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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
Solo Serve Corporation
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(Name of Issuer)
Common Stock, Par Value $.01
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(Title of Class of Securities)
834263204
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(CUSIP Number)
Hamlet T. Newsom Jr.
Cox & Smith Incorporated
112 E. Pecan Street, Suite 1800, San Antonio, Texas 78205
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
March 17, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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SCHEDULE 13D
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CUSIP No. 834263204 Page 2 of 9 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Mark J. Blankenship
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ]
(b)[X]
Ross E. Bacon
Terry Lalosh
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
PF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
349,971
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8 SHARED VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY
OWNED BY -----------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 349,971
WITH
-----------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
349,971
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.78%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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CUSIP No. 834263204 Page 3 of 9 Pages
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SCHEDULE 13D
OF MARK J. BLANKENSHIP COVERING COMMON STOCK OF
SOLO SERVE CORPORATION
ITEM 1. Security and Issuer
This schedule relates to the shares of Common Stock, par value $.01 per
share ("Common Stock"), of Solo Serve Corporation, a Delaware corporation (the
"Company"). The number of shares of the Company's Common Stock, par value $.01
per share, and Preferred Stock, par value $.01 per share ("Preferred Stock"),
outstanding as of the date of this schedule, were 3,565,812 and 679,203 shares,
respectively. The shares of Preferred Stock of the Company are convertible into
an equal number of shares of Common Stock and vote with the shares of Common
Stock on an as-converted basis.
The principal executive offices of the Company are located at 1610
Cornerway Blvd., San Antonio, Texas 78219.
ITEM 2. Identity and Background
(a) This statement is being filed by Mark J. Blankenship.
(b) Mr. Blankenship's business address is 1610 Cornerway Blvd., San
Antonio, Texas 78219.
(c) Mr. Blankenship's present principal occupation is Senior Vice
President of Planning and Allocation of the Company.
(d) During the last five years, Mr. Blankenship has not been
convicted in a criminal proceeding.
(e) During the last five years, Mr. Blankenship was not a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) Mr. Blankenship is a United States citizen.
ITEM 3. Source and Amount of Funds or Other Consideration
(a) Each of Mr. Blankenship, Ross E. Bacon and Terry Lalosh (each a
"Purchaser" and, together the "Purchasers") purchased 236,562 shares of Common
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CUSIP No. 834263204 Page 4 of 9 Pages
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Stock of the Company from General Atlantic Corporation ("GAC") on March 17,
1998 (the Purchasers purchased an aggregate of 709,686 shares of Common Stock)
pursuant to the terms and conditions of the Stock Purchase Agreement dated
March 17, 1998 by and among the Purchasers and GAC (the "Stock Purchase
Agreement"), a copy of which is attached to this schedule as Exhibit A and
incorporated herein by reference. Each of the Purchasers purchased the shares
from GAC in exchange for a Non-Recourse Promissory Note in the principal amount
of $23,656.20 (each a "Note" and, together the "Notes"), copies of which are
attached to this schedule as Exhibit B-1, B-2 and B-3 and incorporated herein
by reference, payable to GAC. The conditions precedent set forth in the Stock
Purchase Agreement were satisfied, and the purchase of stock was effected on
March 17, 1998.
The Notes provide for five equal annual installments to be paid
commencing on March 17, 1999, together with interest on such principal amount
at a fixed rate of 7%. In the event that a Purchaser defaults on payments
under his Note, GAC will be limited in its ability to recover the unpaid
amounts due under such Note by the terms and conditions of the Note and a
Security Agreement - Pledge executed by each of the Purchasers and GAC, copies
of which are attached to this schedule as Exhibits C-1, C-2 and C-3 and
incorporated herein by reference.
(b) Contemporaneously with the purchase of shares of Common Stock
described above, each of the Purchasers provided a $100,000 certificate of
deposit (together, the "CDs") for the benefit of GAC to collateralize in part
two letters of credit provided by GAC in favor of Sanwa Business Credit
Corporation, the Company's primary lender ("Sanwa"), in the amounts of $600,000
and $750,000. In connection with the pledge of the CDs, the Purchasers entered
into a Collateral Pledge Agreement with GAC, a copy of which is attached to
this schedule as Exhibit D and incorporated herein by reference.
(c) On March 17, 1998, Charles M. Siegel, the President and Chief
Executive Officer of the Company, transferred 80,000 shares of Common Stock to
each of the Purchasers for no stated consideration.
(d) Mr. Blankenship expressly declares that, except for the agreement
with Mr. Bacon and Mr. Lalosh to acquire the shares of Common Stock of the
Company from GAC in the transaction described above, and except for his
contractual obligations under the terms of the Stockholders Agreement described
in Item 6 below, the filing of this schedule shall not be construed as an
admission that he is, for the purposes of section 13(d) or 13(g) of the
Securities Exchange Act of 1934, as amended, the beneficial owner of any
securities owned by Mr. Bacon or Mr. Lalosh. Mr. Blankenship further declares
that except as specifically set forth in the Stock Purchase Agreement and the
Stockholders Agreement, he has no agreements, arrangements or understandings
with either of Mr. Bacon or Mr. Lalosh or any other person, to act
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CUSIP No. 834263204 Page 5 of 9 Pages
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together for the purpose of acquiring, holding, voting or disposing of equity
securities of the Company.
(e) The Company had previously granted Messrs. Bacon, Lalosh and
Blankenship options to purchase up to 50,000, 12,000 and, 12,000 shares of
Common Stock, respectively, all of which options are vested and exercisable as
of the date of this schedule.
ITEM 4. Purpose of Transaction
The purpose of the acquisition of the shares of Common Stock was for
investment purposes only.
Mr. Blankenship does not have any plans which relate to or would result
in:
(a) The acquisition by any person of additional securities of the
issuer, or the disposition of securities of the issuer;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the issuer or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of the issuer
or any of its subsidiaries;
(d) Any change in the present board of directors or management of the
issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend
policy of the issuer;
(f) Any other material change in the issuer's business or corporate
structure, including but not limited to, if the issuer is a registered closed-
end investment company, any plans or proposals to make any changes in its
investment policy for which a vote is required by Section 13 of the Investment
Company Act of 1940;
(g) Changes in the issuer's charter, bylaws, or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the issuer by any person;
(h) Causing a class of securities of the issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
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CUSIP No. 834263204 Page 6 of 9 Pages
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(i) A class of equity securities of the issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Act; or
(j) Any action similar to any of those enumerated above.
However, Mr. Blankenship may propose any of the foregoing transactions
described in (a)-(j) which he hereafter considers desirable in light of his
examination of the Company and its assets, operations and future prospects, and
of the circumstances prevailing at the time.
ITEM 5. Interest in Securities of the Issuer
(a)(i) Mr. Blankenship beneficially owns an aggregate of 349,971 shares
of Common Stock, which represent 9.78% of the outstanding Common Stock. The
shares of Common Stock held by Mr. Blankenship (including the shares issuable
upon exercise of options held by Mr. Blankenship) represent 8.24% of the
aggregate voting stock of the Company. The calculation of the percentage of
voting stock of the Company held by Mr. Blankenship includes the number of
shares beneficially owned by him, all shares of Common Stock and all shares of
Preferred Stock of the Company.
(b) Mr. Blankenship has the sole power to vote or direct the vote
and, subject to the terms of the Stockholders Agreement described in Item 6
below, the sole power to dispose or direct the disposition of the shares of
Common Stock he holds.
(c) During the past sixty days, Mr. Blankenship acquired an aggregate
of 316,562 shares of Common Stock (i) in a private transaction whereby Mr.
Blankenship purchased 236,562 shares of Common Stock at a price per share of
$.10, payable by a Note, and (ii) by gift whereby Mr. Blankenship acquired
80,000 shares of Common Stock, as described in Item 3 above.
(d) No other person is known to have the right to receive or the
power to direct receipt of dividends from, or the proceeds from the sale of,
the shares of Common Stock owned by Mr. Blankenship.
(e) Not applicable.
ITEM 6. Contracts, Arrangements, Understanding or Relationships with
Respect to Securities of the Issuer
The Purchasers each purchased 236,562 shares of Common Stock from GAC
pursuant to the terms and conditions of the Stock Purchase Agreement. Each of
the Purchasers paid a cash purchase price for each share of Common Stock of
$.10 per
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CUSIP No. 834263204 Page 7 of 9 Pages
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share, payable by delivery of a Non-Recourse Promissory Note in the original
principal amount of $23,656.20. Each Non-Recourse Promissory Note is secured by
a pledge of the shares being purchased pursuant to a Security-Agreement -
Pledge. In addition to the purchase price, each of the Purchasers pledged to
GAC a $100,000 certificate of deposit to secure payment of any amounts required
to be paid by GAC to Sanwa pursuant to the letters of credit in favor of Sanwa
described in Item 3(b) above.
In connection with the acquisition of shares of capital stock of the
Company by the Purchasers, GAC, Mr. Siegel, and the Purchasers entered into a
Stockholders Agreement (the "Stockholders Agreement"). The Stockholders
Agreement provides that no party thereto will sell, exchange, transfer or
otherwise dispose of shares of the Company's Common Stock or Preferred Stock
owned by such stockholder without the prior written consent of the other
parties thereto and no party will exercise incentive stock options or other
rights to acquire capital stock or will otherwise acquire capital stock of the
Company without the prior written consent of the others. The Stockholders
Agreement provides that the certificates representing shares of capital stock
of the Company currently held by the parties, as well as any additional shares
issued to the parties, shall each bear a legend evidencing the existence of the
Stockholders Agreement and the restrictions upon transfer contained therein.
The Stockholders Agreement terminates on March 17, 2001 unless terminated
earlier or extended by agreement of all parties. The description of the
Stockholders Agreement contained in this schedule is qualified in its entirety
by reference to the full text of the Stockholders Agreement by and between GAC,
Mr. Siegel, and the Purchasers, a copy of which has been attached to this
schedule as Exhibit E and incorporated herein by reference.
ITEM 7. Material to be filed as Exhibits
Exhibit A--Stock Purchase Agreement dated March 17, 1998 by and among
Ross E. Bacon, Terry Lalosh, Mark J. Blankenship and General Atlantic
Corporation, a Delaware corporation.
Exhibit B-1--Non-Recourse Promissory Note dated March 17, 1998 executed
by Ross E. Bacon and payable to General Atlantic Corporation, a Delaware
corporation, in the principal amount of $23,656.20.
Exhibit B-2--Non-Recourse Promissory Note dated March 17, 1998 executed
by Terry Lalosh and payable to General Atlantic Corporation, a Delaware
corporation, in the principal amount of $23,656.20.
Exhibit B-3--Non-Recourse Promissory Note dated March 17, 1998 executed
by Mark J. Blankenship and payable to General Atlantic Corporation, a Delaware
corporation, in the principal amount of $23,656.20.
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CUSIP No. 834263204 Page 8 of 9 Pages
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Exhibit C-1--Security Agreement - Pledge dated March 17, 1998 by and
between Ross E. Bacon and General Atlantic Corporation, a Delaware corporation.
