As filed with the Securities and Exchange Commission on November 13, 1997
Registration No. 333-30999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TEXFI INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 56-0795032
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5400 GLENWOOD AVENUE
SUITE 215
RALEIGH, NORTH CAROLINA 27612
(919) 783-4736
(Address, including zip code, and telephone number
including area code, of Registrant's principal executive offices)
DANE L. VINCENT
5400 GLENWOOD AVENUE
SUITE 215
RALEIGH, NORTH CAROLINA 27612
(919) 783-4736
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Jonathan Goldstein, Esq. Richard C. Hoffman, Esq.
Winston & Strawn Richard C. Hoffman, P.C.
200 Park Avenue 16 Cove Road
New York, New York 10166 Old Greenwich, CT 06870
(212) 294-6700 (203) 698-1665
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to time
after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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PROSPECTUS
924,000 SHARES
TEXFI INDUSTRIES, INC.
COMMON STOCK, $1.00 PAR VALUE
This Prospectus relates to 924,000 shares (the "Shares") of Common Stock, par
value $1.00 per share ("Common Stock"), of Texfi Industries, Inc. (the
"Company"), which have been issued pursuant to a Stock and Option Purchase
Agreement, dated as of May 24, 1994 (the "Stock and Option Purchase Agreement"),
by and between the Company and Chadbourne Corporation (the "Selling
Stockholder") to, and which may be offered for resale from time to time by, the
Selling Stockholder.
The Company's Common Stock is listed on the New York Stock Exchange under the
symbol "TXF". On November 10, 1997, the reported last sale price of the
Common Stock on the New York Stock Exchange Composite Tape was $5.125 per
share.
SEE "RISK FACTORS" COMMENCING ON PAGE 3 FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
The Selling Stockholder may from time to time offer and sell the Shares held
by it directly or through agents or broker-dealers on terms, including the price
per share, to be determined at the time of sale. To the extent required, the
names of any agent or broker-dealer and applicable commissions or discounts and
any other required information with respect to any particular offer will be set
forth in an accompanying Prospectus Supplement. The Selling Stockholder reserves
the sole right to accept or reject, in whole or in part, any proposed purchase
of the Shares to be made directly or through agents. The aggregate proceeds
to the Selling Stockholder from the sale of the Shares offered hereby will be
the purchase price thereof, less the aggregate brokerage commissions, agent's
discount or underwriter's discount, if any, and the expenses of distribution.
The Company will not receive any of the proceeds from the sale of the Shares
offered hereby.
No person has been authorized by the Company to give any information or to make
any representations, other than as contained in this Prospectus, and, if given
or made, such information or representations must not be relied upon.
Neither delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November 13, 1997.
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AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the offices of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well
as the following regional offices of the Commission: Seven World Trade Center,
Suite 1300, New York, New York 10048; and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. In addition, the Commission
maintains a Web site that contains such materials at http://www.sec.gov. The
Company's Common Stock is listed on the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, and such reports, proxy statements and other
information concerning the Company can be inspected at such Exchange.
The Company has filed with the Commission a Registration Statement (which term
shall include all amendments, exhibits and schedules thereto) on Form S-3 under
the Securities Act of 1933, as amended (the "Securities Act") with respect to
the Shares offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any document referred to are not necessarily complete. With respect to each
such document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference and made a part hereof:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
November 1, 1996;
(b) The Company's Quarterly Report on Form 10-Q for the period ended
January 31, 1997;
(c) The Company's Quarterly Report on Form 10-Q for the period ended May
2, 1997;
(d) The Company's Quarterly Report on Form 10-Q for the period ended
August 1, 1997; and
(e) The description of the class of securities being offered which is
contained in the Company's Form 8-A/A dated July 9, 1997.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the filing of a post-effective amendment which indicates that all
the Shares offered hereby are sold or which deregisters all the Shares then
remaining unsold shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in any
subsequently filed document which is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide, without charge, to each person including any
beneficial owner, to whom a copy of this Prospectus is delivered, on the written
or oral request of such person, a copy of any or all of the documents
incorporated herein by reference (other than exhibits thereto, unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Written or telephone requests for such copies
should be directed to the Company's principal office: Texfi Industries, Inc.,
5400 Glenwood Avenue, Suite 215, Raleigh, North Carolina 27612, Attention: Dane
L. Vincent, Vice President, Chief Financial Officer and Treasurer, telephone
number (919) 783-4736.
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THE COMPANY
The Company was incorporated in Delaware in 1963. The Company manufactures and
markets a diverse line of textile products from a variety of raw materials,
including natural and synthetic materials. The Company's principal executive
offices are located at 5400 Glenwood Avenue, Suite 215, Raleigh, North Carolina
27612, telephone (919) 783-4736.
Prior to October 3, 1997, the Company's operations consisted of two
divisions: Texfi Blends and Texfi Narrow Fabrics. For the fiscal year ended
November 1, 1996, the Texfi Blends division contributed 87.5% of the
Company's total net sales and the Texfi Narrow Fabrics division contributed the
remaining 12.5% of such total net sales. On November 1, 1996, the Company
discontinued the woven narrow fabrics operations of the Texfi Narrow Fabrics
division at its Graham, North Carolina facility. The woven narrow fabrics
operations contributed 4.3% of the Company's total net sales during its 1996
fiscal year. On October 3, 1997, the Company sold substantially all of the
assets constituting the knitted narrow fabrics operations of the Texfi Narrow
Fabrics division (other than accounts receivable) to Elastex, Inc. for a
purchase price of approximately $8,200,000 in cash, subject to customary
post-closing adjustments. The assets sold consisted primarily of real property
located in Asheboro, North Carolina and all inventories, raw materials and
equipment and machinery used in the business formerly conducted by the Texfi
Narrow Fabrics division relating to the manufacture and sale of knitted elastic
products.
The Company's remaining operations consist of the former Texfi Blends division
which operates three manufacturing facilities located in Rocky Mount and
Fayetteville, North Carolina and Jefferson, Georgia. The Company's sales
and marketing headquarters are in New York City, with branch offices or agents
in other major cities throughout the United States and Europe. The Company
manufactures products made from textured polyester, flame-retardant polyester,
and blends of polyester, rayon, and wool. These products are sold worldwide to
the mens' wear, womens' wear and childrens' wear apparel, uniform, home
furnishings, and export markets.
"SAFE HARBOR" STATEMENT UNDER SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Except for the historical information presented, the matters disclosed in this
Prospectus and the documents incorporated or deemed to be incorporated herein by
reference herein include forward-looking statements. These statements represent
the Company's judgment on the future and are subject to risks and uncertainties
that could cause actual results to differ materially. Such factors include,
without limitation, the factors discussed under the heading "Risk Factors" below
and factors that are addressed from time to time in the documents incorporated
or deemed to be incorporated herein by reference herein.
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, TOGETHER
WITH ALL OF THE OTHER INFORMATION APPEARING IN THIS PROSPECTUS.
COMPETITION; SENSITIVITY TO BUSINESS CYCLES. The textile and apparel
industry is highly competitive with a large number of domestic and foreign
manufacturers, none of which dominates the market for any of the Company's
product lines. The Company competes on the basis of styling, price, product
performance and customer service. The failure of the Company to compete
effectively in this environment could have a material adverse effect on its
results of operations and financial condition.
The Company and the U.S. textile industry are sensitive to the business cycle of
the national economy. This has contributed historically to fluctuations in the
Company's results of operations and such fluctuations can be expected to occur
in the future.
The North American Free Trade Agreement ("NAFTA"), which became effective on
January 1, 1994, has created a free-trade zone among Canada, Mexico and the U.S.
NAFTA contains safeguards which were sought by the U.S. textile industry,
including a rule of origin requirement that products be processed in one of the
three countries in order to benefit from the agreement. NAFTA will phase out all
trade restrictions and tariffs on textiles and apparel among the three
countries. In addition, legislation has been proposed that would grant benefits
to other countries in the Caribbean and Central and South America that are
roughly equivalent to those applicable to Mexico under NAFTA. There can be no
assurance that NAFTA, or the possible adoption of proposed legislation, will not
adversely affect the Registrant.
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The World Trade Organization was formed in January 1995 and is the successor to
the General Agreement on Tariffs and Trade. This new multilateral trade
organization has set forth mechanisms by which world trade in textiles and
clothing is being progressively liberalized by phasing-out quotas and reducing
duties over a ten-year period which began in January of 1995. There can be no
assurance that this reduction in import protection for domestic textile
manufacturers will not adversely affect the Registrant.
LOSSES FROM OPERATIONS; POSSIBILITY OF FUTURE LOSSES. The Company had losses
from continuing operations of $1,424,000, $734,000 and $2,584,000 for the fiscal
years ended November 1, 1996, November 3, 1995 and October 28, 1994,
respectively. At November 1, 1996, the Company had an accumulated stockholders'
deficit of $47,062,000. There can be no assurance that the Company will operate
profitably in the future.
ABSENCE OF DIVIDENDS. The Company has not, in recent years, paid any cash or
other dividends on its Common Stock, and there can be no assurance that the
Company will pay cash dividends in the foreseeable future. Certain agreements to
which the Company is a party contain certain limitations on the Company's
ability to pay dividends.
POTENTIAL RAW MATERIAL SHORTAGES. The Company purchases from outside
suppliers natural and synthetic fibers, rubber, dyes and chemicals for use in
its fabric manufacturing operations. Any shortage of supply of raw
materials or significant price increases could adversely affect its results of
operations.
COST OF ENVIRONMENTAL AND OTHER GOVERNMENTAL COMPLIANCE. The Company's
operations must meet extensive federal, state and local regulatory standards in
the areas of safety, health and environmental pollution controls. The existence
of groundwater contaminants primarily of a type often found in commonly used
industrial solvents was discovered at one of the Company's facilities. This
facility has not been operated by the Company since 1980 and has been sold to
another party. The Company's cost to monitor and maintain the treatment
system will be approximately $54,000 annually until the site is remediated. In
addition, there may be other potential environmental conditions at the site to
be addressed, and the remedial plan does not cover these conditions.
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SELLING STOCKHOLDER
The Selling Stockholder is Chadbourne Corporation. Two of the executive officers
and directors of Chadbourne Corporation, Richard L. Kramer and William L.
Remley, are also directors and executive officers of the Company. The Shares
offered hereby are being registered pursuant to the demand of the Selling
Stockholder pursuant to the Stock and Option Purchase Agreement. Prior to the
offering, as of July 7, 1997, the Selling Stockholder beneficially owned
2,043,700 shares of Common Stock (including 600,000 shares of Common Stock
subject to an option (the "Option") exercisable on or prior to May 24, 1999
granted pursuant to the Stock and Option Purchase Agreement), representing
approximately 23.4% of the outstanding Common Stock. If all of the Shares are
sold, after the offering the amount and the percentage of the Company's Common
Stock (assuming the Selling Stockholder has exercised the Option) that would be
owned by the Selling Stockholder is 1,119,700 shares or 12.8% of the Company's
outstanding Common Stock.
USE OF PROCEEDS
The Shares are being offered hereby for the account of the Selling Stockholder.
Accordingly, the Company will not receive any of the proceeds from the sale of
the Shares offered hereby.
PLAN OF DISTRIBUTION
Although the Selling Stockholder has advised the Company that it does not
currently have an intent to immediately sell the Shares, the Selling Stockholder
may choose to sell all or a portion of its Shares from time to time in the
manner described herein. Sales of the Shares offered hereby may be effected from
time to time by the Selling Stockholder, or pledgees, donees or transferees of
or other successors in interest to the Selling Stockholder, in one or more
transactions (which may involve block transactions) on the New York Stock
Exchange or such other exchange or market on which the Common Stock may from
time to time be traded, in negotiated transactions or in a combination of any
such transactions. Such transactions may be effected by the Selling Stockholder
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices. The Selling
Stockholder may effect such transactions by selling Shares to or through
broker-dealers, including purchases by a broker-dealer as principal and resale
by such broker-dealer for its account pursuant to this Prospectus. Such
broker-dealers will receive compensation in the form of discounts or commissions
from the Selling Stockholder and may receive commissions from the purchasers of
Shares for whom such broker-dealers may act as agents (which discounts or
commissions from the Selling Stockholder or such purchasers, if in excess of
those customary for the types of transactions involved, will be disclosed in a
supplemental prospectus).
The Selling Stockholder and any broker-dealer that participates with the Selling
Stockholder in the distribution of the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions or discounts
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting discounts or commissions under the Securities
Act. The Company has agreed to indemnify the Selling Stockholder and its
officers, directors, employees and agents and each person who controls the
Selling Stockholder (within the meaning of the Securities Act) against certain
liabilities, including liabilities under the Securities Act, and to make such
provisions as are reasonably requested by the indemnified party for contribution
in the event such indemnification is unavailable for any reason. The Stock and
Option Purchase Agreement provides that the Company will use its best efforts to
effect the registration and the sale of the Shares in accordance with the
intended method of disposition thereof, which includes, if requested, entering
into underwriting agreements in customary form. Such agreements may contain
provisions requiring the Company to indemnify persons deemed to be underwriters
and provisions for contribution in the event such indemnification is
unavailable.
The costs and expenses of the registration and distribution of the Shares will
be paid by the Selling Stockholder.
The Selling Stockholder has certain rights to request that the Company register
the Shares under the Securities Act (a "Demand Registration") pursuant to
provisions of the Stock and Option Purchase Agreement
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and the Registration Statement of which this Prospectus is a part has been filed
under these provisions. The Stock and Option Purchase Agreement provides that
the Company must use its best efforts to keep the Registration Statement, of
which this Prospectus is a part, continuously effective and usable for a period
of at least 270 days from the date on which the Commission declares the
Registration Statement effective or such shorter period which will terminate
when all the Shares covered by the Registration Statement have been sold
pursuant to the Registration Statement. The Selling Stockholder has the right to
one additional Demand Registration under the Stock and Option Purchase
Agreement.
LEGAL MATTERS
The legality of the issuance of the Shares offered hereby will be passed upon
for the Company by Schell Bray Aycock Abel & Livingston P.L.L.C.
EXPERTS
The consolidated financial statements of the Company appearing in the Company's
Annual Report (Form 10-K) for the year ended November 1, 1996, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
Page
Available Information ...................................................... 2
Incorporation of Certain Documents by
Reference .................................................................. 2
The Company ................................................................ 3
"Safe Harbor" Statement under Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended ........................................... 3
Risk Factors ............................................................... 3
Selling Stockholder ........................................................ 5
Use of Proceeds ............................................................ 5
Plan of Distribution ....................................................... 5
Legal Matters .............................................................. 6
Experts .................................................................... 6
PROSPECTUS
TEXFI INDUSTRIES, INC.
924,000 SHARES
COMMON STOCK
November 13, 1997
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses payable by the Selling
Stockholder in connection with the issuance and distribution of the Shares being
registered hereby (other than underwriting discounts and commissions) (except
that the Company will pay its internal expenses including, without limitation,
all salaries and expenses of its officers and employees performing legal and
accounting duties). All of such expenses, except the Securities and Exchange
Commission filing fee, are estimated.
SEC filing fee................................... $1,252
Legal fees and expenses.......................... 60,000
Accounting fees and expenses..................... 7,500
Miscellaneous.................................... 500
Total................................. $69,252
ITEMS 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation. Reference is made to Section 145 of the
Delaware General Corporation Law, as amended (the "GCL"), which provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation), by reason of the fact that such person
is or was a director, officer, employee or agent of the corporation, or is or
was serving at its request in such capacity of another corporation or business
organization against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that such person's conduct was
unlawful. A Delaware corporation may indemnify officers and directors in an
action by or in the right of a corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
(including attorneys' fees) that such officer or director actually and
reasonably incurred.
Reference is also made to Section 102(b)(7) of the GCL, which permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the GCL or (iv) for any transaction from which the director
derived an improper personal benefit.
The certificate of incorporation of the Company provides for the elimination of
personal liability of a director for breach of fiduciary duty as permitted by
Section 102(b)(7) of the GCL. The by-laws of the Company provide that the
Company shall indemnify its directors and officers to the extent and under the
circumstances permitted by Section 145 of the GCL.
Article VI of the by-laws of the Company provides as follows:
"Section 1. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a
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director or officer of the Corporation, or is or was serving at the request of
the Corporation, as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
Section 3. Any indemnification under Sections 1 and 2 (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be made (a)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (b) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
Section 4. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 5. Expenses incurred by a director or officer in defending a civil or
criminal action, suit or proceeding shall be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article.
Section 6. In any case where the indemnification and advancement of expenses of
a director or officer is neither mandated nor prohibited by Sections 1, 2, 4 or
5 of this Article, or in the case of an employee or agent of the Corporation who
is not a director or officer of the Corporation, the Corporation may by vote of
the disinterested directors (as defined under Delaware law) or the stockholders,
indemnify or agree to indemnify such person to the extent permitted by
applicable law against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with any threatened, pending, or completed action, suit or
proceeding, whether civil or criminal, to which he is or was, or is threatened
to be made, a party by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
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Section 7. Any indemnification and advancement of expenses mandated or permitted
to be made under this Article to a person who was a director, officer, employee
or agent shall, unless otherwise provided when authorized or ratified, continue
even though such person has ceased to be a director, officer, employee or agent,
if such indemnification is made on account of expenses, judgments, fines, or
amounts paid in settlement reasonably incurred by him by reason of his former
office or position; and any indemnification provided for hereunder shall inure
to the benefit of the heirs, executors and administrators of such person.
Notwithstanding any other provisions set forth in this Article, indemnification
shall be mandated or permitted hereunder only to the extent that such
indemnification shall not duplicate indemnity or reimbursement received by the
person to be indemnified otherwise than under this Article.
Section 8. The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent or another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article or otherwise.
Section 9. The provisions of this Article VI are separable, and if any provision
be held invalid, all other provisions shall remain fully in effect and such
invalid provision shall only be curtailed to the extent necessary to make such
provision enforceable, it being the intent of this Article VI that the
Corporation indemnify each of its directors, officers, employees and agents to
the maximum extent permitted by law.
