FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 1, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number - 1-6797
TEXFI INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-0795032
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5400 Glenwood Avenue, Suite 215, Raleigh, North Carolina 27612
(Address of principal executive offices)
(ZIP Code)
(919) 783-4736
(Registrant's telephone number, including area code)
Number of shares of Common Stock outstanding
at September 15, 1997 - 8,841,696
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<PAGE>
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED AUGUST 1, 1997
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Texfi Industries, Inc. (the Company") has prepared the consolidated
financial statements included herein, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The consolidated balance
sheet as of November 1, 1996 has been taken from the audited financial
statements as of that date. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's latest Annual
Report on Form 10-K.
The consolidated financial statements included herein reflect all
adjustments (none of which are other than normal recurring accruals) which are,
in the opinion of management, necessary for a fair presentation of the
information included. Operating results for the thirteen-week and thirty-nine
week periods ended August 1, 1997 are not necessarily indicative of the results
that may be expected for the year ended October 31, 1997. The following
consolidated financial statements are included:
Consolidated Statements of Income for the thirteen weeks and
thirty-nine weeks ended August 1, 1997 and August 2, 1996
Consolidated Balance Sheets as of August 1, 1997 and November 1, 1996
Consolidated Statements of Cash Flows for the thirteen weeks and
thirty-nine weeks ended August 1, 1997 and August 2, 1996
Condensed Notes to Consolidated Financial Statements
2
<PAGE>
TEXFI INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
AUGUST 1, August 2, AUGUST 1, August 2,
1997 1996 1997 1996
---------- ---------- ---------- ---------
NET SALES ........................... $ 54,158 $ 50,459 $ 156,927 $ 138,794
---------- ---------- ---------- ----------
COST AND EXPENSES:
Cost of goods sold ............... 47,841 43,472 135,887 120,227
Selling, general and
administrative ............ 4,013 3,784 11,464 9,676
---------- ---------- ---------- ---------
Total ......................... 51,854 47,256 147,351 129,903
---------- ---------- ---------- ---------
OPERATING INCOME..................... 2,304 3,203 9,576 8,891
---------- ---------- ---------- ---------
OTHER EXPENSE (INCOME):
Interest ......................... 2,581 2,567 7,804 7,683
Equity in loss of unconsolidated
subsidiary ................. 423 -- 982 --
Other, net ....................... -- 1 (95) (20)
---------- ---------- ---------- ----------
Total ......................... 3,004 2,568 8,691 7,663
---------- ---------- ---------- ----------
NET (LOSS) INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES....... (700) 635 885 1,228
Benefit from Income Taxes ........... (32) -- -- --
---------- ---------- ----------- -----------
NET (LOSS) INCOME BEFORE
DISCONTINUED OPERATIONS ............. (668) 635 885 1,228
DISCONTINUED OPERATIONS:
Loss from operations of discontinued
operations........................ -- (1,817) -- (2,893)
Loss from disposal of discontinued
operations........................ -- (75) -- (150)
---------- ---------- ---------- ----------
Total.......................... -- (1,892) -- (3,043)
---------- ---------- ---------- ----------
NET (LOSS) INCOME ................... $ (668) $ (1,257) $ 885 $ (1,815)
========== ========== ========== =========
NET (LOSS) INCOME PER SHARE:
Net (loss) income from continuing
operations .................... $ (.07) $ .07 $ .10 $ .14
Loss from discontinued
operations .................... -- (.21) -- (.35)
---------- --------- --------- ---------
Net (loss)income ................. $(.07) $ (.14) $ .10 $ (.21)
========== ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements on page 6.
3
<PAGE>
TEXFI INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
(UNAUDITED)
AUGUST 1, November 1,
1997 1996
---------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............. $ 757 418
Receivables:
Due from factor...................... 39,361 40,885
Trade ............................... 5,126 3,555
Other ............................... 383 130
Inventories ............................ 21,846 22,179
Prepaid expenses........................ 1,605 1,301
--------- --------
Total................................ 69,078 68,468
PROPERTY, PLANT AND EQUIPMENT - NET ...... 30,777 30,223
PROPERTY, PLANT AND EQUIPMENT HELD FOR
DISPOSAL - NET ........................ 8,291 13,461
INVESTMENT IN UNCONSOLIDATED
SUBSIDIARY ............................ 1,531 87
OTHER ASSETS ............................. 1,408 1,951
-------- ---------
$111,085 $ 114,190
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt ... $ 6,662 $ 6,563
Current maturities of sub. debt ........ 3,183 3,537
Accounts payable ....................... 29,636 22,182
Other liabilities ...................... 2,865 8,625
-------- --------
Total................................ 42,346 40,907
REVOLVING CREDIT LOAN...................... 41,203 38,967
LONG-TERM DEBT ............................ 2,325 9,952
SUBORDINATED DEBENTURES ................... 36,841 36,943
OTHER LONG-TERM OBLIGATIONS ............... 205 562
COMMON STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $1.00 par value .......... 8,842 8,735
Additional paid-in capital ............. 25,499 25,186
Accumulated deficit .................... (46,176) (47,062)
-------- --------
Total............................... (11,835) (13,141)
-------- --------
$111,085 $114,190
</TABLE>
See Notes to Consolidated Financial Statements on page 6.
4
<PAGE>
TEXFI INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
AUGUST 1, August 2, AUGUST 1, August 2,
1997 1996 1997 1996
--------- --------- -------- ------
OPERATING ACTIVITIES
Net (loss) income .................... $ (668) $ (1,257) $ 885 $ (1,815)
Adjustments to reconcile net (loss)
income to net cash provided by (used in)
operating activities:
Equity in loss of unconsolidated
Subsidiary ................. 423 -- 982 --
Depreciation & amortization .... 1,324 2,127 3,873 6,280
Provision for losses on accounts
receivable....................... 30 392 163 830
Loss on sale of property, plant
and equipment.................... -- (1) (81) 4
Changes in operating assets and liabilities:
Accounts receivable ............. 1,007 (2,227) (463) (38,862)
Inventories ..................... 1,578 2,171 333 539
Prepaid and other assets ........ 452 141 (113) --
Accounts payables and accrued
liabilities ..................... (1,049) (311) 1,337 (2,754)
-------- -------- ------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 3,097 1,035 6,916 (35,778)
INVESTING ACTIVITIES
Purchases of property, plant and
equipment ............................ (1,747) (1,710) (7,973) (5,972)
Proceeds from sale-lease back of
property, plant and equipment......... 2,446 142 6,657 1,245
Proceeds from sale of property, plant
and equipment......................... 461 1,491 2,721 2,351
-------- ------- ------- -------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 1,160 (77) 1,405 (2,376)
FINANCING ACTIVITIES
Proceeds from long-term debt borrowing. -- -- -- 19,000
Net (repayments)proceeds from Revolver
Debt borrowings....................... (1,431) 912 2,236 40,783
Payments on long-term debt obligations. (3,105) (1,699) (7,528) (21,129)
Investment in unconsolidated subsidiary (1,108) -- (2,426) --
Payments for repurchase of subordinated
debentures ........................... (10) -- (456) (244)
Capitalized loan costs................. (112) (107) (229) (803)
Proceeds from employee stock plans .... -- -- 421 201
------- ------- ------- ------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (5,766) (894) (7,982) 37,808
------- ------- ------- ------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (1,509) 64 339 (346)
Cash and cash equivalents
at beginning of period ................ 2,266 337 418 747
-------- -------- ------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 757 $ 401 $ 757 $ 401
======== ======== ======= =========
</TABLE>
See Notes to Consolidated Financial Statements on page 6.
