ONEITA INDUSTRIES, INC.
10% SUBORDINATED PROMISSORY NOTE
$3,750,000.00 Charleston, South Carolina
January 26, 1996
ONEITA INDUSTRIES, INC., a Delaware corporation (the "Company"), the
principal office of which is located at 4130 Faber Place, Suite 200, Ashley
Corporate Center, Charleston, South Carolina 29405, for value received hereby
promises to pay to ROBERT M. GINTEL or his registered assigns (the "Holder"),
the sum of THREE MILLION SEVEN HUNDRED FIFTY THOUSAND AND 00/100
($3,750,000.00), or such lesser amount as shall then equal the outstanding
principal amount hereof on the terms and conditions set forth hereinafter.
Interest on the unpaid principal amount hereof shall be payable as herein set
forth. The entire principal amount hereof and any unpaid accrued interest
hereon, as set forth below, shall be due and payable on the earlier to occur of
(i) February 26, 1999 or (ii) when declared due and payable by the Holder upon
the occurrence of an Event of Default (as defined below). Payment for all
amounts due hereunder shall be made by wire transfer of immediately available
funds to such account of the Holder as shall have been designated to the
Company. This Note is issued in connection with the transactions described in
Section 1.1 of that certain Note Purchase Agreement between the Company and the
Holders described therein, dated as of December 28, 1995 (the "Purchase
Agreement"). Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Purchase Agreement. This Note is the
Initial Gintel Note referred to in the Purchase Agreement and is issued to the
Holder in addition to the Gintel Subordinated Note (as such term is defined in
the Purchase Agreement) in like principal amount on the date hereof. As set
forth in the Purchase Agreement, the Company anticipates effecting a Rights
Offering to, among other things, raise the funds necessary to repay this Note.
Moreover, the Holder of this Note has agreed, subject to the prior receipt by
the Company of all requisite consents, including, if necessary, that of the New
York Stock Exchange (the "NYSE") and/or the Company's stockholders, to serve as
a standby purchaser of the Company in the Rights Offering. Notwithstanding
anything to the contrary set forth herein, the Holder of this Note may apply the
then outstanding amount of all principal and accrued and unpaid interest under
this Note to satisfy his obligations as a standby purchaser in the Rights
Offering. In the event that the Rights Offering is not consummated prior to May
31, 1996, or upon the occurrence of any of the other events referred to in
Section 4.1 of the Purchase Agreement, then the Holder may, commencing at the
Conversion Date (as such term is defined in the Purchase Agreement) and subject
to the prior receipt by the Company of all requisite consents, including, if
necessary, that of the NYSE and/or the Company's stockholders, exchange this
Note for the Gintel Replacement Note (as such term is defined in the Purchase
Agreement) on the terms set forth in the Purchase Agreement (a "Note Exchange").
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless the
context otherwise requires, have the following meanings:
(i) "Company" includes any corporation which shall succeed to or assume the
obligations of the Company under this Note.
(ii) "Holder," when the context refers to a holder of this Note, shall mean
any person who shall at the time be the registered holder of this Note.
2. Interest. The unpaid principal balance of this Note shall bear interest
compounded annually, from the date hereof until paid in like money, at a rate
(based on a 360-day year) equal to ten percent (10%) per annum, such interest to
be payable on June 30 and December 31 in each year. Any accrued but unpaid
interest shall be payable in full upon maturity or prior prepayment of this
Note. In the event that the principal amount of this Note is not paid in full
upon maturity, interest shall continue to accrue at the rate provided in the
previous sentence plus five percent (5%) on the balance of any unpaid principal
and unpaid interest until such balance is paid.
