<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission File Number: 0-21469
RIDGEVIEW, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0377410
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2101 NORTH MAIN AVENUE
NEWTON, NORTH CAROLINA 28658
(Address of principal executive offices) (Zip Code)
(828) 464-2972
(Registrant's telephone number, including area code)
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 period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
[x] Yes [ ] No
As of August 14, 1998, the registrant had 3,000,000 shares of common
stock, $.01 par value per share, outstanding.
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
RIDGEVIEW, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 422,589 $ 481,674
Accounts receivable (less allowance for doubtful
accounts of $911,279 and $605,289) 15,716,460 15,720,033
Inventories 28,348,441 23,315,890
Refundable income taxes 935,073 164,539
Deferred income taxes 378,957 --
Prepaid expenses 482,235 350,388
----------- -----------
Total current assets $46,283,755 $40,032,524
PROPERTY, PLANT AND EQUIPMENT, less
accumulated depreciation 13,045,424 11,414,153
OTHER ASSETS 2,476,227 1,628,626
EXCESS OF COST OVER FAIR VALUE OF NET
ASSETS ACQUIRED, less accumulated
amortization 1,539,565 1,603,465
----------- -----------
Total assets $63,344,971 $54,678,768
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 3
RIDGEVIEW, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 1,928,279 $ 1,464,333
Accounts payable 7,818,190 5,612,009
Accrued expenses and other liabilities 2,411,305 1,544,844
Deferred income taxes -- 296,668
Current portion of long-term debt 24,971,946 1,299,523
Current portion of deferred compensation 231,369 211,845
------------ ------------
Total current liabilities $ 37,361,089 $ 10,429,222
LONG-TERM DEBT, less current portion (Note 5) 3,285,241 20,265,823
DEFERRED COMPENSATION, less current portion 1,617,473 1,520,972
DEFERRED CREDIT 726,261 788,550
DEFERRED INCOME TAXES 690,880 525,411
------------ ------------
Total liabilities $ 43,680,944 $ 33,529,978
------------ ------------
SHAREHOLDERS' EQUITY (Note 6)
Common stock - authorized 20,000,000 shares of
$.01 par value; issued and outstanding
3,000,000 shares $ 30,000 $ 30,000
Additional paid-in capital 10,650,018 10,650,018
Retained earnings, including amounts reserved of
$826,606 and $854,367 9,294,631 10,688,318
Accumulated other comprehensive income (Note 7) (310,622) (219,546)
------------ ------------
Total shareholders' equity $ 19,664,027 $ 21,148,790
------------ ------------
Total liabilities and shareholders' equity $ 63,344,971 $ 54,678,768
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
RIDGEVIEW, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 21,252,925 $ 21,258,171 $ 41,591,351 $ 40,800,914
COST OF SALES 18,763,488 16,945,253 34,892,936 32,075,125
------------ ------------ ------------ ------------
GROSS PROFIT $ 2,489,437 $ 4,312,918 $ 6,698,415 $ 8,725,789
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES $ 4,264,516 $ 3,252,302 $ 7,943,968 $ 6,827,883
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) $ (1,775,079) $ 1,060,616 $ (1,245,553) $ 1,897,906
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense $ (540,990) $ (446,546) $ (1,027,963) $ (814,313)
Other, net (20,958) 16,200 (5,823) 39,351
------------ ------------ ------------ ------------
Total other income (expense) $ (561,948) $ (430,346) $ (1,033,786) $ (774,962)
------------ ------------ ------------ ------------
INCOME BEFORE
INCOME TAXES $ (2,337,027) $ 630,270 $ (2,279,339) $ 1,122,944
PROVISION (BENEFIT)
FOR INCOME TAXES (876,053) 239,484 (885,652) 370,658
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (1,460,974) $ 390,786 $ (1,393,687) $ 752,286
============ ============ ============ ============
EARNINGS PER SHARE $ (0.49) $ 0.13 $ (.47) $ 0.25
============ ============ ============ ============
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING
3,000,000 3,000,000 3,000,000 3,000,000
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
RIDGEVIEW, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 41,883,948 $ 36,386,278
Cash paid to suppliers and employees (44,130,089) (41,198,702)
Interest paid (1,110,480) (731,040)
Income taxes paid, net of refunds (392,464) (1,083,994)
Other cash disbursements (824,218) (414,605)
------------ ------------
Net cash used in operating activities $ (4,573,303) $ (7,042,063)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for investments in subsidiaries $ (52,509) $ (69,576)
Proceeds from sale of property and equipment 170,459 --
Payments for purchase of property, plant and
equipment (1,560,853) (1,486,913)
------------ ------------
Net cash used in investing activities $ (1,442,903) $ (1,556,489)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net short-term borrowings $ 421,230 $ 1,833,035
Proceeds from long-term debt 44,113,883 41,205,460
Repayments of long-term debt (38,571,965) (34,677,894)
------------ ------------
Net cash provided by financing activities $ 5,963,148 $ 8,360,601
------------ ------------
EFFECT OF EXCHANGE RATE ON CASH $ (6,027) $ (12,622)
------------ ------------
Net decrease in cash $ (59,085) $ (250,573)
CASH, beginning of period 481,674 315,559
------------ ------------
CASH, end of period $ 422,589 $ 64,986
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
RIDGEVIEW, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Continued)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1998 1997
----------- -----------
<S> <C> <C>
RECONCILIATION OF NET INCOME (LOSS) TO
NET CASH USED IN OPERATING ACTIVITIES
Net income (loss) $(1,393,687) $ 752,286
----------- -----------
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization $ 925,804 $ 870,241
Provision for doubtful accounts receivable 306,957 144,605
Capital grants recognized (36,863) (39,624)
Increase in deferred compensation liability 116,025 58,066
Increase in deferred income taxes (505,000) (63,691)
Changes in operating assets and liabilities:
Increase in accounts receivable (303,080) (4,328,747)
Increase in inventories (5,089,791) (5,025,905)
Increase in prepaid expenses and
other assets (912,759) (657,791)
Increase in accounts payable 2,206,147 2,169,230
Decrease in income taxes payable (773,116) (649,645)
Increase (decrease) in accrued expenses
and other liabilities 886,060 (271,088)
----------- -----------
Total adjustments to net income (loss) $(3,179,616) $(7,794,349)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES $(4,573,303) $(7,042,063)
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 1998 and 1997 is unaudited)
NOTE 1 - UNAUDITED FINANCIAL INFORMATION
In the opinion of the Company, the accompanying unaudited Condensed
Consolidated Financial Statements contain all adjustments consisting of normal
recurring accruals for the three and six months ended June 30, 1998, necessary
to present fairly the financial position of the Company as of June 30, 1998 and
the results of operations for the three and six months ended June 30, 1998 and
1997. The financial statements are presented in condensed form as permitted by
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The accounting
policies followed by the Company are set forth in the Company's audited
financial statements, which are included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997, filed with the Securities and
Exchange Commission (the "Form 10-K"). The results of operations for the six and
three months ended June 30, 1998 are not indicative of the results to be
expected for the full year. The Company's net sales and profitability generally
experience stronger performance in the third and fourth quarters. These
unaudited condensed financial statements should be read in conjunction with the
Company's audited financial statements included in the Annual Report on Form
10-K.
NOTE 2 - EARNINGS PER SHARE
Earnings per share are calculated using the weighted average number of
shares outstanding of common stock and dilutive common stock equivalents during
each period presented. The Company has adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share," which requires the
presentation of: (1) "Basic Earnings per Share," computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding during the period and (2) "Diluted Earnings per Share," which gives
effect to all dilutive potential common shares that were outstanding during the
period, by increasing the denominator to include the number of additional common
shares that would have been outstanding if the dilutive potential common shares
had been issued. The options outstanding at June 30, 1998 and December 31, 1997
have not been included in diluted earnings per share due to their anti-dilutive
nature.
7
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Information as of June 30, 1998 and 1997 is unaudited)
NOTE 3 - INVENTORIES
A summary of inventories by major classification is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Raw Materials $ 3,802,146 $ 4,217,281
Work-in-process 11,080,174 8,038,662
Finished goods 13,586,121 11,179,947
(LIFO Reserve) (120,000) (120,000)
------------ ------------
Total inventories $ 28,348,441 $ 23,315,890
============ ============
</TABLE>
NOTE 4 - ACQUISITION
On July 14, 1998, the Company acquired all of the issued and
outstanding shares of capital stock of Tri-Star Hosiery Mills, Inc.
("Tri-Star"), a sports sock manufacturer located in Mebane, North Carolina, for
$3.5 million in cash and $4.0 million in assumed debt, in a transaction to be
accounted for as a purchase.
NOTE 5 - LONG-TERM DEBT
On July 14, 1998, the Company amended its existing bank loan agreement.
The amended agreement provides a $34,000,000 revolving line of credit due June
30, 2000 (the "Revolving Credit Facility"). In addition to the Company's
existing term loan of $4.0 million ("Term Loan A"), the
amended agreement provides for two additional term loans of $500,000 ("Term Loan
B") and $615,000 ("Term Loan C") for the funding of the acquisition of Tri-Star.