5
<PAGE>
TEXFI INDUSTRIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 1, 1997
1. Details of certain balance sheet captions are as follows (in thousands):
(UNAUDITED)
AUGUST 1, November 1,
1997 1996
INVENTORIES:
Finished goods ............................. $ 7,098 $ 10,304
Goods in process ........................... 7,731 8,765
Raw materials .............................. 4,267 4,104
Supplies ................................... 3,377 3,337
-------- --------
Total ................................. 22,473 26,510
Less reserves .............................. 627 4,331
-------- --------
Inventories-net........................ $ 21,846 $ 22,179
======== ========
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements ................... $ 2,547 $ 2,358
Buildings .................................... 17,877 15,170
Machinery, equipment, etc. ................... 57,347 56,306
Construction in progress ..................... 3,224 2,218
-------- --------
Total ............................... 80,995 76,052
Less accumulated depreciation ................ 50,218 45,829
-------- -------
Property, plant and equipment, net... $ 30,777 $ 30,223
======== ========
LONG-TERM DEBT:
Term loan with variable interest of 9.02% at August 1, 1997 and 8.47% at
November 1,1996, payable in equal monthly installments until balloon payment
due
September 1998........................... $ 8,309 $ 15,367
Term loans at 6.75%, payable in monthly
installments plus interest through
November 1998............................ 678 1,148
------- -------
Total ................................. 8,987 16,515
Less current maturities ................... 6,662 6,563
------- -------
Due after one year .................... $ 2,325 $ 9,952
======= =======
6
<PAGE>
1. Continued
AUGUST 1, November 1,
1997 1996
SUBORDINATED DEBENTURES:
Senior Subordinated Debentures,
8 3/4% due August 1, 1999............ $ 34,410 $ 34,420
Subordinated Extendible Debentures,
11%, due April 1, 2000
(Series C)........................... 2,431 2,523
Convertible Senior Subordinated
Debentures, 11-1/4% due October
1, 1997 ............................. 3,183 3,537
--------- --------
Total ....................... 40,024 40,480
Less current maturities............... 3,183 3,537
-------- --------
Due after one year........... $ 36,841 $ 36,943
======== ========
2. Net income per share has been computed using the weighted average number of
common shares and common share equivalents outstanding during the period. The
difference between primary and fully diluted net income per share is not
material for the periods presented.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, EARNINGS PER SHARE, which is required to be adopted for
periods ending after December 15, 1997. Upon adoption, the Company will be
required to change the method currently used to compute earnings per share and
restate all prior periods. Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options, if any, will be
excluded. The impact of Statement No. 128 on the calculation of both the
Company's primary and fully diluted earnings per share for the periods presented
is not expected to be material.
3. At August 1, 1997 shares of common stock were reserved for
possible issuance as follows:
Conversion of 11-1/4% Convertible Senior
Subordinated Debentures ........................ 475,783
Stock options .................................. 858,099
Stock options granted to an entity owned by
certain Company officers........................ 600,000
1990 Executive Stock Purchase Plan ............. 283,992
Directors' Deferred Stock Compensation Plan .... 57,153
---------
Total .................................. 2,275,027
=========
4. The consolidated statement of operations for the thirteen and thirty-nine
weeks ended August 2, 1996 has been restated to reflect the manufacturing
operations of the Company's Kingstree Knit Apparel division as discontinued
operations.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS:
Net sales for the thirteen weeks ended August 1, 1997 increased to
$54,158,000 as compared to $50,459,000 for the thirteen weeks ended August 2,
1996. This $3,699,000 (7.3%) increase resulted from increased sales at the
Company's Texfi Blends division ("Texfi Blends")($4,863,000), which were
partially offset by decreased sales at the Company's Narrow Fabrics division
("Narrow Fabrics") ($1,164,000). Year-to-date net sales for 1997 totaling
$156,927,000 increased $18,133,000 (13.1%) when compared to sales of
$138,794,000 for the same thirty-nine week period in fiscal 1996. This increase
reflects increased sales of $20,600,000 at Texfi Blends, which was offset
partially by decreases in Narrow Fabrics' sales of $2,500,000. Third quarter and
year-to-date increased sales by Texfi Blends were attributable to higher demand
and shipments for many of this division's synthetic fabrics which are sold to
apparel and specialty markets. Decreases in Narrow Fabrics' sales resulted from
closure of the Company's woven narrow fabrics facility on November 1, 1996 which
offset gains in sales of knitted elastic fabrics totaling $1,500,000 and
$3,400,000 for the thirteen and thirty-nine weeks in fiscal 1997, respectively,
when compared to 1996 results.
For the comparable thirteen-week period, cost of goods sold, as a
percentage of net sales, increased from 86.1% in 1996 to 88.3% in 1997. For the
comparable thirty-nine week periods in 1997 and 1996, cost of goods sold as a
percentage of net sales remained constant at 86.6%. During 1997, Texfi Blends
experienced lower margins, primarily a result of higher labor costs associated
with the installation of $18,000,000 of new equipment, the resulting need to
train associates to operate this equipment, and manufacturing inefficiencies
created by increasing production rates to maximum levels in order to meet higher
customer demand. There were, however, improvements during 1997 at Narrow Fabrics
as a result of closing the woven elastic operations and a better mix of higher
margin knitted elastic products sold.
Selling, general and administrative expenses ("SG&A") decreased from
7.5% to 7.4% as a percentage of net sales for the thirteen weeks ended August 1,
1997 when compared to same period a year ago and increased from 7.0% to 7.3% for
the comparable thirty-nine week periods. The year-to-date increase, as a
percentage of net sales, is primarily due to greater distribution costs in order
to accommodate the increased sales volume as well as costs incurred to expand
into new markets.
8
<PAGE>
RESULTS OF OPERATIONS (continued):
Interest expense increased $14,000 (0.6%) from $2,567,000 during the
third thirteen-week period in 1996 to $2,581,000 in 1997. For the comparable
thirty-nine week periods, interest expense increased $121,000 (1.6%) from
$7,683,000 to $7,804,000. These increases resulted from higher floating rates on
debt outstanding which offset principal reductions made since the third quarter
of 1996.
The equity in loss of unconsolidated subsidiary of $423,000 in the
third fiscal quarter and $982,000 for the first thirty-nine weeks of 1997
represents the Company's share of costs related to the startup of RIVAL, LLC.
RIVAL, LLC., which is jointly owned by the Company and NHL Enterprises, was
created to market and source a branded line of hockey-related apparel.
FINANCIAL CONDITION:
At August 1, 1997, working capital equaled $26.7 million, a decrease of
$900,000 from November 1, 1996. This decrease in working capital is due
primarily to the increase in accounts payable and other liabilities ($1.7
million) and decrease in inventories ($333,000) which were not entirely offset
by increases in accounts receivable ($300,000), prepaid expenses ($304,000), and
cash and cash equivalents ($339,000) and a decrease in current maturities
($255,000).
During the first thirty-nine weeks of 1997, operating activities
generated net cash of $6.9 million. This cash was generated as a result of net
income of $885,000, the equity in loss of unconsolidated subsidiary of $982,000,
depreciation and amortization of $3.9 million, along with increases in accounts
payables and accrued liabilities of $1.3 million and decreases in inventories of
$333,000 which more than offset increases in accounts receivable of $300,000 and
prepaid and other assets of $113,000. Net cash flow provided by operations of
$6.9 million, $2.7 million in proceeds from the sale of property, plant and
equipment of discontinued operations, $6.7 million from the sale-lease back of
property, plant and equipment, net proceeds from the revolving line of credit of
$2.2 million and cash on hand provided funds to repay long-term debt and
debentures of $8.0 million, purchase property, plant and equipment totaling $8.0
million, and invest $2.4 million in the unconsolidated subsidiary.
