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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 COMMISSION FILE NO. 0-23082
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------------------------
BELDING HEMINWAY COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-1574754
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1430 BROADWAY
NEW YORK, NY 10018
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 556-4700
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT: N/A
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
[X] YES [ ] NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
AS OF AUGUST 9, 1996, 7,394,798 SHARES OF COMMON STOCK WERE OUTSTANDING.
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BELDING HEMINWAY COMPANY, INC.
1430 BROADWAY
NEW YORK, NY 10018
TABLE OF CONTENTS
PAGE NO.
Part I -- Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
as of June 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations
for the Three and Six months Ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1996 and 1995 5
Notes to Unaudited Consolidated Financial Statements
June 30, 1996 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II -- Other Information
Item 1. Legal Proceedings N/A
Item 2. Changes in Securities N/A
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Index to Exhibits 16
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1996 DECEMBER 31, 1995
Current Assets: (UNAUDITED) (NOTE)
--------------- ------------------
<S> <C> <C>
Cash and cash equivalents $ 552 $ 629
Accounts receivable trade, net 11,739 11,314
Inventories 18,761 18,360
Federal income taxes receivable 100 787
Current deferred tax asset -- 313
Other current assets 892 953
-------- -------
Total current assets 32,044 32,356
-------- -------
Property, plant and equipment, at cost 32,650 33,013
Less: Accumulated depreciation and
amortization (4,426) (3,538)
-------- -------
Net property, plant and equipment 28,224 29,475
-------- -------
Goodwill, net 20,294 20,450
Deferred tax assets 4,668 9,515
Other assets 1,774 2,328
-------- -------
Total Assets $ 87,004 $94,124
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,340 $ 5,593
Current maturities of long-term debt 4,843 4,029
Other current liabilities 9,181 12,948
-------- -------
19,364 22,570
-------- -------
Long-Term debt 42,868 44,666
Other Liabilities 15,488 19,386
-------- -------
Total Liabilities 77,720 86,622
-------- -------
Redeemable Preferred Stock, par value $0.01
per share 20,805,060 shares authorized;
Shares issued and outstanding:
Series A - None
Series B - 20,805,060 20,805 20,805
Accumulated dividends on preferred stock 2,043 1,374
-------- -------
22,848 22,179
-------- -------
Common Stock, par value $0.01 per share
20,000,000 shares authorized;
Shares issued and outstanding:
June 30, 1996: 7,397,282 74
December 31, 1995: 7,409,282 74
Paid in Capital 19,858 19,859
Retained Earnings (33,496) (34,610)
-------- -------
Total Common Stockholders' Equity (13,564) (14,677)
-------- -------
Total Liabilities and Stockholders' Equity $87,004 $94,124
======== =======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
<PAGE>
<PAGE>
BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
------------------ ------------------
<S> <C> <C> <C> <C>
Net Sales $22,236 $21,844 $44,243 $ 45,157
Cost of Sales 16,234 15,970 32,144 32,275
------- ------- ------- --------
Gross profit 6,002 5,874 12,099 12,882
Selling, general & administrative
expenses 3,339 3,910 6,980 8,213
Other (income) expense -- net (213) (62) (266) (153)
------- ------- ------- --------
Income from continuing operations
before interest and income
taxes 2,876 2,026 5,385 4,822
Interest expense 1,217 864 2,312 1,945
------- ------- ------- --------
Income from continuing operations
before income taxes 1,659 1,162 3,073 2,877
Provision for income taxes 719 679 1,335 1,488
------- ------- ------- --------
Income from continuing operations 940 483 1,738 1,389
Less dividends on preferred stock 337 317 669 626
------- ------- ------- --------
Income applicable to common stock
from continuing operations 603 166 1,069 763
Income from discontinued operations,
net of income tax provision --- 128 45 426
------- ------- ------- --------
Income applicable to common stock $ 603 $ 294 $ 1,114 $ 1,189
======= ======= ======= ========
Earnings per common share:
Continuing operations $ 0.08 $ 0.02 $ 0.14 $ 0.10
Discontinued operations 0.00 0.02 0.01 0.06
------- ------- ------- --------
Total $ 0.08 $ 0.04 $ 0.15 $ 0.16
======= ======= ====== ========
Weighted average common shares
outstanding (in thousands) 7,397 7,414 7,399 7,418
======= ======= ====== ========
Total depreciation and amortization 673 836 1,446 1,623
======= ======= ======= ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
<PAGE>
<PAGE>
BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 1,738 $ 1,389
Reconciliation of net income from continuing
operations to net cash provided by operations:
Depreciation and amortization 1,446 1,623
Deferred tax provision 1,202 842
Gain on asset sale (131) ---
Changes in operating assets and liabilities:
Accounts receivable (425) (1,530)
Inventories (1,432) (2,615)
Federal income taxes receivable 565 ---
Other current assets 183 451
Accounts payable (253) 2,152
Other current liabilities (1,209) (2,552)
Other liabilities (362) ---
Other operating assets and liabilities 213 (574)
Cash flow from discontinued operations 91 1,458
------- --------
1,626 644
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (470) (856)
Investments in other assets (100) (200)
Proceeds from asset sales 534 ---
Adjustments related to acquisitions (42) (202)
------- --------
(78) (1,258)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility and capitalized
lease obligations 15,200 20,634
Repayment of long term debt and capital lease obligations (16,184) (19,214)
Payment of long term liabilities (641) (1,244)
------- --------
(1,625) 176
------- --------
Decrease in cash and cash equivalents (77) (438)
Cash and cash equivalents beginning of period 629 1,015
------- -------
Cash and cash equivalents end of period $ 552 $ 577
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 2,403 $ 2,007
======= =======
Income taxes $ 93 $ 702
======= =======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE>
<PAGE>
BELDING HEMINWAY COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. Certain reclassifications have been made to prior year amounts in
order to present them on a basis consistent with the current year. Operating
results for the six-month period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. For further information, refer to the consolidated financial statements
and footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1995.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operation: The Company and its subsidiaries manufacture and market
industrial and consumer threads and distribute a line of home sewing and
craft products, principally buttons. The Company has divested the Home
Furnishings division (See Note 5).
Consolidation: The accompanying consolidated financial statements include the
accounts of the Company and all subsidiaries after elimination of
intercompany items and transactions.
Depreciation and Amortization: Depreciation and amortization are computed
principally by the straight-line method for each class of depreciable
and amortizable asset based on their estimated useful lives. Buildings
and improvements, machinery and equipment, and furniture, fixtures and
leasehold improvements are generally depreciated over periods of 20-35,
5-25 and 5-10 years, respectively.
Revenue Recognition: Revenue is recognized upon shipment of merchandise.
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of six months or less when purchased to be cash equivalents.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE 3: EARNINGS PER SHARE
Earnings per common share for the Company have been computed on the basis of
weighted average common shares outstanding after providing for quarterly
preferred dividend requirements.
<PAGE>
<PAGE>
NOTE 4: INVENTORIES:
The components of inventories, net of reserves, are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
Raw materials and greige goods $ 6,016 $ 3,189
Manufacturing supplies 1,142 1,346
Work in Progress 5,585 6,033
Finished goods 6,018 7,792
------- -------
$18,761 $18,360
======= =======
</TABLE>
NOTE 5: DISCONTINUED OPERATIONS
On July 31, 1996 the Company completed the sale of its Home Furnishings
division. Proceeds received on the sale, adjusted for closing costs and
changes in net asset value of the division subsequent to the contract
date were used to paydown the Company's revolving bank loan. Such net
proceeds approximated the amount that had been borrowed under the
revolving loan in support of the Home Furnishings division's inventories
and receivables. The repayment of bank debt was sufficient in amount to
avoid bank fees that would have been payable had the Company not
completed the sale within the time frame prescribed by the Company's
Credit Agreement dated October 29, 1993, as amended ("Credit Agreement")
or in an amount sufficient to repay amounts borrowed against the
division's inventories and receivables.
The results of the Home Furnishings division for the period January 1, 1996
through July 31, 1996 and all prior periods have been presented as
results of discontinued operations.
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER
SALES
Sales during the second quarter of 1996 totaled $22.2 million as compared to
$21.8 million during the second quarter of 1995.
Sales in the consumer product segment totaled $11.4 million in the second
quarter of 1996 as compared to $9.3 million in the second quarter of 1995. The
increase in consumer segment sales was the result of sales contributed by Culver
Textile Company ("Culver") which was acquired on August 31, 1995.
Sales in the industrial product segment totaled $10.8 million in 1996 as
compared to $12.6 million during the same quarter in 1995. Weakness in our
customers' primary markets which began in the third quarter of 1995, continued
to have a direct impact on industrial thread sales in the second quarter of
1996.
GROSS MARGIN
Gross margin during the second quarter of 1996 totaled $6.0 million as compared
to $5.9 million during the same period in 1995. The gross margin percentage was
27% during the second quarter of 1996 versus 26.9% during the second quarter of
1995.
Gross margin in the consumer product segment during the second quarter of 1996
totaled $3.4 million or 29.4% as compared with $3.0 million or 32.1% in the
second quarter of 1995. Additional margin dollars were contributed as the result
of the Culver acquisition which historically has operated at a lower margin
percentage than the balance of the Company's consumer product segment.
Gross margin in the industrial segment totaled $2.6 million in 1996 as compared
to $2.9 million for the same period in 1995. The decline in margin dollars was
directly attributable to the decline in the sales volume of this segment and was
somewhat offset by an improved margin percentage, which was 24.4% during the
second quarter of 1996 as compared to 23.1% in the second quarter of 1995. The
margin percentage improvement occurred as the result of a reduced headcount in
1996.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses totaled $3.3 million during the
second quarter of 1996 as compared with $3.9 million during the same period in
1995.
Selling, general and administrative expenses in the consumer product segment in
the second quarter of 1996 totaled $1.3 million as compared to $1.1 million in
the second quarter of 1995. The increase in selling, general and administrative
costs in the consumer product segment was the result of additional expenses
attributable to Culver.
<PAGE>
<PAGE>
Selling, general and administrative expenses in the industrial segment totaled
$1.1 million during the second quarter of 1996 as compared to $2.0 million in
the second quarter of 1995. The decline in selling, general and administrative
expenses in the industrial product segment was the result of reduced spending
totaling $.7 million (principally the result of headcount reductions) and lower
goodwill amortization of $.1 million. The headcount reductions were made
principally in the second half of 1995 and $17.4 million of goodwill was written
off in the fourth quarter of 1995 in connection with the Thread division asset
impairment.
INTEREST EXPENSE
Interest expense during the second quarter of 1996 totaled $1.2 million as
compared to $.9 million during the second quarter of 1995. The weighted average
interest rate during the second quarter of 1996 was 9.8% as compared to 8.9 % in
1995. The increase in rate is mostly attributable to the removal of the LIBOR
interest rate option from the Company's credit facility effective in March 1996.
Weighted average debt during the second quarter of 1996 was $48.9 million as
compared to $43.9 million in the second quarter of 1995. The increase in
weighted average debt was primarily attributable to borrowings made to finance
the Culver acquisition on August 31, 1995.
INCOME TAXES
The provision for income taxes during the second quarter of 1996 totaled $.7
million as compared to $.7 million during the same period last year. The
combined effective income tax rate in 1996 was 43.3% as compared to 58.4% in
1995. The combined effective income tax rates are higher than combined statutory
rates because of nondeductible goodwill. The 1996 combined effective income tax
rate is lower than in 1995 because of the reduction in goodwill amortization
resulting from the Thread Division asset impairment recorded in the fourth
quarter of 1995.
PREFERRED DIVIDENDS
Preferred dividends during the second quarter of 1996 totaled $.3 million as
compared to $.3 million during the same period in 1995. Preferred dividends are
accrued and compound at a rate of 6%. No dividend payments have been made by the
Company.
YEAR TO DATE
SALES
Sales during the six month period ended June 30, 1996 totaled $44.4 million as
compared to $45.2 million during the same period of 1995.
Sales in the consumer product segment totaled $23.1 million during the first
half of 1996 as compared to $19.2 million in the first half of 1995. The
increase in consumer segment sales was the result of sales contributed by
Culver.
Sales in the industrial product segment totaled $21.1 million in 1996 as
compared to $26.0 million during the first six months of 1995. Weakness in our
customers' primary markets continued to have a direct impact on industrial
thread sales throughout the first half of 1996.
<PAGE>
<PAGE>
GROSS MARGIN
Gross margin during the first six months of 1996 totaled $12.1 million as
compared to $12.9 million during the same period in 1995. Gross margin percent
during the first half of 1996 was 27.3% versus 28.5% in 1995.
Gross margin in the consumer product segment during the first six months of 1996
totaled $7.0 million as compared with $6.4 million during the first half of
1995. Additional margin dollars were contributed primarily as the result of the
Culver acquisition. The gross margin percentage during the first half of 1996 in
the consumer product segment was 30.4% as compared to 33.4% during the same
period in 1995. The decline in gross margin percentage in the consumer product
segment was due to the lower Culver margins.
Gross margin in the industrial segment during the first half of 1996 totaled
$5.1 million as compared to $6.5 million for the same period in 1995. The
decline in margin dollars was directly attributable to the decline in sales
volume of this segment. The gross margin percentage during the first half of
1996 for the industrial segment was 24.0% as compared to 25.0% during the first
half of 1995.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses during the first six months of 1996
totaled $7.0 million as compared to $8.2 million during the first half of 1995.
Selling, general and administrative expenses in the consumer product segment in
the first six months of 1996 totaled $2.6 million as compared to $2.1 million in
1995. The increase in selling, general and administrative costs in the consumer
product segment are the result of the additional expenses attributable to Culver
operations.
Selling, general and administrative expenses in the industrial segment totaled
$2.7 million during the six months ended June 30, 1996 as compared to $4.0
million in the first half of 1995. The decline in selling, general and
administrative expenses in the industrial product segment was the result of
reduced spending totaling $1.0 million (principally the result of headcount
reductions) and lower goodwill amortization of $.3 million.
INTEREST EXPENSE
Interest expense during the six month period ended June 30, 1996 totaled $2.3
million as compared to $1.9 million during the same period in 1995. The weighted
average interest rate during the first half of 1996 was 9.0% as compared to 8.9%
in 1995.
INCOME TAXES
The provision for income taxes during the six months ended June 30, 1996 was
$1.3 million as compared to $1.5 million during the same period last year. The
combined effective income tax rate in 1996 totaled 43.4% as compared to 51.7% in
1995. The combined effective income tax rates are higher than combined statutory
rates because of nondeductible goodwill. The 1996 combined effective income tax
rate is lower than the 1995 rate because of the reduction in goodwill
amortization.
PREFERRED DIVIDENDS
Preferred dividends during the first half of 1996 totaled $.7 million as
compared to $.6 million during the same period in 1995. Preferred dividends are
accrued and compound at a rate of 6%. No dividend payments have been made by the
Company.
<PAGE>
<PAGE>
IMPACT OF INFLATION
The Company's results are affected by the impact of inflation on manufacturing
and operating costs. Historically, the Company has used selling price
adjustments, cost containment programs and improved operating efficiencies to
offset the otherwise negative impact of inflation on its operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations during the six months ended June 30, 1996 totaled
$1.6 million and included $.1 million of cash flow from discontinued operations.
Net cash used by investing activities during the six months ended June 30, 1996
totaled $.1 million and represents principally $.5 million of capital
expenditures and $.1 million of investments in other assets offset by $.5
million of proceeds from asset sales.
Net cash used by financing activities totaled $1.6 million. Reductions in long
term liabilities of $.6 million reflects primarily pension payments and payments
of other long term liabilities.
