<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1997
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WILLCOX & GIBBS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 5085 22-3308457
(STATE OR OTHER JURISDICTION OF (PRIMARY SIC CODE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
------------------------
900 MILIK STREET
CARTERET, NEW JERSEY 07008
(908) 541-6255
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
JOHN K. ZIEGLER, SR.
WILLCOX & GIBBS, INC.
900 MILIK STREET
CARTERET, NEW JERSEY 07008
(908) 541-6255
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------
WITH COPIES TO:
JOHN K. HOYNS, ESQ.
HUGHES HUBBARD & REED LLP
ONE BATTERY PARK PLAZA
NEW YORK, NEW YORK 10004
(212) 837-6762
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
12 1/4% Series B Senior Notes Due 2003 $85,000,000(1) (2) (2) $25,758
</TABLE>
(1) Equals the aggregate principal amount of the securities being registered.
(2) Pursuant to Rule 457(f)(2), the registration fee has been calculated using
the book value of the securities being registered.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WILLCOX & GIBBS, INC.
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404(A) UNDER THE SECURITIES ACT
AND ITEM 501(B) OF REGULATION S-K
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<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION PROSPECTUS CAPTION
------------------------------------------------------------- ---------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside Front Cover
Page of Prospectus......................................... Facing Page; Cross-Reference Sheet; Outside
Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus...... Inside Front Cover Page; Available
Information; Outside Back Cover Page
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information................................................ Prospectus Summary; Risk Factors; Selected
Historical Financial Information
4. Terms of the Transaction..................................... Prospectus Summary; The Exchange Offer;
Description of Senior Notes; Certain
Federal Income Tax Consequences; Plan of
Distribution
5. Pro Forma Financial Information.............................. Summary Historical and Pro Forma Financial
Information; Pro Forma Combined Financial
Information; Consolidated Financial
Statements
6. Material Contacts with the Company Being Acquired............ Not Applicable
7. Additional Information Required for Reoffering by Persons and
Parties Deemed to Be Underwriters.......................... Not Applicable
8. Interests of Named Experts and Counsel....................... Legal Matters; Independent Public Accountants
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................. Not Applicable
10. Information with Respect to S-3 Registrants.................. Not Applicable
11. Incorporation of Certain Information by Reference............ Not Applicable
12. Information with Respect to S-2 or S-3 Registrants........... Not Applicable
13. Incorporation of Certain Information by Reference............ Not Applicable
14. Information with Respect to Registrants Other Than S-3 or S-2
Registrants................................................ Prospectus Summary; Selected Historical
Financial Information; Management's
Discussion and Analysis of Financial
Condition and Results of Operations--The
Company; Business; Consolidated Financial
Statements
15. Information with Respect to S-3 Companies.................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION PROSPECTUS CAPTION
------------------------------------------------------------- ---------------------------------------------
<C> <S> <C>
16. Information with Respect to S-2 or S-3 Companies............. Not Applicable
17. Information with Respect to Companies Other Than S-3 or S-2
Companies.................................................. The Macpherson Acquisition; Management's
Discussion and Analysis of Financial
Condition and Results of
Operations--Macpherson
18. Information if Proxies, Consents or Authorizations are to be
Solicited.................................................. Not Applicable
19. Information if Proxies, Consents or Authorizations are not to
be Solicited or in an Exchange Offer....................... Inside Front Cover Page; Prospectus Summary;
The Exchange Offer; Management; Security
Ownership of Certain Beneficial Owners and
Management; Description of Senior Notes
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED APRIL 3, 1997
WILLCOX & GIBBS, INC.
OFFER TO EXCHANGE ITS 12 1/4% SERIES B SENIOR NOTES DUE 2003
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING
12 1/4% SERIES A SENIOR NOTES DUE 2003
THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
------------------------
Willcox & Gibbs, Inc. ("Willcox & Gibbs" or the "Company") hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus (this
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal" and, together with this Prospectus, the "Exchange Offer"), to
exchange $1,000 principal amount of its 12 1/4% Series B Senior Notes due 2003
(the "New Notes") which have been registered under the Securities Act of 1933,
as amended (the "Securities Act") pursuant to a registration statement (the
"Registration Statement") of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 12 1/4% Series A Senior Notes due 2003 (the
"Old Notes"), of which $85,000,000 principal amount is outstanding as of the
date hereof. The Old Notes and the New Notes are sometimes collectively referred
to herein as the "Senior Notes." The Senior Notes will be Senior unsecured
obligations of the Company (except for the security interest in 65% of the
shares of a non-U.S. subsidiary) and will be unconditionally guaranteed on a
senior unsecured basis (the "Subsidiary Guarantees") by the Subsidiary
Guarantors (as defined herein). See "The Exchange Offer."
The Company will accept for exchange any and all validly tendered Old Notes
prior to 12:00 midnight, New York City time, on , 1997, unless extended
(such date, as it may be extended, the "Expiration Date"). Old Notes may be
tendered only in integral multiples of $1,000. Tenders of Old Notes may be
withdrawn at any time prior to 12:00 midnight, New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. However, the Exchange
Offer is subject to certain customary conditions. In the event the Company
terminates the Exchange Offer and does not accept for exchange any Old Notes,
the Company will promptly return the Old Notes to the holders thereof. The
Company will not receive any proceeds from the Exchange Offer. See "The Exchange
Offer."
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED TO
HOLDERS OF OLD NOTES ON , 1997.
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
2
<PAGE>
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 , 1997.
3
<PAGE>
The New Notes will be obligations of the Company evidencing the same debt as
the Old Notes, and will be entitled to the benefits of the same indenture (the
"Indenture"). See "Description of Senior Notes." The form and terms of the New
Notes are generally the same as the form and terms of the Old Notes in all
material respects except that the New Notes have been registered under the
Securities Act and hence do not include certain rights to registration
thereunder and do not contain transfer restrictions or terms with respect to
certain special payments applicable to the Old Notes. See "The Exchange Offer."
The New Notes are being offered hereunder in order to satisfy certain
obligations under the Registration Rights Agreement, dated as of December 20,
1996 (the "Registration Rights Agreement"), among the Company, the Subsidiary
Guarantors and Dillon, Read & Co. Inc. (the "Initial Purchaser"), a copy of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The Exchange Offer is intended to satisfy the Company's
obligations under the Registration Rights Agreement to register the New Notes
and exchange them for the Old Notes under the Securities Act. Once the Exchange
Offer is consummated, the Company will have no further obligations to register
any of the Old Notes tendered for exchange, except pursuant to a shelf
registration statement to be filed under certain limited circumstances specified
in "The Exchange Offer--Purpose of the Exchange Offer." See "Risk
Factors--Consequences to Non-Tendering Holders of Old Notes." The Company has
agreed to pay the expenses of the Exchange Offer.
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in several no-action letters issued to
third parties, the Company believes, based on the advice of its counsel, that
the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by holders who are
not affiliates of Willcox & Gibbs without compliance with the registration and
prospectus delivery provisions of the Securities Act; PROVIDED that the holder
is acquiring New Notes in its ordinary course of business and has no arrangement
or understanding with any person to participate in any distribution (within the
meaning of the Securities Act) of the New Notes. Persons wishing to exchange Old
Notes in the Exchange Offer must represent to the Company that such conditions
have been met. However, any holder who is an affiliate of the Company or who
tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the New Notes cannot rely on the
interpretation by the staff of the Commission set forth in such no-action
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
See "The Exchange Offer--Purpose of the Exchange Offer." In addition, each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will use
its best efforts to make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution." EXCEPT AS
DESCRIBED IN THIS PARAGRAPH, THIS PROSPECTUS MAY NOT BE USED FOR ANY OFFER TO
RESELL, RESALE OR OTHER TRANSFER OF NEW NOTES.
Old Notes initially purchased by "qualified institutional buyers" (as such
term is defined in Rule 144A under the Securities Act) were initially
represented by a single Global Old Note (as defined herein) in fully registered
form, registered in the name of a nominee of The Depository Trust Company
("DTC"), as depositary. Old Notes originally purchased by or transferred to
institutional "accredited investors," within the meaning of Rule 501 (a)(1),
(2), (3) or (7) under the Securities Act, who were not "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) were issued in
registered certificated form ("Certificated Securities").
4
<PAGE>
Beneficial interests in the Global Old Note and one such Certificated
Security representing the Old Notes have been shown on, and transfers thereof to
institutional "accredited investors" and "qualified institutional buyers" have
been effected through, records maintained by DTC and its participants.
The New Notes exchanged for Old Notes represented by the Global Old Note
will be represented by one or more Global New Notes (as defined herein) in fully
registered form, registered in the name of the nominee of DTC. The Global New
Notes will be exchangeable for New Notes in registered form, in denominations of
$1,000 and integral multiples thereof as described herein. The New Notes in
global form will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity of such New Notes will therefore settle in immediately
available funds. See "Description of Senior Notes--Book-Entry, Delivery and
Form." For a description of any New Notes exchanged for beneficial interests
represented by the Certificated Security, see "Description of Senior
Notes--Book-Entry, Delivery and Form."
The Senior Notes will bear interest at a rate equal to 12 1/4% per annum
from their date of issuance. Interest on the Senior Notes is payable
semi-annually on June 15 and December 15 of each year, commencing June 15, 1997.
Holders whose Old Notes are accepted for exchange will receive, in cash, accrued
interest and "Liquidated Damages," if any, payable pursuant to Section 6 of the
Registration Rights Agreement (the "Old Note Liquidated Damages") thereon to,
but not including, the date of issuance of the New Notes. Such interest will be
paid with the first interest payment on the New Notes. Interest on the Old Notes
accepted for exchange will cease to accrue upon the issuance of the New Notes
exchanged therefor.
The Senior Notes will be redeemable at the option of the Company, in whole
or in part, on or after December 15, 2001, at the redemption price of 106.125%
of principal (declining to 103.063% on or after December 15 of 2002), together
with accrued and unpaid interest and Old Note Liquidated Damages, if any, to the
date of redemption. On or prior to December 15, 1999, up to 30% of the
originally issued principal amount of the Senior Notes then outstanding will be
redeemable at the option of the Company from the Net Cash Proceeds of a Public
Equity Offering (each as defined herein), at 112 1/4% of the principal amount
thereof, together with accrued and unpaid interest and Old Note Liquidated
Damages, if any, to the date of redemption; PROVIDED that at least $59.5 million
of the originally issued principal amount of Senior Notes remains outstanding
immediately after such redemption and that such redemption occurs within 60 days
following the closing of such Public Equity Offering. Finally, subject to the
limitations and qualifications set forth in the Indenture, in the event of a
Change of Control (as defined in "Description of Senior Notes"), holders of the
Senior Notes will have the right to require the Company to purchase their Senior
Notes, in whole or in part, at a price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest and Old Notes Liquidated
Damages, if any, to the date of purchase. There can be no assurance that the
Company will have the financial resources necessary to purchase the Senior Notes
upon the occurrence of a Change of Control. See "Description of Senior Notes."
The Senior Notes will be senior unsecured obligations of Willcox & Gibbs
(except for the security interest in 65% of the shares of non-U.S. subsidiary)
and will be unconditionally guaranteed on a senior unsecured basis by the
Subsidiary Guarantors. The Senior Notes and each Subsidiary Guarantee will rank
PARI PASSU with all other unsecured and unsubordinated indebtedness of the
Company and the applicable Subsidiary Guarantor, respectively. The Senior Notes
and the Subsidiary Guarantees will, however, be effectively subordinated to
secured indebtedness of the Company and the Subsidiary Guarantors, respectively,
with respect to the assets securing such indebtedness. Because the Company is a
holding company, the Senior Notes are effectively subordinated to all existing
and future liabilities of its subsidiaries that are not Subsidiary Guarantors.
At December 31, 1996, the Company and the Subsidiary Guarantors had $41.4
million of secured indebtedness outstanding. Subject to certain limitations, the
Company and its subsidiaries (including the Subsidiary Guarantors) may incur
additional secured and unsecured indebtedness.
5
<PAGE>
Prior to this offering, there has been no public market for the Senior
Notes. The Company does not intend to list the Senior Notes on a national
securities exchange or to seek approval for quotation through the NASDAQ
National Market. As the Old Notes were issued and the New Notes are being issued
primarily to a limited number of institutions who typically hold similar
securities for investment, the Company does not expect that an active public
market for the Senior Notes will develop. In addition, resales by certain
holders of the Senior Notes of a substantial percentage of the aggregate
principal amount of such notes could constrain the ability of any market maker
to develop or maintain a market for the Senior Notes. To the extent that a
market for the Senior Notes should develop, the market value of the Senior Notes
will depend on prevailing interest rates, the market for similar securities and
other factors, including the financial condition, performance and prospects of
the Company. Such factors might cause the Senior Notes to trade at a discount
from face value. See "Risk Factors--Lack of a Public Market for the Senior
Notes."
THE COMPANY WILL NOT RECEIVE ANY PROCEEDS FROM THE EXCHANGE OFFER. THE
COMPANY HAS AGREED TO PAY THE EXPENSES OF THE EXCHANGE OFFER. NO UNDERWRITER IS
BEING USED IN CONNECTION WITH THE EXCHANGE OFFER.
6
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND HISTORICAL AND PRO FORMA FINANCIAL STATEMENTS, INCLUDING THE
NOTES THERETO, APPEARING IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE
REQUIRES, REFERENCES TO THE "COMPANY" INCLUDE WILLCOX & GIBBS AND ITS DIRECT AND
INDIRECT SUBSIDIARIES. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
MATTERS SET FORTH UNDER THE HEADING "RISK FACTORS."
THE COMPANY
The Company believes that it is the largest independent distributor in North
America of replacement parts, supplies and specialized equipment to
manufacturers of apparel and other sewn products, offering a broad product line
of over 200,000 items. These products include industrial sewing equipment parts,
such as needles, hooks, motors, tools and other accessories, and specialized
equipment, such as screen printing equipment and supplies and production
planning and control systems. In addition, as a result of the consummation of
the Macpherson Acquisition (as defined herein), the Company became a major
distributor of embroidery equipment and supplies, marketing its products through
22 sales and distribution centers strategically located in the United States,
Canada, Mexico, the Dominican Republic and England. During 1996, the Company's
customer base consisted of over 15,000 manufacturers and dealers.
Since the Company was acquired by management and certain investors in July
1994 (the "Management Buyout"), the Company has expanded through internal growth
of operations and acquisitions. The Company intends to pursue strategic
acquisitions to expand its product lines and to enter into new geographic
markets. The Company believes that the size of its operations and the stable
operating history of its replacement parts and supplies distribution business
have enabled it to carry substantially higher levels of inventory than its
competitors. These investments in inventory provide customers with wide
selection, a high degree of product availability and assurance of prompt
delivery. In addition, the Company believes that it is well positioned to pursue
selected growth opportunities internationally, particularly in Mexico and South
America, based upon the size of its operations, its established inventory
management systems and its growing sales in these markets.
INDUSTRY OVERVIEW
Manufacturers of apparel and other sewn products generally utilize a variety
of modern equipment and supplies in their production processes. Although there
have been advances in the speed of equipment and automation of manufacturing
methods, the basic sewing process has changed very little since the first sewing
machines were introduced over 125 years ago. Accordingly, the basic design of
sewing equipment and replacement parts and supplies used with respect to such
equipment has remained stable for many years, and new generations of sewing
equipment have frequently utilized many parts designed for prior generations. In
addition, since numerous manufacturers of sewn products do not regularly replace
major equipment upon the introduction of new models, substantial numbers of
older machines typically continue to be used for many years after the production
of more advanced units.
The improvements in speed of equipment and the trend toward automation in
apparel and sewn products manufacturing have increased the demand for
replacement parts and supplies by manufacturers, since high speed production
increases the wear and tear on equipment. In addition, automation results in the
utilization of other equipment, such as cutting and finishing devices, that must
be maintained. As a result of the large number of differing replacement parts
and supplies utilized by apparel and sewn products manufacturers and the
relatively small quantity of many items required at varying times, such
manufacturers generally prefer to obtain replacement parts and supplies from
dealers that stock a wide range of products and offer prompt delivery. In
addition, manufacturers of such replacement parts, supplies and specialized
equipment often prefer to sell such products through distributors who can
provide wide market coverage, assume credit risk and stock inventory, thereby
limiting the manufacturers' costs of marketing and distribution.
5
<PAGE>
The market for screen printing equipment and embroidery equipment used to
add decoration to apparel products has grown rapidly over the past several
years. This growth has been propelled by expansion of the market for casual
wear, such as T-shirts, sweatshirts and caps, which frequently feature printed
or embroidered trademarks, slogans or other designs. In addition, improvements
in technology have made screen printing and embroidery equipment less expensive
and more sophisticated. The Company acquired Clinton Management Corp. and
Clinton Machinery Corp. (together, "Clinton"), which distribute screen printing
equipment and supplies, in February 1996, and Macpherson Meistergram, Inc. and
its subsidiary, Geoffrey E. Macpherson Canada, Inc. (together, "Macpherson"),
which principally distributes embroidery equipment and supplies, in January
1997, in order to take advantage of the growing demand for such equipment and of
the ability to market these complementary product lines to the same end-user
group.
The market of apparel manufacturers in the Western Hemisphere has expanded
during the 1990s due to the shifting production of apparel products sold in the
United States from the Far East to Mexico and the rest of Latin America.
According to the U. S. Department of Commerce, in 1990 Asia accounted for 75.3%
of U.S. imports of apparel, while Mexico and the Caribbean Basin Initiative
("CBI") countries accounted for 11.2%. By 1995, Asia's share had dropped to
62.7% of U.S. imports, while Mexico and the CBI countries increased to 23.1%.
The trend towards increasing apparel imports to the United States from Mexico is
expected to accelerate with the implementation of the North American Free Trade
Agreement ("NAFTA"). In addition, the Company anticipates that apparel
manufacturers from around the world who sell their products to the United States
will increase apparel production in Mexico, the CBI countries and the rest of
Latin America due to the improved political and economic climate of many of such
countries and the quick and relatively inexpensive access to the U.S. market
from such region. The Company believes it is well positioned to capitalize on
the shift in apparel production to the southern portion of the Western
Hemisphere due to its broad product line, its existing distribution centers
located nearby and its prior relationships with many of the manufacturers that
are establishing production facilities south of the United States. For example,
the Company is a supplier to one of its major customers, Fruit of the Loom, at
its new Mexican manufacturing facility that began operations in 1996.
COMPETITIVE STRENGTHS
The Company believes that it has a strong competitive position attributable
to a number of factors, including the following:
- MARKET LEADERSHIP. The Company believes that it is the largest independent
distributor of replacement parts, supplies and specialized equipment for
the apparel and other sewn products industry in North America. As a
result, the Company has significant purchasing power and can realize
economies of scale in marketing, distribution and administration. The
Company believes that each of its principal operating units is among the
leaders in its respective market.
- STRONG BRAND NAME RECOGNITION. The Willcox & Gibbs brand name has been
well known in the apparel industry since the Company's predecessor began
operations in the mid-1800s as an apparel equipment manufacturer. Since
that time, the Company's Sunbrand and Unity divisions have developed and
maintained well-recognized brand names in replacement parts distribution
through a long history of comprehensive and high quality product lines and
an emphasis on customer service.
- BROAD LINES OF QUALITY PRODUCTS. The Company believes that it markets the
broadest line of quality replacement parts, supplies and specialized
equipment to manufacturers of apparel and other sewn products in North
America. For example, the Company's Sunbrand division markets over 180,000
items, while the Company believes that its closest competitor offers
approximately 40,000 items. As a result of its broad product offering, the
Company believes that it provides its customers with "one-stop shopping"
for their replacement parts, supplies and specialized equipment
requirements.
6
<PAGE>
- HIGH LEVEL OF CUSTOMER SERVICE. The Company provides its customers with a
comprehensive selection of products, a high degree of product
availability, convenient ordering systems and fast order response time.
The Company's strategically placed distribution facilities and efficient
inventory management systems enable it to achieve high order fill rates
for replacement parts and supplies (in excess of 95% of orders are shipped
within 24 hours), timeliness of delivery and wide geographic coverage. The
Company utilizes a real-time computer inventory management system in its
sewn products replacement parts and supplies businesses that enables it to
search all inventory locations in North America for product availability.
In addition, the Company maintains electronic data interchange ("EDI")
systems that link the Company to selected customers, such as Levi Strauss
and Fieldcrest Cannon. The Company fills substantially all of its orders
of parts and supplies by customers in the United States through next-day
delivery, which is important to assist customers in minimizing operator
downtime.
- STRONG RELATIONSHIPS WITH SUPPLIERS. The Company has developed strong
relationships with many of its suppliers, with some dating back over 30
years. The Company maintains exclusive U.S. distribution rights for
genuine replacement parts for Pfaff AG ("Pfaff") (since 1958), and Pegasus
Sewing Machine Mfg. Co., Ltd. ("Pegasus") (since 1966), two major sewing
equipment suppliers to the U.S. apparel and other sewn products industry,
as well as exclusive distribution rights in certain territories for M&R
Printing Equipment, Inc. ("M&R"), a major manufacturer of screen printing
equipment for the apparel industry in the United States.
- DIVERSIFIED BASE OF CUSTOMERS. During 1996, the Company sold products to
over 15,000 apparel and sewn products manufacturers and dealers of
replacement parts and supplies, with no single customer representing more
than 5.2% of net sales. The Company has enjoyed long-term relationships
with a number of its major customers, including Levi Strauss, Fruit of the
Loom, Fieldcrest Cannon, Russell Athletic and VF Corporation.
- EXPERIENCED MANAGEMENT TEAM. The Company's officers have an average of 16
years of experience with the Company and the Company's predecessor and an
average of 19 years of industry experience. The Company retained
substantially all of the senior management of the businesses acquired in
the Management Buyout in July 1994, of Clinton in connection with its
acquisition by the Company in February 1996 and of the senior management
of Macpherson following consummation of the Macpherson Acquisition in
January 1997. The Company's principal managers and employees collectively
owned, as of March 31, 1997, on a fully diluted basis 63.1% of the
Company's outstanding common stock.
BUSINESS STRATEGY
The Company's strategy is to enhance its position as a leading distributor
of replacement parts, supplies and specialized equipment to the apparel and
other sewn products industry. In order to achieve this objective, the Company
has developed a business plan that consists of the following key elements:
- MAINTAIN LEADING MARKET POSITION. The Company believes that it is the
leading independent distributor in North America of replacement parts,
supplies and specialized equipment to the apparel and other sewn products
industry. The Company believes that such leadership is based primarily on
the Company's long history of operations, broad line of products and
excellent customer service. The Company intends to enhance its market
leadership by maintaining and expanding its relationships with suppliers
and customers.
- EXPAND PRODUCT LINES. The Company intends to add lines of replacement
parts, supplies and specialized equipment that can be efficiently marketed
through its existing distribution system. Such additions are intended to
strengthen the Company's position as a "one-stop shop" without significant
incremental expenses related to selling, marketing, distribution and
administration.
7
<PAGE>
- INCREASE PENETRATION OF EMERGING MARKETS. The Company believes that it is
well positioned to increase sales by targeting growth opportunities in
emerging markets such as Mexico, the CBI countries and the rest of Latin
America. The Company expects that its comprehensive line of replacement
parts, supplies and specialized equipment and long experience in serving
the apparel and other sewn products industry will provide a competitive
advantage over smaller, local competitors in these regions. The Company
intends to expand its presence in these areas in 1997 by opening a new
sales office in Colombia.
- PURSUE SELECTED ACQUISITIONS. Since the Management Buyout in July 1994,
the Company has pursued a plan of expanding its product offerings through
strategic acquisitions. In February 1996, it acquired Clinton, a leading
distributor of screen printing equipment and supplies (the "Clinton
Acquisition"), in November 1996 it acquired E.C. Mitchell Co., Inc.
("Mitchell"), a manufacturer of abrasive cords and tapes used principally
by apparel manufacturers (the "Mitchell Acquisition"), and in January 1997
it acquired Macpherson, a leading distributor of embroidery equipment and
supplies (the "Macpherson Acquisition"). The Company intends to pursue
other strategic acquisitions to expand its product lines and to enter into
new geographic markets.
HISTORY OF THE COMPANY
The predecessor to the Company, formerly named Willcox & Gibbs, Inc. (the
"Company's Predecessor"), was incorporated in 1866 and began operations as a
sewing equipment manufacturer. In the late 1960s, as sewing equipment
manufacturing migrated overseas, the Company's Predecessor shifted its business
into the distribution of replacement parts and supplies for the apparel and
other sewn products industry. Parts and supply distribution remained the primary
focus of the Company's Predecessor until 1984, when it expanded into the
distribution of electrical parts. Due to the large and fragmented nature of U.S.
electrical parts distribution, this segment grew rapidly and, by 1993,
represented approximately 85% of the net sales of the Company's Predecessor. In
1994, the Board of Directors of the Company's Predecessor decided to focus its
business on electrical parts distribution and divest its other businesses. In
July 1994, management and outside investors acquired the sewn products
replacement parts, supply and specialized equipment distribution businesses of
the Company's Predecessor (the "Distribution Business") for total consideration
of $44.0 million.
The Company currently operates through six principal business units: (i) its
Sunbrand division ("Sunbrand"), which is a distributor of replacement parts,
supplies and specialized equipment to manufacturers of apparel and other sewn
products; (ii) its Unity Sewing Supply Co. division ("Unity"), which is a
wholesale distributor to dealers of replacement parts and supplies for use by
the apparel and other sewn products industry; (iii) its Willcox & Gibbs, Ltd.
("W&G, Ltd.") subsidiary, which is a distributor to manufacturers and dealers in
the United Kingdom and Europe of replacement parts and supplies for use by the
apparel and other sewn products industry; (iv) its Clinton subsidiaries, which
distribute screen printing equipment and supplies for the apparel industry; (v)
its Leadtec Systems, Inc. ("Leadtec") subsidiary, which develops and supplies
computer-based production planning and control systems for the apparel and other
sewn products industry; and (vi) Macpherson, acquired in January 1997 using a
portion of the net proceeds from the sale of the Old Notes, which distributes
embroidery equipment and supplies used in the apparel industry. See "The
Macpherson Acquisition."
8
<PAGE>
THE MACPHERSON ACQUISITION
A portion of the proceeds from the sale on January 3, 1997 by the Company of
the Old Notes was used to finance the acquisition by the Company of Macpherson.
On November 27, 1996, the Company entered into a stock purchase agreement (the
"Stock Purchase Agreement") with Macpherson and its shareholders pursuant to
which the Company agreed to acquire all of the outstanding capital stock of
Macpherson for a cash purchase price of $24.0 million. In connection with the
Macpherson Acquisition, the Company assumed (and repaid immediately using a
portion of the net proceeds from the sale of the Old Notes) approximately $6.1
million of indebtedness of Macpherson and approximately $6.4 million of trade
payables of Macpherson. Macpherson is primarily engaged in the distribution of
embroidery equipment and supplies to the apparel industry.
In connection with the Macpherson Acquisition, the Company acquired
Embroidery Leasing Corporation, a leasing company affiliate of Macpherson (the
"Leasing Company"), for approximately $0.5 million, payable over three years,
plus interest at 6.0% per annum. The Company intends to utilize the Leasing
Company to offer flexible lease financing to its customers to support the
Company's sales of equipment.
The Macpherson Acquisition expanded the Company's product lines to include
the distribution of embroidery equipment and supplies to the apparel industry.
The market for embroidery equipment has grown rapidly over the past ten years.
The Company acquired Macpherson to take advantage of the expanding demand for
such equipment and of the ability to market such equipment and the Company's
complementary line of screen printing equipment to the same end-user group. In
addition, the Company believes that Macpherson's embroidery equipment can be
efficiently marketed through the Company's existing distribution network without
substantial additional expense. The acquisition of the Leasing Company furthered
the Company's objective of being a "one-stop shop" for its customers by enabling
the Company to offer attractive financing options to support the sale of its
equipment.
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer........................... $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of
Old Notes. As of the date hereof, $85.0
million in aggregate principal amount of Old
Notes were outstanding. The Company will
issue the New Notes to Holders (as defined in
"Description of Senior Notes") on or promptly
after the Expiration Date.
Based on an interpretation by the staff of
the Commission set forth in no-action letters
issued to third parties, the Company
believes, based on the advice of its counsel,
that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may
be offered for resale, resold and otherwise
transferred by Holders thereof who are not
affiliates of the Company without compliance
with the registration and prospectus delivery
provisions of the Securities Act; PROVIDED
that the Holder is acquiring New Notes in its
ordinary course of business and has no
arrangement or understanding with any person
to participate in any distribution (within
the meaning of the Securities Act) of the New
Notes. Persons
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
wishing to exchange Old Notes in the Exchange
Offer must represent to the Company that such
conditions have been met. However, any Holder
who is an affiliate of the Company or who
tenders in the Exchange Offer with the
intention to participate, or for the purpose
of participating, in a distribution of the
New Notes cannot rely on the interpretation
by the staff of the Commission set forth in
such no-action letters and must comply with
the registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. See
"The Exchange Offer--Purpose of the Exchange
Offer."
Each broker-dealer that receives New Notes
for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a
prospectus in connection with any resale of
such New Notes. The Letter of Transmittal
states that by so acknowledging and by
delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "under-
writer" within the meaning of the Securities
Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used
by a broker-dealer in connection with resales
of New Notes received in exchange for Old
Notes where such Old Notes were acquired by
such broker-dealer for its own account as a
result of market-making activities or other
trading activities (other than acquisitions
directly from the Company). The Company has
agreed that, for a period of 180 days after
the effective date of the Registration
Statement of which this Prospectus is part,
it will use its best efforts to make this
Prospectus available to any broker-dealer for
use in connection with any such resale. See
"Plan of Distribution."
Expiration Date.............................. 12:00 midnight, New York City time, on
, 1997, unless the Exchange Offer
is extended to the extent necessary to comply
with applicable federal and state securities
laws, in which case the term "Expiration
Date" means the latest date and time to which
the Exchange Offer is extended.
Accrued Amounts on the Senior Notes.......... The New Notes will bear interest from their
issuance date. Holders whose Old Notes are
accepted for exchange will receive, in cash,
accrued interest and Old Note Liquidated
Damages, if any, thereon to, but excluding,
the issuance date of the New Notes. Such
interest and Old Note Liquidated Damages, if
any, will be paid with the first interest
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
payment on the New Notes. Interest on the Old
Notes accepted for exchange will cease to
accrue upon the issuance of the New Notes
exchanged therefor. Holders of Old Notes
whose Old Notes are not exchanged will
receive the accrued interest and Old Note
Liquidated Damages, if any, payable on the
next interest payment on the Old Notes in
accordance with the terms of the Indenture.
Conditions to the Exchange Offer............. The Exchange Offer is subject to certain
customary conditions. The conditions are
limited and relate in general to laws or
Commission policies that might impair the
ability of the Company to proceed with the
Exchange Offer. As of the date of this
Prospectus, none of these events had
occurred, and the Company believes their
occurrence to be unlikely. If any such
conditions do exist prior to the Expiration
Date, the Company may (i) refuse to accept
any Old Notes and return all previously
tendered Old Notes, (ii) extend the Exchange
Offer, or (iii) waive such conditions. See
"The Exchange Offer-- Conditions."
Procedures for Tendering Old Notes........... Each Holder of Old Notes wishing to accept
the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
such Old Notes to be exchanged and any other
required documentation to IBJ Schroder Bank &
Trust Company, as Exchange Agent (the
"Exchange Agent"), at the address set forth
herein and therein or effect a tender of such
Old Notes pursuant to the procedures for
book-entry transfer as provided for herein.
By executing the Letter of Transmittal, each
holder will represent to the Company that,
among other things, the New Notes acquired
pursuant to the Exchange Offer are being
obtained in the ordinary course of business
of the person receiving such New Notes,
whether or not such person is the Holder,
that neither the Holder nor any such other
person has an arrangement or understanding
with any person to participate in the
distribution of such New Notes and that
neither the Holder nor any such person is an
"affiliate," as defined in Rule 405 under the
Securities Act, of the Company. Each
broker-dealer that receives New Notes for its
own account in exchange for Old Notes, where
such Old Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
prospectus in connection with any resale of
such New Notes. See "The Exchange
Offer--Procedures for Tendering" and "Plan of
Distribution."
Special Procedures for Beneficial Owners..... Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender such Old
Notes in the Exchange Offer should contact
such registered Holder promptly and instruct
such registered holder to tender on such
beneficial owner's behalf. If such beneficial
owner wishes to tender on such owner's own
behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering its Old Notes, either make
appropriate arrangements to register
ownership of the Old Notes in such owner's
name or obtain a properly completed bond
power from the registered Holder. The trans-
fer of registered ownership may take
considerable time and it may not be possible
to complete a transfer initiated shortly
before the Expiration Date. See "The Exchange
Offer--Procedures for Tendering."
Guaranteed Delivery Procedures............... Holders of the Old Notes who wish to tender
their Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other document required by the Letter of
Transmittal to the Exchange Agent, or cannot
complete the procedure for book-entry
transfer prior to the Expiration Date must
tender their Old Notes according to the guar-
anteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Proce-
dures."
Withdrawal Rights............................ Tenders may be withdrawn at any time prior to
12:00 midnight, New York City time, on the
Expiration Date.
Acceptance of Old Notes and Delivery of New
Notes...................................... The Company will accept for exchange any and
all Old Notes which are properly tendered in
the Exchange Offer prior to 12:00 midnight,
New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange
Offer will be delivered promptly following
the Expiration Date. Any Old Notes not
accepted for exchange will be returned
without expense to the tendering Holder
thereof as promptly as practicable after the
expiration or termination of the Exchange
Offer. See "The Exchange Offer--Terms of the
Exchange Offer."
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Certain Tax Considerations................... The exchange pursuant to the Exchange Offer
should not be a taxable event for federal
income tax purposes. See "Certain Federal
Income Tax Considerations."
Exchange Agent............................... IBJ Schroder Bank & Trust Company is serving
as Exchange Agent in connection with the
Exchange Offer.
</TABLE>
TERMS OF NEW NOTES
The Exchange Offer applies to up to the entire $85,000,000 million aggregate
principal amount outstanding of the Old Notes. The New Notes will be obligations
of the Company evidencing the same debt as the Old Notes and will be entitled to
the benefits of the same Indenture. See "Description of Senior Notes." The form
and terms of the New Notes are the same as the form and terms of the Old Notes
in all material respects except that the New Notes have been registered under
the Securities Act and hence do not include certain rights to registration
thereunder and do not contain transfer restrictions. See "Description of Senior
Notes."
<TABLE>
<S> <C>
The New Notes................................ $85,000,000 principal amount of 12 1/4%
Series B Senior Notes due 2003.
Maturity Date................................ December 15, 2003.
Interest Rate and Payment Dates.............. The Senior Notes will bear interest at a rate
of 12 1/4% per annum. Interest on the Senior
Notes will accrue from the date of issuance
thereof and will be payable semi-annually in
cash in arrears on June 15 and December 15 of
each year, commencing June 15, 1997. For a
discussion summarizing certain U.S. federal
income tax consequences to Holders of the
Senior Notes, see "Certain Federal Income Tax
Consequences--U.S. Holders--Original Issue
Discount."
Optional Redemption.......................... The Senior Notes will be redeemable at the
option of the Company, in whole or in part,
at any time on or after December 15, 2001, at
the redemption prices set forth herein,
together with accrued and unpaid interest and
Old Note Liquidated Damages, if any, to the
date of redemption. In the event the Company
consummates a Public Equity Offering (as
defined herein) on or prior to December 15,
1999, the Company may at its option use all
or a portion of the proceeds from such
offering to redeem up to 30% of the
originally issued principal amount of the
Senior Notes at a redemption price equal to
112 1/4% of the aggregate principal amount
thereof, together with accrued and unpaid
interest and Old Note Liquidated Damages, if
any, to the date of redemption, PROVIDED that
at least $59.5 million of the originally
issued principal amount of Senior Notes
remains outstanding immediately
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
after such redemption and that such
redemption occurs within 60 days following
the closing of such Public Equity Offering.
See "Description of Senior
Notes--Redemption."
Ranking...................................... The Senior Notes will be senior unsecured
obligations of the Company (except for the
security interest in 65% of the shares of a
non-U.S. subsidiary) and will rank PARI PASSU
in right of payment with existing and future
unsecured and unsubordinated Indebtedness (as
defined herein) of the Company and senior to
all Subordinated Indebtedness (as defined
herein) of the Company. At December 31, 1996,
on a pro forma basis assuming that the sale
of the Old Notes, the application of the net
proceeds therefrom and the Macpherson
Acquisition occurred on such date, the
Company would have had no unsecured
indebtedness outstanding other than the
Senior Notes. The Senior Notes, however, will
be effectively subordinated to secured
Indebtedness of the Company and the
Subsidiary Guarantors (as defined below) with
respect to the assets securing such
Indebtedness. Because the Company is a
holding company, the Senior Notes are effec-
tively subordinated to all existing and
future liabilities of its subsidiaries that
are not Subsidiary Guarantors. At December
31, 1996, on a pro forma basis assuming that
the sale of the Old Notes, the application of
the net proceeds therefrom and the Mac-
pherson Acquisition occurred on such date,
the Company and the Subsidiary Guarantors
would have had $1.3 million of secured
Indebtedness outstanding. Subject to certain
limitations, the Indenture will permit the
Company and its Restricted Subsidiaries (as
defined herein) to incur additional secured
and unsecured Indebtedness. See "Man-
agement's Discussion and Analysis of
Financial Condition and Results of
Operations--The Company" and "Description of
Senior Notes--Ranking" and "--Certain
Covenants--Limitation on Indebtedness and
Disqualified Capital Stock."
Subsidiary Guarantees........................ The Senior Notes will be unconditionally
guaranteed on a senior unsecured basis by all
of the Company's U.S. subsidiaries existing
as of the date of the Indenture (and any
other Subsidiary of the Company that executes
a Subsidiary Guarantee in accordance with the
provisions of the Indenture) (the "Subsidiary
Guarantors"). The Subsidiary Guarantees will
be unconditional joint and several obliga-
tions of each Subsidiary Guarantor, ranking
PARI PASSU in right of payment with all other
unsecured
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
and unsubordinated Indebtedness of such
Subsidiary Guarantor. See "Description of
Senior Notes-- Subsidiary Guarantees and
Other Security."
Other Security............................... The Senior Notes will be secured by a pledge
of 65% of the capital stock of W&G, Ltd., a
wholly owned Restricted Subsidiary of the
Company organized under the laws of the
United Kingdom. See "Description of Senior
Notes--Subsidiary Guarantees and Other
Security."
Change of Control............................ Upon the occurrence of a Change of Control,
each holder of Senior Notes will have the
right to require the Company to purchase all
or a portion of such holder's Senior Notes at
a price equal to 101% of the aggregate
principal amount thereof, together with
accrued and unpaid interest and Old Note
Liquidated Damages, if any, to the date of
purchase. See "Description of Senior
Notes--Certain Covenants--Change of Control."
Original Issue Discount...................... The Old Notes were issued with original issue
discount for federal income tax purposes.
Consequently, original issue discount will be
includible by a Holder of New Notes as
interest income annually in such Holder's
gross income for federal income tax purposes
in advance of receipt of the cash payments to
which the income is attributable. See
"Certain Federal Income Tax Consequences" and
"Risk Factors--Original Issue Discount."
Certain Covenants............................ The Indenture relating to the Senior Notes
contains certain covenants, including
covenants which limit: (i) indebtedness; (ii)
issuance of preferred stock of subsidiaries;
(iii) restricted payments; (iv) issuances and
sales of capital stock of restricted
subsidiaries; (v) sale/leaseback
transactions; (vi) transactions with
affiliates; (vii) liens; (viii) asset sales;
(ix) dividend and other payment restrictions
affecting restricted subsidiaries; (x)
conduct of business; and (xi) mergers,
consolidations and sales of assets. See
"Description of Senior Notes--Certain
Covenants" and "--Merger, Consolidation and
Sale of Assets."
Exchange Rights.............................. Holders of New Notes are not entitled to any
exchange rights with respect to the New
Notes. Holders of Old Notes are entitled to
certain exchange rights pursuant to the
Registration Rights Agreement. Under the
Registration Rights Agreement, the Company is
required to offer to exchange the Old Notes
for new notes having substantially identical
terms which have been registered under the
Securities Act. This Exchange Offer is
intended
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
to satisfy such obligation. Once the Exchange
Offer is consummated, the Company will have
no further obligations to register any of the
Old Notes not tendered by the Holders for
exchange, except pursuant to a shelf
registration statement to be filed under
certain limited circumstances specified in
"The Exchange Offer--Purpose of the Exchange
Offer." See "Risk Factors--Consequences to
Non-Tendering Holders of Old Notes."
Use of Proceeds.............................. The Company will not receive any proceeds
from the Exchange Offer.
</TABLE>
RISK FACTORS
Prospective investors should consider carefully all of the information set
forth in this Prospectus and, in particular, the information set forth under
"Risk Factors" before making an investment in the Senior Notes or making a
decision to participate in the Exchange Offer.
16
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma statement of operations data, other
operating data and selected ratios for the year ended December 31, 1996 give
effect to the Clinton Acquisition, the Mitchell Acquisition, the Macpherson
Acquisition, the acquisition of the Leasing Company, the sale of the Old Notes
and the application of the net proceeds therefrom (collectively, the
"Transactions") as if each had occurred at the beginning of the period
presented, except that Clinton's results of operations for the period after
February 1, 1996 (the effective date of the Clinton Acquisition) are included in
Willcox & Gibbs' results of operations for such period and except that
Mitchell's results of operations for the period after November 27, 1996 (the
effective date of the Mitchell Acquisition) are included in Willcox & Gibbs'
results of operations for such period. The following unaudited pro forma balance
sheet data as of December 31, 1996 give effect to the Transactions (excluding
the Clinton Acquisition, which was effective as of February 1, 1996 and the
Mitchell Acquisition, which was effective as of November 27, 1996) as if each
had occurred on December 31, 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MACPHERSON/
WILLCOX & CLINTON/ LEASING
GIBBS MITCHELL(C) COMPANY(D) ADJUSTMENTS PRO FORMA
---------- ----------- ------------ ----------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................... $ 113,851 $ 2,975 $ 67,767 $ -- $ 184,593
Cost of goods sold...................................... 77,623 1,888 50,221 (1,599) 128,133
---------- ----------- ------------ ----------- -----------
Gross profit.......................................... 36,228 1,087 17,546 1,599 56,460
Selling, general and administrative expenses............ 28,969 758 13,542 (629) 42,640
---------- ----------- ------------ ----------- -----------
Operating income...................................... 7,259 329 4,004 2,228 13,820
Interest expense........................................ 4,824 21 781 5,864 11,490
Other income (expense).................................. 15 (14) (1,161) 839 (321)
---------- ----------- ------------ ----------- -----------
Income before income taxes.............................. 2,450 294 2,062 (2,797) 2,009
Income taxes............................................ 1,137 -- 54 (222) 969
---------- ----------- ------------ ----------- -----------
Net income from continuing operations................. $ 1,313 $ 294 $ 2,008 $ (2,575) $ 1,040
---------- ----------- ------------ ----------- -----------
---------- ----------- ------------ ----------- -----------
OTHER OPERATING DATA:
EBITDA(a)............................................... $ 8,635 $ 340 $ 3,161 $ 3,574 $ 15,710
Depreciation and amortization........................... 1,361 25 318 507 2,211
Capital expenditures.................................... 1,247 10 282 -- 1,539
SELECTED RATIOS:
EBITDA/cash interest expense............................ -- -- -- -- 1.47x
EBITDA less capital expenditures/cash interest
expense............................................... -- -- -- -- 1.33x
Total debt/ EBITDA...................................... -- -- -- -- 5.50x
Ratio of earnings to fixed charges(b)................... -- -- -- -- 1.17x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------------------------------
<S> <C> <C> <C> <C>
MACPHERSON/
WILLCOX & LEASING
GIBBS COMPANY ADJUSTMENTS PRO FORMA
----------- ------------ ----------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................... $ 18,653 $ 8,385 $ 29,799 $ 56,837
Total assets.................................................. 79,728 36,809 17,306 133,843
Total debt.................................................... 41,435 6,710 38,335 86,481
Equity........................................................ 15,677 9,318 (13,785) 11,210
</TABLE>
See Notes to Summary Pro Forma Financial Information.
17
<PAGE>
NOTES TO SUMMARY PRO FORMA FINANCIAL INFORMATION
(a) EBITDA represents income before income taxes plus interest expense,
depreciation and amortization for the applicable company and, in the case of
Willcox & Gibbs, certain other noncash charges included in cost of goods
sold relating to the amortization of the step-up in basis of the inventory
purchased in the Management Buyout. EBITDA should not be considered as an
alternative measure of net income or cash provided by operating activities
(both as determined in accordance with generally accepted accounting
principles), but is presented to provide additional information relating to
the Company's debt service capability. EBITDA should not be considered in
isolation or as a substitute for other measures of financial performance or
liquidity.
(b) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, earnings include pre-tax income from
continuing operations plus fixed charges. Fixed charges include interest,
whether expensed or capitalized, amortization of debt expense and a portion
of rental expense which is representative of the interest factor in these
rentals.
(c) Clinton's results of operations for the period after February 1, 1996 (the
effective date of the Clinton Acquisition) are included in Willcox & Gibbs'
results of operations for the period presented. Mitchell's results of
operations for the period after November 27, 1996 (the effective date of the
Mitchell Acquisition) are included in Willcox & Gibbs' results of operations
for the period presented.
(d) Excludes net sales of $2.9 million, operating loss of $0.5 million and net
loss of $0.5 million attributable to Macpherson's engraving equipment
distribution business, which the Company discontinued upon consummation of
the Macpherson Acquisition.
SUMMARY HISTORICAL FINANCIAL INFORMATION
WILLCOX & GIBBS
The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" as of December 31, 1994, 1995 and 1996
and for the years ended December 31, 1995 and 1996 and the period from July 13,
1994 to December 31, 1994, are derived from the consolidated financial
statements of the Company, which financial statements have been audited by KPMG
Peat Marwick LLP, independent certified public accountants. The selected data
presented below under the caption "Statement of Operations Data" for the period
from January 1, 1994 to July 12, 1994, are derived from the consolidated
statement of operations of the Company's Predecessor, which financial statement
has been audited by KPMG Peat Marwick LLP. The "Statement of Operations Data"
for the years ended December 31, 1992 and 1993 are unaudited. The financial
statements of the Company's Predecessor for the years ended December 31, 1992
and 1993 and for the period from January 1, 1994 to July 12, 1994 have been
prepared as if the apparel operations had been operated as a separate entity
during those periods. However, such financial statements do not reflect a
complete allocation of all expenses applicable to the operation of an
independent company. Certain expenses were allocated to the apparel operations
by the Company's Predecessor based on actual usage or other allocation methods
that approximate actual usage. The consolidated financial statements of the
Company as of December 31, 1995 and 1996, and for the years ended December 31,
1995 and 1996 and the period from July 13, 1994 to December 31, 1994 and of the
Company's Predecessor for the period from January 1, 1994 to July 12, 1994, and
the report thereon, are included elsewhere in this prospectus. The selected
consolidated financial information set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and
18
<PAGE>
Results of Operations--The Company" and the Consolidated Financial Statements
and Notes thereto of the Company and the Company's Predecessor included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
COMPANY'S PREDECESSOR COMPANY
------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED
DECEMBER 31, JANUARY 1, 1994
-------------------- TO JULY 12, JULY 13, 1994 TO YEAR ENDED YEAR ENDED
1992 1993 1994 DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996
--------- --------- --------------- ------------------- ------------------- -----------------
<CAPTION>
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................... $ 76,048 $ 77,574 $ 41,309 $ 41,644 $ 90,431 $ 113,851
Cost of goods sold........... 47,821 49,228 26,909 29,162 60,642 77,623
--------- --------- ------- ------- ------- --------
Gross profit................. 28,227 28,346 14,400 12,482 29,789 36,228
Selling, general and
administrative expenses.... 20,814 21,315 11,997 11,264 23,606 28,969
--------- --------- ------- ------- ------- --------
Income from operations..... 7,413 7,031 2,403 1,218 6,183 7,259
Interest expense............. 1,993 2,307 1,390 1,946 4,249 4,824
Other (income) expense....... (55) 145 224 (86) (18) (15)
--------- --------- ------- ------- ------- --------
Income (loss) before income
taxes and extraordinary
item..................... 5,475 4,579 789 (642) 1,952 2,450
Income tax expense
(benefit).................. 272 146 426 (288) 558 1,137
--------- --------- ------- ------- ------- --------
Income (loss) before
extraordinary item....... 5,203 4,433 363 (354) 1,394 1,313
Extraordinary item, net...... -- -- -- -- (152) --
--------- --------- ------- ------- ------- --------
Net income (loss)............ $ 5,203 $ 4,433 $ 363 $ (354) $ 1,242 $ 1,313
--------- --------- ------- ------- ------- --------
--------- --------- ------- ------- ------- --------
OTHER OPERATING DATA:
EBITDA (a)................... $ 8,123 $ 7,744 $ 2,580 $ 4,370 $ 8,062 $ 8,635
Depreciation and
amortization............... 655 858 401 3,066 1,861 1,361
Capital expenditures......... 381 712 346 272 771 1,247
Ratio of earnings to fixed
charges (b)................ 3.47x 2.80x 1.52x 0.70x 1.42x 1.46x
BALANCE SHEET DATA (AT PERIOD
END):
Working capital.............. $ 24,563 $ 21,924 $ 18,653
Total assets................. 51,717 52,528 79,728
Total debt................... 32,224 31,109 41,435
Equity....................... 5,967 7,892 15,677
</TABLE>
(FOOTNOTES TO THE SUMMARY HISTORICAL FINANCIAL INFORMATION ON FOLLOWING PAGE.)
19
<PAGE>
MACPHERSON
The following table sets forth selected consolidated financial information
of Macpherson as of December 31, 1994, 1995 and 1996 and for the years then
ended. Such information was derived from the Consolidated Financial Statements
of Macpherson, which have been audited by Arthur Andersen LLP and are included
elsewhere in this Prospectus. The selected consolidated financial information
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Macpherson" and the
Consolidated Financial Statements and Notes thereto of Macpherson included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................................ $ 68,861 $ 71,667 $ 70,058
Cost of goods sold............................................................... 52,216 53,769 52,610
--------- --------- ---------
Gross profit................................................................... 16,645 17,898 17,448
Operating expenses............................................................... 13,566 13,587 14,211
--------- --------- ---------
Operating income............................................................... 3,079 4,311 3,237
Interest expense................................................................. 390 218 781
Other expense.................................................................... 643 768 1,162
--------- --------- ---------
Income before taxes............................................................ 2,046 3,325 1,294
Income taxes..................................................................... 54 76 54
--------- --------- ---------
Net income..................................................................... $ 1,992 $ 3,249 $ 1,240
--------- --------- ---------
--------- --------- ---------
OTHER OPERATING DATA:
EBITDA (a)....................................................................... $ 2,650 $ 3,715 $ 2,393
Depreciation and amortization.................................................... 214 172 318
Capital expenditures............................................................. 171 178 282
Ratio of earnings to fixed charges (b)........................................... 4.46x 9.37x 2.36x
BALANCE SHEET DATA (AT PERIOD END):
Working capital.................................................................. $ 9,721 $ 10,925 $ 9,965
Total assets..................................................................... 31,458 44,403 38,864
Total debt....................................................................... 2,820 4,947 6,710
Equity........................................................................... 9,794 11,375 10,963
</TABLE>
- ------------------------
(a) EBITDA represents income before income taxes plus interest expense,
depreciation and amortization for the applicable company and, in the case of
Willcox & Gibbs, certain other noncash charges included in cost of goods
sold relating to the amortization of the step-up in basis of the inventory
purchased in the Management Buyout. EBITDA should not be considered as an
alternative measure of net income or cash provided by operating activities
(both as determined in accordance with generally accepted accounting
principles), but is presented to provide additional information relating to
the Company's debt service capability. EBITDA should not be considered in
isolation or as a substitute for other measures of financial performance or
liquidity.
(b) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, earnings include pre-tax income from
continuing operations plus fixed charges. Fixed charges include interest,
whether expensed or capitalized, amortization of debt expense and a portion
of rental expense which is representative of the interest factor in these
rentals.
20
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE SPECIFIC RISK FACTORS
SET FORTH BELOW AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS
BEFORE DECIDING TO INVEST IN THE SENIOR NOTES OR PARTICIPATE IN THE EXCHANGE
OFFER.
RANKING OF THE SENIOR NOTES AND SUBSIDIARY GUARANTEES; OTHER SECURITY
The Senior Notes and each Subsidiary Guarantee are senior unsecured
obligations of the Company and the applicable Subsidiary Guarantor,
respectively, and rank PARI PASSU in right of payment with all other existing
and future unsecured and unsubordinated Indebtedness of the Company and the
applicable Subsidiary Guarantor, respectively. At December 31, 1996, on a pro
forma basis assuming that the sale of the Old Notes, the application of the net
proceeds therefrom and the Macpherson Acquisition occurred on such date, the
Company and the Subsidiary Guarantors would have had no unsecured indebtedness
outstanding other than the Senior Notes. The Senior Notes and the Subsidiary
Guarantees are effectively subordinated to secured Indebtedness of the Company
and the Subsidiary Guarantors, respectively, with respect to the assets securing
such Indebtedness. The Indebtedness of the Company under its $18.5 million
working capital facility with NationsBank, N.A. (the "New Credit Facility") is
secured by accounts receivable of the Company, and W&G, Ltd.'s L1.0 million term
loan facility (the "W&G, Ltd. Credit Facility") is secured by substantially all
of the assets of such United Kingdom subsidiary. At December 31, 1996, on a pro
forma basis assuming that the sale of the Old Notes, the application of the net
proceeds therefrom and the Macpherson Acquisition occurred on such date, the
Company and the Subsidiary Guarantors would have had $1.3 million of secured
Indebtedness outstanding. Although the Indenture contains limitations on the
amount of additional Indebtedness that the Company and its Restricted
Subsidiaries (including certain of the Subsidiary Guarantors) can incur, under
certain circumstances the amount of such Indebtedness could be substantial and
may be secured. See "Description of Senior Notes-- Certain Covenants--Limitation
on Indebtedness and Disqualified Capital Stock" and "--Limitation on Liens."
The Senior Notes are secured by a pledge of 65% of the capital stock of W&G,
Ltd., the Company's wholly owned United Kingdom subsidiary. The Senior Notes
effectively rank junior to any indebtedness, secured or unsecured, of W&G, Ltd.
At December 31, 1996, W&G, Ltd. had L1.0 million outstanding Indebtedness.
SUBSTANTIAL LEVERAGE
As a result of the sale of the Old Notes, the Company is highly leveraged
and has significant debt service requirements. At December 31, 1996, on a pro
forma basis assuming that the sale of the Old Notes, the application of the net
proceeds therefrom and the Macpherson Acquisition occurred on such date, the
total Indebtedness of the Company would have been $86.5 million. The degree to
which the Company is leveraged has important consequences to holders of the
Senior Notes, including the following: (i) the ability of the Company to obtain
additional financing in the future, whether for working capital, capital
expenditures, acquisitions or other purposes, may be impaired; (ii) a
substantial portion of the Company's cash flow from operations will be required
to be dedicated to the payment of principal and interest on its indebtedness,
thereby reducing funds available to the Company for other purposes; (iii) the
Company's flexibility in planning for or reacting to changes in market
conditions may be limited; (iv) the Company may be more vulnerable in the event
of a downturn in its business; and (v) to the extent that the Company incurs any
indebtedness under the New Credit Facility, the W&G, Ltd. Credit Facility or any
other Working Capital Agreements (as defined herein), which indebtedness will be
at variable rates, the Company will be vulnerable to increases in interest
rates.
Based on current operations, the Company expects that it will be able to
service the principal and interest obligations on its indebtedness as well as
its working capital needs and to fund its capital
21
<PAGE>
expenditures and other operating expenses out of cash flow from operations and
available borrowings under any Working Capital Agreements. However, there can be
no assurance that the Company's business will continue to generate cash flow at
levels sufficient to meet these requirements. If the Company is unable to
generate sufficient cash flow from operations in the future to service its debt
and capital expenditures, it may be required to sell assets, reduce capital
expenditures, refinance all or a portion of its existing debt (including the
Senior Notes) or obtain additional financings. There can be no assurance that
any such asset sales or refinancing would be possible or that any additional
financing would be on terms acceptable to the Company. The Company's ability to
meet its debt service obligations will be dependent upon its future performance
which, in turn, will be subject to future economic conditions and to financial,
business and other factors, many of which are beyond the Company's control.
The terms of the New Credit Facility, the Indenture and the other agreements
governing the Company's indebtedness impose operating and financing restrictions
on the Company and the Restricted Subsidiaries. Such restrictions affect, and in
many respects limit or prohibit, among other things, the ability of the Company
and its Restricted Subsidiaries to incur additional indebtedness, create liens,
sell assets or engage in mergers or acquisitions. These restrictions could limit
the ability of the Company to respond to market conditions or meet extraordinary
capital needs or otherwise could restrict corporate activities. There can be no
assurance that such restrictions will not adversely affect the Company's ability
to finance its future operations or capital needs or to engage in other business
activities which will be in the interest of the Company. See "Description of
Senior Notes--Certain Covenants" and "--Description of Certain Indebtedness."
HOLDING COMPANY STRUCTURE
Willcox & Gibbs is a holding company, the only assets of which are the stock
of its subsidiaries. All of the operations of Willcox & Gibbs are conducted
through its direct and indirect wholly owned subsidiaries. Accordingly, Willcox
& Gibbs' ability to service its indebtedness, including the Senior Notes, is
dependent upon earnings and cash flow of its subsidiaries and the payment of
funds by those subsidiaries to Willcox & Gibbs in the form of loans, dividends
or otherwise. In addition, the ability of Willcox & Gibbs' subsidiaries to pay
dividends, repay intercompany liabilities or makes other advances to Willcox &
Gibbs is subject to restrictions imposed by corporate law and certain United
States, state and foreign tax considerations. One of the Company's subsidiaries
is incorporated outside the United States.
MACPHERSON ACQUISITION
The Macpherson Acquisition was significantly larger than the Company's
previous acquisitions and represented a substantial increase in the scope of the
Company's business. Macpherson's net sales for 1996 were approximately $70.0
million, and the Company's net sales for 1996 were approximately $113.9 million.
In addition, the Macpherson Acquisition represents the addition of a significant
new product line. The success of the Macpherson Acquisition will depend upon,
among other things, the Company's ability to integrate Macpherson's operations
and to successfully expand into such new product line. There can be no assurance
that the Company can successfully integrate Macpherson, and any inability to do
so may have a material adverse effect on the Company's results of operations and
financial condition. In addition, the Company expects to realize certain
benefits as a result of the Macpherson Acquisition. Realization of such benefits
could be affected by a number of factors beyond the Company's control, such as
general economic conditions, increased operating costs, the response of
competitors or customers and regulatory developments. There can be no assurance
that the Company will achieve the expected benefits.
ACQUISITION RISKS
The Company intends to seek additional acquisition opportunities that will
allow it to increase its market penetration, product offerings and distribution
capabilities. There can be no assurance that the Company will be able to
successfully identify suitable acquisition candidates, complete acquisitions,
22
<PAGE>
integrate acquired operations into its existing operations or expand into new
markets. There can also be no assurance that future acquisitions will not have
an adverse effect upon the Company's operating results, particularly in the
fiscal quarters immediately following the completion of such acquisitions while
the operations of the acquired business are being integrated into the Company's
operations. Once integrated, acquired operations may not achieve levels of
revenues, profitability or productivity comparable with those achieved by the
Company's existing operations, or otherwise perform as expected. In addition,
the Company competes for acquisition and expansion opportunities with companies
that have substantially greater resources.
DEPENDENCE ON SUPPLIERS
The Company derives significant revenues and operating income from certain
lines of replacement parts and equipment distributed under its distribution
agreements with certain suppliers. For example, the Company (including the
Company's Predecessor) has been the exclusive distributor of genuine replacement
parts in the United States for Pfaff, a German sewing equipment manufacturer,
since 1958 and for Pegasus, a Japanese sewing equipment manufacturer, since
1966. In 1996, approximately 5.7% of the Company's total purchases were from
Pfaff and approximately 7.1% from Pegasus (3.5% and 4.4% respectively, on a pro
forma basis assuming the Clinton Acquisition, the Mitchell Acquisition and the
Macpherson Acquisition were consummated on January 1, 1996). In order to
maintain the exclusivity of the Pfaff and Pegasus distribution agreements, the
Company must meet certain performance targets. Historically, the Company has
generally satisfied these requirements, although in certain prior years they
were not satisfied and Pfaff and Pegasus waived such shortfalls.
The Company is the exclusive distributor in certain territories
(non-exclusive in certain other areas) of apparel screen printing equipment
manufactured by M&R, which is a major manufacturer of such equipment in the
United States. The Company's distribution agreements with M&R may be terminated
at the end of any year on not less than 120 days notice. Purchases from M&R
represented 15.7% of the Company's total purchases in 1996 (10.4% of the
Company's total purchases in 1996 on a pro forma basis assuming the Clinton
Acquisition, the Mitchell Acquisition and the Macpherson Acquisition were
consummated on January 1, 1996).
As a result of the Macpherson Acquisition, the Company is the exclusive
distributor in the United States and Canada of embroidery equipment manufactured
by Barudan Company, Ltd. ("Barudan"), which is one of the leading manufacturers
of such equipment in the United States and Canada. The Company's distribution
agreement with Barudan expires in 2003, subject to automatic renewal for a five
year period, unless either party terminates such agreement on not less than 30
days notice. Macpherson's purchases from Barudan represented 78.0% of its total
purchases in 1996 (29.1% of the Company's total purchases in 1996 on a pro forma
basis assuming the Clinton Acquisition, the Mitchell Acquisition and the
Macpherson Acquisition were consummated on January 1, 1996).
The Company's distribution agreements, both exclusive and non-exclusive, and
other supply arrangements with manufacturers are important to enable the Company
to obtain products sought by the Company's customers and to maintain the
Company's broad product selection. Substantially all of such distribution
agreements and other arrangements may be terminated by the supplier for any
reason, although most exclusive distribution agreements require advance written
notice. No assurance can be given that any of the Company's distribution
agreements will be extended beyond their current term or that the Company will
continue to be the distributor for any particular product.
INTERNATIONAL OPERATIONS; IMPACT OF NAFTA
In 1995 and 1996, approximately 25.9% and 34.2%, respectively, of the
Company's revenues were derived from international operations and export sales,
which are subject in varying degrees to risks inherent in doing business abroad.
Such risks include the possibility of unfavorable circumstances arising
23
<PAGE>
from host country laws or regulations. In addition, foreign operations include
risks of partial or total expropriation; currency exchange rate fluctuations and
restrictions on currency repatriation; the disruption of operations from labor
and political disturbances, insurrection or war; and the requirements of partial
local ownership of operations in certain countries.
Any change in the value of the currencies of the foreign countries in which
the Company does business against the U.S. dollar will result in corresponding
changes in the price and affordability of the Company's products, which could
have a material adverse impact on the Company's business, financial condition
and results of operations. The Company purchases a substantial amount of its
inventories with foreign currencies, and Macpherson purchases a substantial
majority of its products with Japanese yen. Most of the Company's and
Macpherson's net sales are in U.S. dollars. Although the Company enters into
forward exchange contracts to hedge against foreign currency exchange risks,
there can be no assurance that the Company will not experience foreign currency
losses. See Note 1(h) of the Notes to Consolidated Financial Statements of the
Company. In addition, the economies of certain of the Company's target Latin
American markets have experienced significant and in some periods extremely high
rates of inflation over the past few years. Inflation and rapid fluctuation in
inflation rates have had and may continue to have negative effects on these
economies and could have a material adverse impact on the Company's business,
financial condition and results of operations.
NAFTA, implemented on January 1, 1994, removes barriers to free trade among
Canada, the United States and Mexico. The removal of barriers will take place
over a 10 year period between Mexico and the United States and over five years
between Canada and the United States. There can be no assurance that NAFTA will
not result in an increase in apparel imports from Mexico that compete against
products manufactured by the Company's customers in the United States, thereby
adversely affecting the Company's sales in the United States. Historically, a
majority of the Company's net sales has been to customers in the United States.
No assurance can be given that the Company will be able to increase sales
outside of the United States in the event of a decline in sales to customers in
the United States.
COMPETITION
The markets in which the Company competes are subject to intense
competition. In addition, certain of the Company's competitors have greater
financial resources than the Company and are less leveraged than the Company.
DEPENDENCE ON EXISTING MANAGEMENT
The depth of experience in the business represented by the Company's
executive management team, including John K. Ziegler, Chairman and Chief
Executive Officer, Maxwell L. Tripp, President and Chief Operating Officer, and
the managers of the Company's operating divisions and subsidiaries, is a key
component of the Company's competitiveness. Although the Company has entered
into employment contracts with Mr. Ziegler, Mr. Tripp, Alan B. Lee, President of
Unity, Jack Klasky, President of Leadtec, Frank Scannavino, Chuck Nall and Marc
Glazer, managers of Clinton, and Jerry Lee, President of Macpherson, the
continued presence of such persons within the Company's management structure
cannot be assured. The loss of the services of any of the foregoing persons
could have a material adverse effect on the Company's business, financial
condition and results of operations.
CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase all of the outstanding Senior Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest to the date of repurchase. There can
be no assurance that the Company will have the financial resources necessary or
be permitted by its other debt agreements to repurchase the Senior Notes upon
the occurrence of a Change of Control. The inability to repurchase all of the
tendered Senior Notes would constitute an Event of Default
24
<PAGE>
(as defined herein) under the Indenture. See "Description of Senior
Notes--Certain Covenants--Change of Control."
LACK OF PUBLIC MARKET FOR THE SENIOR NOTES
There is no existing trading market for the Senior Notes, and there can be
no assurance regarding the future development of a market for the Senior Notes,
or the ability of holders of the Senior Notes to sell their Senior Notes, or the
price at which such holders may be able to sell their Senior Notes. If such a
market were to develop, the Senior Notes could trade at prices that may be
higher or lower than the initial offering price depending on many factors,
including prevailing interest rates, the Company's operating results and the
market for similar securities. The Initial Purchaser has advised the Company
that it currently intends to make a market in the New Notes. The Initial
Purchaser is not obligated to do so, however, and any market making with respect
to the New Notes may be discontinued at any time without notice. There can be no
assurance as to the liquidity of any trading market for the Senior Notes or that
an active trading market for the Senior Notes will develop. The Company does not
intend to apply for listing or quotation of the Senior Notes on any securities
exchange or stock market.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the Senior Notes will
not be subject to similar disruptions. Any such disruptions may have an adverse
effect on holders of the Senior Notes.
FRAUDULENT TRANSFER CONSIDERATIONS; UNENFORCEABILITY OF SUBSIDIARY GUARANTEES
The obligations of any Subsidiary Guarantor as a guarantor under the
Indenture may be subject to review under applicable fraudulent transfer or
similar laws, in the event of the bankruptcy or other financial difficulty of
any such Subsidiary Guarantor. In the United States, under such laws, if a court
in a lawsuit by an unpaid creditor or representative of creditors of any such
Subsidiary Guarantor, such as a trustee in bankruptcy or any such person as
debtor in possession, were to find that at the time such Subsidiary Guarantor
incurred its obligations under its guarantee, it (i) received less than fair
consideration or reasonably equivalent value therefor, and (ii) either (a) was
insolvent, (b) was rendered insolvent, (c) was engaged in a business or
transaction for which its remaining unencumbered assets constituted unreasonably
small capital, or (d) intended to incur or believed that it would incur debts
beyond its ability to pay as such debts matured, such court could void all or a
portion of such obligations under its guarantee and direct the return of any
amounts paid with respect thereof. Moreover, regardless of the factors
identified in the foregoing clauses (i) and (ii), a court could take such action
if it found that the guarantee was entered into with actual intent to hinder,
delay or defraud creditors. The measure of insolvency for purposes of the
foregoing will vary depending on the law of the jurisdiction being applied.
Generally, however, an entity would be considered insolvent if the sum of its
debts (including contingent or unliquidated debts) is greater than all of its
property at a fair valuation or if the present fair salable value of its assets
is less than the amount that would be required to pay its probable liability on
its existing debts as they become absolute and matured.
CONSEQUENCES TO NON-TENDERING HOLDERS OF OLD NOTES
Upon consummation of the Exchange Offer, the Company will have no further
obligation to register the Senior Notes except pursuant to a shelf registration
statement to be filed under certain limited circumstance specified in "The
Exchange Offer--Purpose of the Exchange Offer." Thereafter, subject to such
exception, any Holder of Old Notes who does not tender its Old Notes in the
Exchange offer will continue to hold restricted securities which may not be
offered, sold or otherwise transferred, pledged or hypothecated except pursuant
to Rule 144 and Rule 144A under the Securities Act or pursuant to any other
exemption from registration under the Securities Act relating to the disposition
of securities, in which case, an opinion of counsel must be furnished to the
Company that such an exemption is available.
25
<PAGE>
ORIGINAL ISSUE DISCOUNT
The Old Notes were issued with original issue discount. Consequently,
Holders of the New Notes generally will be required to include amounts in gross
income for federal income tax purposes in advance of receipt of the cash
payments to which the income is attributable. If a bankruptcy petition is filed
by or against the Company under the United States Bankruptcy Code, the claim of
a Holder of Senior Notes with respect to the principal amount thereof may be
limited to an amount equal to the sum of: (i) the initial offering price for the
Senior Notes; and (ii) that portion of the original issue discount that is not
deemed to constitute "unmatured interest" within the meaning of the United
States Bankruptcy Code. Any original issue discount that was not amortized as of
any such bankruptcy filing would constitute "unmatured interest."
USE OF PROCEEDS
THE EXCHANGE OFFER
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the New Notes offered in the
Exchange Offer. In consideration for issuing the New Notes as contemplated in
this Prospectus, the Company will receive in exchange Old Notes in like
principal amount, the form and terms of which are the same in all material
respects as the form and terms of the New Notes except that the New Notes have
been registered under the Securities Act and hence do not include certain rights
to registration thereunder or contain transfer restrictions or terms with
respect to Old Note Liquidated Damages. The Old Notes surrendered in exchange
for the New Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the New Notes will not result in any proceeds to the
Company or increase in the indebtedness of the Company.
THE SALE OF THE OLD NOTES
The net proceeds from the sale of the Old Notes, after deducting the
discount to the Initial Purchaser, the discount to investors and estimated
expenses, were approximately $79.2 million. The Company used the net proceeds as
follows: (i) $24.0 million were used to fund the cash portion of the purchase
price of the Macpherson Acquisition; (ii) approximately $41.0 million were used
by the Company to repay indebtedness existing as of the date of the Macpherson
Acquisition (which included $8.5 million incurred in February 1996 to finance
the purchase price for the Clinton Acquisition and the repayment of indebtedness
of Clinton and $3.0 million incurred in November 1996 to finance the purchase
price for the Mitchell Acquisition); (iii) approximately $3.0 million were used
to redeem a portion of the warrants issued in connection with certain of such
indebtedness; (iv) approximately $6.1 million of debt assumed in the Macpherson
Acquisition; and (v) approximately $6.4 million were used to repay trade
payables of Macpherson. In addition, as a result of the consummation of the
Macpherson Acquisition, Macpherson was obligated to make payments aggregating
approximately $1.0 million pursuant to its phantom stock plan, and a company
owned by the principal shareholder of Macpherson agreed to pay Macpherson a
receivable aggregating approximately $0.1 million. Accordingly, an additional
$0.9 million was utilized to satisfy the phantom stock plan obligation.
At December 31, 1996, the indebtedness of the Company that was repaid
referred to above had a weighted average interest rate of 10.17% per annum. The
foregoing indebtedness of the Company that was repaid included borrowings under
the Financing and Security Agreement, dated as of February 1, 1996 (the "Old
Credit Facility"), between the Company and NationsBank, N.A. ("NationsBank"),
which permitted revolving borrowings by the Company through July 2001.
Borrowings under the Old Credit Facility bore interest at a rate per annum equal
to the one month commercial paper rate for dealer-placed commercial paper of
issuers whose corporate bonds are rated "AA" or its equivalent plus 4%, which
rate was 9.57% per annum as of December 31, 1996. For a description of the
interest rates and maturities of
26
<PAGE>
such other indebtedness that was repaid, see Note 5 of the Notes to the
Consolidated Financial Statements of the Company and Note 6 of the Notes to the
Consolidated Financial Statements of Macpherson.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on January 3, 1997 through the
Initial Purchaser to "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act) and institutional "accredited investors" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. In
connection with the sale of the Old Notes, the Company, the Subsidiary
Guarantors and the Initial Purchaser entered into the Registration Rights
Agreement pursuant to which the Company and the Subsidiary Guarantors agreed to
cause to be filed with the Commission within 180 days of January 3, 1997 (the
date of original issue of the Old Notes), and use their best efforts to cause to
become effective on or prior to 150 days after the date of such filing, a
registration statement with respect to the Exchange Offer. However, if (i)
because of any change in applicable law or policy thereof by the Commission, the
Company is not permitted to effect the Exchange Offer, (ii) the Exchange Offer
is not consummated within 180 days after the date of original issue of the Old
Notes, (iii) the Initial Purchaser so requests within six months after
consummation of the Exchange Offer with respect to the Old Notes not eligible to
be exchanged for Exchange Notes in the Exchange Offer and held by it following
consummation of the Exchange Offer or (iv) any Holder of Old Notes notified the
Company within 20 days of the consummation of the Exchange Offer that, for
certain specified reasons, such Holder is precluded from participating in the
Exchange Offer or, in the case of any Holder that participates in the Exchange
Offer, such Holder does not receive freely tradeable Exchange Notes on the date
of the exchange and such Holder notifies the Company within six months of such
date, the Company and the Subsidiary Guarantors shall (A) cause to become
effective a shelf registration statement (the "Shelf Registration Statement")
with respect to resales of the Old Notes, (B) keep the Shelf Registration
Statement effective until the earlier of (x) the time when the Senior Notes can
be sold pursuant to Rule 144(k) of the Securities Act, and (y) the date on which
all of the Senior Notes covered by the Shelf Registration Statement have been
sold pursuant thereto, and (C) during such period, upon request of any such
Holder of Old Notes, amend the Shelf Registration Statement to bring current the
information contained therein.
The Exchange Offer is being made by the Company to satisfy its obligations
pursuant to the Registration Rights Agreement. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. Once the Exchange offer is consummated, the Company
will have no further obligations to register any of the Old Notes not tendered
by the Holders for exchange, except pursuant to a Shelf Registration Statement
filed under the limited circumstances described in the immediately preceding
paragraph. Thereafter, any Holder of Old Notes who does not tender its Old Notes
in the Exchange Offer and which is not eligible to use such a Shelf Registration
Statement will continue to hold restricted securities which may not be offered,
sold or otherwise transferred, pledged or hypothecated except pursuant to Rule
144 and Rule 144A under the Securities Act or pursuant to any other exemption
from registration under the Securities Act relating to the disposition of
securities (in such case an opinion of counsel must be furnished to the Company
that such an exemption is available).
Based on an interpretation by the staff of the Commission set forth in
several no-action letters issued to third parties and on the advice of its
counsel, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by holders thereof who are not affiliates of the Company without
compliance with the registration and prospectus delivery provisions of the
Securities Act; PROVIDED that the Holder is acquiring New Notes in its ordinary
course of business and has no arrangement or understanding with any person to
participate in any distribution (within the meaning of the Securities Act) of
the New Notes. Persons wishing to exchange Old Notes in the Exchange Offer must
represent to the Company that such conditions have been met.
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However, any Holder who tenders in the Exchange Offer with the intention to
participate, or for the
purpose of participating, in a distribution of the New Notes cannot rely on the
interpretation by the staff of the Commission set forth in such no-action
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. In
addition, any such resale transaction should be covered by an effective
registration statement containing the selling security holders information
required by Item 507 of Regulation S-K of the Securities Act. Further, any
Holder who may be deemed an "affiliate" (as defined under Rule 405 of the
Securities Act) of the Company cannot rely on the interpretation by the staff of
the Commission set forth in such no-action letters with respect to resales of
the New Notes without compliance with the registration and prospectus delivery
requirements of the Securities Act.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Note. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that for a period of 90 days after the
effective date of the Registration Statement of which this Prospectus is a part,
it will use its best efforts to make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
Except as set forth above, this Prospectus may not be used for an offer to
resell, or for a resale or other transfer of New Notes.
TERMS OF THE EXCHANGE OFFER
GENERAL
Upon the terms and subject to the conditions of the Exchange Offer set forth
in this Prospectus and in the Letter of Transmittal, the Company will accept any
and all Old Notes validly tendered and not withdrawn prior to 12:00 midnight,
New York City time, on the Expiration Date. The Company will issue $1,000
principal amount of New Notes in exchange for each $1,000 principal amount of
outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or
all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000.
As of , 1997, there was $85.0 million aggregate principal amount of
the Old Notes outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders as of , 1997.
In connection with the issuance of the Old Notes, the Company arranged for
certain of the Old Notes to be issued and transferable in book-entry form
through the facilities of DTC, acting as depositary, and certain of the Old
Notes to be represented by a Certificated Security. The New Notes exchanged for
the Old Notes in book-entry form will also be issued and transferable in
book-entry form through DTC. See "Description of Senior Notes --Book-Entry
Delivery and Form." For a description of any New Notes exchanged for beneficial
interests represented by the Certificated Security, see "Description of Senior
Notes--Book-Entry, Delivery and Form."
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
of Old Notes for the purpose of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be
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returned, without expense, to the tendering Holder thereof as promptly as
practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay the expenses, other than
certain applicable taxes, of the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Company has the right to extend the Exchange Offer but only to the
extent necessary to comply with applicable federal and state securities laws or
if any action or proceeding is instituted or threatened in any court or by or
before any governmental agency with respect to the Exchange Offer which, in the
reasonable judgment of the Company, might impair the ability of the Company to
proceed with the Exchange Offer. In order to extend the Expiration Date, the
Company will notify the Exchange Agent and the record Holders of Old Notes of
any extension by oral or written notice, each prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration date.
The Company reserves the right to delay accepting any Old Notes, to extend
the Exchange Offer, to amend the Exchange Offer or to terminate the Exchange
Offer and not accept Old Notes not previously accepted if the applicable
condition set forth herein under "--Conditions" shall have occurred and shall
not have been waived by the Company by giving oral or written notice of such
delay, extension, amendment or termination to the Exchange Agent. Any such delay
in acceptance, extension, amendment or termination will be followed as promptly
as practicable by oral or written notice thereof. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment in a manner reasonably
calculated to inform the Holders of such amendment and the Company will extend
the Exchange Offer as necessary to provide to such holders a period of five to
ten business days after such amendment, depending upon the significance of the
amendment and the manner of disclosure to Holders of the Old Notes, if the
Exchange Offer would otherwise expire during such five to ten business day
period.
Without limiting the manner in which the Company may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,
the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
ACCRUED AMOUNTS ON THE SENIOR NOTES
The New Notes will bear interest at a rate equal to 12 1/4% per annum from
their date of issuance. Interest on the Senior Notes is payable semi-annually on
June 15 and December 15 of each year, commencing on June 15, 1997. Holders whose
Old Notes are accepted for exchange will receive, in cash, accrued interest and
Old Note Liquidated Damages, if any, thereon to, but excluding, the date of
issuance of the New Notes. Such interest will be paid with the first interest
payment on the New Notes. Interest and Old Note Liquidated Damages, if any, on
the Old Notes accepted for exchange will cease to accrue upon the issuance of
the New Notes exchanged therefor. Holders of Old Notes whose Old Notes are not
exchanged will receive the accrued interest and Old Note Liquidated Damages, if
any, payable on , 1997.
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PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a Holder of Old Notes must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the instructions to the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Old Notes and any other required documents, so that it is
received by the Exchange Agent prior to 12:00 midnight, New York City time, on
the Expiration Date.
Any financial institution that is a participant in the Company's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing the Company to transfer such Old Notes into the Exchange Agent's account
in accordance with the Company's procedure for such transfer. Although delivery
of Old Notes may be effected through book-entry transfer into the Exchange
Agent's account at the Company, the Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received or confirmed by the
Exchange Agent at its address set forth in "--Exchange Agent" below prior to
12:00 midnight, New York City time, on the Expiration Date. DELIVERY OF
DOCUMENTS TO THE COMPANY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
The tender by a Holder will constitute an agreement between such Holder and
the Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth below. Holders may also request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect the above transactions
for such Holders.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holders. Instead of delivery by mail, it is recommended that Holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company.
Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "Holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered Holder.
ANY BENEFICIAL HOLDER WHOSE OLD NOTES ARE REGISTERED IN THE NAME OF ITS
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE AND WHO WISHES
TO TENDER SHOULD CONTACT SUCH REGISTERED HOLDER PROMPTLY AND INSTRUCT SUCH
REGISTERED HOLDER TO CONSENT AND/OR TENDER ON ITS BEHALF. IF SUCH BENEFICIAL
HOLDER WISHES TO TENDER ON ITS OWN BEHALF, SUCH BENEFICIAL HOLDER MUST, PRIOR TO
COMPLETING AND EXECUTING THE LETTER OF TRANSMITTAL AND DELIVERING ITS OLD NOTES,
EITHER MAKE APPROPRIATE ARRANGEMENTS TO REGISTER OWNERSHIP OF THE OLD NOTES IN
SUCH HOLDER'S NAME OR OBTAIN A PROPERLY COMPLETED BOND POWER FROM THE REGISTERED
HOLDER. THE TRANSFER OF RECORD OWNERSHIP MAY TAKE CONSIDERABLE TIME.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered Holder
who has not completed the box entitled "Special Payment Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an institution which falls within
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the definition of "Eligible Guarantor Institution" contained in Regulation
17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by appropriate bond powers signed as the name of the registered
Holder or Holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Old Notes not property tendered or any Old Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine. None
of the Company, the Exchange Agent nor any other person shall be under any duty
to give notification of defects or irregularities with respect to tenders of Old
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders of Old Notes, unless otherwise provided in the
Letter of Transmittal, as soon as practicable following the Expiration Date.
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of such Holder's business, that such Holder has no
arrangement with any person to participate in the distribution of such New
Notes, and that such Holder is not an "affiliate" (as defined under Rule 405 of
the Securities Act) of the Company. If the Holder is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
such Holder by tendering will acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the Holder of the Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that, within five New York Stock Exchange trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing the Old Notes to be tendered in proper form for
transfer (or a confirmation of a book-entry transfer into the Exchange Agent's
account at the Company of
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Old Notes delivered electronically) and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Old Notes in
proper form for transfer (or confirmation of a book-entry transfer into the
Exchange Agent's account at DTC of Old Notes delivered electronically) and all
other documents required by the Letter of Transmittal are received by the
Exchange Agent within five New York Stock Exchange trading days after the
Expiration Date. Upon request of the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to Holders who wish to tender their Old Notes according to
the guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 12:00 midnight, New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 12:00 midnight, New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the principal amount of such
Old Notes), (iii) be signed by the Holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the trustee with respect to the Old Notes register
the transfer of such Old Notes into the name of the person withdrawing the
tender, and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered. Any
Old Notes which have been tendered but which are not accepted for payment will
be returned to the Holder thereof without cost to such Holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "--Procedures for Tendering" at any time prior
to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company may
terminate or amend the Exchange Offer as provided herein and will not be
required to accept for exchange, or exchange New Notes for, any Old Notes not
theretofore accepted for exchange, if any of the following conditions exist:
(a) the Exchange Offer, or the making of any exchange by a Holder,
violates applicable law or any applicable policy of the Commission; or
(b) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might impair the ability
of the Company to proceed with the Exchange Offer; or
(c) there shall have been adopted or enacted any law, statute, rule or
regulation which, in the reasonable judgment of the Company, might
materially impair the ability of the Company to proceed with the Exchange
Offer.
If any such conditions exist, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to exchanging Holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of Holders to
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<PAGE>
withdraw such Old Notes (see "--Withdrawal of Tenders") or (iii) waive certain
of such conditions with respect to the Exchange Offer and accept all properly
tendered Old Notes which have not been withdrawn or revoked. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver in a manner reasonably calculated to inform Holders of Old
Notes of such waiver.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, (i) if, because of any change in applicable law or applicable
policy thereof by the Commission the Company is not permitted to effect the
Exchange Offer, (ii) the Exchange Offer is not consummated within 180 days after
the date of original issue of the Old Notes, (iii) the Initial Purchaser so
requests within six months after consummation of the Exchange Offer with respect
to the Old Notes not eligible to be exchanged for Exchange Notes in the Exchange
Offer and held by it following consummation of the Exchange Offer or (iv) any
Holder of Old Notes notified the Company within 20 days of the consummation of
the Exchange Offer that, for certain specified reasons, such Holder is precluded
from participating in the Exchange Offer or, in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive freely
tradeable Exchange Notes on the date of the exchange and such Holder notifies
the Company within six months of such date, then the Company shall file a Shelf
Registration Statement. Thereafter, the Company's obligation to consummate the
Exchange Offer shall be terminated.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
By registered or certified mail:
IBJ Schroder Bank & Trust Company
Bowling Green Station
P.O. Box 84
New York, New York 10274-0084
Attention: Reorganization Operations Department
By hand or by overnight courier:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Securities Processing Window
Subcellar one, (SC-1)
By facsimile: (212) 858-2611
Attention: Customer Service
Confirm by telephone: (212) 858-2103
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FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of the Prospectus and related documents to the beneficial owners of the
Old Notes, and in handling or forwarding tenders for exchange.
The cash expenses incurred in connection with the sale of the Old Notes and
to be incurred in connection with the Exchange Offer will be paid by the
Company, are estimated in the aggregate not to exceed $1.3 million, and include
fees and expenses of the Exchange Agent and Trustee under the Indenture and
accounting and legal fees.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered Holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
that is, face value less unamortized original issue discount as reflected in the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized upon the consummation of the
Exchange Offer. The issuance costs incurred in connection with the Exchange
Offer will be capitalized and amortized over the term of the New Notes.
A copy of the Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
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THE COMPANY
The Company is a leading distributor of replacement parts, supplies and
specialized equipment to the apparel and other sewn products industry. It is a
Delaware corporation with its principal executive offices located at 900 Milik
Street, Carteret, New Jersey 07008 (telephone: (908) 541-6255).
COMPANY HISTORY
Willcox & Gibbs is a holding company which was organized on May 13, 1994
under the name "WG, Inc." by an investor group, which included members of the
Company's current management, to acquire the Distribution Business from the
Company's Predecessor. The Company's Predecessor was incorporated in 1866 as a
manufacturer of sewing equipment. In the late 1960s, as sewing equipment
manufacturing migrated overseas, the Company's Predecessor shifted its business
into the distribution of replacement parts and supplies for the apparel and
other sewn products industry. Parts and supply distribution remained the primary
focus of the Company's Predecessor until 1984, when it expanded into the
distribution of electrical parts. Due to the large and fragmented nature of U.S.
electrical parts distribution, this segment grew rapidly and, by 1993,
represented approximately 85.0% of the net sales of the Company's Predecessor.
In 1994, the Board of Directors of the Company's Predecessor decided to focus on
electrical parts distribution and divest its other businesses.
On July 13, 1994, the Company, through its wholly owned subsidiary, WG
Apparel, Inc. ("WG Apparel"), acquired the assets of Sunbrand and Unity, as well
as the stock of Leadtec and W&G, Ltd., and certain other assets in exchange for
$41.0 million in cash, $3.0 million principal amount of subordinated debt and a
warrant to purchase 122,970 shares of common stock of the Company. The cash
portion of such purchase price was funded through approximately $36.2 million of
borrowings and $4.8 million from the sale of common stock of the Company. On
July 26, 1995, the Company repurchased from the Company's Predecessor such
subordinated debt and warrants, together with certain other assets (including
the name "Willcox & Gibbs, Inc."), for approximately $4.1 million in cash.
Effective January 1, 1996, the Company changed its name to Willcox & Gibbs, Inc.
THE CLINTON ACQUISITION
Effective as of February 1, 1996, the Company acquired all of the
outstanding capital stock of Clinton, a leading distributor of screen printing
equipment and supplies for the apparel industry. See "Business-- Clinton." The
purchase price for Clinton consisted of $4.0 million in cash, 100,000 shares of
the Company's common stock, the assumption of $4.5 million of indebtedness and
payables, which was subsequently repaid, and contingent payments of up to 38.9%
of the operating income of Clinton during each of the five years ending December
31, 2000. Such contingent payments may not exceed $10.5 million in the aggregate
over such five year period. In addition, the former shareholders of Clinton have
the right to require WG Apparel to purchase their shares of Company common stock
at a purchase price of $30 per share on the earliest of (i) the day after the
Senior Notes have become due by occurrence of the scheduled maturity date or
sooner acceleration, (ii) the fourth anniversary of the closing date of the
Clinton Acquisition, (iii) the occurrence of an initial public offering of
equity securities by the Company and (iv) a change of control of the Company,
PROVIDED that in the case of clauses (ii) and (iii) such purchase is then
permitted under the Indenture and the New Credit Facility. The Company's
obligation to make contingent payments and to perform the put right is an
unsecured obligation of the Company.
THE MITCHELL ACQUISITION
Effective November 27, 1996, the Company acquired certain assets of Mitchell
for $3.0 million in cash. The acquired assets relate to the manufacture and sale
of abrasive cords and tapes used principally in the apparel industry.
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THE MACPHERSON ACQUISITION
On January 3, 1997, the Company acquired all of the outstanding capital
stock of Macpherson for a cash purchase price of $24.0 million. In connection
with the Macpherson Acquisition, the Company assumed (and repaid immediately
using a portion of the net proceeds from the sale of the Old Notes)
approximately $6.1 million of indebtedness of Macpherson and approximately $6.4
million of trade payables of Macpherson. Macpherson is principally engaged in
the distribution of embroidery equipment and supplies to the apparel industry.
Macpherson also distributes engraving equipment, but the Company intends to
discontinue this business in 1997. Accordingly, this line of business will be
classified as discontinued operations for purposes of the Company's financial
statements. On a pro forma basis assuming the Clinton Acquisition, the Mitchell
Acquisition and the Macpherson Acquisition were consummated on January 1, 1996,
the Company's net sales and income from continuing operations before
extraordinary item for 1996 would have been $184.6 million and $13.8 million,
respectively.
As a result of the Macpherson Acquisition, the Company is the exclusive
distributor in the United States and Canada through 2003 of embroidery equipment
manufactured by Barudan, and Barudan products accounted for approximately 78% of
Macpherson's total purchases in 1996. In connection with the Macpherson
Acquisition, the Company, Macpherson, and Barudan entered into an agreement
providing for a reduction in the prices charged to Macpherson for Barudan
equipment during the year after the consummation of the Macpherson Acquisition
and for Barudan to use its best efforts to maintain pricing after such initial
year that results in gross profit margins for Macpherson comparable to such
first year's pricing. In exchange, Macpherson agreed to pay for the Barudan
equipment it purchases within a shorter time period after invoiced. As a result,
approximately $6.4 million of Macpherson's outstanding payables were paid from
the net proceeds of the sale of the Old Notes in order to comply with the
revised timetable for payments. On a pro forma basis, these agreements would
have increased the Company's gross profit by $1.6 million for 1996, assuming the
effectiveness of the Macpherson Acquisition as of January 1, 1996. See "Pro
Forma Combined Financial Information."
In connection with the Macpherson Acquisition, the Company acquired the
Leasing Company, a leasing company affiliate of Macpherson, for approximately
$0.5 million, payable over three years, plus interest at 6.0% per annum. The
Leasing Company commenced operations in March 1996. The Company intends to
utilize the Leasing Company to offer flexible lease financing to its customers
to support the Company's sales of equipment. The Leasing Company will be an
Unrestricted Subsidiary for purposes of the Indenture.
The Macpherson Acquisition expanded the Company's product line to include
the distribution of embroidery equipment and supplies to the apparel industry.
The market for embroidery equipment has grown rapidly over the past ten years.
The Company acquired Macpherson to take advantage of the expanding demand for
such equipment and of the ability to market such equipment and the Company's
complementary line of screen printing equipment to the same end-user group. In
addition, the Company believes that Macpherson's embroidery equipment can be
efficiently marketed through the Company's existing distribution network without
substantial additional expense. The acquisition of the Leasing Company will
further the Company's objective of being a "one-stop shop" for its customers by
enabling the Company to offer attractive financing options to support the sale
of its equipment.
36
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1996, the consolidated
capitalization of the Company (i) on an historical basis and (ii) on a pro forma
basis assuming that the sale of the Old Notes, the application of the net
proceeds therefrom and the Macpherson Acquisition each had occurred as of such
date. See "Use of Proceeds."
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1996(9)
----------------------
<S> <C> <C>
ACTUAL PRO FORMA
--------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current maturities(1):
Old Credit Facility, due 2001(2)....................................................... $ 19,347 $ --
New Credit Facility(3)................................................................. -- 1,255
Senior note payable, due 2000(4)....................................................... 12,802 --
Senior note payable, due 2001(5)....................................................... 6,471 --
Senior note payable, due 2001(6)....................................................... 902 --
Senior note payable, due 2001(7)....................................................... 200 --
Variable W&G, Ltd. Credit Facility(8).................................................. 1,713 1,713
Senior Notes, net of debt discount of $1,487........................................... -- 83,513
--------- -----------
Total long-term debt including current maturities.................................... 41,435 86,481
Equity................................................................................... 15,677 11,210
--------- -----------
Total capitalization..................................................................... $ 57,112 $ 97,691
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) For further description of the Company's long-term debt, see Notes 5 and 6
of Notes to the Consolidated Financial Statements of the Company.
(2) For further description of the Old Credit Facility, see "Use of Proceeds."
(3) For further description of the New Credit Facility, see "Description of
Certain Indebtedness."
(4) Variable interest rate senior note payable, with final installment due July
13, 2000.
(5) 12.95% senior note payable, due July 13, 2001, net of unamortized discount
of $529.
(6) 10.98% senior note payable, due July 13, 2001, net of unamortized discount
of $298.
(7) 11.66% senior note payable, due July 13, 2001.
(8) Variable interest rate note payable, denominated in pound sterling with
final payment due in September 2000.
37
<PAGE>
(9) The following table sets forth the estimated sources and uses of funds in
connection with the sale of the Old Notes, the Mitchell Acquisition and the
Macpherson Acquisition, assuming that each had occurred as of December 31,
1996.
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
--------------------
<S> <C>
SOURCES OF FUNDS:
Old Notes............................................................. $ 79,238
New Credit Facility................................................... 1,255
Cash on hand.......................................................... 1,200
-------
Total sources..................................................... $ 81,693
-------
-------
USES OF FUNDS:
Repayment of debt..................................................... $ 39,723
Unamortized discount relating to debt repayment....................... 827
Repurchase of warrants................................................ 3,026
Macpherson Acquisition:
Cash purchase price................................................... 24,000
Repayment of debt................................................... 6,710
Repayment of trade payables......................................... 6,442
Payment of phantom stock plan liability............................. 1,043
Payment of receivable due from affiliate of Macpherson.............. (78)
-------
Total uses........................................................ $ 81,693
-------
-------
</TABLE>
38
<PAGE>
PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Statement of Operations for the
year ended December 31, 1996 gives effect to the Transactions as if each had
occurred at the beginning of the period presented, except that Clinton's results
of operations for the period after February 1, 1996 (the effective date of the
Clinton Acquisition) and Mitchell's results of operations for the period after
November 27, 1996 (the effective date of the Mitchell Acquisition) are included
in Willcox & Gibbs' results of operations for such period.
The Unaudited Pro Forma Combined Financial Statements have been prepared
using the purchase method of accounting for the Mitchell Acquisition and the
Macpherson Acquisition, whereby the total cost of each acquisition is allocated
to the tangible and intangible assets acquired and liabilities assumed based
upon their respective fair values at the effective date of such acquisition. For
purposes of the Unaudited Pro Forma Combined Financial Statements, such
allocations have been made based upon currently available information and
management's estimates.
The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1996 is based on the respective audited financial statements for
the year ended December 31, 1996 of the Company and Macpherson and the unaudited
financial statements for the year ended December 31, 1996 of Clinton and
Mitchell. The unaudited pro forma combined balance sheet at December 31, 1996
includes the Company (including the Clinton and Mitchell acquisitions) and
Macpherson at December 31, 1996. Macpherson's historical balance sheet reflects
its engraving equipment business as assets held for sale, since the Company
discontinued this business as of the date of such acquisition. The unaudited
financial statements reflect all adjustments, consisting of normal recurring
accruals, which in the opinion of management of the applicable company are
necessary for a fair presentation of results for the respective periods.
The Unaudited Pro Forma Combined Financial Statements do not purport to
represent what the results of operations or financial position of the Company
would actually have been if any of the Transactions had occurred on such date or
to project the results of operations or financial position of the Company for
any future date or period. The Unaudited Pro Forma Combined Financial Statements
set forth below should be read in conjunction with the respective Consolidated
Financial Statements and Notes thereto of the Company, Macpherson and Clinton
included elsewhere in this Prospectus, and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--The Company" and
"--Macpherson."
39
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLINTON/ MACPHERSON/
WILLCOX & MITCHELL LEASING
GIBBS (A) COMPANY (B) ADJUSTMENTS PRO FORMA
---------- ----------- ------------ ----------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales....................................... $ 113,851 $ 2,975 $ 67,767 $ -- $ 184,593
Cost of goods sold.............................. 77,623 1,888 50,221 (1,599)(c) 128,133
---------- ----------- ------------ ----------- -----------
Gross profit.............................. 36,228 1,087 17,546 1,599 56,460
Selling, general and administrative
expenses...................................... 28,969 758 13,542 (629)(d) 42,640
---------- ----------- ------------ ----------- -----------
Operating income.......................... 7,259 329 4,004 2,228 13,820
Interest expense................................ 4,824 21 781 5,864(e) 11,490
Other income (expense).......................... 15 (14) (1,161) 839(f) (321)
---------- ----------- ------------ ----------- -----------
Income before income taxes................ 2,450 294 2,062 (2,797) 2,009
Income taxes.................................... 1,137 -- 54 (222)(g) 969
---------- ----------- ------------ ----------- -----------
Income from continuing operations......... $ 1,313 $ 294 $ 2,008 $ (2,575) $ 1,040
---------- ----------- ------------ ----------- -----------
---------- ----------- ------------ ----------- -----------
OTHER OPERATING DATA:
EBITDA(h)....................................... $ 8,635 $ 340 $ 3,161 $ 3,574 $ 15,710
Depreciation and amortization................... 1,361 25 318 507 2,211
Capital expenditures............................ 1,247 10 282 -- 1,539
SELECTED RATIOS:
EBITDA/cash interest expense.................... -- -- -- -- 1.47x
EBITDA less capital expenditures/cash interest
expense....................................... -- -- -- -- 1.33x
Total debt/EBITDA(i)............................ -- -- -- -- 5.50x
Ratio of earnings to fixed charges(j)........... -- -- -- -- 1.17x
</TABLE>
See Notes to Unaudited Pro Forma Combined Statements of Operations.
40
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(a) Reflects for the year ended December 31, 1996, the historical operating
results of Clinton for one month and Mitchell for eleven months, since
Clinton was acquired by the Company on February 1, 1996 and Mitchell was
acquired on November 27, 1996. Clinton's results of operations for the
period after February 1, 1996 and Mitchell's results of operations for the
period after November 27, 1996 are included in Willcox & Gibbs' results of
operations for the year ended December 31, 1996.
(b) Reflects for the year ended December 31, 1996, the historical operating
results from continuing operations of Macpherson and the Leasing Company for
the period ended December 31, 1996. The Leasing Company commenced operations
in March 1996. Does not reflect net sales of $2.9 million, operating loss of
$0.5 million, and net loss of $0.5 million for the year ended December 31,
1996 attributable to Macpherson's engraving equipment distribution business,
which the Company discontinued upon consummation of the Macpherson
Acquisition.
(c) Reflects the impact of reduction in prices charged to Macpherson for Barudan
equipment. See "The Macpherson Acquisition."
(d) Reflects the net reduction in officers' compensation and other benefits
implemented as a result of the Clinton Acquisition and the Macpherson
Acquisition. The adjustment also reflects changes in goodwill amortization
as a result of the Transactions.
(e) Reflects (i) pro forma interest expense calculated using an interest rate of
12 1/4% per annum on the Senior Notes, 9.0% per annum on the New Credit
Facility and 8.25% on the W&G Ltd. Credit Facility, (ii) the repayment of
all existing indebtedness, (iii) estimated amortization of deferred
financing costs at a rate of $0.6 million per annum, and (iv) amortization
of debt discount at a rate of approximately $0.2 million per annum. See
"Capitalization."
(f) Reflects (i) the reduction in financing costs as a result of the agreement
to shorten the time to pay for purchases of Barudan equipment and (ii) costs
incurred by Macpherson in connection with the Macpherson Acquisition. See
"The Macpherson Acquisition" and Note 12 to the Consolidated Financial
Statements of Macpherson.
(g) Reflects an assumed 38.0% corporate income tax rate for the operations of
Clinton, Mitchell and Macpherson, which have operated as Subchapter S
corporations under the Internal Revenue Code and, accordingly, the income of
such companies was taxed directly to their respective shareholders.
(h) EBITDA represents income before income taxes plus interest expense,
depreciation and amortization for the applicable company and, in the case of
Willcox & Gibbs, certain other noncash charges included in cost of goods
sold relating to the amortization of the step-up in basis of the inventory
purchased in the Management Buyout. EBITDA should not be considered as an
alternative measure of net income or cash provided by operating activities
(both as determined in accordance with generally accepted accounting
principles), but is presented to provide additional information relating to
the Company's debt service capability. EBITDA should not be considered in
isolation or as a substitute for other measures of financial performance or
liquidity.
(i) Total debt includes $85.0 million in Senior Notes, net of discount, plus
$1.3 million of indebtedness incurred under the New Credit Facility and 1.7
million under the W&G Ltd. Credit Facility at the end of the periods
presented.
(j) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, earnings include pre-tax income from
continuing operations plus fixed charges. Fixed charges include interest,
whether expensed or capitalized, amortization of debt expense and a portion
of rental expense which is representative of the interest factor in these
rentals.
41
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
WILLCOX &
GIBBS MACPHERSON ADJUSTMENTS PRO FORMA
----------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS:
Cash................................................. $ 882 $ 471 $ (1,200)(a) $ 153
Trade accounts receivable............................ 22,336 14,296 (300)(b) 36,332
Inventories.......................................... 34,224 19,697 (3,362)(b) 50,559
Prepaid expenses and other current assets............ 2,655 587 (78)(a) 3,164
Deferred income taxes................................ 804 -- -- 804
Assets held for sale................................. -- 400 -- 400
----------- ----------- ---------------- -----------
Total current assets............................. 60,901 35,451 (4,940) 91,412
Property and equipment, net.......................... 4,400 995 5,395
Intangible assets, net............................... 11,060 -- 20,294(b) 31,354
Deferred financing, net.............................. 2,323 -- 1,952 ( )(c 4,275
Other assets......................................... 1,044 363 -- 1,407
----------- ----------- ---------------- -----------
Total assets..................................... $ 79,728 $ 36,809 $ 17,306 $ 133,843
----------- ----------- ---------------- -----------
----------- ----------- ---------------- -----------
LIABILITIES AND EQUITY:
Revolving line of credit............................. $ 19,347 $ 6,248 $ (24,340)(a) $ 1,255
Book overdrafts...................................... 1,499 -- 1,499
Current installments of long-term debt............... 3,195 462 (3,229)(a) 428
Trade accounts payable............................... 12,806 18,500 (6,442)(a) 24,864
Income taxes payable................................. 642 (884)(d) (242)
Accrued liabilities and other current liabilities.... 4,759 1,856 156(a) 6,771
----------- ----------- ---------------- -----------
Total current liabilities........................ 42,248 27,066 (34,739) 34,575
Deferred income taxes................................ 290 -- 290
Accrued retirement benefits.......................... 2,452 425 (425)(a) 2,452
Long-term debt, excluding current installments....... 18,893 -- 65,905(a) 84,798
Other liabilities.................................... 168 -- 350(a) 518
----------- ----------- ---------------- -----------
Total liabilities................................ 64,051 27,491 31,091 122,633
Equity............................................... 15,677 9,318 (13,785)(e) 11,210
----------- ----------- ---------------- -----------
Total liabilities and equity..................... $ 79,728 $ 36,809 $ 17,306 $ 133,843
----------- ----------- ---------------- -----------
----------- ----------- ---------------- -----------
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(a) Reflects the impact of the sources and uses of funds as they relate to the
Company's cash, debt and certain other liabilities. See "Capitalization."
(b) Reflects the excess of the purchase price for the Macpherson Acquisition
over the net book value of the respective assets acquired.
(c) Reflects the financing costs associated with the sale of the Old Notes net
of the write-off of financing costs of the Company's existing debt.
(d) Reflects income tax effect of the write-off of financing costs and
unamortized discount associated with the Company's existing debt.
(e) Reflects the net effect of the elimination of Macpherson's stockholders'
equity, the repurchase of warrants of the Company originally issued in
connection with certain borrowings and the net write-off of financing costs
and unamortized debt discount associated with the Company's existing debt.
42
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
WILLCOX & GIBBS
The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" as of the end of December 31, 1994,
1995 and 1996 and for the years ended December 31, 1995 and 1996 and the period
from July 13, 1994 to December 31, 1994, are derived from the consolidated
financial statements of the Company, which financial statements have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
selected data presented below under the captions "Statement of Operations Data"
for the period from January 1, 1994 to July 12, 1994, are derived from the
consolidated statement of operations of the Company's Predecessor, which
financial statement has been audited by KPMG Peat Marwick LLP. The "Statement of
Operations Data" for the years ended December 31, 1992 and 1993 are unaudited.
The financial statements of the Company's Predecessor for the years ended
December 31, 1992 and 1993 and for the period from January 1, 1994 to July 12,
1994 have been prepared as if the apparel operations had been operated as a
separate entity during those periods. However, such financial statements do not
reflect a complete allocation of all expenses applicable to the operation of an
independent company. Certain expenses were allocated to the apparel operations
by the Company's Predecessor based on actual usage or other allocation methods
that approximate actual usage. The consolidated financial statements of the
Company as of December 31, 1995 and 1996, and for the years ended December 31,
1995 and 1996 and the period from July 13, 1994 to December 31, 1994 and of the
Company's Predecessor for the period from January 1, 1994 to July 12, 1994, and
the report thereon, are included elsewhere in this prospectus. The selected
consolidated financial information set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations--The Company" and the Consolidated Financial Statements and Notes
thereto of the Company and the Company's Predecessor included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
COMPANY'S PREDECESSOR
-------------------------------------
YEAR ENDED COMPANY
DECEMBER 31, JANUARY 1, 1994 -----------------------------------------------------------
-------------------- TO JULY 12, JULY 13, 1994 TO YEAR ENDED YEAR ENDED
1992 1993 1994 DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996
--------- --------- --------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $ 76,048 $ 77,574 $ 41,309 $ 41,644 $ 90,431 $ 113,851
Cost of goods sold.............. 47,821 49,228 26,909 29,162 60,642 77,623
--------- --------- ------- ------- ------- --------
Gross profit.................. 28,227 28,346 14,400 12,482 29,789 36,228
Selling, general and
administrative expenses....... 20,814 21,315 11,997 11,264 23,606 28,969
--------- --------- ------- ------- ------- --------
Operating income.............. 7,413 7,031 2,403 1,218 6,183 7,259
Interest expense................ 1,993 2,307 1,390 1,946 4,249 4,824
Other (income) expense.......... (55) 145 224 (86) (18) (15)
--------- --------- ------- ------- ------- --------
Income (loss) before income
taxes and extraordinary
item........................ 5,475 4,579 789 (642) 1,952 2,450
Income tax expense (benefit).... 272 146 426 (288) 558 1,137
--------- --------- ------- ------- ------- --------
Income (loss) before
extraordinary item.......... 5,203 4,433 363 (354) 1,394 1,313
Extraordinary item, net......... -- -- -- -- (152) --
--------- --------- ------- ------- ------- --------
Net income (loss)............. $ 5,203 $ 4,433 $ 363 $ (354) $ 1,242 $ 1,313
--------- --------- ------- ------- ------- --------
--------- --------- ------- ------- ------- --------
OTHER OPERATING DATA:
EBITDA (a)...................... $ 8,123 $ 7,744 $ 2,580 $ 4,370 $ 8,062 $ 8,635
Depreciation and amortization... 655 858 401 3,066 1,861 1,361
Capital expenditures............ 381 712 346 272 771 1,247
Ratio of earnings to fixed
charges (b)................... 3.47x 2.80x 1.52x 0.70x 1.42x 1.46x
BALANCE SHEET DATA
(AT PERIOD END):
Working capital................. $ 24,563 $ 21,924 $ 18,653
Total assets.................... 51,717 52,528 79,728
Total debt...................... 32,224 31,109 41,435
Equity.......................... 5,967 7,892 15,677
</TABLE>
(FOOTNOTES TO THE SELECTED HISTORICAL FINANCIAL INFORMATION ON FOLLOWING PAGE.)
43
<PAGE>
MACPHERSON
The following table sets forth selected consolidated financial information
of Macpherson as of December 31, 1994, 1995 and 1996 and for the years then
ended. Such information was derived from the Consolidated Financial Statements
of Macpherson, which have been audited by Arthur Andersen LLP and are included
elsewhere in this Prospectus. The selected consolidated financial information
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Macpherson" and the
Consolidated Financial Statements and Notes thereto of Macpherson included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................................ $ 68,861 $ 71,667 $ 70,058
Cost of goods sold............................................................... 52,216 53,769 52,610
--------- --------- ---------
Gross profit................................................................... 16,645 17,898 17,448
Operating expenses............................................................... 13,566 13,587 14,211
--------- --------- ---------
Operating income............................................................... 3,079 4,311 3,237
Interest expense................................................................. 390 218 781
Other expense.................................................................... 643 768 1,162
--------- --------- ---------
Income before taxes.............................................................. 2,046 3,325 1,294
Income taxes..................................................................... 54 76 54
--------- --------- ---------
Net income..................................................................... $ 1,992 $ 3,249 $ 1,240
--------- --------- ---------
--------- --------- ---------
OTHER OPERATING DATA:
EBITDA(a)........................................................................ $ 2,650 $ 3,715 $ 2,393
Depreciation and amortization.................................................... 214 172 318
Capital expenditures............................................................. 171 178 282
Ratio of earnings to fixed charges(b)............................................ 4.46x 9.37x 2.36x
BALANCE SHEET DATA (AT PERIOD END):
Working capital.................................................................. $ 9,721 $ 10,925 $ 9,965
Total assets..................................................................... 31,458 44,403 38,864
Total debt....................................................................... 2,820 4,947 6,710
Stockholders' equity............................................................. 9,794 11,375 10,963
</TABLE>
- ------------------------
(a) EBITDA represents income before income taxes plus interest expense,
depreciation and amortization for the applicable company and, in the case of
Willcox & Gibbs, certain other noncash charges included in cost of goods
sold relating to the amortization of the step-up in basis of the inventory
purchased in the Management Buyout. EBITDA should not be considered as an
alternative measure of net income or cash provided by operating activities
(both as determined in accordance with generally accepted accounting
principles), but is presented to provide additional information relating to
the Company's debt service capability. EBITDA should not be considered in
isolation or as a substitute for other measures of financial performance or
liquidity.
(b) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, earnings include pre-tax income from
continuing operations plus fixed charges. Fixed charges include interest,
whether expensed or capitalized, amortization of debt expense and a portion
of rental expense which is representative of the interest factor in these
rentals.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--THE COMPANY
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND SELECTED HISTORICAL
FINANCIAL INFORMATION INCLUDED ELSEWHERE HEREIN.
GENERAL
Willcox & Gibbs was organized in 1994 by members of the Company's current
management and certain other investors to acquire the Distribution Business,
which occurred on July 13, 1994. As a result, the Company's financial statements
for the period ended December 31, 1994 reflect the Company's results of
operations for the period beginning July 13, 1994 and ending on December 31,
1994. The financial statements of the Distribution Business for the period
January 1, 1994 to July 12, 1994 have been prepared as if the Distribution
Business had been operated as a separate entity during that period. However,
such financial statements do not reflect a complete allocation of all expenses
applicable to the operation of an independent company. Certain expenses were
allocated to the Distribution Business by the Company's Predecessor based on
actual usage or other allocation methods that approximate actual usage. For
purposes of the discussion of the Company's 1994 results of operations below,
the Company has combined the results for such two periods of 1994 (the "Combined
1994"). However, results for 1995 and 1994 are not directly comparable because
of differences arising from the Company's operations as a separate entity
beginning July 13, 1994. In addition, Combined 1994 does not purport to reflect
the results of the Company had the Management Buyout occurred on January 1,
1994.
Effective February 1, 1996, the Company acquired Clinton, a distributor of
screen printing equipment for the apparel industry. Approximately 25.2% of the
Company's net sales for the year ended December 31, 1996, are attributable to
the operations of Clinton. Accordingly, the results of the Company for the year
ended December 31, 1996 are not directly comparable to the results for the year
ended December 31, 1995 due to the inclusion of the operations of Clinton in the
1996 period.
In addition, on January 3, 1997, the Company acquired Macpherson, which will
have a significant effect on the Company's future results of operations. See
"The Macpherson Acquisition."
The Company currently operates through six principal business units: (i) its
Sunbrand division, which is a distributor of replacement parts, supplies and
specialized equipment to manufacturers of apparel and other sewn products; (ii)
its Unity division, which is a wholesale distributor to dealers of replacement
parts and supplies for use by the apparel and other sewn products industry;
(iii) its W&G, Ltd. subsidiary, which is a distributor to manufacturers and
dealers in the United Kingdom and Europe of replacement parts and supplies for
use by the apparel and other sewn products industry; (iv) its Clinton
subsidiary, which is a distributor of screen printing equipment and supplies for
the apparel industry; (v) its Leadtec subsidiary, which develops and supplies
computer-based production planning and control systems for the apparel industry
and (vi) Macpherson, which distributes embroidery equipment and supplies used in
the apparel industry. See "The Macpherson Acquisition."
45
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentages that certain income and
expense items bear to net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
<S> <C> <C> <C>
1994
(COMBINED) 1995 1996
------------- --------- ---------
Net sales........................................................................... 100.0% 100.0% 100.0%
Gross profit........................................................................ 32.4 32.9 31.8
Selling, general and administrative expenses........................................ 28.0 26.1 25.4
Operating income.................................................................... 4.4 6.8 6.4
Interest expense.................................................................... 4.0 4.7 4.2
Income taxes........................................................................ 0.2 0.6 1.0
Net income.......................................................................... 0.0 1.4 1.2
----- --------- ---------
----- --------- ---------
</TABLE>
1996 COMPARED TO 1995
Net sales were $113.9 million in 1996, an increase of $23.4 million, or
25.9%, as compared to 1995. Net sales increased primarily as a result of the
Clinton Acquisition, which contributed $28.7 million to net sales in 1996. The
increase was partially offset by a decline in sales by the Company of capital
equipment resulting from general market conditions for apparel manufacturers.
Gross profit in 1996 was $36.2 million, an increase of $6.4 million, or
21.6%, as compared with 1995. As a percentage of net sales, gross profit in 1996
was 31.8% as compared with 32.9% period in 1995. The decrease in gross profit
was primarily attributable to Clinton's contribution to gross profit. Clinton's
gross profit margin has traditionally been lower than the Company's parts and
supplies businesses because a larger percentage of Clinton's sales are
attributable to capital equipment. The decrease in gross profit margin in 1996
was partially offset by a decrease in the percentage of net sales comprised of
capital equipment and the corresponding increase in the percentage comprised of
parts and supplies, since parts and supplies generally have higher margins than
capital equipment.
Selling, general and administrative expenses in 1996 were $29.0 million, an
increase of $5.4 million, or 22.7%, as compared to 1995. The increase consisted
primarily of the addition of expenses for Clinton, which were $5.5 million. The
increase was partially offset by a reduction of expenses as a result of
management's continued efforts to lower costs of operations, coupled with lower
sales expenses as a result of the decline in capital equipment sales.
Operating income in 1996 was $7.3 million, an increase of $1.1 million, or
17.4%, as compared to 1995. As a percentage of net sales, operating income was
6.4% in 1996 as compared to 6.8% in 1995. The increase in operating income
resulted primarily from an increase in sales and the efforts to reduce costs.
Interest expense was $4.8 million in 1996, an increase of $0.6 million, or
13.6%, as compared with 1995. The increase in interest expense was primarily a
result of the additional borrowings incurred as of February 1, 1996 used to
finance the acquisition of Clinton.
Provision for income taxes for 1996 was $1.1 million, an increase of $0.6
million, as compared to 1995. The Company's effective tax rate was 46.4% in
1996, as compared to 28.6% in 1995.
Net income in 1996 was $1.3 million, an increase of $0.1 million or 5.7%
compared to 1995. The increase was attributable to the factors discussed above.
46
<PAGE>
1995 COMPARED TO COMBINED 1994
Net sales were $90.4 million in 1995, an increase of $7.5 million, or 9.0%,
compared to Combined 1994. Net sales increased primarily as a result of the
introduction by the Company of new product lines, an increase in the purchase of
capital equipment by apparel manufacturers and the completion of significant
sales by the Company's Leadtec subsidiary of its "Satelite Plus" real-time
computerized production control system.
Gross profit in 1995 was $29.8 million, an increase of $2.9 million, or
10.8%, as compared to Combined 1994. As a percentage of net sales, gross profit
in 1995 was 32.9% as compared to 32.4% in Combined 1994. The increase in gross
profit margin was primarily attributable to the increase in sales by Leadtec of
its software products, which command higher margins than the Company's
traditional businesses. The increases in margins in 1995 were partially offset
by an increase in the cost of certain genuine parts distributed by the Company,
which increases became effective October 1, 1994 and January 1, 1995.
Selling, general and administrative expenses in 1995 were $23.6 million, an
increase of $0.3 million, or 1.5%, as compared to Combined 1994. As a percentage
of net sales, selling, general and administrative expenses were 26.1% in 1995
compared to 28.0% in Combined 1994. The increase in such expenses was
principally attributable to increased selling costs arising from higher sales.
However, sales increased at a higher rate than such expenses, resulting in a
decrease in the percentage that such expenses comprised of net sales in 1995. In
addition, 1994 included certain expenses allocated by the Company's Predecessor
to the Distribution Business prior to the Management Buyout, which were
eliminated for periods after July 12, 1994.
Operating income was $6.2 million in 1995, as compared to $3.6 million in
1994, an increase of 70.7%. The increase was principally due to higher net sales
without corresponding increases in operating expenses. In particular, the
increased sales by Leadtec of higher margin software products had a favorable
impact on 1995 operating income.
Interest expense was $4.2 million in 1995, an increase of $0.9 million, or
27.3% as compared to 1994. The increase was principally attributable to the debt
incurred on July 13, 1994 in connection with the Management Buyout.
Provision for income taxes for 1995 was $0.6 million, an increase of $0.4
million. The Company's effective tax rate was 28.6% in 1995. The effective tax
rate for Combined 1994 is not meaningful, since the allocation of income taxes
to the Distribution Business by the Company's Predecessor was not on the same
basis as taxation applicable to an independent company.
The Company's results for 1995 reflect an extraordinary loss from the
extinguishment of debt (net of income tax benefit) of $0.2 million relating to
the repurchase by the Company from the Company's Predecessor of subordinated
debt issued as part of the consideration in the Management Buyout.
Net income for 1995 was $1.2 million, as compared to net income of $9,000 in
Combined 1994. The increase was principally attributable to the factors
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Since its formation in 1994, the Company has funded its working capital
requirements, capital expenditures and acquisitions from net cash provided by
operations, borrowings under its credit facilities and proceeds from the
issuance of equity securities.
The Company used a portion of the net proceeds of the sale of the Old Notes
to repay substantially all of its existing debt, which was incurred to fund the
Management Buyout in July 1994, the Clinton Acquisition in February 1996, the
Mitchell Acquisition in November 1996 and working capital requirements. The
balance of such net proceeds were used to fund the $24.0 million purchase price
for the
47
<PAGE>
Macpherson Acquisition, to repay approximately $6.1 million of indebtedness of
Macpherson and to pay approximately $6.4 million of trade payables of
Macpherson.
In connection with the sale of the Old Notes, the Old Credit Facility was
terminated. The Company entered into the New Credit Facility with NationsBank,
as lender, which became effective upon consummation of the sale of the Old
Notes. The New Credit Facility provides for borrowings of up to $18.5 million in
the aggregate outstanding at any time, subject to a borrowing base limitation
equal to 80% of the Company's eligible accounts receivable. Borrowings under the
New Credit Facility will bear interest at a rate per annum, at the Company's
option, equal to (i) NationsBank's prime rate plus 0.75% or (ii) LIBOR plus
2.75%. The New Credit Facility is secured by all accounts receivable of the
Company and include certain covenants applicable to the Company, including
requirements that the Company comply with certain financial ratios. The New
Credit Facility expires on July 13, 2001.
In October 1996, W&G, Ltd. borrowed L1.0 million under the W&G, Ltd. Credit
Facility with Coutts & Co. The loan under the W&G, Ltd. Credit Facility bears
interest at a rate per annum equal to the bank's prevailing Base Rate, which is
currently 6.0% per annum, plus a margin of 2.25% per annum. The loan is payable
in eight semiannual installments of L125,000, commencing April 1997. The W&G,
Ltd. Credit Facility is secured by substantially all of the assets of W&G, Ltd.
The proceeds of this loan were used to repay indebtedness of W&G, Ltd. to the
Company, and the Company used such funds to repay higher cost indebtedness.
Effective February 1, 1996, the Company acquired all of the outstanding
capital stock of Clinton. The purchase price for Clinton consisted of $4.0
million in cash, 100,000 shares of the Company's common stock, the assumption of
$4.5 million of indebtedness and payables, which was subsequently paid, and
contingent payments of up to 38.9% of the operating income of Clinton during
each of the five years ending December 31, 2000. Such contingent payments may
not exceed $10.5 million in the aggregate over such five year period. In
addition the former shareholders of Clinton have the right to require WG Apparel
to purchase their shares of Company common stock at a purchase price of $30 per
share on the earliest of (i) the day after the Senior Notes have become due by
occurrence of the scheduled maturity date or sooner acceleration, (ii) the
fourth anniversary of the closing date of the Clinton Acquisition, (iii) the
occurrence of an initial public offering of equity securities by the Company and
(iv) a change of control of the Company, PROVIDED that in the case of clauses
(ii) and (iii) such purchase is then permitted under the Indenture and the New
Credit Facility. The Company's obligation to make contingent payments and to
perform the put right is an unsecured obligation of the Company. The Company
obtained the cash required in connection with the Clinton Acquisition through
additional borrowings from its existing lenders and approximately $2.4 million
in proceeds from the sale of Company common stock to existing shareholders.
Effective November 27, 1996, the Company acquired certain assets of Mitchell
for $3.0 million in cash. The Company financed this purchase price through
borrowings under the Old Credit Facility.
In connection with the Macpherson Acquisition, the Company acquired the
Leasing Company, a leasing company affiliate of Macpherson, for approximately
$0.5 million payable over three years, plus interest at 6.0% per annum. The
Company intends to utilize the Leasing Company to offer flexible lease financing
to its customers to support the Company's sales of equipment. The Company
intends to fund its equity investment in the Leasing Company through borrowings
under the New Credit Facility, which borrowings are expected to aggregate
approximately $3.5 million in 1997. The Company intends that the Leasing Company
will arrange for additional borrowings to finance its operations and will sell a
portion of its leases on a nonrecourse basis. The Leasing Company will be an
Unrestricted Subsidiary for purposes of the Indenture and, therefore, will not
be subject to any of the covenants contained in the Indenture. See "Description
of Senior Notes."
48
<PAGE>
The Company's capital expenditures during 1996 aggregated approximately $1.2
million. Such expenditures were primarily for computer equipment upgrades and
office and warehouse equipment and improvements.
The Company intends to pursue selected acquisitions of other businesses that
will expand the Company's product lines or geographic coverage. The Company is
currently negotiating the terms of investments in certain businesses in
Colombia, which are not expected to involve material investments. Any
acquisition would be funded through cash generated by the Company's operations,
the issuance of additional securities by the Company, the sale of other assets
by the Company or the incurrence of additional indebtedness. The Company's
ability to sell assets and incur indebtedness are restricted under the Indenture
and the New Credit Facility.
Net cash used in the Company's operating activities was $0.3 million during
1996. Principal working capital changes included a $4.7 million increase in
accounts receivable and a $1.4 million increase in inventories. The Company's
investing activities during 1996 related principally to $12.0 million utilized
in the Clinton and Mitchell Acquisitions. Net cash provided by financing
activities aggregated $13.5 million, principally reflecting $10.5 million of
borrowings and $2.3 million from the sale of Company common stock in connection
with the Clinton Acquisition.
Net cash generated by the Company's operations in 1995 was $1.8 million.
Principal working capital changes included a $0.8 million decrease in accounts
receivable and a $0.8 million increase in inventories. Cash used in investing
activities of $0.8 million was principally related to capital expenditures
during the year. Cash used in financing activities in 1995 aggregated $0.8
million, reflecting a net increase in borrowings of $1.0 million, $1.8 million
from the sale of Company common stock to the Company's Savings and Employee
Stock Ownership Plan and the payment to the Company's Predecessor of $3.5
million to retire indebtedness and redeem warrants issued in connection with the
Management Buyout.
The Company believes that the cash generated from operations and borrowings
available under the New Credit Facility will be sufficient to meet the Company's
liquidity needs for the foreseeable future.
49
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--MACPHERSON
GENERAL
Macpherson is principally engaged in the distribution throughout the United
States and Canada of embroidery equipment used in the apparel industry.
Macpherson also distributes engraving equipment, but this business will be
discontinued in 1997.
On December 31, 1994, Macpherson consummated a business combination in which
it acquired all of the outstanding common stock of Meistergram, Inc. and
Macpherson Monogram, Inc. in exchange for Macpherson common stock, which was
accounted for in a manner similar to pooling-of-interests due to the common
ownership of the three companies. The purpose of the transaction was to combine
the three lines of business of such companies, the distribution of embroidery,
monogram and engraving equipment, to lower overhead costs and combine marketing
efforts.
The former shareholders of Macpherson elected under Subchapter S of the
Internal Revenue Code to have Macpherson's income taxed directly to the
shareholders. Accordingly, prior to the Macpherson Acquisition, Macpherson was
not obligated to pay Federal income taxes or, in some cases, state income taxes.
Rather, Macpherson distributed dividends to its former shareholders each year in
amounts estimated as sufficient to pay the Federal and state income taxes
attributable to the income of Macpherson for such year.
RESULTS OF OPERATIONS
The following table sets forth the percentages that certain income and
expense items bear to net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
Net sales....................................................... 100.0% 100.0% 100.0%
Gross profit.................................................... 24.2 25.0 24.9
Operating expenses.............................................. 19.7 19.0 20.3
Operating income................................................ 4.5 6.0 4.6
Interest expense................................................ 0.6 0.3 1.1
Net income...................................................... 2.9 4.5 1.8
--------- --------- ---------
--------- --------- ---------
</TABLE>
1996 COMPARED TO 1995
Net sales were $70.1 million in 1996, an increase of $1.6 million, or 2.2%,
as compared to 1995. The increase in net sales was primarily due to the
increased sales of towel hemming machines. The increase was partially offset by
a decline in net sales of embroidery and monogramming equipment due to delays in
the introduction of a new line of Barudan embroidery equipment and the sale of
older lines of equipment at discounts in order to accommodate the new line of
inventory.
Gross profit in 1996 was $17.4 million, a decrease of $0.5 million, or 1.0%,
as compared with 1995. As a percentage of net sales, gross profit in 1996 was
24.9% as compared with 25.0% in 1995. The decrease in gross profit was primarily
attributable to the discounting of older lines of equipment in 1996 in
contemplation of the introduction of Barudan's new line and to higher costs of
such older equipment due to the unfavorable exchange rate between Japanese yen
and U.S. dollars at the time of purchase. A majority of Macpherson's purchases
of equipment is payable in Japanese yen, although substantially all of
Macpherson's net sales are in U.S. dollars.
50
<PAGE>
Operating expenses in 1996 were $14.2 million, an increase of $0.6 million,
or 4.6%, as compared to 1995. The increase is principally attributable to
increased marketing expenses, including the establishment of a new computer
software sales and support group and additions to the technical support group.
Operating income in 1996 was $3.2 million, a decrease of $1.1 million, or
24.9%, as compared to 1995. The decrease in operating income was principally
attributable to the increased volume of discounted sales and higher operating
expenses in 1996, as discussed above.
Interest expense was $0.8 million in 1996, an increase of 259.1%, as
compared with 1995. The increase was attributable to additional levels of
borrowings in 1996 required to maintain higher than customary levels of
inventory resulting from the introduction of the new line of Barudan equipment.
The Company expects Macpherson to return to its customary inventory levels
during 1997.
Net income for 1996 was $1.2 million, a decline of $2.0 million or 61.8%, as
compared to 1995. The decrease was principally attributable to the reasons
discussed above.
1995 COMPARED TO 1994
Net sales were $71.7 million in 1995, an increase of $2.8 million, or 4.1%,
as compared to 1994. The increase was principally due to the growth in demand in
1995 for embroidery equipment distributed by Macpherson. The increase was
partially offset by a decline in 1995 of $1.2 million in net sales of
Macpherson's engraving equipment, principally due to the delay in the
introduction of Macpherson's laser equipment and falling demand for Macpherson's
rotary engraving equipment.
Gross profit in 1995 was $17.9 million, an increase of $1.3 million, or
7.5%, as compared to 1994. As a percentage of net sales, gross profit increased
from 24.2% in 1994 to 25.0% in 1995. The improvement in gross profit margin was
primarily due to improved pricing in response to higher customer demand. The
improvement was partially offset by fluctuation in the exchange rate of Japanese
yen and U.S. dollars.
Operating expenses in 1995 were $13.6 million, which was essentially
unchanged from 1994. Macpherson's consolidation of operations into one company
at the end of 1994 enabled it to operate its marketing functions more
efficiently and thereby avoid increased costs.
Operating income in 1995 was $4.3 million, an increase of $1.2 million, or
40.0%, as compared to 1994. The increase was principally due to higher sales
without a related increase in operating expense levels.
Interest expense in 1995 was $0.2 million, a decrease of $0.2 million, or
44.2%, as compared to 1994. The decrease was principally due to lower levels of
borrowings.
Net income in 1995 was $3.3 million, an increase of $1.3 million, or 63.1%,
as compared to 1994. The increase was principally due to the factors discussed
above.
LIQUIDITY AND CAPITAL RESOURCES
Macpherson's principal sources of liquidity have been net cash from
operations and borrowings under Macpherson's credit facility.
Net cash generated by Macpherson's operating activities totaled $0.3 million
in 1996. Principal working capital changes included a $5.4 million decrease in
accounts receivable, a $0.4 million decrease in inventories and a $7.0 million
decrease in accounts payable. Macpherson's investing activities during 1996
consisted of $0.3 million of capital expenditures. Net cash used in financing
activities aggregated $0.1 million, principally reflecting dividend payments of
$1.7 million, reduced by a net increase in borrowings of $1.8 million.
Net cash used in operating activities in 1995 was $0.1 million. Principal
working capital changes included a $5.0 million increase in accounts receivable,
a $7.8 million increase in inventories and a $9.2
51
<PAGE>
million increase in accounts payable. Net cash used in investing activities in
1995 aggregated $0.1 million, principally reflecting capital expenditures. Net
cash provided by financing activities in 1995 aggregated $0.5 million,
principally attributable to a net increase in borrowings of $2.1 million, and
partially offset by the payment of $1.9 million of dividends.
Macpherson had a revolving credit line that permitted borrowings of up to
$7.0 million. The revolving credit line was due and payable upon expiration on
July 31, 1998, and bore interest, payable monthly on the first day of each
month, at the lower of LIBOR plus the LIBOR margin (2 1/2% prior to December 15,
1996), or the bank's prime rate. Borrowings under the revolving credit line were
limited to specified percentages of eligible inventory and receivables of the
Company. The Company had outstanding borrowings of $4.8 million, with additional
credit of $2.2 million available at December 31, 1996. This revolving credit
line was collateralized by all trade accounts receivable and all inventories of
Macpherson, except for approximately $12.6 million of stitching machine
inventory. The revolving credit line was repaid and terminated in connection
with the consummation of the Macpherson Acquisition.
52
<PAGE>
BUSINESS
GENERAL
The Company believes that it is the largest independent distributor in North
America of replacement parts, supplies and specialized equipment to
manufacturers of apparel and other sewn products, offering a broad product line
of over 200,000 items. These products include industrial sewing equipment parts,
such as needles, hooks, motors, tools and other accessories, and specialized
equipment, such as screen printing equipment and supplies and production
planning and control systems. In addition, following consummation of the
Macpherson Acquisition, the Company became a major distributor of embroidery
equipment and supplies, marketing its products through 22 sales and distribution
centers strategically located in the United States, Canada, Mexico, the
Dominican Republic and England. During 1996, the Company's customer base
consisted of over 15,000 manufacturers and dealers.
Since the Management Buyout, the Company has expanded through internal
growth of operations and acquisitions. The Company intends to pursue strategic
acquisitions to expand its product lines and enter into new geographic markets.
The Company believes that the size of its operations and the stable operating
history of its replacement parts and supplies distribution business have enabled
it to carry substantially higher levels of inventory than its competitors. These
investments in inventory provide customers with wide selection, a high degree of
product availability and assurance of prompt delivery. In addition, the Company
believes that it is well positioned to pursue selected growth opportunities
internationally, particularly in Mexico and South America, based upon the size
of its operations, its established inventory management systems and its growing
sales in these markets.
The Company currently operates through six principal business units: (i) its
Sunbrand division, which is a distributor of replacement parts, supplies and
specialized equipment to manufacturers of apparel and other sewn products; (ii)
its Unity division, which is a wholesale distributor to dealers of replacement
parts and supplies for use by the apparel and other sewn products industry;
(iii) its W&G, Ltd. subsidiary, which is a distributor to manufacturers and
dealers in the United Kingdom and Europe of replacement parts and supplies for
use by the apparel and other sewn products industry; (iv) its Clinton
subsidiary, which is a distributor of screen printing equipment and supplies for
the apparel industry; (v) its Leadtec subsidiary, which develops and supplies
computer-based production planning and control systems for the apparel industry
and (vi) Macpherson, which distributes embroidery equipment and supplies used in
the apparel industry. See "The Macpherson Acquisition."
53
<PAGE>
The following table sets forth for each of the Company's business units (i)
net sales for the years ended December 31, 1994, 1995 and 1996, and (ii) net
sales for the year ended December 31, 1996 on a pro forma basis assuming that
the Clinton Acquisition, the Mitchell Acquisition and the Macpherson Acquisition
were consummated on January 1, 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
<S> <C> <C> <C> <C>
1994 1995 1996
----------- ----------- -------------------------
<CAPTION>
COMBINED HISTORICAL HISTORICAL PRO FORMA(1)
----------- ----------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Sunbrand.................................... $ 59,794 $ 65,872 $ 60,435 $ 60,435
Unity....................................... 12,566 12,118 10,936 10,936
W & G, Ltd.................................. 6,246 6,535 7,372 7,372
Clinton(2).................................. -- -- 28,682 31,657
Leadtec..................................... 4,347 5,906 6,426 6,426
Macpherson.................................. -- -- -- 67,767
----------- ----------- ---------- -------------
Net sales................................... $ 82,953 $ 90,431 $ 113,851 $ 184,593
----------- ----------- ---------- -------------
----------- ----------- ---------- -------------
</TABLE>
- ------------------------
(1) Gives effect to the Clinton Acquisition, the Mitchell Acquisition and the
Macpherson Acquisition as if each occurred on January 1, 1996. See "Pro
Forma Combined Financial Information."
(2) Clinton was acquired effective February 1, 1996. Sales of Mitchell (0.8
million for 1996) are included with the Clinton pro forma amount for
purposes of this presentation.
INDUSTRY OVERVIEW
Manufacturers of apparel and other sewn products generally utilize a variety
of modern equipment and supplies in their production processes. Although there
have been advances in the speed of equipment and automation of manufacturing
methods, the basic sewing process has changed very little since the first sewing
machines were introduced over 125 years ago. Accordingly, the basic design of
sewing equipment and replacement parts and supplies used with respect to such
equipment has remained stable for many years, and new generations of sewing
equipment have frequently utilized many parts designed for prior generations. In
addition, since numerous manufacturers of sewn products do not regularly replace
major equipment upon the introduction of new models, substantial numbers of
older machines typically continue to be used for many years after the production
of more advanced units.
The improvements in speed of equipment and the trend toward automation in
apparel and sewn products manufacturing have increased the demand for
replacement parts and supplies by manufacturers, since high speed production
increases the wear and tear on equipment. In addition, automation results in the
utilization of other equipment, such as cutting and finishing devices, that must
be maintained. As a result of the large number of differing replacement parts
and supplies utilized by apparel and sewn products manufacturers and the
relatively small quantity of many items required at varying times, such
manufacturers generally prefer to obtain replacement parts and supplies from
dealers that stock a wide range of products and offer prompt delivery. In
addition, manufacturers of such replacement parts, supplies and specialized
equipment often prefer to sell such products through distributors who can
provide wide market coverage, assume credit risk and stock inventory, thereby
limiting the manufacturers' costs of marketing and distribution.
The replacement parts distribution business for sewing equipment involves
both "genuine" and "generic" parts. "Genuine" parts are replacement parts
manufactured by the original equipment manufacturer. "Generic" parts are
non-branded replacement parts manufactured by someone other than the original
equipment manufacturer.
54
<PAGE>
The market for screen printing equipment and embroidery equipment used to
add decoration to apparel products has grown rapidly over the past several
years. This growth has been propelled by expansion of the market for casual
wear, such as T-shirts, sweatshirts and caps, which frequently feature printed
or embroidered trademarks, slogans or other designs. In addition, improvements
in technology have made screen printing and embroidery equipment less expensive
and more sophisticated. The Company acquired Clinton, which distributes screen
printing equipment and supplies, in February 1996 and Macpherson, which
principally distributes embroidery equipment and supplies, in January 1997 upon
consummation of sale of the Old Notes in order to take advantage of the growing
demand for such equipment and of the ability to market these complimentary
product lines to the same end-user group.
The market of apparel manufacturers in the Western Hemisphere has expanded
during the 1990s due to the shifting production of apparel products sold in the
United States from the Far East to Mexico and the rest of Latin America.
According to the U. S. Department of Commerce, in 1990 Asia accounted for 75.3%
of U.S. imports of apparel, while Mexico and the CBI countries accounted for
11.2%. By 1995, Asia's share had dropped to 62.7% of U.S. imports, while Mexico
and the CBI countries increased to 23.1%. The trend towards increasing apparel
imports to the United States from Mexico is expected to accelerate with the
implementation of NAFTA. In addition, the Company anticipates that apparel
manufacturers from around the world who sell their products to the United States
will increase apparel production in Mexico, the CBI countries and the rest of
Latin America due to the improved political and economic climate of many of such
countries and the quick and relatively inexpensive access to the U.S. market
from such region. The Company believes it is well positioned to capitalize on
the shift in apparel production to the southern portion of the Western
Hemisphere due to its broad product line, its existing distribution centers
located nearby and its prior relationships with many of the manufacturers that
are establishing production facilities south of the United States. For example,
the Company is a supplier to one of its major customers, Fruit of the Loom, at
its new Mexican manufacturing facility that began operations in 1996.
The following data compiled by the U.S. Department of Commerce demonstrates
the growth in apparel production by manufacturers located in the United States
and the growth in imports of apparel in the recent past:
<TABLE>
<CAPTION>
VALUE OF VALUE OF U.S.
SHIPMENTS OF IMPORTS OF
U.S. APPAREL
APPAREL PRODUCTS PRODUCTS(1)
---------------- ------------------
<S> <C> <C>
(DOLLARS IN MILLIONS)
1980................................................... $ 45,782
1981................................................... 49,823
1982................................................... 53,388
1983................................................... 55,375
1984................................................... 57,578
1985................................................... 56,993
1986................................................... 57,919
1987................................................... 64,243
1988................................................... 65,032
1989................................................... 63,399 $ 25,372
1990................................................... 64,414 26,602
1991................................................... 65,345 27,230
1992................................................... 71,546 32,462
1993................................................... 74,010 35,278
1994................................................... 76,898 38,343
1995................................................... 77,800 40,998
</TABLE>
- ------------------------
(1) Imports are restricted to goods imported for consumption and are on a
customs value basis. Information for periods prior to 1989 was not
available.
55
<PAGE>
COMPETITIVE STRENGTHS
The Company believes that it has a strong competitive position attributable
to a number of factors, including the following:
- MARKET LEADERSHIP. The Company believes that it is the largest
independent distributor of replacement parts, supplies and specialized
equipment for the apparel and other sewn products industry in North
America. As a result, the Company has significant purchasing power and can
realize economies of scale in marketing, distribution and administration.
The Company estimates that each of its principal operating units is among
the leaders in its respective market.
- STRONG BRAND NAME RECOGNITION. The Willcox & Gibbs brand name has been
well known in the apparel industry since the Company's predecessor began
operations in the mid-1800s as an apparel equipment manufacturer. Since
that time, the Company's Sunbrand and Unity divisions have developed and
maintained well-recognized brand names in replacement parts distribution
through a long history of comprehensive and high quality product lines and
an emphasis on customer service.
- BROAD LINES OF QUALITY PRODUCTS. The Company believes that it markets the
broadest line of quality replacement parts, supplies and specialized
equipment to manufacturers of apparel and other sewn products in North
America. For example, the Company's Sunbrand division markets over 180,000
items, while the Company believes that its closest competitor offers
approximately 40,000 items. As a result of its broad product offering, the
Company believes that it provides its customers with "one-stop shopping"
for their replacement parts, supplies and specialized equipment
requirements.
- HIGH LEVEL OF CUSTOMER SERVICE. The Company provides its customers with a
comprehensive selection of products, a high degree of product
availability, convenient ordering systems and fast order response time.
The Company's strategically placed distribution facilities and efficient
inventory management systems enable it to achieve high order fill rates
for replacement parts and supplies (in excess of 95% of orders are shipped
within 24 hours), timeliness of delivery and wide geographic coverage. The
Company utilizes a real-time computer inventory management system in its
sewn products replacement parts and supplies businesses that enables it to
search all inventory locations in North America for product availability.
In addition, the Company maintains EDI systems that link the Company to
selected customers, such as Levi Strauss and Fieldcrest Cannon. The
Company fills substantially all of its orders of parts and supplies by
customers in the United States through next-day delivery, which is
important to assist customers in minimizing operator downtime.
- STRONG RELATIONSHIPS WITH SUPPLIERS. The Company has developed strong
relationships with many of its suppliers, with some dating back over 30
years. The Company maintains exclusive U.S. distribution rights for
genuine replacement parts for Pfaff (since 1958) and Pegasus (since 1966),
two major sewing equipment suppliers to the U.S. apparel and other sewn
products industry, as well as exclusive distribution rights in certain
territories for M&R, a major manufacturer of screen printing equipment for
the apparel industry in the United States and Barudan, a major
manufacturer of embroidery equipment for the worldwide apparel industry.
- DIVERSIFIED BASE OF CUSTOMERS. During 1996, the Company sold products to
over 15,000 apparel and sewn products manufacturers and dealers of
replacement parts and supplies, with no single customer representing more
than 5.2% of net sales. The Company has enjoyed long-term relationships
with a number of its major customers, including Levi Strauss, Fruit of the
Loom, Fieldcrest Cannon, Russell Athletic and VF Corporation.
- EXPERIENCED MANAGEMENT TEAM. The Company's officers have an average of 16
years of experience with the Company and the Company's Predecessor and an
average of 19 years of industry experience. The Company retained
substantially all of the senior management of the businesses acquired in
the Management Buyout in July 1994, of Clinton in connection with its
acquisition by
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the Company in February 1996 and of Macpherson following consummation of
the Macpherson Acquisition in January 1997. The Company's senior
management and employees collectively owned, as of March 31, 1997, on a
fully diluted basis 63.1% of the Company's outstanding common stock.
BUSINESS STRATEGY
The Company's strategy is to enhance its position as a leading distributor
of replacement parts, supplies and specialized equipment to the apparel and
other sewn products industry. In order to achieve this objective, the Company
has developed a business plan that consists of the following key elements:
- MAINTAIN LEADING MARKET POSITION. The Company believes that it is the
leading independent distributor in North America of replacement parts,
supplies and specialized equipment to the apparel and other sewn products
industry. The Company believes that such leadership is based primarily on
the Company's long history of operations, broad line of products and
excellent customer service. The Company intends to enhance its market
leadership by maintaining and expanding its relationships with suppliers
and customers.
- EXPAND PRODUCT LINES. The Company intends to add lines of replacement
parts, supplies and specialized equipment that can be efficiently marketed
through its existing distribution system. Such additions are intended to
strengthen the Company's position as a "one-stop shop" without significant
incremental expenses related to selling, marketing, distribution and
administration.
- INCREASE PENETRATION OF EMERGING MARKETS. The Company believes that it is
well positioned to increase sales by targeting growth opportunities in
emerging markets such as Mexico, the CBI countries and the rest of Latin
America. The Company expects that its comprehensive line of replacement
parts, supplies and specialized equipment and substantial experience in
serving the apparel and other sewn products industry will provide a
competitive advantage over smaller, local competitors in these regions.
The Company intends to expand its presence in these areas in 1997 by
opening a new sales office in Colombia.
- PURSUE SELECTED ACQUISITIONS. Since the Management Buyout in July 1994,
the Company has pursued a plan of expanding its product offerings through
strategic acquisitions. In February 1996, it acquired Clinton, a leading
distributor of screen printing equipment and supplies, in November 1996,
it acquired Mitchell, a manufacturer of abrasive cords and tapes used
principally by apparel manufacturers, and in January 1997 it acquired
Macpherson, a leading distributor of embroidery equipment and supplies.
The Company intends to pursue other strategic acquisitions to expand its
product lines and to enter into new geographic markets.
SUNBRAND
Sunbrand, which has been operating for over 40 years, believes it is the
largest distributor in North America of replacement parts, supplies and
specialized equipment to manufacturers of apparel and other sewn products.
Sunbrand's products are purchased from many of the leading manufacturers of
equipment for the apparel and sewn products industry. The Company believes that
Sunbrand's breadth of product selection makes it the apparel industry's leading
one-stop shop for replacement parts and supplies. On a pro forma basis assuming
the Clinton Acquisition, the Mitchell Acquisition and the Macpherson Acquisition
were consummated on January 1, 1996, Sunbrand's net sales would have accounted
for approximately 32.7% of the Company's 1996 consolidated net sales.