9
<PAGE>
FINANCIAL CONDITION (continued):
On March 15, 1996, the Company entered into a $74.0 million credit
facility (subsequently amended to $71.0 million), of which $54.7 million was
initially utilized. Net proceeds from the credit facility were applied toward
the previously existing term loans and outstanding factor advances. The new
facility consisted of a $19.0 million term loan, payable in 29 equal monthly
installments with a balloon payment in September 1998, and a revolving credit
line which, as amended, cannot exceed $52.0 million during the life of the
facility. The revolving credit line, which expires on the same date as the term
loan's final maturity, replaced the Company's factor advance arrangements. As of
August 1, 1997, funds available under the revolving credit line, which
represents the difference between the borrowing base as defined by the facility
agreement and the revolving credit line outstanding, approximated $5.8 million.
The credit facility is secured by substantially all of the Company's assets. The
credit facility currently provides for the Company to elect interest rates based
upon a LIBOR or prime interest rate plus applicable margin. The applicable
margin is adjusted each fiscal year based upon the Company's leverage ratio as
defined in the credit facility. In addition, the Company may elect interest
periods of 30, 60, 90 or 180 days.
The facility places limitations on the Company's rental expense,
additional indebtedness, acquisitions, capital expenditures, payment of
subordinated debentures, and sale or disposal of assets. The Company is required
to maintain a minimum net worth and comply with certain financial ratios,
including current ratio, coverage ratio, and leverage ratio, each as defined by
the facility. This facility has been periodically amended to ease the
restrictive covenants therein so that the Company would remain in compliance
with all covenant requirements and effect certain other changes. As of August 1,
1997, the Company was in compliance with all of the facility's financial
covenants.
The Company had $3.2 million of 11-1/4% Convertible Senior Subordinated
Debentures outstanding as of August 1, 1997. These debentures, which are
convertible to common stock at the option of the debenture holders for $6.69 per
share, mature on October 1, 1997 and are classified as a current liability.
As of August 1, 1997 the Company has approximately $2.4 million of its
Series C Debentures outstanding. The annual interest rate of these debentures
may be adjusted at the sole discretion of the Company on April 1st of each year
until maturity in the year 2000. The Company set the Series C interest rate at
13.0% for the period April 1, 1997 through March 31, 1998. The Series C
Debentures are redeemable on April 1st of each year, in whole or in part, at the
option of the holder or the Company for the principal amount thereof plus
accrued interest through the date of redemption.
10
<PAGE>
FINANCIAL CONDITION (continued):
As of August 1, 1997, the Company had outstanding approximately $34.4
million of its Senior Subordinated Debentures due August 1, 1999 ("8-3/4%
Debentures"). The 8-3/4% Debentures, which cannot be called prior to their
maturity date, are unsecured obligations. These debentures contain covenants
that place limitations on the use of proceeds from the disposal of assets and on
the incurrence of additional indebtedness and senior indebtedness (as defined in
the indenture governing the 8-3/4% Debentures (the "Indenture")) if such
indebtedness would exceed stated ratios of capitalization and earnings after
such incurrence. Under the most restrictive of these covenants, the Company may
not incur additional indebtedness if, after giving effect to such incurrence,
the aggregate amount of indebtedness of the Company would exceed 75% of the sum
of all indebtedness and stockholders' (deficit) equity. The Company is currently
prohibited by this covenant from incurring additional indebtedness other than
advances under its revolving credit line and operating leases. This restriction
on the incurrence of additional indebtedness was waived by debenture holders
with respect to the new credit facility. As a condition to the waiver, the
Company executed a Second Supplemental Indenture dated March 15, 1996 which
provided that beginning on the last business day of September 1998 and
continuing on the last business day of each month thereafter to and including
June 1999, the Company will deposit with the Indenture's trustee $600,000 less
an amount equal to 8-3/4% Debentures repurchased during the period prior to the
monthly payment date. Total deposits, including interest earned thereon, are to
be paid as principal and interest when the 8-3/4% Debentures are due.
The Company plans to place into service $11.6 million of machinery and
equipment during fiscal 1997. This equipment primarily will increase dyeing and
finishing capacity as well as replace older weaving equipment with new looms in
order to improve production speed, efficiency and product quality and to expand
styling diversity. Management anticipates that $10.9 million of the $11.6
million of equipment will be placed into service through operating leases and
thus not included in the Company's balance sheet. For the thirty-nine weeks
ended August 1, 1997, $8.0 million had been expended on machinery and equipment
purchases and $6.7 million received from proceeds of sale-lease back
transactions related to this equipment.
The Company has entered into nonbinding letters of intent to sell both
its Narrow Fabrics operations and its Graham, North Carolina facility, an asset
held for disposal. These two separate transactions are subject to certain
conditions, including the execution of definitive purchase agreements and Board
of Directors approval. The transactions, if consummated, are anticipated to
close during the Company's fourth fiscal quarter and any net proceeds would be
used by the Company to reduce its long-term debt and revolving credit line.
11
<PAGE>
FINANCIAL CONDITION (continued):
Management believes cash flows from operations, funds available under
the revolving credit line, and net proceeds from the disposal of assets held for
disposal will provide the Company with sufficient sources of funds to meet its
fiscal 1997 cash needs, and, assuming no significant deterioration in current
market conditions or interest rates, for the foreseeable future.
FORWARD LOOKING INFORMATION:
Statements contained in the foregoing discussion and elsewhere in this
report that are not based on historical fact are considered "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are based on management's present assumptions as to
future trends, and changes in current economic trends, prevailing interest
rates, availability and cost of raw materials, laws affecting the Company's
business and similar factors could affect the validity of such assumptions.
12
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibits to this report are listed in the accompanying index
to exhibits.
(b) Reports on Form 8-K
No reports on From 8-K were filed during the quarter
ended August 1, 1997.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEXFI INDUSTRIES, INC.
(Registrant)
Date: September 15, 1997 By:S/Dane L. Vincent
-----------------
Dane L. Vincent
Chief Financial Officer and
Treasurer
Principal Accounting Officer
14
<PAGE>
TEXFI INDUSTRIES, INC.
INDEX TO EXHIBITS
TEXFI INDUSTRIES, INC.
INDEX TO EXHIBITS
*3(a)(1) Restated Certificate of Incorporation of Registrant
dated August 13, 1969, filed as Exhibit (3)(a)(1) to
Registrant's Form 10-K Annual Report for the fiscal year ended
October 31, 1980.
*3(a)(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.
*3(a)(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.
*3(a)(4) Certificate of Amendment of Certificate of
Incorporation of Registrant dated May 19, 1986, filed as
Exhibit 4.4 to Registrant's Form S-8 Registration Statement
(No. 33-14697).
*3(a)(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).
*3(a)(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. 33-16794).
*3(a)(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).
*3(a)(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).
*3(a)(9) Certificate of Designations of Registrant dated August
4 1988, filed as Exhibit 4(d)(9) to Registrant's Form 10-Q
Quarterly Report for the fiscal quarter ended July 29, 1988.
