Page 1 of 165
Index to Exhibits-Pages 21-31
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
Commission file number 1-3634
CONE MILLS CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 56-0367025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3101 North Elm Street, Greensboro, North Carolina 27408
(Address of principal executive offices) (Zip Code)
(910) 379-6220
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Number of shares of common stock outstanding as of May 1,
1997: 26,099,533 shares.
Page 1
<PAGE>
FORM 10-Q
CONE MILLS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Operations
Thirteen weeks ended March 30, 1997 and
March 31, 1996
(Unaudited) . . . . . . . . . . . . . . . . . . . 3
Consolidated Condensed Balance Sheets
March 30, 1997 and March 31, 1996
(Unaudited) and December 29, 1996 . . . . . . . . 4 & 5
Consolidated Condensed Statements of
Stockholders' Equity
Thirteen weeks ended March 30, 1997 and
and March 31, 1996 (Unaudited). . . . . . . . . . 6
Consolidated Condensed Statements of
Cash Flows
Thirteen weeks ended March 30, 1997 and
and March 31, 1996 (Unaudited). . . . . . . . . . 7
Notes to Consolidated Condensed Financial
Statements (Unaudited). . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . 20
Page 2
<PAGE>
FORM 10-Q
PART I
Item 1.
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
<TABLE>
<S> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
March 30, 1997 March 31, 1996
(Unaudited) (Unaudited)
Net Sales $ 174,714 $ 199,282
Operating Costs and Expenses:
Cost of sales 148,059 161,236
Selling and administrative 18,304 21,116
Depreciation 6,671 7,136
Restructuring 655 (4,675)
173,689 184,813
Income from Operations 1,025 14,469
Other Income (Expense):
Interest income 188 96
Interest expense (3,683) (3,837)
(3,495) (3,741)
Income (Loss) before Income Taxes (Benefit) and Equity
in Earnings (Loss) of Unconsolidated Affiliate (2,470) 10,728
Income Taxes (Benefit) (988) 3,755
Income (Loss) before Equity in Earnings (Loss) of
Unconsolidated Affiliate (1,482) 6,973
Equity in Earnings (Loss) of Unconsolidated Affiliate (513) 212
Net Income (Loss) $ (1,995) $ 7,185
Income (Loss) Available to Common Shareholders:
Net Income (Loss) $ (2,715) $ 6,465
Earnings (Loss) Per Share - Fully Diluted:
Net Income (Loss) $ (.10) $ .24
Weighted Average Common Shares and
Common Share Equivalents Outstanding -
Fully Diluted 26,237 27,462
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
Page 3
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(amounts in thousands, except share and par value data)
<TABLE>
<S> <C> <C> <C>
March 30, March 31, December 29,
ASSETS 1997 1996 1996
(Unaudited) (Unaudited) (Note)
Current Assets:
Cash $ 1,148 $ 1,447 $ 1,018
Accounts receivable - trade, less provision for
doubtful accounts $1,250; $3,000; $3,000 27,862 78,747 49,073
Subordinated note receivable 31,292 - -
Inventories:
Greige and finished goods 93,131 92,823 94,635
Work in process 12,060 13,143 10,793
Raw materials 14,300 11,794 7,231
Supplies and other 26,000 32,599 26,874
145,491 150,359 139,533
Other current assets 12,716 13,781 14,794
Total Current Assets 218,509 244,334 204,418
Investments in Unconsolidated Affiliates 33,631 37,087 34,144
Other Assets 39,819 41,815 40,746
Property, Plant and Equipment:
Land 17,672 18,398 17,880
Buildings 83,025 81,821 83,048
Machinery and equipment 320,577 304,024 319,271
Other 34,284 30,605 34,143
455,558 434,848 454,342
Less accumulated depreciation 205,869 191,243 203,664
Property, Plant and Equipment-Net 249,689 243,605 250,678
$ 541,648 $ 566,841 $ 529,986
</TABLE>
Note: The balance sheet at December 29, 1996, has been
derived from the audited financial statements at that date.
See Notes to Consolidated Condensed Financial Statements.
Page 4
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(amounts in thousands, except share and par value data)
<TABLE>
<S> <C> <C> <C>
March 30, March 31, December 29,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996 1996
(Unaudited) (Unaudited) (Note)
Current Liabilities:
Notes payable $ 25,190 $ 11,391 $ 5,267
Current maturities of long-term debt 10,754 11,096 10,754
Accounts payable - trade 33,055 33,124 27,113
Sundry accounts payable and accrued expenses 44,121 44,779 52,770
Deferred income taxes 23,594 26,317 23,667
Total Current Liabilities 136,714 126,707 119,571
Long-Term Debt 150,079 161,420 149,968
Deferred Items:
Deferred income taxes 40,598 40,849 40,066
Other deferred items 10,229 9,934 10,130
50,827 50,783 50,196
Stockholders' Equity:
Class A Preferred Stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 383,948
shares - Employee Stock Ownership Plan 38,395 38,395 38,395
Class B Preferred Stock - no par value; authorized
5,000,000 shares - - -
Common Stock - $.10 par value; authorized 42,700,000
shares; issued and outstanding 26,119,133 shares;
1996, 27,383,933 shares and 26,301,233 shares 2,612 2,738 2,630
Capital in excess of par 61,625 71,100 62,995
Retained earnings 109,879 124,160 114,706
Currency translation adjustment (8,483) (8,462) (8,475)
Total Stockholders' Equity 204,028 227,931 210,251
$ 541,648 $ 566,841 $ 529,986
</TABLE>
Note: The balance sheet at December 29, 1996, has been
derived from the audited financial statements at that date.
See Notes to Consolidated Condensed Financial Statements.
Page 5
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
THIRTEEN WEEKS ENDED MARCH 30, 1997 AND MARCH 31, 1996
(amounts in thousands, except share data)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Preferred Capital in Currency
Stock Common Stock Excess Retained Translation
Shares Amount Shares Amount of Par Earnings Adjustment
Balance, December 29, 1996 383,948 $ 38,395 26,301,233 $ 2,630 $ 62,995 $ 114,706 $ (8,475)
Net loss - - - - - (1,995) -
Currency translation adjustment - - - - - - (8)
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - - - (55) -
Dividends accrued - - - - - (2,777) -
Common Stock:
Purchase of common shares - - (182,100) (18) (1,370) - -
Balance, March 30, 1997 383,948 $ 38,395 26,119,133 $ 2,612 $ 61,625 $ 109,879 $ (8,483)
Class A Preferred Capital in Currency
Stock Common Stock Excess Retained Translation
Shares Amount Shares Amount of Par Earnings Adjustment
Balance, December 31, 1995 383,948 $ 38,395 27,380,409 $ 2,738 $ 71,090 $ 119,825 $ (9,923)
Net income - - - - - 7,185 -
Currency translation adjustment -
Sale of stock of affiliate - - - - - - 1,461
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - - - (2,850) -
Common Stock:
Options exercised - - 6,000 - 36 - -
Purchase of common shares - - (2,476) - (26) - -
Balance, March 31, 1996 383,948 $ 38,395 27,383,933 $ 2,738 $ 71,100 $ 124,160 $ (8,462)
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
Page 6
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<TABLE>
<S> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
March 30, 1997 March 31, 1996
(Unaudited) (Unaudited)
Cash Flows Used In Operating Activities $ (8,044) $ (16,647)
Cash Flows from Investing Activities:
Proceeds from divestiture (a) - 40,053
Capital expenditures (6,556) (5,341)
Other (275) 1,486
Net cash (used in) provided by investing activities (6,831) 36,198
Cash Flows from Financing Activities:
Net payments - short-term loans 19,923 2,516
Decrease in checks issued in excess of deposits (3,475) (17,502)
Other (1,443) (3,454)
Net cash provided by (used in) financing activities 15,005 (18,440)
Net increase in cash 130 1,111
Cash at Beginning of Period 1,018 336
Cash at End of Period $ 1,148 $ 1,447
(a)Divestiture:
Inventories $ 14,926
Property, plant and equipment 21,516
Other (1,064)
Gain on sale 4,675
Proceeds from sale $ 40,053
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest, net of interest capitalized $ 7,045 $ 7,495
Income taxes, net of refunds $ (3,714) $ 103
Supplemental Schedule of Noncash Investing and Financing Activities:
Receivable recorded from sale of division $ 2,703 $ 4,449
Liability incurred for dividend payable $ 2,777 $ -
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
Page 7
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 30, 1997
Note 1. Basis of Financial Statement Preparation
The Cone Mills Corporation (the "Company") consolidated
condensed financial statements for March 30, 1997 and
March 31, 1996 are unaudited, but in the opinion of
management reflect all adjustments necessary to present
fairly the consolidated condensed balance sheets of Cone
Mills Corporation and Subsidiaries at March 30, 1997,
March 31, 1996, and December 29, 1996, and the related
consolidated condensed statements of operations,
stockholders' equity and cash flows for the thirteen
weeks ended March 30, 1997 and March 31, 1996. All
adjustments are of a normal recurring nature. The
results are not necessarily indicative of the results to
be expected for the full year.
These statements should be read in conjunction with the
audited financial statements and related notes included
in the Company's annual report on Form 10-K for fiscal
1996.
Inventories are stated at the lower of cost or market.
The last-in, first-out (LIFO) method is used to value
inventories of most domestically produced goods. The
first-in, first-out (FIFO) or average cost methods are
used to value all other inventories. Because amounts for
inventories under the LIFO method are based on an annual
determination of quantities as of the year-end, the
inventories at March 30, 1997 and March 31, 1996 and
related consolidated condensed statements of operations
for the thirteen weeks then ended are based on certain
estimates relating to quantities and cost as of the end
of the fiscal year.
Note 2. Securitization of Accounts Receivable
On March 25, 1997, the Company entered into a one year
agreement with the subsidiary of a major financial
institution ("the purchaser") and Cone Receivables, LLC,
Page 8
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
a wholly owned subsidiary of Cone Mills Corporation,
which allows the sale of up to $40 million undivided
interest in eligible accounts receivable by Cone
Receivables, LLC. Cone Receivables, LLC, a qualifying
special-purpose entity, meets the requirements for
accounts receivable securitization in accordance with
SFAS 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities", and
therefore is not a consolidated entity of Cone Mills.
Cone Mills accounts for the sale of receivables to Cone
Receivables, LLC, as a true sale in accordance with SFAS
125.
At March 30, 1997, the Company had sold gross accounts
receivable of $67 million, net of a $2 million provision
for doubtful accounts receivable, to Cone Receivables,
LLC. The Company received $34 million in cash and a note
receivable of $31 million.
The Company acts as an agent for Cone Receivables, LLC,
and the purchaser by performing record keeping and
collection functions of receivables sold. The discount on
receivables sold to Cone Receivables, LLC, is computed
based upon a variable rate and the term of the
receivables sold. The discount on the sale of
receivables is included in cost of sales.
The provision for doubtful accounts receivable was
reduced by $2 million to reflect the sale of receivables
and their related provision to Cone Receivables, LLC. The
remaining provision for doubtful accounts is deemed to be
sufficient for receivables which are not securitized.
Page 9
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 3. Long-Term Debt
<TABLE>
<S> <C> <C> <C>
March 30, 1997
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 64,286 $10,714 $ 53,572
8-1/8% Debentures 96,465 - 96,465
Other 82 40 42
Total $160,833 $10,754 $150,079
March 31, 1996
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 75,000 $10,714 $ 64,286
8-1/8% Debentures 96,021 - 96,021
Capital Lease Obligation 1,374 344 1,030
Other 121 38 83
Total $172,516 $11,096 $161,420
</TABLE>
Note 4. Class A Preferred Stock
The dividend for Class A Preferred Stock payable March
31, 1997, has been included in accrued expenses at March
30, 1997. The 1998 dividend rate for Class A Preferred
Stock is 7.85%, payable March 31, 1998.