Section 10. For purposes of this Article VI, references to "the Corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article VI with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity."
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A list of exhibits is set forth on the Index of Exhibits.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered thereby and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or
II-3
<PAGE>
in the aggregate, represent a fundamental change in the information
set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in the volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement.
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Exchange Act
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
The Company has directors and officers liability insurance that insures the
directors and officers of the Company against certain liabilities up to an
aggregate of $10,000,000.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on November 13, 1997.
TEXFI INDUSTRIES, INC.
By: /s/ William L. Remley
Name: William L. Remley
Title: Chief Executive Officer and
Vice Chairman of the Board
Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
* Chairman of the Board November 13, 1997
- ---------------------------------
Richard L. Kramer
/s/ William L. Remley Chief Executive Officer and Vice November 13, 1997
- --------------------------------- Chairman of the Board
William L. Remley
* Director November 13, 1997
- ---------------------------------
Andrew J. Parise, Jr.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
/s/ Richard C. Hoffman Secretary and Director November 13, 1997
- ---------------------------------
Richard C. Hoffman
* Director November 13, 1997
- ---------------------------------
Joel J. Karp
/s/ Michael D. Schenker Director November 13, 1997
- ---------------------------------
Michael D. Schenker
/s/ Dane L. Vincent Vice President, Chief Financial November 13, 1997
- --------------------------------- Officer, Chief Accounting Officer
Dane L. Vincent and Treasurer
</TABLE>
*By: /s/ Richard C. Hoffman
Richard C. Hoffman
Attorney-in-fact
II-6
<PAGE>
INDEX OF EXHIBITS
EXHIBIT NUMBER EXHIBIT
2.1 Asset Purchase Agreement, dated as of November 3, 1997, among
Elastex, Inc., Worldtex Inc. and Texfi Industries, Inc.
The following exhibit and schedules to the Asset Purchase
Agreement have been omitted. The Company hereby undertakes to
furnish supplementally a copy of any such omitted exhibit or
schedules to the Commission upon request.
Exhibit A Form of Graham Use and
Occupancy Agreement
Schedule 4.1(a) Qualifications to do Business;
Managers
Schedule 4.3(a) Financial Statements of the
Business
Schedule 4.3(c) Nonrecurring Income or
Expense
Schedule 4.3(d) Certain Actions Since November
1, 1996
Schedule 4.3(e) Pro Forma Financial Statements
Schedule 4.3(f) Trade Payables as of September
5, 1997
Schedule 4.4(b) Real Property
Schedule 4.4(c) Machinery and Equipment
Schedule 4.4(d) Insurance
Schedule 4.4(e) Inventory
Schedule 4.4(f) Receivables
Schedule 4.4(g) Permits
Schedule 4.4(h) Computer Software
Schedule 4.4(i) Intellectual Property;
Technology
Schedule 4.5 List of Contracts
Schedule 4.6 Litigation
Schedule 4.7 Taxes
Schedule 4.8(a) Employee Benefit Plans
Schedule 4.8(b) Employee and Agent
Compensation
Schedule 4.8(k) Employees on Disability
Schedule 4.9(b) Employment Losses
Schedule 4.10 Environmental Matters
Schedule 4.11 Customers and Suppliers
Schedule 4.12 Transactions with Related Persons
Schedule 7.12 Leased Machinery and Equipment
Schedule 7.14 Graham Transaction
Schedule 7.17 Computer Services
Schedule 8.2 Form of Opinion of Counsel to
Seller
Schedule 9.3 Form of Opinion of Counsel to
Buyer
*4.1 Restated Certificate of Incorporation of Registrant dated
August 13, 1969, filed as Exhibit
<PAGE>
(3)(a)(1) to Registrant's Form 10-K Annual Report for the
fiscal year ended October 31, 1980.
*4.2 Certificate of Amendment of Certificate of Incorporation of
Registrant dated March 16, 1972, filed as Exhibit (3)(a)(2) to
Registrant's Form 10-K Annual Report for the fiscal year ended
October 31, 1980.
*4.3 Certificate of Amendment of Certificate of Incorporation of
Registrant dated March 27, 1978, filed as Exhibit (3)(a)(3) to
Registrant's Form 10-K Annual Report for the fiscal year ended
October 31, 1980.
*4.4 Certificate of Amendment of Certificate of Incorporation of
Registrant dated March 19, 1978, filed as Exhibit 4.4 to
Registrant's Form S-8 Registration Statement (No. 33-14697).
*4.5 Certificate of Amendment of Certificate of Incorporation of
Registrant dated March 20, 1987, filed as Exhibit 4.5 to
Registrant's Form S-8 Registration Statement (No. 33-14697).
*4.6 Certificate of Amendment of Certificate of Incorporation of
Registrant dated September 28, 1987, filed as Exhibit 4(a)(6)
to Registrant's Form S-2 Registration Statement (No.
33-14697).
*4.7 Certificate of Designations of Registrant dated November 20,
1987, filed as Exhibit 4(a)(7) to Registrant's Form S-2
Registration Statement (No. 33-16794).
*4.8 Certificate of Designations of Registrant dated March 8, 1988,
filed as Exhibit 4(a)(8) to Registrant's Form S-2 Registration
Statement (No. 33-20131).
*4.9 Certificate of Designations of Registrant dated August 4,
1988, filed as Exhibit 4(a)(9) to Registrant's Form 10-Q
Quarterly Report for the fiscal quarter ended July 29, 1988.
*4.10 Bylaws of Registrant, filed as Exhibit 4.6 to Registrant's
Form S-8 Registration Statement (No. 33-14697).
*4.11 Amendment to Bylaws of Registrant, filed as Exhibit 4(b)(2) to
Registrant's Form S-2 Registration Statement (No. 33-16794).
*4.12 Amendment to Bylaws of Registrant adopted by Registrant's
Board of Directors on January 18, 1991, filed as Exhibit
3(b)(3) to Registrant's Form 10-K Annual Report for the fiscal
year ended November 2, 1990.
*4.13 Amendment to Bylaws of Registrant adopted by Registrant's
Board of Directors on August 31,
<PAGE>
1994, filed as Exhibit 4(b)(4) to Registrant's Form 10-Q
Quarterly Report for the fiscal quarter ended July 29, 1994.
*4.14 Amendment to Bylaws of Registrant adopted by Registrant's
Board of Directors on September 7, 1994, filed as Exhibit
4(b)(5) to Registrant's Form 10-Q Quarterly Report for the
fiscal quarter ended July 29, 1994.
*4.15 Indenture between Registrant and Rhode Island Hospital Trust
National Bank, Trustee, with a copy of Subordinated Debentures
due April 1, 1995, Series A, Subordinated Debentures due April
1, 1995, Series B and Subordinated Extendible Debentures due
April 1, 2000, Series C attached, filed as Exhibit 4(f) to
Registrant's Form S-2 Registration Statement (No. 33-32485).
*4.16 First Supplemental Indenture between Registrant and Rhode
Island Hospital Trust National Bank, Trustee, with a revised
Subordinated Debenture due April 1, 1995, Series B attached,
filed as Exhibit 4 to Registrant's Form 8-K Current Form dated
May 16, 1990.
*4.17 Indenture dated October 1, 1991 between Registrant and First
National Bank of Boston, Trustee, with copy of 11-1/4%
Convertible Senior Subordinated Debenture due October 1, 1997,
filed as Exhibit 4(a)(1) to Registrant's Form 10-K Annual
Report for the fiscal year ended November 1, 1991.
*4.18 Indenture dated September 8, 1993 between Registrant and First
Union National Bank of North Carolina, Trustee, with copy of
8-3/4% Senior Subordinated Debenture due August 1, 1999, filed
as Exhibit 4(c)(2) to Registrant's Form 10-Q Quarterly Report
for the fiscal quarter ended July 30, 1993.
*4.19 First Supplemental Indenture dated as of March 10, 1995
between Registrant and First Union National Bank of North
Carolina, as Trustee, filed as Exhibit 4(a)(1) to Registrant's
Form 8-K Current Form as of March 15, 1996.
*4.20 Second Supplemental Indenture dated as of March 15, 1996
between Registrant and First Union National Bank of North
Carolina, as Trustee, filed as Exhibit 4(a)(2) to Registrant's
Form 8-K Current Form as of March 15, 1996.
*4.21 Specimen Common Stock ($1 par value) certificates, filed as
Exhibit 4.01 to Amendment No. 2 to Registrant's Form S-1
Registration Statement (No. 2-41653).
<PAGE>
*4.22 Rights Agreement dated July 22, 1988 between Registrant and
First Union National Bank of North Carolina, as Rights Agent,
filed as Exhibit 1 to Registrant's Form 8-K Current Form dated
July 22, 1988.
*4.23 Form of Rights Certificate, filed as Exhibit B to Exhibit 1 to
Registrant's Form 8-K Current Form dated July 22, 1988.
*4.24 Amendment to Rights Agreement between Registrant and First
Union National Bank of North Carolina dated October 31, 1988,
filed as Exhibit 4(e)(3) to Registrant's Form S-2 Registration
Statement (No. 33-32485).
*4.25 Second Amendment to Rights Agreement dated May 24, 1994
between Registrant and First Union National Bank of North
Carolina, as Rights Agent, filed as Exhibit 4(e)(4) to
Registrant's Form 10-Q Quarterly Report for the fiscal quarter
ended April 29, 1994.
*4.26 Third Amendment to Rights Agreement dated December 16, 1994
between Registrant and First Union National Bank of North
Carolina, as Rights Agent, filed as Exhibit 4(c)(5) to
Registrant's Form 10-K Annual Report for the fiscal year ended
October 28, 1994.
*4.27 Credit Agreement dated as of March 15, 1996 among Registrant,
as Borrower, certain Lenders referred to therein, NationsBank,
N.A., as Agent, and NationsBanc Commercial Corporation, as
Disbursing Agent, filed as Exhibit 2(a)(1) to Registrant's
Form 8-K Current Report dated March 15, 1996.
*4.28 Security Agreement dated as of March 15, 1996 between
Registrant, as Grantor, and NationsBank, N.A., as Agent for
certain Lenders referred to therein, and NationsBanc
Commercial Corporation, as Disbursing Agent, filed as Exhibit
2(a)(2) to Registrant's Form 8-K Current Report dated March
15, 1996.
*4.29 Form of Deed of Trust and Security Agreement (North Carolina
property) dated as of March 15, 1996 between Registrant, as
Grantor, TIM, Inc., as Trustee, and NationsBank, N.A., as
Beneficiary and Agent for certain Lenders referred to therein,
and NationsBanc Commercial Corporation, as Disbursing Agent,
filed as Exhibit 2(a)(3) to Registrant's Form 8-K Current
Report dated March 15, 1996.
*4.30 Form of Mortgage and Security Agreement (South Carolina
property) dated as of March 15, 1996 between Registrant, as
Grantor, and NationsBank, N.A., as Beneficiary and Agent for
certain Lenders
<PAGE>
referred to therein, and NationsBanc Commercial Corporation,
as Disbursing Agent, filed as Exhibit 2(a)(4) to Registrant's
Form 8-K Current Report dated March 15, 1996.
*4.31 Deed to Secure Debt and Security Agreement (Georgia property)
dated as of March 15, 1996 between Registrant, as Grantor, and
NationsBank, N.A., as Beneficiary and Agent for certain
Lenders referred to therein, and NationsBanc Commercial
Corporation, as Disbursing Agent, filed as Exhibit 2(a)(5) to
Registrant's Form 8-K Current Report dated March 15, 1996.
*4.32 Form of Assignment of Factoring Proceeds dated March 15, 1996,
filed as Exhibit 2(a)(6) to Registrant's Form 8-K Current
Report dated March 15, 1996.
*4.33 First Amendment dated May 10, 1996 to the Credit Agreement
dated March 15, 1996 among Registrant, as Borrower, certain
Lenders referred to therein, NationsBank, N.A., as Agent, and
NationsBanc Commercial Corporation, as Disbursing Agent, filed
as Exhibit 2(a)(7) to Registrant's Form 10-Q Quarterly Report
for the fiscal quarter ended May 3, 1996.
*4.34 Waiver Agreement dated June 14, 1996 to the Credit Agreement
dated March 15, 1996 among Registrant, as Borrower, certain
Lenders referred to therein, NationsBank, N.A., as Agent, and
NationsBanc Commercial Corporation, as Disbursing Agent, filed
as Exhibit 2(a)(8) to Registrant's Form 10-Q Quarterly Report
for the fiscal quarter ended May 3, 1996.
*4.35 Second Amendment dated September 12, 1996 to the Credit
Agreement dated March 15, 1996 among Registrant, as Borrower,
certain Lenders referred to therein, NationsBank, N.A., as
Agent, and NationsBanc Commercial Corporation, as Disbursing
Agent, filed as Exhibit 2(a)(9) to Registrant's Form 10-Q
Quarterly Report for the fiscal quarter ended August 2, 1996.
*4.36 Third Amendment dated January 30, 1997 to the Credit Agreement
dated March 15, 1996 among Registrant, as Borrower, certain
Lenders referred to therein, NationsBank, N.A., as Agent, and
NationsBanc Commercial Corporation, as Disbursing Agent.
**5.1 Opinion of Schell Bray Aycock Abel & Livingston P.L.L.C.,
counsel to the Company.
23.1 Consent of Ernst & Young LLP, independent auditors.
<PAGE>
**23.2 Consent of Schell Bray Aycock Abel & Livingston P.L.L.C.
(included in exhibit 5.1).
**24.1 Powers of Attorney
________________________________________
* Incorporated by reference to previous filing.
**Previously filed.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
dated as of October 3, 1997
among
Elastex, Inc.,
(a wholly-owned subsidiary of Worldtex, Inc.,)
Worldtex, Inc.,
and
Texfi Industries, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS............................................................ 1
1.1 Defined Terms................................................. 1
1.2 Terms Defined Elsewhere....................................... 6
1.3 Construction.................................................. 8
2. PURCHASE AND SALE...................................................... 8
2.1 Acquired Assets............................................... 8
2.2 Excluded Assets............................................... 10
2.3 Assumed Contracts............................................. 10
2.4 Other Liabilities Assumed..................................... 11
2.5 Non-Assumption of Liabilities................................. 11
2.6 Schedules of Assets Not Exclusive............................. 12
2.7 Assurances.................................................... 12
2.8 Receivables................................................... 12
3. PURCHASE PRICE......................................................... 12
3.1 Closing Consideration......................................... 12
3.2 Calculation of Closing Amounts................................ 12
3.3 Returned Products............................................. 14
3.4 Payments...................................................... 14
3.5 Allocation of Purchase Price.................................. 14
4. REPRESENTATIONS AND WARRANTIES OF SELLER............................... 15
4.1 Organization.................................................. 15
4.2 Authority; Binding Effect..................................... 15
4.3 Financial and Other Information; Absence of Adverse Changes. 16
4.4 Acquired Assets............................................... 17
4.5 Contracts..................................................... 20
4.6 Litigation; Compliance with Law............................... 21
4.7 Taxes......................................................... 21
4.8 Employee Benefits............................................. 22
4.9 Labor Relations............................................... 24
4.10 Environmental Matters......................................... 24
4.11 Customers and Suppliers....................................... 25
4.12 Transactions with Related Persons............................. 26
4.13 Disclosure of All Material Facts.............................. 26
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT..................... 26
5.1 Organization.................................................. 26
5.2 Authority; Binding Effect..................................... 26
ii
<PAGE>
6. CONFIDENTIAL INFORMATION............................................... 27
6.1 Buyer Confidential Information................................ 27
6.2 Seller Confidential Information............................... 27
7. COVENANTS.............................................................. 27
7.1 Access........................................................ 27
7.2 Public Announcements.......................................... 28
7.3 Conduct of Business of Seller Prior to the Closing............ 28
7.4 Consents...................................................... 28
7.5 Security Interests and Real Property Matters.................. 29
7.6 Additional Agreements......................................... 29
7.7 Notification of Certain Matters; Interim Financial Statements. 29
7.8 Expenses; Transfer Taxes...................................... 29
7.9 Non-Solicitation of Transactions.............................. 30
7.10 Non-Competition............................................... 30
7.11 Non-Solicitation of Employees................................. 30
7.12 Leased Machinery and Equipment................................ 31
7.13 Employee Matters.............................................. 31
7.14 Graham Transaction............................................ 33
7.15 Use of Name................................................... 33
7.16 Taxes......................................................... 33
7.17 Transition Services........................................... 33
7.18 Trade Payables................................................ 34
8. CONDITIONS TO OBLIGATIONS OF BUYER AND PARENT.......................... 34
8.1 Representations and Warranties; Covenants..................... 34
8.2 Opinion of Counsel............................................ 34
8.3 Absence of Litigation, Damages, Changes....................... 34
8.4 Title Insurance............................................... 35
8.5 Working Capital and EBIT...................................... 35
8.6 Trade Payables................................................ 35
9. CONDITIONS TO OBLIGATIONS OF SELLER.................................... 35
9.1 Representations and Warranties; Covenants..................... 35
9.2 Absence of Litigation......................................... 36
9.3 Opinion of Counsel............................................ 36
10. CLOSING................................................................ 36
10.1 Deliveries to Buyer........................................... 36
10.2 Deliveries by Buyer........................................... 37
11. INDEMNIFICATION........................................................ 38
11.1 Indemnification Obligations................................... 38
11.2 Indemnification Procedures.................................... 38
iii
<PAGE>
12. MISCELLANEOUS.......................................................... 40
12.1 Brokerage..................................................... 40
12.2 Survival...................................................... 40
12.3 Notices....................................................... 41
12.4 Bulk Sales Laws............................................... 41
12.5 Termination................................................... 41
12.6 Binding Effect; Assignment; No Third Party Beneficiaries...... 42
12.7 Specific Performance.......................................... 42
12.8 Entire Agreement; Modifications; Headings; Counterparts....... 42
12.9 Guarantee..................................................... 42
12.10 Applicable Law................................................ 42
List of Exhibits
Exhibit A Form of Graham Use and Occupancy Agreement
List of Schedules
Schedule 4.1(a) Qualifications to do Business; Managers
Schedule 4.3(a) Financial Statements of the Business
Schedule 4.3(c) Nonrecurring Income or Expense
Schedule 4.3(d) Certain Actions Since November 1, 1996
Schedule 4.3(e) Pro Forma Financial Statements
Schedule 4.3(f) Trade Payables as of September 5, 1997
Schedule 4.4(b) Real Property
Schedule 4.4(c) Machinery and Equipment
Schedule 4.4(d) Insurance
Schedule 4.4(e) Inventor
Schedule 4.4(f) Receivables
Schedule 4.4(g) Permits
Schedule 4.4(h) Computer Software
Schedule 4.4(i) Intellectual Property; Technology
Schedule 4.5 List of Contracts
Schedule 4.6 Litigation
Schedule 4.7 Taxes
Schedule 4.8(a) Employee Benefit Plans
Schedule 4.8(b) Employee and Agent Compensation
Schedule 4.8(k) Employees on Disability
Schedule 4.9(b) Employment Losses
Schedule 4.10 Environmental Matters
Schedule 4.11 Customers and Suppliers
Schedule 4.12 Transactions with Related Persons
Schedule 7.12 Leased Machinery and Equipment
Schedule 7.14 Graham Transaction
Schedule 7.17 Computer Services
iv
<PAGE>
Schedule 8.2 Form of Opinion of Counsel to Seller
Schedule 9.3 Form of Opinion of Counsel to Buyer
v
<PAGE>
ASSET PURCHASE AGREEMENT
Asset Purchase Agreement, dated as of October 3, 1997, among Texfi Industries,
Inc., a Delaware corporation (the "Seller"), Elastex, Inc., a Delaware
corporation (the "Buyer"), and Worldtex, Inc., a Delaware corporation (the
"Parent").
