SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") dated as of October 3,
2003 is made and entered into by and among Congress Financial Corporation
(Southern), a Georgia corporation ("Senior Agent"), as collateral agent for the
Subsidiary Lenders (defined below) and the Parent Lenders (defined below), Xxxxx
X. Xxxxx, Xxxx X. Xxxxx and Xxxxxxx X. Xxxxxxxx, each individual residents of
the State of North Carolina (each collectively or individually hereinafter
referred to as a "Junior Creditor" or "Junior Creditors"), MJS Acquisition
Company, a North Carolina corporation ("Borrower") and Delta Apparel, Inc., a
Georgia corporation ("Parent").
W I T N E S S E T H:
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WHEREAS, Parent, Borrower, X.X. Xxxxx Co., a North Carolina
corporation, and Junior Creditors are among the parties to that certain Amended
and Restated Stock Purchase Agreement, dated as of October 3, 2003 (the "Stock
Purchase Agreement"), pursuant to which (a) Borrower delivered, as partial
consideration for the purchase of the stock of X.X. Xxxxx Co., a subordinated
promissory note (the "Junior Note"), dated as of the date hereof, payable to the
order of Junior Creditors in the original principal amount of $8,000,000 and (b)
Parent delivered a guaranty in favor of Junior Creditors guaranteeing the
obligations of Borrower under the Stock Purchase Agreement, the Junior Note and
Borrower's closing certificate under the Stock Purchase Agreement (the "Junior
Guaranty") (all obligations, liabilities and indebtedness of every kind, nature
and description owing by Borrower, Parent or any of their respective affiliates
or subsidiaries to Junior Creditors, or any of them, under the Stock Purchase
Agreement (including the closing certificate and all other certificates
delivered in connection therewith), the Junior Note or the Junior Guaranty,
whether now existing or hereafter arising, including principal, interest, earn
out amounts, charges, fees, premiums, indemnities and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise (and
including, without limitation, any principal, interest, fees, costs, expenses
and other amounts, whether or not such amounts are allowable in whole or in
part, in any Insolvency Proceeding) are hereinafter collectively referred to as
the "Junior Creditor Debt"; provided, however, "Junior Creditor Debt" shall not
include (x) any obligations of Borrower to any Junior Creditor arising pursuant
to those certain Employment Agreements listed on Schedule A hereto, and (y) that
certain DC Lease, as defined in the Stock Purchase Agreement);
WHEREAS, pursuant to a certain (a) Loan and Security Agreement (as
supplemented, amended or modified from time to time, the "Subsidiary Loan
Agreement") of even date among Borrower, Senior Agent and the parties thereto
from time to time as lenders (the "Subsidiary Lenders"), (b) Amended and
Restated Loan and Security Agreement (as supplemented, amended or modified from
time to time, the "Parent Loan Agreement") of even date among Parent, Senior
Agent and the parties thereto from time to time as lenders (the "Parent Lenders"
and collectively or individually with Subsidiary Lenders and Senior Agent,
"Senior Creditors"), (c) Guarantee of even date herewith by Borrower and its
subsidiary in favor of Senior Agent (as supplemented, amended or modified from
time to time, the "Subsidiary Guarantee") and (d) Guarantee of even date
herewith by Parent in favor of Senior Agent (as supplemented, amended or
modified from time to time, the "Parent Guarantee")( the Subsidiary Loan
Agreement, the Parent Loan Agreement, the Subsidiary Guarantee and the Parent
Guarantee and all other agreements and documents related thereto (including the
Financing Agreements (as defined in the Parent Loan Agreement and the Subsidiary
Loan Agreement, respectively)) may be collectively or individually hereinafter
referred to as the "Senior Creditor Agreements"), Borrower and Parent are each
indebted to, and have guaranteed indebtedness in favor of, Senior Creditors (all
obligations, liabilities and indebtedness of every kind, nature and description
owing by Borrower, Parent or any of their respective affiliates or subsidiaries
to Senior Creditors, or any of them, and/or any affiliates of Senior Creditors,
under any of the Senior Creditor Agreements, whether now existing or hereafter
arising, including principal, interest, charges, fees, premiums, indemnities and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, (and including, without limitation, any principal, interest, fees,
costs, expenses and other amounts, whether or not such amounts are allowable in
whole or in part, in any Insolvency Proceeding) are hereinafter collectively
referred to as the "Senior Debt"; provided that "Senior Debt" shall be, for the
purposes of this Agreement and the subordination of the Junior Debt, subject to
the limitation set forth in Section 12 of this Agreement);
WHEREAS, as security for the payment and performance of all liabilities
and obligations due under the Senior Debt, each of Borrower and Parent, pursuant
to certain Senior Creditor Agreements, has granted to Senior Agent a first
priority lien (the "Senior Lien") on and unconditional security interest in and
to all of its assets (the "Collateral");
WHEREAS, as an inducement and a condition precedent to, and part of the
consideration for, Senior Creditors' extension of credit to Borrower and Parent,
the initial proceeds of which shall be used, in part, to consummate the
transactions under the Stock Purchase Agreement and thereby directly benefit the
Junior Creditors, each Junior Creditor has agreed, among other things, subject
to the terms and provisions of this Agreement, (i) to subordinate the Junior
Creditor Debt to the Senior Debt, (ii) to subordinate any lien which such Junior
Creditor has or may have in the future on the assets or property of Borrower,
Parent or any affiliate or subsidiary of Borrower or Parent ("Junior Creditor
Lien") to the Senior Lien and (iii) except as otherwise provided herein, to
forebear from foreclosing upon any part of the Collateral or any other security
with respect to the Junior Creditor Debt, if any, or otherwise exercising such
Junior Creditor's remedy or taking any action against Borrower or Parent upon
any of its obligations to such Junior Creditor.
