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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 29, 1998
POLYMER GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-14330 57-1003983
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4838 Jenkins Ave., North Charleston, SC 29405
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (803) 566-7293
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This Instrument contains 5 page (plus Exhibits).
The Exhibit Index is located on page 5.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 29, 1998, Polymer Group, Inc. (the "Company")
completed its acquisition of the Nonwovens Business of Dominion
Textile Inc. ("Dominion"), a Canadian corporation. The acquisition
was consummated pursuant to a Master Separation Agreement, dated
January 29, 1998, among the Company, Galey & Lord, Inc., a Delaware
corporation ("Galey"), DT Acquisition Inc., a Delaware corporation and
affiliate of the Company, Dominion, and certain subsidiaries of
Dominion. The following discussion is only a summary and is qualified
in its entirety by reference to the Exhibits to this Current Report on
Form 8-K filed herewith or to be subsequently filed as indicated.
The operations of Dominion are comprised of two businesses: the
Apparel Fabrics Business (encompassing the denim and careerwear
fabrics business of Dominion ) and the Nonwovens Business
(encompassing the nonwovens fabric business of Dominion, and together
with the Apparel Fabrics Business, the "Businesses"). As reported in
the Company's Form 8-K filed on November 12, 1997, DT Acquisition
announced its commencement of an all-cash tender offer for all
outstanding common and first preferred shares of Dominion on October
29, 1997. Pursuant to a separate Agreement between DT Acquisition, the
Company and Galey, DT Acquisition agreed to sell the Apparel Fabrics
Business to Galey and the Nonwovens Business to the Company if the
tender offer was successful.
On December 19, 1997, pursuant to its Offer to Purchase dated
October 29, 1997, as amended, DT Acquisition completed the purchase of
98% of the outstanding common shares of Dominion for C$14.50 per share
and 96% of the outstanding first preferred shares of Dominion for $150
per share. On December 29, 1997, DT Acquisition acquired an additional
331,207 Common Shares. The Dominion Tender Offer was financed with
$215 million of borrowings under DT Acquisition's $600 million senior
secured credit facilities with The Chase Manhattan Bank and various
other lenders, and subordinated advances of $141 million, $69 million
and $25 million by Galey, ZB Holdings Inc. ("ZB Holdings"), and the
Company, respectively.
On January 29, 1998, DT Acquisition acquired the remaining common
shares and first preferred shares of Dominion in a compulsory
acquisition effectuated pursuant to section 206 of the Canada Business
Corporation Act, and acquired all outstanding second preferred shares
pursuant to a notice of redemption issued December 29, 1997. Dominion
then underwent a "winding up" pursuant to which all assets of Dominion
were transferred to DT Acquisition, all liabilities of Dominion were
assumed by DT Acquisition and all of the outstanding common shares and
first preferred shares held by DT Acquisition were redeemed.
Immediately thereafter, pursuant to the Master Separation
Agreement, the Apparel Fabrics Business was sold to Galey for
approximately $464.5 million, including related fees and expenses. The
Company acquired the assets and liabilities of Dominion which
comprised the Nonwovens Business (held by DT Acquisition). Total
consideration paid by the Company was approximately $351.7 million,
including related fees and expenses. The Company financed the
acquisition through borrowings under its senior credit facility with
The Chase Manhattan Bank, as administrative agent, and various other
lenders.
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The primary operations of the Nonwovens Business are conducted
through Poly-Bond Inc. ("Poly-Bond"), Nordlys S.A. ("Nordlys"), DIFCO,
Geca-Tapes B.V. ("Geca") and Dominion Nonwovens Sudamerica ("DNS").
Poly-Bond, based in Waynesboro, Virginia, is a leading manufacturer of
spunbond and spunmelt composite nonwovens used in disposable diapers,
adult incontinence and feminine hygiene products. Nordlys, based in
Bailleul, France, manufactures dry-laid nonwovens for industrial
applications such as cable wrap, liquid filtration, medical end-uses,
and electrical insulation. DIFCO, based in Magog, Quebec, produces
custom designed technical fabrics. Geca, based in Tilburg, The
Netherlands, manufactures industrial applications such as cable wrap
and liquid filtration. DNS produces spunbond and spunmelt nonwovens to
serve hygiene markets in the Mercosus trading zone.
ZB Holdings is a wholly-owned subsidiary of The InterTech Group,
Inc. ("InterTech"), an affiliate of the Company. Up to the effective
date of the sale of the Businesses pursuant to the Master Separation
Agreement, InterTech held a minority interest in the Company's
subsidiary, DT Acquisition. InterTech's interest in DT Acquisition was
redeemed concurrently with the sale of the Businesses. InterTech is
wholly-owned by Jerry Zucker, Chairman, President and Chief Executive
Officer of the Company and James G. Boyd, Executive Vice President,
Chief Financial Officer, Treasurer and Secretary of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
To be filed by amendment. Pursuant to Item 7(a)(4) of Form 8-K,
the registrant hereby undertakes to file financial statements
required in response to this item on an amendment to this Form 8-K
no later than 60 days after February 13, 1998.
(b) Pro forma financial information.
To be filed by amendment. Pursuant to Item 7(b)(2) of Form 8-K,
the registrant hereby undertakes to file financial statements
required in response to this item on an amendment to this Form 8-K
no later than 60 days after February 13, 1998.
(c) Exhibits
4.1 Agreement dated October 27, 1997, among Polymer Group, Inc.,
Galey & Lord, Inc. and DT Acquisition Inc.
4.2 Operating Agreement, dated December 19, 1997, among Polymer
Group, Inc., Galey & Lord, Inc. and DT Acquisition Inc.
4.3 Master Separation Agreement, dated as of January 29, 1998,
among Polymer Group, Inc., Galey & Lord, Inc., DT
Acquisition Inc., Dominion Textile Inc., and certain
subsidiaries named therein.*
99.1 Press Release dated January 30, 1998.
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*To be filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment in accordance with
Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as
amended.
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SIGNATURE
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 hereunto duly authorized.
POLYMER GROUP, INC.
Dated: February 13, 1998 By: /s/ Jerry Zucker
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Jerry Zucker
Chairman, President and
Chief Executive Officer
By: /s/ James G. Boyd
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James G. Boyd
Executive Vice President, Treasurer
and Secretary
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EXHIBIT INDEX
Exhibit No. Description
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4.1 Agreement dated October 27, 1997, among Polymer Group, Inc., Galey &
Lord, Inc. and DT Acquisition Inc.
4.2 Operating Agreement, dated December 19, 1997, among Polymer Group,
Inc., Galey & Lord, Inc. and DT Acquisition Inc.
4.3 Master Separation Agreement, dated as of January 29, 1998,
among Polymer Group, Inc., Galey & Lord, Inc., DT Acquisition
Inc., Dominion Textile Inc., and certain subsidiaries named
therein.*
99.1 Press Release dated January 30, 1998.
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*To be filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment in accordance with Rule 24b-2
promulgated under the Securities Exchange Act of 1934, as amended.
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Exhibit 4.1
Privileged and Confidential
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[CONFORMED COPY]
AGREEMENT
This Agreement, dated as of October 27, 1997 (the "Agreement"), is
made and entered into by and among Polymer Group, Inc., a Delaware corporation
("PGI"), DT Acquisition, Inc., a corporation organized under the laws of Canada
("DTA") and Galey & Lord Incorporated, a Delaware corporation ("GL") (PGI, DTA
and GL are referred to sometimes herein as a "Party").
