<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 3, 1999
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)
15720 JOHN J. DELANEY, SUITE 445
CHARLOTTE, NORTH CAROLINA 28277
(Address of principal executive offices) (Zip Code)
(704) 341-2299
(Registrant's telephone number, including area code)
1315 PHILLIPS ST., DYERSBURG, TENNESSEE 38024
(Former address if changed since last report)
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.
Title of each Number of shares outstanding as of July 28, 1999
- ---------------------------- ------------------------------------------------
Common Stock $0.01 par value 13,347,221
<PAGE> 2
INDEX TO FORM 10-Q
DYERSBURG CORPORATION
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION PAGE NUMBER
- ----------------------------- -----------
<S> <C>
ITEM 1--FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets at
July 3, 1999, and October 3, 1998 ................................................ 3
Condensed Consolidated Statements of Operations
for the Three Months Ended July 3, 1999,
and July 4, 1998; Nine Months Ended
July 3, 1999, and July 4, 1998.................................................... 4
Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended
July 3, 1999, and July 4,1998..................................................... 5
Notes to Condensed Consolidated Financial
Statements........................................................................ 6
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................... 10
PART II--OTHER INFORMATION
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS........................................ 14
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K....................................................... 15
SIGNATURES .................................................................................... 15
</TABLE>
2
<PAGE> 3
DYERSBURG CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
July 3, October 3,
1999 1998
-------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash ................................................................. $ 172 $ 265
Accounts receivable, net of allowance for doubtful accounts
of $3,380 at July 3, 1999, and $2,899 at October 3, 1998 ........... 56,773 71,359
Inventories .......................................................... 43,379 45,147
Prepaid expenses and other ........................................... 15,788 9,845
--------- ---------
Total current assets ............................................ 116,112 126,616
Property, plant and equipment, net ................................... 120,743 136,613
Goodwill, net ........................................................ 91,665 93,752
Deferred debt costs, net ............................................. 5,311 5,935
Assets held for sale and other ....................................... 4,124 218
--------- ---------
$ 337,955 $ 363,134
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable ............................................... $ 10,484 $ 19,833
Accrued restructuring expenses ....................................... 3,670 575
Other accrued expenses ............................................... 16,017 14,131
Current portion of long-term obligations ............................. 69,294 7,500
--------- ---------
Total current liabilities ....................................... 99,465 42,039
Long-term obligations ................................................ 132,900 198,900
Deferred income taxes and other ...................................... 10,310 13,824
Shareholders' equity:
Preferred stock, authorized 5,000,000 shares; none issued
Series A Preferred stock, authorized 200,000 shares; none issued
Common stock, $.01 par value, authorized 40,000,000
shares; issued and outstanding shares - 13,347,221 at
July 3, 1999, 13,337,066 at October 3,1998 ........................... 133 133
Additional paid-in capital ........................................... 42,773 42,752
Retained earnings .................................................... 52,374 65,486
--------- ---------
Total shareholders' equity ............................................. 95,280 108,371
--------- ---------
$ 337,955 $ 363,134
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
DYERSBURG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------- ----------------------------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales .......................... $ 83,053 $ 113,533 $ 238,582 $ 315,422
Costs and expenses:
Cost of sales ................... 70,864 92,151 205,502 259,514
Selling, general,and
administrative ................ 9,086 8,737 26,499 28,446
Restructuring charge ............ 10,993 1,300 10,993 1,300
Interest and amortization of debt
costs ........................... 5,248 5,955 15,350 16,951
------------ ------------ ------------ -----------
Total costs and expenses ........... 96,191 108,143 258,344 306,211
------------ ------------ ------------ -----------
Income (loss) before income taxes .. (13,138) 5,390 (19,762) 9,211
Income tax (benefit) expense ....... (4,597) 2,367 (6,917) 3,862
------------ ------------ ------------ -----------
Net income (loss) .................. $ (8,541) $ 3,023 $ (12,845) $ 5,349
============ ============ ============ ===========
Weighted average shares outstanding:
Basic ........................ 13,347,221 13,332,840 13,343,954 13,322,990
============ ============ ============ ===========
Diluted ...................... 13,347,221 13,371,247 13,343,954 13,364,251
============ ============ ============ ===========
Earnings per share:
Basic ........................ $ (0.64) $ 0.23 $ (0.96) $ 0.40
============ ============ ============ ===========
Diluted ...................... $ (0.64) $ 0.23 $ (0.96) $ 0.40
============ ============ ============ ===========
Dividends per share .......... $ 0.00 $ 0.01 $ 0.02 $ 0.03
============ ============ ============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
DYERSBURG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
July 3, July 4,
1999 1998
----------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ....................................................... $(12,845) $ 5,349
Adjustments to reconcile to net cash provided by (used in) operating
activities:
Depreciation and amortization ...................................... 15,303 15,543
Write-down of fixed assets ......................................... 6,970
(Increase) decrease in accounts receivable, net .................... 14,586 (8,639)
(Increase) decrease in inventory ................................... 1,768 (5,134)
(Decrease) in trade accounts payable ............................... (9,349) (9,453)
Other-net .......................................................... (920) (9,015)
------- -------
Net cash provided by (used in) operating activities ............ 15,513 (11,349)
INVESTING ACTIVITIES
Capital expenditures .................................................... (6,514) (15,378)
Other-net ............................................................... (4,414) (1,219)
-------- --------
Net cash used in investing activities .......................... (10,928) (16,597)
FINANCING ACTIVITIES
Net borrowings (repayments) on long-term obligations .................... (4,433) 26,936
Dividends paid .......................................................... (266) (399)
Issuance of common stock ................................................ 21 723
-------- --------
Net cash (used in) provided by financing activities ........... (4,678) 27,260
-------- --------
Net decrease in cash .......................................... (93) (686)
Cash at beginning of period ................................................ 265 948
-------- --------
Cash at end of period ...................................................... $ 172 $ 262
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DYERSBURG CORPORATION
July 3, 1999
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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 condensed consolidated 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. Financial information as of October 3,
1998, 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
3, 1998.
NOTE B--CHANGE IN ACCOUNTING ESTIMATES FOR DEPRECIABLE LIVES OF CERTAIN
PROPERTY, PLANT AND EQUIPMENT
During the first quarter of fiscal 1999, the Company changed its
estimates for the useful lives of certain property, plant and equipment at its
Dyersburg Fabrics Inc. facilities. This change was implemented to reflect time
periods more consistent with actual historical experience and anticipated
utilization of the assets. The effect of the change was a decrease in
depreciation expense for each quarter of fiscal 1999 of approximately $350,000.
It is anticipated that this change will decrease depreciation expense for the
full fiscal year by approximately $1.4 million. For the quarter and nine months
ended July 3, 1999, the effect of the change was to reduce the net loss by
approximately $228,000, or $0.02 per share and $683,000, or $0.05 per share,
respectively.
NOTE C--INVENTORIES
<TABLE>
<CAPTION>
July 3, October 3,
1999 1998
-------- ----------
(in thousands)
<S> <C> <C>
Raw Materials ................................................................ $13,096 $15,071
Work in Process .............................................................. 11,058 15,218
Finished Goods ............................................................... 16,926 12,039
Supplies and Other ........................................................... 2,299 2,819
------- -------
$43,379 $ 45,147
======= ========
</TABLE>
6
<PAGE> 7
NOTE D--EARNINGS PER SHARE
The table below sets forth the computations of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------- -----------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
------------- ------------- ----------- -----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C>
Numerator for basic and diluted
earnings per share--net income
(loss) ........................... $ (8,541) $ 3,023 $ (12,845) $ 5,349
Denominator:
Denominator for basic earnings
(loss) per share--weighted
average shares .................. 13,347,221 13,332,840 13,343,954 13,322,990
Effect of dilutive securities:
Employee Stock Options .......... -- 38,407 -- 41,261
------------ ----------- ------------ -----------
Denominator for diluted
earnings (loss) per share --
adjusted weighted average
shares .......................... 13,347,221 13,371,247 13,343,954 13,364,251
============ =========== ============ ===========
Basic earnings (loss) per
share ........................... $ (0.64) $ 0.23 $ (0.96) $ 0.40
============ =========== ============ ===========
Diluted earnings (loss) per $ (0.64) $ 0.23 $ (0.96) $ 0.40
share ........................... ============ ============ ============ ===========
</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.
During January 1999, the Company reduced its line of credit on the
Revolving Credit Facility from $110 million to $90 million. The reduction did
not impact the Company's level of
7
<PAGE> 8
available credit computed as of July 3, 1999, but reduced certain commitment
fees charged on unused lines of credit.
In April, May and August 1999, the Company amended its Credit
Agreement, which includes its Term Loan and Revolving Credit Facility. The
amendments waive certain financial covenants for the fiscal quarters ended
April 3, 1999 and July 3, 1999 through August 31, 1999, increase the borrowing
rate on advances during periods where the Company's Adjusted Funded Debt
Coverage Ratio exceeds 5.0:1.0, and require the Company to engage an appraisal
firm or firms to appraise the inventory and property, plant and equipment.
Based on the current business environment, it is likely that the Company will
not be in compliance with existing financial covenants in future periods
including the fourth quarter of fiscal 1999. Accordingly, generally accepted
accounting principles require that amounts outstanding under the Credit
Agreement be reflected in current liabilities on the balance sheet. However,
the Company continues to access its Revolving Credit Facility and has not
realized any reduction in its borrowing availability.
NOTE F - SUBSEQUENT EVENTS
On August 4, 1999, the Company and certain of its subsidiaries
received a commitment from Congress Financial Corporation (Southern) and
BankBoston, N.A. to provide a revolving credit, term loan and letter of credit
facility in an aggregate principal amount of up to $110,000,000. It is
anticipated that the proceeds from this facility will be used to repay amounts
outstanding under the Company's existing Credit Agreement and to provide for
the Company's working capital needs. The Company anticipates consummating this
financing on or before August 31, 1999, however, there can be no assurance that
such financing will be consummated. The Company anticipates recording an
extraordinary charge in the fourth quarter 1999 for the write-off of existing
deferred financing costs of approximately $2.1 million.
NOTE G -- SHAREHOLDER RIGHTS PLAN
In June, 1999 the Board of Directors adopted a Shareholder Rights
Plan. Under the plan, shareholders of common stock received as a divided one
preferred stock purchase right for each share of common stock held (the "Right"
or "Rights"). Each Right, when exercisable, will entitle the registered holder
to purchase one one-hundredth of a share of new Series A Junior Preferred Stock
at an exercise price of $12 per Right, subject to certain adjustments. The
Rights are not presented in separate certificates and are only exercisable upon
a person's or group's acquisition of, or commencement of a tender or exchange
offer for, 15% or more of the Company's Common Stock ("Acquiring Party"). The
Rights are also exercisable in the event of certain mergers or asset sales
involving more than 50% of the Company's assets or earning power. Upon becoming
exercisable, each Right will allow the holder (other than the Acquiring Party)
to buy either securities of the Company or securities of the acquiring company
having a value twice the exercise price of the Rights. The Rights expire on
June 3, 2009 and are redeemable by the Board of Directors at $.001 per Right.
