-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HzY3UV3hd2BukcnASSOC93Wv+d69+14qRf/+ECi/IV3gn0R0lsVfZYrduOOjUylp c+LKWV4tCmqoBiaWCVv13g== 0000950131-99-005015.txt : 19990818 0000950131-99-005015.hdr.sgml : 19990818 ACCESSION NUMBER: 0000950131-99-005015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990703 FILED AS OF DATE: 19990817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLYMER GROUP INC CENTRAL INDEX KEY: 0000927417 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILS, MAN MADE FIBER & SILK [2221] IRS NUMBER: 571003983 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14330 FILM NUMBER: 99694403 BUSINESS ADDRESS: STREET 1: 4838 JENKINS AVE CITY: NORTH CHARLESTON STATE: SC ZIP: 29405 BUSINESS PHONE: 8037445174 MAIL ADDRESS: STREET 1: 4838 JENKINS AVENUE CITY: NORTH CHARLESTON STATE: SC ZIP: 29405 10-Q 1 FORM 10-Q - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-Q ---------------- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended July 3, 1999 Commission file number 1-14330 POLYMER GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 57-1003983 (State or other jurisdiction of (I.R.S. Employer Indentification No.) incorporation or organization) 4838 Jenkins Avenue 29405 North Charleston, South Carolina (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (843) 566-7293 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. On August 13, 1999 there were 32,000,000 Common Shares, $.01 par value outstanding. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- POLYMER GROUP, INC. INDEX TO FORM 10-Q
Page ---- Part I. Financial Information............................................. 3 Item 1. Financial Statements.......................................... . 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................. 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk.... . 16 Part II. Other Information.............................................. . 17 Signatures................................................................ 18 Exhibit Index............................................................. 19
2 PART I. FINANCIAL INFORMATION Item I. Financial Statements POLYMER GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data)
July 3, January 2, ASSETS 1999 1999 ------ ----------- ---------- (Unaudited) Current assets: Cash and equivalents................................. $ 38,482 $ 58,308 Marketable securities................................ 463 -- Accounts receivable, net............................. 137,711 103,958 Inventories.......................................... 104,172 98,820 Other................................................ 36,197 49,645 ---------- ---------- Total current assets............................... 317,025 310,731 Property, plant and equipment, net..................... 739,276 685,009 Intangibles and loan acquisition costs, net............ 251,271 253,094 Other.................................................. 38,959 34,133 ---------- ---------- Total assets....................................... $1,346,531 $1,282,967 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable, accrued liabilities and other...... $ 124,841 $ 95,205 Current portion of long-term debt.................... 5,084 3,070 ---------- ---------- Total current liabilities.......................... 129,925 98,275 ---------- ---------- Long-term debt, less current portion................... 899,757 863,429 Deferred income taxes.................................. 71,106 82,876 Other non-current liabilities.......................... 21,563 18,262 Shareholders' equity: Series preferred stock--$.01 par value, 10,000,000 shares authorized, 0 shares issued and outstanding.. -- -- Common stock--$.01 par value, 100,000,000 shares authorized, 32,000,000 shares issued and outstanding......................................... 320 320 Non-voting common stock--$.01 par value, 3,000,000 shares authorized, 0 shares issued and outstanding.. -- -- Additional paid-in capital........................... 243,662 243,662 (Deficit)............................................ (5,174) (19,651) Accumulated other comprehensive (loss)............... (14,628) (4,206) ---------- ---------- 224,180 220,125 ---------- ---------- Total liabilities and shareholders' equity......... $1,346,531 $1,282,967 ========== ==========
See accompanying notes. 3 POLYMER GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended ------------------ ------------------ July 3, July 4, July 3, July 4, 1999 1998 1999 1998 -------- -------- -------- -------- Net sales............................... $223,819 $206,111 $433,966 $399,447 Cost of goods sold...................... 161,899 154,227 318,778 301,285 -------- -------- -------- -------- Gross profit............................ 61,920 51,884 115,188 98,162 Selling, general and administrative expenses............................... 30,845 24,329 57,913 50,354 -------- -------- -------- -------- Operating income........................ 31,075 27,555 57,275 47,808 Other (income) expense: Interest expense, net................. 18,240 17,194 35,790 33,174 Investment income--(gain) on marketable securities, net........... (1,567) -- (2,942) -- Foreign currency and other............ 647 486 1,306 1,162 -------- -------- -------- -------- 17,320 17,680 34,154 34,336 -------- -------- -------- -------- Income before income taxes and extraordinary item..................... 13,755 9,875 23,121 13,472 Income taxes............................ 5,110 3,635 8,644 4,937 -------- -------- -------- -------- Income before extraordinary item........ 8,645 6,240 14,477 8,535 Extraordinary item, (loss) from extinguishment of debt................. -- -- -- (2,728) -------- -------- -------- -------- Net income........................ $ 8,645 $ 6,240 $ 14,477 $ 5,807 ======== ======== ======== ======== Net income per common share: Basic and diluted: Average common shares outstanding... 32,000 32,000 32,000 32,000 Income before extraordinary item.... $ 0.27 $ 0.20 $ 0.45 $ 0.27 Extraordinary item, (loss) from extinguishment of debt............. -- -- -- (0.09) -------- -------- -------- -------- Net income per common share--basic and diluted...................... $ 0.27 $ 0.20 $ 0.45 $ 0.18 ======== ======== ======== ========
See accompanying notes. 4 POLYMER GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In Thousands)
Six Months Ended ------------------- July 3, July 4, 1999 1998 -------- --------- Operating activities Net income.............................................. $ 14,477 $ 5,807 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary item.................................... -- 2,728 Depreciation and amortization expense................. 31,938 30,385 Change in marketable securities classified as trading. (463) -- Foreign currency transaction losses, net.............. 1,306 1,162 Changes in operating assets and liabilities, net of effects of business acquisition: Accounts receivable................................... (27,510) (5,452) Inventories........................................... (2,093) (5,226) Accounts payable and other............................ 19,313 8,573 -------- --------- Net cash provided by operating activities........... 36,968 37,977 -------- --------- Investing activities Purchases of property, plant and equipment.............. (73,875) (39,934) Purchases of marketable securities classified as available for sale..................................... -- (7,533) Proceeds from sales of marketable securities classified as available for sale.................................. -- 7,299 Proceeds from sale of assets, net of canceled subordinated advance................................... -- 323,524 Minority interest....................................... -- (54,730) Other, including business acquisition................... (19,075) (53,493) -------- --------- Net cash (used in) provided by investing activities. (92,950) 175,133 -------- --------- Financing activities Proceeds from debt...................................... 99,396 595,586 Payment of debt......................................... (68,450) (781,356) Loan acquisition costs, net............................. (2,857) (10,029) -------- --------- Net cash provided by (used in) financing activities. 28,089 (195,799) -------- --------- Effect of exchange rate changes on cash................... 8,067 (508) -------- --------- Net (decrease) increase in cash and equivalents........... (19,826) 16,803 Cash and equivalents at beginning of period............... 58,308 50,190 -------- --------- Cash and equivalents at end of period..................... $ 38,482 $ 66,993 ======== =========
See accompanying notes. 5 POLYMER GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Description of Business and Basis of Presentation Polymer Group, Inc. (the "Company"), a global manufacturer and marketer of nonwoven and oriented polyolefin products, operates in four business segments which include hygiene, medical, wiping and industrial and specialty products. The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The Condensed Consolidated Balance Sheet as of January 2, 1999 contains summarized information; as a result, such data does not include the same detail provided in the 1998 annual report. In the opinion of management, these unaudited consolidated financial statements contain all adjustments of a normal recurring nature necessary for a fair presentation. Operating results for the three months and six months ended July 3, 1999, are not necessarily indicative of the results that may be expected for fiscal 1999. Certain amounts previously presented in the consolidated financial statements for prior periods have been reclassified to conform to current classification. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 2. Inventories Inventories are stated at the lower of cost or market using the first-in, first-out method of accounting and consist of the following (in thousands):
July 3, January 2, 1999 1999 ----------- ---------- (Unaudited) Inventories: Finished goods.................................. $ 56,812 $51,595 Work in process and stores and maintenance parts.......................................... 13,977 12,126 Raw materials................................... 33,383 35,099 -------- ------- Total......................................... $104,172 $98,820 ======== =======
Note 3. Net Income Per Share The Company discloses earnings per share in accordance with SFAS No. 128, "Earnings Per Share." Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. The numerator for both basic and diluted earnings per share is net income applicable to common stock. The denominator for both basic and diluted earnings per share is average common shares outstanding. Note 4. New Accounting Standards In 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133") which is effective for fiscal years beginning after June 15, 2000. FAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the 6 POLYMER GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) statement of financial position and measure those instruments at fair value. FAS 133 requires disclosure based on the type of hedge and the type of market risk that is being hedged. Currently, the Company does not anticipate FAS 133 to have a material financial or operational impact on the Company. In April 1998, the American Institute of Certified Accountants issued Statement of Position 98-5, "Reporting the Costs of Start-Up Activities" ("SOP"). The SOP was effective beginning on January 1, 1999, and required that start-up/organization costs capitalized prior to January 1, 1999 be written- off and any future start-up costs be expensed as incurred. During the fourth quarter of 1998, the Company elected early adoption and wrote-off the net book value of start-up costs as a cumulative effect of an accounting change, as permitted by the SOP. Note 5. Selected Financial Data of Guarantors Payment of the Company's senior notes is guaranteed jointly and severally on a senior subordinated basis by certain of the Company's subsidiaries. Management has determined that separate complete financial statements of the guarantors are not material to users of the financial statements. The following sets forth selected financial data of the guarantor and non- guarantor subsidiaries (in thousands): Condensed Consolidating Selected Balance Sheet Financial Data As of July 3, 1999
Combined Combined Non- Guarantor Guarantor The Reclassifications Subsidiaries Subsidiaries Company and Eliminations Consolidated ------------ ------------ ---------- ----------------- ------------ Working capital......... $ 69,188 $ 87,334 $ 6,193 $ 24,385 $ 187,100 Total assets............ 2,054,900 575,577 1,054,090 (2,338,036) 1,346,531 Total debt.............. 5,688 42,458 856,695 -- 904,841 Shareholders' equity.... 1,065,107 284,177 153,967 (1,279,071) 224,180
Condensed Consolidating Selected Balance Sheet Financial Data As of January 2, 1999
Combined Combined Non- Guarantor Guarantor The Reclassifications Subsidiaries Subsidiaries Company and Eliminations Consolidated ------------ ------------ ---------- ----------------- ------------ Working capital......... $ 94,702 $102,412 $ 14,272 $ 1,070 $ 212,456 Total assets............ 2,034,836 520,822 1,037,890 (2,310,581) 1,282,967 Total debt.............. 5,741 34,247 826,511 -- 866,499 Shareholders' equity.... 1,084,281 235,106 169,917 (1,269,179) 220,125
7 POLYMER GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Condensed Consolidating Statement of Operations Selected Financial Data For the Six Months Ended July 3, 1999
Combined Combined Non- Guarantor Guarantor The Reclassifications Subsidiaries Subsidiaries Company and Eliminations Consolidated ------------ ------------ -------- ----------------- ------------ Net sales............... $278,145 $165,633 $ -- $ (9,812) $433,966 Operating income........ 32,655 23,537 1,083 -- 57,275 Income (loss) before income taxes and extraordinary item..... 29,216 16,899 (22,994) -- 23,121 Income taxes............ 4,877 2,991 776 -- 8,644 Income (loss) before extraordinary item..... 24,339 13,908 (23,770) -- 14,477 Equity in earnings of subsidiaries........... -- -- 38,247 (38,247) -- Net income.............. 24,339 13,908 14,477 (38,247) 14,477
