<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1998
Commission File No. 1-11126
DYERSBURG CORPORATION
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1363247
(State or other jurisdiction of (I.R.S employer identification no.)
incorporation or organization)
1315 PHILLIPS ST., DYERSBURG, TENNESSEE 38024
(Address of principal executive offices) (Zip Code)
(901) 285-2323
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, Par Value $.01/Share New York Stock Exchange
(Title of each class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X No
--- ---
Indicate the number of shares outstanding of each issuer's classes of common
stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Title of each Number of shares outstanding as of July 31, 1998
- --------------------------- ------------------------------------------------
<S> <C>
Common Stock $.01 par value 13,333,318
</TABLE>
<PAGE> 2
INDEX TO FORM 10-Q
DYERSBURG CORPORATION
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION PAGE NUMBER
- ----------------------------- -----------
<S> <C>
ITEM 1--FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Condensed Balance Sheets at
July 4, 1998, and October 4, 1997 ............................................... 3
Consolidated Condensed Statements of Income
for the Three Months Ended July 4, 1998,
and July 5, 1997; Nine Months Ended
July 4, 1998, and July 5, 1997 .................................................. 4
Consolidated Condensed Statements of Cash
Flows for the Nine Months Ended
July 4, 1998, and July 5, 1997 .................................................. 5
Notes to Consolidated Condensed Financial
Statements ...................................................................... 6
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..................................... 9
<CAPTION>
PART II--OTHER INFORMATION
- --------------------------
<S> <C>
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS ....................................... 11
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K ...................................................... 11
SIGNATURES .................................................................................... 11
</TABLE>
2
<PAGE> 3
DYERSBURG CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
July 4, October 4,
1998 1997
-------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash ...................................................... $ 262 $ 948
Accounts receivable, net of allowance for doubtful accounts
of $2,675 at July 4, 1998, and $2,075 at October 4, 1997 76,929 68,290
Inventories ............................................... 57,356 52,222
Prepaid expenses and other ................................ 13,502 6,597
-------- --------
Total current assets ................................. 148,049 128,057
Property, plant and equipment, net ........................ 137,669 152,523
Goodwill, net ............................................. 95,759 78,277
Deferred debt costs, net .................................. 6,188 6,674
Other assets .............................................. 182 1,283
-------- --------
$387,847 $366,814
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable .................................... $ 13,402 $ 23,721
Accrued expenses .......................................... 16,787 14,758
Income taxes payable ...................................... 1,015 1,564
Current portion of revolving credit facility .............. 10,000 --
Current portion of long-term obligations .................. 7,500 7,500
-------- --------
Total current liabilities ............................ 48,704 47,543
Revolving credit facility ................................. 50,767 28,050
Other long-term obligations ............................... 170,055 175,400
Deferred income taxes ..................................... 7,591 8,459
Other liabilities ......................................... 3,952 6,258
Shareholders' equity:
Preferred stock, authorized 5,000,000 shares; none issued
Common stock, $.01 par value, authorized 40,000,000
shares; issued and outstanding shares - 13,333,318 at
July 4, 1998, and 13,280,033 at October 4, 1997 ......... 133 133
Additional paid-in capital ................................ 42,710 41,985
Retained earnings ......................................... 63,935 58,986
-------- --------
Total shareholders' equity .................................. 106,778 101,104
-------- --------
$387,847 $366,814
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE> 4
DYERSBURG CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
(in thousands except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- -------------------------
July 4, July 5, July 4, July 5,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales .......................... $ 113,533 $ 68,383 $ 315,422 $ 158,214
Costs and expenses:
Cost of sales ................... 92,151 50,419 259,514 120,677
Selling, general, and
administrative ................ 8,737 7,716 28,446 19,938
Restructuring charge ............ 1,300 1,300
Interest and amortization of debt
costs ......................... 5,955 1,516 16,951 4,465
----------- ----------- ----------- -----------
Total costs and expenses ........... 108,143 59,651 306,211 145,080
----------- ----------- ----------- -----------
Income before income taxes ......... 5,390 8,732 9,211 13,134
Income taxes ....................... 2,367 3,449 3,862 5,188
----------- ----------- ----------- -----------
Net income ......................... $ 3,023 $ 5,283 $ 5,349 $ 7,946
=========== =========== =========== ===========
Weighted average shares
outstanding:
Basic ......................... 13,332,840 13,137,999 13,322,990 13,135,333
=========== =========== =========== ===========
Diluted ....................... 13,371,247 13,238,160 13,364,251 13,204,263
=========== =========== =========== ===========
Earnings per share:
Basic ......................... $ 0.23 $ 0.40 $ 0.40 $ 0.60
=========== =========== =========== ===========
Diluted ....................... $ 0.23 $ 0.40 $ 0.40 $ 0.60
=========== =========== =========== ===========
Dividends per share ................ $ 0.01 $ 0.01 $ 0.03 $ 0.03
=========== =========== =========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
DYERSBURG CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------
July 4, July 5,
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income ............................................... $ 5,349 $ 7,946
Adjustments to reconcile to net cash (used in)
provided by operating activities:
Depreciation and amortization ........................ 15,543 9,228
Increase in accounts receivable, net ................. (8,639) (6,096)
Increase in inventory ................................ (5,134) (7,208)
(Decrease) increase in trade accounts payable ........ (9,453) 3,877
Other-net ............................................ (9,015) 4,803
-------- --------
Net cash (used in) provided by operating activities (11,349) 12,550
INVESTING ACTIVITIES
Capital expenditures ..................................... (15,378) (5,685)
Other-net ................................................ (1,219) 84
-------- --------
Net cash used in investing activities .............. (16,597) (5,601)
FINANCING ACTIVITIES
Acquisition of common stock for treasury ................. -- (160)
Net borrowings (repayments) on long-term obligations ..... 26,936 (5,757)
Dividends paid ........................................... (399) (393)
Issuance of common stock ................................. 723 55
-------- --------
Net cash provided by (used in) financing activities 27,260 (6,255)
-------- --------
Net (decrease) increase in cash .................... (686) 694
Cash at beginning of period ................................. 948 983
-------- --------
Cash at end of period ....................................... $ 262 $ 1,677
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
DYERSBURG CORPORATION
July 4, 1998
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
include the accounts of Dyersburg Corporation ("Company") and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated. The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. Financial information as of
October 4, 1997, has been derived from the audited financial statements of the
Company, but does not include all disclosures required by generally accepted
accounting principles. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial information for the periods indicated have been included. Due to
seasonal patterns, the results for interim periods are not necessarily
indicative of results to be expected for the year. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the fiscal year ended October 4,
1997.
NOTE B--BUSINESS COMBINATION
In August 1997, the Company acquired all the outstanding common stock
of AIH, Inc. from West Point Stevens, Inc. AIH, Inc., through its subsidiary,
Alamac Knit Fabrics, Inc. (collectively referred to as "Alamac") is a
manufacturer of knit fabrics sold primarily to domestic apparel producers. The
acquisition was accounted for using the purchase method of accounting. The
purchase price was approximately $128 million.
The operating results of Alamac are included in the Company's condensed
consolidated statements of income from August 27, 1997, the acquisition date.
The following unaudited pro forma results of operations for fiscal 1997 assume
the Alamac acquisition and related financing transactions occurred at the
beginning of the period presented. In connection with the acquisition of Alamac,
the Company recorded an extraordinary charge of $905,000, or $0.07 per share,
related to the early extinguishment of debt. The pro forma results of operations
do not purport to represent what the Company's results would have been had such
transactions in fact occurred at the beginning of the years presented or to
project the Company's results of operations in any future period.
6
<PAGE> 7
NOTE B - BUSINESS COMBINATION (continued)
<TABLE>
<CAPTION>
Nine Months
Ended
-----------
July 5,
1997
-----------
(in thousands,
except per share data)
<S> <C>
Pro forma
Net sales ................................................... $341,942
Income before extraordinary loss ............................ 7,862
Net income .................................................. 6,957
Earnings per share-basic and diluted:
Income before extraordinary loss ......................... $ 0.60
Net income ............................................... $ 0.53
</TABLE>
Included in third quarter earnings is a charge of $1.3 million, or
$0.06 per share after-tax, pertaining to restructuring charges associated with
the Alamac division. During fiscal 1998, Dyersburg also finalized its estimation
of the fair market value of certain Alamac fixed assets, resulting in a
reclassification of approximately $17 million in property, plant and equipment
as goodwill.
NOTE C--INVENTORIES
<TABLE>
<CAPTION>
July 4, October 4,
1998 1997
---------- ----------
(in thousands)
<S> <C> <C>
Raw materials ............................ $18,496 $18,243
Work in process .......................... 15,755 14,011
Finished goods ........................... 20,159 17,180
Supplies and other ....................... 2,946 2,788
------- -------
$57,356 $52,222
======= =======
</TABLE>
7
<PAGE> 8
NOTE D--EARNINGS PER SHARE
The Company has adopted the Financial Accounting Standards Board (FASB)
Statement No. 128, Earnings per Share, and accordingly, the prior period
presentation has been restated. The table below sets forth the computations of
basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- -------------------------
July 4, July 5, July 4, July 5,
1998 1997 1998 1997
----------- ----------- ----------- -----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C>
Numerator for basic and diluted
earnings per share--net income $ 3,023 $ 5,283 $ 5,349 $ 7,946
Denominator:
Denominator for basic earnings
per share--weighted average
shares ..................... 13,332,840 13,137,999 13,322,990 13,135,333
Effect of dilutive securities:
Employee Stock Options ..... 38,407 100,160 41,261 68,930
----------- ----------- ----------- -----------
Denominator for diluted
earnings per share--adjusted
weighted average shares ...... 13,371,247 13,238,160 13,364,251 13,204,263
=========== =========== =========== ===========
Basic earnings per
share ........................... $ 0.23 $ 0.40 $ 0.40 $ 0.60
=========== =========== =========== ===========
Diluted earnings per
share ........................... $ 0.23 $ 0.40 $ 0.40 $ 0.60
=========== =========== =========== ===========
</TABLE>
NOTE E--LONG-TERM OBLIGATIONS
In August 1997, the Company issued $125,000,000 principal amount of
9.75% Senior Subordinated Notes due September 1, 2007 (the "Subordinated
Notes"). The Subordinated Notes are unsecured senior subordinated obligations
and are subordinated in right of payment to the prior payment in full of all
senior indebtedness. The Subordinated Notes are guaranteed by all of the
Company's subsidiaries (the "Guarantors"). Separate financial statements of the
Guarantors are not included herein because: (a) the Company is a holding company
with no assets or operations other than its investments in its subsidiaries; (b)
the Guarantors are wholly-owned subsidiaries of the Company and have fully and
unconditionally guaranteed the Subordinated Notes on a joint and several basis;
(c) the Guarantors comprise all of the direct and indirect subsidiaries of the
Company; and (d) management believes that such information is not material to
investors.
8
<PAGE> 9
NOTE E--LONG-TERM OBLIGATIONS (continued)
During the second quarter of fiscal 1998, the Company entered into two
additional interest rate hedge agreements to reduce the impact of changes in
interest rates on the borrowings under the Credit Agreement. An interest rate
"collar" with a notional principal amount of $10,000,000 was entered into with a
cap of 7.00% and a floor of 5.00%, based on a floating rate of three-month
LIBOR. This Agreement terminates in February 2003. Under the "collar" agreement,
the Company agreed to make interest payments based on a floating rate of
three-month LIBOR if such rate falls below 5.00% and would receive interest
payments based on a floating rate of three-month LIBOR if such rate exceeds
7.00% during the life of the agreement.
The Company also entered into a $10,000,000 notional amount interest
rate swap agreement. Under the terms of the swap agreement, the Company agreed
to make interest payments based on a fixed rate of 5.85%, in exchange for
payments based on a floating rate of three-month LIBOR. The new swap agreement
terminates in March 2003.
The new interest rate hedge agreements supplement the existing two
interest rate swap agreements having a notional principal amount of $10,000,000
each. These existing agreements provide for the Company to make interest
payments based on a fixed rate of 7.06% and 6.17%, respectively, in exchange for
payments based on a floating rate of three-month LIBOR. The agreements terminate
in April 2002 and June 2002, respectively.
As a result of reduced earnings expectations, the Company has amended,
with the full support of its banking group, financial covenants associated with
its bank Credit Agreement, which includes its $44.4 million Term Loan and $110
million Revolving Credit Facility.
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Net sales for the quarter ended July 4, 1998, increased by 66% to
$113.5 million versus $68.4 million for the same quarter of the prior year. The
increase in net sales was due to the inclusion of Alamac sales in fiscal 1998.
Without Alamac sales, net sales decreased by 10%, or $7.0 million, from the
third quarter of fiscal 1997. Net sales for the nine months ended July 4, 1998,
were approximately double the same period of the prior year. Excluding Alamac,
net sales decreased by 5%. The decrease in sales excluding Alamac is a result of
increased imports and softness in the knit market. Gross margins for the quarter
and year-to-date declined to 18.8% and 17.7%, versus 26.3% and 23.7% for the
same periods in fiscal 1997, respectively. The decrease in gross margins
resulted from the inclusion of Alamac's sales in fiscal 1998, which have
historically experienced gross margins of 8 to 14%.
9
<PAGE> 10
Selling, general and administrative expenses increased 13% for the
third quarter and 43% year-to-date for fiscal 1998 compared to the same periods
in fiscal 1997 due to the inclusion of Alamac in fiscal 1998. As a percentage of
sales, these same expenses decreased to 7.7% and 9.0% for the third quarter and
year-to-date, respectively, for fiscal 1998, versus 11.3% and 12.6% for the same
periods in fiscal 1997. This decrease reflects the impact of Alamac's lower
selling, general and administrative expenses as a percent of sales.
Interest expense in the third quarter of fiscal 1998 of $6.0 million
and year-to-date of $17.0 million, was significantly higher than that of the
same periods of fiscal 1997 due to the additional debt issued in relation to the
Alamac acquisition. The effective tax rate for the third quarter was 43.9% and
year-to-date was 41.9% of fiscal 1998. The rates exceed the federal statutory
rate due to certain expense items not being deductible for tax purposes,
principally $1.4 million year-to-date from the amortization of goodwill.
Net income for the quarter ended July 4, 1998, was $3.0 million, or
$0.23 per share, versus $5.3 million, or $0.40 per share, for the same period in
fiscal 1997. For the nine months ended July 4, 1998, net income was $5.3
million, or $0.40 per share, versus $7.9 million, or $0.60 per share, for the
same period in fiscal 1997. Included in third quarter earnings is a charge of
$1.3 million, or $0.06 per share after-tax, pertaining to restructuring charges
associated with the Alamac division. Earnings per share are the same whether
calculated on a basic or diluted basis. The diluted weighted average number of
shares outstanding for the quarter and nine months ended July 4, 1998, was
approximately 13,371,000 and 13,364,000, respectively.
During the third quarter, Dyersburg completed a comprehensive review of
the Alamac division's product line, eliminating non-contributory product
programs and thereby reducing production. As a consequence of this output
reduction, Alamac shortened its labor shifts to five days per week from seven,
reducing its workforce. The Company incurred the above-mentioned restructuring
charge associated with this workforce reduction. Additionally, the Alamac
product review resulted in an inventory write-down of approximately $700,000,
which is included in the cost of goods sold. During fiscal 1998, Dyersburg also
finalized its estimation of the fair market value of certain Alamac fixed
assets, resulting in a reclassification of approximately $17 million in
property, plant and equipment as goodwill.
Liquidity and Capital Resources
Working capital increased to $99.3 million and the current ratio
increased to 3.0:1 at July 4, 1998, from $80.5 million and 2.7:1, respectively,
at October 4, 1997. The Company's long-term debt-to-capital ratio was 67.4% at
July 4, 1998, compared to 66.8% at October 4, 1997.
Net receivables of $76.9 million at July 4, 1998, were relatively
unchanged from their level at April 4, 1998, of $77.0 million. Inventories
decreased to $57.4 million at the end of the third quarter from $68.3 million at
the end of the second quarter of fiscal 1998 due to seasonally high sales and
lower production schedules.
10
<PAGE> 11
Capital expenditures for the nine months ended July 4, 1998, were $15.4
million versus $5.7 million for the same period in the prior year. Cash outlays
for capital spending are anticipated to approximate $21 million in fiscal 1998.
At July 4, 1998, the Company had $27.4 million of additional borrowings
available. The Company believes that cash flow from operations and the existing
revolving credit facility will be sufficient to meet operating needs and fund
the capital spending program.
As a result of reduced earnings expectations, the Company has amended,
with the full support of its banking group, financial covenants associated with
its bank Credit Agreement, which includes its $44.4 million Term Loan and $110
million Revolving Credit Facility.
As the year 2000 approaches, an issue impacting all companies has
emerged regarding how existing application software programs and operating
systems can accommodate this date value. The Company places significant reliance
on technology for many of its operational systems. A review of all systems has
been undertaken to ensure that they do not malfunction as a result of the year
2000. As a result of this process the Company expects to both replace some
systems and upgrade others. Management does not expect the financial impact of
this effort to be material to the consolidated financial statements.