At the option of the Company, borrowings under the loan agreement,
with the exception of Term Loan B, bear interest at a rate based on the lending
bank's prime rate or the London InterBank Offered Rates ("LIBOR"). The interest
rate is reset periodically based on the Company's ratio of Funded Debt to
Earnings Before Interest, Taxes, Depreciation and Amortization ("Funded Debt to
EBITDA"), calculated quarterly, and range from prime to prime plus .37%, or
LIBOR plus 1.75% to LIBOR plus 2.37% (8.02630% as of July 31, 1998 under the
LIBOR option). Funds borrowed under Term Loan B bear interest at the same rate
as the other term loans plus 0.75%. These loans are collateralized by
substantially all assets of the Company.
Based on the Company's results of operations for the quarter ended
June 30, 1998, the Company is in violation of certain financial covenants with
respect to the Revolving Credit Facility and term loans. Because the lending
bank is unwilling to waive these covenant defaults, the Company has reclassified
$23,459,674 of long-term debt to a current liability at June 30, 1998. Based on
discussions with the lending bank the Company expects to enter into an agreement
with the bank that will allow the Company to continue to draw on the Revolving
Credit Facility until the Company refinances its Revolving Credit Facility and
term loans with another lender or lenders. At August 7, 1998, the Company had
approximately $2.0 million of available credit under its Revolving Credit
Facility based on its accounts receivable and inventory as of such date. The
Company is reviewing proposals from three potential new lenders and expects to
be able to refinance its existing bank debt on a long-term basis with comparable
terms to its existing bank debt.
8
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Information as of June 30, 1998 and 1997 is unaudited)
NOTE 6 - CAPITAL STOCK
The Company has an Omnibus Stock Plan (the "Omnibus Plan") which
permits the issuance of options, stock appreciation rights ("SARS"), limited
SARS, restricted stock, performance awards and other stock-based awards to
selected employees and independent contractors of the Company. The Company has
reserved 230,000 shares of common stock for issuance under the Omnibus Plan,
which provides that the term of each award shall be determined by a committee of
the board of directors charged with administering the Plan, but no longer than
ten years after the date they are granted. Under the terms of the Plan, options
granted may be either nonqualified or incentive stock options. SARS and limited
SARS granted in tandem with an option shall be exercisable only to the extent
the underlying option is exercisable. To date, incentive stock options totaling
52,600 shares have been granted to certain of the Company's salaried employees
at an exercise price of $7.50 per share. All of such options are outstanding and
unexercised.
The board has also authorized an employee stock purchase plan that will
allow employees to purchase shares of common stock of the Company through
payroll deductions at 85 percent of the market value of the shares at the time
of purchase. The Company has reserved 75,000 shares for issuance under this
plan.
The Company also has an Outside Directors' Stock Option Plan (the
"Directors' Plan"), which provides that each outside director, at the time of
initial election, shall automatically be granted an option to purchase 500
shares of common stock at the fair market value on the date of election. On each
anniversary date of an outside director's election, an option to purchase 500
additional shares of common stock will automatically be granted, provided that
the director shall have continuously served and the number of shares of common
stock available under the Directors' Plan is sufficient to permit such grant.
Options granted under the Directors' Plan are nonqualified stock options, vest
in increments of 33 1/3% on each anniversary of the option grant and expire ten
years after the date they are granted. The Company has reserved 15,000 shares
for issuance under this plan. In November 1996, options to purchase 500 shares
each were granted to the Company's three new members of the board of directors
at an exercise price of $8.00 per share. Additional grants totaling 4,000 shares
have been granted to the outside directors. All of such options are outstanding
and unexercised.
9
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Information as of June 30, 1998 and 1997 is unaudited)
NOTE 7 - COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, "Reporting Comprehensive Income,"
which requires that all components of comprehensive income and total
comprehensive income be reported on one of the following: a statement of income
and comprehensive income, a statement of comprehensive income or a statement of
stockholders' equity. Comprehensive income is comprised of net income and all
changes to stockholders' equity, except those due to investments by owners
(changes in paid in capital) and distributions to owners (dividends). For
interim reporting purposes, SFAS No. 130 requires disclosure of total
comprehensive income.
Total comprehensive income is as follows:
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1997 1998
--------- -----------
<S> <C> <C>
Net income (loss) $ 752,286 $(1,393,687)
Other comprehensive income (loss), net of tax (295,816) (91,076)
--------- -----------
Comprehensive income (loss) $ 456,470 $(1,484,763)
========= ===========
</TABLE>
Accumulated other comprehensive income consist solely of foreign
currency translation adjustments, and is presented below as follows:
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1997 1998
--------- ---------
<S> <C> <C>
Beginning balance $ 227,104 $(219,546)
Current period change, net of taxes of $166,396
and $51,230, respectively (295,816) (91,076)
--------- ---------
Ending balance $ (68,712) $(310,622)
========= =========
</TABLE>
10
<PAGE> 11
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information regarding
the Company's consolidated financial condition as of June 30, 1998 and its
results of operations for the three and six months then ended. This discussion
and analysis should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Form 10-K, and the
unaudited interim consolidated financial statements and notes thereto included
elsewhere in this report. The results of operations for the three and six months
ended June 30, 1998 are not indicative of results expected for the year ending
December 31, 1998. See "Seasonality" in discussion below.
GENERAL
The following table presents the Company's net sales by product
category for the three-month and six-month periods ended June 30, 1998 and 1997,
expressed in thousands of dollars and as a percentage of total net sales.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------- ----------------------------------------------
1998 1997 1998 1997
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SOCKS:
Sports specific $ 6,673 31.4% $ 5,202 24.5% $12,672 30.5% $10,169 24.9%
Sports promotional 5,835 27.5 6,174 29.0 9,781 23.5 10,030 24.6
Active sport 583 2.7 557 2.6 958 2.3 1,015 2.5
Rugged outdoor and
heavyweight casual 1,937 9.1 1,936 9.1 3,495 8.4 4,261 10.4
Other 1,346 6.3 322 1.5 1,792 4.3 359 0.9
------- ------- ------- ------- ------- ------- ------- -------
Total socks $16,374 77.0% $14,191 66.7% $28,698 69.0% $25,834 63.3%
------- ------- ------- ------- ------- ------- ------- -------
WOMEN'S HOSIERY:
Sheer pantyhose and
knee-highs $ 1,841 8.7% $ 3,542 16.7% $ 5,477 13.2% $ 6,944 17.0%
Tights and trouser socks 3,038 14.3 3,525 16.6 7,416 17.8 8,023 19.7
------- ------- ------- ------- ------- ------- ------- -------
Total women's hosiery $ 4,879 23.0% $ 7,067 33.3% $12,893 31.0% $14,967 36.7%
------- ------- ------- ------- ------- ------- ------- -------
Total net sales $21,253 100.0% $21,258 100.0% $41,591 100.0% $40,801 100.0%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
The net sales by product category for the three and six months ended
June 30, 1998 are not indicative of the net sales by product category expected
for the year ending December 31, 1998, because sales of rugged outdoor and
heavyweight casual socks and tights and trouser socks typically are higher
during the third and fourth quarters.
11
<PAGE> 12
RESULTS OF OPERATIONS
The following table presents the Company's results of operations as a
percentage of net sales for the three and six months ended June 30, 1998 and
1997.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ----------------------
June 30, June 30,
------------------------ ----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of goods sold 88.3 79.7 83.9 78.6
--------- --------- --------- -------
Gross profit 11.7 % 20.3 % 16.1 % 21.4 %
Selling, general and 20.1 15.3 19.1 16.7
administrative expenses
--------- --------- --------- -------
Operating income (8.4)% 5.0 % (3.0) % 4.7 %
Interest expense (2.5) (2.1) (2.5) (2.1)
Other income, net (0.1) 0.0 0.0 0.1
--------- --------- --------- -------
Income before income taxes (11.0)% 2.9 % (5.5) % 2.7 %
Income tax expense (4.1) 1.1 (2.1) 0.9
--------- --------- --------- -------
Net income (6.9)% 1.8 % (3.4) % 1.8 %
========= ========= ========= =======
</TABLE>
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 TO THREE MONTHS ENDED JUNE 30,
1997
Net sales of $21.3 million for the three months ended June 30, 1998
were flat compared to the same period a year ago. Net sales of the sock product
categories, which include sales of sport specific, sports promotional, active
sports socks and rugged outdoor and heavyweight casual socks, increased $2.2
million, or 15.5%. However, sales of women's hosiery products, which include
tights and trouser socks, decreased 31.0%, from $7.1 million in 1997 to $4.9
million in 1998. The decrease in net sales of women's hosiery products is
attributable primarily to a reduction in reorder activity at the retail level.
Overstocked inventory levels at many of the Company's women's hosiery retail
customers have contributed to the lower volume of reorder activity for the
quarter. Also, net sales of women's hosiery products were negatively impacted by
a one-time charge of $900,000 recorded by the Company relating to the re-launch
of the Evan-Picone women's hosiery program. As part of the re-launch, current
Evan-Picone customers are allowed to return older Evan-Picone merchandise in
return for the newly created and redesigned line of products. The charge taken
by the Company during the quarter represents the loss of normal gross profit
margins when the returned Evan-Picone merchandise is sold to the discount retail
market. Without this one-time charge, net sales would have been $22.2 million
for the quarter. Sales of rugged outdoor and heavyweight casual socks for the
quarter of $1.9 million were also flat compared to the same period a year ago.