At June 30, 1996, the Company's principal sources of liquidity included cash and
cash equivalents of $.6 million and trade accounts receivable of $11.7 million.
At June 30, 1996 the Company had $2.3 million of unused availability under its
revolving credit facility (the "Revolving Facility").
At December 31, 1995, the Company was in default on certain of its loan
covenants specified in the Credit Agreement dated October 29, 1993, as amended
("Credit Agreement"). As a result, on March 15, 1996, the Credit Agreement was
amended as more fully described in the Company's Form 10-K for the year ended
December 31, 1995, and Form 10-Q for the quarterly period ended March 31, 1996.
As described in Note 5, the Company completed the sale of the Home Furnishings
division on July 31, 1996 and used the net proceeds to repay all existing
revolving facility advances against the Company's Home Furnishings division
receivables and inventories and thus avoided fees otherwise payable under the
amended Credit Agreement.
In order to meet the requirements of the Term Facility and thus avoid fees
payable on September 30, November 15 and December 31, 1996, the Company expects
that it will have to refinance the Term Facility by September 30, 1996, or sell
assets. If the Company is not successful in refinancing the Term Facility by
September 30, 1996 it will be obligated to demonstrate progress toward the sale
of assets by September 30 and complete a sale of these assets by December 31,
1996, at sufficient levels to repay the Term Facility by December 31, 1996, in
order to avoid the payment of fees. If the Company refinances the Term Facility,
the new borrowing arrangements may carry higher rates of interest and increased
administrative costs. If the Company raises funds through asset sales to
discharge the Term Facility, the reduction in interest expense resulting
therefrom may not be sufficient to offset the diminution in income that would
result from such asset sales. There can be no assurance that the Company will be
able to refinance the Term Facility on commercially acceptable terms or
demonstrate sufficient progress towards asset sale(s) by the dates fees are due
and/or complete a transaction sufficient to discharge the Term Facility by
December 31, 1996. If the Company cannot satisfy those conditions, the Company
would be obligated to pay fees under the agreement. There is no assurance that
the Company's cash
<PAGE>
<PAGE>
flow would be sufficient to pay those fees. If the Company is unable to pay any
of the fees when due it will be in default under the Term Facility. The Company
has engaged a financial advisor in order to assist it in the evaluation of
strategic alternatives and the Company is actively evaluating alternatives to
refinancing.
The Company's ability to make interest and installment principal payments on
outstanding debt also depends on generating sufficient cash flow from operations
as well as maintaining certain levels of receivables and inventory. However,
there can be no assurance the Company will have sufficient cash flow or working
capital levels will be sufficient to make such payments. If the Company is
unable to make installment principal and interest payments when due it will be
in default of the Credit Agreement.
If the Company is not successful in refinancing the Credit Facility and thereby
does not repay all of the amounts outstanding under the Credit Facility on its
final maturity date of July 1, 1997 or meet other covenant provisions it will be
in default under the Credit Facility.
Any such default or non-compliance with the Credit Facility would entitle the
lender to require immediate payment of the outstanding indebtedness and to
refuse advances and to exercise various rights against the Company, including,
without limitation, the right to foreclose its security interest in the
Company's assets and realize upon its collateral by any available judicial
procedure and/or to take possession of and sell any or all of the collateral
with or without judicial process. If such non-compliance occurred and the lender
demanded payment or refused to make further loans and the Company was unable to
obtain alternative financing, the lack of appropriate liquidity would have a
material adverse effect on the Company's results of operations and its ability
to continue as a going concern.
The Company was also in default on one covenant of certain leasing arrangements
totaling $2.2 million in debt at December 31, 1995. The leasing arrangements
have been amended on terms parallel to the amendment of the Credit Agreement.
The maturity date has been moved to July 1, 1997 and interest rate increased to
prime rate plus 1.50%. Lessor has also received a second lien on certain Company
assets. The Company is now in compliance with the provisions as amended of these
leasing arrangements during 1996. If the Company does not comply with the
provisions and is unable to obtain alternative financing, the Company would be
in default and the lender could take back the equipment under lease which would
have an adverse effect on the Company's operations.
Based on discussions with several banks, the Company has received preliminary
proposals to refinance all of its existing debt at commercially acceptable
terms. However, there can be no assurance that the Company will be able to
complete a refinancing of the Term Facility or demonstrate sufficient progress
towards asset sale(s) by the dates fees are due and or complete a transaction
sufficient to discharge the Term Facility by December 31, 1996.
Pursuant to the terms of the Company's Series B Preferred Stock, 20% of such
shares were scheduled to be redeemed on March 15 of each year commencing in 1995
and ending in 1999. Dividends on the Series B Preferred Stock accrue at an
annual rate of 6% and are payable quarterly on March 15, June 15, September 15,
and December 15. Both the preferred stock redemptions and the quarterly dividend
payments are subject to approval of the banks participating in the Company's
credit facility. The Company was notified as of March 15, 1995 that the banks
declined approval of the dividend and redemption payments and no such payments
have been made. As a result, additional dividends will accrue on the scheduled
but unpaid dividends at a rate of 6% per annum.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
a) None
b) REDEEMABLE SERIES B PREFERRED STOCK
Scheduled dividend payments totaling $1,316,018 in 1995, $330,907 on
March 15, 1996 and $339,548 on June 15, 1996 were subject to the
approval of the Company's bank lenders. Such approval was not granted
by the banks and the dividend payments were not made. As a result,
the unpaid dividends accrue at a compounded rate of 6% per annum.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company's annual meeting of Stockholders was held on May 9, 1996
(the "Meeting"). At the Meeting, the Company's stockholders voted
upon and approved the election of eight directors and the
ratification of Arthur Andersen LLP as the independent auditors of
the Company for the fiscal year ending December 31, 1996.
The holders of the Company's Common Stock and Series B Preferred
Stock voted as a single class on all matters submitted for a vote at
the Meeting. The number of votes cast for, against or withheld, as
well as the number of abstentions, as to each such matter is set
forth below:
ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
COMMON STOCK SERIES B PREFERRED STOCK TOTAL
------------ ------------------------ ----------------------
For Withheld For Withheld For Withheld
--- -------- --- -------- --- ---------
<S> <C> <C> <C> <C> <C> <C>
Karen Brenner 6,325,686 29,682 20,756,055 0 27,081,741 29,682
Gilbert H. Lamphere 6,325,703 29,665 20,756,055 0 27,081,758 29,665
Gregory H. Cheskin 6,326,687 28,681 20,756,055 0 27,082,742 28,681
William L. Bennett 6,325,633 29,735 20,756,055 0 27,081,688 29,735
Joseph S. DiMartino 6,329,755 25,613 20,756,055 0 27,085,810 25,613
Robert A. Levinson 6,325,037 30,331 20,756,055 0 27,081,092 30,331
Samuel F. Pryor, IV 6,325,686 29,682 20,756,055 0 27,081,741 29,682
Alan E. Woltz 6,329,072 26,296 20,756,055 0 27,085,127 26,296
</TABLE>
ITEM 5. OTHER INFORMATION
On July 31, 1996, the Company sold all of the issued and outstanding
shares of capital stock of three of its wholly-owned subsidiaries,
Belding Hausman Incorporated, a Delaware corporation ("BHI"),
Southampton Textile Company, Incorporated, a Virginia corporation
("Textile"), and Belding Real Estate Corporation, a Delaware
corporation ("BREC"), to Lewis Textiles Corporation, a Texas
corporation (the "Buyer"). BHI, Textiles and BREC comprise the
Company's Home Furnishings division (the "Division"). The Division
produces fabrics for use in home furnishing products. The Buyer is
owned by J. Lewis Partners, L. P., a Texas limited partnership, and
certain members of the management of the Division. The members of the
management of the Division that own shares of the capital stock of
the Buyer had a material relationship with the Company prior to the
consummation of the Transaction. Except for this relationship between
certain members of the management of the Division and the Company,
neither the Company nor any of its affiliates had any material
relationship with the Buyer or with any affiliates, directors or
officers of the Buyer or any associate of any such director or
officer.
<PAGE>
<PAGE>
In accordance with the terms and provisions of a certain stock
purchase and sale agreement dated July 12, 1996, by and among the
Company and the Buyer, the Company sold the capital stock of BHI,
Textile and BREC for an aggregate purchase price of $8,937,000 in
cash (subject to a post-closing adjustment based upon an audit of the
Division's business at July 12, 1996). The purchase price was
determined by arms-length negotiations. The Company used the net
proceeds of the sale transaction (after the payment of expenses) to
repay all revolving facility advances from NationsBank of North
Carolina, N.A. made against the Division's receivables and inventory.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- --------
<S> <C>
(a) (1) Stock Purchase Agreement, dated July 12, 1996, between
Belding Heminway Company, Inc. and Lewis Textiles
Corporation (omitting schedules and exhibits).*
</TABLE>
b) Reports on Form 8-K.
During the second quarter of 1996, the Company did not file a Current
Report on Form 8-K.
- ------------------------------------
* The Company shall furnish all omitted schedules and exhibits to the
Stock Purchase Agreement, dated July 12, 1996, between Belding
Heminway Company, Inc. and Lewis Textiles Corporation, upon request
of the Securities and Exchange Commission.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BELDING HEMINWAY COMPANY, INC.
(Registrant)
/S/ Gregory H. Cheskin
_________________________________________________________________
Gregory H. Cheskin, President and Chief Executive Officer
/S/ Edward F. Cooke
_________________________________________________________________
Edward F. Cooke, Vice President and Chief Accounting Officer
Date: August 9, 1996
<PAGE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------- ------- -------------
<S> <C> <C>
(a) (1) Stock Purchase Agreement, dated July 12,
1996, between Belding Heminway Company,
Inc. and Lewis Textiles Corporation
(omitting schedules and exhibits).
</TABLE>
<PAGE>
<PAGE>
STOCK PURCHASE AND SALE AGREEMENT
AMONG
LEWIS TEXTILES CORPORATION
AND
BELDING HEMINWAY COMPANY, INC.,
RELATING TO THE SALE OF
ALL OF THE ISSUED AND OUTSTANDING
CAPITAL STOCK
OF
BELDING HAUSMAN INCORPORATED,
SOUTHAMPTON TEXTILE COMPANY, INCORPORATED
AND
BELDING REAL ESTATE CORPORATION
JULY 12, 1996
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C> <C>
1. Sale and Purchase of Shares................................................. 1
1.1 Sale of Shares....................................................... 1
1.2 Purchase Price....................................................... 1
1.3 Delivery of the Shares............................................... 1
1.4 Seller Service Agreement............................................. 1
1.5 Employment Agreements................................................ 2
1.6 Transition Services Agreement........................................ 2
1.7 Lease Agreement...................................................... 2
1.8 Noncompetition Agreement............................................. 2
1.9 Purchase Price Adjustment............................................ 2
1.10 Escrow............................................................... 6
2. Closing; Closing Date; Effective Date....................................... 6
3. Representations and Warranties of Seller.................................... 7
3.1 Due Incorporation and Qualification.................................. 7
3.2 Capitalization; Ownership of the Shares; Etc......................... 7
3.3 Authority............................................................ 8
3.4 Subsidiaries and Other Affiliates.................................... 9
3.5 Articles of Incorporation and By-laws................................ 9
3.6 Financial Statements................................................. 9
3.7 No Material Adverse Change........................................... 10
3.8 Tax Matters.......................................................... 10
3.9 Compliance With Laws................................................. 11
3.10 Permits.............................................................. 11
3.11 No Breach............................................................ 12
3.12 Actions and Proceedings.............................................. 13
3.13 Contracts and Other Agreements....................................... 13
3.14 Real Estate.......................................................... 15
3.15 Tangible Property.................................................... 16
3.16 Intangible Property.................................................. 16
3.17 Right to Assets...................................................... 17
3.18 Liens................................................................ 17
3.19 Liabilities.......................................................... 17
3.20 Suppliers and Customers.............................................. 18
3.21 Employee Matters..................................................... 18
3.22 Employee Benefit Plans .............................................. 21
3.23 Insurance............................................................ 22
3.24 Operations of the Companies.......................................... 22
3.25 Potential Conflicts of Interest...................................... 25
3.26 Bank, Brokers and Proxies............................................ 26
3.27 Restrictive Agreements............................................... 27
3.28 Product Liability.................................................... 27
3.29 Accounts and Notes Receivable........................................ 27
3.30 Consents............................................................. 27
3.31 Full Disclosure...................................................... 27
3.32 Materiality.......................................................... 28
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
4. Representations and Warranties of Buyer..................................... 28
4.1 Due Incorporation.................................................... 28
4.2 Corporate Power of Buyer............................................. 28
4.3 Purchase for Investment.............................................. 28
4.4 Net Worth and Cash................................................... 28
4.5 Financing............................................................ 29
5. Seller's Covenants and Agreements........................................... 29
5.1 Conduct of Business.................................................. 29
5.2 Insurance............................................................ 29
5.3 Preservation of Business............................................. 30
5.4 Corporate Examinations and Investigations............................ 30
5.5 1995 Tax Returns..................................................... 30
5.6 Payment of Debts; Release............................................ 31
6. Parties' Covenants and Agreement............................................ 31
6.1 Consent to Jurisdiction and Service of Process....................... 31
6.2 Fees and Expenses.................................................... 32
6.3 Indemnification of Brokerage......................................... 33
6.4 Code Section 338(h)(10) Election..................................... 34
6.5 Severance Benefits................................................... 34
6.6 Employee Benefits of Buyer........................................... 34
6.7 Further Assurances................................................... 35
6.8 Belding Mark......................................................... 36
7. Conditions Precedent to the Obligation of Buyer to
Close....................................................................... 36
7.1 Representations, Warranties and Covenants............................ 36
7.2 No Material Adverse Change........................................... 36
7.3 Governmental Permits and Approvals................................... 37
7.4 Third Party Consents; Releases....................................... 37
7.5 Opinion of Counsel to Seller and the Company......................... 37
7.6 Resignations of Directors............................................ 37
7.7 Litigation........................................................... 37
7.8 Delivery of Stock Certificates; Transfer Taxes....................... 37
7.9 Approval of Counsel to Buyer......................................... 38
7.10 Employment Agreements................................................ 38
7.11 Other Documents...................................................... 38
7.12 Minute Books and Stock Transfer Ledgers.............................. 39
7.13 Financing............................................................ 39
7.14 Discontinuation of Participation..................................... 39
8. Conditions Precedent to the Obligation of Seller to
Close....................................................................... 39
8.1 Representations and Covenants........................................ 39
8.2 Opinion of Counsel to Buyer.......................................... 39
8.3 Litigation........................................................... 40
8.4 Releases............................................................. 40
8.5 Approval of Counsel to the Seller.................................... 40
8.6 Fairness Opinion..................................................... 40
8.7 Officers Certificate................................................. 40
8.8 Employment Agreements................................................ 41
8.9 Employee Releases.................................................... 41
</TABLE>
ii
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
8.10 Other Documents...................................................... 41
9. Indemnification............................................................. 41
9.1 Obligation of Seller to Indemnify.................................... 41
9.2 Obligation of Buyer to Indemnify..................................... 43
9.3 Conditions of Indemnification........................................ 43
9.4 Waiver............................................................... 45
9.5 Remedies Not Exclusive............................................... 45
9.6 Costs, Expenses and Legal Fees....................................... 45
9.7 Survival............................................................. 45
10. Termination of Agreement.................................................... 46
10.1 Termination.......................................................... 46
10.2 Effect Of Termination................................................ 47
10.3 Other Potential Bidders.............................................. 48
11. Confidentiality............................................................. 48
11.1 Nondisclosure........................................................ 48
11.2 Compelled Disclosure................................................. 49
11.3 Discussions with Employees; No Solicitation.......................... 49
11.4 Insider Trading...................................................... 49
12. Miscellaneous............................................................... 49
12.1 Certain Definitions.................................................. 49
12.2 Publicity............................................................ 51
