FORM 10Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 24, 1996
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: 0-14394
TOWN & COUNTRY CORPORATION
(Exact name of Registrant as specified in its charter
Massachusetts 04-2384321
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification
or organization) Number)
25 Union Street,
Chelsea, Massachusetts 02150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 884-8500
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
On December 16, 1996, the Registrant had outstanding 23,313,212 shares of
Class A Common Stock, $.01 par value and 2,664,927 shares of Class B Common
Stock, $.01 par value. The Registrant also had 1,401,351 shares of Convertible
Preferred Stock, $1 par value, outstanding on December 16, 1996. These shares
are immediately convertible into 2,802,702 shares of Class A Common Stock.
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results could
differ materially from those set forth in the forward-looking statements.
Certain factors that might cause such a difference include the effects on
continuing operations of the Balfour sale, the inability of the Company to
amend its Working Capital Facility as a result of the Balfour transaction and
the Company's inability to sell or sublease its real estate located in
Attleboro and North Attleboro, Massachusetts.
<PAGE>
TOWN & COUNTRY CORPORATION Form 10-Q
Page 2
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 24, February 25,
1996 1996
ASSETS (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 739,773 $ 5,151,929
Restricted cash 105,305 102,012
Accounts receivable--
Less allowances for doubtful
accounts of $3,659,000 at
11/24/96 and $2,120,000 at
2/25/96 69,533,940 51,294,879
Inventories (Note 4) 45,929,148 90,138,403
Prepaid expenses and other
current assets 6,857,776 1,956,537
Total current assets $ 123,165,942 $ 148,643,760
PROPERTY, PLANT & EQUIPMENT, at cost $ 75,012,025 $ 84,073,513
Less - Accumulated depreciation 43,541,372 43,814,604
$ 31,470,653 $ 40,258,909
INVESTMENT IN AFFILIATES $ 17,246,585 $ 15,765,482
OTHER ASSETS $ 5,873,035 $ 6,461,345
$ 177,756,215 $ 211,129,496
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
TOWN & COUNTRY CORPORATION Form 10-Q
Page 3
CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
November 24, February 25,
1996 1996
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Notes payable to banks (Note 3) $ 31,547,641 $ 15,193,176
Current portion of long-term debt (Note 3) 13,441,325 244,928
Accounts payable 22,710,933 20,237,262
Accrued expenses 13,004,900 15,078,569
Accrued taxes 646,098 659,744
Total current liabilities $ 81,350,897 $ 51,413,679
LONG-TERM DEBT, less current portion
(Note 3) $ 78,528,150 $ 93,174,432
OTHER LONG-TERM LIABILITIES $ 1,063,094 $ 1,122,625
Total liabilities $ 160,942,141 $ 145,710,736
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST $ 5,114,636 $ 5,228,363
EXCHANGEABLE PREFERRED STOCK, $1.00
par value--$14.59 preference value-
Authorized--200,000 shares
Issued and outstanding--152,217 shares $ 2,343,534 $ 2,319,476
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value-
Authorized and unissued--800,000 and
2,266,745 shares, respectively $ -- $ --
Convertible Preferred Stock, $1.00 par
value, $6.50 preference value
Authorized--4,000,000 and
2,533,255 shares, respectively
Issued and outstanding--1,407,361 and
2,288,567 shares, respectively 1,407,361 2,288,567
Class A Common Stock, $ .01 par value-
Authorized--40,000,000 shares
Issued and outstanding--23,301,192
and 21,235,246 shares, respectively 233,012 212,352
Class B Common Stock, $.01 par value-
Authorized--8,000,000 shares
Issued and outstanding--2,664,927 shares 26,649 26,649
Additional paid-in capital 75,561,343 74,175,437
Retained deficit (67,872,461) (18,832,084)
Total stockholders' equity $ 9,355,904 $ 57,870,921
$ 177,756,215 $ 211,129,496
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
TOWN & COUNTRY CORPORATION Form 10-Q
Page 4
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
November 24, November 26, November 24, November 26,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $ 80,527,978 $ 86,395,380 $ 181,984,187 $ 203,560,405
COST OF SALES 55,154,612 58,990,465 123,536,397 139,614,070
INVENTORY CHARGE (Note 1) -- -- 35,521,000 --
Gross profit $ 25,373,366 $ 27,404,915 $ 22,926,790 $ 63,946,335
SELLING, GENERAL &
ADMINISTRATIVE
EXPENSES 20,425,922 17,753,273 61,330,299 52,303,005
Income (loss) from
operations $ 4,947,444 $ 9,651,642 $ (38,403,509)$ 11,643,330
INTEREST EXPENSE, net (3,017,241) (3,257,106) (9,168,769) (9,306,077)
MINORITY INTEREST (91,999) (306,465) 49,311 (641,116)
GAINS/LOSSES ON SALES OF
REAL ESTATE (Note 7) (742,330) 417,220 (742,330) 417,220
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
TOWN & COUNTRY CORPORATION Form 10-Q
Page 5
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
November 24, November 26, November 24, November 26,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INCOME (LOSS) BEFORE
INCOME TAXES $ 1,095,874 $ 6,505,291 $ (48,265,297)$ 2,113,357
PROVISION (BENEFIT)
FOR INCOME TAXES 60,000 (131,002) 200,025 172,500
NET INCOME (LOSS) $ 1,035,874 $ 6,636,293 $ (48,465,322)$ 1,940,857
ACCRETION OF DISCOUNT
AND DIVIDENDS ON
PREFERRED STOCKS 232,890 255,320 575,050 786,359
INCOME (LOSS)
ATTRIBUTABLE TO
COMMON STOCKHOLDERS $ 802,984 $ 6,380,973 $ (49,040,372)$ 1,154,498
INCOME (LOSS)PER COMMON
SHARE (Note 5): $ 0.03 $ 0.27 $ (1.94) $ 0.05
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING
(Note 5): 25,966,119 23,834,596 25,330,088 23,728,355
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
TOWN & COUNTRY CORPORATION Form 10-Q
Page 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
November 24, November 26,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (48,465,322) $ 1,940,857
Adjustments to reconcile net income (loss)
to net cash used in operating activities-
Depreciation and amortization 2,428,956 3,158,261
Loss (gain) on disposal of certain
assets 742,330 (417,220)
Undistributed earnings of affiliates,
net of minority interest (49,311) 641,116
Interest paid with issuance of debt -- 4,200,569
Change in assets and liabilities--
Decrease (increase) in accounts
receivable (18,239,061) (29,916,289)
Decrease (increase) in inventory 44,209,255 (7,168,729)
Decrease (increase) in prepaid
expenses and other current assets (3,148,465) (1,508,121)
Decrease (increase) in other assets 385,629 (565,989)
Increase (decrease) in accounts
payable 2,473,671 12,285,254
Increase (decrease) in accrued
expenses (2,073,669) (2,487,790)
Increase (decrease) in accrued taxes (13,646) (634,678)
Increase (decrease) in other
liabilities (59,531) (121,007)
Net cash used in operating
activities (21,809,164) (20,593,766)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,307,208) (1,964,608)
Investment in affiliate (1,481,103) (380,000)
Proceeds from sale of certain assets 5,135,955 950,772
Net cash provided by (used in) investing
activities 1,347,644 (1,393,836)
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
TOWN & COUNTRY CORPORATION Form 10-Q
Page 7
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
November 24, November 26,
1996 1995
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on revolving credit facilities $ (160,742,252) $ (170,254,833)
Proceeds from borrowings under
revolving credit facilities 177,096,717 193,562,171
Payments on long-term debt (211,755) (1,535,039)
Proceeds from the issuance of common stock 40,989 12,072
Decrease (increase) in restricted cash (3,293) (37,624)
Payment of dividends (131,042) (128,359)
Net cash provided by
financing activities $ 16,049,364 $ 21,618,388
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ (4,412,156) $ (369,214)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 5,151,929 3,336,921
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 739,773 $ 2,967,707
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the period for:
Interest $ 12,572,804 $ 8,033,387
Income taxes 258,600 810,265
</TABLE>
Supplemental Disclosure of Noncash Investing and Financing Activities (Note 6)
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 24, 1996
(1) Inventory Charge
During the period from late August up to and including the issuance of this
report, the Company implemented a program to recycle approximately $44 million
of inventory to recover gold and diamonds to meet immediate production
requirements. The Company also sold, for approximately $2 million, inventory
with an original cost basis of approximately $5 million. The Company charged
second quarter operations approximately $35.5 million. Of this amount
approximately $2.5 million was incurred in the second quarter. The remaining
approximately $33.0 million represents third quarter activity. Final valuation
of recovered diamonds and stones and inventory reconciliations are currently
expected to be completed during the fourth quarter of fiscal 1997.
These actions were taken when access to cash and gold under the Company's
working capital facility and gold leasing agreement became constrained near the
end of the second quarter and on a more pronounced basis in the third quarter,
and also because of the Company's commitment to meet its customers' shipping
requirements.
(2) Significant Accounting Policies
The unaudited consolidated financial statements presented herein have been
prepared by the Company and contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly and on a basis consistent
with the consolidated financial statements for the year ended February 25, 1996,
the Company's financial position as of November 24, 1996, and the results of its
operations for the three- and nine-month periods ended November 24, 1996, and
November 26, 1995, and cash flows for the nine-month periods ended November 24,
1996, and November 26, 1995.
The results of operations for the nine months ended November 24, 1996 are
not necessarily indicative of the results to be expected for the year due to the
seasonal nature of the Company's operations and the significant inventory charge
taken in the quarter ended August 25, 1996.
The significant accounting policies followed by the Company are set forth
in Note (2) of the Company's consolidated financial statements for the year
ended February 25, 1996, which have been included in the Annual Report on Form
10-K, Commission File Number 0-14394, for the fiscal year ended February 25,
1996. Except as disclosed below, the Company has made no change in these
policies during the nine months ended November 24, 1996.
Certain reclassifications have been made to the fiscal 1996 financial
statements to conform with presentation of the fiscal 1997 financial statements.
<PAGE>
Long-Lived Assets
On February 26, 1996, the Company adopted Financial Accounting Standard
Board's Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
of ". SFAS No. 121 addresses accounting and reporting requirements for long-term
assets based on their fair market values. The Company's financial condition and
results of operations were not materially impacted as a result of adopting SFAS
No. 121.
Stock Options
On February 26, 1996, the Company adopted SFAS No. 123 "Accounting for
Stock-Based Compensation". The Company intends to continue accounting for its
stock based compensation plans for employees in accordance with Accounting
Principles Board Opinion (APB) No. 25. Under SFAS No. 123, companies choosing to
continue to use APB No. 25 to account for stock based compensation plans for
employees, must make footnote disclosure of the effects that use of the
valuation methods described in SFAS No. 123 would have on their earnings per
share. The Company will disclose this information in the notes to its
consolidated financial statements for the fiscal year ended February 23, 1997.
The Company accounts for non-employee stock based compensation under SFAS No.
123.
(3) Loan Arrangements
On July 3, 1996, the Company entered into a new credit agreement with
Foothill Capital Corporation ("Foothill"). The agreement provides senior secured
financing consisting of a $40 million revolving credit facility and a $30
million letter of credit in support of a Gold Consignment Facility provided by
Fleet Precious Metals ("Fleet"); however, the aggregate amount of the combined
facilities which may be outstanding at any date is $65 million. The agreement is
for a period of two years and provides Foothill with an option to renew for
three additional years. The loans bear interest at a rate per annum equal to the
greater of (a) 2% above the reference rate announced by an identified group of
major banks selected by Foothill or (b) 8%. The agreement contains standard
covenants for facilities of this type including financial covenants relating to
interest coverage, minimum net worth, minimum working capital, debt to net worth
and current ratios and limitations on dividends, distributions and capital
expenditures. Advances under the credit line are based on eligible accounts
receivables and inventory. Foothill has first priority security interest in
receivables, inventory and substantially all real estate and fixed assets owned
by the Company and its domestic subsidiaries subject to Fleet's first position
as gold consignor, supported by the letter of credit.
The Company's results of operations created a potential violation of a
financial covenant in its working capital facility. The Company has received a
waiver of this financial covenant from Foothill. The working capital facility,
pursuant to its terms, is expected to be amended following completion of the
Balfour sale (Note 8), to reflect such sale.
<PAGE>
During the first quarter of fiscal 1996, the Company used its final PIK to
make the semiannual interest payment due May 13, 1995, on the 13% Senior
Subordinated Notes, due May 31, 1998, with approximately $4.2 million of
additional notes. The Company is obligated to make semiannual cash interest
payments of approximately $4.5 million. Such payments were made on May 15, 1996
and on November 14, 1996, in accordance with the loan agreement.
In charging the second quarter with the inventory charge, the Company
reduced its net worth below a covenant threshold established in the Senior
Secured Notes and Senior Subordinated Notes. The Company has amended the
indentures to the Senior Secured Notes and the Senior Subordinated Notes. Such
amendments, among other things, reduced the covenant threshold referred to above
to a level that is below the Company's net worth as of November 24, 1996.
The Company's domestic gold facility provides secured gold consignment
availability of approximately 70,000 troy ounces. A subsidiary of the Company
has an agreement with a gold supplier to provide secured gold consignment
availability of approximately 4,800 troy ounces. As of November 24, 1996,
approximately 64,000 ounces of gold valued at approximately $24.0 million were
on consignment under the Company's gold consignment facilities.
(4) Inventories
Inventories consisted of the following at November 24, 1996, and February
25, 1996:
November 24, 1996 February 25, 1996
Raw Materials $14,321,815 $14,820,768
Work-in-Process 12,868,462 9,947,057
Finished Goods 18,738,871 65,370,578
$45,929,148 $90,138,403
(5) Income (Loss) Per Common Share
Income (loss) per common share is computed by adjusting the Company's net
income (loss) for the accretion of discount and dividends on preferred stocks
and dividing by the weighted average number of common and common equivalent,
where dilutive, shares outstanding during each period.
(6) Supplemental Disclosure of Noncash Investing and Financing Activities
On May 15, 1995, the Company issued approximately $4.2 million in new 13%
Senior Subordinated Notes due May 31, 1998, as payment of the semiannual
interest installment. Approximately $2.5 million of this amount was classified
as accrued expense in the February 26, 1995, Consolidated Balance Sheet.
During the third quarter of fiscal 1997, the Company sold two properties on
which it accepted notes totaling approximately $0.9 million as payment of
portions of the sales prices.
<PAGE>
(7) Sale of Real Estate
On November 14, the Company sold its building in New York City for a gross
sale price of $6.2 million, of which $5.3 million was paid in cash. The Company
has a note receivable for the remaining $0.9 million which bears interest at 9%
per annum and is due on January 15, 1997. In the interest of generating cash on
the sale of the property as quickly as possible, management accepted an offer
for less than the carrying value of the property. As a result, the Company
sustained a loss of approximately $0.8 million on the sale.
(8) Sale of Balfour
Assets On December 16, 1996, the Company sold certain assets of its Balfour
subsidiary constituting substantially all of the operations of Balfour to
Commemorative Brands, Inc. (CBI) a new company formed by Castle Harlan Partners
II, L.P. CBI also assumed certain liabilities of Balfour.
In October 1996, the Federal Trade Commission (FTC), which had been
reviewing the transaction since May 1996, gave preliminary approval to a
modified agreement between the Company and CBI. Final FTC approval was received
on December 26, 1996.
At closing, on December 16, 1996, the Company received cash equal to the
purchase price of $44 million, plus $2.7 million in working capital adjustment
from January 28, 1996 to the date of closing, plus $4.9 million representing the
value of gold on hand as of the date of closing less $14 million which was
placed in escrow pending final FTC approval. On December 31, 1996, the Company
received the $14 million. Approximately $6 million of the proceeds will be used
to pay transaction costs and liabilities not assumed in the sale. The actual
determination of net proceeds available, if any, in excess of the working
capital facility balance, is pending the determination of the final working
capital adjustments. The working capital and gold values are contingent upon
pending reconciliations to be completed within 45 days from date of closing for
working capital and 90 days for gold.
The following pro forma condensed consolidated balance sheet and condensed
consolidated statements of operations of the Company present the effects of the
sale, as if, for balance sheet purposes, the transaction had taken place on
November 24, 1996, and for statement of operations purposes, the transaction had
taken place February 27, 1995 for the year ended February 25, 1996 and February
26, 1996 for the nine month period ended November 24, 1996. The pro forma
statements do not purport to represent what the Company's financial position or
results of operations would actually have been if such transaction in fact had
occurred on such date or at the beginning of the periods indicated or to project
the Company's financial position or results of operations for any future date or
periods.
The pro forma condensed consolidated balance sheet and statements of
operations and accompanying notes should be read in conjunction with the
Company's Consolidated Financial Statements and related notes thereto for the
year ended February 25, 1996 included in the Company's annual report on Form
10-K and in conjunction with the Company's Consolidated Financial Statements and
related notes thereto included in the Company's quarterly report on Form 10-Q of
which this footnote is a component.
<PAGE>
In the Pro Forma Condensed Consolidated Statements of Operations, the
Balfour subsidiary's results of operations are being deducted from the Company's
consolidated results. In addition, adjustments are included for the benefit
derived from the use of proceeds and the cost associated with continuing
exposure on the leased property.
In the Pro Forma Condensed Consolidated Balance Sheet, the Balfour column
represents the sale of certain Balfour assets and assumption of certain Balfour
liabilities while the adjustments represent the pro forma use of proceeds,
change in the carrying value of the real estate and recording of a potential
liability associated with leased property.
<PAGE>
TOWN & COUNTRY CORPORATION
Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended February 25, 1996 (1) (3)
<TABLE>
<CAPTION>
Total Consolidate
Total Consolidate Balfour Adjustments Excluding Balfour
<S> <C> <C> <C> <C>
NET SALES $ 250,577,816 $ (71,300,472)$ 0 $ 179,277,344
COST OF SALES 173,141,311 (35,598,485) 0 137,542,826
Gross Profit 77,436,505 (35,701,987) 0 41,734,518
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 66,407,484 (33,495,663) (1,492,489)(2) 31,419,332
Income (loss) from operations 11,029,021 (2,206,324) 1,492,489 10,315,186
INTEREST EXPENSE, net (12,475,409) 582,941 2,034,738 (2) (10,010,660)
(152,930)(4)
GAIN (LOSS) ON SALE OF REAL ESTATE 417,220 (417,220) 0 0
MINORITY INTEREST (673,079) 0 0 (673,079)
Income (loss) before provision for (1,702,247) (2,040,603) 3,374,297 (368,553)
income taxes
PROVISION FOR INCOME TAXES 163,867 0 0 163,867
Net income (loss) (1,866,114) (2,040,603) 3,374,297 (532,420)
ACCRETION OF DISCOUNT AND DIVIDENDS
ON PREFERRED STOCKS 1,039,802 0 0 1,039,802
Income (loss) attributable to co$ (2,905,916)$ (2,040,603)$ 3,374,297 $ (1,572,222)
stockholders
INCOME (LOSS) PER COMMON SHARE $ (0.12) $ (0.07)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 23,769,323 23,769,323
</TABLE>
<PAGE>
TOWN & COUNTRY CORPORATION
Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended November 24, 1996 (1) (3)
<TABLE>
<CAPTION>
Total Consolidated
Total Consolidated Balfour Adjustments Excluding Balfour
<S> <C> <C> <C> <C>
NET SALES $ 181,984,187 $ (55,520,590)$ 0 $ 126,463,597
COST OF SALES 123,536,397 (27,021,311) 0 96,515,086
INVENTORY CHARGE 35,521,000 0 0 35,521,000
Gross Profit 22,926,790 (28,499,279) 0 (5,572,489)
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 61,330,299 (27,844,318) (1,183,471)(2 32,302,510
Income (loss) from operations (38,403,509) (654,961) 1,183,471 (37,874,999)
INTEREST EXPENSE, net (9,168,769) 431,082 1,427,419 (2 (7,424,965)
(114,697)(4)
GAIN (LOSS) ON SALES OF REAL ESTATE (742,330) (32,135) 0 (774,465)
MINORITY INTEREST 49,311 0 0 49,311
Income (loss) before provision for (48,265,297) (256,014) 2,496,193 (46,025,118)
income taxes
PROVISION FOR INCOME TAXES 200,025 (91,000) 0 109,025
Net income (loss) (48,465,322) (165,014) 2,496,193 (46,134,143)
ACCRETION OF DISCOUNT AND DIVIDENDS
ON PREFERRED STOCKS 575,050 0 0 575,050
Income (loss) attributable to co$ (49,040,372)$ (165,014)$ 2,496,193 $ (46,709,193)
stockholders
INCOME (LOSS) PER COMMON SHARE $ (1.94) $ (1.84)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 25,330,088 25,330,088
</TABLE>
<PAGE>
Notes to Pro Forma Condensed Consolidated Statements of Operations
(1) The Statements of Operations assume that the entire purchase price was
received on the closing date and excludes any impact from the escrow period.
(2) The negotiations which ultimately arrived at a purchase price of $44
million for the Balfour business were based on the financial position of Balfour
in the January-February 1996 time period and, therefore, for the purposes of
determining pro forma interest savings, no working capital adjustment was
assumed.
For the purpose of determining pro forma interest and gold consignment fee
savings, the effective rate of the debt and consigned gold being reduced, is
applied for the period being presented.
<TABLE>
<CAPTION>
Twelve Months
Effective Debt Ended
($ in 000's) Interest Rate Reduction February 25, 1996
Notes payable to banks
<S> <C> <C> <C>
(working capital facility) 11.67% $11,118 $1,298
Senior Secured Notes 11.50% 6,411 737
Total Pro Forma Interest
Savings $2,035
Pro Forma Gold Consignment
Fee Savings 7.1% $21,021 $1,492
Nine Months
Effective Debt Ended
Interest Rate Reduction November 24, 1996
Notes payable to banks
<S> <C> <C> <C>
(working capital facility) 11.67% $15,193 $1,330
Senior Secured Notes 11.50% 1,132 97
Total Pro Forma Interest
Savings $1,427
Pro Forma Gold Consignment
Fee Savings 7.10% $22,225 $1,183
</TABLE>
Debt reduction assumptions are based on a closing at the February 27, 1995
and February 26, 1996 for the twelve month and nine month pro forma statements
of operations, respectively, hich approximate the seasonal low point in the
balance of the working capital facility, and on the application of all available
proceeds to first reduce the working capital facility, next the gold consignment
facility and then outstanding debt. The actual close took place at approximately
the seasonal high point of the working capital facility. The actual
determination of net proceeds available, if any, in excess of the working
capital facility balance, depends also on the timing of the release of the
escrowed funds and the determination of the final working capital and gold
adjustments.
(3) The sale did not include any real property. The prime component of real
property is a facility in Attleboro, Massachusetts with a net book value of
approximately $2.3 million and a fair value of approximately $1.4 million. A
$1.1 million impairment of the carrying value of the facility has been
recognized in association with this transaction. Such amount is reflected as an
adjustment to the Pro Forma Condensed Consolidated Balance Sheet and excluded
from the Pro Form Statements of Operations due to its nonrecurring nature. The
Company is leasing the property to CBI on a temporary basis for approximately
eight months. The Company has begun searching for a buyer. It is possible that
the Company will be required to hold the facility for an unspecified amount of
time after CBI vacates the facility before being able to complete a sale. The
Company has estimated a one year time to sell and has included an estimate of
the carrying costs, approximately $128,000, in determining the nonrecurring
charge.