Management's estimate of the ultimate cost and completion of necessary software
replacement or modification is based on numerous assumptions regarding future
events including continued availability of certain resources, third party
modification plans, and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those anticipated.
PART II--OTHER INFORMATION
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
There were no matters submitted to a vote of shareholders.
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(a)(1) Exhibits:
10 - Material Contracts
(a) Amendment No. 2 to Credit Agreement
(b) Stockholders' Agreement between Dyersburg Corporation and PT
Texmaco Jaya
(c) License Agreement between Dyersburg Corporation and PT Texmaco
Jaya
(d) Technical Services and License Agreement between Dyersburg
Corporation and PT Dyersburg Texmaco Fleece
27 Financial Data Schedule (for SEC use only)
(b) The Corporation did not file any reports on Form 8-K during the three
months ended July 4, 1998.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 17, 1998 /s/ William S. Shropshire, Jr.
----------------------------------------
William S. Shropshire, Jr.
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
12
<PAGE> 1
EXHIBIT 10(a)
AMENDMENT NO. 2 TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT (this "Amendment") dated as
of July__, 1998, by and among DYERSBURG CORPORATION, a Tennessee corporation
("Parent"), DYERSBURG FABRICS LIMITED PARTNERSHIP, I, a Tennessee limited
partnership ("DFLP"), UNITED KNITTING LIMITED PARTNERSHIP, I, a Tennessee
limited partnership (UKLP"), IQUE LIMITED PARTNERSHIP, I, a Tennessee limited
partnership ("IQLP"), and ALAMAC KNIT FABRICS, INC., a Delaware corporation
("Alamac"; Parent, DFLP, UKLP, IQLP and Alamac referred to collectively herein
as the "Borrowers"), the banks and other financial institutions listed on the
signature pages hereof (such banks and other financial institutions referred to
collectively herein as the "Lenders"), SUNTRUST BANK, ATLANTA, in its capacity
as agent for the Lenders (the "Agent"), and SUNTRUST BANK, ATLANTA, in its
capacity as collateral agent for the Agent and the Lenders (the "Collateral
Agent").
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders, the Agent and the Collateral
Agent are parties to a certain Credit Agreement dated as of August 27, 1997, as
amended by Amendment No. 1 to Credit Agreement dated as of September 26, 1997
(as so amended, the "Credit Agreement"; defined terms used herein without
definition shall have the meanings ascribed to such terms in the Credit
Agreement);
WHEREAS, the Borrowers have requested, and the Lenders have agreed,
that the Credit Agreement be amended to make certain modifications therein, all
as more specifically set forth below;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Subject to the satisfaction
of the conditions precedent set forth in Section 2 hereof, and effective as of
the Effective Date (as hereinafter defined), the Credit Agreement is hereby
amended as follows:
1.1 Section 1.01 of the Credit Agreement is hereby amended by adding
the following defined term and accompanying definition in proper alphabetical
order:
<PAGE> 2
"Year 2000 Issues" shall mean the actual and anticipated costs,
claims, losses, liabilities, delays, and other consequences associated with
the inability of certain computer applications to handle effectively data
that includes dates on and after January 1, 2000, as such inability in
respect of the Borrowers and the other Consolidated Companies and in
respect of their respective customers, suppliers and vendors affects the
business, operations, liabilities, prospects, and financial condition of
the Borrowers and the other Consolidated Companies.
1.2 Article VI of the Credit Agreement is hereby amended by adding an
additional Section 6.30 thereto as follows:
SECTION 6.30. YEAR 2000 ISSUES. The Borrowers and the other
Consolidated Companies have made a full and complete assessment of the Year
2000 Issues and have a realistic and achievable program for remediating the
Year 2000 Issues on a timely basis. Based on such assessment and program,
the Borrowers do not reasonably anticipate that Year 2000 Issues will have
a Materially Adverse Effect.
1.3 Section 7.07 of the Credit Agreement is hereby amended by (i)
deleting the word "and" at the end of subsection (s) thereof, (ii) re-lettering
existing subsection (t) thereof as subsection (u), and (iii) adding a new
subsection (t) as follows:
(t) (i) Simultaneously with the delivery of each set of annual and
quarterly financial statements referred to in Sections 7.07(a) and (b) in
respect of any period ending on or before March 31, 2000, a statement of
the president or chief financial officer of the Parent to the effect that
nothing has come to the Borrowers' attention to cause any of them to
believe that the hardware and software systems of the Borrowers and the
other Consolidated Companies will not be Year 2000 compliant on a timely
basis in accordance with the Year 2000 plan previously delivered to the
Lenders, (ii) within twenty (20) Business Days after any of the Borrowers
becomes aware of any deviations from the Year 2000 plan previously
delivered to the Lenders that would cause compliance with such plan to be
delayed or not achieved in any material respect, a statement of the
president or chief financial officer of the Parent setting forth the
details thereof and the action that the Borrowers are taking or propose to
take with respect thereto, and (iii) promptly upon the receipt thereof, a
copy of any third party assessments of the Year 2000 plan of any of the
Consolidated Companies, together with any recommendations made by such
third party with respect to Year 2000 compliance; and
1.4 Section 7.09 of the Credit Agreement is hereby amended by deleting
subsections (a), (b), and (c) thereof, and substituting in lieu thereof the
following subsections (a), (b), and (c):
<PAGE> 3
(a) Fixed Charge Coverage. Maintain as of the last day of each Fiscal
Quarter, commencing with the first Fiscal Quarter of Fiscal Year 1998, a
minimum Fixed Charge Coverage Ratio as shown below for each Fiscal Quarter
during the periods indicated:
<TABLE>
<CAPTION>
Minimum Fixed Charge
Period Coverage Ratio
------ --------------------
<S> <C>
3rd Fiscal Quarter of Fiscal 1.00:1.00
Year 1998 through the
3rd Fiscal Quarter of
Fiscal Year 1999
4th Fiscal Quarter of Fiscal 1.05:1.00
Year 1999 through the
3rd Fiscal Quarter of
Fiscal Year 2000
4th Fiscal Quarter of Fiscal 1.20:1.00
Year 2000 and thereafter
</TABLE>
Notwithstanding the definition of Fixed Charge Coverage Ratio, for the
first three Fiscal Quarters of Fiscal Year 1998, the Fixed Charge Coverage
Ratio shall be calculated for the period commencing on October 4, 1997 and
ending on such date.
(b) Interest Coverage. Maintain as of the last day of each Fiscal
Quarter, commencing with the first Fiscal Quarter of Fiscal Year 1998, a
minimum Interest Coverage Ratio as shown below for each Fiscal Quarter
during the periods indicated:
<TABLE>
<CAPTION>
Minimum Interest
Period Coverage Ratio
------ --------------------
<S> <C>
3rd Fiscal Quarter of Fiscal 1:20:1.00
Year 1998 through the
3rd Fiscal Quarter of
Fiscal Year 1999
4th Fiscal Quarter of Fiscal 1.20:1.00
Year 1999 through the
3rd Fiscal Quarter of
Fiscal Year 2000
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
4th Fiscal Quarter of Fiscal 1.40:1.00
Year 2000 through the
3rd Fiscal Quarter of
Fiscal Year 2001
4th Fiscal Quarter of Fiscal 1.50:1.00
Year 2001 and thereafter
</TABLE>
Notwithstanding the definition of Interest Coverage Ratio, for the first
three Fiscal Quarters of Fiscal Year 1998, the Interest Coverage Ratio
shall be calculated for the period commencing on October 4, 1997 and ending
on such date.
(c) Adjusted Funded Debt Coverage. Maintain as of the last day of
each Fiscal Quarter, commencing with the first Fiscal Quarter of
Fiscal Year 1998, a maximum Adjusted Funded Debt Coverage Ratio
as shown below for each Fiscal Quarter during the periods
indicated:
<PAGE> 5
<TABLE>
<CAPTION>
Maximum Adjusted Funded
Debt Coverage
Period Ratio
------ -----------------------
<S> <C>
3rd Fiscal Quarter of Fiscal 4.90:1.00
Year 1998 through the
3rd Fiscal Quarter of
Fiscal Year 1999
4th Fiscal Quarter of Fiscal 4.50:1.00
Year 1999 through the
3rd Fiscal Quarter of
Fiscal Year 2000
4th Fiscal Quarter of Fiscal 4.00:1.00
Year 2000 through the
3rd Fiscal Quarter of
Fiscal Year 2001
4th Fiscal Quarter of Fiscal 3.50:1.00
Year 2001 and thereafter
</TABLE>
Notwithstanding the definition of Adjusted Funded Debt Coverage Ratio, for
the first three Fiscal Quarters of Fiscal Year 1998, Consolidated EBITDAR
shall be calculated on an annualized basis for the period commencing on
October 4, 1997 and ending on such date (i.e., for the calculation on the
last day of the first Fiscal Quarter of Fiscal Year 1998, Consolidated
EBITDAR shall be calculated for such period and multiplied by four, for the
calculation on the last day of the second Fiscal Quarter of Fiscal Year
1998, Consolidated EBITDAR shall be calculated for such period and
multiplied by two, and for the calculation on the last day of the third
Fiscal Quarter of Fiscal Year 1998, Consolidated EBITDAR shall be
calculated for such period and multiplied by 4/3rds).
1.5 Article VII of the Credit Agreement is hereby amended by adding a
new Section 7.14 thereto as follows:
SECTION 7.14. YEAR 2000 COMPLIANCE. Take, and cause the other
Consolidated Companies to take, all actions reasonably necessary to
implement the Year 2000 plan previously delivered to the Lenders and
otherwise to avoid the existence or occurrence of a Materially Adverse
Effect as a result of Year 2000 Issues. Upon request by any Lender or the
Agent, the Borrowers will provide the Lenders a written updated description
of the Year 2000 compliance program for the Consolidated Companies. The
Borrowers will promptly advise the Lenders and the Agent of any reasonably
anticipated Materially Adverse Effect as a result of any Year 2000 Issues.
<PAGE> 6
1.6 Section 8.06 of the Credit Agreement is hereby amended by deleting
such Section in its entirety and substituting in lieu thereof the following
Section 8.06:
SECTION 8.06. SALE AND LEASEBACH TRANSACTIONS. Sale or transfer any
property, real or personal, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which any
Consolidated Company intends to use for substantially the same purpose or
purposes as the property being sold or transferred, except for such
transactions (i) occurring after the date of this Agreement as are (x)
described in Section 8.01(g), or (y) permitted by Section 8.01(c), or (ii)
in respect of textile manufacturing equipment purchased after the date of
this Agreement in an amount not to exceed $5,000,000.
1.7 Section 11.02 of the Credit Agreement is hereby amended by
deleting clause (vi) of the first sentence of such Section in its entirety and
substituting in lieu thereof the following clause (vi) in the first sentence of
Section 11.02:
(vi) agree to release any of the Collateral from the Lien of the
Security Documents or any funds in the L/C Cash Collateral Account, to the
extent securing the Obligations, or to release any Guarantor from its
obligations under any Guaranty Agreement (provided, that no agreement to
any such release shall be required from any Lenders in connection with (x)
any sale and leaseback transaction permitted by Section 8.06, or (y) the
transactions described in connection with an Asset Sale (including a sale
of Pledged Stock) that is made at a time when Borrower has satisfied the
requirements set forth in Section 8.03 with respect to such sale), or
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Amendment shall become
effective as of the date first above written (the "Effective Date") when this
Amendment shall have been executed and delivered by the Borrowers, Lenders
constituting the Required Lenders as provided in the Credit Agreement, the Agent
and the Collateral Agent.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS. Each of
the Borrowers, without limiting the representations and warranties provided in
the Credit Agreement, represents and warrants to the Lenders and the Agents as
follows:
3.1 The execution, delivery and performance by the Borrowers of this
Amendment are within the Borrowers' organizational powers, have been duly
authorized by all necessary organizational action (including any necessary
shareholder or partner action) and do not and will not (a) violate any provision
of any law, rule or regulation, any judgment, order or ruling of any court or
governmental agency, the organizational documents of any Borrower or any
indenture, agreement or other instrument to which any Borrower is a party or by
which any Borrower or any of its properties is bound or (b) be in conflict with,
result in a breach of, or constitute with notice or lapse of time or both a
default under any such indenture, agreement or other instrument.
<PAGE> 7
3.2 This Amendment constitutes the legal, valid and binding obligation
of the Borrowers, enforceable against the Borrowers in accordance with its
terms.
3.3 No Default or Event of Default has occurred and is continuing as
of the Effective Date.
SECTION 4. SURVIVAL. Each of the foregoing representations and
warranties and each of the representations and warranties made in the Credit
Agreement shall be made at and as of the Effective Date. Each of the foregoing
representations and warranties shall constitute a representation and warranty of
the Borrowers under the Credit Agreement, and it shall be an Event of Default if
any such representation and warranty shall prove to have been incorrect or false
in any material respect at the time when made. Each of the representations and
warranties made under the Credit Agreement (including those made herein) shall
survive and not be waived by the execution and delivery of this Amendment or any
investigation by the Lenders or the Agent or the Collateral Agent.
SECTION 5. NO WAIVER, ETC. The Borrowers hereby agree that nothing
herein shall constitute a waiver by the Lenders of any Default or Event of
Default, whether known or unknown, which may exist under the Credit Agreement.
The Borrowers hereby further agree that no action, inaction or agreement by the
Lenders, including without limitation, any indulgence, waiver, consent or
agreement altering the provisions of the Credit Agreement which may have
occurred with respect to the non-payment of any obligation under the terms of
the Credit Agreement or any portion thereof, or any other matter relating to the
Credit Agreement, shall require or imply any future indulgence, waiver, or
agreement by the Lenders. In addition, the Borrowers acknowledge and agree that
they have no knowledge of any defenses, counterclaims, offsets or objections
against any Lender with regard to any of the obligations due under the terms of
the Credit Agreement as of the date of this Amendment.
SECTION 6. AFFIRMATION OF COVENANTS. The Borrowers hereby affirm and
restate as of the date hereof all covenants set forth in the Credit Agreement,
as amended hereby, and such covenants are incorporated by reference herein as if
set forth herein directly.
SECTION 7. RATIFICATION OF CREDIT AGREEMENT. Except as expressly
amended herein, all terms, covenants and conditions of the Credit Agreement and
the other Credit Documents shall remain in full force and effect, and the
parties hereto do expressly ratify and confirm the Credit Agreement as amended
herein. All references to the Credit Agreement contained in all Credit Documents
shall be deemed to refer to the Credit Agreement as amended hereby.
<PAGE> 8
SECTION 8. BINDING NATURE. This Amendment shall be binding upon and
inure to the benefit of the parties hereto, their respective successors,
successors-in-titles, and permitted assigns.
SECTION 9. COSTS, EXPENSES AND TAXES. The Borrowers agree to pay on
demand all reasonable costs and expenses of the Agent and the Collateral Agent
in connection with the preparation, execution and delivery of this Amendment and
the other instruments and documents to be delivered hereunder, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Agent and the Collateral Agent with respect thereto and with respect to
advising the Agent and the Collateral Agent as to its rights and
responsibilities hereunder and thereunder. In addition, the Borrowers shall pay
any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment and the other
instruments and documents to be delivered hereunder, and agrees to save the
Agent, the Collateral Agent, and each Lender harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
SECTION 10. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Georgia.
SECTION 11. ENTIRE UNDERSTANDING. This Amendment sets forth the entire
understanding of the parties with respect to the matters set forth herein, and
shall supersede any prior negotiations or agreements, whether written or oral,
with respect thereto.
SECTION 12. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts and may
be delivered by telecopier. Each counterpart so executed and delivered shall be
deemed an original and all of which taken together shall constitute but one and
the same instrument.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
through their authorized officers as of the date first above written.
DYERSBURG CORPORATION
By: /s/ William S. Shropshire, Jr.
Name: William S. Shropshire, Jr.
Title: Executive Vice President and
Chief Financial Officer
DYERSBURG FABRICS LIMITED
PARTNERSHIP, I, A TENNESSEE LIMITED
PARTNERSHIP
By: Dyersburg Fabrics Inc., its sole general
partner
By: /s/ William S. Shropshire, Jr.
Name: William S. Shropshire, Jr.
Title: Executive Vice President and
Chief Financial Officer
UNITED KNITTING LIMITED
PARTNERSHIP, I, A TENNESSEE LMITED
PARTNERSHIP
By: United Knitting, Inc., its sole general
partner
By: /s/ William S. Shropshire, Jr.
Name: William S. Shropshire, Jr.
Title: Secretary and Treasurer
<PAGE> 10
IQUE LIMITED PARTNERSHIP, I, A
TENNESSEE LIMITED PARTNERSHIP
By: IQUE, Inc., its sole general partner
By: /s/ William S. Shropshire, Jr.
Name: William S. Shropshire, Jr.
Title: Executive Vice President and
Chief Financial Officer
ALAMAC KNIT FABRICS, INC.
By: /s/ William S. Shropshire, Jr.
Name: William S. Shropshire, Jr.