12.3 Notices.............................................................. 51
12.4 Entire Agreement..................................................... 52
12.5 Amendments........................................................... 53
12.6 Governing Law........................................................ 53
12.7 Binding Effect; No Assignment; No Third Party
Beneficiaries........................................................ 53
12.8 Variations in Pronouns............................................... 53
12.9 Counterparts......................................................... 53
12.10 Schedule Disclosures.................................................. 53
12.11 Exhibits and Schedules................................................ 54
12.12 Headings.............................................................. 54
</TABLE>
iii
<PAGE>
<PAGE>
Exhibits and Schedules
<TABLE>
<S> <C> <C>
Exhibit
1.4 Service Agreement..................................................2, 41
1.5 Persons to be Employed.........................................2, 38, 41
1.6 Transition Services Agreement......................................2, 38
1.7 Lease Agreement....................................................2, 38
1.8 Noncompetition Agreement...........................................2, 38
1.10 Escrow Agreement.......................................................6
3.6.1 BHI Financials.........................................................9
3.6.2 Interim Financials....................................................10
7.5 Bryan Cave LLP Opinion................................................37
7.13 National Bank of Canada Letter........................................39
8.2 Jackson & Walker, L.L.P. Opinion......................................40
Schedule
1.9 GAAP Exceptions........................................................3
1.9.3 Accounting Principles and Practices....................................4
3.1 Due Incorporation and Qualification....................................7
3.2 Capitalization; Ownership of Shares, Etc...............................8
3.3 Consents........................................................8, 9, 12
3.7 Adverse Changes.......................................................10
3.8 Tax Claims........................................................10, 11
3.10 Permits...............................................................12
3.13 Contracts.........................................................13, 15
3.14 Real Estate, Leases...............................................14, 15
3.15 Tangible Property.................................................14, 16
3.16 Intangible Property...............................................14, 16
3.17 Right To Assets...................................................17, 38
3.18 Liens.................................................................17
3.19 Liabilities...........................................................17
3.20 Largest Customers and Suppliers.......................................18
3.21.1 Cash Compensation.............................................14, 18, 29
3.21.2 Employment Agreements.........................................14, 18, 19
3.21.3 Employee Policies and Procedures..................................14, 19
3.21.5 Labor Compliance..................................................14, 19
3.21.6 Unions................................................................20
3.22.1 Employee Benefit Plans........................................21, 39, 42
3.22.6 Medical Claims........................................................22
3.22.7 Employees Nearing Retirement Eligibility..............................22
3.23 Insurance.........................................................22, 29
3.24 Operations........................................................22, 29
3.25 Conflicts of Interest.................................................25
3.26 Banks.................................................................26
3.30 Consents..............................................................27
5.6 Existing Business Obligations.........................................31
6.6.3 Estimate of Reserves for MIP
and Christmas Bonus Plans...........................................35
9.1 Excluded Matters......................................................42
</TABLE>
iv
<PAGE>
<PAGE>
TABLE OF DEFINITIONS
<TABLE>
<S> <C>
Adjustment Amount.............................................................2
Affiliate....................................................................50
Assets........................................................................3
Balance Sheet Date...........................................................10
BHC..........................................................................33
BHI...........................................................................1
BHI Financials................................................................9
BHI Shares....................................................................7
BREC..........................................................................1
BREC Shares...................................................................7
Buyer.........................................................................1
Buyer's 401(k) Plan..........................................................34
Cash Compensation............................................................18
Cause........................................................................34
Closing.......................................................................1
Closing Balance Sheet.........................................................3
Closing Date..................................................................6
Companies.....................................................................1
Company.......................................................................1
Confidential Information.....................................................48
Contracts and other agreements...............................................50
Controlled Group.............................................................21
Determination Date............................................................5
Document or other papers.....................................................50
Effective Date................................................................6
Employee Benefit Plans.......................................................21
Employee Policies and Procedures.............................................19
Employment Agreements.........................................................2
Environment..................................................................50
Environmental................................................................50
Environmental Contaminant....................................................50
Environmental Law or Laws....................................................50
ERISA........................................................................21
Escrow Account................................................................6
Escrow Agent..................................................................6
Escrow Agreemen...............................................................6
Estimated Adjustment Amount...................................................3
Estimated Net Assets..........................................................3
Existing Employment Agreements...............................................18
Fairness Opinion.............................................................40
GAAP..........................................................................3
Indemnifying party...........................................................43
Insurance Policies...........................................................22
Interim Balance Sheet........................................................10
Interim Financials...........................................................10
Inventory.....................................................................3
Investment Bank..............................................................40
IRCA.........................................................................20
Knowledge....................................................................50
Lease Agreement...............................................................2
</TABLE>
v
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Liabilities...............................................................3, 17
Lien or other encumbrance....................................................50
Loss.........................................................................41
Losses.......................................................................41
MIP and Christmas Bonus Plans................................................35
Net Assets....................................................................3
Net Worth.....................................................................3
Noncompetition Agreement......................................................2
Party to be indemnified......................................................43
Permits......................................................................12
Person.......................................................................50
Property.....................................................................51
Release......................................................................51
Representatives..............................................................48
Seller........................................................................1
Service Agreement..........................................................1, 2
Shares........................................................................1
Tangible Property............................................................16
Textile.......................................................................1
Textile Shares................................................................7
Third Party..................................................................47
Thread Inventory..............................................................4
Transaction..................................................................48
Transferred Employees........................................................18
Transition Services Agreement.................................................2
</TABLE>
vi
<PAGE>
<PAGE>
STOCK PURCHASE AGREEMENT
AGREEMENT, dated the 12th day of July 1996, among Lewis Textiles
Corporation, a Texas corporation ("Buyer"), and Belding Heminway Company, Inc.
("Seller").
Seller currently owns all of the issued and outstanding shares of
the capital stock of Belding Hausman Incorporated, a Delaware corporation
("BHI"), Southampton Textile Company, Incorporated, a Virginia corporation
("Textile"), and Belding Real Estate Corporation, a Delaware corporation
("BREC"). BREC, Textile and BHI are referred to herein, separately, as a
"Company" and, collectively, as the "Companies." Such shares of capital stock of
the Companies are collectively referred to herein as the "Shares." Seller wishes
to sell, and Buyer wishes to purchase, the Shares upon the terms and conditions
of this Agreement.
Accordingly, the parties, each intending to be contractually
bound, hereby agree as follows:
1. SALE AND PURCHASE OF SHARES
1.1 SALE OF SHARES
At the closing provided for in Section 2 hereof (the "Closing"),
Seller shall sell the Shares to Buyer and Buyer shall purchase
the Shares from Seller for the purchase price provided in Section
1.2.
1.2 PURCHASE PRICE
The aggregate purchase price payable by Buyer to Seller shall be
Nine Million Five Hundred Seventy Five Thousand Dollars
($9,575,000) as adjusted at Closing by the Estimated Adjustment
Amount determined in accordance with Section 1.9 below, payable
on the Closing Date (as hereinafter defined) by wire transfer of
same day funds.
1.3 DELIVERY OF THE SHARES
At the Closing, Seller shall deliver to Buyer stock certificates
representing all of the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank, in proper
form for transfer.
1.4 SELLER SERVICE AGREEMENT
On or prior to the Closing Date, Textile shall enter into a
Service Agreement with Seller in the form
1
<PAGE>
<PAGE>
annexed hereto as Exhibit 1.4 (the "Service
Agreement").
1.5 EMPLOYMENT AGREEMENTS
On or prior to the Closing Date, BHI shall enter into employment
agreements with each of the persons listed in Exhibit 1.5, in
substantially the form delivered to such persons on July 2, 1996
(the "Employment Agreements"). The Employment Agreements shall
become effective as of the Effective Date and shall thereafter
supersede any and all employment agreements or other contracts
such persons may have with Seller or any Company, except, with
respect to each such person, item numbered three of the first
paragraph of the letter agreement dated November 15, 1996 between
such person and Seller.
1.6 TRANSITION SERVICES AGREEMENT
On or prior to Closing, Seller and Buyer shall enter into a
Transition Services Agreement in the form annexed hereto as
Exhibit 1.6 (the "Transition Services Agreement").
1.7 LEASE AGREEMENT
On or prior to Closing, Seller and Buyer shall enter into a Lease
Agreement for a portion of that certain real property known as
the Virginia Dye House in the form annexed hereto as Exhibit 1.7
(the "Lease Agreement").
1.8 NONCOMPETITION AGREEMENT
On or prior to Closing, Seller and Buyer shall enter into a
Noncompetition Agreement in the form annexed hereto as Exhibit
1.8 (the "Noncompetition Agreement").
1.9 PURCHASE PRICE ADJUSTMENT
1.9.1 For purposes of this Section 1.9, the
following terms shall have the following
meanings:
"Adjustment Amount" shall mean the amount, if any,
by which the Net Assets of the Companies as at and
as reflected in the Closing Balance Sheet exceeds
or is less than the Estimated Net Assets.
2
<PAGE>
<PAGE>
"Assets" shall mean the consolidated assets of the
Companies at any given time determined in
accordance with generally accepted accounting
principles consistently applied ("GAAP"), except as
set forth in Schedule 1.9 hereto.
"Closing Balance Sheet" shall mean the consolidated
balance sheet of the Companies as at the Effective
Date.
"Estimated Adjustment Amount" shall mean the
amount, if any, by which the Estimated Net Assets
of the Companies exceeds or is less than
$16,400,000.
"Estimated Net Assets" shall mean Seller's
reasonable estimate at the Effective Date of the
Net Assets of the Companies to be reflected in the
Closing Balance Sheet.
"Inventory" shall mean work in progress and raw
materials, stores, finished goods, waste inventory,
operating supplies, packaging materials, parts,
components, and other similar items related to or
used in the business of the Companies, on hand, in
transit, in warehouse or otherwise owned by the
Companies or either of them. Inventory shall not
include Thread Inventory.
"Liabilities" shall mean the consolidated
liabilities of the Companies at any given time
determined in accordance with GAAP, except as set
forth in Schedule 1.9 hereto.
"Net Assets" shall mean Net Worth (i) plus any cash
overdrafts and any of the Companies' accounts
payable to Seller, and (ii) minus any cash balances
and any of the Companies' accounts receivable from
Seller, all as reflected in the Closing Balance
Sheet or in accordance with Seller's reasonable
estimate for purposes of the Estimated Adjustment
Amount.
"Net Worth" shall mean the amount, if any, by which
the Assets of the Companies at any given time
exceeds their Liabilities at such time.
3
<PAGE>
<PAGE>
"Thread Inventory" shall mean all greige thread,
greige thread in process of being dyed and/or
finished, finished thread, formulae, records, shade
cards, standards and other tangible and intangible
property owned by Seller or a subsidiary of Seller
other than the Companies and in the possession of
Textile at its Southampton Dye House.
1.9.2 Beginning on or after June 29, 1996,
representatives of Seller and Buyer shall
conduct a physical count of the Inventory,
and Seller shall expeditiously perform such
other procedures with respect to the Assets
and Liabilities as are necessary and
appropriate for Seller to prepare a Closing
Balance Sheet. Seller shall provide Buyer,
and Buyer shall provide Seller, full access
at all reasonable times after the Closing
Date to the Companies' books, records,
premises and other materials and Seller's
work papers and shall furnish Buyer with such
information and assistance as Buyer may
reasonably request to verify the Closing
Balance Sheet.
1.9.3 Within forty-five (45) days after the
Closing, Seller shall deliver to Buyer the
Closing Balance Sheet together with Seller's
computation of the Effective Date Net Assets
as determined from the Closing Balance Sheet
which Seller shall have prepared in
accordance with the accounting principles and
practices set forth in Schedule 1.9.3 hereto,
together with Seller's computation of the
Adjustment Amount.
1.9.4 The Effective Date Net Assets shall be
determined from the Closing Balance Sheet and
the Effective Date Net Assets and the
Adjustment Amount shall be as proposed by
Seller unless the Buyer within fifteen (15)
days after receipt of the Closing Balance
Sheet delivers to Seller a statement signed
by Buyer proposing adjustments to the
Effective Date Net Assets. If Seller and
Buyer fail to agree on the proposed
adjustments within ten (10) days after Seller
receives the written notice of proposed
adjustments, Buyer and Seller shall, as soon
as reasonably possible thereafter, employ
Deloitte & Touche LLP or, in the event that
4
<PAGE>
<PAGE>
Buyer and Seller cannot reach an agreement with
such firm on terms of the engagement that are
reasonably acceptable to Buyer and Seller, another
nationally recognized firm of independent public
accountants that is mutually acceptable to Buyer
and Seller, to examine the items about which
disagreement exists. The determination of the
disputed items by such firm shall be made within
thirty (30) days of the engagement and shall be
binding upon Buyer and Seller. The cost of
employing such firm shall be prorated between Buyer
and Seller in proportion to the amounts in dispute
resolved against each of them. The date the
Effective Date Net Assets and the Adjustment Amount
are conclusively determined as herein provided is
referred to as the "Determination Date".
1.9.5 Payment of Purchase Price Adjustments.
1.9.5.1 At Closing. If the Estimated Net Assets
are less than $16,400,000, the purchase
price shall be decreased by the
Estimated Adjustment Amount at Closing
and such purchase price as decreased
shall be paid by Buyer at Closing. If
the Estimated Net Assets are greater
than $16,400,000, the purchase price
shall be increased by the Estimated
Adjustment Amount at Closing and such
purchase price as increased shall be
paid by Buyer at Closing.
1.9.5.2 Post Closing. If the Effective Date Net
Assets are less than the Estimated Net
Assets, the Seller shall pay the
Adjustment Amount to the Buyer by wire
transfer of immediately available funds
within fifteen (15) days after the
Determination Date. If the Effective
Date Net Assets are more than the
Estimated Net Assets, the Buyer shall
pay the Adjustment Amount to the Seller
by wire transfer of immediately
available funds within fifteen (15) days
after the Determination Date.
5
<PAGE>
<PAGE>
1.10 ESCROW
Simultaneously with the execution of this Agreement, Buyer shall
deposit the sum of $500,000 into an account (the "Escrow
Account") with Jackson & Walker, L.L.P. (the "Escrow Agent")
pursuant to the terms of an escrow agreement in the form attached
hereto as Exhibit 1.10 (the "Escrow Agreement"). The Escrow Agent
shall invest the escrowed funds in such manner as Buyer shall
provide by written instructions to the Escrow Agent. Interest or
dividends, if any, received by the Escrow Agent from the
investment of the escrowed funds shall accumulate in the Escrow
Account for the benefit of Buyer and shall be paid on a monthly
basis and shall not constitute a part of the escrowed funds. The
funds in the Escrow Account, in accordance with the terms of the
Escrow Agreement, shall be available to satisfy any claims by
Seller that Buyer has breached the terms of this Agreement. The
Escrow Account shall terminate (i) on the Closing Date, or (ii)
in the event the Closing does not occur for any reason, six
months after the latest date scheduled for the Closing. On the
date the Escrow Account terminates, any amounts in the Escrow
Account shall, subject to the terms of the Escrow Agreement, be
remitted by the Escrow Agent to Buyer in accordance with Buyer's
written instructions.
