[EXECUTION COPY]
STOCKHOLDERS AGREEMENT
dated as of September 9, 1999
among
AIP/CGI NB ACQUISITION CORP.
CONSOLTEX GROUP INC.,
LES GANTIERS HOLDING B.V.,
LES GANTIERS LIMITED,
and
THE BIG SKY TRUST
THIS STOCKHOLDERS AGREEMENT (this "AGREEMENT"), is made as of
September 9, 1999 among Consoltex Group Inc., a corporation subject to the
laws of Canada (the "COMPANY"), AIP/CGI NB Acquisition Corp., a corporation
subject to the laws of New Brunswick ("AIP"), Les Gantiers Holding B.V., a
company subject to the laws of the Netherlands ("LGH"), Les Gantiers
Limited, a company incorporated under the laws of Jersey ("LGL"), and The
Big Sky Trust, a trust established under the laws of the Island of Jersey
(the "TRUST").
W I T N E S S E T H :
WHEREAS, AIP and the Company are entering into a certain letter agreement
of even date herewith (the "OFFER AGREEMENT") pursuant to which AIP will
agree, subject to the conditions set forth therein, to make a tender
offer for all of the outstanding Subordinate Voting Shares (the
"TENDER OFFER"); and
WHEREAS, AIP requires, as a condition to its execution of the
Offer Agreement that it enter into this Agreement with the Company, LGH,
LGL, and the Trust, and in light of the substantial direct and indirect
benefits that each expects to realize as a result of the Tender Offer, such
other persons desire to enter into this Agreement with AIP.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1. DEFINED TERMS. As used in this Agreement,terms defined in the headings
(i) and the recitals shall have their respective assigned meanings, and
the following capitalized terms shall have the meanings ascribed to them
below:
"AFFILIATE" means, with respect to any Person, any Person that directly
or indirectly controls, is controlled by or is under common control
with, such Person. For purposes of the foregoing definition,
"control" shall have the meaning specified in Rule 12b-2 under the Exchange
Act.
"AIP LOAN AGREEMENT" means the Loan Agreement to be entered into between
LGH and AIP, dated as of the Closing Date.
"BOARD OF DIRECTORS" means, unless the context otherwise
indicates, the Board of Directors of the Company, as the same shall from
time to time be constituted.
"CAPITAL EXPENDITURES" means all expenditures (consistent
with past practice and established Company policy) for any capital or fixed
assets or improvements, or for replacements, substitutions or additions
thereto (including the principal portion of capitalized lease obligations
but excluding expenditures which are fully expensed in the period incurred
in accordance with GAAP consistently applied).
"COATTAIL AGREEMENT" means the Trust Agreement made as of
March 22, 1993 among LGH, Xxxxxxx X. Xxxxxxx, Xxxx Xxxxxxxxx Xxxxxxx, the
Company and Montreal Trust Company, as amended.
"CLAIRVEST LOAN AGREEMENT" means that certain Loan Agreement
among LGH, LGL, RHW and Clairvest Group Inc., dated January 13, 1997, and
related security agreements, as amended.
"CHANGE OF CONTROL" means (a) a "change of control" under the
Credit Agreement or (b) a "change of control" under the Indenture; PROVIDED
that for purposes of Section 4.5(e)(ii) hereof, Change of Control shall not
include any event (i) resulting from Xxxxxxx X. Xxxxxxx'x gross negligence
or willful misconduct in the performance of his duties as a director or
officer of the Company or any of its Subsidiaries or (ii) resulting from
actions taken by LGH, LGL or the Trust in material violation of this
Agreement.
"CLOSING DATE" means the date the Subordinate Voting Shares
are taken up and paid for pursuant to the Tender Offer.
"COMPANY OPTION" means the option issued by the Company,
granting AIP the right to purchase Subordinate Voting Shares of the Company
pursuant to that certain Option Agreement of even date herewith.
"COMPANY SALE" means the consummation of a transaction,
whether in a single transaction or in a series of related and substantially
contemporaneous transactions, with a Third Party or a group of Third
Parties that are Affiliates of each other pursuant to which such party or
parties (a) acquire (whether by merger, consolidation, or transfer or
issuance of capital stock or otherwise) capital stock of the Company (or
any surviving or resulting corporation) possessing the voting power to
elect a majority of the board of directors of the Company (or such
surviving or resulting corporation) or (b) acquire assets constituting all
or substantially all of the assets of the Company and its Subsidiaries (as
determined on a consolidated basis).
"CREDIT AGREEMENT" means the Credit Agreement, dated March
19, 1996 among the Company, certain of its subsidiaries, National Bank of
Canada and NationsBank, National Association and the other lenders thereto
from time to time, as amended, restated or supplemented.
"DEFAULT" means (a) an event of default under the Credit
Agreement, (b) an event of default under the Indenture, (c) the occurrence
of a Change of Control or (d) gross negligence or willful misconduct by
Xxxxxxx X. Xxxxxxx in the performance of his duties as a director or
officer of the Company or any of its Subsidiaries which continues uncured
after a period of 30 days following written notice thereof from the Company
to Xxxxxxx X. Xxxxxxx.
"EXCHANGE ACT" means the United States Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated
thereunder, as the same may be amended from time to time.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as have been approved by a
significant segment of the accounting profession.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"GUARANTY AGREEMENT" means the Guaranty Agreement, in favor
of Les Gantiers Holding, B.V., dated as of the date hereof, of American
Industrial Partners Capital Fund II, L.P.