PRODUCTS. Sunbrand carries one of the most extensive lines of replacement
parts and supplies for the apparel and other sewn products industry in North
America. Its product line includes a full range of replacement parts for sewing
machines, spreading and cutting equipment, finishing equipment, and general
supplies. Sunbrand also offers a broad base of manufacturing equipment,
distribution systems, information systems and management services. Sunbrand
offers over 180,000 items, while the Company
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believes that its closest competitor offers approximately 40,000 items. The
Company believes that Sunbrand's broad product line gives it the advantage of
being the apparel industry's leading one-stop shop for replacement parts and
supplies.
SUPPLIERS. Sunbrand purchases products from 1,200 different vendors,
including many of the leading manufacturers of equipment for the apparel and
sewn products industry. In addition, Sunbrand is the exclusive distributor of
Pfaff and Pegasus genuine replacement parts in the United States. Sunbrand's
five largest suppliers (other than Unity) accounted for 39.6% of its total
purchases in 1996, and Pfaff and Pegasus accounted for approximately 11.0% and
13.9%, respectively, of Sunbrand's purchases for such year. Sunbrand obtains all
of its generic sewing parts and supplies from Unity.
Pfaff, a German company, is a major manufacturer of industrial sewing
equipment for the apparel industry and, in 1995, the Company believes Pfaff had
an estimated 8.0% share of the U.S. "lock-stitch" industrial sewing machine
market. Pegasus is a significant Japanese manufacturer of industrial sewing
equipment, and, in 1995, the Company estimates that Pegasus had a 30.0% share of
the U.S. "chain-stitch" industrial sewing machine market. The Company (including
its predecessor) has been the exclusive distributor in the United States of
Pfaff genuine parts since 1958 and of Pegasus genuine parts since 1966.
Under the Company's distributor agreements with Pfaff and Pegasus, the
Company is the exclusive United States distributor of Pfaff and Pegasus genuine
parts through 1998, which exclusive arrangements automatically renew for
successive two year periods unless notice of termination is given at least one
year prior to December 31, 1998 or the end of any successive two year period of
exclusivity. In order to maintain the exclusivity of the Pfaff and Pegasus
distribution agreements, the Company must meet certain performance targets.
Historically the Company has generally satisfied these requirements, although in
certain prior years they were not satisfied and Pfaff and Pegasus waived such
shortfalls. Although the Company believes that its relationships with Pfaff and
Pegasus have been good, there can be no assurance that the Pfaff or Pegasus
distribution agreement will be extended beyond its current term or that the
Company will continue to be the distributor for Pfaff or Pegasus parts. No
assurance can be given that the failure to extend either the Pfaff or Pegasus
distribution agreement or the loss by the Company of its supplier relationship
with Pfaff or Pegasus would not have a material adverse effect on the Company's
business, financial condition and results of operations. See "Risk
Factors--Dependence on Suppliers."
SALES AND DISTRIBUTION. Sunbrand has its headquarters and principal
warehouse facility in Atlanta, Georgia. In addition, Sunbrand maintains six
strategically located branches that serve as regional sales offices and
distribution points: Fall River, Massachusetts; Miami, Florida; El Paso, Texas;
Mexico City and Gomez Palacio/Torreon, Mexico; and Santo Domingo, Dominican
Republic. All of its branches are connected by a sophisticated computer ordering
system that allows real-time ordering and rapid inventory replenishment. The
Atlanta warehouse provides over 180,000 different items, and the branches stock
the parts ordered most frequently in their particular regions. The typical
branch carries approximately 3,500 items.
Sunbrand is well known for its 1,600 page catalog, which serves as a
reference source for the apparel industry due to the breadth of Sunbrand's
product lines. This catalog, which is published about every three years, is a
valuable marketing tool that is used by many existing and potential buyers of
parts and supplies.
Sunbrand's customers are offered five convenient methods of placing orders:
(i) through the main Atlanta distribution center via a toll-free number printed
at the bottom of each page of Sunbrand's catalog; (ii) through customer service
representatives in the branch closest to them; (iii) through an on-line ordering
system installed at the customer's location linked to Sunbrand's mainframe
computer; (iv) through electronic data interchange; and (v) via facsimile.
As of December 31, 1996, Sunbrand maintained a staff of 25 customer service
representatives, 13 of whom were located in Atlanta. Upon receipt of an order,
customer service relays it either to the Atlanta
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warehouse or the closest branch via on-line computer, where the item is packed,
shipped, and automatically re-ordered for inventory. During 1996, over 95% of
Sunbrand's orders were shipped within 24 hours. Most packages are shipped via
U.P.S. overnight and received by customers the following day.
In addition, Sunbrand maintains three groups of specialized personnel to
serve its customers: field sales representatives, product specialists and
service technicians. Field sales representatives, who numbered 40 at December
31, 1996, are based in Atlanta and each of Sunbrand's branch offices. Each field
sales representative is responsible for expanding existing customer
relationships and developing new customers in his or her assigned territory.
Sunbrand's product specialists, who totalled 23 as of December 31, 1996, are
required to maintain thorough technical knowledge about their assigned products.
Product specialists are available to respond to inquiries regarding the
Company's products and often accompany field representatives on customer calls.
They also monitor product lines for profitability. Sunbrand's technical
specialists repair, install, and train plant maintenance staffs in the operation
and maintenance of parts and equipment. The staff of technical specialists
totalled 16 at December 31, 1996.
CUSTOMERS. Sunbrand serviced over 11,400 customers in 1996, the largest of
which accounted for 6.1% of Sunbrand's 1996 net sales. Sunbrand's top ten
customers, which included Levi Strauss, Fruit of the Loom, Fieldcrest Cannon,
Russell Athletic and VF Corporation, represented 20.1% of Sunbrand's net sales
in 1996. Sunbrand's top fifteen customers have all been Sunbrand customers for
more than 15 years.
Historically, a majority of Sunbrand's sales have been to customers in the
United States, although sales to customers in Latin America have increased
significantly in recent years. Approximately 10% of Sunbrand's net sales in 1990
were to Latin America, which increased to 23.8% in 1996. The balance of
Sunbrand's sales were to customers in the United States and Canada. Mexico was
the principal location of Sunbrand's customers outside of the United States in
1996, comprising 12.6% of Sunbrand's net sales, followed by the CBI countries
and other South American countries. The Company may continue to follow important
customers from the U.S. as they pursue opportunities in the CBI and other South
American countries.
COMPETITION. While there is strong competition throughout the markets
served by Sunbrand, Sunbrand believes that it is the largest distributor in
North America of replacement parts and supplies to manufacturers of apparel and
other sewn products. Most of Sunbrand's competitors are small, regional
distributors. In addition, there are three national competitors to Sunbrand,
some of which may have greater financial resources than the Company. Competition
is principally based on product availability, price and speed of delivery.
UNITY
Unity, founded over 50 years ago in New York City, is a leading wholesale
distributor to dealers in North America of replacement parts and supplies for
use in the apparel and sewn products industry. Unity does not sell directly to
manufacturers or other end-users. On a pro forma basis assuming the Clinton
Acquisition, the Mitchell Acquisition and the Macpherson Acquisition were
consummated on January 1, 1996, Unity's net sales would have accounted for
approximately 5.9% of the Company's 1996 consolidated net sales.
PRODUCTS. Unity's product line includes genuine and generic replacement
parts, needles, motors, tables, stands, cleaning guns and sewing lights. Unity
offers over 70,000 items. Since Unity's customers (other than Sunbrand) are
dealers who typically resell to medium-sized and smaller apparel manufacturers,
Unity's sales have generally been substantially comprised of more economical
generic replacement parts rather than genuine parts. In each of the past three
years, generic parts have accounted for over 92% of Unity's net sales.
SUPPLIERS. Unity purchases the majority of its products from the Far East
and Germany. Japanese and German generic parts are generally regarded as the
highest quality. Taiwanese products have a lesser
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reputation but are lower priced, and Unity purchases many commodity items from
Taiwan in order to meet customers' low cost needs. In 1996, approximately 41% of
Unity's purchases came from Japan, 9% from Germany and 13% from Taiwan. United
States purchases accounted for approximately 23% of the total in 1996, and the
balance of its purchases came from Sunbrand.
Unity purchases generic parts from hundreds of small manufacturers,
principally through trading houses or similar arrangements. Many parts made in
Japan and Taiwan are available to Unity's competitors through similar
arrangements. However, Unity has exclusive arrangements with some manufacturers
that give it either sole distribution rights or shared rights with a limited
number of other wholesalers.
Unity's largest supplier is Sogawa, located in Osaka, Japan. The primary
products purchased by Unity from Sogawa are hooks used for sewing equipment,
principally Hirose hooks. In 1996, Hirose hooks comprised approximately 19.9% of
Unity's total sales, and Sogawa products accounted for approximately 34.3% of
Unity's purchases.
SALES AND DISTRIBUTION. Unity operates warehouses in Carteret, New Jersey;
Los Angeles, California; and Miami, Florida. The Carteret warehouse serves the
eastern and midwestern United States, from Massachusetts to Georgia, and as far
west as Dallas. The Los Angeles facility serves the western United States and as
far east as Denver. The Miami facility principally serves the Latin American
trade. The Miami office initially collected orders that were filled from the
Company's principal warehouse. Due to a rapid increase in orders, Unity opened a
full stocking warehouse in Miami in April 1993. During 1996, the Miami warehouse
filled approximately 85% of the orders taken by the office, and Unity plans to
expand the Miami product line to improve same-day delivery capability.
Unity utilizes a sophisticated inventory tracking computer system that
closely analyzes inventory turnover for each replacement part. This system
enables Unity to minimize inventory levels, yet maintain a very high service
level.
Unity markets its products through its extensive 700 page catalog, which is
a leading source of information for dealers of replacement parts and supplies.
In addition, Unity currently employs two full-time traveling salesmen who visit
regularly with dealers and eight customer service representatives who regularly
visit with large accounts to assist in service, delivery and new product needs.
Most of Unity's orders are booked via telephone or facsimile due to the time
sensitivity of the typical customer's needs. Both New York and California have
nationwide 800 telephone service, and the Miami office offers 800 telephone
service throughout Latin America.
Approximately half of all of Unity's shipped orders are sent directly to the
end-user, with dealers receiving, and subsequently redistributing, the other
half. Whenever Unity delivers a product directly to an end-user, the dealer's
label is placed on the package. U.P.S. ground deliveries represent approximately
80% of Unity's total deliveries, with overnight service comprising the remaining
20%. In order to reduce delivery time to customers, Unity often direct drop
ships to end-users, thus bypassing inventory and shipping, and reducing the cost
to Unity.
CUSTOMERS. Unity sells to a network of over 1,000 independently owned and
operated dealers, none of which accounted for more than 2.0% of Unity's net
sales in 1996. Historically, a majority of Unity's sales have been to customers
in the United States, although sales to customers in Latin America have
increased significantly in recent years. Approximately 14% of Unity's sales in
1990 were to Latin America, which increased to 25.2% in 1996. The balance of
Unity's sales were to customers in the United States and Canada. To increase the
Company's participation in the Latin American markets, Unity plans to open a new
warehouse in Colombia, and similar plans in two other South American countries
are under negotiation.
COMPETITION. Unity's business is highly competitive. There are four other
significant wholesalers that supply dealers with apparel parts and supplies,
none of which has more than two warehouses, as compared
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to Unity's three distribution centers. In addition, there are numerous smaller,
regional competitors, and in some instances dealers bypass wholesalers and buy
directly from manufacturers or trading companies when purchasing a significant
quantity of parts or supplies or if it is otherwise cost effective. Competition
is principally based on product availability, price and speed of delivery.
W&G, LTD.
W&G, Ltd., a United Kingdom corporation organized in 1908, is a leading
distributor of generic and genuine replacement parts, supplies and specialized
equipment to apparel manufacturers and dealers in the United Kingdom and Europe.
The Company believes that the breadth of W&G, Ltd.'s inventory and its
attainment of certain quality control standards make it a leading one-stop
provider for apparel manufacturers and dealers in the United Kingdom and Europe.
On a pro forma basis assuming the Clinton Acquisition, the Mitchell Acquisition
and the Macpherson Acquisition were consummated January 1, 1996, W&G, Ltd.'s net
sales would have accounted for approximately 4.0% of the Company's 1996
consolidated net sales.
PRODUCTS. W&G, Ltd. maintains an inventory of over 35,000 items, the
majority of which are generic parts for sewing machines from virtually every
manufacturer in the industry. In addition to generic machine parts, W&G, Ltd.
sells two needle lines, sewing equipment, cutting equipment and pressing
equipment.
W&G, Ltd. purchases a majority of its products from the Far East and
Germany, and also purchases a considerable amount of its products from Sunbrand
and Unity. W&G, Ltd. has long standing non-exclusive relationships with its
primary suppliers.
SALES AND DISTRIBUTION. W&G, Ltd. sells the majority of its products
directly to apparel manufacturers through its ten sales representatives. In
addition, W&G, Ltd. currently employs three representatives to service its
wholesale dealer business.
W&G, Ltd.'s central warehouse in Braintree, Essex is located close to major
highways, railways to London and Stanstead Airport. In addition to the Braintree
warehouse, two additional stocking facilities are located in Nottingham and
Leicester. To meet customers' time requirements, W&G, Ltd. often uses Royal Mail
and Parcelforce for next day delivery anywhere in the U.K. Less urgent shipments
are sent via regular mail.
CUSTOMERS. W&G, Ltd. has been servicing its top ten customers for an
average of 16 years. During 1996, approximately 60% of sales were direct to
manufacturers, with the balance generated through dealer accounts. None of W&G,
Ltd.'s customers accounted for more than 9.7% of its 1996 net sales.
COMPETITION. W&G, Ltd.'s business is highly competitive. There are a number
of smaller, local competitors, as well as one major national U.K. competitor
comparable in size to W&G, Ltd. Competition is principally based on product
availability, price and speed of delivery.
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CLINTON
Clinton, founded by its current management in 1985 and acquired by the
Company in February 1996, is a distributor of screen printing equipment and
supplies for the apparel industry. See "The Company-- The Clinton Acquisition."
Screen printing is the process by which designs are applied to fabric or other
material using patterned screens. The Company acquired Clinton pursuant to its
business strategy of expanding the product lines it is able to offer through its
existing distribution network. On a pro forma basis, assuming that the Clinton
Acquisition, the Mitchell Acquisition and the Macpherson Acquisition were
consummated on January 1, 1996, Clinton would have accounted for approximately
17.2% of the Company's 1996 consolidated net sales (including Mitchell, which
would have accounted for approximately 0.5% of such net sales).
PRODUCTS. Clinton sells and services a complete line of automatic and
manual screen printers, gas and electric dryers and other accessory equipment
for the screen printing industry. Clinton also offers a comprehensive line of
textile screen printing supplies, including inks, chemicals, emulsions, screen
frames, screen mesh and other accessory items.
The majority of Clinton's products are used to produce designs on men's,
women's and children's T-shirts and sweatshirts and other apparel items. Other
significant applications include home furnishings, towels, hats, industrial
fabrics and other non-apparel promotional articles made from fabric materials.
Clinton also sells a complete line of equipment to graphics customers primarily
for promotional signs and posters.
Clinton distributes the M&R line of screen printing equipment and dryers.
M&R is a major United States manufacturer of screen printing equipment. Pursuant
to two distribution agreements between Clinton and M&R, Clinton has certain
distribution rights for M&R's screen printing equipment. With respect to M&R's
textile equipment, Clinton has exclusive rights to distribute such equipment in
five southeastern states of the United States and in Latin America, Europe,
Africa, the Middle East, Asia and Australia (the "Worldwide Territory"). Clinton
has nonexclusive rights to distribute M&R's textile equipment in Mississippi and
Kentucky. With respect to M&R's graphics equipment, Clinton has nonexclusive
rights to distribute such equipment in seven southeastern states of the U.S. and
the Worldwide Territory. The M&R agreement governing U.S. territories expires on
December 31, 1998 and continues from year to year thereafter, although it may be
terminated at any year end if written notice is given to the other party on or
before July 1 of such year. The M&R agreement governing international territory
expired on December 31, 1996 but continues from year to year thereafter,
although it may be terminated by either party at any year end if written notice
is given to the other party on or before September 1 of such year. M&R products
comprised 51.2% of Clinton's total purchases in 1996. No other vendor accounted
for more than 18.0% of Clinton's purchases in 1996.
SALES AND DISTRIBUTION. Clinton's marketing strategy has been to align
itself with single manufacturers of major screen printing products, which has
allowed Clinton to secure agreements with leading manufacturers of certain
products. The Company believes that these affiliations have created competitive
advantages for Clinton, including closer working relationships, increased buying
power, opportunities for special terms and prices, increased stocking levels
(which significantly reduces backorders) and enhanced product knowledge by
Clinton personnel.
Clinton believes that it is one of the few companies within the screen
printing industry to carry an extensive inventory of both equipment and
supplies. This has enabled Clinton to serve as a "one-stop source" for
customers, providing them with the convenience of dealing with a single supplier
for all of their screen printing needs. By purchasing an extensive inventory of
equipment and supplies through single sources, Clinton is able to stock a more
targeted inventory, as well as allowing for quicker delivery.
Clinton direct sells to its customers with experienced sales representatives
supported by telemarketing, direct marketing materials and a monthly newsletter.
Clinton has a complete working showroom for
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sales demonstrations, customer seminars and personnel training. Customer classes
are given monthly in both English and Spanish.
Clinton has its headquarters in Miami Lakes, Florida with distribution
warehouses in Miami Lakes, Florida; Charlotte, North Carolina; Los Angeles,
California; Mexico City, Mexico; and Braintree, United Kingdom. Clinton markets
its products in the United States and Latin America through a sales force
currently numbering 17 backed up by a telemarketing department. In addition,
approximately eight distributors are currently used in Latin America. Outside of
the Western Hemisphere, sales are made primarily by approximately 40
distributors located throughout the world.
CUSTOMERS. Clinton sells its products to over 1,000 customers in the screen
printing industry, primarily apparel manufacturers and contract apparel
printers. These customers are located principally in the southeastern United
States, but also in Latin America, Europe, Asia, Africa and the Far East.
Clinton's largest customer accounted or approximately 3.5% of Clinton's 1996 net
sales, and Clinton's top ten customers accounted for approximately 22.2% of 1996
net sales.
COMPETITION. M&R's screen printing equipment has captured a major share of
the U.S. market over the past several years, and Clinton estimates that M&R had
approximately 70% of the U.S. market for such equipment in 1996. Competition
with respect to Clinton's other products is strong, mainly from a variety of
distributors of general printing equipment and supplies.
MACPHERSON
Macpherson, founded in 1976, is principally engaged in the distribution
throughout the United States and Canada of embroidery equipment used in the
apparel industry. Such embroidery equipment is used to create designs on apparel
and other products utilizing one or more needle heads and thread. Embroidery can
add value to a finished product with little incremental expense, and
technological developments in recent years have improved equipment capabilities
and lowered capital costs.
The Company acquired Macpherson in January 1997 using a portion of the net
proceeds from the sale of the Old Notes. On a pro forma basis, assuming that the
Clinton Acquisition, the Mitchell Acquisition and the Macpherson Acquisition
were consummated on January 1, 1996, Macpherson would have accounted for
approximately 36.7% of the Company's 1996 consolidated net sales. The Company
believes that Macpherson's products can be effectively marketed through the
Company's existing sales channels without significant added costs. In addition,
the Company believes that the products distributed by Clinton and Macpherson are
complementary and can be targeted for sale to the same end-user group.
PRODUCTS. Macpherson provides a complete line of technologically advanced
embroidery equipment for the apparel industry, as well as customer service,
support and training, and a comprehensive line of embroidery supplies and
accessories. Macpherson's principal supplier of embroidery machines is Barudan,
a Japanese manufacturer.
Embroidery machines may contain single or multiple sewing heads. Each sewing
head consists of a group of needles that are fed by spools of thread attached to
the equipment. The needles operate in conjunction with each other to embroider
the thread into the cloth or other surface in such configuration as to produce
the intended design. Thread flowing to each needle can be of the same or varying
color. Each head creates a design, and heads operating at the same time create
the same size and shape designs. Thus, a 30 head machine with all heads
operating simultaneously can create an identical-design on thirty surfaces. The
design and production capabilities are enhanced through the integration of
computers and specialized software applications.
Growth in Macpherson's sales of singlehead and multihead machines continues
to be driven by technological advances in the machines and related computer
software. These advances have reduced
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customers' embroidery production costs and created new embroidery applications
and markets. Macpherson collaborates with its suppliers in connection with their
development of new embroidery equipment and develops application software to
enhance the efficiency of producing embroidered designs.
Barudan is one of the world's major manufacturers of embroidery machines.
Under the distribution agreement among Macpherson, Barudan and certain of their
affiliates, Macpherson is the exclusive distributor of new Barudan embroidery
equipment in the United States and Canada until December 31, 2003. The Barudan
Agreement automatically renews for a period of five years unless either party
terminates such agreement on not less than 30 days notice. Purchases of Barudan
products accounted for 78.0% of Macpherson's 1996 total purchases. No other
product accounted for more than 5.3% of Macpherson's 1996 purchases.
SALES AND DISTRIBUTION. Macpherson has been selling embroidery equipment in
the United States and Canada since 1976, and believes that it is one of the
major distributors of Barudan equipment in the world. Macpherson is
headquartered in Greensboro, North Carolina, and has seven additional sales
offices located throughout the United States and in Canada. Each location has
showrooms for the demonstration of equipment and embroidery techniques.
Macpherson markets its products through 13 sales representatives and four
dealers. In addition, the sales force is supported by 37 technical
representatives who travel throughout the sales territory to train, instruct and
offer technical assistance to Macpherson's customer base. Macpherson also
maintains eight technicians at its Greensboro, North Carolina, and Costa Mesa,
California, facilities to offer telephone support to customers in technical
applications.
Macpherson provides a full training facility located in Greensboro, North
Carolina, which conducts technical and application training courses throughout
the year. In addition, a series of regional training sessions are conducted
throughout the year at various trade shows, sales offices, and customer
locations.
CUSTOMERS. The products sold by Macpherson are used primarily by contract
embroiderers, manufacturers of apparel and fashion accessories, retail stores
and embroidery entrepreneurs serving specialized niche markets. Macpherson's
customers include Champion Products, Liberty Embroidery, Antiqua, Russell
Athletic, Things Remembered and other major apparel manufacturers. Macpherson's
largest customer accounted for approximately 4.9% of Macpherson's 1996 net
sales, and its top ten customers accounted for approximately 19.9% of its 1996
net sales.
COMPETITION. Macpherson competes with Hirsch International Corp., a
distributor of Tajima singlehead and multihead embroidery machines. The Company
believes that sales of Tajima machines comprised approximately 55.0% of the U.S.
market in 1996, compared to approximately 40.0% for Barudan. Macpherson also
competes with a number of smaller distributors of competitive embroidery
machines and with original equipment manufacturers, such as Melco Industries,
which distribute products directly into Macpherson's markets. Macpherson
believes it competes on the basis of the quality of the embroidery equipment it
distributes, as well as its knowledge, experience and customer service.
Macpherson's customers are subject to competition from importers of embroidered
products, which could effect Macpherson's operations.
THE LEASING COMPANY
In connection with the Macpherson Acquisition, the Company acquired the
Leasing Company, a leasing company affiliate of Macpherson, for approximately
$0.5 million, payable over three years, plus interest at 6.0% per annum. The
Leasing Company commenced operations in March 1996. The Company intends to
utilize the Leasing Company to offer flexible lease financing to its customers
to support the Company's sales of equipment.
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The Leasing Company intends to sell a portion of its leases to financial
institutions on a non-recourse basis. The selling price of the leases to
financial institutions is expected to equal the sales price of the equipment
leased, plus a portion of the finance charges paid by the lessee. In addition,
at the end of the lease term, the residual value of the equipment will either
revert to the Leasing Company or the Leasing Company will sell the equipment to
the lessee at terms agreed upon in the original lease agreement. Each lease will
generally have a term of 3-5 years.
The Leasing Company will retain a majority of its leases. The Company
intends to make an equity investment in the Leasing Company of approximately
$3.5 million in 1997, and the Leasing Company is expected to arrange for
additional borrowings to finance its operations.
Prior to its acquisition by the Company, substantially all of the assets and
liabilities of the Leasing Company were removed. Accordingly, the principal
benefit of the acquisition was the existing organization of the Leasing Company.
The Leasing Company will be an Unrestricted Subsidiary for purposes of the
Indenture and, therefore, will not be subject to the covenants contained in the
Indenture. See "Description of Senior Notes."
LEADTEC
Leadtec, founded by its current chief executive officer in 1978 and acquired
by the Company's Predecessor in 1985, develops, distributes and supports
computer software and specialized hardware for sewn products manufacturers. On a
pro forma basis assuming the Clinton Acquisition, the Mitchell Acquisition and
the Macpherson Acquisition were consummated January 1, 1996, Leadtec's net sales
would have accounted for approximately 3.5% of the Company's 1996 consolidated
net sales.
PRODUCTS. Leadtec's primary product is "Satelite Plus", which is a
production planning and control system designed to allow apparel factory
operators to monitor production progress and efficiency. The manufacture of sewn
products has unique characteristics like piecework incentives, products defined
by style/color/size and highly engineered labor operations which render generic
manufacturing software unable to deliver satisfactory solutions for the control
and management of production. Leadtec's Satelite Plus-Registered Trademark-
system is specifically designed for the sewn product manufacturing process.
Satelite Plus is available in both "batch" and "real-time" formats. Under
the batch product, production operators clip bar-coded coupons to capture data
for each bundle or lot they produce. At the end of the day, or possibly at
predetermined intervals during the day, coupons are submitted in "batch" for
data input. This data is then processed by the Satelite Plus system to calculate
pay and generate reports for management.
The real-time Satelite Plus product is a computerized system that captures
production events as they occur and provides corresponding up-to-the-minute
information to management. When the real- time system is installed at a factory,
production workers have Satelite Plus proprietary terminals at their
workstations that communicate with the computer system. Operator terminals are
multilingual, and are capable of communicating in English, Spanish and other
languages. The operators use these terminals to report for work, start bundles,
report difficulties, and pace themselves for improved performance. The regular
input of data by operators during the work shift and the processing of that data
by Satelite Plus enables management to monitor the productivity of the factory
on a real-time basis. In addition, Satelite Plus can simulate the factory's
performance after giving effect to changes under consideration by management.
For example, the system predicts production on each job, recommends transfers,
and projects the effects of each transfer on excess costs and daily production.
The Satelite Plus real-time system is a complete package of hardware,
software, installation and training support. The main processing computer is an
IBM AS/400 with display stations for plant managers, supervisors, engineers,
production planners and office/support staff. Production employees have
65
<PAGE>
individual Satelite Plus terminals with barcode slot readers and displays for
two-way communication with the system. The Network Manager consists of an IBM
compatible PC and specialized communications hardware to complete the link
between the AS/400 and the operator terminals.
SALES AND DISTRIBUTION. Leadtec, through Satelite Plus, believes it has the
world's largest installed base of batch and real-time apparel production control
systems, with 200 installed systems and 44,300 user terminals as of December 31,
1996. To capitalize on its product recognition and the growth of off-shore
apparel production, Leadtec established distribution arrangements in Australia
in 1990, added its multi-lingual capabilities in 1991 and is presently enhancing
its systems for sale in Latin America.
Sales of Satelite Plus factory installations typically require long
lead-times to develop, given the significant capital expenditure and management
resource commitment required. Leadtec's products are sold by a three-person
direct sales force based in Atlanta, as well as by Sunbrand sales
representatives who generate sales opportunities for Leadtec. Typically,
customers commit to implement Satellite Plus in one plant on a trial basis. If
the trial is successful, the customer then rolls-out the product on a plant by
plant basis to the remainder of its manufacturing facilities. Accordingly,
Leadtec's sales may vary significantly from year to year, as an installation of
numerous plants for a single large customer can have a major impact on sales
volume in any single year.
SUPPORT AND DEVELOPMENT. Leadtec provides installation and training support
on-site at the customer's facility. Leadtec also provides software and
proprietary hardware maintenance services on a contract or time and material fee
basis. Support is offered to its real-time customers 24 hours per day, 7 days
per week. Virtually all software support after the installation and training
period is provided over the telephone by voice and/or data linkages.
Approximately once each year, Leadtec distributes software updates to Satelite
Plus customers who have an annual software maintenance contract. Support of
proprietary hardware is provided on a time and material or annual contract basis
using Leadtec's repair center in California or vendors located in Los Angeles
and in Europe. Leadtec also provides software development services to customers
who require added features or customize software modules. Most software
development is provided on a time and material fee basis.
CUSTOMERS. Leadtec's customers include Levi Strauss, Fruit of the Loom, Lee
Apparel, Van Heusen and Healthtex.
COMPETITION. Leadtec is not aware of any system similar to Satelite Plus'
real-time system. However, its real-time system competes with traditional batch
systems. There are numerous competitors with respect to the batch system.
Competition is usually based on price, functionality and support.
PROPERTIES
The Company leases all of its office and warehouse properties at its various
locations, except for the facilities owned by W&G, Ltd. in Braintree, England.
The Company's headquarters are located in approximately 33,000 square feet of
space in Carteret, New Jersey under a lease expiring in 2005, which also serves
as the headquarters and principal warehouse for Unity. Sunbrand's Atlanta
offices and warehouse occupy approximately 88,000 square feet under a lease
expiring in 2001. Clinton operates its headquarters, showroom and warehouse and
shipping facilities out of approximately 40,000 square feet located in Miami
Lakes, Florida under a lease expiring in 1998. The Company's other operations
are located in smaller leased spaces. The Company believes that, if necessary,
it would be able to lease adequate replacement space without material additional
expense.
EMPLOYEES
As of December 31, 1996, the Company employed 433 full time employees,
including 5 by WG Apparel, 237 by Sunbrand, 60 by Unity, 38 by W&G, Ltd., 71 by
Clinton and 22 by Leadtec. The Company's employees are not represented by any
labor union. As a result of the Macpherson Acquisition, approximately 141
employees joined the Company's workforce effective January 3, 1997, none of whom
is represented by a union. The Company considers its employee relations to be
good.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following table sets forth certain information regarding the Company's
executive officers and directors. Ages are as of January 31, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- --------------------------------- --- -----------------------------------------------------
<S> <C> <C>
John K. Ziegler(1)............... 59 Chairman of the Board, Chief Executive Officer and
Director
Maxwell L. Tripp................. 57 President, Chief Operating Officer and Director
John K. Ziegler, Jr. ............ 29 Chief Financial Officer
Jack Klasky...................... 53 Vice President, President of Leadtec and Director
Alan B. Lee...................... 49 Vice President, President of Unity and Director
Marc Glazer...................... 35 Director
Richard J. Mackey(1)............. 65 Director and Consultant to the Company
Mary-Anne Kieran................. 37 Secretary
Sidney B. Becker(2).............. 86 Director
Christopher W. Roser(2).......... 38 Director
Frank E. Walsh, III(1)(2)........ 30 Director
</TABLE>
- ------------------------
(1) Member of the Compensation and Stock Incentive Committee of the Board of
Directors.
(2) Member of the Audit Committee of the Board of Directors.
JOHN K. ZIEGLER. Mr. Ziegler has been Chairman, Chief Executive Officer and
a Director of the Company since its incorporation in 1994. From 1987 to 1994, he
served as Chairman and Chief Executive Officer of the Company's Predecessor. Mr.
Ziegler joined the Company's Predecessor in 1966 as the Controller and
Treasurer. During his 28 year tenure with the Company's Predecessor, Mr. Ziegler
held the positions of Controller, Treasurer, Executive Vice President, Chief
Operating Officer, President and Director. Prior to joining the Company's
Predecessor, he worked for six years with Coopers & Lybrand. Mr. Ziegler is a
certified public accountant and received a Bachelor of Arts degree from
Lafayette College and a Master of Business Administration from New York
University's Stern School of Business. Mr. Ziegler is on the Board of Directors
of Worldtex, Inc. ("Worldtex"), a manufacturer of covered elastic yarn that is
listed on the New York Stock Exchange.
MAXWELL L. TRIPP. Mr. Tripp has been President, Chief Operating Officer and
a Director of the Company since January 1, 1997. From the date of the Company's
incorporation in 1994 until 1996, he was a Vice President and Director of the
Company and he served as Sunbrand's President from 1985 until 1996. He joined
the Company's Predecessor in 1960 and served as a technical service
representative and a field sales representative. Mr. Tripp became Vice President
of Sales of Sunbrand in 1977 and Executive Vice President of Sales in 1982.
Prior to joining the Company, Mr. Tripp spent five years at Swirl Inc. Mr. Tripp
regularly attends sales and technical workshops and is an active member in
several industry associations. Mr. Tripp is the Chairman of the Associate Member
Congress and the Chairman of the
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Technical Advisory Committee of the American Apparel Machinery Association and
has been honored numerous times in recognition of his contributions to the
apparel industry.
JOHN K. ZIEGLER, JR. Mr. Ziegler has been Chief Financial Officer of the
Company since September 1995. From 1994 until 1996, he also served as Controller
of the Company. From 1990 to 1994, Mr. Ziegler worked as an accountant for
Coopers & Lybrand. Mr. Ziegler is a certified public accountant and received his
Bachelor of Arts degree from Lafayette College. John K. Ziegler, Jr. is the son
of John K. Ziegler.
JACK KLASKY. Mr. Klasky has been a Vice President and Director of the
Company since its incorporation in 1994. He founded Leadtec in 1978 and has
served as its President since that time. His primary responsibilities include
short- and long-range planning, marketing and overall management. Previously, he
had been a Vice President of Lexitron Corporation and a program manager for
Litton Industries, where he was responsible for managing development of large
defense oriented computer systems. Mr. Klasky is a member of the American
Apparel Manufacturers Association and numerous other industry organizations. He
received a Bachelor of Science degree in Engineering in 1965 and a Master of
Business Administration in 1966 from UCLA.
ALAN B. LEE. Mr. Lee has been a Vice President and Director of the Company
since its incorporation in 1994. He has served as Unity's President since 1985.
Previously, Mr. Lee served as Unity's Controller from 1980 to 1985 and as a
staff accountant with the Company's Predecessor from 1975 to 1980. Mr. Lee holds
a Master of Business Administration from the City University of New York and a
Bachelor of Arts degree from Queens College, City University of New York.
RICHARD J. MACKEY. Mr. Mackey has served as a Director and consultant to
the Company since January 1, 1997. From the date of the Company's incorporation
in 1994 until 1996, he was President and a Director of the Company. Mr. Mackey
joined the Company's Predecessor in 1976 as a Vice President and Treasurer.
During his 18 year tenure with the Company's Predecessor, Mr. Mackey served as
Treasurer, Executive Vice President, Director, President and Chief Operating
Officer. Since 1992, Mr. Mackey has served as Chairman and Chief Executive
Officer of Worldtex, in which capacity he devotes a substantial amount of his
business time. Prior to joining the Company's Predecessor, Mr. Mackey worked for
Viewlex, Republic Intermodal Inc., Avis Inc., and Arthur Andersen. Mr. Mackey is
a certified public accountant and received a Bachelor of Science degree from the
University of Illinois.
MARY-ANNE KIERAN. Ms. Kieran has been the Secretary of the Company since
1995. From 1987 until 1994, she was employed at the Company's Predecessor where
she served as Secretary from 1992 until 1994. Ms. Kieran has a Bachelor of Arts
degree from Fordham University.
SIDNEY B. BECKER. Mr. Becker has been a Director of the Company since its
incorporation in 1994. From 1987 until 1992, Mr. Becker was a Director of the
Company's Predecessor. From 1976 until 1987, Mr. Becker served as the Chairman
of the Board of Directors and Chief Executive Officer of the Company's
Predecessor. During the years 1970 through 1976, he was a member of the Board of
Directors of and a consultant to the Company's Predecessor. Prior to such time,
from 1958 until 1970, Mr. Becker first served as Chairman of the Company's
Predecessor, and from 1958 until 1965, he also served as the Chief Executive
Officer of the Company's Predecessor. Mr. Becker also serves on the Board of
Directors of Worldtex.
MARC GLAZER. Mr. Glazer has been Vice President of Operations/Domestic
Sales of Clinton and a Director of the Company since the Company acquired
Clinton effective February 1, 1996. Prior to the Clinton Acquisition, from 1985
to 1996, Mr. Glazer served on the Board of Directors of Clinton and acted as
Clinton's Vice President of Operations/Domestic Sales. Before joining Clinton,
Mr. Glazer served as Corporate Controller for Precision Screen Machines.
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<PAGE>
CHRISTOPHER W. ROSER. Mr. Roser has been a Director of the Company since
its incorporation in 1994. Since 1987, Mr. Roser has been a General Partner of
The Roser Partnerships I, II and III, which are venture capital partnerships.
From 1986 until 1987, Mr. Roser worked at Ladenburg Thalmann & Co.
("Ladenburg"), an investment bank listed on the New York Stock Exchange, as an
associate in the corporate finance department. For one year prior to such period
from 1985 to 1986, he was a securities analyst with Equity Research Associates,
a subsidiary of Ladenburg. During the years 1982 through 1984, Mr. Roser was
employed as a staff public accountant with Main Hurdman KMG. Mr. Roser graduated
from the University of Colorado in 1981 with a Bachelor of Arts degree in
economics and received a Master of Business Administration from New York
University's Stern School of Business in 1984. Mr. Roser is also a Director of
Hauser Chemical Research, Inc., a publicly traded chemical company, and the
North American Technology Group, Inc., a publicly traded diversified concern.
FRANK E. WALSH, III. Mr. Walsh has been a Director of the Company since its
incorporation in 1994. He is Vice President of Jupiter Capital Management, a New
Jersey registered investment advisory firm, where he has been employed since
1991. Mr. Walsh also serves on the Board of Directors of Dynamotion/ ATI, a
publicly traded capital goods manufacturer for the printed circuit board
industry.
Each director will hold office for one year or until his or her successor
has been elected and qualified. Officers serve at the pleasure of the Board of
Directors.
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION. The following table sets forth certain information
concerning the compensation earned during the year ended December 31, 1996 for
the Chief Executive Officer of the Company and its four other most highly
compensated executive officers (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
--------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2)
- ---------------------------------------------------------------- --------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
John K. Ziegler................................................. 1996 $ 200,000 $ 100,000 $ 3,000
Chairman of the Board, Chief Executive Officer and Director
Jack Klasky..................................................... 1996 154,908 100,151 3,000
Vice President, President of Leadtec and Director
Maxwell L. Tripp................................................ 1996 124,840 105,910 3,000
Vice President, President of Sunbrand and Director(3)
Alan B. Lee..................................................... 1996 110,000 30,000 3,000
Vice President, President of Unity and Director
Richard J. Mackey............................................... 1996 100,000 0 0
President and Director(4)
</TABLE>
- ------------------------
(1) The aggregate amount of perquisites and other personal benefits, if any, did
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for each Named Executive Officer and has therefore been omitted.
(2) Amounts shown reflect matching contributions made by the Company to the
Company's Savings and Employee Stock Ownership Plan, a defined contribution
plan, of $3,000 on behalf of the indicated Named Executive Officers.
(3) Effective January 1, 1997, Mr. Tripp became President and Chief Operating
Officer of the Company and remained a Director of the Company.
(4) Effective January 1, 1997, Mr. Mackey became a consultant to the Company and
remained a Director of the Company.
OPTION GRANTS. No stock appreciation rights have been granted by the
Company. The Company granted no stock options during the year ended December 31,
1996.
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<PAGE>
AGGREGATED OPTIONS. The table below sets forth certain information with
respect to options held as of December 31, 1996 by each Named Executive Officer.
AGGREGATED OPTIONS TABLE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT FISCAL YEAR-END
AT FISCAL YEAR-END (#) ($)
------------------------------- --------------------
<S> <C> <C>
EXERCISABLE (E)/ EXERCISABLE (E)/
NAME UNEXERCISABLE (U) UNEXERCISABLE (U)
- ---------------------------------------- ------------------------------- --------------------
John K. Ziegler......................... 1,600(E) $ 30,400
2,400(U) 45,600
Richard J. Mackey....................... 800(E) 15,200
1,200(U) 22,800
Maxwell L. Tripp........................ 2,000(E) 38,000
3,000(U) 57,000
Jack Klasky............................. 2,000(E) 38,000
3,000(U) 57,000
Alan B. Lee............................. 2,000(E) 38,000
3,000(U) 57,000
</TABLE>
RETIREMENT PLAN. Under the Company's non-contributory retirement plan,
eligible employees will be entitled at the normal retirement age of 65 to an
annual retirement benefit equal to 11/4% of their earnings up to the maximum
earnings subject to Social Security withholding and 1 % of all earnings in
excess of such amount but less than $222,220 (as adjusted annually for cost of
living increases) for each full year of service under the plan. Benefits under
this plan are 100% vested after five years of service. The estimated annual
retirement benefits payable under the plan formula described above at current
Social Security withholding rates, assuming that normal retirement occurs at age
65, to the Named Executive Officers are as follows: to Mr. Ziegler, $107,500; to
Mr. Mackey, $64,455; to Mr. Tripp, $45,619; to Mr. Klasky, $39,729; and to Mr.
Lee, $51,604.
Under the Company's supplemental retirement plan, key employees selected by
the Compensation and Stock Incentive Committee (the "Committee") are entitled to
an amount, payable monthly over a ten-year period following any specified event
of retirement, death, disability or termination of employment, equal to a
percentage (up to 40%) determined by the Committee of the portion (determined by
the Committee) of the employee's base salary for the Company's last full fiscal
year prior to the specified event, multiplied by the employee's years of
participation in the plan (not exceeding 10). Thus, upon normal retirement at
age 65 (or, if later, then years as a participant), an employee receiving the
maximum award possible under the plan will receive a total retirement benefit of
400% of base salary. If death or disability occurs prior to age 65, the employee
will receive a total death or disability benefit of up to 400% of base salary.
After three full years as a plan participant, 30% of the retirement benefit
becomes vested and thereafter an additional 10% of the retirement benefit vests
for each additional full year of service. Upon involuntary termination (other
than for cause, as defined) of any participant's employment or upon voluntary
early retirement of any "designated participant" selected by the Committee, a
portion of the vested retirement benefit will be paid which is in the same ratio
to the full vested benefit as the ratio of the total years worked for the
Company to the total years which would have been worked to age 65. Amounts
representing annual accruals under the plan have not been and cannot be readily
calculated for individual participants. Messrs. Ziegler, Tripp, Klasky and Lee
participate in the plan, and are entitled to benefits of 40%, 37%, 31% and 27%,
respectively, of their base salary per year for 10 years.
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<PAGE>
EMPLOYMENT CONTRACTS
The Company has entered into employment contracts with Mr. Ziegler and Mr.
Tripp, Alan B. Lee, President of Unity, Jack Klasky, President of Leadtec and
Jerry Lee, President of Macpherson. The term of each of the Company's employment
contracts with Mr. Ziegler, Mr. Tripp, Mr. A. Lee, Mr. Klasky and Mr. J. Lee is
indefinite, but each employment contract may be terminated by the Company upon
not less than one year written notice. Despite the existence of employment
contracts, the continued employment of such persons cannot be assured. The loss
of the services of any such person could have a material adverse impact on the
Company's business, financial condition and results of operations. See "Risk
Factors-- Dependence on Existing Management."
COMPENSATION OF DIRECTORS
The Company does not compensate the members of its Board of Directors for
their service as directors.
COMPENSATION AND STOCK INCENTIVE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, John K. Ziegler and Richard J. Mackey, Chief Executive
Officer and President of the Company, respectively, served on the Compensation
and Stock Incentive Committee of the Company's Board of Directors. Mr. Ziegler
and Mr. Mackey also serve on the Board of Directors of Worldtex. There are no
other Compensation and Stock Incentive Committee interlocks or insider
participation with respect to such individuals. Effective January 1, 1997, Mr.
Mackey became a consultant to the Company.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 31, 1997
regarding the beneficial ownership of: (i) each class of the Company's voting
securities by each person who is known by the Company to be the beneficial owner
of more than 5% of any class of the Company's voting securities, and (ii) each
class of equity securities of the Company by (a) each director of the Company,
(b) each of the Named Executive Officers (as defined under the heading
"Executive Compensation"), and (c) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES(1) CLASS(2)
- --------------------------------------------------------------------------------- ------------------- -------------
<S> <C> <C>
John K. Ziegler.................................................................. 116,959(3) 11.7%
c/o Willcox & Gibbs, Inc.
900 Milik Street
Carteret, New Jersey 07008
Richard J. Mackey................................................................ 66,558(4) 6.6
104 Crescent Beach Drive
Huntington Bay, New York 11743
The Roser Partnership II, Ltd.................................................... 65,483(5) 6.5
1105 Spruce Street
Boulder, Colorado 80302
Sidney B. Becker................................................................. 26,193(6) 2.6
201 East 79th Street
Apartment 19B
New York, New York 10021
Frank E. Walsh, III.............................................................. 130,965(7) 13.0
330 South Street
Morristown, New Jersey 07962
Marc Glazer...................................................................... 33,657 3.3
c/o Clinton Machinery & Supply Co.
5800 Miami Lakes Drive
Miami Lakes, Florida 33014
Jack Klasky...................................................................... 36,450(8) 3.6
c/o Leadtec Systems, Inc.
6800 Owensmouth Avenue
Suite 320
Canoga Park, California 91303
Alan B. Lee...................................................................... 12,644(9) 1.3
c/o Unity Sewing Supply Co.
900 Milik Street
Carteret, New Jersey 07008
Maxwell L. Tripp................................................................. 43,138(10) 4.3
c/o Sunbrand
3900 Green Industrial Way
Atlanta, Georgia 30341
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES(1) CLASS(2)
- --------------------------------------------------------------------------------- ------------------- -------------
<S> <C> <C>
Company's Savings and Employee Stock Ownership Plan.............................. 167,005 16.6%
Riggs Bank, N.A., as trustee
808 17th St., N.W.
Washington, D.C. 20006
All directors and executive officers of the Company as a group................... 699,052(11) 69.5
</TABLE>
- ------------------------
(1) The persons included in the table had sole voting and investment power with
respect to shares reported as beneficially owned, except as otherwise
indicated in the following notes. The table includes shares beneficially
owned through the Company's Savings and Employee Stock Ownership Plan as of
March 31, 1997.
(2) Percentages are calculated by dividing (x) shares in the "Number of Shares"
column by (y) the sum of shares outstanding on March 31, 1997 and the shares
which a particular owner (or group of owners) has a right to acquire within
60 days of such dates.
(3) Includes 16,730 shares of common stock held by Mr. Ziegler as trustee for
the benefit of his wife, as to which Mr. Ziegler shares voting and
investment power, and 2,000 shares for which options are presently
exercisable.
(4) Includes 800 shares of common stock for which options are presently
exercisable.
(5) Christopher W. Roser, a director of the Company, is a principal of the
general partner of The Roser Partnership II, Ltd.
(6) Includes 26,193 shares of common stock owned by Mr. Becker's wife, as to
which he disclaims beneficial ownership.
(7) Includes 130,965 shares of common stock held by W.G. Inc. Trust under which
an uncle of Mr. Walsh acts as trustee and holds voting and investment power.
Mr. Walsh is a beneficiary of such trust.
(8) Includes 2,000 shares of common stock for which options are presently
exercisable.
(9) Includes 2,000 shares of common stock for which options are presently
exercisable.
(10) Includes 2,000 shares of common stock for which options are presently
exercisable.
(11) Includes 8,400 shares of common stock for which options are presently
exercisable.
DESCRIPTION OF CERTAIN INDEBTEDNESS
THE NEW CREDIT FACILITY
In connection with the sale of the Old Notes, the Old Credit Facility was
terminated and the Company entered into the New Credit Facility with
NationsBank, as lender. The New Credit Facility provides for borrowings of up to
$18.5 million in the aggregate outstanding at any time, subject to a borrowing
base limitation equal to 80% of the Company's eligible accounts receivable.
Borrowings under the New Credit Facility will bear interest at a rate per annum,
at the Company's option, equal to (i) NationsBank's prime rate plus 0.75% or
(ii) LIBOR plus 2.75%. The New Credit Facility is secured by all accounts
receivable of the Company and includes certain covenants applicable to the
Company, including requirements that the Company comply with certain financial
ratios. The New Credit Facility expires on July 13, 2001.
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<PAGE>
THE W&G, LTD. CREDIT FACILITY
In October 1996, W&G, Ltd. borrowed L1.0 million under the W&G, Ltd. Credit
Facility with Coutts & Co. The loan under the W&G, Ltd. Credit Facility bears
interest at a rate per annum equal to the bank's prevailing Base Rate, which is
currently 6.0% per annum, plus a margin of 2.25% per annum. The loan is payable
in eight semiannual installments of L125,000, commencing April 1997. The W&G,
Ltd. Credit Facility is secured by substantially all of the assets of W&G, Ltd.
The proceeds of this loan were used to repay indebtedness of W&G, Ltd. to the
Company, and the Company used such funds to repay higher cost indebtedness.
DESCRIPTION OF SENIOR NOTES
The Senior Notes are issued under the Indenture, dated as of January 3,
1997, among the Company, as issuer, the Subsidiary Guarantors and IBJ Schroder
Bank & Trust Company, as trustee (the "Trustee"). The terms of the Senior Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Senior Notes are subject to all such terms, and Holders of Senior
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions of certain terms contained therein. The
definitions of certain capitalized terms used in the following summary are set
forth below under "--Certain Definitions."
GENERAL
The Senior Notes are senior unsecured obligations of the Company
unconditionally guaranteed by the Subsidiary Guarantors limited to $85.0 million
aggregate principal amount. The Senior Notes are issued only in registered form,
without coupons, in denominations of $1,000 and integral multiples thereof.
Principal of, premium, if any, and interest on the Senior Notes are payable, and
the Senior Notes are transferable, at the office or agency of the Company
maintained for such purposes, which in the case of payments on the Senior Notes
initially is the corporate trust office or agency of the Trustee maintained at
One State Street, New York, New York 10004. No service charge will be made for
any transfer, exchange or redemption of the Senior Notes, but the Company or the
Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge that may be payable in connection therewith.
MATURITY, INTEREST AND PRINCIPAL PAYMENTS
The Senior Notes will mature on December 15, 2003. Interest on the Senior
Notes will accrue from the date of issuance thereof at a rate of 12 1/4% per
annum and will be payable semiannually in cash arrears on June 15 and December
15 of each year, commencing June 15, 1997 to the Persons in whose names the
Senior Notes are registered in the Note Register at the close of business on the
June 1 or December 1 next preceding such interest payment date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
REDEMPTION
OPTIONAL REDEMPTION. The Senior Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after December 15, 2001, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest and Old Note Liquidated Damages, if any, to the date of
redemption (subject to the right of Holders of record on the relevant record
date to receive interest due on an interest payment date that is
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<PAGE>
on or prior to the date of redemption), if redeemed during the 12-month period
beginning on December 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2001............................................................................. 106.125%
2002............................................................................. 103.063%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to December 15, 1999,
up to 30% of the originally issued principal amount of Senior Notes will be
redeemable, at the option of the Company, from the Net Cash Proceeds of a Public
Equity Offering, at a redemption price equal to 1121/4% of the principal amount
thereof, together with accrued and unpaid interest and Old Note Liquidated
Damages, if any, to the date of redemption, PROVIDED that at least $59.5 million
of the originally issued principal amount of Senior Notes remains outstanding
immediately after such redemption and that such redemption occurs within 60 days
following the closing of such Public Equity Offering.
In the event that less than all of the Senior Notes are to be redeemed, the
particular Senior Notes (or any portion thereof that is an integral multiple of
$1,000) to be redeemed shall be selected not less than 30 nor more than 60 days
prior to the date of redemption by the Trustee, from the outstanding Senior
Notes not previously called for redemption, PRO RATA, by lot or by any other
method the Trustee shall deem fair and appropriate.
MANDATORY REDEMPTION. The Company will not be required to make mandatory
redemption or sinking fund payments with respect to the Senior Notes.
OFFERS TO PURCHASE. As described below, (a) upon the occurrence of a Change
of Control, the Company will be obligated to make an offer to purchase all
outstanding Senior Notes at a purchase price equal to 101% of the principal
amount thereof, together with accrued and unpaid interest and Old Note
Liquidated Damages, if any, to the date of purchase and (b) upon certain sales
or other dispositions of assets, the Company may be obligated to make offers to
purchase Senior Notes with a portion of the Net Available Proceeds of such sales
or other dispositions at a purchase price equal to 100% of the principal amount
thereof, together with accrued and unpaid interest and Old Note Liquidated
Damages, if any, to the date of purchase. See "--Certain Covenants--Change of
Control" and "--Limitation on Asset Sales."
RANKING
The Senior Notes and each Subsidiary Guarantee are senior unsecured
obligations (except for the security interest in 65% of the shares of W&G, Ltd.)
of the Company, and the applicable Subsidiary Guarantor, respectively, and will
rank PARI PASSU in right of payment with all other existing and future unsecured
and unsubordinated Indebtedness of the Company and the applicable Subsidiary
Guarantor, respectively, and senior to all existing and future Subordinated
Indebtedness of the Company and the Subsidiary Guarantors. The Senior Notes and
Subsidiary Guarantees, however, are effectively subordinated to secured
Indebtedness of the Company and the Subsidiary Guarantors with respect to the
assets securing such Indebtedness. At December 31, 1996, on a pro forma basis
assuming that the sale of the Old Notes, the application of the net proceeds
therefrom and the Macpherson Acquisition occurred on such date, the Company and
the Subsidiary Guarantors would have had no unsecured Indebtedness outstanding
other than the Senior Notes and $1.3 million of secured Indebtedness
outstanding. Subject to certain limitations, the Company and its Subsidiaries
(including the Subsidiary Guarantors) may incur additional Indebtedness in the
future. See "--Certain Covenants--Limitation on Indebtedness and Disqualified
Capital Stock."
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SUBSIDIARY GUARANTEES AND OTHER SECURITY
Each Subsidiary Guarantor unconditionally guarantees (each, a "Subsidiary
Guarantee"), jointly and severally, to each Holder of Senior Notes and the
Trustee, the full and punctual performance of the Company's obligations under
the Indenture and the Senior Notes, including the payment of principal of and
interest and Old Note Liquidated Damages, if any, on the Senior Notes. Each of
the Subsidiary Guarantees is a senior unsecured obligation of the respective
Subsidiary Guarantor and ranks PARI PASSU with all existing and future unsecured
and unsubordinated Indebtedness of such Subsidiary Guarantor. However, each
Subsidiary Guarantee is effectively subordinated to the secured Indebtedness of
the respective Subsidiary Guarantor with respect to the assets securing such
Indebtedness.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount which, after giving effect to any collections from or payments made by or
on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to
its contribution obligations under the Indenture, will result in the obligations
of such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal law or state law.
Each Subsidiary Guarantor that makes a payment or distribution under a
Subsidiary Guarantee shall be entitled to a PRO RATA contribution from each
other Subsidiary Guarantor based on the net assets of each Subsidiary Guarantor,
determined in accordance with GAAP.
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person) another corporation, Person or entity whether or not affiliated with
such Subsidiary Guarantor unless (i) subject to the provisions of the following
paragraph, the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all of the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture, in form and substance
satisfactory to the Trustee, under the Senior Notes and the Indenture; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default exists; and (iii) immediately after giving effect to such transaction as
if the same had occurred at the beginning of the most recently ended four full
fiscal quarter period for which internal financial statements are available, the
Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in accordance with paragraph (a) of the "--Limitation on
Indebtedness and Disqualified Capital Stock" covenant.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the Capital Stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Subsidiary Guarantor) will be released
and relieved of any obligations under its Subsidiary Guarantee, PROVIDED that
the Net Available Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "Certain
Covenants--Limitation on Asset Sales." In addition, any Subsidiary Guarantor
that is designated by the Board of Directors as an Unrestricted Subsidiary in
accordance with the terms of the Indenture may, at such time, at the option of
the Board of Directors at the time of such designation, be released and relieved
of any obligation under its Subsidiary Guarantee.
Pursuant to a Pledge and Security Agreement (the "Pledge Agreement"), the
Senior Notes are secured by a pledge of 65% of the capital stock of W&G, Ltd.
Upon declaration of a default under the Indenture and acceleration of the
Indebtedness thereunder, the Collateral Agent named in the Pledge Agreement may
sell the capital stock of W&G, Ltd. pledged pursuant to the Pledge Agreement.
The Pledge Agreement establishes certain procedures to be followed by the
Collateral Agent that are designed to provide the maximum possible proceeds as a
result of such a sale.
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CERTAIN COVENANTS
The Indenture contains, among others, the covenants described below.
LIMITATION ON INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK. (a) The Company
will not, and will not permit any of its Restricted Subsidiaries to, create,
incur, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of (collectively, "incur") any Indebtedness (including
any Acquired Indebtedness but excluding any Permitted Indebtedness) or issue any
Disqualified Capital Stock, unless, on a pro forma basis after giving effect to
such incurrence or issuance and the application of the proceeds therefrom, the
Consolidated Fixed Charge Coverage Ratio for the four most recent consecutive
fiscal quarters would have been equal to or greater than 2.0 to 1.0.
(b) Neither the Company nor any Subsidiary Guarantor will incur any
Indebtedness unless such Indebtedness is expressly PARI PASSU with, or
subordinated in right of payment to, in the case of the Company, the Senior
Notes or, in the case of a Subsidiary Guarantor, its Subsidiary Guarantee.
LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The Company will not permit
any of its Restricted Subsidiaries to issue any Preferred Stock (other than to
the Company or to a Wholly Owned Subsidiary) or permit any Person (other than
the Company or a Wholly Owned Subsidiary) to own any Preferred Stock of any
Restricted Subsidiary of the Company.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any other distribution to
holders of, any shares of Capital Stock of the Company (other than dividends
or distributions payable solely in shares of Qualified Capital Stock of the
Company or in options, warrants or other rights to purchase Qualified
Capital Stock of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any Affiliate thereof (other than any
Capital Stock owned by a Restricted Subsidiary) or any options, warrants or
other rights to acquire such Capital Stock;
(iii) make any principal payment on or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, scheduled sinking fund payment or maturity, any Subordinated
Indebtedness; or
(iv) make any Restricted Investment;
(such payments or other actions described in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless at the time of
and after giving effect to the proposed Restricted Payment (the amount of any
such Restricted Payment, if other than cash, shall be the amount determined by
the Board of Directors of the Company, whose determination shall be conclusive
and evidenced by a Board Resolution),
(1) no Default or Event of Default shall have occurred and be continuing,
(2) the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in accordance with paragraph (a) of the "--Limitation on
Indebtedness and Disqualified Capital Stock" covenant, and
(3) the aggregate amount of all Restricted Payments declared or made after
the date of the Indenture shall not exceed the sum (without duplication) of the
following:
(A) 50% of the Consolidated Net Income of the Company (or, if such
Consolidated Net Income is a loss, minus 100% of such loss) accrued on a
cumulative basis during the period beginning on
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October 1, 1996 and ending on the last day of the Company's last fiscal
quarter for which quarterly or annual financial statements are available
next preceding such proposed Restricted Payment,
(B) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of its
Restricted Subsidiaries) of shares of Qualified Capital Stock of the Company
or any options, warrants or rights to purchase such shares of Qualified
Capital Stock of the Company,
(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Restricted
Subsidiaries) upon the exercise of any options, warrants or rights to
purchase shares of Qualified Capital Stock of the Company,
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of its
Restricted Subsidiaries) of Indebtedness or shares of Disqualified Capital
Stock that have been converted into or exchanged for Qualified Capital Stock
of the Company, together with the aggregate cash received by the Company at
the time of such conversion or exchange,
(E) the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Qualified Capital Stock subsequent to the date of
original issuance of the Senior Notes to any employee stock ownership plan
or a trust established by the Company or any of its Restricted Subsidiaries
for the benefit of their employees to the extent that any such Net Cash
Proceeds are equal to an increase in the Consolidated Net Worth of the
Company resulting from principal repayments paid by such employee stock
ownership plan or trust with respect to Indebtedness incurred by it to
finance the purchase of such Qualified Capital Stock, and
(F) to the extent not otherwise included in Consolidated Net Income, the
net reduction in Investments by the Company and its Restricted Subsidiaries,
subsequent to the date of the original issuance of the Senior Notes, in any
Person resulting from dividends, repayments of loans or advances, or other
transfers of assets to the Company or a Restricted Subsidiary, or from the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary
(valued in each case as provided in the definition of Investment), not to
exceed the total amount of Investments (other than Permitted Investments)
made by the Company and its Restricted Subsidiaries in such Unrestricted
Subsidiary that were previously treated as a Restricted Payment.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted
Subsidiaries may take the following actions so long as (in the case of clauses
(ii), (iii) and (iv) below) no Default or Event of Default shall have occurred
and be continuing:
(i) the payment of any dividend on any Capital Stock of the Company or
any Restricted Subsidiary within 60 days after the date of declaration
thereof, if at such declaration date such declaration complied with the
provisions of paragraph (a) above (and such payment shall be deemed to have
been paid on such date of declaration for purposes of any calculation
required by the provisions of paragraph (a) above);
(ii) the repurchase, redemption or other acquisition or retirement of
any shares of any class of Capital Stock of the Company or any Restricted
Subsidiary, in exchange for, or out of the aggregate Net Cash Proceeds from,
a substantially concurrent issuance and sale (other than to a Restricted
Subsidiary) of shares of Qualified Capital Stock of the Company (other than
Capital Stock issued or sold to a Subsidiary of the Company or an employee
stock ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees);
(iii) the repurchase, redemption, repayment, defeasance or other
acquisition or retirement for value of any Subordinated Indebtedness in
exchange for, or out of the aggregate Net Cash Proceeds
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from, a substantially concurrent issuance and sale (other than to a
Restricted Subsidiary) of shares of Qualified Capital Stock of the Company;
and
(iv) the repurchase of shares of, or options to purchase shares of,
Capital Stock (other than Preferred Stock) of the Company or any of its
Subsidiaries from employees, former employees, directors or former directors
of the Company or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors or their
respective estates), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto) approved by the
Board of Directors of the Company under which such individuals purchase or
sell or are granted the option or right to purchase or sell such Capital
Stock (other than Preferred Stock); PROVIDED, HOWEVER, that the aggregate
amount of such repurchases shall not exceed $250,000 in any calendar year.
The actions described in clauses (i), (ii), (iii) and (iv) of this paragraph
(b) shall be Restricted Payments that shall be permitted to be made in
accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph
(a), PROVIDED that any dividend paid pursuant to clause (i) of this paragraph
(b) shall reduce the amount that would otherwise be available under clause (3)
of paragraph (a) when declared, but not also when subsequently paid pursuant to
such clause (i).
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that the Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company (i) will not permit any Restricted Subsidiary to
issue or sell any Capital Stock to any Person other than the Company or a Wholly
Owned Restricted Subsidiary and (ii) will not permit any Person other than the
Company or a Wholly Owned Restricted Subsidiary to own any Capital Stock of any
Restricted Subsidiary, except, in the case of clause (i) or (ii), with respect
to a Wholly Owned Restricted Subsidiary as described in the definition of
"Wholly Owned Restricted Subsidiary." The sale of all of the Capital Stock of
any Restricted Subsidiary is permitted by this covenant but is subject to the
limitations described under "--Limitation on Asset Sales."
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into,
assume, guarantee or otherwise become liable with respect to any Sale/Leaseback
Transaction unless (i) the Company or such Restricted Subsidiary, as the case
may be, would be able to incur Indebtedness (not including the incurrence of
Permitted Indebtedness) pursuant to and in an amount equal to the Attributable
Indebtedness with respect to such Sale/Leaseback Transaction pursuant to the
covenants described in paragraph (a) under "--Limitation on Indebtedness and
Disqualified Capital Stock," (ii) the Company or such Restricted Subsidiary
receives proceeds from such Sales/Leaseback Transaction at least equal to the
fair market value of the property or assets subject thereto (as determined in
good faith by the Company's Board of Directors, whose determination in good
faith and evidenced by a Board Resolution will be conclusive) and (iii) the
Company applies an amount in cash equal to the Net Available Proceeds of the
Sale/Leaseback Transaction in accordance with the provisions of the "Limitation
on Asset Sales" covenant as if such Sale/Leaseback Transaction were an Asset
Sale.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter into
or suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets or property
or the rendering of any service) with, or for the benefit of, any of their
respective Affiliates (each an "Affiliate Transaction") other than (i) Affiliate
Transactions permitted by clause (b) of this covenant, (ii) Affiliate
Transactions on terms that are no less favorable to the Company or such
Restricted
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Subsidiary, as the case may be, than those that would be available in a
comparable arm's length transaction with an unrelated Person, (iii) with respect
to any one transaction or series of related transactions involving aggregate
payments in excess of $1.0 million but less than $5.0 million in the aggregate,
the Company delivers an Officers' Certificate to the Trustee certifying that (A)
such transaction or series of related transactions complies with clause (i)
above and (B) such transaction or series of related transactions has been
approved by the Board of Directors (including a majority of the Disinterested
Directors) of the Company, and (iv) with respect to any one transaction or
series of related transactions involving aggregate payments in excess of $5.0
million, the Company delivers an Officers' Certificate to the Trustee certifying
to the two matters referred to in clause (iii) above and that the Company has
obtained a written opinion, a copy of which shall be attached to such Officers'
Certificate, from an independent nationally recognized investment banking firm
or appraisal firm specializing or having a speciality in the type and subject
matter of the transaction or series of related transactions at issue, which
opinion shall be to the effect set forth in clause (i) above or shall state that
such transaction or series of related transactions is fair from a financial
point of view to the Company or such Restricted Subsidiary, as the case may be.
(b) The restrictions set forth in clause (a) shall not apply to (i)
transactions exclusively between or among the Company and any of its Restricted
Subsidiaries or exclusively between or among the Restricted Subsidiaries so long
as such transactions are not otherwise prohibited by the Indenture, (ii)
reasonable indemnities of officers, directors and employees of the Company or
any Restricted Subsidiary permitted by bylaw or statutory provisions, (iii) the
payment of reasonable and customary regular fees to directors of the Company or
any of its Restricted Subsidiaries who are employees of the Company or any
Affiliate and (iv) reasonable employee compensation and other benefit
arrangements approved by the Board of Directors of the Company.
LIMITATION ON LIENS. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume, affirm
or suffer to exist or become effective any Lien of any kind, except for
Permitted Liens, upon any of their respective property or assets, whether now
owned or acquired after the date of the Indenture, or any income, profits or
proceeds therefrom, or assign or otherwise convey any right to receive income or
profits therefrom, to secure any Indebtedness of the Company or such Restricted
Subsidiary, unless prior to, or contemporaneously therewith, the Senior Notes
are equally and ratably secured; PROVIDED, HOWEVER, that if such Indebtedness is
expressly subordinated to the Senior Notes, the Lien securing such Indebtedness
will be subordinated and junior to the Lien securing the Senior Notes, with the
same relative priority as such Indebtedness has with respect to the Senior
Notes. The incurrence of additional secured Indebtedness by the Company and its
Restricted Subsidiaries is subject to further limitations on the incurrence of
Indebtedness as described under "--Limitation on Indebtedness and Disqualified
Capital Stock."
CHANGE OF CONTROL. Upon the occurrence of a Change of Control, the Company
will be obligated to make an offer to purchase all of the then outstanding
Senior Notes (a "Change of Control Offer"), and will purchase, on a Business Day
(the "Change of Control Purchase Date"), not more than 60 nor less than 30 days
following the date notice is mailed, as provided below, all of the then
outstanding Senior Notes validly tendered pursuant to such Change of Control
Offer and not withdrawn, at a purchase price (the "Change of Control Purchase
Price") equal to 101% of the principal amount thereof plus accrued and unpaid
interest and Old Note Liquidated Damages, if any, to the Change of Control
Purchase Date. The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the fifth Business Day
prior to the Change of Control Purchase Date.
In order to effect such Change of Control Offer, the Company will, not later
than the 30th day after the Change of Control, send, by first class mail, to the
Trustee and each Holder a notice of the Change of Control Offer, which notice
shall govern the terms of the Change of Control Offer and shall state, among
other things, the procedures that Holders must follow to accept the Change of
Control Offer.
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There can be no assurance that the Company will have available funds
sufficient to fund the purchase of the Senior Notes that might be delivered by
Holders seeking to accept a Change of Control Offer. In the event a Change of
Control occurs at a time when the Company does not have available funds
sufficient to pay the Change of Control Purchase Price for all of the Senior
Notes delivered by Holders seeking to accept the Change of Control Offer, an
Event of Default would occur under the Indenture. The definition of Change of
Control includes an event by which the Company sells, conveys, transfers, leases
or otherwise disposes of all or substantially all of the properties and assets
of the Company and its Restricted Subsidiaries, taken as a whole; the phrase
"all or substantially all" is subject to applicable legal precedent and, as a
result, in the future there may be uncertainty as to whether or not a Change of
Control has occurred.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if another Person makes the Change of Control Offer at the
same purchase price, at the same time and otherwise in substantial compliance
with the requirements applicable to a Change of Control Offer to be made by the
Company and purchases all Senior Notes validly tendered and not withdrawn under
such Change of Control Offer. The existence of a Holder's right to require,
subject to certain conditions, the Company to repurchase its Senior Notes upon a
Change of Control may deter a third party from acquiring the Company in a
transaction that constitutes, or results in, a Change of Control.
The Company will comply with Rule 14e-1 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and any other securities laws and
regulations thereunder, if applicable, in the event that a Change of Control
occurs and the Company is required to purchase Senior Notes as described above.
LIMITATION ON ASSET SALES. (a) The Company will not, and will not permit
any Restricted Subsidiary to, engage in any Asset Sales unless (i) the Company
or such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value of the assets
and properties sold or otherwise disposed of pursuant to the Asset Sale (as
determined by the Board of Directors of the Company, whose determination in good
faith shall be conclusive and evidenced by a Board Resolution), (ii) at least
80% of the consideration received by the Company or the Restricted Subsidiary,
as the case may be, in respect of such Asset Sale consists of cash or Cash
Equivalents and (iii) the Company delivers to the Trustee an Officers'
Certificate certifying that such Asset Sale complies with clauses (i) and (ii).
The amount (without duplication) of any Indebtedness (other than Subordinated
Indebtedness) of the Company or such Restricted Subsidiary that is expressly
assumed by the transferee in such Asset Sale and with respect to which the
Company or such Restricted Subsidiary, as the case may be, is unconditionally
released by the holder of such Indebtedness, shall be deemed to be cash or Cash
Equivalents for purposes of clause (ii) and shall also be deemed to constitute a
repayment of, and a permanent reduction in, the amount of such Indebtedness for
purposes of the following paragraph (b). If at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed of for cash (other than interest received with
respect to any such non-cash consideration), then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder and the Net Available
Proceeds thereof shall be applied in accordance with this covenant. A transfer
of assets by the Company to a Restricted Subsidiary or by a Subsidiary to the
Company or to a Restricted Subsidiary will not be deemed to be an Asset Sale and
a transfer of assets that constitutes a Restricted Investment and that is
permitted under "--Restricted Payments" will not be deemed to be an Asset Sale.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under " --Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and its Subsidiaries not so transferred for
purposes of this covenant, and shall comply with the provisions of this covenant
with respect to such deemed sale as if it were an Asset Sale. In
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addition, the fair market value of such properties and assets of the Company or
its Subsidiaries deemed to be sold shall be deemed to be Net Available Proceeds
for purposes of this covenant.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company or any Restricted Subsidiary may either, no later than 270 days
after such Asset Sale, (i) apply all or any of the Net Available Proceeds
therefrom to repay Indebtedness (other than Subordinated Indebtedness) of the
Company or any Restricted Subsidiary, PROVIDED, in each case, that the related
loan commitment (if any) is thereby permanently reduced by the amount of such
Indebtedness so repaid or (ii) invest all or any part of the Net Available
Proceeds thereof in properties and assets that replace the properties or assets
that were the subject of such Asset Sale or in other properties or assets that
will be used in the business of the Company and its Restricted Subsidiaries. The
amount of such Net Available Proceeds not applied or invested as provided in
this paragraph will constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals or exceeds $5.0
million, the Company will be required to make an offer to purchase, from all
Holders of the Senior Notes, an aggregate principal amount of Senior Notes equal
to such Excess Proceeds as follows:
(i) The Company will make an offer to purchase (a "Net Proceeds Offer")
from all Holders of the Senior Notes in accordance with the procedures set
forth in the Indenture the maximum principal amount (expressed as a multiple
of $1,000) of Senior Notes that may be purchased out of the amount (the
"Payment Amount") of such Excess Proceeds.
(ii) The offer price for the Senior Notes will be payable in cash in an
amount equal to 100% of the principal amount of the Senior Notes tendered
pursuant to a Net Proceeds Offer, plus accrued and unpaid interest and Old
Note Liquidated Damages, if any, to the date such Net Proceeds Offer is
consummated (the "Offered Price"), in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate Offered Price of
Senior Notes tendered pursuant to a Net Proceeds Offer is less than the
Payment Amount relating thereto (such shortfall constituting a "Net Proceeds
Deficiency"), the Company may use such Net Proceeds Deficiency, or a portion
thereof, for general corporate purposes, subject to the limitations of the
"Limitation on Restricted Payments" covenant.
(iii) If the aggregate Offered Price of Senior Notes validly tendered and
not withdrawn by Holders thereof exceeds the Payment Amount, Senior Notes to
be purchased will be selected on a PRO RATA basis.
(iv) Upon completion of such Net Proceeds Offer, the amount of Excess
Proceeds remaining shall be zero.
The Company will not permit any Restricted Subsidiary to enter into or suffer to
exist any agreement that would place any restriction of any kind (other than
pursuant to law or regulation) on the ability of the Company to make a Net
Proceeds Offer following any Asset Sale. The Company will comply with Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder,
if applicable, in the event that an Asset Sale occurs and the Company is
required to purchase Senior Notes as described above.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or suffer to exist or allow to
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary (a) to pay dividends, in cash or otherwise,
or make any other distributions on its Capital Stock, or make payments on any
Indebtedness owed, to the Company or any other Restricted Subsidiary, (b) to
make loans or advances to the Company or any other Restricted Subsidiary or (c)
to transfer any of its property or assets to the Company or any other Restricted
Subsidiary (any such restrictions being collectively referred to herein as a
"Payment Restriction"), except in any such case for such encumbrances or
restrictions existing under or by reason of (i) the Indenture or any other
agreement in effect or entered into on the date of the Indenture, or (ii) any
agreement, instrument or charter of or in respect of a Restricted Subsidiary
entered into prior to the date on which such Restricted
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Subsidiary became a Restricted Subsidiary and outstanding on such date and not
entered into in connection with or in contemplation of becoming a Restricted
Subsidiary, PROVIDED such consensual encumbrance or restriction is not
applicable to any properties or assets subsequently acquired by such Restricted
Subsidiary, or (iii) pursuant to an agreement effecting a modification, renewal,
refinancing, replacement or extension of any agreement, instrument or charter
(other than the Indenture) referred to in clause (i) or (ii) above, PROVIDED,
HOWEVER, that the provisions relating to such encumbrance or restriction are not
materially less favorable to the Holder of the Senior Notes than those under or
pursuant to the agreement, instrument or charter so modified, renewed,
refinanced, replaced or extended, or (iv) customary provisions restricting the
subletting or assignment of any lease or the transfer of copyrighted or patented
material, or (v) provisions in agreements that restrict the assignment of such
agreements or rights thereunder, or (vi) the sale or other disposition of any
properties or assets subject to a Lien securing Indebtedness.
LIMITATION ON CONDUCT OF BUSINESS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, engage in the conduct of any
business other than any Related Business.
FUTURE DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES. The
foregoing covenants (including calculation of financial ratios and the
determination of limitations on the incurrence of Indebtedness and Liens) may be
affected by the designation by the Company of any existing or future Subsidiary
of the Company as an Unrestricted Subsidiary. The definition of "Unrestricted
Subsidiary" set forth under the caption "--Certain Definitions" describes the
circumstances under which a Subsidiary of the Company may be designated as an
Unrestricted Subsidiary by the Board of Directors of the Company.
ADDITIONAL COVENANTS. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest, if any,
and Old Note Liquidated Damages, if any; (ii) maintenance of an office or agency
in The City of New York; (iii) arrangements regarding the handling of money held
in trust; (iv) maintenance of corporate existence; (v) payment of taxes and
other claims; and (vi) maintenance of properties.
REPORTS. The Company will file on a timely basis with the Commission, to
the extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act. The
Company will also be required (a) to file with the Trustee (with exhibits), and
provide to each Holder of Senior Notes (without exhibits), without cost to such
Holder, copies of such reports and documents within 15 days after the date on
which the Company files such reports and documents with the Commission or the
date on which the Company would be required to file such reports and documents
if the Company were so required and (b) if filing such reports and documents
with the Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at its cost copies of such reports and documents
(including any exhibits thereto) to any Holder of Senior Notes promptly upon
written request.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company will not, in any single transaction or series of related
transactions, merge or consolidate with or into any other Person, or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any Person or group of Affiliated Persons, and the Company
will not permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions, if, in any event, such transaction or
series of transactions, in the aggregate, would result in the sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any other Person or group of Affiliated Persons, unless
(i) either (A) if the transaction is a merger or consolidation, the Company
shall be the surviving Person of such merger or consolidation, or (B) the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or to which the properties and assets of the Company
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or its Restricted Subsidiaries, as the case may be, are sold, assigned,
conveyed, transferred, leased or otherwise disposed of (any such surviving
Person or transferee Person being the "Surviving Entity") shall be a corporation
organized and existing under the laws of the United States of America, any state
thereof or the District of Columbia and shall, in either case, expressly assume
by a supplemental indenture to the Indenture executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the Company
or the Restricted Subsidiary, as the case may be, with respect to the Senior
Notes and the Indenture, and, in any case, the Indenture shall remain in full
force and effect; and (ii) immediately before and immediately after giving
effect to such transaction or series of transactions on a pro forma basis (and
treating any Indebtedness not previously an obligation of the Company or any of
its Restricted Subsidiaries which becomes an obligation of the Company or any of
its Restricted Subsidiaries in connection with or as a result of such
transaction or transactions as having been incurred at the time of such
transaction or transactions), no Default or Event of Default shall have occurred
and be continuing; (iii) except in the case of the consolidation or merger of
any Restricted Subsidiary with or into the Company, immediately after giving
effect to such transaction or transactions on a pro forma basis, the
Consolidated Net Worth of the Company (or the Surviving Entity if the Company is
not the continuing obligor under the Indenture) is at least equal to the
Consolidated Net Worth of the Company immediately before such transaction or
transactions; (iv) except in the case of the consolidation or merger of the
Company with or into a Restricted Subsidiary or any Restricted Subsidiary with
or into the Company or another Restricted Subsidiary, immediately before and
immediately after giving effect to such transaction or transactions on a pro
forma basis (assuming that the transaction or transactions occurred on the first
day of the period of four fiscal quarters ending immediately prior to the
consummation of such transaction or transactions, with the appropriate
adjustments with respect to the transaction or transactions being included in
such pro forma calculation), the Company (or the Surviving Entity if the Company
is not the continuing obligor under the Indenture) could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
first paragraph of the "--Limitation on Indebtedness and Disqualified Capital
Stock" covenant; (v) if any of the properties or assets of the Company or any of
its Restricted Subsidiaries would upon such transaction or series of related
transactions become subject to any Lien (other than a Permitted Lien), the
creation and imposition of such Lien shall have been in compliance with the
"Limitation on Liens" covenant; and (vi) the Company (or the Surviving Entity if
the Company is not the continuing obligor under the Indenture) shall have
delivered to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, transfer, lease or other disposition and any
supplemental indenture in respect thereto comply with the requirements under the
Indenture and that all conditions precedent in the Indenture relating to such
transaction have been satisfied.
Upon any consolidation or merger or any sale, assignment, lease, conveyance,
transfer or other disposition of all or substantially all of the properties and
assets of the Company and its Restricted Subsidiaries on a consolidated basis in
accordance with the foregoing, in which the Company is not the continuing
corporation, the Surviving Entity shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if the Surviving Entity had been named as the Company therein,
and thereafter the Company, except in the case of a lease, will be discharged
from all obligations and covenants under the Indenture and the Senior Notes and
may be liquidated and dissolved.
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EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any, on
any of the Senior Notes, whether such payment is due at Stated Maturity,
upon redemption, upon repurchase pursuant to a Change of Control Offer or a
Net Proceeds Offer, upon acceleration or otherwise; or
(ii) default in the payment of any installment of interest and Old Note
Liquidated Damages, if any, on any of the Senior Notes, when due, and the
continuance of such default for a period of 30 days; or
(iii) failure to comply with the "--Limitation on Indebtedness and
Disqualified Capital Stock," "--Limitation on Preferred Stock of
Subsidiaries," "--Limitation on Restricted Payments,"
"--Limitation on Liens" covenants, default in the performance or breach of
the provisions of the "Merger, Consolidation and Sale of Assets" section of
the Indenture, the failure to make or consummate a Change of Control Offer
in accordance with the provisions of the "Change of Control" covenant or the
failure to make or consummate a Net Proceeds Offer in accordance with the
provisions of the "Limitation on Asset Sales" covenant; or
(iv) the Company or the Subsidiary Guarantors shall fail to perform or
observe any other term, covenant or agreement contained in the Senior Notes,
the Indenture (other than a default specified in (i), (ii) or (iii) above)
or the Subsidiary Guarantees, as the case may be, for a period of 30 days
after written notice of such failure stating that it is a "notice of
default" under the Indenture and requiring the Company or the Subsidiary
Guarantors, as the case may be, to remedy the same shall have been given (x)
to the Company or the Subsidiary Guarantors, as the case may be, by the
Trustee or (y) to the Company or the Subsidiary Guarantors, as the case may
be, and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Senior Notes then outstanding; or
(v) the occurrence and continuation beyond any applicable grace period
of any default in the payment of the principal of, premium, if any, or
interest on any Indebtedness of the Company (other than the Senior Notes) or
any Subsidiary for money borrowed when due, or any other default resulting
in acceleration of any Indebtedness of the Company or any Subsidiary for
money borrowed, provided that the aggregate principal amount of such
Indebtedness shall exceed $2.5 million; or
(vi) one or more final judgments or orders rendered against the Company
or any Subsidiary that are unsatisfied and that require the payment in
money, either individually or in an aggregate amount, in excess of $2.5
million, which judgments or orders are not paid, discharged or stayed for a
period of 60 days; or
(vii) certain events of bankruptcy or insolvency with respect to the
Company or any Restricted Subsidiary; or
(viii) except as permitted by the Indenture and the Senior Notes, the
cessation of the effectiveness of any Subsidiary Guarantee or the
repudiation by any Subsidiary Guarantor (or by any Person acting on behalf
of any Subsidiary Guarantor) of its obligations under its Subsidiary
Guarantee; or
(ix) the cessation of the effectiveness of the Pledge Agreement or the
repudiation by the Pledgor thereunder (or by any Person acting on behalf of
such Pledgor) of its obligations under the Pledge Agreement.
If an Event of Default (other than as specified in clause (vii) above) shall
occur and be continuing, the Trustee, by written notice to the Company, or the
Holders of at least 25% in aggregate principal amount of the Senior Notes then
outstanding, by written notice to the Trustee and the Company, may, and the
Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the Senior Notes then outstanding shall, declare the
principal of, premium, if any, and accrued and unpaid interest and Old Note
Liquidated Damages, if any, on all of the Senior Notes due and payable
immediately, upon which declaration all amounts payable in respect of the Senior
Notes shall be immediately due and payable. If an
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Event of Default specified in clause (vii) above occurs and is continuing, then
the principal of, premium, if any, and accrued and unpaid interest and Old Note
Liquidated Damages, if any, on all of the Senior Notes shall become and be
immediately due and payable without any declaration, notice or other act on the
part of the Trustee or any Holder of Senior Notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Senior Notes, by written notice to the Company and the Trustee, may,
under certain circumstances, rescind and annul such declaration and its
consequences if all Events of Default, other than the non-payment of principal
of, premium, if any, or interest on the Senior Notes that has become due solely
by such declaration of acceleration, have been cured or waived. No such
rescission shall affect any subsequent Default or Event of Default or impair any
right consequent thereto.
No Holder will have any right to institute any proceeding with respect to
the Indenture or any remedy thereunder, unless such Holder has notified the
Trustee of a continuing Event of Default and the Holders of at least 25% in
aggregate principal amount of the outstanding Senior Notes have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as Trustee under the Senior Notes and the Indenture, the Trustee has
failed to institute such proceeding within 60 days after receipt of such notice
and the Trustee, within such 60-day period, has not received directions
inconsistent with such written request by Holders of a majority in aggregate
principal amount of the outstanding Senior Notes. Such limitations will not
apply, however, to a suit instituted by the Holder of a Senior Note for the
enforcement of the payment of the principal of, premium, if any, or interest on
such Senior Note on or after the respective due dates expressed in such Senior
Note.
The Holders of a majority in principal amount of the Senior Notes may waive
any existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest on
any Senior Notes.
The Company will be required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indenture and as to any default in such performance. The Company will also be
required to notify the Trustee within 10 days of any Default or Event of
Default.
LEGAL DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations of
the Company with respect to the outstanding Senior Notes (such action being a
"legal defeasance"). Such legal defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Senior Notes and to have been discharged from all their other
obligations with respect to the Senior Notes, except for (i) the rights of
Holders of outstanding Senior Notes to receive payment in respect of the
principal of, premium, if any, and interest on such Senior Notes when such
payments are due, (ii) the Company's obligations to replace any temporary Senior
Notes, register the transfer or exchange of any Senior Notes, replace mutilated,
destroyed, lost or stolen Senior Notes and maintain an office or agency for
payments in respect of the Senior Notes, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and (iv) the legal defeasance provisions
of the Indenture. In addition, the Company may, at its option and at any time,
elect to terminate the obligations of the Company with respect to certain
covenants that are set forth in the Indenture, some of which are described under
"--Certain Covenants" above, and any omission to comply with such obligations
shall not constitute a Default or an Event of Default with respect to the Senior
Notes (such action being a "covenant defeasance"). In the event covenant
defeasance occurs, certain events (not including nonpayment, bankruptcy,
insolvency and reorganization events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Senior Notes.
In order to exercise either legal defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Senior Notes, cash in United States
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dollars, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest and Old Note Liquidated Damages, if
any, on the outstanding Senior Notes to redemption or maturity; (ii) the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the outstanding Senior Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such legal defeasance or covenant
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such legal
defeasance or covenant defeasance had not occurred (in the case of legal
defeasance, such Opinion must refer to and be based upon a published ruling of
the Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit or insofar as clauses (vii) and (viii) under the first
paragraph of "Events of Default" are concerned, at any time during the period
ending on the 91st day after the date of deposit; (iv) such legal defeasance or
covenant defeasance shall not cause the Trustee to have a conflicting interest
under the Indenture or the Trust Indenture Act with respect to any securities of
the Company; (v) such legal defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument to which the Company or any of its Restricted
Subsidiaries is a party or by which the Company or any of its Restricted
Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of the Senior Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel satisfactory
to the Trustee, each stating that all conditions precedent under the Indenture
to either legal defeasance or covenant defeasance, as the case may be, have been
complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Senior Notes, as expressly provided for in the Indenture) as to all outstanding
Senior Notes when (i) either (a) all the Senior Notes theretofore authenticated
and delivered (except lost, stolen, mutilated or destroyed Senior Notes which
have been replaced or paid and Senior Notes for whose payment money or certain
U.S. Government Obligations have theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Senior Notes not theretofore delivered to the Trustee
for cancellation have become due and payable or will become due and payable at
their Stated Maturity within one year, or are to be called for redemption within
one year under arrangements satisfactory to the Trustee for the serving of
notice of redemption by the Trustee in the name, and at the expense, of the
Company, and the Company has irrevocably deposited or caused to be deposited
with the Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Senior Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest and Old Note
Liquidated Damages, if any, on the Senior Notes to the date of deposit (in the
case of Senior Notes which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be, together with instructions from
the Company irrevocably directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be; (ii) the Company has paid
all other sums payable under the Indenture by the Company; and (iii) the Company
has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel
which, taken together, state that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
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AMENDMENTS AND WAIVERS
From time to time, the Company and the Trustee may, without the consent of
the Holders of the Senior Notes, amend or supplement the Indenture or the Senior
Notes for certain specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act or making any
change that does not materially adversely affect the rights of any Holder of
Senior Notes. Other amendments and modifications of the Indenture or the Senior
Notes may be made by the Company and the Trustee with the consent of the Holders
of not less than a majority of the aggregate principal amount of the outstanding
Senior Notes; provided, however, that no such modification or amendment may,
without the consent of the Holder of each outstanding Senior Note affected
thereby, (a) change the Stated Maturity of the principal of, or any installment
of interest on, any Senior Note or alter the provisions with respect to
redemption of the Senior Notes, (b) reduce the principal amount of, premium, if
any, or interest or Old Note Liquidated Damages, if any, on any Senior Note, (c)
change the coin or currency in which principal of, premium, if any, or interest
or Old Note Liquidated Damages, if any, on, any Senior Note is payable, (d)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Senior Note, (e) reduce the above-stated percentage of aggregate
principal amount of outstanding Senior Notes necessary to modify or amend the
Indenture, (f) reduce the percentage of aggregate principal amount of
outstanding Senior Notes necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults, (g) modify any
provisions of the Indenture relating to the modification and amendment of the
Indenture or the waiver of past Defaults or covenants, except as otherwise
specified, or the rights of any Holder to receive payments of principal of or
premium, if any, or interest or Old Note Liquidated Damages, if any, on the
Senior Notes, (h) change the ranking of the Senior Notes in a manner adverse to
the Holders or expressly subordinate in right of payment the Senior Notes to any
other Indebtedness, (i) amend, change or modify the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change of
Control or make and consummate a Net Proceeds Offer with respect to any Asset
Sale or modify any of the provisions or definitions with respect thereto or (j)
release any security that may have been granted in respect of the Senior Notes
except as expressly provided in the Indenture.
The Holders of not less than a majority in aggregate principal amount of the
outstanding Senior Notes may, on behalf of the Senior Holders of all Senior
Notes, waive any past default under the Indenture, except a default in the
payment of principal of, premium, if any, or interest or Old Note Liquidated
Damages, if any, on the Senior Notes, or in respect of a covenant or provision
which under the Indenture cannot be modified or amended without the consent of
the Holder of each Senior Note outstanding.
THE TRUSTEE
IBJ Schroder Bank & Trust Company serves as trustee under the Indenture.
The Indenture (including provisions of the Trust Indenture Act incorporated
by reference therein) contains limitations on the rights of the Trustee
thereunder, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Indenture permits the
Trustee to engage in other transactions; provided, however, if it acquires any
conflicting interest (as defined in the Trust Indenture Act) it must eliminate
such conflict or resign.
GOVERNING LAW
The Indenture and the Senior Notes are governed by the laws of the State of
New York, without regard to the principles of conflicts of law.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means, with respect to any specified Person, (a)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Restricted Subsidiary of
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such specified Person, including Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person or (b) assumed in connection with
acquisitions of properties or assets from such Person. Acquired Indebtedness
shall be deemed to be incurred on the date the acquired Person becomes a
Restricted Subsidiary or the date of the related acquisition of properties or
assets from such Person.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of this definition, beneficial ownership of 10% or more of the voting
common equity (on a fully diluted basis) or options or warrants to purchase such
equity (but only if exercisable at the date of determination or within 60 days
thereof) of a Person shall be deemed to constitute control of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease,
assignment or other disposition to any Person other than the Company or any of
its Restricted Subsidiaries (including, without limitation, by means of a
Sale/Leaseback Transaction or a merger or consolidation) (collectively, for
purposes of this definition, a "transfer"), directly or indirectly, in one or a
series of related transactions, of (a) any Capital Stock of any Restricted
Subsidiary held by the Company or any other Restricted Subsidiary or (b) any
other properties or assets of the Company or any of its Restricted Subsidiaries
other than transfers of cash, Cash Equivalents, accounts receivable or other
properties or assets in the ordinary course of business. For the purposes of
this definition, the term "Asset Sale" also shall not include any of the
following: (i) any transfer of properties or assets (including Capital Stock)
that is governed by, and made in accordance with, the provisions described under
"--Merger, Consolidation and Sale of Assets"; (ii) any transfer of properties or
assets to an Unrestricted Subsidiary, if permitted under the "Limitation on
Restricted Payments" covenant; (iii) sales of damaged, worn-out or obsolete
equipment or assets that, in the Company's reasonable judgment, are either (x)
no longer used or (y) no longer useful in the business of the Company or its
Restricted Subsidiaries; and (iv) any transfers that, but for this clause (iv),
would be Asset Sales, if after giving effect to such transfers, the aggregate
fair market value of the properties or assets transferred in such transaction or
any such series of related transactions so designated by the Company does not
exceed $500,000.
"Attributable Indebtedness" means, with respect to any particular lease
under which any Person is at the time liable, whether or not accounted for as a
Capitalized Lease Obligation, and at any date as of which the amount thereof is
to be determined, the present value of the total net amount of rent required to
be paid by such Person under the lease during the primary term thereof, without
giving effect to any renewals at the option of the lessee, discounted from the
respective due dates thereof to such date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. As used in the preceding
sentence, the "net amount of rent" under any such lease for any such period
shall mean the sum of rental and other payments required to be paid with respect
to such period by the lessee thereunder, excluding any amounts required to be
paid by such lessee on account of maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges. In the case of any lease which is
terminable by the lessee upon payment of a penalty, such net amount of rent
shall also include the amount of such penalty, but no rent shall be considered
as required to be paid under such lease subsequent to the first date upon which
it may be so terminated.
"Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years (and any portion thereof) from the date of determination
to the date or dates of each successive scheduled principal payment (including,
without limitation, any sinking fund or mandatory redemption payment
requirements) of such Indebtedness multiplied by (ii) the amount of each such
principal payment by (b) the sum of all such principal payments.
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"Capitalized Lease Obligation" means, with respect to any Person, any
obligation to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) any property (whether real, personal or mixed) that
is required to be classified and accounted for as a capital lease obligation
under GAAP and, for the purpose of the Indenture, the amount of such obligation
at any date shall be the capitalized amount thereof at such date, determined in
accordance with GAAP.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participation, rights or other equivalents in the equity interests
(however designated) in such Person, and any rights (other than debt securities
convertible into an equity interest), warrants or options exercisable for,
exchangeable for or convertible into such an equity interest in such Person.
"Cash Equivalents" means (i) marketable obligations with a maturity of 180
days or less issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof); (ii) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500 million; (iii) commercial
paper maturing no more than 180 days from the date of creation thereof issued by
a corporation that is not an Affiliate of the Company and is organized under the
laws of any state of the United States or the District of Columbia and rated at
least A-1 by S&P or at least P-1 by Moody's; (iv) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any commercial bank meeting the
specifications of clause (ii) above; and (v) investments in money market or
other mutual funds substantially all of whose assets comprise securities of the
types described in clauses (i) through (iv) above.
"Change of Control" means the occurrence of any event or series of events
(whether or not otherwise in compliance with the provisions of the Indenture) by
which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) (other than the Principals) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of more than 35% of the total Voting Stock of the Company, (b) the
Company consolidates with or merges into another Person or any Person
consolidates with, or merges into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is changed into
or exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is changed
into or exchanged for Voting Stock of the surviving or resulting Person that is
Qualified Capital Stock and (ii) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving or resulting Person immediately
after such transaction; (c) the Company, either individually or in conjunction
with one or more Restricted Subsidiaries, sells, assigns, conveys, transfers,
leases or otherwise disposes of, or the Restricted Subsidiaries sell, assign,
convey, transfer, lease or otherwise dispose of, all or substantially all of the
properties and assets of the Company and its Restricted Subsidiaries, taken as a
whole (either in one transaction or a series of related transactions), including
Capital Stock of the Restricted Subsidiaries, to any Person (other than the
Company or a Wholly Owned Restricted Subsidiary); (d) during any consecutive
two-year period, individuals who at the beginning of such period constituted the
Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of two-thirds of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office; or (e) the approval by the holders of
Capital Stock of the Company of any plan or proposal for liquidation or
dissolution of the Company.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
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"Consolidated Fixed Charge Coverage Ratio" means, with respect to the
Company for any period, the ratio of (a) the sum of Consolidated Net Income,
Consolidated Fixed Charges, Consolidated Income Tax Expense and Consolidated
Non-cash Charges of the Company and its Restricted Subsidiaries, on a
consolidated basis for such period, all determined in accordance with GAAP to
(b) Consolidated Fixed Charges for such period. In making such computations, (i)
the Consolidated Fixed Charge Coverage Ratio shall be calculated on a pro forma
basis assuming that (A) the Indebtedness to be incurred or the Disqualified
Capital Stock to be issued (and all other Indebtedness incurred or Disqualified
Capital Stock issued after the first day of such period of four full fiscal
quarters referred to in the covenant described in paragraph (a) under "--Certain
Covenants--Limitation on Indebtedness and Disqualified Capital Stock" through
and including the date of determination), and (if applicable) the application of
the net proceeds therefrom (and from any other such Indebtedness or Disqualified
Capital Stock), including to refinance other Indebtedness, had been incurred on
the first day of such four quarter period and, in the case of Acquired
Indebtedness, on the assumption that the related transaction (whether by means
of purchase, merger or otherwise) also had occurred on such date with the
appropriate adjustments with respect to such acquisition being included in such
pro forma calculation and (B) any acquisition or disposition by the Company or
any Restricted Subsidiary of any properties or assets outside the ordinary
course of business, or any repayment of any principal amount of any Indebtedness
of the Company or any Restricted Subsidiary prior to the Stated Maturity
thereof, in either case since the first day of such period of four full fiscal
quarters through and including the date of determination, had been consummated
on such first day of such four-quarter period; (ii) the Consolidated Fixed
Charges attributable to interest on any Indebtedness required to be computed on
a pro forma basis in accordance with the covenant described in paragraph (a)
under "--Certain Covenants--Limitation on Indebtedness and Disqualified Capital
Stock" and (A) bearing a floating interest rate shall be computed as if the rate
in effect on the date of computation had been the applicable rate for the entire
period and (B) which was not outstanding during the period for which the
computation is being made but which bears, at the option of the Company, a fixed
or floating rate of interest, shall be computed by applying, at the option of
the Company, either the fixed or floating rate; (iii) the Consolidated Fixed
Charges attributable to interest on any Indebtedness under a revolving credit
facility required to be computed on a pro forma basis in accordance with the
covenant described in paragraph (a) under "--Certain Covenants--Limitation on
Indebtedness and Disqualified Capital Stock" shall be computed based upon the
average daily balance of such Indebtedness during the applicable period,
provided that such average daily balance shall be reduced by the amount of any
repayment of Indebtedness under a revolving credit facility during the
applicable period, which repayment permanently reduced the commitments or
amounts available to be reborrowed under such facility; (iv) notwithstanding
clauses (ii) and (iii) of this proviso, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest Rate Protection Obligations, shall be deemed to have accrued at the
rate per annum resulting after giving effect to the operation of such
agreements; and (v) if after the first day of the period referred to in clause
(a) of this definition the Company has permanently retired any Indebtedness out
of the Net Cash Proceeds of the issuance and sale of shares of Qualified Capital
Stock of the Company within 30 days of such issuance and sale, Consolidated
Fixed Charges shall be calculated on a pro forma basis as if such Indebtedness
had been retired on the first day of such period.
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"Consolidated Fixed Charges" means, for any period, without duplication, (i)
the sum of (a) the interest expense of the Company and its Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP, including, without limitation, any amortization of debt discount, the
net cost under Interest Rate Protection Obligations (including any amortization
of discounts), the interest portion of any deferred payment obligation
constituting Indebtedness, all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing and all
accrued interest, in each case to the extent attributable to such period, (b) to
the extent any Indebtedness of any Person (other than the Company or a
Restricted Subsidiary) is guaranteed by the Company or any Restricted
Subsidiary, the aggregate amount of interest paid (to the extent not accrued in
a prior period) or accrued by such other Person during such period attributable
to any such Indebtedness, in each case to the extent attributable to that
period, (c) the aggregate amount of the interest component of Capitalized Lease
Obligations paid (to the extent not accrued in a prior period), accrued or
scheduled to be paid or accrued by the Company and its Restricted Subsidiaries
during such period, and (d) the aggregate amount of dividends paid (to the
extent not accrued in a prior period) or accrued on Preferred Stock or
Disqualified Capital Stock of the Company and its Restricted Subsidiaries, to
the extent such Preferred Stock or Disqualified Capital Stock is owned by
Persons other than the Company or any Restricted Subsidiary, less (ii), to the
extent included in clause (i) above, amortization of capitalized debt issuance
costs of the Company and its Restricted Subsidiaries during such period.
"Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes (including state franchise taxes
accounted for as income taxes in accordance with GAAP) of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net income
(or loss) of the Company and its Restricted Subsidiaries for such period as
determined in accordance with GAAP, adjusted by excluding (a) net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto), (b)
net after-tax gains or losses (less all fees and expenses relating thereto)
attributable to Asset Sales, (c) net income (or net loss) of any Person (other
than the Company or any of its Restricted Subsidiaries), in which the Company or
any of its Restricted Subsidiaries has an ownership interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Company or any of its Restricted Subsidiaries in cash by such other Person
during such period (regardless of whether such cash dividends or distributions
are attributable to net income (or net loss) of such Person during such period
or during any prior period), (d) net income (or net loss) of any Person combined
with the Company or any of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(e) net income of any Restricted Subsidiary to the extent that the declaration
or payment of dividends or similar distributions by that Restricted Subsidiary
of its net income is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, and (f) income
resulting from transfers of assets received by the Company or any Restricted
Subsidiary from an Unrestricted Subsidiary.
"Consolidated Net Worth" means, at any date, the consolidated stockholders'
equity of the Company less (without duplication) the amount of such
stockholders' equity attributable to Disqualified Capital Stock or treasury
stock of the Company and its Restricted Subsidiaries, as determined in
accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, depletion, amortization and other non-cash expenses of the Company
and its Restricted Subsidiaries deducted in computing Consolidated Net Income
for such period, all determined on a consolidated basis in accordance with GAAP
(excluding any such non-cash charge for which an accrual of or reserve for cash
charges for any future period is required).
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"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time which were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or arrangement designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"Default" means any event, act or condition that is, or after notice or
passage of time or both would become, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series of
transactions in respect of which the Board of Directors of the Company is
required to deliver a resolution of the Board of Directors under the Indenture,
a member of the Board of Directors of the Company who does not have any material
direct or indirect financial interest (other than an interest arising solely
from the beneficial ownership of Capital Stock of the Company) in or with
respect to such transaction or series of transactions.
"Disqualified Capital Stock" means any Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or by contract or otherwise, is, or upon the happening of an event or passage of
time or both would be, required to be redeemed or repurchased, in whole or in
part, prior to the final Stated Maturity of the Senior Notes or is redeemable at
the option of the holder thereof at any time prior to such final Stated
Maturity, or is convertible into or exchangeable for debt securities at any time
prior to such final Stated Maturity.
"Event of Default" has the meaning set forth above under the caption "Events
of Default."
"GAAP" means generally accepted accounting principles, consistently applied,
that are set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States of America, which are
applicable as of the date of the Indenture.
"Guarantee" or "guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (ii) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down under letters of credit. When used as a verb,
"guarantee" has a corresponding meaning.
"Holder" means a Person in whose name a Senior Note is registered in the
Note Register.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person, contingent or otherwise, for borrowed money or
for the deferred purchase price of property or services (excluding any trade
accounts payable and other accrued current liabilities incurred in the ordinary
course of business) and all liabilities of such Person incurred in connection
with any letters of credit, bankers' acceptances or other similar credit
transactions or any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, outstanding on the date of the
Indenture or thereafter, if, and to the extent, any of the foregoing would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, (b) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments, if, and to the extent, any of the
foregoing would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (c) all Indebtedness of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of a default are limited
to repossession or sale of such property), (d) the Attributable Indebtedness of
any
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Capitalized Lease Obligation of such Persons, (e) all Indebtedness described in
the preceding clauses and all dividends, the payment of which is secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness
(the amount of such obligation being deemed to be the lesser of the value of
such property or the amount of the obligation so secured), (f) all guarantees by
such Person of Indebtedness referred to in this definition, and (g) all
obligations of such Person under or in respect of Currency Hedge Obligations and
Interest Rate Protection Obligations.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and other similar agreements or arrangements designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Indebtedness or other extension of credit or capital
contribution to (by means of any transfer of cash or other property or assets to
others or any payment for property, assets or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities (including derivatives) or
evidences of Indebtedness issued by, any other Person. In addition, the fair
market value of the net assets of any Restricted Subsidiary at the time that
such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be
deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary
at such time. "Investments" shall exclude (a) extensions of trade credit or
other advances to customers on commercially reasonable terms in accordance with
normal trade practices or otherwise in the ordinary course of business, (b)
Interest Rate Protection Obligations and Currency Hedge Obligations, but only to
the extent that the same constitute Permitted Indebtedness and (c) endorsements
of negotiable instruments and documents in the ordinary course of business.
"Leasing Company" means Embroidery Leasing Corporation.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or similar type
of encumbrance (including, without limitation, any agreement to give or grant
any lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing) upon or with
respect to any property of any kind. A Person shall be deemed to own subject to
a Lien any property which such Person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Maturity" means, with respect to any Senior Note, the date on which any
principal of such Senior Note becomes due and payable as therein or in the
Indenture provided, whether at the Stated Maturity with respect to such
principal or by declaration of acceleration, call for redemption or purchase or
otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of legal
counsel, accountants and investment banks) related to such Asset Sale, (ii)
provisions for all taxes payable as a result of such Asset Sale (after taking
into account
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any available tax credits or deductions and any tax sharing arrangements), (iii)
amounts required to be paid to any Person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in the properties or assets
subject to the Asset Sale or having a Lien therein and (iv) appropriate amounts
to be provided by the Company or any Restricted Subsidiary, as the case may be,
as a reserve required in accordance with GAAP against any liabilities associated
with such Asset Sale and retained by the Company or any Restricted Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pensions and other postemployment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an Officers' Certificate;
provided, however, that any amounts remaining after adjustments, revaluations or
liquidations of such reserves shall constitute Net Available Proceeds.
"Net Cash Proceeds," with respect to any issuance or sale of Qualified
Capital Stock or other securities, means the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
and expenses actually incurred in connection with such issuance or sale and net
of taxes paid or payable as a result thereof.
"Note Register" means the register maintained by or for the Company in which
the Company shall provide for the registration of the Senior Notes and the
transfer of the Senior Notes.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness under Working Capital Agreements in an aggregate
principal amount at any time outstanding not to exceed the greater of (A)
$20.0 million or (B) 60% of the book value of the accounts receivable of the
Company and its Restricted Subsidiaries, calculated on a consolidated basis
and in accordance with GAAP,
(ii) Indebtedness under the Senior Notes or the Indebtedness under the
senior notes issued in the Exchange Offer;
(iii) Indebtedness outstanding or in effect on the date of the Indenture
after giving effect to the Offering and the application of the net proceeds
therefrom;
(iv) Indebtedness under Interest Rate Protection Obligations, provided
that (1) such Interest Rate Protection Obligations are related to payment
obligations on Permitted Indebtedness or Indebtedness otherwise permitted by
paragraph (a) of the "Limitation on Indebtedness and Disqualified Capital
Stock" covenant, and (2) the notional principal amount of such Interest Rate
Protection Obligations does not exceed the principal amount of such
Indebtedness to which such Interest Rate Protection Obligations relate;
(v) Indebtedness under Currency Hedge Obligations, provided that (1)
such Currency Hedge Obligations are related to payment obligations on
Permitted Indebtedness or Indebtedness otherwise permitted by paragraph (a)
of the "Limitation on Indebtedness and Disqualified Capital Stock" covenant
or to the foreign currency cash flows reasonably expected to be generated or
required by the Company and its Restricted Subsidiaries, (2) the notional
principal amount of such Currency Hedge Obligations does not exceed the
principal amount of such Indebtedness and the amount of such foreign
currency cash flows to which such Currency Hedge Obligations relate and (3)
such Currency Hedge Obligations are entered into for the purpose of limiting
currency exchange rate risks in connection with transactions entered into in
the ordinary course of business;
(vi) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary
and Indebtedness of any Restricted Subsidiary to the Company or a Wholly
Owned Restricted Subsidiary; provided, however, that upon either (1) the
subsequent issuance (other than directors' qualifying shares), sale,
transfer or other disposition of any Capital Stock or any other event which
results in any such Wholly Owned Restricted Subsidiary ceasing to be a
Wholly Owned Restricted Subsidiary or (2) the transfer
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or other disposition of any such Indebtedness (except to the Company or a
Wholly Owned Restricted Subsidiary), the provisions of this clause (vi)
shall no longer be applicable to such Indebtedness and such Indebtedness
shall be deemed, in each case, to be incurred and shall be treated as an
incurrence for purposes of paragraph (a) of the "Limitation on Indebtedness
and Disqualified Capital Stock" covenant at the time the Wholly Owned
Restricted Subsidiary in question ceased to be a Wholly Owned Restricted
Subsidiary or the time such transfer or other disposition occurred;
(vii) Indebtedness in respect of bid, performance or surety bonds issued
for the account of the Company in the ordinary course of business, including
guaranties or obligations of the Company with respect to letters of credit
supporting such bid, performance or surety obligations (in each case other
than for an obligation for money borrowed);
(viii) Indebtedness in respect of Capitalized Lease Obligations directly
incurred by the Company, provided that such Indebtedness incurred under this
clause (viii) does not exceed $2.5 million at any one time outstanding; and
(ix) any renewals, amendments, extensions, supplements, modifications,
deferrals, substitutions, refinancing or replacements (each, for purpose of
this clause (ix), a "refinancing") by the Company or a Restricted Subsidiary
of any Indebtedness incurred pursuant to paragraph (a) of the "Limitation on
Indebtedness and Disqualified Capital Stock" covenant (without giving effect
to the parenthetical excluding Permitted Indebtedness) or referred to above
in clauses (ii) through (vi) or this clause (ix), so long as (A) any such
new Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined
by the Company or such Restricted Subsidiary as necessary to accomplish such
refinancing, plus the amount of expenses of the Company or such Restricted
Subsidiary incurred in connection with such refinancing, (B) in the case of
any refinancing of Indebtedness (including the Senior Notes) that is PARI
PASSU with or subordinated in right of payment to the Senior Notes, then
such new Indebtedness is PARI PASSU with or subordinated in right of payment
to the Senior Notes at least to the same extent as the Indebtedness being
refinanced and (C) such new Indebtedness has an Average Life equal to or
longer than the Average Life of the Indebtedness being refinanced and a
final Stated Maturity that is at least 91 days later than the final Stated
Maturity of the Indebtedness being refinanced.
"Permitted Investments" means any of the following: (i) Investments in Cash
Equivalents; (ii) Investments in the Company or any of its Wholly Owned
Restricted Subsidiaries; (iii) Investments by the Company or any of its
Restricted Subsidiaries in another Person, if as a result of such Investment (A)
such other Person becomes a Wholly Owned Restricted Subsidiary or (B) such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all of its properties and assets to, the Company or a Wholly Owned
Restricted Subsidiary; (iv) Investments permitted under the "Limitation on Asset
Sales" covenant; (v) Investments made in the ordinary course of business in
prepaid expenses, lease, utility, workers' compensation, performance and other
similar deposits; (vi) Investments in an aggregate amount not to exceed $2.5
million in any Person engaged primarily in a Related Business on the date of any
such Investment; and (vii) Investments in the Leasing Company in an aggregate
amount not to exceed $5.0 million.
"Permitted Liens" means the following types of Liens:
(i) Liens existing as of the date of the Indenture;
(ii) Liens securing the Senior Notes;
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(iii) Liens in favor of the Company or, with respect to a Restricted
Subsidiary, Liens in favor of another Restricted Subsidiary;
(iv) Liens on accounts receivable, notes receivable or chattel paper
securing Indebtedness under one or more Working Capital Agreements that do
not, in the aggregate, exceed the amounts permitted pursuant to clause (i)
of the definition of Permitted Indebtedness;
(v) Liens securing Indebtedness that constitutes Permitted Indebtedness
pursuant to clause (ix) of the definition of "Permitted Indebtedness"
incurred as a refinancing of any Indebtedness secured by Liens described in
clause (i) or (iv) of this definition; provided, however, that such Liens
(x) are not less favorable to the Holders and are not more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being refinanced and (y) do not extend to or cover any property
or assets of the Company or any of its Restricted Subsidiaries not securing
the Indebtedness so refinanced;
(vi) Liens for taxes, assessments or governmental charges or claims
either (A) not delinquent or (B) contested in good faith by appropriate
proceedings and as to which the Company or a Restricted Subsidiary of the
Company, as the case may be, shall have set aside on its books such reserves
as may be required pursuant to GAAP;
(vii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not delinquent or being
contested in good faith, if such reserve or other appropriate provision, if
any, as shall be required by GAAP shall have been made in respect thereof;
(viii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the payment or performance of
tenders, statutory or regulatory obligations, surety and appeal bonds, bids,
government contracts and leases, performance and return of money bonds and
other similar obligations (exclusive of obligations for the payment of
borrowed money);
(ix) judgment Liens not giving rise to a Default or Event of Default and
so long as any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated shall
not have expired;
(x) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of business of the Company or any
of its Restricted Subsidiaries;
(xi) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease; provided that (A) the Attributable
Indebtedness related thereto constitutes Indebtedness permitted to be
incurred under the terms of the Indenture and (B) with respect to any
Capitalized Lease Obligation, such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(xii) Liens securing Purchase Money Indebtedness; provided, however, that
(A) the Purchase Money Indebtedness shall not be secured by any property or
assets of the Company or any Restricted Subsidiary other than the property
or assets so acquired and any proceeds therefrom and (B) the Lien securing
such Purchase Money Indebtedness shall be created within 90 days of such
acquisition;
(xiii) Liens upon specific items of inventory or other goods of any Person
securing such Person's obligations in respect of bankers acceptances issued
or created for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or other goods;
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(xiv) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property or assets
relating to such letters of credit and products and proceeds thereof;
(xv) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
setoff;
(xvi) Liens securing Acquired Indebtedness incurred in accordance with
the covenant described under "--Certain Covenants--Limitation on
Indebtedness and Disqualified Capital Stock;" provided that (A) such Liens
secured such Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and (B) such Liens do not extend
to or cover any property or assets of the Company or of any of its
Restricted Subsidiaries other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company or a Restricted Subsidiary of the Company and
are no more favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by the
Company or a Restricted Subsidiary of the Company; and
(xvii) Liens on substantially all of the assets of W&G, Ltd. under any
Working Capital Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated) of such
Person's preferred or preference stock, whether now outstanding or issued after
the date of the Indenture, including, without limitation, all classes and series
of preferred or preference stock of such Person.
"Principals" means (i) John K. Ziegler, Richard J. Mackey, John K. Ziegler,
Jr., Jack Klasky, Alan B. Lee, Maxwell L. Tripp, and other members of the
Company's principal management or (ii) the Company's Savings and Employee Stock
Ownership Plan and its other retirement plans holding shares of the Company's
Capital Stock.
"Public Equity Offering" means an offer and sale of Common Stock of the
Company pursuant to a registration statement that has been declared effective by
the Commission pursuant to the Securities Act (other than a registration
statement on Form S-8 or otherwise relating to equity securities issuable under
any employee benefit plan of the Company).
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in connection with the purchase of property or
assets for the business of the Company and its Restricted Subsidiaries.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Disqualified Capital Stock.
"Related Business" means the businesses of the Company and the Restricted
Subsidiaries on the date on which the Senior Notes were originally issued and
any business related, ancillary or complementary to the business of the Company
and the Restricted Subsidiaries on such date.
"Restricted Investment" means (without duplication) any Investment other
than a Permitted Investment including without limitation a Subsidiary designated
as an Unrestricted Subsidiary.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the date of the Indenture, unless such Subsidiary of the
Company is an Unrestricted Subsidiary or is designated as
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an Unrestricted Subsidiary in the manner described in the definition of the term
"Unrestricted Subsidiary."
"S&P" means Standard and Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale/Leaseback Transaction" means any direct or indirect arrangement
pursuant to which properties or assets are sold or transferred by the Company or
a Restricted Subsidiary and are thereafter leased back from the purchaser or
transferee thereof by the Company or one of its Restricted Subsidiaries.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the date specified in the instrument evidencing
or governing such Indebtedness as the fixed date on which the principal of such
Indebtedness or such installment of interest is due and payable.
"Subordinated Indebtedness" means any Indebtedness of the Company or the
Subsidiary Guarantors which is expressly subordinated in right of payment to the
Senior Notes or Subsidiary Guarantees, respectively.
"Subsidiary" means, with respect to any Person, (i) a corporation a majority
of whose Voting Stock is at the time, directly or indirectly, owned by such
Person, by one or more Subsidiaries of such Person or by such Person and one or
more Subsidiaries thereof or (ii) any other Person (other than a corporation),
including, without limitation, a joint venture, in which such Person, one or
more Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, have at least
majority ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other Person performing similar functions).
"Subsidiary Guarantors" mean (i) all U.S. subsidiaries of the Company
existing as of the date of the Indenture and (ii) any other Subsidiary of the
Company or a Subsidiary thereof that executes a Subsidiary Guarantee in
accordance with the provisions of the Indenture, and their respective successors
and assigns.
"Unrestricted Subsidiary" means (i) the Leasing Company, (ii) any Subsidiary
of the Company that at the time of determination will be designated an
Unrestricted Subsidiary by the Board of Directors of the Company as provided
below and (iii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Subsidiary of the Company as an
Unrestricted Subsidiary so long as (a) neither the Company nor any Restricted
Subsidiary is directly or indirectly liable pursuant to the terms of any
Indebtedness of such Subsidiary; (b) no default with respect to any Indebtedness
of such Subsidiary would permit (upon notice, lapse of time or otherwise) any
holder of any other Indebtedness of the Company or any Restricted Subsidiary to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its Stated Maturity; (c) such designation as an
Unrestricted Subsidiary would be permitted under the "Limitation on Restricted
Payments" covenant; (d) such designation shall not result in the creation or
imposition of any Lien on any of the properties or assets of the Company or any
Restricted Subsidiary (other than any Permitted Lien) and (e) the Company could
incur $1.00 of additional Indebtedness (not including the incurrence of
Permitted Indebtedness) under clause (a) of the "Limitation on Indebtedness and
Disqualified Capital Stock" covenant; provided, however, that with respect to
clause (a) above, the Company or a Restricted Subsidiary may be liable for
Indebtedness of an Unrestricted Subsidiary if (x) such liability constituted a
Permitted Investment or a Restricted Payment permitted by the "Limitation on
Restricted Payments" covenant, in each case, at the time of incurrence, or (y)
the liability would be a Permitted Investment in each case at the time of
designation of such Subsidiary as an Unrestricted Subsidiary. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing a Board Resolution with the Trustee giving effect to such
designation along with an Officers' Certificate stating that such designation is
in compliance with the requirements under the Indenture. The Board of Directors
of the Company may designate any Unrestricted Subsidiary as a Restricted
Subsidiary if, immediately after giving effect to such designation on a pro
forma basis, (i) no Default or Event of Default shall have occurred and be
continuing,
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(ii) the Company could incur $1.00 of additional Indebtedness (not including the
incurrence of Permitted Indebtedness) under clause (a) of the "Limitation on
Indebtedness and Disqualified Capital Stock" covenant and (iii) if any of the
properties and assets of the Company or any of its Restricted Subsidiaries would
upon such designation become subject to any Lien (other than a Permitted Lien),
the creation or imposition of such Lien shall have been in compliance with the
"Limitation on Liens" covenant.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
any Person (irrespective of whether or not, at the time, stock of any other
class or classes shall have, or might have, voting power by reason of the
happening of any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary to the
extent (i) all of the Capital Stock or other ownership interests in such
Restricted Subsidiary, other than any directors' qualifying shares mandated by
applicable law, is owned directly or indirectly by the Company or (ii) such
Restricted Subsidiary is organized in a foreign jurisdiction and is required by
the applicable laws and regulations of such foreign jurisdiction to be partially
owned by the government of such foreign jurisdiction or individual or corporate
citizens of such foreign jurisdiction in order for such Restricted Subsidiary to
transact business in such foreign jurisdiction, provided that the Company,
directly or indirectly, owns the remaining Capital Stock or ownership interest
in such Restricted Subsidiary and, by contract or otherwise, controls the
management and business of such Restricted Subsidiary and derives the economic
benefits of ownership of such Restricted Subsidiary to substantially the same
extent as if such Restricted Subsidiary were a wholly owned Subsidiary.
"Working Capital Agreements" mean (i) the New Credit Facility, (ii) the W&G,
Ltd. Credit Facility, (iii) with respect to any Person (including the Company),
without duplication, any agreement or agreements between such Person and a
financial institution or any institutions providing for the making of loans or
advances on a revolving basis, the issuance of letters of credit and/or the
creation of bankers' acceptances to fund such Person's general corporate
requirements, and (iv) any refinancings, renewals, replacements, modification
and extensions of any of the agreements described in clauses (i), (ii) and
(iii).
BOOK ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Old Notes have been, and the
New Notes will be, issued to qualified institutional buyers in the form of a
single, permanent global certificate in the definitive, fully registered form
(collectively, the "Global Note"). The Global Note was deposited on the date of
the closing of the sale of the Old Notes with, or on behalf of, DTC and
registered in the name of the nominee of DTC. Except as set forth below, the
Global Note may be transferred, in whole and not in part, only to another
nominee of DTC or to a successor of DTC or its nominee.
The Old Notes that have been issued that were, and New Notes that will be
issued, as described below under "--Certificated Securities," that will be,
purchased by or transferred to "institutional accredited investors," within the
meaning of Rule 501 (a)(1), (2), (3) or (7) under the Securities Act, who are
not "qualified institutional buyers" (as defined in Rule 144A under the
Securities Act), were or will be Certificated Securities issued in registered
certificated form. Upon the transfer to a qualified institutional buyer of
Certificated Securities, such Certificated Securities may, unless the Global
Note has previously been exchanged for Certificated Securities, be exchanged for
an interest in the Global Note representing the principal amount of Senior Notes
being transferred.
DTC has advised the Company and the Initial Purchaser as follows: It is a
limited-purpose trust company which was created to hold securities for its
participating organizations (the "Participants") and to facilitate the clearance
and settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. Participants
include securities brokers and dealers (including the Initial Purchaser), banks,
trust companies, clearing corporations and certain other organizations. Access
to the DTC's book-entry system is also available to others, such as banks,
brokers,
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dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("indirect
participants"). Persons who are not Participants may beneficially own securities
held by DTC only through Participants or indirect participants.
DTC has also advised that pursuant to procedures established by it ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
that ownership will be effected only through, records maintained by DTC (with
respect to Participants' interest), the Participants and the indirect
participants. The laws of some states require that certain persons take physical
delivery in definitive form of securities which they own. Consequently, the
ability to transfer beneficial interests in the Global Note is limited to such
extent.
So long as a nominee of DTC is the registered owner of the Global Note, such
nominee will be considered the sole owner or holder of the Senior Notes for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in the Global Note will not be entitled to have Senior Notes
registered in their names, will not receive or be entitled to receive physical
delivery of Senior Notes in definitive form and will not be considered the
owners or holders thereof under the Indenture.
Neither the Company, the Trustee, the paying agent nor the Senior Notes
registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Note, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Principal, interest payments and payments of Old Note Liquidated Damages, if
any, on the Global Note registered in the name of DTC's nominee or DTC will be
made by the Company, either directly or through a paying agent, to DTC's nominee
as the registered owner of the Global Note. Under the terms of the Indenture,
the Company and the Trustee will treat the persons in whose names the Senior
Notes are registered as the owners of such Senior Notes for the purpose of
receiving payments of principal and interest on such Senior Notes and for all
other purposes whatsoever. Therefore, neither the Company, the Trustee nor any
paying agent has any direct responsibility or liability for the payment of
principal or interest on the Senior Notes to owners of beneficial interests in
the Global Note. DTC has advised the Company and the Trustee that its present
practice is, upon receipt of any payment of principal or interest to credit
immediately the accounts of the Participants with payment in amounts
proportionate to their respective holdings in principal amount of beneficial
interest in the Global Note as shown on the records of DTC. Payments by
Participants and indirect participants to owners of beneficial interests in the
Global Note will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name" and will be the responsibility of such
Participants or indirect participants.
As long as the Senior Notes are represented by a Global Note, DTC's nominee
will be the holder of the Senior Notes and therefore will be the only entity
that can exercise a right to repayment or repurchase of the Senior Notes. See "
- --Certain Covenants--Change of Control" and "--Limitation on Asset Sales."
Notice by Participants or indirect participants or by owners of beneficial
interests in a Global Note held through such Participants or indirect
participants of the exercise of the option to elect repayment of beneficial
interests in Senior Notes represented by a Global Note must be transmitted to
DTC in accordance with its procedures on a form required by DTC and provided to
Participants. In order to ensure that DTC's nominee will timely exercise a right
to repayment with respect to a particular Senior Note, the beneficial owner of
such Senior Note must instruct the broker or other Participant or exercise a
right to repayment. Different firms have cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other Participant or indirect participant through which it
holds an interest in a Senior Note in order to ascertain the cut-off time by
which such an instruction must be given in order for timely notice to be
delivered to DTC. The Company will not be liable for any delay in delivery of
notices of the exercise of the option to elect repayment.
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CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Senior Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof).
In addition, the Company will issue Senior Notes in definitive form in
exchange for the Global Note if, and only if, DTC is at any time unwilling or
unable to continue as depository and a successor depository is not appointed by
the Company within 90 days. In such an instance, an owner of a beneficial
interest in the Global Note will be entitled to have Senior Notes equal in
principal amount to such beneficial interest registered in its name and will be
entitled to physical delivery of such Senior Notes in definitive form. Senior
Notes so issued in definitive form will be issued in denominations of $1,000 and
integral multiples thereof and will be issued in registered form only, without
coupons.
Neither the Company nor the Trustee will be liable for any delay by DTC or
its nominee in identifying the beneficial owners of Senior Notes and the Company
and the Trustee any conclusively rely on, and will be protected in relying on,
instructions from DTC or its nominee for all purposes.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal U.S. federal income tax
consequences resulting from the exchange of Old Notes for New Notes pursuant to
the Exchange Offer and from the beneficial ownership of Senior Notes by certain
persons. This summary does not purport to consider all the possible U.S. federal
tax consequences of the participation in the Exchange Offer or the ownership or
disposition of the Senior Notes and is not intended to reflect the particular
tax position of any beneficial owner. It deals only with Senior Notes held as
capital assets. Moreover, it does not purport to deal with all aspects of
federal taxation that may be relevant to particular investors in light of their
personal investment circumstances and it does not address beneficial owners that
may be subject to special tax rules, such as banks, insurance companies,
tax-exempt organizations, dealers in securities or currencies, purchasers that
hold Senior Notes as part of a hedging transaction or as part of a straddle with
other investments or as part of a "synthetic security" or other integrated
investment (including a "conversion transaction") comprised of a Senior Note and
one or more other investments, or purchasers that have a "functional currency"
other than the U.S. dollar. Except to the extent discussed below under "Non-U.S.
Holders," this summary is addressed only to beneficial owners of Senior Notes
("U.S. Holders") that are citizens or residents of the United States,
corporations, partnerships, or other business entities created or organized in
or under the laws of the United States or any State (including the District of
Columbia), or estates or trusts the income of which is subject to U.S. federal
income taxation regardless of its source ("U.S. Persons"). This summary is based
upon the U.S. federal tax laws and regulations as now in effect and as currently
interpreted and does not take into account possible changes in such tax laws or
such interpretations, any of which may be applied retroactively. It does not
include any description of estate or gift tax laws or the tax laws of any state,
local or foreign government that may be applicable to the Senior Notes or the
beneficial owners thereof. Persons considering participating in the Exchange
Offer or making an investment in the Senior Notes should consult their own tax
advisors concerning the application of the U.S. federal tax laws to their
particular situations as well as any consequences to them under the laws of any
other taxing jurisdiction.
EXCHANGE
The exchange of the Old Notes for the New Notes pursuant to the Exchange
Offer should not be treated as a taxable transaction for federal income tax
purposes because the New Notes do not differ materially in kind or extent from
the Old Notes. Accordingly, no gain or loss should be recognized by a Holder who
exchanges an Old Note for a New Note pursuant to the Exchange Offer, and each
New Note should be viewed as a continuation of the corresponding Old Note. For
purposes of determining gain or loss upon a subsequent sale or exchange of the
New Notes, a holder's initial basis in the New Notes will be the same as such
holder's adjusted basis in the Old Notes exchanged therefor, and the holding
period of a holder in the New Note should include the period during which such
holder held such corresponding Old Note.
U.S. HOLDERS
PAYMENTS OF INTEREST. In general, interest on a Senior Note will be taxable
to a U.S. Holder as ordinary income at the time it is received or accrued,
depending on the U.S. Holder's method of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT. The Old Notes were issued with original issue
discount ("OID") for federal income tax purposes. Because the New Notes are
treated as a continuation of the Old Notes, the OID on the Old Notes will carry
over to the New Notes, and continue to be treated in the same manner.
U.S. Holders of Senior Notes are required to include OID as ordinary income
as it accrues in accordance with a constant yield method based on compounding at
the end of each accrual period. The term "accrual period" may be any set of
periods (which may be of varying lengths) selected by the U.S. Holder as long as
(i) no accrual period is longer than one year, and (ii) each scheduled payment
of interest
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or principal on the Senior Note occurs on the first or final day of an accrual
period. In general, the amount of OID required to be included in income will
increase with each successive accrual period.
The Company will report annually to the Internal Revenue Service (the "IRS")
and to each holder other than exempt holders not subject to the information
reporting requirements, the amount of OID and interest accrued with respect to
the Senior Notes.
SALE OR REDEMPTION. A U.S. Holder generally will recognize taxable gain or
loss on the sale or redemption of a Senior Note equal to the difference between
the amount realized from such sale or redemption (other than any amount
attributable to accrued interest) and such U.S. Holder's adjusted tax basis for
such Senior Note. Such gain or loss generally will be capital gain or loss and
will be long-term capital gain or loss if the holding period for such Senior
Notes is more than one year. A U.S. Holder's adjusted tax basis in a Senior Note
is generally equal to the amount paid therefor, increased by accrued OID
previously included in the U.S. Holder's gross income with respect to the Senior
Note.
OLD NOTE LIQUIDATED DAMAGES. The Company intends to take the position that
the Old Note Liquidated Damages, if any, will be taxable to a U.S. Holder as
ordinary income in accordance with the U.S. Holder's method of accounting for
federal income tax purposes. The IRS may take a different view, however, which
could affect the timing of the U.S. Holder's income with respect to the Old Note
Liquidated Damages and possibly could affect the timing of inclusion of interest
income.
NON-U.S. HOLDERS
The following discussion summarizes certain U.S. federal income tax
consequences generally applicable to the ownership and disposition of the Senior
Notes by a beneficial owner who is not a U.S. Person ("Non-U.S. Holder"). This
discussion does not purport to deal with all aspects of U.S. federal income
taxation that may be relevant to a Non-U.S. Holder and does not describe any tax
consequences arising out of the laws of any state, locality or foreign
jurisdiction or out of U.S. federal estate and gift tax laws. Non-U.S. Holders
are advised to consult their tax advisors regarding the U.S. federal, state,
local and foreign tax consequences of their participation in the Offering.
Under present U.S. federal income tax law and subject to the discussion of
backup withholding below:
(a) payments of principal and interest (including OID) on the Senior
Notes by the Company or any agent of the Company to any Non-U.S. Holder
whose income from the Senior Notes is not effectively connected with a U.S.
trade or business will not be subject to U.S. federal withholding tax,
provided that (i) the Non-U.S. Holder does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of the Company entitled to vote, (ii) the Non-U.S. Holder is not a
controlled foreign corporation (as defined for U.S. federal income tax
purposes) that is related to the Company through stock ownership or a bank
making an extension of credit pursuant to a loan agreement in the ordinary
course of business, and (iii) either (A) the beneficial owner of the Senior
Notes certifies to the Company or its agent, under penalties of perjury,
that he is not a U.S. Person and provides his name and address, or (B) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
(a "financial institution") and holds the Senior Notes on behalf of the
beneficial owner, certifies to the Company or its agent under penalties of
perjury that such statement has been received from the beneficial owner by
it or by another financial institution and furnishes the payor with a copy
thereof; and
(b) a Non-U.S. Holder generally will not be subject to U.S. federal
income tax on gain recognized on a sale or other disposition (including a
redemption) of Senior Notes unless (i) the gain is effectively connected
with the conduct of a trade or business within the United States by the Non-
U.S. Holder or (ii) in the case of a Non-U.S. Holder who is a nonresident
alien individual, such holder is present in the U.S. for 183 or more days in
the taxable year of the sale or disposition and either has
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a "tax home" (as defined for U.S. federal income tax purposes) in the United
States or an office or other fixed place of business in the United States to
which the sale or disposition is attributable.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Senior Notes are outstanding, the
Company is required to provide the IRS with certain information, including the
holder's name, address and taxpayer identification number, the aggregate amount
of principal and interest paid to that holder during the calendar year and the
amount of tax withheld, if any. This obligation, however, does not apply with
respect to certain U.S. Holders, including corporations, tax-exempt
organizations, qualified pension and profit sharing trusts and individual
retirement accounts.
In the event that a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number in
the manner required by applicable law or under reports its tax liability, the
Company, its agents or paying agents or a broker may be required to "backup"
withhold a tax equal to 31% of each payment of interest and principal (and
premium, if any) on the Senior Notes. This backup withholding is not an
additional tax and may be credited against the U.S. Holder's U.S. federal income
tax liability, provided that the required information is furnished to the IRS.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by the Company or any agent thereof
(in its capacity as such) to a Non-U.S. Holder of a Senior Note if such holder
has provided the required certification that it is not a U.S. Person as set
forth in clause (iii) in paragraph (a) under "--Non-U.S. Holders," or has
otherwise established an exemption (provided that neither the Company nor its
agent has actual knowledge that the holder is a U.S. Person or that the
conditions of any exemption are not in fact satisfied).
Payment of the proceeds from the sale of a Senior Note to or through a
foreign office of a broker will not be subject to information reporting or
backup withholding, except that information reporting may apply to such payments
if the broker is a U.S. Person, a controlled foreign corporation for U.S. tax
purposes or a foreign person 50% or more of whose gross income from all sources
for the three-year period ending with the close of its taxable year preceding
the payment was effectively connected with a United States trade or business.
Payment of the proceeds from a sale of a Senior Note to or through the United
States office of a broker is subject to information reporting and backup
withholding unless the holder or beneficial owner certifies as to its taxpayer
identification number or otherwise establishes an exemption from information
reporting and backup withholding.
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PLAN OF DISTRIBUTION
Any broker-dealer who holds Old Notes that are "Transfer Restricted
Securities" (as defined in the Registration Rights Agreement) and that were
acquired for its own account as a result of market-making activities or other
trading activities (other than Old Notes acquired directly from the Company) may
exchange such Old Notes; however, such broker-dealer may be deemed to be an
"underwriter" within the meaning of the Securities Act in connection with any
resales of the New Notes received by such broker-dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
broker-dealer of a copy of this Prospectus. The Company has agreed that for a
period of 180 days after the effective date of the Registration Statement of
which this Prospectus is a part, and use its best efforts to make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 1997 (90 days
after commencement of the Exchange Offer), all dealers effecting transactions in
the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the effective date of the Registration
Statement of which this Prospectus is a part, the Company will promptly send
additional copies of this Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal. The Company has agreed to pay the expenses incident to the Exchange
Offer and will indemnify the Holders of the Old Notes against certain
liabilities, including certain liabilities under the Securities Act, in
connection with the Exchange Offer.
LEGAL MATTERS
The legality of the New Notes offered hereby will be passed upon by Hughes
Hubbard & Reed LLP, New York, New York.
EXPERTS
The consolidated balance sheets of Willcox & Gibbs, Inc. and subsidiaries as
of December 31, 1996 and 1995 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years ended December
31, 1996 and 1995 and for the period from July 13, 1994 (date of formation) to
December 31, 1994 and the consolidated statements of operations and cash flows
of the Company's Predecessor for the period from January 1, 1994 to July 12,
1994 have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
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The combined balance sheet of Clinton Management Corp. (d/b/a Clinton
Machine & Supply) and Clinton Machinery Corp. as of December 31, 1995 and the
related combined statements of operations, stockholders' equity (deficit) and
cash flows for the year then ended have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants appearing elsewhere herein and upon the
authority of said firm as experts in accounting and auditing.
The consolidated balance sheets of Macpherson Meistergram, Inc. and
subsidiary as of December 31, 1996 and 1995, the related consolidated statements
of income, stockholders' investment and cash flows for each of the three years
in the period ended December 31, 1996, and the information set forth in the
selected historical financial information as of December 31, 1996, 1995 and 1994
and each of the three years in the period ended December 31, 1996, included in
this Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
report.
108
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act for the registration of the New Notes offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information with respect to the
Company and the New Notes offered hereby, reference is made to the Registration
Statement and to the exhibits filed therewith. Statements contained in this
Prospectus concerning the contents of any contract or other document are not
necessarily complete. With respect to each such contract or other document filed
with the Commission 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.
The Company is not currently subject to the periodic reporting and other
informational requirements of the Exchange Act. The Company has agreed that,
whether or not it is required to do so by the rules and regulations of the
Commission, for so long as any of the Senior Notes remain outstanding, it will
furnish to the Holders of the Senior Notes: (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
forms, including a "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and, with respect to annual information
only, a report thereon by the Company's certified independent accountants, and
(ii) all reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, following
consummation of the Exchange Offer, the Company will file a copy of all such
information and reports with the Commission for public availability (unless the
Commission will not accept such a filing) and will make such information
available to any prospective investors upon request. In addition, for so long as
any of the Senior Notes remain outstanding, the Company has agreed to make
available to any prospective purchaser of the Senior Notes or beneficial owner
of the Senior Notes in connection with any sale thereof, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
109
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
Independent Auditors' Report............................................................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995............................................. F-3
Consolidated Statements of Operations for the years ended December 31, 1996 and 1995, for the period July F-4
13, 1994 to December 31, 1994 and for the period January 1, 1994 to July 12, 1994......................
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996 and 1995, for the F-5
period July 13, 1994 to December 31, 1994 and for the period January 1, 1994 to July 12, 1994..........
Consolidated Statements of Cash Flows for the years ended December 31, 1996 and 1995, for the period July F-6
13, 1994 to December 31, 1994 and for the period January 1, 1994 to July 12, 1994......................
Notes to Consolidated Financial Statements............................................................... F-7
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
Report of Independent Public Accountants................................................................. F-23
Consolidated Balance Sheets as of December 31, 1996 and 1995............................................. F-24
Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994................... F-25
Consolidated Statements of Stockholders' Investment for the years ended December 31, 1996, 1995 and F-26
1994...................................................................................................
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994............... F-27
Notes to Consolidated Financial Statements............................................................... F-28
CLINTON MANAGEMENT CORP. AND CLINTON MACHINERY CORP.
Independent Auditors' Report............................................................................. F-37
Combined Balance Sheet as of December 31, 1995........................................................... F-38
Combined Statement of Operations for the year ended December 31, 1995.................................... F-39
Combined Statement of Stockholders' Equity (Deficit) for the year ended December 31, 1995................ F-40
Combined Statement of Cash Flows for the year ended December 31, 1995.................................... F-41
Notes to Combined Financial Statements................................................................... F-42
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Willcox & Gibbs, Inc.:
We have audited the accompanying consolidated balance sheets of Willcox &
Gibbs, Inc. and subsidiaries (the "Company") as of December 31, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the years ended December 31, 1996 and 1995 and for the period
from July 13, 1994 (date of formation) to December 31, 1994 and the consolidated
statements of operations and cash flows of the Company's Predecessor (see note
1) for the period from January 1, 1994 to July 12, 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Willcox &
Gibbs, Inc. and subsidiaries at December 31, 1996 and 1995, and the results of
their operations and their cash flows for the years ended December 31, 1996 and
1995 and for the period from July 13, 1994 (date of formation) to December 31,
1994 and the results of operations and cash flows of the Company's Predecessor
(see note 1) for the period from January 1, 1994 to July 12, 1994, in conformity
with generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, effective
July 13, 1994, Willcox & Gibbs, Inc. acquired the assets and liabilities of
certain divisions of Rexel, Inc. in a transaction accounted for as a purchase.
As a result of the transaction, the consolidated financial statements for
periods after the transaction are presented on a different cost basis than that
for the period before the acquisition and, therefore, are not comparable.
