<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 April 1, 2000
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
incorporation or organization) identification no.)
15720 JOHN J. DELANEY DR., SUITE 445
CHARLOTTE, NORTH CAROLINA 28277
(Address of principal executive offices) (Zip Code)
(704) 341-2299
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, Par Value $.01/Share Over the Counter Bulletin Board
(Title of each class) (Name of exchange on which registered)
Securities registered pursuant to Section 12 (b) 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 April 17, 2000
- ---------------------------- -------------------------------------------------
Common Stock $0.01 par value 13,388,556
<PAGE> 2
INDEX TO FORM 10-Q
DYERSBURG CORPORATION
PAGE
----
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets at
April 1, 2000, and October 2, 1999 ...........................3
Condensed Consolidated Statements of Operations
for the Three Months Ended April 1, 2000,
and April 3, 1999; Six Months Ended
April 1, 2000, and April 3, 1999..............................4
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended
April 1, 2000, and April 3, 1999..............................5
Notes to Condensed Consolidated Financial
Statements....................................................6
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................11
PART II--OTHER INFORMATION
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS....................13
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K...................................15
SIGNATURES.................................................................16
2
<PAGE> 3
DYERSBURG CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
APRIL 1, OCTOBER 2,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash ........................................................... $ 331 $ 158
Accounts receivable, net of allowance for doubtful accounts
of $2,509 at April 1, 2000, and $2,826 at October 2, 1999 ...... 53,598 50,509
Inventories .................................................... 46,945 36,735
Income taxes receivable ........................................ -- 8,253
Deferred income taxes .......................................... 3,126 3,850
Prepaid expenses and other ..................................... 1,148 2,864
--------- ---------
Total current assets ...................................... 105,148 102,369
Property, plant and equipment, net ............................. 115,985 120,688
Goodwill, net .................................................. 89,523 90,954
Deferred debt costs ............................................ 4,735 5,018
Assets held for sale and other ................................. 2,995 3,905
--------- ---------
$ 318,386 $ 322,934
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable ........................................ $ 19,633 $ 14,697
Accrued expenses .............................................. 10,539 11,127
Current portion of long-term obligations ...................... 64,716 3,400
--------- ---------
Total current liabilities ................................. 94,888 29,224
Long-term obligations ......................................... 132,900 194,460
Deferred income taxes ......................................... 5,747 7,779
Other liabilities ............................................. -- 1,571
Shareholders' equity:
Preferred stock, authorized 5,000,000 shares; none issued
Common stock, $.01 par value, authorized 40,000,000 shares; issued
and outstanding shares 13,388,556 at April 1, 2000, and 13,341,066
at October 2, 1999 ............................................... 134 133
Additional paid-in capital ..................................... 42,824 42,773
Retained earnings .............................................. 42,349 46,994
Accumulated other comprehensive loss ........................... (456) --
--------- ---------
Total shareholders' equity ................................ 84,851 89,900
--------- ---------
$ 318,386 $ 322,934
========= =========
</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 SIX MONTHS ENDED
------------------------------- -------------------------------
APRIL 1, APRIL 3, APRIL 1, APRIL 3,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales ..................... $ 78,724 $ 80,138 $ 147,073 $ 155,529
Costs and expenses:
Cost of sales .............. 70,519 70,068 128,353 134,638
Selling, general and
administrative .......... 9,062 8,816 15,313 17,413
Interest and amortization of
debt costs .............. 4,868 4,935 9,725 10,102
------------ ------------ ------------ ------------
Total costs and expenses ...... 84,449 83,819 153,391 162,153
------------ ------------ ------------ ------------
Loss before income taxes ...... (5,725) (3,681) (6,318) (6,624)
Income tax benefit ............ (1,697) (1,029) (1,673) (2,320)
------------ ------------ ------------ ------------
Net Loss ...................... $ (4,028) $ (2,652) $ (4,645) $ (4,304)
============ ============ ============ ============
Weighted average shares
outstanding:
Basic ..................... 13,382,929 13,345,598 13,368,372 13,342,321
Diluted ................... 13,382,929 13,348,033 13,368,372 13,343,767
============ ============ ============ ============
Earnings (loss) per share:
Basic ..................... $ (0.30) $ (0.20) $ (0.35) $ (0.32)
============ ============ ============ ============
Diluted ................... $ (0.30) $ (0.20) $ (0.35) $ (0.32)
============ ============ ============ ============
Dividends per share ........... $ 0.00 $ 0.01 $ 0.00 $ 0.02
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
DYERSBURG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------
APRIL 1, APRIL 3,
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss ........................................... $ (4,645) $ (4,304)
Adjustments to reconcile to net cash (used in)
provided by operating activities:
Depreciation and amortization ................. 10,536 10,442
Decrease (increase) in accounts receivable, net (3,089) 16,110
Increase in inventory ......................... (10,211) (4,456)
Increase (decrease) in trade accounts payable . 4,936 (5,208)
Federal income taxes .......................... 8,328 412
Other-net ..................................... (1,633) (2,481)
-------- --------
Net cash provided by operating activities ..... 4,222 10,515
INVESTING ACTIVITIES
Capital expenditures ............................... (3,796) (5,337)
Other-net .......................................... 1,259 (312)
-------- --------
Net cash used in investing activities ....... (2,537) (5,649)
FINANCING ACTIVITIES
Net repayment of debt .............................. (244) (4,706)
Dividends paid ..................................... -- (266)
Other .............................................. (1,268) 21
-------- --------
Net cash used in financing activities ....... $ (1,512) $ (4,951)
-------- --------
Net increase (decrease) in cash ............. 173 (85)
Cash at beginning of period .......................... 158 265
-------- --------
Cash at end of period ................................. $ 331 $ 180
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DYERSBURG CORPORATION
April 1, 2000
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 consolidated condensed financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Financial
information as of October 2, 1999, 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 2, 1999.
NOTE B--INVENTORIES
APRIL 1, OCTOBER 2,
2000 1999
------- -------
(IN THOUSANDS)
Raw materials .... $13,514 $11,611
Work in process .. 17,816 12,436
Finished goods ... 13,964 10,919
Supplies and other 1,651 1,769
------- -------
$46,945 $36,735
======= =======
NOTE C--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.
6
<PAGE> 7
Effective August 19, 1999, the Company entered into a Credit Agreement,
replacing its existing credit facility, consisting of a three-year $84,000,000
revolving line of credit (the "Revolver") and a three-year $26,000,000 term loan
(the "Term Loan"). Borrowings under the Credit Agreement bear interest at either
LIBOR plus a specified margin currently equal to 2.75% for the Revolver and
3.25% for the Term Loan, or, at the Company's option, bear interest at the
lender's base rate (the base rate was 9.0% at April 1, 2000) plus a margin equal
to 1.0%, for the Revolver and 1.5% for the Term Loan. The availability under the
Revolver is limited at all times, through maturity, to a receivables and
inventory borrowing base.
The Company is currently in default under the terms of its Credit
Agreement as a result of its failure to achieve the prescribed level of
consolidated EBITDA (earnings before interest, taxes, depreciation and
amortization) during the six-month period ended April 1, 2000. On May 12, 2000,
the Company entered into a Forbearance Agreement with its Lenders. Under the
Forbearance Agreement, the Lenders have agreed that for a period ending on
August 25, 2000 they will continue to make Revolving Loans and Letter of Credit
accommodations available to the Company under the Credit Agreement and will not
exercise any remedies available to the Lenders as a result of the Company's
default, including the right to accelerate collection of the Company's
obligations or to foreclose on the Company's assets. The Lenders obligations
under the Forbearance Agreement are conditioned on the Company achieving a
consolidated EBITDA of at least $5 million for the three-month period ending
July 1, 2000, and at least $7 million for the four-month period ending July 29,
2000 and maintaining Net Worth (as defined in the Credit Agreement) of at least
$110 million. The Company continues to access its Revolver and has not realized
any reduction in its borrowing availability.
On May 12, 2000, the Company and its Lenders also entered into a First
Amendment to the Loan and Security Agreement. The amendment restricts certain
investments in affiliates and joint ventures and property transfers that were
previously permitted under the Credit Agreement.
In accordance with generally accepted accounting principles, as a
result of the default under the Credit Agreement, the amounts outstanding under
the Credit Agreement have been reflected in current liabilities on the balance
sheet.
7
<PAGE> 8
NOTE D--EARNINGS (LOSS) PER SHARE
The table below sets forth the computations of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------- ---------------------------------
APRIL 1, APRIL 3, APRIL 1, APRIL 3,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Numerator for basic and diluted
earnings per share--net loss ... $ (4,028) $ (2,652) $ (4,645) $ (4,304)
Denominator:
Denominator for basic earnings
(loss) per share--weighted
average shares ................. 13,382,929 13,345,598 13,368,372 13,342,321
Effect of dilutive securities:
Employee Stock Options ........ -- 2,435 -- 1,446
------------ ------------ ------------ ------------
Denominator for diluted earnings
(loss) per share--adjusted
weighted average shares ........ 13,382,929 13,348,033 13,368,372 13,343,767
============ ============ ============ ============
Basic earnings (loss) per
share .......................... $ (0.30) $ (0.20) $ (0.35) $ (0.32)
============ ============ ============ ============
Diluted earnings (loss) per
share .......................... $ (0.30) $ (0.20) $ (0.35) $ (0.32)
============ ============ ============ ============
</TABLE>
NOTE E--PENSION
The Company elected to freeze benefits under its salaried and hourly
defined benefit pension plans as of December 31, 1999. This resulted in the
recognition of a curtailment gain on the salary plan of approximately
$1,700,000. Also, in connection with the curtailment of the hourly plan, the
Company recognized additional net minimum pension liability of $456,000 (net of
applicable taxes of $245,000). The additional net minimum pension liability has
been recorded as accumulated other comprehensive loss on the balance sheet at
April 1, 2000.
