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EXHIBIT 10.51
LOAN AGREEMENT
THIS LOAN AGREEMENT dated as of November 25, 1996 (the "Loan
Agreement") by and among CONSO PRODUCTS COMPANY, a South Carolina corporation
("Conso" or the "Borrower"); and
NATIONSBANK, N.A., a national banking association existing under the
laws of the United States and having offices in Charlotte, North Carolina (the
"Bank").
RECITALS:
A. The Borrower has requested that the Bank provide revolving loans and
letters of credit of up to $15,000,000 in the aggregate, (pound)5,000,000 of
which would be available for British Trimmings Limited, an English company
("Trimmings"), and the balance of which would be available for the Borrower. The
proceeds of the revolving loans will be used to refinance existing revolving and
term indebtedness of the Borrower and Trimmings to the Bank and to finance the
ongoing working capital needs of the Borrower and Trimmings. In connection with
the refinancing of the existing term indebtedness, the Bank has agreed to waive
any prepayment penalty and release its liens on Conso's real property.
B. The Bank is willing to make the above-described credit
available to the Borrower and Trimmings in accordance with the terms of this
Loan Agreement.
C. This Loan Agreement also amends and restates in their entirety the
terms and conditions of the Loan Agreement, dated as of May 6, 1994 and amended
as of December 1, 1994, February 10, 1995, June 13, 1995, November 1, 1995,
December 1, 1995 and March 1, 1996, by and between the Borrower and the Bank.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, Conso and the Bank hereby agree as follows:
ARTICLE I
Definitions
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1.01 For the purposes hereof:
"Advances" shall have the meaning given to such term in
Section 2.01;
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"Business Day" means a day on which banks are open for the
transaction of business of the nature required in this Loan Agreement
in Charlotte, North Carolina;
"Consistent Basis" in reference to the application of
Generally Accepted Accounting Principles, means that the accounting
principles observed in the period referred to are comparable in all
material respects to those applied in the most recent preceding period
except as to any changes required by the American Institute of
Certified Public Accountants or the Financial Accounting Standards
Board;
"Consolidated Current Assets" means all items which, in
accordance with Generally Accepted Accounting Principles, would be
classified as consolidated current assets on a consolidated balance
sheet of Conso and including the current portion of deferred taxes;
"Consolidated Current Liabilities" means all items which, in
accordance with Generally Accepted Accounting Principles, would be
classified as consolidated current liabilities on a consolidated
balance sheet of Conso but excluding deferred taxes;
"Consolidated EBITDA" means, for any 12 month period of
computation, the sum of Consolidated Net Income for such period plus
interest, taxes, depreciation and amortization to the extent deducted
in determining such Consolidated Net Income;
"Consolidated Fixed Charge Coverage Ratio" means for any
fiscal quarter, the ratio of (x) Consolidated EBITDA minus capital
expenditures minus taxes (each computed for the 12 month period then
ended) to (y) current maturities of long term debt plus current
maturities of capitalized leases plus interest plus dividends (each
computed for such 12 month period);
"Consolidated Funded Indebtedness" means as of the date of
determination, all Indebtedness of the Borrower and its Subsidiaries,
determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles, which by its terms matures more than
one year after the date of calculation, and any such Indebtedness
maturing within one year from such date which is renewable or
extendable at the option of the obligor to a date more than one year
from such date including, in any event, all Indebtedness under this
Loan Agreement;
"Consolidated Net Income" means for any period of
computation, the net income of the Borrower and its
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Subsidiaries, determined on a consolidated basis in
accordance with Generally Accepted Accounting Principles;
"Consolidated Tangible Net Worth" means at any time,
consolidated net stockholders' equity, determined in accordance with
Generally Accepted Accounting Principles applied on a Consistent Basis
minus the book value of assets which would be treated as intangibles
under Generally Accepted Accounting Principles, including, but not
limited to, goodwill, trade names, trademarks, copyright, patents and
unamortized debt discount and expenses;
"Dollar Advances" shall have the meaning given to such
term in Section 2.01;
"Dollar Note" shall have the meaning given to such term
in Section 2.03;
"Exchange Rate" means, in relation to the purchase of one
currency (for purposes of this definition the "first currency") with
another currency (for purposes of this definition the "second
currency") on a given date, the Bank's spot rate of exchange, for the
amount in question, in the London interbank market at or about 11:00
a.m. Charlotte, North Carolina time on such date for the purchase of
the first currency with the second currency, for delivery two Business
Days later;
"Financing Statements" means the financing statements and all
renewals and amendments thereto, whereby the Bank perfects its security
interest in the collateral described therein;
"Generally Accepted Accounting Principles" means those
principles of accounting set forth in pronouncements of the Financial
Accounting Standards Board, the American Institute of Certified Public
Accountants or which have other substantial authoritative support and
are applicable in the circumstances as of the date of a report, as such
principles are from time to time supplemented and amended;
"Guaranty" means the Guaranty Agreement, dated as of May 6,
1994 and amended as of December 1, 1994, November 1, 1995, March 1,
1996 and the date hereof, whereby Conso guarantees the obligations of
Trimmings to the Bank under the Sterling Note;
"Indebtedness" of any Person at any date means:
(a) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property or
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services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with
customary practices);
(b) any other indebtedness which is evidenced by
a note, bond, debenture or similar instrument,
(c) all capital lease obligations of such Person,
(d) all obligations of such Person in respect of
outstanding letters of credit, acceptances and similar
obligations created for the account of such Person, and
(e) all liabilities secured by any lien on any
property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof.