"INDEBTEDNESS" means, with respect to any Person, (a) any
indebtedness for borrowed money or issued in substitution for or exchange
of indebtedness for borrowed money, (b) any indebtedness evidenced by any
note, bond, debenture or other debt instrument, (c) any indebtedness for
the deferred purchase price of property or services with respect to which a
Person is liable, contingently or otherwise, as obligor or otherwise (other
than current trade payables and other current liabilities incurred in the
ordinary course of business), (d) any commitment by which a Person assures
a creditor against loss (including contingent reimbursement obligations
with respect to letters of credit), (e) any obligations for which a Person
is obligated pursuant to a guaranty, (f) any obligations under capitalized
leases with respect to which a Person is liable, contingently or otherwise,
as obligor, guarantor or otherwise, or with respect to which obligations a
Person assures a creditor against loss, (g) any indebtedness secured by a
Lien on a Person's assets, and (h) net obligations under hedging
arrangements designed to protect a Person against fluctuations in interest
rates, currency exchange rates or commodity prices.
"INDENTURE" means the Indenture, dated as of September 30,
1993, among the Company, certain of its subsidiaries and First Trust
National Association, as Trustee.
"LIENS" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against the Company, any
Subsidiary or any Affiliate, any filing or agreement to file a financing
statement as debtor under the Uniform Commercial Code, personal property
legislation in Canada or any similar statute other than to reflect
ownership by a third party of property leased to the Company or any
Subsidiaries under a lease which is not in the nature of a conditional sale
or title retention agreement, or any subordination arrangement in favor of
another Person (other than any subordination arising in the ordinary course
of business).
"LOAN PURCHASE AGREEMENT" means that certain Loan Purchase
Agreement among AIP, Clairvest Group Inc., certain other parties and the
Company, dated as of the date hereof.
"MANAGEMENT SERVICES AGREEMENT" means the Management Services
Agreement attached hereto as Exhibit 1 to be executed on the Closing Date.
"LOCK-UP AGREEMENT" means the Lock-up Agreement, dated as of
the date hereof, between AIP and Clairvest Group Inc.
"MULTIPLE VOTING SHARES" means the Multiple Voting Shares in
the capital of the Company.
"OPTION AGREEMENT" means the Option Agreement, dated the date
hereof, between AIP and the Company.
"OPTION COMMENCEMENT DATE" means the first to occur of (i)
the consummation of the transactions contemplated by the Loan Purchase
Agreement and the Tender Offer and (ii) a Triggering Event.
"OPTION EXPIRY DATE" means the earliest of: (i) 5 days after
Securities are taken up under, or the effective date of, an Acquisition
Proposal (as defined in the Offer Agreement), (ii) the day the Offer (as
defined in the Offer Agreement) expires and the conditions thereto have not
been waived or satisfied or the day the Offer is withdrawn and (iii) 255
days after the date of this Agreement.
"OPTION SHARES" means, prior to the Termination of the
Coattail Agreement, 3,140,000 Subordinate Voting Shares issued upon the
conversion of 3,140,000 Multiple Voting Shares held by LGH as of the date
of this Agreement, and from and after the termination of the Coattail
Agreement, means 3,140,000 Multiple Voting Shares held by LGH.
"ORGANIC CHANGE" means any recapitalization, reorganization,
reclassification, consolidation, merger, statutory arrangement, sale of all
or substantially all of the Company's assets or other transaction, in each
case which is effected in such a way that the holders of Securities are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for such Securities.
"PERMITTED INDEBTEDNESS" means (i) outstanding and unpaid
principal and interest under the Credit Agreement and the Indenture, (ii)
Indebtedness arising from guarantees of the Company in respect of
obligations of its Subsidiaries for the purchases of raw materials in the
ordinary course of business and (iii) other Indebtedness of the Company and
its Subsidiaries not exceeding an aggregate principal amount of $5 million
outstanding at any time on a consolidated basis.
"PERMITTED LIENS" means (a) liens securing obligations under
the Credit Agreement; (b) liens on property of a Person existing at the
time such Person is amalgamated, merged into or consolidated with the
Company or any of its Subsidiaries; PROVIDED that such liens were in
existence prior to the contemplation of such amalgamation, merger or
consolidation; (c) liens on property existing at the time of acquisition
thereof by the Company or any of its Subsidiaries; PROVIDED that such liens
were in existence prior to the contemplation of such acquisition; (d) liens
to secure the performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (e) liens existing on the date of this
Agreement; (f) liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good
faith by appropriate proceedings promptly instituted and diligently
concluded; PROVIDED that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made therefor;
and (g) liens incurred in the ordinary course of business of the Company or
any of its Subsidiaries with respect to obligations that do not exceed $5
million at any one time outstanding and that (i) are not incurred in
connection with the borrowing of money or the obtaining of advances or
credit (other than trade credit in the ordinary course of business) and
(ii) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of business
by the Company or any of its Subsidiaries.
"PERSON" means any individual, corporation, partnership,
trust, joint stock company, business trust, unincorporated association,
joint venture, Governmental Authority or other entity of any nature
whatsoever.
"REQUIRED HOLDERS" means holders of Voting Securities
possessing at least two-thirds (2/3) of the voting power of all Voting
Securities then outstanding.
"SECURITIES" means Subordinate Voting Shares, Multiple Voting
Shares or other capital stock or equity securities of the Company, whether
outstanding on the date hereof or hereafter issued.