Seller desires to sell, and Buyer desires to purchase, substantially all of the
assets of the knitted elastic fabrics business of the Texfi Narrow Fabrics
division of the Seller.
Accordingly, the parties agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. The following terms shall have the respective meanings
indicated below for purposes of this Agreement:
"1997 EBIT" shall mean EBIT for the period from and including November 2,
1996 to and including the Closing Date.
"Accountants Proprietary Information" shall mean planning documentation,
inherent and control risk assessments, listing of matters for the attention of
the partner and detailed audit programs or records of tests, provided that any
information specifically relating to Seller that is the subject of such work
papers contained in any of the foregoing shall not be deemed Accountants
Proprietary Information, and such information shall be provided to a party when
such party is entitled to accountants' work papers pursuant to this Agreement.
"Affiliate" of a specified Person shall mean a Person directly or
indirectly controlling, controlled by, or under common control with, such
specified Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Arbitrating Firm" shall mean one of the "big six" independent public
accounting firms (other than any such firm that audited the 1994, 1995 or 1996
financial statements of Buyer, Seller or any of their respective Affiliates)
selected by agreement of Buyer and Seller or, if they cannot agree, chosen by
lot from among the aforesaid firms.
"Asheboro Facility" shall mean the manufacturing facility of the Business
located at the Owned Real Property.
"Assets" shall mean all properties, assets, privileges, rights, interests
and claims, real and personal, tangible and intangible, of every type and
description, wherever located, in which Seller has any right, title or interest.
"Basket Amount" shall mean $100,000.
<PAGE>
"Best efforts" shall mean, whenever used with reference to a party's
obligation, an obligation of such party to use reasonable commercial efforts,
but shall not be interpreted to require such party to take any action or refrain
from taking any action that would be materially burdensome to such party or to
amend this Agreement or any agreement contemplated hereby or to forego or waive
any of its rights hereunder or thereunder.
"Business" shall mean the business conducted by Texfi Narrow Fabrics
division of the Seller prior to the Closing relating to the manufacture of
knitted elastic products (including pressure dyeing of such products) from
polyester, nylon and rubber for use in apparel, medical products and automotive
products (but specifically excluding the Discontinued Business).
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks in Charlotte, North Carolina or New York, New York, are
required to or may be closed.
"Business-Related" shall mean, when used in reference to a specified asset
or obligation, only those of such assets or obligations that are used or held
for use in, or related or attributable to, the Business.
"Cash," "dollars" or "$" shall mean United States dollars.
"Closing Working Capital" shall mean Working Capital, determined as of the
Closing Date.
"Contracts" shall mean all mortgages, liens, security interests, leases,
instruments, contracts, commitments, arrangements and agreements of every type
and description to which Seller is a party or by which Seller or any of the
Acquired Assets are bound.
"Discontinued Business" shall mean Seller's discontinued business,
formerly a portion of Seller's Narrow Fabrics Division, constituting the
production of woven elastic fabrics for the intimate apparel industry.
"EBIT" shall mean, for any fiscal period, operating income of the Business
before (i) interest expense, (ii) extraordinary items of income and expense,
(iii) interest income and (iv) income taxes of Seller, and adjusted (x) to
exclude the effect of any gain or loss on the disposition of fixed assets and
the cumulative effect of a change in accounting principles and estimation
techniques, all as determined in accordance with U.S. GAAP applied consistently
with the 1996 Financial Statements and (y) to add, to the extent otherwise
deducted in determining such operating income for such fiscal period, an amount
attributable to the allocation by the Seller to the Business of corporate
overhead expense equal to $310,000 multiplied by a fraction the numerator of
which is the number of weeks in such fiscal period and the denominator of which
is fifty-two (52). All audit adjustments actually made in preparing the
financial statements for such fiscal period shall be reflected in determining
EBIT.
2
<PAGE>
"Environmental Condition" shall mean (w) any generation, use, handling,
storage, transportation, treatment, release, discharge, emission, spillage or
disposal of any Hazardous Substance, Hazardous Waste, waste containing a
Hazardous Substance or Petroleum Substance which occurred at or prior to the
Closing in connection with the Business (whether at the Real Property or another
location) any time at or prior to the Closing, by Seller or any of its
Affiliates and that results in an Environmental Liability, (x) any contamination
of air, soil, groundwater or surface water above, at, on, under, or adjacent to
the Real Property at or prior to the Closing, or (y) exposure of any person to
any Hazardous Substance, Hazardous Waste, waste containing a Hazardous Substance
or Petroleum Substance in connection with the Business at or prior to Closing.
The terms "Hazardous Waste," "Hazardous Substance," "Release" and "Facility"
have the meanings set forth in the Resource Conservation and Recovery Act and
the Comprehensive Environmental Response Compensation and Liability Act, as such
statutes are amended from time to time, and any federal or state law, rule or
regulation adopted pursuant thereto or otherwise relating to liability for
environmental contamination, and "Petroleum Substance" means petroleum,
petroleum products, crude oil or any fraction thereof and waste oil.
"Environmental Liability" shall mean any liability or potential liability
under any applicable Environmental Laws.
"Excluded Business" shall mean the business conducted by the Seller other
than the Business.
"FIFO" shall mean the first-in, first-out method of accounting for
inventory under U.S. GAAP.
"Graham Equipment" shall mean the dyeing Machinery and Equipment located
at the Graham Facility and designated on Schedule 4.4(c) as located at the
Graham Facility.
"Graham Facility" shall mean Seller's facility located at 327 N. Elm
Street, Graham, North Carolina.
"Graham Transaction" shall mean the removal of the Graham Equipment from
the Graham Facility, the transportation of the Graham Equipment to the Asheboro
Facility, the installation of the Graham Equipment at the Asheboro Facility and
the commencement of the normal operation of the Graham Equipment at the Asheboro
Facility.
"Graham Use and Occupancy Agreement" shall mean the agreement between
Seller and Buyer in substantially the form of Exhibit A hereto.
"Income Tax Returns" shall mean Returns relating to Income Taxes.
"Income Taxes" shall mean Taxes in the nature of income or franchise
taxes, including interest, penalties and additions to tax with respect thereto.
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"Interest Rate" shall mean a rate per annum equal to the prime rate of
NationsBank, N.A.. as in effect from time to time.
"Knowledge" of Seller shall mean the knowledge of William L. Remley,
Andrew J. Parise or Dane L. Vincent, after due inquiry.
"Leased Machinery and Equipment" shall mean the Machinery and Equipment
listed in Schedule 7.12 and leased to Seller as lessee pursuant to the lease
agreements referred to in Section 7.12.
"Leased Real Property" shall mean the Real Property located at 422B West
Baily Street, Asheboro, North Carolina.
"Legal Expenses" shall mean the reasonable fees, costs and expenses of any
kind incurred by any Person entitled to indemnification pursuant to Article 11
in investigating, preparing for, defending against or providing evidence,
producing documents or taking other action with respect to any claim as to which
such Person is entitled to indemnification under Article 11.
"Legal Requirements" shall mean laws, ordinances, codes, rules, standards,
regulations, decrees or orders or any court or governmental entity and other
requirements of all governmental, administrative or judicial entities.
"Material Adverse Effect" shall mean any change in, or effect on, the
Business that is, or is reasonably likely to be, materially adverse to the
business, operations, assets, financial condition or prospects of the Business
or any adverse effect on the ability of the Seller to carry out its obligations
under and to consummate the transactions contemplated by this Agreement.
"Net Closing Receivables" shall mean the face amount of the Receivables,
net of the Receivables Reserve, determined as of the Closing Date, but without
giving effect to any borrowing from factors secured thereby.
"Obsolescence Reserve" shall mean, as of any date, the reserve for slow
moving or obsolete inventory determined as of such date in accordance with U.S.
GAAP.
"Owned Real Property" shall mean the Real Property located at 328 West
Central Avenue, Asheboro, North Carolina.
"Permits" shall mean all permits, consents, orders, certificates,
licenses, franchises, registrations, approvals, authorizations and similar
rights by governmental or regulatory authorities or bodies.
"Person" shall mean and include an individual, corporation, company,
partnership, joint venture, association, trust, and other unincorporated
organization or entity and a
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governmental entity or any department or agency thereto.
"Perquisites" shall mean all perquisites provided by Seller to employees.
"Real Property" shall mean all real property, fixtures, buildings and
improvements thereon, wherever located, owned, occupied, used or held for use by
Seller in connection with the Business, and all appurtenances and easements and
rights of way which benefit such real property and all construction-in-progress
relating thereto.
"Receivables Reserve" shall mean, as of any date, a reserve equal to
$53,196.14.
"Remedial Action" shall mean all action: (x) to cleanup, remove, treat or
in any other way remediate any Hazardous Substance, Hazardous Waste or waste
containing a Hazardous Substance in the environment; (y) to prevent the Release
of any Hazardous Substance, Hazardous Waste or waste containing a Hazardous
Substance so that they do not endanger or other otherwise adversely affect the
environment or public health or welfare; or (z) to perform pre-remedial studies,
investigations or monitoring, in or under any real property, assets or
facilities. Capitalized terms used in this definition have the meanings provided
in the definition of Environmental Condition.
"Routine Contracts" shall mean (i) all Contracts for the purchase of
Inventories in the ordinary course of business and consistent with past
practices of the Business from established vendors, no one of which individual
purchase orders will involve the payment of more than $50,000 or provide for
deliveries to the Business more than six months after the date of such purchase
order, (ii) all Contracts for the sale of Inventories in the ordinary course of
business and consistent with past practices of the Business to established
customer accounts where an individual invoice does not exceed $50,000 or require
shipments by Buyer more than six months after the Closing Date, and (iii) all
Contracts for the purchase or sale of services or involving the lease by Seller
as lessee of office equipment incurred in the ordinary course of the Business,
no one of which will involve the expenditure by any party thereto of an amount
in excess of $10,000 after the Closing Date or will have a duration of more than
six months after the Closing Date, in each case referred to in clause (i), (ii)
or (iii) only if and to the extent such Contracts shall be consistent with the
representations and warranties of Seller and the other provisions of this
Agreement.
"Subsidiary" shall mean any corporation in which securities representing a
majority of the combined voting power of voting interests entitled to vote
generally for the election of directors are beneficially owned by such company
and/or one or more Subsidiaries.
"Target Closing Working Capital" shall mean $2,719,236.
"Target EBIT" shall mean, as of any date, $2,100,000 multiplied by a
fraction, the numerator of which shall be the number of weeks from and including
November 2, 1996, to and including such date and the denominator of which shall
be 52.
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"Taxes" shall mean (a) all Taxes, fees, levies, customs duties,
assessments, or charges of any kind whatsoever, including, without limitation,
gross income, net income, gross receipts, profits, windfall profits, sales, use,
occupation, value-added, consumption, ad valorem, transfer, license, franchise,
withholding, payroll, employment, excise, estimated, stamp, premium, capital
stock, production, net worth, alternative or add-on minimum, environmental,
business and occupation, disability, severance, or real or personal property
taxes imposed by any Federal, state, county, local, foreign, or other
governmental authority together with any interest, penalties, or additions to
tax imposed with respect thereto and (b) any obligations under any tax sharing,
tax allocation, or tax indemnity agreements or arrangements with respect to any
Taxes described in clause (a) above.
"Taxing Authority" shall mean any governmental authority having
jurisdiction over the assessment, determination, collection, or other imposition
of any Tax.
"Technology" shall mean all technology trade secrets, confidential or
proprietary information, research in progress, inventions and invention
disclosures (whether patentable or unpatentable), know how, formulae, processes,
procedures, research records, records of inventions, test information, market
surveys and marketing know-how; and drawings, schematics, blueprints, flow
sheets, designs and models, if any, of any nature whatsoever.
"Trade Payables" shall mean the current liabilities of Seller for accounts
payable attributable to the acquisition on or prior to the Closing Date of goods
and services solely related to the Business incurred in the ordinary course of
the Business, excluding any liability to any Affiliate of Seller or attributable
to any Excluded Assets or the Excluded Business.
"U.S. GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification
Act, 29 U.S.C. 2101 et seq.
"Working Capital" shall mean, as of any date, the excess of (i) the sum of
the book value of the Inventories, net of the Obsolescence Reserve, and the face
amount of the Receivables, net of the Receivables Reserve, but without giving
effect to any borrowing from factors secured thereby, determined as of such
date, over (ii) the Assumed Liabilities (or if such date is not the Closing
Date, liabilities of the type included in the definition of Assumed
Liabilities), in each case determined in accordance with this Agreement and, to
the extent not inconsistent therewith, U.S. GAAP.
1.2 Terms Defined Elsewhere. The following terms are defined in the text
of the Agreement as indicated below:
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Term Location in Agreement
---- ---------------------
"1996 Financial Statements" Section 4.3(a)
"Acquired Assets" Section 2.1
"Acquisition Transaction" Section 7.9
"Annual Financial Statements" Section 4.3(a)
"Assumed Contracts" Section 2.3
"Assumed Employee Liabilities" Section 7.13(a)
"Assumed Liabilities" Section 2.4
"Benefit Plans" Section 4.8(a)
"Business Employees" Section 4.8(a)
"Business Intellecutal Property" Section 4.4(i)
"Buyer's Savings Plan" Section 7.13(d)
"Buyer" Preamble
"Buyer Confidential Information" Section 6.1
"Buyer Indemnified Party" Section 11.1
"CERCLA" Section 4.10(c)
"Closing" Section 10
"Closing Balance Sheet" Section 3.2(a)
"Closing Date" Section 10
"Contract Default" Section 4.2
"Customer Refund" Section 3.3
"Dispute Deadline Date" Section 3.2(b)
"Disputed Amount" Section 3.2(c)
"Employee Claims" Section 7.13(a)
"Employment Agreement" Section 8.7
"Environmental Laws" Section 4.10(a)
"Environmental Permits" Section 4.10(a)
"ERISA" Section 4.8(a)(i)
"ERISA Affiliate" Section 4.8(g)
"Excluded Assets" Section 2.2
"FICA" Section 7.13(b)
"Financial Statements" Section 4.3(a)
"FUTA" Section 7.13(b)
"indemnified party" Section 11.2(a)
"indemnifying party" Section 11.2(a)
"Intellecutal Property" Section 2.1(g)
"Interim Balance Sheet" Section 4.3(a)
"Interim Financial Statements" Section 4.3(a)
"Inventories" Section 2.1(b)
"IRS" Section 4.8(b)
"Liens" Section 4.2
"Losses" Section 11.1(a)
"Machinery and Equipment" Section 2.1(d)
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"Non-Compete Parties" Section 7.10
"Non-Compete Period" Section 7.10
"PBGC" Section 4.8(g)
"Post-Closing Certificate" Section 3.2(a)
"Prepaid Expenses" Section 2.1(c)
"Principal Machinery and Equipment" Section 4.4(c)
"Pro Forma Financial Statements Section 4.3(e)
"Product Liability Claims" Section 2.5(a)
"Property" Section 4.4(b)
"Purchase Price" Section 3
"Real Property Leases" Section 4.4(b)
"Receivables" Section 2.2(d)
"Related Person" Section 4.12
"Representatives" Section 6.1
"Returns" Section 4.7(b)
"Seller's Accountants" Section 3.2(a)
"Seller's Savings Plan" Section 7.13(d)
"Seller" Preamble
"Seller Confidential Information" Section 6.2
"Seller Contracts" Section 4.5
"Software" Section 2.1(k)
"Survival Date" Section 12.2
"Third Party Action" Section 11.2(a)
"Transferred Employee" Section 7.13(a)
"VEBA" Section 4.8(c)
1.3 Construction. Unless herein otherwise provided, or unless the context
shall otherwise require, words importing the singular number shall include the
plural number, and vice versa; the terms "herein", "hereof" and "hereunder", or
other similar terms, refer to this Agreement as a whole and not only to the
particular sentence, paragraph, Section or Article in which any such terms may
be employed; a reference to any Person shall include such Person's predecessors
and successors; and all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with U.S. GAAP.