The Rights are exchangeable by the Board of Directors at an exchange ratio of
one share of common stock per Right at any time after the Rights become
exercisable.
8
<PAGE> 9
NOTE H - RESTRUCTURING CHARGES
During 1999, the Company announced the consolidation of certain
manufacturing facilities. The consolidation was accomplished through a
reduction of the weekend operations at the Company's Dyersburg, Tennessee
facility subsidiary, closing of the Company's facility in Hamilton, North
Carolina and the elimination of yarn spinning operations at the Company's
Trenton, Tennessee facility. Restructuring charges of $10,993,000 were charged
to operations during the third quarter 1999 as a result of eliminating the
Hamilton and Trenton operations. These restructuring charges represent a
write-down to net realizable value of $6,970,000 for property, plant and
equipment which are either held for sale or abandoned as a result of the
consolidation.
The Company has also recorded severance related expenses associated
with terminated employees of $4,023,000. Over 500 hourly and salaried employees
have been notified of their terminations. During the third quarter of fiscal
1999, $353,000 was paid for severance and related fringe benefits, resulting in
a balance in accrued restructuring charges of $3,670,000 at July 3, 1999.
Substantially all of the remaining balance in these restructuring charges will
be paid in the next six months. The Company believes cost savings associated
with the closing of certain facilities and the resulting consolidation of
manufacturing should exceed $9 million annually.
9
<PAGE> 10
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Beginning in fiscal 1998 and continuing in 1999 the domestic circular
knit industry has experienced accelerating consolidation and excess supply that
has adversely affected the Company's results of operations. The Company has
experienced weakness in sales and margins in both fleece and jersey fabrics.
Competition from imports increased as global sourcing patterns continued to
shift between the Far East and the West. Unstable, often faltering economies in
the Far East caused many textile and apparel manufacturers in the region to
offer products to U.S. markets at reduced prices. These low prices were made
even more attractive to U.S. retailers by significant and prolonged currency
devaluations in several countries. The duration of these market conditions,
evidenced by an excessive supply of low-priced imports is uncertain.
Nonetheless, management of the Company believes that current conditions will
continue, at a minimum, throughout fiscal 1999 and into fiscal 2000. In
response to these business conditions, Dyersburg has adopted a strategy to
broaden its price point offerings, reduce costs, and provide a continuous flow
of value-added and differentiated products to remain efficient and competitive.
The Company believes product offerings with fabric manufactured by the Company
and sold through full garment packages, have begun to favorably impact sales.
Net sales for the quarter ended July 3, 1999, decreased by 27% to
$83.0 million versus $113.5 million for the same quarter of the prior year. Net
sales for the nine months ended July 3, 1999, decreased by 24% compared to the
same period of the prior year. The decrease in net sales was primarily a result
of reduced volume impacted by increased imports and softness in the knit market
as indicated above. Gross margins for the quarter and year-to-date declined to
14.7% and 13.9% versus 18.8% and 17.7% for the same periods in fiscal 1998,
respectfully. Gross margins decreased as production was reduced for the lower
sales volume. However, margins were favorably impacted by a change in the
accounting estimate for useful lives of certain property and equipment at the
Company's Dyersburg facilities. The effect of the change was a decrease in
depreciation expense in the third quarter of 1999 of approximately $350,000 and
year-to-date of $1,050,000. It is anticipated that this change will decrease
depreciation expense for the full fiscal year by approximately $1.4 million.
For the quarter and year-to-date ended July 3, 1999, the effect of the change
was to reduce the net loss by approximately $228,000, or $0.02 per share and
$683,000, or $0.05 per share, respectively.
Due to the continued softness in the knit market, management has
undertaken initiatives to increase revenues and reduce costs. Increased
emphasis on research and development directed at better uses of developing
technology in concert with market intelligence of retail customers is intended
to intensify the Company's focus on developing additional value added and
differentiated products and improving the speed to market of such products. The
Company believes garment packaging, whereby the Company converts fabric into a
finished garment, has provided new opportunities for fabric sales.
10
<PAGE> 11
During 1999, the Company announced the consolidation of certain
manufacturing facilities. The consolidation was accomplished through a
reduction of the weekend operations at the Company's Dyersburg, Tennessee
facility subsidiary, closing of the Company's facility in Hamilton, North
Carolina and the elimination of yarn spinning operations at the Company's
Trenton, Tennessee facility. Restructuring charges of $10,993,000 were charged
to operations during the third quarter 1999 as a result of eliminating the
Hamilton and Trenton operations. These restructuring charges represent a
write-down to net realizable value of $6,970,000 for property, plant and
equipment which are either held for sale or abandoned as a result of the
consolidation. The Company is actively marketing such assets held for sale
through the use of internal sources and outside agents. The timing of the
disposal of these assets is not easily determined, but management of the
Company does not believe any significant sales will likely occur within one
year.
The Company has also recorded severance related expenses associated
with terminated employees of $4,023,000. Over 500 hourly and salaried employees
have been notified of their terminations. During the third quarter of fiscal
1999, $353,000 was paid for severance and related fringe benefits, resulting in
a balance in accrued restructuring charges of $3,670,000 at July 3, 1999.
Substantially all of the remaining balance in these restructuring charges will
be paid in the next six months. The Company believes cost savings associated
with the closing of certain facilities and the resulting consolidation of
manufacturing should exceed $9 million annually. The Company believes
approximately $1 million of such amount will represent an annual reduction in
depreciation expense. The Company will continue to evaluate further cost
reductions during the fourth quarter of fiscal 1999.
The Company also recorded a non-recurring charge of $1.3 million for
restructuring charges in the third quarter of fiscal 1998. These restructuring
charges represented severance-related expenses associated with terminated
employees. During fiscal 1998, $727,000 was paid for severance and related
fringe benefits, resulting in a balance in accrued restructuring charges of
$575,000 at fiscal year end. During the first, second and third quarters of
fiscal 1999, approximately $77,000, $326,000 and $47,000, respectively, was
paid for severance and related fringe benefits; resulting in a balance in
accrued restructuring charges of $498,000, $172,000 and $125,000, respectively
at each fiscal quarter end. All of the employees identified by the
restructuring plan have been terminated. Substantially all of the remaining
balance in accrued restructuring charges of $125,000 will be paid in the next
three months.
Selling, general and administrative expenses increased by 4% for the
third quarter, but decreased 7% year-to-date in fiscal 1999 compared to the
same periods in fiscal 1998. The decrease was primarily due to reductions in
administrative costs due to the lower sales volume and reductions in certain
expenses that are based on performance. As a percentage of sales, these same
expenses increased to 10.9% for the third quarter and 11.1% year-to-date for
fiscal 1999 versus 7.7% and 9.0%, respectively, for the same periods in fiscal
1998. This percentage increase primarily resulted from a decline in sales. The
Company believes cost savings initiatives completed in the third and fourth
quarters of fiscal 1999 should reduce selling, general and administrative
expenses by over $3 million annually which is expected to favorably impact the
ratio of selling, general and administrative expenses as a percent of sales
beginning in the first quarter of fiscal 2000.
11
<PAGE> 12
Interest expense in the third quarter of fiscal 1999 of $5.2 million
and year-to-date of $15.3 million was lower than that of the same periods of
fiscal 1998 due to reduced borrowing levels. The effective tax rate for the
third quarter and year-to-date fiscal 1999 was 35%.
Net loss for the quarter ended July 3, 1999 was $8.5 million, or $0.64
per share, versus net income of $3.0 million, or $0.23 per share, for the same
period in fiscal 1998. For the nine months ended July 3, 1999, the net loss was
$12.8 million, or $0.96 per share, versus net income of $5.3 million, or $0.40
per share, for the same period in fiscal 1998. Earnings (loss) 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 year-to-date was
approximately 13,347,000 and 13,344,000, respectively.
Liquidity and Capital Resources
Working capital and the current ratio decreased to $16.6 million and
1.2:1 at July 3, 1999, from $84.6 million and 3.0:1, respectively, at October
3, 1998. Changes in this ratio are the result of the classification of amounts
outstanding under the Company's Credit Agreement to current liabilities. The
Company's debt-to-capital ratio was 68.0% at July 3, 1999, compared to 65.6% at
October 3, 1998. See discussion below and Note E of the Notes to Condensed
Consolidated Financial Statements.
Net receivables of $56.8 million at July 3, 1999, decreased from the
level at October 3, 1998, due to reduced sales levels. Inventories decreased to
$43.4 million at the end of the third quarter of fiscal 1999 from $45.1 million
at the end of fiscal 1998.
Capital expenditures for the nine months ended July 3, 1999, were $6.5
million versus $15.4 million for the same period in the prior year. Cash
outlays for capital spending have been reduced in response to current business
conditions and are anticipated to approximate $8 million in fiscal 1999.
The Company has outstanding $125,000,000 principal amount of 9.75%
Senior Subordinated Notes due September 1, 2007 (the "Subordinated Notes").
These Subordinated Notes are unsecured senior subordinated obligations and are
subordinated in right of payment to the prior payment in full of all senior
indebtedness, including the indebtedness under the Company's Credit Facility
and the industrial revenue bonds. The proceeds of the Subordinated Notes,
together with borrowings under the Credit Facility, were used to acquire the
common stock of Alamac and retire outstanding senior indebtedness.
The Company is party to a Credit Agreement, consisting of a $90
million revolving credit facility and a $36.9 million term loan facility.
Borrowings under the Credit Agreement bear interest at either LIBOR plus a
specified margin between 0.75% and a 3.25%, or at the lender's adjusted base
rate, at the Company's option. The Company is required to maintain compliance
with certain financial covenants under the Credit Agreement, including
covenants relating to minimum net worth and interest ratio coverage.
12
<PAGE> 13
As a result of the decline in operating results, the Company was not
in compliance with certain financial and other covenants at April 3 and July 3,
1999. The Company has entered into an amendment to the Credit Agreement which
waives the covenants for the quarters ended April 3 and July 3, 1999. Based on
the current business environment, it is likely that the Company will not be in
compliance with existing financial covenants in future periods including the
fourth quarter of fiscal 1999. Accordingly, generally accepted accounting
principles require that amounts outstanding under the Credit Agreement be
reflected in current liabilities on the balance sheet. The waiver currently
expires on August 31, 1999 and there can be no assurance that further waivers
can be obtained. The Credit Agreement continues to be the Company's primary
source of liquidity. The Company continues to access its Revolving Credit
Facility and has not realized any reduction in its borrowing availability.
On August 4, 1999, the Company and certain of its subsidiaries
received a commitment from Congress Financial Corporation (Southern) and
BankBoston, N.A. for a revolving credit, term loan and letter of credit
facility in an aggregate principal amount of up to $110,000,000 to replace the
Company's current credit facility and to support the Company's working capital
and general corporate needs. If obtained, the Company believes borrowings under
the facility would be sufficient to fund the Company's liquidity needs at least
through the end of fiscal 1999. However, the commitment is subject to various
conditions and there can be no assurance the Company will be able to consummate
the financing or obtain a substitutive facility on terms acceptable to the
Company.