"SET-OFF AMOUNT" means C$13.4 million increasing at a rate of
10.5% per annum from the date hereof (computed on the basis of a 360-day
year and the actual number of days elapsed to the Option Closing Date).
"STOCKHOLDERS" means AIP and LGH.
"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, association or other business entity of which
more than fifty percent (50%) of the total voting power of shares of
capital stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof, or more than fifty percent (50%) of the equity interest therein,
is at the time owned or controlled, directly or indirectly, by such Person
or one or more of the other Subsidiaries of such Person or a combination
thereof.
"SUBORDINATE VOTING SHARES" means the Subordinate Voting
Shares in the capital of the Company.
"THIRD PARTY" means any Person other than the Company, the
Stockholders the other parties to this Agreement and any trustee or
beneficiary of the Trust and all such Person's Affiliates.
"TRANSACTION AGREEMENTS" means the Management Services
Agreement, the Company Option and the Guaranty.
"TRANSFER" means any transfer, sale, assignment,
distribution, exchange, mortgage, pledge, hypothecation or other
disposition of any Securities or any interest therein (including a transfer
of the voting power of such Securities by proxy, voting agreement or
otherwise).
"TRIGGERING EVENT" means the date on which AIP is entitled to
receive the Cash Compensation Amount (as defined in the Offer Agreement).
"VOTING SECURITIES" means any Securities entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors.
1.2 OTHER DEFINITIONAL PROVISIONS; INTERPRETATION
The words "hereof","herein", and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement,
and Section, Subsection, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(b) The headings in this Agreement are included for convenience of reference
only and shall not limit or otherwise affect the meaning orinterpretation
of this Agreement.
(c) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Stockholders that:
(a) it is a corporation duly incorporated, organized, validly
existing and in good standing under the laws of Canada, it has
full power and authority to execute, deliver and performthis
Agreement and to consummate the transactions contemplated hereby,
and the execution, delivery and performance by it of this Agreement
and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate and stockholder action;
(b) this Agreement has been duly and validly executed and delivered by
the Company and constitutes a legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of equity; and
(c) the execution, delivery and performance by the Company of this
Agreement and the performance by the Company of its obligations
hereunder will not, with or without the giving of notice or lapse
of time, or both (i) violate any provision of law, statute, rule
or regulation to which the Company is subject, (ii) violate any
order, judgment or decree applicable to the Company or (iii)
conflict with, or result in a breach or default under, any term
or condition of the Company's articles of incorporation or
by-laws or any agreement or instrument to which the Company is
a party or by which it is bound.
2.2 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder
(as to itself only) represents and warrants to the Company and the
other Stockholder that:
(a) this Agreement has been duly and validly executed and delivered
by such Stockholder and this Agreement constitutes a legal and binding
obligation of such Stockholder, enforceable against such Stockholder
in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and
to general principles of equity; and
(b) the execution, delivery and performance by such Stockholder of this
Agreement and the performance by such Stockholder of its obligations
hereunder will not, with or without the giving of notice or lapse of
time, or both (i) violate any provision of law, statute, rule or
regulation to which such Stockholder is subject, (ii) violate any
order, judgment or decree applicable to such Stockholder, or (iii)
conflict with, or result in a breach or default under, any term or
condition of any agreement or other instrument to which such
Stockholder is a party or by which such Stockholder is bound.
2.3 REPRESENTATIONS AND WARRANTIES OF LGH AND LGL.
(a) LGH represents and warrants to AIP that:
(i) LGH is the legal and beneficial owner of and has good title to
3,140,000 Multiple Voting Shares, free and clear of any Liens
(other than Liens incurred in connection with the Loan Purchase
Agreement, the Coattail Agreement and the Clairvest Loan
Agreement); and
(ii) no event has occurred prior to the date hereof (or, as a result
of actions taken prior to the date hereof, is required to occur) that
would, when given effect, either by itself or in conjunction with
the transactions contemplated by the Offer Agreement, cause a
Change of Control.
(b) LGL represents and warrants to AIP that:
(i) LGL is the legal and beneficial owner of all of the issued and
outstanding capital stock of LGH;
(ii) no event has occurred prior to the date hereof (or, as a result
of actions taken prior to the date hereof, is required to occur)
that would, when given effect, either by itself or in conjunction
with the transactions contemplated by the Offer Agreement,
cause a Change of Control; and
(iii) the execution, delivery and performance by LGL of this Agreement
and the performance of its obligations hereunder will not,
with or without the giving of notice or lapse of time, or
both (A) violate any provision of law, statute, rule or
regulation to which LGL is subject, (B) violate any order,
judgment or decree applicable to LGL or (C) conflict with,
or result in a breach or default under, any term or
condition of any agreement or other instrument to which LGL
is a party or by which it is bound; and
(iv) this Agreement has been duly and validly executed and
delivered by LGL, and this Agreement constitutes a legal
and binding obligation of LGL, enforceable against LGL in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general principles of equity; and
(c) the Trust represents and warrants to AIP that:
(i) the Trust is the legal and beneficial owner of
all of the issued and outstanding capital stock of LGL;
(ii) the "Xxxxxxx Family" (as defined in section 3.3.3(a) of the
Company's restated articles of incorporation (the "ARTICLES") is
the beneficial owner (as defined in section 3.3.3(b) of the
Articles) of Multiple Voting Shares and Subordinate Voting Shares
having attached thereto 50% or more of the votes attaching to all
of the Multiple Voting Shares and Subordinate Voting Shares
outstanding as of the date hereof;
(iii) no event has occurred prior to the date hereof (or, as a result
of actions taken prior to the date hereof, is required to occur)
that would, when given effect,either by itself or in conjunction
with the transactions contemplated by the Offer Agreement,
cause a Change of Control; and
(iv) the execution, delivery and performance by
the Trust of this Agreement and the performance of its
obligations hereunder will not, with or without the giving
of notice or lapse of time, or both (A) violate any
provision of law, statute, rule or regulation to which the
Trust is subject, (B) violate any order, judgment or decree
applicable to the Trust or (C) conflict with, or result in a
breach or default under, any term or condition of any
agreement or other instrument to which the Trust is a party
or by which it is bound;
(v) this Agreement has been duly and validly
executed and delivered by the Trust, and this
Agreement constitutes a legal and binding obligation of the
Trust, enforceable against the Trust in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors'
rights and to general principles of equity.