Page 10
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C> <C> <C>
Note 5. Earnings (Loss) Per Share
Thirteen Thirteen
Weeks Ended Weeks Ended
March 30, 1997 March 31, 1996
Fully Fully
Primary Diluted Primary Diluted
(amounts in thousands,
except per share data)
Income (loss) from
continuing operations $(1,995) $(1,995) $ 7,185 $ 7,185
Less: Class A Preferred
dividends ( 720) ( 720) ( 720) ( 720)
Adjusted net income (loss) $(2,715) $(2,715) $ 6,465 $ 6,465
Weighted average common
shares outstanding 26,237 26,237 27,381 27,381
Common share equivalents
from assumed exercise
of outstanding options,
less shares assumed
repurchased - - 75 81
Weighted average common
shares and common share
equivalents outstanding 26,237 26,237 27,456 27,462
Earnings (loss) per common
share and common share
equivalent $( .10) $( .10) $ .24 $ .24
</TABLE>
Primary and fully diluted earnings (loss) per share have been
computed by dividing the net earnings (loss) available to
common stockholders by the sum of the weighted average common
shares and common share equivalents outstanding. Common share
equivalents have been excluded when they would be
antidilutive.
Page 11
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 6. Sale of Division
In January 1996, the Company completed the sale of its
polyurethane products division. The Company sold all
inventory and substantially all of the property, plant,
and equipment of this division. Proceeds of $40.1 million
had been received at March 31, 1996. Gain of $4.7 million
from disposal of this division was recognized in the
first quarter 1996 financial statements as a
restructuring item.
Note 7. Restructuring Activities
Restructuring costs of $0.7 million, incurred in the
first quarter of 1997, related to the consolidation of
operations from Cone's Granite Finishing Plant to its
Carlisle facility. Additional restructuring costs will
be incurred during 1997 as the consolidation of
facilities continues and the Granite plant is eventually
closed.
Page 12
<PAGE>
FORM 10-Q
Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
First Quarter Ended March 30, 1997 Compared with First Quarter
Ended March 31, 1996.
While U.S. consumer spending in apparel and home furnishings
increased in the first quarter of 1997, Cone Mills continued
to experience value-added denim inventory adjustments in
certain customer segments and weak fashion demand for
decorative prints.
Sales for the first quarter of 1997 were $174.7 million, down
12.3%, as compared with sales of $199.3 million for the first
quarter of 1996. After eliminating the sales of business units
included in the Company's restructuring plan, sales were off
approximately 8%. Lower sales in denim products and decorative
prints more than offset increased specialty sportswear sales.
International sales, primarily denims, were $44.5 million, or
25% of total sales, as compared with $52.6 million, or 26% of
sales, for the first quarter of 1996.
Cone Mills had a net loss for the first quarter of 1997 of
$2.0 million, or $.10 per share after preferred dividends,
which included a pre-tax charge of $0.7 million associated
with the consolidation of the Granite operations into
Carlisle. For comparison, first quarter 1996 net income was
$7.2 million, or $.24 per share, including a pre-tax gain of
$4.7 million related to the sale of the Olympic Products
Division.
Gross profit for the first quarter of 1997 (net sales less
cost of sales and depreciation) was 11.4% of sales, as
compared with 15.5% for the previous year. The decrease was
primarily the result of mix changes to more basic denim
products with lower margins, cost inefficiencies associated
with operating plants at less than capacity and pricing
pressures associated with temporary supply and demand
imbalances arising from excess inventories.
Page 13
<PAGE>
FORM 10-Q
Item 2. (continued)
Business Segments. Cone operates in two principal business
segments, apparel fabrics and home furnishings products. The
following table sets forth certain net sales and operating
income (loss) information.
<TABLE>
<S> <C> <C> <C> <C>
First Quarter
1997 1996
(Dollar amounts in millions)
NET SALES
Apparel(1) $ 148.4 84.9% $ 165.7 83.2%
Home Furnishings(2) 26.3 15.1 33.6 16.8
Total $ 174.7 100.0% $ 199.3 100.0%
OPERATING INCOME (LOSS)(3)
Apparel $ 6.1 4.1% $ 13.0 7.8%
Home Furnishings (3.5) (13.4) (1.9) (5.7)
Restructuring (.7) - 4.7 -
</TABLE>
(1) Apparel includes synthetic fabrics net sales of $2.7
million and $6.0 million in 1997 and 1996, respectively.
(2) Home furnishings includes Greeff's and real estate's net
sales of $1.4 million in 1997, and Olympic's, Greeff's
and real estate's net sales of $7.8 million in 1996.
(3) Operating income (loss) excludes general corporate
expenses. Percentages reflect operating income (loss) as
a percentage of segment net sales.
Apparel Fabrics. Apparel fabric segment sales for the first
quarter of 1997 were $148.4 million, down 10.5% from the
first quarter of 1996. Excluding sales of the synthetic
fabrics business, which was sold in January of 1997,
apparel fabric segment sales were down approximately 9%.
Lower denim sales because of lower volume and prices
accounted for the decrease. Average denim prices were down
in the first quarter of 1997 as a result of a mix shift to
more basic denims and price pressure from temporary
industry supply and demand imbalances arising from excess
inventories. While unit sales of denim products continue to
be strong at retail, excessive inventory build-up in
certain segments are resulting in weak near-term sales of
denim fabrics. Sales of specialty sportswear were up as
compared with 1996.
For the first quarter of 1997, the apparel segment had
operating income of $6.1 million, or 4.1% of sales, as
compared with income of $13.0 million, or 7.8% of sales, in
Page 14
<PAGE>
FORM 10-Q
Item 2. (continued)
the first quarter of 1996. All apparel manufacturing
facilities operated at less than capacity as the Company
attempted to control inventory levels.
Home Furnishings. For the first quarter of 1997, home
furnishings segment sales were $24.9 million, excluding
Olympic, Greeff and real estate, as compared with $25.8
million in the first quarter of 1996. Lower sales in Cone
Finishing and Cone Decorative Fabrics, partially offset by
increased sales of Cone Jacquards, accounted for the
decrease. The home furnishings segment had an operating
loss of $3.5 million compared with a loss of $1.9 million
for the first quarter of 1996. Home furnishings results
were negatively impacted by the finishing division
operating at less than capacity.
Total Company selling and administrative expenses declined
from $21.1 million for the first quarter of 1996 to $18.3
million in the first quarter of 1997, the result of the sale
of the Olympic, Greeff and synthetic fabric operations as well
as a cost reduction program to reduce selling and
administrative expenses. Selling and administrative expenses
were 10.5% of sales in the first quarter of 1997 as compared
with 10.6% in the first quarter of 1996.
Interest expense for the first quarter of 1997 was $3.7
million, down 4% from the first quarter of 1996.
Equity in loss of Parras Cone, the joint venture plant in
Mexico, was $0.5 million. The loss was primarily the result of
operating at levels less than capacity.
Even though the Company has seen some improvement in both
denim and specialty sportswear markets, second quarter results
will continue to be impacted by curtailed manufacturing
operating schedules and weak denim and home furnishings sales.
However, Cone continues to implement a five-point
profitability improvement program which includes focusing on
core businesses, aggressive marketing, cost reduction, the
reconfiguration of manufacturing operations and capital
conservation.
Liquidity and Capital Resources
The Company's principal long-term capital components consist
of $64.3 million outstanding under a Note Agreement with The
Prudential Insurance Company of America (the "Term Loan"), its
Page 15
<PAGE>
FORM 10-Q
Item 2. (continued)
8 1/8% Debentures issued on March 15, 1995 and due March 15,
2005 (the "Debentures"), and stockholders' equity. Primary
sources of liquidity are internally generated funds, an $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 the $40
million Receivables Purchase Agreement (the "Receivables
Purchase Agreement") with Delaware Funding Corporation, an
affiliate of Morgan Guaranty. The Receivables Purchase
Agreement is a one year agreement entered into on March 25,
1997 with Delaware Funding Corporation and Cone Receivables,
LLC, a wholly owned subsidiary of Cone Mills Corporation. On
March 30, 1997, the Company had funds available of $86 million
under its Revolving Credit Facility and Receivables Purchase
Agreement.
During the first quarter of 1997, the Company generated cash
from operating activities before changes in working capital of
$6.1 million as compared with $11.9 million in the first
quarter of 1996. Working capital uses in the first quarter of
1997 were $14.1 million. Other uses of cash in the first
quarter of 1997 included $6.6 million for capital expenditures
and $1.4 million for the repurchase of 0.2 million shares of
common stock.
Subsequent to the end of the first quarter of 1997, the
Company completed the sale of substantially all of the assets
of its real estate operation, including Cornwallis Development
Co., for approximately $20 million. Proceeds of the sale will
be used to repay short-term borrowings and for general
corporate purposes.
The Company believes that the proceeds from the sale of its
real estate business, together with Cone's internally
generated operating funds and funds available under its credit
facilities, will be sufficient to meet its working capital,
capital spending, potential stock repurchases, and financing
needs for the foreseeable future. The Company's Revolving
Credit Facility matures in 1997. Based upon discussions with
financial institutions, management believes the Company can
enter into successor facilities that will provide adequate
liquidity with terms and conditions acceptable to the Company.
Page 16
<PAGE>
FORM 10-Q
Item 2. (continued)
On March 30, 1997, the Company's long-term capital structure
consisted of $150.1 million of long-term debt and $204.0
million of stockholders' equity. For comparison, on March 31,
1996, the Company had $161.4 million of long-term debt and
$227.9 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 44%
on March 30, 1997 and 43% on March 31, 1996.
Accounts and note receivables on March 30, 1997, were $59.2
million, down from $78.7 million at March 31, 1996. At March
30, 1997, the Company had sold gross accounts receivable of
$67 million, net of a $2 million provision for doubtful
accounts receivable, to Cone Receivables, LLC. The Company
received $34 million in cash and a note receivable of $31
million. At March 31, 1996, the Company had sold $25 million
of accounts receivable. The decrease in accounts and note
receivable was primarily due to lower sales levels, the
collection of receivables from business units sold and the
additional net amounts outstanding under the Receivables
Purchase Agreement. The Company adopted SFAS 125 "Accounting
for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" during the first quarter of
1997. Receivables, including those sold pursuant to the
Receivables Purchase Agreement, represented 49 days of sales
outstanding at both March 30, 1997 and March 31, 1996.
Inventories on March 30, 1997, were $145.5 million, down $4.9
million or 3.2% from March 31, 1996 levels.
Capital spending in 1997 is budgeted at $44 million. Projects
include new weaving machines that replace 1970s vintage
weaving machines, link ring spinning, and additional looms for
the jacquard facility. Capital spending in the first quarter
of 1997 was $6.6 million.
The Company has an agreement with CIPSA to purchase up to an
additional 33% of the existing outstanding common stock of
Parras Cone for an amount of $20 million if CIPSA does not
meet certain financial obligations.
Federal, state and local regulations relating to the workplace
and the discharge of materials into the environment continue
to change and, consequently, 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 in the Company's competitive position,
Page 17
<PAGE>
FORM 10-Q
Item 2. (continued)
operating results or planned capital expenditures. The Company
has an active environmental committee which fosters protection
of the environment and compliance with laws.
The Company is a party to various legal claims and actions.
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.
"Safe Harbor" Statement under Section 27A of the Securities
Act of 1993, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended.