During the third quarter and including July, 1999, the Company
terminated all of its outstanding interest rate hedge agreements. The cost to
unwind these agreements was insignificant. Presently, the Company has $125
million of its debt at a fixed rate, with the remaining balance of the Term
Loan and Revolving Credit Facility bearing interest at a floating rate of
interest.
Year 2000
The Company determined that it was necessary to modify or replace
portions of its software so that its computer system will function properly
with respect to dates in the year 2000 and beyond. The Company also has
initiated discussions with its significant suppliers, large customers and
financial institutions to ensure that those parties have appropriate plans to
remediate Year 2000 issues where their systems interface with the Company's
systems or otherwise impact its operation.
The Company's comprehensive Year 2000 initiative is being managed by a
team of internal staff. The team's activities are designed to ensure that there
is no adverse effect on the Company's core business operations and that
transactions with customers, suppliers and financial institutions are fully
supported. The Company's business application programs are currently compliant
and the Company is substantially complete with its Year 2000 Project. The
Company continues to follow up with critical suppliers and customers concerning
their plans and progress in addressing the Year 2000 problem. The costs of the
Year 2000 Project have not been and are not
13
<PAGE> 14
expected to be material to the Company's results of operations or financial
position and are being expensed as incurred. These costs represent the labor
costs of time allocated from existing internal staff. The costs of the project
to complete the Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995
This Current Report on Form 10-Q includes, and other communications
from the Company may include, forward-looking statements subject to various
assumptions regarding the Company's operating performance that may not be
realized and which are subject to significant known and unknown business,
economic and competitive uncertainties and contingencies, many of which are
beyond the Company's control. Consequently such matters should not be regarded
as a representation or warranty by the Company that such matters will be
realized or are indicative of the Company's financial condition or operating
results for future periods. Actual results may differ materially from those
contemplated by any forward-looking statement. These forward-looking statements
are being made in reliance upon the "safe harbor" provisions of The Private
Securities Litigation Reform Act of 1995.
The Company's liquidity, capital resources and results of operations
are subject to a number of risks and uncertainties including, but not limited
to, the following: the ability of the Company to consummate adequate financing
arrangements; risks associated with the Company's use of substantial leverage,
restrictions imposed by the terms of the Company's indebtedness; adverse
developments with respect to the Company's liquidity or results of operations;
the ability of the Company to respond to competitive pressures which may affect
the nature and viability of the Company's business strategy; the ability of the
Company to develop new products; trends in the economy as a whole which may
affect consumer confidence and consumer demand for the types of goods produced
by the Company; the seasonal nature of the Company's business; the ability of
the Company to predict consumer demand as a whole, as well as demand for
specific goods; changes in the cost and availability of raw materials; the cost
and availability of labor; governmental regulation and trade policies with
foreign nations; and the ability to effect conversions to new technological
systems, including becoming Year 2000 compliant.
PART II--OTHER INFORMATION
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
There were no matters submitted to a vote of shareholders.
14
<PAGE> 15
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(a) (1) Exhibits:
10 - Material Contracts
(a) Amendment Number 4 to Credit Agreement among Dyersburg
Corporation (and certain of its subsidiaries) and Sun Trust
Bank, Atlanta, or Agents, dated June 18, 1999.
(b) Second Waiver Extension Agreement among Dyersburg Corporation
(and certain of its subsidiaries) and Sun Trust Bank,
Atlanta, or Agent and collateral Agent, dated August 13,
1999.
(c) Commitment Letter among Dyersburg Corporation (and certain of
its subsidiaries) and Congress Financial Corporation
(Southern) and BankBoston, N.A. dated August 4, 1999.
27 Financial Data Schedule (for SEC use only)
(b) The Corporation filed a Current Report on Form 8-K, effective June 3,
1999, regarding a shareholders rights agreement and an amended and
restated Charter.
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, 1999 /s/ William S. Shropshire, Jr.
----------------------------------------------
William S. Shropshire, Jr.
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
15
<PAGE> 1
EXHIBIT 10(a)
AMENDMENT NO. 4 TO CREDIT AGREEMENT
AND
WAIVER EXTENSION AGREEMENT
THIS AMENDMENT NO. 4 TO CREDIT AGREEMENT AND WAIVER EXTENSION AGREEMENT
(this "Agreement") dated as of June 18, 1999, 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").
WITNESSETH:
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 amended by Amendment No. 2 to Credit Agreement dated as of July 23, 1998, and
as amended by Amendment No. 3 to Credit Agreement and Waiver dated as of April
19, 1999 (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, pursuant to the terms of the Amendment No. 3 to Credit
Agreement and Waiver referred to above, Lenders constituting the Required
Lenders under the Credit Agreement agreed to waive compliance with certain
financial covenants for the Parent's Fiscal Quarter ending April 3, 1999, for a
period through July 3, 1999; and
WHEREAS, the Borrowers have requested that the foregoing waiver also be
effective with respect to such financial covenants for the Parent's Fiscal
Quarter ending July 3, 1999, and be extended through August 13, 1999, and that
certain requirements in respect of the appraisal of their assets be modified;
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:
<PAGE> 2
SECTION 1. AMENDMENT TO SECTION 7.14 ("APPRAISAL OF ASSETS"). Section
7.14 of the Credit Agreement is hereby amended by deleting Section 7.14 in its
entirety and substituting in lieu thereof the following Section 7.14:
SECTION 7.14 Appraisal and Audit of Assets. Not later than May
19, 1999, the Borrowers shall have engaged an appraisal firm or firms,
acceptable in each case to the Agent, to conduct an appraisal of the
property, plant and equipment of the Borrowers and their respective
Subsidiaries, and shall thereafter cooperate with the Agent and its
designee(s) in an audit of the inventory of the Borrowers and their
respective Subsidiaries.
SECTION 2. EXTENSION OF WAIVER. Subject to the satisfaction of the
conditions precedent set forth in Section 3 hereof, and effective as of the
Effective Date, the Required Lenders hereby agree to waive, for the period from
April 3, 1999 through August 13, 1999, any Default or Event of Default existing
or occurring under the Credit Agreement by reason of the Consolidated Companies'
failure to maintain, as of the last day of the Fiscal Quarters of Parent ending
April 3, 1999 and July 3, 1999, respectively, the minimum Fixed Charge Coverage
Ratio as required by Section 7.09(a) of the Credit Agreement, the minimum
Interest Coverage Ratio as required by Section 7.09(b) of the Credit Agreement,
and the maximum Adjusted Funded Debt Coverage Ratio as required by Section
7.09(c) of the Credit Agreement; provided, however, that the foregoing waiver
shall be limited in all respects solely to such period of time, and the
requirements to maintain the minimum Fixed Charge Coverage Ratio, the minimum
Interest Coverage Ratio, and maximum Adjusted Funded Debt Coverage Ratio as set
forth in Section 7.09(a), (b) and (c), shall be and remain in full force and
effect upon the expiration of the foregoing waiver.
SECTION 3. CONDITIONS OF EFFECTIVENESS. This Agreement shall become
effective as of the date first above written (the "Effective Date") when this
Agreement 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 4. 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:
4.1 The execution, delivery and performance by the Borrowers of this
Agreement 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.
2
<PAGE> 3
4.2 This Agreement constitutes the legal, valid and binding obligation
of the Borrowers, enforceable against the Borrowers in accordance with its
terms.
4.3 No Default or Event of Default has occurred and is continuing as of
the Effective Date.
SECTION 5. 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 Agreement or any
investigation by the Lenders or the Agent or the Collateral Agent.
SECTION 6. NO WAIVER, ETC. The Borrowers hereby agree that, except as
otherwise expressly provided in Section 2 hereof, 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 Agreement.
SECTION 7. AFFIRMATION OF COVENANTS. The Borrowers hereby affirm and
restate as of the date hereof all covenants set forth in the Credit Agreement,
as expressly waived hereby, and such covenants are incorporated by reference
herein as if set forth herein directly.
SECTION 8. RATIFICATION OF CREDIT AGREEMENT. Except as expressly
amended and waived 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.
SECTION 9. BINDING NATURE. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, their respective successors,
successors-in-titles, and permitted assigns.
3
<PAGE> 4
SECTION 10. COSTS AND EXPENSES. 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 Agreement 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.
SECTION 11. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Georgia.
SECTION 12. ENTIRE UNDERSTANDING. This Agreement 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 13. COUNTERPARTS. This Agreement 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.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
through their authorized officers as of the date first above written.
DYERSBURG CORPORATION
By:/s/ William S. Shropshire, Jr.
-------------------------------------------------
William S. Shropshire, Jr.
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.
--------------------------------------------
William S. Shropshire, Jr.
Executive Vice President and
Chief Financial Officer
UNITED KNITTING LIMITED
PARTNERSHIP, I, A TENNESSEE LIMITED
PARTNERSHIP
By: United Knitting, Inc., its sole general partner
By: /s/ William S. Shropshire, Jr.
--------------------------------------------
William S. Shropshire, Jr.
Secretary and Treasurer
5
<PAGE> 6
IQUE LIMITED PARTNERSHIP, I, A
TENNESSEE LIMITED PARTNERSHIP
By: IQUE, Inc., its sole general partner
By: /s/ William S. Shropshire, Jr.
----------------------------------------
William S. Shropshire, Jr.
Executive Vice President and Chief
Financial Officer
ALAMAC KNIT FABRICS, INC.
By: /s/ William S. Shropshire, Jr.
--------------------------------------------
William S. Shropshire, Jr.
Vice President and Secretary
SUNTRUST BANK, ATLANTA, INDIVIDUALLY
AND AS AGENT AND COLLATERAL AGENT
By: /s/ Laura Kahn
--------------------------------------------
Name: Laura Kahn
Title: Director, Senior Relationship Manager
By: N/A
--------------------------------------------
Name:
Title:
6
<PAGE> 7
FIRST UNION NATIONAL BANK
By: /s/ Roger Pelz
-------------------------------
Name: Roger Pelz
Title: Senior Vice President
WACHOVIA BANK, N.A.
By: /s/ Timothy R. Hileman
-------------------------------
Name: Timothy R. Hileman
Title: Senior Vice President
CENTURA BANK
By:
-------------------------------
Name:
Title:
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEEN BANK B.A.,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By: /s/ Kevin T. King
-------------------------------
Name: Kevin T. King
Title: Vice President
By: /s/ Ellen M. Tackling
-------------------------------
Name: Ellen M. Tackling
Title: Vice President
NATIONAL CITY BANK OF KENTUCKY
By: /s/ Kevin L. Anderson
-------------------------------
Name: Kevin L. Anderson
Title: Vice President
7
<PAGE> 8
NATIONSBANK, N.A.
By: /s/ E. Phifer Helms
--------------------------------
Name: E. Phifer Helms
Title: Senior Vice President
THE FUJI BANK, LIMITED, NEW YORK
BRANCH
By:
--------------------------------
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.
