Exhibit 10.86

 

 

DOMINION TEXTILE INTERNATIONAL B.V.

 

AND

 

TEXTILE S.A.

 

 

--------------------------------------------------------------------------------

AGREEMENT FOR THE SALE AND PURCHASE OF THE  

INTERESTS IN KLOPMAN INTERNATIONAL S.R.L.,  

KLOPMAN A.G., KLOPMAN GMBH, KLOPMAN ESPAÑA  

S.A. AND INTERNATIONAL TEXTILE S.A. AND OF  

CERTAIN TRADEMARK RIGHTS

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

CONTENTS

 

Clause

--------------------------------------------------------------------------------

        Page

--------------------------------------------------------------------------------

1.

   INTERPRETATION    2

2.

   SALE AND PURCHASE    5

3.

   CONDITIONS TO COMPLETION    8

4.

   INTERIM MANAGEMENT    10

5.

   COMPLETION    11

6.

   REPRESENTATIONS AND WARRANTIES BY THE SELLER    13

7.

   THE BUYER'S REMEDIES    13

8.

   REPRESENTATIONS, WARRANTIES AND INDEMNITIES BY THE BUYER    18

9.

   INDEMNIFICATION    18

10.

   FURTHER ACKNOWLEDGEMENTS AND COVENANTS    19

11.

   ANNOUNCEMENTS    19

12.

   SEVERABILITY    20

13.

   COSTS    20

14.

   GENERAL    20

15.

   NOTICES    21

16.

   GOVERNING LAW AND JURISDICTION    21

17.

   GOVERNING LANGUAGE    21

18.

   COUNTERPARTS    21

--------------------------------------------------------------------------------

THIS AGREEMENT is made on 8 July 2003

 

BETWEEN:

 

(a)   DOMINION TEXTILE INTERNATIONAL B.V., a company incorporated with limited
liability under the laws of The Netherlands (registered at the Chamber of
Commerce of Amsterdam under No. 33157183), whose registered office is at De
Boelelaan, 7, Officia 1, 1083HJ Amsterdam, The Netherlands (the “Seller”); and

 

(b)   GALEY & LORD INC. a company incorporated under the laws of Delaware (IRS
Employment/identification No. 56-1593207), whose registered office is at New
York, 980 Avenue of the Americas, (the “Guarantor” and, together with the
Seller, the “Guarantors”); and

 

(c)   TEXTILE S.A., a company incorporated in Luxembourg (registered no. B –
88.171), whose registered office is at 18, Rue de l’Eau – Luxembourg (the
“Buyer”);

 

(hereinafter jointly referred to as the “Parties”)

 

WHEREAS

 

(A)   the Seller directly and indirectly owns an interest representing the
entire (or, in the case of Klopman A.G. and International Textile S.A.,
substantially the entire) issued share capital of the following companies: (i)
Klopman International S.r.l. (“Klopman International”), a company incorporated
under the laws of Italy, with registered office in Frosinone, Italy, having a
subscribed and paid-up share capital of € 36,234,000.00, registered with the
Register of Enterprises of Frosinone and Tax Code No. 01668550609; (ii) Klopman
A.G. (“Klopman AG”), a company incorporated under the laws of Switzerland, with
registered office in Zug, having a subscribed and paid-up share capital equal to
Swiss Francs 4,000,000, registered with the Register of Enterprises of Zug at
No. CH-170.3.014.777-2; which also has a branch in Lille, France and a branch in
the United Kingdom; (iii) Klopman GmbH (“Klopman GmbH”), a company incorporated
under the laws of Germany, with registered office in Ratingen, having a
subscribed and paid-up share capital of € 25,564.50, registered with the
Register of Enterprises of Ratingen at No. HRB2138; (iv) Klopman España S.A.
(“Klopman España”), a company incorporated under the laws of Spain, with
registered office in Barcelona, having a subscribed and paid-up share capital of
€ 64,000.00, registered with the Register of Enterprises of Barcelona at VAT No.
ESA08131294; and (v) International Textile S.A. (“Intex”), a company
incorporated under the laws of Tunisia, with registered office in Monastir,
having a subscribed and paid-up share capital equal to 1,320,000 Tunisian
Dinars, registered with the Register of Enterprises of Tunisia at No.
B1123151998 (hereinafter Klopman International, Klopman AG, Klopman GmbH,
Klopman España and Intex or together the “Companies” and each a “Company”). The
Seller also owns the Dominion Intellectual Property Rights (as defined below);

 

(B)   by letter dated 27 January 2003, the Seller has circulated to potential
buyers an Information Memorandum prepared to assist in the evaluation of the
business, prospects and value of the Companies, inviting such potential buyers
to submit, based on such Memorandum, an expression of interest in the purchase
of the Companies;

 

1

--------------------------------------------------------------------------------

(C)   from 4 February 2003, the Buyer has conducted an overall investigation of
the Companies by means of a due diligence carried out by its representatives and
advisors (“Due Diligence”);

 

(D)   on the basis of the investigation mentioned above sub (C), on 14 March
2003, the Buyer has submitted a firm, unconditional and irrevocable binding
offer to purchase the Companies and the Dominion Intellectual Property Rights
(the “Binding Offer”);

 

(E)   following the Binding Offer, Deloitte and Touche have performed an
accounting due diligence on the Reference Accounts (as defined below) and the
Parties have entered into exclusive negotiations on the basis of an exclusivity
letter dated 9 May 2003;

 

(F)   as a result of such exclusive negotiations, the Seller is willing to sell,
and the Buyer is willing to buy the Interests (as defined below) in the
Companies and the Dominion Intellectual Property Rights on the terms and
conditions of this Agreement;

 

THE PARTIES AGREE as follows:

 

1.   INTERPRETATION

 

1.1   In addition to the terms defined in other sections of this Agreement or in
the Schedules hereto, the following terms shall have the meanings set forth
below for the purposes of this Agreement:

 

“Accounts” means the consolidated balance sheet and the consolidated profit and
loss account for the financial year ended on the Last Accounting Date attached
to this Agreement as Schedule 1, which were drawn-up in accordance with the
principles set forth in the Italian Civil Code and in the Principi Contabili dei
Dottori Commercialisti e dei Ragionieri; for clarity’s sake, the Accounts have
been drafted on the basis of the financial statements of each of the Companies
which were drawn up on the basis of local applicable accounting principles.

 

“Affiliate” means a Person Controlled by, Controlling or under common Control
with the Person in question.

 

“Actuarial Appraisal” means the actuary appraisal as at 1 March 2003 made by Tim
Sanson from HCME Customer Services Ltd. at the request of Klopman AG and
reviewed by Deloitte and Touche at the request of the Buyer that determines the
amount that needs to be restored to bring the pension fund established in July
1979 by the London Branch of Klopman AG for the benefit of its employees (the
“Pension Fund”) to entirely meet its obligations on the basis of its ongoing
funding requirements.