Title: Vice President and Secretary
SUNTRUST BANK, ATLANTA,
INDIVIDUALLY AND AS AGENT AND COLLATERAL
AGENT
By: /s/ Laura Kahn
Name: Laura Kahn
Title: Senior Vice President
By: /s/ Brenda Zino
Name: Brenda Zino
Title: Banking Officer
FIRST UNION NATIONAL BANK
By: /s/ D. C. Hauglid
Name: David C. Hauglid
Title: Vice President
<PAGE> 11
WACHOVIA BANK, N.A.
By: /s/ Timothy R. Hileman
Name: Timothy R. Hileman
Title: Senior Vice President
CENTURA BANK
By: /s/ Stephen B. Draper
Name: Stephen B. Draper
Title: Capital Markets Manager
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEEN BANK B.A.,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By: /s/ Theodore W. Cox
Name: Theodore W. Cox
Title: Vice President
By: /s/ W. Jeffrey Vollack
Name: W. Jeffrey Vollack
Title: Senior Vice President
NATIONAL CITY BANK OF KENTUCKY
By: /s/ Kevin L. Anderson
Name: Kevin L. Anderson
Title: Vice President
<PAGE> 12
NATIONSBANK, N.A.
By: /s/ E. Phifer Helms
Name: E. Phifer Helms
Title: Senior Vice President
THE FIJI BANK, LIMITED, NEW
YORK BRANCH
By:
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.
By: /s/ William L. Otott, Jr.
Name: William L. Otott, Jr.
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/ James A. Knight
Name: James A. Knight
Title: Vice President
<PAGE> 1
SHAREHOLDERS' AGREEMENT
This AGREEMENT is made on 1998 (the Effective Date) between:
1. DYERSBURG CORPORATION, a company organized and existing under the laws
of the State of Tennessee with its registered office at 1315 Phillips
Street, Dyersburg, Tennessee, 38025-0767 United States of
America (the FOREIGN SHAREHOLDER).
2. PT TEXMACO JAYA, a limited liability company established and existing
under the laws of the Republic of Indonesia, with its principal
office at JI. H.R. Rasuna Kav. X-6 No. 8 Jakarta, Indonesia (the
INDONESIAN SHAREHOLDER).
RECITALS
A. The Foreign Shareholder is a leader in the field of the manufacture
of circular knit fabrics.
B. The Indonesian Shareholder has contacts in the Indonesian industrial
and financial sectors.
C. The Foreign Shareholder and the Indonesian Shareholder wish to jointly
establish an Indonesian limited liability PMA joint venture company to
operate in the field of fabric manufacturing in the Territory.
D. The Foreign Shareholder and the Indonesian Shareholder wish to enter
into this Agreement to regulate their rights and obligations in
relation to the establishment of, and thereafter as shareholders in,
the Company.
IT IS AGREED as follows
<PAGE> 2
2
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS
In this Agreement (including the Recitals and Schedules), the following
definitions shall apply unless the context requires otherwise.
AFFILIATE means, in relation to a Party which is a company, that Party and any
company which is for the time being a holding company or a Subsidiary of a
holding company of such shareholder, where a company is a SUBSIDIARY of another
company (its HOLDING COMPANY), if that other company:
(a) holds a majority of the voting rights in it; or
(b) is a member of it and has the right to appoint or remove a majority
of its board of directors; or
(c) is a member of it and controls alone or pursuant to an agreement with
other shareholders or members, a majority of the voting rights in it,
or if it is a Subsidiary of a company which is itself a Subsidiary of that
other company.
Affiliate shall include, but is not limited to, Mr Sinivasan or any entity he
controls directly or indirectly.
ARBITRATION NOTICE is defined in Clause 29.1.
ARTICLES OF ASSOCIATION means the articles of association of the Company
containing terms agreed by the Parties which are consistent with the terms of
this Agreement.
BKPM means the Badan Koordinasi Penanaman Modal (Capital Investment Coordinating
Board) of the Territory.
BOARD OF COMMISSIONERS means the Board of Commissioners (Dewan Komisaris)
of the Company.
<PAGE> 3
3
BOARD OF DIRECTORS means the Board of Directors (Direksi) of the Company.
BUSINESS means the business of the Company as defined in Clause 4.
COMMENCEMENT DATE means the date which is the later to occur of (i) the date on
which the Company has its first sale of more than 10,000 meters of fabric and
(ii) June 1, 1998.
COMPANY is defined in Clause 2.1.
DEFAULT is defined in Clause 8.1.
DEFAULTING PARTY is defined in Clause 20.5.
EXCLUDED TERRITORY means North and Central America and the Caribbean Basin.
EXPERT is defined in Clause 20.6(b).
INFORMATION is defined in Clause 19.1.
INNOCENT PARTY is defined in Clause 20.5.
LICENSE AGREEMENT means the License Agreement dated the date hereof between the
Parties.
PARTIES and a PARTY means the Foreign Shareholder and the Indonesian Shareholder
or any one of them.
PMA means penanaman modal asing or foreign capital investment in accordance with
Law Number 1 of 1967 of the Territory (as amended).
SHAREHOLDER means any individual, company or organization registered from time
to time as a shareholder of the Company.
TERMINATION NOTICE is defined in Clause 20.5.
<PAGE> 4
4
TERRITORY means the Republic of Indonesia.
1.2 INTERPRETATION
In interpreting this Agreement, headings are for convenience only and do not
affect interpretation. The following rules of interpretation apply unless the
context requires otherwise.
(a) The singular includes the plural and conversely.
(b) A gender includes all genders.
(c) Where a word or phrase is defined, its other grammatical forms have a
corresponding meaning.
(d) A reference to a person includes a company, an unincorporated body or
other legal entity and conversely.
(e) A reference to a Clause, Recital or Schedule is to a clause of or
recital or schedule to this Agreement.
(f) A reference to any Party or party to any other agreement or document
includes that Party's or the relevant party's successors and permitted
assigns (if any).
(g) A reference to any agreement or document is to that agreement or
document as amended, novated, supplemented, varied or replaced from
time to time, except to the extent prohibited by this Agreement or that
other agreement or document.
(h) A reference to any law, enactment, regulation, decree or directive or
to any provision of any law, regulation, enactment, decree or directive
includes any modification or re-enactment of it, any legislative or
statutory provision substituted for it, and all regulations and
statutory instruments issued under it.
(i) A reference to DOLLARS or $ is to the lawful currency of the United
States of America.
<PAGE> 5
5
(j) A reference to RUPIAH or RP. is to the lawful currency of the
Territory.
(k) Each Schedule, and each certificate and document delivered under this
Agreement forms part of this Agreement.
2. FORMATION OF THE COMPANY
2.1 PARTIES TO OBTAIN ALL NECESSARY APPROVALS
The Parties shall proceed with the establishment of a limited liability company
with PMA joint venture status (the COMPANY).
The Indonesian Shareholder shall have primary responsibility for obtaining all
approvals and permits necessary for the establishment and commencement of
operations of the Company as, and with the full privileges of, a limited
liability company with PMA joint venture status under the Foreign Investment Law
of 1967 (as amended) of the Territory and its implementing regulations and
policies. The Parties shall cooperate in furnishing all information needed for
obtaining such approvals.
2.2 ESTABLISHMENT OF THE COMPANY
Upon receipt of the Notification of Presidential Approval (Surat Pemberitahuan
Persetujuan Presiden or SPPP) issued by BKPM for the establishment of the
Company with the privileges granted under the Law Number 1 of 1967 (as amended)
upon terms acceptable to the Parties, a Deed of Establishment (Akta Pendirian)
incorporating the Articles of Association shall be executed by the Parties
before a notary in Jakarta and shall be immediately submitted to the Minister of
Justice of the Republic of Indonesia for approval.
The Parties agree that notwithstanding that the approval of the Minister of
Justice has not yet been obtained for the establishment of the Company, the
Parties will at all times conduct themselves in accordance with the terms of
this Agreement.
<PAGE> 6
6
2.3 CONDITIONS PRECEDENT
The obligations of the Parties under this Agreement shall be subject to prior
satisfaction of the following conditions precedent:
(a) each Party obtaining all necessary approvals, licences and permits
required to be obtained from relevant government authorities under
applicable laws, regulations and policies in the Territory or the
jurisdiction of incorporation of that Party for the entry into and
performance of this Agreement by that Party; and
(b) each Party obtaining all approvals as may be required under its
Articles of Association or other constituent documents for the entry
into and performance of this Agreement by that Party.
3. NAME OF THE COMPANY
The name of the Company shall be "PT DYERSBURG TEXMACO FLEECE" (or, if that name
is not acceptable to the Minister of Justice, such similar name as is agreed by
the Parties and acceptable to the Minister of Justice).
If at any time in the future the Foreign Shareholder or any Affiliate of the
Foreign Shareholder (or a combination of these) ceases to be the registered
owner of at least 40% (forty percent) of the issued shares in the capital of the
Company, then prior to or promptly following that situation arising, upon the
written request of the Foreign Shareholder, each other Party shall do all things
necessary to procure that the name of the Company shall be changed to delete the
word, or any part, "Dyersburg" from the name of the Company.
4. BUSINESS OF THE COMPANY
The Company may engage in the following business activities and other actions
anywhere in the World, excluding the Excluded Territory (unless the Foreign
Shareholder gives its prior written consent) (collectively, the Business):
<PAGE> 7
7
(a) to engage in the manufacture and refining of circular knit fabric and
fabric related products and the sale of such fabric and fabric related
products to wholesale and industrial users and as allowed by law; and
(b) to perform all lawful actions and do all other things necessary to
achieve or otherwise related to or connected with the purposes
mentioned in paragraph (a) above and to establish or join in the
establishment of or participate in other companies or other
institutions either by way of joint enterprise or joint venture,
subject always to the prevailing laws and regulations having the force
of law in the Territory,
subject always to the obtaining and holding of all licences, permits, approvals
(if any) and the making of such filings and reports (if any) as may be required
from time to time to conduct such activities and actions.
5. RELATIONSHIP OF THE PARTIES
The Articles of Association shall, to the extent permitted under applicable laws
and regulations, at all times give effect to the terms of this Agreement.
By signing this Agreement (or any document by which another person or entity is
later admitted as a Party), each Party irrevocably agrees that if there is any
conflict or inconsistency between the provisions of this Agreement and the
Articles of Association then:
(a) as between the Parties, the provisions of this Agreement shall
prevail; and
(b) the Parties shall forthwith use their best endeavors to procure an
amendment to the Articles of Association so as to remove such conflict
or inconsistency.
<PAGE> 8
8
6. TOTAL INTENDED INVESTMENT AND CAPITAL
6.1 INITIAL TOTAL INTENDED INVESTMENT
The initial total intended investment in the Company (comprising the proposed
equity and debt capital of the Company) shall be $40,000,000 (forty million
United States Dollars).
6.2 AUTHORIZED CAPITAL
The initial authorized share capital of the Company shall be the Rupiah
equivalent of $30,000,000 (30 million United States Dollars), calculated on the
basis of the Dollar to Rupiah exchange rate set out in the Notification of
Presidential Approval referred to in Clause 2.2.
6.3 INITIAL CAPITAL
The initial issued share capital of the Company shall be the Rupiah equivalent
of $16,000,000 (sixteen million United States Dollars) which shares shall be
subscribed for and fully paid up by the Parties in the following proportions:
(a) Foreign Shareholder: 49% (forty nine percent) of the issued
capital; and
(b) Indonesian Shareholder: 51% (fifty one percent) of the issued
capital.
The initial share capital will be paid in accordance with Clause 6.4.
6.4 EQUITY CONTRIBUTIONS
The Parties agree and acknowledge that their equity contributions shall be made
as follows:
<PAGE> 9
9
<TABLE>
<CAPTION>
INDONESIAN SHAREHOLDER:
AMOUNT TIME DETAILS OF PAYMENT
<S> <C> <C>
US$8,160,000 Effective Date Cash or by suitable assets
for the Company, the form
and valuation of such assets
to be mutually agreed to by
the Parties.
US$4,000,000 Effective Date The Indonesian Shareholder
or one of its Affiliates
will on the Effective Date
contribute US$4,000,000 in
cash and contemporaneously
will assign to the Foreign
Shareholder the share
capital received in exchange
therefor in consideration of
the license of certain know-
how pursuant to the License
Agreement.
FOREIGN SHAREHOLDER:
AMOUNT TIME DETAILS OF PAYMENT
US$4,000,000 Effective Date The Foreign Shareholder will
on the Effective Date license
to the Indonesian
Shareholder, or one of its
Affiliates, certain know-how
pursuant to the License
Agreement. The Indonesian
Shareholder, or such
Affiliate, will transfer its
share capital of the Company
to the extent of $4,000,000
to the Foreign Shareholder in
consideration of such
license.
US$3,840,000 Dyersburg Corporation
common stock valued per
share at the greater of
(i) US$10.75 or (ii) the
average closing price
for the ten trading days
ending five trading days
prior to Dyersburg
Corporation's annual
meeting of shareholders
next following the
Effective Date.
</TABLE>
10
<PAGE> 10
10
The Parties agree and acknowledge that any issuance of Dyersburg Corporation
common stock may be subject to the prior approval of the shareholders of
Dyersburg Corporation at the annual meeting of shareholders next following the
Effective Date. The Parties agree that if such approval is required and is not
obtained at such meeting, the Foreign Shareholder shall promptly make the
relevant equity contribution by way of cash. The obligation of the Foreign
Shareholder to make such equity contribution is subject to the fulfillment by
the Indonesian Shareholder of its obligations in Clause 6.9(a) hereof.
6.5 FURTHER SHARE ISSUES TO BE PROPORTIONAL
The Parties agree that in the case of any further issue of shares by the
Company, each Shareholder shall be given the opportunity first to purchase a
number of the shares to be issued pro-rata in proportion to the number of shares
of which it is the registered owner on the date of issue of the new shares,
subject to obtaining all necessary approvals (if any) of the appropriate
government authorities.
Subject to the provisions of this Clause 6, each Party shall fully subscribe for
and accept all duly authorized issuances of capital by the Company and shall
comply with all calls or requests for funds against subscribed capital which are
made from time to time by the Board of Directors. Funds shall be provided in
cash payments by each Party in proportion to its percentage ownership of shares
in the Company when and as requested by the Board of Directors.
<PAGE> 11
11
6.6 CONSEQUENCES OF FAILURE TO SUBSCRIBE FOR FULL PROPORTIONATE SHARE OR
PAY THE FULL SUBSCRIPTION PRICE
(a) If any Party at any time has failed to subscribe within a period of
30 (thirty) days after the relevant subscription is required to be
made or elects not to subscribe for its full proportionate
entitlement of shares in the Company then being offered (the NON-
SUBSCRIBING PARTY), then the other Party (provided that such other
Party has subscribed for its proportionate share of the total number
of shares then being offered by the Company) (the SUBSCRIBING PARTY)
shall have the right, but not the obligation, to subscribe for the
shares in the Company originally offered to the Non-Subscribing
Party, thereby increasing its percentage interest in the Company and
the Non-Subscribing Party shall have no further rights in respect of
those shares.
If there shall be more than two Parties to this Agreement at the time a
Party becomes a Non-Subscribing Party, then each Subscribing Party
shall have the right to subscribe for the shares in the Company
originally offered to the Non-Subscribing Party pro-rata in proportion
to the number of shares in the Company which it owns bears to the total
number of shares owned by all Subscribing Parties, unless otherwise
agreed by and among the Subscribing Parties. If any Subscribing Party
fails to purchase its full proportionate share of the Non-Subscribing
Party's shares, then the remaining Subscribing
<PAGE> 12
12
Party or Subscribing Parties shall have the right, but not the
obligation, to purchase such shares with the amount to be purchased by
each being determined as provided above as between themselves.
(b) If any Party at any time fails to pay the full subscription price for
shares subscribed for by that Party when such payment is due, as
determined by the Board of Directors (the NON-PAYING PARTY), such
failure shall constitute a breach of the subscription agreement
between the Non-Paying Party and the Company and shall also
constitute a breach of this Agreement and if such breach is not cured
within 30 (thirty) days by payment to the Company of the full amount
then in arrears, plus interest at the rate of 20% per annum on the
amount in arrears from the date such payment was due to the date
payment is made, then on the thirty-first day or within 14 (fourteen
days) thereafter the other Party (provided that such other Party has
paid the full subscription price for shares subscribed for by such
party) (the PAYING PARTY) shall have the right, but not the
obligation, to subscribe for and purchase the shares previously
subscribed for by the Non-Paying Party for the price at which the
Non-Paying Party had subscribed for those Shares. If the Non-Paying
Party had made a partial payment of the subscription price for the
relevant shares prior to such breach, then within 30 (thirty) days
after receiving payment of the full subscription price from the
Paying Party, the Company shall refund to the Non-Paying Party the
<PAGE> 13
13
amount previously paid by that Non-Paying Party on such shares minus
interest at the rate of 20% per annum on the amount in arrears from the
date such payment was due from the Non-Paying Party to the date payment
is received from the Paying Party.