2. PURCHASE AND SALE.
Subject to the terms and conditions hereof, at the Closing, Seller shall
sell, transfer and assign to Buyer, and Buyer shall purchase and acquire from
Seller, the Business and the Acquired Assets.
2.1 Acquired Assets. As used herein, "Acquired Assets" shall mean all
Assets that are used or held for use in, or attributable to, the Business
(except for the Excluded Assets), including, without limitation, the following:
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(a) All receivables from employees.
(b) All inventories, including raw materials, work-in-process and
finished goods ("Inventories").
(c) All prepaid expenses and deferred expenses to the extent such
items will benefit the Business after the Closing Date and to the extent
transferable ("Prepaid Expenses").
(d) All machinery, equipment, computer hardware, fixtures, tools,
furniture, office supplies, spare parts, supplies, vehicles and other fixed
assets (including without limitation the Leased Machinery and Equipment)
("Machinery and Equipment").
(e) The Owned Real Property.
(f) Seller's rights, title and interest in, to and under each of the
Assumed Contracts.
(g) All patents, patent rights, trademarks, trade names (including
without limitation any right, title and interest to the name "Elastex"), service
marks, service names, copyrights, registrations and applications for the
foregoing, licenses with respect to the foregoing and other such property
("Intellectual Property").
(h) All Technology.
(i) All Permits.
(j) All claims and rights against third parties, including, without
limitation, insurance claims, unliquidated rights under manufacturers' and
vendors' warranties, rights of recovery, set-offs and credits.
(k) All computer software and databases ("Software").
(l) All books and records relating to the Business or the Acquired
Assets including, without limitation, copies of lists of customers and suppliers
(past, present and potential); records with respect to items (a) - (k) above;
business development plans; advertising matter, catalogues, brochures,
correspondence, mailing lists, photographs, sales materials and records;
purchasing materials and records; operating manuals and guidelines; software
manuals and documenting data stored on electronic, optical or magnetic form;
sales order files; personnel records of employees; accounting, tax and
litigation files; and other records or documents of any kind used in or required
to continue the Business. Seller, however, shall be entitled to retain copies of
any such documents or records which are necessary for its tax, accounting or
legal purposes.
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2.2 Excluded Assets. The following Assets (the "Excluded Assets") are not
included in the Acquired Assets and Seller shall not sell to Buyer and Buyer
shall not purchase from Seller the following:
(a) All cash and cash equivalents on hand, in transit or in
depositories.
(b) All of the assets, properties, interests and rights of the
Seller which are not used or held for use in, or attributable to, the Business.
(c) The name "Texfi Industries, Inc." and any other name using the
word "Texfi."
(d) All Business-Related accounts and notes receivables other than
receivables from employees ("Receivables").
(e) All assets relating or attributable solely to the Discontinued
Business.
(f) Any rights to and under Contracts not assumed by Buyer pursuant
to Section 2.3.
(g) The rights to any of Seller's claims for any federal, state,
local, or foreign tax refunds.
(h) All books and records of the Seller related to the Excluded
Business, the Excluded Assets and the liabilities not assumed by the Buyer in
accordance with Section 2.5.
2.3 Assumed Contracts. From and after the Closing, Buyer shall assume and
perform Seller's obligations to be performed after the Closing Date under the
following Contracts: (i) all Routine Contracts and (ii) those of the Contracts
listed in Sections (b), (d) and (i) of Schedule 4.5 hereto; provided, however,
that (a) in no event shall Buyer assume any liability or obligation under any
Contract (i) required by the terms thereof to be discharged on or prior to the
Closing Date, (ii) the existence of which constitutes a breach of any
representation or warranty of Seller contained in or made pursuant to this
Agreement, (iii) incurred by Seller in violation of the provisions of this
Agreement, (iv) arising out of a breach or default by Seller on or prior to the
Closing Date (including any event that with the passage of time or the giving of
notice, or both, would become a breach or default) under any Contract, or (v)
existing as of the Closing Date that, under U.S. GAAP, should have been accrued
or reserved for on a balance sheet or in the notes thereto as a liability or
obligation if and to the extent not accrued or reserved for on the Closing
Balance Sheet, and (b) Buyer shall have the right not to assume any Contract if
either Seller or another party thereto is in breach thereof or default
thereunder (including any event that with the passage of time or the giving of
notice, or both, would become a breach or default) as of the Closing or to the
assumption of which any necessary consent is not received prior to the Closing.
Contracts to be assumed by Buyer hereunder (and, as of any time prior to
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the Closing, without giving effect to clause (b) of the preceding sentence) are
referred to as "Assumed Contracts." If any Assumed Contract for which assignment
to Buyer is provided herein is not assignable without the consent of another
party, such consent is not obtained at or prior to the Closing, then such
Assumed Contract shall not be assigned to and assumed by Buyer at the Closing.
Instead, upon Buyer's request, Seller shall cooperate in any reasonable
arrangement designed to provide for Buyer the benefits intended to be assigned
to Buyer under the relevant Assumed Contract, including enforcement of any and
all rights of Seller against the other party thereto arising out of the breach
or cancellation thereof by such other party or otherwise.
2.4 Other Liabilities Assumed. Buyer shall assume as of the Closing and
pay thereafter the Trade Payables and the Assumed Employee Liabilities that are
not discharged on or prior to the Closing Date and the payment of which after
the Closing Date will not subject the Buyer to penalties, to the extent accrued
or reserved for in the calculation of Closing Value, as finally determined (the
"Assumed Liabilities").
2.5 Non-Assumption of Liabilities. Buyer shall not assume or be bound by
any duties, responsibilities, obligations or liabilities of Seller of any kind
or nature, known, unknown, contingent or otherwise, other than those obligations
and liabilities expressly assumed by it pursuant to Sections 2.3 and 2.4.
Without limiting the generality of the foregoing, in no event shall Buyer assume
or incur any liability or obligation under this Agreement or otherwise in
respect of any of the following:
(a) Any product liability or similar claim for injury to person or
property, regardless of when made or asserted, which arises out of or is based
upon any express or implied representation, warranty, agreement or guarantee
made by Seller, or alleged to have been made by Seller, or which is imposed or
asserted to be imposed by operation of law, in connection with any service
performed or product sold or leased by or on behalf of Seller on or prior to the
Closing Date, including without limitation any claim relating to any product
delivered in connection with the performance of such service and any claim
seeking recovery for consequential damage, lost revenue or income ("Product
Liability Claims").
(b) Any liability or obligation for any Tax imposed on Seller (or
any member of an affiliated group of which it is or was a member) or assessed or
incurred in connection with the assets, property or operation of the Business on
or prior to the Closing Date or arising under or in connection with the Excluded
Assets or the Excluded Business.
(c) Any liability or obligation arising prior to or as a result of
the Closing to any employees, agents or independent contractors of Seller,
whether or not employed by Buyer after the Closing, or under any benefit
arrangement with respect thereto, other than the Assumed Employee Liabilities.
(d) Any liability or obligation with respect to an Environmental
Condition arising from acts or omissions at or prior to Closing, including
without limitation any
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matter arising under CERCLA.
2.6 Schedules of Assets Not Exclusive. To the extent any assets of Seller
are intended to be transferred to Buyer pursuant to the general language of this
Article 2 but do not appear on the applicable Schedules, the general language of
this Article 2 shall govern and such assets shall nonetheless be deemed
transferred to Buyer.
2.7 Assurances. After the Closing, for no further consideration, Seller
shall perform all such other action and shall execute, acknowledge and deliver
all such assignments, transfers, consents and other documents as Buyer or its
counsel may reasonably request to vest in Buyer, and protect Buyer's right,
title and interest in, and enjoyment of, the Business and the Acquired Assets.
2.8 Receivables. Buyer shall promptly pay to Seller any amount collected
by Buyer attributable to Receivables. Seller shall promptly pay to Buyer any
amount collected by Seller attributable to accounts receivable relating to sales
by Buyer after the Closing. Amounts collected from customers of the Business
shall be applied as indicated by the customer or, if no indication is made, to
the oldest outstanding receivable, except to the extent that the customer has
indicated a colorable defense against such receivable as to which payment would
otherwise be applied hereunder.
3. PURCHASE PRICE
The purchase price for the Acquired Assets (the "Purchase Price") shall be
calculated and paid in accordance with this Article 3.
3.1 Closing Consideration. Subject to the terms and conditions of this
Agreement, at the Closing Buyer shall deliver to Seller cash in an amount equal
to $7,659,723, plus the amount payable by Buyer pursuant to Section 7.12.
3.2 Calculation of Closing Amounts.
(a) As promptly as practicable after the Closing Date, and in any
event not later than 45 days after the Closing Date, Seller shall deliver to
Buyer (i) a consolidated balance sheet of the Business as of the end of the
Closing Date (the "Closing Balance Sheet") and a statement of income and
statement of cash flows of the Business for the period from the end of the
preceding fiscal year of Seller through the end of the Closing Date, including
footnotes thereto (collectively, the "Closing Financial Statements"), prepared
in accordance with U.S. GAAP consistently applied with the Financial Statements
but without giving effect to any changes attributable to the purchase of the
Acquired Assets or assumption of the Assumed Liabilities by Buyer, (ii) the
audit report of Ernst & Young LLP, Seller's independent public accountants
("Seller's Accountants"), with respect to its review of the Closing Financial
Statements, which audit report shall be unqualified except with respect to
observation of opening inventory, (iii) a certificate of Seller (the
"Post-Closing Certificate") showing its calculation of the Closing
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Working Capital, Net Closing Receivables and 1997 EBIT and (iv) a report of
Seller's Accountants addressed to Buyer stating that the Closing Working
Capital, Net Closing Receivables and 1997 EBIT as set forth in the Post-Closing
Certificate were calculated in accordance with the Closing Financial Statements
and this Agreement. Buyer shall give Seller full access to the personnel, books
and records of Buyer during normal business hours upon reasonable request of
Seller and shall provide to Seller information reasonably requested by Seller
all to enable Seller and its representatives to prepare the Closing Financial
Statements and the Post-Closing Certificate. Seller shall make available to
Buyer its accountants' work papers (excluding papers containing Accountants
Proprietary Information of such accountants) and such other information relating
to the preparation of the Closing Financial Statements and the calculation of
the Closing Working Capital, Net Closing Receivables and 1997 EBIT as Buyer
shall reasonably request.
(b) In the event that Buyer disputes the calculation of the Closing
Working Capital, Net Closing Receivables or 1997 EBIT, Buyer shall give written
notice thereof to Seller on or before the 45th day after the Post-Closing
Certificate was given to Buyer (the "Dispute Deadline Date"), which notice shall
set forth the basis for such dispute in reasonable detail. Buyer and Seller
shall use all reasonable efforts to resolve any such dispute, but if any such
dispute cannot be resolved by such parties within 30 days after the date the
dispute notice is given, all unresolved disputes shall be referred to an
Arbitrating Firm for resolution. Buyer and Seller shall seek to cause the
Arbitrating Firm to make its determination within 30 days after referral of a
dispute to it. The determination of the Arbitrating Firm shall be conclusive and
binding on each party. The fees of the Arbitrating Firm shall be allocated and
paid by Seller or Buyer, or divided between them, on a basis determined by the
Arbitrating Firm to be fair taking into account the correctness of the positions
asserted by each of them with respect to the disputed matters resolved by the
Arbitrating Firm.
(c) The Closing Working Capital, Net Closing Receivables and 1997
EBIT shall be deemed to be finally determined in the amount set forth in the
Post-Closing Certificate on the Dispute Deadline Date unless a dispute notice is
given in accordance with Section 3.2(b) with respect to the calculation thereof.
If such a dispute notice is given with respect to Closing Working Capital, Net
Closing Receivables or 1997 EBIT (each such calculation to which such dispute
relates, a "Disputed Amount"), the Disputed Amount shall be deemed finally
determined on the date that the Arbitrating Firm gives written notice to Buyer
and Seller of its determination with respect to all disputes regarding the
calculation thereof, or, if earlier, the date on which Seller and Buyer agree in
writing on the amount thereof, in which case such Disputed Amount shall be
calculated in accordance with such determination or agreement, as the case may
be.
(d) If the Closing Working Capital, as finally determined, is less
than the Target Closing Working Capital, then Seller shall pay to Buyer the
amount of such deficiency, plus interest on the amount of such deficiency from
and including the Closing Date to but excluding the date of payment at a rate
per annum equal to the Interest Rate.
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(e) If the Net Closing Receivables, as finally determined, is less
than $2,840,277, then Buyer shall pay to Seller the amount of such deficiency.
If the Net Closing Receivables, as finally determined, exceeds $2,840,277, then
Seller shall pay to Buyer the amount of such excess.
(f) If the 1997 EBIT, as finally determined, is less than Target
EBIT determined as of the Closing Date, then Seller shall pay to Buyer an amount
equal to such deficiency multiplied by five.
(g) Any amounts due pursuant to Sections 3.2(d) and (e) shall be
paid within five Business Days after Closing Working Capital and Net Closing
Receivables shall have been finally determined, provided that if Seller must pay
Buyer pursuant to Section 3.2(d) and Buyer must pay Seller pursuant to Section
3.2(e), such amounts shall be netted with the remainder payable as appropriate.
Any amount due pursuant to Section 3.2(f) shall be paid within five Business
Days after 1997 EBIT shall have been finally determined. Any payment referred to
in this Section 3.2(g) shall be deemed an adjustment to the Purchase Price.
3.3 Returned Products. In the event that any customer returns to Buyer for
refund any Business-Related product shipped by Seller on or prior to the Closing
Date, Seller shall be obligated to pay to Buyer, upon demand by Buyer, an amount
equal to the excess of (A) the amount which Buyer refunded to said customer,
over (B) the salvage value, if any, of said returned product (such excess, the
"Customer Refund"), within five Business Days after demand by Buyer, provided
Seller shall not be obligated to make such payment until the aggregate amount of
(x) the Buyer Indemnified Parties' Losses under Section 11.1(a)(i) and (y) the
Customer Refunds exceeds the Basket Amount, after which Seller shall be
obligated for any and all such Losses and Customer Refunds in excess of the
Basket Amount. In connection with any demand for reimbursement hereunder, Buyer
shall provide Seller with copies of any credit memos issued by Buyer and other
documentation in the possession of Buyer relating to the return of the products
for which such reimbursement is demanded. Prior to making any refund for which
Buyer shall seek reimbursement hereunder, the customer seeking such refund shall
provide Buyer with a colorable claim for such refund.
3.4 Payments. All payments of cash required to be made pursuant to this
Article 3 shall be made by wire transfer of immediately available funds to such
account in the United States as shall be designated by the party entitled to
receive the payment in a notice to the party required to make the payment given
at least two Business Days prior to the date such payment is due.
3.5 Allocation of Purchase Price. The Seller, Buyer and Parent agree that
the Purchase Price and the Assumed Liabilities will be allocated to the Acquired
Assets for all purposes (including Tax and financial accounting) in accordance
with an allocation furnished by Buyer to Seller within 45 days after the Closing
Date. The Seller, Buyer and Parent will file all returns (including amended
returns and claims for refund) and information reports in a manner consistent
with such allocation.
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4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants to Buyer and Parent that:
4.1 Organization. Seller was duly organized and is a corporation validly
existing and in good standing under the laws of the State of Delaware. Seller
has all necessary corporate power and authority to own, lease and operate the
Acquired Assets and to carry on the Business as it is now being conducted and is
duly licensed or qualified to do business and is in good standing in each
jurisdiction listed in Part I of Schedule 4.1(a) hereto, which constitute all
jurisdictions where qualification as a foreign corporation is required in
connection with the conduct of the Business, except for such failures to be
licensed or qualified and in good standing, if any, which when taken together
with all other such failures of Seller would not in the aggregate have a
Material Adverse Effect. Seller has delivered to Buyer prior to the date of this
Agreement complete and correct copies of the Certificate of Incorporation and
By-Laws of Seller, as amended and currently in effect. The names of each
managerial employee of the Business and his or her positions with the Business
are fully and correctly set forth on Part II of Schedule 4.1(a) hereto.
4.2 Authority; Binding Effect. The Seller has the power and authority to
execute and deliver this Agreement and the other instruments and documents
required or contemplated by this Agreement to be executed and delivered by it,
to perform its obligations hereunder and thereunder and to consummate the
transactions provided for herein and therein. Such execution, delivery,
performance and consummation do not and will not (i) contravene any provision of
the certificate of incorporation or by-laws of Seller, (ii) except to the extent
expressly indicated on Schedule 4.5, contravene or conflict with, result in a
breach of or loss of benefits to Seller under, require any consent, approval or
waiver of any party to, or entitle any party (with notice or the passage of time
or both) to terminate, accelerate any obligation under, materially alter the
terms of or call a default with respect to, any Seller Contract (any of the
foregoing referred to in this clause (ii), including those referred to in
Schedule 4.5 hereto, being defined as a "Contract Default"), (iii) result in the
creation of a lien, charge, security interest, right or claim of another,
restraint on transfer or other encumbrance (collectively, "Liens") upon any of
the Acquired Assets, (iv) result in any violation by Seller of any law, rule or
regulation applicable to it, (v) violate or require any consent or approval
under any judgment, injunction or decree of any court or governmental authority
applicable to Seller or (vi) require any consent or approval of, notice to or
filing, registration or qualification with, any court or governmental authority.
This Agreement has been duly authorized by all necessary action of the Seller,
duly executed and delivered by the Seller and constitutes, and the other
instruments and documents required or contemplated by this Agreement to be
executed by Seller will be duly executed by the Seller as so required or
contemplated and when so executed will constitute, the legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance with the
terms hereof and thereof (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by the principles governing the availability of
equitable remedies).
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4.3 Financial and Other Information; Absence of Adverse Changes.
