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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 19, 1998
-------------
CONSO PRODUCTS COMPANY
----------------------------------------------------
(Exact name of registrant as specified in its charter)
South Carolina 0-22942 57-0986680
- ---------------------------- ------------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
513 North Duncan Bypass, Union, South Carolina 29379
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 803/427-9004
------------
Not applicable
-----------------------------------------------------
(Former name or former address, if changed since last report.)
Page 1 of 148
Exhibit Index on Page 5
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 19, 1998, the Registrant acquired all of the capital stock of
Simplicity Capital Corporation, a Delaware corporation ("Simplicity"), from its
shareholders for a total consideration of $33,000,000 in cash. Under the terms
of the Stock Purchase Agreement dated June 10, 1998 pursuant to which such
acquisition was effected, portions of the total consideration paid to the
Simplicity shareholders were applied to the expenses of the selling
shareholders (including expenses previously advanced by Simplicity and an
escrow of $100,000 for expenses identified after the closing) and to the
payment, satisfaction and discharge of other outstanding securities and claims
of the selling shareholders so that upon closing of the acquisition the
Registrant owned all of the capital stock of Simplicity and all other
securities and claims of the shareholders of Simplicity were paid, satisfied
and discharged. The acquisition is being accounted for as a purchase. The
Simplicity shareholders consisted of 34 individuals and institutions, including
management and certain institutional investors and their principals.
Prior to the acquisition, there was no material relationship between
Simplicity and its shareholders and the Registrant or any of its affiliates,
directors or officers or associates of such directors or officers. Funds for
the acquisition were provided by NationsBank, N.A. ("NationsBank") pursuant to
a Modified and Restated Loan Agreement dated June 19, 1998 (the "Loan
Agreement") among NationsBank, the Registrant, and Simplicity Pattern Co. Inc.,
a Delaware corporation and indirect wholly-owned subsidiary of Simplicity
("Simplicity Pattern"). The Loan Agreement provides for (i) revolving loans of
up to $30,000,000, (ii) letters of credit in an amount up to $3,000,000 and
(iii) a term loan of $20,000,000. The loan is a refinancing of the Registrant's
existing credit facility with NationsBank, and is secured by substantially all
of the assets of the Registrant and Simplicity Pattern. The revolving loan
provides for advances of up to $30,000,000, including advances of up to
(pound)7,000,000 (in British pounds sterling) to British Trimmings Limited, an
English company and wholly-owned subsidiary of the Registrant. The revolving
loan bears interest at the rate of LIBOR plus a margin that varies based on the
Registrant's ratio of Funded Indebtedness to EBITDA (7.15625% at June 19,
1998). The term loan bears interest at a rate of 7.4% per annum.
Simplicity and its subsidiaries are engaged in the business of
designing, producing and selling patterns and pattern catalogs for apparel,
costumes, crafts, home decorations, and other home sewing applications.
Headquartered in New York City, Simplicity owns and operates production
facilities in Niles, Michigan and maintains sales offices in six countries. The
Registrant plans to continue Simplicity's business as a subsidiary or division
of the Registrant.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
The financial statements required by Item 7(a) of Form 8-K with
respect to Simplicity are not available and it is impracticable to provide them
at the time this report is being filed. The Registrant will file such financial
statements as an amendment to the Form 8-K as soon as practicable and in any
event no later than September 4, 1998 (60 days after the date this report on
Form 8-K must be filed).
(b) Pro forma financial information.
The pro forma financial information required by Item 7(b) of Form 8-K
with respect to the acquisition of Simplicity is not available and it is
impracticable to provide such information at the time this report is being
filed. The Registrant will file such pro forma financial information as an
amendment to the Form 8-K as soon as practicable and in any event no later than
September 4, 1998 (60 days after the date this report on Form 8-K must be
filed).
(c) Exhibits
2 Stock Purchase Agreement dated June 10, 1998 among Conso
Products Company, Simplicity Capital Corporation, and the
Sellers, Sellers Representative and Escrow Agent named
therein.
10.1 Modified and Restated Loan Agreement dated June 19, 1998
among NationsBank, N.A., Conso Products Company and
Simplicity Pattern Co. Inc.
10.2 Promissory Note dated June 19, 1998 issued by Conso Products
Company and Simplicity Pattern Co. Inc. in favor of
NationsBank, N.A. in the original principal amount of
$20,000,000.
10.3 Promissory Note dated June 19, 1998 issued by Conso Products
Company and Simplicity Pattern Co. Inc. in favor of
NationsBank, N.A. in the original principal amount of up to
$30,000,000.
10.4 Promissory Note dated June 19, 1998 issued by British
Trimmings Limited in favor of NationsBank, N.A. in the
original principal amount of up to (pound)7,000,000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSO PRODUCTS COMPANY
By: /s/ J. Cary Findlay
--------------------------------
Name: J. Cary Findlay
Title: Chairman
Dated: July 6, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
FORM 8-K
CURRENT REPORT
Date of Report Commission File Number
June 19, 1998 0-22942
CONSO PRODUCTS COMPANY
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No Exhibit Description
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<S> <C>
2 Stock Purchase Agreement dated June 10,
1998 among Conso Products Company,
Simplicity Capital Corporation, and the
Sellers, Sellers Representative and Escrow
Agent named therein. (Page 6 of the
sequentially numbered pages).
10.1 Modified and Restated Loan Agreement dated
June 19, 1998 among NationsBank, N.A.,
Conso Products Company and Simplicity
Pattern Co. Inc. (Page 92 of the
sequentially numbered pages).
10.2 Promissory Note dated June 19, 1998 issued
by Conso Products Company and Simplicity
Pattern Co. Inc. in favor of NationsBank,
N.A. in the original principal amount of
$20,000,000. (Page 127 of the sequentially
numbered pages).
10.3 Promissory Note dated June 19, 1998 issued
by Conso Products Company and Simplicity
Pattern Co. Inc. in favor of NationsBank,
N.A. in the original principal amount of up
to $30,000,000. (Page 131 of the
sequentially numbered pages).
10.4 Promissory Note dated June 19, 1998 issued
by British Trimmings Limited in favor of
NationsBank, N.A. in the original principal
amount of up to (pound)7,000,000. (Page 138
of the sequentially numbered pages).
</TABLE>
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EXHIBIT 2
===============================================================================
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 10, 1998
BY AND AMONG
CONSO PRODUCTS COMPANY,
SIMPLICITY CAPITAL CORPORATION,
THE SELLERS LISTED ON SCHEDULES I AND II HERETO,
J. DOUGLAS SMITH, AS SELLERS' REPRESENTATIVE,
AND
LOUIS R. MORRIS, AS ESCROW AGENT
===============================================================================
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TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS AND CONSTRUCTION...........................................................................10
1.1. Definitions............................................................................................10
1.2. Construction...........................................................................................15
ARTICLE II PURCHASE AND SALE OF SHARES AND RELATED TRANSACTIONS...................................................15
2.1. Sale of Shares and Redemption, Cancellation and Discharge of Other
Securities and Claims..................................................................................15
2.2. Transaction Consideration..............................................................................16
2.3. Manner of Payment; Appointment of Sellers' Representative..............................................16
2.4. The Closing............................................................................................17
2.5. Deliveries at the Closing..............................................................................17
2.6. Escrowed Expense Fund..................................................................................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................................22
3.1. Capitalization; Ownership Of Shares....................................................................22
3.2. Subsidiaries...........................................................................................22
3.3. Organization...........................................................................................23
3.4. Corporate Power and Authority; No Violations...........................................................23
3.5. Financial Statements...................................................................................24
3.6. Absence of Certain Changes or Events...................................................................24
3.7. Title to Assets........................................................................................25
3.8. Intellectual Property..................................................................................25
3.9. Contracts..............................................................................................25
3.10. Litigation and Other Loss Contingencies................................................................26
3.11. Compliance With Laws...................................................................................27
3.12. Environmental Matters..................................................................................27
3.13. Employee Benefit Plans and Other Employee Matters......................................................27
3.14. Consents...............................................................................................28
3.15. Taxes..................................................................................................28
3.16. Affiliated Transactions................................................................................29
3.17. Real Property..........................................................................................29
3.18. Broker's Fees..........................................................................................30
3.19. Adequacy of Assets.....................................................................................30
3.20. Investigations.........................................................................................31
3.21. No Improper Payments...................................................................................31
3.22. Labor Organizations....................................................................................31
3.23. Insurance..............................................................................................31
3.24. Year 2000 Issues.......................................................................................31
3.25. Predecessors...........................................................................................31
3.26. Hart-Scott-Rodino Nonapplicability.....................................................................32
3.27. Disclaimer of Implied Warranties.......................................................................32
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER............................................................32
4.1. Organization...........................................................................................32
4.2. Corporate Power and Authority; No Violations...........................................................32
4.3. Brokers' Fees..........................................................................................33
4.4. Litigation.............................................................................................33
4.5. Consents...............................................................................................33
4.6. Purchase for Investment................................................................................33
4.7. Availability of Funds..................................................................................33
4.8. Hart-Scott-Rodino Nonapplicability.....................................................................33
ARTICLE V COVENANTS OF THE PARTIES...............................................................................33
5.1. Efforts................................................................................................33
5.2. Conduct of Business....................................................................................34
5.3. Access.................................................................................................35
5.4. No Solicitation........................................................................................36
5.5. Books and Records......................................................................................36
5.6. Litigation Support.....................................................................................36
5.7. Interference...........................................................................................36
5.8. Subsequent Disclosures by Company......................................................................37
5.9. Certain Disclosures....................................................................................37
5.10. Directors and Officers Liability Insurance.............................................................37
5.11. No Transfers Prior to Closing..........................................................................38
5.12. Certain Tax Matters....................................................................................38
ARTICLE VI CONDITIONS TO THE BUYER'S OBLIGATIONS..................................................................42
6.1. Representations, Warranties and Covenants of the Sellers and the Company...............................42
6.2. No Prohibition.........................................................................................42
6.3. Third Party Consents...................................................................................42
6.4. Governmental Consents..................................................................................42
6.5. Closing Deliveries.....................................................................................43
6.6. Financing..............................................................................................43
6.7. Indebtedness...........................................................................................43
6.8. Change of Nominee......................................................................................43
6.9. Exemption from "Parachute Payment" Treatment...........................................................43
ARTICLE VII CONDITIONS TO THE COMPANY'S AND THE SELLERS'
OBLIGATIONS........................................................................................................43
7.1. Representations, Warranties and Covenants of the Buyer..................................................43
7.2. No Prohibition..........................................................................................44
7.3. Governmental Consents...................................................................................44
7.4. Closing Deliveries......................................................................................44
7.5. Special Bonus Trust.....................................................................................44
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE VIII TERMINATION PRIOR TO CLOSING..........................................................................44
8.1. Termination...........................................................................................44
8.2. Effect of Termination.................................................................................44
ARTICLE IX LIABILITIES OF SELLERS AFTER CLOSING..................................................................45
9.1. Survival of Representations and Warranties............................................................45
9.2 Several Representations of Sellers....................................................................45
9.3. Several Indemnity by Each Seller......................................................................47
9.4. Pro Rata Indemnity for Retained Expenses by All Sellers...............................................48
9.5. Termination of Stockholders' Agreement................................................................48
ARTICLE X MISCELLANEOUS.........................................................................................48
10.1. Entire Agreement......................................................................................48
10.2. Successors and Assigns................................................................................48
10.3. Modification and Waiver...............................................................................48
10.4. Expenses..............................................................................................48
10.5. Notices...............................................................................................49
10.6. Governing Law.........................................................................................50
10.7. Arbitration...........................................................................................50
10.8. Public Announcements..................................................................................50
10.9. Counterparts..........................................................................................51
SCHEDULE I NAMES OF SELLERS AND NUMBERS OF SHARES OWNED
SCHEDULE II OTHER SECURITIES AND CLAIMS
SCHEDULE III ALLOCATION OF NET TRANSACTION CONSIDERATION
SCHEDULE IV CERTAIN OTHER ALLOCATION INFORMATION
EXHIBIT 2.5(A)(II) FORM OF SELLER RELEASE
EXHIBIT 2.5(B)(IV)(A) FORM OF OPINION OF KIRKLAND & ELLIS
EXHIBIT 2.5(B)(IV)(B) APPROVED FORM OR FORMS OF OPINION OF OTHER SELLERS' COUNSEL
EXHIBIT 2.5(B)(IV)(C) FORM OF SELLER INDEMNITY AGREEMENT
EXHIBIT 2.5(B)(IV)(D) FORM OF OPINION OF AUSTRALIAN COUNSEL
EXHIBIT 2.5(C)(V) FORM OF OPINION OF KENNEDY COVINGTON LOBDELL & HICKMAN, L.L.P.
EXHIBIT 5.12(G) FORM OF SPECIAL BONUS TRUST AGREEMENT
EXHIBIT 5.12(H) EXAMPLE OF CALCULATION OF SPECIAL BONUS
</TABLE>
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of June 10,
1998, is made by and among Simplicity Capital Corporation, a Delaware
corporation (the "Company"), the persons whose names are set forth on Schedules
I and II hereto (each, a "Seller" and collectively, the "Sellers"), Conso
Products Company, a South Carolina corporation (the "Buyer"), J. Douglas Smith,
as Sellers' Representative, and Louis R. Morris, as Escrow Agent.
RECITALS
WHEREAS, the Sellers constitute the beneficial and record owners of
all of the issued and outstanding shares of Common Stock, par value $.01 per
share, of the Company (the "Shares") as set forth on Schedule I hereto and the
record and beneficial owners of all of the Other Securities and Claims
(hereinafter defined) as set forth on Schedule II hereto; and
WHEREAS, the Buyer wishes to acquire the Company and, to effect such
acquisition, the Sellers wish to sell to the Buyer and the Buyer wishes to
purchase from the Sellers the Shares and provide the funds for the redemption,
cancellation and discharge of all of the Other Securities and Claims upon the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and conditions contained herein, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1. DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following terms, when used in this Agreement, shall have the
following meanings:
"Affiliate" means, as to any person, any other person directly or
indirectly controlling, controlled by or under common control with that person.
"Agreement" has the meaning set forth in the preface hereof.
"Balance Sheet" has the meaning set forth in Section 3.5 hereof.
"Balance Sheet Date" has the meaning set forth in Section 3.5 hereof.
"Bank Commitment" has the meaning set forth in Section 4.7 hereof.
"Benefit Plan" has the meaning set forth in Section 3.13 (a) hereof.
"Buyer" has the meaning set forth in the preface hereof.
"Certificate of Seller Expenses" has the meaning set forth in Section
2.5(b)(vi) hereof.
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"Class A Preferred Stock" has the meaning set forth in Section 3.1
hereof.
"Class B Preferred Stock" has the meaning set forth in Section 3.1
hereof.
"Closing" has the meaning set forth in Section 2.4 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning set forth in Section 3.1 hereof.
"Company" has the meaning set forth in the preface hereof.
"Company Material Adverse Effect" has the meaning set forth in Section
3.3 hereof.
"Confidentiality Agreement" has the meaning set forth in Section 5.3
hereof.
"Contracts" has the meaning set forth in Section 3.9(a) hereof.
"Defaulting Party" has the meaning set forth in Section 8.2 hereof.
"Disclosure Schedule" means the written document so designated, dated
the date of this Agreement, stating that it is the "Disclosure Schedule"
referred to in this Agreement, authenticated by the Company by its execution
thereof, and delivered to and received by the Buyer at or prior to the time of
its execution and delivery of this Agreement as evidenced by its
acknowledgement to such effect and its execution thereof for such purpose.
"Environmental Laws" mean all federal, state, local and foreign
statutes, regulations, ordinances and similar requirements of any Governmental
Entity having the force and effect of law concerning the pollution or
protection of the environment and human health, including without limitation
the federal Clean Air Act, the Clean Water Act, the Toxic Substances Control
Act, the Resource Conservation and Recovery Act, the Solid Waste Disposal Act,
the Comprehensive Environmental Response, Compensation, and Liability Act, and
the Emergency Planning and Community Right To-Know Act of 1986, and their
state, local and foreign counterparts.
"Environmental Lien" means a Lien, either recorded or unrecorded, in
favor of any Governmental Entity, arising under any Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Louis R. Morris or his successor as such Escrow
Agent. If the Escrow Agent shall resign, die, or otherwise become incapable of
or cease acting as such, then a successor Escrow Agent shall be appointed by
the mutual written agreement of the Seller's Representative and the Buyer, and
if such appointment shall not be made within ten days after such vacancy
occurs, either the Seller's Representative or the Buyer may apply to a court of
competent jurisdiction for the appointment of a successor Escrow Agent.
"Escrowed Expense Claim" has the meaning set forth in Section 2.6(c)
hereof.
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"Escrowed Expense Fund" has the meaning set forth in Section 2.6(a)
hereof.
"Financial Statements" has the meaning set forth in Section 3.5
hereof.
"GAAP" means United States generally accepted accounting principles as
in effect for the period for which it is referred to herein.
"Governmental Entity" means any governmental authority or political
subdivision thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such governmental authority or political subdivision, or
any other judicial, administrative or regulatory body.
"Indebtedness" of any person at any date means without duplication (a)
all indebtedness of such person for borrowed money or for the deferred purchase
price of property or services which, in accordance with GAAP, would be required
to be shown as a liability on the face of a balance sheet of such person on
such date (other than trade liabilities and accrued expenses, in each case to
the extent incurred in the ordinary course of business and payable on a current
basis in accordance with customary practices), (b) any other indebtedness of
such person which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such person under capitalized lease
obligations, (d) any such indebtedness or obligations of another person that is
secured by a Lien on any of the property of such person, (e) any guaranty by
such person of any such indebtedness or obligations of another person, or
similar obligation to stand good for the indebtedness or other obligations of
another person, and (f) any obligation of such person to redeem or repurchase
any of the outstanding capital stock of such person or of a subsidiary of such
person.
"Intellectual Property" has the meaning set forth in Section 3.8
hereof.
"IRS" means the United States Internal Revenue Service.
"Knowledge" means: with respect to any Seller, the actual knowledge of
such Seller (or, if such Seller is an entity, the actual knowledge of any
officer or management level employee of such Seller who has any responsibility
for such Seller's interests in the Company); with respect to the Company, the
actual knowledge of any officer or management level employee of the Company;
and, with respect to the Buyer, the actual knowledge of any officer or
management level employee of the Buyer.
"Leased Real Property" has the meaning set forth in Section 3.17(b)
hereof.
"Leases" has the meaning set forth in Section 3.17(b) hereof.
"Letter of Credit Obligations" means the obligations of the Company or
its Subsidiaries to reimburse PNC for drawings made under the letters of credit
outstanding on the date hereof in the aggregate amount of $2,500,000 described
in Section 6.7 of the Disclosure Schedule issued under that certain Credit
Agreement dated September 10, 1990, among the Company, Simplicity Holdings,
Inc., Simplicity Pattern Co., Inc., PNC (as successor to Midlantic Bank, N.A.)
and Mellon Bank, N.A. (as successor to Meritor Savings Bank) as lenders, and
PNC, as agent, as
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amended by (i) Waiver Agreement and Amendment dated August 11, 1992; (ii)
Letter Agreement dated March 23, 1993; (iii) Second Amendment to the Credit
Agreement dated as of July 15, 1996; (iv) Fourth Amendment to Credit Agreement
dated July 15, 1996; and (v) Fifth Amendment to Credit Agreement dated as of
February 27, 1998, and the Liens securing such obligations.
"Liens" means liens, mortgages, security interests, pledges, charges
and other encumbrances and adverse claims. In the case of capital stock or
other equity securities, "Liens" also include, without limitation, any transfer
or voting restrictions or requirements.
"Litigation" has the meaning set forth in Section 3.10 hereof.
"Net Transaction Consideration" has the meaning set forth in Section
2.2 hereof.
"Other Securities and Claims" means, collectively, the Series A
Preferred Stock, the Series B Preferred Stock, the Senior Subordinated Notes
Due 2000 of the Company, the Junior Subordinated Notes Due 2000 of the Company,
all rights of participants in the Company's Management Benefit Plan to
"Benefits" thereunder (other than "Benefits" paid prior to the Balance Sheet
Date), all other rights, securities and claims of the parties to the
Transaction Agreement and their respective successors and assigns to any
"Transaction Consideration" (as defined in the Transaction Agreement), and all
other rights and claims of the Sellers against the Company or its Subsidiaries
arising out of their ownership or prior ownership of any securities or
Indebtedness of the Company or its Subsidiaries, other than their ownership of
the Shares, or arising out of their being parties to (or the successors or
assigns of parties to) the Transaction Agreement, the Transaction-in-Bankruptcy
Agreement or the Stockholders' Agreement; but excluding from the definition of
"Other Securities and Claims" (i) the rights of the Sellers, as parties to the
Transaction Agreement (or their successors and assigns), to receive from the
Sellers' Representative the Net Transaction Consideration remitted to such
Sellers' Representative hereunder (including any of the Escrowed Expense Fund
remitted to such Seller's Representative) for distribution to the Sellers in
accordance with the terms of the Transaction Agreement and (ii) the Letter of
Credit Obligations.
"Owned Real Property" has the meaning set forth in Section 3.17(a)
hereof.
"Permits" has the meaning set forth in Section 3.11 hereof.
"Permitted Liens" means (i) Liens for Taxes or other governmental
charges or levies (a) which are not delinquent, or (b) which are being
contested in good faith and by appropriate proceedings and for which adequate
reserves have been established on the books of the person whose property is
subject to such Liens, (ii) mechanic's, worker's, materialmen's and other like
Liens for payments (x) which are not delinquent, or (y) which are being
contested in good faithand by appropriate proceedings and for which adequate
reserves have been established on the books of the person whose property is
subject to such liens, and (iii) Liens in amounts not material to the Company
arising and subject to being discharged in the ordinary course of business and
not incurred in connection with Indebtedness; provided, that in the case of any
such Liens, such Liens do not have a Company Material Adverse Effect or impair
in any material respect the beneficial ownership, use and enjoyment of any
material property to which such
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Liens attach or the use of such property by the Company and the Subsidiaries in
the conduct of their respective businesses as currently conducted.
"Person" or "person" means any individual, firm, corporation,
association, unincorporated organization, joint stock company, general, limited
or limited liability partnership, limited liability company, trust, joint
venture, Governmental Entity or other entity, or any group of the foregoing
acting in concert.
"PNC" means PNC Bank, National Association.
"Real Property" has the meaning set forth in Section 3.17(b) hereof.
"Required Consents" has the meaning set forth in Section 6.3 hereof.
"Required Government Consents" has the meaning set forth in Section
6.4 hereof.
"Retained Seller Expenses" has the meaning set forth in Section 2.2
hereof.
"Returns" has the meaning set forth in Section 3.15(a) hereof.
"Seller" and "Sellers" have the meaning set forth in the preface
hereof.
"Seller Expenses" has the meaning set forth in Section 10.4 hereof.
"Sellers' Representative" shall mean J. Douglas Smith, or if he shall
resign, die, or otherwise become incapable of or cease acting as such, then a
successor Sellers' Representative shall be appointed by Sellers entitled to a
majority of the Net Transaction Consideration to be paid to the Sellers as set
forth on Schedule III hereto, and upon such appointment such successor shall
be, and succeed to all of the rights, powers and duties of, the Sellers'
Representative.
"Shares" has the meaning set forth in the recitals hereof.
"Stockholders' Agreement" means that certain Stockholders' Agreement
dated as of September 10, 1990 among the Company and its stockholders party
thereto, as such Stockholders' Agreement is in effect at the time relevant to
the reference thereto.
"Subsidiary" means any person with respect to which the Company,
directly or indirectly through another Subsidiary, owns a majority of the
common stock or other equity interests or has the power to vote or direct the
voting of sufficient securities or other interests to elect a majority of the
directors or comparable management authority.
"Substance" has the meaning set forth in Section 3.17(d) hereof.
"Taxes" means any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, excise, real or personal
property, sales, use, service, value added, license, net worth, transfer and
recording taxes, gross receipts, fees and charges, imposed by any taxing
authority or any Governmental Entity, whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest, penalties or
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additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments.
"Transaction Agreement" means that certain Transaction Agreement dated
as of September 10, 1990 by and among the Company, Simplicity Holdings, Inc.,
Simplicity Pattern Co., Inc., Mellon Bank, N.A. (as successor to Meritor
Savings Bank), PNC (as successor to Midlantic National Bank), the holders of
the Company's Senior Subordinated Notes due 2000, the holders of the Company's
Junior Subordinated Notes due 2000, the Guarantors listed therein, the
Stockholders listed therein, and the Chief Executive Officer of the Company
acting as representative of the Company's Management Benefit Plan and the
participants therein, as such Transaction Agreement is in effect at the time
relevant to the reference thereto.
"Transaction-in-Bankruptcy Agreement" means that certain
Transaction-in-Bankruptcy Agreement dated as of September 10, 1990 by and among
the Company, Simplicity Holdings, Inc., Simplicity Pattern Co., Inc., Mellon
Bank, N.A. (as successor to Meritor Savings Bank), PNC (as successor to
Midlantic National Bank), the holders of the Company's Senior Subordinated
Notes due 2000, the holders of the Company's Junior Subordinated Notes due
2000, the Guarantors listed therein, the Stockholders listed therein, and the
Chief Executive Officer of the Company acting as representative of the
Company's Management Benefit Plan and the participants therein, as such
Transaction-in-Bankruptcy Agreement is in effect at the time relevant to the
reference thereto.
"Transaction Consideration" has the meaning set forth in Section 2.2
hereof.
1.2. CONSTRUCTION. The table of contents and the section headings
and subheadings in this Agreement have been inserted for convenience of
reference only and shall be ignored in any construction of the provisions
hereof. Unless the context requires a contrary meaning, whenever used in this
Agreement a pronoun in any gender shall include the remaining genders; the
singular shall include the plural and the plural the singular; the word "any"
shall mean one or more or all; the word "herein" shall refer to this Agreement
as a whole; and the word "including" shall mean "including without limitation."
All accounting terms used herein and not otherwise defined herein shall have
the meanings ascribed to them under GAAP.
ARTICLE II
PURCHASE AND SALE OF SHARES AND RELATED TRANSACTIONS
2.1. SALE OF SHARES AND REDEMPTION, CANCELLATION AND DISCHARGE OF
OTHER SECURITIES AND CLAIMS. At the Closing, subject to the terms and
conditions set forth in this Agreement, each of the Sellers will sell, assign,
transfer and deliver to the Buyer such Seller's Shares, free and clear of all
Liens, other than transfer restrictions imposed on the Buyer by federal and
state securities laws, and will take all action on their part required for the
full redemption, cancellation and discharge, as applicable, of their respective
Other Securities and Claims, so that after the Closing the Buyer will be the
record and beneficial owner of all of the Shares and the Other Securities and
Claims will have been redeemed, cancelled and discharged, as applicable, and
shall no longer exist.
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2.2. TRANSACTION CONSIDERATION. At the Closing, the Buyer shall
pay or cause to be paid to or for the benefit of the Sellers, as provided
herein, for all of the Shares, and for the full redemption, cancellation and
discharge of all of the Other Securities and Claims, the aggregate sum of
Thirty Three Million Dollars ($33,000,000.00) (the "Transaction
Consideration"). There shall be credited against the Transaction Consideration
payable at the Closing the aggregate amount of any and all Seller Expenses that
have been incurred by the Company, the Subsidiaries or the Sellers and either
have been paid by the Company or any Subsidiary and not reimbursed by the
Sellers or have become liabilities of the Company or any Subsidiary (the
"Retained Seller Expenses"); provided, that the Retained Seller Expenses shall
not include any Seller Expenses that were paid by the Company and its
Subsidiaries on or before April 30, 1998 unless, and except to the extent that,
such Seller Expenses paid on or before April 30, 1998 are set forth on Section
10.4 of the Disclosure Schedule. The excess of the Transaction Consideration
over the Retained Seller Expenses is referred to herein as the "Net Transaction
Consideration." The obligation of the Buyer to purchase and pay for the Shares
tendered at Closing by any Seller is subject, inter alia, to the conditions
that all of the Shares held by all Sellers be duly tendered, delivered and
available for purchase and that all of the Other Securities and Claims of all
Sellers be redeemed, cancelled or discharged, as applicable, the Buyer having
no obligation hereunder to purchase less than all of the Shares or to purchase
any of the Shares without the Other Securities and Claims having been redeemed,
cancelled and discharged contemporaneously therewith for no consideration other
than the Transaction Consideration received by the Sellers with respect
thereto.