Except for the historical information presented, the
matters disclosed in the foregoing discussion and
analysis and other parts of this report include forward-
looking statements. These statements represent the
Company's current judgment on the future and are subject
to risks and uncertainties that could cause actual
results to differ materially. Such factors include,
without limitation: (i) the demand for textile products,
including the Company's products, will vary with the U.S.
and world business cycles, imbalances between consumer
demand and inventories of retailers and manufacturers and
changes in fashion trends, (ii) the highly competitive
nature of the textile industry and the possible effects
of reduced import protection and free-trade initiatives,
(iii) the unpredictability of the cost and availability
of cotton, the Company's principal raw material, and (iv)
the Company's relationships with Levi Strauss as its
major customer. For a further description of these risks
see the Company's 1996 Form 10-K, "Item 1. Business -
Competition, -Raw Materials and -Customers" and
"Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Overview" of the
Company's 1996 Annual Report to Shareholders incorporated
by reference into Item 7. of the Form 10-K. Other risks
and uncertainties may be described from time to time in
the Company's other reports and filings with the
Securities and Exchange Commission.
PART II
Item 3. Legal Proceedings
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 certain other
defendants in which the Plaintiffs asserted a variety of
Page 18
<PAGE>
FORM 10-Q
claims related to the Cone Mills Corporation 1983 ESOP (the
"1983 ESOP") and certain other employee benefit plans
maintained by the Company. In March 1992, the United States
District Court in Greenville, South Carolina entered a
judgment in the amount of $15.5 million (including an
attorneys' fee award) 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, certain individual defendants
and the Plaintiffs appealed.
On May 6, 1994, the United States Court of Appeals for the
Fourth Circuit, 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 could establish detrimental reliance creating
estoppel of the Company.
On April 19, 1995, the District Court granted a motion by the
Company for summary judgment on the issues of equitable
estoppel and third-party beneficiary of contract which had
been remanded to it by the Court of Appeals. The court ruled
that the Plaintiffs could not forecast necessary proof of
detrimental reliance. The District Court, however, granted
Plaintiffs motion to amend the complaint insofar as they
sought to pursue a "new" claim for unjust enrichment, but
denied their motion to amend so far as they sought to add
claims for promissory estoppel and unilateral contract. The
court further denied the Company's motion to decertify the
class.
The District Court held a hearing on July 24, 1995 to decide
on the merits Plaintiffs' lone remaining claim of unjust
enrichment, and in an order entered September 25, 1995, the
District Court dismissed that claim with prejudice. On
October 20, 1995, the Plaintiffs appealed to the Court of
Appeals from the April 19, 1995 and September 25, 1995 orders
of the District Court. Oral argument on Plaintiffs' appeal
was held in the Court of Appeals on October 31, 1996. Due to
Page 19
<PAGE>
FORM 10-Q
Item 3. (continued)
the uncertainties inherent in the litigation process, it is
not possible to predict the ultimate outcome of this lawsuit.
However, the Company has defended this matter vigorously, and
it is the opinion of the Company's management that the
probability is remote that this lawsuit, when finally
concluded, will have a material adverse effect on the
Company's financial condition or results of operations.
Item 6. Exhibits and Reports for Form 8-K
None.
Page 20
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.1 Receivables Purchase Agreement dated
as of August 11, 1992, between the
Registrant and Delaware Funding
Corporation filed as Exhibit 2.01 to
the Registrant's report on Form 8-K
dated August 13, 1992.
* 2.1(a) Amendment to Receivables Purchase
Agreement dated April 4, 1994, between
the Registrant and Delaware Funding
Corporation filed as Exhibit 2.1 to
the Registrant's report on Form 8-K
dated March 1, 1995.
* 2.1(b) Amendment to Receivables Purchase
Agreement dated June 7, 1994, between
the Registrant and Delaware Funding
Corporation filed as Exhibit 2.2 to
the Registrant's report on Form 8-K
dated March 1, 1995.
* 2.1(c) Amendment to Receivables Purchase
Agreement dated as of June 30, 1994,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.1 to the Registrant's report on
Form 10-Q for the quarter ended
July 3, 1994.
* 2.1(d) Amendment to Receivables Purchase
Agreement dated as of November 15, 1994,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.4 to the Registrant's report on
Form 8-K dated March 1, 1995.
* 2.1(e) Amendment to Receivables Purchase
Agreement dated as of June 30, 1995,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.1(e) to the Registrant's report on
Form 10-Q for the quarter ended
July 2, 1995.
Page 21
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.1(f) Amendment to Receivables Purchase
Agreement dated as of December 31,
1995, between the Registrant and
Delaware Funding Corporation,
filed as Exhibit 2.1(f) to the
Registrant's report on Form 10-K
for the year ended December 31, 1995.
* 2.1(g) Amendment to Receivables Purchase
Agreement and Letter Agreement
referred to therein dated as of
June 24, 1996, between the Registrant
and Delaware Funding Corporation filed
as Exhibit 2.1(g) to Registrant's report
on Form 10-K for the quarter ended
June 30, 1996.
* 2.1(h) Amendment to Receivables Purchase
Agreement dated as of June 30, 1996,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.1(h)to the Registrant's report on
Form 10-Q for the quarter ended
September 29, 1996.
* 2.1(i) Amendment to Receivables Purchase
Agreement dated as of August 26, 1996,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.1(i) to the Registrant's report on
Form 10-Q for the quarter ended
September 29, 1996.
* 2.1(j) Amendment to Receivables Purchase
Agreement dated as of September 29,
1996, between the Registrant and
Delaware Funding Corporation filed
as Exhibit 2.1(j) to the Registrant's
report on Form 10-Q for the quarter
end September 29, 1996.
2.1(k) Omnibus Termination and Release dated
as of March 26, 1997, between the
Registrant and Delaware Funding
Corporation terminating the
Receivables Purchase Agreement. 33
Page 22
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
2.1(l) Purchase Agreement between Registrant
and Cone Receivables LLC dated as of
March 25, 1997. 36
2.1(m) Receivables Purchase Agreement dated
as of March 25, 1997, among Cone
Receivables LLC, as Seller, the
Registrant, as Servicer, and
Delaware Funding Corporation, as
buyer. 76
* 2.2(a) Investment Agreement dated as of
June 18, 1993, among Compania Industrial
de Parras, S.A. de C.V., Sr. Rodolfo
Garcia Muriel, and Cone Mills
Corporation, filed as Exhibit 2.2(a)
to Registrant's report on Form 10-Q for
the quarter ended July 4, 1993, with
exhibits herein numbered 2.2(b),(c),
(d), (f), (g), and (j) attached.
* 2.2(b) Commercial Agreement dated as of June
25, 1993, among Compania Industrial de
Parras, S.A. de C.V., Cone Mills
Corporation and Parras Cone de Mexico,
S.A., filed as Exhibit 2.2(b) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
* 2.2(c) Guaranty Agreement dated as of June 25,
1993, between Cone Mills Corporation and
Compania Industrial de Parras, S.A. de
C.V., filed as Exhibit 2.2(c) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
* 2.2(d) Joint Venture Agreement dated as of
June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V., and
Cone Mills (Mexico), S.A. de C.V. filed as
Exhibit 2.2(d) to Registrant's report on
Form 10-Q for the quarter ended
July 4, 1993.
Page 23
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.2(e) First Amendment to Joint Venture
Agreement dated as of June 14, 1995,
between Compania Industrial de Parras,
S.A. de C.V., and Cone Mills (Mexico),
S.A. de C.V., filed as Exhibit 2.2(e)
to the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 2.2(f) Joint Venture Registration Rights
Agreement dated as of June 25, 1993,
among Parras Cone de Mexico, S.A.,
Compania Industrial de Parras, S.A. de
C.V. and Cone Mills (Mexico),
S.A. de C.V. filed as Exhibit 2.2(e)
to Registrant's report on Form 10-Q
for the quarter ended July 4, 1993.
* 2.2(g) Parras Registration Rights Agreement
dated as of June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V. and
Cone Mills Corporation filed as Exhibit
2.2(f) to the Registrant's report on Form
10-Q for the quarter ended July 4, 1993.
* 2.2(h) Guaranty Agreement dated as of June 14,
1995, between Compania Industrial de
Parras, S.A. de C.V. and Cone Mills
Corporation filed as Exhibit 2.2(h) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 2.2(i) Guaranty Agreement dated as of June 15,
1995, between Cone Mills Corporation
and Morgan Guaranty Trust Company of
New York filed as Exhibit 2.2(I) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 2.2(j) Support Agreement dated as of June 25,
1993, among Cone Mills Corporation, Sr.
Rodolfo L. Garcia, Sr. Rodolfo Garcia
Muriel and certain other person listed
herein ("private stockholders") filed
as Exhibit 2.2(g) to Registrant's
report on Form 10-Q for the quarter
ended July 4, 1993.
Page 24
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.2(k) Call Option dated September 25, 1995,
between Registrant and SMM Trust, 1995
- M, a Delaware business trust, filed
as Exhibit 2.2(k) to the Registrant's
report on Form 10-Q for the quarter
ended October 1, 1995.
* 2.2(l) Put Option dated September 25, 1995,
between Registrant and SMM Trust, 1995
- M, a Delaware business trust, filed
as Exhibit 2.2(l) to the Registrant's
report on Form 10-Q for the quarter
ended October 1, 1995.
* 2.2(m) Letter Agreement dated January 11, 1996
among Registrant, Rodolfo Garcia Muriel,
and Compania Industrial de Parras,
S.A. de C.V., filed as Exhibit 2.2(m) to
the Registrant's report on Form 10-K
for the year ended December 31, 1995.
* 2.3 Asset Purchase Agreement dated as
of December 2, 1994 between the
Registrant, Lancer Industries, Inc.
and M.P.M. Transportation, Inc.,
filed as Exhibit 2 to the Registrant's
Current Report on Form 8-K dated
December 2, 1994.
* 2.4 Olympic Division Acquisition Agreement
by and among Vitafoam Incorporated,
British Vita PLC, and Registrant
dated January 19, 1996 with related
Lease Agreement, Lease Agreement and
Option to Purchase, Sublease Agreement,
Services Agreement, License Agreement And
Hold Back Escrow Agreement, each
dated January 22, 1996. The Acquisition
Agreement and related agreements were
filed as Exhibit 2.4 to the Registrant's
report on Form 10-K for the year ended
December 31, 1995. The following
exhibits and schedules to the Acquisition
Agreement have been omitted. The
Registrant hereby undertakes to furnish
supplementally a copy of such omitted
exhibit or schedule to the Commission upon
request.
Page 25
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
Exhibits
Exhibit A1 Form of Buyer Lease
Exhibit A2 Form of Buyer Lease
Exhibit B Form of Holdback Escrow
Agreement
Exhibit C1 Facility 1
Exhibit C2 Facility 2
Exhibit C3 Facility 3
Exhibit C4 Facility 4
Exhibit C5 Facility 5
Exhibit C6 Facility 6
Exhibit D Form of Sublease Agreement
Exhibit E Form of Opinion of Buyer's
Counsel
Exhibit F Form of Opinion of Seller's
Counsel
Exhibit G Form of Assumption Agreement
Exhibit H Form of Services Agreement
Exhibit I Inventory Valuation Principles
Exhibit J Form of License Agreement
Schedules
Schedule 1.1(a) Excluded Assets
Schedule 1.1(b) Tangible Fixed Assets
Schedule 2.8 Assigned Contracts
Schedule 2.10 Allocation of Purchase
Price
Schedule 4.3 Consents and
Authorizations
Schedule 4.7 Contracts by Category
Schedule 4.9 Litigation
Schedule 4.11 Tax Matters
Schedule 4.12 Licenses and Permits
Schedule 4.14 Tangible Personal
Property
Schedule 4.15 Employees and Wage Rates
Schedule 4.16 Insurance Policies
Schedule 4.17 Intellectual Property
Schedule 4.18 Licenses to Intellectual
Property; Third-party
Patents
Schedule 4.19 Purchases from One Party
Schedule 4.22 Real Property
Schedule 4.23 Business Names
Schedule 4.24 Environmental Matters
Schedule 9.4 Facility 5 Remediation Plan
Page 26
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 4.1 Restated Articles of Incorporation of
the Registrant effective August 25, 1993,
filed as Exhibit 4.1 to Registrant's
report on Form 10-Q for the quarter ended
October 3, 1993.
