SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement"), is made and entered into
this 28th day of January, 1994, by and among XXXXXXX X. XXXXXX ("Subordinating
Creditor"); PLUMA, INC., a North Carolina corporation and FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, a national banking association ("Bank");
W IT N E S SE T H:
WHEREAS, Borrower and Bank are parties to that certain Third Amended
and Restated Loan and Security Agreement dated May 25, 1993, as amended by First
Amendment thereto dated August 2, 1993 (the "Loan Agreement"), pursuant to
which, and upon the terms and subject to the conditions contained therein, Bank
has agreed to extend credit to Borrower;
WHEREAS, Borrower, contemporaneously with the execution of this
Agreement, desires to incur indebtedness to the subordinating creditor in the
amount of $3,398,560.88 as evidenced by a promissory note ("Subordinated Note")
dated of even date herewith, a copy of such subordinated
Note being attached hereto as Exhibit A;
WHEREAS, the Borrower desires to secure payment of the Subordinated
Note with the pledge of 270,070 shares of the common stock of Borrower being
acquired by Borrower from Subordinating Creditor, such security being more
particularly described in that certain security agreement of even date herewith
being entered into between Borrower and Subordinating Creditor (the "Security
Agreement");
WHEREAS, Borrower is precluded under Section 8.3 of the Loan Agreement
from incurring the indebtedness evidenced by the Subordinated Note without the
prior written consent of the
Bank;
WHEREAS, Borrower has requested that Bank provide its written consent
to the incurrence of the indebtedness evidenced by the Subordinated Note;
WHEREAS, as a condition precedent to providing its written consent to
the incurrence by Borrower of the debt evidenced by the Subordinated Note, Bank
has required the execution of this Agreement by the Subordinating Creditor and
the Borrower;
NOW, THEREFORE, for and in consideration of the premises and other good
and valuable considerations, the receipt and adequacy of which is hereby
acknowledged, and in order to induce Bank to consent to the incurrence by
Borrower of the indebtedness evidenced by the Subordinated Note, the parties do
hereby agree as follows:
1. Certain Definitions. An addition to the terms defined in the
recitals hereto, the following terms shall have the following meanings for the
purposes of this Agreement:
A. "Default" shall have the meaning ascribed to such term in the Loan
Agreement.
B. "Event of Default" shall have the meaning ascribed to such term in
the Loan Agreement.
C. "Senior Debt" shall mean all "obligations" (as such term is defined
in the Loan Agreement) now or hereafter owed to Bank under the Loan
Agreement or otherwise without any dollar limitation, and any
replacements, renewals, refundings or refinancings thereof by Bank or
by any other lender.
D. "Subordinated Indebtedness" shall mean all indebtedness now or
hereafter owed to the subordinating Creditor under the Subordinated
Note and any replacements, renewals, refundings or refinancings
thereof.
E. "Permitted Security Interest" shall mean the security interest of
Subordinating Creditor in the Stock as such term is defined in the
Security Agreement.
2. Subordination. Subordinating Creditor covenants and agrees that the
payment of the subordinated Indebtedness is expressly subordinated to the prior
payment in full of all Senior Debt. subordinating Creditor further agrees that
any liens or security interests other than the Permitted Security interest on
Borrower's assets now or hereafter securing the Subordinated Indebtedness are
subordinated in all respects to liens and security interests on Borrower's
assets now or hereafter securing the Senior Debt notwithstanding the relative
priorities that might otherwise be determined by applicable law.
3. Prohibited Payments an Actions. Except as set forth in Section 4
below, Subordinating Creditor will not (a) ask, demand, xxx for, take or receive
from or on behalf of Borrower, by setoff or in any manner, the whole or any part
of any monies which may now or hereafter be owing to Subordinating Creditor on
the subordinated Indebtedness, (b) initiate, commence, participate or join with
any creditor other than Bank in commencing any bankruptcy, arrangement,
reorganization or, insolvency proceeding, or any other suit, action or
proceeding against Borrower to enforce payment of all or any portion of the
Subordinated Indebtedness, or (c) ask, demand, take or receive any security
other than the Permitted Security Interest for any of the Subordinated
Indebtedness, unless and until all of the Senior Debt shall have been fully paid
and satisfied and the Loan Agreement is terminated in writing.