2.3. MANNER OF PAYMENT; APPOINTMENT OF SELLERS' REPRESENTATIVE.
Subject to withholding for taxes in accordance with Section 5.12 hereof, the
aggregate Net Transaction Consideration (as determined at the time of the
Closing based upon the Certificate of Retained Seller Expenses delivered at the
Closing) shall be paid by the Buyer at the Closing (a) by payment to the Escrow
Agent in immediately available funds of the sum of $100,000 as the Escrowed
Expense Fund, to be held and disbursed by the Escrow Agent in accordance with
Section 2.6, and (b) by wire transfer of the balance of the Net Transaction
Consideration (as so determined at the time of the Closing) in immediately
available funds to a single bank account specified at least one day prior to
the Closing by the Sellers' Representative. As provided in Section 5.12 hereof,
and notwithstanding any contrary provision, payment of the Net Transaction
Consideration shall be subject to withholding for taxes; at the Closing, the
portion of the Net Transaction Consideration to be withheld in accordance with
Section 5.12 shall be remitted to the Company for such withholding, but the
portion so withheld shall nevertheless be deemed, for purposes of this
Agreement, to have been paid to the Sellers' Representative for the benefit of
the respective Sellers for whose accounts such withholding is made. By his, her
or its execution hereof, each of the Sellers other than such Sellers'
Representative hereby appoints the Sellers' Representative as such Seller's
agent and attorney-in-fact to receive and accept at the Closing, on behalf of
such Seller, the portion of the Net Transaction Consideration to which such
Seller is entitled with respect to such Seller's Shares and Other Securities
and Claims in accordance with Schedule III hereto, and all other documents to
be delivered to such Seller at the Closing hereunder, and to deliver at the
Closing such Seller's certificates for the Shares and instruments of transfer
in accordance with Section 2.4 and all other documents to be delivered by or on
behalf of such Seller at the Closing, and to take all other actions on behalf
of each Seller as are provided herein to be taken by the Sellers'
Representative. The Sellers' Representative, by his execution hereof, accepts
such appointment and agrees that promptly after the Closing he will remit such
payment to the other Sellers entitled thereto, in accordance with Schedule III
hereto,
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by check mailed to such respective Sellers at their addresses set forth on the
Company's records, or by wire transfer to such respective accounts as such
Sellers may specify to the Sellers' Representative in writing at least one day
prior to the Closing. Payment of such aggregate amount of the Net Transaction
Consideration by the Buyer to the Escrow Agent, as such, and to the Sellers'
Representative, as such agent, shall constitute a full acquittance of the Buyer
with respect thereto, and the Buyer shall have no obligation to see to the
application of such payment by the Escrow Agent or the Sellers' Representative;
and upon such payment to the Escrow Agent and the Sellers' Representative, as
between the Buyer and the Company and its Subsidiaries, on the one hand, and
the Sellers, on the other hand, the purchase price for all of the Shares shall
be deemed paid in full and the consideration payable to the Sellers with
respect to the Other Securities and Claims shall be deemed paid in full and the
Other Securities and Claims shall be deemed fully redeemed, cancelled and
discharged, as the case may be, and the Sellers shall look only to the Escrow
Agent and the Sellers' Representative for the respective portions of the
aggregate Transaction Consideration to which they are entitled under the
Transaction Agreement or otherwise. Each Seller's appointment of the Sellers'
Representative as such Seller's agent and attorney-in-fact is coupled with an
interest and shall be irrevocable, notwithstanding any incompetence or other
incapacity of such Seller, prior to the earlier of (x) the termination of this
Agreement or (y) the completion of the Closing, the disbursement of all of the
Escrowed Expense Fund, and the Seller's receipt of the portion of the
Transaction Consideration to which such Seller is entitled. The Sellers'
Representative shall incur no liability to the Sellers for any action taken by
him, or any omission to take any action, in good faith in accordance with the
Transaction Agreement or this Agreement, and shall be indemnified by the
Sellers from and against any loss, liability, cost or expense (including
reasonable attorneys' fees) incurred by the Sellers' Representative in the
performance of his duties as such in the absence of bad faith or willful
misconduct on the part of the Sellers' Representative.
2.4. THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Kennedy
Covington Lobdell & Hickman, LLP, NationsBank Corporate Center, Suite 4200,
Charlotte, North Carolina, on June 19, 1998, commencing at 10:00 a.m. local
time, or at such other date, place or time as the parties may agree. If all of
the conditions to the respective parties' obligations to effect the Closing
have not been met or waived by such date but are reasonably expected to be met
or waived by a later date (but not later than June 26, 1998) and an extension
of the date of Closing to a date not later than June 26, 1998 is requested by a
party in good faith to allow sufficient time for such conditions to be met, and
the requesting party is not then in material breach of this Agreement and has
proceeded in good faith and with due diligence to effect the Closing as soon as
practicable, then the other parties shall agree to such extension.
2.5. DELIVERIES AT THE CLOSING. At the Closing:
(a) Each Seller will deliver or cause to be delivered to
the Buyer:
(i) certificates evidencing all of such Seller's
Shares, together with such stock powers, endorsements and assurances (including
signature guarantees) as will entitle the Buyer to immediate registration of
transfer of such Shares in its name and as will convey such Shares to the Buyer
free and clear of all Liens (other than transfer restrictions imposed on the
Buyer by applicable federal and state securities laws); and delivery of such
certificates by or on behalf of such Seller shall constitute such Seller's
confirmation that all representations and
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warranties of such Seller set forth in this Agreement are true and correct in
all material respects as of the time of the Closing as though expressly made at
such time, and that all covenants and agreements to be performed by such Seller
at or prior to the Closing have been duly performed;
(ii) such certificates, notes, releases,
instruments of surrender or cancellation, stock powers, endorsements and
assurances as the Buyer may reasonably request to establish that, upon payment
of the Net Transaction Consideration as provided in Section 2.3, the Other
Securities and Claims will have been fully redeemed, cancelled and discharged,
as the case may be, and will no longer exist and that such Seller will have no
further rights with respect thereto, including a release in substantially the
form attached hereto as Exhibit 2.5(a)(ii).
(iii) such other and further certificates,
assurances and documents as the Buyer may reasonably request in order to
evidence the accuracy of such Seller's representations and warranties, the
performance of its covenants and agreements to be performed at or prior to the
Closing, and the fulfillment of the conditions to the Buyer's obligations.
(b) The Company will deliver or cause to be delivered to
the Buyer:
(i) a copy of resolutions of the board of
directors of the Company and of the Sellers as the shareholders of the Company,
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements, certified as of the date of the Closing by
the Secretary of the Company as being true and correct copies of the originals
thereof subject to no modifications or amendments;
(ii) a certificate of the Secretary of the
Company certifying as of the date of the Closing as to the incumbency of the
officers of the Company and as to the signatures of such officers who have
executed documents delivered at the Closing on behalf of the Company;
(iii) certificates, dated within five days of the
Closing in the case of the Company and the United States Subsidiaries, and
dated within 30 days of the Closing in the case of non-United States
Subsidiaries, of the Secretary of State or other comparable officer of each
jurisdiction in which the Company and each Subsidiary is incorporated or
organized, establishing that the Company and each Subsidiary is in existence
and otherwise is in good standing to transact business in such jurisdiction;
provided, that in the case of the non-United States subsidiaries, only such
certificates or equivalent proofs that are commercially reasonable and
customary shall be required to be delivered;
(iv) (A) an opinion of Kirkland & Ellis, dated as
of the date of the Closing, substantially in the form attached hereto as
Exhibit 2.5(b)(iv)(A) (the "K&E Opinion"); (B) an opinion or opinions of
counsel to each Seller who is not a "Covered Seller" (as defined in the K&E
Opinion), dated as of the date of the Closing and reasonably satisfactory to
the Buyer, as to the matters set forth in paragraphs 8 and 10 of the K&E
Opinion with respect to each such other Seller (it being agreed that the form
or forms of such opinion attached hereto as Exhibit 2.5(b)(iv)(B) is or are
satisfactory as to form); (C) either (I) an opinion of counsel to the Company,
dated as of the date of the Closing and reasonably satisfactory to the Buyer,
to the effect that the Company and the "Covered Subsidiaries" (as defined in
the K&E Opinion) are duly organized and that the Shares have been duly and
validly issued and are fully paid and
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<PAGE> 14
nonassessable, or (II) an Indemnity Agreement from each Seller in the form of
Exhibit 2.5(b)(iv)(C) hereto; and (D) an opinion or opinions of Australian
counsel to the Company, dated as of the date of the Closing, substantially in
the form or forms attached hereto as Exhibit 2.5(b)(iv)(D), with respect to the
Company's Australian Subsidiaries;
(v) a certificate, dated as of the date of the
Closing, of the President and the Chief Financial Officer of the Company on
behalf of the Company, to the effect that all representations and warranties as
to the Company set forth in this Agreement are true and correct in all material
respects as of the time of the Closing as though expressly made at such time,
and that all covenants and agreements to be performed by the Company at or
prior to the Closing have been duly performed in all material respects;
(vi) a certificate of the Company and the
Sellers' Representative setting forth in reasonable detail the nature and
amounts of all known Seller Expenses that are either Retained Seller Expenses
(including the name and address of each person to whom such Retained Seller
Expenses were paid (if paid by the Company or any Subsidiary at or prior to the
Closing and not reimbursed by the Sellers) or to whom such Retained Seller
Expenses will be owed by the Company or any Subsidiary (if incurred by the
Company or any Subsidiary and not yet paid)) or are Seller Expenses that will
be paid by the Sellers out of the Net Transaction Consideration (the
"Certificate of Seller Expenses"), together with such confirmations from the
payees of such Seller Expenses as to the amounts thereof as the Buyer may
reasonably request to confirm the information in such certificate; provided,
that such Certificate of Seller Expenses and accompanying documentation shall
be delivered to the Buyer no later than the day before the Closing, and a draft
thereof shall be delivered to the Buyer, in accordance with Section 10.4, at
least five days prior to the Closing;
(vii) written confirmation by the Company's
accountants, Arthur Andersen LLP, that such firm will consent to the use of its
reports on the Financial Statements in filings by the Buyer under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, in which the inclusion of such reports and such consent is required;
and
(viii) such other and further certificates,
assurances and documents as the Buyer may reasonably request in order to
evidence the accuracy of the Company's representations and warranties, the
performance of their covenants and agreements to be performed at or prior to
the Closing, and the fulfillment of the conditions to the Buyer's obligations.
(c) The Buyer will deliver or cause to be delivered to
the Sellers' Representative:
(i) the Net Transaction Consideration (other
than the portion thereof to be remitted to the Escrow Agent, which shall be so
remitted), in the manner and amount as set forth in Sections 2.2 and 2.3;
(ii) a copy of resolutions of the board of
directors of the Buyer authorizing the execution, delivery and performance of
this Agreement and all related documents
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and agreements, certified as of the date of Closing by the Secretary of the
Buyer as being true and correct copies of the originals thereof subject to no
modifications or amendments;
(iii) a certificate of the Secretary of the Buyer
dated as of the date of the Closing certifying as to the incumbency of the
officers of the Buyer and as to the signatures of such officers who have
executed documents delivered at the Closing on behalf of the Buyer;
(iv) a certificate, dated within five days of
the Closing, of the Secretary of State of South Carolina establishing that the
Buyer is in existence and otherwise is in good standing to transact business in
its state of incorporation;
(v) an opinion of Kennedy Covington Lobdell &
Hickman, L.L.P, dated as of the date of the Closing, substantially in the form
attached hereto as Exhibit 2.5(c)(v);
(vi) a certificate, dated as of the date of the
Closing, of the Chairman of the Buyer on behalf of the Buyer, to the effect
that all representations and warranties of the Buyer set forth in this
Agreement are true and correct in all material respects as of the time of the
Closing as though expressly made at such time, and that all covenants and
agreements to be performed by the Buyer at or prior to the Closing have been
duly performed; and
(vii) such other and further certificates,
assurances and documents as the Company or the Sellers' Representative may
reasonably request in order to evidence the accuracy of the Buyer's
representations and warranties, the performance of its covenants and agreements
to be performed at or prior to the Closing, and the fulfillment of the
conditions to obligations of the Sellers.
2.6. ESCROWED EXPENSE FUND. To provide for the payment of any
Retained Seller Expenses that are not known at the time of the Closing and are
therefore not shown on the Certificate of Seller Expenses and not withheld from
and credited against the Transaction Consideration, at the Closing the sum of
$100,000 shall be withheld from the Net Transaction Consideration and remitted
to the Escrow Agent to be held and disbursed by the Escrow Agent in accordance
with this Section 2.6:
(a) The $100,000 so remitted to the Escrow Agent,
together with any income from the investment and reinvestment thereof and the
income thereon, is referred to herein as the "Escrowed Expense Fund." The
Escrow Agent shall hold the Escrowed Expense Fund in trust for the benefit of
the Buyer and the Sellers, as their interests may appear in accordance with
this Section 2.6. The Escrow Agent may, pending the disbursement thereof,
invest and reinvest the Escrowed Expense Fund in interest-bearing accounts or
securities selected by the Escrow Agent and approved by the Buyer (which
approval shall not be unreasonably withheld); but neither the Buyer nor (if he
has acted in good faith) the Escrow Agent shall be liable from any losses
resulting from such investment of the Escrowed Expense Fund.
(b) The Escrow Agent hereby accepts his appointment as
such and agrees to receive, hold, invest and reinvest, and disburse the
Escrowed Expense Fund only in accordance with this Section 2.6. The Escrow
Agent shall incur no liability for any action taken by him, or any omission to
take action, in good faith and in accordance with this Section 2.6, and shall
be indemnified, but only out of and to the extent of the Escrowed Expense Fund,
by the Buyer and
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the Sellers from and against any loss, liability, cost or expense (including
reasonable attorneys' fees) incurred by the Escrow Agent in the performance of
his duties as such in the absence of bad faith, gross negligence or willful
misconduct on the part of the Escrow Agent.
(c) If, at any time after the Closing and prior to the
disbursement of all of the Escrowed Expense Fund, the Buyer shall identify any
amounts that it claims are Retained Seller Expenses that were not withheld from
and credited against the Transaction Consideration at the Closing, the Buyer
shall promptly give written notice of such claim to the Escrow Agent and the
Sellers' Representative (an "Escrowed Expense Claim"). Upon the making of an
Escrowed Expense Claim, the Buyer and the Sellers' Representative shall attempt
to resolve the matter in good faith and upon resolution of the Escrowed Expense
Claim, the Buyer and the Seller's Representative shall jointly in writing
instruct the Escrow Agent to make disbursements from the Escrowed Expense Fund
to reflect such resolution. To the extent any such Escrowed Expense Claim is
not so resolved by mutual agreement within twenty days after the Escrowed
Expense Claim is made, either the Buyer or the Seller's Representative may
commence an arbitration proceeding pursuant to Section 10.7 to resolve the
Escrowed Expense Claim.
(d) The Escrow Agent may disburse the Escrowed Expense
Fund only as follows:
(i) In accordance with the joint written
instructions of the Buyer and the Sellers' Representative; or
(ii) In accordance with terms of an arbitration
award rendered in an arbitration pursuant to Section 10.7
resolving an Escrowed Expense Claim; or
(iii) In accordance with any order of a court
reasonably believed by the Escrow Agent to have competent
jurisdiction to issue such order; or
(iv) Upon the expiration of three months after
the Closing, to the Sellers' Representative for disbursement
to the Sellers entitled thereto, but only to the extent of
the amount of the Escrowed Expense Fund remaining after
reserving an amount equal to all pending Escrowed Expense
Claims, which reserved amount shall be retained by the Escrow
Agent in the Escrowed Expense Fund until disbursed pursuant
to one or more of clauses (i), (ii) and (iii) above.
(e) Any portion of the Escrowed Expense Fund disbursed
to the Buyer pursuant to this Section 2.6 in satisfaction of an Escrowed
Expense Claim or to the Escrow Agent pursuant to subsection (b) above shall be
treated as a Retained Seller Expense, as though it had been withheld from and
credited against the Transaction Consideration at the Closing. Any portion of
the Escrowed Expense Fund disbursed to the Sellers' Representative for
remittance to the Sellers shall be treated as part of the Net Transaction
Consideration and shall be disbursed by the Sellers' Representative in
accordance with the percentages set forth in the first column of Schedule IV
hereto.
(f) In the event and to the extent that the Escrowed
Expense Fund shall be insufficient to pay all of the claims for Retained Seller
Expenses that the Buyer is entitled to
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recover after the Closing, the Buyer shall be entitled to pursue its rights to
indemnity against the Sellers in accordance with Section 9.4.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Buyer that the
statements contained in this Article III are correct and complete in all
material respects:
3.1. CAPITALIZATION; OWNERSHIP OF SHARES. The authorized capital
stock of the Company consists of (i) 244,000 shares of Common Stock, par value
$.01 per share (the "Common Stock"), of which 242,500 shares are issued and
outstanding and constitute the Shares; (ii) 1,000 shares of Class A Preferred
Stock, par value $.01 per share (the "Class A Preferred Stock"), all of which
1,000 shares are issued and outstanding as of the date hereof and all of which
shall be redeemed out of the Net Transaction Consideration at the Closing; and
(iii) 1,000 shares of Class B Preferred Stock, par value $.01 per share (the
"Class B Preferred Stock"), all of which 1,000 shares are issued and
outstanding as of the date hereof and all of which shall be redeemed out of the
Net Transaction Consideration at the Closing. All of the Shares are owned of
record by the Sellers as set forth on Schedule I hereto and all of the shares
of the Class A Preferred Stock and the Class B Preferred Stock are owned of
record by the Sellers as set forth on Schedule II hereto. All of such Shares
and Class A Preferred Stock and Class B Preferred Stock are validly issued,
fully paid and non-assessable. There are no securities of the Company presently
outstanding, and at the Closing there will not be any securities of the Company
outstanding, which are convertible into, exchangeable for, or carrying the
right to acquire, equity securities of the Company, or any subscriptions,
preemptive rights, warrants, options, calls, convertible securities,
registration or other rights or other arrangements or commitments obligating
the Company to issue, transfer or dispose of any of its equity securities or
other equity interests or any ownership interest therein. The consummation of
the transaction contemplated hereby will convey to the Buyer good title to the
Shares, free and clear of all Liens, except for any Liens created by the Buyer
and restrictions on transfer by the Buyer imposed by applicable federal and
state securities laws, and will effect the redemption of the Class A Preferred
Stock and the Class B Preferred Stock.
3.2. SUBSIDIARIES. The name, jurisdiction of incorporation or
organization, capitalization and ownership of each Subsidiary is set forth in
Section 3.2 of the Disclosure Schedule. Except for the Subsidiaries as set
forth in Section 3.2 of the Disclosure Schedule, the Company does not own,
directly or indirectly, any capital stock or any other equity interest in any
person. The Company, either directly or through one or more other Subsidiaries,
owns beneficially and (except as indicated in Section 3.2 of the Disclosure
Schedule) of record all of the issued and outstanding shares of capital stock
and equity interests of the Subsidiaries, free and clear of any Liens, and all
of such shares or other equity interests are validly issued, fully paid and
non-assessable. There are not now (except as set forth on Section 3.2 of the
Disclosure Schedule), and at the Closing there will be no, outstanding
securities convertible into, exchangeable for, or carrying the right to
acquire, equity securities of any of the Subsidiaries, or any subscriptions,
preemptive rights, warrants, options, calls, convertible securities,
registration or other rights or other arrangements or commitments obligating
any Subsidiary to issue, transfer or dispose of any of its equity securities or
other equity interests or any ownership interest
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therein or voting trusts or other agreements or understandings to which the
Company or any of the Subsidiaries is bound with respect to the voting of the
capital stock or other equity interests of any of the Subsidiaries.
3.3. ORGANIZATION. The Company and each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation with all requisite corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as it is now being conducted. The Company and each of the
United States Subsidiaries is duly qualified to do business and in good
standing as a foreign corporation in the jurisdictions set forth in Section 3.3
of the Disclosure Schedule, which are all of the jurisdictions where the nature
of the property owned or leased by it, or the nature of the business conducted
by it, makes such qualification necessary and the absence of such qualification
would have a material adverse effect on the assets, business, operations or
financial condition of the Company and the Subsidiaries taken as a whole (a
"Company Material Adverse Effect"). Except as set forth in Section 3.3 of the
Disclosure Schedule, none of the non-United States Subsidiaries conducts any
material business or has any material assets in the United States or in any
foreign nation other than the nation under whose laws it is organized. True and
complete copies of the certificate of incorporation and bylaws (or
substantially equivalent documents) of the Company and each of the Subsidiaries
have been delivered or made available to the Buyer.
3.4. CORPORATE POWER AND AUTHORITY; NO VIOLATIONS. The Company has
full power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company, including due and
valid authorization by the board of directors and the stockholders of the
Company (as applicable) and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that such enforceability (i) may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors rights generally, and (ii) is subject to general
principles of equity. Except as set forth in Section 3.4 of the Disclosure
Schedule, neither the execution, delivery and performance by the Company of
this Agreement nor the consummation by the Company of the transactions
contemplated hereby will, with or without the giving of notice or the passage
of time, or both, (x) violate any provision of law, rule, regulation, order,
judgment, writ, injunction or decree applicable to the Company or any of the
Subsidiaries or any of their properties or assets, (y) conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any note, bond, mortgage, indenture, license, contract or
agreement to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries or any of their assets is bound or
result in the imposition of any Lien (other than Permitted Liens) upon any of
the assets of the Company or any of the Subsidiaries, or (z) conflict with or
violate any provision of the certificate of incorporation or bylaws (or
substantially equivalent documents) of the Company, any of the Subsidiaries,
except, in the case of clauses (x) or (y), for violations, conflicts, breaches,
defaults, accelerations, terminations, modifications, cancellations or failures
to give notice or Liens which
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in the aggregate would not be reasonably likely to have a Company Material
Adverse Effect and would not prevent or materially delay, hinder or impair the
consummation of the transactions contemplated hereby.
3.5. FINANCIAL STATEMENTS. The Company has previously furnished to
the Buyer true and complete copies of its audited consolidated balance sheets,
audited consolidated statements of operations, audited consolidated statements
of cash flows and audited consolidated statement of changes in stockholders'
equity, together with notes thereto, for the three fiscal years ended January
31, 1998 (the "Audited Financial Statements"), and the unaudited consolidated
balance sheet, unaudited consolidated statement of operations, unaudited
consolidated statement of cash flows and unaudited consolidated statement of
changes in stockholders' equity for the two-month period ended March 31, 1998,
as set forth in Section 3.5 of the Disclosure Schedule (the "Interim Financial
Statements"; the Audited Financial Statements and the Interim Financial
Statements being referred to collectively as the "Financial Statements"). The
Financial Statements fairly present the consolidated financial position, the
consolidated results of operations, changes in stockholders' equity, cash flows
and the other information included therein of the Company and the Subsidiaries
for the periods or as of the dates therein set forth, in each case in
accordance with GAAP consistently applied during the periods involved, except
that the unaudited Financial Statements are subject to normal year end
adjustments and lack footnotes and other presentation items required for full
disclosure under GAAP. The audited consolidated balance sheet at January 31,
1998 (the "Balance Sheet Date") is sometimes referred to herein as the "Balance
Sheet."
3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as permitted or
contemplated by this Agreement and except as set forth on Sections 3.6, 3.9 or
3.10 of the Disclosure Schedule or disclosed in the Interim Financial
Statements, since the Balance Sheet Date, (a) there has been no material
adverse change in the business, assets, liabilities, operations or condition
(financial or otherwise) of the Company and the Subsidiaries, other than
changes attributable to changes in general economic conditions or in the
Company's industry generally and not isolated to the Company or the
Subsidiaries, (b) the business of the Company and the Subsidiaries has been
operated only in the ordinary course consistent with past practice, (c) there
has not been any resignation or threatened resignation of any key employee of
the Company or any Subsidiary which is material to the Company and the
Subsidiaries, taken as a whole, (d) there has not been any loss of, or material
reduction in the amount of business done with, or any threat of such loss or
reduction by, any key customer of the Company and the Subsidiaries, or any loss
or threatened loss of any source of supply for goods or services to the Company
and the Subsidiaries that is material to their respective businesses, taken as
a whole, and (e) neither the Company nor any Subsidiary has taken any of the
actions set forth in clauses (i) through (xii) of Section 5.2(b).
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3.7. TITLE TO ASSETS. Each of the Company and the Subsidiaries has
good (and, in the case of real property, marketable) title (or leasehold
interest with respect to capital leases) to (a) all of the assets and
properties which are material to the conduct of the businesses of the Company
and the Subsidiaries taken as a whole and (b) all of the assets reflected on
the Balance Sheet (except for assets and properties sold, consumed or otherwise
disposed of in the ordinary course of business since the Balance Sheet Date);
and at the Closing all of the assets of the Company and the Subsidiaries will
be free and clear of all Liens, other than Permitted Liens, Liens securing the
Letter of Credit Obligations, and any Liens incurred by or at the direction of
the Buyer.
3.8. INTELLECTUAL PROPERTY.
(a) Section 3.8 of the Disclosure Schedule sets forth an
accurate and complete list of all of the patents, patent applications,
trademark registrations and applications therefor and copyright registrations
and applications therefor used in the conduct of the Company's and the
Subsidiaries' respective businesses, and all other trademarks, service marks,
patents and registered copyrights that are owned or used by the Company or any
of the Subsidiaries and are material to their respective businesses
(collectively, together with all other material intellectual property rights of
the Company and the Subsidiaries, "Intellectual Property"). Except as set forth
in Section 3.8 of the Disclosure Schedule, the Company and its Subsidiaries, as
the case may be, own and possess all right, title and interest in and to (or,
as and to the extent so indicated in Section 3.8 of the Disclosure Schedule, do
not own but possess the valid right to use) the Intellectual Property, and have
not licensed any of such Intellectual Property to others, and except as set
forth in Section 3.8 of the Disclosure Schedule, neither the Company nor any
Subsidiary has received any written notices of infringement or misappropriation
from any third party with respect to the Intellectual Property, and to the
Company's Knowledge, neither the Company nor the Subsidiaries is currently
infringing on the intellectual property of any other person.
(b) To the Company's Knowledge, except as set forth on
Section 3.8 of the Disclosure Schedule, no officer or employee of the Company
or any Subsidiary is subject to any agreement with any other person which
requires such officer or employee to assign any interest in inventions or other
intellectual property or keep confidential any trade secrets, proprietary data,
customer lists or other business information or which restricts such officer or
employee from engaging in competitive activities or solicitation of customers.
3.9. CONTRACTS.
(a) Section 3.9(a) of the Disclosure Schedule sets forth
an accurate and complete list of each contract or agreement (including any and
all amendments thereto) to which the Company or any of the Subsidiaries is a
party or by which the Company or any of the Subsidiaries is bound which (i)
creates, evidences or governs any Indebtedness of the Company or any
Subsidiary; (ii) involves revenues or expenditures in excess of $250,000
(excluding purchase and sale orders entered into in the ordinary course
consistent with past practice); (iii) is a collective bargaining agreement;
(iv) requires performance by any party for a term extending more than 180 days
after the date hereof and is not terminable prior to such time by the Company
or the Subsidiary (as applicable) without material cost, liability or penalty;
(v) obligates the Company or any Subsidiary not to compete with any business or
which otherwise restrains or
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prevents the Company or any of the Subsidiaries from carrying on any lawful
business; (vi) relates to employment, compensation, severance, consulting or
indemnification between the Company or any Subsidiary and any of their
respective officers, directors, employees, agents or consultants; (vii)
requires the Company or its Subsidiaries to perform their obligations
thereunder at a cost that is or is likely to be materially in excess of the
benefits derived or expected to be derived by the Company and its Subsidiaries
thereunder such that such performance is likely to have a Company Material
Adverse Effect ; (viii) is with a person who is a director, officer, or
shareholder of the Company or any Subsidiary or an Affiliate of such person or
any spouse, sibling, parent, child or grandchild of any such person, or in
which any such person or Affiliate has a material direct or indirect interest;
(xi) grants to any person (other than in such person's capacity as an officer
of the Company or a Subsidiary or as counsel for the Company or a Subsidiary)
any power of attorney or other agency authority to bind the Company or any
Subsidiary, or (x) is otherwise material to the assets, business, operations or
financial condition of the Company and the Subsidiaries taken as a whole
(collectively, the "Contracts"). The Company previously has furnished or made
available to the Buyer true and correct copies of all Contracts. To the
Company's Knowledge, all of the Contracts are enforceable by the Company or the
Subsidiary which is a party thereto in accordance with their terms except to
the extent that such enforceability (a) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally, and (b) is subject to general principles of
equity. Except as set forth in Section 3.9(a) of the Disclosure Schedule,
neither the Company nor any of the Subsidiaries is in breach or default under
(and no event has occurred which with notice or the passage of time or both
would constitute a breach or default under) any agreements listed or required
to be listed in Section 3.9(a) of the Disclosure Schedule nor, to the Knowledge
of the Company, is any other party to any of the agreements listed or required
to be listed in Section 3.9(a) of the Disclosure Schedule in default thereunder
(and no event has occurred which with notice or the passage of time or both
would constitute a breach or default thereunder); excluding, however, in each
instance, breaches or defaults which, in the aggregate, are not reasonably
likely to have a Company Material Adverse Effect.
(b) Except as set forth in Section 3.9(b) of the
Disclosure Schedule, neither the Company nor any Subsidiary is a party to any
Contract which contains a "change in control," "potential change in control" or
similar provision or which could result in a potential "parachute payment"
within the meaning of Section 280G of the Code. Except as set forth in Section
3.9(b) of the Disclosure Schedule, the consummation of the transactions
contemplated hereby will not (either alone or upon the passage of time and/or
occurrence of any additional acts or events) result in any payment (severance
pay or otherwise) becoming due from the Company or any Subsidiary to any person
or accelerate the time of payment or vesting, or increase the amount of
compensation due, any person; excluding, however, any such payments,
accelerations or increases which would have occurred upon the passage of time
and/or occurrence of any additional acts or events even if the "change of
control" or "potential change of control" occurring upon the execution and
delivery of this Agreement and the consummation of the transactions
contemplated herein did not occur.