If there shall be more than two Parties to this Agreement at the time a
Party becomes a Non-Paying Party, then each Paying Party shall have the
right to subscribe for and purchase the shares in the Company which
were originally subscribed for by the Non-Paying Party as the Paying
Parties shall agree between or among themselves or failing such
agreement between the Paying Parties, each Paying Party shall have the
right to subscribe for and purchase a proportion (such proportion for
each Paying Party to be equal to the proportion which the number of
shares in the Company which it owns bears to the total number of shares
owned by all Paying Parties) of the shares in the Company which were
originally subscribed for by the Non-Paying Party, and if any Paying
Party fails to purchase its full proportionate share of such shares,
then the remaining Paying Party or Paying Parties shall have the right,
but not the obligation, to purchase such shares with the amount to be
purchased by each being determined as provided above as between
themselves.
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6.7 POWER OF ATTORNEY
For the purpose of Clauses 6.5 and 6.6, each Non-Subscribing Party and NonPaying
Party shall be deemed to have granted power of attorney to the President
Director of the Company, to act for and on behalf of that Non-Subscribing and
Non-Paying Party, as the case may be, (i) to do all things necessary including
to sign and execute all documents required for performing the matters referred
to in Clause 6.5 and Clause 6.6, as the case may be, and (ii) to designate a
person to represent the Non-Subscribing Party and the Non-Paying Party at any
General Meeting of Shareholders which is necessary achieving for such purposes
(iii) to sign any application or notification to be submitted to BKPM in order
to obtain BKPM approval (if required) or otherwise for or in respect of
performing the matters referred to in Clause 6.5 and Clause 6.6, as the case may
be.
The powers of attorney referred to in the preceding paragraph form an integral
and inseparable part of this Agreement and shall be irrevocable. Accordingly,
the Parties waive Articles 1813, 1814 and 1816 of the Indonesian Civil Code in
respect of those powers of Attorney.
6.8 INCREASE IN AUTHORIZED CAPITAL
The authorized share capital of the Company may be increased when and as
authorized by a General Meeting of Shareholders, subject to obtaining any
necessary Indonesian Government authorizations.
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6.9 FURTHER FINANCING OF THE COMPANY
The Parties agree that, subject to the provisions of this Clause 6:
(a) The Indonesian Shareholder shall, or shall cause an Affiliate to,
provide sufficient financing to the Company to enable it to commence
operations and fund its working capital needs following commencement of
operations. The Company and the Indonesian Shareholder, or such
Affiliate, shall enter into financing agreements on the Effective Date
to evidence such indebtedness in form and substance agreeable to the
Shareholders and approved by the Board of Directors. It is anticipated
that amounts borrowed from the Indonesian Shareholder will bear
interest at 11.0% per annum for periods from May 1997 through August
1997, 12.5% per annum for periods from September 1997 through October
1997, 14.0% per annum for periods from November 1997 through February
1998 and following that time will bear interest at the lower of 17.0%
per annum or the Indonesian Shareholders' cost of capital until the
Company is able to obtain financing from a third party on terms
acceptable to the Shareholders.
(b) So far as possible the Company shall satisfy all further financing
requirements by way of borrowings upon reasonable arms'-length
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commercial terms on its own account from third party banks and other
financial institutions.
(c) The Company shall obtain such further financing without any requirement
for guarantees or similar support from the Foreign Shareholder;
provided, the Foreign Shareholder agrees to extend its reasonable
assistance to the Company and the Indonesian Shareholder in their
attempts to obtain financing for the Company's working capital needs
from financial institutions known to the Foreign Shareholder.
(d) If shareholder guarantees or similar support are or is required in
respect of any financing by the Company and agreed to by each
Shareholder, each Party shall provide or procure to be provided such
guarantee or support, upon such reasonable arms'-length commercial
terms as may be required by the relevant bank or financial
institution providing the financing, on a several (not joint or joint
and several) basis pro rata in proportion to the level of the Party's
shareholding in the Company at that time and each Party undertakes
to indemnify in full each other Party so as to ensure that each Party
shall be liable only in proportion to the level of its shareholding
in the Company at that time.
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7. TRANSFER OF SHARES
7.1 COMPLIANCE WITH THE ARTICLES OF ASSOCIATION
Any sale, transfer, pledge, or any other manner of transfer or encumbrance
(including agreeing, whether conditionally or otherwise, to do any of the
foregoing) of part or all of any Party's shares in the Company shall be subject
to the procedures and requirements set out in the Articles of Association and
this Agreement.
7.2 TRANSFER TO AFFILIATE
Any Party (the TRANSFERRING AFFILIATE) may transfer part or all of its shares in
the Company to any of its Affiliates or other related parties (a GROUP
TRANSFEREE), without being required to follow the procedure set out in Clause
7.3, subject to and in accordance with the terms of this Clause 7.2.
The Transferring Affiliate hereby unconditionally and irrevocably guarantees to
each other Party in relation to any Group Transferee the due and punctual
performance by that Group Transferee of its obligations under this Agreement and
undertakes with each other Party as a continuing obligation that if for any
reason the Group Transferee does not perform any of its obligations the
Transferring Affiliate will, as primary obligor and not merely as guarantor,
perform such obligations on the Group Transferee's behalf and will indemnify and
keep indemnified the Other Party against all losses, damages, liabilities, costs
and expenses which each Other Party may sustain, incur or pay by reason of the
failure of the Group Transferee so
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to perform. In this respect, the Transferring Affiliate waives Articles 1831,
1833, 1837, 1843, 1847, 1848 and 1849 of the Indonesian Civil Code.
7.3 VOLUNTARY TRANSFER TO NON-AFFILIATE
If any Party (the TRANSFEROR) intends at any time to sell , transfer, or
otherwise dispose of, or an offer is made to acquire all or any part of its
shares (the OFFERED SHARES) and, if applicable, the Transferor wishes to accept
that offer other than in the case of a transfer to an Affiliate or other related
party of the Transferor pursuant to Clause 7.2 or other than on terms agreed in
writing by the Shareholders, it shall give irrevocable notice in writing of that
intention or the offer (a TRANSFER NOTICE) to each other Party (the OTHER
SHAREHOLDER(S)) offering to sell the Offered Shares to each Other Shareholder(s)
(the OFFER) at the price set out in the Transfer Notice (the SALE PRICE). In the
event that an offer has been made to the Transferor to acquire all or part of
its shares, the price in the Transfer Notice shall be the same price as in the
offer so received and the Transfer Notice shall include the identity of the
person making the offer. The Offer must be accepted by the Other Shareholder(s)
within the time period beginning at the date the notice is received and ending
45 (forty-five) days thereafter (the OFFER PERIOD). If there are more than one
Other Shareholder, the number of Offered Shares offered to the Other
Shareholders shall be made in proportion to the respective shareholding ratios
of each Other Shareholder as of the date of the Transfer Notice.
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Within 45 (forty-five) days after receipt of the Transfer Notice, each of the
Other Shareholders may accept the Offer made to it in whole or in part by
serving notice in writing to that effect (an ACCEPTANCE NOTICE) on the
Transferor, but if it does not so accept the Offer within the Offer Period then
the Offer shall lapse at the expiry of the Offer Period in respect of that
Shareholder.
If no Other Shareholder accepts the Offer in accordance with the above
requirements, then the Transferor shall be entitled to sell and transfer the
Offered Shares within 90 days of the expiry of the Offer Period, subject to
compliance with the requirements as set out in Clause 7.4, at a price not less
than the Sale Price (and, in the event that an Offer has been made to the
Transferor as stated above, the Offered Shares may only be sold and transferred
to the person making the Offer as identified in the Transfer Notice).
Upon the receipt by the Transferor of the Acceptance Notice, the Transferor and
each of the Other Shareholders which has given an Acceptance Notice shall be
obliged to complete the sale and purchase of the Offered Shares to be acquired
within 30 (thirty) days after the expiry of the Offer Period (exclusive of any
period which falls between a day upon which notice of a General Meeting of
Shareholders was given and the day upon which such meeting is held), at such
reasonable time and place in Jakarta as shall be specified by written notice
from the Other Shareholder to the Transferor
<PAGE> 20
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received not less than 48 (forty-eight) hours before settlement of the Sale
Price.
The transfer of shares shall be in a manner agreed in writing by the
Shareholders and shall be in accordance with the provisions of the Article of
Association.
7.4 COMPLETION OF VOLUNTARY TRANSFERS
For completion of the sale and transfer of the Offered Shares by the Transferor
to the Other Shareholder in accordance with Clause 7.3:
(a) the Transferor and each of the Other Shareholders which has provided
an Acceptance Notice (or any other purchaser of the Offered Shares
in accordance with Clause 7.3) shall execute an instrument of sale
and transfer in favor of each such Other Shareholders, or any
Affiliate of the relevant Other Shareholder or other purchaser as
stated above as nominated by written notice received by the
Transferor not less than 5 days before completion and the Transferor
shall deliver the relevant share certificates and, if requested by
the relevant Other Shareholder, a power of attorney in a form and in
favor of a person nominated by the Other Shareholder or other
purchaser as stated above, so as to enable that Other Shareholder or
other purchaser as stated above to exercise all rights to ownership
<PAGE> 21
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in relation to the Offered Shares including, without limitation, the
voting rights;
(b) upon the execution of the instrument of sale and transfer pursuant to
Clause 7.4(a), the Other Shareholder or other purchaser as stated above
shall pay the aggregate transfer price, being the Sale Price multiplied
by the number of Offered Shares to be acquired, to the Transferor for
value on the date of completion or in such other manner as may be
agreed by the parties before completion;
(c) the Parties shall procure that the transfer of the Offered Shares is
promptly registered in the Register of Shareholders of the Company in
accordance with the provisions of the Articles of Association;
(d) the Transferor shall do all such acts and/or execute all such documents
in a form satisfactory to the Other Shareholders or other purchaser as
stated above as the Other Shareholders or other purchaser as stated
above may require to give effect to the transfer of shares pursuant to
this Clause 7.4; and
(e) if the Offered Shares constitute all of the shares in the Company held
by the Transferor, the Transferor shall, as directed by the Other
Shareholders and with effect from completion of the transfer, procure
the resignation or removal of any members of the Board of
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Directors and the Members of the Board of Commissioners nominated by,
or on behalf of, the Transferor.
7.5 FAILURE BY OTHER SHAREHOLDER TO PURCHASE OFFERED SHARES
Except as otherwise agreed in writing between the Parties, if there are more
than one Other Shareholders and if any (but not all) of the Other Shareholders
fails to exercise its right to purchase all or part of the Offered Shares
allocated to it within the Offer Period, the Transferor shall notify every Other
Shareholder who has exercised its right to purchase the Offered Shares, of such
failure (FAILURE NOTICE).
Any Other Shareholder who is entitled to receive the Failure Notice shall have
the further right, exercisable by written notice given to the Transferor within
30 (thirty) days after receipt of the Failure Notice, to also purchase the
portion of the Offered Shares (TRANSFERRED SHARES) allocated to the Other
Shareholder who has failed to exercise its right to purchase such shares,
provided that the Transferor shall have the option not to sell unless all the
Transferred Shares are purchased provided always that if more than one
Shareholder is entitled and wishes to purchase the Offered Shares pursuant to
the preceding sentence, the Offered Shares shall be allocated to them pro-rata
in accordance with the number of shares of the Company owned by them at the date
of the Failure Notice.
<PAGE> 23
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7.6 COMPLETION OF SALE OF TRANSFERRED SHARES
For completion of the sale of the Transferred Shares by the Transferor to the
Other Shareholders in accordance with Clause 7.5:
(a) the Transferor and the Other Shareholders shall execute an instrument
of sale and transfer in favor of the Other Shareholders, or any
Affiliate or other related party of any Other Shareholder as the
relevant Other Shareholder may nominate by written notice received
by the Transferor not less than 5 days before completion in respect
of the shares which are to be transferred to that Other Shareholder,
together with the relevant share certificates and, if requested by
the Other Shareholders, a power of attorney in a form and in favor
of a person nominated by the Other Shareholders, so as to enable the
Other Shareholders to exercise all rights to ownership in relation
to the Offered Shares including, without limitation, the voting
rights;
(b) upon the execution of the instrument of sale and transfer pursuant to
Clause 7.6(a), the Other Shareholders shall pay the aggregate transfer
price, being the Sale Price multiplied by the number of Offered shares
to be acquired, to the Transferor for value on the date of completion
or in such other manner as may be agreed by the parties before
completion;
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(c) the Parties shall procure that the transfer of shares is promptly
registered in the Register of Shareholders of the Company in accordance
with the provisions of the Articles of Association;
(d) the Transferor shall do all such acts and/or execute all such documents
in a form satisfactory to the Other Shareholders as the Other
Shareholders may require to give effect to the transfer of shares
pursuant to this Clause 7.5; and
(e) if the Offered Shares constitute the Transferor's entire holding of
shares in the Company, the Transferor shall, as directed by the Other
Shareholders and with effect from completion of the transfer, procure
the resignation or removal of any members of the Board of Directors and
the Board of Commissioners nominated by, or on behalf of, the
Transferor.
7.7 INTEREST ON UNPAID AMOUNTS
If any sum payable under Clause 7.4 or 7.5 is not paid (otherwise than as a
result of default by the Transferor) the unpaid sum will bear interest
calculated on a daily basis which may, without limiting the rights of the
Transferor, be claimed as a debt or liquidated demand, for the period from and
including the due date up to the date of actual payment (after as well as before
judgment) at the rate of 20% per annum.
<PAGE> 25
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7.8 FAILURE TO TRANSFER SHARES
If the Transferor fails or refuses to transfer all or any part of the Offered
Shares or the Transferred Shares to be acquired by the Other Shareholders or any
other purchaser in accordance with or as required under this Clause 7:
(a) the Transferor shall be deemed to have irrevocably authorized and
empowered, and hereby irrevocably authorizes and grants power of
attorney to, each member of the Board of Directors to execute and
deliver on the Transferor's behalf and in the Transferor's name the
necessary instrument of transfer and to do any and all other acts
and/or execute any other documents on the Transferor's behalf
required in connection with the transfer of shares under this clause
including, without limitation, revoking the existing share
certificates in respect of all or part of the Offered shares and the
Transferred Shares and issuing new certificates in respect of the
same;
(b) the Company may receive the purchase money on behalf of, and for the
benefit of, the Transferor and receipt by the Company of the purchase
money shall be good discharge for the Other Shareholders or other
purchaser in accordance with this Clause 7 who shall not be bound to
see to the application of the purchase money;
<PAGE> 26
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(c) the Parties shall procure that the Company shall cause the Other
Shareholders or other purchaser in accordance with this Clause 7 to be
registered in the Register of Shareholders of the Company as the holder
of the Offered Shares or the Transferred Shares which have been
acquired; and
(d) once registration in the Register of Shareholders has taken place in
purported exercise of the power contained in this Clause 7.8, the
validity of the proceedings, including in relation to any prevailing
Indonesian regulations having the force of law, shall not be questioned
by any Party or other person in any respect whatsoever.
7.9 NEW SHAREHOLDER TO BECOME BOUND BY THIS AGREEMENT
Any person or entity becoming a new Shareholder shall (and the Parties shall
ensure that), as a condition precedent to having shares registered in its name
and that person or entity being entitled to exercise any rights with respect to
such shares, first sign an agreement with each of the Parties at that time by
which that person or entity agrees to perform and to be bound by all of the
terms and conditions of this Agreement.
8. PUT OPTION IN RESPECT OF FOREIGN SHAREHOLDERS' SHARES
8.1 GRANT OF PUT OPTION
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In consideration of the Foreign Shareholder entering into this Agreement, the
Indonesian Shareholder grants to the Foreign Shareholder a right to sell to the
Indonesian Shareholder (the Put Option) any or all of the Foreign Shareholders'
shares in the capital of the Company at any time following the expiration of 2
(two) years from the Commencement Date; provided, the Foreign Shareholder shall
have the right to exercise the Put Option prior to such time upon the failure of
the Indonesian Shareholder to fulfill in any material respect any of its
covenants contained herein or in the License Agreement (a DEFAULT). The Put
Option shall be exercisable at the fair value (the FAIR VALUE) of the relevant
shares as at the date of serving the exercise notice under Clause 8.2; provided,
that in the event the Foreign Shareholder shall exercise the Put Option
following a Default, the Fair Value shall be deemed to be the greater of (i) the
amount determined in accordance with Clause 8.2 and 8.3 herein and (ii) the
equity contribution by the Foreign Shareholder pursuant to Clause 6.4.
8.2 EXERCISE OF PUT OPTION
The Foreign Shareholder may exercise the Put Option by serving upon the
Indonesian Shareholder written notice of exercise. The notice must include
details of the number of shares, the date of the proposed transfer and
completion (which must be between 30 and 90 days thereafter) and the proposed
Fair Value of the shares.
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8.3 DISPUTE AS TO FAIR VALUE OF THE SHARES
If the Parties do not agree on the proposed Fair Value of the relevant shares,
as set out in the Foreign Shareholders' exercise notice, the dispute shall be
dealt with in accordance with Clause 20.6. (Reference to the terms Terminating
Party, Defaulting Party and Termination Notice shall, for present purposes, be
construed as Indonesian Shareholder, Foreign Shareholder and exercise notice
respectively.)
