EXHIBIT 10.1
[Unofficial Translation]
AGREEMENT
Drafted and signed on March 3, 2010 in Tel-Aviv-Yafo
Between: Bank Leumi L'Israel Ltd.
Address for the purpose of this agreement: 13 Ehad Haam St.,
Tel-Aviv-Yafo ("LEUMI")
ON THE FIRST PARTY;
Between: Bank Hapoalim Ltd.
Address for the purpose of this agreement: 23 Menachem Begin Road,
Tel-Aviv-Yafo ("HAPOALIM")
ON THE SECOND PARTY;
Between: Israel Discount Bank Ltd.
Address for the purpose of this agreement: 17 Yehuda Halevy Street,
Tel-Aviv-Yafo ("Discount")
ON THE THIRD PARTY;
(Leumi, Hapoalim and Discount called jointly and separately "THE
AFOREMENTIONED BANKS")
Between: Tefron Ltd., Registration No. 52-0043407
Address for the purpose of this agreement: P.O. Box 1365, Industrial
Center, Tardyon, D.N. Misgav 20719 ("TEFRON")
ON THE FOURTH PARTY;
Between: Hi-Tex founded by Tefron Ltd., Registration No.51-2489816
Address for the purpose of this agreement: P.O. Box 1365, Industrial
Center, Tardyon, D.N. Misgav 20719 ("HI-TEX")
ON THE FIFTH PARTY;
Between: Macro Clothing Ltd., Registration No.51-222954-3
Address for the purpose of this agreement: P.O. Box 1365, Industrial
Center, Tardyon, D.N. Misgav 20719 ("MACRO")
ON THE SIXTH PARTY;
(Tefron, Hi-Tex and Macro will be called jointly and separately the
"AFOREMENTIONED CORPORATIONS")
Whereas: The Aforementioned Corporations owe the Aforementioned Banks
in accounts managed in the name of the Aforementioned
Corporations in each one of the Aforementioned Banks
(the "AFOREMENTIONED ACCOUNTS"), different sums due to
credits and other bank services which wereprovided to the
Aforementioned Corporations by the Aforementioned Banks;
Whereas: The Aforementioned Corporations sign and/or created for the
benefit of the Aforementioned Banks different liens and
guarantees, which include current liens in unlimited amount
upon all the Aforementioned Corporations' property, and
fixed liens in unlimited amount upon the unpaid capital and
reputation of the Aforementioned Corporations (the
"AFOREMENTIONED LIENS");
Whereas: The Aforementioned Corporations do not fulfill their
debts and obligations to the Aforementioned Banks;
Whereas: The Aforementioned Corporations requested the Aforementioned
Banks to reach a settlement of their debts and obligations to
the Aforementioned Banks;
Whereas: On January 6, 2010 a memorandum of understanding was executed
by the Aforementioned Corporations and the Aforementioned
Banks formulating most of the agreements between the
Aforementioned Corporations and the Aforementioned
Banks relating to the settlement of the Aforementioned
Corporations' debts and obligations to the Aforementioned
Banks ("LETTER OF PRINCIPLES").
Whereas: According to the Letter of Principles it was agreed between
the Aforementioned Corporations and the Aforementioned
Banks, that settling the debts of the Aforementioned
Corporations will be done in a detailed agreement that will
be signed by March 31, 2010.
THEREFORE IT WAS CONDITIONED AND AGREED, AS FOLLOWS:
1. INTRODUCTION
1.1 The introduction of this agreement and its annexes are inseparable
from it.
1.2 This agreement is additional to all the agreements and documents of
every kind which were signed by and between the Aforementioned
Corporations towards the Aforementioned Banks and it is not to detract
from the obligations and/or guarantees which were given by the
Aforementioned Corporations in the Aforementioned Documents, excluding
what is specifically said in this agreement.
1.3 In addition to the terms which are defined in this agreement, the
following terms will be defined as:
1.3.1 "THE DETERMINED RATIO": - Everywhere in this agreement where
this term is mentioned, the division between the banks will be as
detailed below:
1.3.1.1 Leumi - 51.3% (fifty one percent and three tenths of a
percent)
1.3.1.2 Hapoalim - 23.8% (twenty three percent and eight tenths
of a percent)
1.3.1.3 Discount - 24.9% (twenty four percent and nine tenths of
a percent)
1.3.2 "THE AFOREMENTIONED CREDIT" - Jointly and separately: credit
line, Loans A', Loans B', the additional credit lines, which will
be made available to the Aforementioned Corporations as detailed
in this agreement.
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2. DECLARATION AND OBLIGATIONS
The Aforementioned Corporations declare to the Aforementioned Banks and
confirm to the Aforementioned Banks, as follows:
2.1 That the balance of the obligation of the Aforementioned
Corporations against the Aforementioned Banks in the accounts managed
in the name of the Aforementioned Corporations in each one of the
Aforementioned Banks (the "Aforementioned Accounts"), as of 21.2.2010
is as described in annex 2.1 (jointly, the "Current Obligations of the
Corporations").
2.2 That they have examined the Current Obligations of the Corporations in
the Aforementioned Accounts, including all movements, transfers,
payments and obligations of every kind and at any time in the
Aforementioned Accounts, and they confirm the accuracy and that they
do not, and will not, have any claims with respect to them.
2.3 That they have checked the Aforementioned Accounts and the deposits in
them of any kind, whether existing today or existing in the past,
including securities deposits, loans, lines of credit, current
accounts, checking accounts and all the obligations, credits,
transfers, payments, movements, activities in securities activities in
savings plans and all other activities of every kind in the
Aforementioned Accounts and deposits and they confirm the accuracy of
all the aforementioned amounts and activities done in the
Aforementioned Accounts and deposits, and every other matter or
addition connected to the Aforementioned Accounts and deposits in the
bank.
2.4 That they have checked all obligations and/or credit of interest
(including their rates, manner of calculation, dates of changes,
manner of obligation and/or credit with respect to them and the manner
and date of notice with respect to them), linkage differentials, rate
differentials, obligations with respect to the acquisition or sale of
foreign currency, fees, expenses, management fees, etc. in the
Aforementioned Accounts and deposits of every kind in the
Aforementioned Banks, whether existing today or existing in the past,
and they confirm their accuracy.