Condensed Consolidating Statement of Operations Selected Financial Data For the Six Months Ended July 4, 1998
Combined Combined Non- Guarantor Guarantor The Reclassifications Subsidiaries Subsidiaries Company and Eliminations Consolidated ------------ ------------ ------- ----------------- ------------ Net sales............... $252,281 $155,015 $ -- $ (7,849) $399,447 Operating income........ 27,317 15,458 4,889 144 47,808 Income (loss) before income taxes and extraordinary item..... 10,453 10,529 (8,152) 642 13,472 Income taxes (benefit).. 3,363 3,333 (1,743) (16) 4,937 Income (loss) before extraordinary item..... 7,090 7,196 (6,409) 658 8,535 Extraordinary item...... -- (2,728) -- -- (2,728) Equity in earnings of subsidiaries........... -- -- 11,558 (11,558) -- Net income.............. 7,090 4,468 5,149 (10,900) 5,807
Note 6. Comprehensive Income The Company reports comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130 requires unrealized gains or losses on the Company's available-for-sale securities and foreign currency translation adjustments to be included in other comprehensive income. The Company's comprehensive income, net of the related tax benefit, approximated $9.0 million and $8.7 million for the three months ended July 3, 1999 and July 4, 1998, respectively. Year to date comprehensive income, net of the related tax benefit, approximated $4.1 million in 1999 and $1.8 million in 1998. 8 POLYMER GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Note 7. Segment Information The Company reports segment information in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("FAS 131"). Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance. The Company defines operating segments around market sectors. Two primary customers each account for greater than 10% of the Company's sales. Sales to The Procter & Gamble Company are reported primarily within the hygiene segment. Sales to Johnson & Johnson are reported primarily in the hygiene and medical segments. The loss of these sales would have a material adverse effect on these segments. Generally, the Company's products can be manufactured on more than one type of asset. Accordingly, certain costs and assets attributed to each segment of the business were determined on an allocation basis. Production times have a similar relationship to net sales, thus the Company believes a reasonable basis for allocating certain costs is the percent of net sales method. Segment assets have not changed materially from the amounts reported in the 1998 annual report; therefore, the Company has elected not to disclose segment assets for interim reporting, as permitted by FAS 131. Financial data by segments follows (in thousands):
Three Months Ended Six Months Ended ----------------- ----------------- July 3, July 4, July 3, July 4, 1999 1998 1999 1998 -------- -------- -------- -------- Net sales to unaffiliated customers: Hygiene.......................... $ 78,354 $ 79,442 $156,675 $159,615 Medical.......................... 27,089 23,122 51,715 45,949 Wipes............................ 35,648 25,911 70,064 52,171 Industrial and specialty......... 82,728 77,636 155,512 141,712 -------- -------- -------- -------- $223,819 $206,111 $433,966 $399,447 ======== ======== ======== ======== Operating income: Hygiene.......................... $ 15,387 $ 11,292 $ 29,046 $ 18,932 Medical.......................... 5,258 3,936 9,436 7,273 Wipes............................ 5,831 4,096 9,495 8,081 Industrial and specialty......... 4,599 8,231 9,298 13,522 -------- -------- -------- -------- $ 31,075 $ 27,555 $ 57,275 $ 47,808 ======== ======== ======== ========
A reconciliation of operating income shown above to income before income taxes and extraordinary item shown in the Consolidated Statements of Operations follows (in thousands):
Three Months Six Months Ended Ended ---------------- ---------------- July 3, July 4, July 3, July 4, 1999 1998 1999 1998 ------- ------- ------- ------- Operating income....................... $31,075 $27,555 $57,275 $47,808 Interest expense, net.................. 18,240 17,194 35,790 33,174 Investment income-(gain) on marketable securities, net....................... (1,567) -- (2,942) -- Foreign currency and other............. 647 486 1,306 1,162 ------- ------- ------- ------- Income before income taxes and extraordinary item.................. $13,755 $ 9,875 $23,121 $13,472 ======= ======= ======= =======
9 Note 8. Debt On April 9, 1999, the Company amended its credit facility to add an additional term loan in the amount of $50.0 million. The amendment also modified certain covenants, including an increase to the permitted leverage ratios. The Company borrowed the entire amount of the additional term loan which was used to reduce amounts outstanding under the revolving portion of the credit facility. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company's consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and notes thereto contained in Part I of this report on Form 10-Q and with the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 1999. Results of Operations The following table sets forth the percentage relationships to net sales of certain income statement items.
Three Months Six Months Ended Ended --------------- --------------- July 3, July 4, July 3, July 4, 1999 1998 1999 1998 ------- ------- ------- ------- Net sales: Hygiene................................ 35.0% 38.5% 36.1% 40.0% Medical................................ 12.1 11.2 11.9 11.5 Wiping................................. 15.9 12.6 16.2 13.0 Industrial and specialty............... 37.0 37.7 35.8 35.5 ----- ----- ----- ----- 100.0 100.0 100.0 100.0 Cost of goods sold: Material............................... 37.4 42.1 38.1 42.3 Labor.................................. 8.9 8.4 8.6 8.4 Overhead............................... 26.0 24.3 26.8 24.7 ----- ----- ----- ----- 72.3 74.8 73.5 75.4 ----- ----- ----- ----- Gross profit........................... 27.7 25.2 26.5 24.6 Selling, general and administrative expenses................................ 13.8 11.8 13.3 12.6 ----- ----- ----- ----- Operating income......................... 13.9 13.4 13.2 12.0 Other (income) expense: Interest expense, net.................. 8.1 8.3 8.3 8.3 Investment income--(gain) on marketable securities, net....................... (0.7) -- (0.7) -- Foreign currency and other............. 0.3 0.2 0.3 0.3 ----- ----- ----- ----- 7.7 8.5 7.9 8.6 Income before income taxes and extraordinary item...................... 6.2 4.9 5.3 3.4 Income taxes............................. 2.3 1.8 2.0 1.2 ----- ----- ----- ----- Income before extraordinary item......... 3.9 3.1 3.3 2.2 Extraordinary item, (loss) from extinguishment of debt.................. -- -- -- (0.7) ----- ----- ----- ----- Net income............................... 3.9% 3.1% 3.3% 1.5% ===== ===== ===== =====
10 Comparison of Three Months Ended July 3, 1999 and July 4, 1998 The following table sets forth components of the Company's net sales and operating income by segment for the three months ended July 3, 1999 and the corresponding increase/(decrease) over the comparable period in 1998:
Three Months Ended ----------------- % July 3, July 4, Increase/ Increase/ 1999 1998 (Decrease) (Decrease) -------- -------- ---------- ---------- (Dollars in Thousands, Except Percent Data) Net sales: Hygiene......................... $ 78,354 $ 79,442 $(1,088) (1.4)% Medical......................... 27,089 23,122 3,967 17.2 Wiping.......................... 35,648 25,911 9,737 37.6 Industrial and specialty........ 82,728 77,636 5,092 6.6 -------- -------- ------- $223,819 $206,111 $17,708 8.6% ======== ======== ======= Operating income: Hygiene......................... $ 15,387 $ 11,292 $ 4,095 36.3% Medical......................... 5,258 3,936 1,322 33.6 Wiping.......................... 5,831 4,096 1,735 42.4 Industrial and specialty........ 4,599 8,231 (3,632) (44.1) -------- -------- ------- $ 31,075 $ 27,555 $ 3,520 12.8% ======== ======== =======
Net Sales The increase in net sales of 8.6% for the second quarter of 1999 over the second quarter of 1998 was due primarily to organic growth. Hygiene sales decreased 1.4% quarter over quarter as a result of mechanical modifications to certain production lines, including the conversion of two existing lines to be APEX(TM) capable, and the replacement of certain low margin products with high margin products. Medical sales increased 17.2% quarter over quarter as a result of new products and increased demand from several leading customers. Wipes sales increased 37.6% quarter over quarter due to the release of new products and new programs introduced by leading customers. Industrial and specialty sales increased 6.6%, despite a weak farm economy, as a result of organic growth within non-agricultural product lines. Operating Income The increase in operating income of 12.8% for the second quarter of 1999 over the second quarter of 1998 was due to increased sales from both existing and new products and lower raw material costs as a percentage of sales due to both a richer product mix and lower purchase prices for materials. As a percentage of sales, labor costs remained constant. There were increases in both overhead costs and selling, general and administrative costs associated with the development and introduction of new products. Hygiene operating income increased 36.3% quarter over quarter as a result of a better product mix which included new higher margin products. Medical operating income increased 33.6% quarter over quarter as a result of increased sales. Wiping operating income increased 42.4% quarter over quarter as a result of new product introductions. Industrial and specialty operating income decreased 44.1% quarter over quarter, despite increased sales, as a result of incremental costs associated with new manufacturing programs and increased research and development stemming from new products. In addition, certain agricultural products within the industrial and specialty segment were negatively impacted by the weak farm economy. 11 Other Interest expense increased $1.0 million, from $17.2 million in the second quarter of 1998 to $18.2 million in the second quarter of 1999. Interest expense as a percentage of net sales remained constant quarter over quarter. The increase in interest expense is principally due to a higher average amount of indebtedness outstanding. During the second quarter of 1999 the Company recognized a gain on marketable securities, classified as trading, of $1.6 million. Net foreign currency transaction losses were approximately $0.6 million during the second quarter of 1999 and $0.5 million during the second quarter of 1998. The Company provided for income taxes of approximately $5.1 million for the three months ended July 3, 1999, representing an effective tax rate of 37.2%. The provision for income taxes at the Company's effective rate differed from the provision for income taxes at the statutory rate due primarily to higher tax rates in foreign jurisdictions. The Company provided for income taxes of $3.6 million during the second quarter of 1998, representing an effective tax rate of 36.8%. Net Income Income increased $2.4 million from $6.2 million, or $0.20 per share, during the second quarter of 1998 to $8.6 million, or $0.27 per share, during the second quarter of 1999. Comparison of Six Months Ended July 3, 1999 and July 4, 1998 The following table sets forth components of the Company's net sales and operating income by segment for the six months ended July 3, 1999 and the corresponding increase/(decrease) over the comparable period in 1998:
Six Months Ended ----------------- % July 3, July 4, Increase/ Increase/ 1999 1998 (Decrease) (Decrease) -------- -------- ---------- ---------- (Dollars in Thousands, Except Percent Data) Net sales: Hygiene......................... $156,675 $159,615 $(2,940) (1.8)% Medical......................... 51,715 45,949 5,766 12.5 Wiping.......................... 70,064 52,171 17,893 34.3 Industrial and specialty........ 155,512 141,712 13,800 9.7 -------- -------- ------- $433,966 $399,447 $34,519 8.6% ======== ======== ======= Operating income: Hygiene......................... $ 29,046 $ 18,932 $10,114 53.4% Medical......................... 9,436 7,273 2,163 29.7 Wiping.......................... 9,495 8,081 1,414 17.5 Industrial and specialty........ 9,298 13,522 (4,224) (31.2) -------- -------- ------- $ 57,275 $ 47,808 $ 9,467 19.8% ======== ======== =======