<PAGE>
*3(b)(1) Bylaws of Registrant, filed as Exhibit 4.6 to
Registrant's Form S-8 Registration Statement (No. 33-14697).
*3(b)(2) Amendment to Bylaws of Registrant, filed as Exhibit
4(b)(2) to Registrant's Form S-2 Registration Statement
(No. 33-16794).
*3(b)(3) 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.
*3(b)(4) Amendment to Bylaws of Registrant adopted by
Registrant's Board of Directors on August 31, 1994, filed as
Exhibit 4(b)(4) to Registrant's Form 10-Q Quarterly Report for
the fiscal quarter ended July 29, 1994.
*3(b)(5) 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(a)(1) 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(a)(2) 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(a)(3) Indenture dated October 1, 1991 between Registrant and
The 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.
<PAGE>
*4(a)(4) Indenture dated September 8, 1993 between Registrant
and The 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(a)(5) 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 Report as of March 15, 1996.
*4(a)(6) 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 Report as of March 15, 1996.
*4(b)(1) 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).
*4(c)(1) Rights Agreement dated July 22, 1988 between Registrant
and The 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(c)(2) Form of Rights Certificate, filed as Exhibit B to
Exhibit 1 to Registrant's Form 8-K Current Form dated July 22,
1988.
*4(c)(3) Amendment to Rights Agreement between Registrant and
The 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(c)(4) Second Amendment to Rights Agreement dated May 24, 1994
between Registrant and The 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.
<PAGE>
*4(c)(5) Third Amendment to Rights Agreement dated December 16,
1994 between Registrant and The 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(d)(1) 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 as of March 15, 1996.
*4(d)(2) 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 as of March
15, 1996.
*4(d)(3) 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 as of March 15, 1996.
*4(d)(4) 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 referred to therein, and NationsBanc
Commercial Corporation, as Disbursing Agent, filed as Exhibit
2(a)(4) to Registrant's Form 8-K Current Report as of March
15, 1996.
*4(d)(5) 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 as of March
15, 1996.
<PAGE>
*4(d)(6) Form of Assignment of Factoring Proceeds dated as of
March 15, 1996, filed as Exhibit 2(a)(6) to Registrant's Form
8-K Current Report as of March 15, 1996.
*4(d)(7) First Amendment dated May 10, 1996 to the 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)(7) to Registrant's
Form 10-Q dated May 3, 1996.
*4(d)(8) Waiver Agreement dated June 14, 1996 to the 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) (8) to Registrant's
Form 10-Q dated May 3, 1996.
*4(d)(9) Second Amendment dated September 12, 1996 to the 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)(9) to Registrant's
From 10-Q dated August 2, 1996.
*4(d)(10) Third Amendment dated January 30, 1997 to the 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 4(d)(10) to Registrant's
Form 10-K dated January 31, 1997.
*4(d)(11) Waiver and Consent Agreement dated June 12, 1997 to the
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 4(d)(11) to Registrant's
Form 10-Q dated May 2, 1997.
4(d)(12) Fourth Amendment dated June 19, 1997 to the 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.
<PAGE>
10 Employment Agreement between Registrant and Andrew J.
Parise, Jr. dated April 1, 1997.
11 Computation of Earnings Per Share
* Incorporated by reference to previous filing.
<PAGE>
FOURTH AMENDMENT
THIS FOURTH AMENDMENT (the "Amendment") to the Credit Agreement
referred to below is entered into as of the 19th day of June, 1997, by and among
TEXFI INDUSTRIES, INC., a corporation organized under the laws of Delaware (the
"Borrower"), THE LENDERS SIGNATORY HERETO (collectively, the "Lenders"), and
NATIONSBANK, N.A., a national banking association, as Agent (the "Agent").
STATEMENT OF PURPOSE
The Borrower, the Lenders and the Agent are parties to a certain Credit
Agreement dated as of March 15, 1996 (as heretofore amended and as further
amended or modified hereby, the "Credit Agreement"), pursuant to which the
Lenders have agreed to make, and have made, certain Loans to the Borrower. The
Borrower, the Lenders and the Agent have agreed to amend the Credit Agreement
upon the terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto hereby agree as follows:
I. AMENDMENTS.
1. Section 1.1 of the Credit Agreement. Section 1.1 of the
Credit Agreement is hereby amended as follows:
(a) By deleting the definition set forth below in its
entirety and inserting in lieu thereof the following:
"Aggregate Revolving Credit Commitment" means the
aggregate amount of the Lenders' Revolving Credit Commitments
hereunder, as such amount may be reduced at any time or from
time to time pursuant to Section 2.5. As of the effective date
of the Fourth Amendment to the Credit Agreement, the Aggregate
Revolving Credit Commitment shall be
Fifty-two Million Dollars ($52,000,000).
(b) By deleting the first sentence of the definition set
forth below in its entirety and inserting in lieu thereof the
following:
"Borrowing Base" means the sum of (a) 90% of Eligible
Accounts, plus (b) 85% of House Accounts (subject to the
applicable House Accounts limit), plus (c) an amount equal to
the lesser of (i) 50% of Eligible Inventory, calculated on the
basis of the lower of cost or market, with cost calculated on
a first-in, first-out basis, or (ii) $12,000,000.
2. Section 2.2(b) of the Credit Agreement. Section 2.2(b) of the Credit
Agreement is
<PAGE>
hereby amended to provide that the minimum amount of each borrowing which is to
be a LIBOR Rate Loan shall be in the aggregate principal amount of $500,000 or a
whole multiple of $250,000 in excess thereof.
3. Section 2.3(c) of the Credit Agreement. Section 2.3(c) of the Credit
Agreement is hereby amended to provide that partial prepayments shall be in the
aggregate amount of $500,000 or a whole multiple of $250,000 in excess thereof
with respect to LIBOR Rate Loans except as to prepayments required by the
provisions of Section 2.3(b).
4. Section 3.4(a) of the Credit Agreement. Section 3.4(a) of the Credit
Agreement is hereby amended to provide that each optional repayment of the Term
Loan shall be in an aggregate principal amount of at least $500,000 or any whole
multiple of $250,000 in excess thereof with respect to LIBOR Rate Loans.
5. Section 4.1(a) of the Credit Agreement. Section 4.1(a) of the Credit
Agreement is hereby amended to provide that effective with the date of this
Amendment, the LIBOR Rate option shall be available to the Borrower, and the
Borrower may, subject to compliance with the provisions of Section 4.1(b), elect
to have the LIBOR Rate apply to the Loans as of the effective date of this
Amendment.
6. Section 4.1(c) of the Credit Agreement. Section 4.1(c) of the Credit
Agreement is hereby amended by deleting the pricing matrix in its entirety and
inserting in lieu thereof the following pricing matrix:
Applicable Margin Per Annum
Leverage Ratio Base Rate + Fixed Rate +
greater than or equal to
4.75 to 1.0 2.00% 3.25%
less than 4.75 to 1.0
but equal to or greater
than 4.0 to 1.0 1.75% 2.75%
less than 4.0 to 1.0
but equal to or greater
than 3.25 to 1.0 1.50% 2.50%
less than 3.25 to 1.0 1.25% 2.25%
7. Section 4.2 of the Credit Agreement. Section 4.2 of the Credit
Agreement is hereby amended to provide that the Borrower shall have the option
to convert at any time all or any portion of its outstanding Base Rate Loans in
a principal amount equal to $500,000 or a whole multiple of $250,000 in excess
thereof into one or more LIBOR Rate Loans.
- 2 -
<PAGE>
8. Section 8.14 of the Credit Agreement. Section 8.14 of the Credit
Agreement is deleted in its entirety.