3.10. LITIGATION AND OTHER LOSS CONTINGENCIES. Except as set forth
on Section 3.10 of the Disclosure Schedule, there is no claim, action, suit,
arbitration, inquiry, proceeding, or investigation by or before any
Governmental Entity, arbitrator or other person or body authorized by law or
contract to adjudicate disputes ("Litigation") pending or, to the Company's
Knowledge, threatened, involving the Company or any of the Subsidiaries in
which, individually
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or in the aggregate, there is a reasonable likelihood of an adverse outcome
that would have a Company Material Adverse Effect or that would impair the
ability of the Company to perform its obligations hereunder, or which seeks to
enjoin or obtain damages in respect of the consummation of the transactions
contemplated hereby. Neither the Company nor any of the Subsidiaries is subject
to any outstanding orders, rulings, judgments or decrees that would be
reasonably likely to have a Company Material Adverse Effect. Except as set
forth on Section 3.10 of the Disclosure Schedule, there are no other material
"loss contingencies" (as defined in Statement of Financial Accounting Standards
No. 5 issued by the Financial Accounting Standards Board ("SFAS 5")) which
would be required by SFAS 5 to be disclosed or accrued in financial statements
of the Company and its Subsidiaries were such statements prepared at the time
this warranty is made or (for purposes of Section 7.1(b)) deemed made.
3.11. COMPLIANCE WITH LAWS. The Company and the Subsidiaries are,
and at all times since January 1, 1988 have been, in compliance in all material
respects with all applicable laws, rules, regulations, ordinances, decrees or
orders of any Governmental Entity. The Company and the Subsidiaries have all
governmental permits, licenses and authorizations necessary for the conduct of
their businesses as presently conducted ("Permits") and are currently in
compliance with the terms of the Permits except for non-compliance which would
not have a Company Material Adverse Effect.
3.12. ENVIRONMENTAL MATTERS. Except as set forth on Section 3.12
of the Disclosure Schedule:
(a) the Company and the Subsidiaries are, and have
heretofore conducted their respective businesses and owned and operated their
respective properties, in compliance in all material respects with all
applicable Environmental Laws;
(b) neither the Company nor any of the Subsidiaries has
received notice from a Governmental Entity or other person alleging that the
Company or any Subsidiary is not or has not been in compliance with
Environmental Laws or is responsible or potentially responsible to take any
remedial action or make any payments or contributions for environmental damage
or injury to natural resources; and
(c) no Environmental Lien has attached to any property
that is currently or was formerly owned or operated by the Company or any
Subsidiary.
3.13. EMPLOYEE BENEFIT PLANS AND OTHER EMPLOYEE MATTERS.
(a) Section 3.13 of the Disclosure Schedule sets forth
an accurate and complete list of each employee benefit plan (as such term is
defined in Section 3(3) of ERISA), and any other bonus, deferred compensation,
incentive compensation, stock, severance or other employee benefit plan,
program or arrangement (other than non-material fringe benefits provided by the
Company and the Subsidiaries to their employees in the ordinary course of
business at a cost that is not material) (each of the foregoing, a "Benefit
Plan"), currently maintained or contributed to by the Company or any
Subsidiary. With respect to each Benefit Plan, the Company previously has
furnished to the Buyer a true and correct copy of, where applicable, (i) the
most recent annual report (Form 5500) filed with the IRS (or comparable report
filed with any foreign Governmental Entity), (ii) the plan document, (iii) each
trust agreement and group
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annuity contract, if any, relating to such Benefit Plan, (iv) the most recent
actuarial report or valuation relating to such Benefit Plan (if applicable),
(v) the most recent summary plan description or comparable disclosure document
provided to participants, and (vi) the most recent determination letter issued
by the IRS or comparable authority.
(b) Neither the Company nor any Subsidiary has an
obligation to contribute to any multiemployer plan (as defined in Section 3(37)
of ERISA) and no Benefit Plan is or was subject to Title IV of ERISA. Except as
set forth in Section 3.13 of the Disclosure Schedule with respect to the
Benefit Plans, all required contributions to date by the Company have been made
or properly accrued. The Company reasonably believes that, as of the date
hereof, the assets of the Simplicity Limited Pension Scheme will be adequate to
fund all benefits required to be provided thereunder.
(c) Each of the Benefit Plans has been administered in
accordance with its terms in all material respects and is in compliance in all
material respects with applicable laws and regulations.
(d) Except as set forth in Section 3.13 of the
Disclosure Schedule, each of the Benefit Plans which is intended to be a
qualified plan within the meaning of Section 401(a) of the Code has been
determined by the IRS to be so qualified and to the Knowledge of the Company
nothing has occurred to cause the loss of such qualified status.
(e) Except as set forth in Section 3.13 of the
Disclosure Schedule, no Benefit Plan provides health, medical or life insurance
benefits with respect to current or former employees of the Company or any
Subsidiary beyond their retirement or other termination of service other than
(a) coverage mandated by applicable law, or (b) benefits the full costs of
which are borne by the current or former employee (or his or her beneficiary).
(f) Section 3.13 of the Disclosure Schedule sets forth
the names of all employees of the Company and the Subsidiaries whose rate of
gross taxable compensation for 1997 exceeded, or whose base compensation for
1998 is currently expected to exceed, $100,000 per year, and the rate of
compensation and amount of such other benefits for each such employee.
3.14. CONSENTS. Except as set forth in Section 3.14 of the
Disclosure Schedule, no consent, approval or authorization of, or exemption by,
or filing with, any Governmental Entity is required on the part of the Company
in connection with the execution, delivery and performance by the Company of
this Agreement or the taking of any other action contemplated hereby.
3.15. TAXES. Except in each case as set forth in Section 3.15 of
the Disclosure Schedule:
(a) Each of the Company, the Subsidiaries, and any
affiliated, combined or unitary group of which either the Company or any
Subsidiary is or has been a member during the past ten years, has: (i) timely
filed and in all material respects correctly prepared all returns,
declarations, reports, estimates, information returns and statements
("Returns") required to be filed or sent by or with respect to it in respect of
any Taxes; (ii) properly paid all Taxes that are
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shown to be due and payable on such Returns and any other Taxes that have
become due and payable on or prior to the date hereof; (iii) established on its
books and records and in the Financial Statements reserves in accordance with
GAAP for the payment of all accrued Taxes not yet due and payable; and (iv)
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes from employees and
other persons.
(b) There are no Liens for Taxes upon the assets of the
Company or any of the Subsidiaries, except Permitted Liens (which Permitted
Liens are described in Section 3.15 of the Disclosure Schedule).
(c) No written claim or deficiency for any Taxes has
been asserted against the Company or any of the Subsidiaries which has not been
resolved and paid in full.
(d) There are no outstanding waivers or comparable
consents given by the Company or any of the Subsidiaries regarding the
application of the statute of limitations with respect to any Taxes or Returns.
(e) No audits or proceedings before any Governmental
Entity are presently pending with regard to any Taxes or Returns and the
Company and the Subsidiaries have not received any written notices of any such
audits or proceedings.
(f) Neither the Company nor any Subsidiary has ever made
an election under Section 341(f) of the Code.
3.16. AFFILIATED TRANSACTIONS. Except as set forth in Section 3.16
of the Disclosure Schedule, within the past 12 months none of the Company and
its Subsidiaries has been involved in any material business arrangement,
transaction or relationship with any director, officer, or shareholder of the
Company or any Subsidiary or an Affiliate of such person or any spouse,
sibling, parent, child or grandchild of any such person, or in which any such
person or Affiliate has a material direct or indirect interest, and no such
person owns any material asset, tangible or intangible, which is used in the
business of any of the Company and the Subsidiaries.
3.17. REAL PROPERTY.
(a) Section 3.17(a) of the Disclosure Schedule lists all
of the real property owned by the Company or any Subsidiary (the "Owned Real
Property"). The Company or a Subsidiary, as applicable, has good and marketable
title to all of the Owned Real Property, free and clear of all Liens other than
Permitted Liens and Liens listed on Section 3.17(a) of the Disclosure Schedule.
(b) Section 3.17(b) of the Disclosure Schedule lists all
of the leases (the "Leases") for real property to which the Company or any
Subsidiary is a party. Each Lease is in full force and effect and is
enforceable in accordance with its terms. The Sellers have previously delivered
to the Buyer true and complete copies of all of the Leases. The real property
leased by the Company or any Subsidiary is referred to herein as the "Leased
Real Property" and, together with the Owned Real Property, the "Real Property."
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(c) All buildings, structures and improvements upon the
Real Property and all electric, gas, water and sewer utilities serving such
Real Property are in good condition and repair in all material respects,
ordinary wear and tear excepted. There are no zoning or similar land use
restrictions presently in effect or, to the Knowledge of the Company, proposed
by any Governmental Entity, which would impair the use of such Real Property
for the purposes for which it is now being used, and the Real Property is in
compliance in all material respects with all applicable zoning or similar land
use restrictions of all Governmental Entities having jurisdiction thereof and
with all recorded restrictions, covenants and conditions affecting such Real
Property, and the Company and the Subsidiaries have performed all affirmative
covenants as to such Real Property to be performed by them. No proceedings for
the taking of any of such Real Property by eminent domain by any governmental
authority are pending or, to the Knowledge of the Company, threatened.
(d) To the Knowledge of the Company, except as set forth
in Section 3.17(d) of the Disclosure Schedule: (i) all oil and/or gas burners,
incinerators, furnaces and other fuel burning devices, all ground water supply
wells, and all gas, water and sewer utilities on the Real Property comply in
all material respects with all Environmental Laws; (ii) no pollutants or other
toxic or hazardous substances, including any solid, liquid, gaseous or thermal
irritant or contaminant, such as smoke, vapor, soot, fumes, acids, alkalis,
chemicals or waste (including materials to be recycled, reconditioned or
reclaimed), or any other substances or materials regulated pursuant to
Environmental Laws (collectively, the "Substances") have been handled,
discharged, dispersed, released, stored, treated, generated, transported to or
from, disposed of on or allowed to escape on the Real Property in violation of
any Environmental Laws in any material respect; (iii) no asbestos or
asbestos-containing material has been installed, used, incorporated into or
disposed of on the Real Property, and no polychlorinated biphenyls (PCBs) are
located on or in the Real Property in the form of electrical transformers,
fluorescent light fixtures without ballasts, cooling oils or any other device
or form; (iv) no underground storage tanks have been located on the Real
Property or, if so located on the Real Property, such underground storage tanks
have been subsequently removed or filled in compliance in all material respects
with all Environmental Laws; (v) no investigation, administrative order,
consent order and agreement, litigation or settlement with respect to
Substances has been proposed, threatened, anticipated or is in existence with
respect to the Real Property; (vi) the past and current operations of the
Company and the Subsidiaries on the Real Property or on any other real property
heretofore owned, occupied or used by the Company and the Subsidiaries comply
in all material respects with all Environmental Laws; and (vii) no notice has
been served on or delivered to Seller from any Governmental Entity or other
person claiming any violation of any Environmental Laws or demanding any
payment or contribution for environmental damage or injury to natural
resources.
3.18. BROKER'S FEES. Except for Rothschild Inc. (whose fees will be
paid by the Sellers as Seller Expenses), none of the Company, any Subsidiary
nor any of the Sellers, nor any Affiliate or representative of the Company, any
Subsidiary or any of the Sellers, has any liability to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which the Buyer (or, after the Closing, the
Company or any of the Subsidiaries) could become liable or obligated.
3.19. ADEQUACY OF ASSETS. The assets of the Company and the
Subsidiaries at Closing will include all property, contract rights, leases and
intangibles necessary for the continuation in all material respects after the
Closing of the business now conducted by the Company and the
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Subsidiaries. For such continuation of the Company's business as now conducted,
there are no material capital expenditures which the Company now plans to make
or anticipates will be required to be made during the three years following the
date hereof except as described in Section 3.19 of the Disclosure Schedule and
in the Company's capital expenditure budget previously furnished to the Buyer.
3.20. INVESTIGATIONS. Section 3.20 of the Disclosure Schedule
describes all investigations of the Company and the Subsidiaries or their
business since January 1, 1993 to the Knowledge of the Company conducted by any
grand jury, administrative agency or other Governmental Entity and describes
all claims or allegations of violations or noncompliance with law received by
the Company and the Subsidiaries from any Governmental Entity since such date
and all written statements or responses of Seller with respect thereto, other
than requests for information from taxing authorities in connection with audits
of the Company's or Subsidiaries' Tax returns or routine questionnaires and
requests for information received generally by others in the Company's or
Subsidiaries' industry.
3.21. NO IMPROPER PAYMENTS. Neither the Company nor any of the
Subsidiaries nor, to the Knowledge of the Company, any officer, director,
employee or other representative of the Company or any of the Subsidiaries
acting or purporting to act on behalf of the Company or any of the Subsidiaries
or of any business enterprise with which the Company or any of the Subsidiaries
has been associated or affiliated, has, directly or indirectly, made or
authorized any payment, contribution or gift of money, property, or services,
in violation of applicable law, (i) as a kickback or bribe to any person or
(ii) to any political organization or the holder of, or any aspirant to, any
elective or appointive office of any nation, state, political subdivision
thereof, or other Governmental Entity.
3.22. LABOR ORGANIZATIONS. Except as described in Section 3.22 of
the Disclosure Schedule, neither the Company nor any Subsidiary is party to any
collective bargaining agreement with any labor union or similar organization,
and to the Company's Knowledge no such organization represents or claims to
represent any of the Company's employees or intends to organize any of the
Company's employees.
3.23. INSURANCE. Section 3.23 of the Disclosure Schedule lists all
policies of insurance now in effect insuring the business, assets and personnel
of the Company and the Subsidiaries and sets forth for each such policy the
name of the insurer, the type of coverage, the amount of coverage, the term
thereof and the annual premium.
3.24. YEAR 2000 ISSUES. Except as set forth in Section 3.24 of the
Disclosure Schedule, to the Company's Knowledge, there are no issues associated
with the ability of the computer systems used by Company and the Subsidiaries
to process data including dates on or after January 1, 2000 ("Year 2000
Issues") that are reasonably likely to impair the Company's and the
Subsidiaries' operations in any material respect, or to require the Company or
the Subsidiaries to incur any material expense to resolve such issues.
3.25. PREDECESSORS. To the extent the Company or any Subsidiary has
assumed, by operation or law, by contract, or otherwise, or has otherwise
become responsible for, the liabilities or obligations of any person to whose
business, assets or liabilities it has succeeded, and such liabilities and
obligations are relevant to the representations and warranties as to the
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Company and the Subsidiaries set forth in this Article III, all references in
such representations and warranties to the Company or the Subsidiaries shall
include any such predecessor.
3.26. HART-SCOTT-RODINO NONAPPLICABILITY. For purposes of
determining the applicability of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and the regulations thereunder to the transactions contemplated
hereby, the "ultimate parent entity" (as defined in Section 801.1(a)(3) of such
regulations) of the Company and the Subsidiaries is the Company, and neither
the annual net sales of the Company and the Subsidiaries on a consolidated
basis as stated on their last regularly prepared consolidated statement of
income and expense, nor the consolidated total assets of the Company and the
Subsidiaries as stated on their last regularly prepared consolidated balance
sheet, exceeded $100,000,000.
3.27. DISCLAIMER OF IMPLIED WARRANTIES. None of the Company, any
Subsidiary, any officer, director, employee, agent, affiliate of the Company or
any Subsidiary or the Sellers make any representations or warranties except as
expressly set forth in this Agreement, and any implied warranties (including
without limitation implied warranties of merchantibility or fitness for any
particular purpose) are hereby disclaimed.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Sellers and the
Company that the statements contained in this Article IV are correct and
complete in all material respects:
4.1. ORGANIZATION. The Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of South
Carolina. True and complete copies of the articles of incorporation and bylaws
of the Buyer have been delivered or made available to the Company.
4.2. CORPORATE POWER AND AUTHORITY; NO VIOLATIONS. The Buyer has
full power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by the Buyer of this Agreement and the consummation by the Buyer of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Buyer, including due and valid
authorization by the board of directors of the Buyer, and no other corporate
proceedings on the part of the Buyer are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Buyer and constitutes the valid
and binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms, except to the extent that such enforceability (i)
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors rights generally, and (ii) is subject to
general principles of equity. Neither the execution, delivery and performance
by the Buyer of this Agreement nor the consummation by the Buyer of the
transactions contemplated hereby will, with or without the giving of notice or
the passage of time, or both, (x) violate any provision of law, rule,
regulation, order, judgment, writ, injunction or decree applicable to the
Buyer, or (y) conflict with or violate any provision of the certificate of
incorporation or bylaws (or substantially equivalent documents) of the Buyer,
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except, in the case of clause (x), for violations which in the aggregate would
not prevent or materially delay, hinder or impair the consummation of the
transactions contemplated hereby.
4.3. BROKERS' FEES. Neither the Buyer nor any Affiliate or
representative of the Buyer has any liability to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement for which the Sellers or the Company could become liable or
obligated.
4.4. LITIGATION. No Litigation is pending or, to the Knowledge of
the Buyer, is threatened which seeks to delay, prevent, adversely affect or
restrict the consummation of the transactions contemplated hereby.
4.5. CONSENTS. Except for the filing of appropriate tax returns
after the Closing and the filing of reports with the Securities and Exchange
Commission, in each case reporting the transactions contemplated hereby, no
consent, approval or authorization of, or exemption by, or filing with, any
Governmental Entity is required on the part of the Buyer in connection with the
execution, delivery and performance by the Buyer of this Agreement or the
taking of any other action contemplated hereby.
4.6. PURCHASE FOR INVESTMENT. The Buyer is acquiring the Shares
for purposes of investment and its acquisition of the Company and not with a
view to any public resale or other distribution thereof in violation of the
Securities Act of 1933, as amended, or any applicable state securities laws.
4.7. AVAILABILITY OF FUNDS. Based upon the commitment letter dated
May 1, 1998 from NationsBank, N.A., as supplemented by its letter dated May 26,
1998 (the "Bank Commitment"), and assuming the funding under the Bank
Commitment is made at the Closing, the Buyer will at the Closing have
sufficient immediately available funds in cash (a) to pay the Net Transaction
Consideration, (b) to provide the Company with sufficient working capital and
(c) to pay any other amounts payable pursuant to this Agreement and to effect
the transactions contemplated hereby.
4.8. HART-SCOTT-RODINO NONAPPLICABILITY. For purposes of
determining the applicability of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and the regulations thereunder to the transactions contemplated
hereby, the "ultimate parent entity" (as defined in Section 801.1(a)(3) of such
regulations) of the Buyer and its subsidiaries is the Buyer, and neither the
annual net sales of the Buyer and its subsidiaries on a consolidated basis as
stated on their last regularly prepared consolidated statement of income and
expense, nor the consolidated total assets of the Buyer and its subsidiaries as
stated on their last regularly prepared consolidated balance sheet, exceeded
$100,000,000.
ARTICLE V
COVENANTS OF THE PARTIES
5.1. EFFORTS. Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its commercially reasonable efforts to
take, or cause to be taken, all action,
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and to do, or cause to be done, all things necessary, proper or advisable to
consummate and effect the transactions contemplated by this Agreement on June
19, 1998, including, without limitation, obtaining all required consents and
approvals, making all required filings and applications and complying with or
responding to any requests by Governmental Entities.
5.2. CONDUCT OF BUSINESS.
(a) Except as may be otherwise contemplated by this
Agreement or disclosed in Section 5.2 of the Disclosure Schedule or required by
law or any Contracts or other agreements or arrangements disclosed in the
Disclosure Schedule or as the Buyer may otherwise consent to in writing (which
consent shall not be unreasonably withheld), from the date hereof and prior to
the Closing, the Company will, and will cause each of the Subsidiaries, to
operate its business only in the ordinary course consistent with past practice.
(b) Without limiting the generality of the foregoing,
except as may be otherwise contemplated by this Agreement or disclosed in
Section 5.2 of the Disclosure Schedule or as the Buyer may otherwise consent to
in writing (which consent will not be unreasonably withheld), from the date
hereof and prior to the Closing, neither the Company nor any of the
Subsidiaries will:
(i) (A) declare, set aside or pay any dividend
or other distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock or other equity interests, or
make any payments of any Indebtedness to any shareholder of the Company or such
shareholder's Affiliates, (B) split, combine or reclassify any of its capital
stock or other equity interests or issue or authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock or other equity interests, or (C) amend the terms of,
repurchase, redeem or otherwise acquire, or permit any Subsidiary to
repurchase, redeem or otherwise acquire, any of its capital stock or other
securities or equity interests, or any warrants or other rights to acquire any
of its capital stock or other securities or equity interests, or any
Indebtedness to any shareholder of the Company or such shareholder's
Affiliates, or any capital stock, other securities or equity interests, or
warrants or other rights to acquire any of the capital stock or other
securities or equity interests of the Subsidiaries, or commit or propose to do
any of the foregoing;
(ii) authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights
to purchase or otherwise) any stock of any class or any other securities
(including Indebtedness having the right to vote) or equity equivalents
(including, without limitation, stock appreciation rights), or amend in any
respect any of the terms of any such securities or equity equivalents
outstanding on the date hereof;
(iii) amend or propose to amend its certificate
of incorporation or bylaws or equivalent documents;
(iv) acquire, sell, lease, encumber, transfer or
dispose of any assets (except that the Company and the Subsidiaries may
purchase raw materials and other goods and services in the ordinary course of
business consistent with past practice and may sell inventory in the ordinary
course of business consistent with past practice); make any capital
expenditures;
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modify or amend any Contracts (including any relating to Indebtedness) outside
of the ordinary course of business; or enter into any material contract,
commitment or transaction outside the ordinary course of business or that would
be required to be disclosed in any Section of the Disclosure Schedule;
(v) except for revolving credit loans (and
letters of credit obtained in the ordinary course of business) obtained in the
ordinary course of business under currently existing credit lines, incur or
assume any Indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities of the Company or any of the Subsidiaries
or guarantee (or become liable for) any Indebtedness of others or mortgage,
pledge or otherwise encumber any assets or consensually create any Lien
thereupon other than Permitted Liens;
(vi) make any loans, advances or capital
contributions, except to wholly-owned Subsidiaries and advances of business
expenses to employees in the ordinary course of business;
(vii) except as may otherwise be required by GAAP
or the Financial Accounting Standards Board, change any of the accounting
principles or practices used by it,
(viii) make any Tax election or settle or
compromise any Tax liability;
(ix) (1) enter into, adopt, amend or terminate
any Benefit Plan or any agreement, arrangement, plan or policy between itself
and any one or more of its directors or officers or (2) increase in any manner
the compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan or arrangement as in effect as of the date
hereof except in the case of officers and employees for normal increases in
compensation and normal year-end bonuses, in each case in the ordinary course
of business and consistent with past practice; or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing;
(x) forgive any material Indebtedness or
obligations due it or waive any material rights;
(xi) take any action that would cause any of the
representations and warranties set forth in Article III hereof to be incorrect
in any material respect if it were made on any date from the date hereof
through the date of Closing; or
(xii) agree to take any of the foregoing actions.
5.3. ACCESS. From the date hereof and prior to the Closing, the
Sellers and the Company shall provide the Buyer with such information as the
Buyer may from time to time reasonably request with respect to the Company and
the Subsidiaries and their assets and properties and the transactions
contemplated by this Agreement, and shall provide the Buyer and its
representatives reasonable access during regular business hours and upon
reasonable notice to the personnel, representatives, accountants, properties,
books and records of the Company and the Subsidiaries as the Buyer may from
time to time reasonably request. Any such investigation by the Buyer shall not
affect the responsibility of the Company and the Sellers for the
representations or warranties set forth in this Agreement or enlarge the scope
of, or create any
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additional, representations or warranties beyond those set forth in this
Agreement. All such information and access shall be subject to the terms and
conditions of that certain letter dated August 27, 1997, from the Company to
the Buyer regarding certain confidential information (the "Confidentiality
Agreement"). Effective upon the completion of the Closing, the Confidentiality
Agreement shall be terminated.
5.4. NO SOLICITATION. None of the Company, the Subsidiaries, and
any of their respective Affiliates, officers, directors, employees,
representatives or agents, shall, directly or indirectly, encourage, solicit,
participate in, initiate or continue discussions or negotiations with, or
provide any information to, any person (other than the Buyer and its Affiliates
and representatives) concerning any merger, sale of assets, sale of shares of
capital stock or similar transactions involving the Company or any Subsidiary
or division of the Company and any existing discussions or negotiations with
third persons relating thereto shall be terminated immediately; provided,
however, that the directors of the Company shall be permitted to provide
information regarding the transactions contemplated by this Agreement to the
Sellers and to entities regulating such Sellers.
5.5. BOOKS AND RECORDS. For a period of seven (7) years from the
Closing, the Buyer shall, and shall cause the Company and the Subsidiaries to,
provide to any Seller for any reasonable purpose relating to such Seller's
prior ownership of any securities of the Company, reasonable access to the
books and records of the Company relevant thereto upon reasonable advance
written notice during regular business hours for the sole purpose of obtaining
information for use as aforesaid and will permit such Seller to make such
extracts and copies thereof as may be necessary. Such Seller shall reimburse
the Buyer, the Company or the Subsidiary for the reasonable out-of-pocket
expenses incurred by any of them in performing the covenants contained in this
Section 5.5.
5.6. LITIGATION SUPPORT. In the event and for so long as any party
actively is contesting or defending against any Litigation with any person who
is not a party to this Agreement in connection with (a) any transaction
contemplated under this Agreement, or (b) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction on or prior to the date of the Closing
involving any of the Company and the Subsidiaries, each of the other parties
shall reasonably cooperate with the defending or contesting party and its
counsel in providing information relating to the defense or contest, all at the
sole cost and expense of the defending or contesting party (unless the
defending or contesting party is otherwise entitled to indemnification from the
other party).
5.7. INTERFERENCE. From the date hereof and prior to the first to
occur of (i) the Closing, and (ii) the termination of this Agreement pursuant
to Article VIII hereof (a) the Buyer hereby agrees not to induce or attempt to
induce any customer, supplier, licensee or other business relation of the
Company or any Subsidiary to cease doing business with the Company or any
Subsidiary, or in any way interfere with the relationship between any such
customer, supplier, licensee or other business relation and the Company or any
Subsidiary (including, without limitation, making any negative statements or
communications concerning the Company, any Subsidiary or any of their
respective employees, officers, directors or Affiliates), and (b) the Company
and the Sellers hereby agree not to induce or attempt to induce any customer,
supplier, licensee or other business relation of the Buyer to cease doing
business with the Buyer, or in any way interfere with the relationship between
any such customer, supplier, licensee or other
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business relation and the Buyer (including, without limitations making any
negative statements or communications concerning the Buyer or any of its
employees, officers, directors or Affiliates). Nothing in this Section 5.7
shall be deemed to limit in any way the terms and provisions of the
Confidentiality Agreement.
5.8. SUBSEQUENT DISCLOSURES BY COMPANY. To the extent the Sellers
or the Company hereafter and prior to the Closing disclose in writing to the
Buyer (which written disclosure makes specific reference to this Section 5.8)
that any representation or warranty of the Company or the Sellers was untrue
when made, that such untruth was not willful, and such untruth is sufficiently
material to prevent the satisfaction on or prior to June 26, 1998 of the
condition set forth in Section 6.1(b) hereof, and such written disclosure sets
forth the information necessary to correct such untruth, then unless the Buyer
terminates this Agreement pursuant to Section 8.1(c) hereof within fourteen
days after the Buyer's receipt of such written disclosure (or such longer
period as the Buyer and the Sellers' Representative may agree in writing), (a)
the Buyer shall thereafter have no rights hereunder by reason of such untruth
to the extent corrected by such written disclosure, and (b) any such untrue
representation or warranty shall be deemed amended by the correction set forth
in such written disclosure (effective as of the date of this Agreement) to the
extent necessary to render it consistent with such correction.
5.9. CERTAIN DISCLOSURES. Prior to the Closing, except as
otherwise required by applicable law, the Buyer shall not provide any
information concerning the business and affairs of the Company or any
Subsidiaries that is not generally available to the public (including this
Agreement and any other materials containing the Buyer's acquisition proposal
and any financial information, projections or proposals regarding the Company)
to any person (other than the Buyer's Affiliates and the representatives of the
Buyer and its Affiliates) whom the Buyer Knows, or has reason to believe, would
have any interest in participating in Another Transaction. As used herein, the
term "Another Transaction" means the sale of an material assets of the Company
or any Subsidiary (other than the sale of inventory in the ordinary course) or
any sale, merger, consolidation, public offering, reorganization, dissolution,
recapitalization, business combination or similar transaction involving the
Company or any of the Company's capital stock (or rights to acquire such
capital stock), including without limitation the Shares.
5.10. DIRECTORS AND OFFICERS LIABILITY INSURANCE. The Company will
pay or cause to be paid the annual premium that is due on or about June 1, 1998
in the amount of approximately $105,000 for the directors and officers
liability insurance currently maintained by the Company and after the Closing
the Buyer will cause the Company to keep such insurance in force for so long as
coverage is provided by such premium payment; provided, that the Sellers'
Representative may elect to have the Buyer, in lieu of maintaining such
insurance, apply such premium payment or any unused part thereof to the
purchase of such other directors and officers liability insurance (including
any "tail" coverage) as the Seller's Representative may designate.
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5.11. NO TRANSFERS PRIOR TO CLOSING. Except as the Buyer may
otherwise consent in writing (which consent shall not be unreasonably
withheld), each Seller agrees that such Seller any Shares owned by such Seller
prior to the Closing; provided, that a transfer by operation of law will not
exercise any Other Securities and Claims held by such Seller prior to the
Closing, or transfer upon the death of an individual Seller to such Seller's
estate or personal representative is permissible so long as the estate or
personal representative of such Seller is bound to perform the obligations of
such Seller under this Agreement.