Exhibit C-2--Security Agreement - Pledge dated March 17, 1998 by and
between Terry Lalosh and General Atlantic Corporation, a Delaware corporation.
Exhibit C-3--Security Agreement - Pledge dated March 17, 1998 by and
between Mark J. Blankenship and General Atlantic Corporation, a Delaware
corporation.
Exhibit D--Collateral Pledge Agreement dated March 17, 1998 by and among
General Atlantic Corporation, Ross E. Bacon, Terry Lalosh and Mark J.
Blankenship.
Exhibit E--Stockholders Agreement dated March 17, 1998 by and among
General Atlantic Corporation, a Delaware corporation, Charles M. Siegel, Ross
E. Bacon, Terry Lalosh and Mark J. Blankenship.
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CUSIP No. 834263204 Page 9 of 9 Pages
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SIGNATURE
After reasonably inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 26, 1998
/s/ Mark J. Blankenship
-----------------------------------
MARK J. BLANKENSHIP
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
Exhibit A--Stock Purchase Agreement dated March 17, 1998 by and
among Ross E. Bacon, Terry Lalosh, Mark J. Blankenship and
General Atlantic Corporation, a Delaware corporation.
Exhibit B-1--Non-Recourse Promissory Note dated March 17, 1998
executed by Ross E. Bacon and payable to General Atlantic
Corporation, a Delaware corporation, in the principal amount of
$23,656.20.
Exhibit B-2--Non-Recourse Promissory Note dated March 17, 1998
executed by Terry Lalosh and payable to General Atlantic
Corporation, a Delaware corporation, in the principal amount of
$23,656.20.
Exhibit B-3--Non-Recourse Promissory Note dated March 17, 1998
executed by Mark J. Blankenship and payable to General Atlantic
Corporation, a Delaware corporation, in the principal amount of
$23,656.20.
Exhibit C-1--Security Agreement - Pledge dated March 17, 1998 by
and between Ross E. Bacon and General Atlantic Corporation, a
Delaware corporation.
Exhibit C-2--Security Agreement - Pledge dated March 17, 1998 by
and between Terry Lalosh and General Atlantic Corporation, a
Delaware corporation.
Exhibit C-3--Security Agreement - Pledge dated March 17, 1998 by
and between Mark J. Blankenship and General Atlantic Corporation,
a Delaware corporation.
Exhibit D--Collateral Pledge Agreement dated March 17, 1998 by
and among General Atlantic Corporation, Ross E. Bacon, Terry
Lalosh and Mark J. Blankenship.
Exhibit E--Stockholders Agreement dated March 17, 1998 by and
among General Atlantic Corporation, a Delaware corporation,
Charles M. Siegel, Ross E. Bacon, Terry Lalosh and Mark J.
Blankenship.
</TABLE>
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EXHIBIT A
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of the ____
day of March, 1998, between Ross E. Bacon ("Bacon"), Mark J. Blankenship
("Blankenship") and Terry Lalosh ("Lalosh") (Bacon, Blankenship and Lalosh are
referred to collectively herein as the "Buyers") and General Atlantic
Corporation, a Delaware corporation (the "Seller").
WHEREAS, the Seller owns beneficially and of record 709,686 shares (the
"Shares") of the issued and outstanding shares of Preferred Stock, par value
$.01 per share, of Solo Serve Corporation, a Delaware corporation ("Solo
Serve"), having its principal office at 1610 Cornerway Boulevard, San Antonio
TX 78219; and
WHEREAS, subject to the terms and conditions set forth herein, Buyers
desire to purchase from the Seller, and the Seller desires to sell to each of
the Buyers, 236,562 Shares; and
WHEREAS, as a condition to Closing, the Shares are to be converted to
Common Stock of Solo Serve, either prior to the Closing or immediately after
the Closing; and
WHEREAS, for purposes of this Agreement, the term Shares shall mean
either 709,686 shares of Preferred Stock of Solo Serve or 709,686 shares of
Common Stock of Solo Serve, depending on when the conversion to Common Stock of
Solo Serve is effective;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties and conditions contained in this Agreement, the
parties hereto hereby agree as follows:
I . DEFINITIONS
1.1. Certain Defined Terms. Unless the context otherwise requires, as
used in this Agreement, the following terms have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
<PAGE> 12
"Affiliate" with respect to any Person, means any other Person directly
or indirectly Controlling, Controlled by or under common Control with such
Person.
"Applicable Law" means all applicable laws, statutes, regulations and
orders of any governmental authority or regulatory body and judgments, decrees,
injunctions, writs, orders, or like action of any court, arbitrator or other
judicial tribunal of competent jurisdiction with respect thereto.
"Business Day" means any day other than a Saturday, Sunday or a day on
which commercial banks in the State of New York are required or authorized by
law to close.
"Contract" means, with respect to a Person, any contract, agreement,
lease, indenture, deed of trust, mortgage, license, note, instrument, guarantee
or obligation to which such Person is a party or by which such Person or its
property is bound or affected.
"Control" whether used as a noun or verb, refers to the possession,
directly or indirectly, of the power to direct, or cause the direction of, the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Person" means any individual, corporation, limited liability company,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, governmental or regulatory body or other entity.
2. CONSIDERATION FOR PURCHASE AND SALE OF SHARES: TRANSFER OF SHARES
2.1. Consideration for Shares. Subject to the terms and conditions
set forth in this Agreement, at the Closing the Seller agrees to sell, assign,
transfer, convey and deliver to each of the Buyers, and each of the Buyers
agree to purchase, acquire and accept delivery from Seller of, 236,562 Shares
for the Purchase Price. The Purchase Price payable by each Buyer shall be
$0.10 a share, payable by delivery of a Non-Recourse Promissory Note (the
"Notes") in the form of Exhibit A. Each Note provided by a Buyer shall be
secured by a pledge of the Shares being purchased by
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<PAGE> 13
such Buyer pursuant to a Security Agreement - Pledge (the "Security
Agreements") in the form of Exhibit B.
2.2. Transfer of Shares. On the Closing Date, the Seller shall sell,
assign, transfer, convey and deliver to each of the Buyers 236,562 Shares,
together with appropriate stock powers and other transfer documents signed in
blank.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
The parties hereto recognize that Buyers were responsible for the
management of the business of Solo Serve prior to the date hereof and are
expected to continue in such capacity subsequent to the Closing Date.
Consequently, the Seller has relied, in part, upon information supplied by
Buyers regarding the business and affairs of Solo Serve and is selling the
Shares "as is" without representations or warranties regarding the business or
affairs of Solo Serve and only with the following representations and
warranties:
3.1. Corporate Existence. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
3.2. Ownership of Stock. Seller is and as of the Closing will be the
registered holder and beneficial owner of all of the Shares. Seller has, and
at the Closing will have, good and marketable title to all of the Shares, free
and clear of any and all liens and encumbrances.
3.3. Due Authorization; No Restrictions. Seller has full corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and to carry out the transactions contemplated hereunder. The
execution, delivery and performance of this Agreement by Seller will not
conflict with, result in a default, right to accelerate or loss of rights
under, or require the consent of any governmental authority or regulatory body
or other Person under any provision of the certificate of incorporation or by-
laws of Seller, or (b) any material Contract of Seller or any
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<PAGE> 14
Applicable Law. This Agreement has been duly authorized, executed and
delivered by Seller and constitutes Seller's legal, valid and binding
obligation enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws relating to or affecting the enforcement of creditors' rights
generally and except as enforceability may be subject to the application of
general principles of equity (regardless of whether considered in a proceeding
in equity or at law).
4. REPRESENTATIONS AND WARRANTIES OF BUYERS
Each of the Buyers hereby represents, covenants and warrants, as to
himself, as follows and acknowledges that Seller is relying upon such
representations, covenants and warranties in connection with the sale,
assignment and transfer to each Buyer of the Shares:
4.1. Due Authorization; No Breach. Each of the Buyers has full power
and authority to execute, deliver and perform his obligations under this
Agreement and to carry out the transactions contemplated hereunder. The
execution, delivery and performance of this Agreement, the Note, the Security
Agreement and the Collateral Pledge Agreement by each Buyer will not conflict
with, result in a default, right to accelerate or loss of rights under, or
require the consent of any governmental authority or regulatory body or other
Person pursuant to any material Contract of the Buyer or Solo Serve or any
Applicable Law. This Agreement has been duly executed and delivered by Buyers
and constitutes, and the applicable Notes, the Security Agreements and the
Collateral Pledge Agreements when executed and delivered in accordance with
this Agreement will constitute, Buyers' legal, valid and binding obligations
enforceable in accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or affecting the enforcement of creditors' rights generally
and except as enforceability may be subject
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<PAGE> 15
to the application of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
4.2. Investment Representation. Each of the Buyers is acquiring the
number of Shares listed in Section 2.2 hereof for his own account and with no
present intention of dividing the same or otherwise making any distribution of
the same. Each of the Buyers will not make any sale, transfer or other
disposition of any of the Shares being purchased by such Buyer in violation of
the Securities Act of 1933, as amended, or applicable state securities laws.
4.3. No Material Litigation. No litigation or administration of or
before any court, tribunal or governmental body is presently pending, or, to
the knowledge of Buyers, threatened against Buyers or any of their properties
which, if adversely determined, would have a material adverse effect on the
business, assets or financial condition of the Buyers.
4.4. Purchase of Solo Serve Distribution Center. The Buyers are
not aware of any indication from the prospective purchaser of Solo Serve's
distribution center that such purchaser does not intend to close the purchase
of the distribution center according to the terms and conditions of the "Solo
Serve/Koontz/McCombs; Earnest Money Contract" dated January 14, 1998, as
amended by the "First Amendment to Earnest Money Contract Between Solo Serve
Corporation, as Seller, and Koontz/McCombs, L.L.C., as Buyer" dated March 13,
1998.
5. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF BUYERS AND
SELLER
All statements contained herein or any certificate delivered pursuant to
this Agreement shall be deemed representations, warranties, covenants and
agreements made by Buyers or Seller, as the case may be. Each statement,
representation, warranty, covenant and agreement made or deemed made by Seller
shall remain in effect continuously to and including the Closing but shall not
survive the Closing except that the representations and warranties made by the
Seller in Section 3.2 shall
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<PAGE> 16
survive for a period of five years after the Closing Date. Each statement,
representation, warranty, covenant and agreement made or deemed made by Buyers
shall remain in effect continuously to and including the date one year after
the date on which all indebtedness under the Notes shall have been paid in
full.
6. THE CLOSING
6.1. Time and Place. Subject to satisfaction or waiver of the
conditions set forth in Article 7 hereof, the transfer of beneficial ownership
of and legal title to the Shares by the Seller to the Buyers and transfer of
the Purchase Price by the Buyers to the Seller (the "Closing") shall occur at
the offices of Cox & Smith Incorporated, at ______ __.M. local time, on March
___, 1998, or at such other place and time as may be mutually agreed in writing
by the Seller and the Buyers. The date on which the Closing takes place is
referred to herein as the "Closing Date."