(a) Attached as Schedule 4.3(a) hereto are unaudited balance sheets
of the Business and the Discontinued Business as of the end of Seller's 1996,
1995 and 1994 fiscal years and the related unaudited statements of income and
cash flows of the Business and the Discontinued Business for each of the fiscal
years then ended (the "Annual Financial Statements", and the financial
statements included in the Annual Financial Statements as of the end of, and
for, the 1996 fiscal year, the "1996 Financial Statements") and the audited
balance sheet of the Business as of September 5, 1997 (the "Interim Balance
Sheet") and the related statements of income and cash flows for the ten months
then ended (the "Interim Financial Statements" and, together with the Annual
Financial Statements, the "Financial Statements"). The fiscal year of Seller is
the fifty-two or fifty-three week period ending on the Friday that is or is
closest to October 31 in each year.
(b) Net sales for the Business (determined in accordance with U.S.
GAAP) were not less than $15,000,000, $18,000,000, and $16,000,000 for the 1996,
1995 and 1994 fiscal years of Seller, respectively. EBIT for the Business was
not less than $1,200,000, $1,800,000, and $1,200,000 for the 1996, 1995 and 1994
fiscal years of Seller, respectively.
(c) Except as set forth on Schedule 4.3(c), the statements of income
included in the Financial Statements do not contain any items of special or
nonrecurring income or expenses, and the balance sheets included in the
Financial Statements do not reflect any write-up or revaluation increasing the
book value of any assets; nor have there been any transactions since the date of
the Interim Balance Sheet giving rise to special or nonrecurring income or any
such write-up or revaluation. Inventories have been valued throughout the
periods covered by the Financial Statements on a consistent basis. The books and
accounts of the Business are complete and correct and fully and fairly reflect
all of the transactions of the Business. The Financial Statements are in
accordance with the books and records of the Business, were prepared in
conformity with U.S. GAAP applied on a consistent basis and present fairly in
all material respects the financial position, results of operations and cash
flows of the Business as of the dates and for the periods indicated, except that
the Financial Statements do not have footnotes required by U.S. GAAP and the
Interim Financial Statements are subject to normal year-end adjustments.
(d) Except as set forth on Schedule 4.3(d), since November 1, 1996:
(i) there have been no employment or compensation arrangements entered into by
Seller with, no incentive or bonus compensation paid to, and no increases in the
rates of compensation payable to or to become payable by Seller to, any Business
Employee, except in the ordinary course of business consistent with the past
practice of Seller with respect to the Business, provided that the aggregate
amount of performance bonuses payable to management-level Business Employees
accrued by Seller for its 1997 fiscal year will not exceed $154,000; (ii) no
capital expenditures have been authorized or made by Seller with respect to the
Business, other than those in the ordinary course of business and that in the
aggregate do not involve expenditures by Seller of more than $10,000, (iii)
there have been no sales or other dispositions
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or acquisitions (including by purchase, lease as lessee or otherwise) of
Business-Related properties or assets by Seller other than those in the ordinary
course of business and that in the aggregate (excluding sales and acquisitions
of Inventory in the ordinary course of business) do not involve expenditures by
Seller of more than $10,000; (iv) there have been no damages or destructions,
whether or not fully covered by insurance, of or to any Business-Related
properties or assets; (v) Seller has not received notice that any party to any
Seller Contract intends to cancel or terminate any of such agreements or to
exercise or not exercise any options thereunder; (vi) the operations and
business of Seller relating to the Business have been conducted in all respects
only in the ordinary course consistent with past practice (except for the
execution of this Agreement); and (vii) there has been no Material Adverse
Effect.
(e) Attached as Schedule 4.3(e) are pro forma balance sheets of the
Business as of October 31, 1996 and July 4, 1997, and pro forma statements of
income for the year ended November 1, 1996, and the eight months ended July 4,
1997 (assuming no sale of the Business by Seller) (collectively, the "Pro Forma
Financial Statements"). The Pro Forma Financial Statements provide adjustments
to give effect to the consummation of the Graham Transaction as of the
respective dates of such balance sheets and as of the beginning of the periods
presented in such statements of income. The Pro Forma Financial Statements have
been prepared based on reasonable assumptions, which are described therein, and,
except for such projections, are based on historical financial statements and
reflect proper adjustments to give effect to the Graham Transaction.
(f) Schedule 4.3(f) hereto sets forth a true and correct list of all
Trade Payables outstanding as of September 5, 1997, including the invoice date,
the date due and the amount of each such Trade Payables and specifying those
Trade Payables that were past due in accordance with their respective terms of
such date.
4.4 Acquired Assets. The Acquired Assets constitute all the assets that
are used or held for use by Seller in connection with the Business and, except
for contemplated additions of Inventory in the ordinary course of business that
are not material in the aggregate, include all assets the use or benefit of
which are necessary for the performance of any Seller Contract and the conduct
of the Business as now conducted and presently proposed to be conducted.
(a) Title. Seller has as of the date hereof (except for the Leased
Machinery and Equipment and the Leased Real Property), and on the Closing Date
(including the Leased Machinery and Equipment but excluding the Leased Real
Property) will have and convey to Buyer, good and marketable title to all the
Acquired Assets, free and clear of all Liens, except (i) liens for current taxes
not yet due and payable, and (ii) mechanic's, materialmen's, landlord's and
other similar liens arising in the ordinary course of business securing payments
not yet due and payable. No other Person has any right to the use or possession
of any of the Acquired Assets. No financing statement under the Uniform
Commercial Code with respect to any of the Acquired Assets (except with respect
to the Leased Machinery and Equipment) has been filed in any jurisdiction and
Seller has not signed any such financing statement or any security agreement
authorizing any secured party thereunder to file any such financing statement.
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(b) Real Property. Schedule 4.4(b) hereto sets forth a true and
correct list of all parcels of land included in the Real Property, wherever
located, including with respect to each such parcel of Real Property (i) a full
legal description thereof, including metes and bounds and (ii) its street
address. Section (b) of Schedule 4.5 includes a true and correct summary of all
Contracts (the "Real Property Leases") for the use or occupancy by Seller of
Real Property, including fixtures, buildings, improvements, appurtenances,
easements and rights of way. The term "Property" shall mean all Real Property
and all property and rights leased, used or held for use by Seller pursuant to a
Real Property Lease. To the Knowledge of Seller, all Property is in good
condition and conforms with all applicable building, zoning, environmental, land
use and other laws, ordinances, codes, orders and regulations and the use and
proposed uses of such Property conforms with such laws, ordinances, codes,
orders and regulations. All necessary or appropriate occupancy and other
certificates and permits for the lawful use and occupancy of the Property and
the equipment thereon have been issued are not violated and are in full force
and effect. All notes or notices of violations of law, ordinances, codes, orders
or regulations noted in or issued by any state, county, municipal or local
department having jurisdiction against or affecting any of such Property have
been complied with. All Property has access over currently utilized facilities
and land (independent of any facilities or other property not owned by or leased
(for a term continuous with the lease of such Property) to Seller) to all public
roads and has all utilities and other services necessary or desirable for the
conduct of the Business carried out on said Property and the same are in good
and useable condition. No condemnation or eminent domain proceeding against or
affecting all or any portion of any Property is pending or, to the best
Knowledge of Seller, threatened. No Person (other than Seller) is in possession
of (or has any right, absolute or contingent, to possess superior to the right
of Seller to possess) all or any portion of the Property, except for lessor's
right under any Real Property Lease to retake upon termination of such Real
Property Lease the Property leased thereunder. There are no disputes with, or
notices from, the lessor under any Real Property Lease that have not been fully
resolved and satisfied.
(c) Machinery and Equipment. Schedule 4.4(c) hereto sets forth a
complete and accurate list as of the date of the Interim Balance Sheet of (i)
each item of Machinery and Equipment with an original cost of $5,000 or more
(the "Principal Machinery and Equipment") specifying the facility at which it
was then located, the items included as Graham Equipment and, in the case of
owned equipment, its date of purchase, method of depreciation, and book value as
of the date of the Interim Balance Sheet, and (ii) each item of Principal
Machinery and Equipment included in the Leased Machinery and Equipment. None of
the Machinery and Equipment has been moved to a different facility since the
date of the Interim Balance Sheet. The Machinery and Equipment listed or
included in the categories listed on Schedule 4.4(c): (i) comprises sufficient
Machinery and Equipment for Buyer to conduct and operate the Business as now
being conducted by Seller, (ii) is in good working order, is free from any
material defects and has been maintained in a manner sufficient for Buyer to
conduct and operate the Business as now being conducted by Seller, and (iii)
will be included in the Acquired Assets. No other person has any right to use or
possession of any of the Machinery and Equipment included in the Acquired
Assets. The Machinery and Equipment included in the Acquired Assets include such
spare or replacement parts as are necessary in order to permit the
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conduct of the Business without material interruption.
(d) Insurance. Schedule 4.4(d) hereto sets forth a complete and
accurate list of all policies of fire, liability, product liability, workers
compensation and other forms of insurance presently in effect with respect to
the Business and the Acquired Assets. All such policies are in full force and
effect and Seller has not received any notice of cancellation with respect
thereto. During the past three years, no application by Seller for insurance
with respect to the Acquired Assets has been denied for any reason.
(e) Inventories. Schedule 4.4(e) hereto sets forth a complete and
accurate list of the locations of the Inventories. All Inventories, net of the
Obsolescence Reserve, are in good and usable condition and are currently
marketable in the ordinary course of business; and the values thereof as shown
by the books of Seller do not exceed the aggregate of cost (determined on a FIFO
basis) or market thereof (whichever is lower) in accordance with U.S. GAAP
consistently applied with the Financial Statements. There have been no
acquisitions or dispositions of Inventories by Seller since October 31, 1996,
except in the ordinary course of business.
(f) Accounts Receivable. Schedule 4.4(f) contains a true and correct
summary statement as of the date of the Interim Balance Sheet indicating the
aging of all outstanding Receivables.
(g) Permits. Schedule 4.4(g) hereto sets forth a complete and
accurate list of all Permits used or held for use in connection with the conduct
of the Business or required for the ownership or possession of the Acquired
Assets, and (expect if designated on Schedule 4.4(g) hereto as unassignable) all
such Permits will be assigned to Buyer as of the Closing and Buyer will be
entitled commencing as of such time to all authorizations and benefits provided
thereunder, unless otherwise provided by law. Such Permits include all Permits
the use and exercise of which are necessary for the conduct of the Business as
now conducted or the ownership or possession of the Acquired Assets.
(h) Computer Software. Schedule 4.4(h) hereto sets forth a complete
and accurate description of all Software used or held for use in connection with
the conduct of the Business.
(i) Intellectual Property; Software; Technology. The Intellectual
Property, Technology and Software owned by or licensed to Seller and related to,
used in or held for use in the Business (the "Business Intellectual Property")
is sufficient for the conduct and operation of the Business as now being
conducted. Schedule 4.4(i) hereto sets forth a list of all Intellectual Property
and Software included in the Business Intellectual Property and any licenses or
other agreements relating thereto, and contains an indication of any
governmental registrations made by Seller of Business Intellectual Property. All
of Seller's right, title and interest in the Business Intellectual Property are
included in the Acquired Assets. Except as indicated on such Schedule, all
Intellectual Property included on such Schedule and shown as registered has been
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duly registered and filed. Except as set forth on Schedule 4.4(i), Seller is the
sole and exclusive owner of, and has the sole and exclusive right to use, the
Business Intellectual Property, in each case free and clear of any Lien, free
from any requirement of any past, present or future royalty payments, license
fees, charges or other payments and subject to no interference or other contest
proceeding. Seller has valid, binding and enforceable rights to use all Business
Intellectual Property used but not owned by it. Except as set forth on Schedule
4.4(i), Seller has not granted any outstanding licenses or other rights, or has
any obligations to grant licenses or other rights with respect to, any of the
Business Intellectual Property. No claims have been made by Seller of any
violation or infringement by others of the rights of Seller with respect to any
Business Intellectual Property, and Seller has no Knowledge of any basis for the
making of any such claim. To the best Knowledge of Seller, the Business have not
violated or infringed any Intellectual Property or Technology rights of others.
Seller has not received any written notice from any other Person pertaining to
or challenging the right of Seller to use any Business Intellectual Property.
4.5 Contracts. Schedule 4.5 hereto sets forth a complete and accurate list
of all Contracts (excluding Routine Contracts) of the following categories: (a)
Specimen copies of the standard terms of sale and product warranties of Seller;
(b) Leases and similar Contracts providing for the use of assets; (c) Licenses
and franchise agreements; (d) Sale or purchase agreements with respect to any
assets (excluding Routine Contracts); (e) Employment agreements; labor and
collective bargaining agreements; (f) Joint venture, partnership and similar
agreements and agreements entered into during the last five years for the
acquisition of any business; and any agreement containing non-competition or
other limitations restricting the conduct of the business of Seller; (g)
Dealership, distributorship, fiduciary, sales agency and other agency
agreements; (h) Any agreement for the processing or finishing of goods; (i) Any
management, advisory, consulting, advertising, construction, warehousing,
engineering, designing, styling, major utility or other agreement calling for
the rendition of services by or for others; (j) Factoring, loan and credit
agreements, promissory notes, installment obligations, other evidences of
indebtedness (excluding invoices and like evidences of regular trade
indebtedness) and guaranties (including guaranties by Seller of obligations of
others and guaranties by others of obligations of Seller); (k) Liens, mortgages,
deeds of trust, charges, zoning or use restrictions, restraints on transfer and
other encumbrances; (l) Insurance policies (including all under which Seller is
a beneficiary); (m) Consent decrees and other judgments, decrees or orders,
settlement agreements and agreements relating to competitive activities,
requiring or prohibiting any future action; (n) Confidentiality agreements with
employees or with other persons; (o) Export-import arrangements; and (p) All
Contracts to which Seller is a party or to which any of the properties or assets
thereof is subject, that are not otherwise listed above, but that are material
to the Business (collectively, and together with Routine Contracts, the "Seller
Contracts"). Seller has at or prior to the date of this Agreement furnished to
Buyer true and complete copies of all Seller Contracts listed on Schedule 4.5,
as in effect on the date of this Agreement, and no Seller Contract has been
subsequently modified or amended. Neither Seller nor, to the Knowledge of
Seller, any other party to any Seller Contract is in default or is claimed to be
in default in complying with any material provision of any Seller Contract or
has committed or permitted any event which, with notice or the passage of time
or both, would constitute such a default; and each Seller Contract is in full
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force and valid and binding upon Seller and (to the Knowledge of Seller) upon
any other parties thereto. The Routine Contracts will not require the
expenditure by Seller after the Closing of more than $100,000 in the aggregate.
Except as indicated on Schedule 4.5, no consent of any party to any Seller
Contract is required for any of the transactions contemplated by this Agreement.
4.6 Litigation; Compliance with Law. Except as disclosed on Schedule 4.6
hereto, there is no action, suit or proceeding pending or, to the best Knowledge
of Seller, threatened against or affecting Seller's performance of this
Agreement, the Business or the Acquired Assets. No investigation or review by
any governmental entity with respect to the Business or the Acquired Assets is
pending or, to the best Knowledge of Seller, threatened. The Business is being
conducted in accordance with all Legal Requirements applicable to Seller, the
Business or the Acquired Assets. Seller holds, and is in compliance with, all
Permits required by applicable Legal Requirements. No event has occurred and is
continuing that permits, or after notice or lapse of time or both would permit,
any modification or termination of any Permit. Seller (i) has not received any
notice asserting any noncompliance with any Legal Requirement or Permit, (ii) is
not subject to any Legal Requirement or Permit, which if enforced against or
complied with by Seller, could have a Material Adverse Effect, and (iii) has no
Knowledge of any Legal Requirement proposed or under consideration, which, if
effective, could have a Material Adverse Effect.
4.7 Taxes.
(a) Seller has timely filed all returns, declarations, statements,
forms, estimates, reports or other documents or information, including any
amendments to any of the foregoing, required to be filed with or supplied to any
Taxing Authority ("Returns") which are required to be filed in connection with
or relating to the Business, and all Taxes shown to be due on such Returns have
been timely paid. All such Returns are complete, accurate, and correct. Except
as disclosed in Schedule 4.7, Seller does not have in effect, and has not been
requested to make, any waiver or extension of any statute of limitations with
respect to Taxes in connection with or relating to the Business. Seller has paid
all Taxes required to be paid by it in connection with or relating to the
Business.
(b) None of the Acquired Assets is (i) subject to a tax benefit
transfer lease subject to the provisions of former Section 168(f)(8) of the
Code; (ii) "tax-exempt use property" within the meaning of Section 168(h) of the
Code; or (iii) "tax-exempt bond financed property" within the meaning of Section
168(g)(5) of the Code.
(c) There are no pending, proposed, or, to the Knowledge of Seller,
threatened, audits, actions, assessments or deficiencies asserted with respect
to Taxes of Seller.
(d) Seller is not a foreign person subject to withholding under
Section 1445 of the Code and the regulations promulgated thereunder, and
certification to that effect will be delivered to Buyer prior to the Closing
Date.
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4.8 Employee Benefits.
(a) To the Knowledge of Seller, set forth in Schedule 4.8(a) hereto
is a complete and correct list of:
(i) each "employee benefit plan" within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and
(ii) any other material benefit plan, arrangement or policy,
including, without limitation, any stock option, stock purchase,
sick leave, disability, workers compensation, vacation pay, holiday
pay, employee loan, educational assistance, incentive or bonus plan,
policy or arrangement or any employment, indemnification, consulting
or severance plan, policy or agreement, covering current or former
employees of Seller employed in the Business ("Business Employees"),
whether written or oral ("Benefit Plans"). Seller has not made any
commitment to create any additional Benefit Plan or to terminate or
modify or change in any respect any existing Benefit Plan.
(b) Seller has delivered to Buyer prior to the date of this
Agreement complete and correct copies of each Benefit Plan, or written summaries
of any unwritten Benefit Plan, and, where applicable with respect to such
Benefit Plans, any related trust agreements, insurance contracts, the latest
Internal Revenue Service ("IRS") determination letter, the last three annual
reports on IRS Form 5500, the last three annual financial statements, the last
three actuarial reports, and the most recent summary plan description or other
employee handbook. Set forth on Schedule 4.8(b) is a true and complete statement
of (i) the names, current rates of base compensation and amounts of supplemental
compensation of all current Business Employees whose total compensation exceeded
$60,000 in the 1996 fiscal year or is expected to exceed $60,000 during the 1997
fiscal year, and (ii) the compensation from Seller of all sales agents, dealers
or distributors of Seller listed in part (g) of Schedule 4.5 for the fiscal year
1996 and for the period November 2, 1996 to September 5, 1997.