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NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and for other good and valuable consideration, it is
hereby agreed that each capitalized term used herein and not defined herein
shall have the meaning ascribed thereto in the Subsidiary Loan Agreement, and as
follows:
1. Priority of Liens. Notwithstanding anything to the contrary including,
without limitation, the date, time, manner or order of perfection or attachment
of the security interests and liens on the Collateral granted by Borrower or
Parent to any Senior Creditor or any Junior Creditor, and notwithstanding the
usual application of the priority provisions of the Uniform Commercial Code as
in effect in any jurisdiction or any other applicable law or judicial decision
of any jurisdiction, or whether a Junior Creditor holds possession of all or any
part of the Collateral, or if any Senior Creditor or any Junior Creditor is
perfected without filing or possession in any part of the Collateral, the Senior
Liens, or any of them, shall have priority over the Junior Creditor Liens, or
any of them, and such Junior Creditor Liens are and shall be, in all respects,
subject and subordinate to the Senior Liens therein to the full extent of the
Senior Debt, and to the extent that the Senior Liens are perfected under
applicable law. The lien priorities provided in this Section 1 shall not be
altered or otherwise affected by any amendment, modification, supplement,
extension, renewal, restatement or refinancing of either the Senior Debt or the
Junior Creditor Debt, nor by any action or inaction which any Senior Creditor or
any Junior Creditor may take or fail to take in respect of any of the
Collateral.
2. Subordination of the Junior Creditor Debt.
(a) As of the date hereof and until the Termination Date (as defined
below), each Junior Creditor subordinates any and all claims now or hereafter
owing to it by Borrower or Parent under the Junior Creditor Debt to any and all
claims of Senior Creditors under the Senior Debt (including, without limitation,
interest or other payments on the Senior Debt paid or accrued after the
commencement of an Insolvency Proceeding) and payment of or for adequate
protection pursuant to any Insolvency Proceeding, and, except as set forth in
paragraph (b) below, agrees that prior to the Termination Date no payment may be
made on the Junior Creditor Debt, whether of principal or interest or other
indebtedness. "Insolvency Proceeding" shall mean any action or proceeding by or
against Borrower, Parent or any of their respective Affiliates seeking any
reorganization, arrangement, composition, readjustment, liquidation or other
similar relief under Chapter 11 of Title 11 of the United States Code (11 U.S.C.
ss. 101 et seq.) (the "Bankruptcy Code") or any present or future statute, law
or regulation relative to Borrower, Parent or any of their respective Affiliates
or their respective properties, or any proceedings for liquidation, dissolution
or other winding up of Borrower, Parent or any of their respective Affiliates,
or the appointment of any trustee, receiver or liquidator for Borrower, Parent
or any of their respective Affiliates or any part of any of its properties, or
any assignment for the benefit of creditors or any marshaling of assets of
Borrower, Parent or any of their respective Affiliates.
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(b) Except as set forth below in this paragraph (b), each Junior Creditor
agrees not to accept any payment of the Junior Creditor Debt nor make any
transfer to third parties not party to this Agreement or take any other action
designed to secure directly or indirectly from Borrower or Parent or any other
Person any payment on account of the Junior Creditor Debt, without the express,
prior written consent of Senior Agent, and, except for those payments permitted
to be received by Junior Creditors as set forth below in this paragraph (b),
each Junior Creditor agrees to pay over to Senior Agent any funds that may be
received by such Junior Creditor from Borrower or Parent as a payment on account
of the Junior Creditor Debt at any time prior to the Termination Date. Each
Junior Creditor further agrees not to sell, assign, transfer or endorse any
Junior Creditor Debt or any Lien therefor to anyone except subject to the terms
and conditions of this Agreement. Notwithstanding anything contained herein to
the contrary, so long as: (A) after giving effect to each such payment, no event
of default exists and is continuing under the Senior Creditor Agreements; and
(B) Borrower has delivered to Senior Agent a certificate of its chief financial
officer evidencing, to the satisfaction of Senior Agent (which shall include
with respect to any payment permitted by clauses (w) or (x) below, the Annual
Financial Statements (as defined in the Subsidiary Loan Agreement) with respect
to the prior fiscal year), that (i) Borrower had Excess Availability for each of
the immediately preceding ninety (90) consecutive days prior to the date of such
payment of not less than $4,000,000; (ii) after giving effect to any such
payment, Borrower has (1) Excess Availability of not less than $4,000,000 and
(2) a Fixed Charge Coverage Ratio for the twelve-month period ending as of the
last day of the immediately preceding fiscal month of not less than 1.5 to 1.0;
and (iii) Borrower's Net Income for the twelve-month period ending as of the
last day of the immediately preceding fiscal month shall not be less than
$2,000,000, Borrower may pay and Junior Creditors may receive (w) annual
payments with respect to EBITDA Earn Out Amounts required under and as defined
in the Stock Purchase Agreement in an aggregate amount not to exceed $2,000,000
in any fiscal year, (x) annual payments with respect to Return Rate Earnout
Amounts required under and as defined in the Stock Purchase Agreement in an
aggregate amount not to exceed $2,000,000 in any fiscal year, (y) regularly
scheduled quarterly payments of principal under the Junior Note in an amount not
to exceed $400,000 per quarter together with scheduled quarterly payments of
interest thereon at a per annum rate not exceeding 8%, and (z) payments of
principal and/or interest due under the Junior Note in a previous quarter to the
extent payment thereof was not made due to the failure to satisfy the
requirements of this Section 2(b) at the time such payments were due.