Net Sales The increase in net sales of 8.6% for the six months ended July 3, 1999 over the same period in 1998 was due primarily to organic growth. 12 Hygiene sales decreased 1.8% year over year as a result of mechanical modifications to certain production lines, including the conversion of two existing lines to be APEX(TM) capable, and the replacement of certain low margin products with high margin products. Medical sales increased 12.5% year over year as a result of new products and increased demand from several leading customers. Wipes sales increased 34.3% year over year due to the release of new products and new programs introduced by leading customers. Industrial and specialty sales increased 9.7%, despite a weak farm economy, as a result of organic growth within non-agricultural product lines. Operating Income The increase in operating income of 19.8% for the six months ended July 3, 1999 over the same period in 1998 was due to increased sales from both existing and new products and lower raw material costs as a percentage of sales due to both a richer product mix and lower purchase prices for materials. As a percentage of sales, labor costs remained constant. There were increases in both overhead costs and selling, general and administrative costs associated with the development and introduction of new products. Hygiene operating income increased 53.4% year over year as a result of a better product mix which included new higher margin products. Medical operating income increased 29.7% year over year as a result of increased sales. Wiping operating income increased 17.5% year over year, as a result of new product introductions. Industrial and specialty operating income decreased 31.2% year over year, despite higher sales, as a result of incremental costs associated with new manufacturing programs and increased research and development costs stemming from new products. In addition, certain agricultural products within the industrial and specialty segment were negatively impacted by the weak farm economy. Other Interest expense increased $2.6 million, from $33.2 million in the first half of 1998 to $35.8 million in the first half of 1999. Interest expense as a percentage of net sales remained constant year over year. The increase in interest expense is principally due to a higher average amount of indebtedness outstanding. During the first half of 1999 the Company recognized a gain on marketable securities, classified as trading, of $2.9 million. Net foreign currency transaction losses were approximately $1.3 million during the first half of 1999 and $1.2 million during the first half of 1998. The Company provided for income taxes of approximately $8.6 million for the six months ended July 3, 1999, representing an effective tax rate of 37.4%. The provision for income taxes at the Company's effective rate differed from the provision for income taxes at the statutory rate due primarily to higher tax rates in foreign jurisdictions. The Company provided for income taxes of $4.9 million during the first half of 1998, representing an effective tax rate of 36.6%. Income Before Extraordinary Item Income before extraordinary item increased $5.9 million from $8.5 million, or $0.27 per share, during the first half of 1998 to $14.5 million, or $0.45 per share, during the first half of 1999. Extraordinary Item The Company recorded one-time charges of $2.7 million for the write-off of previously capitalized deferred financing costs during the first quarter of 1998. 13 Liquidity and Capital Resources
January July 3, 2, 1999 1999 ---------- --------- (In Thousands) Balance sheet data: Cash and equivalents and marketable securities.. $ 38,945 $ 58,308 Working capital................................. 187,100 212,456 Total assets.................................... 1,346,531 1,282,967 Debt (including current portion)................ 904,841 866,499 Shareholders' equity............................ 224,180 220,125 Six Months Ended --------------------- July 3, July 4, 1999 1998 ---------- --------- (In Thousands) Cash flow data: Net cash provided by operating activities....... $ 36,968 $ 37,977 Net cash (used in) provided by investing activities..................................... (92,950) 175,133 Net cash provided by (used in) financing activities..................................... 28,089 (195,799)
Operating Activities During the first half of 1999 the Company's operations generated $37.0 million in cash. The Company's working capital and cash and equivalents and marketable securities decreased as a result of increased capital expenditures. Investing and Financing Activities Capital expenditures for the first half of 1999 totaled $73.9 million, related primarily to margin-enhancing projects. For the remainder of fiscal 1999, the Company expects capital expenditures to approximate $76.0 million. On April 9, 1999, the Company amended its credit facility to add an additional term loan in the amount of $50.0 million. The amendment also modified certain covenants, including an increase to the permitted leverage ratios. The Company borrowed the entire amount of the additional term loan which was used to reduce amounts outstanding under the revolving portion of the credit facility. The Company believes that based on current levels of operations and anticipated growth, its cash from operations, together with other available sources of liquidity (including but not limited to borrowings under the credit facility) will be adequate over the next several years to make required debt payments, including interest thereon, to permit anticipated capital expenditures and to fund the Company's working capital requirements. As of July 3, 1999, the Company's availability under its credit facility, including cash and equivalents and marketable securities, approximated $222.5 million. Effect of Inflation Inflation generally affects the Company by increasing the cost of labor, equipment and new materials. The Company believes that inflation had no material effect on the Company's business during the six months ended July 3, 1999. 14 Foreign Currency The Company's substantial foreign operations expose it to the risk of exchange rate fluctuations. If foreign currency denominated revenues are greater than costs, the translation of foreign currency denominated costs and revenues into U.S. dollars will improve profitability when the foreign currency strengthens against the U.S. dollar and will reduce profitability when the foreign currency weakens. Year 2000 The Company has commenced global initiatives to address the Year 2000 issue. The project encompasses a review of information systems, personal computers, process systems and ancillary systems and communications with third party suppliers, vendors and customers. The objective of the Year 2000 project is to minimize the seriousness of any technical failures in order to reduce the risk of a material impact on the operations and financial condition of the Company. The following outlines, by key areas, the status of the Company's Year 2000 project, any reasonably expected risks identified during this process, costs and contingency plans. Information Systems and Personal Computers The majority of information systems and personal computers are Year 2000 ready. The information systems at certain facilities in Canada and Europe are in the final phases of readiness with anticipated completion dates during the third quarter of 1999. Year 2000 software "patches" are being tested at the U.S. nonwovens facilities. We anticipate these software "patches" being applied during the third quarter. In most cases, the Company has replaced, or is in the process of replacing, older software with new programs and systems, rather than modifying existing systems solely to become Year 2000 ready. Although the timing of the system replacements is influenced by the Year 2000, in most cases these systems would have been replaced in the normal course of business. Management currently does not reasonably expect any risks material to the operations and financial condition of the Company as a result of information system and personal computer failures. Contingency plans are being investigated for these systems, many of which are not critical. Process Systems The Company has been communicating with vendors and performing physical tests of the process systems and is nearing the completion of the assessment. The initial phase of the assessment revealed that certain systems are not Year 2000 ready. All non-compliant systems are being repaired or replaced. Most process systems can be bypassed if necessary which would limit potential Year 2000 problems. The results of this assessment, plans for the final phase, and any necessary contingency plans will be disclosed at a later date. Ancillary Systems The assessment has revealed that the majority of ancillary systems are Year 2000 ready. All non-compliant systems are being upgraded to avoid potential problems. The assessment has not revealed any material risks associated with ancillary systems. Third Party Compliance The Company continues to learn and evaluate the compliance status of vendors, suppliers and customers with whom we have a material relationship. This process includes sending surveys to key suppliers; however, in most cases, the responses have not been adequate in determining the readiness of third parties. The Company could face a material financial risk if its customers or suppliers are unable to complete critical Year 2000 readiness efforts in a timely manner; however, the evaluation 15 has not revealed any material risks to date associated with third parties. The Company plans to have alternate suppliers available in the event a primary supplier has a Year 2000 related production interruption. Year 2000 Costs Costs incurred to date have been approximately $0.9 million and currently management does not expect future costs to exceed an additional $0.9 million. Costs are being monitored and can be expected to fluctuate during the final phases of the project; however, total costs are not expected to be material to the financial results of the Company. Euro Conversion On January 1, 1999, member countries of the European Monetary Union (EMU) began a three-year transition from their national currencies to a new common currency, the "euro". Permanent rates of exchange between members' national currency and the euro have been established and monetary, capital, foreign exchange, and interbank markets have been converted to the euro. National currencies will continue to exist as legal tender and may continue to be used in commercial transactions. By January 2002, euro currency will be issued and by July 2002, the respective national currencies will be withdrawn. The Company has operations in three of the participating countries and has successfully transitioned to using both the euro and local currencies for commercial transactions. The Company continues to address the euro's impact on information systems, currency exchange rate risk, taxation and pricing. Costs of the euro conversion have not been material and management believes that future costs of the euro conversion will not have a material impact on the operations or the financial condition of the Company. New Accounting Standards See "Note 4 to the Consolidated Financial Statements" Safe Harbor Statement under the Private Securities Litigation Act of 1995 Except for historical information contained herein, certain matters set forth within Management's Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-Q are forward looking statements. Certain risks and uncertainties could cause actual results to differ materially from those set forth in the forward looking statements. The following factors could cause actual results to differ materially from historical results or those anticipated: adverse economic conditions, competition in the Company's markets, fluctuation in raw material costs, and other risks detailed in documents filed by the Company with the Securities and Exchange Commission. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company's variable interest rate applicable to borrowings under its credit facility is based on, in the case of U.S. dollar denominated loans, the Base Rate referred to therein or the Eurocurrency rate referred to therein for U.S. dollars, at the Company's option, plus a specified margin. In the event that a portion of the credit facility is denominated in Dutch Guilders, the applicable interest rate is based on the applicable Eurocurrency Base Rate referred to therein for Dutch Guilders, plus a specified margin. In the event that a portion of the Credit Facility is denominated in Canadian Dollars, the applicable interest rate is based on the Canadian Base Rate referred to therein, plus a specified margin, of the Bankers' Acceptance discount Rate referred to therein, at the Company's option. At July 3, 1999, the Company had borrowings under the Credit Facility of $293.1 million that were subject to interest rate risk. Each 1.0% increase in interest rates would impact pretax earnings by $2.9 million. The Company has an interest rate cap agreement which limits the amount of interest expense on $100 million of this debt to a rate of 9%. 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings Not applicable. Item 2. Changes in Securities Not applicable. Item 3. Defaults upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders The Company's annual meeting of its stockholders was held on May 20, 1999. At the annual meeting, the Company's stockholders voted on two proposals: (i) the election of three nominees to serve as directors for three year terms; and (ii) the ratification of the appointment of Ernst & Young LLP as independent auditors for the year 1999. The voting of the Company's stockholders as to these matters was as follows: Election of Directors David A. Donnini--29,368,264 votes for; 11,951 votes withheld. Duncan M. O'Brien, Jr.--29,368,264 votes for; 11,951 votes withheld. L. Glenn Orr, Jr.--29,368,264 votes for; 11,951 votes withheld. Ratification of Appointment of Accountants 29,368,650 votes for; 11,400 votes against; 165 abstentions Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K Exhibits required to be filed with this report on Form 10-Q are listed in the following Exhibit Index. There were no reports filed on Form 8-K during the quarter ended July 3, 1999. 17 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. Polymer Group, Inc. /s/ Jerry Zucker By: _________________________________ Jerry Zucker Chairman, President, Chief Executive Officer and Director (Principal Executive Officer) /s/ James G. Boyd By: _________________________________ James G. Boyd Executive Vice President, Treasurer and Director (Principal Financial Officer and Principal Accounting Officer) August 16, 1999 18 EXHIBIT INDEX
Exhibit Number Document Description ------- -------------------- 11 Statement of Computation of Per Share Earnings. 10.1 Amendment No. 3, dated April 9, 1999, to the Amended, Restated and Consolidated Credit Agreement dated July 3, 1997 by and among Polymer Group, Inc., the Guarantors named therein, the lenders named therein and the Chase Manhattan Bank, as agent. 27 Financial Data Schedule