8.4 COMPLETION OF SALE PURSUANT TO PUT OPTION
For completion of the sale of the relevant shares by the Foreign Shareholder to
the Indonesian Shareholders in accordance with exercise of the Put Option under
Clause 8.2:
(a) the Foreign Shareholder and the Indonesian Shareholder shall execute
an instrument of sale and transfer in favor of the Indonesian
Shareholder, or any Affiliate of the Indonesian Shareholder as it may
nominate by written notice received by the Foreign Shareholder not
less than 5 days before completion, in respect of the shares which
are to be transferred to the Indonesian Shareholder, together with
the relevant share certificates and, if requested by the Indonesian
Shareholder, a power of attorney in a form and in favor of a person
nominated by the Indonesian Shareholder, so as to enable the
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Indonesian Shareholder to exercise all rights to ownership in relation
to the relevant shares including, without limitation, the voting
rights;
(b) upon the execution of the instrument of sale and transfer pursuant to
Clause 8.4(a), the Indonesian Shareholder shall pay the purchase price
to the Foreign Shareholder for value on the date of completion or in
such other manner as may be agreed by the Parties before completion;
(c) the Parties shall procure that the transfer of shares is promptly
registered in the Register of Shareholders of the Company in accordance
with the provisions of the Articles of Association;
(d) the Foreign Shareholder shall do all such acts and/or execute all such
documents in a form satisfactory to the Indonesian Shareholder as the
Indonesian Shareholder may require to give effect to the transfer of
shares pursuant to this Clause 8.2; and
(e) if the relevant shares constitute the Foreign Shareholders' entire
holding of shares in the Company, the Foreign Shareholder shall, as
directed by the Indonesian Shareholder and with effect from completion
of the transfer, procure the resignation or removal of any members of
the Board of Directors and the Board of Commissioners nominated by, or
on behalf of, the Foreign Shareholder.
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9. MANAGEMENT
9.1 COMPANY TO HAVE BOARD OF DIRECTORS AND BOARD OF COMMISSIONERS
The Company shall be managed by a Board of Directors (Direksi) under the
supervision of a Board of Commissioners (Dewan Komisaris). Members of the Board
of Directors and members of the Board of Commissioners shall be appointed by the
General Meeting of Shareholders, subject to the provisions of this Agreement.
9.2 INITIAL COMPOSITION OF BOARD OF DIRECTORS
The Board of Directors shall be initially composed of 4 (four) directors
(including a President Director), and:
(a) where the Indonesian Shareholder and the Foreign Shareholder each hold
40% or more of the issued share capital of the Company, 2 (two) of whom
(including the President Director) shall be appointed upon the
nomination of the Foreign Shareholder and 2 (two) of whom (excluding
the President Director) shall be appointed upon the nomination of the
Indonesian Shareholder; or
(b) where the Indonesian Shareholder and the Foreign Shareholder do not
each hold 40% or more of the issued share capital of the Company, the
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nomination of appointments to the Board of Directors shall be based
upon the proportion of issued share capital held by the Parties, and
the President Director shall be appointed upon the nomination of the
majority Shareholder.
Each Party shall vote its shares to give effect to the nominations of the
members of the Board of Directors which have been made as stated above. Each
Party shall be entitled at any time to remove and replace at any time any of its
nominees on the Board of Directors and in such event each Party shall vote its
shares so as to give effect to the appointment of the nominated replacement to
the Board of Directors.
In the event of a vacancy on the Board of Directors caused by the death,
retirement, resignation or removal of a director, the vacancy shall be filled by
appointing another nominee of the Party whose nominee has died, retired,
resigned or been removed.
9.3 POWERS OF PRESIDENT DIRECTOR
The President Director shall be entitled to represent the Board of Directors and
therefore to act for and on behalf and in the name of and to bind the Company
within and outside the Courts of law, subject to any limitations set out in the
Articles of Association or by applicable mandatory laws and regulations.
<PAGE> 32
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9.4 BOARD OF COMMISSIONERS
The Board of Commissioners shall be composed of 4 (four) members (including a
President Commissioner), at all times 2 (two) of whom shall be appointed upon
the nomination of the Foreign Shareholder and 2 (two) of whom (including the
President Commissioner) shall be appointed upon the nomination of the Indonesian
Shareholder.
Each Party shall vote its shares to give effect to the binding nominations of
the members of the Board of Commissioners which have been made as stated above.
Each Party shall be entitled to remove and replace at any time any of its
nominees on the Board of Commissioners and in such event each Party shall vote
its shares so as to give effect to the appointment of the nominated replacement
to the Board of Commissioners.
In the event of a vacancy on the Board of Commissioners caused by the death,
retirement, resignation or removal of a member, the vacancy shall be filled by
appointing another nominee of the Party whose nominee has died, retired,
resigned or been removed.
9.5 CONFLICTS OF INTEREST
The Parties shall be responsible for ensuring that any members of the Board of
Directors or Board of Commissioners appointed upon their nomination in
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accordance with this Clause 9 shall act in good faith in the best interests of
the Company at all times.
Persons nominated for the position of member of the Board of Directors or member
of the Board of Commissioners shall not be deemed disqualified to hold such
office by reason of their being officers, directors, commissioners or
shareholders of any other company incorporated within or outside the Territory.
In addition, no member of the Board of Directors or member of the Board of
Commissioners shall be deemed to have a conflict of interest in a matter and
shall not be disqualified to vote and/or serve on the ground that such Director
or Commissioner is appointed upon the nomination of a particular Shareholder and
the matter under consideration involves commercial, financial or other
relationship between the Company and that Shareholder or any Affiliate of that
Shareholder provided that the relevant member of the Board of Directors or Board
of Commissioners has disclosed to the Company the nature of any such
relationship prior to consideration of that matter.
9.6 APPOINTMENT OF EXECUTIVES
The President Director or his nominee shall have the right from time to time to
select for appointment and, as necessary from time to time, to require the
dismissal and replacement of employees (including senior executive non-board
level management personnel) of the Company.
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10. MEETINGS OF BOARD OF DIRECTORS AND BOARD OF COMMISSIONERS
10.1 BOARD OF DIRECTORS' MEETINGS
The Board of Directors shall meet at least quarterly and more frequently as
required for the proper management of the Company.
The quorum for meetings of the Board of Directors shall be the attendance or
representation at the meeting of a simple majority of the members of the Board
of Directors. The level of affirmative vote required to pass a resolution at all
meetings of the Board of Directors shall be a simple majority of the members of
the Board of Directors present or represented at the meeting.
10.2 BOARD OF COMMISSIONERS' MEETINGS
The Board of Commissioners shall meet at least annually and more frequently as
required for the Board of Commissioners to duly perform its functions.
The quorum for meetings of the Board of Commissioners shall be the attendance or
representation at the meeting of a simple majority of the members of the Board
of Commissioners. The level of affirmative vote required to pass a resolution at
all meetings of the Board of Commissioners
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shall be a simple majority of the members of the Board of Commissioners
present or represented at the meeting.
10.3 GENERAL SHAREHOLDERS' MATTERS
The following matters shall be within the exclusive jurisdiction of the General
Meeting of Shareholders, subject to the requirements of applicable mandatory
laws and regulations:
(a) amendments to the Articles of Association;
(b) any increase or decrease in the authorized share capital of the Company
or the issuance or sale of any bonds, notes, warrants, preference
shares or other securities of any kind (other than the issuance of
additional shares out of the authorized share capital of the Company);
(c) the distribution of profits, including the declaration and amount of
dividends;
(d) the appointment and/or dismissal of the Company's auditors;
(e) the merger or consolidation of the Company into or with another
entity;
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(f) the dissolution or liquidation of the Company and the appointment of
a liquidator; and
(g) any change in the principal business of the Company.
10.4 SPECIFIC MATTERS ON WHICH CONCURRENCE OF THE BOARD OF COMMISSIONERS
IS REQUIRED
The following decisions and actions shall only be taken by the Company with the
prior approval of the Board of Commissioners:
(a) the Company making any borrowing from or lending amounts to any
Shareholder or third party in excess of an amount determined by the
Board of Directors from time to time other than making any drawing
under any credit facility which has previously been approved;
(b) the Company obtaining any financing requiring, or to be provided on
the basis of, a Shareholder guarantee or similar support from any
Shareholder(s);
(c) the Company giving any guarantee of or indemnity in respect of the
obligations or liabilities of any other person or company where the
aggregate value of such guarantee or indemnity is in excess of an
amount determined by the Board of Directors from time to time;
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(d) the Company creating any hypothec, pledge, fiduciary transfer of
property for security purposes, assignment for security purposes
(CESSIE), lien or other encumbrance or security interest in or over the
Company or the whole or any of its assets or properties having a value
in excess of an amount determined by the Board of Directors from time
to time;
(e) any sale, lease, transfer or other disposition of the whole or any part
of the undertaking, properties or assets of the Company having a value
in excess of an amount determined by the Board of Directors from time
to time;
(f) the issuance of additional shares in the capital of the Company;
(g) the formation, acquisition or disposition of any subsidiary of the
Company; and
(h) the entry into or material amendment of the terms of any transaction
with any member of the Board of Directors or any member of the Board of
Commissioners of the Company or with any person or company associated
with such member or with any Shareholder or any Affiliate of any
Shareholder.
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11. GENERAL MEETINGS OF SHAREHOLDERS
11.1 ANNUAL GENERAL MEETINGS
An Annual General Meeting of Shareholders shall be held once a year within 6
(six) months after the end of the preceding financial year of the Company.
11.2 EXTRAORDINARY GENERAL MEETINGS
An Extraordinary General Meeting of Shareholders shall be convened by the Board
of Directors whenever it is deemed necessary by the Board of Directors or upon
the written request of 1 (one) or more Shareholders holding or representing at
least 10% (ten percent) of the aggregate number of the issued shares of the
Company, stating in such request the matters to be dealt with.
11.3 CHAIRMAN OF GENERAL MEETING OF SHAREHOLDERS
Subject to the Articles of Association, the President Director shall act as the
chairman of all general meetings of Shareholders.
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11.4 EACH SHARE CARRIES ONE VOTE
At any general meeting of Shareholders a Shareholder shall have 1 (one) vote for
each share of which it is the registered Shareholder and one additional vote for
each other share which it represents at the meeting.
11.5 QUORUM AND VOTING AT GENERAL MEETINGS OF SHAREHOLDERS
Except as otherwise provided for in this Agreement or the Articles of
Association:
(a) the quorum for a general meeting of Shareholders shall be
Shareholders representing 60% of the total issued shares the Company;
and
(b) decisions at a general meeting of Shareholders shall be adopted if
approved by Shareholders representing 60% of the total issued shares in
the Company.
12. PRINCIPLES OF OPERATION AND COOPERATION
The Parties acknowledge and agree to the following corporate and operating
policies to be applied by and in respect of the Company:
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(a) (VOTING BY PARTIES' BOARD NOMINEES) The Parties agree to vote their
shares and to cause the members of the Board of Commissioners and
members of the Board of Directors which are appointed upon their
respective binding nominations as provided above to give effect to the
terms of this Agreement (including the policies stated in this Clause)
during the continuance of this Agreement.
(b) (INDEPENDENT STATUS OF THE COMPANY) The Company shall function as an
independent business enterprise, maintaining an arms'-length
relationship with the Shareholders and their Affiliates as normal
business practice. Without limiting the generality of the previous
sentence, the Parties agree that all transactions between the Company
and any Shareholder or any Affiliate of any Shareholder shall be upon
arms'-length commercial terms.
(c) (GENERAL OPERATING POLICY) The Company shall be managed and operated on
a sound and efficient commercial basis and in accordance with the
prevailing laws and regulations of the Republic of Indonesia.
(d) (SERVICES FROM FOREIGN SHAREHOLDER) The Foreign Shareholder (or an
Affiliate of the Foreign Shareholder) shall provide technical,
management and marketing services to the Company to assist with the
conduct of the Business in accordance with and subject to the terms set
out in the Technical Services Agreement. For the provision of
<PAGE> 41
41
such services, the Company shall pay to the Foreign Shareholder (or the
relevant Affiliate of the Foreign Shareholder) a fee of $0.25 per meter
of fabric manufactured by the Company, or any Affiliate of the Company,
for a period of three years from the Commencement Date, and thereafter,
a fee as may be agreed between the Parties and the Company. This fee
will remain payable by the Company despite the earlier termination of
this Agreement or the Technical Services Agreement or the exercise by
the Foreign Shareholder of the Put Option.
(e) (DIVIDEND POLICY) The distribution of dividends by the Company in
respect of any financial year shall be discussed and determined at the
Annual General Meeting of Shareholders in respect of the relevant
financial year based on the audited annual accounts of the Company
provided that:
(i) dividends may only be paid from profits of the Company in
the relevant financial year or from retained earnings from
previous financial years;
(ii) the Company shall not borrow funds in order to pay any
dividend; and
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(iii) the distribution of dividends by the Company shall be
subject always to the requirements of financially prudent
management of the Company.
Subject to compliance with the provisos stated immediately above and
the Articles of Association, the Board of Directors may resolve to pay
one or more interim dividends in any financial year.
(f) (PARTIES TO ASSIST SUCCESS OF THE COMPANY) Each of the Parties
undertakes that it shall cooperate with each other as expeditiously as
possible to perform all those tasks reasonably necessary to make the
operations of the Company successful in accordance with the terms of
this Agreement.
(g) (PARTIES TO ACT IN GOOD FAITH) Each of the Parties undertakes to act in
good faith and to cooperate with each other Party to amend this
Agreement if required by the laws and regulations of the Republic of
Indonesia and in accordance with the spirit of this Agreement.
(h) (NON-COMPETITION) The Parties will not participate, either directly or
indirectly, in any facility, operation or entity producing circular
knit fabrics, or otherwise acting in competition with the Company,
anywhere in the Territory during the operation of this Agreement.
<PAGE> 43
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13. SEVERABILITY
If any one or more of the provisions contained in this Agreement or any document
executed in connection herewith shall be invalid, illegal, or unenforceable in
any respect under applicable law, the validity, legality and enforceability of
the remaining provision contained herein shall not in any way be affected or
impaired; provided that in such case the Parties shall use their best efforts to
achieve the purpose of the invalid provision by a new legally valid provision or
provisions.
14. FORCE MAJEURE
14.1 EFFECT OF FORCE MAJEURE EVENT
The failure or delay of either of the Parties hereto to perform any obligation
under this Agreement (other than any obligation to make any payment of money)
solely by reason of acts of God, acts of government (except as otherwise
enumerated herein), riots, wars, strikes, lockouts, accidents in transportation
or other causes beyond its control shall not be deemed to be a breach of this
Agreement; provided that the Party so prevented from complying herewith shall
not have procured such force majeure, shall have used reasonable diligence to
avoid such force majeure or to ameliorate its effects, and shall continue to
take all actions within its power to comply as fully as possible with the terms
of the Agreement.
<PAGE> 44
44
14.2 FORCE MAJEURE EVENT TO BE REMEDIED
Except where the nature of the event shall prevent it from doing so, the Party
suffering such force majeure shall notify the other Party in writing within 14
(fourteen) days of the occurrence of such force majeure and shall in every
instance, to the extent reasonable and lawful under the circumstances, use its
best efforts to remove or remedy such cause as soon as possible.
15. BOOKS, RECORDS AND REPORTS
15.1 COMPANY TO MAINTAIN RECORDS AND ACCOUNTS
The Company shall maintain, at its principal office:
(a) accurate and adequate accounting books and records maintained in
Dollars and Rupiah in both English and Bahasa Indonesia in accordance
with generally accepted Indonesian accounting principles and practices
which shall accurately reflect the Company's financial position in
accordance with established financial practices of recognized
international accounting standards;
(b) such other accounting or other records as may be required by the laws
of the Territory;
<PAGE> 45
45
(c) all original agreements, records, and reports relating to its
activities and operations.
All assets, liabilities and transactions of or involving the Company shall be
recorded properly in its accounts and records and shall be fully disclosed to
the auditors of the Company.
15.2 FOREIGN SHAREHOLDER REPORTING REQUIREMENTS
In addition to the records required to be maintained in accordance with Clause
15.1, the Company shall also provide to the Foreign Shareholder records and
financial information in the form necessary to comply with the Foreign
Shareholder's reporting requirements including financial information prepared on
the basis of accrual accounting.
15.3 QUARTERLY DIRECTORS' REPORTS
The Board of Directors shall make quarterly reports to the Shareholders and as
otherwise required by the laws of the Territory. Without limiting the
information contained in the quarterly reports, the reports shall include
financial information required by the Shareholders prepared on an accruals
basis.
<PAGE> 46
46
15.4 ANNUAL AUDIT OF THE COMPANY
Within 120 (one hundred and twenty) days after the end of each financial year,
Deloitte Touche Tohmatsu or such other independent Indonesian public accounting
firm affiliated with an international accounting firm as approved by the
Parties, shall audit the books and records of the Company. The Board of
Directors shall provide to the Shareholders at the Company's expense a report
presented in accordance with generally accepted Indonesian accounting
principles, subject at all times to the requirements of Indonesian law.
The auditors of each Party shall also have the right to review the books and
accounts of the Company on an annual basis at the expense of the relevant Party.
