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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 1, 1995
CONE MILLS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
North Carolina 1-3634 56-0367025
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
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1201 Maple Street, Greensboro, North Carolina 27405
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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Registrant's Telephone Number, Including Area Code: (910) 379-6246
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ITEM 5. OTHER EVENTS.
The following consolidated financial statements of the Registrant and
related notes and management's discussion and analysis are filed herewith on the
pages indicated.
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PAGES
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Management's Discussion and Analysis of Results of Operations and Financial Condition.................................. 2
Independent Auditor's Report........................................................................................... F-1
Consolidated Statements of Income for the years ended January 1, 1995, January 2, 1994 and January 3, 1993............. F-2
Consolidated Balance Sheets as of January 1, 1995 and January 2, 1994.................................................. F-3
Consolidated Statements of Stockholders' Equity for the years ended January 1, 1995, January 2, 1994 and January 3,
1993................................................................................................................. F-4
Consolidated Statements of Cash Flows for the years ended January 1, 1995, January 2, 1994 and January 3, 1993......... F-5
Notes to Consolidated Financial Statements............................................................................. F-6
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ITEM 7.
The following exhibits are filed in connection with this report.
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EXHIBIT NO. DESCRIPTION
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2.1 Amendment to Receivables Purchase Agreement dated April 4, 1994 between the Registrant and Delaware
Funding Corporation
2.2 Amendment to Receivables Purchase Agreement dated June 7, 1994 between the Registrant and Delaware Funding
Corporation
2.3 Amendment to Receivables Purchase Agreement dated June 30, 1994 between the Registrant and Delaware
Funding Corporation
2.4 Amendment to Receivables Purchase Agreement dated November 15, 1994 between the Registrant and Delaware
Funding Corporation
4.1 Amended and Restated Credit Agreement dated November 18, 1994, among the Registrant, various banks and
Morgan Guaranty Trust Company of New York, as Agent
4.2 Letter Agreement dated September 11, 1992, amending the Note Agreement dated August 13, 1992 between the
Registrant and The Prudential Insurance Company of America
4.3 Letter Agreement dated July 19, 1993, amending the Note Agreement dated August 13, 1992 between the
Registrant and The Prudential Insurance Company of America
4.4 Letter Agreement dated June 30, 1994, amending the Note Agreement dated August 13, 1992 between the
Registrant and The Prudential Insurance Company of America
4.5 Letter Agreement dated November 14, 1994, amending the Note Agreement dated August 13, 1992 between the
Registrant and The Prudential Insurance Company of America
23.1 Consent of McGladrey & Pullen, LLP
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The operating results and financial condition of Cone have been influenced
by a number of external factors and Company initiatives. The principal
influences have been domestic cotton costs, the general business cycle,
international apparel and fabric trade developments, and strategic changes in
the Company's business and capital structure.
COTTON COSTS. Management believes that the most significant factor
affecting operating margins has been the price of cotton, the Company's
principal raw material. Cotton prices fluctuate with the balance of supply and
demand and, since cotton is an agricultural product, its supply and quality are
subject to the forces of nature. World cotton prices began to rise in late 1993,
throughout 1994 and into 1995, primarily as a result of cotton crop declines in
Pakistan, India and China due to weather, disease and insects. Consequently,
mill delivered cotton prices per pound rose from the lower $.60's in 1992 and
1993 to the upper $.70's in 1994 and into the mid $.80's during early 1995.
The Company has purchased cotton from suppliers at fixed prices for
delivery throughout 1995. Although these fixed prices compare favorably with
those of the present spot market, the significant increase in the price of
cotton since late 1994 will cause a reduction in profit margins in 1995. While
the Company was unable to increase prices in its major product lines during the
first half of 1994, moderate price increases were effected for the second half
of 1994 and first quarter 1995. Margins will be affected by the strength of
demand for the Company's products and the resulting impact on improved pricing,
cotton and other raw material costs, and productivity improvement programs.
GENERAL BUSINESS CYCLE. The Company's operating results are closely related
to the general business cycle of the U.S. economy. Management believes the U.S.
economy is currently in the mature phase of the economic cycle, when the demand
for home furnishings and consumer durables typically grows at a higher rate than
demand for apparel products, which is usually strongest in the earlier phases of
a recovery. When apparel demand growth rates change during an economic cycle,
adjustments to inventories and production levels often occur. In early 1994,
despite continued strong demand at retail, denim inventories experienced an
inventory imbalance in the softgoods pipeline. The pipeline supply and demand
imbalance was corrected by the second half of 1994.
The external factors discussed above are reflected in the Company's recent
quarterly net sales. All quarters had 13 weeks except the fourth quarter of 1992
which had 14 weeks.
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1994 1993 1992
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(IN MILLIONS)
Net Sales:
1st Quarter................................................ $195.9 $195.0 $174.2
2nd Quarter................................................ 201.7 202.5 182.6
3rd Quarter................................................ 203.5 192.7 170.5
4th Quarter................................................ 205.1 179.0 178.1
Total................................................... $806.2 $769.2 $705.4
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TRADE DEVELOPMENTS. The Company's operating results have been influenced by
U.S. trade policy, which has allowed gains in market share by foreign-produced,
labor-intensive garments over the past decade. This has caused U.S.
manufacturers of fabrics used in these labor-intensive garments to have excess
capacity, which has resulted in increased competition and reduced margins for
U.S. manufacturers of commodity-type goods. In December 1994, Congress approved
implementing legislation for the Uruguay Round world trade accord under the
General Agreement on Tariffs and Trade ("GATT"). As a result, quotas will be
phased out and tariffs outside of the U.S. on textile and apparel products will
be substantially reduced over a period of 10 years. U.S. tariffs on these
products will be reduced slightly. The passage of the North American Free Trade
Agreement ("NAFTA") has essentially eliminated all quotas and tariffs on the
Company's products throughout Canada and Mexico. In response to this
environment, the Company has focused on high-margin and low-labor content
businesses in which it believes it is internationally competitive.
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STRATEGIC INITIATIVES. The Company has adopted a growth strategy aimed at
entering new markets that utilize manufacturing technologies related to existing
Cone strengths. For example, in 1993, the Company positioned itself to supply
markets more efficiently and effectively with basic denim products through the
purchase of a 20% equity ownership interest in CIPSA for approximately $24
million and the formation of a joint venture with CIPSA to construct a modern
denim plant in Mexico. The joint venture partners will invest approximately $50
million in equity in the venture, with each partner providing one-half of the
investment. Capital requirements for the joint venture will primarily occur in
1995. The joint venture also obtained a $63 million credit facility from a
Mexican bank. This facility is not guaranteed by Cone or by CIPSA.
In 1994, the Company further implemented its growth strategy by acquiring
substantially all of the assets of Golding Industries, Inc., consisting
primarily of the Raytex division, for a purchase price of $57.6 million in cash
and the assumption of $6.0 million in liabilities. Raytex is a leading
commission printer of wide fabrics used primarily in home furnishings products
and uses technologies similar to Cone's Carlisle facility, which also prints and
finishes decorative fabrics.
As part of its strategy, the Company has made significant capital
expenditures in recent years and plans to spend a total of $62 million in fiscal
1995, including $15 million for a new plant to weave jacquard pattern fabrics
for home furnishings customers. In January 1995, the Company also purchased
substantially all of the assets of Greeff Fabrics, Inc., a small but well known
designer and distributor of high-end decorative fabrics to interior designers
and specialty retailers in the U.S. and the United Kingdom. The new jacquard
pattern fabrics plant and Greeff Fabrics, Inc. will be part of the Cone
Decorative Fabrics Division formed in January 1995.
SEGMENT INFORMATION
Cone operates in two principal business segments, apparel fabrics and home
furnishings products. The following table sets forth certain net sales and
operating income information regarding these segments for 1994 and 1993, both of
which contained 52 weeks, and 1992, which contained 53 weeks.
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1994 1993 1992
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(DOLLAR AMOUNTS IN MILLIONS)
Net Sales
Apparel................................................. $600.5 74.5% $575.8 74.9% $520.0 73.7%
Home Furnishings........................................ 205.7 25.5 193.4 25.1 185.4 26.3
Total................................................ $806.2 100.0% $769.2 100.0% $705.4 100.0%
Operating Income (1)
Apparel................................................. $ 47.5 7.9% $ 68.8 12.0% $ 67.4 13.0%
Home Furnishings........................................ 19.0 9.2 19.5 10.1 16.3 8.8
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(1) Operating income excludes general corporate expenses. Percentages reflect
operating income as a percentage of segment net sales.
RESULTS OF OPERATIONS
FIFTY-TWO WEEKS ENDED JANUARY 1, 1995 COMPARED WITH FIFTY-TWO WEEKS ENDED
JANUARY 2, 1994
Net sales for 1994 were $806.2 million, up 4.8% from 1993 net sales of
$769.2 million. Income before the cumulative effect of adoption of SFAS No. 112
was $36.2 million, or $1.20 per share after preferred dividends, as compared
with $49.6 million, or $1.68 per share, for 1993. Included in the 1994 results
was a net gain of $.4 million, or $.01 per share, arising from the final
disposal of assets of the Company's discontinued operations. During the first
quarter of 1994, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which resulted in an after-tax, non-cash charge of
$1.2 million, or $.04 per share, and reduced net income to $1.16 per share for
the year of 1994. Net income for 1994 was $35.0 million as compared with $49.6
million for 1993.
Gross profit (net sales less cost of sales and depreciation) as a
percentage of net sales was 17.4% in 1994 as compared with 20.7% for 1993. The
decline resulted primarily from the inability to raise denim prices to cover
higher cotton costs, higher unit production costs associated with operating
denim facilities at less than capacity during the first six months of 1994, and
a higher proportion of the mix in lower margin speciality sportswear fabrics and
polyurethane foam products as a result of stronger sales of those products.
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APPAREL FABRICS. Apparel fabrics net sales were $600.5 million for
1994, an increase of 4.3% from 1993. The higher sales were due to increased
sales volume. Overall, apparel fabric segment sales benefited from
increases in specialty sportswear sales, primarily flannel shirtings, and
to a lesser extent, increases in heavyweight denim sales. Average prices
adjusted for product mix changes were essentially unchanged. Apparel
fabrics export sales for 1994 were up 8.8% to $135.9 million from $124.9
million in 1993.
Operating margins in 1994 for the apparel fabrics segment were 7.9% of
net sales compared with 12.0% for 1993. Margins were lower in 1994 because
of the decline in denim earnings as discussed above.
HOME FURNISHINGS. Home furnishings net sales were $205.7 million in
1994, an increase of 6.3% from 1993. Operating income for 1994 was $19.0
million, a decrease of 2.6% from 1993. Sales and operating income for the
home furnishings fabrics product group were down in 1994 as the Company
continued to experience weak decorative print fabric markets. Olympic's
polyurethane product sales were up in 1994 as the division experienced
stronger sales in automotive markets, but operating income was down as
margins on commodity furniture foam and carpet underlay continued to be
weak and as the division absorbed start-up costs associated with new
product ventures.
Export sales of home furnishings products were $5.8 million in 1994 as
compared with $7.1 million in 1993. Export sales were impacted by poor
economic conditions in European markets.
Total Company selling and administrative expenses were $77.8 million, or
9.7% of net sales, for 1994 as compared with $73.3 million, or 9.5% of net
sales, for 1993. Expenses in 1994 were impacted by higher salary and benefit
costs and costs associated with expansion initiatives.
Interest expense for 1994 increased $1.0 million compared to 1993,
primarily the result of a $.4 million interest charge on the settlement of 1990
and 1991 income taxes by the Internal Revenue Service, higher interest rates and
additional borrowings associated with expansion initiatives.
Income taxes as a percentage of taxable income was 35.6% in 1994 compared
with 37.6% in 1993. The 1993 rate was higher primarily as the result of the one
time impact on deferred taxes of a federal tax rate increase. Both periods
reflect tax benefits resulting from operation of the Company's foreign sales
corporation.
FIFTY-TWO WEEKS ENDED JANUARY 2, 1994 COMPARED WITH FIFTY-THREE WEEKS ENDED
JANUARY 3, 1993
Following a U.S. cyclical recovery from mid-1991 through the end of 1992,
the rate of growth in the domestic softgoods sector began to decline and
retailers and softgoods manufacturers began to report mixed results during 1993.
Despite these general economic conditions, Cone had record sales and income from
continuing operations in 1993. In the apparel fabrics segment, sales were up
substantially, primarily as a result of growth in denims and flannel shirtings.
The Company also benefited from expanding apparel fabrics export sales. Home
furnishings segment sales increased because of sales growth at Carlisle
Finishing, arising primarily from market share gains, and the Company's real
estate division, Cornwallis Development Co.
Net sales for 1993 were $769.2 million, an increase of $63.8 million, or
9.0% from 1992 net sales of $705.4 million. Gross profit (net sales less cost of
sales and depreciation) as a percentage of net sales was 20.7% for both 1993 and
1992. Income from operations increased 9.0% to $85.6 million for 1993. The
Company's 1993 net income was $49.6 million, or $1.68 per share of Common Stock
after preferred dividends. Net income for 1993 included $2.4 million of
increased taxes resulting from the 1993 change in federal tax rates. The
per-share impact of those increased taxes was $.09.
For comparison, Cone reported net income of $43.4 million, or $1.59 per
share, for 1992, which included an after tax benefit of $2.2 million related to
an income tax refund, a $2.0 million extraordinary expense related to the early
extinguishment of debt, and for the first six months of 1992, outstanding shares
did not include 6.9 million shares issued in the Company's mid-1992 initial
public offering.
APPAREL FABRICS. Apparel fabrics net sales were $575.8 million for
1993, an increase of 10.7% from 1992. The improved sales resulted from
increased sales volume and, to a lesser extent, higher prices. Average
prices adjusted for product mix changes were up approximately three
percent. Apparel fabrics export sales for 1993 were up 18.8% to $124.9
million, as compared with $105.2 million for 1992.
Operating margins for the apparel fabrics segment were 12.0% of net
sales for 1993 as compared with 13.0% for 1992. Margins as a percent of
sales were down slightly as a result of a shift in mix to lower margin
specialty sportswear
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fabrics and, to a lesser extent, increased depreciation expense. Average
cotton costs were up by approximately two percent for 1993 as compared with
1992.
HOME FURNISHINGS. For 1993, net sales of $193.4 million for the home
furnishings segment increased $8.0 million, or 4.3%, and operating income
increased $3.2 million, or 19.3% , compared with 1992. All product groups
of the home furnishings segment had higher sales in 1993.
Export sales of home furnishings products were $7.1 million in 1993
compared with $8.6 million in 1992. These export sales were impacted by
poor economic conditions in European and Japanese markets.
In 1993, operating margins for the home furnishings segment improved
to 10.1% of net sales compared with 8.8% for 1992. The increase was
primarily the result of improved operating performance at Olympic Products
and higher sales and improved sales mix of real estate operations.
Total Company selling and administrative expenses increased from $67.6
million, or 9.6% of sales, for 1992 to $73.3 million, or 9.5% of sales, for
1993. The increase in expenses was primarily the result of the redeployment of
people previously charged to discontinued lines to support expanding sportswear
and denim businesses, increases in salaries and benefits costs and, to a lesser
extent, expenses associated with the secondary offering in early 1993 of common
stock held by certain institutional shareholders of the Company.
Interest expense for 1993 decreased $4.0 million as compared with 1992
because of reduced borrowing levels and, to a lesser extent, lower interest
rates. For 1993 interest income was $2.1 million lower than 1992 levels because
of the interest associated with an income tax refund in the first quarter of
1992. Other income in 1993 of $.3 million represented the income from the
Company's 20% investment in CIPSA.
Income taxes as a percentage of taxable income was 37.6% in 1993 compared
with 35.3% in 1992. The effective tax rate for 1993 was higher than the previous
year primarily because of the 1993 increase in federal statutory tax rates. Both
periods reflect tax benefits resulting from operations of the Company's foreign
sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal long-term capital sources are a $75 million Note
Agreement with The Prudential Insurance Company of America (the "Term Loan") and
stockholders' equity. Primary sources of liquidity are internally generated
funds, a $80 million Credit Agreement with a group of banks with Morgan Guaranty
Trust Company of New York ("Morgan Guaranty") as Agent Bank (the "Revolving
Credit Facility"), and a $50 million Receivables Purchase Agreement (the
"Receivables Purchase Agreement") with Delaware Funding Corporation, an
affiliate of Morgan Guaranty. The Receivables Purchase Agreement was increased
from $40 million in the second quarter of 1994 and the Revolving Credit Facility
from $60 million in the fourth quarter of 1994. On January 1, 1995, the Company
had funds available of $31.0 million under its Revolving Credit Facility.
The Term Loan is unsecured and bears interest at a fixed annual rate of 8%,
with required principal payments beginning in August 1996 until final maturity
on August 13, 2002. The Revolving Credit Facility is unsecured and provides for
a floating rate of interest based, at the Company's election, on the agent's
base rate, the Certificate of Deposit rate or LIBOR plus a margin determined by
the Company's capital structure, or at a rate determined through a competitive
bid process. The Company intends to repay all borrowings outstanding under the
Revolving Credit Facility, which is scheduled to expire on August 13, 1997, with
a portion of the net proceeds from the sale of the Debentures offered hereby.
See "Use of Proceeds." Amounts repaid under the Revolving Credit Facility will
remain available. Under the Receivables Purchase Facility, which is extendable
to August 13, 1997, the cost of receivables sold by Cone is the commercial paper
rate plus 55 basis points calculated for the period of time from the sale of a
receivable until its payment date. The resulting cost on the sale of receivables
is included in cost of sales.
During 1994, the Company generated $55.3 million in funds from operating
activities, including $59.0 million from net income adjusted for noncash
depreciation and amortization expenses, partially offset by increased working
capital requirements, primarily increases in trade receivables. Major uses of
cash during this period included $37.5 million for capital expenditures, $57.6
million for the acquisition of the assets of the Raytex commission print
operation and $9.6 million for investment in CIPSA and the related joint
venture. Funding came primarily from operating cash flow, the Revolving Credit
Facility, and the additional sale of accounts receivable to support working
capital needs.
During 1993, Cone generated $57.2 million in funds from operating
activities, including $71.0 million from net income adjusted for noncash
depreciation and amortization expenses, partially offset by increased working
capital requirements,
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primarily resulting from reductions of accounts payable and accrued expenses.
Major uses of cash during this period included $38.7 million for capital
expenditures and $3.1 million for preferred stock dividends. Cone purchased 20%
of CIPSA for approximately $24 million and began construction of the joint
venture denim plant with CIPSA. The investment in the joint venture was $2.3
million for 1993. Funding for these cash uses came primarily from operating cash
flow and cash available at the beginning of the period.
On January 1, 1995, the Company's long-term capital structure consisted of
$126.1 million of long-term debt and $236.9 million of stockholders' equity. For
comparison, at January 2, 1994 the Company had $77.2 million of long-term debt
and $210.0 million of stockholders' equity. Long-term debt (including current
maturities of long-term debt) as a percentage of long-term debt and
stockholders' equity was 35% on January 1, 1995, compared with 27% at January 2,
1994. The Company accounts for investments in unconsolidated affiliated
companies using the equity method on a one quarter delay basis. In December
1994, the Mexican government devalued the peso and allowed it to trade freely
against the U.S. dollar resulting in a substantial decline in value of the peso
versus the U.S. dollar. On January 1, 1995, the peso was trading at 4.94 pesos
per U.S. dollar versus an exchange rate of approximately 3.45 prior to the
devaluation. If an exchange rate of 4.94 had been used in the Company's
financial statements, the currency translation adjustment would have been a $7.8
million (net of income tax benefit) reduction of stockholders' equity at the end
of 1994. The reduction in stockholders' equity is a noncash adjustment.
Accounts receivable on January 1, 1995 were $56.7 million, up from $44.2
million at year-end 1993. At the end of fiscal 1994, the Company had sold $50
million of accounts receivable, an increase of $15 million from the amount sold
at the end of fiscal 1993. Receivables, including those sold pursuant to the
Receivables Purchase Agreement, represented 49 days of sales outstanding at
year-end 1994 compared with 41 days at year-end 1993, as fewer payments were
made in advance of due date.
Inventories on January 1, 1995, were $149.4 million, down $2.7 million from
year-end 1993 levels of $152.1 million.
Capital spending in 1994 was $37.5 million and included expansion and
upgrading of yarn preparation facilities, new weaving machines, and a new fiber
production line at Olympic Products.
Capital spending in 1995 is expected to be $62 million, including $15
million for the new jacquard plant. Other projects include new weaving machines
that replace 1970's vintage weaving machines, additional dyeing capacity to
increase production flexibility, an additional screen printing machine and
approximately $6 million for computers, software and information systems.
Approximately $3.1 million of the budgeted capital expenditures for 1995 had
been committed at year-end 1994. In addition to capital expenditures, the
Company expects to spend approximately $22 million for completion of its
investment in the Mexican joint venture plant.
FINANCIAL OUTLOOK AND STRATEGY
Beginning in 1992, Cone benefited from favorable apparel fabric markets
characterized by increasing prices and volume in both domestic and international
denim markets and the rapid expansion of sportswear fabrics markets. While first
half 1994 sales did not grow due to short-term denim inventory adjustments in
the softgoods pipeline, second half 1994 operations experienced accelerated
growth, and the Company believes that demographic trends and other market
developments continue to present favorable long-term opportunities for growth.
Operating income was lower in 1994 than in 1993 and the Company does not
anticipate improvement in operating income in the first half of 1995. However,
based on apparel fabric order backlogs at the end of fiscal 1994, the Company
expects increased net sales in the first half of 1995.
In addition to the Company's plans to maintain modern manufacturing
facilities through capital reinvestment, the Company has set priorities for the
use of cash flow and debt capacity. Cone's first priority is international denim
manufacturing and marketing opportunities. In 1993, the Company purchased a 20%
ownership in CIPSA, and signed agreements with CIPSA providing for the formation
of a joint venture as described above. Cone's second priority for cash flow and
debt capacity is acquisitions in related home furnishings product lines. The
acquisition of Raytex and Greeff are results of this strategy. The Company also
from time to time reviews and will continue to review acquisitions and other
investment opportunities (some of which may be material to the Company) that
permit Cone to add value through its manufacturing and marketing expertise.
However, the Company currently has no agreement, arrangement or understanding to
make any such acquisition or investment.
Other potential uses of cash include common stock repurchases, the
reduction of outstanding preferred stock, or cash dividends, depending on the
expected benefits to shareholders. On February 17, 1994, the Board of Directors
of the Company authorized the repurchase, from time to time, of up to 2.5
million shares of the Company's outstanding common stock in
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open market transactions. As of February 1, 1995, 385,400 shares had been
repurchased in open market transactions and future repurchase decisions will be
based on the Company's expected capital structure, alternative investment
opportunities, and the market price of the common stock.
The Company believes that the net proceeds from the sale of the Debentures
offered hereby, together with its internally generated operating funds and funds
available under its existing credit facilities, will be sufficient to meet its
working capital, capital spending, possible stock repurchases, and financing
commitment needs for the foreseeable future.
REGULATORY MATTERS
Federal, state and local regulations relating to the workplace and the
discharge of materials into the environment are continually changing; therefore,
it is difficult to gauge the total future impact of such regulations on the
Company. Existing government regulations are not expected to cause a material
change on the Company's competitive position, operating results or planned
capital expenditures. Cone has an active environmental committee which fosters
protection of the environment and compliance with laws.
LEGAL PROCEEDINGS
In November 1988 certain former employees of the Company instituted a class
action suit against the Company and certain other defendants in which the
plaintiffs ("Plaintiffs") asserted a variety of claims related to the 1983 ESOP
and certain other employee benefit plans maintained by the Company. In March
1992 a judgment in the amount of $15.5 million (including an attorneys' fees
award) was entered against the Company with respect to an alleged promise to
make additional Company contributions to the 1983 ESOP and all claims unrelated
to the alleged promise were dismissed. The Company, the individual defendants
and the Plaintiffs appealed.
On May 6, 1994, the Court of Appeals, sitting EN BANC, affirmed the prior
conclusion of a panel of three of its judges and unanimously reversed the $15.5
million judgment and unanimously affirmed all of the District Court's rulings in
favor of the Company. However, the Court of Appeals affirmed, by an equally
divided court, the District Court's holding that Plaintiffs should be allowed to
proceed on an alternative theory whether, subject to proof of detrimental
reliance, Plaintiffs could establish that a letter to salaried employees on
December 15, 1983 created an enforceable obligation that could allow recovery on
a theory of equitable estoppel. Accordingly, the case was remanded to the
District Court for a determination of whether the Plaintiffs can establish
detrimental reliance creating estoppel of the Company.
Additional proceedings are under way in the District Court on the issue of
detrimental reliance and other issues related to whether the Plaintiffs can
prevail on remand. For that reason, and because of the uncertainties inherent in
the litigation process, it is not possible to predict the ultimate outcome of
this lawsuit. However, the Company intends to continue to defend this matter
vigorously, and it is the opinion of the Company's management that this lawsuit,
when finally concluded, will not have a material adverse effect on the Company's
financial condition.
To secure the judgment on appeal from the District Court to the Court of
Appeals, the Company had deposited in escrow with the trustee of the 1983 ESOP
an $8 million letter of credit and 75,330 shares of Class A Preferred Stock
valued at $7.5 million which subsequently earned dividends of an additional
11,474 shares valued at $1.2 million. The letter of credit was substituted for
an $8 million cash deposit made in April 1992. To record this escrow
transaction, the Company increased outstanding Class A Preferred Stock by $8.7
million and established an offsetting contra stockholders' equity account.
Because the judgment of the District Court was reversed, the escrowed stock
and letter of credit were ordered released by order of the District Court
entered July 22, 1994. Subsequent to the court's order, the stock was redeemed,
the offsetting contra account eliminated and letter of credit terminated. None
of these escrow transactions have had an effect on net income or stockholders'
equity.
The Company is a party to various other legal claims and actions incidental
to its business. Management believes that none of these claims or actions,
either individually or in the aggregate, will have a material adverse effect on
the financial condition of the Company.