SECTION 3. CORPORATE GOVERNANCE.
3.1 BOARD OF DIRECTORS>. (a) Subject to Sections 3.1(b) and 3.1(e),
each Stockholder hereby agrees to vote all of the Voting Securities
owned or held of record by such Stockholder and to take all other
necessary stockholder action so as to elect and to continue in office
a Board of Directors and board of directors of each of the
Subsidiaries of the Company (to the extent permitted by applicable local
law) consisting of five members, of which (i) three (3) members shall be
qualified designees of LGH and (ii) two (2) members shall be qualified
designees of AIP. LGH agrees to use its best efforts to nominate, remove,
and replace its designees to the Board of Directors so that its designees,
consistent with their fiduciary duties, are directors who effectively and
efficiently manage the operations of the Company.
(b) Prior to the Closing Date, the Company shall deliver to AIP (i) the
resignations provided for in Section 3.1(i) of the Lock-up Agreement and
the resignations of Xxxx Xxxxxxxx, Xxxxxxx X. Xxxx and Xxxxx
Xxxxxxxxxxx (the "RESIGNATIONS") and (ii) unanimous resolutions (the
"RESOLUTIONS") of the Board of Directors appointing Xxxxx Xxxxxx and Xxxxxx
Pel as designees of LGH and Xxx X. Xxxxxx and Xxxxx Xxxxxx as designees of
AIP; PROVIDED, HOWEVER, that the Resignations and Resolutions shall only be
effective as of the Closing Date. In addition, the Company shall cause one
of its Subsidiaries to execute the Management Services Agreement on the
Closing Date.
(c) Subject to Section 3.1(e), if AIP or LGH shall notify the
other Stockholders of its desire to remove, with or without cause, any
director of the Company previously designated by it, each Stockholder shall
vote all of the Voting Securities owned or held of record by such
Stockholder and to take all other necessary stockholder action so as to
cause the removal of such director.
(d) Subject to Section 3.1(e), if any director designated by
AIP or LGH ceases to serve on the Board of Directors (whether by reason of
death, resignation, removal or otherwise), the Stockholder who designated
such director shall be entitled to designate a successor director qualified
to fill the vacancy created thereby. Each Stockholder agrees to vote all
of the Voting Securities owned or held of record by such Stockholder and to
take all such other necessary stockholder action so as to cause such
designee to be elected or appointed as a director.
(e) Upon the occurrence and during the continuance of a
Default, AIP may, by written notice given to LGH, require LGH to remove any
one of its designees from the Board of Directors as AIP directs and elect
any qualified person that AIP designates as a replacement director to serve
as AIP's designee for the continuation of such Default and LGH shall vote
all of the Voting Securities owned or held of record by it and shall take
all other necessary stockholder action so as to cause the removal of its
designee from, and the election of AIP's designee to, the Board of
Directors in such circumstance.
(f) The Board of Directors shall meet (i) at any time requested
in writing by Stockholders holding a majority of the Subordinate Voting
Shares then outstanding (provided that such notice is given at least three
business days prior to the date of the meeting proposed in such notice),
and (ii) in any event not less frequently than quarterly.
(g) The consent of at least one of the directors designated by
AIP shall be required for the Board of Directors to take any action
regarding:
(i) the approval or rejection of the annual budget or business plan of
the Company and its Subsidiaries;
(ii) the hiring, promotion, demotion, retention or termination of any
officer or senior manager of the Company or any of its Subsidiaries; and
(iii) amendments to the Company's by-laws.
(h) No individual who is an officer, director, partner or the
holder of 5% or more of the voting equity of any competitor of the Company
or any of its Subsidiaries shall serve as a director unless the other
Stockholder consent thereto.
3.2 BOARD COMMITTEES.. (a) Subject to the general oversight and authority
of the full Board of Directors, the Board
of Directors may establish, empower and maintain such Board committees as
the Board of Directors deems necessary or desirable, and the Board of
Directors shall establish and maintain a compensation committee and an
audit committee. AIP and LGH shall be entitled to representation on each
of the committees of the Board of Directors proportionate to their
representation on the Board of Directors; PROVIDED that AIP shall be
entitled to designate a majority of the members of the compensation
committee and audit committee.
(b) No action by any committee of the Board of Directors shall
be valid unless taken at a meeting for which three business days' prior
notice has been duly given or waived by the members of such committee.