The audited accounts and Board of Directors' report shall be submitted in both
English and Bahasa Indonesia for approval at the Annual General Meeting of
Shareholders in respect of the relevant financial year to be held in accordance
with the Articles of Association and upon such approval being granted, the
audited accounts and Board of Directors' report shall
<PAGE> 47
47
be final and binding upon the Parties as to the matters set out or
reflected therein, in the absence of manifest error or fraud.
15.5 FINANCIAL YEAR OF THE COMPANY
The accounting year of the Company shall commence on the first day of January of
each calendar year and end on the thirty-first day of December of the same
calendar year, unless otherwise agreed at a General Meeting of Shareholders.
16. REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants to each other Party that:
(a) it has full power to enter into this Agreement and to perform its
obligations hereunder according to the terms of this Agreement, and
that it has taken all necessary corporate or other actions to authorize
its entering into and performance of this Agreement;
(b) subject to Clause 2.3, it is duly authorized and licensed by all
relevant governmental authorities to enter and to perform this
Agreement and that it has made and will make all required reports and
disclosures to any applicable government or agency thereof with respect
to this Agreement or any activity undertaken in connection with this
Agreement;
<PAGE> 48
48
(c) the statements made by that Party relating to itself in this Agreement
are true and that nothing further needs to be stated to prevent such
statements from being incorrect or misleading; and
(d) it has no outstanding commitments or obligations, contractual or
otherwise, which would in any way impede right and ability of that
Party to enter into this Agreement and/or fulfil any and all of its
obligations hereunder and that all necessary corporate approvals
required in order to enter into this Agreement and carry out the
transactions contemplated hereby have been obtained.
17. INDEMNITIES
Each Party (in this Clause, the Warrantor) shall indemnify and hold each other
Party harmless from, against and in respect of any and all liabilities, losses,
costs, damages, commissions and expenses which the other Party may sustain or
incur by reason of the Warrantor's breach of any representations and warranties
made by the Warrantor under Clause 16 and/or the breach of any material
obligation of the Warrantor under this Agreement.
<PAGE> 49
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18. COVENANTS
18.1 PARTIES TO OBTAIN ALL APPROVALS
The Parties agree and covenant that during the term of this Agreement each Party
shall use its best endeavors expeditiously to obtain and maintain all approvals,
licenses and permits required under applicable laws, regulations and policies
and its articles of association or other constituent documents for maintaining
its shareholding in the Company and the continued existence and operations of
the Company.
18.2 COMPANY TO MAINTAIN INSURANCE
The Parties agree to procure that the Company shall at all times obtain and
maintain all proper and adequate insurance coverage customarily effected having
regard to the nature of the Business.
18.3 PARTIES TO PROCURE BUSINESS ETHICALLY
The Parties shall use all reasonable endeavors to procure that the affairs of
the Company and the Business from time to time shall be conducted in accordance
with sound and good business practice and the highest ethical standards
generally, as well as in accordance with all applicable
<PAGE> 50
50
regulatory requirements and best practices of the jurisdictions and markets
in which the Business is to be conducted.
18.4. TECHNICAL SERVICES AGREEMENT
The Company and the Foreign Shareholder shall enter into a technical services
agreement in respect of technical services to be provided by the Foreign
Shareholder to the Company.
19. CONFIDENTIALITY
19.1 CONFIDENTIAL TREATMENT/PERMITTED DISCLOSURES
The Parties agree and undertake that during the term of this Agreement any and
all other information received by any Party or the Company in connection with
this Agreement which is derived from another Party or the Company (however
acquired and in whatever form) (the Information) shall be treated by it and the
Company as confidential and it shall not disclose all or any part of it to any
third party (other than, in the case of the Parties, to the Company) or
otherwise seek to exploit all or any part of it without the prior written
consent of the Company and each other Party and shall procure that the Company
shall not, provided that this clause shall not apply to Information which:
<PAGE> 51
51
(a) at any time comes into the public domain through no fault of any
Party or the Company; or
(b) is required to be furnished to any government or public authority
pursuant to any law, rule, regulation or judicial order applicable to
the Company or any Party or any Affiliate of a Party; or
(c) is required to be disclosed in compliance with the rules of a stock
exchange on which the shares of a Party or an Affiliate of a Party is
listed; or
(d) is disclosed to a Party's bankers, lawyers, accountants, tax advisors
or other consultants who agree to maintain the secrecy of such
Information.
19.2 IMPLEMENTATION
Each Party further agrees to make all reasonable efforts, and to take all
reasonable precautions, to prevent any of its employees or personnel, or any
other persons, from obtaining or making any unauthorized use of, or effecting
any disclosure of the Information. 19.3 TREATMENT OF INFORMATION BY THE COMPANY
Each Party shall procure that the Company treats all Information as confidential
and shall not disclose all or any part of it to any third
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52
party or otherwise seek to exploit all or any part of it without the prior
written consent of the Party from which it was derived.
19.4 PARTIES RETAIN PROPERTY RIGHTS
It is understood by the Parties that Information shall remain the property of
the Party from which it was obtained and upon termination or expiration of this
Agreement for any reason whatsoever, the Company and the Party receiving
Information shall cease to use the same and shall return the same to the Party
from which it was obtained together with all related documents and copies.
19.5 OBLIGATIONS TO SURVIVE
Notwithstanding any other term of this Agreement, the obligations contained in
this Clause 19 shall bind the Parties during the term of this Agreement and
shall continue to bind the Parties after this Agreement is terminated (for
whatever reason) or expires for a period of two years thereafter.
19.6 PUBLIC ANNOUNCEMENTS
Except as required by applicable law or the requirements of any regulatory body
(including any relevant stock exchange), all press releases and other
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53
public announcements relating, directly or indirectly, to the Company must be in
terms agreed by the Parties.
20. TERM AND TERMINATION
20.1 TERM OF THIS AGREEMENT
This Agreement shall become effective on the date hereof and shall remain in
full force and effect as long as the Company continues to exist, unless earlier
terminated by agreement between the Parties or pursuant to any other provisions
of this Agreement.
20.2 TERMINATION OF THIS AGREEMENT
If at any time any Party commits any of the following acts or any of the
following events occurs in respect of a Party (the Party which commits such act
or the Party in respect of which the event occurs being referred to as the First
Party), any other Party (the Notifying Party) may terminate this Agreement by
written notice to each other Party:
(a) if the First Party becomes insolvent or goes into liquidation (other
than a voluntary liquidation for the purposes of merger or
reorganization) or if a receiver or administrator is appointed in
respect of one third or more of the First Party's assets;
<PAGE> 54
54
(b) if the warranties or representations made by the First Party under or
in connection with this Agreement are found to be materially false or
misleading and are not remedied within 60 (sixty) days of receipt of
notice from the Notifying Party to so remedy;
(c) if the First Party shall fail to perform or observe any material
obligation under this Agreement and such failure shall continue for a
period of 90 (ninety) days after written notice of such failure has
been received by the First Party from the Notifying Party;
(d) if the First Party shall be or become incapable for a period of 180
days of performing any of its obligations under this Agreement because
of any event covered by Clause 14.
Any Party may terminate this Agreement by written notice to each other Party if
the approval of the President of the Republic of Indonesia for the establishment
of the Company (as amended and modified from time to time), as notified by BKPM
or any other necessary approvals, permits or licences of the competent
Indonesian authorities for or in respect of the Business and/or for any and all
other material actions to be taken by the Company or any Party hereunder, and
for enjoyment of the benefits to be secured by each Party hereunder, cannot be
obtained or is withdrawn, or if any subsequent enactment of law or regulation
or any subsequent act of any
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55
governmental authority in Indonesia shall, in the reasonable opinion of the
Party desiring to terminate this Agreement:
(i) make performance under this Agreement impossible; or
(ii) materially alter the rights and obligations of and to the
detriment of that from those agreed and contemplated by this
Agreement; or
(iii) materially interfere with benefits contemplated herein to be
received by that Party.
20.3 VOLUNTARY TERMINATION
A Party may voluntarily terminate this Agreement by giving not less than 90
(ninety) days written notice of termination to the other Party, in which case
the provisions of Clause 20.5 shall apply mutatis mutadis as if references to
the "Innocent Party" in Clause 20.5 were references to the Party receiving the
written voluntary termination notice and references to "Defaulting Party" were
to the Party giving the voluntary notice of termination.
<PAGE> 56
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20.4 ACCRUED RIGHTS NOT AFFECTED
Termination of this Agreement shall be without prejudice to the accrued rights
and liabilities of the Parties at the date of termination.
20.5 RIGHTS OF TERMINATING PARTY
Notwithstanding anything to the contrary in this Agreement, if this Agreement is
terminated in accordance with the provisions of this Clause 20, the Party (the
Innocent Party) which gives written notice of termination (Termination Notice)
shall, at its option (but subject to the obtaining of necessary Authorizations,
if any, of the competent Indonesian authorities), be entitled within 30 (thirty)
days of the date of termination either:
(a) to require the other Party (THE DEFAULTING PARTY) to sell to the
Innocent Party (or its designee) all of the Defaulting Party's shares
in the Company for the Fair Value for the shares determined in
accordance with Clause 20.6 less 20% of the Fair Value thereof; or
(b) to sell its shares in the Company to the Defaulting Party for the Fair
Value determined in accordance with Clause 20.6 or, if the Defaulting
Party does not acquire the shares within 14 days of the determination
of the Fair Value thereof in accordance with Clause
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20.6, then to any third party chosen by the Innocent Party in its
discretion without being subject to the sale and transfer requirements
set out in this Agreement or the Articles of Association for the Fair
Value for the shares determined as stated above.
20.6 FAIR VALUE
For the purposes of Clause 20.5 (and Clause 8), the Fair Value of the shares in
the Company shall be:
(a) the price for the shares as shall be agreed in writing between the
Terminating Party and the Defaulting Party; or
(b) in the absence of agreement within 21 (twenty-one) days after the
service of a Termination Notice (pursuant to Clause 20.2) the Fair
Value will be determined in accordance with the principles stated in
the paragraph (c) below by an independent internationally respected
accounting firm with an associated office in Indonesia (the EXPERT)
nominated by agreement between the Terminating Party and the Defaulting
Party or, failing agreement between them within 14 (fourteen) days
after they commence to discuss the selection of that Expert, as
nominated by the President or other head for the time being of the
International Chamber of Commerce at the request of either the
Terminating Party or the Defaulting Party.
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The Expert shall be requested to give due weight to any representations
put forward by a Party within any time limit prescribed by the Expert.
The Expert shall act as an expert and not as an arbitrator and his
written determination shall in the absence of manifest error be final
and binding on the members and not subject to review in any way. For
the foregoing purposes, the Expert shall have access to all books of
account and records and all vouchers, cheques, papers and documents
which in any way relate to the business of the Company; or
(c) the Expert will certify the Fair Value of the relevant shares in the
Company as at the date of the Termination Notice on the following
assumptions and bases:
(i) valuing the shares as on an arm's length sale between a
willing, but not too anxious, vendor and a willing
purchaser;
(ii) if the Company is then carrying on business as a going
concern, on the assumption that it will continue to do so;
(iii) that the shares are capable of being transferred without
restriction;
(iv) taking into account the total of amounts which the
Defaulting Party is obliged to provide or pay to the Company
pursuant to the terms of this Agreement or otherwise but
which remains
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59
outstanding and unpaid at the date of the Termination
Notice; and
(v) valuing the relevant shares as a rateable proportion of the
total value of all the issued shares of the Company. For the
avoidance of any doubt, any majority or minority position in
respect of the relevant shareholding shall not be taken into
account in valuing the relevant shares.
If any difficulty shall arise in applying any of the foregoing
assumptions or bases, then that difficulty shall be resolved by the
Expert in any manner as it shall in its absolute discretion think fit.
The Company will use its best endeavors to procure that the Expert determines
the Fair Value within 30 (thirty) days of being requested so to do.
20.7 LIABILITY FOR EXPERT'S FEES
The costs and expenses of the Expert in determining the Fair Value shall be
borne equally by each of the Parties.
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20.8 WAIVER OF CIVIL CODE PROVISIONS
The parties hereby waive the provisions of Article 1266 of the Indonesian Civil
Code to the extent that they require a court order to terminate this Agreement.
21. EXPATRIATE WORK PERMITS AND COSTS
21.1 OBTAINING EXPATRIATE WORK PERMITS AND VISAS
The Indonesian Shareholder shall assist the Company and the Foreign Shareholder
to obtain all work permits and other visas as may be required from time to time
to enable expatriate personnel seconded by the Foreign Shareholder to, or
otherwise employed or engaged by, the Company to lawfully enter, reside and work
in and depart from the Territory.
21.2 COMPANY TO PAY EXPATRIATE COSTS
The Company shall pay (or, as applicable, reimburse to) the Foreign Shareholder
all salaries, accommodation costs and other benefits payable to or in respect of
expatriate personnel seconded by the Foreign Shareholder to, or otherwise
employed or engaged by, the Company.
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22. NOTICES
Any notice given under this Agreement:
(a) must be in writing addressed to the intended recipient at the address
shown below or the address last notified by the intended recipient to
the sender:
INDONESIAN SHAREHOLDER:
PT TEXMACO JAYA
JT. H.R. Rasuna Kav. X-6 No. 8 Jakarta
Indonesia
Attention: President Director
Fax: 62-21-5225738
FOREIGN SHAREHOLDER:
DYERSBURG CORPORATION
15720 John J. Delaney Drive
Suite 445
Charlotte, NC 28277-2747
United States of America
Attention: William S. Shropshire
Fax: +1 704 341-4868
(b) must be signed by a person duly authorized by the sender; and
(c) will be taken to have been given or made:
(i) in the case of delivery in person, when delivered;
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(ii) in the case of delivery by post two business days after the
date of posting (if posted to an address in the same country)
or fourteen business days after the date of posting (if posted
to an address in another country); and
(iii) in the case of fax, on receipt by the sender of a transmission
control report from the dispatching machine showing the
relevant number of pages and the correct destination fax
machine number and indicating that the transmission has been
made without error,
but if delivery or receipt occurs on a day on which business is not
generally carried on in the place to which the communication is sent or
is later than 4 pm (local time) it will be taken to have been duly
given or made at the commencement of business on the next day on which
business is generally carried on in the place.
23. ENTIRE AGREEMENT AND AMENDMENT
This Agreement may be amended only by another agreement in writing executed by
all Parties who may be affected by the amendment.
This Agreement contains the entire agreement of the Parties with respect to its
subject matter. It constitutes the only conduct relied on by the Parties (and
supersedes all earlier agreements, understanding and other conduct by the
Parties) with respect to its subject matter.
24. ASSIGNMENT
Except as expressly stated herein, the rights and obligations of each Party are
personal and cannot be assigned, charged or otherwise dealt with, and
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no Party shall attempt or purport to do so, without the prior written consent of
each other Party.
25. NO WAIVER
No failure to exercise and no delay in exercising any right, power or remedy
under this Agreement will operate as a waiver. Nor will any single or partial
exercise of any right, power or remedy preclude any other or further exercise of
that or any other right, power or remedy.
26. COSTS
Each party shall bear its own costs arising out of the preparation of this
Agreement.
27. GOVERNING LANGUAGE
This Agreement has been negotiated and agreed in the English language which
shall be the governing and determining language of and in respect of this
Agreement for all purposes, notwithstanding that it is translated into any other
language for any reason or purpose whatsoever.
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28. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the laws
of the Republic of Indonesia.
29. RESOLUTION OF DISPUTES
29.1 DISPUTES TO BE RESOLVED THROUGH AMICABLE SETTLEMENT OR ARBITRATION
All disputes, controversies or differences which may arise between the Parties
out of or in relation to or in connection with this Agreement, or relating to
the construction, termination or breach hereof, shall be resolved amicably by
consultation between a nominated managing director (or similar officer) of each
Party with sufficient power and authority to represent and bind the relevant
Party. If such dispute, controversy or difference cannot be resolved by such
consultation within thirty (30) days after referring the matter to the
respective managing directors, then the respective positions of each Party shall
be forwarded to the chairman of each Party for discussion to attempt to resolve
the relevant dispute controversy or difference amicably. If such dispute,
controversy or difference still cannot be resolved amicably within thirty (30))
days after the matter has been referred to the respective chairmen, then any
Party may by written notice to the other Party (the ARBITRATION NOTICE), refer
the matter to settlement by arbitration conducted in accordance with the
UNCITRAL Arbitration Rules as in force on the date hereof by one (1) independent
arbitrator (if the Parties are able to agree upon the joint appointment of one
arbitrator within thirty (30) days of service of the Arbitration Notice) or by a
Board of Arbitration comprising three (3) independent arbitrators appointed in
accordance with Clause 29.2 (if the
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parties are unable to agree upon the joint appointment of one arbitrator within
thirty (30) days of service of the Arbitration Notice).