(4) The sale did not include the assumption of a lease of a facility in
North Attleboro, Massachusetts. The Company is subleasing the property to CBI on
a temporary basis for approximately eight months. The Company has begun a search
for a permanent sublessee(s). However, it is possible that the Company will be
required to hold the property for an unspecified amount of time after CBI
vacates the facility before being able to find replacement tenants, or that the
Company may be required to lease the property at lower rent payments than the
Company is currently obligated to pay.
The Company's future lease obligation for this facility is for
approximately twelve years at an average annual cost of approximately $664,000.
Minimum annual operating cost is assumed to be approximately $110,000.
For the purpose of determining the pro forma potential effect of this
liability on continuing operations of the Company, it was assumed that the
property remains vacant for one year after CBI vacates and then is leased for
the remainder of the term at 80% of the Company's contractual liability plus
100% of the operating costs. The net cash flow of this scenario, discounted at
11.1%, has been included as a nonrecurring charge in the Pro Forma Condensed
Consolidated Balance Sheet and the future first year interest, also at 11.1%,
has been included in the Pro Forma Condensed Consolidated Statements of
Operations.
The Company expects to evaluate the sublease environment in greater depth
during the next few months and will be including the result of this evaluation
in the determination of the liability to be recorded in its fiscal 1997 year end
financial statements on Form 10-K.
<PAGE>
TOWN & COUNTRY CORPORATION
Pro Forma Condensed Consolidated Balance Sheet
As of November 24, 1996 (1) (3)
<TABLE>
<CAPTION>
Total Consolidated
Total Consolidated Balfour Adjustments Excluding Balfour
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 739,773 $ 47,057,133 $ (47,057,133)(4) 739,773
Restricted cash 105,305 0 0 105,305
Accounts receivable, less allowances for 0
doubtful accounts 69,533,940 (20,244,869) 0 49,289,071
Inventories 45,929,148 (9,525,832) 10,068,584 (4) 46,471,900
Prepaid expenses and other current asse 6,857,776 (721,939) 0 6,135,837
Total current assets 123,165,942 16,564,493 (36,988,549) 102,741,886
PROPERTY, PLANT AND EQUIPMENT, net 31,470,653 (5,608,030) (1,100,000)(2) 24,762,623
INVESTMENT IN AFFILIATES 17,246,585 0 0 17,246,585
OTHER ASSETS 5,873,035 (2,757,100) 0 3,115,935
$ 177,756,215 $ 8,199,363 $ (38,088,549) $ 147,867,029
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks $ 31,547,641 $ 0 $ (31,547,641)(4) 0
Current portion of long-term debt 13,441,325 0 0 13,441,325
Accounts payable 22,710,933 (2,201,606) 0 20,509,327
Accrued expenses 13,004,900 (5,349,125) (1,390,908)(4) 6,979,867
715,000 (5)
Accrued taxes 646,098 0 0 646,098
Total current liabilities 81,350,897 (7,550,731) (32,223,549) 41,576,617
LONG-TERM DEBT, less current portion 78,528,150 0 0 78,528,150
OTHER LONG-TERM LIABILITIES 1,063,094 (1,170,084) 662,749 (5) 555,759
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 5,114,636 0 0 5,114,636
EXCHANGEABLE PREFERRED STOCK, 2,343,534 0 0 2,343,534
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value - 0 0 0 0
Convertible Preferred Stock, $1.00 par v 1,407,361 0 0 1,407,361
Class A Common Stock, $.01 par value - 259,661 0 0 259,661
Class B Common Stock, $.01 par value - 0 0 0 0
Additional paid-in capital 75,561,343 0 0 75,561,343
Retained deficit (67,872,461) 16,920,178 (4,050,000)(4) (57,480,032)
(1,100,000)(2)
(1,377,749)(5)
Total stockholders' equity 9,355,904 16,920,178 (6,527,749) 19,748,333
$ 177,756,215 $ 8,199,363 $ (38,088,549) $ 147,867,029
</TABLE>
<PAGE>
Notes to Pro Forma Condensed Consolidated Balance Sheet
(1) As a component of this transaction, CBI also paid approximately $4.9
million for the gold content of the inventory, all of which was on consignment
at the closing date. This gold inventory is not reflected on the consolidated
balance sheet and the proceeds are used to reduce the consignment liability with
the gold supplier which also is not reflected on the consolidated balance sheet.
(2) The sale did not include any real property. The prime component of real
property is a facility in Attleboro, Massachusetts, with a net book value of
approximately $2.3 million and a fair value of $1.4 million. An $1.1 million
impairment in the carrying value of the facility has been recognized in
association with the transaction.
(3) The sale included assumption by CBI of a liability related to post
retirement medical benefit obligations, including an unamortized accumulated
post-retirement medical benefit obligation of approximately $5.2 million. This
liability does not appear on the balance sheet as the Company has been
recognizing it on the delayed recognition method.
(4) Use of proceeds as of November 24, 1996:
Gross proceeds (a) $47,057,133
Less transaction costs(b) 4,050,000
Less liabilities not assumed in the sale (c) 1,390,908
Proceeds available for debt repayment $41,616,225
Notes payable to banks
(working capital facility) 31,547,641
Gold consignment facility 10,068,584
$ 0
(a) Assumes that the entire purchase price was received on the closing date
and excludes any impact of escrow period.
(b) Expenses:
Financial advisor fees $1,750,000
Legal fees 1,500,000
Executive bonuses 800,000
$4,050,000
(c) Short-term accruals primarily related to payroll.
(5) See Note 4 to Notes to Pro Forma Condensed Consolidated Statements of
Operations.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results could
differ materially from those set forth in the forward-looking statements.
Certain factors that might cause such a difference include the effects on
continuing operations of the Balfour sale, the inability of the Company to amend
its Working Capital Facility as a result of the Balfour transaction and the
Company's inability to sell or sublease its real estate located in Attleboro and
North Attleboro, Massachusetts.
Results of Operations for the Nine Months Ended November 24, 1996 Compared
to the Nine Months Ended November 26,1995
During the period from late August up to and including the issuance of this
report, the Company implemented a program to recycle approximately $44 million
of inventory to recover gold and diamonds to meet immediate production
requirements. The Company also sold, for approximately $2 million, inventory
with an original cost basis of approximately $5 million. The Company charged
second quarter operations approximately $35.5 million. Of this amount
approximately $2.5 million was incurred in the second quarter. The remaining
approximately $33.0 million represents third quarter activity. Final valuation
of recovered diamonds and stones and inventory reconciliations are currently
expected to be completed during the fourth quarter of fiscal 1997.
These actions were taken when access to cash and gold under the Company's
working capital facility and gold leasing agreement became constrained near the
end of the second quarter and on a more pronounced basis in the third quarter,
and also because of the Company's commitment to meet its customers' shipping
requirements.
Net sales for the nine months ended November 24, 1996, decreased $21.6
million or 10.6% from $203.6 million in fiscal 1996 to $182.0 million in fiscal
1997. Current year sales of fine jewelry have decreased approximately $23.0
million or 16.5% over the corresponding period in fiscal 1996. The Company is
concentrating on improving new product design and cycle time to market; and on
upgrading the performance level of its manufacturing subcontractors to reduce
cost and improve product quality and customer service.
Cost of goods sold for the nine months ended November 24, 1996, decreased
approximately $16.1 million from $139.6 million in fiscal 1996 to $123.5 million
in fiscal 1997, excluding the impact of the inventory charge discussed above.
Margin on sales increased 0.7% from 31.4% in fiscal 1996 to 32.1% in fiscal
1997. Gross profit margin has benefited from the higher mix of Balfour sales to
total sales where scholastic product margin is higher than fine jewelry.
<PAGE>
Selling, general, and administrative expenses for the nine month period
increased approximately $9.0 million from $52.3 million in fiscal 1996 to $61.3
million in fiscal 1997. As a percentage of net sales, selling, general, and
administrative expenses were approximately 8.0% higher in the current year than
for the nine months ended November 26, 1995. Included in the nine-month period
are charges of approximately $5.5 million in excess of expected costs to resolve
disputed items with customers. Selling, general, and administrative expenses for
the quarter were approximately $2.7 million higher than during the corresponding
quarter of fiscal 1996. The primary contributor to this increase was higher
commission expenses associated with increased sales at Balfour.
Net interest expense for the nine months ended November 24, 1996, increased
approximately $0.1 million relative to the corresponding period in fiscal 1996.
On November 14, 1996, the Company sold its building in New York City. In
the interest of generating cash on the sale of the property as quickly as
possible, management accepted an offer for less than the carrying value of the
property. As a result, the Company sustained a loss of approximately $0.8
million on the sale.
Although the Company had a taxable loss for the nine months ended November
24, 1996, a tax provision of approximately $200,000 was recorded. The tax
provision was primarily due to the Company's inability to fully recognize the
tax benefits of operating losses in certain jurisdictions, as well as state and
foreign income taxes.
Liquidity and Working Capital
The Company's results of operations created a potential violation of a
financial covenant in its working capital facility. The Company has received a
waiver of this financial covenant from Foothill. The working capital facility,
pursuant to its terms, is expected to be amended following completion of the
Balfour sale (Note 8), to reflect such sale.
In charging the second quarter with the inventory charge, the Company
reduced its net worth below a covenant threshold established in the Senior
Secured Notes and Senior Subordinated Notes. The Company has amended the
indentures to the Senior Secured Notes and the Senior Subordinated Notes. Such
amendments, among other things, reduced the covenant threshold referred to above
to a level that is below the Company's net worth as of November 24, 1996.
Interest payments of approximately $4.5 million on the Senior Subordinated
Notes were made on May 15, 1996 and November 14, 1996 in accordance with the
loan agreement.
On December 16, 1996, the Company sold certain assets of its Balfour
subsidiary constituting substantially all of the operations of Balfour to
Commemorative Brands, Inc. (CBI) a new company formed by Castle Harlan Partners
II, L.P. CBI also assumed certain liabilities of Balfour.
In October 1996, the Federal Trade Commission (FTC), which had been
reviewing the transaction since May 1996, gave preliminary approval to a
modified agreement between the Company and CBI. Final FTC approval was received
on December 26, 1996.
<PAGE>
At closing on December 16, 1996, the Company received cash equal to the
purchase price of $44 million, plus $2.7 million in working capital adjustment
from January 28, 1996 to the date of closing, plus $4.9 million representing the
value of gold on hand as of the date of closing less $14 million which was
placed in escrow pending final FTC approval. On December 31, 1996, the Company
received the $14 million. Approximately $6 million of the proceeds will be used
to pay transaction costs and liabilities not assumed in the sale. The actual
determination of net proceeds available, if any, in excess of the working
capital facility balance, is pending the determination of the final working
capital adjustments. The working capital and gold values are contingent upon
pending reconciliations to be completed within 45 days from date of closing for
working capital and 90 days for gold.
On November 14, 1996, the Company sold its building in New York City for a
gross sale price of $6.2 million, of which $5.3 million was paid in cash. The
Company has a note receivable for the remaining $0.9 million which bears
interest at 9% per annum and is due on January 15, 1997. In the interest of
generating cash on the sale of the property as quickly as possible, management
accepted an offer for less than the carrying value of the property. As a result,
the Company sustained a loss of approximately $0.8 million on the sale.
Cash used in operating activities for the nine months ended November 24,
1996 was approximately $21.8 million, compared with a use of approximately $20.6
million for the corresponding period of fiscal 1996. The additional cash
requirements are the result of the earnings deterioration and the requirement to
make cash interest payments on the 13% Senior Subordinated Notes.
Cash provided by investing activities for the nine months ended November
24, 1996 was approximately $1.3 million versus a use of approximately $1.4
million for the corresponding period in fiscal 1996. This is primarily the
result of the Company's sale of certain assets for which it received net
proceeds of approximately $5.1 million, compared with proceeds from sales of
certain assets in fiscal 1996 of approximately $1.0 million. Additionally,
investments in affiliate resulted in a use of approximately $1.5 million of cash
in fiscal 1997 versus $0.4 million in fiscal 1996.
Cash provided by financing activities was approximately $16.0 million for
the nine months ended November 24, 1996, compared with cash provided by
financing activities of $21.6 million for the nine months ended November 26,
1995. Cash generated from financing activities was primarily used to fund
operations during both periods. The Company was able to finance a portion of its
current-year operating cash requirements with cash available at foreign
subsidiaries.
The Company's net cash position decreased from approximately $5.2 million
at February 25, 1996, to approximately $0.7 million at November 24, 1996.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Amended and Restated Asset Purchase Agreement
Schedules to the exhibit have not been filed. The Company
will furnish supplementally a copy of any schedule to the
Commission upon request.
4.1 Second Supplemental Indenture governing 11-1/2% Senior Secured
Notes due 9/15/97 from Town & Country Corporation to
Fleet National Bank, as Trustee
4.2 First Supplemental Indenture governing 13% Senior Subordinated
Notes due 5/31/98 from Town & Country Corporation to
Bankers Trust Company, as Trustee
10.1 Amendment to the agreement by and between Town & Country
Corporation, Fine Jewelry Group, Inc., L. G. Balfour, Inc.,
Gold Lance,Inc., and Foothill Capital Corporation
11 Earnings Per Share Computations
. 27 Financial Data Schedule
99 Waiver of Event of Default with respect to the
Non-Compliance Item
(b) Reports on Form 8-K
There were no Form 8-K filings during the third quarter ended
November 24,1996.
<PAGE>
SIGNATURES
- -----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
TOWN & COUNTRY CORPORATION
(Registrant)
Date: December 31 , 1996 /s/ Francis X. Correra
Francis X. Correra
Senior Vice President and
Chief Financial Officer
<PAGE>
TOWN & COUNTRY CORPORATION EXHIBIT 11
Earnings Per Share Computations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
November 24, November 26, November 24, November 26,
1996 1995 1996 1995
PRIMARY EPS:
<S> <C> <C> <C> <C>
Net income (loss) $ 1,035,874 $ 6,636,293 $ (48,465,322)$ 1,940,857
Accretion of discount and dividends
on preferred stocks 232,890 255,320 575,050 786,359
Income (loss) attributable to common
stockholders $ 802,984 $ 6,380,973 $ (49,040,372)$ 1,154,498
Weighted average common
shares outstanding 25,966,119 23,834,596 25,330,088 23,728,355
Weighted shares issued
from exercise and
assumed execise of:
warrants -- -- -- --
options -- -- -- --
Shares for EPS
calculation 25,966,119 23,834,596 25,330,088 23,728,355
REPORTED EPS:
Net income (loss) $ 0.04 $ 0.28 $ (1.92)$ 0.08
Accretion of discount and dividends
on preferred stocks (0.01) (0.01) (0.02) (0.03)
Income (loss) per common sha$ 0.03 $ 0.27 $ (1.94) $ 0.05
FULLY DILUTED EPS:
For the periods presented in this exhibit, there is no dilution from Primary EPS.
</TABLE>
EXHIBIT 2.1
EXECUTION COPY
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
by and among
Scholastic Brands, Inc.,
(formerly known as Class Rings, Inc.)
as Buyer
and
Town & Country Corporation,
L.G. Balfour Company, Inc.
as Sellers
and
(solely for purposes of Articles X and XI hereof) Gold Lance, Inc.,
November 21, 1996
<PAGE>
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
This Amended and Restated Asset Purchase Agreement, dated as of November
21, 1996 (as so amended, this "Agreement"), is by and among Scholastic Brands,
Inc. (formerly known as "Class Rings, Inc."), a Delaware corporation ("Buyer"),
Town & Country Corporation, a Massachusetts corporation ("T&C"), L.G. Balfour
Company, Inc., a Delaware corporation and a wholly-owned subsidiary of T&C
("Balfour" and together with T&C sometimes hereinafter referred to collectively
as the "Sellers" and individually as a "Seller"), and for purposes of Articles X
and XI hereof, Gold Lance, Inc., a Massachusetts corporation and a wholly-owned
subsidiary of T&C ("Gold Lance").
WHEREAS, on May 20, 1996, the parties hereto entered into an Asset Purchase
Agreement (the "Original Agreement"), which provided for the sale to Buyer by
Sellers and Gold Lance of substantially all of the assets of Balfour and Gold
Lance, subject to certain liabilities, upon the terms and conditions set forth
herein; and
WHEREAS, T&C, Buyer and Castle Harlan Partners II L.P., Buyer's sole
stockholder ("CHP II"), have executed an Agreement Containing Consent Order with
the Federal Trade Commission (the "FTC Preliminary Order"), pursuant to which,
among other things (i) Buyer and CHP II have agreed not to acquire from T&C, and
T&C has agreed not to sell to Buyer or CHP II, any interests in or assets of T&C
or Gold Lance other than assets of or used in the business by, Balfour and (ii)
Buyer and CHP II have agreed not to sell to T&C, and T&C has agreed not to
acquire from Buyer or CHP II, any interests in or assets of Buyer; and
WHEREAS, on September 6, 1996, the parties hereto entered into an Interim
Agreement with the Federal Trade Commission (the "FTC Interim Agreement"), which
provides that Buyer, CHP II and T&C agree to be bound by the terms of the FTC
Preliminary Order as if it were final (as finally issued by the Federal Trade
Commission, the "FTC Final Order"); and
WHEREAS, in connection with the FTC Interim Agreement and the FTC
Preliminary Order, the parties hereto have agreed to amend the Original
Agreement in accordance with the terms of Section 10.11 thereof to provide that
(i) Sellers will sell to Buyer, and Buyer will purchase from Sellers,
substantially all of the assets of Sellers used in or associated with the class
ring, graduation graphics products, sports memorabilia, specialty commemorative
rings, pins and other devices, all as related to the scholastic, sports,
recognition and logo products businesses of Sellers, all as currently conducted
by Balfour, including, without limitation, substantially all of the assets of
Balfour and certain related assets of T&C (the "Business") and (ii) Buyer will
assume certain specified liabilities of Sellers associated with the Business,
all upon the terms and subject to the conditions set forth in this Agreement.
In consideration of the foregoing and the mutual representations,
warranties, covenants and agreements contained herein, intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE I
TRANSFER OF ASSETS AND LIABILITIES 1.1 Purchase of Sellers' Assets
(a)Except as provided in Section 1.1(c) below and subject to the terms and
conditions of this Agreement, Balfour shall sell, transfer, convey, assign and
deliver to Buyer, free and clear of all Liens (other than Permitted Liens), and
Buyer shall purchase, acquire, assume and accept from Balfour, all of the
following properties, assets, rights, claims and contracts associated with or
used or held by Balfour for use in the operation of the Business (the "Balfour
Assets"):
(i) all machinery, motor vehicles, equipment, molds, dies and all
other tangible personal property used or held for use in the Business as of the
date hereof, wherever located, plus additions or minus deletions thereto since
the date hereof made in the ordinary course of business (all of the foregoing in
this Section 1.1(a)(i) shall collectively be referred to herein as the
"Equipment");
(ii) all inventories of gold, silver and other raw materials,
supplies, work in process, packaging supplies, samples, finished goods, goods on
consignment or memo goods and other inventories used or held for use in the
Business, including all inventory reflected on the statement, dated as of
January 28, 1996, of assets being purchased and liabilities being assumed
hereunder, a copy of which is set forth on Schedule 1.1(a) hereto (the
"Statement of Purchased Accounts"), plus additions or minus deletions thereto
(x) since the date of the Statement of Purchased Accounts made in the ordinary
course of business or (y) as set forth on Schedule 1.1(a)(ii) hereof; and
including, without limitation, all gold on consignment to Balfour for use in or
held for use in the Business (the "Consigned Gold");
(iii) all rights in and under contracts (including any non-competition
agreements), leases of personal property, licenses, or other arrangements,
purchase and sale orders and other agreements related to the ownership or
operation of the Assets or the Business (the "Contracts"), to the extent
transferable;
(iv) all trademarks, tradenames, service marks, copyrights,
patents and all registrations and applications for registrations of any of the
foregoing that are related to or used or held for use in the Business, all of
which are specifically identified in Schedule 1.1(a)(iv) hereto, and all
inventions, trade secrets, know-how, formula and designs related to the
Business, including the goodwill associated with the foregoing, and all rights
and remedies against any infringement thereof (all of the foregoing referred to
as the "Intellectual Property");
(v) all accounts and notes receivable arising
from the operation of the Business, including accounts for goods and services
but excluding those accounts and notes receivable arising from or constituting
intercompany loans and advances (the "Intercompany Accounts");
(vi) all computer equipment and computer programs (to the extent
transferable) and documentation used in the Business;
(vii) all franchises, licenses, permits or other rights granted by
governmental authorities and all certificates of convenience or necessity,
easements, consents, grants, rights to emission credits and other rights of
every character whatsoever that are used for the lawful ownership or operation
of the Assets or the Business (collectively, the "Permits"), to the extent
transferable;
(viii) all plans or designs for jewelry products at any time used
in or produced or designed for use in or currently in process at or currently
planned in connection with the Business;
(ix) all books of account, records,files and invoices used in or associated
with the Business, including but not limited to all production data, equipment
maintenance data, employee files, accounting records, inventory records, sales
and sales promotional data, advertising materials, customer lists, cost and
pricing information, supplier lists, business plans, reference catalogs and any
other records and data used in connection with the Business;
(x) all rights under express or implied warranties from suppliers of the
Business (to the extent transferable in accordance with applicable law) except
warranties related to Excluded Liabilities (as defined below);
(xi) all cash received on or after the Closing Date, whether received as
cash, check, wire transfer, deposits to any lock boxes of any Seller or
otherwise, attributable to or arising from the activities or operations of the
Business; (xii) all of Balfour's rights and interests in the leases of real
property (the "Sales Office Property") listed on Schedule 1(a)
(xii) hereto, and all renewals and replacements thereof (collectively, the
"Sales Office Leases"); and
(xiii) all other properties, assets, rights, claims and contracts (other
than the Excluded Assets, as defined below) relating to the Assets or used or
usable in the conduct of the Business, including, without limitation, the
goodwill related to the Business.
(b) Subject to the terms and conditions of this Agreement, T&C shall sell,
transfer, convey, assign and deliver to Buyer, free and clear of all Liens
(other than Permitted Liens), and Buyer shall purchase, acquire, assume and
accept from T&C, all of the properties, assets, rights, claims and contracts
associated with or used or held by T&C for use in the operation of the Business
(the "T&C Assets", and together with the Balfour Assets, the "Assets"),
including without limitation, all of T&C's right and interest in and to the
lease of the facility located on property in Louisville, Kentucky (the "Kentucky
Property") dated August 3, 1995, between T&C, as lessee, and Riverport Commerce
Center, Inc., as lessor (the "Kentucky Lease").