Such notice shall include a brief description of the general nature of the
business to be transacted at the meeting. Any committee member unable to
participate in person at any meeting shall be given the opportunity to
participate by telephone. Each of the committees established by the Board
of Directors pursuant to this Section 3.2 shall establish such other rules
and procedures for its operation and governance as it shall see fit and may
seek such consultation and advice as to matters within its purview as it
shall require.
3.3 FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Company shall deliver to AIP:
(a) as soon as available but in any event within twenty-one days
after the end of each monthly accounting period in each fiscal year,
unaudited consolidating and consolidated statements of income and cash
flows of the Company and its Subsidiaries for such monthly period and for
the period from the beginning of the fiscal year to the end of such month,
and unaudited consolidating and consolidated balance sheets of the Company
and its Subsidiaries as of the end of such monthly period, setting forth in
each case comparisons to the Company's annual budget and to the
corresponding period in the preceding fiscal year, and all such statements
shall be prepared in accordance with GAAP, consistently applied, subject to
the absence of footnote disclosures and to normal year-end adjustments and
shall be certified by the Company's chief financial officer;
(b) within sixty days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the
end of such fiscal year, setting forth in each case comparisons to the
Company's annual budget and to the preceding fiscal year, all prepared in
accordance with GAAP, consistently applied, and accompanied by with respect
to the consolidated portions of such statements, an opinion of an
independent accounting firm of recognized national standing that is
unqualified with respect to the scope of such firm's examination and the
Company's status as a going concern;
(c) prior to the beginning of each fiscal year, an annual budget
prepared on a monthly basis for the Company and its Subsidiaries for such
fiscal year (displaying anticipated statements of income and cash flows and
balance sheets), and promptly upon preparation thereof any other
significant forecasts prepared by the Company and any revisions of such
annual or other forecasts;
(d) promptly (but in any event within five business days) after
the discovery or receipt of notice of any default under any material
agreement to which it or any of its Subsidiaries is a party or any other
material adverse change, event or circumstance affecting the Company or any
Subsidiary (including, without limitation, the filing of any material
litigation against the Company or any Subsidiary or the existence of any
dispute with any Person which involves a reasonable likelihood of such
litigation being commenced), an officer's certificate specifying the nature
and period of existence thereof and what actions the Company and its
Subsidiaries have taken and propose to take with respect thereto; and
(e) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Person
entitled to receive information under this Section 3.3 may reasonably
request.
3.4 AFFIRMATIVE COVENANTS. (a) The Company shall
cause Consoltex (USA) Inc. to enter into the Management Services Agreement
in the form attached hereto as Exhibit 1.
(b)The Company shall, and cause each Subsidiary to:(a) at all times cause to
be done all things necessary to maintain, preserve and renew its corporate
existence and all material licenses, authorizations and permits necessary
to the conduct of its businesses; (b) maintain and keep its material
properties in good repair, working order and condition, and from time to
time make all necessary or desirable repairs, renewals and replacements, so
that its businesses may be properly and advantageously conducted in all
material respects at all times; (c) pay and discharge when payable all
taxes, assessments and governmental charges imposed upon its properties or
upon the income or profits therefrom (in each case before the same becomes
delinquent and before penalties accrue thereon) and all claims for labor,
materials or supplies which if unpaid would by law become a Lien upon any
of its property unless and to the extent that the same are being contested
in good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with generally accepted accounting principles,
consistently applied) have been established on its books with respect
thereto; (d) comply with all applicable laws, rules and regulations of all
governmental authorities; (e) apply for and continue in force with good and
responsible insurance companies adequate insurance covering risks of such
types and in such amounts as are customary for corporations of similar size
engaged in similar lines of business; and (f) maintain proper books of
record and account which present fairly in all material respects its
financial condition and results of operations and make provisions on its
financial statements for all such proper reserves as in each case are
required in accordance with generally accepted accounting principles,
consistently applied.