* 4.2 Amended and Restated Bylaws of Registrant,
Effective June 18, 1992, filed as Exhibit
3.5 to the Registrant's Registration
Statement on Form S-1 (File No. 33-46907).
* 4.3 Note Agreement dated as of August 13, 1992,
between Cone Mills Corporation and The
Prudential Insurance Company of America,
with form of 8% promissory note attached,
filed as Exhibit 4.01 to the Registrant's
report on Form 8-K dated August 13, 1992.
* 4.3(a) Letter Agreement dated September 11, 1992,
amending the Note Agreement dated August 13,
1992, between the Registrant and The
Prudential Insurance Company of America
filed as Exhibit 4.2 to the Registrant's
report on Form 8-K dated March 1, 1995.
* 4.3(b) Letter Agreement dated July 19, 1993,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.3 to the
Registrant's report on Form 8-K dated
March 1, 1995.
* 4.3(c) Letter Agreement dated June 30, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.4 to the
Registrant's report on Form 8-K dated
March 1, 1995.
* 4.3(d) Letter Agreement dated November 14, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.5 to the
Registrant's report on Form 8-K dated
March 1, 1995.
Page 27
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 4.3(e) Letter Agreement dated as of June 30,
1995, amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company
of America filed as Exhibit 4.3(e) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 4.3(f) Letter Agreement dated as of June 30,
1995, between the Registrant and
The Prudential Insurance Company
of America superseding Letter Agreement
filed as Exhibit 4.3(e) to the
Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 4.3(g) Letter Agreement dated as of March 30,
1996, between the Registrant and The
Prudential Insurance Company of
America filed as Exhibit 4.3(g) to the
Registrant's report on Form 10-Q for
the quarter ended March 31, 1996.
* 4.3(h) Letter Agreement dated as of January
31, 1997, between the Registrant and
The Prudential Insurance Company of
America filed as Exhibit 4.3(h) to
the Registrant's report on Form 10-K
for the year ended December 29, 1996.
* 4.4 Credit Agreement dated as of August 13,
1992, among Cone Mills Corporation,
the banks listed therein and Morgan
Guaranty Trust Company of New York,
as Agent, with form of note attached
filed as Exhibit 4.02 to the Registrant's
report on Form 8-K dated August 13, 1992.
* 4.4(a) Amended and Restated Credit Agreement
dated November 18, 1994, among the
Registrant, various banks and Morgan
Guaranty Trust Company of New York,
as Agent, filed as Exhibit 4.1
to the Registrant's report on Form 8-K
dated March 1, 1995.
Page 28
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 4.4(b) Amendment to Credit Agreement dated as of
June 30, 1995, amending the Amended and
Restated Credit Agreement dated
November 18, 1994, among the Registrant,
various banks and Morgan Guaranty Trust
Company of New York, as Agent filed as
Exhibit 4.4(b) to the Registrant's
report on Form 10-Q for the quarter
ended July 2, 1995.
* 4.4(c) Amendment No. 2 to Credit Agreement
dated as of December 31, 1995, amending
the Amended and Restated Credit
Agreement dated November 18, 1994,
among the Registrant, various banks
and Morgan Guaranty Trust Company
of New York, as Agent, filed as
Exhibit 4.4(c) to the Registrant's
report on Form 10-K for year ended
December 31, 1995.
* 4.4(d) Amendment No. 3 to Credit Agreement
dated as of June 30, 1996 to the
Amended and Restated Credit
Agreement dated as of November 18,
1994, among the Registrant, various
banks and Morgan Guaranty Trust
Company of New York, as Agent, filed
as Exhibit 4.4(d) to the Registrant's
report on Form 10-Q for the quarter
ended September 29, 1996.
* 4.4(e) Amendment No. 4 to Credit Agreement
dated as of September 29, 1996 to
the Amended and Restated Credit
Agreement dated as of November 18,
1994, among the Registrant, various
banks and Morgan Guaranty Trust
Company of New York, as Agent, filed
as Exhibit 4.4(e) to the Registrant's
report on Form 10-Q for the quarter
ended September 29, 1996.
Page 29
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
4.4(f) Amendment No. 5 to Credit Agreement
dated as of March 30, 1997, to the
Amended and Restated Credit Agreement
dated as of November 18, 1994, among
the Registrant, various banks and
Morgan Guaranty Trust Company of
New York, as Agent. 163
* 4.5 Specimen Class A Preferred Stock
Certificate, filed as Exhibit 4.5
to the Registrant's Registration
Statement on Form S-1(File No. 33-46907).
* 4.6 Specimen Common Stock Certificate,
effective June 18, 1992, filed as
Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-46907).
* 4.7 The 401(k) Program of Cone Mills
Corporation, amended and restated
effective December 1, 1994, filed as
Exhibit 4.8 to the Registrant's
report on Form 10-K for year ended
January 1, 1995.
* 4.7(a) First Amendment to the 401(k)
Program of Cone Mills Corporation
dated May 9, 1995, filed as
Exhibit 4.8(a) to the Registrant's
report on Form 10-K for year ended
December 31, 1995.
* 4.7(b) Second Amendment to the 401(k)
Program of Cone Mills Corporation
dated December 5, 1995, filed as
Exhibit 4.8(b) to the Registrant's
report on Form 10-K for year ended
December 31, 1995.
* 4.8 Cone Mills Corporation 1983 ESOP as
amended and restated effective
December 1, 1994, filed as Exhibit 4.9
to the Registrant's report on Form 10-K
for year ended January 1, 1995.
Page 30
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 4.8(a) First Amendment to the Cone Mills
Corporation 1983 ESOP dated
May 9, 1995, filed as Exhibit 4.9(a)
to the Registrant's report on Form 10-K
for year ended December 31, 1995.
* 4.8(b) Second Amendment to the Cone Mills
Corporation 1983 ESOP dated
December 5, 1995, filed as
Exhibit 4.9(b) to the Registrant's
report on Form 10-K for year ended
December 31, 1995.
* 4.9 Indenture dated as of February 14,
1995, between Cone Mills Corporation
and Wachovia Bank of North Carolina,
N.A. as Trustee, filed as Exhibit 4.1
to Registrant's Registration Statement
on Form S-3 (File No. 33-57713).
27 Financial Data Schedule 165
* Incorporated by reference to the statement or report indicated.
Page 31
<PAGE>
FORM 10-Q
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)
Date May 13, 1997 /s/ Anthony L. Furr
Anthony L. Furr
Vice President and
Chief Financial Officer
Page 32
FORM 10-Q
Exhibit 2.1(k)
OMNIBUS TERMINATION AND RELEASE
AND RECONVEYANCE
This OMNIBUS TERMINATION AND RELEASE (this
"Termination"), dated as of March 26, 1997 is made by and between
CONE MILLS CORPORATION, a North Carolina corporation ("Cone
Mills") and DELAWARE FUNDING CORPORATION, a Delaware corporation
("DFC").
W I T N E S S E T H:
WHEREAS, Cone Mills and DFC are parties to that certain
Receivables Purchase Agreement, dated as of August 11, 1992 (as
amended, the "1992 Receivables Purchase Agreement"), by and
between Cone Mills, as seller (Cone Mills in such capacity, the
"Seller") and DFC, as buyer (DFC in such capacity, the "Buyer"),
pursuant to which the Buyer from time to time purchases undivided
percentage ownership interests (the "Purchased Interests") in
trade receivables of the Seller resulting from the sale of goods
or services to its customers by the Seller ("Receivables");
WHEREAS, Cone Mills, DFC and a certain subsidiary of
Cone Mills desire to enter into new receivables purchase
arrangements (the "1997 Agreements") with respect to the
Receivables; and
WHEREAS, it is a condition precedent to the
consummation of the 1997 Agreements that, contemporaneously with
the execution and delivery thereof, the 1992 Receivables Purchase
Agreement be terminated and the parties released from their
obligations thereunder.
NOW, THEREFORE, in consideration of the premises and
mutual covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound,
do covenant and agree as follows:
1. Capitalized terms used in this Termination and not
otherwise defined herein shall have the meanings assigned to them
in the 1992 Receivables Purchase Agreement (such definitions to
be equally applicable to both the singular and the plural forms
of the terms defined). Any term defined by reference to an
agreement, instrument or other document shall have the meaning so
assigned to it whether or not such document is in effect. The
words "hereof", "herein" and "hereunder" and words of similar
import when used in this Termination shall refer to this
Termination as a whole and not to any particular provision of
this Termination.
Page 33
<PAGE>
FORM 10-Q
Exhibit 2.1(k) (continued)
2. DFC, as assignor, hereby assigns and
transfers to Cone Mills all of its right, title and interest in,
to and under, and all of its duties, liabilities and obligations
(collectively, the "Assigned Interests") under or pursuant or
with respect to the Receivables and all Related Security with
respect thereto, and the Purchased Interests therein.
3. Cone Mills hereby assumes and accepts the
Assigned Interests and agrees to perform under and be bound by
all the terms of each of the Receivables.
4. The 1992 Receivables Purchase Agreement is
hereby terminated and the parties thereto are hereby released
from, and each of the parties hereto hereby cancels and
discharges, any and all obligations and liabilities thereunder
with respect to the period from and after the date hereof.
5. Each of the parties hereto agrees that the
termination of the 1992 Receivables Purchase Agreement hereunder
is irrevocable and it will not take any action or make any
direction which could prejudice any of the rights hereunder of
the parties to any such 1992 Receivables Purchase Agreement and
that any such action or direction shall be void. Each party
hereto agrees that it shall, at any time and from time to time,
promptly and duly execute and deliver any and all such
instruments and documents of further assurance and all such
supplemental instruments and take such further action as a party
to the 1992 Receivables Purchase Agreement may reasonably deem
necessary to carry out the purposes and intent of this
Termination.
6. This Termination shall be binding upon the
successors and assigns of each of the parties hereto and shall
inure to the benefit of each of the parties to the 1992
Receivables Purchase Agreement and its successors and permitted
assigns.
7. This Termination may be executed in any
number of counterparts, all such counterparts together
constituting but one and the same instrument. This Termination
shall be effective, and shall be binding on each party hereto, on
the date first above written.
Page 34
<PAGE>
FORM 10-Q
Exhibit 2.1(k) (continued)
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Termination as of the day and year first above
set forth.