8
<PAGE> 9
NOTE F--COMPREHENSIVE LOSS
The following table provides a reconciliation of net loss reported in
the Company's consolidated condensed statements of operations to comprehensive
loss:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- ------------------------
APRIL 1, APRIL 3, APRIL 1, APRIL 3,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Net loss ................... $(4,028) $(2,652) $(4,645) $(4,304)
Other comprehensive loss:
Additional minimum pension
Liability ................ -- -- (701) --
Tax effect ................. -- -- 245 --
------- ------- ------- -------
Net of tax ................ -- -- (456) --
Comprehensive loss ......... $(4,028) $(2,652) $(5,101) $(4,304)
======= ======= ======= =======
</TABLE>
NOTE G--RESTRUCTURING CHARGES
During the third quarter 1999, the Company implemented a reorganization
plan related to its textile business. The textile business had been running at
less than full capacity due to the domestic circular knit industry experiencing
excess supply and low-priced garment imports from Asia. The duration of these
market conditions remains uncertain. In response to these business conditions,
the Company decided to reduce its U.S. manufacturing capacity. The major
elements of the reorganization plan included the closing of the Company's
facility in Hamilton, North Carolina and the elimination of yarn spinning
operations at the Company's Trenton, Tennessee facilities which were completed
during the fourth quarter. Additionally, the plan resulted in the reduction of
approximately 500 hourly and salaried employees, with severance benefits being
paid over periods up to twelve months from the termination date. At October 2,
1999 substantially all employees had been terminated or notified of their
impending termination.
The cost of the reorganization was reflected as a restructuring charge,
before income taxes, of $10,993,000, recorded in the third quarter 1999,
increased by $585,000 during the fourth quarter 1999. The components of the
charge included $4,499,000 million for severance and related fringe benefits and
$7,079,000 for the write-down of impaired fixed assets. Assets that are no
longer in use have been sold or are held for sale at April 1, 2000 and were
written down to their estimated fair values less costs of sale based primarily
on independent appraisals.
The Company is actively marketing the assets held for sale through the
use of internal sources and outside agents. Assets held for sale were $2,561,000
at April 1, 2000. 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. As a result of the restructuring, the Company
has idle assets of approximately $1.1 million, which continue to be depreciated.
9
<PAGE> 10
NOTE G - RESTRUCTURING CHARGES (continued)
The following is a summary of activity in the restructuring reserves
for severance and related expenses (in thousands):
June 1999 restructuring charge $ 4,023
Payments (353)
-------
Balance at July 3, 1999 3,670
Payments (3,292)
Additional severance recorded 476
-------
Balance at October 2, 1999 854
Payments (457)
-------
Balance at January 1, 2000 397
Payments (129)
-------
Balance at April 1, 2000 $ 268
=======
NOTE H--REPORTING SEGMENT INFORMATION
The Company has adopted SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
reporting by public companies of information about operating segments, products
and services, geographic areas and major customers. The method of determining
what information to report is based on the way management organizes the segments
within the Company for making operating decisions and assessing financial
performance.
The Company's chief operating decision-maker is considered to be the
Chief Executive Officer ("CEO"). The Company's CEO evaluates both consolidated
and disaggregated financial information in deciding how to allocate recourses
and assess performance. The CEO uses certain disaggregated financial information
for the Company's primary knit fabric markets: textile and stretch fabrics.
Sales for textile and stretch fabrics for the quarters ended April 1, 2000 and
April 3, 1999 were $63.6 million and $8.8 million, and $70.4 million and $9.7
million respectively. Sales for textile and stretch fabrics for the six months
ended April 1, 2000 and April 3, 1999 were $120.3 million and $16.0 million, and
$138.4 million and $17.0 million respectively. The Company has aggregated these
two markets into a single reportable textile segment as allowed under SFAS No.
131 because these product lines have similar long-term economic characteristics
such as average gross margin, and the product lines are similar in regards to
nature of production processes, type of customers, and method used to distribute
products. The Company's textile segment manufactures in U.S. plants and markets
fabric through its sales offices, principally sold to customers in the U.S.
The Company also has an apparel segment. The apparel segment purchases
fabric, contracts for cutting, sewing and packaging from companies in the U.S.
and Mexico, and markets the finished apparel to customers in the U.S. The
apparel segment has a 50% equity investment in an apparel manufacturing joint
venture in the Dominican Republic, which is not material at April 1, 2000. The
Company accounts for the joint venture using the equity method, and accordingly
does not include net sales and other individual items of profit and loss in its
Consolidated
10
<PAGE> 11
Statements of Operations or the following table.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- -------------------------
APRIL 1, APRIL 3, APRIL 1, APRIL 3,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Net Sales
Textile ................ $ 72,384 $ 80,138 $ 136,270 $ 155,434
Apparel ................ 6,340 -- 10,803 95
--------- --------- --------- ---------
Consolidated net sales .......... $ 78,724 $ 80,138 $ 147,073 $ 155,529
Operating income (loss)
Textile ................ $ 1,991 $ 2,393 $ 7,789 $ 5,608
Apparel ................ (2,133) (428) (2,951) (753)
Amortization of goodwill ........ 715 711 1,431 1,377
Interest and amortization of debt
costs ........................ 4,868 4,935 9,725 10,102
--------- --------- --------- ---------
Consolidated income (loss)
before taxes ................ $ (5,725) $ (3,681) $ (6,318) $ (6,624)
Depreciation
Textile ................ $ 4,000 $ 4,386 $ 7,775 $ 8,430
Apparel ................ 92 68 183 136
--------- --------- ---------
$ 4,092 $ 4,454 $ 7,958 $ 8,566
Capital Expenditures
Textile ................ $ 2,179 $ 2,847 $ 3,786 $ 4,776
Apparel ................ -- 56 10 561
--------- --------- --------- ---------
...................... $ 2,179 $ 2,903 $ 3,796 $ 5,337
Assets at end of period
Textile ................ $ 206,867 $ 213,392 $ 206,867 $ 213,392
Apparel ................ 9,986 1,602 9,986 1,602
Assets not allocated to
segments ............. 101,533 107,940 101,533 107,940
--------- --------- --------- ---------
$ 318,386 $ 322,934 $ 318,386 $ 322,934
========= ========= ========= =========
</TABLE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements within the
meaning of the federal securities laws, all of which are intended to be covered
by the safe harbors created thereby. These statements include all statements
regarding the Company's intent, belief and expectations (such as statements
concerning the Company's liquidity and future operating and financial strategies
and
11
<PAGE> 12
results) and any other statements with respect to matters other than historical
fact. Investors are cautioned that all forward-looking statements involve known
and unknown risks and uncertainties (some of which are beyond the control of the
Company) including, without limitation, the ability of the Company to
restructure its long-term indebtedness, the ability of the Company to continue
to access availability under the Credit Agreement, the ability of the Company to
comply with the terms of the Forbearance Agreement and the Credit Agreement, as
amended, risks associated with the Company's use of substantial financial
leverage, access to trade credit and terms from suppliers, the ability of the
Company to improve its operating performance, restrictions imposed by the terms
of the Company's credit facility, the Company's ability and success in achieving
cost savings, the Company's ability to compete with other suppliers and to
maintain acceptable gross margins, potential adverse developments with respect
to the cost and availability of raw materials and labor, risks associated with
governmental regulation and trade policies, and potential adverse developments
regarding product demand or mix. Moreover, although the Company believes that
any assumptions underlying the forward-looking statements contained herein are
reasonable however, any of the assumptions could prove to be inaccurate.
Therefore, in light of these known and unknown risks and uncertainties, there
can be no assurances that the forward-looking statements included in this report
will prove to be accurate and the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
forward-looking statements included in this report will prove to the accurate.
The Company undertakes no obligation to update any forward-looking statements
contained in this report.
Results of Operations
Net sales for the quarter ended April 1, 2000, were relatively flat at
$78.7 million versus $80.1 million for the same quarter of the prior year. Net
sales for the six months ended April 1, 2000, decreased by 5.4% compared to the
same period of the prior year. The decrease in net sales was primarily a result
of reduced average prices of units shipped. Gross margins for the quarter and
year-to-date declined to 10.4% and 12.7% versus 12.6% and 13.4% for the same
period in fiscal 1999, respectfully. The gross margins were unfavorably impacted
by negative margins realized among certain programs within the apparel segment.
The negative contribution by these programs was incurred due to higher than
anticipated requirements for fabric necessary to manufacture the garments
produced during fiscal 2000. Additionally, gross margins decreased as additional
costs were incurred to increase textile production for expected demand.
