<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number: 0-22942
CONSO PRODUCTS COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
South Carolina 57-0986680
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
513 North Duncan Bypass, P.O. Box 326, Union, South Carolina 29379
- ------------------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
864/427-9004
----------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of February 10, 1998:
Common Stock, no par value 7,494,974 shares.
Page 1 of 21 pages
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
<S> <C> <C>
Consolidated Balance Sheets (unaudited) as of
December 27, 1997 and June 28, 1997 3
Consolidated Statements of Operations (unaudited)
for the three months and six months
ended December 27, 1997 and December 28, 1996 5
Consolidated Statements of Shareholders' Equity
(unaudited) for the three months and six months
ended December 27, 1997 6
Consolidated Statements of Cash Flows (unaudited) for
the six months ended December 27, 1997 and
December 28, 1996 7
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Securities Holders 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSO PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 27, 1997 June 28, 1997
------------------------ ---------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 294,032 $ 489,580
Accounts receivable, net of allowances for bad debts
and customer deductions of $433,215 and
$310,876 on December 27, 1997 and June 28,
1997, respectively. 11,281,901 11,747,482
Inventories (Note 3) 25,678,588 25,339,936
Deferred income taxes - current portion 589,941 625,873
Prepaid expenses and other 823,780 426,508
------------------------ ---------------------
Total current assets 38,668,242 38,629,379
------------------------ ---------------------
PROPERTY AND EQUIPMENT:
Land and improvements 1,265,952 1,177,248
Buildings and improvements 11,278,905 9,655,017
Machinery and equipment 16,047,927 14,216,300
------------------------ ---------------------
Total 28,592,784 25,048,565
Accumulated depreciation (9,552,293) (8,485,714)
------------------------ ---------------------
Total property and equipment, net 19,040,491 16,562,851
------------------------ ---------------------
DEFERRED INCOME TAXES (Note 5) 1,139,035 1,120,694
------------------------ ---------------------
DEFERRED COSTS AND OTHER 449,321 246,477
======================== =====================
TOTAL ASSETS $59,297,089 $56,559,401
======================== =====================
</TABLE>
See notes to unaudited consolidated financial statements
3
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CONSO PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS - CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
December 27, 1997 June 28, 1997
----------------------- ---------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings (Note 4) $11,207,847 $10,405,973
Current maturities of long-term debt 209,850 208,063
Trade accounts payable 3,288,460 4,162,339
Accrued liabilities 3,214,363 2,879,703
----------------------- ---------------------
Total current liabilities 17,920,520 17,656,078
----------------------- ---------------------
NONCURRENT LIABILITIES:
Long-term debt - -
Deferred income taxes 539,332 535,184
----------------------- ---------------------
Total noncurrent liabilities 539,332 535,184
----------------------- ---------------------
SHAREHOLDERS' EQUITY (Notes 6 through 10):
Preferred stock (no par, 10,000,000 shares
authorized, no shares issued) - -
Common stock (no par, 50,000,000 shares
authorized, 7,494,974 and 7,491,540
shares issued December 27, 1997 and
June 28, 1997, respectively) 16,998,321 16,970,175
Retained earnings 23,044,199 20,728,449
Cumulative translations gain 794,717 669,515
----------------------- ---------------------
Total shareholders' equity 40,837,237 38,368,139
======================= =====================
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $59,297,089 $56,559,401
======================= =====================
</TABLE>
See notes to unaudited consolidated financial statements
4
<PAGE> 5
CONSO PRODUCTS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------------- ------------------------------------
December 27, 1997 December 28, 1996 December 27, 1997 December 28, 1996
------------------ ------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
NET SALES $18,978,230 $18,534,296 $35,712,929 $35,546,610
COST OF GOODS SOLD 12,490,498 11,197,122 23,102,891 21,436,548
----------------- ------------------ ----------------- -----------------
GROSS MARGIN 6,487,732 7,337,174 12,610,038 14,110,062
----------------- ------------------ ----------------- -----------------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:
Distribution expense 861,115 776,869 1,634,184 1,490,129
Selling expense 2,059,045 2,059,205 4,176,535 4,094,607
General and administrative expense 1,044,290 1,190,060 2,457,193 2,344,087
Currency exchange gain 40,941 (96,273) 40,397 (118,704)
----------------- ------------------ ----------------- -----------------
Total 4,005,391 3,929,861 8,308,309 7,810,119
----------------- ------------------ ----------------- -----------------
INCOME FROM OPERATIONS 2,482,341 3,407,313 4,301,729 6,299,943
INTEREST EXPENSE, NET 273,901 113,182 428,860 244,378
----------------- ------------------ ----------------- -----------------
INCOME BEFORE INCOME TAXES 2,208,440 3,294,131 3,872,869 6,055,565
INCOME TAX PROVISION (Note 5) 923,657 1,229,895 1,557,119 2,257,594
================= ================== ================= =================
NET INCOME 1,284,783 $ 2,064,236 2,315,750 $ 3,797,971
================= ================== ================= =================
EARNINGS PER SHARE - BASIC
(Notes 6 through 9)
Net income per share $0.17 $0.28 $0.31 $0.51
================= ================== ================= =================
Weighted average number of shares
outstanding 7,494,379 7,484,983 7,493,307 7,483,480
================= ================== ================= =================
EARNINGS PER SHARE - DILUTED
(Notes 6 through 9)
Net income per share assuming dilution $0.17 $0.27 $0.31 $0.50
================= ================== ================= =================
Weighted average number of shares
outstanding assuming dilution 7,517,083 7,542,983 7,524,071 7,529,510
================= ================== ================= =================
</TABLE>
See notes to unaudited consolidated financial statements
5
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CONSO PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 27, 1997
<TABLE>
<CAPTION>
Common Stock
-------------------------------
Cumulative
Retained Translation
Shares Issued Amount Earnings Adjustments Total
-------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, September 27, 1997 7,493,363 $ 16,986,140 $21,759,416 $432,165 $39,177,721
Stock Options Exercised 825 5,500 5,500
Shares Issued for Director Fees 786 6,681 6,681
Net income 1,284,783 1,284,783
Translation gain 362,552 362,552
-------------- --------------- -------------- --------------- ---------------
December 27, 1997 7,494,974 $16,998,321 $23,044,199 $794,717 $40,837,237
============== =============== ============== =============== ===============
</TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
SIX MONTHS ENDED DECEMBER 27, 1997
<TABLE>
<CAPTION>
Common Stock
-------------------------------
Cumulative
Retained Translation
Shares Issued Amount Earnings Adjustments Total
-------------- --------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, June 28, 1997 7,491,540 $ 16,970,175 $20,728,449 $669,515 $38,368,139
Stock Options Exercised 1,650 11,000 11,000
Shares Issued for Director Fees 1,784 17,146 17,146
Net income 2,315,750 2,315,750
Translation gain 125,202 125,202
-------------- --------------- -------------- --------------- ---------------
December 27, 1997 7,494,974 $16,998,321 $23,044,199 $794,717 $40,837,237
============== =============== ============== ============== ===============
</TABLE>
See notes to unaudited consolidated financial statements
6
<PAGE> 7
CONSO PRODUCTS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------------------------
December 27, 1997 December 28, 1996
---------------------- ----------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Cash received from customers $37,457,796 $37,285,470
Cash paid to suppliers and employees (32,840,286) (30,459,202)
Interest paid (447,413) (419,327)
Interest received 67,998 115,758
Income taxes paid (1,612,760) (1,677,232)
---------------------- ---------------------
Net cash provided by operating activities 2,625,335 4,845,467
---------------------- ---------------------
INVESTING ACTIVITIES:
Net lending to subsidiary under line of credit (15,255) -
Purchase of property and equipment (724,321) (1,058,989)
Construction and equipment purchased for
new dyehouse and distribution center (2,635,382) (918,312)
Payments for investment in India Trimmings (Private)
Limited (144,000) -
Payments for acquisition of assets of HFDC (126,209) -
---------------------- ---------------------
Net cash used in investing activities (3,645,167) (1,977,301)
---------------------- ---------------------
FINANCING ACTIVITIES:
Net borrowings under line of credit
arrangements 796,138 478,189
Payments on long-term debt - (2,233,320)
Principal payments under capital lease obligations - (29,073)
Proceeds from issuance of common stock 28,146 23,836
---------------------- ---------------------
Net cash provided by (used in) financing activities 824,284 (1,760,368)
---------------------- ---------------------
(DECREASE)INCREASE IN CASH (195,548) 1,107,798
CASH AT:
BEGINNING OF PERIOD 489,580 189,845
====================== =====================
END OF PERIOD $ 294,032 $ 1,297,643
====================== =====================
</TABLE>
See notes to unaudited consolidated financial statements
7
<PAGE> 8
CONSO PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------------------------
December 27, 1997 December 28, 1996
---------------------- ---------------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income $2,315,750 $3,797,971
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,043,450 861,179
Amortization of deferred expenses 28,216 54,086
Provision for deferred taxes 33,107 117,085
Currency translation gain (2,943) (118,704)
Disposal of fixed assets (544) -
Changes in assets and liabilities:
Accounts receivable 501,769 461,424
Inventory (140,470) (1,596,689)
Prepaid expenses and other (348,678) 203,263
Income taxes receivable (131,709) 206,374
Trade accounts payable (917,636) 332,335
Accrued liabilities 1,043,640 270,240
Income taxes payable (798,617) 256,903
--------------------- --------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES $2,625,335 $4,845,467
===================== ====================
</TABLE>
See notes to unaudited consolidated financial statements
8
<PAGE> 9
CONSO PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 27, 1997
1. CONSOLIDATION
The financial statements are unaudited and include the accounts of the
Company, its wholly owned subsidiary, British Trimmings Limited and its
subsidiaries (all operating within the United Kingdom), and Conso's
majority-owned subsidiaries, India Trimmings (Private) Limited, Val-Mex, S.A. de
C.V., which operates Conso's Juarez, Mexico assembly plant.
The British Trimmings Limited balances included in the consolidation
are prepared using United States generally accepted accounting principles and
are translated into US dollars based on exchange rates as published in the Wall
Street Journal. Assets and liabilities are translated based on the rates in
effect on the balance sheet date. Income statement amounts are translated using
the average of the month-end exchange rates in effect during the period. The
resulting currency translation adjustments are accumulated and reported as a
separate component of shareholders' equity. From time to time the US parent
company loans or is loaned amounts from its foreign subsidiaries. It is the
Company's policy that such amounts are repayable or receivable in the foreign
currency of the subsidiary. Translation gains and losses on such amounts due to
foreign subsidiaries and all exchange gains and losses on realized foreign
currency transactions are included in the consolidated results of operations.
The India Trimmings and Val-Mex subsidiaries' operations are not significant in
relation to the Company's operations. All significant inter-company accounts and
transactions and profit and loss on inter-company transactions are eliminated in
consolidation.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of
an Enterprise and Related Information, which will be effective for the Company
for the fiscal year ended July 3, 1999. SFAS No. 131 redefines how operating
segments are determined and requires disclosure of certain financial and
descriptive information about a company's operating segments. The Company has
not yet completed its analysis of which additional operating segments, if any,
it will report on separately, or increases in disclosures, if any, will be
required beyond that already reported in its financial statements.
2. INTERIM PERIOD FINANCIAL STATEMENTS
The unaudited consolidated financial statements for the three months
and six months ended December 27, 1997 and December 28, 1996 reflect all
adjustments which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented, in all material
respects. All such adjustments are of a normal recurring nature, except when
disclosed otherwise in the notes below. These financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Operating
results for such interim periods are not necessarily indicative of results to be
expected for the year ending June 27, 1998.
9
<PAGE> 10
The Company prepares annual financial statements on the basis of a 52
or 53 week fiscal year ending on the Saturday nearest June 30th; interim
reporting periods are based on 13 week quarters. The three month and six months
periods ended December 27, 1997 and December 28, 1996 each include 13 weeks and
26 weeks, respectively.
Certain previously reported amounts have been reclassified to conform
with the current year presentation.
3. INVENTORIES
The composition of inventories at December 27, 1997 and June 28, 1997
was as follows:
<TABLE>
<CAPTION>
December 27, 1997 June 28, 1997
----------------- -------------
<S> <C> <C>
Raw Materials $ 8,365,283 $ 7,933,716
Work-In-Process $ 4,746,401 4,232,699
Finished Goods 12,566,904 13,173,521
----------- -----------
Totals $25,678,588 $25,339,936
=========== ===========
</TABLE>
4. BANK LOAN PAYABLE
During December 1997, the Company reached an agreement with the London
branch of a US bank to transition the overdraft (revolving-loan type) borrowing
facility for its British Trimmings subsidiary, from a UK bank. The new agreement
provides overdraft facilities totaling Pound Sterling 600,000 (or $1,007,280 at
the December 27, 1997 exchange rate) (previously Pound Sterling 500,000). The
new facility bears interest at the bank's base rate plus 1.25% but not less than
6%. (The previous facility bore interest at the UK bank's base rate plus 1.5%).
5. INCOME TAXES
The Company did not record any additional Jobs Tax Credits since there
were no increases in employment in the second quarter. In addition, as a result
of unforeseen changes in the Company's markets, including increases in
competition both domestically and from low cost imports, and resulting changes
in profitability, management believes it is more likely than not decreases in
personnel at its South Carolina location are necessary to reduce costs.
Accordingly, management has established a valuation reserve of $120,000 ($79,000
net of federal tax effect) against its Jobs Tax Credits deferred tax assets for
that portion of the SC job increases over the last five years, which may not be
maintained throughout subsequent years two through six.
6. STOCK SPLIT
On September 5, 1996, the Company announced a 3-for-2 split of its
common stock, issued on October 4, 1996, to shareholders of record at the close
of business on September 16, 1996. Share and per share amounts have been
adjusted for the 3-for-2 stock split.
7. EARNINGS PER SHARE
In the second quarter of fiscal year 1997, the Company adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share". SFAS 128 superceded APB Opinion 15, effective for annual
and interim periods ending after December 15, 1997. The provisions of the
statement simplify the computations of earnings per share ("EPS"). Under the new
rules, two EPS amounts are required: (1) basic EPS; and (2) diluted EPS. These
two amounts are now disclosed on the face of the income statements. The earnings
per share
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amounts calculated under the new SFAS 128 and disclosed on the face of
the income statements are not materially different than the EPS which would have
been disclosed if the earnings per share were calculated using the old
requirements of APB Opinion 15. See Note 8, "Stock Options," for a
reconciliation of the weighted average number of shares outstanding to the
weighted average number of shares outstanding assuming dilution. Only dilutive
(no anti-dilutive) options are considered in the calculation of weighted
average number of shares outstanding assuming dilution.
8. STOCK OPTIONS
On September 7, 1995, the Company granted options to certain key
employees to purchase an aggregate of 93,600 shares of the Company's common
stock under its 1993 Stock Option Plan of which 2775, 800, 1200, 1200, 2625, 825
and 825 options were exercised on September 18, 1996, October 28, 1996, January
27, 1997, February 28, 1997, May 23,1997, July 28, 1997 and October 16, 1997.
The options were granted at $6.67 per share and are exercisable with respect to
one-third of the total shares after one year, an additional one-third of the
shares after two years, and the final one-third of the shares after three years.
The options expire after five years and are subject to continued employment by
the employee. (All amounts have been adjusted for the 3-for-2 stock splits)
On September 5, 1996, and September 5, 1997 the Company granted
additional options to certain key employees to purchase an aggregate of 79,500
and 21,000 shares, respectively, of the Company's common stock under its 1993
Stock Option Plan. The options were granted at $11.00 and $10.30 per share,
respectively, and are exercisable with respect to one-third of the total shares
after one year, an additional one-third of the shares after two years, and the
final one-third of the shares after three years. The options expire after five
years and are subject to continued employment by the employee. (All amounts have
been adjusted for the 3-for-2 stock split.)
In fiscal year 1997, the Company adopted the disclosure-only provisions
of Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting for
Stock-Based Compensation". Accordingly, the Company applies APB Opinion 25 and
related interpretations for its stock option plans, and does not recognize
compensation cost for the incentive stock options referred to above. If the
Company had elected to recognize compensation cost based on fair value of the
options granted at the grant date as prescribed by SFAS No. 123, net income and
earnings per share would have been reduced to the pro forma amounts indicated in
the table below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------- ------------------------------------
December 27, December 28, December 27, December 28,
1997 1996 1997 1996
--------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net income - as reported $1,284,783 $2,064,236 $2,315,750 $3,797,971
Less compensation per FAS 123 (31,353) (39,709) (62,705) (79,417)
--------------- --------------- ---------------- ----------------
Net income - as proforma $1,253,430 $2,024,527 $2,253,045 $3,718,554
=============== =============== ================ ================
Net income per share - as reported $ 0.17 $ 0.28 $ 0.31 $ 0.51
=============== =============== ================ ================
Net income per share - as proforma $ 0.17 $ 0.27 $ 0.30 $ 0.50
=============== =============== ================ ================
Net income per share assuming
dilution-as reported $ 0.17 $ 0.27 $ 0.31 $ 0.50
=============== =============== ================ ================
Net income per share - assuming dilution
as proforma $ 0.17 $ 0.27 $ 0.30 $ 0.49
============== =============== ================ ================
Weighted average number of shares
outstanding 7,494,379 7,484,983 7,493,307 7,483,480
Options assumed to be exercised 83,522 169,789 96,524 141,057
Shares assumed to be repurchased
((83,522 shares x $6.67)/$9.16) (60,818)
((90,289 shares x 6.67)/$13.21) (45,589)
((79,500 shares x 11.00)/$13.21) (66,200)
((83,486 shares x 6.67)/$10.51) (52,983)
((13,038 shares x 10.3)/$10.51) (12,777)
((91,260 shares x 6.67)/$12.17) (50,017)
((49,797 shares x 11.00)/$12.17) (45,010)
--------------- --------------- ---------------- ----------------
Weighted average number of shares
outstanding - assuming dilution 7,517,083 7,542,983 7,524,071 7,529,510
=============== ============== ================ ================
</TABLE>
11
<PAGE> 12
The fair value of each option grant is estimated on the date of the
grant using the Black-Scholes option-pricing model with the following
assumptions (for options issued in years):
<TABLE>
<CAPTION>
FY 1998 FY 1997 FY 1996
------- ------- -------
<S> <C> <C> <C>
Expected dividend yield None None None
Expected stock price volatility 37.59% 33.92% 25.51%
Risk-Free interest rate 5.81% 6.72% 6.04%
Expected life of options 3.2 years 3.2 years 3.2 years
</TABLE>
The weighted average fair values of options granted during fiscal 1998,
fiscal 1997 and fiscal 1996 are $4.36, $4.56 and $2.32 per share, respectively.