"Letter of Credit Applications" shall have the meaning
given to such term in Section 2.07 hereof;
"Letter of Credit Obligations" shall have the meaning
given to such term in Section 2.07 hereof;
"Letters of Credit" shall have the meaning given to
such term in Section 2.07 hereof;
"Loan Documents" means this Loan Agreement, the Notes,
the Security Agreement, the Financing Statements, the
Guaranty and the Letter of Credit Applications;
"Notes" means a collective reference to the Dollar Note
and the Sterling Note;
"Permitted Liens" shall mean when used with respect to Conso's
accounts receivable and inventory (but specifically excluding the
accounts receivable and inventory of any Trimmings Company), any of the
following liens or encumbrances:
(i) liens securing any indebtedness (specifically
including any liens created under any of the Loan Documents or
heretofore existing in favor of the Bank) to the Bank or any
of its successors or assigns;
(ii) liens imposed by mandatory provisions of law
of carriers, warehousemen, mechanics and materialmen
incurred in the ordinary course of business;
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(iii) liens incurred in the ordinary course of
business in connection with worker's compensation,
unemployment insurance or other forms of governmental
insurance or benefits;
(iv) liens for taxes, assessments or governmental
charges or levies if the underlying obligations for the same
are not delinquent or are being contested in good faith and
with due diligence by appropriate proceedings; and
(v) liens set forth on Exhibit A hereto.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a government
or agency or political subdivision thereof;
"Revolving Loan Committed Amount" shall have the
meaning given to such term in Section 2.01;
"Security Agreement" means the Security Agreement, dated as of
May 6, 1994 and amended as of December 1, 1994, February 10, 1995, June
13, 1995, November 1, 1995, March 1, 1996 and the date hereof, whereby
Conso grants to the Bank a security interest in all of its accounts
receivable and inventory (but specifically excluding any accounts
receivable or inventory of any Trimmings Company);
"Sterling Advances" shall have the meaning given to
such term in Section 2.01;
"Sterling Note" shall have the meaning given to such
term in Section 2.02;
"Subsidiary" or "Subsidiaries" means any corporation or
corporations of which more than fifty percent (50%) of the voting stock
at the time of computation is owned, directly or indirectly, by Conso
or a Subsidiary;
"Termination Date" means December 1, 1998; provided, however,
the Bank in its sole discretion may elect to extend such date for
additional annual periods upon the request of Conso; provided further,
that in the event the Bank elects not to extend the Termination Date or
any extension thereof for an additional annual period in accordance
with the request of Conso, the Bank shall give Conso notice thereof at
least 30 days prior to the end of the applicable period (regardless of
whether Conso shall have theretofore formally requested an extension);
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"Trimmings" shall have the meaning given to such term
in Recital A hereof; and
"Trimmings Company" means a collective reference to
Trimmings and each of its Subsidiaries.
1.02 All accounting terms not specifically defined herein shall be
construed in accordance with Generally Accepted Accounting Principles applied on
a Consistent Basis.
ARTICLE II
Revolving Loans and Letters of Credit
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2.01 The Bank agrees, on the terms herein set forth, to make revolving
loan advances (the "Advances") from time to time during the period from the date
hereof to the Termination Date in an amount equal to $15,000,000 (or such higher
amount as the parties hereto may from time to time agree) (the "Revolving Loan
Committed Amount"). The Bank agrees that a portion of the Advances shall be
available to Trimmings in U.K. Pounds Sterling (the "Sterling Advances") in an
aggregate amount up to (pound)5,000,000 at any time outstanding. The Bank agrees
that the remaining portion of the Advances shall be available to Conso in U.S.
dollars (the "Dollar Advances"). Within the limits set forth herein and in the
Sterling Note (as hereinafter defined) and the Dollar Note (as hereinafter
defined), the Bank shall make Advances, accept payments and prepayments pursuant
to the terms hereof and readvance any amount so paid or prepaid.
2.02 The Sterling Advances shall be made, shall be repaid and shall
bear interest in accordance with the terms of that certain Promissory Note of
even date herewith executed by Trimmings in favor of the Bank in the original
principal amount of up to (pound)5,000,000 (the "Sterling Note"), the terms of
which are incorporated herein by reference.
2.03 The Dollar Advances shall be made, shall be repaid and shall bear
interest in accordance with the terms of that certain Promissory Note of even
date herewith executed by Conso in favor of the Bank in the original principal
amount of up to $15,000,000 (the "Dollar Note"), the terms of which are
incorporated herein by reference.
2.04 If the U.S. dollar equivalent of the outstanding principal balance
of the Sterling Note (based upon the most recently available Exchange Rate) plus
the outstanding principal balance of the Dollar Note plus the then outstanding
Letter of Credit Obligations shall at any time exceed U.S. $15,000,000, Conso
shall within two Business Days after receiving notice
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thereof from the Bank make a repayment to the Bank for purposes of eliminating
such excess, with such repayment to be applied first to the Dollar Note and then
to the Sterling Note to the extent of any surplus payment amount. Conso agrees
to deliver to the Bank within 15 days after the end of each month a certificate
setting forth as of the last day of such month (i) the U.S. dollar equivalent of
the outstanding principal balance of the Sterling Note (based upon the Exchange
Rate as of the last day of such month), (ii) the outstanding principal balance
of the Dollar Note, (iii) the outstanding Letter of Credit Obligations, (iv) the
sum of items (i), (ii) and (iii) above and (v) and the difference between the
Revolving Loan Committed Amount and the sum of items (i), (ii) and (iii) above.
