Exhibit 4.2
Privileged and Confidential
[Conformed Copy]
OPERATING AGREEMENT
BY AND AMONG
DT ACQUISITION INC.,
POLYMER GROUP, INC.
AND
XXXXX & 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 Xxxxx & 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;
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).
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.
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
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
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;
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.
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 Xxxxx Xxxxxx, Xxxxx
X. Xxxx, Xxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx. Xxxxx Xxxxxx and Xxxxx X.
Xxxx shall be deemed nominated by PGI, and Xxxxxx X. Xxxxxx and Xxxxxxx X.
Xxxxxx 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
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
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
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,
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
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
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 Xxxxxx Xxxxxx, Chairman, President and Chief Executive
Officer of GL, and all notices to PGI and DTA shall be made to Xxxxx Xxxxxx,
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.
* * * * *
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/ Xxxxx Xxxxxx
----------------------------------
Name: Xxxxx Xxxxxx
Title: Chairman, President & CEO
DT ACQUISITION INC.
By: /s/ Xxxxx Xxxxxx
----------------------------------
Name: Xxxxx Xxxxxx
Title: Chairman, President & CEO
XXXXX & LORD INCORPORATED
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman, President & CEO