19 EX-10.1 2 AMENDMENT NO. 3 Exhibit 10.1 ------------ EXECUTION COPY AMENDMENT NO. 3 AMENDMENT NO. 3 dated as of April 9, 1999, between Polymer Group, Inc. ("PGI"); each of the other "Borrowers" identified under the caption "BORROWERS" on the signature pages hereto, each of the Domestic Non-Borrower Guarantors identified under the caption "DOMESTIC NON-BORROWER GUARANTORS" on the signature pages hereto; each of the lenders that is a signatory hereto identified under the caption "LENDERS" on the signature pages hereto; and THE CHASE MANHATTAN BANK, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the "Administrative Agent"). PGI, the other Borrowers, the Domestic Non-Borrower Guarantors, the Lenders referred to therein and the Administrative Agent are parties to a Second Amended, Restated and Consolidated Credit Agreement dated as of July 3, 1997 (as heretofore amended, the "Credit Agreement"), providing for the Lenders to extend credit (by way of revolving credit loans, term loans and letters of credit) to the Borrowers in U.S. Dollars and in certain Alternative Currencies in an amount at any time not exceeding U.S. $450,000,000. PGI has now requested that the Lenders extend additional credit to PGI by way of an additional single-draw term loan facility in U.S. Dollars in the amount of U.S. $50,000,000 to be used by PGI to partially finance capital expenditures in connection with a planned capital expansion program including expansion of its Miratec and Miralace product lines and capital expansion in respect of nonwovens manufacturing capacity in Colombia and in China. PGI, the other Borrowers, the Domestic Non- Borrower Guarantors, the Lenders and the Administrative Agent wish to amend the Credit Agreement in order to provide for such additional credit and in certain other respects, and, accordingly, the parties hereto hereby agree as follows: Section 1. Definitions. Capitalized terms used but not otherwise defined herein have the meanings given them in the Credit Agreement. Section 2. Amendments Requiring Consent of Majority Lenders. Subject to the execution and delivery to the Administrative Agent of this Amendment No. 3 by the Majority Lenders and each Obligor, but effective as of the date hereof, the Credit Agreement shall be amended as follows: Section 2.01. General. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Credit Agreement as amended by this Section 2. Section 2.02. Definitions. Section 1.01 of the Credit Agreement shall be amended by adding the following new definitions (to the extent not already included in said Section 1.01) and inserting the same in the appropriate alphabetical locations and amending in -2- their entirety the following definitions (to the extent already included in said Section 1.01), as follows: "Alternative Currency" shall mean, at any time, Dutch Guilders, Canadian Dollars or Euros, so long as at such time, (i) such Currency is freely transferable and convertible into U.S. Dollars in the London foreign exchange market, (ii) no central bank or other governmental authorization in the country of issue of such Currency is required to permit use of such Currency by any Lender for making any Loan hereunder and/or to permit the relevant Borrower to borrow and repay the principal thereof and to pay the interest thereon, unless such authorization has been obtained, and (iii) in the case of Dutch Guilders or Euros, also so long as at such time such Currency is dealt with in the London interbank deposit market. "EMU" shall mean economic and monetary union as contemplated in the Treaty on European Union. "EMU Legislation" shall mean legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency (whether known as the euro or otherwise), being in part the implementation of the third stage of EMU. "Euro" shall mean the single currency of Participating Member States of the European Union, which shall be a Currency under this Agreement. "Euro Unit" shall mean a currency unit of the Euro. "Dividend Payment" shall mean, with respect to any Person, dividends (in cash, Property or obligations) on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of, any shares of any class of stock of such Person or of any warrants, options or other rights to acquire the same (or to make any payments, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market or equity value of such Person or any of its Subsidiaries), but excluding dividends payable solely in shares of common stock of such Person and excluding also any dividends or other distributions made by any Wholly Owned Restricted Subsidiary to PGI or to any other Wholly Owned Restricted Subsidiary. For purposes hereof, the amount of any Dividend Payment made by any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall be deemed to be equal to the amount of such Dividend Payment that is made to holders of the equity interests in such Restricted Subsidiary other than PGI and its Wholly Owned Restricted Subsidiaries. -3- "Dutch Guilders" and "GL" shall mean the National Currency Unit of the Netherlands. "Eurocurrency Loans" shall mean Loans denominated in either U.S. Dollars, Dutch Guilders or Euros, the interest rates on which are determined (i) on the basis of rates referred to in the definition of "Eurocurrency Base Rate" in this Section 1.01 or (ii) as set forth in Section 12.20(d) hereof. "Euroguilder Loans" shall mean Eurocurrency Loans that are denominated in Dutch Guilders or Euros. "Fixed Charges Ratio" shall mean, as at any date, the ratio of (a) EBITDA for the period of four fiscal quarters ending on or most recently ended prior to such date minus Capital Expenditures for such period (except that, for any period ending on or before the fiscal year ending on or nearest to December 31, 2000, that portion, up to an aggregate amount equal to U.S. $200,000,000, of Capital Expenditures, for the relevant period, made by PGI and its Restricted Subsidiaries in connection with expansion of its Miratec and Miralace product lines and capital expansion in respect of nonwovens manufacturing capacity in Colombia and in China, shall be excluded) to (b) Debt Service for such period. "Joint Venture Restricted Subsidiary" shall mean any Restricted Subsidiary of PGI, established as a joint venture with one or more other joint venture parties, in which at least 80% of the aggregate outstanding ownership interests on a fully-diluted basis in such Restricted Subsidiary is owned by PGI and/or a Wholly Owned Restricted Subsidiary of PGI. "National Currency Unit" shall mean a unit of any Currency (other than a Euro Unit) of a Participating Member State. "Participating Member State" shall mean each state so described in any EMU Legislation. "Principal Financial Center" shall mean, in the case of any Currency, the principal financial center where such Currency is cleared and settled, as determined by the Administrative Agent. "Target Operating Day" shall mean any day that is not (i) a Saturday or Sunday, (ii) Christmas Day or New Year's Day or (iii) any other day on which the Trans-European Real-time Gross Settlement Operating System (or any successor settlement system) is not operating (as determined by the Administrative Agent). -4- "Treaty on European Union" shall mean the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992, and came into force on November 1, 1993), as amended from time to time. Section 2.03. Payments. Section 4.01(a) of the Credit Agreement shall be deleted in its entirety and replaced with the following: "(a) Except to the extent otherwise provided herein, all payments of principal, interest, Reimbursement Obligations and other amounts (other than the principal of and interest on Loans made in an Alternative Currency) to be made by the Borrowers under this Agreement and the Notes, and, except to the extent otherwise provided therein, all payments to be made by the Obligors under any other Basic Document, shall be made in U.S. Dollars, and all payments of principal and interest on Loans made in an Alternative Currency shall be made in such Alternative Currency, in each case in immediately available funds, without deduction, set-off or counterclaim, to the Payment Office for the applicable Currency, not later than 1:00 p.m. New York time (in the case of such payments to be made in U.S. Dollars) or 10:00 a.m. local time in the location of the relevant Payment Office (in the case of payments to be made in an Alternative Currency) on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day and interest shall be payable in respect of any principal so extended for the period of such extension)." Section 2.04. Indebtedness. Section 9.07(k) of the Credit Agreement shall be deleted in its entirety and replaced with the following: "(k) additional Indebtedness of the Borrowers (including Indebtedness secured by Liens permitted under Section 9.06(i) hereof and, to the extent relating to Liens described in Section 9.06(i), under 9.06(j) hereof) so long as the aggregate principal amount thereof does not exceed U.S. $50,000,000 at any one time outstanding." Section 2.05. Investments in Joint Ventures. Section 9.08(d) of the Credit Agreement shall be deleted in its entirety and replaced with the following: "(d) Investments by any Group Member in any Wholly Owned Restricted Subsidiary (other than in Bonlam, Fabrene or their respective Subsidiaries and other than any Resulting Nonwovens Entity that is not incorporated or otherwise formed under the laws of the United States of America or any of its states, as to which clauses (e), (f), (g) and (h) below shall apply) and Investments after the effectiveness of the amendments provided for in Section 2 of Amendment No. 3 hereto in any Joint Venture Restricted Subsidiary, provided that (i) the aggregate amount of such Investments in Joint Venture Restricted Subsidiaries shall not exceed U.S. $100,000,000, (ii) no such Investment shall -5- be made in any Joint Venture Restricted Subsidiary if such Joint Venture Restricted Subsidiary shall at any time have been a Wholly Owned Restricted Subsidiary and (iii) if any Joint Venture Restricted Subsidiary shall at any time become a Wholly Owned Restricted Subsidiary, the Investments in such Joint Venture Restricted Subsidiary shall no longer be subject to such U.S. $100,000,000 limit;" Section 2.06. Investments. The final sentence of Section 9.08 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "The aggregate amount of an Investment at any one time outstanding for purposes of clauses (d) and (k) above, shall be deemed to be equal to (A) the aggregate amount of cash, together with the aggregate fair market value of Property, loaned, advanced, contributed, transferred or otherwise invested that gives rise to such Investment minus (B) the aggregate amount of dividends, distributions or other payments received in cash in respect of such Investment; the amount of an Investment shall not in any event be reduced by reason of any write-off of such Investment. Section 2.07. Restricted Payments. Section 9.09 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "9.09 Restricted Payments. No Obligor will, nor will it permit any of its Restricted Subsidiaries to, make any Restricted Payments at any time during any fiscal year, provided that PGI or a Joint Venture Restricted Subsidiary may make Restricted Payments in cash so long as: (i) no Default shall have occurred and be continuing, and after giving effect to such Restricted Payment no Default shall have occurred and be continuing; and (ii) the sum of the aggregate amount of such Restricted Payments made by PGI plus the aggregate amount of such Restricted Payments made by all Joint Venture Restricted Subsidiaries during the period (the "Determination Period") from and including December 28, 1996 to and including the date of such Restricted Payment shall not exceed an amount equal to the sum of (x) U.S. $25,000,000 plus 50% of Consolidated Net Income (to the extent positive) for each full fiscal year included in the Determination Period minus (y) 100% of Consolidated Net Income (to the extent negative) for each full fiscal year included in the Determination Period plus (z) the aggregate amount of dividends, distributions or other payments received by PGI or any of its Restricted Subsidiaries in cash in respect of any Investment constituting a Restricted Payment hereunder, and the aggregate amount received in cash in respect of the -6- sale or other disposition or any Investments constituting a Restricted Payment hereunder (but shall not in any event be reduced by reason of any write-off of any such Investment). Notwithstanding the foregoing, PGI may make cash payments to officers and employees in respect of shares of stock (or options therefor) granted to such officers and employees upon the termination of employment of such officer or employee (so long as the aggregate amount thereof paid in any single fiscal year shall not exceed U.S. $750,000) (and such cash payments shall not be included in determining the amount of Restricted Payments permitted above). Section 2.08. Leverage Ratio. Section 9.10(a) of the Credit Agreement shall be deleted in its entirety and replaced with the following: "(a) Leverage Ratio. PGI will not permit the Leverage Ratio to exceed the following respective ratios at any time during the following respective periods:
Period Ratio ------ ----- From the Effective Date through but excluding the last day of the first fiscal quarter in 2000 5.85 to 1 From the last day of the first fiscal quarter in 2000 through but excluding the last day of the first fiscal quarter in 2001 5.25 to 1 From the last day of the first fiscal quarter in 2001 through but excluding the last day of the first fiscal quarter in 2002 4.75 to 1 From the last day of the first fiscal quarter in 2002 through but excluding the last day of the first fiscal quarter in 2003 4.50 to 1 From the last day of the first fiscal quarter in 2003 and at all times thereafter 4.25 to 1