(c) Each Junior Creditor agrees that the priority of the Senior Debt set
forth above shall continue during any Insolvency Proceeding by or against
Borrower or Parent. In the event of any payment, distribution, division or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the property, assets or business of Borrower
or Parent, or the proceeds thereof, or any securities of Borrower or Parent, to
Junior Creditor, by reason of any liquidation, dissolution or other winding up
of Borrower, Parent or their respective businesses or by reason of any sale or
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Insolvency Proceeding, then any such payment or distribution of any kind or
character, whether in cash, property or securities, which, but for the
subordination provisions of this Section 2, would otherwise be payable or
deliverable upon or in respect of the Junior Creditor Debt, shall instead be
paid over or delivered directly to Senior Agent, for application to the payment
of the Senior Debt, to the extent necessary to make payment of the Senior Debt
remaining unpaid after giving effect to any concurrent payment or distribution
to any Senior Creditors, and Junior Creditors shall not receive any such payment
or distribution or any benefit therefrom to such extent until after the date
(the "Termination Date") of (i) the indefeasible payment in full in cash of all
Senior Debt, and (ii) the termination of the Senior Creditor Agreements.
(d) Senior Agent and the other Senior Creditors shall have the exclusive
right to manage, perform and enforce the terms of the Senior Creditor Agreements
with respect to the Collateral, to exercise and enforce all privileges and
rights thereunder according to its discretion and the exercise of its business
judgment, including, without limitation, the exclusive right to take or retake
control or possession of the Collateral and to hold, prepare for sale, process,
sell, lease, dispose of, or liquidate the Collateral, and the exclusive right to
control all aspects of liquidation of the Collateral and disposition of the
proceeds thereof, including all proceedings pertaining thereto under any
Insolvency Proceeding and the approval of any plan of reorganization of Borrower
or Parent. Junior Creditors shall have no right to participate in any
negotiations or proceedings involving any condemnation of the Collateral or any
part thereof or involving any insurance that may be available for loss of or
damage to the Collateral or any part thereof, and each Junior Creditor hereby
appoints Senior Agent as its attorney-in-fact to settle or compromise any claim
for proceeds of insurance or condemnation with respect to the Collateral. In
connection with any enforcement of the Senior Lien against the Collateral,
Senior Agent shall use its reasonable efforts to give notice to Junior Creditors
prior to Senior Agent's foreclosure on or liquidation of the Collateral.
