SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
For the month of December, 2010
TEFRON LTD.
(Translation of registrant's name into English)
IND. CENTER TERADYON, P.O. BOX 1365, MISGAV 20179, ISRAEL
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [_]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): ____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): ____
Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [_] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82- N/A
Attached hereto and incorporated by reference herein is an unofficial
translation of the Company's report to the Israel Securities Authority, dated
December 26, 2010, relating to the Company's arrangement with its bank lenders.
This Form 6-K is hereby incorporated by reference into Tefron Ltd.'s
Registration Statement on Form F-3 (Registration No. 333-128847) and its
Registration Statements on Form S-8 (Registration Nos. 333-139021 and
333-111932).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEFRON LTD.
(Registrant)
By: /s/ Eran Rotem
------------------
Name: Eran Rotem
Title: Chief Financial Officer
By: /s/ Hanoch Zlotnik
----------------------
Name: Hanoch Zlotnik
Title: Treasurer
Date: December 27, 2010
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[UNOFFICIAL TRANSLATION FROM HEBREW]
TEFRON LTD.
("THE COMPANY")
DECEMBER 25, 2010
TO TO
THE SECURITIES AUTHORITY THE TEL-AVIV STOCK EXCHANGE LTD.
www.isa.gov.il www.tase.gov.il
DEAR SIR/MADAM,
RE: IMMEDIATE REPORT ON AN EVENT OR MATTER GOING BEYOND THE ORDINARY
AFFAIRS OF A CORPORATION
REGULATION 36(A) OF THE SECURITIES REGULATIONS (PERIODIC AND IMMEDIATE
REPORTS), 5730-1970
NATURE OF EVENT: AGREEMENT WITH THE BANKS AS PART OF PREPARATIONS FOR
COMPLETING A TRANSACTION
The Company hereby announces the execution of an amendment to an agreement
between the Company, Hi-Tex Founded by Tefron Ltd. and Macro Clothing Ltd.
(hereinafter: "THE TEFRON GROUP") and the three banks with which the Company is
connected through financing agreements, Bank Leumi Leyisrael Ltd., Israel
Discount Bank Ltd. and Bank Hapoalim Ltd. (hereinafter: "THE AMENDMENT", "THE
BANKS" and "THE AGREEMENT" respectively). The main aspects of the Amendment
provisions are summarized below:
1. LOAN 1
Subject to the execution of documents employing the standard versions of
any bank, the Banks shall provide a new loan to the Tefron Group, pursuant
to the terms set out below (hereinafter: "LOAN 1"):
1.1 A loan fund in the amount of 3.8 million dollars shall be provided by
the Banks to be divided in accordance with the decisive ratio (as such
term is defined the Company's Immediate Report of March 3, 2010
(reference number: 2010-01-401277), concerning the execution of the
Agreement) (hereinafter: "THE DECISIVE RATIO").
1.2 The loan is for a period of 48 months provided that it shall be
utilized within 30 days of the date of execution of the Amendment.
Alternatively, should the Tefron Group request that Loan 1 be provided
following the expiry of 30 days from the date of execution of the
Amendment, the grace period under section 1.5 below shall be curtailed
accordingly, and, in any event, Loan 1 shall be settled in full by and
no later than the expiry of 48 months from the date of execution of
the Amendment.
[UNOFFICIAL TRANSLATION FROM HEBREW]
1.3 Loan fund 1 shall bear annual interest at a rate to be agreed between
the Tefron Group and any of the Banks in an agreement and/or in
separate loan documents to be executed for such purpose by the Tefron
Group Ltd. vis-a-vis any of the Banks. The Company estimates that the
interest rate on Loan 1, to be determined between the Tefron Group and
each of the Banks is likely to range between 2% and 3.5% with regard
to this dollar credit. The information with respect to the Company's
assessment concerning the interest rates constitutes anticipatory
information within the meaning of the Securities Law. Anticipatory
information is uncertain information regarding the future based on
existing information or assessments in the Company and includes the
Company's intentions or assessments as at the date of publication of
this Report or which is not dependent only on the Company. It is
possible that all or part of the said information, will not
materialize or will materialize differently, inter alia on account of
the following reasons: the negotiations between the Company and the
Banks, interest rates on the market, the date on which the loans shall
be provided to the Company in practice, the status of the company etc.
1.4 The interest on Loan 1 shall be paid by the Tefron Group in
consecutive monthly installments commencing from the date on which
Loan 1 is provided.
1.5 Loan fund 1 shall be paid in equal and consecutive monthly
installments, commencing from the conclusion of 12 months from the
date of execution of the Amendment (above and below: "THE GRACE
PERIOD"), until the date of the final and complete settlement of Loan
1.
2. LOAN 2
Subject to the execution of documents employing the standard versions of
any bank, the Banks shall provide a loan to the Tefron Group, pursuant to
the terms set out below (hereinafter:" LOAN 2"):
2.1 A loan fund in the amount of 1.2 million dollars shall be provided by
the Banks in accordance with the Decisive Ratio and shall be settled
in one payment on June 30, 2011.