Selling, general and administrative expenses increased by 2.8% for the
second quarter and decreased 12.1% year-to-date for fiscal 2000 compared to the
same periods in fiscal 1999. The decrease year-to-date was primarily due to a
one-time credit of approximately $1.6 million stemming from the consolidation of
employee benefit plans.
Interest expense in the second quarter of fiscal 2000 of $4.9 million
and year-to-date of $9.7 million was lower than that of the same periods of
fiscal 1999 due to reduced borrowing levels. The effective tax rate for the
second quarter of fiscal 2000 was 29.6% and year-to-date was 26.5%. The
effective tax rate differs significantly from the statutory rate of
approximately 35% due to non-deductible permanent differences, primarily certain
goodwill.
Net loss for the quarter ended April 1, 2000 was $4.0 million, or $0.30
per share, versus net loss of $2.7 million, or $0.20 per share, for the same
period in fiscal 1999. For the six months
12
<PAGE> 13
ended April 1, 2000, the net loss was $4.6 million, or $0.35 per share, versus
net loss of $4.3 million, or $0.32 per share, for the same period in fiscal
1999. Losses 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 13,383,000 and 13,368,000, respectively.
During the third quarter 1999, the Company implemented a reorganization
plan related to its textile business. The textile business had been running at
less than full capacity due to the domestic circular knit industry experiencing
excess supply and low-priced garment imports from Asia. The duration of these
market conditions is uncertain. In response to these business conditions, the
Company decided to reduce its U.S. manufacturing capacity. The major elements of
the reorganization plan included the closing of the Company's facility in
Hamilton, North Carolina and the elimination of yarn spinning operations at the
Company's Trenton, Tennessee facilities which were completed during the fourth
quarter. Additionally, the plan resulted in the reduction of approximately 500
hourly and salaried employees, with severance benefits being paid over periods
up to twelve months from the termination date. At October 2, 1999 substantially
all employees had been terminated or notified of their impending termination.
The cost of the reorganization was reflected as a restructuring charge,
before income taxes, of $10,993,000, recorded in the third quarter 1999,
increased by $585,000 during the fourth quarter. The components of the charge
included $4,499,000 million for severance and related fringe benefits and
$7,079,000 for the write-down of impaired fixed assets. Assets that are no
longer in use have been sold or are held for sale at April 1, 2000 and were
written down to their estimated fair values less costs of sale based primarily
on independent appraisals.
The Company is actively marketing the assets held for sale through the
use of internal sources and outside agents. Assets held for sale were $2,561,000
at April 1, 2000. 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. As a result of the restructuring, the Company
has idle assets of $1.1 million, which continue to be depreciated.
Liquidity and Capital Resources
The Company is currently in default under the terms of its Credit
Agreement as a result of its failure to achieve the prescribed level of
consolidated EBITDA (earnings before interest, taxes, depreciation and
amortization) during the six-month period ended April 1, 2000. On May 12, 2000,
the Company entered into a Forbearance Agreement with its Lenders. Under the
Forbearance Agreement, the Lenders have agreed that for a period ending on
August 25, 2000 they will continue to make Revolving Loans and Letter of Credit
accommodations available to the Company under the Credit Agreement and will not
exercise any remedies available to the Lenders as a result of the Company's
default, including the right to accelerate collection of the Company's
obligations or to foreclose on the Company's assets. The Lenders obligations
under the Forbearance Agreement are conditioned on the Company achieving a
consolidated EBITDA of at least $5 million for the three-month period ending
July 1, 2000, and at least $7 million for the four-month period ending July 29,
2000 and maintaining Net Worth (as defined in the Credit Agreement) of at least
$110 million. The Company continues to access its Revolver and has not realized
any reduction in its borrowing availability.
13
<PAGE> 14
On May 12, 2000, the Company and its Lenders also entered into a First
Amendment to the Loan and Security Agreement. The amendment restricts certain
investments in affiliates and joint ventures and property transfers that were
previously permitted under the Credit Agreement.
In accordance with generally accepted accounting principles, as a
result of the default under the Credit Agreement, the amounts outstanding under
the Credit Agreement have been reflected in current liabilities on the balance
sheet.
Working capital and the current ratio decreased to $10.3 million and
1.1:1 at April 1, 2000, from $72.7 million and 3.5:1, respectively, at October
2, 1999. Changes in this ratio are the result of the classification of amounts
outstanding under the Company's Credit Agreement as to current liabilities. The
Company's debt-to-capital ratio was 70.0% at April 1, 2000, compared to 68.8% at
October 2, 1999.
Net receivables of $53.6 million at April 1, 2000, increased from the
level at October 2, 1999, due to higher sales levels. Inventories increased to
$46.9 million at the end of the second quarter from $36.7 million at the end of
the fourth quarter of fiscal 1999 in anticipation of expected sales volume
increases during the third quarter.
Capital expenditures for the six months ended April 1, 2000, were $3.8
million versus $5.3 million for the same period in the prior year. Cash outlays
for capital spending are anticipated to approximate $9 million in fiscal 2000.
Based on the borrowing base computation within the Credit Agreement,
the amount of additional borrowing available under the Credit Agreement at
April 1, 2000, was approximately $8.6 million. Availability under the Credit
Agreement and trade credit and terms from suppliers are the Company's primary
sources of liquidity. The Company believes that cash flow from operations and
the Credit Agreement will be sufficient to meet normal operating needs until
August 25, 2000. However, the ability of the Company to meet its operating needs
is dependent upon a combination of factors, including its ability to restructure
its long-term indebtedness and to continue to access liquidity from the Credit
Agreement and other factors described under "Cautionary Note Regarding Forward
Looking Information". The Company has retained a financial advisory firm to
assist the Company in developing strategic alternatives relating to a
restructuring of its long-term indebtedness.
14
<PAGE> 15
PART II--OTHER INFORMATION
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Company held the Annual Meeting of Shareholders on January 26,
2000, ("Annual Meeting"). At the Annual Meeting, the shareholders of the Company
elected: three Class II directors to serve a term of three years, L. R. Jalenak,
T. Eugene McBride and John D. Howard. James P. Casey and M. L. Fontenot were
elected by the Board to serve as Class III directors for a term of one year.
Each of these directors will serve their respective terms until their successors
are duly elected and qualified. Continuing directors for the Company are Julius
Lasnick, Donna Randall, Mickey Ganot, P. Manohar and V. Ravi Shankar.
For Withheld (Abstain)
------------ ------------------
L. R. Jalenak 8,014,447 901,318
T. Eugene McBride 8,014,022 901,743
John D. Howard 7,996,247 919,518
James P. Casey 8,021,947 893,818
M. L. Fontenot 8,023,047 892,718
The shareholders amended the Company's 1992 Stock Incentive Plan
increasing the number of shares of the Company's common stock available for
grant under the 1992 Stock Plan by 1,000,000 shares. There were 3,076,600 votes
cast for such proposal, 1,593,889 votes cast against such proposal, and 91,682
votes withheld (abstained) with respect to such proposal.
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(a) (1) Exhibits:
10 - Material Contract
(a) Amendment No. 1 to Credit Agreement dated May 12, 2000.
(b) Forbearance Agreement among Dyersburg Corporation (and certain
of its subsidiaries) and its Lenders dated May 12, 2000..
27 Financial Data Schedule (for SEC use only)
b) The Company did not file any reports on Form 8-K during the
three months ended April 1, 2000.
15
<PAGE> 16
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.
May 15, 2000 /s/ William S. Shropshire, Jr.
------------------------------
William S. Shropshire, Jr.
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
16
<PAGE> 1
EXHIBIT 10 (a)
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment")
is made and entered into on May 12, 2000, by and among DYERSBURG CORPORATION, a
Tennessee corporation ("Dyersburg"), DYERSBURG FABRICS LIMITED PARTNERSHIP, I, a
Tennessee limited partnership ("DFLP"), DYERSBURG FABRICS INC., a Tennessee
corporation ("DFI"), UNITED KNITTING, INC., a Tennessee corporation ("UKI"),
UNITED KNITTING LIMITED PARTNERSHIP, I, a Tennessee limited partnership ("United
Knitting"), IQUE, INC., a Tennessee corporation ("IQUE, Inc."), IQUE LIMITED
PARTNERSHIP, I, a Tennessee limited partnership ("IQUE"), ALAMAC KNIT FABRICS,
INC., a Delaware corporation ("Alamac"), and AIH INC., a Delaware corporation
("AIH") (each of the foregoing individually referred to hereinafter as a
Borrower and collectively as "Borrowers"); various financial institutions that
are parties to the Loan Agreement (as defined below) ("Lenders"); CONGRESS
FINANCIAL CORPORATION (SOUTHERN), a Georgia corporation, in its capacity as
administrative agent for the Lenders (together with its successors in such
capacity, "Administrative Agent"); and FLEET NATIONAL BANK, a national bank
formerly known as BankBoston, N.A., in its capacity as collateral agent for the
Lenders (together with its successors in such capacity, "Collateral Agent";
Administrative Agent and Collateral Agent sometimes collectively referred to
hereinafter as "Agents").
RECITALS:
Borrowers, Agents and Lenders are parties to a certain Loan and
Security Agreement dated August 17, 1999 (the "Loan Agreement"), pursuant to
which Lenders have made loans and other extensions of credit to Borrowers.