4. Permitted Payments. Notwithstanding the provisions of Section 3,
Borrower may pay the scheduled payments of interest and principal under the
Subordinated Note if and so long as: (a) no Default or event of Default shall
have occurred and be continuing; and (b) after giving effect to such proposed
payment of Subordinated Indebtedness, no
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Default or Event of Default shall occur. However, no part of the principal of,
or the interest on, the Subordinated Note may be prepaid by the Borrower except
by transfer of the Stock pursuant to the Security Agreement under any
circumstances without the prior written consent of Bank, which consent may be
given or withheld in Bank's sole discretion.
5. Modifications of the Subordinated Indebtedness. Subordinating
Creditor agrees that without Bank's prior written consent it will not (a) extend
additional loans, extensions of credit or other accommodations to or for the
account of Borrower; (b) purchase or extend credit upon any instrument in
respect to which Borrower may be liable in any capacity; (c) amend or modify any
terms of the Subordinated Note or the Security Agreement.
6. Priority on Distribution. In the event of any distribution, division
or application, partial or complete, voluntary or involuntary, by operation of
law or otherwise, of all or any part of the assets of Borrower or the proceeds
thereof to the creditors of Borrower or of any readjustment of the obligations
and indebtedness of Borrower, whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding involving the readjustment of all or any of Borrower's
indebtedness, or the application of the assets of Borrower to the payment or
liquidation thereof 1 or the dissolution or winding up of Borrower's business,
or the sale of all or substantially all of Borrower's assets, then, and in such
event, Bank shall first be entitled to receive payment in full of all of the
senior Debt prior to the payment of all or any part of the Subordinated
Indebtedness, and all payments or distributions of any assets of Borrower of any
kind or character, whether in cash, property or securities, to which
Subordinating creditor would be entitled, except for the provisions of this
Agreement, including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of Borrower being
subordinated to the payment of the subordinated Indebtedness, shall be paid to
Bank for application on the Senior Debt, to the extent necessary to make payment
in full of all Senior Debt remaining unpaid, after giving effect to any
concurrent payment or distribution to or for Bank.
7. Turnover or Prohibited Transfers. If any payment, distribution or
security (other than the stock) or the proceeds thereof are received by
Subordinating Creditor on account of or with respect to the payment of the
Subordinated Indebtedness other than is permitted in Section 4 hereof,
subordinating Creditor shall receive and hold the same in trust for the benefit
of Bank, and shall forthwith pay over and deliver the same to Bank in precisely
the same form received (except for the endorsement or assignment of
Subordinating Creditor when necessary) for application on the Senior Debt, to
the extent necessary to make payment in full of all of the Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution to or for
Bank.
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8. Enforcement of Agreement. If subordinating Creditor in violation of
this Agreement shall initiate, commence, participate or join with any creditor
other than Bank in commencing any bankruptcy, arrangement, reorganization or
insolvency proceeding, or any other suit, action or proceeding against Borrower
to enforce payment of all or any portion of the Subordinated Indebtedness or
shall attempt to enforce, foreclose or take any other action to realize upon any
security for the Subordinated Indebtedness other than the Stock, thereof and in
any such event, Borrower or Bank may interpose as a defense or plea the making
of this Agreement and Bank may intervene and interpose such defense in its name
or in the name of Borrower, and Borrower or Bank may by virtue of this Agreement
restrain the enforcement thereof in the name of Borrower or Bank.
9. Grant of Authority. If any proceeding referred to in Section 6 above
is commenced by or against Borrower, Bank is hereby irrevocably authorized and
empowered (in its own name or the name of the Subordinating Creditor or
otherwise), but shall have no obligation, to demand, xxx for, collect and
receive every payment or distribution referred to in Section 6 above and give
acquittance therefor and file claims and proof or claim in any such proceeding
in respect of the Subordinated Indebtedness and take such other action
(including, without limitation, voting such claim or proof of claim or enforcing
any security interest or lien securing payment of the Subordinated Indebtedness)
as it may deem necessary or advisable for. the exercise or enforcement of any.
other rights or interests or Bank hereunder. subordinating Creditor shall duly
and promptly take such action as Bank may request (a) to collect the
Subordinated Indebtedness for the account of Bank and to file appropriate claims
or proof of claims in respect of the Subordinated Indebtedness, (b) to execute
and deliver to Bank such powers of attorney, assignments or other instruments or
documents, as Bank may request, in order to enable it to enforce any and all
claims upon or with respect to any and all of the Subordinated Indebtedness, and
(c) to collect and receive any and all payments or distributions which may be
payable or deliverable upon or with respect to the Subordinated Indebtedness.