 

“Antitrust Clearance” means a decision, in whatever form by the relevant
Antitrust Authority or the expiry of the applicable waiting period,
unconditionally authorizing or not objecting to the transaction.

 

“Approval Order” means an order of the Bankruptcy Court authorizing and
approving the transactions contemplated in this Agreement, including, but not
limited to, the sale, transfer, and assignment of the Interests and the Dominion
Intellectual Property Rights to the Buyer in accordance with the terms and
conditions of this Agreement under Sections

 

2

--------------------------------------------------------------------------------

105, 363 and 365 of the Bankruptcy Code and, upon the full and indefeasible
payment of the Price by the Buyer, expressly excluding any claw-back right of
the Seller with respect to any Interest and other assets of the Seller to be
sold hereunder.

 

“ASI Litigation” means the disputes (whether pending or threatened) between
Klopman International and the Consorzio per l’Area di Sviluppo Industriale della
Provincia di Frosinone listed in the letter from Studio Legale Beltramo to
Klopman International dated 20 February 2003 (the “Beltramo Letter”) attached
hereto as Schedule 3.

 

“Bankruptcy Code” means Title 11 of the United States Code, 11 U.S.C., sections
101-1330 (as amended).

 

“Bankruptcy Court” means the United States Bankruptcy Court for the Southern
District of New York.

 

“Business Day” means a day other than a Saturday or Sunday or public holiday in
Italy, the Netherlands and the State of New York;

 

“Chapter 11 Petition” means the petition for protection under Chapter 11 of the
Bankruptcy Code which the ultimate parent company of the Seller, Galey & Lord
Inc., filed with the Bankruptcy Court in the United States on 19 February 2002;

 

“Claim” means a claim involving or relating to a breach of a Warranty;

 

“Completion” means completion of the sale and purchase of the Interests and the
Dominion Intellectual Property Rights in accordance with Clause 5 of this
Agreement;

 

“Completion Date” means ten Business Days after the date (not being later than
the Final Term or the extended term, as the case may be) on which the last of
the Conditions is satisfied or waived;

 

“Condition” means a condition set out in Clause 3.1 and “Conditions” means all
those conditions;

 

“Confidentiality Agreement” means the confidentiality agreement signed by the
Seller and the Buyer on 10 January 2003;

 

“Control”, “Controlled” and “Controlling” have the meaning provided by and must
be interpreted pursuant to Article 2359 no.1 of the Italian Civil Code;

 

“Disclosure Letter” means the letter from the Seller to the Buyer in relation to
the Warranties as at the Execution Date attached to this Agreement as Schedule
4;

 

“Dominion Intellectual Property Rights” means the intellectual property rights
listed in Schedule 5 which are currently owned by the Seller and which shall be
sold to the Buyer pursuant to this Agreement;

 

“Encumbrance” means a mortgage, charge, pledge, lien, third party right or other
encumbrance or security interest;

 

“Environmental Site Assessment” shall mean the environmental site assessment
(“Piano della Caratterizzazione”), which will be performed by Cosmari at the
request of

 

3

--------------------------------------------------------------------------------

Klopman International between the Execution Date and Completion, in compliance
with ASTM E1527-00—“Standard Practise for Environmental Site Assessments: Phase
I Environmental Site Assessment Process” and ASTM E1903-97—“Standard Guide for
Environmental Site Assessments: Phase II Environmental Site Assessment Process”
issued by ASTM (American Society for Testing and Materials), with the
requirements of D.M. 471/99 and with sampling and analysis performed according
to Italian national recommended practice;

 

“Execution Date” means the date on which this Agreement is executed by both
Parties;

 

“Frosinone Plant” means the industrial site and building located in Frosinone,
Località Mola dei Frati owned by Klopman International;

 

“Intellectual Property Rights” mean patents, trade marks, registered designs,
trade, business and company names, internet domain names, know-how and
inventions owned by any of the Companies;

 

“Interests” mean the interests in each of the Companies to be sold as described
in Clause 2.1;

 

“Last Accounting Date” means 28 September 2002;

 

“Letter of Credit” means the letter of credit, in the form substantially equal
to the draft letter of credit attached hereto as Schedule 6, issued by a primary
bank, which the Seller will provide to ITA Newco at Completion as a guarantee to
the Tax Liabilities. Between the Execution Date and Completion, the Seller shall
be entitled to substitute the Letter of Credit with another analogous instrument
of guarantee, provided that it obtains the Buyer’s consent to the substitution.
The Buyer shall not unreasonably withhold or delay such consent;

 

“Loss” means any loss, liability or cost incurred as a consequence of a breach
of this Agreement, including its Warranties;

 

“Material Adverse Effect” means an event which would prevent the Companies,
taken as a whole, from carrying on their respective businesses or any material
part thereof or which would be likely to cause losses, liabilities or costs of
more than Euro 3,000,000 (three million);

 

“Person” means any individual, company, firm, general or limited partnership,
joint venture, corporation, proprietorship, association, trust, governmental
body, agency or institution of a government, or any other organization or
entity, public or private;

 

“Price” means the aggregate purchase price, which has been offered by the Buyer
and accepted by the Seller for the sale and purchase of the Interests and the
Dominion Intellectual Property Rights, pursuant to Clause 2 hereof;

 

“Reference Accounts” means the consolidated balance sheet and the consolidated
profit and loss account for the period after and excluding the Last Accounting
Date to, and including, 29 March 2003 attached hereto as Schedule 2, which were
drawn-up in accordance with the principles set forth in the Italian Civil Code
and in the Principi

 

4

--------------------------------------------------------------------------------

Contabili dei Dottori Commercialisti e dei Ragionieri; for clarity’s sake, the
Reference Accounts have been drafted on the basis of the financial statements of
each of the Companies which were drawn up on the basis of local applicable
accounting principles;

 

“Sale Hearing” means a hearing before the Bankruptcy Court to consider the entry
of the proposed Approval Order;

 

“Tax Amnesty” means the tax amnesty pursuant to Art. 9 of Law 27 December 2002,
no. 289, as amended by Law 21 February 2003, no. 27 that Klopman International
applied for in relation to income tax (from 1995/96 to 2000/01 inclusive) and
VAT (from 1999 to 2001 inclusive).

 

“Tax Liabilities”, means any tax liability arising on Klopman International for
the fiscal year 2002 and, limited to VAT liabilities, for the fiscal year 1998.

 

“Warranty” means a statement of the Seller contained in Clause 6 and Schedule 7
and “Warranties” means all those statements.

 

1.2   In this Agreement, a reference to:

 

  1.2.1   a “Party” or to the “Parties” is a reference to a Party or to the
Parties to this Agreement;

 

  1.2.2   a “Clause”, “Paragraph” or “Schedule”, unless the context otherwise
requires, is a reference to a clause or paragraph of, or schedule to, this
Agreement.