2.2 Loan fund 2 shall bear annual interest at a rate to be agreed between
the Tefron Group and any of the Banks in an agreement and/or in
separate loan documents to be executed for such purpose by the Tefron
Group Ltd vis-a-vis any of the Banks. The Company estimates that the
interest rate on Loan 2, to be determined between the Tefron Group and
each of the Banks is likely to range between 1.5% and 2.5% with regard
to this dollar credit. The information with respect to the Company's
assessment concerning the interest rates constitutes anticipatory
information within the meaning of the Securities Law. Anticipatory
information is uncertain information regarding the future based on
existing information or assessments in the Company and includes the
Company's intentions or assessments as at the date of publication of
this Report or which is not dependent only on the Company. It is
possible that all or part of the said information, will not
materialize or will materialize differently, inter alia on account of
the following reasons: the negotiations between the Company and the
Banks, interest rates on the market, the date on which the loans shall
be provided to the Company in practice, the status of the company etc.
[UNOFFICIAL TRANSLATION FROM HEBREW]
2.3 The interest on Loan 2 shall be paid by the Tefron Group in
consecutive monthly installments commencing from the date on which
Loan 2 is provided.
3. INJECTION OF CAPITAL
3.1 A precondition for the provision of the loans specified in sections 1
and 2 above, is that equity capital not less than 5 million dollars
and which shall not exceed 5.9 million dollars shall be invested in
the Company (hereinafter: "INJECTION OF Capital"). In addition, deeds
of undertaking from the controlling shareholders in the Company shall
be submitted to the Banks' satisfaction and shall include, inter alia,
an undertaking not to effect a change of ownership and/or control in
the Company without obtaining the Banks' consent and an undertaking
not to compete with the Company's business.
Concerning the set of agreements executed by the Company, which
include, inter alia, an investment in the Company's capital in the
amount of approximately 5.8 million dollars (hereinafter: "THE
TRANSACTION") see the Company's Immediate Report of November 24, 2010
(as amended on November 29, 2000 and on December 23, 2010 (reference
number 2010-01-728055)).
3.2 Notwithstanding the contents of the agreement with the Banks of March
2, 2010, the Injection of Capital pursuant to section 3.1 above shall
not be used for the purpose of settling credit provided by the Banks
to the Tefron Group in the past.
4. FINANCIAL CRITERIA
The financial criteria fixed in the Agreement were cancelled and replaced
by the following financial criteria (which shall be calculated in
accordance with Company's quarterly and annual (consolidated) audited or
examined financial reports):
[UNOFFICIAL TRANSLATION FROM HEBREW]
4.1 The tangible equity capital rate out of the entire balance shall not
fall short at any time whatsoever of 30%, but, in any event, the
tangible equity capital shall not fall short at any time of the
following amounts:
4.1.1 In 2010 - twenty-eight million US dollars ($28,000,000)
4.1.2 In 2011- twenty-nine million five hundred thousand US dollars
($29,500,000).
4.1.3 In 2012 - thirty-two million US dollars ($32,000,000).
4.1.4 From 2013 onwards- thirty-five million US dollars ($35,000,000).
"TANGIBLE EQUITY CAPITAL" - the total of all the issued and paid-up
share capital plus capital funds and non-appropriated retained
earnings as well as the balance of the company loan amounts in respect
of which subordination deeds were executed vis-a-vis the bank by the
Company and its shareholders, less intangible assets (such as:
goodwill, copyrights, patents, trademarks, trade names etc) and less
exchequer stock and less debtors of the Company which are interested
parties and/or subsidiaries and/or associated companies (as such terms
are defined in the Securities Law, 5728-1968 (hereinafter:"THE
SECURITIES LAW")).
4.2 Customer balances (less customer balances in respect of which the
Company performed factoring transactions) of the Company shall not
fall short at any time of the following amounts:
4.2.1 In 2010 - nine million US dollars ($9,000,000).
4.2.2 In 2011- twelve million five hundred thousand US dollars
($12,500,000).
4.2.3 From 2012 onwards - fourteen million US dollars ($14,000,000
million).
A 5% deviation from the amounts specified in sections 4.2.2 and 4.2.3
shall not constitute a breach of the Tefron Group's obligations under
section 4.
4.3 By December 31, 2011, the Company shall be entitled to perform
factoring transactions (lien and/or sale transactions of customer's
notes in favor of third parties for the purpose of establishing
financing) subject to the proviso that the consideration from such
transaction shall be at least 80% of the amount of the note or
invoice, which shall be used for the purpose of financing operating
capital requirements and that the total amount in respect of which
factoring transactions shall be performed shall not exceed 5 million
US dollars at any time.