2. CLOSING; CLOSING DATE; EFFECTIVE DATE
The Closing of the sale and purchase of the Shares contemplated hereby
shall take place at the offices of Bryan Cave LLP, 245 Park Avenue, New
York, New York 10167, at 10:00 A.M. local time on July 12, 1996, or at
such other place or such other time or date as Buyer and Seller agree in
writing. The time and date upon which the Closing occurs is herein
called the "Closing Date." Notwithstanding anything to the contrary
contained herein and irrespective of when the Closing occurs, upon the
Closing, the sale of the Shares hereunder shall be deemed for all
purposes to have occurred on and as of 5:00 p.m. Eastern Day-light
Savings Time on July 12, 1996 (the "Effective Date"), with the effect
that from and after the Effective Date the operations of the Companies
shall be for the account and benefit of the Buyer, all trade accounts
receivable collected by the Companies shall be for the account and
benefit of the Buyer, all risk of loss with respect of the Companies
shall pass to the Buyer and the Seller shall not have any interest in
the operations or profits of the Companies.
6
<PAGE>
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
3.1 DUE INCORPORATION AND QUALIFICATION
Each Company is a corporation duly incorporated, validly existing
and in good standing under the laws of its state of incorporation
and has the corporate power and lawful authority to own, lease
and operate its assets, properties and business and to carry on
its business as now being and as heretofore conducted. No Company
is doing business or qualified as a foreign corporation in any
jurisdiction other than as set forth in Schedule 3.1 hereto, and
no such qualification is required by any Company except where the
failure so to qualify would have a materially adverse effect on
the business or operations of the Companies taken as a whole.
3.2 CAPITALIZATION; OWNERSHIP OF THE SHARES; ETC.
3.2.1 BHI is authorized to issue 1000 shares of
common stock, no par value, of which 100
shares are issued and outstanding (the "BHI
Shares"). No other class of capital stock of
BHI is authorized or outstanding. All of the
BHI Shares are duly authorized and are
validly issued, fully paid and non-
assessable.
3.2.2 Textile is authorized to issue 2000 shares of
common stock, par value $100.00 per share, of
which 673 shares are issued and outstanding
(the "Textile Shares"). No other class of
capital stock of Textile is authorized or
outstanding. All of the Textile Shares are
duly authorized and are validly issued, fully
paid and non-assessable.
3.2.3 BREC is authorized to issue 50,000 shares of
common stock, par value $1.00 per share, of
which 50,000 shares are issued and
outstanding (the "BREC Shares"). No other
class of capital stock of BREC is authorized
or outstanding. All of the BREC Shares are
duly authorized and are validly issued, fully
paid and non-assessable.
3.2.4 Seller currently owns all of the Shares
beneficially and of record, free and clear of
any lien or other encumbrance, except as
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disclosed in Schedule 3.2 hereto. Upon delivery of
and payment for the Shares as herein provided,
Buyer will acquire good and valid title thereto,
free and clear of any lien or other encumbrance.
3.2.5 There is no outstanding right, subscription,
warrant, call, unsatisfied preemptive right,
option, commitment, conversion right or other
agreement of any kind obligating, or which
may upon the occurrence of a condition or the
lapse of time or both, obligate any Company
to authorize, issue, deliver, sell or redeem
any shares of its capital stock or any
security convertible into or evidencing the
right to purchase any shares of such stock.
No dividends have been declared on the Shares
that were not paid or not fully and
adequately reflected or reserved against on
the Interim Balance Sheet.
3.3 AUTHORITY
Seller has the full legal right and power and all authority and
approval required to enter into, execute and deliver this
Agreement and all other agreements contemplated hereby to be
executed and delivered by it and to consummate the transactions
contemplated hereby and thereby and to perform fully its
obligations hereunder. This Agreement and each other agreement
contemplated hereby to be executed and delivered by it have been
duly executed and delivered and each is the legal, valid and
binding obligation of Seller enforceable in accordance with its
terms except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws from time to time in effect which affect creditors' rights
generally and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in
equity or at law. The execution and delivery of this Agreement
and the other agreements contemplated hereby to be executed and
delivered by Seller, the consummation of the transactions
contemplated thereby and the performance by Seller of this
Agreement and the other agreements contemplated hereby to be
executed and delivered by Seller in accordance with their
respective terms and conditions will not (i) require the approval
or consent of any foreign, federal, state, county, local or other
governmental or regulatory body or the approval or consent of any
other person except as set forth in Schedule 3.3 hereto; (ii)
conflict with or result in
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any breach or violation of any of the terms and conditions of, or
constitute (or with notice or lapse of time or both constitute) a
default under, any statute, regulation, order, judgment or decree
applicable to Seller or to the Shares, or any instrument,
contract or other agreement to which Seller is a party or by or
to which Seller is or the Shares are bound or subject, except for
any such conflicts, breaches or violations which would not have a
material adverse effect on the Companies taken as a whole and
except as set forth in Schedule 3.3 hereto; (iii) result in the
creation of any material lien or other encumbrance on the Shares;
or (iv) conflict with or result in a breach or violation of the
Articles of Incorporation or by-laws of any of the Companies.
3.4 SUBSIDIARIES AND OTHER AFFILIATES
No Company owns or has the power to vote the securities of any
class of any other corporation or any partnership, limited
liability company, joint venture or other entity.
3.5 ARTICLES OF INCORPORATION AND BY-LAWS
Each Company has heretofore delivered to Buyer true and complete
copies of its Articles of Incorporation and the by-laws
(certified by the Secretary of such Company) of such Company as
in effect on the date hereof. The minute books of each Company
have been made available to Buyer and its representatives and
will be furnished to Buyer by Seller at Closing.
3.6 FINANCIAL STATEMENTS
3.6.1 The unaudited consolidated financial
statements of the Companies for the years
ended December 31, 1994 and 1995 including
consolidated balance sheets and the related
income statements for the years then ended,
attached hereto as Exhibit 3.6.1. (the "BHI
Financials"), fairly present the financial
position and results of operations of the
Companies as at such dates and for the
respective years then ended in accordance
with GAAP, except as disclosed in Exhibit
3.6.1.
3.6.2 The unaudited consolidated financial statements of
the Companies for the four months ended April 26,
1996, including a consolidated balance sheet and
the related
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income statement for the four months then ended,
attached hereto as Exhibit 3.6.2 (the "Interim
Financials") fairly present the financial position
and results of operations of the Companies as at
such date and for the four months then ended in
accordance with GAAP, except as disclosed in
Exhibit 3.6.2. The balance sheet included in the
Interim Financials is sometimes herein called the
"Interim Balance Sheet" and April 26, 1996 is
sometimes herein called the "Balance Sheet Date."
3.7 NO MATERIAL ADVERSE CHANGE
Except as set forth in Schedule 3.7, since the Balance Sheet
Date, there has been no material adverse change in the assets,
properties, business, operations, condition (financial or
otherwise) nor has there been any damage, destruction or loss
materially adversely affecting the assets, properties, business,
operations or condition (financial or otherwise) of the Companies
taken as a whole.
3.8 TAX MATTERS
Except as set forth on Schedule 3.8 hereto, the Companies have
filed all income tax, excise tax, sales tax, use tax, gross
receipts tax, franchise tax, employment and payroll related tax,
real and personal property tax and all other tax returns which
they are required to file, and have paid or provided for in the
Closing Balance Sheet all taxes shown on such returns, and all
deficiencies or other assessments of tax, interest or penalties
which have been served on or delivered to them. No material
penalties or other charges are, or will become, due with respect
to the late filing of any such return. The total amounts
established as reserves for current and deferred taxes in the
Interim Financials are, and the total amounts accrued on the
books and records of the Companies for the period commencing on
the day following the Balance Sheet Date and ending on the
Effective Date will be, sufficient to cover the payment of all
claims known to the Seller, with respect to all federal, state,
county, local, foreign and other taxes, and all employment and
payroll related taxes, and all import duties, including any
penalties or interest thereon, whether or not assessed or
disputed, which are hereinafter found to be, or to have been, due
with respect to the conduct of the businesses of the Companies
since December 31, 1995 up to and through the Balance Sheet Date
and the
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Effective Date, respectively. There are no claims other than
those described on Schedule 3.8, with respect to federal, state,
county, local, foreign or other taxes. The Federal income tax
returns to be filed by or on behalf of the Companies in respect
of the fiscal year ended December 31, 1995 and with respect to
the Effective Date will correctly and accurately reflect in all
material respects the amount of their respective tax liabilities
for such period. The Seller knows of no material unassessed tax
deficiency proposed or threatened against any Company. Except as
set forth in Schedule 3.8 hereto, no audit of any tax return of
any Company is in progress. Except with respect to the Federal
and state income tax returns of the Companies in respect of the
fiscal year ended December 31, 1995, there are not in force any
extensions of time with respect to the date on which any tax
return was or is due to be filed by any Company or any waivers or
agreements by any Company for an extension of time for the
assessment or payment of any tax.
3.9 COMPLIANCE WITH LAWS
No Company is in violation of any applicable order, judgment,
injunction, award or decree and, to the knowledge of Seller, no
Company is in violation of any federal, state, local or foreign
law, ordinance or regulation or any other requirement of any
governmental or regulatory body, court or arbitrator applicable
to the business of that Company, except for any such violations
which would not have a material adverse effect on the Companies
taken as a whole. Seller knows of no illegal payment made by any
of the Companies to officers or employees of any government or
regulatory body, or any payment to customers for the sharing of
fees or to customers or suppliers for rebating of charges, or
engagement in any other reciprocal practices by the Companies, or
any illegal payment or given any other illegal consideration to
purchasing agents or other representatives of customers in
respect of sales made or to be made by the Companies.
3.10 PERMITS
The Companies have all licenses, permits, consents, orders or
approvals of any federal, state, local or foreign governmental or
regulatory bodies that are material to or necessary for the
conduct of the business of the Companies taken as a whole,
including without limitation all licenses, permits, consents,
orders or approvals required under all applicable
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environmental statutes, ordinances and regulations for such
Companies to lawfully operate and lease, use or occupy any real
property in connection with their businesses which licenses,
permits, consents, orders or approvals are set forth on Schedule
3.10 (collectively, the "Permits"), true and complete copies of
which have been made available to Buyer. Except as disclosed in
Schedule 3.10 hereto, the Companies have all such Permits and so
far as Seller knows all such Permits are in full force and
effect; no violations are or have been recorded in respect of any
Permit; no proceeding is pending or, to the knowledge of the
Seller, threatened, and no claim or demand has been asserted to
revoke or limit any Permit; and neither the execution of this
Agreement nor the consummation of the transactions contemplated
hereby will result in any violation or revocation of or
limitation on any Permit, except for any such Permits which would
not have a material adverse effect on the Companies taken as a
whole.
3.11 NO BREACH
The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i)
violate, conflict with or result in a breach of any of the
provisions of the respective Articles of Incorporation or By-laws
of any Company; (ii) violate, conflict with or result in the
breach of any of the terms of, result in a material modification
of, or otherwise give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or both
constitute) a default (by way of substitution, novation or
otherwise) under, any contract or other agreement to which any
Company is a party or by or to which any Company or any of its
assets or properties may be subject; (iii) violate any order,
writ, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding
upon, any Company or upon the securities, properties or business
of any Company; (iv) violate any statute, law or regulation of
any jurisdiction as such statute, law or regulation relates to
either Company or to the assets of either Company or to the
securities, properties or business of any Company; or (v) violate
or result in the revocation or suspension of any Permit, except
in respect of each of clause (i), (ii), (iii), (iv) and (v)
above, for any such violations, breaches or conflicts which would
not have a material adverse effect on the Companies taken as a
whole and except as set forth in Schedule 3.3 hereto.
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3.12 ACTIONS AND PROCEEDINGS
There are no outstanding orders, injunctions, awards or decrees
of any court, governmental or regulatory body or arbitration
tribunal against or involving any Company and there are no
actions, suits or claims or legal, administrative or arbitration
proceedings or investigations (whether or not the defense thereof
or liabilities in respect thereof are covered by insurance)
pending or, to the knowledge of the Seller, threatened against or
involving any Company or any of their properties or assets,
except for any such orders, injunctions, awards, decrees,
actions, suits or claims which would not have a material adverse
effect on the Companies taken as a whole.
3.13 CONTRACTS AND OTHER AGREEMENTS
Schedule 3.13 hereto sets forth, as of the date of this
Agreement, with respect to each Company, all of the following
contracts and other written agreements to which such Company is a
party or by or to which it or its assets or properties are bound
or subject:
(i) contracts and other agreements with any
current or former officer, director or
shareholder or with any affiliate of any
such officer, director or shareholder;
(ii) contracts and other agreements with any
labor union or association representing
any employee;
(iii) contracts and other agreements for the sale
of any of its assets or properties other
than in the ordinary course of business or
for the grant to any person of any
preferential right to purchase any of its
assets or properties;
(iv) contracts and other agreements calling
for an aggregate purchase price or
payments in any one year of more than
$25,000 in any one case (or in the
aggregate, in the case of any related
series of contracts and other
agreements);
(v) material contracts and other agreements
that can be cancelled without liability,
premium or penalty only on ninety days'
or more notice;
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(vi) contracts and other agreements with
customers or suppliers for the sharing
of fees, the rebating of charges or
other similar arrangements;
(vii) contracts and other agreements
containing obligations or liabilities of
any kind to holders of such Company's
securities as such;
(viii) contracts and other agreements containing
covenants of such Company not to compete in
any line of business or with any person in
any geographical area or covenants of any
other person not to compete with such
Company in any line of business or in any
geographical area;
(ix) contracts and other agreements relating
to the acquisition by such Company of
any operating business or the capital
stock of any other person;
(x) contracts and other agreements for the
payment of fees or other consideration
to any officer or director of such
Company or to any other entity in which
any of the foregoing has an interest;
(xi) contracts and other agreements relating
to the borrowing of money or any other
financing activity;
(xii) contracts or other agreements relating
to consulting services;
(xiii) any guarantee, suretyship,
indemnification, or contribution
agreement or bond (other than
endorsements of negotiable instruments
for collection in the ordinary course of
business);
(xiv) powers of attorney; or
(xv) any other material contract or other
agreement whether or not made in the
ordinary course of business (other than
those reflected in Schedules 3.14, 3.15,
3.16, 3.21.1, 3.21.2, 3.21.3 and 3.21.5
hereto).
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There have been delivered or made available to Buyer true and
complete copies of all the contracts and other agreements set
forth on Schedule 3.13 or on any other schedule to this
Agreement. All of such contracts and other agreements are valid,
subsisting, in full force and effect and binding upon the parties
thereto in accordance with their terms, and the Companies have,
respectively, paid in full or accrued all amounts due thereunder
and have satisfied in full or provided for all of their
respective liabilities and obligations thereunder, and are not in
default under any of them, nor so far as Seller knows is any
other party to any such contract or other agreement in default
thereunder, nor so far as Seller knows does any condition exist
that with notice or lapse of time or both would constitute a
default thereunder. Except as separately identified on Schedule
3.13, no approval or consent of any person is needed in order
that the contracts and other agreements set forth on Schedule
3.13 or on any other Schedule continue in full force and effect
following the consummation of the transactions contemplated by
this Agreement.
3.14 REAL ESTATE
Schedule 3.14 hereto sets forth a list and summary description of
(i) all real property owned either legally or equitably by any of
the Companies and all buildings and other structures located on
such real property, (ii) all leases, subleases or other
agreements under which any Company is a lessor or lessee of any
real property; (iii) all options held by any of the Companies or
contractual obligations on their part to purchase or acquire or
lease any interest in real property and (iv) all options granted
by any of the Companies or contractual obligations on their part
to sell or dispose of any interest in real property. The leases,
subleases and other agreements disclosed in clauses (ii) and
(iii) above are in full force and effect and to the knowledge of
the Seller none of the Companies has received any notice of any
default thereunder. Except as disclosed in Schedule 3.14, the
leasehold interests of the Companies, if any, are not subject to
any lien or other encumbrance and each of the Companies enjoy a
right of quiet possession thereunder as against any lien or other
encumbrance on the property. Each of the options set forth on
Schedule 3.14, if any, is in full force and effect subject to no
lien or other encumbrance, except as disclosed in Schedule 3.14.