KPMG Peat Marwick LLP
Atlanta, Georgia
February 26, 1997
F-2
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMPANY
----------------------------
<S> <C> <C>
1996 1995
------------- -------------
ASSETS (NOTE 5)
Current assets:
Cash............................................................................. $ 881,500 920,238
Trade accounts receivable, net of allowance for doubtful accounts of $2,419,000
in 1996 and $1,596,000 in 1995................................................. 22,335,977 14,235,751
Inventories (note 3)............................................................. 34,223,674 29,447,999
Prepaid expenses and other current assets........................................ 2,655,412 2,021,276
Deferred income taxes (note 7)................................................... 804,006 563,408
------------- -------------
Total current assets......................................................... 60,900,569 47,188,672
Property and equipment, net (note 4)............................................... 4,400,341 2,811,486
Deferred financing costs, less accumulated amortization of $811,755 in 1996 and
$435,439 in 1995 (notes 2 and 15)................................................ 2,323,168 1,344,706
Intangible assets, less accumulated amortization of $228,622
in 1996 (notes 2 and 10)......................................................... 11,059,878 603,000
Other assets....................................................................... 1,044,532 579,659
------------- -------------
$ 79,728,488 52,527,523
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit (notes 5 and 15)........................................ $ 19,347,392 12,941,374
Book overdrafts.................................................................. 1,499,297 597,110
Current installments of long-term debt (notes 6 and 15).......................... 3,195,401 1,812,500
Trade accounts payable........................................................... 12,806,244 6,230,155
Income taxes payable............................................................. 641,568 308,725
Accrued liabilities and other current liabilities................................ 4,757,983 3,375,362
------------- -------------
Total current liabilities.................................................... 42,247,885 25,265,226
Deferred income taxes (note 7)..................................................... 290,113 154,946
Accrued retirement benefits (note 8)............................................... 2,451,939 2,647,724
Long-term debt, excluding current installments (notes 2, 6, and 15)................ 18,893,332 16,354,787
Other liabilities.................................................................. 168,258 212,890
------------- -------------
Total liabilities............................................................ 64,051,527 44,635,573
------------- -------------
Common stock subject to put option (note 2)........................................ 3,000,000 --
Stockholders' equity (notes 2, 9, 10, and 15):
Common stock:
Class A, $10 stated value. Authorized 1,500,000 shares; issued and outstanding
976,277 shares (including 100,000 shares subject to put option) in 1996 and
658,248 shares in 1995....................................................... 8,762,770 6,582,480
Class B, no par value. Authorized 250,000 shares; none issued.................. -- --
Class C, no par value. Authorized 250,000 shares; none issued.................. -- --
Additional paid-in capital....................................................... 1,904,398 826,612
Subscriptions receivable......................................................... (429,462) (113,881)
Retained earnings................................................................ 2,201,527 888,400
Cumulative translation adjustment................................................ 237,728 (291,661)
------------- -------------
Total stockholders' equity....................................................... 12,676,961 7,891,950
------------- -------------
Commitments (note 14)
$ 79,728,488 52,527,523
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995, FOR THE PERIOD FROM
JULY 13, 1994 (DATE OF FORMATION) TO DECEMBER 31, 1994
AND FOR THE PERIOD FROM JANUARY 1, 1994 TO JULY 12, 1994
<TABLE>
<CAPTION>
COMPANY'S
COMPANY PREDECESSOR
------------------------------------------------ -----------------
PERIOD FROM PERIOD FROM
JULY 13, 1994 TO JANUARY 1,1994
1996 1995 DECEMBER 31, 1994 TO JULY 12, 1994
-------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales........................................ $ 113,851,258 90,431,431 41,643,728 41,308,902
Cost of goods sold............................... 77,623,034 60,642,521 29,161,827 26,908,448
-------------- ------------- ----------------- -----------------
Gross profit................................... 36,228,224 29,788,910 12,481,901 14,400,454
Selling, general, and administrative expenses.... 28,968,827 23,606,126 11,263,508 11,997,834
-------------- ------------- ----------------- -----------------
Operating income............................... 7,259,397 6,182,784 1,218,393 2,402,620
Other income (expense):
Interest expense............................... (4,824,553) (4,248,820) (1,946,071) (1,390,274)
Other, net..................................... 14,968 17,806 85,373 (223,922)
-------------- ------------- ----------------- -----------------
Income (loss) before income taxes and
extraordinary item............................. 2,449,812 1,951,770 (642,305) 788,424
Income tax expense (benefit) (note 7)............ 1,136,685 557,513 (288,022) 425,561
-------------- ------------- ----------------- -----------------
Income (loss) before extraordinary item........ 1,313,127 1,394,257 (354,283) 362,863
Extraordinary loss, net of income tax benefit of
$92,901 (note 10).............................. -- (151,574) -- --
-------------- ------------- ----------------- -----------------
Net income (loss)............................ $ 1,313,127 1,242,683 (354,283) 362,863
-------------- ------------- ----------------- -----------------
-------------- ------------- ----------------- -----------------
Earnings (loss) per common share and common share
equivalent:
Income (loss) before extraordinary item........ $ 1.23 1.85 (.58)
Extraordinary item, net........................ -- (.20) --
-------------- ------------- -----------------
Net income (loss)............................ $ 1.23 1.65 (.58)
-------------- ------------- -----------------
-------------- ------------- -----------------
Weighted average number of common shares and
common share equivalents....................... 1,068,645 754,153 607,577
-------------- ------------- -----------------
-------------- ------------- -----------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR THE PERIOD
FROM JULY 13, 1994 (DATE OF FORMATION) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
CLASS A COMMON RETAINED CLASS A
STOCK ADDITIONAL EARNINGS COMMON STOCK CUMULATIVE TOTAL
-------------------- PAID-IN (ACCUMULATED SUBSCRIPTIONS TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT) RECEIVABLE ADJUSTMENTS EQUITY
--------- --------- ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial capitalization at July 13,
1994............................. 481,250 $4,812,500 -- -- -- -- 4,812,500
Fair value of common stock warrants
issued (note 10)................. -- -- 1,688,000 -- -- -- 1,688,000
Net loss........................... -- -- -- (354,283) -- -- (354,283)
Class A common stock issued to the
Company's Employee Stock
Ownership Plan ("ESOP") relating
to Rexel, Inc.'s ESOP rollover... 101,500 1,015,000 -- -- (1,015,000) -- --
Class A common stock issued to the
Company's ESOP................... 24,827 248,267 -- -- (248,267) -- --
Translation adjustments............ -- -- -- -- -- (179,710) (179,710)
--------- --------- ----------- ------------ ------------ ----------- ------------
Balance at December 31, 1994....... 607,577 6,075,767 1,688,000 (354,283) (1,263,267) (179,710) 5,966,507
Net income......................... -- -- -- 1,242,683 -- -- 1,242,683
Proceeds from subscriptions
receivable....................... -- -- -- -- 1,263,267 -- 1,263,267
Class A common stock issued to the
Company's ESOP................... 50,671 506,713 138,612 -- (113,881) -- 531,444
Repurchase and retirement of
warrants (note 10)............... -- -- (1,000,000) -- -- -- (1,000,000)
Translation adjustments............ -- -- -- -- -- (111,951) (111,951)
--------- --------- ----------- ------------ ------------ ----------- ------------
Balance at December 31, 1995....... 658,248 6,582,480 826,612 888,400 (113,881) (291,661) 7,891,950
Net income......................... -- -- -- 1,313,127 -- -- 1,313,127
Proceeds from subscriptions
receivable....................... -- -- -- -- 113,881 -- 113,881
Class A common stock issued to the
Company's ESOP................... 33,715 337,150 281,781 -- (429,462) -- 189,469
Fair value of common stock warrants
issued (note 9).................. -- -- 357,000 -- -- -- 357,000
Class A common stock issued in
Clinton acquisition (note 2)..... 100,000 -- -- -- -- -- --
Class A common stock sold in
private placement (note 2)....... 184,314 1,843,140 439,005 -- -- -- 2,282,145
Translation adjustments............ -- -- -- -- -- 529,389 529,389
--------- --------- ----------- ------------ ------------ ----------- ------------
Balance at December 31, 1996....... 976,277 $8,762,770 1,904,398 2,201,527 (429,462) 237,728 12,676,961
--------- --------- ----------- ------------ ------------ ----------- ------------
--------- --------- ----------- ------------ ------------ ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995, FOR THE PERIOD FROM
JULY 13, 1994 (DATE OF FORMATION) TO DECEMBER 31, 1994
AND FOR THE PERIOD FROM JANUARY 1, 1994 TO JULY 12, 1994
<TABLE>
<CAPTION>
COMPANY
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................................. $ 1,313,127 1,242,683
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Depreciation and amortization............................................................... 651,606 458,514
Provision for losses on accounts receivable................................................. 267,034 580,520
Amortization of deferred financing costs and intangible assets.............................. 604,938 290,292
Amortization of debt discounts.............................................................. 175,929 187,786
Deferred income taxes....................................................................... 271,252 17,424
Translation adjustments..................................................................... 529,389 (111,951)
Extraordinary loss on debt extinguishment, net.............................................. -- 151,574
Changes in operating assets and liabilities, net of effects of business acquisitions:
Trade accounts receivable................................................................. (4,728,958) 768,495
Inventories............................................................................... (1,391,678) (753,188)
Prepaid expenses and other current assets................................................. (363,358) (370,929)
Other assets.............................................................................. (203,064) (652,758)
Income taxes payable...................................................................... 332,843 200,746
Trade accounts payable and other liabilities.............................................. 2,220,304 (191,464)
-------------- --------------
Net cash provided by (used in) operating activities..................................... (320,636) 1,817,744
-------------- --------------
Cash flows from investing activities:
Capital expenditures.......................................................................... (1,247,380) (771,080)
Proceeds from sale of property and equipment.................................................. 76,094 14,716
Payments for business acquisitions, net of cash acquired...................................... (12,012,103) --
-------------- --------------
Net cash used in investing activities....................................................... (13,183,389) (756,364)
-------------- --------------
Cash flows from financing activities:
Net proceeds from (reduction of) revolving line of credit, net of proceeds from debt issued
in business acquisitions.................................................................. 1,738,579 2,327,342
Increase (decrease) in book overdraft....................................................... 902,187 (22,497)
Proceeds from debt issued in business acquisitions.......................................... 9,167,439 --
Proceeds from other debt.................................................................... 1,712,600 --
Principal payments on long-term debt........................................................ (2,110,083) (1,375,000)
Payment of financing costs.................................................................. (530,930) --
Proceeds from common stock sold in private placement........................................ 2,282,145 --
Extinguishment of debt...................................................................... -- (2,500,000)
Repurchase and retirement of warrants....................................................... -- (1,000,000)
Proceeds from common stock issued to the Company's ESOP..................................... 303,350 1,794,711
Net financing transactions with Rexel, Inc.................................................. -- --
-------------- --------------
Net cash provided by (used in) financing activities....................................... 13,465,287 (775,444)
-------------- --------------
Net change in cash........................................................................ (38,738) 285,936
Cash at beginning of period..................................................................... 920,238 634,302
-------------- --------------
Cash at end of period........................................................................... $ 881,500 920,238
-------------- --------------
-------------- --------------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.................................................................................... $ 4,157,170 3,618,429
-------------- --------------
-------------- --------------
Income taxes, net of refunds................................................................ $ 320,277 339,185
-------------- --------------
-------------- --------------
Supplemental disclosure of noncash investing and financing activities:
Issuance of common stock subscriptions receivable............................................. $ 429,462 113,881
-------------- --------------
-------------- --------------
Effects of business acquisitions:
Fair value of assets acquired............................................................... $ 8,875,546 --
-------------- --------------
-------------- --------------
Liabilities assumed......................................................................... $ 4,167,724 --
-------------- --------------
-------------- --------------
<CAPTION>
COMPANY'S
PREDECESSOR
----------------
PERIOD FROM PERIOD FROM
JULY 13, 1994 JANUARY 1, 1994
TO DECEMBER 31, TO JULY 12,
1994 1994
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................................. (354,283) 362,863
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Depreciation and amortization............................................................... 184,421 315,615
Provision for losses on accounts receivable................................................. 320,678 223,551
Amortization of deferred financing costs and intangible assets.............................. 411,498 --
Amortization of debt discounts.............................................................. 110,526 --
Deferred income taxes....................................................................... (425,886) --
Translation adjustments..................................................................... (179,710) 393,019
Extraordinary loss on debt extinguishment, net.............................................. -- --
Changes in operating assets and liabilities, net of effects of business acquisitions:
Trade accounts receivable................................................................. (2,785,869) (512,026)
Inventories............................................................................... 3,090,027 1,366,675
Prepaid expenses and other current assets................................................. (483,080) (57,343)
Other assets.............................................................................. 121,236 500,650
Income taxes payable...................................................................... (76,125) 146,507
Trade accounts payable and other liabilities.............................................. 3,139,525 (803,721)
---------------- ----------------
Net cash provided by (used in) operating activities..................................... 3,072,958 1,935,790
---------------- ----------------
Cash flows from investing activities:
Capital expenditures.......................................................................... (272,491) (346,109)
Proceeds from sale of property and equipment.................................................. 181,802 --
Payments for business acquisitions, net of cash acquired...................................... (39,089,106) --
---------------- ----------------
Net cash used in investing activities....................................................... (39,179,795) (346,109)
---------------- ----------------
Cash flows from financing activities:
Net proceeds from (reduction of) revolving line of credit, net of proceeds from debt issued
in business acquisitions.................................................................. (4,565,968) --
Increase (decrease) in book overdraft....................................................... 619,607 --
Proceeds from debt issued in business acquisitions.......................................... 36,187,500 --
Proceeds from other debt.................................................................... -- --
Principal payments on long-term debt........................................................ (312,500) (48,245)
Payment of financing costs.................................................................. -- --
Proceeds from common stock sold in private placement........................................ 4,812,500 --
Extinguishment of debt...................................................................... -- --
Repurchase and retirement of warrants....................................................... -- --
Proceeds from common stock issued to the Company's ESOP..................................... -- --
Net financing transactions with Rexel, Inc.................................................. -- (940,955)
---------------- ----------------
Net cash provided by (used in) financing activities....................................... 36,741,139 (989,200)
---------------- ----------------
Net change in cash........................................................................ 634,302 600,481
Cash at beginning of period..................................................................... -- 1,310,780
---------------- ----------------
Cash at end of period........................................................................... 634,302 1,911,261
---------------- ----------------
---------------- ----------------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.................................................................................... 1,341,083 1,390,274
---------------- ----------------
---------------- ----------------
Income taxes, net of refunds................................................................ -- --
---------------- ----------------
---------------- ----------------
Supplemental disclosure of noncash investing and financing activities:
Issuance of common stock subscriptions receivable............................................. 1,263,267 --
---------------- ----------------
---------------- ----------------
Effects of business acquisitions:
Fair value of assets acquired............................................................... 52,934,575 --
---------------- ----------------
---------------- ----------------
Liabilities assumed......................................................................... 11,934,575 --
---------------- ----------------
---------------- ----------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) OPERATIONS AND PRINCIPLES OF CONSOLIDATION
Willcox & Gibbs, Inc. and subsidiaries (the "Company") are engaged
principally in the distribution of replacement parts, supplies, and specialized
equipment to manufacturers of apparel and other sewn products in the domestic
and export markets. The accompanying consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
The consolidated financial statements of the Company reflect a new basis of
accounting allocating the purchase price to the assets and liabilities acquired
using the purchase method of accounting (note 2). The consolidated financial
statements of the Company's Predecessor for the period from January 1, 1994 to
July 12, 1994 consist of the apparel operations of Rexel, Inc. prior to their
acquisition by Willcox & Gibbs, Inc. on July 13, 1994.
(B) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
primarily by using the first-in, first-out method.
(C) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided
primarily using the straight-line method over the following estimated useful
lives of the respective assets:
<TABLE>
<S> <C>
Buildings...................................................... 40 years
3 to 7
Machinery and equipment........................................ years
5 to 7
Furniture and fixtures......................................... years
</TABLE>
Leasehold improvements are amortized on a straight-line basis over the
shorter of the lease term or estimated useful life of the asset.
(D) DEFERRED FINANCING COSTS
Deferred financing costs represent origination fees and other related costs
incurred in connection with establishment of the Company's existing credit
agreement. These costs have been deferred and are being amortized using the
straight-line method over the term of the related debt.
(E) INTANGIBLE ASSETS
Intangible assets consist primarily of costs in excess of the fair value of
net assets acquired in business combinations. Intangible assets are amortized on
a straight-line basis over the expected periods to be benefited, generally 40
years. The Company assesses the recoverability of its intangible assets by
determining whether the amortization of such balances over their remaining life
can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the
F-7
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company's average cost of funds. The assessment of the recoverability of
goodwill will be impacted if estimated future operating cash flows are not
achieved.
(F) BOOK OVERDRAFTS
Under the Company's cash management system, checks issued but not presented
to banks frequently result in overdraft balances for accounting purposes and are
classified as book overdrafts in the accompanying consolidated balance sheets.
(G) INCOME TAXES
Income taxes are accounted for using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
The Federal taxable income of the Company's Predecessor was included in
Rexel, Inc.'s consolidated Federal income tax return. The allocation of Federal
income tax expense was provided as if the Company's Predecessor filed a separate
Federal income tax return.
(H) FORWARD EXCHANGE CONTRACTS
The Company enters into forward exchange contracts for foreign currency as a
hedge against accounts payable denominated in a foreign currency. These
contracts are used by the Company to minimize exposure and reduce risk from
exchange rate fluctuations in the normal course of its foreign business. Gains
and losses on forward exchange contracts are deferred and included in the
measurement of foreign currency transaction gains and losses when realized. Cash
provided and used for forward exchange contracts is included in the cash flows
resulting from changes in trade accounts payable. Contracts amounting to $45,514
and $1,123,098, whose contractual amounts approximate market value, were
outstanding at December 31, 1996 and 1995, respectively.
(I) FOREIGN CURRENCY TRANSLATION
The local currency has been used as the functional currency of the Company's
subsidiaries located outside of the United States. Assets and liabilities
denominated in foreign currency are translated from their respective foreign
currencies into U.S. dollars using exchange rates in effect at the balance sheet
date. Revenues and expenses are translated at the average exchange rates in
effect during the period. Translation gains and losses are included as a
separate component of stockholders' equity. Transaction gains and losses
included in results of operations are not material in 1996, 1995, or 1994.
(J) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of the Company's senior notes payable are estimated based
upon cash flows discounted using the interest rate available to the Company for
debt with similar terms and remaining maturities. The carrying value of the
Company's remaining borrowings approximate fair value due to the
F-8
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
variable rate nature of the borrowings and/or the short maturity of the
borrowings. The fair value of the Company's forward exchange contracts is
estimated by obtaining quotes for contracts with similar terms. The fair value
of letters of credit are based on fees currently charged for similar
arrangements. The carrying value of all other financial instruments approximate
fair value due to the short-term nature of such instruments.
(K) EARNINGS PER SHARE
Earnings per share is based on the weighted average number of common shares
and common share equivalents outstanding during the period. Stock options,
warrants, and subscriptions receivable are considered to be common share
equivalents and, accordingly, have been included in the computation of earnings
per share in the accompanying consolidated statements of operations. The
Company's Predecessor operated as divisions of Rexel, Inc. As a result, the
earnings per share for the Company's Predecessor for the period from January 1,
1994 to July 12, 1994 does not provide a meaningful comparison to the earnings
per share of the Company and is, therefore, excluded from the accompanying
consolidated statements of operations.
(L) STOCK OPTIONS
Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense is recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted Statement of Financial Accounting Standards
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, Statement 123 also allows entities
to continue to apply the provisions of APB Opinion No. 25 and provide pro forma
net income and pro forma earnings per share disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based method
defined in Statement 123 had been applied. The Company has elected to continue
to apply the provisions of APB Opinion No. 25. Pro forma disclosure in
accordance with the provisions of Statement 123 is not applicable to the
accompanying consolidated financial statements since no stock options had been
granted by the Company in 1995 or 1996.
(M) USE OF ESTIMATES
Management of the Company and the Company's Predecessor have made a number
of estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from these estimates.
(N) RECLASSIFICATIONS
Certain reclassifications were made to the 1995 and 1994 accounts to conform
to classifications adopted in 1996.
F-9
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) ACQUISITIONS
On July 13, 1994, the Company was incorporated and entered into a Sale and
Purchase Agreement to acquire the net assets and certain common stock of the
apparel operations of Rexel, Inc. The aggregate purchase price consisted of
$41,000,000 in cash and a $3,000,000 subordinated note with detachable Class B
common stock warrants issued to Rexel, Inc. Concurrent with the acquisition, the
Company sold common stock of the Company totaling $4,812,500 (note 9) and
borrowed $35,680,000 from a lender and $507,500 from two officers of the
Company. As discussed in note 10, the subordinated note and warrants were
retired in 1995.
Effective February 1, 1996, the Company purchased Clinton Machinery
Corporation and Clinton Management Corporation (collectively, "Clinton").
Clinton is a distributor of screen-printing equipment and supplies for the
apparel industry. The aggregate purchase price consisted of $4,000,000 in cash;
100,000 shares of the Company's Class A common stock; the assumption of
approximately $4,500,000 of indebtedness and payables, which were subsequently
repaid; and contingent payments of up to 38.87% of the operating income (as
defined in the purchase agreement) of Clinton during each of the five years
ending through December 31, 2000. Such contingent payments shall not exceed
$10,500,000 and will be recorded as additional purchase consideration as such
amounts become determinable. In addition, the shareholders of Clinton received a
put option, giving them the right to sell the Class A common shares to the
Company at $30 per share at the earlier of four years from the acquisition date,
the closing date of an initial public offering by the Company, any accelerated
due date of the senior notes described in note 15, or upon a change in control
of the Company, as defined. In accordance with the rules and regulations of the
Securities and Exchange Commission, the equity subject to this put option has
been classified as common stock subject to put option in the accompanying
consolidated balance sheet. The acquisition was financed by the issuance of
184,314 shares of Class A common stock, with proceeds of a 10.98% senior note
payable for $1,200,000, and with proceeds of increasing the Company's variable
rate senior note payable by $1,050,000 (note 6). As a result of the transaction,
the Company recorded approximately $8,531,000 of intangible assets and $463,000
of deferred financing costs.
Effective November 27, 1996, the Company acquired certain assets of E. C.
Mitchell Co., Inc. for $3,000,000 in cash. The acquired assets relate to the
manufacture and sale of abrasive cords and tape used principally in the apparel
industry. The Company financed the acquisition primarily by increasing its
variable rate senior note payable by $2,050,000 and by issuing an 11.66% senior
note payable for $200,000 (note 6). As a result of the transaction, the Company
recorded approximately $1,900,000 of intangible assets and $68,000 of deferred
financing costs.
Each of the acquisitions have been accounted for as a purchase transaction
and, accordingly, the assets acquired and liabilities assumed have been recorded
at their estimated fair market values at the date of acquisition. The results of
operations of the acquired companies have been included in the accompanying
consolidated financial statements as of the respective acquisition dates.
The following represents the summary (unaudited) pro forma results of
operations for the years ended December 31, 1996 and 1995 as if the acquisitions
of Clinton and E. C. Mitchell Co., Inc. had
F-10
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) ACQUISITIONS (CONTINUED)
occurred at the beginning of 1995. The pro forma results are not necessarily
indicative of the results which may occur in the future.
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
Net sales..................................................... $ 117,003,698 118,104,101
-------------- -------------
-------------- -------------
Income before extraordinary item.............................. $ 1,626,078 1,935,007
-------------- -------------
-------------- -------------
Net income.................................................... $ 1,626,078 1,783,433
-------------- -------------
-------------- -------------
Earnings per share............................................ $ 1.49 1.66
-------------- -------------
-------------- -------------
</TABLE>
(3) INVENTORIES
Inventories consist of the following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Parts and supplies............................................... $ 29,501,944 28,470,926
Machinery and equipment.......................................... 4,721,730 977,073
------------- ------------
$ 34,223,674 29,447,999
------------- ------------
------------- ------------
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Buildings and leasehold improvements............................... $ 2,139,416 1,276,506
Machinery and equipment............................................ 3,006,760 1,923,789
Furniture and fixtures............................................. 699,096 245,745
------------ ----------
5,845,272 3,446,040
Less accumulated depreciation and amortization..................... 1,444,931 634,554
------------ ----------
Net property and equipment....................................... $ 4,400,341 2,811,486
------------ ----------
------------ ----------
</TABLE>
(5) REVOLVING LINE OF CREDIT
The Company has a Credit Agreement with its principal lenders which provides
for a revolving credit facility through July 2001 of up to the lesser of (i)
$25,000,000 or (ii) the sum of 80% (85% for certain subsidiaries) of eligible
accounts receivable and 55% of eligible inventory, less outstanding letters of
credit. At December 31, 1996, approximately $3,229,000 was available under the
facility. Under the Credit Agreement, substantially all assets of the Company
are pledged as security. Borrowings under the facility bear interest at 4% plus
the one month commercial paper rate for dealer-placed commercial paper of
issuers whose corporate bonds are rated "AA" or its equivalent (9.566% at
December 31, 1996 and 9.858% at December 31, 1995). The Company pays an annual
fee of 0.5% of the total unused availability of the facility. The Company also
pays an annual fee of 2% on outstanding letters of credit. Letters of credit
approximating $1,467,000 and $1,972,000 were outstanding at December 31, 1996
and 1995, respectively.
F-11
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) REVOLVING LINE OF CREDIT (CONTINUED)
The Company has available approximately $3,533,000 and $3,028,000 in unused
letters of credit at December 31, 1996 and 1995, respectively.
The Credit Agreement includes various covenants, including restrictions on
liens, capital expenditures, debt and lease obligations, dividends, and
requirements that certain financial ratios be maintained. At December 31, 1996,
the Company was not in compliance with a covenant specifying minimum tangible
net worth and with covenants requiring that certain leverage and debt coverage
ratios be maintained. These covenant violations were cured, however, as a result
of the refinancing described in note 15.
(6) LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Variable rate senior notes payable, with final installment due
July 13, 2000 $ 12,802,417 11,812,500
12.95% senior note payable, due July 13, 2001, net of
unamortized discount of $528,784 and $645,213 at December 31,
1996 and 1995, respectively 6,471,216 6,354,787
10.98% senior note payable, due July 13, 2001, net of
unamortized discount of $297,500 at December 31, 1996 902,500 --
11.66% senior note payable, due July 13, 2001 200,000 --
Variable rate UK note payable 1,712,600 --
------------- ------------
22,088,733 18,167,287
Less current installments 3,195,401 1,812,500
------------- ------------
Long-term debt, excluding current installments $ 18,893,332 16,354,787
------------- ------------
------------- ------------
</TABLE>
The variable rate senior notes payable are included in the Company's Credit
Agreement with its principal lender and are subject to the covenants described
in note 5. The notes accrue interest at 4.25% plus the one month commercial
paper rate for dealer-placed commercial paper of issuers whose corporate bonds
are rated "AA" or its equivalent (9.816% at December 31, 1996 and 10.108% at
December 31, 1995) and are payable in escalating quarterly installments with
interest payable monthly.
Both the 12.95% and 10.98% senior notes payable were issued with detachable
warrants for certain classes of common stock of the Company (note 9). The
proceeds from the issuance of the debt were allocated between the debt and the
warrants based on their relative fair values at the date of issuance. The
resulting debt discount is being amortized using the interest method over the
life of the related debt. The fair value of the 12.95% senior note payable, net
of the unamortized discount, is approximately $7,250,000 and $6,900,000 at
December 31, 1996 and 1995, respectively. The fair value of the 10.98% senior
note payable, net of the unamortized discount, is approximately $1,160,000 at
December 31, 1996.
F-12
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) LONG-TERM DEBT (CONTINUED)
The variable rate UK note payable is denominated in pound sterling and is an
obligation of the Company's United Kingdom subsidiary. The note is subject to
certain financial covenants, accrues interest at 2.25% plus the bank's
prevailing base rate (8.25% at December 31, 1996), and is payable in equal
semiannual installments through September 2000.
The aggregate maturities of long-term debt, excluding debt discount, at
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- -------------------------------------------------------------------------------
<S> <C>
1997........................................................................... $ 3,195,401
1998........................................................................... 3,667,400
1999........................................................................... 3,907,900
2000........................................................................... 3,744,316
2001........................................................................... 8,400,000
-------------
$ 22,915,017
-------------
-------------
</TABLE>
The Company's outstanding long-term debt and their contractual maturities,
except for the variable rate UK note payable, changed in connection with the
refinancing described in note 15.
(7) INCOME TAXES
Total income tax expense (benefit) for the years ended December 31, 1996 and
1995, for the period from July 13, 1994 to December 31, 1994, and for the period
from January 1, 1994 to July 12, 1994 was allocated as follows:
<TABLE>
<CAPTION>
COMPANY'S
PREDECESSOR
COMPANY ---------------
------------------------------------------ PERIOD FROM
PERIOD FROM JANUARY 1, 1994
JULY 13, 1994 TO TO JULY 12,
1996 1995 DECEMBER 31, 1994 1994
------------ --------- ----------------- ---------------
<S> <C> <C> <C> <C>
Income (loss) from continuing
operations.................... $ 1,136,685 557,513 (288,022) 425,561
Extraordinary item.............. -- (92,901) -- --
------------ --------- -------- -------
$ 1,136,685 464,612 (288,022) 425,561
------------ --------- -------- -------
------------ --------- -------- -------
</TABLE>
F-13
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) INCOME TAXES (CONTINUED)
Income tax expense (benefit) attributable to continuing operations for the
years ended December 31, 1996 and 1995, for the period from July 13, 1994 to
December 31, 1994, and for the period from January 1, 1994 to July 12, 1994
consists of the following:
<TABLE>
<CAPTION>
COMPANY'S
PREDECESSOR
COMPANY ---------------
------------------------------------------ PERIOD FROM
PERIOD FROM JANUARY 1, 1994
JULY 13, 1994 TO TO JULY 12,
1996 1995 DECEMBER 31, 1994 1994
------------ --------- ----------------- ---------------
<S> <C> <C> <C> <C>
Current:
Federal....................... $ 641,255 240,210 -- 318,647
State......................... 75,442 75,604 -- 31,500
Foreign....................... 148,736 224,275 137,864 75,414
Deferred:
Federal....................... 242,689 15,590 (381,056) --
State......................... 28,563 1,834 (44,830) --
------------ --------- -------- -------
$ 1,136,685 557,513 (288,022) 425,561
------------ --------- -------- -------
------------ --------- -------- -------
</TABLE>
Actual income tax expense (benefit) attributable to continuing operations
differs from expected income tax expense (benefit)--(computed by applying the
U.S. Federal statutory income tax rate of 34% to income (loss) before income
taxes and extraordinary item) for the years ended December 31, 1996 and
F-14
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) INCOME TAXES (CONTINUED)
1995, for the period from July 13, 1994 to December 31, 1994, and for the period
from January 1, 1994 to July 12, 1994 as follows:
<TABLE>
<CAPTION>
COMPANY'S
PREDECESSOR
--------------
COMPANY PERIOD FROM
------------------------------------------- JANUARY 1,
PERIOD FROM 1994
JULY 13, 1994 TO TO JULY 12,
1996 1995 DECEMBER 31, 1994 1994
------------ ---------- ----------------- --------------
<S> <C> <C> <C> <C>
Computed expected income tax expense (benefit)..... $832,936 663,602 (218,384) 268,064
Increase (decrease) in income taxes resulting from:
Effect of lower foreign tax rates................ (100,866) (164,898) (75,737) (41,478)
Nondeductible expenses........................... 70,437 60,862 35,687 30,702
State taxes, net of Federal income tax benefit... 68,643 44,654 (29,588) 31,222
Other, net....................................... 265,535 (46,707) -- 137,051
------------ ---------- -------- --------------
$1,136,685 557,513 (288,022) 425,561
------------ ---------- -------- --------------
------------ ---------- -------- --------------
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1996 and 1995 are presented below:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, due to allowance for doubtful accounts......... $ 251,424 235,948
Inventory, due to reserves for obsolescence and costs capitalized
for tax purposes.................................................... 532,466 327,460
Accrued expenses deductible for tax purposes when paid.............. 20,116 --
---------- ----------
Total deferred tax assets......................................... 804,006 563,408
---------- ----------
Deferred tax liabilities:
Accelerated depreciation............................................ (242,074) (94,897)
Costs not yet expensed for book purposes............................ (48,039) (60,049)
---------- ----------
Total deferred tax liabilities.................................... (290,113) (154,946)
---------- ----------
Net deferred tax asset............................................ $ 513,893 408,462
---------- ----------
---------- ----------
</TABLE>
F-15
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) INCOME TAXES (CONTINUED)
Income (loss) before income taxes and extraordinary item for U.S. operations
were $1,715,726, $807,145, $(1,270,539), and $427,929 for the years ended
December 31, 1996 and 1995, for the period from July 13, 1994 to December 31,
1994, and for the period from January 1, 1994 to July 12, 1994, respectively.
Income before income taxes and extraordinary item for non-U.S. operations were
$734,086, $1,144,625, $628,234, and $360,495 for the years ended December 31,
1996 and 1995, for the period from July 13, 1994 to December 31, 1994, and for
the period from January 1, 1994 to July 12, 1994, respectively.
At December 31, 1996 and 1995, there was no valuation allowance recorded for
deferred tax assets. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in making this
assessment. Based upon the nature of the temporary differences and projections
for future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences.
(8) PENSION BENEFITS AND OTHER RETIREMENT PLANS
The Company has a qualified noncontributory defined benefit pension plan
covering substantially all of its domestic employees. The benefits are based on
years of service and defined levels of compensation. The Company makes annual
contributions to the plan equal to the maximum amount that can be deducted for
income tax purposes. The Company also has a nonqualified supplemental retirement
plan covering key employees, which is not funded.
The Company also maintains a defined benefit plan for substantially all
employees of its United Kingdom subsidiary. The plan is funded annually for the
maximum amount permitted by local statute. The benefits are based on years of
service and defined levels of compensation.
F-16
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) PENSION BENEFITS AND OTHER RETIREMENT PLANS (CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized in the accompanying consolidated balance sheets at December 31, 1996
and 1995.
<TABLE>
<CAPTION>
1996 1995
-------------------------- ----------------------
UNITED UNITED
DOMESTIC KINGDOM DOMESTIC KINGDOM
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................... $ 7,020,864 1,944,989 5,877,756 1,879,312
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
Accumulated benefit obligation.......................... $ 7,136,559 2,109,029 6,001,744 2,015,609
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
Projected benefit obligation................................ $ 8,055,925 2,620,021 6,745,972 2,175,990
Plan assets at fair value................................... 6,730,352 2,305,726 5,615,569 1,792,257
------------ ------------ ---------- ----------
Projected benefit obligation in excess of plan assets....... 1,325,573 314,295 1,130,403 383,733
Unrecognized net gain....................................... 11,911 -- 393,023 --
------------ ------------ ---------- ----------
Total accrued pension benefits........................ 1,337,484 314,295 1,523,426 383,733
Supplemental retirement plan accrued liability.............. 800,160 -- 740,565 --
------------ ------------ ---------- ----------
Total accrued retirement benefits..................... $ 2,137,644 314,295 2,263,991 383,733
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
</TABLE>
For the nonqualified supplemental retirement plan, the assumed discount rate
was 8% at December 31, 1996 and 1995. No salary increase was assumed as the
Company has frozen salaries at specified amounts. Net periodic supplemental
retirement plan expense included in the accompanying consolidated statements of
operations for the years ended December 31, 1996 and 1995, for the period from
July 13, 1994 to December 31, 1994, and for the period from January 1, 1994 to
July 12, 1994 was $59,595, $55,530, $110,420, and $146,592, respectively.
F-17
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) PENSION BENEFITS AND OTHER RETIREMENT PLANS (CONTINUED)
Net pension cost for the years ended December 31, 1996 and 1995 and for the
period from July 13, 1994 to December 31, 1994 include the following components:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- -----------------------
UNITED UNITED UNITED
DOMESTIC KINGDOM DOMESTIC KINGDOM DOMESTIC KINGDOM
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Service cost--benefits earned during the period..... $ 338,182 128,732 264,428 113,766 175,165 45,000
Interest cost on projected benefit obligation....... 548,625 216,485 456,836 199,169 203,753 84,000
Actual return on plan assets........................ (785,405) (190,516) (702,713) (136,114) 42,794 (74,000)
Net amortization and deferral....................... 323,959 -- 321,963 -- (211,731) --
---------- ---------- ---------- ---------- ---------- -----------
Net pension cost................................ $ 425,361 154,701 340,514 176,821 209,981 55,000
---------- ---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- ---------- -----------
</TABLE>
Assumptions used in accounting for the pension plans as of December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
DOMESTIC UNITED KINGDOM
------------------------------------- -----------------------------------
1996 1995 1994 1996 1995 1994
----- ----- ----- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Discount rates...................................... 7.5% 7.5 8.0 9.0 9.0 10.0
Rates of increase in compensation levels............ 4.5 4.5 4.5 8.0 8.0 9.0
Expected long-term rate of return on assets......... 8.0 8.0 8.0 9.0 9.0 10.0
</TABLE>
The Company also maintains the Willcox & Gibbs, Inc. Savings and Employee
Stock Ownership Plan to provide eligible employees with an opportunity to
purchase the Company's Class A common stock through payroll deductions, which
are matched by the Company, subject to certain limitations. The purchase price
is based on an independent appraisal of the value of the Company's shares at the
subscription date. The Company's matching contributions vest at a rate of 20%
for each year of service by the employee, with 100% vesting after five years of
service. The Company's contribution to the plan, net of forfeitures, was
approximately $305,000, $272,000, and $111,000 for the years ended December 31,
1996 and 1995 and for the period from July 13, 1994 to December 31, 1994,
respectively.
(9) STOCKHOLDERS' EQUITY
On July 13, 1994, the Company authorized 1,500,000 shares of Class A common
stock, no par value; 250,000 shares of Class B common stock, no par value; and
250,000 shares of Class C common stock, no par value. All classes of common
stock have identical rights and privileges. Pursuant to the purchase agreement,
the Company entered into a Stockholders' Agreement to sell 481,250 shares of
Class A common stock at $10 per share to certain investors. Additionally, as
part of the purchase agreement, the Company issued detachable warrants for
122,970 shares of Class B common stock attached to the subordinated note to
Rexel, Inc. and 114,773 shares of Class C common stock attached to the 12.95%
senior note payable to its principal lender (note 6). The warrants for the Class
C shares are convertible at
F-18
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) STOCKHOLDERS' EQUITY (CONTINUED)
any time for nominal consideration, subject to certain redemption provisions. As
discussed in note 10, all of the warrants for the Class B shares were
repurchased and retired by the Company in 1995. As discussed in note 15,
warrants for 110,818 Class C shares were repurchased and retired by the Company
on January 3, 1997.
In February 1996, the Company issued additional detachable warrants for
32,985 shares of Class C common stock attached to the 10.98% senior note payable
to its principal lender (note 6).
(10) TRANSACTION WITH FORMER STOCKHOLDER
On July 26, 1995, the Company retired its 8% subordinated note payable to
Rexel, Inc. and repurchased the associated detachable warrants and certain other
assets for $4,050,000 in cash. The purchase price was allocated as follows:
<TABLE>
<S> <C>
8% subordinated note............................................ $2,500,000
Common stock warrants........................................... 1,000,000
Trademark....................................................... 250,000
Other assets.................................................... 300,000
---------
$4,050,000
---------
---------
</TABLE>
As a result of the transaction, the Company recorded an extraordinary loss
from the extinguishment of debt (net of the income tax benefit of $92,901) of
$151,574 in the accompanying financial statements. The Company funded the
transaction with its revolving line of credit.
The Company also acquired the rights to the Willcox & Gibbs, Inc. name as a
result of this transaction and changed the Company name from WG, Inc. effective
January 1, 1996.
(11) STOCK OPTIONS
On August 15, 1994, the Company adopted the Willcox & Gibbs, Inc. Stock
Incentive Plan. Under the plan, options to purchase 41,250 shares were available
to be granted to key employees of the Company. During 1994, options for 36,500
shares were issued at an exercise price of $10 per share, which the Company
believes approximated fair value at the date of grant. As of December 31, 1996
and 1995, 36,500 options remain outstanding. The options expire after ten years
and vest at a rate of 20% per year of service, with 100% vesting after five
years of service. At December 31, 1996, options for 14,600 shares were
exercisable.
F-19
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) FOREIGN OPERATIONS
Following is a summary of geographic area information, as measured by the
locale of revenue-producing operations, for the years ended December 31, 1996
and 1995, for the period from July 13, 1994 to December 31, 1994, and for the
period from January 1, 1994 to July 12, 1994:
<TABLE>
<CAPTION>
COMPANY'S
PREDECESSOR
COMPANY --------------
----------------------------------------------- PERIOD FROM
JANUARY 1,
YEARS ENDED DECEMBER 31, PERIOD FROM 1994
---------------------------- JULY 13, 1994 TO TO JULY 12,
1996 1995 DECEMBER 31, 1994 1994
-------------- ------------ ----------------- --------------
<S> <C> <C> <C> <C>
Net sales:
United States............................... $ 100,995,604 79,381,846 36,837,194 36,131,154
United Kingdom.............................. 7,371,861 6,535,063 2,953,944 3,726,342
Latin America............................... 5,483,793 4,514,522 1,852,590 1,451,406
-------------- ------------ ----------------- --------------
$ 113,851,258 90,431,431 41,643,728 41,308,902
-------------- ------------ ----------------- --------------
-------------- ------------ ----------------- --------------
Net income (loss):
United States............................... $ 925,079 322,333 (844,653) 77,782
United Kingdom.............................. 301,818 429,264 277,621 212,170
Latin America............................... 283,532 491,086 212,749 72,911
-------------- ------------ ----------------- --------------
$ 1,510,429 1,242,683 (354,283) 362,863
-------------- ------------ ----------------- --------------
-------------- ------------ ----------------- --------------
</TABLE>
<TABLE>
<CAPTION>
COMPANY
----------------------------
<S> <C> <C> <C> <C>
DECEMBER 31,
----------------------------
<CAPTION>
1996 1995
-------------- ------------
<S> <C> <C> <C> <C>
Identifiable assets:
United States............................... $ 69,727,547 44,281,551
United Kingdom.............................. 7,110,908 6,333,340
Latin America............................... 2,890,033 1,912,632
-------------- ------------
$ 79,728,488 52,527,523
-------------- ------------
-------------- ------------
</TABLE>
Export sales from the United States to unaffiliated customers were
approximately $26,100,000, $12,400,000, $4,200,000, and $5,000,000 for the years
ended December 31, 1996 and 1995, for the period from July 13, 1994 to December
31, 1994, and for the period from January 1, 1994 to July 12, 1994,
respectively.
F-20
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) FOREIGN OPERATIONS (CONTINUED)
No provision is made for income taxes which may be payable if undistributed
earnings of foreign subsidiaries were to be paid as dividends to the Company,
since the Company intends that such earnings will continue to be invested in
those countries. Foreign tax credits may be available as a reduction of United
States income taxes in the event of such distributions.
(13) SIGNIFICANT SUPPLIERS
The Company is the exclusive distributor of genuine replacement parts in the
United States for Pfaff AG ("Pfaff"), a German sewing equipment manufacturer,
and for Pegasus Sewing Machine Mfg. Co., Ltd. ("Pegasus"), a Japanese sewing
equipment manufacturer. The Company's distribution agreements with Pfaff and
Pegasus extend through 1998 and automatically renew for successive two-year
periods unless notice of termination is given at least one year prior to
December 31, 1998 or the end of any successive two-year period of exclusivity.
In order to maintain the exclusivity of the Pfaff and Pegasus distribution
agreements, the Company must meet certain performance targets. Historically, the
Company has generally satisfied these requirements, although in certain prior
years they were not satisfied and Pfaff and Pegasus waived such shortfalls.
During the year ended December 31, 1996, approximately 6% of the Company's total
purchases were from Pfaff and approximately 7% of the Company's total purchases
were from Pegasus.
The Company also maintains exclusive distribution rights in certain
territories for M&R Printing Equipment, Inc. ("M&R"), a manufacturer of
screen-printing equipment for the apparel industry. The Company's distribution
agreements with M&R may be terminated by either party at the end of any year on
net less than 120 days' notice. During the year ended December 31, 1996,
approximately 16% of the Company's total purchases were from M&R.
(14) COMMITMENTS
The Company had certain commitments to purchase inventories for
approximately $10,000 and $170,000 at December 31, 1996 and 1995, respectively.
The Company does not expect to incur losses in connection with these purchase
commitments.
The Company has several noncancelable operating leases, primarily for
buildings and equipment. These leases generally contain renewal options for
periods ranging from three to seven years and require the Company to pay most
executory costs such as maintenance and insurance.
F-21
<PAGE>
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) COMMITMENTS (CONTINUED)
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are approximately:
<TABLE>
<CAPTION>
Year ending
December 31
- ----------------------------------------------------------------
1997............................................................ $1,126,000
<S> <C>
1998............................................................ 824,000
1999............................................................ 670,000
2000............................................................ 655,000
2001............................................................ 539,000
Thereafter...................................................... 755,000
---------
$4,569,000
---------
---------
</TABLE>
Total rental expense for the years ended December 31, 1996 and 1995, for the
period from July 13, 1994 to December 31, 1994, and for the period from January
1, 1994 to July 12, 1994 was approximately $1,559,000, $1,229,000, $515,000, and
$381,000, respectively.
(15) SUBSEQUENT EVENTS
Effective January 3, 1997, the Company issued $85,000,000 principal amount
of 12.25% Series A senior notes which are due in December 2003. The Company used
the proceeds, in part, to repay approximately $40,952,000 of its indebtedness
($40,550,000 of which existed at December 31, 1996)-- (notes 5 and 6), to redeem
common stock warrants for a total of $3,026,000 (note 9), and to finance the
acquisition described in the following paragraph.
Effective January 3, 1997, the Company acquired all the outstanding capital
stock of Macpherson Meistergram, Inc. ("Macpherson") for $24,000,000 in cash and
the assumption of approximately $6,100,000 of indebtedness and $6,400,000 of
trade payables. Macpherson is primarily engaged in the distribution of
embroidery equipment and supplies to the apparel industry.
In connection with the acquisition of Macpherson, the Company also acquired
all the outstanding capital stock of Embroidery Leasing Corp., a leasing
affiliate of Macpherson, for approximately $500,000, payable over three years
with interest at 6% per annum.
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Macpherson Meistergram, Inc.:
We have audited the accompanying consolidated balance sheets of Macpherson
Meistergram, Inc. (a North Carolina corporation) and subsidiary as of December
31, 1996 and 1995, and the related consolidated statements of income,
stockholders' investment and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Macpherson Meistergram, Inc.
and subsidiary as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for the each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
We have also audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1994 (which is not presented
herein), and have expressed an unqualified opinion on that balance sheet. In our
opinion, the information set forth in the selected historical financial
information as of December 31, 1996, 1995 and 1994 and for each of the three
years in the period ended December 31, 1996, appearing on pages 20 and 44, is
fairly stated in all material respects in relation to the financial statements
from which it has been derived.
Greensboro, North Carolina,
February 21, 1997. Arthur Andersen LLP
F-23
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
- ---------------------------------------------------------------------------------- -------------- -------------
<S> <C> <C>
(NOTES 3 AND 6)
CURRENT ASSETS:
Cash............................................................................ $ 470,972 $ 260,297
Trade accounts receivable, less allowances for doubtful accounts of $869,000 and
$778,000...................................................................... 14,921,024 20,322,528
Inventories (Note 2)............................................................ 21,462,266 22,079,873
Prepayments, deposits and other................................................. 587,114 474,158
-------------- -------------
Total current assets...................................................... 37,441,376 43,136,856
-------------- -------------
PROPERTY AND EQUIPMENT:
Leasehold improvements.......................................................... 1,031,489 1,030,241
Machinery and equipment......................................................... 1,658,446 1,348,113
Furniture and fixtures.......................................................... 651,832 641,315
Automobiles..................................................................... 128,259 124,708
-------------- -------------
3,470,026 3,144,377
Less--Accumulated depreciation.................................................. 2,410,186 2,195,230
-------------- -------------
1,059,840 949,147
-------------- -------------
OTHER ASSETS...................................................................... 362,722 316,843
-------------- -------------
$ 38,863,938 $ 44,402,846
-------------- -------------
-------------- -------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 6)................................... $ 462,225 $ 424,547
Short-term bank borrowings (Note 6)............................................. 6,247,835 4,060,136
Accounts payable and accrued liabilities (Note 4)............................... 20,765,463 27,726,856
-------------- -------------
Total current liabilities................................................. 27,475,523 32,211,539
-------------- -------------
LONG-TERM DEBT (Note 6)........................................................... 0 461,840
-------------- -------------
DEFERRED COMPENSATION (Note 8).................................................... 425,356 354,747
-------------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 7, 9 and 11)
STOCKHOLDERS' INVESTMENT (Note 2):
Common stock, $1 par value, 300,000 authorized shares; 11,119 shares issued and
outstanding................................................................... 11,119 11,119
Additional paid-in capital...................................................... 1,564,833 1,564,833
Retained earnings............................................................... 9,367,896 9,777,980
Foreign currency translation gain (Note 2)...................................... 19,211 20,788
-------------- -------------
10,963,059 11,374,720
-------------- -------------
$ 38,863,938 $ 44,402,846
-------------- -------------
-------------- -------------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-24
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
NET SALES:
Machines.......................................................... $ 56,622,534 $ 59,169,340 $ 56,994,446
Parts, supplies and services...................................... 13,435,333 12,497,607 11,866,437
------------- ------------- -------------
70,057,867 71,666,947 68,860,883
------------- ------------- -------------
COST OF GOODS SOLD:
Machines.......................................................... 42,784,499 44,521,220 42,583,772
Parts, supplies and services...................................... 9,825,085 9,247,868 9,631,986
------------- ------------- -------------
52,609,584 53,769,088 52,215,758
------------- ------------- -------------
Gross profit................................................ 17,448,283 17,897,859 16,645,125
OPERATING EXPENSES.................................................. 14,211,038 13,586,510 13,566,538
------------- ------------- -------------
Income from operations...................................... 3,237,245 4,311,349 3,078,587
------------- ------------- -------------
OTHER EXPENSE (INCOME):
Interest expense, net............................................. 781,454 217,615 389,930
Foreign exchange costs (Note 2)................................... 934,618 811,588 683,068
Costs incurred in connection with the sale of the Company (Note
12)............................................................. 242,225 0 0
Other, net........................................................ (15,500) (43,347) (40,201)
------------- ------------- -------------
1,942,797 985,856 1,032,797
------------- ------------- -------------
INCOME BEFORE INCOME TAX PROVISION.................................. 1,294,448 3,325,493 2,045,790
INCOME TAX PROVISION (Note 5)....................................... 54,432 76,600 53,486
------------- ------------- -------------
NET INCOME.......................................................... $ 1,240,016 $ 3,248,893 $ 1,992,304
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-25
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(NOTE 2)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY
-------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS GAIN TOTAL
--------- --------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993.................... 11,119 $ 11,119 $ 499,643 $ 8,533,556 $ 27,205 $ 9,071,523
Net income.................................. 0 0 0 1,992,304 0 1,992,304
Foreign currency translation loss (Note
2)........................................ 0 0 0 0 (5,652) (5,652)
Cash dividends paid to stockholders (Note
5)........................................ 0 0 0 (2,067,908) 0 (2,067,908)
Cash contribution from stockholders......... 0 0 804,033 0 0 804,033
--------- --------- ------------ ------------ ----------- -------------
BALANCE, December 31, 1994.................... 11,119 11,119 1,303,676 8,457,952 21,553 9,794,300
Net income.................................. 0 0 0 3,248,893 0 3,248,893
Foreign currency translation loss (Note
2)........................................ 0 0 0 0 (765) (765)
Cash dividends paid to stockholders (Note
5)........................................ 0 0 0 (1,928,865) 0 (1,928,865)
Cash contribution from stockholders......... 0 0 261,157 0 0 261,157
--------- --------- ------------ ------------ ----------- -------------
BALANCE, December 31, 1995.................... 11,119 11,119 1,564,833 9,777,980 20,788 11,374,720
Net income.................................. 0 0 0 1,240,016 0 1,240,016
Foreign currency translation loss (Note
2)........................................ 0 0 0 0 (1,577) (1,577)
Cash dividends paid to stockholders (Note
5)........................................ 0 0 0 (1,650,100) 0 (1,650,100)
--------- --------- ------------ ------------ ----------- -------------
BALANCE, December 31, 1996.................... 11,119 $ 11,119 $ 1,564,833 $ 9,367,896 $ 19,211 $ 10,963,059
--------- --------- ------------ ------------ ----------- -------------
--------- --------- ------------ ------------ ----------- -------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-26
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................ $ 1,240,016 $ 3,248,893 $ 1,992,304
Adjustments to reconcile net income to net cash provided by (used in)
operating activities-
Depreciation and amortization..................................... 317,799 171,895 214,000
Increase in cash surrender value of life insurance................ (77,655) (66,556) (76,757)
Gain on sales of property and equipment, net...................... (13,000) (21,208) (31,753)
Deferred compensation expense..................................... 83,749 59,503 78,336
Payments made under deferred compensation arrangements............ (13,140) (13,140) 0
Changes in current assets and liabilities:
Trade accounts receivable....................................... 5,401,504 (5,085,305) (201,274)
Inventories..................................................... 418,838 (7,803,867) 5,883,863
Prepayments, deposits and other................................. (112,956) 161,642 5,784
Accounts payable and accrued liabilities........................ (6,961,393) 9,243,033 (4,172,488)
Other............................................................. (1,577) 6,469 33,107
------------ ------------ ------------
Net cash provided by (used in) operating activities........... 282,185 (98,641) 3,725,122
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment................................... (281,577) (178,028) (171,067)
Proceeds from sales of property and equipment......................... 64,854 36,737 112,041
Other................................................................. 31,776 0 0
------------ ------------ ------------
Net cash used in investing activities......................... (184,947) (141,291) (59,026)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash contribution received from stockholders.......................... 0 261,157 804,033
Payments of cash dividends............................................ (1,650,100) (1,928,865) (2,067,908)
Increase (decrease) in short-term borrowings, net..................... 2,187,699 2,523,236 (2,712,881)
Payments of long-term debt............................................ (424,162) (396,624) (370,561)
------------ ------------ ------------
Net cash provided by (used in) financing activities........... 113,437 458,904 (4,347,317)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH......................................... 210,675 218,972 (681,221)
CASH, beginning of year................................................. 260,297 41,325 722,546
------------ ------------ ------------
CASH, end of year....................................................... $ 470,972 $ 260,297 $ 41,325
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-27
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. DESCRIPTION OF OPERATIONS:
The principal activities of Macpherson Meistergram, Inc. and subsidiary (the
Company) include the distribution, marketing and servicing, throughout the
United States and Canada, of embroidery and monogram machines (stitching
machines), textile machines and engraving machines used primarily in the apparel
industry.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Macpherson Meistergram, Inc. (a North Carolina corporation) and its
majority-owned subsidiary, Geoffrey E. Macpherson Canada, Inc. (an Ontario,
Canada, corporation). All significant intercompany accounts and transactions
have been eliminated in consolidation.
The financial statements of the Canadian subsidiary have been translated
into U.S. dollars at the balance sheet date rate of exchange for asset and
liability accounts and the average rate of exchange for income statement
accounts. Translation gains and losses are reflected in the foreign currency
translation account in the stockholders' investment section of the accompanying
consolidated balance sheets.
On December 31, 1994, Macpherson, Inc. acquired all of the outstanding
common stock of Meistergram, Inc. and Macpherson Monogram, Inc. in exchange for
1,119 shares of common stock of Macpherson, Inc. The Company accounted for the
acquisition in a manner similar to a pooling-of-interests due to the common
ownership of all three companies. As a result, the stockholders' investment
information in the accompanying consolidated financial statements was restated
in 1994 to record the effect of this transaction. In conjunction with this
transaction, the name of Macpherson, Inc. was changed to Macpherson Meistergram,
Inc.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
CONCENTRATIONS OF CREDIT RISK IN TRADE ACCOUNTS RECEIVABLE
The Company does not have significant concentrations of credit risk with
respect to trade accounts receivable due to the large number of entities
comprising the Company's customer base and dispersion of the Company's customers
across all segments of the apparel industry and many geographic regions of the
United States and Canada. The Company distributes a portion of its products
through third-party distributors. The Company performs ongoing credit
evaluations of its customers' financial condition. The Company establishes an
allowance for doubtful accounts based upon factors related to credit risk of
specific customers, historical trends and other information.
F-28
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
FOREIGN EXCHANGE COSTS
Gains and losses from foreign exchange transactions that hedge existing
assets or liabilities are included in the carrying amounts of those assets and
liabilities and are ultimately recognized in the consolidated statements of
income as part of those carrying amounts. Gains and losses from foreign exchange
transactions that hedge firm purchase commitments are deferred and recognized as
adjustments to the carrying amounts of the related inventory items when the
inventory items are purchased. Premiums paid for foreign exchange contracts and
contract options are amortized over the lives of the respective contracts. See
Note 9 regarding foreign exchange risk management.
INVENTORIES
Inventories consist of machines, parts and supplies held for sale. Machines
are recorded at the lower of specific cost or market value while parts and
supplies are recorded at the lower of first-in, first-out (FIFO) cost or market.
Inventories also include rental machines held at customer locations under a
"rent-to-own" program. Rental machines are recorded at specific cost and the
specific cost of each machine is reduced to reflect a portion of the rental
revenues earned to date. Reserves are established to record provisions for slow
moving inventories in the period in which it becomes reasonably evident that the
product is not salable or the market value is less than cost. Inventories at
December 31, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Stitching machines (includes $211,043, and $0 of rental
machines at December 31, 1996 and 1995)...................... $ 12,174,002 $ 13,295,211
Textile machines............................................... 662,607 582,631
Engraving machines (includes $16,049 and $113,322 of rental
machines at December 31, 1996 and 1995)...................... 1,487,388 1,637,419
Parts, supplies and other...................................... 7,138,269 6,564,612
------------- -------------
$ 21,462,266 $ 22,079,873
------------- -------------
------------- -------------
</TABLE>
PROPERTY AND EQUIPMENT
All property and equipment is stated at cost. Depreciation is computed using
accelerated methods for both financial and income tax reporting purposes. The
estimated service lives used for calculating depreciation are as follows:
<TABLE>
<S> <C>
7-31.5
Leasehold improvements......................................... years
Machinery and equipment and furniture and fixtures............. 5-7 years
Automobiles.................................................... 5 years
</TABLE>
F-29
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
POSTRETIREMENT BENEFITS
The Company adopted a plan during 1996 whereby it provides certain health
care and life insurance benefits for eligible retired employees and their
eligible dependents. Employees retiring from the Company with 15 consecutive
years of service immediately prior to retirement are eligible for these
benefits, subject to deductibles, copayment provisions and other limitations.
The Company accrues the estimated cost of retiree health and life insurance
benefits over the 15 years that employees render service immediately preceding
retirement age. The initial accumulated liability of approximately $50,000 is
being amortized over 10 years. The Company intends to amend its postretirement
benefits plan in 1997 whereby no new participants will be admitted to the plan
after February 28, 1997.
INCOME TAXES
The stockholders of the Company have elected under Subchapter S of the
Internal Revenue Code (IRC) to have the Company's income taxed directly to the
stockholders. Under this election, the corporate income or loss of the S
Corporation is allocated to its stockholders for inclusion in their personal
federal income tax returns and, accordingly, no provision for federal income
taxes is required in the accompanying consolidated statements of income. In
addition, state income taxes are provided for any income attributable to states
that do not recognize S Corporation status.
Deferred income taxes are provided, when applicable, for timing differences
between the recognition of certain income and expense items for financial
reporting and income tax purposes. These differences relate primarily to certain
accrued expenses not currently deductible for state income tax purposes.
MINORITY INTEREST IN SUBSIDIARY
During 1996, 1995 and 1994, the principal stockholder of Macpherson
Meistergram, Inc. held a 21% interest in Geoffrey E. Macpherson Canada, Inc.
Geoffrey E. Macpherson Canada, Inc. has been in a negative equity position
throughout each of the three years in the period ended December 31, 1996.
Accordingly, the minority stockholder's interest in subsidiary has been reduced
to zero in the accompanying consolidated balance sheets. The minority
stockholder's interest in the cumulative net losses of the Canadian subsidiary
exceeded the minority stockholder's net investment by approximately $99,500 at
December 31, 1996. The minority stockholder's interest in future income, if any,
of Geoffrey E. Macpherson Canada, Inc. will be offset by this amount. Subsequent
to December 31, 1996, the minority interest in Geoffrey E. Macpherson Canada was
acquired by W.G. Apparel Inc. in connection with its acquisition of the Company
(See Note 12).
REVENUE RECOGNITION
The Company distributes embroidery, monogramming, textile and engraving
machines, which it offers for sale or rent. Revenue related to the sale of
equipment is recorded at the time of shipment. Aggregate rental revenue is
recognized over the term of the lease and is included in parts, supplies and
services sales in the accompanying consolidated statements of income.
The Company's customer support services include training, technical support,
warranty and maintenance services. Service revenues and costs are recognized
when services are provided. Sales of computer
F-30
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
hardware and software are recognized when shipped provided that no significant
vendor and postcontract and support obligations remain and collection is
probable. Warranty costs associated with products sold with warranty protection,
as well as other vendor and postcontract support obligations, are estimated
based on the Company's historical experience and recorded in the period the
product is sold.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial instruments consist primarily of investments in cash, trade
accounts receivable, accounts payable and debt obligations. At December 31, 1996
and 1995, the fair value of the Company's financial instruments approximated the
carrying value.
CONSOLIDATED STATEMENTS OF CASH FLOWS
During the years ended December 31, 1996, 1995 and 1994, the Company paid
interest of $712,000, $272,000 and $397,000, and income taxes of $78,000,
$76,000 and $69,000, respectively.
RECLASSIFICATIONS
Certain balances in the 1995 and 1994 financial statements have been
reclassified to conform with the current period presentation.
3. MAJOR SUPPLIER AND DISTRIBUTION AGREEMENT:
The Company's principal suppliers of embroidery and monogramming machines
are Barudan America, Inc. and Barudan Co. Ltd. (hereinafter referred to
collectively as Barudan) with manufacturing facilities in Cleveland, Ohio, and
Nagoya, Japan, respectively. The Company made purchases of $38,697,000,
$47,213,000 and $30,563,000 for the years ended December 31, 1996, 1995 and
1994, respectively, representing 78%, 80% and 70% of the Company's total
purchases. Purchases are made through Tekmatex, which is the trading company
through which Barudan sells its machines to the Company. Payment terms on
purchases range from 30 to 150 days. In addition, Tekmatex charges interest on
past due amounts at prime plus 1%. Interest expense related to machine purchases
was $387,000, $0 and $64,000 for the years ended December 31, 1996, 1995 and
1994, respectively. Accounts payable to Tekmatex are collateralized by
approximately $10,044,000 of stitching machine inventory and all other assets
not pledged under the Company's debt arrangement (See Note 6). $6,442,000 of
outstanding accounts payable to Tekmatex was repaid in January 1997 in
connection with the acquisition of the Company by W.G. Apparel, Inc. (See Note
12).
The Company has a distribution agreement with Barudan (Distribution
Agreement) which provides the Company with the exclusive right to distribute
Barudan's products throughout the United States and Canada. The Distribution
Agreement expires December 31, 2003, at which time it automatically renews for a
five-year period unless it has been terminated with prior written notice of 30
days. The Distribution Agreement, among other things, requires the Company to
make certain minimum purchases, which are agreed upon by the parties on an
annual basis. The minimum purchases were met in 1996, 1995 and 1994.
Although management of the Company is of the opinion that the likelihood of
termination of the Distribution Agreement with Barudan is remote, management
believes that it could represent and sell other embroidery and monogramming
machine product lines, if required.
F-31
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
Accounts payable and accrued liabilities at December 31, 1996 and 1995,
consist of the following:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Accounts payable to major supplier--
Domestic currency............................................ $ 7,102,450 $ 7,986,182
Foreign currencies........................................... 8,095,002 14,843,600
All other trade accounts payable--
Domestic currency............................................ 3,085,115 2,207,101
Foreign currencies........................................... 628,184 305,588
Accrued payroll and commissions................................ 1,068,099 1,631,337
Other accrued liabilities...................................... 786,613 753,048
------------- -------------
$ 20,765,463 $ 27,726,856
------------- -------------
------------- -------------
</TABLE>
5. INCOME TAXES:
State income taxes for certain states in which the Company operates are
payable directly by the Company and, as such, the income tax provision included
in the accompanying consolidated statements of income is for these state income
taxes only. The income tax provision does not include federal and certain state
income taxes of approximately $505,000, $1,226,000 and $745,000 for the years
ended December 31, 1996, 1995 and 1994, respectively, which otherwise would have
been payable if the Company had not elected Subchapter S status under the IRC.
Distributions are generally paid in amounts approximating the stockholders'
personal income tax liabilities resulting from the current S Corporation
earnings. No distributions to the stockholders have been made subsequent to
December 31, 1996, to fund their expected S Corporation tax liabilities for the
year ended December 31, 1996.
6. BANK BORROWINGS AND LONG-TERM DEBT:
On September 30, 1996, the Company refinanced its revolving credit line and
term note with a new revolving credit line of $7,000,000 and a term note of
$570,992. The revolving credit line is due and payable upon expiration on July
31, 1998, and bears interest, payable monthly on the first day of each month, at
the lower of the LIBOR rate plus the LIBOR margin (2 1/2% at December 31, 1996),
as defined, or the bank's prime rate less the bank's prime rate margin (0% at
December 31, 1996), as defined. Borrowings under the revolving credit line are
limited to specified percentages of eligible inventory and receivables of the
Company. The Company had outstanding borrowings of $6,247,835, with additional
borrowings of $752,165 available under this agreement at December 31, 1996. This
revolving credit line is collateralized by all trade accounts receivable and all
inventories of the Company, except for approximately $10,044,000 of stitching
machine inventory. The stitching machine inventory and all remaining assets of
the Company are pledged under purchase money agreements with trading companies
of the Company's principal supplier (See Note 3). The term note is due and
payable in 15 equal installments of $39,320 beginning October 15, 1996, with the
final installment due and payable on December 15, 1997. The term note bears
interest at 6.7%. Collateral on the term note is the same as the revolving
credit line above. As of December 31, 1996, the Company had outstanding
borrowings of $462,225 on the term note, all of which
F-32
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
6. BANK BORROWINGS AND LONG-TERM DEBT: (CONTINUED)
mature in 1997. All borrowings outstanding under these credit arrangements were
repaid in January 1997 in connection with the acquisition of the Company by W.G.
Apparel Inc. (See Note 12).
The loan agreements contain various covenants which, among other
requirements, limit acquisitions and dispositions of property and equipment,
require maintenance of insurance coverage satisfactory to the lenders, limit the
payment of cash dividends, prohibit additional debt and require maintenance of
certain financial covenants. At December 31, 1996, there were no events of
noncompliance with these loan agreements.
7. LEASE COMMITMENTS:
The Company leases certain operating assets as well as office and warehouse
space under operating leases, with the primary facilities being leased from the
principal stockholder through November 1998, with options to renew through
November 2018. At December 31, 1996, future minimum payments due under operating
leases with the principal stockholder and unrelated parties are as follows:
<TABLE>
<CAPTION>
PRINCIPAL UNRELATED
STOCKHOLDER PARTIES
----------- ----------
<S> <C> <C>
1997................................................................. $ 399,000 $ 100,000
1998................................................................. 369,000 77,000
1999................................................................. 0 60,000
2000................................................................. 0 25,000
2001................................................................. 0 4,000
Thereafter........................................................... 0 0
----------- ----------
$ 768,000 $ 266,000
----------- ----------
----------- ----------
</TABLE>
Rent expense for the years ended December 31, 1996, 1995 and 1994, by lessor
was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Principal stockholder.................................... $ 379,000 $ 359,000 $ 343,000
Unrelated parties........................................ 129,000 179,000 263,000
---------- ---------- ----------
$ 508,000 $ 538,000 $ 606,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
8. BENEFIT PLANS:
401(K) PLAN
The Company has a 401(k) profit sharing plan covering substantially all
full-time employees. The Company matches 25% of eligible employees'
contributions up to 4% of the eligible employees' compensation for the year. The
Company may make additional contributions to the plan at the discretion of the
Board of Directors. Total contributions to the plan were $41,000, $85,000 and
$64,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
F-33
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
8. BENEFIT PLANS: (CONTINUED)
PHANTOM STOCK PLAN
The Company maintains a phantom stock plan as a means of attracting and
retaining key employees, including officers and directors. Under the provisions
of the plan, "units" are awarded to participants based on the consolidated
operating income of the Company. Unit values are determined annually through the
provisions of the plan. Participants vest in annual awards at 20% per annum, and
become fully vested upon the occurrence of a vesting event, as defined by the
plan. The Company recognized compensation expense of $84,000, $60,000 and
$78,000 in the accompanying consolidated statements of income for the years
ended December 31, 1996, 1995 and 1994, respectively. At December 31, 1996, the
book value of the total units awarded to date under the plan is approximately
$540,000, of which $425,000 is vested.
Under the provisions of the plan, if more than 50% of the voting capital
stock of the Company is sold in any 12-month period, the plan immediately
terminates, all units become 100% vested, are payable within 45 days of the date
of the transaction and are valued based on the average sales price of the stock.
As discussed in Note 12, the Company was sold to W.G. Apparel, Inc. subsequent
to year-end. Based on the terms of the sale, the value of the units issued to
date under the plan is estimated to be approximately $1,043,000, and is payable
in February 1997.
POSTRETIREMENT PLAN
The Company provides certain health care and life insurance benefits for
eligible retired employees and their eligible dependents. The Company does not
fund this benefit arrangement and may modify plan provisions to terminate the
plan at its discretion. Financial information related to the plan was determined
by an independent actuary. At December 31, 1996, the accumulated benefit
obligation was $50,000, none of which is funded. The unrecognized initial
obligation at December 31, 1996, was $45,000 and the net periodic postretirement
benefit expense recorded for the year ended December 31, 1996, was $5,000.
The accumulated postretirement benefit obligation was computed using an
assumed discount rate of 7.0% for 1996. The health care cost trend rate was
assumed to be 11% for 1996 and was assumed to decline by approximately 1% in
each subsequent year to 5.5% where it remains thereafter.
9. FOREIGN EXCHANGE RISK MANAGEMENT:
Because of potential volatile fluctuations in the exchange rate between
Japanese yen and U.S. dollar, the Company enters into forward foreign exchange
contracts in order to establish the dollar cost of purchases and firm purchase
commitments from its Japanese suppliers payable in yen.
The terms of these contracts are less than one year. The Company does not
engage in foreign currency speculation. At December 31, 1996, the Company had
entered into forward foreign exchange contracts to purchase 1,018,622,999
Japanese yen subsequent to December 31, 1996, at a contracted cost of
$9,385,321, including $7,930,200 to hedge accounts payable as of December 31,
1996, and $1,455,121 to cover outstanding commitments to purchase machines and
parts. The difference between the contracted costs and the fair value of the
contracts that hedge the outstanding purchase commitments at December 31, 1996,
based on foreign currency exchange rates at December 31, 1996, was a deferred
loss of $58,299. These deferred losses will be recognized in operations as part
of the purchases that will be made over the next 12 months. The fair market
value of all foreign currency exchange contracts was $8,792,603 at
F-34
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
9. FOREIGN EXCHANGE RISK MANAGEMENT: (CONTINUED)
December 31, 1996. The unamortized premium paid for these contracts at December
31, 1996, of $78,042 is being amortized over the life of the contracts.
The Company's credit risk in these transactions is the cost of replacing, at
current market rates, these contracts in the event of default by the other
party. Management believes the risk of incurring such losses is remote as the
contracts are with major financial institutions.
10. RELATED-PARTY TRANSACTIONS:
LOAN RECEIVABLE FROM PRINCIPAL STOCKHOLDER
At December 31, 1995, the Company had a loan receivable of $54,000 from the
principal stockholder. During the year ended December 31, 1996, this note
receivable was repaid by the principal stockholder. During the year ended
December 31, 1996, the Company made advances of $99,900 to the principal
stockholder. At December 31, 1996, $32,900 remained outstanding.
RECEIVABLE FROM THE CAROLINA DYNAMO
The Company performs certain accounting functions and pays accounts payable
on behalf of the Carolina Dynamo, which is owned by the principal stockholder of
the Company. At December 31, 1996 and 1995, the Company had receivables from the
Carolina Dynamo of $44,684 and $62,762, respectively. These receivables have
been included in prepayments, deposits and other assets in the accompanying
consolidated balance sheets.
LEASING AND MANAGEMENT AGREEMENT
Effective March 1, 1996, the Company entered into a leasing and management
agreement (the Agreement) with Embroidery Leasing Corporation (ELC), which is
50% owned by the principal stockholder of the Company. The Agreement establishes
a contractual arrangement whereby ELC arranges financing for the Company's
domestic customers, at the customer's option, and pays the Company a commission
for each financing transaction completed. The Company's primary
responsibilities, as defined in the Agreement, are delivery and installation of
the equipment, providing support for the leasing program, providing its standard
warranty and certain other administrative tasks. The Agreement expires on March
1, 2001. ELC paid the Company approximately $27,000 in commissions during the
year ended December 31, 1996. Subsequent to year-end, ELC was acquired by W.G.
Apparel Inc. in connection with its acquisition of the Company (See Note 12).
11. COMMITMENTS AND CONTINGENCIES:
LITIGATION
The Company is subject to various claims and actions which arise in the
ordinary course of its business. Although the final outcome of these matters
cannot be determined, based on the facts presently known, it is management's
opinion that the amount of ultimate liability with respect to these actions will
not materially affect the consolidated financial position, results of operations
and cash flows of the Company.
F-35
<PAGE>
MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
PURCHASE COMMITMENTS
As of year-end, the Company had outstanding purchase commitments for
inventory of approximately $13,601,000.
12. SUBSEQUENT EVENTS:
On January 3, 1997, 100% of the outstanding common stock of the Company was
sold to W.G. Apparel, Inc., a wholly owned subsidiary of Willcox & Gibbs, Inc.,
for $24,000,000 in cash. Concurrent with its acquisition of the Company, Willcox
& Gibbs, Inc. issued $85,000,000 of 12- 1/4% Series A Senior Notes Due 2003. The
Company is a guarantor under these notes.
On January 3, 1997, the Company entered into employment contracts with five
key employees. The Company may terminate these contracts at any time subsequent
to January 2, 1998, by providing not less than one year's advance written notice
to the employee.
F-36
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Boards of Directors
Clinton Management Corp. and Clinton Machinery Corp.:
We have audited the accompanying combined balance sheet of Clinton
Management Corp. (d/b/a Clinton Machine & Supply) and Clinton Machinery Corp.
(together, "Clinton") as of December 31, 1995, and the related combined
statements of operations, stockholders' equity (deficit) and cash flows for the
year then ended. These combined financial statements are the responsibility of
Clinton's management. Our responsibility is to express an opinion on the
combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Clinton Management
Corp. (d/b/a Clinton Machine & Supply) and Clinton Machinery Corp. as of
December 31, 1995 and the results of their operations and their cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
November 2, 1996
F-37
<PAGE>
CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP.
COMBINED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS (NOTE 4)
<S> <C>
Current assets:
Cash.......................................................................... $ --
Accounts receivable, net of allowance for doubtful accounts of $463,884....... 3,802,067
Inventory (note 1 (c))........................................................ 3,437,016
Prepaid expenses.............................................................. 142,940
Notes receivable.............................................................. 36,920
Employee advances............................................................. 101,213
Due from affiliates (note 3).................................................. 523,360
---------
Total current assets........................................................ 8,043,516
Property and equipment, net (note 2)............................................ 342,574
Other receivables............................................................... 71,986
Other assets.................................................................... 35,103
Notes receivable, net of allowance for doubtful accounts of $200,000............ 112,014
---------
$8,605,193
---------
---------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C>
Current liabilities:
Bank overdraft................................................................ $ 43,092
Revolving line of credit (note 4)............................................. 3,436,361
Accounts payable.............................................................. 4,361,965
Accrued expenses and other current liabilities................................ 597,407
Distribution payable to shareholders.......................................... 186,375
Current installments of long-term debt (note 5)............................... 1,910
---------
Total current liabilities................................................... 8,627,110
Long-term debt, excluding current installments (note 5)......................... 5,793
---------
Total liabilities........................................................... 8,632,903
---------
Stockholders' deficit:
Common stock (note 6)......................................................... 600
Additional paid-in capital.................................................... 2,700
Accumulated deficit........................................................... (31,010)
---------
Total stockholders' deficit................................................. (27,710)
Commitments and contingencies (notes 8 and 10)
---------
$8,605,193
---------
---------
</TABLE>
See accompanying notes to combined financial statements.
F-38
<PAGE>
CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP.
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Net sales (note 3)............................................................. $26,764,365
Cost of goods sold (note 9).................................................... 20,267,799
----------
Gross profit............................................................... 6,496,566
Selling, general and administrative expenses................................... 6,304,184
----------
Operating income........................................................... 192,382
Interest expense............................................................... 334,630
Other expense, net............................................................. 65,129
----------
Net loss................................................................... $ 207,377
----------
----------
</TABLE>
See accompanying notes to combined financial statements.
F-39
<PAGE>
CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP.
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
RETAINED TOTAL
ADDITIONAL EARNINGS STOCKHOLDERS'
COMMON PAID-IN (ACCUMULATED EQUITY
STOCK CAPITAL DEFICIT) (DEFICIT)
----------- ----------- -------------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994......................... $ 600 $ 2,700 $ 1,125,015 $ 1,128,315
Net loss............................................. -- -- (207,377) (207,377)
Distributions to stockholders........................ -- -- (948,648) (948,648)
----- ----------- ----------- -------------
Balance at December 31, 1995......................... $ 600 $ 2,700 $ (31,010) $ (27,710)
----- ----------- ----------- -------------
----- ----------- ----------- -------------
</TABLE>
See accompanying notes to combined financial statements.
F-40
<PAGE>
CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP.
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss....................................................................... $(207,377)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization................................................ 73,659
Changes in operating assets and liabilities:
Accounts receivable........................................................ 503,866
Inventory.................................................................. (717,381)
Prepaid expenses........................................................... (2,400)
Notes receivable........................................................... 13,870
Employee advances.......................................................... (33,949)
Due from affiliates........................................................ (144,996)
Other receivables.......................................................... 4,155
Other assets............................................................... 21,152
Accounts payable and other liabilities..................................... 844,655
---------
Net cash provided by operating activities................................ 355,254
---------
Cash flows used in investing activities--capital expenditures.................... (212,253)
---------
Cash flows from financing activities:
Net proceeds from line of credit and other borrowings.......................... 535,934
Distributions to stockholders.................................................. (762,273)
Principal payments on long-term debt........................................... (5,506)
Bank overdraft................................................................. 43,092
---------
Net cash used in financing activities.................................... (188,753)
---------
Net decrease in cash............................................................. (45,752)
Cash, beginning of year.......................................................... 45,752
---------
Cash, end of year................................................................ $ --
---------
---------
</TABLE>
See accompanying notes to combined financial statements.
F-41
<PAGE>
CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION AND OPERATIONS
Clinton Management Corp. (d/b/a Clinton Machine & Supply) distributes screen
printing supplies, printing and drying equipment, accessory equipment and
replacement parts worldwide. Clinton Machinery Corp., under the name of M&R
International, distributes screen printing and drying equipment, accessory
equipment and replacement parts worldwide.
The accompanying combined financial statements include the accounts of
Clinton Management Corp. (d/b/a Clinton Machine & Supply) and Clinton Machinery
Corp. (together, "Clinton"). The companies that comprise Clinton have the same
stockholders whose ownership shares are the same for each company.
(B) ACCOUNTS AND OTHER RECEIVABLES
Clinton has established allowances for doubtful accounts based upon
management's judgment of collectibility of receivables and returns on sales
using factors such as historical experience and past customer payment history.
Other receivables consist of amounts which are retained by third party
creditors financing customers' purchases.
(C) INVENTORY
Inventory is stated at the lower of cost or market using the first-in,
first-out method. Inventory at December 31, 1995 consists of the following:
<TABLE>
<S> <C>
New machines.................................................... $ 587,764
Used machines................................................... 588,980
Parts and supplies.............................................. 2,260,272
---------
$3,437,016
---------
---------
</TABLE>
(D) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization is
calculated using the straight-line method over the shorter of the lease term or
the estimated useful lives of the respective assets. Repairs and maintenance
expenditures are expensed as incurred.
(E) BANK OVERDRAFT
Under Clinton's cash management system, checks issued but not presented to
banks frequently result in overdraft balances for accounting purposes and are
classified as bank overdraft in the accompanying combined balance sheet.
F-42
<PAGE>
CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP.
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(F) INCOME TAXES
Clinton, with the consent of its stockholders, elected subchapter S
corporation status under the Internal Revenue Code, effective January 1, 1991
for Clinton Management Corp. and January 1, 1990 for Clinton Machinery Corp. In
lieu of corporation income taxes, the stockholders of an S corporation are taxed
on their proportionate share of each company's taxable income. Therefore, no
liability for federal or state income taxes has been included in these combined
financial statements.
(G) FAIR VALUE OF FINANCIAL INSTRUMENTS
Clinton has determined that the carrying value of all financial instruments
approximate fair value. The carrying value of Clinton's borrowings approximate
fair value due to the nature of the variable interest rate on the borrowings and
their maturity.
(H) USE OF ESTIMATES
Management of Clinton has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these combined financial statements
in conformity with generally accepted accounting principles. Actual results
could differ from these estimates.
(I) NEW ACCOUNTING STANDARD
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which becomes
effective for fiscal years beginning after December 15, 1995. Statement 121
establishes accounting standards for the impairment of long-lived assets and
certain identifiable intangible assets. Clinton does not believe the impact of
Statement 121 will have a material impact on its financial position or results
of operations.
(2) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 consists of the following:
<TABLE>
<S> <C>
Leasehold improvements............................................ $ 77,950
Machinery and equipment........................................... 526,024
---------
603,974
Less accumulated depreciation..................................... 261,400
---------
Net property and equipment........................................ $ 342,574
---------
---------
</TABLE>
(3) RELATED PARTY TRANSACTIONS
The stockholders of Clinton are also stockholders of Clinton Leasing Corp.,
Golden Brush, Clinton Equipment Corp., Equip-Net, Inc., Clinton de Mexico, Citex
and Paradise Color. At December 31, 1995,
F-43
<PAGE>
CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP.
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(3) RELATED PARTY TRANSACTIONS (CONTINUED)
due from affiliates represent receivables from sales transactions, payment of
operating expenses and advances to stockholders. During the year ended December
31, 1995, Clinton had sales to these entities of approximately $388,000.
(4) REVOLVING LINE OF CREDIT
At December 31, 1995, $3,436,361 is outstanding under a $3,500,000 revolving
line of credit arrangement with a bank. Under the terms of the line of credit,
interest is payable monthly at the bank's prime rate plus five-eighths percent
(9.125% at December 31, 1995). The line of credit is due on demand and is
secured by inventory, equipment, accounts receivable, assignments of all
insurance policies applicable to insured accounts receivable, and keyman life
insurance policies on each of the stockholder guarantors.
The line of credit contains certain restrictive covenants including
requirements to maintain working capital of $1,500,000 commencing December 31,
1995 ($1,000,000 from December 31, 1994 through December 31, 1995), and limit
capital expenditures to $100,000 annually. At December 31, 1995, Clinton was not
in compliance with the debt covenants. In February 1996, the line of credit was
paid in full by Willcox & Gibbs, Inc. ("Willcox & Gibbs") upon the acquisition
of Clinton (note 10).
(5) LONG-TERM DEBT
Long-term debt at December 31, 1995 consists of the following:
<TABLE>
<S> <C>
Note payable in installments of $261 per month, including interest
at 10% through December 1998, collaterized by equipment........... $ 7,703
Less current maturities............................................. 1,910
---------
Total long-term debt................................................ $ 5,793
---------
---------
</TABLE>
The aggregate annual maturities of long-term debt at December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------------------------------------------------------------------
<S> <C>
1996................................................................................. $ 1,910
1997................................................................................. 2,732
1998................................................................................. 3,061
---------
$ 7,703
---------
---------
</TABLE>
F-44
<PAGE>
CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP.
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(6) COMMON STOCK
At December 31, 1995, common stock consisted of the following:
<TABLE>
<S> <C>
Clinton Management Corp. (d/b/a Clinton Machine & Supply), $1 par
value, 7,500 shares authorized, 300 shares issued and
outstanding........................................................ $ 300
Clinton Machinery Corp., $1 par value, 10,000 shares authorized, 300
shares issued and outstanding...................................... 300
---------
Total common stock................................................... $ 600
---------
---------
</TABLE>
(7) PROFIT SHARING PLAN
Clinton has a qualified profit sharing plan covering all employees who have
attained twenty-one years of age with one year of service. The profit sharing
plan contribution is determined annually by management. A contribution of
$10,000 was accrued for the year ended December 31, 1995.
(8) COMMITMENTS
Clinton has several noncancelable operating leases, primarily for buildings
and equipment. These leases generally contain options for periods ranging from
three to five years and require Clinton to pay most executory costs such as
maintenance and insurance.
Future minimum lease payments under non-cancelable leases (with initial or
remaining base terms in excess of one year) as of December 31, 1995 are
approximately:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- --------------------------------------------------------------------------------------
<S> <C>
1996.................................................................................. $ 162,000
1997.................................................................................. 162,000
1998.................................................................................. 162,000
----------
$ 486,000
----------
----------
</TABLE>
The lease for Clinton's primary operating facility has a five-year option to
renew. Management has not made a decision whether or not to renew the lease.
Total rental expense for the year ended December 31, 1995 was approximately
$212,780.
(9) MAJOR SUPPLIERS
Clinton purchases a majority of the equipment they sell from one vendor.
Clinton Machinery Corp. distributes this vendor's equipment in seven
southeastern states and internationally, exclusive of Canada. For the year ended
December 31, 1995, approximately 55% of combined purchases were from this
vendor.
A majority of printing supplies are purchased from one vendor. For the year
ended December 31, 1995, approximately 17% of combined purchases were from this
vendor.
F-45
<PAGE>
CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP.
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(10) ACQUISITION BY WILLCOX & GIBBS, INC.
Effective February 1, 1996, Clinton was purchased by Willcox & Gibbs in
exchange for $4,000,000 in cash, the assumption of $4.5 million in debt and
payables, 100,000 shares of Willcox & Gibbs' Class A common stock, and
contingent payments of up to 38.87% of the operating income (as defined) of
Clinton during each of the five years to December 31, 2000. Such contingent
payments shall not exceed $10,500,000 in the aggregate. In addition, the
stockholders of the Company received a put option, giving them the right to sell
the Class A common shares to Willcox & Gibbs at $30 per share at the earlier of
four years from the acquisition date or such time Willcox & Gibbs has an initial
public offering.
F-46
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE INITIAL PURCHASER. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING
LETTER OF TRANSMITTAL CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS NOT BEEN A CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 5
Risk Factors................................... 21
Use of Proceeds................................ 26
The Exchange Offer............................. 27
The Company.................................... 35
The Macpherson Acquisition..................... 36
Capitalization................................. 37
Pro Forma Combined Financial Information....... 39
Selected Historical Financial Information...... 43
Management's Discussion and Analysis of
Financial Condition and Results of
Operations--The Company....................... 45
Management's Discussion and Analysis of
Financial Condition and Results of
Operations--Macpherson........................ 50
Business....................................... 53
Management..................................... 67
Security Ownership of Certain Beneficial Owners
and Management................................ 73
Description of Certain Indebtedness............ 74
Description of Senior Notes.................... 75
Certain Federal Income Tax Consequences........ 104
Plan of Distribution........................... 107
Legal Matters.................................. 107
Independent Public Accountants................. 107
Available Information.......................... 109
Index to Financial Statements.................. F-1
</TABLE>
UNTIL , 199 , ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OF SUBSCRIPTIONS.
[LOGO]
WILLCOX & GIBBS, INC.
---------------
OFFER TO EXCHANGE ITS
12 1/4% SERIES B SENIOR NOTES
DUE 2003 WHICH HAVE BEEN
REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS
AMENDED, FOR ANY AND ALL
OF ITS OUTSTANDING 12 1/4%
SERIES A SENIOR NOTES DUE 2003
---------------------
PROSPECTUS
---------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation provides that the Company shall
indemnify its officers, directors and employees made, or threatened to be made,
a party to any action whether or not such is by or in the right of the Company
by reason of the fact that he is or was a director or officer of the Company
against liabilities and expenses incurred in connection with such action.
The Certificate of Incorporation of the Company limits the liability of
directors of the Company or its stockholders to the fullest extent permitted by
the Delaware General Corporation Law (the "DGCL"). Accordingly, pursuant to the
provisions of the DGCL presently in effect, directors of the Company will not be
personally liable for monetary damages for breach of a director's fiduciary duty
as a director, except for liability: (i) for any breach of the director's duty
of loyalty to the Company or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL; or (iv) for any transaction
from which the director derived an improper personal benefit. In addition, the
bylaws of the Company require the Company to indemnify its directors and
officers to the full extent permitted by the laws of the State of Delaware.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
(Management contracts or compensatory plans are indicated by an asterisk.)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Stock Purchase Agreement, dated November 27, 1996, among WG Apparel, Inc., Willcox & Gibbs, Inc. and
Macpherson Meistergram, Inc., Geoffrey E. Macpherson Canada, Inc., Neil A. Macpherson , Bridget
Macpherson, Bridget Macpherson as Trustee under the Mark Edward Macpherson Trust Agreement, dated
February 1, 1982, Ouida B. Brown as Trustee under the Mark Edward Macpherson Trust No. 2, Bridget M.
Macpherson as Trustee under the Katherine Emma Macpherson Trust Agreement, dated February 1, 1982,
Ouida B. Brown as Trustee under the Katherine Emma Macpherson Trust No. 2, and Neil A. Macpherson as
Trustee under the Nicholas Ian Macpherson Trust Agreement.
3.1 Second Amended and Restated Certificate of Incorporation of Willcox & Gibbs, Inc.
3.2 Bylaws of Willcox & Gibbs, Inc.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
4.1 Indenture, dated as of January 3, 1997, by and among Willcox & Gibbs, Inc., WG Apparel, Inc. Clinton
Management Corp., Clinton Machinery Corporation, Leadtec Systems, Inc., W&G Daon, Inc., J&E Sewing
Supplies, Inc. W&G Tennessee Imports, Inc., Clinton Leasing Corp., Clinton Equipment Corp., Paradise
Color Corp. (collectively, the "Subsidiary Guarantors"), and IBJ Schroder Bank & Trust Company, as
Trustee, with respect to the 12 1/4% Senior Notes due 2003.
4.2 Supplemental Indenture, dated as of January 3, 1997, by and among Willcox & Gibbs, Inc., the Subsidiary
Guarantors and IBJ Schroder Bank & Trust Company, as Trustee.
4.3 Purchase Agreement, dated December 20, 1996, by and among Willcox & Gibbs, Inc., the Subsidiary
Guarantors and Dillon, Read & Co., Inc. (the "Initial Purchaser").
4.4 Registration Rights Agreement, dated as of December 20, 1996, by and among Willcox & Gibbs, Inc., the
Subsidiary Guarantors and the Initial Purchaser.
4.5 Pledge and Security Agreement, dated January 3, 1997, between WG Apparel, Inc. and IBJ Schroder Bank &
Trust Company, as Trustee.
4.6 Form of Old Note.
4.7 Form of New Note.
5.1 Opinion of Hughes Hubbard & Reed LLP, as to the legality of securities registered hereunder.+
10.1 Agreement to Purchase Stock, dated November 27, 1996, of Embroidery Leasing Company, between Michael
Bennett and WG Apparel, Inc.+
10.2 Amendment No. 1, dated December 17, 1996, to Merger Agreement among Willcox & Gibbs, Inc., Clinton
Machinery Corporation, WG Apparel, Inc., Frank Scannavino, Charles Nall and Marc Glazer.+
10.3 Financing and Security Agreement, dated December 17, 1996, among WG Apparel, Inc., Willcox & Gibbs,
Inc., Leadtec Systems, Inc., Clinton Management Corp., Clinton Machinery Corporation and Macpherson
Meistergram, Inc., as Borrowers, and NationsBank, N.A., as Lender.+
10.4 Termination of Security Agreement, dated January 3, 1997, among Willcox & Gibbs, Inc., Clinton
Machinery Corporation, WG Apparel, Inc., Frank Scannavino, Charles Nall and Marc Glazer.+
10.5 Employment Agreement, dated February 1, 1996, among Clinton Machinery Corp. and Clinton Management
Corp. and Frank Scannavino.*+
10.6 Employment Agreement, dated February 1, 1996, among Clinton Machinery Corp. and Clinton Management and
Marc Glazer.*+
10.7 Employment Agreement, dated February 1, 1996, among Clinton Machinery Corp. and Clinton Management
Corp. and Charles Nall.*+
10.8 Employment Agreement, dated June 27, 1994, between WG Apparel, Inc. and Alan B. Lee.*+
10.9 Employment Agreement, dated June 27, 1994, between WG Apparel, Inc. and John K. Ziegler, Sr.*+
10.10 Employment Agreement, dated June 27, 1994, among WG Apparel, Inc., WG Leadtec of Delaware, Inc. and
Jack Klasky.*+
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.11 Employment Agreement, dated June 27, 1994, between WG Apparel, Inc. and Maxwell Tripp.*+
10.12 Pegasus Sewing Machine Mfg. Co., Ltd. Distribution Agreement, dated January 1, 1995, between Pegasus
Sewing Machine Mfg. Co., Ltd. and WG, Inc., as amended as of June 8, 1995.
10.13 GM Pfaff Ag Distribution Agreement, dated October 1, 1994, between GM Pfaff Ag and WG, Inc.
10.14 M&R International Distributor Agreement, dated September 16, 1996, between M&R Sales and Service, Inc.
and Clinton Machinery Corp.
10.15 M&R Distributor Agreement, dated January 10, 1996, between M&R Sales and Service, Inc. and Clinton
Machinery Corp.
10.16 Distribution Agreement, dated June 27, 1996, among Rhein-Nadel Maschinennadel Gmbh, Muva Maschinennadel
Gmbh, WG, Inc., Unity Sewing Supply Co. and Sunbrand, as amended as of October 4, 1996.
10.17 Second Revision, dated November 27, 1996, of Fundamental Barudan Agreements and Contracts among Barudan
Company, Ltd., Barudan America, Inc. and Macpherson Meistergram, Inc.+
10.18 Revision, dated June 1, 1994, of Fundamental Agreements and Contracts among Barudan Company, Ltd.,
Barudan America, Inc. and Macpherson Meistergram, Inc.+
10.19 Distribution Agreement, dated November 7, 1985, among Barudan Company, Ltd., Barudan America, Inc. and
Macpherson Meistergram, Inc.+
10.20 Asset Purchase Agreement, dated October 1996, between E.C. Mitchell Co. Inc., Everett Mitchell, as
Seller, and WG Apparel, Inc., as Buyer.
10.21 Loan Agreement, dated October 1996, between W&G, Ltd., as Borrower, and Coutts & Co., as Lender.+
10.22 Consulting Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Neil A.
Macpherson.*
10.23 Employment Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Jerry Lee.*
10.24 Employment Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Ronald P.
Emerman.*
10.25 Employment Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Jeffrey L.
Hickman.*
10.26 Employment Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Jacob G. Bumm.*
10.27 Employment Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Steven C.
Edwards.*
10.28 Warrant Redemption Agreement, dated December 17, 1996, among Willcox & Gibbs, Inc., NationsCredit
Commercial Corporation and Bank of America Illinois.+
12.1 Computation of ratio of earnings to fixed charges.
21.1 Subsidiaries of Willcox & Gibbs, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
23.1 Consent of Hughes Hubbard & Reed LLP (contained in Exhibit 5.1).
23.2 Consents of KPMG Peat Marwick LLP.
23.3 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney of certain directors and officers of the Company.
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939, as amended,
of IBJ Schroder Bank & Trust Company, as Trustee.
99.1 Form of Letter of Transmittal with respect to the Exchange Offer.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
+ To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULE:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
Schedule II Valuation and Qualifying Accounts for the years ended December 31, 1996 and 1995 and
for the period from July 13, 1994 to December 31, 1994. S-1
</TABLE>
ITEM 22. UNDERTAKINGS.
1. The undersigned registrant hereby undertakes as follows:
(a) 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 in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(b) 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.
(c) 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.
2. 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 Securities and Exchange 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 of 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>
3. The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act of 1939, as amended
("Act") in accordance with the rules and regulations prescribed by the
Securities and Exchange Commission under Section 305(b)(2) of the Act.
4. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
5. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Carteret, State of New Jersey, on April , 1997.
WILLCOX & GIBBS, INC.
a Delaware corporation
By: /s/ JOHN K. ZIEGLER, SR.
-----------------------------------------
John K. Ziegler, Sr.
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman, Chief Executive
/s/ JOHN K. ZIEGLER, SR. Officer, and Director
- ------------------------------ (Principal Executive
John K. Ziegler, Sr. Officer)
MAXWELL L. TRIPP* President, Chief Operating
- ------------------------------ Officer and Director
Maxwell L. Tripp
JOHN K. ZIEGLER, JR.* Chief Financial Officer
- ------------------------------ (Principal Financial and
John K. Ziegler, Jr. Accounting Officer)
JACK KLASKY* Vice President and Director
- ------------------------------
Jack Klasky
ALAN B. LEE* Vice President and Director
- ------------------------------
Alan B. Lee
RICHARD J. MACKEY* Director
- ------------------------------
Richard J. Mackey
MARC GLAZER* Director
- ------------------------------
Marc Glazer
SIDNEY B. BECKER* Director
- ------------------------------
Sidney B. Becker
CHRISTOPHER W. ROSER* Director
- ------------------------------
Christopher W. Roser
FRANK E. WALSH, III* Director
- ------------------------------ April , 1997
Frank E. Walsh, III
By: /s/ JOHN K. ZIEGLER, SR.
- ------------------------------
John K. Ziegler, Sr.
(Attorney-in-fact for persons
indicated by an asterisk)
II-6
<PAGE>
SCHEDULE II
WILLCOX & GIBBS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO ALLOWANCE BALANCE AT
BEGINNING COSTS AND OF ACQUIRED END OF
DESCRIPTION OF PERIOD EXPENSE SUBSIDIARIES DEDUCTIONS PERIOD
- ------------------------------------------------- ------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful accounts................ $ 1,596,000 267,000 746,000 190,000 2,419,000
------------ ----------- ----------- ----------- ----------
------------ ----------- ----------- ----------- ----------
Year ended December 31, 1995:
Allowance for doubtful accounts................ $ 2,002,000 580,000 -- 986,000 1,596,000
------------ ----------- ----------- ----------- ----------
------------ ----------- ----------- ----------- ----------
Period from July 13, 1994 to December 31, 1994:
Allowance for doubtful accounts................ $ 1,699,000 321,000 -- 18,000 2,002,000
------------ ----------- ----------- ----------- ----------
------------ ----------- ----------- ----------- ----------
</TABLE>
S-1
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ---------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
2.1 Stock Purchase Agreement, dated November 27, 1996, among WG Apparel, Inc., Willcox & Gibbs,
Inc. and Macpherson Meistergram, Inc., Geoffrey E. Macpherson Canada, Inc., Neil A. Macpherson
, Bridget Macpherson, Bridget Macpherson as Trustee under the Mark Edward Macpherson Trust
Agreement, dated February 1, 1982, Ouida B. Brown as Trustee under the Mark Edward Macpherson
Trust No. 2, Bridget M. Macpherson as Trustee under the Katherine Emma Macpherson Trust
Agreement, dated February 1, 1982, Ouida B. Brown as Trustee under the Katherine Emma
Macpherson Trust No. 2, and Neil A. Macpherson as Trustee under the Nicholas Ian Macpherson
Trust Agreement.
3.1 Second Amended and Restated Certificate of Incorporation of Willcox & Gibbs, Inc.
3.2 Bylaws of Willcox & Gibbs, Inc.
4.1 Indenture, dated as of January 3, 1997, by and among Willcox & Gibbs, Inc., WG Apparel, Inc.
Clinton Management Corp., Clinton Machinery Corporation, Leadtec Systems, Inc., W&G Daon,
Inc., J&E Sewing Supplies, Inc. W&G Tennessee Imports, Inc., Clinton Leasing Corp., Clinton
Equipment Corp., Paradise Color Corp. (collectively, the "Subsidiary Guarantors"), and IBJ
Schroder Bank & Trust Company, as Trustee, with respect to the 12 1/4% Senior Notes due 2003.
4.2 Supplemental Indenture, dated as of January 3, 1997, by and among Willcox & Gibbs, Inc., the
Subsidiary Guarantors and IBJ Schroder Bank & Trust Company, as Trustee.
4.3 Purchase Agreement, dated December 20, 1996, by and among Willcox & Gibbs, Inc., the
Subsidiary Guarantors and Dillon, Read & Co., Inc. (the "Initial Purchaser").
4.4 Registration Rights Agreement, dated as of December 20, 1996, by and among Willcox & Gibbs,
Inc., the Subsidiary Guarantors and the Initial Purchaser.
4.5 Pledge and Security Agreement, dated January 3, 1997, between WG Apparel, Inc. and IBJ
Schroder Bank & Trust Company, as Trustee.
4.6 Form of Old Note.
4.7 Form of New Note.
5.1 Opinion of Hughes Hubbard & Reed LLP, as to the legality of securities registered hereunder.+
10.1 Agreement to Purchase Stock, dated November 27, 1996, of Embroidery Leasing Company, between
Michael Bennett and WG Apparel, Inc.+
10.2 Amendment No. 1, dated December 17, 1996, to Merger Agreement among Willcox & Gibbs, Inc.,
Clinton Machinery Corporation, WG Apparel, Inc., Frank Scannavino, Charles Nall and Marc
Glazer.+
10.3 Financing and Security Agreement, dated December 17, 1996, among WG Apparel, Inc., Willcox &
Gibbs, Inc., Leadtec Systems, Inc., Clinton Management Corp., Clinton Machinery Corporation
and Macpherson Meistergram, Inc., as Borrowers, and NationsBank, N.A., as Lender.+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ---------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
10.4 Termination of Security Agreement, dated January 3, 1997, among Willcox & Gibbs, Inc., Clinton
Machinery Corporation, WG Apparel, Inc., Frank Scannavino, Charles Nall and Marc Glazer.+
10.5 Employment Agreement, dated February 1, 1996, among Clinton Machinery Corp. and Clinton
Management Corp. and Frank Scannavino.*+
10.6 Employment Agreement, dated February 1, 1996, among Clinton Machinery Corp. and Clinton
Management and Marc Glazer.*+
10.7 Employment Agreement, dated February 1, 1996, among Clinton Machinery Corp. and Clinton
Management Corp. and Charles Nall.*+
10.8 Employment Agreement, dated June 27, 1994, between WG Apparel, Inc. and Alan B. Lee.*+
10.9 Employment Agreement, dated June 27, 1994, between WG Apparel, Inc. and John K. Ziegler, Sr.*+
10.10 Employment Agreement, dated June 27, 1994, among WG Apparel, Inc., WG Leadtec of Delaware,
Inc. and Jack Klasky.*+
10.11 Employment Agreement, dated June 27, 1994, between WG Apparel, Inc. and Maxwell Tripp.*+
10.12 Pegasus Sewing Machine Mfg. Co., Ltd. Distribution Agreement, dated January 1, 1995, between
Pegasus Sewing Machine Mfg. Co., Ltd. and WG, Inc., as amended as of June 8, 1995.
10.13 GM Pfaff Ag Distribution Agreement, dated October 1, 1994, between GM Pfaff Ag and WG, Inc.
10.14 M&R International Distributor Agreement, dated September 16, 1996, between M&R Sales and
Service, Inc. and Clinton Machinery Corp.
10.15 M&R Distributor Agreement, dated January 10, 1996, between M&R Sales and Service, Inc. and
Clinton Machinery Corp.
10.16 Distribution Agreement, dated June 27, 1996, among Rhein-Nadel Maschinennadel Gmbh, Muva
Maschinennadel Gmbh, WG, Inc., Unity Sewing Supply Co. and Sunbrand, as amended as of October
4, 1996.
10.17 Second Revision, dated November 27, 1996, of Fundamental Barudan Agreements and Contracts
among Barudan Company, Ltd., Barudan America, Inc. and Macpherson Meistergram, Inc.+
10.18 Revision, dated June 1, 1994, of Fundamental Agreements and Contracts among Barudan Company,
Ltd., Barudan America, Inc. and Macpherson Meistergram, Inc.+
10.19 Distribution Agreement, dated November 7, 1985, among Barudan Company, Ltd., Barudan America,
Inc. and Macpherson Meistergram, Inc.+
10.20 Asset Purchase Agreement, dated October 1996, between E.C. Mitchell Co. Inc., Everett
Mitchell, as Seller, and WG Apparel, Inc., as Buyer.
10.21 Loan Agreement, dated October 1996, between W&G, Ltd., as Borrower, and Coutts & Co., as
Lender.+
10.22 Consulting Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Neil A.
Macpherson.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ---------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
10.23 Employment Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Jerry
Lee.*
10.24 Employment Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Ronald
P. Emerman.*
10.25 Employment Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Jeffrey
L. Hickman.*
10.26 Employment Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Jacob G.
Bumm.*
10.27 Employment Agreement, dated January 3, 1997, between Macpherson Meistergram, Inc. and Steven
C. Edwards.*
10.28 Warrant Redemption Agreement, dated December 17, 1996, among Willcox & Gibbs, Inc.,
NationsCredit Commercial Corporation and Bank of America Illinois.+
12.1 Computation of ratio of earnings to fixed charges.
21.1 Subsidiaries of Willcox & Gibbs, Inc.
23.1 Consent of Hughes Hubbard & Reed LLP (contained in Exhibit 5.1).
23.2 Consents of KPMG Peat Marwick LLP.
23.3 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney of certain directors and officers of the Company.
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939, as
amended, of IBJ Schroder Bank & Trust Company, as Trustee.
99.1 Form of Letter of Transmittal with respect to the Exchange Offer.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
+ To be filed by amendment.
<PAGE>
Exhibit 2.1
STOCK PURCHASE AGREEMENT
by and among
WG APPAREL, INC.
a Delaware corporation
Willcox & Gibbs, Inc.
a Delaware corporation
and
MACPHERSON MEISTERGRAM, INC.
a North Carolina corporation
GEOFFREY E. MACPHERSON CANADA, INC.
a Ontario Corporation
NEIL A. MACPHERSON
BRIDGET MACPHERSON
BRIDGET MACPHERSON AS TRUSTEE UNDER THE MARK EDWARD MACPHERSON
TRUST AGREEMENT DATED FEBRUARY 1, 1982
OUIDA B. BROWN AS TRUSTEE UNDER THE MARK EDWARD MACPHERSON
TRUST NO. 2
BRIDGET M. MACPHERSON AS TRUSTEE UNDER THE KATHERINE EMMA
MACPHERSON TRUST AGREEMENT DATED FEBRUARY 1, 1982
OUIDA B. BROWN AS TRUSTEE UNDER THE KATHERINE EMMA MACPHERSON
TRUST NO. 2.
NEIL A. MACPHERSON AS TRUSTEE UNDER THE NICHOLAS IAN MACPHERSON
TRUST AGREEMENT
Dated as of November 27, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
- ------- ----
1 DEFINITIONS.......................................................... 2
2 PURCHASE AND SALE OF THE COMPANY SHARES; PURCHASE
PRICE................................................................ 2
2.1 Sale and Purchase of the Company Shares...................... 2
2.2 Purchase Price for Company and GEMC.......................... 2
2.3 Payment of Transfer Taxes and Other Charges.................. 3
3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY, GEMC AND
SELLERS.............................................................. 3
3.1 Organization, Standing and Power............................. 3
3.2 Capital Structure............................................ 3
3.3 Stock Ownership.............................................. 4
3.4 Certificate of Incorporation and By-Laws..................... 4
3.5 Financial Statements and Books and Records................... 4
3.6 No Undisclosed Liability..................................... 5
3.7 Tax Matters.................................................. 5
3.8 Authority to Execute and Perform Agreement; No
Breach....................................................... 6
3.9 Compliance with Law.......................................... 7
3.10 Litigation................................................... 8
3.11 Contracts.................................................... 8
3.12 Title to Property; Encumbrances.............................. 10
3.13 Environmental, Health and Safety Matters..................... 11
3.14 Interest of Officers......................................... 12
3.15 Intangible Property.......................................... 12
3.16 Employee Benefit Plans....................................... 12
3.17 Employees and Employee Relations............................. 15
3.18 Insurance.................................................... 16
3.19 Inventory.................................................... 16
3.20 No Defaults.................................................. 17
3.21 Accounts Receivable.......................................... 17
3.22 Absence of Certain Changes................................... 18
3.23 Restrictions on Business Activities.......................... 20
3.24 Bank Accounts................................................ 20
3.25 Customers and Suppliers...................................... 20
3.26 Certain Business Practices................................... 21
3.27 Related Party Transaction.................................... 21
3.28 Brokers and Finders.......................................... 21
3.29 Orders, Commitments and Returns.............................. 21
3.30 Conversion to C Corp......................................... 22
3.31 C Corp. Conversion Liability................................. 22
3.32 Subsidiaries and Affiliates.................................. 22
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TABLE OF CONTENTS (Cont'd.)
ARTICLE PAGE
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3.33 Machinery and Equipment...................................... 22
3.34 Computer Software............................................ 22
4 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDERS......................................................... 23
4.1 Title to Securities.......................................... 23
4.2 Absence of Violations or Conflicts........................... 23
4.3 Absence of Claims Against the Company and GEMC............... 23
4.4 Litigation................................................... 23
5 REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT................... 23
5.1 Organization: Standing and Power............................ 23
5.2 Authority.................................................... 24
5.3 Litigation................................................... 24
5.4 Brokers and Finders.......................................... 25
6 COVENANTS............................................................ 25
6.1 Conduct of Business of the Company and GEMC.................. 25
6.2 Due Diligence................................................ 27
6.3 Exclusivity: Acquisition Proposals.......................... 28
6.4 Breach of Representations, Warranties and
Covenants.................................................... 28
6.5 Consents..................................................... 29
6.6 All Reasonable Efforts....................................... 29
6.7 Public Announcements......................................... 29
6.8 Expenses..................................................... 29
6.9 Confidentiality.............................................. 30
6.10 Account Collections.......................................... 30
6.11 Audited Financial Statements................................. 30
6.12 Maintenance of Insurance Policies............................ 31
6.13 Cooperation.................................................. 31
6.14 Covenant Not to Compete...................................... 31
6.15 Post-Closing Cooperation..................................... 32
6.16 Certain Taxes................................................ 32
6.17 Section 338(h)(10) Election.................................. 32
6.18 Hart-Scott-Rodino Act........................................ 33
6.19 Termination of the Phantom Stock Plan........................ 34
6.20 Monthly Financial Statements................................. 34
6.21 Landlord Consent............................................. 34
6.22 Lease Extension.............................................. 34
6.23 Cooperation with Rule 144A Financing......................... 34
6.24 Parent Guarantee............................................. 35
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TABLE OF CONTENTS (Cont'd.)
ARTICLE PAGE
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6.25 ELC Acquisition Agreement.................................... 35
6.26 Payment of Loans............................................. 35
7 CONDITIONS PRECEDENT TO THE CLOSING.................................. 35
7.1 Conditions of Obligations of Buyer........................... 35
7.2 Conditions of Obligation of the Sellers, Company
and GEMC..................................................... 38
8 THE CLOSING.......................................................... 40
8.1 The Closing.................................................. 40
8.2 Closing Deliveries by the Company, GEMC and
Sellers...................................................... 40
8.3 Closing Deliveries by Buyer and Parent....................... 41
9 DEFAULT; REMEDIES.................................................... 42
9.1 Sellers/Company Breach....................................... 42
9.2 Buyer/WG, Inc. Breach........................................ 42
9.3 Jurisdiction................................................. 42
10 TERMINATION.......................................................... 43
10.1 Termination.................................................. 43
10.2 Liability for Termination.................................... 44
10.3 Termination Liability........................................ 44
10.4 Authorization................................................ 44
10.5 Employees.................................................... 44
10.6 Survival of Certain Provisions............................... 44
11 INDEMNIFICATION...................................................... 45
11.1 Indemnification by the Sellers............................... 45
11.2 Conditions of Indemnification by the Sellers................. 45
11.3 Obligation of Buyer and Parent to Indemnify.................. 46
11.4 Limitations on Indemnification............................... 47
11.5 Escrow for Indemnity......................................... 47
11.6 Arbitration of Indemnity Disputes............................ 48
11.7 Indemnity Limitations Periods................................ 48
12 GENERAL PROVISIONS................................................... 49
12.1 Amendment.................................................... 49
12.2 Extension: Waiver........................................... 49
12.3 Notices...................................................... 49
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TABLE OF CONTENTS (Cont'd.)
ARTICLE PAGE
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12.4 Interpretation............................................... 50
12.5 Entire Agreement............................................. 50
12.6 No Transfer.................................................. 50
12.7 Severability................................................. 50
12.8 Other Remedies............................................... 51
12.9 Further Assurances........................................... 51
12.10 Variations in Pronouns....................................... 51
12.11 Counterparts................................................. 51
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement") dated as of November 27, 1996, by
and among WG APPAREL, INC., a Delaware corporation ("Buyer"), WILLCOX & GIBBS,
INC., a Delaware corporation ("Parent"), MACPHERSON MEISTERGRAM, INC., a North
Carolina corporation (the "Company"), GEOFFREY E. MACPHERSON CANADA, INC., an
Ontario corporation ("GEMC"), and all of the stockholders of the Company, namely
Neil A. Macpherson ("Macpherson"), Bridget Macpherson, Bridget M. Macpherson as
Trustee Under the Mark Edward Macpherson Trust Agreement Dated February 1, 1982,
Ouida B. Brown as Trustee Under The Mark Edward Macpherson Trust No. 2, Bridget
M. Macpherson as Trustee Under the Katherine Emma Macpherson Trust Agreement
Dated February 1, 1982, Ouida B. Brown as Trustee under the Katherine Emma
Macpherson Trust No. 2, Neil A. Macpherson as Trustee Under the Nicholas Ian
Macpherson Trust Agreement Dated March 18, 1983, and Ouida B. Brown as Trustee
Under the Nicholas Ian Macpherson Trust No. 2. (Macpherson and the other
stockholders of the Company sometimes referred to individually as a "Seller" or
collectively as "Sellers").
Recitals
WHEREAS, Sellers own an aggregate of 11,119.36 shares of common stock,
$1.00 par value per share, of Company (referred to collectively as the "Company
Shares") constituting 100% of the issued and outstanding shares of capital stock
of Company; and
WHEREAS, Buyer desires to acquire from the Sellers and each Seller desires
to sell to Buyer, the number of Company Shares set forth opposite the name of
the respective Sellers on Exhibit A hereto, on the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, Macpherson and Company own an aggregate of 1,000 shares of common
stock, without par value of GEMC (referred to collectively as the "GEMC Shares")
constituting 100% of the issued and outstanding shares of capital stock of GEMC;
and
WHEREAS, Buyer desires to acquire from Macpherson and Macpherson desires
to sell to Buyer, the number of GEMC Shares set forth opposite Macpherson's name
on Exhibit A hereto, on the terms and subject to the conditions set forth in
this Agreement; and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
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ARTICLE 1
DEFINITIONS
"Applicable Law" means any and all United States and Canada federal,
provincial, state, municipal or local laws, statutes, regulations, ordinances,
and authorizations by any Governmental Authority.
"GAAP" shall mean United States generally accepted accounting principles,
applied on a consistent basis.
"Governmental Authority" means any nation or government, any province,
state or other political subdivision thereof.
"Hart-Scott-Rodino Act" means collectively the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, 15 U.S.C. ss. 18(a) and
all regulations promulgated with respect thereto.
"Knowledge of" or "to the best knowledge of" means with respect to an
individual, the actual knowledge of the party, and, with respect to a
corporation, the actual knowledge of the officers and directors of the
corporation, as to the existence or absence of facts that are the subject of
such representations and warranties without any independent inquiry or
investigation.
"Material Adverse Change" or "Material Adverse Effect" means with respect
to an entity, a change in the condition (financial or otherwise), properties,
assets, liabilities, business, operations or prospects of such entity that is
material and adverse to such entity.
ARTICLE 2
PURCHASE AND SALE OF THE COMPANY SHARES;
PURCHASE PRICE
2.1 Sale and Purchase of the Company Shares. On the terms and subject to
the conditions set forth in this Agreement, the Sellers and Company (sometimes
collectively referred to as the "Stockholders") agree that, on the Closing Date
(as hereinafter defined), they will sell, assign and transfer to Buyer and Buyer
agrees to purchase from Stockholders for the Purchase Price defined in Section
2.2 below, the Company Shares and the GEMC Shares owned by Macpherson.
2.2 Purchase Price for Company and GEMC. In consideration of the transfer
to Buyer of the Company Shares and the GEMC Shares owned by Macpherson, Sellers
shall receive from Buyer, Twenty Four Million Dollars ($24,000,000.00) as the
purchase price for the
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Company Shares and the GEMC Shares owned by Macpherson (the "Purchase Price"),
by wire transfer or immediately available funds.
2.3 Payment of Transfer Taxes and Other Charges. Sellers shall pay all
stock transfer tax fees for the Company Shares and the GEMC Shares, stamp taxes,
value added taxes, recording taxes and fees and related expenses, transfer taxes
and other similar taxes and fees, including all interest and penalties, if any,
owed by Stockholders directly relating to the transactions contemplated by this
Agreement ("Transfer Taxes"). Company and GEMC shall be responsible for all
sales taxes for the transactions contemplated by this Agreement. Buyer and
Stockholders shall cooperate in timely preparing and delivering to the other
party or parties for filing any forms or other documents, required in order to
reduce the amount of, or exempt the transactions contemplated by this Agreement
from the imposition of Transfer Taxes, if applicable.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
GEMC AND SELLERS
The Company, GEMC and Sellers represent and warrant jointly and severally
to Buyer as follows:
3.1 Organization, Standing and Power. The Company and GEMC are
corporations duly organized, validly existing and authorized to transact
business under the laws of the state of North Carolina and Ontario, Canada,
respectively, and have all requisite corporate power and authority to own,
operate and lease its properties and assets and to carry on their business as
now being conducted. The Company and GEMC are duly qualified or licensed to do
business as a foreign corporation where required, and are in good standing, in
every jurisdiction in which the nature of their activities requires such
licensing, except in each case for such failures, if any, to be so qualified or
licensed which would not have a Material Adverse Effect. Each jurisdiction in
which the Company and GEMC are qualified or licensed to do business as a foreign
corporation is listed on Schedule 3.1.
3.2 Capital Structure.
(a) The authorized capital stock of the Company consists of 100,000
shares of common stock, $1.00 par value per share, of which there are 11,119.36
shares issued and outstanding. The authorized capital stock of GEMC consists of
100,000 shares of common stock, without par value of which there are 1,000
shares issued and outstanding. All issued and outstanding shares of capital
stock of the Company and GEMC have been duly authorized and validly issued and
are fully paid and non-assessable with no personal liability attaching to the
ownership thereof and are owned
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beneficially and of record by the Sellers for at least the last twelve (12)
months in the amounts set forth on Exhibit A hereto. There are no outstanding
(i) securities convertible into or exchangeable for any capital stock of the
Company or GEMC; (ii) options, warrants, preemptive rights, calls or other
rights to purchase or subscribe for any capital stock of the Company or GEMC or
securities convertible into or exchangeable for capital stock thereof; or (iii)
contracts, commitments, agreements understandings or arrangements of any kind
relating to the issuance of any capital stock of the Company or GEMC, any such
convertible or exchangeable securities or any such options, warrants, calls or
rights. Sellers own 100% of the outstanding capital stock of the Company.
Sellers and Company own 100% of the outstanding capital stock of GEMC. Except as
set forth on Schedule 3.2 the Company and GEMC does not own or control, or have
any ownership interest in or any obligation to acquire an ownership interest,
either directly or indirectly, in, nor is it controlled by or under common
control with, any other corporation, partnership, joint venture or other entity.
3.3 Stock Ownership. The Stockholders have good and valid title to the
Company Shares and the GEMC Shares to be sold by such Stockholders hereunder,
free and clear of any and all liens and at Closing Stockholders will sell,
assign and transfer the Company Shares and the GEMC Shares to Buyer free and
clear of any and all liens.
3.4 Certificate of Incorporation and By-Laws. Stockholders have previously
furnished Buyer true and complete copies of the (i) Articles of Incorporation of
the Company and GEMC as in effect on the date hereof, (ii) By-Laws of the
Company and GEMC as in effect on the date hereof, and (iii) minute books of the
Company and GEMC (containing records of all meetings and consents in lieu of
meetings of its shareholders and Boards of Directors (any committees thereof)
since the time of incorporation and accurately reflecting all transactions
referred to in such minutes and consents in lieu of meetings). The Company and
GEMC are not in violation of any provisions of their Articles of Incorporation
or By-Laws, as in effect as of the date hereof.
3.5 Financial Statements and Books and Records. There have been delivered
to Buyer true and correct copies of the audited consolidated balance sheets and
the related consolidated statements of income, shareholder's investment and cash
flows of the Company and GEMC as are listed on Schedule 3.5 hereto (collectively
the "Financial Statements"). The Financial Statements have been prepared and are
in accordance with the books and records of the Company and GEMC and such
Financial Statements present fairly, in all material respects, the financial
position, and related results of operations of the Company and GEMC as of the
dates and for the periods referred to therein all of which were prepared in
accordance with GAAP. All of the financial books and records of the Company and
GEMC completely and fairly record in all material
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respects the Company's and GEMC's financial affairs which should normally be
recorded in the financial books and records in accordance with GAAP.
As of December 31, 1995, the combined equity in the Company and GEMC was
$11,374,720 and the Company's and GEMC's combined indebtedness for borrowed
money was $4,946,523.
3.6 No Undisclosed Liability. Except as set forth on Schedule 3.6, the
Company and GEMC have no liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) whether as principal, agent, partner, plan
fiduciary, co-venturer, guarantor or in any capacity whatsoever of a type that
would be required to be accrued or otherwise reflected in financial statements
prepared in accordance with GAAP, which are not properly reflected or reserved
against in the Financial Statements except for liabilities or obligations which
have been incurred in the ordinary course of business since January 1, 1996 in a
manner consistent with past practice and which individually or in the aggregate
would not have a Material Adverse Effect.
3.7 Tax Matters.
(a) Except with respect to Taxes (as defined below) for which
adequate reserves are included in the Financial Statements or as otherwise set
forth in Schedule 3.7, the Company, GEMC and the Sellers, where applicable, have
timely paid all federal, state, county, local and foreign taxes, including,
without limitation, income taxes, excise taxes, sales taxes, use taxes, gross
receipts taxes, franchise taxes, employment and payroll taxes, withholding
taxes, property taxes, import duties, and all other taxes, levies and charges of
any nature whosoever and however denominated together with all penalties,
additions to tax, interest, assessment or other damages imposed thereon with
respect to the Company's and GEMC's business (collectively, "Tax" or "Taxes")
required to be paid or deposited by the Company, GEMC and/or Sellers through the
date hereof. For purposes of this Section 3.7, timely payment shall be deemed to
include payment in accordance with any available extensions.
(b) The Company, GEMC and the Sellers have filed on or before the
applicable due date (including extensions) all tax returns, reports or
declarations which they are required to file through the date hereof and have
timely paid all amounts due thereon, as well as any deficiencies or other
additional amounts subsequently assessed by any taxing authority with respect to
each such tax return, report or declaration, except with respect to filings
with, and payments to, state tax authorities, where the failure to so file or
make payments would not have a Material Adverse Effect. All such returns,
reports or declarations are true, correct and complete in all material respects.
The Company's and GEMC's income tax returns have never been audited.
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(c) Except as set forth in Schedule 3.7, the Company and GEMC have
not waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency and the
assessment of any additional Tax with respect to periods for which returns have
been filed is not expected.
(d) Except as set forth on Schedule 3.7, there are no proposed
deficiencies or unresolved claims concerning the Company's, GEMC's or Seller's
liability for Taxes. Any proposed deficiency or unresolved claim set forth on
Schedule 3.7 is being contested in good faith by appropriate proceedings for
which adequate reserves have been created, maintained and disclosed in writing
to Buyer.
(e) Copies of all federal and state income tax returns (including
all attachments and amendments thereto) of the Company and GEMC for all taxable
years for which the limitation periods (including any extensions or waivers
thereof) applicable to deficiencies have not expired have been delivered to
Buyer.
(f) For the years ending December 31 for 1993 through 1995,
inclusive and the partial year 1996 ending on the Closing Date, the Company has
elected to be treated as an S-Corporation under the Internal Revenue Code of
1986, as amended (the "Code"), and has made all filings necessary with
appropriate federal, state and local governmental taxing or other authorities in
order to perfect its status as an S-Corporation and has not been informed by any
such taxing authority that such S-Corporation election has not been accepted.
Except as set forth on Schedule 3.7, no audit of any tax return of any Seller,
Company or GEMC in progress, and each Seller has paid all taxes due and owing by
him on account of the Company's income for all periods.
(g) For the years ending December 31 for 1993 through 1995,
inclusive and the partial year 1996 ending on the Closing Date, GEMC has been
treated as the equivalent of a United States C-Corporation under the Canadian
tax code and has made all filings necessary with appropriate Canadian federal,
state and local governmental taxing or other authorities in order to perfect its
status for treatment as such and has not been informed by any such taxing
authority that such treatment has not been accepted.
(h) Stockholders are relying exclusively upon the advice and
opinions of Stockholders' own legal and financial, advisors as respects the tax
implications and consequences of the transactions contemplated by this Agreement
and Stockholders acknowledge that Buyer and Buyer's own legal and financial
advisors have made no representation to Stockholders as respects same.
3.8 Authority to Execute and Perform Agreement; No Breach.
The Company, GEMC and each of the Sellers have the full legal right
and power and all authority and approvals required to enter into,
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execute and deliver this Agreement (and each other agreement delivered or to be
delivered in connection herewith) and to perform fully its or his or her
respective obligations hereunder and thereunder. This Agreement (and each other
agreement delivered or to be delivered in connection herewith) has been duly
executed and delivered to Buyer by the Company, GEMC and Sellers and,
constitutes the valid and binding obligations of the Company, GEMC and each
Seller, enforceable against them in accordance with their respective terms. The
execution, delivery and the performance of this Agreement (and each other
agreement delivered or to be delivered in connection herewith) by the Company,
GEMC and Sellers and the consummation of the transactions contemplated hereby
and thereby in accordance with the terms and conditions hereof and thereof by
the Company, GEMC and Sellers will not:
(i) violate any provision of the Company's or GEMC's
Articles of Incorporation or By-Laws;
(ii) except as provided in Schedule 3.8, violate, conflict
with or result in the breach of any of the terms of, or constitute (or
with notice or lapse of time or both would constitute) a default under,
any Contract (as hereinafter defined), Realty Leases (as defined below) or
other agreement to which the Company, GEMC or any Seller is a party or by
or to which any of its or their respective assets may be bound or subject
except where such violation, conflict, breach or default could reasonably
be anticipated not to have a Material Adverse Effect;
(iii) violate any order, judgment, injunction, award or, decree
of any Governmental Agency (defined below) by which the Company, GEMC or
any Seller, or the securities, assets, properties or business of any of
them, is bound or subject; or
(iv) violate any statute, law or regulation with respect to
subsections (ii), (iii), or (iv) above, except in each case where such
violation could reasonably be anticipated not to have a Material Adverse
Effect.
3.9 Compliance with Law. The Company and GEMC are not in violation of any
applicable law, rule, regulation, order, judgment, injunction, award or decree,
relating to, arising out of or affecting the business or operations of the
Company and GEMC, and Company and GEMC are not in violation of any statute, law,
rule, regulation, ordinance, or any other requirement of any federal, state,
local, regional, municipal or regulatory department, body, commission, agency,
board, instrumentality, authority, court or arbitrator having jurisdiction over
the Company and GEMC or any of their businesses or properties (collectively, a
"Governmental Agency") (including, without limitation, laws relating to the
environment), which violation could reasonably be anticipated to have a Material
Adverse Effect. Each authorization, license,
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consent, permit, order and approval of any Governmental Agency over the conduct
of the Company's and GEMC's business that is material to the conduct of the
Company's and GEMC's business (collectively, the "Permits") are in full force
and effect, no material violations are or have been recorded in respect of any
Permit and no proceeding is pending to revoke or limit any Permit. Except as set
forth on Schedule 3.9, no approval or consent of any person is needed in order
that the Permits continue in full force and effect following the consummation of
the transactions contemplated by this Agreement.
3.10 Litigation. There are no outstanding orders, judgments, injunctions,
awards or decrees of any court, governmental or regulatory body or arbitration
tribunal by which the Company, GEMC or their assets, properties or business of
any of them is bound or subject that could reasonably be anticipated to have a
Material Adverse Effect. Except as set forth on Schedule 3.10, there are no
actions, suits, legal, administrative or arbitral proceedings or inquiries
relating to the Company, GEMC or Sellers pending or, to the best of the
Company's, GEMC's and Sellers' knowledge threatened (whether or not the defense
thereof or liabilities in respect thereof are covered by insurance) against the
Company, GEMC or Sellers that could reasonably be anticipated to have a Material
Adverse Effect.
3.11 Contracts. Schedule 3.11 sets forth a true, correct and complete list
of all agreements, contracts, understandings, arrangements, obligations, leases
or licenses with respect to personal property, franchises, guarantees,
commitments and orders (other than purchase orders), whether written or oral
between the Company, GEMC and any other party, under or pursuant to which the
Company and GEMC are obligated to make cash payments or deliver products or
render services with a value greater than $50,000 or having greater than a six
(6) month term or receive cash payments of or receive products or services with
a value greater than $50,000 or having greater than a six (6) month term or
which are otherwise material to the Company or GEMC (collectively, "Contracts").
Except as disclosed in Schedule 3.11, the Company and GEMC are not a party to or
subject to any Contract that meets the following criteria:
(a) Any union contract or any employment or consulting contract or
arrangement written or oral, providing for future compensation, with any
director or officer or employee;
(b) Any distribution agreement, volume purchase agreement or other
similar agreement, or joint venture contract or arrangement or any other
agreement which has involved or is expected to involve a sharing of profits with
other persons;
(c) Any lease for real or personal property;
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(d) Except for trade indebtedness incurred in the ordinary course of
business, any instrument related in any way to indebtedness incurred for
borrowed money;
(e) Any license agreement, either as licensor or licensee;
(f) Any contract containing covenants purporting to limit the
freedom of the Company or GEMC to compete in any line of business in any
geographic area;
(g) Any agreement of indemnification, except indemnification
provided in the ordinary course of business;
(h) Any agreement, contract or commitment relating to future capital
expenditures;
(i) Any agreement, contract or commitment relating to the
disposition by the Company or GEMC of any assets (other than Inventory);
(j) Any agreement providing for minimum payment or resale
obligations, ongoing support or research and development obligations, on the
part of the Company or GEMC except arrangements entered into in the ordinary
course of business;
(k) Any agreement for the provision of products or securities to any
Governmental Agency; or
(l) Any material agreement requiring a commitment of the Company or
GEMC resources or personnel to market, distribute or license products or
technology.
To the best knowledge of the Company, GEMC and the Sellers, each
material agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise agreement, license and commitment to which the
Company and GEMC are a party or by which, to the best knowledge of the Company,
GEMC and the Sellers, they or any of their assets are bound (i) is valid and
binding on the Company, GEMC and the other parties thereto, (ii) is in full
force any effect, (iii) has not been materially breached by the Company, GEMC
or, to the best knowledge of the Company, GEMC and the Sellers, any other party
thereto, (iv) contains no material liquidated damages, penalty or similar
provision, and a default will not be caused by reason of the transaction
contemplated hereby. None of the Company, GEMC or the Sellers have received
notice that any party to any such contract, agreement or instrument intends to
cancel, withdraw, modify or amend such contract, agreement or arrangement. There
have been delivered to Buyer true and complete copies of all the Contracts.
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Except as set forth in Schedule 3.11, no approval or consent of any
person is needed in order that the Contracts continue in full force and effect
subsequent to the consummation of the transactions contemplated by this
Agreement and, upon consummation of such transaction and receipt of such
approvals or consents, each of such Contracts will be enforceable in accordance
with their respective terms.
3.12 Title to Property; Encumbrances.
(a) The Company and GEMC have, and at the Closing will have, good
and valid title to their personal property (tangible and intangible) including
without limitation, all personal property reflected on, or included in the
balance sheet dated as of September 30, 1996 (the "Balance Sheet Date") and all
personal property acquired by the Company since the date of the Balance Sheet
except for such property sold since such date in the ordinary course of business
consistent with past practice, in each case free and clear of all liens except
(i) as set forth on Schedule 3.12(a) hereto, (ii) as disclosed in the September
30, 1996 Financial Statements of the Company, (iii) liens for current taxes not
yet due; and (iv) such imperfections of titles, liens and encumbrances as do not
detract from the value or interfere with use of the properties of the Company or
GEMC or otherwise materially effect the business operations of the Company or
GEMC (the "Permitted Liens").
(b) To the best knowledge of the Company, GEMC and the Sellers, all
personal property owned and held by the Company and GEMC pursuant to personal
property leases or licenses, taken as a whole, is in good operating condition
and repair, subject only to ordinary wear and tear, is not in need of
maintenance or repairs which are material in nature or cost and, taken as a
whole, is suitable and appropriate for the use thereof made by the Company and
GEMC in their business and operations.
(c) Schedule 3.12(c) describes all real property leased
(collectively, the "Realty Leases") by the Company and GEMC and all buildings
and other structures located thereon (collectively, the "Real Property"). Each
of the Realty Leases is in full force and effect and there exists no material
defaults of any party thereunder nor to the best of Company's, GEMC's and
Sellers' knowledge, does there exist any circumstances which with the giving of
notice or the passage of time would constitute such a default. Except as set
forth in Schedule 3.12(c), the Company and GEMC have good and marketable
lessee's interest under each lease which it is a party to, each free and clear
of all Liens, other than liens for current taxes not yet due, liens listed on
Schedule 3.12(c) and Permitted Liens . Except as described on Schedule 3.12(c),
to the best knowledge of the Company, GEMC and the Sellers, all buildings and
other structures, and all mechanical systems (including, but not limited to,
electrical, plumbing and heating) roof and
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structural systems and fixtures located thereon or therein or otherwise used by
the Company and GEMC in the conduct of its business as presently conducted are
in good operating condition and repair, reasonable wear and tear excepted. Such
buildings, structures, mechanical systems and structures do not violate in any
material respect any zoning regulations or ordinances of the state, city, town
or village where the Real Property is located or any applicable statutes,
regulations or ordinances and requirements (collectively, "Laws") governing the
Real Property, except for violations which could not reasonably be anticipated
to have a Material Adverse Effect. Except as set forth on Schedule 3.12(c), no
officer or director of the Company, GEMC or any of Sellers has knowledge of any
past or present violation, or any past or present use of the Real Property which
is likely to result in any violation, or of any pending or threatened action or
proceeding alleging any violation, of such Laws, except for violations which
would not have a Material Adverse Effect.
(d) Except as disclosed in Schedule 6.22, the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated thereby will not require any landlord consents under the Realty
Leases and will not violate, conflict with or result in the breach of any of the
terms of or cause a default under any of the Realty Leases.
3.13 Environmental, Health and Safety Matters. Except as described in
Schedule 3.13, each of the Company and GEMC are in compliance with all federal,
state and local laws, ordinances, codes, rules, standards, regulations and
orders applicable to worker health and safety; air emissions; water discharges;
solid wastes; hazardous materials; drinking water; toxic substances; waste
storage, treatment, transportation and disposal or otherwise relating to the
environment applicable to its business as presently conducted, except for
non-compliance which would not have a Material Adverse Effect; and except as
described in Schedule 3.13 there are no violations, citations or claims pending
or threatened with respect to any such matters. Except as described in Schedule
3.13, no toxic, hazardous or otherwise regulated substances ("Hazardous
Materials") have been disposed of, discharged, buried or deposited in, on or
under the ground by or on behalf of the Company or GEMC within the boundaries of
a location occupied or formerly occupied by it or elsewhere, in violation of any
applicable law, regulation or order (now in effect or in effect at the time of
the relevant act); no spills, discharges, or emissions of Hazardous Materials
have occurred within the boundaries of any such location occupied, or formerly
occupied by the Company or GEMC during the occupancy thereof by the Company,
GEMC or a subsidiary thereof in violation of any applicable law, regulation or
order (now in effect or in effect at the time of the relevant act); and, except
as so described in Schedule 3.13, there are no underground storage tanks or
materials containing urea formaldehyde, asbestos or polychlorinated byphenyls or
any other Hazardous Materials in or
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about the two Greensboro, North Carolina Real Properties described on Schedule
3.12(c). Except as so described in Schedule 3.13, the Company, GEMC or the
Sellers have not installed or used any underground storage tank and have never
installed or purchased for use or used materials containing urea formaldehyde,
asbestos or polychorinated byphenyls or any other Hazardous Materials in or
about any other location presently or previously utilized by the Company or
GEMC.
3.14 Interest of Officers. Schedule 3.14 sets forth a complete list of the
officers and directors of Company and GEMC as of September 30, 1996. None of the
officers or directors of Company or GEMC have any interest in any property,
real, personal or mixed, tangible or intangible, used in or pertaining to the
Company's business, except as set forth on Schedule 3.14.
3.15 Intangible Property.
Schedule 3.15 sets forth a true, correct and complete list of all
patents, trade names, trademarks, service marks and copyright registrations, all
applications for any of the foregoing, all common law trademarks, services
marks, copyrights and trade names, slogans and all inventions, formulae,
processes, computer programs (and all versions thereof), compilations and data
bases, Permits, grants, franchises and licenses or other rights relating to any
of the foregoing that are material to the conduct of the Company's and/or GEMC's
business (collectively, the "Intangible Property") copies of any documentation
in respect of which have been delivered or made available to Buyer. Except as
set forth on Schedule 3.15: (i) all rights to the Intangible Property are valid,
uncontested and in good standing and the Company and/or GEMC (as the case may
be) has good and valid title with respect to the Intangible Property and (ii) to
the best knowledge of the Company, GEMC and the Sellers, there is no conflict
with or infringement of the rights of others resulting directly or indirectly
from the use of the Intangible Property or the operation of the Company's and
GEMC's business which would impair in any material respect the use of the
Intangible Property by the Company and/or GEMC, and neither the Company, GEMC
nor any of the Sellers knows of any basis for any such conflict or infringement.
The Company and/or GEMC possesses all rights, licenses or other authority
necessary to have and enjoy the full, free and unencumbered use of all of the
Company's and/or GEMC's rights in the Intangible Property. Except as set forth
in Schedule 3.15, the Company and GEMC have not granted any outstanding licenses
in any of the Intangible Property, nor is the Company and GEMC under any
obligation to grant the same.
3.16 Employee Benefit Plans.
(a) (i) Schedule 3.16 lists every pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other incentive plan,
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any other written or unwritten employee program, arrangement, agreement or
understanding (whether arrived at through collective bargaining or otherwise),
any medical, vision, dental or other health plan, any life insurance plan or any
other employee benefit plan or fringe benefit plan, including, without
limitation, any "employee benefit plan," as that term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
currently or within the past five (5) fiscal years, adopted, maintained,
sponsored in whole or in part, or contributed to by, the Company and GEMC or any
member of a "controlled group of corporations" as that term is used in Section
414(b) of the Code, with the Company and GEMC or any entity that is under
"common control" as that term is used in Section 414(c) of the Code with the
Company and GEMC ("ERISA Affiliate") for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors or other beneficiaries
of the Company, GEMC or its ERISA Affiliates (each a "Plan" and collectively,
the "Plans").
(ii) Schedule 3.16 lists every "Foreign Employee Benefit
Plan," which means any employee benefit plan that is structured like an employee
benefit plan described in Section 3(3) of ERISA which is maintained outside the
United States primarily for the benefit of persons substantially all of whom are
nonresident aliens and who are employees of the Company, GEMC or any of its
ERISA Affiliates and is not covered by ERISA pursuant to Section 4(b)(4) of
ERISA.
(iii) Schedule 3.16 lists every "Foreign Pension Plan," which
means any employee benefit plan that is structured like an employee benefit plan
described in Section 3(3) of ERISA which is (A) maintained outside the United
States primarily for the benefit of persons substantially all of whom are
nonresident aliens and who are employees of the Company, GEMC or any of its
ERISA Affiliates, (B) is not covered by ERISA pursuant to Section 4(b)(4) of
ERISA, and (C) is required to be funded through a trust or other funding
vehicle.
(b) Except as set forth in Schedule 3.16 hereto, no Plan (i) is a
multiemployer plan within the meaning of Section 337 of ERISA, (ii) is a
multiple employer plan within the meaning of Section 413 of the Code, (iii) is
or has been subject to Title IV of ERISA, or (iv) is subject to the requirements
of Section 412 of the Code.
(c) With respect to each Plan, Buyer has been provided heretofore,
with true and complete copies of: (i) all Plan documents and all documents or
instruments establishing or constituting any related trust, annuity contract or
other funding instrument, and any amendments thereto; (ii) the most recent
determination letter received from the Internal Revenue Service ("IRS") (iii)
the most recent financial statement, if any; (iv) the most recent IRS Form 5500,
if any; and (v) written descriptions of
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all non-written agreements relating to the Plans. All Plans, Foreign Employee
Benefit Plans and Foreign Pension Plans and all Plan, Foreign Employee Benefit
Plan, Foreign Pension Plan documents and all documents or instruments
establishing or constituting any related trust, annuity contract or other
funding instrument, and any amendments thereto, comply in all material respects
with the provisions of ERISA and the Code and other Applicable Laws, rules and
regulations. All necessary governmental approvals required to date for all Plans
requiring such approval have been obtained and all available favorable
determinations as to the qualification under the Code of each of the Plans, and
for any Code Section 501(c) (9) trust maintained in connection with any Plan
that is an employee welfare benefit plan within the meaning of Section 3(1) of
ERISA, and each amendment thereto, have been made by the IRS, or have been
applied for. Each Plan which is intended to be qualified or tax exempt under the
Code is so qualified or so tax exempt and has received a favorable determination
letter to that effect from the IRS, which letter is in full force and effect, or
a determination letter with respect to such Plan has been requested within the
applicable remedial amendment period under the Code. Neither the Company, GEMC
nor Sellers are aware of any facts or circumstances that are likely to cause the
loss of any such qualifications or revocation of such letter.
(d) Except as set forth on Schedule 3.16, the administration of all
Plans has been consistent with, and in compliance in all material respects with,
applicable requirements of the Code, ERISA, Applicable Laws, and any applicable
collective bargaining arrangements, including, without limitation, material
compliance with all requirements for reporting and disclosure and requirements
for the continuation of group health insurance. Neither the Company, GEMC nor
its ERISA Affiliates nor Sellers have engaged in any transaction or acted or
failed to act in any manner that violates Section 404 or 406 of ERISA in any
material respect or engaged in any prohibited transaction (as defined in Section
4975 (c) (1) of the Code) for which there exists neither a statutory nor
regulatory exemption or for which an exemption has not been obtained and which
would subject the Company or GEMC to any material taxes, penalties or other
liabilities. All contributions required by law or the terms of each Plan,
Foreign Employee Benefit Plans and Foreign Pension Plans to have been made under
such Plan, Foreign Employee Benefit Plans and Foreign Pension Plans, or to any
trusts or funds established thereunder or in connection therewith, have been
made by the due dates thereof (including any valid extensions).
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute (i) a
termination of employment or other event entitling any person to any additional
or other benefits, or that would otherwise modify any benefits or the vesting of
any benefits, under any Plan, Foreign Employee Benefit Plan and Foreign Pension
Plan,
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maintained at any time by the Company, GEMC or its ERISA Affiliates, or to which
the Company, GEMC or its ERISA Affiliates contribute or have contributed or are
or were required to contribute or (ii) a violation of Section 404 or 406 of
ERISA or a prohibited transaction (as defined in Section 4975 (c) (1) of the
Code) for which there exists neither a statutory nor regulatory exemption or for
which an exemption has not been obtained. With respect to each Plan, Foreign
Employee Benefit Plan and Foreign Pension Plan, there are no actions, suits or
claims pending other than, in each case, claims for benefits in the normal
course, that may result in material liability to the Company or GEMC or, to the
knowledge of the Company, GEMC or Sellers, threatened, and neither the Company
nor Sellers have knowledge of any facts that are likely to give rise to any such
actions, suits or claims other than, in each case, claims for benefits in the
normal course.
(f) The Company and GEMC have not made or agreed to make, or is
required to make (in order to bring any of the Plans into compliance with ERISA
or the Code), any change in benefits or coverage that would materially increase
the cost of maintaining any Plan, Foreign Employee Benefit Plan and Foreign
Pension Plan.
(g) Each Plan which is a "group health plan" within the meaning of
Section 5000 of the Code has been maintained in substantial compliance with
Section 4980 B of the Code and Title I, Subtitle B, Part 6 of ERISA and no
material tax payable on account of Section 4980 B of the Code has been or is
expected to be incurred by the Company or GEMC.
(h) No benefit payable or which may become payable by the Company or
GEMC pursuant to any Plan shall constitute an "excess parachute payment," within
the meaning of Section 280 G of the Code, which is or may be subject to the
imposition of an excise tax under Section 4999 of the Code or which would not be
deductible by reason of Section 280 G of the Code.
3.17 Employees and Employee Relations. The Company and GEMC have delivered
to Buyer a complete list as of September 30, 1996, of all employees of the
Company and GEMC setting forth their names, birth dates, job titles, base
salaries, bonus compensation paid or payable and dates of hire. The Company and
GEMC have not at any time during the last five years had, nor is there now or to
the best of the Company's, GEMC's and Sellers' knowledge threatened, a strike,
picket, work stoppage, or work slowdown. The Company and GEMC are not a party to
and there does not otherwise exist, any union, collective bargaining or similar
agreement with respect to any of its employees. There is not any negotiation
currently being conducted with any labor organization or employee association
with respect to the employees of the Company and GEMC or, to the knowledge of
the Company, GEMC and the Sellers, any contemplated attempt by any such
organization or association to organize such employees. The Company and GEMC are
in material compliance with
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all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and occupational safety and health
and employment practices, and has not engaged in any unfair labor practice and
there is no unfair labor practice complaint against the Company and GEMC which
has been served on the Company or GEMC or of which the Company, GEMC or Sellers
have knowledge pending or threatened before the National Labor Relations Board
or any other Governmental Agency. Except as set forth on Schedule 3.17, there do
not exist any pending workmen compensation claims against the Company or GEMC
that are not adequately provided for by insurance, any pending, or to the
knowledge of the Company, GEMC or Sellers, threatened claims alleging that the
workplace of the Company is unsafe or employment discrimination or wrongful
discharge.
3.18 Insurance. Schedule 3.18 lists all insurance policies covering the
assets, business, equipment, properties, operations, employees, officers and
directors of the Company and GEMC, the amounts of coverage under each such
policy of the Company and GEMC. Since January 1, 1996, the Company and GEMC have
not been refused any requested coverage and no material claim made by the
Company and GEMC have been denied by the underwriters of such policies. All
premiums payable under all such policies have been paid, and the Company and
GEMC is otherwise in material compliance with the terms of such policies (or
other policies providing substantially similar insurance coverage). There is no
threatened termination of, or material premium increase with respect to, any of
such policies. To the best knowledge of the Company, GEMC and the Seller, there
are no outstanding, unpaid claims under such policy which have gone unpaid for
more than 45 days or as to which the carrier has disclaimed liability.
3.19 Inventory. (i) All Inventory (as defined below) of the Company and
GEMC is of a type that is usable and salable in the ordinary and usual course of
business and items of obsolete materials and materials of below standard quality
do not exceed the reserve for such on the books of the Company and GEMC; (ii)
all Inventory has been and is valued at the lower of cost or market (using the
first in, first out method), and (iii) there exists no material risk that
expenses for warranty claims relating to the Inventory would exceed the
Company's and GEMC's reserve for warranty claims. For purposes of this
Agreement, "Inventory" means all products and all raw materials held for the
refurbishment of Inventory of the Company and GEMC, whether or not located on
the premises of the Company or GEMC, on consignment to a third party, or in
transit or storage, packaging materials, supplies, ingredients, and any
warehouse receipts and any other similar documents relating thereto. However,
for purposes of this Section 3.19 "Inventory" shall specifically not include
used machines and/or equipment acquired or reacquired by Company or GEMC as to
which Company and GEMC make no representations or warranties. The Company and
GEMC have provided Buyer with a listing as of
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September 30, 1996, of Inventory held by the Company or GEMC for resale,
including used machinery in the process of reconditioning for resale. The
Company and GEMC have further provided Buyer with a listing of all material
manufacturers' warranties related to the Inventory.
3.20 No Defaults. The Company and GEMC are not, and none of the Company,
GEMC nor the Sellers have received notice that the Company or GEMC is or would
be with the passage of time (a) in violation of any provision of its Articles of
Incorporation or Bylaws or (b) in default or violation of any term, condition or
provision of (i) any judgment, decree, order, injunction or stipulation
applicable to the Company or GEMC, or (ii) any agreement, note, mortgage,
indenture, contract, lease, instrument, permit, concession, franchise or license
to which the Company and GEMC are a party or by which the Company or GEMC or
their properties or assets may be bound, which default or violation could
reasonably be anticipated to have a Material Adverse Effect.
3.21 Accounts Receivable.
(a) Each of the accounts receivable of the Company and GEMC (i)
arose from bona fide sales in the ordinary course of business, (ii) was entered
into under circumstances and by methods usual and customary in the Company's and
GEMC's business in the applicable state or country and the collection practices
used with respect thereto have been and are in all respects legal and proper,
and (iii) was entered into, and credit granted pursuant thereto, consistent with
the Company's and GEMC's historical credit policies and practices. The books of
the Company and GEMC correctly record the principal balance of all accounts
receivable and there are no security instruments securing any account receivable
which are not enforceable, subject to limitation by bankruptcy, insolvency or
similar laws affecting creditor's rights generally and by general principles of
equity (including the possible unavailability of specific performance or
injunctive relief).
(b) The Company and GEMC have delivered to Buyer an Aged Trial
Balance reflecting accounts receivable as of September 30, 1996. To the best
knowledge of the Company, GEMC and the Sellers, there does not exist any
uncollectible accounts receivable which in the aggregate, exceed the Company's
and GEMC's reserve for bad debts. The Company and GEMC will deliver a similar
current Aged Trial Balance accounts receivable statement to the Buyer dated as
of the Closing Date.
(c) To the best knowledge of the Company, GEMC and the Sellers, none
of the accounts receivable of the Company and GEMC are subject to any material
claim of offset, recoupment, set-off or counterclaim and the Company, GEMC and
the Sellers have no knowledge of any specific facts or circumstances (whether
asserted or unasserted) that could give rise to any such claim. No person
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has any lien on any of such accounts receivable and other than in the ordinary
course of business, no agreement for deduction or discount has been made with
respect to any such receivables.
3.22 Absence of Certain Changes. Except as set forth in Schedule 3.22 or
as otherwise disclosed in this Agreement or any Schedule to this Agreement,
since September 30, 1996, the Company has not:
(i) Suffered any Material Adverse Effect in its Working
Capital, condition (financial or otherwise), assets, liabilities
(absolute, accrued, or contingent), reserves, business or operations;
(ii) Incurred any liabilities or obligations (absolute,
accrued, contingent or otherwise) except liabilities and obligations
incurred in the ordinary course of business and consistent with past
practice;
(iii) Paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, or contingent) other than the payment,
discharge or satisfaction in the ordinary course of business and
consistent with past practice, of liabilities and obligations reflected or
reserved against in the Company Financial Statements or incurred in the
ordinary course of business and consistent with past practice;
(iv) Permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any lien
other than Permitted Liens;
(v) Written off as uncollectible any notes or accounts
receivable, except for immaterial write-downs and write-offs in the
ordinary course of business and consistent with past practice;
(vi) Sold, transferred, or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible),
except in the ordinary course of business and consistent with past
practice;
(vii) Granted any general increase in the compensation of
officers, employees or consultants (including any such increase pursuant
to any bonus, pension, profit sharing or other plan or commitment) or any
increase in the compensation payable or to become payable to any officer,
employee or consultant (including any such increase pursuant to any bonus,
pension, profit sharing or other plan or commitment), except as listed on
Schedule 3.22 (vii) and no such increase is required by agreement or
understanding;
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(viii) Made any single capital expenditure or commitment in
excess of $50,000 for additions to property, plant, equipment or
intangible capital assets or made aggregate capital expenditures and
commitments in excess of $100,000 for additions to property, plant,
equipment or intangible capital assets;
(ix) Made any change in any method of accounting or
accounting practice or in depreciation or amortization policies or rates
adopted by it;
(x) Paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement
of any kind with, any of its officers, directors or stockholders or any
affiliate or associate of any of its officers, directors or stockholders,
except compensation to officers at rates not exceeding the rates of
compensation in effect as of September 30, 1996 or any reasonable
increases except as listed on Schedule 3.22 (x);
(xi) Entered into any new, or amended or modified any
existing, employee benefit plan or program or severance arrangements or
made any severance payments or granted any termination benefits;
(xii) Agreed, whether in writing or otherwise, to take any
action described in this section;
(xiii) Made any amendment or change in the Articles of
Incorporation or Bylaws of the Company or GEMC;
(xiv) Incurred any material damage, destruction or loss,
whether covered by insurance or not, affecting any of the material
properties or business of the Company or GEMC;
(xv) Made any loan, advance or capital contribution to, or
investment in, any person, other than advances made in the ordinary course
of business of the Company or GEMC.