6.2 Closing Actions. At the Closing the Seller shall deliver to each
of the Buyers certificates representing the number of Shares purchased by each
Buyer hereunder, endorsed or accompanied by stock powers executed in blank
sufficient to transfer good and marketable legal title in and beneficial
ownership of the Shares to Buyers or their designee against payment by Buyers
of the Purchase Price by delivery of the Notes and the Security Agreements.
Seller shall pay any documentary stamp tax or transfer tax due or payable by
the Seller in connection with the transfer of the Shares to Buyers or their
designee. Immediately following the Closing, the certificates representing the
Shares shall be delivered to the Seller to perfect the liens granted pursuant
to the Collateral Pledge Agreement.
7, CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller and Buyers to sell, assign, transfer, convey,
deliver and/or purchase the Shares and to consummate the transactions
contemplated hereunder is subject to the satisfaction
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<PAGE> 17
of the conditions set forth in this Article 7. Seller or Buyers, as
applicable, may, however, waive the fulfillment of any of these conditions,
either before or after the Closing, but any waiver, to be binding upon the
affected party, must be by a writing duly executed by it. Each of the Buyers
and the Seller shall use his or its best efforts to cause each condition set
forth in this Article 7 to be fulfilled.
7.1. Conversion of Shares to Common Stock. The Shares have been
converted from Preferred Stock to Common Stock of Solo Serve prior to the
Closing, or contemporaneous with the Closing, the Seller provides evidence of
delivery of instructions to the transfer agent, Harris Trust and Savings Bank,
directing such transfer agent to convert the Shares to Common Stock of Solo
Serve prior to issuance of the new stock certificates to the Buyers.
7.2. Pledge of Certificates of Deposit. Pursuant to a Collateral
Pledge Agreement in the form attached hereto as Exhibit C, each of the Buyers
pledges to Seller a $100,000 certificate of deposit issued by Camino Real Bank,
N.A. to secure payment of losses owed by Seller to Sanwa Business Credit
Corporation ("Sanwa") pursuant to letters of credit in favor of Sanwa. The
Collateral Pledge Agreement is to be executed and delivered to Seller at the
Closing.
7.3. Extension of Credit Facility. Sanwa has amended its
existing credit facility with Solo Serve to create an additional borrowing base
of $600,000 based on Seller's providing a letter of credit in favor of Sanwa in
the amount of $600,000 (the "Letter of Credit"). To support the Letter of
Credit, Solo Serve shall have pledged to Seller, in a form reasonably
satisfactory to Seller, additional security in an amount not less than the
Letter of Credit. The amendment to the existing Loan and Security Agreement
dated for reference purposes September 23, 1997 between Solo Serve and Sanwa
shall include (i) a waiver of the Minimum Net Worth and Interest Coverage Ratio
covenants as of January 31, 1998, (ii) elimination of any future Minimum Net
Worth covenant, and
-7-
<PAGE> 18
(iii) adjustment of the existing Interest Coverage Ratio for the six (6)
fiscal-month period ending on or about April 30, 1998, to 0.65 to 1.0, for the
nine (9) fiscal-month period ending on or about July 31, 1998 to 1.25 to 1.0,
and the four (4) fiscal-month quarter period ending on or about October 31,
1998, 1.0 to 1.0.
7.4. Pledge of Shares. Pursuant to a Security Agreement - Pledge in
the form attached hereto as Exhibit B, each of the Buyers shall pledge to
Seller as security for payment by the Buyer of his respective Note, the number
of Shares being purchased by such Buyer hereunder. The Security Agreements are
to be executed and delivered by each Buyer and the Seller at the Closing. Each
Buyer shall deliver to Seller at the Closing, a certificate representing the
number of Shares being purchased by such Buyer, together with appropriate stock
powers signed in blank.
7.5. Stockholders Agreement. The Stockholders Agreement, in the form
of Exhibit D, shall have been executed by the parties thereto.
8. MISCELLANEOUS
8.1. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed (with appropriate answer back received), sent by facsimile transmission
(with immediate confirmation thereafter by telephone or otherwise), or sent by
U.S. registered, certified or express mail, postage prepaid, return receipt
requested, or sent by a nationally recognized overnight courier service, marked
for overnight delivery. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed (provided the correct answer back is
received), or sent by facsimile transmission (provided confirmation is received
immediately thereafter); or if sent by express mail or overnight courier, one
Business Day after the date of delivery to a U.S. Post Office or the courier
service marked for overnight delivery; or if so
-8-
<PAGE> 19
sent by registered or certified mail, seven days after the date of deposit in
the mails; in each case addressed as follows:
(a) If to Buyers, to:
Ross E. Bacon
1610 Cornerway Blvd.
San Antonio, TX 78219
Mark J. Blankenship
1610 Cornerway Blvd.
San Antonio, TX 78219
Terry Lalosh
1610 Cornerway Blvd.
San Antonio, TX 78219
with a copies to:
David Oppenheimer, Esq.
Oppenheimer, Blend, Harrison & Tate
711 Navarro, 6th Floor
San Antonio, TX 78205
(b) If to Seller, to:
General Atlantic Corporation
950 Third Avenue
New York, NY 10022
Attention: Christopher G. Oechsli
Facsimile No.: (212) 826-3813
with a copy to:
Christopher G. Oechsli
Gerard, Atkins & Co.
17 Savile Row
London WIX 1AE,
England
Facsimile No.: (44-171) 434-3738
or to such other address as the parties hereto may specify from time to time by
notice given as provided herein.
-9-
<PAGE> 20
8.2. No Waiver. No modification hereof nor any waiver of any breach
or default hereunder shall be valid unless in writing and signed by the parties
making such modification or giving such waiver, and no such waiver shall be
deemed a waiver of any subsequent breach or default of the same or similar
nature.
8.3. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of each party hereto, and its successors and permitted assigns.
This Agreement shall not be transferred or assigned by either Buyers or Seller
and any attempted transfer or assignment shall be null and void.
8.4. Headings. The article and section headings contained herein are
for the purpose of convenience only and are not intended to define or limit the
contents of said articles or sections.
8.5. Merger. This Agreement cancels and supersedes all prior letters
of intent, memoranda of terms, and other documents of understanding heretofore
executed by or exchanged, circulated or discussed between the parties with
respect to the subject matter hereof.
8.6. GOVERNING LAW. THIS AGREEMENT AND ALL AMENDMENTS HEREOF SHALL,
IN ALL RESPECTS, BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE INTERNAL LAWS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW) OF THE
STATE OF TEXAS.
8.7. Expenses. Each party shall bear its own costs and expenses in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
8.8. Brokers. None of the parties hereto nor any of their respective
Affiliates is obligated to pay, or has retained any broker or finder or any
other Person who is entitled to, any broker's or
-10-
<PAGE> 21
finder's fee or any other commission or financial advisory fee based on any
agreement or undertaking made by or for the benefit of Seller or Buyers in
connection with the sale of the Shares and the consummation of the transactions
contemplated herein. Each party hereto agrees to indemnify, defend and hold
the other party hereto harmless from any claim or demand from any Person for
any and all such fees and commissions through Seller or Buyers.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
----------------------------------------
Ross E. Bacon
----------------------------------------
Mark J. Blankenship
----------------------------------------
Terry Lalosh
GENERAL ATLANTIC CORPORATION
By:
-------------------------------------
Name:
Title:
-11-
<PAGE> 22
EXHIBIT B-1
NON-RECOURSE PROMISSORY NOTE
$23,656.20 March __, 1998
FOR VALUE RECEIVED, the undersigned (the "Maker") hereby agrees to pay
to the order of General Atlantic Corporation, a Delaware Corporation (the
"Corporation"), the principal sum of Twenty-Three Thousand Six Hundred Fifty-
Six and 20/100 Dollars ($23,656.20) in five (5) equal annual installments
commencing on March __, 1999, together with interest on such principal amount
from the date hereof at a fixed rate of 7% per annum. Interest shall be
computed on the basis of a 360-day year of twelve 30-day months. The Maker may
prepay the full principal amount of this Note, together with interest due
thereon to date of payment, without penalty or premium.
This Note has been made and delivered pursuant to the terms and
conditions of the Stock Purchase Agreement, dated March __, 1998, between the
Corporation, the Maker, Mark J. Blankenship, and Terry Lalosh (the "Stock
Purchase Agreement").
Any installment of principal and interest that is paid more than ten
(10) days late shall be subject to a 2% penalty. In addition, Maker shall pay
any court costs and reasonable attorneys' fees and other charges incurred by
the holder in connection with the collection of amounts due hereunder.
The outstanding balance of this Note may be accelerated by the holder
and declared immediately due and payable upon the failure to pay any
installment of principal and interest within ten (10) day after it is due or
upon the insolvency of Maker, an assignment for the benefit of creditors or the
institution of bankruptcy or similar proceedings by Maker.
THIS NOTE SHALL BE NON-RECOURSE TO THE MAKER. The only recourse for
this Note is pursuant to a security interest granted in a Security Agreement -
Pledge of even date herewith, whereby the undersigned granted the Corporation a
security interest in 236,562 shares of the Common Stock of Solo Serve
Corporation, a Delaware corporation, which shares were purchased by Maker from
the Corporation pursuant to the Stock Purchase Agreement.
The terms of this Note shall be governed by and construed and enforced
in accordance with the internal laws (without regard to the principles of
conflicts of law) of the State of Texas.
------------------------------------
ROSS E. BACON
<PAGE> 23
EXHIBIT B-2
NON-RECOURSE PROMISSORY NOTE
$23,656.20 March __, 1998
FOR VALUE RECEIVED, the undersigned (the "Maker") hereby agrees to pay
to the order of General Atlantic Corporation, a Delaware Corporation (the
"Corporation"), the principal sum of Twenty-Three Thousand Six Hundred Fifty-
Six and 20/100 Dollars ($23,656.20) in five (5) equal annual installments
commencing on March __, 1999, together with interest on such principal amount
from the date hereof at a fixed rate of 7% per annum. Interest shall be
computed on the basis of a 360-day year of twelve 30-day months. The Maker may
prepay the full principal amount of this Note, together with interest due
thereon to date of payment, without penalty or premium.
This Note has been made and delivered pursuant to the terms and
conditions of the Stock Purchase Agreement, dated March __, 1998, between the
Corporation, the Maker, Ross E. Bacon, and Mark J. Blankenship (the "Stock
Purchase Agreement").
Any installment of principal and interest that is paid more than ten
(10) days late shall be subject to a 2% penalty. In addition, Maker shall pay
any court costs and reasonable attorneys' fees and other charges incurred by
the holder in connection with the collection of amounts due hereunder.
The outstanding balance of this Note may be accelerated by the holder
and declared immediately due and payable upon the failure to pay any
installment of principal and interest within ten (10) day after it is due or
upon the insolvency of Maker, an assignment for the benefit of creditors or the
institution of bankruptcy or similar proceedings by Maker.
THIS NOTE SHALL BE NON-RECOURSE TO THE MAKER. The only recourse for
this Note is pursuant to a security interest granted in a Security Agreement -
Pledge of even date herewith, whereby the undersigned granted the Corporation a
security interest in 236,562 shares of the Common Stock of Solo Serve
Corporation, a Delaware corporation, which shares were purchased by Maker from
the Corporation pursuant to the Stock Purchase Agreement.