CONE MILLS CORPORATION
By:/s/ David E. Bray
Title: Treasurer
DELAWARE FUNDING CORPORATION
By: MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as attorney-in-
fact for Delaware Funding
Corporation
By:/s/ Richard A. Burke
Title: Vice President
Page 35
FORM 10-Q EXECUTION COPY
Exhibit 2.1(l)
_________________________________________________________________
PURCHASE AGREEMENT
between
CONE MILLS CORPORATION,
as Originator,
and
CONE RECEIVABLES LLC,
as Buyer,
Dated as of March 25, 1997
_________________________________________________________________
Page 36
<PAGE>
FORM 10-Q
Exhibit 2.1(1) (continued)
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Cross Reference to Receivables Purchase
Agreement . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Certain Defined Terms . . . . . . . . . . . . . 1
SECTION 1.3. Interpretation and Construction . . . . . . . . 5
ARTICLE II
SALES AND TRANSFERS; SETTLEMENTS
SECTION 2.1. General Terms . . . . . . . . . . . . . . . . . 6
SECTION 2.2. Purchase and Sale . . . . . . . . . . . . . . . 6
SECTION 2.3. Transfers and Assignments . . . . . . . . . . . 7
SECTION 2.4. Protection of Ownership of the Buyer. . . . . . 9
SECTION 2.5. Payment of Collections and Deemed
Collections . . . . . . . . . . . . . . . . . . 10
SECTION 2.6. Mandatory Repurchase Under Certain
Circumstances . . . . . . . . . . . . . . . . . 10
SECTION 2.7. Dilution. . . . . . . . . . . . . . . . . . . . 10
SECTION 2.8. Deemed Collections. . . . . . . . . . . . . . . 10
SECTION 2.9. Transfers by Buyer. . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of
Originator. . . . . . . . . . . . . . . . . . . 11
SECTION 3.2. Representations and Warranties of the
Originator With Respect to Each Sale of
Receivables . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Closing . . . . . . . . . . . . . 16
SECTION 4.2. Conditions to Purchases . . . . . . . . . . . . 18
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<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
ARTICLE V
COVENANTS
SECTION 5.1. Covenants of the Originator . . . . . . . . . . 19
SECTION 5.2. Negative Covenants of the Originator. . . . . . 24
ARTICLE VI
TERMINATION
SECTION 6.1. Term. . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.2. Effect of Termination . . . . . . . . . . . . . 26
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. Indemnification . . . . . . . . . . . . . . . . 26
SECTION 7.2. Tax Indemnification . . . . . . . . . . . . . . 27
SECTION 7.3. Additional Costs. . . . . . . . . . . . . . . . 28
SECTION 7.4. Other Costs and Expenses. . . . . . . . . . . . 28
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Survival. . . . . . . . . . . . . . . . . . . . 29
SECTION 8.2. Waivers; Amendments . . . . . . . . . . . . . . 29
SECTION 8.3. Notices . . . . . . . . . . . . . . . . . . . . 29
SECTION 8.4. Governing Law; Submission to Jurisdiction;
Integration . . . . . . . . . . . . . . . . . . 30
SECTION 8.5. Records . . . . . . . . . . . . . . . . . . . . 30
SECTION 8.6. No Implied Waiver; Cumulative Remedies. . . . . 30
SECTION 8.7. No Discharge. . . . . . . . . . . . . . . . . . 31
SECTION 8.8. Prior Understandings. . . . . . . . . . . . . . 31
SECTION 8.9. Successors and Assigns. . . . . . . . . . . . . 31
SECTION 8.10. No Petition . . . . . . . . . . . . . . . . . . 31
SECTION 8.11. No Recourse . . . . . . . . . . . . . . . . . . 31
SECTION 8.12. Severability; Counterparts, Waiver of
Setoff. . . . . . . . . . . . . . . . . . . . . 31
SECTION 8.13. Confidentiality . . . . . . . . . . . . . . . . 32
Exhibit A Form of Subordinated Note
Exhibit B Description of Qualifying Receivables
Exhibit C Officer's Certificate pursuant to Section 4.01(f)
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<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
PURCHASE AGREEMENT
This PURCHASE AGREEMENT, dated as of March 25,
1997 (as amended, supplemented or otherwise modified and in
effect from time to time, this "Agreement"), made by and between
CONE RECEIVABLES LLC, a Delaware limited liability company, as
buyer (the "Buyer") and CONE MILLS CORPORATION, a North Carolina
corporation, as originator (the "Originator").
R E C I T A L S:
WHEREAS, subject to the terms and conditions of
this Agreement, the Originator desires to sell from time to time
to the Buyer, and the Buyer desires to purchase from time to time
from the Originator, certain trade receivables resulting from the
sale of goods or services by the Originator to its customers (the
"Receivables"), subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises
and mutual covenants contained herein, and for good and
sufficient consideration, the parties hereto, intending to be
legally bound, do hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Cross Reference to Receivables
Purchase Agreement. Terms used herein and not defined herein
shall have the meanings assigned to such terms in the Receivables
Purchase Agreement.
SECTION 1.2. Certain Defined Terms. As used in
this Agreement, the following capitalized terms shall have the
following meanings:
"Additional Costs" shall have the meaning
specified in Section 7.3(a).
"Adverse Claim" shall mean a Lien or other right
or claim in, of or on any Person's assets or properties in favor
of any other Person.
"Charge-Off" shall mean a Receivable (or any
portion thereof): (i) which has been identified by the Originator
as uncollectible, or (ii) which, in accordance with the Credit
and Collection Policy, should be written off the Originator's
books as uncollectible.
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FORM 10-Q
Exhibit 2.1(l) (continued)
"Chief Executive Office" shall mean, with respect
to the Originator or the Buyer, the place where the Originator or
the Buyer, as the case may be, is located, within the meaning of
Section 9-103(3)(d), or any analogous provision, of the UCC, in
effect in the jurisdiction whose Law governs the perfection of
the Buyer's ownership of any Purchased Asset.
"Closing Date" shall mean March 26, 1997.
"Collections" shall mean, for any Receivable as of
any date, (i) the sum of all amounts, whether in the form of wire
transfer, cash, checks, drafts, or other instruments, received by
the Originator or by the Servicer or in a Permitted Lockbox or
otherwise in payment of, or applied to, any amount owed by an
Obligor on account of such Receivable (including but not limited
to all amounts received on account of any Defaulted Receivable)
on or before such date, including, without limitation, all
amounts received on account of such Receivable, all Finance
Charges, if any, and all other fees and charges, (ii) cash
proceeds of Related Security with respect to such Receivable, and
(iii) all amounts deemed to have been received by the Originator
or the Servicer as a Collection pursuant to Section 2.8(a)
hereof.
"Consolidated Subsidiary" shall mean, at any date,
any subsidiary or other entity the accounts of which would be
consolidated under GAAP with those of the Originator in its
consolidated financial statements as of such date.
"Expense and Tax-Sharing Agreement" shall mean the
Office Space, Administrative and Office Support Services, and Tax
Agreement, dated the date of this Agreement, between the
Originator and the Buyer.
"Foreign Receivable" shall mean all receivables
arising from the sale by the Originator of goods or services to
Obligors located outside of the United States. For the purposes
of this definition, a sale of goods or services shall be deemed
to have been made to an Obligor located outside of the United
States if (i) the goods are shipped by the Originator or at the
Originator's direction to a facility of such Obligor which is not
located within the fifty states of the United States or (ii) such
Obligor is an entity existing under the laws of a jurisdiction
other than the fifty states of the United States and the
principal place of business of such Obligor is not located in any
of the fifty states of the United States.
"Indemnified Amounts" shall have the meaning
specified in Section 7.1.
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FORM 10-Q
Exhibit 2.1(l) (continued)
"Initial Purchase Date" means the date the first
Purchase is made pursuant to this Agreement.
"Material Adverse Effect" shall mean, with respect
to the Originator, a material adverse effect on (i) the financial
condition or operations of the Originator and its Affiliates,
taken as one enterprise, (ii) the ability of the Originator to
perform its obligations under this Agreement, (iii) the legality,
validity or enforceability of this Agreement, (iv) the Buyer's
ownership of the Receivables or (v) the collectibility of the
Receivables or of any significant portion of the Receivables,
other than, in the case of clauses (i) through (v), such Material
Adverse Effects which are the direct result of actions or
omissions of the Buyer.
"Permitted Lien" shall mean (i) a Lien imposed by
any governmental agency or authority for taxes, assessments or
charges not yet due or that are being contested in good faith and
by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Originator in
accordance with GAAP, or (ii) a carriers', warehousemen's,
mechanics' or other like Lien arising in the ordinary course of
business for amounts that are not overdue for a period of more
than 30 days or that are being contested in good faith and by
appropriate proceedings and for payment of which the Originator
has adequately bonded or provided adequate reserves on its books
in accordance with GAAP.
"Purchase" means a purchase of Receivables
together with the Related Security and Collections with respect
thereto by the Buyer from the Originator pursuant to Sections 2.1
and 2.2.
"Purchase Date" means the Initial Purchase Date
and thereafter, each Business Day on which a Purchase occurs.
"Purchase Price" shall have the meaning specified
in Section 2.2(c).
"Purchased Assets" shall mean, (i) each and every
Receivable purchased hereunder, (ii) all Related Security with
respect to each such Receivable, (iii) all Collections, including
all cash collections and other cash proceeds, with respect
thereto, and (iv) all cash and non-cash Proceeds of the
foregoing.
"Receivable" shall mean, all indebtedness owed to
the Originator by any Obligor (without giving effect to any
purchase under this Agreement by the Buyer at any time) under a
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FORM 10-Q
Exhibit 2.1(l) (continued)
Contract, whether or not constituting an account or a general
intangible and whether or not evidenced by chattel paper or an
instrument, whether now existing or hereafter arising and
wherever located, arising in connection with the sale of goods or
the rendering of services by the Originator and satisfying the
descriptions set forth on Exhibit B to this Agreement, all monies
due and to become due under such Contracts and including the
right to payment of any Finance Charges and other obligations of
the Obligor with respect thereto, but excluding any amount of
sales tax, excise tax or other similar tax or charge incurred in
connection with the sale of the goods or services which gave rise
to such indebtedness; provided that the term Receivable shall not
mean and shall not include any Foreign Receivables and shall not
mean and shall not include receivables arising from the sale of
goods or services to Levi Strauss & Co. Notwithstanding the
foregoing, once a Receivable has been deemed collected pursuant
to Section 2.8(a), and the Originator has complied with all of
its' obligations in respect of such deemed Collections pursuant
to Section 2.8(c), it will no longer constitute a Receivable
hereunder.
"Receivables Purchase Agreement" shall mean the
Receivables Purchase Agreement dated the date of this Agreement
by and among the Originator, as Servicer and the Buyer, as seller
thereunder and Delaware Funding Corporation, as buyer thereunder
as the same may be from time to time amended, modified or
supplemented.
"Regulation D" shall mean Regulation D of the
Board of Governors of the Federal Reserve System, as the same may
be amended, supplemented or otherwise modified, in effect from
time to time.
"Regulatory Change" shall mean any change after
the date of this Agreement in United States (federal, state or
municipal) or foreign laws or regulations (including Regulation
D) or the adoption or making after such date of any
interpretations, directives or requests applying to a class of
banks of or under any United States (federal, state or municipal)
or foreign, laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Related Security" shall mean with respect to any
Receivable:
(a) all of the Originator's interest, if any, in
the goods, merchandise (including returned merchandise) or
equipment, if any, the sale of which by the Originator gave rise
to such Receivable;
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FORM 10-Q
Exhibit 2.1(l) (continued)
(b) all other security interests or liens and
property subject thereto from time to time, if any, purporting to
secure payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise, together with
all financing statements signed by an Obligor describing any
collateral securing such Receivable;
(c) all guarantees, insurance or other agreements
or arrangements of any kind from time to time supporting or
securing payment of such Receivable whether pursuant to the
Contract related to such Receivable or otherwise; and
(d) all Records relating to, and all service
contracts and any other contracts associated with, such
Receivable or the Contracts or the Obligors relating thereto.
"Relevant UCC" shall mean the Uniform Commercial
Code as in effect from time to time in all applicable
jurisdictions.
"Responsible Officer" shall mean, with respect to
any Person, the chief executive officer, chief financial officer,
president, treasurer or assistant treasurer of such Person.