3. Negative Covenants. For so long as this Agreement is in effect, and
except as expressly permitted hereby, (a) Borrower and Parent shall not directly
or indirectly, make any payment (other than a payment permitted by Section 2(b)
hereof) on account of or grant a security interest in, mortgage, pledge, assign
or transfer any properties to secure (other than the Junior Creditor Liens) or
satisfy all or any part of the Junior Creditor Debt; (b) no Junior Creditor
shall (i) demand, collect or accept from Borrower, Parent or any other Person
any payment (other than a payment permitted by Section 2(b) hereof) or security
(other than the Junior Creditor Liens) on account of the Junior Creditor Debt or
any part thereof, or accelerate the maturity of the Junior Creditor Debt, (ii)
take any action or exercise any remedy against Borrower or Parent to enforce the
Junior Creditor Debt (other than actions necessary to preserve the Junior
Creditor Debt in an Insolvency Proceeding and not inconsistent with the
provisions of this Agreement), (iii) take any action or exercise any remedy
against any guarantor of or pledgor securing the Senior Debt in order to collect
any of the Junior Creditor Debt, or (iv) take any action or exercise any remedy
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against the Collateral as a result of any breach or default under the Junior
Creditor Debt; (c) no Junior Creditor shall exchange or set off any part of the
Junior Creditor Debt or otherwise exercise any set off rights against any assets
of Borrower or Parent now or hereafter in its possession; (d) no Junior Creditor
shall hereafter give any subordination in respect of the Junior Creditor Debt or
transfer or assign any of the Junior Creditor Debt or any Lien therefor to any
Person other than Senior Creditors unless the transferee or assignee thereof
first agrees in writing with Senior Agent to be bound by the terms of this
Agreement; (e) Borrower and Parent shall not hereafter issue any instrument,
security or other writing evidencing any part of the Junior Creditor Debt (other
than the Junior Note, the Stock Purchase Agreement and the Junior Guaranty and
the documents securing such obligations as of the date hereof, provided true and
correct copies of such documents have been delivered to Senior Agent), and
Junior Creditors will not receive any such writing, except upon the prior
written approval of Senior Agent; (f) Borrower, Parent and Junior Creditors
shall not amend, alter or modify any provision of the agreements evidencing the
Junior Creditor Debt, without the prior written consent of Senior Agent except
as may be permitted in the Parent Loan Agreement or the Subsidiary Loan
Agreement, as applicable; (g) no Junior Creditor shall commence or join with any
other creditors of Borrower or Parent in commencing any bankruptcy,
reorganization, receivership or insolvency proceeding against Borrower or
Parent; and (h) neither Borrower nor Parent nor any Junior Creditor shall
otherwise take or permit any action prejudicial to or inconsistent with the
priority position of the Senior Creditors over Junior Creditors that is created
by this Agreement.
4. Duration and Termination. This Agreement shall constitute a continuing
agreement of subordination, and shall remain in full force and effect until the
Termination Date. This Agreement shall be applicable both before and after the
filing of any petition by or against Borrower or Parent under the United States
Bankruptcy Code and all converted or succeeding cases in respect thereof, and
all references herein to Borrower or Parent shall be deemed to apply to a
trustee for Borrower and Borrower as debtor-in-possession or Parent and Parent
as debtor-in-possession, as applicable. The relative rights of the Senior
Creditors and the Junior Creditors to repayment of the Senior Debt and the
Junior Creditor Debt, respectively, and in or to any distributions from or in
respect of Borrower, Parent or any Collateral or proceeds of Collateral, shall
continue after the filing thereof on the same basis as prior to the date of the
petition, subject to any court order approving the financing of, or use of cash
collateral by, Borrower as debtor-in-possession or Parent as
debtor-in-possession.
5. Warranties and Representations.
(a) Each Junior Creditor hereby represents and warrants that: (i) it has
not relied nor will it rely on any representation or information of any nature
made by or received from any Senior Creditor relative to Borrower or Parent in
deciding to execute this Agreement; (ii) such Junior Creditor has not heretofore
assigned or transferred any of the Junior Creditor Debt, any interest therein or
any Collateral or security pertaining thereto; (iii) such Junior Creditor has
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not heretofore given any subordination in respect to the Junior Creditor Debt;
(iv) it has the power and authority to enter into this Agreement, and to do all
acts and things as are required or contemplated hereunder to be done, observed
and performed by such Junior Creditor; and (v) this Agreement has been validly
executed and delivered, and constitutes the legal, valid and binding obligation
of such Junior Creditor, enforceable against such Junior Creditor in accordance
with its terms. Each Junior Creditor also represents and warrants to Senior
Agent, on behalf of the Senior Creditors, that true and complete copies of the
documents evidencing the Junior Creditor Debt have been or concurrently herewith
are being furnished to Senior Agent, and that no part of the Junior Creditor
Debt is evidenced by any other instrument, security or other writing which has
not been or is not concurrently herewith being furnished to Senior Agent.
(b) Senior Agent hereby warrants and represents that (i) it has the
power and authority to enter into this Agreement, and to do all acts and things
as are required or contemplated hereunder to be done, observed and performed by
it; and (ii) this Agreement has been validly executed and delivered, and
constitutes the legal, valid and binding obligation of Senior Agent, enforceable
against it in accordance with its terms. Senior Agent also represents and
warrants to the Junior Creditors that true and complete copies of Subsidiary
Loan Agreement, the Parent Loan Agreement, the Subsidiary Guarantee and the
Parent Guarantee as in effect as of the date hereof have been or concurrently
herewith are being furnished to Junior Creditors.