(c) Notwithstanding anything to the contrary contained herein, the Assets
shall exclude the following (the "Excluded Assets"):
(i) cash and cash equivalents, bank accounts, lock boxes and other similar
accounts and marketable securities, other than as set forth in Section
1.1(b)(xi) above;
(ii) all real property owned by Sellers and all interests in real property
held by Sellers, including, without limitation (a) the real property owned by
Sellers listed on Schedule 1.1(c)(ii)(a) attached hereto (the "Owned Property")
and (b) the real property leased by Sellers listed on Schedule 1.1(c)(ii)(b)
attached hereto (the "Leased Property" and together with the Owned Property, the
Sales Office Property and the Kentucky Property, the "Real Property"), other
than the Kentucky Lease and the Sales Office Leases, and (c) the other real
property owned by Sellers as listed on Schedule 1.1(c)(ii)(c);
(iii) any insurance policies relating to the Assets or the Business
including premium adjustments, retrospective rating adjustments and prepaid
insurance premiums;
(iv) the Permits and the Contracts, to the extent such Permits or Contracts
(other than any contracts that require only the payment of money not in excess
of $1,250 per month and that are terminable at will by either party thereto,
without premium or penalty or any payment of any kind, on not more than 30 days'
prior notice ("Immaterial Contracts")) are not transferable or consents required
to permit the transfer thereof have not been obtained by the date of the Closing
(the "Closing Date"), or Buyer is not otherwise obtaining substantially
equivalent benefits for the Business thereunder;
(v) all claims, and all deposits on account of claims, for refunds of taxes
and other government charges or assessments arising from or pertaining to
periods, activities, operations or events occurring prior to the Closing Date
relating to Sellers, other than to the extent such claims or deposits are
related to or arise out of an Assumed Liability;
(vi) the capital stock of each Seller and the corporate seals, minute
books, stock ledgers or other books and records pertaining to the organization,
issuance of stock and capitalization of the Sellers (except that Buyer shall
have reasonable access to such of the foregoing relating to the Business);
(vii) all claims against third parties related exclusively to Excluded
Liabilities (as defined below) or Excluded Assets; and
(viii) all machinery, motor vehicles and other equipment set forth on
Schedule 1.1(c)(viii) hereto.
(d) The title to, possession of and risk of loss,destruction or damage with
respect to the Assets shall pass to Buyer as of the time of Closing; provided,
however, that this Section 1.1 shall not diminish, limit or otherwise impair in
any manner Buyer's or Sellers' rights under the other provisions of this
Agreement or the instruments, agreements, certificates and documents to be
executed and delivered in connection herewith that apportion liability between
the parties with respect to events, occurrences, omissions or other matters
arising or occurring during specific periods.
1.2 Assumed Liabilities.
As partial consideration for the purchase of the Assets and the Business,
at the Closing Buyer shall assume and agree thereafter to perform when due and
discharge only the following debts, obligations and liabilities of Sellers
relating to the Business or the Assets, whether known, unknown, fixed,
contingent, or otherwise (the "Assumed Liabilities"):
(a) those liabilities, obligations, costs and expenses of Balfour which
relate to or arise out of the performance of the Contracts and Permits on or
after the Closing Date and those liabilities, obligations, costs and expenses of
T&C under the Kentucky Lease on or after the Closing Date, in each case, (x) to
the extent that such Contracts (in the case of Contracts other than Immaterial
Contracts), Permits, the Kentucky Lease and the Sales Office Leases are assigned
to Buyer hereunder in compliance with any required consents of other parties or
consents or approvals of governmental authorities or (y) to the extent Buyer is
otherwise obtaining substantially equivalent benefits for the Business
thereunder;
(b) the accounts payable and other liabilities of Balfour included as
categories on the Statement of Purchased Accounts and liabilities as incurred in
the ordinary course thereafter other than Intercompany Accounts to the extent:
(x) included in the determination of Adjusted Working Capital pursuant to
Section 1.5 or (y) as Buyer may, at its sole discretion, hereafter consent in
writing with Sellers;
(c) those obligations to employees expressly to be assumed by Buyer under
Article VI of this Agreement;
(d) the obligations of Balfour to honor cash
discounts, dating terms and prepaid orders to the extent included in the
accounts receivable of the Business outstanding as of the Closing Date;
(e) the obligations of Balfour incurred in the ordinary course of the
Business as a bailee to hold, store or retain finished goods located at any
facility of the Business for customers who have previously purchased such goods;
(f) warranty obligations of Balfour arising out of sales by the Business
prior to the Closing Date; and
(g) those liabilities, obligations, costs and expenses to the extent that
they arise out of or relate to the operation of the Business after the Closing
Date (including, without limitation, Environmental Liabilities) (other than the
Excluded Liabilities, as defined below).
1.3 Excluded Liabilities. Sellers shall retain all debts, liabilities,
obligations and commitments (collectively, the "Excluded Liabilities") arising
out of or related to (i) the Assets or the Business on or prior to the Closing
Date, including, without limitation, all Environmental Liabilities, Intercompany
Accounts, all obligations under Sellers' consignment and other financing
arrangements, all obligations to employees of Balfour under the Sellers'
incentive compensation or bonus plans, and all claims, actions, suits,
proceedings or investigations against or affecting any Seller (regardless of
when a claim therefore is asserted) or (ii) the operations of the businesses of
Sellers from and after the Closing Date (including, without limitation,
Environmental Liabilities), in each case, other than the Assumed Liabilities.
1.4 Purchase Price.
(a) Subject to adjustment in accordance with this Section 1.4 and Sections
1.5 and 1.6 below, the aggregate purchase price (the "Purchase Price") payable
to Sellers in consideration for the Assets (other than gold, which shall be
purchased pursuant to subsection 1.4(b) below) and the Business (in addition to
the assumption of the Assumed Liabilities) shall be an aggregate amount in cash
equal to the sum of (x) $23,137,586 [such amount being derived as follows:
$44,000,000 less the net amount contained in the statement of working capital as
at January 28, 1996 as set forth on Schedule 1.4(a) (the "Base Working Capital
Statement")] plus (y) the Adjusted Working Capital (as defined below) plus (z)
the aggregate amount on account of those certain operating liabilities set forth
on Schedule 1.4(b) hereof. Buyer will pay the Purchase Price at Closing as
follows:
(i) by wire transfer in immediately available funds to an account
designated by Sellers (in accordance with the allocation determined pursuant to
Section 1.8(b) hereof), an amount equal to the sum of (x) $9,137,586 plus (y)
Sellers' good faith estimate of the Adjusted Working Capital (the "Estimated
Working Capital"), which estimate shall be set forth in writing and shall be
delivered to Buyer not less than three (3) business days prior to the Closing
Date plus (z) the aggregate amount on account of those certain liabilities set
forth on Schedule 1.4(b) hereof; and
(ii) to an escrow agent (the "Escrow Agent") by wire transfer in
immediately available funds to an account designated by the Escrow Agent, an
amount equal to $14,000,000 to be held by the Escrow Agent pending receipt of
the FTC Final Order, pursuant to the terms of an escrow agreement incorporating
the terms set forth on Exhibit D hereof (the "Escrow Agreement") to be entered
into on the Closing Date among Sellers, Buyer and the Escrow Agent.
Sellers shall have no liability to Buyer if the FTC Final Order differs
from the FTC Preliminary Order except to the extent of a reduction in the
Purchase Price payable pursuant to this Subsection 1.4(a) (and the right to
receive an amount equal to such reduction from the Escrow Fund held by the
Escrow Agent), except to the extent that Sellers would otherwise be liable to
Buyer in connection therewith or on account thereof pursuant to any other
provision of this Agreement without regard to the limitation in the first clause
of this sentence.
"Adjusted Working Capital" means Current Assets of the Business less
Current Liabilities of the Business, each as of the Closing Date. For purposes
of the foregoing, "Current Assets" shall include only (i) accounts receivable,
(ii) inventory (other than gold) to be valued at the lower of market or FIFO
cost, (iii) prepaid expenses (but excluding prepaid insurance) and (iv) monies
on deposit with others, in each case to the extent comprising those general
ledger accounts listed on the Base Working Capital Statement and constituting
the Assets being purchased hereunder. For purposes of the foregoing, "Current
Liabilities" shall include only (i) accounts payable and (ii) accrued expenses,
in each case to the extent comprising those general ledger accounts listed on
the Base Working Capital Statement and constituting Assumed Liabilities
hereunder.
(b) In addition, at the Closing, Buyer or its lenders shall purchase from
Balfour or the Sellers' lenders all of Balfour's gold (including the Consigned
Gold) at a cash purchase price per troy ounce equal to the price announced at
the second London gold fixing for the Closing Date (the "Gold Price") or, at the
option of the Buyer, by the delivery of an equal number of troy ounces of gold.
Sellers shall prepare and deliver to Buyer not less than three (3) business days
prior to the Closing Date a certificate containing its estimate of the number of
troy ounces of gold to be transferred to Buyer at the Closing on the Closing
Date (the "Estimated Gold Certificate"), which Estimated Gold Certificate shall
include estimates of (i) the aggregate number of troy ounces of gold held by
sales representatives of the Business (the "SR Gold Amount") and (ii) the
aggregate number of troy ounces of gold held for the account of the Business and
in Balfour's possession (the "Non-SR Gold Amount"). In connection therewith, not
later than seven business days prior to the scheduled Closing Date, Sellers
shall forward confirmation letters to all sales representatives of the Business,
the form and substance of which shall be reasonably satisfactory to Buyer,
asking each such representative to confirm the type and number of units of the
inventory of gold of the Business in the possession of such representative as of
the Closing Date and requesting that such letters be promptly forwarded to
Buyer's independent accountants, which shall promptly forward copies of such
letters to Buyer and Sellers upon receipt thereof. Buyers shall reconcile such
confirmation letters with the books and records of the Business in accordance
with the procedures set forth in Section 1.5 below. For all purposes hereof,
"gold" shall mean fine gold having a fineness of not less than .9995, regardless
of its form.
1.5 Determination of Adjusted Working Capital and Reconciliation of
Purchased Gold.
(a) As promptly as practical after the Closing Date, and in any event no
later than forty-five (45) days thereafter (in the case of the Statement of Net
Working Capital and the Non-SR Gold Certificate referred to below) and ninety
(90) days thereafter (in the case of the SR Gold Certificate referred to below),
Buyer shall prepare and deliver to Sellers an unaudited statement of working
capital with respect to the Business as of the Closing Date (the "Statement of
Net Working Capital"), showing the Adjusted Working Capital, which shall have
been prepared by Buyer in a manner consistent with the principles used in the
preparation of the Base Working Capital Statement (except with respect to
inventory, which shall be subject to a physical inventory, as described herein),
together with a certificate (the "Non-SR Gold Certificate") setting forth the
aggregate number of troy ounces of the Non-SR Gold Amount actually transferred
to Buyer or its lenders on the Closing Date. In connection with the foregoing, a
physical inventory of all of the Business' inventory including, without
limitation, a physical inventory of all gold, shall be taken as of, and
completed on, the Closing Date. Buyer and Sellers may consult with Buyer's
independent accountants, who will establish the procedures to be followed in
connection with the physical inventory. If within twenty (20) business days
following the date hereof, the parties hereto do not agree as to such
procedures, such disagreement shall be submitted for resolution to the
independent public accounting firm of Price Waterhouse (or, if Price Waterhouse
is not then independent of Buyer or any Seller, such other "Big 6" accounting
firm that is independent of Buyer and Sellers as Buyer and Sellers shall jointly
select), which, upon consultation with the parties hereto, shall promptly
establish the procedures for such physical inventory. Such accountants'
procedures for the physical inventory shall be set forth in a written statement
delivered to Sellers and Buyer, and shall be final, conclusive and binding on
Sellers and Buyer.
The facilities of the Business at which gold is located shall be closed
during the taking of the physical inventory of such gold, which for these
purposes shall only include the physical counting of such gold and not the
calculations or computations thereof. Sellers shall be allowed to have a
representative present for the taking of such inventories (wherever performed),
receive a copy of the physical inventory listing and, subject to the consent of
any accountants as may be assisting Buyer in performing such inventories,
receive copies of all reports and analyses generated therefrom.
(b) As promptly as practical following their receipt of same, Buyer shall
compare the responses of the sale representatives of the Business to the
confirmation letters described in Section 1.4(b) hereof with the information
contained in the books and records of the Business in order to reconcile the SR
Gold Amount set forth on the Estimated Gold Certificate with the SR Gold Amount
derived from the confirmation letters. To the extent that, based on such
reconciliation to the books and records of the Company and such other
investigations as Buyer, in its sole discretion, shall deem necessary, Buyer
determines that a sales representative has underreported the amount of gold held
by it, Buyer shall bill such representative for such amount. If any such sales
representative fails to pay such amount within 30 days after delivery of Buyer's
bill than Buyer may offset the amount of such shortage against any monies owed
by Buyer to such representative. No later than the ninetieth (90th) day
following the Closing Date, Buyer shall deliver to Sellers a certificate (the
"SR Gold Certificates" and together with the Non-SR Gold Certificate, the "Gold
Certificates") setting forth the aggregate number of troy ounces of the SR Gold
Amount confirmed by Buyer as held by the sales representatives on the Closing
Date and providing a list of discrepancies in the SR Gold Amount broken down by
each sales representative of the Business.
(c) After delivery to Sellers of the Statement of Net Working Capital and
each Gold Certificate, Sellers and their independent accountants shall be
afforded, at the Sellers' expense, the opportunity to review and inspect any
workpapers prepared by Buyer or its independent accountants (subject to the
consent of such accountants) relating to the preparation of the Statement of Net
Working Capital and such Gold Certificates and to consult with Buyer and its
independent accountants, if necessary, regarding the methods used in the
preparation of the Statement of Net Working Capital or such Gold Certificates.
(d) The Adjusted Working Capital as shown on the Statement of Net Working
Capital and the matters set forth on each Gold Certificate, in each case as
prepared by Buyer shall be final, conclusive and binding for purposes of this
Agreement, unless Sellers shall give written notice of disagreement therewith
within twenty (20) business days following receipt of the Statement of Net
Working Capital or such Gold Certificate, specifying in reasonable detail the
nature and extent of such disagreement; provided, however, that Sellers shall
not be permitted to give notice of disagreement with respect to the Statement of
Net Working Capital prepared by Buyer unless the amount in dispute exceeds One
Hundred Thousand ($100,000) Dollars.
(e) If within twenty (20) business days following receipt by Buyer of a
notice of the type referred to in subsection (d) above, Sellers and Buyer are
unable to resolve any disagreement with respect to the Statement of Net Working
Capital, the Non-SR Gold Certificate or the SR Gold Certificate, the
disagreement shall be submitted for resolution to the independent public
accounting firm of Price Waterhouse (or, if Price Waterhouse is not then
independent of Buyer or any Seller, such other "Big 6" accounting firm which is
independent of Buyer and Sellers as Buyer and Sellers shall jointly select)
("Accountants"), which shall act as an arbitrator to determine and resolve only
those issues still in dispute. The Accountants' resolution shall be made within
thirty (30) days of the submission of the dispute, shall be prepared in
accordance with this Agreement and in a manner that is consistent with the
principles used in the preparation of the Base Working Capital Statement and the
Gold Certificates, shall be set forth in a written statement delivered to
Sellers and Buyer, and shall be final, conclusive and binding on Sellers and
Buyer.
(f) The fees and expenses of the Accountants in connection with the
resolution referred to in subsection (e) above shall be shared between Sellers,
on the one hand, and Buyer, on the other hand, as follows: the Sellers and the
Buyer shall pay such portion of the fees and expenses equal to the proportion
(but in no event greater than 1) determined by (i) a numerator equal to the
positive difference between the Sellers' or the Buyer's, as the case may be,
submitted amount and the Accountants' determined amount and (ii) a denominator
equal to the sum of such positive difference for the parties. Otherwise, Buyer
and Sellers shall each pay their own costs incurred in connection with this
Section 1.5, including the fees and expenses of their respective accountants, if
any.
1.6 Payment of Adjusted Purchase Price and Reconciliation of Gold Payment.
(a) Promptly following the twenty-first business day following the delivery
of the Statement of Net Working Capital and the Non-SR Gold Certificate, or in
the event of a disagreement, promptly following the final resolution of the
Adjusted Working Capital and calculation of the Non-SR Gold Amount as provided
in Section 1.5, but in no event later than ten (10) days after such resolution,
(i) either: (x) Buyer shall wire transfer to Sellers in immediately available
funds the amount by which the Adjusted Working Capital exceeds the Estimated
Working Capital; or
(y) Sellers shall wire transfer to Buyer in immediately available
funds the amount by which the Estimated Working Capital exceeds the Adjusted
Working Capital.
and (ii) either:
(x) Buyer shall wire transfer to Sellers in immediately available funds the
amount equal to the product of (1) the excess of the Non-SR Gold Amount set
forth on the Non-SR Gold Certificate over the Non-SR Gold Amount set forth on
the Estimated Gold Certificate multiplied by (2) the Gold Price; or
(y) Sellers shall wire transfer to Buyer in immediately available funds the
amount equal to the product of (1) the excess of the Non-SR Gold Amount set
forth on the Estimated Gold Certificate over the Non-SR Gold Amount set forth on
the Non-SR Gold Certificate multiplied by (2) the Gold Price.
(b) Promptly following the twenty-first day following the delivery of the
SR Gold Certificate, or in the event of a disagreement concerning the SR Gold
Certificate, promptly following the final resolution of the SR Gold Amount to be
properly included in the SR Gold Certificate, but in no event later than ten
(10) days after such resolution, if the product of (x) the positive difference
between the SR Gold Amount as set forth on the Estimated Gold Certificate and
the SR Gold Amount as set forth on the SR Gold Certificate times (y) the Gold
Price is equal to or exceeds $25,000, then either:
(i) Sellers shall wire transfer to Buyer in immediately available funds an
amount equal to the product of (a) the excess of the SR Gold Amount set forth on
the Estimated Gold Certificate over the SR Gold Amount set forth on the SR Gold
Certificate multiplied by (b) the Gold Price; or
(ii) Buyer shall wire transfer to Sellers in immediately available funds an
amount equal to the product of (a) the excess of the SR Gold Amount set forth on
the SR Gold Certificate over the SR Gold Amount set forth on the Estimated Gold
Certificate multiplied by (b) the Gold Price.
(c) Any payment required to be made pursuant to this Section 1.6 shall be
made together with interest thereon from the Closing Date to the date of payment
at the rate of interest per annum equal to the prime rate in effect on the
Closing Date as reported in The Wall Street Journal. All wire transfers
hereunder shall be to such accounts as the recipient thereof may designate in
writing for that purpose.
(d) If, as a result of the foregoing, Sellers are required to pay Buyer any
amounts on account of a deficiency in the SR Gold Amount, Sellers shall retain
the right to continue to seek to collect such deficiency from such sales
representative(s).
1.7 [Intentionally Omitted.]
1.8 Allocation of Purchase Price
(a) The Purchase Price shall be allocated among the Assets based on their
relative fair market value in accordance with Section 351 of the Code and
Revenue Ruling 68-55. Buyer shall prepare such an allocation of the Purchase
Price and deliver such allocation to Sellers not later than 3 days before the
scheduled Closing Date (the "Pre-closing Allocation"). The Pre-closing
Allocation shall be binding and conclusive (with such changes as may be
necessary to reflect changes in current assets between the date of the financial
statements on which the Pre-closing Allocation was based and the Closing Date
(the "Interim Changes")) provided that there is a reasonable basis for such
allocation under Section 1060 of the Code and the Treasury Regulations
thereunder. Buyer shall deliver to Sellers within 45 days after the Closing Date
a final allocation of the Purchase Price, which shall reflect the Pre-closing
Allocation revised to include the Interim Changes. If Sellers object to Buyer's
proposed allocation, Buyer and Sellers shall use their reasonable best efforts
to resolve their differences within 5 days of Buyer's delivery of its proposed
allocation with Interim Changes and any resolution reached during such period
shall thereafter be binding and conclusive. In the absence of any such
resolution, Buyer and Sellers shall immediately select by mutual agreement an
independent appraiser (which selection shall be by lot among the "Big 6"
accounting firms that audit neither Buyer nor any Seller if Buyer and Sellers
are unable to agree within such time), which appraiser shall select as most
reasonable either the allocation prepared by Buyer or the allocation prepared by
Sellers (in each case as revised to reflect the Interim Changes and in each case
as Buyer or Sellers, as the case may be, had agreed to modify such allocation
during the 5-day resolution period referred to above). The allocation selected
by Buyer, if Sellers raise no objection in accordance with this Section 1.8(a),
or by such appraiser (in either case, the "Final Allocation") shall be binding
and conclusive and the fees and expenses of such appraiser (if any) shall be
paid by the party whose allocation was not selected. Neither Buyer nor any
Seller shall file any tax return, report or form inconsistent with the Final
Allocation.
(b) The payments of cash to be made by Buyer to Balfour and T&C pursuant to
this Article I on account of the Balfour Assets and the T&C Assets,
respectively, shall be allocated between Sellers in accordance with written
instructions of T&C, which instructions shall be delivered to Buyer no less than
2 business days before such payment is scheduled to be made; provided, that no
such allocation shall conflict with the Final Allocation set forth on Exhibit A
hereto.
1.9 Prorations.
(a) Utilities; Taxes. Notwithstanding anything herein to the contrary, the
water, gas, electricity and other utilities, local business or other license
fees or taxes, common area expenses (and any other amount) charged under the
Kentucky Lease and the Sales Office Leases, and other similar periodic charges,
to the extent not included in the calculation of Adjusted Working Capital, shall
be apportioned as of the Closing Date such that Sellers shall be liable for (and
shall reimburse Buyer to the extent that Buyer shall pay) that portion of such
of the foregoing relating to, or arising in respect to periods on or prior to
the Closing Date and Buyer shall be liable (and shall reimburse Sellers to the
extent Sellers shall have paid) that portion of the foregoing relating to, or
arising in respect to, periods after the Closing Date. To the extent
practicable, and to the extent not included in the calculation of Adjusted
Working Capital, utility meter readings for the Kentucky Lease and the Sales
Office Leases shall be determined as of the Closing Date. Should any amounts to
be prorated not have been finally determined on the Closing Date, a mutually
satisfactory estimate of such amounts made on the basis of Sellers' records
shall be used as a basis for settlement at Closing, and the amount finally
determined will be prorated as of the Closing Date and appropriate settlement
made as soon as practicable after such final determination.
(b) Property Taxes. Notwithstanding anything herein to the contrary, any
taxes (other than payroll taxes) not measured or measurable, in whole or in
part, by net or gross income or receipts (including, but not limited to, real or
personal property or ad valorem taxes) imposed on the Assets that relate to a
tax period beginning before the Closing Date and ending after the Closing Date,
to the extent not included in the calculation of Adjusted Working Capital, shall
be apportioned as of the Closing Date such that Sellers shall be liable for (and
shall reimburse Buyer to the extent that Buyer shall pay) that portion of such
taxes relating to, or arising in respect to, periods on or prior to the Closing
Date and Buyer shall be liable for (and shall reimburse Sellers to the extent
Sellers shall have paid) that portion of such taxes relating to, or arising in
respect to, periods after the Closing Date. Should any amounts to be prorated
not have been finally determined on the Closing Date, a mutually satisfactory
estimate of such amounts made on the basis of Sellers' records shall be used as
a basis for settlement at Closing, and the amount finally determined will be
prorated as of the Closing Date and appropriate settlement made as soon as
practicable after such final determination.
(c) Rents. Sellers shall prepay rental payments due under the Kentucky
Lease and the Sales Office Leases through the end of the calendar month in which
the Closing Date occurs, but, notwithstanding anything herein to the contrary,
to the extent not included in the calculation of Adjusted Working Capital, such
rental payments shall be apportioned as of the Closing Date such that Sellers
shall be liable for (and shall reimburse Buyer to the extent that Buyer shall
pay) that portion of such rental payments relating to, or arising in respect to,
periods on or prior to the Closing Date and Buyer shall be liable for (and shall
reimburse Sellers to the extent Sellers shall have paid) that portion of such
rental payments relating to, or arising in respect to, periods after the Closing
Date.