(xvi) Entered into any amendment of relinquishment,
termination or nonrenewal by the Company or GEMC of any Contract, lease,
commitment or other right or obligation other than in the ordinary course
of business consistent with past practice.
(xvii) Experienced any labor dispute, other than routine
individual grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Company or GEMC;
or
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(xviii) Made any agreement or arrangement to take any action
which, if taken prior to the date of this Agreement, would have made any
representation or warranty set forth in this Agreement untrue or incorrect
as of the date when made.
(xix) Disposed of or permitted to lapse any material rights to
the use of any Intangible Property.
(xx) Declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock or redeemed, purchased
or otherwise acquired, or issued or sold or authorized or proposed the
issuance or sale of, directly or indirectly, any shares of capital stock
or other securities of the Company or GEMC.
3.23 Restrictions on Business Activities. There is no agreement, judgment,
injunction, order or decree binding upon the Company or GEMC or that has or
could reasonably be expected to have the effect of prohibiting or significantly
impairing any material business practice of the Company or GEMC, any material
acquisition of property by the Company or GEMC, or the continuation of the
business of the Company or GEMC as currently conducted or as currently proposed
to be conducted.
3.24 Bank Accounts. Schedule 3.24 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which the Company and GEMC maintains accounts of any nature and
names of all persons authorized to draw thereon, make withdrawals therefrom or
have access thereto.
3.25 Customers and Suppliers. Schedule 3.25 sets forth: (a) a list of the
ten (10) largest customers of the Company and GEMC in terms of sales during the
calendar year ended December 31, 1995 and the nine (9) month period ending
September 30, 1996 showing the approximate total sales by customer during such
periods; and (b) a list of the ten (10) largest suppliers of the Company and
GEMC in terms of purchases during the calendar year ended December 31, 1995 and
the nine (9) month period ending September 30, 1996 and showing the approximate
total purchases by the Company and GEMC from each such supplier during such
periods. Except to the extent set forth in Schedule 3.25 there has not been any
Material Adverse Effect in the business relationship of the Company and GEMC
with any customer or supplier named in Schedule 3.25 since January 1, 1996.
Except for the customers and suppliers named in Schedule 3.25, the Company and
GEMC does not have any customer who accounted for more than 3% of the Company's
and GEMC's sales during the calendar year 1995, or any supplier from whom it
purchased more than 3% of the goods or services which it purchased during the
calendar year 1995. The Company and GEMC have not received any notice nor does
the Sellers have knowledge of any facts, circumstances or conditions that create
a reasonable basis for believing that, nor does it or the
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Sellers have any reason to believe, that any of its current customers or
suppliers will terminate or change in a manner materially adverse to the Company
and GEMC their relationships with the Company and GEMC either before or within
twelve (12) months after the Closing.
3.26 Certain Business Practices. To the best knowledge of the Company,
GEMC and the Sellers, the employees, directors, officers, agents or other
representatives of the Company and GEMC, or any other person acting on behalf of
the Company and GEMC have not, directly or indirectly, within the past five
years, given or agreed to give any illegal gift or similar benefit to any
customer, supplier, governmental employee or other person who is or may be in
connection with any actual or proposed transaction.
3.27 Related Party Transaction. Except as set forth on Schedule 3.27, no
officer, director, or shareholder or to the best knowledge of the Company, GEMC
and the Sellers, employee of the Company or GEMC or affiliate or relative of any
of them:
(i) owns directly or indirectly any interest in (except not
more than three (3%) percent stockholdings for investment purposes in
securities of publicly held and traded companies), or is an officer,
partner, director, employee or consultant of, or otherwise receives
renumeration from, any person which is, or is engaged in business as, a
competitor, lessor, lessee, customer or supplier of the Company or GEMC;
(ii) owns directly or indirectly in whole or in part any
tangible or intangible property, the use of which is necessary for the
conduct of the Company's or GEMC's business and which if not obtained from
such person could have a Material Adverse Effect; or
(iii) owes any amount to the Company or GEMC or, to the
knowledge of the Company, GEMC and Sellers, has any cause of action or
other claim against the Company other than for current wages accrued or
bonuses, benefits, prerequisites or reimbursements for business expenses
payable in the ordinary course of business consistent with past practices.
3.28 Brokers and Finders. None of the Company, GEMC, Sellers or the
Company's and GEMC's respective officers, directors, employees or stockholders
has employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the transaction
contemplated by this Agreement, other than fees payable by Sellers with respect
to this transaction to the firm of Soles Brower & Company.
3.29 Orders, Commitments and Returns. All of Company's and GEMC's current
orders, contracts and commitments for the sale of merchandise and the order of
supplies were made in the ordinary
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course of business, consistent with past practice. As of the date of this
Agreement, to the best knowledge of the Company and GEMC, there is no claim
against either of them for the return of a material amount of merchandise by
reason of alleged overshipments, defective merchandise or otherwise, and there
is no merchandise in the hands of customers under an understanding that such
merchandise would be returnable.
3.30 Conversion to C Corp. Company, GEMC and Sellers acknowledge, accept
and agree that Buyer intends to and shall convert the Company from an S Corp. to
a C Corp. from and after the Closing Date, if Sellers have not converted the
Company from an S Corp. to a C Corp. prior to Closing. Sellers shall not convert
the Company from an S Corp. to a C Corp. without the consent of Buyer.
3.31 C Corp. Conversion Liability. Prior written consent of Buyer shall be
required in the event that Sellers elect a manner in which to pay and/or
allocate tax payments as a result of conversion from an S Corporation to a C
Corporation, whereby the Company or GEMC would be liable directly or indirectly
for any taxes of Sellers, subsequent to the Closing Date, arising from the
Company's and GEMC's operations prior to the Closing Date.
3.32 Subsidiaries and Affiliates. Except as set forth on Schedule 3.33
hereof, the Company and GEMC have no subsidiaries or affiliates.
3.33 Machinery and Equipment. Schedule 3.33 hereto sets forth an accurate
summary as of September 30, 1996, of the major categories of all machinery,
equipment, computer hardware, fixtures, tools, furniture, spare parts, supplies,
vehicles and other fixed assets ("Machinery and Equipment") wherever located,
used or held for use by Company and GEMC in the conduct of the business,
including book value as of, and book accumulated depreciation through, September
30, 1996 of each such category. The Machinery and Equipment included in the
assets include such spare or replacement parts as are necessary in order to
permit the conduct of the business without material interruption. The Machinery
and Equipment included in the assets are in reasonably satisfactory working
order, are free from any material defects and have been maintained in a
reasonably satisfactory manner, and no repairs, replacements or regularly
scheduled maintenance relating to such Machinery and Equipment have been
materially deferred.
3.34 Computer Software. Schedule 3.34 hereto sets forth an accurate list
as of the date of this Agreement of all material computer software and programs
("Software") used or held for use by Company and GEMC in connection with the
conduct of the business including a statement as to whether such software is
owned or leased/licensed by Company and GEMC and, if so, the expiration date for
the current term and any renewal rights for same.
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ARTICLE 4
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
The Stockholders represent and warrant to Buyer that:
4.1 Title to Securities. Stockholders own of record and beneficially, and
immediately prior to the Closing will own of record and beneficially, all of the
outstanding Company Shares and GEMC Shares as set forth herein.
4.2 Absence of Violations or Conflicts. Except as set forth on Schedule
4.3 hereto, the execution and delivery by Stockholders of the transaction
documents to which Stockholders are or will be a party and the consummation by
Stockholders of the transactions contemplated by such transaction documents do
not and will not with the passing of time or giving of notice or both: (i)
constitute a violation of, be in conflict with, constitute a default or require
any payment under, permit a termination of, or result in the creation or
imposition of any lien upon any properties or assets of the Company or GEMC,
under any contract or understanding to which Stockholders are a party or to
which Stockholders' properties or assets are subject; or (ii) create, or cause
the acceleration of the maturity of, any debt, obligation or liability of
Stockholder that would result in any lien or other claim upon the properties or
assets of the Company or GEMC.
4.3 Absence of Claims Against the Company and GEMC. Stockholders have no
claim against the Company or GEMC. Stockholders have no right, claim or interest
in or to any equity ownership interest in the Company or GEMC other than the
Company Shares and the GEMC Shares as set forth herein.
4.4 Litigation. To the best of Stockholders' knowledge, there is no
action, proceeding, claim or investigation pending before any Governmental
Entity with respect to which Sellers have been served or, to the best knowledge
of Stockholders', threatened against Stockholders' or pending but with respect
to which Sellers have not been served, relating to Stockholders' ownership of
the Company Shares or the GEMC Shares.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
Buyer and Parent represent and warrant to the Company and Sellers as
follows:
5.1 Organization: Standing and Power. Each of Buyer and Parent is a
corporation duly organized, validly existing and in
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good standing under the laws of its state of incorporation and has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted.
5.2 Authority.
(a) Each of Buyer and Parent has all requisite corporate power and
authority to enter into this Agreement and the other transaction documents to
which they are a party, to perform their obligations hereunder and thereunder,
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and such other transaction documents,
the performance by Buyer and Parent of their respective obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of Buyer and Parent, including approval by their respective boards
of directors. This Agreement is a legal, valid and binding obligation of Buyer
and Parent enforceable against them in accordance with its terms.
(b) Subject to satisfaction of the conditions set forth in Article
VII hereto, the execution and delivery of this Agreement does not and the
consummation of the transactions contemplated hereby will not, conflict with or
result in any material violation of any material statute, law, rule, regulation,
judgment, order, decree, or ordinance applicable to Buyer or its properties or
assets, or conflict with or result in any breach or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or the loss of material
benefit under, or result in the creation of a lien or encumbrance of any of the
properties or assets of Buyer pursuant to (i) any provision of its respective
articles or certificate of incorporation or bylaws, or (ii) any material
agreement, contract, note, mortgage, indenture, lease, instrument, permit,
concession, franchise or license to which Buyer or Parent is a party or by which
Buyer or Parent or any of their respective properties or assets may be bound or
affected.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Agency is required by
or with respect to Buyer or Parent in connection with the execution and delivery
of this Agreement and the other transaction documents to which it is a party or
the consummation by Buyer or Parent of the transactions contemplated hereby and
thereby.
5.3 Litigation. There is no action, suit, proceeding, arbitration,
investigation or claim pending or, to the best knowledge of Buyer or Parent,
threatened against Buyer or Parent which in any manner challenges or seeks to
prevent, enjoin, alter
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or materially delay any of the transactions contemplated hereby of Buyer's or
Parent's ability to enter into this Agreement. Neither Buyer nor Parent is aware
of any other pending or threatened action, suit, proceeding, investigation or
claim, or any reasonable basis therefor, which individually or in the aggregate
would reasonably be expected to result in a Material Adverse Change in Buyer or
Parent.
5.4 Brokers and Finders. Neither Buyer nor Parent nor any of their
respective officers, directors, employees or stockholders has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement.
ARTICLE 6
COVENANTS
Company, GEMC and Sellers (jointly and severally) and Buyer and Parent
(jointly and severally) covenant and agree as follows:
6.1 Conduct of Business of the Company and GEMC.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Closing Date, the Company
and GEMC shall carry on its business in the usual, regular and ordinary course
in substantially the same manner as conducted prior to the date of this
Agreement and, to the extent consistent with such business, use best efforts
consistent with past practice and policies to preserve intact its present
business organizations, keep available the services of its present officers and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with them, to the end that its
goodwill and ongoing business shall be substantially unimpaired at the Closing
Date. The Company and GEMC shall promptly notify Buyer of any event or
occurrence not in the ordinary course of business of the Company and GEMC, which
could result in a Material Adverse Change in the Company. Except as expressly
contemplated by this Agreement, the Company and GEMC shall not, without the
prior written consent of Buyer:
(a) Enter into any commitment or transaction not in the
ordinary course of business;
(b) Grant any severance or termination pay to any director, officer,
employee or consultant, except mandatory payments made pursuant to written
agreements outstanding on the date hereof (with any such agreement or
arrangement to be disclosed herein) or except in accordance with the Company's
or GEMC's past practices;
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(c) Other than in the ordinary course of business, enter into or
amend any agreements pursuant to which any other party is granted marketing or
other similar rights of any type or scope with respect to any products of the
Company or GEMC;
(d) Violate, amend or otherwise modify the terms of any of the
Contracts except as provided herein;
(e) Commence a lawsuit other than for the routine collection of
bills or for a breach of this Agreement;
(f) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any Company Shares and GEMC
Shares.
(g) Split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of the Company Shares or GEMC Shares, or repurchase
or otherwise acquire, directly or indirectly, any shares of the Company Shares
and GEMC Shares;
(h) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of or authorization of, the purchase of any shares of the
Company Shares and GEMC Shares or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other convertible
securities;
(i) Cause or permit any amendments to the Company's or GEMC's
Certificate of Incorporation or Bylaws;
(j) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof;
(k) Sell, lease, license or otherwise dispose of any the Company or
GEMC properties or assets except in the ordinary course of business and
consistent with past practice;
(l) Incur any indebtedness for borrowed money or guaranty any such
indebtedness except in the ordinary course or issue or sell any debt securities
or guaranty any debt securities of others;
(m) Except as provided for herein, adopt or amend any Plan, or enter
into any employment contract, pay any special bonus or special remuneration to
any director, employee or consultant, or increase the salaries or wage rates of
its employees other than pursuant to scheduled employee reviews under the
Company's or
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GEMC's normal employee review cycle or pursuant to the Company's existing bonus
plans, as the case may be, in connection with the hiring of employees other than
officers in the ordinary course of business, in all cases consistent with past
practice, or otherwise increase or modify the compensation or benefits payable
or to become payable by the Company or GEMC to any of its directors, employees
or consultants, except for changes pursuant to employment agreements in effect
as of the date hereof or changes in position;
(n) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business
consistent with past practice of liabilities reflected or reserved against in
the Financial Statements;
(o) Make any material tax election, change any material tax
election, adopt any material tax accounting method other than in the ordinary
course of business and consistent with past practice, change any material tax
accounting method, file any material tax return (other than any estimated tax
returns, payroll tax returns or sales tax returns) or any amendments to a
material tax return, enter into any closing agreement, settle any tax claim or
assessment or consent to any tax claim or assessment;
(p) Fail to pay or otherwise satisfy its material monetary
obligations as they become due or consistent with past practice, except such as
are being contested in good faith;
(q) Cancel, materially amend or, other than in the ordinary course
upon expiration of a policy term, renew any material insurance policy except for
replacing any material insurance policy with substantially the same coverage by
another insurer;
(r) Take, or agree (in writing or otherwise) to take, any of the
actions described in this Section 6.1 or any action which would make any of the
representations or warranties or covenants of the Company or GEMC contained in
this Agreement or any other transaction document to which the Company or the
Stockholders are a party untrue or incorrect.
6.2 Due Diligence.
(a) The Company and GEMC shall afford Buyer and its independent
accountants, counsel and other representatives, reasonable access during normal
business hours from the date of this Agreement until the Closing (the "Due
Diligence Period") to review (i) all properties, books, contracts, commitments
and records, and (ii) all other information concerning the business, assets,
goodwill, properties and personnel as may reasonably be requested (collectively
the "Due Diligence Materials"). Buyer's
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and its representatives' due diligence shall be conducted in a manner that will
not unreasonably interfere with the Company's and GEMC's business operations.
(b) The Company and GEMC shall provide Buyer such internal financial
statements and other information as may reasonably be requested by Buyer or its
accountants during the Due Diligence Period, including but not limited to Arthur
Anderson's work papers.
6.3 Exclusivity: Acquisition Proposals. Unless and until this Agreement
shall have been terminated by either party pursuant to Section 10.1:
(a) None of the Company, GEMC and the Sellers shall knowingly,
directly or indirectly, through any officer, director, agent or representative
(including, without limitation, investment bankers, attorneys, accountants and
consultants), or otherwise;
(i) Solicit, initiate or further the submission of proposals
or offers from, or enter into any agreement with, any person or entity,
individually or collectively, relating to any acquisition or purchase of
all or a material portion of the assets of, or any equity interest in, the
Company or GEMC or any merger, consolidation or business combination with
the Company;
(ii) Participate in any discussions or negotiations regarding,
or furnish to any third party any confidential information with respect to
the Company or GEMC or Buyer in connection with any acquisition or
purchase of all or a material portion of the assets of, or any equity
interest in, the Company or GEMC or any merger, consolidation or business
combination with the Company.
(b) The Company and GEMC shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any third
party conducted prior to the date of this Agreement with respect to any of the
foregoing.
6.4 Breach of Representations, Warranties and Covenants. The Company, GEMC
and Sellers shall not take, any action which from the date hereof through the
Closing would cause or constitute a breach of any of its respective
representations, warranties and covenants set forth in this Agreement. In the
event of, and promptly after becoming aware of, the actual, pending or
threatened occurrence of any event which would cause or constitute such a
materially adverse breach or inaccuracy, each party shall give detailed notice
thereof to the other parties and shall use its best efforts to prevent or
promptly remedy such breach or inaccuracy.
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6.5 Consents. Buyer, the Parent, Company, GEMC and each of Sellers will
cooperate, and each of the Company, GEMC and Sellers will cause the Company and
GEMC to cooperate, with each other in: (a) filing any necessary applications,
reports or other documents with, giving any notices to, and seeking any consents
from, all regulatory bodies and all governmental agencies and authorities and
all third parties as may be required in connection with the consummation of the
transactions contemplated by this Agreement, and in seeking necessary
consultation with and prompt favorable action by any such body, agency,
authority or third party, and (b) obtaining an amended distribution agreement
with Tekmatex, Inc., Marubeni Tekmatex, International, Ltd., Barudan Company,
Ltd. and Barudan America, Inc. substantially in the form annexed as Exhibit B
hereto (the "Barudan Amendment"). Each of the parties hereto will use all
commercially reasonable efforts to obtain the Barudan Amendment, any further
revisions to the Barudan Amendment and all such consents and favorable actions
required by it for the consummation of the transactions contemplated hereby. The
Barudan Amendment and consents anticipated by the parties are set forth on
Schedule 6.5 hereto (collectively the "Consents").
6.6 All Reasonable Efforts. Each of the Company, GEMC, the Sellers, Buyer
and Parent shall use all commercially reasonable efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to Closing under this Agreement. In furtherance and not in limitation
of the foregoing, the Stockholders agree to vote in favor of or give their
written consent with respect to all voting capital stock of the Company and GEMC
beneficially owned by them to approve this Agreement and the transactions
contemplated by the transaction documents.
6.7 Public Announcements. Each party will consult in advance with the
other concerning the timing and content of any announcements, press releases or
public statements concerning the transaction and will not make any such
announcement, release or statement without the others consent; provided however,
that Buyer may make whatever public disclosures are required or advisable to
comply with the applicable state and federal securities and antitrust laws,
including without limitation, as respects the Rule 144A Financing (hereinafter
defined).
6.8 Expenses. Whether or not the transaction hereunder is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and thereby, including fees of any consultants,
finders or brokers or investment bankers, attorneys and accountants retained by
such party, shall be paid by the party incurring such expense. The parties
hereto acknowledge that the reasonable fees of Smith Helms Mulliss & Moore,
L.L.P., relating to the transactions contemplated by this Agreement and by the
ELC Acquisition Agreement (hereinafter defined) shall be paid by Company,
however, Companys' share of
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responsibility for the payment of such fees shall not exceed $75,000. The fees
of Soles Brower & Company shall be paid by Sellers, and the reasonable fees of
Arthur Anderson, L.L.P., relating to this transaction will be paid by the
Company.
6.9 Confidentiality. Each party will hold, any documents and information
delivered by any other party hereto pursuant to this Agreement or the
confidentiality agreement, dated as of June 26, 1996, between Parent, Sellers
and the Company and will use its best efforts to cause its representatives and
prospective financing parties to which such documents and information are may be
furnished, to hold, in strict confidence, unless (i) compelled to disclose by
judicial or administrative process or by other requirements of applicable laws
of governmental or regulatory authorities (including, without limitation, in
connection with obtaining the necessary approvals of this Agreement or the
transactions contemplated hereby of governmental or regulatory authorities), or
(ii) disclosed in an action or proceeding brought by a party hereto in pursuit
of its rights or in the exercise of its remedies hereunder, all documents and
information concerning the other party and its subsidiaries furnished to it by
such other party or its representatives in connection with this Agreement or the
transactions contemplated hereby, except to the extent that such documents or
information can be shown to have been (x) previously known to the parties or
their representatives or prospective financing parties, (y) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of the parties and their representatives and
prospective financing parties or (z) later acquired by the parties or its
representatives or prospective financing parties from another source if the
recipient is not aware that such source is under an obligation to the parties,
to keep such documents and information confidential.
6.10 Account Collections. The Company and GEMC shall, from the date of
this Agreement to the Closing Date, use commercially reasonable efforts to
collect accounts receivable and make payment on accounts payable of Company and
GEMC in the ordinary course of business and in accordance with their past
customs and practices and without any delay, acceleration or discounting of same
other than as is consistent with such existing Company practices.
6.11 Audited Financial Statements. Company shall deliver to Buyer by no
later than November 15, 1996, audited consolidated balance sheets and the
related consolidated statements of income, shareholders' investment and cash
flows, along with an unqualified opinion prepared by Arthur Andersen LLP (the
"Company's Accountants") for the period ending September 30, 1996 (the "1996
Audited Statement"). Buyer shall have the right to examine and review same and
the supporting financial information and documents, with reasonable cooperation
from Company, GEMC and Sellers. Buyer
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shall have access to the Company's Accountants' work papers for the 1996 Audit
Statement as well as for the Financial Statements.
6.12 Maintenance of Insurance Policies. On and after the date hereof and
until the Closing Date, the Company and GEMC shall maintain in full force and
effect all insurance (or insurance of similar terms and conditions as currently
in effect) with respect to its business, assets and properties.
6.13 Cooperation. Each of the parties hereto will cooperate with each
party to facilitate the completion of the transactions contemplated hereunder
including but not limited to the Rule 144A Financing and compliance with the
Hart-Scott-Rodino Act.
6.14 Covenant Not to Compete.
(a) Each of the Sellers agrees that he will not, directly or
indirectly, whether in the capacity of director, officer, employee, agent,
advisor or otherwise, individually or for, with or through any other person,
firm or corporation, by equity ownership or otherwise, compete with the Company
and GEMC or any subsidiary of the Company, GEMC (collectively the "Protected
Parties") with respect to the business conducted by the Protected Parties (the
"Prohibited Business") during the Covenant Term (hereinafter defined) during the
time period commencing with the Closing Date and expiring on the fifth (5th)
anniversary date of the Closing Date (the "Covenant Term") (x) in North America
and (y) in any area of Central and/or South American where the Prohibited
Business is conducted during the Covenant Term. The "Prohibited Business" shall
include the business of the Company and GEMC as of the Closing Date and
technological extensions, enhancements and/or improvements of such business as
conducted by the Company and GEMC on the Closing Date.
(b) Notwithstanding the foregoing, during the Covenant Term each
individual Seller shall be permitted to own not in excess of three percent (3%)
of any class of securities of any public company which is engaged in the
Prohibited Business.
(c) During the Covenant Term each Seller agrees not to induce any
person who is an employee or officer of the Protected Parties to terminate said
relationship, except where such action is taken at the request of Buyer in the
course of carrying out Sellers duties for the Company or GEMC;
(d) During the Covenant Term the Sellers agree not to disclose or
use, in any manner in competition with or contrary to the interests of the
Protected Parties, the customer lists, business methods, product research, or
other trade secrets of the Protected Parties relating to the Prohibited
Business, it being acknowledged that all such information regarding the
Prohibited Businesses, is confidential information and the exclusive property
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of the Protected Parties; provided, however, that the foregoing restrictions
shall not restrict the use or disclosure of such confidential information (i) to
any government entity to the extent required by law or (ii) which is or becomes
publicly known and available through no wrongful act of Sellers.
(e) It is the intention of the parties that if any of the
restrictions or covenants contained herein is held to cover a geographic area or
to be for a length of time which is not permitted by applicable law, or in any
way construed to be too broad or to any extent invalid, such provision shall not
be construed to be null, void and of no effect, but to the extent such provision
would be valid or enforceable under applicable law, a court of competent
jurisdiction shall construe and interpret or reform this Section 6.14 to provide
for a covenant having the maximum enforceable geographic area, time period and
other provisions (not greater than those contained herein) as shall be valid and
enforceable under such applicable law. Each of the Sellers acknowledge that any
breach of the terms, conditions or covenants set forth in this Section 6.14 may
cause irreparable damage to the Protected Parties because of the special,
unique, unusual and extraordinary and character of their business and the
Protected Parties recovery of damages at law will not be an adequate remedy.
Accordingly, each of the Sellers agree that for any breach of the terms,
covenants or agreements of this Section 6.14, a restraining order or an
injunction or both may be issued against such person, in addition to any other
rights or remedies the Protected Parties may have.
6.15 Post-Closing Cooperation. After the Closing Date, the parties shall
cooperate fully with one another and all shall make available to any taxing
authority all information, records or documents reasonably requested in
connection with the preparation of any tax returns or in connection with any tax
liability with respect to any period prior to or after the Closing Date at their
expense.
6.16 Certain Taxes. The Sellers, GEMC and the Company will pay, or cause
to be paid, all taxes and will file all federal, Canadian, state and local
income tax returns with respect to the income of the Company, GEMC and Seller as
respects the Company and GEMC business, activities and operations through the
Closing Date. Company, GEMC, Sellers and Buyer agree and consent to the election
provided at Section 1362(e)(3) of the Code to have income of the Company
assigned between its S short year return and C short year return under normal
tax accounting rules.
6.17 Section 338(h)(10) Election.
(a) Company, Sellers and Buyer shall jointly make the election
provided for by Section 338(h)(10) of the Code and any corresponding elections
under state, local or foreign tax law (the
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"Election") with respect to the acquisition of the Company Shares and GEMC
Shares. Sellers and Buyer shall provide to the other all necessary information
to permit the Election to be made. Company, Sellers and Buyer shall, as promptly
as practicable following the Closing Date, take all actions necessary and
appropriate (including filing IRS Form 8023-A and other such forms, returns,
elections, schedules, attachments, and other documents as may be required) to
effect and preserve a timely Election. The forms relating to the Election for
federal, state and local tax purposes shall be referred to as the "Forms".
(b) In connection with the Election, Company, Sellers and Buyer have
determined and agree upon the amount of the modified aggregate deemed sales
price ("MADSP") of the Company Shares and GEMC Shares (within the meaning of
Treas. Reg. ss. 1.338(h)(10)-1 (f)) as set forth on Schedule 6.17(b) (the
"Allocations") of the MADSP to the assets of the Company in accordance with
Treas. Reg. ss. 1.338(h)(10)-l(f). Company and Sellers will calculate the gain
or loss, if any, resulting from the Election in a manner consistent with the
Allocations and will not take any position inconsistent with the Election or the
Allocations in any Tax Return or otherwise. Buyer will allocate the MADSP among
the assets of the Company and GEMC in a manner consistent with the Allocations
and will not take any position inconsistent with the Election or the Allocations
in any tax return or otherwise.
(c) Company, Sellers and Buyer agree that the Forms shall be filed
with the appropriate tax authorities not earlier than 60 days before the latest
date for the filing thereof. At least 120 days prior to the latest date for the
filing of each Form, Buyer shall prepare and submit to Company and Sellers a
draft of each Form. No party hereto shall file any Form unless it shall have
obtained the consent of the other party hereto, which consent shall not be
unreasonably withheld. On or prior to the 30th day after Companies' and Sellers'
receipt of a draft Form. Company shall deliver to the buyer either (A) its
consent to such filing or (B) a written notice specifying in reasonable detail
all disputed items and the basis therefor. If Buyer and Company and Sellers have
been unable to resolve their differences within 30 days after Buyers' receipt of
Sellers written notice of disputed items, any remaining disputed issues shall be
submitted to an independent accounting firm selected by Buyer, and reasonably
acceptable to Company and Sellers, to resolve in a final binding manner after
hearing the views of both parties. The fees and expenses of the accounting firm
shall be shared equally between Sellers and Buyer.
6.18 Hart-Scott-Rodino Act. Each of the Company, GEMC, the Sellers, Parent
and Buyer shall (a) prepare and file as promptly as practicable with the
Department of Justice and the Federal Trade Commission the notification and
report form, if any, required for the transactions contemplated hereunder by the
Hart-Scott-Rodino Act, including without limitation, a request for early
termination
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of the waiting period thereunder, and (b) respond promptly to inquiries, if any,
from the Federal Trade Commission or the Department of Justice in connection
with such filing. Buyer will pay all filing fees in connection with the filings
required by the Hart-Scott-Rodino Act and each party shall bear the expenses for
the preparation of their documentation for the filing.
6.19 Termination of the Phantom Stock Plan. Company is party to a phantom
stock plan entitled the "1993 Phantom Stock Plan" (the "Phantom Stock Plan"). To
the extent that the Phantom Stock Plan requires payments and distributions to be
made by reason of the transactions contemplated by this Agreement such payment
and distributions shall be made by Company on the Closing Date (the "Plan
Payments"). To the extent that the Plan Payments exceed $1,100,000, then
pursuant to Article 12 of this Agreement, Buyer and Company shall be held
harmless and shall be indemnified by Sellers with respect to the dollar amount
by which such Plan Payments exceed $1,100,000.
6.20 Monthly Financial Statements. Company and GEMC shall promptly provide
Buyer with internal monthly financial statements for the period beginning
September 1, 1996 through the Closing Date. Such financial statements shall
include without limitation, consolidated balance sheet, statements of income,
shareholders investment and cash flows.
6.21 Landlord Consent. Sellers shall, under the Realty Leases in which one
of the Sellers is landlord, consent to the transactions contemplated by this
Agreement without any modification in the terms of the Realty Leases, other than
as provided in Section 6.23 hereof, unless agreed to by the parties in writing.
Such consent shall be in writing and shall be in a form mutually satisfactory to
the parties.
6.22 Lease Extension. Sellers hereby grant to the Company an option to
extend, on the same terms and conditions, either or both of the terms of realty
leases relating to (a) the Company's principal office and (b) the warehouse,
each located in Greensboro (the "Greensboro Realty Leases") to December 31,
2003. The aforesaid option may only be exercised during the period commencing
with the Closing Date and ending with the six (6) month anniversary of such
date.
6.23 Cooperation with Rule 144A Financing. Company, GEMC and Sellers shall
promptly, prepare or cause to be prepared by the Company's accountants, such
financial statements and information as may be reasonably requested by Parent or
Buyer in connection with its efforts to obtain the Rule 144 Financing.
Additionally, Company, GEMC and Sellers shall provide such cooperation in
connection with such Rule 144A Financing as Parent and Buyer shall reasonably
request.
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6.24 Parent Guarantee. Parent hereby guarantees the performance by the
Buyer of its obligations under this Agreement, and after the Closing, the
performance of the Company under the Greensboro Realty Leases and the Consulting
Agreement.
6.25 ELC Acquisition Agreement. Macpherson and Buyer shall use diligent
good faith efforts to conclude the transactions as respects Embroidery Leasing
Corporation, a Georgia corporation, in accordance with the agreements attached
hereto as Exhibit F (the "ELC Acquisition Agreement").
6.26 Payment of Loans. On or prior to Closing, Sellers shall cause all
loans by Company and GEMC to the Sellers and Carolina Dynamo, Inc., to be paid
in full.
ARTICLE 7
CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions of Obligations of Buyer. The obligations of Buyer to effect
the Closing are subject to the satisfaction of the following conditions, unless
waived by Buyer:
(a) Representations and Warranties. The representations and
warranties of the Company, GEMC and Sellers set forth in this Agreement shall be
true and correct in all material respects (except for such representations and
warranties which are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true in all
respects) as of the Closing, except as otherwise contemplated by this Agreement,
and except for any inaccuracies that alone or taken together would not be
material and adverse to the financial condition of the Company taken as a whole.
(b) No Material Adverse Change. There shall have been no Material
Adverse Change in the Company or GEMC taken as a whole on or before the Closing
Date, and Buyer shall have received a certificate signed by an executive officer
of the Company and GEMC to such effect on the Closing Date.
(c) Performance of Obligations of the Company. The Company and GEMC
and the Seller, shall have performed in all respects all obligations and
covenants required to be performed by them under this Agreement prior to the
Closing Date. Buyer shall have received a certificate signed by an executive
officer of the Company and GEMC to such effect.
(d) Governmental Approvals; Consents. Buyer shall have received duly
executed copies of all authorizations, consents, permits, approvals, licenses or
orders from any Governmental Agency or other third party required to be obtained
by Seller, GEMC or the
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Company for the lawful consummation of the transactions contemplated by this
Agreement in form and substance reasonably satisfactory to Buyer and all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expiration of waiting periods imposed by any Government Agency
necessary for the consummation of the transactions contemplated by this
Agreement, including without limitation, as respects the Hart-Scott-Rodino Act,
shall have been filed, occurred or been obtained, as required by this Agreement.
(e) Opinion of the Company's Counsel. Buyer shall have received an
opinion dated the Closing Date of counsel to the Company, GEMC and Sellers
addressed to Buyer in the form attached hereto as Exhibit C.
(f) Financial Items. The 1996 Audited Statement shall provide that
as of September 30, 1996 combined Company and GEMC: (i) "sales" shall be not
less than $40,582,000, (ii) "income before taxes" shall be not less than
$911,000, (iii) "net income" shall be not less than $876,000, (iv)
"shareholders' equity" shall be not less than $10,599,000 and (v) "indebtedness
for borrowed money" shall be not greater than $5,406,000]. For purposes of the
foregoing the terms "sales", "income before taxes", "net income", "shareholder
equity" and "indebtedness for borrowed money" shall be determined in accordance
with GAAP.
(g) No Action or Proceedings. No statute, rule, regulations, decree,
order or injunction shall have been promulgated, enacted or entered by any
Governmental Agency or judicial authority and be in effect which would prohibit
the consummation of the transactions contemplated by this Agreement and no
action or proceeding by or before any court or other Governmental Agency shall
have been instituted or threatened by any party to restrain or prohibit Seller,
GEMC or the Company from consummating the transactions contemplated by this
Agreement.
(h) Officer's Certificate. Buyer shall have received a certificate,
executed by an executive officer of the Company and GEMC, dated the Closing
Date, reasonably satisfactory in form and substance to the Company and GEMC and
its counsel, certifying as to the satisfaction of the conditions set forth in
Section 7.1(a) hereof.
(i) Secretary's Certificate. Buyer shall have received a certificate
dated the Closing Date, from the Secretary or Assistant Secretary of the Company
and GEMC with respect to the accuracy and completeness of the resolutions
adopted by the Board of Directors of the Company and GEMC authorizing this
Agreement and the consummation of the transactions contemplated hereby.
(j) Certificates of Existence. Buyer shall have received
certificates issued by appropriate Governmental Agencies
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evidencing, as of a recent date, the existence and tax status of the Company and
GEMC in the jurisdictions in which it is incorporated; and as of a date not more
than five (5) days prior to the Closing Date, telegrams or facsimile copies, if
available, issued by the appropriate Governmental Agencies with respect to the
good standing and tax status of the Company and GEMC in such jurisdictions.
(k) Certified Charter Documents. Buyer shall have received a copy of
the Articles of Incorporation and all amendments thereto of the Company and
GEMC, certified by the appropriate Governmental Agencies.
(l) By-Laws. Buyer shall have received a copy of the By-Laws of the
Company and GEMC as amended through the Closing Date, certified by the Company's
and GEMC's secretary.
(m) Audited Financials. Buyer shall have received copies of the 1996
Audited Statement.
(n) Other Closing Deliveries. Buyer shall have received all
documents required to be delivered to Buyer by Sellers, GEMC and the Company
pursuant to the terms of this Agreement.
(o) Rule 144A Debt Financing. Buyer and Parent shall have
successfully completed and closed (with cash available) prior to Closing, a Rule
144A securities offering to, among other things, raise a minimum of $75,000,000
in cash through the issuance of Senior Unsecured Notes to refinance the existing
debt of the Parent and Buyer and to finance the transactions contemplated herein
(the "Rule 144A Financing"). The terms, provisions and requirements of such Rule
144A Financing and the securities offering in connection with same shall be
exclusively determined by Parent, Buyer, their attorneys, accountants and
underwriters in their sole discretion.
(p) Assignment of Leases. The Landlord's consents to the assignment
of the Realty Leases is obtained without cost or expense to Buyer and without
any change in the provision of the Realty Leases, except as provided in Section
6.23 hereof with respect to the Greensboro Realty Leases.
(q) Consulting Agreement; Employment Agreement. Buyer shall have
received the executed employment agreements of certain key employees of the
Company listed on Schedule 7.1(q) as well as the executed consulting agreement
of Macpherson.
(r) Legal Action. No regulation, statute, temporary restraining
order, preliminary injunction or permanent injunction or other order preventing
the consummation of the Closing shall have been issued by any Governmental
Agency and remain in effect, and no litigation shall be pending the ultimate
resolution of which is likely to (i) result in the issuance of such an order or
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injunction, or the imposition against the Parent, Buyer, Company, GEMC or
Sellers of substantial damages if the Closing is consummated, (ii) prohibit
Buyer' ownership or operation of all or a material portion of the business
rights of the Company, GEMC or Buyer, or to compel Buyer, GEMC or the Company to
dispose of or hold separately all or a material portion of the business or
assets of the Company or GEMC as a result of the Closing, or (iii) render
Parent, Buyer, GEMC or the Company unable to consummate the Closing. In the
event any such order or injunction shall have been issued, Sellers, Company and
GEMC agree to use their reasonable efforts to have any such injunction lifted.
(s) ELC Acquisition Agreement. A closing of all transactions
contemplated by the ELC Acquisition Agreement.
(t) Barudan Amendment. Buyer shall have received a fully executed
copy of the Barudan Amendment.
(u) Payment of Loans. The repayment of the loans referred to in
Section 6.26 shall have been made.
7.2 Conditions of Obligation of the Sellers, Company and GEMC. The
obligation of the Sellers, Company and GEMC to effect the Closing is subject to
the satisfaction of the following conditions unless waived by the Sellers,
Company and GEMC:
(a) Representations and Warranties. The representations warranties
of Buyer and Parent, set forth in this Agreement shall be true and correct in
all material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true in all respects) as of the date of
this Agreement, except as otherwise contemplated by this Agreement, and except
for any inaccuracies that alone or taken together would not be material and
adverse to the business condition of Buyer and Parent taken as a whole.
(b) Performance of Obligations of Buyer and Parent. Each of Buyer
and Parent shall have performed in all material respects all obligations and
covenants required to be performed by them under this Agreement prior to the
Closing Date, except for such failures of performance that are not material and
adverse to the business condition of Buyer or Parent, and Sellers shall have
received a certificate signed by an executive officer of each of Buyer and
Parent to such effect.
(c) Governmental Approvals; Consents. The Company, GEMC and Sellers
shall have received duly executed copies of all authorizations, consents,
permits, approvals, licenses or orders from any Governmental Agency or other
third party required to be obtained by Buyer or Parent for the lawful
consummation of the transactions contemplated by this Agreement in form and
substance
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reasonably satisfactory to the Company, GEMC and Sellers and all authorizations,
consents, orders or approvals of, or declarations or filings with, or expiration
of waiting periods imposed by any Government Agency necessary for the
consummation of the transactions contemplated by this Agreement, including
without limitation, as respects the Hart-Scott-Rodino Act, shall have been
filed, occurred or been obtained, as required by this Agreement.
(d) Opinion of Counsel to Buyer and Parent. The Sellers shall have
received an opinion dated the Closing Date of counsel to the Buyer and Parent
addressed to Sellers in the form attached hereto as Exhibit G.
(e) No Action or Proceedings. No statute, rule, regulations, decree,
order or injunction shall have been promulgated, enacted or entered by any
Governmental Agency or judicial authority and be in effect which would prohibit
the consummation of the transactions contemplated by this Agreement and no
action or proceeding by or before any court or other Governmental Agency shall
have been instituted or threatened by any party to restrain or prohibit Buyer or
Parent from consummating the transactions contemplated by this Agreement.
(f) Officer's Certificate. Seller shall have received a certificate,
executed by executive officers of the Buyer and Parent, dated the Closing Date,
reasonably satisfactory in form and substance to the Company, GEMC and Sellers
and their counsel, certifying as to the satisfaction of the conditions set forth
in Section 7.2(a) hereof.
(g) Secretary's Certificate. Sellers shall have received a
certificate dated the Closing Date, from the Secretary or Assistant Secretary of
the each of Buyer and Parent with respect to the accuracy and completeness of
the resolutions adopted by the Board of Directors of the Buyer and Parent
authorizing this Agreement and the consummation of the transactions contemplated
hereby.
(h) Good Standing Certificates. Sellers shall have received
certificates issued by appropriate Governmental Agencies evidencing, as of a
recent date, the good standing of each of Buyer and Parent in the jurisdictions
in which it is incorporated.
(i) Certified Charter Documents. Sellers shall have received a copy
of the Certificates of Incorporation and all amendments thereto of Buyer and
Parent, certified by the appropriate Governmental Agencies.
(j) Other Closing Deliveries. Company, GEMC and Sellers shall have
received all documents required to be delivered to them by Buyer and Parent
pursuant to the terms of this Agreement.
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(k) Legal Action. No regulation, statute, temporary restraining
order, preliminary injunction or permanent injunction or other order preventing
the consummation of the Closing shall have been issued by any Governmental
Agency and remain in effect, and no litigation shall be pending the ultimate
resolution of which is likely to (i) result in the issuance of such an order or
injunction, or the imposition against the Parent, Buyer, Company, GEMC or
Sellers of substantial damages if the Closing is consummated, (ii) prohibit
Buyer' ownership or operation of all or a material portion of the business
rights of the Company, GEMC or Buyer, or to compel Buyer, GEMC or the Company to
dispose of or hold separately all or a material portion of the business or
assets of the Company or GEMC as a result of the Closing, or (iii) render
Parent, Buyer, GEMC or the Company unable to consummate the Closing. In the
event any such order or injunction shall have been issued, Sellers, Company and
GEMC agree to use its reasonable efforts to have any such injunction lifted.
ARTICLE 8
THE CLOSING
8.1 The Closing. The Closing will take place at the offices of Buyer's
attorneys Waters, McPherson, McNeill, P.C., 300 Lighting Way, Secaucus, New
Jersey 07096, at 10:00 a.m. local time or at Buyer's election in New York, New
York on such date as is specified by the Buyer in writing to the Company, GEMC
and the Sellers; provided, that (i) such date is at least three business days
after the date of such written notice and (ii) such date is not earlier than
January 3, 1997 and not later than February 1, 1997 (the "Closing Date"). All
actions at the Closing will be deemed to have taken place simultaneously and
none of such actions will be considered completed until each such action have
been completed or waived.
8.2 Closing Deliveries by the Company, GEMC and Sellers. At the Closing,
the Company, GEMC and Sellers shall deliver to Buyer:
(a) Certificates of GEMC and Company respectively dated the Closing
Date signed by an executive officer required to be delivered pursuant to Section
7.2(a).
(b) Certificates of the Company and GEMC dated the Closing Date
signed by the Secretary or Assistant Secretary certifying as to the Articles of
Incorporation and Bylaws, actions taken by its board of directors and
stockholders in connection with the transactions contemplated by this Agreement
and the signature and incumbency of each officer executing on behalf of the
Company and GEMC any of the transaction documents or any other instruments
delivered pursuant thereto as required to be delivered pursuant to Section
7.2(j).
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(c) A certificate dated the Closing Date signed by the Chief
Financial Officer of the Company certifying that the Company is not a "United
States real property holding company" as defined in Section 897(c)(2) of the
Code.
(d) Certificate of Existence and other certificates and telegrams
required to be delivered pursuant to Section 7.2(k).
(e) Resolutions for both the Company and GEMC certified to by the
Corporate secretary authorizing actions taken by the Company pursuant to this
Agreement.
(f) Stock certificates representing the Company Shares and the GEMC
Shares;
(g) The opinion of the Company's, GEMC's and Seller's counsel
required to be delivered pursuant to Section 7.2(e);
(h) The resignation of the directors and officers of the Company and
of GEMC listed in Schedule 8.2 hereof;
(i) The certified copies of the Certificate of Incorporation for the
Company and GEMC required to be delivered pursuant to Section 7.2(1);
(j) The stock books, stock ledgers, minute books, corporate seals
and financial records and statements of the Company and GEMC;
(k) The copies of the Bylaws for the Company and for GEMC required
to be delivered pursuant to Section 7.2(m);
(l) Executed Employment Agreements in the form attached hereto as
Exhibit D;
(m) Executed Consulting Agreement for Macpherson in the form
attached as Exhibit E;
(n) All consents pursuant to Section 6.5 and 6.22;
(o) The 1996 Audited Statement; and
(p) The fully executed Barudan Amendment.
8.3 Closing Deliveries by Buyer and Parent. At the Closing, Buyer and
Parent will deliver to the Company, GEMC and/or the Sellers, as appropriate:
(a) Certificates dated the Closing Date of executive officers of
Buyer and Parent required to be delivered pursuant to Section 7.2(a);
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(b) Certificate dated the Closing Date signed by the Secretary or
Assistant Secretary of Buyer and by the Secretary or Assistant Secretary of
Parent, certifying as to their respective certificate of incorporation and
bylaws, actions taken by their respective board of directors in connection with
the transactions contemplated by this Agreement and the signature and incumbency
of the officers of Buyer and Parent executing on their behalf any of the
transaction documents pursuant to Section 7.2(g);
(c) Good Standing and other certificates and telegrams pursuant to
Section 7.2(h);
(d) Resolutions of Buyer and Parent authorizing actions taken by
Buyer and Parent pursuant to this Agreement;
(e) Certified copies of the Certificate of Incorporation of Buyer
and Parent pursuant to Section 7.2(j);
(f) The opinion of counsel to Buyer and Parent required to be
delivered pursuant to Section 7.2(d); and
(g) Purchase Price pursuant to Section 2.2.
ARTICLE 9
DEFAULT; REMEDIES
9.1 Sellers/Company Breach. In the event Sellers, GEMC and/or Company
shall be in default hereunder, prior to Closing, Buyer shall be entitled to all
of its remedies available at law or in equity including without limitation the
right to specific performance.
9.2 Buyer/WG, Inc. Breach. In the event Buyer shall be in default
hereunder, prior to Closing, Sellers', GEMC's and Company's sole remedy shall be
entitlement to Five Hundred Thousand ($500,000.00) Dollars as and for liquidated
damages. The parties hereto stipulate and agree that the measurement of such
damages in such event would be difficult if not impossible to ascertain.
9.3 Jurisdiction. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New Jersey, without regard to
principles of conflicts of law. Any and all suits, legal actions or proceedings
against any party hereto arising out of this Agreement shall be brought in any
United States Federal court sitting in New Jersey or, any other court of
appropriate jurisdiction in New Jersey and each party hereby submits to and
accepts the exclusive jurisdiction of such courts for the purpose of such suits,
legal action or proceedings. Each party hereto hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any such
suit,
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legal action or proceeding in any such court and hereby further waives any claim
that any suit, legal action or proceeding brought in any such court has been
brought in an inconvenient forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, without regard
to the principles thereof regarding conflict of laws.
ARTICLE 10
TERMINATION
10.1 Termination. This Agreement may be terminated at any
time prior to the Closing Date, as follows:
(a) by mutual agreement of Buyer and the Company, GEMC and Sellers;
(b) by Buyer, if there has been a material breach by the Company,
GEMC or Sellers of any representation, warranty, covenant or agreement set forth
in this Agreement on the part of the Company, GEMC or Seller;
(c) by the Company, GEMC and Sellers if there has been a material
breach by Buyer or Parent of any representation, warranty, covenant or agreement
set forth in this Agreement on the part of Buyer;
(d) by Buyer or Sellers if the Closing shall not have taken place by
February 1, 1997;
(e) by Buyer if the Rule 144A Financing is not completed by the
Closing Date as same may be extended, or, if at any time prior thereto, Buyer in
its reasonable judgment, believes that the Rule 144A Financing will not be
successfully completed prior to February 1, 1997;
(f) by Buyer, Sellers, GEMC or the Company if any injunction,
directive, or order of a competent Governmental Agency preventing the Closing
shall have become issued, final and nonappealable or, in either party's
reasonable, good faith judgment, shall render unlikely within a reasonable
period of time the consummation of the Closing on the terms contemplated hereby;
(g) by Buyer, Sellers, GEMC or the Company if any Governmental
Agency shall have issued a temporary restraining order, preliminary injunction
or permanent injunction or other order preventing the consummation of the
Closing or any litigation shall be pending, the ultimate resolution of which is
likely to (i) result in the issuance of such an order or injunction, or the
imposition against the Company, GEMC, Sellers or Buyer of substantial damages if
the Closing is consummated, (ii) prohibit
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Buyer' ownership or operation of all or a material portion of its business, or
to compel Buyer to dispose of or hold separate all or a material portion of its
respective business or assets, as a result of the Closing, (iii) render Buyer,
the Company or GEMC unable to consummate the Closing. In the event any such
order or injunction shall have been issued, each party agrees to use its
reasonable efforts to have any such injunction lifted.
(h) by Buyer if the conditions to Closing set forth in Section 7.1
are not met; and
(i) by the Company, GEMC and Sellers if the conditions to Closing
set forth in Section 7.2 are not met.
10.2 Liability for Termination. Except as otherwise specifically set forth
in this Agreement in Section 10.3 below, in the event of a termination of this
Agreement pursuant to any of the events or conditions set forth in this Section,
no party shall be liable for any costs, charges, expenses or fees of any other
party. In addition, in no event will any party to this Agreement be liable for
special, consequential or indirect damages relating to or arising out of this
Agreement, except for such damages arising out of actual fraud or intentional
misrepresentation.
10.3 Termination Liability. In the event: (a) Buyer terminates this
Agreement pursuant to Section 10.1(h) above by reason of Company's, GEMC's or
Seller's breach of any representation, warranty or covenant set forth in
Articles 3, 4 and 6 above, or (b) Company, GEMC and Sellers terminate this
Agreement pursuant to Section 10.1(i) above by reason of Buyer's breach of any
representation, warranty or covenant set forth in Articles 5 and 6 above, then
in such event the terminating party shall be entitled to its remedies as set
forth in Article 9 hereof.
10.4 Authorization. Where action is taken to terminate this Agreement
pursuant to this Section, it shall be sufficient authorization for such action
to be authorized by the Board of Directors of the party taking such action.
10.5 Employees. In the event the transactions contemplated by this
Agreement are not consummated, Buyer and Parent hereto agree that neither they,
nor any of their affiliates, will solicit or hire any person employed by the
Company or GEMC for a period of two (2) years from the date of this Agreement.
10.6 Survival of Certain Provisions. In the event of termination of this
Agreement as provided in this Section, this Agreement shall forthwith become
void; provided, however, that the agreements contained or referred to in
Sections 3.28, 5.4, 6.8, 6.9 and 10.5 will survive. Termination of this
Agreement shall not limit the liability of any party except as otherwise
provided in this Agreement.
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ARTICLE 11
INDEMNIFICATION
11.1 Indemnification by the Sellers.
(a) From and after the date hereof and after the Closing Date
subject to the limitations set forth in Section 12.4 hereof, the Sellers agree
to indemnify and hold harmless Buyer from and against any and all losses,
liabilities, damages, deficiencies, assessments, judgments, costs or expenses
(including, without limitation, interest penalties and reasonable attorneys'
fees and disbursements) (collectively "Claims") arising out of or based upon the
breach or inaccuracy of any representation or warranty contained herein made by
the Company, GEMC or Sellers, or the non-performance or breach by the Company,
GEMC or Sellers of any covenant, term or provision to be performed by them or
any of them hereunder. Sellers' liability under this Article 12 shall be joint
and several.
(b) Buyer's right to indemnification as provided in this Section
12.1 shall not be eliminated, reduced or modified in any way as a result of the
fact that Buyer has been provided with access, as requested by Buyer, to
officers and employees of the Company and GEMC and such of the Company's and
GEMC's books, documents, contracts and records as has been provided to Buyer in
response to Buyer's requests.
11.2 Conditions of Indemnification by the Sellers.
(a) Buyer (the "Indemnified Party") shall notify the party or
parties liable for such indemnification (the "Indemnifying Party") in writing of
any claim which the Indemnified Party has determined has given or could give
rise to a right of indemnification under this Agreement. Such notice shall be
given within a reasonable (taking into account the nature of the Claim) period
of time after the Indemnified Party has actual knowledge thereof. The
Indemnifying Party shall satisfy its obligations under this Article 11 within
twenty (20) days after receipt of subsequent written notice from the Indemnified
Party if an amount is specified therein, or promptly following receipt of
subsequent written notice or notices specifying the amount of such Claim or
additions thereto; provided, however, that for so long as the Indemnifying Party
is in good faith defending a Claim pursuant to Section 11.1 hereof, its
obligation to indemnify the Indemnified Party with respect thereto shall be
suspended.
(b) If the facts giving rise to any such indemnification involve any
actual, threatened or possible Claim or demand by any person not a party to this
Agreement against the Indemnified Party, the Indemnifying Party shall be
entitled to contest or defend such Claim or demand at its expense and through
counsel of its own
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choosing, which counsel shall be reasonably acceptable to the Indemnified Party,
if the Indemnifying Party gives written notice of its intention to assume the
contest and defense of such Claim or demand to the Indemnified Party as soon as
practicable, but in no event more than thirty (30) days after receipt of the
notice of Claim. The Indemnified Party shall have the obligation to cooperate in
the defense of any such Claim or demand and the right, at is own expense, to
participate in the defense of any Claim. So long as the Indemnifying Party is
defending in good faith any such Claim or demand asserted by a third party
against the Indemnified Party, the Indemnified Party shall not settle or
compromise such Claim or demand. The Indemnifying Party shall have the right to
settle or compromise any such claim or demand without consent of the Indemnified
Party at any time utilizing its own funds to do so if in connection with such
settlement or compromise the Indemnified Party is fully released by the third
party and is paid in full any indemnification amounts due hereunder. In the
event the Indemnified Party desires to settle any such claim which the
Indemnifying Party has determined not to contest, the Indemnified Party shall
advise the Indemnifying Party in writing of the amount it proposes to pay in
settlement thereof (the "Proposed Settlement"). If such Proposed Settlement is
unsatisfactory to the Indemnifying Party, it shall have the right, at its
expense, to contest such Claim by giving written notice of such election to the
Indemnified Party within thirty (30) days after the Indemnifying Party's receipt
of the advice of the Proposed Settlement. If the Indemnifying Party does not
deliver such written notice within thirty (30) days after receipt of such
advice, or if the Indemnifying Party, after having given such notice to the
Indemnified Party, fails to defend, settle or pay such Claim, the Indemnifying
Party may offer the Proposed Settlement to the third party making such Claim. If
the Proposed Settlement is not accepted by the party making such Claim, any new
Proposed Settlement figure which the Indemnified Party may wish to present to
the party making such Claim shall first be presented to the Indemnifying Party
who shall have the right, subject to the conditions hereinabove set forth in
this Section 12.2(b), to contest such Claim. The Indemnified Party shall make
available to the Indemnifying Party or its agents all records and other
materials in the Indemnified Party's possession, or obtained by the Indemnified
Party without undue burden, reasonably required by it for its use in contesting
any third party claim or demand and shall otherwise cooperate, at the expense of
the Indemnifying Party, in the defense thereof in such manner as the
Indemnifying Party may reasonably request. Whether or not the Indemnified Party
elects to defend such Claim or demand, the Indemnified Party shall have no
obligation to do so.
11.3 Obligation of Buyer and Parent to Indemnify. Buyer and Parent,
jointly and severally, agree to indemnify, defend and hold harmless the Company,
GEMC and Sellers from and against any Claims arising out of or based upon the
breach or inaccuracy of any
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representation or warranty contained herein by Buyer or Parent or the
nonperformance or breach by Buyer or Parent of any covenant, term or provision
to be performed by parties hereunder.
11.4 Limitations on Indemnification.
The indemnification provided for in this Article shall be subject to the
following limitations:
(i) No party shall be obligated to pay any amounts for
indemnification under this Article 11, until the aggregate amount for
which all items and matters of indemnification have been claimed exceeds
One Hundred Thousand Dollars ($100,000) (the "Basket Amount"), whereupon
the Indemnifying Party shall be obligated to pay in full all amounts in
excess of such Basket Amount due pursuant to this Article, provided
however, that in no event shall the Indemnifying Party be required to pay
or be liable under this Article for any Claims if, and to the extent that,
as a result thereof the aggregate of all such indemnification payments
with respect to Claims shall have exceeded Two Million Five Hundred
Dollars ($2,500,000) ("Indemnity Limit").
(ii) The Basket Amount and Indemnity Limit shall not apply to
Sections 3.2, 3.3 and 4.1 hereof.
(iii) The Indemnifying Party shall not be obligated to pay any
amounts for indemnification hereunder relating to a Claim to the extent of
(A) any tax benefit to the Indemnified Party therefrom, (B) any insurance
proceeds and any indemnity, contribution or similar payment paid to the
Indemnified Party or any affiliated corporations from any third party with
respect thereto, and (C) any reserves provided for the Claim in question
in the 1996 audited Financial Statements.
11.5 Escrow for Indemnity.
(a) At Closing, Buyer shall deposit Five Hundred Thousand ($500,000)
Dollars (the "Escrow Amount") of the Purchase Price monies with Buyer's
attorneys, Waters, McPherson, McNeill, P.C., 300 Lighting Way, Secaucus, New
Jersey 07096 (the "Escrow Agent") to be held in escrow pursuant to the terms of
an Escrow Agreement, in the form attached hereto as Exhibit H.
(b) Escrow Agent shall deposit the Escrow Amount in an interest
bearing trust account at a federal savings or commercial bank located in New
Jersey and reasonably acceptable to Sellers. Escrow Agent shall have no
liability should the bank selected subsequently become insolvent.
- 47 -
<PAGE>
(c) In the event that an Indemnification Claim(s) is made as to the
Escrow Amount same shall be administered in accordance with the procedures set
forth in the Escrow Agreement.
11.6 Arbitration of Indemnity Disputes.
(a) Any dispute between the parties hereto not involving third
parties, with respect to this Article shall be resolved through binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.
(b) The arbitrator or arbitrators shall be selected as follows: In
the event Buyer and Sellers agree on one arbitrator, the arbitration shall be
conducted by such arbitrator. In the event Buyer and Sellers do not so agree,
they shall each select one independent, qualified arbitrator and these two
arbitrators shall select a third arbitrator. Buyer reserves the right to reject
any individual arbitrator who shall be employed by or affiliated with a
competing organization.
(c) The arbitrators shall be retired federal court judges or state
court appellate level judges and shall also have ten (10) years of commercial
litigation experience.
(d) The arbitrator or arbitrators, as the case may be, shall act by
majority vote and shall be able to decree any and all relief of an equitable
nature and shall also be able to award damages, with or without an accounting,
costs, and reasonable attorneys' fees. The arbitrators shall have no authority
to award punitive damages or any other damages not measured by the prevailing
party's actual damages. The arbitrators shall specify the basis for any damage
award and the types of damages awarded. The decision of the arbitrators shall be
in writing, shall set forth the basis for their decision with respect to all
matters and shall be final and binding on the parties and may be entered and
enforced in any court of competent jurisdiction by either party. The award
rendered by the arbitrators shall include costs of arbitration, reasonable
attorneys' fees and reasonable costs for expert and other witnesses, and
judgment on such award may be entered in any court having jurisdiction thereof.
(e) All arbitration proceedings shall be conducted in Newark, New
Jersey.
11.7 Indemnity Limitations Periods. The obligations of Company, GEMC and
Sellers pursuant to this Article 12, shall expire on the second anniversary date
of the Closing Date except as to the representations and warranties of Company,
GEMC and Sellers set forth in Sections 2.3, 3.1, 3.2, 3.3, 3.7, 3.28, 4.1, 4.2,
6.14 and 6.16 which shall survive until the expiration of the applicable statute
of limitations period.
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<PAGE>
ARTICLE 12
GENERAL PROVISIONS
12.1 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
12.2 Extension: Waiver. At any time prior to the Closing, each of the
Sellers and Buyer to the extent legally allowed, (a) may extend the time for the
performance of any of the obligations or other acts of the other, (b) may waive
any inaccuracies in the representations and warranties made to it contained
herein or in any document delivered pursuant hereto, and (c) may waive
compliance with any of the agreements or conditions for the benefit of it
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. A waiver by any party of any provision hereof or
breach hereof shall not operate or be construed as the waiver of any other
provision or any subsequent breach.
12.3 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given (a) on the same day if delivered personally,
(b) three business days after being mailed by registered or certified mail
(return receipt request) as determined by reference to the postmark, (c) one
business day if delivered by an overnight delivery service, or (d) on the same
day if sent by facsimile, confirmation received, to the parties at the following
addresses and facsimile numbers (or at such other address or number for a party
as shall be specified by like notice):
If to Buyer or Parent, to:
Willcox & Gibbs, Inc.
900 Milik Street
Carteret, New Jersey 07008
Attention: John K. Ziegler
Telephone: (908) 541-6255
Facsimile: (908) 541-6249
with copy (which will not constitute notice) to:
Waters, McPherson, McNeill, P.C.
300 Lighting Way
Secaucus, New Jersey 07096
Attention: Charles J. Harriman, Esq.
Telephone: (201) 863-4400
Facsimile: (201) 863-2866
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<PAGE>
if to the Company, GEMC or the Sellers to:
Macpherson Meistergram, Inc.
3517 West Wendover Avenue
Greensboro, North Carolina
Attention: Mr. Neil A. Macpherson
Telephone: (910) 294-5165
Facsimile: (910) 855-0106
with a copy (which will not constitute notice) to:
Smith Helms Mulliss & Moore, L.L.P.
300 North Greene Street
Suite 1400
Greensboro, North Carolina 27401
Attention: E. Kent Auberry, Esq.
Telephone: (910) 378-5200
Facsimile: (910) 379-9558
12.4 Interpretation. When a reference is made in this agreement to
Sections or Exhibits, such references shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The words "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation". The headings contained in this Agreement are for referenced
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
12.5 Entire Agreement. This Agreement and the documents and instruments
and other agreements among the parties delivered pursuant hereto constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and are not intended to
confer upon any other person any rights or remedies hereunder except as
otherwise expressly provided herein.
12.6 No Transfer. This Agreement and the rights and obligations set forth
herein may not be transferred or assigned by operation by law or otherwise
without the consent of each party hereto except by Buyer to any of its
affiliates or subsidiaries, provided that any such affiliate or subsidiary is
owned 100% directly by Buyer. This agreement is binding upon and will inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
12.7 Severability. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto. The parties further agree to replace such void or
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<PAGE>
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
12.8 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law or equity on
such party; and the exercise of any one remedy will not preclude the exercise of
any other.
12.9 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
12.10 Variations in Pronouns. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the context may
require.
12.11 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have signed this Stock Purchase Agreement as of
the date first written above.
GEOFFREY E. MACPHERSON WG APPAREL, INC.
CANADA, INC.
By: /s/ Neil Macpherson By: /s/ John K. Ziegler
---------------------------- ------------------------
NEIL MACPHERSON JOHN K. ZIEGLER
Chief Executive Officer Chief Executive Officer
WILLCOX & GIBBS, INC.
By: /s/ John K. Ziegler
-------------------------
JOHN K. ZIEGLER
Chief Executive Officer
MACPHERSON MEISTERGRAM, INC.
By: /s/ Neil Macpherson
---------------------------
NEIL MACPHERSON
Chief Executive Officer
/s/ Neil Macpherson
- -----------------------------------
NEIL MACPHERSON, Individually
/s/ Bridget Macpherson
- -----------------------------------
BRIDGET MACPHERSON, Individually
/s/ Bridget M. Macpherson
- -----------------------------------
BRIDGET M. MACPHERSON AS TRUSTEE UNDER THE MARK EDWARD MACPHERSON TRUST
AGREEMENT DATED FEBRUARY 1, 1982
/s/ Ouida B. Brown
- -----------------------------------
OUIDA B. BROWN AS TRUSTEE UNDER THE MARK EDWARD MACPHERSON TRUST NO. 2
/s/ Bridget M. Macpherson
- -----------------------------------
BRIDGET M. MACPHERSON AS TRUSTEE UNDER THE KATHERINE EMMA MACPHERSON
TRUST AGREEMENT DATED FEBRUARY 1, 1982
/s/ Ouida B. Brown
- -----------------------------------
OUIDA B. BROWN AS TRUSTEE UNDER THE KATHERINE EMMA MACPHERSON TRUST NO. 2
/s/ Neil Macpherson
- -----------------------------------
NEIL A. MACPHERSON AS TRUSTEE UNDER THE NICHOLAS IAN MACPHERSON TRUST
AGREEMENT
/s/ Ouida B. Brown
- -----------------------------------
OUIDA B. BROWN AS TRUSTEE UNDER THE NICHOLAS IAN MACPHERSON TRUST NO. 2
- 52 -
<PAGE>
EXHIBIT 3.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"WG, INC.", CHANGING ITS NAME FROM "WG, INC." TO "WILLCOX & GIBBS, INC.", FILED
IN THIS OFFICE ON THE TWENTY-SIXTH DAY OF DECEMBER, A.D. 1995, AT 10 O'CLOCK
A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY
RECORDER OF DEEDS FOR RECORDING.
AUTHENTICATION:
DATE:
<PAGE>
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
WG, INC.
(a Delaware Corporation)
WG, INC., A CORPORATION ORGANIZED AND EXISTING UNDER AND BY VIRTUE OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE (THE "CORPORATION") HEREBY
CERTIFIES AS FOLLOWS:
1. THE CORPORATION WAS ORIGINALLY INCORPORATED UNDER THE NAME WG, INC.,
ON MAY 13, 1994. A RESTATED CERTIFICATE OF INCORPORATION WAS FILED ON JULY 12,
1994.
2. THE BOARD OF DIRECTORS OF THE CORPORATION DULY ADOPTED RESOLUTIONS
SETTING FORTH THE TEXT OF THE SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF THE CORPORATION SET FORTH BELOW, DECLARING THE ADVISABILITY OF
ITS ADOPTION.
3. THEREAFTER, IN LIEU OF A MEETING AND VOTE, THE STOCKHOLDERS OF THE
CORPORATION GAVE WRITTEN CONSENT TO SAID SECOND AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION IN ACCORDANCE WITH SECTION 228 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE.
4. SAID SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION WAS DULY
ADOPTED IN ACCORDANCE WITH THE APPLICABLE PROVISIONS OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE.
5. THE TEXT OF SAID SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION IS AS FOLLOWS:
FIRST: THE NAME OF THE CORPORATION IS WILLCOX & GIBBS, INC.
SECOND: THE ADDRESS OF THE CORPORATION'S REGISTERED OFFICE IN THE STATE
OF DELAWARE IS 1013 CENTRE ROAD, CITY OF WILMINGTON, COUNTY OF NEW CASTLE, STATE
OF DELAWARE, AND THE NAME OF ITS REGISTERED AGENT THEREAT IS THE PRENTICE-HALL
CORPORATION SYSTEM, INC.
<PAGE>
2
THIRD: THE PURPOSE OF THE CORPORATION IS TO ENGAGE IN ANY LAWFUL ACT OR
ACTIVITY FOR WHICH A CORPORATION MAY BE ORGANIZED UNDER THE DELAWARE GENERAL
CORPORATION LAW.
FOURTH: THE TOTAL NUMBER OF SHARES OF ALL CLASSES OF STOCK WHICH THE
CORPORATION SHALL HAVE AUTHORITY TO ISSUE IS 2,000,000, CONSISTING OF 1,500,000
SHARES OF CLASS A COMMON STOCK, NO PAR VALUE PER SHARE (HEREINAFTER REFERRED TO
AS "CLASS A COMMON STOCK"), 250,000 SHARES OF CLASS B COMMON STOCK, NO PAR VALUE
PER SHARE (HEREINAFTER REFERRED TO AS "CLASS B COMMON STOCK"), AND 250,000
SHARES OF CLASS C COMMON STOCK, NO PAR VALUE PER SHARE (HEREINAFTER REFERRED TO
AS "CLASS C COMMON STOCK", AND TOGETHER WITH THE CLASS A COMMON STOCK AND THE
CLASS B COMMON STOCK, THE "COMMON STOCK"). ALL SHARES OF COMMON STOCK SHALL BE
IDENTICAL AND WILL ENTITLE THE HOLDERS THEREOF TO THE SAME RIGHTS AND
PRIVILEGES, EXCEPT AS OTHERWISE PROVIDED HEREIN. THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, IF
ANY, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF EACH CLASS OF STOCK
SHALL BE GOVERNED BY THE FOLLOWING PROVISIONS:
1. VOTING RIGHTS. Each registered holder of Class A Common Stock and
Class B Common Stock shall be entitled to one vote for each share of such stock
held by such holder. Except as required by law, the registered holders of Class
A Common Stock and Class B Common Stock shall vote together as a class on all
matters submitted to a vote as stockholders of the Corporation. The holders of
shares of Class C Common Stock shall not be entitled to vote upon or express
consent or dissent to any corporate action of the Corporation, except as
otherwise expressly provided by law. The number of authorized shares of Class A
Common Stock may be increased or decreased without a vote of the Class A Common
Stock, Class B Common Stock or Class C Common Stock voting as a separate class.
2. DIVIDENDS. The holders of shares of Common Stock shall be entitled to
receive, when and if declared by the Board of Directors, out of the assets of
the Corporation which are by law available, therefor, dividends payable either
in cash, in stock or otherwise. Any dividend or distribution on the Common
Stock shall be payable on shares of Common Stock ratably;
<PAGE>
3
PROVIDED, HOWEVER, that in the case of dividends payable in shares of Common
Stock, or options, warrants or rights to acquire shares of such Common Stock, or
securities convertible into or exchangeable for shares of such Common Stock, the
shares, options, warrants, rights or securities so payable shall be payable in
shares of, or options, warrants or rights to acquire, or securities convertible
into or exchangeable for, Common Stock of the same class upon which the dividend
or distribution is being paid.
3. LIQUIDATION. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation, the
holders of shares of all classes of Common Stock shall be entitled to share
ratably in the remaining net assets of the Corporation. Neither the merger or
consolidation of the Corporation, nor the sale, lease or conveyance of all or
part of its assets, shall be deemed to be a liquidation, dissolution or winding
up of the Corporation, either voluntarily or involuntarily within the meaning of
this Section 3.
4. CONVERSION. The holder of shares of Class B Common Stock or Class C
Common Stock may, at any time, convert some or all of such holder's shares of
Class B Common Stock or Class C Common Stock into Class A Common Stock at a rate
of one share of Class of Class A Common Stock for each share of Class B Common
Stock or Class C Common Stock converted, by surrender to the Corporation of
Certificates representing such Class B. Common Stock or Class C Common Stock and
written notice requesting such conversion (together, in the case of any
conversion of Class C Common Stock, with a certificate signed by or on behalf of
the holder or holders seeking conversion to the effect that such conversion and
the holding of Class A Common Stock by such holder or holders are permitted
under then current applicable law). Such conversion shall be deemed affected as
of the close of business on the date on which the Corporation receives such
certificates and notice. Shares of Class A Common Stock issued in accordance
with this Section shall be duly authorized, validly issued, fully paid and
nonassessable. The Corporation shall at all times keep reserved a sufficient
number of shares of
<PAGE>
4
Class A Common Stock to enable it to convert all outstanding shares of Class B
Common Stock and Class C Common Stock, and any purported issuance of shares of
Class A Common Stock such that the remaining authorized and unissued shares of
Class A Common Stock would be insufficient to satisfy such obligation to reserve
shares shall be void.
FIFTH: The Board of Directors of the Corporation shall be comprised of
the individuals elected as such pursuant to the By-Laws of the Corporation.
SIXTH: The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation. The directors need not be elected by
written ballot. The number of directors of the corporation shall be fixed from
time to time by or pursuant to the By-Laws of the Corporation.
SEVENTH: No director shall be personally liable to the Corporation or any
stockholder 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 Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of directors of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment or repeal of the foregoing provisions nor adoption of any
provision of this Certificate of Incorporation or the By-Laws of the Corporation
which is inconsistent with the foregoing provisions shall adversely affect any
right or protection of a director of the Corporation existing at the time of
such amendment, repeal or adoption.
The Corporation shall indemnify to the fullest extent permitted by the laws
of the State of Delaware is from time to time in effect any person who was or is
a party or is threatened to be made a party to, or otherwise requires
representation by counsel in connection with, any
<PAGE>
5
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (whether or not an action by or in the
right of the Corporation), by reason of the fact that he is or was a director or
officer of the Corporation, or while serving as a director or officer of the
Corporation, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity. The right to
indemnification conferred by this Article SEVENTH also shall include the right
of such persons to be paid in advance by the Corporation for their expenses to
the fullest extent permitted by the laws of the State of Delaware as from time
to time in effect. The right to indemnification conferred on such persons by
this Article SEVENTH shall be a contract right.
Unless otherwise determined by the Board of Directors of the Corporation,
the Corporation shall indemnify to the fullest extent permitted by the laws of
the State of Delaware as from time to time in effect any person who was or is a
party or is threatened to be made a party to, or otherwise requires
representation by counsel in connection with, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (whether or not an action by or in the right of the Corporation),
by reason of the fact that he is or was an employee (other than an officer) 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, or by reason of any action alleged to
have been taken or omitted in such capacity.
The rights and authority conferred in this Article SEVENTH shall not be
exclusive of any other right that any person may have or hereafter acquire under
any statute, provision of this Certificate of Incorporation or the By-Laws of
the Corporation, agreement, vote of stockholders or disinterested directors or
otherwise.
Neither the amendment nor repeal of this Article SEVENTH, nor the adoption
of any provision of the Certificate of Incorporation or By-Laws or of any
statute inconsistent with this
<PAGE>
6
Article SEVENTH, shall eliminate or reduce the effect of this Article SEVENTH in
respect of any facts or omissions occurring prior to such amendment, repeal or
adoption of an inconsistent provision.
IN WITNESS WHEREOF, the Corporation has caused Second Amended and Restated
Certificate of Incorporation to be signed and attested by its duly authorized
officers this 21st day of December _____, 1995. The effective date of filing
shall be January 1, 1996.
WG, Inc.
By: _______________________________
Name: John K. Ziegler
Title: Chairman of the Board and
Chief Executive Officer
ATTEST:
By: _______________________________
Name: Mary-Anne Kieran
Title: Secretary
<PAGE>
Exhibit 3.2
WILLCOX & GIBBS, INC.
BY-LAWS
ARTICLE I
PLACE OF BUSINESS
The principal office of Willcox & Gibbs, Inc. (the "Company") for the
carrying on of its general business and affairs, for the keeping of its books,
papers, and records, for the making of transfers of stock and for the payment of
dividends shall be at 900 Milik Street in the Borough of Carteret in the State
of New Jersey. Nothing herein contained shall be construed to prevent the
Directors from opening offices elsewhere for the carrying on of the business of
the Company.
ARTICLE II
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The Annual Meeting of Stockholders for the
election of Directors and for action upon such other matters as may be brought
before such meeting shall be held on such date and at such place, within or
without, the State of Delaware, as may be fixed in advance by the Board of
Directors, provided that the first annual meeting shall be held on a date no
later than as required pursuant to ss.211 of the Delaware General Corporation
Law. Annual and special meetings shall be held at such place within or without
the State of Delaware, as the Chairman of the Board of Directors may, from time
to time, fix. Whenever the Chairman of the Board of Directors shall fail to fix
a place, the meeting shall
<PAGE>
be held at the Company's principal office.
No business shall be transacted at an Annual Meeting of Stockholders
except such business as shall be (i) specified in the notice (or supplemental
notice) of meeting given by or at the direction of the Board of Directors, (ii)
otherwise brought before the meeting by or at the direction of the Board of
Directors or the Chairman of the Board of Directors or (iii) brought before the
meeting by a stockholder of record entitled to vote at that meeting in
accordance with the following procedure. For business to be brought before an
Annual Meeting by a stockholder, the stockholder must have given timely notice
in writing to the Secretary of the Company. To be timely, a stockholder's notice
must be delivered or mailed to, and received at, the principal executive offices
of the Company not less than 90 days prior to the anniversary date of the
immediately preceding years' Annual Meeting of Stockholders; provided, however,
that if the Annual Meeting date fixed by the Board of Directors is more than 30
days before or after such anniversary date, a stockholder notice will also be
timely if delivered or mailed to, and received at, the principal executive
offices of the Company not later than the close of business on the tenth day
following the date on which the Company first makes public disclosure of the
date of the Annual Meeting. Each notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the Annual Meeting (i) a
brief description of the business desired to be brought before the Annual
Meeting and the reasons for bringing such business before the Annual Meeting,
- 2 -
<PAGE>
(ii) the name and address of the stockholder intending to propose such business,
(iii) a representation that the stockholder is a holder of record of stock of
the Company entitled to vote at such meeting (or if the record date for such
meeting is subsequent to the date required for such stockholder notice, a
representation that the stockholder is a holder of record at the time of such
notice and intends to be a holder of record on the record date for such
meeting), specifying the classes and numbers of shares so held, and that the
stockholder intends to appear in person or by proxy at such meeting to propose
such business, and (iv) any material interest of the stockholder in such
business. The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provision of this Section 1; and, if the Chairman should
so determine and declare, any such business not properly brought before the
meeting shall not be transacted.
SECTION 2. SPECIAL MEETINGS. A special meeting of the stockholders may be
called at any time by the Chairman of the Board of Directors or as set forth in
the Company's Second Amended and Restated Certificate of Incorporation.
SECTION 3. PLACE OF SPECIAL MEETINGS. Special meetings of the stockholders
shall be held at such place within or without the State of Delaware as may be
fixed by the Directors or, if no such
- 3 -
<PAGE>
place is fixed, at the principal place of business of the Company.
SECTION 4. NOTICE. Notice of each meeting of stockholders shall be given
to each stockholder of record entitled to vote at such meeting. Such notice
shall be in writing, shall be signed by the Chairman of the Board, the
President, the Secretary or an Assistant Secretary, shall state the place, date
and hour of the meeting and, if the meeting is a special meeting, shall state
the purpose or purposes for the meeting; and a copy thereof shall be given
either personally or by mail not less than ten or more than sixty days before
the meeting to each stockholder entitled to such notice. If mailed, such notice
shall be directed to each stockholder entitled thereto, at his address as it
appears upon the stock book, unless he shall have filed with the Secretary of
the Company a written request that notices intended for him be mailed to some
other address, in which case it shall be mailed to the address designated in
such request.
SECTION 5. CONDUCT OF MEETING. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting - the Chairman of the Board, if any, the President, a
Vice-President or if none of the foregoing is in office and present and acting,
by a chairman to be chosen by the stockholders. The Secretary of the Company, or
in his absence, an Assistant Secretary, shall act as secretary of every meeting,
but if neither the Secretary nor an
- 4 -
<PAGE>
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
SECTION 6. VOTING. Every stockholder shall be entitled to vote as set
forth in the Company's Second Amended and Restated Certificate of Incorporation.
SECTION 7. STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the Company shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city or other municipality or community
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. The stock ledger shall be the only evidence as to who are the
stockholders entitle to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- 5 -
<PAGE>
SECTION 8. PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the Company generally.
SECTION 9. QUORUM. Except as otherwise provided by law or the Second
Amended and Restated Certificate of Incorporation, there shall be present in
person or by proxy, at all meetings of stockholders, in order to constitute a
quorum, stockholders owning a majority of the stock of the Company entitled to
vote but less than a quorum shall have power to adjourn any meeting from time to
time. At any such adjourned meeting at which a quorum may be present, any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 10. INSPECTORS OF ELECTION. Three Inspectors of
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Election, to serve at all meetings of the stockholders for the ensuing year and
until their successors are appointed, shall be appointed by the Board of
Directors at the last regular meeting of Directors preceding the Annual Meeting
of Stockholders.
SECTION 11. WAIVER OF NOTICE. The giving of any notice required by this
Article may be waived by the stockholder or stockholders affected thereby.
SECTION 12. STOCKHOLDER ACTION WITHOUT MEETINGS. Except as provided by the
Second Amended and Restated Certificate of Incorporation, any action required by
the Delaware General Corporation Law to be taken at any annual or special
meeting of stockholders, or any action which may be taken at any annual or
special meeting of stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize to take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the Delaware General Corporation
Law.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 1. DUTIES AND METHOD OF SELECTION. The business and affairs of the
Company shall be managed and its corporate powers exercised by or under the
direction of a Board of Directors. The Board of Directors shall have the
authority to fix the compensation of the members thereof. Such Directors (except
as hereinafter provided for the filling of vacancies) shall be elected in
accordance with the Company's Second Amended and Restated Certificate of
Incorporation by the stockholders by a plurality vote of the whole number of
shares voting at the meeting at which such election shall take place or as
otherwise provided in the Company's Second Amended and Restated Certificate of
Incorporation.
Subject to any specified rights contained in the Company's Second Amended
and Restated Certificate of Incorporation, nominations for the election of
directors may be made by or at the direction of the Board of Directors (or any
nominating Committee of the Board) or, subject to the following, by any
stockholder entitled to vote for the election of directors. Any stockholder
entitled to vote for the election of directors at an annual meeting or a special
meeting called for the purpose of electing directors may nominate persons for
election as directors for whom they are entitled to vote at such meeting only if
written notice to the Secretary of the Company of such stockholder's intent to
make such nomination is delivered or mailed to, and received at, the
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principal executive offices of the Company not later than (i) in the case of an
Annual Meeting, 90 days prior to the anniversary date of the immediately
preceding Annual Meeting; provided, however, that if the date of the Annual
Meeting is more than 30 days before or after the anniversary date of the
immediately preceding Annual Meeting, written notice of such stockholder's
intent to make such nomination must instead be delivered or mailed to, and
received at, the principal executive offices of the Company not later than the
close of business on the tenth day following the date on which the Company first
makes public disclosure of the date of the Annual Meeting and (ii) in the case
of a special meeting, the close of business on the tenth day following the date
on which the Company first makes public disclosure of the date of the special
meeting. Each notice given by such stockholder shall set forth: (A) the name and
address of the stockholder who intends to make the nomination and the person or
persons to be nominated; (B) a representation that the stockholder is a holder
of record of stock of the Company entitled to vote at such meeting (or if the
record date for such meeting is subsequent to the date require for such
stockholder notice, a representation that the stockholder is a holder of record
at the time of such notice and intends to be a holder of record on the record
date for such meeting), specifying the number and class of shares so held, and
that the stockholder intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (C) a description of all
arrangements of understandings between the stockholder and each
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nominee and any other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the stockholder; (D)
such other information regarding each nominee proposed by such stockholder as
would have been required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission had each nominee been
nominated, or intended to be nominated, by the Board of Directors; and (E) the
consent of each such nominee to serve as a director of the Company if so
elected. The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
provisions of this Section 1; and, if the Chairman should so determine and
declare, the defective nomination shall be disregarded.
SECTION 2. QUALIFICATIONS AND NUMBER. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. Except for the initial Board of Directors and subject to the
limitations contained in the Company's Second Amended and Restated Certificate
of Incorporation, the number of members of the Board of Directors may be fixed
from time to time by actions of the Board of Directors or of the stockholders.
SECTION 3. ANNUAL MEETINGS. There shall be an Annual Meeting of the Board
of Directors for the election of officers, the appointment of committees and for
action upon such other matters as may be brought before such meeting. Said
meeting shall be held at
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the place of and immediately after the annual election of Directors by the
stockholders.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at the principal office of the Company unless the Board or a
notice of meeting shall prescribe a different place. The Board of Directors, at
or prior to the commencement of a particular calendar year, shall prescribe a
schedule for such meetings. The time and place of any such scheduled meeting may
be changed, however, in a notice of meeting or by subsequent action of the Board
of Directors.
SECTION 5. SPECIAL MEETINGS. The Chairman of the Board, the President, the
Secretary, or a majority of the Directors as provided in the Company's Second
Amended and Restated Certificate of Incorporation may call a special meeting of
the Board of Directors whenever he or they shall deem it proper. Such meeting
shall be called by the giving to each Director of notice of the time and place
thereof.
SECTION 6. NOTICE OF DIRECTORS' MEETINGS AND WAIVER THEREOF. Except as
otherwise provided by these By-Laws, notice of annual or regular meetings of the
Board of Directors need not be given. Notice of all special meetings of the
Board of Directors shall be mailed to each Director at the address given by him
to the Secretary for that purpose at least five days prior to the time of
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holding the meeting, provided, however, such notice may be served personally
upon or telecopied to each Director at the address given by him to the Secretary
for that purpose at least 48 hours prior to the time of holding the meeting, but
any such notice may be waived by any Director. In the absence of a specific
provision of these By-Laws to the contrary, no notice of the object or purposes
of any meeting of the Board of Directors need be given, and unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
SECTION 7. QUORUM. Subject to the Company's Second Amended and Restated
Certificate of Incorporation, a majority of the Directors shall constitute a
quorum for the transaction of business, but if a quorum shall not be present a
majority of those present may adjourn any meeting from time to time and the
meeting may be held adjourned without further notice or waiver.
SECTION 8. FILLING OF VACANCIES. Except as the Delaware General
Corporation Law or the Company's Second Amended and Restated Certificate of
Incorporation may provide, any vacancy in the Board of Directors and any newly
created directorship resulting from an increase in the number of Directors may
be filled by the Directors or filled by a vote of a majority of the remaining
directors then in office, although less than a quorum, or by the sole remaining
director.
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SECTION 9. EXECUTIVE COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the entire Board, shall designate three or more of the
Directors as an Executive Committee. Except as prohibited by law or the
Company's Second Amended and Restated Certificate of Incorporation, the
Executive Committee shall have all the authority of the Board of Directors as
set forth in the Company's Second Amended and Restated Certificate of
Incorporation.
SECTION 10. NOMINATING COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the entire Board, shall designate three or more of the
Directors as a Nominating Committee. Except as prohibited by law or the
Company's Second Amended and Restated Certificate of Incorporation, the
Nominating Committee shall have all of the authority of the Board of Directors
to nominate candidates for election by the stockholders of the Company as
members of the Board of Directors of the Company.
SECTION 11. AUDIT COMMITTEE. The Board of Directors, by resolution adopted
by a majority of the entire Board, shall designate three or more of the
Directors as the Audit Committee. The Audit Committee shall consult with the
Company's management and the Company's independent public accountants on matters
related to the annual audit, including the appointment of the Company's
auditors, the Company's financial statements, and the accounting principles and
auditing procedures being applied.
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SECTION 12. EXECUTIVE COMPENSATION COMMITTEE. The Board of Directors, by
resolution adopted by a majority of the entire Board, shall designate three or
more of the Directors as an Executive Compensation Committee. Except as
prohibited by law, the Executive Compensation Committee shall have full
authority of the Board to review and approve the compensation of the officers of
the Company and to make awards under the Company's bonus, stock option,
incentive compensation and similar employee benefit plans.
SECTION 13. OTHER COMMITTEES. The Board of Directors may, by resolution
adopted by a majority of the entire Board, designate from among its members such
other Committees, consisting of three or more of the Directors, with such powers
as the Board may from time to time determine.
SECTION 14. MEETINGS AND REPORTS OF COMMITTEES. Each Committee shall fix
its own rules and procedures and shall meet at such times and places as it may
from time to time determine. The presence of a majority of all its members shall
be necessary to constitute a quorum of the Committee. All action taken by any
Committee shall be recorded in minutes of the meeting at which the action was
taken and shall be reported to the Board of Directors as such Board may from
time to time require.
SECTION 15. TELEPHONIC PARTICIPATION. Any one or more members of the Board
of Directors or any Committee thereof may
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participate in a meeting of such Board or Committee by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear such other at the same time. Participation by such means
shall constitute presence in person at a meeting.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS AND THEIR ELECTION. The officers of the Company shall
consist of a Chairman of the Board and Chief Executive Officer, a President, a
Secretary, at the discretion of the Board of Directors, one or more Vice
Presidents, one or more Assistant Secretaries, and such other officers as may be
designated by the Board of Directors. The Board of Directors, at its annual
meeting, shall elect the officers for the ensuing year and shall thereafter fill
for the unexpired term any vacancy which may occur in any office. All officers
shall hold office until their respective successors have been elected. The same
person may hold simultaneously more than one office.
SECTION 2. THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER.
The Chairman of the Board and Chief Executive Officer shall preside at all
meetings of the stockholders and of the Board of Directors at which he is
present and shall have such duties as shall be delegated to him by the Board of
Directors.
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<PAGE>
SECTION 3. THE PRESIDENT. The President shall be the Chief Operating
Officer of the Company and shall have such duties as shall be delegated to him
by the Board of Directors. The President shall be responsible for the day-to-day
management of the business and affairs of the Company and shall have such other
powers commonly incident to the office.
SECTION 4. VICE PRESIDENTS. Any Vice President shall possess such powers
and duties as shall be assigned from time to time by the Board of Directors or
the Chairman of the Board.
SECTION 5. THE SECRETARY. The Secretary shall possess the powers and
duties generally incident to his office, shall keep a record of all proceedings
of the Board of Directors and of all meetings of the stockholders, shall attend
to the giving of all required notices of such meetings, shall keep the stock
book of the Company, shall have custody of the Company's Seal, shall attest the
Seal on all documents whose execution under seal is duly authorized and shall
perform such other duties as may be assigned to him by the Board of Directors or
the Chairman of the Board.
SECTION 6. ASSISTANT SECRETARIES. The Company shall have such Assistant
Secretaries, if any, as may be designated by the Board of Directors.
Any Assistant Secretary shall, subject to any limitation
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placed upon his powers and duties by the Board of Directors, have all the powers
and duties of the Secretary to be exercised as the occasion may require. He
shall have such other powers and perform such other duties as the Board of
Directors or the Chairman of the Board shall from time to time designate.
SECTION 7. ADDITIONAL OFFICERS. The holders of any other offices created
by the Board of Directors shall perform such duties as may be assigned by the
Board of Directors or the Chairman of the Board.
SECTION 8. BONDING OFFICERS. The Board of Directors shall determine on
behalf of whom and in what amounts bonds shall be procured for the faithful
performance by the officers and employees of the Company of their respective
duties and such bonds shall be procured at the expense of the Company from a
surety company satisfactory to the Board of Directors.
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<PAGE>
ARTICLE V
RESIGNATIONS AND REMOVALS
SECTION 1. DIRECTORS. Any Director of the Company may resign at any time
by giving written notice of such resignation to the Board of Directors, the
Chairman of the Board, the President or the Secretary of the Company, such
resignation to take effect at the time specified therein, or, if no time be
specified, upon receipt thereof. Unless otherwise specified therein, acceptance
of such resignation shall not be necessary to make it effective.
SECTION 2. OFFICERS, AGENTS AND EMPLOYEES. Any officer, agent or employee
of the Company may resign at any time by giving written notice of such
resignation to the Board of Directors, the Chairman of the Board, the President
or the Secretary of the Company, such resignation to take effect at the time
specified therein, or, if no time be specified, upon receipt thereof. Unless
otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective. The Board of Directors, by a vote of not less
than two-thirds of the members thereof, may at any time, with or without cause,
remove from office or discharge any officer, agent or employee.
ARTICLE VI
CAPITAL STOCK
SECTION 1. STOCK CERTIFICATES. The certificates for shares of the capital
stock of the Company shall be in such form, not
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inconsistent with the Second Amended and Restated Certificate of Incorporation,
as shall be approved by the Board of Directors. The certificates shall be signed
by the Chairman of the Board, the President or a Vice President, and also by the
Secretary or an Assistant Secretary, and shall be sealed with the seal of the
Company. Such Seal may be a facsimile, engraved or printed. Where any such
certificate is countersigned (1) by a transfer agent other than the Company or
its employee or (2) by a registrar other than the Company or its employee, any
other signature on the certificate may be facsimile. All certificates shall be
consecutively numbered, and the name of the person owning the shares represented
thereby, with the number of shares, and the date of issue, shall be entered on
the Company's books. The Board of Directors may appoint on or more transfer
agents and one or more registrars for the stock of the Company, in which event
no certificates shall be valid unless countersigned by a transfer agent or
registered by a registrar.
SECTION 2. TRANSFERS OF STOCK. Shares of stock may be transferred by
delivery of the certificate therefor accompanied either by an assignment in
writing on the back of the certificate or by a written power of attorney to
sell, assign and transfer the same on the books of the Company, signed by the
person appearing by the certificate to be the owner of the shares represented
thereby, and such shares of stock shall be transferable on the books of the
Company upon surrender of the certificate therefor so assigned or
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endorsed; provided, however, that until the transfer is duly made upon the books
of the Company, the possession of a certificate of stock so endorsed or
otherwise shall not be regarded as vesting any ownership of the same (as between
the Company and such holder) in any person other than the person in whose name
it stands upon the books of the Company.
SECTION 3. LOST CERTIFICATES. No new certificate shall be issued until the
former certificate is canceled, except that the Board of Directors may authorize
the issuance of a duplicate in place of a lost, stolen or destroyed certificate
upon proof satisfactory to it or its designee of such loss, theft or destruction
and the giving of a satisfactory bond or indemnity.
SECTION 4. CLOSING OF TRANSFER BOOKS. The Board of Directors may fix in
advance a date not exceeding fifty days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining the
consent of stockholders for any purpose, as a record date for the determination
of the stockholders entitled to notice of, and to vote at, any such meeting and
any adjournment thereof, or to receive payment of any such dividend, or to
receive any such allotment of rights or to exercise any rights in respect of any
such change, conversion or exchange of capital stock, or to give
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such consent, as the case may be, notwithstanding any transfer of any stock on
the books of the Company after such record date fixed as aforesaid.
ARTICLE VII
DIVIDENDS AND RESERVES
The Board of Directors, subject to any restrictions contained in the
Second Amended and Restated Certificate of Incorporation, shall have power to
declare and pay dividends upon the shares of the Company's capital stock as
provided by the laws of the State of Delaware. The Board of Directors shall have
authority, from time to time, to set apart, out of any of the funds of the
Company available for dividends, a reserve or reserves as working capital or for
any other proper purpose or purposes, and to abolish in whole or in part, or to
add to any such reserve or reserves, from time to time, as the Board may deem to
be in the interest of the Company; and the Board shall likewise have power to
determine, in its discretion, what part of the assets of the Company, lawfully
available for dividends, in excess of such reserve or reserves if any, shall be
declared in dividends and paid to the stockholders of the Company.
ARTICLE VIII
THE CORPORATE SEAL
The Company shall have a common Seal which shall be circular in form and
which shall have engraved upon it the name of the
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Company, the State and the year of incorporation.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Any person made, or threatened to be made, a party to an action or
proceeding, whether civil or criminal, by reason of the fact that he then is or
was a director or officer of the Company, or while a director or officer of the
Company serves or has served any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity at the request
of the Company, shall, to the fullest extent permissible under Delaware law, be
indemnified by the Company against all expenses (including attorneys' fees)
judgments, fines and amounts paid in settlement incurred by such person in
connection with such action or proceeding. To the full extent so permitted, the
foregoing shall apply to actions by or in the right of the Company and require
the Company to pay any such expenses in advance of final disposition of such
action or proceeding. The adoption of the foregoing provisions shall not
adversely affect any right to indmenification which any person may have under
these By-Laws as in effect prior to such adoption or apart from the provisions
of these By-Laws as now, hereafter or formerly in effect; and other rights to
indemnification or advancement of expenses may be provided by (i) a resolution
of stockholders, (ii) a resolution of directors or (iii) an agreement providing
for such indemnification. If the Board of Directors so determines, the Company
may provide
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indemnity, on such terms and to such extent as may be fixed by the Board, to
employees and other persons to whom the foregoing provisions do not relate. The
indemnification provided by these By-Laws shall not be deemed exclusive of any
other rights to which a person seeking indemnification may be entitled under any
statute, agreement, vote of stockholders or directors, or otherwise both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
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ARTICLE X
AMENDMENTS TO BY-LAWS
Subject to the provisions of the Second Amended and Restated Certificate
of Incorporation and the provisions of the Delaware General Corporation Law, the
power to amend, alter, or repeal these By-Laws and to adopt new By-Laws may be
exercised by the Board of Directors or by the stockholders.
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EXECUTION COPY
================================================================================
WILLCOX & GIBBS, INC.,
THE SUBSIDIARY GUARANTORS NAMED HEREIN
and
IBJ SCHRODER BANK & TRUST COMPANY,
Trustee
------------------------
INDENTURE
Dated as of January 3, 1997
------------------------
$85,000,000
12 1/4% Series A Senior Notes Due 2003
================================================================================
<PAGE>
Reconciliation and Tie between Trust Indenture Act of
1939, as amended, and Indenture, dated as of January 3, 1997
Trust Indenture Indenture
Act Section Section
ss.310 (a)(1)................................................... 6.7
(a)(2)................................................... 6.7
(b)...................................................... 6.7, 6.8, 6.9
ss.311 (a)...................................................... 6.12
(b)...................................................... 6.12
ss.312 ......................................................... 7.1
ss.313 ......................................................... 7.2
ss.314 (a)...................................................... 7.3
(a)(4)................................................... 10.8(a)
(c)(1)................................................... 15.1
(c)(2)................................................... 15.1
(e)...................................................... 15.1
ss.315 (a)...................................................... 6.1
(b)...................................................... 6.13
(c)...................................................... 6.1
(d)...................................................... 6.1
ss.316 (a) (last sentence)...................1.1 ("Outstanding")
(a)(1)(A)................................................ 5.2, 5.12
(a)(1)(B)................................................ 5.13
(b)...................................................... 5.8
ss.317 (a)(1)................................................... 5.3
(a)(2)................................................... 5.4
(b)...................................................... 10.3
ss.318 (a)...................................................... 15.10(b)
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1. Definitions...............................................
Section 1.2. Other Definitions.........................................
Section 1.3. Incorporation by Reference of Trust Indenture Act.........
Section 1.4. Rules of Construction.....................................
ARTICLE II
SECURITY FORMS
Section 2.1. Forms Generally...........................................
Section 2.2. Form of Securities........................................
ARTICLE III
THE SECURITIES
Section 3.1. Title and Terms...........................................
Section 3.2. Denominations.............................................
Section 3.3. Execution, Authentication, Delivery and Dating............
Section 3.4. Temporary Securities......................................
Section 3.5. Registration of Transfer and Exchange.....................
Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities..........
Section 3.7. Payment of Interest; Interest Rights Preserved............
Section 3.8. Persons Deemed Owners.....................................
Section 3.9. Cancellation..............................................
Section 3.10. Computation of Interest...................................
Section 3.11. CUSIP Numbers.............................................
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1. Satisfaction and Discharge of Indenture...................
Section 4.2. Application of Trust Money................................
ARTICLE V
REMEDIES
Section 5.1. Events of Default.........................................
Section 5.2. Acceleration of Maturity; Rescission and Annulment........
<PAGE>
Section 5.3. Collection of Indebtedness and Suits for Enforcement
by Trustee ...............................................
Section 5.4. Trustee May File Proof of Claim...........................
Section 5.5. Trustee May Enforce Claims Without Possession of
Securities ...............................................
Section 5.6. Application of Money Collected............................
Section 5.7. Limitations on Suits......................................
Section 5.8. Unconditional Right of Holders to Receive Principal,
Premium, Liquidated Damages and Interest..................
Section 5.9. Restoration of Rights and Remedies........................
Section 5.10. Rights and Remedies Cumulative............................
Section 5.11. Delay or Omission Not Waiver..............................
Section 5.12. Control by Holders........................................
Section 5.13. Waiver of Past Defaults...................................
Section 5.14. Waiver of Stay, Extension or Usury Laws...................
Section 5.15. Undertaking for Costs.....................................
ARTICLE VI
THE TRUSTEE
Section 6.1. Duties of Trustee.........................................
Section 6.2. Certain Rights of Trustee.................................
Section 6.3. Trustee Not Responsible for Recitals or Issuance of
Securities ...............................................
Section 6.4. May Hold Securities.......................................
Section 6.5. Money Held in Trust.......................................
Section 6.6. Compensation and Reimbursement............................
Section 6.7. Corporate Trustee Required; Eligibility...................
Section 6.8. Conflicting Interests.....................................
Section 6.9. Resignation and Removal; Appointment of Successor.........
Section 6.10. Acceptance of Appointment by Successor....................
Section 6.11. Merger, Conversion, Consolidation or Succession to
Business .................................................
Section 6.12. Notice of Defaults........................................
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1. Holders' Lists; Holder Communications; Disclosures
Respecting Holders........................................
Section 7.2. Reports by Trustee........................................
Section 7.3. Reports by Company........................................
ii
<PAGE>
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1. Company May Consolidate, Etc., Only on Certain Terms......
Section 8.2. Successor Substituted.....................................
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1. Supplemental Indentures Without Consent of Holders......
Section 9.2. Supplemental Indentures with Consent of Holders.........
Section 9.3. Execution of Supplemental Indentures....................
Section 9.4. Effect of Supplemental Indentures.......................
Section 9.5. Conformity with Trust Indenture Act.....................
Section 9.6. Reference in Securities to Supplemental Indentures......
Section 9.7. Notice of Supplemental Indentures and Waivers...........
ARTICLE X
COVENANTS
Section 10.1. Payment of Principal, Premium or Liquidated
Damages, if any, and Interest...........................
Section 10.2. Maintenance of Office or Agency.........................
Section 10.3. Money for Security Payments to Be Held in Trust.........
Section 10.4. Corporate Existence.....................................
Section 10.5. Payment of Taxes; Maintenance of Properties; Insurance..
Section 10.6. Limitation on Sale-Leaseback Transactions...............
Section 10.7. Limitation on Conduct of Business.......................
Section 10.8. Statement by Officers as to Default.....................
Section 10.9. Provision of Financial Information......................
Section 10.10. Limitation on Restricted Payments.......................
Section 10.11. Limitation on Indebtedness and Disqualified Capital
Stock.................................................
Section 10.12. Limitation on Issuance and Sales of Capital Stock by
Restricted Subsidiaries.................................
Section 10.13. Limitation on Liens.....................................
Section 10.14. Purchase of Securities, Upon Change of Control..........
Section 10.15. Limitation on Asset Sales...............................
Section 10.16. Limitation on Transactions with Affiliates..............
Section 10.17. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries..........
Section 10.18. Limitation on Preferred Stock of Subsidiaries...........
Section 10.19. Waiver of Certain Covenants.............................
iii
<PAGE>
ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1. Right of Redemption.......................................
Section 11.2. Applicability of Article..................................
Section 11.3. Election to Redeem; Notice to Trustee.....................
Section 11.4. Selection by Trustee of Securities to Be Redeemed.........
Section 11.5. Notice of Redemption......................................
Section 11.6. Deposit of Redemption Price...............................
Section 11.7. Securities Payable on Redemption Date.....................
Section 11.8. Securities Redeemed in Part...............................
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
Section 12.1. Company's Option to Effect Defeasance or Covenant
Defeasance ...............................................
Section 12.2. Defeasance and Discharge..................................
Section 12.3. Covenant Defeasance.......................................
Section 12.4. Conditions to Defeasance or Covenant Defeasance...........
Section 12.5. Deposited Money and U.S. Government Obligations to
Be Held in Trust; Other Miscellaneous Provisions..........
Section 12.6. Reinstatement.............................................
ARTICLE XIII
SUBSIDIARY GUARANTEES
Section 13.1. Unconditional Guarantee...................................
Section 13.2. Execution and Delivery of Subsidiary Guarantees...........
Section 13.3. Limitation on Merger or Consolidation.....................
Section 13.4. Release of Subsidiary Guarantors..........................
Section 13.5. Additional Subsidiary Guarantors..........................
Section 13.6. Limitation of Subsidiary Guarantor's Liability............
Section 13.7. Contribution..............................................
ARTICLE XIV
PLEDGE AGREEMENT
Section 14.1. Unconditional Pledge......................................
Section 14.2. Recording and Opinions....................................
Section 14.3. Release of Collateral.....................................
Section 14.4. Authorization of Actions to be Taken by the Trustee
Under the Pledge Agreement................................
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Section 14.5. Authorization of Receipt of Funds by the Trustee
Under the Pledge Agreement..............................
Section 14.6. Termination of Security Interest........................
ARTICLE XV
MISCELLANEOUS
Section 15.1. Compliance Certificates and Opinions....................
Section 15.2. Form of Documents Delivered to Trustee..................
Section 15.3. Acts of Holders.........................................
Section 15.4. Notices, etc. to Trustee and the Company................
Section 15.5. Notice to Holders; Waiver...............................
Section 15.6. Effect of Headings and Table of Contents................
Section 15.7. Successors and Assigns..................................
Section 15.8. Severability............................................
Section 15.9. Benefits of Indenture...................................
Section 15.10. Governing Law; Trust Indenture Act Controls.............
Section 15.11. Legal Holidays..........................................
Section 15.12. No Recourse Against Others..............................
Section 15.13. Duplicate Originals.....................................
Section 15.14. No Adverse Interpretation of Other Agreements...........
Appendix A - Provisions Relating to Initial Securities, Private
Exchange Securities and Exchange Securities
Exhibit 1 to Appendix A - Form of Initial Security
Exhibit 2 to Appendix A - Form of Exchange/Private Exchange Security
Exhibit A - Form of Pledge and Security Agreement
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THIS INDENTURE, dated as of January 3, 1997, is between WILLCOX & GIBBS,
INC., a Delaware corporation (hereinafter called the "Company"), the Subsidiary
Guarantors parties hereto ("Subsidiary Guarantors") and IBJ SCHRODER BANK &
TRUST COMPANY (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's 12 1/4% Series A
Senior Notes Due 2003 (the "Initial Securities") and, if and when issued
pursuant to a registered exchange for Initial Securities, the Company's 12 1/4%
Series B Senior Notes Due 2003 (the "Exchange Securities") and, if and when
issued pursuant to a private exchange for Initial Securities, the Company's 12
1/4% Series C Senior Notes Due 2003 (the "Private Exchange Securities," together
with the Exchange Securities and the Initial Securities, the "Securities").
All things necessary have been done on the part of the Company and the
Subsidiary Guarantors to make the Securities, when issued and executed by the
Company and the Subsidiary Guarantors and authenticated and delivered by the
Trustee as herein provided, the valid obligations of the Company and the
Subsidiary Guarantors, as the case may be, and to make this Indenture a valid
agreement of the Company and the Subsidiary Guarantors and the Trustee, in
accordance with their respective terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.
"Acquired Indebtedness" means, with respect to any specified Person, (a)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Restricted Subsidiary of such specified Person,
including Indebtedness incurred in connection with, or in contemplation of, such
other Person merging with or into or becoming a Restricted Subsidiary of such
specified Person or (b) assumed in connection with acquisitions of properties or
assets from such Person. Acquired Indebtedness shall be deemed to be incurred on
the date the acquired Person becomes a Restricted Subsidiary or the date of the
related acquisition of properties or assets from such Person.
"Act" when used with respect to any Holder, has the meaning specified in
Section 15.3.
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"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of this definition, beneficial ownership of 10% or more of the voting
common equity (on a fully diluted basis) or options or warrants to purchase such
equity (but only if exercisable at the date of determination or within 60 days
thereof) of a Person shall be deemed to constitute control of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease,
assignment or other disposition to any Person other than the Company or any of
its Restricted Subsidiaries (including, without limitation, by means of a
Sale/Leaseback Transaction or a merger or consolidation) (collectively, for
purposes of this definition, a "transfer"), directly or indirectly, in one or a
series of related transactions, of (a) any Capital Stock of any Restricted
Subsidiary held by the Company or any other Restricted Subsidiary or (b) any
other Property of the Company or any of its Restricted Subsidiaries other than
transfers of cash, Cash Equivalents, accounts receivable or other Properties in
the ordinary course of business. For the purposes of this definition, the term
"Asset Sale" also shall not include any of the following: (i) any transfer of
Properties (including Capital Stock) that is governed by, and made in accordance
with, the provisions of Article VIII; (ii) any transfer of Properties to an
Unrestricted Subsidiary, if permitted under Section 10.10 hereof; (iii) sales of
damaged, worn-out or obsolete equipment or assets that, in the Company's
reasonable judgment, are either (x) no longer used or (y) no longer useful in
the business of the Company or its Restricted Subsidiaries; and (iv) any
transfers that, but for this clause (iv), would be Asset Sales, if after giving
effect to such transfers, the aggregate Fair Market Value of the Properties
transferred in such transaction or any such series of related transactions so
designated by the Company does not exceed $500,000.
"Attributable Indebtedness" means, with respect to any particular lease
under which any Person is at the time liable, whether or not accounted for as a
Capitalized Lease Obligation, and at any date as of which the amount thereof is
to be determined, the present value of the total net amount of rent required to
be paid by such Person under the lease during the primary term thereof, without
giving effect to any renewals at the option of the lessee, discounted from the
respective due dates thereof to such date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. As used in the preceding
sentence, the "net amount of rent" under any such lease for any such period
shall mean the sum of rental and other payments required to be paid with respect
to such period by the lessee thereunder, excluding any amounts required to be
paid by such lessee on account of maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges. In the case of any lease which is
terminable by the lessee upon payment of a penalty, such net amount of rent
shall also include the amount of such penalty, but no rent shall
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be considered as required to be paid under such lease subsequent to the first
date upon which it may be so terminated.
"Authorized Newspaper" shall have the meaning set forth in Section 10.3.
"Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years (and any portion thereof) from the date of determination
to the date or dates of each successive scheduled principal payment (including,
without limitation, any sinking fund or mandatory redemption payment
requirements) of such Indebtedness multiplied by (ii) the amount of each such
principal payment by (b) the sum of all such principal payments.
"Board of Directors" means, with respect to the Company, either the board
of directors of the Company or any duly authorized committee of such board of
directors, and, with respect to any Subsidiary, either the board of directors of
such Subsidiary or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by its Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee, and with respect to a Subsidiary, a
copy of a resolution certified by the Secretary or an Assistant Secretary of
such Subsidiary to have been duly adopted by its Board of Directors and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
"Capitalized Lease Obligation" means, with respect to any Person, any
obligation to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) any property (whether real, personal or mixed) that
is required to be classified and accounted for as a capital lease obligation
under GAAP and, for the purpose of the Indenture, the amount of such obligation
at any date shall be the capitalized amount thereof at such date, determined in
accordance with GAAP.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participation, rights or other equivalents in the equity interests
(however designated) in such Person, and any rights (other than debt securities
convertible into an equity interest), warrants or options exercisable for,
exchangeable for or convertible into such an equity interest in such Person.
"Cash Equivalents" means (i) marketable obligations with a maturity of 180
days or less issued or directly or indirectly guaranteed or insured by the
United States of America or any
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agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof); (ii) demand and
time deposits and certificates of deposit or acceptances with a maturity of 180
days or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500,000,000; (iii) commercial paper maturing no more than 180 days
from the date of creation thereof issued by a corporation that is not an
Affiliate of the Company and is organized under the laws of any state of the
United States or the District of Columbia and rated at least A-1 by S&P or at
least P-1 by Moody's; (iv) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i) above
entered into with any commercial bank meeting the specifications of clause (ii)
above; and (v) investments in money market or other mutual funds substantially
all of whose assets comprise securities of the types described in clauses (i)
through (iv) above.
"Change of Control" means the occurrence of any event or series of events
(whether or not otherwise in compliance with the provisions of the Indenture) by
which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) other than the Principals, is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of more than 35% of the total Voting Stock of the Company, (b) the
Company consolidates with or merges into another Person or any Person
consolidates with, or merges into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is changed into
or exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is changed
into or exchanged for Voting Stock of the surviving or resulting Person that is
Qualified Capital Stock and (ii) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving or resulting Person immediately
after such transaction; (c) the Company, either individually or in conjunction
with one or more Restricted Subsidiaries, sells, assigns, conveys, transfers,
leases or otherwise disposes of, or the Restricted Subsidiaries sell, assign,
convey, transfer, lease or otherwise dispose of, all or substantially all of the
Properties of the Company and its Restricted Subsidiaries, taken as a whole
(either in one transaction or a series of related transactions), including
Capital Stock of the Restricted Subsidiaries, to any Person (other than the
Company or a Wholly Owned Restricted Subsidiary); (d) during any consecutive
two-year period, individuals who at the beginning of such period constituted the
Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of two-thirds of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office; or (e) the approval by the holders of
Capital Stock of the Company of any plan or proposal for liquidation or
dissolution of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations thereunder issued by the
Internal Revenue Service.
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"Collateral" means any assets pledged under the Pledge Agreement by the
Pledgor as Collateral thereunder.
"Collateral Agent" shall have the meaning set forth in the Pledge
Agreement.
"Commission" or "SEC" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Company" means Willcox & Gibbs, Inc., a Delaware corporation, until a
successor corporation replaces it pursuant to the applicable provisions of this
Indenture, and thereafter "Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President, or any Vice
President, and its Treasurer or an Assistant Treasurer, Controller, any
Assistant Controller, Secretary or any Assistant Secretary, and delivered to the
Trustee.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to the
Company for any period, the ratio of (a) the sum of Consolidated Net Income,
Consolidated Fixed Charges, Consolidated Income Tax Expense and Consolidated
Non-cash Charges of the Company and its Restricted Subsidiaries, on a
consolidated basis for such period, all determined in accordance with GAAP to
(b) Consolidated Fixed Charges for such period. In making such computations, (i)
the Consolidated Fixed Charge Coverage Ratio shall be calculated on a pro forma
basis assuming that (A) the Indebtedness to be incurred or the Disqualified
Capital Stock to be issued (and all other Indebtedness incurred or Disqualified
Capital Stock issued after the first day of such period of four full fiscal
quarters referred to in Section 10.11(a) through and including the date of
determination), and (if applicable) the application of the net proceeds
therefrom (and from any other such Indebtedness or Disqualified Capital Stock),
including to refinance other Indebtedness, had been incurred on the first day of
such four quarter period and, in the case of Acquired Indebtedness, on the
assumption that the related transaction (whether by means of purchase, merger or
otherwise) also had occurred on such date with the appropriate adjustments with
respect to such acquisition being included in such pro forma calculation and (B)
any acquisition or disposition by the Company or any Restricted Subsidiary of
any properties or assets outside the ordinary course of business, or any
repayment of any principal amount of any Indebtedness of the Company or any
Restricted Subsidiary prior to the Stated Maturity thereof, in either case since
the first day of such period of four full fiscal quarters through and including
the date of
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determination, had been consummated on such first day of such four-quarter
period; (ii) the Consolidated Fixed Charges attributable to interest on any
Indebtedness required to be computed on a pro forma basis in accordance with
Section 10.11(a) and (A) bearing a floating interest rate shall be computed as
if the rate in effect on the date of computation had been the applicable rate
for the entire period and (B) which was not outstanding during the period for
which the computation is being made but which bears, at the option of the
Company, a fixed or floating rate of interest, shall be computed by applying, at
the option of the Company, either the fixed or floating rate; (iii) the
Consolidated Fixed Charges attributable to interest on any Indebtedness under a
revolving credit facility required to be computed on a pro forma basis in
accordance with Section 10.11(a) shall be computed based upon the average daily
balance of such Indebtedness during the applicable period, provided that such
average daily balance shall be reduced by the amount of any repayment of
Indebtedness under a revolving credit facility during the applicable period,
which repayment permanently reduced the commitments or amounts available to be
reborrowed under such facility; (iv) notwithstanding clauses (ii) and (iii) of
this proviso, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Rate
Protection Obligations, shall be deemed to have accrued at the rate per annum
resulting after giving effect to the operation of such agreements; and (v) if
after the first day of the period referred to in clause (a) of this definition
the Company has permanently retired any Indebtedness out of the Net Cash
Proceeds of the issuance and sale of shares of Qualified Capital Stock of the
Company within 30 days of such issuance and sale, Consolidated Fixed Charges
shall be calculated on a pro forma basis as if such Indebtedness had been
retired on the first day of such period.
"Consolidated Fixed Charges" means, for any period, without duplication,
(i) the sum of (a) the interest expense of the Company and its Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP, including, without limitation, any amortization of debt discount, the
net cost under Interest Rate Protection Obligations (including any amortization
of discounts), the interest portion of any deferred payment obligation
constituting Indebtedness, all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing and all
accrued interest, in each case to the extent attributable to such period, (b) to
the extent any Indebtedness of any Person (other than the Company or a
Restricted Subsidiary) is guaranteed by the Company or any Restricted
Subsidiary, the aggregate amount of interest paid (to the extent not accrued in
a prior period) or accrued by such other Person during such period attributable
to any such Indebtedness, in each case to the extent attributable to that
period, (c) the aggregate amount of the interest component of Capitalized Lease
Obligations paid (to the extent not accrued in a prior period), accrued or
scheduled to be paid or accrued by the Company and its Restricted Subsidiaries
during such period, and (d) the aggregate amount of dividends paid (to the
extent not accrued in a prior period) or accrued on Preferred Stock or
Disqualified Capital Stock of the Company and its Restricted Subsidiaries, to
the extent such Preferred Stock or Disqualified Capital Stock is owned by
Persons other than the Company or any Restricted Subsidiary, less (ii), to the
extent included in clause (i) above, amortization of capitalized debt issuance
costs of the Company and its Restricted Subsidiaries during such period.
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"Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes (including state franchise taxes
accounted for as income taxes in accordance with GAAP) of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
as determined in accordance with GAAP, adjusted by excluding (a) net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto), (b)
net after-tax gains or losses (less all fees and expenses relating thereto)
attributable to Asset Sales, (c) net income (or net loss) of any Person (other
than the Company or any of its Restricted Subsidiaries), in which the Company or
any of its Restricted Subsidiaries has an ownership interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Company or any of its Restricted Subsidiaries in cash by such other Person
during such period (regardless of whether such cash dividends or distributions
are attributable to net income (or net loss) of such Person during such period
or during any prior period), (d) net income (or net loss) of any Person combined
with the Company or any of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(e) net income of any Restricted Subsidiary to the extent that the declaration
or payment of dividends or similar distributions by that Restricted Subsidiary
of its net income is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, and (f) income
resulting from transfers of assets received by the Company or any Restricted
Subsidiary from an Unrestricted Subsidiary.
"Consolidated Net Worth" means, at any date, the consolidated
stockholders' equity of the Company less (without duplication) the amount of
such stockholders' equity attributable to Disqualified Capital Stock or treasury
stock of the Company and its Restricted Subsidiaries, as determined in
accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, depletion, amortization and other non-cash expenses of the Company
and its Restricted Subsidiaries deducted in computing Consolidated Net Income
for such period, all determined on a consolidated basis in accordance with GAAP
(excluding any such non-cash charge for which an accrual of or reserve for cash
charges for any future period is required).
"Corporate Trust Office" means the principal corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Indenture is located
at One State Street, New York, New York 10004.
"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time which were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or
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arrangement designed to protect against or manage such Person's or any of its
Subsidiaries' exposure to fluctuations in foreign currency exchange rates.
"Default" means any event, act or condition that is, or after notice or
passage of time or both would become, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.7 hereof.
"Depository" mean The Depository Trust Company, its nominees and their
respective successors.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors of the Company is
required to deliver a Board Resolution under the Indenture, a member of the
Board of Directors of the Company who does not have any material direct or
indirect financial interest (other than an interest arising solely from the
beneficial ownership of Capital Stock of the Company) in or with respect to such
transaction or series of transactions.
"Disqualified Capital Stock" means any Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or by contract or otherwise, is, or upon the happening of an event or passage of
time or both would be, required to be redeemed or repurchased, in whole or in
part, prior to the final Stated Maturity of the Securities or is redeemable at
the option of the holder thereof at any time prior to such final Stated
Maturity, or is convertible into or exchangeable for debt securities at any time
prior to such final Stated Maturity.
"Event of Default" has the meaning specified in Section 5.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor act thereto.
"Fair Market Value" means the fair market value of a Property as
determined in good faith by the Board of Directors of the Company and evidenced
by a Board Resolution, which determination shall be conclusive for purposes of
this Indenture; provided, however, that unless otherwise specified herein, the
Board of Directors shall be under no obligation to obtain any valuation or
assessment from any investment banker, appraiser or other third party.
"Federal Bankruptcy Code" means the United States Bankruptcy Code of Title
11 of the United States Code, as amended from time to time.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial
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Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession of the
United States of America, which are applicable as of the date of this Indenture.
"Global Security" shall have the meaning set forth in Appendix A.
"Guarantee" or "guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (ii) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down under letters of credit. When used as a verb,
"guarantee" has a corresponding meaning.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person, contingent or otherwise, for borrowed money or
for the deferred purchase price of property or services (excluding any trade
accounts payable and other accrued current liabilities incurred in the ordinary
course of business) and all liabilities of such Person incurred in connection
with any letters of credit, bankers' acceptances or other similar credit
transactions or any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, outstanding on the date of this
Indenture or thereafter, if, and to the extent, any of the foregoing would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, (b) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments, if, and to the extent, any of the
foregoing would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (c) all Indebtedness of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of a default are limited
to repossession or sale of such property), (d) the Attributable Indebtedness of
any Capitalized Lease Obligation of such Persons, (e) all Indebtedness described
in the preceding clauses and all dividends, the payment of which is secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness
(the amount of such obligation being deemed to be the lesser of the value of
such property or the amount of the obligation so secured), (f) all guarantees by
such Person of Indebtedness referred to in this definition, and (g) all
obligations of such Person under or in respect of Currency Hedge Obligations and
Interest Rate Protection Obligations.
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"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
(a) an insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or similar case or proceeding in connection
therewith, relative to such Person or its creditors, as such, or its assets or
(b) any liquidation, dissolution or other winding-up proceeding of such Person,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy or (c) any assignment for the benefit of creditors or any other
marshaling of assets and liabilities of such Person.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and other similar agreements or arrangements designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Indebtedness or other extension of credit or capital
contribution to (by means of any transfer of cash or other property or assets to
others or any payment for property, assets or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities (including derivatives) or
evidences of Indebtedness issued by, any other Person. In addition, the Fair
Market Value of the net assets of any Restricted Subsidiary at the time that
such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be
deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary
at such time. "Investments" shall exclude (a) extensions of trade credit or
other advances to customers on commercially reasonable terms in accordance with
normal trade practices or otherwise in the ordinary course of business, (b)
Interest Rate Protection Obligations and Currency Hedge Obligations, but only to
the extent that the same constitute Permitted Indebtedness and (c) endorsements
of negotiable instruments and documents in the ordinary course of business.
"Issue Date" means the date of first issuance of the Securities under this
Indenture.
"Leasing Company" means Embroidery Leasing Corporation, a Georgia
corporation.
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"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or similar type
of encumbrance (including, without limitation, any agreement to give or grant
any lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing) upon or with
respect to any Property. A Person shall be deemed to own subject to a Lien any
Property which such Person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Liquidated Damages" means all liquidated damages due and owing pursuant
to Section 6 of the Registration Rights Agreement.
"Maturity" means, with respect to any Security, the date on which any
principal of such Security becomes due and payable as therein or in the
Indenture provided, whether at the Stated Maturity with respect to such
principal or by declaration of acceleration, call for redemption or purchase or
otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants and investment banks) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be paid to any Person (other than the
Company or any Restricted Subsidiary) owning a beneficial interest in the
properties or assets subject to the Asset Sale or having a Lien therein, and
(iv) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve required in accordance with GAAP
against any liabilities associated with such Asset Sale and retained by the
Company or any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pensions and other postemployment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an Officers' Certificate; provided, however, that any amounts
remaining after adjustments, revaluations or liquidations of such reserves shall
constitute Net Available Proceeds.
"Net Cash Proceeds," with respect to any issuance or sale of Qualified
Capital Stock or other securities, means the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
and expenses actually incurred in connection with such issuance or sale, and net
of taxes paid or payable as a result thereof.
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"New Credit Facility" means the Company's Working Capital Facility with
NationsBank, N.A. in an aggregate amount not to exceed $18,500,000.00.
"Officers" means, with respect to any Person, the Chief Executive Officer,
the President, any Vice President, the Chief Financial Officer and the Treasurer
of such Person.
"Officers' Certificate" means a certificate signed by any Officer and an
Assistant Treasurer, Controller, Assistant Controller, the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company including an employee of the Company, and who shall be
reasonably acceptable to the Trustee, which opinion may contain customary
qualifications and assumptions.
"Outstanding" when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust by the Company (if the Company shall act
as its own Paying Agent) for the Holders of such Securities, provided
that, if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to the Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Securities, except to the extent provided in Sections 12.2 and
12.3 hereof, with respect to which the Company has effected legal
defeasance or covenant defeasance as provided in Article XII hereof; and
(iv) Securities which have been paid pursuant to Section 3.6 hereof
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands the Securities are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except
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that, in determining whether the Trustee shall be protected in making such
calculation or in relying upon any such request, demand, authorization,
direction, consent, notice or waiver, only Securities which the Trustee knows to
be so owned shall be so disregarded. Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor.
"Paying Agent" means any Person (including the Company acting as Paying
Agent) authorized by the Company to pay the principal of (and premium or
Liquidated Damages, if any, on) or interest on any Securities on behalf of the
Company.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness under Working Capital Agreements in an aggregate
principal amount at any time outstanding not to exceed the greater of (A)
$20,000,000 or (B) 60% of the book value of the accounts receivable of the
Company and its Restricted Subsidiaries, calculated on a consolidated
basis and in accordance with GAAP,
(ii) Indebtedness under the Securities;
(iii) Indebtedness outstanding or in effect on the date of this
Indenture after giving effect to the issuance and sale of Initial
Securities and the application of the net proceeds therefrom;
(iv) Indebtedness under Interest Rate Protection Obligations,
provided that (A) such Interest Rate Protection Obligations are related to
payment obligations on Permitted Indebtedness or Indebtedness otherwise
permitted by paragraph (a) of Section 10.11, and (B) the notional
principal amount of such Interest Rate Protection Obligations does not
exceed the principal amount of such Indebtedness to which such Interest
Rate Protection Obligations relate;
(v) Indebtedness under Currency Hedge Obligations, provided that (A)
such Currency Hedge Obligations are related to payment obligations on
Permitted Indebtedness or Indebtedness otherwise permitted by paragraph
(a) of Section 10.11 or to the foreign currency cash flows reasonably
expected to be generated or required by the Company and its Restricted
Subsidiaries, (B) the notional principal amount of such Currency Hedge
Obligations does not exceed the principal amount of such Indebtedness and
the amount of such foreign currency cash flows to which such Currency
Hedge Obligations relate, and (C) such Currency Hedge Obligations are
entered into for the purpose of limiting currency exchange rate risks in
connection with transactions entered into in the ordinary course of
business;
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(vi) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary to the Company or
a Wholly Owned Restricted Subsidiary; provided, however, that upon either
(A) the subsequent issuance (other than directors' qualifying shares),
sale, transfer or other disposition of any Capital Stock or any other
event which results in any such Wholly Owned Restricted Subsidiary ceasing
to be a Wholly Owned Restricted Subsidiary or (B) the transfer or other
disposition of any such Indebtedness (except to the Company or a Wholly
Owned Restricted Subsidiary), the provisions of this clause (vi) shall no
longer be applicable to such Indebtedness and such Indebtedness shall be
deemed, in each case, to be incurred and shall be treated as an incurrence
for purposes of paragraph (a) of Section 10.11 at the time the Wholly
Owned Restricted Subsidiary in question ceased to be a Wholly Owned
Restricted Subsidiary or the time such transfer or other disposition
occurred;
(vii) Indebtedness in respect of bid, performance or surety bonds
issued for the account of the Company in the ordinary course of business,
including guaranties or obligations of the Company with respect to letters
of credit supporting such bid, performance or surety obligations (in each
case other than for an obligation for money borrowed);
(viii) Indebtedness in respect of Capitalized Lease Obligations
directly incurred by the Company, provided that such Indebtedness incurred
under this clause (viii) does not exceed $2,500,000 at any one time
outstanding; and
(ix) any renewals, amendments, extensions, supplements,
modifications, deferrals, substitutions, refinancing or replacements
(each, for purpose of this clause (ix), a "refinancing") by the Company or
a Restricted Subsidiary of any Indebtedness incurred pursuant to paragraph
(a) of Section 10.11 (without giving effect to the parenthetical excluding
Permitted Indebtedness) or referred to above in clauses (ii) through (vi)
or this clause (ix), so long as (A) any such new Indebtedness shall be in
a principal amount that does not exceed the principal amount (or, if such
Indebtedness being refinanced provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination)
so refinanced plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Indebtedness
refinanced or the amount of any premium reasonably determined by the
Company or such Restricted Subsidiary as necessary to accomplish such
refinancing, plus the amount of expenses of the Company or such Restricted
Subsidiary incurred in connection with such refinancing, (B) in the case
of any refinancing of Indebtedness (including the Securities) that is pari
passu with or subordinated in right of payment to the Securities, then
such new Indebtedness is pari passu with or subordinated in right of
payment to the Securities at least to the same extent as the Indebtedness
being refinanced and (C) such new Indebtedness has an Average Life equal
to or longer than the Average Life of the Indebtedness being refinanced
and a final
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Stated Maturity that is at least 91 days later than the final Stated
Maturity of the Indebtedness being refinanced.
"Permitted Investments" means any of the following: (i) Investments in
Cash Equivalents; (ii) Investments in the Company or any of its Wholly Owned
Restricted Subsidiaries; (iii) Investments by the Company or any of its
Restricted Subsidiaries in another Person, if as a result of such Investment (A)
such other Person becomes a Wholly Owned Restricted Subsidiary or (B) such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all of its Properties to, the Company or a Wholly Owned Restricted
Subsidiary; (iv) Investments permitted under Section 10.15; (v) Investments made
in the ordinary course of business in prepaid expenses, lease, utility, workers'
compensation, performance and other similar deposits; (vi) Investments in an
aggregate amount not to exceed $2,500,000 in any Person engaged primarily in a
Related Business on the date of any such Investment; and (vii) Investments in
the Leasing Company in an aggregate amount not to exceed $5,000,000.
"Permitted Liens" means the following types of Liens:
(i) Liens existing as of the date of this Indenture;
(ii) Liens securing the Securities;
(iii) Liens in favor of the Company or, with respect to a Restricted
Subsidiary, Liens in favor of another Restricted Subsidiary;
(iv) Liens on accounts receivable, notes receivable or chattel paper
securing Indebtedness under one or more Working Capital Agreements that do
not, in the aggregate, exceed the amounts permitted pursuant to clause (i)
of the definition of Permitted Indebtedness;
(v) Liens securing Indebtedness that constitute Permitted
Indebtedness pursuant to clause (ix) of the definition of "Permitted
Indebtedness" incurred as a refinancing of any Indebtedness secured by
Liens described in clause (i) or (iv) of this definition; provided,
however, that such Liens (x) are not less favorable to the Holders and are
not more favorable to the lienholders with respect to such Liens than the
Liens in respect of the Indebtedness being refinanced and (y) do not
extend to or cover any property or assets of the Company or any of its
Restricted Subsidiaries not securing the Indebtedness so refinanced;
(vi) Liens for taxes, assessments or governmental charges or claims
either (A) not delinquent or (B) contested in good faith by appropriate
proceedings and as to which the Company or a Restricted Subsidiary of the
Company, as the case may be, shall have set aside on its books such
reserves as may be required pursuant to GAAP;
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(vii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
(viii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the payment or
performance of tenders, statutory or regulatory obligations, surety and
appeal bonds, bids, government contracts and leases, performance and
return of money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(ix) judgment Liens not giving rise to a Default or Event of Default
and so long as any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated
shall not have expired;
(x) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of business of the Company or
any of its Restricted Subsidiaries;
(xi) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease; provided that (A) the Attributable
Indebtedness related thereto constitutes Indebtedness permitted to be
incurred under the terms of the Indenture and (B) with respect to any
Capitalized Lease Obligation, such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(xii) Liens securing Purchase Money Indebtedness; provided, however,
that (A) the Purchase Money Indebtedness shall not be secured by any
property or assets of the Company or any Restricted Subsidiary other than
the property or assets so acquired and any proceeds therefrom and (B) the
Lien securing such Purchase Money Indebtedness shall be created within 90
days of such acquisition;
(xiii) Liens upon specific items of inventory or other goods of any
Person securing such Person's obligations in respect of bankers
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(xiv) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
or assets relating to such letters of credit and products and proceeds
thereof;
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(xv) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and setoff;
(xvi) Liens securing Acquired Indebtedness incurred in accordance
with Section 10.11; provided that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
were not granted in connection with, or in anticipation of, the incurrence
of such Acquired Indebtedness by the Company or a Restricted Subsidiary of
the Company and (B) such Liens do not extend to or cover any property or
assets of the Company or of any of its Restricted Subsidiaries other than
the property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of the Company or a
Restricted Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company; and
(xvii) Liens on substantially all of the assets of W&G, Ltd. under
any Working Capital Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Physical Security" shall have the meaning set forth in Appendix A.
"Pledge Agreement" means that certain Pledge and Security Agreement, dated
the Issue Date executed by the Pledgor, in favor of the Trustee for the benefit
of the Holders, pursuant to which 66% of the Capital Stock of W&G, Ltd. has been
pledged and substantially in the form attached as Exhibit A hereto, as such
agreement may be amended, modified or supplemented from time to time.
"Pledgor" means WG Apparel, Inc., a wholly owned Subsidiary of the
Company, as the Pledgor under the Pledge Agreement.
"Predecessor Security" of any particular Security means every previous
Security, including any Security of a different series, evidencing all or a
portion of the same debt as that evidenced by such particular Security; and, for
the purposes of this definition, any Security authenticated and delivered under
Section 3.6 hereof in exchange for a mutilated security or in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Security.
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"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated) of such
Person's preferred or preference stock, whether now outstanding or issued after
the date of this Indenture, including, without limitation, all classes and
series of preferred or preference stock of such Person.
"Principals" means (i) John K. Ziegler, Richard J. Mackey, John K.
Ziegler, Jr., Jack Klasky, Alan B. Lee, Maxwell L. Tripp, and other members of
the Company's principal management or (ii) the Company's Savings and Employee
Stock Ownership Plan and its other retirement plans holding shares of the
Company's Capital Stock.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or assets, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Capital Stock in any other Person.
"Public Equity Offering" means an offer and sale of Common Stock of the
Company pursuant to a registration statement that has been declared effective by
the Commission pursuant to the Securities Act (other than a registration
statement on Form S-8 or otherwise relating to equity securities issuable under
any employee benefit plan of the Company).
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in connection with the purchase of property or
assets for the business of the Company and its Restricted Subsidiaries.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Disqualified Capital Stock.
"Redemption Date" when used with respect to any Security to be redeemed,
in whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price" when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of December 20, 1996, by and among the Company, the Subsidiary
Guarantors and Dillon, Read & Co. Inc., as such agreement may be amended,
modified or supplemented from time to time.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the June 1 or December 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Related Business" means the businesses of the Company and the Restricted
Subsidiaries on the date on which the Securities were originally issued and any
business related, ancillary or complementary to the business of the Company and
the Restricted Subsidiaries on such date.
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"Responsible Officer" when used with respect to the Trustee, means any
officer in the Corporate Trust Department of the Trustee, and also means, with
respect to a particular corporate trust matter, any other officer of the Trustee
to whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Restricted Investment" means (without duplication) any Investment other
than a Permitted Investment including without limitation a Subsidiary designated
as an Unrestricted Subsidiary.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the date of the Indenture, unless such Subsidiary of the
Company is an Unrestricted Subsidiary or is designated as an Unrestricted
Subsidiary in the manner described in the definition of the term "Unrestricted
Subsidiary."
"S&P" means Standard and Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale/Leaseback Transaction" means any direct or indirect arrangement
pursuant to which properties or assets are sold or transferred by the Company or
a Restricted Subsidiary and are thereafter leased back from the purchaser or
transferee thereof by the Company or one of its Restricted Subsidiaries.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor act thereto.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 3.5 hereof.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7 hereof.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the date specified in the instrument evidencing
or governing such Indebtedness as the fixed date on which the principal of such
Indebtedness or such installment of interest is due and payable.
"Subordinated Indebtedness" means any Indebtedness of the Company or the
Subsidiary Guarantors which is expressly subordinated in right of payment to the
Securities or Subsidiary Guarantees, respectively.
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"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, have at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person performing
similar functions).
"Subsidiary Guarantors" means (i) WG Apparel, Inc., Clinton Management
Corporation, Clinton Machinery Corporation, W&G Daon, Inc., J & E Sewing
Supplies, Inc., W&G Tennessee Imports, Inc., Clinton Leasing Corp., Clinton
Equipment Corp., Paradise Color Incorporated and Leadtec Systems, Inc. and (ii)
any other Subsidiary of the Company or a Subsidiary thereof that executes a
Subsidiary Guarantee in accordance with the provisions of this Indenture, and
their respective successors and assigns.
"Subsidiary Guarantee" means the guarantee of the Subsidiary Guarantors as
provided herein.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended and in force at the date as of which this Indenture was executed until
such time as this Indenture is qualified under the TIA, and thereafter as in
effect on the date on which this Indenture is qualified under the TIA, except as
provided in Section 9.5 hereof.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"Unrestricted Subsidiary" means (i) the Leasing Company, (ii) any
Subsidiary of the Company that at the time of determination will be designated
an Unrestricted Subsidiary by the Board of Directors of the Company as provided
below and (iii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Subsidiary of the Company as an
Unrestricted Subsidiary so long as (a) neither the Company nor any Restricted
Subsidiary is directly or indirectly liable pursuant to the terms of any
Indebtedness of such Subsidiary; (b) no default with respect to any Indebtedness
of such Subsidiary would permit (upon notice, lapse of time or otherwise) any
holder of any other Indebtedness of the Company or any Restricted Subsidiary to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its Stated Maturity; (c) such designation as an
Unrestricted Subsidiary would be permitted under Section 10.10; (d) such
designation shall not result in the creation or imposition of any Lien on any of
the properties or assets of the Company or any Restricted Subsidiary (other than
any Permitted Lien) and (e) the Company could incur $1.00 of additional
Indebtedness (not including the incurrence of Permitted Indebtedness) under
clause (a) of Section 10.11; provided, however, that with respect to clause (a)
above, the Company or a
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Restricted Subsidiary may be liable for Indebtedness of an Unrestricted
Subsidiary if (x) such liability constituted a Permitted Investment or a
Restricted Payment permitted by Section 10.10, in each case, at the time of
incurrence, or (y) the liability would be a Permitted Investment in each case at
the time of designation of such Subsidiary as an Unrestricted Subsidiary. Any
such designation by the Board of Directors of the Company shall be evidenced to
the Trustee by filing a Board Resolution with the Trustee giving effect to such
designation along with an Officers' Certificate stating that such designation is
in compliance with the requirements under the Indenture. The Board of Directors
of the Company may designate any Unrestricted Subsidiary as a Restricted
Subsidiary if, immediately after giving effect to such designation on a pro
forma basis, (i) no Default or Event of Default shall have occurred and be
continuing, (ii) the Company could incur $1.00 of additional Indebtedness (not
including the incurrence of Permitted Indebtedness) under clause (a) of Section
10.11 hereof and (iii) if any of the Properties of the Company or any of its
Restricted Subsidiaries would upon such designation become subject to any Lien
(other than a Permitted Lien), the creation or imposition of such Lien shall
have been in compliance with Section 10.13.
"Vice President" when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"W&G, Ltd." means Willcox & Gibbs, Ltd., a corporation organized under the
laws of England and Wales and wholly owned by the Pledgor.
"W&G, Ltd. Credit Facility" means the (pound)1,000,000 term loan facility
of W&G, Ltd. with Coutts & Co.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary to
the extent (i) all of the Capital Stock or other ownership interests in such
Restricted Subsidiary, other than any directors' qualifying shares mandated by
applicable law, is owned directly or indirectly by the Company or (ii) such
Restricted Subsidiary is organized in a foreign jurisdiction and is required by
the applicable laws and regulations of such foreign jurisdiction to be partially
owned by the government of such foreign jurisdiction or individual or corporate
citizens of such foreign jurisdiction in order for such Restricted Subsidiary to
transact business in such foreign jurisdiction, provided that the Company,
directly or indirectly, owns the remaining Capital Stock or ownership interest
in such Restricted Subsidiary and, by contract or otherwise, controls the
management and business of such Restricted Subsidiary and derives the economic
benefits of
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ownership of such Restricted Subsidiary to substantially the same extent as if
such Restricted Subsidiary were a wholly owned Subsidiary.
"Working Capital Agreements" means (i) the New Credit Facility, (ii) the
W&G, Ltd. Credit Facility, (iii) with respect to any Person (including the
Company), without duplication, any agreement or agreements between such Person
and a financial institution or any institutions providing for the making of
loans or advances on a revolving basis, the issuance of letters of credit and/or
the creation of bankers' acceptances to fund such Person's general corporate
requirements, and (iv) any refinancings, renewals, replacements, modifications
and extensions of any of the agreements described in clauses (i), (ii) and
(iii).
SECTION 1.2. Other Definitions.
Defined
Term in Section
---- ----------
"Change of Control Notice"............................ 10.14(c)
"Change of Control Offer"............................. 10.14(a)
"Change of Control Purchase Date"..................... 10.14(c)
"Change of Control Purchase Price".................... 10.14(a)
"Excess Proceeds"..................................... 10.15(b)
"Net Proceeds Deficiency"............................. 10.15(c)
"Net Proceeds Offer".................................. 10.15(c)
"Net Proceeds Payment Date"........................... 10.15(c)
"Offered Price"....................................... 10.15(c)
"Payment Amount"...................................... 10.15(c)
"Payment Restriction"................................. 10.17
"Purchase Notice"..................................... 10.15(c)
"Restricted Payment".................................. 10.10(a)
"Surviving Entity".................................... 8.1
"Trigger Date"........................................ 10.15(c)
"U.S. Government Obligations"......................... 12.4(a)
SECTION 1.3. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities,
"indenture security holder" means a Holder,
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"indenture to be qualified" means this Indenture,
"indenture trustee" or "institutional trustee" means the Trustee,
and
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.4. Rules of Construction.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP and all accounting
calculations will be determined in accordance with GAAP;
(c) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(d) the masculine gender includes the feminine and the neuter;
(e) a "day" means a calendar day;
(f) the term "merger" includes a statutory share exchange and the
term "merged" has a correlative meaning; and
(g) references to agreements and other instruments include
subsequent amendments and waivers but only to the extent not prohibited by
this Indenture.
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ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.
The Securities and Subsidiary Guarantees endorsed thereon shall be
printed, lithographed or engraved on steel-engraved borders or may be produced
in any other manner, all as determined by the Officers executing such Securities
as evidenced by their execution of such Securities.
Securities (including the Trustee's certificate of authentication) shall
be issued initially in the form of one or more permanent global Securities
substantially in the form set forth in Exhibit 1 to Appendix A (each being
herein called a "Global Security") deposited with the Trustee, as custodian for
the Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. Subject to the limitation set forth in Section 3.1, the
principal amounts of the Global Securities may be increased or decreased from
time to time by adjustments made on the records of the Trustee, as custodian for
the Depository, as hereinafter provided.
Securities (including the Trustee's certificate of authentication)
exchanged for beneficial interests in a Global Security as described in Appendix
A shall be issued initially in the form of permanent certificated securities in
registered form in substantially the form set forth in Exhibit 1 to Appendix A
("Physical Securities").
SECTION 2.2. Form of Securities.
Provisions relating to the Initial Securities, the Private Exchange
Securities and the Exchange Securities are set forth in Appendix A, which is
hereby incorporated in and expressly made part of this Indenture. The Initial
Securities, the Subsidiary Guarantees endorsed thereon and the Trustee's
certificate of authentication thereon shall be substantially in the form of
Exhibit 1 to Appendix A which is hereby incorporated in and expressly made a
part of this Indenture. The Exchange Securities, the Private Exchange
Securities, the Subsidiary Guarantees endorsed thereon and the Trustee's
certificate of authentication thereon shall be substantially in the form of
Exhibit 2 to Appendix A, which is hereby incorporated in and expressly made a
part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Company is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company). Each Security shall be
dated the date of its authentication. The terms of the Securities set forth in
Exhibits 1 and 2 of Appendix A are part of the terms of this Indenture.
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ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture for original issue is limited to $85,000,000.
The aggregate principal amount of Securities Outstanding at any one time may not
exceed such amount except as provided in Section 3.6 hereof.
The Initial Securities shall be known and designated as the "12 1/4%
Series A Senior Notes Due 2003" of the Company. Their Stated Maturity shall be
December 15, 2003, and they shall bear interest at the rate of 12 1/4% per annum
from the Issue Date, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, payable semiannually in cash in
arrears on June 15 and December 15 in each year, commencing June 15, 1997, and
at said Stated Maturity, until the principal thereof is paid or duly provided
for.
The principal of (and premium, if any, on) and interest and Liquidated
Damages, if any, on the Securities shall be payable at the office or agency of
the Company maintained for such purpose in the City of New York; provided,
however, that, at the option of the Company, interest may be paid on Physical
Securities on or before the due date (i) by check mailed to addresses of the
Persons entitled thereto as such addresses shall appear on the Security
Register, or (ii) with respect to any Holder owning Securities in the principal
amount of $500,000 or more, by wire transfer to an account maintained by such
Holder located in the United States, as specified in a written notice to the
Trustee by any such Holder requesting payment by wire transfer and specifying
the account to which transfer is requested.
The Securities shall be redeemable as provided in Article XI hereof.
The Securities shall be subject to defeasance at the option of the Company
as provided in Article XII hereof.
SECTION 3.2. Denominations.
The Securities shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its President or a Vice President of the Company, under its
corporate seal reproduced thereon and attested by its Secretary or an Assistant
Secretary of the Company. The signature of any of these
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officers on the Securities may be manual or facsimile signatures of the present
or any future such authorized officer and may be imprinted or otherwise
reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time after the execution and delivery of this Indenture, the
Company may deliver Securities executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with such Company
Order shall authenticate and deliver such Securities as provided in this
Indenture. Such Company Order shall specify the principal amount of the
Securities to be authenticated, the date on which the original issue of
Securities is to be authenticated, and applicable delivery instructions.