6. Junior Creditors' Waivers. Each Junior Creditor expressly waives all
notices not specifically required pursuant to the terms of this Agreement
whatsoever, and expressly consents to reliance by Senior Agent and Senior
Creditors upon the subordination and other agreements as herein provided. Each
Junior Creditor agrees that no Senior Creditor has made any warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Senior Creditor Agreements or the
collectibility of the obligations thereunder, that Senior Agent and the other
Senior Creditors shall be entitled to manage and supervise the Senior Debt in
accordance with applicable law and its or their usual practices, modified from
time to time as it or they deem appropriate under the circumstances, without
regard to the existence of any rights that any Junior Creditor may now or
hereafter have in or to any of the Collateral, and that no Senior Creditor shall
have any liability to any Junior Creditor for, and each Junior Creditor waives
any claim which such Junior Creditor may now or hereafter have against any
Senior Creditor arising out of, and each Junior Creditor waives any objection
to, (a) any and all actions which any Senior Creditor may take or omit to take
(including, without limitation, actions with respect to the creation, perfection
or continuation of liens or security interests in the Collateral or the Lien
therefor, actions with respect to the occurrence of an event of default under
the Senior Creditor Agreements, actions with respect to the foreclosure upon,
sale, release, or depreciation of, or failure to realize upon, the Collateral
and actions with respect to the collection of any claim for all or any part of
the obligations from any account debtor, guarantor or any other party) with
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respect to the Senior Debt, the Senior Creditor Agreements or to the collection
of the Senior Debt or the valuation, use, protection or release of the
Collateral and/or other security for the Senior Debt, (b) any motion for relief
from the automatic stay brought by Senior Agent, (c) the procedures established
for, or the terms of, any foreclosure on, or sale or other liquidation of the
Collateral, (d) Senior Agent's election, on behalf of any Senior Creditors, in
any proceeding instituted under the Bankruptcy Code, of the application of
Section 1111 (b)(2) of the Bankruptcy Code, and/or (e) the use of cash
collateral, or any borrowing or grant of a security interest under Section 364
of the Bankruptcy Code, by Borrower as debtor-in-possession or Parent as
debtor-in-possession. Additionally, each Junior Creditor acknowledges that any
right it may have to receive adequate protection or an administrative claim
priority in connection with debtor-in-possession financing, use of cash
collateral or otherwise under the Bankruptcy Code is junior and subordinate to
the rights of Senior Creditors to receive adequate protection and administrative
claim priority.
7. Turnover of Prohibited Transfers. If any payment, distribution or
security, or the proceeds thereof, are received by any Junior Creditor on
account of or with respect to any of the Junior Creditor Debt other than as
expressly permitted in Section 2(b) hereof, such Junior Creditor shall forthwith
deliver same to Senior Agent in the form received (except for the addition of
any endorsement or assignment necessary to effect a transfer of all rights
therein to Senior Agent) for application to the Senior Debt or, at Senior
Agent's option to the extent in the form of cash or cash equivalents, such
Junior Creditor shall pay to Senior Agent the amount thereof on demand. Senior
Agent is irrevocably authorized to supply any required endorsement or assignment
which may have been omitted. Until so delivered, any such payment, distribution
or security shall be held by such Junior Creditor in trust for Senior Agent, and
shall not be commingled with other funds or property of such Junior Creditor.
8. Proceeds. The order of priority of liens set forth in Section 1 hereof
shall apply to all proceeds of the Collateral, including, without limitation,
any insurance proceeds payable in the event of loss of, or damage to, the
Collateral.
9. Waiver of Marshaling. Each Junior Creditor agrees that no Senior
Creditor shall have any obligation to marshal any part of the Collateral or any
other property, instruments, documents, agreements or guaranties before
enforcing its rights against any other Collateral. Accordingly, the parties
hereto agree that Senior Agent and Senior Creditors may liquidate the Collateral
in any order in its or their sole discretion.
10. Perfection and Release of Liens. Each Junior Creditor hereby agrees to
execute and deliver such documents, instruments, lien releases, assignments and
financing statements and do such acts as may be necessary in order for Senior
Agent, on behalf of Senior Creditors, to establish and maintain a valid, prior
and perfected security interest in the Collateral. In the event of any sale or
other disposition of all or any part of the Collateral prior to payment in full
of the Senior Debt, upon request by Senior Agent, each Junior Creditor shall
execute releases, assignments, UCC terminations and other similar agreements
that are requested by Senior Agent from time to time; provided, (a) Senior Agent
also releases its Lien on such Collateral in connection with such sale or
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disposition, and (b) the Lien of the Junior Creditors shall continue in any
proceeds of such Collateral subject to the provisions of this Agreement. Upon
payment and satisfaction in full of the Junior Creditor Debt, each Junior
Creditor shall cooperate fully in releasing the Liens therefor, if in existence
at such time, promptly upon the request of Senior Agent. Senior Agent shall
serve as bailee on behalf of Junior Creditors for purposes of perfection of the
Junior Creditor Lien in the stock of Borrower pledged by Parent in favor of
Junior Creditors. Senior Agent shall have no obligation to Junior Creditors in
such capacity other than to hold the certificates evidencing such stock in
accordance with its usual and customary procedures and subject to the Senior
Lien. As of the Termination Date, Senior Agent shall continue to hold such stock
as bailee and in trust for the Junior Creditors until Senior Agent delivers the
share certificates representing the stock to Junior Creditors at the address for
Xxxxx X. Xxxxx set forth on the signature pages hereof. Parent and Junior
Creditor agree that Senior Agent may deliver any stock pledged by Parent to any
Junior Creditor after the Termination Date without further liability to Parent
or Junior Creditor. Senior Agent agrees to deliver such stock to Junior
Creditors at the above address promptly after the Termination Date, to the
extent such stock has not been sold, disposed of or otherwise foreclosed upon by
Senior Agent to repay the Senior Debt on or prior to the Termination Date.