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(McGLADREY & PULLEN, LLP logo here)
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS
CONE MILLS CORPORATION
Greensboro, North Carolina
We have audited the accompanying consolidated balance sheets of Cone Mills
Corporation and subsidiaries as of January 1, 1995 and January 2, 1994 and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended January 1, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cone Mills
Corporation and subsidiaries as of January 1, 1995 and January 2, 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended January 1, 1995 in conformity with generally accepted
accounting principles.
As described in Note 12 to the consolidated financial statements, on
January 3, 1994 the Company changed its method of accounting for postemployment
benefits.
MCGLADREY & PULLEN, LLP
Greensboro, North Carolina
February 10, 1995
F-1
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JANUARY 1, 1995, JANUARY 2, 1994 AND JANUARY 3, 1993
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE DATA)
Net Sales (Note 19)...................................................................... $806,167 $769,230 $705,430
Operating Costs and Expenses:
Cost of sales.......................................................................... 642,472 589,314 540,825
Selling and administrative............................................................. 77,823 73,326 67,554
Depreciation........................................................................... 23,269 20,991 18,553
743,564 683,631 626,932
Income from Operations................................................................... 62,603 85,599 78,498
Other Income (Expense):
Interest income........................................................................ 614 521 2,621
Interest expense....................................................................... (7,924) (6,950) (10,938)
Other income........................................................................... 223 317 --
(7,087) (6,112) (8,317)
Income from Continuing Operations before Income Taxes.................................... 55,516 79,487 70,181
Income Taxes (Note 13)................................................................... 19,764 29,884 24,782
Income from Continuing Operations........................................................ 35,752 49,603 45,399
Gain on Disposal -- Discontinued Operations -- (Net of income tax of $276)
(Note 21).............................................................................. 439 -- --
Income before Extraordinary Item and Cumulative Effect of Accounting Change.............. 36,191 49,603 45,399
Extraordinary Item -- Expenses Related to Early Extinguishment of Debt -- (Net of income
tax benefit of $1,212)................................................................. -- -- (2,009)
Cumulative Effect of Accounting Change for Postemployment Benefits -- (Net of income tax
benefit of $772) (Note 12)............................................................. (1,228) -- --
Net Income............................................................................... $ 34,963 $ 49,603 $ 43,390
Income Available to Common Shareholders (Note 18):
Income from Continuing Operations...................................................... $ 33,064 $ 46,808 $ 40,839
Income before Extraordinary Item and Cumulative Effect of Accounting Change............ $ 33,503 $ 46,808 $ 40,839
Extraordinary Item..................................................................... -- -- (2,009)
Cumulative Effect of Accounting Change................................................. (1,228) -- --
Net Income............................................................................... $ 32,275 $ 46,808 $ 38,830
Earnings Per Share -- Fully Diluted (Note 18):
Income from Continuing Operations...................................................... $ 1.19 $ 1.68 $ 1.67
Income before Extraordinary Item and Cumulative Effect of Accounting Change............ $ 1.20 $ 1.68 $ 1.67
Extraordinary Item..................................................................... -- -- (.08)
Cumulative Effect of Accounting Change................................................. (.04) -- --
Net Income............................................................................... $ 1.16 $ 1.68 $ 1.59
Weighted Average Common Shares and Common Share Equivalents Outstanding -- Fully Diluted
(Note 18).............................................................................. 27,834 27,894 24,470
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 1, 1995 AND JANUARY 2, 1994
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
(AMOUNTS IN
THOUSANDS, EXCEPT
SHARE AND PAR VALUE
DATA)
ASSETS
Current Assets:
Cash................................................................................................ $ 1,158 $ 503
Accounts receivable -- trade, less provision for doubtful accounts $3,000 (Notes 2 and 19).......... 56,654 44,175
Inventories (Note 3):
Greige and finished goods........................................................................ 83,377 84,923
Work in process.................................................................................. 15,796 15,968
Raw materials.................................................................................... 19,973 20,612
Supplies and other............................................................................... 30,274 30,621
149,420 152,124
Other current assets................................................................................ 6,007 5,542
Total Current Assets............................................................................. 213,239 202,344
Investments in Unconsolidated Affiliates (Note 4)..................................................... 34,294 26,420
Other Assets (Note 6)................................................................................. 38,803 3,171
Property, Plant and Equipment:
Land................................................................................................ 20,662 20,758
Buildings........................................................................................... 79,418 71,942
Machinery and equipment............................................................................. 284,401 239,846
Other............................................................................................... 30,581 25,799
415,062 358,345
Less accumulated depreciation....................................................................... 177,321 158,669
Property, Plant and Equipment -- Net............................................................. 237,741 199,676
$524,077 $431,611
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable (Note 7).............................................................................. $ 10,700 $ 5,099
Current maturities of long-term debt (Note 9)....................................................... 414 767
Accounts payable -- trade........................................................................... 38,430 26,746
Sundry accounts payable and accrued expenses (Note 8)............................................... 39,881 44,231
Deferred income taxes (Note 13)..................................................................... 28,148 27,295
Total Current Liabilities........................................................................ 117,573 104,138
Long-Term Debt (Note 9)............................................................................... 126,108 77,172
Deferred Items:
Deferred income taxes (Note 13)..................................................................... 36,789 36,652
Other deferred items................................................................................ 6,727 3,615
43,516 40,267
Stockholders' Equity:
Class A Preferred Stock -- $100 par value; authorized 1,500,000 shares; issued and outstanding
383,948 shares; 1993, 465,077 shares -- Employee Stock Ownership Plan (Notes 15 and 20).......... 38,395 46,508
Class A Preferred Stock held in escrow (1993, 81,125 shares) (Notes 15 and 20)...................... -- (8,113)
Class B Preferred Stock -- no par value; authorized 5,000,000 shares (Note 15)...................... -- --
Common Stock -- $.10 par value; authorized 42,700,000 shares; issued and outstanding 27,403,621
shares; 1993, 27,744,783 shares (Notes 15 and 16)................................................ 2,740 2,774
Capital in excess of par............................................................................ 71,354 75,397
Retained earnings................................................................................... 125,771 93,468
Currency translation adjustment..................................................................... (1,380) --
Total Stockholders' Equity....................................................................... 236,880 210,034
$524,077 $431,611
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 1, 1995, JANUARY 2, 1994 AND JANUARY 3, 1993
<TABLE>
<CAPTION>
CLASS A PREFERRED CLASS A PREFERRED
PARTICIPATING NONVOTING
STOCK STOCK -- ESCROW PREFERRED STOCK COMMON STOCK COMMON STOCK
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Balance, December 29,
1991..................... 601,874 $ 60,187 -- $ -- 635,000 $ 635 -- $-- 11,590,456 $1,159
Net Income................ -- -- -- -- -- -- -- -- -- --
Class A Preferred Stock --
Employee Stock Ownership
Plan:
Shares redeemed.......... (274,425) (27,442) -- -- -- -- -- -- -- --
Cash dividends paid...... -- -- -- -- -- -- -- -- -- --
Shares issued (9.70%
dividend on shares
outstanding)........... 56,100 5,610 -- -- -- -- -- -- -- --
Shares issued for partial
funding of 1991
contribution to
Employee Stock
Ownership Plan......... 403 40 -- -- -- -- -- -- -- --
Shares issued to Employee
Stock Ownership Plan
Trustee held in Cone
Mills escrow account... 75,330 7,533 (75,330) (7,533 ) -- -- -- -- -- --
Participating Preferred
Stock
Converted to Common
Stock:
Voting................. -- -- -- -- (511,867) (512 ) -- -- 5,118,669 512
Nonvoting.............. -- -- -- -- (123,133) (123 ) 1,231,327 123 -- --
Common Stock:
6,900,000 common shares
issued in public
offering............... -- -- -- -- -- -- -- -- 6,900,000 690
Options exercised........ -- -- -- -- -- -- -- -- 3,200,550 320
Purchase of common
shares................. -- -- -- -- -- -- -- -- (373,787) (37)
Balance, January 3,
1993..................... 459,282 $ 45,928 (75,330) $(7,533) -- $-- 1,231,327 $ 123 26,435,888 $2,644
Net income................ -- -- -- -- -- -- -- -- -- --
Class A Preferred Stock --
Employee Stock Ownership
Plan:
Cash dividends paid...... -- -- -- -- -- -- -- -- -- --
Shares issued (8.0%
dividend on shares held
in Cone Mills escrow
account)............... 5,795 580 (5,795) (580 ) -- -- -- -- -- --
Nonvoting Common Stock --
converted to Voting
Common Stock............. -- -- -- -- -- -- (1,231,327) (123 ) 1,231,327 123
Common Stock:
Options exercised........ -- -- -- -- -- -- -- -- 100,000 10
Purchase of common
shares................. -- -- -- -- -- -- -- -- (22,432) (3)
Balance, January 2,
1994..................... 465,077 $ 46,508 (81,125) $(8,113) -- $-- -- $-- 27,744,783 $2,774
Net income................ -- -- -- -- -- -- -- -- -- --
Currency translation loss
(net of income tax
benefit of $1,002)....... -- -- -- -- -- -- -- -- -- --
Class A Preferred Stock --
Employee Stock Ownership
Plan:
Cash dividends paid...... -- -- -- -- -- -- -- -- -- --
Shares issued (7.0%
dividend on shares held
in Cone Mills escrow
account)............... 5,679 567 (5,679) (567 ) -- -- -- -- -- --
Shares received from
Employee Stock
Ownership Plan
Trustee -- Cone Mills
escrow account......... (86,804) (8,680) 86,804 8,680 -- -- -- -- -- --
Shares redeemed.......... (4) -- -- -- -- -- -- -- -- --
Common Stock:
Options exercised........ -- -- -- -- -- -- -- -- 21,000 2
Purchase of common
shares................. -- -- -- -- -- -- -- -- (362,162) (36)
Balance, January 1,
1995..................... 383,948 $ 38,395 -- $ -- -- $-- -- $-- 27,403,621 $2,740
<CAPTION>
CAPITAL IN CURRENCY
EXCESS RETAINED TRANSLATION
OF PAR EARNINGS ADJUSTMENT
<S> <<C> <C> <C>
Balance, December 29,
1991..................... $ 10,731 $10,196 $ --
Net Income................ -- 43,390 --
Class A Preferred Stock --
Employee Stock Ownership
Plan:
Shares redeemed.......... -- (5 ) --
Cash dividends paid...... -- (1,009 ) --
Shares issued (9.70%
dividend on shares
outstanding)........... -- (5,610 ) --
Shares issued for partial
funding of 1991
contribution to
Employee Stock
Ownership Plan......... -- -- --
Shares issued to Employee
Stock Ownership Plan
Trustee held in Cone
Mills escrow account... -- -- --
Participating Preferred
Stock
Converted to Common
Stock:
Voting................. -- -- --
Nonvoting.............. -- -- --
Common Stock:
6,900,000 common shares
issued in public
offering............... 62,792 -- --
Options exercised........ 7,084 -- --
Purchase of common
shares................. (5,380) -- --
Balance, January 3,
1993..................... $ 75,227 $46,962 $ --
Net income................ -- 49,603 --
Class A Preferred Stock --
Employee Stock Ownership
Plan:
Cash dividends paid...... -- (3,097 ) --
Shares issued (8.0%
dividend on shares held
in Cone Mills escrow
account)............... -- -- --
Nonvoting Common Stock --
converted to Voting
Common Stock............. -- -- --
Common Stock:
Options exercised........ 525 -- --
Purchase of common
shares................. (355) -- --
Balance, January 2,
1994..................... $ 75,397 $93,468 $ --
Net income................ -- 34,963 --
Currency translation loss
(net of income tax
benefit of $1,002)....... -- -- (1,380)
Class A Preferred Stock --
Employee Stock Ownership
Plan:
Cash dividends paid...... -- (2,660 ) --
Shares issued (7.0%
dividend on shares held
in Cone Mills escrow
account)............... -- -- --
Shares received from
Employee Stock
Ownership Plan
Trustee -- Cone Mills
escrow account......... -- -- --
Shares redeemed.......... -- -- --
Common Stock:
Options exercised........ 113 -- --
Purchase of common
shares................. (4,156) -- --
Balance, January 1,
1995..................... $ 71,354 $125,771 $ (1,380)
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 1, 1995, JANUARY 2, 1994 AND JANUARY 3, 1993
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
Cash Flows from Operating Activities:
Net Income.................................................................................. $ 34,963 $ 49,603 $ 43,390
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation.............................................................................. 23,269 20,991 19,952
Employee Stock Ownership Plan expense..................................................... -- -- 1,250
Gain on sale and writedown of property, plant and equipment, net.......................... (2,519) (1,657) (1,670)
Amortization.............................................................................. 777 444 959
Equity in earnings -- unconsolidated affiliate............................................ (223) (317) --
Dividend received -- unconsolidated affiliate............................................. 541 -- --
Change in assets and liabilities, net of acquisition:
Decrease (increase) in trade receivables.................................................. (9,577) 13,182 42,050
Decrease (increase) in inventories........................................................ 5,317 (6,363) (5,013)
Decrease (increase) in other assets....................................................... (2,989) (2,045) 275
Increase (decrease) in accounts payable and accrued expenses.............................. 1,644 (19,299) 14,194
Increase (decrease) in income taxes payable............................................... -- (276) (1,948)
Increase (decrease) in deferred income taxes.............................................. 990 3,771 4,062
Increase (decrease) in other liabilities.................................................. 3,113 (835) (1,661)
Net cash provided by operating activities................................................. 55,306 57,199 115,840
Cash Flows from Investing Activities:
Investments in unconsolidated affiliates.................................................... (9,572) (26,103) --
Acquisition, net of cash acquired*.......................................................... (57,647) -- --
Proceeds from sale of property, plant and equipment......................................... 2,903 4,869 6,423
Capital expenditures........................................................................ (37,494) (38,712) (25,398)
Net cash used in investing activities..................................................... (101,810) (59,946) (18,975)
Cash Flows from Financing Activities:
Net borrowings (payments) -- short-term loans............................................... 5,601 (1,554) 353
Principal payments -- long-term debt........................................................ (47,606) (77,307) (316,655)
Proceeds from long-term debt borrowings..................................................... 94,578 77,746 189,246
Purchase of outstanding capital stock -- Class A Preferred.................................. -- -- (27,442)
Purchase of outstanding capital stock -- Common............................................. (2,869) (358) (5,417)
Proceeds from issuance of capital stock -- Common........................................... 115 535 70,886
Dividends paid -- Class A Preferred......................................................... (2,660) (3,097) (1,009)
Net cash provided by (used in) financing activities....................................... 47,159 (4,035) (90,038)
Net increase (decrease) in cash........................................................... 655 (6,782) 6,827
Cash at Beginning of Period................................................................... 503 7,285 458
Cash at End of Period......................................................................... $ 1,158 $ 503 $ 7,285
* Acquisition, net of cash acquired:
Working capital, other than cash............................................................. $ (1,377)
Property, plant and equipment................................................................ (23,795)
Cost in excess of net assets................................................................. (19,686)
Other assets................................................................................. (14,400)
Long-term debt assumed....................................................................... 1,611
Net cash used to acquire business......................................................... $ (57,647)
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest, net of interest capitalized....................................................... $ 7,703 $ 7,125 $ 11,100
Income taxes, net of refunds................................................................ $ 17,938 $ 23,926 $ 25,011
Supplemental Schedule of Noncash Investing and Financing Activities:
Stock dividend paid -- Class A Preferred Stock.............................................. $ -- $ -- $ 5,610
Contribution to ESOP -- Class A Preferred Stock............................................. -- -- 40
Class A Preferred Stock issued.............................................................. $ -- $ -- $ 5,650
Class A Preferred Stock issued to ESOP trustee -- Cone Mills escrow account................. $ -- $ -- $ 7,533
Stock dividend paid to ESOP trustee for Cone Mills escrow account........................... 567 580 --
Class A Preferred Stock issued.............................................................. $ 567 $ 580 $ 7,533
Class A Preferred Stock received from ESOP trustee and closure of escrow account............ $ 8,680 $ -- $ --
Purchase of outstanding capital stock -- Common through incurrence of accounts payable...... $ 1,323 $ -- $ --
Nonvoting Common Stock issued............................................................... $ -- $ -- $ 123
Common Stock issued......................................................................... -- 123 512
Participating Preferred Stock converted to common stocks.................................... $ 635
Nonvoting Common Stock converted to Voting Common Stock..................................... $ -- $ 123
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts have been
eliminated.
FISCAL YEAR
The Company's fiscal year ends on the Sunday nearest December 31. The years
ended January 1, 1995, and January 2, 1994, contained 52 weeks. The year ended
January 3, 1993, contained 53 weeks.
INVENTORIES
Substantially all components of textile inventories are valued at the lower
of cost or market using the last-in, first-out (LIFO) method. Nontextile
inventories are valued at the lower of average cost or market. If current
replacement cost had been used for valuing financial statement inventories, that
portion of the inventories based on the LIFO method would have been
approximately $30,000,000 higher at January 1, 1995, and $20,000,000 higher at
January 2, 1994. LIFO inventories valued for financial statement purposes exceed
their income tax basis by approximately $83,000,000 at January 1, 1995, and
$86,000,000 at January 2, 1994.
INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Investments in unconsolidated affiliated companies are accounted for by the
equity method. The Company's equity in earnings and currency translation
adjustments are recorded on a one quarter delay basis.
OTHER ASSETS
Other assets consist primarily of the excess of cost over net assets
acquired and trade names, which are carried at cost less accumulated
amortization. Costs are amortized using the straight-line method over the
estimated useful lives of the related assets, not exceeding twenty years.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost. Depreciation is computed
by the straight-line method for financial reporting purposes.
CAPITAL STOCK REDEEMED
Redemption of capital stock is accounted for by the par value method.
Excess of redemption price over par value for Class A Preferred Stock is charged
to retained earnings. Excess of purchase price over par value for common stock
is charged to capital in excess of par applicable to common shares and to
retained earnings thereafter.
DEFERRED INCOME TAXES
Deferred income taxes are provided on the difference between the financial
reporting and the income tax basis of assets and liabilities, principally
inventories, and property, plant and equipment. Balance sheet classification of
these deferred income taxes is based upon the classification of the related
assets or liabilities that created the temporary differences and does not
necessarily reflect the expected timing of the reversals.
NOTE 2. SALE OF ACCOUNTS RECEIVABLES
On August 11, 1992, the Company entered into an agreement with the
subsidiary of a major financial institution, which allows the sale without
recourse of up to $40 million of an undivided interest in eligible trade
receivables. This agreement was amended on June 30, 1994, which made the
agreement extendable to August 1997 and allowed the sale of up to $50 million in
eligible trade receivables. The Company acts as an agent for the purchaser by
performing record keeping and collections function of receivables sold. The cost
of receivables sold by the Company is the commercial paper rate plus 55 basis
points calculated for the period of time from the sale of a receivable until its
payment date. The resulting cost on the
F-6
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 2. SALE OF ACCOUNTS RECEIVABLES -- Continued
sale of receivables is included in cost of sales. Accounts receivable is shown
net of $50 million sold at January 1, 1995 and net of $35 million sold at
January 2, 1994 under this agreement. Cash flows provided by operating
activities for the years 1994, 1993 and 1992 include the sale of accounts
receivable of $15 million, $11 million and $24 million, respectively.
NOTE 3. INVENTORY LIQUIDATIONS
During 1994, 1993 and 1992, certain inventory quantities were reduced,
resulting in a liquidation of LIFO inventory layers carried at lower costs
prevailing in prior years. The effect of these liquidations increased net
earnings by $218,000 in 1994, $303,000 in 1993 and by $1,076,000 in 1992.
NOTE 4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
On June 25, 1993, the Company purchased a 20% ownership in Compania
Industrial de Parras S.A., ("CIPSA"), the largest denim manufacturer in Mexico.
Cost of the initial investment was approximately $24 million. During the fourth
quarter of 1994, CIPSA elected to increase capital through the sale of
additional shares of capital stock, and the Company retained its 20% ownership
level by an additional investment of $6.7 million. The Company accounts for this
investment by the equity method.
The summarized unaudited financial information of CIPSA (100% basis), as
adjusted for purchase accounting, is set forth below:
Financial Information:
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED SEPT. 30,
SEPT. 30, 1994 1993
<S> <C> <C>
(AMOUNTS IN THOUSANDS)
Income statement data
Net sales.................................................................................... $ 90,648 $ 23,128
Gross profit................................................................................. 17,025 5,669
Net income................................................................................... 1,114 1,584
Company's equity in net income............................................................... 223 317
</TABLE>
<TABLE>
<CAPTION>
SEPT. 30,
SEPT. 30, 1994 1993
<S> <C> <C>
(AMOUNTS IN THOUSANDS)
Balance sheet data
Current assets............................................................................... $ 70,310 $ 70,311
Noncurrent assets............................................................................ 178,573 87,657
Current liabilities.......................................................................... 109,409 13,282
Noncurrent liabilities....................................................................... 30,242 24,121
Net assets................................................................................... 109,232 120,565
Company's equity in net assets............................................................... 21,847 24,113
</TABLE>
On January 1, 1995, the carrying value of this investment exceeded by
approximately $9.2 million the Company's share in CIPSA's net assets calculated
using U.S. generally accepted accounting principles before application of
purchase accounting. Approximately $2.4 million of the excess relates to
differences between historical costs and fair market values of CIPSA's property,
plant and equipment. The remainder is the excess of cost over net assets
acquired, net of accumulated amortization, of approximately $6.8 million which
is being amortized over a life of 25 years by the straight-line method.
The Company has also signed agreements dated June 25, 1993, with CIPSA
providing for the formation of a joint venture company to build and operate a
world-class denim manufacturing facility in Parras, Mexico. The partners plan to
invest a total of approximately $50 million, with each partner providing 50% of
this investment. The joint venture has signed a credit agreement with a Mexican
bank for approximately $63 million of debt financing. This debt is not
guaranteed by Cone Mills Corporation or CIPSA. Expenditures on the joint venture
began in the third quarter of 1993 and as of January 1, 1995 the Company had
invested $5.0 million.
F-7
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES -- Continued
In December 1994, the Mexican government devalued the peso and allowed it
to freely trade against the U.S. dollar resulting in a substantial decline in
value of the peso versus the U.S. dollar. On January 1, 1995, the peso was
trading at 4.94 pesos per U.S. dollar versus an exchange rate of approximately
3.45 prior to the devaluation. If an exchange rate of 4.94 had been used in the
Company's financial statements, the currency translation adjustment would have
been a $7.8 million (net of income tax benefit) reduction of stockholders'
equity at the end of 1994.
NOTE 5. ACQUISITION
On December 2, 1994, the Company completed the closing of the acquisition
of substantially all of the assets of M.P.M. Transportation, Inc., successor by
merger with Golding Industries, Inc. Golding was merged into M.P.M.
Transportation, Inc. as of the day immediately preceding the closing. Golding
conducted a commission printing operation in Marion, South Carolina that was
also known as the Raytex Division ("Raytex"). Raytex prints primarily wide
fabrics used in home furnishings, including comforters and bedspreads. The
assets purchased consist primarily of a printing plant and related real
property, equipment, inventories and receivables.
The acquisition was accounted for using the purchase method. The purchase
price was approximately $63.6 million, consisting of cash in the amount of $57.6
million and assumption of net liabilities of $6.0 million. The excess of the
purchase price over the fair value of net assets acquired was $19.7 million. The
fair value of net assets acquired included other intangible assets of $14.4
million.
Raytex's results of operations have been included in the 1994 consolidated
financial statements from date of acquisition. The unaudited proforma results of
operations for the fiscal years 1994 and 1993, assuming the acquisition occurred
as of the beginning of the respective periods, follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
(AMOUNTS IN
THOUSANDS, EXCEPT
SHARE DATA)
Net sales............................................................................................. $845,915 $818,495
Income before cumulative effect of accounting change.................................................. 37,902 50,126
Net income............................................................................................ 36,674 50,126
Earnings per common share -- fully diluted:
Income before cumulative effect of accounting change................................................ $ 1.27 $ 1.70
Net income.......................................................................................... 1.22 1.70
</TABLE>
NOTE 6. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
(AMOUNTS IN
THOUSANDS)
Excess of cost over net assets acquired............................................................... $ 19,863 $ 177
Trade names........................................................................................... 14,317 17
Other intangible assets............................................................................... 6,838 3,875
$ 41,018 $ 4,069
Less accumulated amortization......................................................................... (2,567) (1,788)
Net intangible assets............................................................................... $ 38,451 $ 2,281
Other assets.......................................................................................... 352 890
Total other assets.................................................................................. $ 38,803 $ 3,171
</TABLE>
F-8
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 7. NOTES PAYABLE
The Company's real estate subsidiary had unsecured notes payable
outstanding of $8,700,000 and $5,099,000 for 1994 and 1993, respectively. These
funds are borrowed pursuant to a $15,000,000 bank credit agreement with interest
rates, at the borrower's option, of LIBOR plus 2% or the prime rate. The
availability of funds under this credit agreement is based upon capital invested
in real estate inventory. At January 1, 1995, the Company also had outstanding
unsecured notes payable of $2,000,000 at an interest rate of 6.65%.
NOTE 8. SUNDRY ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Sundry accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
(AMOUNTS IN
THOUSANDS)
Accrued salaries, wages and commissions................................................................. $14,414 $15,062
Checks issued in excess of deposits..................................................................... 10,811 12,185
Other................................................................................................... 14,656 16,984
$39,881 $44,231
</TABLE>
NOTE 9. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JANUARY 1, 1995
CURRENT
TOTAL MATURITY LONG-TERM
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
8% Senior Note............................................................................. $ 75,000 $ -- $ 75,000
Revolving Credit Agreement................................................................. 49,000 -- 49,000
Capital Lease Obligation................................................................... 1,610 155 1,455
Industrial Revenue Bonds................................................................... 757 224 533
Other...................................................................................... 155 35 120
$126,522 $414 $126,108
</TABLE>
<TABLE>
<CAPTION>
JANUARY 2, 1994
CURRENT
TOTAL MATURITY LONG-TERM
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
8% Senior Note............................................................................. $ 75,000 $ -- $ 75,000
Revolving Credit Agreement................................................................. -- -- --
Industrial Revenue Bonds................................................................... 1,231 474 757
Other...................................................................................... 1,708 293 1,415
$ 77,939 $767 $ 77,172
</TABLE>
Financing arrangements effective August 13, 1992 include a ten year $75
million 8% Senior Promissory Note and a three year $60 million Revolving Credit
Agreement. On November 18, 1994, the Revolving Credit Agreement was amended to
$80 million and extended to August 13, 1997. Annual principal payments of $10.7
million are required by the Senior Note, beginning August 1996, with the
remaining principal amount due August 2002. Borrowings under the Revolving
Credit Agreement are at floating rates, determined by either the prime rate, CD
Rate, or LIBOR, at the Company's option, plus a margin determined by the
Company's capital structure or through a competitive bid. On January 1, 1995,
the Company had borrowings under the Revolving Credit Agreement at interest
rates ranging from 6.19% to 6.63%.