9. Section 9.2 of the Credit Agreement. Section 9.2 of the Credit
Agreement is hereby amended to provide that the Coverage Ratio shall be not less
than .80 to 1.0 at the end of the third quarter of Fiscal Year 1997, not less
than .90 to 1.0 at the end of the fourth quarter of Fiscal Year 1997 and not
less than 1.25 to 1.0 at the end of each quarter thereafter.
10. Section 9.3 of the Credit Agreement. Section 9.3 of the Credit
Agreement is hereby amended to provide that the Leverage Ratio shall not exceed
5.5 to 1.0 at the end of the first quarter of Fiscal Year 1997, 5.82 to 1.0 at
the end of the second quarter of Fiscal Year 1997, 6.25 to 1.0 at the end of the
third quarter of Fiscal Year 1997, 5.0 to 1.0 at the end of the fourth quarter
of Fiscal Year 1997 and 3.5 to 1.0 at the end of each quarter thereafter.
11. Section 10.4(e)(iv) of the Credit Agreement. Section 10.4(e)(iv) is
hereby amended by deleting the reference to $1,000,000 and inserting in lieu
thereof "$2,000,000."
12. Section 10.11 of the Credit Agreement. Section 10.11 of the Credit
Agreement is hereby amended by deleting the first phrase of the proviso in its
entirety and inserting in lieu thereof the following:
; provided that the Borrower may make the payment of principal
under the Borrower's 11-1/4% Convertible Senior Subordinated
Debentures due October 1, 1997, provided no Default or Event
of Default shall have occurred and is continuing or would
result therefrom.
II. CONFIRMATION; CONDITIONS TO EFFECTIVENESS.
1. Representations and Warranties. To induce the Lenders and the Agent
to execute this Amendment, the Borrower hereby confirms that each representation
and warranty made by it under the Loan Documents is true and correct as of the
date hereof and that after giving effect to this Amendment, no Default or Event
of Default exists under the Credit Agreement. The Borrower hereby represents and
warrants that as of the date hereof there are no claims or offsets against or
defenses or counterclaims to its obligations under the Credit Agreement or any
other Loan Document.
2. Conditions to Effectiveness. This Amendment shall become effective
upon completion of the following conditions to the satisfaction of the Agent:
(a) the following documents, in form and substance
satisfactory to the Agent:
(i) this Amendment;
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<PAGE>
(ii) the separate Revolving Credit Notes made by the
Borrower payable to the order of each of the Lenders,
substantially in the form of Schedule 3 hereto; and
(iii) the documents listed on Schedule 2 attached
hereto
shall have been duly authorized, executed and delivered by the
Borrower, shall be in full force and effect, and no Default or Event of
Default shall exist thereunder;
(b) receipt by the Agent of a certificate of the Secretary or
an Assistant Secretary of the Borrower, certifying that attached
thereto is a true and complete copy of resolutions duly adopted by the
Board of Directors of the Borrower authorizing the execution, delivery
and performance of this Amendment and the other documents to be
executed and delivered by the Borrower, and as to the incumbency and
genuineness of the signature of each officer of the Borrower executing
this Amendment, the Revolving Credit Notes and the other documents
delivered by the Borrower pursuant hereto;
(c) receipt by the Agent of a favorable opinion of counsel to
the Borrower addressed to the Agent and the Lenders with respect to the
Borrower and such other matters as the Agent shall reasonably request;
(d) receipt by the Agent of evidence satisfactory to the Agent
that the Liens of the Lenders in the Collateral described in the
Security Documents constitute valid and perfected first priority Liens
therein and that upon the recording of the documents listed on Schedule
2 attached hereto, the Liens of the Lenders in the Collateral described
in the Security Documents will secure the Obligations of the Borrower
under the Credit Agreement as amended hereby and any renewals or
extensions of any of the Obligations, together with all other Secured
Obligations as defined in the Security Documents;
(e) receipt by the Agent of a commitment fee in an amount
equal to 1/8% of the sum of the Aggregate Revolving Credit Commitment
plus the outstanding balance of the Term Loan, such fee to be shared by
the Lenders pro rata in accordance with the Commitment Percentage of
each Lender; and
(f) receipt by the Agent of any other document or instrument
reasonably requested by it in connection with the execution of this
Amendment.
III. GENERAL PROVISIONS.
1. Additional Fee. The requirement for the payment of the additional
fee as provided in Section III. General Provisions, Paragraph 1, of the Third
Amendment to the Credit Agreement
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<PAGE>
entered into as of January 30, 1997 is hereby deleted.
2. Limited Amendment. The amendment of Section 9.3 of the Credit
Agreement as set forth in Paragraph 10 of this Amendment shall be effective as
of November 1, 1996. Except as expressly amended herein, the Credit Agreement
and each other Loan Document shall continue to be, and shall remain, in full
force and effect. This Amendment shall not be deemed (i) to be a waiver of, or
consent to, or a modification or amendment of, any other term or condition of
the Credit Agreement or (ii) to prejudice any other right or rights which the
Agent or any Lender may now have or may have in the future under or in
connection with the Credit Agreement or the Loan Documents or any of the
instruments or agreements referred to therein, as the same may be amended or
modified from time to time.
3. Sale of Asheboro Facility. (a) Fifty percent (50%) of the Net
Proceeds realized from the sale of the Borrower's manufacturing facility located
in Asheboro, North Carolina (the "Asheboro Plant") shall be applied to the
payment of the then outstanding principal amount of all Revolving Credit Loans
and the balance of such Net Proceeds shall be applied against the principal
installments due on the Term Loan, first, against the final installment due on
the Term Loan in the original principal amount of $4,500,000 and then against
the remaining installments on a pro rata basis.
(b) From and after the effective date of the sale of the Asheboro
Plant, for purposes of determining the Borrowing Base, the advance rate against
discontinued inventory from the Borrower's Kingstree Knits and Graham, North
Carolina elastics facilities which has been sold but not shipped or delivered by
the Borrower shall be (a) 50% if payment of the Account is supported by
confirmed letters of credit duly issued and transferred to the Agent and (b) 25%
if payment of such Account is not so supported.
4. Counterparts. This Amendment may be executed by one or more of the
parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
5. Definitions. All capitalized terms used and not defined herein shall
have the meanings given thereto in the Credit Agreement.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
BORROWER:
TEXFI INDUSTRIES, INC.
By: /s/ William L. Remley
Name: William L. Remley
Title: CEO, Vice Chairman of the Board
- 6 -
<PAGE>
AGENT:
NATIONSBANK, N.A.
By: /s/ Joseph R. Netzel
Name: Joseph R. Netzel
Title: Vice President
- 7 -
<PAGE>
LENDERS:
NATIONSBANK, N.A.
By: /s/ Joseph R. Netzel
Name: Joseph R. Netzel
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Stephen Y. McGehee
Name: Stephen Y. McGehee
Title: Director
CORESTATES BANK, N.A.