2.05 The obligation of the Bank to make any Advance or to issue any
Letter of Credit shall be subject to the satisfaction of the following
conditions:
(a) the representations and warranties set forth in Article IV
hereof shall be true and correct in all material respects as of the day
of the making of such Advance or the issuance of such Letter of Credit,
except to the extent any such representation or warranty relates to a
prior date;
(b) at the time of the making of and immediately after the
making of such Advance or the issuance of such Letter of Credit there
shall have occurred or be continuing no Event of Default, or event
which upon notice or lapse of time or both would constitute an Event of
Default; and
(c) immediately after the making of such Advance or the
issuance of such Letter of Credit, the sum of the U.S. dollar
equivalent of the outstanding principal balance of the Sterling Note
(based upon the most recently available Exchange Rate) plus the
outstanding principal balance of the Dollar Note plus the then
outstanding Letter of Credit Obligations shall not exceed U.S.
$15,000,000.
Each Advance made at the request of Conso or Trimmings, as the case may be,
hereunder shall be deemed to be a reaffirmation on the date of such Advance as
to the matters specified in subsections (a) and (b) hereof.
2.06 The Borrower shall have the right from time to time to voluntarily
reduce the Revolving Loan Committed Amount; provided, however, if upon such
reduction the U.S. dollar equivalent of the outstanding principal balance of the
Sterling Note (based upon the most recently available Exchange Rate) plus the
outstanding
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principal balance of the Dollar Note plus the then outstanding Letter of Credit
Obligations shall exceed such reduced Revolving Loan Committed Amount, Conso
shall make a repayment to the Bank for purposes of eliminating such excess, with
such repayment to be applied first to the Dollar Note and then to the Sterling
Note to the extent of any surplus payment amount.
2.07 The Bank also agrees to issue standby and documentary letters of
credit (the "Letters of Credit") on Conso's application from time to time at
Conso's request from time to time in accordance with the following terms and
conditions:
(a) Conso will execute a letter of credit application on the
Bank's standard form in connection with the issuance of each Letter of
Credit (hereinafter the "Letter of Credit Applications");
(b) The form of each Letter of Credit must be
satisfactory to the Bank in its sole discretion;
(c) No Letter of Credit shall have a term in excess of
one year;
(d) No Letter of Credit shall have an expiration date
more than six months beyond the Termination Date;
(e) The aggregate undrawn amounts of the Letters of Credit at
any time outstanding plus the outstanding principal amount of amounts
drawn under the Letters of Credit and not reimbursed by Conso (the
"Letter of Credit Obligations") plus the outstanding principal balance
of the Dollar Advances plus the U.S. dollar equivalent of the Sterling
Advances (based upon the most recently available Exchange Rate) shall
not exceed U.S. $15,000,000;
(f) The Bank is authorized to reimburse itself for amounts
drawn under the Letters of Credit by disbursing directly to itself
proceeds of the Dollar Advances;
(g) Amounts drawn under the Letters of Credit shall be
payable in accordance with the terms of the Letter of Credit
Applications; and
(h) Conso shall pay the Bank such fees with respect to the
Letters of Credit as are agreed to by Conso and the Bank from time to
time.
(i) If at any time after the date hereof, and from time to
time, the Bank reasonably determines that the adoption or modification
of any applicable law, rule or regulation regarding taxation, the
Bank's required levels of
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reserves, deposits, insurance or capital (including any allocation of
capital requirements or conditions), or similar requirements, or any
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation,
administration or compliance of the Bank with any of such requirements,
has or would have the effect of (i) increasing the Bank's costs
relating to the Letters of Credit hereunder, or (ii) reducing the yield
or rate of return of the Bank on the Letters of Credit hereunder, to a
level below that which the Bank could have achieved but for the
adoption or modification of any such requirements, Conso shall, within
15 days of any written request (which request shall state in reasonable
detail the basis therefor) by the Bank, pay to the Bank such additional
amounts as will compensate the Bank for such increase in costs or
reduction in yield or rate of return of the Bank. 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. Nothing herein contained
shall be construed or so operate as to require Conso to pay any
interest, fees, costs or charges greater than is permitted by
applicable law.
ARTICLE III
Security
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3.01 Conso has heretofore delivered the following documents:
(a) the Security Agreement;
(b) the Financing Statements; and
(c) the Guaranty.
The collateral granted to the Bank by Conso under the Security
Agreement secures the obligations of Conso to the Bank under this Loan
Agreement, the Dollar Note and the Guaranty. Conso has guaranteed the
obligations of Trimmings to the Bank under the Sterling Note pursuant to the
Guaranty.
3.02 At the request of the Bank, Conso will execute by its duly
authorized officers, alone or with the Bank, any certificate, instrument,
statement or document and will procure any such certificate, instrument,
statement or document (and pay
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all connected costs) which the Bank reasonably deems necessary to preserve the
security interest of the Bank contemplated hereby.