-7- Section 2.09. Year 2000 Issues. Section 9 of the Credit Agreement shall be amended by adding the following new Section 9.19: "9.19. Year 2000 Issues. Any reprogramming required to permit the proper functioning, prior to, during and following the year 2000, of (i) the Borrower's computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which the Borrower's systems interface) which is material to the operation of the Borrower's business and the testing of all such systems and equipment, as so reprogrammed, will be completed in all material respects prior to October 2, 1999. The cost to the Borrower of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to the Borrower (including, without limitation, reprogramming errors and the failure of others' systems or equipment) will not result in a Default or a Material Adverse Change." Section 2.10. European Monetary Union. Section 12 of the Credit Agreement shall be amended by adding the following new Section 12.20: "12.20. European Monetary Union. (a) Effectiveness of Provisions. The provisions of paragraphs (b) through (g) below shall be effective at and from the effective date of the amendments provided for in Section 2 of Amendment No. 3 hereto, provided, that if and to the extent that any such provision relates to any state (or the currency of such state) that is not a Participating Member State on the commencement of the third stage of EMU, and that has not become a Participating Member State prior to the effective date of the amendments provided for in Section 2 of Amendment No. 3 hereto, such provision shall become effective in relation to such state (and the currency of such state) at and from the date on which such state becomes a Participating Member State. (b) Redenomination and Alternative Currencies. Each obligation under this Agreement of a party to this Agreement which has been denominated in the National Currency Unit of a Participating Member State shall be redenominated into the Euro Unit in accordance with EMU Legislation, provided, that if and to the extent that any EMU Legislation provides that following the commencement of the third stage of EMU an amount denominated either in the Euro or in the National Currency Unit of a Participating Member State and payable within the Participating Member State by crediting an account of the creditor can be paid by the debtor either in the Euro Unit or in that National Currency Unit, any party to this Agreement shall be entitled to pay or repay any such amount either in the Euro Unit or in such National Currency Unit. -8- (c) Payments by the Administrative Agent Generally. With respect to the payment of any amount denominated in the Euro or in a National Currency Unit, the Administrative Agent shall not be liable to the Dutch Borrowers or either of them or any of the Lenders in any way whatsoever for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by the Administrative Agent if the Administrative Agent shall have taken all relevant steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds (in the Euro Unit or, as the case may be, in a National Currency Unit) to the account of any Lender in the Principal Financial Center in the Participating Member State which the Dutch Borrowers or either of them or, as the case may be, such Lender shall have specified for such purpose. In this paragraph (c), "all relevant steps" shall mean all such steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as the Administrative Agent may from time to time determine for the purpose of clearing or settling payments of the Euro. (d) Determination of Eurocurrency Base Rate. For the purposes of determining the date on which the applicable rate for Eurocurrency Borrowings is determined under this Agreement for any Loan denominated in the Euro (or any National Currency Unit) for any Interest Period therefor, references in this Agreement to Business Days shall be deemed to be references to Target Operating Days. In addition, if the Administrative Agent determines that there is no Eurocurrency Base Rate displayed on the applicable Telerate screen page for deposits denominated in the National Currency Unit in which any Loans are denominated, the Eurocurrency Base Rate for such Loans shall be based upon the rate displayed on the applicable Telerate screen page for the offering of deposits denominated in Euro Units. (e) Basis of Accrual. If the basis of accrual of interest or fees expressed in this Agreement with respect to the Currency of any state that becomes a Participating Member State shall be inconsistent with any convention or practice in the applicable interbank market for the basis of accrual of interest or fees in respect of the Euro, such convention or practice shall replace such expressed basis effective as of and from the date on which such state becomes a Participating Member State, provided, that if any Loan in the Currency of such state if outstanding immediately prior to such date, such replacement shall take effect, with respect to such Loan, at the end of the then current Interest Period. (f) Rounding. Without prejudice and in addition to any method of conversion or rounding prescribed by the EMU Legislation, each reference in this Agreement to a minimum amount (or a multiple thereof) in a National Currency Unit to be paid to or by the Administrative Agent shall be replaced by a reference to such reasonably comparable -9- and convenient amount (or a multiple thereof) in the Euro Unit as the Administrative Agent may from time to time specify. (g) Other Consequential Changes. Without prejudice to the respective liabilities of the Dutch Borrowers to the Lenders and the Lenders to the Dutch Borrowers under or pursuant to this Agreement, except as expressly provided in this Section 12.20, each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be necessary or appropriate to reflect the introduction of or changeover to the Euro in Participating Member States. Section 3. Amendments Requiring Consent of Each Lender. Subject to the execution and delivery to the Administrative Agent of this Amendment No. 3 by each Lender and each Obligor, but effective as of the date hereof, the Credit Agreement shall be amended as follows: Section 3.01. General. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Credit Agreement as amended by this Section 3. Section 3.02. Preamble. The fourth paragraph in the preamble to the Credit Agreement shall be amended by replacing the amount "U.S. 450,000,000" with the amount "U.S. $500,000,000". Section 3.03. Definitions. Section 1.01 of the Credit Agreement shall be amended by adding the following new definitions (to the extent not already included in said Section 1.01) and inserting the same in the appropriate alphabetical locations and amending in their entirety the following definitions (to the extent already included in said Section 1.01), as follows: "Applicable Margin" shall mean with respect to Eurocurrency Revolving Credit Loans, Base Rate Revolving Credit Loans, Canadian Base Rate Loans, letter of credit fees (as such term is used in Section 2.03(g) hereof), commitment fees (as such term is used in Section 2.05 hereof), Eurocurrency Term Loans, and Base Rate Term Loans during any Accrual Period (as defined below), the respective rates set forth below for such Loans of such Class and Type and such fees for such Accrual Period, which rates shall be based upon the Leverage Ratio for such Accrual Period: -10-
Base Rate Revolving Credit Loans Eurocurrency and Canadian Revolving Base Rate Letter of Commitment Eurocurrency Base Rate Leverage Ratio Credit Loans Loans Credit Fees Fees Term Loans Term Loans - ----------------------------------------------------------------------------------------------------------------- Greater than or equal to 4.50 2.25% 1.00% 2.25% 0.50% 2.50% 1.25% - ----------------------------------------------------------------------------------------------------------------- Greater than or equal to 4.25 by less than 4.50 1.75% 0.50% 1.75% 0.375% 2.25% 1.00% - ----------------------------------------------------------------------------------------------------------------- Greater than or equal to 3.75 but less than 4.25 1.50% 0.25% 1.50% 0.375% 2.00% 0.75% - ----------------------------------------------------------------------------------------------------------------- Greater than or equal to 3.00 but less than 3.75 1.25% 0% 1.25% 0.30% 2.00% 0.75% - ----------------------------------------------------------------------------------------------------------------- Greater than or equal to 2.50 but less than 3.00 1.00% 0% 1.00% .25% 2.00% .75% - ----------------------------------------------------------------------------------------------------------------- Less than 2.50 .75% 0% .75% .20% 2.00% .75% - -----------------------------------------------------------------------------------------------------------------
For purposes hereof, an "Accrual Period" shall mean each of the following successive periods, as applicable: (i) the period commencing during any fiscal quarter on the date (the "Change Date") that is the second Business Day following the receipt by the Administrative Agent of the certificate referred to in clause (a) of the next following paragraph or (ii) in the event that PGI or any of its Restricted Subsidiaries makes an Acquisition and borrows hereunder in an amount equal to or greater than U.S. $25,000,000 (or the Foreign Currency Equivalent thereof) in connection with such Acquisition, the period commencing during any fiscal quarter on the second Business Day (the "Acquisition Change Date") following the date of such Acquisition, in each case to but not including the earlier of (x) the Change Date in the immediately following fiscal quarter and (y) the next Acquisition Change Date, provided, that the initial Accrual Period shall commence on the Effective Date and continue until the earlier of (x) the Change Date during the fiscal quarter ending on December 27, 1997 and (y) an Acquisition Change Date, and provided further, that the Leverage Ratio for any Accrual Period commencing with an Acquisition Change Date shall be calculated on a pro forma basis, as at the end of and for the period of four fiscal quarters most recently ended prior -11- to the date of the related Acquisition for which financial statements of PGI are available, under the assumption that such Acquisition and the incurrence of any Indebtedness in connection with such Acquisition, shall have occurred at the beginning of the applicable period. The Leverage Ratio for the initial Accrual Period shall be determined on the basis of the certificate of a senior officer delivered pursuant to Section 7.01(p) hereof (together with the financial statements for the fiscal quarter on which such calculation is based). The Leverage Ratio for any Accrual Period after the initial Accrual Period shall be determined (a) if such Accrual Period commences with a Change Date, on the basis of a certificate of a senior officer setting forth a calculation of the Leverage Ratio as at the last day of the fiscal quarter immediately prior to the first day of such Accrual Period (together with the financial statements for the fiscal quarter on which such calculation is based) and (b) if such Accrual Period commences with an Acquisition Change Date, on the basis of the certificate of a senior officer delivered pursuant to Section 9.05(d)(iv)(z) hereof in connection with the related Acquisition. Anything in this Agreement to the contrary notwithstanding, the Applicable Margin shall be the highest applicable rate provided for above (i.e., 2.25% for Eurocurrency Revolving Credit Loans, 1.00% for Base Rate Revolving Credit Loans and Canadian Base Rate Loans, 2.25% for letter of credit fees, 0.50% for commitment fees, 2.50% for Eurocurrency Term Loans and 1.25% for Base Rate Term Loans (i) during any period when an Event of Default shall have occurred and be continuing or (ii) if the Obligors shall default in the delivery of any financial statements pursuant to Section 9.01(a) or 9.01(b) hereof, or in the delivery of the certificate of a senior financial officer pursuant to Section 9.05(d)(iv)(z). "Commitments" shall mean the Facility A Revolving Credit Commitments, the Facility B Revolving Credit Commitments, the Term B Loan Commitments and the Term B-1 Loan Commitments. "Interest Period" shall mean, with respect to any Eurocurrency Loan, each period commencing on the date such Eurocurrency Loan is made or Converted from a Base Rate Loan or the last day of the next preceding Interest Period for such Loan and ending on the numerically corresponding day in the first, third or sixth (or, subject to the agreement of each Lender participating in such Loan in its sole discretion, twelfth) calendar month thereafter, as the Borrowers may select as provided in Section 4.05 hereof, except that each Interest Period that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: -12- (i) if any Interest Period for any Revolving Credit Loan would otherwise end after the Revolving Credit Termination Date, such Interest Period shall end on the Revolving Credit Termination Date; (ii) no Interest Period for any Facility A Revolving Credit Loan may commence before and end after any Reduction Date unless, after giving effect thereto, the aggregate principal amount of the Facility A Revolving Credit Loans having Interest Periods that end after such Reduction Date shall be equal to or less than the aggregate amount of the Facility A Revolving Credit Commitments on such Reduction Date; (iii) no Interest Period for any Term B Loan may commence before and end after any Principal Payment Date applicable thereto unless, after giving effect thereto, the aggregate principal amount of the Term B Loans having Interest Periods that end after such Principal Payment Date shall be equal to or less than the aggregate principal amount of the Term B Loans scheduled to be outstanding after giving effect to the payments of principal required to be made on such Principal Payment Date; (iv) no Interest Period for any Term B-1 Loan may commence before and end after any Principal Payment Date applicable thereto unless, after giving effect thereto, the aggregate principal amount of the Term B-1 Loans having Interest Periods that end after such Principal Payment Date shall be equal to or less than the aggregate principal amount of the Term B-1 Loans scheduled to be outstanding after giving effect to the payments of principal required to be made on such Principal Payment Date; (v) each Interest Period that would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); and (vi) notwithstanding clauses (i), (ii), (iii) and (iv) above, no Interest Period shall have a duration of less than one month and, if the Interest Period for any Loan would otherwise be a shorter period, such Loan shall not be available hereunder for such period. "Lenders" shall mean, collectively, the Facility A Revolving Credit Lenders, the Facility B Revolving Credit Lenders, the Term B Loan Lenders and the Term B-1 Loan Lenders. -13- "Loans" shall mean, collectively, the Facility A Revolving Credit Loans, the Facility B Revolving Credit Loans, the Term B Loans and the Term B-1 Loans. "Majority Term B-1 Loan Lenders" shall mean Term B-1 Loan Lenders