"Servicer" shall mean, initially, the Originator,
and any successor Servicer designated pursuant to the Receivables
Purchase Agreement.
"Subordinated Loan" shall have the meaning
specified in Section 2.2(d) hereof.
"Subordinated Note" shall have the meaning
specified in Section 2.2(d) hereof.
"Termination Date" shall have the meaning ascribed
to such term in Section 6.1.
SECTION 1.3. Interpretation and Construction.
Unless the context of this Agreement otherwise clearly requires,
references to the plural include the singular, the singular the
plural and the part the whole. References in this Agreement to
"determination," "determine" and "determined" by the Buyer shall
be conclusive absent manifest error and include good faith
estimates by the Buyer (in the case of quantitative
determinations), and the good faith belief of the Buyer (in the
case of qualitative determinations). The words "hereof,"
"herein," "hereunder" and similar terms in this Agreement refer
to this Agreement as a whole and not to any particular provision
of this Agreement. Unless otherwise stated in this Agreement, in
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FORM 10-Q
Exhibit 2.1(l) (continued)
the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including"
and the words "to" and "until" each means "to but excluding."
The section and other headings contained in this Agreement are
for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation hereof in
any respect. Section, subsection and exhibit references are to
this Agreement unless otherwise specified. As used in this
Agreement, the masculine, feminine or neuter gender shall each be
deemed to include the others whenever the context so indicates.
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. Terms not otherwise defined
herein which are defined in the Uniform Commercial Code as in
effect in the State of New York on the date hereof shall have the
respective meanings ascribed to such terms therein unless the
context otherwise clearly requires.
ARTICLE II
SALES AND TRANSFERS; SETTLEMENTS
SECTION 2.1. General Terms. On the terms and
conditions hereinafter set forth, from the date the conditions
precedent to the initial Purchase in Section 4.1 are satisfied to
the Expiration Date under the Receivables Purchase Date, the
Originator shall sell to the Buyer on each Purchase Date, without
recourse, except as specifically set forth herein, all right,
title and interest of the Originator in, to and under those
Receivables that the Originator determines to sell hereunder on
such date, along with Related Security with respect to such
Receivables and Collections with respect thereto, and the Buyer
agrees to purchase such Receivables, Related Security and
Collections from the Originator.
SECTION 2.2. Purchase and Sale. (a) The
Originator hereby irrevocably sells, sets over, assigns,
transfers and conveys to the Buyer and its successors and
assigns, without recourse, except as specifically set forth
herein, and the Buyer hereby accepts, purchases and receives, all
of the Originator's right, title, and interest in and to the
Purchased Assets, whether such Purchased Assets are now owned or
hereafter created or acquired by the Originator, along with all
monies, instruments, securities, documents and other property
from time to time on deposit in or credited to the Lockbox
Accounts relating to the Purchased Assets.
(b) The consideration to the Originator for the
initial Purchase shall be the execution and delivery by the Buyer
of the Receivables Purchase Agreement on the Closing Date and the
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FORM 10-Q
Exhibit 2.1(l) (continued)
making by the Buyer thereunder of the "Initial Purchase" (as
defined thereunder). The initial Purchase hereunder shall be
made subject to the satisfaction of the conditions to purchase
specified in Section 4.2.
(c) The "Purchase Price" for the Purchased Assets
which came into existence on or prior to the Closing Date
conveyed to the Buyer under this Agreement shall be payable on
the Closing Date and shall be an amount equal to 100% of the
Outstanding Balance of the Receivables so conveyed, adjusted to
reflect such factors as the Originator and the Buyer mutually
agree will result in a Purchase Price determined to approximate
the fair market value of such Purchased Assets. Such computation
of the initial Purchase Price shall assume no reinvestment in new
Purchased Assets. The "Purchase Price" for the Purchased Assets
to be conveyed to the Buyer under this Agreement that come into
existence after the Closing Date shall be payable on the Purchase
Date in an amount equal to 100% of the Outstanding Balance of the
Receivables so conveyed (the "New Purchased Assets"), adjusted to
reflect such factors as the Originator and the Buyer mutually
agree will result in a Purchase Price determined to approximate
the fair market value of such New Purchased Assets.
(d) The Purchase Price to be paid by the Buyer on
the Closing Date and on each subsequent Purchase Date shall be
paid (i) in cash, (ii) with the consent of the Originator, by
means of capital contributed by the Originator to the Buyer in
the form of a contribution of the Purchased Assets, (iii) if
consented to by the Originator and in the sole discretion of the
Originator, by means of a loan by the Originator to the Buyer
(each a "Subordinated Loan" and collectively, the "Subordinated
Loans") evidenced by the subordinated note (the "Subordinated
Note") in the form attached hereto as Exhibit A. The
Subordinated Loans shall be made on a revolving basis from time
to time during the term of this Agreement as the Buyer may from
time to time request and the Originator shall agree for the sole
purpose of purchasing Receivables from the Originator. Interest
on and principal of the Subordinated Note shall be payable in the
amounts and at the times specified in the Subordinated Note. The
Originator shall maintain records of the date and amounts of each
Subordinated Loan and payments thereon on the grid attached to
the Subordinated Note.
(e) The sale of the Purchased Assets by the
Originator hereunder shall be made without recourse except as
specifically provided herein.
(f) No obligation or liability of the Originator
to any Obligor or any third party under any Receivable or
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FORM 10-Q
Exhibit 2.1(l) (continued)
Contract purchased by the Buyer shall be assumed by the Buyer,
and any assumption is hereby expressly disclaimed. The Buyer
shall be indemnified by the Originator in accordance with Section
7.1 hereof in respect of any losses, claims, damages,
liabilities, costs or expenses arising out of or incurred in
connection with any Obligor's assertion of such obligation or
liability against the Buyer.
SECTION 2.3. Transfers and Assignments. (a) It
is the intention of the parties hereto that each Purchase made
hereunder shall constitute a sale and assignment, which sales and
assignments are absolute, irrevocable and without recourse except
as specifically provided herein and shall provide the Buyer with
the full benefits of ownership of the Receivables and the other
related Purchased Assets. In the event that such Purchase is
deemed to constitute a pledge rather than a sale and assignment
of the aforementioned property, then (i) this Agreement also
shall be deemed to be and hereby is a security agreement within
the meaning of the UCC and (ii) the Originator does hereby grant
to the Buyer a first priority perfected security interest in and
to and lien on all of the Originator's right, title and interest
in, to and under the Purchased Assets. The Originator and the
Buyer shall, to the extent consistent with this Agreement, take
such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the
Receivables, such security interest would be deemed to be a
perfected security interest of first priority under applicable
law and will be maintained as such throughout the term of this
Agreement. The possession by the Buyer or its transferee or
agent of notes and such other goods, letters of credit, advices
of credit, money, documents, instruments, chattel paper or
certificated securities related thereto shall be deemed to be
"possession by the secured party" for purposes of perfecting such
security interest pursuant to the Relevant UCC (including,
without limitation, Section 9-305 thereof). Notifications to
persons holding such property, and acknowledgments, receipts or
confirmations from persons holding such property, shall be deemed
to be notifications to, or acknowledgments, receipts or
confirmations from, bailees or agents (as applicable) of, the
Buyer or its transferee for the purpose of perfecting such
security interest under the Relevant UCC and other applicable
laws. The sale and conveyance hereunder of the Purchased Assets
does not constitute an assumption by the Buyer or its successors
and assigns of any obligations of the Originator to Obligors or
to any other Person in connection with Receivables or under any
agreement or instrument relating to the Receivables.
(b) In connection with the sale and transfer
under Section 2.2(a), the Originator agrees to record and file,
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FORM 10-Q
Exhibit 2.1(l) (continued)
at its own expense, financing statements, with respect to the
Purchased Assets now existing and hereafter created or acquired,
suitable to reflect the transfer of chattel paper, amounts and
general intangibles (each as defined in Article 9 of the Relevant
UCC) and meeting the requirements of applicable state law in such
manner and in such jurisdictions as are necessary to perfect the
sale, transfer and assignment of the Purchased Assets to the
Buyer, and to deliver a file-stamped copy of such financing
statements or other evidence of such filing satisfactory to the
Buyer on or prior to the applicable Purchase Date. In addition
to, and without limiting the foregoing, the Originator shall,
upon the request of the Buyer, in order to accurately reflect
this transaction, execute and file such financing or continuation
statements or amendments thereto or assignments thereof (as
permitted pursuant to Section 8.9 hereof) as may be reasonably
requested by the Buyer.
(c) The Originator shall maintain its books and
records so that such records that refer to a Receivable shall
indicate clearly that the Originator's right, title and interest
in such Receivable has been sold to the Buyer and mark its master
data processing records with a notation describing the
acquisition (or assignment) by, the Buyer of the Purchased
Assets, as the Buyer may reasonably request. Indication of the
Buyer's interest in a Receivable shall be deleted from or
modified on the Originator's records when, and only when, the
Receivable shall have been paid in full or the Buyer's interest
in such Receivable shall have been repurchased or repaid by the
Originator hereunder. In addition, the Originator shall maintain
its computer systems so that the Originator's master computer
records (including any back-up archives) that refer to a
Receivable shall indicate clearly that such Receivable has been
sold to the Buyer pursuant to this Agreement and that an interest
in such Receivable has been transferred and assigned by the Buyer
hereunder to Delaware Funding Corporation as Buyer under the
Receivables Purchase Agreement. The Originator will at all times
keep or cause to be kept at its Chief Executive Office or at an
office of the Servicer designated in advance to the Buyer, each
writing or Record which evidences, and which is necessary or
desirable to establish or protect, including such books of
account and other Records as will enable the Buyer or its
designee to determine at any time the status of, the Purchased
Assets of the Buyer in each Receivable. The Originator shall at
its own expense prepare and maintain machine-readable magnetic
tapes in such format as the Originator customarily maintains its
records; provided, however, that upon a upon the request of the
Buyer, the Originator shall, within 15 days of such request,
prepare such records in such format as may be required to permit
or facilitate the needs of the Buyer.
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FORM 10-Q
Exhibit 2.1(l) (continued)
SECTION 2.4. Protection of Ownership of the
Buyer.
(a) The Originator will, on or prior to each
Purchase, and with respect to all Receivables that are sold
pursuant to Section 2.1 hereof after the initial Purchase, on
each respective date such Receivables are sold, place an
appropriate code or notation in its Records to indicate that each
such Receivable has been sold to the Buyer hereunder.
(b) The Originator agrees that from time to time,
at its expense, it shall promptly execute and deliver all
additional instruments and documents and take all additional
action that the Buyer may reasonably request in order to perfect
the interests of the Buyer in and to, or to protect, the
Purchased Assets or to enable the Buyer to exercise or enforce
any of its rights hereunder. To the fullest extent permitted by
applicable law, the Buyer shall be permitted to sign and file
continuation statements and amendments thereto and assignments
thereof without the Originator's signature in such cases where
the Originator is obligated hereunder or under the Relevant UCC
to sign such statements, amendments or assignments if, after
written notice to the Originator, the Originator shall have
failed to sign such continuation statements, amendments or
assignments within ten (10) Business Days after receipt of such
notice from the Buyer. Carbon, photographic or other
reproduction of this Agreement or any financing statement shall
be sufficient as a financing statement.
(c) At any reasonable time and from time to time
at the Buyer's reasonable request and upon seven days prior
notice to the Originator, the Originator shall permit such Person
as the Buyer may designate, at such Person's expense, to conduct
audits or visit and inspect any of the properties of the
Originator to examine the Records, internal controls and
procedures maintained by the Originator with respect to the
Receivables and take copies and extracts therefrom, and to
discuss the Originator's affairs with its officers, employees
and, upon notice to the Originator, independent accountants. The
Originator hereby authorizes such officers, employees and
independent accountants to discuss with the Buyer the affairs of
the Originator. Any audit provided for herein shall be conducted
in accordance with Originator's rules respecting safety and
security on its premises and without materially disrupting
operations.