5.12. CERTAIN TAX MATTERS.
(a) At the Closing, the Company (or, as applicable, the
Subsidiaries) shall withhold from that portion of the amount of Net Transaction
Consideration allocable to each of the participants in the Company's Management
Benefit Plan (each a "Manager" and collectively the "Managers") which is in
excess of $32.40 for each Share held directly by such Manager (i.e., excluding
unallocated Shares held by Frank J. Rizzo, as Trustee under the Trust dated
September 7, 1990, as of the date hereof) and purchased hereunder (with respect
to each Manager, such excess portion being referred to as such Manager's
"Compensation Portion") such amount as is required to be withheld from such
Compensation Portion (treating such Compensation Portion as compensation for
such Manager's services to the Company) under applicable tax laws, and shall
deposit the amounts so withheld with the appropriate taxing authorities. The
Company currently estimates that the amount of the Compensation Portion
required to be withheld consists of 28% thereof for federal income tax
purposes, 7.35 % thereof for New York state income tax purposes, 0.45 % thereof
for New York City local income tax purposes, and the Managers' portions of
applicable social security, medicare and other payroll taxes; provided, that it
is understood that Gordon Robinson is a citizen and resident of the United
Kingdom who has not provided services to the Company or its Subsidiaries within
the United States and that, subject to his submission of appropriate statements
to avoid withholding with respect to his Compensation Portion, no amounts are
expected to be required to be withheld from his Compensation Portion. For all
tax purposes, the Buyer, the Company and its Subsidiaries, and the Managers
shall report the payment and receipt of such Compensation Portion as the
payment of compensation expense to, and the receipt of compensation income by,
such Managers, and will treat the remainder of the Net Transaction
Consideration allocable to the Managers (i.e., $32.40 per Share) as payment by
the Buyer for their Shares, and each will use its, his or her best efforts to
adhere to and defend such tax reporting and treatment in any examinations by
the applicable taxing authorities. Each Manager shall promptly notify the Buyer
of any examination or proposed examination of such Manager's tax returns for
1998 or any other year in which such treatment is reflected, and the subsequent
results of any such examination. The Buyer shall promptly notify the Managers
of any examination of the tax returns of the Buyer, the Company or its
Subsidiaries that reflect such treatment, and of any adjustment required upon
such examination that is inconsistent with such treatment.
(b) It is understood that the amount of federal, state and local
taxes that will be payable by each Manager with respect to such Manager's
receipt of such Manager's allocation of the Net Transaction Consideration in
accordance with the foregoing subsection (a) will likely be greater than the
amount of such taxes that would have been payable by such Manager had such
receipt been treated entirely as a payment in exchange for such Manager's
Shares. At such time as a Manager calculates and pays his or her income taxes
for 1998 in accordance with subsection (a), such Manager shall also make a
calculation of his or her income taxes for 1998 on the
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assumption that such Manager's receipt of Net Transaction Consideration had
been treated entirely as a payment in exchange for such Manager's Shares,
setting forth the excess of the taxes actually paid over the taxes that would
have been payable using such assumption (the "Capital Gain Calculation"), and
shall submit his or her applicable 1998 tax returns and Capital Gain
Calculation to the Buyer for review by the Buyer's independent accountants.
Once the Buyer has approved the Capital Gain Calculation and the calculation of
such excess (which approval shall not be unreasonably withheld or delayed), the
amount of such excess shall be deemed such Manager's "Capital Gain
Differential." In the event that, prior to the payment of the Special Bonus
(hereinafter defined) in accordance with subsection (e), it is finally
determined, for federal income tax purposes, that a Manager's Compensation
Portion is less than or greater than that calculated pursuant to subsection
(a), then the amount of such Manager's Capital Gain Differential shall be
recalculated to reflect such increase or decrease in the Compensation Portion,
such Manager shall provide the Buyers' independent accountants with a statement
of such recalculation together with such supporting records as the Buyer may
reasonably request, and upon approval of such recalculation by the Buyer (which
approval shall not be unreasonably withheld or delayed) such recalculated
Capital Gain Differential shall be deemed such Manager's Capital Gain
Differential.
(c) The Buyer expects that the Company or its Subsidiaries will
be entitled to income tax deductions for the Compensation Portion allocable to
each Manager in accordance with the tax treatment described in subsections (a)
and (b) above (the "Compensation Portion Deductions"), and that such deductions
will result in tax benefits to the Buyer (either directly or through the
Company or its Subsidiaries) to be realized in the form of tax refunds or
credits or reductions in taxes then due that would otherwise be payable (as
finally determined upon the applicable Tax Closure Date (hereinafter defined)
with respect to the Compensation Portion allocable to such Manager, such
Manager's "Allocable Compensation Portion Tax Benefit"). The Buyer also expects
that the Buyer, the Company or its Subsidiaries will be entitled to income tax
deductions for the Capital Gain Differential, the Gross-Up Amount (hereinafter
defined), and the Trust Income Amount (hereinafter defined) paid to each
Manager as hereinafter provided (the "Additional Deductions"), and that such
deductions will result in tax benefits to the Buyer to be realized in the form
of tax refunds or credits or reductions in taxes that would otherwise be
payable (as reasonably calculated by the Buyer at the time of such payment to
such Manager, such Manager's "Allocable Additional Tax Benefit"). The aggregate
amount of a Manager's Allocable Compensation Portion Tax Benefit and such
Manager's Allocable Additional Tax Benefit is referred to herein as such
Manager's "Allocable Tax Benefit."
(d) The Buyer will, or will cause the Company or its Subsidiaries
to, claim the Compensation Portion Deductions as soon as practicable after the
Closing in a manner that maximizes the Allocable Compensation Portion Tax
Benefits with respect to all of the Managers (including, if necessary, filing
amended returns for previous periods to utilize loss carrybacks). The time at
which the claims for the Compensation Portion Deductions (or at least a
sufficient amount thereof to provide sufficient tax benefits to fund the
payment provided for in subsection (e)) are no longer subject to challenge by
the applicable taxing authorities (whether by expiration of the applicable
statutes of limitations, final resolution upon audit, or otherwise) is referred
to as the "Tax Closure Date"; provided, that if the Buyer has not then received
and approved a Manager's 1998 tax returns and Capital Gain Calculation and the
data necessary to calculate such Manager's Gross-Up Amount, such Manager's Tax
Closure Date shall not occur until they have been so received and approved;
provided, further, that the Buyer may, in its sole discretion,
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accelerate the Tax Closure Date applicable to any Manager by giving written
notice of such acceleration to such Manager, whereupon such Manager's Tax
Closure Date shall be the earlier of such accelerated Tax Closure Date or the
Tax Closure Date as otherwise determined under this subsection (d).
(e) Within 30 days after the applicable Tax Closure Date, the
Buyer will, or will cause the Company or its Subsidiaries to, pay to each
Manager (subject to the limitation set forth below) the sum of the following
(the "Special Bonus"):
(1) Such Manager's Capital Gain Differential;
(2) An amount equal to the federal, state and local
income taxes that would be payable by such Manager with respect to such
Manager's receipt of his or her Capital Gain Differential and of the amounts
payable under this clause (2), assuming that the applicable tax rate is such
Manager's effective marginal tax rate on ordinary income for the year in which
the Special Bonus is paid to such Manager and assuming the Manager's taxable
income for such year is the same as for the previous year plus the Special
Bonus (the "Gross-Up Amount") (each Manager to provide to the Buyer's
independent accountants for the Buyer's approval such data as the Buyer may
reasonably request in order to determine such assumed effective marginal tax
rate, such approval not to be unreasonably withheld or delayed); and
(3) An amount equal to such Manager's pro rata share of
the net investment income held by the Special Bonus Trust (hereinafter defined)
at the time of such payment, such pro rata share to be determined based upon
the relative portion of the corpus of the Special Bonus Trust being distributed
to such Manager (the "Trust Income Amount");
provided, that in no event shall the amount required to be paid to a Manager
pursuant to this subsection (e), when added to all payroll taxes imposed on the
Buyer, the Company or any Subsidiary by reason of such payment of the Special
Bonus, exceed (x) such Manager's Allocable Tax Benefit less (y) any taxes,
penalties and interest that have been paid by the Buyer, the Company or any
Subsidiaries by reason of the failure of such Manager to pay any taxes imposed
on such Manager on account of such Manager's receipt of any Net Transaction
Consideration or the failure of the Company or any Subsidiary to make any
withholding thereof other than the withholding to be made in accordance with
subsection (a) above. Any payment pursuant to this subsection (e) shall be
subject to such withholding as is required by applicable law. To the extent of
the funds held for the account of a Manager under the Special Bonus Trust, any
payment pursuant to this subsection (e) shall be made from such Special Bonus
Trust, but the Buyer's payment obligation is not limited to the assets of such
Special Bonus Trust.
(f) By his execution hereof, Louis R. Morris agrees that he will
indemnify and save harmless the Buyer, the Company and the Subsidiaries from
and against any and all costs and expenses (including taxes, interest and
penalties) reasonably incurred by them by reason of their not withholding from
the Net Transaction Consideration allocable to him any amount for possible
excise tax under Section 4999 of the Code.
(g) To provide a mechanism for the funding of the Special Bonus,
the Buyer shall use its commercially reasonable efforts to establish at the
Closing and thereafter maintain a trust (the "Special Bonus Trust") pursuant to
a Trust Agreement in substantially the form of Exhibit
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5.12(g) hereto (the "Special Bonus Trust Agreement") with a trustee selected by
the Buyer and reasonably approved by Louis R. Morris. At the Closing, the
Special Bonus Trust shall be funded with $10.00. Thereafter, as the Buyer
realizes (on an incremental basis after taking into account all other tax
benefits the Buyer would otherwise realize, and in the form of a cash refund
actually received, a tax credit against taxes then due, or the reduction of
taxes then due) the Allocable Compensation Portion Tax Benefit with respect to
such Manager, the Buyer shall deposit the amount thereof in the Special Bonus
Trust for the account of such Manager until such time as the amount so
deposited is equal to the estimated amount of such Manager's Special Bonus
(based upon such Manager's anticipated effective marginal 1998 income tax
rates, using assumptions presented to the Buyer's independent accountants by
such Manager and reasonably approved by the Buyer). Amounts deposited in the
Special Bonus Trust shall be held, invested and reinvested, and disbursed in
accordance with the terms of the Special Bonus Trust Agreement, and upon
disbursement of all of the Special Bonus to which all of the Managers are
entitled, the Special Bonus Trust shall terminate and all remaining funds
therein shall be distributed to the Buyer. The fees and expenses of the trustee
of the Special Bonus Trust shall be paid 50% by the Buyer and 50% by the
Managers (pro rata in accordance with their interests in the corpus of the
Special Bonus Trust), and the Managers' shares of such fees and expenses may be
paid from the funds held for them in the Special Bonus Trust (which shall be
credited against the Special Bonus). Such fees and expenses shall not be deemed
to be Seller Expenses hereunder.
(h) Attached hereto as Exhibit 5.12(h) is an example showing the
calculation of the Special Bonus based upon the assumptions indicated on such
example.
(i) In the event that a Manager believes that the Buyer has
failed to pay when due, or cause to be paid when due, to such Manager all of
the Special Bonus to which such Manager is entitled pursuant to this Section
5.12 in accordance with the terms hereof and such Manager commences or becomes
a party to an arbitration proceeding under this Agreement to enforce such
Manager's claim to such Special Bonus, and the arbitrators determine that the
Buyer unreasonably or in bad faith failed to make such payment in whole or in
part, then the arbitrators may also award to such Manager an amount equal to
the reasonable costs and expenses (including reasonable attorneys' fees)
incurred by such Manager in enforcing such claim, or award such portion thereof
as the arbitrators determine to be just and equitable.
(j) The personal representative(s) and beneficiaries of the
estate of a deceased Manager shall succeed to the rights of such Manager under
this Section 5.12.
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ARTICLE VI
CONDITIONS TO THE BUYER'S OBLIGATIONS
The obligation of the Buyer to consummate the transactions
contemplated hereby shall be subject to the satisfaction (or waiver) at or
prior to the Closing of all of the following conditions:
6.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLERS AND
THE COMPANY.
(a) The Sellers and the Company shall have performed and
complied in all material respects with their respective agreements and
covenants contained herein on, prior to or as of the date of the Closing, as
applicable.
(b) The representations and warranties of the Company
and the Sellers contained herein (as they may be amended pursuant to Section
5.8 hereof, if applicable) shall be true and correct in all material respects
at and as of the date of the Closing as though made at the date of the Closing,
except for representations and warranties that speak as of a specific date or
time other than the date of the Closing, which shall be true as of such date or
time. This condition shall be deemed satisfied unless the failure of the
representations and warranties to be true in the aggregate shall be material to
the transactions contemplated by this Agreement.
(c) The representations and warranties of the Company
and the Sellers set forth in this Agreement shall not contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(d) The Buyer shall have received a certificate of the
Company, dated as of the date of the Closing, certifying as to the fulfillment
of the conditions set forth in this Section 6.1.
6.2. NO PROHIBITION. No order, judgement, ruling, charge, decree
or injunction of any Government Entity shall be in effect which prohibits the
consummation of the transactions contemplated hereby or imposes material
conditions thereon.
6.3. THIRD PARTY CONSENTS. The Sellers, the Company and the
Subsidiaries (as applicable) shall have received all consents, authorizations
and approvals from non-governmental third parties, in form reasonably
acceptable to the Buyer, which are necessary in order to enable (i) the parties
to consummate the transactions contemplated hereby and to (ii) enable the
Company and the Subsidiaries to conduct their businesses after the Closing in
all material respects on the same basis as conducted prior to the date hereof
(the "Required Consents"). The Required Consents are listed on Section 6.3 of
the Disclosure Schedule.
6.4. GOVERNMENTAL CONSENTS. All consents, approvals,
authorizations, exemptions and waivers from Governmental Entities that shall be
required in order to (i) enable the parties to consummate the transactions
contemplated hereby and (ii) enable the Company and the Subsidiaries to conduct
their businesses after the Closing in all material respects on the same basis
as conducted prior to the date hereof (the "Required Government Consents")
shall have
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been obtained. The Required Government Consents are listed on Section 6.4 of
the Disclosure Schedule.
6.5. CLOSING DELIVERIES. The deliveries required to be made by the
Sellers and the Company at the Closing pursuant to Section 2.5(a) and (b) shall
have been made.
6.6. FINANCING. The financing provided for in the Bank Commitment
shall have been closed and the funding contemplated thereby shall have been
obtained by the Buyer, provided that the Buyer shall have used its commercial
best efforts to close such financing and obtain such funding.
6.7. INDEBTEDNESS. After giving effect to the remittance of the
Net Transaction Consideration to the Sellers' Representative and the Escrow
Agent, there shall be no Indebtedness of the Company or the Subsidiaries
outstanding at the Closing other than the Indebtedness described in Section 6.7
of the Disclosure Schedule, and the Other Securities and Claims shall have been
redeemed, cancelled and discharged, as applicable.
6.8. CHANGE OF NOMINEE If requested by Buyer, the Company shall
have caused to be transferred to persons reasonably designated by the Buyer the
shares of capital stock of the Subsidiaries that are not owned of record by the
Company or another Subsidiary.
6.9. EXEMPTION FROM "PARACHUTE PAYMENT" TREATMENT. Prior to the
Closing, the Company and the Subsidiaries shall have taken appropriate action
to secure the exemption under Section 280G(b)(5) of the Code for any payments
made in connection with the transactions contemplated hereby that would, but
for such exemption, constitute "parachute payments" as defined in Section
280G(b)(2) of the Code, and shall have provided the Buyer with evidence thereof
reasonably satisfactory to the Buyer.
ARTICLE VII
CONDITIONS TO THE COMPANY'S AND THE SELLERS' OBLIGATIONS
The obligations of the Company and the Sellers to consummate the
transactions contemplated hereby shall be subject to the satisfaction (or
waiver) at or prior to the Closing of all of the following conditions:
7.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYER
.
(a) The Buyer shall have performed and complied in all
material respects with its agreements and covenants contained herein on, prior
to or as of the date of the Closing, as applicable.
(b) The representations and warranties of the Buyer
contained herein shall be true and correct in all material respects at and as
of the date of the Closing as though made at the date of the Closing, except
for representations and warranties that speak as of a specific date or time
other than the date of the Closing, which shall be true as of such date or
time.
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<PAGE> 39
(c) The Company and the Sellers shall have received a
certificate of the Buyer, dated as of the Closing and signed by the Chairman of
the Buyer, certifying as to the fulfillment of the conditions set forth in this
Section 7. 1.
7.2. NO PROHIBITION. No order, judgement, ruling, charge, decree
or injunction of any Governmental Entity shall be in effect which prohibits the
consummation of the transactions contemplated hereby.
7.3. GOVERNMENTAL CONSENTS. All consents, approvals,
authorizations, exemptions and waivers from Governmental Entities that shall be
required in order to enable the Company and the Sellers to consummate the
transactions contemplated hereby (except for such consents, approvals,
authorizations, exemptions and waivers, the absence of which would not prohibit
consummation of such transactions or render such consummation illegal) shall
have been obtained. Such required consents, approvals, authorizations,
exemptions and waivers from Governmental Entities are listed on Section 7.3 of
the Disclosure Schedule.
7.4. CLOSING DELIVERIES. The deliveries required to be made by the
Buyer at the Closing pursuant to Section 2.5(b) shall have been made.
7.5. SPECIAL BONUS TRUST. The Special Bonus Trust shall have been
established in accordance with Section 5.12 hereof.
ARTICLE VIII
TERMINATION PRIOR TO CLOSING
8.1. TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) By the mutual written consent of the Sellers'
Representative and the Buyer;
(b) By either the Sellers' Representative or the Buyer
in writing, without liability to the terminating party on account of such
termination (except as otherwise provided in Section 8.2), if the Closing shall
not have occurred on or before June 26, 1998; or
(c) By either the Sellers' Representative or the Buyer
if the conditions to such party's obligations shall have become impossible to
satisfy on or before June 26, 1998 (after giving effect to any potential
actions the non-terminating party may propose to take to cure such failure of
condition after reasonable notice from the party proposing to terminate this
Agreement), provided that no party shall be entitled to terminate this
Agreement pursuant to this clause (c) if the reason for such impossibility is
due to a breach by the party proposing to terminate this Agreement.
8.2. EFFECT OF TERMINATION. Termination of this Agreement pursuant
to this Article 8 shall terminate all obligations of the parties hereunder,
except for the obligations under Sections 5.9, 10.4 and 10.7 hereof and the
Confidentiality Agreement; provided, however, that nothing in this Section 8.2
shall relieve or limit the liability hereunder of any party (the "Defaulting
Party")
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<PAGE> 40
to the other party or parties on account of a willful breach of a
representation, warranty or covenant contained herein by the Defaulting Party.
In the case of such a willful breach, in addition to any damages for which the
Defaulting Party may be liable, the Defaulting Party shall reimburse the other
party or parties for any expenses incurred by such party or parties in order to
enforce its or their rights under this Agreement (including reasonable
attorney's fees and expenses).
ARTICLE IX
LIABILITIES OF SELLERS AFTER CLOSING
9.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall not survive the Closing.
The representations and warranties of the Sellers made in this Agreement shall
survive the Closing only to the extent of the indemnity liabilities of the
Sellers with respect thereto as provided in this Article IX, except in the case
of any actual fraud on the part of a Seller.
9.2 SEVERAL REPRESENTATIONS OF SELLERS. Each of the Sellers
hereby severally, but not jointly, represents and warrants, but only with
respect to such Seller and the Shares and Other Securities and Claims of such
Seller, to the Buyer that:
(a) Such Seller is the record and beneficial owner of
the Shares set forth by such Seller's name on Schedule I hereto and the Other
Securities and Claims set forth by such Seller's name on Schedule II hereto,
with full power and authority to transfer such Shares to the Buyer hereunder
and to effect the redemption, cancellation and discharge, as applicable, of the
Other Securities and Claims, and at the Closing, upon remittance of the Net
Transaction Consideration to the Sellers' Representative and the Escrow Agent
in accordance with Section 2.3, the Buyer will acquire good title to such
Shares, free and clear of all Liens other than transfer restrictions imposed on
the Buyer under applicable federal and state securities laws and other than any
Liens created by the Buyer, and such Other Securities and Claims will be
redeemed, cancelled and discharged, as applicable, and will no longer exist.
(b) Except for Shares, which will be purchased by the
Buyer hereunder, and the Other Securities and Claims, which will be redeemed,
cancelled and discharged, as applicable, upon remittance of the Net Transaction
Consideration to the Sellers' Representative at the Closing, and, in the case
of PNC, the Letter of Credit Obligations, such Seller has no claims of any
nature, whether by contract, in tort, or otherwise, against the Company or any
of the Subsidiaries or any of their respective assets except, in the case of a
Seller who is an officer or employee of the Company or any of the Subsidiaries,
claims for accrued salary, benefits, accrued pension benefits and employee
compensation and reimbursement of reasonable and necessary business expenses,
in each case arising and payable in the ordinary course of such Seller's
employment and not then materially overdue. PNC agrees that, upon surrender for
cancellation of the related letters of credit, the Letter of Credit Obligations
shall be discharged and all Liens securing the Letter of Credit Obligations
shall be terminated and released.
(c) To the Knowledge of such Seller, there are no
circumstances or events existing or arising that have a reasonable likelihood
of forming the basis for any claim by such Seller against the Company or any
Subsidiary for indemnification under applicable law or the
45
<PAGE> 41
charter or bylaws (or comparable governing instruments) of the Company or any
Subsidiary or otherwise.
(d) By such Seller's execution hereof, such Seller has
appointed the Sellers' Representative as such and as the agent and
attorney-in-fact for such Seller, to take such actions on behalf of the Seller
as are set forth in Section 2.3, and to otherwise act on behalf of such Seller
as such Seller's agent and attorney-in-fact with respect to all matters
relating to this Agreement and the transactions contemplated hereby until such
time as the Closing shall have been completed , the Escrowed Expense Fund shall
have been disbursed, and such Seller shall have received from said Sellers'
Representative the portion of the Net Transaction Consideration to which such
Seller is entitled; and the Buyer may conclusively rely upon this appointment
until such time as the Closing shall have been completed and all of the
Escrowed Expense Fund shall have been disbursed, or this Agreement has been
terminated prior to the Closing. Upon the remittance of the Net Transaction
Consideration to the Sellers' Representative and the Escrow Agent in accordance
with Section 2.3, such Net Transaction Consideration shall, as between the
Buyer and the Company and its Subsidiaries, on the one hand, and such Seller,
on the other hand, be deemed to have been paid to such Seller as the "Final
Distribution" to such Seller under the Transaction Agreement of all
"Transaction Consideration" thereunder to which such Seller is entitled. As
between the Seller, on the one hand, and the Sellers' Representative, on the
other hand, and as among the Sellers, such Seller hereby confirms that the
portion of the Net Transaction Consideration that such Seller is entitled to
receive under the Transaction Agreement is as set forth on Schedule III hereto.
(e) Such Seller's delivery of such Seller's certificates
for such Seller's Shares at the Closing, or such Seller's surrender for
redemption, cancellation or discharge of any of such Seller's Other Securities
and Claims or the documents or instruments evidencing such Other Securities and
Claims or the redemption, cancellation or discharge thereof, shall constitute
such Seller's confirmation, at and as of the time of the Closing, that such
Seller's representations and warranties in this Section 9.2 are true and
correct and are deemed made at and as of the time of the Closing as though
expressly made at such time.
(f) Such Seller has full power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by such Seller of
this Agreement and the consummation by such Seller (if such Seller is not an
individual) of the transactions contemplated hereby have been duly authorized
by all necessary corporate or other organizational action on the part of such
Seller, including due and valid authorization by the board of directors or
other governing authority of such Seller (as applicable) and, if necessary, the
shareholders or other owners of such Seller, and no other corporate or
organizational proceedings on the part of such Seller are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by such Seller
and constitutes the valid and binding obligation of such Seller, enforceable
against such Seller in accordance with its terms, except to the extent that
such enforceability (i) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors rights
generally, and (ii) is subject to general principles of equity. Except as set
forth in Section 3.4 of the Disclosure Schedule, neither the execution,
delivery and performance by such Seller of this Agreement nor the consummation
by such Seller of the transactions contemplated hereby will, with or without
the giving of notice or the passage of time, or both, (x) violate any provision
of law, rule,
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<PAGE> 42
regulation, order, judgment, writ, injunction or decree applicable to such
Seller or any of such Seller's properties or assets, (y) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any note, bond, mortgage, indenture, license, contract
or agreement to which such Seller is a party or by which such Seller or any of
the assets of such Seller is bound, or result in the imposition of any Lien
(other than Permitted Liens) upon any of the assets of such Seller; or (z)
conflict with or violate any provision of the certificate of incorporation or
bylaws (or substantially equivalent documents) of such Seller (if such Seller
is not an individual), except, in the case of clauses (x) or (y), for
violations, conflicts, breaches, defaults, accelerations, terminations,
modifications, cancellations or failures to give notice or Liens which in the
aggregate would not be reasonably likely to have a Company Material Adverse
Effect and would not prevent or materially delay, hinder or impair the
consummation of the transactions contemplated hereby.
(g) Except as set forth on Section 9.2(g) of the
Disclosure Schedule, there is no claim, action, suit, arbitration, inquiry,
proceeding, or investigation by or before any Governmental Entity, arbitrator
or other person or body authorized by law or contract to adjudicate disputes
("Litigation") pending or, to such Seller's Knowledge, threatened, involving
any of the Sellers in which, individually or in the aggregate, there is a
reasonable likelihood of an adverse outcome that would have a Company Material
Adverse Effect or that would impair the ability of such Seller to perform their
obligations hereunder, or which seeks to enjoin or obtain damages in respect of
the consummation of the transactions contemplated hereby.
(h) Except as set forth in Section 9.2(h) of the
Disclosure Schedule, no consent, approval or authorization of, or exemption by,
or filing with, any Governmental Entity is required on the part of such Seller
in connection with the execution, delivery and performance by such Seller of
this Agreement or the taking of any other action contemplated hereby.
9.3. SEVERAL INDEMNITY BY EACH SELLER. Each of the Sellers hereby
severally but not jointly agrees that such Seller will indemnify and save
harmless the Buyer and its Affiliates from and against any and all loss,
liability, cost or expense (including reasonable attorneys fees) incurred by
the Buyer or its Affiliates arising out of the falsity of any of the several
representations and warranties of such Seller set forth in Section 9.2, as of
the date hereof or as of the time of the Closing; provided, that the liability
of such Seller for indemnity under this Section 9.3 shall be limited to the
portion of the Net Transaction Consideration that such Seller is entitled to
receive under the Transaction Agreement as set forth on Schedule III hereto.
47
<PAGE> 43
9.4. PRO RATA INDEMNITY FOR RETAINED EXPENSES BY ALL SELLERS. The
Sellers, severally but not jointly, hereby agree that they will indemnify and
save harmless the Buyer and its Affiliates from and against any and all
Retained Seller Expenses that are not either (a) withheld from and credited
against the Transaction Consideration in determining the Net Transaction
Consideration at the Closing, or (b) disbursed to the Buyer from the Escrowed
Expense Fund or covered by sufficient funds held in the Escrowed Expense Fund
and not yet disbursed; provided, that (i) the liability of all Sellers for
indemnity under this Section 9.4 that is not paid from the Escrowed Expense
Fund shall be limited to the aggregate Net Transaction Consideration, and (ii)
the liability of each Seller for indemnity under this Section 9.4 shall be
limited to such Seller's pro rata share of the liability of all Sellers for
such indemnity, based upon the percentages set forth on Schedule IV hereto.
9.5. TERMINATION OF STOCKHOLDERS' AGREEMENT. Effective upon the
Closing and the remittance to the Shareholder's Representative and the Escrow
Agent of the Net Transaction Consideration in accordance with Section 2.3, the
Sellers hereby agree that the Stockholders' Agreement, and all rights and
obligations of the parties thereto under the Stockholders' Agreement, shall be
terminated.
ARTICLE X
MISCELLANEOUS
10.1. ENTIRE AGREEMENT. This Agreement (including the Disclosure
Schedule and all Exhibits and Schedules hereto) and the Confidentiality
Agreement constitute the sole understanding of the parties with respect to the
subject matter hereof. Matters disclosed in the Disclosure Schedule pursuant to
any section of this Agreement shall be deemed to be disclosed with respect to
all sections of this Agreement.
10.2. SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto; provided, however, that this
Agreement may not be assigned by any party without the prior written consent of
the other parties and any such attempted assignments shall be null and void,
except that the Buyer may assign its rights under this Agreement (i) to any of
its Affiliates, (ii) to any person succeeding after the Closing to the business
and assets of the Company and the Subsidiaries, and (iii) as collateral
security for any Indebtedness; but no such assignment shall release the Buyer
from any liability hereunder.
10.3. MODIFICATION AND WAIVER. No amendment, modification or
alteration of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by the parties hereto, except
that any of the terms or provisions of this Agreement may be waived in writing
at any time by the party which is entitled to the benefits of such waived terms
or provisions. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether
or not similar). No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof.