29.2 BOARD OF ARBITRATION
If the parties are unable to agree upon the joint appointment of one arbitrator
within thirty (30) days of service of the Arbitration Notice, then the parties
shall each appoint one (1) independent arbitrator within forty-five (45) days of
service of the Arbitration Notice. The two arbitrators thus appointed shall
appoint a third independent arbitrator within sixty (60) days of service of the
Arbitration Notice. The third independent arbitrator thus appointed shall be a
lawyer experienced in matters of international, financial and commercial
matters. In the event that the two independent arbitrators shall fail to appoint
a third independent arbitrator within sixty (60) days of service of the
Arbitration Notice, the third arbitrator shall be appointed in accordance with
the UNCITRAL Arbitration Rules as in force on the date hereof.
If any Party shall fail to appoint an arbitrator within the time stated, then
any arbitrator appointed within such time period shall sit alone as a single
arbitrator and shall expeditiously hear and decide the dispute.
29.3 LOCATION OF ARBITRATION
The arbitration shall be conducted in Singapore.
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29.4 LANGUAGE OF ARBITRATION
All communications during the arbitration proceedings shall be in the English
language.
29.5 ARBITRATION AWARD
The arbitrator or the Board of Arbitration shall render its award applying
strict rules of law and principles consistent with the explicit terms of this
Agreement and shall have the authority to include in such award a decision
binding upon the Parties, enjoining them to take or refrain from taking specific
action with respect to the matter in dispute or disagreement. The award of the
arbitrator or the Board of Arbitration shall be final and binding on the Parties
and the Parties hereby irrevocably exclude any right of application or appeal to
any Court in any jurisdiction whatsoever in connection with any question arising
in the course of any arbitration or in respect of any award made. For this
purpose, the Parties expressly agree to waive the operation of Article 641 of
Reglement of de Rechtsvordering (RV) and Articles 15 and 108 of Law No. 1 of
1950 (Supreme Court Rules). An order of judicial acceptance or an application
for enforcement of the arbitration award may be sought in any Court of competent
jurisdiction within or outside Indonesia. The costs of any arbitration shall be
borne in accordance with the determination of the arbitrator or the Board of
Arbitration.
The Parties hereby irrevocably agree to cause the Company to observe and give
effect to the award of the arbitrator or the Board of Arbitration.
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29.6 MANDATE OF ARBITRATOR NOT TO EXPIRE
The Parties hereby irrevocably waive Article 260 section 1 and Article 650
section 2 of RV so that the mandate of the arbitrator or Board of Arbitrators
duly constituted in accordance with the terms of this Agreement shall remain in
effect until a final arbitration award has been issued by the arbitrator or
Board of Arbitration.
29.7 ELECTION OF DOMICILE FOR ENFORCEMENT OF AWARD
For the purposes of enforcing any arbitration award only, each of the Parties
hereby irrevocably elects domicile at the Clerk's Office of the District Court
of Central Jakarta (Kantor Panitera Pengadilan Negeri Jakarta Pusat), without
prejudice to any Party's right to commence proceedings in respect of the
enforcement of the arbitral award in any other Court whether within or outside
the Territory having jurisdiction over any other Party or any of its assets.
EXECUTED on the date first stated above.
SIGNED for and on behalf of )
DYERSBURG CORPORATION )
In the presence of: )
----------------------
Signature
- ------------------------- ----------------------
Witness Print name
- -------------------------
Print name
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SIGNED for and on behalf of )
PT TEXMACO JAYA )
In the presence of: )
----------------------
Signature
- ------------------------- ----------------------
Witness Print name
- -------------------------
Print name
<PAGE> 1
LICENSE AGREEMENT
This LICENSE AGREEMENT is made on 1998 between:
1. DYERSBURG CORPORATION, a company organized and existing under the laws
of the State of Tennessee with its registered office at 1315 Phillips
Street, Dyersburg, Tennessee, 38025-0767 United States of America
(DYERSBURG).
2. PT TEXMACO JAYA, a corporation established and existing under the laws
of the Republic of Indonesia, with its principal office at Jalan H.R.
Rasuna Said, Kav X-6, No. 8, Jakarta, Indonesia (TEXMACO).
RECITALS
A. Dyersburg and Texmaco entered into a Shareholders' Agreement on the date
hereof (the SHAREHOLDERS' AGREEMENT) pursuant to which they will establish a
joint venture company (the COMPANY) for the purpose of manufacturing and selling
circular knit fleece fabrics in Indonesia.
B. Dyersburg and its Affiliates have available to them extensive expertise
and certain technical know-how and technical information relating to the
manufacture and sale of circular knit fleece fabrics.
C. Texmaco is desirous of availing itself of the Know-how (as herein
defined) from Dyersburg for the possible manufacture and sale of circular knit
fleece fabrics outside of Indonesia, North America, Central America and the
Caribbean Basin.
<PAGE> 2
2
IT IS AGREED as follows.
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement (including the Recitals and Schedule), the following
definitions shall apply unless the context requires otherwise.
EXCLUDED TERRITORY shall mean Indonesia, North and Central America and the
Caribbean Basin.
KNOW-HOW means the expertise, technical knowledge and technical information
possessed by Dyersburg with respect to the manufacture and sale of Licensed
Products set forth in Schedule 1 hereto.
LICENSED PRODUCTS shall mean the full range of circular knit fleece fabrics
produced by Dyersburg.
1.2 IMPORTATION OF DEFINITIONS FROM SHAREHOLDERS' AGREEMENT
Unless the context otherwise requires, terms defined in the Shareholders'
Agreement have the same meaning when used in this Agreement.
1.3 INTERPRETATION
Clause 1.2 of the Shareholders' Agreement shall apply as if set out in
full in this Agreement.
<PAGE> 3
3
2. LICENSE
(a) During the term hereof, Dyersburg agrees to grant to Texmaco a
non-exclusive license and permission to use the Know-how for manufacture of the
Licensed Products anywhere in the World other than the Excluded Territory. Each
time, if any, as Texmaco shall determine, alone or in combination with any third
party, to commence the manufacture of the Licensed Products , Texmaco shall
provide prior written notice to Dyersburg and consult with Dyersburg regarding
Dyersburg's possible participation in such venture. The obligation to provide
notice to and consult with Dyersburg shall not require Texmaco to provide
Dyersburg a right of first refusal to participate in such venture.
(b) The Know-how and all documents, materials and other data and
information pertaining thereto shall be delivered by Dyersburg to Texmaco or one
of its Affiliates.
3. REPRESENTATIONS OF DYERSBURG; INDEMNIFICATION
3.1 OWNERSHIP OF KNOW-HOW
Dyersburg is the owner of the Know-how and has full right, power and authority
to license the Know-how to Texmaco in accordance with the terms of this
Agreement. There is no infringement action, lawsuit or claim that asserts that
Dyersburg's ownership or use of the Know-how violates or infringes the rights of
others and Dyersburg is not in any way making use of any confidential
information or trade secrets of any person in connection with its use of the
Know-how.
<PAGE> 4
4
3.2 INDEMNIFICATION
Dyersburg agrees to defend, indemnify and hold harmless Texmaco for any claim
directly or indirectly relating to, resulting from or arising out of any breach
of its representations made in Clause 3.1 above.
4. TERM
(a) This License Agreement shall become effective upon the date of
formation of the Company (the "Effective Date") and shall continue in full force
and effect thereafter, subject to the termination provisions set forth herein.
(b) In the event the Company shall not be formed and Texmaco provides
written notice to Dyersburg of its desire that this License Agreement shall
nevertheless become effective, Dyersburg shall have the option, exerciseable by
written notice to Texmaco, to agree that the License Agreement shall become
effective upon the payment by Texmaco of $4,000,000 to Dyersburg and the
delivery by Dyersburg to Texmaco of its share capital in the Company. In the
event Dyersburg exercises the foregoing option, (i) the Excluded Territory shall
mean North and Central America and the Carribbean Basin, and (ii) the
Commencement Date shall mean the date of Dyersburg's written notice to Texmaco.
<PAGE> 5
5
5. REMUNERATION
5.1 LICENSE FEES
(a) For a period of three years from the Commencement Date, Texmaco
shall pay to Dyersburg a fee of $0.25 per meter of Licensed Product manufactured
by it or any Affiliate other than the Company anywhere in the World.
(b) Texmaco shall make an equity contribution to the Company in the
amount of US $4,000,000 and shall contemporaneously assign and convey to
Dyersburg for no additional consideration the share capital in the Company in
respect of such equity construction. For the avoidance of any doubt, the
remuneration contemplated in this subclause (b) shall be in addition to any
remuneration payable under subclause 5.1(a).
5.2 CURRENCY OF PAYMENT
Payment pursuant to Clause 5.1 and Clause 4(b) shall be in United States
Dollars, and shall be made by telegraphic transfer to a bank account designated
by Dyersburg from time to time or in such other manner as may be agreed by the
Parties from time to time.
5.3 RECORDS
Texmaco shall and shall cause its Affiliates to maintain adequate and proper
records and accounts of Licensed Products manufactured during the term of this
Agreement.
<PAGE> 6
6
6. ASSIGNMENT
Dyersburg shall be entitled to assign all its rights and obligations under this
Agreement to an Affiliate of Dyersburg by giving written notice to Texmaco.
7. CONFIDENTIALITY
(a) Texmaco shall, and shall cause its Affiliates to, keep secret and
confidential at all time and shall not disclose, divulge, or communicate the
licensed Know-how and the improvements and/or any part of the same and any other
information and data disclosed or made available by Dyersburg to Texmaco in any
manner, directly or indirectly, to any director or employee of Texmaco or any
other person, firm or company, including without limitation any Affiliate of
Texmaco, or any employees of purchasers, suppliers or vendors or distributors or
agents except to the extent necessary and only after such persons aforesaid
shall have executed an appropriate confidentiality agreement and undertaking as
approved by Dyersburg and Texmaco confirming that the person agrees to use the
Know-how solely and exclusively for the purposes contemplated by this Agreement.
(b) Texmaco shall take all reasonable steps to prevent the infringement
by third parties of any Know-how licensed hereunder. Texmaco shall promptly
notify Dyersburg of any claim made against Texmaco for infringement and shall
enable Dyersburg to join in any negotiation and legal proceedings relating to
such an alleged infringement. Texmaco shall not make any concessions or enter
into any settlement of any claim alleging infringement without the prior written
consent of Dyersburg.
<PAGE> 7
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8. TERMINATION
8.1 EVENTS OF TERMINATION
Dyersburg may terminate this Agreement with immediate effect by written notice
to Texmaco if any of the following occurs:
(a) if Texmaco or any of its Affiliates breaches a provision of this
Agreement or if Texmaco has committed a Default under the Shareholders'
Agreement and has not remedied that breach or Default within 30 days after
service of notice by Dyersburg of its intention to terminate this Agreement
under this Clause 8.1 giving adequate particulars of the alleged breach or
Default; or
(b) if Texmaco has terminated the Shareholders' Agreement pursuant to
Section 20.3 thereof; or
(c) if Texmaco becomes insolvent or goes into liquidation, including
without limitation, any petition, application or proceeding under applicable
laws relating to bankruptcy or related matters or, with respect to Texmaco, any
event provided for in Article 114 to Article 124 of the Law No. 1 of 1995
regarding Company Law (other than a voluntary liquidation for the purposes of
merger or re-organization) or a receiver, liquidator (or equivalent official) is
appointed in respect of one third or more of Texmaco's assets.
8.2 ACCRUED RIGHTS
Termination of this Agreement in accordance with this Clause 8 shall not affect
the accrued rights and obligations of either Party hereto arising prior to the
date of such termination or expiration.
<PAGE> 8
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8.3 WAIVER OF ARTICLE 1266
The Parties waive Article 1266 of the Indonesian Civil Code to the extent that
if requires a judicial order to give effect to the termination of this
Agreement.
9. TAXES
Should Texmaco be required to withhold under the laws and regulations of, and
applicable treaties entered into by, the Republic of Indonesia any taxes with
respect to any amounts due to be paid to Dyersburg hereunder, Texmaco shall make
such withholding and account to the competent Indonesian authority in respect of
the amount so withheld. Within 10 days following the date of payment of such
taxes to the competent Indonesian authority, Texmaco shall deliver to Dyersburg
an official receipt evidencing the payment of such taxes.
10. NO AGENCY OR PARTNERSHIP
This Agreement does not constitute any Party the agent of another or imply that
the Parties intend constituting a partnership or other form of association in
which any Party may be liable for the acts or omissions of another.
11. NOTICES
Any notice given under this Agreement:
(a) must be in writing addressed to the intended recipient at the address
shown below or the address last notified by the intended recipient to the
sender:
<PAGE> 9
9
TEXMACO:
PT TEXMACO JAYA
Jalan H.R. Rasuna Said Kav X-6, No. 8
Jakarta
Indonesia
Attention: President Director
Fax: 62-21-5225738
DYERSBURG:
DYERSBURG CORPORATION
15720 John J. Delaney Drive
Suite 445
Charlotte, NC 28277-2747
United States of America
Attention: William S. Shropshire
Fax: +1 704 341-4868
(b) must be signed by a person duly authorized by the sender; and
(c) will be taken to have been given or made:
(i) in the case of delivery in person, when delivered;
(ii) in the case of delivery by post two business days after the date of
posting (if posted to an address in the same country) or fourteen
business days after the date of posting (if posted to an address in
another country); and
<PAGE> 10
10
(iii) in the case of fax, on receipt by the sender of a transmission
control report from the despatching machine showing the relevant
number of pages and the correct destination fax machine number and
indicating that the transmission has been made without error, but if
delivery or receipt occurs on a day on which business is not
generally carried on in the place to which the communication is sent
or is later than 4 pm (local time) it will be taken to have been duly
given or made at the commencement of business on the next day on
which business is generally carried on in the place.
12. WAIVER
The failure of either Party hereto at any time to enforce any of the terms,
provisions or conditions of this Agreement shall not be construed as a waiver of
the same or of the rights of either Party to enforce the same on any subsequent
occasion.
13. GOVERNING LAW
This Agreement is governed by the laws of the Republic of Indonesia.
14. LANGUAGE
This Agreement has been written in English and the English version shall be the
definitive text, even if for convenience or otherwise the Agreement is
translated into another language.
<PAGE> 11
11
15. DISPUTES
Any disputes which may arise between the Parties in relation to this Agreement
shall be resolved in the same manner provided in Clause 30 of the Shareholders'
Agreement.
EXECUTED on the date first stated above.
SIGNED for and on behalf of )
DYERSBURG CORPORATION )
In the presence of: )
----------------------------------------
Signature
- -------------------------------- ----------------------------------------
Witness Print name
- --------------------------------
Print name
SIGNED for and on behalf of )
PT TEXMACO JAYA )
In the presence of: )
----------------------------------------
Signature
- -------------------------------- ----------------------------------------
Witness Print name
- --------------------------------
Print name
<PAGE> 12
SCHEDULE 1
TECHNICAL KNOW-HOW
Know-how shall include expertise, technical data, information, drawings,
designs, standards, parameters, specifications, process sheets, inputs, advice
and assistance as regards (but not limited to) the following:
A. Manufacturing process sequence for each product from raw material to
finished fabric inspection.
B. Selection of the most appropriate raw materials, machinery and
equipment for all required manufacturing process including but not limited to:
Spinning
Knitting for circular knit fabrics and other related items
Fabric dyeing, including preparatory processes
Fabric finishing processes, including normal and special
requirements
Fabric printing, including preparation for printing
Fabric packing/warehousing/dispatch
C. Quality standards, specifications, practices, norms, systems, etc.
required to be maintained during manufacturing at each stage of the production
cycle.
Quality standards and specifications for all fibers, yarn, dyes,
chemicals and other materials consumed in the production cycle.
<PAGE> 13
D. Plant material handling and storage equipment and systems.
E. Plant layout for an efficient process flow and optimal space
utilization and utility consumption for proposed initial capacity and later
expansions.
F. Equipment for fabric design developments and sample preparation.
G. Productivity norms for various manufacturing operations, benchmark
for operations, computation of manpower including direct labor, supervisory and
plant management considering best practices followed.
H. Consumption standards for input materials, including fibers, dyes,
etc., norms for allowable rejections and wastage.
<PAGE> 1
TECHNICAL SERVICES AND LICENSE AGREEMENT
This AGREEMENT is made on 1998 between:
1. DYERSBURG CORPORATION, a company organized and existing under the laws
of the State of Tennessee with its registered office at 1315 Phillips
Street, Dyersburg, Tennessee, 38025-0767 United States of America
(DYERSBURG).
2. PT DYERSBURG TEXMACO FLEECE, a limited liability company established
and existing under the laws of the Republic of Indonesia, with its
principal office at [*], Indonesia (the Company).
RECITALS
A. Dyersburg and PT Texmaco Jaya entered into a Shareholders' Agreement on
[*] (the SHAREHOLDERS' AGREEMENT) pursuant to which they will establish the
Company as a joint venture company for the purpose of manufacturing and selling
circular knit fabric (the BUSINESS).
B. Dyersburg and its Affiliates have available to them extensive expertise
and certain technical know-how and technical information relating to the
Business.
C. The Parties agree that it is in the interests of the Company for
Dyersburg to provide technical and other forms of assistance to the Company from
time to time in connection with the conduct of the Business.