Gross profit for the quarter ended June 30, 1998 was $2.5 million,
compared to $4.3
12
<PAGE> 13
million for the same period in 1997, a decrease of $1.8 million, or 41.9%. As a
percentage of net sales, gross profit decreased to 11.7% for the three months
ended June 30, 1998, compared to 20.3% during the same period in 1997.
Contributing to the reduction in gross profit for the quarter was the one-time
charge of $900,000 relating to the Evan-Picone re-launch. Also contributing
to the reduction in margin for the quarter was a shift in the mix of the
products sold by the Company that included a higher concentration of sales of
lower margin products and pricing pressures from certain customers.
Selling, general and administrative expenses for the three months ended
June 30, 1998 and 1997 were $4.3 million and $3.3 million, respectively. As a
percentage of net sales, selling, general and administrative expenses increased
to 20.1% for the quarter ended June 30, 1998, compared to 15.3% for the same
period the prior year. Included in selling, general and administrative expenses
are certain additional non-recurring charges, which totalled $700,000 in the
aggregate, taken by the Company during the second quarter. These charges relate
to costs associated with the Company's implementation of an enterprise-wide
management information system and an accrued liability arising from a state
department of revenue audit relating to unclaimed or abandoned properties. Also,
the Company increased its allowance for doubtful accounts during the second
quarter. Given the Company's current customer base of larger department store
and sporting goods retailers, management elected to increase this reserve to
offset the chargebacks and deductions that are a part of doing business with
these customers. Had the Company not taken these charges during the quarter,
selling, general and administrative expenses would have been $3.6 million for
the quarter.
As a result primarily of the above-mentioned charges taken during the
quarter, the Company posted an operating loss of $(1.8) million, compared to
operating income of $1.1 million for the same period in 1997, a reduction of
$2.9 million. Also affecting the results of operations was the overall reduction
in the gross profit margins achieved during the quarter.
Interest expense for the quarter ended June 30, 1998, increased 21.0%
to $541,000 from $447,000 for the three months ended June 30, 1997. Increased
borrowings during the quarter ended June 30, 1998, compared to the same period
in 1997, account for the increase in interest expense.
Income tax expense (benefit) for the three months ended June 30, 1998
and 1997 was $(876,000) and $239,000, respectively. The income tax benefit for
the three months ended June 30, 1998 is the result of the operating loss posted
by the Company for the quarter then ended.
Net loss for the three months ended June 30, 1998 was $(1.5) million,
compared to net income for the three months ended June 30, 1997 of $391,000. The
decrease in net income is attributable primarily to the net effect of the
one-time charges taken by the Company during the quarter, as well as the reduced
gross profit margins attained on the lower than expected sales volume. Had the
Company not taken the one-time charges during the quarter, the net loss would
have been $(441,000).
13
<PAGE> 14
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 TO SIX MONTHS ENDED JUNE 30, 1997
Net sales for the six months ended June 30, 1998 were $41.6 million,
compared to $40.8 million for the six months ended June 30, 1997. The Company
experienced an increase in net sales of its sock product categories of $2.9
million for the six months ended June 30, 1998, compared to the same period a
year ago. However, net sales of women's hosiery products, which includes tights
and trouser socks, decreased 14.0%, from $15.0 million for the first half of
1997 to $12.9 million for the same period in 1998. The decrease in net sales of
women's hosiery products is attributable primarily to overstocked inventory
levels at many of the Company's women's hosiery retail customers, which
translates into a lower volume of reorder activity for the period compared to
the prior year. Also, net sales of women's hosiery products were negatively
impacted by the $900,000 one-time charge taken by the Company relating to the
re-launch of the Evan-Picone women's hosiery program, which is discussed above.
Excluding this one-time charge, net sales would have been $42.5 million for the
six months ended June 30, 1998.
Gross profit for the six months ended June 30, 1998 was $6.7 million,
compared to $8.7 million for the same period in 1997, a decrease of $2.0
million, or 23.0%. As a percentage of net sales, gross profit decreased to 16.1%
for the six months ended June 30, 1998, compared to 21.4% during the same
period in 1997. Pressures to reduce pricing for certain of the Company's
customers and a shift in the mix of sales that included a larger volume of
seasonal and closeout goods sold during the six months ended June 30, 1998,
account for the majority of the reduction in gross profit. The charge taken by
the Company during the second quarter, relating to the Evan-Picone re-launch,
effectively reduced gross profit for the six months ended June 30, 1998 by
$900,000.
For the six months ended June 30, 1998 and 1997, selling, general and
administrative expenses were $7.9 million and $6.8 million, respectively. As a
percentage of net sales, selling, general and administrative expenses increased
from 16.7% for the first six months of 1997, compared to 19.1% for the same
period the in 1998. Selling, general and administrative expenses were negatively
impacted by $700,000 of charges taken by the Company during the second quarter
relating to costs associated with the management information systems
implementation and increases in the Company's allowance for doubtful accounts.
Without these charges, selling, general and administrative expenses would have
been $7.2 million for the six months ended June 30, 1998.
Income (loss) from operations for the six months ended June 30, 1998
and 1997 was $(1.2) million and $ 1.9 million respectively. The $1.6 million in
charges taken by the Company during the second quarter contributed to the
operating loss for the six-month period ending June 30, 1998. Operating income
would have been $374,000 had the Company not taken these charges.
Interest expense for the six months ended June 30, 1998 was $1.0
million, compared to $814,000 for the same period the prior year, an increase of
22.9%. The increase in interest expense is attributable to an increase in the
average borrowings for the six months ended June 30, 1998, compared to the same
period a year ago.
14
<PAGE> 15
Income tax (benefit) for the six months ended June 30, 1998 was
$(886,000), compared to income tax expense of $371,000 for the six months ended
June 30, 1997. The income tax benefit is the result of operating losses posted
be each of the Company's wholly-owned subsidiaries, excluding the Company's
operation in Tralee, in the Republic of Ireland, as well a loss for the six
months ended June 30, 1998 posted by the parent company, Ridgeview, Inc.
Net loss for the first six months of 1998 was $(1.4) million, compared
to net income of $752,000 for the same period in 1997, a decrease in earnings of
$2.2 million for the six-month period. The net loss of $1.4 million included
approximately $1.0 million of after-tax charges described above.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used in operating activities during the six months ended
June 30, 1998 and 1997 were $(4.6) million and $(7.0) million, respectively. The
negative cash flow from operating activities during the first six months of 1998
was the result of a $5.0 million increase in inventories since December 31,
1997. During the first and second quarters of the year, the Company typically
builds inventory levels to fill orders during the fall shipping season.
In addition to cash flow from operations, the Company obtains working
capital and, on a temporary basis, finances its capital expenditures for
equipment modernization, through borrowings under the Company's revolving credit
facility extended by NationsBank, N.A. ("NationsBank") (the "Revolving Credit
Facility"). The Revolving Credit Facility provides for borrowings up to $34.0
million through June 2000. As of August 7, 1998, $28.3 million was outstanding
under the Revolving Credit Facility, and there was $5.7 million available for
additional borrowings. Funds borrowed under the Revolving Credit Facility bear
interest at a rate based on London Interbank Offered Rates ("LIBOR"). The
LIBOR-based rate available to the Company ranges from LIBOR plus 1.75% to LIBOR
plus 2.37%, depending upon the Company's ratio of Funded Debt to EBITDA
(8.02630% at July 31, 1998). The Revolving Credit Facility is secured by the
Company's accounts receivable, inventory, equipment and certain real property.
Amounts borrowed under the Revolving Credit Facility may not exceed the sum of
specified percentages of the Company's accounts receivable and inventory.
Based on the Company's results of operations for the quarter ended June
30, 1998, the Company is in violation of certain financial covenants with
respect to the Revolving Credit Facility and term loans. Because the lending
Bank is unwilling to waive these covenant defaults, the Company has reclassified
approximately $23.5 million of long-term debt to a current liability at June 30,
1998. Based on discussions with the lending bank the Company expects to enter
into an agreement with the bank that will allow the Company to continue to draw
on the Revolving Credit Facility until the Company refinances its Revolving
Credit Facility and term loans with another lender or lenders. At August 7,
1998, the Company had approximately $2.0 million of available credit based on
its accounts receivable and inventory as of such date. The Company is reviewing
proposals from three potential new lenders and expects to be able to refinance
its existing bank debt on a long-term basis with comparable terms to its
existing bank debt.
15
<PAGE> 16
The implementation of the Company's new enterprise-wide management
information system is currently in progress. Once completed, the system will
link each of the Company's facilities electronically and provide operational
improvements in manufacturing, forecasting, planning, distribution and financial
reporting. Additionally, the project will address issues relating to the Year
2000 relating to date driven applications. Of the expected $2.1 million cost of
the project, approximately $800,000 had been disbursed as of August 12, 1998.