3. Events of Default. If any of the events specified in this Section 3
shall occur (herein individually referred to as an "Event of Default"), the
Holder of this Note may, in the sole discretion of the Holder, so long as such
condition exists, (a) declare the entire principal and unpaid accrued interest
hereon immediately due and payable and (b) subject to the prior receipt by the
Company of all requisite consents, including, if necessary, that of the NYSE
and/or the Company's stockholders, effect a Note Exchange, by notice in writing
to the Company:
(i) (a) Default in the payment of the principal when due under this Note,
the Gintel Subordinated Note or the Avondale Note, and (b) default in the
payment of the unpaid accrued interest under this Note, the Gintel Subordinated
Note or the Avondale Note when due and payable if such default in the payment of
accrued interest is not cured by the Company within ten (10) days after the
Holder or Avondale, as the case may be, has given the Company written notice of
such default; or
(ii) The institution by the Company or any material Subsidiary of
proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against it or the filing by
it of a petition or answer or consent seeking reorganization or release under
the federal Bankruptcy Act, or any other applicable federal or state law, or the
consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official of the Company
or any material Subsidiary, or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the taking of
corporate action by the Company or any material Subsidiary in furtherance of any
such action; or
(iii) If, within sixty (60) days after the commencement of an action
against the Company or any material Subsidiary (and service of process in
connection therewith on the Company or any material Subsidiary) seeking any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such action shall
not have been resolved in favor of the Company or any material Subsidiary or all
orders or proceedings thereunder affecting the operations or the business of the
Company or any material Subsidiary stayed, or if the stay of any such order or
proceeding shall thereafter be set aside, or if, within sixty (60) days after
the appointment without the consent or acquiescence of the Company or any
material Subsidiary of any trustee, receiver or liquidator of the Company or any
material Subsidiary or of all or any substantial part of the properties of the
Company or any material Subsidiary, such appointment shall not have been
vacated; or
(iv) Any event of default or default of the Company under any Senior
Indebtedness (as defined below) that gives the holder thereof the right to
accelerate such Senior Indebtedness, even if such Senior Indebtedness is not, in
fact, accelerated by the holder; or
(v) Any failure by the Company to comply with, perform or observe any term,
covenant or agreement contained in the Purchase Agreement, this Note, the Gintel
Subordinated Note, the Avondale Note, the Registration Rights Agreement, the
Standby Agreement or any other agreement, instrument or documents entered into
in connection therewith, which failure continues for a period of 30 days after
written notice thereof by the Holder to the Company; or
(vi) Any change of control of the Company which, for purposes of this
Section 3(vi), shall be deemed to have occurred if (i) any person, other than
any person who, as of the date of the Purchase Agreement, beneficially owns 5%
of more of the outstanding capital stock of the Company, whether alone or as
part of a group (including any individual, firm, partnership or other entity)
together with all Affiliates and Associates (as defined under Rule 12b-2 of the
General Rules and Regulations promulgated under the Securities Exchange Act of
1934, as amended) of such person, but excluding (A) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
subsidiary of the Company, (B) a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of the Company or (C) the Company or any subsidiary of the Company is
or becomes the Beneficial Owner (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company's then outstanding
securities, (ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or (iii) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all of substantially all of the Company's assets;
or
(vii) the Company or any material Subsidiary shall be subject to a final
judgment by a court of competent jurisdiction (which is no longer being
appealed) in an amount in excess of $1,000,000.
4. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all the Company's Senior
Indebtedness, as hereinafter defined.
4.1 Senior Indebtedness. As used in this Note, the term "Senior
Indebtedness" shall mean the principal of and unpaid accrued interest on: (i)
all indebtedness of the Company concurrently being incurred by the Company with
SunTrust Bank, Atlanta, First Union Bank of South Carolina and NatWest Bank,
N.A., (ii) all indebtedness of the Company to banks, insurance companies or
other financial institutions regularly engaged in the business of lending money
(collectively, "Bank Debt"), which is outstanding on the date hereof and which
is for money borrowed by the Company (whether or not secured), (iii) up to $6
million of additional Bank Debt provided that such additional Bank Debt is
advanced to the Company prior to such time as the conversion privileges set
forth in the Avondale Replacement Note and the Gintel Replacement Note have
either been exercised in their entirety, canceled or terminated and (iv) any
refinancings of the indebtedness described in clauses (i) through (iii) above.
4.2 Default on Senior Indebtedness. If there should occur any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy, reorganization
or arrangements with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets, dissolution,
liquidation or any other marshalling of the assets and liabilities of the
Company, then (i) no amount shall be paid by the Company in respect of the
principal of or interest on this Note at the time outstanding, unless and until
the principal of and interest on the Senior Indebtedness then outstanding shall
be paid in full, and (ii) no claim or proof of claim shall be filed with the
Company by or on behalf of the Holder of this Note that shall assert any right
to receive any payments in respect of the principal of and interest on this
Note, except subject to the payment in full of the principal of and interest on
all of the Senior Indebtedness then outstanding. If there occurs an event of
default that has been declared in writing with respect to a payment obligation
under any Senior Indebtedness, or in the instrument under which any Senior
Indebtedness is outstanding, permitting the holder of such Senior Indebtedness
to accelerate the maturity thereof, then, unless and until such event of default
shall have been cured or waived or shall have ceased to exist, or all Senior
Indebtedness shall have been paid in full, no payment shall be made in respect
of the principal of or interest on this Note, unless within three (3) months
after the happening of such Event of Default, the maturity of such Senior
Indebtedness shall not have been accelerated.
4.3 Effect of Subordination. Subject to the rights, if any, of the holders
of Senior Indebtedness under this Section 4 to receive cash, securities or other
properties otherwise payable or deliverable to the Holder of this Note, nothing
contained in this Section 4 shall impair, as between the Company and the Holder,
the obligation of the Company, subject to the terms and conditions hereof, to
pay to the Holder the principal hereof and interest hereon as and when the same
become due and payable, or shall prevent the Holder of this Note, upon default
hereunder, from exercising all rights, powers and remedies otherwise provided
herein or by applicable law.