The terms of this Note shall be governed by and construed and enforced
in accordance with the internal laws (without regard to the principles of
conflicts of law) of the State of Texas.
------------------------------------
TERRY LALOSH
<PAGE> 24
EXHIBIT B-3
NON-RECOURSE PROMISSORY NOTE
$23,656.20 March __, 1998
FOR VALUE RECEIVED, the undersigned (the "Maker") hereby agrees to pay
to the order of General Atlantic Corporation, a Delaware Corporation (the
"Corporation"), the principal sum of Twenty-Three Thousand Six Hundred Fifty-
Six and 20/100 Dollars ($23,656.20) in five (5) equal annual installments
commencing on March __, 1999, together with interest on such principal amount
from the date hereof at a fixed rate of 7% per annum. Interest shall be
computed on the basis of a 360-day year of twelve 30-day months. The Maker may
prepay the full principal amount of this Note, together with interest due
thereon to date of payment, without penalty or premium.
This Note has been made and delivered pursuant to the terms and
conditions of the Stock Purchase Agreement, dated March __, 1998, between the
Corporation, the Maker, Ross E. Bacon, and Terry Lalosh (the "Stock Purchase
Agreement").
Any installment of principal and interest that is paid more than ten
(10) days late shall be subject to a 2% penalty. In addition, Maker shall pay
any court costs and reasonable attorneys' fees and other charges incurred by
the holder in connection with the collection of amounts due hereunder.
The outstanding balance of this Note may be accelerated by the holder
and declared immediately due and payable upon the failure to pay any
installment of principal and interest within ten (10) day after it is due or
upon the insolvency of Maker, an assignment for the benefit of creditors or the
institution of bankruptcy or similar proceedings by Maker.
THIS NOTE SHALL BE NON-RECOURSE TO THE MAKER. The only recourse for
this Note is pursuant to a security interest granted in a Security Agreement -
Pledge of even date herewith, whereby the undersigned granted the Corporation a
security interest in 236,562 shares of the Common Stock of Solo Serve
Corporation, a Delaware corporation, which shares were purchased by Maker from
the Corporation pursuant to the Stock Purchase Agreement.
The terms of this Note shall be governed by and construed and enforced
in accordance with the internal laws (without regard to the principles of
conflicts of law) of the State of Texas.
------------------------------------
MARK J. BLANKENSHIP
<PAGE> 25
EXHIBIT C-1
SECURITY AGREEMENT - PLEDGE
This SECURITY AGREEMENT - PLEDGE ("Security Agreement") is made and
entered into effective as of the ___ day of March, 1998, by and between ROSS E.
BACON (the "Pledgor") in favor of GENERAL ATLANTIC CORPORATION, a Delaware
corporation (the "Secured Party").
W I T N E S S E T H:
WHEREAS, the Pledgor has purchased from Secured Party Two Hundred
Thirty-Six Thousand Five Hundred Sixty-Two (236,562) shares of the common stock
in Solo Serve Corporation, a Delaware corporation (the "Purchased Stock"); and
WHEREAS, in consideration for the purchase of the Purchased Stock,
Pledgor has delivered to the Secured Party that one certain Promissory Note
(the "Note") of even date herewith in the original principal amount of Twenty-
Three Thousand Six Hundred Fifty-Six and 20/100 Dollars ($23,656.20); and
WHEREAS, Secured Party has conditioned its agreement to sell the
Purchased Stock to the Pledgor in exchange for the Note on the Pledgor's
agreement to pledge to Secured Party the collateral described below and to
execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
SECURITY INTEREST
SECTION 1.01. GRANT OF SECURITY INTEREST. Pledgor hereby grants to
Secured Party a security interest in, a general lien upon, and a right of set-
off against the following described property (the "Collateral"):
(a) Two Hundred Thirty-Six Thousand Five Hundred Sixty-Two
(236,562) shares of common stock of Solo Serve Corporation, a Delaware
corporation evidenced by Certificate No. ____; and
(b) All proceeds, products, and accessions of and to any of
the foregoing.
The security interest in, general lien upon, and right of set-off
against the Collateral is granted to Secured Party to secure (a) the payment
and performance by the Pledgor of the Note; (b) the performance of Pledgor of
the covenants, terms, conditions, obligations and provisions of this Agreement;
(c) all renewals, extensions, and modifications of the foregoing documents and
any other documents executed in connection herewith or therewith; and (d) all
costs, expenses, advances and liabilities which may be made or incurred by
Secured Party in the disbursement, administration and
<PAGE> 26
collection of the Note and in the protection, maintenance and liquidation of
the security interest hereby granted (the aforementioned obligations of the
Pledgor are collectively referred to hereinafter as the "Secured Obligations"
or the "Indebtedness").
SECTION 1.02. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENT BY
THE PLEDGOR. The Pledgor hereby represents, warrants, covenants, and agrees to
and with the Secured Party as follows:
(a) Transfer of Collateral. Pledgor shall not, without the
express prior written consent of the Secured Party, sell, encumber,
pledge, hypothecate, dispose of, or grant any other security interest in
the Collateral, regardless of whether same is allegedly or expressly
inferior to the security interest granted hereby.
(b) Payment of Impositions. Pledgor shall pay, at the cost
and expense of the Pledgor, prior to delinquency, any tax, charge, lien,
or assessment against the Collateral.
(c) Defense. Pledgor shall defend, at the cost and expense of
the Pledgor, any action, claim, or demand affecting (i) the Collateral,
(ii) the security interest granted hereby, (iii) the right, title,
interest and benefit of the Pledgor in and to the Collateral, or (iv)
the right, title, interest, and benefit of the Secured Party in and to
the Collateral. Pledgor shall give Secured Party notice of any such
action, claim or demand within five (5) days from the date such action,
claim or demand is made or asserted, detailing the origin and nature
thereof.
(d) Additional Documents. Pledgor shall execute and deliver
to the Secured Party such other and further certificates, documents and
instruments, including, but not limited to, the stock certificate
representing the Purchased Stock and a stock power endorsed by Pledgor
in blank, as shall be deemed reasonably necessary by the Secured Party
so as to maintain, give notice of, perfect, or otherwise assure the
priority and perfection of the security interest granted hereby.
Pledgor shall execute and deliver to the Secured Party, from time to
time, such financing statements as the Secured Party may reasonably
request, in a form satisfactory to Secured Party.
(e) Ownership. Pledgor owns the Collateral and has the
authority to grant this security interest.
SECTION 1.03. POWER OF ATTORNEY. Secured Party is hereby authorized
and appointed as agent and attorney-in-fact of the Pledgor, which appointment
is coupled with an interest and shall be irrevocable so long as any of the
Secured Obligations remain outstanding, to sign and deliver such documents,
endorsements and instruments, and to take all such other actions, in the name
of the
2
<PAGE> 27
Pledgor as Secured Party may deem necessary or advisable to perfect, preserve
or foreclose Secured Party's security interest in and lien on the Collateral.
ARTICLE II
EVENTS OF DEFAULT
SECTION 2.01. EVENTS. Any of the following events shall be considered
an "Event of Default" as that term is used herein:
(a) Principal and Interest Payments under Note. Principal and
interest under the Note or any other Indebtedness is not paid when due
and such default continues for a period of five (5) days after written
notice thereof by Secured Party to the Pledgor; or
(b) Other Note Terms. There is a default under any term of
the Note or this Agreement, other than default in payment of the Note,
and such default continues for a period of thirty (30) days after
written notice thereof by Secured Party to the Pledgor; or
(c) Involuntary Bankruptcy Proceedings. A receiver,
conservator, custodian, liquidator, creditors' committee, board of
inspectors, or trustee of Pledgor or of any of the property of Pledgor
is created, engaged, retained, procured, authorized or appointed in the
United States or under any law of any foreign country by the order or
decree of any court or agency or supervisory authority having
jurisdiction; or Pledgor becomes a debtor under the Bankruptcy Code of
the United States or under the law of any foreign country, and is the
subject of an order for relief, or becomes a bankrupt or insolvent; or
any of Pledgor's property is sequestered, seized or attached in the
United States or under any law of any foreign country by court order or
decree; or a complaint, petition or similar pleading is filed against
Pledgor under any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law of any jurisdiction, in the
United States or in any foreign country, whether such law is now in
existence or hereafter in effect, and such filing is not dismissed
within sixty (60) days of the date of such filing; or
(d) Voluntary Petitions. Pledgor files a petition in
bankruptcy or reorganization or seeks relief under any provision of any
bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, in the United States
or in any foreign country, whether such law is now in existence or
hereafter in effect, or Pledgor is the subject of an order for relief or
winding-up petition entered by any bankruptcy court, or Pledgor consents
to the filing of any petition against it under any such law in the
United States or in any foreign country; or
3
<PAGE> 28
(e) Assignments, Conveyances or Transfers for Benefit of
Creditors. Pledgor makes an assignment, conveyance or transfer for the
benefit of his creditors, or for the purpose of enforcing a lien against
his property, or admits in writing his inability to pay his debts
generally as they become due, or is generally not paying his debts as
such debts become due, or consents to the appointment of a custodian,
receiver, trustee, assignee or liquidator of all, substantially all,
less than substantially all, or any part of the Pledgor's property for
the purpose of enforcing a lien against the Pledgor's property; or
(f) Breach of Terms of Agreement. Pledgor breaches any of the
terms of this Security Agreement, including any representation, warranty
or covenant contained in Section 1.02, and such default continues for a
period of thirty (30) days after written notice thereof by Secured Party
to Pledgor; or
(g) False Representation. Any statement, representation or
warranty made by Pledgor in, under or pursuant to this Security
Agreement or the Note secured hereby or any affidavit or certificate
executed or sworn to in connection with either such document shall be
false or misleading in any material respect.
SECTION 2.02. REMEDIES.
(a) Upon the happening of any Event of Default specified in
Section 2.01, Secured Party may declare the entire principal amount of
all Indebtedness then outstanding, including interest accrued thereon,
to be immediately due and payable (provided that the occurrence of any
event described in Subsections 2.01(b) or (c) shall automatically
accelerate the maturity of the Indebtedness, without the necessity of
any action by Pledgor) without presentment, demand, protest, notice of
protest or dishonor, further notice of default, notice of intent to
accelerate the maturity thereof, notice of acceleration of the maturity
thereof, or other notice of any kind, all of which are expressly waived
by Pledgor;
(b) If all or any part of the Indebtedness shall become due
and payable as specified in (a) above, Secured Party may then, or at any
time thereafter, apply, set-off, sell in one of more sales, lease or
otherwise dispose of all or any part of the Collateral, and the
proceeds, products, additions, substitutions and accessions of and to
any and all of the foregoing Collateral, following any commercially
reasonable preparation or processing, in such order as Secured Party may
elect;
(c) Any sale made pursuant to subsection (b) above, may be
made either at public or private sale at Secured Party's place of
business or elsewhere, either for cash or upon credit or for future
delivery, at such price as Secured Party may deem fair, and Secured
Party may be the purchaser of any or all Collateral so sold and hold the
same thereafter in its own right free from any claim of Pledgor or right
of
4
<PAGE> 29
redemption. No such purchase or holding by Secured Party shall be
deemed a retention by Secured Party in satisfaction of the Indebtedness.