2.5 That all of the documents of every kind that were signed by the
Aforementioned Corporations, from time to time, for the benefit of any
of the Aforementioned Banks in connection with the obligations of the
Current Obligations of the Corporations, the amounts guaranteed and
the liens and security securing them, are in full force and are
binding in every manner.
2.6 That there is, and will not be, and they irrevocably waive every
demand or claim of every kind against the Aforementioned Banks and/or
the subsidiaries and/or affiliated companies and/or officers and/or
employees and/or agents and/or consultants of any of the
Aforementioned Banks in every related matter, directly or indirectly,
to the obligations of the corporations, to the guaranteed amounts and
every remaining matters mentioned in this Section 2.
2.7 That there is no hindrance under any agreement and/or law to the
execution of this agreement and to the undertaking of the obligations
included therein.
2.8 That as of the date of execution of this agreement, all conditions and
representations described herein have been satisfied, and to the
extent of conditions that must be satisfied afterwards, to their
knowledge there is no prevention to their completion and/or
satisfaction completely and in a timely manner.
2.9 That, to their knowledge there is nothing in the execution of this
agreement and/or its completion to grant to any third party and right
and/or cause to demand immediate payment of their obligations with
respect to such party, all or in part and/or a misrepresentation
and/or liability of any of them towards any such party.
2.10 That there is no claim, arbitration, litigation or administrative
proceeding pending against the aforementioned corporation, and that
they are not aware of any upcoming proceedings against any of them
that can affect the capability of the Aforementioned Corporations to
fulfill their obligations to the Aforementioned Banks according to
this agreement, except for the described proceedings in annex 2.10 to
this agreement.
2.11 That all the information that was given by them to the Bank is true,
and accurately reflects the business condition of the Aforementioned
Corporations. Moreover, the Aforementioned Corporations are not in
possession of any information that has not been brought to the
attention of the Aforementioned Banks and which had it been brought to
the attention of any of the Aforementioned Banks, could have been
affected the willingness of the Aforementioned Banks, or any one of
them, to agree to that which is stated in this agreement, or any part
thereof.
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2.12 That they are aware that the Aforementioned Banks' consent to settle
the debts and the obligations of the Aforementioned Corporations to
the Aforementioned Banks, under the conditions detailed of this
agreement, was given only in the light of their declarations and
consents which are stated in this agreement.
2.13 Each document to be provided and/or signed in favor of the
Aforementioned Banks will be in the format and under the terms that
will be consented with the Aforementioned Banks, so far as this
document is relevant to all the Aforementioned Banks and/or in the
format and under the terms that will be consented between the
Aforementioned Corporations and any one of the Aforementioned Banks,
so far as this document is relevant only to the Aforementioned
Corporations' conduct with the specific bank, all while there is an
approval for taking the appropriate decision of the suitable organ of
the corporation that will sign the document, and with a lawyers'
approval for the validity of the decisions under any law.
2.14 The Aforementioned Corporations will provide to the bank all the
necessary agreements or the agreements which the bank may deem
necessary for completion of what is stated in this agreement.
2.15 All terms and commitments described in this agreement, as well as the
security described in this agreement will be valid as long as the full
amounts due to the Aforementioned Banks with respect to and in
connection with the Current Obligations of the Corporations have not
been paid.
3 ARRANGEMENT OF THE CURRENT OBLIGATIONS OF THE CORPORATIONS
3.1 GENERAL PROVISIONS REGARDING THE GRANTING OF THE AFOREMENTIONED CREDIT
3.1.1 Subject to the fulfillment of all the following terms,
cumulatively, the Aforementioned Banks shall agree to the
Aforementioned Corporations' request to receive the
Aforementioned Credit as detailed in Section 3 below:
3.1.1.1 The accuracy of all the declarations and representations
of the Aforementioned Corporations as detailed in this
agreement; and
3.1.1.2 The fulfillment of all the obligations of the
Aforementioned Corporations as detailed in this agreement;
and
3.1.1.3 There is no legal and/or other restriction to grant the
Aforementioned Credit by the Aforementioned Banks, including
those imposed by authority of directives from the Bank of
Israel or by authority of directives from any other legal
entity; and
3.1.1.4 The Aforementioned Corporations will sign all of the
required documents in format acceptable at the relevant
Bank, in accordance with the relevant Bank's discretion, in
order to grant the Aforementioned Credit; and
3.1.1.5 All of the required approvals and decisions will be
delivered to the Aforementioned Banks, in accordance to the
Aforementioned Banks' discretion, in order to grant the
Aforementioned Credit.
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3.1.2 The Current Obligations of the Corporations, except those that
have been settled as detailed in Section 3 above, will continue
to be repaid as arranged in accordance with the terms of the
agreements under which they have been granted to the
Aforementioned Corporations.
3.2 By signing this Agreement, the Aforementioned Corporations are
requesting the granting of the Aforementioned Credit as detailed
below:
3.2.1 LOANS A
Subject to the signature by the Aforementioned Corporations of
the standard documents of the Aforementioned Banks which are
required in order to grant loans, loans in foreign currency, and
in accordance with the terms as detailed below:
3.2.1.1 The principal of the loans shall be in the aggregate
amount of US$ 15,000,000 (fifteen million United States
dollars) and shall be divided among the Banks according to
the Determining Ratio and among the Aforementioned
Corporations according to the agreements they shall reach
with each of the Aforementioned Banks.
3.2.1.2 The loans shall be provided for a period of 120 months.
3.2.1.3 The principal of the loans shall carry annual interest at
a rate to be agreed upon between the Aforementioned
Corporations and each one of the Aforementioned Banks in an
agreement and/or in separate loan documents which shall be
signed for this purpose by the Aforementioned Corporations
towards any one of the Aforementioned Banks
3.2.1.4 The interest on the loans shall be paid by the
Aforementioned Corporations in 40 consecutive quarterly
installments commencing from the end of three (3) months
from the date of the loans and in respect of the unpaid
principal balance of the loans, it stands at any date of
payment.