Each Security shall be dated the date of its authentication.
No Security or Subsidiary Guarantee endorsed thereon shall be entitled to
any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of authentication
substantially in the form provided for herein duly executed by the Trustee by
manual signature of an authorized signatory, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
and the Subsidiary Guarantees endorsed thereon have been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to and in compliance with Article VIII
hereof, shall be consolidated or merged with or into any other Person or shall
sell, convey, transfer, lease or otherwise dispose of all or substantially all
of its Properties to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a sale, conveyance,
transfer, lease or other disposition as aforesaid, shall have executed an
indenture supplemental hereto with the Trustee pursuant to Article VIII hereof,
any of the Securities authenticated or delivered prior to such sale,
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person be exchanged for other
Securities executed in the name of the successor Person with such changes in
phraseology and form as may be appropriate, but otherwise in substance of like
tenor as the Securities surrendered for such exchange and of like principal
amount; and the Trustee, upon Company Request of the successor Person, shall
authenticate and deliver Securities as specified in such request for the purpose
of such exchange. If Securities shall at any time be authenticated and delivered
in any new name of a successor Person pursuant to this Section in exchange or
substitution for or upon registration of transfer of any Securities, such
successor Person, at the option of the Holders but without
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expense to them, shall provide for the exchange of all Securities at the time
Outstanding for Securities authenticated and delivered in such new name.
SECTION 3.4. Temporary Securities.
Pending the preparation of definitive Securities, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Securities which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Securities in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as conclusively evidenced by
their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 10.2
hereof, without charge to the Holders. Upon surrender for cancellation of any
one or more temporary Securities, the Company and each Subsidiary Guarantor
shall execute and, upon Company Order, the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations and of like tenor and aggregate principal amount. Until
so exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 3.5. Registration of Transfer and Exchange.
The Company shall cause to be kept a register (the "Security Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfers of Securities.
The Security Register shall be in written form or any other form capable of
being converted into written form within a reasonable time. At all reasonable
times and during normal business hours, the Security Register shall be open to
inspection by the Trustee. The Trustee is hereby initially appointed as security
registrar (the "Security Registrar") for the purpose of registering Securities
and transfers of Securities as herein provided.
Subject to the provisions of this Section and Appendix A, upon surrender
for registration of transfer of any Security at the office or agency of the
Company designated pursuant to Section 10.2 hereof, the Company and each
Subsidiary Guarantor shall execute, and upon Company Order, the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities with the Subsidiary Guarantees endorsed
thereon of like tenor and of any authorized denomination and of a like aggregate
principal amount.
Furthermore, any Holder of a Global Security shall, by acceptance of such
Global Security, be deemed to have agreed that transfers of beneficial interests
in such Global Security
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may be effected only through a book-entry system maintained by the Depository
(or its agent), and that ownership of a beneficial interest in a Global Security
shall be required to be reflected in a book-entry.
At the option of any Holder, Securities may be exchanged for other
Securities with the Subsidiary Guarantees endorsed thereon of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Securities to be exchanged at the office or agency of the Company designated
pursuant to Section 10.2 hereof. Whenever any Securities are so surrendered for
exchange, the Company and each Subsidiary Guarantee shall execute and, upon
Company Order, the Trustee shall authenticate and deliver, the Securities with
the Subsidiary Guarantees endorsed thereon which the Holder making the exchange
is entitled to receive.
All Securities with the Subsidiary Guarantees endorsed thereon issued upon
any registration of transfer or exchange of Securities shall be the valid
obligations of the Company and each Subsidiary Guarantor, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Security Registrar) be
duly endorsed, or be accompanied by a written instrument of transfer or
exchange, in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer, exchange
or redemption of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer, exchange or redemption of
Securities, other than exchanges pursuant to Section 3.4, 9.6 or 11.8 hereof not
involving any transfer.
Neither the Trustee, the Security Registrar nor the Company shall be
required (i) to issue, register the transfer of or exchange any Physical
Security during a period beginning at the opening of business 15 days before the
mailing of a notice of redemption of Securities selected for redemption under
Section 11.4 hereof and ending at the close of business on the day of such
mailing of the relevant notice of redemption, or (ii) to register the transfer
of or exchange any Physical Security so selected for redemption in whole or in
part, except the unredeemed portion of any such Security being redeemed in part
or (iii) to register the transfer of or exchange any Physical Security between a
Regular Record Date and the next succeeding Interest Payment Date.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee or (ii) the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such Security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
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Trustee that such Security has been acquired by a bona fide purchaser, the
Company and each Subsidiary Guarantor shall execute and upon Company Order the
Trustee shall authenticate and deliver, in exchange for any such mutilated
Security or in lieu of any such destroyed, lost or stolen Security, a new
Security with the Subsidiary Guarantees endorsed thereon of like tenor and of
like principal amount bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Every new Security issued and authenticated pursuant to this Section in
lieu of any mutilated, destroyed, lost or stolen Security shall constitute an
original additional contractual obligation of the Company and the Subsidiary
Guarantors whether or not the mutilated, destroyed, lost or stolen Security
shall be at any time enforceable by anyone, and shall be entitled to all
benefits of this Indenture equally and proportionately with any and all other
Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name such Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency of the Company maintained for such purpose pursuant to Section 10.2
hereof.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date shall forthwith cease to be
payable to the Holder on the Regular Record Date by virtue of having been such
Holder, and such defaulted interest and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Securities (such defaulted interest
and interest thereon herein collectively called "Defaulted Interest") may be
paid by the Company, at its election in each case, as provided in clause (a) or
(b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Holders in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment at least 60 days
prior to the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an
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amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the proposed payment,
and such money when deposited shall be held in trust for the benefit of
the Holders entitled to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and
not less than 10 days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify the Company of
such Special Record Date, and in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be given to the Holders
entitled to such Defaulted Interest in the manner provided for in Section
15.5 hereof, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so given, such Defaulted Interest shall
be paid to the Holders in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.8. Persons Deemed Owners.
Prior to the due presentment of a Security for registration of transfer,
the Company, the Security Registrar, the Trustee and any agent of the Company or
the Trustee may treat the Person in whose name such Security is registered as
the owner of such Security for the purpose of receiving payment of principal of
(and premium, if any, on) and (subject to Section 3.9 hereof) interest and
Liquidated Damages, if any, on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and none of the Company,
the Subsidiary Guarantors, the Security Registrar, the Trustee or any agent of
the Company or the Trustee shall be affected by notice to the contrary.
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SECTION 3.9. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and, upon Company Order, shall be promptly canceled
by it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall, upon Company Order, be promptly canceled by the Trustee. No Securities
shall be authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee shall be disposed of as directed by a
Company Order or, if no such Company Order has been provided, in accordance with
the Trustee's usual practice; provided, however, that the Trustee shall not be
required to destroy canceled Securities.
SECTION 3.10. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
SECTION 3.11. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided, however, that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
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ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of
Securities, as expressly provided for in this Indenture) as to all Outstanding
Securities, and the Trustee, at the expense of the Company, shall, upon payment
of all amounts due the Trustee under Section 6.6 hereof, execute proper
instruments acknowledging satisfaction and discharge of this Indenture when
(a) either
(1) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 3.6 hereof and (ii)
Securities for whose payment money or United States governmental
obligations of the type described in clause (i) of the definition of Cash
Equivalents have theretofore been deposited in trust with the Trustee or
any Paying Agent or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as
provided in Section 10.3 hereof) have been delivered to the Trustee for
cancellation, or
(2) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their final Stated
Maturity within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the serving of notice
of redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of clause (2)(i), (2)(ii) or (2)(iii) above,
has irrevocably deposited or caused to be deposited with the Trustee funds
in an amount sufficient to pay and discharge the entire Indebtedness on
such Securities not theretofore delivered to the Trustee for cancellation,
for principal of, premium, if any, and Liquidated Damages, if any, on such
Securities and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the final Stated
Maturity or Redemption Date, as the case may be, together with the Company
Order irrevocably directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be;
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(b) the Company has paid or caused to be paid all other sums then due and
payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, which, taken together, state that all conditions
precedent herein relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.6 hereof and, if money
shall have been deposited with the Trustee pursuant to this Section, the
obligations of the Trustee under Section 4.2 hereof and the last paragraph of
Section 10.3 hereof and the Trustee's right under Article VI hereof shall
survive.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3 hereof,
all money deposited with the Trustee pursuant to Section 4.1 hereof shall be
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium and Liquidated Damages, if any) and interest for whose payment such
money has been deposited with the Trustee.
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
"Event of Default" wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of the principal of or premium, if any,
on any of the Securities when the same becomes due and payable, whether
such payment is due at Stated Maturity, upon redemption, upon repurchase
pursuant to a Change of Control Offer or a Net Proceeds Offer, upon
acceleration or otherwise; or
(b) default in the payment of any installment of interest or
Liquidated Damages, if any, on any of the Securities, when it becomes due
and payable, and the continuance of such default for a period of 30 days;
or
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(c) default in the performance or breach of the provisions of
Article VIII hereof or Section 10.10, 10.11, 10.12 or 10.13, the failure
to make or consummate a Change of Control Offer in accordance with the
provisions of Section 10.14 or the failure to make or consummate a Net
Proceeds Offer in accordance with the provisions of Section 10.15; or
(d) the Company or any Subsidiary Guarantor shall fail to perform or
observe any other term, covenant or agreement contained in the Securities
or this Indenture (other than a default specified in subparagraph (a), (b)
or (c) above) or the Subsidiary Guarantees, as the case may be, for a
period of 30 days after written notice of such failure stating that it is
a "notice of default" hereunder and requiring the Company or such
Subsidiary Guarantor, as the case may be, to remedy the same shall have
been given (x) to the Company or such Subsidiary Guarantor, as the case
may be, by the Trustee or (y) to the Company or such Subsidiary Guarantor,
as the case may be, and the Trustee, by the Holders of at least 25% in
aggregate principal amount of the Securities then Outstanding; or
(e) the occurrence and continuation beyond any applicable grace
period of any default in the payment of the principal of, premium, if any,
or interest on any Indebtedness of the Company (other than the Securities)
or any Subsidiary for money borrowed when due, or any other default
resulting in acceleration of any Indebtedness of the Company or any
Subsidiary for money borrowed, provided that the aggregate principal
amount of such Indebtedness shall exceed $2,500,000; or
(f) one or more final judgments or orders rendered against the
Company or any Subsidiary that are unsatisfied and that require the
payment in money, either individually or in an aggregate amount in excess
of $2,500,000, which judgments or orders are not paid, discharged or
stayed for a period of 60 days; or
(g) the entry of a decree or order by a court having jurisdiction in
the premises (A) for relief in respect of the Company or any Restricted
Subsidiary in an involuntary case or proceeding under the Federal
Bankruptcy Code or any other applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (B) adjudging the
Company or any Restricted Subsidiary bankrupt or insolvent, or approving a
petition seeking reorganization, arrangement, adjustment or composition of
the Company or any Restricted Subsidiary under the Federal Bankruptcy Code
or any applicable federal or state law, or appointing under any such law a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Restricted Subsidiary or of a
substantial part of its consolidated assets, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect
for a period of 60 consecutive days; or
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(h) the commencement by the Company or any Restricted Subsidiary of
a voluntary case or proceeding under the Federal Bankruptcy Code or any
other applicable federal or state bankruptcy, insolvency, reorganization
or other similar law or any other case or proceeding to be adjudicated
bankrupt or insolvent, or the consent by the Company or any Restricted
Subsidiary to the entry of a decree or order for relief in respect thereof
in an involuntary case or proceeding under the Federal Bankruptcy Code or
any other applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by
the Company or any Restricted Subsidiary of a petition or consent seeking
reorganization or relief under any applicable federal or state law, or the
consent by it under any such law to the filing of any such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or other similar official)
of the Company or any Restricted Subsidiary or of any substantial part of
its consolidated assets, or the making by it of an assignment for the
benefit of creditors under any such law, or the admission by it in writing
of its inability to pay its debts generally as they become due or taking
of corporate action by the Company or any Restricted Subsidiary in
furtherance of any such action; or
(i) except as permitted hereunder and the Securities, the cessation
of the effectiveness of any Subsidiary Guarantee or the repudiation by any
Subsidiary Guarantor (or any Person acting on behalf of any Subsidiary
Guarantor) of its obligations under its Subsidiary Guarantee; or
(j) except as permitted hereunder and the Securities, the cessation
of the effectiveness of the Pledge Agreement or the repudiation by the
Pledgor thereunder (or any Person acting on behalf of such Pledgor) of its
obligations under the Pledge Agreement.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(g) or (h) hereof) occurs and is continuing, the Trustee or the
Holders of not less than 25% in aggregate principal amount of the Securities
then Outstanding, by written notice to the Company (and to the Trustee if such
notice is given by the Holders), may, and the Trustee upon the request of the
Holders of not less than 25% in aggregate principal amount of the Outstanding
Securities shall, by a notice in writing to the Company, declare all unpaid
principal of, premium, if any, and accrued and unpaid interest and Liquidated
Damages, if any, on all the Securities to be due and payable immediately, upon
which declaration all amounts payable in respect of the Securities shall be
immediately due and payable. If an Event of Default specified in Section 5.1(g)
or (h) hereof occurs and is continuing, the amounts described above shall become
and be immediately due and payable without any declaration, notice or other act
on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and before a
judgment or decree for payment of the money due has been obtained by the Trustee
as hereinafter in this
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Article provided, the Holders of a majority in aggregate principal amount of the
Securities Outstanding, by written notice to the Company and the Trustee, may
rescind and annul each such declaration and its consequences if
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay,
(1) all overdue interest on all Outstanding Securities,
(2) all unpaid principal of (and premium or Liquidated
Damages, if any, on) any Outstanding Securities which have become
due otherwise than by such declaration of acceleration, including
any Securities required to have been purchased on a Change of
Control Date or a Net Proceeds Payment Date pursuant to a Change of
Control Offer or a Net Proceeds Offer, as applicable, and interest
on such unpaid principal at the rate borne by the Securities,
(3) to the extent that payment of such interest is lawful,
interest on overdue interest and overdue principal at the rate borne
by the Securities (without duplication of any amount paid or
deposited pursuant to clauses (1) and (2) above), and
(4) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
(b) the rescission would not conflict with any judgment or decree of
a court of competent jurisdiction as certified to the Trustee by the
Company in an Officer's Certificate and Opinion of Counsel; and
(c) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest or Liquidated Damages,
if any, on Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13
hereof.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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Notwithstanding the foregoing, if an Event of Default specified in Section
5.1(e) hereof shall have occurred and be continuing, such Event of Default and
any consequential acceleration shall be automatically rescinded if the
Indebtedness that is the subject of such Event of Default has been repaid, or if
the default relating to such Indebtedness is waived or cured and if such
Indebtedness has been accelerated, then the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness (provided, in each
case, that such payment, waiver, cure or rescission is effected within a period
of 10 days from the continuation of such default beyond the applicable grace
period or the occurrence of such acceleration), and written notice of such
repayment, or cure or waiver and rescission, as the case may be, shall have been
given to the Trustee by the Company and countersigned by the holders of such
Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days
after any such acceleration in respect of the Securities, and so long as such
rescission of any such acceleration of the Securities does not conflict with any
judgment or decree as certified to the Trustee by the Company by an Officers'
Certificate and Opinion of Counsel.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(a) default is made in the payment of any installment of interest or
Liquidated Damages, if any, on any Security when such interest or
Liquidated Damages becomes due and payable and such default continues for
a period of 30 days, or
(b) default is made in the payment of the principal (or premium, if
any, on) any Security at the Maturity thereof or with respect to any
Security required to have been purchased by the Company on the Change of
Control Purchase Date or the Net Proceeds Payment Date pursuant to a
Change of Control Offer or Net Proceeds Offer, as applicable,
then the Company will, upon the demand of the Trustee, pay to the Trustee for
the benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal (and premium or Liquidated Damages, if
any) and interest, and interest on any overdue principal (and premium or
Liquidated Damages, if any) and, to the extent that payment of such interest
shall be legally enforceable, upon any overdue installment of interest, at the
rate borne by the Securities, and in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
money adjudged or decreed to be payable in the manner provided by law out of the
Property of the Company or any other obligor upon the Securities, wherever
situated.
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If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proof of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company, or any other obligor upon the
Securities, their creditors or the Property of the Company or of such other
obligor, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company or such other obligor for the payment of overdue principal, premium
or Liquidated Damages, if any, or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal (and
premium or Liquidated Damages, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or documents and
take any other actions including participation as a full member of any
creditor or other committee as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel) and of the Holders allowed in such judicial
proceedings and
(b) to collect and receive any money or other Property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.6 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
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SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or Securities or
Subsidiary Guarantees endorsed thereon may be prosecuted and enforced by the
Trustee without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name and as trustee of an express
trust, and any recovery of judgment shall, after provision for the payment of
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders of
the Securities in respect of which such judgment has been recovered.
SECTION 5.6. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in the case of the distribution of such money on account of principal (or
premium or Liquidated Damages, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: to the payment of all amounts due the Trustee under Section
6.6 hereof;
SECOND: to the payment of the amounts then due and unpaid for
principal of (and premium, if any, on) and interest and Liquidated
Damages, if any, on the Securities in respect of which or for the benefit
of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal (and premium, if any) and interest and Liquidated
Damages, if any, respectively; and
THIRD: the balance, if any, to the Company.
SECTION 5.7. Limitations on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal amount
of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
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(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority or more in aggregate principal amount of the Outstanding
Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium,
Liquidated Damages and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment, as provided herein (including, if applicable, Article XII hereof) and
in such Security of the principal of (and premium if any, on) and (subject to
Section 3.7 hereof) interest and Liquidated Damages, if any, on such Security on
the respective Stated Maturities expressed in such Security (or, in the case of
redemption, on the Redemption Date) and to institute suit for the enforcement of
any such payment, and such rights shall not be impaired without the consent of
such Holder.
SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Subsidiary Guarantors, the Trustee and the
Holders shall be restored severally and respectively to their former positions
hereunder and thereunder and all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
3.6 hereof, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall to the extent permitted by law, be
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cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 5.12. Control by Holders.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture,
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(c) the Trustee need not take any action which might involve it in
personal liability or be unduly prejudicial to the Holders not joining
therein.
SECTION 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities may on behalf of the Holders of all the Securities
waive any existing Default or Event of Default hereunder and its consequences,
except a Default or Event of Default
(a) in respect of the payment of the principal of (or premium, if
any, on) or interest or Liquidated Damages, if any, on any Security, or
(b) in respect of a covenant or provision hereof which under Article
IX hereof cannot be modified or amended without the consent of the Holder
of each Outstanding Security affected thereby.
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Upon any such waiver, such Default or Event of Default shall cease to
exist for every purpose under this Indenture, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
SECTION 5.14. Waiver of Stay, Extension or Usury Laws.
Each of the Company and each Subsidiary Guarantor covenants (to the extent
that each may lawfully do so) that it will not at any time insist upon, plead or
in any manner whatsoever claim or take the benefit or advantage of, any stay,
extension, or usury law or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Company from paying all
or any portion of the principal of (premium, if any, on) or interest or
Liquidated Damages, if any, on the Securities as contemplated herein, or which
may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) each of the Company and each Subsidiary
Guarantor hereby expressly waives all benefit or advantage of any such law, and
covenant that they will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 5.15. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorney's fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the Trustee
or to any suit instituted by any Holders of more than 10% in principal amount of
the Outstanding Securities.
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
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(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, and shall be fully protected in so relying, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; provided, however, in
the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
(i) this paragraph shall not limit the effect of Section 6.1(b);
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.12.
(d) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 6.2. Certain Rights of Trustee.
Subject to the provisions of Section 6.1 hereof:
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from action upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors shall be sufficiently evidenced by a
Board Resolution;
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(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence or indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may reasonably
see fit;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it in good faith to be
authorized or within the discretion or rights or powers conferred upon it
by this Indenture; and
(i) the Trustee shall not be deemed to have notice or knowledge of
any matter unless a Responsible Officer has actual knowledge thereof or
unless written notice thereof is received by the Trustee at its Corporate
Trust Office and such notice references the Securities generally, the
Company or this Indenture.
The Trustee shall not be required to advance, expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers if it shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
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SECTION 6.3. Trustee Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except for the
Trustee's certificate of authentication, shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or the Securities, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder. The Trustee shall not be accountable for
the use or application by the Company of any Securities or the proceeds thereof.
SECTION 6.4. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other agent
of the Company or of the Trustee, in its individual or any other capacity, may
become the owner or pledgee of Securities and, subject to TIA Sections 310(b)
and 311 in the case of the Trustee, may otherwise deal with the Company with the
same rights it would have if it were not the Trustee, Paying Agent, Security
Registrar or such other agent.
SECTION 6.5. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
SECTION 6.6. Compensation and Reimbursement.
The Company agrees:
(a) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agent and counsel), except any such expense,
disbursement or advance as may be attributable to the Trustee's wilful
misconduct, negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without wilful misconduct,
negligence or bad faith on its part, (i) arising out of or in connection
with the acceptance or administration of this trust, including the costs
and expenses of defending itself against any claim or liability in
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connection with the exercise or performance of any of its powers or duties
hereunder or (ii) in connection with enforcing this indemnification
provision.
The obligations of the Company under this Section 6.6 to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture or any other termination under any Insolvency or
Liquidation Proceeding. As security for the performance of such obligations of
the Company, the Trustee shall have a claim and lien prior to the Securities
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for payment of principal of (and premium or Liquidated
Damages, if any, on) or interest on particular Securities. Such lien shall
survive the satisfaction and discharge of this Indenture or any other
termination under any Insolvency or Liquidation Proceeding.
When the Trustee incurs expenses or renders services after the occurrence
of an Event of Default specified in paragraph (g) or (h) of Section 5.1 of this
Indenture, such expenses and the compensation for such services are intended to
constitute expenses of administration under any Insolvency or Liquidation
Proceeding.
SECTION 6.7. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be eligible to
act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and
surplus of at least $50,000,000. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of federal,
state, territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section 6.7, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 6.8. Conflicting Interests.
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act; provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
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SECTION 6.9. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.10 hereof.
(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 6.10 hereof shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of not
less than a majority in aggregate principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 6.7 hereof
and shall fail to resign after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a Security for at least
six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee. If, within
one year after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in aggregate principal amount of the Outstanding Securities delivered
to the Company and the retiring Trustee, the successor Trustee so appointed
shall, forthwith upon
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its acceptance of such appointment, become the successor Trustee and supersede
the successor Trustee appointed by the Company. If no successor Trustee shall
have been so appointed by the Company or the Holders and accepted appointment in
the manner hereinafter provided, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all other
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee. The evidence of such successorship may, but
need not be, evidenced by a supplemental indenture.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to the Holders of
Securities in the manner provided for in Section 15.5 hereof. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 6.10. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of all amounts due it under
Section 6.6 hereof, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all money and
other Property held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.11. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities;
and in case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the
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name of any predecessor hereunder or in the name of the successor Trustee; and
in all such cases such certificates shall have the full force which it is
anywhere in the Securities of like tenor or in this Indenture provided;
provided, however, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
SECTION 6.12. Notice of Defaults.
Within 90 days after the occurrence of any Default hereunder, the Trustee
shall transmit in the manner and to the extent provided in TIA Section 313(c),
notice of such Default hereunder, which a Responsible Officer of the Trustee has
actual knowledge of, unless such Default shall have been cured or waived;
provided, however, that, except in the case of a Default in the payment of the
principal of (or premium or Liquidated Damages, if any, on) or interest on any
Security, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interest of the Holders; and
provided, further, that in the case of any Default under Section 5.1(b) or
5.1(d) no such notice to Holders shall be given until at least 30 days after the
occurrence thereof.
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1. Holders' Lists; Holder Communications; Disclosures Respecting
Holders.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. Neither the Company nor the Trustee shall be under any
responsibility with regard to the accuracy of such list. If the Trustee is not
the Security Registrar, the Company shall furnish to the Trustee semi-annually
before each Regular Record Date, and at such other times as the Trustee may
reasonably request in writing, a list, in such form as the Trustee may
reasonably request, as of such date of the names and addresses of the Holders
then known to the Company. The Company and the Trustee shall also satisfy any
other requirements imposed upon each of them by TIA Section 312(a).
Holders may communicate pursuant to Section 312(b) of the TIA with other
Holders with respect to their rights under this Indenture or the Securities.
Every Holder of Securities, by receiving and holding the same, agrees with the
Company, the Security Registrar and the Trustee that none of the Company, the
Security Registrar or the Trustee, or any agent of any of them, shall be held
accountable by reason of the disclosure of any information as to the names and
addresses of the Holders in accordance with TIA Section 312, regardless of the
source from which such information was derived, that each of such Persons shall
have the protection of TIA Section
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312(c) and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under TIA Section 312(b).
SECTION 7.2. Reports by Trustee.
Within 60 days after July 31 of each year commencing with July 31, 1997,
the Trustee shall transmit by mail to all Holders, as their names and addresses
appear in the Security Register, a brief report dated as of such July 31 in
accordance with, and to the extent required under TIA Section 313(a). The
Trustee shall also comply with TIA Sections 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the Securities
become listed on any stock exchange or automatic quotation system.
A copy of each Trustee's report, at the time of its mailing to Holders of
Securities, shall be mailed to the Company and filed with the Commission and
each stock exchange, if any, on which the Securities are listed.
SECTION 7.3. Reports by Company.
The Company shall:
(a) file with the Trustee, within 15 days after the date on which
the Company files or is required to file the same with the Commission,
copies of the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) which
the Company may be required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not
required to file information, documents or reports pursuant to either of
said Sections, then the Company shall file with the Trustee such
information, documents or reports as required pursuant to Section 10.9
hereof;
(b) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance
by the Company with the conditions and covenants of this Indenture as may
be required from time to time by such rules and regulations; and
(c) transmit by mail to all Holders, in the manner and to the extent
provided in TIA Section 313(c), such summaries of any information,
documents and reports (without exhibits except to the extent required by
TIA Section 313(c)) required to be filed by the Company pursuant to
paragraph (a) or (b) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission.
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ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not, in any single transaction or a series of related
transactions, merge or consolidate with or into any other Person, or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of the Properties of the Company and its Restricted Subsidiaries on a
consolidated basis to any Person or group of Affiliated Persons, and the Company
shall not permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if, in any event, such transaction or
series of transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the Properties of the Company and its Restricted Subsidiaries on a consolidated
basis to any other Person or group of Affiliated Persons, unless:
(a) either (i) if the transaction is a merger or consolidation, the
Company shall be the surviving Person of such merger or consolidation, or
(ii) the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or to which the Properties of the
Company or its Restricted Subsidiaries, as the case may be, are sold,
assigned, conveyed, transferred, leased or otherwise disposed of (any such
surviving Person or transferee Person being called the "Surviving Entity")
shall be a corporation organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and
shall, in either case, expressly assume by a supplemental indenture to
this Indenture executed and delivered to the Trustee, in form satisfactory
to the Trustee, all the obligations of the Company or the Restricted
Subsidiaries with respect to the Securities and this Indenture, and, in
any case, this Indenture shall remain in full force and effect;
(b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (and treating
any Indebtedness not previously an obligation of the Company or any of its
Restricted Subsidiaries which becomes an obligation of the Company or any
of its Restricted Subsidiaries in connection with or as a result of such
transaction or transactions as having been incurred at the time of such
transaction or transactions), no Default or Event of Default shall have
occurred and be continuing;
(c) except in the case of the consolidation or merger of any
Restricted Subsidiary with or into the Company, immediately after giving
effect to such transaction or transactions on a pro forma basis, the
Consolidated Net Worth of the Company (or the Surviving Entity if the
Company is not the continuing obligor under this Indenture) is at least
equal to the Consolidated Net Worth of the Company immediately before such
transaction or transactions;
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(d) except in the case of the consolidation or merger of the Company
with or into a Restricted Subsidiary or any Restricted Subsidiary with or
into the Company or another Restricted Subsidiary, immediately before and
immediately after giving effect to such transaction or transactions on a
pro forma basis (assuming that the transaction or transactions occurred on
the first day of the period of four full fiscal quarters ending
immediately prior to the consummation of such transaction or transactions,
with the appropriate adjustments with respect to the transaction or
transactions being included in such pro forma calculation), the Company
(or the Surviving Entity if the Company is not the continuing obligor
under this Indenture) could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under Section 10.11(a) hereof;
(e) if any of the Properties of the Company or any of its Restricted
Subsidiaries would upon such transaction or series of related transactions
become subject to any Lien (other than a Permitted Lien), the creation or
imposition of such Lien shall have been in compliance with Section 10.13
hereof; and
(f) the Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture) shall have delivered to the
Trustee, in form and substance reasonably satisfactory to the Trustee, (i)
an Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, transfer, lease or other disposition and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture complies with this Indenture and that all
conditions precedent set forth in this Section 8.1 have been satisfied.
SECTION 8.2. Successor Substituted.
Upon any consolidation or merger or any sale, assignment, lease,
conveyance, transfer or other disposition of all or substantially all of the
Properties of the Company and its Restricted Subsidiaries on a consolidated
basis in accordance with Section 8.1 in which the Company is not the continuing
corporation, the Surviving Entity shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture with the
same effect as if such Surviving Entity had been named as the Company herein,
and thereafter the Company (which term shall for this purpose mean the Person
named as the "Company" in the first paragraph of this Indenture of any successor
Person which shall theretofore become such in the manner described in Section
8.1), except in the case of a lease, shall be discharged from all obligations
and covenants under this Indenture and the Securities, and the Company may be
liquidated and dissolved.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, the Subsidiary Guarantors and the Trustee upon Company
Request, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(a) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
contained herein and in the Securities or;
(b) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company; or
(c) to comply with any requirement of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Sections
6.9 and 6.10; or
(e) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture provided that such action shall not
adversely affect the interests of the Holders in any material respect; or
(f) to secure the Securities pursuant to the requirements of Section
10.13 or otherwise;
(g) to provide for uncertificated Securities in addition to or in
place of certificated Securities; or
(h) to reflect the release of any Subsidiary Guarantor from its
Subsidiary Guarantee pursuant to Section 13.4 or to add as a Subsidiary
Guarantor any Subsidiary of the Company pursuant to Section 13.5 in the
manner provided by this Indenture.
After an amendment under this Section becomes effective, the Company shall
mail to Holders of Securities a notice briefly describing such amendment. The
failure to give such notice
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to all Holders of Securities, or any defect therein, shall not impair or affect
the validity of an amendment under this Section.
SECTION 9.2. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, the Subsidiary Guarantors and the Trustee upon Company Request may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Security or alter the provisions with
respect to redemption of the Securities, or reduce the principal amount
thereof or the rate of interest thereon or any premium thereon or any
Liquidated Damages thereon, or change the coin or currency in which
principal of any Security or any premium or the interest or any Liquidated
Damages, if any, on any Security is payable, or impair the right to
institute suit for the enforcement of any such payment on or with respect
to any Security; or
(b) reduce the percentage of aggregate principal amount of the
Outstanding Securities, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver of compliance with certain provisions of this Indenture or
certain defaults hereunder or the consequences of a default provided for
in this Indenture; or
(c) modify any of the provisions of this Section or Sections 5.13
and 10.19 hereof, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby or the rights of any Holder to receive payments of
principal of or premium, if any or interest or Liquidated Damages, if any,
on the Securities; or
(d) change the ranking of the Securities in a manner adverse to the
Holders or expressly subordinate in right of payment the Securities to any
other Indebtedness; or
(e) amend, change or modify the obligation of the Company to make
and consummate a Change of Control Offer in the event of a Change of
Control or to make and consummate a Net Proceeds Offer with respect to any
Asset Sale or modify any of the provisions or definitions with respect
thereto; or
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(f) release any security that may have been granted in respect of
the Securities.
It shall not be necessary for any Act of the Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
After an amendment under this Section becomes effective, the Company shall
mail to Holders of Securities a notice briefly describing such amendment. The
failure to give such notice to all Holders of Securities, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 9.3. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive
(subject to Section 6.1), and shall be fully protected relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect, if
this Indenture shall then be qualified under the TIA.
SECTION 9.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Board of Directors of the Company, to any such supplemental indenture may be
prepared and executed by the Company and, upon Company Order, authenticated and
delivered by the Trustee in exchange for Outstanding Securities of like tenor
and in like principal amount.
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SECTION 9.7. Notice of Supplemental Indentures and Waivers.
Promptly after (i) the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 9.2 hereof or (ii)
a waiver under Section 5.13 or 10.19 hereof becomes effective, the Company shall
give notice thereof to the Holders of each Outstanding Security affected, in the
manner provided for in Section 15.5, setting forth in general terms the
substance of such supplemental indenture or waiver as the case may be.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium or Liquidated Damages, if any,
and Interest.
The Company covenants and agrees for the benefit of the Holders that it
will duly and punctually pay the principal of (and premium or Liquidated
Damages, if any, on) and interest on the Securities in accordance with the terms
of the Securities and this Indenture.
SECTION 10.2. Maintenance of Office or Agency.
The Company shall maintain an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Corporate Trust Office shall be such office or agency of the Company, unless the
Company shall designate and maintain some other office or agency for one or more
of such purposes. The Company will give prompt written notice to the Trustee of
any change in the location of any such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the aforementioned office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind any such designation. Further,
if at any time there shall be no such office or agency in The City of New York
where the Securities may be presented or surrendered for payment, the Company
shall forthwith designate and maintain such an office or agency in The City of
New York, in order that the Securities shall at all times be payable in The City
of New York. The Company will give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such other
office or agency.
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SECTION 10.3. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it shall, on
or before 11:00 a.m., New York City time, on each due date of the principal of
(and premium or Liquidated Damages, if any, on) or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium or Liquidated
Damages, if any) or interest so becoming due until such sum shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will on or before 11:00 a.m., New York City time, on each due
date of the principal of (and premium or Liquidated Damages, if any, on), or
interest on, any Securities, deposit with a Paying Agent immediately available
funds sufficient to pay the principal (and premium or Liquidated Damages, if
any) or interest so becoming due, such funds to be held in trust for the benefit
of the Persons entitled to such principal, premium, Liquidated Damages or
interest, and (unless such Paying Agent is the Trustee) the Company shall
promptly notify the Trustee of such action or any failure so to act.
The Company shall cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of (and
premium, if any, on) or interest or Liquidated Damages, if any, on Securities in
trust for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal (and
premium, if any) or interest or Liquidated Damages, if any; and
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
sums.
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Subject to applicable escheat and abandoned property laws, any money
deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of (and premium, if any, on) or interest
or Liquidated Damages, if any, on any Security and remaining unclaimed for two
years after such principal (and premium, if any) or interest or Liquidated
Damages, if any, has become due and payable shall be paid to the Company on
Company Request, or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The City of
New York (an "Authorized Newspaper"), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 10.4. Corporate Existence.
Except as expressly permitted by Article VIII hereof, Section 10.15 hereof
or other provisions of this Indenture, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of the Company and each
Restricted Subsidiary; provided, however, that the Company shall not be required
to preserve any such existence of its Restricted Subsidiaries, rights or
franchises, if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries, taken as a whole, and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 10.5. Payment of Taxes; Maintenance of Properties; Insurance.
The Company shall or, as applicable, shall cause its Restricted
Subsidiaries to, pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Restricted
Subsidiary or upon the income, profits or Property of the Company or any
Restricted Subsidiary and (b) all lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a Lien upon the Property of the
Company or any Restricted Subsidiary; provided, however, that the Company shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which
appropriate provision has been made in accordance with GAAP.
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The Company shall or, as applicable, shall cause its Restricted
Subsidiaries to, cause all material Properties owned by the Company or any
Restricted Subsidiary and used or held for use in the conduct of its business or
the business of any Restricted Subsidiary to be maintained and kept in good
condition, repair and working order (ordinary wear and tear excepted), all as in
the judgment of the Company or such Restricted Subsidiary may be necessary so
that its business may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company or any
Restricted Subsidiary from discontinuing the maintenance of any such Properties
if such discontinuance is, in the judgment of the Company or such Restricted
Subsidiary, as the case may be, desirable in the conduct of the business of the
Company or such Restricted Subsidiary and not disadvantageous in any material
respect to the Holders. Notwithstanding the foregoing, nothing contained in this
Section 10.5 shall limit or impair in any way the right of the Company and its
Restricted Subsidiaries to sell, divest and otherwise to engage in transactions
that are otherwise permitted by this Indenture.
The Company shall at all times keep all of its, and cause its Restricted
Subsidiaries to keep their, Properties which are of an insurable nature insured
with insurers, believed by the Company to be responsible, against loss or damage
to the extent that property of similar character and in a similar location is
usually so insured by corporations similarly situated and owning like
Properties.
The Company or any Restricted Subsidiary may adopt such other plan or
method of protection, in lieu of or supplemental to insurance with insurers,
whether by the establishment of an insurance fund or reserve to be held and
applied to make good losses from casualties, or otherwise, conforming to the
systems of self-insurance maintained by corporations similarly situated and in a
similar location and owning like Properties, as may be determined by the Board
of Directors of the Company or such Restricted Subsidiary.
SECTION 10.6. Limitation on Sale-Leaseback Transactions.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into, assume, guarantee or otherwise become liable
with respect to any Sale/Leaseback Transaction unless (i) the Company or such
Restricted Subsidiary, as the case may be, would be able to incur Indebtedness
(not including the incurrence of Permitted Indebtedness) pursuant to and in an
amount equal to the Attributable Indebtedness with respect to such
Sale/Leaseback Transaction pursuant to Sections 10.11(a), (ii) the Company or
such Restricted Subsidiary receives proceeds from such Sale/Leaseback
Transaction at least equal to the Fair Market Value of the Property subject
thereto and (iii) the Company applies an amount in cash equal to the Net
Available Proceeds of the Sale/Leaseback Transaction in accordance with the
provisions of Section 10.15 hereof as if such Sale/Leaseback Transaction were an
Asset Sale.
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SECTION 10.7. Limitation on Conduct of Business.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in the conduct of any business other than any Related
Business.
SECTION 10.8. Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company and within 45 days of the end of each of
the first, second and third quarters of each fiscal year of the Company, a
written certificate signed by a principal executive officer, principal financial
officer or principal accounting officer stating that a review of the activities
of the Company and its Restricted Subsidiaries during the preceding fiscal
quarter or fiscal year, as applicable, has been made under the supervision of
the signing Person with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Person signing such certificate, that to the
best of such Person's knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and no Default or
Event of Default has occurred and is continuing (or, if a Default or Event of
Default shall have occurred to either such Person's knowledge, describing all
such Defaults or Events of Default of which such Person may have knowledge and
what action the Company is taking or proposes to take with respect thereto).
Such written statement shall comply with TIA Section 314(a)(4). For purposes of
this Section 10.8(a), such compliance shall be determined without regard to any
period of grace or requirement of notice under this Indenture.
(b) The Company shall, so long as any of the Securities is Outstanding,
deliver to the Trustee, upon any of its Officers becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company proposes to take with respect thereto,
within 10 days of its occurrence.
SECTION 10.9. Provision of Financial Information.
The Company shall file on a timely basis with the Commission, to the
extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act. The
Company shall also be required (i) to file with the Trustee (with exhibits), and
provide to each Holder of Securities (without exhibits), without cost to such
Holder, copies of such reports and documents within 15 days after the date on
which the Company files such reports and documents with the Commission or the
date on which the Company would be required to file such reports and documents
if the Company were so required and (ii) if filing such reports and documents
with the Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at its cost copies of such reports and documents
(including any exhibits
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thereto) to any Holder of Securities, securities analyst or prospective investor
promptly upon written request given in accordance with Section 15.4 hereof.
SECTION 10.10. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, take the following actions:
(i) declare or pay any dividend on, or make any other distribution
to holders of, any shares of Capital Stock of the Company (other than
dividends or distributions payable solely in shares of Qualified Capital
Stock of the Company or in options, warrants or other rights to purchase
Qualified Capital Stock of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any Affiliate thereof (other than Capital
Stock owned by a Restricted Subsidiary) or any options, warrants, or other
rights to acquire such Capital Stock;
(iii) make any principal payment on or repurchase, redeem, defease
or otherwise acquire or retire for value, prior to any scheduled principal
payment, scheduled sinking fund payment or maturity, any Subordinated
Indebtedness; or
(iv) make any Restricted Investment;
(such payments or other actions described in clauses (i) through (iv) being
collectively referred to as "Restricted Payments"), unless at the time of and
after giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the amount determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default shall have
occurred and be continuing, (2) the Company could incur $1.00 of additional
Indebtedness (excluding Permitted Indebtedness) in accordance with Section
10.11(a) hereof and (3) the aggregate amount of all Restricted Payments declared
or made after the date of this Indenture shall not exceed the sum (without
duplication) of the following:
(A) 50% of the Consolidated Net Income of the Company (or, if such
Consolidated Net Income shall be a loss, minus 100% of such loss) accrued
on a cumulative basis during the period beginning on October 1, 1996 and
ending on the last day of the Company's last fiscal quarter for which
quarterly or annual financial statements are available next preceding such
proposed Restricted Payment, plus
(B) the aggregate Net Cash Proceeds received after the date of this
Indenture by the Company from the issuance or sale (other than to any of
its Restricted Subsidiaries) of shares of Qualified Capital Stock of the
Company or any options, warrants or rights to purchase such shares of
Qualified Capital Stock of the Company, plus
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(C) the aggregate Net Cash Proceeds received after the date of this
Indenture by the Company (other than from any of its Restricted
Subsidiaries) upon the exercise of any options, warrants or rights to
purchase shares of Qualified Capital Stock of the Company, plus
(D) the aggregate Net Cash Proceeds received after the date of this
Indenture by the Company from the issuance or sale (other than to any of
its Restricted Subsidiaries) of Indebtedness or shares of Disqualified
Capital Stock that have been converted into or exchanged for Qualified
Capital Stock of the Company, together with the aggregate cash received by
the Company at the time of such conversion or exchange, plus
(E) the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Qualified Capital Stock subsequent to the date of
original issuance of the Securities to any employee stock ownership plan
or a trust established by the Company or any of its Restricted
Subsidiaries for the benefit of their employees to the extent that any
such Net Cash Proceeds are equal to an increase in the Consolidated Net
Worth of the Company resulting from principal repayments paid by such
employee stock ownership plan or trust with respect to Indebtedness
incurred by it to finance the purchase of such Qualified Capital Stock,
plus
(F) to the extent not otherwise included in Consolidated Net Income,
the net reduction in Investments by the Company and its Restricted
Subsidiaries, subsequent to the Issue Date, in any Person resulting from
dividends, repayments of loans or advances, or other transfers of assets
to the Company or a Restricted Subsidiary, or from the redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary (valued in each case as
provided in the definition of Investment), not to exceed the total amount
of Investments (other than Permitted Investments) made by the Company and
its Restricted Subsidiaries in such Unrestricted Subsidiary that were
previously treated as a Restricted Payment.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted
Subsidiaries may take the following actions so long as (in the case of clauses
(ii), (iii) and (iv) below) no Default or Event of Default shall have occurred
and be continuing:
(i) the payment of any dividend on any Capital Stock of the Company
or any Restricted Subsidiary within 60 days after the date of declaration
thereof, if at such declaration date such declaration complied with the
provisions of paragraph (a) above (and such payment shall be deemed to
have been paid on such date of declaration for purposes of any calculation
required by the provisions of paragraph (a) above);
(ii) the repurchase, redemption or other acquisition or retirement
of any shares of any class of Capital Stock of the Company or any
Restricted Subsidiary, in exchange for, or out of the aggregate Net Cash
Proceeds of, a substantially concurrent issue and sale (other than to a
Restricted Subsidiary) of shares of Qualified Capital Stock of the Company
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(other than Capital Stock issued or sold to a Subsidiary of the Company or
an employee stock ownership plan or to a trust established by the Company
or any of its Subsidiaries for the benefit of their employees);
(iii) the repurchase, redemption, repayment, defeasance or other
acquisition or retirement for value of any Subordinated Indebtedness in
exchange for, or out of the aggregate Net Cash Proceeds from, a
substantially concurrent issuance and sale (other than to a Restricted
Subsidiary) of shares of Qualified Capital Stock of the Company; and
(iv) the repurchase of shares of, or options to purchase shares of,
Capital Stock (other than Preferred Stock) of the Company or any of its
Subsidiaries from employees, former employees, directors or former
directors of the Company or any of its Subsidiaries (or permitted
transferees of such employees, former employees, directors or former
directors or their respective estates), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors of the Company under which
such individuals purchase or sell or are granted the option or right to
purchase or sell such Capital Stock (other than Preferred Stock);
provided, however, that the aggregate amount of such repurchases shall not
exceed $250,000 in any calendar year.
The actions described in clauses (i), (ii), (iii) and (iv) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be made in accordance
with this paragraph (b) but shall reduce the amount that would otherwise be
available for Restricted Payments under clause (C) of paragraph (a), provided,
that any dividend paid pursuant to clause (i) of this paragraph (b) shall reduce
the amount that would otherwise be available under clause (C) of paragraph (a)
when declared, but not also when subsequently paid pursuant to such clause (i).
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officer's Certificate stating that the
Restricted Payment complies with the Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed.
(c) In computing Consolidated Net Income under paragraph (a), (1) the
Company shall use audited financial statements for the portions of the relevant
period for which audited financial statements are available on the date of
determination and unaudited financial statements and other current financial
data based on the books and records of the Company for the remaining portion of
such period and (2) the Company shall be permitted to rely in good faith on the
financial statements and other financial data derived from the books and records
of the Company that are available on the date of determination. If the Company
makes a Restricted Payment which, at the time of the making of such Restricted
Payment would in the good faith determination of the Company be permitted under
the requirements of this Indenture, such Restricted Payment shall be deemed to
have been made in compliance with this Indenture notwithstanding any subsequent
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adjustments made in good faith to the Company's financial statements affecting
Consolidated Net Income of the Company for any period.
SECTION 10.11. Limitation on Indebtedness and Disqualified Capital Stock.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume, guarantee or in any manner become
directly or indirectly liable for the payment of (collectively, "incur") any
Indebtedness (including any Acquired Indebtedness but excluding any Permitted
Indebtedness), or issue any Disqualified Capital Stock, unless, an a pro forma
basis after giving effect to such incurrence or issuance and the application of
the proceeds therefrom, the Consolidated Fixed Charge Coverage Ratio for the
four most recent consecutive fiscal quarters would have been equal to or greater
than 2.0 to 1.0.
(b) Neither the Company nor any Subsidiary Guarantor shall incur any
Indebtedness unless such Indebtedness is expressly pari passu with, or
subordinated in right of payment to, in the case of the Company, the Securities
or, in the case of a Subsidiary Guarantor, its Subsidiary Guarantee.
SECTION 10.12. Limitation on Issuance and Sales of Capital Stock by
Restricted Subsidiaries.
The Company (i) shall not permit any Restricted Subsidiary to issue or
sell any Capital Stock to any Person other than to the Company or a Wholly Owned
Restricted Subsidiary and (ii) shall not permit any Person other than the
Company or a Wholly Owned Restricted Subsidiary to own any Capital Stock of any
Restricted Subsidiary, except, in the case of clause (i) or (ii), with respect
to a Wholly Owned Restricted Subsidiary as described in of the definition of
"Wholly Owned Restricted Subsidiary". The sale of all of the Capital Stock of
any Restricted Subsidiary is permitted by this Section 10.12 but is subject to
the limitations of Section 10.15.
SECTION 10.13. Limitation on Liens.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume, affirm or suffer to exist or
become effective any Lien of any kind, except for Permitted Liens, upon any of
their respective Properties, whether now owned or acquired after the date of
this Indenture, or any income or profits or proceeds therefrom, or assign or
otherwise convey any right to receive income or profits therefrom, to secure any
Indebtedness of the Company or such Restricted Subsidiary, unless prior to, or
contemporaneously therewith, the Securities are equally and ratably secured;
provided, however, that if such Indebtedness is expressly subordinated to the
Securities, the Lien securing such Indebtedness shall be subordinated and junior
to the Lien securing the Securities with the same relative priority as such
Indebtedness has with respect to the Securities.
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SECTION 10.14. Purchase of Securities, Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall be
obligated to make an offer to purchase (a "Change of Control Offer") all of the
then Outstanding Securities, in whole or in part, from the Holders of such
Securities in integral multiples of $1,000, at a purchase price (the "Change of
Control Purchase Price") equal to 101% of the principal amount of such
Securities, plus accrued and unpaid interest, if any, and Liquidated Damages, if
any, to the Change of Control Purchase Date (as defined below), in accordance
with the procedures set forth in paragraphs (b), (c) and (d) of this Section.
The Company shall, subject to the provisions described below, be required to
purchase all Securities properly tendered into the Change of Control Offer and
not withdrawn. The Company will not be required to make a Change of Control
Offer upon a Change of Control if another Person makes the Change of Control
Offer at the same purchase price, at the same times and otherwise in substantial
compliance with the requirements applicable to a Change of Control Offer to be
made by the Company and purchases all Securities validly tendered and not
withdrawn under such Change of Control Offer.
(b) The Change of Control Offer is required to remain open for at least 20
Business Days and until the close of business on the fifth Business Day prior to
the Change of Control Purchase Date (as defined below).
(c) Not later than the 30th date following any Change of Control, the
Company shall give to the Trustee in the manner provided in Section 15.4 and
each Holder of the Securities in the manner provided in Section 15.5, a notice
(the "Change of Control Notice") governing the terms of the Change of Control
Offer and stating:
(1) that a Change in Control has occurred and that such Holder has
the right to require the Company to repurchase such Holder's Securities,
or portion thereof, at the Change of Control Purchase Price;
(2) any information regarding such Change of Control required to be
furnished pursuant to Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder;
(3) a purchase date (the "Change of Control Purchase Date") which
shall be on a Business Day and no earlier than 30 days nor later than 60
days from the date such notice is mailed;
(4) that any Security, or portion thereof, not tendered or accepted
for payment will continue to accrue interest;
(5) that unless the Company defaults in depositing money with the
Paying Agent in accordance with the last paragraph of clause (d) of this
Section 10.14, or payment is otherwise prevented, any Security, or portion
thereof, accepted for payment pursuant
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to the Change of Control Offer shall cease to accrue interest after the
Change of Control Purchase Date; and
(6) the instructions a Holder must follow in order to have his
Securities repurchased in accordance with paragraph (d) of this Section.
(d) Holders electing to have Securities purchased will be required to
surrender such Securities to the Paying Agent at the address specified in the
Change of Control Notice at least five Business Days prior to the Change of
Control Purchase Date. Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than three Business Days prior to the
Change of Control Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the certificate number(s) (in the
case of Physical Securities) and principal amount of the Securities delivered
for purchase by the Holder as to which his election is to be withdrawn and a
statement that such Holder is withdrawing his election to have such Securities
purchased. Holders whose Securities are purchased only in part will be issued
new Securities of like tenor and equal in principal amount to the unpurchased
portion for the Securities surrendered.
On or prior to the Change of Control Purchase Date, the Company shall (i)
accept for payment Securities or portion thereof validly tendered pursuant to
the Change of Control Offer, (ii) irrevocably deposit with the Paying Agent
money sufficient to pay the purchase price of all Securities or portions thereof
so tendered, and (iii) deliver or cause to be delivered to the Trustee the
Securities so accepted. The Paying Agent shall promptly mail or deliver to
Holders of the Securities so tendered payment in an amount equal to the Change
of Control Purchase Price for the Securities, and the Company shall execute and,
upon Company Order, the Trustee shall authenticate and mail or make available
for delivery to such Holders a new Security of like tenor and equal in principal
amount to any unpurchased portion of the Security which any such Holder did not
surrender for purchase. The Company shall announce the results of a Change of
Control Offer on or as soon as practicable after the Change of Control Purchase
Date. For purposes of this Section 10.14, the Trustee will act as the Paying
Agent.
(e) The Company shall comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Securities as described in this Section 10.14.
SECTION 10.15. Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any Asset Sales unless (i) the Company or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the Properties sold or otherwise
disposed of pursuant to the Asset Sale, (ii) at least 80% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, in
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respect of such Asset Sale consists of cash or Cash Equivalents and (iii) the
Company delivers to the Trustee an Officers' Certificate certifying that such
Asset Sale complies with clauses (i) and (ii) of this Section 10.15(a). The
amount (without duplication) of any Indebtedness (other than Subordinated
Indebtedness) of the Company or such Restricted Subsidiary that is expressly
assumed by the transferee in such Asset Sale and with respect to which the
Company or such Restricted Subsidiary, as the case may be, is unconditionally
released by the holder of such Indebtedness, shall be deemed to be cash or Cash
Equivalents for purposes of clause (ii) and shall also be deemed to constitute a
repayment of, and a permanent reduction in, the amount of such Indebtedness for
purposes of the following paragraph (b). If at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed of for cash (other than interest received with
respect to any such non-cash consideration), then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder and the Net Available
Proceeds thereof shall be applied in accordance with this Section 10.15. A
transfer of assets by the Company to a Restricted Subsidiary or by a Subsidiary
to the Company or to a Restricted Subsidiary will not be deemed to be an Asset
Sale and a transfer of assets that constitutes a Restricted Investment and that
is permitted under Section 10.10 will not be deemed to be an Asset Sale. In the
event of the transfer of substantially all (but not all) of the property and
assets of the Company and its Restricted Subsidiaries as an entirety to a Person
in a transaction permitted under Article VIII, the successor corporation shall
be deemed to have sold the properties and assets of the Company and its
Subsidiaries not so transferred for purposes of this Section 10.15, and shall
comply with the provisions of this Section 10.15 with respect to such deemed
sale as if it were an Asset Sale. In addition, the Fair Market Value of such
Properties of the Company or its Subsidiaries deemed to be sold shall be deemed
to be Net Available Proceeds for purposes of this Section 10.15.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company or any Restricted Subsidiary may either, no later than 270 days
after such Asset Sale, (i) apply all or any of the Net Available Proceeds
therefrom to repay Indebtedness (other than Subordinated Indebtedness) of the
Company or any Restricted Subsidiary, provided, in each case, that the related
loan commitment (if any) is thereby permanently reduced by the amount of such
Indebtedness so repaid, or (ii) invest all or any part of the Net Available
Proceeds thereof in Properties that replace the Properties that were the subject
of such Asset Sale or in other Properties that will be used in the business of
the Company and its Restricted Subsidiaries. The amount of such Net Available
Proceeds not applied or invested as provided in this paragraph shall constitute
"Excess Proceeds".
(c) When the aggregate amount of Excess Proceeds equals or exceeds
$5,000,000 (the "Trigger Date"), the Company shall make an offer to purchase,
from all Holders of the Securities, an aggregate principal amount of Securities
equal to such Excess Proceeds as follows:
(i) Not later than the 30th date following the Trigger Date, the
Company shall give to the Trustee in the manner provided in Section 15.4
hereof and each Holder of the
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Securities in the manner provided in Section 15.5 hereof, a notice (a
"Purchase Notice") offering to purchase (a "Net Proceeds Offer") from all
Holders of the Securities the maximum principal amount (expressed as a
multiple of $1,000) of Securities that may be purchased out of an amount
(the "Payment Amount") equal to such Excess Proceeds.
(ii) The offer price for the Securities shall be payable in cash in
an amount equal to 100% of the principal amount of the Securities tendered
pursuant to a Net Proceeds Offer, plus accrued and unpaid interest, if
any, and the Liquidated Damages, if any, to the date such Net Proceeds
Offer is consummated (the "Offered Price"), in accordance with the
procedures set forth in paragraph (d) of this Section. To the extent that
the aggregate Offered Price of the Securities tendered pursuant to a Net
Proceeds Offer is less than the Payment Amount relating thereto (such
shortfall constituting a "Net Proceeds Deficiency"), the Company may use
such Net Proceeds Deficiency, or a portion thereof, for general corporate
purposes, subject to the limitations of Section 10.10 hereof.
(iii) If the aggregate Offered Price of Securities validly tendered
and not withdrawn by Holders thereof exceeds the Payment Amount,
Securities to be purchased will be selected on a pro rata basis by the
Trustee based on the aggregate principal amount of Securities so tendered.
Upon completion of a Net Proceeds Offer, the amount of Excess Proceeds
shall be zero.
(iv) The Purchase Notice shall set forth a purchase date (the "Net
Proceeds Payment Date"), which shall be on a Business Day no earlier than
30 days nor later than 60 days from the Trigger Date. The Purchase Notice
shall also state (i) that a Trigger Date with respect to one or more Asset
Sales has occurred and that such Holder has the right to require the
Company to repurchase such Holder's Securities at the Offered Price,
subject to the limitations described in the foregoing paragraph (iii),
(ii) any information regarding such Net Proceeds Offer required to be
furnished under the Exchange Act and any other securities laws and
regulations thereunder, (iii) that any Security, or portion thereof, not
tendered or accepted for payment will continue to accrue interest, (iv)
that, unless the Company defaults in depositing money with the Paying
Agent in accordance with the last paragraph of clause (d) of this Section
10.15, or payment is otherwise prevented, any Security, or portion
thereof, accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Net Proceeds Payment Date, and (v) the
instructions a Holder must follow in order to have his Securities
repurchased in accordance with paragraph (d) of this Section.
(d) Holders electing to have Securities purchased will be required to
surrender such Securities to the Paying Agent at the address specified in the
Purchase Notice at least five Business Days prior to the Net Proceeds Payment
Date. Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than three Business Days prior to the Net Proceeds Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the certificate number(s) (in the case of Physical Securities)
and principal amount of the
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Securities delivered for purchase by the Holder as to which his election is to
be withdrawn and a statement that such Holder is withdrawing his election to
have such Securities purchased. Holders whose Securities are purchased only in
part will be issued new Securities of like tenor and equal in principal amount
to the unpurchased portion of the Securities surrendered.
On or prior to the Net Proceeds Payment Date, the Company shall (i) accept
for payment Securities or portions thereof validly tendered pursuant to a Net
Proceeds Offer in an aggregate principal amount equal to the Payment Amount or
such lesser amount of Securities as has been tendered, (ii) irrevocably deposit
with the Paying Agent money sufficient to pay the purchase price of all
Securities or portions thereof so tendered in an aggregate principal amount
equal to the Payment Amount or such lesser amount and (iii) deliver or cause to
be delivered to the Trustee the Securities so accepted. The Paying Agent shall
promptly mail or deliver to Holders of the Securities so accepted payment in an
amount equal to the purchase price, and the Company shall execute and the
Trustee shall authenticate and mail or make available for delivery to such
Holders a new Security of like tenor and equal in principal amount to any
unpurchased portion of the Security which any such Holder did not surrender for
purchase. Any Securities not so accepted will be promptly mailed or delivered to
the Holder thereof. The Company shall announce the results of a Net Proceeds
Offer on or as soon as practicable after the Net Proceeds Payment Date. For
purposes of this Section 10.15, the Trustee will act as the Paying Agent.
(e) The Company shall not permit any Restricted Subsidiary to enter into
or suffer to exist any agreement that would place any restriction of any kind
(other than pursuant to law or regulation) on the ability of the Company to make
a Net Proceeds Offer following any Asset Sale. The Company shall comply with
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder, if applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Securities as described in this Section 10.15.
SECTION 10.16. Limitation on Transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of Property or the rendering of any
service) with, or for the benefit of, any of their respective Affiliates (each
an "Affiliate Transaction") other than (i) Affiliate Transactions permitted by
paragraph (b) of this Section 10.16, (ii) Affiliate Transactions on terms that
are no less favorable to the Company or such Restricted Subsidiary, as the case
may be, than would be available in a comparable arm's length transaction with an
unrelated Person, (iii) with respect to any one transaction or series of related
transactions involving aggregate payments in excess of $1,000,000 but less than
$5,000,000 in the aggregate, the Company delivers an Officers' Certificate to
the Trustee certifying that (A) such transaction or series of related
transactions complies with clause (ii) above and (B) such transaction or series
of related transactions has been approved by the Board of Directors (including a
majority of the Disinterested Directors) of the Company, and (iv) with respect
to any one transaction or series of related transactions involving aggregate
payments in
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excess of $5,000,000, the Company delivers an Officers' Certificate to the
Trustee certifying to the two matters referred to in clause (iii) above and that
the Company has obtained a written opinion, a copy of which shall be attached to
such Officers' Certificate, from an independent nationally recognized investment
banking firm or appraisal firm specializing or having a speciality in the type
and subject matter of the transaction or series of related transactions at
issue, which opinion shall be to the effect set forth in clause (ii) above or
shall state that such transaction or series of related transactions is fair from
a financial point of view to the Company or such Restricted Subsidiary, as the
case may be.
(b) The restrictions set forth in paragraph (a) shall not apply to (i)
transactions exclusively between or among the Company and any of its Restricted
Subsidiaries or exclusively between or among Restricted Subsidiaries so long as
such transactions are not otherwise prohibited hereunder, (ii) reasonable
indemnities of officers, directors and employees of the Company or any
Restricted Subsidiary permitted by bylaw or statutory provisions, (iii) the
payment of reasonable and customary regular fees to directors of the Company or
any of its Restricted Subsidiaries who are not employees of the Company or any
Affiliate and (iv) reasonable employee compensation and other benefit
arrangements approved by the Board of Directors of the Company.
SECTION 10.17. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create or suffer to exist or allow to become effective
any consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary (a) to pay dividends, in cash or otherwise, or make any
other distributions on its Capital Stock, or make payments on any Indebtedness
owed, to the Company or any other Restricted Subsidiary, (b) to make loans or
advances to the Company or any other Restricted Subsidiary or (c) to transfer
any of its Property to the Company or any other Restricted Subsidiary (any such
restrictions being collectively referred to herein as a "Payment Restriction"),
except in any such case for such encumbrances or restrictions existing under or
by reason of (i) this Indenture or any other agreement in effect or entered into
on the date of this Indenture, or (ii) any agreement, instrument or charter of
or in respect of a Restricted Subsidiary entered into prior to the date on which
such Restricted Subsidiary became a Restricted Subsidiary and outstanding on
such date and not entered into in connection with or in contemplation of
becoming a Restricted Subsidiary, provided such consensual encumbrance or
restriction is not applicable to any Properties subsequently acquired by such
Restricted Subsidiary, or (iii) pursuant to an agreement effecting a
modification, renewal, refinancing, replacement or extension of any agreement,
instrument or charter (other than this Indenture) referred to in clause (i) or
(ii) above, provided, however, that the provisions relating to such encumbrance
or restriction are not materially less favorable to the Holders of the
Securities than those under or pursuant to the agreement, instrument or charter
so modified, renewed, refinanced, replaced or extended, or (iv) customary
provisions restricting the subletting or assignment of any lease or the transfer
of copyrighted or patented materials, or (v) provisions
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in agreements that restrict the assignment of such agreements or rights
thereunder, or (vi) the sale or other disposition of any Properties subject to a
Lien securing Indebtedness.
SECTION 10.18. Limitation on Preferred Stock of Subsidiaries.
The Company will not permit any of its Restricted Subsidiaries to issue
any Preferred Stock (other than to the Company or to a wholly owned Subsidiary)
or permit any Person (other than the Company or a wholly owned Subsidiary) to
own any Preferred Stock of any Restricted Subsidiary of the Company.
SECTION 10.19. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any term,
provision or condition set forth in Sections 10.5 through 10.13 and Section
10.16 and 10.18 hereof if, before or after the time for such compliance, the
Holders of at least a majority in aggregate principal amount of the Outstanding
Securities, by Act of such Holders, waive such compliance in such instance with
such term, provision or condition, but no such waiver shall extend to or affect
such term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Right of Redemption.
The Securities may be redeemed, at the election of the Company, as a whole
or from time to time in part, at any time on or after December 15, 2001, upon no
less than 30 or more than 60 days' notice to each Holder of Securities to be
redeemed, subject to the conditions and at the redemption prices (expressed as
percentages of principal amount) set forth below, if redeemed during the
twelve-month period beginning on December 15 of the years indicated below:
Redemption
Year Price
---- ----------
2001..................................... 106.125%
2002..................................... 103.063%
together in the case of any such redemption with accrued and unpaid interest and
Liquidated Damages, if any, to the applicable date of redemption (subject to the
right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to such date of
redemption), all as provided herein.
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Notwithstanding the foregoing, at any time on or prior to December 15,
1999, up to 30% of the originally issued principal amount of Securities may be
redeemed, at the election of the Company, upon not less than 30 or more than 60
days' notice to each Holder of Securities to be redeemed, from the Net Cash
Proceeds of a Public Equity Offering, at a redemption price equal to 112 1/4% of
the principal amount thereof, together with accrued and unpaid interest and
Liquidated Damages, if any, to date of redemption, provided that at least
$59,500,000 of the originally issued principal amount of Securities remains
Outstanding immediately after such redemption and that such redemption occurs
within 60 days following the closing of such Public Equity Offering.
SECTION 11.2. Applicability of Article.
Redemption of Securities at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 11.3. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to Section
11.1 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 11.4. Any election to redeem
Securities shall be revocable until the Company gives a notice of redemption
pursuant to Section 11.5 to the Holders of Securities to be redeemed.
SECTION 11.4. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not less than 30 days nor more than
60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities not previously called for redemption, pro rata, by lot or by any
other method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions of the principal of
Securities; provided, however, that any such partial redemption shall be in
integral multiples of $1,000.
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs of this Section 11.4 shall
not apply with respect to any redemption affecting only a Global Security,
whether such Global Security is to be
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redeemed in whole or in part. In the case of any such redemption in part, the
unredeemed portion of the principal amount of the Global Security shall be in an
authorized denomination.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed.
SECTION 11.5. Notice of Redemption.
Notice of redemption shall be given in the manner provided for in Section
15.5 hereof not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Securities to be redeemed.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) in the case of a partial redemption of Physical Securities, the
identification of the particular Securities to be redeemed, and, if any
Global Security or Physical Security is to be redeemed in part, the
portion of the principal amount thereof to be redeemed;
(d) that on the Redemption Date the Redemption Price (together with
accrued interest, if any, to the Redemption Date payable as provided in
Section 11.7 hereof) will become due and payable upon each such Security,
or the portion thereof, to be redeemed, and that, unless the Company shall
default in the payment of the Redemption Price and any applicable accrued
and unpaid interest, interest thereon will cease to accrue on and after
said date; and
(e) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, which shall be the office or agency
of the Company maintained for such purpose pursuant to Section 10.2
hereof.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. Failure to give such
notice by mailing to any Holder of Securities or any defect therein shall not
affect the validity of any proceedings for the redemption of other Securities.
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SECTION 11.6. Deposit of Redemption Price.
On or before 11:00 a.m., New York City time, on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3 hereof) immediately available funds in an amount
sufficient to pay the Redemption Price of, and accrued and unpaid interest on,
all the Securities which are to be redeemed on such Redemption Date.
SECTION 11.7. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued and unpaid interest,
if any, to the Redemption Date), and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued and
unpaid interest) such Securities shall cease to bear interest. Upon surrender of
any such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with accrued and
unpaid interest, if any, to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Regular Record Dates according to their terms and the provisions of
Section 3.7 hereof.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium and Liquidated Damages, if
any) shall, until paid, bear interest from the Redemption Date at the rate borne
by the Securities.
SECTION 11.8. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at
the office or agency of the Company maintained for such purpose pursuant to
Section 10.2 hereof (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and, upon
Company Order, the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, of like tenor and in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal amount of the Security so surrendered.
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ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1. Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either Section 12.2 or Section 12.3
hereof be applied to all Outstanding Securities upon compliance with the
conditions set forth below in this Article XII.
SECTION 12.2. Defeasance and Discharge.
Upon the Company's exercise under Section 12.1 hereof of the option
applicable to this Section 12.2, the Company and the Subsidiary Guarantors shall
be deemed to have been discharged from their obligations with respect to all
Outstanding Securities on and after the date the conditions set forth in Section
12.4 hereof are satisfied (hereinafter, "legal defeasance"). For this purpose,
such legal defeasance means that the Company shall be deemed (i) to have paid
and discharged its obligations under the Outstanding Securities, provided,
however, that the Securities shall continue to be deemed to be "Outstanding" for
purposes of Section 12.5 hereof and the other Sections of this Indenture
referred to in clauses (A) and (B) below, and (ii) to have satisfied all its
other obligations with respect to such Securities and this Indenture (and the
Trustee, at the expense and direction of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Securities to receive, solely from the trust fund
described in Section 12.4 hereof and as more fully set forth in such Section,
payments in respect of the principal of (and premium if any, on) and interest on
such Securities when such payments are due (or at such time as the Securities
would be subject to redemption at the option of the Company in accordance with
this Indenture), (B) the obligations of the Company under Section 3.3, 3.4, 3.5,
3.6, 5.8, 6.6, 6.9, 6.10, 10.2 and 10.3, (C) the rights, powers, trusts, duties
and immunities of the Trustee hereunder, and (D) the obligations of the Company
under this Article XII. Subject to compliance with this Article XII, the Company
may exercise its option under this Section 12.2 notwithstanding the prior
exercise of its option under Section 12.3 hereof with respect to the Securities.
SECTION 12.3. Covenant Defeasance.
Upon the Company's exercise under Section 12.1 hereof of the option
applicable to this Section 12.3, (i) the Company shall be released from its
obligations under clauses (c), (d) and (e) under Section 8.1, any covenant in
Sections 10.5 through 10.18 and any covenant in Articles XIII and XIV, (ii) the
Subsidiary Guarantors shall be released from the Subsidiary Guarantees and the
Collateral shall be released from the Lien securing the Securities and (iii) the
occurrence of any event specified in Sections 5.1(c), 5.1(d) (with respect to
clauses (c), (d) and (e) under Section 8.1, Sections 10.5 though 10.18, and
Section 10.19) 5.1(e), 5.1(f), 5.1(g) (with respect
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to any Restricted Subsidiary) and 5.1(h) (with respect to any Restricted
Subsidiary) shall be deemed not to be or result in an Event of Default, in each
case with respect to the Outstanding Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance"),
and the Securities shall thereafter be deemed not to be "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the Outstanding
Securities, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such Article or
Section (to the extent so specified in the case of Sections 5.1(d), 5.1(g) and
5.1(h) hereof), whether directly or indirectly, by reason of any reference
elsewhere herein to any such Article or Section or by reason of any reference in
any such Article or Section to any other provision herein or in any other
document, but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby.
SECTION 12.4. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
12.2 or Section 12.3 hereof to the Outstanding Securities:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 6.7 hereof who shall agree to comply with the provisions of
this Article XII applicable to it) as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of such Securities,
(A) cash in United States dollars in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide, not later
than one day before the due date of any payment, money in an amount, or
(C) a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and
which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of (and premium, if any, on) and interest and
Liquidated Damages, if any, on the Outstanding Securities on the Stated
Maturity thereof (or Redemption Date, if applicable), provided that the
Trustee shall have been irrevocably instructed by a Company Order to apply
such money or the proceeds of such U.S. Government Obligations to said
payments with respect to the Securities. Before such a deposit, the
Company may give to the Trustee, in accordance with Section 11.3 hereof, a
notice of its election to redeem all of the Outstanding Securities at a
future date in accordance with Article XI hereof, which notice shall be
irrevocable. Such irrevocable redemption notice, if given, shall be given
effect in applying the foregoing. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the
United States of America for the timely payment of which its full faith
and credit is pledged or (y) obligations of a Person
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controlled or supervised by and acting as an agency or instrumentality of
the United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such
U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or
the specific payment of principal of or interest on the U.S. Government
Obligation evidenced by such depository receipt.
(b) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders of the Outstanding Securities will
not recognize income, gain or loss for federal income tax purposes as a
result of such legal defeasance or covenant defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such legal defeasance or
covenant defeasance had not occurred (in the case of legal defeasance,
such Opinion must refer to and be based upon a published ruling of the
Internal Revenue Service or a change in applicable federal income tax
laws).
(c) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or,
insofar as Sections 5.1(g) and 5.1(h) are concerned, at any time during
the period ending on the 91st day after the date of such deposit.
(d) Such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest under this Indenture or the Trust
Indenture Act with respect to any securities of the Company.
(e) Such legal defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, any other
material agreement or instrument to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound, as evidenced to the Trustee in an
Officers' Certificate delivered to the Trustee concurrently with such
deposit.
(f) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' right generally.
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(g) The Company shall have delivered to the Trustee an Officer's
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of the Outstanding Securities over the
other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others.
(h) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the legal defeasance under
Section 12.2 hereof or the covenant defeasance under Section 12.3 (as the
case may be) have been complied with.
SECTION 12.5. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 10.3 hereof,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee -- collectively for
purposes of this Section 12.5, the "Trustee") pursuant to Section 12.4 hereof in
respect of the Outstanding Securities shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent (other
than the Company acting as its own Paying Agent) as the Trustee may determine,
to the Holders of such Securities of all sums due and to become due thereon in
respect of principal (and premium and Liquidated Damages, if any) and interest,
but such money need not be segregated from other funds except to the extent
required by law.
The Company shall pay and indemnify the Trustee against all taxes, fees or
other charges imposed on or assessed against the U.S. Governmental Obligations
deposited pursuant to Section 12.4 hereof or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of the Outstanding Securities.
Anything in this Article XII to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 12.4
hereof which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent legal defeasance or covenant defeasance, as
applicable, in accordance with this Article.
SECTION 12.6. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 12.5 hereof by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations
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under this Indenture and the Securities shall be revived and reinstated as
though no deposit had occurred pursuant to Section 12.2 or 12.3 hereof, as the
case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money in accordance with Section 12.5 hereof; provided, however,
that if the Company makes any payment of principal of (or premium or Liquidated
Damages, if any, on) or interest on any Security following the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money held by the Trustee or
Paying Agent.
ARTICLE XIII
SUBSIDIARY GUARANTEES
SECTION 13.1. Unconditional Guarantee.
Each of the Subsidiary Guarantors hereby jointly and severally
unconditionally Guarantees to each Holder of a Security authenticated and
delivered by the Trustee, and to the Trustee on behalf of such Holder, the full
and punctual payment of the principal of (and premium and Liquidated Damages, if
any) and interest on such Security when and as the same shall become due and
payable, whether at the Stated Maturity, by acceleration, call for redemption,
purchase or otherwise, in accordance with the terms of such Security and of this
Indenture. In case of the failure of the Company punctually to make any such
payment, each of the Subsidiary Guarantors hereby jointly and severally agrees
to pay or cause such payment to be made punctually when and as the same shall
become due and payable, whether at the Stated Maturity, by acceleration, call
for redemption, purchase or otherwise, and as if such payment were made by the
Company.
Each of the Subsidiary Guarantors hereby jointly and severally agrees that
its obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of such Security or this Indenture, the absence of
any action to enforce the same, any exchange, release or non-perfection of any
Lien on any collateral for, or any release or amendment or waiver of any term of
any other Guarantee of all or any of the Securities, or any consent to departure
from any requirement of any other Guarantee of all or any of the Securities, the
election by the Trustee or any of the Holders in any proceeding under Chapter 11
of the Federal Bankruptcy Code, or the application of Section 1111(b)(2) of the
Federal Bankruptcy Code, any borrowing or grant of a security interest by the
Company, as debtor-in-possession, under Section 364 of the Federal Bankruptcy
Code, the disallowance, under Section 502 of the Federal Bankruptcy Code, of all
or any portion of the claims of the Trustee or any of the Holders for payment of
any of the Securities (including, without limitation, any interest, Liquidated
Damages or premium thereon), any waiver or consent by the Holder of such
Security or by the Trustee with respect to any provisions thereof or of this
Indenture or with respect to the provisions of this Article XIII as they apply
to any other Subsidiary Guarantor, the obtaining of any judgment against the
Company or any action to enforce the same or any other circumstances which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each of the Subsidiary Guarantors hereby waives the benefits of diligence,
presentment, demand of payment, any requirement that the Trustee or any
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of the Holders protect, secure, perfect or insure any security interest in or
other Lien on any property subject thereto or exhaust any right or take any
action against the Company or any other Person, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest or notice with respect to such
Security or the Indebtedness evidenced thereby and all demands whatsoever, and
covenants that its Subsidiary Guarantee will not be discharged in respect of
such Security except by complete performance of the obligations contained in
such Security and in such Subsidiary Guarantee. Each of the Subsidiary
Guarantors hereby agrees that, in the event of a default in payment of principal
(or premium or Liquidated Damages, if any) or interest on such Security, whether
at their Stated Maturity, by acceleration, call for redemption, purchase or
otherwise, legal proceedings may be instituted by the Trustee on behalf of, or
by, the Holder of such Security, subject to the terms and conditions set forth
in this Indenture, directly against all or any of the Subsidiary Guarantors to
enforce their respective Subsidiary Guarantees without first proceeding against
the Company. Each Subsidiary Guarantor agrees that if, after the occurrence and
during the continuance of an Event of Default, the Trustee or any of the Holders
are prevented by applicable law from exercising their respective rights to
accelerate the maturity of the Securities, to collect interest on the
Securities, or to enforce or exercise any other right or remedy with respect to
the Securities, such Subsidiary Guarantor agrees to pay to the Trustee for the
account of the Holders, upon demand therefor, the amount that would otherwise
have been due and payable had such rights and remedies been permitted to be
exercised by the Trustee or any of the Holders.
Each Subsidiary Guarantor shall be subrogated to all rights of the Holders
of the Securities against the Company in respect of any amounts paid by such
Subsidiary Guarantor on account of such Securities pursuant to the provisions of
its Subsidiary Guarantee of this Indenture; provided, however, that no
Subsidiary Guarantor shall be entitled to enforce or to receive any payments
arising out of, or based upon, such right of subrogation until the principal of
(and premium and Liquidated Damages, if any) and interest on all Securities
issued hereunder shall have been paid in full.
Each Subsidiary Guarantee shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Company
for liquidation or reorganization, should the Company become insolvent or make
an assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Securities is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by an obligee on the Securities whether as a "voidable
preference," "fraudulent transfer," or otherwise, all as though such payment or
performance has not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Securities shall, to
the fullest extent permitted by law, be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
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The Subsidiary Guarantors shall have the right to seek contribution from
any non-paying Subsidiary Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Subsidiary Guarantees or under
this Article XIII in accordance with Section 13.7.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to the Subsidiary Guarantee and this Indenture are senior
unsecured obligations of such Subsidiary Guarantor.
SECTION 13.2. Execution and Delivery of Subsidiary Guarantees.
The Subsidiary Guarantee to be endorsed on the Securities is set forth in
Appendix A. Each of the Subsidiary Guarantors hereby agrees to execute its
Subsidiary Guarantee, in a form established pursuant to Appendix A, to be
endorsed on each Security authenticated and delivered by the Trustee.
The Subsidiary Guarantee shall be executed on behalf of each respective
Subsidiary Guarantor by any one of such Subsidiary Guarantor's Officers,
attested by its Secretary or Assistant Secretary. The signature of any or all of
these Officers on the Subsidiary Guarantee may be manual or facsimile.
A Subsidiary Guarantee bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of a Subsidiary Guarantor
shall bind such Subsidiary Guarantor, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of the Security on which such Subsidiary Guarantee is endorsed or did
not hold such offices at the date of such Subsidiary Guarantee.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee
endorsed thereon on behalf of the Subsidiary Guarantors. Each of the Subsidiary
Guarantors hereby jointly and severally agrees that its Subsidiary Guarantee set
forth in Section 13.1 shall remain in full force and effect notwithstanding any
failure to endorse a Subsidiary Guarantee on any Security.
SECTION 13.3. Limitation on Merger or Consolidation.
No Subsidiary Guarantor shall consolidate or merge with or into, in one or
more related transactions, another Person or entity unless (i) such Subsidiary
Guarantor is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than such Subsidiary
Guarantor) is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or Person
formed by or surviving any such consolidation or merger (if other than such
Subsidiary Guarantor) assumes all the Obligations of such Subsidiary Guarantor,
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee, under the Securities and this Indenture;
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(iii) immediately after giving effect to such transaction no Default or Event of
Default exists; and (iv) the Company will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the most recently ended four full fiscal quarter period, be
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the Consolidated Fixed Charge Coverage Ratio
set forth in Section 10.11(a).
Except as set forth in this Section 13.3, Section 13.4 and Articles VIII
and X hereof, nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of a Subsidiary Guarantor with or into
the Company or another Subsidiary Guarantor or shall prevent any sale or
conveyance of the Property of a Subsidiary Guarantor as an entirety or
substantially as an entirety to the Company or another Subsidiary Guarantor.
SECTION 13.4. Release of Subsidiary Guarantors.
(a) Concurrently with any consolidation or merger of a Subsidiary
Guarantor or any sale or conveyance of the Property of a Subsidiary Guarantor as
an entirety or substantially as an entirety, in each case as permitted by
Section 13.3 hereof, and upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to the effect that such
consolidation, merger, sale or conveyance was made in accordance with Section
13.3 hereof, the Trustee shall execute any documents reasonably required in
order to evidence the release of such Subsidiary Guarantor from its obligations
under its Subsidiary Guarantees endorsed on the Securities and under this
Article XIII. Any Subsidiary Guarantor not released from its obligations under
its Subsidiary Guarantees endorsed on the Securities and under this Article XIII
shall remain liable for the full amount of principal of (and premium and
Liquidated Damages, if any) and interest on the Securities and for the other
obligations of a Subsidiary Guarantor under its Subsidiary Guarantees endorsed
on the Securities and under this Article XIII.
(b) Concurrently with the legal defeasance of the Securities under Section
12.2 hereof or the covenant defeasance of the Securities under Section 12.3
hereof, the Subsidiary Guarantors shall be released from all of their
obligations under their Subsidiary Guarantees endorsed on the Securities and
under this Article XIII.
(c) Upon the sale or disposition (by merger or otherwise) of any
Subsidiary Guarantor by the Company or any Restricted Subsidiary of the Company
to any entity that is not a Restricted Subsidiary of the Company and which sale
or disposition is otherwise in compliance with the terms of this Indenture,
including, without limitation, Section 8.1 and Section 10.15 of this Indenture,
such Subsidiary Guarantor shall automatically be released from all obligations
under its Subsidiary Guarantees endorsed on the Securities and under this
Article XIII.
(d) Upon the redesignation by the Company of a Subsidiary Guarantor from
Restricted Subsidiary to an Unrestricted Subsidiary in compliance with the
provisions of this Indenture, such Subsidiary may, at its option, cease to be a
Subsidiary Guarantor and shall be released from all
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of the obligations of a Subsidiary Guarantor under its Subsidiary Guarantees
endorsed on the Securities and under this Article XIII, which release shall be
evidenced by a supplemental indenture executed by the Company, the Subsidiary
Guarantors and the Trustee.
SECTION 13.5. Additional Subsidiary Guarantors.
The Company may cause any Subsidiary to become a Subsidiary Guarantor with
respect to the Securities. If the Company or any of its Subsidiaries shall, in
compliance with the covenants in Article X, after the date of this Indenture,
(i) transfer or cause to be transferred, any Property to any Subsidiary that is
not a Subsidiary Guarantor (other than an Unrestricted Subsidiary) or (ii) make
any Investment in any Subsidiary that is not a Subsidiary Guarantor (other than
an Unrestricted Subsidiary), then the Company shall cause such Subsidiary to
execute a Subsidiary Guarantee and deliver an Opinion of Counsel, in accordance
with the terms of this Indenture. Any such Subsidiary shall become a Subsidiary
Guarantor by executing and delivering to the Trustee (a) a supplemental
indenture, in form and substance satisfactory to, and executed by, the Trustee
and executed by the Company, which subjects such Subsidiary to the provisions of
this Indenture as a Subsidiary Guarantor and (b) an Opinion of Counsel to the
effect that such supplemental indenture has been duly authorized and executed by
such Subsidiary and constitutes the legal, valid, binding and enforceable
obligation of such Subsidiary (subject to such customary exceptions concerning
creditors' rights and equitable principles).
SECTION 13.6. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the Guarantee
by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute
a fraudulent transfer or conveyance for purposes of the Federal Bankruptcy Code,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or
any similar Federal or state law. To effectuate the foregoing intention, the
Holders and such Subsidiary Guarantor hereby irrevocably agree that the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee shall be
limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collection from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Subsidiary Guarantee or pursuant to Section 13.7, result in
the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not
constituting such a fraudulent transfer or conveyance.
SECTION 13.7. Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Subsidiary Guarantor") under its Subsidiary Guarantee, and so long as
the exercise of such right does not impair the rights of the Holders under the
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Subsidiary Guarantees or under this Article XIII, such Funding Subsidiary
Guarantor shall be entitled to a contribution from all other Subsidiary
Guarantors in a pro rata amount, based on the net assets of each Subsidiary
Guarantor (including the Funding Subsidiary Guarantor), determined in accordance
with GAAP, subject to Section 13.6, for all payments, damages and expenses
incurred by that Funding Subsidiary Guarantor in discharging the Company's
obligations with respect to the Securities or any other Subsidiary Guarantor's
obligations with respect to its Subsidiary Guarantee.
ARTICLE XIV
PLEDGE AGREEMENT
SECTION 14.1. Unconditional Pledge.
The due and punctual payment of the principal of (and premium, if any) and
interest and Liquidated Damages, if any, on the Securities when and as the same
shall be due and payable, whether on a Stated Maturity, by acceleration,
repurchase, redemption or otherwise and performance of all other obligations of
the Company to the Holders or the Trustee under this Indenture and the
Securities, according to the terms hereunder or thereunder, shall be secured as
provided in the Pledge Agreement substantially in the form attached hereto as
Exhibit A which the Pledgor has entered into simultaneously with the execution
of this Indenture. Each Holder, by its acceptance thereof, consents and agrees
to the terms of the Pledge Agreement (including, without limitation, the
provisions providing for foreclosure and release of the Collateral) as the same
may be in effect or may be amended from time to time in accordance with its
terms and authorizes and directs the Collateral Agent to enter into the Pledge
Agreement and to perform its obligations and exercise its rights thereunder in
accordance therewith. The Company shall deliver to the Trustee copies of all
documents delivered to the Collateral Agent pursuant to the Pledge Agreement,
and shall do or cause to be done all such acts and things as may be necessary or
proper, or as may be required by the provisions of the Pledge Agreement, to
assure and confirm to the Trustee and the Collateral Agent the security interest
in the Collateral contemplated hereby, by the Pledge Agreement or any part
thereof, as from time to time constituted, so as to render the same available
for purposes herein expressed. The Company shall take, or shall cause the
Pledgor under the Pledge Agreement to take, upon request of the Trustee, any and
all actions reasonably required to cause the Pledge Agreement to create and
maintain, as security for the Obligations of the Company hereunder, a valid and
enforceable perfected first priority Lien in and on all the Collateral, in favor
of the Collateral Agent for the benefit of the Holders, superior to and prior to
the rights of all third Persons and subject to no Liens other than Permitted
Liens.
SECTION 14.2. Recording and Opinions.
(a) The Company shall furnish to the Trustee on the Issue Date an Opinion
of Counsel either (i) stating that in the opinion of such counsel all action has
been taken with respect to the
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recording, registering and filing of this Indenture, financing statements or
other instruments necessary to make effective the Liens intended to be created
by the Pledge Agreement, and reciting with respect to the security interest in
the Collateral, the details of such action, or (ii) stating that, in the opinion
of such counsel, no such action is necessary to make such Liens effective.
(b) The Company shall otherwise comply with the provisions of TIA Section
314(b).
SECTION 14.3. Release of Collateral.
(a) Upon the full and final payment and performance of all Obligations of
the Company under this Indenture and the Securities, the Pledge Agreement will
terminate and the Collateral will be released.
(b) To the extent applicable, the Company shall cause TIA Section 313(b),
relating to reports, and TIA Section 314(d), relating to the release of property
or securities from the Liens and security interests of the Pledge Agreement and
related to the substitution therefor of any property or securities to be
subjected to the Liens and security interests of the Pledge Agreement, to be
complied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an Officer of the Company except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected by the Company and approved by the Trustee and the Collateral Agent in
the exercise of reasonable care.
SECTION 14.4. Authorization of Actions to be Taken by the Trustee Under
the Pledge Agreement.
Subject to the provisions of Section 6.1 and 6.2 hereof, the Trustee may,
in its sole discretion and without the consent of the Holders, direct, on behalf
of the Holders, the Collateral Agent to take all actions it deems necessary or
appropriate in order to (i) enforce any of the terms of the Pledge Agreement and
(ii) collect and receive any and all amounts payable in respect of the
Obligations of the Company hereunder. The Trustee shall have power to institute
and maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts that may be unlawful or in violation of
the Pledge Agreement or this Indenture, and such suits and proceedings as the
Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders in the Collateral (including power to institute and
maintain suits or proceedings to restrain the enforcement of or compliance with
any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interests of the Holders or of the Trustee).
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SECTION 14.5. Authorization of Receipt of Funds by the Trustee Under the
Pledge Agreement.
The Trustee is authorized to receive any funds for the benefit of the
Holders distributed under the Pledge Agreement, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture.
SECTION 14.6. Termination of Security Interest.
Upon (i) the payment in full of all obligations of the Company under this
Indenture and the Securities, or (ii) effectiveness of legal defeasance or
covenant defeasance in accordance with Article XII, (iii) the sale or
disposition (by merger or otherwise) of all of the capital stock included in the
Collateral to any entity that is not a Restricted Subsidiary or the Company
(subject to the release thereof from the Lien of the Pledge Agreement) and which
sale or other disposition is otherwise in compliance with the terms of this
Indenture, including without limitation, Section 8.1 and Section 10.15 of this
Indenture or (iv) the designation by the Company of Willcox & Gibbs, Ltd. as an
Unrestricted Subsidiary, the Trustee shall, upon Company Request deliver a
certificate to the Collateral Agent instructing the Collateral Agent to release
the Liens pursuant to this Indenture and the Pledge Agreement.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee such certificates and opinions as may be required under the Trust
Indenture Act or this Indenture. Each such certificate and each such opinion
shall be in the form of an Officers' Certificate or an Opinion of Counsel, as
applicable, and shall comply with the requirements of this Indenture.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each Person signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope for the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
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(3) a statement that, in the opinion of each such Person, such
Person has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such Person,
such condition or covenant has been complied with.
The certificates and opinions provided pursuant to this Section 15.1 and
the statements required by this Section 15.1 shall comply in all respects with
TIA Sections 314(c) and (e).
SECTION 15.2. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Officer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such Officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion is based is or are erroneous.
Any such Opinion of Counsel may be based, insofar as it relates to factual
matters, upon an Officers' Certificate, unless such counsel knows that the
certificate with respect to such matters is erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 15.3. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agents duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for
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any purpose of this Indenture and (subject to Section 6.1) conclusive in favor
of the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership, principal amount and serial numbers of Securities held
by any Person, and the date of holding the same, shall be provided by the
Security Register.
(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purpose of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date, provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than eleven
months after the record date.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof, in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
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SECTION 15.4. Notices, etc. to Trustee and the Company.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of Holders or other document provided or permitted by this Indenture
to be made upon, given or furnished to or filed with,
(1) the Trustee by any Holder or the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing (in
the English language) and delivered in person or mailed by certified or
registered mail (return receipt requested) to the Trustee at its Corporate
Trust Office; or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if in writing (in the English language) and delivered in person or mailed
by certified or registered mail (return receipt requested) to the Company,
addressed to it at the Company's offices located at 900 Milik Street,
Carteret, New Jersey 07008, Attention: Chief Executive Officer, or at any
other address otherwise furnished in writing to the Trustee by the
Company.
SECTION 15.5. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders by the
Company, the Trustee or any Paying Agent, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing (in the English
language) and mailed, first-class postage prepaid, to each Holder affected by
such event, at his address as it appears in the Security Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Any notice mailed to a Holder in the manner herein
prescribed shall be conclusively deemed to have been received by such Holder,
whether or not such Holder actually receives such notice. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of publication of any Authorized
Newspaper, or by reason of any other cause, it shall be impossible to make
publication of any notice in an Authorized Newspaper or Authorized Newspapers as
required by this Indenture, then such method of publication or notification as
shall be made with the approval of the Trustee shall constitute a sufficient
publication of such notice.
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SECTION 15.6. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 15.7. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 15.8. Severability.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
SECTION 15.9. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person (other than the parties thereto, any Paying Agent, any
Securities Registrar and their successors hereunder and the Holders) any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 15.10. Governing Law; Trust Indenture Act Controls.
(a) THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND EACH
SUBSIDIARY GUARANTOR IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN, THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS INDENTURE, OR THE SECURITIES, OR ANY SUBSIDIARY GUARANTEE AND
THE COMPANY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED BY ANY SUCH COURT.
(b) This Indenture is subject to the provisions of the Trust Indenture Act
that are required to be part of this Indenture and shall, to the extent
applicable, be governed by such provisions. If and to the extent that any
provision of this Indenture limits, qualifies or conflicts with the duties
imposed by operation of Section 318(c) of the Trust Indenture Act, or conflicts
with any provision (an "incorporated provision") required by or deemed to be
included in this
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Indenture by operation of such Trust Indenture Act section, such imposed duties
or incorporated provisions shall control.
SECTION 15.11. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium and Liquidated Damages, if any)
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the Interest Payment Date,
Redemption Date or at the Stated Maturity or Maturity; provided, however, that
no interest shall accrue for the period from and after such Interest Payment
Date, Redemption Date, Stated Maturity or Maturity, as the case may be.
SECTION 15.12. No Recourse Against Others.
A director, officer, employee, stockholder, incorporator or Affiliate, as
such, past, present or future, of the Company shall not have any personal
liability under the Securities or this Indenture by reason of his or its status
as a director, officer employee, stockholder, incorporator or Affiliate or any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder, by accepting any of the Securities,
waives and releases all such lability to the extent permitted by applicable law.
SECTION 15.13. Duplicate Originals.
The parties may sign any number of copies or counterparts of this
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
SECTION 15.14. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
ISSUER:
WILLCOX & GIBBS, INC.
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: CFO
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: CEO
SUBSIDIARY GUARANTORS:
WG APPAREL, INC.
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: CEO
CLINTON MANAGEMENT CORPORATION
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: V.P.
S-1
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CLINTON MACHINERY CORPORATION
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: V.P.
LEADTEC SYSTEMS, INC.
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: V.P.
W&G DAON, INC.
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: President
J&E SEWING SUPPLIES, INC.
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: President
W&G TENNESSEE IMPORTS, INC.
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: President
S-2
<PAGE>
CLINTON LEASING CORP.
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: V.P.
CLINTON EQUIPMENT CORP.
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: V.P.
PARADISE COLOR INCORPORATED
By: /s/ John K. Ziegler, Jr.
-------------------------------------
Name: John K. Ziegler, Jr.
Title: V.P.
[Signature page to follow]
S-3
<PAGE>
TRUSTEE:
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By: /s/ Max Volmar
-------------------------------------
Name: Max Volmar
Title: Vice President
S-4
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APPENDIX A
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A,
INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(A) (1),
(2), (3) OR (7)) AND TO CERTAIN PERSONS
IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. Definitions.
1.1. Definitions.
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Exchange Offer" means the offer by the Company, pursuant to the
Registration Rights Agreement, to certain Holders of Initial Securities, to
issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.
"IAI" means an institutional "accredited investor" as described in Rule
501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchaser" means Dillon, Read & Co. Inc.
"Physical Security" means a certificated Initial Security bearing the
restricted securities legend set forth in Section 2.3(d) of this Appendix and
which is held by an IAI in accordance with Section 2.1(c) of this Appendix.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Initial Purchaser to issue and deliver to
the Initial Purchaser, in exchange for the Initial Securities held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
"Purchase Agreement" means the Purchase Agreement dated December 20, 1996,
between the Company, the Subsidiary Guarantors and the Initial Purchaser.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
<PAGE>
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of December 20, 1996, by and among the Company, the Subsidiary
Guarantors and the Initial Purchaser, as such agreement may be amended, modified
or supplemented from time to time.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depository), or any successor person thereto and
shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement issued by
the Company, in connection with the offer and sale of Initial Securities or
Private Exchange Securities, pursuant to the Registration Rights Agreement.
"Transfer Restricted Securities" means Physical Securities and Global
Securities that bear or are required to bear the legend set forth in Section
2.3(d) of this Appendix A.
1.2. Other Definitions.
Defined in
Appendix
Term A Section
---- ---------
"Agent Members"...................................... 2.1(b)
"Global Security".................................... 2.1(a)
"Regulation S"....................................... 2.1(a)
"Rule 144A".......................................... 2.1(a)
Terms used herein without definition have the meanings ascribed to them in
the Indenture.
2. The Securities.
2.1. Form and Dating.
The Initial Securities are being offered and sold by the Company pursuant
to the Purchase Agreement.
(a) Global Securities. Initial Securities offered and sold to a QIB in
reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance on
Regulation S under the Securities Act ("Regulation S"), in each case as provided
in the Purchase Agreement, shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form without
interest coupons with the global securities legend and restricted securities
legend set forth in Exhibit 1 hereto (each, a "Global Security"), which shall be
deposited on behalf of the Initial Purchaser with IBJ Schroder Bank & Trust
Company, at its New York office, as custodian for the Depository (or with such
other custodian as the Depository may direct), and registered in the name of the
Depository or a nominee of the Depository, duly executed by the Company and duly
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endorsed by each Subsidiary Guarantor and authenticated by the Trustee as
provided in the Indenture. The aggregate principal amount of the Global
Securities may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depository or its nominee as hereinafter
provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.1(b) and pursuant to a Company Order, authenticate and deliver
initially one or more Global Securities that (a) shall be registered in the name
of the Depository for such Global Security or Global Securities or the nominee
of such Depository and (b) shall be delivered by the Trustee to such Depository
or pursuant to such Depository's instructions or held by IBJ Schroder Bank &
Trust Company as custodian for the Depository.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository or the custodian of the Depository or by the
Trustee under such Global Security, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary practices of
such Depository governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(c) Physical Securities. Except as provided in this Section 2.1 or Section
2.3 or 2.4 of Appendix A, owners of beneficial interests in Global Securities
will not be entitled to receive physical delivery of certificated Securities.
Purchasers of Initial Securities who are IAI's and are not QIBs and did not
purchase Initial Securities sold in reliance on Regulation S will receive
Physical Securities; provided, however, that upon transfer of such Physical
Securities to a QIB, such Physical Securities will, unless the Global Security
has previously been exchanged, be exchanged for an interest in a Global Security
pursuant to the provisions of Section 2.3 of Appendix A.
2.2. Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$85,000,000 and (2) Exchange Securities or Private Exchange Securities for issue
only in an Exchange Offer or a Private Exchange, respectively, pursuant to the
Registration Rights Agreement, for a like principal amount, in each case, upon a
Company Order. Such Company Order shall specify the amount of the Securities to
be authenticated and the date on which the original issue of Securities is to be
authenticated and whether the Securities are to be Initial Securities, Exchange
Securities or Private Exchange
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Securities. The aggregate principal amount of Securities outstanding at any time
may not exceed $85,000,000, except as provided in Section 2.7 of the Indenture.
2.3. Transfer and Exchange. (a) Transfer and Exchange of Physical
Securities. When Physical Securities are presented to the Security Registrar or
a co-registrar with a request:
(x) to register the transfer of such Physical Securities; or
(y) to exchange such Physical Securities for an equal principal
amount of Physical Securities of other authorized denominations,
the Security Registrar or co-registrar shall register the transfer or make the
exchange as requested if its reasonable requirements for such transaction are
met; provided, however, that the Physical Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Security
Registrar or co-registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.3(b) of Appendix A or pursuant to clause (A), (B) or (C) below, and are
accompanied by the following additional information and documents, as
applicable:
(A) if such Physical Securities are being delivered to the
Security Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect (in the form set forth on the reverse of the Security); or
(B) if such Physical Securities are being transferred to the
Company, a certification to that effect; or
(C) if such Physical Securities are being transferred pursuant
to Rule 144, Rule 904 or another available exemption from
registration, (i) a certification to that effect (in the form set
forth on the reverse of the Security) and (ii) if the Company or
Security Registrar so requests, an Opinion of Counsel or other
evidence reasonably satisfactory to them as to the compliance with
the restrictions set forth in the legend set forth in Section
2.3(d)(i) of Appendix A.
(b) Restrictions on Transfer of a Physical Security for a Beneficial
Interest in a Global Security. A Physical Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a
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Physical Security duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Security, that such Physical Security is being transferred (A) to a QIB in
accordance with Rule 144A, or (B) outside the United States in an offshore
transaction within the meaning of Regulation S and in compliance with Rule
904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books and
records with respect to such Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security, such instructions to contain information regarding the
Depository account to be credited with such increase,
then the Trustee shall cancel such Physical Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Physical Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Physical Security so canceled. If no Global
Securities are then Outstanding, the Company shall issue and the Trustee shall
authenticate, upon the Company Order, a new Global Security in the appropriate
principal amount.
(c) Transfer and Exchange of Global Securities.
(i) The transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depository, in accordance
with this Indenture (including applicable restrictions on transfer set
forth herein, if any) and the procedures of the Depository therefor. A
transferor of a beneficial interest in a Global Security shall deliver to
the Security Registrar a written order given in accordance with the
Depository's procedure containing information regarding the participant
account of the Depository to be credited with a beneficial interest in the
Global Security. The Security Registrar shall, in accordance with such
instructions, instruct the Depositary to credit to the account of the
Person specified in such instructions a beneficial interest in the Global
Security and to debit the account of the Person making the transfer the
beneficial interest in the Global Security being transferred.
(ii) Notwithstanding any other provisions of this Appendix A (other
than the provisions set forth in Section 2.4 of Appendix A), a Global
Security may not be transferred as a whole except by the Depository to a
nominee of the Depository or by a nominee of the Depository to the
Depository or another nominee of the Depository or by
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<PAGE>
the Depository or any such nominee to a successor Depository or a nominee
of such successor Depository.
(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4 of
Appendix A prior to the consummation of an Exchange Offer or the
effectiveness of a Shelf Registration Statement with respect to such
Securities, such Securities may be exchanged only in accordance with such
procedures as are substantially consistent with the provisions of this
Section 2.3 (including the certification requirements set forth on the
reverse of the Initial Securities intended to ensure that such transfers
comply with Rule 144A or Regulation S, as the case may be) and such other
procedures as may from time to time be adopted by the Company.
(d) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing the Global Securities and the
Physical Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following
form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT."
"THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), BUT ONLY IN THE CASE OF A TRANSFER THAT IS
EFFECTED BY THE DELIVERY TO THE TRANSFEREE OF DEFINITIVE SECURITIES REGISTERED
IN
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ITS NAME (OR ITS NOMINEE'S NAME) IN THE BOOKS MAINTAINED BY THE REGISTRAR, AND
SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION OF THE TRANSFEROR AND
AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE."
Each Physical Security will also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
SECURITY REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM
THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Physical Security the Security Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a Physical
Security that does not bear the legend set forth above and rescind
any restriction on the sale or transfer of such Transfer Restricted
Security; and
(B) in the case of any Transfer Restricted Security that is
represented by a Global Security, the Security Registrar shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a Physical Security that does not bear the legend set
forth above and rescind any restriction on the sale or transfer of
such Transfer Restricted Security, in either case, if the Holder
certifies in writing to the Security Registrar that its request for
such exchange was made in reliance on Rule 144 (such certification
to be in the form set forth on the reverse of the Initial Security).
in either case, if the Holder certifies in writing to the Security Registrar
that its request for such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of the Initial
Security).
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(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf Registration
Statement with respect to such Initial Securities or Private Exchange
Securities, as the case may be, all requirements pertaining to legends on
such Initial Securities or such Private Exchange Securities will cease to
apply, the requirements requiring any such Initial Securities or such
Private Exchange Securities issued to certain Holders be issued in global
form will cease to apply, and an Initial Securities or Private Exchange
Securities in certificated or global form without legends will be
available to the transferee of the Holder of such Initial Securities or
Private Exchange Securities upon exchange of such transferring Holder's
certificated Initial Securities or Private Exchange Securities. Upon the
occurrence of any of the circumstances described in this paragraph, the
Company will deliver a Company Order instructing the Trustee to issue
Securities without legends.
(iv) Upon the consummation of an Exchange Offer with respect to the
Initial Securities pursuant to which certain Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form will
cease to apply and certificated Initial Securities with the restricted
securities legend set forth in Exhibit 1 hereto will be available to
Holders of such Initial Securities that do not exchange their Initial
Securities, and Exchange Securities in certificated or global form will be
available to Holders that exchange such Initial Securities in such
Exchange Offer. Upon the occurrence of any of the circumstances described
in this paragraph, the Company will deliver a Company Order instructing
the Trustee to issue Exchange Securities without legends.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which certain Holders of such Initial
Securities are offered Private Exchange Securities in exchange for their
Initial Securities, all requirements pertaining to such Initial Securities
that Initial Securities issued to certain Holders be issued in global form
will still apply, and Private Exchange Securities in global form with the
Restricted Securities Legend set forth in Exhibit 1 hereto will be
available to Holders that exchange such Initial Securities in such Private
Exchange.
(e) Cancellation or Adjustment of Global Security. At such time as all
beneficial interests in a Global Security have either been exchanged for
certificated or Physical Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to the Depository for cancellation or retained
and canceled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Security is exchanged for certificated or
Physical Securities, redeemed, repurchased or canceled, the principal amount of
Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
8
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(f) Obligations with Respect to Transfers and Exchanges of Securities.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and, upon Company Order, the Trustee shall authenticate
certificated Securities, Physical Securities and Global Securities.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith (other than any such transfer
taxes, assessments or similar governmental charge payable upon exchange or
transfer pursuant to Sections 3.5 and 10.14).
(iii) The Security Registrar or co-registrar shall not be required
to register the transfer or exchange of (a) any Physical Security selected
for redemption in whole or in part pursuant to Article 3 of the Indenture,
except the unredeemed portion of any Physical Security being redeemed in
part, or (b) any Security for a period beginning 15 Business Days before
the mailing of a notice of an offer to repurchase or redeem Securities or
15 Business Days before an Interest Payment Date.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Security
Registrar or any co-registrar may deem and treat the person in whose name
a Security is registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and interest on such Security
and for all other purposes whatsoever, whether or not such Security is
overdue, and none of the Company, the Trustee, the Paying Agent, the
Security Registrar or any co-registrar shall be affected by notice to the
contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, an Agent Member, or a participant
in the Depository or other Person with respect to the accuracy of the
records of the Depository or its nominee or of any participant or an Agent
Member, with respect to any ownership interest in the Securities or with
respect to the delivery to any participant, member, beneficial owner or
other Person (other than the Depository) of any notice (including any
notice of redemption) or the payment of any amount, under or with respect
to such Securities. All notices and communications to be given to the
Holder and all payments to be made to Holders under the Securities shall
be given or made only to or upon the order of the registered Holders
(which shall be the Depository or its nominee in the case of a Global
Security). The rights
9
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of beneficial owners in any Global Security shall be exercised only
through the Depository subject to the applicable rules and procedures of
the Depository. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depository with respect to its
members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any security (including any transfers between
or among Depository participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of the Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4. Certificated Securities.
(a) A Global Security deposited with the Depository or with the Trustee as
custodian for the Depository pursuant to Section 2.1 of Appendix A shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 of Appendix A and (i) the Depository notifies
the Company that it is unwilling or unable to continue as Depository for such
Global Security or if at any time such Depository ceases to be a "clearing
agency" registered under the Exchange Act and a successor depository is not
appointed by the Company within 90 days of such notice, or (ii) an Event of
Default has occurred and is continuing or (iii) the Company, in its sole
discretion, notifies the Trustee in writing that it elects to cause the issuance
of certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depository to
the Trustee to be so transferred, in whole or from time to time in part, without
charge, and, upon Company Order, the Trustee shall authenticate and deliver,
upon such transfer of each portion of such Global Security, an equal aggregate
principal amount of certificated Initial Securities of authorized denominations.
Any portion of a Global Security transferred pursuant to this Section shall be
executed, authenticated and delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such cases as the Depository shall
direct. Any certificated Initial Security delivered in exchange for an interest
in the Global Security shall, except as otherwise provided by Section 2.3(d) of
Appendix A, bear the restricted securities legend set forth in Exhibit l hereto.
(c) Subject to the provisions of Section 2.4(b) of Appendix A, the
registered Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
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(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i) of Appendix A, (ii) or (iii), the Company will promptly make
available to the Trustee a reasonable supply of certificated Securities in
definitive, fully registered form without interest coupons.
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EXHIBIT 1
to
APPENDIX A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT."
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED
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OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), BUT ONLY IN THE
CASE OF A TRANSFER THAT IS EFFECTED BY THE DELIVERY TO THE TRANSFEREE OF
DEFINITIVE SECURITIES REGISTERED IN ITS NAME (OR ITS NOMINEE'S NAME) IN THE
BOOKS MAINTAINED BY THE REGISTRAR, AND SUBJECT TO THE RECEIPT BY THE REGISTRAR
OF A CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY
OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE SECURITY
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.] (1)
- ----------
(1) Include if a Physical Security to be held by an institutional "accredited
investor" (as defined in Rule 501(a),(1),(2),(3) or (7) under the Securities
Act).
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GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, INTEREST
AND LIQUIDATED DAMAGES, IF ANY, BY CERTAIN SUBSIDIARIES OF
WILLCOX & GIBBS, INC.
CUSIP No. ____________
No. ______________ $____________
WILLCOX & GIBBS, INC.
12 1/4% Series A Senior Note Due 2003
Willcox & Gibbs, Inc., a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
____________ or registered assigns the principal sum of ___________ Dollars on
December 15, 2003, at the office or agency of the Company referred to below, and
to pay interest thereon, commencing on June 15, 1997 and continuing semiannually
thereafter, on June 15 and December 15 in each year, accruing from January 3,
1997, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, at the rate of 12 1/4% per annum, until the principal
hereof is paid or duly provided for, and (to the extent lawful) to pay on demand
interest on any overdue interest at the rate borne by the Securities from the
date on which such overdue interest becomes payable to the date payment of such
interest has been made or duly provided for. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered on the Security Register
at the close of business on the Regular Record Date for such interest, which
shall be the June 1 or December 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date, and such Defaulted Interest, and (to the
extent lawful) interest on such Defaulted Interest at the rate borne by the
Securities, may be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered on the Security Register at the close
of business on a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
any upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
Payment of the principal of (and premium, if any, on) and interest and
Liquidated Damages, if any, on this Security will be made at the office or
agency of the Company maintained for that purpose in The City of New York, in
such coin or currency of the United States of
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America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made on
Physical Securities at the option of the Company on or before the due date (i)
by check mailed to the address of the Person entitled thereto as such address
shall appear on the Security Register or (ii) with respect to any Holder owning
Securities in the principal amount of $500,000 or more, by wire transfer to an
account maintained by the Holder located in the United States, as specified in a
written notice to the Trustee by any such Holder requesting payment by wire
transfer and specifying the account to which transfer is requested.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
WILLCOX & GIBBS, INC.
By:__________________________
Title:
Attest:
_____________________________
Assistant Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:___________ IBJ SCHRODER BANK & TRUST
COMPANY, TRUSTEE
By:_____________________________
Authorized Signatory
15
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
This Security is one of a duly authorized issue of securities of the
Company designated as its 12 1/4% Series A Senior Notes Due 2003 (herein called
the "Securities"), limited (except as otherwise provided in the Indenture
referred to below) in aggregate principal amount to $85,000,000 which may be
issued under an indenture (herein called the "Indenture"; capitalized terms used
herein and not defined herein shall have the respective meanings set forth in
the Indenture) dated as of January 3, 1997 between the Company, the Subsidiary
Guarantors and IBJ Schroder Bank & Trust Company (herein called the "Trustee,"
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties, obligations
and immunities thereunder of the Company, the Trustee and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
The Securities are subject to redemption, at the option of the Company, in
whole or in part, at any time on or after December 15, 2001, upon not less than
30 or more than 60 days' notice at the following Redemption Prices (expressed as
percentages of principal amount) set forth below if redeemed during the
twelve-month period beginning December 15 of the years indicated below:
Redemption
Year Price
---- ----------
2001........................................106.125%
2002........................................103.063%
together in the case of any such redemption with accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due on
an Interest Payment Date that is on or prior to the Redemption Date), all as
provided in the Indenture.
Notwithstanding the foregoing, at any time on or prior to December 15,
1999 up to 30% of the originally issued principal amount of Securities may be
redeemed, at the option of the Company, upon not less than 30 or more than 60
days' notice to each Holder of Securities to be redeemed, from the Net Cash
Proceeds of a Public Equity Offering, at a Redemption Price equal to 112 1/4% of
the principal amount thereof, together with accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date, provided that at least
$59,500,000 of the originally issued principal amount of Securities remains
Outstanding immediately after such redemption and that such redemption occurs
within 60 days following the closing of such Public Equity Offering.
16
<PAGE>
In the case of any redemption of Securities, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Date referred to on the face hereof.
Securities (or portions thereof) for whose redemption and payment provision is
made in accordance with the Indenture shall cease to bear interest from and
after the Redemption Date. In the event of redemption or purchase of this
Security in part only, a new Security or Securities for the unredeemed or
unpurchased portion hereof shall be issued in the name of the Holder hereof upon
the cancellation hereof.
The Securities do not have the benefit of any mandatory redemption or
sinking fund obligations.
In the event of a Change of Control of the Company, and subject to certain
conditions and limitations provided in the Indenture, the Company will be
obligated to make an offer to purchase, on a Business Day not more than 60 or
less than 30 days following the occurrence of a Change of Control of the
Company, all of the then Outstanding Securities at a purchase price equal to
101% of the principal amount thereof, together with accrued and unpaid interest,
if any, to the Change of Control Purchase Date, all as provided in the
Indenture.
In the event of Asset Sales, under certain circumstances, the Company will
be obligated to make a Net Proceeds Offer to purchase all or a specified portion
of each Holder's Securities at a purchase price equal to 100% of the principal
amount of the Securities, together with accrued and unpaid interest, if any, to
the Net Proceeds Payment Date.
As set forth in the Indenture, an Event of Default is generally (i)
failure to pay principal or premium, if any, upon maturity, redemption or
otherwise (including pursuant to a Change of Control Offer or a Net Proceeds
Offer); (ii) default for 30 days in payment of interest or Liquidated Damages,
if any, on any of the Securities; (iii) default in the performance of agreements
relating to mergers, consolidations and sales of all or substantially all
assets, limitation on Indebtedness and Disqualified Capital Stock, limitation on
the issuance of preferred stock of Restricted Subsidiaries, limitation on
restricted payments or the failure to make or consummate a Change of Control
Offer or a Net Proceeds Offer; (iv) failure of the Company or any Subsidiary
Guarantor for 30 days after notice to comply with any other covenants in the
Indenture or the Securities or its Subsidiary Guarantee, as the case may be; (v)
certain payment defaults under, and the acceleration prior to the maturity of,
certain Indebtedness of the Company or any Subsidiary in an aggregate principal
amount in excess of $2,500,000; (vi) certain final judgments or orders against
the Company or any Subsidiary in an aggregate amount of more than $2,500,000 not
paid, discharged or stayed for a period of 60 days; (vii) certain events of
bankruptcy, insolvency or reorganization of the Company or any Restricted
Subsidiary; and (viii) except as permitted by the Indenture and hereby,
cessation of the effectiveness of any Subsidiary Guarantee or the Pledge
Agreement or any repudiation thereof. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Outstanding Securities may declare the principal amount of all the
Securities to be due and payable immediately, except
17
<PAGE>
that (a) in the case of an Event of Default arising from certain events of
bankruptcy, insolvency or reorganization of the Company or any Restricted
Subsidiary, the principal amount of the Securities will become due and payable
immediately without further action or notice, and (b) in the case of an Event of
Default which relates to certain payment defaults or acceleration with respect
to certain Indebtedness, any such Event of Default and any consequential
acceleration of the Securities will be automatically rescinded if any such
Indebtedness is repaid or if the default relating to such Indebtedness is cured
or waived and if the holders thereof have accelerated such Indebtedness then
such holders have rescinded their declaration of acceleration. No Holder may
pursue any remedy under the Indenture unless the Trustee shall have failed to
act after notice from such Holder of an Event of Default and written request by
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities, and the offer to the Trustee of indemnity reasonably satisfactory to
it; however, such provision does not affect the right to sue for enforcement of
any overdue payment on a Security by the Holder thereof. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the
Outstanding Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders notice of any continuing default
(except default in payment of principal, premium, interest or Liquidated
Damages) if it determines in good faith that withholding the notice is in the
interest of the Holders. The Company is required to file annual and quarterly
reports with the Trustee as to the absence or existence of defaults.
The Indenture contains provisions for (i) defeasance at any time of the
entire indebtedness of the Company on this Security and (ii) discharge from
certain covenants and Defaults and Events of Default, upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Security.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by or on behalf of the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof whether or not notation of such consent or waiver is made upon
this Security. Without the consent of any Holder, the Company and the Trustee
may amend or supplement the Indenture or the Securities to cure any ambiguity,
defect or inconsistency, to qualify or maintain the qualification of the
Indenture under the Trust Indenture Act and to make certain other specified
changes and other changes that do not materially adversely affect the interests
of any Holder in any material respect.
18
<PAGE>
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any, on)
and interest and Liquidated Damages, if any, on this Security at the times,
place, and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable on the Security
Register of the Company, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained for such purpose duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
A director, officer, employee, incorporator, stockholder or Affiliate of
the Company, as such, past, present or future shall not have any personal
liability under this Security or any other Security or the Indenture by reason
of his or its status as such director, officer, employee, incorporator,
stockholder or Affiliate, or any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of,
or by reason of such obligations or their creation. Each Holder, by accepting
this Security, waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of this Security.
Prior to the time of due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security is overdue, and neither
the Company, the Trustee nor any agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture. The Company will furnish to
any Holder upon written request and without charge a copy of the Indenture.
Requests may be made to the Company at 900 Milik
19
<PAGE>
Street, Carteret, New Jersey 07008, Attention: Secretary (or such other address
as the Company may have furnished in writing to the Trustee).
Each Holder of a Security, by acceptance hereof, acknowledges and agrees
to the provisions of the Registration Rights Agreement, including without
limitation the obligations of the Holders with respect to a registration and
indemnification of the Company to the extent provided therein.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders thereof. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identifying information
printed hereon.
Interest on this Security shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
This Security shall be governed by and construed in accordance with the
laws of the State of New York.
[FORM OF NOTATION ON SECURITY
RELATING TO SUBSIDIARY GUARANTEE]
The Subsidiary Guarantors, referred to in this Security upon which this
notation is endorsed and each hereinafter referred to as a "Subsidiary
Guarantor," which term includes any successor person under the Indenture, have
unconditionally guaranteed, jointly and severally, on a senior basis (such
guarantee by each Subsidiary Guarantor being referred to herein as the
"Subsidiary Guarantee") (i) the due and punctual payment of the principal of and
interest on the Securities, whether at Stated Maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal and
interest, if any, on the Securities, the payment of Liquidated Damages on the
Securities, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set forth
in Article XIII of the Indenture and (ii) in case of any extension of time of
payment or renewal of any Securities or any of such other obligations, the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
The obligations of each Subsidiary Guarantor to the Holders of Securities
and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are
expressly set forth, and are senior obligations of each such Subsidiary
Guarantor to the extent and in the manner provided,
20
<PAGE>
in Article XIII of the Indenture, and may be released or limited under certain
circumstances. Reference is hereby made to such Indenture for the precise terms
of the Subsidiary Guarantee therein made.
The Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication of the Securities upon which this
Subsidiary Guarantee is endorsed shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized signatories.
SUBSIDIARY GUARANTORS:
WG APPAREL, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON MANAGEMENT CORPORATION
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON MACHINERY CORPORATION
By:___________________________________
Name: ____________________________
Title: _____________________________
LEADTEC SYSTEMS, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
21
<PAGE>
W&G DAON, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
J&E SEWING SUPPLIES, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
W&G TENNESSEE IMPORTS, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON LEASING CORP.
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON EQUIPMENT CORP.
By:___________________________________
Name: ____________________________
Title: _____________________________
22
<PAGE>
PARADISE COLOR INCORPORATED
By:___________________________________
Name: ____________________________
Title: _____________________________
23
<PAGE>
ASSIGNMENT FORM
To assign this Security fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's Soc. Sec. or tax I.D. No.)
and irrevocably appoint _________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
_______________________________________________________________________________
Date: __________________ Your Signature: ______________________________________
_______________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration statement under the
Securities Act of 1933, as amended; or
(3) |_| inside the United States to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933, as
amended) that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that such
transfer is being made in reliance on Rule 144A, in each case
pursuant to and in compliance with Rule 144A under the Securities
Act of 1933, as amended; or
24
<PAGE>
(4) |_| outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with
Rule 904 under the Securities Act of 1933, as amended;
(5) |_| pursuant to Rule 144 under the Securities Act of 1933, as
amended; or
(6) |_| pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (4), (5) or
(6) is checked, the Trustee may require, prior to registering any such transfer
of the Securities, such legal opinions, certifications and other information as
the Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, as amended.
________________________________
Signature
Signature Guarantee:
_____________________________________ ________________________________
(Signature must be guaranteed) Signature
________________________________________________________________________________
TO BE COMPLETED BY PURCHASER IF BOX (3) ABOVE IS CHECKED.
25
<PAGE>
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned for ongoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: _______________________ _____________________________________________
NOTE: To be executed by an executive officer
26
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Date of Exchange Amount of decrease in Amount of increase in Principal Principal amount of this Signature of authorized
Principal Amount of this Amount of this Global Security Global Security following officer of Trustee or
Global Security such decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
27
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 10.14 or 10.15 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 10.14 or 10.15 of the Indenture, state the
amount in principal amount: $ ____________________
Date: ____________________ Your Signature: __________________________________
(Sign exactly as your name
appears on the other side of
this Security.)
Signature Guarantee: ___________________________________________________________
(Signature must be guaranteed)
28
<PAGE>
EXHIBIT 2
to
Appendix A
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE
EXCHANGE SECURITY]
GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, INTEREST
AND LIQUIDATED DAMAGES, IF ANY, BY CERTAIN SUBSIDIARIES OF
WILLCOX & GIBBS, INC.
[*/]
[**/]
CUSIP No. ___________
No. ___________ $____________
WILLCOX & GIBBS, INC.
12 1/4% Series B Senior Note Due 2003
Willcox & Gibbs, Inc., a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
____________ or registered assigns the principal sum of ___________ Dollars on
December 15, 2003, at the office or agency of the Company referred to below, and
to pay interest thereon, commencing on June 15, 1997 and continuing semiannually
thereafter, on June 15 and December 15 in each year, accruing from January 3,
1997, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, at the rate of 12 1/4% per annum, until the principal
hereof is paid or duly provided for, and (to the extent lawful) to pay on demand
interest on any overdue interest at the rate borne by the Securities from the
date on which such overdue interest becomes payable to the date payment of such
interest has been made or duly provided for. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in
- ----------
*/ If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".
**/ If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment, add
the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the
Assignment Form included in this Exhibit 2 with the Assignment Form included in
such Exhibit 1.
29
<PAGE>
whose name this Security (or one or more Predecessor Securities) is registered
on the Security Register at the close of business on the Regular Record Date for
such interest, which shall be the June 1 or December 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date, and such
Defaulted Interest, and (to the extent lawful) interest on such Defaulted
Interest at the rate borne by the Securities, may be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered on the
Security Register at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Trustee, notice whereof
shall be given to Holders of Securities not less than 10 days prior to such
Special Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, any upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any, on) and interest and
Liquidated Damages, if any, on this Security will be made at the office or
agency of the Company maintained for that purpose in The City of New York, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
payment of interest may be made on Physical Securities at the option of the
Company on or before the due date (i) by check mailed to the address of the
Person entitled thereto as such address shall appear on the Security Register or
(ii) with respect to any Holder owning Securities in the principal amount of
$500,000 or more, by wire transfer to an account maintained by the Holder
located in the United States, as specified in a written notice to the Trustee by
any such Holder requesting payment by wire transfer and specifying the account
to which transfer is requested.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
30
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
WILLCOX & GIBBS, INC.
By:_________________________
Title:
Attest:
_____________________________
Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:___________ IBJ SCHRODER BANK & TRUST
COMPANY, TRUSTEE
By:_____________________________
Authorized Signatory
[FORM OF REVERSE SIDE OF EXCHANGE
OR PRIVATE EXCHANGE SECURITY]
This Security is one of a duly authorized issue of securities of the
Company designated as its 12 1/4% Series B Senior Notes Due 2003 (herein called
the "Securities"), limited (except as otherwise provided in the Indenture
referred to below) in aggregate principal amount to $85,000,000 which may be
issued under an indenture (herein called the "Indenture"; capitalized terms used
herein and not defined herein shall have the respective meanings set forth in
the Indenture) dated as of January 3, 1997 between the Company, the Subsidiary
Guarantors and IBJ Schroder Bank & Trust Company (herein called the "Trustee,"
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties, obligations
31
<PAGE>
and immunities thereunder of the Company, the Trustee and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
The Securities are subject to redemption, at the option of the Company, in
whole or in part, at any time on or after December 15, 2001, upon not less than
30 or more than 60 days' notice at the following Redemption Prices (expressed as
percentages of principal amount) set forth below if redeemed during the
twelve-month period beginning December 15 of the years indicated below:
Redemption
Year Price
---- ----------
2001........................................106.125%
2002........................................103.063%
together in the case of any such redemption with accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due on
an Interest Payment Date that is on or prior to the date of redemption), all as
provided herein.
Notwithstanding the foregoing, at any time on or prior to December 15,
1999 up to 30% of the originally issued principal amount of Securities may be
redeemed, at the option of the Company, upon not less than 30 or more than 60
days' notice to each Holder of Securities to be redeemed, from the Net Cash
Proceeds of a Public Equity Offering, at a Redemption Price equal to 112 1/4% of
the principal amount thereof, together with accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date, provided that $59,500,000 of
the originally issued principal amount of Securities remains Outstanding
immediately after such redemption and that such redemption occurs within 60 days
following the closing of such Public Equity Offering.
In the case of any redemption of Securities, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Date referred to on the face hereof.
Securities (or portions thereof) for whose redemption and payment provision is
made in accordance with the Indenture shall cease to bear interest from and
after the Redemption Date. In the event of redemption or purchase of this
Security in part only, a new Security or Securities for the unredeemed or
unpurchased portion hereof shall be issued in the name of the Holder hereof upon
the cancellation hereof.
The Securities do not have the benefit of any mandatory redemption or
sinking fund obligations.
In the event of a Change of Control of the Company, and subject to certain
conditions and limitations provided in the Indenture, the Company will be
obligated to make an offer to purchase,
32
<PAGE>
on a Business Day not more than 60 or less than 30 days following the occurrence
of a Change of Control of the Company, all of the then Outstanding Securities at
a purchase price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the Change of Control Purchase Date, all
as provided in the Indenture.
In the event of Asset Sales, under certain circumstances, the Company will
be obligated to make a Net Proceeds Offer to purchase all or a specified portion
of each Holder's Securities at a purchase price equal to 100% of the principal
amount of the Securities, together with accrued and unpaid interest, if any, to
the Net Proceeds Payment Date.
As set forth in the Indenture, an Event of Default is generally (i)
failure to pay principal or premium, if any, upon maturity, redemption or
otherwise (including pursuant to a Change of Control Offer or a Net Proceeds
Offer); (ii) default for 30 days in payment of interest or Liquidated Damages,
if any, on any of the Securities; (iii) default in the performance of agreements
relating to mergers, consolidations and sales of all or substantially all
assets, limitation on Indebtedness and Disqualified Capital Stock, limitation on
the issuance of preferred stock of Restricted Subsidiaries, limitation on
restricted payments or the failure to make or consummate a Change of Control
Offer or a Net Proceeds Offer; (iv) failure of the Company or any Subsidiary
Guarantor for 30 days after notice to comply with any other covenants in the
Indenture or the Securities or its Subsidiary Guarantee, as the case may be; (v)
certain payment defaults under, and the acceleration prior to the maturity of,
certain Indebtedness of the Company or any Subsidiary in an aggregate principal
amount in excess of $2,500,000; (vi) certain final judgments or orders against
the Company or any Subsidiary in an aggregate amount of more than $2,500,000 not
paid, discharged or stayed for a period of 60 days; (vii) certain events of
bankruptcy, insolvency or reorganization of the Company or any Restricted
Subsidiary and (viii) cessation of the effectiveness of any Subsidiary Guarantee
or the Pledge Agreement or any repudiation thereof. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Outstanding Securities may declare the
principal amount of all the Securities to be due and payable immediately, except
that (a) in the case of an Event of Default arising from certain events of
bankruptcy, insolvency or reorganization of the Company or any Restricted
Subsidiary, the principal amount of the Securities will become due and payable
immediately without further action or notice, and (b) in the case of an Event of
Default which relates to certain payment defaults or acceleration with respect
to certain Indebtedness, any such Event of Default and any consequential
acceleration of the Securities will be automatically rescinded if any such
Indebtedness is repaid or if the default relating to such Indebtedness is cured
or waived and if the holders thereof have accelerated such Indebtedness then
such holders have rescinded their declaration of acceleration. No Holder may
pursue any remedy under the Indenture unless the Trustee shall have failed to
act after notice from such Holder of an Event of Default and written request by
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities, and the offer to the Trustee of indemnity reasonably satisfactory to
it; however, such provision does not affect the right to sue for enforcement of
any overdue payment on a Security by the Holder thereof. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the
Outstanding Securities may direct the Trustee in its exercise of
33
<PAGE>
any trust or power. The Trustee may withhold from Holders notice of any
continuing default (except default in payment of principal, premium, interest or
Liquidated Damages) if it determines in good faith that withholding the notice
is in the interest of the Holders. The Company is required to file annual and
quarterly reports with the Trustee as to the absence or existence of defaults.
The Indenture contains provisions for (i) defeasance at any time of the
entire indebtedness of the Company on this Security and (ii) discharge from
certain covenants and Defaults and Events of Default, upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Security.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by or on behalf of the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof whether or not notation of such consent or waiver is made upon
this Security. Without the consent of any Holder, the Company and the Trustee
may amend or supplement the Indenture or the Securities to cure any ambiguity,
defect or inconsistency, to qualify or maintain the qualification of the
Indenture under the Trust Indenture Act and to make certain other specified
changes and other changes that do not materially adversely affect the interests
of any Holder in any material respect.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any, on)
and interest and Liquidated Damages, if any, on this Security at the times,
place, and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable on the Security
Register of the Company, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained for such purpose duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
34
<PAGE>
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
A director, officer, employee, incorporator, stockholder or Affiliate of
the Company, as such, past, present or future shall not have any personal
liability under this Security or any other Security or the Indenture by reason
of his or its status as such director, officer, employee, incorporator,
stockholder or Affiliate, or any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of,
or by reason of such obligations or their creation. Each Holder, by accepting
this Security, waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of this Security.
Prior to the time of due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security is overdue, and neither
the Company, the Trustee nor any agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture. The Company will furnish to
any Holder upon written request and without charge a copy of the Indenture.
Requests may be made to the Company at 900 Milik Street, Carteret, New Jersey
07008, Attention: Secretary (or such other address as the Company may have
furnished in writing to the Trustee).
Each Holder of a Security, by acceptance hereof, acknowledges and agrees
to the provisions of the Registration Rights Agreement, including without
limitation the obligations of the Holders with respect to a registration and
indemnification of the Company to the extent provided therein.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders thereof. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identifying information
printed hereon.
35
<PAGE>
Interest on this Security shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
This Security shall be governed by and construed in accordance with the
laws of the State of New York.
[FORM OF NOTATION ON SECURITY
RELATING TO SUBSIDIARY GUARANTEE]
The Subsidiary Guarantors, referred to in this Security upon which this
notation is endorsed and each hereinafter referred to as a "Subsidiary
Guarantor," which term includes any successor person under the Indenture, have
unconditionally guaranteed, jointly and severally, on a senior basis (such
guarantee by each Subsidiary Guarantor being referred to herein as the
"Subsidiary Guarantee") (i) the due and punctual payment of the principal of and
interest on the Securities, whether at Stated Maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal and
interest, if any, on the Securities, the payment of Liquidated Damages on the
Securities, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set forth
in Article XIII of the Indenture and (ii) in case of any extension of time of
payment or renewal of any Securities or any of such other obligations, the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
The obligations of each Subsidiary Guarantor to the Holders of Securities
and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are
expressly set forth, and are senior obligations of each such Subsidiary
Guarantor to the extent and in the manner provided, in Article XIII of the
Indenture, and may be released or limited under certain circumstances. Reference
is hereby made to such Indenture for the precise terms of the Subsidiary
Guarantee therein made.
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<PAGE>
The Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication of the Security upon which this
Subsidiary Guarantee is endorsed shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized signatories.
SUBSIDIARY GUARANTORS:
WG APPAREL, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON MANAGEMENT CORPORATION
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON MACHINERY CORPORATION
By:___________________________________
Name: ____________________________
Title: _____________________________
LEADTEC SYSTEMS, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
37
<PAGE>
W&G DAON, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
J&E SEWING SUPPLIES, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
W&G TENNESSEE IMPORTS, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON LEASING CORP.
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON EQUIPMENT CORP.
By:___________________________________
Name: ____________________________
Title: _____________________________
38
<PAGE>
PARADISE COLOR INCORPORATED
By:___________________________________
Name: ____________________________
Title: _____________________________
39
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's Soc. Sec. or tax I.D. No.)
and irrevocably appoint ___________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
________________________________________________________________________________
Date: _________________________ Your Signature: ____________________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
40
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 10.14 or 10.15 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 10.14 or 10.15 of the Indenture, state the amount:
Date: _________________________ Your Signature: ______________________________
(Sign exactly as your name
appears on the other side of
the Security)
Signature Guarantee: ___________________________________________________________
<PAGE>
EXHIBIT A TO INDENTURE
FORM OF PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is made and entered into as of
January 3, 1997 by WG APPAREL, INC., a Delaware corporation and a wholly owned
Subsidiary of Willcox & Gibbs, Inc. (the "Pledgor"), having its principal office
at 900 Milik Street, Carteret, New Jersey 07008, in favor of IBJ SCHRODER BANK &
TRUST COMPANY, having an office at One State Street, New York, New York 10004,
as collateral agent (the "Collateral Agent") for the holders (the "Holders") of
the Notes (as defined below). Capitalized terms used and not defined herein
shall have the meanings given to such terms in the Indenture referred to below.
W I T N E S S E T H :
WHEREAS, the Pledgor is the legal and beneficial owner of all of the
issued and outstanding shares of capital stock set forth on Schedule I hereto
(the "Pledged Shares") of Willcox & Gibbs, Ltd. (the "Issuer"); and
WHEREAS, Willcox & Gibbs, Inc. (the "Company") and IBJ Schroder Bank &
Trust Company, as trustee, have entered into that certain Indenture dated as of
January 3, 1997 (as amended, supplemented or otherwise modified from time to
time, the "Indenture"), pursuant to which the Company issued $85,000,000 in
aggregate principal amount of 12 1/4% Series A Senior Notes Due 2003 (together
with any Exchange Securities and Private Exchange Securities and any notes
issued in replacement thereof or in exchange or substitution therefor, the
"Notes"); and
WHEREAS, the terms of the Indenture require that Pledgor (i) pledge to the
Collateral Agent for the ratable benefit of the Holders and grant to the
Collateral Agent for the ratable benefit of the Holders a security interest in
the Pledged Collateral (as defined herein) and (ii) execute and deliver this
Agreement in order to secure the payment and performance by the Company of all
of the obligations of the Company under the Indenture and the Notes (the
"Obligations").
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and in order to induce
the Holders to purchase the Notes, the Pledgor hereby agrees with the Collateral
Agent for its benefit and the ratable benefit of the Holders as follows:
<PAGE>
SECTION 1. Pledge. The Pledgor hereby pledges to the Collateral Agent for
its benefit and for the ratable benefit of the Holders and grants to the
Collateral Agent for its benefit and ratable benefit of the Holders a continuing
first priority security interest in all of Pledgor's right, title and interest
in the following (the "Pledged Collateral"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares, and all products and proceeds of any of the Pledged Shares, including,
without limitation, all dividends, cash, options, warrants, rights, instruments,
subscriptions and other property or proceeds from time to time received,
receivable or otherwise distributed to Pledgor in respect of or in exchange for
any or all of the Pledged Shares or any of the foregoing; and
(b) an undivided sixty-six percent (66%) interest in all additional shares
of, and all securities convertible into and all warrants, options or other
rights to purchase, Capital Stock of, or other Equity Interests (as defined
below) in, the Issuer from time to time acquired by the Pledgor in any manner,
and the certificates representing such additional shares and Equity Interests
(any such additional shares and Equity Interests and other items shall
constitute part of the Pledged Shares under and as defined in this Agreement);
and
(c) all products and proceeds of any of the foregoing, including, without
limitation, all dividends, cash, options, warrants, rights, instruments,
subscriptions, and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the foregoing.
For purposes of this Agreement, "Equity Interests" means Capital Stock and
all warrants, options or other rights to acquire Capital Stock (but excluding
any debt security that is convertible into, or exchangeable for Capital Stock).
SECTION 2. Security for Obligations. This Agreement secures the prompt and
complete payment and performance when due (whether at Stated Maturity, by
acceleration or otherwise) of all Obligations of the Pledgor hereunder, under
the Indenture and the Notes (including, without limitation, interest and any
other Obligations accruing after the date of any filing by the Pledgor of any
petition in bankruptcy or the commencement of any bankruptcy, insolvency or
similar proceeding with respect to the Pledgor).
SECTION 3. Delivery of Pledged Collateral. The Pledgor hereby agrees that
all certificates or instruments representing or evidencing the Pledged
Collateral shall be immediately delivered to and held at all times by the
Collateral Agent pursuant hereto in the State of New York and shall be in
suitable form for transfer by delivery, or issued in the name of the Pledgor and
accompanied by instruments of transfer or assignment duly executed in blank and
undated, and in either case having attached thereto all requisite federal or
state stock transfer tax stamps, all in form and substance satisfactory to the
Collateral Agent.
2
<PAGE>
SECTION 4. Representations and Warranties. The Pledgor hereby makes all
representations and warranties applicable to the Pledgor contained in the
Indenture. The Pledgor further represents and warrants that:
(a) The execution, delivery and performance by the Pledgor of this
Agreement are within the Pledgor's corporate powers, have been duly authorized
by all necessary corporate action, and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation or bylaws of the Pledgor or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Pledgor, or result in the creation or imposition of any Lien on any assets of
the Pledgor, other than the Lien contemplated hereby.
(b) The Pledged Shares have been duly authorized and validly issued and
are fully paid and non-assessable.
(c) The Pledged Shares constitute 66% of the authorized, issued and
outstanding Equity Interests of the Issuer and constitute 66% of the shares of
Equity Interests of the Issuer beneficially owned by the Pledgor. The Pledgor
owns the remaining 34% of the Equity Interests of the Issuer (the "Unencumbered
Shares") free and clear of any Lien or claims of any Person.
(d) The Pledgor is the legal, record and beneficial owner of the Pledged
Collateral, free and clear of any Lien or claims of any Person except for the
security interest created by this Agreement.
(e) The Pledgor has full power and authority to enter into this Agreement
and has the right to vote, pledge and grant a security interest in the Pledged
Collateral as provided by this Agreement.
(f) This Agreement has been duly executed and delivered by the Pledgor and
constitutes a legal, valid and binding obligation of the Pledgor, enforceable
against the Pledgor in accordance with its terms, except as the enforceability
thereof may be limited by (i) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors and (ii) the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law.
(g) Upon the delivery to the Collateral Agent of the Pledged Collateral
and the filing of Uniform Commercial Code (the "UCC") financing statements, the
pledge of the Pledged Collateral pursuant to this Agreement creates a valid and
perfected first priority security interest in the Pledged Collateral, securing
the payment of the Obligations for the benefit of the Collateral Agent and the
Holders and enforceable as such against all creditors of the Pledgor and any
Persons purporting to purchase any of the Pledged Collateral from the Pledgor.
3
<PAGE>
(h) No consent of any other Person and no consent, authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required (i) for the pledge by the Pledgor of
the Pledged Collateral pursuant to this Agreement or for the execution, delivery
or performance of this Agreement by the Pledgor or (ii) for the exercise by the
Collateral Agent of the voting or other rights provided for in this Agreement or
the remedies in respect of the Pledged Collateral pursuant to this Agreement
(except as may be required in connection with such disposition by laws affecting
the offering and sale of securities).
(i) No litigation, investigation or proceeding of or before any arbitrator
or governmental authority is pending or, to the best knowledge of the Pledgor,
threatened by or against the Pledgor or against any of its properties or
revenues with respect to this Agreement or any of the transactions contemplated
hereby.
(j) The pledge of the Pledged Collateral pursuant to this Agreement is not
prohibited by any law or governmental regulation, release, interpretation or
opinion of the Board of Governors of the Federal Reserve System or other
regulatory agency (including, without limitation, Regulations G, T, U and X of
the Board of Governors of the Federal Reserve System) which is binding upon the
Pledgor.
(k) All information set forth herein relating to the Pledged Collateral is
accurate and complete in all material respects.
SECTION 5. Further Assurance. The Pledgor will at all times cause the
security interests granted pursuant to this Agreement to constitute valid
perfected first priority security interests in the Pledged Collateral (other
than with respect to Permitted Liens), enforceable as such against all creditors
of the Pledgor and (except as otherwise specifically provided herein) any
Persons purporting to purchase any Pledged Collateral from the Pledgor. The
Pledgor will, promptly upon the reasonable request by the Collateral Agent,
execute and deliver or cause to be executed and delivered, or use its best
efforts to procure, all stock powers, proxies, tax stamps, assignments,
instruments and other documents, all in form and substance reasonably
satisfactory to the Collateral Agent, deliver any instruments to the Collateral
Agent and take any other actions that are reasonably necessary or desirable to
perfect, continue the perfection of, or protect the first priority of the
Collateral Agent's security interest in, the Pledged Collateral, to protect the
Pledged Collateral against the rights, claims, or interests of third persons, to
enable the Collateral Agent to exercise or enforce its rights and remedies
hereunder, or otherwise to effect the purposes of this Agreement. The Pledgor
also hereby authorized the Collateral Agent to file any financing or
continuation statements with respect to the Pledged Collateral without the
signature of the Pledgor to the extent permitted by applicable law. The Pledgor
will pay all costs incurred in connection with any of the foregoing.
4
<PAGE>
SECTION 6. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default (as defined in the Indenture) shall
have occurred and be continuing, the Pledgor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the Pledged Shares or
any part thereof for any purpose not inconsistent with the terms of this
Agreement or the Indenture; provided, however, that the Pledgor shall not
exercise or shall refrain from exercising any such right if such action would
have a material adverse effect on the value of the Pledged Collateral or any
part thereof or be inconsistent with or violate any provisions of this Agreement
or the Indenture.
(b) So long as no Event of Default (as defined in the Indenture) shall
have occurred and be continuing, and subject to the other terms and conditions
of the Indenture, the Pledgor shall be entitled to receive, and to utilize
(subject to the provisions of the Indenture) free and clear of the Lien of this
Agreement, all regular and ordinary cash dividends paid from time to time in
respect of the Pledged Shares.
(c) Any and all (i) dividends, other distributions, interest and principal
payments paid or payable in the form of instruments and/or other property (other
than cash dividends permitted under Section 6(b) hereof) received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged Collateral,
(ii) dividends and other distributions paid or payable in cash in respect of any
Pledged Shares in connection with a partial or total liquidation or dissolution
or in connection with a reduction of capital, capital surplus or paid-in
surplus, and (iii) cash paid, payable or otherwise distributed in redemption of,
or in exchange for, any Pledged Collateral, shall in each case be forthwith
delivered to the Collateral Agent to be held as Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the benefit of the Collateral
Agent for the benefit of the Holders, be segregated from the other property and
funds of the Pledgor and be forthwith delivered to the Collateral Agent as
Pledged Collateral in the same form as so received (with any necessary
endorsements).
(d) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies, dividend and interest
payment orders and other instruments as the Pledgor may reasonably request for
the purpose of enabling the Pledgor to exercise the voting and other rights that
it is entitled pursuant to Section 6(a) and 6(b) above.
(e) Upon the occurrence and during the continuance of an Event of Default
(as defined in the Indenture), (i) all rights of the Pledgor to exercise the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 6(a) shall cease, and all such rights shall, at the
option of the Collateral Agent, thereupon become vested in the Collateral Agent,
which, to the extent permitted by law, shall thereupon have the sole right to
exercise such voting and other consensual rights, and (ii) all dividends and
other distributions payable in respect of the Pledged Collateral shall be paid
to the Collateral Agent and the Pledgor's right to receive such cash payments
pursuant to Section 6(b) hereof shall immediately cease.
5
<PAGE>
(f) Upon the occurrence and during the continuance of an Event of Default
(as defined in the Indenture), the Pledgor shall execute and deliver (or cause
to be executed and delivered) to the Collateral Agent all such proxies, dividend
and interest payment orders and other instruments as the Collateral Agent may
reasonably request for the purpose of enabling the Collateral Agent to exercise
the voting and other rights that it is entitled to exercise pursuant to Section
6(e) above.
(g) All dividends and other distributions that are received by the Pledgor
contrary to the provisions of this Section 6 shall be received in trust for the
benefit of the Collateral Agent, the Holders, shall be segregated from the other
property or funds of the Pledgor and shall be forthwith delivered to the
Collateral Agent as Pledged Collateral in the same form as so received (with any
necessary endorsements).
SECTION 7. Covenants. The Pledgor hereby covenants and agrees with the
Collateral Agent and the Holders that it will (i) comply with all of the
obligations, requirements and restrictions applicable to the Pledgor contained
in the Indenture and (ii) if the Trustee and the Collateral Agent shall not be
the same Person, notify the Collateral Agent of the occurrence of an Event of
Default. The Pledgor further covenants and agrees, from and after the date of
this Agreement and until the Obligations have been paid in full, as follows:
(a) The Pledgor agrees that it will not (i) sell, assign, transfer, convey
or otherwise dispose of, or grant any option or warrant with respect to, any of
the Pledged Collateral or Unencumbered Shares without the prior written consent
of the Collateral Agent and the Holders, (ii) create or permit to exist any Lien
upon or with respect to any of the Pledged Collateral or Unencumbered Shares,
except for the security interest granted under this Agreement and Permitted
Liens, and at all times will be the sole beneficial owner of the Pledged
Collateral and the Unencumbered Shares, (iii) enter into any agreement or
understanding that purports to or that restricts or inhibits the Collateral
Agent's rights or remedies hereunder, including, without limitation, the
Collateral Agent's right to sell or otherwise dispose of the Pledged Collateral,
(iv) take any action, or permit the taking of any action by the Issuer, with
respect to the Pledged Collateral, the taking of which would result in a
material impairment of the economic value of the Pledged Collateral as
collateral or a violation of the Indenture or this Agreement, (v) permit the
Issuer to merge or consolidate with or into another person or entity other than
the Pledgor or sell or transfer all or substantially all of its assets to
another person or entity other than the Pledgor, unless (x) Pledgor shall have
delivered to the Collateral Agent an Opinion of Counsel substantially in the
form of Exhibit A hereto and a certificate executed by the President and Chief
Financial Officer of Pledgor substantially in the form of Exhibit B hereto, (y)
an undivided sixty-six percent (66%) interest in all outstanding Capital Stock
of the surviving entity in such merger or consolidation or of the entity to whom
such sale or transfer was made and (z) the Pledgor shall otherwise have complied
with the Indenture, or (vi) fail to pay or discharge any tax, assessment or levy
of any nature not later than the date of any proposed sale under any judgment,
writ or warrant of attachment with regard to the Pledged Collateral.