10. Subordinated Indebtedness Owed only to Subordinating Creditor.
Subordinating Creditor warrants and represents to Bank that subordinating
Creditor has not previously assigned any interest in the Subordinated
indebtedness to any party, that no party owns an interest in the Subordinated
Indebtedness other than subordinating creditor (whether as joint holder of the
Subordinated Indebtedness, participants or otherwise), that the entire
Subordinated Indebtedness is owing to Subordinating Creditor, and Subordinating
Creditor covenants that the Subordinating Indebtedness shall continue to be
owing only to Subordinating Creditor, unless assigned or disposed of in
accordance with the terms of this Agreement as provided in Section 14 hereof.
11. Instrument Legend. Each instrument evidencing any of the
Subordinated Indebtedness, and any renewals or replacements thereof, will be
inscribed with a legend conspicuously indicating that the
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payment, priority and enforcement thereof is subordinated to the payment in full
of Senior Debt and the claims of Bank pursuant to the terms of this Agreement
and copies thereof will be delivered to Bank promptly thereafter.
12. Subrogation. After all of the Senior Debt has been paid in full and
until the Subordinated Indebtedness has been paid in full, Subordinating
Creditor shall be subrogated to the rights of Bank to receive payments and
distributions of assets of Borrower applicable to the Senior Debt, to the extent
that payments or distributions otherwise payable to Subordinating creditor have
been applied to the payment of the Senior Debt in accordance with the provisions
of this Agreement. As between Borrower and Subordinating Creditor, a payment or
distribution applied to the payment of the senior Debt in accordance with the
provisions of this Agreement which otherwise would have been made to
Subordinating Creditor shall not be deemed a payment by Borrower on the
Subordinated Indebtedness, it being understood that the subordination provisions
of this Agreement are intended solely for the purpose of defining the relative
rights of Subordinating Creditor, on the one hand, and Bank, on the other hand.
13. Obligation of Borrower Unconditional. Nothing contained in this
Agreement is intended to nor shall impair, as between Borrower, its creditors
other than Bank and subordinating Creditor, the obligations of Borrower, which
are absolute and unconditional, to pay to Subordinating Creditor the
Subordinated Indebtedness as and when the same shall become due and payable in
accordance with its terms, except as such obligations are modified by the rights
confirmed hereunder in favor of Bank, or affect the relative rights of
Subordinating Creditor and the creditors of Borrower other than Bank.
14. Assignment of Subordinated Indebtedness. Subordinating Creditor
agrees that until the Senior Debt has been paid in full and satisfied and the
Loan Agreement has been terminated in writing, Subordinating Creditor will not
assign, transfer or otherwise dispose of the Subordinated Indebtedness or any
portion thereof unless such assignment, transfer or other disposition is made
expressly subject to this Agreement and the transferee expressly acknowledges in
a writing delivered to Bank and in form acceptable to it that the Subordinated
Indebtedness is being sold subject to the terms of this Agreement.
15. Subordination Non-Impaired. All rights and interests of Bank, and
all agreements and obligations of subordinating Creditor hereunder, shall remain
in full force and effect irrespective of: (a) any change in the time, manner, or
place of payment of, or in any other term of, all or any of the Senior Debt; (b)
any change, release or nonperfection of any collateral, or any release or
amendment or waiver of or consent to the departure from, any guaranty for all or
any of the senior Debt; or (c) any other circumstances which might otherwise
constitute a defense available to, or a discharge of, Borrower in respect of the
Senior Debt or Subordinating Creditor in respect or its obligations under this
Agreement. The provisions of this Agreement
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shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of any of the Senior Debt is rescinded or must otherwise be
returned by Bank upon the insolvency, bankruptcy or reorganization of Borrower
or otherwise, all as though such payment had not been made.
