to Section 3.2 of the
Purchase Agreement or (ii) April 30, 1995.
All amounts due under this Note are payable at par in lawful
money of the United States of America, at Suite 215, 5400 Glenwood Avenue,
Raleigh, North Carolina 27612 or at such other address as the Payee may
direct.
Maker hereby covenants and agrees that, until all amounts due and
owing under this Note shall have been paid in full, it will duly observe
and perform the following covenants and agreements:
(i) No Dividends. Maker will not declare, pay or make any
dividend or distribution (in cash, property or obligations) on
any shares of stock (including any interest payment with respect
to dividends or other payments owing with respect to stock),
including any preferred stock (now or hereafter outstanding), of
Maker or apply any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of any
stock, including any preferred stock (now or hereafter
outstanding), of Maker.
(ii) Senior Debt. Except for that Promissory Note executed
by Maker in favor of First Union National Bank of North Carolina
in the original principal amount of $1,000,000, dated March 31,
1995, that Promissory Note executed by Maker in favor of BNY
Financial Corporation ("BNY") in the original principal amount of
$8,000,000, dated March 31, 1995 and amounts owing by Maker to
BNY under that Factoring Agreement
<PAGE>
between Maker and BNY dated March 31, 1995 (collectively
referred to as the "Senior Indebtedness"), Maker will not
incur any indebtedness for borrowed money senior in right of
payment to this Note and the obligations of Maker hereunder.
The occurrence of any of the following shall constitute an Event
of Default under this Note (an "Event of Default"): (a) the failure of
Maker to make any payment of principal when due under this Note; (b) the
institution of proceedings by Maker under any state insolvency law or under
any federal bankruptcy law; (c) Maker seeks or consents to the appointment
of a receiver, liquidator, assignee, trustee, conservator, sequestrator,
legal custodian or other similar official for Maker or of any substantial
part of its property or Maker makes an assignment for the benefit of
creditors; (d) the institution of proceedings against Maker under any state
insolvency law or under any federal bankruptcy law, if such proceedings are
not dismissed within twenty (20) days; (e) the occurrence of any default or
event of default on the part of Maker that is not waived or cured
(including specifically, but without limitation, defaults due to
nonpayment) under the terms of any agreement, document or instrument
pursuant to which Maker has incurred any indebtedness, which default would
permit acceleration of such indebtedness; (f) Maker fails or neglects to
comply with any covenant contained in this Note; (g) a merger or
consolidation involving Maker in which Maker is not the surviving entity or
in which the common stock of Maker is converted or exchanged; (h) a sale or
other transfer of all or substantially all of the Maker's assets; (i) the
sale or other transfer of fifty percent (50%) or more of the common capital
stock of Maker; or (j) a public offering of capital stock of the Maker
pursuant to a registration statement filed under the Securities Act of
1933, as amended.
Upon the occurrence of an Event of Default, the Payee may, at its
option and without notice, declare all principal and interest provided for
under this Note to be immediately due and payable. The Payee may waive any
Event of Default before or after it occurs and may restore this Note in
full effect without impairing the right to declare it due for a subsequent
default, this right being a continuing one. Upon acceleration, the
remaining unpaid principal balance of the indebtedness evidenced hereby and
all expenses due the Payee shall bear interest at a rate equal to thirteen
percent (13%) per annum.
All amounts received for payment of this Note shall be first
applied to any expenses due the Payee under this Note, then to the
reduction of principal. The indebtedness evidenced by this Note may be
prepaid in its entirety at any time without notice, and without penalty,
and may be prepaid in part in multiples of $10,000 without notice and
without penalty at any time from time to time.
-2-
<PAGE>
Maker hereby consents to any and all renewals, waivers,
modifications, or extensions of time (of any duration) that may be granted
by the Payee with respect to this Note and waives demand, presentment,
protest, notice of dishonor, and all other notices that might otherwise be
required by law.
If the date of any business due hereunder would otherwise fall on
a non-Business Day, such payment or expiration date shall be extended to
the next following Business Day with interest payable at the applicable
rate specified herein during such extension. "Business Day" shall mean any
day other than a Saturday, Sunday, or any day which shall be in Raleigh,
North Carolina a legal holiday or a day on which banking institutions are
authorized by law to close.
Maker agrees to pay reasonable attorneys' fees and all court and
other costs and expenses that the Payee may incur in enforcing this Note.