[UNOFFICIAL TRANSLATION FROM HEBREW]
4.4 The total amount of the Company's inventory and customer capital
balances shall not fall short at any time of 33,000,000 US dollars,
except with regard to the financial reports of the third quarter of
each calendar year in which the total amount of inventory and account
receivable cash balances of the Company shall not fall short of
29,000,000 dollars.
4.5 The relationship between the total amount of the Company's debts and
liabilities towards banking corporations and other financial bodies
and the Company's annual EBITDA, according to the annual consolidated
reports is as follows:
4.5.1 In 2011 - shall not exceed 9.5.
4.5.2 In 2012 - shall not exceed 8.5.
4.5.3 In 2013 - shall not exceed 7.5.
4.5.4 In 2014 - shall not exceed 6.5.
4.5.5 From 2015 onwards - shall not exceed 5.5.
The breach of each of the obligations to maintain the financial
relationships specified in sections 4.1 through 4.5 above (hereinafter:
"THE FINANCIAL RELATIONSHIPS"), shall be deemed to be a breach of the
Financial Relationships.
The Banks shall be entitled to announce a change in the financial criteria
in the event of a change in its accounting standards without requiring the
Company's approval.
5. ADDITIONAL OBLIGATIONS
In addition to all the aforementioned obligations, the Tefron Group shall
undertake the following obligations towards the Banks:
5.1 In any event where part of the Company's fixed assets (hereinafter:
"THE EQUIPMENT") shall be sold, the following provisions shall apply:
5.1.1 In respect of any amount to be received from such sale not
exceeding 2,000,000 dollars cumulatively (hereinafter:
"CONSIDERATION FOR THE BASIC EQUIPMENT") - 50% of the total said
consideration shall be used on the date of receipt thereof for
the purpose of settling credits and loans under the Agreement and
the Amendment thereof, based on the Decisive Ratio and 50% shall
be used for the purpose of the Tefron Group's operating capital.
[UNOFFICIAL TRANSLATION FROM HEBREW]
5.1.2 The settlement of accounts and division of the aforementioned
Consideration for the Basic Equipment shall take place on the
earlier of the following two dates:
5.1.2.1 At the end of each quarter; or-
5.1.2.2 At any time that the Tefron Group shall sell Equipment
for a cumulative amount exceeding 200,000 dollars.
5.1.2.3 Notwithstanding the aforesaid, the settlement of accounts
with regard to sales of Equipment in the course of 2010,
shall take place by the end of January 2011.
5.1.3 Any amount to be received as aforesaid in excess of 2,000,000
dollars shall be used for the purpose of settling the Tefron
Group's credit to the Banks in accordance with the Decisive
Ratio, including by way early repayment (in such an event no
prepayment penalty shall be paid).
5.1.4 The manner and order of repayment shall be in accordance with
the provisions of the Agreement. For particulars see section
1.3.2 of the Company's Immediate Report of March 3, 2010
(reference number: 2010-01-401277).
5.2 The provisions of the Agreement shall apply with regard to the sale of
any other asset not constituting Equipment.
5.3 To allot to the Banks following the Injection of Capital (in
accordance with the Decisive Ratio), without consideration, a total
amount of 200,000 non-negotiable option deeds, exercisable into
200,000 shares with a nominal value of 10 NIS each of the Company in
return for payment of an exercise price of 3 US dollars per share. The
option deeds shall be exercisable for a period of 72 months from the
date of execution of the Amendment. With the exception of the
aforesaid, the remaining terms of the option deeds have yet to be
fixed. Immediately upon crystallization of all the remaining terms of
the option deeds, the Company shall publish an immediate report in
accordance with the provisions of the Securities Regulations (Private
Offer of Securities in a Registered Company), 5760-2000. The allotment
of the option deeds shall be subject to obtaining all the approvals
required under the law (including the approval of the stock exchange
for registering the shares to be derived from exercising the option
deeds by no later than April 30, 2011.)
[UNOFFICIAL TRANSLATION FROM HEBREW]
5.4 Not to effect a change of ownership and/or control in the company (by
Intimes Nouvelle Seamless Inc., 7341148 Canada Inc., Mivtach Shamir
Holdings Ltd., Ben Lieberman and Martin Lieberman), without obtaining
the Banks' prior consent therefor in writing, with regard to the
ownership and control structure to be created immediately upon
completion of the Transaction. Notwithstanding the aforesaid, a
cumulative change of up to 5% of the rate of holdings of the aforesaid
bodies shall not constitute a breach of the Company's obligation,
provided that the rate of holdings of all the aforementioned bodies
shall not fall short at any time of 45% of the Company's issued and
paid-up capital.
5.5 Not to have holdings in subsidiaries or other associated companies,
other than subject to the execution by such companies of deeds of
undertakings towards the Banks.
YOURS FAITHFULLY,
ERAN ROTEM, CHIEF FINANCIAL OFFICER
TEFRON LTD.