 

1.3   The following terms are defined in other sections of this Agreement
(a-part from those that are defined in the Schedules hereof):

 

“Bankruptcy Rules” are defined in Clause 10.1;

 

“Extended Term” is defined in Clause 3.1;

 

“Final Term” is defined in Clause 3.1;

 

“ITA Newco” is defined in Clause 2.2;

 

“Material Breach” is defined in Clause 3.2;

 

“Notice” is defined in Clause 15.1;

 

“Sum Recovered” is defined in Clause 7.11.2; and

 

“Transaction” is defined in Clause 4.2.

 

1.4   The headings in this Agreement do not affect its interpretation.

 

2.   SALE AND PURCHASE

 

2.1   The Seller agrees to sell the following Interests and the Dominion
Intellectual Property Rights, which the Buyer agrees to buy, also on behalf of
nominees controlled by it:

 

5

--------------------------------------------------------------------------------

Company

--------------------------------------------------------------------------------

 

Nominal value of the sold
share capital

--------------------------------------------------------------------------------

 

Percentage of the share
capital

--------------------------------------------------------------------------------

Klopman International S.r.l.

  € 36,234,000   100 %

Klopman A.G.

  Swiss Francs 4,000,000   99.6%

Klopman GmbH

  € 25,564.50   100 %

Klopman España S.A.

  € 64,000   100 %

International Textile S.A.

  Tunisian Dinars 1,319,340 plus an amount equal to the increase of share
capital resulting from the Seller’s contribution set forth in Clause 2.6 hereof
  99,9 %

 

2.2   At Completion the Seller, in consideration for full payment of the Price,
shall transfer to the Buyer of:

 

Company

--------------------------------------------------------------------------------

 

Nominal value of the sold
share capital

--------------------------------------------------------------------------------

 

Percentage of the share
capital

--------------------------------------------------------------------------------

Klopman A.G.

  Swiss Francs 4,000,000   99.6%

Klopman GmbH

  € 25,564.50   100 %

Klopman España S.A.

  € 64,000   100 %

International Textile S.A.

  Tunisian Dinars 1,319,340 plus an amount equal to the increase of share
capital resulting from the Seller’s contribution set forth in Clause 2.6 hereof
  99,9 %

the Dominion Intellectual Property Rights

 

shall transfer to Textile Italia S.r.l., with registered office in Milan – Via
San Paolo 7 (Registration code 03985530967) or to the other company controlled
by the Buyer that shall be communicated in writing to the Seller pursuant to
Article 1404 of the Italian Civil Code at least 5 Business Days prior to the
Completion (either of them, “ITA Newco”):

 

Company

--------------------------------------------------------------------------------

 

Nominal value of the sold
share capital

--------------------------------------------------------------------------------

 

Percentage of the share
capital

--------------------------------------------------------------------------------

Klopman International S.r.l.

  € 36,234,000   100 %

 

In addition, the Seller shall procure the transfer to the persons that the Buyer
shall communicate in writing to the Seller pursuant to Article 1404 of the
Italian Civil Code at least 5 Business Days prior to the Completion of all the
no. 6 shares of Intex (for a nominal value equal to 660 Tunisian Dinars)
currently owned by persons other than the Seller, so that eventually the Buyer
and the persons designated by it shall own in the aggregate 100% of the share
capital of Intex. The price for the sale and transfer of such shares shall be
deemed included in the Price and the Seller shall hold the Buyer and the

 

6

--------------------------------------------------------------------------------

persons designated by the Buyer as purchasers of such Intex shares free from any
liabilities in respect to the payment of such Intex shares.

 

2.3   The Interests and the Dominion Intellectual Property Rights shall be
transferred to the Buyer and ITA Newco free from all Encumbrances, options,
equities and other third party rights of any other nature and together with all
rights and entitlements relating thereto, including the right to receive
dividends (whether declared, payable or otherwise) or other distributions as
from 1 October 2002.

 

2.4   The total aggregate price for the acquisition of the Interests and the
Dominion Intellectual Property Rights shall be an amount equal to Euro
24,084,643 and will not be subject to any adjustment except for as provided
below in Clause 2.5.

 

  The   Parties hereby acknowledge and agree to split the Price as follows

 

  (a)   for the purchase of the Interests in Klopman International: Euro
21,813,000.00;

 

  (b)   for the purchase of the Interests in Klopman AG:Euro 542,910.77;

 

  (c)   for the purchase of the Interests in Klopman GmbH: Euro 542,910.77;

 

  (d)   for the purchase of the Interests in Klopman España: Euro 542,910.77;

 

  (e)   for the purchase of the Interests in Intex: Euro 542,910.77;

 

  (f)   for the purchase of the Dominion Intellectual Property Rights: Euro
100,000.00.

 

For the sake of clarity, the Parties hereby acknowledge that the Price reflects
and takes into account the amount that needs to be restored to bring the Pension
Fund to entirely meet its obligations on the basis of its ongoing funding
requirements.

 

2.5   Between Execution Date and Completion, Klopman International will undergo
the Environmental Site Assessment, it being understood that during such time
period each of the Parties, and any of their advisers or consultants, (i) is
entitled to participate to the Environmental Site Assessment activities, and
(ii) must be kept constantly informed by Klopman International of the progress
of the Environmental Site Assessment and be provided with all documents and
information concerning the same which it may reasonably request. To this end,
the Seller shall procure that the company carrying out the Environmental Site
Assessment and Klopman International shall provide reasonable co-operation to
the Buyer.

 

  2.5.1   The Seller shall use its best efforts to procure that (and the Buyer
shall provide its cooperation so that) (i) the Environmental Site Assessment
shall be completed, and the relevant report be delivered in its final form to
Klopman International, by 15 July 2003; and the Seller shall procure that (ii)
Klopman International shall deliver to the Buyer and the Seller a full copy of
the Environmental Site Assessment report by and no later than 5 (five) Business
Days after its delivery to Klopman International, together with a letter signed
by the legal representative of Klopman International indicating (a) the actions
that Klopman International intends to carry out in order to comply with the
outcome of the Environmental Site Assessment, and (b) the estimated costs of
such

 

7

--------------------------------------------------------------------------------

actions, based on the prudent judgement of the Companies’ management
(altogether, the “Environmental Costs”).

 

  2.5.2   If the Environmental Site Assessment finds that Klopman International
is required to take actions which involve Environmental Costs (as determined by
the management of Klopman International) which:

 

  (a)   are less than Euro 100,000, then no Price adjustment will be made; or

 

  (b)   exceed Euro 100,000 but are less than Euro 500,000, then the Buyer shall
deduct an amount equal to 50% of the entire amount of the Environmental Costs
from the Price payable at Completion; or

 

  (c)   exceed Euro 500,000, then each of the Parties shall be entitled to
terminate this Agreement in which case Clause 3.2 shall apply mutatis mutandis.