(d) Payroll and Payroll Taxes. Notwithstanding anything herein to the
contrary, that portion of such payroll expenses and payroll taxes related to or
arising in respect to Balfour employees for the period on or prior to the
Closing Date, to the extent not included in the calculation of Adjusted Working
Capital, shall be apportioned as of the Closing Date such that Sellers shall be
liable for (and shall reimburse Buyer to the extent that Buyer shall pay) that
portion of such taxes relating to, or arising in respect to, periods on or prior
to the Closing Date and Buyer shall be liable for (and shall reimburse Sellers
to the extent Sellers shall have paid) that portion of such expenses and taxes
relating to, or arising in respect to, periods on or after the Closing Date.
Should any amounts to be prorated not have been finally determined on the
Closing Date, a mutually satisfactory estimate of such amounts made on the basis
of Balfour's records shall be used as a basis for settlement at Closing, and the
amount finally determined will be prorated as of the Closing Date and
appropriate settlement made as soon as practicable after such final
determination.
ARTICLE II CLOSING
2.1 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 9:00 a.m., at the offices of
Schulte Roth & Zabel, 900 Third Avenue, New York, New York, on a date mutually
agreed to by the parties within ten business days after all conditions to the
Closing have been mutually satisfied or waived pursuant to Article VII hereof,
or at such other time, at such other place or on such other date as the parties
hereto may agree ("Closing Date"). 2.2 Deliveries by Sellers. At the Closing,
Sellers will deliver or cause to be delivered to Buyer the following, which
shall vest in Buyer good and marketable title to the Assets:
(a) duly executed bills of sale ("Bills of Sale"), in form and substance
reasonably acceptable to Buyer;
(b) instruments of assignment and transfer with respect to the Contracts,
the Kentucky Lease and Intellectual Property;
(c) all such other endorsements, assignments and other instruments of
transfer as, in the reasonable opinion of Buyer's counsel, are necessary to vest
in Buyer title to the Assets to be transferred to it pursuant to this Agreement;
(d) duly endorsed title certificates to all motor vehicles included in the
Assets;
(e) an opinion of Goodwin, Procter & Hoar, counsel to Sellers, in form and
substance reasonably acceptable to Buyer's counsel;
(f) a certificate, dated as of the Closing Date, of an authorized officer
of each Seller certifying as to the matters specified in Section 7.3(a);
(g) to the extent required by Section 5.8 of this Agreement, duly executed
subleases, in form and substance reasonably acceptable to Buyer (the
"Subleases"), providing for the sublease by Sellers to Buyer of the Leased
Properties, containing the sublease terms set forth on Exhibit B attached
hereto;
(h) to the extent required by Section 5.8 of this Agreement, duly executed
leases, in form and substance reasonably acceptable to Buyer (the "Temporary
Leases"), providing for the lease by Sellers to Buyer of the Owned Properties,
containing the lease terms set forth on Exhibit C attached hereto; (i) all
required releases on Form UCC-3 or otherwise as may be necessary or desirable to
release any Liens on any of the Assets;
(j) copies of all consents of third parties (including, without limitation,
consents of T&C's lenders) or governmental authorities as may be required to be
obtained by any Seller in connection with the transfer of Assets and the
transactions contemplated hereby;
(k) if the list delivered by Buyer pursuant to Section 2.3(f) does not
contain all of the Equipment, a written option agreement, in form and substance
reasonably acceptable to Buyer (the "Option Agreement"), granting Buyer the
right to buy any Equipment not included on such list for a price of $1.00,
exercisable by Buyer in writing at any time or from time to time until the
earliest to occur of (i) 60 days after Buyer leaves the facility where such
Equipment is located; (ii) the date on which Sellers are required to vacate the
premises where such Equipment is stored pursuant to a binding agreement between
any Seller and an unaffiliated third party for the sale or lease of such
premises; or (iii) Buyer advises Sellers that it no longer wishes to have the
right to buy such Equipment; which agreement shall provide that Sellers shall
have no liabilities and no obligation to secure, insure or maintain such
Equipment, or otherwise incur any costs, and shall not incur any costs, in
connection with such Equipment during the period during which the option is in
effect; provided, however, that if any costs are imposed on Sellers pursuant to
applicable law arising from storage or the ownership of such equipment (for
example, for personal property taxes), Sellers shall promptly notify Buyer, and
Buyer shall promptly reimburse Sellers for such costs;
(l) such landlord consents and estoppel certificates in form and substance
reasonably satisfactory to Buyer with regard to (i) the assignment of the
Kentucky Lease and the Sales Office Leases and (ii) the subleases of the Leased
Property (the leases relating to the Leased Property, together with the Kentucky
Lease and the Sales Office Leases, shall be hereinafter referred to as the
"Leases"), duly executed by each respective landlord;
(m) all licenses, permits, approvals, plans, specifications, environmental
and engineering reports, warranties and guarantees required for the ownership
and operation of the Assets and the Real Property, to the extent transferable;
(n) a duly executed certificate of non-foreign status consistent with
Section 1.1445-2(b)(2)(iii)(B) of the United States Treasury Regulations;
(o) all certificates, agreements, releases and other documents, in form and
substance reasonably satisfactory to Buyer, as shall be reasonably necessary or
desirable to transfer good title to the Consigned Gold, free and clear of all
Liens, including without limitation, bank payoff letters (or reasonably
equivalent alternatives to such letters) and all requisite releases on Form
UCC-3;
(p) an opinion of Morgan, Lewis & Bockius, special antitrust counsel to
Sellers as to compliance with the HSR Act (as hereinafter defined) and the FTC
Preliminary Order, in form and substance reasonably acceptable to Buyer's
counsel; and
(q) if the FTC Final Order has not been received by Buyer prior to the
Closing Date, the Escrow Agreement, in form and substance reasonably acceptable
to Buyer.
2.3 Deliveries by Buyer. At the Closing, Buyer will deliver or cause to be
delivered to Sellers the following:
(a) immediately available funds in the amount of (i) $9,137,586 (as
adjusted, if at all, in accordance with Section 1.4(a) hereof, if the FTC Final
Order is received by Buyer prior to the Closing Date) plus (ii) the Estimated
Working Capital plus (iii) the aggregate amount on account of those certain
operating liabilities set forth on Schedule 1.4(b) hereof plus (iv) to the
extent determinable on the Closing Date, any amounts payable by Buyer in
accordance with Section 1.9 less (v) to the extent determinable on the Closing
Date, any amounts payable by Sellers in accordance with Section 1.9;
(b) a duly executed Assumption Agreement, in form and substance reasonably
acceptable to Sellers ("Assumption Agreement"), and such other good and
sufficient instruments of assumption as shall be reasonably necessary, in the
opinion of Sellers' counsel, to vest in Buyer as of the Closing the Assumed
Liabilities;
(c) an opinion of Schulte Roth & Zabel LLP, counsel to Buyer, in form and
substance reasonably acceptable to Sellers' counsel;
(d) a certificate, dated as of the Closing Date, of an authorized officer
of Buyer certifying as to the matters specified in Section 7.2(a);
(e) to the extent required by Section 5.8 of this Agreement, duly executed
Subleases and Temporary Leases, each in form and substance reasonably acceptable
to Sellers;
(f) a list containing the Equipment that Buyer desires to acquire and the
Option Agreement in connection therewith, which Option Agreement shall be in
form and substance reasonably acceptable to Sellers;
(g) an opinion of Morgan, Lewis & Bockius, special antitrust counsel to
Buyer as to compliance with the HSR Act and the FTC Preliminary Order, in form
and substance reasonably acceptable to Sellers' counsel; and
(h) if the FTC Final Order has not been received by Buyer prior to the
Closing Date, the Escrow Agreement, in form and substance reasonably acceptable
to Sellers.
2.4 Other Deliveries. At the Closing, if the FTC Order has not been
received by Buyer, Buyer will deliver or cause to be delivered to the Escrow
Agent immediately available funds in the amount of $14,000,000, to be held in
escrow pursuant to the terms of the Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby jointly and severally represent and warrant to Buyer as
follows:
3.1 Corporate Organization. (a) Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation as indicated on Schedule 3.1(a) hereto and is duly qualified
or licensed as a foreign corporation authorized to do business in each
jurisdiction in which the character of the properties and assets now owned or
held by it or the nature of the business now conducted by it requires it to be
so licensed or qualified and where the failure to be so licensed or qualified
would have a material adverse effect on such Seller or the Assets or the
Business. Each Seller has full corporate power and authority to carry on its
business as now being conducted. (b) As of the Closing Date, no Seller owns any
subsidiary, or has any investment or proprietary interest in any other entity,
that holds Assets or is engaged in the Business or in the manufacturing,
marketing or sale of class rings, other than T&C's ownership of all of the
outstanding capital stock of Gold Lance and, until the consummation of the
transactions contemplated hereby, Balfour.
3.2 Authorization. Each Seller has full corporate power and authority to
execute, deliver and perform this Agreement and, to the extent it is a party
thereto, the documents to be delivered at the Closing pursuant to Section 2.2
(collectively, the "Seller Agreements") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Seller Agreements by each Seller and the consummation by each Seller of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action and no other corporate action or proceeding on
the part of any Seller is necessary to authorize the execution and delivery by
any Seller of this Agreement or the Seller Agreements or the consummation by any
Seller of the transactions contemplated hereby or thereby or the performance of
any of such Seller's obligations hereunder or thereunder. This Agreement has
been, and the Seller Agreements on the Closing Date will be, duly executed and
delivered by each of the Sellers party thereto, and this Agreement is, and on
the Closing Date each of the Seller Agreements will be, the legal, valid and
binding obligations of each Seller party thereto enforceable against it in
accordance with their terms, subject to applicable laws affecting creditors'
rights generally and, as to enforcement, to general principles of equity,
regardless of whether applied in a proceeding at law or in equity.
3.3 No Violations; No Consents or Approvals Required. Except as set forth
in Schedule 3.3, neither the execution and delivery of this Agreement or the
Seller Agreements nor the consummation of the transactions contemplated hereby
or thereby will (a) conflict with or violate any provision of the Articles or
Certificate of Incorporation or By-Laws of any Seller, (b) conflict with or
violate any law, rule, regulation, ordinance, order, writ, injunction, judgment
or decree applicable to the Business or by which any Seller or any of the Assets
are bound or affected or (c) conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination or
cancellation of, or accelerate the performance required by or maturity of, or
result in the creation of any security interest, lien, charge or encumbrance on
any of the Assets pursuant to any of the terms, conditions or provisions of, any
note, bond, mortgage, indenture, permit, license, franchise, lease, contract, or
other instrument or obligation to which any of the Sellers is a party or by
which any of the Assets are bound, except, in the case of (c) above, for such
conflicts, violations, breaches, defaults, terminations, cancellations and
accelerations that in the aggregate will not have a material adverse effect on
the Assets or the Business. Except for applicable requirements, if any, of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or as set forth in Schedule 3.3, which filings, waivers or consents have
been made or obtained on or prior to the date hereof and will be, made or
obtained on or prior to the Closing Date, no notice, declaration, report or
other filing or registration with, and no waiver, consent, approval or
authorization of, any governmental or regulatory authority or instrumentality or
any other person is required to be submitted, made or obtained by any of the
Sellers in connection with the execution, delivery or performance of this
Agreement or the Seller Agreements and the consummation of the transactions
contemplated hereby or thereby. The consummation of the transactions
contemplated hereby is permitted by and consistent with the terms of the FTC
Interim Agreement
<PAGE>
3.4 Financial Statements. (a) (i) The audited consolidated balance sheets
of T&C and its subsidiaries as at February 27, 1994, February 26, 1995, and
February 25, 1996 and the related audited consolidated statements of income and
cash flow for the years then ended and (ii) the unaudited consolidated financial
statements of T&C for the six-month period ended August 25, 1996 (collectively,
the financial statements described in clauses (i) and (ii) shall hereafter be
referred to as the "Audited Financial Statements"), copies of which are annexed
as Schedule 3.4(a) hereto and were previously delivered to Buyer, fairly present
the consolidated financial position of T&C as of the respective dates set forth
therein and the consolidated results of operations and changes in retained
earnings and cash flows of T&C for the respective periods or as of the
respective dates set forth therein, in each case in conformity with GAAP applied
on a consistent basis throughout the periods involved and subject (in the case
of the interim financial statements referred to in clause (ii) above) to normal
year-end audit adjustments. (b) (i) The audited balance sheets of the Business
as at February 27, 1994, February 26, 1995 and February 25, 1996 and the related
statements of operations and cash flows for the periods then ended, (ii) the
audited balance sheet of the Business as at August 25, 1996 and the related
statements of operations and cash flow for such period and (iii) the unaudited
balance sheet of the Business as of August 27, 1995 and the related statements
of operations and cash flow for such period (collectively, the financial
statements described in clauses (i), (ii) and (iii) shall hereafter be referred
to as the "Business Financial Statements"), final copies of which (in the case
of the financial statements referred to in clauses (i) and (ii) above) are
annexed as Schedule 3.4(b) hereto and (in the case of all such financial
statements referred to in clauses (i), (ii) and (iii) above) were previously
delivered to Buyer, fairly present the financial position of the Business as of
the dates set forth therein and the results of operations and changes in
retained earnings and cash flows of the Business for the respective periods or
as of the respective dates set forth therein, in each case in conformity with
GAAP and Regulation S-X of the Securities and Exchange Commission ("SEC"),
applied on a consistent basis throughout the periods involved (other than as set
forth on the notes to the Business Financial Statements), and subject for the
unaudited period, to normal recurring adjustments consistent with the fact that
financial statements of the Business have not been audited apart from the
Sellers' consolidated group. (c) The unaudited balance sheet of the Business as
at January 28, 1996 set forth on Schedule 3.4(c) hereto (the "Balance Sheet")
fairly presents the financial position of the Business as at such date. The
Balance Sheet has been prepared in accordance with GAAP applied on a consistent
basis throughout such period (other than as set forth on the notes to the
Balance Sheet), subject to normal year-end audit adjustments consistent with the
fact that the Balance Sheet has not been audited apart from the Sellers'
consolidated group. The accruals and reserves set forth on the Balance Sheet
have been established in the ordinary course of business consistent with past
practice and, taken as a whole, are reasonable and would not be materially
different as a result of year-end audit adjustments for Balfour as a subsidiary
of T&C in accordance with GAAP. (d) The Statement of Purchased Accounts fairly
presents that portion of the Business being transferred to and Assets being
purchased by and liabilities being assumed by Buyer and consists of certain line
items derived from the Balance Sheet, using methodology consistent with the
methodology previously delivered to Buyer, a true and correct copy of which
together with all supplying workpapers is set forth on Schedule 3.4(d) hereto
(the "Schedule 3.4(d) Methodology"). (e) The Base Working Capital Schedule
consists of line items derived from the Statement of Purchased Accounts, using
methodology consistent with the Schedule 3.4(d) Methodology. (f) The statement
setting forth the Estimated Working Capital shall be an estimate and shall be
prepared in accordance with the Schedule 3.4(d) Methodology.
3.5 Absence of Undisclosed Liabilities. There are no material liabilities
or obligations of the Business (whether absolute or contingent) except for
liabilities and obligations (i) reflected on the Balance Sheet or adequately
reserved for on the Balance Sheet, (ii) incurred in the ordinary course of the
business of the Business consistent with past practices or (iii) as expressly
set forth in Schedule 3.5 hereto.
3.6 Absence of Certain Changes. Since the date of the Balance Sheet, the
Business has been conducted only in the ordinary course, consistent with past
practice. Without limiting the foregoing, since the date of the Balance Sheet,
except as set forth in Schedule 3.6, there has not been (a) any actual or to the
best knowledge of Sellers, threatened change in the condition (financial or
otherwise), properties, assets or results of operations of the Business or any
Seller which, individually or in the aggregate, could have a material adverse
effect, (b) any material damage, destruction or other casualty loss to, or
actual or, to Sellers' knowledge, threatened forfeiture or taking of, any Assets
or any property used in the Business (whether or not covered by insurance), (c)
any waiver or modification by any Seller of any right or rights of substantial
value, or any payment (direct or indirect) in satisfaction of any liability,
which individually or in the aggregate, could have a material adverse effect on
the Business, (d) any change in the accounting principles, methods, practices or
procedures followed by any Seller in connection with the Business or any change
in the depreciation or amortization policies or rates theretofore adopted by any
Seller in connection with the Business, (e) any sale, transfer, conveyance of
any Asset, or grant to any party of any license, sublicense, franchise or option
or other right of any nature to sell or distribute the Assets, other than
inventory in the ordinary course of the Business, (f) any material change to any
business policy of the Business, including, without limitation, advertising,
marketing, pricing, purchasing, personnel, return or product acquisition
policies; (g) any increase in the rate of compensation or in the benefits
payable or to become payable by Balfour to any employee or officer of the
Business inconsistent with their past practices or, except as set forth on
Schedule 3.6(g) hereto, any institution of a bonus or incentive plan for
employees for fiscal 1997 or subsequent years, (h) any declaration, setting
aside or payment of any dividends, or other distributions in respect of the
outstanding shares of capital stock of Balfour, (i) any strikes, work stoppages,
slowdowns, lockouts, arbitrations or any grievances or other labor disputes
pending or, to Sellers' best knowledge, threatened against or involving Balfour,
(j) any unfair labor practice charges, grievances or complaints pending or, to
any Seller's best knowledge, threatened by or on behalf of any employee or group
of employees of the Business, (k) any organizing activity involving any Seller
or, to any Seller's best knowledge, threatened by any labor organization or
group of employees of the Business, (l) any payment or commitment to pay
severance or termination pay to any of Sellers' officers, directors, employees,
consultants, agents or other representatives of the Business or (m) any pending
or, to any Seller's best knowledge, threatened or anticipated dispute with any
customer or supplier or any occurrence or situation or other event which is
reasonably likely to result in any material reduction in amount of products
purchased or sold or material change in terms or conditions of doing business
with any substantial customer or supplier of the Business.
3.7 Title to Properties and Related Matters. Except for liens and
encumbrances which shall be removed at Closing, each Seller is, and upon
consummation of the transactions contemplated by this Agreement, Buyer will
become, the legal and beneficial owner of, and each Seller has, and Buyer will
acquire, good and marketable title to all of the Assets, free and clear of all
mortgages, pledges, liens, security interests, conditional sales agreements,
tenancies, rights of occupancy, encumbrances or charges of any kind ("Liens"),
except for (a) Liens created by Buyer, (b) Liens of lessors under equipment
leases assumed by Buyer hereunder, (c) mechanic's, materialmen's and similar
liens with respect to amounts of Assumed Liabilities not yet due and payable or
which are being contested in good faith through appropriate proceedings and have
been adequately reserved for on the Statement of Purchased Accounts, and (d)
Liens on the Kentucky Property and the Sales Office Properties, each of which
Liens described in clauses (c) and (d) of this Section 3.7 have been disclosed
in writing on Schedule 3.7 (collectively, "Permitted Liens").
3.8 Intellectual Property. Except as set forth in Schedule 3.8, (a) Balfour
is the sole and exclusive owner of all rights to the Intellectual Property set
forth opposite its name on Schedule 1.1(a)(iv), free and clear of all Liens, the
same are fully assignable and the Seller which is the owner thereof has the
right to use the same without the payment of any license, fee, royalty or
similar charge, (b) there is no material claim of any other person, firm or
corporation or any proceeding pending or, to any Seller's best knowledge,
threatened which relates to any of the Intellectual Property, (c) the
Intellectual Property identified in Schedule 1.1(a)(iv) constitutes all
intellectual property used in or necessary for the operation of the Business and
does not infringe on the rights of any other person, (d) no Seller has granted
any license or sublicense with respect to any Intellectual Property, and (e) to
the best knowledge of each Seller, no person is infringing on any Seller's
rights to any Intellectual Property. None of the Intellectual Property set forth
on Schedule 1.1(a)(iv) is used or owned by or licensed to Gold Lance, and
Balfour does not use any intellectual property owned by or licensed to or by
Gold Lance.
3.9 Litigation. Except as set forth on Schedule 3.9 there are no claims,
actions, suits, proceedings or investigations by or before any court or
governmental or other regulatory or administrative agency, instrumentality or
authority pending or, to any Seller's best knowledge, threatened by or against
or affecting the Business or Balfour. Except as set forth on Schedule 3.9, there
are no claims, actions, suits, proceedings or investigations by or before any
court or governmental or other regulatory or administrative agency,
instrumentality or authority pending or, to any Seller's knowledge, threatened
by or against or affecting T&C or any of its subsidiaries that, individually or
in the aggregate, could be reasonably likely to have a material adverse effect
on the Business, any Asset or any Seller's ability to consummate the
transactions contemplated hereby. None of the matters set forth in Schedule 3.9,
either individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the Business or the Assets. There are no claims,
actions, proceedings or investigations pending, or to the best knowledge of each
Seller, threatened, nor is there outstanding any writ, order, decree or
injunction that (a) calls into question any Seller's authority or right to enter
into this Agreement or the Seller Agreements, or (b) would otherwise prevent or
delay the transactions contemplated by this Agreement or the Seller Agreements.
3.10 Compliance with Applicable Law. Except as set forth in Schedule 3.10,
each Seller and the Business is complying and has complied in all material
respects with all applicable laws, rules, regulations, orders, ordinances,
judgments or decrees of all governmental authorities (federal, state, local or
foreign) or any court applicable to it or its respective Assets or the Business.
Except as set forth on Schedule 3.10 hereto, no Permit is necessary for the
conduct of the Business, except for such Permits the absence of which could not
have a material adverse effect on the Assets or the Business. Each Seller has
all of the Permits set forth on Schedule 3.10 hereto, and all of such Permits
are in full force and effect. Except as set forth on Schedule 3.10 hereto, no
violations are or have been recorded in respect of any Permit which could have a
material adverse effect on the Assets or the Business, and no proceeding is
pending, or to the knowledge of any Seller, threatened, to revoke or limit any
Permit.
3.11 Brokers and Finders. None of the Sellers nor any of their officers,
directors or employees has incurred any liability for any brokerage fees,
commissions, finders' fees or similar fees or expenses in connection with the
sale of the Business for which Buyer may be liable. 3.12 Powers of Attorney.
Except as set forth in Schedule 3.12, there is not currently existing any power
of attorney of any type given by any Seller and pertaining to any Assets or the
Business.
3.13 Labor and Employment. Except as set forth in Schedule 3.13, (a) no
Seller is party to or subject to any collective bargaining or other agreement
with a labor union or similar organization, contingent or otherwise covering or
applicable to employees in the Business and (b) there is no employment or
consulting agreement that will remain in effect after the Closing that pertains
to the Business. Except as described in Schedule 3.13, there are no
controversies, labor disturbances, investigations or proceedings pending or, to
each Seller's best knowledge, threatened, between any Seller and any of their
respective Employees. With respect to the Business, each Seller has complied in
all material respects with all laws and regulations relating to the employment
of labor, including without limitation, the Occupational Safety and Health Act
("OSHA"), all laws and regulations relating to wages, hours, and collection and
payment of social security and withholding taxes, or both, and similar taxes in
respect of the Business. Except as set forth in Schedule 3.13, there is no
unfair labor practice charge or complaint against any Seller or the Business
pending against or with the National Labor Relations Board or any other
governmental agency arising out of the activities or operations of the Business.