The Company expects to complete the implementation by the end of the first
quarter of 1999. Financing of the project is expected to be provided by the
Company's Revolving Credit Facility, a leasing arrangement for certain hardware
and the term loan of approximately $425,000.
In July 1998, the Company completed its acquisition of Tri-Star, a
sports sock manufacturer located in Mebane, North Carolina. The Company acquired
100% of the outstanding common stock of Tri-Star for $3.5 million in cash and
assumed debt in the amount of $4.0 million. Funding for the acquisition came
from the Company's Revolving Credit Facility and two additional term loans in
the amount of $1.1 million.
SEASONALITY
Although the Company generally experiences higher net sales and greater
profitability in the third and fourth quarters, management expects the trend of
lower than expected sales and reduced gross profit margins to continue through
the end of the year.
16
<PAGE> 17
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," which supercedes SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise." SFAS No. 131 establishes standards for the way that
public companies report information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. SFAS No. 131 defines operating segments as components of a company
about which separate financial information is available that is regularly
evaluated by the chief decision makers in deciding how to allocate resources and
in assessing performance.
SFAS No. 131 is effective for periods beginning after December 15, 1997,
and requires comparative information for earlier years to be restated.
Management will adopt this standard in 1998, and believes that additional
disclosure will be required to disclose separately, certain information about
the profit or loss and the assets of the Company's operating divisions. Results
of operations and financial position will be unaffected by the implementation of
this standard.
17
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual Meeting of Shareholders was held on May 26, 1998.
(b) The matters voted upon and the results of the voting were as
follows:
(1) The shareholders voted to re-elect the nine members of
the Company's Board of Directors for one year terms,
and, in each case, until their successors are elected
and qualified. The result of the vote for election of
directors was as follows:
For Abstain
Albert C. Gaither 2,351,961 6,250
Hugh R. Gaither 2,351,961 6,250
William D. Durrant 2,351,961 6,250
Susan Gaither Jones 2,351,961 6,250
J. Michael Gaither 2,351,961 6,250
Claude S. Abernethy, Jr. 2,351,961 6,250
George Watts Carr, III 2,351,961 6,250
Joseph D. Hicks 2,351,961 6,250
Charles M. Snipes 2,351,961 6,250
(2) The shareholders voted 2,356,361 shares in the
affirmative and 1,750 shares in the negative to ratify
the Board of Director's selection of BDO Seidman, LLP as
the Company's independent auditors for the fiscal year
ending December 31, 1998. There were 100 votes withheld.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10.1 - Amendment No. 5, Waiver and Consent to Amended
and Restated Loan and Security Agreement dated as of
December 20, 1996
(b) Exhibit 10.2 - Amended and Restated Revolving Credit Note
(c) Exhibit 10.3 - Allonge
(d) Exhibit 10.4 - Term Note B
(e) Exhibit 10.5 - Term Note C
(f) Exhibit 27 - Financial Data Schedule (for SEC use only)
18
<PAGE> 19
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.
RIDGEVIEW, INC.
Date: August 14, 1998 By: /s/ Walter L. Bost, Jr.
-----------------------
Walter L. Bost, Jr.
Executive Vice President
and Chief Financial Officer
<PAGE> 1
EXHIBIT 10.1
[EXECUTION COPY]
AMENDMENT NO. 5, WAIVER
AND CONSENT
to
Amended and Restated
Loan and Security Agreement
dated as of December 20, 1996
AMENDMENT NO. 5, WAIVER AND CONSENT entered into as of July 14, 1998
among RIDGEVIEW, INC., a North Carolina corporation (for itself and as successor
by merger to InterKnit, Inc., an Alabama corporation) ("Ridgeview"), SENECA
KNITTING MILLS CORPORATION, a New York corporation ("Seneca"), TRI-STAR HOSIERY
MILLS, INC., a North Carolina corporation ("THM", and, together with Ridgeview
and Seneca, the "Borrowers"), and NATIONSBANK, N.A., a national banking
association (the "Lender").
Preliminary Statement
The Borrowers and the Lender are parties to that certain Amended and
Restated Loan and Security Agreement dated as of December 20, 1996, as amended
by Amendment No.1 dated as of January 31, 1997, Amendment No.2 dated as of March
13, 1997, Amendment No. 3 dated as of July 31, 1997 and Amendment No. 4 dated as
of March 13, 1998 (as so amended, the "Loan Agreement," terms defined therein,
unless otherwise defined herein, being used herein as therein defined).
The Borrowers have informed the Lender that Ridgeview has entered into
a certain Stock Purchase Agreement dated as of July 14, 1998 (the "THM
Acquisition Agreement") by and between Ridgeview, as purchaser, and James W.
Daniel, William W. Burke, and J. Brad Peavy, each an individual, as sellers
(collectively, the "THM Acquisition Parties"), pursuant to which Ridgeview shall
acquire all of the issued and outstanding stock of Tri-Star Hosiery Mills, Inc.,
a North Carolina corporation (the "THM Acquisition").
The Borrowers have requested an increase in the Revolving Credit
Facility, an extension of new Term Loans and certain other modifications to the
Loan Agreement, that the Lender consent to the THM Acquisition, and that the
Lender waive certain Defaults under the Loan Agreement, and the Lender has
agreed to such request, upon and subject to all of the terms, conditions and
provisions hereinafter set forth.
NOW, THEREFORE, in consideration of the Loan Agreement, the mutual
covenants set forth therein and herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
<PAGE> 2
Section 1. Amendment to Loan Agreement. Subject to the provisions of
Section 4, the Loan Agreement is hereby amended:
(a) by amending the provisions of Section 1.1 Definitions as
follows:
(i) by amending the definition "Borrower" in its entirety to read as
follows:
"Borrower" means each of Ridgeview, Seneca and THM, and
"Borrowers" means all of Ridgeview, Seneca and THM.
(ii) by amending the definition "Borrowing Base" in its entirety to
read as follows:
"Borrowing Base" means at any time an amount equal to the sum
of:
(a) 80% (or such lesser percentage as the Lender may in its sole and
absolute discretion determine from time to time) of the face value of
Eligible Receivables due and owing at such time, PLUS
(b) the lesser of
(i) subject to the proviso below, 60% (or such lesser
percentage as the Lender may in its sole and absolute discretion
determine from time to time) of the lesser of cost (computed on a
first-in-first-out basis) and fair market value of Eligible Inventory
at such time, and
(ii) (A) during the period April 1 through September 30 of
each calendar year, $18,000,000, and (B) during the period October 1 of
one calendar year through March 31 of the following calendar year,
$14,000,000, MINUS
(c) the Letter of Credit Obligations and such other reserves as the
Lender may determine from time to time in the exercise of its
reasonable credit judgment;
PROVIDED, that the stated advance rate (subject to the Lender's
discretion) against Eligible Inventory may be 65% during the period
April 1 through September 30 of each calendar year.
(iv) by deleting the definitions "CAPEX Loan", "CAPEX Loan Facility",
"CAPEX Lock-in Date", "CAPEX Note" and "Hard Cost Capital Expenditures" in their
entirety.
(v) by amending the definition "Permitted Investments" by (A) deleting
the word "and" appearing immediately before clause (d) appearing therein, and
(B) by inserting the phrase ", and (e) the THM Acquisition" immediately before
the period appearing at the end thereof;
(vi) by amending the definition "Revolving Credit Facility" by deleting
the figure "$28,000,000" appearing therein and substituting therefor the figure
"$34,000,000";
2
<PAGE> 3
(vii) by amending the definition "Term Note" in its entirety to read as
follows:
"Term Note" means any of (a) the Amended, Restated and Consolidated
Term Note, substantially in the form of EXHIBIT A-2 hereto, and (b) any other
Term Note, substantially in the form of EXHIBIT A-3 hereto, in each case made by
the Borrowers payable to the order of the Lender evidencing the joint and
several obligation of the Borrowers to pay the aggregate unpaid principal amount
of the Term Loan made to it by the Lender (and any promissory note or notes that
may be issued from time to time in substitution, renewal, extension, replacement
or exchange therefor, whether payable to the Lender or a different lender,
whether issued in connection with a Person becoming a lender after the Effective
Date or otherwise), in each case with all blanks properly completed.
(b) by further amending Section 1.1 Definitions by adding
thereto in appropriate alphabetical order the following additional definitions:
"Amendment No. 5" means Amendment No. 5, Waiver and Consent
dated as of July 14, 1998 to this Agreement.
"Amendment No. 5 Effective Date" means the date on which
Amendment No. 5 shall have become effective in accordance with its
terms.
"Term Loan A" means the Term Loan made to the Borrowers
pursuant to SECTION 2B.1(a).
"Term Loan B" means the Term Loan made to the Borrowers
pursuant to SECTION 2B.1(b)(i).
"Term Loan C" means the Term Loan made to the Borrowers
pursuant to SECTION 2B.1(b)(ii).
"THM" means Tri-Star Hosiery Mills, Inc., a North Carolina
corporation.
"THM Acquisition" means the Acquisition by Ridgeview of 100%
of the issued and outstanding capital stock of THM pursuant to that
certain Stock Purchase Agreement dated as of July 14, 1998 by and
between Ridgeview, as purchaser, and James W. Daniel, William W. Burke,
and J. Brad Peavy, each an individual, as sellers, in the form
delivered to the Lender on or prior to the Amendment No. 5 Effective
Date.