4.4 Subrogation. Subject to the payment in full of all Senior Indebtedness
and until this Note shall be paid in full, the Holder shall be subrogated to the
rights of the holders of Senior Indebtedness (to the extent of payments or
distributions previously made to such holders of Senior Indebtedness pursuant to
the provisions of Section 4.2 above) to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness. No such payments or
distributions applicable to the Senior Indebtedness shall, as between the
Company and its creditors, other than the holders of Senior Indebtedness and the
Holder, be deemed to be a payment by the Company to or on account of this Note;
and for the purposes of such subrogation, no payments or distributions to the
holders of Senior Indebtedness to which the Holder would be entitled except for
the provisions of this Section 4 shall, as between the Company and its
creditors, other than the holders of Senior Indebtedness and the Holder, be
deemed to be a payment by the Company to or on account of the Senior
Indebtedness.
4.5 Undertaking. By its acceptance of this Note, the Holder agrees to
execute and deliver such documents as may be reasonably requested from time to
time by the Company or the lender of any Senior Indebtedness in order to
implement the foregoing provisions of this Section 4.
5. Prepayment.
5.1 Optional Prepayment. The Company may not prepay this Note, in whole or
in part, without the prior consent of the Holder hereof and the holders of the
Avondale Note and the Gintel Subordinated Note. If the Company shall prepay this
Note pursuant to this Section 5, it shall cause notice thereof, specifying the
date and amount of prepayment, to be given by registered or certified mail to
the holders of the Avondale Note and the Gintel Subordinated Note at their
last-known post office addresses of which the Company shall have received
written notice, at least 10 days prior to the date fixed for such prepayment.
Notice of prepayment having been given as aforesaid, this Note, the Avondale
Note and the Gintel Subordinated Note, or the portions thereof so to be prepaid
shall, on the date designated in such notice, become due and payable in the
principal amounts thereof to be prepaid. In the event that this Note, the
Avondale Note and/or the Gintel Subordinated Note are outstanding and a partial
prepayment is made, each of this Note, the Avondale Note and the Gintel
Subordinated Note shall be prepaid pro rata to the then outstanding principal
amounts thereof.
5.2 Mandatory Prepayment. The Company shall immediately use any proceeds
received by it from any stockholder of the Company upon the exercise by such
stockholder of rights issued in the Rights Offering, to repay, pro rata with the
Avondale Note, based upon the then outstanding principal amount in relation to
the then outstanding principal amount of the Avondale Note, the outstanding
principal amount and any unpaid and accrued interest hereunder and the Holder
hereof shall accept such prepayment.
6. Notifications by the Company. In case at any time:
(1) there shall be any capital reorganization, reclassification of the
capital stock of the Company, consolidation or merger of the Company with, or
sale of all or substantially all of the assets of the Company to, another
corporation; or
(2) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, in any one or more of such cases, the Company shall give written
notice to the registered Holder of this Note of the date on which such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up shall take place, as the case may be. Such written
notice shall be given not less than 30 days and not more than 60 days prior to
the action in question and not less than 30 days and not more than 80 days prior
to the record date or the date on which the Company's transfer books are closed
in respect thereto and such notice may state that the record date is subject to
the effectiveness of a registration statement under the Securities Act of 1933,
as amended, or to a favorable vote of stockholders, if either is required.
7. Assignment. The rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
8. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail or
overnight courier, postage prepaid, at the respective addresses of the parties
as set forth herein. Any party hereto may by notice so given change its address
for future notice hereunder. Notice shall conclusively be deemed to have been
given when delivered in the manner set forth above and shall be deemed to have
been received when delivered. Copies of all notices to the Company shall be
given to:
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
Attention: Edward I. Kramer
and copies of all notices to Robert M. Gintel shall be given to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Leonard Gubar
9. No Stockholder Rights. Nothing contained in this Note shall be construed
as conferring upon the Holder or any other person the right to vote or to
consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company.
10. Collection. If the Holder shall institute any action to enforce
collection of this Note, there shall become due and payable from the Company, in
addition to the unpaid principal amount and interest under this Note, all costs
and expenses of that action (including, but not limited, to reasonable
attorneys' fees) and the Holder shall be entitled to judgment for all such
additional amounts.
11. Governing Law. This Note is executed and delivered in, and shall be
construed in accordance with, and governed by, the laws of the State of New
York, without giving effect to the conflicts of law principles thereof.
12. Headings; References. All headings used herein are used for convenience
only and shall not be used to construe or interpret this Note. Except where
otherwise indicated, all references herein to Sections refer to Sections hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be issued this 26th
day of January, 1996.
ONEITA INDUSTRIES, INC.
By/s/ James L. Ford
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