No. 1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR QUALIFIED UNDER ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED OR QUALIFIED THEREUNDER OR
AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE.
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL OF CERTAIN SENIOR DEBT (AS DEFINED IN THE SUBORDINATION
AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN,
THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF SEPTEMBER 22, 1997, AMONG FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, FIRST UNION COMMERCIAL CORPORATION, AS
LENDERS (COLLECTIVELY, THE "LENDERS"), FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, AS AGENT (THE "AGENT"), DANSKIN, INC. AND DANSKIN INVESTORS, LLC. ANY
HOLDER OF THIS INSTRUMENT SHALL BE DEEMED TO BE BOUND BY, AND SUBJECT TO, THE
TERMS OF THE SUBORDINATION AGREEMENT.
PROMISSORY NOTE
$15,000,000 New York, New York
September 22, 1997
FOR VALUE RECEIVED, DANSKIN, INC., a Delaware corporation (the "Company"),
hereby promises to pay to Danskin Investors, LLC ("Payee"), 0000 Xxxxxxxx Xxxx.,
Xxxxx 000, Xxxxxxx Xxxxx, XX 00000, the principal sum of Fifteen Million Dollars
($15,000,000), on the dates and in the amounts hereinafter set forth. This
Promissory Note is issued by the Company with an initial aggregate principal
amount of $15,000,000 pursuant to (a) the Securities Purchase Agreement, dated
as of the date hereof, between the Company and the Payee (the "Purchase
Agreement") and (b) the Loan and Security Agreement, dated as of the date
hereof, between the Company and the Payee (the "Security Agreement"), and the
Payee shall be entitled to all benefits thereof. The provisions of the Purchase
Agreement and the Security Agreement are incorporated herein by reference.
Capitalized terms used in this Promissory Note but not defined shall have the
respective meanings ascribed to them in the Security Agreement. This Promissory
Note is hereinafter referred to as this "Note."
1. Principal and Maturity Date. The principal amount of
this Note shall be due and payable on March 31, 1998 (the "Maturity Date"),
unless earlier exchanged for other securities of the Company as provided in
Section 5 of this Note.
2. Interest. The outstanding principal amount of this Note
shall bear interest beginning December 19, 1997, at the per annum rate as
provided in Section 2 of the Security Agreement through the earlier of the date
of repayment of this Note or exchange for other securities of the Company as
provided in Section 5 of this Note. Interest shall be payable each month, in
arrears, beginning on January 1, 1998, and on the first day of each calendar
month thereafter and upon the date of repayment or exchange of this Note, if
earlier.
3. Prepayment. This Note may not be prepaid, in whole or in
part, without the prior written consent of the Payee as to such prepayment,
which consent may be withheld in the discussion of Payee. All prepayments made
on this Note shall be applied first to the payment of all fees under this Note,
then unpaid interest accrued on this Note, and then to the outstanding and
unpaid principal amount of this Note as of the date of prepayment.
4. General Payment Provisions. All payments or prepayments
of principal and interest and other sums due pursuant to this Note shall be made
by wire transfer to an account(s) designated in writing by the Payee.
If the due date of any payment under this Note would otherwise
fall on a day which is not a Business Day, such date will be extended to the
immediately succeeding Business Day and interest shall be payable at the rate
set forth herein for the period of the extension. The term "Business Day" shall
mean any day on which commercial banks in the State of New York are not
authorized or required to close.