WHEREAS, PGI and certain investors currently own approximately 14.5%
of the outstanding common shares (the "Common Shares") of Dominion Textile,
Inc., a corporation organized under the laws of Canada ("Target");
WHEREAS, DTA intends to commence, directly or indirectly, a tender
offer to acquire all of the outstanding Common Shares of Target and all of the
outstanding first preferred shares ("First Preferred") of Target;
WHEREAS, PGI, after completing the Target Acquisition (as defined
below), is primarily interested in (i) retaining the nonwoven textile group
businesses of Target (conducted primarily through the Dominion Industrial
Fabrics Company division ("DIFCO") of Target, two indirect, wholly owned
subsidiaries of Target, Poly-Bond Inc., a Delaware corporation, and Nordlys
S.A., a company organized under the laws of the Republic of France, and the
Dominion Nonwoven (South America) Argentinean joint venture) (collectively, the
"Nonwoven Business"); and (ii) disposing of the apparel fabrics textile group
businesses of Target (conducted primarily through the Swift Textiles Canada
division of Target, six direct or indirect wholly owned subsidiaries of Target
(Dominion Textile (USA) Inc., a Delaware corporation, Swift Textiles, Inc., a
Delaware corporation, Dominion Textile (Asia) Pte. Ltd., a company organized
under the laws of Singapore, Swift Textiles (Far East) Ltd., a company organized
under the laws of Hong Kong, Dominion Textile International B.V., a company
organized under the laws of the Netherlands, and Klopman International S.r.L., a
company organized under the laws of Italy), and Swift Textiles Europe Ltd., a
company organized under the laws of the Republic of Ireland) (collectively, the
"Apparel Fabric Business", and together with the Nonwoven Business, the
"Businesses");
WHEREAS, following the Target Acquisition by DTA, GL, directly or
through one or more affiliates (such entities are collectively referred to
herein as the "GL Buyer") is interested in acquiring (the "Transaction") the
Apparel Fabric Business from PGI; and
WHEREAS, PGI and GL are entering into this Agreement for the purpose
of setting forth the rights and obligations of each Party following an
acquisition by DTA, directly or indirectly, of all of the outstanding Common
Shares of Target (including the Common Shares owned by PGI, The Intertech Group,
Inc. ("TIG") and Jerry Zucker), or all or substantially all of the assets or
operations of Target (any such acquisition referred to herein as the "Target
Acquisition").
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NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
Parties hereto intending to be legally bound, hereby agree as follows:
1. Exclusivity. Until this Agreement has been terminated in
accordance with its terms, each Party agrees that it will not, and shall cause
any of their respective affiliates, representatives, officers, directors, agents
or stockholders not to, (a) enter into any arrangement, agreement, understanding
or negotiations with respect to a possible Target Acquisition, with any other
Person, including Target (other than with respect to the Target Acquisition),
nor (b) enter into any agreement, arrangement, understanding or negotiations
with any other Person, including Target (other than with respect to the Target
Acquisition), with respect to (i) the acquisition of only the Nonwoven Business
or only the Apparel Fabric Business, or any portion of the assets, operations,
business or any securities of Target or any similar transaction, however
structured, or (ii) the investment in any other Person (other than through DTA
or an affiliate of PGI or TIG formed for the purpose of the Target Acquisition)
formed for any such purpose; provided, that in the event this Agreement is
terminated pursuant to clause (c) of Section 14 below, the provisions of the
first sentence of this Section 1 shall survive for two months following the date
of such termination. Following the consummation of the Target Acquisition, PGI
agrees that until the termination of this Agreement it will not, and shall cause
its representatives, officers, directors, agents, stockholders or controlled
affiliates, including Target, not to provide any non-public information to any
Person in connection with any offer or proposal to acquire all or any portion of
the assets, operations, business, or securities related to the Apparel Fabric
Business. PGI will not and following consummation of the Target Acquisition
will cause Target not to, enter into any agreement, arrangement or understanding
requiring it to abandon or terminate the Transaction (other than any agreement,
arrangement or understanding with any governmental or regulatory body or
agency). Each of PGI and GL represents to the other Party that neither is party
to or bound by any agreement with respect to the Target Acquisition other than
this Agreement. The term "Person" in this Agreement will be interpreted broadly
to include, without limitation, any corporation, company (including limited
liability company), partnership, joint venture or individual.
2. Purchase and Sale of Assets. At the earliest possible time that
DTA is able to cause Target to consummate the Transaction following (a) the
purchase by DTA of all of the outstanding Common Shares of Target, or (b) the
acquisition of all or substantially all of the Apparel Fabric Business of
Target, DTA hereby agrees to sell to GL and GL hereby agrees to purchase from
DTA, the Apparel Fabric Business of Target for cash in an amount to be
determined in accordance with Section 3 hereof. The exact structure of the
transaction pursuant to which GL will acquire the Apparel Fabric Business and
PGI will acquire the Nonwovens Business will be determined by the Parties in
good faith to accomplish the objectives contained in this Agreement and minimize
overall tax liabilities. The terms of the agreements relating to the purchase
of the Apparel Fabric Business and Nonwovens Business, as applicable, shall
contain customary terms and conditions for acquisitions of public companies. In
particular, there will be no survival of any representations or warranties, and
limited customary indemnification provisions (related to the allocation of
liabilities of the Businesses) contained in the purchase agreements. To the
extent any assets are used in both the Apparel Fabric Business and Nonwovens
Business, the Parties will enter into an agreement providing for joint use, or
will otherwise agree to an equitable solution for such asset. In the event the
Parties are unable to
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negotiate in good faith an agreement or agreements for the purchase and sale of
the Apparel Fabric Business or the purchase and sale of the Nonwovens Business,
as applicable, at the option of DTA, the Apparel Fabric Business shall be sold
to GL by either a sale of stock of the corporation or corporations containing
the Apparel Fabric Business, or by a sale of the assets necessary for the
Apparel Fabric Business, on an "as is," "where is" and "with all faults" basis,
without any express or implied representations, and without any other
representations, warranties, covenants, agreements or indemnities (other than
related to the allocation of liabilities of the Businesses).
3. Determination of Purchase Price and Allocation.
(a) Cash to Target Stockholders. The Parties agree to determine the
purchase price for each Business by first allocating the amount of cash
consideration (and the fair market value of any consideration other than
cash) paid by DTA to holders of Common Shares of Target (including the
amount that would otherwise have been paid to PGI and TIG in respect of
their Common Shares if such Common Shares are not acquired by DTA pursuant
to the public takeover bid) and First Preferred shares of Target to effect
the Target Acquisition in the proportion of 60.0% for the purchase of the
Apparel Fabric Business and 40.0% for the purchase of the Nonwovens
Business. In addition, the purchase price for each Business shall be
adjusted, and the assets and liabilities with respect thereto shall be
allocated to each Business, as specifically provided in the following
clauses (b), (c), (d), (e) and (f) of this Section.
(b) Specific Allocable Assets and Liabilities. All assets and
liabilities of Target that are specifically allocable to the Apparel Fabric
Business shall be transferred to and assumed by GL and the GL Buyer, and
all assets and liabilities of Target that are specifically allocable to the
Nonwoven Business shall be retained by PGI and DTA, without any adjustment
in the purchase price for each Business.
(c) Transaction Related and Similar Assets and Liabilities. The net
amount of any assets or liabilities that are part of, or resulted from, the
Businesses as a whole on a shared basis and, except as expressly provided
in clause (iv), assets and liabilities associated with the Target
Acquisition and the Transaction, including, without limitation, (i) the tax
liabilities and assets associated with the transactions contemplated
hereby, including taxes imposed in connection with separating the Apparel
Fabric Business and the Nonwovens Business and transferring such businesses
to GL and PGI, respectively, (ii) any litigation costs and expenses related
to the Target Acquisition or Target defense costs and expenses, (iii) any
corporate overhead liabilities or corporate assets, (iv) any transaction
costs incurred by or on behalf of DTA or PGI solely in connection with the
proposed Target Acquisition, including an amount necessary to compensate
PGI and DTA for obtaining commitments for, and utilizing, the financing
provided directly to DTA by The Chase Manhattan Bank and First Union
National Bank pursuant to the commitment letter dated October 27, 1997,
including the interest expense incurred for the amount necessary to
complete the Target Acquisition and related transactions, but not including
the investment banking and merger and acquisition advisory fees specified
in clause (d)(ii) below or any transaction costs, commitment fees or
financing fees, payable by either PGI or GL in connection with providing
the financing required to
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complete the Target Acquisition or the subsequent purchase and sale of the
Apparel Fabric Business and the Nonwovens Business, (v) the principal
amount of outstanding corporate indebtedness assumed by either Party or
Business or the amounts paid to retire, repay or acquire outstanding
corporate indebtedness (whether in the nature of payments of principal,
interest, premiums, defeasance costs, tender payments, overdrafts,
penalties, breakage costs, fees, litigation expenses, other expenses or
indemnities relating thereto) and Preferred Shares of Target, and (vi)
similar liabilities, shall increase the purchase price of the Apparel
Fabric Business by 60.0% of the total of such amount, and shall increase
the purchase price of the Nonwovens Business by 40.0% of the total of such
amount; provided, if such adjustment is not practicable because of the
nature of the assets or liabilities, such assets or liabilities shall be
acquired by, assumed by or borne by, respectively, each Business in the
respective percentage.