Concurrently with the execution of this Amendment, Borrowers are
entering into a Forbearance Agreement with Agents and Lenders (the "Forbearance
Agreement"), pursuant to which Agents and Lenders have agreed to forbear from
exercising certain remedies available to Agents and Lenders under the Loan
Agreement as a consequence of Borrowers' defaults thereunder.
As a condition to their willingness to enter into the Forbearance
Agreement, Agents and Lenders have required that Borrowers execute this
Amendment.
NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good
and valuable consideration, the receipt and sufficiency of which are hereby
severally acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Loan Agreement.
<PAGE> 2
2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended
as follows:
(a) By deleting the definitions of "Due from Factor Report," "Eligible
Factored Amounts," "Federal Funds Rate," "Letter of Credit Accommodations,"
"Mortgages," "Obligations," "Real Property," "Reference Bank," and "Value" from
Section 1 of the Loan Agreement and by substituting the following new
definitions in lieu thereof, in proper alphabetical sequence:
"Due from Factor Report" shall mean a report prepared by
Borrowers that reflects the amount of Factored Accounts as of the date
of the report and the aggregate amount standing to the credit of
Borrowers from all Factors as of such date.
"Eligible Factored Amounts" shall mean, on any date of
determination thereof, an amount equal to the aggregate balance
standing to the credit of Borrowers as reflected on a Due From Factor
Report delivered to Agents by Borrowers on or within one (1) Business
Day prior to such date, or, in the absence of such timely delivery of a
Due From Factor Report, an amount that is either determined by Agents
in their sole and absolute discretion or, at Agents' election,
represents the aggregate amount reflected on the most recent Factor
Status Statements as the aggregate balance standing to the credit of
Borrowers from Factors minus the sum of any fees, commissions, reserves
or other charges due from a Borrower to any Factor on such date under
its Factoring Agreement.
"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate per annum equal for each date during such period to the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) in Atlanta, Georgia by the
Federal Reserve Bank of Atlanta, or if such rate is not so published
for any day which is a Business Day, the average of the quotations for
such day on such transactions received by Collateral Agent from three
(3) federal funds brokers of recognized standing selected by Collateral
Agent.
"Letter of Credit Accommodations" shall mean the Letters of
Credit, merchandise purchase or other guaranties which are from time to
time either (a) issued or opened by Congress for the account of any
Borrower or any other Obligor or (b) with respect to which Congress has
agreed to indemnify the issuer or guaranteed to the issuer the
performance by a Borrower of its obligations to such issuer.
"Mortgages" shall mean, individually and collectively, each of
the following: (i) the North Carolina Deed of Trust, Security Agreement
and Assignment of Rents executed by Alamac in favor of Collateral Agent
with respect to the Real Property and related assets of Alamac located
in Martin County, North Carolina,(ii) the North Carolina Deed of Trust,
Security Agreement and Assignment of Rents executed by Alamac in favor
of Collateral Agent with respect to the Real Property and related
assets of Alamac located in Bladen County, North Carolina, (iii) the
North Carolina Deed of Trust, Security Agreement and Assignment of
Rents executed by Alamac in favor of Collateral Agent with respect to
the Real Property and related assets of Alamac located in Robeson
County, North Carolina, (iv) the North Carolina Deed of Trust, Security
Agreement and Assignment of Rents executed by Alamac in favor of
Collateral Agent with respect to the Real Property and related assets
of Alamac located in Sampson County, North Carolina, (v) the Tennessee
Deed of Trust, Security Agreement and Assignment of Rents executed by
DFLP in favor of
2
<PAGE> 3
Collateral Agent with respect to the Real Property and related assets
of DFLP located in Dyer County, Tennessee, (vi) the Tennessee Deed of
Trust, Security Agreement and Assignment of Rents executed by DFLP in
favor of Collateral Agent with respect to the Real Property and related
assets of DFLP located in Gibson County, Tennessee, (vii) the Tennessee
Deed of Trust, Security Agreement and Assignment of Rents executed by
DFLP in favor of Collateral Agent with respect to the Real Property and
related assets of DFLP located in Bradley County, Tennessee, (viii) the
Tennessee Leasehold Deed of Trust and Security Agreement executed by
DFLP in favor of Collateral Agent with respect to DFLP's leasehold
interest in the Real Property of DFLP located in Dyer County, Tennessee
and (ix) any other mortgage or deed of trust at any time executed by
any Obligor in favor of Collateral Agent to secure any of the
Obligations.
"Obligations" shall mean any and all Revolving Loans, the Term
Loan, all Settlement Loans, Letter of Credit Accommodations, all
Extraordinary Expenses, and all other obligations, liabilities and
indebtedness of every kind, nature and description owing by any or all
Obligors to either or both Agents, any Lender and/or any Affiliates of
either or both Agents or any Lender (including any indebtedness of any
Obligor to either or both Agents or Congress arising from any
indemnities or other assurances of payment that are given at any time
by either or both Agents or Congress to another Person with respect to
any Letters of Credit or cash management arrangements for any Borrower)
and, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or any of the other
Financing Agreements, whether now existing or hereafter arising,
whether arising before, during or after the Original Term or any
Renewal Term of this Agreement or after the commencement of any case
with respect to any Obligor under the Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which
would accrue and become due but for the commencement of such case,
whether or not such amounts are allowed or allowable in whole or in
part in such case), whether direct or indirect, absolute or contingent,
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and however acquired by either or
both Agents or any Lender.
"Real Property" shall mean all now owned and hereafter
acquired real property of any Borrower, including leasehold interests,
together with all buildings, structures, and other improvements located
thereon and all licenses, easements and appurtenances relating thereto,
wherever located, including the real property and related assets more
particularly described in the Mortgages.
"Reference Bank" shall mean Fleet National Bank, or such other
bank as Agents may from time to time designate.
"Value" shall mean, as determined by Collateral Agent in good
faith, with respect to Inventory, the lower of (a) cost computed on a
first-in-first-out basis in accordance with GAAP or (b) market value.
3
<PAGE> 4
(b) By changing the reference to "Real Estate" wherever it appears in
the Loan Agreement to "Real Property"; by deleting the reference to "Section
2.2(e)" that is contained in "Section 2.2(f)" of the Loan Agreement and by
inserting in lieu thereof a reference to "Section 2.2(f)"; by deleting the
reference to "four (4)" that is contained in Section 3.1(e)(vi) of the Loan
Agreement and by substituting in lieu thereof a reference to "six (6)"; by
adding a closed parentheses after the language "tax duty and refund" in Section
5.1(b) of the Loan Agreement; by deleting the reference to "Agent" that is
contained in Section 7.5(iv) of the Loan Agreement and by substituting in lieu
thereof a reference to "Collateral Agent"; by changing the reference to
"Information Certificate" wherever it appears in the Loan Agreement to
"Information Certificates"; by deleting the reference to "without the prior
written consent of Agents" that is contained in Section 9.16 of the Loan
Agreement and by substituting in lieu thereof a reference to "without the prior
written consent of Required Lenders"; by deleting Exhibit F to the Loan
Agreement and by substituting in lieu thereof a new Exhibit F in the form
attached to this Amendment.
(c) By deleting Sections 7.2(d) and 7.2(e) of the Loan Agreement and by
inserting in lieu thereof the following news Section 7.2(d) and 7.2(e):
(d) Collateral Agent shall have the right at any time or
times, in Collateral Agent's name or in the name of a nominee of
Collateral Agent, to verify the validity, amount or any other matter
relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(e) Borrowers shall deliver or cause to be delivered to
Collateral Agent, with appropriate endorsement and assignment, with
full recourse to Borrowers, all chattel paper and instruments which any
Borrower now owns or may at any time acquire immediately upon any
Borrower's receipt thereof, except as Collateral Agent may otherwise
agree.
(d) By deleting subsection (ii) of Section 9.11 of the Loan Agreement
and by substituting the following new language in lieu thereof:
(ii)(a) Upstream Payments and (b) so long as no Event of
Default exists or would result therefrom, dividends payable
solely in shares of capital stock to another Borrower or
Guarantor.