 

For the sake of clarity, the Parties hereby acknowledge and agree that no other
remedy or actions in relation to any result or finding included in the
Environmental Site Assessment is permitted and the Parties hereby expressly
waive any such other potential remedy whatsoever in relation thereto.

 

2.6   The Parties agree that, on or before Completion, the Seller shall
contribute in full its Euro 459,453 receivable to Intex in a manner to
definitively increase Intex’s share capital by a corresponding amount.

 

3.   CONDITIONS TO COMPLETION

 

3.1   Completion is conditional on the satisfaction of the following Conditions
on or before 19 September 2003 (the “Final Term”):

 

  3.1.1   the Autorità Garante della Concorrenza e del Mercato and any foreign
applicable anti-trust authority (the “Antitrust Authority”) having released the
Antitrust Clearance. In this connection, the Buyer agrees to procure that full
and accurate filings to the Antitrust Authorities are made, pursuant to
applicable antitrust laws and regulations, with respect to the transactions
contemplated hereby (the “Antitrust Filings”) as soon as practicable after the
Execution Date and, in any event, within ten Business Days from the Execution
Date or any other shorter term provided for by applicable antitrust laws or
regulations, and to supply promptly any additional information and documentary
material that may be requested by the relevant Antitrust Authority. In addition,
the Parties acknowledge the importance that the Antitrust Clearance be obtained
as soon as possible and therefore undertake as follows:

 

  (i)   the Buyer shall keep the Seller constantly informed of the processing of
the Antitrust Filings and provide the Seller with all the documents and
information concerning the Antitrust Filings which the Seller may reasonably
request, including the Antitrust Clearance; and

 

8

--------------------------------------------------------------------------------

  (ii)   the Seller shall provide the cooperation, and shall ensure that the
Companies provide the cooperation, that the Buyer may reasonably request; and

 

  (iii)   the Parties shall abstain from any action or omission which could,
directly or indirectly, have the effect of delaying, impairing or impeding the
receipt of the Antitrust Clearance;

 

  3.1.2   the Bankruptcy Court having entered the Approval Order and, if and
when so entered, the Seller having provided to the Buyer documentary evidence
that the Approval Order was entered by the Bankruptcy Court;

 

  3.1.3   the Seller having provided to the Buyer documentary evidence that the
Environmental Site Assessment was completed;

 

  3.1.4   the Seller having provided to the Buyer documentary evidence that the
Company filed for the Tax Amnesty and paid any relevant instalment due in
respect of the Tax Amnesty until such time;

 

  3.1.5   the Seller having provided to the Buyer documentary evidence that the
contribution in full of its Euro 459,453 receivable to Intex was validly and
definitively completed and that it has been duly registered on Intex books and
the relevant shares of Intex have been issued.

 

The Seller will have the right to extend the Final Term up to 31 October 2003
(the “Extended Term”), in the event that the delivery of the Approval Order or
the Environmental Site Assessment report is delayed or in the event that it
shall be so required in order to complete the increase of Intex share capital by
the contribution of the Seller’s receivable as set forth in Clause 2.6 hereof
or, in relation to Intex, to complete the transfer of the Interests as provided
for in Clause 5.

 

3.2   The Buyer shall be entitled, by written notice to the Seller, to terminate
this Agreement if at any time prior to Completion the Buyer becomes aware of an
event or circumstance which constitutes a breach of any of the Warranties which
would give rise to the Buyer being entitled under the Agreement to recover an
amount in excess of Euro 3,000,000 (three million) (a “Material Breach”),
whereupon the provisions of this Agreement (other than Clauses 1
(Interpretation); 11 (Announcements); 12 (Severability); 13 (Costs); 14
(General); 15 (Notices); 16 (Governing Law and Jurisdiction); 17 (Governing
Language) and 18 (Counterparts)) shall cease to have effect.

 

3.3   The Seller undertakes to the Buyer to disclose to it in writing,
immediately upon it becoming aware of the same, full details of any fact,
matter, event or circumstance which constitutes or is likely to constitute a
Material Breach.

 

3.4   Each of the Parties shall as soon as reasonably practicable notify the
other Party in writing of any matter which may give rise to the Conditions not
being fulfilled.

 

3.5   Without prejudice to the Buyer’s rights under Clause 3.2 hereof, if the
Conditions have not been fulfilled by the Final Term or the Extended Term (as
the case may be) neither the Seller nor the Buyer shall be obliged to complete
the sale and purchase set forth in

 

9

--------------------------------------------------------------------------------

Clause 2, provided that the unfulfilment of the relevant Condition may not be
attributed to the conduct of the Party opposing Completion on such grounds, and
none of the Parties shall have any further rights, liabilities, or obligations
under this Agreement save in respect of Clauses 1 (Interpretation); 11
(Announcements); 12 (Severability); 13 (Costs); 14 (General); 15 (Notices); 16
(Governing Law and Jurisdiction); 17 (Governing Language) and 18 (Counterparts),
which will continue in full force and effect.

 

4.   INTERIM MANAGEMENT

 

4.1   Except for all activities which are necessary with regard to Tax Amnesty
and Environmental Site Assessment, and except as expressly contemplated by this
Agreement or disclosed in the Disclosure Letter, or unless with the prior
written consent of the Buyer (such consent not to be unreasonably withheld or
delayed), the Seller, during the period between 30 March 2003 inclusive and the
Completion Date, represents and agrees that and shall ensure the following:

 

  4.1.1   each of the Companies’ business activities shall be conducted only in
the ordinary and usual course of business and so as to maintain the same as
going concerns;

 

  4.1.2   no action shall be taken by the Seller, the Companies that may have a
Material Adverse Effect on the business of the Companies taken as a whole;

 

  4.1.3   no contracts unrelated to the usual course of business (including, but
not limited to, licensing agreements, mortgages, pledges or joint venture
agreements) shall be entered into, amended or terminated by any of the
Companies;

 

  4.1.4   no transaction, arrangement or agreement shall take place between any
of the Companies and their Affiliates, except for transactions at arm’s length
and consistent with past practice, nor any of the terms of any existing
transaction, arrangement or agreement shall be varied;

 

  4.1.5   no existing loans or credit agreements shall be amended or terminated
at the option of the Seller and no action shall be taken that could detriment
the net financial position of the Companies in excess of Euro 2,000,000 (two
million);

 

  4.1.6   no increase or reduction of the share capital, and no mergers or
de-mergers, of any of the Companies shall be approved;

 

  4.1.7   no dividends, reserves or other extraordinary dividends shall be
resolved or paid out by any of the Companies;

 

  4.1.8   no compensation or other benefit (including, without limitation, basic
salary, pension contributions, pension benefit, bonuses, commissions and
benefits in kind) to the directors and managers or external counsel of any of
the Companies, other than those existing on the date hereof, shall be approved
and no senior employee shall be engaged or dismissed (other than in
circumstances justifying dismissal for just cause) or have his terms of
employment materially altered and for the purposes of this clause, “senior
employee” shall mean a