By: /s/ R. Glass
--------------------------------
Name: R. Glass
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/ Thomas H. Bell
--------------------------------
Name: Thomas H. Bell
Title: Vice President
8
<PAGE> 1
EXHIBIT 10(b)
SECOND WAIVER EXTENSION AGREEMENT
THIS SECOND WAIVER EXTENSION AGREEMENT (this "Agreement")
dated as of August 13, 1999, 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 amended by Amendment No. 2 to Credit Agreement dated as
of July 23, 1998, as amended by Amendment No. 3 to Credit Agreement and Waiver
dated as of April 19, 1999, and as amended by Amendment No. 4 to Credit
Agreement and Waiver Extension Agreement dated as of June 18, 1999 (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, pursuant to the terms of the Amendment No. 3 to
Credit Agreement and Waiver and the Amendment No. 4 to Credit Agreement and
Waiver Extension Agreement referred to above, Lenders constituting the Required
Lenders under the Credit Agreement agreed to waive compliance with certain
financial covenants for the Parent's Fiscal Quarters ending April 3, 1999 and
July 3, 1999, for a period through August 13, 1999; and
WHEREAS, the Borrowers have requested that the foregoing
waivers be extended through August 31, 1999;
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:
<PAGE> 2
SECTION 1. EXTENSION OF WAIVER. Subject to the satisfaction of
the conditions precedent set forth in Section 3 hereof, and effective as of the
Effective Date, the Required Lenders hereby agree to waive, for the period from
April 3, 1999 through August 31, 1999, any Default or Event of Default existing
or occurring under the Credit Agreement by reason of the Consolidated Companies'
failure to maintain, as of the last day of the Fiscal Quarters of Parent ending
April 3, 1999 and July 3, 1999, respectively, the minimum Fixed Charge Coverage
Ratio as required by Section 7.09(a) of the Credit Agreement, the minimum
Interest Coverage Ratio as required by Section 7.09(b) of the Credit Agreement,
and the maximum Adjusted Funded Debt Coverage Ratio as required by Section
7.09(c) of the Credit Agreement; provided, however, that the foregoing waiver
shall be limited in all respects solely to such period of time, and the
requirements to maintain the minimum Fixed Charge Coverage Ratio, the minimum
Interest Coverage Ratio, and maximum Adjusted Funded Debt Coverage Ratio as set
forth in Section 7.09(a), (b) and (c), shall be and remain in full force and
effect upon the expiration of the foregoing waiver.
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Agreement shall
become effective as of the date first above written (the "Effective Date") when
this Agreement 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. NO WAIVER, ETC. The Borrowers hereby agree that,
except as otherwise expressly provided in Section 1 hereof, 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 Agreement.
SECTION 4. AFFIRMATION OF COVENANTS. The Borrowers hereby
affirm and restate as of the date hereof all covenants set forth in the Credit
Agreement, as expressly waived hereby, and such covenants are incorporated by
reference herein as if set forth herein directly.
SECTION 5. RATIFICATION OF CREDIT AGREEMENT. Except as
expressly amended and waived 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.
2
<PAGE> 3
SECTION 6. BINDING NATURE. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their respective
successors, successors-in-titles, and permitted assigns.
SECTION 7. COSTS AND EXPENSES. 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 Agreement 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.
SECTION 8. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Georgia.
SECTION 9. ENTIRE UNDERSTANDING. This Agreement 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 10. COUNTERPARTS. This Agreement 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.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement through their authorized officers as of the date first above written.
DYERSBURG CORPORATION
By: /s/ William S. Shropshire, Jr.
------------------------------------------------
William S. Shropshire, Jr.
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.
--------------------------------------------
William S. Shropshire, Jr.
Executive Vice President and
Chief Financial Officer
UNITED KNITTING LIMITED
PARTNERSHIP, I, A TENNESSEE LIMITED
PARTNERSHIP
By: United Knitting, Inc., its sole general partner
By: /s/ William S. Shropshire, Jr.
--------------------------------------------
William S. Shropshire, Jr.
Secretary and Treasurer
4
<PAGE> 5
IQUE LIMITED PARTNERSHIP, I, A
TENNESSEE LIMITED PARTNERSHIP
By: IQUE, Inc., its sole general partner
By: /s/ William S. Shropshire, Jr.
----------------------------------------
William S. Shropshire, Jr.
Executive Vice President and Chief
Financial Officer
ALAMAC KNIT FABRICS, INC.
By: /s/ William S. Shropshire, Jr.
--------------------------------------------
William S. Shropshire, Jr.
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
5
<PAGE> 6
FIRST UNION NATIONAL BANK
By: /s/ Roger Pelz
-------------------------------
Name: Roger Pelz
Title: Senior Vice President
WACHOVIA BANK, N.A.
By: /s/ Timothy R. Hileman
-------------------------------
Name: Timothy R. Hileman
Title: Senior Vice President
CENTURA BANK
By:
-------------------------------
Name:
Title:
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEEN BANK B.A.,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By:
-------------------------------
Name:
Title:
NATIONAL CITY BANK OF KENTUCKY
By: /s/ Donald Pullen
-------------------------------
Name: Donald Pullen
Title: Vice President
6
<PAGE> 7
BANK OF AMERICA, N.A.
By:
--------------------------------
Name:
Title:
THE FUJI BANK, LIMITED, NEW YORK
BRANCH
By:
--------------------------------
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:
--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By: /s/ Thomas H. Bell
--------------------------------
Name: Thomas H. Bell
Title: Vice President
7
<PAGE> 1
EXHIBIT 10(c)
August 4, 1999
Dyersburg Corporation and its Subsidiaries
1315 Phillips Street
Dyersburg, Tennessee 38024
Attention: President
You have requested that CONGRESS FINANCIAL CORPORATION (SOUTHERN), a
Georgia corporation ("Congress"), and BANKBOSTON, N.A., a national banking
association ("BankBoston"; Congress and BankBoston are sometimes collectively
referred to hereinafter as "Lenders" and individually as a "Lender"), provide a
revolving credit, term loan and letter of credit facility in an aggregate
principal amount of up to $110,000,000 (the "Facilities"), to Dyersburg
Corporation, a Tennessee corporation, and certain of its subsidiaries
(collectively, "Borrowers" and individually, a "Borrower"). The purpose of the
Facilities will be to refinance Borrowers' existing senior revolving and term
loan facility with SunTrust Bank, N.A., as agent and various other financial
institutions (the "Existing Facility"), to support ongoing working capital and
general corporate needs of Borrowers, including permitted capital expenditures,
and to pay transaction expenses associated with the closing of the Facilities.
Subject to the terms and conditions set forth herein, Lenders are
pleased to advise you of their respective commitments to make available to
Borrowers the Facilities as hereinafter described:
1. REVOLVING CREDIT FACILITY.
(a) Subject to and upon the terms and conditions set forth herein and
in the Loan Documents (as hereinafter defined), each Lender will, severally to
the extent of its Revolving Commitment (as hereinafter defined) and not jointly
with the other Lender, make revolving loans ("Revolving Loans") to Borrowers
from time to time in amounts requested by Borrowers, up to the amount equal to
the sum of:
(i) eighty-five percent (85%) of the net amount of
eligible accounts plus ninety percent (90%) of the
net amount of eligible factored accounts, plus
(ii) the lesser of:
(A) the sum of:
(I) seventy percent (70%) of the value
of eligible cotton inventory, plus
(II) sixty percent (60%) of the value of
eligible raw materials during the
period from the closing date to the
sooner to occur of: (x) February
15, 2000 or (y) Borrowers' receipt
of their federal tax refund claim
for prior fiscal years of Borrowers
-1-
<PAGE> 2
and fifty percent (50%) of the value
of eligible raw materials at all
times thereafter, plus
(III) sixty percent (60%) of the value of
eligible finished goods during the
period from the closing date to the
sooner to occur of: (x) February 15,
2000 or (y) Borrowers' receipt of
their federal tax refund claim for
prior fiscal years of Borrowers and
fifty percent (50%) of the value of
eligible finished goods at all times
thereafter, plus
(IV) the lesser of: (x) fifty percent
(50%) of the value of eligible
work-in-process consisting of
manufactured yarn, greige cloth
inventory and dyed greige cloth at
Borrowers' Dyersburg, Tennessee
location and greige cloth inventory
at Alamac's location plus
twenty-five percent (25%) of the
value of eligible Alamac
stock-in-process and finishing
department inventory or (y)
$8,000,000, or
(B) $25,000,000, less
(iii) any availability reserves that are established by
Agents.
(b) For purposes hereof, "Revolving Commitment" shall mean, at any date
for any Lender, the obligation of such Lender to make Revolving Loans and to
purchase participations in letter of credit accommodations under the Loan
Documents with Borrowers, which shall not exceed (a) $42,000,000 for Congress,
and (b) $42,000,000 for BankBoston, and "Revolving Commitments" means the
aggregate principal amount of the Revolving Commitments of all Lenders, the
maximum amount of which shall not exceed $84,000,000.
(c) Eligible accounts and eligible inventory and the net amounts
thereof shall be determined by Congress, in its capacity as administrative agent
("Administrative Agent") and BankBoston, in its capacity as collateral agent
("Collateral Agent"; Administrative Agent and Collateral Agent are sometimes
collectively referred to hereinafter as "Agents") pursuant to general criteria
which will be set forth in the Loan Documents and which will be substantially in
the form of Exhibit A, attached hereto. Agents may, in their discretion from
time to time upon not less than five (5) days prior notice to Borrowers, (i)
reduce the lending formula with respect to eligible accounts and eligible
factored accounts to the extent that Agents determine in good faith that: (A)
the dilution with respect to the accounts for any period (based on the ratio of
(x) the aggregate amount of reductions in accounts other than as a result of
payments in cash to (y) the aggregate amount of total sales) has increased in
any material respect or may be reasonably anticipated to increase in any
material respect above historical levels, or (B) the general creditworthiness of
account debtors has declined or (ii) reduce the lending formula(s) with respect
to eligible inventory to the extent that Agents determine that: (x) the number
of days of the turnover of the inventory for any period has changed in any
material respect from historical levels or (y) the liquidation value of the
eligible inventory, or any category thereof, has decreased, or (z) the nature
and quality of the inventory has deteriorated. In determining whether to reduce
the lending formula(s), Agents may
-2-
<PAGE> 3
consider events, conditions, contingencies or risks which are also considered in
determining eligible accounts, eligible inventory or in establishing
availability reserves.
(d) Lenders will allow Borrowers to elect once during the term of the
Loan Agreement to reduce permanently the Revolving Commitments by up to
$10,000,000, and such commitment reduction of up to $10,000,000 shall not be
subject to a prepayment penalty, premium or fee.
2. TERM LOAN FACILITY.
(a) Subject to and upon the terms and conditions herein set forth and
in the Loan Documents, each Lender severally agrees to make to Borrowers a term
loan advance in an amount not to exceed such Lender's Term Loan Commitment (as
defined below) (collectively, the "Term Loan"). The Term Loan shall be comprised
of term loan advances in the aggregate principal amount of $26,000,000 and shall
be funded by Lenders on the closing date, concurrently with Lenders' funding of
their initial Revolving Loans. Each term loan advance shall be evidenced by a
term note in the principal amount of the Term Loan Commitment of the holder
thereof, repaid, together with interest and other amounts due in respect
thereof, in accordance with the Loan Documents and shall be secured by all of
the Collateral (as defined below). The Term Loan shall be repaid in monthly
installments of $425,000 each, commencing on February 1, 2000, and continuing on
the first day of each month thereafter, with a final payment upon the commitment
termination date; provided, however, that the unpaid balance shall be due,
without notice or demand, upon any termination of the revolving credit facility.
