TERM PROMISSORY NOTE
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$5,760,000 New York, New York
May 16, 2000
FOR VALUE RECEIVED, DH APPAREL COMPANY, INC., a Georgia corporation ("DH")
and DELTA MERCHANDISING, INC., a South Carolina corporation ("DMI" and, together
with DH, (each individually, a "Debtor" and collectively, "Debtors"), hereby,
jointly and severally, unconditionally promise to pay to the order of CONGRESS
FINANCIAL CORPORATION (SOUTHERN), a Georgia corporation ("Payee"), at the
offices of Payee at 200 Galleria Parkway, Suite 1500, Atlanta, Georgia 30339, or
at such other place as Payee or any holder hereof may from time to time
designate, the principal sum of FIVE MILLION SEVEN HUNDRED SIXTY THOUSAND
DOLLARS ($5,760,000) in lawful money of the United States of America and in
immediately available funds, in seventy-two (72) consecutive monthly
installments (or earlier as hereinafter provided) on the first day of each month
commencing June 1, 2000 of which the first seventy-one (71) installments shall
each be in the amount of EIGHTY THOUSAND DOLLARS ($80,000), and the last
installment shall be in the amount of the entire unpaid balance of this Note.
Debtors hereby further promise to pay interest to the order of Payee on the
unpaid principal balance hereof at the Interest Rate. Such interest shall be
paid in like money at said office or place from the date hereof, commencing June
1, 2000 and on the first day of each month thereafter until the indebtedness
evidenced by this Note is paid in full. Interest payable upon and after an Event
of Default or termination or non-renewal of the Loan Agreement (as hereinafter
defined) shall be payable upon demand.
For purposes hereof, (a) subject to clauses (b) and (c) below, "Interest
Rate" shall mean a rate equal to one-half of one (1/2%) percent per annum in
excess of the Prime Rate and, as to Eurodollar Rate Loans, a rate of two and
one-half (2 1/2%) percent per annum in excess of the Adjusted Eurodollar Rate
(based on the Eurodollar Rate applicable for the Interest Period selected by
Debtors as in effect two (2) Business Days after the date of receipt by Payee of
the request of Debtors for such Eurodollar Rate Loans in accordance with the
terms hereof, whether such rate is higher or lower than any rate previously
quoted to Debtors); (b) notwithstanding anything to the contrary set forth in
clause (a) above, the Interest Rate shall mean as to Prime Rate Loans, a rate
equal to one-quarter (1/4%) percent per annum in excess of the Prime Rate, as to
Eurodollar Rate Loans, a rate equal to two and one-quarter (2 1/4%) percent per
annum in excess of the Adjusted Eurodollar Rate (calculated as described in
clause (a) above), effective as of the first day of the month after each of the
following conditions is satisfied as determined by Payee in good faith: (ii) the
EBITDA of DH and its Subsidiaries for the immediately preceding fiscal year
(commencing with the fiscal year ending on June 30, 2000) calculated based on
the audited financial statements of DH and its Subsidiaries for such fiscal year
delivered to Payee, together with the unqualified opinion of their independent
certified accountants, in accordance
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with Section 9.6 or the Loan Agreement, shall equal or exceed $5,000,000, and
(iii) no Event of Default or any act, condition or event which, with notice or
passage of time or both would constitute an Event of Default shall exist or have
occurred and be continuing; provided, that, in the event that the Interest Rate
is reduced as provided in this clause (b), if in any subsequent fiscal year
thereafter the condition set forth in clause (b)(i) is not satisfied, effective
as of the first day of the month after the receipt by Payee of the audited
financial statements of DH and its Subsidiaries for such fiscal year, the
Interest Rate shall increase to those rates set forth in clause (a) above; (c)
notwithstanding anything to the contrary contained in clauses (a) and (b) above,
the Interest Rate shall mean the rate of two and one-half (2 1/2%) percent per
annum in excess of the Prime Rate as to Prime Rate Loans and the rate of four
and one-half (4 1/2%) percent per annum in excess of the Adjusted Eurodollar
Rate as to Eurodollar Rate Loans, at Payee's option, without notice, (i) either
(A) for the period on and after the date of termination or non-renewal of the
Loan Agreement until such time as all Obligations are indefeasibly paid and
satisfied in full, or (B) for the period from and after the date of the
occurrence of any Event of Default, and for so long as such Event of Default is
continuing as determined by Payee; (d) the term "Prime Rate" shall mean the rate
from time to time publicly announced by First Union National Bank, or its
successors, from time to time, as its prime rate, whether or not such announced
rate is the best rate available at such bank; (e) the term "Event of Default"
shall mean an Event of Default as such term is defined in the Loan Agreement;
and (f) the term "Loan Agreement" shall mean the Loan and Security Agreement,
dated of even date herewith, by and among Debtors and Payee, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced. Unless otherwise defined herein, all capitalized terms
used herein shall have the meaning assigned thereto in the Loan Agreement.
The Interest Rate applicable to Prime Rate Loans payable hereunder shall
increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate is announced. The increase or decrease shall be
based on the Prime Rate in effect on the last day of the month in which any such
change occurs. Interest shall be calculated on the basis of a three hundred
sixty (360) day year and actual days elapsed. In no event shall the interest
charged hereunder exceed the maximum permitted under the laws of the State of
Georgia or other applicable law.