(All amounts above have been adjusted to reflect the 3-for-2 stock splits issued
on October 4, 1996 and October 6, 1995.)
9. DIRECTORS STOCK ELECTION PLAN
In January 1997, the Company established a Stock Election Plan for
Non-Employee Directors whereby non-employee directors may elect to receive their
director compensation in common stock in lieu of cash payments. The plan permits
the award of up to 25,000 shares of the Company's stock in lieu of director
compensation. During the quarter and six months ended December 27, 1997, 786,
and 1,784 shares, respectively, were issued in accordance with directors'
elections. The compensation under this plan is not material.
10. STOCK REPURCHASE
On November 10, 1997, the Company announced that its Board of Directors
had authorized the repurchase of up to 500,000 shares of its outstanding common
stock, or about 6.7% of the outstanding shares. No repurchases were made as of
December 27, 1997.
Repurchases may be made from time to time depending upon market
conditions. The Company's Executive Committee will direct the specific
repurchases and approve prices and other terms. The Company expects to fund
repurchases either through internally generated funds or existing credit lines,
but may consider additional credit facilities depending upon the timing and
amount of repurchases.
12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
attached consolidated financial statements and notes thereto, and with the
Company's Annual Report on Form 10-K for the fiscal year ended June 28, 1997,
including the financial information and management's discussion contained or
incorporated by reference therein.
RESULTS OF OPERATIONS
QUARTER ENDED DECEMBER 27, 1997 COMPARED TO QUARTER ENDED DECEMBER 28, 1996
Net sales for the quarter ended December 27, 1997, were $19.0 million,
up from the prior year's second quarter sales of $18.5 million or 2.4%. Conso US
was up $397,000 or 3.0% from the comparable prior year quarter, while British
Trimmings increased $47,000 or 0.9%.
British Trimmings sales would show higher increase over the prior
year's figures were it not for the sale of MacCulloch & Wallis (London) Ltd
("MacCulloch & Wallis"), a retail subsidiary operation in London servicing
primarily the apparel industry with haberdashery items. The majority of items
sold by this operation were goods purchased for resale rather than manufactured
by the Company and tailored to a highly competitive, lower margin industry.
Operations from this London based group had been barely breaking even for the
last several years and were facing potential losses due to increasing rent and
other overhead costs. Accordingly, the Company sold the business in August 1997.
British Trimmings continues to supply certain manufactured items to MacCulloch &
Wallis' new owner. The business operated through July 1997 (until the business
was sold) with no sales in the second quarter compared to the prior year's
quarterly sales of $350,000. On a comparable basis (without the MacCulloch &
Wallis sales in the prior year) the retail segment shown below would have been
up 5.5%. Sales were further affected by other factors noted below.
Sales for the second quarter by customer type were as follows:
Distributors $ 8,232,000 up 4.9%
Manufacturers 7,742,000 up 3.2%
Retailers 3,004,000 down -5.5%
- --------------------------------------------------------------------------------
Total $18,978,000 up 2.4%
- --------------------------------------------------------------------------------
Sales to manufacturers, the Company's largest growth area in prior
years improved in the second quarter after decreased sales (12.4%) in the first
quarter. Sales to manufacturers were up 3.2% overall, up 5.7% at Conso US and
down 7.9 % at British Trimmings. Distributor sales continue to increase, up 4.9%
after a strong (up 9.1%) first quarter.
Sales to manufacturers in the US has been affected both by increased
domestic competition and low-cost imports of certain items. The Company began
production in India in January 1998 to compete with the lower cost imports and
has established a
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manufacturing specials support team, including the Company's top manufacturing
sales person to work on developing the expertise and success of all the
Company's sales personnel in dealing with manufacturing businesses and to
enhance the quality of service to this group. Although sales have increased this
quarter, margins have continued to be negatively affected by pricing
reductions, and product reformulations to meet the increased competition.
In the UK, in the second quarter, manufacturing business continues to
be affected, by competition. A special team has been established at British
Trimmings, as well, to improve service to this group and to recover business
from customers who went to the competition. Unfortunately, delays have caused
some customers to place purchase contracts out with other suppliers. As these
placements run out, there are opportunities for British Trimmings to prove that
its prior service levels have been restored; levels typically better than the
competition.
Sales outside the US and UK (the Company's major sales regions)
increased to $2.3 million, a 4.7% increase over the comparable prior year
quarter. Sales outside the US and UK, by geographic region, were as follows:
Western Hemisphere $1,156,000 up 15.4%
Continental Europe, Middle East 753,000 down -2.3%
Pacific Rim 378,000 down -8.2%
- --------------------------------------------------------------------------------
Total $2,287,000 up 4.7%
- --------------------------------------------------------------------------------
The Pacific Rim, Europe and the Middle East continued to be negatively
impacted by the recent negative changes in currency values in those areas
against the strong British pound and US dollar.
The gross margin for the quarter declined to 34.2% from the prior year
quarter's 39.6%. Gross margin declined due to several factors. Increased costs
of inventory produced, prior to the reductions in personnel and focus on cost
controls, have been recorded in the income statement, delaying the financial
impact of reductions in personnel and other costs. Changes in the sales mix,
pricing, and reformulation of product to meet competitive offerings continue to
be a significant factor, also.
In the US, the gross margin declined by $524,000, from 42.2% of sales
in the prior year to 37.1% of sales in the current year. A significant portion
of the reduction is attributable to the prior increases in the number of
personnel primarily in the production support departments, in anticipation of
greater sales growth. These and additional overhead costs increased the
incremental cost of inventory, significantly in the US. The Company has taken
action to reduce personnel in these areas considering the current sales climate.
The remainder of the reduction in the US is attributed to increased competitive
pressures, changes in sales mix, pricing and the reformulation of product to
meet competitive offerings, including low-priced imports.
In the UK, the gross margin declined from 33.0% of sales in the prior
year to 26.7% in the current year, for a decrease of $325,000. It is estimated
that approximately $150,000 of the prior year's physical inventory adjustment
recorded at the end of the prior fiscal year was related to and
14
<PAGE> 15
would have reduced the prior year's margin in this quarter. In addition, the
sale of the MacCulloch & Wallis division resulted in a reduction of
approximately $100,000 of gross margin on sales in that group, for this year,
compared to the prior year. The increase in personnel at British Trimmings,
necessary to restore inventory levels and deliveries after the deterioration in
the first half of fiscal 1997, cost the Company approximately an additional
$100,000. The remainder of the reduction is attributed to changes in product mix
and pricing and the affect of changes in the exchange rate on the consolidation.
Distribution expenses increased $84,000 from 4.2% to 4.5% of sales. In
the UK, distribution costs increased $26,000, primarily due to changes in the
exchange rate ($20,000). The remainder of the increase was due to some
redundancy costs. In the US, the $58,000 increase was primarily due to increases
in depreciation on the new distribution center. British Trimmings is
implementing a change in freight carriers as an additional cost savings measure.
Selling expenses were virtually flat. British Trimmings' selling
expenses decreased $80,000, while Conso US selling expenses increased $80,000.
General and administrative expenses decreased $146,000 from 6.4% to
5.5% of net sales. In the US, which decreased $127,000, the primary contributing
items was a reduction in management bonus provisions corresponding with the
reductions in operations performance. In the UK, which decreased $19,000, a
slight improvement in general and administrative costs was offset by an
increase, as a result of exchange rate changes, and charges for legal fees and
redundancy costs due to the disposal of the MacCulloch & Wallis operations.
In the prior year, the Company reported a $96,000 foreign currency
gain, while in the current year the Company had a $41,000 loss. Action has been
taken to keep the inter-company account balances to a minimum to minimize the
effect of foreign currency exchange rates.
Operating income decreased approximately $925,000, or 27.1% a slightly
smaller decline than in the prior quarter, from 18.4% to 13.1% of net sales.
Interest expense increased while taxes were down significantly as a
result of the reduction in operating income and, therefore, pre-tax income. The
company reported an effective tax rate for the quarter of 41.8% compared to the
prior year's same quarter of 37.3%. The increase in the rate is due primarily to
the establishment of a valuation reserve on the deferred tax asset for SC Jobs
Tax Credits.
Net income for the quarter ended December 27, 1997 was $1,285,000, a
decrease of $779,000 or 37.8% from the net income of the second quarter of the
prior year of $2,064,000 bringing earnings per share to 17 cents down from the
prior year's 28 cents. Conso US net income decreased $523,000 to $1.4 million
from the prior year quarter's net income of $1.9 million; down from 26 cents per
share to 19 cents per share, while British Trimmings net income decreased
$256,000, (after adjustments for inter-company
15
<PAGE> 16
transactions, foreign exchange translation and purchase accounting), declining
from net income of $136,000 or 2 cents per share, to a net loss of $120,000 or 2
cents per share.
In order to restore profitability to previous levels and in light of
current sales conditions, the Company has substantially reduced its personnel
compliment. Personnel since June 1997 has declined 82 people or 11.0% in the US,
107 people or 20.6% in the UK and 67 people or 21.9% in Mexico, taking its
employment at its current production regions from 1574 to 1318. The benefits
from these and other costs reductions will not be fully realized until later
this fiscal year.
Six Months Ended December 27, 1997 Compared to Six Months Ended December 28,
1996
Net Sales for the six months ended December 27, 1997, were $35.7
million, up 0.5% from the prior year's comparable six month period. Conso US was
up $256,000 or 1.0% from the comparable prior year period while British
Trimmings declined $90,000 or 0.9%.
British Trimmings' sales would have increased were it not for the sale
of the MacCulloch & Wallis retail operation in London. The operation ceased in
July of the current reporting period, during which time the Company only
reported $100,000. Prior year's sales for the same six month period for
MacCulloch & Wallis were approximately $700,000. On a comparable basis (or
without the MacCulloch & Wallis sales), British Trimmings sales were up 6.5%,
bringing Company wide sales to 2.5% over the prior year's comparable six month
period.
Sales by customer type were as follows:
<TABLE>
<S> <C> <C> <C>
Manufacturers $14,332,000 down 4.6%
Distributors $15,630,000 up 6.8%
Retailers $ 5,751,000 down -2.3%
- ------------------------------------------------------------------------------------
Total $35,713,000 up 0.5%
- ------------------------------------------------------------------------------------
</TABLE>
The retail segment is down as a result of the sales of the
MacCulloch & Wallis retail unit in London.
Sales to manufacturers in the US has been affected both by increased
domestic competition and low-cost imports of certain items. The Company is
scheduled to begin production of handmade products in India early in calendar
year 1998 to compete with the lower cost imports. In the meantime, pricing
reductions to meet the competition have resulted in lower per unit sales
dollars.
Sales outside the US and UK (the Company's major sales regions)
increased to $4.3 million or 5.9%. The decline in the rate of growth in this
area is due in part to the current strength of the UK pound and US dollar
against other foreign currencies. Sales by region are as follows:
<TABLE>
<S> <C> <C> <C>
Western Hemisphere $2,064,000 up 8.9%
Continental Europe, Middle East $1,336,000 up 2.1%
Pacific Rim $ 876,000 up 5.4%
- ------------------------------------------------------------------------------------
Total $4,276,000 up 5.9%
- ------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
The gross margin for the six months declined to 35.3% from the prior
year's six month period's 39.7%. Increased costs of inventory produced prior to
the reductions of personnel and focus on cost controls have been recorded as
cost of goods sold. In addition, pricing pressures from competition, both
domestically and foreign have contributed to the margins decline. In addition,
reformulations of existing products to provide cheaper alternatives have
contributed to the decline in the margin dollars.
In the US the gross margin for the current six month period was 38.3%
compared to the prior year's 41.9%, while at British Trimmings, the margins
declined from 34.2% in the prior year to 27.6% in the comparable current year's
six month period. The Company has taken actions to reduce the number of
personnel considering the current sales and margin climate.
Distribution expenses increased $144,000 for the six month's period,
from 4.2% to 4.6% of net sales. British Trimmings expenses increased $64,000,
due primarily to changes in the exchange rate ($34,000), redundancy costs and
freight. British trimmings is implementing a change in freight carriers as an
additional cost savings measure. The remainder of the increase occurring at
Conso US is due primarily to depreciation on the new warehouse facility and
related equipment including radio frequency bar-code systems.
Selling expenses for the current six-month period increased $82,000,
substantially all at Conso US. The increase at Conso US was related to some
targeted marketing done to encourage the use of decorative trims through the
sponsorship of some "How-to" seminars.
General and Administrative costs increased $113,000 with approximately
half of the increase coming from Conso US and the other half coming from British
Trimmings. The increased costs came from the appointment of Bill Stewart to the
position of Co-Managing Director of the UK operations, and some redundancy costs
related to the disposal of MacCulloch and Wallis operations, and exchange rate
translation ($47,000).
Currency losses of $40,000 were incurred in the first six months. As a
result of the decline in margin and increases in general and administrative
costs, and the translation losses, operating income decreased approximately $2.0
million or 31.7% from 17.7% of net sales to 12.0%.
Interest expense increased $184,000, in connection with increases in
borrowings on the Company's revolving loan facilities to help fund the dyehouse
and warehouse projects.
The effective tax rate increased as management established a valuation
allowance for the reductions in personnel being effected which will, more likely
than not, continue through the end of the year and result in a certain amount of
lost SC Jobs Tax Credits.
Net income for the six months declined approximately $1.5 million from
$3.8 million in the prior year to $2.3 million in the same comparable period of
the current year, and from 51 cents per share to 31 cents per share. Conso US
net income declined $834,000 while British Trimmings income declined $649,000.
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
During December 1997, the Company reached an agreement with a US bank
to transition the overdraft (revolving-loan type) borrowing facility for its
British Trimmings subsidiary, from a UK bank. The new agreement provides
overdraft facilities totaling Pound Sterling 600,000 (or $1,007,280 at the
December 27,1997 exchange rate) (previously Pound Sterling 500,000) The new
facility bears interest at the bank's base rate plus 1.25% (7.25% at December
27, 1997) but not less than 6%. (the previous facility was at the UK bank's base
rate plus 1.5%).
The outstanding aggregate balances of both the Company's and British
Trimmings' lines of credit and the British Trimmings' (line of credit type)
overdraft facility were $11.4 million at December 27, 1997, with approximately
$4.5 million available for future borrowings subject to satisfaction of certain
borrowing base requirements. The Company's primary revolving credit facility is
secured by Conso's US receivables and inventory and bears interest based on
LIBOR rates plus 1% (5.72% for US dollar borrowings and 8.375% to 8.75% for
borrowings in British pounds sterling at December 27, 1997). Working capital
declined by $300,000 to $20.7 million at December 27, 1997, from $21 million at
June 28, 1997, primarily from a partial funding of the long-term capital
projects through the revolver loan.
The Company anticipates that its total capital expenditures during the
1998 fiscal year, excluding major expansion projects, will be approximately
$1,050,000, of which approximately $724,000 has been spent through December 27,
1997. In the US, Conso had budgeted $2.3 million for the construction of a new
dyehouse facility and related equipment and $3.7 million for a new warehouse
facility and some new equipment. In addition, the Company had budgeted $1
million for the re-equipping of the space left unutilized by the move of the
warehouse and dyehouse facilities for more efficient production work flow and
some additional office space. As of December 27, 1997, approximately $6.4
million had been spent on these projects with the majority of the amount going
toward the building of the new warehouse and dyehouse. An additional amount of
$1.7 million has been approved by the Board of Directors as additional spending
relating to these expansions with most of the funding for computer equipment,
the distribution center and dyeing equipment for the new dyehouse and some
spending in excess of budgeted amounts on the facilities.
Additionally, the Company has evaluated its "Year 2000" issues and
believes that they can be resolved as the Company purchase additional computer
hardware and software at an estimated cost of $200,000.
The Company believes that cash generated by operations and available
borrowings under lines of credit will be adequate to fund its working capital
and capital expenditure requirements for the foreseeable future, but excluding
possible additional acquisitions of other businesses. Based on the Company's
financial position, the Company believes that it will also be able to obtain any
additional financing necessary to fund its planned long-term growth and
expansion. Such additional financing may include long-term debt or equity;
however, the Company has not yet made arrangements for any such additional
financing.
On November 10, 1997, the Company announced that its Board of Directors
had authorized the repurchase of up to 500,000 shares of its outstanding common
stock, or about 6.7% of the outstanding shares. No repurchases have taken place
as of this date.