5. Exchange of Securities. Upon the closing (the "Closing") of
the repayment of all amounts due and owing to the Lenders by the Company under
the revolving credit portion of the Company's Amended and Restated Loan and
Security Agreement with the Lenders, dated as of June 22, 1995, as the same has
further been amended, $14,396,488.20 aggregate principal amount of this Note
(together with Five Hundred Thousand Dollars ($500,000) in stated value of
Series C Cumulative Convertible Preferred Stock of the Company held by the
Payee) shall be automatically exchanged for (i) shares of fully paid and
non-assessable Series D Cumulative Convertible Preferred Stock of the Company in
the form of Exhibit C to the Purchase Agreement equal to Twelve Million Dollars
($12,000,000) in stated value, (ii) a fully paid and non-assessable common stock
purchase warrant in the form of Exhibit D to the Purchase Agreement and (iii) to
the extent the authorized capital stock of the Company permits and the
Registration Statement (as defined in the Purchase Agreement) shall have been
declared effective by the Securities and Exchange Commission (the "Commission"),
7,988,294 shares of fully paid and non-assessable common stock of the Company in
the Rights Offering at $.30 per share, without further notice and without action
on the part of the Payee (or such lesser number of shares of common stock as are
available for purchase by the Payee (provided, that no
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shares shall be deemed available for purchase if the Registration Statement
shall not have been declared effective by the Commission)); provided, however,
that if for any reason the Closing shall not have occurred on or prior to March
31, 1998, the Notes shall no longer be exchangeable as provided herein. The
remaining aggregate principal amount of this Note (assuming authorized capital
stock of the Company is available to permit the purchase by the Payee for the
full 7,988,294 shares of the Company's common stock and the Registration
Statement shall have been declared effective by the Commission) shall be used to
purchase Common Stock in the Rights Offering by paying the exercise price of
Rights (as defined in the Purchase Agreement) not exercised by stockholders of
the Company other than the Payee pursuant to the Rights Offering. The Company
shall promptly remit to the Payee all monies representing the exercise of Rights
by stockholders of the Company other than the Payee pursuant to the Rights
Offering (as defined in the Purchase Agreement) and the remaining principal
amount of this Note shall be repaid dollar for dollar as the Payee receives such
monies from the Company. If the Closing occurs prior to the time that the
Company has 7,988,294 shares of common stock available for purchase by the Payee
and prior to the time the Registration Statement shall have been declared
effective by the Commission, this Note shall remain outstanding in a principal
amount equal to $3,000,000. Any remaining balance of this Note which remains
outstanding after the Closing (subject to the amount which is available to
purchase unexercised Rights) will be converted into Common Stock, upon the
Company authorizing a sufficient amount of capital stock, in an amount equal to
the quotient obtained by dividing (aa) the balance of this Note less the
aggregate dollar amount to be paid by other stockholders, in the exercise of
their Rights to purchase Common Stock in the Rights Offering by (bb) .30. The
Company shall pay all issue taxes, if any, incurred in respect of the issue of
the securities delivered on as provided herein exchange of this Note pursuant to
this Section 5.
6. Security. This Note is secured by the Collateral as
defined in, and provided under, the Security Agreement.
7. Subordination of Note. This Note is subject to the
provisions of the Subordination Agreement, dated as of September 19, 1997, among
the Agent, the Lender, the Company and the Payee. In the event of a conflict
between the provisions of this Note and the provisions of the Subordination
Agreement, the provisions of the Subordination Agreement shall control.