The Term Loan Commitment of each Lender shall expire on the funding by such
Lender of its term loan advance. Borrowers shall not be entitled to reborrow any
amounts repaid with respect to the Term Loan.
(b) For purposes hereof, "Term Loan Commitment" shall mean at any date
for any Lender, the obligation of such Lender to make term loan advances
pursuant to the terms and conditions of the Loan Documents, which shall not
exceed (i) $13,000,000 for Congress, and (ii) $13,000,000 for BankBoston; and
the term "Term Loan Commitments" shall mean the aggregate principal amount of
the Term Loan Commitments of all Lenders, the maximum amount of which shall not
exceed $26,000,000.
(c) Voluntary prepayments of the Term Loan shall be permitted in part
subject to premiums of three percent (3.0%) of the total prepayment in Year 1,
one and one-half percent (1.50%) in Year 2, and three-fourths of one percent
(0.75%) in Year 3 and at all times thereafter, together with any standard LIBOR
breakage costs as applicable.
3. LETTER OF CREDIT FACILITY. Congress shall procure from an issuing
bank all letters of credit. The letter of credit facility shall be a sublimit of
the revolving credit facility and shall not exceed $16,000,000 in the aggregate
at any time. Letter of credit fees in respect of standby and direct pay letters
of credit shall be payable pro rata to the Lenders at the annual rate equal to
the Applicable Margin (as defined below) for Revolving Loans consisting of LIBOR
Rate loans and based on the maximum amount available to be drawn under each
standby letter of credit. Letter of credit fees in respect of documentary
letters of credit shall be payable pro rata to the Lenders at the annual rate of
1.50% of the face amount of each issued documentary letter of credit. In
addition, Borrowers shall pay to the issuing bank a fronting fee equal to 0.125%
per annum of the face amount
-3-
<PAGE> 4
of each standby and documentary letter of credit. Any other issuance fees in
respect of documentary letters of credit will be in amounts to be agreed upon
among Borrowers, Agents and Lenders.
4. TERM. The Facilities will have an initial term of three (3) years
from the closing date and may be extended for an additional one (1) year period
with the mutual written consent of Borrowers, Agents and Lenders.
5. INTEREST.
(a) Interest Rate. Outstanding amounts under the Facilities shall
accrue interest at the Borrowers' option at either the Alternate Base Rate plus
the Applicable Margin or the LIBOR Rate plus the Applicable Margin. "Alternate
Base Rate" shall mean a floating rate equal to BankBoston's base rate. "LIBOR
Rate" shall mean with respect to the interest period for a LIBOR Rate loan, the
interest rate per annum equal to the arithmetic average of the rates of interest
per annum (rounded upwards, if necessary, to the next one-sixteenth (1/16) of
one (1%) percent) at which BankBoston is offered deposits of United States
dollars in the London interbank market (or other LIBOR Rate market selected by
Borrowers and approved by Agents and Lenders) on or about 9:00 a.m. (New York
time) two (2) business days prior to the commencement of such interest period in
amounts substantially equal to the principal amount of the LIBOR Rate loans
requested by and available to Borrowers in accordance with the Loan Agreement,
with a maturity of comparable duration to the interest period selected by
Borrowers.
For purposes hereof, "Applicable Margin" shall mean a percentage equal to 2.75%
with respect to Revolving Loans consisting of LIBOR Rate loans; 0.75% with
respect to Revolving Loans consisting of Base Rate loans; 3.25% with respect to
any portion of the Term Loan consisting of LIBOR Rate loans; and 1.25% with
respect to any portion of the Term Loan consisting of Base Rate loans; provided,
that, commencing October 1, 2000, if there exists no Default or Event of Default
under (and as defined in) the Loan Agreement, then the Applicable Margin shall
be increased or decreased, based upon the ratio of Consolidated Funded Debt to
Consolidated EBITDA, as follows:
<TABLE>
<CAPTION>
Consolidated Funded Revolving Loans Term Loan
Debt/Consolidated
EBITDA
- --------------------------------------------------------------------------------
LIBOR Rate Base Rate LIBOR Rate Base Rate
Loans Loans Loans Loans
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Greater than or
equal to 6.50 to 1.0 3.00% 1.00% 3.50% 1.50%
- --------------------------------------------------------------------------------
Less than 6.50 to
1.0 but greater than
or equal to 5.50 to 1.0 2.75% 0.75% 3.25% 1.25%
- --------------------------------------------------------------------------------
Less than 5.50 to 1.0
but greater than or
equal to 4.50 to 1.0 2.50% 0.50% 3.00% 1.00%
- --------------------------------------------------------------------------------
Less than 4.5 to 1.0
but greater than or
equal to 3.50 to 1.0 2.25% 0.25% 2.75% 0.75%
- --------------------------------------------------------------------------------
Less than 3.50 to 1.0 2.00% 0% 2.50% 0.50%
- --------------------------------------------------------------------------------
</TABLE>
For purposes of this definition and the unused line fee, Consolidated EBITDA
shall mean earnings before interest, taxes, depreciation and amortization for
the last four (4) quarters plus up to $2,000,000 of cash restructuring charges
associated with the closing of up to one (1) additional business facility plus
all non-cash charges related to a restructuring in financial statements prepared
in accordance with GAAP. The effective date of any change in the Applicable
Margin due
-4-
<PAGE> 5
to a change in the Borrowers' relevant ratio will be the third business day
following the receipt by Agents of the Borrowers' quarterly financial
statements.
(b) Default Rate. If an Event of Default occurs, the default rate of
interest will be two percent (2.00%) over the rates otherwise applicable to the
loans.
(c) Interest Periods. LIBOR rates may be selected for interest periods
of 1, 2, or 3 months, as available.
(d) Payment Dates. Interest on Base Rate loans will be due and payable
monthly, in arrears. Interest on LIBOR Rate loans will be due and payable at the
earlier of the end of each applicable interest period.
(e) Minimum Amounts. LIBOR Rate Loans shall be in a minimum amount of
$5,000,000 and integral multiples of $1,000,000 in excess of that amount.
(f) Calculation of Fees and Interest. Interest and all fees described
herein and payable to Lenders under the Loan Documents shall be calculated on
the basis of the actual days elapsed in a year of 360 days.
6. FEES. All fees listed below are in addition to interest and other
fees and charges provided for herein and may, at Agents' and Lenders' option, be
charged directly to any loan account.
(a) Closing Fee. Borrowers shall jointly and severally pay to
Collateral Agent (for the pro rata benefit of Lenders) a closing fee in the
amount of $825,000: (i) $250,000 of which has been paid by Borrowers to Lenders
on July 14, 1999, in connection with the acceptance of the Outline of Terms and
Conditions, (ii) $500,000 of which shall be payable by Borrowers to Lenders on
or before August 5, 1999, in immediately available funds, and (iii) the
remaining $75,000 of which shall be payable by Borrowers to Lenders on the
closing date subject, in each case, to the limitations and conditions set forth
in the Letter from Congress and BankBoston to Dyersburg dated July 14, 1999.
Such closing fee shall compensate Lenders for the costs associated with the
origination, structuring, processing, approving and closing of the transactions
contemplated in this commitment, exclusive of any other expenses for which
Borrowers have agreed to reimburse Agents and Lenders.
(b) Syndication Fee. Borrowers shall jointly and severally pay to
BankBoston and Congress on the closing date a syndication fee in the amount of
$550,000 in immediately available funds.
(c) Collateral Agent Fee. Borrowers shall jointly and severally pay to
Collateral Agent for its benefit a monthly fee in an amount equal to $4,000 per
month, which fee shall be fully earned as of, and payable in advance on, the
first day of each month.
(d) Administrative Agent Fee. Borrowers shall jointly and severally pay
Administrative Agent for its benefit a monthly fee in an amount equal to $1,500
per month in respect of Administrative Agent's services, which fee shall be
fully earned as of, and payable in advance on the closing date and on the first
day of each month thereafter.
(e) Unused Line Fee. Borrowers shall jointly and severally pay to
Collateral Agent (for the pro rata benefit of Lenders) monthly an unused line
fee equal to (i) the percentage set forth below based upon the ratio of
Consolidated Funded Debt to Consolidated EBITDA (calculated as provided in
paragraph 5(a) above), multiplied by (ii) the amount by which the Revolving
Commitments exceed the average daily principal balance of the outstanding
Revolving Loans and letter of credit accommodations during the immediately
preceding month (or part thereof), which fee shall be payable on the first day
of each month in arrears:
(A) If the ratio of Consolidated Funded Debt to
Consolidated EBITDA is greater than or equal to 6.5 to 1.0,
then the applicable percentage shall be 0.50%.
(B) If the ratio of Consolidated Funded Debt to
Consolidated EBITDA is less than 6.5 to 1.0, then the
applicable percentage shall be 0.375%.
(f) Early Termination Fee. If the Facilities are terminated for any
reason prior to the end of the then current term, Borrowers shall pay to
Collateral Agent, for the pro rata benefit of Lenders, an Early Termination Fee
as
-5-
<PAGE> 6
follows: (i) three percent (3.0%) of the Facilities if terminated on or prior to
the first anniversary of the closing date; (ii) one and one-half of one percent
(1.5%) of the Facilities if terminated after the first anniversary and on or
prior to the second anniversary of the closing date; and (iii) three-quarters of
one percent (0.75%) of the Facilities if terminated after the second anniversary
and prior to the third anniversary of the closing date or at any other time
prior to the end of the then current term.
7. MANDATORY PREPAYMENTS. The loans shall be prepaid through
application to the loans of the following amounts: (a) 100% of the net proceeds
received from the sale or disposition of all or any part of the assets of any
Borrower or any of its subsidiaries (other than (i) sales in the ordinary course
of a Borrowers' business, (ii) permitted sales to be agreed upon, subject to the
reinvestment of the net proceeds thereof within six (6) months, and (iii) other
sales not in the ordinary course of business not to exceed in any fiscal year of
such Borrower an amount to be agreed upon by Borrowers, Agents and Lenders); and
(b) 100% of the net proceeds received from the issuance of subordinated debt or
equity by any Borrower. Mandatory prepayments described in the foregoing
sentence shall be applied to repay, without penalty or premium (except for LIBOR
breakage costs, if any) first, to outstandings on the Term Loan in inverse order
of maturity, then to the Revolving Loans; provided, however, that any proceeds
arising from (i) the issuance of subordinated debt or equity as described above
or (ii) the sale of machinery and equipment not included in Accuval's appraisal
dated June 18, 1999 and real estate in Trenton, Tennessee and Hamilton, North
Carolina, shall be applied first to Revolving Loans and then to outstandings on
the Term Loan in inverse order of maturity.