11. No Contest of Security Interest. No Junior Creditor shall contest the
validity, perfection, priority or enforceability of the Lien of Senior Agent
granted by Borrower or Parent, or any payment on the Senior Debt or the
allowance of the Senior Debt as a senior secured claim, and each Junior Creditor
agrees to cooperate in the defense of any action contesting the validity,
perfection, priority or enforceability of such liens or security interests or
such payment or allowance. No Senior Creditor shall contest the validity,
perfection, or enforceability of the Junior Creditor Lien granted by Borrower or
Parent, or any payment on the Junior Debt to the extent expressly permitted
hereunder or the allowance of the Junior Debt as a subordinated secured claim.
Each Junior Creditor agrees that, as between the Senior Creditors and the Junior
Creditors, the terms of this Agreement shall govern even if part or all of the
Senior Debt or the Liens securing payment and performance thereof are avoided,
disallowed, set aside or otherwise invalidated in any judicial proceeding or
otherwise.
12. Subordination Not Affected, Etc. The Senior Creditors may, without
notice to any Junior Creditor, extend or continue or increase the amount of
credit and make other financial accommodations to or for the account of Borrower
or Parent in reliance upon this Agreement; provided that the aggregate principal
amount of Senior Debt to which the Junior Debt is subordinate shall not exceed
$82,000,000 without the consent of Junior Creditors. Nothing in this Agreement
shall be construed as affecting or in any way limiting the extension of any new
or additional financial accommodation by any Senior Creditor to Borrower or
Parent and the terms and conditions hereof shall apply to such new and
additional financial accommodations. Notwithstanding the preceding sentence or
anything contained in this Agreement to the contrary, none of the provisions of
this Agreement shall be deemed or construed to constitute a commitment or an
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obligation on the part of any Senior Creditor to make any future loans, advances
or other extensions of credit or financial accommodation to Borrower or Parent.
Each Junior Creditor understands and agrees that all accrued interest, charges,
expenses, attorneys' fees and other liabilities and obligations under the Senior
Creditor Agreements shall constitute part of the Senior Debt, and nothing in
this Agreement shall be construed as affecting or in any way limiting any
indulgence granted by any Senior Creditors with respect to any existing
financial accommodation to Borrower or Parent. The subordinations effected, and
the rights created, hereby shall not be affected by (a) any amendment of or any
addition of or supplement to the Senior Creditor Agreements or any other
instrument, document or agreement relating to the Senior Debt, (b) any exercise
or non-exercise of any right, power or remedy under or in respect of the Senior
Debt or the Senior Creditor Agreements or any other instrument, document or
agreement relating thereto, (c) the release, sale, exchange or surrender, in
whole or in part, of any part of the Collateral or any additional collateral to
which any Senior Creditors may become entitled, (d) any release of any guarantor
of or pledgor securing the Senior Debt or any security for such pledge or
guaranty, or (e) any waiver, consent, release, indulgence, extension, renewal,
modification, delay or other action, inaction or omission in respect of the
Senior Debt or the Senior Creditor Agreements or any other instrument, document
or agreement relating thereto or any security therefor or pledge or guaranty
thereof, whether or not such Junior Creditor shall have had notice or knowledge
of any of the foregoing and regardless of whether such Junior Creditor shall
have consented or objected thereto. Any provision of any document, instrument or
agreement evidencing, securing or otherwise relating to the Junior Creditor Debt
purporting to limit or restrict in any way Borrower's or Parent's ability to
enter into any agreement with Senior Agent or any other Senior Creditors to
amend or modify any document, instrument or agreement evidencing, securing or
otherwise relating to the Senior Debt shall be deemed of no force or effect.
13. Legend. Junior Creditors will cause all agreements, notes, bonds,
debentures or other instruments from time to time evidencing the Junior Creditor
Debt or any part thereof to contain a specific statement thereon to the effect
that the indebtedness evidenced thereby is subject to the provisions of this
Agreement, and Borrower agrees to the foregoing.
14. Voided Payments. To the extent that any Senior Creditor receives any
payment on behalf of the Senior Debt which, within twelve (12) months of the
date of such payment, is subsequently invalidated, declared to be fraudulent,
avoidable or preferential, set aside or is required to be repaid to a trustee,
receiver, the estate of Borrower or any other party under any bankruptcy act,
state or Federal law, common law or equitable cause (such payment being
hereinafter referred to as a "Voided Payment"), then to the extent of such
Voided Payment that portion of the Senior Debt which had been previously
satisfied by such Voided Payment shall be revived and continue in full force and
effect as if such Voided Payment had never been made, and the obligations of
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Junior Creditors under this Agreement shall continue to be effective, or be
reinstated, as the case may be, all as though such Voided Payment had never been
made.