8. Events of Default/Maturity of Senior Debt. If the
Senior Debt shall have become due at maturity or one or more of the following
events (an "Event of Default") shall occur and be continuing:
(a) the Company shall default in the payment when due of any
principal of or interest under this Note and such default, in respect of the
payment of interest, shall continue for ten (10) days; or
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(b) any representation, warranty or certification made or
deemed made by the Company in this Note, the Security Agreement or the Purchase
Agreement shall prove to have been false or misleading as of the time made or
furnished in any material respect; or
(c) any default by the Company in the performance of any of
its covenants or agreements in this Note, the Security Agreement or the Purchase
Agreement, and such default shall continue unremedied for a period of 30 days
after notice thereof to the Company by Payee; or
(d) any indebtedness of the Company (i) for borrowed money
in the aggregate in excess of $250,000 or (ii) constituting Senior Debt, shall
become repayable prior to the due date for payment thereof by reason of default
by the Company or shall not be repaid at maturity as extended by any applicable
grace period therefor; or
(e) an uninsured final judgment or judgments aggregating
$250,000 or more shall have been entered by a court of competent jurisdiction
against the Company and such judgment(s) shall remain unstayed or undischarged
for three days or more; or
(f) the Company shall admit in writing its inability to pay
its debts as such debts generally become due; or
(g) the Company shall (i) apply for or consent in writing to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under Title II of the United States Code (as now or hereafter
in effect) (the "Bankruptcy Code"), (iv) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or readjustment of debts, (v) acquiesce in writing to
any petition filed against it in an involuntary case under the Bankruptcy Code,
or (vi) take any corporate action for the purpose of effecting any of the
foregoing; or
(h) a proceeding or case shall be commenced, without the
application or consent of the Company in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of such entity or of all or any
substantial part of its assets, or (iii) similar relief in respect of such
entity, under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of at least 30 days; or an order for relief against any
such entity shall be entered in an involuntary case under the Bankruptcy Code;
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THEREUPON: if the Senior Debt (as defined in the Subordination
Agreement) has been indefeasibly paid in full in cash as provided in the
Subordination Agreement, the maturity thereof has been accelerated or the
outstanding balance of the Senior Debt has come due at maturity or an Event of
Default referred to in clause (d)(ii), (f), (g) or (h) above has occurred, (i)
in the case of an Event of Default (other than an Event of Default referred to
in clause (d)(ii), (f), (g) or (h) above), the Payee, by notice to the Company,
may declare the principal amount then outstanding of, and the accrued interest
on, this Note and all other amounts payable by the Company under this Note to be
forthwith due and payable, whereupon such amount shall be immediately due and
payable without presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Company; (ii) in the case of the
occurrence of an Event of Default referred to in clause (d)(ii), (f), (g) or (h)
above or the Senior Debt coming due at maturity, the principal amount then
outstanding of, and the accrued interest on, this Note shall become
automatically immediately due and payable without presentment, demand, protest
or other formalities of any kind, all of which are hereby expressly waived by
the Company, and in any case Payee may take such action as is permitted to
enforce its rights hereunder; (iii) the Company shall pay all of the expenses of
the Payee incurred for the collection of this Note and for the enforcement of
its rights to obtain payment of this Note, including reasonable attorneys' fees
and legal expenses; and (iv) the Payee may exercise from time to time any rights
and remedies available to it by law, including those available under any
agreement or other instrument relating to the amounts owed under this Note or
any security therefor. No delay on the part of the Payee in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Payee of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy. Notwithstanding
Section 3 above, Payee may apply any funds received from the Company, in such
manner and order of priority and against such payment obligations hereunder as
Payee may determine.
9. Subrogation. Subject to the prior indefeasible payment in
full in cash of the Senior Debt as provided in the Subordination Agreement, and
until this Note is paid in full, the Payee shall be subrogated to the rights of
the Senior Debt including the right to receive distributions applicable to the
Senior Debt to the extent that distributions otherwise payable to the Payee have
been applied to the Senior Debt.
10. Assignment.
(a) Securities Laws. This Note has not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or under any
state securities laws and unless so registered may not be transferred, sold,
pledged, hypothecated or otherwise disposed of unless an exemption from such
registration is available. In the event the Payee desires to transfer this Note,
the Payee must give the Company prior written notice of such proposed transfer
including the name and address of the proposed transferee. Such transfer may be
made only either (i) upon publication by the Securities and Exchange Commission
(the "Commission") of a ruling, interpretation, opinion or "no action letter"
based upon facts presented to said Commission, or (ii) upon receipt by the
Company of an opinion of counsel acceptable to the Company to the
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effect that the proposed transfer will not violate the provisions of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the rules and regulations promulgated under either such act, or to the
effect that this Note has been registered under the Securities Act of 1933, as
amended, and that there is in effect a current prospectus meeting the
requirements of Subsection 10(a) of the Securities Act, which is being or will
be delivered to the purchaser or transferee at or prior to the time of delivery
of this Note to be sold or transferred. Notwithstanding anything else contained
herein, Danskin Investors, LLC (x) may distribute this Note to its members at
any time and (y) may not transfer, sell, pledge, hypothecate or otherwise
dispose of this Note prior to March 31, 1998, except to its members or to The
Oppenhiemer Bond Fund for Growth or any of their respective affiliates.