No Seller is liable for any arrearages of wages or any taxes or penalties for
failure to comply with any of the foregoing. To each Seller's best knowledge,
there are no organizational efforts presently being made or threatened by or on
behalf of any labor union, with respect to the Employees. The Business has not
experienced a work stoppage or other material labor disturbance within the past
three years. No Seller has incurred any liability under the Worker Adjustment
and Retraining Notification Act or similar state law. 3.14 Employee Benefits.
(a) Except as set forth in Schedule 3.14, no Seller has nor does any other
organization which is a member of a controlled group of organizations within the
meaning of Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of
1986, as amended (the "Code") (an "ERISA Affiliate"), of which any Seller is a
member have any obligation, contingent or otherwise, covering any employees of
the Business under any employment or consulting agreement or under any executive
or employee's compensation plan, agreement or arrangement including, without
limitation, any pension, retirement, profit sharing, stock option, stock
purchase, bonus, savings plan, or any ERISA (as defined below) plans of any
Seller (collectively referred to herein as "Seller Plans"). (b) With respect to
Employees, except as set forth in Schedule 3.14, there are no written and filed
claims or grievances outstanding against any Seller under any Seller Plan other
than in the normal course of business. (c) With respect to each Seller Plan, (i)
such Seller Plan has been maintained in material compliance with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Code, the
terms of such Seller Plan and other applicable Laws, (ii) a favorable
determination letter has been obtained from the IRS, and a copy thereof
delivered to the Buyer, for any such Seller Plan that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA and that is intended
to be qualified within the meaning of Section 401(a) of the Code, and since such
determination letter, no event has occurred that would disqualify such Seller
Plan; and (iii) there has been no "prohibited transaction" within the meaning of
Section 4975(c) of the Code or Section 406 of ERISA involving the assets of any
Seller Plan. Except as set forth on Schedule 3.14 hereto, neither the Seller nor
any ERISA Affiliate is or was required to contribute during any period within
the preceding six years to any "multi-employer plan" (as defined in Section
3(37) of ERISA). (d) Sellers have previously delivered to Buyer with respect to
each Seller Plan, true and correct copies of the following, to the extent
applicable (i) each Seller Plan and any trust agreements related thereto; (ii)
the most recent annual report (Form 5500 Series); and (iii) the most recent
summary plan description, as described in Section 102(a)(1) of ERISA. (e) Except
as required by Section 4980B of the Code and as set forth on Schedule 3.14, no
Seller Plan or other arrangement provides medical or death benefits (whether or
not insured) with respect to current or former employees of the Seller or any
ERISA Affiliate beyond their retirement or other termination of employment. Any
continuation coverage provided under any welfare benefit plans complies with
Section 4980B of the Code and is at the expense of the participant or
beneficiary. Copies of the most recent reports (the "FASB Reports") regarding
post-retirement benefits under Sellers' Plans, other than pension benefits,
prepared in accordance with Financial Accounting Standards Board Statement No.
106 have been delivered to Buyer. Since the date of the FASB Reports, there have
been no material changes in the assumptions relied upon in any such FASB Report,
including, without limitation, the terms of the Sellers' Plans. (f) No Seller
Plan is subject to Title IV of ERISA. None of Sellers' purposes for engaging in
the transactions contemplated hereby is for the evasion of liability under Title
IV of ERISA. (g) No Seller Plan or agreement, program, policy or other
arrangement by or to which any Seller or any ERISA Affiliate is a party, is
bound or is otherwise liable, by its terms or in effect would reasonably be
expected to require any payment or transfer of money, property or other
consideration on account of or in connection with the sale, lease, exchange or
transfer of either any shares of stock or any of the assets of any Seller or any
ERISA Affiliate (whether or not any such payment would constitute a "parachute
payment" or "excess parachute payment" within the meaning of Section 280G of the
Code). 3.15 Asset Maintenance. Except as set forth on Schedule 3.15, the Assets
have been properly maintained and are (a) in good operating condition (except
for ordinary wear and tear which would not have a material adverse effect on the
Assets) and (b) are capable of being used in the Business as presently conducted
without present need for repair or replacement except in the ordinary course of
business. 3.16 Contracts. Except as set forth on Schedule 3.16(a), no Seller
party to any Contract is in default under, nor does any event, circumstance or
situation exist which, with or without the passage of time will cause a default
under any material lease, contract or agreement, undertaking, commitment,
judgment, order or decree of any court or any government agency or
instrumentality relating to or constituting any of the Assets or the Business
under which any person, firm, corporation or other entity is or may be entitled
to assert any rights against any of the Assets or the Business or to terminate
any Contract. All of the Contracts are in full force and effect and the
applicable Seller party thereto has paid in full all amounts due and payable
thereunder or has accrued all amounts due thereunder and has satisfied in full
or provided for all of its liabilities thereunder. Schedule 3.16(b) lists all
Contracts other than Immaterial Contracts, including, without limitation, all
non-competition arrangements restricting the business of the Business. Except as
indicated on Schedule 3.3, no consent or notice to any party to such Contract is
or will be required in connection with the transfer of such Contract to Buyer in
accordance with the terms hereof. To the extent required, the consent of the
other party or parties to any such Contracts in order to assign such Contract to
Buyer in accordance with the terms of this Agreement has been or will be
obtained on or prior to the Closing Date.
3.17 Environmental.
(a) For purposes of this Section 3.17, the following definitions shall
apply:
"Environmental Claim" refers to any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding or judgment, letter or other written communication from any
governmental agency, department, bureau, office or other authority, or any third
party involving violations of Environmental Laws or Releases of Hazardous
Materials.
"Environmental Laws" includes the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as amended;
the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901 et seq., as
amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., as amended; the
Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq., as amended; and any other
federal, state, local or municipal laws, statutes, regulations, rules or
ordinances imposing liability or establishing standards of conduct for
protection of the environment.
"Environmental Liabilities" means any monetary obligations, losses,
liabilities (including strict liability), damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility studies,
and removal or remedial actions), fines, penalties, sanctions and interest
incurred as a result of any Environmental Claim.
"Hazardous Materials" shall include (a) any element, compound, or chemical
that is defined, listed or otherwise classified as a contaminant, pollutant,
toxic pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, special waste, or solid waste under Environmental
Laws; (b) petroleum or petroleum-derived products; (c) polychlorinated
biphenyls; (d) any substance exhibiting a hazardous waste characteristic
including but not limited to corrosivity, ignitability, toxicity or reactivity
as well as any radioactive or explosive materials; and (e) any asbestos
containing materials.
"Release" means any spilling, leaking, pumping, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing of Hazardous
Materials (including the abandonment or discarding of barrels, containers or
other closed receptacles containing Hazardous Materials) into the environment.
(b) Except as set forth in Schedule 3.17, (i) the operations of Balfour and
the Business are in material compliance with Environmental Laws; (ii) there has
been no Release at any of the properties owned or operated by any Seller or the
Business or, to Sellers' knowledge, a predecessor in interest, or to Sellers'
knowledge, at any disposal or treatment facility which received Hazardous
Materials generated by the Business or any predecessor in interest, in each
case, which, individually or in the aggregate, is reasonably likely to result in
Environmental Liabilities that have a material adverse effect on the Business;
(iii) no Environmental Claims have been asserted against any Seller, the
Business or, to Sellers' knowledge, any predecessor in interest, nor, to
Sellers' knowledge, are there any threatened or pending Environmental Claims
against any Seller, the Business or, to Sellers' knowledge, any predecessor in
interest, in each case, which, individually or in the aggregate, are reasonably
likely to result in Environmental Liabilities that would have a material adverse
effect on the Business; and (iv) to the knowledge of Seller, no Environmental
Claims have been asserted against any facilities that may have received
Hazardous Materials generated by the Business or any predecessor in interest, in
each case, which, individually or in the aggregate, are reasonably likely to
result in Environmental Liabilities that would have a material adverse effect on
the Business.
3.18 Taxes. (a) No Seller, nor any subsidiary nor any member of a Relevant
Group has failed to file any Tax Return required to be filed, which failure
could result in the imposition of any Lien on or against the Assets, the
Business or Buyer or in any liability to Buyer, as transferee or otherwise. All
Taxes imposed on each Seller, any subsidiary or any member of a Relevant Group
the non-payment of which could result in a Lien on or against the Assets, the
Business or Buyer or in any liability to Buyer, as transferee or otherwise, have
been or will prior to the Closing Date be paid. All deposits required to be made
by any Seller, any subsidiary or any member of a Relevant Group in respect of
any material Tax, including, without limitation, withholding taxes, have been or
will be made in a timely fashion. There are no material Tax deficiencies or
claims asserted against any Seller, any subsidiary or any member of a Relevant
Group. There is no basis for any Tax deficiency or claim which could result in
the imposition of any Lien on the Assets, the Business or Buyer or in any
liability to Buyer, as transferee or otherwise. Neither Buyer nor any of its
subsidiaries shall have any liability for any Tax imposed on or with respect to
any subsidiary that is attributable to the Pre-Closing Tax Period.
(b) No Seller is a party to any Tax allocation or sharing agreement or
understanding that could, under any circumstances, require any payment by Buyer,
any of its subsidiaries or any affiliate thereof after the Closing Date. None of
Buyer nor any of its subsidiaries shall have any liability for any Tax imposed
on or with respect to any subsidiary that is attributable to the Pre-Closing Tax
Period.
(c) For purposes of this Agreement:
"Pre-Closing Tax Period" shall mean all taxable periods ending on or before
the Closing Date and the portion ending on the Closing Date of any taxable
period that includes (but does not end on) the Closing Date.
"Relevant Group" means any combined, consolidated, affiliated, unitary or
similar group of which any Seller or any subsidiary of any Seller is or was a
member.
"Tax" or "Taxes" means all U.S. (federal, state and local) and foreign net
or gross income, gross receipts, net proceeds, estimated, sales, use, ad
valorem, value added, franchise, withholding, payroll, employment, excise,
property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements (including any
information returns and estimated tax returns) required to be filed for purposes
of a particular Tax.
3.19 Accounts Payable. All accounts payable reflected on the Balance Sheet
and to be reflected on the Statement of Net Working Capital have been or will
have been incurred on or prior to the Closing Date in the ordinary course of
business and all payment terms are consistent with past practices.
3.20 Customers and Suppliers. Sellers have previously provided to Buyer
complete and correct lists of the customers (other than individual ring buyers
pursuant to direct sales) and suppliers of the Business. Sellers' relations with
the 50 largest customers and suppliers of the Business are good. No material
customer or supplier has canceled or terminated or threatened to cancel or
terminate, its relationship with any Seller or any of their subsidiaries, or has
decreased materially, or threatened to decrease materially, its dealing with any
Seller or any of their subsidiaries, to the best knowledge of each Seller, there
is no reason why any such customer or supplier would cease to do business with
Buyer after, or as a result of, the consummation of the transactions
contemplated by this Agreement.
3.21 Inventory. (a) All inventory used in or held for the Business is held
by Balfour. As of the date of the Balance Sheet, the date hereof and the Closing
Date, all such inventory is and will be of good and merchantable quality and
salable, subject to appropriate reserves (in the case of inventory held for
sale), or usable (in the case of other inventory) in the ordinary course of
business for the purpose for which intended. (b) All inventory reflected on the
Balance Sheet and in the books and records of Balfour and to be reflected in the
statement setting forth the Estimated Working Capital is or will be reflected at
the lower of cost or market and the value at which such inventory is or will be
carried reflects the customary inventory policy of Balfour (which fairly
reflects the net realizable market value of obsolete, damaged, below quality or
excess inventory) for stating inventory in accordance with GAAP consistently
applied, subject to adjustments as set forth in the notes to the Balance Sheet.
(c) As of the date of the Balance Sheet, the precious metals and gems were, and
as of the Closing Date the precious metals and gems will be, of at least the
quality as marked, stamped or otherwise indicated by the Sellers on such items
(including, without limitation, as indicated on any containers or packages
holding such items) or as otherwise indicated by the Sellers in their books and
records. As of the date of the Balance Sheet the inventory was not, and as of
the Closing Date the inventory will not be, in excess of the normal purchasing
patterns of Balfour.
3.22 Accounts Receivable. All accounts and notes receivable reflected on
the Balance Sheet and to be reflected on the statement setting forth the
Estimated Working Capital arose from the sale of products and services provided
in the ordinary course of business, are the legal and binding claims of Balfour,
as the case may be, free and clear of all Liens, have been recorded in
accordance with generally accepted accounting principles, and, subject only to
consistently recorded reserves for bad debts and returns, which reserves have
been established in accordance with generally accepted accounting principles
consistently applied (subject to year-end adjustments) and fairly reflect the
past collection experience of Balfour.
3.23 Real Property. The Sellers have good and marketable title in the Owned
Property, and, except as set forth on Schedule 3.23, have valid leasehold
interests in the Leased Property, the Kentucky Property and the Sales Office
Property. Except as set forth on Schedule 3.23, all Leases are in full force and
effect and are valid, binding, and enforceable against the respective Sellers in
accordance with their respective terms and there does not exist any default (or
event which, with notice or lapse of time or both, would constitute a default)
thereunder. There are no outstanding options, contracts, or rights of first
refusal to purchase any Seller's interest in any parcel of the Owned Property
and, to Sellers' knowledge, the Leased Property, the Kentucky Property or the
Sales Office Property, or any portion thereof or interest therein. To the extent
required by law, Sellers have all permits, including, without limitation, a
certificate of occupancy, necessary for the use and/or operation of such parcel
of or interest in the Real Property.
3.24 Assets Constituting the Business. The Assets to be transferred to
Buyer pursuant to the Agreement comprise all of the assets, properties, rights
and businesses currently employed by any of the Sellers (other than the Excluded
Assets) in, the conduct of the Business and the sale of the Assets to Buyer
pursuant to this Agreement will effectively convey the Business (other than the
Excluded Assets) to Buyer, including all tangible and intangible assets and the
goodwill relating thereto. The machinery, motor vehicles and other equipment set
forth in Schedule 1.1(c)(viii) hereto is not currently, and in the past has not
been, used in, and is not necessary for the operations of, the Business as
currently conducted. 3.25 Cost Savings Assumptions. Sellers, jointly with CJC,
have prepared and have delivered to Buyer their good faith estimates of
projected cost savings of the Business after the Closing Date, as set forth on
Schedule
3.25 hereto (the "Estimated Cost Savings"). The portion of the projections
and the assumptions on which such projections are based that were prepared by
Sellers were prepared by Sellers in good faith, based upon information derived
from the books and records of the Business. Sellers believe such estimates of
cost savings and the assumptions provided by Sellers on which such Estimated
Cost Savings were based are reasonable; provided, however, that (i) the parties
hereto recognize that such Estimated Cost Savings were based, in part on
information and material provided by CJC and (ii) such Estimated Cost Savings do
not constitute a guarantee or warranty about future performance or results of
operations.
3.26 [Intentionally Omitted.]
3.27 Shareholder Vote. No shareholder vote by T&C shareholders is necessary
in connection with the transactions contemplated herein. The sale of the Assets
and the Business to Buyer in accordance with the terms contained herein does not
constitute substantially all of the assets of T&C for purposes of the laws of
the Commonwealth of Massachusetts. 3.28 Related Party Transactions. Except as
set forth on Schedule 3.28 or on Schedule 3.4(c), no affiliate of Balfour
(including T&C and its subsidiaries) has borrowed any monies from or has
outstanding any indebtedness or other similar obligations to any Seller that
exceed $25,000 principal amount in the aggregate (other than ordinary course
travel expenses, advances and allowances to employees that are not material in
amount). Set forth on Schedule
3.28 is a true and complete description of each contract, arrangement or
understanding between Balfour and any subsidiary or affiliate of Balfour
(including T&C and its subsidiaries) (other than employment contracts). Each of
the contracts, arrangements or understandings set forth on Schedule 3.28 to
which a Seller is a party provides for terms and conditions that are no less
favorable to such Seller than could be obtained from a non-affiliated
third-party in an arm's-length transaction. The aggregate impact of intercompany
costs and sales (including gross margins thereon) is not material to the
Business.
3.29 SEC Documents. T&C has made available to Buyer true and complete
copies of (i) each report on Form 10-K filed by T&C with the SEC since June 13,
1991 and (ii) all other reports, schedules, registration statements and
definitive proxy statements filed by T&C with the SEC since February 26, 1995
and prior to the date of this Agreement (collectively, the "SEC Documents"),
which are all the documents (other than preliminary material) that T&C was
required to file with the SEC since February 26, 1995. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act of 1933, as amended (the "Securities Act"), or the
Securities Exchange Act, of 1934, as amended, as the case may be, and the rules
and regulations of the SEC thereunder applicable to such SEC Documents, and none
of the SEC Documents contained as of the date of its filing any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All material
agreements, contracts and other documents required to be filed as exhibits to
any of the SEC Documents have been so filed.
3.30 Gold. On the Closing Date, the gold purchased by Buyer (or its
lenders) from Sellers (or their lenders) shall be of at least the amount and
quality (measured in troy ounces having a fineness of not less than .9995
without regard to whether such gold is alloyed or unalloyed, in bullion form or
contained in or processed into other materials that contain elements other than
gold, and whether in the possession of the Sellers or their sales
representatives) as set forth on the Estimated Gold Certificate. Such gold is of
good and merchantable quality and useable in the ordinary course of business for
the purpose for which intended. Sellers make no representation as to the taking
of the physical inventory of the gold.
3.31 Consolidation of Graphics Plants. Sellers have consolidated the
operations of the Dallas graphics plant located at 2621 Lonestar Drive, Dallas,
Texas (the "Dallas Graphics Plant") with Sellers' plant in Louisville, Kentucky
and moved all of such operations to the Kentucky Property. Sellers have paid all
costs, expenses, liabilities and obligations incurred or to be incurred in
connection with the closing of such plant in accordance with the terms of
Schedule 5.13 of the Original Agreement, the accrual for which shall be set
forth on the Statement of Net Working Capital, and Sellers shall indemnify Buyer
from and against and promptly reimburse it for any and all reasonable costs,
expenses, liabilities and obligations incurred by Buyer in connection with the
Dallas Graphics Plant and the subsequent closing thereof and its consolidation
with other operations of Buyer and the operations of the Business conducted
thereat (including, without limitation, all employee costs) in excess of such
accrual. Sellers have complied with the WARN Act and all comparable state laws
with respect to the Dallas Graphics Plant.
3.32 Full Disclosure. No representation or warranty of Sellers contained in
this Agreement (including the exhibits and schedules hereto) or in the Seller
Agreements contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. To the
best knowledge of the Sellers, there is no fact relating to the Business that
could reasonably be expected to have a material adverse effect thereon that has
not been disclosed pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
4.1 Corporate Organization. Buyer is a Delaware corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has not conducted any business other than in connection with its formation
and the transactions contemplated by this Agreement and the CJC Agreement and
the financing therefor.
4.2 Authorization. Buyer has full corporate power and authority to execute
and deliver this Agreement and the documents to be delivered at the Closing
pursuant to Section 2.3 (collectively, the "Buyer Agreements") and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Buyer Agreements by Buyer and the consummation by Buyer
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action and no other corporate action or proceeding on
the part of Buyer is necessary to authorize the execution and delivery by Buyer
of this Agreement or the Buyer Agreements or the consummation by Buyer of the
transactions contemplated hereby or thereby. This Agreement has been, and the
Buyer Agreements on the Closing Date will be, duly executed and delivered by
Buyer, and this Agreement is, and on the Closing Date each of the Buyer
Agreements will be, legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their terms, subject to applicable laws
affecting creditors' rights generally and, as to enforcement, to general
principles of equity, regardless of whether applied in a proceeding at law or in
equity.
4.3 No Violations, No Consents or Approvals Required. Neither the execution
and delivery of this Agreement or the Buyer Agreements nor the consummation of
the transactions contemplated hereby or thereby will (a) conflict with or
violate any provision of the Certificate of Incorporation or By-Laws of Buyer,
(b) conflict with or violate any law, rule, regulation, ordinance, order, writ,
injunction, judgment or decree applicable to Buyer or by which any of its
properties or assets are bound or affected or (c) conflict with or result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination or cancellation of, or accelerate the performance required by or
maturity of, or result in the creation of, any security interest, lien, charge
or encumbrance on any of its assets or properties pursuant to any of the terms,
conditions or provisions of, any note, bond, mortgage, indenture, permit,
license, franchise agreement, lease, contract, or other instrument or obligation
to which Buyer is a party or by which Buyer or any of its properties or assets
is bound or affected, except, in the case of (c) above, for such conflicts,
violations, breaches, defaults, terminations, cancellations and accelerations
which in the aggregate will not have a material adverse effect on the ability of
Buyer to consummate the transactions contemplated by this Agreement and the
Buyer Agreements. Except for applicable requirements, if any, of the HSR Act,
which filings, waivers or consents have been made or obtained on or prior to the
date hereof and will be made or obtained on or prior to the Closing Date, no
notice, declaration, report or other filing or registration with, and no waiver,
consent, approval or authorization of, any governmental or regulatory authority
or instrumentality or any other person is required to be submitted, made or
obtained by Buyer in connection with the execution, delivery or performance of
this Agreement or the Buyer agreements and the consummation of the transactions
contemplated hereby or thereby. In accordance with the terms of the FTC Interim
Agreement, Buyer is permitted to consummate the transactions contemplated
hereby.
4.4 [Intentionally Omitted.]
4.5 Brokers and Finders. Neither Buyer nor its officers, directors or
employees has incurred any liability for any brokerage fees, commissions,
finders' fees or similar fees or expenses in connection with the purchase of the
Business or the other transactions contemplated hereby, for which Sellers may be
liable.
4.6 Financing. Buyer has received
(a) a commitment letter from a commercial bank with respect to the
provision of bank financing for Buyer, and
(b) a highly confident letter from an investment banking firm with respect
to the provision of subordinated debt to Buyer to fund the transactions
comtemplated by this Agreement, in each case subject to the conditions stated
therein. Buyer has delivered to Sellers copies of such letters. On the Closing
Date, Castle Harlan Partners II, L.P. will provide at least $35 million of
equity capital to Buyer.
4.7 Litigation Affecting Buyer. There is no claim, action, proceeding or
investigation pending or, to the best knowledge of Buyer, threatened, nor is
there outstanding any writ, order, decree or injunction that (a) calls into
question Buyer's authority or right to enter into this Agreement or the Buyer
Agreements and consummate the transactions contemplated hereby or thereby, or
(b) would otherwise prevent or delay the transactions comtemplated by this
Agrement or the Buyer Agreements.