(d) Other Assets and Liabilities. The net amount of any other such
assets or liabilities, including (i) any assets or liabilities related to
any discontinued operations of Target or not otherwise related to either
Business or otherwise described in clause (c) of this Section, which may
include environmental, retiree medical, or similar liabilities and (ii)
investment banking and merger and acquisition advisory fees incurred by or
on behalf of PGI or DTA in connection with the Target Acquisition, shall
increase the purchase price of the Apparel Fabric Business by 50.0% of the
total of such amounts and shall increase the purchase price of the
Nonwovens Business by 50.0% of the total of such amount; provided, if such
adjustment is not practicable because of the nature of the assets or
liabilities, such assets or liabilities shall be acquired by, assumed by or
borne by, respectively, each Business in the respective percentage.
(e) Aggregate Asset and Liability Adjustment. To the extent that the
allocation of assets to, and assumption of liabilities by, each Business as
contemplated by clauses (c) and (d) of this Section cannot be accomplished
in the exact proportions set forth in such clauses as a result of the
nature of the specific assets or liabilities, all of the assets acquired or
liabilities assumed by each Party shall be determined on an aggregate basis
and an appropriate adjustment will be made to compensate a Party that has
assumed, on a net overall basis, liabilities in excess of its respective
percentages and require a payment from a Party that has acquired, on a net
overall basis, assets in excess of its respective percentages. Any such
adjustment may take the form of a reallocation of corporate level cash, a
payment from one Party to the other Party, transfer of other assets or
other appropriate mechanism.
(f) DIFCO Adjustment. The purchase price allocation percentage of
60.0% for the Apparel Fabric Business and 40.0% for the Nonwovens Business
contained in clauses (a) and (c) of this Section 3 shall be subject to
possible further adjustment in accordance with Annex A attached hereto
related to the earnings before interest, depreciation and amortization of
DIFCO.
(g) Illustrative Example. An illustrative example of the calculation
of the purchase price for each Business is set forth on Annex B attached
hereto.
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4. Structure of Transaction.
(a) Plan of Arrangement. The Parties agree that the most desirable
form of the Target Acquisition may be a plan of arrangement with court
approval under Canadian laws, designed to accomplish the objectives set
forth in this Agreement and minimize overall tax liabilities associated
with the Transaction and will attempt to utilize this structure if
possible. To this end, GL agrees to enter into any agreement or agreements
with PGI and Target to accomplish this form of transaction.
(b) DTA. In the event a plan of arrangement is not possible or
desirable, PGI intends to proceed by causing DTA, a Canadian company, to
commence a public takeover bid for the outstanding Common Shares and
associated preferred share purchase rights. To the extent that, following
the commencement of a public takeover bid by DTA, a plan of arrangement
becomes possible, the Parties will proceed under clause (a) of this
Section. Subject to the other provisions of this Agreement and until
consummation of the Transaction, DTA will not engage in any other business,
incur any other liabilities, sell any of its securities or make any
distributions in respect of its securities, other than a distribution to
its stockholders of the cash proceeds or other consideration received by
DTA in respect of the Common Shares owned by DTA and tendered into the
public takeover bid or a return to its stockholders of the Common Shares
that were contributed to DTA by its stockholders.
5. Conditions. Following the consummation of the Target
Acquisition, the closing of the Transaction will be subject only to the
following conditions:
(i) The absence of any final injunction or decree preventing
the sale of the Apparel Fabric Business to GL;
(ii) The receipt of all required material governmental or
regulatory approvals and consents, the failure of which to obtain would
prevent the sale of the Apparel Fabric Business to GL; and
(iii) The repayment, retirement or acquisition of all
outstanding bank indebtedness of Target and its subsidiaries and the issued
and outstanding publicly issued senior notes of Target and its
subsidiaries.
6. Agreement to Disclose Identity. Each Party agrees to permit DTA
to disclose in the takeover circular its identity and the ownership of Common
Shares of DTA and Target by each Party and the nature of this Agreement;
provided, that each Party will have the opportunity to approve any description
of it contained in any publicly filed document, such approval not to be
unreasonably withheld.
7. No Additional Acquisitions of Common Shares. Neither Party shall
acquire any additional Common Shares without the prior consent of the other
Party. In addition, neither Party shall become the "beneficial owner" (within
the meaning of Canadian and U.S. securities laws
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and Target's shareholder rights plan) of any Common Shares without the prior
consent of the other Party. As of the date hereof, GL does not "beneficially
own" any Common Shares.
8. Liquidated Damages. In the event that GL shall breach this
Agreement in any material respect or fail to satisfy its obligations in any
material respect hereunder for any reason, in addition to any other remedy
available to PGI hereunder for a breach of this Agreement by GL, GL agrees to
pay to PGI liquidated damages in the amount of $35.0 million. In the event that
either PGI or ZB Holdings, Inc. ("ZBH") shall breach this Agreement in any
material respect or fail to satisfy its obligations in any material respect
hereunder, in addition to any other remedy available to GL hereunder for a
breach of this Agreement by PGI or ZBH, as applicable, PGI or ZBH, as the case
may be, shall pay liquidated damages to GL in the amount of $35.0 million. Any
amounts payable pursuant to this Section 8 shall be payable in two equal
installments, one-half of which shall be paid within two business days of the
date of the breach resulting in the payment and the remaining one-half payable
on the second anniversary of the date of such breach. Any amounts paid by GL or
PGI to the other Party following a termination of this Agreement pursuant to
Section 9 shall be credited on a dollar-for-dollar basis against the $35.0
million amount that is otherwise payable to such Party pursuant to this Section
8, with any amount paid by PGI applied to reduce the amount payable by ZBH. The
provisions of this Section 8 shall be the exclusion remedy in the event of a
breach of Section 2 or Section 11 hereof.
9. Expenses. Except as otherwise provided in Section 3 and Section
8, each Party shall bear its out-of-pocket fees and expenses incurred in
connection with the transactions contemplated by this Agreement; provided, that
if this Agreement is terminated pursuant to clauses (b), (d), (e), (i), (ii),
(iii), (x), (y) or (z) of Section 14, (A) 60.0% of the out-of-pocket fees and
expenses incurred by PGI, any investors acting with PGI with respect to the
Target Acquisition and by or on behalf of DTA which would be included in the
determination of Purchase Price under Section 3 will be payable by GL and GL
Buyer and 40.0% will be payable by PGI and DTA and (B) 50.0% of any break-up
fee, termination payments or other payments made to or for the benefit of DTA by
or on behalf of Target relating to the Target Acquisition (other than with
respect to the Common Shares owned by DTA) will be payable to GL and GL Buyer
and 50.0% will be payable to PGI and DTA.
10. Covenants. Promptly following the execution of this Agreement,
PGI and GL shall enter into good faith negotiations to enter into an agreement
or agreements to provide for the separate operation of the Apparel Fabric
Business and the Nonwovens Business by GL and PGI, respectively, following the
Target Acquisition. Promptly following the consummation of the Target
Acquisition, PGI and DTA shall commence negotiations with GL to arrive at a
mutually satisfactory structure for the Transaction. All Parties shall use
their respective commercially reasonable efforts to close the Transaction on an
expedited basis. DTA will use its commercial best efforts to obtain access and
information regarding Target and the Businesses. In the event that DTA obtains
any such access and/or information regarding Target or the Businesses at any
time, DTA will (i) promptly provide the same access and/or information to GL and
(ii) utilize such access and/or seek such information regarding both Businesses
with equal efforts and diligence; provided, GL enters into any necessary
confidentiality agreements or arrangements.
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11. Financing. The financing for the Target Acquisition will be
provided as follows:
(a) GL Financing. GL agrees to provide to DTA $132 million for the
purpose of the Target Acquisition concurrently with the tender to DTA of
the funds to be provided by the letter specified in paragraph (b) of this
Section.
(b) DTA Financing. Attached hereto as Annex C is a true, complete
and executed copy of a letter of commitment dated October 27, 1997, from
The Chase Manhattan Bank and First Union National Bank to DTA, to provide
for borrowing by DTA of up to $255.0 million, which includes a revolving
facility in an amount of $25.0 million. DTA shall not consent to any
amendment, modification or waiver of such commitment letter, the related
fee letter, and the related credit agreement without the consent of GL.