3.5 NEGATIVE COVENANTS. Except as otherwise
required by the terms of this Agreement, without the prior written consent
of the Required Holders, the Company shall not, and shall not cause, permit
or suffer any of its Subsidiaries to, directly or indirectly, do any of the
following:
(a) authorize, issue or sell any capital stock or equity
securities or any securities convertible into or exercisable or
exchangeable for any class or series of capital stock, of the Company or
any Subsidiary of the Company (other than the issuance of shares of capital
stock to the Company or any Subsidiary of the Company by any Subsidiary of
the Company or the issuance of shares of capital stock pursuant to the
exercise of the Company Option or other options outstanding as of the date
hereof);
(b) declare or pay dividends or make any distributions on, or
redeem or otherwise acquire any shares of any class or series of capital
stock or equity securities of the Company (other than pursuant to the
Company Option);
(c) effect a reclassification, combination, split, or
subdivision of any of the capital stock of the Company or any Subsidiary of
the Company;
(d) amend the articles of incorporation or bylaws (or equivalent
governing documents) of the Company or any Subsidiary of the Company,
except as provided in this Agreement;
(e) adopt any plan or proposal for a complete or partial
liquidation or dissolution of the Company or any Subsidiary of the Company
or any reorganization or recapitalization of the Company or commence any
case, proceeding or action seeking relief under any existing or future laws
relating to bankruptcy, insolvency, conservatorship or relief of debtors
with respect to the Company or any Subsidiary of the Company;
(f) engage in, or enter into, any lines of business other than
the lines of business which the Company and its Subsidiaries are presently
engaged in;
(g) change the fiscal year of the Company or make any material
change in accounting policies or procedures of the Company or any
Subsidiary of the Company unless required under generally accepted
accounting principles in effect in the country in which the Company or any
of its Subsidiaries is located or change the fiscal year of the Company;
(h) create, incur, assume or suffer to exist any Indebtedness (other
than Permitted Indebtedness);
(i) create or suffer to exist any Liens (other than Permitted
Liens);
(j) adopt any stock option, restricted stock or other
equity-based compensation plan or increase any compensation or benefits
(including any salary, bonuses and other forms of current or deferred
compensation) of any director, officer or senior manager (except as
required by agreements in force as of the date of this Agreement);
(k) enter into, amend, modify or supplement or permit any
Subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment or arrangement with an Affiliate (other than any
Subsidiary of the Company and other than as contemplated by the Tender
Offer and the Transaction Agreements) or any entity in which an Affiliate
has an interest as a director, officer, employee or greater than 5%
stockholder or interest through a family relationship;
(l) acquire any assets or business, other than acquisitions of
inventory inputs, fixed assets and other similar acquisitions in the
ordinary course of business;
(m) enter into any merger, consolidation, business combination,
joint venture or other material corporate transaction;
(n) establish or acquire any Subsidiaries that are not
wholly-owned by the Company or any Subsidiaries;
(o) make or commit to make (whether in one transaction or a
series of transactions) Capital Expenditures in excess of amounts set forth
in the annual budget approved by the Board of Directors;
(p) sell, assign, transfer, convey or otherwise dispose of any
assets, securities or businesses (other than sales of inventory or other
dispositions of assets in the ordinary course of business);
(q) amend or modify any provision of the Credit Agreement, the
Indenture or any contract disclosed on Schedule 6(j) of the Company
Disclosure Letter (as defined in the Offer Agreement);
(r) repay, repurchase or redeem the notes issued under the
Indenture; and
(s) enter into any agreement, commitment or
arrangement (other than the Credit Agreement or the Indenture) that would
limit the ability of the Company or any of its Subsidiaries to make payment
pursuant to the Management Services Agreement.
3.6 ARTICLES OF INCORPORATION AND BY-LAWS.
(a) Immediately following the Closing Date, the Stockholders
shall take or cause to be taken all necessary corporate and stockholder
action to cause section 3.3.3 of the Company's Restated Articles of
Incorporation to be amended to read as follows:
"On the date as the Xxxxxxx Family (as hereinafter defined) cease to be the
beneficial owners in the aggregate of Multiple Voting Shares and
Subordinate Voting Shares having attached thereto 50% or more of the votes
attaching to all Multiple Voting Shares and Subordinate Voting Shares then
outstanding, the Multiple Voting Shares will automatically be converted
into a like number of Subordinate Voting Shares."
(b) The Company and the Stockholders shall take or cause to be
taken all necessary corporate and stockholder action to ensure at all times
that the Company's Articles of Incorporation and By-Laws are not, at any
time, inconsistent with the provisions of this Agreement and contain such
provisions as are necessary to give effect to the provisions contained in
this Section 3, including, without limitation, taking any action to (i)
obviate the requirement that the Board of Directors be comprised of a
majority of Canadian residents (ii) ensure that the Multiple Voting Shares
represent 51% of the voting power of the Voting Securities and (iii)
provide the Multiple Voting Shares with a liquidation preference of $4.3
million.
SECTION 4. TRANSFERS RESTRICTIONS; OPTION ON LGH SECURITIES.
4.1 TRANSFER, CONVERSION OR VOTING OF MULTIPLE VOTING SHARES.
(a) LGH, LGL and the Trust each hereby agree, subject to the
rights of Clairvest Group Inc. under the Clairvest Loan Agreement, that
each of them will not, without the prior written consent of AIP, which AIP
may grant or withhold in its sole discretion, except as required by the
terms of this Agreement, (i) directly or indirectly Transfer, or permit the
Transfer of, as the case may be, any Securities, (ii) except as required
hereunder and by the Articles of Incorporation of the Company, convert, or
permit the conversion of, as the case may be, any of the Multiple Voting
Shares LGH owns into Subordinate Voting Shares or (iii) until AIP has taken
up Subordinate Voting Shares under the Offer (as defined in the Offer
Agreement) or withdrawn the Offer, exercise the voting rights of the
Multiple Voting Shares in respect of any amalgamation, merger, sale of the
Company's assets, take-over bid, plan of arrangement, reorganization,
recapitalization, shareholder rights plan, liquidation or winding up of, or
reverse take-over or other business combination or similar transactions
involving the Company or any of its Subsidiaries.
(b) LGH, LGL and the Trust each agree that immediately prior to the
Option Closing (as defined below) LGH, LGL and the Trust each will, at the
written request of AIP, convert or cause LGH to convert, as the case may
be, all of the Multiple Voting Shares LGH holds at such time into
Subordinate Voting Shares.
4.2 EFFECT OF VOID TRANSFERS OR CONVERSIONS. In the
event of any purported Transfer of any Securities, or purported conversion
of Multiple Voting Shares into Subordinate Voting Shares, in violation of
the provisions of this Agreement, such purported Transfer or conversion
shall be void and of no effect and the Company shall not give effect to
such Transfer or conversion.
