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 22, 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 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
$603,511.80 aggregate principal amount of this Note
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(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 will be converted into Common Stock, upon the Company
authorizing a sufficient amount of capital stock and the Registration Statement
having been declared effective by the Commission, 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 22, 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
(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
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(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;
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),
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(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 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
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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 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
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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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