<PAGE>
ARTICLE V
COVENANTS
5.1 Conduct of the Business Pending the Closing. Sellers hereby jointly and
severally covenant that, from the date hereof to and including the Closing Date,
unless Buyer shall otherwise consent (such consent not to be unreasonably
withheld or delayed) or as otherwise contemplated by this Agreement:
(a) the Business shall be conducted and the Assets repaired and maintained
only in the ordinary and usual course, in a manner consistent with past
practice;
(b) Balfour shall not (i) except as set forth in Schedule 5.1(b) hereto
make any commitment to make any capital expenditures after the Closing Date
individually in excess of $20,000 or in the aggregate in excess of $250,000;
(ii) amend or waive any rights under any of its material contracts; or (iii)
enter into (1) any written employment or severance agreement with any Acquired
Employee or (2) any new employee benefit plan, program or arrangement or amend
any existing employee benefit plan, program or arrangement or grant any
increases in compensation to the Acquired Employees in excess of increases in
compensation consistent with the past practices of the Business;
(c) except in the ordinary course of business consistent with past
practice, Balfour shall not (i) other than as set forth on Schedule 5.1(c),
dispose of any capital assets with a book value, individually or in the
aggregate, in excess of $20,000 or further encumber any of its capital assets or
(ii) incur, or guarantee or otherwise become liable for, any indebtedness for
borrowed money;
(d) Sellers shall maintain in full force and effect all insurance policies
now in effect or renewals thereof covering the Assets or the Business and the
Employees;
(e) Sellers shall promptly notify Buyer of the following of which any of
them become aware: (i) any breach or violation of, default or event of default
under, or actual or threatened termination or cancellation of any material
contract or other material instrument relating to the Business; (ii) any
material loss of, damage to, or disposition of any of the Assets (other than the
sale or use of inventories in the ordinary course of business); and (iii) any
material claim or litigation, threatened or instituted against any Seller and
affecting the Business;
(f) Sellers shall consult with Buyer with respect to any collective
bargaining negotiations affecting the Business and the adoption of employee
benefit plans;
(g) Other than in connection with the Temporary Leases and Subleases no
Seller shall sell, dispose of, lease, sublease, distribute, encumber or enter
into any agreement, arrangement or commitment, whether oral or written, for the
sale, disposition, leasing, subleasing, distribution or encumbrance of any
portion of the Assets or the Business (other than the sale of obsolete equipment
or the sale or use of inventories in the ordinary course of business of the
Business or as set forth in item (c)(i) above) or initiate or participate,
through agents, representatives or otherwise, in any discussions or negotiations
with, or otherwise solicit from, any corporation, business or person any
proposals or offers relating to the disposition of any such portion of the
Business;
(h) No Seller shall make any material change to any business policy of the
Business, including, without limitation, promotional, advertising, marketing,
pricing, purchasing, personnel, return or product acquisition policy; and
(i) Sellers shall use their respective best efforts to preserve for the
benefit of the Business their relations with the Business' customers and
suppliers.
5.2 Access to Information.
(a) Prior to the Closing Date and upon reasonable notice from Buyer,
Sellers (i) shall give Buyer and its authorized representatives and
representatives of its financing sources reasonable access, subject to such
limitations or procedures as may be necessary to protect the attorney-client
privilege or the work product doctrine, to all offices, warehouses, plants,
stores and other facilities relating to the Business or the Assets and to all
books and records of the Business, (ii) will permit Buyer and all such persons
to make such inspections as they may reasonably request at reasonable times and
(iii) will cause its officers to furnish Buyer and all such persons with such
financial and operating data and other information with respect to the Assets
and the Business as they may from time to time reasonably request.
(b) Buyer shall hold and shall cause its employees, agents and other
representatives to hold in strict confidence all documents and information
concerning the Business to the extent and in accordance with the terms and
conditions of the Confidentiality Agreement dated April 23, 1996, between Buyer
and T&C; provided, however, that Sellers acknowledge that Buyer may disclose
certain information regarding the Business, this Agreement and the transactions
contemplated hereby to Buyer's lenders or in connection with the public or
private offering of Buyer's securities to the extent required by federal and
state securities laws, in either case, in connection with Buyer's financing of
the transactions contemplated by this Agreement and the provision of a line of
credit to Buyer from its lenders.
(c) For a period of at least six (6) years following the Closing Date,
Buyer shall retain, at Buyer's sole expense, the books, records and other data
of the Business transferred pursuant to Section 1.1(a). During such period,
Buyer shall afford to Sellers, their counsel and accountants, during normal
business hours, reasonable access to such books, records and other data.
Following the expiration of such six-year period, Buyer may dispose of any such
books, records and other data; provided, however, that before disposing of any
such materials it shall first notify T&C and permit T&C, at its sole expense, to
remove such materials.
(d) Buyer shall, at the request of any Seller, (i) provide reasonable
assistance in the collection of information or documents and (ii) make Buyer's
employees available when reasonably requested by Sellers in connection with
claims or actions brought by or against third parties based upon events or
circumstances concerning Excluded Liabilities. After the Closing Date, Buyer
agrees to make available to Sellers for inspection and copying at Sellers'
expense, at reasonable times upon request therefor, any records and documents
relating to the Business and the Assets which, at the time of such request, are
in Buyer's possession or control. In addition, Buyer agrees to make available to
Sellers such financial data and other information relating to the Business and
the Assets, and will make available such employees of the Business employed by
Buyer, as Seller shall from time to time reasonably request to permit Seller to
prepare any Tax Returns and in connection with any governmental examination of
Tax Returns relating to the Business or the Assets for the periods prior to the
Closing Date. Buyer's reasonable expenses in connection therewith shall be
reimbursed by Sellers.
(e) After the Closing Date, Sellers agree to make available to Buyer for
inspection and copying at Buyer's expense, at reasonable times upon request
therefor, any records and documents relating to the Business and the Assets
retained by Sellers which, at the time of such request, are in any Seller's
possession or control. In addition, Sellers agree to provide reasonable
assistance in the collection of information or documents and make available to
Buyer any financial data and other information retained by any Seller relating
to the Business and the Assets, and will make available such former employees of
the Business that at the time shall be employed by any Seller, as Buyer shall
from time to time reasonably request, in connection with claims or actions
brought by or against third parties based on events or circumstances concerning
the Assets or the Business or the Assumed Liabilities and to permit Buyer to
prepare any Tax Returns and in connection with any governmental examination of
Tax Returns relating to the Business or the Assets for periods from and after
the Closing Date. Sellers' reasonable expenses in connection therewith shall be
reimbursed by Buyer.
(f) Prior to the Closing, Sellers agree to make their respective Employees
available for reasonable periods of time in order to assist Buyer in its efforts
to obtain the financing for the purchase of the Assets; provided, however, that
the assistance provided by such Employees in Buyer's financing efforts shall not
unduly interfere with the normal duties and responsibilities of such Employees
to operate the business of Sellers.
5.3 Cooperation.
(a) Subject to the proviso contained in Section 5.5 hereof, upon the terms
and subject to the conditions hereof, each of the parties hereto agrees to use
its reasonable efforts to take or cause to be taken all actions and to do or
cause to be done all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, the Seller Agreements and the Buyer
Agreements and shall use its reasonable efforts to obtain all necessary waivers,
consents and approvals and to effect all necessary registrations and filings.
(b) Sellers shall use all reasonable efforts to provide to Buyer all
information concerning the Business reasonably requested by Buyer for inclusion
in Buyer's registration statement on Form S-1 in connection with the
registration by Buyer under the Securities Act of debt or other offering
memorandum for the public or private offering by Buyer of such debt as
contemplated by Section 4.6.
(c) Sellers shall cooperate with Buyer and take all actions reasonably
requested by Buyer in connection with (i) the planning for the consolidation of
certain of Sellers' plants and (ii) the financings contemplated by Section 4.6
of the Agreement; provided, however, that (x) Sellers shall not incur (except as
specifically set forth to the contrary herein) any out-of-pocket costs or
expenses and (y) Sellers shall not be obligated to comply with Buyer's requests
if Sellers deem such actions to be otherwise inconsistent with Sellers' business
needs or Sellers reasonably determine that such actions will have a material
adverse effect on the Business or will unreasonably interfere with the regular
duties and responsibilities of Sellers' employees to operate Sellers' business.
(d) Upon reasonable notice by Buyer, Sellers agree to cooperate with Buyer
and its lender in connection with the transfer of Consigned Gold by providing
access to such gold and the relevant books and records of the Business and
performing all tasks that may be reasonably requested by Buyer in connection
therewith.
(e) In the event (i) Buyer or any Seller, as the case may be, is unable to
obtain, prior to the Closing, any consents, approvals, waivers or other
authorizations to transfer to Buyer any Asset or with respect to the Leases
(other than the Kentucky Lease) and (ii) Buyer elects to waive Section 7.3(b)
hereof with respect to such consent, approval, waiver or other authorization and
to consummate the transactions contemplated hereby, Buyer and Sellers shall
cooperate with each other in order to obtain such consents, approvals, waivers
or other authorizations at the earliest practicable date.
5.4 Public Announcements. Buyer, on the one hand, and Sellers, on the other
hand, shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or the
transactions contemplated hereby and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law or any national securities exchange.
5.5 Hart-Scott-Rodino Filing. Each of the parties hereto has filed a
Notification and Report Form under the HSR Act in connection with the
transactions contemplated by this Agreement, and shall use its respective best
efforts to take promptly all other actions and do all other things necessary and
proper to avoid or eliminate any impediment under any antitrust law that may be
asserted by any government antitrust authority or any other party to the
consummation of the transactions contemplated by this Agreement in accordance
with the terms of this Agreement and to comply with its obligations under the
FTC Interim Agreement and to secure an FTC Final Order; provided, however, that
notwithstanding the foregoing, Buyer shall not be required to agree to take or
refrain from taking any further action or to make any agreement with any
governmental agency or authority or any other party (other than the FTC Interim
Agreement) that Buyer, in its sole and absolute discretion, believes may be
detrimental to the Business or its business plan. The filing fee applicable to
the Notification and Report Forms to be filed by Sellers and Buyer pursuant
hereto was borne by Sellers; provided, that upon consummation of the
transactions contemplated by this Agreement, Buyer shall promptly reimburse
Sellers for such amount. Except for the foregoing, Buyer and Seller's shall each
be solely responsible for their respective costs and expenses including legal
fees and other charges incurred in connection with the filing of the
Notification and Report Form, the FTC Interim Agreement and the FTC Final Order
and all proceedings in connection therewith Each of the parties hereto shall
comply with the FTC Interim Agreement and the FTC Preliminary Order, a form of
which is attached hereto as Schedule 5.5.
5.6 Post Closing Confidentiality. After the Closing, each Seller on behalf
of its self and its respective affiliates and subsidiaries agrees to maintain
the confidentiality of all confidential or proprietary information of the
Business and agrees not to, directly or indirectly, disclose any confidential or
proprietary information related to the Business or use or appropriate for its
own benefit or for the benefit of any other person or entity, any confidential
or proprietary information of the Business, including without limitation, any
information relating to the Business or customers except to the extent that
disclosure of any portion thereof is required by law or determined to be
necessary to comply with any legal or regulatory order, regulation or
requirement or to the extent the information becomes generally available to the
public other than as a result of a disclosure by any Seller; provided, however,
that Sellers shall first notify Buyer of any such disclosure and, if Buyer
desires, shall cooperate with Buyer to seek approval to prevent or limit such
disclosure. In addition, for a period of 12 months commencing on the earlier of
(i) November 30, 1997 or (ii) the date Buyer ceases to operate any facility in
Massachusetts, none of the Sellers nor any of their respective affiliates shall
hire or, directly or indirectly, solicit, induce or encourage any individual who
is then an employee of Buyer or the Business or offer such employee employment
with any Seller or any of their respective affiliates; provided, however, that
the foregoing shall not apply to (a) employees whose employment has been
terminated by Buyer and (b) after a period of at least thirty days since the
termination of employment with Buyer or the Business, employees who have
terminated their employment with Buyer.
5.7 Environmental Assessment. As a condition precedent to the Buyer's
obligation to purchase the Assets, the Buyer shall have the right to conduct a
Phase I environmental site assessment (the "ESA"), of the Kentucky Property at
Buyer's sole cost and expense by the date that is six weeks after the date
hereof. Buyer will provide Sellers with a copy of the ESA within three (3)
business days of receipt by Buyer from the consulting firm conducting the ESA.
If the ESA reveals the presence of Hazardous Materials reasonably likely to
result in Environmental Liabilities which could have a material adverse effect
on the Business, Buyer may notify the Sellers in writing within two (2) days of
receipt of the ESA and the parties shall have two (2) days to discuss a
resolution thereto (the "Consultation Period"). If the parties cannot reach an
acceptable resolution thereto upon the expiration of the Consultation Period,
either party may terminate this Agreement by written notice to the other within
two (2) days of expiration of the Consultation Period. If Buyer fails to object
to such presence of Hazardous Materials disclosed in the ESA within two (2) days
of receiving the ESA or fails to terminate this Agreement within two (2) days of
the expiration of the Consultation Period, this Section 5.7 shall be null and
void and of no further force and effect.
5.8 Temporary Leases and Subleases. To the extent the operations (the
"Short Term Operations") conducted at the Owned Property and the Leased Property
are not combined with the operations (i) conducted at the Kentucky Property or
(ii) conducted at any other properties held by Buyer as of the Closing Date,
Buyer and Sellers shall, at Buyer's option, enter into appropriate lease and/or
sublease agreements containing the terms and conditions set forth on Exhibits
"B" and "C" hereto to continue the Short Term Operations at their present
locations. Sellers agree that such lease and/or sublease agreements shall
provide Buyer the use of the manufacturing and administrative facilities
currently used in the Business on the terms set forth on Exhibits B and C
hereto.
5.9 CJC Agreement. Buyer shall promptly notify Sellers in writing of any
proposed amendment, waiver, or other modification (each, a "Proposed Amendment")
of the CJC Agreement (as such term is defined in Section 7.1 below) after the
date hereof that could reasonably be likely to cause a delay in the Closing
beyond January 31, 1997, or otherwise affect Buyer's ability to close the
transactions contemplated hereby in accordance with the terms hereof by such
date. Sellers shall have the right, but not the obligation, to terminate this
Agreement if (i) Sellers object to such Proposed Amendment in writing to Buyer
within 10 business days of Sellers' receipt of Buyer's notice of such Proposed
Amendment, stating Sellers' reason(s) for such objection, and (ii) such Proposed
Amendment is effected despite Sellers' objection. Sellers may exercise this
termination right by providing written notice to Buyer no later than 10 business
days after Sellers are notified of the effectuation of the Proposed Amendment,
assuming Sellers had previously objected to it.
5.10 Update of Schedules. From time to time not later than the tenth (10th)
day prior to the scheduled Closing Date, Sellers shall have the right (and the
obligation) to update or amend in any respect its disclosure of any matter set
forth or permitted to be set forth in the Schedules hereto to the extent that
such matter was unknown to any officer of any Seller on the date hereof after
reasonable due diligence with respect thereto, which fact shall be certified by
an executive officer of such Seller. If the information in any such update or
amendment could materially adversely affect the Business or Assets or the rights
and obligations of Buyer (when compared with the matters set forth in the
Schedules immediately prior to such update or amendment) as determined in good
faith by Buyer, then Buyer may terminate this Agreement by notice to Sellers not
later than the fifth (5th) day prior to the scheduled Closing Date (or later if
any such updates occur within ten (10) days of the Closing Date) or, at Buyer's
sole option, delay the Closing Date for up to ten (10) days until such date as
Buyer concludes for the purpose of making a determination as to whether such
update or amendment could materially adversely affect the Business or Assets or
the rights and obligations of Buyer. If Buyer fails to terminate this Agreement,
the schedules as of the Closing Date shall be deemed to be the schedules as so
updated. The parties acknowledge that an update or amendment to the Schedules
may contain information relating to provisions of this Agreement that are
currently not the subject of exceptions or other disclosures set forth in the
Schedules or otherwise provided to Buyer. In such event the affected provisions
shall be deemed to be modified by the updated and amended information contained
in the revised Schedules.
5.11 Audit; Delivery of Financial Statements.
(a) Sellers have delivered the final, audited balance sheet of the Business
as at February 27, 1994, February 26, 1995 and February 25, 1996 and the related
statements of operations and cash flows for the period then ended, and the
final, audited balance sheet of the Business as at August 25, 1996 and the
related statements of income and cash flows for the six months then ended. Upon
receipt by Buyer of written evidence thereof, the incremental reasonable cost of
such audit, to the extent attributable to the additional procedures required to
be performed by such accountants in order to perform the audit of the Business
only over and above their prior review of Sellers' financial statements for such
years, shall be borne equally by Buyer, on the one hand, and by Sellers, on the
other hand; provided, however, that upon consummation of the transactions
contemplated by this Agreement, Buyer shall promptly reimburse Sellers for the
portion of such incremental costs previously paid by them.
(b) [Intentionally Omitted.]
(c) [Intentionally Omitted.]
(d) Sellers' independent accountants have reviewed the unaudited balance
sheets of the Business as at February 28, 1993 and February 29, 1992 and the
related statements of income. On or prior to the Closing Date, such accountants
shall deliver an accountant's review letter or other form of letter to Buyer
stating that, based upon their review, they are not aware of any material
modifications to such financial statements that would be necessary in order for
such financial statements to be in conformity with GAAP, or such other
conclusions or information as shall be reasonably requested by Buyer's
underwriters or placement agents in connection with the financing contemplated
in this Agreement. Buyer shall pay Sellers' independent accountants (i) their
reasonable fees in connection with the work described in this paragraph (d) plus
(ii) $13,000 associated with the work performed by such accountants with respect
to the financial statements of the Business for the fiscal quarter ended May
1996.
(e) [Intentionally Omitted.]
5.12 Non-Competition.
(a) Neither any Seller nor any entity affiliated (within the meaning of the
Securities Act) with Sellers (other than Gold Lance) shall, for a period of five
years commencing on the Closing Date and ending on the fifth anniversary
thereof, directly or indirectly:
(i) engage, directly or indirectly, in any
managerial, administrative, advisory, operational or sales activities in a
Restricted Business anywhere in the Restricted Area; or
(ii) organize,
establish, operate, own, manage, control or have a direct or indirect investment
or ownership interest in a Restricted Business or in any corporation,
partnership (limited or general), limited liability company enterprise or other
business entity that engages in a Restricted Business anywhere in the Restricted
Area.
(b) Nothing contained in this Section 5.12 shall prohibit or otherwise
restrict any Seller or any entity affiliated with it from acquiring or owning,
directly or indirectly, for investment or other legitimate business purposes not
intended to circumvent this Agreement, securities of any entity engaged,
directly or indirectly, in a Restricted Business if either (i) such entity is a
public entity and such member (A) is not a controlling Person of, or a member of
a group that controls, such entity and (B) owns, directly or indirectly, no more
than 5% of any class of equity securities of such entity or (ii) such entity is
not a public entity and no affiliate of any Seller (A) is a controlling Person
of, or a member of a group that controls, such entity and (B) owns, directly and
indirectly, no more than 10% of any class of equity securities of such entity.
(c) For purposes of this Section 5.12: (i) "Restricted Business" means the
manufacture or sale of scholastic, licensed sports, and logo recognition
products including, without limitation, jewelry, commemorative and graphics
products in such businesses. (ii) "Restricted Area" means the United States.
(d) The parties hereto acknowledge that the covenants and restrictions
contained in this Section 5.12 are reasonable. The parties agree that the Buyer
shall have the right and remedy to have this Section 5.12 specifically enforced,
it being agreed that any breach or threatened breach of this Section 5.12 would
cause irreparable injury to Buyer and that money damages would not provide an
adequate remedy to Buyer.
5.13 Dallas Graphics Plant. Sellers shall indemnify and hold harmless Buyer
from and against any liability, cost or expense in connection with the
consolidation of the operations of the Dallas Graphics Plant, including any such
liability, cost or expense arising from the WARN Act and comparable state laws.
ARTICLE VI
PERSONNEL, EMPLOYMENT ARRANGEMENTS AND EMPLOYEE BENEFITS
6.1 Personnel. Effective as of the Closing, Buyer shall offer employment to
(a) all active employees of Balfour set forth on Schedule 6.1 hereto (including
those on short-term disability (who return to active employment within 90 days
of the Closing), temporary leave and temporary lay-off, but excluding employees
hired on a temporary basis) engaged by Balfour in plant operations at the plants
of the Business as of the Closing ("Employees"), provided that Employees on
short-term disability, temporary leave and temporary lay-off shall be offered
employment in their same status, and (b) all non-plant staff Employees and
corporate staff Employees, in each case at compensation and benefit levels
substantially equivalent to their present levels. Such offers shall be
outstanding for at least ten days. Employees who accept offers of employment
made by Buyer pursuant to this Section 6.1 shall be referred to hereinafter as
the "Transferred Employees." The term "Transferred Employees" shall not include
(i) any former employees of any Seller who are hired pursuant to an offer made
after the expiration of the offer made by Buyer under this Section 6.1, (ii)
employees formerly engaged in operations at the Dallas Graphics Plant of the
Business other than such employees transferred to Louisville, Kentucky. Sellers
shall assist Buyer in effecting the change of employment of the Transferred
Employees as of the Closing in an orderly fashion.
6.2 401 (k) Plan.
(a) The Transferred Employees shall be eligible to commence participation
in a defined contribution plan established and maintained by Buyer (the "Buyer
401 (k) Plan") which shall be effective no later than 60 days after the Closing
Date and which is intended to be qualified under Sections 401(a) and 401(k) of
the Code, such eligibility to be effective immediately upon the effective date
of Buyer 401 (k) Plan.
(b) Sellers shall cause Transferred Employees who are participants in the
Town & Country Corporation 401(k) and Profit Sharing Plan (the "Seller 401 (k)
Plan") to be fully vested as of the Closing Date. As of the Closing Date, Seller
401 (k) Plan shall be liable for payment of such account balances in accordance
with the terms of Seller 401 (k) Plan.
(c) Buyer shall cause each Transferred Employee to be given full credit for
service with Sellers (as defined in Seller 401(k) Plan) for purposes of
eligibility and vesting in Buyer 401(k) Plan. Buyer 401(k) Plan shall permit
rollovers of distributions made from Seller 401(k) Plan at the election of each
Transferred Employee. As soon as practicable after the Closing Date, Buyer shall
receive from Sellers such pertinent data or information as Buyer may reasonably
require to determine the Transferred Employees' service with Sellers as of the
Closing.
6.3 Other Seller Welfare Benefit Plans.
(a) As of the Closing Date, Buyer shall take such actions so that
Transferred Employees and their dependents shall commence participation in the
"employee welfare benefit plans" to be established by Buyer (the "Buyer Welfare
Plans"), which are comparable to Sellers' "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA) associated with the Business (the "Seller
Welfare Plans"); provided, that Buyer may increase the rates of contribution by
the Transferred Employees to cover increased costs. Sellers shall remain
responsible and liable for claims under the Seller Welfare Plans of Transferred
Employees and their eligible dependents incurred prior to the Closing Date under
the Seller Welfare Plans; provided, however, that Buyer shall reimburse Sellers
for the first $200,000 in the aggregate of claims incurred prior to the Closing
Date that are made on or after the Closing Date upon written evidence thereof
from Sellers to Buyer, setting forth the amount and a description of such
claim(s) in reasonable detail. Buyer shall be responsible and liable for claims
of Transferred Employee and their eligible dependents under the Buyer Welfare
Plans incurred on and after the Closing Date.
(b) The Seller Welfare Plans shall not be liable for payment of expenses
incurred by eligible Transferred Employees or their eligible dependents, except
as otherwise provided by this Section 6.3. The Seller Welfare Plans shall be
liable for the payment of benefits to eligible Transferred Employees and their
eligible dependents for claims made prior to the Closing Date.