(e) By deleting Section 11.9(a) of the Loan Agreement and by
substituting the following new Section 11.9(a) in lieu thereof:
(a) No amendment or modification of any provision of this
Agreement shall be effective without the prior written agreement of the
Required Lenders and Borrowers, and no waiver of any Default or Event
of Default shall be effective without the prior written consent of the
Required Lenders; provided, however, that, (i) without the prior
written consent of Collateral Agent, no amendment or waiver shall be
effective with respect to any provision in any of the Financing
Agreements (including this SECTION 11), to the extent such provision
relates to the rights, duties or immunities of Collateral Agent; (ii)
without the prior written consent of Administrative Agent, no amendment
or waiver shall be effective with respect to any provision in any of
the Financing Agreements (including THIS SECTION 11), to the extent
such provision relates to the rights, duties or immunities of
Administrative Agent; (iii) without the prior written consent of
Congress, no waiver or amendment with respect to the provisions of
SECTION 2.2 OR 6.1(C) shall be effective; (iv) without the prior
consent of all Lenders, no waiver of any Default or Event of Default
4
<PAGE> 5
shall be effective if the Default or Event of Default relates to
Borrower's failure to observe or perform any covenant that may not be
amended without the unanimous written consent of Lenders as hereinafter
set forth in this SECTION 11.9; and (v) the written agreement of all
Lenders (except defaulting Lenders as provided in SECTION 6.2 of this
Agreement) shall be required to effectuate any amendment, modification
or waiver that would (a) alter the provisions of SECTIONS 2.1(A),
3.1(F), 6.9, 10, 11 or 14, the definitions of "Availability Reserve,"
and the other defined terms used in such definitions, "Pro Rata,"
"Required Lenders" or any provision of this Agreement obligating Agents
to take certain actions at the direction of the Required Lenders, or
any provision of any of the Financing Agreements regarding the Pro Rata
treatment or obligations of Lenders; (b) increase or otherwise modify
any provision of any Lender's Commitment (other than to reduce
proportionately each Lender's Commitment in connection with any overall
reduction in the amount of this Agreement); (c) alter or amend (other
than to increase) the rate of interest payable in respect of the Loans
(except as may be expressly authorized by the Financing Agreements or
as may be necessary, in Collateral Agent's judgement, to comply with
Applicable Law); (d) waive or agree to defer collection of any fee,
termination charge or other charge provided for under any of the
Financing Agreements (except to the extent that the Required Lenders
agree after and during the continuance of any Event of Default to a
waiver or deferral of any termination charge provided for in SECTION
14.1 hereof) or the unused line fee in Section 3 hereof; (e)
subordinate the payment of any of the Obligations to any other debt or
the priority of any Liens granted to Collateral Agent under any of the
Financing Agreements to Liens granted to any other Person, except as
currently provided in or contemplated by the Financing Agreements in
connection with Borrowers' incurrence of permitted purchase money debt,
and except for Liens granted by an Obligor to financial institutions
with respect to amounts on deposit with such financial institutions to
cover returned items, processing and analysis charges and other charges
in the ordinary course of business that relate to deposit accounts with
such financial institutions; (f) alter the time or amount of repayment
of any of the Loans or waive any Event of Default resulting from
nonpayment of the Loans on the due date thereof (or within any
applicable period of grace); (g) forgive any of the Obligations, except
any portion of the Obligations held by a Lender who consents in writing
to such forgiveness; or (h) release any Obligor from liability for any
of the Obligations. No Lender shall be authorized to amend or modify
any Note held by it, unless such amendment or modification is consented
to in writing by all Lenders; provided, however, that the foregoing
shall not be construed to prohibit an amendment or modification to any
provision of this Agreement that may be effected pursuant to this
SECTION 11.9 by agreement of Borrowers and the Required Lenders even
though such an amendment or modification results in an amendment or
modification of the Notes by virtue of the incorporation by reference
in each of the Notes of this Agreement. The making of any Loans
hereunder by any Lender during the existence of a Default or Event of
Default shall not be deemed to constitute a waiver of such Default or
Event of Default. Any waiver or consent granted by Lenders hereunder
shall be effective only if in writing and then only in the specific
instance and for the specific purpose for which it was given.
5
<PAGE> 6
3. SUSPENSION OF CERTAIN TRANSACTIONS. Notwithstanding anything to the
contrary contained in the Loan Agreement or any of the other Financing
Agreements, unless otherwise consented to by Agents in writing after the date
hereof, no Borrower nor any other Obligor shall: (i) make any Permitted Property
Transfers (other than those consisting of Offshore Equipment so long as the
aggregate value of such Permitted Property Transfers does not exceed $100,000),
any Permitted Supplemental Investments, or any Permitted Affiliate Investments
(other than up to $500,000 in the aggregate during the Forbearance Period under
(and as defined in) the Forbearance Agreement); (ii) sell or otherwise dispose
of any Property other than sales of Inventory in the ordinary course of business
and sales or other dispositions of worn-out or obsolete Equipment to the extent
permitted by the Loan Agreement and provided that the proceeds thereof are
delivered to Collateral Agent for application to the Obligations; (iii) merge or
otherwise consolidate with any other Person; (iv) change its name; or (v) open
any new business location.
4. REFERENCES TO BANKBOSTON, N.A. Effective March 1, 2000, Fleet
National Bank merged into BankBoston, N.A. and BankBoston, N.A., the survivor of
such merger, changed its name to Fleet National Bank. Wherever in the Loan
Agreement or any of the other Financing Agreement reference is made to
"BankBoston, N.A.," such reference shall be deemed to refer to "Fleet National
Bank."
5. RATIFICATION AND REAFFIRMATION. Each Borrower hereby ratifies and
reaffirms the Obligations, each of the Financing Agreements and all of such
Borrower's covenants, duties, indebtedness and liabilities under the Financing
Agreements.
6. ACKNOWLEDGMENTS AND STIPULATIONS. Each Borrower acknowledges and
stipulates that the Loan Agreement and the other Financing Agreements executed
by such Borrower are legal, valid and binding obligations of such Borrower that
are enforceable against such Borrower in accordance with the terms thereof; all
of the Obligations are owing and payable without defense, offset or counterclaim
(and to the extent there exists any such defense, offset or counterclaim on the
date hereof, the same is hereby waived by such Borrower); as of the opening of
business on May 11, 2000, the unpaid principal amount of the Revolving Loans
totaled $44,938,508.50, and the aggregate principal balance owing under the Term
Notes totaled $24,300,000; and the amount of all Letter of Credit Accommodations
on and as of May 11, 2000, totaled $9,890,094.50, of which $8,056,903.00
represents Letter of Credit Accommodations in respect of the Bond Letter of
Credit.
7. REPRESENTATIONS AND WARRANTIES. Each Borrower represents and
warrants to Agents and Lenders, to induce Agents and Lenders to enter into this
Amendment and the Forbearance Agreement, that no Default or Event of Default
exists on the date hereof other than the Stipulated Defaults under (and as
defined in) the Forbearance Agreement; the execution, delivery and performance
of this Amendment have been duly authorized by all requisite corporate or
partnership action on the part of such Borrower and this Amendment has been duly
executed and delivered by such Borrower; and all of the representations and
warranties made by such Borrower in the Loan Agreement are true and correct on
and as of the date hereof, except for (i) representations and warranties that
speak as of a specified earlier date, which remain true and correct in all
material respects as of such earlier date, and (ii) changes in facts and
circumstances permitted by the terms of the Financing Agreements.
8. REFERENCE TO LOAN AGREEMENT. Upon the effectiveness of this
Amendment, each reference in the Loan Agreement to "this Agreement,"
"hereunder," or words of like import shall mean and be a reference to the Loan
Agreement, as amended by this Amendment.
9. BREACH OF AMENDMENT. This Amendment shall be part of the Loan
Agreement and a breach of any of any representation, warranty or covenant herein
shall constitute an Event of Default.
6
<PAGE> 7
10. EXPENSES OF AGENTS AND LENDERS. Borrowers agrees to pay, ON DEMAND,
all costs and expenses incurred by Agents and Lenders in connection with the
preparation, negotiation and execution of this Amendment, the Forbearance
Agreement, and any other Financing Agreements executed pursuant hereto and any
and all amendments, modifications, and supplements thereto, including, without
limitation, the reasonable costs and fees of Agents' and Lenders' legal counsel
and any taxes or expenses associated with or incurred in connection with any
instrument or agreement referred to herein or contemplated hereby.
11. EFFECTIVENESS; GOVERNING LAW. This Amendment shall be effective
upon acceptance by Agents and Lenders in Atlanta, Georgia (notice of which
acceptance is hereby waived), whereupon the same shall be governed by and
construed in accordance with the internal laws of the State of Georgia.
12. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
13. NO NOVATION, ETC.. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Financing Agreements, each of which shall
remain in full force and effect. This Amendment is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Loan
Agreement as herein modified shall continue in full force and effect.
14. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be executed
in any number of counterparts and by different parties to this Amendment on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
15. FURTHER ASSURANCES. Borrowers agree to take such further actions as
Agents and Lenders shall reasonably request from time to time in connection
herewith to evidence or give effect to the amendments set forth herein or any of
the transactions contemplated hereby.
16. SECTION TITLES. Section titles and references used in this
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto.
17. RELEASE OF CLAIMS. TO INDUCE AGENTS AND LENDERS TO ENTER INTO THIS
AMENDMENT, EACH BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES EACH
AGENT AND EACH LENDER, AND ALL OFFICERS, DIRECTORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS OF EACH AGENT AND EACH LENDER, FROM ANY AND ALL
LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OF ACTION OF ANY KIND OR NATURE
(IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED OR UNDISPUTED, AT
LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT ANY BORROWER NOW HAS OR EVER HAD
AGAINST EITHER OR BOTH AGENTS OR ANY LENDER AND THAT ARISE OUT OF OR RELATE TO
ANY ACT OR FAILURE TO ACT OF EITHER OR BOTH AGENTS OR ANY LENDER UNDER OR IN
CONNECTION WITH ANY OF THE FINANCING AGREEMENTS. EACH BORROWER REPRESENTS AND
WARRANTS TO AGENTS AND LENDERS THAT SUCH BORROWER HAS NOT TRANSFERRED OR
ASSIGNED TO ANY PERSON ANY CLAIM THAT SUCH BORROWER EVER HAD OR CLAIMED TO HAVE
AGAINST EITHER OR BOTH AGENTS OR ANY LENDER.
