<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1999
--------------------------------------
OR
() TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------------- ----------------------
Commission file number 1-8769
------
R. G. BARRY CORPORATION
-----------------------
(Exact name of registrant as specified in its charter)
OHIO 31-4362899
------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
13405 Yarmouth Road NW, Pickerington, Ohio 43147
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
614-864-6400
------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- ---------
Common Shares, $1 Par Value, Outstanding as of October 2, 1999 - 9,328,477
Index to Exhibits at page 14
Page 1 of 55 pages
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 2, 1999 January 2, 1999
--------------- ---------------
(in thousands)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 4,951 29,596
Accounts receivable, less allowances 37,064 15,985
Inventory (note 3) 50,995 38,648
Deferred income taxes (note 4) 3,729 3,729
Recoverable income taxes 2,149 --
Prepaid expenses 2,385 2,275
--------- --------
Total current assets 101,273 90,233
--------- --------
Property, plant and equipment, at cost 44,890 41,697
Less accumulated depreciation & amortization 30,215 28,822
--------- --------
Net property, plant and equipment 14,675 12,875
--------- --------
Goodwill, net 6,104 4,114
Other assets 4,433 4,123
--------- --------
$ 126,485 111,345
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current installments of long-term debt
and capital lease obligations 2,278 2,278
Short-term notes payable 30,000 --
Accounts payable 10,171 6,581
Accrued expenses 1,426 8,404
--------- --------
Total current liabilities 43,875 17,263
--------- --------
Accrued retirement costs and other 6,151 5,288
Long-term debt excluding current installments:
Note payable 8,571 10,714
--------- --------
Total liabilities 58,597 33,265
--------- --------
Minority interest 524 --
Shareholders' equity:
Preferred shares, $1 par value
Authorized 3,775,000 Class A shares, 225,000 Series I Junior
Participating Class A shares, and 1,000,000 Class B shares,
none issued -- --
Common shares, $1 par value
Authorized 22,500,000 shares
(excluding treasury shares) 9,328 9,745
Additional capital in excess of par value 11,976 15,357
Deferred compensation (482) (204)
Retained earnings 46,542 53,182
--------- --------
Net shareholders' equity 67,364 78,080
--------- --------
$ 126,485 111,345
========= ========
</TABLE>
Page 2 of 55 pages
<PAGE> 3
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
October 2, October 3, October 2, October 3,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
Net sales 48,118 $ 52,387 88,020 93,156
Cost of sales 26,433 25,418 52,823 47,310
------- -------- ------- -------
Gross profit 21,685 26,969 35,197 45,846
Selling, general and
administrative expense 18,820 16,460 45,261 38,900
------- -------- ------- -------
Operating income (loss) 2,865 10,509 (10,064) 6,946
Other income 130 102 414 293
Interest expense (674) (675) (1,311) (1,459)
Interest income 12 11 313 252
------- -------- ------- -------
Net interest expense (662) (664) (998) (1,207)
Earnings (loss) before income
tax (benefit) 2,333 9,947 (10,648) 6,032
Income tax (benefit) (note 4) 860 3,882 (4,008) 2,316
------- -------- ------- -------
Net earnings (loss) 1,473 6,065 (6,640) 3,716
======= ======== ======= =======
Earnings (loss) per common share (note 5)
Basic 0.15 0.62 (0.70) 0.38
======= ======== ======= =======
Diluted 0.15 0.61 (0.70) 0.37
======= ======== ======= =======
Average number of common
shares outstanding
Basic 9,337 9,733 9,490 9,676
======= ======== ======= =======
Diluted 9,337 10,050 9,490 10,004
======= ======== ======= =======
</TABLE>
Page 3 of 55 pages
<PAGE> 4
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Thirty-nine Thirty-nine
weeks ended weeks ended
October 2, 1999 October 3, 1998
--------------- ---------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (6,640) 3,716
Adjustments to reconcile net earnings (loss) to
net cash used in operating activities, net of
the effects of acquired company:
Depreciation and amortization of
property, plant and equipment 1,393 1,510
Amortization of goodwill 86 86
Net (increase) decrease in:
Accounts receivable, net (18,406) (26,393)
Inventory (11,488) (16,112)
Prepaid expenses (44) (2)
Recoverable income taxes (2,149) --
Other (257) 454
Net increase (decrease) in:
Accounts payable 1,058 764
Accrued expenses (7,104) (6,174)
Accrued retirement costs and other 863 598
-------- -------
Net cash used in operating activities (42,688) (41,553)
-------- -------
Cash flows from investing activities:
Acquisition of business, net of cash acquired (2,788) --
Additions to property, plant and equipment, net (2,912) (596)
-------- -------
Net cash used in investing activities (5,700) (596)
-------- -------
Cash flows from financing activities:
Proceeds from short-term notes 30,000 24,000
Stock options exercised 35 475
Treasury share acquisitions (4,149) --
Repayment of long-term debt and
capital lease obligations (2,143) (2,143)
-------- -------
Net cash provided by financing activities 23,743 22,332
-------- -------
Net decrease in cash (24,645) (19,817)
Cash at the beginning of the period $ 29,596 22,495
-------- -------
Cash at the end of the period $ 4,951 2,678
======== =======
Supplemental cash flow disclosures:
Interest paid $ 1,537 1,733
======== =======
Income taxes paid $ 5,583 6,751
======== =======
</TABLE>
Page 4 of 55 pages
<PAGE> 5
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
Under Item 1 of Part I of Form 10-Q
for the Periods ended
October 2, 1999 and October 3, 1998
1. These interim financial statements are unaudited. All adjustments
(consisting solely of normal recurring adjustments) have been made which,
in the opinion of management, are necessary to fairly present the results
of operations.
2. The Company operates on a fifty-two or fifty-three week annual fiscal year,
ending annually on the Saturday nearest December 31. Fiscal 1999 and fiscal
1998 are both fifty-two week years.
3. A substantial portion of inventory is valued using the dollar value LIFO
method; therefore, it is impractical to separate inventory values between
raw materials, work-in-process and finished goods.
4. Income tax (benefit) for the periods ended October 2, 1999 and October 3,
1998, consists of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Current:
U. S. Federal $(3,721) $2,166
State & Local (287) 150
------- ------
Total $(4,008) $2,316
======= ======
</TABLE>
The income tax (benefit) reflects a combined federal, foreign, state and
local effective rate of 37.6 percent and 38.4 percent for the first nine
months of 1999 and 1998, respectively, as compared to the statutory U. S.
federal rate of 35.0 percent in both years.
Income tax (benefit) for the periods ended October 2, 1999 and October 3,
1998 differed from the amounts computed by applying the U. S. federal
income tax rate of 35.0 percent to pretax profit (loss) as a result of the
following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Computed "expected"
tax (benefit):
U. S. Federal tax (benefit) $(3,727) $2,111
Other (94) 107
State & Local tax
(benefit), net of federal
income tax (187) 98
------- ------
Total $(4,008) $2,316
======= ======
</TABLE>
5. The computation of basic earnings (loss) per common share has been computed
based on the weighted average number of common shares outstanding during
each period. Diluted earnings (loss) per common share is based on the
weighted average number of outstanding common shares during the period,
plus, when their effect is dilutive, potential common shares consisting of
certain common shares subject to stock options and the stock purchase plan.
6. Effective July 22, 1999, the Company acquired 80% of the outstanding stock
of Escapade SARL, which owns Fargeot et Compagnie SA and Michel Fargeot SA
(collectively "Fargeot"), all of Thiviers, France. Fargeot manufactures and
markets slipper type footwear. The purchase price of $4,173,000 was paid in
cash, and the acquisition has been accounted for by the purchase method of
accounting. The acquisition did not result in a significant business
combination within the definition provided by the Securities and Exchange
Commission and therefore, pro forma financial information has not been
presented.
Page 5 of 55 pages
<PAGE> 6
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Financial Statements
Under Item 1 of Part I of Form 10-Q
for the periods ended October 2, 1999 and October 3, 1998
(continued)
7. Segment Information - The Company maintains two operating segments: Barry
Comfort manufactures and markets comfort footwear for
at-and-around-the-home; and Thermal supplies thermal retention technology
products. The accounting policies of the operating segments are
substantially similar, except that the disaggregated information has been
prepared using certain management reports, which by their very nature
require estimates. In addition, certain items from these management reports
have not been allocated between the operating segments, such as a) costs of
certain administrative functions, b) current and deferred income tax
expense (benefit) and deferred tax assets (liabilities), and c) certain
operating provisions.
<TABLE>
<CAPTION>
Thirty-nine weeks ended
October 2, 1999 Barry Intersegment
(in thousands) Comfort Thermal Eliminations Total
------- ------- ------------ -----
<S> <C> <C> <C> <C>
Net sales $ 82,462 $ 5,786 $ (228) $ 88,020
Depreciation and amortization 1,206 187 1,393
Interest income 518 (205) 313
Interest expense 1,311 205 (205) 1,311
Pre tax earnings (loss) (7,337) (3,282) (29) (10,648)
Additions to property, plant
and equipment 2,801 111 2,912
Total assets devoted $ 124,000 $ 6,960 $(4,475) $ 126,485
========= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Thirty-nine weeks ended
October 3, 1998 Barry Intersegment
(in thousands) Comfort Thermal Eliminations Total
------- ------- ------------ -----
<S> <C> <C> <C> <C>
Net sales $ 87,288 $ 6,264 $ (396) $ 93,156
Depreciation and amortization 1,336 174 1,510
Interest income 434 (182) 252
Interest expense 1,459 182 (182) 1,459
Pre tax earnings (loss) 6,875 (724) (119) 6,032
Additions to property, plant
and equipment 520 76 596
Total assets devoted $120,176 $ 9,671 $(3,937) $125,910
======== ======= ======= ========
</TABLE>
8. The Company currently accounts for sales returns using a net sales
approach. Previously, it had followed a cost of sales approach. As a result
of this reclassification, there has been no impact on gross profit, net
earnings or loss, or earnings or loss per share for any period noted.
All previously presented financial statements have been reclassified to
conform to this presentation.
Page 6 of 55 pages
<PAGE> 7
R. G. BARRY CORPORATION AND SUBSIDIARIES
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Company ended the third quarter of 1999 with $57.4 million in net working
capital. This compares with $66.6 million at the end of the same quarter in
1998, and $73.0 million at the end of fiscal 1998.
Much of the decline in net working capital from period to period is the result
of the following:
o During the first half of 1999, the Company purchased in the open market
approximately 478 thousand of its common shares, totaling, about $4.2
million to be held in Treasury,
o Early in the third quarter, the Company completed the acquisition of an 80%
interest in Fargeot, a French slipper manufacturer, at a cost of about $4.2
million in cash,
o Capital expenditures for the first nine months of 1999 amounted to $2.9
million,
o During the first nine months, the Company incurred a net loss of $6.6
million, and
o Late in the second quarter of 1999, the Company made a $2.1 million
scheduled repayment of long-term debt.
As noted, capital expenditures during the first nine months of 1999 amounted to
$2.9 million, compared with $596 thousand during the same period of 1998.
Capital expenditures in 1999, are higher than in most previous years, primarily
due to projects unique to 1999, the more significant of which were: I) equipping
a new warehouse in San Antonio, Texas; II) starting up of a plant in the
Dominican Republic; and III) purchasing a warehouse in Goldsboro, North
Carolina, formerly leased by the Company. Capital expenditures have been funded
out of working capital.
Highlights of the significant changes in the components of the Company's net
working capital are:
o At the end of the third quarter of 1999, accounts receivable at $37.1
million, were about $6.3 million less than the $43.4 million at the end of
the third quarter of 1998. A substantial portion of the decline is the
consequence of the decrease in net sales during the third quarter of 1999
when compared with the same quarter of 1998. The increase in accounts
receivable from the fiscal year end 1998 balance of $16.0 million,
represents a normal seasonal pattern of change in receivables.
o Inventories at the end of the third quarter of 1999, at $51.0 million, are
about $0.7 million lower than the inventory levels of $51.7 million
one-year ago, although increased from $38.6 million at the end of fiscal
1998. The decline in inventories from the end of the third quarter of 1998
to the end of the third quarter of 1999 is the outcome of a previously
announced plan to systematically reduce inventory. As noted in the
discussion of the results of operations that follows regarding net sales
for the quarter, the Company believes that it postponed about $8 million of
shipments from late in the third quarter into the fourth quarter. Rising
waters at the Company's distribution center in Goldsboro, North Carolina
following Hurricane Floyd, caused the shipment of about $3.5 million in
customer orders to be delayed from late September into October. In
addition, the Company estimates about $5 million of September orders were
pushed into October, as a result of manufacturing inefficiencies.
Manufacturing production inefficiencies created production shortfalls,
which forced the Company to defer shipment of certain orders from September
to October, until each order could be shipped complete to customers. Were
it not for the deferral of these shipments from the third quarter into the
fourth quarter, inventories would have decreased by about $4 million when
compared with the same quarter last year. The increase in inventories from
the end of fiscal 1998, reflects a normal seasonal pattern of change in
inventory.
o The Company ended the third quarter of 1999, with $5.0 million in cash and
$30.0 million in short-term bank loans. This compares with the third
quarter of 1998, when the Company had $2.7 million in cash and $24.0
million in short-term bank loans. The increase in short-term bank loans, at
the end of the third quarter, was largely due the Company's expenditures
earlier in the year, as previously discussed: I) to acquire an 80% interest
in Fargeot, during the third quarter, and II) to purchase in the open
market, about 478 thousand of the Company's common shares, totaling about
$4.2 million, to be held in Treasury. There were no short-term bank loans
outstanding at the end of fiscal 1998.
Page 7 of 55 pages
<PAGE> 8
Management's Discussion and Analysis of Financial Condition and
Results of Operations - continued
The Company currently has in place a Revolving Credit Agreement ("Revolver"),
with its three main lending banks. The Revolver provides the Company a
seasonally adjusted available line of credit ranging from $6 million during
January, to a peak of $51 million from July through November. The Company
believes that the Revolver contains financial covenants typical of agreements of
its type and duration. The Company is in compliance with all the covenants of
the Revolver, and all other debt agreements. The Revolver, which contains
provisions for periodic extensions upon request and with the approval of the
banks, currently extends through the end of the year 2001.