10.4. EXPENSES. The Buyer shall bear its own expenses in connection
with this Agreement and the transactions contemplated hereby, including without
limitation the fees and
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<PAGE> 44
expenses of its attorneys, accountants and financial and other advisors. The
Sellers shall bear all of their expenses and all of the expenses of the Company
and its Subsidiaries in connection with this Agreement and the transactions
contemplated hereby, including without limitation the fees and expenses of
their respective attorneys, accountants and financial and other advisors (the
expenses of the Sellers, the Company and the Subsidiaries to be borne by the
Sellers being referred to herein collectively as the "Seller Expenses"), and
shall reimburse the Company for or otherwise credit against the Transaction
Consideration any such Seller Expenses paid or incurred by the Company or the
Subsidiaries. The costs of any environmental or other audits or examinations of
the Company's or the Subsidiaries properties reasonably requested by the Buyer
in connection with its due diligence investigations shall be treated as Seller
Expenses. Section 10.4 of the Disclosure Schedule sets forth all of the Seller
Expenses paid or incurred through the date hereof and the Seller Expenses
currently expected to be incurred after the date hereof, including the name of
each person to whom such Seller Expenses have been, or are currently expected
to be, paid or incurred and identifying any such Seller Expenses that are, or
are expected to be, Retained Seller Expenses. At least five days prior to the
Closing, the Company and the Sellers' Representative shall provide the Buyer
with a draft of the Certificate of Seller Expenses in the form proposed to be
delivered at the Closing and containing all information required to be stated
therein as is then known to the Company and the Sellers' Representative. At
least one day prior to the Closing, the final Certificate of Seller Expenses
shall be delivered to the Buyer, signed by the President of the Company and the
Sellers' Representative.
10.5. NOTICES. Any notice, request, instruction or other document
to be given hereunder by any party hereto to any other party shall be in
writing and shall be given (and will be deemed to have been duly given upon
receipt) by delivery in person, by electronic facsimile transmission, by
overnight courier or by registered or certified mail, postage prepaid,
if to the Company to:
Simplicity Capital Corporation
2 Park Avenue, 12th Floor
New York, NY 10016
Attention: Frank J. Rizzo
Telecopy: 212-372-0628
with a copy to:
Kirkland & Ellis
655 15th Street, N.W., Suite 1200
Washington, D.C. 20005-5793
Attention: Jack M. Feder, Esq.
Telecopy: 202-879-5200
49
<PAGE> 45
if to the Buyer, to:
Conso Products Company
513 North Duncan Bypass
Union, SC 29379
Attention: J. Cary Findlay
Telecopy: 864/427-8820
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center, Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
Attention: J. Norfleet Pruden, III
Telecopy: 704/331-7598
if to the Sellers' Representative, to:
J. Douglas Smith
c/o Harding Service, L.L.C.
330 South Street
Morristown, NJ 07960
Telecopy: 973/540-1693
and if to a Seller, to such Seller's address as set forth beneath such
Seller's signature to this Agreement.
Any such party may change the address to which notices to it are to be directed
by giving notice of such change to the other parties.
10.6. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York (exclusive of
the conflicts of laws principles thereof).
10.7. ARBITRATION. Any controversy, claim or dispute between the
parties arising out of or relating to this Agreement, or the breach hereof,
shall be settled by arbitration in Charlotte, North Carolina, in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
by a panel of three (3) impartial arbitrators selected in accordance with such
Rules; provided, that if none of the Buyer, the Company or any Subsidiary of
the Company is party to such arbitration, such arbitration shall be conducted
in New York, New York. Judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof. The costs of the
arbitration may be assessed against any or all of the parties to the
arbitration as part of the award, as the arbitrators deem just and reasonable.
10.8. PUBLIC ANNOUNCEMENTS. Prior to the Closing, none of the
parties shall make any public statements, including, without limitation, any
press releases, with respect to this Agreement and the transactions
contemplated hereby without the prior written consent of the
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<PAGE> 46
other parties except as such party in good faith believes may be required by
applicable law or the rules of the Nasdaq Stock Market or pursuant to any
Contract (in which case the disclosing party will use its reasonable best
efforts to consult with the other party in advance as to the contents and
timing thereof). It is understood and agreed that, promptly after the execution
and delivery hereof, the Buyer will issue a press release disclosing this
Agreement and the transactions contemplated hereby, and may file a report on
Form 8-K with the U.S. Securities and Exchange Commission containing such
disclosures and including as an exhibit a copy of this Agreement.
10.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
* * *
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<PAGE> 47
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
CONSO PRODUCTS COMPANY
By: /s/ J. Cary Findlay
-------------------------------------
J. Cary Findlay
Chairman
SIMPLICITY CAPITAL CORPORATION
By: /s/ Louis R. Morris
-------------------------------------
Louis R. Morris
President
By: /s/ J. Douglas Smith
-------------------------------------
J. Douglas Smith,
as Sellers' Representative
By: /s/ Louis R. Morris
-------------------------------------
Louis R. Morris, as Escrow Agent
[SIGNATURES OF THE SELLERS CONTINUED ON THE FOLLOWING PAGES]
52
<PAGE> 48
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Frank E. Walsh, Jr.
----------------------------
Signature: /s/ Frank E. Walsh, Jr.
---------------------------------
Capacity (if applicable):
Notice Address: 330 South Street, P.O. Box 1975
Morristown, NJ 07962-1975
53
<PAGE> 49
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Frank E. Richardson
-----------------------------------
Signature: /s/ Frank E. Richardson
----------------------------------------
Capacity (if applicable):
Notice Address: 245 Park Avenue, 41st Floor
New York, NY 10167
54
<PAGE> 50
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: William E. Simon
-----------------------------------
Signature: /s/ J. Peter Simon
----------------------------------------
Capacity (if applicable): Attorney in Fact
Notice Address: 310 South Street
Morristown, NJ 07962
55
<PAGE> 51
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: John D. Howard
-----------------------------------
Signature: /s/ John D. Howard
----------------------------------------
Capacity (if applicable):
Notice Address: 80 Irving Place
New York, NY 10003
56
<PAGE> 52
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Hugh J. Byrnes
-----------------------------------
Signature: /s/ Hugh J. Byrnes
----------------------------------------
Capacity (if applicable):
Notice Address: 330 South Street, P.O. Box 1975
Morristown, NJ 07962-1975
57
<PAGE> 53
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Manfred L. Steyn
-----------------------------------
Signature: /s/ Manfred L. Steyn
----------------------------------------
Capacity (if applicable):
Notice Address: 330 South Street
Morristown, NJ 07960
58
<PAGE> 54
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Vanderlip Children's 1988 Trust
-----------------------------------
Signature: /s/ Henrik N. Vanderlip
----------------------------------------
Capacity (if applicable): Trustee
Notice Address: c/o Viking Capital Partners, Inc.
133 River Road
Cos Cob, CT 06807
59
<PAGE> 55
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Keith A. Hightower
-----------------------------------
Signature: /s/ Keith A. Hightower
----------------------------------------
Capacity (if applicable):
Notice Address: 330 South Street
Morristown, NJ 07960
60
<PAGE> 56
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Kurt T. Borowsky
-----------------------------------
Signature: /s/ Kurt T. Borowsky
----------------------------------------
Capacity (if applicable):
Notice Address: 330 South Street, P.O. Box 1975
Morristown, NJ 07962
61
<PAGE> 57
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Richard S. Linhart
-----------------------------------
Signature: /s/ Richard S. Linhart
----------------------------------------
Capacity (if applicable):
Notice Address: Opus Capital Partners
1776 Broadway, 18th Floor
New York, NY 10019
62
<PAGE> 58
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Thomas E. Giarratana
-----------------------------------
Signature: /s/ Thomas E. Giarratana
----------------------------------------
Capacity (if applicable):
Notice Address: 330 South Street
Morristown, NJ 07960
63
<PAGE> 59
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Julius Koppelman
-----------------------------------
Signature: /s/ Julius Koppelman
----------------------------------------
Capacity (if applicable):
Notice Address: 59 Stetson Way
Princeton, NJ 08540
64
<PAGE> 60
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: J. Douglas Smith
-----------------------------------
Signature: /s/ J. Douglas Smith
----------------------------------------
Capacity (if applicable):
Notice Address: 330 South Street, P.O. Box 1975
Morristown, NJ 07962-1975
65
<PAGE> 61
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Gary L. Moore
-----------------------------------
Signature: /s/ Gary L. Moore
----------------------------------------
Capacity (if applicable):
Notice Address: Gary L. Moore
425 Bellevue Avenue
Newport, RI 02840
66
<PAGE> 62
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Robert O. Meyer
-----------------------------------
Signature: /s/ Robert O. Meyer
----------------------------------------
Capacity (if applicable):
Notice Address: 330 South Street
Morristown, NJ 07960
67
<PAGE> 63
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: CONTINENTAL ASSURANCE COMPANY
on behalf of its separate account
CONTINENTAL ASSURANCE COMPANY
Guaranteed Investment Fund
Signature: /s/ Richard W. Dubberke
----------------------------------------
Capacity (if applicable): Vice President
Notice Address: CNA
CNA Plaza, 23 - S
Chicago, IL 60685
68
<PAGE> 64
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Judith Raymond Hadjandreas
-----------------------------------
Signature: /s/ Judith Raymond Hadjandreas
----------------------------------------
Capacity (if applicable):
Notice Address: 283D South Broadway
Tarrytown, NY 10591
69
<PAGE> 65
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Louis R. Morris
-----------------------------------
Signature: /s/ Louis R. Morris
----------------------------------------
Capacity (if applicable):
Notice Address: 19 Talcott Road
Rye Brook, NY 10573
70
<PAGE> 66
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Frank J. Rizzo
-----------------------------------
Signature: /s/ Frank J. Rizzo
----------------------------------------
Capacity (if applicable):
Notice Address: 74 Wintercress Lane
East Northport, NY 11731
71
<PAGE> 67
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Louis S. Oltman
-----------------------------------
Signature: /s/ Louis S. Oltman
----------------------------------------
Capacity (if applicable):
Notice Address: 51 Vernasa Drive
Langhorne, PA 19053
72
<PAGE> 68
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Gordon B. Robinson
-----------------------------------
Signature: /s/ Gordon B. Robinson
----------------------------------------
Capacity (if applicable): VP International
Notice Address: 9 Miller Place
Greenmount Park
Falkirk
Stirlingshire FK28QB Scotland UK
73
<PAGE> 69
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Grace Brothers, Ltd.
----------------------------------------
Signature: /s/ Bradford T. Whitmore
----------------------------------------
Capacity (if applicable): General Partner
Notice Address: 1560 Sherman Avenue,
Ste 900
Evanston, IL 60201
74
<PAGE> 70
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Abbie Small
-----------------------------------
Signature: /s/ Abbie Small
----------------------------------------
Capacity (if applicable):
Notice Address: 22 Green Meadow Blvd.
Middletown, NJ 07748
75
<PAGE> 71
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Paul J. Isaac
-----------------------------------
Signature: /s/ Paul J. Isaac
----------------------------------------
Capacity (if applicable):
Notice Address: 7 Douglas Lane
Larchmont, NY 10538
76
<PAGE> 72
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Hare & Co.
-----------------------------------
Signature: /s/ Vincent Nardon
----------------------------------------
Capacity (if applicable): Assistant Vice President
Notice Address:
----------------------------------------
----------------------------------------
----------------------------------------
77
<PAGE> 73
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: USF&G Company
-----------------------------------
Signature: /s/ Edward B. Meigs
----------------------------------------
Capacity (if applicable): Vice President
Notice Address: 6225 Smith Avenue
Baltimore, MD 21209
78
<PAGE> 74
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Pacholder Associates, Inc.
-----------------------------------
Signature: /s/ James P. Shanahan, Jr.
----------------------------------------
Capacity (if applicable): Executive Vice President
Notice Address: Pacholder Associates, Inc.
8044 Montgomery Road, Suite 382
Cincinnati, Ohio 4523
79
<PAGE> 75
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: AIL & CO.
-----------------------------------
Signature: /s/ Jerry K. Anderson
----------------------------------------
Capacity (if applicable): Partner
Notice Address: %AmerUs Life
699 Walnut, 17th Floor
Des Moines, IA 50309
80
<PAGE> 76
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: American Investors Life Ins Co
---------------------------------
Signature: /s/ Tim Reimer
--------------------------------------
Capacity (if applicable): Senior Vice President
Notice Address: % AmerUs Life
699 Walnut, 17th Floor
Des Moines, IA 50309
81
<PAGE> 77
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Hare & Co.
---------------------------------
Signature: /s/ Hare & Co. (NY)
--------------------------------------
Capacity (if applicable):
Notice Address: Fifth Third Bank
38 Fountain Sq. Plaza, MD 109062
Cincinnati, OH 45263
Send Additional Notice To: Pacholder Assoc
Attention: Mark Premger
8044 Montgomery Road, Ste 382
Cincinnati, OH 45236
82
<PAGE> 78
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Pacholder Heron Limited Partnership
------------------------------------
Signature: /s/ James P. Shanahan
-----------------------------------------
Capacity (if applicable): Manager of OP General Partners, LLC
General Partner
Notice Address: c/o Pacholder Associates, Inc.
8044 Montgomery Road, Suite 382
Cincinnati, OH 45236
83
<PAGE> 79
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Van Beuren Management Trust
-----------------------------------
Signature: /s/ Kurt T. Borowsky
----------------------------------------
Capacity (if applicable): Trustee
Notice Address: 330 South Street, P.O. Box 1975
Morristown, NJ 07962
84
<PAGE> 80
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: E. Burke Ross, Jr. Family Trust I
----------------------------------
Signature: /s/ Linda D'Addario
----------------------------------------
Capacity (if applicable): Trustee
Notice Address: P.O. Box 1975
330 South Street
Morristown, NJ 07692-1975
85
<PAGE> 81
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Frank J. Rizzo, as Trustee under the
-------------------------------------
Trust Agreement dated 9/7/90
-------------------------------------
Signature: /s/ Frank J. Rizzo
------------------------------------------
Capacity (if applicable): Trustee
Notice Address: 2 Park Avenue - 12th Floor
New York, NY 10016
86
<PAGE> 82
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Franca M. Ferracane
Signature: /s/ Franca M. Ferracane
-----------------------
Capacity (if applicable):
Notice Address: 330 South Street
Morristown, NJ 07960
87
<PAGE> 83
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: PNC Bank, National Association,
------------------------------------
successor by merger to
------------------------------------
Midlantic National Bank
------------------------------------
Signature: /s/ Robert Anchundia
-----------------------------------------
Capacity (if applicable): Assistant Vice President
Notice Address: PNC Bank, National Association
c/o PNC Business Credit
Two Tower Center, 8th Floor
East Brunswick, NJ 08816
88
<PAGE> 84
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Mellon Bank, N.A.
-----------------------------------
Signature: /s/ Gary A. Best
----------------------------------------
Capacity (if applicable): Vice President
Notice Address: Mellon Bank
1735 Market Street - 7th Floor
Philadelphia, PA 19103
89
<PAGE> 85
[Seller Signature Page to Stock Purchase Agreement among Conso Products Company,
as the "Buyer," Simplicity Capital Corporation, as the "Company," and the
Shareholders of Simplicity Capital Corporation, as the "Sellers"]
Name of Seller: Bear, Stearns & Co., Inc.
----------------------------------------
Signature: /s/ Donald R. Mullen, Jr.
----------------------------------------
Capacity (if applicable): Bear Stearns & Co., Inc.
Senior Managing Director
Notice Address:
----------------------------------------
----------------------------------------
----------------------------------------
90
<PAGE> 86
NOTE: The Schedules and Exhibits to this Exhibit 2 listed in the Table
of Contents hereof are omitted from the filing of this report on Form 8-K
pursuant to Item 601(b)(2) of Regulation S-K. The Registrant hereby agrees to
furnish supplementally a copy of any omitted schedule to the Commission upon
request.
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<PAGE> 1
EXHIBIT 10.1
MODIFIED AND RESTATED LOAN AGREEMENT
THIS MODIFIED AND RESTATED LOAN AGREEMENT dated as of June 19, 1998
(the "Loan Agreement") by and among CONSO PRODUCTS COMPANY, a South Carolina
corporation ("Conso"), and SIMPLICITY PATTERN CO., INC., a Delaware corporation
("Simplicity" -- hereinafter Conso and Simplicity are sometimes individually
referred to as a "Borrower" or collectively referred to as the "Borrowers"); and
NATIONSBANK, N.A., a national banking association existing under the
laws of the United States and having offices in Charlotte, North Carolina (the
"Bank").
RECITALS:
A. The Borrowers have requested that the Bank provide (i)
revolving loans of up to $30,000,000, (pound)7,000,000 of which would be
available for direct borrowing by British Trimmings Limited, an English company
("Trimmings"), and the balance of which would be available for the Borrowers,
(ii) letters of credit in an amount up to $3,000,000 and (iii) a term loan of
$20,000,000. The proceeds of the loans will be used to acquire 100% of the
capital stock of Simplicity Capital Corporation, a Delaware corporation ("SCC")
that is the indirect parent of Simplicity, to refinance existing indebtedness of
Conso and Trimmings to the Bank and to finance the ongoing working capital needs
of the Borrowers and Trimmings.
B. The Bank is willing to make the above-described credit
available to the Borrowers and Trimmings in accordance with the terms of this
Loan Agreement.
C. This Loan Agreement also amends and restates in its entirety
the terms and conditions of the Loan Agreement, dated as of November 25, 1996,
as amended as of June 5, 1997 and November 17, 1997, by and between Conso and
the Bank.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the Borrowers and the Bank hereby agree as
follows:
ARTICLE I
Definitions
1.01 For the purposes hereof:
"Advances" shall have the meaning given to such term in
Section 2.01;
"Business Day" means a day on which banks are open for the
transaction of business of the nature required in this Loan Agreement
in Charlotte, North Carolina;
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<PAGE> 2
"Consistent Basis" in reference to the application of
Generally Accepted Accounting Principles, means that the accounting
principles observed in the period referred to are comparable in all
material respects to those applied in the most recent preceding period
except as to any changes required by the American Institute of
Certified Public Accountants or the Financial Accounting Standards
Board;
"Consolidated EBITDA" means, for any 12 month period of
computation, the sum of Consolidated Net Income for such period plus
interest, income taxes, depreciation and amortization to the extent
deducted in determining such Consolidated Net Income;
"Consolidated Fixed Charge Coverage Ratio" means for any
fiscal quarter, the ratio of (x) Consolidated EBITDA minus capital
expenditures (other than capital expenditures made in connection with
the construction of Conso's distribution and dyehouse facilities and
related relocation and upfitting costs in the current facilities in
Union, South Carolina) minus income taxes (each computed for the 12
month period then ended) to (y) current maturities of Consolidated
Funded Indebtedness plus current maturities of capitalized leases plus
interest plus dividends (each computed for such 12 month period);
"Consolidated Funded Indebtedness" means as of the date of
determination, all Indebtedness of Conso and its Subsidiaries,
determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles applied on a Consistent Basis, which by
its terms matures more than one year after the date of calculation, and
any such Indebtedness maturing within one year from such date which is
renewable or extendable at the option of the obligor to a date more
than one year from such date including, in any event, all Indebtedness
under this Loan Agreement;
"Consolidated Net Income" means for any period of computation,
the net income of Conso and its Subsidiaries, determined on a
consolidated basis in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis;
"Consolidated Tangible Net Worth" means at any time,
consolidated net stockholders' equity, determined in accordance with
Generally Accepted Accounting Principles applied on a Consistent Basis
minus the book value of assets which would be treated as intangibles
under Generally Accepted Accounting Principles, including, but not
limited to, goodwill, trade names, trademarks, copyright, patents and
unamortized debt discount and expenses;
"Dollar Advances" shall have the meaning given to such term in
Section 2.01;
"Dollar Note" shall have the meaning given to such term in
Section 2.03;
"Exchange Rate" means, in relation to the purchase of one
currency (for purposes of this definition the "first currency") with
another currency (for purposes of this definition the "second
currency") on a given date, the Bank's spot rate of exchange, for the
amount in question, in the London interbank market at or about 11:00
a.m. (Charlotte,
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<PAGE> 3
North Carolina time) on such date for the purchase of the first
currency with the second currency, for delivery two Business Days
later;
"Financing Statements" means the financing statements and all
renewals and amendments thereto, whereby the Bank perfects its security
interest in the collateral described therein;
"Generally Accepted Accounting Principles" means those
principles of accounting set forth in pronouncements of the Financial
Accounting Standards Board, the American Institute of Certified Public
Accountants or which have other substantial authoritative support and
are applicable in the circumstances as of the date of a report, as such
principles are from time to time supplemented and amended;
"Guaranty" means (i) the Guaranty Agreement, dated as of the
date hereof, whereby the Borrowers guarantee the obligations of
Trimmings to the Bank under the Sterling Note and (ii) the Guaranty
Agreement, dated as of the date hereof, whereby SCC and Simplicity
Holdings, Inc. guarantee the obligations of the Borrowers to the Bank;
"Indebtedness" of any Person at any date means:
(a) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the
ordinary course of business (and not incurred through the
borrowing of money) and payable in accordance with customary
practices);
(b) any other indebtedness which is evidenced by
a note, bond, debenture or similar instrument,
(c) all capital lease obligations of such
Person,
(d) all obligations of such Person in respect of
outstanding letters of credit, acceptances and similar
obligations created for the account of such Person, and
(e) all liabilities secured by any lien on any
property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof.
"Letter of Credit Applications" shall have the meaning given
to such term in Section 2.07 hereof;
"Letter of Credit Obligations" shall have the meaning given to
such term in Section 2.07 hereof;
"Letters of Credit" shall have the meaning given to such term
in Section 2.07 hereof;
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<PAGE> 4
"Loan Documents" means this Loan Agreement, the Notes, the
Security Agreement, the Mortgages, the Financing Statements, the
Guaranty and the Letter of Credit Applications;
"Mortgages" means mortgages on the Borrower's facilities in
Union, South Carolina and Simplicity's facility in Niles, Michigan;
"Notes" means a collective reference to the Dollar Note, the
Term Note and the Sterling Note;
"Permitted Liens" shall mean, when used with respect to
Conso's and Simplicity's assets (real or personal, tangible or
intangible), any of the following liens or encumbrances:
(i) liens securing any indebtedness
(specifically including any liens created under any of the
Loan Documents or heretofore existing in favor of the Bank) to
the Bank or any of its successors or assigns;
(ii) liens imposed by mandatory provisions of law
of carriers, warehousemen, mechanics and materialmen incurred
in the ordinary course of business;
(iii) liens incurred in the ordinary course of
business in connection with worker's compensation,
unemployment insurance or other forms of governmental
insurance or benefits;
(iv) liens for taxes, assessments or governmental
charges or levies if the underlying obligations for the same
are not delinquent or are being contested in good faith and
with due diligence by appropriate proceedings;
(v) liens set forth on Exhibit A hereto; and
(vi) liens incurred in the ordinary course of
business that are not material to Conso's consolidated
financial position;
(vii) extensions or renewals of any Permitted
Lien.
"Person" means an individual, partnership, limited liability
company, corporation, trust, unincorporated organization, association,
joint venture or a government or agency or political subdivision
thereof;
"Revolving Loan Committed Amount" shall have the meaning given
to such term in Section 2.01;
"Security Agreement" means the Security Agreement, dated as of
the date hereof, whereby Conso and Simplicity grant to the Bank a
security interest in all of their United States personal property
assets, tangible or intangible, whether now owned or hereinafter
acquired, as set forth therein;
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<PAGE> 5
"Sterling Advances" shall have the meaning given to such term
in Section 2.01;
"Sterling Note" shall have the meaning given to such term in
Section 2.02;
"Subsidiary" or "Subsidiaries" means any corporation or
corporations of which more than fifty percent (50%) of the voting stock
at the time of computation is owned, directly or indirectly, by Conso
or a Subsidiary;
"Termination Date" means December 1, 2000; provided, however,
the Bank in its sole discretion may elect to extend such date for
additional two-year periods upon the request of Conso; provided
further, that in the event the Bank elects not to extend the
Termination Date or any extension thereof for an additional two-year
period in accordance with the request of Conso, the Bank shall give
Conso notice thereof at least 60 days prior to the end of the
applicable period (regardless of whether Conso shall have theretofore
formally requested an extension);
"Term Loan" shall have the meaning given to such term in
Section 2.08.
"Term Note" shall have the meaning given to such term in
Section 2.08.
"Trimmings" shall have the meaning given to such term in
Recital A hereof; and
"Trimmings Company" means a collective reference to Trimmings
and each of its Subsidiaries.
1.02 All accounting terms not specifically defined herein shall be
construed in accordance with Generally Accepted Accounting Principles applied on
a Consistent Basis.
ARTICLE II
Revolving Loans, Letters of Credit and Term Loan
2.01 The Bank agrees, on the terms herein set forth, to make
revolving loan advances (the "Advances") from time to time during the period
from the date hereof to the Termination Date in an amount equal to $30,000,000
(or such higher or lesser amount as the parties hereto may from time to time
agree) (the "Revolving Loan Committed Amount"). The Bank agrees that a portion
of the Advances shall be available to Trimmings for direct borrowings in U.K.
Pounds Sterling (the "Sterling Advances") in an aggregate amount up to
(pound)7,000,000 at any time outstanding. The Bank agrees that the remaining
portion of the Advances shall be available to the Borrowers in U.S. dollars (the
"Dollar Advances"). Within the limits set forth herein and in the Sterling Note
(as hereinafter defined) and the Dollar Note (as hereinafter defined), the Bank
shall make Advances, accept payments and prepayments pursuant to the terms
hereof and readvance any amount so paid or prepaid.
2.02 The Sterling Advances shall be made, shall be repaid and shall
bear interest in accordance with the terms of that certain Promissory Note of
even date herewith executed by
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<PAGE> 6
Trimmings in favor of the Bank in the original principal amount of up to
(pound)7,000,000 (the "Sterling Note"), the terms of which are incorporated
herein by reference.
2.03 The Dollar Advances shall be made, shall be repaid and shall
bear interest in accordance with the terms of that certain Promissory Note of
even date herewith executed by the Borrowers in favor of the Bank in the
original principal amount of up to $30,000,000 (the "Dollar Note"), the terms of
which are incorporated herein by reference.
2.04 If the U.S. dollar equivalent of the outstanding principal
balance of the Sterling Note (based upon the most recently available Exchange
Rate) plus the outstanding principal balance of the Dollar Note plus the then
outstanding Letter of Credit Obligations shall at any time exceed U.S.
$33,000,000, the Borrowers shall within five Business Days after receiving
notice thereof from the Bank make a repayment to the Bank for purposes of
eliminating such excess, with such repayment to be applied first to the Dollar
Note and then to the Sterling Note to the extent of any surplus payment amount.
The Borrowers agree to deliver to the Bank within 15 days after the end of each
month a certificate setting forth as of the last day of such month (i) the U.S.
dollar equivalent of the outstanding principal balance of the Sterling Note
(based upon the Exchange Rate as of the last day of such month), (ii) the
outstanding principal balance of the Dollar Note, (iii) the outstanding Letter
of Credit Obligations, (iv) the sum of items (i) and (ii) above and (v) and the
difference between the Revolving Loan Committed Amount and the sum of items (i)
and (ii).
2.05 The obligation of the Bank to make any Advance or to issue any
Letter of Credit shall be subject to the satisfaction of the following
conditions:
(a) the representations and warranties set forth in
Article IV hereof shall be true and correct in all material respects as
of the day of the making of such Advance or the issuance of such Letter
of Credit, except to the extent any such representation or warranty
relates to a prior date;
(b) at the time of the making of and immediately after
the making of such Advance or the issuance of such Letter of Credit
there shall have occurred or be continuing no Event of Default, or
event which upon notice or lapse of time or both would constitute an
Event of Default; and
(c) immediately after the making of such Advance or the
issuance of such Letter of Credit, the sum of the U.S. dollar
equivalent of the outstanding principal balance of the Sterling Note
(based upon the most recently available Exchange Rate) plus the
outstanding principal balance of the Dollar Note plus the then
outstanding Letter of Credit Obligations shall not exceed U.S.
$33,000,000.
Each Advance made at the request of either Borrower or Trimmings, as the case
may be, hereunder shall be deemed to be a reaffirmation on the date of such
Advance as to the matters specified in subsections (a) and (b) hereof.
2.06 The Borrowers shall have the right from time to time, upon
written notice to the Bank, to voluntarily reduce the Revolving Loan Committed
Amount; provided, however, if upon such reduction the U.S. dollar equivalent of
the outstanding principal balance of the Sterling
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<PAGE> 7
Note (based upon the most recently available Exchange Rate) plus the outstanding
principal balance of the Dollar Note shall exceed such reduced Revolving Loan
Committed Amount, the Borrowers shall make a repayment to the Bank for purposes
of eliminating such excess, with such repayment to be applied first to the
Dollar Note and then to the Sterling Note to the extent of any surplus payment
amount.
2.07 The Bank also agrees to issue standby and documentary letters
of credit (the "Letters of Credit") on the Borrowers' application from time to
time at the Borrowers' request in accordance with the following terms and
conditions:
(a) The Borrowers will execute a letter of credit
application on the Bank's standard form in connection with the issuance
of each Letter of Credit (hereinafter the "Letter of Credit
Applications");
(b) Each Letter of Credit shall be in the Bank's then
customary form for letters of credit of this type;
(c) No Letter of Credit shall have a term in excess of
one year;
(d) No Letter of Credit shall have an expiration date
more than six months beyond the Termination Date;
(e) (i) The aggregate undrawn amounts of the Letters
of Credit at any time outstanding plus the outstanding principal amount
of amounts drawn under the Letters of Credit and not reimbursed by the
Borrowers (the "Letter of Credit Obligations") shall not exceed
$3,000,000 and (ii) the Letter of Credit Obligations plus the
outstanding principal balance of the Dollar Advances plus the U.S.
dollar equivalent of the Sterling Advances (based upon the most
recently available Exchange Rate) shall not exceed U.S. $33,000,000;
(f) The Bank is authorized to reimburse itself for
amounts drawn under the Letters of Credit by disbursing directly to
itself proceeds of the Dollar Advances;
(g) Amounts drawn under the Letters of Credit shall be
payable in accordance with the terms of the Letter of Credit
Applications; and
(h) The Borrowers shall pay the Bank a fee with respect
to each standby Letter of Credit equal to 1% per annum on the amount of
such Letter of Credit for the period commencing on the date of its
issuance through the date of its expiration, such fee to be payable
quarterly in arrears. The Borrowers shall pay the Bank such fees with
respect to the documentary Letters of Credit as are agreed to by the
Borrowers and the Bank from time to time.