holding at least 51% of the aggregate outstanding principal amount of the Term B-1 Loans. "Project" shall mean the capital expansion program including expansion of PGI's Miratec and Miralace product lines and capital expansion in respect of nonwovens manufacturing capacity in Colombia and China. "Notes" shall mean, collectively, the Facility A Revolving Credit Notes, the Facility B Revolving Credit Notes, the Term B Loan Notes and the Term B-1 Loan Notes. "Revolving Credit" refers, as applicable, to the Facility A Revolving Credit Commitments, Lenders, Loans and Notes and the Facility B Revolving Credit Commitments, Lenders, Loans and Notes. "Supermajority Lenders" shall mean, subject to the last paragraph of Section 12.04 hereof, Lenders having at least 66-2/3% of the sum of (i) the aggregate unused amount, if any, of the Commitments at such time plus (ii) the aggregate outstanding principal amount of the Loans at such time (including, without limitation, in the case of the Facility B Revolving Credit Lenders, Bankers' Acceptance Loans). "Term" refers, as applicable, to the Term B Loan Commitments, Loan Lenders, Loans and Loan Notes and the Term B-1 Loan Commitments, Loan Lenders, Loans and Loan Notes. "Term B-1 Loans" shall mean the loans provided for by Section 2.01(d) hereof, which may be Base Rate Loans and/or U.S. Dollar denominated Eurocurrency Loans. "Term B-1 Loan Closing Date" shall mean the date on which each of the conditions precedent to the making of the Term B-1 Loans specified in Sections 7.02 and 7.04 hereof shall have been satisfied or waived. "Term B-1 Loan Commitment" shall mean, for each Term B-1 Loan Lender, the obligation of such Lender to make a Term B-1 Loan to PGI on the Term B-1 Loan Closing Date in U.S. Dollars in an amount up to but not exceeding the amount set opposite the name of such Lender on Schedule XIII hereof or, in the case of any Person that becomes a Term B-1 Loan Lender pursuant to an assignment permitted under -14- Section 12.06(b) hereof, as specified in the respective instrument of assignment pursuant to which such assignment is effected (as the same may be reduced from time to time pursuant to Section 2.04 hereof). The original aggregate principal amount of the Term B-1 Loan Commitments is U.S. $50,000,000. "Term B-1 Loan Lenders" shall mean (a) on the date hereof, the Lenders having Term B-1 Loan Commitments on Schedule XIII hereof and (b) thereafter, the Lenders from time to time holding Term B-1 Loans and Term B-1 Loan Commitments after giving effect to any assignments thereof permitted by Section 12.06 hereof. "Term B-1 Loan Notes" shall mean the promissory notes provided for by Section 2.08(d) hereof and all promissory notes delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time. Section 3.04. Classes of Loans. Section 1.03 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "1.03 Classes, Types and Currencies of Loans. Loans hereunder are distinguished by "Class", "Type" and "Currency." The "Class" of a Loan (or of a Commitment to make a Loan) refers to whether such Loan is a Facility A Revolving Credit Loan, a Facility B Revolving Credit Loan, a Term B Loan or a Term B-1 Loan, each of which constitutes a Class. The "Type" of a Loan as used in connection with U.S. Dollar-denominated Loans refers to whether such Loan is a Base Rate Loan or a Eurodollar Loan, each of which constitutes a Type, and, as used in connection with Canadian Dollar- denominated Loans refers to whether such Loan is a Canadian Base Rate Loan or a Bankers' Acceptance Loan, each of which constitutes a Type. The "Currency" of a Loan refers to whether such Loan is to be made in U.S. Dollars, Dutch Guilders or Canadian Dollars, each of which constitutes a "Currency." Loans may be identified by Class, Type and Currency." Section 3.05. Loans. Section 2.01 of the Credit Agreement shall be amended by relettering paragraphs (d), (e) and (f) thereof, as paragraph (e), (f) and (g), respectively, and inserting a new paragraph (d) as follows: "(d) Term B-1 Loans. Each Term B-1 Loan Lender severally agrees, on the terms and conditions of this Agreement, to make loans to PGI on the Term B-1 Loan Closing Date in U.S. Dollars in an aggregate principal amount up to but not exceeding such Lender's Term B-1 Loan Commitment as then in effect. After the Term B-1 Loan Closing Date, and subject to the terms and conditions of this Agreement, PGI may Convert Term B-1 Loans of one Type into Term B-1 Loans of another Type (as provided -15- in Section 2.09 hereof) or Continue Term B-1 Loans of one Type as Term B-1 Loans of the same Type (as provided in Section 2.09 hereof). Proceeds of Term B-1 Loans shall be available for any use permitted under Section 9.13 hereof." Section 3.06. Borrowings. Section 2.02 of the Credit Agreement shall be amended by adding after the words "Term B Loan Lender" in the second sentence thereof the following: "or Term B-1 Loan Lender". Section 3.07. Reduction of Commitments. Section 2.04(a) of the Credit Agreement shall be amended by inserting the following after the second sentence thereof: "The Term B-1 Loan Commitments shall be automatically terminated on the Term B-1 Loan Closing Date (following the making of the loans under Section 2.01(d) hereof to be made on such Date)." Section 3.08. Notes. Section 2.08 of the Credit Agreement shall be amended by relettering paragraphs (d) and (e) thereof, as paragraph (e) and (f), respectively, and inserting a new paragraph (d) as follows: "(d) The Term B-1 Loan made by each Term B-1 Loan Lender to PGI shall be evidenced by a single promissory note of PGI, substantially in the form of Exhibit A-4 hereto, dated the Term B-1 Loan Closing Date, payable to such Lender in a principal amount equal to the amount of its Term B-1 Loan Commitment as originally in effect, and otherwise duly completed." Section 3.09. Prepayments. Section 2.10 of the Credit Agreement shall be amended by deleting paragraph (e) in its entirety and replacing it with the following: "(e) Application. Prepayments and reductions of Commitments described in the above paragraphs of this Section 2.10 shall be effected as follows: (i) in the case of paragraphs (a), (c) and (d) above, the amount of the required prepayment and reduction shall be apportioned between the Term B-1 Loans, the Term B Loans and the Revolving Credit Loans (and Letter of Credit Liabilities) ratably in accordance with the respective then-outstanding aggregate principal amounts of the Term B-1 Loans, the Term B Loans and the Revolving Credit Commitments with the amounts so apportioned to be applied to the prepayment of the respective Loans of each such Class (and to provide cover for Letter of Credit Liabilities and to the reduction of Revolving Credit Commitments), such reductions of Revolving Credit Commitments, and prepayments of the Revolving Credit Loans, to be applied first to the reduction of -16- Facility A Revolving Credit Commitments (and to the prepayment first of Facility A Revolving Credit Loans denominated in U.S. Dollars, second to the prepayment of Facility A Revolving Credit Loans denominated in Dutch Guilders and third to provide cover for Letter of Credit Liabilities), and second, after all outstanding Facility A Revolving Credit Commitments have been reduced to zero (and all Facility A Revolving Credit Loans paid in full and cover for all Letter of Credit Liabilities provided), to the reduction of Facility B Revolving Credit Commitments (and to the prepayment of Facility B Revolving Credit Loans), provided that to the extent any such required reduction of Revolving Credit Commitments shall exceed the then- outstanding aggregate principal amount of Revolving Credit Loans (and Letter of Credit Liabilities), such excess shall be applied ratably to the prepayment of Term B-1 Loans and Term B Loans, and (ii) in the case of paragraph (b) above, the amount of the required prepayment and reduction shall be apportioned between the Term B-1 Loans, the Term B Loans and the Revolving Credit Loans (and Letter of Credit Liabilities) ratably in accordance with the respective then-outstanding aggregate principal amounts of the Term B-1 Loans, the Term B Loans and the Revolving Credit Commitments with the amounts so apportioned to be applied to the prepayment of the Term B-1 Loans, to the prepayment of the Term B Loans and to the prepayment of the Revolving Credit Loans (to provide cover for Letter of Credit Liabilities), but not to the reduction of the Revolving Credit Commitments, such prepayments to the Revolving Credit Loans to be applied first to Facility A Revolving Credit Loans denominated in U.S. Dollars, second to Facility A Revolving Credit Loans denominated in Dutch Guilders, third to the provision of cover for Letter of Credit Liabilities and fourth to Facility B Revolving Credit Loans. Notwithstanding anything herein to the contrary, any Term Loan Lender shall have the option to forego a prepayment of any Term Loan at its sole discretion, and in any such case, the amount of any such foregone prepayment will be applied pro rata to the outstanding Term Loan Lenders who have not foregone such prepayment; provided, in the event that, with respect to any such prepayment, each Term Loan Lender shall forego such prepayment, the amount of such foregone prepayment will be applied pro rata to the outstanding Revolving Credit Loans (and Letter of Credit Liabilities) of the Revolving Credit Lenders (and, in the case of any such prepayment contemplated by paragraphs (a), (c) or (d) above, to the reduction of the Revolving Credit Commitments), all in accordance with and subject to the priorities set forth in clauses (i) and (ii) above." - 17 - Section 3.10. Amortization of Term B-1 Loans. Section 3.01 of the Credit Agreement shall be amended by appending the following new paragraph (d): "(d) PGI hereby promises to pay to the Administrative Agent in U.S. Dollars for account of the Term B-1 Loan Lenders the following aggregate principal amounts on the following Principal Payment Dates:
Principal Payment Date Amount of Payment ---------------------- ----------------- June 20, 1999 U.S.$ 240,000 December 20, 1999 U.S.$ 240,000 June 20, 2000 U.S.$ 240,000 December 20, 2000 U.S.$ 240,000 June 20, 2001 U.S.$ 240,000 December 20, 2001 U.S.$ 240,000 June 20, 2002 U.S.$ 240,000 December 20, 2002 U.S.$ 240,000 June 20, 2003 U.S.$ 240,000 December 20, 2003 U.S.$ 240,000 June 20, 2004 U.S. $11,900,000 December 20, 2004 U.S. $11,900,000 June 20, 2005 U.S. $11,900,000 December 20, 2005 U.S. $11,900,000"
Section 3.11. Limitation of Eurodollar Loans. Section 5.02 of the Credit Agreement shall be amended by deleting Section 5.02(b) in its entirety and replacing it with the following: "(b) if the related Loans are Facility A Revolving Credit Loans, the Majority Facility A Revolving Credit Lenders determine or, if the related Loans are Term B Loans, the Majority Term B Loan Lenders determine or, if the related Loans are Term B-1 Loans, the Majority Term B-1 Loan Lenders determine (in each case, which determination shall be conclusive), and notify the Administrative Agent that the relevant rates of interest referred to in the definition of "Eurocurrency Base Rate" in Section 1.01 hereof upon the basis of which the rate of interest for Eurodollar Loans for such Interest - 18 - Period is to be determined are not likely to adequately cover the cost to such Lenders of making or maintaining Eurodollar Loans for such Interest Period;" Section 3.12. Conditions. Section 7.02 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "7.02 Initial and Subsequent Extensions of Credit. The obligation of the Lenders to make any Loan, including, without limitation, the obligation to create and discount any Bankers' Acceptance, or otherwise extend any credit to the Borrowers upon the occasion of each borrowing or other extension of credit hereunder (including the initial borrowing, the borrowing to be made on the Term B Loan Closing Date, and the borrowing to be made on the Term B-1 Loan Closing Date) is subject to the further conditions precedent that, both immediately prior to the making of such Loan or creation and discount of such Bankers' Acceptance or other extension of credit and also after giving effect thereto and to the intended use thereof: (a) no Default shall have occurred and be continuing; and (b) the representations and warranties made by the Obligors in Section 8 hereof, and by each of the Group Members in each of the other Basic Documents to which it is a party, shall be true and complete on and as of the date of the making of such Loan or other extension of credit with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). Each notice of borrowing or request for the issuance of a Letter of Credit by the Borrowers hereunder shall constitute a certification by the Borrowers to the effect set forth in the preceding sentence (both as of the date of such notice or request and, unless the Borrowers otherwise notify the Administrative Agent prior to the date of such borrowing or issuance, as of the date of such borrowing or issuance). Notwithstanding anything herein to the contrary, for purposes of Loans to be made on the Term B Loan Closing Date, any determination to be made that there has been no material adverse change in the financial condition, operation, business or prospects of PGI and its consolidated Subsidiaries taken as a whole from that set forth in the financial statements referred to in Section 8.02 hereof shall be made only by the Administrative Agent." - 19 - Section 3.13. Additional Conditions to Term B-1 Loans. Section 7 of the Credit Agreement shall be amended by adding the following new Section 7.04: "7.04 Term B-1 Loan Closing Date. Without in any way limiting the applicability of Section 7.02 hereof, the obligation of each Term B-1 Loan Lender to make its Term B-1 Loan on the Term B-1 Loan Closing Date is subject to the satisfaction of the following conditions precedent or, as applicable, to the receipt by the Administrative Agent of the following documents, in each case in a manner in form and substance satisfactory to the Administrative Agent: (a) Corporate Documents. Certified copies of the charter and by-laws (or equivalent documents) of