F-9
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 9. LONG-TERM DEBT -- Continued
The financing agreements contain certain covenants regarding the operations
and financial condition of the Company. The Company was in compliance with all
loan covenants on January 1, 1995. The total amount of unused capacity under the
Revolving Credit Agreement at January 1, 1995, was $31 million.
In December of 1994, the Company assumed a capital lease obligation of $1.6
million in connection with the acquisition of substantially all of the assets of
Golding Industries, Inc. Golding entered into this lease in June of 1994 with a
lease term of five years and an effective interest rate of 10.27%. Equipment
with a net book value of $3.6 million secures the lease and is included in
property, plant and equipment. Aggregate future minimum lease payments of $2.0
million consist of the present value of mininum payments of $1.6 million and
interest expense of $.4 million. Future minimum capital lease payments are:
1995, $237,000; 1996, $472,000; 1997, $472,000; 1998, $472,000; and 1999,
$355,000.
The Company's industrial revenue bond obligations are at interest rates
ranging from 70% to 84% of prime rate and have maturities through 1999.
The Company also has a long-term obligation of $155,000 at 7% per annum
with maturities through 1998.
Annual maturities of long-term debt, excluding the capital lease
obligation, for each of the next five fiscal years are:
<TABLE>
<S> <C>
1995................................................................................... $ 259,000
1996................................................................................... 10,901,000
1997................................................................................... 59,878,000
1998................................................................................... 10,881,000
1999................................................................................... 10,850,000
</TABLE>
NOTE 10. RETIREMENT PLANS
The Company maintains noncontributory defined benefit pension plans
covering substantially all employees. The plan covering salaried employees
provides pension benefits based on years of service and average compensation for
the highest five consecutive years during the last ten years of service. Plans
covering hourly employees and long distance drivers provide benefits based on
compensation for each year of service. Pension expense related to these plans
was $4,100,000 in 1994, $2,445,000 in 1993 and $1,807,000 in 1992. The Company's
funding policy is to make annual contributions of amounts that are deductible
for income tax purposes. Assets of the pension plans are primarily invested in
fixed income securities consisting of bond funds and short-term money market or
cash equivalent funds.
Net periodic pension costs for 1994, 1993, and 1992 included the following
components:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
Service cost, benefits earned during period...................................................... $2,144 $1,284 $1,194
Interest cost on projected benefit obligation.................................................... 1,752 1,180 686
Actual loss (return) on assets................................................................... 93 (571) (262)
Net amortization and deferral.................................................................... 111 552 189
$4,100 $2,445 $1,807
</TABLE>
Assumptions used in determining the periodic pension cost of the pension
plans are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Discount rate.................................................................................... 7.5% 8.5% 8.5%
Average rate of increase in compensation levels.................................................. 4.0 4.0 4.5
Expected long-term rate of return on assets...................................................... 8.5 9.0 8.0
</TABLE>
F-10
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 10. RETIREMENT PLANS -- Continued
The following table sets forth the pension plans' funded status and amounts
recognized in the Company's consolidated balance sheets at January 1, 1995 and
January 2, 1994:
<TABLE>
<CAPTION>
1994 1993
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
<S> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
Actuarial present value of accumulated benefit obligation -- vested
portion............................................................ $ 9,449 $ 4,511 $ 5,415 $ 2,472
Actuarial present value of accumulated benefit obligation --
nonvested portion.................................................. 1,261 174 649 20
Accumulated benefit obligation -- total.............................. 10,710 4,685 6,064 2,492
Additional amounts related to projected compensation levels.......... 12,202 1,068 8,377 133
Total actuarial projected benefit obligation for service
rendered to date........................................... 22,912 5,753 14,441 2,625
Less: Plan assets at fair value...................................... 11,624 1,749 8,168 159
Projected benefit obligation in excess of plan assets................ (11,288) (4,004) (6,273) (2,466)
Unrecognized net actuarial loss, difference in assumptions and actual
experience......................................................... 15,067 1,111 7,879 176
Unrecognized prior service cost (income)............................. (1,164) 651 (543) (28)
Initial unrecognized net liability at date of adoption, being
recognized over 14-16 years........................................ 364 752 512 756
Adjustment to recognize minimum liability through recording an
intangible asset................................................... -- (1,446) -- (734)
Pension related assets (liabilities) included in the consolidated
balance sheets..................................................... $ 2,979 $(2,936) $ 1,575 $(2,296)
</TABLE>
Assumptions used in determining the funded status of the pension plans
(shown above) are as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Discount rate................................................................................................... 8.0% 7.5%
Average rate of increase in compensation levels................................................................. 5.0 4.0
</TABLE>
Listed below are the Company's five defined contribution plans which cover
substantially all employees.
1. The 1983 Employee Stock Ownership Plan ("ESOP")
2. The Supplemental Retirement Plan ("SRP")
3. The Supplemental Retirement Plan -- Hourly ("SRP Hourly")
4. The Employee Equity Plan ("EEP")
5. The Employee Equity Plan -- Hourly ("EEP Hourly")
The Company discontinued contributions to the ESOP after 1992. The ESOP is
subject to a floor offset arrangement in conjunction with the Company's defined
benefit plans with respect to pension benefits earned for service after 1983.
Under the floor offset arrangement, retirement benefits earned after 1983 under
the Company's three defined benefit pension plans are offset by the actuarial
equivalent pension value of a portion of participants' ESOP accounts.
The 401(k) Program consists of the EEP, EEP Hourly, SRP and the SRP Hourly
plans. Participants of the Program may contribute from 2% to 15% of their annual
compensation to their respective SRP or to their respective EEP, or their
contributions may be divided between the two plans. The Company makes matching
cash contributions of 25% to both SRP plans,
F-11
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 10. RETIREMENT PLANS -- Continued
and 50% to both EEP plans. The Company does not match employee contributions in
excess of 6% of the employee's annual compensation.
Expenses for the defined contribution plans are shown below:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
ESOP............................................................................................... $ -- $ -- $1,250
EEP (combined)..................................................................................... 1,090 544 1,174
SRP (combined)..................................................................................... 630 631 1,149
</TABLE>
The 1992 EEP and SRP expenses include a special discretionary contribution
made by the Company.
NOTE 11. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides postretirement health care benefits to certain retired
employees between the ages of 55 and 65. These employees become eligible for
postretirement health care benefits if they retire after age 55 and have
completed 15 years of service. The plan is contributory, with retiree
contributions and plan design adjusted annually to reflect changes in health
care costs. The Company funds a portion of the actual health care costs.
The Company adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," ("FAS 106"), as of the beginning of the 1993
fiscal year. FAS 106 requires accrual of the cost of providing postretirement
benefits during the employees' active service periods. The Company's accumulated
postretirement benefit obligation ("APBO") at the time of adoption was
$4,598,000 and is being amortized to expense over a 20-year transition period.
Prior to 1993, the Company recognized retiree health care expense when the
benefits were paid. The effect of the change in accounting policy was to reduce
net income for 1993 by $405,000.
The periodic expense for postretirement benefits included the following
components:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
(AMOUNTS IN
THOUSANDS)
Service cost for benefits earned during the year........................................................... $ 113 $ 188
Interest cost on accumulated benefit obligation............................................................ 197 379
Amortization of the unrecognized net gain.................................................................. (130) --
Amortization of transition obligation...................................................................... 230 230
Total expense....................................................................................... $ 410 $ 797
</TABLE>
Postretirement benefit cost recognized in 1992 under the Company's prior
accounting policy was $277,000.
The actuarial and recorded liabilities for postretirement benefits, none of
which have been funded, are as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
(AMOUNTS IN
THOUSANDS)
Accumulated postretirement benefit obligation:
Retirees................................................................................................. $ 571 $ 743
Fully eligible active plan participants.................................................................. 703 967
Other active plan participants........................................................................... 1,466 2,242
Total................................................................................................. $2,740 $3,952
Plus unrecognized gain..................................................................................... 2,149 1,080
Less unrecognized transition obligation.................................................................... 4,138 4,368
Accrued postretirement benefit cost................................................................... $ 751 $ 664
</TABLE>
F-12
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 11. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- Continued
For measurement purposes, a 13% annual rate of increase in per capita
health care costs of covered benefits was assumed for 1995, with such rate of
increase gradually declining to 5.5% in 2003. Increasing the assumed health care
cost trend rate by 1 percentage point would increase the accumulated
postretirement benefit obligation at January 1, 1995 by $297,000 and increase
net periodic postretirement benefit expense by approximately $42,000 in 1994.
The accumulated postretirement benefit obligation was computed using an assumed
discount rate of 8% for 1994 and 7% for 1993.
NOTE 12. POSTEMPLOYMENT BENEFITS
The Company provides health care benefits (in excess of Medicare) and life
insurance benefits for certain disabled employees and health care continuation
coverage for former employees as mandated by law. Presently, the Company pays a
portion of the actual costs of these benefits.
The Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits", as of the beginning of the 1994 fiscal year. This statement requires
an accrual method of recognizing postemployment benefits rather than recording
an expense when paid. The cumulative effect of this accounting change, included
in first quarter 1994 earnings, resulted in a one-time charge to income of
$2,000,000 and a reduction in net income of $1,228,000. Additional annual
expenses resulting from the implementation of this accounting statement were
insignificant.
NOTE 13. INCOME TAXES
The following tables present the provision for income taxes, the components
of income tax expense from continuing operations, a reconciliation of the
statutory U.S. income tax rate to the effective income tax rate, and the
components and items comprising net deferred income tax liability.
PROVISION (CREDIT) FOR INCOME TAXES (IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Continuing operations........................................................................ $19,764 $29,884 $24,782
Discontinued operations...................................................................... 276 -- --
Extraordinary item........................................................................... -- -- (1,212)
Cumulative effect of accounting change....................................................... (772) -- --
Stockholders' equity, currency translation adjustment........................................ (1,002) -- --
Total provision......................................................................... $18,266 $29,884 $23,570
</TABLE>
COMPONENTS OF INCOME TAX EXPENSE FROM CONTINUING OPERATIONS (IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal..................... $15,928 $1,145 $17,073 $22,303 $3,470 $25,773 $17,447 $3,511 $20,958
State and local............. 2,350 341 2,691 3,810 301 4,111 3,273 551 3,824
Total provision........ $18,278 $1,486 $19,764 $26,113 $3,771 $29,884 $20,720 $4,062 $24,782
</TABLE>
RECONCILIATION TO EFFECTIVE TAX RATE FROM CONTINUING OPERATIONS
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Statutory U. S. tax rate................................................................................ 35.0% 35.0% 34.0%
State income taxes, net of federal benefit.............................................................. 3.2 3.4 3.6
Tax benefit from foreign sales corporation.............................................................. (2.3) (1.9) (1.4)
Impact on deferred taxes from federal tax rate increase................................................. -- 2.1 --
Other................................................................................................... (0.3) (1.0) (0.9)
Total effective tax rate........................................................................... 35.6% 37.6% 35.3%
</TABLE>
F-13
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 13. INCOME TAXES -- Continued
COMPONENTS OF NET DEFERRED INCOME TAX LIABILITY (IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Deferred income tax liabilities.............................................................. $75,391 $75,160 $73,731
Deferred income tax assets................................................................... (10,454) (11,213) (13,555)
Net deferred income tax liability............................................................ $64,937 $63,947 $60,176
</TABLE>
No valuation allowance has been provided due to scheduled reversals of
deferred tax liabilities sufficient to offset scheduled reversals of deferred
tax assets.
ITEMS COMPRISING NET DEFERRED INCOME TAX LIABILITY (IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Property, plant & equipment -- principally depreciation...................................... $38,804 $37,538 $37,239
Inventories.................................................................................. 32,313 32,853 31,557
Other -- net................................................................................. (6,180) (6,444) (8,620)
Net deferred income tax liability............................................................ $64,937 $63,947 $60,176
</TABLE>
NOTE 14. COMMON STOCK OFFERING AND CONVERSION OF PARTICIPATING PREFERRED STOCK
On June 25, 1992, the Company received net proceeds of $55.2 million upon
consummation of an underwritten public offering for 6,000,000 shares of Common
Stock. Pursuant to exercise by the underwriters of a 900,000 share
over-allotment option, the Company received additional net proceeds of $8.3
million on July 22, 1992.
On June 18, 1992, the effective date of the Company's registration
statement for its public offering, and in accordance with agreements executed by
the Company and each of the holders of its Participating Preferred Stock, all
outstanding shares of Participating Preferred Stock were converted into an
aggregate of 5,118,669 shares of Common Stock and 1,231,327 shares of Nonvoting
Common Stock.
NOTE 15. CAPITAL STOCK
All Class A Preferred Stock is held by the Cone Mills Corporation 1983 ESOP
except shares which were held in escrow and shares held by former participants
who elected to receive shares in a distribution of account balances. Class A
Preferred Stock is nonvoting, except as otherwise required by law, and is senior
in dividend preference to all other classes of capital stock. Class A Preferred
Stock has a liquidation preference senior to all other classes of capital stock
of $100 per share plus accrued and unpaid dividends.
Holders of Class A Preferred Stock are entitled to receive dividends on the
31st day of March of each year from funds legally available therefor when, as
and if declared by the Board of Directors. The dividend rate is established on
March 31 for the succeeding dividend period, and is determined by an independent
investment bank or appraisal firm selected by the Board of Directors, subject to
confirmation by the ESOP trustee. The dividend rate is determined annually, and
is that rate required to make the fair market value of Class A Preferred Stock
equal to its original par value. The dividend rate cannot exceed 13% per annum
or be less than 7% per annum. Dividends on Class A Preferred Stock are
cumulative, but accumulated dividends do not bear interest. Dividend rates for
Class A Preferred Stock were 7.0% for 1995, 7.0% for 1994 and 8.0% for 1993.
Dividends on the Class A Preferred Stock are, at the option of the Board of
Directors, paid in cash or by delivery of shares of the Company's Class A
Preferred Stock, Common Stock or by delivery of other "qualifying employer
securities" of the Company as that term is used, on the date of such delivery,
in Section 407 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (or the corresponding section of any future law) or by a
combination of the foregoing; provided, however, that on the date of delivery
the fair market value of any stock or qualifying employer securities used to pay
dividends shall be equal to or greater than the amount of dividends paid
therewith. All dividends paid to date on the Class A Preferred Stock have been
paid in additional shares of Class A Preferred Stock or cash.
F-14
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 15. CAPITAL STOCK -- Continued
Class A Preferred Stock held by the 1983 ESOP may be redeemed, in whole or
in part, at the option of the Company by a vote of the Board of Directors, at a
price equal to the greater of $100 per share or the fair market value thereof,
plus dividends accrued and unpaid thereon to the date fixed for redemption. The
redemption price shall be paid in cash or by delivery of shares of the Company's
Class A Preferred Stock, Common Stock or by delivery of other qualifying
employer securities or a combination of the foregoing, at the Company's option;
provided, however, that on the date of delivery the fair market value of any
stock or other qualifying employer securities used to pay the redemption price
shall be equal to or greater than the redemption price (or portion thereof) paid
therewith. The fair market value of Class A Preferred Stock was determined to be
$99.78 per share at January 1, 1995.
Purchases of Class A Preferred Stock by the ESOP may be necessary to
provide all or part of the pension due under the Company's defined benefit plans
pursuant to the floor offset arrangement in connection with the ESOP and to make
distributions due to retired or terminated employees. The ESOP is obligated to
purchase shares of Class A Preferred Stock from participants and former
participants of these plans in accordance with the terms and conditions of the
plans, the trust agreements and liquidity agreements thereunder. To the extent
the ESOP has insufficient liquidity to make these purchases, it may require the
Company to repurchase shares of Class A Preferred Stock. It is within the
control of the Company to satisfy the liquidity needs of the ESOP through cash
contributions, cash dividends or optional repurchases of the Class A Preferred
Stock.
All outstanding shares of Nonvoting Common Stock were converted to Common
Stock during February, 1993. These shares, owned exclusively by unaffiliated
shareholders, were converted at the rate of one share of Common Stock for each
share of Nonvoting Common Stock. On May 11, 1993, the shareholders approved an
amendment to the Company's Restated Articles of Incorporation which removed
Nonvoting Common Stock as authorized capital stock. At the same time,
Participating Preferred Stock was removed as authorized capital stock.
The Company is authorized to issue Class B Preferred Stock but it has no
Class B Preferred Stock outstanding nor does it have present plans to issue such
shares. The Restated Articles of Incorporation provide that the Board of
Directors may determine the preferences, limitations and relative rights of the
Class B Preferred Stock, including voting rights, which could adversely affect
the voting rights of holders of Common Stock. Any Class B Preferred Stock which
is authorized and issued shall be junior to Class A Preferred Stock in
accordance with the terms of the Restated Articles of Incorporation.
Holders of Common Stock are entitled ratably, share for share, to
dividends, when, as and if declared by the Board of Directors, out of funds
legally available therefor. Common Stock is junior to Class A Preferred Stock
with respect to dividend preference and may be junior to Class B Preferred Stock
depending upon the relative preferences, limitations and relative rights the
Board of Directors may determine upon issuance of such Class B Preferred Stock.
The Common Stock is junior in liquidation preference to the Class A
Preferred Stock and may be junior to the Class B Preferred Stock depending upon
the relative preferences, limitations and rights the Board of Directors may
establish upon issuance of Class B Preferred Stock. After payment in liquidation
has been made to the senior capital stock, the remaining assets of the Company
would be distributed pro rata among the holders of Common Stock equally on a per
share basis. Holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of holders of Common Stock.
NOTE 16. STOCK OPTION PLAN
The Company's 1984 Stock Option Plan provides for the granting of options
to purchase 5,000,000 shares of Common Stock; such options may be incentive
stock options or nonqualified stock options. All of the options granted have
been nonqualified stock options with a term of ten years, and such grants
included income tax reimbursement in accordance with the terms of the plan.
Options are exercisable on a cumulative basis, at a rate of 20% per year
beginning in the year of grant. No additional grants will be made under the 1984
Plan.
The Company has in effect the 1992 Stock Option Plan that permits the
granting of options to purchase up to 2,000,000 shares of Common Stock. This
plan is substantially identical to the 1984 Stock Option Plan. On February 18,
1993, incentive stock option grants to purchase 500,000 shares of Common Stock
at $15.625 per share were made. On November 9, 1994, nonqualified stock option
grants to purchase 410,000 shares of common stock at $12.00 per share were made.
The 1993 and
F-15
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 16. STOCK OPTION PLAN -- Continued
1994 option grants have a term of ten years and are exercisable, on a cumulative
basis, at a rate of 20% in each twelve month period, beginning six months after
the date of grant; however, the 1994 options provide that no more than fifty
percent (50%) of the shares granted can be exercised in any one calendar year.
The 1994 nonqualified option grants have the income tax benefit reimbursement
feature.
On May 10, 1994, the shareholders approved the Company's 1994 Stock Option
Plan for non-employee directors which allows the grant of options to purchase an
aggregate of 100,000 shares of common stock. A grant of one thousand (1,000)
shares is issued on the fifth business day after each annual meeting to each of
the non-employee directors. The option price is the last reported sale price on
the New York Stock Exchange composite tape on the date of grant. Options granted
under the Plan are nonqualified stock option grants with a term of seven years.
Grants of 6,000 shares were made on May 17, 1994, at $12.875 per share.
A summary of activity under the plans follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
1984 Stock Option Plan:
Option price per share............................................ $ 5.25 $ 6.50
Outstanding at 1/3/93............................................. 190,200 111,800
Canceled.......................................................... (3,000) --
Exercised......................................................... (92,000) (8,000)
Outstanding at 1/2/94............................................. 95,200 103,800
Exercised......................................................... (17,000) (4,000)
Outstanding at 1/1/95............................................. 78,200 99,800
1992 Stock Option Plan:
Option price per share............................................ $ 15.625 $ 12.00
Granted 2/18/93................................................... 500,000
Outstanding 1/2/94................................................ 500,000
Granted 11/9/94................................................... 410,000
Canceled.......................................................... (8,000) --
Outstanding at 1/1/95............................................. 492,000 410,000
1994 Stock Option Plan:
Option price per share............................................ $12.875
Granted 5/17/94................................................... 6,000
Outstanding at 1/1/95............................................. 6,000
Options exercisable at 1/1/95..................................... 78,200 45,900 196,800 -- 6,000
</TABLE>
NOTE 17. LEASES, COMMITMENTS AND REPAIRS AND MAINTENANCE
The Company has various leases accounted for as operating leases. Rent
expense was $ 5,132,000, $5,053,000 and $4,465,000 for 1994, 1993, and 1992,
respectively. Future minimum rental payments required under lease agreements are
$4,289,000 for 1995, $3,755,000 for 1996, $2,268,000 for 1997, $1,911,000 for
1998, $1,550,000 for 1999 and thereafter $1,431,000. Aggregate future minimum
rental payments total $15,204,000. Commitments for improvements of and additions
to property, plant and equipment were approximately $3,100,000 at January 1,
1995. Operating costs and expenses include repairs and maintenance costs of
$34,622,000, $34,680,000 and $32,239,000 for 1994, 1993 and 1992, respectively.
F-16
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 18. EARNINGS PER SHARE
<TABLE>
<CAPTION>
1994 1993 1992
FULLY FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED
<S> <C> <C> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Income from continuing operations........................... $35,752 $35,752 $49,603 $49,603 $45,399 $45,399
Less: Class A Preferred dividends........................... (2,688) (2,688) (2,795) (2,795) (4,560) (4,560)
Adjusted income from continuing operations.................. 33,064 33,064 46,808 46,808 40,839 40,839
Gain on disposal -- discontinued operations................. 439 439 -- -- -- --
Adjusted income before extraordinary item and cumulative
effect of accounting change............................... 33,503 33,503 46,808 46,808 40,839 40,839
Extraordinary Item.......................................... -- -- -- -- (2,009) (2,009)
Cumulative effect of accounting change...................... (1,228) (1,228) -- -- -- --
Adjusted net income......................................... $32,275 $32,275 $46,808 $46,808 $38,830 $38,830
Weighted average common shares outstanding.................. 27,728 27,728 27,694 27,694 19,421 19,421
Common share equivalents from assumed exercise of
outstanding options, less shares assumed
repurchased............................................... 106 106 192 200 4,864 5,049
Weighted average common shares and common share equivalents
outstanding............................................... 27,834 27,834 27,886 27,894 24,285 24,470
Earnings per common share and common share equivalent:
Income from continuing operations......................... $ 1.19 $ 1.19 $ 1.68 $ 1.68 $ 1.68 $ 1.67
Income before extraordinary item and cumulative effect of
accounting change...................................... $ 1.20 $ 1.20 $ 1.68 $ 1.68 $ 1.68 $ 1.67
Extraordinary item........................................ -- -- -- -- (.08) (.08)
Cumulative effect of accounting change.................... (.04) (.04) -- -- -- --
Net income................................................ $ 1.16 $ 1.16 $ 1.68 $ 1.68 $ 1.60 $ 1.59
</TABLE>
Primary and fully diluted earnings per share have been computed by dividing
the net earnings available to common stockholders by the sum of the weighted
average common shares and common share equivalents outstanding.
Common shares issued June 18, 1992 have been included from date of issue.
NOTE 19. SEGMENT INFORMATION AND MAJOR CUSTOMERS
The Company operates in two major segments within the textile industry:
Apparel Fabrics and Home Furnishings. The Company designs, manufactures and
markets Apparel Fabrics including denim in various styles, finishes and weights,
yarn-dyed and chamois flannel shirting fabrics, printed fabrics and synthetic
sportswear fabrics. The Home Furnishings segment consists of the design and
distribution of decorative fabrics for the home furnishings industry, and
decorative fabrics commission dyeing, printing and finishing services. This
segment also includes polyurethane foam products, batting, cushions, carpet
padding, and the distribution of furniture hardware. For reporting purposes,
real estate operations are included in the Home Furnishings segment.
The Company has no foreign operations. Sales to unaffiliated foreign
customers, principally in Europe, were 17.6% of sales from continuing operations
in 1994, 17.2% in 1993 and 16.1% in 1992. Cone has one unaffiliated customer
which accounted for more than 10% of consolidated sales from the Apparel Fabrics
segment. Sales to this customer, as a percentage of sales from continuing
operations, were 33.9% in 1994, 35.3% in 1993 and 37.9% in 1992. At January 1,
1995, this customer had an outstanding accounts receivable balance with the
Company of approximately $17.9 million. The Company has not incurred any losses
in past years related to this customer's accounts receivable.
F-17
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 19. SEGMENT INFORMATION AND MAJOR CUSTOMERS -- Continued
Operating profit for each segment is total revenue less operating expenses
applicable to that segment. General corporate expenses, interest, income taxes,
gains from discontinued operations, extraordinary items and cumulative effect of
accounting changes are not included in segment operating income. General
corporate expenses include certain executive officers salaries, legal expenses,
bank fees and charitable contributions. Intersegment sales and transfers are
considered insignificant. Corporate assets include cash, administrative
facilities, deferred charges, and miscellaneous receivables.