 

10

--------------------------------------------------------------------------------

 

single employee with a gross salary in excess of Euro 100,000 (Euro one hundred
thousand) per annum;

 

  4.1.9   no asset involving a capital expenditure in excess of Euro 1,000,000
(one million) shall be acquired or agreed to acquire or disposed or agreed to
dispose of or leased or agreed to lease or licensed or agreed to licence by any
of the Companies;

 

  4.1.10   no litigation or arbitration proceedings shall be commenced other
than in relation to debt collection in the ordinary course of business by any of
the Companies;

 

  4.1.11   no insurance policies shall be terminated or rendered void or
voidable by any of the Companies;

 

  4.1.12   no partnership, consortium, joint venture or any other incorporated
association shall be formed or entered into by any of the Companies;

 

  4.1.13   no charge, security, lien or encumbrance over any of the assets of
the Companies shall be granted, created or allowed to arise other than in the
ordinary course of business and in any case in excess of Euro 1,000,000 (one
million),

 

  4.1.14   no incorporation or liquidation of any subsidiary undertaking or
intra-group transfer of assets (other than in the normal course of trading) or
any share reorganisation shall be carried out or effected by any of the
Companies; and

 

  4.1.15   no material change in the nature or scope of the business of any of
the Companies shall be made or permitted.

 

4.2   During the period between 30 March 2003 (inclusive) and the Completion
Date, the Seller shall notify the Buyer of any transaction falling under the
ambit of Clause 4.1, which any of the Companies intends to carry out (the
“Transaction”) and of any other event otherwise falling under the ambit of
Clause 4.1. Within five Business Days from the notification by the Seller, the
Buyer shall have the right to object in writing to the Transaction. It is hereby
agreed that if the Buyer does not notify its objection to the Transaction to the
Seller within such five Business Day period, the Transaction shall be deemed
approved.

 

5.   COMPLETION

 

5.1   Completion shall take place on the Completion Date or on such other date
agreed in writing by the Parties at the offices of NCTM in Milan or in such
other place agreed in writing by the Parties.

 

5.2   At Completion the Seller and the Buyer shall perform, directly or by way
of proxy, all actions and formalities needed in order to:

 

  5.2.1   transfer the Interests in favour of the Buyer and ITA Newco together
with the relative share certificates;

 

11

--------------------------------------------------------------------------------

  5.2.2   transfer, also by execution of separate deeds of transfer suitable for
registration in the relevant jurisdictions, the Dominion Intellectual Property
Rights in favour of the Buyer.

 

5.3   At Completion the Seller shall deliver to the Buyer:

 

  5.3.1   the valid resignations of all the directors of Klopman International
and of Mr. Len Ferro as director of Klopman AG. The resignation letters shall
include acknowledgement that each resigning director has no claims against each
relevant Company for compensation, loss of office or otherwise;

 

  5.3.2   all the statutory books (libro soci, libro verbali assemblee, libro
verbali del consiglio di amministrazione, libro adunanze del collegio sindacale)
of Klopman International; such books will also be made available by the Seller
at the offices of Clifford Chance in Milan at least 3 (three) Business Days
before Completion for verification by the Buyer;

 

  5.3.3   in the event that the context shall so require or it shall be
necessary, upon reasonable request of the Buyer, any other statutory book of the
Companies; in such circumstance, such books will also be made available by the
Seller at the offices of Clifford Chance in Milan at least 3 (three) Business
Days before Completion for verification by the Buyer, provided that the Buyer
shall require them at least 5 Business Days in advance; and

 

  5.3.4   the Letter of Credit.

 

5.4   The Seller shall also use its best efforts in order to ensure that at
Completion the internal auditors of Klopman International validly resign.

 

5.5   At Completion, the Seller shall ensure that the shareholders’ meetings of
Klopman International are held at which the following matters are resolved:

 

  5.5.1   the approval for registration in Klopman International’s shareholders’
book of the transfer of the Interests;

 

  5.5.2   the appointment as directors of Klopman International of the persons
that the Buyer shall indicate at least 3 Business Days prior to Completion; and

 

  5.5.3   the appointment as “sindaci” of Klopman International, provided that
the existing “sindaci” have resigned, of the persons that the Buyer shall
indicate at least 3 Business Days prior to Completion.

 

5.6   At Completion, the Seller as directed by the Buyer shall comply with all
formalities required in the place of incorporation of each Company (other than
Klopman International) in order (i) to perfect the transfer of the Interests to
the Buyer; and (ii) to enable the Buyer to perform all formalities to make the
transfer validly opposable to each Company and any third parties.

 

5.7   At Completion the Buyer shall pay to the Seller the Price as follows: (i)
as to Euro 22,284,000, by wire transfer of immediately available funds to such
account as shall have been notified to the Buyer by the Seller, or as the Seller
directs in writing at least

 

12

--------------------------------------------------------------------------------

 

three Business Days before the Completion Date; (ii) as to Euro 1,800,643, by
the assumption by the Buyer in full of the CHF 2,800,000 debt of the Seller to
Klopman AG, regardless of the applicable conversion rate at the date of
Completion.

 

5.8   If in any respect the obligations of either party set out in this Clause 5
are not complied with on the Completion Date, the non-defaulting Party shall not
be obliged to complete this Agreement and may (without prejudice to its rights
under this Agreement):

 

  5.8.1   defer Completion to a date not more than ten Business Days after that
date; or

 

  5.8.2   proceed to Completion as far as practicable; or

 

  5.8.3   after the expiry of a 10 (ten) Business Days grace period, terminate
this Agreement; or

 

  5.8.4   waive all or any of the requirements contained in this Clauses 5 at
its discretion by means of a notice to that effect in writing served on the
other.

 

6.   REPRESENTATIONS AND WARRANTIES BY THE SELLER

 

6.1   Except as disclosed in this Agreement and in the Disclosure Letter, the
Guarantors represent and warrant to the Buyer that the Warranties set forth in
relation to each of the Companies and the Dominion Intellectual Property Rights
in Schedule 7 to this Agreement are true and correct at the Execution Date.
Subject to Clause 3 above, the Warranties in Schedule 7 shall also be true and
correct on the Completion Date with reference to the situation existing as at
such date. The Warranties shall also continue in full force and effect
notwithstanding Completion in connection with the indemnification rights
provided hereunder.

 

6.2   The Guarantors do not make any representations, give any warranties or
undertake any commitments with reference to any of the Companies, their assets
and businesses, the Interests, the Dominion Intellectual Property Rights, or in
connection with any other matter relating to the transactions contemplated under
this Agreement, other than those expressly given in this Agreement. Each
Warranty shall be separate and independent and, save as expressly provided,
shall not be limited by reference to any other Warranty.