(c) Each Buyer Welfare Plan or Plans which provides medical, health and
dental care benefits to Transferred Employees (the "Buyer Medical Plans") shall
credit service with Sellers toward any coverage waiting period, maintain only
the pre-existing conditions under the applicable Seller Welfare Plans and waive
actively-at-work requirements, and shall provide that any expenses incurred
before the Closing Date by a Transferred Employee (and his or her eligible
dependents) during the calendar year of the Closing shall be taken into account
for purposes of satisfying the applicable deductible, coinsurance and maximum
out-of-pocket provisions, and applicable annual and/or lifetime maximum benefit
limitation of the Buyer Medical Plans.
(d) Buyer shall assume, on and as of the Closing Date, the liability
described on Schedule 6.3(d) for post-retirement benefits payable under Seller
Welfare Plans to employees of Balfour who terminated employment with Balfour
prior to the Closing Date and are eligible for post-retirement benefits pursuant
to the terms of the applicable Seller Welfare Plans as of the Closing Date.
(e) If any Transferred Employee (other than such Transferred Employee set
forth on Schedule 6.3(e), whose severance shall be treated as set forth on such
schedule), is terminated by Buyer within eighteen months of the Closing Date for
any reason not attributable to such Transferred Employee's conduct or job
performance, Buyer shall provide such Transferred Employee with the amount of
severance pay that would have been provided to such Transferred Employee under
Balfour's severance program as if such employee had been terminated on the
Closing Date. The full amount of Balfour's accrued severance obligations for the
Transferred Employees in Massachusetts shall be set forth on Sellers' statement
containing the Estimated Working Capital and the Statement of Net Working
Capital, and Buyer shall return unused funds to Balfour within eighteen months
after the Closing Date. Sellers represent and warrant to Buyer that the
severance accruals to be set forth on Sellers' statement of Estimated Working
Capital will be adequate.
6.4 Limitations. Nothing contained in Sections 6.2 and 6.3 is intended to
confer any rights to any third party nor limit the ability of the Buyer to amend
or terminate any employee benefit plan after the Closing Date.
6.5 Vacation. With respect to Transferred Employees, Buyer shall continue
in effect the vacation policy of Balfour with respect to the Business that is in
effect on the day before the Closing Date (the "Business Vacation Policy") for
the remainder of the calendar year in which the Closing occurs but thereafter
reserves the right to change such policy. The Business Vacation Policy is set
forth in Schedule 6.5.
6.6 Payroll Issues. At the request of Sellers made any time after Closing,
Buyer shall, in a timely manner, provide Sellers with the information in Buyer's
possession that Sellers deems necessary for Sellers to complete any Internal
Revenue Service filing, including IRS W-2 Forms and insurance premium reports,
with respect to each individual whose employment with the Business terminated
prior to the Closing Date.
6.7 Worker Adjustment and Retraining Notification Act. Upon reasonable
written request by Buyer and at Buyer's expense, Sellers shall provide
appropriate notice (including renewal notices) pursuant to the Worker Adjustment
and Retraining Notification Act (29 U.S.C. Sections 2101, et seq.) (the "WARN
Act") with respect to employees Buyer expects to terminate less than 60 days
after the Closing Date. With respect to any other plant closings by Sellers for
which notice has not been provided by Buyer in accordance with the preceding
sentence (including the Dallas Graphics Plant) prior to the Closing Date,
Sellers shall have complied with the WARN Act and all comparable state laws and
shall indemnify and hold harmless Buyer from and against any liability, cost or
expense in connection therewith. Buyer and Sellers shall each comply with the
WARN Act and any comparable state law.
6.8 Employee Rights. Nothing herein expressed or implied shall confer upon
any employee of Sellers, any Transferred Employee, any other employee or any
legal representative thereof any rights or remedies, including any right to
employment or continued employment for any specified period, of any nature or
kind whatsoever, under or by reason of this Agreement.
ARTICLE VI
CONDITIONS TO CLOSING
7.1 General Conditions. The obligations of each party hereto to effect the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of the following conditions:
(a) No order, statute, rule, regulation, executive order, injunction, stay,
decree or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental or regulatory
authority or instrumentality that prohibits the consummation of the transactions
contemplated hereby.
(b) The waiting period applicable to the transactions contemplated hereby
pursuant to the HSR Act shall have expired or been terminated. The Interim
Agreement shall have been executed, and each of Buyer and Sellers shall be in
compliance therewith.
(c) Buyer shall concurrently with the consummation of the transactions
contemplated by this Agreement, consummate the transactions contemplated by the
Agreement, dated as of May 20, 1996, as amended as of the date hereof, and as
further amended (if at all) in accordance with the provisions set forth in
Section 5.9 hereof, by and among Buyer, as buyer, and CJC Holdings, Inc. ("CJC")
and CJC North America, Inc., as sellers (as so amended, the "CJC Agreement") on
substantially the same terms as set forth in the CJC Agreement.
7.2 Conditions to Obligations of Sellers. The obligations of Sellers to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) Buyer shall have performed its obligations required under this
Agreement to be performed by it at or prior to the Closing and the
representations and warranties of Buyer contained in this Agreement shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except to the extent that a different time is specifically stated in such
representations and warranties), and Buyer shall have delivered to Sellers on
the Closing Date a certificate of an authorized officer of Buyer, dated the
Closing Date, to such effect.
(b) Sellers shall have received the Purchase Price and the documents
referred to in Section 2.3.
(c) All necessary approvals, consents or orders of all administrative
agencies or government authorities which have jurisdiction over Buyer or the
Business to the assignment of the Assets shall have been obtained upon terms and
conditions reasonably satisfactory to Sellers.
7.3 Conditions to Obligations of Buyer. The obligation of Buyer to effect
the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) Each Seller shall have performed its obligations required under this
Agreement to be performed by it at or prior to the Closing and, the
representations and warranties of Seller contained in this Agreement (as amended
pursuant to Section 5.10) shall be true and correct on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of the Closing Date (except to the extent that a different time
is specifically stated in such representations and warranties), and each Seller
shall have delivered to Buyer on the Closing Date a certificate of an authorized
officer of such Seller, dated the Closing Date, to such effect.
(b) Buyer shall have received the documents referred to in Section 2.2.
(c) No material casualty, loss or damage shall have occurred prior to the
Closing to any Assets unless Sellers shall have either repaired or replaced such
lost or damaged property, all to the reasonable satisfaction of Buyer.
(d) All necessary approvals, consents or orders of all administrative
agencies or government authorities which have jurisdiction over Sellers or the
Business to the assignment of the Assets shall have been obtained upon terms and
conditions reasonably satisfactory to Buyer.
(e) Buyer shall have obtained the financing contemplated in Section 4.6
hereof. Such financing shall be available and shall, together with the equity
contribution referred to in Section 4.6 hereof, be sufficient for the purchase
of the Assets and to purchase the assets of CJC as contemplated by the CJC
Agreement.
(f) [Intentionally Omitted.]
(g) [Intentionally Omitted.]
<PAGE>
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by mutual consent of Buyer and Sellers;
(b) by Buyer pursuant to (i) the proviso contained in Section 5.5 above or
(ii) Section 5.11(c) above, or by Sellers (i) pursuant to Section 5.9 above or
(ii) in the event the CJC Agreement is terminated in accordance with its terms;
(c) by either Sellers or Buyer, by notice to the other, if the Closing
shall not have occurred by January 31, 1997, or earlier, if the parties mutually
agree that the transactions contemplated herein can no longer be accomplished
under the economic terms contemplated;
(d) by Sellers or by Buyer, by notice to the other, if on the date
scheduled for Closing any order shall have been entered restraining or
prohibiting consummation of the transactions contemplated hereby;
(e) by Buyer, without affecting any of its other rights hereunder at any
time after the Closing Date, if it is prepared to tender full performance of its
obligations hereunder on the Closing Date and any one or more of the conditions
precedent to its obligations herein shall not have been fulfilled or waived; or
(f) by Seller, without affecting any of its other rights hereunder at any
time after the Closing Date, if it is prepared to tender full performance of its
obligations hereunder on the Closing Date and any one or more of the conditions
precedent to its obligations herein shall not have been fulfilled or waived.
8.2 Notice of Termination. Written notice of any termination under clauses
(b), (c), (d), (e) or (f) of Section 8. 1, stating the grounds therefor, shall
be given by the party entitled to give such notice.
8.3 Effect of Termination. Except for Sections 5.2(b), 5.4 and 10.1 and for
liability for breaches of this Agreement, upon the termination of this Agreement
pursuant to Section 8. 1, this Agreement shall forthwith become null and void.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES, INDEMNIFICATION
9.1 Survival. The representations and warranties of Sellers and Buyer
herein shall survive the execution and delivery hereof and the Closing
hereunder, and shall thereafter terminate and expire fifteen (15) months after
the Closing Date with respect to any theretofore unasserted claim relating to or
arising out of any Sellers' breach of any representation or warranty contained
in Section 3 or Buyer's breach of any representation or warranty contained in
Section 4, except (i) that Sellers' representations and warranties as to title
contained in Sections 3.1, 3.7 and 3.8 shall continue indefinitely and (ii) that
Sellers' representation contained in the final sentence of Section 3.31 shall
not survive the Closing. The period of survival of the representations and
warranties as contemplated by this Section 9.1 are referred to herein as the
"Survival Period." The liabilities of the parties under their respective
representations and warranties shall expire as of the expiration of the
applicable Survival Period; provided, however, that such expiration shall not
include, extend or apply to any representation or warranty, the breach of which
shall have been asserted in a written notice before such expiration, such notice
to specify (in reasonable detail) the matter which gives rise to the breach, the
nature of the breach and the amount claimed in respect thereof. The covenants
and agreements of the parties herein and in the other documents and instruments
contemplated hereby shall survive the Closing and shall continue in full force
and effect forever, except as otherwise explicitly limited by their terms.
9.2 Indemnification by Seller. Sellers hereby jointly and severally agree
to indemnify, save and hold harmless Buyer, its successors and permitted assigns
and all of its officers, directors, stockholders, agents and employees from and
against any and all damages, liabilities, losses, claims, deficiencies,
penalties, interest, expenses, fines, assessments, charges or costs, including
reasonable attorney's fees and expenses and costs of investigation
(collectively, the "Damages") arising from (a) the Excluded Liabilities, (b) the
breach of any covenant or agreement of any Seller contained herein and (c) any
inaccuracy or breach of any representation or warranty of any Seller in this
Agreement or in any other agreement or certificate or other writing delivered
pursuant hereto.
9.3 Indemnification by Buyer. Buyer hereby agrees to indemnify, save and
hold harmless Sellers, their respective successors and permitted assigns and all
of their respective officers, directors, shareholders, agents and employees from
and against any Damages arising from (a) the Assumed Liabilities, (b) the breach
of any covenant or agreement of Buyer contained herein, and (c) any inaccuracy
or breach of any representation or warranty of Buyer in this Agreement or in any
other agreement or certificate or other writing delivered pursuant hereto.
9.4 Limitation of Liability. For purposes of this Article IX, all Damages
shall be computed net of (a) any insurance proceeds actually received from
insurance for the event or occurrence giving rise to the Damages, and (b) any
amounts actually received, from any third parties based on claims related to the
event or occurrence giving rise to the Damages that the indemnified party has
against such third parties, which reduce the Damages that would otherwise be
sustained; provided, however, that no indemnified party shall have any
obligation to pursue such recoveries under such insurance or against such third
parties, and provided, further, however, that, in all cases, the timing of the
receipt or realization of insurance proceeds or recoveries from third parties,
the amount of increased costs of insurance arising from the payment or
collection of such insurance proceeds, and the costs of collection shall be
taken into account in determining the amount of reduction of Damages. If any
indemnifying party pays to the indemnified party any Damages under this Article
IX and the indemnified party subsequently recovers from some other person any
sum in respect of any matter giving rise to the relevant claim, the indemnified
party shall repay to the indemnifying party the lesser of (a) the amount paid by
the indemnifying party to the indemnified party and (b) the sum recovered from
such other person. No indemnified party hereunder shall be entitled to seek
indemnification from an indemnifying party until and unless the aggregate of all
claims for indemnification by the indemnified party exceeds $150,000, in which
event the indemnifying party shall only be liable for the excess over such
amount. In no event shall the aggregate liability of any indemnifying party to
indemnify, save and hold harmless any indemnified party hereunder exceed
$7,500,000.
9.5 Notice and Right to Defend. The Sellers, on the one hand, and the
Buyer, on the other hand, hereto agree to give prompt notice to the other of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought hereunder, provided that the failure to
give such notice to the indemnifying party shall not relieve the indemnifying
party of any liability that it may have to an indemnified party except to the
extent that the indemnifying party shall have been materially prejudiced in its
ability to defend the claim, suit, action or proceeding for which such indemnity
is sought by reason of such failure. The indemnifying party shall have the right
to assume the defense of any third-party claim, suit, action or proceeding in
respect of which indemnity hereunder is sought by giving prompt notice to the
indemnified party. In the event that the indemnifying party elects to assume the
defense of such claim, suit, action or proceeding, the indemnifying party shall
promptly retain counsel reasonably satisfactory to the indemnified party. The
indemnified party shall have the right to employ its own counsel in any such
claim, suit, action or proceeding, but the fees and expenses of such counsel
shall be at the expense of the indemnified party unless (a) the employment of
such counsel shall have been authorized by the indemnifying party, (b) the
indemnifying party shall not have promptly retained counsel reasonably
satisfactory to the indemnified party to take charge of the defense of such
claim, suit, action or proceeding; (c) the indemnified party shall have
concluded that there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying party or (d)
the resolution of the matter being contested may, in the reasonable judgment of
the indemnified party, have a material adverse effect on the indemnified party's
business, in which event such fees and expenses shall be borne by the
indemnifying party. If an indemnifying party elects to assume the defense of any
such claim, suit, action or proceeding, (i) no compromise or settlement thereof
may be effected by the indemnifying party without the indemnified party's
written consent, and (ii) the indemnifying party shall have no liability for any
settlement or compromise by the indemnified party with any third party relating
to any such claim, suit, action or proceeding effected without the prior written
consent of the indemnifying party. Notwithstanding the foregoing, if an
indemnified party determines that there is a reasonable possibility that any
such claim, suit, action or proceeding may adversely affect it or its business
or any of its subsidiaries or affiliates, such indemnified party may, by written
notice to the indemnifying party assume the exclusive right to defend such
claim, suit, action or proceeding. If the indemnifying party fails to give
written notice to the indemnified party of its election to assume the defense of
any claim, suit, action or proceeding for which it is called upon to indemnify
an indemnified party pursuant to this Article IX within thirty (30) days after
the indemnified party gives notice to the indemnifying party of the commencement
of such claim, suit, action or proceeding, the indemnifying party shall be bound
by any determination made in any such claim, suit, action or proceeding or
compromise or settlement thereof effected by the indemnified party.
9.6 Remedies Exclusive. The remedies provided in this Article IX shall be
the sole and exclusive remedies, and shall preclude assertion by an indemnified
party of any other rights or the seeking of any and all other remedies against
an indemnifying party, for claims based on any breach of any representation or
warranty contained in this Agreement.
ARTICLE X
ADDITIONAL COVENANTS
10.1 No Disposition. Until the date of the FTC Final Order, each of T&C and
Gold Lance shall not, and T&C shall cause Gold Lance not to, sell, dispose of,
lease, sublease, distribute or enter into discussions or negotiate with any
party for the sale or other distribution of, or enter into any agreement,
arrangement or commitment, whether oral or written, directly or indirectly, or
enter into discussions or negotiations with any party with respect to any such
agreement, arrangement or commitment for the sale, disposition, leasing,
subleasing, distribution or other transfer of any direct or indirect interest in
(i) any capital stock of Gold Lance or (ii) any asset of Gold Lance, other than
sales of inventory in the ordinary course of Gold Lance's business and sales or
dispositions of obsolete assets that, individually and in the aggregate with all
other such sales or dispositions, are not material to Gold Lance.
10.2 Employees. For a period of 12 months commencing on the Closing Date,
neither Gold Lance nor any of its affiliates shall hire or, directly or
indirectly, solicit, induce or encourage any individual who is then an employee
of Buyer or the Business or offer such employee employment with Gold Lance or
any of its affiliates; provided, however, that the foregoing shall not apply to
(a) employees whose employment has been terminated by Buyer and (b) after a
period of at least thirty days since the termination of employment with Buyer or
the Business, employees who have terminated their employment with Buyer.
10.3 Non-Compete. Gold Lance agrees that for a period of 18 months
following the Closing Date, neither it nor any of its affiliates will sell,
offer to sell, or seek to obtain the right to sell or distribute any products
manufactured or distributed by it or under its name or trademarks to any school
or other educational institution to or in which Balfour has sold or distributed
products during the past year or currently sells or distributes or has been
granted the right to sell or distribute any products. The parties hereto
acknowledge that the covenants and restrictions contained in this Section 10.3
are reasonable. The parties agree that the Buyer shall have the right and remedy
to have this Section 10.3 specifically enforced, it being agreed that any breach
or threatened breach of this Section 10.3 would cause irreparable injury to
Buyer and that money damages would not provide an adequate remedy to Buyer.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses, Taxes. Except as otherwise specifically set forth herein,
each party shall pay all fees and expenses incurred by it in connection with
this Agreement and the consummation of the transactions contemplated hereby
(other than any excise, sales, use or transfer taxes or any other such taxes
which are payable or arise as a result of execution of this Agreement or the
transfer of Assets to Buyer pursuant to this Agreement, which shall be paid by
Sellers).
11.2 Further Assurances. From time to time after the Closing and without
further consideration, (i) Sellers, upon the request of Buyer and at Sellers'
expense, shall, subject to applicable law, execute and deliver such documents
and instruments of conveyance and transfer as Buyer may reasonably request in
order to consummate more effectively the purchase and sale of the Assets as
contemplated hereby and to vest in Buyer title to the Assets transferred
hereunder and (ii) Buyer, upon the request of Sellers and at Buyer's expense,
shall, subject to applicable law, execute and deliver such documents and
instruments of assumption as Sellers may reasonably request in order to vest in
Buyer obligations under the Assumed Liabilities. In addition to the actions,
contracts and other agreements and documents and other papers specifically
required to be taken or delivered pursuant to this Agreement, each of the
parties hereto shall execute such contracts and other agreements and documents
and take such further actions as may be reasonably required or desirable to
carry out the provisions hereof and the transactions contemplated hereby.
11.3 Notices. Any notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given when
delivered in person or transmitted by facsimile transmission or upon receipt
after dispatch by registered or certified mail, postage prepaid, or overnight
courier services, addressed, as follows:
If to Sellers or Gold Lance to:
Town & Country Corporation
25 Union Street Chelsea, Massachusetts 02150
Attention: C.William Carey, Chairman
Telephone: (617) 884-8500
Telecopy: (617) 889-6707
with a copy to:
Kevin Dennis, Esq.
Goodwin, Procter & Hoar, LLP
Exchange Place
Boston, Massachusetts 02109
Telephone: (617) 570-1000
Telecopy: (617) 523-1231
If to Buyer to:
Mr. David B. Pittaway
Castle Harlan, Inc.
150 East 58th Street
New York, New York 10155
Telephone: (212) 644-8600
Telecopy: (212) 207-8042
with a copy to:
Janet C. Walden, Esq.
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Telephone: (212) 756-2495
Telecopy: (212) 593-5955
or such other address as the person to whom notice is to be given has
furnished in writing to the other party. A notice of change in address shall not
be deemed to have been given until received by the addressee.
11.4 Headings; Interpretation. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement. Unless otherwise specified, references
in this Agreement to Sections, Articles and Schedules are to Sections and
Articles of, and Schedules to, this Agreement.
11.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts regardless of the
laws that might otherwise govern under applicable principles of conflict of laws
thereof.
11.6 Successors and Assigns. This Agreement, and each party's rights and
obligations hereunder, shall be binding upon each of such party's successors
(including, without limitation, any successor or to all or any substantial
portion of such party's assets or business, by operation of law or otherwise)
and permitted assigns. No party shall assign this Agreement in whole or in part
without the prior written consent of the other party; provided, however, that
Buyer may assign its rights and obligations hereunder or any portion thereof to
one or more wholly-owned subsidiaries of Buyer. Any assignment made or attempted
in violation of this Section 12.6 shall be void and of no effect.
11.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.8 Entire Agreement. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties and (b) other than as provided in Sections 9.2 or 9.3, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
11.9 Severability. In the event that any one or more of the provisions or
parts of a provision contained in this Agreement shall for any reason be held to
be invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision of this Agreement or any other jurisdiction, but this
Agreement shall be reformed and construed in any such jurisdiction as if such
invalid or illegal or unenforceable provision or part of a provision had never
been contained herein and such provision or part shall be reformed so that it
would be valid, legal and enforceable to the maximum extent permitted in such
jurisdiction.
11.10 Bulk Sales Laws. The parties hereby waive compliance with the Bulk
Sales Laws of any state or territory in which the Assets are located or in which
operations relating to the Business are conducted. Sellers jointly and severally
shall defend, indemnify and hold Buyer harmless from any liability, damage, cost
or expense relating to such non-compliance.
11.11 Amendment. This Agreement may be amended by the parties at any time
but only by an instrument in writing signed by Buyer and Sellers; provided,
however, that the provisions of Article X and this Article XI may be amended
only by an instrument in writing signed by all parties hereto.
11.12 Waiver. Either Sellers, on the one hand, or Buyers, on the other
hand, may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto or (c) waive compliance by the other party
with any of the agreements, or satisfaction of any of the conditions, contained
herein. Any agreement on the part of the other party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
such party.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its duly authorized officer, all as of the day and
year first above written.
TOWN & COUNTRY CORPORATION,
Seller
By: /s/ C. William Carey
Name: C. William Carey
Title: Chairman & CEO
L. G. BALFOUR COMPANY, INC.,
Seller
By: /s/ C. William Carey
Name: C. William Carey
Title: Chairman & CEO
GOLD LANCE, INC.
(Solely for Purposes of Articles X and XI hereof)
By: /s/ C. William Carey
Name: C. William Carey
Title: Chairman & CEO
SCHOLASTIC BRANDS, INC., Buyer
By: /s/ David B. Pittaway
Name: David B. Pittaway
Title: President
EXHIBIT 4.2
TOWN & COUNTRY CORPORATION,
as Issuer
AND
TOWN & COUNTRY FINE JEWELRY GROUP, INC.,
L.G. BALFOUR COMPANY, INC. and GOLD LANCE, INC.,
as Guarantors
AND
BANKERS TRUST COMPANY,
as Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of November 13, 1996
to
INDENTURE
Dated as of May 14, 1993
13% Senior Subordinated Notes Due May 31, 1998
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE dated as of November 13, 1996, by and among
TOWN & COUNTRY CORPORATION, a Massachusetts corporation (the "Issuer"), BANKERS
TRUST COMPANY, a New York banking corporation, as Trustee (the "Trustee"), and
TOWN & COUNTRY FINE JEWELRY GROUP, INC., L.G. BALFOUR COMPANY, INC. and GOLD
LANCE, INC. (the "Guarantors").