Segment Information
The Company operates in two major industry segments: products for apparel
and home furnishings. Sales, operating income, identifiable assets, depreciation
and capital expenditures for these segments are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
Sales
Apparel................................................................................ $600,477 $575,800 $520,019
Home Furnishings....................................................................... 205,690 193,430 185,411
Total............................................................................... $806,167 $769,230 $705,430
Operating Income
Apparel................................................................................ $ 47,498 $ 68,828 $ 67,382
Home Furnishings....................................................................... 18,970 19,470 16,317
66,468 88,298 83,699
General corporate expenses............................................................... 3,865 2,699 5,201
Interest expense -- net.................................................................. 7,310 6,429 8,317
Other income............................................................................. (223) (317) --
10,952 8,811 13,518
Income from continuing operations before income taxes.................................... $ 55,516 $ 79,487 $ 70,181
Operating Margin
Apparel................................................................................ 7.9% 12.0% 13.0%
Home Furnishings....................................................................... 9.2 10.1 8.8
Total............................................................................... 8.2% 11.5% 11.9%
Identifiable Assets
Apparel................................................................................ $324,223 $295,832 $268,872
Home Furnishings....................................................................... 182,510 113,780 104,039
Corporate.............................................................................. 17,344 16,227 20,888
Discontinued Operations................................................................ -- 5,772 8,149
Total............................................................................... $524,077 $431,611 $401,948
Depreciation
Apparel................................................................................ $ 17,913 $ 16,518 $ 14,634
Home Furnishings....................................................................... 4,122 3,376 2,893
Corporate.............................................................................. 1,234 1,097 1,026
Total............................................................................... $ 23,269 $ 20,991 $ 18,553
Capital Expenditures
Apparel................................................................................ $ 25,234 $ 28,083 $ 17,590
Home Furnishings....................................................................... 9,077 8,927 5,993
Corporate.............................................................................. 3,183 1,702 1,815
Total............................................................................... $ 37,494 $ 38,712 $ 25,398
</TABLE>
F-18
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20. LITIGATION AND CONTINGENCIES
In November 1988, William J. Elmore and Wayne Comer (the "Plaintiffs"),
former employees of the Company, instituted a class action suit against the
Company and Wachovia Bank & Trust Company, N.A. ("Wachovia") and certain current
and former employees of the Company and Wachovia. The suit was brought on behalf
of salaried employees of the Company who were participants in certain Company
retirement plans. The Plaintiffs asserted a variety of claims related to actions
taken and statements made concerning certain employee benefit plans maintained
by the Company.
On March 20, 1992, the United States District Court in Greenville, South
Carolina, entered a judgment finding that the Company had promised to contribute
certain surplus funds (or their equivalent in Company stock) relating to the
overfunding of the Company's pension plans to the 1983 ESOP by December 23,
1985, that such surplus amounted to $69 million, that the Company's actual
contribution totaled approximately $55 million, and that the Company and certain
of its executive officers therefore had breached their fiduciary duties under
the Employee Retirement Income Security Act of 1974 ("ERISA") to certain
participants in the 1983 ESOP. The District Court ordered the Company to pay to
the 1983 ESOP for the benefit of plan participants, both salaried and hourly,
the sum of $14.2 million in cash or the equivalent in Company stock. In
addition, the District Court awarded $3.5 million in attorneys' fees to the
Plaintiffs, $2.2 million of which was to be paid from the sum awarded to the
1983 ESOP. Judgment was entered in favor of the defendants on all remaining
claims except for claims relating to the ESOP contribution.
On March 20, 1992, the Company and the individual defendants appealed the
District Court's judgment against them to the United States Court of Appeals for
the Fourth Circuit. On April 2, 1992, the Plaintiffs appealed the District
Court's judgment to the Court of Appeals insofar as it dismissed certain of
their claims. To secure the judgment on appeal the Company had deposited in
escrow with the trustee of the 1983 ESOP an $8 million letter of credit and
75,330 shares of Class A Preferred Stock valued at $7.5 million which
subsequently earned dividends of an additional 11,474 shares valued at $1.2
million. To record these escrow transactions, the Company increased outstanding
Class A Preferred Stock by $8.7 million. The increase in outstanding Class A
Preferred Stock was offset by a contra stockholders' equity account labeled
"Class A Preferred Stock held in escrow." These escrow account transactions did
not have an effect upon net income or stockholders' equity of the Company.
On May 6, 1994, the Court of Appeals, sitting EN BANC, affirmed the prior
conclusion of a panel of three of its judges and unanimously reversed the $15.5
million judgment and unanimously affirmed all of the District Court's rulings in
favor of the Company. However, the Court of Appeals affirmed, by an equally
divided court, the District Court's holding that Plaintiffs should be allowed to
proceed on an alternative theory whether, subject to proof of detrimental
reliance, Plaintiffs could establish that a letter to salaried employees on
December 15, 1983 created an enforceable obligation that could allow recovery on
a theory of equitable estoppel. Accordingly, the case was remanded to the
District Court for a determination of whether the Plaintiffs can establish
detrimental reliance creating estoppel of the Company.
Additional proceedings are under way in the District Court on the issue of
detrimental reliance and other issues related to whether the Plaintiffs can
prevail on remand. For that reason, and because of the uncertainties inherent in
the litigation process, it is not possible to predict the ultimate outcome of
this lawsuit. However, the Company intends to continue to defend this matter
vigorously, and it is the opinion of the Company's management that this lawsuit,
when finally concluded, will not have a material adverse effect on the Company's
financial condition.
Because judgment of the District Court was reversed, the escrowed stock and
letter of credit were ordered released by order of the District Court entered
July 22, 1994. Subsequent to the court's order, the stock was redeemed, the
offsetting contra account eliminated and letter of credit terminated. None of
these escrow transactions had an effect on net income or stockholders' equity.
F-19
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 21. DISCONTINUED OPERATIONS
The Company adopted a plan to discontinue and liquidate its corduroy and
other bottomweight continuous piece-dyed fabrics product line in December 1991.
During 1992 and 1993 the Company continued to accommodate customers, liquidate
inventory, and collect receivables. Revenues for 1993 and 1992 were $4,814,000
and $62,036,000, respectively. Actual losses for 1993 and 1992 were consistent
with the estimates provided for these years, and no gain nor additional loss was
recognized for these periods. On January 4, 1994, the Company completed the sale
of all remaining assets identified with discontinued operations. Proceeds from
this sale of inventories were $3,500,000 and resulted in net income of $439,000.
This transaction concluded the Company's 1991 Plan for Discontinued Operations.
NOTE 22. FAIR VALUE OF FINANCIAL INSTRUMENTS AND DERIVATIVES
The Company has estimated the fair value amounts of financial instruments
as required by SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments", using market information and appropriate valuation methodologies.
The valuation of long-term debt is based on current rates for similar debt
maturities that the Company expects it could obtain in present financial
markets. It is estimated that the carrying value of all of the Company's
financial instruments, including long-term debt, approximated fair value at
January 1, 1995 and January 2, 1994.
The Company purchases cotton futures for the purpose of managing its raw
material costs. On January 1, 1995, no cotton futures were held by the Company,
and for each of the fiscal years presented gains or losses charged to cost of
sales have been less than $200,000. In addition to cotton, from time to time the
Company hedges foreign currency transactions and interest rates.
F-20
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 23. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for years 1994 and 1993:
<TABLE>
<CAPTION>
QUARTERS ENDED
APR. 3, JUL. 3, OCT. 2, JAN. 1,
1994 1994 1994 1995
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE)
Net sales.................................................................... $195,919 $201,662 $203,475 $205,111
Gross profit (1)............................................................. 36,536 36,232 33,722 33,936
Income from operations....................................................... 17,583 16,905 14,790 13,325
Income from continuing operations............................................ 10,025 9,847 8,559 7,321
Gain on discontinued operations.............................................. 439 -- -- --
Income before cumulative effect of accounting change......................... 10,464 9,847 8,559 7,321
Cumulative effect of accounting change....................................... (1,228) -- -- --
Net income................................................................... $ 9,236 $ 9,847 $ 8,559 $ 7,321
Per share data (fully diluted):
Income from continuing operations............................................ $ .34 $ .33 $ .28 $ .24
Income before cumulative effect of accounting change......................... $ .35 $ .33 $ .28 $ .24
Net income................................................................... $ .31 $ .33 $ .28 $ .24
Weighted average shares outstanding.......................................... 27,866 27,858 27,853 27,760
Common stock prices*
High....................................................................... 17 1/4 14 5/8 14 7/8 13 1/2
Low........................................................................ 13 1/2 12 12 3/8 11 1/8
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
APR. 4, JUL. 4, OCT. 3, JAN. 2,
1993 1993 1993 1994
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE)
Net sales.................................................................... $195,035 $202,515 $192,644 $179,036
Gross profit (1)............................................................. 41,839 40,320 39,623 37,143
Income from operations....................................................... 21,593 23,365 21,669 18,972
Net income................................................................... $ 12,619 $ 13,668 $ 11,809 $ 11,507
Per share data (fully diluted):
Net income................................................................... $ .42 $ .47 $ .40 $ .39
Weighted average shares outstanding.......................................... 27,877 27,936 27,889 27,911
Common stock prices*
High....................................................................... 19 5/8 19 1/4 18 17 5/8
Low........................................................................ 13 3/8 15 7/8 14 5/8 14 3/8
</TABLE>
The number of holders of record of the Company's Common Stock as of
February 23, 1995 was 572.
*New York Stock Exchange Composite Tape.
(1) Net sales less cost of sales and depreciation
No dividends have been declared on Common Stock since 1984 and the Company
anticipates that its earnings for the foreseeable future will be retained for
use in its business and to finance growth. Payment of cash dividends in the
future will depend upon the Company's financial condition, results of
operations, current and anticipated capital requirements, and other factors
deemed relevant by the Company's Board of Directors.
F-21
<PAGE>
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.
CONE MILLS CORPORATION
(Registrant)
<TABLE>
<S> <C>
March 1, 1995 By: /s/ JOHN L. BAKANE
JOHN L. BAKANE
EXECUTIVE VICE PRESIDENT
</TABLE>
Exhibit 2.1
AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
AMENDMENT dated as of April 4, 1994 (this "Amendment") of a
Receivables Purchase Agreement dated as of August 11, 1992, as amended,
(the "Receivables Purchase Agreement") between CONE MILLS CORPORATION (the
"Seller") and DELAWARE FUNDING CORPORATION (the "Buyer"). Terms defined in
the Receivables Purchase Agreement and not otherwise defined herein have
the same meaning when used herein.
WITNESSETH:
WHEREAS, the Seller and the Buyer are parties to the Receivables
Purchase Agreement; and
WHEREAS, the Seller and the Buyer desire to amend certain
provisions of the Receivables Purchase Agreement;
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants hereinafter set forth and intending to be legally bound
hereby, agree as follows:
ARTICLE I. Amendment to the Receivables Purchase Agreement.
Subject to the satisfaction of the conditions precedent specified
in Article IV hereof, the Receivables Purchase Agreement and the exhibits
thereto shall be amended as follows:
(a) The definition "Expiration Date" in Section 1.01 of the
Receivables Purchase Agreement is amended by replacing clause (i) of
said definition with "(i) July 11, 1994,".
(b) Section 2.15 of the Receivables Purchase Agreement is
amended in its entirety to read as follows:
2.15. Expiration Date. Subject to other provisions of this
Agreement requiring earlier termination, this Agreement shall
terminate on July 11, 1994.
ARTICLE II. Representations.
The Seller hereby represents and warrants that, after giving
effect to this Amendment:
<PAGE>
2
(a) the representations and warranties set forth in Section 5.01
of the Receivables Purchase Agreement are true on the date hereof as
if made on and as of the date hereof except as such representations
and warranties specifically relate to an earlier date and as if each
reference to the "Receivables Purchase Agreement" in said Section 5.01
was deemed to be a reference to the Receivables Purchase Agreement as
amended by this Amendment; and
(b) there shall exist no Termination Event or Potential
Termination Event under the Receivables Purchase Agreement.
ARTICLE III. Status of the Receivables Purchase Agreement.
Except as otherwise expressly provided herein, all terms and
conditions of the Receivables Purchase Agreement are ratified and shall
remain unchanged and continue in full force and effect. Each reference in
the Receivables Purchase Agreement to such Agreement or any exhibit thereto
shall mean and be a reference to the Receivables Purchase Agreement and the
exhibits thereto as amended hereby.
ARTICLE IV. Condition Precedent.
The amendment to the Receivables Purchase Agreement set forth in
Article I hereof shall become effective upon the execution and delivery of
this Amendment by each of the parties hereto.
ARTICLE V. Governing Law.
This Amendment shall be governed by and construed in accordance
with the laws of the State of New York.
ARTICLE VI. Counterparts.
This Amendment may be executed in any number of counterparts, all
of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Amendment by signing such counterpart.
<PAGE>
3
IN WITNESS WHEREOF, each of the parties hereto have caused a
counterpart of this Amendment to be duly executed as of the date first
above written.
DELAWARE FUNDING CORPORATION
by: J.P. Morgan Delaware,
as attorney-in-fact
for Delaware Funding
Corporation
by:____________________________
Authorized Signatory
____________________________
Title
CONE MILLS CORPORATION
by:____________________________
Authorized Signatory
____________________________
Title
<PAGE>
Exhibit 2.2
AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
AMENDMENT dated as of June 7, 1994 (this "Amendment") of a
Receivables Purchase Agreement dated as of August 11, 1992, as amended (as
amended, the "Receivables Purchase Agreement") between CONE MILLS
CORPORATION (the "Seller") and DELAWARE FUNDING CORPORATION (the "Buyer").
Terms defined in the Receivables Purchase Agreement and not otherwise
defined herein have the same meaning when used herein.
WITNESSETH:
WHEREAS, the Seller and the Buyer are parties to the Receivables
Purchase Agreement; and
WHEREAS, the Seller and the Buyer desire to amend the Receivables
Purchase Agreement to extend the Expiration Date;
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants hereinafter set forth and intending to be legally bound
hereby, agree as follows:
ARTICLE I. Amendment to the Receivables Purchase Agreement.
Subject to the satisfaction of the conditions precedent specified
in Article IV hereof, the Receivables Purchase Agreement and the exhibits
thereto shall be amended as follows:
(a) The definition "Expiration Date" in Section 1.01 of the
Receivables Purchase Agreement is amended by replacing clause (i) of
said definition with "(i) August 31, 1994,";
(b) The definition "Letter Agreement" in Section 1.01 of the
Receivables Purchase Agreement is amended by inserting ", as amended
by the letter dated June 7, 1994," after "August 11, 1992" in such
definition.
(c) Section 2.15 of the Receivables Purchase Agreement is
amended by deleting the date "July 11, 1994" therein and replacing
such date with the date "August 31, 1994".
ARTICLE II. Representations.
The Seller hereby represents and warrants that, after giving
effect to this Amendment:
<PAGE>
(a) the representations and warranties set forth in Section 5.01
of the Receivables Purchase Agreement are true on the date hereof as
if made on and as of the date hereof except as such representations
and warranties specifically relate to an earlier date and as if each
reference to the "Receivables Purchase Agreement" in said Section 5.01
was deemed to be a reference to the Receivables Purchase Agreement as
amended by this Amendment; and
(b) there shall exist no Termination Event or Potential
Termination Event under the Receivables Purchase Agreement.
ARTICLE III. Status of the Receivables Purchase Agreement.
Except as otherwise expressly provided herein, all terms and
conditions of the Receivables Purchase Agreement are ratified and shall
remain unchanged and continue in full force and effect. Each reference in
the Receivables Purchase Agreement to such Agreement or any exhibit thereto
shall mean and be a reference to the Receivables Purchase Agreement and the
exhibits thereto as amended hereby.
ARTICLE IV. Condition Precedent.
The amendment to the Receivables Purchase Agreement set forth in
Article I hereof shall become effective upon the execution and delivery of
this Amendment by each of the parties hereto.
ARTICLE V. Governing Law.
This Amendment shall be governed by and construed in accordance
with the laws of the State of New York.
ARTICLE VI. Counterparts.
This Amendment may be executed in any number of counterparts, all
of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Amendment by signing such counterpart.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have caused a
counterpart of this Amendment to be duly executed as of the date first
above written.
DELAWARE FUNDING CORPORATION
by: J.P. Morgan Delaware,
as attorney-in-fact
for Delaware Funding
Corporation
by:____________________________
Authorized Signatory
____________________________
Title
CONE MILLS CORPORATION
by:____________________________
Authorized Signatory
____________________________
Title
<PAGE>
Exhibit 2.3
AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
AMENDMENT dated as of June 30, 1994 (this "Amendment") of a
Receivables Purchase Agreement dated as of August 11, 1992, as amended (as
amended, the "Receivables Purchase Agreement") between CONE MILLS
CORPORATION (the "Seller") and DELAWARE FUNDING CORPORATION (the "Buyer").
Terms defined in the Receivables Purchase Agreement and not otherwise
defined herein have the same meaning when used herein.
WITNESSETH:
WHEREAS, the Seller and the Buyer are parties to the Receivables
Purchase Agreement; and
WHEREAS, the Seller and the Buyer desire to amend the Receivables
Purchase Agreement (i) to increase the Maximum Net Investment, (ii) to
extend the Expiration Date and (iii) to increase the maximum permissible
length of the Tranche Periods;
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants hereinafter set forth and intending to be legally bound
hereby, agree as follows:
ARTICLE I. Amendment to the Receivables Purchase Agreement.
Subject to the satisfaction of the conditions precedent specified
in Article IV hereof, the Receivables Purchase Agreement and the exhibits
thereto shall be amended as follows:
(a) The definition "Expiration Date" in Section 1.01 of the
Receivables Purchase Agreement is amended by replacing clause (i) of
said definition with "(i) June 28, 1995,";
(b) The definition "Maximum Net Investment" in Section 1.01 of
the Receivables Purchase Agreement is amended by replacing
"$40,000,000" therein with "$50,000,000".
(c) The definition "Tranche Period" in Section 1.01 of the
Receivables Purchase Agreement is amended by replacing the phrase "90
days" in the first sentence therein with the phrase "120 days".
<PAGE>
(d) Section 2.15 of the Receivables Purchase Agreement is
amended by deleting the date "August 31, 1994" therein and replacing
such date with the date "June 28, 1995".
ARTICLE II. Representations.
The Seller hereby represents and warrants that, after giving
effect to this Amendment:
(a) the representations and warranties set forth in Section 5.01
of the Receivables Purchase Agreement are true on the date hereof as
if made on and as of the date hereof except as such representations
and warranties specifically relate to an earlier date and as if each
reference to the "Receivables Purchase Agreement" in said Section 5.01
was deemed to be a reference to the Receivables Purchase Agreement as
amended by this Amendment; and
(b) there shall exist no Termination Event or Potential
Termination Event under the Receivables Purchase Agreement.
ARTICLE III. Status of the Receivables Purchase Agreement.
Except as otherwise expressly provided herein, all terms and
conditions of the Receivables Purchase Agreement are ratified and shall
remain unchanged and continue in full force and effect. Each reference in
the Receivables Purchase Agreement to such Agreement or any exhibit thereto
shall mean and be a reference to the Receivables Purchase Agreement and the
exhibits thereto as amended hereby.
ARTICLE IV. Conditions Precedent.
The amendments to the Receivables Purchase Agreement set forth in
Article I hereof shall become effective upon:
(i) the execution and delivery of this Amendment by each of
the parties hereto;
(ii) the delivery by the Seller to the Buyer of
certification that all necessary corporate action has been taken
by the Seller to approve this Amendment and the sale of
Receivables by the Seller under the Agreement as amended hereby
(including without limitation, a certificate setting forth the
resolutions of the Seller adopted in respect of the transaction
contemplated hereby); and
(iii) the Buyer shall have received a favorable written
opinion of Neil Koonce, General Counsel of the Seller, dated the
date hereof and covering the matters
<PAGE>
set forth in paragraphs 1,2,3,4 and 5 of the opinion of Schell
Bray Aycock Abel & Livingston delivered pursuant to Section 3.02(j)
of the Receivables Purchase Agreement.
ARTICLE V. Governing Law.
This Amendment shall be governed by and construed in accordance
with the laws of the State of New York.
ARTICLE VI. Counterparts.
This Amendment may be executed in any number of counterparts, all
of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Amendment by signing such counterpart.
IN WITNESS WHEREOF, each of the parties hereto have caused a
counterpart of this Amendment to be duly executed as of the date first
above written.
DELAWARE FUNDING CORPORATION
by: J.P. Morgan Delaware,
as attorney-in-fact
for Delaware Funding
Corporation
by:____________________________
Authorized Signatory
____________________________
Title
CONE MILLS CORPORATION
by:____________________________
Authorized Signatory
____________________________
Title
<PAGE>
Exhibit 2.4
AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
AMENDMENT dated as of November 15, 1994 (this "Amendment") of a
Receivables Purchase Agreement dated as of August 11, 1992, as amended (as
amended, the "Receivables Purchase Agreement") between CONE MILLS
CORPORATION (the "Seller") and DELAWARE FUNDING CORPORATION (the "Buyer").
Terms defined in the Receivables Purchase Agreement and not otherwise
defined herein have the same meaning when used herein.
WITNESSETH:
WHEREAS, the Seller and the Buyer are parties to the Receivables
Purchase Agreement; and
WHEREAS, the Seller and the Buyer desire to amend certain
provisions of the Receivables Purchase Agreement;
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants hereinafter set forth and intending to be legally bound
hereby, agree as follows:
ARTICLE I. Amendment to the Receivables Purchase Agreement.
Subject to the satisfaction of the conditions precedent specified
in Article IV hereof, the Receivables Purchase Agreement and the exhibits
thereto shall be amended as follows:
(a) Section 6.02(h) of the Receivables Purchase Agreement is
amended in its entirety to read "(h) Intentionally left blank."
(b) Section 6.02(i) of the Receivables Purchase Agreement is
amended in its entirety to read as follows:
(i) Adjusted Debt to Capital Ratio. Permit, as of the last day
of any fiscal quarter, the ratio of Adjusted Total Consolidated Debt
as of such date to Adjusted Total Consolidated Capitalization as of
such date to exceed 61%.
For the purpose of this Section 6.02(i):
"Adjusted Total Consolidated Debt" shall mean, as of any date,
the sum for the Seller and its Consolidated Subsidiaries
(determined on a consolidated basis without duplication in
accordance with GAAP) of (a) all liabilities which should be
classified as Debt in accordance with GAAP
<PAGE>
-2-
(including without limitation all short-term Debt and the current
portion of all long-term Debt) as of such date plus (b) the
Net Investment as of such date plus (c) eight times the
aggregate rental expense (other than with respect to
capital leases) for the period of four consecutive fiscal
quarters of the Seller ended on or most recently prior to
such date.
"Adjusted Total Consolidated Capitalization" shall mean, as
of any date, the sum for the Seller and its Consolidated
Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) of (a) all liabilities which
should be classified as Debt in accordance with GAAP (including
without limitationall short-term Debt and the current portion of
all long-term Debt) as of such date plus (b) the Net Investment
as of such date plus (c) the aggregate amount of long term
deferred tax liabilities as of such date plus (d) stockholder's equity
as of such date plus (e) the aggregate amount deducted in determining
such stockholders' equity with respect to minority interests in
Subsidiaries that are not Consolidated Subsidiaries all of
the shares of capital stock or other ownership interests of which
(except director's qualifying shares) are at the time directly
or indirectly owned by the Seller plus (f) eight times the aggregate
rental expense (other than with respect to capital leases) for the
period of four consecutive fiscal quarters of the Seller ended on
or most recently prior to such date.
(c) Section 6.02(j) of the Receivables Purchase Agreement is
amended in its entirety to read as follows:
(j) (i) Interest Coverage Test. Permit, as of the last day of
any fiscal quarter, the ratio of EBIT for the period of four
consecutive fiscal quarters then ended, to Consolidated Interest
Expense for the period of four consecutive fiscal quarters then ended
to be less than 2.3:1.
For the purpose of this Section 6.02(j)(i):
"EBIT" shall mean, for any period, the sum for the Seller and
its Consolidated Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP) of (a) net income for
such period plus (b) the aggregate amount deducted in determining net
income in respect of Consolidated Interest Expense and income
taxes for such period.
"Consolidated Interest Expense" shall mean, for any period,
for the Seller and its Consolidated Subsidiaries
<PAGE>
-3-
(determined on a consolidated basis without duplication in accordance
with GAAP), the interest expense for such period.
(ii) Debt Ratio. Permit, as of the last day of any fiscal
quarter, the percentage of Adjusted Cash Flow for the period of four
consecutive fiscal quarters then ended, to Total Consolidated Debt as
of such date to be less than 26%.
For the purpose of this Section 6.02(j)(ii):
"Adjusted Cash Flow" shall mean, for any period, the sum for
the Seller and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP)
of (a) net income for such period determined before giving
effect to any net gain or loss with respect to discontinued
operations during such period, plus (b) the aggregate amount
deducted in determining the amount determined pursuant to clause
(a) for such period in respect of (1) depreciation and amortization
and (2) any increase (or minus the aggregate amount added in
respect of any decrease) in deferred tax liabilities.
"Total Consolidated Debt" shall mean, as of any date, the sum
for the Seller and its Consolidat ed Subsidiari es (determine d on
a consolidat ed basis without duplicatio n in accordance with
GAAP) of (a) all liabilitie s which should be classified as Debt
in accordance with GAAP (including without limitation all short-
term Debt and the current portion of all long- term Debt) as of
such date plus (b) the Net Investment as of such date.
ARTICLE II. Representations.
The Seller hereby represents and warrants that, after giving
effect to this Amendment:
(a) the representations and warranties set forth in Section 5.01
of the Receivables Purchase Agreement are true on the date hereof as
if made on and as of the date hereof except as such representations
and warranties specifically relate to an earlier date and as if each
reference to the "Receivables Purchase Agreement" in said Section 5.01
was deemed to be a reference to the Receivables Purchase Agreement as
amended by this Amendment; and
(b) there shall exist no Termination Event or Potential
Termination Event under the Receivables Purchase Agreement.
<PAGE>
-4-
ARTICLE III. Status of the Receivables Purchase Agreement.
Except as otherwise expressly provided herein, all terms and
conditions of the Receivables Purchase Agreement are ratified and shall
remain unchanged and continue in full force and effect. Each reference in
the Receivables Purchase Agreement to such Agreement or any exhibit thereto
shall mean and be a reference to the Receivables Purchase Agreement and the
exhibits thereto as amended hereby.
ARTICLE IV. Conditions Precedent.