Impact of Recently Issued Accounting Standards
In January 1999, the Company adopted Statement of Position 98-1 ("SOP 98-1")
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". SOP 98-1 requires that certain costs related to the development
or purchase of internal-use software be capitalized and amortized over the
estimated useful life of the software. SOP 98-1 also requires that costs related
to the preliminary project stage and the post-implementation/operations stage
(as defined in SOP 98-1) in an internal-use computer software development
project be expensed as incurred. The adoption of SOP 98-1 did not affect results
of operations or financial position of the Company.
In addition, in January 1999, the Company adopted Statement of Position 98-5
("SOP 98-5"), "Reporting on the Costs of Start-Up Activities ". The SOP requires
that costs incurred during start-up activities, including organization costs, be
expensed as incurred. The adoption of SOP 98-5 did not affect results of
operations or financial position.
The FASB has issued Statements No. 133 and No. 137, "Accounting for Derivative
Instruments and Hedging Activities", which is required to be adopted in years
beginning after June 15, 2000. The Statement permits early adoption as of the
beginning of any fiscal quarter after its issuance. The Company expects to adopt
the new Statement effective January 1, 2001. The Statement will require
companies to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If a derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivative will either be offset against the change in fair
value of the hedged asset, liability, or firm commitment through earnings, or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company does not anticipate that the
adoption of this Statement will have a significant effect on its results of
operations or financial position.
Year 2000 Readiness Disclosures
The Company has conducted a review of its key financial, information and
operating systems to determine the extent to which it is exposed to so-called
year 2000 computer date problems. The Company believes that all of its critical
application systems have been converted to correct for potential problems. The
Company has conducted extensive tests, which have confirmed the readiness of its
systems. Key suppliers and electronic trading partners have been contacted to
obtain their commitments to conversion and readiness, so as to minimize problems
relating to the exchange of electronic data. The Company has not separately
identified the costs associated with its conversion, but estimates that the
costs incurred, which have been expensed as incurred, have not been material,
and does not anticipate the future impact on its financial condition, results of
operations or cash flows will be material. The possibility exists that the
Company's conversion could inadvertently fail, although the Company believes
that the impact of such an occurrence would be manageable and minor in impact as
a result of substantial equipment and software upgrades implemented in recent
years. The Company is not dependent upon any one customer or any one supplier to
conduct its business and the Company believes that should one of its suppliers
or customers prove not to become year 2000 compliant in a timely manner, the
Company can revert to alternative compliant suppliers or resort to increased use
of traditional methods of transacting business to satisfy its customer needs. If
in the future, the Company uncovers additional risks associated with year 2000
compliance, the Company will develop contingency plans at that time as deemed
necessary.
Page 8 of 55 pages
<PAGE> 9
Management's Discussion and Analysis of Financial Condition and
Results of Operations - continued
Results of Operations
During the third quarter of 1999, net sales amounted to $48.1 million, an 8.1
percent decline when compared with net sales of $52.4 million during the third
quarter of 1998. For the nine months, net sales amounted to $88.0 million, a 5.5
percent decline in net sales when compared with the first nine months of 1998.
Several factors contributed to the decline in net sales during the third quarter
and the nine months:
o Throughout most of 1999, the Company operated its plants at less than
capacity, in a largely successful endeavor to reduce the Company's
inventory levels. This effort, while successful at reducing inventory
levels, had a greater than expected negative impact on plant efficiencies
and manufacturing costs. It also created production shortfalls in the third
quarter that forced the Company to reschedule into the fourth quarter,
approximately $5 million of customer orders intended to be shipped in
September. Although the Company filled these orders in the fourth quarter,
late deliveries increased the possibility of order cancellations.
o Hurricane Floyd and the resulting widespread flooding in eastern North
Carolina, caused the Goldsboro, North Carolina Distribution Center to close
for five days in late September. This prevented the shipment of an
estimated $3.5 million of third quarter orders. These orders were
subsequently shipped early in October.
In addition to the factors noted in the prior paragraph, several factors
discussed in prior Form 10-Q's, press releases, and other shareholder
communications had an impact of net sales for the nine months:
o The strategic decisions of certain national chain department store
customers to purchase a portion of their slippers directly from other
suppliers, utilizing their own private label brands, reduced the amount of
the Company's Dearfoams(R) brand slippers that they purchased. This was a
significant factor during the first half of the year, although impacting
the third quarter to a lesser extent.
o In addition, the Company has discussed the slowdown in sales to a strategic
alliance consumer housewares customer, Corning Consumer Products. Corning
has considered an alternative technology supply, which the Company believes
is cheaper although less effective than the Company's thermal retention
technology. The Company believes that Corning has made its decision to
pursue that alternative source of supply. As such, the Company believes
that any additional future sales to Corning will be insignificant.
o Earlier in the year, the Company learned that Upton's stores were going out
of business, and the Company has adjusted its sales estimates to reflect
this lost business.
Gross profit during the third quarter, amounted to $21.7 million, or 45.1
percent of net sales. This compares with gross profit of $27.0 million, or 51.5
percent of net sales in the same quarter of 1998. For the nine months, gross
profit percent also decreased to 40.0 percent in 1999 compared with 49.2 percent
in 1998. Most of the decline in gross profit dollars relates to the deferral of
net sales from September to October as discussed in earlier paragraphs. The
Company's goal of bringing about a reduction in inventory levels throughout 1999
has had a negative impact on gross profit as a percent of net sales. Lowering
inventory has been accomplished mainly by operating manufacturing plants
throughout most of 1999, at less than full capacity and at lower efficiencies.
Selling, general and administrative expenses during the quarter amounted to
$18.8 million, an increase of 14.3 percent from the same quarter one-year ago.
For the nine months these expenses amounted to $45.3 million, an increase of
16.4 percent from the same nine month period last year. Expenses increased
during the periods, even though net sales declined. As noted in prior Form
10-Q's, the Company has decided to continue with several long-term productivity
improvement projects that will have a negative impact short-term on expenses,
although the Company believes that the long-term benefits from these projects
will outweigh the short-term costs.
Page 9 of 55 pages
<PAGE> 10
Management's Discussion and Analysis of Financial Condition and
Results of Operations - continued
The legal defense of the Company's thermal product patents and intellectual
property rights and the continued development work on a hot food delivery system
also have had a negative impact on expenses during 1999.
Net interest expense declined from 1998 to 1999. During the third quarter of
1999, net interest expense amounted to $662 thousand compared with $664 thousand
in the same period of 1998. For the nine months, net interest expense also
declined to $998 thousand from $1.2 million in 1998. The decrease in net
interest expense is principally due to the Company's lower average usage of its
Revolver, mainly during the first half of 1999, when compared with 1998.
For the third quarter of 1999, the Company earned $1.5 million, or $0.15 per
share, compared with net earnings of $6.1 million, or $0.61 per share during the
same quarter of 1998. For the nine months, the Company incurred a net loss in
1999 of $6.6 million, or $0.70 per share, compared with net earnings in 1998 of
$3.7 million, or $0.37 per share. All per share references are on a diluted
share basis.
- --------------------------------------------------------------------------------
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
The statements in this Quarterly Report on Form 10-Q, which are not historical
fact are forward-looking statements based upon the Company's current plans and
strategies, and reflect the Company's current assessment of the risks and
uncertainties related to its business. These risks include such things as
product demand and market acceptance; the economic and business environment and
the impact of governmental regulations, both in the United States and abroad;
the effects of direct sourcing by customers of competitive products from
alternative suppliers; the effect of pricing pressures from retailers; inherent
risks of international development, including foreign currency risks;
implementation of the Euro; economic conditions, regulatory and cultural
difficulties or delays in the Company's development outside the United States;
the Company's ability to improve its processes and business practices to keep
pace with the economic, competitive and technological environment, including
successfully addressing year 2000 issues; capacity, efficiency, and supply
constraints; weather conditions; and other risks detailed in the Company's press
releases, shareholder communications, and Securities and Exchange Commission
filings. Actual events affecting the Company and the impact of such events may
vary from those currently anticipated.
- --------------------------------------------------------------------------------
Page 10 of 55 pages
<PAGE> 11
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Risks
The Company transacts business in several foreign countries. Its primary foreign
currency net cash outflows occur in Mexico and China, and beginning later in
1999, the Company also expects to incur net cash outflows in the Dominican
Republic. The Company does not hedge its anticipated foreign currency cash
outflows in the Mexican Peso, the Chinese Renminbi or the Dominican peso, as
these currencies generally have declined in value, over time, when compared with
the U. S. Dollar. In addition, forward contracts in these currencies are
generally neither readily nor economically available.
The Company's primary foreign currency net cash inflows are generated from
Canada and Western Europe. The Company does employ a foreign currency hedging
program utilizing currency forward exchange contracts for its anticipated net
cash inflows in the Canadian Dollar, British Pound, and French and Swiss Francs.
Under this program, increases or decreases in the Company's net local operating
revenue and expenses as measured in U. S. Dollars are partially offset by
realized gains and losses on hedging instruments. The goal of the hedging
program is to economically fix the exchange rates on the Company's projected
foreign currency net cash inflows. The Company does not use foreign currency
forward contracts for trading purposes.
All foreign currency contracts are marked-to-market and unrealized gains and
losses are included in the current period's calculation of net income. Because
not all economic hedges qualify as accounting hedges, unrealized gains and
losses may be recognized in net income in advance of the actual projected
foreign currency net cash flows. This often results in a mismatch of accounting
gains and losses, and transactional foreign currency net cash flow gains and
losses.
The Company believes that the impact of these foreign currency forward contracts
is not material to the Company's financial condition or results of operations.
At the end of the third quarter of 1999, the Company had foreign currency
contracts outstanding to sell forward the following currencies. All contracts
mature later in 1999.
<TABLE>
<CAPTION>
Nominal Amount in Approximate Estimated Fair Unrealized Gain
thousands of Average Value as of (Loss), as of
US Dollars Exchange Rate October 2, 1999 October 2, 1999
---------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Pound Sterling $1,792 US$1 = GBP 0.61 $1,820 $(28)
French Francs $1,518 US$1 = FRF 5.93 $1,471 $ 47
Swiss Francs $ 422 US$1 = CHF 1.42 $ 404 $ 17
</TABLE>
Page 11 of 55 pages
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On September 10, 1998, the Company filed a lawsuit for patent
infringement of United States Patent No. 5,790,962 against Domino's
Pizza, Inc. and Phase Change Laboratories, Inc. The case was filed on
behalf of both the Company and its subsidiary Vesture Corporation in
the United States District Court for the Middle District of North
Carolina. The '962 patent covers an invention which maintains the
desired temperature of food and other items using a phase change
material. Domino's Pizza, Inc. purchases a product, which it calls the
"Heat Wave" system. The product is manufactured by Phase Change
Laboratories, Inc. The Company believes that the product infringes upon
the '962 Patent. The Company seeks damages, attorney's fees and
injunction against further infringement by both defendants. The matter
is currently in discovery. A mediator has been selected to aid in
settlement discussions. The case has been amended to add a claim for
deceptive advertising. The case has been assigned Civil Action No.
1:98CV00802.
Item 2. Changes in Securities and Use of Proceeds
(a) through (d) Not Applicable
Item 3. Defaults Upon Senior Securities
(a), (b) Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
(a) through (d) Not Applicable
Item 5. Other Information
No response required
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Index to Exhibits at page 14.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarter ended October 2, 1999.
Page 12 of 55 pages
<PAGE> 13
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.
R. G. BARRY CORPORATION
-----------------------
Registrant
November 16, 1999
- -----------------
date
/s/ Richard L. Burrell
Richard L. Burrell
Senior Vice President - Finance
(Principal Financial Officer)
(Duly Authorized Officer)
Page 13 of 55 pages
<PAGE> 14
R. G. BARRY CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Page Number
----------- ----------- -----------
<C> <S> <C>
2.1 Stock Purchase Agreement, dated July 22, 1999, between 15 - 38
Mr. Thierry Civetta, Mr. Michel Fargeot, FCPR County
Natwest Venture France, SCA Capital Prive-Investissements,
Hoche Investissements, and SA Capital Prive, parties of
the first part, and R. G. Barry Corporation and Escapade SA,
parties of the second part.
10.1 Shareholders' Agreement, dated July 20, 1999 and 39 - 46
executed on July 22, 1999, between Mr. Thierry Civetta
and R. G. Barry Corporation
10.2 Current Account Agreement, executed on July 22, 1999, 47 - 48
between Escapade SA and Mr. Thierry Civetta
10.3 Joint Guarantee, granted by Credit Suisse Hottinguer, as 49 - 52
guarantor, to R. G. Barry Corporation, as beneficiary, and
executed on July 22, 1999
10.4 Loan Agreement, executed on July 22, 1999, between 53 - 54
Escapade SA and R. G. Barry France Holdings, Inc.
27 Financial Data Schedule 55
(Period October 2, 1999)
</TABLE>
Page 14 of 55 pages
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made this day of July 22, 1999
BETWEEN:
1. Mr. THIERRY CIVETTA, a French national, born in Paris, France, on
December 1956 residing at Le Fouillage, 24460 chateau l'Eveque, ,
acting in his capacity of:
shareholder of Fargeot et Compagnie, and
legal owner of 2500 shares in Escapade, a corporation with share capital
of FF 250,000, having its registered office at Le Petit Gue, 24800
Nantheuil de Thiviers, registered with the Trade and Company Registry of
Perigueux under number 384 486 601, (hereinafter referred to as
"Escapade").
2. Mr. MICHEL FARGEOT, a French national, born in Perigueux, France, on
March 25, 1957, residing at Chemin des Penassoux, 24800 Thiviers,
acting in his capacity of:
legal owner of 76 shares in Fargeot et Compagnie, a French Societe
Anonyme with share capital of FF 2,000,000, having its registered office
at Le Petit Gue - Nantheuil de Thiviers, 24800 Thiviers, registered with
the Trade and Company Registry of Perigueux under number 681 980 165,
(hereinafter referred to as "Fargeot et Compagnie").
3. FCPR COUNTY NATWEST VENTURE FRANCE, a French venture capital fund (fonds
commun de placement a risque; Law of December 23, 1988) located at 9, rue
Phalsbourg, 75017 Paris, whose management company is Natwest Equity
Partners, a French Societe Anonyme with share capital of FF 3,000,000,
having its registered office at 9, rue de Phalsbourg, 75017 Paris,
registered with the Trade and Company Registry of Paris under number 380
223 313, itself represented by Mr. Pierre Olivier Barennes, duly
authorized for the purpose of this Agreement pursuant to the Power of
Attorney attached hereto as Schedule (1).
acting in its capacity of:
legal owner of 451 shares in Fargeot et Compagnie.