By: /s/ John P. Brady
Name: John P. Brady
Title: Vice President
- 8 -
<PAGE>
NATIONAL BANK OF CANADA
By: /s/ Charles Collie
Name: Charles Collie
Title: Vice President and Manager
By: /s/ D. Shaw
Name: D. Shaw
Title: Vice President
THE CIT GROUP
By: /s/ Peter B. Cooney
Name: Peter B. Cooney
Title: Vice President
- 9 -
<PAGE>
Schedule 1
To
Fourth Amendment to Credit Agreement
Dated As of March 15, 1996
by and among
Texfi Industries, Inc.,
the Lenders Referred To Therein,
and
NationsBank, N.A., as Agent
Commitments
COMMITMENT
AND
COMMITMENT
LENDER PERCENTAGE ADDRESS
NationsBank, N.A. $15,596,907 8th Floor
25.224004% NationsBank Corporate Center
NC1-007-08-11
100 North Tryon Street
Charlotte, North Carolina 28255
Attention: Joseph R. Netzel
Telephone: 704/386-1185
Telecopy: 704/386-1270
The First National Bank $14,632,927 115 Perimeter Center Place, N.E.
of Boston 23.665016% Suite 500
Atlanta, Georgia 30346
Attention: Pamela D. Petrick
Assistant Vice
President
Telephone: 770/390-6540
Telecopy: 770/393-4166
<PAGE>
CoreStates Bank, N.A. $14,632,927 1339 Chestnut Street
23.665016% FC: 18412
Philadelphia, Pennsylvania
19107-3579
Attention: John Brady
Vice President
Telephone: 610/834-2384
Telecopy: 610/834-2069
National Bank of Canada $ 7,704,972 Suite 2020
12.460821% Two First Union Center
Charlotte, North Carolina 28282
Attention: Charles Collie
Vice President
Telephone: 704/372-0783
Telecopy: 704/335-0570
The CIT Group $ 9,265,850 Two First Union Center
14.985142% Post Office Box 31307
Charlotte, North Carolina
28231-1307
Attention: Louis Tabb
Senior Vice President
Telephone: 704/339-2908
Telecopy: 704/339-2250
<PAGE>
Schedule 2
To
Fourth Amendment to Credit Agreement
Dated As of March 15, 1996
by and among
Texfi Industries, Inc.,
the Lenders Referred To Therein,
and
NationsBank, N.A., as Agent
Documents
Modification of Deed of Trust and Security Agreement with respect to the
Asheboro, North Carolina facility.
Modification of Deed of Trust and Security Agreement with respect to the
Fayetteville, North Carolina facility.
Modification of Deed of Trust and Security Agreement with respect to the Graham,
North Carolina facility.
Modification of Deed of Trust and Security Agreement with respect to the Haw
River, North Carolina facility.
Modification of Deed of Trust and Security Agreement with respect to the Rocky
Mount, North Carolina facility.
Modification of Mortgage and Security Agreement with respect to the Andrews,
South Carolina facility.
Modification of Mortgage and Security Agreement with respect to the Georgetown,
South Carolina facility.
Modification of Mortgage and Security Agreement with respect to the Olanta,
South Carolina facility.
<PAGE>
Schedule 3
To
Fourth Amendment to Credit Agreement
Dated As of March 15, 1996
by and among
Texfi Industries, Inc.,
the Lenders Referred To Therein,
and
NationsBank, N.A., as Agent
Revolving Credit Note
$__________ ___________, 1997
FOR VALUE RECEIVED, the undersigned, TEXFI INDUSTRIES, INC., a Delaware
corporation (the "Borrower"), promises to pay to the order of
___________________________________________________ (the "Lender"), at the place
and times provided in the Credit Agreement referenced below the principal sum of
_________________________ ($__________) or, if less, the principal amount of all
Revolving Credit Loans made by the Lender from time to time pursuant to that
certain Credit Agreement, dated as of March 15, 1996 (as heretofore amended and
as amended by the fourth Amendment of even date with this Revolving Credit Note,
the "Credit Agreement") among the Borrower, the Lenders who are or may become a
party thereto (collectively, the "Lenders") and NationsBank, N.A., as Agent for
the Lenders. Capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Credit Agreement.
The unpaid principal amount of this Revolving Credit Note from time to
time outstanding is subject to mandatory repayment from time to time as provided
in the Credit Agreement and shall bear interest as provided in Section 4.1 of
the Credit Agreement. All payments of principal of and interest on this
Revolving Credit Note shall be payable in lawful currency of the United States
of America in immediately available funds to the account designated in the
Credit Agreement.
This Revolving Credit Note amends, modifies and restates the Revolving
Credit Note of the Borrower to the Lender dated March 15, 1996, is a Revolving
Credit Note referred to in, is entitled to the benefits of, and evidences
Obligations incurred under, the Credit Agreement, to which reference is made for
a description of the security for this Revolving Credit Note and for a statement
of the terms and conditions on which the Borrower is permitted and required to
make prepayments and repayments of principal of the Obligations evidenced by
this Revolving Credit Note and on which such Obligations may be declared to be
immediately due and payable.
<PAGE>
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF NORTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS
OR CHOICE OF LAW PRINCIPLES THEREOF.
The Debt evidenced by this Revolving Credit Note is senior in right of
payment to all Subordinated Debt referred to in the Credit Agreement.
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and (except as required by the Credit
Agreement) notice of any kind with respect to this Revolving Credit Note.
IN WITNESS WHEREOF, the undersigned Borrower has executed this
Revolving Credit Note under seal as of the day and year first above written.
TEXFI INDUSTRIES, INC.
[CORPORATE SEAL]
By: ____________________________________
Name: ___________________________
Title: ___________________________
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made and entered into as of April 1, 1997 (the "Agreement"),
by and between TEXFI INDUSTRIES, INC., a Delaware corporation with offices at
5400 Glenwood Avenue, Raleigh, North Carolina ("Texfi" or the "Company"), and
ANDREW J. PARISE, JR., ("Parise").
W I T N E S S E T H:
WHEREAS, Parise and the Company previously entered into an Employment
Agreement dated as of October 31, 1994; and
WHEREAS, Parise and the Company desire to cancel the October 31, 1994
Agreement and enter into this Employment Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree that the following provisions shall constitute the Agreement:
1. Termination of Prior Agreement. As of the date of this
Employment Agreement , the Employment Agreement dated October 31, 1994 by
and between Parise and the Company shall be terminated andbe of no further
force or effect.
2. Employment. Texfi hereby employs Parise and Parise
hereby accepts employment with Texfi for the term set forth in Section 3
below, in the position and with the duties and responsibilities set forth in
Section 4 below, and upon the other terms and conditions hereinafter stated.
3. Term. Unless otherwise terminated as hereinafter
provided, the term of the
1
<PAGE>
Agreement shall commence on April 1, 1997 and shall continue through
April 30, 2000.
4. Position, Duties, Responsibilities, Extent of Services.
4.1 Position. It is intended that, at all times during the
term of the Agreement, Parise shall serve as President and Chief Operating
Officer of the Company. In accordance with such position, he is hereby granted
appropriate responsibilities duties, and authorities, subject to the direction
of the Chief Executive Officer of the Company.
4.2 Extent of Services. During his employment under this
Agreement, Parise shall devote his full time and attention to the business and
affairs of Texfi; provided, however, that nothing in this Agreement shall
preclude Parise from engaging in charitable and civic activities or from
managing his personal investments so long as such outside activities do not
unreasonably interfere with the performance of his duties and responsibilities
under this Agreement.
5. Salary. For services rendered by him under this
Agreement, Parise shall receive a base salary at the annual rate of
$375,000 (the "Base Salary"), payable at least in equal monthly
installments.
6. Bonus. Parise will be eligible to participate in
the incentive bonus plans in effect from time to time for senior executive
officers of Texfi.
7. Stock Options. Texfi hereby grants to Parise [nonqualified]
[qualified] stock options of the Company in the amount of 100,000 shares of
common stock of the Company. Such options shall expire on a date ten (10)
years from the date of this Agreement and shall be exercisable at a price
equal to $4.125 per share.