The amendments to the Receivables Purchase Agreement set forth in
Article I hereof shall become effective upon:
(i) the execution and delivery of this Amendment by each of
the parties hereto;
(ii) the delivery by the Seller to the Buyer of
certification that all necessary corporate action has been taken
by the Seller to approve this Amendment and the sale of
Receivables by the Seller under the Agreement as amended hereby
(including without limitation, a certificate setting forth the
resolutions of the Seller adopted in respect of the transaction
contemplated hereby); and
(iii) the Buyer shall have received a favorable written
opinion of Neil Koonce, General Counsel of the Seller, dated the
date hereof and covering the matters set forth in paragraphs
1,2,3,4 and 5 of the opinion of Schell Bray Aycock Abel &
Livingston delivered pursuant to Section 3.02(j) of the
Receivables Purchase Agreement.
ARTICLE V. Governing Law.
This Amendment shall be governed by and construed in accordance
with the laws of the State of New York.
ARTICLE VI. Counterparts.
This Amendment may be executed in any number of counterparts, all
of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Amendment by signing such counterpart.
<PAGE>
-5-
IN WITNESS WHEREOF, each of the parties hereto have caused a
counterpart of this Amendment to be duly executed as of the date first
above written.
DELAWARE FUNDING CORPORATION
by: J.P. Morgan Delaware,
as attorney-in-fact
for Delaware Funding
Corporation
by:____________________________
Authorized Signatory
____________________________
Title
CONE MILLS CORPORATION
by:____________________________
Authorized Signatory
____________________________
Title
Exhibit 4.1
$80,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of
November 18, 1994
among
Cone Mills Corporation,
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE>
TABLE OF CONTENTS1
Page
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . 17
SECTION 1.03. Types of Borrowings . . . . . . . . . . . . . . . . . 17
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . 18
SECTION 2.02. Notice of Committed Borrowing. . . . . . . . . . . . 18
SECTION 2.05. Notes . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.06. Maturity of Loans . . . . . . . . . . . . . . . . . . 24
SECTION 2.07. Interest Rates . . . . . . . . . . . . . . . . . . . 24
SECTION 2.08. Facility Fees . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.09. Optional Termination or Reduction of Commitments . . 29
SECTION 2.10. Mandatory Termination of Commitments . . . . . . . . 30
SECTION 2.11. Optional Prepayments . . . . . . . . . . . . . . . . 30
SECTION 2.12. Additional Interest . . . . . . . . . . . . . . . . . 30
SECTION 2.13. General Provisions as to Payments . . . . . . . . . . 31
SECTION 2.14. Funding Losses . . . . . . . . . . . . . . . . . . . 32
SECTION 2.15. Computation of Interest and Fees . . . . . . . . . . 32
SECTION 2.16. Withholding Tax Exemption . . . . . . . . . . . . . . 32
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.02. Transitional Provisions . . . . . . . . . . . . . . . 34
SECTION 3.03. Borrowings . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power . . . . . . . . . . . . 36
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.03. Binding Effect . . . . . . . . . . . . . . . . . . . 36
SECTION 4.04. Financial Information . . . . . . . . . . . . . . . . 36
SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . 37
1The Table of Contents is not a part of this Agreement.
i
<PAGE>
Page
SECTION 4.06. Compliance with ERISA . . . . . . . . . . . . . . . . 37
SECTION 4.07. Environmental Matters . . . . . . . . . . . . . . . . 38
SECTION 4.08. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.09. Compliance with Laws . . . . . . . . . . . . . . . . 38
SECTION 4.10. Not an Investment Company . . . . . . . . . . . . . . 39
SECTION 4.11. Title to Properties . . . . . . . . . . . . . . . . . 39
SECTION 4.12. Full Disclosure . . . . . . . . . . . . . . . . . . . 39
ARTICLE V
COVENANTS
SECTION 5.01. Information . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.02. Payment of Obligations . . . . . . . . . . . . . . . 42
SECTION 5.03. Maintenance of Property; Insurance . . . . . . . . . 43
SECTION 5.04. Conduct of Business and Maintenance of Existence . . 43
SECTION 5.05. Compliance with Laws . . . . . . . . . . . . . . . . 43
SECTION 5.06. Inspection of Property, Books and Records . . . . . . 44
SECTION 5.07. Transactions with Affiliates . . . . . . . . . . . . 44
SECTION 5.08. Debt . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.09. Contingent Obligations . . . . . . . . . . . . . . . 45
SECTION 5.10. Debt Ratio . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.11. Interest Coverage Ratio . . . . . . . . . . . . . . . 45
SECTION 5.12. Investments . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.13. Negative Pledge . . . . . . . . . . . . . . . . . . . 46
SECTION 5.14. Consolidations, Mergers and Sales of Assets . . . . . 47
SECTION 5.15. Use of Proceeds . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . 48
SECTION 6.02. Notice of Default . . . . . . . . . . . . . . . . . . 50
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization . . . . . . . . . . . . 51
SECTION 7.02. Agent and Affiliates . . . . . . . . . . . . . . . . 51
SECTION 7.03. Action by Agent . . . . . . . . . . . . . . . . . . . 51
SECTION 7.04. Consultation with Experts . . . . . . . . . . . . . . 51
SECTION 7.07. Credit Decision . . . . . . . . . . . . . . . . . . . 52
SECTION 7.08. Successor Agent . . . . . . . . . . . . . . . . . . . 52
ii
<PAGE>
Page
SECTION 7.09. Agent's Fee . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 8.02. Illegality . . . . . . . . . . . . . . . . . . . . . 53
SECTION 8.03. Increased Cost and Reduced Return . . . . . . . . . . 54
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.02. No Waivers . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.03. Expenses; Documentary Taxes; Indemnification . . . . 58
SECTION 9.04. Sharing of Set-Offs . . . . . . . . . . . . . . . . . 59
SECTION 9.05. Amendments and Waivers . . . . . . . . . . . . . . . 59
SECTION 9.06. Successors and Assigns . . . . . . . . . . . . . . . 60
SECTION 9.07. Collateral . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.08. Governing Law; Submission to Jurisdiction . . . . . . 62
SECTION 9.09. Counterparts; Integration . . . . . . . . . . . . . . 62
SECTION 9.10. Confidentiality . . . . . . . . . . . . . . . . . . . 62
SECTION 9.11. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . 63
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Money Market Quote
Exhibit E - Opinion of General Counsel of the Borrower
Exhibit F - Opinion of Special Counsel for the Agent
Exhibit G - Assignment and Assumption Agreement
iii
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
AGREEMENT dated as of November 18, 1994 among CONE MILLS
CORPORATION, the BANKS listed on the signature pages hereof and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
WHEREAS, Cone Mills Corporation (together with its successors, the
"Borrower"), the banks party thereto (the "Banks") and Morgan Guaranty
Trust Company of New York, as agent, are parties to a Credit Agreement
dated as of August 13, 1992 (as amended prior to the effectiveness of the
Amended Agreement (as defined below), the "Original Agreement"); and
WHEREAS, the Borrower and the Banks wish to amend the Original
Agreement by, among other things, increasing the aggregate amount of the
commitments thereunder, changing the basis upon which certain interest
rates applicable to the loans outstanding or to be made thereunder are to
be determined, and replacing certain financial covenants contained therein;
NOW, THEREFORE, the parties hereto agree that, on and as of the
Effective Date (as defined below), the Original Agreement is amended and
restated in its entirety as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein,
have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Acquisition" means the acquisition by the Borrower or any
Subsidiary of any asset of any Person, whether by purchase, merger or
otherwise, which, or which together with other such acquisitions,
constitutes one or more businesses or substantially all of the assets of
one or more businesses.
"Additional Interest" means, for any period, with respect to a Loan
of any Type, an amount of interest calculated on the average daily amount
of Loans of such Type
<PAGE>
outstanding during such period (computed for the actual number of days
in such period) at a rate per annum determined with reference to the
Applicable Ratio as of the last day of the Relevant Quarter as set
forth below:
Applicable Ratio Additional Interest Rate
Less than 35% Base Rate Loans: 0 %
CD Loans: 0 %
Euro-Dollar Loans: 0 %
Equal to or greater than Base Rate Loans: 0 %
35% and less than CD Loans: .10%
50% Euro-Dollar Loans: .10%
Equal to or greater than Base Rate Loans: 0 %
50% CD Loans: .20%
Euro-Dollar Loans: .20%
If on or prior to the date of determination of Additional Interest on any
Loan the Borrower shall not have delivered to the Banks the financial
statements for the Relevant Quarter, the Applicable Ratio will be deemed to
be equal to 50%.
"Adjusted Cash Flow" means, for any period, the sum of (i)
Consolidated Net Income for such period determined before giving effect to
any net gain or loss with respect to discontinued operations during such
period, plus (ii) the aggregate amount deducted in determining the amount
determined pursuant to clause (i) for such period in respect of (A)
depreciation, (B) amortization and (C) any increase (or minus the aggregate
amount added in respect of any decrease) in consolidated deferred tax
liabilities of the Borrower and its Subsidiaries.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Adjusted Debt to Capital Ratio" means as of any date the ratio of
Adjusted Total Consolidated Debt as of such date to Adjusted Total
Consolidated Capitalization as of such date, expressed as a percentage.
"Adjusted London Interbank Offered Rate" has the meaning set forth
in Section 2.07(c).
"Adjusted Total Consolidated Capitalization" means as of any date
(i) Total Consolidated Capitalization as of such date plus (ii) eight times
Consolidated Operating Lease Expense for the period of four consecutive
fiscal quarters of the Borrower ended on or most recently prior to such
date.
2
<PAGE>
"Adjusted Total Consolidated Debt" means as of any date (i) Total
Consolidated Debt as of such date plus (ii) eight times Consolidated
Operating Lease Expense for the period of four consecutive fiscal quarters
of the Borrower ended on or most recently prior to such date.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and
submitted to the Agent (with a copy to the Borrower) duly completed by such
Bank.
"Affiliate" means (i) any Person that directly, or indirectly
through one or more intermediaries, controls the Borrower (a "Controlling
Person") or (ii) any Person (other than the Borrower or a Subsidiary) which
is controlled by or is under common control with a Controlling Person. As
used herein, the term "control" means the possession, directly or
indirectly, of power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities,
by contract or otherwise and the term "voting securities" means securities
or interests entitling the holder thereof to vote for or designate
directors or individuals performing a similar function.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such
capacity.
"Agreement" means the Original Agreement as amended and restated by
this Amended Agreement and as the same may be further amended or restated
from time to time in accordance with the terms hereof.
"Amended Agreement" means this Amended and Restated Credit
Agreement dated as of November 18, 1994 among the Borrower, the Banks and
the Agent.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in
the case of its Money Market Loans, its Money Market Lending Office.
"Applicable Ratio" means as of any date the Adjusted Debt to
Capital Ratio as of such date.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
3
<PAGE>
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their
respective successors.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1%
plus the Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a
Base Rate Loan in accordance with the applicable Notice of Committed
Borrowing or pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by
any member of the ERISA Group.
"Borrower" means Cone Mills Corporation, a North Carolina
corporation, and its successors.
"Borrower's 1993 Form 10-K" means the Borrower's annual report on
Form 10-K for the fiscal year ended December 29, 1993, as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934.
"Borrower's Second Quarter 10-Q" means the Borrower's quarterly
report for the fiscal quarter ended June 29, 1994, as filed with the
Securities and Exchange Commission on Form 10-Q pursuant to the Securities
Exchange Act of 1934.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan to be made by a Bank as a CD Loan
in accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means Wachovia Bank of North Carolina, N.A.,
and Morgan Guaranty Trust Company of New York.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the
4
<PAGE>
signature pages hereof, as such amount may be reduced from time to time
pursuant to Sections 2.09 and 2.10.
"Committed Loan" means a loan made by a Bank pursuant to Section
2.01.
"Consolidated Interest Expense" means, for any period, the interest
expense of the Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis, for such period.
"Consolidated Net Income" means, for any period, the net income of
the Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis, for such period.
"Consolidated Operating Lease Expense" means, for any period, the
aggregate rental expense of the Borrower and its Consolidated Subsidiaries
(other than with respect to capital leases), determined on a consolidated
basis, for such period.
"Consolidated Subsidiary" means as of any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Borrower in its consolidated financial statements if such statements were
prepared as of such date.
"Contingent Obligation" of any Person means as of any date any Debt
of such Person, including, without limitation, all Debt of others
Guaranteed by such Person and all Contingent Reimbursement Obligations of
such Person, that is not or would not be set forth in a balance sheet of
such Person as of such date.
"Contingent Reimbursement Obligation" of any Person means as of any
date any contingent obligation of such Person to reimburse, directly or
indirectly, any bank or other Person in respect of amounts paid under a
letter of credit or similar instrument.
"Cornwallis" means Cornwallis Development Company, a North
Carolina corporation and a Wholly Owned Consolidated Subsidiary, and its
successors.
"Cornwallis Debt" means Debt of Cornwallis incurred in connection
with the development and sale of real estate in the ordinary course of its
business and with respect to which (i) neither the Borrower nor any
Subsidiary other than Cornwallis has any liability, absolute or contingent,
other than Contingent Obligations of the
5
<PAGE>
Borrower to the extent permitted by Section 5.09, and (ii) recourse is
expressly limited to Cornwallis and the real property or other tangible assets
of Cornwallis (and no property or assets of the Borrower or any other
Subsidiary) that are the subject of the relevant financing, except to
the extent of the Contingent Obligations of the Borrower referred to in
clause (i) above.
"Debt" of any Person means as of any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all obligations of such
Person as lessee which are capitalized in accordance with generally
accepted accounting principles, (v) all obligations, fixed or contingent,
of such Person to reimburse any bank or other Person in respect of amounts
paid under a letter of credit or similar instrument, (vi) all Debt of
others secured by a Lien on any asset of such Person, whether or not such
Debt is assumed by such Person, and (vii) all Debt of others Guaranteed by
such Person.
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Disclosure Schedule" means the schedule captioned "Disclosure
Schedule" delivered to the Banks by the Borrower prior to the date of the
Original Agreement.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law
to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending
Office) or such other office as such Bank may hereafter designate as its
Domestic Lending Office by notice to the Borrower and the Agent; provided
that any Bank may so designate separate Domestic Lending Offices for its
Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in
which case all references herein to the Domestic Lending Office of such
Bank shall be deemed to refer to either or both of such offices, as the
context may require.
6
<PAGE>
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"EBIT" means, for any period, the sum of (i) Consolidated Net
Income for such period, plus (ii) the aggregate amount deducted in
determining Consolidated Net Income for such period in respect of
Consolidated Interest Expense and income taxes.
"Effective Date" means the date this Amended Agreement becomes
effective in accordance with Section 3.01.
"Elmore Litigation" means the class action proceeding commenced by
William J. Elmore and Wayne Comer against the Borrower, et al., in the
United States District Court in Greenville, South Carolina and pending in
such court as of the date hereof.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements or other governmental restrictions
relating to the environment, or to the effect of the environment on human
health or to emissions, discharges or releases of pollutants, contaminants,
Hazardous Substances or wastes into the environment including, without
limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants,
petroleum or petroleum products, chemicals or industrial, toxic or
Hazardous Substances or wastes or the clean-up or other remediation
thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of
a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or
any Subsidiary, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"ESOP" means the Cone Mills Corporation 1983 Employee Stock
Ownership Plan effective as of January 1, 1983, as amended and in effect
from time to time.
7
<PAGE>
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to
each Bank, its office, branch or affiliate located at
its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Euro-Dollar Lending Office) or such
other office, branch or affiliate of such Bank as it may hereafter
designate as its Euro-Dollar Lending Office by notice to the Borrower and
the Agent.
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Reference Banks" means the principal London offices of
Wachovia Bank of North Carolina, N.A., and Morgan Guaranty Trust Company of
New York.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.07(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Receivables Purchase Agreement" means the receivables
purchase agreement between the Borrower and Delaware Funding Corporation
dated as of August 11, 1992, as amended or renewed from time to time.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Domestic Business Day next succeeding such day, provided that (i) if such
day is not a Domestic Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day,
and (ii) if no such rate is so published on such next succeeding Domestic
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to Morgan Guaranty
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Trust Company of New York on such day on such transactions as determined
by the Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money
Market Loans (excluding Money Market LIBOR Loans bearing interest at the
Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the
obligee of such Debt or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" means (i) any "hazardous substance" as
defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended from
time to time and regulations promulgated thereunder, (ii) any "hazardous
waste" as defined in the Resource Conservation and Recovery Act of 1976 (42
U.S.C. Sections 6901 et seq.) as amended from time to time, and regulations
promulgated thereunder, (iii) asbestos, (iv) polychlorinated biphenyls, (v)
petroleum, its derivatives, by-products and other hydrocarbons and (vi) any
other toxic, radioactive, caustic or otherwise hazardous substance
regulated under laws relating to the environment.
"HLT Status" shall be in effect from and after the date, if any, on
which the Agent determines that, or the Agent is advised by any Bank that
such Bank has received notice from any governmental authority, central bank
or comparable agency having jurisdiction over such Bank that, Loans
hereunder are classified as a "highly leveraged transaction". The Agent
shall promptly give notice of the effectiveness of any HLT Status to the
Borrower and the other Banks.
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"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending
one, two, three or six months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Borrowing, the period commencing on the date
of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the
Borrower may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the
date of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
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(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market LIBOR Borrowing, the period
commencing on the date of such Borrowing and ending such whole number of
months thereafter as the Borrower may elect in accordance with Section
2.03; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 7 days nor more than 180 days) as the
Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means any investment in any Person, whether by means
of share purchase, capital contribution, loan, time deposit or otherwise;
provided that in no event shall an Acquisition be an Investment.
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"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, the Borrower or any
Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money
Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money
Market Loans or any combination of the foregoing. Loans hereunder are
distinguished by "Type". The "Type" of a Loan refers to whether such Loan
is a Base Rate Loan, a CD Loan, a Euro-Dollar Loan or a Money Market Loan.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
"Material Debt" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal amount exceeding
$2,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $10,000,000.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it
may hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Agent; provided that any Bank may from time to time by
notice to the Borrower and the Agent designate separate Money Market
Lending Offices for its Money Market LIBOR Loans, on the one hand, and its
Money Market Absolute Rate Loans, on the other hand, in which case all
references herein to the Money Market Lending Office of such Bank shall be
deemed to refer to either or both of such offices, as the context may
require.
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"Money Market LIBOR Loan" means a loan to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the
Base Rate pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.03.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member
of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period.
"Notes" means promissory notes of the Borrower, substantially in
the form of Exhibit A hereto, evidencing the obligation of the Borrower to
repay the Loans, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined
in Section 2.03(f)).
"Original Agreement" has the meaning set forth in the first WHEREAS
clause.
"Outstanding Receivables Amount" means, as of any date, the
aggregate unrecovered purchase price as of such date in respect of all
accounts receivable (or interests therein) sold by the Borrower to the
Receivables Purchaser on or prior to such date pursuant to the terms of the
Receivables Purchase Agreement.
"Parent" means, with respect to any Bank, any Person controlling
such Bank.
"Participant" has the meaning set forth in Section 9.06(b).
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject
to the minimum funding standards under Section 412 of the Internal Revenue
Code and either (i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed
to, by any Person which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to
time as its Prime Rate.
"Qualifying Employer Securities" means qualifying employer
securities as defined in Section 407(d)(5) of ERISA.
"Quarterly Date" means each March 31, June 30, September 30 and
December 31.
"Receivables Purchase Agreement" means (i) the Existing Receivables
Purchase Agreement and (ii) if such Agreement is no longer in effect, any
other agreement between the Borrower and the Receivables Purchaser
providing for the purchase by the Receivables Purchaser of accounts
receivable of the Borrower (or interests therein) in such aggregate amount
and on such terms as shall be reasonably satisfactory to the Banks.
"Receivables Purchaser" means Delaware Funding Corporation or any
other financial institution to which the Required Banks consent, which
consent will not be unreasonably withheld.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any
one of such Reference Banks.
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"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of March 30, 1992 by and between the Borrower and the
shareholders of the Borrower named on the signature pages thereof, as in
effect on the date of the Original Agreement.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Relevant Quarter" means, as of any date of determination of
Additional Interest payable under Section 2.12 or facility fees payable
under Section 2.08, the fiscal quarter of the Borrower most recently ended
prior to such date for which financial statements shall have been required
to be delivered to the Banks prior to such date pursuant to subsection (a)
or (b), as the case may be, of Section 5.01.
"Required Banks" means at any time Banks having at least 66 2/3% of
the aggregate amount of the Commitments or, if the Commitments shall have
been terminated, holding Notes evidencing at least 66 2/3% of the aggregate
unpaid principal amount of the Loans.
"Responsible Officer" means any of the chief executive officer,
chief operating officer, chief financial officer or chief accounting
officer of the Borrower or any other officer of the Borrower involved
principally in its financial administration or its controllership function.
"Restricted Payment" means (i) any dividend or other distribution
on any shares of the Borrower's capital stock (except dividends payable
solely in shares of its capital stock) or (ii) any payment on account of
the purchase, redemption, retirement or acquisition of (a) any shares of
the Borrower's capital stock or (b) any option, warrant or other right to
acquire shares of the Borrower's capital stock.
"Special Retirement Account" means the Special Retirement Account
of the Supplemental Retirement Plan.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of
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directors or other persons performing similar functions are at the time
directly or indirectly owned by the Borrower.
"Supplemental Retirement Plan" means the Supplemental Retirement
Plan of Cone Mills Corporation, effective as of January 1, 1984, as amended
and in effect from time to time.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) time deposits
with, including certificates of deposit issued by, any office located in
the United States of any bank or trust company which is organized under the
laws of the United States or any state thereof and (A) which is a Bank or
(B) whose short-term certificates of deposit are rated at least A-1 by
Standard & Poor's Ratings Group or P-1 by Moody's Investors Service, Inc.
and (iii) investment grade commercial instruments.
"Termination Date" means August 13, 1997, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in
which case the Termination Date shall be the next preceding Euro-Dollar
Business Day.
"Total Consolidated Capitalization" means as of any date the sum of
(i) Total Consolidated Debt plus (ii) the aggregate amount of the
consolidated long term deferred tax liabilities of the Borrower and its
Consolidated Subsidiaries, plus (iii) stockholders' equity of the Borrower
and its Consolidated Subsidiaries plus (iv) the aggregate amount deducted
in determining such stockholders' equity with respect to minority interests
in Subsidiaries that are not Wholly Owned Consolidated Subsidiaries, in
each case determined on a consolidated basis as of such date.
"Total Consolidated Debt" means as of any date (i) all Debt of the
Borrower and its Consolidated Subsidiaries determined on a consolidated
basis, as of such date, as the same is or would be set forth in a
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of such date (including without limitation all short-term
Debt and the current portion of all long-term Debt) plus (ii) the
Outstanding Receivables Amount as of such date.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all benefits under
such Plan exceeds (ii) the fair market value of all Plan assets allocable
to such
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benefits (excluding any accrued but unpaid contributions), all
determined as of the then most recent valuation date for such Plan, but
only to the extent that such excess represents a potential liability of a
member of the ERISA Group to the PBGC or any other Person under Title IV of
ERISA.
"Wholly Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared
in accordance with generally accepted accounting principles as in effect
from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the
most recent audited consolidated financial statements of the Borrower and
its Consolidated Subsidiaries delivered to the Banks; provided that, if the
Borrower notifies the Agent that the Borrower wishes to amend any covenant
in Article V to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant (or if the Agent
notifies the Borrower that the Required Banks wish to amend Article V for
such purpose), then the Borrower's compliance with such covenant shall be
determined on the basis of generally accepted accounting principles in
effect immediately before the relevant change in generally accepted
accounting principles became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the
Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes
the aggregation of Loans of one or more Banks to be made to the Borrower
pursuant to Article II on a single date and for a single Interest Period.
Borrowings are classified for purposes of this Agreement either by
reference to the pricing of Loans comprising such Borrowing (e.g., a
"Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or
by reference to the provisions of Article II under which participation
therein is determined (i.e., a "Committed Borrowing" is a Borrowing under
Section 2.01 in which all Banks participate in proportion to their
Commitments, while a "Money Market Borrowing" is a Borrowing under Section
2.03 in which the Bank participants are
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determined on the basis of their bids in accordance therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Bank severally agrees, on
the terms and conditions set forth in this Agreement, to lend to the
Borrower pursuant to this Section from time to time amounts not to exceed
in the aggregate at any one time outstanding the amount of its Commitment.
Each Borrowing under this subsection (a) shall be in an aggregate principal
amount of $1,000,000 or any larger multiple of $1,000,000 (except that any
such Borrowing may be in the aggregate amount available in accordance with
Section 3.03(b)) and shall be made from the several Banks ratably in
proportion to their respective Commitments. Within the foregoing limits,
the Borrower may borrow under this Section, repay, or to the extent
permitted by Section 2.13, prepay Loans and reborrow at any time under this
Section.
SECTION 2.02. Notice of Committed Borrowing. (a) The Borrower
shall give the Agent notice (a "Notice of Committed Borrowing") not later
than 11:00 A.M. (New York City time) on (x) the date of each Base Rate
Borrowing, (y) the second Domestic Business Day before each CD Borrowing
and (z) the third Euro-Dollar Business Day before each Euro-Dollar
Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be CD
Loans, Base Rate Loans or Euro-Dollar Loans, and
(iv) in the case of a Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
Notwithstanding the foregoing, no more than six Fixed Rate
Committed Borrowings shall be outstanding at any one time and any Borrowing
which would exceed such limitation shall be made as a Base Rate Borrowing.
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SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.01, the Borrower may, as set forth in this Section,
request the Banks to make offers to make Money Market Loans to the
Borrower. The Banks may, but shall have no obligation to, make such offers
and the Borrower may, but shall have no obligation to, accept any such
offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to
request offers to make Money Market Loans under this Section, it shall
transmit to the Agent by telex or facsimile transmission a Money Market
Quote Request substantially in the form of Exhibit B hereto so as to be
received no later than 10:30 A.M. (New York City time) on (x) the fifth
Euro-Dollar Business Day prior to the date of Borrowing proposed therein,
in the case of a LIBOR Auction or (y) the Domestic Business Day next
preceding the date of Borrowing proposed therein, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Agent shall have mutually agreed and shall have notified
to the Banks not later than the date of the Money Market Quote Request for
the first LIBOR Auction or Absolute Rate Auction for which such change is
to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day
in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than
one Interest Period in a single Money Market Quote Request. No Money
Market Quote Request shall be given within five Euro-Dollar Business Days
(or such other number of days as the Borrower and the Agent may agree) of
any other Money Market Quote Request.