4. SCA CAPITAL PRIVE-INVESTISSEMENTS, a French Societe en commandite par
actions with share capital of FF 28,500,000, having its registered office
at 9, rue de Phalsbourg, 75017 Paris, registered with the Trade and
Companies Registry of Paris under number 353 005 580, represented by its
management Company, Capital Prive, a French Societe Anonyme with share
capital of FF 1,000,000, having its registered office at 9, rue de
Phalsbourg, 75017 Paris, registered with the Trade and Companies Registry
of Paris under number 353 985 683, itself represented by Mr. Pierre
Olivier Barennes, duly authorized for the purpose of this Agreement
pursuant to the Power of Attorney attached hereto as Schedule (1).
acting in its capacity of:
<PAGE> 2
owner of 451 shares of Fargeot et Compagnie.
5. HOCHE INVESTISSEMENTS, a French Societe Anonyme with share capital of FF
250,000, having its registered office at 9, rue de Phalsbourg, 75017
Paris, registered with the Trade and Company Registry of Paris under
number 381 078 195, represented by Mr. Pierre Olivier Barennes, duly
authorized for the purpose of this Agreement pursuant to the Power of
Attorney dated July 19, 1999 attached hereto as Schedule (1).
acting in its capacity of:
legal owner of 1 share in Fargeot et Compagnie.
6. SA CAPITAL PRIVE, a French Societe Anonyme with share capital of FF
1,000,000, having its registered office at 9, rue de Phalsbourg, 75017
Paris, registered with the Trade and Company Registry of Paris under
number 352 985 683, represented by Mr. Pierre Olivier Barennes, duly
authorized for the purpose of this Agreement pursuant to the Power of
Attorney dated July 19, 1999 attached hereto as Schedule (1).
acting in its capacity of:
legal owner of 1 share in Fargeot et Compagnie.
Hereinafter collectively referred to as "the Sellers"
PARTIES OF THE FIRST PART,
AND
1. RG BARRY CORPORATION, a United-States corporation incorporated under the
laws of the State of OHIO, having its registered office at 13405 Yarmouth
Rd. NW, Pickerington, Ohio, 43147, USA (hereinafter referred to as "RG
Barry"), represented by Mr. Yves Gaget, duly authorized for the purpose
of this Agreement pursuant to the corporate resolution and power of
attorney attached hereto as Schedules (5) and (6).
2. ESCAPADE, a French Societe Anonyme with share capital of FF 250,000,
having its registered office at Le Petit Gue, 24800 Nantheuil de
Thiviers, registered with the Trade and Company Registry of Perigueux
under number 384 486 601, represented by M. Thierry Civetta, duly
authorized for the purpose of this Agreement pursuant to the decision of
the Board of Directors attached hereto as Schedule (3).
Hereinafter collectively referred to as the "Purchasers".
PARTIES OF THE SECOND PART
The Sellers and the Buyers being collectively referred to hereinafter as the
"Parties".
WHEREAS
Mr. Thierry Civetta holds 100% of the shares of Escapade (hereinafter "Escapade
Shares").
<PAGE> 3
The Natwest Group and Mr. Michel Fargeot hold collectively 49% of the share
capital of Fargeot et Compagnie, which in turn holds 100% of the share capital
of Michel Fargeot SA, the major operating company of the Fargeot group, located
in Thiviers.
The Purchasers have decided to acquire the shares in Fargeot et Compagnie under
the terms and conditions hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION OF THE REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS SET FORTH HEREIN, THE PARTIES HERETO AGREE AS FOLLOWS :
ARTICLE 1 - DEFINITIONS AND INTERPRETATION
In this Agreement, the following words and expressions bear the following
meanings:
"Bank guarantee" means the bank guarantee attached hereto as Schedule
4 as well as the commitments provided for in this
guarantee within the scope of this Agreement and
referred to in articles 8 and 10 hereafter.
"Closing" means the completion of the sale of the Fargeot et
Compagnie Shares(as defined in article 2 hereto), the
sale of Escapade Shares (as defined in article 3
hereto), and the signature and/or the provision of
all and any such necessary and/or related documents
as referred to in articles 12 and 13 of this
Agreement.
"Balance Sheet Date" means April 30, 1999 for Fargeot et Compagnie, and
February 28, 1999 for Escapade.
"Closing Date" means the date hereof.
"Financial Statements" means (i) the balance sheet, income statement and
notes of Escapade, Fargeot et Compagnie and Michel
Fargeot SA as of the Balance Sheet Date, as audited
by the statutory auditors and approved by the
shareholders in a meeting held on June 30, 1999 by
each of said companies.
"Guarantees" means the representations, warranties, guarantees,
statements, commitments and obligations made or taken
by Mr. Thierry Civetta and provided for in articles 5
to 9 of this Agreement.
"Natwest Group" means the group of companies formed by FCPR county
Natwest Venture France, SCA Capital
Prive-Investissements Hoche Investissements and
Capital Prive.
"Shareholders' Agreement" means the agreement entered into between Mr. Thierry
Civetta, RG Barry and RG Barry France on the date
hereof.
"Purchase price" shall have the meaning defined in article 4 of this
Agreement.
"RG Barry France" means RG Barry France Holdings, Inc., a company of
<PAGE> 4
the RG Barry group, grantor of a loan of FF
11,536,780 to Escapade referred to in article 4.1,
pursuant to a loan agreement with Escapade referred
to in articles 12 and 13.4 and attached hereto as
Schedule (6).
"The Companies"
or "Fargeot Group" means the group of companies formed by Escapade,
Fargeot et Compagnie SA and Michel Fargeot SA.
ARTICLE 2 - SALE AND PURCHASE OF SHARES OF FARGEOT ET COMPAGNIE SA
2.1 Upon the terms and conditions set forth in this Agreement, the Natwest
Group and Mr. Michel Fargeot agree to sell to Escapade, and Escapade
agrees to acquire from the Natwest Group and Mr. Michel Fargeot, nine
hundred eighty (980) shares representing 49% of the capital stock of
Fargeot et Compagnie, together with the rights, title or interests
attached thereto (hereinafter the "Fargeot et Compagnie Shares").
2.2 Except only as provided for in article 5(2.8) hereof, the beneficial
right to the Fargeot et Compagnie Shares, including without limitation,
dividends, profits, stock split, stock options, or the like, shall be
vested in Escapade on the Closing Date.
2.3 The transfer of the Fargeot et Compagnie Shares shall be completed on the
Closing Date, in accordance with the conditions set forth in articles 3
and 4.1 hereof, and in the offices of Simmons & Simmons, 68 rue du
Faubourg Saint Honore, or at such other time and location as may be
mutually agreed in writing by the Parties.
ARTICLE 3 - SALE AND PURCHASE OF ESCAPADE SHARES
3.1 Prior to the transfer of the Fargeot et Compagnie Shares, Mr. Thierry
Civetta agrees to sell to RG Barry, and RG Barry agrees to acquire from
Mr. Thierry Civetta, under the terms and conditions provided for herein,
one-thousand nine-hundred and ninety-five (1995) Escapade Shares.
3.2 The beneficial right attached to the Fargeot et Compagnie Shares,
including without limitation, dividends, profits, stock splits, stock
options, or the like, shall be the vested in Escapade on the Closing
Date.
3.3 The transfer of Escapade shares shall be completed on the Closing Date,
only subject to the limit set forth in article 5(2.8) hereof, in the
offices of Simmons & Simmons, 68 rue du Faubourg Saint Honore, or at such
other time and location as mutually agreed in writing by the Parties.
ARTICLE 4 - PURCHASE PRICE AND MEANS OF PAYMENT
4.1 The sale of Fargeot et Compagnie Shares set out to in article 2 hereof is
agreed for the total price of FF 14,770,780 to be paid to the Natwest
Group and to Mr. Michel Fargeot by Escapade on the Closing Date as
follows:
- FF 1,145,489.06 to Mr. Michel Fargeot for 76 Fargeot et Compagnie Shares;
- FF 6,797,573.25 to FCPR County Natwest Venture for 451 Fargeot et
Compagnie Shares;
- FF 6,797,573.25 to SCA Capital Prive-Investissements for 451 Fargeot et
Companies Shares.
<PAGE> 5
- FF 15,072.22 to Hoche Investissements for 1 Fargeot et Compagnie Share;
- FF 15,072.22 to SA Capital Prive for 1 Fargeot et Compagnie Share;
Escapade shall pay the Sellers the purchase price of the Fargeot et
Compagnie Shares by bank checks.
The initial financing of the Purchase Price for the Fargeot et Compagnie
Shares by Escapade is made through a current account advance made by Mr.
Thierry Civetta, under the terms and conditions of the shareholder's
current account agreement (hereinafter "SCA") attached hereto as Schedule
(5), as well as through a loan granted by RG Barry France to Escapade
attached hereto as Schedule (6), broken down as follows:
- loan from RG Barry France of FF 11,536,780
- SCA advance Mr. Thierry Civetta of FF 3,234,000
--------------
Total FF 14,770,780
The ultimate financing of the Purchase Price of the Fargeot et Compagnie
shares will be made through a bank loan to be negotiated and obtained by
Escapade in accordance with the terms and conditions of the Shareholders'
Agreement entered into between Mr. Thierry Civetta, RG Barry and RG Barry
France.
4.2 The sale of Escapade Shares referred to in article 3 hereof, is agreed
for the total price of FF 14,863,220 to be paid in cash to Mr. Thierry
Civetta by RG Barry on the Closing Date. Pursuant to Mr. Thierry
Civetta's instructions, FF 11,629,220 of this total price shall be
credited to account number 20112400001 opened by Mr. Thierry Civetta's at
Credit Suisse Hottinguer's agency (Bank Code: 18169; branch code 0001)
located at 38 rue de Provence, 75009 Paris, France, and FF 3,234,000
shall be credited to account number 20112500001 opened by Escapade with
said branch; the latter amount represents the current account advance
referred to in Article 4.1. Moreover, the loan of FF 11,536,780 from RG
Barry France shall be made available on the Closing Date through a
deposit by RG Barry to Escapade's above-mentioned account.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF MR. THIERRY CIVETTA
In entering into this Agreement and all the commitments resulting herefrom, RG
Barry and RG Barry France have relied upon Mr. Thierry Civetta's representations
and warranties, the accuracy of which is determinative, and has induced them to
enter into this Agreement.
Mr. Thierry Civetta warrants that he has not delegated any powers to anyone
within the Companies which would void or render ineffective the representations
and warranties.
Mr. Thierry Civetta certifies that the following representations and warranties
are exhaustive, sincere and accurate.
5.1 With respect to himself and the Escapade Shares, Mr. Thierry Civetta
represents on the Closing Date and warrants as follows:
<PAGE> 6
5.1.1 Absence of violation
The entering into of this Agreement and the other agreements
and instruments to be executed by Mr. Civetta pursuant to this
Agreement, and the performance of the transactions
contemplated hereby or thereby will not constitute (i) any
violation whatsoever, or cause a default under or breach of
any judgment, order or decree applicable to him, or (ii)
non-compliance with or breach of any undertaking, covenant,
agreement or other instrument to which he is a party or by
which he or his property is bound.
5.1.2 Compliance with legal and regulatory provisions
Approval, authorization of, declaration to, or filing with,
any governmental authority or other regulatory body or third
party is not required to be obtained by Mr. Thierry Civetta in
connection with the execution and validity of this Agreement
and of the other agreements and instruments to be executed by
him pursuant hereto, and the performance of the transactions
contemplated hereby and thereby.
5.1.3 Litigation
There is no action, suit or proceeding pending nor, to his
knowledge, threatened against or affecting him in any court or
before any governmental agency or authority which would
materially and adversely affect the performance of his
obligations under this Agreement and the other agreements and
instruments to be executed by him pursuant hereto.
5.1.4 Share capital and allocation of Escapade Shares
Mr. Thierry Civetta has full ownership of the Escapade Shares
and full power and capacity to dispose thereof. The Escapade
Shares are validly issued and fully paid-up and represent 100
% of the share capital of Escapade; they are not subject to
any pledge, encumbrance or security interest whatsoever or any
promise or right of first refusal or similar right granted to
any third party.
Moreover, Mr. Thierry Civetta has not entered into any
contract or agreement relating to the Escapade Shares, other
than this Agreement, the purpose or effect of which, directly
or indirectly, would affect in any way the unrestricted
ownership, transferability or value of all or part of the
Escapade Shares.
5.1.5 Law applicable to the sale of Escapade Shares
The sale of the Shares in accordance with the provisions of
this Agreement is valid under French law.
5.1.6 Accuracy of agreements and documents transmitted
The agreements and other documents attached hereto as
Schedules 7 to 19 hereof are copies of originals held by the
Company and are therefore true and accurate in all respects.
5.2 With respect to the Companies, Mr. Thierry Civetta represents and
warrants as follows:
<PAGE> 7
5.2.1 Capacity of the Companies
Each Company is duly organized as a Societe Anonyme and
validly existing under French law.
The Companies have full power and authority to engage in their
business, as it is presently conducted, and to manage and
dispose of their property and assets. They have obtained any
and all rights, authorizations, licenses, or permits required
to engage in such businesses and have complied with all
statutory and regulatory obligations relating thereto.
5.2.2 Corporate authorization
The execution and provision of the agreements and instruments
to be executed by the Companies pursuant to this Agreement,
and the performance of the transactions contemplated thereby
have been duly authorized and no further corporate
authorization is necessary on their part. The agreements and
instruments to be executed by the Companies pursuant to this
Agreement will be legally binding on and enforceable against
them in accordance with their respective terms.
5.2.3 Absence of violation
The entering into the agreements and instruments to be
executed by the Companies pursuant to this Agreement, and the
performance of the transactions contemplated thereby will not
violate, or cause a default under or a breach of (i) each
Company's by-laws, (ii) any judgment, order or decree
applicable to it, or (iii) any undertaking, covenant,
agreement or other instrument to which the Companies are
parties or by which themselves or their property are bound.