Repurchases may be made from time to time depending upon market
conditions. The Company's Executive Committee will direct the specific
repurchases and approve prices and other terms. The Company expects to fund
repurchases either through internally generated funds or existing credit lines,
but may consider additional credit facilities depending upon the timing and
amount of repurchases.
18
<PAGE> 19
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of
an Enterprise and Related Information, which will be effective for the Company
for the fiscal year ended July 3, 1999. SFAS No. 131 redefines how operating
segments are determined and requires disclosure of certain financial and
descriptive information about a company's operating segments. The Company has
not yet completed its analysis of which additional operating segments, if any,
it will report on separately, or increases in disclosures, if any, will be
required beyond that already reported in its financial statements.
CAUTIONARY STATEMENTS AS TO FORWARD LOOKING INFORMATION
Statements contained in this report as to the Company's outlook for
sales, operations, capital expenditures and other amounts, budgeted amounts and
other projections of future financial or economic performance of the Company,
and statements of the Company's plans and objectives for the future operations
are "forward looking" statements, and are being provided in reliance upon the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Important factors that could cause actual results or events to differ
materially from those projected, estimated, assumed or anticipated in any such
forward looking statements include, without limitation: generally economic
conditions in the Company's markets, including inflation, recession, interest
rates and other economic factors, especially in the United States and the United
Kingdom but also including other areas of the world where the Company markets
its products; changes in consumer fashion preferences for finished products in
the home furnishings market, which may affect the demand for the Company's
products; any loss of the services of the Company's key management personnel;
increased competition in the United States and abroad, both from existing
competitors and from any new entrants in the decorative trimmings business; the
Company's ability to successfully continue its international expansion and
to successfully and profitability integrate into its operations any existing
businesses it may acquire; changes in the cost and availability of raw
materials; changes in governmental regulations applicable to the Company's
business; fluctuations in exchange rates relative to the US dollar for
currencies of the United Kingdom and other nations where the Company does
business; casualty to or disruption of the Company's production facilities and
equipment; delays and disruptions in the shipment of the Company's products and
raw materials; disruption of operations due to strikes or other labor unrest;
and other factors that generally affect the business of manufacturing companies
with international operations.
19
<PAGE> 20
PART II OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following tabulation sets forth the matters voted upon at the Annual
Meeting of Shareholders of the Registrant held October 15, 1996, and the votes
on each such matter:
<TABLE>
<CAPTION>
Against/ Broker
For Withheld Abstain Nonvotes
--- -------- ------- --------
<S> <C> <C> <C> <C>
ELECTION OF DIRECTORS
J. Cary Findlay 6,725,347 0 74,500 N/A
Antony W. Laughton 6,725,347 0 74,500 N/A
John H. Maxheim 6,725,347 0 74,500 N/A
James H. Shaw 6,649,647 0 150,200 N/A
Konstance J.K. Findlay 6,725,347 0 74,500 N/A
Marcus T. Hickman 6,725,347 0 74,500 N/A
S. Duane Southerland 6,725,347 0 74,500 N/A
APPROVAL OF SELECTION OF
DELOITTE & TOUCHE LLP AS
INDEPENDENT PUBLIC
ACCOUNTANTS 6,799,897 0 0 N/A
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Description
10.62 Second Amendment dated as of November 17, 1997
to the Loan Agreement dated as of November 25,
1997 by and between the Company and NationsBank
N.A. ("NationsBank")
10.63 Promissory Note dated November 17, 1997 issued
by British Trimmings Limited in favor of
NationsBank in the original principal amount of
L6,500,00
10.64 Sixth Amendment dated as of November 17, 1997 to
the Guaranty Agreement dated as of May 6, 1994
by and between the Company and NationsBank
10.65 Letter Agreement between British Trimmings
Limited and First Union National Bank (London
Branch) relating to overdraft and documentary
credit facility (including a copy of the General
Conditions relating thereto)
10.66 Guaranty dated November 10, 1997 by Conso
Products Company in favor of First Union
National Bank (London Branch)
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule (with respect
to the Company's quarterly period ended
September 27, 1997)
27.3 Restated Financial Data Schedule (with respect
to the Company's quarterly period ended
June 28, 1997)
27.4 Restated Financial Data Schedule (with respect
to the Company's quarterly period ended
March 29, 1997)
27.5 Restated Financial Data Schedule (with respect
to the Company's quarterly period ended
December 28, 1996)
27.6 Restated Financial Data Schedule (with respect
to the Company's quarterly period ended
September 28, 1996)
27.7 Restated Financial Data Schedule (with respect
to the Company's quarterly period ended
June 29, 1996)
27.8 Restated Financial Data Schedule (with respect
to the Company's quarterly period ended
March 30, 1996)
(b) Reports on Form 8-K
On December 11, 1997, the Registrant filed a Current
Report on Form 8-K reporting in "Item 4. Changes in Registrant's
Certifying Accountant." the approval on December 5, 1997, by the
Registrant's Audit Committee and its Board of Directors of the
expansion of the engagement of Deloitte & Touche, LLP, the
Registrant's principal accountant, to include the audit of the
financial statements of British Trimmings Limited, a significant
subsidiary of the Registrant, for the fiscal year ending June 27,
1998.
20
<PAGE> 21
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Company caused this Report to be signed on its behalf by the undersigned
thereunto duly authorized.
CONSO PRODUCTS COMPANY
Dated: February 10, 1998 By: /s/ David B. Dechant
------------------------
Name: David B. Dechant
Title: Chief Accounting Officer
Dated: February 10, 1998 By: /s/ Gilbert G. Bartell
------------------------
Name: Gilbert G. Bartell
Title: Chief Financial Officer and
Vice President of Finance/Treasurer
21
<PAGE> 1
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (the "Second Amendment"), dated
as of November 17, 1997, is made by and between
CONSO PRODUCTS COMPANY, a corporation organized and existing under the
laws of the State of South Carolina (the "Borrower"); and
NATIONSBANK, N.A., a national banking association organized and
existing under the laws of the United States (the "Bank").
RECITALS:
A. The Borrower and the Bank entered into that certain Loan Agreement,
dated November 25, 1996, as amended (the "Loan Agreement").
B. The Borrower and the Bank have agreed to modify and amend the Loan
Agreement as set forth herein.
NOW THEREFORE, the parties hereto agree as follows:
1. The Loan Agreement is hereby amended as follows:
(a) Recital A is amended by replacing the reference to
"(pound)6,000,000" with a reference to "(pound)6,500,000".
(b) Section 2.01 is amended by replacing the reference to
"(pound)6,000,000" with a reference to "(pound)6,500,000".
(c) Section 2.02 is amended in its entirety so the such Section
now reads as follows:
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, dated November 17, 1997,
executed by Trimmings in favor of the Bank in the original
principal amount of up to (pound)6,500,000 (the "Sterling
Note"), the terms of which are incorporated herein by
reference.
2. Except as hereby modified, all the terms and provisions of the Loan
Agreement remain in full force and effect.
3. Each reference to the "Loan Agreement" in each of the Loan Documents
(as defined in the Loan Agreement) shall refer to the Loan Agreement as amended
hereby.
- 1 -
<PAGE> 2
4. The Borrower will execute such additional documents as are
reasonably requested by the Bank to reflect the terms and conditions of this
Second Amendment and will cause to be delivered such certificates, legal
opinions and other documents as are reasonably required by the Bank.
5. This Second Amendment 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 Second Amendment to produce or
account for more than one counterpart.
6. This Second Amendment and all other documents executed pursuant to
the transactions contemplated herein shall be deemed to be contracts made under,
and for all purposes shall be construed in accordance with, the internal laws
and judicial decisions of the State of North Carolina.
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their fully authorized officers as of the day and
year first above written.
CONSO PRODUCTS COMPANY
ATTEST:
By By
------------------------- --------------------------
Title Title
------------------------- --------------------------
(Corporate Seal)
NATIONSBANK, N.A.
By
------------------------------
William A. Serenius,
Senior Vice President
- 3 -
<PAGE> 1
PROMISSORY NOTE
U.K. (pound)6,500,000 November 17, 1997
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
SIX MILLION FIVE HUNDRED THOUSAND POUNDS STERLING (U.K.
(pound)6,500,000), 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 Loan Agreement, dated November 25, 1996, as amended (if amended),
executed by and between Conso Products Company ("Conso") and the Bank (the "Loan
Agreement").
Advances. The Borrower, in accordance with the terms hereof, may from
time to time until December 1, 1998 (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)6,500,000 at any time outstanding
based on an interest rate equal to the Adjusted LIBOR Rate plus 1.00% per annum;
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.
<PAGE> 2
The terms of each Sterling Advance shall be noted on the schedule attached
hereto, the terms of 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 1.00% per annum. 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.
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 June 5, 1997 in the original principal amount of
(pound)6,000,000 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
- 2 -
<PAGE> 3
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.
(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.
- 3 -
<PAGE> 4
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 Section, 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,
although the failure to give any such notice shall not release or diminish any
of the Borrower's obligations to pay additional amounts pursuant to this
paragraph. 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.
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
- 4 -
<PAGE> 5
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.
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:
- 5 -
<PAGE> 6
(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
(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
- 6 -
<PAGE> 7
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.
- 7 -
<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 By
------------------------- --------------------------
Title Title
------------------------- --------------------------
(Corporate Seal)
- 8 -
<PAGE> 9
SCHEDULE A TO THE
(pound)6,500,000 PROMISSORY NOTE
DATED NOVEMBER 17, 1997
<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>
- 9 -
<PAGE> 1
SIXTH AMENDMENT TO GUARANTY AGREEMENT
THIS SIXTH AMENDMENT TO GUARANTY AGREEMENT (the "Sixth Amendment"),
dated as of November 17, 1997, is made by and between
CONSO PRODUCTS COMPANY, a corporation organized and existing under the
laws of the State of South Carolina (the "Guarantor"); and
NATIONSBANK, N.A., a national banking association organized and
existing under the laws of the United States (the "Bank").
RECITALS:
A. The Guarantor entered into that certain Guaranty Agreement, dated
May 6, 1994, as amended (the "Guaranty Agreement").
B. The Guarantor and the Bank have agreed to modify and amend the
Guaranty Agreement as set forth herein.
NOW THEREFORE, the parties hereto agree as follows:
1. The Guaranty Agreement is hereby amended as follows:
(a) Recital 1 is amended in its entirety so that such Recital
now reads as follows:
1. The Bank has agreed to make loans (the "Loans") to
the Borrower pursuant to the terms and conditions of that
certain Promissory Note, dated November 17, 1997, executed by
the Borrower in favor of the Bank in the original principal
amount of up to (pound)6,500,000 (the "Note").
2. Except as hereby modified, all the terms and provisions of the
Guaranty Agreement remain in full force and effect.
3. The Guarantor will execute such additional documents as are
reasonably requested by the Bank to reflect the terms and conditions of this
Sixth Amendment and will cause to be delivered such certificates, legal opinions
and other documents as are reasonably required by the Bank.
4. This Sixth Amendment 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 Sixth Amendment to produce or
account for more than one counterpart.
<PAGE> 2
5. This Sixth Amendment and all other documents executed pursuant to
the transactions contemplated herein shall be deemed to be contracts made under,
and for all purposes shall be construed in accordance with, the internal laws
and judicial decisions of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment
to be executed by their fully authorized officers as of the day and year first
above written.
CONSO PRODUCTS COMPANY
ATTEST:
By By
------------------------- --------------------------
Title Title
------------------------- --------------------------
(Corporate Seal)
NATIONSBANK, N.A.
By
------------------------------
William A. Serenius,
Senior Vice President
- 2 -
<PAGE> 1
FIRST UNION NATIONAL BANK
London Branch
1 Bishopsgate
London EC2N 3AB England
Telephone: 0171 621 1477
Facsimile: 0171 929 4644
Telex: 883432
To: The Directors
British Trimmings Limited
PO Box 46
Coronation Street
Stockport
Chesire SK5 7PJ
Dear Sirs,
We are pleased to advise you that First Union National Bank, London Branch (the
"Bank") is prepared to offer British Trimmings Limited (Company No. 2150914)(the
"Borrower") an overdraft facility and a documentary credit facility (together
the "Facilities" and each a "Facility") on the following terms and conditions.
1. General Conditions
1.1 The Bank's General Conditions from time to time shall apply to the
Facilities.
2. Amount
2.1 The amount outstanding at any time under the overdraft facility
("Facility A") shall not exceed L.600,000 (six hundred thousand
pounds).
2.2 The amount outstanding under the documentary credit facility ("Facility
B") shall not exceed L.200,000 (two hundred thousand pounds). If
any drawings under facility B are made under letters of credit opened
under Facility B or other amounts outstanding are denominated in US
dollars, the same shall be converted into Sterling according to the
spot rate of exchange for the same from time to time of the Bank.
3. Purpose
3.1 The Facilities are being made available to finance the general
corporate purposes of the Borrower and for such other purposes as the
Bank and the Borrower may from time to time agree.
4. Availability and Term
4.1 Facility A is available by way of an overdraft on the Borrower's
current account with the Bank and may be drawn in the case of Facility
A by way of cash advances and/or such other credit facilities which the
Bank may in it's discretion provide (subject to the provision of such
receipts,
<PAGE> 2
invoices or other evidence of the purposes of any drawing as the Bank
may from time to time require.) Facility B may be drawn by way of
letters of credit having a validity period of up to 90 days and/or such
other credit facilities which the Bank in its discretion provide
(subject to the provision of such receipts, invoices or other evidence
of the purpose of any drawing as the Bank may from time to time
require). Subject to paragraph 4.2 below the Facilities will be
reviewed on each anniversary of the date of this Letter (each a
"Termination Date") and unless t he Borrower is notified in writing to
the contrary prior to each Termination Date the Facilities will expire
on such Termination Date.
4.2 Whilst it is the Bank's present intention that the Facilities should
remain available to the Borrower until the Termination Date
notwithstanding any other provision of the Letter Bank nonetheless
reserves the right to reduce or terminate the Facilities and make
demand for all or any part of the sums outstanding hereunder at any
time by written notice to the Borrower in the event that the Bank
considers this necessary to protect the interests of the Bank.
4.3 On expiry or termination of the Facilities all amounts then outstanding
under the Facilities, together with accrued interest and any other sums
for which the Borrower is liable under the Facilities, will be
immediately due and payable without further notice of demand.
5. Interest
5.1 Interest will accrue and be calculated in respect of the amount from
time to time drawn under Facility A from day today, at a rate equal to
the Bank's base rate (or, until such time as the Bank establishes a
base rate, the base rate of Midland Bank plc) from time to time plus
1.25% per annum, with a minimum rate of 6% per annum. Interest so
calculated will be payable both before and after judgement monthly in
arrear and will be debited tot he Borrower's current account with the
Bank and compounded on the Bank's usual monthly charging days. Any sum
payable hereunder which is not paid when due shall be subject to
default interest until the same is paid in full at a rate equal to the
aggregate of the foregoing rate plus 2% per annum. Interest on any
indebtedness from time to time in excess of either Facility will be
charged at the Bank's unauthorized borrowing rate. The Bank is not
obligated to allow (or to continue to allow) any such excess borrowing.
6. Payments
6.1 Sums payable by the Borrower under the Facilities shall be made to the
Bank at it's branch at the address stated at the head of the Letter (or
at such other office as the Bank may notify to the Borrower) in cleared
Sterling funds (or, in the case of any outstandings under Facility B
denominated in US dollars, in immediately available US dollars) in
full, free of and without any withholding or deduction for any and all
present or future taxes, duties, levies, fees or other charges and
without any set-off or counter-claim whatsoever. If any such
withholding or deduction has to be made by law from any such payment
the Borrower will pay to the Bank an increased amount so that after any
withholding or deduction the Bank receives a net amount equal to the
amount which it would have received and retained had no such
withholding or deduction been made.
7. Conditions Precedent
7.1 The Facility will not be available for drawing until the Bank has
received the following documents each in form and substance
satisfactory to it:-
2
<PAGE> 3
(i) the enclosed copy of this Letter with the endorsement thereon
duly signed on behalf of the Borrower;
(ii) copies, each certified to be true, complete and up-to-date
copies, of the Certificate of Incorporation and Memorandum and
Articles of Association of the Borrower and of a resolution of
the Borrower's board of directors authorizing acceptance,
execution, delivery and performance of this Letter, the
Counter Indemnity and the General Conditions and mandate
referred to in sub-paragraph (iii) below;
(iii) the Counter Indemnity, the General Conditions and the Bank's
form of mandate including specimen signatures, duly completed;
(iv) the latest audited annual accounts of the Borrower;
(v) and any other documents or information which the Bank shall
have notified to the Borrower in writing prior to the
expiration of the period referred to in Paragraph 16.1.
8. Arrangement Fee and Costs
8.1 The Borrower shall pay to the Bank on the date a letter of credit is
opened charges as laid out in the attached schedule.
8.2 The Borrower shall indemnify the Bank on demand against any fees,
costs, charges, commission, expenses or interests charges incurred or
suffered by the Bank in connection with the negotiation of any letter
of credit or the discharging of any amount payable under any letter of
credit.
8.3 The Borrower will pay to the Bank on demand the amount of all
translation, authentication, advising, confirming and other charges and
expenses incurred by the Bank under or pursuant to this Letter or as a
result of opening any letter of credit.
8.4 All costs, charges and expenses reasonably and properly incurred or
suffered by the Bank, including legal costs, arising at any time in
connection with the Facilities or with any security or guarantee in
respect of all or any of the Borrower's obligations in connection with
the Facilities, are payable by the Borrower on demand on a full
indemnity basis.