(c) PGI Financing. PGI agrees to provide to DTA $25 million for the
purpose of the Target Acquisition concurrently with the tender to DTA of
the funds to be provided by the letter specified in paragraph (b) of this
Section. This obligation may be satisfied by crediting to PGI an amount
equal to the value of the Common Shares contributed to DTA that were owned
by PGI, valued at the price paid to the holders of Common Shares pursuant
to the public takeover bid.
(d) ZBH Financing. ZBH agrees to provide to DTA $63 million for the
purpose of the Target Acquisition concurrently with the tender to DTA of
the funds to be provided by the letter specified in paragraph (b) of this
Section. This obligation may be satisfied by crediting to ZBH an amount
equal to the value of the Common Shares contributed to DTA that were owned
by TIG, valued at the price paid to the holders of Common Shares pursuant
to the public takeover bid.
(e) Ratable Reductions. In the event that the aggregate funds
required in connection with the public takeover bid (and to pay related
fees and expenses and interest) are less than $450.0 million, ratable
reductions shall be made in the amount of the funds to be provided by GL,
PGI and ZBH described above.
12. Binding Effect. The Parties agree that, until the execution of
the definitive agreement or agreements contemplated by Section 2 of this
Agreement, the provisions of this Agreement shall be a binding commitment of the
Parties with respect to the subject matter hereof.
13. Confidentiality. The Parties agree that the provisions of the
Confidentiality Agreement dated as of September 5, 1997 (the "Confidentiality
Agreement), shall be binding upon the Parties and such provisions are
incorporated herein by reference.
14. Termination. This Agreement will automatically be terminated and
be of no further force and effect upon the earlier of (a) the execution of
definitive acquisition agreements for the Transaction, (b) mutual agreement of
the Parties, (c) the occurrence of a "Termination Event" as defined in the
letter of even date herewith from PGI to GL, (d) subject to the proviso of the
first
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sentence of Section 1, the termination, abandonment, or withdrawal of the tender
offer related to the Target Acquisition without the purchase of any Common
Shares pursuant thereto following its commencement for any reason (other than as
a result of the implementation of a plan of arrangement with court approval
under Canadian laws which is approved by the board of directors of Target, DTA,
PGI and GL) and (e) April 30, 1998; provided, that in the event a Party
materially breaches this Agreement or is unable to fulfil any conditions
required to be fulfilled, and such breach is not cured within five business days
following notice from the other Parties, the non-breaching Parties may terminate
this Agreement on the tenth business day following delivery of such notice and
thereafter, the non-breaching Parties will not be subject to the restrictions
contained in Section 1. In the event this Agreement is terminated pursuant to
this Section 14 by a non-breaching Party, a breaching Party will not be relieved
of any liability it may have as a result of any breach of this Agreement
occurring prior to the termination of this Agreement. Notwithstanding the
foregoing, only until the time (the "Acceptance Time") that DTA or PGI has taken
up and paid for any Common Shares pursuant to the tender offer related to the
Target Acquisition, acquired a majority of the outstanding Common Shares of
Target or acquired all or substantially all of the assets of the Apparel Fabric
Business, GL may, upon written notice, terminate this Agreement if (i) any
material adverse change in the business, assets, condition (financing or
otherwise), results of operations, cash flows, prospects or properties relating
to the Apparel Fabric Business has occurred during the period beginning on the
date hereof until the Acceptance Time, (ii) Target has taken any action
following the date hereof and prior to the Acceptance Time, out of the ordinary
course of business, which has a material adverse effect on the Apparel Fabric
Business or the ability of the Parties to consummate the Target Acquisition, the
Transaction or the transactions contemplated hereby, or (iii) the failure of
Target to redeem Target's Rights Plan, adopted as of August 9, 1989 (and any
other similar "poison-pill" or other plan with the purpose of preventing or
obstructing any takeover of Target implemented by Target subsequent hereto), or
failure of PGI or DTA to obtain a cease-trade order, in the Province of Ontario,
the Province of Quebec and such other provinces as may be necessary, of the
rights issued under such Plan by April 30, 1998. Notwithstanding the foregoing,
only until the time (the "Acceptance Time") that DTA or PGI has taken up and
paid for any Common Shares pursuant to the tender offer related to the Target
Acquisition, acquired a majority of the outstanding Common Shares of Target or
acquired all or substantially all of the assets of the Apparel Fabric Business,
PGI and DTA may, upon written notice, terminate this Agreement if (x) any
material adverse change in the business, assets, condition (financing or
otherwise), results of operations, cash flows, prospects or properties relating
to the Nonwovens Business has occurred during the period beginning on the date
hereof until the Acceptance Time, (y) Target has taken any action following the
date hereof and prior to the Acceptance Time, out of the ordinary course of
business, which has a material adverse effect on the Nonwovens Business or the
ability of the Parties to consummate the Target Acquisition, the Transaction or
the transactions contemplated hereby, or (z) the failure of Target to redeem
Target's Rights Plan, adopted as of August 9, 1989 (and any other similar
"poison-pill" or other plan with the purpose of preventing or obstructing any
takeover of Target implemented by Target subsequent hereto), or failure of PGI
or DTA to obtain a cease-trade order, in the Province of Ontario, the Province
of Quebec and such other provinces as may be necessary, of the rights issued
under such Plan by April 30, 1998.
15. Further Assurances. Subject to the terms and conditions
contained herein, each Party agrees to use commercially reasonable efforts to
take, or cause to be taken, all action and
-8-
<PAGE>
to do, or cause to be done, all things necessary, proper or advisable under
applicable law and regulation to consummate the Transaction in accordance with
the terms of this Agreement. In case at any time following the date hereof any
further action is necessary or desirable to carry out the purpose of this
Agreement, the Parties agree to discuss taking such action in good faith.
16. Miscellaneous. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
conflicts of law principles thereof. This Agreement, together with the
Confidentiality Agreement and the letter agreement of even date herewith from
PGI to GL described in Section 14(c), constitutes the entire agreement and
supersedes all prior agreements and understandings, written and oral, among the
Parties with respect to the subject matter hereof. If any provision of this
Agreement is deemed invalid, illegal or incapable of enforcement by any rule of
law or public policy, all other provisions of this Agreement shall remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated by this Agreement are not affected in any manner
materially adverse to any Party. Upon any determination that any provision of
this Agreement is invalid, illegal or incapable of enforcement, the Parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the Parties as closely as possible to the transactions
originally contemplated by the Parties. Each Party may assign its rights
hereunder only to any of its affiliates, but may not assign its obligations or
delegate its duties hereunder without the prior written approval of the other
Party hereto; provided, that in connection with any such assignment to an
affiliate, the assigning party must guarantee all of the obligations owed to the
other Party hereunder. The Parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached, and therefore
agree that, in addition to any other remedy to which any Party may be entitled
to at law or in equity, the Parties shall be entitled to injunctive relief to
prevent breaches of this Agreement and to enforce specifically the provisions
hereof; provided, that no Party will be entitled to seek specific performance
hereunder in any particular circumstances to the extent that the provisions of
Section 8 apply to such circumstances. All notices required by this letter
agreement shall be in writing and may be sent by registered or certified mail,
return receipt requested, by overnight courier or by facsimile (with confirming
copy sent by overnight courier). All notices to GL shall be made to Arthur
Wiener, Chairman, President and Chief Executive Officer of GL, and all notices
to PGI shall be made to Jerry Zucker, Chairman, President and Chief Executive
Officer of PGI, at the addresses of their respective principal executive
offices. This Agreement may be executed in counterparts and delivered by
facsimile transmission.
* * * * *
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective officers thereto duly authorized, all as of the
date first above written.
POLYMER GROUP, INC.
By: /s/ Jerry Zucker
-----------------------------------------------
Its: Chairman, President and Chief Executive Officer
-----------------------------------------------
DT ACQUISITION INC.
By: /s/ Jerry Zucker
-----------------------------------------------
Its: Chairman, President and Chief Executive Officer
-----------------------------------------------
GALEY & LORD INCORPORATED
By: /s/ Arthur C. Wiener
-----------------------------------------------
Its: Chairman, President and Chief Executive Officer
-----------------------------------------------
ZB HOLDING, INC.