3.2.1.5 The principal of the loans shall be paid in 4 (four)
installments until the date of final and full repayment of
the loans, on such dates and in such sums as follows:
3.2.1.5.1 A sum total of 1,250,000 (one million two hundred
and fifty thousand United States dollars), out of the
loans' principal shall be repaid at the end of the
seventh year after the date of providing the loans -
pro rata between all A Loans together.
3.2.1.5.2 A sum total of 1,250,000 (one million two hundred
and fifty thousand United States dollars), out of the
loans' principal shall be repaid at the end of the
eighth year after the date of providing the loans - pro
rata between all the A Loans together.
3.2.1.5.3 A sum total of 1,250,000 (one million two hundred
and fifty thousand United States dollars), out of the
loans' principal shall be repaid at the end of the
ninth year after the date of providing the loans - pro
rata between all the A Loans together.
3.2.1.5.4 A sum total of 11,250,000 (eleven million two
hundred and fifty thousand United States dollars), out
of the loans' principal shall be repaid at the end of
the tenth year after the date of providing the loans -
pro rata between all the A Loans together (hereinafter:
"THE FINAL PAYMENT OF A LOANS CAPITAL")
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3.2.1.6 All other terms of the loans shall be as detailed in
pledge agreements regarding return of loans and/or written
requests to receive a loan/credit, which shall be signed
between whichever of the Aforementioned Corporations and
whichever of the Aforementioned Banks as relevant.
(hereinafter: "LOANS A ")
3.2.1.7 EARLY REPAYMENT OF LOANS A
The Aforementioned Corporations shall make early repayment
of the unpaid balance of Loans A, in whole or in part, in a
distribution between the Aforementioned Banks according to
the Determining Ratio, in such instances, on such conditions
and on such dates as are specified below:
3.2.1.7.1 Future Raising Capital - in any event where any of
the Aforementioned Corporations raises capital, then
the sum constituting fifty percent (50%) of the Net
Consideration from the Capital Raising shall be used
for the purpose of early repayment, according to the
Determining Ratio, at the expense of the Final Payment
of Loans A Capital.
For the purpose of this section the terms below shall
have the following meaning:
3.2.1.7.1.1 "CAPITAL RAISING" - the injection of capital
into any of the Aforementioned Corporations, of any
kind and nature whatsoever and/or from any source
whatsoever, including by way of any issuance of shares
to the public and/or private issuance of shares and/or
receiving owners loans and/or allocation of rights
and/or securities of any kind and nature whatsoever to
any of the Aforementioned Corporations and excluding
capital raising as described in Section 4 below and/or
the allotment of shares in any of the Aforementioned
Corporations to the other Aforementioned Corporations
or any of them.
3.2.1.7.1.2 "THE NET CONSIDERATION FROM THE CAPITAL RAISING"
- the total of the cash consideration obtained within
the framework of any capital raising, after deduction
of the expenses Tefron actually paid to third parties
for the purpose of performing the capital raising,
including the fees of the attorneys, accountants and
other advisors to Tefron, payment to the Stock Exchange
and the Securities Authority, underwriters' and
distributors' commissions, and all at the total and
accumulative rate which shall not exceed 6% of the
total consideration from the capital raising.
3.2.1.7.2 THE SALE OF ASSETS - in any event where any of the
aforementioned Corporations sells assets, other than
during the normal course of business of such
corporation, then the whole Net Consideration from the
Sale of the Asset shall be used for the purpose of
early repayment, according to the Determining Ratio, at
the expense of the Final Payment of Loans A principal.
The provisions of this Section 3.2.1.7.2 above shall
not apply in the event of a sale and/or transfer of the
assets between the aforementioned Corporations
themselves.
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3.2.1.7.3 For the avoidance of doubt it is clarified, that
the Aforementioned Corporations shall not perform a
sale of assets of any kind and nature whatsoever,
including among themselves, otherwise than during their
normal course of business, without obtaining the
consent of the aforementioned Banks in advance and in
writing.
For the purpose of this section the terms below shall
have the following meaning:
3.2.1.7.3.1 "THE NET CONSIDERATION FROM THE SALE OF THE
ASSET" - the total consideration obtained within the
framework of the sale of any asset, after the deduction
of taxes in respect of the sale of the assets which by
law are levied on any of the aforementioned
Corporations as the case may be.
3.2.1.7.4 Excess Cash Flow - in any event where the Injection
Surplus sum according to the Financial Reports exceeds the
Determining Ratio, then the sum constituting 50% (fifty
percent) of the sum of the difference between the excess
cash flow and the Determining Ratio, shall be used for the
purpose of early repayment, according to the Determining
Ratio, at the expense of the Final Payment of Loans A
principal, as it stands from time to time.
For the purpose of this section the terms below shall have
the following meanings:
3.2.1.1.1.1 "Excess Cash Flow" - the sum of the EBITDA of
the Aforementioned Corporations according to the
financial reports, in any calendar year, after
deduction of: (a) the sum of the Aforementioned
Corporations' interest costs in respect of such
calendar year; and (b) the sum of the investments which
the Aforementioned Corporations made within the
framework of the activity and the ongoing maintenance
in respect of such calendar year (hereinafter: "The
Ongoing Investments"). For the avoidance of doubt it is
clarified, that the Aforementioned Corporations shall
not make any Ongoing Investments, including during
their normal course of business, in an accumulative
annual sum, for all the Aforementioned Corporations,
which exceeds the sum of $US 2,000,000 (two million
United States dollars).
3.2.1.7.4.2 "EBITDA" - the operational profit, as at its
value in the Aforementioned Corporations' financial
reports plus depreciation and deductions and with the
addition of non-cash flow expenses which arise from
granting of options to the Aforementioned Banks as
specified in Section 7.5 below. With regard the
financial reports which are drawn up according to IFRS,
the definition of EBITDA shall vary and the sections in
accordance with what is specified below shall not be
taken into account:
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(a) Profits/losses from the revaluation of real estate
for investment.
(b) Profits/losses arising from the changes in the
actuarial discounts which are used for the purpose of
giving bonuses to employees.
(c) Capital profits/losses.
(d) Expenditures/income in respect of the revaluation
of options where the realization addition in respect
thereof is linked/a convertible element of convertible
debentures where their exercise price is linked.