(i) If at any time after the date hereof, and from time
to time, the Bank reasonably determines that the adoption or
modification of any applicable law, rule or regulation regarding
taxation, the Bank's required levels of reserves, deposits, insurance
or capital (including any allocation of capital requirements or
conditions), or similar requirements, or any interpretation or
administration thereof by any governmental authority, central
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<PAGE> 8
bank or comparable agency charged with the interpretation,
administration or compliance of the Bank with any of such requirements,
has or would have the effect of (i) increasing the Bank's costs
relating to the Letters of Credit hereunder, or (ii) reducing the yield
or rate of return of the Bank on the Letters of Credit hereunder, to a
level below that which the Bank could have achieved but for the
adoption or modification of any such requirements, the Borrowers shall,
within 15 days of any written request (which request shall state in
reasonable detail the basis therefor) by the Bank, pay to the Bank such
additional amounts as will compensate the Bank for such increase in
costs or reduction in yield or rate of return of the Bank for the
period commencing 90 days prior to the date of such written request.
Upon determining in good faith that any additional amounts will be
payable pursuant to this Section, the Bank will give prompt written
notice thereof to the Borrowers, which notice shall set forth in
reasonable detail the basis of the calculation of such additional
amounts. Nothing herein contained shall be construed or so operate as
to require the Borrowers to pay any interest, fees, costs or charges
greater than is permitted by applicable law.
2.08 The Bank agrees to make a term loan of $20,000,000 to the
Borrowers on the date hereof (the "Term Loan"). The Term Loan shall be paid and
shall bear interest in accordance with further terms of that certain Promissory
Note of even date herewith executed by the Borrowers in favor of the Bank in the
original principal amount of $20,000,000 (the "Term Note), the terms of which
are incorporated herein by reference.
ARTICLE III
Security
3.01 The Borrowers will deliver the following documents:
(a) the Mortgages;
(b) the Security Agreement;
(c) the Financing Statements; and
(d) the Guaranty.
The collateral granted to the Bank by the Borrowers under the Security
Agreement and the Mortgages secures the obligations of the Borrowers to the Bank
under this Loan Agreement, the Dollar Note, the Term Note and the Guaranty. The
Borrowers have guaranteed the obligations of Trimmings to the Bank under the
Sterling Note pursuant to the Guaranty.
3.02 At the request of the Bank, the Borrowers will execute by
their duly authorized officers, alone or with the Bank, any certificate,
instrument, statement or document and will procure any such certificate,
instrument, statement or document (and pay all reasonable connected costs) which
the Bank reasonably deems necessary to preserve the security interest of the
Bank contemplated hereby.
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<PAGE> 9
3.03 The Bank agrees to release its lien and/or security interest
in the Borrowers' real estate and machinery and equipment upon the receipt by
the Bank of audited financial statements of the Borrowers confirming that the
Borrowers' ratio of Consolidated Funded Indebtedness (as of the date of such
financial statements) to Consolidated EBITDA (for the four fiscal quarterly
periods ending as of the date of such financial statements) is less than 1.0 to
1.0; provided, however, the Bank shall not be obligated to release its lien
and/or security interest as described above if an Event of Default, or an event
which constitute such an Event of Default but for the requirement that notice be
given or time elapse or both, then exists.
ARTICLE IV
Representations and Warranties
4.0l The Borrowers represent and warrant that:
(a) (i) Conso and each of its Subsidiaries is a
corporation, duly organized, validly existing and in good
standing under the laws of the jurisdictions in which they are
incorporated;
(ii) Conso and each of its Subsidiaries has the
corporate power and authority to own its properties and assets
and to carry on its business as now being conducted and is
qualified to do business in every jurisdiction in which, by
reason of the character of its business, it is required to
qualify as a foreign corporation (other than those
jurisdictions where the failure to so qualify could not be
reasonably expected to subject any such Person to any material
liability or disability);
(iii) Each Borrower has the corporate power and
authority to execute and perform this Loan Agreement, to
borrow hereunder and to execute and deliver each of the Loan
Documents to which it is a party, and all other certificates,
instruments and documents with respect to the indebtedness of
each Borrower hereunder;
(iv) Trimmings has the corporate power and
authority to execute and perform the Sterling Note, to borrow
thereunder and to execute and deliver all other certificates,
instruments and documents with respect to the indebtedness of
Trimmings thereunder;
(v) when executed and delivered, the Loan
Documents will be valid and binding obligations of Conso,
Simplicity and Trimmings enforceable in accordance with their
respective terms, except as enforceability (i) may be limited
by bankruptcy, insolvency, moratorium, reorganization or other
similar laws relating to creditors rights generally and (ii)
is subject to general principles of equity;
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(vi) the material Subsidiaries of Conso as of the
date hereof are set forth on Exhibit B attached hereto and
except as set forth on Exhibit B, Conso has no material
Subsidiaries;
(b) the execution, delivery and performance of the Loan
Documents:
(i) have been duly authorized by all requisite
corporate action of Conso, Simplicity and Trimmings required
for the lawful execution and delivery thereof;
(ii) do not violate any provisions of law, any
order of any court or other agency of government or the
charter documents or by-laws (or any other applicable organic
document) of Conso, Simplicity or Trimmings;
(iii) will not be in conflict with, result in a
breach of or constitute an event of default nor an event
which, upon notice or lapse of time, or both, would constitute
such an event of default under any indenture, agreement or
other instrument to which Conso, Simplicity or Trimmings is a
party, except for any such conflict, breach or default that
could not be reasonably expected to have a material adverse
effect on Conso's consolidated financial condition;
(iv) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of Conso,
Simplicity or Trimmings except to the extent any liens are
created by such Loan Documents;
(c) (i) Conso has heretofore furnished the Bank with
an (A) audited consolidated balance sheet of Conso and its
Subsidiaries as of June 28, 1997 and the related audited
consolidated statements of operations for the 12 months then
ended and the notes thereto and (B) an unaudited consolidated
balance sheet of Conso and its Subsidiaries as of March 28,
1998 and the related unaudited consolidated statements of
operations for the nine months then ended. Such financial
statements have been prepared in accordance with Generally
Accepted Accounting Principles applied on a Consistent Basis
throughout the period involved (except that the unaudited
financial statements are subject to normal year-end
adjustments and lack certain notes); the consolidated balance
sheets and the notes thereto present fairly in all material
respects the financial position of Conso and its Subsidiaries
as of the dates thereof, and the consolidated statements of
operations and the notes thereto present fairly in all
material respects the results of the operation of Conso and
its Subsidiaries for the periods indicated;
(ii) since the date of the financial statements
described in Section 4.01(c)(i) hereinabove, except for (A)
matters disclosed in documents and reports filed by Conso with
the United States Securities
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and Exchange Commission and (B) the acquisition of all of the
outstanding capital stock of SCC, there has been no material
adverse change in the condition, financial or otherwise, of
Conso and its Subsidiaries nor have their businesses or
properties been adversely affected as a result of any fire,
explosion, earthquake, accident, strike, lockout, combination
of workers, flood, embargo, acts of God or by cancellation or
loss of any major contract;
(d) there is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or agency or
arbitral body now pending or, to the knowledge of Conso, threatened by
or against or affecting Conso or any of its Subsidiaries or any
properties or rights of Conso or any of its Subsidiaries which, if
adversely determined, would materially impair the right of Conso or any
of its Subsidiaries to carry on business substantially as now conducted
or could be reasonably expected to materially adversely affect the
financial condition, business or operations of Conso or any of its
Subsidiaries;
(e) (i) Conso has filed or caused to be filed all
federal and all material state and local tax returns which are required
to be filed and has paid or caused to be paid or is otherwise
contesting in good faith all taxes as shown on said returns or on any
assessment received by it, to the extent that such taxes have become
due and (ii) each of its Subsidiaries has filed or caused to be filed
all material tax returns which are required to be filed and have paid
or caused to be paid or is otherwise contesting in good faith all taxes
as shown on said returns or on any assessment received by them, to the
extent that such taxes have become due (except with respect to clauses
(i) and (ii), where the failure to file any such return or to pay any
such taxes could not be reasonably expected to have a material adverse
effect on Conso and its Subsidiaries taken as a whole);
(f) neither Conso nor any of its Subsidiaries is
(i) a party to any judgment, order, decree or
any agreement or instrument or subject to corporate
restrictions materially adversely affecting its business,
properties or assets, operations or condition (financial or
otherwise);
(ii) in default in the performance, observance or
fulfillment of any material obligations, covenants or
conditions contained in any material agreement or instrument
to which it is a party;
(g) no part of the proceeds of any loan hereunder will be
used to purchase or carry or to reduce or retire any loan incurred to
purchase or carry, any "margin stock" (within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System) or to extend
credit to others for the purpose of purchasing or carrying any such
margin stocks; provided, however, nothing contained herein shall
prohibit Conso from (i) instituting a loan program pursuant to which it
makes loans to employees and other participants in its employee stock
option plan to fund their payment of the exercise price for stock
options granted
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pursuant to such plan or (ii) repurchasing up to 500,000 shares of its
common stock after the date hereof so long as no Event of Default
exists immediately prior to or immediately after any such repurchase.
Neither Conso nor any of its Subsidiaries is engaged, as one of their
important activities, in extending credit for the purpose of purchasing
or carrying such margin stock. If requested by the Bank and to the
extent applicable, Conso, Simplicity and Trimmings will furnish to the
Bank in connection with any loan hereunder, a statement in conformance
with the requirements of Federal Reserve Form U-1 referred to in said
Regulation. In addition, no part of the proceeds of any loan hereunder
will be used for the purchase of commodity future contracts (or margins
therefor for short sales) for any commodity not required for the normal
raw material inventory of Conso or any of its Subsidiaries;
(h) Conso and each of its Subsidiaries possess all
necessary material patents, licenses, trademarks, trademark rights,
tradenames, tradename rights, copyrights or other similar intellectual
property rights to conduct their respective businesses without known
conflict with any patent, license, trademark, tradename, copyrights or
other similar intellectual property rights of any other Person except
for any such conflict which could not be reasonably expected to have a
material adverse effect on Conso and its Subsidiaries;
(i) none of the Loan Documents contains any material
misrepresentation or untrue statement of a material fact or omits to
state a material fact necessary in order to make any such
representation or statement contained therein not misleading;
(j) neither the nature of Conso or any of its
Subsidiaries nor of their respective businesses or properties, nor any
relationship between Conso or any of its Subsidiaries and any other
Person, nor any circumstance in connection with the offer, issue, sale
or delivery of the Notes is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority on the part of Conso, Simplicity or Trimmings as
a condition to the execution and delivery of this Loan Agreement or any
other Loan Document;
(k) neither Conso nor any of its Subsidiaries has
incurred or assumed any liability for any accumulated unfunded
deficiency within the meaning of the Employee Retirement Income
Security Act of 1974 as amended ("ERISA") or has incurred any material
liability to the Pension Benefit Guaranty Corporation ("PBGC")
established under ERISA (or any successor thereto under ERISA) in
connection with any employee benefit plan established or maintained by
Conso and any of its Subsidiaries;
(l) except as set forth on Exhibit A and for other
Permitted Liens, the Borrowers have good and marketable fee simple
title to their assets; and
(m) the business of Conso and its Subsidiaries has been
operated in compliance in all respects with all applicable federal,
state, local and foreign laws, regulations, orders, ordinances,
judgments and decrees (including, for example, matters
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relating to the environment, discrimination, employment and health and
safety), except for such matters, if any, as may have been previously
disclosed by Conso to the Bank in writing and for violations which
could not be reasonably expected to have a material adverse effect on
the financial condition, business or results of operations of Conso.
All material permits, certificates, licenses, approvals, and other
authorizations that are required in connection with the operation of
the respective businesses of Conso and its Subsidiaries have been
issued, and, as of the date hereof and immediately thereafter Conso and
its Subsidiaries will have all material permits, certificates,
licenses, approvals and other authorizations required in connection
with the operation of their respective businesses.
ARTICLE V
Affirmative Covenants
5.01 Conso covenants and agrees that from the date hereof and until
payment in full of all principal and interest on the Notes and until the
commitment of the Bank to make loans and issue Letters of Credit hereunder has
been terminated (unless the Bank shall otherwise consent in writing), Conso
will:
(a) as soon as practical and in any event not later than
within one hundred twenty (120) days of the end of each fiscal year
ending after the date hereof, deliver to the Bank a financial report in
U.S. Dollars including a consolidated balance sheet of Conso and its
Subsidiaries as at the end of such fiscal year, and the related
consolidated statements of operations, shareholders' equity and cash
flows for such fiscal year and the notes thereto, setting forth in each
case comparative financial statements for the preceding year, all
prepared in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis and containing an unqualified opinion of
independent certified public accountants selected by Conso and
reasonably acceptable to the Bank (it being understood and agreed that
delivery by Conso to the Bank of its Annual Report on Form 10-K as
filed with the Securities and Exchange Commission shall be deemed to
satisfy this Section 5.01(a));
(b) as soon as practical and in any event not later than
within fifty (50) days after the end of each fiscal quarter (except the
fourth and final fiscal quarter) of each fiscal year of Conso, deliver
to the Bank a financial report in U.S. Dollars including a consolidated
balance sheet of Conso and its Subsidiaries as at the end of such
quarterly period and the related consolidated statements of operations,
shareholders' equity and cash flows for the period from the beginning
of the current fiscal year to the end of such quarterly period (it
being understood and agreed that delivery by Conso to the Bank of its
Quarterly Report on Form 10-Q as filed with the Securities and Exchange
Commission shall be deemed to satisfy this Section 5.01(b)), together
with a financial covenant compliance report setting forth the actual
results of the covenants set forth in Sections 5.01(g), (h) and (i)
below as of the last day of such quarter then ending, all prepared in
accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis
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(subject to normal year-end adjustments which could not be reasonably
expected to have a material adverse affect on Conso's consolidated
financial condition, and the absence of certain footnotes) and
certified by the chief financial officer of Conso as presenting fairly
in all material respects the consolidated financial condition of Conso
and its Subsidiaries;
(c) together with each delivery of financial reports
required by Sections 5.01(a) and (b) hereof, deliver to the Bank a
statement signed by the chief financial officer of Conso setting forth
that, to the best of his knowledge, the Borrowers and Trimmings have
kept, observed, performed and fulfilled in all material respects each
and every material agreement binding on them contained in the Loan
Documents and that no Event of Default specified in Article VII hereof,
nor any event, which, upon notice or lapse of time or both, would
constitute such an Event of Default, has occurred, or if such Event of
Default exists or would occur as the case may be, stating the nature
thereof, the period of existence thereof and what action Conso proposes
to take with respect thereto;
(d) promptly upon becoming available, deliver to the Bank
a copy of all documents filed by Conso with the Securities and Exchange
Commission;
(e) promptly, from time to time, deliver to the Bank such
other information regarding the operations, business, affairs and
financial condition of Conso and its Subsidiaries as the Bank may
reasonably request. The Bank is hereby authorized to deliver a copy of
any such financial information delivered hereunder to the Bank to any
regulatory authority having jurisdiction over the Bank that requests
such information;
(f) together with each delivery of the financial
statements required by Section 5.01(a) hereof, deliver to the Bank a
letter of Conso's certified public accountants stating that in
performing the examination necessary to render an opinion on the
financial statements delivered therewith, they obtained no knowledge of
any Event of Default by Conso in the fulfillment of the terms and
provisions of the financial covenants contained in Sections 5.01(g)-(i)
of this Loan Agreement; and if the accountants have obtained knowledge
of such an Event of Default a statement specifying, to the best of
their knowledge, the nature and period of existence thereof;
(g) maintain for Conso and its Subsidiaries on a
consolidated basis at the end of each fiscal quarter a ratio of
Consolidated Funded Indebtedness (computed on the last day of such
quarter) to Consolidated EBITDA (computed for the 12 months then ended)
of no greater than 3.0 to 1.0;
(h) maintain for Conso and its Subsidiaries on a
consolidated basis at the end of each fiscal quarter a Consolidated
Fixed Charge Coverage Ratio of at least 1.5 to 1.0 (computed for the
fiscal 12 months then ending);
(i) maintain for Conso and its Subsidiaries on a
consolidated basis at the end of each fiscal quarter a ratio of
Consolidated Funded Indebtedness
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(computed on the last day of such quarter) to Consolidated Funded
Indebtedness plus Consolidated Tangible Net Worth (each computed on the
last day of such quarter) of not greater than .75 to 1.0.;
(j) maintain, and cause each of its Subsidiaries to
maintain, all material items of personal property in good working order
and condition and make all material needed repairs, replacements and
renewals as is necessary to conduct the business in accordance with its
customary business practices;
(k) do or cause to be done all things necessary to
preserve and keep in full force and effect the corporate existence,
rights and franchises of Conso, Simplicity and Trimmings;
(l) pay all taxes, assessments, governmental charges,
material claims for labor, significant amounts of supplies, rent and
any other material obligation which, if unpaid, might become a lien
against any of the property of Conso and its Subsidiaries except (i)
liabilities being contested in good faith and against which, if
reasonably requested by the Bank, reserves reasonably satisfactory to
the Bank will be established, or (ii) liabilities the payment of which
could not be reasonably expected to have a material adverse effect on
the condition of Conso and its Subsidiaries, taken as a whole;
(m) maintain insurance covering Conso's and Simplicity's
inventory, property, plant and equipment that shall provide that, in
case of each separate loss with respect to casualty insurance in excess
of $100,000, the full amount of insurance proceeds with respect thereto
shall be payable to the Bank as secured party, or otherwise as its
interest may appear. All such insurance proceeds received by the Bank
shall at its option be applied to reduce the outstanding balance under
the Notes and the Loan Agreement with the excess proceeds, if any,
remitted in full to Conso;
(n) continue to conduct and operate the business of Conso
and its Subsidiaries substantially as such businesses were conducted
and operated during the present and preceding fiscal year;
(o) preserve, protect, retain and maintain free from
material encumbrances the material patents, licenses, trademarks,
trademark rights, tradenames, tradename rights and copyrights of Conso
and its Subsidiaries;
(p) keep accurate books of records and accounts in
accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis, and in which full, accurate and correct entries will
be made of all of the dealings and transactions of Conso and its
Subsidiaries;
(q) permit any officer of the Bank designated in writing
by the Bank to visit and inspect any of the properties, corporate books
and financial records of Conso and its Subsidiaries at such times as
the Bank may reasonably request upon reasonable notice and during
ordinary business hours;
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(r) upon the written request of the Bank, authorize any
officer of the Bank to discuss the financial statements and financial
affairs of Conso, Simplicity or Trimmings at any time from time to time
with Conso's independent certified public accountants upon reasonable
notice and during ordinary business hours;
(s) deliver to the Bank forthwith, upon any officer of
Conso obtaining knowledge of an Event of Default or an event which
would constitute such an Event of Default but for the requirement that
notice be given or time elapse or both, a certificate of the chief
executive officer or treasurer of Conso specifying the nature and
period of existence thereof and what action Conso proposes to take with
respect thereto;
(t) notify the Bank in writing within five (5) Business
Days of the earlier of the occurrence or the obtaining of any knowledge
by any executive officer of Conso of any of the following with respect
to Conso or any of its Subsidiaries:
(i) the pendency or commencement of any material
action, suit or proceeding at law or in equity wherein the
opposing party seeks damages of more than $250,000 which is
not dismissed within 30 days of the filing thereof;
(ii) any levy of an attachment, execution or
other process against the assets of Conso or any of its
Subsidiaries worth in excess of $100,000 in the aggregate
which is not released, dismissed or discharged within 30 days
of such levy;
(iii) any change in any existing agreement or
contract which could be reasonably expected to materially
adversely affect the business or affairs, financial or
otherwise, of Conso and its Subsidiaries taken as a whole;
(iv) if the consummation thereof would have a
material effect on the condition of Conso and its Subsidiaries
taken as a whole, the intent of Conso or any of its
Subsidiaries to enter into any agreement or plan of merger or
acquisition, and the effect of any such merger or acquisition
on the financial condition of Conso and its Subsidiaries;
(u) make prompt payment of all contributions required
under all employee benefit plans ("Plans") and required to meet the
minimum funding standard set forth in ERISA with respect to the Plans
of Conso; (b) upon the request of the Bank furnish to the Bank copies
of each annual report/return (Form 5500 Series), as well as all
schedules and attachments required to be filed with the Department of
Labor and/or the Internal Revenue Service pursuant to ERISA, and the
regulations promulgated thereunder, in connection with each of the
Plans of Conso for each plan year; (c) notify the Bank promptly of any
fact, including, but not limited to, any Reportable Event (as defined
in ERISA) arising in connection
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with any of the Plans of Conso, which would reasonably be expected to
constitute grounds for termination thereof by the PBGC or for the
appointment by the appropriate United States District Court of a
trustee to administer such United States District Court of a trustee to
administer such Plan, (d) provide the Bank with a statement, if
requested by the Bank, as to the reason therefor and the action, if
any, proposed to be taken with respect thereto, together with a copy of
the notice of such Reportable Event given to the PBGC or a statement
that said notice will be filed with the annual report to the United
States Department of Labor with respect to such Plan if such filing has
been authorized, (e) promptly after receipt thereof, provide the Bank
with a copy of any material notice Conso may receive from the United
States Department of Labor, the Internal Revenue Service or the PBGC
with respect to such Plan; and (f) furnish to the Bank, upon its
request, such additional information concerning any of the Plans of
Conso as may be reasonably requested;
(v) comply with or contest in good faith, and cause each
of its Subsidiaries to comply with or contest in good faith, all
material statutes and governmental regulations (including all federal,
state and local requirements relating to protection of health or the
environment) in connection with the operation of Conso's or any of such
Subsidiaries' business;
(w) maintain its and its Subsidiaries' primary banking
relationships with the Bank (provided, that Trimmings may maintain its
existing banking relationships in the United Kingdom with its current
lender (or such lender's successors)); and
(x) offer the Bank the first opportunity to negotiate
with Conso with respect to the financing needs of any Trimmings
Company.
ARTICLE VI
Negative Covenants
6.01 Until payment in full of the principal and interest of the
Notes and until the commitment of the Bank to make loans and issue Letters of
Credit hereunder has been terminated, Conso covenants that (without the prior
written consent of the Bank) it will not, nor will it permit any of its
Subsidiaries to:
(a) incur or permit to exist any Indebtedness other than
(i) Indebtedness of any Trimmings Company consisting of an overdraft
facility of up to (pound)600,000, a letter of credit facility of up to
(pound)260,000 and a term loan of (pound)62,500 maturing June, 1998;
(ii) Indebtedness owed to the Bank; or (iii) $500,000 for purchase
money and other Indebtedness;
(b) incur, create or permit to exist any pledge, security
interest, lien, charge or other encumbrance of any nature whatsoever on
any assets (real or personal, tangible or intangible) of Conso or any
of its Subsidiaries, whether now
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owned or hereafter acquired, other than the Permitted Liens and
pledges, security interests, liens, charges and encumbrances securing
Indebtedness permitted by Section 6.01(a); or
(c) make or permit (i) all directors and executive
officers of Conso as a group to own less than 30% of the issued and
outstanding shares of common stock, no par value, of Conso, (ii) any
change in ownership of Simplicity that would result in Simplicity
ceasing to be a direct or indirect Subsidiary of Conso or (iii) any
change in ownership of Trimmings or any other Trimmings Company if any
such change in ownership would have a material adverse effect on Conso
and its Subsidiaries, taken as a whole.
ARTICLE VII
Events of Default and Acceleration
7.01 Any of the following shall constitute an event of default
hereunder (hereinafter an "Event of Default"):
(a) the failure of Conso, Simplicity or Trimmings to make
payment when due of any installment of principal or payment of interest
required by any of the Notes and the continuation of such failure for a
period of 3 days;
(b) the failure of Conso, Simplicity or Trimmings to
comply with any other covenants or terms in this Loan Agreement or any
other Loan Document and the continuation of such failure for a period
of thirty (30) days after Conso receives written notice thereof from
the Bank;
(c) if any representation or warranty made by Conso or
Simplicity in this Loan Agreement or in any other Loan Document or by
Conso, Simplicity or Trimmings in any certificate, statement or report
heretofore or hereafter furnished by Conso, Simplicity or Trimmings to
the Bank shall be untrue in any material respect;
(d) in the event that Conso or Simplicity
(i) shall make an assignment for the benefit of
creditors; or
(ii) has a petition initiating a proceeding under
any section or chapter of the Bankruptcy Code or its
amendments, filed by or against it and, if against it, such
petition is not set aside within sixty (60) days after such
filing; or
(iii) shall file any proceedings for dissolution
or liquidation; or
(iv) has a receiver, trustee or custodian
appointed for all or part of its assets; or
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(v) seeks to make an adjustment, settlement or
extension of its debts with its creditors generally; or
(vi) has a notice of an action for enforcement of
a lien filed or recorded or a judgment lien or execution
obtained against it in excess of an aggregate of $250,000.00
which notice of lien or judgment lien or execution is not
removed, or satisfied or contested in good faith within sixty
(60) days after any of its officers becomes aware thereof; or
(e) in the event that:
(i) any petition is presented by any Person
(other than a petition which, in the reasonable opinion of the
Bank, is frivolous or vexatious and which is withdrawn or
stayed within 60 days) or any order is made by any competent
court or any resolution is passed by any Trimmings Company for
its winding up or dissolution or for the appointment of a
liquidator of any Trimmings Company (except for the purpose of
a solvent amalgamation or reconstruction on terms and
conditions which shall have first been approved by the Bank);
(ii) any Trimmings Company has a receiver or
administrative receiver or manager or sequestrator appointed
over the whole or any part of the undertakings, assets, rights
or revenues of such Trimmings Company and such action is not
lifted or discharged within sixty (60) days after any of its
officers becomes aware thereof;
(iii) any Trimmings Company proposes or enters
into any composition or other arrangement for the benefit of
its creditors generally; or
(iv) any Trimmings Company has notice of any
proposed distress or other process to be levied or enforced on
any of the assets, rights or remedies of such Trimmings
Company in respect of any indebtedness in excess of $250,000
and any such action is not lifted, discharged, satisfied or
contested in good faith within 60 days after any of is
officers becomes aware thereof;
(f) if Conso or any of its Subsidiaries defaults in the
performance of any agreement between it and the Bank or any other
lender with respect to indebtedness for borrowed money in excess of
$250,000.00 of Conso or any of such Subsidiaries (including capitalized
lease indebtedness) and such default results in the acceleration of
such indebtedness or would permit the Bank or such other lender to
accelerate such indebtedness.
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7.02 Upon the occurrence of any Event of Default:
(a) the Bank's commitment to make Advances shall
terminate and all of the indebtedness of any and every kind owing by
Conso, Simplicity or Trimmings to the Bank shall become due and payable
upon written notice to Conso (other than an Event of Default described
in Section 7.01(d) or (e) in which case the Bank's commitment to make
Advances shall automatically terminate and such indebtedness shall
become due and payable immediately without necessity of written demand)
without the necessity of any other demand, presentment, protest or
notice upon Conso, Simplicity and/or Trimmings, all of which are hereby
expressly waived by Conso, Simplicity and Trimmings;
(b) all of the obligations of Conso, Simplicity and
Trimmings under the Loan Documents shall upon delivery of such written
notice be immediately due and payable without the necessity of any
other demand, presentment, protest or notice upon Conso, Simplicity
and/or Trimmings, all of which are hereby expressly waived by Conso,
Simplicity and Trimmings;
(c) regardless of the adequacy of the collateral, the
Bank shall have the right, immediately and without further action by
it, to set-off against the Notes all money owed by the Bank in any
capacity to Conso, Simplicity or Trimmings, whether or not due, and the
Bank shall be deemed to have exercised such right of set-off and to
have made a charge against any such money immediately upon the
occurrence of such Event of Default even though such charge is made or
entered on the books of the Bank subsequent thereto; and
(d) the Bank may demand, and Conso and Simplicity shall
immediately pay to the Bank upon such demand, cash in an amount equal
to the then outstanding Letter of Credit Obligations which will be held
in a cash collateral account in the name of the Bank and under the
dominion and control of the Bank as additional security for the
reimbursement obligations which may thereafter arise on account of
subsequent drawings or payments under the Letters of Credit.
ARTICLE VIII
Miscellaneous
8.01 Any notice shall be conclusively deemed to have been received
by any party hereto and be effective on the day on which delivered to such party
at the address set forth below or such other address as such party shall specify
to the other party in writing, or if sent prepaid by certified or registered
mail or by telegram or telex (where the receipt of such message is verified by
return) on the third Business Day after the day on which mailed (or sent),
addressed to such party at said address:
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(a) if to Conso, Simplicity or Trimmings at the following
address:
c/o Conso Products Company
P.O. Box 326
513 North Duncan Bypass
Union, South Carolina 29379
Attention: S. Duane Southerland, Jr.
Telephone: 864-427-9004
Telecopy: 864-427-8820
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
Suite 4200
100 N. Tryon Street
Charlotte, North Carolina 28202-4006
Attention: Sean M. Jones
Telephone: 704-331-7400
Telecopy: 704-331-7598
(b) if to the Bank:
NationsBank, N.A.