 

7.   THE BUYER’S REMEDIES

 

7.1   The Guarantors’ obligation to indemnify

 

  7.1.1   Subject to the conditions and limitations set forth below, the
Guarantors agree to indemnify the Buyer against any Loss which is a direct
consequence of the Guarantors’ breach of any of the Warranties. The Losses shall
not include any indirect or consequential damages, it being understood that
Losses shall only include the amount of any final and successful third party
claim or cash disbursement made by, or in relation to, any of the Companies.

 

  7.1.2   For the sake of clarity, the only exceptions to the Warranties shall
be those set out in the Disclosure Letter, in this Agreement or in the Schedules
hereto (excluding Schedule 7) or permitted under Clause 4 above.

 

13

--------------------------------------------------------------------------------

  7.1.3   Any indemnification due to the Buyer herein:

 

  (a)   shall become payable only when the Buyer or the relevant Company has
made a disbursement in relation to the Loss as a result of (i) a settlement
authorized by the Seller pursuant to this Agreement, or (ii) an enforcement of a
decision of a competent court; and

 

  (b)   shall be paid in immediately available funds on the account that the
Buyer shall timely communicate to the Seller on the date which is on or before
10 (ten) Business Days after the date on which the relevant Company or the Buyer
has made a disbursement as set forth above.

 

7.2   Exclusive Remedy

 

The right to obtain indemnification pursuant to this Clause 7 shall exclude any
other right, action, remedy, claim or means of protection available to the Buyer
in relation to the Guarantors’ breach of the Warranties.

 

7.3   Limitations on Quantum

 

  7.3.1   The Guarantors are not liable in respect of any Claim pursuant to any
Warranty set out in Schedule 7 until:

 

  (a)   the amount that would otherwise be recoverable from the Guarantors under
this Clause 7 in respect of the Claim exceeds € 15,000 (fifteen thousand); and

 

  (b)   the amount that would otherwise be recoverable from the Guarantors under
this Clause 7 in respect of that Claim (excluding any amounts in respect of a
Claim for which the Seller has no liability because of paragraph (a) above),
when aggregated with any other amount or amounts recoverable in respect of such
other Claim, exceeds € 300,000 (three hundred thousand), in which case the
Guarantors shall be liable for the excess amount only.

 

  7.3.2   The Guarantors’ total liability in respect of all Claims is limited to
€ 2,500,000 (two million and five hundred thousand).

 

7.4   Time Limits for Bringing Claims

 

  7.4.1   The Guarantor are not liable in respect of a Claim unless the Buyer
has given the Guarantors written notice of the Claim, stating in detail the
nature of the Claim and the amount claimed:

 

  (a)   within five calendar years from the Completion Date in respect of any
claim under a Warranty contained in paragraph 4 and 9 of Schedule 7; and

 

  (b)   within 21 calendar months from the Completion Date in respect of any
other claim pursuant to any Warranty in Schedule 7 except for paragraph 4 and 9.

 

14

--------------------------------------------------------------------------------

  7.4.2   Notwithstanding the above, the Guarantors shall be liable also beyond
the above time limits until final adjudication of any proceedings concerning the
pending ASI Litigations listed in the Beltramo Letter.

 

7.5   Specific Limitations

 

  7.5.1   The Guarantors are not liable in respect of a Claim:

 

  (a)   to the extent that the matter giving rise to the Claim is an amount for
which the Buyer or any of the Companies have already recovered the claimed
amount from a person other than the Guarantors whether under a provision of
applicable law, insurance policy or otherwise howsoever;

 

  (b)   to the extent that the matter giving rise to the Claim was taken into
account in computing the amount of a specific allowance, provision or reserve in
the Accounts, or in the Reference Accounts, or was specifically referred to in
the Accounts or in the Reference Accounts or in the notes thereto;

 

  (c)   to the extent of the amount by which a provision against liabilities
included in the Accounts or in the Reference Accounts is overstated because the
risk against which it was posted did not materialize and is definitively
excluded that it may materialize; or

 

  (d)   to the extent that the matter giving rise to the Claim is a tax
liability of any of the Companies arising because such Company’s assets are more
than, or its liabilities are less than the amount stated in the Accounts or in
the Reference Accounts or were taken into account in computing the provision for
tax in the Accounts or in the Reference Accounts; or

 

  (e)   to the extent of the amount of any supervening assets or credits (such
as an understatement of assets or an overstatement of liabilities or provisions
or reserves, without prejudice to paragraph (c) above) not reflected in the
Accounts or in the Reference Accounts to the extent that such supervening asset
or credit is in available cash or capable of being promptly converted into cash.

 

7.6   Notification and conduct of Claims

 

  7.6.1   If the Buyer becomes aware of a matter which might give rise to a
Claim:

 

  (a)   the Buyer shall promptly give written notice to the Guarantors of the
matter, together with reasonable details of the nature of the Claim and a bona
fide estimate of any alleged loss and shall consult the Guarantors with respect
to the matter;

 

  (b)   the Buyer will provide the Guarantors and its advisers full access to
premises and personnel and to relevant assets, documents and records (in a
manner an timing that will not determine a material detriment to the normal
activity of the Companies) for the purposes of investigating the

 

15

--------------------------------------------------------------------------------

         relevant Claim and enabling the Guarantors to take appropriate action
in order to mitigate their liability;

 

  (c)   the Buyer shall take any action and institute any proceedings, and give
any information and assistance, as the Guarantors may reasonably request to:

 

  (i)   avoid, dispute, resist, appeal, compromise, defend, remedy or mitigate
the matter;

 

  (ii)   enforce against third parties any of the Buyer’s rights in relation to
the matter; and

 

  (iii)   in connection with proceedings related to the matter against third
parties, if the Seller so requests, allow the Guarantors the exclusive right to
conduct the proceedings;

 

provided that the Guarantors shall timely anticipate to the Buyer and to the
relevant Company, as directed by the Buyer, any and all amounts payable in
respect of such actions and proceedings, together with all reasonable costs that
might be incurred as a result of a request or nomination by the Guarantors;

 

  7.6.2   the Buyer shall not admit liability in respect of, or compromise or
settle, the matter, and shall not pay any amount in respect of a Claim, without
the prior written consent of the Guarantors (not to be unreasonably withheld or
delayed), unless it would have a Material Adverse Effect on the Companies, in
which case the Buyer shall consult with the Guarantors as to the alternative
actions to be taken, and shall provide all reasonable cooperation, to protect
the interest of the Guarantors.