16. Waivers of Subordinating Creditor. All of the Senior Debt shall be
deemed to have been made or incurred in reliance upon this Agreement, and
Subordinating Creditor expressly waives all notice of acceptance by Bank of the
subordination and other provisions of this Agreement, notice of the incurring of
any Senior Debt from time to time under the Loan Agreement or otherwise and all
other notices not specifically required pursuant to the terms of this Agreement
or by law, and reliance by Bank upon the subordination and other agreements as
herein provided. Subordinating Creditor agrees that Bank shall be entitled to
manage and supervise its loans to borrower in accordance with its usual
practices, modified from time to time as it deems appropriate under the
circumstances. Subordinating Creditor agrees that Bank has made no warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Loan Agreement or the collectability of
the Senior Debt; and that Bank shall have no responsibility to Subordinating
Creditor to advise it of information known to Bank regarding the financial
condition of Borrower or of any circumstances bearing upon the risk of
non-payment of the Senior Debt or any other indebtedness of Borrower.
17. Waivers of Parties. No waiver shall be deemed to be made by any
party of any of its rights hereunder, unless the same shall be in writing signed
on behalf of such party, and each waiver, if any, shall be a waiver only with
respect to the specific instance involved and shall in no way impair the rights
of such party or the obligations of the other parties in any other respect at
any other time.
18. Agreements of Borrower. Borrower agrees that it will not pay any or
the Subordinated Indebtedness except as this Agreement provides, and will be
bound by all of the provisions of this Agreement, including, without limitation,
the subrogation provisions of Section 12 hereof. In the event of a breach by
Borrower of any of the provisions herein, all of the Senior Debt shall, without
presentment, demand, protest or notice of any kind except as otherwise required
by the Loan Agreement, become immediately due and payable unless Bank shall
otherwise elect in writing.
19. Notices. Any notice required to be given under this Agreement shall
be sent by certified mail, postage prepaid, return receipt requested, overnight
air courier or delivered by hand, and shall be deemed to have been received upon
hand delivery, one (1) day after sending if sent by overnight air courier and
three (3) days after mailing if sent by certified mail. Notices shall be
addressed as follows:
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(a) If to Borrower: Pluma, Inc.
000 Xxxx Xxxxxxxxxx Xxxx
Xxxx, Xxxxx Xxxxxxxx 00000
(b) If to subordinating
Creditor: Xxxxxxx X. Xxxxxx
000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx0xx, XX 00000
(c) If to Bank: First Union National Bank
of North Carolina
000 Xxxxx Xxxxxx Xxxxxx
X.X. Xxx 00000
Xxxxxxxxxx, XX 00000
Any party may change the address to which notices are to be given to it
hereunder by giving notice of such change of address in conformity with the
provisions hereof.
20. Consent of Bank. In reliance on the terms and conditions of this
Agreement, Bank hereby consents to the incurrence of the Subordinated
Indebtedness by Borrower and to the execution by Borrower of the Subordinated
Note and the Security Agreement Borrower agrees that for purposes of the Loan
Agreement the Subordinated Indebtedness is excluded from Subordinated Debt (as
defined in the Loan Agreement).
21. Governing Law. This Agreement shall be interpreted, and the rights
and liabilities of the parties' hereto determined, in accordance with the laws
and decisions of the State of North Carolina.
22. Parties. This Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns. The term "Borrower" as used herein
shall also refer to the successors and assigns of Borrower, including, without
limitation, a receiver, trustee, custodian or debtor in possession.
23. Term of Agreement. This Agreement shall continue in full force and
effect and shall be irrevocable by any party hereto until the earliest to occur
of the following: (a) the parties hereto mutually agree in writing to terminate
this Agreement, or (b) the Senior Debt is fully paid and satisfied and the Loan
Agreement is terminated in writing.
24. Section Titles. The section titles contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto.
25. Counterparts. In order to expedite the execution of this Agreement,
this Agreement may be executed in any number of
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counterparts, all of which, taken together, shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties under seal as of the day and year first above written.
(Signature of Xxxxxxx X. Xxxxxx appears here)(SEAL)
Xxxxxxx X. Xxxxxx
PLUMA, INC.
By: (Signature appears here)
____________ President
ATTEST:
(Signature appears here)
______________ Secretary
[CORPORATE SEAL]
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
ATTEST:
By: (Signature appears here)
Vice President
(Signature appears here)
Assistant Secretary
[CORPORATE SEAL]
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EXHIBIT A
TO
SUBORDINATION AGREEMENT
THE PAYMENT, PRIORITY AND ENFORCEMENT OF THIS NOTE ARE SUBORDINATE TO THE
PAYMENT IN FULL AND RIGHTS OF FIRST UNION NATIONAL BANK OF NORTH CAROLINA AND/OR
OTHER LENDERS OF THE MAKER HEREOF AS MORE SPECIFICALLY SET FORTH HEREIN AND THAT
CERTAIN SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH.