NationsBank Plaza, NC1-002-03-10
Charlotte, North Carolina 28255
Attention: William A. Serenius
Telephone: 704-386-8577
Telecopy: 704-386-1023
8.02 No failure or delay on the part of the Bank in the exercise of
any right, power or privilege hereunder or under any other Loan Document shall
operate as a waiver of any such right, power or privilege nor shall any such
failure or delay preclude any other or further exercise of any such right, power
or privilege. The rights and remedies herein provided are cumulative and not
exclusive or any rights or remedies provided by law.
8.03 All covenants, agreements, representations and warranties made
herein and in the other Loan Documents shall survive the making by the Bank of
the loans and the issuance of the Letters of Credit herein contemplated and the
execution and delivery to the Bank of the Loan Documents and shall continue in
full force and effect so long as any of the indebtedness of Conso, Simplicity or
Trimmings to the Bank hereunder or any obligations of Conso, Simplicity or
Trimmings to the Bank hereunder remain outstanding and unpaid. Whenever in this
Loan Agreement, any of the parties hereto is referred to, such reference shall
be deemed to include the successors and assigns of such party and all covenants,
provisions and agreements by or on behalf of Conso, Simplicity or Trimmings
which are contained in the Loan Documents or this Loan Agreement shall inure to
the benefit of the successors and assigns of the Bank. Notwithstanding the
foregoing, prior to the occurrence of an Event of Default, the Bank may not
sell, assign, transfer or otherwise dispose of or create participations in this
Loan Agreement or
112
<PAGE> 22
any of the other Loan Documents or any portions thereof, including without
limitation, any of the Bank's rights, title, interests, remedies, powers and
duties hereunder or thereunder, without the prior written consent of Conso.
8.04 Conso agrees to pay all reasonable costs and expenses in
connection with the preparation, execution and delivery of the Loan Documents,
including, without limitation, the reasonable fees and out-of-pocket expenses of
special counsel to the Bank, and reasonable costs and expenses of the Bank in
connection with the implementation and/or enforcement of the Loan Documents and
this Loan Agreement, as well as any filing and recording fees and stamp and
other taxes with respect thereto and to hold the Bank harmless from any and all
such costs, expenses and liabilities.
8.05 No approval, decision, opinion or action required of the Bank
("Approval") hereunder nor any modification, amendment or waiver ("Waiver") of
any provision of this Agreement or any other Loan Document, nor any consent to
any departure by Conso, Simplicity or Trimmings therefrom ("Consent") shall in
any event be effective unless the same shall be delivered in accordance with the
provisions of Section 8.01 hereof, and then such Approval, Waiver or Consent
shall be effective only in the specific instance and for the purpose for which
given, but any such Approval, Waiver or Consent when so signed shall be
effective and binding upon the Bank. Notice to or demand on Conso, Simplicity or
Trimmings in any case shall not entitle Conso, Simplicity or Trimmings, as the
case may be, to any other or further notice or demand in the same, similar or
other circumstances.
8.06 Except as set forth in the Sterling Note, interest, fees and
premiums hereunder shall be computed on the basis of a three hundred sixty (360)
day year for the actual number of days in the interest period.
8.07 Should any installment or other payment of the principal of or
interest on any Note become due and payable on other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day
thereafter and in the case of an installment of principal, interest shall be
payable thereon at the rate per annum herein specified during such extension.
8.08 This Loan Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Loan Agreement
to produce or account for more than one such counterpart.
8.09 The terms hereof shall extend to any subsequent holder of the
Notes to the extent such holder has acquired the Notes in accordance with the
terms hereof.
8.10 The term of this Loan Agreement shall be until (a) payment in
full of all sums payable by Conso, Simplicity and Trimmings hereunder, under the
Notes, or otherwise payable to the Bank, howsoever evidenced, whichever is later
and (b) termination of the obligation of the Bank to make Advances and issue
Letters of Credit.
8.11 All documents executed pursuant to the transactions
contemplated herein, including without limitation this Loan Agreement, the
Dollar Note and the Term Note (but not the Sterling Note), shall be deemed to be
contracts made under, and for all purposes shall be construed in
113
<PAGE> 23
accordance with, the internal laws and judicial decisions of the State of North
Carolina. Conso and Simplicity hereby submit to the jurisdiction and venue of
the state and federal courts of North Carolina for the purposes of resolving
disputes hereunder or for the purposes of collection.
8.12 All obligations of the Borrowers hereunder shall be joint and
several.
114
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed under seal by their duly authorized officers as of the day and year
first above written.
CONSO PRODUCTS COMPANY
ATTEST:
By /s/ Konstance J. K. Findlay By /s/ J. Cary Findlay
-------------------------------- ------------------------------------------
Title Secretary Title Chairman
----------------------------- ---------------------------------------
(Corporate Seal)
SIMPLICITY PATTERN CO., INC.
ATTEST:
By /s/ Frank J. Rizzo By /s/ Louis R. Morris
-------------------------------- ------------------------------------------
Title Secretary Title President and Chief Executive Officer
-------------------------- ---------------------------------------
(Corporate Seal)
NATIONSBANK, N.A.
By: /s/ William A. Serenius
-----------------------------------------
William A. Serenius
Senior Vice President
115
<PAGE> 25
EXHIBIT A
PERMITTED LIENS
1. Encumbrances on, or other defects in title to, Conso's real
and personal property in favor of Union County, South Carolina in connection
with a "fee-in-lieu of taxes" arrangement.
2. The liens set forth on Attachment I hereto which are
incorporated herein by reference.
3. The exceptions set forth on Attachment II hereto which are
incorporated herein by reference.
116
<PAGE> 26
ATTACHMENT I
UCC Financing Statements
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Jurisdiction/ Date of Filing Debtor Original Collateral
File No. Secured Party
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Secretary of 6/20/91 Simplicity Forsythe/ Leased
State/Michigan Pattern Co., Inc. McArthur Computer
12193B Associates, Inc. Equipment
Continuation 4/17/96
69982B
- -------------------------------------------------------------------------------------------------
Secretary of 1/23/95 Simplicity Minolta Copier Leased Copier
State/New York Pattern Co., Inc. Corp
014711
- -------------------------------------------------------------------------------------------------
New York 1/25/95 Simplicity Minolta Copier Leased Copier
County/NY Pattern Co., Inc. Corp.
95PN03622
- -------------------------------------------------------------------------------------------------
Secretary of 4/22/96 Simplicity Minolta Copier Leased Copiers
State/New York Pattern Co., Inc. Corp.
079888
- -------------------------------------------------------------------------------------------------
Secretary of 4/22/96 Simplicity Minolta Copier Leased Copiers
State/New York Pattern Co., Inc. Corp.
079975
- -------------------------------------------------------------------------------------------------
Secretary of 5/5/97 Simplicity Minolta Leased Copiers
State/New York Pattern Co., Inc. Business
091969 Systems
- -------------------------------------------------------------------------------------------------
New York 6/17/97 Simplicity Minolta Business Leased Copier
County/NY Pattern Co., Inc. Systems
97PN26850
- -------------------------------------------------------------------------------------------------
Secretary of 3/10/95 Simplicity BESCO Graphic All inventory
State/Michigan Pattern Co., Inc. Systems Corp. delivered in the
53527B (Consignee) (Consignor) future under
consignment
Assignment 5/12/95 arrangement
969453
To: Shawmut
Capital
Corporation
- -------------------------------------------------------------------------------------------------
Berrien County, 3/10/95 Simplicity BESCO Graphic All goods and
Michigan Pattern Co., Inc. Systems Corp. inventory
421 (Consignee) (Consignor) delivered in the
future in
Assignment 5/22/95 connection with
982 the printing
To: Shawmut prepress and
Capital press room
Corporation operations.
- -------------------------------------------------------------------------------------------------
</TABLE>
117
<PAGE> 27
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Jurisdiction/ Date of Filing Debtor Original Collateral
File No. Secured Party
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Berrien County, 9/3/85 Simplicity Greyhound Leasing & Printing Press.
Michigan Pattern Co., Inc. Financial Corp. Real Estate in
2303 Niles Michigan.
- -------------------------------------------------------------------------------------------------
New York 1/8/96
County, NY
Judgement Lien
in the amount of
$3053.04
- -------------------------------------------------------------------------------------------------
</TABLE>
118
<PAGE> 28
Attachment II
South Carolina Fee Mortgage
FIRST AMERICA TITLE INSURANCE COMPANY
SCHEDULE B-II
(EXCEPTIONS)
Agent's
File No.: 09168022A Commitment No. FA-CC-09168022A
SCHEDULE B OF THE POLICY OR POLICIES TO BE ISSUED WILL CONTAIN EXCEPTIONS TO THE
FOLLOWING MATTERS UNLESS THE SAME ARE DISPOSED OF TO THE SATISFACTION OF THE
COMPANY.
1. Defects, liens, encumbrances, adverse claims, or other matters, if any,
created, first appearing in the public records or attaching subsequent
to the effective date hereof but prior to the date the proposed Insured
acquires for value of record the estate or interest or mortgage thereon
covered by this Commitment.
2. Rights or claims of parties in possession not shown by the public
records.
3. Easements, or claims of easement, not shown by the public records.
4. Encroachments, overlaps, boundary line disputes, or other matters which
would be disclosed by an accurate survey or inspection of the premises.
5. Any lien, or right to a lien, for services, labor, or material
heretofore or hereafter furnished, imposed by law and not shown by the
public records.
6. Any adverse claim to any portion of said land which has been created by
artificial means or has accreted to any such portion so created and
riparian rights, if any.
7. Taxes or special assessments which are not shown as existing liens by
the public records.
Standard Exceptions 3, 4, 5, 6 and 7 are deleted.
THE FOLLOWING EXCEPTIONS APPLY TO PARCEL NO. 1 ONLY:
8. Easement granted to Duke Power Company by instrument dated January 24,
1928, filed January 31, 1928, in Deed Book 56, Page 445, Office of the
Clerk of Court for Union County, South Carolina.
9. Easements granted to Southern Bell Telephone and Telegraph Co., Inc. by
instrument dated April 5, 1930, recorded May 6, 1930, in Deed Book 61,
Page 16, Office of the Clerk of Court for Union County, South Carolina.
10. Easement granted to City of Union by instrument dated April 18, 1995,
recorded August 30, 1995 in Deed Book 213, Page 63, Office of the Clerk
of Court of Union County, South Carolina.
11. Rights of others in and to the use of so much of insured premises as
lies within the road along the eastern boundary line as shown on plat
of survey by Freeland-Clinkscales & Associates dated May 18, 1993, and
recorded in Plat Cabinet A, Slide 314, Page 1, Office of the Clerk of
Court for Union County, South Carolina.
See Attached Schedule B-2 Continued
119
<PAGE> 29
Attachment II
South Carolina Fee Mortgage
FIRST AMERICAN TITLE INSURANCE COMPANY
SCHEDULE B2 (CONTINUED)
Agent's
File No.: 09168022A Commitment No. FA-CC-09168022A
Policy No.: FA-
12. Sanitary sewer line and easement incident thereto crossing northwestern
corner of insured premises as shown on plat of survey by
Freeland-Clinkscales & Associates dated May 18, 1993, recorded in Plat
Cabinet A Slide 314, Page 1, Office of the Clerk of Court of Union
County, South Carolina.
13. Such state of facts occurring subsequent to May 18, 1993, the date of
survey of Tract A of Parcel 1 comprising a part of the insured premises
made by Freeland-Clinkscales & Associates, Inc. recorded in Plat
Cabinet A, Slide 314, Page 1, Office of the Clerk of Court for Union
County, South Carolina. NOTE: This exception may be modified in
accordance with any matters revealed by the current boundary survey
required in Item 12 in Schedule B-1.
The following exceptions apply to PARCEL 2 ONLY:
14. Restrictions appearing of record in Book 154, Page 598 and 600, Office
of the Clerk of Court for Union County, South Carolina.
15. Right of way and easement granted to Duke Power Company recorded in
Deed Book 56, Page 439, Office of the Clerk of Court for Union County,
South Carolina.
16. Right of way and easement granted to Broad River Power Company recorded
in Deed Book 56, Page 197, Office of the Clerk for Union County, South
Carolina.
17. Right of way and easement granted to Broad River Power Company recorded
in Book 54, Page 488, Office of the Clerk of Court for Union County,
South Carolina.
18. Right of way and easement granted to Southern Bell Telephone and
Telegraph Company recorded in Deed Book 61, Page 22, Office of the
Clerk of Court for Union County, South Carolina.
19. Right of way and easement granted to Lockhart Power Company recorded in
Deed Book 147, Page 447, Office of the Clerk of Court for Union County,
South Carolina.
20. The following matters that are shown by survey prepared by F. V.
Clinkscales, Jr., Registered Land Surveyor, dated July 15, 1992,
recorded in Plat Book 27, Page 193, Office of the Clerk of Court for
Union County, South Carolina: (a) Power lines located on the subject
property; (b) Note: Underground utilities not located by surveyor and
therefore excluded from coverage hereunder.
See Attached Schedule B-2 Continued
120
<PAGE> 30
Attachment II
South Carolina Fee Mortgage
FIRST AMERICAN TITLE INSURANCE COMPANY
SCHEDULE B2 (CONTINUED)
Agent's
File No.: 09168022A Commitment No. FA-CC-09168022A
Policy No.: FA-
21. Such states of facts occurring subsequent to July 15, 1992, the date of
the survey of Parcel 2 comprising a part of the insured premises
prepared by F. V. Clinkscales, Jr., Registered Land Surveyor, recorded
in Plat Book 27, Page 193, Office of the Clerk for Union County, South
Carolina.
THE FOLLOWING EXCEPTIONS APPLY TO BOTH PARCELS NO. 1 AND 2:
22. Property taxes for 1998 and all subsequent years, a lien not yet due
are payable.
23. No insurance is afforded as to the amount of acreage contained in the
property described herein.
121
<PAGE> 31
Attachment II
South Carolina Leasehold Mortgage
FIRST AMERICAN TITLE INSURANCE COMPANY
SCHEDULE B-II
(EXCEPTIONS)
Agent's
File No.: 09168022B Commitment No. FA-CC-09168022B
SCHEDULE B OF THE POLICY OR POLICIES TO BE ISSUED WILL CONTAIN EXCEPTIONS TO THE
FOLLOWING MATTERS UNLESS THE SAME ARE DISPOSED OF TO THE SATISFACTION
OF THE COMPANY.
1. Defects, liens, encumbrances, adverse claims, or other matters, if any,
created, first appearing in the public records or attaching subsequent
to the effective date hereof but prior to the date the proposed Insured
acquires for value of record the estate or interest or mortgage thereon
covered by the Commitment.
2. Rights or claims of parties in possession not shown by the public
records.
3. Easements, or claims of easement, not shown by the public records.
4. Encroachments, overlaps, boundary line disputes, or other matters which
would be disclosed by an accurate survey or inspection of the premises.
5. Any lien, or right to a lien, for services, labor, or material
heretofore or hereafter furnished, imposed by law and not shown by the
public records.
6. Any adverse claim to any portion of said land which has been created by
artificial means or has accreted to any such portion so created and
riparian rights, if any.
7. Taxes or special assessments which are not shown as existing liens by
the public records.
Standard Exceptions 3, 4, 5, 6 and 7 are deleted.
8. Property taxes for 1998 and all subsequent years, a lien not yet due
and payable.
9. The terms and conditions of the lease set forth in Schedule A, Part II.
10. Lease, dated December 10, 1997, by and between Union County, as
Landlord, and Conso Products Company, as Tenant, together with
Supplements thereto, as evidenced in Memorandum of Lease recorded
December 30, 1997, in Deed Book 217, Page 7, Office of the Clerk of
Court for Union County, South Carolina.
11. Terms and Conditions of Option to Purchase between Union County, South
Carolina, and Conso Products Company dated December 10, 1997, and
recorded December 30, 1997, in Deed Book 217, Page 8, Office of the
Clerk of Court for Union County, South Carolina.
12. Easement granted to Duke Power Company by instrument dated January 24,
1928, filed January 31, 1928, in Deed Book 56, Page 445, Office of the
Clerk of Court for Union County, South Carolina.
See Attached Schedule B-2 Continued
122
<PAGE> 32
Attachment II
South Carolina Leasehold Mortgage
FIRST AMERICAN TITLE INSURANCE COMPANY
SCHEDULE B2 (CONTINUED)
Agent's
File No.: 09168022B Commitment No. FA-CC-09168022B
Policy No.: FA-
13. Easements granted to Southern Bell Telephone and Telegraph Co., Inc. by
instrument dated April 5, 1930, recorded May 6, 1930, in Deed Book 61,
Page 16, Office of the Clerk of Court for Union County, South Carolina.
14. Easement granted to City of Union by instrument dated May 2, 1995,
recorded August 30, 1995, in Deed Book 213, Page 66, Office of the
Clerk of Court for Union County, South Carolina.
15. Easement granted to Conso Products Company by instrument dated October
31, 1996, recorded November 8, 1996, in Deed Book 215, Page 103, Office
of the Clerk for Union County, South Carolina.
16. Reciprocal Easement Agreement between Loubev Family Partnership and
Conso Products Company dated July 22, 1997, recorded July 23, 1997 in
Deed Book 216k, Page 258, Office of the Clerk of Court for Union
County, South Carolina.
17. Right of others thereto entitled in and to the continued uninterrupted
flow of the creek which marks the eastern boundary line of the insured
premises as shown on plat dated April 24, 1997, prepared for Conso
Products Company by Piedmont Olsen Hensley, Surveyors/Mappers, and
recorded in Plat Cabinet A, Slide 250, Page 16, Office of the Clerk of
Court for Union County, South Carolina.
18. Easement granted to City of Union by instrument dated April 18, 1995,
recorded August 30, 1995 in Deed Book 213, Page 63, Office of the Clerk
for Union County, South Carolina.
19. Rights of others in and to the use of so much of insured premises as
lies within the road along the eastern boundary line as shown on plat
of survey by Freeland-Clinkscales & Associates dated May 18, 1993, and
recorded in Plat Cabinet A, Slide 314, Page 1, Office of the Clerk of
Court for Union County, South Carolina.
20. Sanitary sewer line and easement incident thereto crossing northwestern
corner of insured premises as shown on plat of survey by
Freeland-Clinkscales & Associates dated May 18, 1993, recorded in Plat
Cabinet A Slide 314, Page 1, Office of the Clerk of Court for Union
County, South Carolina.
21. Such state of facts as would be revealed by an accurate survey and
inspection of the premises. Note: This exception may be modified or
deleted in accordance with any matters revealed by a current ALTA/ACSM
Survey of the premises acceptable to the Company.
See Attached Schedule B-2 Continued
123
<PAGE> 33
Attachment II
South Carolina Leasehold Mortgage
FIRST AMERICAN TITLE INSURANCE COMPANY
SCHEDULE B2 (CONTINUED)
Agent's
File No.: 09168022B Commitment No. FA-CC-09168022B
Policy No.: FA-
22. No insurance is afforded as to the amount of acreage contained in the
property described herein.
124
<PAGE> 34
Attachment II
Michigan Mortgage
SCHEDULE B - SECTION II
EXCEPTIONS
COMMITMENT NO. BN - 7578
Any policy we issue will have the following exceptions unless they are
taken care of to our satisfaction.
1. Any discrepancies or conflicts in boundary lines, any shortages in
area, or any encroachment or overlapping of improvements.
2. Any facts, rights, interests or claims which are not shown by the
public record but which could be ascertained by an accurate survey of
the land or by making inquiry of persons in possession thereof.
3. Easements, liens or encumbrances or claims thereof, which are not shown
by the public record.
4. Any lien or right to lien for services, labor or material imposed by
law and not shown by the public record.
5. All assessments and taxes due in 1997, and thereafter.
6. Easements in favor of Indiana & Michigan Electric Company (now known as
Indiana Michigan Power Company), a corporation, recorded October 27,
1960, in Liber 183 of Misc., pages 335 and 345; and recorded June 21,
1949, in Liber 113 of Misc., page 429, Berrien County Records.
7. Easement in favor of Michigan Central Railroad Company, recorded
February 11, 1976, in Liber 1014, page 228, Berrien County Records.
8. Agreement, between the City of Niles, a municipal corporation and
Garden City Fan and Blower Company, an Illinois Corporation, recorded
August 4, 1976, in Liber 1026, page 435, Berrien County Records.
9. Right of ingress and egress in favor of Niles Chamber of Commerce,
Inc., recorded November 2, 1932, in Liber 284 of Deeds, page 363,
Berrien County Records.
10. Easement in favor of Berrien County Board of Public Works and City of
Niles, a municipal corporation, recorded February 17, 1976, in Liber
1014, page 476, Berrien County Records.
11. Reservation on portions of captioned land as disclosed by Deed,
recorded February 11, 1976, in Liber 1014, page 206, Berrien County
Records.
12. Rights of the public and of any governmental unit in any part thereof
taken, used, or deeded for street, road, or highway purposes, thereof
lying in Lake and Thirteenth Streets.
13. Taxes and assessments not due and payable at date of commitment.
14. Encroachments, as disclosed by Survey, prepared by Barger Engineering,
dated January 26, 1988.
125
<PAGE> 35
EXHIBIT B
MATERIAL SUBSIDIARIES
British Trimmings Limited
Itatrim Limited
MacCulloch & Wallis (London) Limited
Pattern Masters Limited
Simplicity Pattern Co., Inc.
Val-Mex, S.A. de C.V.
126
<PAGE> 1
EXHIBIT 10.2
PROMISSORY NOTE
U.S. $20,000,000 June 19, 1998
FOR VALUE RECEIVED, the undersigned, CONSO PRODUCTS COMPANY, a South
Carolina corporation ("Conso"), and SIMPLICITY PATTERN CO., INC., a Delaware
corporation ("Simplicity") (hereinafter Conso and Simplicity are sometimes
collectively referred to as the "Borrowers"), jointly and severally promise to
pay to the order of
NATIONSBANK, N.A., a national banking association (the "Bank") at its
office in Charlotte, North Carolina (or at such other place or places as the
Bank may designate) the principal sum of up to
TWENTY MILLION DOLLARS (U.S. $20,000,000) pursuant to the terms and
conditions hereinafter set forth and the terms and conditions set forth in that
certain Modified and Restated Loan Agreement, dated June 19, 1998, executed by
and among the Borrowers and the Bank (the "Loan Agreement").
Term Loan. The Bank agrees to make a term loan of $20,000,000 to the
Borrowers (the "Term Loan") on the date hereof.
Principal. The outstanding principal balance of the Term Loan shall be
repayable in 20 consecutive quarterly installments on the first day of each
January, April, July and October commencing October 1, 1998. The first 19 of
such installments shall each be in the principal amount of $500,000. The 20th
and final of such installments due and payable on July 1, 2003 shall be in an
amount equal to the remaining principal balance of the Term Loan.
Interest. The outstanding principal balance of the Term Loan shall bear
interest at a fixed rate equal to 7.4% per annum. Accrued interest calculated at
the foregoing rate shall be payable in arrears on the first day of each month.
Whenever a payment on this Note is stated to be due on a day which is not a
business day, such payment shall be made on the next succeeding business day
with interest accruing to the date of payment. Interest hereunder shall be
computed on the basis of actual number of days elapsed over a year of 360 days.
Payments. All payments made on this Note shall be in U.S. dollars.
Amounts repaid may not be reborrowed.
Prepayments. Subject to the prepayment penalty set forth below, the
Borrowers may prepay this Note in whole or in part at any time without any
penalty whatsoever; provided,
127
<PAGE> 2
however, partial prepayments shall be applied to principal installments in the
inverse order of maturities.
Prepayment Penalty. If the Borrowers prepay all or any portion of the
Term Loan during the period commencing on the date hereof through December 31,
1999, the Borrowers shall pay the Bank on the date of any such prepayment an
amount equal to 1% of the amount prepaid. If the Borrowers prepay all or any
portion of the Term Loan during the period commencing on January 1, 2000 through
December 31, 2001, the Borrowers shall pay the Bank on the date of any such
prepayment an amount equal to 1/2% of the amount prepaid. If the Borrowers
prepay all or any portion of the Term Loan during the period commencing on
January 1, 2002 through June 30, 2003, the Borrowers shall pay the Bank on the
date of any such prepayment an amount equal to 1/4% of the amount prepaid.
Events of Default. Upon the occurrence of an Event of Default under the
Loan Agreement, (a) this Note and all other debts due the Bank by the Borrowers
shall immediately become due and payable upon written notice to the Borrowers
(except that in the case of any Event of Default relating to a bankruptcy
petition filed by either Borrower, this Note and all other debts due the Bank
shall become immediately due and payable without the necessity of demand or
other action by the Bank) without the necessity of any other demand,
presentment, protest or notice of any kind, all of which are hereby waived by
the Borrowers, (b) the then remaining unpaid principal amount and accrued but
unpaid interest shall bear interest at a per annum rate equal to the prime rate
of NationsBank (as it changes from time to time) plus two percent (2%) until
such principal and interest has been paid in full and (c) regardless of the
adequacy of the collateral, the Bank shall have the right, immediately and
without further action by it, to set-off against this Note all money owed by the
Bank in any capacity to either Borrower, whether or not due, and the Bank shall
be deemed to have exercised such right of set-off and to have made a charge
against any such money immediately upon the occurrence of such Event of Default
even though such charge is made or entered on the books of the Bank subsequent
thereto.
No Waiver. No failure or delay on the part of the Bank in the exercise
of any right, power or privilege hereunder or under any other Loan Document
shall operate as a waiver of any such right, power or privilege nor shall it
preclude any other or further exercise thereof. The Borrowers assent to any one
or more extensions or postponements of the time of payment or other indulgences,
to any substitutions, exchanges or releases of collateral if at any time there
is collateral available to the holder of this Note, and to the additions or
releases of any other parties or persons primarily or secondarily liable.
Late Charge. Should any payment due hereunder be in default for more
than fifteen (15) days, there may be imposed, to the extent permitted by law, a
delinquency charge not to exceed four percent (4%) of such payment in default.
In addition, at the option of the Bank, any accrued and unpaid interest, fees or
charges may, for purposes of computing accruing interest on a daily basis after
the due date for such interest fees or charges, be deemed to be a part of the
principal balance thereof, and interest shall accrue on a daily compounded basis
after such date at the rate provided for hereunder until the entire balance of
principal and interest is paid in full.
128
<PAGE> 3
Notices. All notices and other communications hereunder shall be
sufficiently given and shall be deemed given when delivered or when mailed by
registered or certified mail, postage prepaid, addressed as follows:
(a) If to the Borrowers:
c/o Conso Products Company
513 North Duncan Bypass
P.O. Box 326
Union, South Carolina 29379
Attn: Mr. S. Duane Southerland, Jr.
Telephone: 864-427-9004
Telecopy: 864-427-8820
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
Suite 4200
100 N. Tryon Street
Charlotte, North Carolina 28202-4006
Attn: Sean M. Jones
Telephone: (704) 331-7400
Telecopy: (704) 331-7598
(b) If to the Bank:
NationsBank, N.A.
NationsBank Plaza, NC1-002-03-10
Charlotte, North Carolina 28255
Attention: William A. Serenius
Telephone: (704) 386-8577
Telecopy: (704) 386-1023
Attorneys' Fees. In the event this Note is not paid when due at any
stated or accelerated maturity, the Borrowers will pay, in addition to principal
and interest, all costs of collection, including reasonable attorneys' fees.
Choice of Law. This Note shall be governed by and construed in
accordance with, the laws of the State of North Carolina. In addition, the
Borrowers hereby consent and submit to the jurisdiction and venue of the federal
and state courts located in Mecklenburg County, North Carolina.
Joint and Several Obligations. The obligations of the Borrowers
hereunder shall be joint and several.
129
<PAGE> 4
IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed
under seal by its duly authorized officers as of the day and year first above
written.
CONSO PRODUCTS COMPANY
ATTEST:
By /s/ Konstance J.K. Findlay By /s/ J. Cary Findlay
------------------------------ ------------------------------------------
Title Secretary Title Chairman
--------------------------- ---------------------------------------
(Corporate Seal)
SIMPLICITY PATTERN CO., INC.
ATTEST:
By /s/ Frank J. Rizzo By /s/ Louis R. Morris
------------------------------ ------------------------------------------
Title Secretary Title President and Chief Executive Officer
--------------------------- ---------------------------------------
(Corporate Seal)
130
<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE
U.S. $30,000,000 June 19, 1998
FOR VALUE RECEIVED, the undersigned, CONSO PRODUCTS COMPANY, a South
Carolina corporation ("Conso"), and SIMPLICITY PATTERN CO., INC., a Delaware
corporation ("Simplicity") (hereinafter Conso and Simplicity are sometimes
collectively referred to as the "Borrowers"), jointly and severally promise to
pay to the order of
NATIONSBANK, N.A., a national banking association (the "Bank") at its
office in Charlotte, North Carolina (or at such other place or places as the
Bank may designate) the principal sum of up to
THIRTY MILLION DOLLARS (U.S. $30,000,000), or such lesser amount as may
constitute the unpaid principal amount of the Dollar Advances (as hereinafter
defined), pursuant to the terms and conditions hereinafter set forth and the
terms and conditions set forth in that certain Modified and Restated Loan
Agreement, dated June 19, 1998, executed by and among the Borrowers and the Bank
(the "Loan Agreement").