9. Further Assurance
9.1 The Borrower undertakes to perform, execute and deliver such further
acts and documents as the Bank may require to implement the purposes of
and perfect this Letter and/or any of the transactions contemplated
hereby or thereby.
10. Applicable Law
10.1 The law applicable to this Letter shall be the law of England and
Wales.
11. Successors
11.1 This Letter shall ensure to the benefit of the Bank and its successors
and assigns form time to time including without limitation any entity
with which the Bank may merge or amalgamate or by which it may be
absorbed or to which it may transfer all or any part of its undertaking
or assets, and any change in the Bank's constitution or any such
merger, amalgamation, absorption or
3
<PAGE> 4
transfer will not prejudice or affect its rights hereunder in any
respect. The Borrower may not assign or transfer any of its rights,
benefits or obligations under this Letter.
12. Severance
12.1 If at any time any provision hereof is or becomes invalid, illegal or
unenforceable in any respect under any law of any jurisdiction, the
validity, the legality and enforceability of the remaining provisions
hereof and the validity, legality and enforceability of such provisions
under the law of other jurisdictions shall not in any way be affected
or impaired thereby.
13. Non-Waiver
13.1 No failure by the Bank to exercise and no delay by the Bank in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise of any right,
power or privilege preclude any other or further exercise thereof or
any exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights
or remedies provided by law.
14. Demand or Notice
14.1 Any demand or notice on the Borrower hereunder shall be made as
specified in the General Conditions.
15. Information
15.1 The Borrower shall provide to the Bank such financial and/or other
information as the Bank may from time to time reasonably require.
16. Period and Offer
16.1 Please confirm your acceptance of the terms and conditions of the
Facility by signing the acceptance on the enclosed duplicate of this
Letter and returning it to the Bank together with the documents
referred to in Paragraphs 7.1 above within 21 days of the date of this
Letter. If this offer is not so accepted within that period, it will
lapse.
Yours faithfully,
For and on behalf of
FIRST UNION NATIONAL BANK
LONDON BRANCH
4
<PAGE> 5
In accordance with the Resolution of it's Board of Directors, the Company hereby
accepts the terms and conditions set out in the Facility Letter dated today's
date of which this is a true copy.
Signed by
C.V. BALAKRISHNAN
(Director)
For and on behalf of
British Trimmings Limited
5
<PAGE> 6
FIRST UNION NATIONAL BANK
London Branch
3 Bishopsgate
London EC2N 3AB England
Telephone: 0171 621 1477
Facsimile: 0171 929 4644
Telex: 883432
To: British Trimmings Limited,
Attn. Chris Kirrane,
PO Box 46,
Coronation Street,
Stockport,
Cheshire SK5 7PJ.
By Fax: 0161 480 5830
9th December, 1997.
Dear Chris,
In reply to your fax of yesterday, please find below the revised schedule for
our charges regarding Letters of Credit.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Charges per L.100.00 up to 180 days L.0.60
- --------------------------------------------------------------------------------
Amendments L.40.00
- --------------------------------------------------------------------------------
Additional Shipment Charges No Charge
- --------------------------------------------------------------------------------
Telex Charges per L/C L.10.00
- --------------------------------------------------------------------------------
Additional Payments under L/C No Additional Charges
- --------------------------------------------------------------------------------
</TABLE>
I believe Claire has spoken with you about your Bacs requirements. May I stress
the importance of advising us what your current arrangements are, and what
software you have. Obviously in the event of you requiring new software the
sooner we can arrange this the better
Thanks and regards,
Yours sincerely,
/s/ Chris Bolton
Chris Bolton,
Sales Assistant,
International Corporate Banking.
6
<PAGE> 7
GENERAL CONDITIONS
To: First Union National Bank, London Branch
1 Bishopsgate
London EC2N 3AB Date:___________
This document governs the relationship between First Union National Bank, acting
through its London Branch, and its customers, and may only be varied by written
agreement between the Bank and the Customer and pursuant to clause 33.02 hereof.
In these Conditions:
"Bank" means First Union National Bank, London Branch
1 Bishopsgate
London EC2N 3AB
facsimile: 0171 929 4644
"Customer" means
name: British Trimmings Limited (Company No. 2150914)
address: PO Box 46, Coronation Street, Stockport, Chesire SK5 7PJ
facsimile:
"Associate Bank" means any bank or corporation which is wholly owned by the
ultimate corporation of the Bank.
"Authorized Signatory" shall have the meaning provided in Clause 1.
"Bank Document" means each agreement, letter or other document governing the
terms of the banking relationship between the Bank and Customer, including,
without limitation, these General Conditions, any mandate letter provided to the
Bank as referred to in Clause 1 of these General Conditions, any facility
letter, debenture or other security document in favor of the Bank, guarantee
and/or counter-indemnity.
In these General Conditions where the context permits:-
The singular shall include the plural and vice versa, the masculine shall
include the feminine gender and reference s to persons include corporations and
unincorporated bodies.
The headings are inserted for convenience only and shall have no effect on the
interpretation of these General Conditions.
In consideration of the Bank opening an account or from time to time granting or
continuing to make available credit or other banking facilities and
accommodation and/or performing banking services for the Customer, the Customer
agrees that it shall be bound by the following conditions:-
7
<PAGE> 8
Q. OPERATION OF ACCOUNTS
1. Mandates/Authorized Signatories
The Customer shall provide the Bank with a mandate letter in the Bank's standard
form containing specimen signatures of all persons authorized to operate the
Customer's accounts (each such person being referred to herein as an "Authorized
Signatory"). Until written notice of revocation of a person's authority is
received by the Bank, the Bank shall be entitled to act upon documents bearing
or purporting to bear the signature of an Authorized Signatory and shall be
entitled to act upon all instructions received or purported to be received from
an Authorized Signatory in accordance with Clause 4.
2. Repayment
The Customer shall pay to the Bank on demand the aggregate of all amounts
whether principal, interest or otherwise which may from time to time or at any
time be or become due and owing actually or contingently from the Customer to
the Bank under any agreement, account or arrangement whatsoever whether as
principal debtor or surety or in any other manner or capacity whatsoever and
whether alone or jointly with any other person including all costs,
disbursements and expenses incurred by the Bank in relation to the recovery or
attempted recovery of any amounts owing to the Bank or liabilities incurred by
the Customer.
3. Cheques
3.01 Cheques must be written only on forms supplied by the Bank and the
forms may only be used for the account for which they are issued. The
customer undertakes to keep the cheque forms in a safe place and bear
any and all consequences arising from their loss regardless of fault on
its part. The Bank must be informed as soon as possible of the loss or
theft of cheque forms, including an indication of the number of cheque
forms involved.
3.02 No cheques will be paid unless the Customer has sufficient cleared
funds in the account on which the cheque is drawn to enable the cheque
to be paid unless the funds are to be drawn within the limits of the
overdraft facility which has been agreed in writing between the
Customer and the Bank.
3.03 Alterations to cheques must be countersigned by the Customer with the
Customer's full signature. The Bank reserves the right to return
cheques if alterations are not countersigned in this manner. The
Customer shall bear all consequences and losses arising from a forged
or fraudulently altered cheque, or the abuse of cheques and/or receipts
and the Bank shall be entitled to maintain debits to the Customer's
accounts(s) made as a consequence of a forged or fraudulently altered
cheque.
3.04 Any stop payment order given by the Customer must relate to the exact
amount to be drawn in respect of the cheque and must include complete
and accurate details of the number of the cheque, the name of the payee
and the date on which the cheque was drawn and shall only be effective
if the cheque has not been paid. The Bank shall only be obliged to
comply with a stop payment order if all details provided by the
Customer accord strictly with those of the cheque presented. Where a
stop payment order has been given the Bank shall not be liable if
payment is made through inadvertence or oversight.
3.05 The Bank shall not be obliged to pay any cheque which is presented more
that six months after the date of drawing or which is undated.
8
<PAGE> 9
4. Instructions
4.01 Notwithstanding the terms of any mandate or other agreement or course
of dealing between the Bank and the Customer (whether currently in
existence or in the future), the Bank may, but is not obliged to, rely
upon and act in accordance with any instruction, notice, demand or
other communication which may from time to time be, or purport to be,
given by telephone, telex, or facsimile message by the Customer or any
Authorised Signatory. The Bank may treat such instruction, notice,
demand or other communication as fully authorised by and binding upon
the Customer without inquiring as to the authority or identity of the
person making or purporting to make the same and regardless of the
circumstances prevailing at the time of such instruction, notice,
demand or other communication and the Bank shall be entitled (but not
bound) to take such steps in connection with or in reliance upon such
communication as the Bank may in good faith consider appropriate,
whether such communication includes instructions to pay money or
otherwise to debit or credit any account or relates to the dispositions
of any money, securities or documents or countermand any previous
instruction given on behalf of the Customer or purports to bind the
Customer to any agreement or other arrangement with the Bank or with
any other person or to commit the Customer to any other type of
transaction or arrangement whatsoever regardless of the nature of the
transaction or arrangement or the amount of money involved and
notwithstanding any error or misunderstanding or lack of clarity in the
terms of such instruction, notice, demand or other communication.
4.02 The Customer specifically empowers the bank to tape record its
instructions given by telephone to the Bank and agrees and acknowledges
that any such tape recording may, at the discretion of the Bank, be
used in court proceedings as evidence as if it were a written document.
5. Errors in transmission
Damages or losses resulting from the use of postal services, telegraph,
telephone, telex or other means of communication or transport, and in particular
from loss, delay, misunderstandings, mutilation or duplicate dispatch, shall be
borne by the Customer.
6. Execution of instructions
Complaints by the Customer relating to any failure by the Bank to act upon
instructions must be lodged soon as the Customer becomes aware of the
circumstances giving rise to complaint provided that the Bank shall have no
liability in respect of such failure unless the Customer has given notice of
such complaint to the Bank in writing by no later than 28 days after the date of
the transaction or event in respect of which the Customer wishes to raise such
complaint.
7. Liability
7.01 The Bank's liability, if any, in regard to damages with respect to
electronic funds transfers will be limited to an amount equal to
interest on the funds for each day the error or delay remains
uncorrected at the applicable London Interbank Offered Rate ("LIBOR").
The Bank may at its sole discretion substitute in lieu of interest an
"as of" adjustment method of compensation (i.e. recompute the
Customer's balances for account analysis purposes as if the error or
delay had not occurred). If the Bank is unable to recover all or any
part of erroneously transferred funds from a transferee who has no
claim to them, the Bank's liability will not exceed the amount of funds
which the Bank is unable to recover plus interest as aforesaid. The
Bank shall be subrogated to all rights of the Customer against third
parties and to any rights of a transferee against the Customer in
connection with any claim. In no event shall the Bank be liable
regardless of whether any claim
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is based on contract or tort, for any consequential, special or
indirect losses or damages the Customer may incur or suffer under any
agreement with the Bank, whether or not the likelihood or possibility
of such losses or damages was known to the Bank in advance.
7.02 The Bank shall not be responsible for any loss or damage resulting from
acts of God, war, riots, strikes, civil or industrial disturbance,
malfunctions of equipment or other causes beyond the Bank's control.
8. Accounts
8.01 Statements of account shall be issued on written application or by
arrangement with the Bank. Failure by the Customer to object to a
statement of account within thirty days after receipt thereof shall be
deemed approval of all entries contained therein and in the absence of
any such objections the statement of account shall be final and binding
on the Customer. This means that if the Customer fails to object to an
entry in his statement of account within this time limit and such entry
is found to be incorrect, the Customer will not be entitled to
challenge the entry or to require it to be corrected by the Bank.
8.02 Accounts shall be balanced at such intervals as the Bank may advise the
Customer. The Customer's account shall be debited with any interest or
other charges due to the Bank without demand or notice to the Customer.
Any expenses, taxes or other charges shall be borne by the Customer.
The Bank reserves the right to alter interest rates or other charges
and to advise the Customer thereof by any suitable method. The Customer
agrees that default interest (at such rate or rates as the Bank may
reasonably determine) may be charged (before as well as after
judgement) on any moneys not paid by the Customer, on demand, or when
otherwise due, and interest shall continue to be charged as aforesaid,
notwithstanding the termination of the relationship between the Bank
and the Customer, until all sums owing have been paid or repaid in
full.
8.03 Any certificate signed by a duly authorized officer of the Bank stating
the balance of an account or the amount owing by the Customer to the
Bank shall, in the absence of manifest arithmetical error, be
conclusive evidence of the balance of the account of the amount owing
and shall be binding on the Customer.
8.04 If the Customer gives several instructions for payments to be made or
liabilities to be incurred, the total amount of which exceeds its
credit balance or the facilities granted to it, the Bank shall be
entitled to carry out all or any of the instructions at its discretion,
in whole or in part, irrespective of the date they bear or the date of
their receipt by the Bank.
8.05 In the event that any account of the Customer with the Bank is credited
with any amount incorrectly or in error, the Customer shall forthwith
notify the Bank as soon as it becomes aware of any such incorrect
credit and the Bank shall have the right to debit to such account any
amount incorrectly credited.
9. Indemnity
The Customer shall indemnify the Bank and keep the Bank indemnified in full and
hold it harmless against all demands, claims, liabilities, losses, actions,
proceedings, costs and expenses (including all legal and other costs,
disbursements and expenses) damages or other consequences which the Bank may
incur or sustain of whatever nature and howsoever arising out of or in
connection with or in relation to opening or closing any account, granting any
facilities, giving credit or performing any services for, or
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following any instructions of the Customer in accordance with Clause 4 and the
Customer shall reimburse the Bank upon demand, for any payment, loss or damage
which the Bank may make, suffer or sustain by reason or on account thereof and
shall upon request appear in and defend at the Customer's own expense any action
which may be brought against the Bank in connection therewith.
10. Foreign Currency
10.01 The Customer is obliged to discharge it's obligations to the Bank in
the currencies in which they are denominated, in the manner directed by
the Bank and at the places directed by the Bank.
10.02 If any law, regulation or decree prohibits the Customer from
discharging its liability and indebtedness to the Bank (or the relevant
part thereof) in the currency in which it is denominated or prevents
any funds in such currency being remitted to the Bank the Customer
shall instead discharge its liability and pay its indebtedness (or the
relevant part thereof) by paying to the Bank (at the Bank's option and
in the manner directed by the Bank) such other currency as the Bank may
direct. The Customer shall pay sufficient amount of such other currency
as will enable the Bank to purchase am amount equal to the Customer's
liability and indebtedness (or the relevant part thereof) in the
currency in which it is denominated calculated at the relevant spot
rate of exchange as conclusively determined by the Bank.
10.03 The Customer agrees to indemnify the bank against any loss incurred by
it as a result of any judgement or order being given or made for the
payment of any amount due to the Bank in respect of the Customer's
obligations and liability to it and such judgement or order being
expressed in a currency other than that in which the payment was due
and as a result of any variation having occurred in rates of exchange
between the date on which the currency is converted for the purpose of
such judgement or order and the date of actual payment thereof. This
indemnity shall constitute a separate and independent liability of the
Customer and shall continue in full force and effect notwithstanding
any such judgement or order as aforesaid.
10.04 Where the Bank undertakes any transaction in a currency other than
pounds sterling for the Customer, the rate of exchange applicable shall
be the spot rate conclusively determined by the Bank for purchasing
such foreign currency with pounds sterling.
10.05 The Customer shall obtain all necessary approvals for any foreign
currency transactions and agrees that performance of the Bank's
obligations in respect thereof is at all times subject to compliance in
such manner as the Bank may think fit with any exchange control or
other restrictions or rules from time to time in force.
11. Set-off, Combination and consolidation
11.01 The Bank shall have the right and in addition to all rights of set-off,
combination, lien or otherwise to which is entitled at law or under any
agreement between the Bank and the Customer at any time without demand
and without further notice to the Customer, and not withstanding any
settlement of account or other matter whatsoever:-
(a) to combine or consolidate all or any of the existing accounts
of the Customer with the Bank (whether matured or unmatured,
whether deposit, loan or any nature whatsoever, held in the
name of the Customer or in the nature of any other person
alone or jointly, and whether subject to notice or not);
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(b) to procure the transfer to the Bank of any amount standing to
the credit of any such existing account of the Customer with
any other Associate Bank or any other amount held by any other
Associate Bank in respect of the liabilities of the Customer
to any Associate Bank; and
(c) to set-off any amount standing to the credit of any such
existing accounts of the Customer with the Bank or any amount
transferred to the Bank under paragraph (b) above or any
amount held by the Bank in respect of the liabilities of the
Customer in or towards payment of all moneys which are now or
may at any time hereafter become from time to time due or
owing by the Customer to the Bank anywhere and at any time in
respect of any transaction, dealing or engagement whatsoever
(in all cases whether alone or jointly with any other person
and in whatever style, name or form and whether as principal
or surety.)
11.02 Where such combination, consolidation, set-off or transfer requires the
conversion of one currency into another, such conversion shall be
calculated at the spot rate as conclusively determined by the Bank for
purchasing such currency with the currency in which the relevant
amounts are denominated on the date of actual payment.
11.03 The Customer hereby agrees that the Bank may apply any amounts held or
received by it hereunder which are not applied in payment of the
liabilities and indebtedness of the Customer to the Bank or any
Associate Bank under any other agreement, account, arrangement,
transaction or engagement whatsoever between the Customer and the Bank
and/or Associate Bank and that Associate Bank shall have the right to
require payment of any amounts due to it from the Customer from such
amounts held by the Bank for the Customer.