By: /s/ Jerry Zucker
-----------------------------------------------
Its: Chairman, President and Chief Executive Officer
-----------------------------------------------
-10-
<PAGE>
ANNEX A
DIFCO Adjustment
Following the consummation of the Target Acquisition, the Parties
shall determine the actual earnings before interest, depreciation and
amortization for the one-year period ending June 30, 1997 ("EBITDA") for DIFCO
("DIFCO EBITDA"), and for the Apparel Fabric Business and the Nonwovens Business
("Total EBITDA"). Such determinations shall be made in United States dollars
and be based upon generally accepted accounting principles as consistently
applied, and verified by Ernst & Young LLP. To the extent that the DIFCO EBITDA
exceeds U.S.$2.8 million for such period, the 60.0% purchase price percentage
allocation for the Apparel Fabric Business and the 40.0% purchase price
percentage allocation for the Nonwovens Business contained in Sections 3(a) and
3(c) will be adjusted in accordance with the following formula:
(a) If the DIFCO EBITDA exceeds U.S.$2.8 million, the excess amount
over $2.8 million will be determined (the "DIFCO Excess Amount"). The
percentage of the DIFCO Excess Amount compared to Total EBITDA will be
determined (the "Excess Percentage"), rounded to the nearest 0.1%. The
60.0% purchase price percentage allocation for the Apparel Fabric Business
will be reduced by the Excess Percentage, and the 40.0% purchase price
percentage allocation for the Nonwovens Business will be increased by the
Excess Percentage.
(b) As an illustrative example, if DIFCO EBITDA equaled $3.8 million,
the DIFCO Excess Amount would be $1.0 million. If, in this example, Total
EBITDA equaled $100.0 million, the Excess Percentage would equal 1.0%, and
the purchase price percentage for the Apparel Fabric Business would be
reduced to 59.0%, and the purchase price percentage of the Nonwovens
Business would be increased to 41.0%.
(c) If the DIFCO EBITDA is equal to or less than U.S.$2.8 million, no
adjustment will be made.
(d) The adjustment in this Annex A will only apply to the percentages
set forth in Sections 3(a) and 3(c).
-11-
<PAGE>
Exhibit 4.2
Privileged and Confidential
[Conformed Copy]
OPERATING AGREEMENT
BY AND AMONG
DT ACQUISITION INC.,
POLYMER GROUP, INC.
AND
GALEY & LORD INCORPORATED
REGARDING
DOMINION TEXTILE INC.
This operating agreement, dated as of December 19, 1997 (the "Operating
Agreement"), is made and entered into by and among Polymer Group, Inc., a
Delaware corporation ("PGI"), DT Acquisition, Inc., a corporation organized
under the laws of Canada ("DTA") and Galey & Lord Incorporated, a Delaware
corporation ("GL") (PGI, DTA and GL are referred to sometimes herein as the
"Parties"). Capitalized terms used but not defined herein shall have the
respective meanings set forth in the DTA Offers and Takeover Bid Circular dated
October 29, 1997, as amended by the Notice of Extension and Variation dated
November 18, 1997, the Notice of Extension dated December 2, 1997 and the Notice
of Extension and Variation dated December 8, 1997.
WHEREAS, DTA has commenced a public takeover bid to acquire all of the
outstanding common shares of Dominion Textile Inc., a corporation organized
under the laws of Canada ("Target") (such acquisition referred to herein as the
"Target Acquisition") and all of the outstanding first preferred shares of
Target;
WHEREAS, PGI, GL and DTA have entered into an agreement dated as of October
27, 1997 (the "Agreement"), as amended and supplemented by the letter agreement
dated as of October 27, 1997 between the Parties and the three letter agreements
dated as of November 16, 1997 between the Parties (the Agreement as so amended
and supplemented is referred to herein as the "Purchase Agreement"), which
would, contingent on the completion of the Target Acquisition by DTA, (i)
transfer the Nonwovens Business (including its proportionate liabilities) to
PGI, and (ii) transfer the Apparel Fabric Business (including its proportionate
liabilities) to GL (such transfers referred to herein as the "Purchase Agreement
Transaction");
WHEREAS, PGI, GL and an affiliate of PGI have committed to lend money to
DTA to provide funds to DTA to complete the Target Acquisition;
<PAGE>
Operating Agreement
December 19, 1997
Page 2
WHEREAS, PGI and GL each has expertise with respect to the Nonwovens
Business and the Apparel Fabric Business, respectively, and, upon completion of
the Target Acquisition, Target would benefit from the utilization of their
expertise in the management of Target's operations; and
WHEREAS, DTA, PGI and GL are entering into this Agreement for the purpose
of setting forth certain management rights and responsibilities of each Party
during the period following the appointment by DTA of all of the directors of
Target's board of directors and prior to completion of the Purchase Agreement
Transaction.
NOW, THEREFORE, in consideration of the foregoing and the agreements herein
contained, the parties hereto intending to be legally bound, hereby agree as
follows:
1. Definitions. In addition to terms otherwise defined herein and in the
Offers, the following terms have the meanings set forth below:
(a) "Agreement" has the meaning set forth in the preface above.
(b) "Apparel Committee" has the meaning set forth in Section 2(a).
(c) "Business" has the meaning set forth in Section 2(a).
(d) "DTA" has the meaning set forth in the preface above.
(e) "GL" has the meaning set forth in the preface above.
(f) "Nonwovens Committee" has the meaning set forth in Section 2(a).
(g) "Operating Agreement" has the meaning set forth in the preface
above.
(h) "Operating Committees" has the meaning set forth in Section 2(a).
(i) "PGI" has the meaning set forth in the preface above.
(j) "Parties" has the meaning set forth in the preface above.
(k) "Partner" means an individual who is designated as a member of
the Partners Committee pursuant to Section 3(b).
<PAGE>
Operating Agreement
December 19, 1997
Page 3
(l) "Partners Committee" means the executive committee designated
pursuant to Section 3.
(m) "Purchase Agreement" has the meaning set forth in the preface
above.
(n) "Purchase Agreement Transaction" has the meaning set forth in the
preface above.
(o) "Target" has the meaning set forth in the preface above.
(p) "Target Acquisition" has the meaning set forth in the preface
above.
2. Day-to-Day Management: The Apparel Committee and the Nonwovens
Committee. The Parties hereby expressly agree that this Operating Agreement
shall set forth the exclusive arrangement for the management and operation of
the Apparel Fabric Business and the Nonwovens Business. The Parties agree to
take (and to cause their subsidiaries and affiliates to take) whatever actions
are necessary or desirable (whether in such Party's capacity as a stockholder
(whether direct or indirect), director, Partner or otherwise, and including,
without limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), to
effect the management of the Businesses as set forth herein and in a manner
consistent with the undertakings given to the Minister of Industry by the
Parties. The Parties agree that they will not take any actions specifically for
the purpose of frustrating the intent of this Operating Agreement.
(a) Operating Committee Responsibilities. The Apparel Fabric Business
operating committee (the "Apparel Committee") shall manage the day-to-day
affairs of the Apparel Fabric Business. The Nonwovens Business operating
committee (the "Nonwovens Committee", and together with the Apparel
Committee the "Operating Committees") shall manage the day-to-day affairs
of the Nonwovens Business (the Nonwovens Business and the Apparel Fabric
Business are each referred to sometimes herein as a "Business" and,
collectively, as the "Businesses"). Each Operating Committee shall, in
accordance with the direction established by the Partners Committee, make
all decisions and exercise all powers necessary for the day-to-day
operation of its respective Business, including the power to appoint or
cause to be appointed officers and agents and to execute contracts;
provided, however, the powers of the Operating Committees shall not be
construed to extend to those matters that are reserved for decision by the
Partners Committee under Section 3 of this Operating Agreement. Each
Operating Committee shall operate its respective Business consistent with
the provisions of this Operating Agreement and the Purchase Agreement.
<PAGE>
Operating Agreement
December 19, 1997
Page 4
(b) Formation and Composition of Operating Committees. The Apparel
Committee shall consist of the Partners who are the GL nominees to the
Partners Committee. The Nonwovens Committee shall consist of the Partners
who are the PGI nominees to the Partners Committee. Each member of an
Operating Committee shall serve so long as the person is a Partner and
shall cease to be a member of an Operating Committee in the event that the
person ceases to be a Partner.
(c) Procedures Governing Operating Committees.
(i) Each Operating Committee shall meet with such frequency and
at such places (including meetings by telephone or video conference)
as mutually decided by the members of the respective Operating
Committee.