 

  7.6.3   If, during the period in which the Warranties and obligations of the
Guarantors are valid and enforceable in accordance with this Agreement, there
are newly enacted provisions of law which would allow the relevant Company to
proceed with an amnesty or an alternative dispute resolution procedure in the
field of taxation, administrative matters, social security or exchange control,
including amnesties for real estate and building law violations, then the Buyer
shall consult with the Guarantors and, if so required by any of the Guarantors,
shall procure that the relevant Company shall take advantage of the benefits
arising from the intervening legislation, provided that the Guarantors shall
timely provide to the relevant Company, as directed by the Buyer, any and all
amounts payable under the new legislation based on the amnesty or alternative
dispute resolution procedure.

 

7.7   Any act or omission by the Buyer or any of the Companies in breach of the
foregoing provisions of this Clause 7 shall result in the Guarantors being
discharged from its obligations to indemnify the Buyer in respect of the Claim.

 

7.8   No failure to exercise, and no delay in exercising on the part of the
Buyer any right or remedy in respect of any Warranty pursuant to this Agreement
shall operate as a waiver

 

16

--------------------------------------------------------------------------------

 

of such right, remedy or Warranty nor shall a single or partial exercise of such
right or remedy preclude the exercise of such or any other right or remedy.

 

7.9   As long as the Seller and the Guarantor shall be included in the same
group of companies, the Seller and Guarantor and the Buyer hereby acknowledge
and agree that the Guarantor shall be the sole representative of the Seller and
the Guarantor for all notifications and communications and decisions due or
allowed hereunder. Thereafter, in the event of conflict between the instructions
given to the Buyer by the Seller and the Guarantor, the Seller and the Buyer
hereby acknowledge and agree that the instructions given by the Guarantor shall
prevail.

 

7.10   Determination of Loss

 

  7.10.1   In assessing any damages or other amounts recoverable for a Claim
there shall be taken into account any corresponding savings by, or net benefit
to, the Buyer.

 

  7.10.2   In particular, any amount due by the Guarantors pursuant to this
Clause 7 shall be reduced by an amount equal to tax benefit enjoyed or the
present value of the benefit to be enjoyed by the relevant Company or the Buyer
as a consequence of its suffering the Loss which is the subject of the Claim and
increased by an amount equal to the increase of taxes payable by the relevant
Company or by the Buyer as a consequence of receiving any indemnity pursuant to
a Claim hereunder.

 

7.11   Recovery From a Third Party

 

  7.11.1   If the Guarantors have paid or pay an amount in respect of a Claim
and the Buyer subsequently recovers or becomes entitled to recover from a third
party an amount which is referable to the matter giving rise to the Claim:

 

  (a)   the Buyer shall immediately notify the Guarantors and, if relevant,
shall ensure that the relevant Company shall take such action as the Guarantors
may reasonably require to enforce the recovery against the third party in
question;

 

  (b)   if the Guarantors have already paid an amount in satisfaction of a Claim
and the amount paid by the Guarantors in respect of the Claim is more than the
Sum Recovered (as defined below), the Buyer shall immediately pay to the
Guarantors the Sum Recovered;

 

  (c)   if the Guarantors have already paid an amount in satisfaction of a Claim
and the amount paid by the Guarantors in respect of the Claim is less than or
equal to the Sum Recovered, the Buyer shall immediately pay to the Seller an
amount equal to the amount paid by the Guarantors; and

 

  (d)   if the Guarantors have not already paid an amount in satisfaction of a
Claim, the amount of the Claim for which the Guarantors would have been liable
shall be reduced by and to the extent of the Sum Recovered.

 

17

--------------------------------------------------------------------------------

  7.11.2   For the purposes of this Clause 7.11.2, “Sum Recovered” means an
amount equal to the total of the amount recovered from the other person plus any
interest in respect of the amount recovered from the person less all reasonable
costs incurred by the Buyer in recovering the amount from the person.

 

7.12   Provision of Information

 

If at any time after the date of this Agreement the Guarantors wants to insure
against their liabilities in respect of Claims, the Buyer shall provide any
information as a prospective insurer may reasonably require before effecting the
insurance.

 

7.13   Preservation of Information

 

The Buyer shall preserve all documents, records, correspondence, accounts and
other information whatsoever relevant to a matter which may give rise to a Claim
and shall provide to the Guarantors copy of such documents upon their request.

 

8.   REPRESENTATIONS, WARRANTIES AND INDEMNITIES BY THE BUYER

 

8.1   Representations and warranties

 

The Buyer warrants to the Seller that each Warranty set out in Schedule 8 is
true, accurate and not misleading at the date of this Agreement and shall also
be true and correct on the Completion Date with reference to the situation
existing on such date.

 

9.   INDEMNIFICATION

 

9.1   Indemnification by the Guarantors

 

Without prejudice and subject to the limitations of Clause 7 above, and to the
extent that the relevant loss cannot be off set with any available provision,
reserve or allowance Accounts or in the Reference Accounts, the Guarantors agree
to indemnify the Buyer against and to hold the Buyer harmless from any Loss
which the Buyer or any Company may suffer or incur, together with all costs and
expenses (including legal fees and together with any applicable VAT), by reason
of breach of any Warranty given by the Guarantors hereunder.

 

In addition to the above, and always without prejudice and subject to the
limitations of Clause 7 above, the Guarantors agree to indemnify the Buyer in
respect of any Loss directly deriving to Klopman International from the ASI
Litigation and arising from any judgment, order, decree, arbitral award or
decision of a competent court, tribunal, arbitrator or any other authority or
from settlement of the relevant proceeding, the aforementioned limited to the
aggregate excess of the liabilities with respect to (i) the amount provided for
the ASI Litigation in the Reference Accounts, and (ii) any other available
specific provision, reserve or allowance provided for in the Reference Accounts,
provided that the risk against which it was posted did not materialize and is
definitively excluded that it may materialize.

 

9.2   Indemnification by the Buyer

 

18

--------------------------------------------------------------------------------

The Buyer hereby agrees fully to indemnify the Seller against any loss,
liability, damage or cost deriving from any breach of the Buyer’s warranties set
out in Schedule 8. The Buyer’s warranties set out in Schedule 8 shall expire on
the first anniversary of the Completion Date and, in any event, no claim may be
brought by the Seller thereafter, except that they shall continue until final
adjudication of any proceedings issued and served by the Seller against the
Buyer prior to the expiration of such period.

 

The Buyer shall not however be liable pursuant to any Warranty set out in
Schedule 8 in respect of any claim whose amount would otherwise be recoverable
from the Buyer under this Clause 9.2 that does not exceed € 15,000 (fifteen
thousand), until the aggregate amount of such claims and of any other amount or
amounts recoverable in respect of other claims exceeds € 300,000 (three hundred
thousand), in which case the Buyer shall be liable for the excess amount only up
to a maximum amount of € 2,500,000 (two million and five hundred thousand).