Advances. The Borrowers, in accordance with the terms hereof, may from
time to time until December 1, 2000 (the "Termination Date") request advances
from the Bank in U.S. dollars (hereinafter the "Dollar Advances") in an
aggregate amount up to $30,000,000 less the outstanding principal amount of all
loans made pursuant to that certain Promissory Note dated June __, 1998 executed
by British Trimmings Limited ("Trimmings") in favor of the Bank in the original
face amount of (pound)7,000,000 (the "Sterling Note") (such amount is
hereinafter referred to as the "Dollar Committed Amount"). Upon receipt of such
a request for a Dollar Advance hereunder, the Bank shall make any such Dollar
Advance hereunder available to the Borrowers on the date requested for such
Advance on the terms and conditions set forth herein and in the Loan Agreement;
provided, however, the Bank shall not be obligated to make such advance unless
the Borrowers have satisfied the conditions set forth in Section 2.05 of the
Loan Agreement.
Principal. The outstanding principal balance of the Dollar Advances
shall be due and payable on the Termination Date.
Interest. Dollar Advances hereunder shall bear interest on the
outstanding balance hereunder at a per annum interest rate equal to the Floating
LIBOR Rate plus the Applicable Margin. For purposes hereof, "Floating LIBOR
Rate" means the fluctuating interest rate per annum for the London InterBank
Offered Rates (LIBOR) one month rate quoted in the "Money Rates" section of The
Wall Street Journal. Changes in the Floating LIBOR Rate shall be effective for
purposes of this Note on the dates of such changes. Unless otherwise agreed,
accrued interest with respect to each Dollar Advance shall be payable in arrears
on the first day of each month. Whenever a payment on this Note is stated to be
due on a day which is not a business day, such payment shall be made on the next
succeeding business day with interest
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<PAGE> 2
accruing to the date of payment. Interest hereunder shall be computed on the
basis of actual number of days elapsed over a year of 360 days.
Unused Fee. The Borrowers shall pay the Bank a commitment fee on the
unused amount of the Dollar Committed Amount during each calendar quarter in an
amount equal to the average unused amount of the Dollar Committed Amount for
each such calendar quarter multiplied by the Applicable Percentage. Such
commitment fee for any calendar quarter shall be payable in arrears on the first
day of the following calendar quarter. The commitment fee shall be computed on
the basis of actual number of days elapsed over a year of 360 days.
Applicable Margin. Applicable Margin means the following percentages
determined and adjusted quarterly on the first day of the month following the
receipt by the Bank of Conso's Form 10-Q for any fiscal quarter or Form 10-K for
any fiscal year and based on the following levels of the ratio of Consolidated
Funded Indebtedness (as defined in the Loan Agreement and as computed on the
last day of such fiscal quarter or such fiscal year) to Consolidated EBITDA (as
defined in the Loan Agreement and as computed for the twelve months then ended)
(the "Consolidated Leverage Ratio") as set forth in a letter from Conso to the
Bank accompanying such Form 10-Q or Form 10-K:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
APPLICABLE MARGIN
FOR FLOATING LIBOR APPLICABLE MARGIN
CONSOLIDATED LEVERAGE RATIO RATE ADVANCES FOR COMMITMENT FEE
- ---------------------------------------------------------------------------------
<S> <C> <C>
>2.75 to 1.0 1.75% .35%
- ---------------------------------------------------------------------------------
>1.75 to 1.0 but <=2.75 to 1.0 1.50% .30%
- ---------------------------------------------------------------------------------
>1.25 to 1.0 but <=1.75 to 1.0 1.25% .25%
- ---------------------------------------------------------------------------------
>.75 to 1.0 but <=1.25 to 1.0 1.00% .20%
- ---------------------------------------------------------------------------------
<=.75 to 1.0 .75% .15%
- ---------------------------------------------------------------------------------
</TABLE>
Supersession. It is understood and agreed by the Bank and the Borrowers
that this Note amends, restates, supplements and supersedes in all respects the
promissory note dated November 25, 1996 in the original principal amount of up
to $15,000,000 heretofore issued by Conso to the Bank.
Payments. All payments made on this Note shall be in U.S. dollars.
Subject to the conditions set forth herein and in the Loan Agreement, amounts
repaid may be reborrowed.
Prepayments. The Borrowers may repay this Note in whole or in part at
any time without any penalty whatsoever.
Capital Adequacy. If the Bank shall have determined that the adoption
or effectiveness of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change after the date hereof in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has the effect of materially reducing the
rate of return on the Bank's capital
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<PAGE> 3
or assets as a consequence of its commitments or obligations hereunder to a
level below that which the Bank could have achieved but for such adoption,
effectiveness, change or compliance (taking into consideration the Bank's
policies with respect to capital adequacy), then from time to time, within 15
days after written demand by the Bank the Borrowers shall pay to the Bank such
additional amount or amounts as will compensate the Bank for such reduction.
Upon determining in good faith that any additional amounts will be payable
pursuant to this Section, the Bank will give prompt written notice thereof to
the Borrowers, which notice shall set forth in reasonable detail the basis of
the calculation of such additional amounts. Determination by the Bank of amounts
owing under this paragraph shall, absent evidence of error, be binding on the
parties hereto. Failure on the part of the Bank to demand compensation for any
period hereunder shall not constitute a waiver of the Bank's rights to demand
any such compensation in such period or in any other period.
Taxes. All payments made by the Borrowers hereunder will be made
without (but without waiving any rights with respect to) setoff or counterclaim.
Promptly upon notice from the Bank to the Borrowers, the Borrowers will pay,
prior to the date on which penalties attach thereto, but without duplication,
all present and future, stamp and other taxes, levies, or costs and charges
whatsoever imposed, assessed, levied or collected on or in respect of advances
hereunder (all such taxes, levies, costs and charges being herein collectively
called "Taxes"), provided that Taxes shall not include taxes imposed on or
measured by the income of the Bank by the United States of America or any
political subdivision or taxing authority thereof or therein, or taxes on or
measured by the overall net income of any foreign office, branch or subsidiary
of the Bank by any foreign country of subdivision thereof in which that office,
branch or subsidiary is doing business. Promptly after the date on which payment
of any such Tax is due pursuant to applicable law, the Borrowers will at the
request of the Bank, furnish to the Bank evidence, in form and substance
satisfactory to the Bank, that the Borrowers have met their obligations under
this paragraph. The Borrowers will indemnify the Bank against, and reimburse the
Bank on demand for, any Taxes, as determined by the Bank in its good faith
discretion. The Bank shall provide the Borrowers with appropriate receipts for
any payments or reimbursements made by the Borrowers pursuant to this Section.
Events of Default. Upon the occurrence of an Event of Default under the
Loan Agreement, (a) this Note and all other debts due the Bank by the Borrowers
shall immediately become due and payable upon written notice to the Borrowers
(except that in the case of any Event of Default relating to a bankruptcy
petition filed by either Borrower, this Note and all other debts due the Bank
shall become immediately due and payable without the necessity of demand or
other action by the Bank) without the necessity of any other demand,
presentment, protest or notice of any kind, all of which are hereby waived by
the Borrowers, (b) the then remaining unpaid principal amount and accrued but
unpaid interest shall bear interest at a per annum rate equal to the prime rate
of NationsBank (as it changes from time to time) plus two percent (2%) until
such principal and interest has been paid in full and (c) regardless of the
adequacy of the collateral, the Bank shall have the right, immediately and
without further action by it, to set-off against this Note all money owed by the
Bank in any capacity to either Borrower, whether or not due, and the Bank shall
be deemed to have exercised such right of set-off and to have made a charge
against any such money immediately upon the occurrence of such Event of Default
even though such charge is made or entered on the books of the Bank subsequent
thereto.
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<PAGE> 4
No Waiver. No failure or delay on the part of the Bank in the exercise
of any right, power or privilege hereunder or under any other Loan Document
shall operate as a waiver of any such right, power or privilege nor shall it
preclude any other or further exercise thereof. The Borrowers assent to any one
or more extensions or postponements of the time of payment or other indulgences,
to any substitutions, exchanges or releases of collateral if at any time there
is collateral available to the holder of this Note, and to the additions or
releases of any other parties or persons primarily or secondarily liable.
Late Charge. Should any payment due hereunder be in default for more
than fifteen (15) days, there may be imposed, to the extent permitted by law, a
delinquency charge not to exceed four percent (4%) of such payment in default.
In addition, at the option of the Bank, any accrued and unpaid interest, fees or
charges may, for purposes of computing accruing interest on a daily basis after
the due date for such interest fees or charges, be deemed to be a part of the
principal balance thereof, and interest shall accrue on a daily compounded basis
after such date at the rate provided for hereunder until the entire balance of
principal and interest is paid in full.
Notices. All notices and other communications hereunder shall be
sufficiently given and shall be deemed given when delivered or when mailed by
registered or certified mail, postage prepaid, addressed as follows:
(a) If to the Borrowers:
c/o Conso Products Company
513 North Duncan Bypass
P.O. Box 326
Union, South Carolina 29379
Attn: Mr. S. Duane Southerland, Jr.
Telephone: 864-427-9004
Telecopy: 864-427-8820
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
Suite 4200
100 N. Tryon Street
Charlotte, North Carolina 28202-4006
Attn: Sean M. Jones
Telephone: (704) 331-7400
Telecopy: (704) 331-7598
134
<PAGE> 5
(b) If to the Bank:
NationsBank, N.A.
NationsBank Plaza, NC1-002-03-10
Charlotte, North Carolina 28255
Attention: William A. Serenius
Telephone: (704) 386-8577
Telecopy: (704) 386-1023
Attorneys' Fees. In the event this Note is not paid when due at any
stated or accelerated maturity, the Borrowers will pay, in addition to principal
and interest, all costs of collection, including reasonable attorneys' fees.
Choice of Law. This Note shall be governed by and construed in
accordance with, the laws of the State of North Carolina. In addition, the
Borrowers hereby consent and submit to the jurisdiction and venue of the federal
and state courts located in Mecklenburg County, North Carolina.
Joint and Several Obligations. The obligations of the Borrowers
hereunder shall be joint and several.
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<PAGE> 6
IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed
under seal by its duly authorized officers as of the day and year first above
written.
CONSO PRODUCTS COMPANY
ATTEST:
By /s/ Konstance J.K. Findlay By /s/ J. Cary Findlay
----------------------------- ------------------------------------------
Title Secretary Title Chairman
-------------------------- ---------------------------------------
(Corporate Seal)
SIMPLICITY PATTERN CO., INC.
ATTEST:
By /s/ Frank J. Rizzo By /s/ Louis R. Morris
----------------------------- ------------------------------------------
Title Secretary Title President and Chief Executive Officer
-------------------------- ---------------------------------------
(Corporate Seal)
136
<PAGE> 7
SCHEDULE A TO THE
$30,000,000 PROMISSORY NOTE
DATED JUNE 19, 1998
<TABLE>
<CAPTION>
Name of
Principal Person
Amount of Applicable Payment Making
Date Advance Interest Rate Principal Interest Notation
---- --------- ------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
137
<PAGE> 1
EXHIBIT 10.4
PROMISSORY NOTE
U.K. (pound)7,000,000 June 19, 1998
FOR VALUE RECEIVED, the undersigned, BRITISH TRIMMINGS LIMITED, an
English company (the "Borrower"), promises to pay to the order of
NATIONSBANK, N.A., a national banking association (the "Bank") at its
London Branch (or at such other place or places as the Bank may designate with
the Borrower's written consent, such consent not to be unreasonably withheld)
the principal sum of up to
SEVEN MILLION POUNDS STERLING (U.K. (pound)7,000,000), or such lesser
amount as may constitute the unpaid principal amount of the Sterling Advances
(as hereinafter defined), pursuant to the terms and conditions hereinafter set
forth and the terms and conditions set forth in that certain Modified and
Restated Loan Agreement, dated June 19, 1998, as amended (if amended), executed
by and between Conso Products Company ("Conso"), Simplicity Pattern Co., Inc.
("Simplicity") and the Bank (the "Loan Agreement").
Advances. The Borrower, in accordance with the terms hereof, may from
time to time until December 1, 2000 (the "Termination Date") request offers from
the Bank for advances in U.K. Pounds Sterling (hereinafter the "Sterling
Advances") in an aggregate amount up to (pound)7,000,000 at any time outstanding
based on an interest rate equal to the Adjusted LIBOR Rate plus the Applicable
Margin; provided, however, no more than five Sterling Advances may be
outstanding at any one time. Upon receipt of such a request for a Sterling
Advance hereunder, the Bank shall make any such Sterling Advance hereunder on
the terms and conditions set forth herein and in the Loan Agreement; provided,
however, the Bank shall not be obligated to make such advance unless Conso has
satisfied the conditions set forth in Section 2.05 of the Loan Agreement. To
request an offer for a Sterling Advance hereunder, the Borrower shall make a
written request of the Bank for an offer for a Sterling Advance under this Note
(hereinafter, a "Request for Sterling Advance") not later than 11:00 a.m.
(London time) on the business day of the proposed Sterling Advance which notice
shall specify (i) that the requested Sterling Advance would be made under this
Note, (ii) the date of the requested Sterling Advance (which shall be a business
day), (iii) the amount of the requested Sterling Advance which shall be in a
minimum principal amount of (pound)250,000 and integral multiples of
(pound)250,000 in excess thereof, and (iv) the requested Interest Period with
respect thereto. In response to any such Request for a Sterling Advance, the
Bank shall respond to the Borrower by 11:30 a.m. (London time) on the business
day of the proposed Sterling Advance specifying the applicable Adjusted LIBOR
Rate for such Sterling Advance (the "Offer for Sterling Advance"). The Borrower
may then by telephone or telecopy (and if by telephone, promptly confirmed by
telecopy) by 11:30 a.m. (London time) on the business day of the proposed
Sterling Advance, in its sole discretion, accept or reject the Offer for
Sterling Advance. Failure by the Borrower to accept an Offer for Sterling
Advance by the appropriate time shall be deemed to be rejection of such Offer
for Sterling Advance. The terms of each Sterling Advance shall be noted on the
schedule attached hereto, the terms of
138
<PAGE> 2
which shall be presumed correct absent evidence of error; provided, however that
any failure to make such notation (or any inaccuracy in such notation) shall not
limit or otherwise affect the obligations of the Borrower hereunder. As used
herein, "Interest Period" means a period of seven days, fourteen days, one month
or three months duration as may be selected by the Borrower; provided, however,
that (A) each Interest Period which would otherwise end on a day which is not a
business day shall end on the next succeeding business day unless such
succeeding business day falls in the next calendar month and then in such case
on the next preceding business day and (B) no Interest Period shall extend
beyond the Termination Date; "Adjusted LIBOR Rate" means for the respective
Interest Period, a per annum interest rate offered by the Bank to the Borrower
in accordance with the foregoing terms equal to the per annum rate obtained by
dividing (a) the rate of interest determined by the Bank to be the average
(rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such
average is not such a multiple) of the per annum rates at which deposits in U.K.
Pounds Sterling are offered to the Bank in the London interbank market at 11:30
a.m. (London time) (or as soon thereafter as is practicable), in each case on
the date of the Offer for Sterling Advance in an amount substantially equal to
the requested Sterling Advance and for a period equal to such Interest Period by
(b) a percentage (expressed as a decimal fraction) equal to 100% minus maximum
reserve requirements which may be applicable with respect to such Sterling
Advance.
Principal. The outstanding principal balance of the Sterling Advances
shall be due and payable on the earlier of the last day of its respective
Interest Period as noted on the schedule attached or the Termination Date.
Interest. Sterling Advances hereunder shall bear interest on the
outstanding balance hereunder at a per annum interest rate equal to the Adjusted
LIBOR Rate plus the Applicable Margin. Unless otherwise agreed, accrued interest
with respect to each Sterling Advance shall be payable in arrears on the last
day of an Interest Period for such Sterling Advance. Whenever a payment on this
Note is stated to be due on a day which is not a business day, such payment
shall be made on the next succeeding business day with interest accruing to the
date of payment. Interest hereunder shall be computed on the basis of actual
number of days elapsed over a year of 365 days.
Additional Interest. Any Sterling Advance shall have added to the
interest otherwise applicable to such Sterling Advance the MLA Cost associated
with such Sterling Advance. As used herein, "MLA Cost" means the cost imputed to
the Bank of compliance with the Mandatory Liquid Assets requirements of the Bank
of England during the term of any Sterling Advance, as determined in accordance
with Schedule B attached hereto.
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<PAGE> 3
Applicable Margin. Applicable Margin means the following percentages
determined and adjusted quarterly on the first day of the month following the
receipt by the Bank of Conso's Form 10-Q for any fiscal quarter or Form 10-K for
any fiscal year and based on the following levels of the ratio of Consolidated
Funded Indebtedness (as defined in the Loan Agreement and as computed on the
last day of such fiscal quarter or such fiscal year) to Consolidated EBITDA (as
defined in the Loan Agreement and as computed for the twelve months then ended)
(the "Consolidated Leverage Ratio") as set forth in a letter from Conso to the
Bank accompanying suchForm 10-Q or Form 10-K:
<TABLE>
<CAPTION>
---------------------------------------------------------
APPLICABLE MARGIN
CONSOLIDATED LEVERAGE RATIO FOR STERLING ADVANCES
---------------------------------------------------------
<S> <C>
>2.75 to 1.0 1.75%
---------------------------------------------------------
>1.75 to 1.0 but <=2.75 to 1.0 1.50%
---------------------------------------------------------
>1.25 to 1.0 but <=1.75 to 1.0 1.25%
---------------------------------------------------------
>.75 to 1.0 but <=1.25 to 1.0 1.00%
---------------------------------------------------------
<=.75 to 1.0 .75%
---------------------------------------------------------
</TABLE>
Supersession. It is understood and agreed by the Bank and the Borrower
that this Note amends, restates, supplements and supersedes in all respects the
promissory note dated November 17, 1997 in the original principal amount of
(pound)6,500,000 heretofore issued by the Borrower to the Bank.
Payments. All payments made on this Note shall be in U.K. Pounds
Sterling. Subject to the conditions set forth herein and in the Loan Agreement,
amounts repaid may be reborrowed.
Prepayments. Prepayments are not permitted prior to maturity of
Interest Periods.
Indemnification. The Borrower agrees to indemnify the Bank against all
reasonable losses, expenses and liabilities sustained by the Bank on account of
the Borrower (i) failing to accept a Sterling Advance after notice to the Bank
of its acceptance of any such Sterling Advance and (ii) making a prepayment on a
Sterling Advance prior to the last day of an Interest period.
Yield Indemnification. In the event the Bank shall determine (which
determination shall be presumed correct absent evidence of error) that:
(i) Unavailability. On any date for determining the
appropriate Adjusted LIBOR Rate for any Interest Period, that by reason
of any changes arising on or after the date of this Note affecting the
London interbank Pounds Sterling market, U.K. Pounds Sterling deposits
in the principal amount requested are not generally available in the
London interbank market or adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in
the definition of Adjusted LIBOR Rate then Sterling Advances hereunder
will not be available until such time as the Bank shall notify the
Borrower that the circumstances giving rise thereto no longer exist.
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<PAGE> 4
(ii) Increased Costs. At any time that the Bank shall
incur increased costs or reductions in the amounts received or
receivable hereunder with respect to any Sterling Advances because of
any change since the date of this Note in any applicable law,
governmental rule, regulation, guideline or order (or in the
interpretation or administration thereof and including the introduction
of any new law or governmental rule, regulation, guideline or order)
including without limitation the imposition, modification or deemed
applicability of any reserves, deposits or similar requirements as
related to such Sterling Advances (such as, for example, but not
limited to, a change in official reserve requirements, but, in all
events, excluding reserves to the extent included in the computation of
the Adjusted LIBOR Rate), then the Borrower shall pay to the Bank
promptly upon written demand therefor (which demand shall state the
basis therefor), such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as
the Bank may determine in its reasonable discretion) as may be required
to compensate the Bank for such increased costs or reductions in
amounts receivable hereunder. Upon determining in good faith that any
additional amounts will be payable pursuant to this subsection, the
Bank will give prompt written notice thereof to the Borrower, which
notice shall set forth in reasonable detail the basis of the
calculation of such additional amounts.
(iii) Illegality. At any time that the making or
continuance of any Sterling Advance has become unlawful by compliance
by the Bank in good faith with any law, governmental rule, regulation,
guideline or order (or would conflict with any such governmental rule,
regulation, guideline or order not having the force of law even though
the failure to comply therewith would not be unlawful), or has become
impractical as a result of a contingency occurring after the date of
this Note which materially and adversely affects the London interbank
Sterling market, then Sterling Advances will no longer be available.
Capital Adequacy. If the Bank shall have determined that the adoption
or effectiveness of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change after the date hereof in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has the effect of materially reducing the
rate of return on the Bank's capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which the Bank could
have achieved but for such adoption, effectiveness, change or compliance (taking
into consideration the Bank's policies with respect to capital adequacy), then
from time to time, within 15 days after written demand by the Bank the Borrower
shall pay to the Bank such additional amount or amounts as will compensate the
Bank for such reduction. Upon determining in good faith that any additional
amounts will be payable pursuant to this paragraph, the Bank will give prompt
written notice thereof to the Borrower, which notice shall set forth in
reasonable detail the basis of the calculation of such additional amounts.
Determination by the Bank of amounts owing under this paragraph shall, absent
evidence of error, be binding on the parties hereto. Failure on the part of the
Bank to demand compensation for any period hereunder shall not constitute a
waiver of the Bank's rights to demand any such compensation in such period or in
any other period.
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<PAGE> 5
Taxes. All payments made by the Borrower hereunder will be made without
(but without waiving any rights with respect to) setoff or counterclaim.
Promptly upon notice from the Bank to the Borrower, the Borrower will pay, prior
to the date on which penalties attach thereto, but without duplication, all
present and future, stamp and other taxes, levies, or costs and charges
whatsoever imposed, assessed, levied or collected on or in respect of advances
hereunder solely as a result of the interest rate being determined by reference
to the Adjusted LIBOR Rate and/or the provisions of this Note relating to the
Adjusted LIBOR Rate and/or the recording, registration, notarization or other
formalization of any thereof and/or any payments of principal, interest or other
amounts made on or in respect of advances hereunder when the interest rate is
determined by reference to the Adjusted LIBOR Rate and any increases thereof
(all such taxes, levies, costs and charges being herein collectively called
"Taxes"), provided that Taxes shall not include taxes imposed on or measured by
the income of the Bank by the United States of America or any political
subdivision or taxing authority thereof or therein, or taxes on or measured by
the overall net income of any foreign office, branch or subsidiary of the Bank
by any foreign country of subdivision thereof in which that office, branch or
subsidiary is doing business. Promptly after the date on which payment of any
such Tax is due pursuant to applicable law, the Borrower will at the request of
the Bank, furnish to the Bank evidence, in form and substance satisfactory to
the Bank, that the Borrower has met its obligations under this paragraph. The
Borrower will indemnify the Bank against, and reimburse the Bank on demand for,
any Taxes, as determined by the Bank in its good faith discretion. The Bank
shall provide the Borrower with appropriate receipts for any payments or
reimbursements made by the Borrowers pursuant to this Section.
Events of Default. Upon the occurrence of an Event of Default under the
Loan Agreement, (a) this Note and all other debts due the Bank by the Borrower
shall immediately become due and payable upon written notice to the Borrower
(except that in the case of any Event of Default relating to a bankruptcy
petition filed by the Borrower, this Note and all other debts due the Bank shall
become immediately due and payable without the necessity of demand or other
action by the Bank) without the necessity of any other demand, presentment,
protest or notice of any kind, all of which are hereby waived by the Borrower,
(b) the then remaining unpaid principal amount and accrued but unpaid interest
shall bear interest at a per annum rate equal to the Prime Rate plus two percent
(2%) until such principal and interest has been paid in full and (c) regardless
of the adequacy of the collateral, the Bank shall have the right, immediately
and without further action by it, to set-off against this Note all money owed by
the Bank in any capacity to the Borrower, whether or not due, and the Bank shall
be deemed to have exercised such right of set-off and to have made a charge
against any such money immediately upon the occurrence of such Event of Default
even though such charge is made or entered on the books of the Bank subsequent
thereto. For purposes hereof, the term "Prime Rate" means the floating rate of
interest publicly announced by the Bank in Charlotte, North Carolina from time
to time as its prime rate.
No Waiver. No failure or delay on the part of the Bank in the exercise
of any right, power or privilege hereunder or under any other Loan Document
shall operate as a waiver of any such right, power or privilege nor shall it
preclude any other or further exercise thereof. The Borrower assents to any one
or more extensions or postponements of the time of payment or other indulgences,
to any substitutions, exchanges or releases of collateral if at any time there
is collateral available to the holder of this Note, and to the additions or
releases of any other parties or persons primarily or secondarily liable.
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<PAGE> 6
Late Charge. Should any payment due hereunder be in default for more
than fifteen (15) days, there may be imposed, to the extent permitted by law, a
delinquency charge not to exceed four percent (4%) of such payment in default.
In addition, at the option of the Bank, any accrued and unpaid interest, fees or
charges may, for purposes of computing accruing interest on a daily basis after
the due date for such interest fees or charges, be deemed to be a part of the
principal balance thereof, and interest shall accrue on a daily compounded basis
after such date at the rate provided for hereunder until the entire balance of
principal and interest is paid in full.
Notices. All notices and other communications hereunder shall be
sufficiently given and shall be deemed given when delivered or when mailed by
registered or certified mail, postage prepaid, addressed as follows:
(a) If to the Borrower:
British Trimmings Limited
P.O. Box 46
Coronation Street
Stockport, Cheshire SK5 7TJ
England
Attn: Chris Balakrishnan
Telephone: 44 161 480 6122
Telecopy: 44 161 487 3378
with a copy to:
Conso Products Company
513 North Duncan Bypass
P.O. Box 326
Union, South Carolina 29379
Attention: Mr. S. Duane Southerland, Jr.
Telephone: (864) 427-9004
Telecopy: (864) 427-8820
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
Suite 4200
100 N. Tryon Street
Charlotte, North Carolina 28202-4006
Attention: Sean M. Jones
Telephone: (704) 331-7400
Telecopy: (704) 331-7598
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<PAGE> 7
(b) If to the Bank:
NationsBank, N.A.
London Branch
New Broad Street House
35 New Broad Street
London
EC2M 1NH, England
Telephone: 171-282-6831
Telecopy: 171-282-6836
with a copy to:
NationsBank, N.A.
NationsBank Plaza, NC1-002-03-10
Charlotte, North Carolina 28255
Attention: William A. Serenius
Telephone: (704) 386-8577
Telecopy: (704) 386-1023
Attorneys' Fees. In the event this Note is not paid when due at any
stated or accelerated maturity, the Borrower will pay, in addition to principal
and interest, all costs of collection, including reasonable attorneys' fees.
Choice of Law. This Note shall be governed by and construed in
accordance with, the laws of England.
144
<PAGE> 8
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
under seal by their duly authorized officers as of the day and year first above
written.
BRITISH TRIMMINGS LIMITED
ATTEST:
By /s/ John Regan By /s/ William M. Stewart
-------------------------------- --------------------------------
Title Chief Accounting Officer Title Co-Managing Director
----------------------------- -----------------------------
(Corporate Seal)
145
<PAGE> 9
SCHEDULE A TO THE
(pound)7,000,000 PROMISSORY NOTE
DATED JUNE 19, 1998
<TABLE>
<CAPTION>
Name of
Principal Person
Amount of Applicable Payment Making
Date Advance Interest Rate Principal Interest Notation
---- --------- ------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
146
<PAGE> 10
SCHEDULE B TO THE
7,000,000 POUND STERLING PROMISSORY NOTE
DATED JUNE 19, 1998
CALCULATION OF THE MLA COST
(a) The MLA Cost for a Sterling Advance denominated in British Pounds
Sterling is calculated in accordance with the following formula:
BY + L(Y-X) + S(Y-Z) % per annum = MLA Cost
--------------------
100 - (B+S)
where on the day of application of the formula:
B is the percentage of the Bank's eligible liabilities
which the Bank of England requires the Bank to hold on a
non-interest-bearing deposit account in accordance with its
cash ratio requirements;
Y is the rate at which British Pounds Sterling deposits
are offered by the Bank to leading banks in the London
interbank market at or about 11.00 a.m. on that day for the
relevant period;
L is the percentage of eligible liabilities which the
Bank of England requires the Bank to maintain as secured money
with members of the London Discount Market Association and/or
as secured call money with certain money brokers and
gilt-edged primary market makers;
X is the rate at which secured British Pounds Sterling
deposits in the relevant amount may be placed by the Bank with
members of the London Discount Market Association and/or as
secured call money with certain money brokers and gilt-edged
primary market makers at or about 11.00 a.m. on that day for
the relevant period;
S is the percentage of the Bank's eligible liabilities
which the Bank of England requires the Bank to place as a
special deposit; and
Z is the interest rate per annum allowed by the Bank of
England on special deposits.
(b) For the purposes of this Schedule B:
(i) "eligible liabilities" and "special deposits" have
the meanings given to them at the time of application of the
formula by the Bank of England;
(ii) "relevant period" in relation to a Sterling Advance
means:
(A) if its Interest Period is three
months or less, that Interest Period.
147
<PAGE> 11
(B) if its Interest Period is more than
three months, each successive period of three months
and any necessary shorter period comprised in that
Interest Period.
(c) In application of the formula, B, Y, L, X, S and Z are included in the
formula as figures and not as percentages, e.g. if B=0.5% and Y=15%, BY
is calculated as 0.5 x 15.
(d) (i) The formula is applied on the first day of each
relevant period comprised in the Interest Period of the
relevant Sterling Advance.
(ii) Each rate calculated in accordance with the formula
is, if necessary, rounded upward to four decimal places.
(e) If the Bank determines that a change in circumstances has rendered, or
will render, the formula inappropriate, the Bank shall notify the
Borrower of the manner in which the MLA Cost will subsequently be
calculated. The manner of calculation so notified by the Bank shall, in
the absence of manifest error, be binding on all the parties.
148