If, notwithstanding the foregoing provisions, any applicable provision
of the Texas Business and Commerce Code (the "Code") or other law
requires Secured Party to give reasonable notice of any such sale or
disposition or other action, Pledgor agrees ten (10) days' prior written
notice shall constitute reasonable notice. Any sale made hereunder may
be conducted by an auctioneer or any agent of Secured Party. The
Collateral need not be present at any such sale.
SECTION 2.03. PROCEEDS. The proceeds of any sale or other disposition
of the Collateral and all sums received or collected by Secured Party from or
on account of the Collateral shall be applied by Secured Party in the manner
set forth in Section 9.504 of the Code as presently in effect.
SECTION 2.04. DEFICIENCY. This Note is non-recourse to the Pledgor;
hence, Pledgor shall not remain liable to Secured Party for any deficiency,
advances, costs, charges and expenses, together with interest thereon remaining
unpaid.
SECTION 2.05. RETENTION OF COLLATERAL. The parties hereby agree that,
upon an Event of Default, the Secured Party may retain the Collateral in
satisfaction of the Indebtedness pursuant to the terms of Section 9.505(b) of
the Code.
SECTION 2.06. EXERCISE OF RIGHTS. Time shall be of the essence for the
performance of any act under this Security Agreement, but neither Secured
Party's acceptance of partial or delinquent payment nor any forbearance,
failure or delay by Secured Party in exercising any right, power or remedy
shall be deemed a waiver of any Indebtedness or of any right, power or remedy
of Secured Party or preclude any other or further exercise thereof; and no
single or partial exercise of any right, power or remedy shall preclude any
other or further exercise thereof, or the exercise of any other right, power or
remedy.
SECTION 2.07. REMEDY AND WAIVER. Secured Party may remedy any default
and may waive any default without waiving the default remedied or waiving any
prior or subsequent default.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. NOTICES. Any notice or demand to Pledgor under this
Security Agreement or in connection with this Security Agreement may be given
and shall conclusively be deemed and considered to have been given and received
three (3) days after the deposit thereof, in writing, duly stamped and
addressed to Pledgor at the address of Pledgor set forth next to Pledgor's
signature below, unless Pledgor has notified Secured Party in writing at
Secured Party's address next to Secured Party's signature below of a change of
Pledgor's address, in the U.S. Mail, but actual notice, however given or
received, shall always be effective.
5
<PAGE> 30
SECTION 3.02. CONSTRUCTION. THIS SECURITY AGREEMENT HAS BEEN MADE IN
AND THE SECURITY INTEREST GRANTED HEREBY IS GRANTED IN AND BOTH SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS (EXCEPT TO THE EXTENT THAT THE LAWS
OF ANY OTHER JURISDICTION GOVERN THE PERFECTION AND PRIORITY OF THE SECURITY
INTEREST GRANTED HEREBY) AND OF THE UNITED STATES OF AMERICA, AS APPLICABLE, IN
ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY, ENFORCEMENT AND
PERFORMANCE.
SECTION 3.03. AMENDMENT AND WAIVER. This Security Agreement may not be
amended, altered or modified (nor may any of its terms be waived) except in
writing duly signed by Secured Party and Pledgor.
SECTION 3.04. INVALIDITY. If any provision of this Security Agreement
is rendered or declared invalid, illegal or unenforceable by reason of any
existing or subsequently enacted legislation or by a judicial decision which
shall have become final, Pledgor and Secured Party shall promptly meet and
negotiate substitute provisions for those rendered invalid, illegal or
unenforceable, but all of the remaining provisions shall remain in full force
and effect.
SECTION 3.05. SUCCESSORS AND ASSIGNS. The covenants, representations,
warranties and agreements herein set forth shall be binding upon Pledgor and
shall inure to the benefit of Secured Party and Secured Party's legal
representatives, successors and assigns.
SECTION 3.06. SURVIVAL OF AGREEMENTS. All representations and
warranties of Pledgor herein, and all covenants and agreements herein not fully
performed before the effective date of this Security Agreement, shall survive
such date.
SECTION 3.07. TITLES OF ARTICLES AND SECTIONS. All titles or headings
to articles, sections or other divisions of this Security Agreement are only
for the convenience of the parties and shall not be construed to have any
effect or meaning with respect to the other content of such articles, sections
or other divisions, such other content being controlling as to the agreement
between the parties hereto.
SECTION 3.8. MULTIPLE COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned has executed this Security Agreement
effective as of the date first written above.
ADDRESSES: PLEDGOR:
1610 Cornerway Blvd. --------------------------------------
San Antonio, Texas 78219 ROSS E. BACON
SECURED PARTY:
GENERAL ATLANTIC CORPORATION
950 Third Avenue By:
New York, New York 10022 -----------------------------------
, its
------------ -----------------
6
<PAGE> 31
EXHIBIT C-2
SECURITY AGREEMENT - PLEDGE
This SECURITY AGREEMENT - PLEDGE ("Security Agreement") is made and
entered into effective as of the ___ day of March, 1998, by and between TERRY
LALOSH (the "Pledgor") in favor of GENERAL ATLANTIC CORPORATION, a Delaware
corporation (the "Secured Party").
W I T N E S S E T H:
WHEREAS, the Pledgor has purchased from Secured Party Two Hundred
Thirty-Six Thousand Five Hundred Sixty-Two (236,562) shares of the common stock
in Solo Serve Corporation, a Delaware corporation (the "Purchased Stock"); and
WHEREAS, in consideration for the purchase of the Purchased Stock,
Pledgor has delivered to the Secured Party that one certain Promissory Note
(the "Note") of even date herewith in the original principal amount of Twenty-
Three Thousand Six Hundred Fifty-Six and 20/100 Dollars ($23,656.20); and
WHEREAS, Secured Party has conditioned its agreement to sell the
Purchased Stock to the Pledgor in exchange for the Note on the Pledgor's
agreement to pledge to Secured Party the collateral described below and to
execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
SECURITY INTEREST
SECTION 1.01. GRANT OF SECURITY INTEREST. Pledgor hereby grants to
Secured Party a security interest in, a general lien upon, and a right of set-
off against the following described property (the "Collateral"):
(a) Two Hundred Thirty-Six Thousand Five Hundred Sixty-Two
(236,562) shares of common stock of Solo Serve Corporation, a Delaware
corporation evidenced by Certificate No. ____; and
(b) All proceeds, products, and accessions of and to any of
the foregoing.
The security interest in, general lien upon, and right of set-off
against the Collateral is granted to Secured Party to secure (a) the payment
and performance by the Pledgor of the Note; (b) the performance of Pledgor of
the covenants, terms, conditions, obligations and provisions of this Agreement;
(c) all renewals, extensions, and modifications of the foregoing documents and
any other documents executed in connection herewith or therewith; and (d) all
costs, expenses, advances and liabilities which may be made or incurred by
Secured Party in the disbursement, administration and
<PAGE> 32
collection of the Note and in the protection, maintenance and liquidation of
the security interest hereby granted (the aforementioned obligations of the
Pledgor are collectively referred to hereinafter as the "Secured Obligations"
or the "Indebtedness").
SECTION 1.02. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENT BY
THE PLEDGOR. The Pledgor hereby represents, warrants, covenants, and agrees to
and with the Secured Party as follows:
(a) Transfer of Collateral. Pledgor shall not, without the
express prior written consent of the Secured Party, sell, encumber,
pledge, hypothecate, dispose of, or grant any other security interest in
the Collateral, regardless of whether same is allegedly or expressly
inferior to the security interest granted hereby.
(b) Payment of Impositions. Pledgor shall pay, at the cost
and expense of the Pledgor, prior to delinquency, any tax, charge, lien,
or assessment against the Collateral.
(c) Defense. Pledgor shall defend, at the cost and expense of
the Pledgor, any action, claim, or demand affecting (i) the Collateral,
(ii) the security interest granted hereby, (iii) the right, title,
interest and benefit of the Pledgor in and to the Collateral, or (iv)
the right, title, interest, and benefit of the Secured Party in and to
the Collateral. Pledgor shall give Secured Party notice of any such
action, claim or demand within five (5) days from the date such action,
claim or demand is made or asserted, detailing the origin and nature
thereof.
(d) Additional Documents. Pledgor shall execute and deliver
to the Secured Party such other and further certificates, documents and
instruments, including, but not limited to, the stock certificate
representing the Purchased Stock and a stock power endorsed by Pledgor
in blank, as shall be deemed reasonably necessary by the Secured Party
so as to maintain, give notice of, perfect, or otherwise assure the
priority and perfection of the security interest granted hereby.
Pledgor shall execute and deliver to the Secured Party, from time to
time, such financing statements as the Secured Party may reasonably
request, in a form satisfactory to Secured Party.
(e) Ownership. Pledgor owns the Collateral and has the
authority to grant this security interest.
SECTION 1.03. POWER OF ATTORNEY. Secured Party is hereby authorized
and appointed as agent and attorney-in-fact of the Pledgor, which appointment
is coupled with an interest and shall be irrevocable so long as any of the
Secured Obligations remain outstanding, to sign and deliver such documents,
endorsements and instruments, and to take all such other actions, in the name
of the
2
<PAGE> 33
Pledgor as Secured Party may deem necessary or advisable to perfect, preserve
or foreclose Secured Party's security interest in and lien on the Collateral.
ARTICLE II
EVENTS OF DEFAULT
SECTION 2.01. EVENTS. Any of the following events shall be considered
an "Event of Default" as that term is used herein:
(a) Principal and Interest Payments under Note. Principal and
interest under the Note or any other Indebtedness is not paid when due
and such default continues for a period of five (5) days after written
notice thereof by Secured Party to the Pledgor; or
(b) Other Note Terms. There is a default under any term of
the Note or this Agreement, other than default in payment of the Note,
and such default continues for a period of thirty (30) days after
written notice thereof by Secured Party to the Pledgor; or
(c) Involuntary Bankruptcy Proceedings. A receiver,
conservator, custodian, liquidator, creditors' committee, board of
inspectors, or trustee of Pledgor or of any of the property of Pledgor
is created, engaged, retained, procured, authorized or appointed in the
United States or under any law of any foreign country by the order or
decree of any court or agency or supervisory authority having
jurisdiction; or Pledgor becomes a debtor under the Bankruptcy Code of
the United States or under the law of any foreign country, and is the
subject of an order for relief, or becomes a bankrupt or insolvent; or
any of Pledgor's property is sequestered, seized or attached in the
United States or under any law of any foreign country by court order or
decree; or a complaint, petition or similar pleading is filed against
Pledgor under any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law of any jurisdiction, in the
United States or in any foreign country, whether such law is now in
existence or hereafter in effect, and such filing is not dismissed
within sixty (60) days of the date of such filing; or
(d) Voluntary Petitions. Pledgor files a petition in
bankruptcy or reorganization or seeks relief under any provision of any
bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, in the United States
or in any foreign country, whether such law is now in existence or
hereafter in effect, or Pledgor is the subject of an order for relief or
winding-up petition entered by any bankruptcy court, or Pledgor consents
to the filing of any petition against it under any such law in the
United States or in any foreign country; or
3
<PAGE> 34
(e) Assignments, Conveyances or Transfers for Benefit of
Creditors. Pledgor makes an assignment, conveyance or transfer for the
benefit of his creditors, or for the purpose of enforcing a lien against
his property, or admits in writing his inability to pay his debts
generally as they become due, or is generally not paying his debts as
such debts become due, or consents to the appointment of a custodian,
receiver, trustee, assignee or liquidator of all, substantially all,
less than substantially all, or any part of the Pledgor's property for
the purpose of enforcing a lien against the Pledgor's property; or
(f) Breach of Terms of Agreement. Pledgor breaches any of the
terms of this Security Agreement, including any representation, warranty
or covenant contained in Section 1.02, and such default continues for a
period of thirty (30) days after written notice thereof by Secured Party
to Pledgor; or
(g) False Representation. Any statement, representation or
warranty made by Pledgor in, under or pursuant to this Security
Agreement or the Note secured hereby or any affidavit or certificate
executed or sworn to in connection with either such document shall be
false or misleading in any material respect.