(c) by amending Section 2B.1 Term Loan in its entirety to read
as follows:
Section 2B.1 Term Loans. (a) The Lender has made the Term Loan
A to the Borrowers prior to the Effective Date pursuant to Section 2.1
of the Existing Term Loan Agreement in the original principal amount of
$5,000,000 and pursuant to Section 2.7(a) of the Existing Revolving
Agreement in the original principal amount of $1,000,000. As of
3
<PAGE> 4
the Agreement Date, the aggregate outstanding principal balance of Term
Loan A is $4,969,659.
(b) Upon the terms and subject to the conditions of, and in reliance upon
the representations and warranties made under, this Agreement and
Amendment No. 5, the Lender shall make to the Borrowers on the
Amendment No. 5 Effective Date (i) a Term Loan B in the original
principal amount of $500,000 and (ii) a Term Loan C in the original
principal amount of $615,000.
(d) by amending Section 2B.2 Repayment of Term Loan in its
entirety to read as follows:
Section 2B.2 Repayment of Term Loans. The Term Loans are due
and payable, and shall be repaid in full by the Borrowers as follows:
(a) as to Term Loan A, in 43 installments, the first 42 installments,
payable on January 1, 1997 and on the first day of each calendar month
thereafter, shall be in the amount of $53,667 each and the final
installment payable on June 30, 2000 shall be in the amount of the then
unpaid balance of such Term Loan A, (b) as to Term Loan B, in 24
installments, the first 23 installments payable on August 1, 1998 and
on the first day of each calendar month thereafter, shall be in the
amount of $20,833 each and the final installment payable on June 30,
2000 shall be in the amount of the then unpaid balance of such Term
Loan B, and (c) as to Term Loan C, in 24 installments, the first 23
installments payable on August 1, 1998 and on the first day of each
calendar month thereafter, shall be in the amount of $7,321 each and
the final installment payable on June 30, 2000 shall be in the amount
of the then unpaid balance of such Term Loan C.
(e) by amending Section 2B.3 Term Note in its entirety to read
as follows:
Section 2B.3 Term Notes. The Term Loans and the joint and several obligations of
the Borrowers to repay such Loans shall be evidenced by three Term
Notes payable to the order of Lender. The Term Note in respect of Term
Loan A shall be dated the Effective Date and the Term Notes in respect
of Term Loan B and Term Loan C shall be dated the Amendment No. 5
Effective Date; each such Term Note shall be duly and validly executed
and delivered by the Borrowers.
(f) by amending Section 2B.4 Prepayment of Term Loan in its
entirety to read as follows:
Section 2B.4 Prepayment of Term Loans.
(a) Voluntary Prepayment. The Borrowers shall have the right
at any time and from time to time, upon at least 60 days' prior written
notice to the Lender in the case of a prepayment in full and upon at
least five days' prior written notice to the Lender in the case of a
partial prepayment, to prepay the Term Loans in whole or in part on any
Business Day. Each partial prepayment of the Term Loans shall be in a
principal amount equal to $100,000 or any integral multiple thereof and
shall be applied (x) first to the principal installments of Term Loan B
in the inverse order of their maturities, and (y) then to the
4
<PAGE> 5
principal installments of each other Term Loan ratably in the inverse
order of their maturities. On the prepayment date, the Borrowers shall
pay interest on the amount prepaid, accrued to the prepayment date and
any amounts which may become due pursuant to SECTION 3.10 as a result
of such prepayment. Any notice of prepayment given by the Borrowers
hereunder shall be irrevocable, and the amount to be prepaid (including
accrued interest and any fees) shall be due and payable on the date
designated in the notice.
(b) Mandatory Prepayment. (i) Any and all amounts received by
a Borrower as proceeds from the sale of any Equipment or Real Estate to
the extent such proceeds exceed (i) $5,000 in the case of any single
item of Equipment or parcel of Real Estate, or (ii) $25,000 in the
aggregate for all such Equipment and Real Estate sold during any
twelve-month period shall be paid, immediately upon receipt by the
applicable Borrower to the Lender and shall be applied (x) first to the
principal installments of Term Loan B in the inverse order of their
maturities, and (y) then to the principal installments of each other
Term Loan ratably in the inverse order of their maturities, with any
balance remaining after prepayment in full of the Term Loans to be
applied to repay any amounts due under the Revolving Credit Loan. The
Borrowers shall also be obligated to prepay the Term Loans in full
together with accrued and unpaid interest thereon upon any termination
of this Agreement pursuant to SECTION 3.5 or otherwise or upon any
acceleration of the Term Loans pursuant to ARTICLE 11.
(g) by deleting ARTICLE 2C. CAPEX LOAN FACILITY in its entirety;
(h) by amending Section 3.1 Interest by (i) amending clause
(a) appearing therein by inserting the phrase "(PLUS, with regard to Term Loan
B, 0.75%)" immediately after the phrase "PLUS the Applicable Margin" appearing
therein, and (ii) amending clause (b) appearing therein by inserting the phrase
"(PLUS, with regard to Term Loan B, 0.75%)" immediately after the phrase "PLUS
the Applicable Margin" appearing therein;
(i) by amending Section 10.1(b)(ii) in its entirety to read as
follows:
(ii) Minimum Tangible Net Worth. Permit the Tangible Net Worth of the
Domestic Business of Ridgeview and its U.S. Subsidiaries (A) to be less
than $13,800,000 at any time during the fiscal quarter of Ridgeview
ending on September 29, 1998, (B) to be less than $14,750,000 at any
time during the fiscal quarter of Ridgeview ending on December 30,
1998, (C) to be less than $15,500,000 at any time during the fiscal
quarter of Ridgeview ending on March 30, 1998, and (D) from January 1,
1997 to and including June 29, 1998, and from and after March 31, 1999
to be less than the following amounts at any time during the following
periods:
Minimum Domestic Business
Period Tangible Net Worth
------ -------------------------
January 1 through such Tangible Net Worth as of December 31
through June 29 of the fiscal year immediately preceding
the date of determination
5
<PAGE> 6
June 30 sum of such Tangible Net Worth as of
through September 29 December 31 of the fiscal year
immediately preceding the date of
determination and the greater of (x)
$250,000 and (y) 70% of earnings of
Ridgeview and its U.S. Subsidiaries for
the first two fiscal quarters of the
current fiscal year
September 30 sum of such Tangible Net Worth as of
through December 30 December 31 of the fiscal year
immediately preceding the date of
determination and the greater of (x)
$750,000 and (y) 70% of earnings of
Ridgeview and its U.S. Subsidiaries for
the first three fiscal quarters of the
current fiscal year
December 31 sum of such Tangible Net Worth as of
December 31 of the fiscal year
immediately preceding the date of
determination and the greater of (x)
$1,750,000 and (y) 70% of earnings of
Ridgeview and its U.S. Subsidiaries for
the fiscal year ending on the date of
determination
(j) by amending Section 10.1(b)(iii) in its entirety to read
as follows:
(iii) Minimum Fixed Charge Ratio. Permit the Fixed Charge Ratio of the
Domestic Business of Ridgeview and its U.S. Subsidiaries to be less
than 1.25 to 1.0 as of the last day of each month from December 31,
1996 to and including June 29, 1998, and thereafter as of the last day
of each month during any period set forth below to be less than the
ratio set forth below opposite such period, in each case computed for
the period of 12 consecutive calendar months then ended:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From June 30, 1998 to and including September 29, 1998 1.00 to 1.0
From September 30, 1998 to and including December 30, 1998 0.70 to 1.0
From December 31, 1998 to and including March 30, 1999 0.85 to 1.0
From March 31, 1999 to and including September 29, 1999 1.10 to 1.0
From and after September 30, 1999 1.25 to 1.0
</TABLE>
6
<PAGE> 7
(k) by amending Section 10.1(b)(iv) by deleting the ratio "1.3
to 1.0" appearing therein and substituting therefor the ratio "1.2 to 1.0"; and
(l) by deleting Exhibit A-3 to the Loan Agreement in its
entirety, and substituting therefor a new Exhibit A-3 in the form attached
hereto.
Section 2. Consent and Acknowledgment. The Lender hereby consents,
subject to the conditions of Section 4, to the THM Acquisition. By their
execution and delivery hereof, each of the Borrowers and the Lender acknowledges
and agrees that THM, as of the Amendment No. 5 Effective Date (as hereinafter
defined), will become, by its execution and delivery hereof, a Borrower under
and as defined in the Loan Agreement, bound by all of the terms and provisions
thereof.
Section 3. Waiver. The Lender hereby waives, subject to the conditions
of Section 4, compliance and the effects of noncompliance by the Borrowers with
the provisions of (i) Section 10.1(b)(ii) of the Loan Agreement, to the extent
that the Tangible Net Worth of the Borrowers as of March 31, 1998 was not less
than $17,055,660, and (ii) Section 10.1(b)(iii) of the Loan Agreement, to the
extent that the Fixed Charge Coverage Ratio of the Borrowers as of March 31,
1998 was not less than 0.15 to 1.0.