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3.15 TANGIBLE PROPERTY
Schedule 3.15 hereto sets forth all interests owned, claimed or
leased by any of the Companies (including, without limitation,
options) in or to the material plant, machinery, equipment,
furniture, leasehold improvements, fixtures, vehicles,
structures, any related capitalized items and other tangible
property that is material to the conduct of their businesses,
taken as a whole, and that is treated by them as depreciable or
amortizable property ("Tangible Property") not reflected in the
Interim Financials and not sold or disposed of in the ordinary
course of business since the Balance Sheet Date. All material
leases, conditional sale contracts, franchises or licenses
pursuant to which either of the Companies may hold or use any
interest owned or claimed by any of the Companies (including,
without limitation, options) in or to Tangible Property, each of
which is described on Schedule 3.15, are in full force and effect
and, with respect to performance by the Companies, or either of
them, there is no default or event of default or event which with
notice or lapse of time or both would constitute a default. None
of the Companies has received written notice that it is in
violation of any existing law or any building, zoning, health,
safety or other ordinance, code or regulation.
3.16 INTANGIBLE PROPERTY
Schedule 3.16 hereto sets forth all patents, trademarks, service
marks, trade names, copyrights and franchises, all applications
for any of the foregoing, and all permits, grants and licenses or
other rights running to or from any Company relating to any of
the foregoing owned or used by the Companies, or any of them,
which are material to the business of the Companies taken as a
whole. The rights of each of the Companies in the property set
forth on Schedule 3.16 are free and clear of any liens or other
encumbrances. No Company has received any written notice of any
adversely held patent, invention, trademark, service mark,
copyright or trade name of any other person or written notice of
any claim of any other person relating to any of the property set
forth on Schedule 3.16 or any process or confidential information
of such Company.
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3.17 RIGHT TO ASSETS
Except as set forth on Schedule 3.17, each Company owns, leases
or otherwise possesses the right to use all assets used in the
conduct of its business as currently conducted, which rights will
not be impaired by the consummation of the transactions
contemplated hereby.
3.18 LIENS
The Companies own outright and have good and marketable title to
all of their respective assets and properties, including, without
limitation, all of the assets and properties reflected in the
Interim Financials, in each case free and clear of any lien or
other encumbrance, except as disclosed in Schedule 3.18 and
except for (i) assets and properties which are not material to
the business of the Companies taken as a whole; (ii) assets and
properties disposed of, or subject to purchase or sales orders,
in the ordinary course of business since the Balance Sheet Date;
(iii) liens or other encumbrances securing taxes, assessments,
governmental charges or levies, or the claims of materialmen,
carriers, landlords and like persons, all of which are not yet
due and payable; or (iv) minor liens or other encumbrances of a
character that do not substantially impair the assets or
properties of either Company or detract materially from the
business of the Companies taken as whole.
3.19 LIABILITIES
Except as set forth in Schedule 3.19 hereto, as of the Balance
Sheet Date, none of the Companies had any indebtedness,
liability, claim, loss, damage, deficiency, obligation or
responsibility, fixed or unfixed, liquidated or unliquidated,
secured or unsecured, accrued, absolute, contingent or otherwise,
including, without limitation, liabilities on account of taxes,
other governmental charges or lawsuits brought, whether or not of
a kind required by GAAP to be set forth on a financial statement
("Liabilities"), that were not fully and adequately reflected or
reserved against on the Interim Balance Sheet. Except as set
forth on Schedule 3.19, none of the Companies had any Liabilities
other than Liabilities fully and adequately reflected or reserved
against on the Interim Balance Sheet or the Closing Balance
Sheet. Except as set forth on Schedule 3.19, none of the
Companies has guaranteed the payment or performance of any
Liability of any other person.
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3.20 SUPPLIERS AND CUSTOMERS
Schedule 3.20 hereto sets forth the five largest suppliers and
five largest customers of each Company, and each other supplier
or customer of material importance to the business of each
Company during the year ended December 31, 1995. Except as
identified on Schedule 3.20, no single supplier or customer is
materially important to the business of either Company. The
relationships of the Companies with such suppliers and customers
are generally good commercial working relationships and none of
such suppliers or customers has since December 31, 1995 cancelled
or otherwise terminated, or threatened in writing to cancel or
otherwise terminate, its relationship with any Company. Seller
has no knowledge that any such supplier or customer intends to
cancel its relationship with any Company, and the acquisition of
the Shares by Buyer or the consummation of any of the other
transactions contemplated hereby shall not, to the knowledge of
the Seller, adversely affect the relationships of the Companies
with their suppliers or customers; provided, however, that Seller
makes no representation or warranty that any supplier or customer
will continue its relationship with the Companies after the
Closing.
3.21 EMPLOYEE MATTERS
3.21.1 Cash Compensation. Schedule 3.21.1 contains
a complete and accurate list of the names,
titles and cash compensation, including
without limitation wages, salaries, bonuses
(discretionary and formula) and other cash
compensation (the "Cash Compensation") of all
employees of the Companies (the "Transferred
Employees") who are currently compensated at
a rate in excess of $50,000 per year and who
earned in excess of such amount during the
preceding fiscal year of the Companies. In
addition, Schedule 3.21.1 contains a complete
and accurate description of (i) all increases
in Cash Compensation of Transferred Employees
during the current fiscal year of the
Companies and (ii) any increases in Cash
Compensation of Existing Transferred
Employees that have not yet been effected.
3.21.2 Employment Agreements. Schedule 3.21.2
contains a complete and accurate list of all
employment agreements (the "Existing
Employment Agreements") to which any Company
is a party with respect to the Transferred
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Employees. The Existing Employment Agreements
include without limitation all employee
compensation agreements, employee leasing
agreements, employee services agreements and
noncompetition agreements to which any Company is a
party. Seller has provided Buyer a copy of each
written Existing Employment Agreement and a written
description of each unwritten Existing Employment
Agreement under which any Transferred Employee is
currently compensated at a rate in excess of
$50,000 per year or under which any Transferred
Employee earned in excess of such amount during the
preceding fiscal year of the Companies.
3.21.3 Employee Policies and Procedures.
Schedule 3.21.3 contains a complete and
accurate list of all written employee
manuals, policies, procedures and work-
related rules (the "Employee Policies and
Procedures") that apply to Transferred
Employees. Seller has provided Buyer a copy
of all written Employee Policies and
Procedures. Each of the Employee Policies
and Procedures can be amended or terminated
at will by the Companies.
3.21.4 Unwritten Amendments. To the knowledge of
Seller, except as set forth on Schedule
3.21.2, no unwritten amendments have been
made, whether by oral communication, pattern
of conduct or otherwise, with respect to any
Compensation Plans, Existing Employment
Agreements or Employee Policies and
Procedures.
3.21.5 Labor Compliance. Except as set forth in Schedule
3.21.5, each of the Companies:
(i) has been and is in compliance with
all laws, rules, regulations and
ordinances respecting employment
and employment practices, terms and
conditions of employment and wages
and hours, and
(ii) is not liable for any arrears of
wages or penalties for failure to
comply with any of the foregoing.
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Neither Company has engaged in any unfair labor
practice or discriminated on the basis of race,
color, religion, sex, national origin, age or
handicap in its employment conditions or practices.
There are no:
(iii) unfair labor practice charges or
complaints or racial, color,
religious, sex, national origin,
age or handicap discrimination
charges or complaints pending or,
to the knowledge of Seller,
threatened against any Company
before any federal, state or local
court, board, department,
commission or agency nor, to the
knowledge of Seller, does any basis
therefor exist; or
(iv) existing or, to the knowledge of
Seller, threatened labor strikes,
disputes, grievances, controversies
or other labor troubles affecting
the Companies, nor, to the
knowledge of Seller, does any basis
therefor exist.
3.21.6 Unions. Except as set forth in Schedule
3.21.6, neither of the Companies has ever
been a party to any agreement with any union,
labor organization or collective bargaining
unit. Except as set forth in Schedule
3.21.6, no employees of the Companies are
represented by any union, labor organization
or collective bargaining unit. Except as set
forth in Schedule 3.21.6, to the knowledge of
Seller, the employees of the Companies have
no intention to and have not threatened to
organize or join a union, labor organization
or collective bargaining unit.
3.21.7 Alien Employment Eligibility. With respect
to each Transferred Employee employed by a
Company who actually commenced such
employment on or after December 6, 1986, (a)
such Company hired such person in compliance
with the Immigration Reform and Control Act
of 1986 and the rules and regulations
thereunder ("IRCA") and (b) such Company has
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complied with all record keeping and other
regulatory requirements under IRCA.
3.22 EMPLOYEE BENEFIT PLANS
3.22.1 Identification. Schedule 3.22.1 contains a
complete and accurate list of all employee
benefit plans that currently cover the
Transferred Employees (the "Employee Benefit
Plans") (within the meaning of Section 3(3)
of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")). Seller
has provided Buyer with copies of all plan
documents and summary plan descriptions and
any plan changes not reflected therein, that
constitute a part of or are incident to the
administration of the Employee Benefit Plans.
3.22.2 Buyer Qualification of 401(k) Plan. Seller
has received a favorable determination letter
or ruling from the Internal Revenue Service
for Seller's 401(k) Plan intended to be
qualified within the meaning of Section 401(k)
of the Code. No proceedings exist or have been
threatened that could result in the revocation
of any such favorable determination letter
or ruling.
3.22.3 Funding Status. No accumulated funding
deficiency (within the meaning of Section 412
of the Code), whether waived or unwaived,
exists with respect to any Employee Benefit
Plan or any plan sponsored by any member of a
controlled group (within the meaning of
Section 412(n)(6)(B) of the Code) in which
any Company is a member (a "Controlled
Group").
3.22.4 Multiemployer Plans. No Transferred Employees have
been covered under a multiemployer plan within the
meaning of Section 3(37) of ERISA.
3.22.5 PBGC. To knowledge of Seller, no facts or
circumstances exist that would result in the
imposition of liability against Buyer by the
Pension Benefit Guaranty Corporation as a
result of any act or omission by any Company
or any member of a Controlled Group. No
reportable event (within the meaning of
Section 4043 of ERISA) for which the notice
requirement has not been waived has occurred
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with respect to any Employee Benefit Plan subject
to the requirements of Title IV of ERISA.
3.22.6 Medical Claims. Schedule 3.22.6 contains a
complete and accurate list of all claims made
(without identifying specific individuals)
under any medical care plan or commitment
offered by the Companies to the Transferred
Employees involving hospitalization or
medical care claims that have exceeded
$50,000 per year for an individual during the
current fiscal year of the Companies or the
fiscal year immediately preceding the date
hereof.
3.22.7 Retirees. Except for the Transferred Employees
listed on Schedule 3.22.7, no Transferred Employees
would have become eligible to receive retirement
benefits pursuant to the terms of the Retirement
Plan of Seller within less than six months of the
date of this Agreement.
3.23 INSURANCE
The Companies have in full force and effect the policies of
insurance, or renewals thereof, in the amounts and for the
periods set forth in Schedule 3.23, which Schedule contains a
true and complete list (specifying the insurer, the policy number
or covering note number with respect to binders setting forth the
aggregate amounts paid out under each such policy through the
date hereof and the aggregate limit, if any, of the insurer's
liability thereunder) of all policies of insurance held by or on
behalf of the Companies or any of them (the "Insurance
Policies"). To the knowledge of the Seller, none of the Companies
is in default with respect to any provision contained in any of
the Insurance Policies nor has failed to give notice of any claim
under any of the Insurance Policies in due and timely fashion.
3.24 OPERATIONS OF THE COMPANIES
Except as set forth on Schedule 3.24 hereto, since the Balance
Sheet Date no Company has:
(i) amended its Articles of Incorporation or
By-laws or merged with or into or
consolidated with any other person,
subdivided or in any way reclassified
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any shares of its capital stock or
changed or agreed to change in any
manner the rights of its outstanding
capital stock or the character of its
business;
(ii) issued or sold or purchased, or issued
options or rights to subscribe to, or
entered into any contracts or commitments to
issue or sell or purchase, any shares of its
capital stock;
(iii) entered into or amended any employment
agreement, entered into or amended any
agreement with any labor union or
association representing any employee,
adopted, entered into, or amended any
employee benefit plan, or made any
change in the actuarial methods or
assumptions used in funding any defined
benefit pension plan, or made any change
in the assumptions or factors used in
determining benefit equivalencies
thereunder;
(iv) except for short-term bank borrowings in
the ordinary course of business,
incurred any indebtedness for borrowed
money;
(v) declared or paid any dividends or
declared or made any other distributions
of any kind to its shareholders, or made
any direct or indirect redemption,
retirement, purchase or other
acquisition of any shares of its capital
stock;
(vi) waived any right of material value to
its business;
(vii) made any change in its accounting
methods or practices or made any change
in depreciation or amortization policies
or rates adopted by it;
(viii) materially changed any of its business
policies, including, without limitation,
advertising, marketing, pricing, purchasing,
personnel, sales, returns, budget or product
acquisition policies;
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(ix) made any wage or salary increase or
bonus, or increase in any other direct
or indirect compensation, for or to any
of its officers, directors, employees,
consultants, agents or other
representatives, or any accrual for or
commitment or agreement to make or pay
the same, other than to persons other
than its officers, directors or
shareholders made in the ordinary course
of business;
(x) made any loan or advance to any of its
shareholders, officers, directors,
employees, consultants, agents or other
representatives (other than travel
advances made in the ordinary course of
business), or made any other loan or
advance otherwise than in the ordinary
course of business;
(xi) made any payment or commitment to pay
any severance or termination pay to any
of its officers, directors, consultants,
agents or other representatives, other
than payments or commitments to pay
persons other than its officers,
directors or shareholders made in the
ordinary course of business;
(xii) except in the ordinary course of
business, (a) entered into any lease (as
lessor or lessee); (b) sold, abandoned
or made any other disposition of any of
its assets or properties material to the
conduct of its business; (c) granted or
suffered any lien or other encumbrance
on any of its assets or properties
material to the conduct of its business;
or (d) entered into or amended any
material contract or other material
agreement to which it is a party, or by
or to which it or its assets or
properties are bound or subject, or
pursuant to which it agrees to indemnify
any party or to refrain from competing
with any party;
(xiii) except in the ordinary course of
business and in amounts less than
$50,000 in each case, incurred or
assumed any debt, obligation or
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liability (whether absolute or
contingent and whether or not currently
due and payable);
(xiv) except for inventory or equipment acquired
in the ordinary course of business, made any
acquisition of all or any part of the
assets, properties, capital stock or
business of any other person;
(xv) suffered or incurred any damage,
destruction or loss (whether or not
covered by insurance) materially
adversely affecting the assets,
properties, business, operations or
condition (financial or otherwise) of
such Company;
(xvi) terminated or failed to renew, or
received any written threat (that was
not subsequently withdrawn) to terminate
or fail to renew, any contract or other
agreement that is or was material to the
assets, properties, business, operations
or condition (financial or otherwise) of
such Company; or
(xvii) except in the ordinary course of business,
entered into any other material contract or
other agreement or other material
transaction.