11.04 The Customer shall not have any right or claim against the Bank in
respect of any loss arising by reason of the exercise of the Bank's
rights hereunder including (without limitation) any loss of interest
occasioned by any deposit account being terminated without due notice
or before the expiry of its term.
12. Costs
12.01 The Customer shall provide the Bank upon demand with immediately
available funds to meet all disbursements and expenses including
commission, interest and charges.
12.02 All costs incurred by the Bank in taking from it's professional
advisors (including legal advisors) or for any work done by such
advisers on instructions with regard to anything or matter arising out
of these General Conditions (whether to be done or performed by the
Bank or by the Customer) shall be borne by the Customer and the Bank
may debit the Customer's account for such costs and expenses without
demand or notice. If the Customer fails to pay when due any sum which
it may owe, all charges, costs and expenses, including legal costs,
incurred or paid by the Bank in exercising any right, power or remedy
conferred under these General Conditions or otherwise for the recovery
of such sum shall be paid forthwith to the Bank by the Customer.
12.03 The Customer agrees to indemnify the Bank on demand against all costs
charges and expenses (including legal fees) incurred by the Bank in
connection with the drafting, preparation, negotiation, execution and
registration of all mortgages, debentures, charges and other security
documents and such other agreements as the Bank may require and of any
amendment, variation or extension thereof or the granting of any waiver
or consent thereunder and the presentation,
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enforcement or attempted enforcement of the Bank's rights and powers
under any such security document or in respect of any other
transaction, dealing or arrangement between the Customer and the Bank.
13. Continuing Agreement
This is a continuing agreement and all the rights, powers and remedies hereunder
shall apply to all the Customer's present, future and contingent obligations and
liabilities to the Bank, including those arising under successive transactions
which shall either continue existing obligations and liabilities , increase of
decrease them or from time to time create new obligations or liabilities after
any or all prior obligations and liabilities have been satisfied, and
notwithstanding the Customer's death, incapacity, bankruptcy, liquidation or any
other event or proceeding affecting the Customer.
14. Payments - Generally
14.01 Transfers are final when made to the Bank. However, pursuant to the
request of the originator, an, if possible, the Bank will attempt to
cancel or amend any order. The Bank shall incur no liability if it is
unable to cancel or amend any order. The Customer bears all risk of
loss due to fluctuations in the rate of exchange where the Customer has
requested a refund. No transfer fee shall be refunded. The Customer is
responsible for any charges related to the cancellation or amendment of
payment orders.
14.02 For same day delivery, payments must be received before the cut-off
time for fund transfers on a business day as established by the Bank
from time to time.
15. Payment with no deductions
15.01 The Customer shall make all payments to the Bank in full in the
currency in which the liability or indebtedness of the Customer to the
Bank is denominated or such other currency as the Bank may from time to
time direct, in full in immediately available funds, without any
set-off or counterclaim whatsoever, and without deduction or
withholding for or on behalf of any present or future taxes, duties or
similar charges the Customer shall pay all present or future taxes or
similar charges due with respect to such payments which may be imposed
by any competent fiscal authority, except taxes on the overall income
of the Bank.
15.02 If any deduction or withholding has to be made by law from any such
payment, the Customer shall pay an increased amount so that after such
deduction or withholding the Bank receives and retains a net amount
equal to the amount which it would have received and so retained had no
such deduction or withholding been made.
15.03 The Customer shall provide the Bank with official receipts evidencing
payment of such taxes or similar charges within thirty days after the
due date for each payment.
16. Appropriation
The Bank may appropriate all amounts received in respect of the Customer's
obligations and liabilities to the Bank in or towards any part of the Customer's
liability in respect of any transaction, dealing or engagement or any account as
the Bank may in its absolute discretion from time to time conclusively
determine.
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17. Suspense account
The Bank may at any time place any amount received from the Customer or any
other person in respect of the Customer's obligations and liabilities to the
Bank to the credit of a suspense account without being under any duty to apply
such amount towards the payment and discharge of any such liabilities so that
the Bank may retain its rights to prove for all amounts due to the Bank from the
Customer or any other person liable for the obligations and liabilities of the
Customer to the Bank in the event of any composition or arrangement in relation
to the Customer or any such person.
18. New accounts
After the bank has made demand upon the Customer the Bank may at any time rule
off the Customer's accounts and open any new accounts so that subsequent
payments to the Bank do not operate to reduce the Customer's liability. Whether
or not the Bank opens such new accounts, it shall nevertheless be treated as
having done so.
19. Security
19.01 The Customer shall furnish upon demand such further security in such
form and value as may be required by the Bank from time to time in
amounts and/or values sufficient at all times in the Bank's opinion to
secure any or all of the Customer's obligations and liabilities to the
Bank whether actual or contingent, future or otherwise and if required
by the Bank shall register or procure the registration thereof with the
appropriate authorities.
19.02 All payment orders will be transmitted to the Bank in compliance with
the security procedures established between the Bank and the Customer.
The Customer will disclose these procedures only to its authorized
representative(s) and establish internal controls to protect them from
unauthorized disclosure. These procedures may be changed from time to
time and the Bank will do so immediately at the Customer's request if
the Customer knows or suspects that they have become known by
unauthorized persons. The Bank will be entitled to presume that all
payment orders which comply with security procedures are being
transmitted by authorised representatives of the Customer.
20. Insurance
The Customer undertakes to insure fully against all risks with insurance
companies acceptable to the Bank the goods and such of the Customer's property
as is in any way charged in the Bank's favour. In the case of loss or
destruction the amount due under any such insurance shall be paid over to he
Bank; in the case of damage the amount due under any such insurance shall,
unless otherwise agreed by the Bank be applied in repairing or reinstating the
insured property. The Customer further undertakes to lodge any and all policies
and premium receipts evidencing such insurance with the Bank if so required with
the Bank's interest duly endorsed and authorizes the Bank to collect the amounts
due under any policy or policies of insurance. If the Customer defaults in
effecting of keeping up any such insurance or in producing any policy or
policies to the Bank or if any insurance effected by the Customer is
insufficient in the Bank's opinion, the Bank shall have the full power to insure
in such sum as it shall think fit and moneys expended by the Bank for such
insurance shall be paid forthwith to it by the Customer and may be debited to
the Customer's account.
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B. COMMERCIAL BUSINESS
Where the Customer and the Bank enter into any of the following arrangements:-
(a) for depositing any negotiable instruments, documents of title,
shares, stocks or other securities with the Bank;
(b) for negotiating or purchasing from the Customer documents
and/or drafts relating to letters of credit;
(c) for issuing by the bank letters of guarantee or indemnity;
(d) for the Bank collecting on the Customer's behalf documents
and/or drafts;
(e) for cheque discounting;
(f) for releasing documents of title to the Customer;
(g) for the Bank issuing letters of credit;
then the Customer agrees that the following conditions in this Section B shall
also apply:-
21. Pledge
21.01 All bills of exchange, promissory notes and negotiable instruments of
any description, all bills of lading, dock warrants, delivery orders,
warehouse warrants and receipts and other documents of title or
documents relating to goods and all policies and certificates of
insurance, stocks, shares and securities whatsoever and the goods
relating thereto, and any goods which are now or may at any time
hereafter be in the Bank's possession or held in its name or its order
or deposited or lodged with the Bank or its agents or representatives
or correspondents or transferred to the Bank, or its nominees by the
Customer or by others in the Customer's name or for the Customer's
account whether for safe custody, collection, security or for any
specific purpose or generally are hereby pledged to the Bank and shall
not be subject to any encumbrance in favour of any other person. The
pledge hereby granted is a continuing security for the due payment to
the Bank and the satisfaction and discharge of the Customer's
obligations and liabilities to the Bank.
21.02 The Bank may take possession of (whether by opening any safe deposit or
otherwise) sell dispose of or otherwise deal with any such assets as
and when in such manner upon such terms (including price) and by
whatever means and to whoever the Bank thinks fit without prior notice
to the Customer or any other person. The Bank may apply the net
proceeds of any such sale, disposition or dealing in or towards
discharge of the Customer's obligations and liabilities to the Bank.
The Bank may, but shall not be obliged to, release any such assets to
the Customer against trust receipts.
22. Negotiation
Where there are discrepancies between any documents and/or drafts presented by
the Customer to the Bank for payment purchase or negotiation and the terms of
the applicable letters of credit or authorities to pay, irrespective of when
such discrepancies are discovered, the Customer agrees to refund to the Bank on
demand all money paid or expended by it in respect of such documents and/or
drafts and the Bank and its correspondents are hereby authorized to give the
drawees and paying of reimbursing banks such indemnities for all losses and
consequences arising from such discrepancies as they may require and the
Customer shall indemnify the bank on demand for all liabilities, losses, costs
and expenses whatsoever which including legal fees may be incurred, sustained or
suffered by the Bank, and/or its correspondents arising from such indemnities.
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23. Guarantees and Indemnities
23.01 If at the request of the Customer the Bank countersigns or issues any
guarantees or indemnities whatsoever including without limitation bonds
or standby letters of credit, the Customer shall indemnify the Bank
against all liabilities, losses, costs and expenses whatsoever
including legal fees arising by reason of the Bank having countersigned
or issued such guarantee or indemnities and shall pay to the Bank on
demand all moneys paid or expended by it by reason of or in respect of
any guarantees, indemnities bonds or standby letters of credit signed
or issued by it at the Customer's request.
23.02 Where guarantees or indemnities are issued by the Bank relate to the
release of goods without documents of title, the Customer shall
endeavor to obtain the bills of lading and/or other documents of title
to the relevant goods and upon their receipt shall procure the Bank's
release from it's guarantee or indemnity and the return of the relevant
document for cancellation. The Customer further authorises the Bank to
endorse in the Customer's name all relevant bills of lading so that
they may be delivered directly by the Bank to shipping companies and/or
their agents and/or forwarding agents as aforesaid and in order to give
effect to this, in the case of shipments under letters of credit the
Customer undertakes to disregard all discrepancies (if any) between the
shipping documents received and those called for by the relevant letter
of credit and to accept all such shipping documents as if they were all
the documents and the only documents called for by the relevant letter
of credit.
23.03 Without prejudice to the Customer's indemnity herein against all losses
or damages, the Bank is authorized at its discretion to debit any
account of the Customer for or with the amount of all moneys which are
paid of expended by the Bank in respect of such documents and/or drafts
or goods without demand or notice and the Customer undertakes to
deposit with the Bank immediately on demand by the Bank such sums as
the Bank may consider itself to be liable for in respect to such
guarantees or indemnities until they are released and returned to the
Bank or until such time as the Bank considers that the liabilities
thereunder are no longer outstanding.
24. Collection
24.01 Where the Banks makes upon the Customer's request any collection on any
documents and/or drafts, the Customer agrees that, if credit has been
given by the Bank for any such documents and/or drafts, such credit is
conditional and is subject to collection and receipt by the Bank of
full payment of such documents and/or drafts and in the absence of such
collection and receipt by the Bank the Customer agrees to reimburse the
Bank upon demand for the amount so advanced. In receiving any items for
deposit or collection, the Bank assumes no responsibility beyond the
exercise of reasonable care. All items which are credited are so
credited subject to actual payment in cash and the Bank will not be
liable in any way whatsoever for the default or negligence of it's
correspondence or for any losses in transit and each such correspondent
shall not be liable except for its own negligence. The Bank or any of
its agents may accept a draft or credit as conditional payment in lieu
of cash settlement of any obligation but the Customer's obligation to
the Bank will not be discharged until the Bank has duly received
payment on such draft or credit.
24.02 Each collection shall be subject to the Uniform Laws for Collections,
International Chamber of Commerce Publication No.322, as from time to
time amended.
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25. Cheque Discounting
In the event that the bank agrees to enter into discounting arrangements with
the Customer or into any arrangements involving or including the purchase by it
of negotiable instruments, the Customer hereby guarantees the full payment at
maturity of all such instruments discounted or purchased by the Bank under such
arrangements and the Customer hereby agrees to indemnify the Bank in respect of
all monies, costs, charges and expenses including legal fees incurred by the
Bank in connection with such arrangements and to enter into or procure the
entering into of such further guarantees and/or indemnities as the Bank may
require in connection therewith. The Bank shall not be obliged to give notice of
dishonor and/or note and protest any dishonored and negotiable instruments.
26. Letters of Credit
26.01 All letters of credit opened or confirmed on the Customer's application
shall be subject to Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication
No. 500, as amended from time to time. As between the Customer and the
Bank in the event of any conflict between the said Uniform Customs and
any of these conditions, these conditions shall prevail.
26.02 Neither the Bank nor it's agents shall be in any way responsible for
the description, quality, fitness for use, quantity, value or delivery
of any goods, nor the correctness, genuineness, regularity or validity
of any documents and/or drafts nor for their failure to conform to the
descriptions contained in any documents, nor for general or particular
conditions stipulated in any documents, nor from any delay or deviation
from instructions with regard to shipments and no obligation of the
Customer to the Bank shall be affected thereby. Further, the Bank
and/or it's agents, acting bona fide, shall be entitled to honour
drafts drawn under any letter of credit opened by it at the Customer's
request notwithstanding that it and/or its agents or correspondents are
not obliged to honor such drafts on the grounds that there are
discrepancies between the documents required to be presented under such
letter of credit and the documents actually presented under such letter
of credit. The existence of such discrepancies of any nature whatsoever
shall not affect in any way the Customer's liabilities to the Bank in
respect of or arising out of such letter of credit.
26.03 Where the Customer applies to the Bank for a pre-export loan, the
Customer undertakes to present or procure presentation to the Bank the
documents and/or drafts for negotiation properly drawn and conforming
to the terms of the letter of credit referred to in the application, as
soon as available and in any case not later than the date fixed in the
Customer's application as approved by the Bank. In the event that the
required documents and/or drafts are not delivered to the Bank upon
such date, the Customer further undertakes to repay in full immediately
to the Bank the amount advanced and all interest accrued thereon
without notice from or demand from the Bank.
26.04 The Banks shall not be responsible for other than the exercise of
reasonable care in respect of any goods, documents or items in its
possession and shall not be liable in any way whatsoever for the
default or negligence of any agent or correspondent or for any loss in
transit.
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C. GENERAL
27. Default
Without prejudice to any rights of the Bank pursuant to Clause 2, Clause 28
and/or any other agreement entered into with the Customer to make demand at any
time and/or to take the actions referred to in subparagraphs (a) and (b) below
at any time, upon the occurrence of any of the following events:-
27.01 The failure by the Customer to pay on demand or when otherwise due any
amount (whether in respect of principal interest or otherwise ) owed to
the Bank or to any Associate Bank.
27.02 The failure by the Customer, duly and punctually, to perform or
discharge any other duty or liability under any agreement between the
Customer and the Bank or which the Customer has otherwise undertaken to
the Bank and if (in the opinion of the Bank) such failure is capable of
remedy, it shall continue for ten (10) days after the Bank shall have
given to the Customer notice of such failure.
27.03 Any deterioration or impairment (in the Bank's opinion) of any security
granted to the Bank under any agreement or arrangement between the Bank
and the Customer or any part thereof or any decline or depreciation in
the Bank's opinion in the value or market price thereof (whether actual
or reasonably anticipated).
27.04 Any license consent or approval of any public, governmental or judicial
authority or agency at any time necessary in connection with the
execution, delivery, validity, or enforceability of any agreement or
arrangement between the Customer and the Bank or to enable the Customer
to perform and discharge its duties and liabilities under any such
agreement or arrangement shall be revoked or withheld or terminated or
materially modified or shall expire or shall otherwise not be granted
or fail to remain in full force and effect.
27.05 Any representation, warranty or statement made or implied by the
Customer in any agreement between the Customer and the Bank or
otherwise given by the Customer to the Bank or any notice, certificate,
statement or opinion referred to, delivered or made in or in
connection with any such agreement shall be incorrect or inaccurate
when made in any material respect.
27.06 Any other indebtedness (whether arising from a loan guarantee or
otherwise of the Customer becoming due and payable or, with the
giving of notice and/or lapse of time, capable of being declared due
and payable prior to its stated date of maturity by reason of any
circumstances entitling the creditor(s) of the Customer to declare such
indebtedness due and payable or not being paid when due or to the
Customer being in breach or default under any agreement, charge or
other document under or pursuant to which such indebtedness incurred.
27.07 The Customer declaring a general moratorium on the payment of its
indebtedness.
27.08 A winding up petition being presented in any court or a meeting being
convened for the purpose of considering a resolution for the winding up
of the Customer or the Customer otherwise entering into liquidation or
dissolution, or proceedings being commenced by or against it under any
reorganization, arrangement, readjustment of debts, dissolution or
liquidation law or regulation in any jurisdiction to which the Customer
or its assets are subject.
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27.09 An encumbrancer taking possession or a trustee, administrator,
administrative receiver, receiver or similar officer being appointed of
the whole or a material (in the opinion of the Bank) part of the assets
or undertaking of the Customer.
27.10 The Bank becoming aware of any circumstances which lead the Bank to
believe that a petition for an administration order under Section 9 of
the Insolvency Act 1986 may be presented to the Court in respect of the
Customer or such a petition is presented to the Court in respect of the
Customer.
27.11 Any distress or execution being levied or enforced against a material
(in the opinion of the Bank) part of the property and assets of the
Customer and such distress or execution not being withdrawn or
discharged within five (5) days.
27.12 The Customer stopping payment, being unable to or admitting its
inability to pay its debts as they fall due or the Bank becoming aware
of any circumstances which lead the Bank to believe that the Customer
will not, or will not be able to, pay its debts as they fall due,
whether owed to the Bank, any Associate Bank or otherwise.