(ii) Meetings of an Operating Committee may be called by any of
its respective members. Notice (by hand, telephone, overnight courier,
or the U.S. mail) shall be given to all members of the respective
Operating Committee at any time prior to a meeting (notice shall be
deemed given when received). If the notice requirement is not met, an
Operating Committee meeting shall nonetheless be valid as if held
after due notice if all members of the Operating Committee attend
without objection to the lack of notice or if, either before or after
such meeting, each member of the Operating Committee signs a written
waiver of notice, a consent to the holding of such meeting or a
written approval of the minutes of such meeting.
(iii) No meeting of an Operating Committee may be validly
convened unless both members of the respective Operating Committee are
present (either in person or by proxy). A member of an Operating
Committee may appoint another person as his or her proxy to represent
such member at any such Operating Committee meeting for any purpose,
including voting and quorum purposes.
(iv) Each member of an Operating Committee shall have one (1)
vote at all meetings of their respective Operating Committee. All
resolutions of an Operating Committee must be adopted by the unanimous
vote of all members of the Operating Committee present (or their
proxies). Minutes shall be kept of each meeting of an Operating
Committee, copies of which shall be transmitted to each member for
approval as to the accuracy of the minutes. A resolution in writing
which is signed by all of the members of an Operating Committee shall
be valid and effective as if it had been unanimously passed at a
meeting of the respective Operating Committee
<PAGE>
Operating Agreement
December 19, 1997
Page 5
duly convened and held. Copies of any such resolutions shall be filed
with the minutes of the meetings of such Operating Committee.
(v) Each of GL and PGI shall pay the expenses (including travel
expenses) incurred by the Operating Committee members nominated by it
to attend Operating Committee meetings.
(vi) By unanimous consent of its respective members, an
Operating Committee may adopt such other procedures governing meetings
and the conduct of business as it shall deem appropriate.
3. The Partners Committee
(a) Partners Committee Responsibilities. Subject to change by
agreement of GL and PGI, the management of each of the Businesses shall be
conducted exclusively by the applicable Operating Committee, provided that
the approval of the Partners Committee shall be required prior to:
(i) approving any activity outside of the ordinary course of
business, consistent with past practice, of the Apparel Fabric
Business or the Nonwovens Business, considered individually;
(ii) approving any acquisition or agreement to acquire, by
amalgamating, merging, consolidating or entering into a business
combination with or purchasing or leasing substantially all of the
assets of or otherwise, any business or undertaking or any
corporation, partnership, association or other business organization
or division thereof, if such transactions, individually or in the
aggregate, represent a value to or commitment of Target or either
Business of $250,000 or more;
(iii) approving the sale, lease, transfer or other disposition
of any of the property or assets, real or personal, including
intangible assets and stock of subsidiaries with respect to either
Business, that, individually or in the aggregate, (x) represent a
value to or commitment of Target or either Business of $250,000 or
more, or (y) have a book value of $250,000 or more;
(iv) executing or canceling any mortgage, security interest or
similar document or instrument purporting to encumber any one or more
of the assets of
<PAGE>
Operating Agreement
December 19, 1997
Page 6
either Business if such transactions, individually or in the
aggregate, represent a value to or commitment of Target or either
Business of $50,000 or more;
(v) entering into, amending or terminating any agreements,
covenants or contracts that, individually or in the aggregate,
represent a value to or commitment of Target or either Business of
$250,000 or more;
(vi) modifying, amending, waiving or terminating any
confidentiality agreement Target or either Business has entered into
with third parties;
(vii) guaranteeing the payment of any indebtedness, or incurring
any liability or indebtedness for borrowed money, that, individually
or in the aggregate, represents a commitment of Target or either
Business of $10,000 or more;
(viii) lending funds on behalf of Target or either Business
that, individually or in the aggregate, represent a value to or
commitment of Target or either Business of $25,000 or more;
(ix) committing to any capital expenditure or investment,
including any capital or operating lease, that, individually or in the
aggregate, represents a value to or commitment of Target or either
Business of $25,000 or more;
(x) making any capital expenditure, investment or other
payment pursuant to any contract or commitment if there is
insufficient cash within the particular Business to make such payment;
(xi) entering into (or amending, modifying, waiving or
deviating from the previously approved terms of) any transaction
between (x) Target or either Business and (y) any Party or any
affiliate of a Party (other than transactions with a Party (or its
affiliates) which are specifically authorized by the Purchase
Agreement);
(xii) entering into (or amending, modifying, waiving or
deviating from the previously approved terms of) any transaction which
benefits any Party (or its affiliates) (other than transactions
benefitting a Party (or its affiliates) which are specifically
authorized by the Purchase Agreement);
(xiii) approving or changing the salaries, bonuses or other
compensation payable to any officer or employee of Target or either
Business;
<PAGE>
Operating Agreement
December 19, 1997
Page 7
(xiv) commencing, prosecuting, defending or settling any case,
controversy, claim, cause of action or dispute which arises out of or
relates to the Target or either Business and which involves claims in
excess of $25,000 to Target, either Business or any Party;
(xv) determining how best to maintain, protect and defend the
rights and interests in and to the intellectual property of Target and
each Business;
(xvi) approving new bank accounts which shall hold funds of
Target or either Business;
(xvii) approving the purchase of insurance policies;
(xviii) approving any distribution of assets (including cash) of
Target or either Business to any Party (or its subsidiary) or to the
other Business;
(xix) adopting, amending or terminating any (a) collective
bargaining agreement, (b) plan, policy, arrangement or understanding
providing any of the following benefits to current or former employees
of Target or either Business: bonus, pension, profit sharing, deferred
compensation, incentive compensation, equity or quasi-equity based
compensation, retirement, vacation, severance, disability, death
benefit or insurance or (c) other personnel practices or policies;
(xx) creating any subsidiary of Target or either Business;
(xxi) causing Target or either Business or any of their
subsidiaries to cease doing business, liquidate or dissolve, file a
petition in bankruptcy, make an assignment for the benefit of
creditors or take or allow to be taken against it any similar action;
(xxii) permitting any subsidiary of Target or either Business
to take any action described above; and
(xxiii) performing all other duties specifically reserved to the
Partners Committee in this Operating Agreement or subsequently
delegated to the Partners Committee by agreement of GL and PGI.
<PAGE>
Operating Agreement
December 19, 1997
Page 8
(b) Formation and Composition of the Partners Committee. The Partners
Committee shall consist of four (4) individuals or such other even number
of individuals as GL and PGI from time to time may agree in writing;
provided that each of PGI and GL shall have the right to nominate an equal
number of Partners to the Partners Committee. The Parties shall cause the
board of directors of Target to appoint the persons so nominated by PGI and
GL to serve on the Partners Committee. All such Partners shall be officers
or employees of the Party which nominated them (or one of its affiliates)
or an employee of Target. The initial Partners shall be Jerry Zucker, James
G. Boyd, Arthur C. Wiener and Michael R. Harmon. Jerry Zucker and James G.
Boyd shall be deemed nominated by PGI, and Arthur C. Wiener and Michael R.
Harmon shall be deemed nominated by GL. At the request of either PGI or GL,
which request must relate to a Partner nominated by the requesting Party,
the Parties shall cause Target's board of directors to replace a Partner,
provided that no revocation shall be valid until a notice thereof has been
given to the other Parties.
(c) Operation of the Partners Committee. The Partners Committee shall
meet with such frequency and at such places (including meetings by
telephone or video conference) as mutually decided by the Partners,
provided that there shall be a face-to-face Partners Committee meeting at
least once every two (2) months.
(i) Meetings may be called by any Partner on at least seven (7)
days prior written notice to each Partner. If the notice requirement is
not met, a Partners Committee meeting shall nonetheless be valid as if held
after due notice if all Partners attend without objection to the lack of
notice or if, either before or after such meeting, each Partner signs a
written waiver of notice, a consent to the holding of such meeting or a
written approval of the minutes of such meeting.
(ii) No meeting of the Partners Committee may be validly
convened unless at least one (1) Partner nominated by PGI and at least one
(1) Partner nominated by GL are present (either in person or by proxy). A
Partner may appoint another person as his or her proxy to represent such
Partner at any meeting for any purpose, including voting and quorum
purposes.
(iii) Each Partner shall have one (1) vote at all meetings of
the Partners Committee. All resolutions of the Partners Committee must be
adopted by the unanimous vote of all Partners present (or their proxies).