each Group Member and of all corporate authority for each Group Member (including, without limitation, board of director resolutions and evidence of the incumbency of officers) with respect to the execution, delivery and performance of such Basic Documents to which such Group Member is or is intended to be a party and each other document to be delivered by such Group Member from time to time in connection with the transactions contemplated in connection with the Term B-1 Loan Commitments and Term B-1 Loans hereunder (and the Administrative Agent and each Lender may conclusively rely on such certificate until it receives notice in writing from such Group Member). (b) Officer's Certificate. A certificate of a senior financial officer of PGI, dated the Term B-1 Loan Closing Date, to the effect set forth in paragraphs (a) and (b) of the first sentence of Section 7.02 hereof. (c) Opinions of Counsel to the Group Members. Opinions, dated the Term B-1 Loan Closing Date, of Kirkland & Ellis, special New York counsel to the Group Members, covering matters covered by the opinions of Kirkland & Ellis delivered in connection with the Credit Agreement (including, without limitation, with respect to the Term B-1 Loans), and in each case covering such other matters as the Administrative Agent or any Lender may reasonably request, including, without limitation, matters related to the Security Documents (and each Obligor hereby instructs such counsel to deliver each such opinion to the Lenders and to the Administrative Agent). (d) Additional Security Documents. The Administrative Agent shall have received the following: (i) all necessary modifications or confirmations to the Security Documents in effect on the Term B-1 Loan Closing Date duly executed - 20 - and delivered so as to ensure the continued effectiveness of the security interests created thereby and the spreading of the liens created thereby to cover the additional obligations to be incurred by the Obligors on the Term B-1 Loan Closing Date, in each case covering such matters as shall be requested by the Administrative Agent and in each case in form and substance satisfactory to the Administrative Agent; and (ii) evidence that such other action (including opinions of counsel and, in the case of real property, obtaining appropriate mortgagee title insurance policies) as shall be necessary to perfect or record the Liens contemplated by the foregoing clause (i) under applicable law shall have been taken. (e) Notes. The Term B-1 Loan Notes described in Section 2.08(d) hereof shall have been duly completed and executed. (f) Payment of Certain Fees and Expenses. All amounts owing to Lenders under the Credit Agreement as in effect immediately prior to the Term B-1 Loan Closing Date shall have been paid to such Lenders in full in the manner contemplated by Section 2.01(d) hereof including, for the avoidance of doubt, fees payable to such Lenders to obtain their consent hereto. (g) Other Documents. Such other documents as the Administrative Agent, any Lender or special New York counsel to Chase may reasonably request." Section 3.14. Certain Agency Provisions. Sections 11.02 and 11.03 of the Credit Agreement shall be amended by adding after the words "the Majority Term B Loan Lenders" the following wherever such words appear: "or the Majority Term B-1 Loan Lenders". Section 3.15. Consents under Basic Documents. Section 11.09 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "11.09 Consents under Basic Documents. Except as otherwise provided in Section 12.04 hereof with respect to this Agreement, the Administrative Agent may, with the prior consent of the Majority Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the Basic Documents, provided that, without the prior consent of each Lender, the Administrative Agent shall not (except as provided herein or in the Security Documents) do any of the following: - 21 - (i) release all or substantially all of the collateral or otherwise terminate all or substantially all of the Liens under the Basic Documents providing for collateral security, except that the Administrative Agent may, with the prior consent of the Supermajority Lenders (but not otherwise), release less than all or substantially all of the collateral or otherwise terminate less than all or substantially all of the Liens under the Basic Documents providing for collateral security, (ii) alter with respect to all or substantially all of the collateral the relative priorities of the obligations entitled to the benefits of the Liens created under the Security Documents, except that the Administrative Agent may, with the prior consent of the Majority Lenders (but not otherwise), consent to: (i) any modification, supplement or waiver under any of the Basic Documents that would result in additional obligations hereunder being secured by all or substantially all of such collateral security or (ii) a Lien securing such additional obligations that is junior to the Lien in favor of the other obligations secured by such Basic Document or (iii) release all, or substantially all of the Domestic or Foreign Non-Borrower Guarantors from their obligations under Section 6 hereof, except that the Administrative Agent may, with the prior consent of the Supermajority Lenders (but not otherwise), release fewer than all or substantially all of the Domestic or Foreign Non- Borrower Guarantor. No such consent shall be required, and the Administrative Agent is hereby authorized, to release any Lien covering Property (and to release any such Domestic or Foreign Non-Borrower Guarantor from such guarantee obligations) which is the subject of either a disposition of Property permitted hereunder or a disposition to which the Majority Lenders have consented." Section 3.16. Amendments. Section 12.04 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "12.04 Amendments, Etc. Except as otherwise expressly provided in this Agreement, any provision of this Agreement, including any amendment providing for extension of new credit hereunder to be secured equally and ratably by the collateral hereunder, may be modified or supplemented only by an instrument in writing signed by each Obligor, the Administrative Agent and the Majority Lenders, or by each Obligor and the Administrative Agent acting with the consent of the Majority Lenders, and any provision of this Agreement may be waived by the Majority Lenders or by the Administrative Agent acting with the consent of the Majority Lenders; provided that: - 22 - (a) no modification, supplement or waiver shall, unless by an instrument signed by each Lender affected thereby: (i) increase, or extend the term of any of the Commitments, or extend the time or waive any requirement for the reduction or termination of any of the Commitments, (ii) extend any date fixed for the payment of principal of or interest on any Loan, the Reimbursement Obligations or any fee hereunder, (iii) reduce the amount of any such payment of principal, (iv) reduce the rate at which interest is payable thereon or any fee is payable hereunder; (b) no modification, supplement or waiver shall, unless by an instrument signed by the "Majority Lenders" of each Class of Loans hereunder or by the Administrative Agent acting with the consent of the "Majority Lenders" of each Class of Loans hereunder: (i) alter the manner of application to the Loans hereunder of any prepayment or (ii) modify the definition of the term "Majority Lenders", "Majority Facility A Revolving Credit Lenders", "Majority Facility B Revolving Credit Lenders", "Majority Term B Loan Lenders" or "Majority Term B-1 Loan Lenders"; (c) no modification, supplement or waiver shall, unless by an instrument signed by all of the Lenders or by the Administrative Agent acting with the consent of all of the Lenders: (i) alter the terms of this Section 12.04 (other than by amendment to the terms referred to in paragraph (b) above) or (ii) modify the definition of the term "Supermajority Lenders" or modify in any manner any requirement hereunder that determinations or waivers of any rights, or modifications of any provision, be made only with the consent of each Lender; and (d) any modification or supplement of Section 11 hereof, or any of the rights or duties of the Administrative Agent hereunder, shall require the consent of the Administrative Agent. Anything in this Agreement to the contrary notwithstanding, (A) no waiver or modification of any provision of this Agreement that has the effect (either immediately or at some later time) of enabling PGI to satisfy a condition precedent to the making of a Facility A Revolving Credit Loan or the issuance of a Letter of Credit shall be effective against the Facility A Revolving Credit Lenders for the purposes of the Facility A Revolving Credit Commitments unless the Majority Facility A Revolving Credit Lenders shall have concurred with such waiver or modification, (B) no waiver or modification of any provision of this Agreement that has the effect (either immediately or at some later time) of enabling Fabrene to satisfy a condition precedent to the making of a -23- Facility B Revolving Credit Loan shall be effective against the Facility B Revolving Credit Lenders for the purposes of the Facility B Revolving Credit Commitments unless the Majority Facility B Revolving Credit Lenders shall have concurred with such waiver or modification, (C) no waiver or modification of any provision of this Agreement that has the effect (either immediately or at some later time) of enabling PGI to satisfy a condition precedent to the making of a Term B Loan shall be effective against the Term B Loan Lenders for the purposes of the Term B Loan Commitments unless the Majority Term B Loan Lenders shall have concurred with such waiver or modification and (D) no waiver or modification of any provision of this Agreement that has the effect (either immediately or at some later time) of enabling PGI to satisfy a condition precedent to the making of a Term B-1 Loan shall be effective against the Term B-1 Loan Lenders for the purposes of the Term B-1 Loan Commitments unless the Majority Term B-1 Loan Lenders shall have concurred with such waiver or modification." Section 3.17. Certain Tax Considerations. Section 12.19 (a) shall be amended by adding after the words "Any Term B Loan Lender" in the first sentence thereof the following: "or Term B-1 Loan Lender" Section 3.18. Additional Schedule and Exhibit. The Credit Agreement shall be amended by attaching thereto and making a part thereof Schedule XIII attached hereto and Exhibit A-4 attached hereto. Section 4. Consent to Release of Certain European Collateral. Subject to the execution and delivery to the Administrative Agent of this Amendment No. 3 by each Lender and each Obligor, but effective as of the date hereof, the Lenders hereby (a) consent to the release of up to $20,000,000 of collateral security covering assets of the Obligors in Europe, other than (i) the shares of stock of, or other ownership interest in, any Subsidiaries organized outside of the United States of America, to the extent that the Majority Lenders reasonably determine (in consultation with PGI) that a Lien on such shares or ownership interest will not result in adverse tax consequences under Section 956 of the Code or any violation of law and (ii) any such collateral security granted by Dutch Holding or Dutch Operating (or, pursuant to Section 9.16(c) of the Credit Agreement, any Subsidiary of Dutch Operating) securing obligations of Dutch Holding or Dutch Operating under the Credit Agreement, (b) waive any requirement in the Credit Agreement or any of the Security Documents requiring delivery, perfection or other action to create an enforceable Lien with respect to any collateral security to be released as described in the preceding clause (a) and (c) authorize the Administrative Agent to execute and deliver such instruments of release as shall be necessary to effect the foregoing. Section 5. Security Agreement. Effective as of the Term B-1 Loan Closing Date, PGI, the Domestic Non-Borrower Guarantors and the Administrative Agent agree that the Security Agreement shall be amended by replacing the amount "U.S. $450,000,000" in the third -24- paragraph thereof with the amount "U.S. $500,000,000" and, for avoidance of doubt, that the "Credit Agreement" referred to in the Security Agreement shall mean the Credit Agreement as amended hereby. Section 6. Representations and Warranties. Each Obligor represents and warrants to the Lenders and the Administrative Agent that the representations and warranties set forth in Section 8 of the Credit Agreement as amended hereby are true and complete on the date hereof as if made on and as of the date hereof and as if each reference in said Section 8 to "this Agreement" include reference to this Amendment No. 3. Section 7. Miscellaneous. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No. 3 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 3 by signing any such counterpart. This Amendment No. 3 shall be governed by, and construed in accordance with, the law of the State of New York. -25- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to be duly executed and delivered as of the day and year first above written. THE BORROWERS ------------- POLYMER GROUP, INC. PGI NONWOVENS B. /S/ Jerry Zucher /S/ Jerry Zucker By ------------------------------ By ________________________________ Jerry Zucker Jerry Zucker Title: President Title: President CHICOPEE HOLDINGS B.V. FABRENE INC. (incorporated in the State of Delaware under the name Chicopee Holdings (Netherlands) B.V. Corporation) /S/ Jerry Zucker /S/ Jerry zucker By ------------------------------ By ________________________________ Jerry Zucker Jerry Zucker Title: President Title: President -26- DOMESTIC NON-BORROWER GUARANTORS -------------------------------- FIBERTECH GROUP, INC. CHICOPEE, INC. By /s/ James G. Boyd By /s/ James G. Boyd -------------------------------- --------------------------------- James G. Boyd James G. Boyd Title: Executive Vice President and CFO Title: Executive Vice President and CFO PGI POLYMER, INC. CHICOPEE HOLDINGS, INC. By /s/ James G. Boyd By /s/ James G. Boyd -------------------------------- --------------------------------- James G. Boyd James G. Boyd Title: Executive Vice President and CFO Title: Executive Vice President and CFO TECHNETICS GROUP, INC. FABRENE GROUP, L.L.C. By /s/ James G. Boyd By /s/ James G. Boyd -------------------------------- --------------------------------- James G. Boyd James G. Boyd Title: Executive Vice President and CFO Title: Executive Vice President and CFO FABRENE CORP. FIBERGOL CORPORATION By /s/ James G. Boyd By /s/ James G. Boyd -------------------------------- --------------------------------- James G. Boyd James G. Boyd Title: Executive Vice President and CFO Title: Executive Vice President and CFO -27- FABRENE GROUP, INC. PNA CORP. By /s/ Jerry Zucker By /s/ Jerry Zucker -------------------------------- --------------------------------- Jerry Zucker Jerry Zucker Title: President Title: President FNA POLYMER CORP. By /s/ Jerry Zucker -------------------------------- Jerry Zucker Title: President -28- LENDERS ------- THE CHASE MANHATTAN BANK THE CHASE MANHATTAN as Lender and Administrative Agent BANK OF CANADA By /s/ Robert T. Sacks By /s/ Christine Chan /s/ Arun K. Berry ------------------- ------------------ ----------------- Robert T. Sacks Title: Vice President Vice President Title: Managing Director THE BANK OF NOVA SCOTIA THE BANK OF NOVA SCOTIA, as Canadian Dollar Lender By /s/ William E. Zarrett By /s/ William E. Zarrett ---------------------- ---------------------- Title: Senior Relationship Title: Senior Relationship Manager Manager BHF-BANK AKTIENGESELLSCHAFT FIRST UNION NATIONAL BANK By /s/ Michael T. Pellerito By /s/ John Jones ------------------------ -------------- Title: AVP Title: Vice President By /s/ Dan Dobrjanskyj ------------------- Title: Assistant Vice President CIBC INC. BALANCED HIGH YIELD FUND I LTD., By: BHF-Bank Aktiengesellschaft, acting through its New York Branch as Attorney-in-Fact By By /s/ Michael T. Pellerito ------------------- ------------------------ Title: Title: AVP By /s/ Dan Dobrjanskyj ------------------- Title: Assistant Vice President -29- CANADIAN IMPERIAL BANK COMPAGNIE FINANCIERE DE OF COMMERCE CIC ET DE L'UNION EUROPEENNE By /s/ Gerald Girardi By /s/ Brian O'Leary ----------------------- ------------------------- Title: Executive Director Title: Vice President CIBC Oppenheimer Corp., as agent By /s/ Sean Mounier ------------------------- Title: First Vice President CREDIT LYONNAIS ATLANTA CREDIT LYONNAIS CANADA AGENCY By /s/ David M. Carusa By ---------------------- ------------------------- Title: Vice President Title: and Manager By _________________________ Title: COOPERATIEVE CENTRALE THE ROYAL BANK OF RAIFFEISEN-BOERENLEENBANK SCOTLAND PLC B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By /s/ Michael V.M. Van Der Voort By /s/ Scott Barton ------------------------------ ------------------------- Title: Vice President Title: Vice President By /s/ R.P. Michlin ------------------------------ Title: -30- WACHOVIA BANK, N.A. BANK OF SCOTLAND By /s/ David S. Bellski By /s/ Annie Chin Tat ----------------------- -------------------------- Title: Vice President Title: Senior Vice President BANK AUSTRIA CREDITANSTALT DG BANK DEUTSCHE CORPORATE FINANCE, INC. GENOSSENSCHAFTSBANK AG By /s/ Clifford Belle By /s/ Sabine Wendt ----------------------- -------------------------- Title: Vice President Title: Asst. Vice President By /s/ D. Zine By /s/ Wolfgang Bollmann ----------------------- -------------------------- Title: Vice President Title: Senior Vice President MERITA BANK PLC, NATIONAL CITY BANK NEW YORK BRANCH By /s/ A. Maffe By /s/ Lisa B. Lin ----------------------- -------------------------- Title: VP Title: VP By /s/ C. Abriz ----------------------- Title: VP ERSTE BANK THE DAI-ICHI KANGYO BANK, LIMITED By /s/ Arcinee Hovanessian By /s/ Michelle A. Fox ----------------------- ----------------------------- Title: Vice President Title: Assistant Vice President By /s/ John S. Runnion ------------------------- Title: First Vice President - 31 - THE FIRST NATIONAL ROYAL BANK OF CANADA BANK OF CHICAGO By /s/ James F. Gable By /s/ J. Milford ---------------------- -------------------- Title: Customer Service Officer Title: Sr. Manager ING HIGH INCOME PRINCIPAL ROYAL BANK OF CANADA, PRESERVATION FUND HOLDINGS, LDC as Canadian Dollar Lender By: ING Capital Advisors LLC, as Investment Advisor By /s/ Michael D. Hatley By /s/ J. Milford ---------------------------- ------------------------ Title: Managing Director Title: Sr. Manager By _____________________ Title: OAK HILL SECURITIES FUND, L.P., MERRILL LYNCH PRIME RATE PORTFOLIO By: Oak Hill Securities GenPar, L.P., By: Merrill Lynch Asset its General Partner Management L.P., By: Oak Hill Securities MPG, Inc., as Investment Advisor its General Partner By ____________________ By /s/ Colleen M. Cunniffe ---------------------------- Title: Title: Authorized Signatory ARCHIMEDES FUNDING II, LTD. KZH CYPRESSTREE-1 LLC By: ING Capital Advisors LLC as Collateral Manager By /s/ Michael D. Hatley By _____________________ -------------------------- Title: Managing Director Title: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By /s/ Colleen M. Cunniffee ------------------------- Title: Authorized Signatory ARCHIMEDES FUNDING, LLC By ING Capital Advisors LLC as Collateral Manager By /s/ Michael D. Hatley -------------------------- Title: Managing Director - 32 - KZH CRESCENT LLC KZH CRESCENT-2 LLC By /s/ V. Conway By /s/ V. Conway --------------------- ---------------------- Title: Agent Title: Agent MORGAN STANLEY DEAN WITTER EATON VANCE SENIOR INCOME TRUST PRIME INCOME TRUST By: Eaton Vance Management, as Investment Adviser By /s/ Buford Fennerty By /s/ Scott H. Page --------------------- ---------------------- Title: Vice President Title: Vice President PILGRIM PRIME RATE TRUST VAN KAMPEN CLO I, LTD. By: Pilgrim Investments, Inc., By: Van Kampen Management Inc. as its investment manager as Collateral Manager By /s/ Howard Tiffen By /s/ Jeffrey W. Maillet --------------------- ---------------------- Title: Senior Vice President Title: Senior Vice President & Director By /s/ Jeffrey A. Bakalar --------------------- Title: Vice President SENIOR DEBT PORTFOLIO EATON VANCE INSTITUTIONAL By: Boston Management and Research SENIOR LOAN FUND as Investment Advisor By: Eaton Vance Management, as Investment Adviser By /s/ Scott H. Page By /s/ Scott H. Page --------------------- ---------------------- Title: Vice President Title: Vice President KZH ING-2 LLC KZH PAMCO LLC By /s/ V. Conway By /s/ V. Conway --------------------- ---------------------- Title: Authorized Agent Title: Authorized Agent KZH CYPRESSTREE-1 LLC By /s/ V. Conway --------------------- Title: Authorized Agent - 33 - CYPRESSTREE INVESTMENT PARTNERS II LTD., DELANO COMPANY By: CypressTree Investment Management By: Pacific Investment Management Company, Inc., Company as its investment advisor as Portfolio Manager By: PIMCO Management Inc., a general partner By /s/ Peter K. Merrill By /s/ Mohan V. Phansalkar ------------------------ -------------------------- Title: Managing Director Mohan V. Phansalkar Title: Senior Vice President CYPRESSTREE INSTITUTIONAL FUND, LLC SUNTRUST BANK INC. By: CypressTree Investment Management Company, Inc., its Managing Member By /s/ Peter K. Merrill By ------------------------ -------------------------- Title: Managing Director Title: ABN AMRO BANK, N.V. FIRSTAR BANK, N.A. By By /s/ Mark A. Whitson ------------------------ ----------------------- Title: Title: Vice President By _______________________ Title: BALANCED HIGH YIELD FUND II LTD., By: BHF-Bank Aktiengesellschaft, SEQUILS I, LTD. acting through its New York Branch as Attorney-in-Fact By: TCW Advisors, Inc., as its Collateral Manager By /s/ Michael Dot -------------------------- By: /s/ Mark L. Gold Title: AVP ----------------- Title: Managing Director By /s/ A. Henry -------------------------- By: /s/ Jonathan P. Insoll Title: AVP ---------------------- Title: Vice President CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC. As: Attorney-in-Fact and on behalf of First Allmerica Financial Life Insurance Company as Portfolio Manager By: /s/ Peter K. Merrill --------------------- Title: Managing Director Sub-Allocation: $1,000,000 NORTH AMERICAN SENIOR FLOATING RATE FUND By: Cypress Tree Investment Management Company, Inc., as Portfolio Manager By: /s/ Peter K. Merrill --------------------- Title: Managing Director Sub-Allocation: $1,000,000 CYPRESS TREE INVESTMENT FUND, LLC By: Cypress Tree Investment Management Company, Inc., its Managing Member By: /s/ Peter K. Merrill --------------------- Title: Managing Director Sub-Allocation: $500,000 SCHEDULE XIII TERM B-1 LOAN COMMITMENTS -------------------------
Lender Term B-1 Loan Commitment - ------ ------------------------ CypressTree Investment Management $ 5,000,000 Eaton Vance Management $ 5,000,000 ING Capital Advisors $ 5,000,000 Pacific Investment Management Company $ 5,000,000 Trust Company of the West $ 5,000,000 Van Kampen Management $ 5,000,000 Highland Capital Management $ 4,000,000 Morgan Stanley Dean Witter $ 4,000,000 Pilgrim America Group, Inc. $ 4,000,000 First Chicago National Bank $ 2,000,000 National City Bank $ 2,000,000 BHF Balanced High Yield Fund $ 2,000,000 FirStar Bank $ 2,000,000 -----------
$50,000,000 EXHIBIT A-4 [Form of Term B Loan Note] PROMISSORY NOTE (Term B-1 Loans) U.S. $______________ _________________, 1999 New York, New York FOR VALUE RECEIVED, POLYMER GROUP, INC., a corporation duly organized and validly existing under the laws of the State of Delaware (the "Maker"), hereby promises to pay to __________________ (the "Lender") [or registered assigns]/1/, for account of its respective Applicable Lending Offices provided for by the Credit Agreement referred to below, at the principal office of The Chase Manhattan Bank at 270 Park Avenue, New York, New York 10017, the principal sum of _______________ U.S. Dollars (or such lesser amount as shall equal the aggregate unpaid principal amount of the Term B-1 Loans made by the Lender to the Maker under the Credit Agreement), in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Credit Agreement, and to pay interest on the unpaid principal amount of each such Term B-1 Loan, at such office, in like money and funds, for the period commencing on the date of such Term B-1 Loan until such Term B-1 Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement. [This Note and the Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the register maintained for such purpose by or on behalf of PGI as provided by the Credit Agreement.] The date, amount, Type, interest rate and duration of Interest Period (if applicable) of each Term B-1 Loan made by the Lender to the Maker, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note, endorsed by the Lender on the schedule attached hereto or any continuation thereof (and the Maker hereby authorizes the Lender to endorse such recording on the schedule attached hereto), provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Maker to make a payment when due of any amount owing under the Credit Agreement or hereunder in respect of the Term B-1 Loans made by the Lender. This Note is one of the Term B-1 Loan Notes [(constituting a Registered Note)] referred to in the Second Amended, Restated and Consolidated Credit Agreement dated as of July 3, 1997 (as modified and supplemented and in effect from time to time, the "Credit Agreement") between the Maker, the other "Borrowers" named therein, the Domestic Non- ____________ /1/ Bracketed language to be inserted into Registered Notes. - 2 - Borrower Guarantors named therein, the lenders named therein (including the Lender), and The Chase Manhattan Bank, as Administrative Agent, and evidences Term B-1 Loans made by the Lender to the Maker thereunder. Terms used but not defined in this Note have the respective meanings assigned to them in the Credit Agreement. The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events and for prepayments of Loans upon the terms and conditions specified therein. Except as permitted by Section 12.06(b) of the Credit Agreement, this Note may not be assigned by the Lender to any other Person. This Note shall be governed by, and construed in accordance with, the law of the State of New York. The Maker hereby waives presentment, demand, notice of protest or notice of any other kind with respect to this Note. POLYMER GROUP, INC. By_________________________ Title: SCHEDULE OF TERM B-1 LOANS This Note evidences Term B-1 Loans made to the Maker, or Continued or Converted, under the within-described Credit Agreement, on the dates, in the principal amounts, of the Types, bearing interest at the rates and having Interest Periods (if applicable) of the durations set forth below, subject to the payments, Continuations, Conversions and prepayments of principal set forth below:
Amount Date Prin- Paid, Made, cipal Duration Prepaid, Unpaid Continued Amount Type of Continued Prin- or of of Interest Interest or cipal Notation Converted Loan Loan Rate Period Converted Amount Made by - ------------- ------ ---- -------- -------- --------- ------ --------
EX-11 3 STATEMENT OF COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 POLYMER GROUP, INC. COMPUTATION OF PER SHARE EARNINGS (In Thousands, Except Per Share Data)
Three Months Six Months Ended Ended --------------- --------------- July 3, July 4, July 3, July 4, 1999 1998 1999 1998 ------- ------- ------- ------- Basic and diluted: Net income applicable to common stock......... $ 8,645 $ 6,240 $14,477 $ 5,807 Weighted average shares outstanding........... 32,000 32,000 32,000 32,000 ------- ------- ------- ------- Net income per common share--basic and diluted.................................... $ 0.27 $ 0.20 $ 0.45 $ 0.18 ======= ======= ======= =======
EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Polymer Group, Inc.'s Form 10-Q for the quarter ended July 3, 1999 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS JAN-01-2000 APR-04-1999 JUL-03-1999 38,482 463 146,733 9,022 104,172 317,025 896,132 156,856 1,346,531 129,925 599,210 0 0 320 223,860 1,346,531 223,819 223,819 161,899 161,899 0 0 18,240 13,755 5,110 8,645 0 0 0 8,645 0.27 0.27
-----END PRIVACY-ENHANCED MESSAGE-----