15. Immediate Effect. This Agreement shall be effective immediately upon
its execution by each of the parties hereto, and there are no conditions
precedent or subsequent to the effectiveness of this Agreement.
16. Successors and Assigns. This Agreement is being entered into for the
benefit of, and shall be binding upon, Senior Agent, each Junior Creditor,
Borrower, Parent and their respective successors and assigns. The Parent Lenders
and the Subsidiary Lenders are express third party beneficiaries of this
Agreement. Each Senior Creditor may assign or participate out to any other
Person any portion of its interest under the Senior Debt and no such assignee or
participant shall be required to become a signatory hereto. Junior Creditors,
Borrower and Parent shall cause any assignee or transferee of any Junior
Creditor to execute and deliver to the other parties hereto an agreement
pursuant to which they will become parties hereto as fully as if they were
signatories hereto and providing for the effectiveness of this Agreement as to
such transferee or assignee and other parties. Additionally, each Junior
Creditor agrees to execute and deliver an agreement containing terms
substantially identical to those contained herein in favor of any third person
who replaces or refinances all of the indebtedness under the Subsidiary Loan
Agreement or guaranteed under the Subsidiary Guarantee, whether such replacement
or refinancing occurs by transfer, "takeout" or any other means or vehicle.
17. Notification of Defaults. Junior Creditor shall give written notice to
Senior Agent of a default or an event of default by Borrower or Parent under the
Junior Creditor Debt. Junior Creditor acknowledges that any default by Borrower
under the Junior Creditor Debt is, automatically, an Event of Default under the
Senior Debt.
18. Notices. Any notices, consents, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to be given to any party or parties (a) upon delivery to the
address of the party or parties set forth below if delivered in person or by
courier or if sent by certified or registered mail (return receipt requested),
or (b) upon dispatch between the hours of 8:00 a.m. and 5:00 p.m. (Atlanta,
Georgia time) on any Business Day if transmitted by telecopy or other means of
facsimile transmission, in any case to the party or parties at the telecopy
numbers set forth below:
If to Borrower: X. X. XXXXX CO.
c/o Delta Apparel, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxx
Telecopy No.: (000) 000-0000
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With a copy to: XXXXX XXXXXXX XXXXXXX & XXXXXX, P.A.
00 X. Xxxxxxxxxx Xxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Telecopy No. 000-000-0000
If to any Junior Creditor, to its address set forth below its signature on the
signature page hereto;
With a copy to: XXXXXX & XXXXXXX LLP
0000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx X. X'Xxxxx. II, Esq.
Telecopy No.: (000) 000-0000
If to Senior Agent: Congress Financial Corporation (Southern)
000 Xxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Telecopy No. (000) 000-0000
With a copy to: Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. X. Xxxxx, Esq.
Telecopy No. (000) 000-0000
Any party hereto may designate any other address or telecopy number, as
applicable, to which any notices or other communications shall be given by
notice duly given hereunder; provided, however, that any such notice of other
address or telecopy number shall be deemed to have been given hereunder only
when actually received by the party to which it is addressed.
19. Amendments; Modifications. This Agreement may not be modified, altered
or amended except by an agreement in writing executed by all of the parties
hereto.
20. Cost and Expenses of Enforcement. Borrower agrees to pay all reasonable
costs, legal expenses and attorneys' and paralegals' fees of every kind,
actually paid or incurred by any Senior Creditor in enforcing its rights
hereunder, including, but not limited to, litigation instituted in a State or
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Xxxxxxx Xxxxx, as hereinafter provided (including proceedings under the United
States Bankruptcy Code) or in so enforcing this Agreement, or in defending
against any defense, cause of action, counterclaim, setoff or cross claim based
on any act of commission or omission by any Senior Creditor with respect to the
Senior Debt or the Collateral promptly on demand of Senior Agent.
21. JURISDICTION; SERVICE OF PROCESS. THE PARTIES HERETO HEREBY IRREVOCABLY
AGREE THAT ALL ACTIONS ARISING DIRECTLY OR INDIRECTLY AS A RESULT OR IN
CONSEQUENCE OF THIS AGREEMENT SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS
HAVING SITUS IN XXXXXX COUNTY, GEORGIA (OR IN ANY UNITED STATES BANKRUPTCY COURT
WHEREIN ANY CASE OF BORROWER OR PARENT UNDER THE BANKRUPTCY CODE IS THEN
PENDING), AND HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY
STATE OR FEDERAL COURT LOCATED AND HAVING ITS SITUS IN SAID CITY AND STATE (OR
OF SUCH BANKRUPTCY COURT). THE PARTIES HERETO HEREBY WAIVE ANY OBJECTION BASED
ON FORUM NONCONVENIENS, AND HEREBY WAIVE PERSONAL SERVICE OF ANY AND ALL
PROCESS. THE PARTIES CONSENT THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO SENIOR AGENT, BORROWER,
PARENT OR ANY JUNIOR CREDITOR AT THE RESPECTIVE ADDRESSES SET FORTH HEREIN IN
THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT, OR OTHERWISE.