6
<PAGE>
(b) The Pledgor agrees that immediately upon becoming the beneficial owner
of any additional shares of Capital Stock, notes, other securities or Equity
Interests of the Issuer or of any other subsidiary of the Pledgor or the Issuer
that is not a Subsidiary Guarantor, including as a result of the merger or
consolidation of the Issuer with or into another entity, it will pledge and
deliver to the Collateral Agent for its benefit and the ratable benefit of the
Holders and grant to the Collateral Agent for its benefit and the ratable
benefit of the Holders, a continuing first priority security interest in an
undivided sixty-six percent (66%) interest in such shares, notes, other
securities or Equity Interests (as well as instruments of transfer or assignment
duly executed in blank and undated together with any necessary stock transfer
tax stamps, all in form and substance reasonably satisfactory to the Collateral
Agent).
SECTION 8. Power of Attorney. In addition to all of the powers granted to
the Collateral Agent pursuant to Section 14.4 of the Indenture, the Pledgor
hereby appoints and constitutes the Collateral Agent as the Pledgor's
attorney-in-fact to exercise all of the following powers upon and at any time
after the occurrence and during the continuance of an Event of Default (as
defined in the Indenture): (i) collection of proceeds of any Pledged Collateral;
(ii) conveyance of any item of Pledged Collateral to any purchaser thereof;
(iii) giving of any notices or recording of any Liens under Section 5 hereof;
(iv) making of any payments or taking any acts under Section 9 hereof; and (v)
paying or discharging taxes or Liens levied or placed upon or threatened against
the Pledged Collateral, the legality or validity thereof and the amounts
necessary to discharge the same to be determined by the Collateral Agent in its
sole discretion, and such payments made by the Collateral Agent to become the
obligations of the Pledgor to the Collateral Agent, due and payable immediately
without demand. The Collateral Agent's authority hereunder shall include,
without limitation, the authority to endorse and negotiate, for the Collateral
Agent's own account, any checks or instruments in the name of the Pledgor,
execute and give receipt for any certificate of ownership or any document,
transfer title to any item of Pledged Collateral, sign the Pledgor's name on all
financing statements or any other documents deemed necessary or appropriate to
preserve, protect or perfect the security interest in the Pledged Collateral and
to file the same, prepare, file and sign the Pledgor's name on any notice of
Lien, and prepare, file and sign the Pledgor's name on a proof of claim in
bankruptcy or similar document against any customer of the Pledgor, and to take
any other actions arising from or incident to the powers granted to the
Collateral Agent in this Agreement. This power of attorney is coupled with an
interest and is irrevocable by the Pledgor.
SECTION 9. Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the reasonable expenses of the
Collateral Agent incurred in connection therewith shall be payable by the
Pledgor under Section 14 hereof.
SECTION 10. No Assumption of Duties; Reasonable Care. The rights and
powers granted to the Collateral Agent hereunder are being granted in order to
preserve and protect the security interest in and to the Pledged Collateral
granted hereby and shall not be interpreted to, and shall not, impose any duties
on the Collateral Agent in connection therewith. The Collateral
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Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if the Pledged
Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords its own property, it being understood that the
Collateral Agent shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Pledged Collateral, whether or not the
Collateral Agent has or is deemed to have knowledge of such matters, or (ii)
taking any necessary steps to preserve rights against any parties with respect
to any Pledged Collateral.
SECTION 11. Subsequent Changes Affecting Collateral. The Pledgor
represents to the Collateral Agent and the Holders that the Pledgor has made its
own arrangements for keeping informed of changes or potential changes affecting
the Pledged Collateral (including, but not limited to, rights to convert, rights
to subscribe, payment of dividends, payments of interest and/or principal,
reorganization or other exchanges, tender offers and voting rights), and the
Pledgor agrees that the Collateral Agent and the Holders shall have no
responsibility or liability for informing the Pledgor of any such changes or
potential changes or for taking any action or omitting to take any action with
respect thereto. The Pledgor covenants that it will not, without the prior
written consent of the Collateral Agent and the Holders, vote to enable, or take
any other action to permit, the Issuer to issue any Capital Stock or other
Equity Interest or to sell or otherwise dispose of, or grant any option with
respect to, any of the Pledged Collateral or create or permit to exist any Lien
upon or with respect to any of the Pledged Collateral, except for the security
interests granted under this Agreement. The Pledgor will defend the right, title
and interest of the Collateral Agent and the Holders in and to the Pledged
Collateral against the claims and demands of all Persons.
SECTION 12. Remedies Upon Default.
(a) If any Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the Collateral Agent and the Holders shall have, in
addition to all other rights given by law or by this Agreement or the Indenture,
all of the rights and remedies with respect to the Pledged Collateral of a
secured party under the UCC as in effect in the State of New York at that time.
The Collateral Agent may, without notice and at its option, transfer or
register, and the Pledgor shall register or cause to be registered upon request
therefor by the Collateral Agent, the Pledged Collateral or any part thereof on
the books of the Issuer into the name of the Collateral Agent or the Collateral
Agent's nominee(s), with or without any indication that such Pledged Collateral
is subject to the security interest hereunder. In addition, with respect to any
Pledged Collateral that shall then be in or shall thereafter come into the
possession or custody of the Collateral Agent, the Collateral Agent may sell or
cause the same to be sold at any broker's board or at public or private sale, in
one or more sales or lots, at such price or prices as the Collateral Agent may
deem best, for cash or on credit or for future delivery, without assumption of
any credit risk. The purchaser of any or all Pledged Collateral so sold shall
thereafter hold the same absolutely, free from any claim, encumbrance or right
of any kind whatsoever. Unless any of the Pledged Collateral threatens to
decline speedily in value or is or becomes of a type sold on a
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recognized market, the Collateral Agent will give the Pledgor reasonable notice
of the time and place of any public sale thereof, or of the time after which any
private sale or other intended disposition is to be made. Any sale of the
Pledged Collateral conducted in conformity with reasonable commercial practices
of banks, insurance companies, commercial finance companies, or other financial
institutions disposing of property similar to the Pledged Collateral shall be
deemed to be commercially reasonable. Any requirements of reasonable notice
shall be met if such notice is mailed to the Pledgor as provided below in
Section 18.1, at least ten days before the time of the sale or disposition. Any
other requirement of notice, demand or advertisement for sale is, to the extent
permitted by law, waived. The Collateral Agent or any Holder may, in its own
name or in the name of a designee or nominee, buy any of the Pledged Collateral
at any public sale and, if permitted by applicable law, at any private sale. All
expenses (including court costs and reasonable attorneys' fees and
disbursements) of, or incident to, the enforcement of any of the provisions
hereof shall be recoverable from the proceeds of the sale or other disposition
of the Pledged Collateral.
(b) The Pledgor agrees to cause the Issuer to cooperate with and assist
the Collateral Agent to comply with the provisions of the securities or "Blue
Sky" laws, if applicable, of any jurisdiction that the Trustee shall designate
for the sale of the Pledged Shares.
(c) In view of the fact that federal and state securities laws may impose
certain restrictions on the method by which a sale of the Pledged Collateral may
be effected after the occurrence of and during the continuance of an Event of
Default (as defined in the Indenture), Pledgor agrees that upon the occurrence
or existence of any such Event of Default, the Collateral Agent may, from time
to time, attempt to sell all or any part of the Pledged Collateral by means of a
private placement, restricting the prospective purchasers to those who will
represent and agree that they are purchasing for investment only and not for
distribution. In so doing, the Collateral Agent may solicit offers to buy the
Pledged Collateral, or any part of it, for cash, from a limited number of
investors who might be interested in purchasing the Pledged Collateral. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Collateral
Agent shall be under no obligation to delay a sale of any of the Pledged
Collateral for the period of time necessary to permit the Issuer of such
securities to register them for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer agrees to do so.
(d) The Pledgor further agrees to use its best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Collateral pursuant to this Section 12 valid
and binding and in compliance with any and all other applicable requirements of
law. The Pledgor further agrees that a breach of any of the covenants contained
in this Section 12 will cause irreparable injury to the Collateral Agent and the
Holders that the Collateral Agent and the Holders have no adequate remedy at law
in respect of such breach and, as a consequence, that each and every covenant
contained in this Section 12 shall be
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specifically enforceable against the Pledgor, and the Pledgor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Default or Event of Default has
occurred.
SECTION 13. Irrevocable Authorization and Instruction of the Issuer. The
Pledgor hereby authorizes and instructs the Issuer to comply with any
instruction received by the Issuer from the Collateral Agent that (i) states
that an Event of Default has occurred under the Indenture and (ii) is otherwise
in accordance with the terms of this Agreement, without any other or further
instructions from the Pledgor, and the Pledgor agrees that the Issuer shall be
fully protected in so complying.
SECTION 14. Fees and Expenses. The Pledgor will upon demand pay to the
Collateral Agent the amount of any and all reasonable fees and expenses
(including, without limitation, the reasonable fees and disbursements of its
counsel, of any investment banking firm, business broker or other selling agent
and of any other experts and agents retained by the Collateral Agent) that the
Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent and the Holders
hereunder or (iv) the failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 15. Security Interest Absolute. All rights of the Collateral Agent
and the Holders and the security interests created hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any Note or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations, or any other amendment or waiver of or
any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guarantee, for all or any of the Obligations; or
(d) any other circumstances that might otherwise constitute a defense
available to, or a discharge of, the Pledgor in respect of the Obligations or of
this Agreement.
SECTION 16. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default (as defined in the Indenture), the proceeds
of any sale of, or other realization upon, all or any part of the Pledged
Collateral and any cash held shall be applied by the Collateral Agent in the
following order of priorities:
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first, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the Collateral
Agent, and all expenses, liabilities and advances incurred or made by the
Collateral Agent in connection therewith, and any other unreimbursed fees and
expenses for which the Collateral Agent is to be reimbursed pursuant to Section
14 hereof;
second, to the ratable payment (based on the principal amount of Notes
deemed by the Indenture to be outstanding at the time of distribution) of
accrued but unpaid interest on such outstanding Notes;
third, to the ratable payment (based on the principal amount of Notes
deemed by the Indenture to be outstanding at the time of distribution) of unpaid
principal of such outstanding Notes;
fourth, to the ratable payment (based on the principal amount of Notes
deemed by the Indenture to be outstanding at the time of distribution) of all
other Obligations, until all Obligations shall have been paid in full; and
finally, to payment to the Pledgor or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
SECTION 17. Uncertificated Securities. Notwithstanding anything to the
contrary contained herein, if any Pledged Shares (whether now owned or hereafter
acquired) are uncertificated Pledged Shares, the Pledgor shall promptly notify
the Collateral Agent, and shall promptly take all actions reasonably required to
perfect the security interest of the Collateral Agent under applicable law
(including, in any event, under Sections 8-313 and 8-321 of the New York UCC).
The Pledgor further agrees to take such actions as the Collateral Agent deems
reasonably necessary or desirable to effect the foregoing and to permit the
Collateral Agent to exercise any of its rights and remedies hereunder, and
agrees to provide an Opinion of Counsel satisfactory to the Collateral Agent
with respect to any such pledge of uncertificated Pledged Shares promptly upon
request of the Collateral Agent.
SECTION 18. Miscellaneous Provisions.
Section 18.1 Notices. All notices, approvals, consents or other
communications required or desired to be given hereunder shall be in the form
and manner as set forth in Section 15.4 or 15.5 of the Indenture, and if to any
Holder delivered to the addresses set forth in such Section and
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if to the Pledgor:
c/o Willcox & Gibbs, Inc.
900 Milik Street
Carteret, New Jersey 07008
Attn: Chief Executive Officer
Telephone: 908.541.6255
Telecopier: 908.541.6249
if to the Collateral Agent:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attn: Corporate Trust Administration
Telephone: 212.858.2000
Telecopier: 212.858.2952
Section 18.2 Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Pledgor to the Collateral Agent to take any action
or omit to take any action under this Agreement, the Pledgor shall deliver to
the Collateral Agent an Officers' Certificate and/or an Opinion of Counsel in
accordance with the requirements of Section 15.1 of the Indenture.
Section 18.3 No Adverse Interpretation of Other Agreements. This Agreement
may not be used to interpret another pledge, security or debt agreement of the
Pledgor, the Issuer or any subsidiary of any of them. No such pledge, security
or debt agreement may be used to interpret this Agreement.
Section 18.4 Severability. The provisions of this Agreement are severable,
and if any clause or provision shall be held invalid or unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability shall
affect in that jurisdiction only such clause or provision, or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
Section 18.5 Headings. The headings of the Sections of this Agreement have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 18.6 Counterpart Originals. This Agreement may be signed in two or
more counterparts. Each signed copy shall be an original, but all of them
together represent one and the same agreement. Each counterpart may be executed
and delivered by telecopy, if such delivery is promptly followed by the original
manually signed copy sent by overnight courier.
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Section 18.7 Benefits of Agreement. Nothing in this Agreement, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Holders any benefit or any legal or equitable
right, remedy or claim under this Agreement.
Section 18.8 Amendments, Waivers and Consents. Any amendment or waiver of
any provision of this Agreement and any consent to any departure by the Pledgor
from any provision of this Agreement shall be effective only if made or given in
compliance with all of the terms and provisions of the Indenture necessary for
amendments or waivers of, or consents to any departure by the Pledgor from any
provision of the Indenture, as applicable, and neither the Collateral Agent nor
any Holder shall be deemed, by any act, delay, indulgence, omission or
otherwise, to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default or in any breach of any of the terms and
conditions hereof. Failure of the Collateral Agent or any Holder to exercise, or
delay in exercising, any right, power or privilege hereunder shall not operate
as a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Collateral
Agent or any Holder of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy that the Collateral Agent or
such Holder would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
Section 18.9 Interpretation of Agreement. Time is of the essence in each
provision of this Agreement of which time is an element. All terms not defined
herein or in the Indenture shall have the meaning set forth in the applicable
UCC, except where the context otherwise requires. To the extent a term or
provision of this Agreement conflicts with the Indenture and is not dealt with
herein with more specificity, the Indenture, as the case may be, shall control
with respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Agreement shall not
be relevant to determine the meaning of this Agreement even though the accepting
or acquiescing party had knowledge of the nature of the performance and
opportunity for objection.
Section 18.10 Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (i) remain in
full force and effect until the payment in full of all the Obligations and all
the fees and expenses owing to the Collateral Agent, (ii) be binding upon the
Pledgor, its successors and assigns, and (iii) inure, together with the rights
and remedies of the Collateral Agent hereunder, to the benefit of the Collateral
Agent, the Holders and their respective successors, transferees and assigns.
Section 18.11 Reinstatement. This Agreement shall continue to be effective
or be reinstated if at any time any amount received by the Collateral Agent or
any Holder in respect of the Obligations is rescinded or must otherwise be
restored or returned by the Collateral Agent or any Holder upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Pledgor or upon
the appointment of any receiver, intervenor, conservator, trustee or similar
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official for the Pledgor or any substantial part of its assets, or otherwise,
all as though such payments had not been made.
Section 18.12 Survival of Provisions. All representations, warranties and
covenants of the Pledgor contained herein shall survive the execution and
delivery of this Agreement and shall terminate only upon the full and final
payment and performance by the Pledgor of the Obligations and all fees and
expenses owing to the Collateral Agent.
Section 18.13 Waivers. The Pledgor waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled.
Section 18.14 Authority of the Collateral Agent.
(a) The Collateral Agent shall have and be entitled to exercise all powers
hereunder that are specifically granted to the Collateral Agent by the terms
hereof, together with such powers as are reasonably incident thereto. The
Collateral Agent may perform any of its duties hereunder or in connection with
the Pledged Collateral by or through agents or employees and shall be entitled
to retain counsel and to act in reliance upon the advice of counsel concerning
all such matters. Neither the Collateral Agent nor any director, officer,
employee, attorney or agent of the Collateral Agent shall be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Collateral Agent and its directors, officers,
employees, attorneys and agents shall be entitled to rely on any communication,
instrument or document believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons. The Pledgor agrees to
indemnify and hold harmless the Collateral Agent, the Holders and any other
Person from and against any and all costs, expenses (including the reasonable
fees and disbursements of counsel (including, the allocated costs of inside
counsel)), claims and liabilities incurred by the Collateral Agent, the Holders
or such Person hereunder, unless such claim or liability shall be due to willful
misconduct or gross negligence on the part of such Person.
(b) The Pledgor acknowledges that the rights and responsibilities of the
Collateral Agent under this Agreement with respect to any action taken by the
Collateral Agent or the exercise or non-exercise by the Collateral Agent of any
option, right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall be conclusively presumed to be
acting as agent for the Holders with full and valid authority so to act or
refrain from acting, and the Pledgor shall not be obligated or entitled to make
any inquiry respecting such authority.
Section 18.15 Resignation or Removal of the Collateral Agent. Until such
time as the Obligations and all fees and expenses of the Collateral Agent shall
have been paid in full, the Collateral Agent may at any time by giving written
notice to the Pledgor and the Holders resign and be discharged of the
responsibilities hereby created, such resignation to become effective upon
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(i) the appointment of a successor Collateral Agent and (ii) the acceptance of
such appointment by such successor Collateral Agent. As promptly as practicable
after the giving of any such notice, the Holders shall appoint a successor
Collateral Agent, which successor Collateral Agent shall be reasonably
acceptable to the Pledgor. If no successor Collateral Agent shall be appointed
and shall have accepted such appointment within 90 days after the Collateral
Agent gives the aforesaid notice of resignation, the Collateral Agent may apply
to any court of competent jurisdiction to appoint a successor Collateral Agent
to act until such time, if any, as a successor shall have been appointed as
provided in this Section 18.15. Any successor so appointed by such court shall
immediately and without further act be superseded by any successor Collateral
Agent appointed by the Holders as provided in this Section 18.15. Simultaneously
with its replacement as Collateral Agent hereunder, the Collateral Agent so
replaced shall deliver to its successor all documents, instruments, certificates
and other items of whatever kind (including, without limitation, the
certificates and instruments evidencing the Pledged Collateral and all
instruments of transfer or assignment) held by it pursuant to the terms hereof.
The Collateral Agent that has resigned shall be entitled to fees, costs and
expenses to the extent incurred or arising, or relating to events occurring,
before its replacement or removal.
Section 18.16 Termination of Agreement; Release.
(a) Subject to the provisions of Section 18.11 hereof, this Agreement
shall terminate (i) upon full and final payment and performance of the
Obligations (and upon receipt by the Collateral Agent of the Pledgor's written
certification that all such Obligations have been satisfied) and payment in full
of all fees and expenses owing by the Pledgor to the Collateral Agent or (ii)
upon the Legal Defeasance of all of the Obligations pursuant to Section 12.2 of
the Indenture (other than those surviving Obligations specified therein). At
such time, the Collateral Agent shall reassign and redeliver to the Pledgor all
of the Pledged Collateral hereunder that has not been sold, disposed of,
retained or applied by the Collateral Agent in accordance with the terms hereof.
Such reassignment and redelivery shall be without warranty by or recourse to the
Collateral Agent, except as to the absence of any prior assignments by the
Collateral Agent of its interest in the Pledged Collateral, and shall be at the
expense of the Pledgor.
(b) The Pledgor agrees that it will not, except as permitted by the
Indenture or Section 7(a) hereof, sell or dispose of, or grant any option or
warrant with respect to, any of the Pledged Collateral; provided, however, that
if the Pledgor shall sell any of the Pledged Collateral in accordance with the
terms of the Indenture, including the requirement that Pledgor apply the Net
Cash Proceeds, if any, of such sale in accordance with Section 10.15 of the
Indenture, the Collateral Agent shall, at the request of the Pledgor and subject
to requirements of Section 14.3 of the Indenture, release the Pledged Collateral
subject to such sale free and clear of the Lien and security interest under this
Agreement; provided further that if the sale or other disposition of Pledged
Collateral is to the Issuer, subject to Section 7(a) hereof, the Collateral
Agent shall at the request of the Pledgor, release that portion of the Pledged
Collateral so transferred, for the sole purpose of registering the change of
ownership in such Pledged Collateral.
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Section 18.17 Final Expression. This Agreement, together with any other
agreement executed in connection herewith, is intended by the parties as a final
expression of their Agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
Section 18.18 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; WAIVER OF DAMAGES.
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK. THE PLEDGOR IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND THE PLEDGOR
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED BY ANY SUCH COURT.
(ii) THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS OWN NAME
OR IN THE NAME AND ON BEHALF OF ANY HOLDER HAVE THE RIGHT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR ITS PROPERTY IN A
COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE THE COLLATERAL
AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF THE COLLATERAL AGENT. THE PLEDGOR AGREES THAT IT WILL NOT
ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE COLLATERAL
AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
IN FAVOR OF THE COLLATERAL AGENT. THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS.
(iii) EACH OF THE PLEDGOR, THE COLLATERAL AGENT AND EACH HOLDER WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY.
(iv) THE PLEDGOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY ACTION OR
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PROCEEDING WITH RESPECT TO THIS AGREEMENT BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET
FORTH IN SECTION 15.4 OF THE INDENTURE, SUCH SERVICE TO BECOME EFFECTIVE FIVE
(5) BUSINESS DAYS AFTER SUCH MAILING.
(v) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT OR ANY
HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER
JURISDICTION.
(vi) The Pledgor hereby agrees that neither the Collateral Agent nor any
Holder shall have any liability to the Pledgor (whether sounding in tort,
contract or otherwise) for losses suffered by the Pledgor in connection with,
arising out of, or in any way related to, the transactions contemplated and the
relationship established by this Agreement, or any act, omission or event
occurring in connection therewith, unless it is determined by a final and
nonappealable judgment of a court that is binding on the Collateral Agent or
such Holder, as the case may be, that such losses were solely the result of acts
or omissions on the part of the Collateral Agent or such Holder, as the case may
be, constituting gross negligence or willful misconduct.
(vii) Except as otherwise provided for in this Agreement or which are not
waivable under applicable law, the Pledgor waives all rights of notice and
bearing of any kind prior to the exercise by the Collateral Agent or any Holder
of its rights during the continuance of an Event of Default (as defined in the
Indenture) to repossess the Pledged Collateral with judicial process or to
replevy, attach or levy upon the Pledged Collateral or other security for the
Obligations. The Pledgor waives the posting of any bond otherwise required of
the Collateral Agent or any Holder in connection with any judicial process or
proceeding to obtain possession of, replevy, attach or levy upon the Pledged
Collateral or other security for the Obligations, to enforce any judgment or
other court order entered in favor of the Collateral Agent or any Holder or to
enforce by specific performance, temporary restraining order or preliminary or
permanent injunction this Agreement.
Section 18.19 Acknowledgments. The Pledgor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement;
(b) neither the Collateral Agent nor any Holder has any fiduciary
relationship to the Pledgor, and the relationship between the Collateral Agent
and the Holders on the one hand, and the Pledgor, on the other hand, is solely
that of a secured party and a creditor; and
(c) no joint venture exists among (i) the Holders or (ii) the Pledgor and
the Holders.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have each caused
this Agreement to be duly executed and delivered as of the date first above
written.
PLEDGOR:
WG APPAREL, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
COLLATERAL AGENT:
IBJ SCHRODER BANK & TRUST COMPANY,
as Collateral Agent
By:___________________________________
Name: ____________________________
Title: _____________________________
S-1
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SCHEDULE I
PLEDGED SHARES
Number of Pledged Share Certificate Percentage of
Issuer Shares Number Outstanding
- ------ ----------------- ----------------- -------------
Willcox & Gibbs, Ltd. 16830 Vol. 2 No. 3 66%
<PAGE>
EXHIBIT A
FORM OF OPINION OF COUNSEL
(i) [New Entity] is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power and authority to own and to operate its properties and
to carry on its business;
(ii) All of the outstanding Capital Stock of [New Entity] has been validly
authorized and issued and is fully paid and nonassessable and, to the best
knowledge of such counsel after diligent inquiry, is owned by the Pledgor,
directly or indirectly, free and clear of any security interest, claim, lien or
encumbrance, other than the security interests created by the Pledge Agreement,
and, to the best knowledge of such counsel after diligent inquiry, there are no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares of Capital Stock or other Equity Interest
in [New Entity];
(iii) (A) Pledgor has the requisite corporate power and authority to
create, deliver and perfect the security interests created under the Pledge
Agreement; (B) the Pledge Agreement has been duly authorized, executed and
delivered by Pledgor and constitutes the legal, valid and binding obligation of
Pledgor enforceable against it in accordance with its terms; (C) after giving
effect to the [merger] [consolidation] [sale or transfer of all or substantially
all assets], and assuming the Collateral Agent is holding the certificates
representing the Pledged Collateral in the State of New York, the Pledge
Agreement will create a valid and perfected security interest in the Pledged
Collateral (including, without limitation, all of the Equity Interests of [New
Entity]) in favor of the Collateral Agent, on behalf and for the benefit of
itself, the Holders, subject to no other consensual security interest in favor
of any other person, and no filings or recordings will be required in order to
perfect or maintain the security interests created under the Pledge Agreement in
such Pledged Collateral; and
(iv) The consummation of the [merger] [consolidation] [sale or transfer of
all or substantially all assets] does not (A) conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Pledgor, the Issuer or [New Entity] is a
party by which the Pledgor, the Issuer or [New Entity] is bound or to which any
of the property or assets of the Pledgor, the Issuer or [New Entity] is subject,
nor will such action result in any violation of the provisions of the respective
charter or by-laws of the Pledgor, the Issuer or [New Entity], nor will such
action result in any violation of any application law or statute or any
applicable order, rule or regulation known to us of any court or governmental
agency or body having jurisdiction over the Pledgor and its subsidiaries or any
of their respective properties, or (B) result in the creation of any Lien upon
any other properties or assets of the Pledgor, the Issuer or [New Entity] (other
than Liens created by the Pledge Agreement).
<PAGE>
EXHIBIT B
FORM OF CONSOLIDATED NET WORTH CERTIFICATE
The undersigned, __________________ and __________________, respectively the
President and Chief Financial Officer of WG Apparel, Inc., a Delaware
corporation (the "Pledgor"), certify that they are authorized to execute this
Certificate in the name and on behalf of the Pledgor, and further certify as
follows (capitalized terms used but not defined herein have the respective
meanings assigned to them in the Pledge and Security Agreement, dated January 3,
1997 (the "Pledge Agreement"), between the Pledgor and IBJ Schroder Bank & Trust
Company, as Collateral Agent):
(d) We are familiar with the historical and current financial condition of
[name of Issuer merging, consolidating or transferring assets] (the
"Issuer") that proposes to [merge or consolidate with] [sell or transfer
all or substantially all of its assets to] [New Entity] (the "Successor
Issuer") pursuant to Section 7(a)(vii) of the Pledge Agreement.
(e) For the purposes of this Certificate, we have reviewed other financial
information and forecasts relating to the Issuer and the Successor Issuer
prepared by [the management of the Issuer] [______________, the
independent certified public accountants for the Pledgor] and the
Successor Issuer which we believe (as to the historical financial
information) fairly present the historical financial positions and results
of operations of the Issuer and the Successor Issuer as of the dates and
for the periods presented and (in the case of the forecasts) were based
upon reasonable assumptions and provide reasonable estimations of future
performance, although any forecasts are necessarily uncertain of
fulfillment. We know of no facts or circumstances arising subsequent to
the dates as of which such information and projections were prepared that
would materially alter such conclusions.
Based upon the foregoing, we have reached the conclusions that, after
giving effect to the transactions contemplated by Section 7(a)(vii) of the
Pledge Agreement and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the most recently ended four full
fiscal quarter period, the Company will be permitted to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
Consolidated Fixed Charged Coverage Ratio set forth in Section 10.11(a) of the
Indenture.
WITNESS the signatures of the undersigned, this ________ day of
_______________________.
______________________________
President
______________________________
Chief Financial Officer
<PAGE>
- --------------------------------------------------------------------------------
WILLCOX & GIBBS, INC.,
MACPHERSON MEISTERGRAM, INC.,
as Subsidiary Guarantor
AND
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
-------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of January 3, 1997
-------------------------------
Supplementing and Amending the Indenture
dated as of
January 3, 1997
- ------------------------------------------------------------------------------
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of January 3, 1997, is among
WILLCOX & GIBBS, INC., a Delaware corporation (hereinafter called the
"Company"), MACPHERSON MEISTERGRAM, INC. ("Macpherson"), a North Carolina
corporation ("Macpherson"), and IBJ SCHRODER BANK & TRUST COMPANY (hereinafter
called the "Trustee"). Any capitalized term used in this First Supplemental
Indenture and not defined herein shall have the meaning specified in the
Original Indenture (as defined below).
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of the Company's
12 1/4% Series A Senior Notes Due 2003 (the "Initial Securities") and, if and
when issued pursuant to a registered exchange for Initial Securities, an issue
of the Company's 12 1/4% Series B Senior Notes Due 2003 (the "Exchange
Securities") and, if and when issued pursuant to a private exchange for Initial
Securities, an issue of the Company's 12 1/4% Series C Senior Notes Due 2003
(the "Private Exchange Securities," together with the Exchange Securities and
the Initial Securities, the "Securities"), of substantially the tenor and in the
aggregate principal amount set forth in the Indenture; and the Company and the
Subsidiary Guarantors have heretofore made, executed and delivered to the
Trustee its Indenture dated as of January 3, 1997 (the "Original Indenture")
pursuant to which the Securities are issuable.
The Company's obligations under the Original Indenture and the Securities
are guaranteed by the Subsidiary Guarantors.
It is deemed desirable to supplement and amend the Original Indenture to
add a Restricted Subsidiary of the Company as a Subsidiary Guarantor (the
Original Indenture, as so supplemented and amended by this First Supplemental
Indenture, being sometimes referred to herein as the "Indenture").
Article XIII, Section 13.5 of the Original Indenture provides that certain
Subsidiaries of the Company shall become a Subsidiary Guarantor by executing and
delivering to the Trustee (a) a supplemental indenture, in form and substance
satisfactory to, and executed by, the Trustee and executed by the Company, which
subjects such Subsidiary to the provisions of the Indenture as a Subsidiary
Guarantor and (b) an Opinion of Counsel to the effect that such supplemental
indenture has been duly authorized and executed by such Subsidiary and
constitutes the legal, valid, binding and enforceable obligation of such
Subsidiary (subject to such customary exceptions concerning creditors' rights
and equitable principles).
The Initial Securities were issued on January 3, 1997 under the Original
Indenture and no Exchange Securities or Private Exchange Securities have been
issued as of the date hereof.
1
<PAGE>
All things necessary to make this First Supplemental Indenture, and to
make the Original Indenture a valid agreement of the Company and Macpherson, in
accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of the
Securities (together with the related Subsidiary Guarantees) by the Holders
thereof, it is mutually agreed, for the equal and proportionate benefit of all
Holders of the Securities (together with the related Subsidiary Guarantees), as
follows:
ARTICLE I
SECTION 1.1. Addition of Macpherson as a Subsidiary Guarantor. Macpherson
by execution of this First Supplemental Indenture hereby agrees to be bound by
the terms of the Indenture as a Subsidiary Guarantor and agrees to be subject to
the provisions of the Indenture applicable to Subsidiary Guarantors as though
originally a signatory and party to the Original Indenture.
ARTICLE II
REPRESENTATIONS
AND COVENANTS OF THE COMPANY
AND THE SUBSIDIARY GUARANTOR
SECTION 2.1. Authority of the Company. The Company represents and warrants
that it is duly authorized by a resolution of the Special Committee of the Board
of Directors to execute and deliver this First Supplemental Indenture, and all
corporate action on its part required for the execution and delivery of this
First Supplemental Indenture has been duly and effectively taken.
SECTION 2.2. Authority of Macpherson. Macpherson represents and warrants
that it is duly authorized by a resolution of its Board of Directors to execute
and deliver this First Supplemental Indenture, and all corporate action on its
part required for the execution and delivery of this First Supplemental
Indenture has been duly and effectively taken.
ARTICLE III
CONCERNING THE TRUSTEE
SECTION 3.1. Acceptance of Trusts. The Trustee accepts the trust hereunder
and agrees to perform the same, but only upon the terms and conditions set forth
in the Indenture, to all of which the Company, the Subsidiary Guarantors party
thereto and the respective Holders of Securities at any time hereafter
outstanding agree by their acceptance thereof.
-2-
<PAGE>
SECTION 3.2. Responsibility of Trustee for Recitals, etc. The recitals and
statements contained in this First Supplemental Indenture shall be taken as the
responsibility of the Company for the correctness of the same. The Trustee makes
no representations as to the validity or sufficiency of this First Supplemental
Indenture, except that the Trustee is duly authorized to execute and deliver
this First Supplemental Indenture.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1. Relation to the Indenture. The provisions of this First
Supplemental Indenture shall be deemed to be effective immediately upon the
execution and delivery hereof. This First Supplemental Indenture and all the
terms and provisions herein contained shall form a part of the Indenture as
fully and with the same effect as if all such terms and provisions had been set
forth in the Original Indenture. The Original Indenture is hereby ratified and
confirmed and shall remain and continue in full force and effect in accordance
with the terms and provisions thereof, as supplemented and amended by the First
Supplemental Indenture, and the Original Indenture and this First Supplemental
Indenture shall be read, taken and construed together as one instrument.
SECTION 4.2. Counterparts. This First Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
SECTION 4.3. Governing Law. This First Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of laws.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, all as of the day and year first above written.
WILLCOX & GIBBS, INC.
By: /s/ John K. Zeigler
------------------------------------
Name: John K. Zeigler
Title: CEO
MACPHERSON MEISTERGRAM, INC.,
as Subsidiary Guarantor
By: /s/ John K. Zeigler
------------------------------------
Name: John K. Zeigler
Title: CEO
IBJ SCHRODER BANK & TRUST
COMPANY,
as Trustee
By: /s/ Max Volmar
------------------------------------
Name: MAX VOLMAR
Title: VICE PRESIDENT
-4-
<PAGE>
EXECUTION COPY
$85,000,000
12.25% Series A Senior Notes
due December 15, 2003
PURCHASE AGREEMENT
December 20, 1996
<PAGE>
PURCHASE AGREEMENT
December 20, 1996
DILLON, READ & CO. INC.
as Initial Purchaser
535 Madison Avenue
New York, New York 10022
Dear Ladies and Gentlemen:
Willcox & Gibbs, Inc. (the "Company") proposes to issue and sell to you
(also referred to herein as the "Initial Purchaser") $85,000,000 aggregate
principal amount of its 12.25% Series A Senior Notes due December 15, 2003 (the
"Notes"). The Notes are described in the Offering Memorandum which is referred
to below.
The Notes are to be issued pursuant to an indenture (the "Indenture") to
be dated as of the Closing Date (as defined herein), among the Company, WG
Apparel, Inc. ("Apparel"), Clinton Machinery Corporation and Clinton Management
Corp. (together, "Clinton"), Leadtec Systems, Inc. ("Leadtec"), W&G Daon, Inc.
("W&G Daon"), J&E Sewing Supplies, Inc. ("J&E"), W&G Tennessee Imports, Inc.
("W&G Tennessee"), Clinton Leasing Corp. ("Clinton Leasing"), Clinton Equipment
Corp. ("Clinton Equipment Corp.) and Paradise Color Corp. ("Paradise Color")
(Apparel, Clinton, Leadtec, W&G Daon, J&E, W&G Tennessee, Clinton Leasing,
Clinton Equipment and Paradise Color are referred to herein collectively as the
"Subsidiary Guarantors") and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee"). Pursuant to the Indenture, the Notes will be unconditionally
guaranteed on a senior unsecured basis (the "Subsidiary Guarantees") by the
Subsidiary Guarantors. Pursuant to a Pledge and Security Agreement, dated the
Closing Date (the "Stock Pledge Agreement"), between the Company and the
Trustee, the Notes will be secured by a pledge of 65% of the capital stock of
Willcox & Gibbs, Ltd. Copies of the Indenture and the Stock Pledge Agreement, in
substantially final form, have been delivered to the Initial Purchaser.
A portion of the proceeds from the sale of the Notes will be used to
finance the acquisition by WG Apparel, Inc. ("Apparel"), a Delaware corporation
and a wholly owned subsidiary of the Company, of all the outstanding capital
stock of Macpherson Meistergram, Inc. ("Macpherson"), a North Carolina
corporation, and Geoffrey E. Macpherson Canada, Inc. ("GEMC"), an Ontario
corporation, pursuant to that certain Stock Purchase Agreement, dated as of
November 27, 1996 (the "Stock Purchase Agreement"), by and among the Company,
Apparel, Macpherson, GEMC, Neil A. Macpherson and the other stockholders of
Macpherson.
<PAGE>
In connection with the issuance of the Notes, (i) the Company, Apparel,
Leadtec and Clinton (collectively, the "Borrowers"), have entered into a
Financing and Security Agreement, dated December 17, 1996, with NationsBank,
N.A. (the "Lender"), to be joined by Macpherson, as Borrower as of the time of
purchase, and (ii) the Company has entered into an amendment (the "Clinton
Amendment") to the Agreement and Plan of Merger, dated December 17, 1995, among
the Company, Clinton Machinery Corporation, Apparel, Frank Scannavino, Charles
Nall and Marc Glazer.
Holders of the Notes (including subsequent transferees) of the Notes will
have the registration rights set forth in the Registration Rights Agreement of
even date herewith (the "Registration Rights Agreement") among the Company, the
Subsidiary Guarantors and the Initial Purchaser. Pursuant to the Registration
Rights Agreement, the Company has agreed to file with the Securities and
Exchange Commission (the "Commission") (i) a registration statement (the
"Exchange Offer Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act") with respect to an offer to exchange the Notes
for a new issue of debt securities of the Company (the "Exchange Notes") with
terms substantially identical to those of the Notes (the "Exchange Offer") and
(ii) under certain circumstances specified in the Registration Rights Agreement,
a shelf registration statement pursuant to Rule 415 under the Securities Act
(the "Shelf Registration Statement").
The Company has furnished to you for your use copies of a preliminary
offering memorandum, dated November 29, 1996 (the "Preliminary Offering
Memorandum"), and will promptly prepare and furnish to you for your use copies
of an offering memorandum, dated December 19, 1996 (the "Offering Memorandum"),
relating to the Notes. The Preliminary Offering Memorandum and the Offering
Memorandum, as amended and supplemented, are hereinafter referred to as the
"Offering Documents."
This Agreement, the Indenture, the Registration Rights Agreement and the
Stock Pledge Agreement are hereinafter sometimes referred to collectively as the
"Operative Documents."
The Company and the Subsidiary Guarantors jointly and severally agree with
the Initial Purchaser as follows:
1. Sale and Purchase. Upon the basis of the warranties and representations
and the other terms and conditions herein set forth, the Company agrees to sell
to the Initial Purchaser and the Initial Purchaser agrees to purchase from the
Company, $85,000,000 aggregate principal amount of Notes at a purchase price of
94.75% of the principal amount thereof, plus accrued interest, if any, from the
Closing Date (as hereinafter defined). You shall release the Notes for sale as
described in the next succeeding paragraph promptly after this Agreement becomes
effective. You may from time to time increase or decrease the offering price
after your purchase to such extent as you may determine.
-2-
<PAGE>
2. Payment and Delivery. The Company will deliver against payment of the
purchase price the Notes in the form of one or more permanent global securities
in definitive form (the "Global Securities") deposited with the Trustee as
custodian for The Depository Trust Company ("DTC") and registered in the name of
Cede & Co., as nominee for DTC. Interests in any permanent Global Securities
will be held only in book-entry form through DTC, except in the limited
circumstances described in the Offering Documents. Payment for the Notes shall
be made by the Initial Purchaser in Federal (same-day) funds by wire transfer to
an account in New York previously designated to the Initial Purchaser by the
Company at a bank acceptable to the Initial Purchaser at 10:00 a.m. (New York
time), January 3, 1997, or at such other time not later than seven full business
days thereafter as the Initial Purchaser and the Company determine, such time
being herein referred to as the "time of purchase" or the "Closing Date,"
against delivery to the Trustee as custodian for DTC of the Global Securities
representing all of the Notes. The Global Securities will be made available for
checking at the office of the Trustee at least 24 hours prior to the Closing
Date.
Notwithstanding the foregoing, any Notes sold to Institutional Accredited
Investors (as hereinafter defined) pursuant to Section 4(c) hereof shall be
issued in definitive, fully registered form (the "Definitive Certificates") and
shall bear the legend relating thereto set forth under "Transfer Restrictions"
in the Offering Documents, but shall be paid for in the same manner as any Notes
to be purchased by the Initial Purchaser hereunder and to be offered and sold by
them in reliance on Rule 144A under the Securities Act ("Rule 144A"). Definitive
Certificates shall be registered in such names and in such denominations as the
Initial Purchaser may request not less than two business days in advance of the
Closing Date.
3. Representations and Warranties of the Company. The Company represents
and warrants to the Initial Purchaser that:
(a) as of their respective dates and in the case of the Offering
Memorandum, as of the date of this Agreement, no Offering Document
contains an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading; provided,
however, that the Company makes no warranty or representation with respect
to any statement contained in the Offering Documents in reliance upon and
in conformity with information concerning the Initial Purchaser and
furnished in writing by or on behalf of the Initial Purchaser to the
Company expressly for use in the Offering Documents;
(b) as of September 30, 1996, the Company had an authorized
capitalization as set forth under the heading entitled "Actual" in the
section of the Offering Documents entitled "Capitalization" and, assuming
the time of purchase had occurred as of September 30, 1996, the Company
would have had an authorized capitalization as set forth under the heading
entitled "Pro Forma" in the section of the Offering Documents entitled
"Capitalization"; all of the issued and outstanding shares of capital
-3-
<PAGE>
stock of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of
the State of Delaware, with full power and authority to own its properties
(including, upon the closing of the transactions contemplated by the Stock
Purchase Agreement, the power and authority to own, directly or indirectly
through one or more Subsidiaries (as defined herein), the properties owned
by Macpherson and GEMC) and conduct its business (including, upon the
closing of the transactions contemplated by the Stock Purchase Agreement,
the power and authority to conduct, directly or indirectly through one or
more Subsidiaries, the business conducted by Macpherson and GEMC) as
described in the Offering Documents, to execute and deliver the Operative
Documents, the New Credit Agreement, the Clinton Amendment, the Barudan
Amendment (as such term is defined in the Stock Purchase Agreement) and
the ELC Acquisition Agreement (as such term is defined in the Stock
Purchase Agreement) and to issue and sell the Notes as herein
contemplated;
(c) each of the Company's direct and indirect subsidiaries (the
"Subsidiaries") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority to own its properties and
conduct its respective business as described in the Offering Documents,
and in the case of each Subsidiary Guarantor, to execute and deliver this
Agreement, the Subsidiary Guarantees, the Registration Rights Agreement
and the Indenture and to the extent a party thereto, the New Credit
Agreement, the Clinton Amendment, the Barudan Amendment and the ELC
Acquisition Agreement; all of the issued and outstanding shares of capital
stock of each of the Company's Subsidiaries have been duly authorized and
validly issued, are fully paid and non-assessable and are owned
beneficially by the Company free and clear of all liens, security
interests, pledges, charges, encumbrances, defects, shareholders'
agreements, voting trusts, equities or claims of any nature whatsoever,
except for the liens listed on Schedule I to this Agreement; other than as
listed on Schedule I to this Agreement, the Company does not own, directly
or indirectly, any capital stock or other equity securities of any other
corporation or any ownership interest in any partnership, joint venture or
other association;
(d) each of Macpherson and GEMC has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority to own
its properties and conduct its respective business, as described in the
Offering Documents, and to execute and deliver the Stock Purchase
Agreement; all of the issued and outstanding shares of capital stock of
each of Macpherson and GEMC have been duly authorized and validly issued,
are fully paid and non-assessable, and upon consummation of the
transactions contemplated by the Stock Purchase Agreement, will be owned
beneficially by the Company free and clear of all liens, security
interests, pledges, charges, encumbrances, defects,
-4-
<PAGE>
shareholders' agreements, voting trusts, equities or claims of any nature
whatsoever; Macpherson and GEMC do not have any other subsidiaries and do
not own, directly or indirectly, any capital stock or other equity
securities of any other corporation or any ownership interest in any
partnership, joint venture or other association;
(e) the Company, each of the Subsidiaries, Macpherson and GEMC are
duly qualified or licensed by and are in good standing in each
jurisdiction in which they conduct their respective businesses and in
which the failure, individually or in the aggregate, to be so licensed or
qualified could reasonably be expected to have a material adverse effect
on the results of operations, business or condition (financial or
otherwise) of the Company and the Subsidiaries taken as a whole (a
"Company Material Adverse Effect") or Macpherson and GEMC taken as a whole
(a "Macpherson Material Adverse Effect"), and the Company, each of the
Subsidiaries, Macpherson and GEMC are in compliance in all material
respects with the laws, orders, rules, regulations and directives issued
or administered by such jurisdictions;
(f) none of the Company, the Subsidiaries, Macpherson or GEMC is in
breach of, or in default under (nor has any event occurred which with
notice, lapse of time, or both would constitute a breach of, or default
under) (i) its respective charter or by-laws or (ii) in the performance or
observance of any obligation, agreement, covenant or condition contained
in any indenture, mortgage, deed of trust, bank loan or credit agreement
or other agreement or instrument to which the Company, any of the
Subsidiaries, Macpherson or GEMC is a party or by which any of them is
bound that has had or could reasonably be expected to have a Company
Material Adverse Effect or a Macpherson Material Adverse Effect; and the
execution, delivery and performance of the Operative Documents, the New
Credit Agreement, the Clinton Amendment, the Barudan Amendment and the ELC
Acquisition Agreement, the issuance of the Notes by the Company and
consummation of the transactions contemplated hereby and thereby by the
Company, the Subsidiaries, Macpherson and GEMC (to the extent a party
thereto) will not conflict with, or result in any breach of or constitute
a default under (nor constitute any event which with notice, lapse of
time, or both would constitute a breach of, or default under), any
provisions of the charter or by-laws of the Company, any of the
Subsidiaries, Macpherson or GEMC or under any provision of any license,
indenture, mortgage, deed of trust, bank loan or credit agreement or other
agreement or instrument to which the Company, any of the Subsidiaries,
Macpherson or GEMC is a party or by which any of them or their respective
properties may be bound, or under any Federal, state, local or foreign
law, regulation or rule or any decree, judgment or order applicable to the
Company, any of the Subsidiaries, Macpherson or GEMC;
(g) the Indenture has been duly authorized by each of the Company
and the Subsidiary Guarantors and when executed and delivered by the
Company, the Subsidiary Guarantors and the Trustee will constitute the
legal, valid and binding agreement of the Company and the Subsidiary
Guarantors, enforceable in accordance
-5-
<PAGE>
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization,
moratorium or similar laws affecting creditors' rights generally and
general principles of equity;
(h) the Notes have been duly authorized by the Company and when
executed and authenticated in accordance with the terms of the Indenture
and delivered by the Company against payment therefor in accordance with
this Agreement, will constitute legal, valid and binding obligations of
the Company, enforceable in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance or transfer, reorganization, moratorium or similar
laws affecting creditors' rights generally and general principles of
equity;
(i) the Exchange Notes have been duly authorized by the Company and
when executed and authenticated in accordance with the terms of the
Indenture and delivered by the Company against exchange of the Notes in
accordance with the Indenture and the Registration Rights Agreement, will
constitute legal, valid and binding obligations of the Company,
enforceable in accordance with their terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization, moratorium or similar laws affecting creditors'
rights generally and general principles of equity;
(j) the Operative Documents and the Stock Purchase Agreement have
been duly authorized, executed and delivered by the Company, and the Stock
Purchase Agreement has been duly authorized, executed and delivered by
each of the other parties thereto, and constitute legal, valid and binding
agreements of the Company and, with respect to the Stock Purchase
Agreement, such other parties thereto, enforceable in accordance with
their respective terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium or similar laws affecting creditors' rights
generally and general principles of equity and, in the case of this
Agreement and the Registration Rights Agreement, except for limitations on
the indemnification of, or contribution to amounts paid by, any person in
respect of liabilities under the Federal securities laws;
(k) the New Credit Agreement, the Clinton Amendment, the Barudan
Amendment and the ELC Acquisition Agreement have been duly authorized,
executed and delivered by the Company and the Subsidiaries of the Company
party thereto and constitute legal, valid and binding agreements of the
Company and such Subsidiaries, enforceable in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization,
moratorium or similar laws affecting creditors' rights generally and
general principles of equity;
-6-
<PAGE>
(l) the Operative Documents, the Notes, the New Credit Agreement,
the Clinton Amendment, the Barudan Amendment and the ELC Acquisition
Agreement conform in all material respects to the respective descriptions
thereof contained in the Offering Documents;
(m) no approval, authorization, consent or order of or filing with
any Federal, state or local governmental or regulatory commission, board,
body, authority or agency is required by the Company or any of the
Subsidiary Guarantors in connection with the performance by the Company
and the Subsidiary Guarantors of their respective obligations (to the
extent a party thereto) under the Indenture, the Registration Rights
Agreement, the Barudan Amendment and the ELC Acquisition Agreement, the
issuance or sale of the Notes by the Company, the issuance of the
Subsidiary Guarantees by the Subsidiary Guarantors or the consummation of
the transactions contemplated by the Stock Purchase Agreement, other than
actions required to comply with securities laws in the performance of the
Registration Rights Agreement;
(n) no approval, authorization, consent or order of or filing with
any Federal, state or local governmental or regulatory commission, board,
body, authority or agency, except for those of which have been or will be
obtained prior to the Closing Date, is required by the Company or any of
the Subsidiary Guarantors in connection with the performance by the
Company and the Subsidiary Guarantors of their respective obligations (to
the extent a party thereto) under the Stock Pledge Agreement, the New
Credit Agreement and the Clinton Amendment;
(o) KPMG Peat Marwick LLP, whose reports on the (i) consolidated
financial statements of the Company and its Subsidiaries and (ii) combined
financial statements of Clinton are included in the Offering Documents,
and Arthur Andersen LLP, whose reports on the consolidated financial
statements of Macpherson and GEMC are included in the Offering Documents,
are each independent public accountants as required by the Act and the
applicable published rules and regulations thereunder;
(p) each of the Company, the Subsidiaries, Macpherson and GEMC has
all necessary licenses, authorizations, consents and approvals and has
made all necessary filings required under any Federal, state, local or
foreign law, regulation or rule, and has obtained all necessary
authorizations, consents and approvals from any governmental entity, in
order to conduct its respective business, except for any failure to do so
that would have a Company Material Adverse Effect or a Macpherson Material
Adverse Effect; none of the Company, any of the Subsidiaries, Macpherson
or GEMC, is in violation of, or in default under, any such license,
authorization, consent or approval or any federal, state, local or foreign
law, regulation or rule or any decree, order or judgment applicable to the
Company, any of the Subsidiaries, Macpherson or
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GEMC the effect of which could reasonably be expected to have a Company
Material Adverse Effect or a Macpherson Material Adverse Effect;
(q) there are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against the Company, any of the
Subsidiaries, Macpherson or GEMC or any of their respective properties, at
law or in equity, or before or by any Federal, state, local or foreign
governmental or regulatory commission, board, body, authority or agency
which could reasonably be expected to result in a judgment, decree or
order having a Company Material Adverse Effect or a Macpherson Material
Adverse Effect;
(r) the audited consolidated financial statements included in the
Offering Documents present fairly in all material respects (i) the
consolidated financial position of the Company and the Subsidiaries as of
the dates indicated and the consolidated results of operations and changes
in cash flows of the Company and the Subsidiaries for the periods
specified, (ii) the combined financial position of Clinton as of the dates
indicated and the combined results of operations and changes in cash flows
of Clinton for the periods specified and (iii) the consolidated financial
position of Macpherson and GEMC as of the dates indicated and the
consolidated results of operations and changes in cash flows of Macpherson
and GEMC for the periods specified; such consolidated financial statements
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods involved
except as indicated in the respective notes thereto;
(s) the unaudited interim consolidated financial statements of the
Company included in the Offering Memorandum present fairly in all material
respects the consolidated financial position of the Company and the
Subsidiaries as of the dates indicated and the consolidated results of
operations and changes in cash flows of the Company and the Subsidiaries
for the periods specified, subject to normal year-end adjustments; such
unaudited interim consolidated financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis during the periods involved, except for the absence of
footnotes required by such principles;
(t) the unaudited pro forma combined financial statements included
in the Offering Documents comply as to form in all material respects with
the applicable accounting requirements of the rules and regulations under
the Securities Act and (A) management of the Company believes the
assumptions underlying the pro forma adjustments are reasonable, (B) such
adjustments have been properly applied to the historical amounts in the
compilation of such statements and (C) such statements fairly present in
all material respects, with respect to the Company, the Subsidiaries,
Macpherson and GEMC, the combined pro forma financial position and results
of operations at the respective dates and for the respective periods
therein specified;
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(u) subsequent to the respective dates as of which information is
given in the Offering Documents, and except as may be otherwise stated in
the Offering Documents, there has not been (i) any material and
unfavorable change, financial or otherwise, in the results of operations,
business, condition (financial or otherwise) or prospects, present or
prospective, of the Company and the Subsidiaries taken as a whole, or
Macpherson and GEMC taken as a whole, (ii) any transaction, which is
material to the Company and the Subsidiaries taken as a whole, or
Macpherson and GEMC taken as a whole, contemplated or entered into by the
Company, any of the Subsidiaries, Macpherson or GEMC or (iii) any
obligation, contingent or otherwise, directly or indirectly, incurred by
the Company, any of the Subsidiaries, Macpherson or GEMC which is material
to the Company and the Subsidiaries taken as a whole, or Macpherson or
GEMC taken as a whole;
(v) except as contemplated by this Agreement or disclosed in the
Offering Documents, there is no broker, finder or other party engaged by
the Company or any affiliate of the Company that is entitled to receive
from the Company, any of the Subsidiaries or the Initial Purchaser any
brokerage or finder's fee or other fee or commission as a result of the
transactions contemplated by this Agreement;
(w) except as disclosed in the Offering Documents, none of the
Company, the Subsidiaries, Macpherson, or GEMC is (i) in violation of any
statute, any rule, regulation, decision or order of any governmental
agency or body or any court, domestic or foreign, relating to the use,
disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, "environmental laws"), (ii)
owns or operates any real property contaminated with any substance that is
subject to any environmental laws, (iii) is liable for any off-site
disposal or contamination pursuant to any environmental laws, or (iv) is
subject to any claim relating to any environmental laws, which violation,
contamination, liability or claim referred to in clause (i), (ii), (iii)
or (iv) individually or in the aggregate could reasonably be expected to
have a Company Material Adverse Effect or a Macpherson Material Adverse
Effect and the Company is not aware of any pending investigation which
might lead to such a claim except for any such claim that would not have
such a Company Material Adverse Effect or a Macpherson Material Adverse
Effect;
(x) except as disclosed in the Offering Documents, the Company and
each of the Subsidiary Guarantors maintains insurance covering the
operation of its business and such insurance insures against such losses
and risks in accordance with customary industry practice to protect the
Company and each of the Subsidiary Guarantors and its respective business;
neither the Company nor any of the Subsidiary Guarantors has received
notice from any insurer or agent of such insurer that any material capital
improvements or other material expenditures will have to be made in order
to continue any insurance maintained by any of them other than capital
improvements and other
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<PAGE>
expenditures in the ordinary course of the Company's or such Subsidiary
Guarantor's business;
(y) the Company has delivered to the Initial Purchaser true and
correct copies of the Stock Purchase Agreement, the Clinton Amendment, the
Barudan Amendment and the ELC Acquisition Agreement in the forms
originally executed, and there have been no amendments or waivers thereto
or in the exhibits or schedules thereto;
(z) the Company has delivered to the Initial Purchaser a true and
correct executed copy of the New Credit Agreement and there have been no
amendments, alterations or modifications to the New Credit Agreement or
waivers of any of the provisions thereof;
(aa) the Company is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), nor is it a closed-end investment
company required to be registered, but not registered, thereunder; and the
Company is not and, after giving effect to the offering and sale of the
Notes and the application of the proceeds thereof as described in the
Offering Documents, will not be an "investment company" as defined in the
Investment Company Act;
(bb) no securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Notes are listed on any
national securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or quoted in the
U.S. automated inter-dealer quotation system;
(cc) assuming the accuracy of the representations and warranties of
the Initial Purchaser in Section 4 hereof, the offer and sale of the Notes
in the manner contemplated by this Agreement will be exempt from the
registration requirements of the Securities Act; and it is not necessary
to qualify an indenture in respect of the Notes under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act") in connection with
such offer and sale of the Notes;
(dd) neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf (other than the Initial Purchaser), (i) has
(except as contemplated by the Offering Documents), within the six-month
period prior to the date hereof, offered or sold in the United States or
to any U.S. person (as such terms are defined in Regulation S under the
Securities Act) the Notes, or any security of the same class or series as
the Notes or (ii) has offered or will offer or sell the Notes (A) in the
United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act or
(B) with respect to any such
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<PAGE>
securities sold in reliance on Rule 904 of Regulation S under the
Securities Act, by means of any directed selling efforts within the
meaning of Rule 902(b) of Regulation S; the Company, its affiliates and
any person acting on its or their behalf (other than the Initial
Purchaser) have complied and will comply with the offering restrictions
requirement of Regulation S; the Company has not entered and will not
enter into any contractual arrangement with respect to the distribution of
the Notes except for this Agreement; and
(ee) there is no "substantial U.S. market interest" as defined in
Rule 902(n) of Regulation S in the Company's debt securities.
4. Representations by the Initial Purchaser; Resale by the Initial
Purchaser.
(a) The Initial Purchaser represents and warrants to the Company
that it is an "accredited investor" within the meaning of Regulation D
under the Securities Act.
(b) The Initial Purchaser acknowledges that the Notes have not been
registered under the Securities Act and, unless so registered, may not be
offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S or
pursuant to an exemption from the registration requirements of the
Securities Act. The Initial Purchaser represents and agrees that it has
offered and sold the Notes and will offer and sell the Notes only in
accordance with Rule 144A, to a limited number of Institutional Accredited
Investors (as hereinafter defined) in accordance with subsection (c) of
this Section 4 or outside the United States to foreign persons in
transactions meeting the requirements of Rule 904 of Regulation S under
the Securities Act. Accordingly, neither the Initial Purchaser nor its
affiliates, nor any persons acting on its or their behalf, have engaged or
will engage in any directed selling efforts with respect to the Notes, and
the Initial Purchaser, its affiliates and all persons acting on its or
their behalf have complied and will comply with the offering restrictions
requirement of Regulation S. Unless otherwise defined herein, terms used
in this subsection (b) have the meanings given to them by Regulation S.
(c) The Initial Purchaser may offer and sell Notes in definitive,
fully registered form to a limited number of institutions, each of which
is reasonably believed by the Initial Purchaser to be an "accredited
investor" within the meaning of Rule 501(a) (1), (2), (3) or (7) under the
Securities Act or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a) (1), (2), (3) or
(7) under the Securities Act (each, an "Institutional Accredited
Investor"); provided, however, that each such Institutional Accredited
Investor executes and delivers to the Initial Purchaser and the Company,
prior to the consummation of any sale of Notes to such Institutional
Accredited Investor, an Initial Purchaser's Letter in substantially the
form attached as Annex A to the Offering Documents (an "Initial
Purchaser's Letter").
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<PAGE>
(d) The Initial Purchaser represents, warrants and agrees that it
and each of its affiliates has not entered and will not enter into any
contractual arrangement with respect to the distribution of the Notes
except with the prior written consent of the Company.
(e) The Initial Purchaser agrees that it and each of its affiliates
or anyone acting on its behalf will not offer or sell the Notes purchased
hereby in the United States by means of any form of general solicitation
or general advertising within the meaning of Rule 502(c) under the
Securities Act, including, but not limited to (i) any advertisement,
article, notice or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio or (ii)
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. The Initial Purchaser agrees, with
respect to resales of any of the Notes made in reliance on Rule 144A, to
deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that such resale has been
made in reliance upon the exemption from the registration requirements of
the Securities Act provided by Rule 144A.
(f) The Initial Purchaser represents, warrants and agrees that (i)
it has not offered or sold, and prior to the date six months after the
date of issue of the Notes will not offer or sell, any Notes to persons in
the United Kingdom except to persons whose ordinary activities involve
them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers
of Securities Regulations 1995, (ii) it has complied and will comply with
all applicable provisions of the Public Offers of Securities Regulations
1995 and the Financial Services Act 1986 with respect to anything done by
it in relation to the Notes in, from or otherwise involving the United
Kingdom and (iii) it has only issued or passed on, and will only issue or
pass on to any person, in the United Kingdom, any document received by it
in connection with the issue of the Notes to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom such
document may otherwise lawfully be issued or passed on.
(g) The Initial Purchaser represents, warrants and agrees that (i)
it has not solicited, and will not solicit, offers to purchase any of the
Notes from, (ii) it has not sold, and will not sell, any of the Offering
Documents to, and (iii) it has not distributed, and will not distribute,
the Notes to, any person or entity in any jurisdiction outside of the
Untied States except, in each case, in compliance in all material respects
with all applicable laws. For the purpose of this Agreement, "United
States" means the United States of America, its territories, its
possessions and other areas subject to its jurisdiction.
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<PAGE>
5. Certain Covenants of the Company.
(a) The Company will advise the Initial Purchaser promptly of any
proposal to amend or supplement the Offering Documents and will not effect
such amendment or supplementation without the Initial Purchaser's consent,
which consent shall not be unreasonably withheld. If, at any time prior to
the completion of the initial resale of the Notes by the Initial
Purchaser, any event occurs as a result of which the Offering Documents as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, the Company promptly will notify the
Initial Purchaser of such event and promptly will prepare at its own
expense, an amendment or supplement which will correct such statement or
omission. Neither the Initial Purchaser's consent to, nor the Initial
Purchaser's delivery to offerees or investors of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth in
Section 7.
(b) The Company will furnish to the Initial Purchaser copies of the
Offering Documents and all amendments and supplements to such documents,
in each case as soon as available and in such quantities as the Initial
Purchaser reasonably requests, and the Company will furnish to the Initial
Purchaser on the date thereof three copies of the independent accountants'
reports included in the Offering Memorandum manually signed by such
independent accountants. At any time when the Company is not subject to
Section 13 or 15(d) of the Exchange Act, for so long as any Notes are
outstanding, the Company will promptly furnish or cause to be furnished to
the Initial Purchaser and, upon request of holders and prospective
purchasers of the Notes, to such holders and purchasers, a reasonable
number of copies of the information required to be delivered to holders
and prospective purchasers of the Notes pursuant to Rule 144(d)(4) under
the Securities Act (or any successor provision thereto) in order to permit
compliance with Rule 144A in connection with resales by such holders of
the Notes. The Company will pay the expenses of printing and distributing
to the Initial Purchaser all such documents.
(c) The Company will arrange, in cooperation with the Initial
Purchaser and its counsel, for the qualification of the Notes for sale and
the determination of their eligibility for investment under the laws of
such jurisdictions in the United States and Canada as the Initial
Purchaser designates and will continue such qualifications in effect so
long as required to complete the resale of the Notes by the Initial
Purchaser; provided, however, that the Company will not be required to
qualify as a foreign corporation or to file a general consent to service
of process in any such jurisdiction.
(d) During the period of three years after the Closing Date or, if
earlier, until such time as the Notes are no longer restricted securities
(as defined in Rule 144 under the Securities Act), the Company will not,
and will not permit any of its affiliates
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<PAGE>
(as defined in Rule 144 under the Securities Act) to, resell any of the
Notes that have been reacquired by any of them.
(e) During the period of three years after the Closing Date or, if
earlier, until such time as the Notes are no longer restricted securities
(as defined in Rule 144 under the Securities Act), the Company will not be
or become an open-end investment company, unit investment trust or
face-amount certificate company that is or is required to be registered
under Section 8 of the Investment Company Act and will not be or become a
closed-end investment company required to be registered, but not
registered, under the Investment Company Act.
(f) The Company will furnish to you as early as practicable prior to
the time of purchase, but no later than two business days prior thereto, a
copy of the latest available unaudited interim consolidated financial
statements, if any, of (i) the Company and its Subsidiaries and (ii)
Macpherson and GEMC, which have been read by the Company's independent
certified public accountants and Macpherson's independent certified public
accountants, respectively, as stated in their letters to be furnished
pursuant to Section 6(c) of this Agreement.
(g) In connection with the offering, until the Initial Purchaser
shall have notified the Company of the completion of the resale of the
Notes, neither the Company nor any of its affiliates has or will, either
alone or with one or more other persons, bid for or purchase for any
account in which it or any of its affiliates has a beneficial interest any
Notes; and neither it nor any of its affiliates will make bids or
purchases for the purpose of creating actual, or apparent, active trading
in, or of raising the price of, the Notes.
(h) For a period of 90 days after the date of the Offering
Memorandum, neither the Company nor any of its Subsidiaries will offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any United States dollar-denominated debt securities issued by
the Company or any of its Subsidiaries (other than the Exchange Notes as
contemplated by the Registration Rights Agreement) in any transaction
involving a public offering or a private placement in connection with
intended resale under Rule 144A and having a maturity of more than three
years from the date of issue or publicly disclose the intention to make
any such offer, sale, pledge or disposal, without the prior written
consent of the Initial Purchaser. Neither the Company nor any of its
Subsidiaries will at any time offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any securities under
circumstances where such offer, sale, pledge, contract or disposition
would cause the exemption afforded by Section 4(2) of the Securities Act
or the safe harbor of Regulation S thereunder to cease to be applicable to
the offer and sale of the Notes.
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<PAGE>
(i) The Company will apply the net proceeds from the sale of the
Notes in the manner set forth under the caption "Use of Proceeds" in the
Offering Memorandum.
(j) The Company will pay all expenses, fees and taxes (other than
any transfer taxes and fees and disbursements of counsel for the Initial
Purchaser except as set forth under Section 6 hereof and subclause (iv)
below) in connection with (i) the preparation of the Offering Documents,
and any amendments or supplements thereto, and the printing and furnishing
of copies of each thereof to the Initial Purchaser (including costs of
mailing and shipment), (ii) the preparation, issuance, execution,
authentication and delivery of the Notes, (iii) the word processing and/or
printing of this Agreement, the Indenture, and the reproduction and/or
printing and furnishing of copies of each thereof to the Initial Purchaser
(including costs of mailing and shipment), (iv) the determination of the
eligibility of the Notes for investment under state securities or Blue Sky
laws (including the legal fees and filing fees and other disbursements of
counsel for the Initial Purchaser) and the printing and furnishing of
copies of any Blue Sky surveys or legal investment surveys to the Initial
Purchaser, (v) any fees payable to investment rating agencies with respect
to the Notes (vi) the cost of qualifying the Notes for trading in the
Private Offerings, Resale and Trading through Automated Linkages
("PORTAL") Market and any expenses incidental thereto and (vii) the
performance of the Company's other obligations hereunder.
(k) The Company will use its best efforts to cause the Notes to be
eligible for trading in the PORTAL Market upon issuance.
(l) The Company will comply with all of its agreements set forth in
the Registration Rights Agreement and all agreements set forth in the
representation letters of the Company to DTC relating to the approval of
the Notes by DTC for "book-entry" transfer.
(m) The Company will cause each Note to bear the legend set forth in
the form of Note attached as Exhibit 1 to Appendix A to the Indenture
until such legend shall no longer be necessary or advisable because the
Notes are no longer subject to the restrictions on transfer described
therein.
6. Reimbursement of Initial Purchaser Expenses. If the Notes are not
delivered for any reason other than the termination of this Agreement pursuant
to the first two paragraphs of Section 8 hereof or the default by the Initial
Purchaser in its obligations hereunder, the Company shall reimburse the Initial
Purchaser for all of its reasonable out-of-pocket expenses, including the fees
and disbursements of its counsel.
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<PAGE>
7. Conditions of Initial Purchaser's Obligations. The Initial Purchaser's
obligations hereunder are subject to the accuracy of the representations and
warranties on the part of the Company on the date hereof and at the time of
purchase, the performance by the Company of its obligations hereunder and to the
following conditions:
(a) The Company shall furnish to you at the time of purchase an
opinion of Hughes Hubbard & Reed LLP, special counsel for the Company,
addressed to the Initial Purchaser and dated the time of purchase and in
form satisfactory to King & Spalding, counsel for the Initial Purchaser,
stating that:
(i) the Company is a corporation validly existing and in good
standing under the laws of the State of Delaware, with the corporate
power and authority to execute and deliver this Agreement, the
Indenture and the Registration Rights Agreement (collectively, the
"Transaction Documents") and to issue, sell and deliver the Notes;
(ii) each of the Subsidiary Guarantors is a corporation
validly existing in good standing under the laws of the jurisdiction
of its incorporation, with the corporate power and authority to
execute and deliver the Transaction Documents to which it is a
party;
(iii) this Agreement has been duly authorized by all necessary
corporate action on the part of the Company and each of the
Subsidiary Guarantors and has been executed and delivered by the
Company and each of the Subsidiary Guarantors;
(iv) the Indenture has been duly authorized by all necessary
corporate action on the part of the Company and the Subsidiary
Guarantors, has been executed and delivered by the Company and each
of the Subsidiary Guarantors and constitutes the legal, valid and
binding obligation of the Company and the Subsidiary Guarantors,
enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance or transfer, reorganization, moratorium or
similar laws affecting creditors' rights generally and general
principles of equity;
(v) the Notes have been duly authorized by all necessary
corporate action on the part of the Company and, when executed and
authenticated in accordance with the terms of the Indenture and
delivered by the Company against payment therefor in accordance with
this Agreement, will constitute legal, valid and binding obligations
of the Company, enforceable in accordance with their terms, except
as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance or transfer, reorganization or
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<PAGE>
similar laws affecting creditors' rights generally and general
principles of equity;
(vi) the Exchange Notes have been duly authorized by all
necessary corporate action on the part of the Company and, when
executed and authenticated in accordance with the terms of the
Indenture and delivered by the Company in exchange for the Notes in
accordance with the Indenture, will constitute legal, valid and
binding obligations of the Company, enforceable in accordance with
their terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium or similar laws affecting creditors'
rights generally and general principles of equity;
(vii) the Registration Rights Agreement has been duly
authorized by all necessary corporate action on the part of the
Company and the Subsidiary Guarantors, has been executed and
delivered by the Company and the Subsidiary Guarantors and
constitutes legal, valid and binding agreements of the Company and
the Subsidiary Guarantors enforceable in accordance with their
respective terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization, moratorium or similar laws affecting
creditors' rights generally and general principles of equity;
(viii) the Indenture, the Notes and the Registration Rights
Agreement conform in all material respects to the descriptions
thereof contained in the Offering Memorandum;
(ix) no approval, authorization, consent or order of or filing
with any Federal or New York state governmental or regulatory
commission, board, body, authority or agency is required to be
obtained by the Company or any of the Subsidiary Guarantors in
connection with the performance by the Company and the Subsidiary
Guarantors of their respective obligations under the Transaction
Documents (to the extent a party thereto), the issuance or sale of
the Notes by the Company or the issuance of the Subsidiary
Guarantees by the Subsidiary Guarantors, other than actions required
to comply with securities laws in the performance of the
Registration Rights Agreement;
(x) the execution, delivery and performance of the Transaction
Documents, the issuance of the Notes by the Company and consummation
of the transactions contemplated by the Transaction Documents by the
Company and the Subsidiary Guarantors party thereto will not
conflict with, or result in any breach of or constitute a default
under (nor constitute any event which with notice, lapse of time, or
both would constitute a breach of, or default under),
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any provisions of the charter or by-laws of the Company or any of
the Subsidiary Guarantors or under any provision of the distribution
agreements of the Company and the Subsidiary Guarantors with Pfaff
AG, Pegasus Sewing Machine Mfg. Co., Ltd., M&R Printing Equipment,
Inc., and Barudan America, Inc. and Barudan Company, Ltd., or under
any Federal or New York state law, regulation or rule or any decree,
judgment or order known to such counsel to be applicable to the
Company or any of the Subsidiary Guarantors;
(xi) to such counsel's knowledge, there are no actions, suits
or proceedings pending or threatened in writing against the Company,
any of the Subsidiary Guarantors, Macpherson or GEMC or any of their
respective properties, at law or in equity, or before or by any
Federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency which could reasonably
be expected to result in a judgment, decree or order having a
Company Material Adverse Effect;
(xii) the Company is not and, after giving effect to the
offering and sale of the Notes and the application of the proceeds
thereof as described in the Offering Memorandum, will not be an
"investment company" as defined in the Investment Company Act; and
(xiii) assuming the accuracy of the representations and
warranties of the Initial Purchaser in Section 4 hereof, the offer
and sale of the Notes in the manner contemplated by this Agreement
will be exempt from the registration requirements of the Securities
Act; and it is not necessary to qualify an indenture in respect of
the Notes under the Trust Indenture Act in connection with such
offer and sale of the Notes.
In addition, such opinion shall include a statement that such
counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants of the Company and representatives of the Initial Purchaser at
which the contents of the Offering Memorandum were discussed, and although
such counsel has not independently verified and does not assume
responsibility for the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum (except as and to the
extent stated in subparagraph (viii) above), on the basis of the foregoing
such counsel does not believe that the Offering Memorandum, after giving
effect to any amendment or supplement thereto made prior to the time of
purchase, as of its date or at the time of purchase contained an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need express no opinion with respect to the financial statements
and schedules and other financial and statistical data included in the
Offering Memorandum).
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<PAGE>
(b) The Company shall furnish to you at the time of purchase an
opinion of Waters, McPherson, McNeill, counsel for the Company, addressed
to the Initial Purchaser and dated the time of purchase and in form
satisfactory to King & Spalding, counsel for the Initial Purchaser,
stating that:
(i) the Company has the corporate power and authority to own
its properties (including, upon the closing of the transactions
contemplated by the Stock Purchase Agreement, the properties owned
by Macpherson and GEMC) and conduct its business (including, upon
the closing of the transactions contemplated by the Stock Purchase
Agreement, the business conducted by Macpherson and GEMC) as
described in the Offering Documents and to execute and deliver the
Stock Pledge Agreement, the New Credit Agreement, the Clinton
Amendment, the Barudan Amendment and the ELC Acquisition Agreement;
(ii) each of the Company's direct and indirect Subsidiaries
has the corporate power and authority to own its properties and
conduct its respective business as described in the Offering
Documents; all of the issued and outstanding shares of capital stock
of each of the Company's Subsidiaries have been duly authorized and
validly issued, are fully paid and non-assessable and are owned of
record directly or indirectly by the Company free and clear of all
liens, security interests, pledges, charges, encumbrances, defects,
shareholders' agreements, voting trusts, equities or claims of any
nature whatsoever, except for the liens listed on Schedule I to this
Agreement; other than the Subsidiaries listed on Schedule I to this
Agreement, to the best of such counsel's knowledge, the Company does
not own, directly or indirectly, any capital stock or other equity
securities of any other corporation or any ownership interest in any
partnership, joint venture or other association;
(iii) the Company and each of the Subsidiaries are duly
qualified or licensed by and are in good standing in each
jurisdiction in which they conduct their respective businesses and
in which the failure, individually or in the aggregate, to be so
licensed or qualified could reasonably be expected to have a Company
Material Adverse Effect, and the Company and each of the
Subsidiaries are in compliance in all material respects with the
laws, orders, rules, regulations and directives issued or
administered by such jurisdictions;
(iv) the Stock Pledge Agreement, the New Credit Agreement, the
Clinton Amendment, the Barudan Amendment and the ELC Acquisition
Agreement have been duly authorized by all necessary corporate
action on the part of the Company and the Subsidiaries party
thereto, have been executed and delivered by the Company and the
Subsidiaries party thereto and constitute legal, valid and binding
agreements of the Company and the Subsidiaries party
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thereto, enforceable in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance or transfer, preferential
transfers, reorganization, moratorium or similar laws affecting
creditors' rights generally and general principles of equity;
(v) the Stock Pledge Agreement, the New Credit Agreement, the
Stock Purchase Agreement, the Clinton Amendment, the Barudan
Amendment and the ELC Acquisition Agreement conform in all material
respects to the descriptions thereof contained in the Offering
Memorandum;
(vi) no approval, authorization, consent or order of or filing
with any Federal, state or local governmental or regulatory
commission, board, body, authority or agency is required to be
obtained by the Company or any of the Subsidiary Guarantors in
connection with the performance by the Company and the Subsidiary
Guarantors of their respective obligations under the Stock Pledge
Agreement, the New Credit Agreement, the Clinton Amendment, the
Barudan Amendment and the ELC Acquisition Agreement or the
consummation of the transactions contemplated by the Stock Purchase
Agreement;
(vii) neither of the Company nor any of the Subsidiaries is in
breach of, or in default under (nor has any event occurred which
with notice, lapse of time, or both would constitute a breach of, or
default under), (viii) its respective charter or by-laws or (ix) in
the performance or observance of any obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust,
bank loan or credit agreement or other agreement or instrument to
which the Company or any such Subsidiary is a party or by which any
of them is bound that had or reasonably could be expected to have a
Company Material Adverse Effect; and the execution, delivery and
performance of the Stock Pledge Agreement, the New Credit Agreement,
the Clinton Amendment, the Barudan Amendment and the ELC Acquisition
Agreement and consummation of the transactions contemplated thereby
by the Company and the Subsidiaries party thereto will not conflict
with, or result in any breach of or constitute a default under (nor
constitute any event which with notice, lapse of time, or both would
constitute a breach of, or default under), any provisions of the
charter or by-laws of the Company or any of the Subsidiaries or
under any provision of any license, indenture, mortgage, deed of
trust, bank loan or credit agreement or other agreement or
instrument to which the Company or any of the Subsidiaries is a
party or by which any of them or their respective properties may be
bound, or under any Federal, state, local or foreign law, regulation
or rule or any decree, judgment or order known to such counsel
applicable to the Company or any of its Subsidiaries, other than
those which would not have a Company Material Adverse Effect;
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(viii) to the best of such counsel's knowledge each of the
Company and the Subsidiaries has all necessary licenses,
authorizations, consents and approvals and has made all necessary
filings required under any Federal, state, local or foreign law,
regulation or rule, and has obtained all necessary authorizations,
consents and approvals from any governmental entity, in order to
conduct its respective business, other than those which the failure
to obtain would not have a Company Material Adverse Effect; to the
best of such counsel's knowledge, neither the Company nor any of the
Subsidiaries is in violation of, or in default under, any such
license, authorization, consent or approval or any federal, state,
local or foreign law, regulation or rule or any decree, order or
judgment applicable to the Company or any of the Subsidiaries the
effect of which could reasonably be expected to have a Company
Material Adverse Effect;
(ix) to the best of such counsel's knowledge, there are no
actions, suits or proceedings pending or threatened against the
Company or any of the Subsidiaries or any of their respective
properties, at law or in equity, or before or by any Federal, state,
local or foreign governmental or regulatory commission, board, body,
authority or agency which could reasonably be expected to result in
a judgment, decree or order having a Company Material Adverse
Effect;
(c) The Company shall furnish to you at the time of purchase an
opinion of Smith Helms Mulliss & Moore LLP, counsel for Macpherson and
GEMC, addressed to the Initial Purchaser and dated the time of purchase
and in form satisfactory to King & Spalding, counsel for the Initial
Purchaser, stating that:
(i) Macpherson has been duly incorporated and is validly
existing as a corporation, authorized to transact business under the
laws of the jurisdiction of its incorporation with full corporate
power and authority to own its properties and to conduct its
business, and to execute and deliver the Stock Purchase Agreement;
(ii) GEMC has been duly incorporated and is validly existing
as a corporation, in good standing under the laws of the
jurisdiction of its incorporation with full corporate power and
authority to own its properties and to conduct its business, and to
execute and deliver the Stock Purchase Agreement;
(iii) all of the issued shares of capital stock of Macpherson
have been duly authorized and validly issued, are fully paid and
non-assessable, and, to the best knowledge of such counsel, based
upon a review of the corporate books and records, upon consummation
of the transactions contemplated by the Stock
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Purchase Agreement, will be owned of record by the Company free and
clear of all liens, security interests, pledges, charges,
encumbrances, defects, shareholders' agreements, voting trusts,
equities or claims of any nature whatsoever other than those liens,
security interests, pledges, charges, encumbrances, defects,
shareholders' agreements, voting trusts, equities or claims created
by the Company or as the result of actions of the Company;
(iv) all of the issued shares of capital stock of GEMC have
been duly authorized and validly issued, are fully paid and
nonassessable, and, to the best knowledge of such counsel, based
upon a review of the corporate books and records, upon consummation
of the transactions contemplated by the Stock Purchase Agreement,
will be owned of record by the Company and Macpherson free and clear
of all liens, security interests, pledges, charges, encumbrances,
defects, shareholders' agreements, voting trusts, equities or claims
of any nature whatsoever other than those liens, security interests,
pledges, charges, encumbrances, defects, shareholders' agreements,
voting trusts, equities or claims created by the Company or
Macpherson or as the result of actions of the Company or Macpherson
after the consummation of the transactions contemplated by the Stock
Purchase Agreement;
(v) to the best knowledge of such counsel, Macpherson and GEMC
do not own, directly or indirectly, any capital stock or other
equity securities of any other corporation or any ownership interest
in any partnership, joint venture or other association;
(vi) the Stock Purchase Agreement has been duly authorized,
executed and delivered by Macpherson and GEMC and is a legal, valid
and binding agreement of Macpherson and GEMC, enforceable in
accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization, moratorium or similar laws affecting
creditors' rights generally and general principles of equity;
(vii) no approval, authorization, consent or order of or
filing with any national, state or local governmental or regulatory
commission, board, body, authority or agency is required in
connection with the performance by Macpherson and GEMC of its
obligations under the Stock Purchase Agreement or consummation of
the transactions contemplated thereby or, if required, has been
obtained in connection with the execution, delivery or performance
by the Macpherson or GEMC of the Stock Purchase Agreement or any of
the instruments or agreements referenced therein or the taking of
any action therein contemplated;
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<PAGE>
(viii) the execution, delivery and performance of the Stock
Purchase Agreement by Macpherson and GEMC and the consummation by
Macpherson and GEMC of the transactions contemplated thereby do not
and will not conflict with, or result in any breach of, or
constitute a default under (nor constitute any event which with
notice, lapse of time, or both would constitute a breach of or
default under), any provisions of the charter or by-laws of
Macpherson or GEMC or under any provision of any license, indenture,
mortgage, deed of trust, bank loan, credit agreement or other
agreement or instrument, of which such counsel is aware, to which
Macpherson or GEMC is a party or by which any of them or their
respective properties may be bound or affected, or, to such
counsel's best knowledge, under any law, regulation or rule or any
decree, judgment or order applicable to Macpherson or GEMC;
(ix) to the best of such counsel's knowledge, neither
Macpherson or GEMC is in breach of, or in default under (nor has any
event occurred which with notice, lapse of time, or both would
constitute a breach of, or default under), any license, indenture,
mortgage, deed of trust, bank loan or credit agreement or any other
agreement or instrument to which Macpherson or GEMC is a party or by
which any of them or their respective properties may be bound or
affected or under any law, regulation or rule or any decree,
judgment or order applicable to Macpherson or GEMC which could
reasonably be expected to have Macpherson Material Adverse Effect;
and
(x) to the best of such counsel's knowledge, there are no
actions, suits or proceedings pending or threatened against
Macpherson or GEMC or any of their respective properties, at law or
in equity or before or by any commission, board, body, authority or
agency which could reasonably be expected to have a Macpherson
Material Adverse Effect.
(d) You shall have received from each of KPMG Peat Marwick LLP and
Arthur Andersen LLP letters dated as of the date of this Agreement and the
time of purchase and addressed to the Initial Purchaser in the forms
heretofore approved by you.
(e) You shall have received at the time of purchase, the favorable
opinion of King & Spalding, counsel for the Initial Purchaser, dated the
time of purchase, as to the matters referred to in subparagraphs (v),
(vii), (x) and (xii) of paragraph (a) of this Section 7.
In addition, such counsel shall state that they have advised you as
to the requirements of the Securities Act and the applicable rules and
regulations thereunder and rendered legal advice and assistance to you in
the course of your investigation pertaining to, and your participation in
the preparation of, the Offering Memorandum.
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<PAGE>
Such counsel shall state that rendering such assistance involved, among
other things, discussions and inquiries concerning various legal matters
and the review of the documents referred to above. Such counsel shall
state that they have also participated in conferences with your
representatives, representatives of the Company and its counsel and
independent public accountants during which the contents of the Offering
Memorandum and related matters were discussed and reviewed. Such counsel
shall state that, nothing has come to their attention that causes such
counsel to believe that the Offering Memorandum (other than the financial
statements and schedules and other financial and statistical data included
therein as to which such counsel need express no belief), on the date of
such Offering Memorandum and as of the date of the time of purchase,
contained or contains any untrue statement of a material fact or omitted
or omits to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(f) No amendment or supplement to the Offering Documents shall have
been made to which you reasonably object in writing.
(g) At the time of purchase, the Offering Memorandum and all
amendments or supplements thereto, or modifications thereof, if any, taken
together, shall not contain an untrue statement of material fact or omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
(h) Between the time of execution of this Agreement and the time of
purchase, there has not been (i) any material adverse change, present or
prospective, in the business, properties, results of operations, condition
(financial or otherwise), assets or prospects of the Company, the
Subsidiaries, and Macpherson and GEMC taken as a whole, other than as
described in the Offering Memorandum, (ii) any transaction that is
material to the Company, the Subsidiaries, and Macpherson and GEMC taken
as a whole, entered into by such persons, other than as described in the
Offering Memorandum, or (iii) any obligation, contingent or otherwise,
directly or indirectly, incurred by the Company, the Subsidiaries, and
Macpherson and GEMC taken as a whole, that is material to such persons
other than as described in the Offering Memorandum.
(i) The Company will, at the time of purchase, deliver to you a
certificate of two of its executive officers to the effect that the
representations and warranties of the Company set forth in this Agreement
and the conditions set forth in paragraph (f) and paragraph (g) have been
met and are true and correct as of such date.
(j) The Company shall have furnished to you such other documents and
certificates as to the accuracy and completeness of any statement in the
Offering Documents as of the time of purchase as you may reasonably
request.
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<PAGE>
(k) The Company shall perform such of its obligations under this
Agreement as are to be performed by the terms hereof at or before the time
of purchase.
(l) The Company, each of the Subsidiary Guarantors and the Trustee
shall have entered into the Indenture and the Initial Purchaser shall have
received executed counterparts thereof.
(m) The Notes shall be eligible for trading in the PORTAL Market
upon issuance.
(n) The closing of the transactions contemplated by the Stock
Purchase Agreement shall occur simultaneously with the closing of the
transactions contemplated by this Agreement. The Company shall have
provided to the Initial Purchaser and its counsel copies of all material
documents required to be delivered by parties pursuant to the Stock
Purchase Agreement in connection with the closing of the transactions
thereunder. All consents, approvals, authorizations, orders or
declarations of or from, or registrations, qualifications or filings with,
any court or governmental agency or body required in connection with the
transactions contemplated by the Stock Purchase Agreement shall have been
obtained and shall be in full force and effect.
(o) The Clinton Amendment, the Barudan Amendment and the ELC
Acquisition Agreement shall be in full force and effect.
(p) Prior to or simultaneously with the closing of the transactions
contemplated by this Agreement, the Company shall have entered into the
New Credit Agreement and the Initial Purchaser shall have received
executed counterparts thereof and all other documents and agreements
entered into in connection therewith, including but not limited to, such
documents and agreements evidencing the release of liens on certain of the
Company's assets under the Existing Credit Facility (as defined in the
Offering Documents).
(q) Prior to or simultaneously with the closing of the transactions
contemplated by this Agreement, the Company shall have entered into the
Clinton Amendment and the Initial Purchaser shall have received executed
counterparts of the Clinton Amendment and all other documents and
agreements entered into in connection therewith.
8. Effective Date of Agreement; Termination. This Agreement shall become
effective when the parties hereto have executed and delivered this Agreement.
The obligations of the Initial Purchaser hereunder shall be subject to
termination in its absolute discretion if, at any time prior to the time of
purchase, trading in securities on the New York Stock Exchange shall have been
suspended or minimum prices shall have been
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<PAGE>
established on the New York Stock Exchange, or if a general banking moratorium
shall have been declared either by the United States or New York State
authorities, or if the United States shall have declared war in accordance with
its constitutional processes or there shall have occurred any material outbreak
or escalation of hostilities or other national or international calamity or
crisis of such magnitude in its effect on, or any material adverse change in any
financial market which, in your judgment makes it impracticable to market the
Notes.
If the Initial Purchaser elects to terminate this Agreement as provided in
this Section 8, the Company shall be notified promptly by letter or telegram.
If the sale to the Initial Purchaser of the Notes, as contemplated by this
Agreement, is not carried out by the Initial Purchaser for any reason permitted
under this Agreement or if such sale is not carried out because the Company
shall be unable to comply with any of the terms of this Agreement, the Company
shall not be under any obligation or liability under this Agreement (except to
the extent provided in Sections 5(j), 6 and 9 hereof), and the Initial Purchaser
shall be under no obligation or liability to the Company under this Agreement
(except to the extent provided in Section 9 hereof) or to one another hereunder.
9. Indemnity by the Company, the Subsidiary Guarantors and the Initial
Purchaser.
(a) The Company and each of the Subsidiary Guarantors, jointly and
severally, agree to indemnify, defend and hold harmless the Initial Purchaser
and any person who controls the Initial Purchaser within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, from and against any
loss, expense, liability or claim (including but not limited to reasonable
attorneys' fees and any and all reasonable expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), which, jointly or severally, the Initial Purchaser
or controlling person may incur under the Securities Act, the Exchange Act or
otherwise, insofar as such loss, expense, liability or claim (or actions in
respect thereof) arises out of or is based upon any untrue statement or alleged
untrue statement of a material fact contained in any Offering Document or any
amendment or supplement thereto or arises out of or is based upon any omission
or alleged omission to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, except insofar as any such loss, expense, liability or
claim arises out of or is based upon any untrue statement or alleged untrue
statement of a material fact made in reliance upon and in conformity with
information furnished in writing by the Initial Purchaser to the Company
expressly for use in such Offering Document or arises out of or is based upon
any omission or alleged omission to state a material fact in connection with
such information necessary in order to make the statements regarding such
information, in light of the circumstances under which they were made, not
misleading; provided, however, that neither the Company nor any Subsidiary
Guarantor shall be liable pursuant to this subsection (a) with respect to the
Preliminary Offering Memorandum to the extent that any such loss, expense,
liability or claim
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arises solely from the fact that the Initial Purchaser sold Notes to a person to
whom there was not sent or given, on or prior to the written confirmation of
such sale, a copy of the Offering Memorandum, as amended and supplemented,
provided that the Company shall have previously furnished copies thereof to the
Initial Purchaser in accordance with this Agreement and the Offering Memorandum,
as amended and supplemented, would have corrected any such untrue statement or
omission.
If any action is brought against the Initial Purchaser or such other
indemnified party in respect of which indemnity may be sought against the
Company pursuant to the foregoing paragraph, the Initial Purchaser shall
promptly notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action, including the employment of
counsel and payment of expenses (but the failure so to notify an indemnifying
party shall not relieve such indemnifying party from any liability which it may
have under this Section 9 except to the extent that it has been prejudiced in
any material respect by such failure or from any liability which it may
otherwise have). The Initial Purchaser or such other indemnified party shall
have the right to employ its own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of the Initial Purchaser or
such controlling person unless the employment of such counsel shall have been
authorized in writing by the Company in connection with the defense of such
action or the Company shall not have employed counsel to have charge of the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to the Company (in which
case the Company shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events such fees
and expenses shall be borne by the Company and paid as incurred (it being
understood, however, that the Company shall not be liable for the fees and
expenses of more than one separate law firm (in addition to any local counsel)
in any one action or series of related actions in the same jurisdiction
representing the indemnified parties who are parties to such action). Anything
in this paragraph to the contrary notwithstanding, the Company shall not be
liable for any settlement of any such claim or action effected without its
written consent (which consent shall not be unreasonably withheld or delayed),
but if settled with the written consent of the Company, or if there is a final
judgment with respect thereto, the Company agrees to indemnify and hold harmless
the Initial Purchaser and each controlling person from and against any loss or
liability by reason of such settlement or judgment.
(b) The Initial Purchaser agrees to indemnify, defend and hold harmless
the Company and the Subsidiary Guarantors, their respective directors and
officers and any person who controls the Company and the Subsidiary Guarantors
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any loss, expense, liability or claim (including
but not limited to reasonable attorneys' fees and any and all reasonable
expenses whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation), which, jointly or
severally, the Company and the
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Subsidiary Guarantors or any such person may incur under the Securities Act, the
Exchange Act or otherwise, insofar as such loss, expense, liability or claim (or
actions in respect thereof) arises out of or is based upon any untrue statement
or alleged untrue statement of a material fact contained in any Offering
Document or any amendment or supplement thereto that is made in reliance upon
and in conformity with information furnished in writing by or on behalf of the
Initial Purchaser to the Company expressly for use in such Offering Document, or
arises out of or is based upon any omission or alleged omission to state a
material fact in connection with such information necessary in order to make the
statements regarding such information, in light of the circumstances under which
they were made, not misleading.
If any action is brought against the Company, the Subsidiary Guarantors or
any such person in respect of which indemnity may be sought against the Initial
Purchaser pursuant to the foregoing paragraph, the Company, the Subsidiary
Guarantors or such person shall promptly notify the Initial Purchaser in writing
of the institution of such action and the Initial Purchaser shall assume the
defense of such action, including the employment of counsel and payment of
expenses. The Company, the Subsidiary Guarantors or such person shall have the
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of the Company, the Subsidiary Guarantors
or such person unless the employment of such counsel shall have been authorized
in writing by the Initial Purchaser in connection with the defense of such
action or the Initial Purchaser shall not have employed counsel to have charge
of the defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to the Initial Purchaser (in
which case the Initial Purchaser shall not have the right to direct the defense
of such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses shall be borne by the Initial Purchaser and paid
as incurred (it being understood, however, that the Initial Purchaser shall not
be liable for the expenses of more than one separate law firm (in addition to
any local counsel) in any one action or series of related actions in the same
jurisdiction representing the indemnified parties who are parties to such
action). Anything in this paragraph to the contrary notwithstanding, the Initial
Purchaser shall not be liable for any settlement of any such claim or action
effected without the written consent of the Initial Purchaser (which consent
shall not be unreasonably withheld or delayed), but if settled with the written
consent of the Initial Purchaser, or if there is a final judgment with respect
thereto, the Initial Purchaser agrees to indemnify and hold harmless the
Company, the Subsidiary Guarantors and each controlling person from and against
any loss or liability by reason of such settlement or judgment.
(c) If the indemnification provided for in this Section 9 is unavailable
to an indemnified party under subsections (a) and (b) of this Section 9 or is
insufficient to hold harmless an indemnified party under this Section 9, in each
case in respect of any losses, expenses, liabilities or claims required to be
indemnified, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, expenses, liabilities or claims
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(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Subsidiary Guarantors on the one hand and the
Initial Purchaser on the other hand from the offering of the Notes or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Subsidiary Guarantors on the one hand and of the Initial Purchaser on the
other in connection with the statements or omissions which resulted in such
losses, expenses, liabilities or claims, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Subsidiary
Guarantors on the one hand and the Initial Purchaser on the other shall be
deemed to be in the same proportion as the total proceeds from the offering of
the Notes (net of discounts to the Initial Purchaser but before deducting
expenses) received by the Company bear to the discounts received by the Initial
Purchaser, in each cases as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and the Subsidiary
Guarantors on the one hand and of the Initial Purchaser on the other shall be
determined by reference to, among other things, whether the untrue statement or
alleged untrue statement of a material fact or omission or alleged omission
relates to information supplied by the Company and the Subsidiary Guarantors or
by the Initial Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, expenses,
liabilities and claims referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any claim or action.
(d) The Company, the Subsidiary Guarantors and the Initial Purchaser agree
that it would not be just and equitable if contribution pursuant to this Section
9 were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in
subsection (c) above. Notwithstanding the provisions of this Section 9, the
Initial Purchaser shall not be required to contribute any amount in excess of
the amount by which the total discount applicable to the Notes pursuant to this
Agreement exceeds the amount of any damages which the Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action against such party in
respect of which a claim for contribution may be made against another party or
parties under this Section 9, notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 9 or otherwise. Anything
in this paragraph to the contrary notwithstanding, no party or parties from whom
contribution may be sought shall be liable for contribution with respect to any
claim or action settled without its written consent (which consent shall not be
unreasonably withheld), but if settled with the written consent of such party,
or if there is a final judgment with respect thereto, such party or
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parties from whom contribution may be sought agree to indemnify and hold
harmless such other party or parties seeking contribution and each controlling
person in respect thereof from and against any loss or liability by reason of
such settlement or judgment.
The Company and the Subsidiary Guarantors hereby acknowledge and agree
with the Initial Purchaser that the statements set forth in (i) the last
paragraph on the cover page of the Offering Documents and (ii) the last
paragraph in boldface type on page five of the Offering Documents relating to
stabilization constitute the only information furnished to the Company in
writing by the Initial Purchaser expressly for use in the Offering Documents.
(e) The indemnity and contribution agreements contained in this Section 9
and the covenants, warranties and representations of the Company contained in
this Agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of the Initial Purchaser, or any person who
controls the Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, or by or on behalf of the
Company, the Subsidiary Guarantors, their respective directors and officers or
any person who controls the Company and the Subsidiary Guarantors within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
and shall survive any termination of this Agreement or the issuance and delivery
of the Notes. The Company, the Subsidiary Guarantors and the Initial Purchaser
agree promptly to notify the other of the commencement of any litigation or
proceeding against it and, in the case of the Company and the Subsidiary
Guarantors, against any of their respective officers and directors, in
connection with the issuance and sale of the Notes, or in connection with the
Offering Memorandum.
10. Notices. Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if to
the Initial Purchaser, shall be sufficient in all respects if delivered or sent
to Dillon, Read & Co. Inc., 535 Madison Avenue, New York, N.Y. 10022, Attention:
Syndicate Department and, if to the Company and the Subsidiary Guarantors, shall
be sufficient in all respects if delivered to the Company at the offices of the
Company at 900 Milik Street, Carteret, New Jersey 07008, Attention: Chief
Executive Officer.
11. Construction. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflicts of law. The section headings in this Agreement have been inserted
as a matter of convenience of reference and are not a part of this Agreement.
12. Parties at Interest. The Agreement herein set forth has been and is
made solely for the benefit of the Initial Purchaser and the Company, the
Subsidiary Guarantors and the controlling persons, directors and officers
referred to in Section 9 hereof, and their respective successors, assigns,
executors and administrators. No other person, partnership, association or
corporation (including a purchaser, as such purchaser, from the Initial
Purchaser) shall acquire or have any right under or by virtue of this Agreement.
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<PAGE>
13. Counterparts. This Agreement may be signed by the parties in
counterparts which together shall constitute one and the same agreement among
the parties.
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<PAGE>
If the foregoing Purchase Agreement correctly sets forth the understanding
among the Company, the Subsidiary Guarantors and the Initial Purchaser, please
so indicate in the space provided below for the purpose, whereupon this letter
and your acceptance shall constitute a binding agreement among the Company, the
Subsidiary Guarantors and the Initial Purchaser.
Very truly yours,
WILLCOX & GIBBS, INC.
By /s/ [Illegible]
---------------------------------
Title: CEO
WG APPAREL, INC.
By /s/ [Illegible]
---------------------------------
Title: CEO
CLINTON MANAGEMENT CORP.
By /s/ [Illegible]
---------------------------------
Title: V.P.
CLINTON MACHINERY
CORPORATION
By /s/ [Illegible]
---------------------------------
Title: V.P.
LEADTEC SYSTEMS, INC.
By /s/ [Illegible]
---------------------------------
Title: V.P.
[Signature page continued on next page]
<PAGE>
W&G DAON, INC.
By /s/ [Illegible]
---------------------------------
Title: President
J&E SEWING SUPPLIES, INC.
By /s/ [Illegible]
---------------------------------
Title: President
W&G TENNESSEE IMPORTS, INC.
By /s/ [Illegible]
---------------------------------
Title: President
CLINTON LEASING CORP.
By /s/ [Illegible]
---------------------------------
Title: V.P.
CLINTON EQUIPMENT CORP.
By /s/ [Illegible]
---------------------------------
Title: V.P.
PARADISE COLOR CORP.
By /s/ [Illegible]
---------------------------------
Title: V.P.
[Signature page continued on next page]
<PAGE>
The foregoing Purchase Agreement is
accepted and agreed to as of
the date first above written:
DILLON, READ & CO. INC.,
as Initial Purchaser
By /s/ [Illegible]
---------------------------------
Title: Vice President
<PAGE>
SCHEDULE I
List of Subsidiaries and Liens
Subsidiaries
1. WG Apparel, Inc.
2. Clinton Machinery Corporation
3. Clinton Management Corp.
4. Leadtec Systems, Inc.
5. W&G Daon, Inc.
6. J&E Sewing Supplies, Inc.
7. W&G Tennessee Imports, Inc.
8. Clinton Leasing Corp.
9. Clinton Equipment Corp.
10. Paradise Color Corp.
11. Willcox & Gibbs, Ltd.
12. Sunbrand S.A. de C.V.
13. Sunbrand Caribe S.A.
14. Allied Machine Parts Ltd.
15. M.E.C. (Sewing Machines) Ltd.
16. Unity Sewing Supply Company (UK) Limited
17. Allide Machine Parts Limited
18. Matyork Limited
19. Forest Needle Company Limited
20. Morris & Ingram (Textiles) Limited
21. Eildon Electronics Limited
Other Equity Investments
Pegasus Sewing Machine Mfg. Co., Ltd.
Liens
The Company's indebtedness under the Financing and Security Agreement,
dated as of February 1, 1996, between the Company and NationsBank, N.A. is
secured by pledges of the capital stock of certain direct and indirect
Subsidiaries of the Company as follows: 100% of the capital stock of WG Apparel,
Inc., Leadtec Systems, Inc., Clinton Management Corp. and Clinton Machinery
Corporation, and 66% of the capital stock of Willcox & Gibbs, Ltd. Such
indebtedness will be repaid as of the time of purchase with a portion of the net
proceeds of the offering of the Notes.
<PAGE>
EXECUTION COPY
WILLCOX & GIBBS, INC.
$85,000,000
12.25% Series A Senior Notes Due 2003
REGISTRATION RIGHTS AGREEMENT
December 20, 1996
Dillon, Read & Co. Inc.
535 Madison Avenue
New York, NY 10022
Ladies and Gentlemen:
Willcox & Gibbs, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to Dillon, Read & Co. Inc. (the "Initial Purchaser"), upon the
terms set forth in a purchase agreement of even date herewith (the "Purchase
Agreement"), $85,000,000 aggregate principal amount of its 12.25% Series A
Senior Notes Due 2003 (the "Senior Notes") to be unconditionally guaranteed on a
senior unsecured basis by each of the subsidiaries identified on Schedule I
hereto (the "Subsidiary Guarantors"). The Senior Notes will be issued pursuant
to an Indenture, to be dated as of the Closing Date (as defined in the Purchase
Agreement) (the "Indenture"), among the Company, the Subsidiary Guarantors and
IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"). As an inducement
to the Initial Purchaser, the Company and the Subsidiary Guarantors agree with
the Initial Purchaser, for the benefit of the holders of the Senior Notes
(including, without limitation, the Initial Purchaser), the Exchange Notes (as
defined below) and the Private Exchange Notes (as defined below) (collectively,
the "Holders"), as follows:
1. Exchange Offer. The Company shall, at its cost, prepare and, not later
than 90 days after (or if such 90th day is not a business day, the first
business day thereafter) the original date of issue of the Senior Notes (the
"Issue Date") of the Senior Notes, file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Exchange Offer
Registration Statement") on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), with respect to a proposed offer (the
"Exchange Offer") to the Holders of Transfer Restricted Notes (as defined in
Section 6 hereof), who are not prohibited by any law or policy of the Commission
from participating in the Exchange Offer, to issue and deliver to such Holders,
in exchange for the Senior Notes, a like aggregate principal amount of debt
securities
<PAGE>
(the "Exchange Notes") of the Company issued under the Indenture and identical
in all material respects to the Senior Notes (except for the transfer
restrictions relating to the Senior Notes) that would be registered under the
Securities Act. The Company shall use its best efforts to cause such Exchange
Offer Registration Statement to become effective under the Securities Act within
150 days (or if such 150th day is not a business day, the first business day
thereafter) after the Issue Date of the Senior Notes and shall keep the Exchange
Offer Registration Statement effective for not fewer than 20 business days (or
longer, if required by applicable law) after the date on which notice of the
Exchange Offer is mailed to the Holders (such period being called the "Exchange
Offer Registration Period").
If the Company effects the Exchange Offer, the Company will be entitled to
close the Exchange Offer 20 business days after the commencement thereof,
provided that the Company has accepted all the Senior Notes theretofore validly
tendered in accordance with the terms of the Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Exchange Offer,
it being the objective of such Exchange Offer to enable each Holder of Transfer
Restricted Notes (as defined in Section 6 hereof) electing to exchange the
Senior Notes for Exchange Notes (assuming that such Holder is not an affiliate
of the Company within the meaning of the Securities Act, acquires the Exchange
Notes in the ordinary course of such Holder's business and does not intend and
has no arrangements or understandings with any person to participate in the
distribution of the Exchange Notes and is not prohibited by any law or policy of
the Commission from participating in the Exchange Offer) to trade such Exchange
Notes from and after their receipt without any limitations or restrictions under
the Securities Act and without material restrictions under the securities laws
of the several states of the United States. In connection with such Exchange
Offer, the Company shall take such further action, including, without
limitation, appropriate filings under state securities laws, as may be necessary
to realize the foregoing objective subject to the proviso of Section 3(h).
The Company acknowledges that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder that is a broker-dealer electing
to exchange Senior Notes, acquired for its own account as a result of market
making activities or other trading activities, for Exchange Notes (an
"Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Notes received by such
Exchanging Dealer pursuant to the Exchange Offer and (ii) the Initial Purchaser,
if it elects to sell Exchange Notes acquired in exchange for Senior Notes
constituting any portion of an unsold allotment, is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.
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<PAGE>
The Company shall use its reasonable efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes; provided, however, that (i) in the case
where such prospectus and any amendment or supplement thereto must be delivered
by an Exchanging Dealer or the Initial Purchaser, such period shall be the
lesser of 180 days and the date on which all Exchanging Dealers and the Initial
Purchaser have sold all Exchange Notes held by them (unless such period is
extended pursuant to Section 3(j) below) and (ii) the Company shall make such
prospectus and any amendment or supplement thereto available to any
broker-dealer for use in connection with any resale of any Exchange Notes for a
period not less than 90 days after the consummation of the Exchange Offer.
If, upon consummation of the Exchange Offer, the Initial Purchaser holds
Senior Notes acquired by it as part of its initial distribution, the Company,
simultaneously with the delivery of the Exchange Notes pursuant to the Exchange
Offer, shall issue and deliver to the Initial Purchaser upon the written request
of the Initial Purchaser in exchange (the "Private Exchange") for the Senior
Notes held by the Initial Purchaser, a like principal amount of debt securities
of the Company issued under the Indenture and identical in all material respects
(including the existence of restrictions on transfer under the Securities Act
and the securities laws of the several states of the United States) to the
Senior Notes (the "Private Exchange Notes"). The Senior Notes, the Exchange
Notes and the Private Exchange Notes are herein collectively called the
"Securities".
In connection with the Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Exchange Offer open for not less than 20 business days
(or longer, if required by applicable law) after the date notice thereof
is mailed to the Holders;
(c) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York, which may be
the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Senior Notes at any time
prior to the close of business, New York time, on the last business day on
which the Exchange Offer shall remain open; and
(e) otherwise comply in all material respects with all applicable
laws.
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<PAGE>
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all the Senior Notes validly tendered and
not withdrawn pursuant to the Exchange Offer and the Private Exchange;
(ii) deliver to the Trustee for cancellation all the Senior Notes so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of the Senior Notes, Exchange Notes or Private Exchange Notes, as
the case may be, equal in principal amount to the Senior Notes of such
Holder so accepted for exchange.
Each Holder participating in the Exchange Offer shall be required to
represent to the Company that at the time of the consummation of the Exchange
Offer (i) any Exchange Notes received by such Holder will be acquired in the
ordinary course of business, (ii) such Holder will have no arrangements or
understandings with any person to participate in the distribution of the Senior
Notes or the Exchange Notes within the meaning of the Securities Act, (iii) such
Holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of
the Company or any Subsidiary Guarantor or if it is an affiliate, such Holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Notes and (v) if such Holder is a broker-dealer,
that it will receive Exchange Notes for its own account in exchange for Senior
Notes that were acquired as a result of market-making activities or other
trading activities and that it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
Notwithstanding any other provisions hereof, the Company will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies as to form
in all material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not, as of its date, include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Exchange Offer as contemplated by Section 1 hereof,
(ii) the Exchange Offer is not consummated within 180 days after the date of
original issue of the Senior Notes (or, if such 180th day is not
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<PAGE>
a business day, the first business day thereafter), (iii) the Initial Purchaser
so requests within six month after consummation of the Exchange Offer with
respect to the Senior Notes (or any Private Exchange Notes) not eligible to be
exchanged for Exchange Notes in the Exchange Offer and held by it following
consummation of the Exchange Offer or (iv) any Holder (other than an Exchanging
Dealer) is not eligible to participate in the Exchange Offer or, in the case of
any Holder (other than an Exchanging Dealer) that participates in the Exchange
Offer, such Holder does not receive freely tradeable Exchange Notes on the date
of the exchange and such Holder notifies the Company within six months of such
date, the Company shall take the following actions:
(a) The Company shall, at its cost, as promptly as practicable (but
in no event more than 30 days after so required or requested pursuant to
this Section 2) file with the Commission and thereafter shall use its best
efforts to cause to be declared effective a registration statement (the
"Shelf Registration Statement" and, together with the Exchange Offer
Registration Statement, a "Registration Statement") on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Notes (as defined below) by the Holders thereof from time to
time in accordance with the methods of distribution set forth in the Shelf
Registration Statement and Rule 415 under the Securities Act (hereinafter,
the "Shelf Registration"); provided, however, that no Holder (other than
an Initial Purchaser) shall be entitled to have the Securities held by it
covered by such Shelf Registration Statement unless such Holder agrees in
writing to be bound by all the provisions of this Agreement applicable to
such Holder.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, until the earlier of (i) the time when the Securities
covered by the Shelf Registration Statement can be sold pursuant to Rule
144(k) thereof, and (ii) the date on which all of the Securities covered
by the Shelf Registration Statement have been sold pursuant thereto.
Subject to Section 6(b), the Company shall be deemed not to have used its
best efforts to keep the Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result in
Holders of Securities covered thereby not being able to offer and sell
such Securities during that period, unless such action is required by
applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply as to form in all material respects with the
applicable requirements of the Securities Act and the rules and
regulations of the Commission and (ii) not to contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
-5-
<PAGE>
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Exchange
Offer contemplated by Section 1 hereof, the following provisions shall apply:
(a) The Company shall (i) furnish to the Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that the Initial Purchaser
(with respect to any portion of an unsold allotment from the original
offering) is participating in the Exchange Offer or the Shelf Registration
Statement, shall use its best efforts to reflect in each such document,
when so filed with the Commission, such comments as the Initial Purchaser
reasonably may propose; (ii) include the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C
hereto in the "Plan of Distribution" section of the prospectus forming a
part of the Exchange Offer Registration Statement and include the
information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Exchange Offer; (iii) if requested by the
Initial Purchaser, include the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in the prospectus
forming a part of the Exchange Offer Registration Statement; (iv) include
within the prospectus contained in the Exchange Offer Registration
Statement a section entitled "Plan of Distribution," reasonably acceptable
to the Initial Purchaser, which shall contain a summary statement of the
positions taken or policies made by the staff of the Commission with
respect to the potential "underwriter" status of any broker-dealer that is
the beneficial owner (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Notes
received by such broker-dealer in the Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the staff of the Commission or such positions or policies,
in the reasonable judgment of the Initial Purchaser based upon advice of
counsel (which may be in-house counsel), represent the prevailing views of
the staff of the Commission; and (v) in the case of a Shelf Registration
Statement, include the names of the Holders who propose to sell Securities
pursuant to the Shelf Registration Statement, as selling security holders.
(b) The Company shall give written notice to the Initial Purchaser,
the Holders of the Securities and any Participating Broker-Dealer from
whom the Company has received prior written notice that it will be a
Participating Broker-Dealer in the Exchange Offer (which notice pursuant
to clauses (ii) through (v) hereof shall be accompanied by an instruction
to suspend the use of the prospectus until the requisite changes have been
made):
(i) when the Registration Statement or any amendment thereto
has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective;
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<PAGE>
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information (provided that with respect to
any requests prior to the effectiveness of the Registration
Statement, the Company shall be required to give written notice only
to the initial Purchaser and its counsel, King & Spalding);
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of
the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to
make changes in the Registration Statement or the prospectus in
order that the Registration Statement or the prospectus do not
contain an untrue statement of a material fact nor omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(c) The Company shall use its best efforts to obtain the withdrawal
at the earliest possible time, of any order suspending the effectiveness
of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least
one copy of the Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if
the Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(e) The Company shall deliver to each Exchanging Dealer and the
Initial Purchaser, and to any other Holder who so requests, without
charge, at least one copy of the Exchange Offer Registration Statement and
any post-effective amendment thereto, including financial statements and
schedules, and, if the Initial Purchaser or any such Holder requests in
writing, all exhibits thereto (including those incorporated by reference).
(f) The Company shall deliver to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in the Shelf Registration Statement and any amendment or supplement
thereto as such person may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus
or any amendment or supplement thereto by each of the selling Holders of
the Securities in connection with the offering and sale of the Securities
covered by the
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<PAGE>
prospectus, or any amendment or supplement thereto, included in the Shelf
Registration Statement.
(g) The Company shall deliver to the Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Exchange Offer, without
charge, as many copies of the final prospectus included in the Exchange
Offer Registration Statement and any amendment or supplement thereto as
such persons may reasonably request. The Company consents, subject to the
provisions of this Agreement, to the use of the prospectus or any
amendment or supplement thereto by the Initial Purchaser, if necessary,
any Participating Broker-Dealer and such other persons required to deliver
a prospectus following the Exchange Offer in connection with the offering
and sale of the Exchange Notes covered by the prospectus, or any amendment
or supplement thereto, included in such Exchange Offer Registration
Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Company shall register or qualify or cooperate
with the Holders of the Securities included therein and their respective
counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of
such states of the United States as any Holder of the Securities
reasonably requests in writing and do such other acts or things reasonably
necessary or advisable to enable the offer and sale in such jurisdictions
of the Securities covered by such Registration Statement; provided,
however, that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it is not then so qualified or
(ii) take any action which would subject it to general service of process
or to taxation in any jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of the Securities
to facilitate the timely preparation and delivery of certificates
representing the Securities to be sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders may request a reasonable period of
time prior to sales of the Securities pursuant to such Registration
Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
or (v) of Section 3(b) above during the period for which the Company is
required to maintain an effective Registration Statement, the Company
shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Senior Notes or purchasers of Securities, the prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
If the Company notifies the Initial Purchaser, the Holders of the
Securities and any known Participating Broker-Dealer in accordance with
-8-
<PAGE>
paragraphs (ii) through (v) of Section 3(b) above to suspend the use of
the prospectus until the requisite changes to the prospectus have been
made or any stop order has been lifted, as the case may be, then the
Initial Purchaser, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and the
period of effectiveness of the Shelf Registration Statement provided for
in Section 2(b) above and the Exchange Offer Registration Statement
provided for in Section 1 above shall each be extended (i) by the number
of days from and including the date of the giving of such notice to and
including the date when the Initial Purchaser, the Holders of the
Securities and any known Participating Broker-Dealer shall have received
such amended or supplemented prospectus pursuant to this Section 3(j) or
(ii) if earlier, until the date when none of the Securities represent
Transfer Restricted Notes.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Senior Notes,
the Exchange Notes or the Private Exchange Notes, as the case may be, and
provide the applicable trustee with printed certificates for the Senior
Notes, the Exchange Notes or the Private Exchange Notes, as the case may
be, in a form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Exchange Offer or the Shelf Registration and will make generally available
to its security holders (or otherwise provide in accordance with Section
11(a) of the Securities Act) an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act, no later than 45 days
after the end of a 12-month period (or 90 days, if such period is a fiscal
year) beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Registration Statement, which
statement shall cover such 12-month period.
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new
trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company
such information regarding the Holder and the distribution of the
Securities as the Company may from time to time reasonably require for
inclusion in the Shelf Registration Statement, and the Company may exclude
from such registration the Securities of any Holder that unreasonably
fails to furnish such information within a reasonable time after receiving
such request.
(o) The Company shall enter into such customary agreements
(including if requested an underwriting agreement in customary form) and
take all such other action,
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<PAGE>
if any, as any Holder of the Securities shall reasonably request in order
to facilitate the disposition of the Securities pursuant to any Shelf
Registration.
(p) In the case of any Shelf Registration, the Company shall (i)
make available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney or accountant retained by the
Holders of the Securities or any such underwriter all relevant financial
and other records, pertinent corporate documents and properties of the
Company and (ii) cause the Company's officers, directors and employees,
and use its best efforts to cause the Company's accountants and auditors,
to supply all relevant information reasonably requested by the Holders of
the Securities or any such underwriter, attorney or accountant in
connection with the Shelf Registration Statement, in each case, as shall
be necessary, in the judgment of the Holder or any such underwriter,
attorney or accountant referred to in this paragraph, to conduct a
investigation within the meaning of Section 11 of the Securities Act;
provided, however, that the foregoing inspection and information gathering
shall be coordinated on behalf of yourself by you and on behalf of the
other parties, by one counsel designated by and on behalf of such other
parties as described in Section 4 hereof.
(q) In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall cause (i) its counsel
to deliver an opinion and updates thereof relating to the Securities in
customary form (with customary carve-outs and qualifications) addressed to
such Holders and the managing underwriters, if any, thereof and dated, in
the case of the initial opinion, the effective date of such Shelf
Registration Statement (it being agreed that the matters to be covered by
such opinion shall include, without limitation, the due incorporation and
good standing of the Company and its subsidiaries; the due authorization,
execution and delivery of the relevant agreement of the type referred to
in Section 3(o) hereof; the due authorization, execution, authentication
and issuance, and the validity and enforceability, of the applicable
Securities; the absence of material legal or governmental proceedings
involving the Company; the absence of governmental approvals required to
be obtained in connection with the Shelf Registration Statement, the
offering and sale of the applicable Securities, or any agreement of the
type referred to in Section 3(o) hereof; the compliance as to form of such
Shelf Registration Statement and any documents incorporated by reference
therein and of the Indenture with the requirements of the Securities Act
and the Trust Indenture Act, respectively; and such opinion shall include
a statement of such counsel's belief that, as of the date of the opinion
and as of the effective date of the Shelf Registration Statement or most
recent post effective amendment thereto, as the case may be, such Shelf
Registration Statement and the prospectus included therein, as then
amended or supplemented, including any documents incorporated by reference
therein, did not and does not contain an untrue statement of a material
fact and did not and does not omit to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading (in the case of any such incorporated documents, in
the light of the circumstances existing at the time that such documents
were filed with the
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Commission under the Exchange Act); (ii) its officers to execute and
deliver all customary documents and certificates and updates thereof
requested by any underwriters of the applicable Securities and (iii) its
independent public accountants to provide to the selling Holders of the
applicable Securities and any underwriter therefor a comfort letter in
customary form and covering matters of the type customarily covered in
comfort letters in connection with primary underwritten offerings, subject
to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
(r) In the case of the Exchange Offer, if requested by the Initial
Purchaser or any known Participating Broker-Dealer, the Company shall
cause (i) its counsel to deliver to the Initial Purchaser or such
Participating Broker-Dealer signed opinions in the forms set forth in
Section 7(a) and 7(b) of the Purchase Agreement with such changes as are
customary in connection with the preparation of a Registration Statement
and (ii) its independent public accountants to deliver to the Initial
Purchaser or such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the substance thereof as
set forth in Section 7(d) of the Purchase Agreement, with appropriate date
changes, and only if permitted by Statement of Auditing Standards No. 72.
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Senior Notes by Holders to the Company (or to such
other Person as directed by the Company) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Company shall
mark, or caused to be marked, on the Senior Notes so exchanged that such
Senior Notes are being cancelled in exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be; in no event shall the Senior
Notes be marked as paid or otherwise satisfied.
(t) The Company will use its best efforts to (i) if the Senior Notes
have been rated prior to the initial sale of such Senior Notes, confirm
that such ratings will apply to the Securities covered by a Registration
Statement or (ii) if the Senior Notes were not previously rated, cause the
Securities covered by a Registration Statement to be rated with the
appropriate rating agencies, if so requested by Holders of a majority in
aggregate principal amount of Securities covered by such Registration
Statement, or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a member of
an underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Rules of Fair Practice and the By-Laws of the
National Association of Securities Dealers, Inc. ("NASD")) thereof,
whether as a Holder of such Securities or as an underwriter, a placement
or sales agent or a broker or dealer in respect thereof, or otherwise, the
Company shall cooperate with and assist such broker-dealer in complying
with the requirements of such Rules and By-Laws.
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<PAGE>
(v) The Company shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a
Registration Statement contemplated hereby.
4. Registration Expenses. (a) All fees and expenses incident to the
Company's performance of or compliance with this Agreement will be borne by the
Company regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made with the NASD (and, if applicable, the reasonable fees
and expenses of any "qualified independent underwriter" and its counsel that may
be required by the rules and regulations of the NASD)); (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
Exchange Notes to be issued in the Exchange Offer and printing of prospectuses);
(iv) all fees and disbursements of counsel for the Company, the Subsidiary
Guarantors and, subject to Section 7(b) below, the Holders of Transfer
Restricted Securities; (v) all application and filing fees in connection with
listing the Notes on a national securities exchange or automated quotation
system pursuant to the requirements of this Agreement; and (vi) all fees and
disbursements of independent accountants of the Company (including the expenses
of any special audit and comfort letters required by or incident to such
performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by it.
Notwithstanding the foregoing or anything in this Agreement to the
contrary, each Holder shall pay all underwriting discounts and commissions of
any underwriters with respect to any Securities sold by or on behalf of it.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Securities being tendered in the Exchange
Offer and/or resold pursuant to the Shelf Registration Statement, as applicable,
for the reasonable fees and disbursements of not more than one counsel.
5. Indemnification. (a) The Company and each Subsidiary Guarantor agrees
to indemnify and hold harmless (i) the Initial Purchaser, each Holder of the
Securities and any Participating Broker-Dealer, and (ii) each person, if any,
who controls the Initial Purchaser, such Holder or such Participating
Broker-Dealer within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act (any of the persons referred to in this clause (ii) being
hereinafter referred to as a "controlling person") and (iii) the agents,
employees, officers and directors of any Person referred to in clause (i) or
(ii) who, collectively with the Persons referred to in clauses (i) and (ii) are
referred to collectively as the "Indemnified Parties," from and against
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any and all losses, liabilities, claims, damages or expenses whatsoever
(including but not limited to attorneys' fees and any and all expenses incurred
in investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which any
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, liabilities, claims, damages, expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in a Registration
Statement or prospectus included therein or in any amendment thereof or
supplement thereto, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company and the Subsidiary Guarantors shall not be liable in any such case
to the extent, but only to the extent, that such loss, liability, claim, damage,
or expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in a Registration Statement or
prospectus included therein or in any amendment thereof or supplement thereto or
in any preliminary prospectus relating to a Shelf Registration in reliance upon
and in conformity with written information pertaining to such Indemnified Party
and furnished to the Company or a Subsidiary Guarantor by or on behalf of such
Indemnified Party expressly for use therein; provided, further, that neither the
Company nor any Subsidiary Guarantor shall be liable pursuant to this subsection
(a) with respect to any preliminary prospectus to the extent that any loss,
expense, liability or claim arises solely from the fact that the Indemnified
Party or related Holder fails to send or deliver, on or prior to the written
confirmation of the sale by such Indemnified Party or related Holder a final
prospectus; provided that the Company shall have previously furnished copies
thereof to the Indemnified Party or such related Holder and such final
prospectus would have corrected any such untrue statement or omission; provided
further, that this indemnity agreement will be in addition to any liability
which the Company or any Subsidiary Guarantor may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters participating
in the distribution (as described in the Registration Statement), their officers
and directors and each person who controls such persons within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as provided above with respect to the indemnification of the Holders of
the Securities if requested by such Holders.
(b) In connection with any Registration Statement pursuant to which a
Holder offers or sells Securities, such Holder agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Subsidiary
Guarantors, their respective directors and officers and any person controlling
the Company or a Subsidiary Guarantor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, to the same extent as the
foregoing indemnity from the Company and the Subsidiary Guarantors to each
Indemnified Person but only with respect to information relating to such Holder
furnished in writing by or on behalf of such Holder expressly for use in such
Registration Statement or prospectus included therein or in any amendment
thereof or supplement thereto. In any such case in which any action shall be
brought
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<PAGE>
against the Company or a Subsidiary Guarantor, any director or officer of the
Company or a Subsidiary Guarantor or any person controlling the Company or a
Subsidiary Guarantor based on such Registration Statement and in respect of
which indemnity may be sought against a Holder, such Holder shall have the
rights and duties given to the Company and the Subsidiary Guarantors (except
that if the Company or a Subsidiary Guarantor shall have assumed the defense
thereof, such Holder shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof but the fees and expenses
of such counsel shall be at the expense of such Holder), and the Company and the
Subsidiary Guarantors, their respective directors and officers and any person
controlling the Company or a Subsidiary Guarantor shall have the rights and
duties given to the Indemnified Parties by Section 5(a) hereof. This indemnity
agreement will be in addition to any liability which such Holder may otherwise
have to the Company or any of its controlling persons.
(c) Promptly after receipt by an Indemnified Party under this Section 5 of
notice of the commencement of any action or proceeding (including a governmental
investigation) (collectively an "Action"), such Indemnified Party shall, if a
claim in respect thereof is to be made against the Indemnifying Party under this
Section 5, promptly notify each party against whom indemnification is to be
sought in writing of the commencement of such Action (but the failure so to
notify the Indemnifying Party shall not, in any event, relieve the Indemnifying
Party of liability that it may have under this Section 5, except to the extent
that it has been prejudiced in any material respect by such failure, or from any
liability which it may otherwise have). In case any such Action is brought
against any Indemnified Party, and it notifies the Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled to participate in
such Action and, to the extent that it may elect by written notice delivered to
the Indemnified Party promptly after receiving the aforesaid notice from such
Indemnified Party, to assume the defense of such Action, with counsel reasonably
satisfactory to such Indemnified Party (which counsel shall not, except with the
consent of the Indemnified Party (which consent shall not be unreasonably
withheld), be counsel to the Indemnifying Party. Notwithstanding the foregoing,
the Indemnified Party or parties shall have the right to employ its or their own
counsel in any such Action, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Party or Parties unless (i) the employment of
such counsel shall have been authorized in writing by the Indemnifying Parties
in connection with the defense of such Action, (ii) the Indemnifying Parties
shall not have employed counsel to take charge of the defense of such Action
within a reasonable time after notice of commencement of the Action, or (iii)
such Indemnified Party or Parties shall have reasonably concluded that there may
be defenses available to it or them that are different from or additional to
those available to one or all of the Indemnifying Parties (in which case the
Indemnifying Parties shall not have the right to direct the defense of such
Action on behalf of the Indemnified Party or Parties), in any of which events
such fees and expenses of counsel shall be borne by the Indemnifying Parties. In
no event shall the Indemnifying Party be liable for the fees and expenses of
more than one counsel (together with appropriate local counsel) at any time for
all Indemnified Parties in connection with any one Action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. Anything in this subsection to
the contrary notwithstanding, an Indemnifying Party shall not be liable for
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<PAGE>
any settlement of any claim or Action effected without its written consent;
provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in which the
indemnification provided for in paragraphs (a) and (b) of this Section 5 is
applicable for any reason held to be unavailable from the indemnifying party, or
is insufficient to hold harmless a party indemnified under this Section 5, the
Company, the Subsidiary Guarantors and the Indemnified Parties shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any reasonable
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any Action or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the indemnifying party, any contribution received by the
indemnifying party, from persons other than the Indemnified Party who may also
be liable for contribution, including persons who control the Indemnified Party
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act) to which the Company, the Subsidiary Guarantors and the Indemnified Parties
may be subject, in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Subsidiary Guarantors, on the one hand,
and the Indemnified Parties, on the other hand, from the offering of the Senior
Notes or, if such allocation is not permitted by applicable law or
indemnification is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in paragraph (c) of this Section 5, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and the Subsidiary Guarantors, on the one
hand, and the Indemnified Parties, on the other hand, in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Subsidiary Guarantors
shall be deemed to be in the same proportion as the total proceeds from the
offering of Senior Notes (net of discounts but before deducting expenses)
received by the Company as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company and the Subsidiary Guarantors, on
the one hand, and the Indemnified Parties, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, the Subsidiary
Guarantors or the Indemnified Parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The agreements contained in this Section 5 shall survive the sale of
the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Liquidated Damages Under Certain Circumstances. (a) Liquidated damages
("Liquidated Damages") with respect to the Securities shall be assessed as
follows if any of the
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<PAGE>
following events occur (each such event in clauses (i) through (iii) below a
"Registration Default"):
(i) If by the 90th day (or if such 90th day is not a business day,
the first business day thereafter) after the Issue Date, neither the
Exchange Offer Registration Statement nor a Shelf Registration Statement
has been filed with the Commission;
(ii) If by the 180th day (or if such 180th day is not a business
day, the first business day thereafter) after the Issue Date, neither the
Exchange Offer is consummated nor, if required in lieu thereof, the Shelf
Registration Statement is declared effective by the Commission; or
(iii) If after either the Exchange Offer Registration Statement or
the Shelf Registration Statement is declared effective, (A) such
Registration Statement thereafter ceases to be effective prior to
completion of the Exchange Offer or the sale of all of the Transfer
Restricted Notes registered pursuant to the Shelf Registration Statement,
as the case may be; or (B) such Registration Statement or the related
prospectus ceases to be usable (except as permitted in paragraph (b) of
this Section 6) in connection with resales of Transfer Restricted Notes
during the periods specified herein because either (1) any event occurs as
a result of which the related prospectus forming part of such Registration
Statement would include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or
(2) it shall be necessary to amend such Registration Statement or
supplement the related prospectus, to comply with the Securities Act or
the Exchange Act or the respective rules thereunder.
The Company will pay Liquidated Damages to each Holder of Transfer Restricted
Securities, during the first 90-day period immediately following the occurrence
of a Registration Default in amount equal to $.05 per week per $1,000 principal
amount of Senior Notes constituting Transfer Restricted Securities held by such
Holder. The amount of Liquidated Damages will increase an additional $.05 per
week per $1,000 principal amount of Senior Notes constituting Transfer
Restricted Securities for each subsequent 90-day period until the applicable
Registration Default has been cured, up to a maximum amount of Liquidated
Damages of $.30 per week per $1,000 principal amount of Senior Notes
constituting Transfer Restricted Securities. All accrued Liquidated Damages will
be paid by the Company on the regular interest payment dates with respect to the
Senior Notes to the Global Note Holders by wire transfer of immediately
available funds or by federal funds check to the Holders of certified securities
by mailing a check to such Holders' registered addresses. Following the cure of
all Registration Defaults, the accrual of Liquidated Damages shall cease.
(b) A Registration Default referred to in Section 6(a)(iii)(B) shall be
deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited or,
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if required by the rules and regulations under the Securities Act, quarterly
unaudited, financial information with respect to the Company where such
post-effective amendment is not yet effective and needs to be declared effective
to permit Holders to use the related prospectus or (y) other material events or
developments with respect to the Company that would need to be described in such
Shelf Registration Statement or the related prospectus and (ii) in the case of
clause (y), the Company is proceeding promptly and in good faith to amend or
supplement such Shelf Registration Statement and related prospectus to describe
such events or, in the case of material developments that the Company determines
in good faith must remain confidential for business reasons, the Company is
proceeding promptly and in good faith to take such steps as are necessary so
that such developments need no longer remain confidential.
(c) "Transfer Restricted Notes" means each Security until (i) the date on
which such Security has been exchanged by a person other than a broker-dealer
for a freely transferrable Exchange Note in the Exchange Offer, (ii) following
the exchange by a broker-dealer in the Exchange Offer of a Security for an
Exchange Note, the date on which such Exchange Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy of
the prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Security has been effectively registered under the Securities
Act and disposed of in accordance with the Shelf Registration Statement or (iv)
the date on which such Security is distributed to the public pursuant to Rule
144 under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act.
7. Rules 144 and 144A. The Company shall use its best efforts to file the
reports required to be filed by it under the Securities Act and the Exchange Act
in a timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Transfer Restricted Notes,
make publicly available other information so long as necessary to permit sales
of their securities pursuant to Rules 144 and 144A. The Company covenants that
it will take such further action as any Holder of Transfer Restricted Notes may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Notes without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including the requirements of Rule 144A(d)(4)). The Company will provide a
copy of this Agreement to prospective purchasers of Senior Notes identified to
the Company by the Initial Purchaser upon request. Upon the request of any
Holder of Transfer Restricted Notes, the Company shall deliver to such Holder a
written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
8. Underwritten Registrations. If any of the Transfer Restricted Notes
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
administer the offering ("Managing Underwriters") will be selected by the
Holders of a majority in aggregate principal amount of such Transfer Restricted
Notes to be included in such offering (subject to the approval (which approval
shall not
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<PAGE>
be unreasonably withheld) of the Company, provided that the Company shall not be
obligated to arrange for more than one underwritten offering during the period
that such Shelf Registration is required to be effective pursuant to this
Agreement.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Notes on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(i) if to a Holder of the Securities, at the most current address
given by such Holder to the Company in accordance with the provisions of
this Section 9(b), which address initially is, with respect to each
Holder, the address of such Holder to which confirmation of the sale of
the Senior Notes to such Holder was first sent by the Initial Purchaser,
with a copy in like manner to you as follows:
Dillon, Read & Co. Inc.
535 Madison Avenue
New York, New York 10022
Fax No.: 212-759-2580
Attention:Corporate Finance Department
with a copy to:
King & Spalding
120 West 45th Street
New York, New York 10036
Fax No.: 212.556.2222
Attention:Mary A. Bernard
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<PAGE>
(ii) if to the Initial Purchaser, at the addresses specified in
Section 9(b)(i);
(iii) if to the Company, at its address as follows:
Willcox & Gibbs, Inc.
900 Milik Street
Carteret, New Jersey 07008
Fax No: 908.541.6249
Attention:Chief Financial Officer
with a copy to:
Hughes Hubbard & Reed LLP
1 Battery Park Plaza
New York, New York 10004
Fax No: 212.422.4726
Attention:John Hoyns
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by the recipient's facsimile machine operator, if sent by
facsimile transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
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(h) Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
(j) Remedies. Each Holder, in addition to being entitled to exercise all
rights provided in this Agreement, in the Indenture, the Purchase Agreement or
granted by law, including recovery of liquidated or other damages, will be
entitled to specific performance of its rights under this Agreement. The Company
and the Subsidiary Guarantors agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agree to waive the defense in any Action for
specific performance that a remedy at law would be adequate.
(k) Adjustments Affecting the Notes. Without the written consent of the
Holders of a majority in aggregate principal amount of outstanding Senior Notes,
the Company and the Subsidiary Guarantors will not take any action, or permit
any change to occur, with respect to the Senior Notes that would materially and
adversely affect the ability of the Holders to consummate any Exchange Offer.
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<PAGE>
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first above written.
DILLON, READ & CO. INC.
By: /s/ Vincent Lu
-------------------------------
Title: Vice President
Name: Vincent Lu
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Senior Notes where such Senior Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, for a period of 180 days
after the Expiration Date (as defined herein), it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution".
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Senior Notes, where such Senior Notes were acquired by such
broker-dealer as a result of market making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution".
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Existing
Notes where such Existing Notes were acquired as a result of market making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this prospectus, as
it may be amended or supplemented from time to time, available to any
broker-dealer for use in connection with any such resale. In addition, until
_____________, 199_, all dealers effecting transactions in the Exchange Notes
may be required to deliver a prospectus.*
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Senior Notes) other than commissions or concessions of any
brokers or dealers and will indemnify the Holders of the Securities (including
any broker-dealers) against certain liabilities including liabilities under the
Securities Act.
- ----------
* In addition, the legend required by Item 502(e) of Regulation S-K
will appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ____________________________________________________________
Address:__________________________________________________________
__________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Senior Notes that were acquired as a result
of market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
<PAGE>
Schedule I
to the
Registration Rights Agreement
1. WG Apparel, Inc.
2. Clinton Machinery Corporation
3. Clinton Management Corp.
4. Leadtec Systems, Inc.
5. W&G Daon, Inc.
6. J&E Sewing Supplies, Inc.
7. W&G Tennessee Imports, Inc.
8. Clinton Leasing Corp.
9. Clinton Equipment Corp.
10. Paradise Color Corp.
<PAGE>
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is made and entered into as of
January 3, 1997 by WG APPAREL, INC., a Delaware corporation and a wholly owned
Subsidiary of Willcox & Gibbs, Inc. (the "Pledgor"), having its principal office
at 900 Milik Street, Carteret, New Jersey 07008, in favor of IBJ SCHRODER BANK &
TRUST COMPANY, having an office at One State Street, New York, New York 10004,
as collateral agent (the "Collateral Agent") for the holders (the "Holders") of
the Notes (as defined below). Capitalized terms used and not defined herein
shall have the meanings given to such terms in the Indenture referred to below.
W I T N E S S E T H :
WHEREAS, the Pledgor is the legal and beneficial owner of all of the
issued and outstanding shares of capital stock set forth on Schedule I hereto
(the "Pledged Shares") of Willcox & Gibbs, Ltd. (the "Issuer"); and
WHEREAS, Willcox & Gibbs, Inc. (the "Company") and IBJ Schroder Bank &
Trust Company, as trustee, have entered into that certain Indenture dated as of
January 3, 1997 (as amended, supplemented or otherwise modified from time to
time, the "Indenture"), pursuant to which the Company issued $85,000,000 in
aggregate principal amount of 12 1/4% Series A Senior Notes Due 2003 (together
with any Exchange Securities and Private Exchange Securities and any notes
issued in replacement thereof or in exchange or substitution therefor, the
"Notes"); and
WHEREAS, the terms of the Indenture require that Pledgor (i) pledge to the
Collateral Agent for the ratable benefit of the Holders and grant to the
Collateral Agent for the ratable benefit of the Holders a security interest in
the Pledged Collateral (as defined herein) and (ii) execute and deliver this
Agreement in order to secure the payment and performance by the Company of all
of the obligations of the Company under the Indenture and the Notes (the
"Obligations").
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and in order to induce
the Holders to purchase the Notes, the Pledgor hereby agrees with the Collateral
Agent for its benefit and the ratable benefit of the Holders as follows:
<PAGE>
SECTION 1. Pledge. The Pledgor hereby pledges to the Collateral Agent for
its benefit and for the ratable benefit of the Holders and grants to the
Collateral Agent for its benefit and ratable benefit of the Holders a continuing
first priority security interest in all of Pledgor's right, title and interest
in the following (the "Pledged Collateral"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares, and all products and proceeds of any of the Pledged Shares, including,
without limitation, all dividends, cash, options, warrants, rights, instruments,
subscriptions and other property or proceeds from time to time received,
receivable or otherwise distributed to Pledgor in respect of or in exchange for
any or all of the Pledged Shares or any of the foregoing; and
(b) an undivided sixty-six percent (66%) interest in all additional shares
of, and all securities convertible into and all warrants, options or other
rights to purchase, Capital Stock of, or other Equity Interests (as defined
below) in, the Issuer from time to time acquired by the Pledgor in any manner,
and the certificates representing such additional shares and Equity Interests
(any such additional shares and Equity Interests and other items shall
constitute part of the Pledged Shares under and as defined in this Agreement);
and
(c) all products and proceeds of any of the foregoing, including, without
limitation, all dividends, cash, options, warrants, rights, instruments,
subscriptions, and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the foregoing.
For purposes of this Agreement, "Equity Interests" means Capital Stock and
all warrants, options or other rights to acquire Capital Stock (but excluding
any debt security that is convertible into, or exchangeable for Capital Stock).
SECTION 2. Security for Obligations. This Agreement secures the prompt and
complete payment and performance when due (whether at Stated Maturity, by
acceleration or otherwise) of all Obligations of the Pledgor hereunder, under
the Indenture and the Notes (including, without limitation, interest and any
other Obligations accruing after the date of any filing by the Pledgor of any
petition in bankruptcy or the commencement of any bankruptcy, insolvency or
similar proceeding with respect to the Pledgor).
SECTION 3. Delivery of Pledged Collateral. The Pledgor hereby agrees that
all certificates or instruments representing or evidencing the Pledged
Collateral shall be immediately delivered to and held at all times by the
Collateral Agent pursuant hereto in the State of New York and shall be in
suitable form for transfer by delivery, or issued in the name of the Pledgor and
accompanied by instruments of transfer or assignment duly executed in blank and
undated, and in either case having attached thereto all requisite federal or
state stock transfer tax stamps, all in form and substance satisfactory to the
Collateral Agent.
2
<PAGE>
SECTION 4. Representations and Warranties. The Pledgor hereby makes all
representations and warranties applicable to the Pledgor contained in the
Indenture. The Pledgor further represents and warrants that:
(a) The execution, delivery and performance by the Pledgor of this
Agreement are within the Pledgor's corporate powers, have been duly authorized
by all necessary corporate action, and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation or bylaws of the Pledgor or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Pledgor, or result in the creation or imposition of any Lien on any assets of
the Pledgor, other than the Lien contemplated hereby.
(b) The Pledged Shares have been duly authorized and validly issued and
are fully paid and non-assessable.
(c) The Pledged Shares constitute 66% of the authorized, issued and
outstanding Equity Interests of the Issuer and constitute 66% of the shares of
Equity Interests of the Issuer beneficially owned by the Pledgor. The Pledgor
owns the remaining 34% of the Equity Interests of the Issuer (the "Unencumbered
Shares") free and clear of any Lien or claims of any Person.
(d) The Pledgor is the legal, record and beneficial owner of the Pledged
Collateral, free and clear of any Lien or claims of any Person except for the
security interest created by this Agreement.
(e) The Pledgor has full power and authority to enter into this Agreement
and has the right to vote, pledge and grant a security interest in the Pledged
Collateral as provided by this Agreement.
(f) This Agreement has been duly executed and delivered by the Pledgor and
constitutes a legal, valid and binding obligation of the Pledgor, enforceable
against the Pledgor in accordance with its terms, except as the enforceability
thereof may be limited by (i) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors and (ii) the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law.
(g) Upon the delivery to the Collateral Agent of the Pledged Collateral
and the filing of Uniform Commercial Code (the "UCC") financing statements, the
pledge of the Pledged Collateral pursuant to this Agreement creates a valid and
perfected first priority security interest in the Pledged Collateral, securing
the payment of the Obligations for the benefit of the Collateral Agent and the
Holders and enforceable as such against all creditors of the Pledgor and any
Persons purporting to purchase any of the Pledged Collateral from the Pledgor.
3
<PAGE>
(h) No consent of any other Person and no consent, authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required (i) for the pledge by the Pledgor of
the Pledged Collateral pursuant to this Agreement or for the execution, delivery
or performance of this Agreement by the Pledgor or (ii) for the exercise by the
Collateral Agent of the voting or other rights provided for in this Agreement or
the remedies in respect of the Pledged Collateral pursuant to this Agreement
(except as may be required in connection with such disposition by laws affecting
the offering and sale of securities).
(i) No litigation, investigation or proceeding of or before any arbitrator
or governmental authority is pending or, to the best knowledge of the Pledgor,
threatened by or against the Pledgor or against any of its properties or
revenues with respect to this Agreement or any of the transactions contemplated
hereby.
(j) The pledge of the Pledged Collateral pursuant to this Agreement is not
prohibited by any law or governmental regulation, release, interpretation or
opinion of the Board of Governors of the Federal Reserve System or other
regulatory agency (including, without limitation, Regulations G, T, U and X of
the Board of Governors of the Federal Reserve System) which is binding upon the
Pledgor.
(k) All information set forth herein relating to the Pledged Collateral is
accurate and complete in all material respects.
SECTION 5. Further Assurance. The Pledgor will at all times cause the
security interests granted pursuant to this Agreement to constitute valid
perfected first priority security interests in the Pledged Collateral (other
than with respect to Permitted Liens), enforceable as such against all creditors
of the Pledgor and (except as otherwise specifically provided herein) any
Persons purporting to purchase any Pledged Collateral from the Pledgor. The
Pledgor will, promptly upon the reasonable request by the Collateral Agent,
execute and deliver or cause to be executed and delivered, or use its best
efforts to procure, all stock powers, proxies, tax stamps, assignments,
instruments and other documents, all in form and substance reasonably
satisfactory to the Collateral Agent, deliver any instruments to the Collateral
Agent and take any other actions that are reasonably necessary or desirable to
perfect, continue the perfection of, or protect the first priority of the
Collateral Agent's security interest in, the Pledged Collateral, to protect the
Pledged Collateral against the rights, claims, or interests of third persons, to
enable the Collateral Agent to exercise or enforce its rights and remedies
hereunder, or otherwise to effect the purposes of this Agreement. The Pledgor
also hereby authorized the Collateral Agent to file any financing or
continuation statements with respect to the Pledged Collateral without the
signature of the Pledgor to the extent permitted by applicable law. The Pledgor
will pay all costs incurred in connection with any of the foregoing.
4
<PAGE>
SECTION 6. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default (as defined in the Indenture) shall
have occurred and be continuing, the Pledgor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the Pledged Shares or
any part thereof for any purpose not inconsistent with the terms of this
Agreement or the Indenture; provided, however, that the Pledgor shall not
exercise or shall refrain from exercising any such right if such action would
have a material adverse effect on the value of the Pledged Collateral or any
part thereof or be inconsistent with or violate any provisions of this Agreement
or the Indenture.