3.2.1.7.4.3"Financial Reports" - Tefron Ltd.'s annual
financial reports on a consolidated basis which are
published by Tefron Ltd., in accordance with generally
accepted accounting standards in Israel, which include
inter alia a balance sheet, profit and loss account,
cash flow account, a report of the changes in equity
and any other report or explanation which may be
required according to the proper accounting rules
and/or according to any of the authorized authorities.
3.2.1.7.4.4"THE DETERMINING SUM" - the sum of 8,000,000
(eight) million United States dollars.
3.2.2 LOANS B
Subject to the execution by the Aforementioned Corporations of
the standard documents of the Aforementioned Banks which are
required in order to grant loans, loans in foreign currency, and
in accordance with the terms as detailed below:
3.2.2.1 The principal of the loans shall be in the total amount
of US$ 5,000,000 (five million United States dollars) and
shall be divided among the Banks according to the
Determining Ratio, and among the Aforementioned Corporations
according to the agreements they shall reach with each of
the Aforementioned Banks.
3.2.2.2 The loans shall be provided for a period of 72 months.
3.2.2.3 The principal of the loans shall carry annual interest at
the rate to be agreed upon between the Aforementioned
Corporations and each one of the Aforementioned Banks in an
agreement and/or in separate loan documents which shall be
signed for this purpose by the Aforementioned Corporations
towards any one of the Aforementioned Banks.
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3.2.2.4 The interest on the loans shall be by the Aforementioned
Corporations in 24 consecutive quarterly installments with
effect from the end of three (3) months from the date of the
loans in respect of the unpaid principal balance of the
loans, as it stands at any date of payment.
3.2.2.5 The principal of the loans shall be paid in 4 (four)
installments until the date of final and full repayment of
the loans, on such dates and in such sums as follows:
3.2.2.5.1 A sum total of US$ 1,250,000 (one million two
hundred and fifty thousand United States dollars), out
of the loans' principal shall be repaid at the end of
the third year after the date of providing the loans -
pro rata between all B Loans together
3.2.2.5.2 A sum total of US$ 1,250,000 (one million two
hundred and fifty thousand United States dollars), out
of the loans' principal shall be repaid at the end of
the fourth year after the date of providing the loans -
pro rata between all the B Loans together
3.2.2.5.3 A sum total of US$ 1,250,000 (one million two
hundred and fifty thousand United States dollars), out
of the loans' principal shall be repaid at the end of
the fifth year after the date of providing the loans -
pro rata between all the B Loans together
3.2.2.5.4 A sum total of US$ 1,250,000 (one million two
hundred and fifty thousand United States dollars), out
of the loans' principal shall be repaid at the end of
the sixth year after the date of providing the loans -
pro rata between all the B Loans together (hereinafter:
"THE FINAL PAYMENT OF B LOANS CAPITAL")
3.2.2.6 All other terms of the loans shall be as detailed in
pledge agreements regarding return of loans and/or
written requests for a loan/credit, which shall be
signed between whichever of the Aforementioned
Corporations and whichever of the Aforementioned Banks
as relevant.
(hereinafter: "B LOANS")
3.3 A Loans and B Loans shall be used solely and exclusively for the payment of
some of the Company's existing debts in each one of the Banks, in a
distribution between the Banks according to the Determining Ratio.
3.4 Subject to their signature on this Agreement the aforementioned
Corporations are instructing the aforementioned Banks to act upon the
aforesaid in Section 3.3 above, and to repay part of the Corporations'
existing loans, as detailed in Section 3.3 above, with the monies of A
Loans and B Loans, immediately ensuing their deposit into their accounts at
whichever of the aforementioned Banks. 3.3 Cancellation of Existing Credit
Lines
3.5 Cancellation of Existing Frameworks
3.5.1 Within seven days following the signing of this Agreement all
existing credit frameworks in the Aforementioned Accounts shall be
cancelled (hereinafter: "The Existing Credit Frameworks").
3.5.2 Subject to their signature on this Agreement, the Aforementioned
Corporations are directing the Aforementioned Banks, and granting
irrevocable permission to cancel all Existing Credit Frameworks as
aforesaid in Section 3.5.1 above. In order to enable the cancellation
of all Existing Credit Frameworks, the Aforementioned Corporations are
committing to sign any additional document that is required by
whichever of the Aforementioned Banks, as required.
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3.6. Provision of New Credit Framework
3.6.1 At the time of the cancelation of the Existing Credit Framework, the
Aforementioned Banks will provide the Aforementioned Corporations a
new credit framework for the purpose of the working capital of the
Aforementioned Corporations, in the Aforementioned Accounts in the
total sum of US$8,950,000 (Eight million nine hundred and fifty
thousand US Dollars) divided between the Aforementioned Banks
according to the Determined Ratio (The "New Credit Framework"), under
the following terms:
3.6.1.1 The New Credit Framework will be made available by the
Aforementioned Banks to the Aforementioned Corporations for a
period not exceeding one year from the signing of this agreement;
3.6.1.2 Use of the credit within the New Credit Framework will be done
only when jointly directed by all of the Aforementioned
Corporations. It is herby clarified that the distribution of the
credit use of the New Credit Framework between the Aforementioned
Corporations in each one of the Aforementioned Banks will be done
according to the agreement between the Aforementioned
Corporations and any one of the Aforementioned Banks according to
the matter at hand;
3.6.1.3 Payment of all the used credit of the New Credit Framework
will be made no later than and until the end of one year from the
signing of this agreement;
3.6.1.4 The New Credit Framework will be provided to the
Aforementioned Corporations as an operating/current credit in the
Aforementioned Accounts and/or by short term loans that will not
exceed one year and/or by providing bank guarantees and/or
documentary credit, all as will be determined between the
Aforementioned Corporations and between each of the
Aforementioned Banks separately, subject to section 3.6.1.5;
3.6.1.5 Despite what is stated in section 3.6.1.4 above, it is agreed
that use of the New Credit Framework for new bank guarantees
and/or new documentary credit provided by one of the
Aforementioned Banks will require the consent, in advance and in
writing, from the such bank as one of the Aforementioned
Corporations requested to provide the new bank guarantees and/or
new documentary credit, and the provision of any new bank
guarantees and/or new documentary credit, will be subject to the
sole discretion of each of the Aforementioned Banks, as is
customary at that bank;
3.6.1.6 All the conditions of paying the credit within the New Credit
Framework, including various amounts and types of interest for
the credit that will be used in the New Credit Framework and the
various dates and options for paying the interest for the credit
that was used from the New Credit Framework, will be determined
between the Aforementioned Corporations and the relevant
Aforementioned Banks by an agreement and/or by a separate written
understanding that will be signed for this matter by one of the
Aforementioned Corporations and one of the Aforementioned Banks
accordingly.