PROMISSORY NOTE
January 28, 1994
$3,398,560.88 Winston-Salem, N.C.
FOR VALUE RECEIVED, the undersigned promises to pay to Xxxxxxx X.
Xxxxxx, or order, the principal amount of Three Million Three Hundred
Ninety-eight Thousand Five Hundred Sixty and 88/100 Dollars ($3,398,560.88) with
interest at the rate of five per cent (5%) pr annum. The principal unpaid
balance of this Note, together with all interest which accrues hereon from time
to time shall be payable in lawful money of the United States to Xxxxxxx X.
Xxxxxx at 000 Xxxxxxxxxx Xxxxx, Xxxxxxxxxxxx, XX 00000, or such other places as
the Noteholder may designate, said payment to be made as follows:
Interest on the unpaid balance hereof shall be paid in quarterly
installments beginning on May 1, 1994, with such payments continuing on
each August 1, November 1, February 1, and May thereafter until the
principal f this Note is paid in full.
The principal amount of this Note shall be paid in four consecutive
equal annual installments of Eight Hundred Forty-nine Thousand Six
Hundred Forty and 22/100 Dollars ($849,640.22), beginning on January
31, 1995, and continuing on each January 31 thereafter until the
principal amount of this Note is paid in full.
In the event of default in payment of the principal balance or any
interest payment due on this Note when it becomes due, or default under the
terms of any instrument securing this Note, the unpaid balance and any past due
interest on this Note will bear interest at the rate of nine percent (9%) per
annum until paid, and the holder may, without notice, declare the remainder of
the debt evidenced hereby at once due and payable.
All parties to this Note, whether principal, surety, guarantor or
endorsers, hereby waive presentment for payment, demand, protest and notice of
dishonor, and all defenses on the ground of extension of time for the payment
hereof, which may be given by the holder of the Note to them, or to anyone who
has assumed the payment of this Note.
Upon default the holder of this Note may employ an attorney to enforce
the holder's rights and remedies and the maker, principal, surety, guarantor and
endorsers of this Note hereby agree to pay to the holder reasonable attorney's
fees, plus all other reasonable expenses incurred by the holder in exercising
any of the holder's rights and remedies upon default under this Note or the
Security Agreement.
Further, this Note is secured by the pledge of common shares of Pluma,
Inc. pursuant to a Security Agreement of event date herewith. The provisions of
the Security Agreement are incorporated herein by reference.
The payment, priority and enforcement of this Note are subject and
subordinate to
(i) the payment in full of, and the rights of First Union National Bank
of North Carolina ("First Union") as more fully set forth in that
certain Subordination Agreement of even date herewith by and among the
Maker and Payee hereof and First Union (the "Subordination Agreement");
and
(ii) the payment in full of any indebtedness of the maker to any lender
who may refinance any portion of the indebtedness of the maker to First
Union, and the rights of any such lender to receive payment or exercise
any rights or remedies set forth in any loan documents evidencing such
loan(s)
all as the same may be deferred, renewed, modified, or extended (the "Senior
Indebtedness").
The undersigned expressly agree to remain and continue bound for the
payment of the principal amount provided for by the terms of this Note
notwithstanding any extension or extensions of tie of, or for the payment of
such principal, or any change or changes in the amount or amounts agreed to be
paid under and by virtue of the obligation to pay the amount or amounts agreed
to be paid under and by virtue of the obligation to pay provided for in this
Note, or any change or changes by way of release or surrender of any collateral
held as security for this Note and waive all and every kind of notice of such
extension or extensions, change or changes and agree that the same may be made
without the joinder of the undersigned.
This note may be prepaid in whole or in part, at any time prior to the
maturity date hereof, without penalty.
The rights and remedies of the Holder as provided in this Note and the
Security Agreement shall be cumulative and may be pursued singularly,
successively, or together against the collateral described in the Security
Agreement, in the sole discretion of the Holder. The failure to exercise any
such right or remedy shall not be a waiver or release of such rights or remedies
or the right to exercise any of them at another time.
2
IN WITNESS WHEREOF, the undersigned have caused this Purchase Money
Promissory Note to be executed as of the day and year first above written.
PLUMA, INC.
By: ______________________________
___________ President
Attest: __________________________
___________ Secretary
[CORPORATE SEAL]