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(c) Invitation for Money Market Quotes. Promptly upon receipt of
a Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially
in the form of Exhibit C hereto, which shall constitute an invitation by
the Borrower to each Bank to submit Money Market Quotes offering to make
the Money Market Loans to which such Money Market Quote Request relates in
accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each
Bank may submit a Money Market Quote containing an offer or offers to make
Money Market Loans in response to any Invitation for Money Market Quotes.
Each Money Market Quote must comply with the requirements of this
subsection (d) and must be submitted to the Agent by telex or facsimile
transmission at its offices specified in or pursuant to Section 9.01 not
later than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar
Business Day prior to the proposed date of Borrowing, in the case of a
LIBOR Auction or (y) 9:30 A.M. (New York City time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Agent shall have mutually
agreed and shall have notified to the Banks not later than the date of the
Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective); provided that Money
Market Quotes submitted by the Agent (or any affiliate of the Agent) in the
capacity of a Bank may be submitted, and may only be submitted, if the
Agent or such affiliate notifies the Borrower of the terms of the offer or
offers contained therein not later than (x) one hour prior to the deadline
for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior
to the deadline for the other Banks, in the case of an Absolute Rate
Auction. Subject to Articles III and VI, any Money Market Quote so made
shall be irrevocable except with the written consent of the Agent given on
the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount (w) may be greater than
or less than the Commitment of the quoting Bank, (x) must be $5,000,000
or a larger multiple of $1,000,000, (y) may
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not exceed the principal amount of Money Market Loans for which offers
were requested and (z) may be subject to an aggregate limitation as
to the principal amount of Money Market Loans for which offers being made
by such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest
per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the
quoting Bank with respect to each Interest Period specified in the related
Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or
does not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the
Borrower of the terms (x) of any Money Market Quote submitted by a Bank
that is in accordance with subsection (d) and (y) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Bank with respect to the same Money Market
Quote Request. Any such subsequent Money Market Quote shall be disregarded
by the Agent unless such subsequent Money Market Quote is submitted
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solely to correct a manifest error in such former Money Market Quote. The
Agent's notice to the Borrower shall specify (A) the aggregate principal amount
of Money Market Loans for which offers have been received for each Interest
Period specified in the related Money Market Quote Request, (B) the
respective principal amounts and Money Market Margins or Money Market
Absolute Rates, as the case may be, so offered and (C) if applicable,
limitations on the aggregate principal amount of Money Market Loans for
which offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the
proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Borrower and the Agent shall
have mutually agreed and shall have notified to the Banks not later than
the date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective), the
Borrower shall notify the Agent of its acceptance or non-acceptance of the
offers so notified to it pursuant to subsection (e). In the case of
acceptance, such notice (a "Notice of Money Market Borrowing") shall
specify the aggregate principal amount of offers for each Interest Period
that are accepted. The Borrower may accept any Money Market Quote in whole
or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing
may not exceed the applicable amount set forth in the related Money
Market Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$5,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be, and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks
with the same Money Market Margins or Money Market Absolute Rates, as the
case may be, for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related
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Interest Period, the principal amount of Money Market Loans in respect of
which such offers are accepted shall be allocated by the Agent among such
Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem
appropriate) in proportion to the aggregate principal amounts of such offers.
Determinations by the Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank's share
(if any) of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of
each Borrowing, each Bank participating therein shall (except as provided
in subsection (c) of this Section) make available its share of such
Borrowing, in Federal or other funds immediately available in New York
City, to the Agent at its address referred to in Section 9.01. Unless the
Agent determines that any applicable condition specified in Article III has
not been satisfied, the Agent will make the funds so received from the
Banks available to the Borrower at the Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment
and only an amount equal to the difference (if any) between the amount
being borrowed and the amount being repaid shall be made available by such
Bank to the Agent as provided in subsection (b), or remitted by the
Borrower to the Agent as provided in Section 2.13, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior
to the date of any Borrowing that such Bank will not make available to the
Agent such Bank's share of such Borrowing, the Agent may assume that such
Bank has made such share available to the Agent on the date of such
Borrowing in accordance with subsections (b) and (c) of this Section 2.04
and the Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent that
such Bank shall not have so made such share available to the Agent, such
Bank and the Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount together with interest thereon, for each
day from the date such amount is made available to the Borrower until the
date such
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amount is repaid to the Agent, at (i) in the case of the
Borrower, a rate per annum equal to the higher of the Federal Funds Rate
and the interest rate applicable thereto pursuant to Section 2.07 and (ii)
in the case of such Bank, the Federal Funds Rate. If such Bank shall repay
to the Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank shall be
evidenced by a single Note payable to the order of such Bank for the
account of its Applicable Lending Office in an amount equal to the
aggregate unpaid principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent,
request that its Loans of a particular Type be evidenced by a separate Note
in an amount equal to the aggregate unpaid principal amount of such Loans.
Each such Note shall be in substantially the form of Exhibit A hereto with
appropriate modifications to reflect the fact that it evidences solely
Loans of the relevant Type. Each reference in this Agreement to the "Note"
of such Bank shall be deemed to refer to and include any or all of such
Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b),
the Agent shall mail such Note to such Bank. Each Bank shall record the
date, amount, Type and maturity of each Loan made by it and the date and
amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding; provided that the failure of any Bank to
make any such recordation or endorsement shall not affect the obligations
of the Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach
to and make a part of its Note a continuation of any such schedule as and
when required.
SECTION 2.06. Maturity of Loans. Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such
Borrowing.
SECTION 2.07. Interest Rates. (a) Subject to the provisions of
Section 2.12, each Base Rate Loan shall bear
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interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to (i)
if no HLT Status exists on such day, the Base Rate for such day and (ii) if
HLT Status exists on such day, the Base Rate for such day plus 1-1/2%. Such
interest shall be payable quarterly on each Quarterly Date. Any overdue
principal of or interest (including any Additional Interest) on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the rate otherwise applicable to Base
Rate Loans for such day.
(b) Subject to the provisions of Section 2.12, each CD Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the CD
Margin plus the applicable Adjusted CD Rate; provided that if any CD Loan
or any portion thereof shall, as a result of clause (2)(b) of the
definition of Interest Period, have an Interest Period of less than 30
days, such portion shall bear interest during such Interest Period at the
rate applicable to Base Rate Loans during such period. Such interest shall
be payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than 90 days, at intervals of 90 days after the
first day thereof. Any overdue principal of or interest (including any
Additional Interest) on any CD Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the sum of 2% plus the
higher of (i) the sum of the CD Margin plus the Adjusted CD Rate applicable
to such Loan and (ii) the rate applicable to Base Rate Loans for such day.
"CD Margin" means (i) .525% for any day on which HLT Status does
not exist and (ii) 2.40% for any day on which HLT Status exists.
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The "Adjusted CD Rate" applicable to any Interest Period means a
rate per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per
annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New
York certificate of deposit dealers of recognized standing for the purchase
at face value from each CD Reference Bank of its certificates of deposit in
an amount comparable to the principal amount of the CD Loan of such CD
Reference Bank to which such Interest Period applies and having a maturity
comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation
any basic, supplemental or emergency reserves) for a member bank of the
Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of new non-personal time deposits in dollars in
New York City having a maturity comparable to the related Interest Period
and in an amount of $100,000 or more. The Adjusted CD Rate shall be
adjusted automatically on and as of the effective date of any change in the
Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A"
(or a comparable successor assessment risk classification) within the
meaning of 12 C.F.R. (section mark) 327.3(e) (or any successor
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provision) to the Federal Deposit Insurance Corporation (or any successor) for
such Corporation's (or such successor's) insuring time deposits at offices of
such institution in the United States. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change in the Assessment
Rate.
(c) Subject to the provisions of Section 2.12, each Euro-Dollar
Loan shall bear interest on the outstanding principal amount thereof, for
the Interest Period applicable thereto, at a rate per annum equal to the
sum of the Euro-Dollar Margin plus the applicable Adjusted London Interbank
Offered Rate. Such interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof.
"Euro-Dollar Margin" means (i) .40% for any day on which HLT Status
does not exist and (ii) 2.275% for any day on which HLT Status exists.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained
(rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing
(i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the
Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher
1/16 of 1%) of the respective rates per annum at which deposits in dollars
are offered to each of the Euro-Dollar Reference Banks in the London
interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Euro-Dollar Loan of such
Euro-Dollar Reference Bank to which such Interest Period is to apply and
for a period of time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the
Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or in respect of
any other category of liabilities which includes deposits by reference to
which the interest rate on Euro-Dollar Loans is determined or any category
of extensions of credit or other assets which
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<PAGE>
includes loans by a non-United States office of any Bank to United States
residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
(d) Any overdue principal of or interest (including any Additional
Interest) on any Euro-Dollar Loan shall bear interest, payable on demand,
for each day from and including the date payment thereof was due to but
excluding the date of actual payment, at a rate per annum equal to the sum
of 2% plus the higher of (i) the sum of the Euro-Dollar Margin plus the
Adjusted London Interbank Offered Rate applicable to such Loan and (ii) the
Euro-Dollar Margin plus the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (x) the average
(rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which one day (or, if such amount due remains
unpaid more than three Euro-Dollar Business Days, then for such other
period of time not longer than six months as the Agent may select) deposits
in dollars in an amount approximately equal to such overdue payment due to
each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar
Reference Bank in the London interbank market for the applicable period
determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of
Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus
the rate applicable to Base Rate Loans for such day).
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the
London Interbank Offered Rate for such Interest Period (determined in
accordance with Section 2.07(c) as if the related Money Market LIBOR
Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money
Market Margin quoted by the Bank making such Loan in accordance with
Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on
the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the Money Market Absolute
Rate quoted by the Bank making such Loan in accordance with Section 2.03.
Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest,
payable on demand, for each day until
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paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and
the participating Banks by telex or cable of each rate of interest so
determined, and its determination thereof shall be conclusive in the
absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference
Bank does not furnish a timely quotation, the Agent shall determine the
relevant interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Banks or, if none of such
quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
SECTION 2.08. Facility Fees. The Borrower shall pay to the Agent
for the account of the Banks ratably in proportion to their Commitments a
facility fee at a rate per annum equal to (i) .12% if the Applicable Ratio
as of the last day of the Relevant Quarter was less than 35%, (ii) .15% if
the Applicable Ratio as of the last day of the Relevant Quarter was equal
to or greater than 35% and less than 50%, and (iii) .20% if the Applicable
Ratio as of the last day of the Relevant Quarter was equal to or greater
than 50%. For purposes of determining the facility fee pursuant hereto, if
the Borrower shall not have delivered to the Banks the financial statements
for the Relevant Quarter, the Applicable Ratio will be deemed to be equal
to 50%. Such facility fee shall accrue (i) from and including the
Effective Date to but excluding the Termination Date (or earlier date of
termination of the Commitments in their entirety), on the daily aggregate
amount of the Commitments (whether used or unused) and (ii) from and
including the Termination Date or such earlier date of termination to but
excluding the date the Loans shall be repaid in their entirety, on the
daily aggregate outstanding principal amount of the Loans. Such facility
fee shall be payable quarterly on each Quarterly Date, commencing December
31, 1994 and upon the date of termination of the Commitments in their
entirety (and, if later, the date the Loans shall be repaid in their
entirety).
SECTION 2.09. Optional Termination or Reduction of Commitments.
The Borrower may, upon at least three Domestic Business Days' notice to the
Agent, terminate at any time, or proportionately reduce from time to time
by an aggregate amount of $5,000,000 or any larger multiple of
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$1,000,000, the aggregate amount of the Commitments in excess of the aggregate
outstanding principal amount of the Loans.
SECTION 2.10. Mandatory Termination of Commitments. The
Commitments shall terminate on the Termination Date, and any Loans then
outstanding (together with accrued interest thereon) shall be due and
payable on such date.
SECTION 2.11. Optional Prepayments. (a) The Borrower may, upon
at least one Domestic Business Day's notice to the Agent, prepay any Base
Rate Borrowing (or any Money Market Borrowing bearing interest at the Base
Rate pursuant to Section 8.01(a)) in whole at any time, or from time to
time in part in amounts aggregating $1,000,000 or any larger multiple of
$1,000,000, by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several
Banks included in such Borrowing.
(b) Except as provided in Sections 8.02 and 8.03(c), the Borrower
may not prepay all or any portion of the principal amount of any Fixed Rate
Loan prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents thereof
and of such Bank's ratable share (if any) of such prepayment and such
notice shall not thereafter be revocable by the Borrower.
SECTION 2.12. Additional Interest. (a) Promptly after the end of
each fiscal quarter of the Borrower and on the Termination Date (or any
earlier date on which the Commitments shall have been terminated in their
entirety and any later date on which all outstanding Committed Loans shall
have been repaid in their entirety), the Agent shall give notice to the
Borrower of the Additional Interest on the Committed Loans of each Type for
such fiscal quarter or for the portion of the current fiscal quarter ending
on the Termination Date (or such earlier or later date, as the case may
be), as the case may be.
(b) No later than the fifth Domestic Business Day after the Agent
gives notice pursuant to subsection (a) above, the Borrower shall pay to
the Agent (for the accounts of the several Banks which had Committed Loans
outstanding during the relevant fiscal quarter or part thereof) the
Additional Interest on such Loans specified in such notice.
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(c) The Agent shall (i) calculate the Additional Interest on
Committed Loans of each Type and (ii) shall determine each Bank's share of
such Additional Interest based on such Bank's pro rata share of the average
daily amount of Committed Loans of such Type outstanding during the fiscal
quarter or part thereof with respect to which such Additional Interest is
payable. Each such calculation and determination shall be conclusive in
the absence of manifest error.
SECTION 2.13. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of
facility fees hereunder, not later than 12:00 Noon (New York City time) on
the date when due, in Federal or other funds immediately available in New
York City, to the Agent at its address referred to in Section 9.01. The
Agent will promptly distribute to each Bank its ratable share of each such
payment received by the Agent for the account of the Banks. Whenever any
payment of principal of, or interest on, the Domestic Loans or of facility
fees shall be due on a day which is not a Domestic Business Day, the date
for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business
Day, the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case the date for payment thereof shall be
the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on, the Money Market Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day. If the date
for any payment of principal is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that
the Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and
the Agent may, in reliance upon such assumption, cause to be distributed to
each Bank on such due date an amount equal to the amount then due such
Bank. If and to the extent that the Borrower shall not have so made such
payment, each Bank shall repay to the Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day from
the date such amount is distributed to such Bank until the date such
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Bank repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.14. Funding Losses. If the Borrower makes any payment
of principal with respect to any Fixed Rate Loan (pursuant to Article VI or
VIII or otherwise) on any day other than the last day of the Interest
Period applicable thereto, or the end of an applicable period fixed
pursuant to Section 2.07(d), or if the Borrower fails to borrow any Fixed
Rate Loans after notice has been given to any Bank in accordance with
Section 2.04(a), the Borrower shall reimburse each Bank within 15 days
after demand for any resulting loss or expense incurred by it (or by an
existing or prospective Participant in the related Loan), including
(without limitation) any loss incurred in obtaining, liquidating or
employing deposits from third parties, but excluding loss of margin for the
period after any such payment or failure to borrow, provided that such Bank
shall have delivered to the Borrower a certificate as to the amount of such
loss or expense, which certificate shall be conclusive in the absence of
manifest error.
SECTION 2.15. Computation of Interest and Fees. Interest based on
the Prime Rate hereunder shall be computed on the basis of a year of 365
days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest (including without limitation Additional Interest) and fees shall
be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last
day).
SECTION 2.16. Withholding Tax Exemption. At least five Domestic
Business Days prior to the first date on which interest or fees are payable
hereunder for the account of any Bank, each Bank that is not incorporated
under the laws of the United States of America or a state thereof agrees
that it will deliver to each of the Borrower and the Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Bank is entitled to receive
payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes. Each Bank which so
delivers a Form 1001 or 4224 further undertakes to deliver to each of the
Borrower and the Agent two additional copies of such form (or a successor
form) on or before the date that such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent
form so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrower or the
Agent, in each case
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certifying that such Bank is entitled to receive
payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent
such Bank from duly completing and delivering any such form with respect to
it and such Bank advises the Borrower and the Agent that it is not capable
of receiving payments without any deduction or withholding of United States
federal income tax.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Amended Agreement shall become
effective on the date that each of the following conditions shall have been
satisfied (or waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of
the parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex, telecopy or other written
confirmation from such party of execution of a counterpart hereof by
such party);
(b) receipt by the Agent for the account of each Bank of a duly
executed Note dated on or before the Effective Date complying with the
provisions of Section 2.05;
(c) receipt by the Agent of an opinion of Neil W. Koonce, General
Counsel for the Borrower, substantially in the form of Exhibit E hereto,
and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(d) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit F
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
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(e) receipt by the Agent on the Effective Date of all amounts
payable under Section 9.03 of which the Borrower shall have notice on
such date; and
(f) receipt by the Agent of all documents it may reasonably
request relating to the existence of the Borrower and its Subsidiaries,
the corporate authority for and the validity of this Amended Agreement
and the Notes, and any other matters relevant hereto, all in form and
substance satisfactory to the Agent;
provided that this Amended Agreement shall not become effective or be
binding on any party hereto unless all of the foregoing conditions are
satisfied not later than November 30, 1994.
On the Effective Date the Original Agreement will be automatically
amended and restated in its entirety to read as set forth herein. On and
after the Effective Date the rights and obligations of the parties hereto
shall be governed by this Amended Agreement; provided that rights and
obligations of the parties hereto with respect to the period prior to the
Effective Date shall continue to be governed by the provisions of the
Original Agreement. The Notes delivered to each Bank under the Original
Agreement shall become void on the Effective Date and, upon receiving its
new Notes delivered pursuant to clause (b) of this Section 3.01, each Bank
will cancel its original Notes and return them to the Borrower. No failure
of a Bank so to cancel and return its original Note shall affect the
validity of its new Notes. The Agent shall promptly notify the Borrower
and the Banks of the effectiveness of this Amended Agreement, and such
notice shall be conclusive and binding on all parties hereto.
SECTION 3.02. Transitional Provisions. (a) Each Committed Loan
outstanding under the Original Agreement on the Effective Date shall mature
on the last day of the then current Interest Period applicable thereto
under the Original Agreement.
(b) The interest rates determined in accordance with Section 2.07
of this Amended Agreement shall be effective on the Effective Date;
provided that, (i) the interest rate applicable to each Euro-Dollar Loan
outstanding on the Effective Date for the then current Interest Period
applicable thereto shall be the rate per annum equal to the sum of the
Euro-Dollar Margin (as defined in this Amended Agreement) plus the Adjusted
London Interbank Offered Rate applicable to such Loan (as determined
pursuant to Section 2.05 of the Original
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Agreement) and (ii) the interest rate applicable to each CD Loan outstanding
on the Effective Date for the then current Interest Period applicable thereto
shall be the rate per annum equal to the sum of the CD Margin (as defined in
this Amended Agreement) plus the Adjusted CD Rate applicable to such Loan (as
determined pursuant to Section 2.05 of the Original Agreement).
(c) In addition, the Additional Interest on the Committed Loans of
each Type outstanding under the Original Agreement on the Effective Date to
be paid for any fiscal quarter of the Borrower ended after the Effective
Date shall be determined in accordance with the provisions of this Amended
Agreement.
SECTION 3.03. Borrowings. The obligation of any Bank to make a
Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Agent of notice of such Borrowing as required
by Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate
amount of the Commitments;
(c) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing;
(d) the fact that the representations and warranties of the
Borrower contained in this Agreement (except, in the case of a Refunding
Borrowing, the representations and warranties set forth in Sections
4.04(c) and 4.05 as to any matter which has theretofore been disclosed
in writing by the Borrower to the Banks) shall be true on and as of the
date of such Borrowing; and
(e) the fact that the Adjusted Debt to Capital Ratio as of the
date of such Borrowing, after giving effect thereto, shall not exceed
61%;
Each Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Borrowing as to the facts
specified in clauses (b), (c), (d), and (e) of this Section.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. Each of the Borrower
and its Subsidiaries is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as
now conducted, and is duly qualified as a foreign corporation in good
standing in each jurisdiction where it is required by applicable law to be
so qualified and the failure so to qualify or be in good standing would
have a material adverse effect on the business, financial condition or
operations of the Borrower and its Subsidiaries, taken as a whole.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of
this Agreement and the Notes are within the Borrower's corporate powers,
have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency
or official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the articles of
incorporation or by-laws of the Borrower or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Borrower or
result in the creation or imposition of any Lien on any asset of the
Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid
and binding agreement of the Borrower and the Notes, when executed and
delivered in accordance with this Agreement, will constitute valid and
binding obligations of the Borrower.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 29, 1993 and the related
consolidated statements of operations, stockholders' equity and cash flows
for the fiscal year then ended, reported on by McGladrey & Pullen and set
forth in the Borrower's 1993 Form 10-K, a copy of which has been delivered
to each of the Banks, fairly present, in conformity with generally accepted
accounting principles, the consolidated financial position of the
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Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of June 29, 1994 and the related unaudited
consolidated statements of operations, stockholders' equity and cash flows
for the three months then ended, set forth in the Borrower's Second Quarter
10-Q, a copy of which has been delivered to each of the Banks, fairly
present, in conformity with generally accepted accounting principles
applied on a basis consistent with the financial statements referred to in
subsection (a) of this Section, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such six-month period
(subject to normal year-end adjustments).
(c) Since June 29, 1994 there has been no material adverse change
in the business, financial position, results of operations or prospects of
the Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. Except as set forth in the Borrower's
Second Quarter 10-Q, there is no action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened against or
affecting, the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially
adversely affect the business, consolidated financial position or
consolidated results of operations of the Borrower and its Consolidated
Subsidiaries or which in any manner draws into question the validity of
this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA
Group has fulfilled its obligations under the minimum funding standards of
ERISA and the Internal Revenue Code with respect to each Plan and each Plan
is being administered in all material respects in compliance with the
presently applicable provisions of ERISA and the Internal Revenue Code with
respect to each Plan. No member of the ERISA Group has (i) sought a waiver
of the minimum funding standard under Section 412 of the Internal Revenue
Code in respect of any Plan, (ii) failed to make any contribution or
payment to any Plan or Multiemployer Plan or in respect of any Benefit
Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the
posting of a bond or
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other security under ERISA or the Internal Revenue
Code or (iii) incurred any liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. In the ordinary course of
its business, the Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the
Borrower and its Subsidiaries, in the course of which it identifies and
evaluates associated liabilities and costs (including, without limitation,
any capital or operating expenditures required for clean-up or closure of
properties presently or previously owned, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by law or as a condition of any license,
permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction
in the level of or change in the nature of operations conducted thereat,
any costs or liabilities in connection with off-site disposal of wastes or
Hazardous Substances and any actual or potential liabilities to third
parties, including employees, and any related costs and expenses). On the
basis of this review, the Borrower has reasonably concluded that such
associated liabilities and costs, including the costs of compliance with
Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. United States Federal income tax returns of
the Borrower and its Subsidiaries have been examined and closed through the
fiscal year ended December 29, 1991. The Borrower and its Subsidiaries
have filed all United States Federal income tax returns and all other
material tax returns which are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower or any Subsidiary. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of
taxes or other governmental charges are, in the opinion of the Borrower,
adequate.
SECTION 4.09. Compliance with Laws. Each of the Borrower and its
Subsidiaries is in compliance with all applicable laws, ordinances, rules,
regulations and requirements of governmental authorities (including,
without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) other than such laws, ordinances,
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rules, regulations or requirements (i) the validity or applicability of which
the Borrower or such Subsidiary is contesting in good faith by appropriate
proceedings diligently conducted or (ii) the failure to comply with which
cannot reasonably be expected to have consequences which would materially
and adversely affect the business, consolidated financial position,
consolidated results of operations or prospects of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.10. Not an Investment Company. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 4.11. Title to Properties. The Borrower or a Subsidiary
has good and marketable title to each of the material properties and assets
reflected in the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries delivered pursuant to Section 4.04(b), or
thereafter acquired, other than properties and assets disposed of in the
ordinary course of business since the date of such balance sheet, free and
clear of any Lien other than Liens permitted by Section 5.14.