SECTION 2.5. Payment of Collections and Deemed
Collections. If the Originator shall receive any Collections
with respect to Receivables which have been sold to the Buyer
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FORM 10-Q
Exhibit 2.1(l) (continued)
pursuant to this Agreement or shall be deemed to have received
any Collections under the provisions of Section 2.8 hereof, the
Originator shall hold such Collections or cash in an amount equal
to the deemed Collection in trust for the Buyer and shall pay
such amounts to the Buyer as soon as practicable, but in no event
more than two Business Days after receipt thereof or the deemed
Collection thereof.
SECTION 2.6. Mandatory Repurchase Under Certain
Circumstances. The Originator shall repurchase from the Buyer
(i) all Receivables constituting Purchased Assets if at any time,
as determined by written advice of counsel, the Buyer or its
assignee shall cease to have a perfected ownership interest or a
first priority perfected security interest in all of the
Purchased Assets, free and clear of any Lien and (ii) any
Receivables that the Buyer determines were not, at the time of
their Purchase hereunder, Eligible Receivables, in each case
within five days of notice by the Buyer of its exercise of a
repurchase right under this Section 2.6. The Repurchase Amount
shall be paid upon the repurchase by the Originator to the Buyer
under this Section 2.6 shall be an amount equal to the Aggregate
Unpaids.
SECTION 2.7. Dilution. If the Outstanding
Balance of a Receivable is either (i) reduced or cancelled as a
result of any (a) refunded item, (b) defective or rejected goods
or services, any cash discount or of any adjustment by the
Originator, or (ii) reduced or cancelled as a result of a set off
in respect of any claim by any Person (whether such claim arises
out of the same or a related transaction or an unrelated
transaction), the Originator shall pay to the Buyer on such day
the amount of such reduction or, if such transferred Receivable
is cancelled, the amount of the Outstanding Balance thereof,
together with the Finance Charges accrued thereon through such
day.
SECTION 2.8. Deemed Collections.
(a) If on any day the Outstanding Balance of a
Receivable is (w) reduced or canceled as a result of any
defective or rejected goods or services, any cash discount or any
adjustment by the Originator, or (x) reduced or canceled as a
result of a set-off in respect of any claim by any Person
(whether such claim arises out of the same or a related
transaction or an unrelated transaction) or (y) reduced or
canceled as a result of any forgiveness of the obligation or of
any adjustment by the Originator, or (z) otherwise reduced or
canceled as a result of any Dilution Factor with respect to such
Receivable, the Originator shall be deemed to have received on
such day a Collection of such Receivable in the amount of such
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FORM 10-Q
Exhibit 2.1(l) (continued)
reduction or cancellation. If on any day any of the
representations or warranties in Section 3.1 or 3.2 hereof is no
longer true or was not true when made with respect to a
Receivable, the Originator shall be deemed to have received on
such day a Collection of such Receivable in full.
(b) If the Buyer determines that any Receivable,
on the date of its Purchase was not an Eligible Receivable, the
Originator shall, on the date of discovery by or notice to the
Originator of such fact, be deemed to have received on such day a
Collection of such Receivable in full.
(c) Any Collections deemed to be received by the
Originator pursuant to Section 2.8(a) or (b) hereof shall be held
and distributed, as provided in Section 2.5, and shall be used to
make calculations and determinations hereunder, to the same
extent as if such Collections had actually been received. So
long as the Originator shall hold any Collections or deemed
Collections required to be paid to the Buyer or its agent, it
shall hold such Collections in trust for such Person.
SECTION 2.9. Transfers by Buyer. The Originator
acknowledges and agrees that (a) the Buyer may, pursuant to the
Receivables Purchase Agreement, sell the Purchased Assets and
assign its rights under this Agreement to Delaware Funding
Corporation as Buyer under the Receivables Purchase Agreement and
(b) the representations and warranties contained in this
Agreement and the rights of the Buyer under this Agreement are
intended to benefit the Buyer under the Receivables Purchase
Agreement. The Originator hereby consents to all such sales and
assignments.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of
Originator. The Originator represents and warrants to the Buyer
on and as of the Closing Date and as of each Purchase Date that:
(a) Organization and Qualification. The
Originator is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation. The Originator is duly qualified to do business
as a foreign corporation in good standing in each jurisdiction in
which the ownership of its properties or the nature of its
activities (including transactions giving rise to Receivables),
or both, requires it to be so qualified or, if not so qualified,
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FORM 10-Q
Exhibit 2.1(l) (continued)
the failure to so qualify would not have a material adverse
effect on its financial condition or results of operations.
(b) Authorization. The Originator has the
corporate power and authority to execute and deliver the Purchase
Documents, to make the sales provided for herein and to perform
its obligations hereunder and thereunder.
(c) Execution and Binding Effect. Each of the
Purchase Documents to which the Originator is a party has been
duly and validly executed and delivered by the Originator and
(assuming the due and valid execution and delivery thereof by the
other parties thereto), constitutes a legal, valid and binding
obligation of the Originator enforceable in accordance with its
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws of
general application relating to or affecting the enforcement of
creditors, rights or by general principles of equity, and will
vest absolutely and unconditionally in the Buyer a valid
undivided ownership interest in the Receivables purported to be
assigned thereby, subject to no Liens whatsoever. Upon the
filing of the necessary financing statements under the Relevant
UCC, the Buyer's ownership interest in the Receivables will be
perfected under Article Nine of such UCC, prior to and
enforceable against all creditors of and purchasers from the
Originator and all other Persons whatsoever (other than the Buyer
and its successors and assigns).
(d) Authorizations and Filings. No
authorization, consent, approval, license, exemption or other
action by, and no registration, qualification, designation,
declaration or filing with, any governmental body, agency or
official is or will be necessary or, in the opinion of the
Originator, advisable in connection with the execution and
delivery by the Originator of the Purchase Documents, the
consummation by the Originator of the transactions herein or
therein contemplated or the performance by the Originator of or
the compliance by the Originator with the terms and conditions
hereof or thereof, to ensure the legality, validity or
enforceability hereof or thereof, or to ensure that the Buyer
will have an undivided ownership interest in and to the
Receivables which is perfected and prior to all other Liens
(including competing ownership interests), other than the filing
of financing statements under the UCC in the jurisdiction of the
Originator's Chief Executive Office.
(e) Absence of Conflicts. Neither the execution
and delivery by the Originator of the Purchase Documents, nor the
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FORM 10-Q
Exhibit 2.1(l) (continued)
consummation by the Originator of the transactions herein or
therein contemplated, nor the performance by the Originator of or
the compliance by the Originator with the terms and conditions
hereof or thereof, will (i) violate any Law or (ii) conflict with
or result in a breach of or a default under (A) the Articles of
Incorporation or By-laws of the Originator or (B) any agreement
or instrument, including, without limitation, any and all
indentures, debentures, loans or other agreements to which the
Originator is a party or by which it or any of its properties
(now owned or hereafter acquired) may be subject or bound, which
would have a material adverse effect on the financial position or
results of operations of the Originator or result in rendering
any debt evidenced thereby due and payable prior to its maturity
or result in the creation or imposition of any Lien pursuant to
the terms of any such instrument or agreement upon any property
(now owned or hereafter acquired) of the Originator. The
Originator has not entered into any agreement with any Obligor
prohibiting, restricting or conditioning the assignment of any
portion of the Receivables.
(f) Location of Chief Executive Office, etc. As
of the date hereof: (i) the Originator's Chief Executive Office
is located at the address for notices set forth in Section 8.3
hereof; (ii) the Originator has only the Subsidiaries and
divisions listed on Exhibit L to the Receivables Purchase
Agreement; (iii) the offices where the Originator keeps all of
its Records are listed on Exhibit L to the Receivables Purchase
Agreement; and (iv) the Originator has, within the last 5 years,
operated only under the trade names identified in Exhibit L to
the Receivables Purchase Agreement; and, within the last 5 years,
has not changed its name, merged or consolidated with any other
corporation or been the subject of any proceeding under Title 11,
United States Code (Bankruptcy), except as disclosed in Exhibit L
to the Receivables Purchase Agreement.
(g) Accurate and Complete Disclosure. No
information furnished in writing by the Originator to the Buyer
pursuant to or in connection with this Agreement or any
transaction contemplated hereby is false or misleading in any
material respect as of the date as of which such information was
furnished (including by omission of material information
necessary to make such information not misleading).
(h) No Proceedings. There are no proceedings or
investigations pending, or to the knowledge of the Originator,
threatened, before any Official Body (A) asserting the invalidity
of the Purchase Documents, (B) seeking to prevent the ,
consummation of any of the transactions contemplated by the
Purchase Documents, or (C) seeking any determination or ruling
Page 52
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
that might materially and adversely affect (i) the performance by
the Originator or the Buyer of its obligations under the Purchase
Documents or (ii) the validity or enforceability of the Purchase
Documents, the Contracts or any material amount of the
Receivables.
(i) Bulk Sales Act. No transaction contemplated
hereby requires compliance with any bulk sales act or similar
law.
(j) Financial Condition. (x) The consolidated
balance sheet of the Originator and its Consolidated Subsidiaries
as at December 29, 1996 and the related statements of operations
and cash flows of the Originator and its Consolidated
Subsidiaries for the fiscal year then ended, certified by
McGladrey & Pullen LLP, independent accountants, copies of which
have been furnished to the Buyer, fairly present the consolidated
financial position of the Originator and its Consolidated
Subsidiaries as at such date and the consolidated results of the
operations of and changes in consolidated cash flows of the
Originator and its Consolidated Subsidiaries for the period ended
on such date, all in accordance with GAAP and (y) since December
29, 1996, there has been no material adverse change in any such
financial condition or results of operations or in the
Originator's ability to perform its obligations under the
Purchase Documents, except as set forth on Schedule 2 of the
Disclosure Schedule attached to the Receivables Purchase
Agreement.
(k) Litigation. No injunction, decree or other
decision has been issued or made by any Official Body that
prevents, and to the knowledge of the Originator, no threat by
any Person has been made to attempt to obtain any such decision
that would have a material adverse impact on, the conduct by the
Originator of a significant portion of the Originator's business
operations or any portion of its business operations affecting
the Receivables, and no litigation, investigation or proceeding
of the type referred to in Section 5.1(i) exists except as set
forth on Schedule 3 of the Disclosure Schedule attached to the
Receivables Purchase Agreement.
(l) Margin Regulations. The use of all funds
acquired by the Originator under this Agreement will not conflict
with or contravene any of Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System, as the same may from
time to time be amended, supplemented or otherwise modified.
(m) ERISA. No event or condition is occurring or
exists with respect to any Plan or Multiemployer Plan concerning
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<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
which the Originator would be under an obligation to furnish a
report to the Buyer in accordance with Section 5.1(n) hereof.
(n) Taxes. All United States Federal income tax
returns of the Originator and its Consolidated Subsidiaries have
been examined and closed through the Fiscal Year ended January 2,
1994. The Originator and its Consolidated 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 Originator or any of its
Consolidated Subsidiaries. The charges, accruals and reserves on
the books of the Originator and its Consolidated Subsidiaries in
respect of taxes and other governmental charges are, in the
opinion of the Originator, adequate.
(o) Books and Records. The Originator has
indicated on its books and records (including any computer files)
that the Purchased Assets are the property of the Buyer.