4.3 LEGEND ON SECURITIES. Each certificate representing Securities
issued to any Stockholder shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT AMONG CONSOLTEX GROUP INC. (THE "COMPANY") AND
CERTAIN OTHER PARTIES. A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION
OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
STOCKHOLDERS AGREEMENT. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE
OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF
SUCH STOCKHOLDERS AGREEMENT, INCLUDING RESTRICTIONS RELATING TO THE
TRANSFERABILITY OF, AND THE EXERCISE OF ANY VOTING RIGHTS GRANTED BY,
THE SECURITIES."
4.4 TRANSFERS OF INTERESTS IN LGH. LGL and the Trust each agree,
subject to the rights of Clairvest Group Inc. under the Clairvest Loan
Agreement and except for a transfer pursuant to the provisions
of this Agreement, that without the prior written consent of AIP,
which AIP may grant or withhold in its sole discretion, neither LGL
nor the Trust shall Transfer, or permit the Transfer of, as the case may
be, any interest in or any asset of LGH, or except as required hereunder,
take any action, or cause LGL or the Trust to take any action, that would,
by itself or in conjunction with the transactions contemplated by the Offer
Agreement, cause a Change of Control.
4.5 OPTION TO PURCHASE LGH SECURITIES.
(a) LGH hereby grants to AIP an irrevocable option (the
"OPTION") to purchase during the period beginning on the Option
Commencement Date and ending on October 1, 2003 (the "EXERCISE PERIOD"),
subject to the terms of this Agreement, all, but not less than all, of the
Option Shares at a price per share in cash equal to C$5.60 (or such greater
amount offered for the Subordinate Voting Shares by AIP), increasing in an
amount equal to 10.5% per annum (computed on the basis of a 360-day year
and the actual number of days elapsed from the date hereof to the Option
Closing Date) (the "OPTION PRICE"), subject to adjustment as provided
below; provided that, prior to the Closing Date, AIP can only exercise the
Option in connection with the consummation of an Acquisition Proposal (as
defined in the Offer Agreement) that includes the purchase of the Clairvest
Loan Agreement on the terms set forth therein and the purchase by the
Person making such Acquisition Proposal of the Subordinate Voting Shares
held by Clairvest Group Inc. and its direct or indirect subsidiaries. In
no event will the Option be exercisable unless at the Option Closing AIP
purchases the Subordinate Voting Shares of Clairvest Group Inc. and its
subsidiaries and purchases the Clairvest Loan Agreement pursuant to the
terms of the Loan Purchase Agreement.
(b) Any time during the Exercise Period, AIP may exercise the Option
by delivering an irrevocable written notice (the date of which is referred
to in this Agreement as the "NOTICE DATE"), (i) stating that AIP will
acquire the Option Shares from LGH at the Option Price and subject to the
other terms and conditions set forth in this Agreement and (ii) specifying
a place and date (the "OPTION CLOSING DATE") not earlier than three
business days nor later than 20 business days from the Notice Date for the
consummation of such purchase (the "OPTION CLOSING"); PROVIDED that the
Option Closing Date may be deferred at the election of AIP so that AIP may
obtain any regulatory approvals necessary for its acquisition of the Option
Shares.
(c) At the Option Closing, (i) AIP shall pay to LGH the
aggregate purchase price for the Option Shares purchased pursuant to the
exercise of the Option LESS the Set-off Amount in immediately available
funds by a wire transfer to a bank account designated by LGH, and (ii) LGH
shall sell, assign and transfer the Option Shares to AIP free of all
claims, liens, encumbrances, security interests and adverse claims and
shall deliver to AIP, if not previously delivered, a certificate or
certificates representing the Option Shares purchased by AIP endorsed in
blank or accompanied by stock powers executed in blank with signature
guarantees, all in form and substance satisfactory to AIP.
(d) If the Company at any time after the date of this Agreement
subdivides (by any stock split, stock dividend, recapitalization or
otherwise) its outstanding Multiple Voting Shares into a greater number of
shares, the Option Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of Option Shares obtainable
upon exercise of the Option shall be proportionately increased. If the
Company at any time after the date of this Agreement combines (by reverse
stock split or otherwise) its outstanding shares of Multiple Voting Shares
into a smaller number of shares, the Option Price in effect immediately
prior to such combination shall be proportionately increased and the number
of Option Shares obtainable upon exercise of the Option shall be
proportionately decreased. Prior to the consummation of any Organic Change
after the date of this Agreement, the Company shall make appropriate
provision (in form and substance satisfactory to AIP) to insure that AIP
shall thereafter have the right to acquire and receive, in lieu of or
addition to (as the case may be) the Option Shares immediately theretofore
acquirable and receivable upon the exercise of the Option, such shares of
stock, securities or assets as may be issued or payable with respect to or
in exchange for the number of Option Shares immediately theretofore
acquirable and receivable upon exercise of the Option had such Organic
Change not taken place. In any such case, the Company shall make
appropriate provision (in form and substance satisfactory to AIP) with
respect to such holders' rights and interests to insure that the provisions
of this Section 4.5(d) shall thereafter be applicable to the Option
(including, in the case of any such consolidation, merger or sale in which
the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Option Price to the value for the Securities
reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of Option Shares
acquirable and receivable upon exercise of the Option, if the value so
reflected is less than the Option Price in effect immediately prior to such
consolidation, merger or sale).