5.2.4 Compliance
No consent, approval, authorization of, or declaration to or
filing with, any governmental authority or other regulatory
body or any third party is required to be obtained by the
Companies in connection with the agreements and instruments to
be executed by them pursuant to this Agreement, and the
performance of the transactions contemplated thereby.
5.2.5 Trade and Company Registry and Corporate Registers
The Certificate of Incorporation and by-laws of the Companies,
as of the date hereof, are attached hereto as Schedule (7) and
are complete as of the date hereof.
The corporate records of the Companies including, but not
limited to, minutes of the Board of Directors' Meetings,
minutes of the Shareholders' Meetings, the registry of
transfers of shares and shareholders' accounts are complete,
accurate and kept in accordance with applicable laws.
5.2.6 Share capital
The share capital of the Companies has been fully paid up, and
no other securities, bonds, options, warrants or other rights
giving access to the share capital have been issued by any of
the Companies since April 30, 1999, it being specified that
Escapade's share capital was increased from FF 50,000 to
<PAGE> 8
FF 250,000 upon its transformation into a Societe Anonyme.
5.2.7 Dividends
With the exception of the distribution of dividends of FF
4,000,000 referred to below, of Mr. Thierry Civetta's
exceptional bonus of FF 396,000 attributed by Escapade's
general shareholders' meeting pursuant to a decision dated
June 28, 1999, and of the exceptional bonus of FF 1,000,000
attributed to Mr. Thierry Civetta by the directors of Fargeot
et Compagnie pursuant to a decision dated April 28, 1999, no
distribution or payment of any kind whatsoever to the
shareholders has been declared or made by the Companies since
April 30, 1999. A certified copy of the minutes of the
shareholders' meeting of each the Companies held on April 30,
1999 for the purpose of approving the 1998/1999 accounts is
attached hereto as Schedule (8).
Notwithstanding the above stipulations, the Parties agree that
the distribution of dividends of FF 2,040,000 received by
Escapade further to the dividend distribution of FF 4,000,000
(FF 1,960,000 of which was distributed to the Natwest Group)
decided upon by the general shareholders' meeting of Fargeot
et Compagnie held on June 30, 1999 shall be dedicated to the
repayment of Escapade's outstanding bank debt.
5.2.8 Shareholding
The Companies have no shareholding interest or other interest
in any legal entity, partnership or other entity of any form
whatsoever and are not members of any group or association
whatsoever.
The Companies are no longer liable towards any third party or
governmental or local authorities and agencies, with respect
to the acquisition, holding or transfer of (i) any
shareholding interest previously held by the Companies in any
legal entities, partnerships or other entities or (ii) any of
their assets.
5.2.9 Financial Statements
The Financial Statements attached hereto as Exhibit (9) are
complete, sincere, duly filed and published every year on due
date, and fairly reflect the assets and liabilities of the
Companies as of the Balance Sheet Date. The Financial
Statements have been prepared in accordance with generally
accepted accounting principles in France. Since the Balance
Sheet Date until the Closing Date, no event has occurred
which, if then known, would have led to any substantial change
in the financial position, the operating results or the
activities of the Companies or the amount attributed to any
item in the Financial Statements at that date or which would
have resulted in the making of additional reserves or
provisions.
Customer receivables, accounts receivables and credits
recorded in the Financial Statements and existing as of the
Balance Sheet Date have arisen out of valid transactions
conducted and performed in good faith, are not affected by any
dispute, objection, claim, challenge or set-off and are duly
receivable.
They shall be paid punctually when due, except those for which
a suitable provision for bad debt has been made in the
Financial Statements.
<PAGE> 9
There are, as of the Balance Sheet Date, no liabilities, fixed
or contingent, likely to generate in the future any liability
or claim, except those recorded or adequately provided for in
the Financial Statements.
5.2.10 Assets
The Companies have good and marketable title to and rightful
possession of all of the assets reflected in the Financial
Statements delivered to RG Barry, free and clear of any and
all mortgages, liens, pledges, privileges, claims, rights,
charges, encumbrances and security interests of whatsoever
kind or nature except only those liens or liabilities
disclosed in Schedule (10) hereto.
It is hereby specified that Mr. Thierry Civetta does make any
guarantees regarding the operational condition of the
Companies' material and equipment.
5.2.11 Contracts
Mr. Thierry Civetta represents that all the copies of the
contracts provided and attached hereto as Schedule (11) to
which the Companies are parties are true, complete and include
the following:
(i) profit sharing agreements or plans maintained or
sponsored by or on behalf of the Companies or to which
the Companies contribute;
(ii) employment contracts to which the Companies are parties
or by which they are bound;
(iii) agency, sales, wholesaling, distributorship or similar
agreements or contracts;
(iv) loan agreements or letters of credit;
(v) real property leases (commercial lease and short term
lease);
(vi) mortgages;
(vii) sales commitments to, or contracts or agreements with,
any customer;
(viii) license, authority or permit granted by the Companies
to any person or entity;
(ix) contracts or agreements to which the Companies are
parties or by which the Companies are bound, which
reasonably may be expected to involve future financial
obligations or benefits in excess of FF 50,000 within
any one calendar year;
For each of the Companies when concerned, each of the
Contracts is in accordance with the applicable law in force.
There is no existing default, or event or condition which,
with or without the giving of notice or the passage of time,
or both, would constitute an event of default by the Companies
or any other party thereto under any of the Contracts.
No party to any of the Contracts has given the Companies any
notice of default or termination, and there exists no basis
for termination under the terms of any of said contracts as of
the date hereof or as a result of the transactions provided
for in this Agreement. Furthermore, the Companies have not
waived any material right under or with respect to any of the
Contracts. The Companies are not bound by any agreement or
arrangement to sell or provide goods or services at prices
below the prevailing market prices therefore. As chairman of
the board of directors or manager of the Companies, Mr.
Thierry Civetta has not received from customers any notice
indicating that any of the
<PAGE> 10
customers of or suppliers to the Company will terminate or
materially change their business relationship with the
Companies for any reason whatsoever.
5.2.12 Intellectual property
Attached hereto as Schedule (12), is a true and complete list
of all models and designs, trademarks, trade names and all
registrations or applications with respect thereto, and all
licenses or rights the same which are presently or which have
been, owned or used by the Companies (collectively the
"Intellectual Property Rights").
The Companies own or hold all of the rights necessary to use
the Intellectual Property Rights.
None of the products manufactured or processes used by the
Companies, nor any of the Companies' trademarks, patents or
name, constitute a counterfeit or unfair competition.
To Mr. Thierry Civetta's knowledge, the Companies have not
committed any act of unfair competition or of counterfeit
infringing on a trade secret or copyright belonging to any
person or entity.
Mr. Thierry Civetta does not provide any guarantee as to the
use by the Companies of the names "Pied Sensibles", "Grand
Confort", and "Confort Plus".
The Companies are not bound to pay any royalty or to make any
other payment with respect to any Intellectual Property Right.
To Mr. Thierry Civetta's knowledge, no person or entity is
producing, providing, selling or using products which infringe
on any of the Intellectual Property Rights, with the exception
of a dispute before the Tribunal de Grande Instance of La
Roche sur Yon as disclosed in a judgment attached hereto as
Schedule (12).
5.2.14 Taxes - Social welfare contributions
The Companies have duly filed all required declarations,
returns and reports with the tax, customs and social security
authorities, in the manner provided for under applicable laws.
All taxes and duties due and payable by the Companies have
been fully paid on their due date or adequately been reserved
for in accordance with the accounting principles accepted in
France.
With the exceptions of a claim relating to VAT and amounting,
according to Mr. Thierry Civetta, to FF 115,000 and a claim
relating to custom nomenclature, there is no pending or
threatened claim, reassessment or dispute with respect to said
taxes and duties with the relevant authorities.
For the purposes of this clause 5.2.13, the terms "tax" and
"duty" shall refer, without limitation, to any direct or
indirect levies collected on behalf of the State or any local
authority, such as corporate income tax, value-added tax,
registration tax, customs duty and business tax and all social
welfare charges (including but not limited to charges on wages
or other benefits as well as social security, unemployment or
retirement charges) and to any penalties or late payment
interest relating thereto.
<PAGE> 11
5.2.14 Bank accounts - Bank guarantees
All the bank accounts opened in the Companies' name are listed
in Schedule (13) attached hereto. Schedule (13) specifies the
authorized signatories, conditions for overdraft facilities
granted by each bank and conditions of remuneration of each
bank for the issuance of guarantees in favor of third parties
to secure the Companies' undertakings or liabilities.
None of the Companies is a party to any loan agreements,
whether as lender or borrower, or other financing arrangements
except for those listed in Schedule (13).
There are no guarantees or other security devices granted by
the Companies to the benefit of any bank or any other third
party except for those listed in Schedule (13).
5.2.15 Agreements with Mr. Thierry Civetta
The Companies have not entered into any agreements, whether
oral or written, with Mr. Thierry Civetta which have not been
terminated on the date hereof.
5.2.16 Real Estate - Environment - Health and Safety
(a) The land and buildings owned by the Companies are
listed in Schedule (15) hereto.
The land and buildings owned by the Companies are free
and clear of any options, mortgages, liens, charges,
leases, conditions, claims, restrictions and other
encumbrances of any kind, and there exists no
restriction on the use, lease or transfer of such land
and buildings except as listed in Schedule (15).
(b) With the exception of the storage premises leased in
Thiviers, the Companies do not rent or share land,
buildings, premises or other real property. With
respect to leased premises, the related lease
agreements are valid and enforceable, the rents or the
fees have been paid when due in accordance with the
terms of said agreements, and there exists no basis for
termination under the terms of any of said agreements
as of the date hereof. The rights to the leases are not
subject to any option or security interest.
(c) With the exception of fibro-cement plates located in
the roofs of the buildings rented to, or owned by, the
Companies, the owners or tenants of the premises
occupied by the Companies have not indicated to them or
to Mr. Civetta whether said premises or the equipment
used as tenants by them contain asbestos. A report
drawn up by APAVE dated July 12, 1999 is attached
hereto in Schedule (15).
(d) The Companies have complied with applicable laws,
regulations and orders issued by any authority or
agency relating to health and safety.
To Mr. Thierry Civetta's knowledge, there exists no
liability or claim, pending or threatened, in respect
thereof, whether such legislation or order is already
in force or is to be implemented in the foreseeable
future.
<PAGE> 12
(e) To Mr. Thierry Civetta's knowledge in his capacity as
President and chairman of the Board of Directors
(President General) of the Companies, the Companies are
in full compliance with all environmental laws and
regulations and orders issued by any local or national
authorities, including, but not limited to, those
concerning land use and emissions to the air,
discharges to surface and subsurface waters and the
generation, handling, storage, transportation,
treatment and disposal of waste.
There exists no actual or potential environmental
responsibility or liability of the Companies.
5.2.17 Human Resources
(a) The list of employees attached hereto in Schedule (X)
gives complete and accurate details on the age,
seniority, position and gross remuneration of each of
the Companies' employees.
The employees have received in full all amounts payable
to them and benefit from all required social coverage
and insurance under their contracts as well as under
applicable legislation.
(b) Copies of the employment contracts with employees
having a gross monthly remuneration exceeding FF 10,000
are attached in Schedule (16) hereto. All other
employment agreements, except where there is a
particular contractual stipulation otherwise, follow
the current employment agreement standard forms for the
various categories of personnel employed by the
Companies. These employment contracts and particular
stipulations are also attached in said Schedule (16).
(c) Schedule (16) gives a full and accurate description of
all the direct or indirect benefits, profit-sharing
agreements, health insurance plans, bonus plans or
other agreements providing for any benefits in favor of
the employees, other than those provided for by laws
and regulations or the applicable collective bargaining
agreement.
To Mr. Thierry Civetta's knowledge, there exists no
claim nor potential conflict, whether individual or
collective, with respect to those matters.
(d) All labor laws and regulations applicable to dismissal
procedures, payment of salaries, social security
charges and indemnities, use of temporary workers,
employees' disciplinary rules and procedures and
keeping of books, registers and records have been and
are complied with.
To Mr. Thierry Civetta's knowledge, there exists no
potential or actual collective or individual claims or
disputes with respect to those matters.
(e) The Companies do not use the services of any
consultant, accountant or agent other than those listed
in Schedule (16) hereto and, accordingly, are not
required to pay any indemnification upon termination of
the agreements to provide services listed in said
Schedule other than the usual expenses and fees. Nor
are the Companies required to pay the social security
contributions attached to the services provided by the
consultants, accountants and other agents listed in
Schedule (16).
<PAGE> 13
(f) There exists no agreement to provide services,
including agreements to use the services of any
consultant or other agent, whether written or oral,
which might be considered as labor contracts and
involve all consequences attached thereto such as those
relating to wages and social security contributions.
5.2.18 Insurance
Listed in Schedule (17) hereto are the insurance policies
subscribed by the Companies such as the ones relating to
political risks which are covered by the Agences de Credit
Export (such as Coface).
Such policies provide insurance for the Companies' assets,
property, operations and staff in an adequate manner, and the
related premiums have been paid when due. The Companies are
not in breach of any of the terms and conditions of such
insurance policies, and have carried out all necessary
formalities for any loss or damage incurred, as of the date
hereof.
5.2.19 Liabilities
Except as fully reflected in the Financial Statements, the
Companies do not have any : (i) debts, liabilities or
obligations of a nature required to be reflected or disclosed
in Financial Statements prepared in accordance with generally
accepted accounting principles; or (ii) other debts,
liabilities or obligations, whether accrued, absolute,
contingent or otherwise, whether due or become due, relating
to or arising out of any act, transaction, circumstance or
state of facts which occurred or existed on or before the
Balance Sheet Date.
Except as set forth in the Schedules and hereunder in Article
5.2.7, the Companies have not incurred any debts, liabilities
or obligations, whether accrued, absolute, contingent or
otherwise, whether due or become due, other than debts,
liabilities and obligations incurred in the ordinary course of
business, none of which were incurred in violation of this
Agreement.
5.2.20 Litigation
(a) To Mr. Thierry Civetta's knowledge and with the
exception set forth in Schedule (18) hereto, no
actions, disputes, claims or proceedings are pending or
threatened against the Companies in any court or before
any governmental agency or authority which would
materially and adversely affect the performance of the
Companies' obligations under the agreements and
instruments to be executed by it pursuant to this
Agreement.