From and at all times after the date of this Note, and in
addition to all of the Payee's other rights and remedies against Maker,
Maker agrees to indemnify and hold harmless the Payee and each director,
officer, employee, agent of the Payee against any and all claims, losses,
damages, liabilities, costs and expenses of any kind or nature whatsoever
(including without limitation reasonable attorneys' fees, costs and
expenses) incurred by or asserted against the Payee or any such director,
officer, employee or agent from and after the date hereof, whether direct,
indirect or consequential, as a result of or arising from or in any way
relating to any suit, action or proceeding (including any inquiry or
investigation) by any Person other than Maker, whether threatened or
initiated, asserting a claim for any legal or equitable remedy against any
Person under any statute or regulation, including, but not limited to, any
federal or state securities laws, or under any common law or equitable
cause or otherwise, arising from or in connection with the negotiation,
preparation, execution or performance of this Note, whether or not the
Payee or any such director, officer, employee, agent or affiliate is a
party to any such action, proceeding, suit or the target of any such
inquiry or investigation; provided, however, that no indemnified party
shall have the right to be indemnified hereunder for any liability
resulting from the gross negligence or willful misconduct of such
indemnified party. All of the foregoing losses, damages, costs and
expenses of the Payee shall be payable by Maker upon demand by the Payee
and shall be additional obligations hereunder. "Person" shall mean a
corporation, an association, a joint venture, a partnership, an
organization, an individual or a government or political subdivision
thereof or any government agency.
-3-
<PAGE>
The validity and construction of this Note shall be determined
according to the laws of the State of North Carolina applicable to
contracts executed and performed within that state. If any provisions of
this Note should for any reason be invalid or unenforceable, the remaining
provisions hereof shall remain in full effect.
The provisions of this Note shall be binding upon and inure to
the benefit of the Payee, Maker and their respective heirs, personal
representatives, successors and assigns (to the extent assignable under the
provisions hereof). The provisions of this Note may be amended or waived
only by instrument in writing signed by the Payee and Maker and attached to
this Note.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
sealed in its name by its duly authorized corporate officers as of the day
and year first above written.
DECOTECH, L.C.
By: Management Advisory
Services, Inc.
By: /S/ L. Terrell Sovey, Jr.
President
-4-
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (the "Agreement"), dated as of March
31, 1995, is made by and between BNY FINANCIAL CORPORATION, a New York
corporation (the "Bank"), DECOTECH, L.C., a South Carolina limited
liability company ("Decotech"), and TEXFI INDUSTRIES, INC., a Delaware
corporation ("Texfi").
A. The Bank has made available financial accommodation to
Decotech, pursuant to a Factoring Agreement, dated as of March , 1995
(as amended, restated, supplemented, extended, renewed, or modified from
time to time, the "Loan Agreement")(all such loans to be made and other
obligations to be incurred under the Loan Agreement, whether for principal,
interest, fees, expenses or otherwise and all renewals, extensions,
modifications and amendments thereof and substitutions therefor are
referred to herein collectively as the "Senior Debt").
B. Concurrently with the execution of this Agreement, Decotech
is delivering to Texfi its Subordinated Promissory Note dated March 31,
1995 (the "Subordinated Note") in the original principal amount of
$2,000,000 (all indebtedness and other obligations of Decotech under the
Subordinated Note, as amended, restated, supplemented, extended, renewed,
or modified from time to time, are referred to herein collectively as the
"Subordinated Debt").
C. It is a condition precedent to the Bank's making the loans
pursuant to the Loan Agreement that the parties hereto shall have executed
and delivered this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of the
mutual covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Subordination. (a) Subject to the limitations contained in
Section 2 hereof, the Subordinated Debt is and shall be subordinate and
junior in right of payment to the prior payment in full of all Senior Debt.
Except as otherwise expressly permitted herein, Decotech shall not make,
and Texfi shall not receive or accept, any payment, or security for
payment, from Decotech in respect of the Subordinated Debt (for principal,
interest or otherwise) unless and until all Senior Debt shall have been
paid in full, and Texfi shall not commence any action or proceeding against
Decotech, or take any action with respect to the Subordinated Debt
(including any acceleration thereof) to recover all or part of such
Subordinated Debt, or join with a creditor (unless the Bank also shall have
joined with such creditor) in bringing any proceedings against Decotech
under any federal or state bankruptcy, reorganization, readjustment of
debt, arrangement of debt, receivership, liquidation or insolvency law or
statute, unless and until all Senior Debt shall have been paid in full.
For the
<PAGE>
purposes of this Agreement, the Senior Debt shall not be deemed to
have been paid in full until the Bank (or successors or assigns of the
Bank) shall have irrevocably received payment in full of the Senior Debt.