SECTION 4.12. Full Disclosure. All information heretofore
furnished by the Borrower to the Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated hereby is,
and all such information hereafter furnished by the Borrower to the Agent
or any Bank will be, true and accurate in all material respects on the date
as of which such information is stated or certified. The Borrower has
disclosed to the Banks in writing any and all facts which materially and
adversely affect or may affect (to the extent the Borrower can now
reasonably foresee), the business, operations or financial condition of the
Borrower and its Consolidated Subsidiaries, taken as a whole, or the
ability of the Borrower to perform its obligations under this Agreement.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will mail to each of the
Banks:
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(a) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, a consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of the end of such
fiscal year and the related consolidated statements of operations,
stockholders' equity and cash flows for such fiscal year, setting forth
in each case in comparative form the figures for the previous fiscal
year, all reported on in accordance with applicable rules and
regulations of the Securities and Exchange Commission by McGladrey &
Pullen or other independent public auditors of nationally recognized
standing;
(b) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the
Borrower, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of operations, stockholders' equity and cash
flows for such quarter and for the portion of the Borrower's fiscal year
ended at the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter and the
corresponding portion of the Borrower's previous fiscal year, all
certified (subject to normal year-end adjustments) as to fairness of
presentation, preparation in accordance with generally accepted
accounting principles (subject to normal year-end adjustments) and
consistency by the chief financial officer or the chief accounting
officer of the Borrower;
(c) not later than the fifteenth day of each fiscal year of the
Borrower, a forecasted consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as at the end of such fiscal year and as
at the end of each of the four fiscal quarters constituting such fiscal
year and the related consolidated budget and statements of forecasted
income, forecasted stockholders' equity and forecasted cash flows for
each of such fiscal quarters and for the portions of such fiscal year
then ending, and, as soon as available, any materially adverse revisions
of such statements, all such statements to be based, and to be certified
by the chief financial officer or the chief accounting officer of the
Borrower as being based, on the Borrower's reasonable estimates at the
time, and to be in reasonable detail and substantially in the form
delivered to the Banks prior to the date hereof, with such changes as
the Required Banks may approve;
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(d) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of
the chief financial officer or the chief accounting officer of the
Borrower (i) setting forth in reasonable detail the calculations
required to establish (x) whether the Borrower was in compliance with
the requirements of Sections 5.08 to 5.14, inclusive, on the date of
such financial statements and (y) the Applicable Ratio as of the date of
such financial statements, (ii) setting forth the Outstanding
Receivables Amount as of the date of such financial statements and (iii)
stating whether any Default exists on the date of such certificate and,
if any Default then exists, setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect
thereto;
(e) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public auditors which reported on such statements (i)
whether anything has come to their attention to cause them to believe
that any Default existed on the date of such statements and (ii)
confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to clause (d) above;
(f) within five days after any Responsible Officer of the Borrower
obtains knowledge of any Default, if such Default is then continuing, a
certificate of the chief financial officer, the chief accounting
officer, the treasurer or the controller of the Borrower setting forth
the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(g) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and
proxy statements so mailed;
(h) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) which the Borrower shall have filed
with the Securities and Exchange Commission;
(i) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of
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ERISA) with respect to any Plan with Unfunded
Liabilities at such time which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any
such reportable event, a copy of the notice of such reportable event
given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA or
notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from
the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in
respect of, or appoint a trustee to administer any Plan, a copy of such
notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application;
(v) gives notice of intent to terminate any Plan under Section 4041(c)
of ERISA, a copy of such notice and other information filed with the
PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section
4063 of ERISA, a copy of such notice; or (vii) fails to make any payment
or contribution to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement or makes any amendment to any Plan or Benefit
Arrangement which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the
chief financial officer or the chief accounting officer of the Borrower
setting forth details as to such occurrence and action, if any, which
the Borrower or applicable member of the ERISA Group is required or
proposes to take;
(j) within 15 days after June 30 of every year and promptly after
any material change to the insurance coverage of the Borrower and its
Subsidiaries, a schedule setting forth the amounts of the insurance
coverage of the Borrower and its Subsidiaries and the risks insured
against, in substantially the detail set forth with respect to the date
of the Original Agreement in the Disclosure Schedule; and
(k) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as
the Agent, at the request of any Bank, may reasonably request, as soon
as reasonably practicable after such request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each
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Subsidiary to pay and discharge, at or before maturity (or, in
the case of ad valorem taxes, on or before the date on which
such taxes are required to be paid pursuant to applicable law),
all their respective obligations and liabilities, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings, and except for liabilities which are not
material to the financial position, results of operations or prospects of
the Borrower and its Consolidated Subsidiaries, considered as a whole, and
will maintain, and will cause each Subsidiary to maintain, in accordance
with generally accepted accounting principles, appropriate reserves for the
accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The
Borrower will keep, and will cause each Subsidiary to keep, all material
property used and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(b) The Borrower will maintain, and will cause each Subsidiary to
maintain (either in the name of the Borrower or in such Subsidiary's own
name), insurance with financially sound and reputable insurers on all
property, in such amount and covering such risks, as are adequate and
reasonable for the businesses in which the Borrower is engaged.
SECTION 5.04. Conduct of Business and Maintenance of Existence.
The Borrower will continue, and will cause each Subsidiary to continue, to
engage in business of the same general type as now conducted by the
Borrower and its Subsidiaries, and will preserve, renew and keep in full
force and effect, and will, except as permitted under Section 5.15, cause
each Subsidiary to preserve, renew and keep in full force and effect, their
respective corporate existences and their respective material rights,
privileges and franchises necessary or desirable in the normal conduct of
their respective businesses.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and
cause each Subsidiary to comply, with all applicable laws, ordinances,
rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules
and regulations thereunder) except where (i) the necessity of compliance
therewith is contested in good faith by appropriate proceedings diligently
conducted or (ii) failure to comply with such law, ordinance, rule,
regulation or requirement cannot reasonably be expected to have
consequences which would materially and adversely affect the
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business, consolidated financial position, consolidated results of operations
or prospects of the Borrower and its Consolidated Subsidiaries, taken as a
whole.
SECTION 5.06. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each Subsidiary to keep, proper books of
record and account in which full, true and correct entries shall be made of
all dealings and transactions in relation to its business and activities;
and will permit, and will cause each Subsidiary to permit, representatives
of any Bank at such Bank's expense to visit and inspect any of their
respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs,
finances and accounts with their respective officers, employees and
independent public accountants, all at such reasonable times and as often
as may reasonably be desired.
SECTION 5.07. Transactions with Affiliates. The Borrower will
not, and will not permit any Subsidiary to, engage in any transaction
directly or indirectly with or for the account or benefit of any Affiliate
except that:
(a) the Borrower and any Subsidiary may make any Investment
permitted under Section 5.12;
(b) the Borrower may make any Restricted Payment permitted under
Section 5.13;
(c) the Borrower and any Subsidiary may (i) pay reasonable
compensation, including, but not limited to, stock options and other
employee benefits, which has been approved by the Board of Directors of
the Borrower or any committee thereof to any Affiliate who is an
officer, director or employee of the Borrower or any Subsidiary in such
capacity for services rendered and (ii) afford miscellaneous benefits
without approval by the Board of Directors of the Borrower to any such
Affiliate who is an officer, director or employee with an aggregate fair
value for each such Person in any fiscal year not exceeding $25,000;
(d) the Borrower and any Subsidiary may in the ordinary course of
their respective businesses sell assets or provide services to, and
purchase assets or services from, any Affiliate on terms which the Board
of Directors of the Borrower has determined are no less favorable to the
Borrower or such Subsidiary than those available from Persons who are
not Affiliates; and
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(e) the Borrower may perform its obligations under the Registration
Rights Agreement.
SECTION 5.08. Debt. (a) The Adjusted Debt to Capital Ratio on the
last day of any fiscal quarter of the Borrower ended after the Effective
Date will not exceed 61%.
(b) The Borrower will not permit any Subsidiary to incur,
Guarantee, assume, issue or at any time be liable with respect to any Debt
except that Cornwallis may incur Cornwallis Debt in an aggregate principal
amount outstanding at any time not to exceed $15,000,000.
SECTION 5.09. Contingent Obligations. The Borrower will not, and
will not permit any Subsidiary to, incur, create, assume, make or at any
time be liable with respect to any Contingent Obligation other than (i)
Contingent Reimbursement Obligations of the Borrower in respect of letters
of credit issued in connection with the Elmore Litigation in an aggregate
amount not to exceed $10,000,000 at any time, (ii) other Contingent
Reimbursement Obligations of the Borrower incurred in the ordinary course
of its business, in an aggregate amount not to exceed $8,000,000 at any
time and (iii) Contingent Obligations of the Borrower in respect of
Cornwallis Debt in an aggregate amount not exceeding at any time
$7,500,000.
SECTION 5.10. Debt Ratio. As of the last day of each fiscal
quarter ended after the Effective Date, the percentage of Adjusted Cash
Flow for the period of four consecutive fiscal quarters then ended to Total
Consolidated Debt as of such day will not be less than 26%.
SECTION 5.11. Interest Coverage Ratio. As of the last day of each
fiscal quarter ended after the Effective Date, the ratio of EBIT to
Consolidated Interest Expense for the period of four consecutive fiscal
quarters then ended will not be less than 2.3:1.
SECTION 5.12. Investments. Neither the Borrower nor any
Consolidated Subsidiary will make or acquire any Investment in any Person
other than:
(a) Temporary Cash Investments;
(b) Advances by the Borrower or a Subsidiary to officers,
directors and employees for reasonable moving expenses and business
expenses incurred in the ordinary course of business of the Borrower or
any Subsidiary and consistent with past practice; and
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(c) other Investments by the Borrower not to exceed in the
aggregate at any time 20% of Total Capitalization at such time.
SECTION 5.13. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except Liens existing on the date hereof
and set forth on the Disclosure Schedule and:
(a) Liens securing Debt incurred in connection with the issuance of
industrial revenue bonds in an aggregate principal amount outstanding at
any time not to exceed $10,000,000;
(b) any Lien existing on any asset of any corporation at the time
such corporation becomes a Subsidiary and not created in contemplation
of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such
asset, provided that such Lien attaches to such asset concurrently with
or within 90 days after the acquisition thereof;
(d) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into the Borrower or
a Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof
by the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that such Debt is not
increased and is not secured by any additional assets;
(g) any Lien for ad valorem taxes not overdue;
(h) Liens arising in the ordinary course of its business or by
operation of law which (i) do not secure Debt, (ii) do not secure any
obligation in an amount exceeding $5,000,000 or any obligation that is
overdue or in default and (iii) do not in the aggregate materially
detract from the value of the assets of the Borrower and its
Subsidiaries, taken as a whole, or
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materially impair the use thereof in the operation of its business;
(i) Liens on real estate held for development and/or sale by
Cornwallis in the ordinary course of its business securing Cornwallis
Debt permitted under Section 5.08(b);
(j) escrow arrangements existing on the date hereof pursuant to
which cash is held in escrow to secure the Borrower's liabilities in
connection with the Elmore Litigation; provided that at no time will the
aggregate amount of such cash exceed (i) $10,000,000, minus (ii) the
aggregate amount of all Contingent Reimbursement Obligations of the
Borrower in respect of outstanding letters of credit or similar
instruments permitted under clause (i) of Section 5.09;
(k) Liens arising in respect of the Elmore Litigation during any
period in which the Borrower shall in good faith be prosecuting an
appeal by appropriate proceedings diligently conducted and appropriate
escrow arrangements or bonds shall have been made; and
(l) Liens on accounts receivable of the Borrower pursuant to the
Receivables Purchase Agreement.
SECTION 5.14. Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other Person or
(ii) sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Borrower and its Subsidiaries, taken
as a whole, to any other Person; provided that the Borrower may sell
accounts receivable pursuant to the terms of the Receivables Purchase
Agreement; and provided further that the Borrower may merge with another
Person if (A) the Borrower is the corporation surviving such merger and (B)
immediately after giving effect to such merger, no Default shall have
occurred and be continuing.
SECTION 5.15. Use of Proceeds. The proceeds of the Loans made
under this Agreement will be used by the Borrower for general corporate
purposes. None of such proceeds will be used, directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of buying or
carrying any "margin stock" within the meaning of Regulation U.
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ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of or
interest (including without limitation, any Additional Interest) on any
Loan, any fees or any other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.07 to 5.15, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by
clause (a) or (b) above) for 10 days after written notice thereof has
been given to the Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made
by the Borrower in this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect when made (or
deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment
in respect of any Material Debt when due or within any applicable grace
period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with
the giving of notice or lapse of time or both, would enable) the holder
of such Debt or any Person acting on such holder's behalf to accelerate
the maturity thereof, except for Debt in respect of industrial revenue
bonds that is accelerated, or with the giving of notice or lapse of time
or both may be accelerated, by reason of changes in tax laws or any
interpretation thereof;
(g) the Borrower or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment
of a trustee,
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receiver, liquidator, custodian or other similar official
of it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take
any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property,
and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 60 days; or an order for relief shall be
entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $1,000,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent
to terminate a Material Plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan administrator or any combination
of the foregoing; or the PBGC shall institute proceedings under Title IV
of ERISA to terminate, to impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer any Material Plan; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall
occur a complete or partial withdrawal from, or a default, within the
meaning of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more members of the ERISA
Group to incur a current payment obligation in excess of $1,000,000;
(j) a judgment or order for the payment of money in excess of
$1,000,000 shall be rendered against the Borrower or any Subsidiary and
such judgment or order shall continue unsatisfied and unstayed for a
period of 30 days;
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(k) any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) of
35% or more of the outstanding shares of common stock of the Borrower;
or, at any time during any period of twelve consecutive calendar months,
a majority of the Board of Directors of the Borrower shall not consist
of individuals who were either directors of the Borrower on the first
day of such period ("original directors") or appointed as or nominated
to be directors by individuals including a majority of those of the
original directors who have not, prior to such appointment or
nomination, resigned by reason of disability or died; or
(l) a Termination Event, as defined in the Existing Receivables
Purchase Agreement, shall occur thereunder, or any analogous event shall
occur in any other Receivables Purchase Agreement;
then, and in every such event, the Agent shall (i) if requested by Banks
having more than 50% in aggregate amount of the Commitments, by notice to
the Borrower terminate the Commitments and they shall thereupon terminate,
and (ii) if requested by Banks holding Notes evidencing more than 50% in
aggregate principal amount of the Loans, by notice to the Borrower declare
the Notes (together with accrued interest thereon) to be, and the Notes
shall thereupon become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived
by the Borrower; provided that in the case of any of the Events of Default
specified in clause (g) or (h) above with respect to the Borrower, without
any notice to the Borrower or any other act by the Agent or the Banks, the
Commitments shall thereupon terminate and the Notes (together with accrued
interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to
the Borrower under Section 6.01(c) promptly upon being requested to do so
by any Bank and shall thereupon notify all the Banks thereof.
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ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement and the
Notes as are delegated to the Agent by the terms hereof or thereof,
together with all such powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company
of New York shall have the same rights and powers under this Agreement as
any other Bank and may exercise or refrain from exercising the same as
though it were not the Agent, and Morgan Guaranty Trust Company of New York
and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower or any Subsidiary or
affiliate of the Borrower as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any
action with respect to any Default, except as expressly provided in Article
VI.
SECTION 7.04. Consultation with Experts. The Agent may consult
with legal counsel (who may be counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable
for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of
its affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Agent nor any of its affiliates nor any of their
respective directors, officers, agents or employees shall be responsible
for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this
Agreement or any borrowing hereunder; (ii) the performance or observance of
any of the covenants or agreements of the Borrower; (iii) the satisfaction
of any condition specified in Article III, except receipt of items required
to be
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delivered to the Agent; or (iv) the validity, effectiveness or
genuineness of this Agreement, the Notes or any other instrument or writing
furnished in connection herewith. The Agent shall not incur any liability
by acting in reliance upon any notice, consent, certificate, statement, or
other writing (which may be a bank wire, telex, facsimile transmission or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent, its affiliates and
their respective directors, officers, agents and employees (to the extent
not reimbursed by the Borrower) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitees' gross negligence or willful
misconduct) that such indemnitees may suffer or incur in connection with
this Agreement or any action taken or omitted by such indemnitees
hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement.
Each Bank also acknowledges that it will, independently and without
reliance upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under this
Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time
by giving notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of America
or of any State thereof and having a combined capital and surplus of at
least $50,000,000. Upon the acceptance of its appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the
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provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent
for its own account fees in the amounts and at the times previously agreed
upon between the Borrower and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any
Fixed Rate Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the
Reference Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having 50% or more
of the aggregate amount of the Commitments advise the Agent that the
Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the
case may be, as determined by the Agent will not adequately and fairly
reflect the cost to such Banks of funding their CD Loans or Euro-Dollar
Loans, as the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the
Banks, whereupon until the Agent notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case
may be, shall be suspended. Unless the Borrower notifies the Agent at
least two Domestic Business Day before the date of any Fixed Rate Borrowing
for which a Notice of Borrowing has previously been given that it elects
not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed
Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing
and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing,
the Money Market LIBOR Loans comprising such Borrowing shall bear interest
for each day from and including the first day to but excluding the last day
of the Interest Period applicable thereto at the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of the
Original Agreement, the adoption of any
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applicable law, rule or regulation,
or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with
any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank (or its Euro-Dollar Lending Office) to make,
maintain or fund its Euro-Dollar Loans and such Bank shall so notify the
Agent, the Agent shall forthwith give notice thereof to the other Banks and
the Borrower, whereupon until such Bank notifies the Borrower and the Agent
that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be suspended.
Before giving any notice to the Agent pursuant to this Section, such Bank
shall designate a different Euro-Dollar Lending Office if such designation
will avoid the need for giving such notice and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. If such Bank shall
determine that it may not lawfully continue to maintain and fund any of its
outstanding Euro-Dollar Loans to maturity and shall so specify in such
notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued
interest thereon. Concurrently with prepaying each such Euro-Dollar Loan,
the Borrower shall borrow a Base Rate Loan in an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks),
and such Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or
after (x) the date of the Original Agreement, in the case of any Committed
Loan or any obligation to make Committed Loans or (y) the date of the
related Money Market Quote, in the case of any Money Market Loan, the
adoption of any applicable law, rule or regulation, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:
(i) shall subject any Bank (or its Applicable Lending Office) to
any tax, duty or other charge with respect to its Fixed Rate Loans, its
Note or its obligation to make Fixed Rate Loans, or shall change
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the basis of taxation of payments to any Bank (or its Applicable Lending
Office) of the principal of or interest on its Fixed Rate Loans or any
other amounts due under this Agreement in respect of its Fixed Rate
Loans or its obligation to make Fixed Rate Loans (except for changes in
the rate of tax on the overall net income of such Bank or its Applicable
Lending Office imposed by the jurisdiction in which such Bank's
principal executive office or Applicable Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding (A) with respect
to any CD Loan any such requirement included in an applicable Domestic
Reserve Percentage and (B) with respect to any Euro-Dollar Loan any such
requirement included in an applicable Euro-Dollar Reserve Percentage),
special deposit, insurance assessment (excluding, with respect to any CD
Loan, any such requirement reflected in an applicable Assessment Rate)
or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Bank (or its Applicable Lending
Office) or shall impose on any Bank (or its Applicable Lending Office)
or on the United States market for certificates of deposit or the London
interbank market any other condition affecting its Fixed Rate Loans, its
Note or its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank
(or its Applicable Lending Office) of making or maintaining any Fixed Rate
Loan, or to reduce the amount of any sum received or receivable by such
Bank (or its Applicable Lending Office) under this Agreement or under its
Note with respect thereto, by an amount deemed by such Bank to be material,
then, within 15 days after demand by such Bank (with a copy to the Agent),
the Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date of the
Original Agreement, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank
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or comparable agency, has or would have the effect of reducing
the rate of return on capital of such Bank (or its Parent) as a consequence
of such Bank's obligations hereunder to a level below that which such Bank
(or its Parent) could have achieved but for such adoption, change, request
or directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then
from time to time, within 15 days after demand by such Bank (with a copy to
the Agent), the Borrower shall pay to such Bank such additional amount or
amounts as will compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of
any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. A certificate of any Bank claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods. If any Bank demands compensation under Section
8.03(a), the Borrower may at any time, upon at least five Euro-Dollar
Business Days' prior notice to such Bank through the Agent, prepay in full
the then outstanding CD Loans or Euro-Dollar Loans, as the case may be, of
such Bank, together with accrued interest thereon to the date of
prepayment. Concurrently with prepaying each such Fixed Rate Loan, the
Borrower shall borrow a Base Rate Loan in an equal principal amount from
such Bank (on which interest and principal shall be payable
contemporaneously with the related CD Loans or Euro-Dollar Loans, as the
case may be, of the other Banks), and such Bank shall make such a Base Rate
Loan.
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has
been suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03(a) and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through the Agent,
have elected that the provisions of this Section shall apply to such Bank,
then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer apply:
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(a) all Loans which would otherwise be made by such Bank as CD
Loans or Euro-Dollar Loans, as the case may be, shall be made instead as
Base Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of the other Banks),
and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case
may be, has been repaid, all payments of principal which would otherwise
be applied to repay such Fixed Rate Loans shall be applied to repay its
Base Rate Loans instead.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. (a) Except as provided in subsection (b)
of this Section, all notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given to such party: (x) in
the case of the Borrower or the Agent, at its address or telex number set
forth on the signature pages hereof, (y) in the case of any Bank, at its
address or telex number set forth in its Administrative Questionnaire or
(z) in the case of any party, such other address or telex number as such
party may hereafter specify for the purpose by notice to the Agent and the
Borrower. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the
telex number specified in this Section and the appropriate answerback is
received, (ii) if given by mail in connection with Section 2.13, 6.01,
6.02, 8.01, 8.03 or 9.03, when received, (iii) if given by mail in
connection with any other Section of this Agreement, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered
at the address specified in this Section; provided that notices to the
Agent under Article II or Article VIII shall not be effective until
received.
(b) The Borrower hereby authorizes (i) the Agent to accept
telephonic Notices of Borrowing to the Agent made by any Person or Persons
whom the Agent in good faith believes to be an authorized officer acting on
behalf of the Borrower and (ii) each of the Banks to extend Loans based on
such Notices of Borrowing. The Borrower agrees to confirm promptly in
writing (including bank wire, telefax, facsimile transmission or similar
writing) to the Agent any telephonic Notice of Borrowing. If the written
confirmation differs in
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any material respect from the action taken by the
Agent, the records of the Agent shall govern absent manifest error. The
Borrower hereby agrees to indemnify and hold the Agent and the Banks
harmless from any loss or expense they might incur in acting in good faith
on the request of any unauthorized Person.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any
Bank in exercising any right, power or privilege hereunder or under any
Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification. (a)
The Borrower shall pay (i) all reasonable out-of-pocket expenses of the
Agent, including reasonable fees and disbursements of special counsel for
the Agent, in connection with the preparation of this Agreement, any waiver
or consent hereunder or any amendment hereof, except for any such waiver,
consent or amendment given or made expressly and solely at the written
request of the Banks, or any Default or alleged Default hereunder and (ii)
if an Event of Default occurs, all out-of-pocket expenses incurred by the
Agent and each Bank, including fees and disbursements of counsel, in
connection with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom. The
Borrower shall indemnify each Bank against any transfer taxes, documentary
taxes, assessments or charges made by any governmental authority by reason
of the execution and delivery of this Agreement or the Notes.
(b) The Borrower agrees to indemnify each Bank and hold each Bank
harmless from and against any and all liabilities, losses, damages, costs
(including without limitation, settlement costs) and expenses of any kind,
including, without limitation, the reasonable fees and disbursements of
counsel (including but not limited to allocated time and other reasonable
charges of attorneys who are employees of such Bank) which may be incurred
by any Bank (or by the Agent in connection with its actions as Agent
hereunder) in connection with any investigative, administrative or judicial
proceeding (whether or not such Bank shall be designated a party thereto)
relating to or arising out of this Agreement or any actual or proposed use
of proceeds of Loans hereunder; provided that no Bank shall have the right
to be indemnified hereunder for its own gross
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negligence or willful misconduct as determined by a court of competent
jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to any Note held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to any Note held by such other
Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the Notes held by the other Banks, and such
other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Notes held by the
Banks shall be shared by the Banks pro rata; provided that nothing in this
Section shall impair the right of any Bank to exercise any right of set-off
or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness under the Notes. The Borrower agrees, to the fullest extent
it may effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of the Agent are affected
thereby, by the Agent); provided that no such amendment or waiver shall,
unless signed by all the Banks, (i) increase or decrease the Commitment of
any Bank (except for a ratable decrease in the Commitments of all Banks) or
subject any Bank to any additional obligation, (ii) reduce the principal of
or rate of interest (including without limitation, the rate of Additional
Interest) on any Loan or any fees hereunder, (iii) postpone the date fixed
for any payment of principal of or interest (including without limitation,
any Additional Interest) on any Loan or any fees hereunder or for any
reduction or termination of any Commitment, or (iv) change the percentage
of the Commitments or of the aggregate unpaid principal amount of the
Notes, or the number of Banks, which shall be required for the Banks or any
of them to take any action under this Section or any other provision of
this Agreement.
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SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its
Commitment or any or all of its Loans. In the event of any such grant by a
Bank of a participating interest to a Participant, whether or not upon
notice to the Borrower and the Agent, such Bank shall remain responsible
for the performance of its obligations hereunder, and the Borrower and the
Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement.
Any agreement pursuant to which any Bank may grant such a participating
interest shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement; provided that
such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause
(i), (ii), or (iii) of Section 9.05 without the consent of the Participant.
The Borrower agrees that each Participant shall, to the extent provided in
its participation agreement, be entitled to the benefits of Article VIII
with respect to its participating interest. An assignment or other
transfer which is not permitted by subsection (c) or (d) below shall be
given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of
its rights and obligations under this Agreement and the Notes, and such
Assignee shall assume such rights and obligations, pursuant to an
Assignment and Assumption Agreement in substantially the form of Exhibit G
hereto executed by such Assignee and such transferor Bank, with (and
subject to) the subscribed consent (which consent shall not be unreasonably
withheld) of the Borrower and the Agent; provided that (A) if an Assignee
is an affiliate of such transferor Bank or a Bank, no such consent shall be
required, but the transferor Bank agrees promptly upon such assignment to
notify the Borrower thereof, (B) each assignment hereunder to any Person
other than a Bank shall be in an amount of at least $5,000,000
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unless such assignment constitutes an assignment of all of the transferor
Bank's Commitment and Loans hereunder and (C) such assignment may, but need not,
include rights of the transferor Bank in respect of outstanding Money
Market Loans. Upon execution and delivery of such instrument and payment
by such Assignee to such transferor Bank of an amount equal to the purchase
price agreed between such transferor Bank and such Assignee, such Assignee
shall be a Bank party to this Agreement and shall have all the rights and
obligations of a Bank with a Commitment as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by
any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and the
Borrower shall make appropriate arrangements so that, if required, a new
Note is issued to the Assignee. In connection with any such assignment,
the transferor Bank shall pay to the Agent an administrative fee for
processing such assignment in the amount of $2,000. If the Assignee is not
incorporated under the laws of the United States of America or a state
thereof, it shall, prior to the first date on which interest or fees are
payable hereunder for its account, deliver to the Borrower and the Agent
certification as to exemption from deduction or withholding of any United
States federal income taxes in accordance with Section 2.16.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No
such assignment shall release the transferor Bank from its obligations
hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03
than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02 or 8.03
requiring such Bank to designate a different Applicable Lending Office
under certain circumstances or at a time when the circumstances giving rise
to such greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the
Agent and each of the other Banks that it in good faith is not relying upon
any "margin stock" (as defined in Regulation U) as collateral in the
extension or maintenance of the credit provided for in this Agreement.