ARTICLE IV
Representations and Warranties
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4.0l Conso represents and warrants that:
(a) (i) Conso and each of its Subsidiaries is a corporation,
duly organized, validly existing and in good standing under
the laws of the jurisdictions in which they are incorporated;
(ii) Conso and each of its Subsidiaries has the corporate
power and authority to own its properties and assets and to
carry on its business as now being conducted and is qualified
to do business in every jurisdiction in which, by reason of
the character of its business, it is required to qualify as a
foreign corporation (other than those jurisdictions where the
failure to so qualify would not subject any such Person to any
material liability or disability);
(iii) Conso has the corporate power and authority to
execute and perform this Loan Agreement, to borrow hereunder
and to execute and deliver each of the Loan Documents to which
it is a party, and all other certificates, instruments and
documents with respect to the indebtedness of Conso hereunder;
(iv) Trimmings has the corporate power and authority to
execute and perform the Sterling Note, to borrow thereunder
and to execute and deliver the Sterling Note, and all other
certificates, instruments and documents with respect to the
indebtedness of Trimmings thereunder;
(v) when executed and delivered, the Loan Documents will
be valid and binding obligations of Conso and Trimmings
enforceable in accordance with their respective terms;
(vi) the material Subsidiaries of Conso are set forth on
Exhibit B attached hereto and except as set forth on Exhibit
B, Conso has no material Subsidiaries;
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(b) the execution, delivery and performance of the Loan
Documents
(i) have been duly authorized by all requisite
corporate action of Conso and Trimmings required for the
lawful execution and delivery thereof;
(ii) do not violate any provisions of law, any order of
any court or other agency of government or the charter
documents or by-laws (or any other applicable organic
document) of Conso or Trimmings;
(iii) will not be in conflict with, result in a breach of
or constitute an event of default nor an event which, upon
notice or lapse of time, or both, would constitute such an
event of default under any indenture, agreement or other
instrument to which Conso or Trimmings is a party, except for
any such conflict, breach or default that could not be
reasonably expected to have a material adverse effect on Conso
or Trimmings, as the case may be;
(iv) will not result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of Conso or Trimmings except to
the extent any liens are created by such Loan Documents;
(c) (i) Conso has heretofore furnished the Bank with an
audited consolidated balance sheet of Conso and its
Subsidiaries as of June 29, 1996 and the related audited
consolidated statements of operations for the 12 months then
ended and the notes thereto. Such financial statements have
been prepared in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis throughout the period
involved; the consolidated balance sheet and the notes thereto
present fairly in all material respects the financial position
of Conso and its Subsidiaries as of the date thereof, and the
consolidated statements of operations and the notes thereto
present fairly in all material respects the results of the
operation of Conso and its Subsidiaries for the period
indicated;
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(ii) since the date of the financial statements described
in Section 4.01(c)(i) hereinabove, there has been no material
adverse change in the condition, financial or otherwise, of
Conso and its Subsidiaries nor have their businesses or
properties been adversely affected as a result of any fire,
explosion, earthquake, accident, strike, lockout, combination
of workers, flood, embargo, acts of God or by cancellation or
loss of any major contract;
(d) there is no action, suit or proceeding at law or in equity
or by or before any governmental instrumentality or agency or arbitral
body now pending or, to the knowledge of Conso, threatened by or
against or affecting Conso or any of its Subsidiaries or any properties
or rights of Conso or any of its Subsidiaries which, if adversely
determined, would impair the right of Conso or any of its Subsidiaries
to carry on business substantially as now conducted or would materially
adversely affect the financial condition, business or operations of
Conso or any of its Subsidiaries;
(e) (i) Conso has filed or caused to be filed all federal and
all material state and local tax returns which are required to be filed
and has paid or caused to be paid all taxes as shown on said returns or
on any assessment received by it, to the extent that such taxes have
become due and (ii) each of its Subsidiaries has filed or caused to be
filed all material tax returns which are required to be filed and have
paid or caused to be paid all taxes as shown on said returns or on any
assessment received by them, to the extent that such taxes have become
due;
(f) neither Conso nor any of its Subsidiaries is
(i) a party to any judgment, order, decree or any
agreement or instrument or subject to corporate restrictions
materially adversely affecting its business, properties or
assets, operations or condition (financial or otherwise);
(ii) in default in the performance, observance or
fulfillment of any material obligations, covenants or
conditions contained in any agreement or instrument to which
it is a party;
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(g) no part of the proceeds of any loan hereunder will be used
to purchase or carry or to reduce or retire any loan incurred to
purchase or carry, any "margin stock" (within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System) or to extend
credit to others for the purpose of purchasing or carrying any such
margin stocks; provided, however, nothing contained herein shall
prohibit Conso from instituting a loan program pursuant to which it
makes loans to employees and other participants in its employee stock
option plan to fund their payment of the exercise price for stock
options granted pursuant to such plan. Neither Conso nor any of its
Subsidiaries is engaged, as one of their important activities, in
extending credit for the purpose of purchasing or carrying such margin
stock. If requested by the Bank and to the extent applicable, Conso and
Trimmings will furnish to the Bank in connection with any loan
hereunder, a statement in conformance with the requirements of Federal
Reserve Form U-1 referred to in said Regulation. In addition, no part
of the proceeds of any loan hereunder will be used for the purchase of
commodity future contracts (or margins therefor for short sales) for
any commodity not required for the normal raw material inventory of
Conso or any of its Subsidiaries;
(h) Conso and each of its Subsidiaries possess all necessary
material patents, licenses, trademarks, trademark rights, tradenames,
tradename rights and copyrights (or their equivalents in the United
Kingdom) to conduct their respective businesses without known conflict
with any patent, license, trademark, tradename or copyrights (or their
equivalents in the United Kingdom) of any other Person except for any
such conflict which could not be reasonably expected to have a material
adverse effect on Conso and its Subsidiaries;
(i) none of the Loan Documents contains any material
misrepresentation or untrue statement of a material fact or omits to
state a material fact necessary in order to make any such
representation or statement contained therein not misleading;
(j) neither the nature of Conso or any of its Subsidiaries nor
of their respective businesses or properties, nor any relationship
between Conso or any of its Subsidiaries and any other Person, nor any
circumstance in connection with the offer, issue, sale or delivery of
the Notes is such as to require a
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consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority on the part of Conso or
Trimmings as a condition to the execution and delivery of this Loan
Agreement or any other Loan Document;
(k) neither Conso nor any of its Subsidiaries has incurred or
assumed any liability for any accumulated unfunded deficiency within
the meaning of the Employee Retirement Income Security Act of 1974 as
amended ("ERISA") or has incurred any material liability to the Pension
Benefit Guaranty Corporation ("PBGC") established under ERISA (or any
successor thereto under ERISA) in connection with any employee benefit
plan established or maintained by Conso and any of its Subsidiaries;
(l) except as set forth on Exhibit A and for other Permitted
Liens, Conso has good and marketable fee simple title to its
receivables and inventory (with no representation or warranty being
made as to the receivables or inventory of any Trimmings Company); and
(m) the business of Conso and its Subsidiaries has been
operated in compliance in all respects with all applicable federal,
state, local and foreign laws, regulations, orders, ordinances,
judgments and decrees (including, for example, matters relating to the
environment, discrimination, employment and health and safety), except
for such matters, if any, as may have been previously disclosed by
Conso to the Bank in writing and for violations which do not and will
not have a material adverse effect on the financial conditions,
business or results of operations of Conso and its Subsidiaries. All
material permits, certificates, licenses, approvals, and other
authorizations that are required in connection with the operation of
the respective businesses of Conso and its Subsidiaries have been
issued, and, as of the date hereof and immediately thereafter Conso and
its Subsidiaries will have all material permits, certificates,
licenses, approvals and other authorizations required in connection
with the operation of their respective businesses.