3.25 POTENTIAL CONFLICTS OF INTEREST
Except as set forth on Schedule 3.25 hereto, no officer or
director of any Company, Seller, no entity controlled by any such
officer or director and no relative or spouse (or relative of
such spouse) who resides with any such officer or director:
(i) owns, directly or indirectly, any
interest in (excepting not more than 1%
stock holdings for investment purposes
in securities of publicly held traded
companies), or is an officer, director,
employee or consultant of, any person
which is, or is engaged in business as,
a competitor, lessor, lessee, customer
or supplier of any Company;
(ii) owns, directly or indirectly, in whole
or in part, any tangible or intangible
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property that either Company uses or the
use of which is necessary or desirable
for the conduct of the business of any
Company;
(iii) has any cause of action or other claim
whatsoever against, or owes any amount
to, any Company, except for claims in
the ordinary course of business, such as
for accrued vacation pay, accrued
benefits under employee benefit plans,
and similar matters and agreements
existing on the date hereof;
(iv) has made any payment or commitment to
pay any commission, fee or other amount,
to, or purchase or obtain or otherwise
contract to purchase or obtain any goods
or services from, any corporation or
other person of which any officer or
director of any Company, or a relative
of any of the foregoing, is a partner or
stockholder (excepting stock holdings
solely for investment purposes in
securities of publicly held and traded
companies); or
(v) has entered into any kind of material
transaction with any Company on terms less
favorable to that Company than could have
been obtained by that Company from unrelated
third parties.
3.26 BANK, BROKERS AND PROXIES
Schedule 3.26 sets forth (i) the name of each bank, trust
company, securities or other brokers or other financial
institution with which the Companies, or either of them, have or
has an account, credit line or safe deposit box or vault, or
otherwise maintains relations; (ii) the name of each person
authorized by either of the Companies to draw thereon or to have
access to any safe deposit box or vault; (iii) the purpose of
each such account, safe deposit box or vault; and (iv) the names
of all persons authorized by proxies, powers of attorney or other
instruments to act on behalf of the Companies or any of them in
matters concerning its business or affairs. All such accounts,
credit lines, safe deposit boxes and vaults are maintained by the
Companies for normal business purposes, and no such proxies,
power of attorney or other like instruments are irrevocable.
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3.27 RESTRICTIVE AGREEMENTS
So far as Seller knows, no Company is restricted by agreement
from carrying on business anywhere in the world.
3.28 PRODUCT LIABILITY
There is no claim or liability of any Company on account of
personal injury, death or property damages in connection with the
manufacture, sale or rental of defective products and there is no
basis for any such claim that is not fully covered by insurance
or reflected on the Interim Balance Sheet in accordance with
GAAP.
3.29 ACCOUNTS AND NOTES RECEIVABLE
All accounts and notes receivable reflected in the Closing
Balance Sheet have arisen in the ordinary course of business of
the Companies, represent actual sales made or services rendered,
and represent valid obligations due to the Companies. All items
that are required by generally accepted accounting principles to
be reflected as accounts and notes receivable in the Closing
Balance Sheet and on the books of account of the Companies are so
reflected.
3.30 CONSENTS
Except as set forth in Schedule 3.30, no consent, authorization,
approval, permit or license of, or filing with, any governmental
or public body or authority, any lender or lessor or any other
person or entity is required to authorize, or is required in
connection with, the execution, delivery and performance of this
Agreement or the agreements contemplated hereby on the part of
the Seller.
3.31 FULL DISCLOSURE
No representation or warranty of Seller contained in this
Agreement, and no document or other paper furnished by or on
behalf of Seller to Buyer pursuant to this Agreement contains an
untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the
statements made, in the context in which made, not false or
misleading. To the best of Seller's knowledge, there is no fact
that Seller has not disclosed to Buyer in writing that materially
adversely affects, the assets, properties, business, operations
or condition (financial or otherwise) of the Companies,
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taken as a whole, or the ability of Seller to perform
this Agreement.
3.32 MATERIALITY
Each of the above subsections 3.1 through 3.31 of this Section 3
which is qualified in any manner by materiality shall be deemed
to be true and correct so long as not more than $15,000 is
required to make such subsection true and correct, after which
amount the materiality qualifier shall not apply to such
subsection.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 DUE INCORPORATION
Buyer is duly incorporated, validly existing and in good standing
under the laws of the State of its incorporation, and has the
corporate power and lawful authority to own, lease and operate
its assets, properties and business and to carry on its business
as now being and as heretofore conducted.
4.2 CORPORATE POWER OF BUYER
Buyer has the full legal right and power and all authority and
approval required to enter into, execute and deliver this
Agreement and to perform fully its obligations under this
Agreement. This Agreement has been duly executed and delivered,
and is the valid and binding obligation of Buyer enforceable in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which
affect creditors' rights generally and by general principles of
equity regardless of whether such enforceability is considered in
a proceeding in equity or at law.
4.3 PURCHASE FOR INVESTMENT
Buyer is purchasing the Shares for investment and not for resale
or distribution.
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4.4 NET WORTH AND CASH
The net worth of Buyer, determined in accordance with GAAP, and
the cash and cash equivalents of Buyer are as of the date hereof
and shall be on the Closing Date not less than $500,000.
4.5 FINANCING
The financing agreements, pursuant to which Buyer will obtain
funds to pay for the Shares, will not violate Regulations G, T, U
or X of the Board of Governors of the Federal Reserve System.
5. SELLER'S COVENANTS AND AGREEMENTS
Seller covenants and agrees as follows:
5.1 CONDUCT OF BUSINESS
From the date hereof through the Closing Date, Seller shall cause
the Companies to conduct their businesses in the ordinary course
only, and without the prior written consent of Buyer shall not
cause, permit or suffer any Company to take any of the actions
specified in Section 3.24, except as disclosed in Schedule 3.24.
Without limiting the generality of the foregoing, from the date
hereof through the Closing Date, Seller shall not permit any of
the persons listed on Schedule 3.21.1 hereto to receive any
compensation (whether as salaries, bonuses or otherwise) from the
Companies in excess of their 1995 base salary (pro rated for the
period through the Closing Date) as shown on Schedule 3.21.1
except as provided in Section 6.6.3. From the date hereof through
the Closing Date, the operations, books and records, and
accounting and other systems of the Companies will be maintained
and kept on a basis consistent with the Companies' current
operations, books, records and accounting and other systems.
5.2 INSURANCE
From the date hereof through the Closing Date, Seller shall cause
the Companies to maintain in force (including necessary renewals
thereof) the Insurance Policies listed on Schedule 3.23 hereto,
except to the extent that they may be replaced with equivalent
policies appropriate to insure the assets, properties and
businesses of the Companies to the same extent as currently
insured.
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5.3 PRESERVATION OF BUSINESS
From the date hereof through the Closing Date, Seller shall cause
the Companies to use all reasonable efforts to preserve their
respective business organizations intact, keep available the
services of their present officers, employees, consultants and
agents, maintain their present suppliers and customers and
preserve their goodwill, provided, however, that any inability of
the Seller or the Companies to keep available the services of
such personnel or to maintain any such business relationships
despite its reasonable efforts to do so shall not constitute a
breach of this Section 5.3.
5.4 CORPORATE EXAMINATIONS AND INVESTIGATIONS
Prior to the Closing Date, Buyer shall be entitled, through its
employees and representatives, including without limitation,
Jackson & Walker, L.L.P., Ernst & Young, National Bank of Canada
and J. Lewis Partners, L.P. and each general and limited partner
thereof, to make such investigation of the assets of the
Companies, and such examination of the books, records and
financial condition of the Companies as Buyer wishes. Any such
investigation and examination shall be conducted at mutually
agreeable and reasonable times and under reasonable circumstances
and the Companies and Seller shall cooperate fully therein. In
order that Buyer may have full opportunity to make such business,
accounting and legal review, examination or investigation as it
may wish of the business and affairs of the Companies, Seller
shall furnish and shall cause the Companies to furnish the
representatives of Buyer during such period with all such
information and copies of such documents concerning the business
and affairs of the Companies as such representatives may
reasonably request and cause its officers, employees,
consultants, agents, accountants and attorneys to cooperate fully
with such representatives in connection with such review and
examination.
5.5 1995 TAX RETURNS
Seller shall at its sole cost and expense prepare and timely file
or cause to be prepared and timely filed all Federal and state
tax returns required to be filed by the Companies or any of them
in respect of any tax period prior to, and including the period
ended as of, the Effective Date. Seller shall pay, and indemnify
and hold Buyer and the Companies harmless against and from, any
and all Federal and state taxes, and interest
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and penalties therein payable by the Companies in respect of any
tax period prior to, and including the period ended as of, the
Effective Date and Seller shall be entitled to receive any and
all Federal and state tax refunds in respect of such periods.
Upon the reasonable request of Seller at any time after the
Closing Date, the Companies and Buyer shall execute and deliver
to Seller any and all powers of attorney, assignments and other
instruments as, in the opinion of Seller's counsel, are necessary
or appropriate to effectuate the provisions of this Section 5.5.
Buyer shall provide Seller reasonable access at all reasonable
times after the Closing Date to the Companies' books, records,
premises and other materials and shall furnish Seller with such
information and assistance as Seller may reasonably request to
prepare and file such state tax returns.
5.6 PAYMENT OF DEBTS; RELEASE
As of the Effective Date, all accounts payable by the Companies
to Seller shall be paid in full by the Companies and all of the
Companies' accounts receivable from the Seller shall be paid in
full by the Seller. Effective as of the Effective Date, Seller
shall be deemed to have released, remised and forever discharged
each of the Companies, and each of the Companies shall be deemed
to have released, remised and forever discharged Seller, of and
from any and all actions, causes of action, suits, debts,
contracts, controversies, agreements, promises, damages,
judgements, claims or demands whatsoever, of whatever kind and
based on whatever legal theory, that any of them ever had, now
has or hereafter can, shall or may have against the other, for,
upon, or by reason of any matter, cause or thing whatsoever from
the beginning of the world to the Effective Date, except only
existing obligations as set forth on Schedule 5.6 hereto between
the Seller and any Company, this Agreement and any matters
arising after the Effective Date.
6. PARTIES' COVENANTS AND AGREEMENT
The parties covenant and agree as follows:
6.1 CONSENT TO JURISDICTION AND SERVICE OF PROCESS
Any legal action, suit or proceeding arising out of or relating
to this Agreement or the transactions contemplated hereby may be
instituted in any state or federal court located in the City of
Richmond, Commonwealth of Virginia, and each party agrees not to
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assert, by way of motion, as a defense, or otherwise, in any such
action, suit or proceeding, any claim that it is not subject
personally to the jurisdiction of such court, that its property
is exempt or immune from the attachment or execution, that the
action suit or proceeding is brought in an inconvenient forum,
that the venue of the action, suit or proceeding is improper or
that this Agreement or the subject matter hereof may not be
enforced in or by such court, and hereby waives any offsets or
counterclaims in any such action, suit or proceeding. Each party
further irrevocably submits to the jurisdiction of any such court
in any such action, suit or proceeding. Any and all service of
process and any other notice in any such action, suit or
proceeding shall be effective against Buyer if given personally
or by registered or certified mail, return receipt requested, or
by any other means of mail that requires a signed receipt,
postage prepaid, mailed: (i) if prior to the Closing, to Buyer as
herein provided, or by personal service on Jackson & Walker,
L.L.P., 901 Main Street, Suite 1600 Dallas, Texas 75202; (ii) if
after the Closing, to the Companies as herein provided, or by
personal service on Jackson & Walker, L.L.P., 901 Main Street,
Suite 1600 Dallas, Texas 75202, with, in each case, a copy of
such process by first class mail or registered or certified mail,
return receipt requested, postage prepaid to Buyer or the
Companies, respectively, and to such other persons as are to
receive copies as provided in Section 12.3. Any and all service
of process and any other notice in any such action, suit or
proceeding shall be effective against Seller if given personally
or by registered or certified mail, return receipt requested, or
by any other means of mail that requires a signed receipt,
postage prepaid, mailed to Seller as herein provided, or by
personal service on the Chief Executive Officer of Seller, with a
copy of such process mailed by first class mail or registered or
certified mail, return receipt requested, postage prepaid to
Seller and to such other persons as are to receive copies as
provided in Section 12.3. Nothing herein contained shall be
deemed to affect the right of any party to serve process in any
manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any jurisdiction
other than Richmond, Virginia.
6.2 FEES AND EXPENSES
Except as otherwise specifically provided herein, Buyer shall
bear the fees and expenses incurred on its behalf, and Seller
(and not, directly or indirectly, the Companies) shall bear the
fees and expenses
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incurred on its behalf and the out-of-pocket fees and expenses
incurred on behalf of the Companies, in connection with the
preparation, execution and performance of this Agreement and the
transactions contemplated hereby, including without limitation,
all fees and expenses of agents, representatives, counsel and
accountants. Notwithstanding the foregoing, the prevailing party
in any litigation arising under this Agreement shall have the
right to collect from the non-prevailing party all fees and
expenses incurred, including reasonable attorney's fees, in
connection with such litigation.
6.3 INDEMNIFICATION OF BROKERAGE
6.3.1 Buyer represents and warrants to Seller that
no broker, finder, agent or similar
intermediary has acted on its behalf in
connection with this Agreement or the
transactions contemplated hereby, and that
there are no brokerage commissions, finders'
fees or similar fees or commissions, payable
in connection therewith based on any
agreement, arrangement or understanding with
Buyer or any action taken by Buyer.
6.3.2 Seller represents and warrants to Buyer that
except for Bowles Hollowell Conner & Co.
("BHC") no broker, finder, agent or similar
intermediary has acted on behalf of the
Companies or Seller, or any of them, in
connection with this Agreement or the
transactions contemplated hereby, and that
there are no brokerage commissions, finders'
fees or similar fees or commissions payable
in connection therewith based on any
agreement, arrangement or understanding with
the Companies or Seller, or any action taken
by the Companies or Seller.
6.3.3 Buyer and Seller each agree to indemnify and
save the other harmless from any claim or
demand for commission or other compensation
by any broker, finder, agent or similar
intermediary claiming to have been employed
by or on behalf of Buyer, on the one hand, or
the Companies or Seller (including, without
limitation, BHC), on the other, and to bear
the cost of legal expenses incurred in
defending against any such claim.
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6.4 CODE SECTION 338(h)(10) ELECTION
Seller and Buyer each hereby covenants and agrees to make an
election with respect to the transactions contemplated hereby
under section 338(h)(10) of the Code and the Treasury Regulations
promulgated thereunder and any similar state statute or
regulation. In such regard, Seller and Buyer shall, and hereby
agree to execute and cause the Companies to execute any and all
documents (including without limitation Internal Revenue Service
Form 8023) and take any and all action necessary to cause such
election to become effective.
6.5 SEVERANCE BENEFITS
Buyer covenants and agrees that for a period of 12 months after
the Closing Date it will cause each Company to pay severance to
all its terminated employees at the rate of one week of their
base salary for each full year of their employment by the Company
with a maximum of 26 weeks payment; provided, however, that
nothing contained herein shall require the payment of severance
to an employee (a) who is represented by a union; (b) is
terminated for "cause" (as hereinafter defined); or (c) to any
employee who refuses to execute a release in customary form to
the Company. For purposes of this Section 6.5 "Cause" shall mean
(i) an employee's failure to perform his duties (other than as a
result of total or partial incapacity due to physical or mental
illness) in a satisfactory manner, (ii) dishonesty in the
performance of an employee's duties, (iii) an act or acts on an
employee's part constituting a felony under the laws of the
United States or any state thereof or (iv) the failure of an
employee to return to active employment at the end of an approved
leave of absence.