22. WAIVER OF DEFENSES; JURY TRIAL. EACH JUNIOR CREDITOR WAIVES EVERY
DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF, WHICH SUCH JUNIOR CREDITOR MAY
NOW HAVE, OR HEREAFTER MAY HAVE, TO ANY ACTION BY SENIOR AGENT IN ENFORCING THE
TERMS AND PROVISIONS OF THIS AGREEMENT AND RATIFIES AND CONFIRMS WHATEVER SENIOR
AGENT MAY DO PURSUANT TO THE TERMS HEREOF AND AGREES THAT SENIOR AGENT SHALL NOT
BE LIABLE FOR ANY ERRORS OF JUDGMENT OR MISTAKE OF FACT OR LAW EXCEPT FOR
WILLFUL MISCONDUCT OF SENIOR AGENT OR BREACH OF THIS AGREEMENT BY SENIOR AGENT.
TO THE EXTENT PERMITTED BY LAW, SENIOR AGENT AND EACH JUNIOR CREDITOR, AND EACH
ONE OF THEM, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, THE
RIGHT EITHER ONE OF THEM OR ANY MAY HAVE TO TRIAL BY JURY WITH RESPECT TO ANY
LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH OR ANY COURSE OF CONDUCT OR COURSE OF DEALING HEREUNDER, IN WHICH
SENIOR AGENT AND SUCH JUNIOR CREDITOR ARE ADVERSE PARTIES. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE CONSENT OF SENIOR CREDITORS TO THE JUNIOR CREDITOR
LIEN.
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23. Governing Law; Benefit of Agreement. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Georgia.
All of the understandings, agreements, covenants and representations contained
herein are solely for the benefit of Senior Creditors and the Junior Creditors,
and there are no other Persons who are intended to be benefited in any way
whatsoever by this Agreement.
24. Severability. In the event any one or more of the provisions contained
herein shall for any reason be held to be invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
25. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective as
delivery of an original executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telefacsimile also shall
deliver an original executed counterpart of this Agreement but the failure to
deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement
26. Borrower's and Parent's Acknowledgment. Borrower and Parent each hereby
consents to this Agreement, agrees to abide by the terms hereof, agrees to make
no payments or distributions contrary to the terms and provisions hereof and to
do every act and thing necessary to carry out such terms and provisions.
Borrower and Parent each agrees that should it make any payment in contravention
of any provision of this Agreement the maturity of said Senior Debt may be
accelerated in accordance with the terms of the Senior Creditor Agreements.
27. No Impairment. This Agreement defines the relative rights of the Junior
Creditors as holders of the Junior Creditor Debt and the Senior Creditors as
holders of the Senior Debt with respect to the Collateral. Nothing in this
Agreement shall impair, as between Borrower or Parent and (a) the Junior
Creditors as holders of the Junior Creditor Debt or (b) the Senior Creditors as
holders of the Senior Debt, which in each case is absolute and unconditional, to
pay principal and interest thereon and other amounts owed in respect thereof in
accordance with their terms, subject to the provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
JUNIOR CREDITORS:
By: /s/ Xxxxx X. Xxxxx
---------------------------
Xxxxx X. Xxxxx
Address: 0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
STATE OF ______________)
)
COUNTY OF _____________)
The foregoing instrument was acknowledged before me the ___ day of October,
2003 by _____________________.
--------------------------------
Notary Public
Signature Page 1
By: /s/ Xxxx X. Xxxxx
----------------------------
Xxxx X. Xxxxx
Address: 000 Xxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
STATE OF ______________)
)
COUNTY OF _____________)
The foregoing instrument was acknowledged before me the ___ day of October,
2003 by _____________________.
--------------------------------
Notary Public
Signature Page 2
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx
Address: 000 Xxxxxx Xxxx Xxxx
Xxxxxxxxxxxx, XX 00000
STATE OF _____________)
)
COUNTY OF ____________)
The foregoing instrument was acknowledged before me the ___ day of October,
2003 by _____________________.
-----------------------------------
Notary Public
Signature Page 3
SENIOR AGENT: CONGRESS FINANCIAL CORPORATION
(SOUTHERN)
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Its: First Vice President
------------------------------------
BORROWER: MJS ACQUISITION COMPANY,
a North Carolina corporation
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Its: Vice President
------------------------------------
PARENT: DELTA APPAREL, INC., a Georgia corporation
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Its: Vice President and CFO
-----------------------------------
Signature Page 4
Schedule A - Employment Agreements
1. Employment and Non-Solicitation Agreement dated as of October 3, 2003,
by and between Xxxxx X. Xxxxx, Parent and X. X. Xxxxx Co.
2. Employment and Non-Solicitation Agreement dated as of October 3, 2003,
by and between Xxxx X. Xxxxx, Parent and X. X. Xxxxx Co.
3. Employment and Non-Solicitation Agreement dated as of October 3, 2003,
by and between Xxxxxxx X. Xxxxxxxx, Parent and X. X. Xxxxx Co.