ARTICLE V
Affirmative Covenants
---------------------
5.01 Conso covenants and agrees that from the date hereof and until
payment in full of all principal and interest on the Notes and until the
commitment of the Bank to make loans and
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issue Letters of Credit hereunder has been terminated (unless the Bank shall
otherwise consent in writing), Conso will:
(a) as soon as practical and in any event not later than
within one hundred twenty (120) days of the end of each fiscal year
ending after the date hereof, deliver to the Bank a financial report in
U.S. Dollars including a consolidated balance sheet of Conso and its
Subsidiaries as at the end of such fiscal year, and the related
consolidated statements of operations, shareholders' equity and cash
flows for such fiscal year and the notes thereto, setting forth in each
case comparative financial statements for the preceding year, all
prepared in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis and containing an unqualified opinion of
independent certified public accountants selected by Conso and
reasonably acceptable to the Bank (it being understood and agreed that
delivery by Conso to the Bank of its Annual Report on Form 10-K as
filed with the Securities and Exchange Commission shall be deemed to
satisfy this Section 5.01(a));
(b) as soon as practical and in any event not later than
within fifty (50) days after the end of each fiscal quarter (except the
fourth and final fiscal quarter) of each fiscal year of Conso, deliver
to the Bank a financial report in U.S. Dollars including a consolidated
balance sheet of Conso and its Subsidiaries as at the end of such
quarterly period and the related consolidated statements of operations,
shareholders' equity and cash flows for the period from the beginning
of the current fiscal year to the end of such quarterly period (it
being understood and agreed that delivery by Conso to the Bank of its
Quarterly Report on Form 10-Q as filed with the Securities and Exchange
Commission shall be deemed to satisfy this Section 5.01(b)), together
with a financial covenant compliance report setting forth the actual
results of the covenants set forth in Sections 5.01(g), (h), (i) and
(j) below as of the last day of such quarter then ending, all prepared
in accordance with Generally Accepted Accounting Principles applied on
a Consistent Basis (subject to normal year-end adjustments which would
not have a material adverse affect on Conso's consolidated financial
condition, and the absence of certain footnotes) and certified by the
chief financial officer of Conso as presenting fairly in all material
respects the consolidated financial condition of Conso and its
Subsidiaries;
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(c) together with each delivery of financial reports required
by Sections 5.01(a) and (b) hereof, deliver to the Bank a statement
signed by the chief financial officer of Conso setting forth that, to
the best of his knowledge, Conso and Trimmings have kept, observed,
performed and fulfilled in all material respects each and every
agreement binding on them contained in the Loan Documents and that no
Event of Default specified in Article VII hereof, nor any event, which,
upon notice or lapse of time or both, would constitute such an Event of
Default, has occurred, or if such Event of Default exists or would
occur as the case may be, stating the nature thereof, the period of
existence thereof and what action Conso proposes to take with respect
thereto;
(d) promptly upon becoming available, deliver to the Bank a
copy of all documents filed by Conso with the Securities and Exchange
Commission;
(e) promptly, from time to time, deliver to the Bank such
other information regarding the operations, business, affairs and
financial condition of Conso and its Subsidiaries as the Bank may
reasonably request. The Bank is hereby authorized to deliver a copy of
any such financial information delivered hereunder to the Bank to any
regulatory authority having jurisdiction over the Bank that requests
such information;
(f) together with each delivery of the financial statement
required by Section 5.01(a) hereof, deliver to the Bank a letter of
Conso's certified public accountants stating that in performing the
examination necessary to render an opinion on the financial statements
delivered therewith, they obtained no knowledge of any event of default
by Conso in the fulfillment of the terms and provisions of the
financial covenants contained in Sections 5.01(g)-(j) of this Loan
Agreement; and if the accountants have obtained knowledge of such an
event of default a statement specifying, to the best of their
knowledge, the nature and period of existence thereof;
(g) maintain for Conso and its Subsidiaries on a consolidated
basis at the end of each fiscal quarter Consolidated Tangible Net Worth
of at least $28,000,000.00; provided, however, such amount shall be
increased on the last day of each fiscal year (commencing with the
fiscal year ending June 28, 1997) by an amount equal to 75% of
Consolidated Net Income of
- 16 -
17
Conso and its Subsidiaries for such fiscal year (but not decreased by
losses in any such fiscal year);
(h) maintain for Conso and its Subsidiaries on a consolidated
basis at the end of each fiscal quarter a ratio of Consolidated Funded
Indebtedness (computed on the last day of such quarter) to Consolidated
EBITDA (computed for the 12 months then ended) of no greater than 2.0
to 1.0;
(i) maintain for Conso and its Subsidiaries on a consolidated
basis at the end of each fiscal quarter a Consolidated Fixed Charge
Coverage Ratio of at least 1.5 to 1.0 (computed for the fiscal 12
months then ending);
(j) maintain for Conso and its Subsidiaries on a consolidated
basis at the end of each fiscal quarter a ratio of Consolidated Current
Assets to Consolidated Current Liabilities at all times of at least 2.0
to 1.0;
(k) maintain, and cause each of its Subsidiaries to maintain,
all personal property in good working order and condition and make all
needed repairs, replacements and renewals as is necessary to conduct
the business in accordance with prudent business practices;
(l) do or cause to be done all things necessary to preserve
and keep in full force and effect the corporate existence, rights and
franchises of Conso and Trimmings;
(m) pay all taxes, assessments, governmental charges, material