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SECTION 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance
with the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in
New York City for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient
forum.
SECTION 9.09. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject
matter hereof.
SECTION 9.10. Confidentiality. The Agent and each Bank agree that
they will maintain the confidentiality of, and will not use for any
commercial purpose (other than exercising its rights and enforcing its
remedies hereunder and under its Note), any written or oral information
provided under this Agreement by or on behalf of the Borrower that has been
identified by its source as confidential, including any information
provided pursuant to Section 5.06 (hereinafter collectively called
"Confidential Information"), subject to the Agent's and each Bank's (a)
obligation to disclose any such Confidential Information pursuant to a
request or order under applicable laws and regulations or pursuant to a
subpoena or other legal process, (b) right to disclose any such
Confidential Information to its bank examiners, affiliates, auditors,
counsel and other professional advisors and to other Banks, (c) right to
disclose any such Confidential Information in connection with any
litigation or dispute involving the Banks and the Borrower or any of its
Subsidiaries and affiliates and (d) right to provide such information to
participants, prospective participants or prospective assignees pursuant to
Section 9.06 if such participant, prospective participant or prospective
assignee agrees to maintain the confidentiality of such information on
terms substantially similar to those of this Section as if it were a "Bank"
party hereto. Notwithstanding the foregoing, any such information supplied
to a Bank, participant,
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prospective participant or prospective assignee under this
Agreement shall cease to be Confidential Information if it is or
becomes known to such Person by other than unauthorized disclosure, or if
it is, at the time of disclosure, or becomes a matter of public knowledge.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day
and year first above written.
CONE MILLS CORPORATION
By /s/ John L. Bakane
Title: Vice President and Chief
Financial Officer
1201 Maple Street
Greensboro, North Carolina 27405
Telex number: 5109251120
Telecopy number: (910) 379-6287
Attention: David E. Bray
Treasurer
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Commitments
$20,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ David B. Common
Title: Vice President
$20,000,000 FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By /s/ Kent L. Phillips
Title: Vice President
$20,000,000 NATIONSBANK OF NORTH
CAROLINA, N.A.
By /s/ Alison H. Mewborne
Title: Vice President
$20,000,000 WACHOVIA BANK OF NORTH
CAROLINA, N.A.
By /s/ Charles D. Barham, III
Title: Corporate Banking Officer
_________________
Total Commitments
$80,000,000
=================
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MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ David B. Common
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Telex number: 177615
Attention:
65
<PAGE>
EXHIBIT A
NOTE
New York, New York
, 1994
For value received, Cone Mills Corporation, a North Carolina
corporation (the "Borrower"), promises to pay to the order of
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to
the Credit Agreement referred to below on the last day of the Interest
Period relating to such Loan. The Borrower promises to pay interest on the
unpaid principal amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in Federal
or other immediately available funds at the office of Morgan Guaranty Trust
Company of New York, 60 Wall Street, New York, New York.
All Loans made by the Bank, the Types and maturities thereof and
all repayments of the principal thereof shall be recorded by the Bank and,
if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding may be endorsed by the Bank on
the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of the Bank
to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Amended and
Restated Credit Agreement dated as of November 18, 1994 among the Borrower,
the banks listed on the signature pages thereof and Morgan Guaranty Trust
Company of New York, as Agent (as the same may be amended from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are
used herein with the same meanings.
<PAGE>
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
CONE MILLS CORPORATION
By________________________
Title:
2
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
__________________________________________________________________
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
3
<PAGE>
EXHIBIT B
Form of Money Market Quote Request
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: Cone Mills Corporation
Re: Amended and Restated Credit Agreement (the "Credit
Agreement") dated as of November 18, 1994 among the
Borrower, the Banks listed on the signature pages
thereof and the Agent
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes for the following proposed
Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount2 Interest Period3
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
2Amount must be $5,000,000 or a larger multiple of
$1,000,000.
3Not less than one month (LIBOR Auction) or not less
than 7 days nor more than 180 days (Absolute Rate Auction),
subject to the provisions of the definition of Interest
Period.
<PAGE>
Terms used herein have the meanings assigned to them in the Credit
Agreement.
CONE MILLS CORPORATION
By________________________
Title:
2
<PAGE>
EXHIBIT C
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Cone Mills
Corporation (the "Borrower")
Pursuant to Section 2.03 of the Amended and Restated Credit
Agreement dated as of November 18, 1994 among the Borrower, the Banks
listed on the signature pages thereof and the undersigned, as Agent, we are
pleased on behalf of the Borrower to invite you to submit Money Market
Quotes to the Borrower for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.]
[9:30 A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By______________________
Authorized Officer
<PAGE>
EXHIBIT D
Form of Money Market Quote
To: Morgan Guaranty Trust Company of New York,
as Agent
Re: Money Market Quote to Cone Mills Corporation (the
"Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
$
$
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed
$____________.]**
__________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the
individual offers exceeds the amount the Bank is willing to lend. Bids
must be made for $5,000,000 or a larger multiple of $1,000,000.
(notes continued on following page)
<PAGE>
We understand and agree that the offer(s) set forth above, subject
to the satisfaction of the applicable conditions set forth in the Amended
and Restated Credit Agreement dated as of November 18, 1994 among the
Borrower, the Banks listed on the signature pages thereof and yourselves,
as Agent, irrevocably obligates us to make the Money Market Loan(s) for
which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
__________
*** Not less than one month or not less than 7 days or more than 180 days,
as specified in the related Invitation. No more than five bids are
permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for
the applicable Interest Period. Specify percentage (to the nearest
1/10,000 of 1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%)
2
<PAGE>
EXHIBIT E
OPINION OF GENERAL
COUNSEL OF THE BORROWER
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am the General Counsel of Cone Mills Corporation, a North
Carolina corporation (the "Borrower"), and have acted as counsel for the
Borrower in connection with the Amended and Restated Credit Agreement (the
"Credit Agreement") dated as of November 18, 1994 among the Borrower, the
banks listed on the signature pages thereof and Morgan Guaranty Trust
Company of New York, as Agent. Terms defined in the Credit Agreement are
used herein as therein defined. This opinion is being rendered to you at
the request of my client pursuant to Section 3.01(c) of the Credit
Agreement.
In connection with the preparation of this opinion, I have reviewed
the originals or copies, certified or otherwise identified to my
satisfaction, of the following documents:
(a) The Credit Agreement;
(b) The form of the Notes;
(c) The Articles of Incorporation of the Borrower;
(d) A Certificate of Existence of the Borrower as certified by the
Secretary of State of North Carolina on November 18, 1994;
(e) The bylaws of the Borrower; and
(f) Corporate resolutions of the Borrower, authorizing the
execution, delivery and performance of the Credit Agreement and the
Notes.
<PAGE>
In such examination, I have assumed the genuineness of all
signatures, the authenticity of all documents submitted to me as originals,
the conformity to originals of all documents submitted to me as certified,
photostatic or conformed copies, and the authenticity of the originals of
such documents.
I call your attention to the fact that the Credit Agreement states
that the Credit Agreement and each Note are to be construed in accordance
with and governed by the laws of the State of New York. Please be advised
that I am a member of the bar of the State of North Carolina and do not
purport to be an expert in the laws of any jurisdiction other than the
State of North Carolina and the United States of America. Accordingly,
this opinion is limited in all respects to the laws of the State of North
Carolina and of the United States and, in expressing the opinion set forth
in paragraph 3 hereof, we have assumed without independent investigation
that the laws of the State of New York are substantially identical in all
relevant respects to the laws of the State of North Carolina.
Based solely upon and subject to the foregoing, and the
qualifications and limitations set forth below, it is my opinion that:
1. Each of the Borrower and its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted, and is duly qualified as a foreign
corporation in good standing in each jurisdiction where it is required by
applicable law to be so qualified and the failure so to qualify or be in
good standing would have a material adverse effect on the business,
financial condition or operations of the Borrower and its Subsidiaries,
taken as a whole.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers,
have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency
or official (other than routine filings after the date hereof with the
Securities and Exchange Commission and with state securities commissions)
and do not contravene, or constitute a default under, any provisions of
applicable law or regulation or of the articles of incorporation or by-laws
of the Borrower or of any agreement, judgment, injunction, order, decree or
other instrument binding upon the Borrower
2
<PAGE>
or result in the creation or imposition of any Lien on any asset of the
Borrower or any of its Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement
of the Borrower and the Notes constitute valid and binding obligations of
Borrower.
4. Except as set forth in the Borrower's Second Quarter 10-Q,
there is no action, suit or proceeding pending against, or to the best of
my knowledge threatened against or affecting, the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body,
agency or official, in which there is a reasonable possibility of an
adverse decision which could materially adversely affect the business,
consolidated financial position or consolidated results of operations of
the Borrower and its Consolidated Subsidiaries or which in any manner draws
into question the validity of the Credit Agreement or the Notes.
This opinion is solely for the benefit of the Banks and the Agent
in connection with the transactions provided for in or contemplated by the
Credit Agreement. It may not be otherwise distributed or relied upon by
any person or quoted or reproduced, in whole or in part, in any other
document or filed with any government agency without our prior written
consent.
Very truly yours,
3
<PAGE>
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Amended and Restated
Credit Agreement (the "Credit Agreement") dated as of November 18, 1994
among Cone Mills Corporation, a North Carolina corporation (the
"Borrower"), the banks listed on the signature pages thereof (the "Banks")
and Morgan Guaranty Trust Company of New York, as Agent (the "Agent"), and
have acted as special counsel for the Agent for the purpose of rendering
this opinion pursuant to Section 3.01(d) of the Credit Agreement. Terms
defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted
such other investigations of fact and law as we have deemed necessary or
advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that the
Credit Agreement constitutes a valid and binding agreement of the Borrower
and each Note constitutes a valid and binding obligation of the Borrower,
in each case enforceable in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York and the
federal laws of the United States of America. In giving the foregoing
opinion (i) we express
<PAGE>
no opinion as to the effect (if any) of any law of
any jurisdiction (except the State of New York) in which any Bank is
located which limits the rate of interest that such Bank may charge or
collect and (ii) we have relied, without independent investigation, as to
all matters relevant to such opinion that are governed by the laws of the
State of North Carolina upon the opinions of Neil Koonce, General Counsel
of the Borrower, dated November 18, 1994, a copy of which has been
delivered to you.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other
purpose or relied upon by any other person without our prior written
consent.
Very truly yours,
2
<PAGE>
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), CONE MILLS CORPORATION (the
"Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Amended and Restated Credit Agreement dated as of November
18, 1994 among the Borrower, the Assignor and the other Banks party
thereto, as Banks, and the Agent (as amended, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower in an aggregate principal amount
at any time outstanding not to exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion
of its Commitment thereunder in an amount equal to $__________ (the
"Assigned Amount"), together with a corresponding portion of its
outstanding Committed Loans, and the Assignee proposes to accept assignment
of such rights and assume the corresponding obligations from the Assignor
on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to
the Assignee all of the rights of the Assignor under the Credit Agreement
to the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the
<PAGE>
obligations of the Assignor under the Credit Agreement to the extent of the
Assigned Amount, including the purchase from the Assignor of the corresponding
portion of the principal amount of the Committed Loans made by the Assignor
outstanding at the date hereof. Upon the execution and delivery hereof by
the Assignor, the Assignee, the Borrower and the Agent and the payment of
the amounts specified in Section 3 required to be paid on the date hereof
(i) the Assignee shall, as of the date hereof, succeed to the rights and be
obligated to perform the obligations of a Bank under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount, and (ii) the
Commitment of the Assignor shall, as of the date hereof, be reduced by a
like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee.
The assignment provided for herein shall be without recourse to the
Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds an amount equal to $_________.4 It is
understood that facility fees accrued to the date hereof are for the
account of the Assignor and such fees accruing from and including the date
hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit
Agreement which is for the account of the other party hereto, it shall
receive the same for the account of such other party to the extent of such
other party's interest therein and shall promptly pay the same to such
other party.
[SECTION 4. Consent of the Borrower and the Agent. This Agreement
is conditioned upon the consent (which shall not be unreasonably withheld)
of the Borrower and the Agent pursuant to Section 9.06(c) of the Credit
Agreement. The execution of this Agreement by the Borrower and the Agent
is evidence of this consent. Pursuant to Section 9.06(c) the Borrower
agrees to execute and deliver a Note payable to the order of the Assignee
to evidence the assignment and assumption provided for herein, and the
Assignor agrees, if the assignment is for all of the
4 Amount should combine principal together with accrued
interest and breakage compensation, if any, to be paid by
the Assignee, net of any portion of any upfront fee to be
paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically
or by formula rather than as a fixed sum.
2
<PAGE>
Assignor's Commitment and Loans, promptly to cancel its Note and return it
to the Borrower.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition, or
statements of the Borrower, or the validity and enforceability of the
obligations of the Borrower in respect of the Credit Agreement or any Note.
The Assignee acknowledges that it has, independently and without reliance
on the Assignor, and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Agreement and will continue to be responsible for making its own
independent appraisal of the business, affairs and financial condition of
the Borrower.
SECTION 6. Withholding Tax Exemption. If the Assignee is not
incorporated under the laws of the United States of America or a state
thereof, it shall, prior to the first date on which interest or fees are
payable hereunder for its account, deliver to the Borrower and the Agent
certification as to exemption from deduction or withholding of any United
States federal income taxes in accordance with Section 2.14 of the Credit
Agreement.
SECTION 7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 8. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date
first above written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By__________________________
Title:
CONE MILLS CORPORATION
By__________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By__________________________
Title:
4
<PAGE>
Exhibit 4.2
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
c/o Prudential Capital Corporation
Three Gateway Center
Newark, New Jersey 07102
As of September 11, 1992
CONE MILLS CORPORATION
1201 Maple Street
Greensboro, North Carolina 27405
Attn: Mr. John Bakane, Chief Financial Officer
Ladies and Gentlemen:
This letter is to amend that certain Note Agreement dated as of
August 13, 1992 (the "Note Agreement") between Cone Mills Corporation
(the "Company") and The Prudential Insurance Company of America
("Prudential").
Pursuant to Paragraph 11C of the Note Agreement, Prudential and
the Company hereby agree that the current Exhibit C to the Note
Agreement shall be replaced in its entirety with a new Exhibit C in the
form attached.
Except as amended herein, all of the terms, conditions and
obligations of the Note Agreement shall remain in full force and effect.
If the Company agrees to this amendment, please sign each copy of
this letter enclosed and return two of them to Prudential, whereupon
this letter shall become a binding agreement as of the date first above
written.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Charles King
----------------
Vice President
(Signatures Continued on Following Page)
<PAGE>
Cone Mills Corporation
September 11, 1992
Page 2
Agreed to and accepted
as of September 11, 1992.
CONE MILLS CORPORATION
By: /s/ David E. Bray
-----------------
Treasurer
<PAGE>
EXHIBIT C
to
Note Agreement
Permitted Liens
All Liens or obligations arising out of or existing under
the following agreements or circumstances:
1. Exclusive Supply Agreement with Levi Strauss dated
March 30, 1992.
2. March 20, 1992 Judgment of the U.S. District Court in
William J. Elmore et al. v. Cone Mills Corporation et
al. (secured on appeal), including, but not limited to
any escrow arrangements to the extent such judgment
lien does not violate Paragraph 7A of the Note
Agreement.
3. Receivables Purchase Agreement between the Company and
Delaware Funding Corporation dated August 11, 1992.
Any common law right of set off or banker's lien of the
following:
1. Delaware Funding Corporation ("DFC") under the
Receivables Purchase Agreement (as defined in the Note
Agreement) so long as the Letter Agreement dated August
13, 1992 between DFC and the Prudential Insurance
Company of America and Morgan Guaranty Trust Company of
New York, as agent for the Banks is in full force and
effect;
2. Any bank a party to the Credit Agreement (as defined in
the Note Agreement); and
3. Any other financial institution with which the Company
does not have any arrangement or accommodation for
Funded Debt (including a lock box account under the
Receivables Purchase Agreement); except as permitted in
the following paragraph 4.
4. Bank of America but only for a Lock Box Account of or
for the Company under the Receivables Purchase
Agreement and only if the Company does not at any time
have any Indebtedness to Bank of America.
<PAGE>
Exhibit 4.3
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
c/o Prudential Capital Group
Four Gateway Center
Newark, New Jersey 07102
As of July 19, 1993
CONE MILLS CORPORATION
1201 Maple Street
Greensboro, North Carolina 27405
Attn: Mr. David Bray, Treasurer
Ladies and Gentlemen:
This letter is to amend the Note Agreement dated as of August 13,
1992, as amended previously (the "Note Agreement") between Cone Mills
Corporation (the "Company") and The Prudential Insurance Company of
America ("Prudential"). Capitalized words in this letter shall have the
same meaning as in the Note Agreement except as otherwise defined
herein. Prudential and the Company agree that the Note Agreement shall
be amended as follows:
1. Paragraph 6C(2) is amended to restate clause (2) thereof as
follows:
"(2) Priority Debt (other than the Cornwallis Debt) to
exceed 15% of Consolidated Net Tangible Assets at any time;
provided, however, in no event shall an amount greater than 10%
of Consolidated Net Tangible Assets be attributable to Priority
Debt which is unrelated to the Receivables Financing; and"
2. Paragraph 6C(7) is amended by inserting the following clause
just before the period punctuation at the end of that paragraph:
"and (iii) any purchase by the Company or any Subsidiary of
finished goods from Parras Cone de Mexico S.A. de C.V."
3. Paragraph 10B is amended to restate the following definitions
as follows:
""Cornwallis Debt" shall mean up to $15,000,000 aggregate
principal amount at any time outstanding of Debt incurred by Cornwallis,
the repayment of which is (l) nonrecourse to the Company or any of its
Subsidiaries (other than Cornwallis) and (2) secured solely by
property 100% owned by Cornwallis and in an amount not more than
1.75 times the aggregate principal amount of such Debt."
<PAGE>
Cone Mills Corporation
As of July 19, 1993
Page 2
"Subsidiary" shall mean (l) Cone Mills (Mexico) S.A. de C.V.
and (2) any corporation organized under the laws of any state of
the United States of America, Canada, or any province of Canada,
which conducts the major portion of its business in and makes the
major portion of its sales to Persons located in the United States
or Canada; in either case, whose accounts are, or are required to
be, consolidated with the Company's accounts in accordance with
generally accepted accounting principles."
4. The definition "International Investment" in paragraph 10B
shall be redefined as follows:
""International Investment" shall mean the Investment by the
Company, directly or indirectly, in Cone Mills (Mexico) S.A. de
C.V., Parras Cone de Mexico S.A. de C.V., and Compania Industrial
de Parras S.A. de C.V."
5. Except as amended herein, all of the terms, conditions and
obligations of the Note Agreement shall remain in full force and effect.
If you agree to these changes, please sign each copy of this
letter enclosed and return two of them to Prudential, at which time this
letter shall become a binding agreement as of the date first above
written.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Charles King
----------------
Vice President
Agreed to and accepted
as of July 19, 1993.
CONE MILLS CORPORATION
By: /s/ David E. Bray
-------------
Treasurer
<PAGE>
Exhibit 4.4
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
c/o Prudential Capital Group
Four Gateway Center
Newark, New Jersey 07102
As of June 30, 1994
CONE MILLS CORPORATION
1201 Maple Street
Greensboro, North Carolina 27405
Attn: Mr. David Bray, Treasurer
Ladies and Gentlemen:
This letter is to amend the Note Agreement dated as of August 13,
1992, as amended previously (the "Note Agreement") between Cone Mills
Corporation (the "Company") and The Prudential Insurance Company of
America ("Prudential"). Capitalized words in this letter shall have the
same meaning as in the Note Agreement except as otherwise defined
herein. Prudential and the Company agree that the Note Agreement shall
be amended as follows:
1. Paragraph 6H is amended to restate clauses (ii) and (iii)
thereof as follows:
"(ii) all the Purchased Interest (as defined in the Purchase
Agreement) in the Receivables (as defined in the Purchase
Agreement) to exceed $78,000,000, or at any time after the
effectiveness of the amendment contemplated by paragraph 5K,
$70,000,000; or (iii) all the Maximum Net Investment (as defined
in the Purchase Agreement) to exceed $50,000,000."
2. Except as amended herein, all of the terms, conditions and
obligations of the Note Agreement shall remain in full force and effect.
<PAGE>
Cone Mills Corporation
As of June 30, 1994
Page 2
If you agree to these changes, please sign each copy of this
letter enclosed and return two of them to Prudential, at which time this
letter shall become a binding agreement as of the date first above
written.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Robert R. Derrick
---------------------
Vice President
Agreed to and accepted
as of June 30, 1994
CONE MILLS CORPORATION
By: /s/ David E. Bray
-----------------
Treasurer
Exhibit 4.5
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
c/o Prudential Capital Group
Four Gateway Center
Newark, New Jersey 07102
As of November 14, 1994
CONE MILLS CORPORATION
1201 Maple Street
Greensboro, North Carolina 27405
Attn: Mr. David Bray, Treasurer
Ladies and Gentlemen:
This letter is to amend the Note Agreement dated as of August 13, 1992,
as amended previously (the "Note Agreement") between Cone Mills Corporation
(the "Company") and The Prudential Insurance Company of America
("Prudential"). Capitalized words in this letter shall have the same meaning
as in the Note Agreement except as otherwise defined herein. Prudential and
the Company agree that the Note Agreement shall be amended as follows:
1. Paragraph 6A is hereby amended and restated in its entirety as
follows:
"6A. FUNDS FROM OPERATIONS TO DEBT RATIO. The Company covenants that
it will not permit its Funds from Operations to Debt Ratio to be less
than 26% at the end of any fiscal quarter."
2. Paragraph 6B is hereby amended and restated in its entirety as follows:
"6B. [Intentionally omitted]"
3. Clause(3) of paragraph 6C(2) is hereby deleted and clauses (1) and (2)
of Paragraph 6C(2) are hereby amended and restated in their entirety as
follows:
"(1) the sum of (i) Debt, whether Secured or Unsecured (other than the
Cornwallis Debt) of the Company and its Subsidiaries, plus (ii) eight (8)
times Rental Charges to exceed at any time an amount equal to 61% of the
sum of Total Capitalization plus eight (8) times Rental Charges at such
time; and
(2) Priority Debt (other than the Cornwallis Debt) to exceed at any
time an amount equal to 10% of Total Capitalization at such time;
<PAGE>
Cone Mills Corporation
As of November 14, 1994
Page 2
4. Paragraph 6C(3)(v) is hereby amended and restated in its entirety as
follows:
"make or permit to remain outstanding other Investments in an aggregate
amount which does not at any time exceed 20% of Total Capitalization."
5. Clause (iii) of Paragraph 6H is hereby deleted and clause (ii) of
paragraph 6H is hereby amended and restated as follows:
"or (ii) all the Maximum Net Investment (as defined in the Purchase
Agreement) to exceed 60% of Receivables (as defined in the Purchase
Agreement)."
6. The definitions of "CONSOLIDATED NET EARNINGS" and "SECURED DEBT"
contained in Paragraph 10B are hereby amended and restated in their entirety
as follows:
""CONSOLIDATED NET EARNINGS" shall mean consolidated net revenues of
the Company and its Subsidiaries taken as a whole less all operating and
nonoperating expenses of the Company and its Subsidiaries, but not
including in net revenues any gains (net of expenses and taxes applicable
thereto) in excess of losses resulting from the sale, conversion or other
disposition of capital assets other than in the ordinary course of business
consistent with the Company's practices existing on the Date of Closing
(i.e., assets other than assets included in the determination of Current
Assets), any gains resulting from the write-up of assets, any earnings of
any Person acquired by the Company or any Subsidiary through purchase,
merger or consolidation or otherwise for any year prior to the year of
acquisition, or any deferred credit representing the excess of equity in
any Subsidiary at the date of acquisition over the cost of the investment
in such Subsidiary, financing gains from debt restructuring or repurchases,
any dividends or other income earned from any equity securities held or
sold by the Company or any Subsidiary or the amount of any minority
interest, all as determined in accordance with generally accepted
accounting principles.
"RENTAL CHARGES" shall mean, on any determination date, all payment
obligations of the Company and its Subsidiaries under all Operating
Leases for most recently ended four fiscal quarters, determined on a
consolidated basis.
"SECURED DEBT" shall mean, without duplication, (i) the aggregate
principal amount outstanding of all Debt secured by Liens permitted under
Paragraph 6C(1), and (ii) any Capitalized Lease Obligation."
<PAGE>
Cone Mills Corporation
As of November 14, 1994
Page 3
7. Paragraph 10B is hereby amended by adding the following definitions
in alphabetical order:
""FUNDS FROM OPERATIONS" shall mean, on any determination date, the sum
of Consolidated Net Earnings for the four fiscal quarters ending on such
determination date plus the amount of any reserves for deferred income
taxes, depreciation and amortization deducted in determining Consolidated
Net Earnings.
"FUNDS FROM OPERATIONS TO DEBT RATIO" shall mean, on any determination
date, the quotient (expressed as a percentage) of (i) Funds from Operations
for the fiscal quarter ending on such determination date divided by (ii)
Debt.
"TOTAL CAPITALIZATION" shall mean, on any determination date, the sum of
(i) Debt and (ii) consolidated stockholder's equity of the Company and its
Subsidiaries determined in accordance with generally accepted accounting
principles."
7. Except as amended herein, all of the terms, conditions and obligations
of the Note Agreement shall remain in full force and effect.
If you agree to these changes, please sign each copy of this letter
enclosed and return two of them to Prudential, at which time this letter
shall become a binding agreement as of the date first above written.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Robert R. Derrick
Vice President
Agreed to and accepted
as of November 17, 1994
CONE MILLS CORPORATION
By: /s/ David E. Bray
Treasurer
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANT
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 33-57713) and the Registration Statements on Form S-8
(Nos. 33-31977, 33-31979, 33-51951 and 33-51953) of our report dated February
10, 1995 which appears on page F-1 of the Form 8-K of Cone Mills Corporation and
subsidiaries dated March 1, 1995 with respect to their consolidated financial
statements.
MCGLADREY & PULLEN, LLP
Greensboro, North Carolina
March 1, 1995