This Note is issued pursuant to the terms and provisions of the Loan
Agreement to evidence the Term Loan by Payee to Debtors. This Note is secured by
the Collateral described in the Loan Agreement and all notes, guarantees,
security agreements and other agreements, documents and instrument now or at any
time hereafter executed and/or delivered by any Debtor or any other party in
connection therewith (all of the foregoing, together with the Loan Agreement, as
the same now exist or may hereafter be amended, modified, supplemented, renewed,
extended, restated or replaced, being collectively referred to herein as the
"Financing Agreements"), and is entitled to all of the benefits and rights
thereof and of the other Financing Agreements. At the time any payment is due
hereunder, at its option, Payee may charge the amount thereof to any accounts of
Debtors maintained by Payee.
If any payment of principal or interest is not made within three (3)
business days after the same becomes due hereunder, or if any other Event of
Default shall occur for any reason, or if the
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Loan Agreement shall be terminated or not renewed for any reason whatsoever,
then and in any such event, in addition to all rights and remedies of Payee
under the Financing Agreements, applicable law or otherwise, all such rights and
remedies being cumulative, not exclusive and enforceable alternatively,
successively and concurrently, Payee may, at its option, declare any or all of
Debtors' obligations, liabilities and indebtedness owing to Payee under the Loan
Agreement and the other Financing Agreements (the "Obligations"), including,
without limitation, all amounts owing under this Note, to be due and payable,
whereupon the then unpaid balance hereof, together with all interest accrued
thereon, shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable Interest Rate stated above until the
indebtedness evidenced by this Note is paid in full, plus the costs and expenses
of collection hereof, including, but not limited to, attorneys' fees and legal
expenses.
Each Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for Payee to first
institute suit in order to enforce payment of this Note and (iii) consents to
any one or more extensions or postponements of time of payment, release,
surrender or substitution of collateral security, or forbearance or other
indulgence, without notice or consent. The pleading of any statute of
limitations as a defense to any demand against any Debtor is expressly hereby
waived by each Debtor. Upon any Event of Default or termination or non-renewal
of the Loan Agreement, Payee shall have the right, but not the obligation to
setoff against this Note all money owed by Payee to any Debtor.
Payee shall not be required to resort to any Collateral for payment, but
may proceed against one or both Debtors and any guarantors or endorsers hereof
in such order and manner as Payee may choose. None of the rights of Payee shall
be waived or diminished by any failure or delay in the exercise thereof.
The validity, interpretation and enforcement of this Note and the other
Financing Agreements and any dispute arising in connection herewith or therewith
shall be governed by the internal laws of the State of Georgia (without giving
effect to principles of conflicts of law).
Each Debtor irrevocably consents and submits to the non-exclusive
jurisdiction of the Superior Court of Fulton County, Georgia and the United
States District Court for the Northern District of Georgia and waives any
objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Note or any of the other Financing
Agreements or in any way connection with or related or incidental to the
dealings of such Debtor and Payee in respect of this Note or any of the other
Financing Agreements or the transactions related hereto or thereto, in each case
whether now existing or hereafter arising, and whether in contract, tort, equity
or otherwise, and agrees that any dispute arising out of the relationship among
Debtors and Payee or the conduct of such persons in connection with this Note or
otherwise shall be heard only in the courts described above (except that Payee
shall have the right to bring any action or proceeding against any Debtor or its
property in the courts of any other jurisdiction which Payee deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against any Debtor or its property).
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Each Debtor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to it and service so made shall be deemed to
be completed five (5) days after the same shall have been so deposited in the
U.S. mails, or, at Payee's option, by service upon such Debtor in any other
manner provided under the rules of any such courts. Within thirty (30) days
after such service, such Debtor shall appear in answer to such process, failing
which such Debtor shall be deemed in default and judgment may be entered by
Payee against such Debtor for the amount of the claim and other relief
requested.
EACH DEBTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (iv) ARISING UNDER THIS NOTE OR (v) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS AMONG DEBTORS AND PAYEE
IN RESPECT OF THIS NOTE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH
DEBTOR AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY.
The execution and delivery of this Note has been authorized by the Board of
Directors and by any necessary vote or consent of the stockholders of each
Debtor. Each Debtor hereby authorizes Payee to complete this Note in any
particulars according to the terms of the loan evidenced hereby.
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This Note shall be binding upon the successors and assigns of Debtors and
inure to the benefit of Payee and its successors, endorsees and assigns.
Whenever used herein, the term "Debtor" or "Debtors" shall be deemed to include
each Debtor's respective successors and assigns and the term "Payee" shall be
deemed to include its successors, endorsees and assigns. If any term or
provision of this Note shall be held invalid, illegal or unenforceable, the
validity of all other terms and provisions hereof shall in no way be affected
thereby.
DH APPAREL COMPANY, INC.
By: /s/ K. Scott Grassmyer
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Title: Sr. Vice President & CFO
DELTA MERCHANDISING, INC.
By: /s/ K. Scott Grassmyer
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Title: Sr. Vice President & CFO
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