claims for labor, significant amounts of supplies, rent and any other
material obligation which, if unpaid, might become a lien against any
of the property of Conso and its Subsidiaries except (i) liabilities
being contested in good faith and against which, if requested by the
Bank reserves reasonably satisfactory to the Bank will be established,
or (ii) liabilities the payment of which would not have a material
adverse effect on the condition of Conso and its Subsidiaries, taken as
a whole;
(n) maintain insurance covering Conso's inventory that shall
provide that, in case of each separate loss with respect to casualty
insurance, the full amount of insurance proceeds with respect thereto
shall be payable to the Bank as secured party, or otherwise as
- 17 -
18
its interest may appear. All such insurance proceeds received by the
Bank shall at its option be applied to reduce the outstanding balance
under the Notes and the Loan Agreement with the excess proceeds, if
any, remitted in full to Conso;
(o) continue to conduct and operate the business
of Conso and its Subsidiaries substantially as
conducted and operated during the present and preceding
fiscal year;
(p) preserve, protect, retain and maintain free from material
encumbrances the material patents, licenses, trademarks, trademark
rights, tradenames, tradename rights and copyrights of Conso and its
Subsidiaries and maintain all of the other material properties and
assets used or useful in the conduct of the business of Conso and its
Subsidiaries in good repair, working order and condition and from time
to time cause to be made all proper replacements, betterments and
improvements thereto;
(q) keep accurate books of records and accounts in accordance
with Generally Accepted Accounting Principles applied on a Consistent
Basis, and in which full, accurate and correct entries will be made of
all of the dealings and transactions of Conso and its
Subsidiaries;
(r) permit any officer of the Bank designated in writing by
the Bank to visit and inspect any of the properties, corporate books
and financial records of Conso and its Subsidiaries at such times as
the Bank may reasonably request upon reasonable notice and during
ordinary business hours;
(s) upon the written request of the Bank, authorize any
officer of the Bank to discuss the financial statements and financial
affairs of Conso or Trimmings at any time from time to time with
Conso's independent certified public accountants upon reasonable notice
and during ordinary business hours;
(t) deliver to the Bank forthwith, upon any officer of Conso
obtaining knowledge of an Event of Default or an event which would
constitute such an Event of Default but for the requirement that notice
be given or time elapse or both, a certificate of the chief executive
officer or treasurer of Conso specifying the nature and period of
existence thereof
- 18 -
19
and what action Conso proposes to take with respect thereto;
(u) notify the Bank in writing within five (5) Business Days
of the earlier of the occurrence or the obtaining of any knowledge by
any officer of Conso of any of the following with respect to Conso or
any of its Subsidiaries:
(i) the pendency or commencement of any material
action, suit or proceeding at law or in equity wherein the
opposing party seeks damages of more than $100,000.00 which is
not dismissed within 30 days of the filing thereof;
(ii) any levy of an attachment, execution or other
process against the assets of Conso or any of its Subsidiaries
worth in excess of $100,000 in the aggregate which is not
released, dismissed or discharged within 30 days of such levy;
(iii) any change in any existing agreement or
contract which could be reasonably expected to materially
adversely affect the business or affairs, financial or
otherwise, of Conso and its Subsidiaries;
(iv) if the consummation thereof would have a
material effect on the condition of Conso and its Subsidiaries
taken as a whole, the intent of Conso or any of its
Subsidiaries to enter into any agreement or plan of merger or
acquisition, and the effect of any such merger or acquisition
on the financial condition of Conso and its Subsidiaries;
(v) make prompt payment of all contributions required under
all employee benefit plans ("Plans") and required to meet the minimum
funding standard set forth in ERISA with respect to the Plans of Conso;
(b) upon the request of the Bank furnish to the Bank copies of each
annual report/return (Form 5500 Series), as well as all schedules and
attachments required to be filed with the Department of Labor and/or
the Internal Revenue Service pursuant to ERISA, and the regulations
promulgated thereunder, in connection with each of the Plans of Conso
for each plan year; (c) notify the Bank immediately of any fact,
including, but not limited to, any Reportable Event (as defined in
ERISA) arising in connection with any of the Plans of Conso, which
would reasonably be expected to constitute grounds for
- 19 -
20
termination thereof by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer
such United States District Court of a trustee to administer such Plan,
(d) provide the Bank with a statement, if requested by the Bank, as to
the reason therefor and the action, if any, proposed to be taken with
respect thereto, together with a copy of the notice of such Reportable
Event given to the PBGC or a statement that said notice will be filed
with the annual report to the United States Department of Labor with
respect to such Plan if such filing has been authorized, (e) promptly
after receipt thereof, provide the Bank with a copy of any material
notice Conso may receive from the United States Department of Labor,
the Internal Revenue Service or the PBGC with respect to such Plan; and
(f) furnish to the Bank, upon its request, such additional information
concerning any of the Plans of Conso as may be reasonably requested;
(w) comply with or contest in good faith, and cause each of
its Subsidiaries to comply with or contest in good faith, all material
statutes and governmental regulations (including all federal, state and
local requirements relating to protection of health or the environment)
in connection with the operation of Conso's or any of such
Subsidiaries' business; and
(x) offer the Bank the first opportunity to negotiate with
Conso with respect to the financing needs of any Trimmings Company.