27.13 The Customer ceasing or threatening to cease carrying on business.
27.14 The death of the Customer, the appointment of a receiver or trustee
over any of the revenues or assets of the Customer, the commission of
any act of bankruptcy by the Customer, any general assignment by the
Customer for the benefit of creditors, the commencement of negotiations
by the Customer with any one or more of its creditors with a view to
the general rescheduling of the Customer's indebtedness, the filing of
any petition in bankruptcy of, by, or against the Customer.
27.15 The occurrence of any of the events referred to in sub-clauses 25.07 to
25.14 above of any accommodators of bills, sureties or guarantors of
any obligation of the Customer to the Bank or any endorser of any bill
of exchange, note instrument or other documents evidencing any
obligation of the Customer to the bank.
27.16 There being a transfer or disposal of all or substantial part of the
assets of the Customer whether by one or a series of transactions
whether related or not at less than a fair market value.
27.17 There being a change in the ultimate control or beneficial ownership of
the Customer.
27.18 Any governmental authority or any person or entity acting or purporting
to act under any governmental authority shall have taken any action in
order to condemn, cease or appropriate or to assume custody or control
of the Customer or of all or any substantial part of its property or
assets or shall have taken any action to curtail the Customer's
authority in The overall conduct of its business of operations.
27.19 The Customer fails to comply with applicable environmental laws or
environmental licenses where such non compliance might have a material
adverse effect on its business, assets or financial condition
27.20 It becomes unlawful or impossible for the Customer or for any third
party guaranteeing or otherwise securing any of the Customer's
obligations owed to the Bank (including without limitation pursuant to
any guarantee or debenture) to perform any of its obligations hereunder
or under such security document, as the case may be. or any such
security ceases to be continuing or in full force or effect or is
terminated or the validly of applicability thereof to any sums due or
to
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become due by the Customer to the Bank is disaffirmed by or on behalf
of the Customer or any such third party.
27.21 The occurrence of a material adverse change (in the Bank's opinion) in
the business, assets or financial condition of the Customer.
Then in any such case and at any time thereafter the Bank may by notice to the
Customer:-
(a) declare all of the Customer's obligations and liabilities to
the Bank for the payment of money whether present or future
actual or contingent, joint or several to be immediately due
and payable, whereupon the same shell become so due and
payable; and/or
(b) cancel all credit and other facilities and accommodation
provided by the Bank to the Customer. In any such case the
Customer shall pay to the Bank immediately available funds an
amount equal to the aggregate of all the Customer's
indebtedness to the Bank including amounts sufficient to cover
all of the Customer's liabilities (both actual and contingent
and whether or not matured) to the Bank which sums shall be
credited forthwith to a blocked non-interest bearing deposit
account with the Bank in the Customer's name and the Customer
agrees that such sums may be applied in fulfillment pro tanto
of the Customer's liabilities and obligations to the Bank on
any account and in any order chosen by the Bank.
28. Termination of business relationship
28.01 The Bank reserves the fight at any time and at its discretion to terminate
its relationship with the Customer and in particular to cancel credit facilities
which it has granted and to demand repayment of amounts owing by the Customer
without further notice
28.02 Where an account has not been operated for a period of more then twelve
months, the Bank may without further notice close the account. The Bank may
close any account of the Customer after giving written notice to the Customer
and any credit balance on the closed account will be forwarded by cheque to the
Customer at its address last provided to the Bank in writing.
29. Powers of the Bank
Each of the rights, powers and remedies given to the Bank hereunder shall be in
addition to all other rights, powers and remedies given to the Bank by virtue of
any other agreement, security, statute or rule of law or equity and provided the
Bank exercises the rights, powers or remedies given to it hereunder or otherwise
in the bona fide belief that the Customer is under a liability to the Bank of
any kind, it shall be exempted from liability of any nature whatsoever in
respect thereof in the event that such exercise is eventually considered by the
Bank or found or adjudged to be wrongful or unjustified.
30. Partnership
30.01 If the Customer is a partnership, the retirement of a partner or the
addition of any new partner shall not affect the joint and several
liability of the partners; in the case of the death of a partner, the
liability of the estate of the deceased partner to the Bank shall cease
only with regard to transactions with the Bank subsequent to the
receipt by the Bank of a written notice of the death of the deceased
partner. Where a partner ceases to be a member of the partnership for
any reason the Bank may treat the surviving or continuing partners as
having full power and authority to carry on the business of the
partnership.
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<PAGE> 21
30.02 The authority granted pursuant to any mandate provided to the Bank and its
provisions shall remain in full force and affect and bind the partners jointly
and generally notwithstanding any change in the constitution, name or membership
of the partnership by reason of death, bankruptcy, retirement or otherwise or
the admission of any new partner or modification or termination of any powers of
any partner.
31. Submission of financial data
Where the Customer is a limited Company, business or partnership, the Customer
undertaker to submit, if required by the Bank, any current financial statements
duly audited by qualified auditors and to notify the Bank immediately of any
significant changes ire the extent, character or any other aspect of the
Customer's financial status.
32. Disclosure
32.01 The Bank is authorized to disclose the Customer's financial statements
and any information regarding the Customer's account or dealings with
the bank in such terms as it deems appropriate, to any Associate Bank.
32.02 The bank may give references to third parties in such terms as it deems
appropriate.
33. Application and Alteration
33.01 These General Conditions shall govern the operation of all accounts of
the Customer with the Bank and all transactions, dealings and
arrangements between the Customer and the Bank whether or not
specifically referred to or incorporated therein. Furthermore, each of
the rights, powers and remedies given to the Bank hereunder or which
are expressed to be applicable to these General Conditions shall (so
far as the context shall permit) equally be applicable to and enure for
the benefit of any such transaction, dealing or arrangement aforesaid
and any agreement entered into in relation thereto. However, the
express provisions of any agreement or other document entered into
between the Bank and the Customer in relation to any such transaction
dealing or arrangement shall prevail in the event of any conflict
between such provision and these General Conditions.
33.02 The Bank reserves the right to change these General Conditions and a
circular letter to the Customer of a notice posted at any branch of the Bank
shall constitute sufficient notice to the Customer of any such change.
34. Waivers
No waiver or release of any of the rights powers or privileges of the Bank or
any consent to be given by the Bank shall be valid unless in writing signed by a
duly authorized officer of the Bank. No failure or delay, on the part of the
Bank to exercise any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial excrete preclude any other or further exercise
thereof or the exercise of any other fight or power.
35. Exclusion Of Liability
35.01 The Customer agrees that the Bank shall in no circumstances whatsoever be
liable to the Customer or other parson for:-
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<PAGE> 22
(a) the validity, authenticity, accuracy or enforceability of any
certificate or document received by the Bank pursuant to or in
connection with any bank guarantee, indemnity, counter
indemnity, documentary credit, undertaking or other document
or engagement issued or accepted by the Bank at the request of
the Customer or any other person at whose request the Customer
has instructed the Bank in writing to issue any of the
foregoing and the Bank shall have the right to assume that all
certificates and documents presented to it are valid authentic
and accurate and are what they purport to be;
(b) any damage, detention, loss or deterioration of any goods or
property held by the Bank or to which it is entitled as
security for any obligation or liability of the Customer or
for the quantity, quality, condition, packing. value, delivery
or insurance thereof; of
(c) any error, negligence, neglect, default, omission or
insolvency of any of the Bank's agents in any manner connected
with any such goods or property.
35.02 The Customer shall have no claim against the Bank for any loss arising
out of the disposal or sale of any goods, property, securities and
other assets and rights held by the Bank as security for any obligation
or liability of the Customer (including a sale at less than market
value) unless the Bank acted in bad faith. The Bank shall not be liable
for negligence in relation to any sale whether of itself or any agent
or receiver appointed by it.
35.03 The Bank shall have, no liability in respect of negligent or incorrect
advice or information given by its officers in relation to the
activities of the Customer or otherwise except to the extent of the
fees (if any) charged by the Bank for the provision of that advice or
information.
35.04 The Bank shall in no circumstances whatsoever be liable to the Customer
or any other person for consequential loss or loss of profit.
36. Remedies cumulative
The remedies of the Bank provided herein are cumulative and are not exclusive of
any remedies provided by law or contract.
37. References to more than one Customer
Where the Customer consists of more than one person, reference to the Customer
shall where the context admits, also take effect as references to each of the
persons who constitute the Customer and their liability shall be joint and
several. If these General Conditions are not signed by or valid and enforceable
against any one or more of the persons constituting or purporting to constitute
the Customer or if these General Conditions or any of their provisions are not
or cease to be binding upon any one or more of them, none of the others shall be
released from any obligation or liability hereunder. The Bank may release or
make any arrangements with any of them without hereby releasing, exonerating or
limiting its rights against the other or others of them.
38. Constitution of the Bank
These General Conditions shall continue in full force and effect notwithstanding
any change in the name or constitution of the Bank or by its amalgamation or
merger with any other body of company and references to the "Bank" in these
General Conditions include its successors and assigns. The Customer agrees to be
bound by these General Conditions in respect of all of its liabilities to the
Bank including indebtedness and liabilities incurred after any amalgamation,
merger or assignment.
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<PAGE> 23
39. Assignment by the Bank
In the event that the Customer's obligations or liabilities to the Bank or any
part thereof are assigned or transferred by the Bank then the Bank may assign
the benefit of these General Conditions to the assignee or transferee and the
bank may disclose to any intending assignee or to any other person who may
propose to enter into contractual relations with the Banks in relation thereto
such information about the Customer as the Bank may consider appropriate.
40. Partial invalidity
In the event that any term of condition of these General Conditions is rendered
or declared invalid or unenforceable in whole or in part by any statute, rule or
regulation or any decision of any court or tribunal of competent jurisdiction
then such determination or declaration shall not affect the validity of the
other terms and conditions hereof which (save as aforesaid) will remain in full
force and effect.
41. Representations of the Customer
The Customer hereby represents to this Bank that:-
41.01 in the case of any Customer which is a company, it is duly formed and
existing under the laws of the country in which iris incorporated and
the execution and performance of these General Conditions has been
properly approved and authorised by resolution of the directors and (if
requested by the Bank) the shareholders of the Customer and all other
necessary corporate action and does not contravene the Memorandum and
Articles of Association (or the equivalent corporate documents) of the
Customer and it has power to execute these General Conditions and to
perform and discharge its duties and liabilities hereunder and no
limitation on its powers to borrow or give indemnities will be exceeded
as a result of it entering into these General Conditions.
41.02 it is not insolvent (as defined by the Insolvency Act 1986) and is able
to pay its debt, as they fall due.
41.03 all financial and other information provided by the Customer to the
Bank is true and accurate in all material respects and is not
misleading.
41.04 these General Conditions are in proper form for their enforcement in
the courts of England and constitute legally binding duties and
liabilities of the Customer enforceable in accordance with their terms.
41.05 the choice of English law as the applicable law of these General
Conditions and the submission by the Customer to the jurisdiction of
the English courts is valid an binding.
41.06 the Customer has no right to claim any immunity in relation to itself
or its assets under any law or in any jurisdiction in connection with
any legal proceedings, set-off or counterclaim relating to its
obligations and liabilities to the Bank or in connection with the
enforcement of any judgement or order arising from such proceedings.
42. Undertakings of the Customer
The Customer hereby warrants and undertakes with the Bank that until the
relationship between the Bank and the Customer is terminated:-
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<PAGE> 24
42.01 it will obtain and maintain or take reasonable steps to cause to be
obtained and maintained in full force and effect all licenses, consents
and approvals of public governmental and judicial authorities and
agencies necessary for the Customer to enter into and perform and
discharge its obligations and liabilities to the Bank and the Customer
will comply with all conditions and restrictions imposed by every such
license consent and approval.
42.02 it will promptly inform the Bank of any occurrence including (without
limitation) any action, suit, or proceedings commenced or threatened against the
Customer before any court, arbitration tribunal or administrative agency if
which it becomes aware which in its reasonable opinion might result in a
material adverse change in the financial position, business or assets of the
Customer or adversely affect its ability to perform or discharge its duties and
liabilities to the Bank.
42.03 it will deliver to the Bank all such financial and other information as
the Bank may from time to time properly request and without prejudice
to the generality of the foregoing it will inform the Bank of any
material alteration in its corporate structure.
43. Indemnity
The Customer hereby undertakes to indemnify and keep indemnified the Bank from
and against all loss or liability of any nature which it may suffer or incur as
a result of any of the representations, warranties and undertakings given by the
Customer in Clauses 41 and 42.
44. Applicable law
44.01 The law applicable to these General Conditions and each other Bank
Document shall be the law of England and Wales.
45. Notices
45.01 Every notice, demand or other communication under any Bank Document
shall be in writing and may be given of made personally or by first
class prepaid mail or facsimile message.
45.02 Any demand for payment and every other notice, or communication shall
be sent to the Customer at such other address as specified in the
General Conditions (or at such other address as may be specified in any
document to which these General Conditions apply) and shall be deemed
to have been received in the case of personal delivery, when so
delivered, in the case of a facsimile message at the time it is
transmitted (but in case is delivered or transmitted outside normal
business hours the same shall be deemed to be received on the next
business day immediately following) or, if sent by first class post to
an address outside the United Kingdom, or on an expiry of forty-eight
hours after the same is posted or, if sent by airmail post to an
address outside the United Kingdom, seven days after the same is
posted.
45.03 Where the Customer consists of more than one person any notice. demand
or other communication shall be deemed to have been sent to each of
them it sent to any one of them.
45.04 Every notice or communication shall be sent to the Bank at I
Bishopsgate, London EC2N 3AB, facsimile no. 0171 929 4644 (or the
address of the Bank's principal place of business in England for the
time being as registered at the Companies Registry) and will only be
effective on receipt thereof by the Bank. The Bank shall have the right
to rely on any notice or communication sent of given or purporting to
have been sent or given by the Customer whether by telephone,
facsimile,
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<PAGE> 25
post or any other means of communication and to assume the validity and
accuracy of such notice or communication which shall be binding on the
Customer.
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<PAGE> 26
The Customer hereby agrees to be bound by these General Conditions (subject to
amendments and additions as provided herein).
Signed for and on behalf of the Customer
in the presence of:-
/s/ C.V. Balakrishnan (Director)
------------------------------------
(Signature(s) of person(s) authorized to sign)
/s/ Christopher Kirrane
- ------------------------------- ---------------------------------------------
(Signature of Witness) (Print name(s) of authorized person(s))
- -----------------------------------------------
(Print name, address and occupation of witness)
2 NEWTON DRIVE
GREENMOUNT
BURY
BL8 4D4
GROUP FINANCIAL CONTROLLER
26
<PAGE> 1
GUARANTEE
FIRST UNION NATIONAL BANK
IMPORTANT NOTICE
BY GIVING THIS GUARANTEE YOU MAY BECOME LIABLE TO THE BANK INSTEAD OF OR AS WELL
AS THE CUSTOMER. YOU SHOULD SEEK INDEPENDENT LEGAL ADVICE BEFORE ENTERING INTO
THIS GUARANTEE.
THIS GUARANTEE is granted this 5th day of December, 1997
by Conso Products Company
of P.O. Box 326, 513 N. Duncan By-Pass, Union SC 29379
("the Guarantor") to First Union National Bank, acting through its London Branch
at 3 Bishopsgate, London EC2N 3AB, ("the Bank") in respect of British Trimmings
Limited of P.O. Box 46, Stockport, Cheshire SK5 7PJ ("the Customer")
Definitions
1.01 In this Guarantee, the following terms shall have the meanings set
opposite them: -
"Account Currency" means the currency in which the Indebtedness (or
the relevant part thereof) is denominated;
"Associate Bank" means any bank or corporation which is wholly
owned by the ultimate holding corporation of
the Bank;
"Indebtedness" means the aggregate of all amounts whether
principal, interest or otherwise which may
from time to time or at any time be or
become due and owing actually or
contingently from the Customer to the Bank
under any agreement, account or arrangement
whatsoever, whether solely or jointly with
any other person, and whether as principal
or surety or in any other manner or capacity
whatsoever, including all costs,
disbursements and expenses incurred by the
Bank in relation to the recovery or
attempted recovery of any amounts owing or
liabilities incurred by the Customer to the
Bank and any liabilities and obligations of
whatsoever nature owing or for which the
Customer may be or become liable to any
assignee of this Guarantee whether such
liabilities and obligations are incurred
before or after the date of assignment of
this Guarantee to the assignee;
"Liability Limit" means {850,000 (Eight Hundred and Fifty Thousand
Pounds plus interest)}.
1.02 Where there are two or more Customers to which this Guarantee relates then
the Guarantee shall secure the Indebtedness of each Customer whether such
Indebtedness is owned solely, jointly or on any other basis.
1.03 In this Guarantee all references to the Bank shall be deemed to include a
reference to each Associate Bank and to any assignee from the Bank so that this
Guarantee shall secure the payment of the Indebtedness of the Customer to the
Bank, each Associate Bank or assignee (as the case may be).
1.04 In this Guarantee where the context permits the singular shall include the
plural and vice versa, the masculine shall include the feminine gender and
references to persons shall include corporations and unincorporated bodies. The
headings are inserted for convenience only and shall have no effect on the
interpretation of this Guarantee.