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4. INJECTION OF CAPITAL
4.1 Tefron commits to complete a rights offering and/or a private
placement in which not less than US$3,400,000 (minus expenses that
Tefron paid in fact to third parties for the purpose of the rights
offering and/or the private placement, including legal fees,
accounting fees and fees to other advisers to Tefron, payment to the
stock exchange and the Securities Authority, fees for underwriters and
distributors and all at a total amount that will not exceed 6% of the
total amount raised) (the "Permitted Offering Expenses") is invested
in Tefron's equity (in addition to the existing capital) by March 31,
2010 (The "First Capital Injection").
4.2 Without derogating from the provisions of article 4.1 above, if
the First Capital Injection that was invested in the Capital of Tefron
is less than US$4,000,000 after deduction of the Permitted Offering
Expenses, Tefron commits to complete by July 31, 2010 a rights
offering and/or a private placement and/or further capital raising for
an additional amount (in addition to the existing capital and to the
net sum that was invested in the First Capital Injection) not less
than the difference between US$4,000,000 and the amount actually
invested in the First Capital Injection (minus Permitted Offering
Expenses) (The "Second Capital Injection").
The First Capital Injection and the Second Capital Injection together:
"The Capital Injections".
4.3 A copy of the letter of commitment towards the Banks, by the majority
shareholder in Tefron, Norfet, Limited Partnership, pursuant to which
Norfet committed subject to all the necessary regulatory permits and
the approval of the shareholders of Tefron, that it and/or its
designee will would participate in the Capital Injections attached to
this agreement as annex 4.2.
5. ADDITIONAL CREDIT LINES
5.1 Subject to the full and timely performance of the capital injections,
as detailed in Section 4 above (in other words USD $4,000,000, after
deduction of Permitted Offering Expenses, until July 31, 2010), the
Aforementioned Banks shall, upon request, grant to the Aforementioned
Corporations, according the Determined Ratio, additional short-term
credit lines in the aggregate amount of USD $1,800,000 (One Million
Eight Hundred Thousand US Dollars) (hereinafter the "Additional Credit
Line"), pursuant to the following conditions:
5.1.1 The Additional Credit Lines will be made available by the
Aforementioned Banks to the Aforementioned Corporations for a
period of no longer than a year from the availability of the
Additional Credit Line.
5.1.2 The use of the credit made on account of the Additional Credit
Line shall be performed only upon the mutual instructions of all
of the Aforementioned Corporations.
5.1.3 The repayment of all the used portions of the Additional Credit
Line will be made no later than the year anniversary on which the
Additional Credit Lines were granted.
5.1.4 The Additional Credit Lines will be made available to the
Aforementioned Corporations as operating/current credit lines of
the Aforementioned Accounts and/or short-term loans of no longer
than one year and/or via bank guarantees and/or documentary
credit; all as agreed upon by the Aforementioned Corporations and
each of the Aforementioned Banks, in accordance with Section
5.1.5 below.
5.1.5 Notwithstanding that which is stated in Section 5.1.4 above, it
is hereby agreed that any use of the Additional Credit Lines for
purposes of the issuance of a new bank guarantee and/or new
documentary credit by any of the Aforementioned Banks will
require such Bank's prior written approval, and any such issuance
of a new bank guarantee and/or new documentary credit will be
subject to the sole discretion of such Bank, as per what is
customary in such Bank.
5.1.6 The repayment terms of the Additional Credit Lines, including
the rate and type of interests on the utilized portion of the
Additional Credit Lines, as well as the dates and method of the
interest payments due as a resulting from the utilized portions
of the Additional Credit Lines, shall be determined by the
Aforementioned Corporations and the relevant Aforementioned
Bank(s) upon written agreement and/or separate promissory notes
which will be signed for this purpose by the relevant
Aforementioned Corporation(s) and the relevant Aforementioned
Bank(s).
11
5.2 In the event where, in the framework of the first capital injection,
an investment of no less than USD $3,400,000 is made in Tefron after
deducting the Permitted Offering Expenses, although this amount shall
not exceed an amount of US $4,000,000 minus Permitted Offering
Expenses (hereinafter the "First Actual Capital Injection"), the
Aforementioned Banks agree, upon the request of the Aforementioned
Corporations, to make the Additional Credit Lines available in an
amount equal to the First Actual Capital Injection less USD
$2,200,000, all in accordance with the Determined Ratio; for example:
If the sum of the First Actual Capital Injection is USD $3,600,000
after deducting the Permitted Offering Expenses, the Additional Credit
Line will be equal to USD $1,400,000.
5.3 Without derogating from that which is stated in Sections 5.1 and 5.2
above, it is agreed that, upon the request of the Aforementioned
Corporations, the Aforementioned Banks will make available a partial
amount of the Additional Credit Line of up to USD $1,200,000
(hereinafter the "New Partial Additional Credit Line"), even before
the First Actual Capital Injection, subject to the signatures of FIMI
2001 Ltd., registration no. 513108332 and Mivtach Shamir Holdings
Ltd., registration no. 520034125 (hereinafter the "Guarantors") on
irrevocable letters of guarantee for the benefit of the Aforementioned
Banks in an amount of up to $1,200,000 (One Million Two Hundred
Thousand US Dollars) which will be equal to the New Partial Additional
Credit Line requested by the Aforementioned Corporations (hereinafter
the "Total Actual New Partial Additional Credit Line"); all in a
manner by which each Guarantor will sign three letters of guarantee
(one letter of guarantee per each of the Aforementioned Banks), which
shall total an amount equal to half of the Total Actual New Partial
Additional Credit Line, to secure the debts and obligations of the
Aforementioned Corporations toward the Aforementioned Banks, to be
split by the Aforementioned Banks in accordance with the Determined
Ratio, to be detailed in the letters of guarantee in the forms
attached hereto as annexes 5.2A - 5.2F (hereinafter the "Letters of
Guarantee").