8. COLLATERAL. To secure payment and performance of all obligations of
Borrowers to Agents and Lenders, each Borrower and each guarantor shall grant to
Collateral Agent, for the benefit of itself as Collateral Agent and for the pro
rata benefit of Lenders, a continuing security interest in and lien upon all
domestic real and personal property of each Borrower and each guarantor,
including, all accounts, contract rights, general intangibles, chattel paper,
documents, instruments, deposit accounts, investment property, inventory,
equipment, fixtures and real property and all products and proceeds thereof of
each Borrower and each guarantor (collectively, the "Collateral"). A pledge of
100% of the stock of all domestic subsidiaries and affiliates of Borrowers and a
pledge of 65% of the stock of all foreign subsidiaries and affiliates of
Borrowers shall be required. Agents and Lenders will agree to release specific
identified equipment that is not listed in the Accuval appraisal dated June 18,
1999, with aggregate net book value not to exceed $5,000,000, that is targeted
to be transferred to Borrowers' foreign-owned subsidiaries, so long as no
Default or Event of Default exists at such time or would result therefrom.
9. GUARANTIES. DFIC, Inc., a Delaware corporation, IQUE, Inc., a
Tennessee corporation, IQUEIC, Inc., a Delaware corporation , United Knitting
Inc., a Tennessee corporation, UKIC, Inc., a Delaware corporation, AIH Inc., a
Delaware corporation, and Alamac Enterprises Inc., a Delaware corporation, and
any and all other direct and indirect existing and future subsidiaries and/or
affiliates of each Borrower, shall execute and deliver to Lenders unlimited
guaranties in favor of Lenders, pursuant to which each of the guarantors shall
guarantee any and all obligations of each Borrower to Agents and Lenders,
whether now existing or hereafter arising.
10. COLLECTIONS. Borrowers shall maintain either a lockbox or an agency
account(s) in which daily collected funds will be applied against the
outstanding loan balance of Borrowers. Agents and Lenders intend to work within
the framework of Borrowers' existing cash management system to insure timely
application of collected funds against any outstanding debt. The lockbox or
agency account(s) will be located at First Union National Bank or at a financial
institution acceptable to Agents and Lenders. All collections will be credited
one (1) business day after the receipt of wire transfers.
11. CLOSING DATE; EXPIRATION DATE. The closing with respect to the
transactions contemplated hereby will be held in Atlanta, Georgia, on or before
September 15, 1999 (the "Expiration Date"), unless Agents and Lenders agree with
Borrowers in writing to a later date; provided, however, that Lenders shall have
no obligation to close the transactions contemplated hereby unless and until
Borrowers have satisfied, or cause to be satisfied to Lenders' satisfaction, all
of the conditions to funding set forth herein on or before the Expiration Date.
Lenders will have no further obligation hereunder on the Expiration Date or the
date on which closing shall occur, whichever occurs first.
12. BASIC LOAN DOCUMENTATION. Borrowers shall be required to execute
and deliver, or cause to be executed and delivered, to Agents and Lenders such
instruments, agreements, documents, assignments, pledges, waivers, certificates,
opinions, affidavits and assurances as Agents and Lenders may request in
connection with the funding of any loans on the basis outlined in this
commitment, including execution of a Loan and Security Agreement (the "Loan
-6-
<PAGE> 7
Agreement") pursuant to which Borrowers shall, among other things, grant to
Collateral Agent a lien upon the Collateral; the revolving credit notes; the
term notes; mortgages; environmental indemnities; and UCC-1 financing statements
naming Borrowers as debtor and Collateral Agent as secured party and to be filed
in each jurisdiction in which a Borrower has an office or place of business or
in which any of the Collateral is located or stored (collectively, the "Loan
Documents"), all of which shall be in form and content satisfactory to Agents
and Lenders and their counsel. The Loan Documents will contain the
representations, warranties, covenants and conditions that are normally
contained in loan documents used by Agents and Lenders that relate to loans
similar to the loans described herein, including the following:
(a) Borrowers shall provide the following reports: (i) annual financial
statements prepared on a consolidated and consolidating basis in accordance with
GAAP, all certified by a nationally recognized firm of certified public
accountants and accompanied by an unqualified opinion of such firm on the annual
financial statements, accompanied by covenant compliance calculations and a
representation by the Chief Financial Officer of Borrowers that to the knowledge
of such officer, no Event of Default has occurred or is continuing, all
submitted to Agents and Lenders within ninety (90) days after the end of each
fiscal year; and (ii) monthly financial statements prepared on a consolidated
and consolidating basis in accordance with GAAP, with comparable information for
the year to date and corresponding month of the immediately preceding fiscal
year, accompanied by covenant compliance calculations and a representation by
the Chief Financial Officer of Borrowers that no Event of Default has occurred
or is continuing, all submitted to Agents and Lenders within thirty (30) days
after the end of each month.
(b) Borrowers shall be required to provide daily sales, collections and
other reporting as requested by Agents and Lenders and shall submit a borrowing
base report weekly, with accounts receivable agings and inventory designations
required monthly.
(c) Borrowers shall not be permitted to obtain any other loans or other
financings secured by a lien upon any of the Collateral.
(d) Agents and Lenders may require certain covenants from Borrowers
relating to capital expenditure limitations; restrictions on incurrence of debts
and granting of liens; prohibitions on dividend declarations and payments and
the prepayment of any subordinated debt; restrictions on investments, mergers
and business acquisitions; and prohibitions against selling, leasing or
otherwise disposing of any of the Collateral, except for sales of inventory in
the ordinary course of business, disposition of equipment that is no longer
economically operational in the business, and other dispositions expressly
authorized herein.
(e) An Event of Default will be deemed to have occurred under the Loan
Documents by reason of, among other things, the nonpayment of any of the
Facility obligations when due; the breach by any Borrower of any covenant
contained in the Loan Documents; any Borrower's default under any instrument or
agreement evidencing or securing the payment of any material indebtedness for
borrowed money, including any indebtedness owed to the holders of any
subordinated debt; the making by any Borrower of any material misrepresentation
in the Loan Documents; the bankruptcy or insolvency of any Borrower; and the
institution of any suit or proceeding by any Borrower or by any of the
shareholders of any Borrower against either Agents or any Lender that arises out
of or is related to the obligations, the Loan Documents or the ownership,
management or operation of any of the Collateral. There will be no grace periods
regarding principal and interest payments. Other notice or grace periods and/or
thresholds shall be agreed upon by Borrowers, Agents and Lenders.
(f) Borrowers shall be required to indemnify Agents and Lenders from
and against any and all liabilities, claims or expenses Agents and Lenders may
incur under or in connection with the Loan Documents, including any
environmental claims associated with or arising from Collateral Agent's Lien
upon, use or inspection of, or foreclosure upon any of the Collateral or
otherwise, and all taxes (excluding taxes imposed on any Lender's income)
associated in any way with the transactions contemplated hereby, except to the
extent that claims are the result of Agents' or Lenders' gross negligence or
willful misconduct.
(g) Borrowers shall agree to consent to jurisdiction and venue in the
State of Georgia as to any and all litigation arising out of or related to the
Loan Documents, the loans or the Collateral and to waive (along with Agents and
Lenders) all rights to trial by jury in any such litigation.
-7-
<PAGE> 8
(h) Borrowers shall maintain Excess Availability at all times of at
least $5,000,000 after the closing date. For purposes hereof, "Excess
Availability" shall mean the amount, as determined by Agents, calculated at any
time, equal to: (a) the lesser of: (i) the amount of the Revolving Loans
available to Borrowers as of such time based on the applicable lending formulas
multiplied by the net amount of eligible accounts and the net amount of eligible
factored accounts and the value of eligible inventory, as determined by Agents,
and subject to the sublimits and availability reserves from time to time
established by Agents, and (ii) the Revolving Commitments minus the sum of: (i)
the amount of all then outstanding, and unpaid Facility obligations (but not
including for this purpose the then outstanding principal amount of the Term
Loan), plus (ii) the aggregate amount of all then outstanding, unpaid and
undisputed trade payables of Borrowers which are more than sixty (60) days past
due as of such time, plus (iii) the amount of checks issued by Borrowers to pay
trade payables, but not yet sent and the book overdraft of Borrowers.
13. FINANCIAL COVENANTS; PERMITTED INVESTMENTS.
(a) Financial covenants will be set by Borrowers, Agents and Lenders at
mutually agreeable levels based on Borrowers' projections dated July 16, 1999
(the "Plan") and shall include, but not be limited to, the following:
(i) Minimum Consolidated Adjusted Tangible Net Worth: of
at least $115,000,000 (the "Target Covenant"), to be
tested on a monthly basis beginning August 31, 1999.
For purposes hereof, Adjusted Tangible Net Worth
shall mean stockholder's equity plus the face value
of the Subordinated Notes (as defined below) less
intangible assets, including, without limitation,
goodwill and deferred financing and closing costs. If
Borrowers, with the prior written consent of Agents
and Lenders, reduce the outstanding principal amount
of the Subordinated Notes below $125,000,000, then
the Target Covenant shall be reduced in an amount
equal to such reduction.
(ii) Minimum Consolidated EBITDA: During Borrowers' fiscal
year 2000; to be tested on a cumulative quarterly
basis for the quarters ending on or about December
31, 1999 and March 31, 2000 based on approximately
75% of the Plan and on a cumulative monthly basis
beginning April 30, 2000 through on or about August
31, 2000 based on 75% of the Plan;
(iii) Minimum Consolidated Fixed Charge Coverage Ratio:
minimum (EBITDA - Capex - Cash Taxes) / (Interest
Expense + current maturities of long-term debt) on a
rolling four quarter basis beginning September 30,
2000 at a level of approximately 1.1x based on the
Plan.
Consolidated EBITDA shall be defined as earnings
before interest, taxes, depreciation and amortization
plus non-cash charges related to a restructuring in
financial statements prepared in accordance with
GAAP.
(b) In addition to limitations on total capital expenditures (annual
limitation amount(s) to be determined), Borrowers will be permitted to make
investments and/or capital expenditures in non-domestic affiliates and joint
ventures up to $1,000,000 from the closing date through December 31, 1999,
$2,000,000 during calendar year 2000, and $2,000,000 during calendar year 2001.
Such investments are conditional upon Borrowers having a minimum Excess
Availability of at least $5,000,000 after consummation of such investment and no
Event of Default shall exist at such time or result therefrom. Borrowers also
may make additional investments and/or capital expenditures in non-domestic
affiliates and joint ventures at any time after January 1, 2000, provided, that
(i) the ratio of (EBITDA - Capital Expenditures - Cash Taxes) / (Interest
Expense + Principal Amortization) for the prior twelve-month period equals a
minimum of 1.25 times; and (ii) Excess Availability equals at least $10,000,000
after such investment or capital expenditure; and (iii) no Event of Default
exists. In addition, after payment of future subordinated debt interest payments
by Borrowers, Borrowers must have a minimum availability of at least $5,000,000.