<PAGE> 2
2. Guarantee
In consideration of the Bank granting or continuing to make available credit or
other banking facilities and accommodation to the Customer for such period as
the Bank considers appropriate or otherwise incurring any liability whatsoever
for or at the request of the Customer the Guarantor hereby unconditionally and
irrevocably guarantees the due payment of the Indebtedness to the Bank and
undertakes to pay to the Bank on first demand from time to time and at any time
an amount equal to the Indebtedness due but not paid by the Customer.
Notwithstanding any provision herein expressly or implicitly to the contrary the
Bank may issue legal proceedings against the Guarantor without prior demand and
in that event such proceedings shall be deemed to be a demand hereunder.
3. Liability limit
The liability of the Guarantor under this Guarantee is unlimited save that the
total amount recoverable from the Guarantor hereunder shall not exceed the
Liability Limit (if any) together with interest, commission, banking and other
charges and expenses (including all legal and other costs, disbursements and
expenses) which are due to or are incurred by the Bank (whether in connection
with the Customer or this Guarantee up to the date of demand against the
Guarantor or at any time thereafter and all interest payable under Clause 4
hereof and other amounts payable by the Guarantor hereunder.
4. Interest
If the Guarantor fails to pay any amount demanded hereunder by the Bank on first
demand, the Guarantor shall pay interest on such amount for each day during the
period of such default at such annual rate as is conclusively certified by the
Bank to the Guarantor to be equal to the aggregate of: ___________________ three
(3) per centum per annum; and the relevant London Interbank Offered Rate (as
conclusively determined by the Bank) or (at the Bank's election) the base rate
of the Bank as conclusively certified by the Bank to Guarantor. Such interest
shall accrue from day to day and be calculated on the basis of a 365 day year
for the actual number of days elapsed and shall be compounded every thirty (30)
days.
5. Continuing Security
This Guarantee shall be a continuing guarantee and shall remain in full force
and effect until all liabilities of the Guarantor hereunder shall have been paid
in full (subject to Clauses 22 and 23) and shall not be satisfied or discharged
by any intermediate payment or settlement of account.
6. Notice to terminate Guarantee
This Guarantee is irrevocable except that the Guarantor may give written notice
to the Bank ot the effect that it shall not be liable for any Indebtedness
incurred or arising in respect of any agreement, account arrangement,
transaction or engagement entered into after a date not less than three months
after such notice has been received by the Bank ("the Termination Date")
provided that the Guarantor shall remain liable for the Indebtedness outstanding
at the Termination Date including:
6.01 interest, commission, banking and other charges and expenses which
continue to accrue in respect of the Indebtedness outstanding at the Termination
Date;
6.02 advances made or any other agreement, account, arrangement, transaction
or engagement entered into at any time pursuant to any commitment given by the
Bank to the Customer before the Bank received the relevant notice;
6.03 any bills of exchange, cheques, promissory notes and any other
instruments dated before the Termination Date which are presented to the Bank at
any time and are paid after the Termination Date;
6.04 any part of the Indebtedness which is incurred before the Termination
Date but which matures after the Termination Date; and
6.05 any increase in the Indebtedness which results from any bills of
exchange, cheques, promissory notes and any other instruments being credited to
the Customer's account before the Termination Date but which are dishonored
after Termination Date.
If any notice given to the Bank pursuant to this Clause 6 has not been given by
all the persons who constitute the Guarantor, the liability of those who have
not given notice shall not be affected.
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<PAGE> 3
7. Payments without deductions
7.01 The Guarantor shall make all payments to the Bank in full in the
Account Currency or such other currency as the Bank may from time to time direct
in immediately available funds, without any set-off or counterclaim whatsoever,
and without deduction or withholding for or on account of any present or future
taxes, levies, imposts, duties, charges or withholdings of any nature
whatsoever. The Guarantor shall pay all present or future taxes or similar
charges due with respect to such payments which may be imposed by any competent
fiscal authority, except taxes on the overall income of the Bank.
7.02 If any deduction or withholding has to be made by law from any such
payment, the Guarantor shall pay an increased amount so that after any such
deduction or withholding the Bank receives and retains a net amount equal to the
amount which it would have received and retained had no such deduction or
withholding been made.
7.03 The Guarantor shall provide the Bank with official receipts evidencing
payment of such taxes or similar charges within thirty days after the due date
for each such payment.
8. Further assurance
The Guarantor hereby undertakes to execute such further deeds and documents as
the Bank may from time to time require to perfect the Bank's rights under this
Guarantee and to give effect and validity to the security hereby constituted
which deeds and documents shall be prepared by or on behalf of the Bank at the
cost of the Guarantor and shall contain such terms for the Bank's benefit as it
may reasonably require.
9. Set-off and Combination
9.01 The Bank shall have the right, in addition to all rights of set-off,
combination, lien or otherwise to which it is entitled at law or under any
agreement between the Bank and the Guarantor, at any time without demand and
without further notice to the Guarantor to set-off any amount standing to the
credit of any account of the Guarantor with the Bank (whether deposit, loan or
otherwise in the name of the Guarantor or in the name of any other person,
solely or jointly) in or towards payment of all amounts due from the Guarantor
under this Guarantee and to transfer and apply any amounts standing to the
credit of any existing accounts of the Guarantor with any Associate Bank in or
towards payment of all amounts due from Guarantor under this Guarantee.
9.02 Where such set-off or transfer requires the conversion of one currency
into another, such conversion shall be calculated at the spot rate as
conclusively determined by the Bank for purchasing the Account Currency with the
currency in which the relevant amounts are denominated on the date of actual
payment.
9.03 The Guarantor hereby agrees that the Bank may apply any amounts held
or received by it hereunder which are not applied in payment of all amounts due
from the Guarantor under this Guarantee in or towards the payment of any amounts
due and payable by the Guarantor to the Bank or any Associate Bank under any
other agreement, account, arrangement, transaction or engagement whatsoever
between the Guarantor and the Bank and/or Associate Bank and that any Associate
Bank shall have the right to require payment of any amounts due to it from the
Guarantor from such amounts held by the Bank for the Guarantor.
10. Appropriation and suspense account
The Bank may appropriate all amounts received in respect of the Indebtedness in
or towards any part of the Indebtedness as the Bank may in its absolute
discretion from time to time conclusively determine and the Bank may at any time
place any amount received under this Guarantee to the credit of a suspense
account without being under any duty to apply such amounts towards the payment
or discharge of any liabilities under this Guarantee so that the Bank may retain
its rights to prove for the whole of the Indebtedness against the Customer or
any other person liable for the Indebtedness (including the Guarantor) in the
event of any proceedings in or analogous to bankruptcy, liquidation or winding
up or any composition or arrangement in relation to the Customer, the Guarantor
or any such person.
11. New accounts
After any notice referred to in Clause 6 has been given to the Bank or after the
Bank has made demand upon the Guarantor, the Bank may at any time rule off the
Customer's accounts and open any new accounts so that subsequent payments to the
Bank do not operate to reduce the Guarantor's liability. Whether or not the Bank
opens such new accounts, it shall nevertheless be deemed to have done so.
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<PAGE> 4
12. Foreign currency
If any law, regulation or decree prohibits the Customer (but not the Guarantor)
from discharging the Indebtedness (or the relevant part thereof) in the Account
Currency or prevents any funds in the Account Currency being remitted to the
Bank by the Customer (but not the Guarantor), the Guarantor shall instead pay
the Indebtedness (or the relevant part thereof) in the Account Currency. If any
law, regulation or decree prohibits the Guarantor from making payment of the
amount due under this Guarantee (or the relevant part thereof) in the Account
Currency, the Guarantor, shall pay the amount due (or relevant part thereof) by
paying to the Bank (at the Bank's option and in the manner directed by the Bank)
such other currency as the Bank may direct. The Guarantor shall pay such amount
of such other currency as will enable the Bank to purchase an amount equal to
the amount due under this Guarantee in the Account Currency calculated at the
relevant spot rate of exchange as conclusively determined by the Bank.
13. Currency indemnity
The Guarantor agrees to indemnify the Bank against any loss incurred by it as a
result of any judgment or order being given or made for the payment of any
amount due hereunder and such judgment or order being expressed in a currency
other than the Account Currency and as a result of any variation having occurred
in rates of exchange between the date on which the currency is converted for the
purpose of such judgment or order and the date of actual payment thereof. This
indemnity shall constitute a separate and independent liability of the Guarantor
and shall continue in full force and effect notwithstanding any such judgment or
order as aforesaid.
14. Bank's dealings with Customer not to affect liability of Guarantor
The Bank shall have the right and power at all times without notice to the
Guarantor and without its consent, whether before or after any demand hereunder
for payment and without prejudice to the terms of this Guarantee so that the
Guarantor shall not be exonerated nor its liability hereunder in any way
limited, to do any one or more of the following: -
14.01 allow to the Customer or to any other person any waiver or extension of
time or any other indulgence;
14.02 increase, vary or determine any facilities granted to the Customer
and/or any charges or rates of interest or commission;
14.03 deal with, give up, renew, vary, release, realize or refrain from
enforcing or fail to perfect any present or future securities, guarantees,
negotiable instruments or rights which the Bank may from time to time hold in
respect of the Customer or any other person in relation to the Indebtedness;
14.04 enter into, renew, vary or terminate any agreement, account,
arrangement, transaction or engagement with the Customer or any other person;
14.05 compound, compromise or settle with or omit to prove against or omit to
claim payment from the Customer or any other person; or
14.06 release or enter into any composition with the Customer or any other
person including any one or more co-guarantors, and no act or omission on the
part of the Bank with reference to the Customer shall in any way diminish this
Guarantee which shall remain binding on the Guarantor as if originally liable as
principal debtor for the Indebtedness.
15. Exclusion of Guarantor's claims
The Guarantor agrees to and does hereby subordinate all present or future claims
whatsoever against the Customer or any other Guarantor to any and all claims by
the Bank for the Indebtedness. Until the Indebtedness shall have been paid and
discharged in full (which expression shall not include payment of a dividend in
bankruptcy, liquidation or winding up of less than 100 percent).
15.01 the Guarantor shall have no right of subrogation and agrees not to
demand or accept repayment in full or in part of any monies then or thereafter
due to the Guarantor from the Customer or to demand or accept any security in
respect thereof or to assign or charge the same as security or to take any step
to enforce any right against the Customer or to claim any set-off or
counterclaim against the Customer;
15.02 the Guarantor shall not be entitled to share in any security or other
guarantee at any time held by the Bank or amounts received by the Bank in
respect of the Indebtedness; and
15.03 the Guarantor shall not in competition with or in priority to the Bank:
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<PAGE> 5
15.03.1 make any claim or effect any set-off against the Customer for
reimbursement of any amounts paid by the Guarantor to the Bank
in respect of any part of the Indebtedness; or
15.03.2 enforce any right of contribution of any security against any
co-guarantor; or
15.03.3 prove or make any claim in the liquidation, bankruptcy or
insolvency of the Customer or of any co-guarantor in respect
of any debts or liabilities whatsoever owed to the Guarantor
by the Customer or by any co-guarantor.
Provided that the Guarantor shall, if required by the Bank, claim or prove in
respect of any of the matters specified in Clause 15.03 above and hold the
benefit of its claim or proof on trust to pay all amounts received in respect
thereof to the Bank.
16. Disability of Customer
The death, insanity, bankruptcy, liquidation, dissolution, incapacity,
disability or change in the constitution, name or style (or any analogous
procedure in any jurisdiction) of the Customer (or of any person who constitutes
the Customer) shall not exonerate, discharge or limit the Guarantor's liability
under this Guarantee.
17. Guarantor's separate liability
In the event that any amounts due under this Guarantee are not recoverable from
the Guarantor as surety under the terms of this Guarantee for any reason
whatsoever the Guarantor shall as a separate and independent obligation be
liable to the Bank for the Indebtedness as principal debtor which the Guarantor
hereby promises to pay to the Bank on demand.
18, Remedies
18.01 This Guarantee is in addition to and shall not be merged with or in any
way affected or prejudiced by and may be enforced notwithstanding any other
means of payment, guarantee, indemnity or security or other right or power which
the Bank may at any time hold whether from the Guarantor, the Customer or any
other person in respect of the Indebtedness and the Liability Limit (if any)
shall be aggregated with all limits (if any) in such other guarantees,
indemnities and securities and the Bank may but is under no duty to) enforce any
of them without reducing the Guarantor's liability hereunder.
18.02 It shall not be necessary for the Bank before demanding payment
hereunder to endeavor to take proceedings or obtain judgment against the
Customer in any court or to make or file any claim in a bankruptcy or
liquidation (or any analogous procedure in any jurisdiction) of the Customer or
to endeavor to enforce any other guarantee or security whether from the
Guarantor, the Customer or any other person. The Bank shall have the right and
power to claim all amounts due and payable in respect of the Indebtedness from
the Customer and/or the Guarantor or any other person in such order and at such
times as the Bank may in its absolute discretion consider appropriate.
19. Security and Lien
19.01 If the Bank releases or sells any other security, it may do so in any
manner, at any price and on such terms as the Bank considers appropriate (free
from all claims or rights of the Customer relative thereto) and the Guarantor
shall have no claim against the Bank for any loss arising out of such
realization or sale (including a sale at less than the market value) unless the
Bank acted in bad faith.
19.02 The Bank shall not be liable for negligence in relation to any such
realization or sale whether of itself or any agent or receiver appointed by it.
19.03 The Bank shall have a lien on and be entitled to retain as security for
the Guarantor's liability hereunder any property of the Guarantor held by the
Bank (whether for safe custody or otherwise), with power to sell such property
(but without the Bank being under any duty to sell such property) and the
provisions of this Clause 19 shall apply to such sale.
20. Customer indebtedness to Guarantor
Upon any demand being made under this Guarantee, all debts and liabilities at
that time or thereafter due from the Customer to the Guarantor shall be held on
trust by the Guarantor to pay all amounts received in respect thereof to the
Bank.
5
<PAGE> 6
21. Guarantor not to take security
The Guarantor warrants that it has not taken (and agrees not to take) any
security from the Customer or from any co-Guarantor in relation to this
Guarantee. However, if any security is so taken, it shall be held by the
Guarantor on trust for the Bank and shall forthwith be assigned to the Bank upon
request.
22. Preservation of Bank's rights
Any settlement, discharge or release between the Bank and the Guarantor shall be
conditional upon no security disposition or payment to the Bank by the Customer,
the Guarantor or any other person being avoided, limited or ordered to be
refunded or reduced under any provisions or enactment's relating to bankruptcy,
liquidation, winding up or insolvency for the time being in force or for any
other reason, and in any such case the Guarantor shall continue to be liable
under this Guarantee as if there had been no such settlement, discharge or
release and such security disposition or payment had not been made.
23. Retention of security
Following the payment or discharge of all the Indebtedness, the Bank may retain
any security held by the Bank for the Guarantor's liability for seven months
and, if the Customer or other person making such payment or discharge becomes
insolvent or is wound up or declared bankrupt during that period, the Bank may
further retain the security until the Bank is satisfied that it will not have to
make any repayment under any enactment relating to insolvency, winding up or
bankruptcy and may enforce this Guarantee subsequently as if such payment or
discharge had not occurred. This Guarantee is and shall remain the property of
the Bank.
24. Waivers
24.01 No waiver or release of any of the rights, powers or privileges of the
Bank or any consent to be given by the Bank shall be valid unless in writing
signed by a duly authorized officer of the Bank.
24.02 Time is of the essence but no failure or delay on the part of the Bank
to exercise any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and powers of
the Bank provided herein are cumulative and are not exclusive of any rights and
powers provided by law.
25. References to more than one Guarantor
Where the Guarantor consists of more than one person, references to the
Guarantor shall, where the context admits, take effect as references to each of
the person who constitute the Guarantor and their liability under this Guarantee
shall be joint and several. If this Guarantee is not signed by or is not valid
and enforceable against any one or more of the persons constituting or
purporting to constitute the Guarantor or if this Guarantee or any of its
provisions is not or ceases to be binding upon any one or more of them, none of
the others shall be released from any liability under this Guarantee. The Bank
may release or make any arrangements with any of them without thereby releasing,
exonerating or limiting its rights and powers hereunder against the other or
others of them.
26. Disability of Guarantor
The death, insanity, bankruptcy, liquidation, dissolution, incapacity,
disability or change in the constitution, name or style (or any analogous
procedure in any jurisdiction) of the Guarantor (or of any person who
constitutes the Guarantor) shall not exonerate, discharge or limit the
Guarantor's liability under this Guarantee.
27. Constitution of the Bank
This Guarantee shall continue in full force and effect notwithstanding any
change in the name or constitution of the Bank or by its amalgamation or merger
with any other body or company or the acquisition of all or any part of its
undertaking by any other body or company and references to the "Bank" in this
Guarantee include its successors and assigns. The Guarantor agrees to be bound
by this Guarantee in respect of all the Indebtedness and all other liabilities
of the Guarantor hereunder including any Indebtedness and liabilities incurred
after any amalgamation, merger, acquisition or assignment.
6
<PAGE> 7
28. Assignment by the Bank
In the event that the Indebtedness (or any part thereof) is assigned or
transferred by the Bank then the Bank may assign this Guarantee to the assignee
or transferee of the Indebtedness (or part thereof) and the Bank may disclose to
any intending assignee or to any other person who may propose to enter into
contractual relations with the Bank in relation to the Indebtedness (or any part
thereof) such information about the Guarantor as the Bank may consider
appropriate.
29. Partial invalidity
In the event that any term or condition of this Guarantee is rendered or
declared invalid or unenforceable in whole or in part by any statute, rule or
regulation or any decision of any court or tribunal of competent jurisdiction
then such determination or declaration shall not affect the validity of the
other terms and conditions of this Guarantee which (same as aforesaid) will
remain in full force and effect.