Section 4. Effectiveness. Sections 1,2 and 3 of this Amendment shall
become effective as of the date hereof on the first date (the "Amendment No. 5
Effective Date") on which the following conditions have been satisfied:
(a) Documents and Fees. The Lender shall have received the
following, in form and substance satisfactory to the Lender:
(i) payment by the Borrowers of a $40,000 origination
fee with respect to the increase in the Revolving Credit
Facility and the additional Term Loans effected by this
Amendment (which amount the Borrowers hereby irrevocably
authorize the Lender to charge to any account of the Borrowers
(or an individual Borrower)) maintained with the Lender;
(ii) counterparts of this Amendment duly executed by
the Borrowers, together with the Consent and Confirmation
attached hereto duly executed by the Guarantor;
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<PAGE> 8
(iii) a Revolving Credit Note in the form attached
hereto as ANNEX 1, duly executed and delivered by each
Borrower to the order of the Lender;
(iv) the Term Notes in respect of Term Loan B and
Term Loan C in the form attached hereto as Exhibit A-3, duly
executed and delivered by the Borrowers to the order of the
Lender;
(v) certified copies of the articles of incorporation
and by-laws of each Borrower as in effect on the Amendment No.
5 Effective Date and all corporate action, including
shareholder approval, if necessary, taken by each Borrower or
its shareholders to authorize the transactions contemplated by
this Amendment and the THM Acquisition and the incumbency of
officers of each Borrower;
(vi) a certificate of the chief operating officer,
president, vice president-finance or other officers reasonably
acceptable to the Lender of each of the Borrowers stating
that, to the best of his knowledge and based on an examination
sufficient to enable him to make an informed statement,
(A) both before and after giving effect to this
Amendment and the THM Acquisition, all of the
representations and warranties made or deemed to be
made under the Loan Agreement are true and correct as
of the Amendment No. 5 Effective Date,
(B) both before and after giving effect to this
Amendment and the THM Acquisition, no Default or
Event of Default exists;
(C) there has not occurred any material adverse
change since December 31, 1997 in the business,
assets, operations, condition (financial or
otherwise) or prospects of any Borrower prior to the
Amendment No. 5 Effective Date; and
(D) there does not exist any action, suit,
investigation or proceeding pending or threatened in
any court or before any arbitrator or governmental
authority that purports to affect adversely any
Borrower or the THM Acquisition, or that could have a
material adverse effect on any Borrower or the THM
Acquisition or on the ability of the Borrowers to
perform their obligations under the Loan Documents as
amended.
(vii) a certificate evidencing the good standing of
THM in the jurisdiction of its incorporation and in each other
jurisdiction in which it is qualified as a foreign corporation
to transact business;
(viii) Financing Statements duly executed and
delivered by THM;
8
<PAGE> 9
(ix) a Mortgage duly executed and delivered by THM
with respect to property of THM located at 300 West Crawford
Street, Mebane, North Carolina in proper form for the
recording of such instrument in Alamance County, North
Carolina;
(x) a fully paid endorsement to the mortgagee title
insurance policy relating to such Mortgage of THM or, at the
option of the Lender, an unconditional commitment for the
issuance thereof with all requirements and conditions to the
issuance of the final endorsement deleted or marked satisfied,
issued by a title insurance company satisfactory to the
Lender, confirming that such Mortgage creates a valid first
lien on, and security title to, all Real Estate described
therein as security for the Secured Obligations;
(xi) certificates or binders of insurance relating to
each of the policies of insurance covering any of the
Collateral owned by THM together with loss payable clauses
which comply with the terms of Section 7.9 of the Loan
Agreement;
(xii) evidence satisfactory to the Lender of the
release and termination of (or agreement to release and
terminate) all Liens relating to THM's property other than
Permitted Liens;
(xiii) a signed opinion of Moore & Van Allen, counsel
for the Borrowers, and such local counsel as the Lender shall
deem necessary and desirable, opining as to such matters in
connection with this Amendment as the Lender or its counsel
may reasonably request; and
(xiv) updated Schedules to the Loan Agreement and the
Loan Documents, as necessary, revised to reflect the THM
Acquisition and any other changes since March 13, 1998; and
(xv) such other documents and instruments as the
Lender may reasonably request.
(b) THM Acquisition. On the Amendment No. 5 Effective Date (i)
the Lender shall have received true and complete executed or conformed
copies of the THM Acquisition Agreement, and any other agreement,
document, certificate or instrument to be delivered in connection with
the THM Acquisition (collectively, the "THM Acquisition Documents") and
any amendments thereto; (ii) the THM Acquisition Documents shall be in
full force and effect and no material term or condition thereof shall
have been amended, modified or waived after the execution thereof
(other than solely to extend the date by which the THM Acquisition is
required to occur) except with the prior written consent of the Lender,
(iii) none of the parties to any of the THM Acquisition Documents shall
have failed to perform any material obligation or covenant required by
such THM Acquisition Document to be performed or complied with by it on
or before the Amendment No. 5 Effective Date; (iv) certificates shall
have been executed and delivered
9
<PAGE> 10
by the THM Acquisition Parties to each other confirming (and such
confirmation shall be accurate) that all representations and warranties
of the THM contained in the THM Acquisition Agreement and the other THM
Acquisition Documents are true and correct in all material respects
with the same effect as though made on and as of the Amendment No. 5
Effective Date; (v) all requisite approvals by governmental authorities
and regulatory bodies having jurisdiction over the THM Acquisition
Parties in respect of the THM Acquisition shall have been obtained by
such parties, and no such approvals shall impose any conditions to the
consummation of the THM Acquisition; (vi) the THM Acquisition shall
have been consummated in accordance with the terms and provisions of
the THM Acquisition Agreement and the other THM Acquisition Documents,
without any amendment or waiver of any material provision thereof;
(vii) the Agent shall have received in form and substance satisfactory
to it financial statements of THM and the pro forma consolidated
balance sheet of the Borrowers as of January 1, 1998; (viii) the Lender
shall have received evidence satisfactory to it and confirmed by a
certificate of the chief financial officer of Ridgeview, that as of the
Amendment No. 5 Effective Date, availability under the Revolving Credit
Facility, after giving effect to the estimated fees and expenses in
connection with the consummation of the transactions contemplated by
this Amendment and the THM Acquisition to be paid on the Amendment No.
5 Effective Date, is not less than $1,000,000; and (x) the Lender shall
have received a certificate of the Ridgeview's chief executive officer
or other evidence satisfactory to it that each of the foregoing
conditions has been satisfied. In addition, all opinion letters
delivered in connection with the THM Acquisition Documents and the
transactions contemplated thereby shall be addressed to the Lender, or
accompanied by a written authorization from the firm delivering such
opinion letter stating that the Lender may rely on such opinion letter
as though it were addressed to them.
Section 5. Effect of Amendment. Upon and after the effectiveness of
this Amendment as provided in Section 3 hereof, all references to the Loan
Agreement in the Loan Agreement or in any other Loan Document shall mean the
Loan Agreement as amended by this Amendment. Except as expressly provided in
this Amendment, the execution and delivery of this Amendment does not, and will
not, amend, modify or supplement any provision of or constitute a consent to or
a waiver of any noncompliance with the provisions of the Loan Agreement and,
except as specifically provided in this Amendment, the Loan Agreement shall
remain in full force and effect.
Section 6. Representations, Warranties and Covenants. Each Borrower
hereby makes the following representations and warranties to, and covenants with
the Lender, which representations, warranties and covenants shall survive the
delivery of this Amendment and the making of Loans under the Loan Agreement as
amended hereby:
(a) Organization; Power; Qualification. Each Borrower is a
corporation, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its properties and to carry on its
business as now being and hereafter proposed to be conducted and is
duly qualified
10
<PAGE> 11
and authorized to do business in each jurisdiction in which failure to
be so qualified and authorized would have a Materially Adverse Effect.
(b) Authorization of Agreements. To the extent it is a party
thereto, each Borrower has the right and power and has taken all
necessary action to authorize it to execute, deliver and perform this
Amendment, the THM Mortgage, the THM Acquisition Agreement and each
other Loan Document and THM Acquisition Document executed in connection
with this Amendment and the THM Acquisition in accordance with its
terms. This Amendment has been, and the THM Mortgage, the THM
Acquisition Agreement and each other Loan Document and THM Acquisition
Document contemplated hereby when executed and delivered by the
Borrowers, will have been, duly executed and delivered by the duly
authorized officers of each Borrower and is, or at such time will be, a
legal, valid and binding obligation of such Borrower, enforceable in
accordance with its terms.
(c) Compliance of Agreements with Laws. The execution and
delivery of this Amendment, the THM Mortgage, the THM Acquisition
Agreement and each other Loan Document and THM Acquisition Document
executed in connection with this Amendment and the THM Acquisition, and
the performance of the Loan Agreement as amended by this Amendment and
of the THM Mortgage, the THM Acquisition Agreement and each other Loan
Document and THM Acquisition Document in accordance with their
respective terms, do not and will not, by the passage of time, the
giving of notice or otherwise,
(i) require any Governmental Approval or violate any
applicable law relating to such Borrower or any of its
Affiliates,
(ii) conflict with, result in a breach of or
constitute a default under (1) the articles of incorporation
or by-laws or any shareholders' agreement of such Borrower,
(2) any indenture, agreement or other instrument to which such
Borrower is a party or by which any of its property may be
bound or (3) any Governmental Approval relating to such
Borrower, or
(iii) result in or require the creation or imposition
of any Lien upon or with respect to any property now owned or
hereafter acquired by such Borrower other than the Security
Interest.