14. FEES AND EXPENSES. Borrowers shall jointly and severally reimburse
Agents and Lenders for expenses reasonably incurred in connection with periodic
field examinations, wire transfer charges and other expenses set forth in the
Loan Documents. Field examinations shall be performed at Borrowers' expense at a
cost of $650 per person day plus expenses. All fees and out-of-pocket expenses
heretofore and hereafter reasonably incurred by Borrowers in connection with the
negotiation, documentation and closing of the Facilities, and the transactions
contemplated thereby, including closing costs, recording costs, filing fees,
documentary and intangibles taxes, appraisal costs, lien search
-8-
<PAGE> 9
charges, travel expenses and the reasonable fees and disbursements of Agents'
counsel, will be payable by Borrowers whether or not the Facilities are
established or any loan is made pursuant thereto. This obligation will survive
the expiration or termination of this commitment.
15. CONDITIONS TO FUNDING. The establishment of the Facilities is
expressly conditioned upon Borrowers' strict adherence to and timely compliance
with the requirements of this commitment, the satisfaction of Agents' legal
counsel concerning all legal matters, the accuracy and completeness of any and
all representations and warranties at any time made to Agents and Lenders by
Borrowers and the following matters:
(a) The Loan Documents shall have been duly executed by Borrowers,
Agents and Lenders, in form and substance satisfactory to Agents and Lenders and
counsels for Agents;
(b) Each of the representations and warranties contained in the Loan
Documents shall be true, accurate and complete on and as of the closing date,
and all information heretofore or hereafter provided to Agents and Lenders
concerning Borrowers and the Collateral shall be true, accurate and complete;
(c) No event shall have occurred and no condition shall exist which
constitutes a Default or an Event of Default (other than any default that exists
under the Existing Facility) under (and as defined in) the Loan Documents;
(d) Agents and Lenders shall have received from Borrowers' legal
counsel in the State of Tennessee and the State of North Carolina, written
opinions satisfactory to Agents in which such counsel opine that, among other
things: (i) each Borrower is duly incorporated or organized, validly existing
and in good standing under the laws of the State of its organization and is duly
qualified to transact business in certain other states; (ii) each Borrower has
taken all necessary corporate or partnership actions to authorize the execution,
delivery and performance of the Loan Documents and any other documents required
to be executed on the closing date pursuant thereto; (iii) the execution and
delivery of each Loan Document does not, and the consummation of the financing
transactions evidenced thereby will not, violate, result in the breach of, be in
conflict with or constitute a default under any provision of any law, rule,
order, judgment or decree applicable to Borrowers or any agreement (including
any agreement evidencing any of the subordinated debt of any Borrower) known to
counsel to be applicable to Borrowers or binding on Borrowers' properties; (iv)
the Loan Documents are legal, valid and binding obligations of each Borrower
enforceable against each Borrower party thereto in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy and
other similar laws of general application relating to or affecting the
enforcement of creditor's rights generally and by general principles of equity
and other customary limitations on enforceability typically included in such
opinions; (v) such attorney knows of no litigation, proceeding or investigation,
pending or threatened against any Borrower other than that disclosed in the Loan
Agreement; (vi) no registration or declaration with any governmental authority
is required by or on behalf of Borrowers in connection with the execution and
delivery of the Loan Documents or any other documents contemplated thereby
delivered on the closing date; (vii) the Loan Documents do not violate any
applicable law relating to interest or usury and a Tennessee and a North
Carolina court would give effect to the choice of Georgia law (including laws
regulating interest) under the Loan Documents (except as to matters of procedure
and enforcement of remedies in the States of North Carolina and Tennessee);
(viii) the liens granted and conveyed to Collateral Agent with respect to all of
the Collateral are legal and valid under Tennessee and North Carolina law and
are duly perfected pursuant to applicable provisions of Tennessee and North
Carolina law; (x) all documentary stamps, intangibles taxes and fees required to
be paid by Lenders in connection with any of the Loan Documents have been duly
paid and no additional stamps, taxes or fees are required to be paid other than
recording fees in a nominal amount and franchise and excise taxes, if
applicable; and (xi) such other matters as may be reasonably requested by legal
counsel to Agents;
(e) Agents and Lenders shall have received certificates from the
appropriate state officials to the effect that each Borrower is in good standing
and fully qualified to own its properties and to carry on its business in each
state in which such qualification is necessary;
(f) Agents and Lenders shall have received evidence satisfactory to
Agents that the liens granted to Collateral Agent under the Loan Documents will
constitute on the closing date duly perfected first priority liens in the
Collateral (wherever such Collateral may be located) and that there are no other
liens affecting the Collateral other than liens for specific leased equipment
that are in existence on the date hereof;
-9-
<PAGE> 10
(g) Each landlord or owner of premises used by a Borrower shall have
executed in favor of Agents and Lenders a landlord waiver agreement in form and
substance satisfactory to Agents and their counsels pursuant to which such
landlord shall waive or subordinate any lien it may hold with respect to any
Collateral to liens in favor of Agents and Lenders, and Agents shall have
received copies of all leases;
(h) Each processor of any domestic inventory of a Borrower shall have
executed in favor of Agents and Lenders a processor waiver agreement in form and
substance satisfactory to Agents and their counsel and by which each such
processor shall, among other things, agree to waive any lien that it may have
upon any inventory from time to time placed with it by Borrowers;
(i) Each mortgagee of any premises at which any of the Collateral
consisting of equipment (including fixtures) shall be located shall execute in
favor of Agents and Lenders a mortgagee waiver agreement, in form and substance
satisfactory to Agents, pursuant to which such mortgagee shall waive or
subordinate any lien it may hold with respect to any of such Collateral;
(j) From July 3, 1999, to the closing date, Borrowers' financial
condition and results of continuing operations shall not have deviated to a
degree deemed materially adverse by Agents from that set forth in the Plan
delivered by Borrowers to Agents and Lenders prior to the date hereof;
(k) Agents shall be satisfied that Borrowers will have Excess
Availability of at least $10,000,000 on the closing date, after giving effect to
the initial Revolving Loans and letter of credit accommodations to be made by
Lenders on the closing date and the payment of all transaction expenses;
(l) Agents shall have completed (and found the results thereof to be
acceptable) their customary field examinations of Borrowers, their financial
records and the Collateral, during which Agents will examine and inspect, and
conduct detailed tests of, Borrowers MIS, inventory accounting, accounts
receivable and records thereof, accounts payable and records thereof, tax
payment procedures and compliance and other matters usually covered by such
field examination;
(m) Agents shall have found satisfactory the results of their inventory
test counts and costing tests;
(n) All of the subordinated debt of Borrowers shall be expressly
subordinate in right of payment to the prior payment and satisfaction in full of
all of the obligations to Agents and Lenders, all in a manner and pursuant to
such written agreements binding on the holders of such subordinated debt as
shall be satisfactory to Agents and their counsel (with the Agents'
acknowledging that the subordination terms contained in the Indenture with
respect to the Subordinated Notes are acceptable to Agents and their counsel;
(o) Agents and Lenders shall have received and reviewed environmental
reports, in form and substance satisfactory to Agents, and Agents shall have
satisfied themselves that Borrowers are in compliance with all environmental
laws;
(p) Agents and Lenders shall have received and found satisfactory in
all respects Borrowers' financial statements for the quarter and year-to-date
period ending July 3, 1999;
(q) Borrowers shall have delivered to Agents and Lenders acceptable
title insurance, commitments and surveys with respect to all real estate of
Borrowers, which shall be in form and substance satisfactory to Agents in all
respects;
(r) Borrowers shall have certified to Agents that the Indenture dated
as of August 27, 1997, including all amendments thereto (the "Indenture"), for
the Borrowers' $125,000,000 Series A and Series B 9-3/4% Senior Subordinated
Notes due 2007 (the "Subordinated Notes") has not been amended or otherwise
modified;
(s) There shall be no order or injunction or other pending litigation
in which there is a reasonable possibility of a decision which could materially
adversely affect the ability of the Borrowers to perform under the Loan
Documents or Agents' and Lenders' rights in respect thereof or their ability to
exercise such rights;
-10-
<PAGE> 11
(t) No event of default shall exist under the Subordinated Notes on or
prior to the closing date or shall result from the transactions contemplated by
the Loan Documents;
(u) Agents shall have reviewed and found acceptable in all respects the
industrial revenue bond documentation with respect to Borrowers' Trenton,
Tennessee location.
Agents, in their sole discretion, may in writing waive the satisfaction
of any one or more of the foregoing conditions precedent.
16. CONFIDENTIALITY. This commitment is delivered to Borrowers with the
understanding that neither it nor its contents shall be disclosed to any third
party without the prior written consent of Agents and Lenders, except for
Borrowers' legal counsel, accountants and other professional advisors and to
SunTrust Bank, N.A., in its capacity as agent under the Existing Facility and to
any regulatory authority or as otherwise required by any applicable law, rule or
regulation, none of whom, however, shall have any right to enforce any of the
terms hereof or recover damages on account of any asserted breach hereof by
Agents and Lenders but each of whom shall be subject to the confidentiality
terms contained herein.
17. ASSIGNMENT AND PARTICIPATIONS. Each Lender may assign all or a
portion of its loan and commitments under the Facilities, or sell participations
therein to another person(s), provided, that assignments shall be in a minimum
amount of $3,000,000. Prior to or after the execution of definitive
documentation for the Facilities, Lenders reserve the right to assign all or a
portion of their commitment to one or more financial institutions after
consultation with Borrowers. Upon the acceptance by Agents of the written
commitment of any new Lender to assume a portion of the Facilities, the Lender
making such assignment shall be released from a portion of its commitments in an
aggregate amount equal to the commitment of the new Lender.
Congress and BankBoston Robertson Stephens Inc. ("BRSI") will act as
the exclusive syndication agents and arrangers for the Lenders (the
"Co-Arrangers") with respect to the financing. Congress and BankBoston will
provide the full amount of such financing, but intend to syndicate the financing
either before or after closing.