SECTION 2.02. REMEDIES.
(a) Upon the happening of any Event of Default specified in
Section 2.01, Secured Party may declare the entire principal amount of
all Indebtedness then outstanding, including interest accrued thereon,
to be immediately due and payable (provided that the occurrence of any
event described in Subsections 2.01(b) or (c) shall automatically
accelerate the maturity of the Indebtedness, without the necessity of
any action by Pledgor) without presentment, demand, protest, notice of
protest or dishonor, further notice of default, notice of intent to
accelerate the maturity thereof, notice of acceleration of the maturity
thereof, or other notice of any kind, all of which are expressly waived
by Pledgor;
(b) If all or any part of the Indebtedness shall become due
and payable as specified in (a) above, Secured Party may then, or at any
time thereafter, apply, set-off, sell in one of more sales, lease or
otherwise dispose of all or any part of the Collateral, and the
proceeds, products, additions, substitutions and accessions of and to
any and all of the foregoing Collateral, following any commercially
reasonable preparation or processing, in such order as Secured Party may
elect;
(c) Any sale made pursuant to subsection (b) above, may be
made either at public or private sale at Secured Party's place of
business or elsewhere, either for cash or upon credit or for future
delivery, at such price as Secured Party may deem fair, and Secured
Party may be the purchaser of any or all Collateral so sold and hold the
same thereafter in its own right free from any claim of Pledgor or right
of
4
<PAGE> 35
redemption. No such purchase or holding by Secured Party shall be
deemed a retention by Secured Party in satisfaction of the Indebtedness.
If, notwithstanding the foregoing provisions, any applicable provision
of the Texas Business and Commerce Code (the "Code") or other law
requires Secured Party to give reasonable notice of any such sale or
disposition or other action, Pledgor agrees ten (10) days' prior written
notice shall constitute reasonable notice. Any sale made hereunder may
be conducted by an auctioneer or any agent of Secured Party. The
Collateral need not be present at any such sale.
SECTION 2.03. PROCEEDS. The proceeds of any sale or other disposition
of the Collateral and all sums received or collected by Secured Party from or
on account of the Collateral shall be applied by Secured Party in the manner
set forth in Section 9.504 of the Code as presently in effect.
SECTION 2.04. DEFICIENCY. The Note is non-recourse to the Pledgor;
hence, Pledgor shall not remain liable to Secured Party for any deficiency,
advances, costs, charges and expenses, together with interest thereon remaining
unpaid.
SECTION 2.05. RETENTION OF COLLATERAL. The parties hereby agree that,
upon an Event of Default, the Secured Party may retain the Collateral in
satisfaction of the Indebtedness pursuant to the terms of Section 9.505(b) of
the Code.
SECTION 2.06. EXERCISE OF RIGHTS. Time shall be of the essence for the
performance of any act under this Security Agreement, but neither Secured
Party's acceptance of partial or delinquent payment nor any forbearance,
failure or delay by Secured Party in exercising any right, power or remedy
shall be deemed a waiver of any Indebtedness or of any right, power or remedy
of Secured Party or preclude any other or further exercise thereof; and no
single or partial exercise of any right, power or remedy shall preclude any
other or further exercise thereof, or the exercise of any other right, power or
remedy.
SECTION 2.07. REMEDY AND WAIVER. Secured Party may remedy any default
and may waive any default without waiving the default remedied or waiving any
prior or subsequent default.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. NOTICES. Any notice or demand to Pledgor under this
Security Agreement or in connection with this Security Agreement may be given
and shall conclusively be deemed and considered to have been given and received
three (3) days after the deposit thereof, in writing, duly stamped and
addressed to Pledgor at the address of Pledgor set forth next to Pledgor's
signature below, unless Pledgor has notified Secured Party in writing at
Secured Party's address next to Secured Party's signature below of a change of
Pledgor's address, in the U.S. Mail, but actual notice, however given or
received, shall always be effective.
5
<PAGE> 36
SECTION 3.02. CONSTRUCTION. THIS SECURITY AGREEMENT HAS BEEN MADE IN
AND THE SECURITY INTEREST GRANTED HEREBY IS GRANTED IN AND BOTH SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS (EXCEPT TO THE EXTENT THAT THE LAWS
OF ANY OTHER JURISDICTION GOVERN THE PERFECTION AND PRIORITY OF THE SECURITY
INTEREST GRANTED HEREBY) AND OF THE UNITED STATES OF AMERICA, AS APPLICABLE, IN
ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY, ENFORCEMENT AND
PERFORMANCE.
SECTION 3.03. AMENDMENT AND WAIVER. This Security Agreement may not be
amended, altered or modified (nor may any of its terms be waived) except in
writing duly signed by Secured Party and Pledgor.
SECTION 3.04. INVALIDITY. If any provision of this Security Agreement
is rendered or declared invalid, illegal or unenforceable by reason of any
existing or subsequently enacted legislation or by a judicial decision which
shall have become final, Pledgor and Secured Party shall promptly meet and
negotiate substitute provisions for those rendered invalid, illegal or
unenforceable, but all of the remaining provisions shall remain in full force
and effect.
SECTION 3.05. SUCCESSORS AND ASSIGNS. The covenants, representations,
warranties and agreements herein set forth shall be binding upon Pledgor and
shall inure to the benefit of Secured Party and Secured Party's legal
representatives, successors and assigns.
SECTION 3.06. SURVIVAL OF AGREEMENTS. All representations and
warranties of Pledgor herein, and all covenants and agreements herein not fully
performed before the effective date of this Security Agreement, shall survive
such date.
SECTION 3.07. TITLES OF ARTICLES AND SECTIONS. All titles or headings
to articles, sections or other divisions of this Security Agreement are only
for the convenience of the parties and shall not be construed to have any
effect or meaning with respect to the other content of such articles, sections
or other divisions, such other content being controlling as to the agreement
between the parties hereto.
SECTION 3.8. MULTIPLE COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned has executed this Security Agreement
effective as of the date first written above.
ADDRESSES: PLEDGOR:
1610 Cornerway Blvd. ----------------------------------------
San Antonio, Texas 78219 TERRY LALOSH
SECURED PARTY:
GENERAL ATLANTIC CORPORATION
950 Third Avenue By:
New York, New York 10022 -------------------------------------
, its
----------------- ---------------
6
<PAGE> 37
EXHIBIT C-3
SECURITY AGREEMENT - PLEDGE
This SECURITY AGREEMENT - PLEDGE ("Security Agreement") is made and
entered into effective as of the ___ day of March, 1998, by and between MARK J.
BLANKENSHIP (the "Pledgor") in favor of GENERAL ATLANTIC CORPORATION, a
Delaware corporation (the "Secured Party").
W I T N E S S E T H:
WHEREAS, the Pledgor has purchased from Secured Party Two Hundred
Thirty-Six Thousand Five Hundred Sixty-Two (236,562) shares of the common stock
in Solo Serve Corporation, a Delaware corporation (the "Purchased Stock"); and
WHEREAS, in consideration for the purchase of the Purchased Stock,
Pledgor has delivered to the Secured Party that one certain Promissory Note
(the "Note") of even date herewith in the original principal amount of Twenty-
Three Thousand Six Hundred Fifty-Six and 20/100 Dollars ($23,656.20); and
WHEREAS, Secured Party has conditioned its agreement to sell the
Purchased Stock to the Pledgor in exchange for the Note on the Pledgor's
agreement to pledge to Secured Party the collateral described below and to
execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
SECURITY INTEREST
SECTION 1.01. GRANT OF SECURITY INTEREST. Pledgor hereby grants to
Secured Party a security interest in, a general lien upon, and a right of set-
off against the following described property (the "Collateral"):
(a) Two Hundred Thirty-Six Thousand Five Hundred Sixty-Two
(236,562) shares of common stock of Solo Serve Corporation, a Delaware
corporation evidenced by Certificate No. ____; and
(b) All proceeds, products, and accessions of and to any of
the foregoing.
The security interest in, general lien upon, and right of set-off
against the Collateral is granted to Secured Party to secure (a) the payment
and performance by the Pledgor of the Note; (b) the performance of Pledgor of
the covenants, terms, conditions, obligations and provisions of this Agreement;
(c) all renewals, extensions, and modifications of the foregoing documents and
any other documents executed in connection herewith or therewith; and (d) all
costs, expenses, advances and
<PAGE> 38
liabilities which may be made or incurred by Secured Party in the disbursement,
administration and collection of the Note and in the protection, maintenance
and liquidation of the security interest hereby granted (the aforementioned
obligations of the Pledgor are collectively referred to hereinafter as the
"Secured Obligations" or the "Indebtedness").
SECTION 1.02. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENT BY
THE PLEDGOR. The Pledgor hereby represents, warrants, covenants, and agrees to
and with the Secured Party as follows:
(a) Transfer of Collateral. Pledgor shall not, without the
express prior written consent of the Secured Party, sell, encumber,
pledge, hypothecate, dispose of, or grant any other security interest in
the Collateral, regardless of whether same is allegedly or expressly
inferior to the security interest granted hereby.
(b) Payment of Impositions. Pledgor shall pay, at the cost
and expense of the Pledgor, prior to delinquency, any tax, charge, lien,
or assessment against the Collateral.
(c) Defense. Pledgor shall defend, at the cost and expense of
the Pledgor, any action, claim, or demand affecting (i) the Collateral,
(ii) the security interest granted hereby, (iii) the right, title,
interest and benefit of the Pledgor in and to the Collateral, or (iv)
the right, title, interest, and benefit of the Secured Party in and to
the Collateral. Pledgor shall give Secured Party notice of any such
action, claim or demand within five (5) days from the date such action,
claim or demand is made or asserted, detailing the origin and nature
thereof.
(d) Additional Documents. Pledgor shall execute and deliver
to the Secured Party such other and further certificates, documents and
instruments, including, but not limited to, the stock certificate
representing the Purchased Stock and a stock power endorsed by Pledgor
in blank, as shall be deemed reasonably necessary by the Secured Party
so as to maintain, give notice of, perfect, or otherwise assure the
priority and perfection of the security interest granted hereby.