(d) Ridgeview hereby makes the following representations and
warranties to the Lender, which representations and warranties shall
survive the delivery of this Amendment and the making of additional
Loans under the Loan Agreement as amended hereby: (i) it has heretofore
furnished to the Lender true, complete and correct copies of the THM
Acquisition Agreement (including any schedules, exhibits and annexes
thereto) and each THM Acquisition Document; (ii) the THM Acquisition
Agreement has not been amended supplemented or modified except as
previously disclosed in writing to the Lender and, together with the
other THM Acquisition Documents, copies of which have
11
<PAGE> 12
also been delivered to the Lender, constitutes the complete
understanding among the THM Acquisition Parties in respect of the THM
Acquisition and the other matters and transactions covered thereby;
(iii) the THM Acquisition Agreement has been duly executed and
delivered by the THM Acquisition Parties and is a valid, legal and
binding obligation of Ridgeview and to Ridgeview's knowledge, the other
THM Acquisition Parties; (iv) the representations and warranties of
Ridgeview contained in the THM Acquisition Agreement are true and
correct in all material respects on the Amendment No. 5 Effective Date,
and the Lender is entitled to rely on such representations and
warranties with the same force and effect as though they were
incorporated in the Loan Agreement as amended by this Amendment and
made to the Lender directly as of the Amendment No. 5 Effective Date.
(e) Landlord Waiver. The Borrowers shall deliver to the
Lender, within 30 days of the date hereof, a landlord's waiver and
consent agreement in form and substance satisfactory to Lender, duly
executed on behalf of the lessor of real property leased by THM in
Mebane, Alamance County, North Carolina.
Section 7. General Provisions.
(a) Expenses.
(i) The Borrowers agree to pay or reimburse on demand
all costs and expenses incurred by the Lender, including,
without limitation, the reasonable fees and disbursements of
counsel, in connection with (a) the negotiation, preparation,
execution, delivery, administration, enforcement and
termination of this Amendment, the Loan Agreement and each of
the other Loan Documents, whenever the same shall be executed
and delivered, including, without limitation, the
out-of-pocket costs and expenses incurred in connection with
the administration and interpretation of this Amendment, the
Loan Agreement and the other Loan Documents, (b) sums paid or
obligations incurred in connection with the payment of any
amount or taking any action required of a Borrower under this
Amendment, the Loan Agreement and the other Loan Documents
that such Borrower fails to pay or take, and (c) any other
obligations or expenses of the Borrowers under Section 12.2 of
the Loan Agreement.
(ii) The foregoing shall not be construed to limit
any other provisions of the Loan Documents regarding costs and
expenses to be paid by the Borrowers. The Borrowers hereby
irrevocably authorize the Lender to charge to any account of
the Borrowers (or any individual Borrower) maintained with the
Lender in the amount of any costs and expenses owed by the
Borrowers , as set forth in this Section or otherwise, when
such costs and expenses are due to the Lender and to deem such
amounts (but not in duplication) a request for a borrowing
under the Revolving Credit Facility pursuant to the provisions
of Section 2A.2(a)(iii) of the Loan Agreement.
12
<PAGE> 13
(b) Governing Law. This Amendment shall be construed
in accordance with and governed by the law of the State of
Georgia.
(c) Counterpart Execution. This Amendment may be
executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and
all of which taken together shall constitute one and the same
agreement.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
RIDGEVIEW, INC.
[CORPORATE SEAL]
Attest: By: ______________________________
Hugh R. Gaither
By: President
Name:
Title:
SENECA KNITTING MILLS CORPORATION
[CORPORATE SEAL]
Attest: By: ______________________________
Hugh R. Gaither
By: President
Name:
Title:
TRI-STAR HOSIERY MILLS, INC.
[CORPORATE SEAL]
Attest: By: ______________________________
Hugh R. Gaither
By: President
Name:
Title:
NATIONSBANK, N.A.
By: ______________________________
Scott K. Goldstein
Vice President
14
<PAGE> 15
EXHIBIT E
CONSENT AND CONFIRMATION
The undersigned, GPM Corporation, as the maker of the Subsidiary
Guaranty, hereby acknowledges receipt of the foregoing Amendment No. 5 and
confirms, for the benefit of the Borrowers and the Lender, that the Subsidiary
Guaranty remains in full force and effect, in accordance with its terms, as to
Secured Obligations of the Borrower under the Loan Agreement as amended by the
said Amendment No. 5 and is hereby in all respects ratified and confirmed.
Dated: As of July ___, 1998
GPM CORPORATION
By: ______________________________
Hugh R. Gaither
President
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
$34,000,000.00 Atlanta, Georgia
July ___, 1998
FOR VALUE RECEIVED, the undersigned, RIDGEVIEW, INC., a North
Carolina corporation ("Ridgeview"), SENECA KNITTING MILLS CORPORATION, a New
York corporation, and TRI-STAR HOSIERY MILLS, INC., a North Carolina corporation
(collectively, the "Borrowers"), hereby jointly and severally unconditionally
promise to pay to the order of NATIONSBANK, N.A. (f/k/a NationsBank, N.A.
(South), the "Lender"), at the offices of the Lender located at 600 Peachtree
Street, N.E., Atlanta, Georgia, 30308, or at such other place within the United
States as shall be designated from time to time by the Lender, on the
Termination Date, the principal amount of THIRTY-FOUR MILLION AND NO/100 DOLLARS
($34,000,000.00), or such lesser principal amount as may then constitute the
aggregate unpaid balance of all Revolving Credit Loans made by the Lender to the
Borrowers pursuant to the Loan Agreement, in lawful money of the United States
of America in federal or other immediately available funds.
The Borrowers also jointly and severally unconditionally
promise to pay interest on the unpaid principal amount of this Note outstanding
from time to time for each day from the date of disbursement until such
principal amount is paid in full at the rates per annum and on the dates
specified in the Loan Agreement applicable from time to time in accordance with
the provisions thereof. Nothing contained in this Note or in the Loan Agreement
shall be deemed to establish or require the payment of a rate of interest in
excess of the maximum rate permitted by any applicable law. In the event that
any rate of interest required to be paid hereunder exceeds the maximum rate
permitted by applicable law, the provisions of the Loan Agreement relating to
the payment of interest under such circumstances shall control.
This Note is the Revolving Credit Note referred to in that
certain Amended and Restated Loan and Security Agreement dated as of December
20, 1996 (as amended, modified, supplemented or restated from time to time, the
"Loan Agreement"; terms defined therein being used in this Note as therein
defined) between the Borrowers and the Lender, is subject to, and entitled to,
all provisions and benefits of the Loan Documents, is secured by the Collateral
and other property as provided in the Loan Documents, is subject to optional and
mandatory prepayment in whole or in part and is subject to acceleration prior to
maturity upon the occurrence of one or more Events of Default, all as provided
in the Loan Documents.
<PAGE> 2
Presentment for payment, demand, protest and notice of demand,
notice of dishonor, notice of non-payment and all other notices are hereby
waived by the Borrowers, except to the extent expressly provided in the Loan
Agreement. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
This Amended and Restated Revolving Credit Note is delivered
in exchange and substitution for, but not in extinguishment of the indebtedness
outstanding under, that certain Revolving Credit Note dated December 20, 1996 in
the original principal amount of $14,000,000 made by the Borrowers in favor of
the Lender, as increased to $18,000,000 pursuant to Amendment No. 3 dated as of
July 31, 1997, and as further increased to $28,000,000 pursuant to Amendment No.
4 dated as of March 13, 1998.
The Borrowers hereby jointly and severally agree to pay on
demand all costs and expenses incurred in collecting the Secured Obligations
hereunder or in enforcing or attempting to enforce any of the Lender's rights
hereunder, including, but not limited to, reasonable attorneys' fees and
expenses if collected by or through an attorney, whether or not suit is filed.
THE PROVISIONS OF SECTION 12.5 OF THE LOAN AGREEMENT ARE
HEREBY EXPRESSLY INCORPORATED BY REFERENCE HEREIN.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF GEORGIA WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PRINCIPLES THEREOF.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this Note as
of the day and year first above written.
RIDGEVIEW, INC.
[CORPORATE SEAL]
Attest: By:
Name:
By: Title:
Name:
Title:
SENECA KNITTING MILLS
CORPORATION
[CORPORATE SEAL]
Attest: By:
Name:
By: Title:
Name:
Title:
TRI-STAR HOSIERY MILLS, INC.