(b) No event has occurred, nor any omission noticed, which
is likely to give rise to any such action before any
court or governmental authority. Within the last three
years prior to the date hereof, the Companies have not
incurred any adverse judgment or governmental decision
which could affect the conduct of their business.
No actions, disputes, claims or proceedings are pending
or threatened against the Companies with respect to
products delivered.
<PAGE> 14
5.2.21 Compliance with contracts, laws and regulations
The Companies have validly entered into the contracts to which
they are parties and have complied with their obligations
under all such contracts, except as otherwise disclosed in
this Agreement. The Companies have carried on their business
in all material respects in accordance with all applicable
laws and regulations. Mr. Thierry Civetta is not aware of any
act or omission whatsoever as a result of which the Companies
could incur any liability thereunder.
5.2.22 Conduct of business
Since April 30, 1999, the Companies have conducted their
business in the ordinary course of business, consistent with
past practices, without change of policy or procedure,
including without limitation their practices in connection
with the treatment of expenses, selling and purchasing
policies and recovery of any amounts due to them by their
customers and there has been no material adverse change in the
business, activities or prospects of the Companies, except as
disclosed in Schedule (14) hereto.
5.2.23 It is stipulated that, at the Closing Date, Mr. Thierry
Civetta provides a guarantee only on the existence of the
inventories, but provides no guarantee of their condition or
amount.
ARTICLE 6 - INDEMNIFICATION BY MR. THIERRY CIVETTA
6.1 Mr. Thierry Civetta shall totally indemnify RG Barry, subject to the
provisions of Article 7 hereof, from and against any increase in
liabilities or decrease in assets resulting from losses, damages,
liabilities, claims, judgments, transactions, costs and expenses of any
kind (including reasonable and duly substantiated lawyers' fees and
expenses) related to facts which, having occurred before the Closing
Date, are caused by:
(a) any additional liability or shortfall of assets which has not been
recorded in the Financial Statements or has not been accounted for
as a reserve or for which a sufficient reserve or depreciation has
not been reflected in the Financial Statements provided to RG
Barry;
(b) any inaccuracy, insufficiency, violation or omission in any of the
representations and/or warranties and/or commitments made by Mr.
Thierry Civetta contained in Articles 5 and 6 above and in
particular:
- any written claim made by the employees or third parties
against the Companies, regardless of the nature thereof;
- any environment-related claim resulting from facts or
situations having occurred or taken place before the Closing
Date and in particular, any refurbishing or clean-up
obligation provided for by the regulations in force as of the
date hereof, with the exception of those refurbishing
obligations concerning the Companies' materials and equipment;
- any past due payment relating to tax, social security
contributions and fines attached thereto which might be
claimed by any tax or social security authority or any other
administrative authority to any of the Companies.
6.2 It is expressly agreed that the disclosure of documents
transmitted by the Companies to RG Barry's counsels before the
Closing Date and which are attached hereto in Schedule (14), does
not restrict in any way whatsoever Mr. Thierry Civetta's
obligations pursuant to his representations made in Article 5
hereof and the related warranties set forth in Article 6 hereof.
<PAGE> 15
ARTICLE 7 - EXEMPTION, THRESHOLD, LIMITATIONS AND DURATION OF THE WARRANTEES
7.1 Mr. Thierry Civetta shall guarantee RG Barry and the Companies against
claims only if an indemnification claim, whether separate from or added
to other indemnification claims, amounts to at least FF 200,000. When the
amount claimed is in excess of FF 200,000, Mr. Thierry Civetta's
obligation to indemnify RG Barry and the Companies shall be limited to
the amount exceeding FF 200,000 and subject to the provisions set forth
in Article 7.2 hereof.
7.2 With respect to any commitment covered by this Agreement, including
without limitation, the representations and warranties, Mr. Thierry
Civetta's guarantee shall be limited to a maximum amount of twenty-five
million French Francs (FF 25,000,000).
7.3 The only indemnities which may be granted to RG Barry pursuant to
performance hereof are provided for in Articles 6 and 7 hereof. No
obligation, representation or warranty other than those provided for
herein shall be the basis for any claim relating to the performance of
this Agreement.
Mr. Thierry Civetta shall not be liable with respect to any claim based
on the warranties when a specific reserve has been recorded in the
Financial Statements before April 30, 1999 for the facts which are the
basis for said claims. The specific reserves and their amount are listed
in Schedule (19) hereto.
When excessive and accounted for as an income of the Company, such excess
of reserves as recorded in the Financial Statements and listed in
Schedule (6-bis) hereto shall be deducted from the amount which Mr.
Thierry Civetta may be obligated to pay pursuant to any claim based
hereon.
Similarly, in the event that the claims for subsidies, referred to in the
letters (copies of which are attached hereto in Schedule (19)) from the
Prefecture of the Aquitaine Region dated September 30, 1999 and June 8,
1999, for amounts of FF 440,970 and FF 225,000, respectively, are
partially or fully paid, these amounts shall be deducted from any sums
that Mr. Thierry Civetta may be led to pay in respect of any claim
relating hereto.
Mr. Thierry Civetta shall not be liable pursuant to any claim relating
hereto if said claim is based on any modification in the laws,
regulations or administrative doctrines of any government or governmental
authority which might come into force subsequent to the date hereof and
have a retroactive effect.
Mr. Thierry Civetta shall not be liable for any claim relating hereto and
based on any modification in the accounting principles or methods used to
complete the Financial Statements if said modification occurs after the
Closing Date and has such retroactive effect as to modify the Financial
Statements approved before the Closing Date.
Mr. Thierry Civetta shall not be liable for any claim relating hereto if
through said claim, covered damage is sought to be indemnified. By
"covered damage", the Parties mean: all damages covered by an insurance
policy subscribed in the Companies' interest, if such insurance policy be
effective as of the date hereof or if such an insurance, now effective,
were maintained after the Closing Date; in the latter case, Mr. Thierry
Civetta shall remain guarantor of the payment of the claim if not covered
and/or paid by the insurance company.
<PAGE> 16
If Mr. Thierry Civetta pays RG Barry a sum of money claimed on the basis
hereof and if RG Barry is paid a sum of money by a third party on the
same basis as the one used for the claim against Mr. Civetta, RG Barry
shall pay Mr. Thierry Civetta a sum equal to the payment received.
For the purpose of determining the amount of money due by Mr. Thierry
Civetta pursuant to a claim based hereon, any reduction in taxes due by
RG Barry or the Companies, resulting from facts or events upon which the
claim against Mr. Thierry Civetta is based, shall be taken into account.
If and insofar as a claim based hereon is about a tax reassessment based
on charges and proceeds being recorded by the Companies in the Financial
Statements of a given year instead of another, Mr. Thierry Civetta shall
be liable only for the corresponding fines and late payment interest.
7.4 The duration of the warrantees shall be: (i) three years, for the
representations and warranties relating to any tax, social security and
customs liability, i.e., from the Closing Date until December 31, 2002
and (ii) two years from the Closing Date for any other claim or liability
under any other representation or warranty, subject to the cases and
conditions for extension provided for in Article 8 hereof.
ARTICLE 8 - INDEMNIFICATION CLAIMS
8.1 In his capacity of president and chairman of the Board of Directors of
the Companies and pursuant to his obligations as warrantor hereunder, Mr.
Thierry Civetta shall immediately notify RG Barry as soon as he becomes
aware of any event, situation or action whose occurrence or consequences
are covered by the representations and warranties.
Such notification shall set out in a reasonable and adequate manner the
event triggering the claim, the nature thereof and, if it can be
determined at the time of notification, the amount involved.
In the event a request, claim or action is made for an undetermined
amount prior to expiration of the time period set forth in Article 7.4,
the parties shall consult each other in good faith, within 30 days from
the notification, for the purpose of fixing the amount of the claim.
Failing an amicable determination of the amount of the claim, Mr. Thierry
Civetta and RG Barry shall, within 30 days, in order to determine the
amount of the claim. In the event of disagreement, the parties shall
appoint an expert for the purpose of fixing irrevocably the amount of
claim(s) to be covered by the representations and/or the warranties.
Failing an agreement on the appointment of an expert, the most diligent
of Mr. Thierry Civetta and RG Barry may petition before the relevant
courts for the appointment of an expert. If the amount is not determined
prior to expiration of the representations and warranties, RG Barry shall
claim indemnification under the representation/warranty on a provisional
basis prior to expiration of one of the two warranty periods, increased
by the notice periods provided for in the following two paragraphs, i.e.
until March 15, 2003 at the latest. Mr. Thierry Civetta's obligations
pursuant to the representations and warranties hereunder shall then be
maintained until the disputed claim(s) is definitely settled but only to
the extent of the amount of the claim as definitely fixed by the expert
and taking into account the aggregate amounts of these claims increased
by any late-payment interest, fines or penalties incurred until the date
of enforcement of the final decision of the authorities or courts or of a
settlement pursuant to the provisions of Article 2052 of the Civil Code..
<PAGE> 17
If notice is not provided within 45 days of the claim, i.e. no later than
February 15, 2003, and in any case within the legal time periods for
response and recourse, Mr. Thierry Civetta shall personally reimburse the
amount required and/or the fines and/or the penalties and/or the late
payment interest, payable since the expiration date of the legal time
period for response and recourse, until the date of actual payment.
8.2 RG Barry shall notify Mr. Thierry Civetta of its indemnification claim by
registered letter with return receipt within 30 days from the date of the
notice sent by Mr. Thierry Civetta, i.e. no later than January 31, 2003.
IF RG Barry fails to provide notice within this period, RG Barry may no
longer seek an indemnification based on these claims, and Mr. Thierry
Civetta may not be sought to be held liable in this respect.
If, within the 30 days following receipt of this notice sent by RG Barry,
Mr. Thierry Civetta does not notify RG Barry of its rejection, together
with the reasons therefor, of the indemnification claim, he shall be
expressly deemed to have accepted the indemnification claim and shall be
required to pay the amount claimed without delay.
If Mr. Thierry Civetta challenges the claim, he and RG Barry shall
attempt to resolve their dispute amicably, and if no agreement has been
reached within fifteen (15) days after the challenge of the claim, i.e.
April 30, 2003, they shall regain their freedom of action.
8.3 In the event of Mr. Thierry Civetta no longer running the Companies, he
shall be released from the notice obligation provided by Article 8.1, and
RG Barry shall be personally responsible for notifying Mr. Thierry
Civetta within 30 days of its discovery of an act or event upon which an
indemnification claim may be based pursuant hereto. This claim shall
include the information provided for in Article 8.2. If it does not
provide notice within the time periods set for above, RG Barry may not
claim an indemnification under the warranty based on such acts and
events.
ARTICLE 9 - BANK GUARANTEE (CAUTION BANCAIRE SOLIDAIRE)
As a guarantee of its representations and warranties, commitments and
obligations set forth in Articles 5 and 6 hereof, Mr. Thierry Civetta shall, as
of the date hereof, provide RG Barry with a guarantee from a first rate French
bank, Banque Credit Suisse Hottinguer, an original of said guarantee being
attached hereto as Schedule (16).
Such bank guarantee shall guarantee all the financial consequences of the
non-compliance by Mr. Thierry Civetta of his warrantor's obligations under
article 5 and 6 hereof, shall provide for a guarantee of payment of the maximum
sum of FF 4,000,000 (four million French Francs) and shall be effective from the
date hereof to December 31, 2002.
In any case, such bank guarantee shall remain in force for all claims initiated
prior to March 15, 2003 and until complete and final payment, whether amicable
or upon final judgment, of all claims, obligations, losses (including without
limitation, losses of profits), fees and expenses (including without limitation,
lawyers' fees) tax liabilities, damages and interest, fines and penalties
incurred by the Companies which have been notified to the guarantor prior to
December 31, 2002.
Any notifications and claims relating to this guarantee shall be made in writing
and, unless otherwise agreed, shall be sent by registered letter with
acknowledgment of receipt to the Bank, with a copy sent to Mr. Thierry Civetta.
<PAGE> 18
ARTICLE 10 - HANDLING OF CLAIMS AND DISPUTES
In the event the Companies are confronted with a claim or involved in a dispute
which might lead to an indemnification claim by RG Barry against Mr. Thierry
Civetta and/or the Bank, the Companies' interests shall be handled as follows:
10.1 If Mr. Thierry Civetta has specified, in writing and within the delays
provided for in this Agreement, that he accepts that the sums which might
be due by the Companies, or damages that might be suffered thereby as a
result of this dispute, are guaranteed by him as warrant pursuant to his
representations and warranties, the defense of the Companies' interests
will be managed by himself and he will accordingly choose and instruct
his counsels. Mr. Thierry Civetta may nonetheless waive this right and
leave it to RG Barry to defend the Companies' interests;
10.2 Otherwise (i.e., upon refusal by Mr. Thierry Civetta to perform his
obligations as warrantor), the Companies shall defend their interest in
consultation with RG Barry which shall decide ultimately upon the means
of defense and accordingly choose and instruct its counsels, subject to a
court decision, in the event of litigation between the Parties, regarding
Mr. Thierry Civetta's obligation to bear the consequences of this
dispute.
10.3 In any case, the party in charge of defending the Companies' interests
shall do so in a manner that is fair to the other party, taking care not
to harm the interests of the Companies.
The party in charge of the defense of the Companies shall keep the other
party informed of the dispute in the most complete manner. It shall
provide the other party with all documents relating to the dispute and
all procedural documents issued or received. It shall commit itself to
providing the information in due course so that the other party may give
its stance on the most appropriate way of defense within no more than 15
days following the transmittal of such document.
Under all circumstances, Mr. Thierry Civetta shall assist RG Barry in the
defense of RG Barry's or the Companies' interests when such interests
involve Mr. Thierry Civetta's representations and warranties hereunder,
and vice versa.
In case of emergency, Mr. Thierry Civetta shall defend the Companies'
interest and RG Barry's interest. RG Barry and Mr. Thierry Civetta shall
agree to have the dispute handled by the former or the latter in
accordance with the terms and conditions provided for in Article 10.1 and
10.2.
ARTICLE 11 - REPRESENTATIONS OF RG BARRY AND RG BARRY FRANCE
RG Barry represents vis-a-vis Mr. Thierry Civetta and the Natwest Group the
following:
11.1 RG Barry has the powers and authorizations which are necessary to enter
into this Agreement and the Shareholder Agreement.