(c) With respect to each Benefit Plan: (i) each such Benefit Plan is
and has been in substantial compliance, in form and operation, with all
applicable laws and regulatory requirements, and has been administered in
accordance with its terms and the terms of any applicable collective bargaining
agreement; and (ii) each such Benefit Plan intended to be tax-qualified under
Section 401(a) of the Code has received a favorable determination letter from
the IRS as to its tax-qualified status under the Code, and nothing has occurred
since the date of such favorable determination letter which would adversely
affect its tax-qualified status. Seller does not maintain and has never
maintained any trust which is or was intended to be a voluntary employees'
beneficiary association under Section 501(c)(9) of the Code ("VEBA").
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(d) After December 31, 1986 and with regard to the Business
Employees, Seller has not maintained and has not contributed to or had an
obligation to contribute to any defined benefit plan within the meaning of
Section 3(35) of ERISA or a "multiemployer plan" within the meaning of Section
3(37) of ERISA.
(e) No event has occurred and no condition exists with respect to
any Benefit Plan which could subject any Benefit Plan, Buyer, or any of Buyer's
employees, directly or indirectly (through an indemnification agreement or
otherwise), to a liability for a breach of fiduciary duty or for an excise tax,
penalty tax or fine under the Code or ERISA, including, without limitation,
liability for a "prohibited transaction" within the meaning of Section 406 of
ERISA or Section 4975 of the Code. No Benefit Plan or related trust is liable
for any federal, state, local or foreign taxes. There are no actions, suits, or
claims (other than routine claims for benefits in the ordinary course) with
respect to any Benefit Plan pending or threatened which could give rise to a
material liability, and Seller has no Knowledge of any facts which could give
rise to any such actions, suits or claims (other than routine claims for
benefits in the ordinary course). No Benefit Plan is currently under
investigation, audit or review by any governmental agency and, to the best
Knowledge of Seller, no such investigation, audit or review is contemplated or
under consideration.
(f) No event has occurred nor does any condition exist with respect
to: (i) any plan subject to Title IV of ERISA maintained, sponsored or
contributed to by Seller or (ii) any employee benefit plan or arrangement
maintained, sponsored or contributed to by any entity which is treated as a
single employer with Seller under Section 414(b), (c), (m) or (o) of the Code
("ERISA Affiliate") which could subject Buyer or any of Buyer's employees,
directly or indirectly (through an indemnification agreement or otherwise), to
liability, including, without limitation, liability under Section 412, 4971 or
4980B of the Code or Title IV of ERISA. Neither the execution of this Agreement
nor the Closing will be a "reportable event" under Section 4043 of ERISA (for
which the 30-day notice requirement has not been waived by the Pension Benefit
Guaranty Corporation (the "PBGC") with respect to any defined benefit plan
maintained, sponsored or contributed to by an ERISA Affiliate.
(g) All contributions and premium payments required to have been
made under or with respect to any Benefit Plan have been timely made.
(h) Seller has provided to Buyer: (i) the amount of premiums paid by
Seller with respect to current and former Business Employees (and their covered
dependents) under any insured group health plan for each of the last three
years; and (ii) the amount of claims paid by Seller with respect to current and
former Business Employees (and their covered dependents) under any self-insured
group health plan for each of the last three years. No Benefit Plan provides
life, health or other welfare benefits to retirees or other terminated employees
of the Business, other than continuation coverage mandated by Section 4980B of
the Code or any state law requiring similar continuation coverage.
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(i) The execution and performance of this Agreement will not trigger
or accelerate the payment or vesting, or increase the amount of compensation or
remuneration (whether of severance pay or otherwise) due any employee, former
employee, or director of Seller.
(j) Each Benefit Plan covers only current or former employees or
directors of Seller and their beneficiaries. Substantially adequate and complete
records for each Benefit Plan have been maintained and are in the custody of
Seller or a third party service provider retained by Seller.
(k) Schedule 4.8(k) hereto identifies the number of employees of the
Business who are not actively at work due to short-term or long-term disability.
4.9 Labor Relations. (a) Except for such matters as to which Buyer could
incur no Losses, Seller has (i) paid or made provision for payment of all
salaries and accrued wages of Business Employees; (ii) complied in all respects
with all applicable laws, rules and regulations relating to the employment of
labor, including those relating to equal employment opportunity obligations,
prohibitions against discrimination in employment, fair employment practices,
entitlements, wages, hours, collective bargaining and the payment and
withholding of taxes; and (iii) withheld and paid to the appropriate government
authority, or is holding for payment not yet due to such authority, all amounts
required by law or agreement to be withheld from the wages or salaries of
Business Employees. No union or other collective bargaining unit has been
certified or recognized by Seller as representing any Business Employees. There
are no controversies pending or, to the Knowledge of Seller, threatened between
Seller, on the one hand, and any labor union or other collective bargaining unit
purporting to represent any Business Employees. The Business is not affected by
any current or threatened strike or other labor disturbance, nor to the
Knowledge of Seller is any union attempting to represent any Business Employees
as collective bargaining agent. Seller has on file a properly completed
Immigration and Naturalization Service Form I-9 for each Business Employee to
the extent required by law, and Seller has duly examined all appropriate
documentation in connection therewith.
(b) Except as set forth on Schedule 4.9 (b), during the preceding 90
days, there has been no "employment loss" as defined in the WARN Act) with
respect to any Business Employee.
4.10 Environmental Matters.
(a) Seller has obtained all permits, licenses and other
authorizations that are required with respect to the ownership or occupancy of
any Acquired Assets or the operation of the Business as currently conducted
under any Environmental Laws (as hereinafter defined) (such permits, licenses
and authorizations being hereinafter referred to as "Environmental Permits"),
including all federal, state and local laws relating to pollution or protection
of the environment such as laws relating to emissions, discharges, releases or
threatened releases of hazardous, toxic or other pollutants, contaminants,
chemicals or industrial materials, substances
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or wastes into the environment, including but not limited to ambient air,
surface water, ground water, land surface or subsurface strata, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of hazardous, toxic or other pollutants,
contaminants, chemicals or industrial materials, substances or wastes (which
laws, together with all regulations, rules, codes, plans, decrees, judgments,
injunctions, notices and demand letters issued, entered, promulgated or approved
thereunder being herein referred to as "Environmental Laws"). To Seller's
Knowledge, Seller is in compliance in all material respects with all terms and
conditions of all Environmental Permits required under the Environmental Laws,
and is also in compliance in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables applicable to the Acquired Assets or the Business that
are contained in the Environmental Laws. Seller has not received any notice of
whatever form within the five years preceding the date of this Agreement
alleging noncompliance with any Environmental Law.
(b) There is no civil, criminal or administrative action, demand,
claim, investigation, order, notice, or proceeding pending or, to Seller's
Knowledge, threatened against Seller, under or relating in any way to the
Environmental Laws.
(c) Except as disclosed on Schedule 4.10, there are no past or
present events, conditions, circumstances or plans that may interfere with or
prevent compliance or continued compliance with respect to the Business or the
Acquired Assets with the Environmental Laws, or that may give rise to any common
law or other legal liability or obligation with respect to the Business or the
Acquired Assets, including, but not limited to, liability or obligation under
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, chemical, industrial toxic or hazardous material, substance or
waste. Without in any way limiting the foregoing, to Seller's Knowledge no
release, emission or discharge into the environment of any hazardous substance
(as that term is currently defined under CERCLA or any applicable similar state
law) has occurred or is currently occurring in connection with the conduct of
the Business and there is no spill, deposit or discharge of any hazardous
substance (as that term is currently defined under CERCLA or any applicable
similar state law) at, on, into, under or having originated from the Acquired
Assets or the Business. Except as disclosed on Schedule 4.10, to Seller's
Knowledge the Acquired Assets do not include any equipment, machinery, device,
or other apparatus that contains polychlorinated biphenyls that is not now or
ever has been leaking; any asbestos that is or reasonably may be anticipated to
become in friable condition within the next five years; or any underground tank
that contains petroleum products or any toxic or hazardous material, substance
or waste, as those terms are defined in the Environmental Laws, which tank has
not been determined by Petro Tite test or equivalent method to be free of leaks
within the last twelve months.
4.11 Customers and Suppliers. Schedule 4.11 contains a true and complete
list of (i) the names of each of the four largest suppliers of products and
services to the Business during its 1996 fiscal year and the first ten months of
its 1997 fiscal year and (ii) the dollar
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volume and percentage of sales to each of the 25 largest customers (in terms of
sales and gross profits) of products and services of the Business during such
periods. Seller has not received notice from any such customer or supplier that
it does not intend to continue, or currently is contemplating ceasing, business
dealings with Seller.
4.12 Transactions with Related Persons. Schedule 4.12 contains a true and
complete description of all transactions relating to the Business or the
Acquired Assets between Seller, or any Benefit Plan of Seller or any of its
Related Persons or any other Related Person of Seller that have occurred since
October 31, 1994, or that have not been fully performed and discharged as of the
date of this Agreement (whether under any of the Contracts listed on Schedule
4.5 or otherwise). For purposes of this Agreement, a "Related Person" of a
specified person is (i) an Affiliate of the person specified, (ii) a director or
officer of any of the foregoing referred to in this sentence, (iii) a spouse,
parent, sibling, child, mother-or father-in-law, son-or daughter-in-law, or
brother-or sister-in-law of any of the foregoing referred to in this sentence,
and (iv) any trust or other estate in which any of the foregoing referred to in
this sentence has a substantial beneficial interest or as to which any of the
foregoing referred to in this sentence serves as trustee or in a similar
fiduciary capacity.
4.13 Disclosure of All Material Facts. None of the information provided to
Buyer or Parent by Seller, or any of its representatives, includes an untrue
statement of material fact or omits to state a material fact necessary in order
to make the statements made, in light of the circumstances under which they were
made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.
Each of the Buyer and Parent hereby represents and warrants to Seller
that:
5.1 Organization. Each of the Buyer and Parent was duly organized and is a
corporation validly existing and in good standing under the laws of Delaware.
5.2 Authority; Binding Effect. Each of the Buyer and Parent has the power
and authority to execute and deliver this Agreement and the other instruments
and documents required or contemplated by this Agreement to be executed and
delivered by it, to perform its obligations hereunder and thereunder and to
consummate the transactions provided for herein and therein. Such execution,
delivery, performance and consummation do not and will not (i) contravene any
provision of the certificate of incorporation or by-laws of Buyer or Parent,
(ii) contravene or conflict with, result in a breach of, or entitle any party
(with notice or the passage of time or both) to call a default with respect to,
any agreement or instrument to which Buyer or Parent is party or by which any of
its properties or assets are bound, (iii) result in any violation by Buyer or
Parent of any law, rule or regulation applicable to it, (iv) violate or require
any consent or approval under any judgment, injunction or decree of any court or
governmental authority applicable to Buyer or Parent or (v) require any consent
or approval of or notice to or filing, registration or qualification with, any
court or governmental authority. This Agreement has been duly executed and
delivered by Buyer and Parent and constitutes, and such other
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instruments and documents required or contemplated by this Agreement to be
executed and delivered by Buyer and Parent will be duly executed by it as so
required or contemplated and when so executed will constitute, its legal valid
and binding obligation enforceable against it in accordance with the terms
hereof and thereof (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by the principles governing the availability of
equitable remedies).
6. CONFIDENTIAL INFORMATION.
6.1 Buyer Confidential Information. Prior to the Closing and after the
termination of this Agreement if there is no Closing, each of Buyer and Parent
shall, and shall cause their Affiliates and their respective officers,
employees, auditors, attorneys and other authorized representatives
("Representatives") to, hold in confidence (unless and to the extent compelled
to disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law) all Buyer Confidential Information (as
defined below) and shall not disclose the same to any third party except as may
reasonably be necessary to carry out this Agreement and the transactions
contemplated hereby, including any due diligence review. As used in this
Section, "Buyer Confidential Information" shall mean all information concerning
Seller obtained by Buyer or Parent from Seller or any of its Representatives in
connection with the transactions contemplated by this Agreement, except
information (i) ascertainable or obtained from public information, (ii) received
from a third party not employed by or otherwise affiliated with Seller, (iii)
which is or becomes known to the public, other than through a breach of this
Agreement, or (iv) furnished to Buyer or Parent for use in any governmental or
regulatory filing.
6.2 Seller Confidential Information. Seller shall, and shall cause its
Affiliates and Representatives to, hold in confidence (unless and to the extent
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law) all Seller Confidential
Information (as defined below) and shall not disclose the same to any third
party except as may reasonably be necessary to carry out this Agreement and the
transactions contemplated hereby. As used in this Section, "Seller Confidential
Information" shall mean all information concerning the Business or Buyer, except
information (i) ascertainable or obtained from public information, (ii) received
from a third party not employed by or otherwise affiliated with Seller (iii)
which is or becomes known to the public, other than through a breach of this
Agreement, or (iv) furnished to Seller for use in any governmental or regulatory
filing.
7. COVENANTS.
The parties covenant and agree as follows:
7.1 Access. From the date hereof through the Closing, Seller shall, after
reasonable advance notice from Buyer in each instance (except for matters
referred to in clause (iii)): (i) afford the Representatives of Buyer access
during normal business hours to any and all premises, properties, files, books,
records, documents and other information of Seller relating to the Business or
the Acquired Assets; (ii) make available for inspection and copying by Buyer or
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any such Representatives of Buyer true and complete copies of any documents
relating to the foregoing; (iii) on as frequent and timely a basis as is
practicable, furnish business and financial information that may be reasonably
requested by Buyer relating to the Business or the Acquired Assets; (iv) arrange
confidential interviews between Buyer's representatives and key executive and
managerial employees of Seller and such other employees as Buyer may reasonably
request; and (v) allow Buyer to carry out such further inquiry as Buyer
considers reasonably necessary to substantiate its assessment of the Business
and the Acquired Assets. In connection with Buyer's investigation pursuant to
this Section 7.1, Buyer hereby agrees that it shall not contact any of Seller's
suppliers, customers or financial institutions without the prior written consent
of Seller.
7.2 Public Announcements. Prior to the Closing, neither Seller, without
the consent of Buyer, nor Buyer, without the consent of Seller, shall issue any
press release or otherwise make any public statement with respect to the
transactions contemplated by this Agreement, except (i) for the press releases
issued on August 7, 1997 and (ii) as and to the extent that such party shall be
so obligated by law, in which case such party shall give advance notice to the
other parties, or as provided in the next sentence. Promptly following the
execution and delivery of this Agreement, (i) Buyer and Seller, after
consultation with one another, shall issue a joint press release announcing the
execution of this Agreement; and (ii) Seller and Buyer will cooperate in issuing
joint statements to suppliers, customers and employees of the Business.
7.3 Conduct of Business of Seller Prior to the Closing. Seller agrees
that, during the period from the date hereof to the Closing, except as
specifically consented to or approved by Buyer in writing, the Business of
Seller shall be operated conducted only in the ordinary course and in a manner
consistent with past practice.
(a) Without limiting the generality of the foregoing, (i) Seller
shall not take any action that would be inconsistent with the representations
and warranties contained in clauses (i) through (vii) of Section 4.3(d) being
true and correct as of the Closing, and (ii) in general, Seller shall not take
any action that would result in a failure to meet the condition contained in
Section 8.1.
(b) From the date hereof to the Closing, Seller shall use its best
efforts to preserve the business organization of the Business intact, to keep
available to Seller the current services of the Business, its Employees and to
preserve for Seller the goodwill of the Business's suppliers, customers and
others with whom a business relationship exists; provided, however, that nothing
shall permit Seller to dispose of any assets, make or agree to make any increase
in compensation, or take any other action with respect to employees, suppliers
or customers, in any such case that is inconsistent with current policies and
practices of Seller or with any other provisions of this Agreement.
7.4 Consents. Seller shall use its best efforts to obtain the consents of
other parties required for the consummation of the transactions contemplated
hereunder or which if not obtained could constitute a breach or default under
any Seller Contract and the estoppel
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certificates with respect to Seller Contracts requested by Buyer.
7.5 Security Interests and Real Property Matters. Not later than 15 days
prior to the Closing Date, Seller, at its cost and expense, shall furnish to
Buyer (i) recent surveys of the Owned Real Property, reasonably satisfactory and
certified to Buyer and its title company or companies, showing all buildings and
improvements, easements, rights of way and other relevant matters and sufficient
for Buyer's title insurance company to affirmatively insure the same and (ii)
commitments for title insurance issued by a nationally recognized title company
or companies specified by Buyer for the issuance of policies of title insurance
on the forms specified by Buyer, and in the amounts indicated, with respect to
the Owned Real Property. The commitments shall show title to such Owned Real
Property (including easements and rights of way which benefit such Owned Real
Property) in Seller, subject only to the exceptions set forth on Schedules
4.4(a) hereto and such additional exceptions and conditions which can be and are
omitted at or prior to the time of Closing.
7.6 Additional Agreements. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best efforts at its own
expense and in compliance with applicable law to take, or cause to be taken, all
action and to do, or cause to be done, all things reasonably necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Closing any further action is
reasonably necessary or desirable to carry out the purposes of this Agreement,
the proper officers of Buyer shall take all such action.
7.7 Notification of Certain Matters; Interim Financial Statements. Between
the date hereof and the Closing, Seller shall give prompt notice in writing to
Buyer and Parent of: (i) any information that indicates that any representation
or warranty by it contained in this Agreement was not true and correct as of the
date of this Agreement or will not be true and correct as of the Closing, (ii)
the occurrence of any event that will result, or has a reasonable prospect of
resulting, in the failure to satisfy a condition specified in Articles 8 or 9
hereof, (iii) any notice or other communication from any third Person alleging
that the consent of such third Person is or may be required in connection with
the transactions contemplated by this Agreement (other than those consents
indicated as required on Schedule 4.5 hereto), and (iv) any notice of, or other
communication relating to, any default or event which, with notice or lapse of
time or both, would become a default under any Seller Contract.