(b) Transfer. Upon surrender of this Note to the Company with
assignment documentation duly executed, and upon compliance with the foregoing
provisions, the Company shall, without charge, execute and deliver a new Note in
the name of the assignee named in such instrument of assignment, and this Note
shall promptly be canceled. Any assignment, transfer, pledge, hypothecation or
other disposition of this Note attempted contrary to the provisions of this
Note, or any levy of execution, attachment or other process attempted upon the
Note, shall be null and void and without effect.
11. Governing Law. This Note shall be construed in accordance
with, and governed by, the laws of the State of New York as applied to contracts
made and to be performed entirely in the State of New York without regard to
principles of conflicts of law. Each of the parties hereto hereby irrevocably
and unconditionally submits to the exclusive jurisdiction of any court of the
State of New York or any federal court sitting in the State of New York for
purposes of any suit, action or other proceeding arising out of this Note (and
agrees not to commence any action, suit or proceedings relating hereto except in
such courts). Each of the parties hereto agrees that service of any process,
summons, notice or document by U.S. registered mail at its address set forth
herein shall be effective service of process for any action, suit or proceeding
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Note, which is brought by or
against it, in the courts of the State of New York or any federal court sitting
in the State of New York and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.
12. Adjustment of Interest Rate. No provision of this Note
shall require the payment of interest to the extent that receipt of any such
payment by the Company would be contrary to the provisions of law applicable to
the Company limiting the maximum amount of interest that may be charged to or
collected from the Company, and if any sum in excess of such maximum rate of
interest is paid or charged, the excess will be deemed to have been a prepayment
of principal of this Note when paid, without premium or penalty, and all
payments made thereafter will be appropriately applied to interest and principal
to give effect to such
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maximum rate, and after such application any excess shall be immediately
refunded to the Company.
If the maximum rate of interest, if any, now permitted by law
to be charged for this transaction is increased, then for so long as the
increase is in effect, the applicable maximum rate permitted to be charged as
referred to in the paragraph immediately preceding will be deemed to be such
increased rate. If the maximum rate of interest, if any, now permitted by law to
be charged for this transaction should be eliminated so that there would be no
maximum rate, then interest on this Note shall thereafter be paid at the rate
provided in this Note.
13. Waiver. The obligations of the Company under this Note
are absolute and unconditional, and are not subject to any counterclaim,
set-off, deduction or defense that the Company may have against the Payee. Time
is of the essence of this Note. To the fullest extent permitted by applicable
law, the Company, for itself and its legal representatives, successors and
assigns, expressly waives presentment, demand, protest, notice of dishonor,
notice of non-payment, notice of maturity, notice of protest, presentment for
the purpose of accelerating maturity, diligence in collection, and the benefit
of any exemption or insolvency laws.
14. Interpretation. Wherever possible each provision of this
Note shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or remaining provisions of this Note. No delay or failure on the part of Payee
in the exercise of any right or remedy hereunder shall operate as a waiver
thereof, nor as an acquiescence in any default, nor shall any single or partial
exercise by Payee of any right or remedy preclude any other right or remedy.
Payee, at its option, may enforce its rights against any collateral securing
this Note without enforcing its rights against the Company, any guarantor of the
indebtedness evidenced hereby or any other property or indebtedness due or to
become due to the Company. The Company agrees that, without releasing or
impairing the Company's liability hereunder, Payee may at any time release,
surrender, substitute or exchange any collateral securing this Note and may at
any time release any party primarily or secondarily liable for the indebtedness
evidenced by this Note. The rights and remedies herein provided are cumulative
and not exclusive of any rights or remedies provided by law.
DANSKIN, INC.
By:
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Name:
Title:
ATTEST:
By:
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Secretary
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