Pledgor shall execute and deliver to the Secured Party, from time to
time, such financing statements as the Secured Party may reasonably
request, in a form satisfactory to Secured Party.
(e) Ownership. Pledgor owns the Collateral and has the
authority to grant this security interest.
SECTION 1.03. POWER OF ATTORNEY. Secured Party is hereby authorized
and appointed as agent and attorney-in-fact of the Pledgor, which appointment
is coupled with an interest and shall be irrevocable so long as any of the
Secured Obligations remain outstanding, to sign and deliver such documents,
endorsements and instruments, and to take all such other actions, in the name
of the
2
<PAGE> 39
Pledgor as Secured Party may deem necessary or advisable to perfect, preserve
or foreclose Secured Party's security interest in and lien on the Collateral.
ARTICLE II
EVENTS OF DEFAULT
SECTION 2.01. EVENTS. Any of the following events shall be considered
an "Event of Default" as that term is used herein:
(a) Principal and Interest Payments under Note. Principal and
interest under the Note or any other Indebtedness is not paid when due
and such default continues for a period of five (5) days after written
notice thereof by Secured Party to the Pledgor; or
(b) Other Note Terms. There is a default under any term of
the Note or this Agreement, other than default in payment of the Note,
and such default continues for a period of thirty (30) days after
written notice thereof by Secured Party to the Pledgor; or
(c) Involuntary Bankruptcy Proceedings. A receiver,
conservator, custodian, liquidator, creditors' committee, board of
inspectors, or trustee of Pledgor or of any of the property of Pledgor
is created, engaged, retained, procured, authorized or appointed in the
United States or under any law of any foreign country by the order or
decree of any court or agency or supervisory authority having
jurisdiction; or Pledgor becomes a debtor under the Bankruptcy Code of
the United States or under the law of any foreign country, and is the
subject of an order for relief, or becomes a bankrupt or insolvent; or
any of Pledgor's property is sequestered, seized or attached in the
United States or under any law of any foreign country by court order or
decree; or a complaint, petition or similar pleading is filed against
Pledgor under any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law of any jurisdiction, in the
United States or in any foreign country, whether such law is now in
existence or hereafter in effect, and such filing is not dismissed
within sixty (60) days of the date of such filing; or
(d) Voluntary Petitions. Pledgor files a petition in
bankruptcy or reorganization or seeks relief under any provision of any
bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, in the United States
or in any foreign country, whether such law is now in existence or
hereafter in effect, or Pledgor is the subject of an order for relief or
winding-up petition entered by any bankruptcy court, or Pledgor consents
to the filing of any petition against it under any such law in the
United States or in any foreign country; or
3
<PAGE> 40
(e) Assignments, Conveyances or Transfers for Benefit of
Creditors. Pledgor makes an assignment, conveyance or transfer for the
benefit of his creditors, or for the purpose of enforcing a lien against
his property, or admits in writing his inability to pay his debts
generally as they become due, or is generally not paying his debts as
such debts become due, or consents to the appointment of a custodian,
receiver, trustee, assignee or liquidator of all, substantially all,
less than substantially all, or any part of the Pledgor's property for
the purpose of enforcing a lien against the Pledgor's property; or
(f) Breach of Terms of Agreement. Pledgor breaches any of the
terms of this Security Agreement, including any representation, warranty
or covenant contained in Section 1.02, and such default continues for a
period of thirty (30) days after written notice thereof by Secured Party
to Pledgor; or
(g) False Representation. Any statement, representation or
warranty made by Pledgor in, under or pursuant to this Security
Agreement or the Note secured hereby or any affidavit or certificate
executed or sworn to in connection with either such document shall be
false or misleading in any material respect.
SECTION 2.02. REMEDIES.
(a) Upon the happening of any Event of Default specified in
Section 2.01, Secured Party may declare the entire principal amount of
all Indebtedness then outstanding, including interest accrued thereon,
to be immediately due and payable (provided that the occurrence of any
event described in Subsections 2.01(b) or (c) shall automatically
accelerate the maturity of the Indebtedness, without the necessity of
any action by Pledgor) without presentment, demand, protest, notice of
protest or dishonor, further notice of default, notice of intent to
accelerate the maturity thereof, notice of acceleration of the maturity
thereof, or other notice of any kind, all of which are expressly waived
by Pledgor;
(b) If all or any part of the Indebtedness shall become due
and payable as specified in (a) above, Secured Party may then, or at any
time thereafter, apply, set-off, sell in one of more sales, lease or
otherwise dispose of all or any part of the Collateral, and the
proceeds, products, additions, substitutions and accessions of and to
any and all of the foregoing Collateral, following any commercially
reasonable preparation or processing, in such order as Secured Party may
elect;
(c) Any sale made pursuant to subsection (b) above, may be
made either at public or private sale at Secured Party's place of
business or elsewhere, either for cash or upon credit or for future
delivery, at such price as Secured Party may deem fair, and Secured
Party may be the purchaser of any or all Collateral so sold and hold the
same thereafter in its own right free from any claim of Pledgor or right
of
4
<PAGE> 41
redemption. No such purchase or holding by Secured Party shall be
deemed a retention by Secured Party in satisfaction of the Indebtedness.
If, notwithstanding the foregoing provisions, any applicable provision
of the Texas Business and Commerce Code (the "Code") or other law
requires Secured Party to give reasonable notice of any such sale or
disposition or other action, Pledgor agrees ten (10) days' prior written
notice shall constitute reasonable notice. Any sale made hereunder may
be conducted by an auctioneer or any agent of Secured Party. The
Collateral need not be present at any such sale.
SECTION 2.03. PROCEEDS. The proceeds of any sale or other disposition
of the Collateral and all sums received or collected by Secured Party from or
on account of the Collateral shall be applied by Secured Party in the manner
set forth in Section 9.504 of the Code as presently in effect.
SECTION 2.04. DEFICIENCY. The Note is non-recourse to the Pledgor;
hence, Pledgor shall not remain liable to Secured Party for any deficiency,
advances, costs, charges and expenses, together with interest thereon remaining
unpaid.
SECTION 2.05. RETENTION OF COLLATERAL. The parties hereby agree that,
upon an Event of Default, the Secured Party may retain the Collateral in
satisfaction of the Indebtedness pursuant to the terms of Section 9.505(b) of
the Code.
SECTION 2.06. EXERCISE OF RIGHTS. Time shall be of the essence for the
performance of any act under this Security Agreement, but neither Secured
Party's acceptance of partial or delinquent payment nor any forbearance,
failure or delay by Secured Party in exercising any right, power or remedy
shall be deemed a waiver of any Indebtedness or of any right, power or remedy
of Secured Party or preclude any other or further exercise thereof; and no
single or partial exercise of any right, power or remedy shall preclude any
other or further exercise thereof, or the exercise of any other right, power or
remedy.
SECTION 2.07. REMEDY AND WAIVER. Secured Party may remedy any default
and may waive any default without waiving the default remedied or waiving any
prior or subsequent default.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. NOTICES. Any notice or demand to Pledgor under this
Security Agreement or in connection with this Security Agreement may be given
and shall conclusively be deemed and considered to have been given and received
three (3) days after the deposit thereof, in writing, duly stamped and
addressed to Pledgor at the address of Pledgor set forth next to Pledgor's
signature below, unless Pledgor has notified Secured Party in writing at
Secured Party's address next to Secured Party's signature below of a change of
Pledgor's address, in the U.S. Mail, but actual notice, however given or
received, shall always be effective.
5
<PAGE> 42
SECTION 3.02. CONSTRUCTION. THIS SECURITY AGREEMENT HAS BEEN MADE IN
AND THE SECURITY INTEREST GRANTED HEREBY IS GRANTED IN AND BOTH SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS (EXCEPT TO THE EXTENT THAT THE LAWS
OF ANY OTHER JURISDICTION GOVERN THE PERFECTION AND PRIORITY OF THE SECURITY
INTEREST GRANTED HEREBY) AND OF THE UNITED STATES OF AMERICA, AS APPLICABLE, IN
ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY, ENFORCEMENT AND
PERFORMANCE.
SECTION 3.03. AMENDMENT AND WAIVER. This Security Agreement may not be
amended, altered or modified (nor may any of its terms be waived) except in
writing duly signed by Secured Party and Pledgor.
SECTION 3.04. INVALIDITY. If any provision of this Security Agreement
is rendered or declared invalid, illegal or unenforceable by reason of any
existing or subsequently enacted legislation or by a judicial decision which
shall have become final, Pledgor and Secured Party shall promptly meet and
negotiate substitute provisions for those rendered invalid, illegal or
unenforceable, but all of the remaining provisions shall remain in full force
and effect.
SECTION 3.05. SUCCESSORS AND ASSIGNS. The covenants, representations,
warranties and agreements herein set forth shall be binding upon Pledgor and
shall inure to the benefit of Secured Party and Secured Party's legal
representatives, successors and assigns.
SECTION 3.06. SURVIVAL OF AGREEMENTS. All representations and
warranties of Pledgor herein, and all covenants and agreements herein not fully
performed before the effective date of this Security Agreement, shall survive
such date.
SECTION 3.07. TITLES OF ARTICLES AND SECTIONS. All titles or headings
to articles, sections or other divisions of this Security Agreement are only
for the convenience of the parties and shall not be construed to have any
effect or meaning with respect to the other content of such articles, sections
or other divisions, such other content being controlling as to the agreement
between the parties hereto.
SECTION 3.8. MULTIPLE COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned has executed this Security Agreement
effective as of the date first written above.
ADDRESSES: PLEDGOR:
1610 Cornerway Blvd. --------------------------------------
San Antonio, Texas 78219 MARK J. BLANKENSHIP
SECURED PARTY:
GENERAL ATLANTIC CORPORATION
950 Third Avenue By:
New York, New York 10022 -----------------------------------
, its
------------------- -----------
6
<PAGE> 43
EXHIBIT D
COLLATERAL PLEDGE AGREEMENT
March __, 1998
To: General Atlantic Corporation
950 Third Avenue
New York, NY 10022
Re: $100,000 Certificates of Deposit held by each of Ross E.
Bacon ("Bacon"), Mark J. Blankenship ("Blankenship") and
Terry Lalosh ("Lalosh") (Bacon, Blankenship and Lalosh are
sometimes referred to herein collectively as the
"Pledgors") issued by Camino Real Bank, N.A. (the "Bank")
Ladies and Gentlemen:
The Pledgors and General Atlantic Corporation ("GA") are writing to
confirm that they have agreed as follows:
1. GA has provided a Letter of Credit (the "First Letter of Credit")
in favor of Sanwa Business Credit Corporation ("Sanwa") dated
_________, 1997, in the amount of $750,000, to secure repayment
of the indebtedness owed by Solo Serve Corporation, a Delaware
corporation ("Solo Serve") to Sanwa, pursuant to that one certain
Senior Loan Agreement dated ___________, by and between Solo
Serve and Sanwa.