Minutes shall be kept of each meeting of the Partners Committee, copies of
which shall be transmitted to each Partner for approval as to the accuracy
of the minutes. A resolution in writing which
<PAGE>
Operating Agreement
December 19, 1997
Page 9
is signed by all of the Partners shall be valid and effective as if it
had been unanimously passed at a meeting of the Partners Committee
duly convened and held. Copies of any such resolutions shall be filed
with the minutes of the Partners Committee meetings. The respective
counsel of each of GL and PGI shall be permitted to attend all
Partners Committee meetings.
(iv) Each of GL and PGI shall pay the expenses (including travel
expenses) incurred by the Partners nominated by it to attend Partners
Committee meetings.
(v) By unanimous consent of all Partners, the Partners Committee
may adopt such other procedures governing meetings and the conduct of
business as it shall deem appropriate.
4. Resolution of Potential Partners Committee Impasse.
(a) Mediation. The Partners shall attempt to settle all matters
before the Partners Committee through consultation and negotiation in good
faith and in a spirit of mutual cooperation. In the event that the
Partners Committee does not reach a decision on a matter within twenty (20)
business days from the date that the matter was submitted to the Partners
Committee, then the matter will be deemed to be a dispute and such dispute
will be mediated by a mediator to be selected by the Partner demanding
mediation and to be consented to by all other Partners. No Partner may
unreasonably withhold consent to the selection of a mediator. By mutual
agreement, however, the Partners may postpone mediation until the Partners
have each completed some specified but limited inquiry regarding the
matter.
(b) Arbitration. In the event that the Partners Committee, with or
without the involvement of a mediator, does not reach agreement on a matter
within forty (40) business days from the date the matter was submitted to
the Partners Committee, then, at the request of any Partner, the matter
shall be submitted to arbitration by such Partner delivering a notice of
arbitration (a "Notice of Arbitration") to a Partner who was nominated by a
Party other than the Party that nominated the Partner requesting
arbitration. Such Notice of Arbitration shall specify the matters as to
which arbitration is sought, the nature of any dispute and any other
matters required to be included therein by the Rules and Commentary for
Non-Administered Arbitration of Business Disputes, as in effect from time
to time (the "Rules"), of the Center for Public Resources, Inc. ("CPR"). A
partner of Ernst & Young having expertise in the textile industry to be
selected by such accounting firm and not by either Party, shall be the
arbitrator (the "Arbitrator"); provided, however, that, in the event that
the Arbitrator for any reason withdraws or is disqualified from serving in
that capacity and cannot
<PAGE>
Operating Agreement
December 19, 1997
Page 10
be replaced by another qualified partner of such accounting firm because of
such accounting firm's withdrawal or disqualification, CPR shall select as
a substitute Arbitrator a person who is or has been actively employed in an
executive or managerial capacity in the textile industry or with an
independent public accounting firm having expertise in that area.
The Arbitrator will determine the allocations of the costs and
expenses of arbitration (except for fees and expenses of legal counsel, if
any, selected by a party, which shall be borne by such party) as well as
the resolution of any dispute governed by this Section 4. The Arbitrator
shall be instructed to resolve any dispute in a manner that is consistent
with the Purchase Agreement and this Operating Agreement. The arbitration
shall be conducted in Atlanta, Georgia, under the Rules, except as modified
by agreement of GL and PGI. The pendency of any arbitration under this
Section 4 shall not in any way relieve the Partners from continuing to
carry out their responsibilities under this Operating Agreement in good
faith.
Evidentiary hearings, if any, shall not exceed three (3) business
days. The Arbitrator shall conduct the arbitration so that a final result,
determination, finding or judgment (the "Final Determination") is made or
rendered as soon as practicable, but in no event later than forty (40)
business days after the receipt by the relevant Partner(s) of the Notice of
Arbitration nor later than ten (10) business days following the completion
of all other aspects of the arbitration. The Arbitrator shall seek a Final
Determination that maximizes the net benefit to the Parties while
allocating benefits and detriments in a manner equitable to the Parties in
light of the Parties' relationship.
The Final Determination shall be signed by the Arbitrator, and shall
be limited to the matters properly set forth in the Notice of Arbitration.
The Final Determination shall be final and binding on the Partners
Committee, and there shall be no appeal or reexamination of the Final
Determination, except as provided in Sections 10 and 11 of the Federal
Arbitration Act, 9 U.S.C. (S) 1 et seq. Any Partner or Party may enforce
any Final Determination in any state or federal court having jurisdiction
over the dispute. For the purpose of any action or proceeding instituted
with respect to any Final Determination, each Partner and Party irrevocably
consents to the service of process by registered mail or personal service
and hereby irrevocably waives, to the fullest extent permitted by law, any
objection which it may have or hereafter have as to personal jurisdiction,
the laying of the venue of any such action or proceeding brought in any
such court and any claim that any such action or proceeding brought in any
court has been brought in an inconvenient forum.
(c) Limited Application of Dispute Resolution Procedures. The
dispute resolution procedures provided in Sections 4(a) and 4(b) shall
apply only to the resolution of
<PAGE>
Operating Agreement
December 19, 1997
Page 11
matters properly submitted to the Partners Committee regarding the
operations of Target and its subsidiaries. These dispute resolution
procedures shall not be construed to apply to any other disputes arising
out of or concerning this Operating Agreement and shall not be construed to
apply to or alter any other agreement between the Parties.
5. Indemnification of Partners and Directors and Officers of DTA.
(a) Scope of Indemnification. In addition to any other right to
indemnification granted by the bylaws or articles of incorporation of
either the Target or DTA (Target and DTA are together referred to as the
"Indemnifying Parties"), each person who was or is made a party to or is
threatened to be made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "Proceeding") by reason of the fact that he or
she is or was a Partner or a member of an Operating Committee or an officer
or director of DTA (hereinafter an "Indemnitee"), whether the basis of such
a Proceeding is alleged action by the Indemnitee in an official capacity as
a Partner, director, or officer or in any other capacity while serving as a
Partner, director, or officer, shall be indemnified and held harmless by
the Indemnifying Parties to the fullest extent authorized by law
(including indemnification for negligence, gross negligence and breach of
fiduciary duty to the extent so authorized), as the law now exists or may
hereinafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Indemnifying Parties to provide
broader indemnification rights than such law permitted the Indemnifying
Parties to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, excise taxes, or
penalties and amounts paid in settlement) reasonably incurred or suffered
by such Indemnitee in connection therewith. However, it is provided that:
(i) an Indemnitee shall not be entitled to be indemnified by the
Indemnifying Parties unless he or she acted in good faith in what such
person reasonably believed to be in accordance with the Purchase
Agreement and this Operating Agreement and, with respect to criminal
action or proceeding, he or she must not have had reasonable cause to
believe that his or her conduct was unlawful;
(ii) any indemnification pursuant to this Section 5 shall be
recoverable only from the assets of the Indemnifying Parties and not
from the assets of any other Party.
(b) Advancement of Expenses. The right to indemnification conferred
in this Section 5 shall include the right to be paid by the Indemnifying
Parties the expenses (including attorneys' fees) incurred in defending any
Proceeding in advance of its final disposition,
<PAGE>
Operating Agreement
December 19, 1997
Page 12
subject to the receipt of an undertaking from such Indemnitee to promptly
repay any amounts so advanced in the event that he or she is not ultimately
entitled to receive indemnification under Section 5(a).
(c) Survival. The rights of indemnification in Sections 5(a) and 5(b)
shall be contractual rights, and such rights shall continue as to an
Indemnitee who has ceased to be a Partner, director or officer and shall
inure to the benefit of the Indemnitee's heirs, executors and
administrators;
(d) Non-Exclusive Rights. The rights to indemnification and to the
advancement of expenses conferred in this Section 5 shall not be exclusive
of any other right that any person may have or hereafter acquire under any
statute, agreement, vote of the directors or shareholders or otherwise.
(e) Insurance. The Indemnifying Parties may maintain insurance, at
their expense, to protect themselves and any Indemnitee against any
expense, liability or loss, whether or not the Indemnifying Parties would
have the power to indemnify such person against such expense, liability or
loss under relevant laws.