 

10.   FURTHER ACKNOWLEDGEMENTS AND COVENANTS

 

10.1   The Seller represents, and the Buyer acknowledges, that the Seller is an
Affiliate of the Galey & Lord group of companies and that Galey & Lord Inc. and
certain of its U.S. Affiliates filed the Chapter 11 Petitions with the
Bankruptcy Court on 19 February 2002. In particular, the Seller represents and
the Buyer acknowledges that the transactions contemplated by this Agreement are
subject to the approval of the Bankruptcy Court, and that no party to this
agreement shall have any obligations or liabilities to any other party if, for
any reason, such approval is not granted by the Bankruptcy Court. In addition,
the Seller represents and the Buyer acknowledges that such transactions may be
expressly subject, under the Bankruptcy Code and/or the Bankruptcy Rules (as
defined below), to the Bankruptcy Court’s imposing or otherwise requiring a
competitive bidding process with respect to such transactions. In this regard,
the Seller fully commits to act in this transaction, provided that it complies
with the applicable rules, procedures, and requirements, so as to obtain the
Bankruptcy Court’s approval of the transaction through a direct sale of the
Companies rather than through a competitive bidding procedure with respect
thereto. The Buyer, as may be reasonably requested or required by the Seller,
fully commits to act in this transaction so as to enable Galey & Lord Inc. and
its Affiliates to comply (as the Seller may deem reasonably necessary or
appropriate) in all respects with the rules, requirements, and procedures of the
Bankruptcy Court, the Bankruptcy Code and the United States Federal Rules of
Bankruptcy Procedure (the “Bankruptcy Rules”).

 

11.   ANNOUNCEMENTS

 

11.1   Subject to Clause 11.2 below, neither Party may, before or after
Completion, make or send a public announcement, communication or circular
concerning the transactions referred to herein unless it has first obtained the
other Party’s written consent, which may not be unreasonably withheld or
delayed.

 

11.2   Clause 11.1 does not apply to a public announcement, notice or motion
filed in the Bankruptcy Court, communication, or circular that is, in the
opinion of the Seller, required or requested by, advisable or appropriate under
(as is applicable) the Bankruptcy Code, the Bankruptcy Rules, the Bankruptcy
Court, any other applicable

 

19

--------------------------------------------------------------------------------

laws and regulations, a rule of a listing authority by which either Party or its
respective Affiliates’ shares are listed or traded, or a governmental authority
or other authority with relevant powers to which either Party or its respective
Affiliates are subject or submits, whether or not the requirement has the force
of law; provided that such public announcement, notice or motion filed in the
Bankruptcy Court, communication, or circular shall, so far as is practicable, be
made after consultation with the other Party and after taking into account the
reasonable requirements of the other Party as to its timing, content,
publication or delivery (as applicable), provided that the Buyer may not
withhold its consent to the Seller or any of the Seller’s Affiliates (as
applicable) filing any notice or motion in the Bankruptcy Court that the Seller,
in its sole discretion, deems necessary, advisable, or appropriate under the
rules, requirements or procedures of the Bankruptcy Code and the Bankruptcy
Rules.

 

11.3   In the event that Completion does not occur for any reason whatsoever,
this Agreement and any information provided by either Party to the other or
relating to any of the Companies or the Dominion Intellectual Property Rights
and the matters contemplated herein shall be kept confidential as provided for
in the Confidentiality Agreement which shall remain in full force and effect.

 

12.   SEVERABILITY

 

12.1   Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition and unenforceable without invalidating the remaining provisions
hereof. However, the Parties hereby undertake to use their best efforts to agree
on substitute provisions which, while valid, will achieve as closely as possible
the same economic effects as the invalid provisions.

 

13.   COSTS

 

13.1   Except where this Agreement or the relevant document provides otherwise,
each Party shall pay its own costs relating to the negotiation, preparation,
execution and performance by it of this Agreement and of each document referred
to herein.

 

13.2   Any registration tax and stamp duty, together with the fees of any public
notary required for the professional services to be rendered by him in relation
to this Agreement, shall be borne by the Buyer.

 

14.   GENERAL

 

14.1   Any Amendment of this Agreement is valid only if it is in writing and
signed by or on behalf of each Party.

 

14.2   The failure to exercise or any delay in exercising a right or remedy
provided by this Agreement or by law does not impair or constitute a waiver of
the right or remedy or an impairment of or a waiver of other rights or remedies.
No single or partial exercise of a right or remedy provided by this Agreement or
by law prevents further exercise of the right or remedy or the exercise of
another right or remedy.

 

20

--------------------------------------------------------------------------------

14.3   This Agreement and each document referred herein constitute the entire
agreement and supersede any previous agreement between the Parties relating to
the subject matter of this Agreement.

 

15.   NOTICES

 

15.1   A notice or other communication under or in connection with this
Agreement (a “Notice”) shall be:

 

  15.1.1   in writing;

 

  15.1.2   in the English language; and

 

  15.1.3   sent by registered mail, anticipated by fax or e-mail, to the Party
due to receive the Notice to the following address:

 

Party  

Dominion Textile

International

 

Galey & Lord Inc.

  Textile S.A. Address  

Officia 1

De Boelelaan 7

1083 HJ Amsterdam

The Netherlands

  980, Avenue of the Americas, New York  

C/o NCTM – Studio

Legale Associato – Via

Agnello 12 – 20121

Milano Italia

email   Piet.vanderlinden@wxs.nl   lferro@gnl.com  

filippo.cesaris@nctm.it

andrea.bernardi@nctm.it

Facsimile No.   +31.206442144   +1.3366653113   +39 0272551501 Marked for the
attention of   Pieter van der Linden   Leonard Ferro   Filippo Cesaris and
Andrea Bernardi

 

15.2   Unless there is evidence that it was received earlier or later, a Notice
is deemed given four Business Days after posting it by fax or e-mail, when
confirmation of its receipt has been recorded by the sender’s fax machine or
e-mail and provided that transmission is followed by registered mail.

 

16.   GOVERNING LAW AND JURISDICTION

 

16.1   This Agreement is governed by Italian law.

 

16.2   The Court of Milan will have exclusive jurisdiction over all disputes
which may arise between the Parties, out of, or in connection with this
Agreement or for breach thereof.

 

17.   GOVERNING LANGUAGE

 

17.1   This Agreement is drawn up in the English language. If this Agreement is
translated into another language, the English language text prevails.

 

18.   COUNTERPARTS

 

This Agreement may be executed in any number of counterparts, each of which when
executed and delivered is an original and all of which together evidence the
same agreement.

 

21

--------------------------------------------------------------------------------

EXECUTED by the Parties:

 

Signed by

 

Len Ferro

 

Pieter van der Linden

 

duly authorised representative of Dominion Textile International B.V.

 

Signed by Andres Bernardi

   )                                         

a duly authorised

   )                                         

representative of/for

   )                                         

and on behalf of

   )                                                         

Textile S.A.

    

 

Signed by

 

Len Ferro

 

a duly authorised representative of Galey & Lord, Inc. in connection with its
obligations as Guarantor hereunder

 

22