8. Employee Benefit Plans. Parise will be provided employee
benefit
2
<PAGE>
programs comparable to those being provided by Texfi to senior executive
officers during the term of the Agreement.
9. Reimbursable Expenses.
9.1 Business Expenses. During the term of his employment
hereunder, Parise shall be entitled to receive proper reimbursement for all
reasonable out-of-pocket expenses incurred by him (in accordance with the
policies and procedures established by Texfi for its senior executive officers)
in performing services hereunder, provided Parise properly accounts therefor.
9.2 Automobile. During the term of his
employment hereunder, Texfi will furnish to Parise an automobile to be used in
performing his duties on behalf of Texfi.
10. Termination of Employment.
10.1 Death. In the event of the death of Parise during the
term of this Agreement, the following payments shall be made to his designated
beneficiary or, in the absence of such designation, to his estate: (a) his Base
Salary, as provided in Section 5, though the end of the month in which death
occurs, and (b) any amounts due under Incentive Bonus Plans then in effect in
accordance with the terms of such plans.
10.2 Long Term Disability. In the event that Parise shall
suffer an illness or mental or physical disability or incapacity of such a
nature, degree or effect that he is unable to perform his duties hereunder for a
continuous period of six months or for shorter periods aggregating six months
within any 12-month period, the Company, at its sole option, may terminate his
employment and this Agreement. Upon such termination, Parise, shall be entitled
to payment of (a) his Base Salary, as provided in Section 5, through
3
<PAGE>
the end of the pay period in which the termination occurs, and (b) any amounts
due under Incentive Bonus Plans then in effect in accordance with the terms of
such plans.
10.3 For Cause. The Company shall have the right to terminate
the employment of Parise and this Agreement for "cause." For purposes of this
Agreement, "cause" shall mean: (I) Parise's willful and continued failure to
perform substantially his duties under this Agreement (other than by reason of
illness or mental or physical disability or incapacity) for more than 60 days
after a written demand for substantial performance is delivered to him by the
Board of Directors of the Company, which demand specifically identifies the
manner in which Parise has not substantially performed his duties; (ii) theft or
misappropriation by Parise of assets of the Company; or (iii) actions by Parise
which constitute an act of moral turpitude or that materially injure the
Company. If Parise's employment is terminated for cause, he shall be entitled to
his Base Salary, as provided in Section 5, through the end of the pay period in
which the termination occurs.
10.4 Without Cause. Notwithstanding any other term or
provision of this Agreement, the Company may terminate Parise's employment and
this Agreement at any time and for whatever reason it deems appropriate. In the
event such termination by the Company occurs and is not due to disability
pursuant to Section 10.2 or for cause pursuant to Section 10.3, Parise shall be
entitled to payment of (a) his Base Salary, as provided in Section 5, for the
greater of six (6) months from the date of termination or the remaining term of
this Agreement, and (b) any amounts due under Incentive Bonus Plans then in
effect in accordance with the terms of such plans.
10.5 Voluntary Termination. Parise may voluntarily terminate
his
<PAGE>
4
employment with the Company on at least 60 days' prior written notice. Upon
such termination, Parise shall be entitled to his Base Salary, as provided in
Section 5, though the end of the pay period in which the termination occurs.
10.6 Change of Duties.Parise may voluntarily terminate his
employment with the Company on at least 60 days' prior written notice at any
time after his position, responsibilities and duties as President and Chief
Operating Officer of the Company, as set forth in Section 4.1, are substantially
changed and the new position, responsibilities and duties assigned to him are
not reasonably acceptable to him. In the event of such termination, Parise shall
be entitled to payment of (a) his Base Salary, as provided in Section 5 for the
greater of six (6) months from the date of termination or the remaining term of
this Agreement, and (b) any amounts due under Incentive Bonus Plans then in
effect in accordance with the terms of such plans.
11. Acceleration of Stock Options. All outstanding and
unexpired stock options held by Parise that are not then exercisable shall
become exercisable, in whole or in part, for a period of sixty (60) days
following termination of employment pursuant to Section 10.4 or Section 10.6.
12. Covenants Not to Compete.
12.1 Competition; Soliciting Customers. Parise promises
and agrees that, until the later of (a) the termination of the Agreement or
(b) the expiration of any salary payments made to Parise pursuant to Sections
10.4 or 10.6, he will not, directly or indirectly:
(i) own, manage, operate, control, be employed by,
render
5
<PAGE>
advisory services to, participate in or be connected
in any management or control of any business in the
United States that is engaged in competition with
Texfi or any of its subsidiaries or affiliates in
the commission dyeing and finishing of textile
products or the manufacture and/or sale of textile
products of the same or a like nature to the
products of Texfi and its subsidiaries, or (ii)
influence or attempt to influence any customer of
Texfi or any of its subsidiaries or affiliates to
divert its purchases of woven or knit fabrics or
other products to any individual, partnership, firm,
corporation or other entity then in competition with
Texfi or any of its subsidiaries or affiliates.
For purposes of this Section 12.1, "competition with Texfi or any of its
subsidiaries or affiliates" shall mean direct competition for customers of
textile products or services in any geographic area in which Texfi or any of its
subsidiaries or affiliates is engaged, directly or indirectly, in selling or
attempting to sell such products or services/
12.2 Soliciting Employees; Interference.Parise promises and
agrees that, for a period of one year after the later of (a) the termination of
the Agreement, or (b) the expiration of any salary payments made to Parise
pursuant to Sections 10.4 or 10.6, he will not, directly or indirectly:
(i) solicit any employee of Texfi or any subsidiary
or affiliate of Texfi or any subsidiary or affiliate
of Texfi, who earned annually $25,000 or more as an
employee during the last six months of
6
<PAGE>
Parise's employment by Texfi, to work for any
business, individual, partnership, firm, corporation
or other entity then in competition with the
business of Texfi or any of its subsidiaries or
affiliates; or (ii) wrongfully interfere with,
disrupt or attempt to disrupt the relationship,
contractual or otherwise, between Texfi and any
other party, including without limitation any
supplier, distributor, lessor or lessee, licensor or
licensee.
12.3 Scope. Parise acknowledges and agrees that the covenants
set forth in Sections 12.1 and 12.2 shall be enforceable in accordance with
their terms notwithstanding any termination of the Agreement or his employment
by Texfi, for any reason whatsoever, including without limitation, the
termination of his employment under the circumstances described in Sections
10.3, 10.4, 10.5 and 10.6; and the obligations set forth in Sections 12.1 and
12.2 shall continue as therein provided irrespective of whether payments are
required by Texfi to Parise under the Agreement except that Parise shall not be
bound by said covenants if Texfi fails to make any payments which, under the
terms of the Agreement, it has agreed to make to Parise after the termination of
his employment.
12.4 Savings Clause. It is the desire and intent of the
parties that the provisions of Sections 12.1 and 12.2 shall be enforced to the
fullest extent permitted under the laws and public policies of each jurisdiction
in which enforcement is sought. Accordingly, if any particular portion of
Sections 10.1 and 10.2 shall be adjudicated to be invalid or unenforceable, such
adjudication shall apply only with respect to the operation of that portion in
the particular jurisdiction in which such adjudication is made, and all
7
<PAGE>
other portions shall continue in full force and effect.