ARTICLE VI
Negative Covenants
------------------
6.01 Until payment in full of the principal and interest of the Notes
and until the commitment of the Bank to make loans and issue Letters of Credit
hereunder has been terminated, Conso covenants that (without the prior written
consent of the Bank) it will not, nor will it permit any of its Subsidiaries to
(a) incur, create or permit to exist any pledge, security
interest, lien, charge or other encumbrance of any nature whatsoever on
any of Conso's accounts receivable or inventory (but specifically
excluding the accounts receivable and inventory of any Trimmings
Company), whether now owned or hereafter acquired, other than the
Permitted Liens; or
- 20 -
21
(b) make or permit (i) all directors and executive officers of
Conso as a group to own less than 35% of the issued and outstanding
shares of common stock, no par value, of Conso, or (ii) any change in
ownership of Trimmings or any other Trimmings Company if any such
change in ownership would have a material adverse effect on Conso and
its Subsidiaries, taken as a whole.
ARTICLE VII
Events of Default and Acceleration
----------------------------------
7.01 Any of the following shall constitute an event of default
hereunder (hereinafter an "Event of Default"):
(a) the failure of Conso or Trimmings to make
payment when due of any installment of principal or
payment of interest required by any of the Notes;
(b) the failure of Conso or Trimmings to comply with any other
covenants or terms in this Loan Agreement or any other Loan Document
and the continuation of such failure for a period of thirty (30) days
after Conso receives written notice thereof from the Bank;
(c) if any representation or warranty made by Conso in this
Loan Agreement or in any other Loan Document or by Conso or Trimmings
in any certificate, statement or report heretofore or hereafter
furnished by Conso or Trimmings to the Bank shall be untrue in any
material respect;
(d) in the event that Conso
(i) shall make an assignment for the benefit of
creditors; or
(ii) has a petition initiating a proceeding under any
section or chapter of the Bankruptcy Code or its amendments,
filed by or against it and, if against it, such petition is
not set aside within sixty (60) days after such filing; or
(iii) shall file any proceedings for dissolution or
liquidation; or
(iv) has a receiver, trustee or custodian appointed
for all or part of its assets; or
- 21 -
22
(v) seeks to make an adjustment, settlement or
extension of its debts with its creditors generally; or
(vi) has a notice of an action for enforcement of a
lien filed or recorded or a judgment lien or execution
obtained against it in excess of an aggregate of $100,000.00
which notice of lien or judgment lien or execution is not
removed, or satisfied or contested in good faith within sixty
(60) days after any of its officers becomes aware thereof; or
(e) in the event that:
(i) any petition is presented by any Person (other
than a petition which, in the reasonable opinion of the Bank,
is frivolous or vexatious and which is withdrawn or stayed
within 60 days) or any order is made by any competent court or
any resolution is passed by any Trimmings Company for its
winding up or dissolution or for the appointment of a
liquidator of any Trimmings Company (except for the purpose of
a solvent amalgamation or reconstruction on terms and
conditions which shall have first been approved by the Bank);
(ii) any Trimmings Company has a receiver or
administrative receiver or manager or sequestrator appointed
over the whole or any part of the undertakings, assets, rights
or revenues of such Trimmings Company and such action is not
lifted or discharged within sixty (60) days after any of its
officers becomes aware thereof;
(iii) any Trimmings Company proposes or enters into
any composition or other arrangement for the benefit of its
creditors generally; or
(iv) any Trimmings Company has notice of any proposed
distress or other process to be levied or enforced on any of
the assets, rights or remedies of such Trimmings Company in
respect of any indebtedness in excess of $100,000 and any such
action is not lifted, discharged, satisfied or contested in
good faith within 60 days after any of is officers becomes
aware thereof;
(f) if Conso or any of its Subsidiaries defaults in the
performance of any agreement between it and the
- 22 -
23
Bank or any other lender with respect to indebtedness for borrowed
money in excess of $100,000.00 of Conso or any of such Subsidiaries
(including capitalized lease indebtedness) and such default results in
the acceleration of such indebtedness or would permit the Bank or such
other lender to accelerate such indebtedness.
7.02 Upon the occurrence of any Event of Default:
(a) the Bank's commitment to make Advances shall terminate and
all of the indebtedness of any and every kind owing by Conso or
Trimmings to the Bank shall become due and payable upon written notice
to Conso (other than an Event of Default described in Section 7.01(d)
or (e) in which case the Bank's commitment to make Advances shall
automatically terminate and such indebtedness shall become due and
payable immediately without necessity of written demand) without the
necessity of any other demand, presentment, protest or notice upon
Conso and/or Trimmings, all of which are hereby expressly waived by
Conso and Trimmings;
(b) all of the obligations of Conso and Trimmings under the
Loan Documents shall upon delivery of such written notice be
immediately due and payable without the necessity of any other demand,
presentment, protest or notice upon Conso and/or Trimmings, all of
which are hereby expressly waived by Conso and Trimmings;
(c) regardless of the adequacy of the collateral, the Bank
shall have the right, immediately and without further action by it, to
set-off against the Notes all money owed by the Bank in any capacity to
Conso or Trimmings, whether or not due, and the Bank shall be deemed to
have exercised such right of set-off and to have made a charge against
any such money immediately upon the occurrence of such Event of Default
even though such charge is made or entered on the books of the Bank
subsequent thereto; and
(d) the Bank may demand, and Conso shall immediately pay to
the Bank upon such demand, cash in an amount equal to the then
outstanding Letter of Credit Obligations which will be held in a cash
collateral account in the name of the Bank and under the dominion and
control of the Bank as additional security for the reimbursement
obligations which may thereafter arise on account of subsequent
drawings or payments under the Letters of Credit.