11.2 This Agreement and the Shareholder Agreement are performed by RG Barry in
accordance with their respective terms.
11.3 RG Barry has obtained from its board of directors all authorizations
necessary to enter into this Agreement and the Shareholders' Agreement.
11.4 The performance by RG Barry of its obligations under this Agreement and
the Shareholders' Agreement:
<PAGE> 19
11.4.1 does not constitute a violation of its by-laws;
11.4.2 does infringe any court or administrative decision;
11.4.3 does not require any specific authorization from the United States
or French authorities but only the filing of a direct foreign
investment declaration form (Declaration d'Investissment Direct
Etranger) with the French Ministere de l'Economie et des Finances.
11.5 RG Barry holds on the date hereof the sums necessary to perform its
financial obligations hereunder.
ARTICLE 12 - CONDITIONS TO THE CLOSING
Mr. Thierry Civetta shall have:
(i) full ownership of all the shares representing the capital stock of
Escapade;
(ii) prepared and forwarded to RG Barry the following documents to be signed
on the Closing Date:
- the Bank Guarantee referred to in Article 9 hereof;
- the Shareholders' Agreement entered into between himself and RG Barry;
- the shareholder's current account agreement between himself and
Escapade.
- the loan agreement between RG Barry France and Escapade.
ARTICLE 13 - PROVISION AND EXCHANGE OF DOCUMENTS AT CLOSING
Mr. Thierry Civetta shall remit to RG Barry the following documents:
13.1 Concerning Fargeot et Compagnie:
(i) Minutes of the Board of Directors Meeting of Fargeot et Compagnie dated
April 28, 1999, deciding to attribute an exceptional bonus of FF
1,000,000 to Mr. Thierry Civetta;
(ii) Minutes of the Ordinary Shareholders' Meeting of Fargeot et Compagnie
dated June 30, 1999 approving the accounts and deciding upon the
distribution of dividends amounting to FF 400,000,000;
(iii) Minutes of the Ordinary Shareholders' Meeting of Fargeot et Compagnie
dated July 22, 1999, taking formal notice of the resignation of members
of the Board of Directors and deciding on the appointment of new members
of the Board of Directors, and the corresponding share transfer orders.
13.2 Concerning Michel Fargeot SA:
(i) Minutes of the Ordinary Shareholders' Meeting of Michel Fargeot SA dated
June 30, 1999, approving the accounts;
(ii) Minutes of the Ordinary Shareholders' Meeting of Michel Fargeot SA dated
July 22, 1999, taking formal notice of the resignation of members of the
Board of Directors and deciding on the appointment of new members of the
Board of Directors, and the corresponding share transfer orders.
<PAGE> 20
13.3 Concerning Escapade:
(i) Minutes of the Extraordinary Shareholders' Meeting of April 29, 1999,
approving new shareholders of Escapade SARL, a copy of the corresponding
share transfer deed dated May 3, 1999;
(ii) Minutes of the Extraordinary Shareholders' Meeting of June 4, 1999,
carrying out the increase in capital of Escapade SARL from FF 50,000 to
FF 250,000, and appointing a transformation supervisor;
(iii) Minutes of the Ordinary Shareholders' Meeting of June 4, 1999, approving
Escapade SARL's accounts;
(iv) Minutes of the Extraordinary Shareholders' Meeting of Escapade SARL dated
July 22, 1999, deciding to transform the company into a Societe Anonyme,
to adopt an approval clause, to create two classes of shares, to close
the financial year on April 30, to approve new shareholders and to
appoint new members of the Board of Directors and statutory auditors;
(v) Minutes of the Ordinary Shareholders' Meeting of Escapade SARL dated June
28, 1999, attributing an exceptional bonus of FF 396,000 to Mr. Thierry
Civetta;
(vi) Share transfer orders representing 80% of the shares making up the share
capital of Escapade SA, of which Mr. Thierry Civetta holds 100%, and
those enabling Mr. Thierry Civetta to become sole shareholder;
(vii) Minutes of Escapade's first Board of Directors' Meeting appointing the
chairman of the Board of Directors, and authorizing him (i) to enter into
the loan agreement with RG Barry France and the shareholder's current
account agreement on behalf of Escapade, (ii) immediately to take out a
loan of FF 14,770,780 aimed at fully repaying the principal and interest
of the sums respectively advanced by Escapade, under the form of a loan
granted by RG Barry France and a shareholder's current account by Mr.
Thierry Civetta and (iii) to acquire the Fargeot et Compagnie Shares held
by the Natwest Group and Mr. Michel Fargeot;
(viii) The by-laws of Escapade under the form of a Societe Anonyme.
13.4 Other documents:
(i) bank guarantee of an amount of FF 4,000,000 issued by the bank Credit
Suisse Hottinguer for the purpose of guaranteeing, from the Closing Date
until December 31, 2002 and in accordance with the terms and conditions
set forth in Article 9 hereof, any financial consequences resulting from
non-performance by Mr. Thierry Civetta of his obligations hereunder;
(ii) the shareholders' current account advance agreement entered into between
Escapade and Mr. Thierry Civetta, for an amount of FF 3,234,000, and the
loan agreement between Escapade and RG Barry France, for an amount of FF
11,536,780, with a duration of 1 month, automatically extendible by 1
month periods and within the limit of two (2) months, repayable in
principal and interest, the rate of which is calculated in accordance
with Article 39-1,3(degree) of the French General Tax Code (Code General
des Impots). In the event of extension and until the date on which
Escapade obtains a bank loan, the interest is repayable on a monthly
basis.
(iii) the shareholders' agreement between Mr. Thierry Civetta and RG Barry;
<PAGE> 21
(iv) receipt and discharge from Mr. Thierry Civetta to RG Barry for payment of
the sum of FF 14,863,220, representing the sale price of 80% of the
Escapade shares.
RG shall remit to Mr. Thierry Civetta:
(i) Minutes of the Board of Directors meeting of RG Barry authorizing Mr.
Gordon Zacks and/or Mr. Richard Burrell and/or any other person
personally appointed as an attorney in fact to sign this Agreement and
any other documents necessary to its performance;
(ii) power of attorney designating the person duly entitled to act in the name
and on behalf of RG Barry;
(iii) power of attorney designating the person entitled to sign and act in the
name and on behalf of RG Barry France for purposes of the signing and
performance of the loan agreement with Escapade referred to in Articles
4, 12 and 13;
(iv) the three irrevocable transfer orders in favor of Mr. Thierry Civetta and
Escapade for a total amount of FF 14,863,220, representing payment of the
sale price of 80% of the Escapade shares, in accordance with the terms
and conditions provided by Article 4 hereof.
The companies of the Natwest group and Mr. Michel Fargeot shall, respectively,
remit to Escapade the share transfer orders representing the transfer of 980
Fargeot et Compagnie Shares as set forth in Article 2 hereof;
Escapade shall remit to the Natwest Group the bank checks amounting to FF
14.770.780, i.e.:
(i) FF 1,145,489.66 to Mr. Michel Fargeot for 76 Fargeot et Compagnie
Shares;
(ii) FF 6,797,573.25 to FCPR County Natwest Venture France for 451
Fargeot et Compagnie Shares;
(iii) FF 6,797,573.25 to SCA Capital Prive-Investissments for 451
Fargeot et Compagnie Shares;
(iv) FF 15,072.22 to Hoche Investissements for 1 Fargeot et Compagnie
Share;
(v) FF 15,072.22 to SA Capital Prive for 1 Fargeot et Compagnie Share;
ARTICLE 14 - EXPENSES
Each Party shall pay its own fees and expenses in relation with the negotiation
and execution of this Agreement and the other agreements and instruments to be
executed pursuant to this Agreement.
ARTICLE 15 - MISCELLANEOUS
11.1 Default
Except as otherwise provided for in this Agreement, neither of the
Parties hereto shall be deemed to be in default under any of the terms of
this Agreement and neither Party shall seek or be entitled to enforce any
remedy for any claimed default, unless said claimed default is not cured
or corrected within fifteen (15) days following receipt by the Party
against whom such default is claimed of a written notice of said claimed
default from the other Party.
<PAGE> 22
11.2 Waiver
The failure of any of the Parties to enforce any of the provisions of
this Agreement at any time shall not be construed to be a waiver of such
provision unless specifically so notified by a duly authorized
representative of such Party to the other Party in writing which writing
shall expressly set forth the exact nature of such waiver. No waiver of
any breach of this Agreement shall be held to be a waiver of any other
breach.
11.3 Entire Agreement and Amendments
This Agreement, including those agreements and documents to the extent
incorporated herein by reference, constitutes the entire agreement
between the Parties and supersedes all prior agreements or understandings
relating to the subject matter hereof.
No Party shall claim any amendment to this Agreement unless it is in
writing, sets forth the exact nature of such amendment and is signed by a
duly authorized representative of each Party hereto.
11.4 Headings
All headings herein are for convenience only.
11.5 Severability
In the event any term or provision of this Agreement shall for any reason
be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
term or provision of the Agreement, and this Agreement shall be
interpreted and construed as if such term or provision, to the extent to
which it is invalid, illegal or unenforceable, had never been contained
in this Agreement provided, however, that such invalidity, illegality or
unenforceability shall not result in a material change of this Agreement.
11.6 Notices
It shall be a sufficient receipt of any notice or other communication in
writing hereunder if one Party desiring to give such notice or other
communication sends the notice or communication by registered or
certified mail letter, delivery in person or express courier to the other
Party. Such notice or other communication shall be deemed to have been
duly given upon receipt by the other Party, to the address set forth
below or to such other address as such other Party shall have designated
in writing :
(i) To Mr. Thierry Civetta: Mr. Thierry Civetta
Le Fouillage,
24460 Chateau L'Eveque
with copy to: Simmons & Simmons
68 rue du Faubourg Saint-Honore
75008 Paris
Attention: Maitre Jacques de Taisne
(ii) To Mr. Michel Fargeot: Mr. Michel Fargeot
Le Petit-Gue, Nantheuil de Thiviers,
24800 Thiviers
<PAGE> 23
with copy to: Simmons & Simmons
68 rue du Faubourg Saint-Honore
75008 Paris
Attention: Maitre Jacques de Taisne
(iii) To the companies of the Natwest Group:
Natwest Equity Partners
9, rue de Phalsbourg,
75017 Paris
Attention: Mr. Marc Foulds
with copy to: Simmons & Simmons
68 rue du Faubourg Saint-Honore
75008 Paris
Attention: Maitre Jacques de Taisne
(iv) To RG Barry: RG BARRY CORPORATION
13405 Yarmouth Rd. NW
Pickerington, OHIO 43147 USA
Attention: Gordon Zacks and/or Richard Burrell
with copy to: FIDAL Direction Paris et International
5, cours Valmy, F92923
Paris La Defense
Attention: Maitres Philippe Breton and/or
Pierre-Maudez Caille
(v) To RG Barry France: RG BARRY FRANCE HOLDINGS INC.
13405 Yarmouth Rd. NW
Pickerington, OHIO 43147 USA
Attention: Gordon Zacks and/or Richard Burrell
with copy to: FIDAL Direction Paris et International
5, cours Valmy, F92923
Paris La Defense
Attention: Maitres Philippe Breton and/or
Pierre-Maudez Caille
(vi) To Escapade: Escapade SA
Le Petit Gue
24800 Nantheuil de Thiviers
Attention: Mr. Gordon Zacks and/or Richard Burrell
with copy to: FIDAL Direction Paris et International
5, cours Valmy, F92923
Paris La Defense
Attention: Maitres Philippe Breton and/or
Pierre-Maudez Caille
ARTICLE 16 - APPLICABLE LAW
This Agreement is governed by and construed under and in accordance with the
laws of France.
<PAGE> 24
ARTICLE 17 - DISPUTES
Any dispute between the Parties arising from or in connection with the present
Agreement shall be resolved amicably between the Parties, failing which such
dispute shall fall within the jurisdiction of the courts of Paris.
ARTICLE 18 - LANGUAGE
This Agreement is entered into in French.
Executed in nine (8) originals
on July 22, 1999
in Paris
/s/ Thierry Civetta /s/ Thierry Civetta
Mr. THIERRY CIVETTA Mr. MICHEL FARGEOT
represented by Mr. Thierry Civetta
/s/ Pierre-Oliver Barennes
FCPR COUNTY NATWEST VENTURE FRANCE
represented by Natwest Equity Partners, itself represented by
Mr. Pierre-Olivier Barennes
/s/ Pierre-Oliver Barennes /s/ Pierre Oliver-Barennes
SCA CAPITAL PRIVE-INVESTSSEMENTS HOCHE INVESTISSEMENTS
represented by represented by
Mr. Pierre-Olivier Barennes Mr. Pierre-Olivier Barennes
/s/ Pierre-Oliver Barennes /s/ Yves Gaget
SA CAPITAL PRIVE RG BARRY CORPORATION
represented by Mr. Pierre- represented by Mr. Yves Gaget
Olivier Barennes
/s/ Thierry Civetta
ESCAPADE
represented by Mr. Thierry Civetta
<PAGE> 1
EXHIBIT 10.1
Translated from the French for Information Purposes Only
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement is made this day of July 20th 1999.
BETWEEN
Mr. THIERRY CIVETTA, a French citizen born in Paris, France, on December 12,
1956 and residing at La Fouillarge, 24460 Chateau-l'Eveque.
AND:
RG BARRY Corp., a US corporation incorporated under the laws of the State of
OHIO, whose corporate headquarters are located at 13405 Yarmouth Rd. NW,
Pickerington, Ohio 43147, USA (hereafter referred to as "RG Barry") represented
by Mr. Yves Gaget, duly empowered for the purpose of this Agreement pursuant to
a corporate resolution and power of attorney in accordance with the corporate
resolution attached as Exhibit (1) to this Agreement.
Mr. THIERRY CIVETTA and RG BARRY being collectively referred to hereinafter as
the "Parties", or "Shareholders".
WHEREAS:
A. RG Barry has acquired 80% of the issued share capital of ESCAPADE SA
from Mr. Thierry Civetta, who holds the remaining 20% pursuant to a
stock purchase agreement entered into by and between the parties as of
the date hereof.