5.4 For the avoidance of doubt, it is hereby clarified that the signing of
the Letters of Guarantee shall not derogate from any of the
Aforementioned Corporations obligations towards any of the
Aforementioned Banks including those undertaken in this Agreement and
Tefron's obligation to perform the First Capital Injection referenced
in Section 4.1 above. It is hereby clarified that the non-performance
of the First Capital Injection, as referenced in Section 4.1 above,
shall be deemed a breach of the Aforementioned Corporations
obligations towards the Bank, and shall be deemed as a separate cause
of action for the immediate repayment of any credit given by any of
the Aforementioned Banks, including the credit made available pursuant
to this Agreement, even if the Letters of Guarantee have been issued
to the Banks pursuant to Section 5.2 above.
5.5 It is hereby agreed that in the event the Guarantors produce to the
Banks the Letters of Guarantee, and if within the framework of the
First Capital Injection no investment is made of at least USD
$3,400,000 after deducting the Permitted Offering Expenses, by the
date set forth in Section 4.1 above, then, and without derogating from
any of the Aforementioned Banks' rights, including those granted
pursuant to the Letters of Guarantee and those set forth in Section
5.4 above, the Aforementioned Banks shall be permitted to demand from
the Guarantors the amounts guaranteed on behalf of the Aforementioned
Corporations for the benefit of the Aforementioned Banks pursuant to
the Letters of Guarantee (hereinafter the "Guaranteed Amounts"), and
each of the Aforementioned Banks shall be allowed to use the
Guaranteed Amounts paid by the Guarantors for purposes of early
repayment of a portion of the Aforementioned Corporations' outstanding
debt toward such bank, at such bank's discretion.
5.6 By signing this Agreement, the Aforementioned Corporations are hereby
irrevocably instructing the Aforementioned Banks to use the Guaranteed
Amounts, as decided by each of the Aforementioned Banks, for purposes
of early repayment of a portion of the Aforementioned Corporations'
outstanding debt toward such bank, at the discretion of each of the
Aforementioned Banks, as applicable.
12
6. GUARANTEES
6.1 In order to secure the payment of all the Aforementioned Credit, the
Aforementioned Banks will use all the guarantees which were created
and/or will be created in favor of the Aforementioned Banks and which
are detailed in annex 6.1 of this agreement.
7. OTHER OBLIGATIONS
In addition to the collateral and obligations described in this Agreement
as aforesaid, all of the following obligations shall also apply:
7.1. The Aforementioned Corporations obligate themselves not to acquire,
and not to provide financing for, any acquisition, and not obligate
itself to acquire, any of their own shares in any manner or form,
including, without limitation, by provision of a guarantee, directly
or indirectly, by them or by any of their subsidiaries, to guarantee
the obligations of any entity in their control, without the prior
written consent of the Aforementioned Banks.
7.2. The Aforementioned Corporations obligate themselves not to pass a
resolution relating to voluntary liquidation, change of corporate
structure, or its reorganization, merger, with another company or
companies, merger with another company's assets, settlement or
arrangement pursuant to Section 350 of the Companies Law, or any law
in addition to or replacement thereof, without the prior written
consent of the Aforementioned Banks.
7.3. The Aforementioned Corporations obligate themselves, until full
repayment of Loans "A" and "B" to the Aforementioned Banks, the
Aforementioned Corporations obligate themselves not to pay, in any
manner or form, directly or indirectly, to any of their shareholders
or any of their controlling shareholders and/or their family members,
or any entities under their control, and/or any third party that may
be on their behalf on their stead, any amount, from or on account of,
capital notes and/or loans granted or to be granted to the
aforementioned entities, by any of the above, or in connection with
them, including, without limitation, principal payments, interest,
fees or expenses, and all without the prior written consent of the
Aforementioned Banks. The above provisions of Section 7.3 shall not
apply to payments made among the aforementioned entities themselves.
7.4. The Aforementioned Corporations obligate themselves, until full
repayment of Loans "A" and "B" to the Aforementioned Banks, the
Aforementioned Corporations obligate themselves not to pay or obligate
themselves to pay, in any manner or form, directly or indirectly (from
earnings or capital or any other source), dividends to shareholders or
their controlling shareholders and/or to any of their family members,
and/or companies or entities any of the shareholders of which are
interested parties therein and/or to any third party that may be on
their behalf on their stead without the prior written consent of the
Aforementioned Banks. The above provisions of Section 7.4 shall not
apply to payments made among the aforementioned entities themselves.
"Dividends" - as defined in the Companies law, 1999 (hereinafter, the
"Companies Law") as amended from time to time, and/or interest, and/or
management fees, and/or compensation payments, and/or indemnification
payments (including compensation payments and indemnification payments
on account of a claim), and/or consulting fees, and/or amounts of
money, and/or in kind.
7.5. Tefron obligates itself to issue to the Aforementioned Banks (in
accordance with the Determined Ratio without consideration, an
aggregate amount of 100,000 options, nominal value of NIS 10, of
Tefron, against payment of an exercise price of US$4.50 per shares.
The options shall be exercisable (in whole or in part) during a period
of 48 months following the date of the signing of this Agreement. The
terms of the options will be as set forth in customary option
agreements, as agreed by Tefron and the Aforementioned Banks. Tefron
agrees to carry out the grant of the options as described, after the
receipt of all approvals required by law (including stock exchange
approval to list the shares underlying the options) and this no later
than April 15, 2010.
7.6. By execution of this Agreement, the Aforementioned Banks agree not to
exercise their rights against Tefron due to the expected lack of
compliance with the financial ratios that Tefron has obligated itself
to meet in 2009 (hereinafter, the "Aforementioned Cause") in
accordance with Tefron's financial statements as of 31.12.2009, solely
(hereinafter, the "Aforementioned Period"). For the avoidance of
doubt, it is clarified that the consent of the Aforementioned Banks as
aforesaid in this section is granted only in respect of the
Aforementioned Cause in the Aforementioned Period.