30. Certificate by Bank
The certificate signed by a duly authorized officer of the Bank, as to any of
the matters referred to in this Guarantee including the amount of the
Indebtedness shall, save for manifest arithmetical error, be conclusive and
binding on the Guarantor.
31. Representations of Guarantor
The Guarantor hereby represents to the Bank that:
31.01 in the case of any Guarantor which is a company, it is duly formed and
existing under the laws of the country in which it is incorporated and the
execution and performance of this Guarantee has been properly approved and
authorized by resolutions of the directors and (if so requested by the Bank) the
shareholders of the Guarantor and all other necessary corporate action and does
not contravene the Memorandum and Articles of Association (or the equivalent
corporate documents) of the Guarantor or any provision of any applicable law,
statute, decree, rule or regulation or any order, judgment, injunction,
resolution, determination or award of any court, or any judicial, administrative
or governmental authority or organization or any provision of any agreement or
document to which it is a party or obligation which is binding on it or any of
its assets;
31.02 it has power to execute this Guarantee and to perform and discharge its
duties and liabilities hereunder, and no limitation on its powers to borrow or
give guarantees will be exceeded as a result of the issue of this Guarantee;
31.03 it is not insolvent (as defined by the Insolvency Act 1986) and is
able to pay its debts as they fall due;
31.04 all licenses, consents and approvals of public, governmental and
judicial authorities and agencies necessary for the Guarantor to enter into and
perform and discharge its duties and liabilities under this Guarantee have been
obtained and are in full force and effect and there has been no default in the
compliance with the conditions or restrictions (if any) imposed in, or in
connection with any of them and as of the date of this Guarantee no further
licenses, consents or approvals are necessary in relation thereto;
31.05 no action, suit or proceeding is pending or threatened against the
Guarantor before any court, arbitration tribunal or administrative agency which
could or might result in any material adverse change in the financial condition,
business or assets of the Guarantor;
31.06 it is not in material breach under any agreement to which it is a party
nor is it in default in respect of any material financial commitment or
liability;
31.07 the latest audited accounts of the Guarantor and the audited
consolidated accounts of the Guarantor and its subsidiaries (if any) containing
certified financial statements as at its last accounting reference date have
been prepared in accordance with U.S.GAAP and fairly represent the financial
position of the Guarantor and its subsidiaries (if any) at the date and the
results of its or their operations for the period ended on the date and there
has been no material adverse change in the financial condition, business or
assets of the Guarantor since the date of such accounts;
31.08 all financial and other information provided by the Guarantor to the
Bank is true and accurate in all material respects and is not misleading;
31.09 it is not necessary to ensure the legality, validity, enforceability or
admissibility in evidence of this Guarantee that it be filed, recorded,
registered or enrolled with any public, governmental or judicial authority or
agency in England or any other country where the Guarantor is incorporated or
carries on
7
<PAGE> 8
business or that it be stamped with any stamp, registration or similar
transaction tax in England or in any other country;
31.10 this Guarantee is in proper form for its enforcement in the courts of
England and constitutes the legally binding duties and liabilities of the
Guarantor enforceable in accordance with is terms;
31.11 the choice of English law to govern this Guarantee and the submission
by the Guarantor to the non-exclusive jurisdiction of the English courts is
valid and binding; and
31.12 the Guarantor has no right to claim any immunity in relation to itself
of its assets under any law or in any jurisdiction in connection with any legal
proceedings, set-off or counterclaim relating to this Guarantee, or in
connection with the enforcement of any judgment or order arising from such
proceedings.
32. Undertakings of the Guarantor
The Guarantor hereby warrants and undertakes with the Bank that throughout the
term of this Guarantee:
32.01 it will duly perform and discharge its duties and liabilities under
this Guarantee;
32.02 it will obtain and maintain or take all reasonable steps to cause to be
obtained and maintained in full force and effect all licenses, consents and
approvals of public, governmental and judicial authorities and agencies
necessary for the Guarantor to enter into and perform and discharge its
obligations and liabilities under this Guarantee and the Guarantor will comply
with all conditions and restrictions (if any) imposed by every such license,
consent and approval;
32.03 it will promptly inform the Bank of any occurrence including (without
limitation) any action, suit or proceedings commenced or threatened against the
Guarantor or the Customer before any court, arbitration tribunal or
administrative agency of which it becomes aware which in its reasonable opinion
might result in a material adverse change in the financial condition, business
or assets of the Guarantor or the Customer or adversely affect its ability to
perform or discharge its duties and liabilities under this Guarantee or the
ability of the Customer to perform and discharge its duties and liabilities to
the Bank and to pay the Indebtedness;
32.04 it will deliver to the Bank all such financial and other information as
the Bank from time to time may properly request and without prejudice to the
generality of the foregoing it will inform the Bank of any material alteration
in its corporate structure;
32.05 it will deliver to the Bank the audited accounts and audited
consolidated accounts of the Guarantor and its subsidiaries (if any) for each
financial year of the Guarantor containing certified financial statements as at
its last accounting reference date prepared in accordance with U.S.GAAP as soon
as the same are available and in any event within 180 days of the end of each
financial year of the Guarantor such accounts and financial statements to be
reported upon by external auditors; and
32.06 in the event that the Guarantor is granted the right to claim any
immunity in relation to itself or its assets under any law or in any
jurisdiction it will waive such immunity in connection with any legal
proceedings, set-off or counterclaim relating to this Guarantee or in connection
with the enforcement of any judgment or order arising from such proceedings.
33. Indemnity
The Guarantor hereby undertakes to indemnify and keep indemnified the Bank from
and against loss or liability of any nature which it may suffer or incur as a
result of any breach of any of the representations, warranties and undertakings
given by the Guarantor in Clause 31 and 32 above or any other presentation,
warranty or undertaking of the Guarantor under this Guarantee.
34. Costs
The Guarantor agrees to indemnify the Bank upon demand against all costs,
charges and expenses (including legal fees) incurred by the Bank in connection
with the drafting, preparation, negotiation and execution of this Guarantee and
any documents relative thereto and of any amendment, variation or extension
thereof or the granting of any waiver or consent under this Guarantee and the
preservation and enforcement or attempted enforcement of the Bank's rights and
powers under this Guarantee.
35. Proper law and jurisdiction
This Guarantee shall be governed by and construed in accordance with the laws of
England and the Guarantor hereby submits to the non-exclusive jurisdiction of
the English courts.
8
<PAGE> 9
36. Service Agent
This Guarantor hereby irrevocably appoints the following as its agent to accept
service of all legal process issued in England in any legal action or
proceedings against the Guarantor or its assets arising out of or in connection
with the Guarantee:
Name:
---------------------------------------------------------
Address:
---------------------------------------------------------
Telex: Fax:
------------------------------------- ----------------
("the Service Agent")
The Guarantor agrees that any notice, demand or other communication to be given
hereunder and any legal process shall be sufficiently service if delivered to
the Service Agent at its address as specified in this Guarantee or such other
address in England as it may have notified to the Bank for such purpose.
37. Notices
37.01 Every notice, demand or other communication under this Guarantee shall
be in writing and may be given or made by telex or facsimile message.
37.02 Any demand for payment and every other notice or communication shall be
sent to the Guarantor at is address as specified in this Guarantee and shall be
deemed to have been received in the case of a telex or facsimile message at the
time it is transmitted and (in the case of a telex) when the answerback is
received on Bank's telex machine, or if sent by first class postage to an
address in the United Kingdom, on the expiry of forty eight hours after the same
is posted or, if sent by airmail postage to an address outside the United
Kingdom seven days after the same is posted.
37.03 Where the Guarantor consists of more than one person any demand, notice
or other communication shall be deemed to have been sent to each of them if sent
to any one of them.
37.04 Every notice or communication shall be sent to the Bank at
3 Bishopsgate, London EC2N 3AB telex no. 883432 and facsimile no. 0171-929-4644
(or the address of the Bank's principal place of business in England for the
time being as registered at the Companies Registry) and will only be effective
on receipt thereof by the Bank.
IN WITNESS whereof this Guarantee has been duly executed by the Guarantor on the
day and year first above written.
Execution by Company EXECUTED
as a deed and DELIVERED by the
Guarantor pursuant to a resolution
of its board of directors duly
passed dated [
11/10/97 ]
by: President /s/ S. Duane Southerland, Jr.
-----------------------------------------
[Signature]
-----------------------------------------
(Print name of person signing)
Secretary /s/ Konstance J.K. Findlay
-----------------------------------------
[Signature]
-----------------------------------------
(Print name of person signing)
9
<PAGE> 10
Execution by individual
EXECUTED as a deed and DELIVERED
by the Guarantor
in the presence of:
-----------------------------------------
Signature of Guarantor
Witness:
Address:
Occupation:
I/We hereby confirm receipt of a copy of this Guarantee
- ------------------------------------ ------------------------------------
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATUS OF CONSO PRODUCTS COMPANY FOR THE THREE MONTHS ENDED
DECEMBER 27, 1997, AND IS QUALIFIED IN ITS ENTIRETY.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> DEC-27-1997
<CASH> 294,032
<SECURITIES> 0
<RECEIVABLES> 11,281,901
<ALLOWANCES> 433,215
<INVENTORY> 25,678,588
<CURRENT-ASSETS> 38,668,242
<PP&E> 28,592,784
<DEPRECIATION> (9,552,293)
<TOTAL-ASSETS> 59,297,089
<CURRENT-LIABILITIES> 17,920,520
<BONDS> 0
0
0
<COMMON> 16,998,321
<OTHER-SE> 23,838,916
<TOTAL-LIABILITY-AND-EQUITY> 59,297,089
<SALES> 35,712,929
<TOTAL-REVENUES> 35,712,929
<CGS> 23,102,891
<TOTAL-COSTS> 23,102,891
<OTHER-EXPENSES> 8,308,309
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 428,860
<INCOME-PRETAX> 3,872,869
<INCOME-TAX> 1,557,119
<INCOME-CONTINUING> 2,315,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,315,750
<EPS-PRIMARY> .31
<EPS-DILUTED> .30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> SEP-27-1997
<CASH> 239,521
<SECURITIES> 0
<RECEIVABLES> 11,359,922
<ALLOWANCES> 323,090
<INVENTORY> 25,639,405
<CURRENT-ASSETS> 38,164,016
<PP&E> 26,858,249
<DEPRECIATION> (8,853,723)
<TOTAL-ASSETS> 58,051,743
<CURRENT-LIABILITIES> 18,361,622
<BONDS> 0
0
0
<COMMON> 16,986,140
<OTHER-SE> 22,191,581
<TOTAL-LIABILITY-AND-EQUITY> 58,051,743
<SALES> 16,734,699
<TOTAL-REVENUES> 16,734,699
<CGS> 10,612,393
<TOTAL-COSTS> 10,612,393
<OTHER-EXPENSES> 4,302,918
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154,959
<INCOME-PRETAX> 1,664,429
<INCOME-TAX> 633,462
<INCOME-CONTINUING> 1,030,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,030,967
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> JUN-28-1997
<CASH> 489,580
<SECURITIES> 0
<RECEIVABLES> 12,058,358
<ALLOWANCES> 310,876
<INVENTORY> 25,339,936
<CURRENT-ASSETS> 38,629,379
<PP&E> 25,048,565
<DEPRECIATION> (8,485,714)
<TOTAL-ASSETS> 56,559,401
<CURRENT-LIABILITIES> 17,656,078
<BONDS> 0
0
0
<COMMON> 16,970,175
<OTHER-SE> 21,397,964
<TOTAL-LIABILITY-AND-EQUITY> 56,559,401
<SALES> 73,447,466
<TOTAL-REVENUES> 73,447,466
<CGS> 45,281,292
<TOTAL-COSTS> 45,281,292
<OTHER-EXPENSES> 16,305,392
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 497,546
<INCOME-PRETAX> 11,020,403
<INCOME-TAX> 3,993,233
<INCOME-CONTINUING> 7,027,170
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,027,170
<EPS-PRIMARY> .94
<EPS-DILUTED> .93
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> MAR-29-1997
<CASH> 881,376
<SECURITIES> 0
<RECEIVABLES> 12,852,678
<ALLOWANCES> 353,474
<INVENTORY> 24,448,354
<CURRENT-ASSETS> 39,134,354
<PP&E> 22,373,318
<DEPRECIATION> (7,939,587)
<TOTAL-ASSETS> 55,018,021
<CURRENT-LIABILITIES> 17,373,098
<BONDS> 0
0
0
<COMMON> 16,942,186
<OTHER-SE> 20,007,287
<TOTAL-LIABILITY-AND-EQUITY> 55,018,021
<SALES> 54,973,203
<TOTAL-REVENUES> 54,973,203
<CGS> 33,434,571
<TOTAL-COSTS> 33,434,571
<OTHER-EXPENSES> 12,090,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 361,320
<INCOME-PRETAX> 9,086,677
<INCOME-TAX> 3,299,136
<INCOME-CONTINUING> 5,787,541
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,787,541
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> DEC-28-1996
<CASH> 1,297,643
<SECURITIES> 0
<RECEIVABLES> 11,623,981
<ALLOWANCES> 263,294
<INVENTORY> 22,311,331
<CURRENT-ASSETS> 35,978,965
<PP&E> 21,897,540
<DEPRECIATION> (7,641,634)
<TOTAL-ASSETS> 51,755,218
<CURRENT-LIABILITIES> 15,794,705
<BONDS> 0
0
0
<COMMON> 16,920,182
<OTHER-SE> 18,341,860
<TOTAL-LIABILITY-AND-EQUITY> 51,755,218
<SALES> 35,546,610
<TOTAL-REVENUES> 35,546,610
<CGS> 21,436,548
<TOTAL-COSTS> 21,436,548
<OTHER-EXPENSES> 7,810,119
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 244,378
<INCOME-PRETAX> 6,055,565
<INCOME-TAX> 2,257,594
<INCOME-CONTINUING> 3,797,971
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,797,971
<EPS-PRIMARY> .51
<EPS-DILUTED> .50
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUN-30-1995
<PERIOD-END> SEP-28-1996
<CASH> 2,073,764
<SECURITIES> 0
<RECEIVABLES> 11,468,155
<ALLOWANCES> 330,063
<INVENTORY> 20,449,119
<CURRENT-ASSETS> 34,888,276
<PP&E> 19,954,775
<DEPRECIATION> (7,052,786)
<TOTAL-ASSETS> 49,358,498
<CURRENT-LIABILITIES> 14,140,535
<BONDS> 0
0
0
<COMMON> 16,914,846
<OTHER-SE> 15,679,665
<TOTAL-LIABILITY-AND-EQUITY> 49,358,498
<SALES> 17,012,314
<TOTAL-REVENUES> 17,012,314
<CGS> 10,239,426
<TOTAL-COSTS> 10,239,426
<OTHER-EXPENSES> 3,880,258
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 131,196
<INCOME-PRETAX> 2,761,434
<INCOME-TAX> 1,027,699
<INCOME-CONTINUING> 1,733,735
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,733,735
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-02-1995
<PERIOD-END> JUN-29-1996
<CASH> 189,845
<SECURITIES> 0
<RECEIVABLES> 11,522,528
<ALLOWANCES> 327,770
<INVENTORY> 20,064,822
<CURRENT-ASSETS> 33,321,833
<PP&E> 18,966,638
<DEPRECIATION> (6,592,375)
<TOTAL-ASSETS> 47,277,512
<CURRENT-LIABILITIES> 13,860,913
<BONDS> 0
0
0
<COMMON> 16,896,346
<OTHER-SE> 30,381,166
<TOTAL-LIABILITY-AND-EQUITY> 47,277,512
<SALES> 70,713,651
<TOTAL-REVENUES> 70,713,651
<CGS> 45,281,292
<TOTAL-COSTS> 45,281,292
<OTHER-EXPENSES> 15,560,257
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 752,997
<INCOME-PRETAX> 9,119,105
<INCOME-TAX> 2,675,945
<INCOME-CONTINUING> 6,443,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,443,160
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30<F1>
<FN>
<F1>EPS DOES NOT INCLUDE EFFECT OF 3-FOR-2 STOCK SPLIT EFFECTIVE OCTOBER 4, 1996.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-02-1995
<PERIOD-END> MAR-30-1996
<CASH> 174,154
<SECURITIES> 0
<RECEIVABLES> 11,467,974
<ALLOWANCES> 928,808
<INVENTORY> 20,637,245
<CURRENT-ASSETS> 32,810,613
<PP&E> 19,178,118
<DEPRECIATION> (6,990,264)
<TOTAL-ASSETS> 47,379,833
<CURRENT-LIABILITIES> 15,734,536
<BONDS> 0
0
0
<COMMON> 16,896,346
<OTHER-SE> 11,907,098
<TOTAL-LIABILITY-AND-EQUITY> 47,379,833
<SALES> 52,521,185
<TOTAL-REVENUES> 52,521,185
<CGS> 33,651,178
<TOTAL-COSTS> 33,651,178
<OTHER-EXPENSES> 11,785,389
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 620,518
<INCOME-PRETAX> 6,464,100
<INCOME-TAX> 1,892,662
<INCOME-CONTINUING> 4,571,438
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,571,438
<EPS-PRIMARY> .92
<EPS-DILUTED> .92<F1>
<FN>
<F1>EPS DOES NOT INCLUDE EFFECT OF 3-FOR-2 STOCK SPLIT EFFECTIVE OCTOBER 4, 1996.
</FN>
</TABLE>