B. It is in the best interest of Escapade SA that RG Barry and Mr. THIERRY
CIVETTA have an orderly and harmonious shareholders relationship in
accordance with the terms of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
CLAUSE 1 - DEFINITIONS
For the purpose of this Agreement, the following terms shall have the meanings
set forth below:
"BUSINESS DAY" means any week day (except Saturdays, Sundays
and public holidays).
"FARGEOT GROUP OF COMPANIES" means Escapade Etablissements Fargeot et
Compagnie, Michel Fargeot SA and any other
company directly or indirectly controlled by
Escapade SA.
"STOCK PURCHASE AGREEMENT" means the agreement entered into by and
between Mr. THIERRY CIVETTA and RG BARRY.
THE CLOSING DATE means the date hereof.
<PAGE> 2
"THE COMPANY" means ESCAPADE SA, a societe anonyme with
share capital of FF 250,000, whose registered
office is in Thivviers 24800 Nantheuil, Le
Petit Gue, France, registered with the
Perigueux Trade and Companies Registry under
number B 384 485 601.
CLAUSE 2 - GOVERNANCE OF ESCAPADE SA
2.1 BOARD OF DIRECTORS
The Board of Directors of each company of the Fargeot Group
consists of four (4) members and may be convened at any time, by
each and any of the Director members of the Board.
Mr. Thierry Civetta shall be the President and Chairman of the
Board of Directors ("President Directeur General") of each company
of the Fargeot group for a period of five years after the closing
date with an annual gross remuneration for his services to
Fargeot, in respect of the same scope of work and responsibilities
as he has hitherto assumed of 1 million French francs (FF.
1,000,000), as per the following breakdown: FF 216,000 paid by
Michel Fargeot SA, and FF 784,000 paid by Etablissements Fargeot
et Cie SA.
The Board of each company of the Fargeot group shall meet at least
annually, unless a special meeting is required by any one
Director.
Agenda and Board Papers shall be distributed at least fourteen
(14) days before annual meetings, and at least three (3) Business
Days before any other scheduled meeting.
The parties expressly agree to consult each other on the
anniversary date of this agreement for the purpose of
restructuring Mr. Civetta's remuneration if necessary and in the
best respective interests of the parties.
2.2 CATEGORIES OF SHARES
The shares of Escapade SA held by RG Barry are Class A shares of Escapade SA and
the shares held by Mr. Thierry Civetta and any other shareholders
of Escapade SA are Class B shares of Escapade SA.
Holders of Class A shares are entitled to propose for nomination and election
three (3) members of the Board of Directors of Escapade SA and the
holder of Class B shares is entitled to propose for nomination and
election one (1) member of the Board of Directors.
CLAUSE 3 - SALE OF THE BALANCE OF MR. CIVETTA'S SHARES IN ESCAPADE
3.1 RG Barry irrevocably undertakes to purchase from Mr. Civetta the
number of company shares held by Mr. Civetta as of the date of the
exercise of the option provided for in Article 4.2 of this
agreement.
3.2 Said option shall be exercised by Mr. Civetta in whole only and as
from July 20, 2004 until December 31, 2009 at the latest.
3.3 The purchase price of the company shares shall be calculated on
the basis of the following formula:
<PAGE> 3
Formula =
8.75 x 20% of the average pro forma net Fargeot group profit of
the last two years preceding the year during which said option is
exercised
where:
"Pro forma net Fargeot group profit" means: the net accounting
profit of the Fargeot Group of companies determined according
to French consolidation principles.
The net accounting profit of the Fargeot group will be adjusted to
take account of any transactions between the Fargeot Group and the
RG Barry Group which may not be on arms' length terms.
For the purpose of calculating the consolidated net accounting
profit of the Fargeot Group of Companies in accordance with French
consolidation principles, the statutory auditors of the Fargeot
Group of Companies shall annually draw up consolidated accounts as
from the Closing Date and on the basis of the certified accounts
of each Fargeot group company.
CLAUSE 4 - PUT OPTION CLAUSE
4.1 In the event of Mr. Civetta's resignation as Chairman of the Board
of Directors for reason of:
(i) a person or persons acting together acquiring
control of RG Barry (whether by tender offer, merger
or otherwise); or
(ii) the death of Mr. Gordon Zacks or his dismissal or
resignation as chief executive of RG Barry (or his
otherwise ceasing to perform the functions of chief
executive of RG Barry for a continuous period of at
least 12 months), and/or
(iii) in the event of death, permanent incapacity or
ill-health of Mr. Civetta,
(iv) in the event of Mr. Thierry Civetta's resignation as
President (President Directeur General) of one of
the Companies of the group for any reason
whatsoever,
RG Barry irrevocably undertakes to purchase Mr. Civetta's
shareholding in the Company's capital on the basis of a price
calculated in accordance with the price formula and procedure set
forth in Article 4.3.
4.2 In case of the occurrence of an event referred to in Article
5.1.(i), (ii) and (iii), Mr. Thierry Civetta or his assignees may
exercise this option as from the date of the event and for a
period of six months. The exercise of this option shall be carried
out upon first demand by Mr. Thierry Civetta or his assignees by
registered letter with return receipt requested.
4.3 The sale of shares must occur no later than the fifth Business Day
following the date on which the option shall be exercised by Mr.
Thierry Civetta or his assignees. Mr. Thierry Civetta shall remit,
duly signed, the share transfer forms (ordres de mouvements)
relating to the shares. RG Barry shall remit to Mr. Thierry
Civetta or his assignees a bank check or any other means of
payment accepted by Mr. Thierry Civetta or his assignees, made
payable to him in payment of the price of these shares.
<PAGE> 4
CLAUSE 5 - CALL OPTION CLAUSE
RG Barry shall have the right to purchase Mr. Civetta's shares of
Escapade SA after 12 months from the closing date (i.e. after July
20, 2000) and until December 31, 2009.
For this purpose, RG Barry shall notify Mr. Thierry Civetta of its
intent to purchase his shares by registered letter with
acknowledgment of receipt, in accordance with the price formula
and procedure set forth in Article [4].
The parties further agree that in the event that, within 12 months
as from the sale of shares pursuant to this Article, more than 50%
of the Company's voting rights and capital are sold at a higher
unitary realization value per share than the price resulting from
this call option, Mr. Thierry Civetta shall receive from RG Barry
the difference between the value of the shares on the day the call
option is exercised and the value on the day of the sale of more
than 50% of the Company's voting rights and capital, in due
proportion to the number of shares actually sold in respect of the
day on which this call option is exercised, after subtraction of
the portion of costs of any kind whatsoever generated by RG
Barry's sale of more than 50% of Escapade SA's voting rights and
capital. It is understood that, in the event that the unitary
share price on the day of the sale of more than 50% of the
Company's voting rights and capital is less than the unitary share
price on the day of the call option, Mr. Thierry Civetta shall not
owe any sum.
CLAUSE 6 - TRANSFER OF SHARES
6.1 Mr. Thierry Civetta undertakes not to sell or pledge his shares of
the Company, unless a pledge of such shares is required to obtain
the bank financing necessary for the Company to purchase shares of
Fargeot et Cie.
6.2 Any sale, transfer, pledge, encumbrance or other disposition in
violation of this Agreement will be null and void, if the
potential beneficiary of such sale, transfer, pledge or
encumbrance has not been approved by the other parties and/or if
the transferor does not procure the transferee's written consent
to be bound by the terms of this Agreement.
6.3 Subject to the terms and conditions set forth in this Agreement
and in the Articles of Association, in case RG Barry intends to
transfer, in whole or in part, its shares in the Company to a
third party, RG Barry shall undertake to procure an offer from
said third party providing that the shares held by Mr. Thierry
Civetta will be transferred to said third party at the same price
as its own shares.
For this purpose, RG Barry shall notify by registered letter with acknowledgment
of receipt to Mr. Thierry Civetta the number of shares that it
intends to transfer as well as the transfer price and any other
substantial terms and conditions of the transaction.
Mr. Thierry Civetta shall notify by registered letter with acknowledgment of
receipt to RG Barry his intent to transfer his shares to said
third party under the same terms and conditions. In that case, RG
Barry is not allowed to transfer its shares to said third party
unless the shares held by Mr. Thierry Civetta are offered to be
transferred at the same terms and conditions.
In the event of failure by Mr. Thierry Civetta to respond within fifteen (15)
days as from the date of notification by RG Barry, Mr. Thierry
Civetta shall be deemed to have waived his right provided for
under this clause.
<PAGE> 5
CLAUSE 7 - RIGHT OF PREEMPTION
RG Barry may at any time sell part or all of its shares of the Company to any
third party, subject to the following:
Such sale of all or part of its shares by RG Barry to a third party shall be
subject to Mr. Thierry Civetta's preemptive right to purchase said
shares under the same terms and conditions as those offered to the
third party.
Notice of the planned transfer shall be given by RG Barry to Mr. Thierry Civetta
by registered letter with acknowledgement of receipt and contain
complete details of the identity of the third party, the number of
shares concerned in the envisaged transfer and the offer price.
Mr. Thierry Civetta shall have, under penalty of foreclosure, a time limit of 30
days as from the receipt of the notice by RG Barry of the said
information, to purchase the relevant shares, his decision being
notified by registered letter with acknowledgement of receipt and
having to be sent to RG Barry within this time period.
If, within the time period granted to him, Mr. Thierry Civetta has not purchased
all the shares concerned, the preemptive right shall be deemed not
to have been exercised and the transfer of all the shares may be
made by RG Barry to the third party.
Mr. Thierry Civetta shall have no preemptive right in the event of a sale of RG
Barry Corporation.
CLAUSE 8 - ANTI-DILUTION CLAUSE
RG Barry undertakes not to effect any increase in the share capital of Escapade
SA involving a waiver of the shareholders' preferential rights of
subscription, whilst Mr Thierry Civetta remains a shareholder of
Escapade SA.
CLAUSE 9 - INFORMATION OBLIGATION
Mr. Civetta shall draw up monthly reports of the activities
concerning the Companies in a form agreed upon by the Parties,
which reports shall be transmitted to RG Barry.
CLAUSE 10 - SHAREHOLDERS' ADVANCES
10.1 In connection with Escapade's acquisition, on the date hereof, of
49% of the shares making up the capital of Etablissements Fargeot
et Compagnie, pursuant to the Stock Purchase Agreement, the
financing was set up and paid to Escapade as follows:
- FF 3,234,000 by Mr. Thierry Civetta in the form of a
shareholder's current account advance,
- FF 11,536,780 by RG Barry France Holding Inc. in the form of a
loan.
In this respect, it is provided that this advance and loan are
entered into for a term of one month, which is automatically
extendible for a period of one months, up to a limit of two
months. It is understood that Escapade may repay this advance and
loan prior to the due date in the event that it takes out a bank
loan prior to the due date, which bank loan is to be intended to
repay said advance and loan on a preferred basis. Said advance and
loan shall
<PAGE> 6
bear interest as set out in Article 39-1.3(degree) of the French
General Tax Code, i.e. currently 4.38%.
10.2 Mr. Thierry Civetta shall make his best effort to negotiate and
propose to Escapade, RG Barry and RG Barry France Holding, bank
financing in the amount of FF 14,770,780. RG Barry may not
unreasonably refuse the terms and conditions of said bank
financing.
In the event that RG Barry and RG Barry France Holding refuse the
terms and conditions of the bank financing proposed by Mr.
Civetta, RG Barry and RG Barry France Holding undertake either (i)
to purchase from Mr. Thierry Civetta the amount of the advance he
contracted, referred to in 10.1., or (ii) that Escapade shall take
out a bank loan in the same amount as that advanced by Mr. Thierry
Civetta, referred to in 10.1., under the terms and conditions
negotiated by the latter.
10.3 It is expressly provided that any repayment in respect of the
advances effected by RG Barry France Holding and Mr. Thierry
Civetta shall be made on a pro-rata basis according to the amounts
advanced by Mr. Thierry Civetta and RG Barry France Holding.
CLAUSE 11 - CONFLICTS
In the event of any conflict between the terms of this agreement and those of
the Articles of Association of Escapade SA, the terms of this
Agreement shall prevail and the shareholders shall take all
necessary steps to modify the Articles of Association in order to
make them consistent with terms of this Agreement, subject to
mandatory public policy rules provided by French company law.
CLAUSE 12 - NOTICES
It shall be a sufficient receipt of any notice or other communication in writing
hereunder if one Party desiring to give such notice or other
communication sends the notice or communication by registered or
certified mail, delivery in person or express courier to the other
Party. Such notice or other communication shall be deemed to have
been duly given upon receipt by the other Party, at the address
set forth below or at such other address as such other Party shall
have designated in writing:
To Mr. Thierry Civetta: MR. THIERRY CIVETTA,
with copy to: SIMMONS AND SIMMONS
To the attention of Maitre Jacques de Taisne
68, rue du Faubourg Saint-Honore
75008 Paris
To RG Barry: RG BARRY CORPORATION,
Attention: Mr. Burrell
13405 Yarmouth Rd. NW
Pickerington, Ohio, 43147 U.S.A.
with copy to: FIDAL Direction Paris et International,
5, cours Valmy,
F92923 Paris La Defense
Attention: Maitre Philippe Breton and Maitre
Pierre Mandez-Caille
<PAGE> 7
To RG Barry France Holding Inc.:
13405 Yarmouth Rd. NW
Pickerington, Ohio 43147 U.S.A.
with copy to: FIDAL Direction Paris et International,
5, cours Valmy,
F92923 Paris La Defense
Attention: Maitre Philippe Breton and Maitre
Pierre Mandez-Caille
CLAUSE 13 - TERMINATION
The Shareholders' Agreement shall take effect as from the date hereof and shall
remain effective until December 31, 2009 so long as RG Barry and
Mr. Thierry Civetta remain shareholders of the Company.
CLAUSE 14 - APPLICABLE LAW AND JURISDICTION
14.1 This Agreement shall be governed and construed in accordance with
French law.
14.2 Any dispute between the Parties as to the interpretation or
performance of this Agreement shall be brought before the
competent courts falling within the jurisdiction of the Court of
Appeal of Paris.
CLAUSE 15 - ENTIRE AGREEMENT AND AMENDMENTS
This Agreement, including those agreements and documents to the extent
incorporated herein by reference, constitutes the entire agreement
between the Parties and supersedes all prior agreements or
understandings relating to the subject matter hereof.