6.6 EMPLOYEE BENEFITS OF BUYER
6.6.1 ESTABLISHMENT OF 401(k) PLAN
Buyer shall establish or maintain a plan qualified
under Section 401(k) of the Code for Transferred
Employees ("Buyer's 401(k) Plan"). Within thirty
(30) days after the Closing Date, Seller will cause
the trustee of Seller's 401(k) Plan to transfer to
the trust forming part of Buyer's 401(k) Plan, the
assets (including loan balances) of the Transferred
Employees held by Seller's 401(k) Plan.
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6.6.2 OTHER BENEFITS
For a period not less than eighteen (18) months
after the Closing Date, Buyer will provide to
Transferred Employees benefits substantially
equivalent in the aggregate to benefits provided to
such Transferred Employees by the Companies as of
the Effective Date. Without limiting the generality
of the foregoing, Buyer agrees that the medical
plan that it establishes for Transferred Employees
will not exclude coverage for any pre-existing
conditions.
6.6.3 MANAGEMENT INCENTIVE AND CHRISTMAS BONUS
Buyer acknowledges that Seller is transferring to
Buyer amounts accrued through the Effective Date on
behalf of the Transferred Employees under Seller's
Management Incentive and Christmas Bonus Plans
("MIP and Christmas Bonus Plans"). Buyer will pay
to the Transferred Employees at the Determination
Date the amounts reserved on the Closing Balance
Sheet in respect of the MIP and Christmas Bonus
Plans for the period ending on the Effective Date.
Schedule 6.6.3 sets forth the amounts reserved on
the books and records of the Companies in respect
of the MIP and Christmas Bonus Plans as of June 28,
1996.
6.6.4 ACCESS
Buyer shall provide Seller full access at all
reasonable times after the Closing Date to the
Companies' books, records, premises and other
materials and shall furnish Seller with such
information and assistance regarding the employees
of the Companies as Seller may reasonably request.
6.7 FURTHER ASSURANCES
Each of the parties shall execute such documents or other papers
and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the transactions
contemplated in this Agreement. Each such party shall use all
reasonable efforts to fulfill or obtain the fulfillment of the
conditions of the Closing.
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6.8 BELDING MARK
Buyer acknowledges that Seller owns all right, title and interest
in and to the mark "Belding" (the "Belding Mark"). Seller hereby
grants and agrees to grant to Buyer a worldwide, royalty-free,
perpetual limited license to use the Belding Mark solely in
conjunction with the word "Hausman." Buyer acknowledges that
Buyer shall have no right, title or interest in the Belding Mark
and no right to use the Belding Mark, except solely the right to
use such mark in accordance with the terms of this Agreement.
7. CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE
The obligation of Buyer to consummate the transactions contemplated by
this Agreement is subject, at its option acting in accordance with the
termination provisions of this Agreement, to the fulfillment on or prior
to the Closing Date of the following conditions, any one or more of
which may be waived by it:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties of Seller contained in this
Agreement shall be true on and as of the Effective Date with the
same force and effect as though made on and as of the Effective
Date, except to the extent that such representations and
warranties were made as of a specified date and as to such
representations and warranties the same continue as of the date
hereof to have been true as of the specified date. Seller shall
have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by Seller on or prior to the Closing
Date. Seller shall have delivered to Buyer a certificate, dated
the Closing Date and signed by the Seller, to the foregoing
effect and stating that all conditions to Buyer's obligations
hereunder have been satisfied in all material respects.
7.2 NO MATERIAL ADVERSE CHANGE
Seller shall have delivered to Buyer a certificate, signed by the
President and Controller of Seller, to the effect that as of the
Effective Date there has been no material adverse change in the
financial condition, results of operations or business of the
Companies since the Balance Sheet Date or any material adverse
change in the nature of the business or the manner of conducting
the business of the Companies since such Date.
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7.3 GOVERNMENTAL PERMITS AND APPROVALS
All permits required for the lawful consummation of the Closing
shall have been obtained.
7.4 THIRD PARTY CONSENTS; RELEASES
All consents, permits and approvals from parties to contracts or
other agreements with the Companies, or any of them, or with
Seller that may be required in connection with the performance by
Seller of its obligations under this Agreement or the continuance
of such contracts or other agreements after the Closing shall
have been obtained. In addition, NationsBank, N.A. shall have
released the Companies from all guarantees in respect of the
obligations of Seller to NationsBank, N.A. and shall have
released all liens on the assets of the Companies in connection
therewith.
7.5 OPINION OF COUNSEL TO SELLER AND THE COMPANY
Buyer shall have received the opinion of Bryan Cave LLP, counsel
to the Companies and the Seller, dated the Effective Date,
addressed to Buyer, in the form of Exhibit 7.5 hereto.
7.6 RESIGNATIONS OF DIRECTORS
Buyer shall have received the resignation, dated the as of the
Effective Date, of each officer and director of each Company.
7.7 LITIGATION
No action, suit or proceeding shall have been instituted before
any court or governmental or regulatory body, or instituted or
threatened by any governmental or regulatory body, to restrain,
modify or prevent the carrying out of the transactions
contemplated hereby, or to seek damages or discovery order in
connection with such transactions.
7.8 DELIVERY OF STOCK CERTIFICATES; TRANSFER TAXES
Seller shall have delivered to Buyer at the Closing stock
certificates representing all of the Shares duly endorsed in
blank or accompanied by stock powers duly executed in blank, in
proper form for transfer, with a standard form of bank or stock
brokerage firm guaranty of Seller's signature. Seller shall have
paid, or caused to be paid, all stock transfer and other taxes
required to be paid in connection with the sale and delivery to
Buyer of the Shares owned by such Seller,
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and Seller shall have caused all appropriate stock transfer tax
stamps to be affixed to the certificate or certificates
representing the Shares so sold and delivered.
7.9 APPROVAL OF COUNSEL TO BUYER
All actions and proceedings hereunder and all documents and other
papers required to be delivered by Seller hereunder or in
connection with the consummation of the transactions contemplated
hereby, and all other related matters, shall have been approved
by Jackson & Walker, L.L.P., counsel to Buyer, as to their form
and substance, it being understood and agreed that Jackson &
Walker, L.L.P.'s approval shall not be unreasonably withheld.
7.10 EMPLOYMENT AGREEMENTS
Each of the persons identified in Exhibit 1.5 shall have executed
and delivered to the Companies and the Buyer duplicate
counter-parts of the Employment Agreements, dated as of the
Effective Date.
7.11 OTHER DOCUMENTS
Seller shall have executed and delivered to Buyer at the Closing
the following:
(i) the Transition Services Agreement, dated
as of the Effective Date, in the form of
Exhibit 1.6;
(ii) the Lease Agreement, dated as of the
Effective Date, in the form of Exhibit
1.7;
(iii) the Noncompetition Agreement, dated as
of the Effective Date, in the form of
Exhibit 1.8; and
(iv) If Buyer elects, a quit claim deed or
bargain and sale deed without covenants
against granter's acts to the real
property described in paragraph 4 of
Schedule 3.17; provided, however, that
the Sellers indemnity contained in
Section 9.1 (iv) shall survive the
delivery of such deed.
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7.12 MINUTE BOOKS AND STOCK TRANSFER LEDGERS
Seller shall have delivered to Buyer all corporate minute
books and stock transfer ledgers of each Company.
7.13 FINANCING
Buyer shall have received debt financing in the amount,
and on terms substantially as favorable to Buyer as the
terms, set forth in that certain letter dated May 31, 1996
from National Bank of Canada, a copy of which is attached
hereto as Exhibit 7.13.
7.14 DISCONTINUATION OF PARTICIPATION
The board of directors of each of BHI and Textile shall
have terminated each of such Company's participation in
the benefit plans of Seller listed in Schedule 3.22.1
attached hereto, resolutions as to which are true and
correct at Closing and shall be delivered to Buyer at
Closing.
8. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject, at the option of Seller acting in accordance
with the provisions of this Agreement with respect to termination
hereof, to the fulfillment of the following conditions, any one or more
of which may be waived.
8.1 REPRESENTATIONS AND COVENANTS
The representations and warranties of Buyer contained in this
Agreement shall be true on and as of the Effective Date with the
same force and effect as though made on and as of the Effective
Date. Buyer shall have performed and complied in all material
respects with all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to
the Closing Date. Buyer shall have delivered to Seller a
certificate, dated the Closing Date and signed by an officer of
Buyer, to the foregoing effect and stating that all conditions to
Seller's obligations hereunder have been satisfied in all
material respects.
8.2 OPINION OF COUNSEL TO BUYER
Seller shall have received the opinion of Jackson & Walker,
L.L.P., counsel to Buyer, dated the Effective
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Date, addressed to Seller, in the form of Exhibit 8.2 hereto.
8.3 LITIGATION
No action, suit or proceeding shall have been instituted before
any court or governmental or regulatory body, or instituted or
threatened by an governmental or regulatory body, to restrain,
modify or prevent the carrying out of the transactions
contemplated hereby, or to seek damages or a discovery order in
connection with such transaction.
8.4 RELEASES
NationsBank, N.A. shall have released the Companies
from all guaranties in respect of the obligations of
Seller to NationsBank, N.A. and shall have released all
liens on the assets of the Companies in connection
therewith.
8.5 APPROVAL OF COUNSEL TO THE SELLER
All actions and proceedings hereunder and all documents or other
papers required to be delivered by Buyer hereunder or in
connection with the consummation of the transactions contemplated
hereby, and all other related matters, shall have been approved
by Bryan Cave LLP, counsel to the Seller, as to their form and
substance, it being understood and agreed that Bryan Cave LLP's
approval shall not be unreasonably withheld.
8.6 FAIRNESS OPINION
The written opinion (the "Fairness Opinion") of Bowles Hollowell
Conner & Co. (the "Investment Bank"), stating that, in its
opinion, as of the date of such opinion, the terms of this
Agreement are fair to the Seller and public stockholders of the
Seller from a financial point of view, heretofore delivered to
Seller shall not have been withdrawn or modified in any material
respect by the Investment Bank.
8.7 OFFICERS CERTIFICATE
The President and Controller of each Company shall have delivered
to Seller a certificate to the effect that as of the Effective
Date (i) the representations and warranties of Seller contained
in this Agreement are true and correct with the same force and
effect as though made on and as of the Effective Date, except for
such changes as occur with the passage of time; (ii) Seller has
complied with all material covenants
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and agreements required by this Agreement to be performed or
complied with by Seller on or prior to the Closing Date; (iii)
all material conditions to Buyer's obligations hereunder have
been satisfied; and (iv) there has been no material adverse
change in the financial condition, results of operations or
business of such Company since the Balance Sheet Date or any
material adverse change in the nature of the business or the
manner of conducting the business of such Company since such
Date. Neither Buyer nor the Companies shall have any liability
whatsoever to Seller based upon the delivery such certificates or
the contents thereof.
8.8 EMPLOYMENT AGREEMENTS
Each of the persons identified in Exhibit 1.5 shall have executed
and delivered to the Companies and the Buyer duplicate
counter-parts of the Employment Agreements, dated as of the
Effective Date.
8.9 EMPLOYEE RELEASES
Each of the persons identified in Exhibit 1.5 shall have executed
and delivered to Seller a release with respect to all employment
or other contracts such persons may have with Seller or any
Company other than (i) the Employment Agreements and (ii) with
respect to each such person, item numbered three of the first
paragraph of the letter agreement dated November 15, 1996 between
such person and Seller.
8.10 OTHER DOCUMENTS
Buyer shall have executed and delivered to Seller the Service
Agreement, dated as of the Effective Date, in the form of Exhibit
1.4.
9. INDEMNIFICATION
9.1 OBLIGATION OF SELLER TO INDEMNIFY
Subject to the limitations set forth herein, Seller agrees to
indemnify, defend and hold harmless Buyer and its directors,
officers, stockholders, employees, affiliates, agents and
attorneys, and their respective successors and assigns, from and
against all losses, liabilities, damages, deficiencies, costs,
actions, suits, proceedings, claims, demands, orders,
assessments, amounts paid in settlement, fines, costs,
deficiencies or expenses (including interest, penalties and
reasonable attorneys' fees and disbursements)
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(singly a "Loss" and collectively, "Losses") (i) to the extent
based upon, arising out of or otherwise in respect inaccuracy in
or any breach of any representation, warranty, covenant or
agreement of Seller contained in this Agreement or in any
document or other papers delivered pursuant to this Agreement;
(ii) to the extent based upon, arising out of or otherwise in
respect of the ownership or operation of the Companies and their
respective properties prior to the Effective Date except to the
extent set forth on a Schedule or to the extent reflected or
reserved against on the Closing Balance Sheet, except as provided
in (v) below, (iii) for taxes arising with respect to the
activities of the Companies with respect to all periods ending on
or before the Effective Date and portions thereof to the
Effective Date except to the extent expressly provided for in the
Closing Balance Sheet, and for any adverse tax consequences
occurring during any period that Buyer operates the Companies
which result from Seller's amendment of any tax return with
respect to periods ending on or before the Effective Date and
portions thereof to the Effective Date, (iv) for acts or
omissions, in connection with the Companies, of Seller, its
affiliates or the Companies, prior to the Effective Date, or
events or circumstances occurring on or before the Effective
Date, which give rise to, or form the basis for a claim for, the
violation of any Environmental Law, (v) the matters set forth on
Schedule 9.1, (vi) for Losses arising out of or otherwise in
respect of the Employee Benefit Plans listed in Schedule 3.22.1,
and/or (vii) medical claims submitted by Transferred Employees to
Seller's insurance carrier but not processed as of the Effective
Date. Notwithstanding the foregoing, Seller shall have no
obligation to indemnify Buyer from and against any Losses, except
to the extent, if any, that the aggregate amount of such Losses
exceeds $100,000 and Seller's obligation hereunder shall not
exceed, individually or in the aggregate, $1,000,000; provided,
however, that such $1,000,000 limitation shall not apply to the
extent that Losses in excess of such amount are based upon, arise
out of or are otherwise in respect of the matters set forth in
(iii) and (iv) above or any inaccuracy in or any breach of the
representations and warranties of Seller contained in Sections
3.1, 3.2, 3.3, 3.6, 3.8, 3.19 and 3.21 hereof, in which event
Seller's obligation hereunder shall not exceed, individually or
in the aggregate, the purchase price as adjusted by the
Adjustment Amount. The foregoing limitations on Seller's
indemnification obligations shall not apply to the matters set
forth on Schedule 9.1, if any.
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9.2 OBLIGATION OF BUYER TO INDEMNIFY
Buyer agrees to indemnify, defend and hold harmless Seller from
and against any Losses to the extent based upon, arising out of
or otherwise in respect of any inaccuracy in or breach of any
representation, warranty, covenant or agreement of Buyer
contained in this Agreement or in any document or other papers
delivered pursuant to Section 4. Notwithstanding the foregoing,
Buyer shall have no obligation to indemnify Seller from and
against any Losses, except to the extent, if any, that the
aggregate amount of such Losses exceeds $100,000 and Buyer's
obligation hereunder shall not exceed, individually or in the
aggregate, $1,000,000.