By their signatures below, each Borrower agrees to assist and cooperate
with the Co-Arrangers in their syndication efforts, including, but not limited
to, promptly preparing and providing materials and information reasonably deemed
necessary by the Co-Arrangers to successfully complete and otherwise facilitate
the syndication of the facilities described herein. In the event that such
syndication cannot be achieved in a manner reasonably satisfactory to Congress,
BankBoston and BRSI under the structure described in this Commitment Letter,
Borrowers, Congress, BankBoston and BRSI each agrees to cooperate with each
other in developing a mutually acceptable alternative structure that will permit
satisfactory syndications of such credit facilities but that will not have a
material impact on the availability of Borrower under the Loan Agreement or the
ability of Borrowers to meet financial covenants contained in the Loan
Agreement. Without limiting the foregoing, each Borrower hereby agrees: (a) that
the Co-Arrangers shall have the exclusive right to syndicate the financing and
manage all aspects of the syndication (including, without limitation, in
consultation with and subject to the reasonable approval of Borrowers, decisions
as to the selection of institutions to be approached and when they will be
approached, when their commitments will be accepted, which institutions will
participate, the allocations of the commitments among the syndicate lenders and
any titles to be given to any lender participating in the financing) and that
Borrowers will assist the Co-Arrangers in contacting and soliciting potential
co-lenders and will provide to the Co-Arrangers, as they reasonably request,
financial and organizational information as well as financial projections needed
for syndication purposes; (b) that the Co-Arrangers shall be expressly permitted
to distribute any and all documents and information relating to the transactions
contemplated hereby and received from Borrowers or any other source to any
potential lender, participant or assignee, on a confidential basis and subject
to reasonable confidentiality agreements requested by Borrowers; (c) to make
available Borrowers' personnel responsible for the financing or operations of
Borrowers and their subsidiaries for meetings with potential syndicate members
upon reasonable notification and at reasonable times to be mutually agreed; (d)
to permit the Co-Arrangers to publish information in respect of the financing
(including the Agents' and the Co-Arrangers' roles in the structuring and
financing thereof), subject to Borrowers' prior reasonable approval of the form
and content thereof; and (e) that prior to or after the execution of the
definitive documentation for the facilities, Congress and BankBoston may
syndicate all or any portion of their commitment hereunder to one or more
financial institutions after consultation with and subject to the reasonable
approval of Borrowers and the Co-Arrangers, and further, that upon acceptance by
Congress or BankBoston of a written commitment of any lender to provide a
portion of the financing, Congress or BankBoston shall
-11-
<PAGE> 12
be released from a portion of its commitment hereunder in an aggregate amount
equal to the commitment of such lender. In particular, and without limitation of
the foregoing, Borrowers, BankBoston, and the Co-Arrangers agree to negotiate in
good faith regarding any changes in the definitive loan documents that may be
requested in good faith by prospective Lenders.
Borrowers agree that, prior to and during the syndication of the
Facilities, Borrowers will not permit any offering, placement or arrangement of
any competing issues of debt securities or commercial bank facilities of
Borrowers and any subsidiaries.
18. MISCELLANEOUS.
(a) The Loan Documents shall be governed by the laws of the State of
Georgia, except (i) as to attachment and perfection of liens, matters of
procedure and enforcement of remedies in other jurisdictions, and (ii)to the
extent that certain rights and privileges are granted to Agents and Lenders
under federal law, in which event federal law shall govern to such extent.
(b) This commitment is solely for the benefit of Borrowers and no other
person or entity shall be deemed a beneficiary hereof or entitled to enforce any
of the provisions hereof. No third party shall have the right to require
satisfaction of the conditions imposed herein nor be deemed a beneficiary of
such conditions. This commitment may be signed in separate counterparts, each of
which shall constitute an original but all of which taken together shall
constitute one and the same instrument. This commitment may not be assigned or
transferred without Agents' and Lenders' prior written consent.
(c) No act hereunder will constitute either or both Lenders as an agent
for any Borrower or any other entity, or constitute any Borrower as an agent for
either or both Lenders, for any purpose whatsoever.
(d) Each provision of this commitment shall be interpreted in such
manner as to be effective and valid, but in the event any such provision should
be held invalid or unenforceable, the remaining provisions hereof shall not be
affected thereby.
(e) Time is of the essence of this commitment.
(f) This commitment supersedes in all respects any prior statements of
intent, proposals, commitments or agreements of Lenders pertaining to any loan
or proposed extension of credit to Borrowers.
12
<PAGE> 13
(g) This commitment is made in reliance upon the accuracy and
completeness of the information received by Lenders from Borrowers and, in the
event of any misrepresentations, inaccuracies or failures to disclose material
information, Lenders shall be authorized to cancel this commitment.
This letter constitutes an offer that may be revoked by either or both
Lenders, verbally or in writing, at any time prior to the written acceptance of
same by Borrowers, which acceptance shall be effective if and only if Borrowers
execute this commitment in the space provided below and return the original
hereof to Lenders at Lenders' Atlanta, Georgia offices, together with the
$500,000 portion of the closing fee payable in accordance with paragraph 6(a)
above, in immediately available funds, not later than 2:00 p.m., Atlanta,
Georgia, time on August 5, 1999. Upon such execution and delivery by Borrowers
and receipt by Lenders of said $500,000 portion of the closing fee, this letter
shall constitute a commitment of Lenders to provide the Facilities subject to
the terms and conditions hereof, and a commitment by Borrowers to accept such
Facilities and to endeavor in good faith to satisfy or cause to be satisfied all
conditions to funding set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
(SOUTHERN)
By: /s/ Virginia Kiseljack
--------------------------------------------
Title: Vice President
--------------------------------------
BANKBOSTON, N.A.
By: /s/ David Rich
--------------------------------------------
Title: Vice President
--------------------------------------
Accepted this 5th day of August, 1999:
ATTEST: DYERSBURG CORPORATION
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- ------------------------- --------------------------------------------
Assistant Secretary Title: Executive Vice President and
Chief Financial Officer
--------------------------------------
DYERSBURG FABRICS LIMITED
PARTNERSHIP, I
By: /s/ William S. Shropshire, Jr.
--------------------------------------------
its sole General Partner
13
<PAGE> 14
ATTEST: DYERSBURG FABRICS INC.
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- ------------------------- --------------------------------------------
Assistant Secretary Title: Executive Vice President and
Chief Financial Officer
--------------------------------------
UNITED KNITTING LIMITED
PARTNERSHIP, I
By: /s/ William S. Shropshire, Jr.
--------------------------------------------
its sole General Partner
IQUE LIMITED PARTNERSHIP, I
By: /s/ William S. Shropshire, Jr.
--------------------------------------------
its sole General Partner
ATTEST: ALAMAC KNIT FABRICS, INC.
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- ------------------------- --------------------------------------------
Assistant Secretary Title: Executive Vice President and
Chief Financial Officer
--------------------------------------
14
<PAGE> 15
EXHIBIT A
"Eligible Accounts" shall mean Accounts created by a Borrower which are
and continue to be acceptable to Agents based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and delivery
of goods by a Borrower or rendition of services by a Borrower in the ordinary
course of its business which transactions are completed in accordance with the
terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than sixty (60) days after the
original due date thereof or more than one hundred twenty (120) days after the
date of the original invoice;
(c) such Accounts comply with all applicable representations,
warranties and covenants contained in the Loan Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America, or, at Agents' option,
if either: (i) the account debtor has delivered to a Borrower an irrevocable
letter of credit issued or confirmed by a bank satisfactory to Agents and
payable only in the United States of America and in U.S. dollars, sufficient to
cover such Account, in form and substance satisfactory to Agents and, if
required by Agents, the original of such letter of credit has been delivered to
Collateral Agent and the issuer thereof notified of the assignment of the
proceeds of such letter of credit to Collateral Agent, or (ii) such Account is
subject to credit insurance payable to Agents and Lenders issued by an insurer
and on terms and in an amount acceptable to Agents, or (iii) such Account is
otherwise acceptable in all respects to Agents (subject to such lending formula
with respect thereto as Agents may determine);
(f) such Accounts do not consist of progress billings, bill and hold
invoices or retainage invoices, except as to bill and hold invoices, if Agents
shall have received an agreement in writing from the account debtor, in form and
substance satisfactory to Agents, confirming the unconditional obligation of the
account debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts
(but the portion of the Accounts of such account debtor in excess of the amount
at any time and from time to time owed by a Borrower to such account debtor or
claimed owed by such account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectibility of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Collateral Agent and any goods giving rise
thereto are not, and were not at the time of the sale thereof, subject to any
Liens except those permitted in the Loan Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with any Borrower or any guarantor directly or indirectly by
virtue of family membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Agents'
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Agents;
-1-
<PAGE> 16
(l) there are no proceedings or actions that are threatened or pending
against the account debtors with respect to such Accounts that might result in
any material adverse change in any such account debtor's financial condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than twenty percent (20%) of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
that constitute more than fifty percent (50%) of the total Accounts of such
account debtor;
(o) such Accounts are owed by account debtors whose total indebtedness
to a Borrower does not exceed the credit limit with respect to such account
debtors as determined by Agents from time to time (but the portion of the
Accounts not in excess of such credit limit may be deemed Eligible Accounts);
and
(p) such Accounts are owed by account debtors deemed creditworthy at
all times by Agents, as determined by Agents.
General criteria for Eligible Accounts may be established and revised from time
to time by Agents in good faith. Any Accounts that are not Eligible Accounts
shall nevertheless be part of the Collateral.
"Eligible Inventory" shall mean Inventory consisting of finished goods
held for resale in the ordinary course of the business of a Borrower, raw
materials for such finished goods and selected work-in-process that are
acceptable to Agents based on the criteria set forth below. In general, Eligible
Inventory shall not include (a) work-in-process that is not in a ready salable
form; (b) components that are not part of finished goods; (c) spare parts for
equipment; (d) packaging and shipping materials; (e) supplies used or consumed
in a Borrower's business; (f) Inventory at premises other than those owned and
controlled by a Borrower, except if Agents shall have received an agreement in
writing from the person in possession of such Inventory and/or the owner or
operator of such premises in form and substance satisfactory to Agents
acknowledging Collateral Agent's first priority security interest in the
Inventory, waiving security interests and claims by such person against the
Inventory and permitting Agents access to, and the right to remain on, the
premises so as to exercise Agent's rights and remedies and otherwise deal with
the Collateral; (g) Inventory subject to a Lien in favor of any person other
than Agents except those permitted in the Loan Agreement; (h) bill and hold
goods; (i) unserviceable, obsolete or slow-moving Inventory; (j) Inventory that
is not subject to the first priority, valid and perfected security interest of
Collateral Agent; (k) returned and not first quality goods, damaged and/or
defective Inventory; and (l) Inventory purchased or sold on consignment. General
criteria for Eligible Inventory may be established and revised from time to time
by Agents in good faith. Any Inventory that is not Eligible Inventory shall
nevertheless be part of the Collateral.
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE NINE MONTHS ENDED JULY 3, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-28-1999
<PERIOD-END> JUL-03-1999
<CASH> 172
<SECURITIES> 0
<RECEIVABLES> 60,153<F1>
<ALLOWANCES> (3,380)<F1>
<INVENTORY> 43,379
<CURRENT-ASSETS> 116,112
<PP&E> 205,076<F1>
<DEPRECIATION> (84,333)<F1>
<TOTAL-ASSETS> 337,955
<CURRENT-LIABILITIES> 99,465
<BONDS> 0
0
0
<COMMON> 133
<OTHER-SE> 95,147
<TOTAL-LIABILITY-AND-EQUITY> 337,955
<SALES> 238,582
<TOTAL-REVENUES> 238,582
<CGS> 205,502
<TOTAL-COSTS> 205,502
<OTHER-EXPENSES> 37,492
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,350
<INCOME-PRETAX> (19,762)
<INCOME-TAX> (6,917)
<INCOME-CONTINUING> (12,845)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,845)
<EPS-BASIC> (0.96)
<EPS-DILUTED> (0.96)
<FN>
<F1>AMOUNTS INAPPLICABLE OR NOT DISCLOSED AS A SEPARATE LINE ON THE BALANCE
SHEET OR STATEMENT OF INCOME ARE REPORTED AS $0 HEREIN. AMOUNTS ARE REPORTED NET
OF RESERVES IN THE CONDENSED CONSOLIDATED BALANCE SHEET.
</FN>
</TABLE>