13
7.7. Tefron obligates itself to satisfy, at all times during 2010, all of
the financial ratios and the obligations as detailed below:
7.7.1. EBITDA of Tefron, according to the consolidated financial
statements for 2010, will be positive; and
7.7.2. Shareholders equity of Tefron according to the consolidated
financial statements (annual and quarterly), will not be less
than thirty five million US dollars (US$35,000,000); and
7.7.3. The aggregate balances of cash, inventory and receivables of
Tefron according to the consolidated financial statements (annual
and quarterly), will not be less than thirty three million US
dollars (US$33,000,000); and
7.7.4. The aggregate balance of receivables of Tefron according to the
consolidated financial statements (annual and quarterly), will
not be less than nine million US dollars (US$9,000,000); and
7.7.5. The CEO and Chairman of any of the Aforementioned Corporations
will not be compensated by a salary in excess of the salary of
the CEO and the Chairman in effect on the date of the execution
of this Agreement, as adjusted for the consumer price index.
7.8. Until 30.11.2010, the Aforementioned Corporations will agree with the
Aforementioned Banks regarding the financial ratios and additional
obligations, including limitations on salaries of office holders in
the Aforementioned Corporations, which the Aforementioned Corporations
shall be required to comply with commencing 1.1.2011. If the
Aforementioned Corporations and the Aforementioned Banks will not
agree, by 30.11.2010, what financial ratios the Aforementioned
Corporations will be required to meet commencing 1.1.2011, the
Aforementioned Corporations shall be required to comply with the
financial ratios that the Aforementioned Corporations agreed to prior
to the date of the signing of this Agreement, and this as set forth in
the undertakings attached hereto as annexes 7.8A - 7.8D.
8. IMMEDIATE PAYMENT
Each of the Aforementioned Banks will be permitted to demand immediate
repayment of every portion of the Aforementioned Credit provided by it,
together with all amounts that as bank determines to compensate it for any
damage to it as a result of such immediate payment, upon the occurrence of
one or more of the material events to any of the Aforementioned Banks a
reason to cause any of the Aforementioned Credit to the immediately payable
as described in any of the documents that are signed and/or will be signed
by any of the Aforementioned Corporations towards such bank.
9. REPORTS
The Aforementioned Corporations will convey, on time, to the Aforementioned
Banks all the following reports, announcements and statements:
9.1 By April the first of every year, the audited consolidated financial
reports of Tefron by external qualified accountant, while the included
balance sheet relates to December 31 of the last year.
9.2 Announcement in any case of occurrence of event which gives any of the
Aforementioned Banks the right to demand immediate payment or such
event is about to occur.
9.3 Copies of any approval, announcement, report or other document which
the Aforementioned Corporations have to give the registrar of
companies or to the Securities Authority.
9.4 Reports, documents, information and declaration as far as required by
the Aforementioned Banks, and the Aforementioned Banks believe that
they are relevant for managing the Aforementioned Credit, guarantees
and the other Aforementioned Corporations' obligations to the
Aforementioned Banks.
14
10. Miscellaneous
10.1 A waiver by the Aforementioned Banks of a previous breach or
non-performance of one or more of the Aforementioned Corporations'
obligations and/or non-performance of any condition of this Agreement
and/or any document signed by the Aforementioned Corporations towards
the Aforementioned Banks (hereinafter the "Aforementioned Documents"),
shall not constitute an approval for any additional breach or
non-performance of any of the conditions obligations hereunder; and
any refrainment by the Aforementioned Banks and/or by any other entity
that is granted rights hereunder or pursuant to the Aforementioned
Documents or by law, shall not constitute a waiver of such right.
10.2 No waiver, relief, or change of any condition hereunder shall obligate
the Aforementioned Banks or operate as approval of any non-performance
by unless so authorized in writing by the Aforementioned Banks.
10.3 All the undertakings of the Aforementioned Banks hereunder are not
joint and several, rather they are of each of the Aforementioned
Banks, in such a way that the Aforementioned Corporations shall not be
entitled to bring any claim and/or demand and/or suit against any one
of the Aforementioned Banks as a result of the non-performance of any
conditions and/or undertakings of another bank under this Agreement.
10.4 None of Aforementioned Corporations' rights hereunder and/or pursuant
to any documents referenced in or related to this Agreement may be
assigned, pledged, or transferred in any manner without the prior
written consent of the Aforementioned Banks.
10.5 The Aforementioned Corporations may not disclose this document to any
entity without the Aforementioned Banks' prior written consent, unless
there is an obligation to disclose this document by law.
10.6 This Agreement is in addition to, and shall not derogate from,
anything said in the Aforementioned Documents, and in any event of a
conflict between a provision in the Aforementioned Documents and a
provision in the this Agreement - the provision set forth in this
Agreement shall prevail. For the avoidance of any doubts, it is hereby
clarified that the above shall be limited to only to those situations
where there is explicit reference to a specific matter, both in the
Agreement and the Aforementioned Documents. It is further clarified
that in any event where it would be reasonable to collectively
interpret the conflicting provisions together - then they shall be so
interpreted.
10.7 Any notices sent by either party shall be sent to the addresses
mentioned in the preamble of this Agreement or to any other address
designated in writing, and shall be deemed to have been duly given on
the third day after delivery, and if delivered by hand - at the time
of such hand delivery.
10.8 Each of the Aforementioned Corporations shall be jointly and severally
responsible for fulfilling all the undertakings in this Agreement.
IN WITNESS WHEREOF:
/s/ /s/ Eran Rotem /s/ Yacov Gelbard
- -------------------------- --------------------------------
Bank Leumi Israel Ltd. Tefron Ltd.
/s/ /s/ Eran Rotem /s/ Yacov Gelbard
- -------------------------- --------------------------------
Bank Hapoalim Ltd. Hi-Tex Founded by Tefron Ltd.
/s/ /s/ Eran Rotem /s/ Yacov Gelbard
- -------------------------- --------------------------------
Israel Discount Banks Ltd. Macro Clothing Ltd.