7.8 Expenses; Transfer Taxes. Each party shall pay its own fees and
expenses (including the fees of any attorneys, accountants, investment bankers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby whether or not the transactions contemplated
hereby are consummated. Notwithstanding the foregoing, Seller shall pay, and
shall indemnify and hold harmless Buyer and Parent from and against, all sales,
use, transfer, excise, real property gains or similar taxes imposed as a result
of the transactions contemplated by this Agreement and all costs of title
insurance delivered at the Closing for the Owned Real Property.
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7.9 Non-Solicitation of Transactions. From and after the date hereof,
Seller shall not, and shall cause its Affiliates (including their respective
directors, officers, employees and advisors) not to, solicit, encourage or
initiate any offer or proposal from, or engage in any discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group, other than Buyer and its Affiliates (including
its directors, officers, employees and advisors), concerning a merger,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets of, or any equity interest in, the Business
(any such transactions being referred to herein as an "Acquisition
Transaction"), and Seller shall not, and shall cause their respective Affiliates
(including their respective directors, officers, employees and advisors) not to,
accept any proposal with respect to any Acquisition Transaction. If Seller or
any of its Affiliates (including their respective directors, officers, employees
and advisors) shall receive any proposal with respect to any Acquisition
Transaction, the recipient shall immediately communicate to Buyer the terms of
such proposal.
7.10 Non-Competition. Seller agrees that it shall not, prior to the third
anniversary of the Closing Date (the "Non-Compete Period"), directly or
indirectly, individually or for, with or through any other Person (which shall
be deemed to include any equity participation in any other person), compete with
Buyer or any subsidiary or other Affiliate of Buyer or any of its successors or
assigns of the Business conducted at the Closing by Seller (collectively,
"Non-Compete Parties"), with respect to the Business in any state in the United
States; provided, however, that (i) nothing herein shall be construed to prevent
Seller from owning, as an investment, up to 1% of a class of equity securities
issued by any competitor of any Non-Compete Party that is publicly traded and
registered under Section 12 of the Securities Exchange Act of 1934 and (ii)
Seller shall not be deemed to have breached this covenant if Seller merges or
consolidates with, or substantially all of the assets or stock of Seller are
acquired by, another person that so competes with respect to the Business. The
parties intend that the covenant contained in the preceding sentence shall be
construed as a series of separate covenants, one for each county and city
included within each state or other jurisdiction and, except for geographic
coverage, each such separate covenant shall be deemed identical. The parties
agree that the covenants deemed included in this Section are, taken as a whole,
reasonable in their geographic scope and their duration and no party shall raise
any issue of the reasonableness of the scope or duration of the covenants in any
proceeding to enforce any such covenants. If, in any judicial proceeding, a
court shall refuse to enforce any separate covenant, then the unenforceable
covenant shall be modified in order to make it acceptable to the court and
enforced accordingly, or, if necessary, deemed eliminated to the extent
necessary to permit the remaining separate covenants to be enforced.
7.11 Non-Solicitation of Employees. Seller agrees that, until the end of
the Non-Compete Period, Seller will not, directly or indirectly, (i) influence
or attempt to influence any Business Employee not to accept employment with
Buyer or, if employed by Buyer , to leave Buyer's employ, or (ii) employ any
person who was employed by Buyer at any time within one year prior to the time
of such employment with Seller or any of its Affiliates.
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7.12 Leased Machinery and Equipment. At or prior to the Closing, Seller
shall purchase the Leased Machinery and Equipment from the lessor thereof and,
at the Closing, shall sell it to Buyer as part of the Acquired Assets in
accordance with the terms of this Agreement. At the Closing, Buyer shall pay to
Seller an amount equal to the "Stipulated Loss Value" of the Leased Machinery
and Equipment (as such term is defined in the lease agreement between
NationsCredit Commercial Corp., f.k.a. Greyrock Capital Group Inc., and Seller,
dated August 10, 1995, and the lease agreement between NationsCredit Commercial
Corp. and Seller dated July 11, 1996, against receipt by Buyer of good to title
to such Leased Machinery and Equipment, free and clear of all Liens, provided
that in no event shall the amount payable by Buyer hereunder exceed $595,000 in
the aggregate. Seller shall be responsible for all other payments required in
connection with the purchase of the Leased Machinery and Equipment.
7.13 Employee Matters. (a) Seller will terminate employment of all of the
Business Employees, effective as of the Closing, and Buyer shall offer
employment, effective as of the Closing, to substantially all of such Business
Employees. Seller will use its best efforts to assist Buyer in hiring the
Business Employees that Buyer wishes to hire. The terms of employment of any of
the Business Employees hired by Buyer (a "Transferred Employee") shall be
determined in Buyer's sole discretion; provided, however, that Buyer will
provide Transferred Employees with employee benefit plans which, as of the
Closing, are substantially similar, in the aggregate, to the employee benefit
plans provided to employees of Buyer's subsidiary, Regal Manufacturing Company,
Inc., other than 401(k)/profit sharing and vacation pay, incentive pay and other
payroll practices, and that Buyer will provide full past service and seniority
credit to the Transferred Employees for their service with Seller for purposes
of the Transferred Employees' coverage under any employee benefit plans and
policies which Buyer may provide to Transferred Employees. Nothing in this
Agreement shall, or shall be construed to, limit Buyer's ability to terminate
the employment of any employee or to amend or terminate any employee benefit
plan. Except for vacation and sick pay of Transferred Employees, to the extent
accrued and provided for in the calculation of Closing Value, as finally
determined ("Assumed Employee Liabilities"), Buyer shall not assume any
obligation or liability relating to or arising from any Benefit Plan,
commitment, undertaking, act or omission of Seller, any Affiliate of Seller or
any of their respective Representatives with respect to the Business's Employees
or any occupational injury or disease of any of Seller's employees occurring or
existing on or prior to the Closing Date (collectively, other than the Assumed
Employee Liabilities, "Employee Claims"). Seller shall pay directly to each of
its employees that portion of all benefits that has been accrued on behalf of
that employee as of the Closing Date, including obligations with respect to
accrued bonuses, incentive pay, and travel and entertainment expense
reimbursement.
(b) Seller and Buyer will treat the Buyer as a "successor employer"
and Seller as "predecessor," within the meaning of sections 3121(a)(1) and
3306(b)(1) of the Code, with respect to Transferred Employees for purposes of
Taxes imposed under the United States Federal Unemployment Tax Act ("FUTA") or
the United States Federal Insurance Contributions Act ("FICA"). At the request
of the Buyer with respect to any particular applicable Tax law relating to
employment, unemployment insurance, social security, disability, workers'
compensation, payroll, health care or other similar Tax other than Taxes imposed
under FICA
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and FUTA, Seller and Buyer will (i) treat Buyer as a successor employer and
Seller as a predecessor employer, within the meaning of the relevant provisions
of such Tax law, with respect to Transferred Employees and (ii) cooperate with
each other to avoid, to the extent possible, the filing of more than one
individual information reporting form pursuant to each such Tax law with respect
to each such Transferred Employee for the calendar year within which the Closing
Date occurs.
(c) Buyer shall be responsible for compliance with the WARN Act with
respect to the transactions contemplated by this Section 7.13 to occur as of the
Closing and for actions taken by Buyer subsequent to the Closing, provided that
if the representation and warranty set forth in Section 4.9(b) is not correct
and there is a failure to comply with the WARN Act attributable thereto, then
Seller shall be responsible for any consequences of any failure to comply with
the WARN Act by Buyer.
(d) Effective as of the Closing, Seller shall terminate the
participation of the Transferred Employees in the Texfi Industries, Inc. 401(k)
Retirement and Savings Plan ("Seller's Savings Plan") and shall amend Seller's
Savings Plan, if necessary, to cause all of the Transferred Employees who are
participants in Seller's Savings Plan to become 100% vested in their account
balances under such plan and to permit Transferred Employees to receive a
distribution of their account balances under Seller's Savings Plan within a
reasonable period of time following the Closing Date. After Seller provides
Buyer with a copy of a favorable IRS determination letter with respect to
Seller's Savings Plan (or such other evidence as to the qualified status of
Seller's Savings Plan as Buyer may require), The Worldtex, Inc. Profit Sharing
and Retirement Savings Plan ("Buyer's Savings Plan") shall accept direct
rollovers of distributions to Transferred Employees from Seller's Savings Plan
in cash and promissory notes representing participant loans to the extent
permitted by Sections 401(a)(31) and 402 of the Code and Buyer's Savings Plan.
(e) Seller shall be responsible for providing continuation of group
health coverage required by Section 4980B of the Code or Sections 601 through
608 of ERISA ("COBRA") with respect to any current or former Business Employee
or any "qualified beneficiary" (within the meaning of Section 4980B of the Code)
of any such current or former employee who has incurred a "qualifying event"
(within the meaning of Section 4980B of the Code) on or prior to the Closing
Date, including any "qualifying event" which is incurred as a result of the
transactions contemplated by this Section 7.13 to occur as of the Closing Date.
Buyer shall be responsible for providing COBRA coverage with respect to any
Transferred Employee or any "qualified beneficiary" of a Transferred Employee
who incurs a "qualifying event" after the Closing Date. Buyer shall (i) credit
the service of Transferred Employees with Seller for purposes of any waiting
period under any medical plan Buyer provides to Transferred Employees; and (ii)
credit all covered expenses of Transferred Employees and their eligible family
members under Seller's medical plan incurred from January 1, 1997 to the Closing
for purposes of annual deductibles and out-of-pocket limits under Buyer's
medical plan.
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(f) Notwithstanding any possible inference to the contrary, none of
the parties to this Agreement intends for this Section 7.13 to create any right
or obligation except as between the parties to this Agreement, and no past,
present or future employees of Seller or Buyer shall be treated as third-party
beneficiaries of this Section 7.13.
7.14 Graham Transaction. Within 150 days after the Closing Date, Buyer
shall remove the Graham Equipment from the Graham Facility. If the aggregate
cost of completing the Graham Transaction, to the extent conducted in accordance
with the plan described in Schedule 7.14 hereto, exceeds $450,000, Seller shall
promptly pay to Buyer the amount of such excess upon written request from Buyer
specifying in reasonable detail the aggregate costs of the Graham Transaction.
At the Closing, Seller and Buyer shall enter into the Graham Use and Occupancy
Agreement relating to the use by Buyer of the Graham Facility after the Closing.
7.15 Use of Name. Effective as of the Closing, Seller hereby grants to
Buyer a nonexclusive, nontransferable, royalty-free worldwide license to use the
name "Texfi" (together and with other words) and related logos, to the extent
included on labels, Inventories, invoices, advertising materials, brochures and
similar matter included in the Acquired Assets, in substantially the same manner
as they were used prior to the Closing. Such license shall expire on the first
anniversary of the Closing Date.
7.16 Taxes. Seller and Buyer shall (a) each provide the other with such
assistance as may reasonably be requested by either of them in connection with
the preparation of any Tax return, any audit or other examination by any Taxing
Authority or any judicial or administrative proceeding with respect to Taxes,
(b) each retain and provide the other with any records or other information
which may be relevant to such return, audit, examination or proceeding,
redacted, in the case of clauses (a) and (b), to provide only the information
thereon relevant to the Acquired Assets, and (c) each provide the other with the
relevant redacted portion of any final determination of any such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Tax return of the other for any period (which shall be maintained
confidentially). Without limiting the generality of the foregoing, Buyer and
Seller shall retain, until the applicable statutes of limitations (including all
extensions) have expired, copies of all Tax returns, supporting workpapers, and
other books and records or information which may be relevant to such returns for
all Tax periods or portions thereof ending before or including the Closing Date,
and shall not destroy or dispose of such records or information without first
providing the other party with a reasonable opportunity to review and copy the
relevant redacted portions of the same. With respect to Taxes incurred in
connection with, relating to or arising out of the Business prior to the Closing
that are not yet due or owing as of the Closing, Seller will (i) timely file
when due all returns and reports for such Taxes, including information returns,
that are required to be filed, (ii) timely pay when due the Taxes that are shown
to be due pursuant to such returns or reports, and (iii) timely pay when due all
other such Taxes not required to be reported on returns.
7.17 Transition Services. Following the Closing, Seller shall provide to
Buyer the computer services specified on Schedule 7.17 to the same extent as
utilized in the Business
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prior to the Closing. Seller shall provide such services through the 180th day
after the Closing Date, or such earlier date as Buyer shall specify by written
notice to Seller given at least five Business Days in advance of such specified
date. Buyer shall pay to Seller at a monthly rate of $5,500 for the period that
Seller provides such services, payable on the last day of each month during such
service period and on the last day that Seller is obligated to provide such
services.
7.18 Trade Payables. As of the Closing Date, Seller shall pay all Trade
Payables that are past due in accordance with their respective terms. At the
Closing, Seller shall provide to Buyer such written evidence of the payment of
all such past due Trade Payables as Buyer shall reasonably request. To the
extent any Trade Payable included in the Assumed Liabilities was past due in
accordance with its terms as of the Closing Date, Seller shall pay to Buyer,
within five Business Days after written request by Buyer to Seller, the amount
required to be paid to the vendor with respect to such Trade Payable. Any amount
not paid by Seller to Buyer when due pursuant to the preceding sentence shall
bear interest at the Interest Rate until paid in full.
8. CONDITIONS TO OBLIGATIONS OF BUYER AND PARENT.
The obligations of Buyer and Parent required to be performed by it at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by Buyer and
Parent as provided herein except as otherwise required by applicable law:
8.1 Representations and Warranties; Covenants. Each of the representations
and warranties of Seller contained in this Agreement shall be true and correct
as of the date of this Agreement and (having been deemed to have been made again
at and as of the Closing in the same language) shall be true and correct as of
the Closing, except for representations and warranties that speak as of a
specific date or time other than the Closing (which need only be true and
correct as of such date or time), provided that this condition shall be deemed
to be satisfied if any breaches of such representations and warranties of Seller
could not result in Losses to Buyer and Parent, in the aggregate, in excess of
the Basket Amount. Each of the obligations of the Seller required by this
Agreement to be performed by it at or prior to the Closing shall have been duly
performed and complied with as of the Closing. At the Closing, Buyer shall have
received certificates, dated the Closing Date and duly executed on behalf of
Seller to the effect that the conditions set forth in the preceding sentences
have been satisfied.
8.2 Opinion of Counsel. Buyer shall have been furnished with the opinion
of Winston & Strawn, counsel to Seller, addressed to Buyer and dated the Closing
Date, to the effect set forth in Schedule 8.2 hereto.
8.3 Absence of Litigation, Damages, Changes. No order, stay, injunction or
decree of any court of competent jurisdiction shall be in effect (i) that
prevents or delays the consummation of any of the transactions contemplated
hereby to occur at the Closing or (ii) that would impose any material limitation
on the ability of Buyer effectively to exercise full rights of ownership of the
Business or the Acquired Assets. No action, suit or proceeding before any
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court or any governmental or regulatory entity shall be pending or threatened,
and no investigation by any governmental or regulatory entity shall have been
commenced (and be pending), (x) seeking to restrain or prohibit (or questioning
the validity or legality of) the consummation of the transactions contemplated
by this Agreement or seeking damages in connection therewith that Buyer, in its
reasonable discretion, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby or (y) that might result in
a Material Adverse Effect.
8.4 Title Insurance. Buyer shall have received (i) the evidence of, recent
surveys of Owned Real Property and the commitments for title insurance required
to be delivered to Buyer pursuant to Section 7.5 and (ii) such commitment for
title insurance redated the date and time of the Closing, including such
endorsements and affirmative insurance as Buyer shall specify, and certified in
the name of Buyer, that insure good and marketable title in Buyer to all of the
Owned Real Property, subject only to exceptions set forth on Schedule 4.4(a)
hereto (and specifically, but without limitation, containing no exception for
matters created, first appearing in the public records or attaching subsequent
to the date of such commitments but prior to the recordation of the deeds to the
Owned Real Property in the name of Buyer).
8.5 Working Capital and EBIT. As of the last fiscal month end next
preceding the Closing Date, the Working Capital shall not be less than the
Target Closing Working Capital, and the EBIT of the Business for the period
since November 1,1996 through such month-end shall not be less than the Target
EBIT determined as of such month-end, and Seller shall have furnished to Buyer
interim financial statements of Seller pursuant to Section 7.7 demonstrating
satisfaction of this condition.
8.6 Trade Payables. Buyer shall be satisfied, in its reasonable
discretion, that as of the Closing all Trade Payables that are past due in
accordance with their terms shall have been paid.
9. CONDITIONS TO OBLIGATIONS OF SELLER.
The obligations of Seller required to be performed by it at the Closing
shall be subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, each of which may be waived by it as provided herein,
except as otherwise provided by applicable law:
9.1 Representations and Warranties; Covenants. Each of the representations
and warranties of Buyer and Parent contained in this Agreement shall be true and
correct as of the date of this Agreement and (having been deemed to have been
made again at and as of the Closing in the same language) shall be true and
correct in all respects as of the Closing, except for representations and
warranties that speak as of a specific date or time other than the Closing
(which need only be true and correct as of such date or time), provided that
this condition shall be deemed to be satisfied if any breaches of such
representations and warranties of Buyer and Parent could not result in Losses to
Seller, in the aggregate, in excess of the Basket Amount.
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Each of the obligations of Buyer and Parent required by this Agreement to be
performed by it at or prior to the Closing shall have been duly performed and
complied with as of the Closing. At the Closing, Seller shall have received a
certificate, dated the Closing Date and duly executed on behalf of Buyer and
Parent, to the effect that the conditions set forth in the preceding sentences
have been satisfied.