7
<PAGE> 8
18. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal, and delivered by their respective duly authorized
officers, on the date first written above.
DYERSBURG CORPORATION
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
DYERSBURG FABRICS INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
UNITED KNITTING, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
IQUE, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
[Signatures continued on following page]
8
<PAGE> 9
ALAMAC KNIT FABRICS, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
AIH INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
DYERSBURG FABRICS LIMITED
PARTNERSHIP, I
ATTEST: By: DYERSBURG FABRICS INC., its sole
General Partner
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
UNITED KNITTING LIMITED
PARTNERSHIP, I
ATTEST: By: UNITED KNITTING, INC., its sole
General Partner
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
[Signatures continued on following page]
9
<PAGE> 10
IQUE LIMITED PARTNERSHIP, I
ATTEST: By: IQUE, INC., its sole General Partner
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
Accepted:
FLEET NATIONAL BANK, as Collateral
Agent
By: /s/ David Rich
-----------------------------------
Title: Vice President
-------------------------
CONGRESS FINANCIAL CORPORATION
(SOUTHERN), as Administrative Agent and
a Lender
By: /s/ Morris P. Holloway
-----------------------------------
Title: Senior Vice President
-------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as a Lender
By: /s/ Patrick Aarons
-----------------------------------
Title: Vice President
-------------------------
THE CIT GROUP/COMMERCIAL
SERVICES, INC., as a Lender
By: /s/ John Suchaniak
-----------------------------------
Title: Vice President
-------------------------
MELLON BANK, N.A., as a Lender
By: /s/ Steve Bellah
-----------------------------------
Title: Managing Director
-------------------------
FLEET CAPITAL CORPORATION, as a
Lender
By: /s/ David Rich
-----------------------------------
Title: Vice President
-------------------------
10
<PAGE> 11
CONSENT AND REAFFIRMATION
Each of the undersigned guarantors of the Obligations of Borrowers at
any time owing to Agents and Lenders hereby (i) acknowledges receipt of a copy
of the foregoing First Amendment to Loan and Security Agreement; (ii) consents
to Borrowers' execution and delivery thereof and of the other documents,
instruments or agreements Borrowers agrees to execute and deliver pursuant
thereto; (iii) agrees to be bound thereby; and (iv) affirms that nothing
contained therein shall modify in any respect whatsoever its guaranty of the
Obligations and reaffirms that such guaranty is and shall remain in full force
and effect.
IN WITNESS WHEREOF, each of the undersigned has executed this Consent
and Reaffirmation as of the date of such First Amendment to Loan and Security
Agreement.
DFIC, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
IQUEIC, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
UKIC, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
[Signatures continued on following page]
11
<PAGE> 12
ALAMAC ENTERPRISES, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
ALAMAC KNIT FABRICS LLC
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
12
<PAGE> 13
EXHIBIT F
COMPLIANCE CERTIFICATE
[Letterhead of Borrowers]
__________________, 20__
Congress Financial Corporation (Southern), as Administrative Agent
200 Galleria Parkway
Suite 1500
Atlanta, Georgia 30339
Attention: Office Head
Fleet National Bank, as Collateral Agent
200 Galleria Parkway
Suite 800
Atlanta, Georgia 30339
Attention: Mr. David Rich
The undersigned, the chief financial officer of Dyersburg Corporation,
Dyersburg Fabrics Limited Partnership, I, Dyersburg Fabrics Inc., United
Knitting, Inc., United Knitting Limited Partnership, I, IQUE, Inc., IQUE Limited
Partnership, I, Alamac Knit Fabrics, Inc. and AIH Inc. ("Borrowers"), gives this
certificate to Agents in accordance with the requirements of SECTION 9.6 of that
certain Loan and Security Agreement dated August 17, 1999, among Borrowers,
Agents and the Lenders referenced therein (as at any time amended, the "Loan
Agreement"). Capitalized terms used in this Certificate, unless otherwise
defined herein, shall have the meanings ascribed to them in the Loan Agreement.
1. Based upon my review of the balance sheets and statements
of income of Borrowers and their Subsidiaries for the [Fiscal Year] [quarterly
period] ending __________________, ____, copies of which are attached hereto, I
hereby certify that:
(a) Consolidated Adjusted Tangible Net Worth is
$____________;
(b) Consolidated EBITDA is $___________;
(c) Consolidated Fixed Charge Coverage Ratio is ____ to
1;
(d) Excess Availability is $____________.
2. No Default exists on the date hereof, other than:
__________________ ________________________________________________ [if none, so
state]; and
<PAGE> 14
3. No Event of Default exists on the date hereof, other than
__________ ____________________________________________________ [if none, so
state].
4. As of the date hereof, Borrowers are current in their
payment of all accrued rent and other charges to Persons who own or lease any
premises where any of the Collateral is located, and there are no pending
disputes or claims regarding any Borrower's failure to pay or delay in payment
of any such rent or other charges.
Very truly yours,
---------------------------------------
Chief Financial Officer
<PAGE> 1
EXHIBIT 10 (b)
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT is made and entered into on May 12, 2000, by
and among DYERSBURG Corporation, a Tennessee corporation ("Dyersburg"),
DYERSBURG FABRICS LIMITED PARTNERSHIP, I, a Tennessee limited partnership
("DFLP"), DYERSBURG FABRICS INC., a Tennessee corporation ("DFI"), UNITED
KNITTING, INC., a Tennessee corporation ("UKI"), UNITED KNITTING LIMITED
PARTNERSHIP, I, a Tennessee limited partnership ("United Knitting"), IQUE, INC.,
a Tennessee corporation ("IQUE, Inc."), IQUE LIMITED PARTNERSHIP, I, a Tennessee
limited partnership ("IQUE"), ALAMAC KNIT FABRICS, INC., a Delaware corporation
("Alamac"), and AIH INC., a Delaware corporation ("AIH") (each of the foregoing
individually referred to hereinafter as a "Borrower" and collectively as
"Borrowers"); DFIC, INC., a Delaware corporation ("DFIC"), IQUEIC, INC., a
Delaware corporation ("IQUEIC"), UKIC, INC., a Delaware corporation ("UKIC"),
ALAMAC ENTERPRISES INC., a Delaware corporation ("Alamac Enterprises"), and
ALAMAC KNIT FABRICS LLC, a Delaware limited liability company ("Alamac LLC";
DFIC, IQUEIC, UKIC, Alamac Enterprises, and Alamac LLC are individually referred
to hereinafter as "Guarantor" and collectively as "Guarantors"); various
financial institutions that are parties to the Loan Agreement (as defined below)
("Lenders"); CONGRESS FINANCIAL CORPORATION (SOUTHERN), a Georgia corporation,
in its capacity as administrative agent for the Lenders (together with its
successors in such capacity, "Administrative Agent"); and FLEET NATIONAL BANK,
formerly known as BankBoston, N.A., a national bank, in its capacity as
collateral agent for the Lenders (together with its successors in such capacity,
"Collateral Agent"; Administrative Agent and Collateral Agent sometimes
collectively referred to hereinafter as "Agents").
RECITALS:
Agents, Lenders and Borrowers entered into a certain Loan and Security
Agreement dated August 17, 1999 (as amended from time to time, the "Loan
Agreement"), pursuant to which Lenders have made loans and other extensions of
credit to Borrowers, which loans and extensions of credit are secured by
security interests in and liens upon all or substantially all of the assets of
Borrowers and guaranteed unconditionally by Guarantors.
Events of Default under (and as defined in) the Loan Agreement exist
and may continue to exist, in consequence of which Agents and Lenders are
entitled to terminate further advances to Borrowers, to declare the entire
balance owing to them from Borrowers to be immediately due and payable, to
enforce Collateral Agent's liens and security interests in the collateral
securing their claims against Borrowers, and to enforce their claims against
Guarantors.
Borrowers and Guarantors desire that Agents and Lenders forbear from
exercising certain remedies available to Agents and Lenders under the Loan
Agreement as a consequence of Borrowers' default in order to afford Borrowers an
opportunity to reorganize their affairs and to pay the indebtedness owing to
Lenders pursuant to the Loan Agreement.
Borrowers and Guarantors desire that Lenders continue, during the
period of Agents' and Lenders' forbearance, to make loans and other credit
accommodations to Borrowers pursuant to the Loan Agreement.
-1-
<PAGE> 2
Agents and Lenders are willing to forbear, in accordance with the terms
of this Agreement, from exercising remedies available to them as a result of
Borrowers' defaults under the Loan Agreement and Lenders are willing to continue
making loans in accordance with the Loan Agreement and this Agreement.
NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and in
consideration of the premises and the mutual covenants herein contained, the
parties hereto, intending to be legally bound hereby, agree as follows:
1. DEFINITIONS; RULES OF CONSTRUCTION.
(a) All capitalized terms used in this Agreement, unless
otherwise defined, shall have the meaning ascribed to such terms in the Loan
Agreement. In addition, as used herein, the following terms shall have the
meanings ascribed to them:
"Agreement" shall mean this Forbearance Agreement.
"Collections" shall mean all sums received by Borrowers as the
result of payments made by third parties in respect of that portion of
the Collateral constituting Accounts.
"Forbearance Conditions" shall mean the conditions to
forbearance set forth in Section 4 of this Agreement.