9.3 CONDITIONS OF INDEMNIFICATION
The respective obligations and liabilities of each of the parties
(the "indemnifying party") to the other (the "party to be
indemnified") under Sections 9.1 and 9.2 with respect to claims
resulting from the asserting of liability by third parties shall
be subject to the following terms and conditions:
9.3.1 Within twenty (20) days (or such earlier time
as might be required to avoid prejudicing the
indemnifying party's position) after receipt
of notice of commencement of any action
evidenced by service of process or other
legal pleading, the party to be indemnified
shall give the indemnifying party written
notice thereof together with a copy of such
claim, process or other legal pleading, and
the indemnifying party shall have the right
to undertake the defense thereof by
representatives of its own choosing and at
its own expense; provided that the party to
be indemnified may participate in the defense
with counsel of its own choice, the fees and
expenses of which counsel shall be paid by
the party to be indemnified unless (i) the
indemnifying party has agreed to pay such
fees and expenses, (ii) the indemnifying
party has failed to assume the defense of
such action or (iii) the named parties to any
such action (including any impleaded parties)
include both the indemnifying party and the
party to be indemnified and the party to be
indemnified has been advised by counsel that
there may be one or more legal defenses
available to it that are different from or
additional to those available to the
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indemnifying party (in which case, if the
party to be indemnified informs the indemnifying
party in writing that it elects to employ separate
counsel at the expense of the indemnifying party,
the indemnifying party shall not have the right to
assume the defense of such action on behalf of the
party to be indemnified, it being understood,
however, that the indemnifying party shall not, in
connection with any one such action or separate but
substantially similar or related actions in the
same jurisdiction arising out of the same general
allegations or circumstances, be liable for the
reasonable fees and expenses of more than one
separate firm of attorneys at any time for the
party to be indemnified, which firm shall be
designated in writing by the party to be
indemnified).
9.3.2 In the event that the indemnifying party, by
the 30th day after receipt of notice of any
such claim (or, if earlier, by the 10th day
preceding the day on which an answer or other
pleading must be served in order to prevent
judgment by default in favor of the person
asserting such claim), does not elect to
defend against such claim, the party to be
indemnified will (upon further notice to the
indemnifying party) have the right to
undertake the defense, compromise or
settlement of such claim on behalf of and for
the account and risk of the indemnifying
party and at the indemnifying party's
expense, subject to the right of the
indemnifying party to assume the defense of
such claims at any time prior to settlement,
compromise or final determination thereof.
9.3.3 Notwithstanding the foregoing, the
indemnifying party shall not settle any claim
without the consent of the party to be
indemnified unless such settlement involves
only the payment of money and the claimant
provides to the party to be indemnified a
release from all liability in respect of such
claim. If the settlement of the claim
involves more than the payment of money, the
indemnifying party shall not settle the claim
without the prior consent of the party to be
indemnified.
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9.3.4 The party to be indemnified and the indemnifying
party will each cooperate with all reasonable
requests of the other.
9.4 WAIVER
No waiver by any party of any default or breach by another party
of any representation, warranty, covenant or condition contained
in this Agreement, any exhibit, schedule, or any document,
instrument or certificate contemplated hereby shall be deemed to
be a waiver of any subsequent default or breach by such party of
the same or any other representation, warranty, covenant or
condition. No act, delay, omission or course of dealing on the
part of any party in exercising any right, power or remedy under
this Agreement or at law or in equity shall operate as a waiver
thereof or otherwise prejudice any of such party's rights, powers
and remedies. All remedies, whether at law or in equity, shall be
cumulative and the election of any one or more shall not
constitute a waiver of the right to pursue other available
remedies.
9.5 REMEDIES NOT EXCLUSIVE
The remedies provided in this Agreement shall not be exclusive of
any other rights or remedies available to one party against the
other, either at law or in equity.
9.6 COSTS, EXPENSES AND LEGAL FEES
Subject to the provisions of Section 6.2, whether or not the
transactions contemplated hereby are consummated, each party
hereto shall bear its own costs and expenses (including
attorneys' fees and expenses), except that each party hereto that
is shown to have breached this Agreement or any other agreement
contemplated hereby agrees to pay the costs and expenses
(including reasonable attorneys' fees and expenses) incurred by
any other party in successfully (i) enforcing any of the terms of
this Agreement against such breaching party or (ii) proving that
another party breached any of the terms of this Agreement.
9.7 SURVIVAL
The representations and warranties of the parties contained
herein and the indemnification obligations of the parties in
respect thereof shall survive the Effective Date as follows: (i)
until expiration of any applicable statute of limitations with
respect to
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Sections 3.8 and 3.21 and subsection (iii) of Section 9.1; (ii)
three years with respect to Sections 3.1, 3.2, 3.3, 3.6, 3.19,
4.1 and 4.2 hereof and subsection (iv) of Section 9.1; and (iii)
twelve (12) months with respect to any other matter. Such
representations and warranties and indemnification obligations
shall expire on the dates described above unless a claim with
respect thereto shall have been made pursuant to Section 9.1
prior to such date against the party responsible for
indemnification hereunder.
10. TERMINATION OF AGREEMENT
10.1 TERMINATION
This Agreement may be terminated prior to the Closing as follows:
(i) at the election of Seller, if (a) any
one or more of the conditions to the
obligations of Seller to close has not
been fulfilled as of the Closing Date;
or (b) Buyer has breached any material
representation, warranty, covenant or
agreement contained in this Agreement
and such breach is not cured within five
days after Buyer receives notice
thereof;
(ii) at the election of Buyer, if (a) any one
or more of the conditions to its
obligation to close has not been
fulfilled as of the Closing Date; or
(b) Seller or the Companies have
breached any material representation,
warranty, covenant or agreement
contained in this Agreement and such
breach is not cured within five days
after Seller receives notice thereof;
(iii) at any time on or prior to the Closing Date,
by mutual written consent of Seller and
Buyer. If this Agreement so terminates, it
shall become null and void and have no
further force or effect, except as provided
in Section 11.2;
(iv) at the election of either party, if the
Closing shall not have taken place on or
before July 12, 1996; provided that neither
Seller nor Buyer may terminate
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this Agreement pursuant to this clause if
its failure to fulfill any of its
obligations under this Agreement shall have
been the reason that the Closing shall not
have occurred on or before such date. This
right of termination is not exclusive and is
in addition to all other rights and remedies
of the terminating party; and
(v) at the election of the Seller made by
notice delivered to the Buyer not less
than five (5) business days prior to the
Closing Date if (a) the Board of
Directors of the Seller, in the exercise
of its fiduciary responsibilities,
(after consultation with its legal and
financial advisors) in order to permit
the Seller to execute an agreement
providing for the acquisition of the
Companies by a Third Party (as defined
below) on terms determined by the Board
of Directors of the Seller to be more
favorable to the Seller and the public
stockholders of the Seller than the
acquisition of the Companies
contemplated by this Agreement or (b)
the Investment Bank shall have withdrawn
or modified in any material respect the
Fairness Opinion. In no event, however,
will Seller close a transaction for the
acquisition of the Companies by a Third
Party (other than Buyer) prior to July
12, 1996. For the purposes of this
Agreement a "Third Party" means any
person or "group" as defined in Section
13(d) of the Securities Exchange Act of
1934, as amended, other than the Buyer
or any affiliate of the Buyer.
10.2 EFFECT OF TERMINATION
In the event of the termination and abandonment of this Agreement
pursuant to Section 10.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party
hereto or its officers or directors, provided that this Section
10.2 is not intended to limit any cause of action that any party
may have for any material breach of this Agreement that results
in a termination of this Agreement.
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10.3 OTHER POTENTIAL BIDDERS
Neither the Seller nor any of its subsidiaries, affiliates,
officers, directors, employees, representatives or agents, shall,
directly or indirectly, solicit any person concerning any merger,
sale of assets, sale of shares of capital stock or similar
transaction (each, a "Transaction") involving the Companies or
any of them and such person. Notwithstanding the foregoing, the
Seller may furnish information concerning the Companies'
business, properties or assets to any person pursuant to
appropriate confidentiality agreements, and may negotiate with
any such person if counsel to the Seller in its sole judgment
advises the Board of Directors of the Seller that, in the
exercise of its fiduciary responsibilities, such information
should be provided or such negotiations should be undertaken.
11. CONFIDENTIALITY
11.1 NONDISCLOSURE
Buyer shall and shall cause its Affiliates to retain in strict
confidence all information (whether oral or written) (the
"Confidential Information") conveyed to any of them by Seller,
the Companies or any of their respective directors, officers,
employees or legal, financial (including financing sources) or
other representatives or agents (collectively,
"Representatives"), regarding the Companies, unless the
Confidential Information (i) is publicly available, (ii) was
known to Buyer prior to such disclosure, or (iii) is or becomes
available to Buyer on a nonconfidential basis from a source other
than Seller, the Companies or their respective Representatives,
provided that such other source is not bound by a confidentiality
agreement with Seller, any of the Companies or any of their
respective Representatives. Buyer will use the Confidential
Information only in connection with its due diligence
investigation with respect to the Companies and shall not
otherwise use it in the business of Buyer or any affiliate of
Buyer. Buyer shall not disclose the Confidential Information to
any third party, except that Buyer shall have the right to
communicate the Confidential Information to such of its
Representatives (if any) who are required by their duties to have
knowledge thereof, provided that each such person is informed
that such information is strictly confidential and subject to the
provisions of this Section 11 and agrees not to disclose or use
such information except as provided herein. Buyer
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hereby agrees to be responsible for any breach of this
agreement by its Representatives.
11.2 COMPELLED DISCLOSURE
In the event that Buyer becomes legally compelled by deposition,
subpoena, or other court or governmental action to disclose any
of the confidential information covered by this agreement, Buyer
shall provide Seller with prompt prior written notice to that
effect, and shall cooperate with Seller and the Companies if
Seller seeks to obtain a protective order concerning such
confidential information.
11.3 DISCUSSIONS WITH EMPLOYEES; NO SOLICITATION
Buyer shall not initiate contact, or engage in discussions, with
any employee, customer, or supplier of the Companies without the
prior written consent of Seller, except that Buyer may initiate
and engage in discussions with solely management level employees
of the Companies without such prior written consent. Unless and
until the transactions contemplated by this Agreement are
consummated, Buyer shall not hire or solicit for employment any
employees of the Companies without the written consent of Seller
and the Companies for a period of two years from the date of this
Agreement.
11.4 INSIDER TRADING
Buyer shall advise all of its Representatives who are informed of
the matters which are the subject of this Agreement that U.S.
securities laws prohibit any person who has material, nonpublic
information concerning an issuer of publicly held securities from
purchasing of selling such securities.
12. MISCELLANEOUS
12.1 CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the following
meanings unless the context otherwise requires:
"affiliate" with respect to any person, means any other person
controlling, controlled by or under common control with such
person.
"contracts and other agreements" means all contracts,
agreements, understandings, indentures, notes, bonds,
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loans, instruments, leases, mortgages, franchises, licenses,
commitments or other binding arrangements, express or implied.
"document or other papers" means any document, agreement,
instrument, certificate, notice, consent, affidavit, letter,
telegram, telex, statement, schedule (including any schedule to
this Agreement), exhibit (including any Exhibit to this
Agreement) or any other paper whatsoever.
"Environment" or "Environmental" means air, land, and
water or any combination or part thereof.
"Environmental Contaminant" means any solid, liquid, gas, odor,
heat, sound, vibration, radiation, or combination of any of them,
or other substance that is regulated or defined or subject to any
Environmental Law.
"Environmental Law or Laws" means any federal, state or local law
or regulation relating to Environmental pollution or the
protection of the Environment or the Release or threatened
Release of any Environmental Contaminant into the Environment.
"knowledge" with respect to the Buyer means the actual knowledge
after reasonable inquiry by any of its officers or directors and,
with respect to Seller, means the actual knowledge after
reasonable inquiry by any of its officers or directors or by
Nancy Zarin, C. Wick Wolfe, Robert DeAngelis, Mel Callahan or
Walter Boswell.
"lien or other encumbrance" means any lien, pledge, mortgage,
security interest, claim, lease, charge, option, right of first
refusal, easement, servitude, transfer restriction under any
shareholder or similar agreement, encumbrance or any other
restriction or limitation whatsoever.
"person" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust,
unincorporated organization, governmental or regulatory body or
other entity.
"property" means real, personal or mixed property,
tangible or intangible.
"release" means, with respect to Environmental matters, any
spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, dumping, or disposing into the
Environment of any Environmental
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Contaminant that has occurred or is occurring on or at, onto,
from or beneath any parcel of real property owned, leased or used
by the Companies.
12.2 PUBLICITY
No publicity release or announcement concerning this Agreement or
the transaction contemplated hereby shall be made without advance
approval thereof by Seller and Buyer; provided, that Buyer
acknowledges that Seller is required to disclose certain
information pursuant to applicable securities laws and Buyer
agrees not to unreasonably withhold or delay any such approval.
12.3 NOTICES
Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by
certified, registered or express mail, postage prepaid. Any such
notice shall be deemed given when so delivered personally,
telegraphed, telexed or sent by facsimile transmission or, if
mailed, three days after the date of deposit in the United States
mails, as follows:
if to Seller to:
Belding Heminway Company, Inc.
1430 Broadway
New York, New York 10018
Attention: Gregory H. Cheskin
President
with a copy to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10167
Attention: Peter A. Eisenberg, Esq.
if to Buyer, to:
Lewis Textiles Corporation
13355 Noel Road
Suite 2000
Dallas, Texas 75240
Attention: John P. Lewis
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with a copy to:
J. Lewis Partners, L.P.
13355 Noel Road
Suite 2000
Dallas, Texas 75240
Attention: John P. Lewis
and to:
Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attention: Richard F. Dahlson, Esq.
if to the Companies after Closing:
Belding Hausman Incorporated
1430 Broadway
New York, New York 10018
Attention: Nancy Zarin
with a copy to:
J. Lewis Partners, L.P.
13355 Noel Road
Suite 2000
Dallas, Texas 75240
Attention: John P. Lewis
and to:
Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attention: Richard F. Dahlson, Esq.
Any party may by notice given in accordance with this Section to
the other parties designate another address or person for receipt
of notices hereunder.
12.4 ENTIRE AGREEMENT
This Agreement (including the schedules and exhibits) and the
agreements executed in connection with the consummation of the
transactions contemplated herein contain the entire agreement
among the parties with respect to the purchase of the Shares and
related transactions, and supersede all prior agreements, with
respect thereto.
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12.5 AMENDMENTS
This Agreement may be amended, superseded, cancelled, renewed or
extended, and the terms hereof may be waived, only by a written
instrument signed by the parties or, in the case of a waiver, by
the parties waiving compliance.
12.6 GOVERNING LAW
This Agreement shall be governed and construed in accordance with
the laws of the State of New York applicable to agreements made
and to be performed entirely within such State (without giving
effect to conflicts of law principles thereof).
12.7 BINDING EFFECT; NO ASSIGNMENT; NO THIRD PARTY
BENEFICIARIES
This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and legal
representatives. Nothing contained herein is intended or shall be
construed as creating third party beneficiaries to this
Agreement. This Agreement is not assignable except by operation
of law or by Buyer to any of its affiliates.
12.8 VARIATIONS IN PRONOUNS
All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may
require.
12.9 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. Each counterpart may
consist of a number of copies hereof each signed by less than
all, but together signed by all of the parties hereto.
12.10 SCHEDULE DISCLOSURES
Disclosure of an item on any schedule or in respect of
any section, subsection or clause to this Agreement
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shall constitute disclosure of such item on each other schedule
or in respect of each other section, subsection or clause of this
Agreement to which such disclosure is relevant.
12.11 EXHIBITS AND SCHEDULES
The Exhibits and Schedules are a part of this Agreement as if
fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed
references to such parts of this Agreement, unless the context
shall otherwise require.
12.12 HEADINGS
The headings in this Agreement are for reference only, and shall
not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
LEWIS TEXTILES CORPORATION
By: /s/Arthur W. Hollingsworth
____________________________________
Name: Arthur W. Hollingsworth
___________________________________
Title: President
__________________________________
BELDING HEMINWAY COMPANY, INC.
By: /s/Gregory H. Cheskin
____________________________________
Name: Gregory H. Cheskin
___________________________________
Title: President
__________________________________
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
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0
22,848
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</TABLE>