13. Confidential Information; Rights to Materials.
13.1 Confidential Information. Parise agrees not to disclose,
either while in Texfi's employ or at any time thereafter, to any person not
employed by Texfi, or not engaged to render services to Texfi, any confidential
and proprietary information of Texfi obtained ;by him while in the employ of
Texfi, including, without limitation, any of Texfi's methods, processes,
techniques, shop practices, formulae, research data, marketing and sales
information, personnel data, customer lists, financial data, plans, and all
other know-how, trade secrets and proprietary information of Texfi; provided,
however, that this provision shall not preclude Parise from use or disclosure of
information known generally to the public (other than information known
generally to the public as a result of a violation of this Section 12.1 by
Parise), from use or disclosure of information acquired by Parise outside of his
affiliation with Texfi, from disclosure required by law or court order, or from
disclosure appropriate and in the ordinary course of carrying out his duties and
authorities hereunder (e.g., disclosure to Texfi's outside accountants, bankers
or trade creditors of financial data properly requested by such persons).
13.2 Rights to Materials. Parise also agrees that, upon
termination of his employment for whatever reason, he will not take with him,
without the prior written consent of an officer authorized to act in the matter
by the Board of Directors, any records, files, memoranda, reports, price lists,
customer lists, drawings, plans, sketches, documents, specifications, and the
like (or any copies thereof) relating to the business of Texfi.
14. Assignment by Texfi. This Agreement shall be binding upon and shall
inure
8
<PAGE>
to the benefit of Texfi or any corporation or other entity to which Texfi
may transfer all or substantially all of its assets and business (by operation
of law or otherwise) and to which Texfi may assign this Agreement, in which case
"Texfi," as used herein, shall mean such transferee corporation or other entity.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws and judicial decisions of the State of
North Carolina.
16. Entire Agreement. This Agreement contains all of the
understandings and agreements of the parties hereto with respect to the
employment of Parise by the company and supersedes all prior
understandings and agreements between the parties, whether oral or in writing.
17. Amendment; Waiver. No provision of this Agreement may be amended,
modified or waived unless such amendment, modification or waiver is agreed to in
writing and signed by Parise and by an officer of the Company duly authorized to
sign by the Board of Directors of the Company. No waiver by either party hereto
of any breach by the other of any provision of this Agreement to be performed by
such other party shall be deemed a waiver of a similar or dissimilar provision
at the same time or at any prior or subsequent time.
18. Severability. If any one or more of the provisions
contained in this Agreement shall be invalid, illegal, or unenforceable in any
respect under applicable law, the validity, legality or enforceability of the
remaining provisions shall not in any way be effected or impaired thereby.
19. Withholding. Anything herein to the contrary
notwithstanding, all
9
<PAGE>
payments made by the Company hereunder shall be subject to
the withholding of such amounts relating to taxes as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation.
IN WITNESS WHEREOF, the parties hereby have executed this Agreement
as of the 1st day of April,
1997.
TEXFI INDUSTRIES, INC.
By: /s/ William L. Remley
William L. Remley,
Chief Executive Officer
EMPLOYEE:
/s/ Andrew J. Parise, Jr.
Andrew J. Parise, Jr.
EXHIBIT 11
TEXFI INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
AUGUST 1, August 2, AUGUST 1, August 2,
1997 1996 1997 1996
---------- --------- ----------- -------
<S> <C> <C> <C> <C>
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING:
Balance at beginning of period ................. 8,841,696 8,735,491 8,735,491 8,650,690
Deferred compensation........................... -- -- 106,205 84,801
--------- --------- --------- ---------
Balance at end of period ....................... 8,841,696 8,735,491 8,841,696 8,735,491
========= ========= ========= =========
PRIMARY:
Net (loss) income from continuing operations.... $ (668,000) $ 635,000 $ 885,000 $ 1,228,000
Net loss from discontinued operations........... -- (1,892,000) -- ( 3,043,000)
----------- ----------- ---------- -----------
Net (loss) income applicable to
stockholders ................................. $ (668,000) $(1,257,000) $ 885,000 $( 1,815,000)
=========== =========== ============ ============
Weighted average number of shares outstanding:
Common stock outstanding for the period
based on a daily weighted average ........... 8,841,696 8,735,491 8,791,646 8,683,073
Common stock equivalents - outstanding stock
options computed on the treasury stock
method using average market price ........... 54,418 -- 72,355 --
----------- ----------- ------------ -------
Weighted average number of common and common
equivalent shares outstanding ............... 8,896,114 8,735,491 8,864,001 8,683,073
=========== =========== ============ ===========
Per share amounts:
Net (loss) income from continuing operations $ (.07) $ .07 $ .10 $ .14
Net loss from discontinued operations......... -- (.21) -- ( .35)
---------- ------- ------- --------
Net (loss) income........................... $ (.07) $ (.14) $ .10 $ ( .21)
========== ======== ======= ========
FULLY DILUTED:
Net (loss) income from continuing operations.... $ (668,000) $ 635,000 $ 885,000 $ 1,228,000
Net loss from discontinued operations........... -- (1,892,000) -- ( 3,043,000)
----------- ----------- ---------- -----------
Net (loss) income applicable to
stockholders ................................. $ (668,000) $(1,257,000) $ 885,000 $( 1,815,000)
=========== =========== ============ ============
Weighted average number of shares outstanding:
Common stock outstanding for the period
based on a daily weighted average ........... 8,841,696 8,735,491 8,791,646 8,683,073
Common stock equivalents - outstanding stock
options computed on the treasury stock
method using average market price ........... 66,249 -- 75,974 --
----------- ----------- ------------ -------
Weighted average number of common and common
equivalent shares outstanding ............... 8,907,945 8,735,491 8,867,620 8,683,073
----------- ----------- ------------ -----------
Increase in common shares assuming conversion
of the 11-1/4% Convertible Senior Subordinated
Debentures .................................. 475,783 528,647 498,826 528,647
------------ ----------- ------------ ----------
Weighted average number of common and common
equivalent shares outstanding ............... 9,383,728 9,264,138 9,366,446 9,264,138
============ ============ ============ ===========
Per share amounts:
Excluding convertible debenture shares:
Net income (loss) from continuing operations $ (.07) $ .07 $ .10 $ .14
Net loss from discontinued operations......... -- (.21) -- ( .35)
---------- ------- ------- --------
Net income (loss)........................... $ (.07) $ (.14) $ .10 $ ( .21)
========== ======== ======= ========
Including Convertible Debenture Shares:
Net income (loss) from continuing operations $ (.06) $ .07 $ .13 $ .13
Net loss from discontinued operations......... -- (.20) -- ( .33)
---------- ------- ------- --------
Net income (loss)........................... $ (.06) $ (.13) $ .13 $ ( .20)
========== ======== ======= ========
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> AUG-1-1997
<CASH> 757
<SECURITIES> 0
<RECEIVABLES> 46,159
<ALLOWANCES> 1,289
<INVENTORY> 21,846
<CURRENT-ASSETS> 69,078
<PP&E> 103,576
<DEPRECIATION> 64,508
<TOTAL-ASSETS> 111,085
<CURRENT-LIABILITIES> 42,346
<BONDS> 36,841
0
0
<COMMON> 34,341
<OTHER-SE> (46,176)
<TOTAL-LIABILITY-AND-EQUITY> 111,085
<SALES> 156,927
<TOTAL-REVENUES> 156,927
<CGS> 135,887
<TOTAL-COSTS> 147,351
<OTHER-EXPENSES> 887
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,804
<INCOME-PRETAX> 885
<INCOME-TAX> 0
<INCOME-CONTINUING> 885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 885
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