"Forbearance Period" shall mean the period commencing on the
date of this Agreement and ending at 5:00 p.m. on August 25, 2000,
unless extended in writing by Agents and Lenders in their sole
discretion.
"Forbearance Termination Date" shall mean the sooner to occur
of (a) 5:01 p.m. on the last day of the Forbearance Period or (b) the
date on which Agents' and Lenders' agreement to forbear terminates as
provided in Paragraph 5 of this Agreement.
"Obligors" shall mean Borrowers and Guarantors.
"Payroll Taxes" shall mean all taxes and deposits required to
be paid or withheld from the wages or salaries of Borrowers' employees.
"Stipulated Defaults" shall mean the Events of Default
referenced in Paragraph 2(d) of this Agreement.
(b) The terms "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular section, paragraph or subdivision. Any pronoun used shall be deemed
to cover all genders. All references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations; to
any of the Financing Agreements shall include any and all modifications thereto
and any and all restatements, extensions or renewals thereof; to any Person
shall mean and include the successors and permitted assigns of such Person; to
"including" and "include" shall be understood to mean "including, without
limitation" (and, for purposes of this Agreement and each other Financing
Agreement, the parties agree that the rule of ejusdem generis shall not be
applicable to limit a general statement, which is followed by or referable to an
enumeration of specific matters to matters similar to the matters specifically
mentioned); or to the time of day shall mean the time of day on the day in
question in Atlanta, Georgia, unless otherwise expressly provided in this
Agreement.
-2-
<PAGE> 3
2. ACKNOWLEDGMENTS AND STIPULATIONS BY OBLIGORS. Each Obligor
acknowledges, stipulates and agrees that (a) as of the opening of business on
May 11, 2000, the aggregate principal balance of Revolving Loans outstanding
under the Loan Agreement, exclusive of costs and attorneys' fees chargeable to
Borrowers under the Financing Agreements, totaled $44,938,508.50 and the
aggregate amount of Letter of Credit Accommodations totaled $9,890,094.50; (b)
as of the opening of business on May 11, 2000, the aggregate principal balance
owing by Borrowers to Lenders under the Term Notes totaled $24,300,000; (c) all
of the Obligations are absolutely due and owing by Borrowers to Agents and
Lenders without any defense, deduction, offset or counterclaim (and, to the
extent Borrowers had any defense, deduction, offset or counterclaim on the date
hereof, the same is hereby waived by each Borrower); (d) Events of Default have
occurred and now exist under the Financing Agreements and are continuing by
reason of Borrowers breach of the Consolidated EBITDA covenant that is set forth
in Section 9.15 of the Loan Agreement for the periods ending April 1, 2000 and
April 29, 2000, and Events of Default may hereafter occur by reason of
Borrowers' breach of the Consolidated EBITDA covenant for the periods ending May
27, 2000, July 1, 2000, and July 29, 2000, and by reason of Borrowers' breach of
the Consolidated Adjusted Tangible Net Worth covenant that is set forth in
Section 9.16 of the Loan Agreement at any time during the Forbearance Period;
(e) the Financing Agreements executed by Borrowers are legal, valid and binding
obligations of Borrowers enforceable against Borrowers in accordance with their
terms; (f) the Liens granted by Borrowers to Collateral Agent in the Accounts,
Inventory, General Intangibles, Real Property and other Collateral are duly
perfected, first priority Liens, subject only to those Permitted Liens that were
in existence prior to the Closing Date, constitute purchase money security
interests or constitute non-consensual statutory Liens having priority under
Applicable Law over the Liens in favor of Collateral Agent; (g) each Guaranty
Agreement is a legal, valid and binding obligation of the Guarantor party
thereto and is enforceable against such Guarantor in accordance with its terms;
(h) each of the recitals contained at the beginning of this Agreement is true
and correct; and (i) prior to executing this Agreement, Borrowers and Guarantors
consulted with and had the benefit of advice of legal counsel of their own
selection and each has relied upon the advice of such counsel and in no part
upon any representation of Agents and Lenders concerning the legal effects of
this Agreement or any provision hereof.
3. AGREEMENT TO FORBEAR. If and for so long as each of the Forbearance
Conditions is satisfied, Agents and Lenders agree that during the Forbearance
Period they will not, solely by reason of the occurrence or existence of any of
the Stipulated Defaults (a) exercise any default remedy available to Agents and
Lenders under the Loan Agreement, any of the other Financing Agreements or
Applicable Law to enforce collection from Borrowers or Guarantors of any of the
Obligations or to foreclose Collateral Agent's security interest in any of the
Collateral during the Forbearance Period or (b) charge the Default Rate with
respect to the principal balance of any of the Obligations. Neither this
Agreement nor Agents' and Lenders' forbearance hereunder shall be deemed to be a
waiver of or a consent to any Default or Event of Default.
4. CONDITIONS TO FORBEARANCE. The following conditions shall constitute
Forbearance Conditions, the timely satisfaction of each and every one of which
during the Forbearance Period shall be a condition to the agreement of Agents
and Lenders to forbear as set forth in Paragraph 3 of this Agreement:
(a) each Borrower and each Guarantor duly and punctually
observes, performs and discharges each and every obligation and
covenant on its part to be performed under this Agreement;
(b) no Event of Default occurs or exists other than the
Stipulated Defaults;
(c) no event shall occur and no condition shall exist which
has a Material Adverse Effect;
-3-
<PAGE> 4
(d) no Guarantor revokes or attempts to revoke or terminate,
or disputes its liability under, its Guaranty Agreement;
(e) Borrowers achieve Consolidated EBITDA of at least
$5,000,000 for the three-month period ending July 1, 2000 and at least
$7,000,000 for the four-month period ending July 29, 2000;
(f) Borrowers maintain a Consolidated Adjusted Tangible Net
Worth of at least $110,000,000, tested on a monthly basis, commencing
May 31, 2000;
(g) no representation or warranty made by any Borrower or any
Guarantor in this Agreement proves to have been false or misleading in
any material respect;
(h) each Borrower timely deducts from the wages of its
employees and makes timely and proper deposits for all Payroll Taxes as
the same became due and payable, and if, as and when requested to do so
by Agents and Lenders, provides Agents and Lenders with proof of all
deposits for Payroll Taxes;
(i) Borrowers are able to pay and do pay, as the same shall
become due and payable, all debts incurred by Borrowers on or after the
date hereof;
(j) Borrowers do not prepay any of the Subordinated Debt,
except as may be required by any instrument or agreement evidencing
such Subordinated Debt on the date hereof;
(k) no default by any Obligor under any agreement relating to
indebtedness for borrowed money shall occur and result in the holder of
such indebtedness accelerating the maturity or demanding payment of
such indebtedness, in whole or in part; and
(l) concurrently with their execution of this Agreement,
Borrowers shall enter into (and Guarantors shall consent to the
execution and delivery by Borrowers of) a First Amendment to Loan and
Security Agreement in the form presented to Borrowers and Guarantors by
Agents and Lenders.
5. TERMINATION OF FORBEARANCE. If any one or more of the Forbearance
Conditions is not satisfied, Agents' and Lenders' agreement to forbear as set
forth in Paragraph 3 of this Agreement shall, at Agents' and Lenders' election
but without further notice to or demand upon Borrowers, terminate, and Agents
and Lenders shall thereupon have and may exercise from time to time all of the
remedies available to them under the Financing Agreements and Applicable Law as
a consequence of an Event of Default. On and after the Forbearance Termination
Date, Agents and Lenders shall be authorized, at any time and without further
notice to or demand upon Borrowers or any other Person, to enforce all of their
remedies under the Financing Agreements and Applicable Law, including
repossession, suit, foreclosure and charging of the Default Rate.
6. CREDIT ACCOMMODATIONS TO BORROWERS. Notwithstanding the occurrence
or existence of the Stipulated Defaults, but subject to the satisfaction of each
of the Forbearance Conditions, Lenders agree to continue during the Forbearance
Period to honor requests by Borrowers for Revolving Loans and Letter of Credit
Accommodations pursuant to the Loan Agreement, not to exceed on any date the
maximum amount permitted under the Loan Agreement to be outstanding on such
date. In no event shall Agents' and Lenders' honoring of any such requests be
deemed a waiver of the Stipulated Defaults.
-4-
<PAGE> 5
7. REPORTING. In addition to providing to Agents and Lenders the
information, notices and reports set forth in the Financing Agreements,
Borrowers shall provide to Agents and Lenders, on a daily basis, a Borrowing
Base Certificate. Any information that is to be provided by Borrowers under the
Loan Agreement solely to either or both Agents shall be provided to both Agents
and all Lenders during the Forbearance Period.
8. APPLICATION OF PROCEEDS. Each Obligor hereby waives the right, if
any, to direct the manner in which Agents and Lenders apply any payments,
Collections or Collateral proceeds to the Obligations and agrees that Agents and
Lenders may apply and reapply all such payments, Collections or proceeds to the
Obligations as Agents and Lenders in their sole and absolute discretion elect
from time to time.