(b) So long as no Event of Default (as defined in the Indenture) shall
have occurred and be continuing, and subject to the other terms and conditions
of the Indenture, the Pledgor shall be entitled to receive, and to utilize
(subject to the provisions of the Indenture) free and clear of the Lien of this
Agreement, all regular and ordinary cash dividends paid from time to time in
respect of the Pledged Shares.
(c) Any and all (i) dividends, other distributions, interest and principal
payments paid or payable in the form of instruments and/or other property (other
than cash dividends permitted under Section 6(b) hereof) received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged Collateral,
(ii) dividends and other distributions paid or payable in cash in respect of any
Pledged Shares in connection with a partial or total liquidation or dissolution
or in connection with a reduction of capital, capital surplus or paid-in
surplus, and (iii) cash paid, payable or otherwise distributed in redemption of,
or in exchange for, any Pledged Collateral, shall in each case be forthwith
delivered to the Collateral Agent to be held as Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the benefit of the Collateral
Agent for the benefit of the Holders, be segregated from the other property and
funds of the Pledgor and be forthwith delivered to the Collateral Agent as
Pledged Collateral in the same form as so received (with any necessary
endorsements).
(d) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies, dividend and interest
payment orders and other instruments as the Pledgor may reasonably request for
the purpose of enabling the Pledgor to exercise the voting and other rights that
it is entitled pursuant to Section 6(a) and 6(b) above.
(e) Upon the occurrence and during the continuance of an Event of Default
(as defined in the Indenture), (i) all rights of the Pledgor to exercise the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 6(a) shall cease, and all such rights shall, at the
option of the Collateral Agent, thereupon become vested in the Collateral Agent,
which, to the extent permitted by law, shall thereupon have the sole right to
exercise such voting and other consensual rights, and (ii) all dividends and
other distributions payable in respect of the Pledged Collateral shall be paid
to the Collateral Agent and the Pledgor's right to receive such cash payments
pursuant to Section 6(b) hereof shall immediately cease.
5
<PAGE>
(f) Upon the occurrence and during the continuance of an Event of Default
(as defined in the Indenture), the Pledgor shall execute and deliver (or cause
to be executed and delivered) to the Collateral Agent all such proxies, dividend
and interest payment orders and other instruments as the Collateral Agent may
reasonably request for the purpose of enabling the Collateral Agent to exercise
the voting and other rights that it is entitled to exercise pursuant to Section
6(e) above.
(g) All dividends and other distributions that are received by the Pledgor
contrary to the provisions of this Section 6 shall be received in trust for the
benefit of the Collateral Agent, the Holders, shall be segregated from the other
property or funds of the Pledgor and shall be forthwith delivered to the
Collateral Agent as Pledged Collateral in the same form as so received (with any
necessary endorsements).
SECTION 7. Covenants. The Pledgor hereby covenants and agrees with the
Collateral Agent and the Holders that it will (i) comply with all of the
obligations, requirements and restrictions applicable to the Pledgor contained
in the Indenture and (ii) if the Trustee and the Collateral Agent shall not be
the same Person, notify the Collateral Agent of the occurrence of an Event of
Default. The Pledgor further covenants and agrees, from and after the date of
this Agreement and until the Obligations have been paid in full, as follows:
(a) The Pledgor agrees that it will not (i) sell, assign, transfer, convey
or otherwise dispose of, or grant any option or warrant with respect to, any of
the Pledged Collateral or Unencumbered Shares without the prior written consent
of the Collateral Agent and the Holders, (ii) create or permit to exist any Lien
upon or with respect to any of the Pledged Collateral or Unencumbered Shares,
except for the security interest granted under this Agreement and Permitted
Liens, and at all times will be the sole beneficial owner of the Pledged
Collateral and the Unencumbered Shares, (iii) enter into any agreement or
understanding that purports to or that restricts or inhibits the Collateral
Agent's rights or remedies hereunder, including, without limitation, the
Collateral Agent's right to sell or otherwise dispose of the Pledged Collateral,
(iv) take any action, or permit the taking of any action by the Issuer, with
respect to the Pledged Collateral, the taking of which would result in a
material impairment of the economic value of the Pledged Collateral as
collateral or a violation of the Indenture or this Agreement, (v) permit the
Issuer to merge or consolidate with or into another person or entity other than
the Pledgor or sell or transfer all or substantially all of its assets to
another person or entity other than the Pledgor, unless (x) Pledgor shall have
delivered to the Collateral Agent an Opinion of Counsel substantially in the
form of Exhibit A hereto and a certificate executed by the President and Chief
Financial Officer of Pledgor substantially in the form of Exhibit B hereto, (y)
an undivided sixty-six percent (66%) interest in all outstanding Capital Stock
of the surviving entity in such merger or consolidation or of the entity to whom
such sale or transfer was made and (z) the Pledgor shall otherwise have complied
with the Indenture, or (vi) fail to pay or discharge any tax, assessment or levy
of any nature not later than the date of any proposed sale under any judgment,
writ or warrant of attachment with regard to the Pledged Collateral.
6
<PAGE>
(b) The Pledgor agrees that immediately upon becoming the beneficial owner
of any additional shares of Capital Stock, notes, other securities or Equity
Interests of the Issuer or of any other subsidiary of the Pledgor or the Issuer
that is not a Subsidiary Guarantor, including as a result of the merger or
consolidation of the Issuer with or into another entity, it will pledge and
deliver to the Collateral Agent for its benefit and the ratable benefit of the
Holders and grant to the Collateral Agent for its benefit and the ratable
benefit of the Holders, a continuing first priority security interest in an
undivided sixty-six percent (66%) interest in such shares, notes, other
securities or Equity Interests (as well as instruments of transfer or assignment
duly executed in blank and undated together with any necessary stock transfer
tax stamps, all in form and substance reasonably satisfactory to the Collateral
Agent).
SECTION 8. Power of Attorney. In addition to all of the powers granted to
the Collateral Agent pursuant to Section 14.4 of the Indenture, the Pledgor
hereby appoints and constitutes the Collateral Agent as the Pledgor's
attorney-in-fact to exercise all of the following powers upon and at any time
after the occurrence and during the continuance of an Event of Default (as
defined in the Indenture): (i) collection of proceeds of any Pledged Collateral;
(ii) conveyance of any item of Pledged Collateral to any purchaser thereof;
(iii) giving of any notices or recording of any Liens under Section 5 hereof;
(iv) making of any payments or taking any acts under Section 9 hereof; and (v)
paying or discharging taxes or Liens levied or placed upon or threatened against
the Pledged Collateral, the legality or validity thereof and the amounts
necessary to discharge the same to be determined by the Collateral Agent in its
sole discretion, and such payments made by the Collateral Agent to become the
obligations of the Pledgor to the Collateral Agent, due and payable immediately
without demand. The Collateral Agent's authority hereunder shall include,
without limitation, the authority to endorse and negotiate, for the Collateral
Agent's own account, any checks or instruments in the name of the Pledgor,
execute and give receipt for any certificate of ownership or any document,
transfer title to any item of Pledged Collateral, sign the Pledgor's name on all
financing statements or any other documents deemed necessary or appropriate to
preserve, protect or perfect the security interest in the Pledged Collateral and
to file the same, prepare, file and sign the Pledgor's name on any notice of
Lien, and prepare, file and sign the Pledgor's name on a proof of claim in
bankruptcy or similar document against any customer of the Pledgor, and to take
any other actions arising from or incident to the powers granted to the
Collateral Agent in this Agreement. This power of attorney is coupled with an
interest and is irrevocable by the Pledgor.
SECTION 9. Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the reasonable expenses of the
Collateral Agent incurred in connection therewith shall be payable by the
Pledgor under Section 14 hereof.
SECTION 10. No Assumption of Duties; Reasonable Care. The rights and
powers granted to the Collateral Agent hereunder are being granted in order to
preserve and protect the security interest in and to the Pledged Collateral
granted hereby and shall not be interpreted to, and shall not, impose any duties
on the Collateral Agent in connection therewith. The Collateral
7
<PAGE>
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if the Pledged
Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords its own property, it being understood that the
Collateral Agent shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Pledged Collateral, whether or not the
Collateral Agent has or is deemed to have knowledge of such matters, or (ii)
taking any necessary steps to preserve rights against any parties with respect
to any Pledged Collateral.
SECTION 11. Subsequent Changes Affecting Collateral. The Pledgor
represents to the Collateral Agent and the Holders that the Pledgor has made its
own arrangements for keeping informed of changes or potential changes affecting
the Pledged Collateral (including, but not limited to, rights to convert, rights
to subscribe, payment of dividends, payments of interest and/or principal,
reorganization or other exchanges, tender offers and voting rights), and the
Pledgor agrees that the Collateral Agent and the Holders shall have no
responsibility or liability for informing the Pledgor of any such changes or
potential changes or for taking any action or omitting to take any action with
respect thereto. The Pledgor covenants that it will not, without the prior
written consent of the Collateral Agent and the Holders, vote to enable, or take
any other action to permit, the Issuer to issue any Capital Stock or other
Equity Interest or to sell or otherwise dispose of, or grant any option with
respect to, any of the Pledged Collateral or create or permit to exist any Lien
upon or with respect to any of the Pledged Collateral, except for the security
interests granted under this Agreement. The Pledgor will defend the right, title
and interest of the Collateral Agent and the Holders in and to the Pledged
Collateral against the claims and demands of all Persons.
SECTION 12. Remedies Upon Default.
(a) If any Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the Collateral Agent and the Holders shall have, in
addition to all other rights given by law or by this Agreement or the Indenture,
all of the rights and remedies with respect to the Pledged Collateral of a
secured party under the UCC as in effect in the State of New York at that time.
The Collateral Agent may, without notice and at its option, transfer or
register, and the Pledgor shall register or cause to be registered upon request
therefor by the Collateral Agent, the Pledged Collateral or any part thereof on
the books of the Issuer into the name of the Collateral Agent or the Collateral
Agent's nominee(s), with or without any indication that such Pledged Collateral
is subject to the security interest hereunder. In addition, with respect to any
Pledged Collateral that shall then be in or shall thereafter come into the
possession or custody of the Collateral Agent, the Collateral Agent may sell or
cause the same to be sold at any broker's board or at public or private sale, in
one or more sales or lots, at such price or prices as the Collateral Agent may
deem best, for cash or on credit or for future delivery, without assumption of
any credit risk. The purchaser of any or all Pledged Collateral so sold shall
thereafter hold the same absolutely, free from any claim, encumbrance or right
of any kind whatsoever. Unless any of the Pledged Collateral threatens to
decline speedily in value or is or becomes of a type sold on a
8
<PAGE>
recognized market, the Collateral Agent will give the Pledgor reasonable notice
of the time and place of any public sale thereof, or of the time after which any
private sale or other intended disposition is to be made. Any sale of the
Pledged Collateral conducted in conformity with reasonable commercial practices
of banks, insurance companies, commercial finance companies, or other financial
institutions disposing of property similar to the Pledged Collateral shall be
deemed to be commercially reasonable. Any requirements of reasonable notice
shall be met if such notice is mailed to the Pledgor as provided below in
Section 18.1, at least ten days before the time of the sale or disposition. Any
other requirement of notice, demand or advertisement for sale is, to the extent
permitted by law, waived. The Collateral Agent or any Holder may, in its own
name or in the name of a designee or nominee, buy any of the Pledged Collateral
at any public sale and, if permitted by applicable law, at any private sale. All
expenses (including court costs and reasonable attorneys' fees and
disbursements) of, or incident to, the enforcement of any of the provisions
hereof shall be recoverable from the proceeds of the sale or other disposition
of the Pledged Collateral.
(b) The Pledgor agrees to cause the Issuer to cooperate with and assist
the Collateral Agent to comply with the provisions of the securities or "Blue
Sky" laws, if applicable, of any jurisdiction that the Trustee shall designate
for the sale of the Pledged Shares.
(c) In view of the fact that federal and state securities laws may impose
certain restrictions on the method by which a sale of the Pledged Collateral may
be effected after the occurrence of and during the continuance of an Event of
Default (as defined in the Indenture), Pledgor agrees that upon the occurrence
or existence of any such Event of Default, the Collateral Agent may, from time
to time, attempt to sell all or any part of the Pledged Collateral by means of a
private placement, restricting the prospective purchasers to those who will
represent and agree that they are purchasing for investment only and not for
distribution. In so doing, the Collateral Agent may solicit offers to buy the
Pledged Collateral, or any part of it, for cash, from a limited number of
investors who might be interested in purchasing the Pledged Collateral. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Collateral
Agent shall be under no obligation to delay a sale of any of the Pledged
Collateral for the period of time necessary to permit the Issuer of such
securities to register them for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer agrees to do so.
(d) The Pledgor further agrees to use its best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Collateral pursuant to this Section 12 valid
and binding and in compliance with any and all other applicable requirements of
law. The Pledgor further agrees that a breach of any of the covenants contained
in this Section 12 will cause irreparable injury to the Collateral Agent and the
Holders that the Collateral Agent and the Holders have no adequate remedy at law
in respect of such breach and, as a consequence, that each and every covenant
contained in this Section 12 shall be
9
<PAGE>
specifically enforceable against the Pledgor, and the Pledgor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Default or Event of Default has
occurred.
SECTION 13. Irrevocable Authorization and Instruction of the Issuer. The
Pledgor hereby authorizes and instructs the Issuer to comply with any
instruction received by the Issuer from the Collateral Agent that (i) states
that an Event of Default has occurred under the Indenture and (ii) is otherwise
in accordance with the terms of this Agreement, without any other or further
instructions from the Pledgor, and the Pledgor agrees that the Issuer shall be
fully protected in so complying.
SECTION 14. Fees and Expenses. The Pledgor will upon demand pay to the
Collateral Agent the amount of any and all reasonable fees and expenses
(including, without limitation, the reasonable fees and disbursements of its
counsel, of any investment banking firm, business broker or other selling agent
and of any other experts and agents retained by the Collateral Agent) that the
Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent and the Holders
hereunder or (iv) the failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 15. Security Interest Absolute. All rights of the Collateral Agent
and the Holders and the security interests created hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any Note or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations, or any other amendment or waiver of or
any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guarantee, for all or any of the Obligations; or
(d) any other circumstances that might otherwise constitute a defense
available to, or a discharge of, the Pledgor in respect of the Obligations or of
this Agreement.
SECTION 16. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default (as defined in the Indenture), the proceeds
of any sale of, or other realization upon, all or any part of the Pledged
Collateral and any cash held shall be applied by the Collateral Agent in the
following order of priorities:
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first, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the Collateral
Agent, and all expenses, liabilities and advances incurred or made by the
Collateral Agent in connection therewith, and any other unreimbursed fees and
expenses for which the Collateral Agent is to be reimbursed pursuant to Section
14 hereof;
second, to the ratable payment (based on the principal amount of Notes
deemed by the Indenture to be outstanding at the time of distribution) of
accrued but unpaid interest on such outstanding Notes;
third, to the ratable payment (based on the principal amount of Notes
deemed by the Indenture to be outstanding at the time of distribution) of unpaid
principal of such outstanding Notes;
fourth, to the ratable payment (based on the principal amount of Notes
deemed by the Indenture to be outstanding at the time of distribution) of all
other Obligations, until all Obligations shall have been paid in full; and
finally, to payment to the Pledgor or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
SECTION 17. Uncertificated Securities. Notwithstanding anything to the
contrary contained herein, if any Pledged Shares (whether now owned or hereafter
acquired) are uncertificated Pledged Shares, the Pledgor shall promptly notify
the Collateral Agent, and shall promptly take all actions reasonably required to
perfect the security interest of the Collateral Agent under applicable law
(including, in any event, under Sections 8-313 and 8-321 of the New York UCC).
The Pledgor further agrees to take such actions as the Collateral Agent deems
reasonably necessary or desirable to effect the foregoing and to permit the
Collateral Agent to exercise any of its rights and remedies hereunder, and
agrees to provide an Opinion of Counsel satisfactory to the Collateral Agent
with respect to any such pledge of uncertificated Pledged Shares promptly upon
request of the Collateral Agent.
SECTION 18. Miscellaneous Provisions.
Section 18.1 Notices. All notices, approvals, consents or other
communications required or desired to be given hereunder shall be in the form
and manner as set forth in Section 15.4 or 15.5 of the Indenture, and if to any
Holder delivered to the addresses set forth in such Section and
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if to the Pledgor:
c/o Willcox & Gibbs, Inc.
900 Milik Street
Carteret, New Jersey 07008
Attn: Chief Executive Officer
Telephone: 908.541.6255
Telecopier: 908.541.6249
if to the Collateral Agent:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attn: Corporate Trust Administration
Telephone: 212.858.2000
Telecopier: 212.858.2952
Section 18.2 Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Pledgor to the Collateral Agent to take any action
or omit to take any action under this Agreement, the Pledgor shall deliver to
the Collateral Agent an Officers' Certificate and/or an Opinion of Counsel in
accordance with the requirements of Section 15.1 of the Indenture.
Section 18.3 No Adverse Interpretation of Other Agreements. This Agreement
may not be used to interpret another pledge, security or debt agreement of the
Pledgor, the Issuer or any subsidiary of any of them. No such pledge, security
or debt agreement may be used to interpret this Agreement.
Section 18.4 Severability. The provisions of this Agreement are severable,
and if any clause or provision shall be held invalid or unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability shall
affect in that jurisdiction only such clause or provision, or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
Section 18.5 Headings. The headings of the Sections of this Agreement have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 18.6 Counterpart Originals. This Agreement may be signed in two or
more counterparts. Each signed copy shall be an original, but all of them
together represent one and the same agreement. Each counterpart may be executed
and delivered by telecopy, if such delivery is promptly followed by the original
manually signed copy sent by overnight courier.
12
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Section 18.7 Benefits of Agreement. Nothing in this Agreement, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Holders any benefit or any legal or equitable
right, remedy or claim under this Agreement.
Section 18.8 Amendments, Waivers and Consents. Any amendment or waiver of
any provision of this Agreement and any consent to any departure by the Pledgor
from any provision of this Agreement shall be effective only if made or given in
compliance with all of the terms and provisions of the Indenture necessary for
amendments or waivers of, or consents to any departure by the Pledgor from any
provision of the Indenture, as applicable, and neither the Collateral Agent nor
any Holder shall be deemed, by any act, delay, indulgence, omission or
otherwise, to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default or in any breach of any of the terms and
conditions hereof. Failure of the Collateral Agent or any Holder to exercise, or
delay in exercising, any right, power or privilege hereunder shall not operate
as a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Collateral
Agent or any Holder of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy that the Collateral Agent or
such Holder would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
Section 18.9 Interpretation of Agreement. Time is of the essence in each
provision of this Agreement of which time is an element. All terms not defined
herein or in the Indenture shall have the meaning set forth in the applicable
UCC, except where the context otherwise requires. To the extent a term or
provision of this Agreement conflicts with the Indenture and is not dealt with
herein with more specificity, the Indenture, as the case may be, shall control
with respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Agreement shall not
be relevant to determine the meaning of this Agreement even though the accepting
or acquiescing party had knowledge of the nature of the performance and
opportunity for objection.
Section 18.10 Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (i) remain in
full force and effect until the payment in full of all the Obligations and all
the fees and expenses owing to the Collateral Agent, (ii) be binding upon the
Pledgor, its successors and assigns, and (iii) inure, together with the rights
and remedies of the Collateral Agent hereunder, to the benefit of the Collateral
Agent, the Holders and their respective successors, transferees and assigns.
Section 18.11 Reinstatement. This Agreement shall continue to be effective
or be reinstated if at any time any amount received by the Collateral Agent or
any Holder in respect of the Obligations is rescinded or must otherwise be
restored or returned by the Collateral Agent or any Holder upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Pledgor or upon
the appointment of any receiver, intervenor, conservator, trustee or similar
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official for the Pledgor or any substantial part of its assets, or otherwise,
all as though such payments had not been made.
Section 18.12 Survival of Provisions. All representations, warranties and
covenants of the Pledgor contained herein shall survive the execution and
delivery of this Agreement and shall terminate only upon the full and final
payment and performance by the Pledgor of the Obligations and all fees and
expenses owing to the Collateral Agent.
Section 18.13 Waivers. The Pledgor waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled.
Section 18.14 Authority of the Collateral Agent.
(a) The Collateral Agent shall have and be entitled to exercise all powers
hereunder that are specifically granted to the Collateral Agent by the terms
hereof, together with such powers as are reasonably incident thereto. The
Collateral Agent may perform any of its duties hereunder or in connection with
the Pledged Collateral by or through agents or employees and shall be entitled
to retain counsel and to act in reliance upon the advice of counsel concerning
all such matters. Neither the Collateral Agent nor any director, officer,
employee, attorney or agent of the Collateral Agent shall be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Collateral Agent and its directors, officers,
employees, attorneys and agents shall be entitled to rely on any communication,
instrument or document believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons. The Pledgor agrees to
indemnify and hold harmless the Collateral Agent, the Holders and any other
Person from and against any and all costs, expenses (including the reasonable
fees and disbursements of counsel (including, the allocated costs of inside
counsel)), claims and liabilities incurred by the Collateral Agent, the Holders
or such Person hereunder, unless such claim or liability shall be due to willful
misconduct or gross negligence on the part of such Person.
(b) The Pledgor acknowledges that the rights and responsibilities of the
Collateral Agent under this Agreement with respect to any action taken by the
Collateral Agent or the exercise or non-exercise by the Collateral Agent of any
option, right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall be conclusively presumed to be
acting as agent for the Holders with full and valid authority so to act or
refrain from acting, and the Pledgor shall not be obligated or entitled to make
any inquiry respecting such authority.
Section 18.15 Resignation or Removal of the Collateral Agent. Until such
time as the Obligations and all fees and expenses of the Collateral Agent shall
have been paid in full, the Collateral Agent may at any time by giving written
notice to the Pledgor and the Holders resign and be discharged of the
responsibilities hereby created, such resignation to become effective upon
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(i) the appointment of a successor Collateral Agent and (ii) the acceptance of
such appointment by such successor Collateral Agent. As promptly as practicable
after the giving of any such notice, the Holders shall appoint a successor
Collateral Agent, which successor Collateral Agent shall be reasonably
acceptable to the Pledgor. If no successor Collateral Agent shall be appointed
and shall have accepted such appointment within 90 days after the Collateral
Agent gives the aforesaid notice of resignation, the Collateral Agent may apply
to any court of competent jurisdiction to appoint a successor Collateral Agent
to act until such time, if any, as a successor shall have been appointed as
provided in this Section 18.15. Any successor so appointed by such court shall
immediately and without further act be superseded by any successor Collateral
Agent appointed by the Holders as provided in this Section 18.15. Simultaneously
with its replacement as Collateral Agent hereunder, the Collateral Agent so
replaced shall deliver to its successor all documents, instruments, certificates
and other items of whatever kind (including, without limitation, the
certificates and instruments evidencing the Pledged Collateral and all
instruments of transfer or assignment) held by it pursuant to the terms hereof.
The Collateral Agent that has resigned shall be entitled to fees, costs and
expenses to the extent incurred or arising, or relating to events occurring,
before its replacement or removal.
Section 18.16 Termination of Agreement; Release.
(a) Subject to the provisions of Section 18.11 hereof, this Agreement
shall terminate (i) upon full and final payment and performance of the
Obligations (and upon receipt by the Collateral Agent of the Pledgor's written
certification that all such Obligations have been satisfied) and payment in full
of all fees and expenses owing by the Pledgor to the Collateral Agent or (ii)
upon the Legal Defeasance of all of the Obligations pursuant to Section 12.2 of
the Indenture (other than those surviving Obligations specified therein). At
such time, the Collateral Agent shall reassign and redeliver to the Pledgor all
of the Pledged Collateral hereunder that has not been sold, disposed of,
retained or applied by the Collateral Agent in accordance with the terms hereof.
Such reassignment and redelivery shall be without warranty by or recourse to the
Collateral Agent, except as to the absence of any prior assignments by the
Collateral Agent of its interest in the Pledged Collateral, and shall be at the
expense of the Pledgor.
(b) The Pledgor agrees that it will not, except as permitted by the
Indenture or Section 7(a) hereof, sell or dispose of, or grant any option or
warrant with respect to, any of the Pledged Collateral; provided, however, that
if the Pledgor shall sell any of the Pledged Collateral in accordance with the
terms of the Indenture, including the requirement that Pledgor apply the Net
Cash Proceeds, if any, of such sale in accordance with Section 10.15 of the
Indenture, the Collateral Agent shall, at the request of the Pledgor and subject
to requirements of Section 14.3 of the Indenture, release the Pledged Collateral
subject to such sale free and clear of the Lien and security interest under this
Agreement; provided further that if the sale or other disposition of Pledged
Collateral is to the Issuer, subject to Section 7(a) hereof, the Collateral
Agent shall at the request of the Pledgor, release that portion of the Pledged
Collateral so transferred, for the sole purpose of registering the change of
ownership in such Pledged Collateral.
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Section 18.17 Final Expression. This Agreement, together with any other
agreement executed in connection herewith, is intended by the parties as a final
expression of their Agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
Section 18.1 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; WAIVER OF DAMAGES.
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK. THE PLEDGOR IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND THE PLEDGOR
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED BY ANY SUCH COURT.
(ii) THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS OWN NAME
OR IN THE NAME AND ON BEHALF OF ANY HOLDER HAVE THE RIGHT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR ITS PROPERTY IN A
COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH TO ENABLE THE COLLATERAL
AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF THE COLLATERAL AGENT. THE PLEDGOR AGREES THAT IT WILL NOT
ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE COLLATERAL
AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
IN FAVOR OF THE COLLATERAL AGENT. THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS.
(iii) EACH OF THE PLEDGOR, THE COLLATERAL AGENT AND EACH HOLDER WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY.
(iv) THE PLEDGOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY ACTION OR
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PROCEEDING WITH RESPECT TO THIS AGREEMENT BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS SET
FORTH IN SECTION 15.4 OF THE INDENTURE, SUCH SERVICE TO BECOME EFFECTIVE FIVE
(5) BUSINESS DAYS AFTER SUCH MAILING.
(v) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT OR ANY
HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER
JURISDICTION.
(vi) The Pledgor hereby agrees that neither the Collateral Agent nor any
Holder shall have any liability to the Pledgor (whether sounding in tort,
contract or otherwise) for losses suffered by the Pledgor in connection with,
arising out of, or in any way related to, the transactions contemplated and the
relationship established by this Agreement, or any act, omission or event
occurring in connection therewith, unless it is determined by a final and
nonappealable judgment of a court that is binding on the Collateral Agent or
such Holder, as the case may be, that such losses were solely the result of acts
or omissions on the part of the Collateral Agent or such Holder, as the case may
be, constituting gross negligence or willful misconduct.
(vii) Except as otherwise provided for in this Agreement or which are not
waivable under applicable law, the Pledgor waives all rights of notice and
bearing of any kind prior to the exercise by the Collateral Agent or any Holder
of its rights during the continuance of an Event of Default (as defined in the
Indenture) to repossess the Pledged Collateral with judicial process or to
replevy, attach or levy upon the Pledged Collateral or other security for the
Obligations. The Pledgor waives the posting of any bond otherwise required of
the Collateral Agent or any Holder in connection with any judicial process or
proceeding to obtain possession of, replevy, attach or levy upon the Pledged
Collateral or other security for the Obligations, to enforce any judgment or
other court order entered in favor of the Collateral Agent or any Holder or to
enforce by specific performance, temporary restraining order or preliminary or
permanent injunction this Agreement.
Section 18.1Acknowledgments. The Pledgor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement;
(b) neither the Collateral Agent nor any Holder has any fiduciary
relationship to the Pledgor, and the relationship between the Collateral Agent
and the Holders on the one hand, and the Pledgor, on the other hand, is solely
that of a secured party and a creditor; and
(c) no joint venture exists among (i) the Holders or (ii) the Pledgor and
the Holders.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have each caused
this Agreement to be duly executed and delivered as of the date first above
written.
PLEDGOR:
WG APPAREL, INC.
By: /s/ John K. Ziegler
---------------------------
Name: John K. Ziegler
Title: Chief Executive Officer
COLLATERAL AGENT:
IBJ SCHRODER BANK & TRUST COMPANY,
as Collateral Agent
By: /s/ [illegible]
---------------------------
Name: [illegible]
Title: Vice President
S-1
<PAGE>
SCHEDULE I
PLEDGED SHARES
Number of Pledged Share Certificate Percentage of
Issuer Shares Number Outstanding
- ------ ----------------- ----------------- -------------
Willcox & Gibbs, Ltd. 16830 Vol. 2 No. 3 66%
<PAGE>
EXHIBIT A
FORM OF OPINION OF COUNSEL
(i) [New Entity] is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power and authority to own and to operate its properties and
to carry on its business;
(ii) All of the outstanding Capital Stock of [New Entity] has been validly
authorized and issued and is fully paid and nonassessable and, to the best
knowledge of such counsel after diligent inquiry, is owned by the Pledgor,
directly or indirectly, free and clear of any security interest, claim, lien or
encumbrance, other than the security interests created by the Pledge Agreement,
and, to the best knowledge of such counsel after diligent inquiry, there are no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares of Capital Stock or other Equity Interest
in [New Entity];
(iii) (A) Pledgor has the requisite corporate power and authority to
create, deliver and perfect the security interests created under the Pledge
Agreement; (B) the Pledge Agreement has been duly authorized, executed and
delivered by Pledgor and constitutes the legal, valid and binding obligation of
Pledgor enforceable against it in accordance with its terms; (C) after giving
effect to the [merger] [consolidation] [sale or transfer of all or substantially
all assets], and assuming the Collateral Agent is holding the certificates
representing the Pledged Collateral in the State of New York, the Pledge
Agreement will create a valid and perfected security interest in the Pledged
Collateral (including, without limitation, all of the Equity Interests of [New
Entity]) in favor of the Collateral Agent, on behalf and for the benefit of
itself, the Holders, subject to no other consensual security interest in favor
of any other person, and no filings or recordings will be required in order to
perfect or maintain the security interests created under the Pledge Agreement in
such Pledged Collateral; and
(iv) The consummation of the [merger] [consolidation] [sale or transfer of
all or substantially all assets] does not (A) conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Pledgor, the Issuer or [New Entity] is a
party by which the Pledgor, the Issuer or [New Entity] is bound or to which any
of the property or assets of the Pledgor, the Issuer or [New Entity] is subject,
nor will such action result in any violation of the provisions of the respective
charter or by-laws of the Pledgor, the Issuer or [New Entity], nor will such
action result in any violation of any application law or statute or any
applicable order, rule or regulation known to us of any court or governmental
agency or body having jurisdiction over the Pledgor and its subsidiaries or any
of their respective properties, or (B) result in the creation of any Lien upon
any other properties or assets of the Pledgor, the Issuer or [New Entity] (other
than Liens created by the Pledge Agreement).
<PAGE>
EXHIBIT B
FORM OF CONSOLIDATED NET WORTH CERTIFICATE
The undersigned, ______________ and ______________, respectively the President
and Chief Financial Officer of WG Apparel, Inc., a Delaware corporation (the
"Pledgor"), certify that they are authorized to execute this Certificate in the
name and on behalf of the Pledgor, and further certify as follows (capitalized
terms used but not defined herein have the respective meanings assigned to them
in the Pledge and Security Agreement, dated January 3, 1997 (the "Pledge
Agreement"), between the Pledgor and IBJ Schroder Bank & Trust Company, as
Collateral Agent):
(d) We are familiar with the historical and current financial condition of
[name of Issuer merging, consolidating or transferring assets] (the
"Issuer") that proposes to [merge or consolidate with] [sell or transfer
all or substantially all of its assets to] [New Entity] (the "Successor
Issuer") pursuant to Section 7(a)(vii) of the Pledge Agreement.
(e) For the purposes of this Certificate, we have reviewed other financial
information and forecasts relating to the Issuer and the Successor Issuer
prepared by [the management of the Issuer] [______________, the
independent certified public accountants for the Pledgor] and the
Successor Issuer which we believe (as to the historical financial
information) fairly present the historical financial positions and results
of operations of the Issuer and the Successor Issuer as of the dates and
for the periods presented and (in the case of the forecasts) were based
upon reasonable assumptions and provide reasonable estimations of future
performance, although any forecasts are necessarily uncertain of
fulfillment. We know of no facts or circumstances arising subsequent to
the dates as of which such information and projections were prepared that
would materially alter such conclusions.
Based upon the foregoing, we have reached the conclusions that, after
giving effect to the transactions contemplated by Section 7(a)(vii) of the
Pledge Agreement and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the most recently ended four full
fiscal quarter period, the Company will be permitted to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
Consolidated Fixed Charged Coverage Ratio set forth in Section 10.11(a) of the
Indenture.
WITNESS the signatures of the undersigned, this _______ day of _________.
________________________
President
________________________
Chief Financial Officer
<PAGE>
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), BUT ONLY IN THE CASE OF A TRANSFER THAT IS
EFFECTED BY THE DELIVERY TO THE TRANSFEREE OF DEFINITIVE SECURITIES REGISTERED
IN ITS NAME (OR ITS NOMINEE'S NAME) IN THE BOOKS MAINTAINED BY THE REGISTRAR,
AND SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION OF THE TRANSFEROR
AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (2)
<PAGE>
TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
2
<PAGE>
GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, INTEREST
AND LIQUIDATED DAMAGES, IF ANY, BY CERTAIN SUBSIDIARIES OF
WILLCOX & GIBBS, INC.
CUSIP No. 969219AA2
No. C-01 $82,700,000.00
WILLCOX & GIBBS, INC.
12 1/4% Series A Senior Note Due 2003
Willcox & Gibbs, Inc., a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO. or registered assigns the principal sum of EIGHTY TWO MILLION SEVEN HUNDRED
THOUSAND DOLLARS on December 15, 2003, at the office or agency of the Company
referred to below, and to pay interest thereon, commencing on June 15, 1997 and
continuing semiannually thereafter, on June 15 and December 15 in each year,
accruing from January 3, 1997, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, at the rate of 12 1/4% per
annum, until the principal hereof is paid or duly provided for, and (to the
extent lawful) to pay on demand interest on any overdue interest at the rate
borne by the Securities from the date on which such overdue interest becomes
payable to the date payment of such interest has been made or duly provided for.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered on the Security Register at the close of business on the Regular
Record Date for such interest, which shall be the June 1 or December 1 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and
such Defaulted Interest, and (to the extent lawful) interest on such Defaulted
Interest at the rate borne by the Securities, may be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered on the
Security Register at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Trustee, notice whereof
shall be given to Holders of Securities not less than 10 days prior to such
Special Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, any upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any, on) and interest and
Liquidated Damages, if any, on this Security will be made at the office or
agency of the Company maintained
3
<PAGE>
for that purpose in The City of New York, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that payment of interest may be
made on Physical Securities at the option of the Company on or before the due
date (i) by check mailed to the address of the Person entitled thereto as such
address shall appear on the Security Register or (ii) with respect to any Holder
owning Securities in the principal amount of $500,000 or more, by wire transfer
to an account maintained by the Holder located in the United States, as
specified in a written notice to the Trustee by any such Holder requesting
payment by wire transfer and specifying the account to which transfer is
requested.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
WILLCOX & GIBBS, INC.
By: /s/ [illegible]
------------------------------
Title:
Attest:
By: /s/ [illegible]
-----------------------
Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within mentioned
Indenture.
Dated: January 3, 1997 IBJ SCHRODER BANK & TRUST
COMPANY, TRUSTEE
By:_____________________________
Authorized Signatory
4
<PAGE>
This Security is one of a duly authorized issue of securities of the
Company designated as its 12 1/4% Series A Senior Notes Due 2003 (herein called
the "Securities"), limited (except as otherwise provided in the Indenture
referred to below) in aggregate principal amount to $85,000,000, which may be
issued under an indenture dated as of January 3, 1997 between the Company, the
Subsidiary Guarantors and IBJ Schroder Bank & Trust Company (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Securities, and of the terms upon which the Securities are, and
are to be, authenticated and delivered. Capitalized terms used herein and not
defined herein shall have the respective meanings set forth in the Indenture.
The Securities are subject to redemption, at the option of the Company, in
whole or in part, at any time on or after December 15, 2001, upon not less than
30 or more than 60 days' notice at the following Redemption Prices (expressed as
percentages of principal amount) set forth below if redeemed during the
twelve-month period beginning December 15 of the years indicated below:
Redemption
Year Price
---- ----------
2001........................................106.125%
2002........................................103.063%
together in the case of any such redemption with accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due on
an Interest Payment Date that is on or prior to the Redemption Date), all as
provided in the Indenture.
Notwithstanding the foregoing, at any time on or prior to December 15,
1999 up to 30% of the originally issued principal amount of Securities may be
redeemed, at the option of the Company, upon not less than 30 or more than 60
days' notice to each Holder of Securities to be redeemed, from the Net Cash
Proceeds of a Public Equity Offering, at a Redemption Price equal to 112 1/4% of
the principal amount thereof, together with accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date, provided that at least
$59,500,000 of the originally issued principal amount of Securities remains
Outstanding immediately after such redemption and that such redemption occurs
within 60 days following the closing of such Public Equity Offering.
In the case of any redemption of Securities, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Date referred to on the face hereof.
Securities (or portions thereof) for whose redemption and payment provision
5
<PAGE>
is made in accordance with the Indenture shall cease to bear interest from and
after the Redemption Date. In the event of redemption or purchase of this
Security in part only, a new Security or Securities for the unredeemed or
unpurchased portion hereof shall be issued in the name of the Holder hereof upon
the cancellation hereof.
The Securities do not have the benefit of any mandatory redemption or
sinking fund obligations.
In the event of a Change of Control of the Company, and subject to certain
conditions and limitations provided in the Indenture, the Company will be
obligated to make an offer to purchase, on a Business Day not more than 60 or
less than 30 days following the occurrence of a Change of Control of the
Company, all of the then Outstanding Securities at a purchase price equal to
101% of the principal amount thereof, together with accrued and unpaid interest,
if any, to the Change of Control Purchase Date, all as provided in the
Indenture.
In the event of Asset Sales, under certain circumstances, the Company will
be obligated to make a Net Proceeds Offer to purchase all or a specified portion
of each Holder's Securities at a purchase price equal to 100% of the principal
amount of the Securities, together with accrued and unpaid interest, if any, to
the Net Proceeds Payment Date.
As set forth in the Indenture, an Event of Default is generally (i)
failure to pay principal or premium, if any, upon maturity, redemption or
otherwise (including pursuant to a Change of Control Offer or a Net Proceeds
Offer); (ii) default for 30 days in payment of interest or Liquidated Damages,
if any, on any of the Securities; (iii) default in the performance of agreements
relating to mergers, consolidations and sales of all or substantially all
assets, limitation on Indebtedness and Disqualified Capital Stock, limitation on
the issuance of preferred stock of Restricted Subsidiaries, limitation on
restricted payments or the failure to make or consummate a Change of Control
Offer or a Net Proceeds Offer; (iv) failure of the Company or any Subsidiary
Guarantor for 30 days after notice to comply with any other covenants in the
Indenture or the Securities or its Subsidiary Guarantee, as the case may be; (v)
certain payment defaults under, and the acceleration prior to the maturity of,
certain Indebtedness of the Company or any Subsidiary in an aggregate principal
amount in excess of $2,500,000; (vi) certain final judgments or orders against
the Company or any Subsidiary in an aggregate amount of more than $2,500,000 not
paid, discharged or stayed for a period of 60 days; (vii) certain events of
bankruptcy, insolvency or reorganization of the Company or any Restricted
Subsidiary; and (viii) except as permitted by the Indenture and hereby,
cessation of the effectiveness of any Subsidiary Guarantee or the Pledge
Agreement or any repudiation thereof. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Outstanding Securities may declare the principal amount of all the
Securities to be due and payable immediately, except that (a) in the case of an
Event of Default arising from certain events of bankruptcy, insolvency or
reorganization of the Company or any Restricted Subsidiary, the principal amount
of the Securities will become due and payable immediately without further action
or notice, and (b) in the case of an Event of Default which relates to certain
payment defaults or acceleration with
6
<PAGE>
respect to certain Indebtedness, any such Event of Default and any consequential
acceleration of the Securities will be automatically rescinded if any such
Indebtedness is repaid or if the default relating to such Indebtedness is cured
or waived and if the holders thereof have accelerated such Indebtedness then
such holders have rescinded their declaration of acceleration. No Holder may
pursue any remedy under the Indenture unless the Trustee shall have failed to
act after notice from such Holder of an Event of Default and written request by
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities, and the offer to the Trustee of indemnity reasonably satisfactory to
it; however, such provision does not affect the right to sue for enforcement of
any overdue payment on a Security by the Holder thereof. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the
Outstanding Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders notice of any continuing default
(except default in payment of principal, premium, interest or Liquidated
Damages) if it determines in good faith that withholding the notice is in the
interest of the Holders. The Company is required to file annual and quarterly
reports with the Trustee as to the absence or existence of defaults.
The Indenture contains provisions for (i) defeasance at any time of the
entire indebtedness of the Company on this Security and (ii) discharge from
certain covenants and Defaults and Events of Default, upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Security.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by or on behalf of the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof whether or not notation of such consent or waiver is made upon
this Security. Without the consent of any Holder, the Company and the Trustee
may amend or supplement the Indenture or the Securities to cure any ambiguity,
defect or inconsistency, to qualify or maintain the qualification of the
Indenture under the Trust Indenture Act and to make certain other specified
changes and other changes that do not materially adversely affect the interests
of any Holder in any material respect.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any, on)
and interest and Liquidated Damages, if any, on this Security at the times,
place, and rate, and in the coin or currency, herein prescribed.
7
<PAGE>
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable on the Security
Register of the Company, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained for such purpose duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
A director, officer, employee, incorporator, stockholder or Affiliate of
the Company, as such, past, present or future shall not have any personal
liability under this Security or any other Security or the Indenture by reason
of his or its status as such director, officer, employee, incorporator,
stockholder or Affiliate, or any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of,
or by reason of such obligations or their creation. Each Holder, by accepting
this Security, waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of this Security.
Prior to the time of due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security is overdue, and neither
the Company, the Trustee nor any agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture. The Company will furnish to
any Holder upon written request and without charge a copy of the Indenture.
Requests may be made to the Company at 900 Milik Street, Carteret, New Jersey
07008, Attention: Secretary (or such other address as the Company may have
furnished in writing to the Trustee).
Each Holder of a Security, by acceptance hereof, acknowledges and agrees
to the provisions of the Registration Rights Agreement, including without
limitation the obligations of
8
<PAGE>
the Holders with respect to a registration and indemnification of the Company to
the extent provided therein.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders thereof. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identifying information
printed hereon.
Interest on this Security shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
This Security shall be governed by and construed in accordance with the
laws of the State of New York.
9
<PAGE>
The Subsidiary Guarantors, referred to in this Security upon which this
notation is endorsed and each hereinafter referred to as a "Subsidiary
Guarantor," which term includes any successor person under the Indenture, have
unconditionally guaranteed, jointly and severally, on a senior basis (such
guarantee by each Subsidiary Guarantor being referred to herein as the
"Subsidiary Guarantee") (i) the due and punctual payment of the principal of and
interest on the Securities, whether at Stated Maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal and
interest, if any, on the Securities, the payment of Liquidated Damages on the
Securities, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set forth
in Article XIII of the Indenture and (ii) in case of any extension of time of
payment or renewal of any Securities or any of such other obligations, the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
The obligations of each Subsidiary Guarantor to the Holders of Securities
and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are
expressly set forth, and are senior obligations of each such Subsidiary
Guarantor to the extent and in the manner provided, in Article XIII of the
Indenture, and may be released or limited under certain circumstances. Reference
is hereby made to such Indenture for the precise terms of the Subsidiary
Guarantee therein made.
The Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication of the Securities upon which this
Subsidiary Guarantee is endorsed shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized signatories.
SUBSIDIARY GUARANTORS:
WG APPAREL, INC.
By: /s/ John K. Ziegler
-----------------------------------
Name: John K. Ziegler
Title: Chairman & CEO
CLINTON MANAGEMENT CORP.
By: /s/ John K. Ziegler
-----------------------------------
Name: John K. Ziegler
Title: V.P.
10
<PAGE>
CLINTON MACHINERY CORPORATION
By: /s/ John K. Ziegler
-----------------------------------
Name: John K. Ziegler
Title: V.P.
LEADTEC SYSTEMS, INC.
By: /s/ John K. Ziegler
-----------------------------------
Name: John K. Ziegler
Title: V.P.
W&G DAON, INC.
By: /s/ John K. Ziegler
-----------------------------------
Name: John K. Ziegler
Title: President
J&E SEWING SUPPLIES, INC.
By: /s/ John K. Ziegler
-----------------------------------
Name: John K. Ziegler
Title: President
W&G TENNESSEE IMPORTS, INC.
By: /s/ John K. Ziegler
-----------------------------------
Name: John K. Ziegler
Title: President
11
<PAGE>
CLINTON LEASING CORP.
By: /s/ John K. Ziegler
-----------------------------------
Name: John K. Ziegler
Title: V.P.
CLINTON EQUIPMENT CORP.
By: /s/ John K. Ziegler
-----------------------------------
Name: John K. Ziegler
Title: V.P.
PARADISE COLOR INCORPORATED
By: /s/ John K. Ziegler
-----------------------------------
Name: John K. Ziegler
Title: V.P.
12
<PAGE>
ASSIGNMENT FORM
To assign this Security fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's Soc. Sec. or tax I.D. No.)
and irrevocably appoint _______________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date:__________________ Your Signature:________________________________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [_] to the Company; or
(2) [_] pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(3) [_] inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933, as amended)
that purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and in
compliance with Rule 144A under the Securities Act of 1933, as
amended; or
13
<PAGE>
(4) [_] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with
Rule 904 under the Securities Act of 1933, as amended; or
(5) [_] pursuant to Rule 144 under the Securities Act of 1933, as amended;
or
(6) [_] pursuant to another available exemption from registration provided
by Rule 144 under the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (4), (5) or
(6) is checked, the Trustee may require, prior to registering any such transfer
of the Securities, such legal opinions, certifications and other information as
the Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, as amended.
_______________________________
Signature
Signature Guarantee:
___________________________________ _______________________________
(Signature must be guaranteed) Signature
________________________________________________________________________________
TO BE COMPLETED BY PURCHASER IF BOX (3) ABOVE IS CHECKED.
14
<PAGE>
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned for ongoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:_____________________ _____________________________________________
NOTE: To be executed by an executive officer
15
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<S> <C> <C> <C> <C>
Date of Exchange Amount of decrease in Amount of increase in Principal Principal amount of this Signature of authorized
Principal Amount of this Amount of this Global Security Global Security following officer of Trustee or
Global Security such decrease or increase Securities Custodian
</TABLE>
16
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 10.14 or 10.15 of the Indenture, check the box:
[_]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 10.14 or 10.15 of the Indenture, state the
amount in principal amount: $__________
Date:________________ Your Signature:_________________________________
(Sign exactly as your name
appears on the other side of
this Security.)
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed)
<PAGE>
EXHIBIT 2
to
Appendix A
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE
EXCHANGE SECURITY]
GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, INTEREST
AND LIQUIDATED DAMAGES, IF ANY, BY CERTAIN SUBSIDIARIES OF
WILLCOX & GIBBS, INC.
[*/]
[**/]
CUSIP No. ___________
No. ___________ $____________
WILLCOX & GIBBS, INC.
12 1/4% Series B Senior Note Due 2003
Willcox & Gibbs, Inc., a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
____________ or registered assigns the principal sum of ___________ Dollars on
December 15, 2003, at the office or agency of the Company referred to below, and
to pay interest thereon, commencing on June 15, 1997 and continuing semiannually
thereafter, on June 15 and December 15 in each year, accruing from January 3,
1997, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, at the rate of 12 1/4% per annum, until the principal
hereof is paid or duly provided for, and (to the extent lawful) to pay on demand
interest on any overdue interest at the rate borne by the Securities from the
date on which such overdue interest becomes payable to the date payment of such
interest has been made or duly provided for. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in
- ----------
*/ If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".
**/ If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment, add
the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the
Assignment Form included in this Exhibit 2 with the Assignment Form included in
such Exhibit 1.
29
<PAGE>
whose name this Security (or one or more Predecessor Securities) is registered
on the Security Register at the close of business on the Regular Record Date for
such interest, which shall be the June 1 or December 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date, and such
Defaulted Interest, and (to the extent lawful) interest on such Defaulted
Interest at the rate borne by the Securities, may be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered on the
Security Register at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Trustee, notice whereof
shall be given to Holders of Securities not less than 10 days prior to such
Special Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, any upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any, on) and interest and
Liquidated Damages, if any, on this Security will be made at the office or
agency of the Company maintained for that purpose in The City of New York, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
payment of interest may be made on Physical Securities at the option of the
Company on or before the due date (i) by check mailed to the address of the
Person entitled thereto as such address shall appear on the Security Register or
(ii) with respect to any Holder owning Securities in the principal amount of
$500,000 or more, by wire transfer to an account maintained by the Holder
located in the United States, as specified in a written notice to the Trustee by
any such Holder requesting payment by wire transfer and specifying the account
to which transfer is requested.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
30
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
WILLCOX & GIBBS, INC.
By:_________________________
Title:
Attest:
_____________________________
Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:___________ IBJ SCHRODER BANK & TRUST
COMPANY, TRUSTEE
By:_____________________________
Authorized Signatory
[FORM OF REVERSE SIDE OF EXCHANGE
OR PRIVATE EXCHANGE SECURITY]
This Security is one of a duly authorized issue of securities of the
Company designated as its 12 1/4% Series B Senior Notes Due 2003 (herein called
the "Securities"), limited (except as otherwise provided in the Indenture
referred to below) in aggregate principal amount to $85,000,000 which may be
issued under an indenture (herein called the "Indenture"; capitalized terms used
herein and not defined herein shall have the respective meanings set forth in
the Indenture) dated as of January 3, 1997 between the Company, the Subsidiary
Guarantors and IBJ Schroder Bank & Trust Company (herein called the "Trustee,"
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties, obligations
31
<PAGE>
and immunities thereunder of the Company, the Trustee and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
The Securities are subject to redemption, at the option of the Company, in
whole or in part, at any time on or after December 15, 2001, upon not less than
30 or more than 60 days' notice at the following Redemption Prices (expressed as
percentages of principal amount) set forth below if redeemed during the
twelve-month period beginning December 15 of the years indicated below:
Redemption
Year Price
---- ----------
2001........................................106.125%
2002........................................103.063%
together in the case of any such redemption with accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due on
an Interest Payment Date that is on or prior to the date of redemption), all as
provided herein.
Notwithstanding the foregoing, at any time on or prior to December 15,
1999 up to 30% of the originally issued principal amount of Securities may be
redeemed, at the option of the Company, upon not less than 30 or more than 60
days' notice to each Holder of Securities to be redeemed, from the Net Cash
Proceeds of a Public Equity Offering, at a Redemption Price equal to 112 1/4% of
the principal amount thereof, together with accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date, provided that $59,500,000 of
the originally issued principal amount of Securities remains Outstanding
immediately after such redemption and that such redemption occurs within 60 days
following the closing of such Public Equity Offering.
In the case of any redemption of Securities, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Date referred to on the face hereof.
Securities (or portions thereof) for whose redemption and payment provision is
made in accordance with the Indenture shall cease to bear interest from and
after the Redemption Date. In the event of redemption or purchase of this
Security in part only, a new Security or Securities for the unredeemed or
unpurchased portion hereof shall be issued in the name of the Holder hereof upon
the cancellation hereof.
The Securities do not have the benefit of any mandatory redemption or
sinking fund obligations.
In the event of a Change of Control of the Company, and subject to certain
conditions and limitations provided in the Indenture, the Company will be
obligated to make an offer to purchase,
32
<PAGE>
on a Business Day not more than 60 or less than 30 days following the occurrence
of a Change of Control of the Company, all of the then Outstanding Securities at
a purchase price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the Change of Control Purchase Date, all
as provided in the Indenture.
In the event of Asset Sales, under certain circumstances, the Company will
be obligated to make a Net Proceeds Offer to purchase all or a specified portion
of each Holder's Securities at a purchase price equal to 100% of the principal
amount of the Securities, together with accrued and unpaid interest, if any, to
the Net Proceeds Payment Date.
As set forth in the Indenture, an Event of Default is generally (i)
failure to pay principal or premium, if any, upon maturity, redemption or
otherwise (including pursuant to a Change of Control Offer or a Net Proceeds
Offer); (ii) default for 30 days in payment of interest or Liquidated Damages,
if any, on any of the Securities; (iii) default in the performance of agreements
relating to mergers, consolidations and sales of all or substantially all
assets, limitation on Indebtedness and Disqualified Capital Stock, limitation on
the issuance of preferred stock of Restricted Subsidiaries, limitation on
restricted payments or the failure to make or consummate a Change of Control
Offer or a Net Proceeds Offer; (iv) failure of the Company or any Subsidiary
Guarantor for 30 days after notice to comply with any other covenants in the
Indenture or the Securities or its Subsidiary Guarantee, as the case may be; (v)
certain payment defaults under, and the acceleration prior to the maturity of,
certain Indebtedness of the Company or any Subsidiary in an aggregate principal
amount in excess of $2,500,000; (vi) certain final judgments or orders against
the Company or any Subsidiary in an aggregate amount of more than $2,500,000 not
paid, discharged or stayed for a period of 60 days; (vii) certain events of
bankruptcy, insolvency or reorganization of the Company or any Restricted
Subsidiary and (viii) cessation of the effectiveness of any Subsidiary Guarantee
or the Pledge Agreement or any repudiation thereof. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Outstanding Securities may declare the
principal amount of all the Securities to be due and payable immediately, except
that (a) in the case of an Event of Default arising from certain events of
bankruptcy, insolvency or reorganization of the Company or any Restricted
Subsidiary, the principal amount of the Securities will become due and payable
immediately without further action or notice, and (b) in the case of an Event of
Default which relates to certain payment defaults or acceleration with respect
to certain Indebtedness, any such Event of Default and any consequential
acceleration of the Securities will be automatically rescinded if any such
Indebtedness is repaid or if the default relating to such Indebtedness is cured
or waived and if the holders thereof have accelerated such Indebtedness then
such holders have rescinded their declaration of acceleration. No Holder may
pursue any remedy under the Indenture unless the Trustee shall have failed to
act after notice from such Holder of an Event of Default and written request by
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities, and the offer to the Trustee of indemnity reasonably satisfactory to
it; however, such provision does not affect the right to sue for enforcement of
any overdue payment on a Security by the Holder thereof. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the
Outstanding Securities may direct the Trustee in its exercise of
33
<PAGE>
any trust or power. The Trustee may withhold from Holders notice of any
continuing default (except default in payment of principal, premium, interest or
Liquidated Damages) if it determines in good faith that withholding the notice
is in the interest of the Holders. The Company is required to file annual and
quarterly reports with the Trustee as to the absence or existence of defaults.
The Indenture contains provisions for (i) defeasance at any time of the
entire indebtedness of the Company on this Security and (ii) discharge from
certain covenants and Defaults and Events of Default, upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Security.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by or on behalf of the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof whether or not notation of such consent or waiver is made upon
this Security. Without the consent of any Holder, the Company and the Trustee
may amend or supplement the Indenture or the Securities to cure any ambiguity,
defect or inconsistency, to qualify or maintain the qualification of the
Indenture under the Trust Indenture Act and to make certain other specified
changes and other changes that do not materially adversely affect the interests
of any Holder in any material respect.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any, on)
and interest and Liquidated Damages, if any, on this Security at the times,
place, and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable on the Security
Register of the Company, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained for such purpose duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
34
<PAGE>
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
A director, officer, employee, incorporator, stockholder or Affiliate of
the Company, as such, past, present or future shall not have any personal
liability under this Security or any other Security or the Indenture by reason
of his or its status as such director, officer, employee, incorporator,
stockholder or Affiliate, or any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of,
or by reason of such obligations or their creation. Each Holder, by accepting
this Security, waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of this Security.
Prior to the time of due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security is overdue, and neither
the Company, the Trustee nor any agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture. The Company will furnish to
any Holder upon written request and without charge a copy of the Indenture.
Requests may be made to the Company at 900 Milik Street, Carteret, New Jersey
07008, Attention: Secretary (or such other address as the Company may have
furnished in writing to the Trustee).
Each Holder of a Security, by acceptance hereof, acknowledges and agrees
to the provisions of the Registration Rights Agreement, including without
limitation the obligations of the Holders with respect to a registration and
indemnification of the Company to the extent provided therein.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders thereof. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identifying information
printed hereon.
35
<PAGE>
Interest on this Security shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
This Security shall be governed by and construed in accordance with the
laws of the State of New York.
[FORM OF NOTATION ON SECURITY
RELATING TO SUBSIDIARY GUARANTEE]
The Subsidiary Guarantors, referred to in this Security upon which this
notation is endorsed and each hereinafter referred to as a "Subsidiary
Guarantor," which term includes any successor person under the Indenture, have
unconditionally guaranteed, jointly and severally, on a senior basis (such
guarantee by each Subsidiary Guarantor being referred to herein as the
"Subsidiary Guarantee") (i) the due and punctual payment of the principal of and
interest on the Securities, whether at Stated Maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal and
interest, if any, on the Securities, the payment of Liquidated Damages on the
Securities, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set forth
in Article XIII of the Indenture and (ii) in case of any extension of time of
payment or renewal of any Securities or any of such other obligations, the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
The obligations of each Subsidiary Guarantor to the Holders of Securities
and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are
expressly set forth, and are senior obligations of each such Subsidiary
Guarantor to the extent and in the manner provided, in Article XIII of the
Indenture, and may be released or limited under certain circumstances. Reference
is hereby made to such Indenture for the precise terms of the Subsidiary
Guarantee therein made.
36
<PAGE>
The Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication of the Security upon which this
Subsidiary Guarantee is endorsed shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized signatories.
SUBSIDIARY GUARANTORS:
WG APPAREL, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON MANAGEMENT CORPORATION
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON MACHINERY CORPORATION
By:___________________________________
Name: ____________________________
Title: _____________________________
LEADTEC SYSTEMS, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
37
<PAGE>
W&G DAON, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
J&E SEWING SUPPLIES, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
W&G TENNESSEE IMPORTS, INC.
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON LEASING CORP.
By:___________________________________
Name: ____________________________
Title: _____________________________
CLINTON EQUIPMENT CORP.
By:___________________________________
Name: ____________________________
Title: _____________________________
38
<PAGE>
PARADISE COLOR INCORPORATED
By:___________________________________
Name: ____________________________
Title: _____________________________
39
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's Soc. Sec. or tax I.D. No.)
and irrevocably appoint ___________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
________________________________________________________________________________
Date: _________________________ Your Signature: ____________________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
40
<PAGE>
Exhibit 10.12
June 8, 1995
Mr. Daido Mima
President
Pegasus Sewing Machine Mfg. Co., Ltd.
7-2 Sagisu 5-chome
Fukushima-ku
Osaka 553, Japan
Dear Mr. Mima:
I refer to Section 2.2 of the Distribution Agreement made as of
January 1, 1995 between Pegasus Sewing Machine Mfg. Co., Ltd. ("Pegasus") and
WG, Inc. ("WG").
This will confirm our agreement that Pegasus will make sales and
shipments of Parts to WG upon payment by WG to Pegasus of cash by wire transfer
to a bank designated by Pegasus. It is further agreed that Pegasus is not
obligated to make any shipments of Parts until Pegasus confirms or Pegasus's
bank confirms that the payment has been received.
If you are in agreement with the above payment terms, please
indicate by signing below.
Very truly yours,
/s/ John K. Ziegler
--------------------------
John K. Ziegler
Agreed to: Agreed to:
Pegasus Sewing Machine Mfg. Co., Ltd. WG, Inc.
By: /s/ Daido Mima By: /s/ John K. Ziegler
------------------- ----------------------
<PAGE>
PEGASUS SEWING MACHINE MFG. CO., LTD.
Distribution Agreement
January 1, 1995
<PAGE>
DISTRIBUTION AGREEMENT
This AGREEMENT is made as of January 1, 1995, between Pegasus Sewing
Machine Mfg. Co. Ltd., a Japanese corporation ("Pegasus"), and WG, Inc., a
Delaware (U.S.A.) corporation ("WG").
The parties desire to continue their existing business relationship
under amended contractual arrangements. To accomplish this, it is agreed that
(i) all existing contracts between the parties are hereby terminated, as
provided in Section 7.1 of this Agreement; and (ii) the following new contract
terms shall take effect as of this date to govern the distribution by WG in the
United States of America and Puerto Rico (the "Territory") of all spare or
replacement parts ("Parts") for industrial sewing machines (i.e., equipment for
industrial use which either is a sewing machine or incorporates a sewing machine
as a part thereof) and related accessories and attachments manufactured or sold
by Pegasus and its Affiliates ("Products").
1. Appointment
1.1 Subject to the terms and conditions of this Agreement, Pegasus
grants to WG the right to import, promote and sell Parts in the Territory. Such
right shall be exclusive except for:
(i) Sales or deliveries of Parts to Pegasus Corporation of
America ("PCA") or any Affiliate of Pegasus but only to the extent
that such Parts are conversion Parts (designed to convert industrial
sewing machines from one design-dependent or special design
sub-class to another) . Conversion Parts may be acquired from WG or
from any other source. If acquired from WG, conversion Parts shall
be sold as provided in Section 4.3.
(ii) Parts sales by PCA in accordance with Section 4.2.
(iii) Sales or deliveries of Parts for automatic machines
to PCA or any Affiliate of Pegasus.
For purposes of this Agreement, an "Affiliate" of a person shall mean any person
who owns, is owned by or is owned by any owner of such person. For purposes of
this definition, a person owns: (i ) a corporation when more than 50 % of the
outstanding voting shares or total outstanding shares is owned directly or
indirectly by the person; or (ii) a partnership, trust or other entity when the
person controls such entity or has any equity interest therein greater than 50%.
1.2 Except for used machines, during the exclusive term of this
Agreement WG and its Affiliates shall not engage in the distribution in the
Territory ( or any area outside the Territory where WG has rights to sell the
Products ) of industrial sewing equipment that competes with Products.
<PAGE>
2
1.3 During the exclusive term of this Agreement the Sunbrand
Division of WG will not sell parts in the Territory for the Products other than
Parts manufactured by Pegasus.
2. Terms of Sale
2.1 Pegasus shall provide WG such technical assistance and such
printed material ( including operating and service manuals and sales literature
) as may be reasonably required by WG in the promotion, sale and servicing of
Parts. The cost of such technical assistance and printed material shall be borne
by WG.
2.2 WG shall purchase Parts at prices set by Pegasus F.O.B. Osaka or
Kobe. Prices are subject to change from time to time by Pegasus on 60 days'
written notice prior to the effective date of any such change. Price changes
shall apply to orders submitted before the expiration of the 60-day period, if
delivery is scheduled to take place after such period expires. In any event,
however, during the non-exclusive term hereof, Pegasus shall afford to WG prices
and other terms which are no less favorable to WG than those afforded by Pegasus
or any Affiliate to any other purchaser ( including any Pegasus Affiliate) of
Parts intended for the Territory. All sales by Pegasus to WG shall be delivered
against sight irrevocable letters of credit unless the parties shall agree in
writing to such other payment terms.
2.3 Pegasus hereby extends to WG Pegasus' standard warranty with
respect to Parts. Pegasus disclaims, both under this Agreement and in connection
with any sales pursuant hereto, all express and implied warranties, including
any warranties of merchantability and fitness for purpose, other than those
express warranties specifically stated in Pegasus' then current standard
warranty, and Pegasus further excludes all remedies other than those
specifically set forth in such standard warranty. Under all circumstances
special consequential, punitive, and all other similar damages are excluded.
Pegasus' standard warranty shall incorporate the substance of the preceding two
sentences. WG agrees that it shall not give any warranty or remedy in regard to
Parts that is any longer in duration or broader in scope than such Pegasus'
warranty without the prior written approval of Pegasus.
3. Trademarks, Tradenames and Patents
3.1 Pegasus grants to WG the right and license to use in the
Territory without right of sublicense, all of the following now or hereafter
during the term of this Agreement owned or possessed by Pegasus and its
Affiliates:
(i) all trademarks that are used in the manufacture, promotion
or sale of Parts ("Trademarks");
(ii) the tradenames that are used in the manufacture,
promotion or sale of Parts ("Tradenames"); and
(iii) all patents and patent applications relating to the
manufacture, use or sale of Parts ("Patents");
<PAGE>
3
but only for the purpose of importing, promoting and selling Parts in the
Territory and for no other purpose. The foregoing shall not constitute an
assignment of the Trademarks, Tradenames or Patents.
3.2 WG may place the Trademarks and Tradenames on its stationery,
catalogues, promotional literature, advertising material and signs, but only in
connection with the promotion, sale and servicing of Parts in the Territory.
4. Compensation and Sales to Pegasus
4.1 WG shall pay to PCA with respect to any calendar year during the
exclusive term of this Agreement a commission equal to 10 % of WG's total net
sales of Parts to end-users and 2.5 % of WG's total net sales to dealers (
excluding sales of Conversion Parts to PCA and sales of Parts in accordance with
Section 4.2 ) under this Agreement. Payment of commissions shall be a minimum of
$ 125,000 per calendar quarter commencing January 1,1995. If commissions for the
calendar year exceed $ 125,000 per quarter, such excess commissions will be paid
by WG no later than February 15 of the following calendar year. If commissions
for the calendar year are less than $ 125,000 per quarter, such deficiency shall
be carried forward and applied as a credit against excess commissions for
subsequent calendar years. Any deficiency still outstanding at the time the
exclusive term of this Agreement expires or is terminated for any reason will
not be refunded to WG but rather will be deemed earned by PCA as a minimum
commission.
(i) Payments shall be made quarterly within 20 days after the
end of each calendar quarter. Such commission shall be subject to
reduction pursuant to Section 4.2.
(ii) For purposes of this Section 4.1, net sales shall be
computed net of discounts to be deducted ( other than discounts to
be deducted from commissions pursuant to Section 4.2 ), allowances,
credits and returns and without consideration of any charges for
taxes, freight, shipping costs, import duties or the like.
4.2 At PCA's request, WG shall sell Parts to PCA at WG's cost plus
40 %. PCA shall pay WG the cost plus 40 % within 45 days. WG shall ship and bill
such Parts directly to the end-user or dealer under PCA's name. The receivable
thereby created and all credit risk and collection responsibility with respect
thereto shall be PCAs' . The amount of any discount from WG's list price shall
be deducted from the commission payable under Section 4.1 except to the extent
PCA and WG shall agree to a dealer discount schedule ( where PCA sells to
dealers ). The parties shall discuss WG's list prices twice a year (and in
special circumstances on request); but such prices shall be WG's sole
prerogative.
4.3 Conversion Parts (as described in clause (i) of Section 1.1)
shall be sold by WG at WG's cost plus an amount equal to 2 % of such cost, on
the 45-day terms referred to in Section 4.2. Customer-rejected Conversion Parts
returned to WG shall be repurchased by WG at WG's cost less an amount equal to 2
% of such cost, on such 45-day terms, provided such
<PAGE>
4
Conversion Parts are not obsolete and provided that, to the extent WG's
inventory supply of any Part, based upon average monthly sales of such Parts
over the preceding l 8 months, exceeds 36 months, than the aggregate amount WG
shall be required to pay in any calendar year upon repurchases of such excess
supply (and such excess supply of any other Part) shall not exceed $15,000
(which $15,000 limit shall be increased for any calendar year by an amount which
is in the same ratio to $15,000 as the ratio of the number of Pegasus Machines
sold during the year in excess of 11,000 to 11,000).
4.4 WG will agree at Pegasus request to supply end-users with up to
a total for all customers of $100,000 of consignment inventory.
Consignment inventory requested by Pegasus over $ 100,000 will be financed
by Pegasus by extending credit terms to WG in excess of normal terms to
the extent of 50 % of the amount over $ 100,000.
4.5 At the end of each calendar quarter Pegasus will supply to WG
and WG will supply to Pegasus written reports of sales of Parts and Products in
the territory.
5. Termination
5.1 This Agreement shall continue in full force and effect on an
exclusive basis until December 31,1996. It shall automatically be renewed on
such exclusive basis for successive periods of two years each, unless one of the
parties to this Agreement gives written notice of termination to the other at
least one year prior to the expiration of said initial period or any successive
two-year period, whichever is applicable.
5.2 Pegasus shall have the right to declare this Agreement
non-exclusive (if not then non-exclusive) upon 30 days prior written notice
given within 120 days after the end of any calendar year ending after January 1,
1994, if in the calendar year in question WG failed to purchase Parts having an
aggregate purchase price (computed in yen), based upon the invoice price set
forth on the invoice from Pegasus to WG (without consideration of any charges
for taxes, freight, shipping costs, import duties; or the like), equal to at
least 20% of the average annual amount of purchases of Products (excluding
automatic machines) by PCA or predecessor company (computed in yen) based upon
the invoice price of such Products (without consideration of any charges for
taxes, freight, shipping cost, import duties, or the like, and using the same
concept of invoice price as used in determining the aggregate purchase price of
Parts) as invoiced by Pegasus or any Affiliate of Pegasus to PCA for sale or use
in the Territory, for the seven full calendar years ended immediately preceding
the calendar year in question. For purposes of this Section 5.2:
(i) Parts purchased during a calendar year shall mean Parts
actually invoiced by Pegasus and its Affiliates during such year
plus Parts on order as of October 1 of such year but not delivered
during the year, provided, however, that such ordered but not
delivered Parts shall not be included in the calculation of
purchases the following year.
(ii) If purchases of Parts by WG during the calendar year
immediately preceding the calendar year in question exceeded the
amount of purchases
<PAGE>
5
required for such year in order to meet the aforesaid 20 % minimum
of average purchases of Products, the amount of such excess may be
carried forward and applied as a credit against the purchase
requirement for the calendar year in question but no subsequent
calendar year.
(iii) Parts purchased or ordered prior to January 1, 1995
under this Agreement as previously in effect shall be counted for
purposes of meeting the minimum aggregate purchase provisions of
this Section 5.2
5.3 Upon expiration or termination of the exclusive term of this
Agreement pursuant to Section 5.l or Section 5.2, however, this Agreement shall
continue thereafter on a non-exclusive basis until the later of the following
dates: (i) the third anniversary of the date of termination of such exclusive
terms; or (ii) until December 31, 2000.
5.4 This Agreement may be terminated by the aggrieved party
immediately upon written notice to the other ("Defaulting Party") in the event
that after the date hereof:
(i) The Defaulting Party commits a material breach or default
under this Agreement, which breach or default shall not be remedied
within 30 days after giving of notice thereof to the Defaulting
Party; or
(ii) The Defaulting Party is unable to meet its debts as they
fall due or enters into liquidation or dissolution or becomes
bankrupt or insolvent, or if a trustee or receiver is appointed for
such party, whether by voluntary act or otherwise, or if any
preceding is instituted by or against such party under the
provisions of any bankruptcy act or amendment thereto which results
in the entry of an order for relief against it which is not stayed
or remains undismissed for a period of 60 days, or if it enters into
a voluntary arrangement with its creditors.
5.5 Upon termination of both the exclusive and non-exclusive terms
of this Agreement, Pegasus is entitled to restrict or even stop entirely
deliveries of Parts to WG, including deliveries on orders already received at
the time of notice of termination. However, Pegasus is required to make Parts
available to WG in order to enable WG to maintain its own delivery commitments
existing before termination becomes effective subject to proof being given by WG
to Pegasus.
5.6 Upon termination of both the exclusive and non-exclusive terms
of this Agreement, all of WG's rights with respect to the Trademarks shall
immediately cease, and Pegasus shall repurchase all useable advertising and
printed matter made available by it to WG. WG shall have no further right to use
the designation "Pegasus" in any manner.
5.7 Neither party hereto is under any obligation to continue this
Agreement in effect, nor to continue the legal and contractual arrangement
established hereunder, after termination of this Agreement in accordance with
this Article 5. Both parties recognize the necessity of making expenditures in
performing and in preparing to perform this Agreement. The parties nevertheless
agree that neither party shall be liable to the other for termination of this
<PAGE>
6
Agreement in accordance with this Article 5, including, but not limited to, for
loss or damage due to investments, leases and sales, and advertising and
promotional activities, whether incurred in connection with the preparation to
perform or the performance of this Agreement or in the expectation of its
renewal or extension.
6. Non-Competition
Subject to the exceptions contained in Section 1, during the exclusive
term of this Agreement Pegasus and its Affiliates shall not directly or
indirectly (by equity or management participation, beneficial ownership,
contract arrangement or otherwise) contribute to, participate in or furnish
material goods or information for the selling, offering for sale or distribution
of Parts in the Territory, and shall each use its best efforts to prevent any
such sale, offer or distribution, other than by WG. Without limitation, Pegasus
and its Affiliates shall not so contribute to, participate in, or furnish
material goods or information for the selling, offering for sale or distribution
of Parts for industrial sewing machines in the Territory other than under one of
the Trademarks
7. Miscellaneous Provisions
7.1 In addition to termination of existing contracts between Pegasus
and WG all existing contracts between Pegasus or any Pegasus Affiliate (on
the one hand) and WG or any WG Affiliate (on the other hand) are hereby
terminated. Such terminations shall be without liability of any party to
any other party . Notwithstanding the foregoing, ordinary commercial
dealings such as those involving the sale, purchase or delivery of Parts
or payment therefor, uncompleted at the date hereof, shall be completed in
accordance with the parties' regular trade practices.
7.2 Neither of the parties hereto shall be responsible for or liable
to the other party for any damages or loss of any kind, directly or indirectly
resulting from fire, flood, explosion, riot, rebellion, revolution, war, labor
trouble ( whether or not due to the fault of either party), requirements or acts
of any government or subdivision thereof, mechanical breakdown or any other
cause beyond the reasonable control of the party. The occurrence and the
termination of such force majeure shall be promptly communicated to the other
party.
7.3 All notices, request, demands and other communications hereunder
shall be in writing and shall be given by delivery against receipt, by facsimile
transmission, by telex or by registered or certified airmail, postage prepaid,
addressed as follows, or to such other address or person as a party may
designate by notice to the other party hereunder:
(i) If to WG to: (ii) If to Pegasus, to:
WG, Inc. Pegasus Sewing Machine Mfg. Co.,
900 Miik Avenue Ltd.
Carteret 7-2 Sagisu 5-chome
New Jersey 07008 Fukushima-ku
Osaka 553, Japan
<PAGE>
7
Communications hereunder by facsimile transmission or telex shall be deemed
given at the time of transmission and communications hereunder by airmail shall
be deemed given ten days after the date of registration or certification.
7.4 This Agreement shall be governed by the laws of the State of New
York.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day first above written.
Pegasus Sewing Machine Mfg. Co., Ltd.
By: /s/ Daido Mima
-------------------------
WG, Inc.
By: /s/ John K. Ziegler
-------------------------
<PAGE>
Exhibit 10.13
G. M. PFAFF AG
Distribution Agreement
October 1, 1994
<PAGE>
DISTRIBUTORSHIP AGREEMENT
(Pfaff - WG)
This AGREEMENT is made as of October 1, 1994, between G. M. Pfaff AG, a
German limited liability company ("Pfaff"); and WG, Inc., a Delaware (U.S.A.)
corporation ("WG").
R E C I T A L S:
A. The parties desire to continue their existing business relationship
under new contractual arrangements.
B. To accomplish this, it is agreed that: (i) all existing contracts
between the parties are hereby terminated, as provided in Section 7.1 of this
Agreement; and (ii) the following new contract terms shall take effect as of
this date to govern the distribution by WG in the United States of America and
Puerto Rico (the "Territory") of all spare or replacement parts ("Parts") for
industrial sewing machines (i.e., equipment for industrial use which either is a
sewing machine or incorporates a sewing machine as a part thereof) and related
accessories and attachments manufactured or sold by Pfaff and its Affiliates
("Products") (excluding, however, those parts and industrial sewing machines and
related accessories and attachments excluded from the definition of Parts and
Products, respectively, by the provisions of Section 6.2 below).
1. Appointment
1.1 Subject to the terms and conditions of this Agreement, Pfaff grants to
WG the right to import, promote and sell Parts in the Territory. Such right
shall be exclusive for the exclusive period specified in Article 5 hereof except
for:
(i) Sales to United Shoe Machinery Corporation ("USM") which are
made directly from Pfaff's main facilities in Germany for replacement of
parts contained in machines sold by USM.
(ii) Sales or deliveries of Parts to Pfaff USA, Inc. ("PUSA") or any
other Affiliate of Pfaff or any successor of PUSA, but only to the extent
that such Parts are conversion Parts (designed to convert pocket-setting
machines or other automatic industrial sewing machines from one
design-dependent or special design sub-class to another). Conversion Parts
may be acquired from WG or from any other source. If acquired from WG,
conversion Parts shall be sold as provided in Section 4.3.
For purposes of this Agreement, an "Affiliate" of a person shall mean any person
who owns, is owned by or is owned by any owner of such person. For purposes of
this definition, a person owns: (i) a corporation when more than 50% of the
outstanding voting shares or total outstanding shares is owned directly or
indirectly by the person; or (ii) a partnership, trust or
<PAGE>
2
other entity when the person controls such entity or has any equity interest
therein greater than 50%. The term "Affiliate" when used with respect to Pfaff
shall not include The Singer Company, Semi-Tech (Global) Company Limited or any
of their affiliates, other than affiliates owned by Pfaff.
1.2 Except for parts and used machines and except to the extent necessary
to carry on distribution for export outside the Territory, during the exclusive
term of this Agreement WG and its Affiliates shall not engage in the
distribution in the Territory of industrial sewing equipment that competes with
Products. Equipment currently manufactured by Pegasus Sewing Machine Mfg. Co.,
Ltd. ("Pegasus") and currently sold by Pegasus or its Affiliates or agents in
the Territory, or subsequently introduced and sold by Pegasus or its Affiliates
or agents in the Territory which is of the same type and function as that
currently sold, shall be deemed non-competitive for these purposes. WG covenants
and agrees that it and its Affiliates shall not distribute or sell parts not
manufactured by or for Pfaff for use in or on the Products (other than generic
parts hereafter sold by WG or its Unity Division in the same manner as
heretofore).
1.3 The parties hereto agree that industrial sewing machine needles
manufactured by or for Pfaff and sold under one of the Trademarks shall be
deemed Parts for the purposes of this Agreement. WG agrees to use all reasonable
efforts to promote the sale of such needles for use with the Products and with
other industrial sewing machines manufactured by Pfaff but not marketed or sold
under any of the Trademarks (and therefore not constituting Products), including
without limitation distributing promotional flyers in fulfilling orders of
customers of WG for other Parts and supplying such needles to customers when
such customers order needles for Products or for other industrial sewing
machines manufactured by Pfaff. The parties agree that WG shall sell (meaning
the completion of the shipment and invoicing of such needles to customers in
such calendar year, less all returns to WG in such calendar year of such needles
previously sold to any customer) at least an aggregate of Two Million Five
Hundred Thousand (2,500,000) of such needles in calendar year 1995. For calendar
year 1996 and for each calendar year thereafter, said minimum sales quantity
shall increase by Twenty Percent (20%) over the minimum sales quantity for the
immediately preceding calendar year (being Three Million (3,000,000) for
calendar year 1996, Three Million Six Hundred Thousand (3,600,000) for calendar
year 1997, and so on). If WG shall fail to sell such quantity of such needles in
any calendar year, Pfaff at its option may terminate the exclusive distribution
rights of WG granted to WG pursuant to section 1.1 hereof in regard to such
needles only (but not in regard to any other Parts) by giving written notice to
WG to such effect no later than the latter of (i) sixty (60) days after Pfaff
shall learn of the total quantity of such needles sold by WG in the relevant
calendar year and (ii) ninety (90) days after the end of the relevant calendar
year, in which event WG's distribution rights in regard to such needles shall
become non-exclusive. The foregoing sentence shall not affect in any way the
rights of termination of the exclusive and non-exclusive terms of this Agreement
generally set forth in Article 5 hereof.
2. Terms of Sale
2.1 Pfaff shall provide WG such technical assistance and such printed
material (including operating and service manuals and sales literature) as may
be reasonably required by
<PAGE>
3
WG in the promotion, sale and servicing of Parts. The cost of such technical
assistance and printed material shall be borne by WG.
2.2 WG shall purchase Parts at prices set by Pfaff, ex works Pfaff's plant
in Germany, although Pfaff shall arrange for the shipment from its Plant. Prices
are subject to change from time to time by Pfaff on 60 days' written notice
prior to the effective date of any such change. Price changes shall apply to
orders submitted before the expiration of the 60-day period, if delivery is
scheduled to take place after such period expires. In any event, however, Pfaff
prices to WG shall not exceed the following:
(i) During the exclusive term hereof, Pfaff shall afford to WG prices
and other payment and shipping terms which are no less favorable to WG than
those afforded to USM.
(ii) During the non-exclusive term hereof, if any, Pfaff shall afford
to WG prices and other payment and shipping terms which are no less
favorable to WG than those afforded by Pfaff or any Affiliate to PUSA, to
any Affiliate or to any other person in the Territory.
2.3 Pfaff hereby extends to WG Pfaff's standard warranty with respect to
Parts. Pfaff disclaims, both under this Agreement and in connection with any
sales pursuant hereto, all express and implied warranties, including any
warranties of merchantability and fitness for purpose, other than those express
warranties specifically stated in Pfaff's then current standard warranty, and
Pfaff further excludes all remedies other than those specifically set forth in
such standard warranty. All consequential, punitive, and all other similar
damages are excluded. Pfaff's standard warranty shall incorporate the substance
of the preceding two sentences. WG agrees that it shall not give any warranty or
remedy in regard to Parts that is any longer in duration or broader in scope
than such Pfaff warranty without the prior written approval of Pfaff.
3. Trademarks, Tradenames and Patents
3.1 Pfaff grants to WG the right and license to use in the Territory,
without right of sublicense, all of the following now or hereafter during the
term of this Agreement owned or possessed by Pfaff and its Affiliates:
(i) all trademarks that are used by Pfaff or any of its Affiliates in
the manufacture, promotion or sale of Parts ("Trademarks");
(ii) the tradenames that are used by Pfaff or any of its Affiliates in
the manufacture, promotion or sale of Parts ("Tradenames") and
(iii) all patents and patent applications relating to the manufacture,
use or sale of Parts ("patents");
<PAGE>
4
but only for the purpose of importing, promoting and selling Parts in the
Territory and for no other purpose. The foregoing shall not constitute an
assignment of the Trademarks, Tradenames or Patents.
3.2 WG may place the Trademarks and Tradenames on its stationery,
catalogues, promotional literature, advertising material and signs, but only in
connection with the promotion, sale and servicing of Parts in the Territory. The
method of use of the Trademarks and Trade names by WG shall be strictly in
accordance with the instructions to be given by Pfaff and subject to the prior
written approval by Pfaff. WG shall submit to Pfaff for prior approval
representative samples of all leaflets and other advertising materials referred
to above. WG shall not be allowed to combine the Trademarks and Tradenames with
any other trademarks or tradenames or any sort of patterns or letters or
designs. WG shall not make any change or alteration to the original
configuration and colors of the Trademarks and Tradenames.
4. Compensation and Sales to PUSA
4.1 WG shall pay to PUSA with respect to any calendar year during the
exclusive term of this Agreement a commission equal to ten percent of WG's total
net sales of Parts under this Agreement. Payment of commissions shall be a
minimum of $80,000 per month commencing September 1, 1994. If commissions for
the calendar year exceed $80,000 per month, such excess commissions will be paid
by WG no later than February 15 of the following calendar year. If commissions
for the calendar year are less than $80,000 per month, such deficiency shall be
carried forward and applied as a credit against excess commissions for
subsequent calendar years. Any deficiency still outstanding at the time the
exclusive term of this Agreement expires or is terminated for any reason will
not be refunded to WG but rather will be deemed earned by PUSA as a minimum
commission. Payments shall be made within 15 days after the end of each month.
For purposes of this Section 4.1, net sales shall be computed net of discounts,
allowances, credits and returns and without consideration of any charges for
taxes, freight, shipping costs, import duties or the like.
4.2 WG shall provide a $100 Gift Certificate to PUSA for each Pegasus
manufactured machine sold by PUSA on or after September 1, 1994. Gift
Certificates will be redeemable by PUSA customers against purchases of Pegasus
parts from WG. PUSA may redeem the Gift Certificates issued in any calendar year
for cash equal to 50% of the face value of the Gift Certificates.
4.3 Conversion Parts (as described in clause (ii) of Section 1.1) shall be
sold by WG to PUSA at WG's cost plus an amount equal to 2% of such cost, on the
30-day terms referred to in Section 4.3. Customer-rejected conversion Parts
returned by PUSA to WG shall be repurchased by WG at WG's cost less an amount
equal to 2% of such cost, on such 30-day terms, provided such conversion Parts
are not obsolete and provided that, to the extent WG's inventory supply of any
Part, based upon average monthly sales of such Part over the preceding 18
months, exceeds 36 months, then the aggregate amount WG shall be required to pay
in any calendar year upon repurchases of such excess supply of such Part shall
not exceed $15,000 (which $15,000 limit shall be increased for any calendar year
by an amount which is in the same ratio to $15,000
<PAGE>
5
as the ratio of (i) the number of PUSA machine manufactured by Pfaff or Pegasus
("Machines") sold during the year in excess of 4,000 to (ii) 4,000).
4.4 Purchases of PUSA Machines or other merchandise by WG from PUSA shall
be paid for by WG within 30 days.
5. Termination
5.1 This Agreement shall continue in full force and effect on an exclusive
basis until December 31, 1996.
(i) It shall automatically be renewed on such exclusive basis for
successive periods of two (2) years each, unless one of the parties to this
Agreement gives written notice of termination to the other at least one
year prior to the expiration of said initial period or any successive
two-year period, whichever is applicable, such termination to be effective
at the end of the initial period or the relevant two-year extension
thereof: in the event such one-year termination notice is given, this
Agreement shall continue on an exclusive basis during the one-year
termination period, and shall continue thereafter on a non-exclusive basis.
(ii) If the notice of termination of the exclusive period of this
Agreement has previously been given, either party may terminate the
non-exclusive term of this Agreement at the end of any calendar year ending
after the calendar year in which the exclusive term ends by giving at least
one year's prior written notice of such termination of the non-exclusive
term: in the event such one-year termination of the nonexclusive term is
given, this Agreement shall continue in force during the one-year
termination period on a non-exclusive basis; but this Agreement shall end
and be of no further force or effect thereafter.
(iii) Either party may terminate both the exclusive and non-exclusive
term of this Agreement while the Agreement is still on an exclusive basis,
effective as of the end of any calendar year at which the termination of
the exclusive term may become effective pursuant to clause (i) above, by
giving at least two (2) years prior written notice of such termination of
both the exclusive and non-exclusive terms of this Agreement: subject to
the provisions of the following clause (iv), in the event such two-year
termination notice is given, this Agreement shall in both years of such
termination period remain in force on an WG exclusive basis; but this
Agreement shall end and be of no further force or effect thereafter.
(iv) Anything in this Section 5.1 hereof to the contrary
notwithstanding, any termination of the non-exclusive term of this
Agreement may not be effective prior to December 31, 1998.
<PAGE>
6
5.2 Pfaff shall have the right to declare this Agreement non-exclusive (if
not then non-exclusive) upon 30 days prior written notice given within 120 days
after the end of any calendar year ending after January 1, 1994, if in the
calendar year in question WG failed to purchase Parts having an aggregate
purchase price (computed in DM), based upon the invoice price set forth on the
invoice from Pfaff to WG (without consideration of charges for taxes, freight,
shipping costs, import duties, or the like), equal to at least 25% of the
average annual amount of purchases of Products by PUSA (computed in DM) based
upon the invoice price of such Products (excluding automatic machines) without
consideration of any charges for taxes, freight, shipping costs, import duties,
or the like, and using the same concept of invoice price as used in determining
the aggregate purchase price of Parts) as invoiced by Pfaff or any Affiliate of
Pfaff to PUSA for sale or use in the Territory, for the three full calendar
years ended immediately preceding the calendar year in question (including under
the predecessor to this Agreement). For purposes of this Section 5.1:
(i) Parts purchased by WG during a calendar year shall mean Parts
actually invoiced by Pfaff and its Affiliates during such year plus Parts
on order as of October 1 of such year but not delivered during the year,
provided, however, that such ordered but not delivered Parts shall not be
included in the calculation of purchases the following year.
(ii) If purchases of Parts by WG during the calendar year immediately
preceding the calendar year in question exceeded the amount of purchases
required for such year in order to meet the aforesaid 25% minimum or
average purchases of Products, the amount of such excess may be carried
forward and applied as a credit against the purchases requirement for the
calendar year in question but not no subsequent calendar year.
(iii) Products purchased by PUSA and sold to USM shall be included in
determining the said aggregate purchase price.
(iv) Parts purchased or ordered prior to October 1, 1994, under the
predecessor of this Agreement (i.e., the agreement of September 1982
between and Willcox & Gibbs, Inc.) shall be counted for purposes of meeting
the minimum aggregate purchase provisions of this Section 5.2.
5.3 This Agreement may be terminated by the aggrieved party immediately
upon written notice to the other ("Defaulting Party"), in the event that after
the date hereof:
(i) The Defaulting Party commits a material breach or default under
this Agreement, which breach or default shall not be remedied within 30
days after giving of notice thereof to the Defaulting Party; or
(ii) The Defaulting Party is unable to meet its debts as they fall due
or enters into liquidating or dissolution or becomes bankrupt or insolvent,
or if a trustee or receiver is appointed for such party, whether by
voluntary act or otherwise, or if any proceeding is instituted by or
against such party under the
<PAGE>
7
provisions of any bankruptcy act or amendment thereto which results in the
entry of an order for relief against it which is not stayed or remains
undismissed for a period of 60 days, or if it enters into a voluntary
arrangement with its creditors.
5.4 Upon termination of both the exclusive and nonexclusive terms of this
Agreement, Pfaff is entitled to restrict or even stop entirely deliveries of
Parts to WG including deliveries on orders already received at the time of
notice of termination. However, Pfaff is required to make Parts available to WG
in order to enable WG to maintain its own delivery commitments existing before
termination becomes effective subject to proof being given by WG to Pfaff.
5.5 Upon termination of both the exclusive and nonexclusive terms of this
Agreement, all of WG's rights with respect to the Trademarks and Tradenames
shall immediately cease, and shall repurchase all usable advertising and printed
matter made available by it to WG. WG shall have no further right to use the
designation "Pfaff" in any manner.
5.6 Neither party hereto is under any obligation to continue this
Agreement in effect, nor to continue the legal and contractual arrangement
established hereunder, after termination of this Agreement in accordance with
this Article 5. Both parties recognized the necessity of making expenditures in
performing and in preparing to perform this Agreement. The parties nevertheless
agree that neither party shall be liable to the other for termination of this
Agreement in accordance with this Article 5, including but not limited to, for
loss or damage due to investments, leases and sales, and advertising and
promotional activities, whether incurred in connection with the preparation to
perform or the performance of this Agreement or in the expectation of its
renewal or extension.
6. Non-Competition
6.1 Subject to the exceptions contained in Article 1, during the exclusive
term of this Agreement Pfaff and its Affiliates shall not directly or indirectly
(by equity or management participation, beneficial ownership, contract
arrangement or otherwise) contribute to, participate in or furnish material
goods or information for the selling, offering for sale or distribution of Parts
in the Territory, and shall each use its best efforts to prevent any such sale,
offer or distribution, other than by WG. Without limitation Pfaff and its
Affiliates shall not so contribute to, participate in, or furnish material goods
or information for the selling, offering for sale or distribution of Parts for
the Products in the Territory other than under one of the Trademarks.
6.2 The parties hereto hereby acknowledge and agree that the Singer
Company, Semi-Tech (Global) Company Limited and their affiliates other than
those affiliates owned by Pfaff (the "ISTM Group") may from time to time sell in
the Territory industrial sewing machines and related accessories and attachments
manufactured by Pfaff or its Affiliates and bearing one or more of the
Trademarks or Tradenames or none of the Trademarks or Tradenames.
<PAGE>
8
(i) The parties hereto agree that such industrial sewing machines and
related accessories and attachments (even if manufactured by Pfaff) shall
not be deemed included within the definition of Products as used in this
Agreement unless the same bear or are sold under one of the Trademarks or
Tradenames. In this connection, the definition of "Parts" as used in this
Agreement shall not include any parts sold by the ISTM Group or Pfaff for
any such industrial sewing machines and related accessories and attachments
which are not included within the definition of Products. However, the
immediately preceding sentence shall not be deemed to exclude from the
definition of Parts" any such parts which are sold by Pfaff or the ISTM
Group under any of the Trademarks or Tradenames but this sentence shall not
be applicable to the sale of certain parts manufactured by Pfaff which are
stamped with the "Pfaff" name and sold for sewing machines, accessories and
attachments referred to in the immediately preceding sentence.
(ii) WG covenants and agrees (A) to sell conversion Parts to the ISTM
Group for such industrial sewing machines and related accessories and
attachments, even if the same are not "Products," on the same terms and
conditions, including price, as Parts are sold by WG to PUSA for Products
hereunder and (B) to sell other Parts to the ISTM Group for such industrial
sewing machines and related accessories and attachments, even if the same
are not "Products," on the same terms and conditions, including price, as
if selling to its dealers for Products.
7. Miscellaneous Provisions
7.1 In addition to termination of existing contracts between Pfaff and W&G,
all existing contracts between Pfaff or any Pfaff Affiliate (on the one hand)
and WG or any WG Affiliate (on the other hand) are hereby terminated. Such
terminations shall be without liability of any party to any other party.
Notwithstanding the foregoing, ordinary commercial dealings such as those
involving the sale, purchase or delivery of Parts or payment therefor,
uncompleted at the date hereof, shall be completed in accordance with the
parties' regular trade practices.
7.2 Neither of the parties hereto shall be responsible for or liable to the
other party for any damages or loss of any kind, directly or indirectly
resulting from fire, flood, explosion, riot, rebellion, revolution, war, labor
trouble (whether or not due to the fault of either party), requirements or acts
of any government or subdivision thereof, mechanical breakdown or any other
cause beyond the reasonable control of the party. The occurrence and the
termination of such force majeure shall be promptly communicated to the other
party.
7.3 All notices, requests, demands and other communication hereunder shall
be in writing and shall be given by delivery against receipt, by facsimile
transmission, by telex or by registered air mail, postage prepaid, addressed as
follows, or to such other address or person as a party may designate by giving
notice to the other party hereunder:
<PAGE>
9
(i) To WG, to (ii) If to Pfaff, to:
WG, Inc. Pfaff USA Inc.
200 Madison Avenue 7270 McGinnis Ferry Road
New York, New York 10016 Suwanee, Georgia 30174
Attention: Chairman of the Board Attention: President
Communications hereunder by facsimile transmission or telex shall be deemed
given at the time of transmission and communications hereunder by airmail shall
be deemed given ten days after the date of registration.
7.4 This Agreement shall be governed by the laws of the State of New York.
Pfaff's standard terms and conditions of sale and delivery of equipment, however
shall be governed by German law so long as not in conflict with the terms of
this Agreement. In all events, the United Nations Convention on Contracts for
the International Sale of Goods shall be inapplicable.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day first above written.
G.M. PFAFF AG WG, INC.
By: /s/ J.A. Gardiner By: /s/ John K. Ziegler
------------------------- ----------------------
<PAGE>
Exhibit 10.14
M&R
INTERNATIONAL DISTRIBUTOR
AGREEMENT
<PAGE>
TABLE OF CONTENTS
Page
----
I GRANT OF DlSTRIBUTORSHIP........................................... 1
1.01 Appointment.................................................. 1
1.02 Products..................................................... 1
1.03 Efforts...................................................... 1
II TERRITORY.......................................................... 1
2.01 Definition................................................... 1
2.02 Inquiries.................................................... 2
2.03 Exclusivity.................................................. 2
III TERM............................................................... 2
3.01 Initial Term................................................. 2
IV SALES GOALS........................................................ 2
4.01 Minimum Sales................................................ 2
4.02 Renegotiation of Standards................................... 3
V PRICES, DISCOUNTS AND SECURITY INTEREST............................ 3
5.01 Prices....................................................... 3
5.02 Discounts.................................................... 3
5.03 Security Interest............................................ 3
5.04 Terms of Payment............................................. 4
VI INDEPENDENT PARTIES................................................ 4
6.01 No Agency.................................................... 4
6.02 Independent Contractors...................................... 4
VII M&R'S LIABILITY.................................................... 5
7.01 Non-Liability................................................ 5
VIII DISTRIBUTOR'S RESPONSIBILITIES..................................... 5
8.01 Sales Organization........................................... 5
8.02 Reporting.................................................... 5
8.03 Confidential Information..................................... 5
8.04 Showroom..................................................... 5
8.05 Product Inventory............................................ 5
8.06 Technical Support............................................ 5
8.07 Competitive Equipment........................................ 5
8.08 Tax and Duties............................................... 6
i
<PAGE>
TABLE OF CONTENTS
(Continued)
IX ORDER ENTRY........................................................ 6
9.01 Order Procedure.............................................. 6
X TERMINATION........................................................ 6
10.01 Early Termination............................................ 6
10.02 Bankruptcy................................................... 8
10.03 Actions on Termination....................................... 8
XI PRODUCT MARKINGS; TRADEMARKS....................................... 9
11.01 Serial or Machine Numbers.................................... 9
11.02 Equipment Identification..................................... 9
11.03 Trademarks................................................... 9
XII FORCE MAJEURE...................................................... 9
12.01 Relief of M&R................................................ 9
Xlll WARRANTY........................................................... 9
13.01 Individual Warranties of Products............................ 10
XIV M&R POLICIES....................................................... 10
14.01 Policies..................................................... 10
14.02 Product Changes.............................................. 10
14.03 Non-Assignability............................................ 10
14.04 Benefit...................................................... 10
14.05 Severability................................................. 10
14.06 Counterparts................................................. 10
14.07 Governing Law................................................ 10
14.08 Amendments................................................... 11
14.09 Enforcement.................................................. 11
SCHEDULE 1 M&R Sales & Services, Inc. / Discounts
EXHIBIT A The Territory
EXHIBIT B 1996 Sales Goals in Territory
ii
<PAGE>
DISTRIBUTOR AGREEMENT
THIS AGREEMENT made and entered as of the 16 of September, between M&R
SALES AND SERVICE, INC., a Delaware corporation, with a principal place of
business in Glen Ellyn, Illinois (hereinafter referred to as "M&R"), and Clinton
Machinery Corp., a Florida corporation, and Clinton Machinery Corp., a Delaware
corporation, each with a principal place of business in Miami Lakes, Florida
(hereinafter referred to as "DISTRIBUTOR").
W I T N E S S E T H:
I
I GRANT OF DlSTRIBUTORSHIP
1.01 Appointment. M&R hereby appoints DISTRIBUTOR as its distributor for
its line of Products (other than Excluded Equipment and Custom Equipment (all as
defined in Paragraph 1.02 below)) manufactured by M&R Printing Equipment, Inc.
and Precision Screen Machines, Inc. (collectively, "Manufacturers") in the
Exclusive Territory and the Non-Exclusive Territory as defined in Paragraph 2.01
below.
1.02 Products. As used herein, Products shall mean all standard textile
and graphic screen printing and drying equipment and parts manufactured by the
Manufacturers. All equipment and parts designed to customers' specifications and
not of M&R's standard design are hereinafter referred to as "Custom Equipment."
1.03 Efforts. DISTRIBUTOR agrees to use its best efforts to promote and
sell Products in the Territory. DISTRIBUTOR shall, at its cost and expense,
hire, develop, and supervise its own personnel under such terms and conditions
as DISTRIBUTOR may deem appropriate. Under no circumstances shall any employee,
agent, Independent contractor or subcontractor of DISTRIBUTOR be deemed to be a
third party beneficiary of this Agreement. All expenses and disbursements
incurred in the solicitation of orders for Products shall be borne by
DISTRIBUTOR. DISTRIBUTOR shall not incur any liability for the account of M&R,
and shall indemnify and defend M&R against and hold M&R harmless from all
claims, expenses and disbursements in connection with the sale of Products.
DISTRIBUTOR shall, at its own cost and expense, comply with all federal, state
and local laws of the United States and other laws in effect in any jurisdiction
in which any sales are made, including but not limited to all licensing and
permitting laws, statutes or ordinances which may be required in connection with
its business.
II
II TERRITORY
2.01 Definition. As used herein the terms "Exclusive Territory" and
"Non-Exclusive Territory" shall mean the areas listed on Exhibit "A." The
Exclusive Territory and the
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Non-Exclusive Territory is sometimes hereinafter collectively referred to as the
"Territory." DISTRIBUTOR shall have the exclusive right to market Products
(other than Excluded Equipment and Custom Equipment) in the Exclusive Territory
an-d shall have the right, together with M&R and other distributors, to market
Products in the Non-Exclusive Territory.
2.02 Inquiries. M&R agrees to refer to DISTRIBUTOR all inquiries and
orders received from customers or prospective customers in the Exclusive
Territory.
2.03 Exclusivity. If, in the reasonable opinion of M&R, DISTRIBUTOR fails
to maintain a sales force, showroom and technical personnel necessary to perform
all of its obligations to promote sales in the Exclusive Territory, upon written
notice to DISTRIBUTOR, M&R may convert all or part of the Exclusive Territory
into a Non-Exclusive Territory.
III
III TERM
3.01 Initial Term. The term ("Term") of this Agreement shall expire on
December 31, 1996, unless terminated in accordance with the early termination
provisions set forth in Article X. The Term shall be automatically renewed for
successive one year terms unless on or before September 1 of the year in which
the Term is due to expire, M&R or DISTRIBUTOR delivers a written notice to the
other party electing to terminate this Agreement as of December 31 of that year.
IV
IV SALES GOALS
4.01 Minimum Sales. If DISTRIBUTOR fails to meet its Sales Goal as
hereinafter defined) for the Territory for any fiscal year (January 1 to
December 31) commencing January 1, l996, M&R may terminate this Agreement upon
written notice to DISTRIBUTOR. If DISTRIBUTOR shall meet its Sales Goal for the
entire Territory, but shall fail to meet its Sales Goal in any particular area
in the Exclusive Territory, at M&R's sole and absolute discretion and upon
written notice from M&R, DISTRIBUTOR shall lose its exclusive status in such
area for which it did not meet its Sales Goal and such area shall thereafter be
deemed to be a Non-Exclusive Territory. If DISTRIBUTOR shall meet its Sales Goal
for the entire Territory, but shall fail to meet its Sales Goal in any area in
the Non-Exclusive Territory, at M&R's sole and absolute discretion and upon
written notice from M&R, DISTRIBUTOR shall no longer have the right to sell that
category of Products In the area in which its Sales Goal was not met.
DISTRIBUTOR shall be deemed not to have met its Sales Goal for a fiscal year if
the List Price (as defined in Section 5.01) for new Products shipped by M&R
during such fiscal year, net of discounts, warranty claims, service charges,
crating, freight, insurance, taxes and returns fails to equal or exceed the
applicable Sales Goal set forth on Exhibit "B" attached hereto.
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4.02 Renegotiation of Standards. The Sales Goal for the Territory,
together with the Sales Goal for each area in the Territory, shall be
renegotiated by the parties annually for the following fiscal year and shall be
agreed to by the parties not later than September 15 of each year during the
Term. In renegotiating the new Sales Goal, the parties shall consider additions
to or deletions from M&R's list of Products, changes in prices charged by M&R,
planned marketing promotions and other relevant factors. in the event that the
parties fail to agree upon a new Sales Goal prior to the date set forth above.
either party may terminate this Agreement as of a date at least six months after
written notice is delivered to the other party of such party's election to
terminate this Agreement. During the period from the delivery of the notice to
terminate until the termination of this Agreement, all Exclusive areas shall be
deemed Non-Exclusive areas and, for the purposes of determining discounts
pursuant to Schedule 1, the then existing Sales Goals shall remain in effect.
V
V PRICES, DISCOUNTS AND SECURITY INTEREST
5.01 Prices. Applicable prices for any Products ordered by DISTRIBUTOR for
resale shall be the price for said Products as set forth in M&R's then current
published list of prices for the particular model or part ordered ("List Price")
less the discounts, if any. referred to in 5.02 below.
5.02 Discounts. DISTRIBUTOR will receive discounts from the List Price
pursuant to and subject to the conditions set forth on Schedule 1 attached
hereto. Notwithstanding anything contained herein or on Schedule 1, if payment
in full for Products ordered by DISTRIBUTOR is received by M&R more than thirty
(30) days but less than sixty (60) days after the shipping date of the Product
by M&R, no Bonus Discount or 1% Discount as described on Schedule 1 ) will be
earned by DISTRIBUTOR and if payment in full for Products ordered DISTRIBUTOR is
not received by M&R within sixty (60) days after the shipping date of the
Product by M&R, DISTRIBUTOR shall earn no Base Discount, Bonus Discount or 1%
Discount on such Product. All Base Discounts shall be deductible only from the
List Price of the Products for which the Base Discount is given. So long as
DISTRIBUTOR is not in default hereunder, the Bonus Discounts and 1% Discounts
may be credited, at DISTRIBUTOR's option, against any open invoice due M&R by
DISTRIBUTOR. If DISTRIBUTOR is in default hereunder, M&R may credit the Bonus
Discount and 196 Discount against any invoice of its choice. No discounts shall
be payable by M&R to DISTRIBUTOR in cash. Schedule 1 may be modified or amended
by M&R on an annual basis, as of the first day of January of each Year during
the Term.
5.03 Security Interest. It M&R believes in good faith that it would not be
prudent for M&R to sell a Product without obtaining a first lien security
interest in the Product, upon written notice to DISTRIBUTOR, M&R may sell the
Product directly to the buyer of the Product identified by DISTRIBUTOR without
first selling the Product to DISTRIBUTOR, so long as M&R pays or credits to
DISTRIBUTOR the profit that DISTRIBUTOR would have made if such sale was made to
DISTRIBUTOR pursuant to the terms of this Agreement and then
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resold to the ultimate buyer of the Product for the price and on the terms of
the direct sale by M&R to such ultimate buyer, considering all discounts to
which DISTRIBUTOR would otherwise have been entitled pursuant to this Agreement.
5.04 Terms of Payment. Payment in good funds of 15% of the List Price, net
of the Base Discount, of ordered Products shall accompany all orders of Products
and no Products will be shipped without receipt by M&R of such 1596 payment;
provided, however, leased equipment shall be subject to terms negotiated by M&R
and DISTRIBUTOR on a case-by-case basis prior to shipping. The remainder of the
List Price, net of any applicable discounts, for the ordered Products shall be
due not later than sixty (60) days after shipment of the Products by M&R.
Notwithstanding the foregoing, if DISTRIBUTOR disputes the validity of an
invoice and M&R determines in its sole and absolute discretion that the basis
for the dispute was justified and caused by the fault of M&R, for purposes of
this Agreement, DISTRIBUTOR's obligation to pay such invoice shall be suspended
until actions deemed appropriate by M&R are taken with respect to such dispute.
5.05 Excluded Equipment: Custom Equipment. If during The Term, DISTRIBUTOR
introduces to M&R a customer in the Territory who purchases Excluded Equipment
from M&R, DISTRIBUTOR shall be eligible to receive a finder's fee upon the sale
of the Excluded Equipment and receipt by M&R of the entire purchaser, price
thereof, in the amount and subject to the conditions set forth in Schedule 1.
All finder's fee or other arrangements with respect to sales of Custom Equipment
in the Territory shall be subject to mutual agreement between M&R and
DISTRIBUTOR, provided that absent an express prior agreement with respect to the
sale of such Custom Equipment, no commission, finder's fee or other
consideration shall be Payable to DISTRIBUTOR based on the sale of Custom
Equipment.
VI
VI INDEPENDENT PARTIES
6.01 No Agency. It is acknowledged that DISTRIBUTOR and its employees
shall not be deemed and shall under no circumstances represent themselves to be
agents or representatives of M&R, and, further, that DISTRIBUTOR shall have no
right to enter into any contracts and/or commitments of any type on behalf of
M&R.
6.02 Independent Contractors. DISTRIBUTOR and M&R understand that, except
as specifically set forth herein, the provisions of this Agreement are not
intended to give M&R any substantial control over DISTRIBUTOR's method of
operation. DISTRIBUTOR shall be solely responsible for its conduct, direction,
operation and activities, including, but not limited to, the conduct, direction,
operation and activities of its employees and subcontractors in connection with
its business and the performance of its obligations under this Agreement. This
Agreement is not intended to grant a franchise to DISTRIBUTOR.
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VII
VII M&R'S LIABILITY
7.01 Non-Liability. M&R shall not be liable for any injury, loss or damage
to any individual, person or property, which injury or damage was caused
directly or indirectly by the negligence of DISTRIBUTOR or its employees. M&R
shall not be liable for any injury, loss or damage, unless the same was directly
caused by the negligence of M&R, its agents or employees. M&R assumes no
liability for any damages, including incidental or consequential damages for
loss of goodwill, production or income which results from the use or misuse of
its Products by DISTRIBUTOR or others.
VIII
VIII DISTRIBUTOR'S RESPONSIBILITIES
8.01 Sales Organization. DISTRIBUTOR will establish and maintain a
trained, conscientious and effective sales organization to assure representation
of M&R'S Products in the Territory at a level to achieve the highest level of
sales possible.
8.02 Reporting. DISTRIBUTOR will eport promptly in writing to M&R any
complaint or customer requirements which DISTRIBUTOR cannot immediately remedy,
any recurring complaint regarding Products and all incidents involving Products
which result in personal injury or property damage. DISTRIBUTOR will conduct a
market review with M&R on a quarterly basis, covering all key issues selected by
M&R.
8.03 Confidential Information. All materials provided to DISTRIBUTOR by
M&R which are not generally known in the trade are confidential (including price
lists) and furnished solely for DISTRIBUTOR's use in performing DISTRIBUTOR's
obligations under this Agreement. DISTRIBUTOR agrees to return such materials to
M&R upon request and, in any event, upon termination of this Agreement .
8.04 Showroom. DISTRIBUTOR shall maintain on its premises a showroom to
demonstrate Products.
8.05 Product Inventory. DISTRIBUTOR agrees to keep in inventory a
representative grouping of Products.
8.06 Technical Support. DISTRIBUTOR agrees to provide technical
support to customers in its Territory after sale to ensure the Products are
properly installed and operating.
8.07 Competitive Equipment. As partial consideration for this grant of a
distributorship, DISTRIBUTOR agrees that it will not carry or offer for sale any
equipment competitive with Products offered for sale by M&R as of the date
hereof or Products offered for sale by M&R hereafter; provided that M&R agrees
that DISTRIBUTOR may carry and offer for sale small manual presses and screen
washers that may be competitive with the Products. If at
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the time a new Product is added to those offered by M&R, DISTRIBUTOR then has in
inventory or has ordered products competitive with M&R's Products, DISTRIBUTOR
shall be permitted to dispose of the competitive equipment within eighteen
months after the introduction of the competitive Product by M&R, but DISTRIBUTOR
shall not place orders for such new competitive equipment after the date of
M&R's introduction of its Product.
8.08 Tax and Duties. DISTRIBUTOR shall be solely responsible for the
collection, reporting and payment of all sales, use and other similar taxes and
duties payable to DISTRIBUTOR hereunder. DISTRIBUTOR shall provide M&R with all
documents including certificates of resale, exemption etc.) necessary pursuant
to the various countries' laws to ensure that if M&R has not collected tax and
duties from DISTRIBUTOR in connection with a sale hereunder, such sale of
Products pursuant to this Agreement is exempt from such taxes. DISTRIBUTOR
hereby indemnifies and holds M&R harmless from all liability and expense in
connection with such taxes and duties.
IX
IX ORDER ENTRY
9.01 Order Procedure. All orders from DISTRIBUTOR are subject to
acceptance by M&R at its offices in Glen Ellyn, Illinois, according to M&R's
policies and procedures and shall not be deemed accepted for any purpose unless
accompanied by a completed purchase order on M&R's approved form and except for
leased Products which shall be subject to prior agreement between M&R and
Distributor a fifteen percent 15%) down payment. DISTRIBUTOR understands that
M&R may reject or withhold acceptance and shipment of orders if DISTRIBUTOR
fails to comply with this Agreement, M&R's credit or other policies, or if
DISTRIBUTOR's credit standing becomes impaired. M&R reserves the right to
determine in its sole and absolute discretion in which sequence orders from
DISTRIBUTOR and from other customers will be filled.
X
X TERMINATION
10.01 Early Termination. M&R may terminate this Agreement, at M&R's option
with respect to the entire Territory or with respect to a geographical area or
Country within the Territory, upon six (6) months prior written notice to
DISTRIBUTOR the date six (6) months after the date of such termination notice is
referred to herein as the "Effective Termination Date") in the following events;
provided that during such six (6) month period prior to the Effective
Termination Date all areas which constitute Exclusive Territories under Section
2.01 hereof shall instead be deemed to be Non-Exclusive Territories:
(a) failure by DISTRIBUTOR to remit payments for Products to M6R when due
pursuant to this terms of this Agreement, when such failure continues for sixty
160J days after written notice of such failure is given to DISTRIBUTOR;
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(b) repeated failure by DISTRIBUTOR to cooperate with M&R's management in
the promotion and sale of Products, when such failure continues for sixty (60)
days after written notice of such failure is given to DISTRIBUTOR;
(c) failure by DISTRIBUTOR to maximize the market potential of Products in
the Territory by (i) failing to cooperate with M&R's management in coordinating
sales and marketing effect in order to maximize their effect, and/or (ii)
continuing to take actions which M8zR's management reasonably believes, and has
advised DISTRIBUTOR it believes. do not enhance the reputation of Products
and/or do not contribute to maximizing the market potential of the Territory,
when such failure or action continues for sixty l60) days after written notice
of such failure or action is given to DISTRIBUTOR:
(d) breach by DISTRIBUTOR of a material provision in this Agreement
including, without limitation, the obligations set forth in Paragraph 8.07
hereof, when such breach continues for sixty (60) days after written notice of
such failure is given to DISTRIBUTOR:
(e) six (6) months following written notice to DISTRIBUTOR stating the
failure of DISTRIBUTOR to meet at least 80% of its Sales Goals for the
Territory:
(f) if DISTRIBUTOR owns an interest in or control a graphics or textile
printing business which uses equipment similar to the Products and does not
dispose of such interest within sixty (60) days after written notice from M&R.
This paragraph shall not apply if DISTRIBUTOR acquires such ownership or control
rights upon foreclosure of security for a trade account. In such event,
DISTRIBUTOR shall give written notification to M&R within thirty 130) days of
acquiring such interest and divest itself of such business as soon as possible,
and in all events within ninety (90) days after acquisition.
(g) if after December 31, 1996 M&R delivers a written notice to
DISTRIBUTOR indicating that its strategic direction with respect to
international distribution of the Products has changed and M&R no longer wishes
to distribute the Products pursuant to this Agreement. If, pursuant to this
Section 1 0.0l (g), M&R terminates this Agreement with respect to the entire
Territory or with respect to a geographical area or a country, and, within
eighteen (18) months following the Effective Termination. Date M&R sells any
Products in such terminated portion of the Territory directly to the end user of
the Products and not through a distributor or other third party, then
DISTRIBUTOR shall be entitled to receive from M&R a finder's fee equal to five
percent 15%) of M&R's net manufacturer's price (defined as M&R's then list price
for the Product less the discount otherwise receivable by DISTRIBUTOR pursuant
to this Agreement with respect to such sale. The finder's fee will be payable
within sixty (60) days after the shipment of the Products by M&R.
Notwithstanding the foregoing, in no event shall M&R be obligated to pay
finder's fees to DISTRIBUTOR pursuant to this preceding sentence (g) for any
Products shipped more than eighteen (18) months following the Effective
Termination Date with respect to such portion to the Territory or (ii) in excess
of live percent (5%X of the total manufacturer's net sales price of all Products
shipped by M&R in such portion of the Territory during the eighteen (18) month
period preceding the Effective Termination Date.
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In addition, in consideration of M&R's oblation to pay a finder's fee to
DISTRIBUTOR pursuant to this 10.01 (g), during such period that DISTRIBUTOR is
entitled to a finder's fee, the covenant set forth in Section 8.07 hereto shall
continue to be effective, notwithstanding the termination or partial termination
of this Agreement pursuant to Paragraph 10.01 19).
10.02 Bankruptcy. This Agreement shall be deemed to be immediately
terminated upon written notice to DISTRIBUTOR If proceedings are initiated by or
against DISTRIBUTOR in bankruptcy, or under any insolvency laws, or for
reorganization, receivership, dissolution or liquidation, an assignment for the
benefit of creditors or if a change occurs in the ownership, form of
organization or working capital position of DISTRIBUTOR which reasonably causes
M&R to believe DISTRIBUTOR cannot fulfill its obligations under this Agreement:
and
10.03 Actions on Termination. Upon the termination of this Agreement for
any reason:
(a) M&R or any of its agents, representatives or other designees,
including any successor DISTRIBUTOR, shall have the right, immediately upon
termination, to sell Products directly or indirectly to any customer developed
or dealt with by DISTRIBUTOR without incurring any liability or accountability
to DISTRIBUTOR:
(b) M&R may, at is option, repurchase from DISTRIBUTOR for the price
actually paid to M&R by DISTRIBUTOR (exclusive of any amounts attributable to
any freight, insurance or forwarding charges, or any taxes or other governmental
charges, all or any portion of the salable, unused and undamaged Products
purchased by DISTRIBUTOR from M&R prior to termination that remain in
DISTRIBUTOR's inventory; provided, however, that DISTRIBUTOR may sell Products
for which it has accepted orders from customers prior to the date of
termination, or for which M&R does not exercise its right of repurchase.
DISTRIBUTOR shall return all repurchased Products to M&R at DISTRIBUTOR's cost
and expense (including, without limitation, freight, insurance and forwarding
charges);
(c) All unpaid amounts owing from either party to the other hereunder
shall be paid, including amounts owing for Products purchased by DISTRIBUTOR
prior to termination but for which an invoice has not yet been submitted;
(d) DISTRIBUTOR shall cease promoting or marketing the Products or making
any use of M&R's or Manufacturer's trademarks and shall return promptly to M&R
all promotional and sales materials provided to it; and
(e) Neither party shall have any continuing duty, liability or obligation
to the other hereunder, except that the DISTRIBUTOR's obligations relating to
confidentiality and all undertakings hereunder by DISTRIBUTOR to indemnify and
defend M&R shall survive such termination.
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XI
XI PRODUCT MARKINGS; TRADEMARKS
11.01 Serial or Machine Numbers. Manufacturers shall identify each Product
with a serial number or machine number, which number shall not be removed,
altered or transferred to any other machine or piece of equipment at any time.
11.02 Equipment Identification. All equipment sold under the terms of this
Agreement as well as all proposals forwarded to any prospective customers by
DISTRIBUTOR shall clearly identify the equipment being sold as being
manufactured by the Manufacturer and shall carry the Manufacturer's trademarks.
Under no circumstances shall DISTRIBUTOR, its agents or employees, represent
Products furnished by the Manufacturer as being manufactured by DISTRIBUTOR or
by anyone other than the Manufacturer, directly or indirectly.
11.03 Trademarks. DISTRIBUTOR expressly understands and acknowledges that
M&R has developed and will develop considerable goodwill in connection with its
and Manufacturer's names and marks (the "MARKS") and that DISTRIBUTOR will not
by virtue of this Agreement or performance under it acquire any interest in the
marks. In order to more fully protect M&R's and the Manufacturer's interest in
the marks, it is agreed that. except on literature provided by M&R, any use by
DISTRIBUTOR of the marks, either alone or in conjunction with DISTRIBUTOR's
name, whether for purposes of advertising or otherwise, will be subject to prior
submission to M&R and receipt of written approval of use as submitted. Under no
circumstances will DISTRIBUTOR use any of the marks in the absence of such prior
written approval from M&R, and unauthorized use may, at M&R's election, result
in immediate termination of this Agreement. DISTRIBUTOR shall not use the names
"M&R Sales and Service, Inc.," "M&R Printing Equipment" or "Precision Screen
Machines" nor any other name confusingly or deceptively similar to it in or in
conjunction with the trade name of DISTRIBUTOR or in connection with the sale or
distribution of any Products other than those manufactured by the Manufacturers.
Upon and after termination of this Agreement, DISTRIBUTOR shall not use said
names or the marks or similar names or marks in any shape or form. DISTRIBUTOR
will, insofar as it is or becomes aware of same, immediately bring to the
attention of M&R any improper or wrongful or confusing use of Manufacturers'
names, marks, emblems, designs or packages, or confusingly similar names, marks,
emblems, designs or packages or other similar industrial or commercial rights on
products which come to his notice or attention, together with such information
as will enable M&R to identify the sources of such improper or wrongful or
confusing use, and will cooperate with M&R in causing such improper or wrongful
or confusing use to be discontinued.
XII
XII FORCE MAJEURE
12.01 Relief of M&R. It is further acknowledged by and between the parties
that M&R's obligation to deliver any equipment or parts ordered is subject to
the availability of raw
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materials, to prior commitments, fires, strikes, acts of God, governmental
regulations, decrees, actions, and any other cause beyond its control which may
delay or prevent performance by M&R.
Xlll
Xlll WARRANTY
13.01 Individual Warranties of Products. Products are supplied with a
statement of warranty. No other warranties, express or implied, are made by M&R
or the Manufacturers, and DISTRIBUTOR cannot and will not attempt to commit or
bind M&R or the Manufacturers to any other warranty without M&R's written
consent.
XIV
XIV M&R POLICIES
14.01 Policies. DISTRIBUTOR shall at all times conform to all policies and
guidelines from time to time promulgated by M&R in connection with the
performance of DISTRIBUTOR's duties under this Agreement.
14.02 Product Changes. M&R or the Manufacturers may change the design or
composition of any Products without obligation to DISTRIBUTOR. M&R will,
however, give DISTRIBUTOR reasonable notice of all significant changes.
14.03 Non-Assignability. DISTRIBUTOR has been selected as a distributor
based on its particular sales and service ability, and this Agreement
contemplates significant personal services by DISTRIBUTOR. No rights under this
Agreement may be assigned by DISTRIBUTOR without M&R's prior written consent,
which may be given or withheld in M&R's sole and absolute discretion.
14.04 Benefit. This Agreement shall obligate and benefit the successors
and assigns of M8tR and the permitted successors and assigns of DISTRIBUTOR.
14.05 Severability. The provisions of this Agreement are severable and any
invalidity, unenforceability or illegality in any provision or provisions in
this Agreement shall not affect the remaining provisions of this Agreement.
14.06 Counterparts. This Agreement is legally binding on the parties and
shall inure to the benefit of the parties hereto. It may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement represents
the entire understanding between the parties and supersedes any and all prior
agreements.
14.07 Governing Law. This Agreement shall be deemed made and construed
under the laws of the State of Illinois and venue for resolution of all
controversies arising out of
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this Agreement or the subject matter hereof shall only be proper in the Circuit
Court of DuPage County, Illinois or the federal court in the Northern District
of Illinois.
14.08 Amendments. The terms and conditions of this Agreement cannot be
terminated, modified, or amended, except in writing, signed by both parties
hereto.
14.09 Enforcement. Should it be necessary for M&R to initiate legal
proceedings to enforce its rights under this Agreement and M&R is the prevailing
party in such proceedings (whether or not such proceeding result in a court
order or judgment), DISTRIBUTOR agrees to pay and discharge all costs,
attorney's fees and expenses that are incurred by M&R in enforcing the
provisions and agreements contained herein.
DISTRIBUTOR: CLINTON MACHINERY CORP. M&R SALES AND SERVICE, INC.
By:__________________________________ By:_____________________________
Title:_______________________________ Title:__________________________
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Schedule 1
M&R Sales & Service, Inc.
Discounts
1. All capitalized terms not otherwise defined in this Schedule 1 shall have
the same meanings as set forth in the attached Distributor Agreement.
2. This schedule of Discounts shall be effective from January 1, 1996 through
December 31, 1996.
3. DISTRIBUTOR shall receive a discount ("Base Discount") equal to
twenty-five percent (25%) of the List Price of all Products (other than
Excluded Equipment and Custom Equipment) sold to DISTRIBUTOR for resales
in the Territory during the Term.
4. In addition to the Base Discount, DISTRIBUTOR shall receive a discount
("Bonus Discount") from the List Price of Products sold to DISTRIBUTOR for
resale in the Territory during the Term if DISTRIBUTOR meets or exceeds
its Sales Goal for the Territory during a fiscal year. Such Bonus Discount
shall be equal to two percent (2%) of the aggregate purchase price, net of
Base Discount, of Products sold in the Territory during such fiscal year
(hereinafter "Net Sales")
5. Nothing contained in this Schedule 1 should be deemed to detract from
M&R's rights to terminate the Agreement or terminate DISTRIBUTOR's
exclusivity or right to sell Products in an area or Territory in the event
any Sales Goal is not met, all as set forth in Articles IV and X of the
Agreement.
6. If DISTRIBUTOR exceeds the aggregate Sales Goal for the Territory during a
fiscal year, DISTRIBUTOR shall receive an additional discount ("1%
Discount is equal to 1% of all Net Sales in excess of DISTRIBUTOR's annual
Sales Goal for the Territory in such fiscal year).
7. The granting of all discounts hereunder is subject to and contingent upon
meeting the payment requirements set forth in Section 5.02 of the
Agreement.
8. All Excluded Equipment shall be sold by M&R directly to buyer in the
Territory and shall not be sold to DISTRIBUTOR for resale. However,
DISTRIBUTOR shall receive as a finder's fee the following percentages of
the purchase price paid and received by M&R from purchasers of the
following equipment (other than House Accounts) in the Territory who are
introduced to M&R by Distributor:
(a) Conquest and HST Transfer Press - ten percent (10%);
(b) VOF Glass Printers - five percent (5%);
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(c) Processor - five percent (5%).
So long as DISTRIBUTOR is not in default under the Agreement, such finder's fee
shall be credited against any outstanding invoice owed by DISTRIBUTOR to M&R at
DISTRIBUTOR's choice. Upon a default by DISTRIBUTOR under the Agreement, the
finder's fee shall be credited against outstanding invoices at M&R's choice. The
sales price paid and received by M&R for any of the foregoing Excluded Equipment
shall be included in the calculation of DISTRIBUTOR's Net Sales for the purpose
of determining whether DISTRIBUTOR has met its Sales Goal, but no Bonus
Discounts or 1% Discounts shall be granted to DISTRIBUTOR based on the purchase
price received by M&R for Excluded Equipment.
9. Custom Equipment shall be sold directly by M&R to buyers in the Territory
and not sold to DISTRIBUTOR for resale. All compensation, credits,
discounts and other consideration, if any receivable by DISTRIBUTOR based
on the sale of Custom Equipment shall be negotiated by M&R and DISTRIBUTOR
in writing prior to the sale.
10. If DISTRIBUTOR reasonably believes that because of the reduced purchase
price negotiated by a prospective buyer of Products in the Territory,
it is not economically feasible for DISTRIBUTOR to purchase the
Products for resale to such buyer, DISTRIBUTOR may request that M&R
sell the Products to the buyer. If M&R ion its sole and absolute
discretion decides to directly sell Products to such buyer, M&R will
credit DISTRIBUTOR's account with an amount equal to the excess, if
any, of the price actually received by M&R from such buyer over the
List Price of the Product, less the Base Discount. In such event, as
with Excluded Equipment, the sales price of the Product will count
toward fulfillment of DISTRIBUTOR's Sales Goal, but shall not be the
basis of the receipt by DISTRIBUTOR of Bonus Discounts or 1% Discounts.
<PAGE>
Exhibit "A"
THE TERRITORY
"Exclusive Territory"
- ---------------------
Textile Graphics
- ------- --------
Area 1 - Central America (including None
Mexico), the Caribbean, and South
America
Area 2 - Europe, North Africa and the None
Middle East
Area 3 - Asia (including the Far None
East), Southeast Asia, India,
Australia and South Africa
"Non-Exclusive Territory"
- -------------------------
Textile Graphics
- ------- --------
None Area 1
Area 2
Area 2
<PAGE>
Exhibit "B"
1996 Sales Goal in Territory = $7,500,000
Area 1 - Central America (including $2,500,000
Mexico), the Caribbean, and South
America
Area 2 - Europe, North Africa and the $2,750,000
Middle East
Area 3 - Asia (including the Far $2,250,000
East), Southeast Asia, India,
Australia and South Africa
<PAGE>
Exhibit 10.15
Chuck Nall
Marc Glazer
Frank Scannavino
Clinton Machinery Corp.
5800 Miami Lakes Drive
Miami Lakes, FL 33014
Re: Distributor Agreement dated January 10, 1996
Originals - Via Overnight Courier
Copies - Via Certified Mail, Return Receipt Requested #Z 702 447 281
Gentlemen:
We are enclosing two (2) executed originals of a Distributor
Agreement between M&R Sales and Service, Inc. and Clinton Machinery Corp. dated
January 10, 1996 (the "Agreement"). We are delivering the enclosed executed
originals of the Agreement on the condition and understanding that you will, no
later than January 31, 1996, in addition to any required deposits to be made on
orders to be placed between now and January 31, 1996, wire transfer to us at the
account set forth below the sum of $1,973,000. If, for whatever reason, we do
not receive said sum on or before January 31, 1996, our execution of the
Agreement shall be deemed to be revoked and the Agreement, and all of the terms
and conditions set forth therein, shall be of no force and effect
Please wire-transfer the funds to the following account:
Bank of America, Illinois
231 South LaSalle Street
Chicago, IL 60697
ABA# 071000039
A/C # 75-02141
A/C Name: MR ACQUISITION, INC
Please call me with any questions.
Very truly yours,
/s/ John A. Major
------------------------
John A. Major
Vice President - Finance
<PAGE>
DISTRIBUTOR AGREEMENT
THIS AGREEMENT made and entered as of the 10th day of January, 1996,
between M&R SALES AND SERVICE, INC., a Delaware corporation, with a principal
place of business in Glen Ellyn, Illinois (hereinafter referred to as "M&R"),
and Clinton Machinery Corp., with a principal place of business in Miami Lakes,
Florida (hereinafter referred to as "DISTRIBUTOR").
WITNESSETH:
I
GRANT OF DISTRIBUTORSHIP
1.01 Appointment. M&R hereby appoints DISTRIBUTOR as its
distributor for its line of Products (other than Excluded Equipment and
Custom Equipment (all as defined in Paragraph 1.02 below)) manufactured by
M&R Printing Equipment, Inc. and Precision Screen Machines, Inc.
(collectively, "Manufacturers") in the Exclusive Territory and the
Non-Exclusive Territory (as defined in Paragraph 2.01 below).
1.02 Products. As used herein, Products shall mean all standard
textile and graphic screen printing and drying equipment and parts manufactured
by the Manufacturers. All equipment and parts designed to customers'
specifications and not of M&R's standard design are hereinafter referred to as
"Custom Equipment".
1.03 Efforts. DISTRIBUTOR agrees to use its best efforts to promote
and sell Products in the Territory. DISTRIBUTOR shall, at its cost and expense,
hire, develop, and supervise its own personnel under such terms and conditions
as DISTRIBUTOR may deem appropriate. Under no circumstances shall any employee,
agent, independent contractor or subcontractor of DISTRIBUTOR be deemed to be a
third party beneficiary of this Agreement. All expenses and disbursements
incurred in the solicitation of orders for Products shall be borne by
DISTRIBUTOR. DISTRIBUTOR shall not incur any liability for the account of M&R,
and shall indemnify and defend M&R against and hold M&R harmless from all
claims, expenses and disbursements in connection with the sale of Products.
DISTRIBUTOR shall, at its own cost and expense, comply with all federal, state
and local laws, including but not limited to all licensing and permitting laws,
statutes or ordinances which may be required in connection with its business.
II
TERRITORY
2.01 Definition. As used herein the terms "Exclusive Territory" and
"Non-Exclusive Territory" shall mean the states listed on Exhibit "A" The
Exclusive Territory and the Non-Exclusive Territory is sometimes hereinafter
collectively referred to as the "Territory".
<PAGE>
2
Subject to M&R's right to market Products to those parties listed on Exhibit "B"
or their affiliates which are collectively hereinafter referred to as "House
Accounts" and the provisions of this Agreement, DISTRIBUTOR shall have the
exclusive right to market Products (other than Excluded Equipment and Custom
Equipment) in the Exclusive Territory and shall have the right, together with
M&R and other distributors, to market Products in the Non-Exclusive Territory.
2.02 Inquiries. M&R agrees to refer to DISTRIBUTOR all inquiries and
orders received from customers or prospective customers in the Exclusive
Territory, except those inquiries and orders received from House Accounts.
DISTRIBUTOR shall receive commissions, finder's fees and other compensation in
connection with sales of Products to House Accounts if agreed in writing with
M&R prior to such sales.
2.03 Exclusivity. If, in the reasonable opinion of M&R, DISTRIBUTOR
fails to maintain a sales force, showroom and technical personnel necessary to
perform all of its obligations to promote sales in the Exclusive Territory, upon
written notice to DISTRIBUTOR, M&R may convert all or part of the Exclusive
Territory into a Non-Exclusive Territory.
III
TERM
3.01 Initial Term. The term ("Term") of this Agreement shall be for
three years from the date hereof and shall expire on December 31, 1998, unless
terminated in accordance with the early termination provisions set forth in
Article X. The Term shall be automatically renewed for successive one year terms
unless on or before July 1 of the year in which the Term is due to expire, M&R
or DISTRIBUTOR delivers a written notice to the other party electing to
terminate this Agreement as of December 31 of that year.
IV
SALES GOALS
4.01 Minimum Sales. If DISTRIBUTOR fails to meet its Sales Goal (as
hereinafter defined) for the Territory for any fiscal year (October 1 to
September 30) commencing October 1, 1995, M&R may terminate this Agreement upon
written notice to DISTRIBUTOR. If DISTRIBUTOR shall meet its Sales Goal for the
entire Territory, but shall fail to meet its Sales Goal with respect to the sale
of textile Products in any particular state in the Exclusive Territory, at M&R's
sole and absolute discretion and upon written notice from M&R, DISTRIBUTOR shall
lose its exclusive status in such state for which it did not meet its Sales Goal
and such state shall thereafter be deemed to be a Non-Exclusive Territory. If
DISTRIBUTOR shall meet its Sales Goal for the entire Territory, but shall fail
to meet its graphic or textile Sales Goal in any state in the Non-Exclusive
Territory, at M&R's sole and absolute discretion and upon written notice from
M&R, DISTRIBUTOR shall no longer have the right to sell that category of
Products in the state in which its Sales Goal was not met. DISTRIBUTOR shall be
deemed not to have met its Sales Goal for a fiscal year if the List Price (as
defined in Section 5.01 ) for new Products shipped by M&R during such fiscal
year, net of
<PAGE>
3
discounts, warranty claims, service charges, crating, freight, insurance, taxes
and returns fails to equal or exceed the applicable Sales Goal set forth on
Exhibit "C" attached hereto.
4.02 Renegotiation of Standards. The Sales Goal for the Territory,
together with the Sales Goal for each state in the Territory, shall be
renegotiated by the parties annually for the following fiscal year and shall be
agreed to by the parties not later than September 15 of each year during the
Term. In renegotiating the new Sales Goal, the parties shall consider additions
to or deletions from M&R's list of Products, changes in prices charged by M&R,
planned marketing promotions and other relevant factors. In the event that the
parties fail to agree upon a new Sales Goal prior to the date set forth above,
either party may terminate this Agreement as of a date at least six months after
written notice is delivered to the other party of such party's election to
terminate this Agreement. During the period from the delivery of the notice to
terminate until the termination of this Agreement, all Exclusive states shall be
deemed Non-Exclusive states and, for the purposes of determining discounts
pursuant to Schedule 1, the then existing Sales Goals shall remain in effect.
V
PRICES, DISCOUNTS AND SECURITY INTEREST
5.01 Prices. Applicable prices for any Products ordered by
DISTRIBUTOR for resale shall be the price for said Products as set forth in
M&R'S then current published list of prices for the particular model or part
ordered ("List Price") less the discounts, if any, referred to in 5.02 below.
5.02 Discounts. DISTRIBUTOR will receive discounts from the List
Price pursuant to and subject to the conditions set forth on Schedule 1 attached
hereto. Notwithstanding anything contained herein or on Schedule 1, if payment
in full for Products ordered by DISTRIBUTOR is received by M&R more than thirty
(30) days but less than sixty (60) days after the shipping date of the Product
by M&R, no Bonus Discount or 1% Discount (as described on Schedule 1 ) will be
earned by DISTRIBUTOR and if payment in full for Products ordered DISTRIBUTOR is
not received by M&R within sixty (60) days after the shipping date of the
Product by M&R, DISTRIBUTOR shall earn no Base Discount, Bonus Discount or 1%
Discount on such Product; provided however with respect to payments due from the
date hereof through September 30, 1996, DISTRIBUTOR shall not lose its Bonus
Discount or 1% Discount if payment is made within forty-five (45) days after the
shipping date of the Product by M&R. All Base Discounts shall be deductible only
from the List Price of the Products for which the Base Discount is given. So
long as DISTRIBUTOR is not in default hereunder, the Bonus Discounts and 1%
Discounts may be credited, at DISTRIBUTOR's option, against any open invoice due
M&R by DISTRIBUTOR. If DISTRIBUTOR is in default hereunder, M&R may credit the
Bonus Discount and 1% Discount against any invoice of its choice. No discounts
shall be payable by M&R to DISTRIBUTOR in cash. Schedule 1 may be modified or
amended by M&R on an annual basis, as of the first day of October of each year
during the Term. Notwithstanding any of the foregoing, DISTRIBUTOR shall not
receive any Bonus Discount or
<PAGE>
4
1% Discount for products shipped during the period October 1, 1995 through
December 31, 1995 even though such Bonus Discount or 1% Discount would otherwise
be receivable hereunder.
5.03 Security Interest. If M&R believes in good faith that it would
not be prudent for M&R to sell a Product without obtaining a first lien security
interest in the Product, upon written notice to DISTRIBUTOR, M&R may sell the
Product directly to the buyer of the Product identified by DISTRIBUTOR without
first selling the Product to DISTRIBUTOR, so long as M&R pays or credits to
DISTRIBUTOR the profit that DISTRIBUTOR would have made if such sale was made to
DISTRIBUTOR pursuant to the terms of this Agreement and then resold to the
ultimate buyer of the Product for the price and on the terms of the direct sale
by M&R to such ultimate buyer, considering all discounts to which DISTRIBUTOR
would otherwise have been entitled pursuant to this Agreement.
5.04 Terms of Payment. Payment in good funds of one-third of the
List Price, net of the Base Discount, of ordered Products shall accompany all
orders of Products and no Products will be shipped without receipt by M&R of
such one-third payment; provided, however, leased equipment shall be subject to
terms negotiated by M&R and DISTRIBUTOR on a case-by-case basis prior to
shipping. The remainder of the List Price, net of any applicable discounts, for
the ordered Products shall be due not later than thirty (30) days after shipment
of the Products by M&R. Notwithstanding the foregoing, if DISTRIBUTOR disputes
the validity of an invoice and M&R determines in its sole and absolute
discretion that the basis for the dispute was justified and caused by the fault
of M&R, for purposes of this Agreement, DISTRIBUTOR's obligation to pay such
invoice shall be suspended until actions deemed appropriate by M&R are taken
with respect to such dispute.
5.05 Excluded Equipment; Custom Equipment. If during the Term,
DISTRIBUTOR introduces to M&R a customer in the Territory who purchases Excluded
Equipment from M&R, DISTRIBUTOR shall be eligible to receive a finder's fee upon
the sale of the Excluded Equipment and receipt by M&R of the entire purchase
price thereof, in the amount and subject to the conditions set forth in Schedule
1. All finder's fee or other arrangements with respect to sales of Custom
Equipment in the Territory shall be subject to mutual agreement between M&R and
DISTRIBUTOR, provided that absent an express prior agreement with respect to the
sale of such Custom Equipment, no commission, finder's fee or other
consideration shall be payable to DISTRIBUTOR based on the sale of Custom
Equipment.
VI
INDEPENDENT PARTIES
6.01 No Agency. It is acknowledged that DISTRIBUTOR and its
employees shall not be deemed and shall under no circumstances represent
themselves to be agents or representatives of M&R, and, further, that
DISTRIBUTOR shall have no right to enter into any contracts and/or commitments
of any type on behalf of M&R.
6.02 Independent Contractors. DISTRIBUTOR and M&R understand that,
except as specifically set forth herein, the provisions of this Agreement are
not intended to give
<PAGE>
5
M&R any substantial control over DISTRIBUTOR'S method of operation. DISTRIBUTOR
shall be solely responsible for its conduct, direction, operation and
activities, including, but not limited to, the conduct, direction, operation and
activities of its employees and subcontractors in connection with its business
and the performance of its obligations under this Agreement. This Agreement is
not intended to grant a franchise to DISTRIBUTOR.
VII
M&R'S LIABILITY
7.01 Non-Liability. M&R shall not be liable for any injury, loss or
damage to any individual, person or property, which injury or damage was caused
directly or indirectly by the negligence of DISTRIBUTOR or its employees. M&R
shall not be liable for any injury, loss or damage, unless the same was directly
caused by the negligence of M&R, its agents or employees. M&R assumes no
liability for any damages, including incidental or consequential damages for
loss of goodwill, production or income which results from the use or misuse of
its Products by DISTRIBUTOR or others.
VIII
DISTRIBUTOR'S RESPONSIBILITIES
8.01 Sales Organization. DISTRIBUTOR will establish and maintain a
trained, conscientious and effective sales organization to assure representation
of M&R'S Products in the Territory at a level to achieve the highest level of
sales possible.
8.02 Reporting. DISTRIBUTOR will report promptly in writing to M&R
any complaint or customer requirements which DISTRIBUTOR cannot immediately
remedy, any recurring complaint regarding Products and all incidents involving
Products which result in personal injury or property damage.
8.03 Confidential Information. All materials provided to DISTRIBUTOR
by M&R which are not generally known in the trade are confidential (including
price lists) and furnished solely for DISTRIBUTOR'S use in performing
DISTRIBUTOR'S obligations under this Agreement. DISTRIBUTOR agrees to return
such materials to M&R upon request and, in any event, upon termination of this
Agreement.
8.04 Showroom. DISTRIBUTOR shall maintain on its premises a
showroom to demonstrate Products.
8.05 Product Inventory. DISTRIBUTOR agrees to keep in inventory
a representative grouping of Products.
8.06 Technical Support. DISTRIBUTOR agrees to provide technical
support to customers in its Territory after sale to ensure that the Products
are properly installed and operating.
<PAGE>
6
8.07 Competitive Equipment. As partial consideration for this grant
of a distributorship, DISTRIBUTOR agrees that it will not carry or offer for
sale any equipment competitive with Products offered for sale by M&R as of the
date hereof or Products offered for sale by M&R hereafter; provided that M&R
agrees that DISTRIBUTOR may carry and offer for sale small manual presses and
screen washers that may be competitive with the Products. If at the time a new
Product is added to those offered by M&R, DISTRIBUTOR then has in inventory or
has ordered products competitive with M&R's Products, DISTRIBUTOR shall be
permitted to dispose of the competitive equipment within eighteen months after
the introduction of the competitive Product by M&R, but DISTRIBUTOR shall not
place orders for such new competitive equipment after the date of M&R'S
introduction of its Product.
8.08 Sales Tax. DISTRIBUTOR shall be solely responsible for the
collection, reporting and payment of all sales, use and other similar taxes
payable to DISTRIBUTOR hereunder. DISTRIBUTOR shall provide M&R with all
documents (including certificates of resale, exemption etc.) necessary pursuant
to the various states' laws to ensure that if M&R has not collected sales tax
from DISTRIBUTOR in connection with a sale hereunder, such sale of Products
pursuant to this Agreement is exempt from such taxes. DISTRIBUTOR hereby
indemnifies and holds M&R harmless from all liability and expense in connection
with such taxes.
IX
ORDER ENTRY
9.01 Order Procedures. All orders from DISTRIBUTOR are subject to
acceptance by M&R at its offices in Glen Ellyn, Illinois, according to M&R'S
policies and procedures and shall not be deemed accepted for any purpose unless
accompanied by a completed purchase order on M&R's approved form and (except for
leased Products which shall be subject to prior agreement between M&R and
Distributor) a one-third down payment. DISTRIBUTOR understands that M&R may
reject or withhold acceptance and shipment of orders if DISTRIBUTOR fails to
comply with this Agreement, M&R's credit or other policies, or if DISTRIBUTOR'S
credit standing becomes impaired. M&R reserves the right to determine in its
sole and absolute discretion in which sequence orders from DISTRIBUTOR and from
other customers will be filled.
X
TERMINATION
10.01 Early Termination. M&R may terminate this Agreement upon six
months prior written notice to DISTRIBUTOR in the following events; provided
that during such six (6) month period all states which constitute Exclusive
Territories under Section 2.01 hereof shall instead be deemed to be
Non-Exclusive Territories:
<PAGE>
7
(a) failure by DISTRIBUTOR to remit payments for Products to M&R
when due pursuant to the terms of this Agreement, when such failure continues
for sixty (60) days after written notice of such failure is given to
DISTRIBUTOR;
(b) repeated failure by DISTRIBUTOR to cooperate with M&R's
management in the promotion and sale of Products, when such failure continues
for sixty (60) days after written notice of such failure is given to
DISTRIBUTOR;
(c) failure by DISTRIBUTOR to maximize the market potential of
Products in the Territory by (i) failing to cooperate with M&R's management in
coordinating sales and marketing efforts in order to maximize their effect,
and/or (ii) continuing to take actions which M&R's management reasonably
believes, and has advised DISTRIBUTOR it believes, do not enhance the reputation
of Products and/or do not contribute to maximizing the market potential of the
Territory, when such failure or action continues for sixty (60) days after
written notice of such failure or action is given to DISTRIBUTOR;
(d) breach by DISTRIBUTOR of a material provision in this Agreement
including, without limitation, the obligations set forth in Paragraph 8.07
hereof, when such breach continues for sixty (60) days after written notice of
such failure is given to DISTRIBUTOR;
(e) six (6) months following written notice to DISTRIBUTOR stating
the failure of DISTRIBUTOR to meet at least 80% of its Sales Goals for the
Territory;
(f) if DISTRIBUTOR owns an interest in or control a graphics or
textile printing business which uses equipment similar to the Products and does
not dispose of such interest within sixty (60) days after written notice from
M&R. This paragraph shall not apply if DISTRIBUTOR acquires such ownership or
control rights upon foreclosure of security for a trade account. In such event,
DISTRIBUTOR shall give written notification to M&R within thirty (30) days of
acquiring such interest and divest itself of such business as soon as possible,
and in all events within ninety (90) days after acquisition.