[CORPORATE SEAL]
Attest: By:
Name:
By: Title:
Name:
Title:
-3-
<PAGE> 1
EXHIBIT 10.3
Allonge
The undersigned, Tri-Star Hosiery Mills, Inc., a North Carolina
corporation ("THM") and a wholly owned subsidiary of Ridgeview, Inc., a North
Carolina corporation, hereby executes and delivers this allonge to Amended,
Restated and Consolidated Term Note dated December 20, 1996, payable to the
order of NATIONSBANK, N.A., formerly known as NationsBank, N.A. (South) (the
"Lender"), in the original principal amount of $4,969,659.00 as evidence of
THM's joint and several liability thereon under and pursuant to the Amended and
Restated Loan and Security Agreement dated as of December 20, 1996, as amended,
to which Ridgeview, Inc., Seneca Knitting Mills Corporation, Tri-Star Hosiery
Mills, Inc. and the Lender are parties, all as of this ___ day of July, 1998.
TRI-STAR HOSIERY MILLS, INC.
By: ____________________________
[Corporate Seal] Hugh R. Gaither
President
ATTEST:
By:
Name:
Title:
<PAGE> 1
EXHIBIT 10.4
TERM NOTE B
$500,000.00 Atlanta, Georgia
July ___, 1998
FOR VALUE RECEIVED, the undersigned, RIDGEVIEW, INC., a North
Carolina corporation ("Ridgeview"), SENECA KNITTING MILLS CORPORATION, a New
York corporation, and TRI-STAR HOSIERY MILLS, INC., a North Carolina corporation
(collectively, the "Borrowers"), hereby jointly and severally unconditionally
promise to pay to the order of NATIONSBANK, N.A., (f/k/a NationsBank, N.A.
(South)), a national banking association (the "Lender"), at the offices of the
Lender located at 600 Peachtree Street, N.E., Atlanta, Georgia, 30308, or at
such other place within the United States as shall be designated from time to
time by the Lender, on the Termination Date (as defined in the Loan Agreement
referred to below) the principal amount of FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($500,000.00), constituting the Term Loan B made by the Lender to the
Borrowers pursuant to the Loan Agreement, in lawful money of the United States
of America in federal or other immediately available funds, in such amounts and
on the dates specified in the Loan Agreement applicable from time to time in
accordance with the provisions thereof.
The Borrowers also jointly and severally unconditionally
promise to pay interest on the unpaid principal amount of this Note outstanding
from time to time for each day from the date of disbursement until such
principal amount is paid in full at the rates per annum and on the dates
specified in the Loan Agreement applicable from time to time in accordance with
the provisions thereof. Nothing contained in this Note or in the Loan Agreement
shall be deemed to establish or require the payment of a rate of interest in
excess of the maximum rate permitted by any applicable law. In the event that
any rate of interest required to be paid hereunder exceeds the maximum rate
permitted by applicable law, the provisions of the Loan Agreement relating to
the payment of interest under such circumstances shall control.
This Note is one of the Term Notes referred to in that certain
Amended and Restated Loan and Security Agreement dated as of December 20, 1996
(as amended, modified, supplemented or restated from time to time, the "Loan
Agreement"; terms defined therein being used in this Note as therein defined)
between the Borrowers and the Lender, is subject to, and entitled to, all
provisions and benefits of the Loan Documents, is secured by the Collateral and
other property as provided in the Loan Documents, is subject to optional and
mandatory prepayment in whole or in part and is subject to acceleration prior to
maturity upon the occurrence of one or more Events of Default, all as provided
in the Loan Documents.
<PAGE> 2
Presentment for payment, demand, protest and notice of demand,
notice of dishonor, notice of non-payment and all other notices are hereby
waived by the Borrowers, except to the extent expressly provided in the Loan
Agreement. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
The Borrowers hereby jointly and severally agree to pay on
demand all costs and expenses incurred in collecting the Secured Obligations
hereunder or in enforcing or attempting to enforce any of the Lender's rights
hereunder, including, but not limited to, reasonable attorneys' fees and
expenses if collected by or through an attorney, whether or not suit is filed.
THE PROVISIONS OF SECTION 12.5 OF THE LOAN AGREEMENT ARE
HEREBY EXPRESSLY INCORPORATED BY REFERENCE HEREIN.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF GEORGIA WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PRINCIPLES THEREOF.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this Note as
of the day and year first above written.
RIDGEVIEW, INC.
[CORPORATE SEAL]
Attest: By:
Name:
By: Title:
Name:
Title:
SENECA KNITTING MILLS
CORPORATION
[CORPORATE SEAL]
Attest: By:
Name:
By: Title:
Name:
Title:
TRI-STAR HOSIERY MILLS, INC.
[CORPORATE SEAL]
Attest: By:
Name:
By: Title:
Name:
Title:
-3-
<PAGE> 1
EXHIBIT 10.5
TERM NOTE C
$615,000.00 Atlanta, Georgia
July ___, 1998
FOR VALUE RECEIVED, the undersigned, RIDGEVIEW, INC., a North
Carolina corporation ("Ridgeview"), SENECA KNITTING MILLS CORPORATION, a New
York corporation, and TRI-STAR HOSIERY MILLS, INC., a North Carolina corporation
(collectively, the "Borrowers"), hereby jointly and severally unconditionally
promise to pay to the order of NATIONSBANK, N.A., (f/k/a NationsBank, N.A.
(South)), a national banking association (the "Lender"), at the offices of the
Lender located at 600 Peachtree Street, N.E., Atlanta, Georgia, 30308, or at
such other place within the United States as shall be designated from time to
time by the Lender, on the Termination Date (as defined in the Loan Agreement
referred to below) the principal amount of SIX HUNDRED FIFTEEN THOUSAND AND
NO/100 DOLLARS ($615,000.00), constituting the Term Loan C made by the Lender to
the Borrowers pursuant to the Loan Agreement, in lawful money of the United
States of America in federal or other immediately available funds, in such
amounts and on the dates specified in the Loan Agreement applicable from time to
time in accordance with the provisions thereof.
The Borrowers also jointly and severally unconditionally
promise to pay interest on the unpaid principal amount of this Note outstanding
from time to time for each day from the date of disbursement until such
principal amount is paid in full at the rates per annum and on the dates
specified in the Loan Agreement applicable from time to time in accordance with
the provisions thereof. Nothing contained in this Note or in the Loan Agreement
shall be deemed to establish or require the payment of a rate of interest in
excess of the maximum rate permitted by any applicable law. In the event that
any rate of interest required to be paid hereunder exceeds the maximum rate
permitted by applicable law, the provisions of the Loan Agreement relating to
the payment of interest under such circumstances shall control.
This Note is one of the Term Notes referred to in that certain
Amended and Restated Loan and Security Agreement dated as of December 20, 1996
(as amended, modified, supplemented or restated from time to time, the "Loan
Agreement"; terms defined therein being used in this Note as therein defined)
between the Borrowers and the Lender, is subject to, and entitled to, all
provisions and benefits of the Loan Documents, is secured by the Collateral and
other property as provided in the Loan Documents, is subject to optional and
mandatory prepayment in whole or in part and is subject to acceleration prior to
maturity upon the occurrence of one or more Events of Default, all as provided
in the Loan Documents.
<PAGE> 2
Presentment for payment, demand, protest and notice of demand,
notice of dishonor, notice of non-payment and all other notices are hereby
waived by the Borrowers, except to the extent expressly provided in the Loan
Agreement. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
The Borrowers hereby jointly and severally agree to pay on
demand all costs and expenses incurred in collecting the Secured Obligations
hereunder or in enforcing or attempting to enforce any of the Lender's rights
hereunder, including, but not limited to, reasonable attorneys' fees and
expenses if collected by or through an attorney, whether or not suit is filed.
THE PROVISIONS OF SECTION 12.5 OF THE LOAN AGREEMENT ARE
HEREBY EXPRESSLY INCORPORATED BY REFERENCE HEREIN.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF GEORGIA WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PRINCIPLES THEREOF.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this Note as
of the day and year first above written.
RIDGEVIEW, INC.
[CORPORATE SEAL]
Attest: By:
Name:
By: Title:
Name:
Title:
SENECA KNITTING MILLS
CORPORATION
[CORPORATE SEAL]
Attest: By:
Name:
By: Title:
Name:
Title:
TRI-STAR HOSIERY MILLS, INC.
[CORPORATE SEAL]
Attest: By:
Name:
By: Title:
Name:
Title:
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 422,589
<SECURITIES> 0
<RECEIVABLES> 16,627,739
<ALLOWANCES> 911,279
<INVENTORY> 28,348,441
<CURRENT-ASSETS> 46,283,755
<PP&E> 26,571,834
<DEPRECIATION> 13,526,410
<TOTAL-ASSETS> 63,344,971
<CURRENT-LIABILITIES> 37,361,089
<BONDS> 28,257,187
0
0
<COMMON> 30,000
<OTHER-SE> 19,634,027
<TOTAL-LIABILITY-AND-EQUITY> 63,344,971
<SALES> 21,252,925
<TOTAL-REVENUES> 21,252,925
<CGS> 18,763,488
<TOTAL-COSTS> 4,264,516
<OTHER-EXPENSES> 20,958
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 540,990
<INCOME-PRETAX> (2,337,027)
<INCOME-TAX> (876,053)
<INCOME-CONTINUING> (1,460,974)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,460,974)
<EPS-PRIMARY> (.49)
<EPS-DILUTED> (.49)
</TABLE>