(e) Any time after the Closing Date, upon (i) the consummation
of a Company Sale, (ii) a Change of Control or (iii) the repayment,
repurchase or redemption of the notes issued under the Indenture, AIP
agrees to exercise the Option immediately prior to the consummation of the
transactions described in clause (i) and (iii) of this Section 4.5(e) and
immediately upon a Change of Control.
SECTION 5. MISCELLANEOUS
5.1 EFFECTIVENESS AND TERMINATION. Except for
Sections 2, 3.1(b), 4.1(a) and 4.4, all of which shall come into effect and
be effective from the date hereof and Section 4.5 which shall come into
effect on the Option Commencement Date, all rights and obligations under
this Agreement shall come into effect on the Closing Date. If the Option
Commencement Date has not occurred and there is no Closing Date within 10
days after Expiry Time (as defined in the Offer Agreement), then this
Agreement shall terminate on the tenth day after the Expiry Time. If the
Option Commencement Date occurs prior to the Expiry Time and there is no
Closing Date prior to the Option Expiry Date, then this Agreement shall
terminate on the Option Expiry Date. If a Closing Date occurs, this
Agreement shall terminate on the first to occur of (a) October 1, 2003 and
(b) the date on which AIP exercises its rights to purchase the Option
Shares pursuant to Section 4.5. No termination shall relieve any party
hereto from (i) liability for any breach of this Agreement and (ii) any
obligation arising pursuant to Section 4.5 of this Agreement.
5.2 ADDITIONAL SECURITIES SUBJECT TO AGREEMENT. Each
Stockholder agrees that any other Securities which it shall hereafter
acquire by means of a stock split, stock dividend, distribution, exercise
of stock options, or otherwise shall be subject to the provisions of this
Agreement to the same extent as if held on the date hereof.
5.3 INJUNCTIVE RELIEF. The Stockholders acknowledge
and agree that a violation of any of the terms of this Agreement will cause
the Stockholders irreparable injury for which adequate remedy at law is not
available. Accordingly, it is agreed that each Stockholder shall be
entitled to an injunction, restraining order or other equitable relief to
prevent breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in addition to any
other remedy to which they may be entitled at law or in equity.
5.4 OTHER AGREEMENTS. During the term of this
Agreement, none of the Company or any of the Stockholders shall enter into
any stockholder agreement or other arrangement of any kind with any Person
with respect to any Securities which is inconsistent with the provisions of
this Agreement or which may impair its ability to comply with this
Agreement.
5.5 AMENDMENTS. This Agreement may be amended only
by a written instrument signed by the Company and each of the Stockholders.
5.6 SUCCESSORS. The provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors, each of which shall agree, in a writing in
form and substance satisfactory to the Company and the Stockholders, to
become a party hereto and be bound to the same extent as its transferor
hereby.
5.7 NOTICES. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or
when delivered by a recognized courier or, in the case of telecopy notice,
when transmitted (provided that an appropriate confirmation is received),
addressed as follows to the parties hereto, or to such other address as may
be hereafter notified by the respective parties hereto:
if to AIP, to:
AIP/CGI NB Acquisition Corp.
c/o American Industrial Partners
Xxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx X. Xxxxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
12{th} Floor
Washington, D.C. 20005
Attention: Xxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
if to the Company, to:
Consoltex Group Inc.
c/o Consoltex (USA) Inc.
1040 Avenue of the Americas
6{th} Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx
Telecopy: (000) 000-0000
with a copy to:
Osler, Xxxxxx & Harcourt
000 Xxxx Xxxxxx, 00X
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxx
Telecopy: (000) 000-0000
and, prior to the Closing Date, with a copy to:
Xxxxxxx Xxxxxxxx & Xxxxxxxx
0000 XxXxxx Xxxxxxx
00{xx} Xxxxx
Xxxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxxx Xxxx
Telecopy: (000) 000-0000
5.8 INTEGRATION. This Agreement, the Offer Agreement
and the documents referred to herein or delivered pursuant hereto contain
the entire understanding of the parties with respect to the subject matter
hereof and thereof. There are no agreements, representations, warranties,
covenants or undertakings with respect to the subject matter hereof and
thereof other than those expressly set forth herein and therein. This
Agreement and the Offer Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
5.9 SEVERABILITY. If one or more of the provisions,
paragraphs, words, clauses, phrases or sentences contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any
way impaired, it being intended that all rights, powers and privileges of
the parties hereto shall be enforceable to the fullest extent permitted by
law.
5.10 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, and by different parties on separate counterparts
each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
5.11 GOVERNING LAW. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the Province
of Ontario and the laws of Canada.
5.12 JURISDICTION. Any action to enforce, which
arises out of or in any way relates to, any of the provisions of this
Agreement may be brought and prosecuted in such court or courts located
within the State of New York as provided by law; and the parties consent to
the jurisdiction of such court or courts located within the State of New
York and to service of process by registered mail, return receipt
requested, or by any other manner provided by New York law.
[END OF PAGE]
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the
date first written above.
AIP/CGI NB ACQUISITION CORP.
By:____________________________________
Name: Xxx X. Xxxxxx
Title: President
CONSOLTEX GROUP INC.
By:____________________________________
Name:
Title:
LES GANTIERS HOLDING B.V.
By:____________________________________
Name:
Title:
LES GANTIERS LIMITED
By: ____________________________________
Name:
Title:
____________________________________
Witnessed by:
____________________________________
Xxxxxxx Xxxxx Cubitt Sowden, as Trustee
for The Big Sky Trust