D. For that purpose Dyersburg has agreed to license to the Company the
Know-how (as hereinafter defined) and to provide the Company the Technical
Services (as hereinafter defined) on the terms and conditions set out in this
Agreement.
IT IS AGREED as follows.
<PAGE> 2
2
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement (including the Recitals and Schedule), the following
definitions shall apply unless the context requires otherwise.
FORCE MAJEURE EVENT means any event beyond the control of the Parties which was
not reasonably foreseeable at the relevant time and which prevents or hinders in
a material way the carrying out by either Party of its obligations under this
Agreement, including but not limited to, war, hostilities, revolution
(substitution of a new system of government by means of violent uprising), or by
reason of any law, decree, regulation or policy of the Government of the
Republic of Indonesia or any sub-division thereof or because of any act of God.
KNOW-HOW means the expertise, technical knowledge and technical information
possessed by Dyersburg with respect to the manufacture and sale of Licensed
Products set forth in Schedule 1 hereto.
LICENSED PRODUCTS shall mean the full range of circular knit fleece fabrics
produced by Dyersburg from time to time during the term hereof.
SECONDEE means each person employed by Dyersburg or by one of its Affiliates,
the services of whom are to be provided to the Company on secondment in
accordance with this Agreement.
TECHNICAL SERVICES means the advice, management resources, training, personnel,
information and other assistance set forth in Schedule 1 hereto.
1.2 IMPORTATION OF DEFINITIONS FROM SHAREHOLDERS' AGREEMENT
Unless the context otherwise requires, terms defined in the Shareholders'
Agreement have the same meaning when used in this Agreement.
<PAGE> 3
3
1.3 INTERPRETATION
Clause 1.2 of the Shareholders' Agreement shall apply as if set out in full in
this Agreement.
2. LICENSE/TECHNICAL SERVICES
(a) From and after the date of this Agreement, Dyersburg agrees to
grant to the Company an exclusive license and permission to use the Know-how for
manufacture and sale of the Licensed Products in Indonesia.
(b) The Know-how and all documents, materials and other data and
information pertaining thereto shall be delivered by Dyersburg to the Company
during the term hereof.
(c) Dyersburg agrees to provide, or through its Affiliates procure the
provision of, Technical Services to the Company reasonably required in
connection with the Business.
(d) Modifications and improvements in the Know-how or Licensed Products
made by the Company or Dyersburg during the term hereof shall be made available
to the other and shall be deemed to be included in the definition of Know-how
and Licensed Products for the purposes of this Agreement.
3. REPRESENTATIONS OF DYERSBURG; INDEMNIFICATION
3.1 OWNERSHIP OF KNOW-HOW
Dyersburg is the owner of the Know-how and has full right, power and authority
to license the Know-how to the Company in accordance with the terms of this
Agreement. There is no infringement action, lawsuit or claim that asserts that
Dyersburg's use of the Know-how violates or infringes the rights of others and
Dyersburg is not in any way making use of any confidential information or trade
secrets of any person in connection with its use of the Know-how.
3.2 INDEMNIFICATION
Dyersburg agrees to defend, indemnify and hold harmless the Company for any
claim directly or indirectly relating to, resulting from or arising out of any
breach of its representations made in Clause 3.1 above.
<PAGE> 4
4
4. OBLIGATION OF THE PARTIES
4.1 OBLIGATION OF DYERSBURG
Without limiting Clause 2, as part of the Technical Services, Dyersburg shall
provide, or cause to be provided by one or more of its Affiliates, to the
Company (on secondment or otherwise) the assistance of management personnel as
agreed between the parties from time to time during the term hereof.
4.2 OBLIGATIONS OF THE COMPANY
Except to the extent that Dyersburg may otherwise be permitted to do so under
Indonesian law, the Company shall:
(a) obtain and at all times maintain all licences of the Company;
(b) obtain all visas, work permits, resident, exit and re-entry
permits, and all appropriate government permits for each person provided under
Clause 4.1 while in Indonesia; and
(c) obtain and at all times maintain its corporate existence and all
necessary registration, licences and approvals needed to carry out the Business
in Indonesia
5. TERM
Subject to any clauses which are expressed to survive termination, this
Agreement shall remain in full force and effect from the date hereof unless and
until terminated pursuant to Clause 10.
6. REMUNERATION
6.1 TECHNICAL SERVICES FEES FOR FUTURE PRODUCTION
The Company shall:
(a) reimburse Dyersburg and/or its Affiliates for all out-of-pocket
costs and expenditures incurred by it with respect to the Technical Services
provided to the Company under this Agreement including, but not by way of
limitation, travel and related expenses of Dyersburg
<PAGE> 5
5
personnel providing services to the Company and the cost of any raw materials
purchased by Dyersburg for the benefit of the Company; and
(b) for a period of three years from the Commencement Date, and
thereafter, as agreed between Dyersburg and the Company, pay to Dyersburg a fee
of $0.25 per meter of fabric manufactured by the Company; provided, such fee
shall not apply to waste and trial production fabric and fabric which is not
consistent with commercially acceptable standards that is sold for less than its
standard cost to produce.
This Clause 6.1 shall survive termination of this Agreement. For the avoidance
of any doubt, the Parties agree that if this Agreement is terminated within the
first three years following the Commencement Date and the Company or any
Affiliate of the Company continues to produce fabric anywhere in the World, the
Company shall pay to Dyersburg a fee of $0.25 per meter of circular knit fabric
manufactured by the Company or any Affiliate of the Company anywhere in the
World for a period of three years from the Commencement Date.
6.2 CURRENCY OF PAYMENT
Reimbursement pursuant to Clause 6.1 shall be in United States Dollars or any
other currency agreed by the Parties, and shall be made by telegraphic transfer
to a bank account designated by Dyersburg from time to time or in such other
manner as may be agreed by the Parties from time to time.
6.3 RECORDS
The Company shall maintain adequate and proper records and accounts of revenues
and expenses of its operation and the Business.
7. LIMITATION ON LIABILITY
Neither Dyersburg nor any of its Affiliates shall be liable for any loss or
damage caused by or in the provision of its services (whether by its employees,
Secondees or otherwise).
<PAGE> 6
6
8. INDEMNITY
8.1 INDEMNITY AGAINST LIABILITIES FOR INJURY OR DEATH OF SECONDEE
The Company shall indemnify Dyersburg on demand against any loss, cost, charge,
liability or expense Dyersburg (or any Affiliate, or officer or employee of
Dyersburg or its Affiliates) may sustain or incur as a direct or indirect
consequence of the personal injury or death of any Secondee.
8.2 INDEMNITY AGAINST ACTIONS
The Company shall indemnify on demand Dyersburg, its Affiliates and any
Secondees against, including but not limited to, all actions, proceedings,
damages, costs, charges or expenses taken against, or payable by, Dyersburg in
arising from the provision of Technical Services under this Agreement.
8.3 CLARIFICATION OF PERSONAL INJURY AND THIRD PARTY
In this Clause 8, for the avoidance of any doubt, PERSONAL INJURY includes fatal
injury and disease and THIRD PARTY means any person other than the parties to
this Agreement, and includes without prejudice to the generality of the
foregoing, servants and agents of Dyersburg.
9. ASSIGNMENT
Dyersburg shall be entitled to assign all its rights and obligations under this
Agreement to an Affiliate of Dyersburg by giving written notice to the Company.
10. TERMINATION
10.1 EVENTS OF TERMINATION
(a) Either Party may terminate this Agreement with immediate effect by
written notice to the other Party if any of the following occurs:
<PAGE> 7
7
(i) if the other Party breaches a provision of this
Agreement and has not remedied that breach within 30 days after service
of notice by the non-defaulting Party of its intention to terminate
this Agreement under this Clause 10.2 giving adequate particulars of
the alleged default;
(ii) if the other Party becomes insolvent or goes into
liquidation, including without limitation, any petition, application or
proceeding under applicable laws relating to bankruptcy or related
matters or, with respect to that Party, any event provided for in
Article 114 to Article 124 of the Law No. 1 of 1995 regarding Company
Law (other than a voluntary liquidation for the purposes of merger or
re-organization) or a receiver, liquidator (or equivalent official) is
appointed in respect of one third or more of that Party's assets; or
(iii) the other Party has any of its material assets,
operation or undertaking wholly or partially seized, confiscated or
expropriated by the court.
(b) Dyersburg may terminate this Agreement with immediate effect by
written notice to the Company if any of the following occurs:
(i) if Texmaco has committed a Default under the
Shareholders' Agreement and has not remedied such Default within 30
days after service of notice by Dyersburg of its intention to terminate
this Agreement under this Clause 10.1(b) giving adequate particulars of
the alleged Default; or
(ii) if Texmaco has terminated the Shareholders' Agreement
pursuant to Section 20.3 thereof.
10.2 ACCRUED RIGHTS
Termination of this Agreement in accordance with this Clause 10 shall not affect
the accrued rights and obligations of either Party hereto arising prior to the
date of such termination or expiration.
<PAGE> 8
8
10.3 WAIVER OF ARTICLE 1266
The Parties waive Article 1266 of the Indonesian Civil Code to the extent that
if requires a judicial order to give effect to the termination of this
Agreement.
10.4 FORCE MAJEURE
Neither Party shall be liable for any delay in performance where a Force Majeure
Event exists for a period of 30 consecutive days and that Force Majeure Event
continues for a further consecutive period of 30 days after a Party has given
written notice to the other of the existence the Force Majeure Event. At the end
of such period the Parties agree to resume their respective obligations under
this Agreement.
11. TAXES
Should the Company be required to withhold under the laws and regulations of,
and applicable treaties entered into by, the Republic of Indonesia any taxes
with respect to any amounts due to be paid to Dyersburg hereunder, the Company
shall make such withholding and account to the competent Indonesian authority in
respect of the amount so withheld. Within 10 days following the date of payment
of such taxes to the competent Indonesian authority, the Company shall deliver
to Dyersburg an official receipt evidencing the payment of such taxes.
12. NO AGENCY OR PARTNERSHIP
In the performance of the Technical Services, Dyersburg and its Affiliates shall
act as an independent contractor and not as agent of the Company. This Agreement
does not constitute any Party the agent of another or imply that the Parties
intend constituting a partnership or other form of association in which any
Party may be liable for the acts or omissions of another. Neither Party has
authority to pledge the credit of the other.
<PAGE> 9
9
13. NOTICES
Any notice given under this Agreement:
(a) must be in writing addressed to the intended recipient at the
address shown below or the address last notified by the intended recipient to
the sender:
DYERSBURG:
DYERSBURG CORPORATION
15720 John J. Delaney Drive
Suite 445
Charlotte, NC 28277-2747
United States of America
Attention: William S. Shropshire
Fax: +1 704 341-4868
THE COMPANY:
PT DYERSBURG TEXMACO FLEECE
[*]
[*]
[*]
Indonesia
Attention: [*]
Fax: [*]
(b) must be signed by a person duly authorized by the sender; and
(c) will be taken to have been given or made:
(i) in the case of delivery in person, when delivered;
(ii) in the case of delivery by post two business days after
the date of posting (if posted to an address in the same country) or
fourteen business days after the date of posting (if posted to an
address in another country); and
<PAGE> 10
10
(iii) in the case of fax, on receipt by the sender of a
transmission control report from the despatching machine showing the
relevant number of pages and the correct destination fax machine number
and indicating that the transmission has been made without error, but
if delivery or receipt occurs on a day on which business is not
generally carried on in the place to which the communication is sent or
is later than 4 pm (local time) it will be taken to have been duly
given or made at the commencement of business on the next day on which
business is generally carried on in the place.
14. WAIVER
The failure of either Party hereto at any time to enforce any of the terms,
provisions or conditions of this Agreement shall not be construed as a waiver of
the same or of the rights of either Party to enforce the same on any subsequent
occasion.
15. GOVERNING LAW
This Agreement is governed by the laws of the Republic of Indonesia.
16. LANGUAGE
This Agreement has been written in English and the English version shall be the
definitive text, even if for convenience or otherwise the Agreement is
translated into another language.
17. DISPUTES
Any disputes which may arise between the Parties in relation to this Agreement
shall be resolved in the same manner provided in Clause 30 of the Shareholders'
Agreement.
<PAGE> 11
11
18. CONFIDENTIALITY
18.1 NO DISCLOSURE
The Company agrees that it will keep confidential and not disclose to any third
party for use for any purpose other than those permitted by this Agreement any
data, information or other property provided to it by Dyersburg or any of its
Affiliates under this Agreement unless Dyersburg grants its prior approval in
writing.
18.2 EXCEPTIONS
The obligations of the Parties under Clause 18.1 shall not apply to any data,
information or other property which:
(a) is obtained by the Company from other sources without breach of any
obligation of confidence owed (by the third party or any other party) to
Dyersburg, provided that the Company is aware, or should reasonably be aware, of
that obligation of confidence; or
(b) is already in the public domain.
<PAGE> 12
12
EXECUTED on the date first stated above.
SIGNED for and on behalf of )
DYERSBURG CORPORATION )
In the presence of: )
-----------------------
Signature
- -------------------------- -----------------------
Witness Print name
- --------------------------
Print name
SIGNED for and on behalf of )
PT DYERSBURG TEXMACO FLEECE )
In the presence of: )
-----------------------
Signature
- -------------------------- -----------------------
Witness Print name
- --------------------------
Print name
<PAGE> 13
SCHEDULE 1
TECHNICAL KNOW-HOW AND SERVICES
Know-how shall include technical data, information, drawings, designs,
standards, parameters, specifications, process sheets, inputs, advice and
assistance as regards (but not limited to) the following:
I. PLANNING STAGE
A. Manufacturing process sequence for each product from raw material to
finished fabric inspection.
B. Selection of the most appropriate raw materials, machinery and
equipment for all required manufacturing process including but not limited to:
Spinning
Knitting for circular knit fabrics and other related
items
Fabric dyeing, including preparatory processes Fabric
finishing processes, including normal and special
requirements
Fabric printing, including preparation for printing
Fabric packing/warehousing/dispatch
C. Quality standards, specifications, practices, norms, systems, etc.
required to be maintained during manufacturing at each stage of the production
cycle.
Quality standards and specifications for all fibers, yarn, dyes,
chemicals and other materials consumed in the production cycle.
D. Plant material handling and storage equipment and systems.
E. Plant layout for an efficient process flow and optimal space
utilization and utility consumption for proposed initial capacity and later
expansions.
F. Equipment for fabric design developments and sample preparation.
G. Productivity norms for various manufacturing operations, benchmark
for operations, computation of manpower including direct labor, supervisory and
plant management considering best practices followed.
<PAGE> 14
H. Consumption standards for input materials, including fibers, dyes,
etc., norms for allowable rejections, and wastage.
II. START-UP STAGE
Dyersburg will provide meaningful assistance and guidance to the
Company at the plant commissioning and start up stage, including but not limited
to:
A. Approve the plant installation prior to start up trials of
machinery, or advise changes as necessary to be carried out.
B. Evaluate and approve the test runs carried out for each
process/stage so as to ensure process output/quality levels required, advise on
changes/modifications required to meet specific norms.
C. Install production and quality systems at each stage in the plant
with Company personnel, and secure their proper understanding of the same for
effective use.
D. Oversee the regular production start up of fabric. Advise/guide and
train in all aspects of plant operations until output, quality and productivity
norms are reached.
E. Issue initial benchmark for achievement in production, quality at
appropriate stages for highly efficient operations.
III. PRODUCTION STAGE
A. Assist in resolution of any major problems faced such as rejections,
low output, etc. by technical guidance.
B. Set progressive benchmark in production output, quality, machine
utilization and guide to help achieve the same.
MARKETING AND PRODUCT DEVELOPMENT
Dyersburg will provide know-how and assistance in product merchandising/product
development and marketing methods as below:
<PAGE> 15
A. Assist in the development of a comprehensive design and/or sample
library for effective customer interfacing.
B. Provide assistance in design creation/adaptation/development to suit
respective markets.
C. Provide assistance in estimating product cost.
D. Provide assistance in training methods and systems of customer
servicing.
E. Assist in establishing a marketing plan.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF DYERSBURG CORPORATION FOR THE NINE MONTHS ENDED JULY 4, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUL-04-1998
<CASH> 262
<SECURITIES> 0
<RECEIVABLES> 79,604
<ALLOWANCES> (2,675)
<INVENTORY> 57,356
<CURRENT-ASSETS> 148,049
<PP&E> 214,427
<DEPRECIATION> (76,758)
<TOTAL-ASSETS> 387,847
<CURRENT-LIABILITIES> 48,704
<BONDS> 220,822
0
0
<COMMON> 133
<OTHER-SE> 106,645
<TOTAL-LIABILITY-AND-EQUITY> 387,847
<SALES> 315,422
<TOTAL-REVENUES> 315,422
<CGS> 259,514
<TOTAL-COSTS> 259,514
<OTHER-EXPENSES> 29,746
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,951
<INCOME-PRETAX> 9,211
<INCOME-TAX> 3,862
<INCOME-CONTINUING> 5,349
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,349
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
<FN>
<F1>*AMOUNTS ARE REPORTED NET OF RESERVES IN THE CONSOLIDATED CONDENSED BALANCE
SHEET
</FN>
</TABLE>