6. Waiver of Conflict of Interest. Each Party hereby waives any claim or
cause of action against any other Party, any Partner nominated by another Party,
or any person ("Appointee") appointed by an Operating Committee which consists
of Partners nominated by another Party, for any breach of fiduciary duty to the
Target by such Partner or Appointee as a result of any potential or actual
conflict of interest. Each Party acknowledges and agrees that in the event of
any such conflict of interest, each such Partner or Appointee, subject to
applicable law, may act in the best interest of the Party which, directly or
indirectly through an Operating Committee, nominated him or her. Subject to
applicable law, no Partner or Appointee shall be obligated to recommend or take
any action that prefers the interests of the Target over the interests of a
Party, and the Target and the Parties waive the fiduciary duty, if any, to the
Target of each such Partner or Appointee in the event of any such conflict of
interest. The foregoing shall not limit the right of any Party and its
affiliates to pursue available remedies against the other Parties and their
affiliates for breach of any representation, warranty, covenant or agreement
contained in the Purchase Agreement and this Operating Agreement.
7. Public Announcements. Neither GL on the one hand or PGI and DTA on
the other hand shall make or send a public announcement or communication
regarding this Operating Agreement unless it has first obtained the prior
written approval of PGI or GL, respectively (which
<PAGE>
Operating Agreement
December 19, 1997
Page 13
approval shall not be unreasonably withheld); provided that any Party may make
any public disclosure it believes in good faith, upon advice of counsel, is
required by applicable law, the regulations of the stock exchange on which the
Party's stock is traded or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party, whether GL on
the one hand or PGI and DTA on the other hand, will use reasonable efforts to
consult PGI or GL, respectively, prior to making the disclosure). The Parties
agree that in response to any questions or inquiries from third parties, any
statements shall be consistent with the provisions of this Operating Agreement
and no statements will be made that would be likely to mislead or confuse third
parties regarding the management authority agreed to herein.
8. Entire Agreement. This Operating Agreement and the Purchase
Agreement together contain the entire agreement and understanding among the
Parties.
9. Amendments. This Operating Agreement may be amended only upon the
written consent of each of GL and PGI.
10. Termination. This Operating Agreement will automatically be
terminated and be of no further force and effect upon the earlier of (a) mutual
agreement of the Parties, (b) the termination of the Purchase Agreement, or (c)
the completion of the Purchase Agreement Transaction; provided, that in the
event a Party materially breaches this Operating Agreement or is unable to
fulfil any conditions required to be fulfilled, and such breach is not cured
within fifteen days following notice from another Party, the non-breaching
Parties may terminate this Operating Agreement on or after the twenty-second day
following delivery of such notice. Termination of this Operating Agreement by a
non-breaching Party pursuant to this Section 10 will not relieve the breaching
Party of any liability it may have as a result of any breach of the Purchase
Agreement or this Operating Agreement.
11. Construction. The Parties have participated jointly in the
negotiation and drafting of this Operating Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Operating Agreement shall
be construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Operating Agreement. Any reference
to any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation.
12. Miscellaneous. This Operating Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the conflicts of law
<PAGE>
Operating Agreement
December 19, 1997
Page 14
principles thereof. In furtherance of the foregoing, the internal laws of the
State of New York shall control the interpretation and construction of this
Operating Agreement, even though under New York's choice of law or conflict of
law analysis, the substantive law of some other jurisdiction may ordinarily
apply. If any provision of this Operating Agreement is deemed invalid, illegal
or incapable of enforcement by any rule of law or public policy, all other
provisions of this Operating Agreement shall remain in full force and effect.
Upon any determination that any provision of this Operating Agreement is
invalid, illegal or incapable of enforcement, the Parties shall negotiate in
good faith to modify this Operating Agreement so as to effect the original
intent of the Parties as closely as possible to the management rights and
responsibilities originally contemplated by the Parties. Each Party may assign
its rights hereunder only to any of its affiliates, but neither GL on the one
hand or PGI and DTA on the other hand may assign its obligations or delegate its
duties hereunder without the prior written approval of PGI or GL, respectively;
provided, that in connection with any such assignment to an affiliate, the
assigning party must guarantee all of the obligations owed to the other Parties
hereunder. The Parties agree that irreparable damage would occur in the event
that any of the provisions of this Operating Agreement were not performed in
accordance with their specific terms or were otherwise breached, and therefore
agree that, in addition to any other remedy to which any Party may be entitled
to at law or in equity, the Parties shall be entitled to injunctive relief to
prevent breaches of this Operating Agreement and to enforce specifically the
provisions hereof (without posting a bond or other security). All notices
required by this letter agreement shall be in writing and may be sent by
registered or certified mail, return receipt requested, by overnight courier or
by facsimile (with confirming copy sent by overnight courier). All notices to
GL shall be made to Arthur Wiener, Chairman, President and Chief Executive
Officer of GL, and all notices to PGI and DTA shall be made to Jerry Zucker,
Chairman, President and Chief Executive Officer of PGI and DTA, at the addresses
of their respective principal executive offices. This Operating Agreement may
be executed in counterparts and delivered by facsimile transmission. Nothing in
this Operating Agreement, whether express or implied, is intended to confer any
rights or remedies under or by reason of this Operating Agreement on any persons
other than the Parties hereto and their affiliates and respective permitted
successors and assigns.
* * * * *
<PAGE>
Operating Agreement
December 19, 1997
Page 15
IN WITNESS WHEREOF, the parties hereto have caused this Operating
Agreement to be signed by their respective officers thereto duly authorized, all
as of the date first above written.
POLYMER GROUP, INC.
By: /s/ Jerry Zucker
----------------------------------
Name: Jerry Zucker
Title: Chairman, President & CEO
DT ACQUISITION INC.
By: /s/ Jerry Zucker
----------------------------------
Name: Jerry Zucker
Title: Chairman, President & CEO
GALEY & LORD INCORPORATED
By: /s/ Arthur C. Wiener
----------------------------------
Name: Arthur C. Wiener
Title: Chairman, President & CEO
<PAGE>
EXHIBIT 99.1
NORTH CHARLESTON, S.C., Jan. 30 /PRNewswire/ -- Polymer Group, Inc.
(NYSE: PGH) announced today that, effective January 29, 1998, its affiliate,
DT Acquisition Inc. ("DTA"), completed the separation of the Nonwovens and
Apparel Businesses of Dominion Textile Inc. ("Dominion") and the sales of the
Nonwovens assets to Polymer Group, Inc. ("PGI") and the Apparel assets to
Galey & Lord, Inc. ("Galey & Lord") (NYSE: GNL). The asset separation and
sales were pursuant to a Purchase Agreement between PGI and Galey & Lord dated
October 27, 1997 (the "Purchase Agreement").
On December 19, 1997, DTA successfully completed its tender offers to
purchase all outstanding common and first preferred shares of Dominion,
acquiring approximately 98% of the common shares and 96% of the first
preferred shares.
Dominion's Nonwovens Businesses include: Waynesboro, Virginia-based
Poly-Bond, a manufacturer of nonwovens primarily for hygienic consumer product
applications; Nordlys, based in Bailleul, France, a producer of nonwovens for
industrial applications; and DNS, a joint venture with manufacturing
operations in Buenos Aires, Argentina.
"We are very pleased to have finalized the acquisition," commented Jerry
Zucker, Chairman, President and CEO of Polymer Group. "The addition of these
businesses to the Polymer Group will be one of several important drivers of
our continuing growth in Fiscal 1998 and beyond."
At 5:00 p.m., New York City time, January 28, 1998, Domionion Textile (USA)
Inc., a subsidiary of Dominion, successfully completed its previously
announced tender offers and consent solicitations for its outstanding 8-7/8%
Guaranteed Senior Notes due 2003 (the "8-7/8% Notes") and its outstanding
9-1/4% Guaranteed Senior Notes due 2003 (the "9-1/4% Notes"). Of the $150
million of 8-7/8% Notes outstanding, approximately $145.6 million, or 97.0%,
were tendered as of the close of business on January 28, 1998. Of the $125
million of 9-1/4% Notes outstanding, approximately $124.5 million, or 99.6%,
were tendered as of the close of business on January 28, 1998.
Polymer Group, one of the world's 3 largest producers of nonwovens, is a
global manufacturer and marketer of nonwovens and woven slit film materials
with principal business lines in disposable hygiene, medical, wiping and
specialized industrial applications. The Company employs approximately 3,000
people and operates 19 manufacturing facilities in 7 countries in North
America, South America and Europe. DTA is a Canadian affiliate of PGI formed
for the purpose of acquiring Dominion and facilitating the execution of the
Purchase Agreement.
For further information, please contact:
James Bryant
Director of Investor Relations
Polymer Group, Inc.
4838 Jenkins Avenue