(b) Notwithstanding any other provisions of this Section 1, the
Bank agrees to permit the payments of principal and interest on the
Subordinated Debt in accordance with the terms of the Subordinated Note or
any other instrument evidencing the Subordinated Debt provided that no
Event of Default (as defined in the Loan Agreement) has occurred and is
continuing.
(c) In the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other similar
proceeding relating to Decotech, its creditors as such or its property,
whether voluntary or involuntary, or any assignment by Decotech for the
benefit of creditors:
(i) the holders of Senior Debt shall first be entitled to
receive payment in full (or to have such payment duly provided
for) of the principal thereof and interest due thereon and other
amounts due in connection therewith before any payment or
distribution of any kind or character, whether in cash, property,
or securities, is made in respect of the principal of or interest
on the Subordinated Debt;
(ii) any payment or distribution of assets of Decotech of
any kind or character, whether in cash, property or securities,
to which the holder of the Subordinated Debt would be entitled
except for the provisions of this Section 1(c) shall be paid by
Decotech or any liquidating trustee or agent or other person
making such payment or distribution directly to the holders of
the Senior Debt or their representative to the extent necessary
to make payment in full of all Senior Debt remaining unpaid,
after giving effect to any concurrent payment or distribution or
provision therefor to the holders of such Senior Debt;
(iii) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of Decotech of any kind or
character, whether in cash, property or securities, shall be
received by the holder of the Subordinated Debt in interest on
account of principal, interest or other sums due under the
Subordinated Debt before all Senior Debt is paid in full, or
effective provision made for its payment, such payment or
distribution shall be received and held in trust for and shall be
paid over to the holders of the Senior Debt for application to
the payment of such Senior Debt until all such Senior Debt shall
have been paid in full, after giving effect to any concurrent
payment or distribution or provision therefor to the
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<PAGE>
holders of such Senior Debt; and
(iv) the holders of Senior Debt shall be entitled to vote
claims comprising any of the Subordinated Debt to accept or
reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension.
(d) Decotech and Texfi shall not amend any terms of the
Subordinated Indebtedness without the prior written consent of the Lender.
2. Subordination Not Impaired. Texfi agrees and consents that,
without notice to or assent by Texfi, the obligations and liabilities of
Decotech and any other party or parties for or upon the Senior Debt (and
any security documents or guaranties evidencing or securing the same) may,
from time to time, in whole or in part, be extended, renewed, refinanced,
modified, amended, restated, accelerated, compromised, supplemented,
terminated, sold, exchanged, waived or released, all as the holders of the
Senior Debt, and any representative or representatives acting on behalf
thereof, may deem advisable, and all without impairing, abridging,
diminishing, releasing or affecting the subordination of the Subordinated
Debt to the Senior Debt provided for herein; provided, however, that if the
principal amount of the Senior Debt outstanding during the term of this
Agreement exceeds $15,000,000 without the prior written consent of Texfi,
the Subordinated Debt shall not be subordinated to the amount of Senior
Debt in excess of $15,000,000.
3. Legend. The Subordinated Note shall bear the following
legend:
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE MAKER AND THE
PAYEE HEREUNDER ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT
SUBORDINATION AGREEMENT AMONG TEXFI INDUSTRIES, INC., DECOTECH,
L.C. AND BNY FINANCIAL CORPORATION.
4. Miscellaneous.
(a) Decotech and Texfi hereby expressly agree that the holders
of Senior Debt may enforce any and all rights derived herein by suit,
either in equity or law, for specific performance of any agreement
contained in this Agreement for judgment at law and any other relief
whatsoever appropriate to such action or procedure.
(b) This Agreement shall be governed by and enforced in
accordance with the laws of the State of North Carolina, exclusive of its
choice of law provisions.
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<PAGE>
(c) This Agreement shall terminate upon the payment in full of
the Subordinated Debt.
(d) This Agreement may be executed in one or more counterparts,
and each counterpart shall be deemed to be an original, but all shall
constitute together one and the same Agreement.
(e) This Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof, and shall be binding
upon and inure to the benefit of their respective successors and assigns.
This Agreement may not be modified or amendment except by written agreement
of all of the parties hereto. Upon the execution hereof, Decotech shall
deliver a complete copy of the Loan Agreement to Texfi. Decotech agrees to
deliver copies of any future amendments of the Loan Agreement to Texfi.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
BNY FINANCIAL CORPORATION
By: /S/ Frank Imperato
Title: Vice President
TEXFI INDUSTRIES, INC.
By: /S/ Dane L. Vincent
Title: VP Finance, Treasurer
DECOTECH, L.C.
By: Management Advisory Services, Inc.,
Manager
By: /S/ L. Terrell Sovey, Jr.
Title: President
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