No Party shall claim any amendment to this Agreement unless it is in writing,
sets forth the exact nature of such amendment and is signed by a
duly authorized representative of each Party hereto.
CLAUSE 16 - MISCELLANEOUS
16.1 WAIVER
The failure of any of the Parties to enforce any of the provisions
of this Agreement at any time shall not be construed to be a
waiver of such provision unless specifically so notified by a duly
authorized representative of the non defaulting Party to the other
Party in writing which writing expressly sets forth the exact
nature of such waiver. No waiver of any breach of this Agreement
shall be held to be a waiver of any other breach.
16.2 SEVERABILITY
In the event any term or provision of this Agreement shall for any
reason be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect
any other term or provision of the Agreement, and this Agreement
shall be interpreted and construed as if such term or provision,
to the extent to which it is invalid, illegal or unenforceable,
had never been contained in this Agreement provided, however,
<PAGE> 8
that such invalidity, illegality or unenforceability shall not
result in a material change of this Agreement.
16.3 CONFIDENTIALITY
Neither Party shall disclose any information whatsoever relating
to this Agreement without having obtained the prior written
consent of the other Party.
16.4 LANGUAGE
This Agreement is entered into and executed in French.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Executed in two (2) counterparts
On July 22, 1999,
In Paris
/s/ Thierry Civetta /s/ Yves Gaget
Mr. Thierry Civetta RG BARRY
Represented by Mr. Yves Gaget
<PAGE> 1
EXHIBIT 10.2
Translated from the French
CURRENT ACCOUNT AGREEMENT
BETWEEN THE UNDERSIGNED:
1. The company ESCAPADE SA, a French societe anonyme (corporation) with share
capital of FF 250,000, whose registered office is located at Le Petit Gue,
24800 Nantheuil de Thiviers, registered with the Commercial and Companies
Registry of Perigueux under the number 384 486 601,
Hereinafter referred to as "the Company",
represented by Mr. Yves Gaget, duly authorized for purposes hereof by decision
of the Board of Directors dated July 20, 1999;
AND
2. Mr. Thierry Civetta, a French national, born in Paris, France on December
12, 1956 and residing in La Fouillarge, 24460 Chateau-l'Eveque.
WHEREAS:
On July 20, 1999, Escapade SA's Board of Directors authorized its Chairman to
enter into a shareholder's current account agreement with Mr. Thierry Civetta in
the amount of FF 3,234,000, and to take out a loan in the amount of FF
11,636,780 from RG Barry France Holding, Inc.
Mr. Thierry Civetta, in his capacity of legal representative of RG Barry France,
agrees to grant Escapade SA a current account advance under the terms and
conditions set out hereafter.
NOW, THEREFORE, IT IS HEREBY STATED AND AGREED AS FOLLOWS:
Article 1 - Advance on shareholder's current account
Mr. Thierry Civetta now remits to the Company, on account number 20112500001
opened in the books of the Credit Suisse Hottinguer, 38 rue de Provence 75009
Paris, a sum of FF 3,234,000 as a shareholder's current account advance.
Article 2 - Term
This current account advance is granted for a term of one month, which is
automatically renewable for a period of one month within the limit of two
months.
Nonetheless, the Company may make advance repayment of the entirety of said
advance in the event that, prior to the term thus provided for, it takes out a
bank loan that is first allocated to the repayment of said advance and of the
loan granted by RG Barry France Holding, Inc.
Article 3 - Remuneration
The sums advanced to the Company shall bear interest at the rate set out in
Article 39-1 3(degree) of the French General Tax Code, which is currently 4.38%.
<PAGE> 2
Interest shall be paid monthly on the 20th of each month.
Article 4 - Repayment
The Company shall be required to repay the sums advanced to it by Mr. Thierry
Civetta in accordance with the conditions provided for by Article 2 above.
Article 6 - Applicable law - Competent jurisdiction
This agreement is subject to French law and to the jurisdiction of the
Commercial Court of Paris.
Executed in Paris
On July 22, 1999
In two counterparts
/s/ Yves Gaget /s/ Thierry Civetta
Escapade SA, represented by Mr. Thierry Civetta
Mr. Yves Gaget
<PAGE> 1
EXHIBIT 10.3
Translated from the French
JOINT GUARANTEE
Granted by
THE CREDIT SUISSE HOTTINGUER (the Bank)
as Guarantor
To
RG BARRY CORPORATION
As Beneficiary
Relating to the stock purchase agreement entered into between Mr. Thierry
Civetta and RG Barry on July 22, 1999.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<C> <S> <C>
1. DEFINITIONS..............................................................4
2. GUARANTEE COMMITMENT.....................................................4
3. TERM.....................................................................5
4. NOTIFICATIONS............................................................5
5. APPLICABLE LAW - CHOICE OF JURISDICTION..................................5
</TABLE>
<PAGE> 2
This joint guarantee is granted on July 22, 1999 by
(1) THE CREDIT SUISSE HOTTINGUER, a French societe anonyme (corporation)
with share capital of EUR 52,888,000, whose registered office is at 38,
rue de Provence, 75009 Paris, registered with the Commercial and
Companies Registry of Paris under the number RCS B 317 823 755,
represented by Mr. Pascal DEFEVER and Mr. Georges PEREZ, duly
authorized for purposes hereof,
(hereinafter referred to as the "Guarantor"),
to:
(2) RG BARRY CORPORATION, incorporated under the laws of Ohio, whose head
office is at 13045 Yarmouth Rd. NW, Pickerington, Ohio, 43147, the
United States, represented by Mr. Yves Gaget, duly authorized for
purposes hereof pursuant to the decision and power of attorney annexed
hereto,
(hereinafter referred to as the "Beneficiary"),
WHEREAS:
(A) Pursuant to the stock purchase agreement dated July 22, 1999, the
Beneficiary acquired from Mr. Thierry CIVETTA 2,000 shares of ESCAPADE
SA, a French societe anonyme (corporation) with capital of FF 250,000,
whose registered office is at Le Petit Guet - Nantheuil de Thiviers,
24800 Thiviers, registered with the Commercial and Companies Registry
of Perigueux under the number B 384 486 601.
(B) Under the terms of said stock purchase agreement, Mr. Thierry CIVETTA
gave representations and guarantees and undertook to indemnify the
Beneficiary, until March 15, 2003 and within the limit of an amount of
FF 25,000,000, for any harm which may result from any inaccuracies or
violation of the representations and guarantees provided for in the
stock purchase agreement.
(C) The stock purchase agreement also provides for the obligation of Mr.
Thierry CIVETTA to provide RG BARRY with a joint bank guarantee issued
by a first-rate European bank.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS
1.1. The terms used in this Guarantee that start with a capital letter
(including those in the recital) have, unless otherwise stated, the
meaning attributed to them in the stock purchase agreement.
1.2. Furthermore:
"GUARANTEED COMMITMENTS" means any commitments of sums of money undertaken
by Mr. Thierry CIVETTA in respect of Articles 6 and
7 of the stock purchase agreement.
2. GUARANTEE COMMITMENTS
2.1. The Guarantor unconditionally and irrevocably stands personal, joint
and indivisible
<PAGE> 3
security for the Beneficiary of the payment by Mr. Thierry CIVETTA of
the Guaranteed Commitments.
2.2. The Guarantor waives its right to claim the benefices de discussion et
de division (benefit of discussion and division)1. Therefore, the
Beneficiary may ask the Guarantor by registered letter with return
receipt requested ("the Notice") to perform this commitment in favor of
the Beneficiary merely after notice by registered letter with return
receipt
requested has been provided to Mr. Thierry CIVETTA to no avail. The
Beneficiary shall not by any means be required first to exhaust all of
his means of recourse against Mr. Thierry CIVETTA or against any of the
latter's third party guarantors.
2.3. The Guarantor's MAXIMUM COMMITMENT under this guarantee is in the
amount of FF 4,000,000 (FOUR MILLION FRENCH FRANCS).
2.4. The Guarantor represents that it is perfectly aware of Mr. Thierry
CIVETTA's situation and financial needs and the nature of his
obligations arising under the stock purchase agreement, a copy of which
is annexed hereto.
2.5. The Guarantor acknowledges having received a copy of the stock purchase
agreement and having accepted the terms thereof.
1 Translator's note: This benefit refers to the right a surety has to cause the
property of the principal debtor to be applied in satisfaction of
the obligation in the first instance, and/or the privilege of one
of several co-sureties to insist upon paying only its pro-rata
share of the debt.
3. TERM
The Guarantor is bound as from the date of this guarantee until March 15, 2003.
Nonetheless, the Guarantor shall continue to be bound beyond said date until
complete and final payment is made, either amicably or by judicial decision, of
any action or claim relating to the Secured Bonds and which has been the subject
of a Notice received by the Guarantor prior to March 15, 2003 in accordance with
the provisions of Articles 8 and 9 of the stock purchase agreement.
4. NOTICES
Any notices and claims relating to this Guarantee shall be made in writing and,
unless otherwise agreed, sent by registered letter with return receipt requested
to the following addresses:
As regards the Guarantor:
MR. GEORGES PEREZ
Credit Suisse Hottinguer
38, rue de Provence
75009 Paris
Fax: 01 40 82 61 28
As regards the Beneficiary:
RG BARRY
13405 Yarmouth Road NW.
Pickerington, Ohio, 43143 USA
<PAGE> 4
Fax:
To the attention of: Mr. Richard BURRELL, Mr. Gordon ZACKS, with copy to FIDAL
Direction International, 5 Cours Valmy, F, 92923 Paris La Defense to the
attention of Messrs. Philippe BRETON and Pierre MAUDEZ-CAILLE.
5. APPLICABLE LAW - CHOICE OF JURISDICTION
5.1. This guarantee shall be governed by French law.
5.2. Any dispute arising or resulting from this guarantee shall be brought
before the Commercial Court of Paris.
Executed in Paris on July 22, 1999,
In three original counterparts, including one for registration (the registration
fees being at the Guarantor's expense).
CREDIT SUISSE HOTTINGUER
As Guarantor
PASCAL DEFEVER GEORGE PEREZ
/s/ Pascal Defever /s/ George Perez
<PAGE> 1
EXHIBIT 10.4
Translated from the French
LOAN AGREEMENT
BETWEEN THE UNDERSIGNED:
1. The company ESCAPADE SA, a French societe anonyme (corporation) with share
capital of FF 250,000, whose registered office is located at Le Petit Gue,
24800 Nantheuil de Thiviers, registered with the Commercial and Companies
Registry of Perigueux under the number 384 486 601,
Hereinafter referred to as "the Company",
represented by Mr. Thierry Civetta, acting in his capacity of Chairman of the
Company's Board of Directors, duly authorized for purposes hereof;
AND
2. The company RG BARRY FRANCE HOLDINGS INC., whose head office is at 13405
Yarmouth Rd., NW, Pickerington, Ohio, 43147, the United States,
Hereinafter referred to as "RG Barry France",
represented by Mr. Yves Gaget, duly authorized for purposes hereof.
WHEREAS:
On July 20, 1999, Escapade SA's Board of Directors authorized its Chairman to
take out a loan in the amount of FF 11,636,780 from RG Barry France Holding,
Inc. and an advance on a shareholder's current account in the amount of FF
3,234,000 from Mr. Thierry Civetta.
Mr. Yves Gaget, in his capacity of legal representative of RG Barry France,
agrees to grant Escapade SA a loan under the terms and conditions set out
hereafter.
NOW, THEREFORE, IT IS HEREBY STATED AND AGREED AS FOLLOWS:
Article 1 - Loan
RG Barry now remits to the Company, on account number 20112500001 opened in the
books of the Credit Suisse Hottinguer, 38 rue de Provence 75009 Paris, a sum of
FF 11,636,780 as a loan.
Article 2 - Term
This loan is granted for a term of one month, which is automatically renewable
for a period of one month within the limit of two months.
Nonetheless, the Company may make advance repayment of the entirety of said loan
in the event that, prior to the term thus provided for, it takes out a bank loan
that is first allocated to the repayment of this loan and of said advance.
<PAGE> 2
Article 3 - Remuneration
The sums lent to the Company shall bear interest at the rate set out in Article
39-1 3(degree) of the French General Tax Code, which is currently 4.38%.
Interest shall be paid monthly on the 20th of each month.
Article 4 - Repayment
The Company shall be required to repay the sums lent to it by RG Barry in
accordance with the conditions provided for by Article 2 above.
Article 5 - Representations of RG Barry France
RG Barry France certifies to Escapade the following representations:
RG Barry has the necessary powers and authorizations to enter into and perform
this loan agreement.
This loan agreement is performed by RG Barry France in accordance with its
provisions.
RG Barry France has obtained all the necessary authorizations from its board of
directors for purposes of entering into this loan agreement.
RG Barry France's performance of its obligations arising hereunder:
o does not constitute a violation of its bylaws;
o does not put it in violation of any judicial decision or of any decision of
an administrative authority;
o does not necessitate the obtaining of special authorization from the US or
French authorities.
Article 6 - Applicable law - Competent jurisdiction
This agreement is subject to French law and to the jurisdiction of the
Commercial Court of Paris.
Executed in Paris
On July 22, 1999
In two counterparts
/s/ Thierry Civetta /s/ Yves Gaget
Escapade SA, represented by RG Barry France Holdings, Inc.,
Mr. Thierry Civetta represented by Mr. Yves Gaget
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> OCT-02-1999
<CASH> 4,951
<SECURITIES> 0
<RECEIVABLES> 43,233
<ALLOWANCES> 6,169
<INVENTORY> 50,995
<CURRENT-ASSETS> 101,273
<PP&E> 44,890
<DEPRECIATION> 30,215
<TOTAL-ASSETS> 126,485
<CURRENT-LIABILITIES> 43,875
<BONDS> 8,571
0
0
<COMMON> 9,328
<OTHER-SE> 58,036
<TOTAL-LIABILITY-AND-EQUITY> 126,485
<SALES> 88,020
<TOTAL-REVENUES> 88,020
<CGS> 52,823
<TOTAL-COSTS> 52,823
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 998
<INCOME-PRETAX> (10,648)
<INCOME-TAX> (4,008)
<INCOME-CONTINUING> (6,640)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,640)
<EPS-BASIC> (0.70)
<EPS-DILUTED> (0.70)
</TABLE>