WHEREAS, all capitalized terms used in this First Supplemental Indenture
have the respective meanings set forth in the Indenture; and
WHEREAS, the Issuer, the Guarantors and the Trustee entered into that
certain Indenture dated as of May 14, 1993 (the "Indenture"), which authorized
the issuance of 13% Senior Subordinated Notes due May 31, 1998 (the
"Securities"); and
WHEREAS, Section 9.02 of the Indenture provides, among other things, that
the Issuer, the Trustee and the Guarantors may amend the Indenture as provided
herein with the written consent of the Holders of at least a majority in
principal amount of the outstanding Securities; and
WHEREAS, all acts and proceedings required by law, the Indenture, the
articles of organization and the by-laws of the Issuer and the Guarantors to
authorize, approve and constitute this First Supplemental Indenture as a valid
and binding agreement for the uses and purposes set forth herein, in acco rdance
with its terms, have been done and taken, and the execution and delivery of this
First Supplemental Indenture have in all respects been duly authorized by the
Issuer and the Guarantors.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the Issuer,
the Guarantors and the Trustee hereby agree as follows:
(1) The definition of "Minimum Net Worth" as set forth in the Indenture
shall be deleted in its entirety and replaced as follows: "Minimum Net Worth"
means, as of any date, an amount equal to negative $7,500,000.
(2) Section 4.10 of the Indenture is hereby amended by eliminating in its
entirety clause (ii) of the first full paragraph of Section 4.10 and replacing
it with the following: "(ii) the proceeds therefrom consist of at least 85% cash
or Cash Equivalents, and."
(3) Section 4.10 of the Indenture is hereby further amended by eliminating
in its entirety clause (iii) of the first full paragraph of Section 4.10 and
replacing it with the following: "(iii) within thirty (30) days of the Asset
Disposition, the proceeds arising therefrom are applied by the Company to redeem
or prepay Indebtedness secured by Liens subject to the Intercreditor Agreement
in accordance with the terms of the Intercreditor Agreement."
(4) Section 4.10(b)of the Indenture is hereby amended by eliminating in its
entirety the first full sentence thereof and replacing it with the following:
"In the event that the Company is required to redeem or prepay Indebtedness with
the proceeds arising from an Asset Disposition pursuant to this Section 4.10,
and to the extent that the Intercreditor Agreement provides that any portion of
such proceeds may be applied to redeem Securities hereunder, the Company shall,
subject to Section 3.01, redeem Securities at a redemption price equal to the
applicable percentage of the principal amount of such Securities as set forth in
Section 3.01 plus accrued and unpaid interest to and including the redemption
date."
(5) The Trustee accepts the amendment of the Indenture effected by this
First Supplemental Indenture. Without limiting the generality of the foregoing,
the Trustee has no responsibility for the correctness of the recitals of fact
herein contained which shall be taken as the statements of the Issue r and the
Guarantors.
(6) This First Supplemental Indenture shall become valid, binding and
effective upon its execution by the Issuer, the Guarantors and the Trustee.
(7) Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. In addition, without limitation, the
Issuer and the Guarantors hereby reconfirm their obligations to the Trust ee
under Section 7.07 of the Indenture.
(8) This First Supplemental Indenture shall form a part of the Indenture
for all purposes, and every Holder of Securities heretofore or hereafter
authenticated and delivered shall be bound hereby.
(9)This First Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and all of such counterparts shall together constitute one and the same
instrument.
(10)The laws of the State of New York shall govern this First Supplemental
Indenture without regard to principles of conflicts of law.
(11) Nothing contained in this First Supplemental Indenture shall operate
as a waiver or release of any right, remedy, claim or privilege against the
Company, the Guarantors or any other person as to matters not specifically
addressed by this First Supplemental Indenture, and all such rights, remed ies,
claims and privileges are hereby expressly preserved.
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed as of the date first written above.
TOWN & COUNTRY CORPORATION
By: /S/ C. William Carey
Name: C. William Carey
Title: Chairman
TOWN & COUNTRY FINE JEWELRY GROUP, INC.
By: /S/ C. William Carey
Name: C. William Carey
Title: Chairman
L.G. BALFOUR COMPANY, INC.
By: /S/ C. William Carey
Name: C. William Carey
Title: Chairman
GOLD LANCE, INC.
By: /S/ C. William Carey
Name: C. William Carey
Title: Chairman
BANKERS TRUST COMPANY, as Trustee
By: /s/ Terrence Rawlins
Name: Terrence Rawlins
Title: Assistant Treasurer
EXHIBIT 10.1
AMENDMENT NUMBER ONE TO LOAN AGREEMENT
(TOWN & COUNTRY CORPORATION AND
SUBSIDIARIES)
THIS AMENDMENT NUMBER ONE TO LOAN AGREEMENT (this "Amendment"), dated as of
October 31, 1996, is entered into between Town & Country Corporation, a
Massachusetts corporation, Town & Country Fine Jewelry Group, Inc., a
Massachusetts corporation, Gold Lance, Inc., a Massachusetts corporation, L. G.
Balfour Company, Inc., a Delaware corporation (which aforesaid corporations,
individually and collectively, jointly and severally, and together with their
successors and assigns, are herein referred to as "Borrower"), and Foothill
Capital Corporation, a California corporation ("Foothill"), in light of the
following:
WHEREAS Borrower and Foothill are parties to that certain Loan Agreement
dated as of July 3, 1996 (as from time to time amended, modified, supplemented,
renewed, extended, or restated, the "Loan Agreement"); and
WHEREAS Borrower has requested that certain provisions of the Loan
Agreement be amended, and Foothill has agreed to amend such provisions in
accordance with the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
conditions, and provisions as hereinafter set forth, the parties hereto agree as
follows:
1. Initially capitalized terms used herein have the meanings defined in the
Loan Agreement unless otherwise defined herein.
2. Section 6.13 of the Loan Agreement hereby is deleted in its entirety and
the following hereby is substituted in lieu thereof:
6.13 FINANCIAL COVENANTS. Borrower shall maintain:
(a) Current Ratio. A ratio of Consolidated Current Assets divided by
Consolidated Current Liabilities of at least one and three-quarters to one
(1.75:1.00), measured on a fiscal quarter basis; provided, however, that
Borrower need only maintain such a ratio of at least one and three-tenths to one
(1.3:1.0) for the fiscal quarter ending November 24, 1996 and of at least one
and three-tenths to one (1.3:1.0) for the fiscal quarter ending February 23,
1997.
(b) Consolidated Tangible Net Worth. Consolidated Tangible Net Worth of at
least Forty-Eight Million Dollars ($48,000,000) measured on a fiscal quarter
basis; provided, however, that Borrower need only maintain Consolidated Tangible
Net Worth of at least Six Million Eight Hundred Thousand Dollars ($6,800,000 for
the fiscal quarter ending November 24, 1996 and of at least Two Million
Ninety-Three Thousand Dollars ($2,093,000 for the fiscal quarter ending February
23, 1997.
(c) Working Capital. Working Capital of not less than Seventy Five Million
Dollars ($75,000,000), measured on a fiscal quarter basis; provided, however,
that Borrower need only maintain Working Capital of not less than Thirty Four
Million Dollars ($34,000,000) for the fiscal quarter ending November 24, 1996
and of not less than Twenty Nine Million Six Hundred Thousand Dollars
($29,600,000) for the fiscal quarter ending February 23, 1997.
(d) Consolidated Interest Coverage Ratio. A Consolidated Interest Coverage
Ratio of not less than three-quarters to one (.75:1.0), measured on a fiscal
quarter basis (for the purposes hereof, the Consolidated Interest Coverage Ratio
will be calculated based upon the most recently completed twelve (12) month
period; provided, however, that Borrower need only maintain such a ratio of not
less than fifteen one-hundredths to one (0.15:1.0) for the fiscal quarter ending
November 24, 1996 and of not less than fifteen one-hundredths to one (0.15:1.0)
for the fiscal quarter ending February 23, 1997 without regard to the
restructuring charge, totaling Thirty Nine Million, Seven Hundred Ninety Two
Thousand ($39,792,000) taken at the second quarter ending August 25, 1996.
(e) Consolidated Total Senior Liabilities to Consolidated Tangible Capital
Base. A ratio of Consolidated Total Senior Liabilities divided by Consolidated
Tangible Capital Base of not more than nine tenths to one (.90:1.0), measured on
a fiscal quarter basis; provided, however, that Borrower need only maintain such
a ratio of not more than one and one-quarter to one (1.25:1.0) for the fiscal
quarter ending November 24, 1996 and of not more than one and five
onE-hundredths to one (1.05:1.0) for the fiscal quarter ending February 23,
1997.
(f) Consolidated Adjusted Total Senior Liabilities to Consolidated Capital
Base. A ratio of Consolidated Adjusted Total Senior Liabilities divided by
Consolidated Capital Base of not more than one and fifteen one-hundreds to one
(1.15:1.0), measured on a fiscal quarter basis; provided, however, that Borrower
need only maintain such a ration of not more than one and fifty-fifV
one-hundredths to one (1.55:1.0) for the fiscal quarter ending November 24, 1996
and of not more than one and forty-five one-hundredths to one (1.45:1.0) for the
fiscal quarter ending February 23, 1996.
(g) Consolidated Operating Income. Borrower shall not permits its
consolidated operating income to be less than negative One Million Seven Hundred
Thousand Dollars ($1,700,000) for the fiscal year ending February 23, 1997
(without regard to restructuring charge, totaling Thirty Nine Million Seven
Hundred Ninety Two Thousand ($39,792,000), taken at the second quarter ending
August 25, 1996) and to be less than Twelve Million Dollars ($12,000,000) for
any fiscal year of Borrower commencing with Borrower's fiscal year ending
February 23, 1998.
(h) Operating Income at Town & Country Fine Jewelry Group, Inc. Borrower
shall not permit Group's operating income to be less than Seven Hundred
Ninety-Two Thousand Dollars ($792,000) for the fiscal year ending February 23,
1997 (without regard to restructuring charge, totaling Thirty Nine Million Seven
Hundred Ninety Two Thousand ($39,792,000), taken at the second quarter ending
August 25, 1996) and to be less than Ten Million Three Hundred Thousand Dollars
($10,300,000) for any fiscal year of the Group commencing with Group's fiscal
year ending February 23, 1998.
(i) Operating Income at L. G. Balfour Company. Borrower shall not permit
Balfour's operating income to be less than Two Million Six Hundred Fifty
Thousand Dollars ($2,650,000) for the fiscal year ending February 23, 1997
(without regard to restructuring charge, totaling Thirty Nine Million Seven
Hundred Ninety Two Thousand ($39,792,000), taken at the second quarter ending
August 25, 1996) and to be less than Two Million Eight Hundred Thousand Dollars
($2,800,000) for any fiscal year of Balfour commencing with Balfour's fiscal
year ending February 23, 1998.
(j) Gross Profit at Town & Country Fine Jewelry Group, Inc. Borrower shall
not permit Group's gross profit to be less than Twenty Six Million One Hundred
Thousand Dollars ($26,100,000) for any fiscal year of Group commencing with
Group's fiscal year ending February 23, 1997 (without regard to restructuring
charge, totaling Thirty Nine Million Seven Hundred Ninety Two Thousand
($39,792,000), taken at the second quarter ending August 25, 1996).
With respect to the foregoing covenants, Foothill and Borrower agree that
Borrower has made a good faith estimate of the expenses incurred or to be
incurred relating to the restructuring of its Gold facility (which expenses are
estimated at $900,000) and the Pending Material Transaction (which expenses are
estimated at $1,100,000). Of such $2,000,000, T&C expensed $450,000 in its
fiscal year ended February 5, 1996. Borrower believes there should not be any
significant increase in these expenses, which therefore currently would be
expected to have an approximate $1,500,000 impact on its financial statements
for its fiscal year ending in 1997. Foothill agrees that up to, but not more
than, $2,000,000 of such expenses shall be disregarded for purposes of making
all financial covenant calculations that pertain to Borrower's fiscal year
ending February 23, 1997.
Should the pending Material Transaction be consummated with the consent of
Foothill, Borrower and Foothill will negotiate in good faith to reset the
foregoing covenants at reasonable levels within forty-five days following the
Pending Material Transaction Closing Date, taking into account the effect of the
consummation of the Pending Material Transaction.
3. Borrower has requested Foothill to consent to:
a. the sale by Borrower of its real property located at 45 County Street,
in Attleboro, Massachusetts pursuant to a purchase and sale reasonably
satisfactory to Foothill and the release of Foothill's lien thereon by Foothill
without recourse, representation, or warranty;
b. the sale by Borrower of its real property located at 50 County Street,
in Attleboro, Massachusetts pursuant to a purchase and sale reasonably
satisfactory to Foothill and the release of Foothill's lien thereon by Foothill
without recourse, representation, or warranty;
c. The sale by Borrower of its real property located at 2621 Lone Star
Drive, in Dallas, Texas pursuant to a purchase and sale reassonably
satisfactory to Foothill and the release of Foothill's lien thereon by Foothill
without recourse, representation, or warranty; and
d. The sale by Borrower of its real property located at 130 West 46th
Street, in New York, New York pursuant to a purchase and sale reasonably
satisfactory to Foothill and the release of Foothill's lien thereon by Foothill
without recourse, representation, or warranty;
and (the foregoing items 3.a., 3.b., 3.c., and 3.d are referred to herein,
collectively, as the "Designated Items"). Foothill hereby consents to the
Designated Items; provided that Borrower promptly shall pay to Foothill all net
cash proceeds of each of the Designated Items and pledge and deliver to Foothill
all Negotiable Collateral (and all associated endorsements or assignments,
executed in blank, in form and substance satisfactory to Foothill) in respect of
each of the Designated Items (including that certain Nonrecourse Purchase Money
Note, dated as of November __, 1996, made by Apple Core Hotels Corp. to the
order of Town & Country Fine Jewelry Group, Inc. in the original principal
amount of $1,460,000); it being understood that all such Negotiable Collateral
shall constitute Collateral, the release (if any) of which shall be governed by
the Loan Document.
Each of the consents to the Designated Items is limited to the specifics
hereof, shall not apply with respect to any facts or occurrences other than
those on which the applicable Designated Item is based, shall not excuse future
non-compliance with the Loan Agreement (as it may from time to time be amended),
including Section 6.13 thereof, and, except as expressly set forth herein, shall
not operate as a waiver or an amendment of any right, power or remedy of
Foothill, nor as a consent to any further or other matter, under the Loan
Documents.
4. As a condition precedent to the effectiveness of the Amendment, Foothill
shall have received an amendment fee of Fifty Thousand Dollars ($50,000), which
fee is earned in full by Foothill and due and payable by Borrower to Foothill
concurrently with the execution and delivery of this Amendment by Borrower.
5. Borrower hereby represents and warrants to Foothill as follows:
(a) The execution, delivery, and performance by Borrower of this Amendment
have been duly authorized by all necessary corporate and other action and do not
and will not require any registration with, consent or approval of, or notice to
or action by, any Person in order to be effective and enforceable.
(b) The Loan Agreement, as amended by the Amendment, constitutes the legal,
valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its terms, without defense, counterclaim, or offset.
6. Foothill and Borrower also agree that:
(a) Except as herein expressly amended, all terms, covenants and provisions
of the Loan Agreement are and shall remain in full force and effect and all
references therein to the Loan Agreement shall henceforth refer to the Loan
Agreement as amended by this Amendment. This Amendment shall be deemed
incorporated into, and a part of, the Loan Agreement.
(b) This Amendment shall be governed by, and construed and enforced in
accordance with, the laws of the State of California.
(c) This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, and all such counterparts together shall
constitute but one and the same instrument. This Amendment shall become
effective when each party has executed and delivered a counterpart hereof.
(d) The Amendment, together with the Loan Agreement and the other Loan
Documents, contains the entire and exclusive agreement of the parties hereto
with reference to the matters discussed herein and therein. This Amendment
supersedes all prior drafts and communications with respect thereto. This
Amendment may not be amended except in writing executed by both of the parties
hereto.
(e) If any term or provision of this Amendment shall be deemed prohibited
by or invalidated without affecting the remaining provisions of this Agreement
or the Loan Agreement, respectively.
<PAGE>
IN WITNESS HEREOF, this Amendment has been executed and delivered as of the
date first set forth above.
TOWN & COUNTRY CORPORATION,
a Massachusetts corporation
By /s/ Francis X. Correra
Name:
Title:
TOWN & COUNTRY FINE JEWELRY GROUP, INC.,
a Massachusetts corporation
By /s/ Francis X. Correra
Name: Francis X. Correra
Title: Vice President
GOLD LANCE, INC., a Massachusetts corporation
By /s/ Francis X. Correra
Name: Francis X. Correra
Title: Treasurer
L. G.BALFOUR COMPANY, INC.
a Delaware corporation
By /s/ Francis X. Correra Name:
Francis X. Correra
Title: Executive Vice President
FOOTHILL CAPITAL CORPORATION
a California Corporation
By /s/ Anthony Aloi
Name: Anthony Aloi
Title: Assistant Vice President
EXHIBIT 4.1
TOWN & COUNTRY CORPORATION,
as Issuer
AND
TOWN & COUNTRY FINE JEWELRY GROUP, INC.,
L.G. BALFOUR COMPANY, INC. and GOLD LANCE, INC.,
as Guarantors
AND
FLEET NATIONAL BANK (as successor to Shawmut Bank, N.A.),
as Trustee
SECOND SUPPLEMENTAL INDENTURE
Dated as of November 13, 1996
to
INDENTURE
Dated as of May 4, 1993
$30,000,000
11-1/2% Senior Secured Notes Due September 5, 1997
<PAGE>
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE dated as of November 13, 1996, by and among
TOWN & COUNTRY CORPORATION, a Massachusetts corporation (the "Issuer"), FLEET
NATIONAL BANK (as successor to Shawmut Bank, N.A.), a national banking
association, as Trustee (the "Trustee"), and TOWN & COUNTRY FINE JEWELRY GROUP,
INC., L.G. BALFOUR COMPANY, INC. and GOLD LANCE, INC. (the "Guarantors").
WHEREAS, all capitalized terms used in this Second Supplemental Indenture
have the respective meanings set forth in the Indenture; and
WHEREAS, the Issuer, the Guarantors and the Trustee entered into that
certain Indenture dated as of May 14, 1993 (as amended by the First Supplemental
Indenture dated August 31, 1993, the "Indenture"), which authorized the issuance
of $30,000,000 11p% Senior Secured Notes due September 15, 1997 (the
"Securities"); and
WHEREAS, all acts and proceedings required by law, the Indenture, the
articles of organization and the by-laws of the Issuer and the Guarantors to
authorize, approve and constitute this Second Supplemental Indenture as a valid
and binding agreement for the uses and purposes set forth herein, in accordance
with its terms, have been done and taken, and the execution and delivery of this
Second Supplemental Indenture have in all respects been duly authorized by the
Issuer and the Guarantors.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the Issuer,
the Guarantors and the Trustee hereby agree as follows:
(1) Section 4.05 of the Indenture is hereby amended by deleting subsection
(a) in its entirety.
(2) The definition of "Minimum Net Worth" as set forth in the Indenture
shall be deleted in its entirety and replaced as follows: "Minimum Net Worth"
means, as of any date, an amount equal to negative $7,500,000.
(3) Section 4.11(a) of the Indenture is hereby amended by eliminating in
its entirety clause (ii) thereof and replacing it with the following: "(ii) the
proceeds therefrom consist of at least 85% cash or Cash Equivalents,".
(4) The Trustee accepts the amendment of the Indenture effected by this
Second Supplemental Indenture. Without limiting the generality of the foregoing,
the Trustee has no responsibility for the correctness of the recitals of fact
herein contained which shall be taken as the statements of the Issuer and the
Guarantors.
(5) This Second Supplemental Indenture shall become valid, binding and
effective upon its execution by the Issuer, the Guarantors and the Trustee.
(6) Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect.
(7) This Second Supplemental Indenture shall form a part of the Indenture
for all purposes, and every Holder of Securities heretofore or hereafter
authenticated and delivered shall be bound hereby.
(8) This Second Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and all of such counterparts shall together constitute one and the same
instrument.
(9) The laws of The Commonwealth of Massachusetts shall govern this Second
Supplemental Indenture without regard to principles of conflicts of law.
(10) Nothing contained in this Second Supplemental Indenture shall operate
as a waiver or release of any right, remedy, claim or privilege against the
Company, the Guarantors or any other person as to matters not specifically
addressed by this Second Supplemental Indenture, and all such rights, remedies,
claims and privileges are hereby expressly preserved.
IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental
Indenture to be duly executed as of the date first written above.
TOWN & COUNTRY
CORPORATION
By: /s/ C. William Carey
Name: C. William Carey
Title: Chairman
TOWN & COUNTRY FINE
JEWELRY GROUP, INC.
By: /s/ C. William Carey
Name: C. William Carey
Title: Chairman
L.G. BALFOUR
COMPANY, INC.
By: /s/ C. William Carey
Name: C. William Carey
Title: Chairman
GOLD LANCE, INC.
By: /s/ C. William Carey
Name: C. William Carey
Title: Chairman
FLEET NATIONAL BANK
(as successor to Shawmut Bank, N.A.),
as Trustee
By: /s/ Lee MacDonald
Name: Lee MacDonald
Title: Vice President
EXHIBIT 99
FOOTHILL CAPITAL CORPORATION
December 30, 1996
Town & Country Corporation
Town & Country Fine Jewelry Group, Inc.
Gold Lance, Inc.
L.G. Balfour Company, Inc.
25 Union Street
Chelsea, Massachusetts 02150
Re: Waiver of Event of Default with respect to the "Non-Compliance Items"
as defined below
Gentlemen:
Reference is made to the Loan Agreement dated as of July 3, 1996 (as the
same heretofore may have been amended or modified, the "Agreement") between
Foothill Capital Corporation ("Lender") and Town & Country Corporation, Town &
Country Fine Jewelry Group, Inc., Gold Lance, Inc., and L.G. Balfour Company,
Inc. (collectively, "Borrower"). Terms used herein and not otherwise defined
herein shall have the meaning ascribed thereto in the Agreement.
Borrower has advised Lender that Borrower is not in compliance with Section
6.13(b) of the Agreement on November 24, 1996, because Borrower failed to
maintain the minimum Consolidated Tangible Net Worth required therein at all
times (the "Non-Compliance Items"). Borrower has asked Lender to waive any Event
of Default that may have been occasioned by the Non-Compliance Item. Lender
hereby waives any Event of Default that may have been occasioned solely by the
Non-Compliance Item.
The waiver of the Non-Compliance Item is limited to the specifics hereof,
shall not apply with respect to any facts or occurrences other than those on
which the Non-Compliance Item is based, shall not excuse future non-compliance
with the Agreement (as it may from time to time be amended), including Section
6.13 thereof, and except as expressly set forth herein, shall not operate as a
waiver or an amendment of any right, power or remedy of Lender, nor as a consent
to any further or other matter, under the Loan Documents.
This waiver shall not be effective until Lender advises Borrower in writing
that Lender has obtained any consents that Lender may need or require from
participants of Lender.
Cordially,
Foothill Capital Corporation
By: /s/ Anthony Aloi
Name: Anthony Aloi
Title: Assistant Vice President
<PAGE>
December 30, 1996
Mr. Robert Hannon
Town & Country Corporation
25 Union Street
Chelsea, MA 02150
Dear Bob:
This letter should serve as notice that Foothill Capital has received
proper consent from our participants and the "Waiver of Event of Default with
respect to the Non-Compliance Items" dated December 30, 1996, is now effective.
Sincerely
/s/ Anthony Aloi
Anthony Aloi
Assistant Vice President
CC: Donna Compagna, CIT
Alan Ghole, FINOVA Capital Corporation
Kevin Vaughan, Textron Financial Corporation
Britt Terrell, Coast Business Credit
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