15
ANNEX 2.1
TEFRON GROUP - CREDIT BALANCE AT BANKS AS OF 19/2/2010
TOTAL TO BANKS HAPOALIM DISCOUNT LEUMI
------------ ------------ ------------ ------------
BALANCE IN $ BALANCE IN $ BALANCE IN $ BALANCE IN $
(THOUSANDS) (THOUSANDS) (THOUSANDS) (THOUSANDS)
------------ ------------ ------------ ------------
Short Term Credit in NIS 1,073 737 336 0
Short Term Credit in Foreign Currency 3,006 2,432 574 0
Guarantees in NIS 219 160 59 0
Guarantees/Documentary Credit in Foreign
Currency 2,380 1,207 673 500
Loans in NIS 301 0 0 301
Loans in Foreign Currency 21,977 2,547 5,359 14,071
- ------------------------------------------------ ------------ ------------ ------------ ------------
Total Credit as of 19/2/2010 28,956 7,083 7,001 14,872
- ------------------------------------------------ ------------ ------------ ------------ ------------
Approved framework as per Memorandum of
Understanding -from Jan. 6, 2010. 28,950 6,900 7,200 14,850
Percentage of each Bank 23.8% 24.9% 51.3%
- ------------------------------------------------ ------------ ------------ ------------ ------------
ANNEX 4.1
[see exhibit 99.4 to this Registration Statement]
ANNEX 6.1 - SECURITY - Leumi
Pursuant to Section 6.1 to the agreement, described below are the security and
guarantees created by Tefron Ltd. and/or Hi-Tex Founded by Tefron Ltd. and /or
Macro Clothing Ltd. (collectively, the "Aforementioned Corporations"), in the
Abovementioned Accounts in the bank, as defined in the agreement, to secure
debts and obligations of any of the Aforementioned Corporations to Bank Leumi
L'Israel Ltd. (the "Bank"), as described below:
1. TEFRON LTD.
1.1 A first priority fixed lien without limitation as to amount from
28.5.2006, on the capital and goodwill and a first priority floating lien
without limitation as to amount, on its plant and the rest of the property (lien
no. 48 in the Companies Registrar), all as described in the lien documentation.
1.2 A continuing guarantee without limitation as to amount from 22.5.2006
upon the execution of Tefron Ltd., to secure the debts and obligations of Hi-Tex
Founded by Tefron Ltd. to the Bank.
1.3 A continuing guarantee without limitation as to amount from 22.5.2006
upon the execution of Tefron Ltd., to secure the debts and obligations of Macro
Clothing Ltd. to the Bank.
2. HI-TEX FOUNDED BY TEFRON LTD.
2.1 A first priority fixed lien without limitation as to amount from
28.5.2006, on the capital and goodwill and a first priority floating lien
without limitation as to amount, on its plant and the rest of the property (lien
no. 9 in the Companies Registrar), all as described in the lien documentation.
2.2 A first priority fixed lien without limitation as to amount from
26.11.2009, on equipment (lien no. 11 in the Companies Registrar), all as
described in the lien documentation.
2.3 A continuing guarantee without limitation as to amount from 27.1.2009
upon the execution of Hi-Tex Founded by Tefron Ltd., to secure the debts and
obligations of Tefron Ltd. to the Bank.
2.4 A continuing guarantee without limitation as to amount from 27.1.2009
upon the execution of Hi-Tex Founded by Tefron Ltd., to secure the debts and
obligations of Macro Clothing Ltd. to the Bank.
3. MACRO CLOTHING LTD.
3.1 A first priority fixed lien without limitation as to amount from
28.5.2006, on the capital and goodwill and a first priority floating lien
without limitation as to amount, on its plant and the rest of the property (lien
no. 4 in the Companies Registrar), all as described in the lien documentation.
3.2 A continuing guarantee limited to 10 (ten) million US dollars from
27.7.2009 upon the execution of Macro Clothing Ltd., to secure the debts and
obligations of Tefron Ltd. to the Bank.
3.3 A continuing guarantee limited to 10 (ten) million US dollars from
27.7.2009 upon the execution of Macro Clothing Ltd., to secure the debts and
obligations of Hi-Tex Founded by Tefron Ltd. to the Bank.
4. To remove any doubt, it is clarified that there is nothing in this annex to
derogate from the right of the Bank against any of the Aforementioned
Corporations and/or any other third party, on the basis of all security of
any kind that was grantd to the Bank in connection with the debts and
obligations of the Aforementioned Corporations to the Bank, and that are
not described in this annex, including guarantee letters, as described in
Section 5.2 to the agreement.
5. Nothing in this annex shall derogate in any manner from the rights of the
Bank against any of the Aforementioned Corporations and/or against any
third parties, according to the agreement and/or any document that shall be
signed and/or will be signed by any of the Aforementioned Corporations to
the Bank.
2
ANNEX 6.1-A
BANK DISCOUNT GUARANTEES
REGISTER NUMBER DATE NOTES
--------------- ---- -----
1. TEFRON
- ---------
Security 9 29.12.82 Secures Hi-Tex as well
Guarantee 06/00
Guarantee 10.10.07
Guarantee 22.10.07
2. HI-TAX
- ---------
Security 4 16.8.09 Secures Tefron as well
Fix Assets Security 11 26.11.09
Guarantee 10.10.07
Guarantee 06/00
Guarantee 22.10.07
ANNEX 6.1-B
BANK HAPOALIM GUARANTEES
REGISTER NUMBER DATE NOTES
--------------- ---- -----
1. TEFRON
- ---------
Security 13 24.12.86
Security 46 30.09.01
Security 49 30.03.09
Guarantee 10.10.99
Guarantee 27.09.00
Guarantee 31.03.09 Together with Macro
Guarantee 31.03.09 Together with Hi-Tex
Guarantee 24.9.07
2. MACRO
- ---------
Security 3 06.02.05
Guarantee 06.05.03
Guarantee 31.03.09 Together with Hi-Tex
Guarantee 24.09.07
Guarantee 31.03.09 Together with Tefron
3. HI-TEX
- ---------
Security 2 18.02.98
Security 3 18.10.99
Security 10 31.03.09
Fix Assets Security 11 26.11.09 Secures Tefron and
Hi-Tex as well
Guarantee 10.10.99
Guarantee 31.03.09 Together with Macro
Guarantee 31.03.09 Together with Tefron
Guarantee 24.09.07
4. TEFRON HOLDINGS 1 10.10.99 Secures 95,900 shares
- ------------------ of Tefron