2. GA is also providing an additional Letter of Credit in favor of
Sanwa dated March __, 1998, in the amount of $600,000 (the
"Second Letter of Credit"), to secure repayment of additional
indebtedness owed by Solo Serve to Sanwa, pursuant to amended
loan documents dated March __, 1998, by and between Solo Serve
and Sanwa. The First Letter of Credit and the Second Letter of
Credit are sometimes referred to collectively herein as the
"Letters of Credit." The First Letter of Credit expires December
31, 1998, and the Second Letter of Credit expires May 31, 1998.
3. The Bank has issued a Certificate of Deposit to each of the
Pledgors in the amount of $100,000 each ($300,000 in the
aggregate) (collectively, the "Certificates of Deposit"), and the
original Certificates of Deposit are held by the Bank.
4. Each of the Pledgors hereby pledges and grants to GA, a security
interest in his respective Certificate of Deposit, to offset any
losses GA incurs under one or both of the Letters of Credit
should payment be made to Sanwa pursuant to one or both of the
Letters of Credit.
5. In the event one or both of the Letters of Credit are drawn down
by Sanwa for the full or some lesser amount (the "Loss Amount"),
each of the Pledgors shall be responsible for partial payment of
the Loss Amount to GA in an amount equal to (i) the Loss
<PAGE> 44
Amount, multiplied by (ii) the Sharing Percentage (as herein
defined). GA shall be responsible for payment to Sanwa of the
remainder of the Loss Amount. In the event a Pledgor fails to
pay his proportionate share of the Loss Amount to GA within five
(5) days of written request by GA to the Pledgor, GA shall have
the right to redeem that Pledgor's Certificate of Deposit. A
copy of the written request for payment also shall be sent by GA
to the Bank. Any amount remaining after payment of the Pledgor's
portion of the Loss Amount shall be delivered by GA to the
Pledgor within ten days of the date the Certificate of Deposit is
redeemed by GA. The Sharing Percentage for each Pledgor prior to
the expiration of the Second Letter of Credit is 7.41%;
thereafter, the Sharing Percentage for each Pledgor is 13.33%.
6. In the event one or both of the Letters of Credit are called for
the full or some lesser amount and a recoupment of the amount
paid to Sanwa is made by GA (the "Recoupment Amount") by
liquidation of collateral previously pledged by Solo Serve to
Sanwa, or otherwise, each of the Pledgors shall be repaid their
proportionate share of the Recoupment Amount in an amount equal
to (i) the Recoupment Amount, multiplied by (ii) the Sharing
Percentage. Any amounts due the Pledgors pursuant to this
Paragraph 6 shall be paid to the Pledgors within ten days of
receipt of any recoupment of such amounts by GA.
7. GA shall continue to hold a security interest in each respective
Pledgor's Certificate of Deposit until thirty (30) days following
the expiration of the Letters of Credit by their own terms, which
shall be no later than January 31, 1999 (the "Release Date").
Upon the Release Date, if GA has not made a claim as provided in
the following paragraph, GA shall have no further right or
interest in the Certificates of Deposit or the proceeds thereof.
8. By its signature below, the Bank hereby agrees to the collateral
pledge of the Certificates of Deposit to GA. The Bank further
agrees that until the sooner of: (i) the Release Date, or (ii)
the Bank receives written notice from GA that GA has executed on
its security interest in the Certificates of Deposit or the
proceeds thereof, the Bank shall not allow a Pledgor's
Certificate of Deposit to be cashed or redeemed by a Pledgor, and
shall not allow any offsets against that Pledgor's Certificate of
Deposit. If any Certificate of Deposit matures prior to the
Release Date, the Bank shall hold the proceeds of the Certificate
of Deposit in the same manner as it held the Certificate of
Deposit. On the Release Date, the Bank shall no longer be
obligated under this Agreement, unless prior to such date the
Bank receives written notice from GA that it is exercising its
rights to the proceeds of the Certificate of Deposit as herein
provided. Upon receipt of such notice, the Bank shall pay in
accordance with instructions from GA.
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<PAGE> 45
9. The Bank is not a party to any other agreement between the
parties hereto. Barring gross negligence or willful disregard
for its agreement hereunder, the Bank shall have no additional
responsibilities hereunder.
10. This Agreement may not be terminated or amended without the
approval of the Pledgors and GA.
11. This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall
constitute but one and the same instrument.
12. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS.
------------------------------------
ROSS E. BACON
------------------------------------
MARK J. BLANKENSHIP
------------------------------------
TERRY LALOSH
GENERAL ATLANTIC CORPORATION
By:
---------------------------------
, its
------------- -------------
AGREED AND ACCEPTED:
CAMINO REAL BANK, N.A.
By:
------------------------------------
, its
---------- -------------------
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<PAGE> 46
EXHIBIT E
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT ("Agreement) made and entered into as of
March 17, 1998 by and among General Atlantic Corporation, a Delaware
corporation, Charles M. Siegel, Ross E. Bacon, Terry Lalosh and Mark J.
Blankenship (together, the "Principal Stockholders"), each a principal
stockholder of Solo Serve Corporation (the "Company").
W I T N E S S E T H:
WHEREAS, each of the Principal Stockholders owns and holds shares of the
common stock, par value $.01 per share (the "Common Stock") or the preferred
stock, par value $.01 per share (the "Preferred Stock"), of the Company;
WHEREAS, the Principal Stockholders desire to limit their ability to
transfer shares of Common Stock and Preferred Stock of the Company as set forth
herein;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter contained and for other good and valuable
consideration, the receipt and sufficiency of all of which are hereby
acknowledged, the parties hereto agree as follows:
1. A copy of this Agreement and of every amendment or supplement
hereto shall be filed in the principal office of the Company in San Antonio,
Texas, and shall be open to inspection by any holder of capital stock of the
Company (as hereinafter defined), in person or by agent or attorney, daily
during business hours, to the same extent as such holder would be entitled to
examine the books and records of the Company, under the provisions of the
Delaware General Corporation Law or other applicable law.
2. For the purposes of this Agreement, the term "capital stock"
shall mean the Company's common stock and the preferred stock, if any, of the
Company of every class and series. The term "Shares" shall mean all shares of
capital stock of the Company owned and/or held by the Principal Stockholders,
including those issued in connection with any stock split, stock dividend or
other recapitalization of the Company or in connection with the exercise of
stock options, as well as any additional shares of the capital stock of the
Company hereafter acquired by the Principal Stockholders.
3. During the term of this Agreement, (i) no Principal Stockholder
shall sell, exchange, transfer or otherwise dispose of shares of Common Stock
or Preferred Stock owned by any such shareholder, whether for cash or other
consideration or by gift, without the prior written consent of all other
Principal Stockholders; and (ii) no Principal Stockholder who has or hereafter
is granted incentive stock options or other rights to acquire capital stock of
the Company shall exercise any such options or otherwise
<PAGE> 47
acquire any shares of capital stock without the prior written consent of all
other Principal Stockholders.
4. Pursuant to Section 202 of the Delaware General Corporation Law,
the restrictions on transfer set forth herein shall be noted conspicuously on
the certificates representing shares of capital stock owned by the Principal
Stockholders, with each of such certificates to bear the following restrictive
legend:
The shares represented by this certificate may not be sold, exchanged,
transferred or disposed of, whether for cash or other consideration or
by gift, without the prior written consent of all other Principal
Stockholders, as defined in that certain Stockholder Agreement dated
March __, 1998, between and among General Atlantic Corporation, a
Delaware corporation, Charles M. Siegel, Ross E. Bacon, Terry Lalosh and
Mark J. Blankenship. A copy of the referenced Stockholder Agreement is
on file at the principal office of Solo Serve Corporation (the
"Company") in San Antonio, Texas and is available for inspection by any
holder of capital stock of the Company to the same extent as any such
holder would be entitled to examine the books and records of the Company
under the provisions of the Delaware General Corporation Law.
If and to the extent additional shares of capital stock are issued to
any of the Principal Stockholders during the term of this Agreement, the
certificates evidencing such shares shall be legended as set forth above.
5. The term of this Agreement shall commence as of the date hereof
and shall terminate on March 15, 2001, unless terminated earlier or extended by
agreement of all parties. Upon termination of this Agreement, the restrictions
set forth in paragraph 3 hereof shall lapse and be of no further force and
effect, and the restrictive legend set forth in paragraph 4 hereof may be
removed from certificates representing capital stock owned by the Principal
Stockholders.
6. In the event that a notice or other document is required to be
sent hereunder, such notice or other document shall be sent by registered or
certified mail, return receipt requested, to the party entitled to receive such
notice or other document at the address reflected below or at such other
address as such party shall request in a written notice sent to the other
party:
If to the Company: Chief Executive Officer
Solo Serve Corporation
1610 Cornerway Blvd.
San Antonio, TX 78219
<PAGE> 48
With a copy to: Cox & Smith Incorporated
112 E. Pecan, Suite 1800
San Antonio, TX 78205
Attention: James B. Smith, Jr.
Charles M. Siegel
1403 Fortune Hill
San Antonio, Texas 78258
If to a Principal Ross E. Bacon
Stockholder: 2279 Encino Loop
San Antonio, Texas 78259
Terry Lalosh
105 Ponca Bend
San Antonio, Texas 78231
Mark J. Blankenship
733 Patterson Ave.
San Antonio, Texas 78209
with a copy to: Oppenheimer, Blend, Harrison & Tate, Inc.
711 Navarro, Suite 600
San Antonio, Texas 78205
Attn: J. David Oppenheimer
General Atlantic Corporation
950 Third Avenue, 26th Floor
New York, New York 10022
Attention: Julie S. Lefkowitz
Any party may change the address as to which a notice or other document
is sent to such party by giving all other parties hereto notice thereof in
accordance with this Section 5.
7. This Agreement shall be binding upon and inure to the benefit of
the respective heirs, executors, administrators, legal representatives,
successors, assigns and affiliates of each of the parties hereto. This
Agreement and the rights and obligations evidenced hereby may not be
transferred, assigned, pledged or hypothecated by any party hereto.
8. This Agreement shall be construed and enforced in accordance with
the laws of the State of Texas. The parties hereto acknowledge that any breach
or threatened breach of any provision of this Agreement will cause irreparable
injury for which there is no adequate remedy at law, and each party agrees that
each of the other
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<PAGE> 49
parties hereto shall be entitled to specific performance and injunctive and
other equitable relief in case of any such breach or attempted breach.
9. This Agreement may be executed in one or more counterparts, all
of which taken together shall constitute one and the same instrument.
10. This Agreement embodies the entire agreement and understanding
among the parties hereto with respect to the subject matter hereof, and except
as expressly set forth herein, the rights of the Principal Stockholders
incident to ownership of capital stock of the Company shall not be restricted
hereby. This Agreement may be altered, modified or amended, in whole or in
part, at any time only by an instrument in writing signed by each of the
parties hereto.
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<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and duly delivered the same or caused the same to be duly delivered on their
behalf as of the date first above written.
-----------------------------------
Charles M. Siegel
-----------------------------------
Ross E. Bacon
-----------------------------------
Terry Lalosh
-----------------------------------
Mark J. Blankenship
GENERAL ATLANTIC CORPORATION
By:
--------------------------------
Julie S. Lefkowitz
5