10.02 Bankruptcy. This Agreement shall be deemed to be immediately
terminated upon written notice to DISTRIBUTOR if proceedings are initiated by or
against DISTRIBUTOR in bankruptcy, or under any insolvency laws, or for
reorganization, receivership, dissolution or liquidation, an assignment for the
benefit of creditors or if a change occurs in the ownership, form of
organization or working capital position of DISTRIBUTOR which reasonably causes
M&R to believe DISTRIBUTOR cannot fulfill its obligations under this Agreement;
and
10.03 Actions on Termination. Upon the termination of this
Agreement for any reason:
(a) M&R or any of its agents, representatives or other designees,
including any successor DISTRIBUTOR, shall have the right, immediately upon
termination, to sell
<PAGE>
8
Products directly or indirectly to any customer developed or dealt with by
DISTRIBUTOR without incurring any liability or accountability to DISTRIBUTOR;
(b) M&R may, at is option, repurchase from DISTRIBUTOR for the price
actually paid to M&R by DISTRIBUTOR (exclusive of any amounts attributable to
any freight, insurance or forwarding charges, or any taxes or other governmental
charges), all or any portion of the salable, unused and undamaged Products
purchased by DISTRIBUTOR from M&R prior to termination that remain in
DISTRIBUTOR's inventory; provided, however, that DISTRIBUTOR may sell Products
for which it has accepted orders from customers prior to the date of
termination, or for which M&R does not exercise its right of repurchase.
DISTRIBUTOR shall return all repurchased Products to M&R at DISTRIBUTOR's cost
and expense (including, without limitation, freight, insurance and forwarding
charges);
(c) All unpaid amounts owing from either party to the other
hereunder shall be paid, including amounts owing for Products purchased by
DISTRIBUTOR prior to termination but for which an invoice has not yet been
submitted;
(d) DISTRIBUTOR shall cease promoting or marketing the Products or
making any use of M&R's or Manufacturer's trademarks and shall return promptly
to M&R all promotional and sales materials provided to it; and
(e) Neither party shall have any continuing duty, liability or
obligation to the other hereunder, except that the DISTRIBUTOR's obligations
relating to confidentiality and all undertakings hereunder by DISTRIBUTOR to
indemnify and defend M&R shall survive such termination.
XI
PRODUCT MARKINGS; TRADEMARKS
11.01 Serial or Machine Numbers. Manufacturers shall identify each
Product with a serial number or machine number, which number shall not be
removed, altered or transferred to any other machine or piece of equipment at
any time.
11.02 Equipment Identification. All equipment sold under the terms
of this Agreement as well as all proposals forwarded to any prospective
customers by DISTRIBUTOR shall clearly identify the equipment being sold as
being manufactured by the Manufacturer and shall carry the Manufacturer's
trademarks. Under no circumstances shall DISTRIBUTOR, its agents or employees,
represent Products furnished by the Manufacturer as being manufactured by
DISTRIBUTOR or by anyone other than the Manufacturer, directly or indirectly.
11.03 Trademarks. DISTRIBUTOR expressly understands and acknowledges
that M&R has developed and will develop considerable goodwill in connection with
its and Manufacturer's names and marks (the "marks") and that DISTRIBUTOR will
not by virtue of this Agreement or performance under it acquire any interest in
the marks. In order to more fully protect M&R's and the Manufacturer's interest
in the marks, it is agreed that, except on literature
<PAGE>
9
provided by M&R, any use by DISTRIBUTOR of the marks, either alone or in
conjunction with DISTRIBUTOR's name, whether for purposes of advertising or
otherwise, will be subject to prior submission to M&R and receipt of written
approval of use as submitted. Under no circumstances will DISTRIBUTOR use any of
the marks in the absence of such prior written approval from M&R, and
unauthorized use may, at M&R's election, result in immediate termination of this
Agreement. DISTRIBUTOR shall not use the names "M&R Sales and Service, Inc.",
"M&R Printing Equipment" or "Precision Screen Machines" nor any other name
confusingly or deceptively similar to it in or in conjunction with the trade
name of DISTRIBUTOR or in connection with the sale or distribution of any
Products other than those manufactured by the Manufacturers. Upon and after
termination of this Agreement, DISTRIBUTOR shall not use said names or the marks
or similar names or marks in any shape or form. DISTRIBUTOR will, insofar as it
is or becomes aware of same, immediately bring to the attention of M&R any
improper or wrongful or confusing use of Manufacturers' names, marks, emblems,
designs or packages, or confusingly similar names, marks, emblems, designs or
packages or other similar industrial or commercial rights on products which come
to his notice or attention, together with such information as will enable M&R to
identify the sources of such improper or wrongful or confusing use, and will
cooperate with M&R in causing such improper or wrongful or confusing use to be
discontinued.
XII
FORCE MAJEURE
12.01 Relief of M&R. It is further acknowledged by and between the
parties that M&R'S obligation to deliver any equipment or parts ordered is
subject to the availability of raw materials, to prior commitments, fires,
strikes, acts of God, governmental regulations, decrees, actions, and any other
cause beyond its control, which may delay or prevent performance by M&R.
XIII
WARRANTY
13.01 Individual Warranties of Products. Products are supplied with
a statement of warranty. No other warranties, express or implied, are made by
M&R or the Manufacturers, and DISTRIBUTOR cannot and will not attempt to commit
or bind M&R or the Manufacturers to any other warranty without M&R'S written
consent.
XIV
M&R POLICIES
14.01 Policies. DISTRIBUTOR shall at all times conform to all
policies and guidelines from time to time promulgated by M&R in connection with
the performance of DISTRIBUTOR's duties under this Agreement.
<PAGE>
10
14.02 Product Changes. M&R or the Manufacturers may change the
design or composition of any Products without obligation to DISTRIBUTOR. M&R
will, however, give DISTRIBUTOR reasonable notice of all significant
changes.
14.03 Non-Assignability. DISTRIBUTOR has been selected as a
distributor based on its particular sales and service ability, and this
Agreement contemplates significant personal services by DISTRIBUTOR. No rights
under this Agreement may be assigned by DISTRIBUTOR without M&R'S prior written
consent, which may be given or withheld in M&R's sole and absolute discretion.
14.04 Benefit. This Agreement shall obligate and benefit the
successors and assigns of M&R and the permitted successors and assigns of
DISTRIBUTOR.
14.05 Severability. The provisions of this Agreement are severable
and any invalidity, unenforceability or illegality in any provision or
provisions in this Agreement shall not affect the remaining provisions of this
Agreement.
14.06 Counterparts. This Agreement is legally binding on the parties
and shall inure to the benefit of the parties hereto. It may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement represents
the entire understanding between the parties and supersedes any and all prior
agreements.
14.07 Governing Law. This Agreement shall be deemed made and
construed under the laws of the State of Illinois and venue for resolution of
all controversies arising out of this Agreement or the subject matter hereof
shall only be proper in the Circuit Court of DuPage County, Illinois or the
federal court in the Northern District of Illinois.
14.08 Amendments. The terms and conditions of this Agreement cannot
be terminated, modified, or amended, except in writing, signed by both parties
hereto.
14.09 Enforcement. Should it be necessary for M&R to initiate legal
proceedings to enforce its rights under this Agreement and M&R is the prevailing
party in such proceedings (whether or not such proceeding result in a court
order or judgment), DISTRIBUTOR agrees to pay and discharge all costs,
attorney's fees and expenses that are incurred by M&R in enforcing the
provisions and agreements contained herein.
DISTRIBUTOR: CLINTON MACHINERY CORP. M&R SALES AND SERVICE, INC.
By: /s/ Jack Scannavino By: /s/ Jeff Elinore
----------------------- ----------------------------
Title: President Title: Vice President of Sales
<PAGE>
11
Schedule 1
M&R Sales & Service, Inc.
Discounts
1. All capitalized terms not otherwise defined in this Schedule 1 shall have
the same meanings as set forth in the attached Distributor Agreement.
2. This schedule of Discounts shall be effective from October 1, 1995
through September 30, 1996.
3. DISTRIBUTOR shall receive a discount ("Base Discount") equal to twenty
percent (20%) of the List Price of all Products (other than Excluded
Equipment and Custom Equipment) sold to DISTRIBUTOR for resale in the
Territory during the Term.
4. In addition to the Base Discount, DISTRIBUTOR shall receive a discount
("Bonus Discount") from the List Price of Products sold to DISTRIBUTOR for
resale in the Territory during the Term based on the following:
(a) If DISTRIBUTOR meets or exceeds its aggregate Sales Goal for the
Territory during a fiscal quarter, DISTRIBUTOR shall earn a Bonus
Discount equal to four percent (4%) of the aggregate purchase price,
net of Base Discount of Products sold in the Territory during such
fiscal quarter (hereinafter "Net Sales");
(b) If DISTRIBUTOR achieves at least ninety percent (90%) but less than
one hundred percent (100%), of its aggregate Sales Goal for the
Territory during a fiscal quarter, DISTRIBUTOR shall receive a Bonus
Discount of three percent (3%) of Net Sales;
(c) If DISTRIBUTOR achieves at least eighty-five percent (85%), but less
than ninety percent (90%), of its aggregate Sales Goal for the
Territory during a fiscal quarter, DISTRIBUTOR shall receive a Bonus
Discount equal to two percent (2%) of its Net Sales; and
(d) If DISTRIBUTOR achieves less than eighty-five percent (85%) of its
aggregate Sales Goal for the Territory during a fiscal quarter,
DISTRIBUTOR shall receive no Bonus Discount.
Nothing contained in this Schedule 1 should be deemed to detract from M&R's
rights to terminate the Agreement or terminate DISTRIBUTOR's exclusivity or
right to sell Products in a state or Territory in the event any Sales Goal is
not met, all as set forth in Articles IV and X of the Agreement.
<PAGE>
12
If DISTRIBUTOR exceeds the aggregate Sales Goal for the Territory during a
fiscal year, DISTRIBUTOR shall receive an additional discount ("1% Discount")
equal to 1% of all Net Sales in excess of DISTRIBUTOR's annual Sales Goal for
the Territory in such fiscal year.
6. The granting of all discounts hereunder is subject to and contingent upon
meeting the payment requirements set forth in Section 5.02 of the
Agreement.
7. All Excluded Equipment shall be sold by M&R directly to buyer in the
Territory and shall not be sold to DISTRIBUTOR for resale. However,
DISTRIBUTOR shall receive as a finder's fee the following percentages of
the purchase price paid and received by M&R from purchasers of the
following equipment (other than House Accounts) in the Territory who are
introduced to M&R by Distributor
(a) Conquest and HST Transfer Press - ten percent (10%);
(b) VOF Glass Printers - three percent (3%);
(c) Processor - two percent (2%).
So long as DISTRIBUTOR is not in default under the Agreement, such finder's fee
shall be credited against any outstanding invoice owed by DISTRIBUTOR to M&R at
DISTRIBUTOR's choice. Upon a default by DISTRIBUTOR under the Agreement, the
finder's fee shall be credited against outstanding invoices at M&R's choice. The
sales price paid and received by M&R for any of the foregoing Excluded Equipment
shall be included in the calculation of DISTRIBUTOR's Net Sales for the purpose
of determining whether DISTRIBUTOR has met its Sales Goal, but no Bonus
Discounts or 1% Discounts shall be granted to DISTRIBUTOR based on the purchase
price received by M&R for Excluded Equipment; (for example, if DISTRIBUTOR's
Sales Goal was $1,000,000, DISTRIBUTOR had prior Net Sales of $900,000 and
$100,000 was received by M&R as the purchase price for Excluded Equipment,
DISTRIBUTOR shall be deemed to have met its Sales Goal and shall receive a four
percent (4%) Bonus Discount on the $900,000 of Net Sales, but shall not receive
any Bonus Discount on the $100,000 received from the sale of the Excluded
Equipment.)
8. Custom Equipment shall be sold directly by M&R to buyers in the Territory
and not sold to DISTRIBUTOR for resale. All compensation, credits,
discounts and other consideration, if any, receivable by DISTRIBUTOR based
on the sale of Custom Equipment shall be negotiated by M&R and DISTRIBUTOR
in writing prior to the sale.
9. If DISTRIBUTOR reasonably believes that because of the reduced purchase
price negotiated by a prospective buyer of Products in the Territory,
it is not economically feasible for DISTRIBUTOR to purchase the
Products for resale to such buyer, DISTRIBUTOR may request that M&R
sell the Products directly to the buyer. If M&R in its sole and
absolute discretion decides to directly sell Products to such buyer,
M&R will credit DISTRIBUTOR's account with an amount equal to the
excess, if any, of the price actually received by M&R from such buyer
over the List Price of the Product, less the Base Discount. In such
event, as with Excluded Equipment, the sales price of the
<PAGE>
13
Product will count toward fulfillment of DISTRIBUTOR's Sales Goal, but
shall not be the basis of the receipt by DISTRIBUTOR of Bonus Discounts or
1% Discounts.
<PAGE>
14
Exhibit "A"
THE TERRITORY
"Exclusive Territory"
Textile Graphics
- ------- --------
Florida None
Georgia
Alabama
South Carolina
Tennessee
"Non-Exclusive Territory"
Textile Graphics
- ------- --------
Mississippi Florida
Kentucky Georgia
Alabama
South Carolina
Mississippi
Kentucky
Tennessee
<PAGE>
15
Exhibit "B"
HOUSE ACCOUNTS
Logo 7 - Indianapolis, IN Gullwing - Winston-Salem, NC
Oats - Cape May Courthouse, NJ Blue Sky Graphics - Marion, IN
Oats 11- Bethlehem, PA Art Venture - Chattanooga, TN
A.V.I. - Gardena, CA Spectra - Chattanooga TN
Nutmeg Mills - All Locations Kel-Tex - Cape May Courthouse, NJ
Shirt Shed, Inc. - Wabash, IN Sony - All Locations
Nike - All Locations New Age Graphics - Anaheim, CA
H.H. Cutler - All Locations Transcolor - All Locations
Four Seasons - Conway, SC Creative Silk Screen - Rockford, IL
Giant - Commerce, CA Miller/Zell - Atlanta, GA
Printworks - Franklin, WI Peeler Rug - Gafney, SC
Barth & Dryfuss - All Locations R.C. Screen Print - Patterson, NJ
Changes - Middle Village, NY Garan - All Locations
Spumoni - San Francisco, CA Oshkosh - Liberty, KY
Sun Sportswear- Ken, WA Monroe Prints - Monroe, NC
Pageland - All Locations Sunrise Sportswear - Clarksville, IN
Fruit Of The Loom - All Locations
M&R reserves the rights to add new House Accounts to this Exhibit "B" upon
written notice to DISTRIBUTOR.
<PAGE>
16
Exhibit "C"
SALES GOALS
Aggregate Sales Goal in Territory = $6,700,000
Exclusive Territory
------------------- Textile
-------
Florida $2,600,000
Georgia $800,000
Alabama $600,000
South Carolina $500,000
Tennessee $500,000
Non-Exclusive
Territory
------------- Textile Graphics
------- --------
Mississippi $50,000 $50,000
Kentucky $200,000 $50,000
Tennessee N/A $150,000
Florida N/A $350,000
Georgia N/A $500,000
Alabama N/A $150,000
South Carolina N/A $200,000
<PAGE>
October 4, 1996
Messrs. Gunesch and Morton
RHEIN-NADEL MASCHINENNADEL GmbH
Reichsweg 19/42
Postfach 1408
D-52068 Aachen Germany
Re: AGREEMENT between
RHEIN-NADEL/MUVA and
/UNITY/SUNBRAND
Gentlemen:
I am In receipt of your fax of September 30, 1996 pointing out the error
on page 4 of the above agreement regarding minimum purchase levels of Unity. We
are in agreement with the revision to the levels as you discussed with Alan Lee
in June and inadvertently executed an earlier draft of the agreement.
As discussed with Alan Lee, the levels for Unity will be as follows:
1 Jan 97 - 31 Dec 97 9.0 million needles
1 Jan 98 - 31 Dec 98 10.0 million needles
Enclosed is a revised page 4 of the agreement which I have initialled.
Please indicate acceptance of this by signing the enclosed duplicate of this
letter and returning to me.
I wish to thank you for bringing this to my attention.
Regards.
Sincerely,
/s/ John K. Ziegler, Jr.
---------------------------------
John K. Ziegler, Jr.
<PAGE>
A G R E E M E N T
Between Messrs: RHEIN-NADEL MASCHINENNADEL GMBH
(called hereafter RN)
&
MUVA MASCHINENNADEL GMBH
(called hereafter MUVA)
both located at Reichsweg 19-42
52068 Aachen
Germany
(collectively called hereafter RN/MUVA)
and Messrs: WG, Inc.
(called hereafter WG)
located at 900 Milik Street
Carteret, New Jersey 07008-1117
USA
including Unity Sewing Supply Co.
A Division of WG, Inc.
Carteret, New Jersey, USA
&
Sunbrand
A Division of WG, Inc.
Atlanta, Georgia, USA
1. This agreement becomes effective January 01 1997 and supersedes all
previous agreements.
2. RN/MUVA grant the exclusive sales rights for RN and MUVA brand sewing
machine needles to WG for the territory of the United States of America
for the term specified in paragraph 10 but not exempt the provisions of
paragraph 11.
3. WG agree not to represent any other manufacturers of sewing machine
needles or to import, either directly or indirectly, sewing machine
needles in the U.S.A. from other sources unless with the knowledge and
approval of RN/MUVA. Except that SB will be permitted to sell Schmetz
needle in reasonable quantities over the term of this agreement. For each
and every breach of this obligation the agreement can be terminated by
RN/MUVA under the provisions of paragraph 13.
<PAGE>
2
WG shall inform us on the RN/MUVA needle sales of each month and stock
level at the end of the month. This information to be submitted latest 3
weeks from the past month. WG shall not reveal, either during the term of
the agreement or after its termination, the trade secrets of RN/MUVA nor
use such secrets otherwise than for purposes of the agreement.
4. All enquiries received by RN/MUVA from interested parties in the U.S.A.
will be passed to WG. WG shall always keep RN/M W A informed of their
activities as well as of the market conditions within the territory and
their special promotion and sales activities.
5. Payment terms are for UNITY 30 days after invoice date ./. 1.75% and for
SUNBRAND by draft 120 days from shipping date. All losses caused by
delayed settlement of invoices are for the account of WG and are to be
paid promptly. The goods remain the property of RN/MUVA until complete
payment is received.
6. Present prices are as in the enclosed annex 1 in US$ and are CIF port of
entry, customs duties not included. Prices will be changed according to
market conditions and/or unavoidable increases in the cost price of the
products. Prices can be modified if significant changes occur in the
US$/DM exchange rate.
7. RN/MUVA hereby grants WG a license which is exclusive for the U.S.A. to
use the RN and MUVA names and trademarks during the term of this agreement
but only in connection with the sale or use of sewing machine needles and
other needle products manufactured or sold by RN/M W A.
8. WG agrees to engage itself with all means reasonably available in the
promotion and sale of RN/MUVA needles in the U.S.A. In principle, the
costs of advertising and exhibitions will be for the account of WG.
9. WG is obliged to inform RN/MUVA in advance about all changes and
alterations in their present status (management, effective control
etc.) by registered letter.
10. The validity of this agreement is two years starting January 01,
1997. This agreement will be renewed automatically for the period of
one year unless either party notifies the other that the agreement
will not be renewed. This notice has to be made by registered letter
upon not less than three months warning. Expiration or termination of
this agreement shall not affect WG's right to receive and sell needles
which are on order or in their possession at the time of expiration or
termination and the license referred to in paragraph 7 shall continue
to the extent necessary to permit WG's disposition of such needles.
In case of gross negligence or exceptional circumstances each party has
the right to cancel the contract under the provisions of paragraph 13.
<PAGE>
3
11. The specified minimum purchase volumes are applicable for the
following years:
UNITY SUNBRAND
----- --------
1/Jan. 97 - 31/Dec. 97 9.0 Million needles 6.0 Million needles
1/Jan. 98 - 31/Dec. 98 10.0 Million needles 7.0 Million needles
In case the above mentioned minimum purchase volumes are not reached, the
exclusive sales rights as in the provisions of paragraph 2 can be
cancelled by RN/MUVA upon not less than 90 days notice to WG.
12. German law applies. Place of jurisdiction is Aachen. In the event of any
dispute between the parties concerning or arising out of this agreement,
the same shall be settled by arbitration conducted in Aachen in accordance
with the rules of the International Chamber of Commerce and judgment upon
any award rendered by the arbitrators may be entered in Aachen.
13. No termination of this agreement may be effected or asserted by RN/M W A
without notice to WG stating the default and WG's failure to cure the same
within ten days thereafter. Any notice of default or notice pursuant to
paragraph 10 or 11 shall be in writing and shall be given either by
personal delivery against receipt or by facsimile transmission (with
acknowledgment of receipt).
14. Force majeure and other events which render the delivery substantially
more difficult or impossible for RN/MUVA, e.g. interruption of
production, loss, delays in the delivery of important raw materials,
strike, lock-out - whether in RN/MUVA's or his sub-contractors works
shall extend the delivery period by the duration of such hindrance,
plus reasonable initial period. In these cases, RN/MUVA shall also
have the right to rescind the delivery obligations affected by the
a.m. factors, in which event WG shall not be entitled to claim damages
therefor.
15. Except when the agreement is terminated by reason of a breach by either
party, no compensation shall be payable in consequence of a termination or
failure to renew the contract.
16. Should individual conditions of this agreement become invalid or be
rendered invalid at a later date, the validity of the remaining conditions
is not affected.
Aachen,
RHEIN-NADEL/MUVA WG, INC.
MASCHINENNADEL GMBH
/s/ Morton & Gunesch /s/ John K. Ziegler
- --------------------------- ---------------------------
<PAGE>
4
UNITY SEWING SUPPLY CO.
/s/ John K. Ziegler
--------------------------
SUNBRAND
/s/ Camille Aucell
--------------------------
<PAGE>
PRICES FOR DOMESTIC SEWING MACHINE NEEDLES IN US $ PER 1,000
CIF NEWARK
Needle Self-Service card Self-Service card Chip Chip
5 needles 10 needles 5 needles 10 needles
----------------- ----------------- ----------- ------------
130/705 H $82,07 $69,70 $74,64 ?
Regular
130/705 H $89,61 $76,90 $82,00 $73,28
Ball Point
130/705 H $114,70 $102,10 $107,30 $98,40
Jeans
130/705 H $129,50 $116,80 $122,00 $113,10
Stretch
130/705 $129,50 $116,80 $122,00 $113,10
Leather
Blx1 $114,70 $102,10 $107,30 $98,40
Dcx1/ $137,30 $124,90 $130,00 $121,10
81x1
DCx1F $156,80 $144,10 $149,30 $140,60
PRESENT RANGE OF SELF-SERVICE DOMESTIC NEEDLE CARDS
Needle Sizes
- ------ -----
Regular 60/8, 70/9, 80/11, 90/14, 100/16, 110/18, 120/19
Assortments 5. 70/9 x 2
80/11 x 3
90/14 x 1
10. 70/9 x 2
80/11 x 3
90/14 x 3
100/16 x 2
Ball Point 70/9, 80/11, 90/14
Assortments 5. 70/9 x 2
<PAGE>
2
80/11 x 2
90/14 x 1
10. 70/9 x 2
80/11 x 2
90/14 x 1
Jeans 90/14, 100/16,
110/18
Assortment 5. 90/14 x 2
100/16 x 2
110/18 x 1
PRICES INDUSTRIAL SEWING MACHINE NEEDLES USA IN US $ PER 1,000
CIF ATLANTA / NEWARK / LOS ANGELES
VALID FROM 1ST JULY 1995
Price Group US $ Price Group US$
----------- ---- ----------- ---
1 73,20 16 342,10
2 98,40 17 365,30
3 113,10 18 390,50
4 121,10 19 413,60
5 130,70 20 480,90
6 140,50 21 553,90
7 165,50 22 622,90
8 188,20 23 695,30
9 209,80 24 773,00
10 224,90 25 923,10
11 242,00 26 1.026,80
12 257,60 27 1.126,90
13 272,80 28 1.207,50
14 294,10 29 1.326,60
15 317,30 30 1.445,40
<PAGE>
3
System US$
- ------ ---
UY 128 132,50
UY 154 GAS 285,30
UY 154 FGS 285,30
UY 154 GHS 285,30
UY 154 GJS 351,10
UY 154 GBS 432,30
UY 154 GCS 432,30
UY 154 GDS 432,30
UY 154 GFS 432,30
?? ? ? 432,30
206x13 58,20
Free Rot 69,00
130/705 H 65.50
?x1 65,50
SURCHARGE KUHLSEW:
Straight needles $ 28,70 per 1.000
Curved needles $45,20 per 1.000
SURCHARGE FOR SMALL SIZES:
#40 $48,10 per 1.000
#45 $40,50 per 1.000
#50 $36,60 per 1.000
#55 $31,80 per 1.000
<PAGE>
E.C. MITCHELL CO. INC.
EVERETT MITCHELL
(SELLER)
TO
WG APPAREL INC.
(BUYER)
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT made October _ , 1996 between E.C. MITCHELL CO., INC. ("ECM"), a
Massachusetts corporation having an address at 88 Boston Street, Middleton, MA
01949, Attn: Everett Mitchell, President, EVERETT MITCHELL ("Mr. Mitchell"), an
individual having an address at (ECM and Mr. Mitchell, sometimes collectively,
the "Seller") and WG APPAREL, INC., a Delaware Corporation having an address at
900 Milik Street, Carteret, New Jersey 07008, Attn: John K. Ziegler, Chairman
("Buyer").
RECITALS
WHEREAS, ECM operates a business manufacturing and selling abrasive cords
and tapes (the "Business"); and
WHEREAS, Mr. Mitchell owns all of the outstanding stock of ECM;
WHEREAS, Mr. Mitchell owns the real property commonly known as 88
Boston Street, Middleton, MA (the "Real Property"), on which ECM operates the
Business, which Real Property is more particularly described on Exhibit A
hereto; and
WHEREAS, ECM desires to sell and Buyer desires to purchase certain of the
assets constituting the Business, and Mr. Mitchell desires to sell and Buyer
desires to purchase the Real Property.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
<PAGE>
1. Sale of Business.
(A) ECM shall sell, assign, and transfer to Buyer, and Buyer shall
purchase, on the Closing Date (hereinafter defined), all of ECM's Business
Assets (hereinafter defined) and properties which are generally described in
ECM's June 30, 1996 Financial Statements prepared by Francis E. Cosgrove, CPA
with accompanying letter of Mr. Cosgrove dated August 15, 1996 (the "Financial
Statements").
(B) The Business Assets shall consist of goodwill, notes, leasehold
improvements, security interests, inventories, raw materials, machinery,
equipment, furniture and fixtures, one (1) forklift, business records,
manufacturing processes, trademarks, trade names including without limitation
(Seller's corporate name, and the names "E.C. Mitchell", "E.C. Mitchell Co."),
intellectual property processes, tangible personal property which ECM owns or to
which it is entitled.
(C) The Business Assets shall specifically exclude accounts receivable,
cash, certificates of deposit, personal records and effects, corporate
governance records, autos, US Treasury Notes, office equipment and supplies at
Mr. Mitchell's homes located in Massachusetts, Florida and Nova Scotia, accrued
interest income and brokerage accounts.
2. Sale of Real Property. Mr. Mitchell shall sell, assign and transfer to
Buyer, and Buyer shall purchase the Real Property, consisting of 1.32 acres and
more particularly described on Exhibit _, on the Closing Date.
2
<PAGE>
3. Purchase Price for business and Real Property.
(A) Buyer shall pay to ECM at Closing (hereinafter defined) in cash by
wire transfer of immediately available funds, the purchase price for the
Business Assets and the Real Property of Three Million ($3,000,000) Dollars.
(B) Buyer shall assume as of the Closing Date, ECM's Business liabilities
and obligations set forth on Schedule 3(B) attached hereto.
(C) The purchase price shall be allocated among the Business Assets and
the Real Property in the manner set forth in Exhibit B. The allocation shall be
binding on the parties hereto for all purposes, including federal income tax
purposes, and the parties agree not to take any contrary position in respect of
the price of any of the Business Assets or Real Property in any tax return, tax
proceeding, tax audit, or any documents filed by any of the parties with
federal, state or local authorities.
4. Inventory. ECM and Buyer agree to take a joint inventory of all of the
Business Assets, including without limitation physical assets, financial assets,
accounts payable, deposits, raw materials and spools of abrasive cords and tapes
(the "Inventory") by October 31, 1996 (the "Inventory Date") in a commercially
reasonable manner to be agreed upon by ECM and Buyer.
5. Closing. The closing of title as to the transfer of the Real Property
and Business Assets (the "Closing") shall occur fifteen (15) days after the
Inventory Date. However, Seller acknowledges that Buyer may adjourn the Closing
Date up to December 31, 1996, if such adjournment is necessary in connection
with Buyer's Financing (as said term is hereinafter defined). Buyer shall
provide Seller with two (2) weeks written notice of the Closing Date. The
Closing shall take place at the offices of Hutchins, Wheeler & Dittmar, 101
Federal Street, Boston, Massachusetts 02110.
3
<PAGE>
6. Access. From the date of this Agreement up to the Closing, Seller shall
give Buyer and its representatives reasonable access during normal business
hours to the Real Property and the Business Assets, other than its intellectual
property processes. During such period Seller shall furnish Buyer with all
information which Buyer may reasonably request. After the Closing Buyer shall
give Seller sufficient access to business records for purposes of preparing its
tax returns.
7. Seller's or Mr. Mitchell's Representations and Warranties.
(A) Seller represents and warrants to Buyer as follows:
(a) DULY organized corporations. ECM is a corporation duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts, and has its sole place of business at 88 Boston
Street, Middleton, Massachusetts.
(b) Financial statements. The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis and are true, complete, and correct, and accurately reflect
Seller's financial condition at the respective dates shown.
(c) Inventory. The inventory shown on the Financial Statements, is
shown at the lower of cost or market. The inventory to be conducted on the
Inventory Date is to be shown in the same manner. As of the Closing Date,
inventory will consist of readily salable goods and merchandise, but will not
include items below standard quality or in disrepair, nonsalable, or products
not in conformity with Seller's existing standards.
(d) Litigation. No suits, governmental proceedings or litigation are
pending, or to Seller's knowledge threatened against Seller or their properties
which might materially adversely affect Seller's financial condition, business,
or property or the Real Property.
4
<PAGE>
(e) Employment contract. There are no written contracts of
employment between Seller and any officer or other employee.
(f) Corporate books and records. Seller's operational business
records which have been provided to Buyer for inspection are true, correct, and
complete, and contain no material omission with respect to Seller's business,
operations, or status.
(g) Accounts. ECM shall, from the date of this Agreement to the
Closing Date, make payment on all accounts payable in the ordinary course of
business and in accordance with its past customs and practices and without any
delay, acceleration or discounting of same other than as is consistent with
existing ECM practices.
(h) No Change. The business of ECU has not materially changed since
June 30, 1996. If any of the foregoing representations are materially untrue as
of the Closing Date, ECU shall notify Buyer in writing.
(B) Buyer's representations and warranties. Buyer represents and warrants
as follows:
(a) DULY organized corporation. It is a corporation duly organized,
validly existing and in good standing under the laws of Delaware.
(b) Authority. Buyer has all necessary corporate authority to
perform its obligations hereunder.
8. Transfer of Real Property.
Mr. Mitchell shall convey to Buyer good and marketable title to the Real
Property at Closing. Such title is to be insurable by a recognized title
insurance company licensed to do business in the Commonwealth of Massachusetts
at its usual insurance premium rates. Buyer
5
<PAGE>
shall have conducted, at its own cost and expense, a title search with respect
to the Real Property and shall be responsible, at its sole cost and expense, for
obtaining said title insurance.
(a) There shall be adjusted between the parties and apportioned as
of the date of Closing, unpaid or prepaid real estate taxes with respect to the
Real Property, water and sewer rents, utility charges, and all other charges
constituting a lien or encumbrance upon the Real Property.
(b) If the Real Property is affected by an assessment for municipal
improvements as of Closing, all unpaid installments of such assessment shall be
paid and satisfied by Seller.
9. Conditions to Buyer's obligations. Buyer's obligations under this
Agreement are, at its option, subject to the following conditions:
(a) Representations and warranties. Seller's representations and
warranties contained in this Agreement, shall be true and correct as of the
Closing in all material respects.
(b) Seller's Performance. Seller has performed and complied with all
of its agreements and conditions under this Agreement.
(c) Casualty. There has not been from the date hereof to the Closing
Date any damage, destruction, or loss (regardless of whether covered by
insurance) exceeding $5,000, or any other event materially and adversely
affecting the Business.
(d) Opinion Letter. Buyer has received an opinion of Thomas
Bongiorno, Esq., co-counsel for Seller, dated as of the Closing date, in form
and substance satisfactory to Buyer, to the effect that: (i) Seller's corporate
existence is valid and in good standing in; and (ii) all corporate and other
proceedings required to be taken by or on the part of Seller to authorize it
6
<PAGE>
to carry out this Agreement and to issue and deliver the instruments referred to
herein have been duly and properly taken.
(e) Buyer's Financing. The Buyer shall have received at or prior to
the Closing immediately available financing sufficient -to consummate the
purchase of the Business and Real Property, such financing to be upon terms and
conditions reasonably satisfactory to Buyer ("Buyer's Financing").
(f) Inventory Value. The inventory value as of the Inventory Date
shall be no less than $320,000. In the event the inventory value is less than
$320,000, the purchase price shall be adjusted dollar for dollar by the amount
of such shortfall, but in no event shall the inventory value be less than
$300,000 or the purchase price adjusted more than $20,000.
(g) No chances. Until the Closing date, Seller will not, except with
Buyer's prior written consent, conduct its business except in the regular and
ordinary course.
(h) Change of Corporate Name. Seller shall as of the Closing Date
change Seller's corporate name so that Seller's corporate name after the Closing
will not include the names "E.C. Mitchell" or "E.C. Mitchell Co.".
10. Seller' obligations at Closing. At the Closing, or thereafter as
herein required, Seller shall deliver to Buyer the following:
(a) Conveyances. Bills of sale, assignments, consents, deeds, and
all other instruments of transfer and documents that are necessary or
appropriate under this Agreement.
(b) Written Formula. Written formulae and instructions for the
manufacture of all abrasive cords and tape produced by Seller.
(c) Additional documents. From time to time at Buyer's request and
expense (whether at or after the Closing and without further consideration) all
further
7
<PAGE>
instruments of conveyance and transfer that are reasonably required. Seller
shall take all other action that Buyer reasonably may request to convey and
transfer more effectively to Buyer all of the property to be sold to it, and
shall assist Buyer at Buyer's expense in the collection or reduction to
possession of such property.
(d) Corporate resolutions. Certified copies of resolutions of ECM's
directors and shareholders authorizing the transactions set forth in this
agreement.
(e) Books and records. All of Seller's books and records relating to
the Business, Business Assets and Real Property other than those specifically
excluded by the terms of this Agreement.
(f) Corporate Name Change Certificate. Certified copy of the
Secretary of the Commonwealth of Massachusetts as to the change in corporate
name.
11. Restrictive covenant. Mr. Mitchell shall not, directly or indirectly,
as owner, partner, shareholder, or any other capacity, engage in a business
similar to the one involved in this transaction anywhere where Buyer or its
assigns is then conducting the business of the Business, for a period of five
(5) years from the date of the Closing. Mr. Mitchell shall also not disclose to
anyone but Buyer the process related to the Business or the manufacture of
abrasive cords and tapes. Because the breach or anticipated breach of these
restrictive covenants will result in immediate and irreparable injury to Buyer
for which it will not have an adequate remedy at law, Seller agrees that Buyer
shall be entitled to sue in equity to enjoin such breach or anticipated breach
and to seek all legal and equitable remedies to which it is entitled. If a court
of competent jurisdiction determines that the restrictions contained in this
paragraph are too broad to be enforced, it may modify such provisions to the
extent necessary to permit their enforceability.
8
<PAGE>
12. Buyer's obligations at Closing. At the Closing, Buyer shall deliver to
Seller:
(a) Purchase Price. The total purchase price provided for in
paragraph 2.
(b) Corporate resolutions. Certified copies of resolutions of
Buyer's directors authorizing the transactions set forth in this agreement.
13. Casualty prior to Closing. If before the Closing the Business Assets
or Real Property are damaged in an amount exceeding $100,000, Buyer may
terminate this Agreement without liability or waive the diminution in value and
close under this Agreement, buying the property "as is", in which event Buyer
shall be entitled to receive the proceeds of any insurance paid by reason of
such loss or damage.
14. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of both parties and their respective legal representatives, successors,
and permitted assigns. Wherever in this Agreement Seller is an obligated party,
such obligations shall be deemed to be the joint and several obligations of ECM
and Mr. Mitchell.
15. Entire Agreement; Modification. This Agreement sets forth the entire
understanding of the parties. It may not be amended or terminated except by an
instrument executed by both parties.
16. Exhibits. All exhibits and schedule referred to in this Agreement are
attached hereto and incorporated herein by reference.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but each of which shall
constitute one and the same agreement.
18. Notices. All notices, statements, payments, or other documents
required by this Agreement shall be in writing and sent by Federal Express or
registered mail, postage prepaid,
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addressed as to the parties, as set forth in the beginning of this Agreement,
with simultaneous copies delivered to:
To the Seller: Ronald Garmey, Esq.
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
To the Buyer: David A. Waters, Esq.
waters, McPherson, McNeill, P.C.
300 Lighting Way Secaucus, New Jersey 07096
19. Non-waiver. No delay or failure by either party to exercise any right
hereunder, and no partial or single exercise of any such right, shall constitute
a waiver of that or any other right, unless otherwise expressly provided herein.
20. Headings. Headings in this Agreement are for reference and convenience
only and shall not be used to interpret or construe its provisions.
21. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
22. Post Closing Consultation. For a period following the Closing Date
through the completion of "one manufacturing cycle", (which for purposes of this
section is defined as, the period of -time required for the manufacturing of an
approximately one year's supply of abrasive cord and tape and which in no event
shall exceed three (3) months from the date of the Closing), Mr. Mitchell shall
be available (health permitting), without additional charge or compensation, at
the Real Property during normal work hours of normal work days of the Business
to assist in an orderly transition of the Business and all manufacturing
processes and know how, from Seller to Buyer. In addition, during the same
period, Mr. Mitchell shall use his best efforts to make available his assistant,
Irene Byko, for post-closing consultation.
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23. No Assignment. This Agreement is not assignable except by Buyer to any
of its subsidiaries or affiliates.
24. Expenses. The parties agree that they shall each be responsible for
their own fees and expenses incurred by them in connection with this transaction
including without limitation, all fees of counsel and accountants.
25. Golf Cart Access. Mr. Mitchell shall be permitted to cross-over the
Real Property after the Closing Date in his golf cart to visit the adjoining
property where his daughter resides. Mr. Mitchell's golf cart access shall be
terminated upon the earlier to occur of the sale of his daughter's property or
the sale by Buyer of the Real Property.
In witness whereof the parties have caused this Agreement to be duly
executed and their corporate seals affixed as of the day and year first above
written.
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SELLER:
E.C. MITCHELL CO., INC.
_____________________________________
BY: EVERETT C. MITCHELL, PRESIDENT
_____________________________________
EVERETT C. MITCHELL, individually
BUYER:
WG APPAREL,
_____________________________________
JOHN K. ZIEGLER, Chairman
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EXHIBIT A
METES AND BOUNDS
DESCRIPTION OF REAL PROPERTY
Lot B as shown on a plan entitled "Middleton, Mass., Subdivision of Land
owned by: Everett W. Mitchell" by Reid Land Surveyors dated March 12, 1990 and
recorded on Plan Book 261/31. (Subdivision Map attached hereto.)
The Metes and Bounds description will be delivered as part of the deed by
Seller at Closing.
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EXHIBIT B
ALLOCATION OF PURCHASE PRICE
Land and Building $500,000
Inventory $535,000
Equipment $100,000
Technology & Know-How 922,500
Goodwill $942,500
----------
$3,000,000
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Exhibit 10.22
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is entered into this _____ day
of ________, 1996 (the "Effective Date"), between Macpherson Meistergram, Inc.,
a North Carolina corporation ("Company") and Neil A. Macpherson ("Consultant").
W I T N E S S E T H:
WHEREAS, Company, Willcox & Gibbs, Inc. ("W&G") and Consultant, among
others, have entered into a Stock Purchase Agreement dated as of November ___,
1996 (the "Stock Purchase Agreement"); and
WHEREAS, Prior to the Closing Date (as defined in the Stock Purchase
Agreement) under the Stock Purchase Agreement Consultant has been employed as a
key employee by Company; and
WHEREAS, the parties are desirous of entering into this Agreement in order
to ensure Company and W&G of Consultant's valuable services pursuant to the
terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are mutually acknowledged, the parties hereto agree as
follows:
1. EMPLOYMENT CONDITIONS
a. Company hereby engages Consultant as a consultant and Consultant
hereby accepts such engagement upon the terms and
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conditions hereinafter set forth. Consultant shall perform consulting, oversight
and advisory service to Company at all times reasonably requested by Company and
upon reasonable advance notice by the Company. Company acknowledges that
Consultant is engaged in various other businesses which may require scheduling
flexibility as respects Consultants' services.
b. During the term of his engagement, Consultant shall not be
required to devote all of his business time and attention to providing services
to Company. In no event shall Consultant's services be required for more than
sixty (60) days over the Term (as defined below).
2. TERM.
Subject to the provisions for earlier termination hereinafter
provided, the term of Consultant's employment hereunder shall be for a period of
one (1) year commencing with the date of this Agreement (the "Term").
3. COMPENSATION.
a. For all services to be rendered by Consultant pursuant to this
Agreement, Consultant shall receive from Company a per diem fee in an amount of
$1,000.00.
b. Consultant shall be entitled to reimbursement for all reasonable
business expenses incurred in the performance of his responsibilities under this
Agreement. Consultant shall submit to Company periodic statements of all
expenses so incurred and Company shall reimburse Consultant the full amount of
any such expenses.
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4. BENEFITS. Consultant shall not be entitled to any Company benefits.
5. COVENANTS AND CONFIDENTIAL INFORMATION.
a. Consultant agrees that he will not, directly or indirectly,
whether in the capacity of director, officer, employee, agent, advisor or
otherwise, individually or for, with or through any other person, firm or
corporation, by equity ownership or otherwise, compete with the Company and
Geoffrey E. Macpherson Canada, Inc. ("GEMC") or any subsidiary of the Company or
GEMC (collectively the "Protected Parties") with respect to the business
conducted by the Protected Parties (the "Prohibited Business") during the
Covenant Term (hereinafter defined) during the time period commencing with the
Closing Date of the Stock Purchase Agreement and expiring on the fifth (5th)
anniversary date of the Closing Date (the "Covenant Term") (x) in North America
and (y) in any area of Central and/or South America where the Prohibited
Business is conducted during the Covenant Term. The "Prohibited Business" shall
include the business of the Company and GEMC as of the Closing Date and
technological extensions, enhancements and/or improvements of such business as
conducted by the Company and GEMC on the Closing Date.
b. Notwithstanding the foregoing, during the Covenant Term
Consultant shall be permitted to own not in excess of three percent (3%) of any
class of securities of any public company which is engaged in the Prohibited
Business.
c. During the Covenant Term Consultant agrees not to induce any
person who is an employee or officer of the Protected
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Parties to terminate said relationship, except where such action is taken at the
request of Company in the course of carrying out Consultant's duties for the
Company or GEMC;
d. During the Covenant Term the Consultant agrees not to disclose or
use, in any manner in competition with or contrary to the interests of the
Protected Parties, the customer lists, business methods, product research, or
other trade secrets of the Protected Parties relating to the Prohibited
Business, it being acknowledged that all such information regarding the
Prohibited Businesses, is confidential information and the exclusive property of
the Protected Parties; provided, however, that the foregoing restrictions shall
not restrict the use or disclosure of such confidential information (i) to any
government entity to the extent required by law, or (ii) which is or becomes
publicly known and available through no wrongful act of Consultant, or (iii) in
the course of carrying out Consultant's duties for the Company or GEMC.
e. It is the intention of the parties that if any of the
restrictions or covenants contained herein is held to cover a geographic area or
to be for a length of time which is not permitted by applicable law, or in any
way construed to be too broad or to any extent invalid, such provision shall not
be construed to be null, void and of no effect, but to the extent such provision
would be valid or enforceable under applicable law, a court of competent
jurisdiction shall construe and interpret or reform this Section 5 to provide
for a covenant having the maximum enforceable geographic area, time period and
other provisions (not greater than those contained herein) as
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shall be valid and enforceable under such applicable law. Consultant
acknowledges that any breach of the terms, conditions or covenants set forth in
this Section 5 may cause irreparable damage to the Protected Parties because of
the special, unique, unusual and extraordinary character of their business and
the Protected Parties' recovery of damages at law will not be an adequate
remedy. Accordingly, Consultant agrees that for any breach of the terms,
covenants or agreements of this Section 5, a restraining order or an injunction
or both may be issued against such person, in addition to any other rights or
remedies the Protected Parties may have.
6. TERMINATION AND SEVERANCE COMPENSATION.
The employment of Consultant under this Agreement, and
the Term hereof, may be terminated by the Company with or without cause at any
time without further liability of Company to Consultant. No such termination of
the engagement of the Consultant or the Term hereof shall in any way affect the
Company's obligation to pay any compensation owed to Consultant, as provided for
in Section 3 hereof.
7. SEVERABILITY. The provisions of this Agreement are severable, and if
any one or more provisions shall be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions, and any partially
unenforceable provision to the extent enforceable in any jurisdiction, shall
nevertheless be binding and enforceable.
8. BINDING AGREEMENT. The rights and obligations of Company under this
Agreement shall inure to the benefit of, and
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<PAGE>
shall be binding upon, Company and its successors and assigns, and the rights
and obligations of Consultant under this Agreement shall inure to the benefit
of, and shall be binding upon, Consultant and his heirs, personal
representatives and estate.
9. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given (a) on the same day if delivered personally,
(b) three business days after being mailed by registered or certified mail
(return receipt requested) as determined by reference to the postmark; or (c) on
the same day if sent by facsimile, confirmation received, at the address of such
party first above set forth or to such other address as the parties shall
furnish in writing.
10. WAIVER. The failure of any party to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions as to any future violations thereof, nor
prevent that party thereafter from enforcing each and every other provision of
this Agreement. The rights granted the parties herein are cumulative and the
waiver of any single remedy shall not constitute a waiver of such party's right
to assert all other legal remedies available to it under the circumstances.
11. MISCELLANEOUS. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof,
and may not be modified or terminated orally. No modification, termination or
attempted waiver of this Agreement shall be valid unless in writing and signed
by the party against whom the same is sought to be enforced. This Agreement may
be executed in multiple counterparts, each of which
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shall be an original, and all of which, when taken together, shall constitute
one and the same document. This Agreement shall be governed by and construed
according to the laws of the State of New Jersey, without regard to the
principles thereof regarding conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
day and year first set forth above.
MACPHERSON MEISTERGRAM, INC.
By: ______________________________
Name: John K. Ziegler
Title: Chief Executive Officer
__________________________________
NEIL A. MACPHERSON
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Willcox & Gibbs, Inc., unconditionally guarantees the
prompt payment and performance of all obligations of Macpherson Meistergram,
Inc. under this Consulting Agreement.
WILLCOX & GIBBS, INC.
By: ______________________________
Name: John K. Ziegler
Title: Chief Executive Officer
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Exhibit 10.23
EMPLOYMENT CONTRACT
EMPLOYMENT CONTRACT dated December __, 1996 among Macpherson Meistergram,
Inc., a North Carolina corporation ("MAC"), whose business address is 3517 West
Wendover Avenue, Greensboro, North Carolina 27407, and Jerry D. Lee, whose
address is 88 Gretchen Lane, Greensboro, NC 27410 ("Employee").
MAC desires to engage Employee to perform services as an executive officer
of MAC and Employee desires to perform such services, on the terms and
conditions hereinafter set forth.
Accordingly, MAC and Employee agree as follows:
1. Term.
MAC agrees to employ Employee to perform services as an executive
officer for a period which will commence with the closing (the "Closing") of the
sale of the capital stock of MAC and Geoffrey E. Macpherson Canada, Inc.
("GEMC") to WG Apparel, Inc. ("WG Apparel") pursuant to the Stock Purchase
Agreement among MAC, GEMC, Willcox & Gibbs, Inc. ("W&G"), WG Apparel and the
stockholders of MAC, dated as of November 27, 1996 (the "Stock Purchase
Agreement") and shall continue indefinitely until terminated as provided in this
Section 1 or Section 10 hereof (the "Employment Period"). At any time after one
(1) year from the date of the Closing, MAC may terminate this Employment
Contract by providing not less than one (1) year advance written notice to
Employee; provided, however, that MAC may terminate the Employee as of such
notice by paying one year's salary to Employee and providing for the
continuation and funding of the
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<PAGE>
benefits provided for in Sections 6(iii), (iv) and (v) hereof. Employee may
terminate this Employment Contract at any time by providing ninety (90) day's
written notice to MAC. If the Closing does not occur for any reason, this
Employment Contract shall be null and void and neither party shall have any
rights hereunder.
2. Nature of Services.
During the Employment Period, Employee shall at all times be
employed in an executive capacity in the business of MAC in Greensboro, North
Carolina. Employee shall serve as the President and Chief Operating Officer of
MAC upon commencement of the Employment Period and thereafter for so long as
requested by MAC's Board of Directors. In the performance of his duties,
Employee shall have responsibility for the overall operations of MAC including
without limitation the supervision and direction of MAC's sales, marketing,
financial, operations and other departments and executives therein, subject to
the policy direction of the Board of Directors of MAC and the chief executive
officer of W&G or his designee.
3. Agreement to Serve.
Employee agrees to his employment as described in Section 2 and
agrees to devote all his business time and efforts (except immaterial time and
effort devoted to personal business affairs and investments) to the performance
of his duties under this employment contract. Employee agrees that in the course
of his employment, he will use good faith efforts to faithfully
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observe and carry out all of the duties and responsibilities customarily owed by
an employee to his employer.
4. Compensation.
Employee's salary during the Employment Period shall be fixed from
time to time by the Compensation Committee of the Board of Directors of W&G (the
"Committee") but shall not be less than $145,236 per annum, payable in equal
installments no less frequently than monthly. Employee's salary shall be
reviewed during the first quarter of each calendar year during the Employment
Period (with the first review to occur during the first quarter of 1997). Salary
increases, if any, shall be effective as of April 1 of each year.
5. Incentive Compensation.
Employee shall be entitled to receive bonus or bonuses during the
Employment Period pursuant to an incentive compensation plan and/or a stock
option plan described on Schedule A annexed hereto
6. Expenses; Vacations; Fringe Benefits.
During the Employment Period, Employee shall be entitled to: (i)
reimbursement for reasonable travel, entertainment and other expenses incurred
in the performance of his duties hereunder upon submission and approval of
written statements in accordance with MAC's standard policies as in effect from
time to time; (ii) vacations, holidays and sick leave in accordance with MAC's
then current regular policies governing executives; (iii) continued medical,
hospital and disability insurance benefits, which shall be at least equal to
those
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benefits in effect on the date hereof; (iv) use of an automobile comparable to
that presently being used by him in the business of MAC if applicable; (v) such
additional compensation, in the form of incentive compensation or otherwise, and
such participation in W&G stock option, stock award, stock purchase or other
stock plans, as the Committee may from time to time provide, if any; and (vi)
participate in all other employee benefit plans, in accordance with the
provisions thereof, made available by MAC to its executive employees generally.
7. Non-Competition.
Employee agrees that he will not, directly or indirectly
(individually or for, with or through any other person, firm or corporation, by
equity ownership or otherwise), (i) compete with W&G, MAC, or any subsidiary or
other affiliate of either of them or any successors or assigns of their
businesses during the Employment Period with respect to any business carried on
by W&G, MAC, or any such subsidiary or other affiliate, successor or assign, or
(ii) for a period of (A) one year after the end of the Employment Period, if
Employee terminates this Employment Contract pursuant to Section 1 or (B) two
years after MAC terminates this Employment Contract pursuant to Section 10 as a
result of Employee's material breach of the Employment Contract, or (C) or when
the Employee's salary ceases to be paid by MAC, if MAC terminates this
Employment Contract for any other reason, compete with MAC, with respect to its
business in the United States, Mexico, Central America & South America.
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(A) Notwithstanding the foregoing, if MAC wrongfully terminates the
Employment Period or otherwise materially breaches the terms of this Employment
Contract, the foregoing provisions of this Section 7 shall cease to apply from
and after such wrongful termination or breach.
(B) Notwithstanding the foregoing, Employee shall be permitted to
own not in excess of one percent of any class of securities of any public
company which, at the time of Employee's acquisition of the securities, is not
engaged in competition with W&G, MAC or any subsidiary or other affiliate of
either of them or any such successor or assign notwithstanding the fact that
such company thereafter (without assistance from Employee) becomes engaged in
such competition, provided Employee is not part of any controlling group and is
solely a passive investor.
8. Patents; Inventions.
All of Employee's interest in patents, patent applications,
inventions, technological innovations, copyrights, developments and processes
now or hereafter during the Employment Period owned or developed by Employee
relating to the business of W&G, MAC, or any subsidiary or other affiliate of
either of them shall belong to MAC, and without further compensation, but at
MAC's expense, forthwith upon request of the MAC, Employee shall execute any and
all such assignments and other documents and take any and all such other action
as MAC may reasonably request in order to vest in MAC all Employee's right,
title and interest in and to such patents, patent applications, inventions,
technological innovations, copyrights, developments or processes,
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free and clear of liens, charges and encumbrances in favor of Employee.
9. Confidential Information.
No confidential information which Employee may now have or may
obtain during the Employment Period relating to the business of W&G, MAC, or any
subsidiary or other affiliate of either of them shall be disclosed to any other
persons either during or after the termination of the Employment Period without
the prior written permission of MAC, and, at MAC's written request, Employee
shall return all tangible evidence of such confidential information to MAC prior
to or at the termination of the Employment Period. Notwithstanding the
foregoing, this provision shall not preclude the Employee from the use or
disclosure of information known generally to the public (other than information
known generally to the public as a result of violation of this Section 9 by
Employee), from the use or disclosure of information required by law or court
order, or from disclosure or use of information appropriate and in the ordinary
course of carrying out his duties as an employee of MAC.
10. Termination
Notwithstanding anything herein contained:
(A) If Employee shall, during the Employment Period, die or become
physically or mentally incapacitated or disabled for a period of six (6)
consecutive months (and MAC is not in breach of any condition hereof (including,
without limitation, the provisions of Section 6), then MAC shall have the right
to give immediate notice of termination of Employee's services
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hereunder. Additionally, if, during the Employment Period, Employee shall
materially breach any of the terms hereof, MAC shall have the right to give
notice of termination of Employee's services hereunder as of a date (not earlier
than thirty [30] days from such notice) to be specified in such notice;
provided, however, that Employee shall have the right during such 30-day period
to correct such breach (if capable of being corrected) or pay compensation which
does not exceed MAC's reasonable estimate of the aggregate loss, damage,
deficiency or expense attributable to such breach (if not capable of being
corrected) and thereby avoid termination.
(B) In the event of termination pursuant to Section 10(A): (i)
Employee (or his estate) shall be entitled to receive his salary at the rate
provided in Section 4 to the end of the calendar month in which termination
occurs; and (ii) Employee (or his estate) shall be entitled to incentive
compensation for portions of the year prior to the effective date of such
termination which is in the same ratio to the amount of incentive compensation
that would have been payable for the full year as the ratio of the portions of
the year prior to termination to the full year (such incentive compensation to
be determined and paid at the time provided for in Section 5 for the full year).
(C) If any legal action or other proceeding is brought for the
enforcement of this Employment Contract or because of a dispute regarding an
alleged breach, default or misrepresentation in connection herewith, the
prevailing party in such action or other proceeding shall be entitled to recover
reasonable
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attorneys' fees and other litigation costs (including cost of appeal) and all
reasonable related costs and expenses thereby incurred, in addition to any other
relief to which such prevailing party may be entitled.
11. Entire Agreement; Severability.
This Employment Contract sets forth the entire
understanding of the parties with respect to the subject matter herein and may
be modified only by a written instrument duly executed by each party. The
invalidity or unenforceability of any provision of this Employment Contract
shall not affect the validity or enforceability of any other provision.
12. Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed given (a) on the same day if
delivered personally, (b) three business days after being mailed by registered
or certified mail (return receipt requested) as determined by reference to the
postmark; or (c) on the same day if sent by facsimile, confirmation received, at
the address of such party first above set forth or to such other address as the
parties shall furnish in writing.
13. Assignment.
In the event of a future disposition of (or including) the
properties and business of W&G or MAC, substantially as an entirety, by merger,
consolidation, sale of stock or assets then MAC may elect to assign this
Employment Contract and all of its and W&G's rights and obligations hereunder to
the acquiring or
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surviving corporation, provided that such corporation shall assume in writing
all of the obligations of MAC and W&G hereunder and provided further that MAC
and W&G shall remain liable for the performance of their obligations hereunder
in the event of unjustified failure of the acquiring corporation to perform its
obligation. Employee's rights under this Employment Contract shall not be
transferrable by assignment or otherwise, shall not be subject to commutation or
encumbrance and shall not be subject to the claims of Employee's creditors.
14. Binding Effect; Inurement
This Employment Contract shall be binding upon and inure to the
benefit of MAC, W&G and (in each case) its successors and those who are its
assigns under Section 13.
15. Governing Law
This Employment Contract shall be governed by and construed in
accordance with the laws of the State of North Carolina, without giving effect
to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this employment
contract as of the date first above written.
MACPHERSON MEISTERGRAM, INC.
BY: ________________________________
JOHN K. ZIEGLER, Chairman
________________________________
JERRY D. LEE
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GUARANTEE OF WILLCOX & GIBBS, INC.
To induce Employee to enter into the foregoing Employment Contract with
MAC, W&G hereby unconditionally guarantees to Employee the prompt payment and
performance of all obligations of MAC under the Employment Contract.
WILLCOX & GIBBS, INC.
BY: ________________________________
JOHN K. ZIEGLER, Chairman
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SCHEDULE A
OPTIONS TO ACQUIRE FIVE THOUSAND (5,000) SHARES OF
WILLCOX & GIBBS, INC. CLASS A STOCK PURSUANT
TO THE WG, INC. 1994 STOCK INCENTIVE PLAN
<PAGE>
Exhibit 10.24
EMPLOYMENT CONTRACT
EMPLOYMENT CONTRACT dated December __, 1996 among Macpherson Meistergram,
Inc., a North Carolina corporation ("MAC"), whose business address is 3517 West
Wendover Avenue, Greensboro, North Carolina 27407, and Ronald P. Emerman, whose
address is 707 Coleridge Drive, Greensboro, NC 27410 ("Employee").
MAC desires to engage Employee to perform services as an executive officer
of MAC and Employee desires to perform such services, on the terms and
conditions hereinafter set forth.
Accordingly, MAC and Employee agree as follows:
1. Term.
MAC agrees to employ Employee to perform services as an executive
officer for a period which will commence with the closing (the "Closing") of the
sale of the capital stock of MAC and Geoffrey E. Macpherson Canada, Inc.
("GEMC") to WG Apparel, Inc. ("WG Apparel") pursuant to the Stock Purchase
Agreement among MAC, GEMC, Willcox & Gibbs, Inc. ("W&G"), WG Apparel and the
stockholders of MAC, dated as of November 27, 1996 (the "Stock Purchase
Agreement") and shall continue indefinitely until terminated as provided in this
Section 1 or Section 10 hereof (the "Employment Period"). At any time after one
(1) year from the date of the Closing, MAC may terminate this Employment
Contract by providing not less than one (1) year advance written notice to
Employee; provided, however, that MAC may terminate the Employee as of such
notice by paying one year's salary to Employee and providing for the
continuation and funding of the
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benefits provided for in Sections 6(iii), (iv) and (v) hereof. Employee may
terminate this Employment Contract at any time by providing ninety (90) day's
written notice to MAC. If the Closing does not occur for any reason, this
Employment Contract shall be null and void and neither party shall have any
rights hereunder.
2. Nature of Services.
During the Employment Period, Employee shall at all times be
employed in an executive capacity in the business of MAC in Greensboro, North
Carolina. Employee shall serve as Vice President Finance and Assistant Secretary
of MAC upon commencement of the Employment Period and thereafter for so long as
requested by MAC's Board of Directors. In the performance of his duties,
Employee shall have responsibility for the overall financial affairs of MAC,
subject to the policy direction of the Board of Directors of MAC and the chief
executive officer of W&G or his designee.
3. Agreement to Serve.
Employee agrees to his employment as described in Section 2 and
agrees to devote all his business time and efforts (except immaterial time and
effort devoted to personal business affairs and investments) to the performance
of his duties under this employment contract. Employee agrees that in the course
of his employment, he will use good faith efforts to faithfully observe and
carry out all of the duties and responsibilities customarily owed by an employee
to his employer.
4. Compensation.
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Employee's salary during the Employment Period shall be fixed from
time to time by the Compensation Committee of the Board of Directors of W&G (the
"Committee") but shall not be less than $114,790 per annum, payable in equal
installments no less frequently than monthly. Employee's salary shall be
reviewed during the first quarter of each calendar year during the Employment
Period (with the first review to occur during the first quarter of 1997). Salary
increases, if any, shall be effective as of April 1 of each year.
5. Incentive Compensation.
Employee shall be entitled to receive bonus or bonuses during the
Employment Period pursuant to an incentive compensation plan and/or a stock
option plan described on Schedule A annexed hereto
6. Expenses; Vacations; Fringe Benefits.
During the Employment Period, Employee shall be entitled
to: (i) reimbursement for reasonable travel, entertainment and other expenses
incurred in the performance of his duties hereunder upon submission and approval
of written statements in accordance with MAC's standard policies as in effect
from time to time; (ii) vacations, holidays and sick leave in accordance with
MAC's then current regular policies governing executives; (iii) continued
medical, hospital and disability insurance benefits, which shall be at least
equal to those benefits in effect on the date hereof; (iv) use of an automobile
comparable to that presently being used by him in the business of MAC if
applicable; (v) such additional compensation, in the form
-3-
<PAGE>
of incentive compensation or otherwise, and such participation in W&G stock
option, stock award, stock purchase or other stock plans, as the Committee may
from time to time provide, if any; and (vi) participate in all other employee
benefit plans, in accordance with the provisions thereof, made available by MAC
to its executive employees generally.
7. Non-Competition.
Employee agrees that he will not, directly or indirectly
(individually or for, with or through any other person, firm or corporation, by
equity ownership or otherwise), (i) compete with W&G, MAC, or any subsidiary or
other affiliate of either of them or any successors or assigns of their
businesses during the Employment Period with respect to any business carried on
by W&G, MAC, or any such subsidiary or other affiliate, successor or assign, or
(ii) for a period of (A) one year after the end of the Employment Period, if
Employee terminates this Employment Contract pursuant to Section 1 or (B) two
years after MAC terminates this Employment Contract pursuant to Section 10 as a
result of Employee's material breach of the Employment Contract, or (C) or when
the Employee's salary ceases to be paid by MAC, if MAC terminates this
Employment Contract for any other reason, compete with MAC, with respect to its
business in the United States, Mexico, Central America & South America.
(A) Notwithstanding the foregoing, if MAC wrongfully terminates the
Employment Period or otherwise materially breaches the terms of this Employment
Contract, the foregoing provisions
-4-
<PAGE>
of this Section 7 shall cease to apply from and after such wrongful termination
or breach.
(B) Notwithstanding the foregoing, Employee shall be permitted to
own not in excess of one percent of any class of securities of any public
company which, at the time of Employee's acquisition of the securities, is not
engaged in competition with W&G, MAC or any subsidiary or other affiliate of
either of them or any such successor or assign notwithstanding the fact that
such company thereafter (without assistance from Employee) becomes engaged in
such competition, provided Employee is not part of any controlling group and is
solely a passive investor.
8. Patents; Inventions.
All of Employee's interest in patents, patent applications,
inventions, technological innovations, copyrights, developments and processes
now or hereafter during the Employment Period owned or developed by Employee
relating to the business of W&G, MAC, or any subsidiary or other affiliate of
either of them shall belong to MAC, and without further compensation, but at
MAC's expense, forthwith upon request of the MAC, Employee shall execute any and
all such assignments and other documents and take any and all such other action
as MAC may reasonably request in order to vest in MAC all Employee's right,
title and interest in and to such patents, patent applications, inventions,
technological innovations, copyrights, developments or processes, free and clear
of liens, charges and encumbrances in favor of Employee.
9. Confidential Information.
-5-
<PAGE>
No confidential information which Employee may now have or may
obtain during the Employment Period relating to the business of W&G, MAC, or any
subsidiary or other affiliate of either of them shall be disclosed to any other
persons either during or after the termination of the Employment Period without
the prior written permission of MAC, and, at MAC's written request, Employee
shall return all tangible evidence of such confidential information to MAC prior
to or at the termination of the Employment Period. Notwithstanding the
foregoing, this provision shall not preclude the Employee from the use or
disclosure of information known generally to the public (other than information
known generally to the public as a result of violation of this Section 9 by
Employee), from the use or disclosure of information required by law or court
order, or from disclosure or use of information appropriate and in the ordinary
course of carrying out his duties as an employee of MAC.
10. Termination
Notwithstanding anything herein contained:
(A) If Employee shall, during the Employment Period, die or become
physically or mentally incapacitated or disabled for a period of six (6)
consecutive months (and MAC is not in breach of any condition hereof (including,
without limitation, the provisions of Section 6), then MAC shall have the right
to give immediate notice of termination of Employee's services hereunder.
Additionally, if, during the Employment Period, Employee shall materially breach
any of the terms hereof, MAC shall have the right to give notice of termination
of Employee's
-6-
<PAGE>
services hereunder as of a date (not earlier than thirty [30] days from such
notice) to be specified in such notice; provided, however, that Employee shall
have the right during such 30-day period to correct such breach (if capable of
being corrected) or pay compensation which does not exceed MAC's reasonable
estimate of the aggregate loss, damage, deficiency or expense attributable to
such breach (if not capable of being corrected) and thereby avoid termination.
(B) In the event of termination pursuant to Section 10(A): (i)
Employee (or his estate) shall be entitled to receive his salary at the rate
provided in Section 4 to the end of the calendar month in which termination
occurs; and (ii) Employee (or his estate) shall be entitled to incentive
compensation for portions of the year prior to the effective date of such
termination which is in the same ratio to the amount of incentive compensation
that would have been payable for the full year as the ratio of the portions of
the year prior to termination to the full year (such incentive compensation to
be determined and paid at the time provided for in Section 5 for the full year).
(C) If any legal action or other proceeding is brought for the
enforcement of this Employment Contract or because of a dispute regarding an
alleged breach, default or misrepresentation in connection herewith, the
prevailing party in such action or other proceeding shall be entitled to recover
reasonable attorneys' fees and other litigation costs (including cost of appeal)
and all reasonable related costs and expenses thereby
-7-
<PAGE>
incurred, in addition to any other relief to which such prevailing party may be
entitled.
11. Entire Agreement; Severability.
This Employment Contract sets forth the entire
understanding of the parties with respect to the subject matter herein and may
be modified only by a written instrument duly executed by each party. The
invalidity or unenforceability of any provision of this Employment Contract
shall not affect the validity or enforceability of any other provision.
12. Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed given (a) on the same day if
delivered personally, (b) three business days after being mailed by registered
or certified mail (return receipt requested) as determined by reference to the
postmark; or (c) on the same day if sent by facsimile, confirmation received, at
the address of such party first above set forth or to such other address as the
parties shall furnish in writing.
13. Assignment.
In the event of a future disposition of (or including) the
properties and business of W&G or MAC, substantially as an entirety, by merger,
consolidation, sale of stock or assets then MAC may elect to assign this
Employment Contract and all of its and W&G's rights and obligations hereunder to
the acquiring or surviving corporation, provided that such corporation shall
assume in writing all of the obligations of MAC and W&G hereunder
-8-
<PAGE>
and provided further that MAC and W&G shall remain liable for the performance of
their obligations hereunder in the event of unjustified failure of the acquiring
corporation to perform its obligation. Employee's rights under this Employment
Contract shall not be transferrable by assignment or otherwise, shall not be
subject to commutation or encumbrance and shall not be subject to the claims of
Employee's creditors.
14. Binding Effect; Inurement
This Employment Contract shall be binding upon and inure to the
benefit of MAC, W&G and (in each case) its successors and those who are its
assigns under Section 13.
15. Governing Law
This Employment Contract shall be governed by and construed in
accordance with the laws of the State of North Carolina, without giving effect
to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this employment
contract as of the date first above written.
MACPHERSON MEISTERGRAM, INC.
BY: _____________________________
JOHN K. ZIEGLER, Chairman
_____________________________
RONALD P. EMERMAN
-9-
<PAGE>
GUARANTEE OF WILLCOX & GIBBS, INC.
To induce Employee to enter into the foregoing Employment Contract with
MAC, W&G hereby unconditionally guarantees to Employee the prompt payment and
performance of all obligations of MAC under the Employment Contract.
WILLCOX & GIBBS, INC.
BY: _____________________________
JOHN K. ZIEGLER, Chairman
-10-
<PAGE>
SCHEDULE A
OPTIONS TO ACQUIRE THREE THOUSAND (3,000) SHARES OF
WILLCOX & GIBBS, INC. CLASS A STOCK PURSUANT
TO THE WG, INC. 1994 STOCK INCENTIVE PLAN
<PAGE>
Exhibit 10.25
EMPLOYMENT CONTRACT
EMPLOYMENT CONTRACT dated December __, 1996 among Macpherson Meistergram,
Inc., a North Carolina corporation ("MAC"), whose business address is 3517 West
Wendover Avenue, Greensboro, North Carolina 27407, and Jeffrey L. Hickman, whose
address is 1219 Foxfire Drive, Greensboro, NC 27410 ("Employee").
MAC desires to engage Employee to perform services as an executive officer
of MAC and Employee desires to perform such services, on the terms and
conditions hereinafter set forth.
Accordingly, MAC and Employee agree as follows:
1. Term.
MAC agrees to employ Employee to perform services as an executive
officer for a period which will commence with the closing (the "Closing") of the
sale of the capital stock of MAC and Geoffrey E. Macpherson Canada, Inc.
("GEMC") to WG Apparel, Inc. ("WG Apparel") pursuant to the Stock Purchase
Agreement among MAC, GEMC, Willcox & Gibbs, Inc. ("W&G"), WG Apparel and the
stockholders of MAC, dated as of November 27, 1996 (the "Stock Purchase
Agreement") and shall continue indefinitely until terminated as provided in this
Section 1 or Section 10 hereof (the "Employment Period"). At any time after one
(1) year from the date of the Closing, MAC may terminate this Employment
Contract by providing not less than one (1) year advance written notice to
Employee; provided, however, that MAC may terminate the Employee as of such
notice by paying one year's salary to Employee and providing for the
continuation and funding of the
-1-
<PAGE>
benefits provided for in Sections 6(iii), (iv) and (v) hereof. Employee may
terminate this Employment Contract at any time by providing ninety (90) day's
written notice to MAC. If the Closing does not occur for any reason, this
Employment Contract shall be null and void and neither party shall have any
rights hereunder.
2. Nature of Services.
During the Employment Period, Employee shall at all times be
employed in an executive capacity in the business of MAC in Greensboro, North
Carolina. Employee shall serve as Vice President-Operations of MAC upon
commencement of the Employment Period and thereafter for so long as requested by
MAC's Board of Directors. In the performance of his duties, Employee shall have
responsibility for the overall operations of MAC, subject to the policy
direction of the Board of Directors of MAC and the chief executive officer of
W&G or his designee.
3. Agreement to Serve.
Employee agrees to his employment as described in Section 2 and
agrees to devote all his business time and efforts (except immaterial time and
effort devoted to personal business affairs and investments) to the performance
of his duties under this employment contract. Employee agrees that in the course
of his employment, he will use good faith efforts to faithfully observe and
carry out all of the duties and responsibilities customarily owed by an employee
to his employer.
4. Compensation.
-2-
<PAGE>
Employee's salary during the Employment Period shall be fixed from
time to time by the Compensation Committee of the Board of Directors of W&G (the
"Committee") but shall not be less than $90,012 per annum, payable in equal
installments no less frequently than monthly. Employee's salary shall be
reviewed during the first quarter of each calendar year during the Employment
Period (with the first review to occur during the first quarter of 1997). Salary
increases, if any, shall be effective as of April 1 of each year.
5. Incentive Compensation.
Employee shall be entitled to receive bonus or bonuses during the
Employment Period pursuant to an incentive compensation plan and/or a stock
option plan described on Schedule A annexed hereto
6. Expenses; Vacations; Fringe Benefits.
During the Employment Period, Employee shall be entitled to: (i)
reimbursement for reasonable travel, entertainment and other expenses incurred
in the performance of his duties hereunder upon submission and approval of
written statements in accordance with MAC's standard policies as in effect from
time to time; (ii) vacations, holidays and sick leave in accordance with MAC's
then current regular policies governing executives; (iii) continued medical,
hospital and disability insurance benefits, which shall be at least equal to
those benefits in effect on the date hereof; (iv) use of an automobile
comparable to that presently being used by him in the business of MAC if
applicable; (v) such additional compensation, in the form
-3-
<PAGE>
of incentive compensation or otherwise, and such participation in W&G stock
option, stock award, stock purchase or other stock plans, as the Committee may
from time to time provide, if any; and (vi) participate in all other employee
benefit plans, in accordance with the provisions thereof, made available by MAC
to its executive employees generally.
7. Non-Competition.
Employee agrees that he will not, directly or indirectly
(individually or for, with or through any other person, firm or corporation, by
equity ownership or otherwise), (i) compete with W&G, MAC, or any subsidiary or
other affiliate of either of them or any successors or assigns of their
businesses during the Employment Period with respect to any business carried on
by W&G, MAC, or any such subsidiary or other affiliate, successor or assign, or
(ii) for a period of (A) one year after the end of the Employment Period, if
Employee terminates this Employment Contract pursuant to Section 1 or (B) two
years after MAC terminates this Employment Contract pursuant to Section 10 as a
result of Employee's material breach of the Employment Contract, or (C) or when
the Employee's salary ceases to be paid by MAC, if MAC terminates this
Employment Contract for any other reason, compete with MAC, with respect to its
business in the United States, Mexico, Central America & South America.
(A) Notwithstanding the foregoing, if MAC wrongfully terminates the
Employment Period or otherwise materially breaches the terms of this Employment
Contract, the foregoing provisions
-4-
<PAGE>
of this Section 7 shall cease to apply from and after such wrongful termination
or breach.
(B) Notwithstanding the foregoing, Employee shall be permitted to
own not in excess of one percent of any class of securities of any public
company which, at the time of Employee's acquisition of the securities, is not
engaged in competition with W&G, MAC or any subsidiary or other affiliate of
either of them or any such successor or assign notwithstanding the fact that
such company thereafter (without assistance from Employee) becomes engaged in
such competition, provided Employee is not part of any controlling group and is
solely a passive investor.
8. Patents; Inventions.
All of Employee's interest in patents, patent applications,
inventions, technological innovations, copyrights, developments and processes
now or hereafter during the Employment Period owned or developed by Employee
relating to the business of W&G, MAC, or any subsidiary or other affiliate of
either of them shall belong to MAC, and without further compensation, but at
MAC's expense, forthwith upon request of the MAC, Employee shall execute any and
all such assignments and other documents and take any and all such other action
as MAC may reasonably request in order to vest in MAC all Employee's right,
title and interest in and to such patents, patent applications, inventions,
technological innovations, copyrights, developments or processes, free and clear
of liens, charges and encumbrances in favor of Employee.
9. Confidential Information.
-5-
<PAGE>
No confidential information which Employee may now have or may
obtain during the Employment Period relating to the business of W&G, MAC, or any
subsidiary or other affiliate of either of them shall be disclosed to any other
persons either during or after the termination of the Employment Period without
the prior written permission of MAC, and, at MAC's written request, Employee
shall return all tangible evidence of such confidential information to MAC prior
to or at the termination of the Employment Period. Notwithstanding the
foregoing, this provision shall not preclude the Employee from the use or
disclosure of information known generally to the public (other than information
known generally to the public as a result of violation of this Section 9 by
Employee), from the use or disclosure of information required by law or court
order, or from disclosure or use of information appropriate and in the ordinary
course of carrying out his duties as an employee of MAC.
10. Termination
Notwithstanding anything herein contained:
(A) If Employee shall, during the Employment Period, die or become
physically or mentally incapacitated or disabled for a period of six (6)
consecutive months (and MAC is not in breach of any condition hereof (including,
without limitation, the provisions of Section 6), then MAC shall have the right
to give immediate notice of termination of Employee's services hereunder.
Additionally, if, during the Employment Period, Employee shall materially breach
any of the terms hereof, MAC shall have the right to give notice of termination
of Employee's
-6-
<PAGE>
services hereunder as of a date (not earlier than thirty [30] days from such
notice) to be specified in such notice; provided, however, that Employee shall
have the right during such 30-day period to correct such breach (if capable of
being corrected) or pay compensation which does not exceed MAC's reasonable
estimate of the aggregate loss, damage, deficiency or expense attributable to
such breach (if not capable of being corrected) and thereby avoid termination.
(B) In the event of termination pursuant to Section 10(A): (i)
Employee (or his estate) shall be entitled to receive his salary at the rate
provided in Section 4 to the end of the calendar month in which termination
occurs; and (ii) Employee (or his estate) shall be entitled to incentive
compensation for portions of the year prior to the effective date of such
termination which is in the same ratio to the amount of incentive compensation
that would have been payable for the full year as the ratio of the portions of
the year prior to termination to the full year (such incentive compensation to
be determined and paid at the time provided for in Section 5 for the full year).
(C) If any legal action or other proceeding is brought for the
enforcement of this Employment Contract or because of a dispute regarding an
alleged breach, default or misrepresentation in connection herewith, the
prevailing party in such action or other proceeding shall be entitled to recover
reasonable attorneys' fees and other litigation costs (including cost of appeal)
and all reasonable related costs and expenses thereby
-7-
<PAGE>
incurred, in addition to any other relief to which such prevailing party may be
entitled.
11. Entire Agreement; Severability.
This Employment Contract sets forth the entire
understanding of the parties with respect to the subject matter herein and may
be modified only by a written instrument duly executed by each party. The
invalidity or unenforceability of any provision of this Employment Contract
shall not affect the validity or enforceability of any other provision.
12. Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed given (a) on the same day if
delivered personally, (b) three business days after being mailed by registered
or certified mail (return receipt requested) as determined by reference to the
postmark; or (c) on the same day if sent by facsimile, confirmation received, at
the address of such party first above set forth or to such other address as the
parties shall furnish in writing.
13. Assignment.
In the event of a future disposition of (or including) the
properties and business of W&G or MAC, substantially as an entirety, by merger,
consolidation, sale of stock or assets then MAC may elect to assign this
Employment Contract and all of its and W&G's rights and obligations hereunder to
the acquiring or surviving corporation, provided that such corporation shall
assume in writing all of the obligations of MAC and W&G hereunder
-8-
<PAGE>
and provided further that MAC and W&G shall remain liable for the performance of
their obligations hereunder in the event of unjustified failure of the acquiring
corporation to perform its obligation. Employee's rights under this Employment
Contract shall not be transferrable by assignment or otherwise, shall not be
subject to commutation or encumbrance and shall not be subject to the claims of
Employee's creditors.
14. Binding Effect; Inurement
This Employment Contract shall be binding upon and inure to the
benefit of MAC, W&G and (in each case) its successors and those who are its
assigns under Section 13.
15. Governing Law
This Employment Contract shall be governed by and construed in
accordance with the laws of the State of North Carolina, without giving effect
to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this employment
contract as of the date first above written.
MACPHERSON MEISTERGRAM, INC.
BY: ______________________________
JOHN K. ZIEGLER, Chairman
______________________________
JEFFREY L. HICKMAN
-9-
<PAGE>
GUARANTEE OF WILLCOX & GIBBS, INC.
To induce Employee to enter into the foregoing Employment Contract with
MAC, W&G hereby unconditionally guarantees to Employee the prompt payment and
performance of all obligations of MAC under the Employment Contract.
WILLCOX & GIBBS, INC.
BY: ______________________________
JOHN K. ZIEGLER, Chairman
-10-
<PAGE>
SCHEDULE A
OPTIONS TO ACQUIRE THREE THOUSAND (3,000) SHARES OF
WILLCOX & GIBBS, INC. CLASS A STOCK PURSUANT
TO THE WG, INC. 1994 STOCK INCENTIVE PLAN
<PAGE>
Exhibit 10.26
EMPLOYMENT CONTRACT
EMPLOYMENT CONTRACT dated December __, 1996 among Macpherson Meistergram,
Inc., a North Carolina corporation ("MAC"), whose business address is 3517 West
Wendover Avenue, Greensboro, North Carolina 27407, and Jacob G. Bumm, whose
address is 8700 Dapple Grey Road, Oak Ridge, NC 27310 ("Employee").
MAC desires to engage Employee to perform services as an executive officer
of MAC and Employee desires to perform such services, on the terms and
conditions hereinafter set forth.
Accordingly, MAC and Employee agree as follows:
1. Term.
MAC agrees to employ Employee to perform services as an executive
officer for a period which will commence with the closing (the "Closing") of the
sale of the capital stock of MAC and Geoffrey E. Macpherson Canada, Inc.
("GEMC") to WG Apparel, Inc. ("WG Apparel") pursuant to the Stock Purchase
Agreement among MAC, GEMC, Willcox & Gibbs, Inc. ("W&G"), WG Apparel and the
stockholders of MAC, dated as of November 27, 1996 (the "Stock Purchase
Agreement") and shall continue indefinitely until terminated as provided in this
Section 1 or Section 10 hereof (the "Employment Period"). At any time after one
(1) year from the date of the Closing, MAC may terminate this Employment
Contract by providing not less than one (1) year advance written notice to
Employee; provided, however, that MAC may terminate the Employee as of such
notice by paying one year's salary to Employee and providing for the
continuation and funding of the
-1-
<PAGE>
benefits provided for in Sections 6(iii), (iv) and (v) hereof. Employee may
terminate this Employment Contract at any time by providing ninety (90) day's
written notice to MAC. If the Closing does not occur for any reason, this
Employment Contract shall be null and void and neither party shall have any
rights hereunder.
2. Nature of Services.
During the Employment Period, Employee shall at all times be
employed in an executive capacity in the business of MAC in Greensboro, North
Carolina. Employee shall serve as Vice President-Sales of MAC upon commencement
of the Employment Period and thereafter for so long as requested by MAC's Board
of Directors. In the performance of his duties, Employee shall have
responsibility for the sales and marketing activities of MAC, subject to the
policy direction of the Board of Directors of MAC and the chief executive
officer of W&G or his designee.
3. Agreement to Serve.
Employee agrees to his employment as described in Section 2 and
agrees to devote all his business time and efforts (except immaterial time and
effort devoted to personal business affairs and investments) to the performance
of his duties under this employment contract. Employee agrees that in the course
of his employment, he will use good faith efforts to faithfully observe and
carry out all of the duties and responsibilities customarily owed by an employee
to his employer.
4. Compensation.
-2-
<PAGE>
Employee's salary during the Employment Period shall be fixed from
time to time by the Compensation Committee of the Board of Directors of W&G (the
"Committee") but shall not be less than $105,716 per annum, payable in equal
installments no less frequently than monthly. Employee's salary shall be
reviewed during the first quarter of each calendar year during the Employment
Period (with the first review to occur during the first quarter of 1997). Salary
increases, if any, shall be effective as of April 1 of each year.
5. Incentive Compensation.
Employee shall be entitled to receive bonus or bonuses during the
Employment Period pursuant to an incentive compensation plan and/or a stock
option plan described on Schedule A annexed hereto
6. Expenses; Vacations; Fringe Benefits.
During the Employment Period, Employee shall be entitled
to: (i) reimbursement for reasonable travel, entertainment and other expenses
incurred in the performance of his duties hereunder upon submission and approval
of written statements in accordance with MAC's standard policies as in effect
from time to time; (ii) vacations, holidays and sick leave in accordance with
MAC's then current regular policies governing executives; (iii) continued
medical, hospital and disability insurance benefits, which shall be at least
equal to those benefits in effect on the date hereof; (iv) use of an automobile
comparable to that presently being used by him in the business of MAC if
applicable; (v) such additional compensation, in the form
-3-
<PAGE>
of incentive compensation or otherwise, and such participation in W&G stock
option, stock award, stock purchase or other stock plans, as the Committee may
from time to time provide, if any; and (vi) participate in all other employee
benefit plans, in accordance with the provisions thereof, made available by MAC
to its executive employees generally.
7. Non-Competition.
Employee agrees that he will not, directly or indirectly
(individually or for, with or through any other person, firm or corporation, by
equity ownership or otherwise), (i) compete with W&G, MAC, or any subsidiary or
other affiliate of either of them or any successors or assigns of their
businesses during the Employment Period with respect to any business carried on
by W&G, MAC, or any such subsidiary or other affiliate, successor or assign, or
(ii) for a period of (A) one year after the end of the Employment Period, if
Employee terminates this Employment Contract pursuant to Section 1 or (B) two
years after MAC terminates this Employment Contract pursuant to Section 10 as a
result of Employee's material breach of the Employment Contract, or (C) or when
the Employee's salary ceases to be paid by MAC, if MAC terminates this
Employment Contract for any other reason, compete with MAC, with respect to its
business in the United States, Mexico, Central America & South America.
(A) Notwithstanding the foregoing, if MAC wrongfully terminates the
Employment Period or otherwise materially breaches the terms of this Employment
Contract, the foregoing provisions
-4-
<PAGE>
of this Section 7 shall cease to apply from and after such wrongful termination
or breach.
(B) Notwithstanding the foregoing, Employee shall be permitted to
own not in excess of one percent of any class of securities of any public
company which, at the time of Employee's acquisition of the securities, is not
engaged in competition with W&G, MAC or any subsidiary or other affiliate of
either of them or any such successor or assign notwithstanding the fact that
such company thereafter (without assistance from Employee) becomes engaged in
such competition, provided Employee is not part of any controlling group and is
solely a passive investor.
8. Patents; Inventions.
All of Employee's interest in patents, patent applications,
inventions, technological innovations, copyrights, developments and processes
now or hereafter during the Employment Period owned or developed by Employee
relating to the business of W&G, MAC, or any subsidiary or other affiliate of
either of them shall belong to MAC, and without further compensation, but at
MAC's expense, forthwith upon request of the MAC, Employee shall execute any and
all such assignments and other documents and take any and all such other action
as MAC may reasonably request in order to vest in MAC all Employee's right,
title and interest in and to such patents, patent applications, inventions,
technological innovations, copyrights, developments or processes, free and clear
of liens, charges and encumbrances in favor of Employee.
9. Confidential Information.
-5-
<PAGE>
No confidential information which Employee may now have or may
obtain during the Employment Period relating to the business of W&G, MAC, or any
subsidiary or other affiliate of either of them shall be disclosed to any other
persons either during or after the termination of the Employment Period without
the prior written permission of MAC, and, at MAC's written request, Employee
shall return all tangible evidence of such confidential information to MAC prior
to or at the termination of the Employment Period. Notwithstanding the
foregoing, this provision shall not preclude the Employee from the use or
disclosure of information known generally to the public (other than information
known generally to the public as a result of violation of this Section 9 by
Employee), from the use or disclosure of information required by law or court
order, or from disclosure or use of information appropriate and in the ordinary
course of carrying out his duties as an employee of MAC.
10. Termination
Notwithstanding anything herein contained:
(A) If Employee shall, during the Employment Period, die or become
physically or mentally incapacitated or disabled for a period of six (6)
consecutive months (and MAC is not in breach of any condition hereof (including,
without limitation, the provisions of Section 6), then MAC shall have the right
to give immediate notice of termination of Employee's services hereunder.
Additionally, if, during the Employment Period, Employee shall materially breach
any of the terms hereof, MAC shall have the right to give notice of termination
of Employee's
-6-
<PAGE>
services hereunder as of a date (not earlier than thirty [30] days from such
notice) to be specified in such notice; provided, however, that Employee shall
have the right during such 30-day period to correct such breach (if capable of
being corrected) or pay compensation which does not exceed MAC's reasonable
estimate of the aggregate loss, damage, deficiency or expense attributable to
such breach (if not capable of being corrected) and thereby avoid termination.
(B) In the event of termination pursuant to Section 10(A): (i)
Employee (or his estate) shall be entitled to receive his salary at the rate
provided in Section 4 to the end of the calendar month in which termination
occurs; and (ii) Employee (or his estate) shall be entitled to incentive
compensation for portions of the year prior to the effective date of such
termination which is in the same ratio to the amount of incentive compensation
that would have been payable for the full year as the ratio of the portions of
the year prior to termination to the full year (such incentive compensation to
be determined and paid at the time provided for in Section 5 for the full year).
(C) If any legal action or other proceeding is brought for the
enforcement of this Employment Contract or because of a dispute regarding an
alleged breach, default or misrepresentation in connection herewith, the
prevailing party in such action or other proceeding shall be entitled to recover
reasonable attorneys' fees and other litigation costs (including cost of appeal)
and all reasonable related costs and expenses thereby
-7-
<PAGE>
incurred, in addition to any other relief to which such prevailing party may be
entitled.
11. Entire Agreement; Severability.
This Employment Contract sets forth the entire
understanding of the parties with respect to the subject matter herein and may
be modified only by a written instrument duly executed by each party. The
invalidity or unenforceability of any provision of this Employment Contract
shall not affect the validity or enforceability of any other provision.
12. Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed given (a) on the same day if
delivered personally, (b) three business days after being mailed by registered
or certified mail (return receipt requested) as determined by reference to the
postmark; or (c) on the same day if sent by facsimile, confirmation received, at
the address of such party first above set forth or to such other address as the
parties shall furnish in writing.
13. Assignment.
In the event of a future disposition of (or including) the
properties and business of W&G or MAC, substantially as an entirety, by merger,
consolidation, sale of stock or assets then MAC may elect to assign this
Employment Contract and all of its and W&G's rights and obligations hereunder to
the acquiring or surviving corporation, provided that such corporation shall
assume in writing all of the obligations of MAC and W&G hereunder
-8-
<PAGE>
and provided further that MAC and W&G shall remain liable for the performance of
their obligations hereunder in the event of unjustified failure of the acquiring
corporation to perform its obligation. Employee's rights under this Employment
Contract shall not be transferrable by assignment or otherwise, shall not be
subject to commutation or encumbrance and shall not be subject to the claims of
Employee's creditors.
14. Binding Effect; Inurement
This Employment Contract shall be binding upon and inure to the
benefit of MAC, W&G and (in each case) its successors and those who are its
assigns under Section 13.
15. Governing Law
This Employment Contract shall be governed by and construed in
accordance with the laws of the State of North Carolina, without giving effect
to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this employment
contract as of the date first above written.
MACPHERSON MEISTERGRAM, INC.
BY: ______________________________
JOHN K. ZIEGLER, Chairman
______________________________
JACOB G. BUMM
-9-
<PAGE>
GUARANTEE OF WILLCOX & GIBBS, INC.
To induce Employee to enter into the foregoing Employment Contract with
MAC, W&G hereby unconditionally guarantees to Employee the prompt payment and
performance of all obligations of MAC under the Employment Contract.
WILLCOX & GIBBS, INC.
BY: ______________________________
JOHN K. ZIEGLER, Chairman
-10-
<PAGE>
SCHEDULE A
OPTIONS TO ACQUIRE THREE THOUSAND (3,000) SHARES OF
WILLCOX & GIBBS, INC. CLASS A STOCK PURSUANT
TO THE WG, INC. 1994 STOCK INCENTIVE PLAN
<PAGE>
Exhibit 10.27
EMPLOYMENT CONTRACT
EMPLOYMENT CONTRACT dated December __, 1996 among Macpherson Meistergram,
Inc., a North Carolina corporation ("MAC"), whose business address is 3517 West
Wendover Avenue, Greensboro, North Carolina 27407, and Stephen C. Edwards, whose
address is 4500 Lewiston Oaks Court, Greensboro, NC 27410 ("Employee").
MAC desires to engage Employee to perform services as an executive officer
of MAC and Employee desires to perform such services, on the terms and
conditions hereinafter set forth.
Accordingly, MAC and Employee agree as follows:
1. Term.
MAC agrees to employ Employee to perform services as an executive
officer for a period which will commence with the closing (the "Closing") of the
sale of the capital stock of MAC and Geoffrey E. Macpherson Canada, Inc.
("GEMC") to WG Apparel, Inc. ("WG Apparel") pursuant to the Stock Purchase
Agreement among MAC, GEMC, Willcox & Gibbs, Inc. ("W&G"), WG Apparel and the
stockholders of MAC, dated as of November 27, 1996 (the "Stock Purchase
Agreement") and shall continue indefinitely until terminated as provided in this
Section 1 or Section 10 hereof (the "Employment Period"). At any time after one
(1) year from the date of the Closing, MAC may terminate this Employment
Contract by providing not less than one (1) year advance written notice to
Employee; provided, however, that MAC may terminate the Employee as of such
notice by paying one year's salary to Employee and providing for the
continuation and funding of the
-1-
<PAGE>
benefits provided for in Sections 6(iii), (iv) and (v) hereof. Employee may
terminate this Employment Contract at any time by providing ninety (90) day's
written notice to MAC. If the Closing does not occur for any reason, this
Employment Contract shall be null and void and neither party shall have any
rights hereunder.
2. Nature of Services.
During the Employment Period, Employee shall at all times be
employed in an executive capacity in the business of MAC in Greensboro, North
Carolina. Employee shall serve as Controller of MAC upon commencement of the
Employment Period and thereafter for so long as requested by MAC's Board of
Directors. In the performance of his duties, Employee shall have responsibility
for the day to day financial operations of MAC, subject to the policy direction
of the Board of Directors of MAC and the chief executive officer of W&G or his
designee.
3. Agreement to Serve.
Employee agrees to his employment as described in Section 2 and
agrees to devote all his business time and efforts (except immaterial time and
effort devoted to personal business affairs and investments) to the performance
of his duties under this employment contract. Employee agrees that in the course
of his employment, he will use good faith efforts to faithfully observe and
carry out all of the duties and responsibilities customarily owed by an employee
to his employer.
4. Compensation.
-2-
<PAGE>
Employee's salary during the Employment Period shall be fixed from
time to time by the Compensation Committee of the Board of Directors of W&G (the
"Committee") but shall not be less than $60,034 per annum, payable in equal
installments no less frequently than monthly. Employee's salary shall be
reviewed during the first quarter of each calendar year during the Employment
Period (with the first review to occur during the first quarter of 1997). Salary
increases, if any, shall be effective as of April 1 of each year.
5. Incentive Compensation.
Employee shall be entitled to receive bonus or bonuses during the
Employment Period pursuant to an incentive compensation plan and/or a stock
option plan described on Schedule A annexed hereto
6. Expenses; Vacations; Fringe Benefits.
During the Employment Period, Employee shall be entitled to: (i)
reimbursement for reasonable travel, entertainment and other expenses incurred
in the performance of his duties hereunder upon submission and approval of
written statements in accordance with MAC's standard policies as in effect from
time to time; (ii) vacations, holidays and sick leave in accordance with MAC's
then current regular policies governing executives; (iii) continued medical,
hospital and disability insurance benefits, which shall be at least equal to
those benefits in effect on the date hereof; (iv) use of an automobile
comparable to that presently being used by him in the business of MAC if
applicable; (v) such additional compensation, in the form
-3-
<PAGE>
of incentive compensation or otherwise, and such participation in W&G stock
option, stock award, stock purchase or other stock plans, as the Committee may
from time to time provide, if any; and (vi) participate in all other employee
benefit plans, in accordance with the provisions thereof, made available by MAC
to its executive employees generally.
7. Non-Competition.
Employee agrees that he will not, directly or indirectly
(individually or for, with or through any other person, firm or corporation, by
equity ownership or otherwise), (i) compete with W&G, MAC, or any subsidiary or
other affiliate of either of them or any successors or assigns of their
businesses during the Employment Period with respect to any business carried on
by W&G, MAC, or any such subsidiary or other affiliate, successor or assign, or
(ii) for a period of (A) one year after the end of the Employment Period, if
Employee terminates this Employment Contract pursuant to Section 1 or (B) two
years after MAC terminates this Employment Contract pursuant to Section 10 as a
result of Employee's material breach of the Employment Contract, or (C) or when
the Employee's salary ceases to be paid by MAC, if MAC terminates this
Employment Contract for any other reason, compete with MAC, with respect to its
business in the United States, Mexico, Central America & South America.
(A) Notwithstanding the foregoing, if MAC wrongfully terminates the
Employment Period or otherwise materially breaches the terms of this Employment
Contract, the foregoing provisions
-4-
<PAGE>
of this Section 7 shall cease to apply from and after such wrongful termination
or breach.
(B) Notwithstanding the foregoing, Employee shall be permitted to
own not in excess of one percent of any class of securities of any public
company which, at the time of Employee's acquisition of the securities, is not
engaged in competition with W&G, MAC or any subsidiary or other affiliate of
either of them or any such successor or assign notwithstanding the fact that
such company thereafter (without assistance from Employee) becomes engaged in
such competition, provided Employee is not part of any controlling group and is
solely a passive investor.
8. Patents; Inventions.
All of Employee's interest in patents, patent applications,
inventions, technological innovations, copyrights, developments and processes
now or hereafter during the Employment Period owned or developed by Employee
relating to the business of W&G, MAC, or any subsidiary or other affiliate of
either of them shall belong to MAC, and without further compensation, but at
MAC's expense, forthwith upon request of the MAC, Employee shall execute any and
all such assignments and other documents and take any and all such other action
as MAC may reasonably request in order to vest in MAC all Employee's right,
title and interest in and to such patents, patent applications, inventions,
technological innovations, copyrights, developments or processes, free and clear
of liens, charges and encumbrances in favor of Employee.
9. Confidential Information.
-5-
<PAGE>
No confidential information which Employee may now have or may
obtain during the Employment Period relating to the business of W&G, MAC, or any
subsidiary or other affiliate of either of them shall be disclosed to any other
persons either during or after the termination of the Employment Period without
the prior written permission of MAC, and, at MAC's written request, Employee
shall return all tangible evidence of such confidential information to MAC prior
to or at the termination of the Employment Period. Notwithstanding the
foregoing, this provision shall not preclude the Employee from the use or
disclosure of information known generally to the public (other than information
known generally to the public as a result of violation of this Section 9 by
Employee), from the use or disclosure of information required by law or court
order, or from disclosure or use of information appropriate and in the ordinary
course of carrying out his duties as an employee of MAC.
10. Termination
Notwithstanding anything herein contained:
(A) If Employee shall, during the Employment Period, die
or become physically or mentally incapacitated or disabled for a period of six
(6) consecutive months (and MAC is not in breach of any condition hereof
(including, without limitation, the provisions of Section 6), then MAC shall
have the right to give immediate notice of termination of Employee's services
hereunder. Additionally, if, during the Employment Period, Employee shall
materially breach any of the terms hereof, MAC shall have the right to give
notice of termination of Employee's
-6-
<PAGE>
services hereunder as of a date (not earlier than thirty [30] days from such
notice) to be specified in such notice; provided, however, that Employee shall
have the right during such 30-day period to correct such breach (if capable of
being corrected) or pay compensation which does not exceed MAC's reasonable
estimate of the aggregate loss, damage, deficiency or expense attributable to
such breach (if not capable of being corrected) and thereby avoid termination.
(B) In the event of termination pursuant to Section 10(A): (i)
Employee (or his estate) shall be entitled to receive his salary at the rate
provided in Section 4 to the end of the calendar month in which termination
occurs; and (ii) Employee (or his estate) shall be entitled to incentive
compensation for portions of the year prior to the effective date of such
termination which is in the same ratio to the amount of incentive compensation
that would have been payable for the full year as the ratio of the portions of
the year prior to termination to the full year (such incentive compensation to
be determined and paid at the time provided for in Section 5 for the full year).
(C) If any legal action or other proceeding is brought for the
enforcement of this Employment Contract or because of a dispute regarding an
alleged breach, default or misrepresentation in connection herewith, the
prevailing party in such action or other proceeding shall be entitled to recover
reasonable attorneys' fees and other litigation costs (including cost of appeal)
and all reasonable related costs and expenses thereby
-7-
<PAGE>
incurred, in addition to any other relief to which such prevailing party may be
entitled.
11. Entire Agreement; Severability.
This Employment Contract sets forth the entire
understanding of the parties with respect to the subject matter herein and may
be modified only by a written instrument duly executed by each party. The
invalidity or unenforceability of any provision of this Employment Contract
shall not affect the validity or enforceability of any other provision.
12. Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed given (a) on the same day if
delivered personally, (b) three business days after being mailed by registered
or certified mail (return receipt requested) as determined by reference to the
postmark; or (c) on the same day if sent by facsimile, confirmation received, at
the address of such party first above set forth or to such other address as the
parties shall furnish in writing.
13. Assignment.
In the event of a future disposition of (or including) the
properties and business of W&G or MAC, substantially as an entirety, by merger,
consolidation, sale of stock or assets then MAC may elect to assign this
Employment Contract and all of its and W&G's rights and obligations hereunder to
the acquiring or surviving corporation, provided that such corporation shall
assume in writing all of the obligations of MAC and W&G hereunder
-8-
<PAGE>
and provided further that MAC and W&G shall remain liable for the performance of
their obligations hereunder in the event of unjustified failure of the acquiring
corporation to perform its obligation. Employee's rights under this Employment
Contract shall not be transferrable by assignment or otherwise, shall not be
subject to commutation or encumbrance and shall not be subject to the claims of
Employee's creditors.
14. Binding Effect; Inurement
This Employment Contract shall be binding upon and inure to the
benefit of MAC, W&G and (in each case) its successors and those who are its
assigns under Section 13.
15. Governing Law
This Employment Contract shall be governed by and construed in
accordance with the laws of the State of North Carolina, without giving effect
to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this employment
contract as of the date first above written.
MACPHERSON MEISTERGRAM, INC.
BY: _____________________________
JOHN K. ZIEGLER, Chairman
_____________________________
Stephen C. Edwards
-9-
<PAGE>
GUARANTEE OF WILLCOX & GIBBS, INC.
To induce Employee to enter into the foregoing Employment Contract with
MAC, W&G hereby unconditionally guarantees to Employee the prompt payment and
performance of all obligations of MAC under the Employment Contract.
WILLCOX & GIBBS, INC.
BY: _____________________________
JOHN K. ZIEGLER, Chairman
-10-
<PAGE>
SCHEDULE A
OPTIONS TO ACQUIRE ONE THOUSAND (1,000) SHARES OF
WILLCOX & GIBBS, INC. CLASS A STOCK PURSUANT
TO THE WG, INC. 1994 STOCK INCENTIVE PLAN
<PAGE>
Exhibit 12
EXHIBIT 12
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
Willcox & Gibbs, Inc.
<TABLE>
<CAPTION>
Company's Predecessor Company
------------------------------------------ ----------------------------------------------------------
Year Ended December 31, January 1, 1994 July 13, 1994 to Year Ended Year Ended
1992 1993 to July 12, 1994 December 31, 1994 December 31, 1995 December 31, 1996
------ ------ ---------------- ----------------- ----------------- -----------------
(unaudited)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income from
operations.............. 5,475 4,579 789 (642) 1,952 2,450
Plus: Fixed charges....... 2,221 2,544 1,517 2,117 4,658 5,343
----- ----- ----- ----- ----- -----
Total................ 7,696 7,123 2,306 1,475 6,610 7,793
Fixed Charges:
Interest Expense.......... 1,993 2,307 1,309 1,946 4,249 4,824
1/3 rent expense.......... 228 237 127 171 409 519
----- ----- ----- ----- ----- -----
Total................ 2,221 2,544 1,517 2,117 4,658 5,343
===== ===== ===== ===== ===== =====
Ratio of earnings to
fixed charges........... 3.47x 2.80x 1.52x 0.70x 1.42x 1.46x
</TABLE>
Macpherson Meistergram, Inc.
Year Ended December 31,
-------------------------------
1994 1995 1996
---- ---- ----
(Dollars in thousands)
Pre-tax income from operations......... 2,046 3,325 1,294
Plus: Fixed charges.................... 592 397 950
----- ----- -----
Total.............................. 2,638 3,722 2,244
===== ===== =====
Fixed charges:
Interest expense....................... 390 218 781
1/3 rent expense....................... 202 179 169
----- ----- -----
Total.............................. 592 397 950
===== ===== =====
Ratio of earnings to fixed charges..... 4.46x 9.37x 2.36x
<PAGE>
EXHIBIT 21
List of Subsidiaries
1. WG Apparel, Inc.
2. Clinton Machinery Corporation
3. Clinton Management Corp.
4. Leadtec Systems, Inc.
5. W&G Daon, Inc.
6. J&E Sewing Supplies, Inc.
7. W&G Tennessee Imports, Inc.
8. Clinton Leasing Corp.
9. Clinton Equipment Corp.
10. Paradise Color Corp.
11. Willcox & Gibbs, Ltd.
12. Sunbrand S.A. de C.V.
13. Sunbrand Caribe S.A.
14. Allied Machine Parts Ltd.
15. M.E.C. (Sewing Machines) Ltd.
16. Unity Sewing Supply Company (UK) Limited
17. Allide Machine Parts Limited
18. Matyork Limited
19. Forest Needle Company Limited
20. Morris & Ingram (Textiles) Limited
21. Eildon Electronics Limited
22. Macpherson Meistergram, Inc.
23. Geoffrey E. Macpherson Canada, Inc.
<PAGE>
Exhibit 23.2
AUDITORS' CONSENT
The Boards of Directors
Clinton Management Corp. and Clinton Machinery Corp.:
We consent to the use of our reports included herein
and to reference to our firm under the heading "Experts"
in the prospectus.
Atlanta, Georgia KPMG Peat Marwick LLP
April 2, 1997
<PAGE>
Exhibit 23.2
AUDITORS' CONSENT AND REPORT ON SCHEDULE
The Board of Directors
Willcox & Gibbs, Inc.:
The audits referred to in our report dated February 26, 1997 included the
related financial statement schedule as of December 31, 1996 and 1995, and
for the years ended December 31, 1996 and 1995 and for the period from July
13, 1994 (date of formation) to December 31, 1994, included in the
registration statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We consent to the use of our reports included herein and to reference to our
firm under the heading "Experts" in the prospectus.
Atlanta, Georgia KPMG Peat Marwick LLP
April 2, 1997
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 21, 1997 and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Greensboro, North Carolina,
April 3, 1997.
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents, that the undersigned person hereby
constitutes and appoints John K. Ziegler, Sr., John K. Ziegler, Jr. and
Mary-Anne Kieran, and each of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation,
for such person and in such person's name, place and stead, in any and all
capacities to sign the Registration Statement on Form S-4 and any and all
amendments (including post-effective amendments) and any other documents and
instruments incidental thereto, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
Date: March 26, 1997
By: /s/ JOHN K. ZIEGLER, SR.
--------------------------------------
John K. Ziegler, Sr.
Chairman, Chief Executive Officer, and
Director
(Principal Executive Officer)
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents, that the undersigned person hereby
constitutes and appoints John K. Ziegler, Sr., John K. Ziegler, Jr. and
Mary-Anne Kieran, and each of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation,
for such person and in such person's name, place and stead, in any and all
capacities to sign the Registration Statement on Form S-4 and any and all
amendments (including post-effective amendments) and any other documents and
instruments incidental thereto, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
Date: March 22, 1997
By: /s/ MAXWELL L. TRIPP
------------------------------------------
Maxwell L. Tripp
President, Chief Operating Officer and Director
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents, that the undersigned person hereby
constitutes and appoints John K. Ziegler, Sr., John K. Ziegler, Jr. and
Mary-Anne Kieran, and each of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation,
for such person and in such person's name, place and stead, in any and all
capacities to sign the Registration Statement on Form S-4 and any and all
amendments (including post-effective amendments) and any other documents and
instruments incidental thereto, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
Date: March 19, 1997
By: /s/ JOHN K. ZIEGLER, JR.
----------------------------------------
John K. Ziegler, Jr.
Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents, that the undersigned person hereby
constitutes and appoints John K. Ziegler, Sr., John K. Ziegler, Jr. and
Mary-Anne Kieran, and each of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation,
for such person and in such person's name, place and stead, in any and all
capacities to sign the Registration Statement on Form S-4 and any and all
amendments (including post-effective amendments) and any other documents and
instruments incidental thereto, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
Date: March 20, 1997
By: /s/ JACK KLASKY
-------------------------
Jack Klasky
Vice President and Director
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents, that the undersigned person hereby
constitutes and appoints John K. Ziegler, Sr., John K. Ziegler, Jr. and
Mary-Anne Kieran, and each of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation,
for such person and in such person's name, place and stead, in any and all
capacities to sign the Registration Statement on Form S-4 and any and all
amendments (including post-effective amendments) and any other documents and
instruments incidental thereto, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
Date: March 20, 1997
By: /s/ ALAN B. LEE
--------------------------
Alan B. Lee
Vice President and Director
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents, that the undersigned person hereby
constitutes and appoints John K. Ziegler, Sr., John K. Ziegler, Jr. and
Mary-Anne Kieran, and each of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation,
for such person and in such person's name, place and stead, in any and all
capacities to sign the Registration Statement on Form S-4 and any and all
amendments (including post-effective amendments) and any other documents and
instruments incidental thereto, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
Date: March 21, 1997
By: /s/ RICHARD J. MACKEY
--------------------------
Richard J. Mackey
Director
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents, that the undersigned person hereby
constitutes and appoints John K. Ziegler, Sr., John K. Ziegler, Jr. and
Mary-Anne Kieran, and each of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation,
for such person and in such person's name, place and stead, in any and all
capacities to sign the Registration Statement on Form S-4 and any and all
amendments (including post-effective amendments) and any other documents and
instruments incidental thereto, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
Date: March 21, 1997
By: /s/ MARC GLAZER
-------------------
Marc Glazer
Director
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents, that the undersigned person hereby
constitutes and appoints John K. Ziegler, Sr., John K. Ziegler, Jr. and
Mary-Anne Kieran, and each of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation,
for such person and in such person's name, place and stead, in any and all
capacities to sign the Registration Statement on Form S-4 and any and all
amendments (including post-effective amendments) and any other documents and
instruments incidental thereto, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
Date: March 19, 1997
By: /s/ SIDNEY B. BECKER
--------------------------
Sidney B. Becker
Director
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents, that the undersigned person hereby
constitutes and appoints John K. Ziegler, Sr., John K. Ziegler, Jr. and
Mary-Anne Kieran, and each of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation,
for such person and in such person's name, place and stead, in any and all
capacities to sign the Registration Statement on Form S-4 and any and all
amendments (including post-effective amendments) and any other documents and
instruments incidental thereto, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
Date: March 19, 1997
By: /s/ CHRISTOPHER W. ROSER
---------------------------
Christopher W. Roser
Director
<PAGE>
POWER OF ATTORNEY
Know All Men By These Presents, that the undersigned person hereby
constitutes and appoints John K. Ziegler, Sr., John K. Ziegler, Jr. and
Mary-Anne Kieran, and each of them, such person's true and lawful
attorneys-in-fact and agents, with full power of substitution and revocation,
for such person and in such person's name, place and stead, in any and all
capacities to sign the Registration Statement on Form S-4 and any and all
amendments (including post-effective amendments) and any other documents and
instruments incidental thereto, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
Date: March 25, 1997
By: /s/ FRANK E. WALSH, III
--------------------------------
Frank E. Walsh, III
Director
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305 (b) (2)
----------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Barbara McCluskey, Vice President
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
WILLCOX & GIBBS, INC.
(Exact name of obligor as specified in its charter)
Delaware 98-0160214
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 Milik Street
Carteret, New Jeresy
07008
(Address of principal executive office) (Zip code)
-----------------
$85,000,000 12 1/4% Series A Senior Notes due 2003
(Title of Indenture Securities)
-----------------
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 3. Voting securities of the trustee.
Furnish the following information as to each class of voting securities
of the trustee:
As of March 27, 1997
Col. A Col. B
Title of class Amount Outstanding
Not Applicable
2
<PAGE>
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, furnish the following
information:
(a) Title of the securities outstanding under each such other indenture
Not Applicable
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interest within the meaning of Section 310 (b)
(1) of the Act arises as a result of the trusteeship under any such
other indenture, including a statement as to how the indenture
securities will rank as compared with the securities issued under
such other indenture.
Not Applicable
Item 5. Interlocking directorates and similar relationships with the obligor or
underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the
nature of each such connection.
Not Applicable
Item 6. Voting securities of the trustee owned by the obligor or its officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner,
and executive officer of the obligor:
As of March 27, 1997
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially securities represented by
amount given in Col. C
_____________ _____________ _____________ _________________________
Not Applicable
3
<PAGE>
Item 7. Voting securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner and executive officer of each such underwriter:
As of March 27, 1997
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially securities represented by
amount given in Col. C
_____________ _____________ _____________ _________________________
Not Applicable
Item 8. Securities of the obligor owned or held by the trustee
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default
by the trustee:
As of March 27,1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
_____________ _____________ ________________________ _________________________
</TABLE>
Not Applicable
4
<PAGE>
Item 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the
obligor, furnish the following information as to each class of
securities of such underwriter any of which are so owned or held by the
trustee:
As of March 27, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
_____________ _____________ ________________________ _________________________
</TABLE>
Not Applicable
Item 10. Ownership or holdings by the trustee of voting securities of
certain affiliates or securityholders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the
knowledge of the trustee (1) owns 10 percent or more of the voting
securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor, furnish the following information as to the
voting securities of such person:
As of March 27, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
_____________ _____________ ________________________ _________________________
</TABLE>
Not Applicable
5
<PAGE>
Item 11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
If the trustee owns beneficially or holds as collateral security
security for obligations in default any securities of a person who,
to the knowledge of the trustee, owns 50 percent or more of the
voting securities of the obligor, furnish the following information
as to each class of securities of such any of which are so owned or
held by the trustee:
As of March 27, 1997
Col. A Col. B Col. C
Nature of Indebtedness Amount Outstanding Date Due
_______________________ _____________________ ____________
Not Applicable
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
As of March 27, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
_____________ _____________ ________________________ _________________________
</TABLE>
Not Applicable
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
Not Applicable
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in
any other securities,
6
<PAGE>
of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether
there has been a default under any such indenture or series,
identify the indenture or series affected, and explain the nature
of any such default.
Not Applicable
Item 14. Affiliations with the Underwriters
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not Applicable
Item 15. Foreign Trustees.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be
qualified under the Act.
Not Applicable
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the Trustee to Commence
Business (Included in Exhibit I above).
*3. A copy of the Authorization of the Trustee, as amended to date (See
Exhibit 4 to Form T-1, Securities and Exchange Commission File No.
22-19146).
*4. A copy of the existing By-Laws of the Trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission File
No. 22-19146).
7
<PAGE>
5. A copy of each Indenture referred to in Item 4, if the Obligor is
in default. Not Applicable.
6. The consent of the United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
NOTE
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers,
the trustee has relied upon information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2, the answer to said Item
are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment to
this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and
16 of this form since to the best knowledge of the trustee as indicated in Item
13, the obligor is not in default under any indenture under which the applicant
is trustee.
8
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility & qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 27th day of March, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Barbara McCluskey
---------------------------------
Barbara McCluskey
Vice President
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the issue by Willcox & Gibbs, Inc. of its
12 1/4% Series A Senior Notes due 2003, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Barbara McCluskey
---------------------------------
Barbara McCluskey
Vice President
Dated: March 27, 1997
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility & qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 27th day of March, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /S/ BARBARA MCCLUSKEY
---------------------------------
Barbara McCluskey
Vice President
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the issue by, Willcox & Gibbs, Inc. of its
12 1/4% Series Senior Notes due 2003 we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /S/ BARBARA MCCLUSKEY
---------------------------------
Barbara McCluskey
Vice President
Dated: March 27, 1997
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of September 30, 1996
Dollar Amounts
in Thousands
--------------
ASSETS
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin............... $ 34,228
Interest-bearing balances........................................ $ 229,175
Securities: Held-to-maturity securities............................ $ 174,707
Available-for-sale securities.......................... $ 36,168
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold............................................... $ 15,062
Securities purchased under agreements to resell.................. $ -0-
Loans and lease financing receivables:
Loans and leases, net of unearned income.........$ 1,780,278
LESS: Allowance for loan and lease losses........$ 56,976
LESS: Allocated transfer risk reserve............$ -0-
Loans and leases, net of unearned income, allowance, and reserve.. $1,723,302
Trading assets held in trading accounts............................. $ 622
Premises and fixed assets (including capitalized leases)............ $ 4,264
Other real estate owned............................................. $ 397
Investments in unconsolidated subsidiaries and associated companies. $ -0-
Customers' liability to this bank on acceptances outstanding........ $ 105
Intangible assets................................................... $ -0-
Other assets........................................................ $ 153,290
TOTAL ASSETS........................................................ $2,371,320
<PAGE>
LIABILITIES
Deposits:
In domestic offices............................................... $ 671,747
Noninterest-bearing ............................... $ 224,231
Interest-bearing .................................. $ 447,516
In foreign offices, Edge and Agreement subsidiaries, and IBFs..... $ 856,540
Noninterest-bearing ............................... $ 17,313
Interest-bearing .................................. $ 839,227
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased........................................... $ 430,500
Securities sold under agreements to repurchase.................... $ -0-
Demand notes issued to the U.S. Treasury............................ $ 50,000
Trading Liabilities................................................. $ 539
Other borrowed money:
a) With a remaining maturity of one year or less.................. $ 61,090
b) With a remaining maturity of more than one year................ $ 7,647
Mortgage indebtedness and obligations under capitalized leases...... $ -0-
Bank's liability on acceptances executed and outstanding............ $ 105
Subordinated notes and debentures................................... $ -0-
Other liabilities................................................... $ 77,289
TOTAL LIABILITIES................................................... $2,155,457
Limited-life preferred stock and related surplus.................... $ -0-
EQUITY CAPITAL
Perpetual preferred stock and related surplus....................... $ -0-
Common stock........................................................ $ 29,649
Surplus (exclude all surplus related to preferred stock)............ $ 217,008
Undivided profits and capital reserves.............................. $ (30,795)
Net unrealized gains (losses) on available-for-sale securities...... $ 1
Cumulative foreign currency translation adjustments................. $ -0-
TOTAL EQUITY CAPITAL................................................ $ 215,863
TOTAL LIABILITIES AND EQUITY CAPITAL................................ $2,371,320
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
__________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
WILLCOX & GIBBS, INC.
LETTER OF TRANSMITTAL
12 1/4% SERIES A SENIOR NOTES DUE 2003
To: IBJ Schroder Bank & Trust Company, The Exchange Agent
By Registered or Certified Mail: Hand or By Overnight Courier:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
Bowling Green Station One State Street
P.O. Box 84 New York, New York 10004
New York, New York 10274-0084 Attention: Securities Processing
Attention: Reorganization Operations Window
Department Subcellar One, (SC-1)
By Facsimile:
(212) 858-2611
Attention: Customer Service
Confirm by telephone:
(212) 858-2103
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
The undersigned acknowledges that he or she has received the Prospectus
dated __________, 1997, (the "Prospectus") of Willcox & Gibbs, Inc., (the
"Company") and this Letter of Transmittal (the "Letter of Transmittal"), which
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 12 1/4% Series A Senior Notes due 2003 (the "New
Notes") which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which the
Prospectus is a part, for each $1,000 principal amount of its outstanding 12
1/4% Series A Senior Notes due 2003 (the "Old Notes"), of which $85,000,000
principal amount is outstanding. Other capitalized terms used but not defined
herein have the meaning given to them in the Prospectus.
<PAGE>
2
The Letter of Transmittal is to be used by Holders of Old Notes (i) if
certificates representing the Old Notes are to be physically delivered herewith;
or (ii) if tender of Old Notes is to be made by book-entry transfer to the
Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to
the procedures set forth in the Prospectus under "The Exchange Offer -
Procedures for Tendering" by any financial institution that is a participant in
DTC and whose name appears on a security position listing as the owner of Old
Notes; or (iii) if tender of Old Notes is to be made according to the guaranteed
delivery procedures set forth in the Prospectus under "The Exchange Offer -
Guaranteed Delivery Procedures." Delivery of documents to DTC does not
constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person (i)
in whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder; or (ii) whose Old Notes are held of record by DTC who desires to deliver
such Old Notes by book-entry transfer at DTC. The undersigned has completed,
executed and delivered this Letter of Transmittal to indicate the action the
undersigned desires to take with respect to the Exchange Offer. Holders who wish
to tender their Old Notes must complete this letter in its entirety.
<PAGE>
3
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
================================================================================
DESCRIPTION OF 12 1/4% SERIES A SENIOR NOTES DUE 2003 ("OLD NOTES"):
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF AGGREGATE PRINCIPAL PRINCIPAL AMOUNT TENDER
REGISTERED HOLDER(S) AMOUNT REPRESENTED BY (MUST BE IN INTEGRAL
(PLEASE FILL IN, IF BLANK) CERTIFICATE(S) MULTIPLE OF $1,000)*
- --------------------------------------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Total
-----------------------------------------------------
- --------------------------------------------------------------------------------
* Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the principal amounts on a
separate signed schedule and affix the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Old Notes. All
other tenders must be in integral multiples of $1,000.
- --------------------------------------------------------------------------------
- ------------------------------------- -------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4, 5 AND 6) (SEE INSTRUCTIONS 3, 4, 5 AND 6)
To be completed ONLY if certificates To be completed ONLY if certificates
for Old Notes in a principal amount for Old Notes in a principal amount
not tendered or not accepted for not tendered or not accepted for
exchange, or New Notes issued in exchange, or New Notes issued in
exchange for Old Notes accepted for exchange for Old Notes accepted for
exchange, are to be issued in the exchange, are to be sent to someone
name of someone other than the other than the undersigned, or to
undersigned, or if the Old Notes the undersigned at an address other
tendered by book-entry transfer that than that shown above.
are not accepted for exchange are to
be credited to an account maintained
by DTC.
ISSUE CERTIFICATE(S) TO: MAIL TO:
Name_________________________________ Name:________________________________
(Please Print) (Please Print)
Address______________________________ Address______________________________
_____________________________________ _____________________________________
(Include Zip Code) (Include Zip Code)
_____________________________________ _____________________________________
(Tax Identification or Social Security (Tax Identification or Social Security
No.) No.)
- -------------------------------------- -------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE
EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:____________________________________________
DTC Book-Entry Account No.:_______________________________________________
Transaction Code No.:_____________________________________________________
<PAGE>
4
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):__________________________________________
Window Ticket Number (if any):____________________________________________
Date of Execution of Notice of Guaranteed Delivery:_______________________
Name of Institution which guaranteed delivery:____________________________
IF DELIVERY BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number:________________ Transaction Code Number:__________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:________________________________________________
Address:_____________________________________________
- --------------------------------------------------------------------------------
<PAGE>
5
LADIES AND GENTLEMEN:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Old Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Old Notes with
full power of substitution to (i) deliver certificates for such Old Notes to the
Company, or transfer ownership of such Old Notes on the account books maintained
by DTC, and deliver all accompanying evidences of transfer and authenticity to,
or upon the order of, the Company; and (ii) present such Old Notes for transfer
on the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Old Notes, all in accordance with the
terms of the Exchange Offer. The power of attorney granted in this paragraph
shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign, and transfer the Old Notes tendered
hereby and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim, when such Notes are acquired by the Company. THE
UNDERSIGNED HEREBY FURTHER REPRESENTS THAT ANY NEW NOTES ACQUIRED IN EXCHANGE
FOR OLD NOTES TENDERED HEREBY WILL HAVE BEEN ACQUIRED IN THE ORDINARY COURSE OF
BUSINESS OF THE HOLDER RECEIVING SUCH NEW NOTES, WHETHER OR NOT THE UNDERSIGNED,
THAT NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON HAS AN ARRANGEMENT WITH ANY
PERSON TO PARTICIPATE IN THE DISTRIBUTION OF SUCH NEW NOTES AND THAT NEITHER THE
HOLDER NOR ANY SUCH OTHER PERSON IS AN "AFFILIATE," AS DEFINED UNDER RULE 405 OF
THE SECURITIES ACT, OF THE COMPANY OR ANY OF ITS SUBSIDIARIES. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of New Notes. If
the undersigned is a broker-dealer that will receive New Notes, it represents
that the Old Notes to be exchanged for New Notes were acquired as a result of
market-making activities or other trading activities and not acquired directly
from the Company, and it acknowledges that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
assignment, transfer and purchase of the Old Notes tendered hereby.
<PAGE>
6
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
or written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned (except as noted below with respect to tenders through DTC),
without expense, to the undersigned at the address shown below or at a different
address as may be indicated herein under "Special Payment Instructions" as
promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer - Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged, in the name(s) of the undersigned (or in either such event in the
case of Old Notes tendered by DTC, by credit to the undersigned's account at
DTC). Similarly, unless otherwise indicated under "Special Delivery
Instructions," please send the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange and any certificates for Old
Notes not tendered or not exchanged (and accompanying documents, as appropriate)
to the undersigned at the address shown below the undersigned's signature(s),
unless, in either event, tender is being made through DTC. In the event that
both "Special Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange and return any Old Notes not
tendered or not exchanged in the name(s) of, and send said certificates to, the
person(s) so indicated. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Payment Instructions" and "Special Delivery
Instructions" to transfer any Old Notes from the name of the registered
holder(s) thereof if the Company does not accept for exchange any of the Old
Notes so tendered.
Holders of Old Notes who wish to tender their Old Notes and (i) whose Old
Notes are not immediately available, or (ii) who cannot deliver their Old Notes,
this Letter of Transmittal or any other documents required hereby to the
Exchange Agent, or cannot complete the procedure for book-entry transfer, prior
to the Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer - Guaranteed Delivery Procedures". See Instruction 1 regarding the
completion of the Letter of Transmittal printed below.
<PAGE>
7
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X_______________________________________ ______________________________
DATE
X_______________________________________ ______________________________
SIGNATURE(S) OF REGISTERED HOLDER(S) DATE
OR AUTHORIZED SIGNATORY
AREA CODE AND TELEPHONE NUMBER:_________________________________________________
THE ABOVE LINES MUST BE SIGNED BY THE REGISTERED HOLDER(S) OF OLD NOTES AT
THEIR NAME(S) APPEAR(S) ON THE OLD NOTES OR, IF THE OLD NOTES ARE TENDERED BY A
PARTICIPANT IN DTC, AS SUCH PARTICIPANT'S NAME APPEARS ON A SECURITY POSITION
LISTING AS THE OWNER OF THE OLD NOTES, OR BY PERSON(S) AUTHORIZED TO BECOME
REGISTERED HOLDER(S) BY A PROPERLY COMPLETED BOND POWER FROM THE REGISTERED
HOLDER(S), A COPY OF WHICH MUST BE TRANSMITTED WITH THIS LETTER OF TRANSMITTAL.
IF OLD NOTES TO WHICH THIS LETTER OF TRANSMITTAL RELATES ARE HELD OF RECORD BY
TWO OR MORE JOINT HOLDERS, THEN ALL SUCH HOLDERS MUST SIGN THIS LETTER OF
TRANSMITTAL. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN,
ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY
OR REPRESENTATIVE CAPACITY, SUCH PERSON MUST (I) SET FORTH HIS OR HER FULL TITLE
BELOW AND (II) UNLESS WAIVED BY THE COMPANY, SUBMIT EVIDENCE SATISFACTORY TO THE
COMPANY OF SUCH PERSON'S AUTHORITY SO TO ACT. SEE INSTRUCTION 4 REGARDING THE
COMPLETION OF THIS LETTER OF TRANSMITTAL PRINTED BELOW.
NAME(S): __________________________________________________________________
__________________________________________________________________
(PLEASE PRINT)
CAPACITY: __________________________________________________________________
ADDRESS: __________________________________________________________________
<PAGE>
8
__________________________________________________________________
(INCLUDE ZIP CODE)
SIGNATURE(S) GUARANTEED BY AN ELIGIBLE INSTITUTION:
(IF REQUIRED BY INSTRUCTION 4)
__________________________________________________________________
(AUTHORIZED SIGNATURE)
__________________________________________________________________
(TITLE)
__________________________________________________________________
(NAME OF FIRM)
DATED:_____________________________________________________ , 1997
<PAGE>
9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. The tendered Old
Notes (or a confirmation of a book-entry transfer into the Exchange Agent's
account at DTC of all Old Notes delivered electronically), as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
hereof and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at its address set forth herein prior to 5:00
P.M., New York City time, on the Expiration Date. The method of delivery of the
tendered Old Notes, this Letter of Transmittal and all other required documents
to the Exchange Agent is at the election and risk of the Holder and, except as
otherwise provided below, the delivery will be deemed made only when actually
received or confirmed by the Exchange Agent. Instead of delivery by mail, it is
recommended that the Holder use an overnight or hand-delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. No Letter of
Transmittal or Old Notes should be sent to the Company.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available; or (ii) who cannot deliver their Old Notes, this Letter
of Transmittal or any other documents required hereby to the Exchange Agent, or
cannot complete the procedure for book-entry transfer, prior to 5:00 P.M., New
York City time, on the Expiration Date must tender their Old Notes according to
the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States or an institution which falls within the
definition of "Eligible Guarantor Institution" contained in Regulation 17Ad-15
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (each, an "Eligible Institution"); (ii) prior
to the Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder of the Old Notes and the principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that,
within five New York Stock Exchange trading days after the Expiration Date, this
Letter of Transmittal (of facsimile hereof) together with the certificate(s)
representing the Old Notes (or a confirmation of electronic delivery of
book-entry delivery into the Exchange Agent's account at DTC) and any other
required documents will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) such properly completed and executed Letter of
Transmittal (or facsimile hereof), as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all tendered Old
Notes in proper form for transfer (or a confirmation of electronic delivery of
book-entry delivery into the Exchange Agent's account at DTC), must be received
by the Exchange Agent within five New York Stock Exchange trading days after the
Expiration Date, all as provided in the Prospectus under the caption "Exchange
Offer - Guaranteed Delivery Procedures." Any Holder of Old Notes who wishes to
tender his or her Old Notes pursuant to the guaranteed delivery procedures
described
<PAGE>
10
above must ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery prior to 5:00 P.M., New York City time, on the Expiration Date. Upon
request of the Exchange Agent, a Notice of Guaranteed Delivery will be sent to
Holders who wish to tender their Old Notes according to the guaranteed delivery
procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Old Notes not properly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any defects or
irregularities or conditions of tender as to the Exchange Offer and/or
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in this Letter of Transmittal)
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection tenders of Old Notes must be cured within such time
as the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering Holders
of Old Notes, unless otherwise provided in this Letter of Transmittal, as soon
as practicable following the Expiration Date.
2. TENDER BY HOLDER. Only a Holder of Old Notes may tender such Old Notes
in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and delivery this Letter of Transmittal on his or her behalf
or must, prior to completing and executing this Letter of Transmittal and
delivering his or her Old Notes, either make appropriate arrangements to
register ownership of the Old Notes in such Holder's name or obtain a properly
completed bond power from the registered holder.
3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If less than the entire principal amount of any Old Notes
is tendered, the tendering Holder should fill in the principal amount tendered
in the third column of the box entitled "Description of 12 1/4% Series A Senior
Notes due 2003 ("Old Notes")" above. The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes is not
tendered, then Old Notes for the principal amount of Old Notes not tendered and
a certificate or certificates representing New Notes issued in exchange for any
Old Notes accepted will be sent to the Holder at his or her registered address,
unless a different address is provided in the appropriate box on this Letter of
Transmittal, promptly after the Old Notes are accepted for exchange.
<PAGE>
11
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is
signed by the record Holder(s) of the Old Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of the Old Notes or, if
the Old Notes are tendered by a participant in DTC, as such participant's name
appears on a security position listing as the owner of the Old Notes, without
alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Notes tendered and the certificate or
certificates for New Notes issued in exchange therefor are to be issued (or any
untendered principal amount of Old Notes is to be reissued) to the registered
Holder, the said Holder need not and should not endorse any tendered Old Notes,
nor provide a separate bond power. In any case, such Holder must either properly
endorse the Old Notes tendered or transmit a properly completed separate bond
power with this Letter of Transmittal, with the signatures on the endorsement or
bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers signed as the
name of the registered Holder or Holders appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorney-in-fact or officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 4 must be guaranteed by an Eligible Institution.
Except as otherwise provided below, all signatures on this Letter of
Transmittal (or facsimile hereof) must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed if (i) this
Letter of Transmittal is signed by the registered Holder(s) of the Old Notes
tendered herewith and such Holder(s) have not completed the box set forth herein
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions;" or (ii) such Old Notes are tendered for the account of an
Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal (or in the case of tender of Old
Notes through DTC, if different from DTC). In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
<PAGE>
12
6. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
Holder whose offered Old Notes are accepted for exchange must provide the
Company (as payor) with his, her or its correct Taxpayer Identification Number
("TIN"), which, in the case of an exchanging Holder who is an individual, is his
or her social security number. If the Company is not provided with the correct
TIN or an adequate basis for exemption, such Holder may be subject to a $50
penalty imposed by the Internal Revenue Service (the "IRS"). In addition,
delivery to such holder of New Notes may be subject to backup withholding in an
amount equal to 31% of the gross proceeds resulting from the Exchange Offer. If
withholding results in an overpayment of taxes, a refund may be obtained from
the IRS by the Holder. Exempt Holders (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See instructions to the enclosed Form W-9.
To prevent backup withholding, each exchanging Holder must provide his,
her or its correct TIN by completing the Form W-9 enclosed herewith, certifying
that the TIN provided is correct (or that such Holder is awaiting a TIN) and
that (i) the Holder is exempt from backup withholding; (ii) the Holder has not
been notified by the IRS that he, she or it is subject to backup withholding as
a result of a failure to report all interest or dividends; or (iii) the IRS has
notified the Holder that he, she or it is no longer subject to backup
withholding. In order to satisfy the Exchange Agent that a foreign individual
qualifies as an exempt recipient, such Holder must submit a statement signed
under penalty of perjury attesting to such exempt status. Such statements may be
obtained from the Exchange Agent. If the Old Notes are in more than one name or
are not in the name of the actual owner, consult the Form W-9 for information on
which TIN to report. If you do not provide your TIN to the Company within 60
days, backup withholding will begin and continue until you furnish your TIN to
the Company.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered Holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or on any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Old Notes tendered.
<PAGE>
13
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus of this
Letter of Transmittal may be directed to the Exchange Agent at the address
specified in the Prospectus. Holders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Exchange Offer.
(DO NOT WRITE IN SPACE BELOW)
- --------------------------------------------------------------------------------
CERTIFICATE OLD NOTES OLD NOTES
SURRENDERED TENDERED ACCEPTED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Delivery Prepared by _______________ Checked By _______________ Date____________
<PAGE>
14
FORM W-9
(Rev. March 1994) REQUEST FOR TAXPAYER GIVE FORM TO THE
Department of Treasury IDENTIFICATION NUMBER AND REQUESTER. DO NOT
Internal Revenue Service) CERTIFICATION SEND TO THE IRS
- --------------------------------------------------------------------------------
Name (If joint names, list first and circle the name of the person or
entity whose number you enter in Part I below. See instructions on page 2
if your name has changed.)
_________________________________________________________________________
Business name (Sole proprietors see instructions on page 2.)
Please _________________________________________________________________________
print Please check appropriate box: / / Individual/Sole proprietor
or / / Corporation / / Partnership / / Other. . . . . . . . . . . .
type _________________________________________________________________________
Address (number, street, and apt. or suite no.)
Requester's name and address (optional)
_________________________________________________________________________
City, state, and ZIP code
_________________________________________________________________________
PART I Taxpayer Identification Number (TIN)
List account number(s) here (optional)
- --------------------------------------------------------------------------------
Enter your TIN in the Social Security
appropriate box. For Number
individuals, this is your / / / / / --------------------------------
social security number (SSN). / / / / / PART II For Payees Exempt
For sole proprietors, see the OR From Backup withholding
instructions on page 3. For Employer (See Part II
other entities, it is your Identification instructions on page 2)
employer identification number Number --------------------------------
(EIN). If you do not have a / / / / /
number, see HOW TO GET A TIN / / / / /
below.
NOTE: If the account is in
more than one name, see
the chart on page 2 for
guidelines on whose
number to enter.
- --------------------------------------------------------------------------------
PART III Certification
- --------------------------------------------------------------------------------
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification (or
I am waiting for a number to be issued to me), and
2. I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS: - You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return. For real estate
transactions, item 2 does not apply. For mortgage interest paid, the acquisition
or abandonment of secured property, cancellation of debt, contributions to an
individual retirement arrangement (IRA), and generally payments other than
interest and dividends, you are not required to sign the Certification, but you
must provide your correct TIN. (Also, see Part III instructions on page 2.)
- --------------------------------------------------------------------------------
Sign
Here Signature - Date -
- --------------------------------------------------------------------------------
Section references are to the Internal Revenue Code.
PURPOSE OF FORM. - A person who is required to file an information return with
the IRS must get your correct TIN to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, cancellation of debt, or contributions you made to an IRA. Use
Form W-9 to give your correct TIN to the requester (the person requesting your
TIN) and, when applicable, (1) to certify the TIN you are giving is correct
<PAGE>
15
(or you are waiting for a number to be issued), (2) to certify you are not
subject to backup withholding, or (3) to claim exemption from backup withholding
if you are an exempt payee. Giving your correct TIN and making the appropriate
certifications will prevent certain payments from being subject to backup
withholding.
Note: If a requester gives you a form other than a W-9 to request your TIN, you
must use the requester's form if it is substantially similar to this Form W-9.
WHAT IS BACKUP WITHHOLDING? - Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators. Real estate transactions are not subject to backup
withholding.
If you give the requester your correct TIN, make the proper
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS tells the requester that you furnished an incorrect TIN,
or
3. The IRS tells you that you are subject to backup withholding
because you did not report all your interest and dividends on your tax return
(for reportable interest and dividends only), or
4. You do not certify your TIN. See the Part III instructions for
exceptions.
Certain payees and payments are exempt from backup withholding and
information reporting. See the Part II instructions and the separate
INSTRUCTIONS FOR THE REQUESTER OF FORM W-9.
HOW TO GET A TIN. - If you do not have a TIN, apply for one immediately. To
apply, get Form SS-5, Application for a Social Security Number Card (for
individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
If you do not have a TIN, write "Applied For" in the space for the TIN in
Part I, sign and date the form, and give it to the requester. Generally, you
will then have 60 days to get a TIN and give it to the requester. If the
requester does not receive your TIN within 60 days, backup withholding, if
applicable, will begin and continue until you furnish your TIN.
Cat. No. 10231x Form W-9 (Rev. 3-94)
<PAGE>
16
Note: Writing "Applied For" on the form means that you have already applied
for a TIN or that you intend to apply for one soon.
As son as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
PENALTIES
FAILURE TO FURNISH TIN. - If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. - If you make a
false statement with no reasonable basis that results in no backup withholding,
you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. - Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS. - If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
NAME. - If you are an individual, you must generally enter the name shown on
your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
Sole Proprietor. - You must enter your individual name. (Enter either your
SSN or EIN in Part I.) You may also enter your business name or "doing business
as" name on the business name line. Enter your name as shown on your social
security card and business name as it was used to apply for your EIN on Form
SS-4.
PART I - TAXPAYER IDENTIFICATION NUMBER (TIN)
You must enter your TIN in the appropriate box. If you are a sole proprietor,
you may enter your SSN or TIN. Also see the chart on this page for further
clarification of name and TIN combinations. If you do not have a TIN, follow the
instructions under HOW TO GET A TIN on page 1.
<PAGE>
17
PART II - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are not exempt from backup withholding.
Corporations are exempt from backup withholding. Corporations are exempt from
backup withholding for certain payment, such as interest and dividends. For a
complete list of exempt payees, see the separate instructions for the Requester
of Form W-9.
If you are exempt from backup withholding, you should still complete this
form to avoid possible erroneous backup withholding. Enter you correct TIN in
Part I, write "Exempt" in part II, and sign and date the form. If you are a
nonresident alien or a foreign entity not subject to backup withholding, give
the requester a completed Form W-8, Certificate of Foreign Status.
PART III - CERTIFICATION
For a joint account, only the person whose TIN is shown in Part I should sign.
1. INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You must give your correct TIN,
but you do not have to sign the certification.
2. INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER 1983 AND
BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign the certification
or backup withholding will apply. If you are subject to backup withholding and
you are merely providing your correct TIN to the requester, you must cross out
Item 2 in the certification before signing the form.
3. REAL ESTATE TRANSACTIONS. You must sign the certification. You may
cross out Item 2 of the certification.
4. OTHER PAYMENTS. You must give your correct TIN, but you do not have to
sign the certification unless you have been notified of an incorrect TIN. Other
payments include payments made in the course of the requester's trade or
business for rents, royalties, goods (other than bills for merchandise), medical
and health care services, payments to a nonemployee for services (including
attorney and accounting fees), and payments to certain fishing boat crew
members.
5. MORTGAGE INTEREST PAID BY YOU. ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, CANCELLATION OF DEBT, OR IRA CONTRIBUTIONS. You must give your correct
TIN, but you do not have to sign the certification.
PRIVACY ACT NOTICE
Section 6109 requires you to give your correct TIN to persons who must file
information returns with the IRS to report interest, dividends, and certain
other income paid to you, mortgage interest
<PAGE>
18
you paid, the acquisition or abandonment of secured property, cancellation of
debt, or contributions you made to an IRA. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return. You
must provide your TIN whether or not you are required to file a tax return.
Payers must generally withhold 31% of taxable interest, dividend, and certain
other payments to a payee who does not give a TIN to a payer. Certain penalties
may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
- --------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT GIVE NAME AND SSN OF:
- --------------------------------------------------------------------------------
1. Individual The individual
2. Two or more The actual owner of the account,
individuals (joint or if combined funds, the first
account) individual on the account. (1)
3. Custodian account of a The minor (2)
minor (Uniform Gift to
Minors Act)
4. a. The usual
revocable The grantor-trustee (1)
savings trust
(grantor is also
trustee)
The actual owner (1)
b. So-called trust
account that is
not a legal or
valid trust
under state law
5. Sole proprietorship The owner (3)
- --------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT GIVE NAME AND EIN OF:
- --------------------------------------------------------------------------------
6. Sole proprietorship The owner (3)
<PAGE>
19
7. A valid trust, estate, Legal entity (4)
or pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable
educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
- --------------------------------------------------------------------------------
(1) List first, circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) You must show your individual name, but you may also enter your business
or "doing business as" name. You may use either your SSN or EIN.
(4) List first and circle the name of the legal trust, estate or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title.)
Note: If no name is circled when more than one name is listed, the number
will be considered to be that of the first name listed.
- --------------------------------------------------------------------------------
Cat. No. 10231X Form W-9 (Rev. 3-94)
<PAGE>
EXHIBIT 99.2
Notice of Guaranteed Delivery
for
12 1/4% Series A Senior Notes due 2003
of
WILLCOX & GIBBS, INC.
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of Willcox & Gibbs, Inc. (the "Company") made pursuant to the
Prospectus dated _________, 1997 (the "Prospectus") if certificates for the 12
1/4% Series A Senior Notes due 2003 (the "Old Notes") of the Company are not
immediately available or if the Old Notes, the Letter of Transmittal or any
other documents required thereby cannot be delivered to the Exchange Agent or
the procedure for book-entry transfer cannot be completed, prior to 5:00 P.M.,
New York City time, on the Expiration Date (as defined in the Prospectus). Such
form may be delivered by hand or transmitted by facsimile transmission,
overnight courier or mail to the Exchange Agent. Capitalized terms used but not
defined herein have the meaning given to them in the Prospectus.
To: IBJ Schroder Bank & Trust Company, The Exchange Agent
By Registered or Certified Mail: By Hand or Overnight Courier:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust
Bowling Green Station Company
P.O. Box 84 One State Street
New York, New York 10274-0084 New York, New York 10004
Attention: Reorganization Operations Attention: Securities
Department Processing Window Subcellar
One, (SC-1)
By Facsimile:
(212) 858-2611
Attention: Customer
Service
Confirm by telephone:
(212) 858-2103
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Old Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal.
LADIES AND GENTLEMEN:
<PAGE>
2
The undersigned hereby tenders to Willcox & Gibbs, Inc., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus and the Letter of Transmittal (which together constitute
the "Exchange Offer"), receipt of which is hereby acknowledged,
________________________________ Old Notes pursuant to the guaranteed
(principal amount of Old Notes)
delivery procedures set forth in Instruction 1 of the Letter of Transmittal.
<PAGE>
3
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
Principal Amount(s) of Old Notes Name(s) of Record Holder(s)
_____________________________________ _____________________________________
_____________________________________ _____________________________________
PLEASE PRINT OR TYPE
Address______________________________
ZIP CODE
Area Code and Tel. No._______________
Signature(s)_________________________
_____________________________________
Dated: ______________________________
If Old Notes will be delivered by
book-entry transfer at The Depository
Trust Company ("DTC"), Depository
Account No:..........................
This Notice of Guaranteed Delivery must be signed by the registered
Holder(s) of Old Notes exactly as its (their) name(s) appear on certificates for
Old Notes or on a security position listing as the owner of Old Notes, or by
person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information.
Please print name(s) and address(es)
Name(s): ___________________________________________________________________
___________________________________________________________________
Capacity: ___________________________________________________________________
Address(es): ___________________________________________________________________
___________________________________________________________________
<PAGE>
4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the United
States or an "Eligible Guarantor Institution" within the meaning of Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby guarantees (a) that the above named person(s) "own(s)" the Old Notes
tendered hereby within the meaning of Rule 10b-4 under the Exchange Act, (b)
that such tender of Old Notes complies with Rule 10b-4 under the Exchange Act
and (c) that delivery to the Exchange Agent of certificates for the Old Notes
tendered hereby, in proper form for transfer (or confirmation of the book-entry
transfer of such Old Notes into the Exchange Agent's Account at DTC, pursuant to
the procedures for book-entry transfer set forth in the Prospectus), with
delivery of a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) with any required signature and any other
required documents, will be received by the Exchange Agent at one of its
addresses set forth above within five business trading days after the Expiration
Date.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF
TRANSMITTAL AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME
PERIOD SET FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS
TO THE UNDERSIGNED.
Name of Firm_________________________ _____________________________________
AUTHORIZED SIGNATURE
Address______________________________ Name_________________________________
PLEASE PRINT OR TYPE
_____________________________________ Title________________________________
ZIP CODE
Area Code and Tel. No._______________ Date_________________________________
Dated: _______________________________, 199__
NOTE: DO NOT SEND OLD NOTES WITH THIS FORM; OLD NOTES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT
WITHIN FIVE BUSINESS TRADING DAYS AFTER THE EXPIRATION DATE.