9.2 Absence of Litigation. No order, stay, injunction or decree of any
court of competent jurisdiction shall be in effect that prevents or delays the
consummation of any of the transactions contemplated hereby to occur at the
Closing.
9.3 Opinion of Counsel. Seller shall have been furnished with the opinion
of Hughes Hubbard & Reed LLP, counsel to Buyer, addressed to Seller and dated
the Closing Date, to the effect set forth in Schedule 9.3 hereto.
10. CLOSING.
The transfers and deliveries to be made pursuant to this Agreement (the
"Closing") shall take place at the offices of Hughes Hubbard & Reed LLP, One
Battery Park Plaza, New York, New York, at 10:00 a.m. on October 3, 1997 or, if
the conditions set forth in Sections 8.3, 8.4, 8.5, 8.7, and 9.2 shall not have
been satisfied or waived on such day, then on the first fiscal month end of
Seller to occur after such conditions shall have been satisfied or waived, or at
such other place, time or date as the parties shall agree upon in writing. The
date on which the Closing is to occur is herein referred to as the "Closing
Date".
At the Closing, subject to the satisfaction or waiver of the conditions to
its obligations set forth in this Agreement, Shareholders, Seller and Buyer
shall make the following deliveries or such deliveries in substitution therefor
as are satisfactory to the indicated recipient:
10.1 Deliveries to Buyer. The following Persons shall make the indicated
deliveries to Buyer:
(a) Seller shall deliver the following:
(i) Bills of sale, instruments of transfer, assignment and
conveyance, and other instruments in form and substance satisfactory to Buyer
and sufficient to convey, transfer, and assign to Buyer and effectively vest in
Buyer all right, title and interest in and to the Business and good and
marketable title to the Acquired Assets, free and clear of all Liens.
(ii) Warranty deeds in recordable and locally customary form
describing the Owned Real Property and all easements, rights of way and uses
which benefit the Owned Real Property in form and substance satisfactory to
Buyer and sufficient to convey, transfer and assign to Buyer good and marketable
title to the Owned Real Property subject only to exceptions permitted by
Schedules 4.4(a) and 4.4(b) hereto.
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(iii) Possession of the Acquired Assets.
(iv) A certificate of an officer of Seller certifying (i) that
attached to such certificate are true and correct copies of the Certificate of
Incorporation and By-Laws of Seller as in effect as of the Closing, (ii) that
attached to such certificate are true and correct copies of resolutions adopted
by the Board of Directors of Seller authorizing the execution, delivery and
performance of this Agreement by such company and that such resolutions are in
full force and effect as of the Closing and (iii) the incumbency and signatures
of the officers of Seller who have executed this Agreement and the other
instruments and documents delivered at the Closing on behalf of Seller.
(v) A certificate from the Secretary of State of Delaware as
to the good standing of Seller and listing all charter documents on file.
(vi) Certification that Seller is not a foreign person subject
to withholding under Section 1445 of the Code.
(b) Seller shall deliver to Buyer such other instruments and
documents as may be reasonably requested by, and in form and substance
reasonably satisfactory to, Buyer or its title insurance company in order to
effect the transactions contemplated by this Agreement to occur at the Closing.
10.2 Deliveries by Buyer. Buyer shall make the following deliveries to the
indicated Persons:
(a) Cash by wire transfer to Seller's account in the amount required
to be paid at the Closing by Section 3.1.
(b) A certificate of an officer of Buyer certifying (i) that
attached to such certificate are true and correct copies of the Certificate of
Incorporation and By-Laws of such company as in effect as of the Closing, (ii)
that attached to such certificate are true and correct copies of resolutions
adopted by the Board of Directors of such company authorizing the execution,
delivery and performance of this Agreement by such company and that such
resolutions are in full force and effect as of the Closing and (iii) the
incumbency and signatures of the officers of such company who have executed this
Agreement and the other instruments and documents delivered at the Closing on
behalf of such company.
(c) A certificate from the Secretary of State of Delaware as to the
good standing of Buyer and listing all charter documents on file.
(d) Such other instruments and documents as may be reasonably
requested by, and in form and substance reasonably satisfactory to, Seller in
order to effect the transactions contemplated by this Agreement to occur at the
Closing.
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11. INDEMNIFICATION.
11.1 Indemnification Obligations.
(a) Seller hereby agrees to indemnify and hold harmless Buyer and
Parent, and Buyer's and Parent's respective directors, officers, employees and
Affiliates (each, a "Buyer Indemnified Party"), against and in respect of any
and all losses, damages, liabilities, claims, costs and expenses (including,
without limitation, Legal Expenses) (collectively, "Losses") arising out of,
based upon or resulting from (i) the breach of any representation or warranty of
Seller contained in this Agreement or in any statement or certification of
Seller furnished pursuant hereto, (ii) the breach by Seller of or failure of
Seller to observe any of its covenants or agreements contained in this
Agreement, (iii) any liability or obligation of or attributable to Seller or any
of its Affiliates not expressly assumed by Buyer pursuant to Sections 2.3 or
2.4, (iv) any Contract Default, (v) any Product Liability Claim, (vi) any
Employee Claim, and (vii) any Environmental Condition (regardless of whether, in
the case of Third Party Actions, suits or proceedings, Seller may have a
meritorious defense). Notwithstanding any other provision herein to the
contrary, Seller shall not be required, pursuant to Section 11.1(a)(i), to
indemnify and hold harmless any Buyer Indemnified Party until the aggregate
amount of (x) the Buyer Indemnified Parties' Losses under Section 11.1(a)(i) and
(y) the Customer Refunds exceeds the Basket Amount, after which Seller shall be
obligated for any and all Losses of the Buyer Indemnified Parties and Customer
Refunds in excess of the Basket Amount.
(b) Buyer and Parent hereby jointly and severally agree to indemnify
and hold harmless Seller against and in respect of any and all Losses arising
out of, based upon or resulting from (i) the breach of any representation or
warranty of Buyer or Parent contained in this Agreement or in any statement or
certification of Buyer or Parent furnished pursuant hereto and (ii) the breach
by Buyer or Parent of or failure of Buyer or Parent to observe any of its
covenants or agreements contained in this Agreement (regardless of whether, in
the case of Third Party Actions, suits or proceedings, Buyer or Parent may have
a meritorious defense). Notwithstanding any other provision herein to the
contrary, (i) Buyer shall not be required, pursuant to Section 11.1(b)(i), to
indemnify and hold harmless Seller until the aggregate amount of the Losses of
Seller under Section 11.1(b)(i) exceeds the Basket Amount, after which Buyer
shall be obligated for any and all Losses of Seller in excess of the Basket
Amount.
(c) For purposes of this Section 11.1, a party shall not be deemed
to have made a representation or warranty as of the Closing to the extent that
such party expressly disclaims such representation or warranty in the
certificate delivered by such party to the other parties pursuant to the last
sentence of Section 8.1 or Section 9.1.
11.2 Indemnification Procedures.
(a) Promptly after receipt by any Person entitled to indemnification
under Section 11.1 (an "indemnified party") of notice of the commencement of any
action, suit or proceeding by a Person not a party to this Agreement in respect
of which the indemnified
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party will seek indemnification hereunder (a "Third Party Action"), the
indemnified party shall notify the Person that is obligated to provide such
indemnification (an "indemnifying party") thereof in writing, but any failure to
so notify the indemnifying party shall not relieve it from any liability that it
may have to the indemnified party under Section 11.1, except to the extent that
the indemnifying party is prejudiced by the failure to give such notice. The
indemnifying party shall be entitled to participate in the defense of such Third
Party Action and to assume control of such defense with counsel reasonably
satisfactory to such indemnified party; provided, however, that:
(i) the indemnified party shall be entitled to participate in
the defense of such Third Party Action and to employ counsel at its own expense
to assist in the handling of such Third Party Action;
(ii) the indemnifying party shall obtain the prior written
approval of the indemnified party before entering into any settlement of such
Third Party Action or ceasing to defend against such Third Party Action, if
pursuant to or as a result of such settlement or cessation, injunctive or other
equitable relief would be imposed against the indemnified party or the
indemnified party would be adversely affected thereby;
(iii) no indemnifying party shall consent to the entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to each indemnified party
of a release from all liability in respect of such Third Party Action; and
(iv) the indemnifying party shall not be entitled to control
the defense of any Third Party Action unless within 15 days after receipt of
such written notice from the indemnified party the indemnifying party confirms
in writing its responsibility to indemnify the indemnified party with respect to
such Third Party Action and reasonably demonstrates that it will be able to pay
the full amount of the reasonably expected Losses in connection with any such
Third Party Action.
After written notice by the indemnifying party to the indemnified party of its
election to assume control of the defense of any such Third Party Action in
accordance with the foregoing and compliance by the indemnifying party with
Section 11.2(a)(iv), (i) the indemnifying party shall not be liable to such
indemnified party hereunder for any Legal Expenses subsequently incurred by such
indemnified party attributable to defending against such Third Party Action, and
(ii) as long as the indemnifying party is reasonably contesting such Third Party
Action in good faith, the indemnified party shall not admit any liability with
respect to, or settle, compromise or discharge the claim underlying, such Third
Party Action without the indemnifying party's prior written consent. If the
indemnifying party does not assume control of the defense of such Third Party
Action in accordance with this Section 11.2, the indemnified party shall have
the right to defend and/or settle such Third Party Action in such manner as it
may deem appropriate at the cost and expense of the indemnifying party, and the
indemnifying party will promptly reimburse the indemnified party therefor in
accordance with this Article 11. The reimbursement of fees,
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costs and expenses required by this Article 11 shall be made by periodic
payments during the course of the investigation or defense, as and when bills
are received or expenses incurred.
(b) If an indemnified party becomes entitled to any indemnification
from an indemnifying party pursuant to this Agreement, such indemnification
payment shall be made in cash upon demand.
(c) If the indemnifying party shall be obligated to indemnify the
indemnified party pursuant to this Article 11, the indemnifying party shall,
upon payment of such indemnity in full, be subrogated to all rights of the
indemnified party with respect to the claims to which such indemnification
relates.
12. MISCELLANEOUS.
12.1 Brokerage. Seller hereby represents and warrants to Buyer and Parent
that neither it nor any of its Affiliates has made any agreement or taken any
other action which might cause any Person to become entitled to a broker's or
finder's fee or commission as a result of the transactions contemplated
hereunder. Buyer and Parent hereby represent and warrant to Seller that neither
it nor any of its Affiliates has made any agreement or taken any other action
which might cause any Person to become entitled to a broker's or finder's fee or
commission as a result of the transactions contemplated hereunder. In the event
any Person shall assert a claim to a fee, commission or other compensation on
account of alleged employment as a broker or finder, or performance of services
as a broker or finder, in connection with the transactions contemplated by this
Agreement, the party (or parties) alleged to have been responsible for such
employment or performance of services shall hold harmless the other party (or
parties) as well as the other party's (or parties') directors, officers and
employees, from and against such claim and at the indemnifying party's (or
parties') sole expense defend any and all actions, suits or proceedings
involving such claim that may at any time be brought against those so
indemnified and satisfy promptly any settlement or judgment arising therefrom.
If, however, it is ultimately determined in any such action, suit or proceeding
in which the indemnified party (or parties) were afforded the opportunity to
have their counsel participate in the defense, that the employment was by or
services were performed for the indemnified party (or parties), then the latter
shall be responsible under this Section and shall reimburse any amounts
theretofore paid by the indemnifying party (or parties) by reason hereof.
12.2 Survival. All covenants and agreements contained in this Agreement
and the right to indemnification with respect to all representations and
warranties contained in this Agreement or in any certificate, document or
statement delivered pursuant hereto, shall survive (and not be affected in any
respect by) the Closing, any investigation conducted by any party hereto and any
information which any party may receive. Notwithstanding the foregoing, the
right to indemnification with respect to each representation and warranty
contained in this Agreement or made pursuant to any certificate, document or
statement delivered pursuant hereto shall terminate on the last day of the 18th
month after the month that includes the Closing Date (the "Survival Date");
provided, however, that (i) the right to indemnification with respect to the
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representations and warranties set forth in (x) Sections 4.7 and 4.8 shall
survive until 30 days after the expiration of the applicable statute of
limitations relating to the matters set forth in such sections, (y) Section 4.10
shall survive until the fourth anniversary of the Closing Date and (z) the first
sentence of Section 4.4(a) shall survive without limitation and (ii) the right
to indemnification with respect to such representations and warranties, and the
liability of any party with respect thereto, shall not terminate with respect to
any claim, whether or not fixed as to liability or liquidated as to amount, with
respect to which such party has been given written notice prior to the Survival
Date, such fourth anniversary or such 30th day after the expiration of the
applicable statute of limitations, whichever shall be applicable thereto in
accordance with this Section.
12.3 Notices. Any notice, direction or other advice or communication
required or permitted to be given hereunder shall be in writing and shall be
given by certified mail, next day delivery service such as Federal Express, or
personal delivery against receipt to the party to whom it is to be given (i) at
such party's address set forth on the signature page of this Agreement, or (ii)
to such other address as the party shall have furnished in writing in accordance
with the provisions of this Section 12.3. Any notice or other communication
shall be deemed to have been given as of the date so delivered, on the next
business day when sent by overnight delivery service or five days after the date
so mailed.
12.4 Bulk Sales Laws. The parties hereto waive compliance by Seller with
the provisions of any applicable bulk sales, fraudulent conveyance or other law
for the protection of creditors, including any bulk sales and similar laws
relating to Taxes. Seller shall indemnify and hold Buyer harmless from, and
reimburse Buyer for, any loss, cost, expense, liability or damage which Buyer
may suffer or incur by virtue of the noncompliance by the parties with such
applicable laws.
12.5 Termination. This Agreement and the transactions contemplated hereby
may be terminated and abandoned at any time prior to the Closing (i) by mutual
written agreement of Buyer and Seller; (ii) by Buyer or Seller upon written
notice to the other if the Closing shall not have taken place by October 3,
1997, other than by reason of a matter within the control of the party asserting
such termination (or, in the case of termination by Seller, within the control
of any Stockholder); (iii) by Buyer upon written notice to Seller, if there has
been any violation or breach by or Seller of any representation, warranty,
covenant or obligation contained in this Agreement that has rendered the
satisfaction of any condition to the obligations of Buyer set forth in Article 8
hereof impossible and such violation or breach has not been waived by Buyer or
if any other event shall occur that shall render the satisfaction of any such
condition to the obligations of Buyer impossible and such condition has not been
waived by Buyer; and (iv) by Seller upon written notice to Buyer if there has
been a violation or breach by Buyer of any representation, warranty, covenant or
obligation contained in this Agreement that has rendered the satisfaction of any
condition to the obligations of Seller set forth in Article 9 hereof impossible
and such violation or breach has not been waived by Seller or if any other event
shall occur that shall render the satisfaction of any such condition to the
obligations of Seller impossible and such condition has not been waived by
Seller. Except for any breach of this
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Agreement occurring at or prior to termination and for the obligations contained
in Sections 6.1, 7.8 and 12.1, upon the termination of this Agreement pursuant
to this Section, this Agreement shall forthwith become null and void and none of
the parties hereto or any of their respective officers, directors, employees,
agents, consultants, Shareholders or principals shall have any liability or
obligation hereunder or with respect hereto.
12.6 Binding Effect; Assignment; No Third Party Beneficiaries. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns and the provisions of
Article 11 shall inure to the benefit of the indemnified parties referred to
therein; provided, however, that neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by any of the parties hereto
without the prior written consent of the other parties and any such purported
assignment shall be void. This Agreement is not intended to confer upon any
other Person any rights or remedies hereunder.
12.7 Specific Performance. The parties to this Agreement recognize that
any breach of the terms of this Agreement by Seller may give rise to irreparable
harm for which money damages would not be an adequate remedy, and accordingly
agree that, in addition to other remedies, Buyer shall be entitled to enforce
the terms of this Agreement by a decree of specific performance without the
necessity of proving the inadequacy as a remedy of money damages.
12.8 Entire Agreement; Modifications; Headings; Counterparts. This
Agreement and the Exhibits and Schedules attached hereto, and the other writings
specifically identified herein or contemplated hereby contain the entire
agreement among the parties hereto with respect to the transactions contemplated
herein and supersede all previous written or oral negotiations, commitments and
writings (including without limitation the letter agreement dated August 1,
1997). This Agreement may be modified only by a written instrument duly executed
by or on behalf of each party. No breach of any covenant, agreement, warranty or
representation shall be deemed waived unless expressly waived in writing by and
on behalf of the party who might assert such breach. The Article and Section
headings of this Agreement are for convenience of reference only and do not form
a part hereof and do not in any way modify, interpret or construe the intentions
of the parties. This Agreement may be executed in two or more counterparts, and
all such counterparts shall constitute one and the same instrument.
12.9 Guarantee. By signing below, the Parent hereby unconditionally and
irrevocably guaranties the obligations of Buyer under this Agreement.
12.10 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
[Remainder of this page is blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
ELASTEX, INC. TEXFI INDUSTRIES, INC.
By: /s/ Mitchell Setzer By: /s/ Dane L. Vincent
Name: Mitchell Setzer Name: Dane L. Vincent
Title: Vice President Title: VP, CFO & Treasurer
Address: 212 12th Avenue, N.E. Address: 5400 Glenwood Avenue
Hickory, North Carolina Raleigh, North Carolina
28601 27612
WORLDTEX, INC.
By: /s/ Mitchell Setzer
Name: Mitchell Setzer
Title: Vice President
Address: 212 12th Avenue, N.E.
Hickory, North Carolina 28601
43
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 of the Registration Statement on Form S-3 (No. 333-30999) and related
Prospectus of Texfi Industries, Inc. for the registration of 924,000 shares of
its common stock and to the incorporation by reference therein of our report
dated December 9, 1996, except for Note 5 as to which the date is January 30,
1997, with respect to the consolidated financial statements and schedule of
Texfi Industries, Inc. included in its Annual Report (Form 10-K) for the year
ended November 1, 1996, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Raleigh, North Carolina
November 7, 1997