9. REPRESENTATIONS AND WARRANTIES OF OBLIGORS. Each Obligor represents
and warrants that (a) no Default or Event of Default exists under the Financing
Agreements, except for Stipulated Defaults that are in existence on the date
hereof; (b) subject to the existence of the Stipulated Defaults, the
representations and warranties of Borrowers contained in the Financing
Agreements were true and correct in all material respects when made and continue
to be true and correct in all material respects on the date hereof, except for
(i) representations and warranties that speak as of a specified earlier date,
which remain true and correct in all material respects as of such earlier dated
and (ii) changes in facts and circumstances permitted by the terms of the
Financing Agreements; (c) the execution, delivery and performance by Obligors of
this Agreement and the consummation of the transactions contemplated hereby are
within the corporate or partnership power of each Obligor and have been duly
authorized by all necessary corporate or partnership action on the part of each
Obligor, do not require any approval or consent, or filing with, any
governmental agency or authority, do not violate any provisions of any law, rule
or regulation or any provision of any order, writ, judgment, injunction, decree,
determination or award presently in effect in which any Borrower is named or any
provision of the charter or partnership documents of any Obligor and do not
result in a breach of or constitute a default under any agreement or instrument
to which any Obligor is a party or by which it or any of its properties are
bound; (d) this Agreement constitutes the legal, valid and binding obligation of
Obligors, enforceable against Obligors in accordance with its terms; (e) all
Payroll Taxes required to be withheld from the wages of Borrowers' employees
have been paid or deposited when due; (f) each Obligor is entering into this
Agreement freely and voluntarily with the advice of legal counsel of its own
choosing; and (g) each Obligor has freely and voluntarily agreed to the
releases, waivers and undertakings set forth in this Agreement.
10. REAFFIRMATION OF OBLIGATIONS. Each Borrower hereby ratifies and
reaffirms the Financing Agreements and all of its obligations and liabilities
thereunder. Each Guarantor hereby ratifies and reaffirms the validity, legality
and enforceability of its Guaranty Agreement and agrees that such Guaranty
Agreement is and shall remain in full force and in effect until all the
Obligations have been paid in full.
11. WAIVER OF LIMITATIONS PERIOD. To the fullest extent permitted by
Applicable Law, each Obligor hereby waives the benefit of any statute of
limitations that might otherwise bar the recovery of any of the Obligations from
any one or more of them.
12. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARIES. Nothing in
this Agreement shall be construed to alter the existing debtor-creditor
relationship among Borrowers, Agents and Lenders, nor is this Agreement intended
to change or affect in any way the relationship among Agents, Lenders and
Guarantors to one other than a debtor-creditor relationship. This Agreement is
not intended, nor shall it be construed, to create a partnership or joint
venture relationship between or among any of the parties hereto. No Person other
than a party hereto is intended to be a beneficiary hereof and no Person other
than a party hereto shall be authorized to rely upon or enforce the contents of
this Agreement.
-5-
<PAGE> 6
13. ENTIRE AGREEMENT; MODIFICATION OF AGREEMENT. This Agreement and the
other Financing Agreements constitute the entire understanding of the parties
with respect to the subject matter hereof and thereof. This Agreement may not be
modified, altered or amended except by agreement in writing signed by all the
parties hereto.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Georgia.
15. NON-WAIVER OF DEFAULT. Neither this Agreement, Agents' and Lenders'
forbearance hereunder nor Agents' and Lenders' continued making of loans or
other extensions of credit to Borrowers in accordance with this Agreement and
the Financing Agreements shall be deemed a waiver of or consent to the
Stipulated Defaults or any other Event of Default. Obligors agree that such
Events of Default shall not be deemed to have been waived, released or cured by
virtue of any Loans or other extensions of credit at any time to Borrowers,
Agents' and Lenders' agreement to forbear pursuant to the terms of this
Agreement or the execution of this Agreement.
16. NO NOVATION, ETC. This Agreement is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction and the Loan
Agreement and the other Financing Agreements shall remain in full force and
effect. Notwithstanding any prior mutual temporary disregard of any of the terms
of any of the Financing Agreements, the parties agree that the terms of each of
the Financing Agreements shall be strictly adhered to on and after the date
hereof, except as expressly modified by this Agreement.
17. COUNTERPARTS; WAIVERS OF NOTICE OF ACCEPTANCE. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall constitute an
original, but all of which taken together shall be one and the same instrument.
In proving this Agreement or any of the Financing Agreements, it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought. Any signature delivered by a party by
facsimile transmission shall be deemed to be an original signature hereto.
Notice of Agents' and Lenders' acceptance hereof is hereby waived.
18. REIMBURSEMENT FOR LEGAL EXPENSES. Borrowers agree to reimburse
Agents and Lenders, on demand, for any costs and expenses, including reasonable
legal fees, incurred by Agents and Lenders in connection with the drafting,
negotiation, execution and closing of this Agreement.
19. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
20. RELEASE OF CLAIMS. TO INDUCE AGENTS AND LENDERS TO ENTER INTO THIS
AGREEMENT, EACH OBLIGOR HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES AGENTS
AND LENDERS, AND AGENTS' AND LENDERS' RESPECTIVE OFFICERS, DIRECTORS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL LIABILITIES, CLAIMS, DEMANDS,
ACTIONS OR CAUSES OF ACTION OF ANY KIND (IF ANY THERE BE), WHETHER ABSOLUTE OR
CONTINGENT, DUE OR TO BECOME DUE, DISPUTED OR UNDISPUTED, LIQUIDATED OR
UNLIQUIDATED, AT LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT ANY ONE OR MORE OF
THEM NOW HAVE OR EVER HAVE HAD AGAINST EITHER AGENT OR ANY LENDER, AND THAT
ARISE OUT OF OR RELATE TO ANY ACT OR FAILURE TO ACT OF EITHER AGENT OR ANY
LENDER UNDER OR IN CONNECTION WITH ANY OF THE FINANCING AGREEMENTS.
-6-
<PAGE> 7
21. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE LOAN
AGREEMENT OR THE GUARANTY AGREEMENTS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered on the date first written above.
BORROWERS:
DYERSBURG CORPORATION
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
DYERSBURG FABRICS INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
UNITED KNITTING, INC.
IQUE, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
ALAMAC KNIT FABRICS, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
[Signatures continued on following page]
-7-
<PAGE> 8
AIH INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
DYERSBURG FABRICS LIMITED
PARTNERSHIP, I
ATTEST: By: DYERSBURG FABRICS INC., its sole
General Partner
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
UNITED KNITTING LIMITED
PARTNERSHIP, I
ATTEST: By: UNITED KNITTING, INC., its sole
General Partner
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
IQUE LIMITED PARTNERSHIP, I
ATTEST: By: IQUE, INC., its sole General Partner
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
[Signatures continued on following page]
-8-
<PAGE> 9
GUARANTORS:
DFIC, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
IQUEIC, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
UKIC, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
ALAMAC ENTERPRISES, INC.
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
ALAMAC KNIT FABRICS LLC
ATTEST:
/s/ Paul L. Hallock By: /s/ William S. Shropshire, Jr.
- -------------------------------- ---------------------------------------
PAUL L. HALLOCK WILLIAM S., SHROPSHIRE, JR.
Vice President-Finance and Executive Vice President,
Assistant Secretary Chief Financial Officer, Secretary and
Treasurer
[CORPORATE SEAL]
[Signatures continued on following page]
-9-
<PAGE> 10
Accepted:
FLEET NATIONAL BANK, as Collateral
Agent
By: /s/ David Rich
----------------------------------
Title: Vice President
-------------------------
CONGRESS FINANCIAL CORPORATION
(SOUTHERN), as Administrative Agent and
a Lender
By: /s/ Morris P. Holloway
----------------------------------
Title: Senior Vice President
-------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as a Lender
By: /s/ Patrick Aarons
----------------------------------
Title: Vice President
-------------------------
THE CIT GROUP/COMMERCIAL
SERVICES, INC., as a Lender
By: /s/ John Suchaniak
----------------------------------
Title: Vice President
-------------------------
MELLON BANK, N.A., as a Lender
By: /s/ Steve Bellah
----------------------------------
Title: Managing Director
-------------------------
FLEET CAPITAL CORPORATION, as a
Lender
By: /s/ David Rich
----------------------------------
Title: Vice President
-------------------------
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE SIX MONTHS ENDED APRIL 1, 2000, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> APR-01-2000
<CASH> 331
<SECURITIES> 0
<RECEIVABLES> 56,107<F1>
<ALLOWANCES> (2,509)<F1>
<INVENTORY> 46,945
<CURRENT-ASSETS> 105,148
<PP&E> 211,382<F1>
<DEPRECIATION> (95,397)<F1>
<TOTAL-ASSETS> 318,386
<CURRENT-LIABILITIES> 94,888
<BONDS> 0
0
0
<COMMON> 134
<OTHER-SE> 84,717
<TOTAL-LIABILITY-AND-EQUITY> 318,386
<SALES> 147,073
<TOTAL-REVENUES> 147,073
<CGS> 128,353
<TOTAL-COSTS> 128,353
<OTHER-EXPENSES> 15,313
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,725
<INCOME-PRETAX> (6,318)
<INCOME-TAX> (1,673)
<INCOME-CONTINUING> (4,645)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,645)
<EPS-BASIC> (0.35)
<EPS-DILUTED> (0.35)
<FN>
<F1>AMOUNTS ARE REPORTED NET OF RESERVES IN THE CONDENSED CONSOLIDATED BALANCE
SHEET.
</FN>
</TABLE>