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24
ARTICLE VIII
Miscellaneous
-------------
8.01 Any notice shall be conclusively deemed to have been received by
any party hereto and be effective on the day on which delivered to such party at
the address set forth below or such other address as such party shall specify to
the other party in writing, or if sent prepaid by certified or registered mail
or by telegram or telex (where the receipt of such message is verified by
return) on the third Business Day after the day on which mailed (or sent),
addressed to such party at said address:
(a) if to Conso or Trimmings at the following address:
c/o Conso Products Company
P.O. Box 326
513 North Duncan Bypass
Union, South Carolina 29379
Attention: S. Duane Southerland, Jr.
Telephone: 864-427-9004
Telecopy: 864-427-8820
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
Suite 4200
100 N. Tryon Street
Charlotte, North Carolina 28202-4006
Attention: Sean M. Jones
Telephone: 704-331-7400
Telecopy: 704-331-7598
(b) if to the Bank:
NationsBank, N.A.
NationsBank Plaza, NC1-002-03-10
Charlotte, North Carolina 28255
Attention: William A. Serenius
Telephone: 704-386-8577
Telecopy: 704-386-1023
8.02 No failure or delay on the part of the Bank in the exercise of any
right, power or privilege hereunder or under any other Loan Document shall
operate as a waiver of any such right, power or privilege nor shall any such
failure or delay preclude any other or further exercise of any such right, power
or privilege. The rights and remedies herein provided are
- 24 -
25
cumulative and not exclusive or any rights or remedies provided
by law.
8.03 All covenants, agreements, representations and warranties made
herein and in the other Loan Documents shall survive the making by the Bank of
the loans and the issuance of the Letters of Credit herein contemplated and the
execution and delivery to the Bank of the Loan Documents and shall continue in
full force and effect so long as any of the indebtedness of Conso or Trimmings
to the Bank or any obligations of Conso or Trimmings to the Bank remain
outstanding and unpaid. Whenever in this Loan Agreement, any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party and all covenants, provisions and agreements by or on
behalf of Conso or Trimmings which are contained in the Loan Documents or this
Loan Agreement shall inure to the benefit of the successors and assigns of the
Bank. Notwithstanding the foregoing, prior to the occurrence of an Event of
Default, the Bank may not sell, assign, transfer or otherwise dispose of or
create participations in this Loan Agreement or any of the other Loan Documents
or any portions thereof, including without limitation, any of the Bank's rights,
title, interests, remedies, powers and duties hereunder or thereunder, without
the prior written consent of Conso.
8.04 Conso agrees to pay all costs and expenses in connection with the
preparation, execution and delivery of the Loan Documents, including, without
limitation, the reasonable fees and out-of-pocket expenses of special counsel to
the Bank, and costs and expenses of the Bank in connection with the
implementation and/or enforcement of the Loan Documents and this Loan Agreement,
as well as any filing and recording fees and stamp and other taxes with respect
thereto and to hold the Bank harmless from any and all such costs, expenses and
liabilities.
8.05 No approval, decision, opinion or action required of the Bank
("Approval") hereunder nor any modification, amendment or waiver ("Waiver") of
any provision of this Agreement or any other Loan Document, nor any consent to
any departure by Conso or Trimmings therefrom ("Consent") shall in any event be
effective unless the same shall be delivered in accordance with the provisions
of Section 8.01 hereof, and then such Approval, Waiver or Consent shall be
effective only in the specific instance and for the purpose for which given, but
any such Approval, Waiver or Consent when so signed shall be effective and
binding upon the Bank. Notice to or demand on Conso or Trimmings in any case
shall not entitle Conso or Trimmings, as the case may be, to any other or
further notice or demand in the same, similar or other circumstances.
- 25 -
26
8.06 Except as set forth in the Sterling Note, interest, fees and
premiums hereunder shall be computed on the basis of a three hundred sixty (360)
day year for the actual number of days in the interest period.
8.07 Should any installment or other payment of the principal of or
interest on any Note become due and payable on other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day
thereafter and in the case of an installment of principal, interest shall be
payable thereon at the rate per annum herein specified during such extension.
8.08 This Loan Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original, and it
shall not be necessary in making proof of this Loan Agreement to produce or
account for more than one such counterpart.
8.09 The terms hereof shall extend to any subsequent holder of the
Notes to the extent such holder has acquired the Notes in accordance with the
terms hereof.
8.10 The term of this Loan Agreement shall be until (a) payment in full
of all sums payable by Conso and Trimmings hereunder, under the Notes, or
otherwise payable to the Bank, howsoever evidenced, whichever is later and (b)
termination of the obligation of the Bank to make Advances and issue Letters of
Credit.
8.11 All documents executed pursuant to the transactions contemplated
herein, including without limitation this Loan Agreement and the Dollar Note
(but not the Sterling Note), 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. Conso hereby submits to the
jurisdiction and venue of the state and federal courts of North Carolina for the
purposes of resolving disputes hereunder or for the purposes of collection.
- 26 -
27
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed under seal by their duly authorized officers as of the day and year
first above written.
CONSO PRODUCTS COMPANY
ATTEST:
By /s/ Konstance Findlay By /s/ J. Cary Findlay
--------------------------- -----------------------------
Title Secretary Title Chairman
------------------------ --------------------------
(Corporate Seal)
NATIONSBANK, N.A.
By: /s/ William A. Serenius
---------------------------
William A. Serenius
Senior Vice President
- 27 -
28
EXHIBIT A
Permitted Liens
None.
29
EXHIBIT B
Material Subsidiaries
British Trimmings Limited
Itatrim Limited
MacCulloch & Wallis (London) Limited
Pattern Masters Limited
Val-Mex, S.A. de C.V.