(p) Permitted Lockbox Banks. The names and
addresses of all Permitted Lockbox Banks, together with the
numbers of all Lockbox Accounts at such Permitted Lockbox Banks
and the addresses of all related Permitted Lockboxes, as are
specified in Schedule 4 of the Disclosure Schedule attached to
the Receivables Purchase Agreement (or such other Permitted
Lockbox Banks, Lockbox Accounts and/or Permitted Lockboxes as
have been notified by the Originator to the Buyer.)
(q) Investment Company. The Originator is not an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended.
(r) Separate Existence. The Originator is
entering into the transactions contemplated by this Agreement in
reliance on the Buyer's identity as a separate legal entity from
the Originator and each of its Affiliates, and acknowledges that
the Buyer and the other parties to the Purchase Documents are
similarly entering into the transactions contemplated by the
other Purchase Documents in reliance on the Buyer's identity as a
separate legal entity from the Originator and each such other
Affiliate.
SECTION 3.2. Representations and Warranties of
the Originator With Respect to Each Sale of Receivables. By
selling Receivables to the Buyer on each Purchase Date, the
Originator represents and warrants to the Buyer as of each such
Purchase Date and only as to Receivables sold by the Originator
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<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
to the Buyer hereunder on such Purchase Date (in addition to its
other representations and warranties contained herein or made
pursuant hereto) that:
(a) Assignment. This Agreement vests in the
Buyer all the right, title and interest of the Originator in and
to the Purchased Assets, and constitutes a valid sale of the
Purchased Assets enforceable against all creditors of and
purchasers from the Originator.
(b) No Liens. Each Receivable, together with the
related Contract and all purchase orders and other agreements
related to such Receivable, is owned by the Originator free and
clear of any Lien (other than any Permitted Liens), and when the
Buyer makes a purchase of Purchased Assets it shall have acquired
and shall continue to have maintained an undivided percentage
ownership interest in such Receivable and in the Related Security
and the Collections with respect thereto free and clear of any
Lien (other than (x) the Lien arising in connection with this
Agreement, (y) any Permitted Liens). The Originator has not and
will not have sold, pledged, assigned, transferred or subjected
to a Lien any of the Receivables, other than the assignment of
the Purchased Assets to the Buyer.
(c) Filings. On or prior to each Purchase Date,
all financing statements and other documents required to be
recorded or filed in order to perfect and protect the Purchased
Assets against all creditors of and purchasers from the
Originator and all other Persons whatsoever have been duly filed
in each filing office necessary for such purpose and all filing
fees and taxes, if any, payable in connection with such filings
have been paid in full.
(d) Credit and Collection Policy. The Originator
has complied in all material respects with the Credit and
Collection Policy in regard to each Receivable and related
Contract.
(e) Nature of Receivables. Each Receivable is,
or will be, an account receivable or other obligation
representing all or part of the sales price of merchandise,
insurance and services within the meaning of Section 3(c)(5)(A)
promulgated under the Investment Company Act of 1940, as amended
from time to time, and a purchase of each Receivable with the
proceeds of Commercial Paper would constitute a "current
transaction" within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended from time to time.
(f) Eligible Receivables. Each Receivable
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FORM 10-Q
Exhibit 2.1(l) (continued)
classified as an "Eligible Receivable" by the Originator in any
document or report delivered pursuant to any Program Document
satisfies the requirements of eligibility contained in the
definition of Eligible Receivable.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Closing. On or prior
to the Closing Date, the Originator shall deliver to the Buyer
the following documents and instruments, all of which shall be in
form and substance acceptable to the Buyer:
(a) A copy of the resolutions of the Board of
Directors of the Originator certified by the Originator's
secretary authorizing the execution, delivery and performance of
this Agreement and the other documents to be delivered by the
Originator approving the transactions contemplated hereby and
thereby;
(b) The Articles of Incorporation of the
Originator certified as of a date reasonably near the date hereof
by the Secretary of State or other similar official of the
Originator's jurisdiction of incorporation;
(c) A good standing certificate for the
Originator issued by the Secretary of State or other similar
official of the state of the Originator's jurisdiction of
incorporation, certificates of qualification as a foreign
corporation issued by the Secretaries of State or other similar
officials of each jurisdiction where such qualification is
material to the transactions contemplated by this Agreement and
certificates of the appropriate state official in each
jurisdiction specified by the Buyer as to the absence of any tax
Liens against the Originator under the Laws of such jurisdiction,
each such certificate to be dated a date reasonably near the date
hereof;
(d) A certificate of the secretary of the
Originator certifying (i) the names and signatures of the
officers authorized on its behalf to execute, and the officers
and other employees authorized to perform, this Agreement and any
other documents to be delivered by the Originator hereunder (on
which certificate the Buyer may conclusively rely until such time
as the Buyer shall receive from the Originator a revised
certificate meeting the requirements of this clause (d)(i)) and
(ii) a copy of the Originator's By-laws;
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FORM 10-Q
Exhibit 2.1(l) (continued)
(e) Acknowledgment copies of proper financing
statements (Form UCC-1) dated a date reasonably near to the date
of the initial Purchase hereunder (i) the Originator as the
debtor of Receivables and the Buyer as the secured party or other
similar instruments or documents as may be necessary or, in the
opinion of the Buyer, desirable under the UCC of all appropriate
jurisdictions to evidence or perfect the Buyer's ownership
interest in all Receivables;
(f) Acknowledgment copies of proper financing
statements (Form UCC-3) necessary to release all security
interests and other rights of any person in Receivables
previously granted by the Originator;
(g) Certified copies of requests for information
or copies (Form UCC-11) (or a similar search report certified by
parties acceptable to Buyer) dated a date reasonably near the
date of the initial Purchase listing all effective financing
statements which name the Originator (under its present name and
any previous name) as debtor and which are filed in jurisdictions
in which the filings were made pursuant to item (e) above,
together with copies of such financing statements;
(h) Copies of Lockbox Servicing Instructions (to
the extent available) and all other agreements previously given
or entered into with each of the Permitted Lockbox Banks;
(i) Undated duly executed letters (a "Lockbox-
Transfer Letter") from the Originator as Servicer under the
Receivables Purchase Agreement, addressed to each Permitted
Lockbox Bank substantially in the form of Exhibit H to the
Receivables Purchase Agreement;
(j) Favorable opinions of Lindy Bode Aucoin
counsel for the Originator dated the Closing Date as to
corporate, enforceability, perfection, tax and other matters, in
form and substance acceptable to the Buyer;
(k) An opinion of counsel acceptable to the
Originator and which specifically allows reliance thereon by the
Originator's outside auditors with respect to the treatment of
the transfer of the Receivables from the Originator to the Buyer
as provided in this Agreement as a true sale;
(l) Officer's certificate executed by a
Responsible Officer of the Originator in form and substance
acceptable to the Buyer;
(m) Executed copies of the Subordinated Note and
of the Officer's Certificate attached hereto as Exhibit C;
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FORM 10-Q
Exhibit 2.1(l) (continued)
(n) An executed copy of the Expense and Tax-
Sharing Agreement;
(o) An executed copy of the Omnibus Termination
and Release and Reconveyance dated the Closing Date, by an
between the Originator and Delaware Funding Corporation; and
(p) Such other documents as the Buyer may
reasonably request.
SECTION 4.2. Conditions to Purchases. The
Buyer's obligation to make a Purchase on any Purchase Date shall
be subject to satisfaction of the following applicable conditions
precedent:
(a) the truth and correctness of:
(i) the representations and warranties in Section
3.1 hereof as of such Purchase Date, as though
made on and as of such date, and
(ii) the representations and warranties in
Section 3.2 of this Agreement, as though made on
and as of such date;
(b) the Originator shall have taken all actions
necessary or advisable to maintain a perfected first priority
security interest of the Buyer in and to the Purchased Assets
(including in and to the Receivables purchased on such Purchase
Date);
(c) the satisfactory completion by the Buyer of
any due diligence determined necessary by the Buyer with respect
to the Receivables and the related Obligors and Contracts being
Purchased on such date;
(d) the receipt by the Buyer of all approvals,
opinions or other documents as the Buyer shall have reasonably
requested.
ARTICLE V
COVENANTS
SECTION 5.1. Covenants of the Originator. At all
times during the term of this Agreement, unless the Buyer shall
otherwise consent in writing:
(a) Notice of Material Adverse Change. Promptly
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FORM 10-Q
Exhibit 2.1(l) (continued)
upon becoming aware thereof, the Originator shall give the Buyer
notice of any material adverse change in the business, operations
or financial condition of the Originator, as the case may be,
which reasonably could affect adversely the collectibility of the
Receivables or the ability to service such Receivables in order
to verify compliance with this Section 5.1(a) and otherwise
verify compliance with this Agreement, the Originator shall mail
the following to the Buyer:
(i) as soon as practicable and in any event
within 45 days following the close of each fiscal
quarter, excluding the last fiscal quarter, of
each Fiscal Year during the term of this
Agreement, an unaudited consolidated balance sheet
of the Originator as at the end of such quarter
and unaudited consolidated statements of income
and cash flows of the Originator for such quarter
and for the fiscal year through such quarter,
setting forth in comparative form the
corresponding figures for the corresponding
quarter of the preceding fiscal year, together
with notes thereto as are required to be included
therein in accordance with GAAP or applicable
Securities and Exchange Commission requirements,
all in reasonable detail and certified by the
chief financial officer of the Originator, subject
to adjustments of the type which would occur as a
result of a year-end audit, as having been
prepared in accordance with GAAP; and
(ii) as soon as practicable and in any event
within 90 days after the close of each Fiscal Year
during the term of this Agreement, a consolidated
balance sheet of the Originator as at the close of
such fiscal year and consolidated statements of
income and cash flows of the Originator for such
fiscal year, setting forth in comparative form the
corresponding figures for the preceding fiscal
year, all in reasonable detail and certified (with
respect to the consolidated financial statements)
by independent certified public accountants of
recognized standing selected by the Originator and
reasonably satisfactory to the Buyer (which shall
include McGladrey & Pullen LLP), whose certificate
or opinion accompanying such financial statements
shall not contain any qualification, exception or
scope limitation not satisfactory to the Buyer.
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FORM 10-Q
Exhibit 2.1(l) (continued)
(b) Preservation of Corporate Existence. The
Originator shall preserve and maintain its corporate existence,
rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing
as a foreign corporation in each jurisdiction where the failure
to preserve and maintain such existence, rights, franchises,
privileges and qualification would materially adversely affect
(i) the interests of the Buyer hereunder or (ii) the ability of
the Originator to perform its obligations under the Purchase
Documents.
(c) Compliance with Laws. The Originator shall
comply in all material respects with all Laws applicable to it,
its business and properties, and all Receivables related to the
Purchased Assets.
(d) Enforceability of Obligations. The
Originator shall take such actions as are reasonable and within
its power to ensure that, with respect to each Receivable, the
obligation of any related Obligor to pay the unpaid balance of
such Receivable in accordance with the terms of the related
Contract remains legal, valid, binding and enforceable against
such obligor.
(e) Books and Records. The Originator shall, to
the extent practicable, maintain and implement administrative and
operating procedures (including, without limitation, an ability
to recreate records evidencing Receivables in the event of the
destruction of the originals thereof), and keep and maintain or
obtain, as and when required, all documents, books, records and
other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of all
Related Security and Collections of and adjustments to each
existing Receivable).
(f) Fulfillment of Obligations. The Originator
will duly observe and perform, or cause to be observed or
performed, all material obligations and undertakings on its part
to be observed and performed under or in connection with the
Receivables, will duly observe and perform all material
provisions, covenants and other promises required to be observed
by it under the Contracts related to the Receivables, will do
nothing to impair the rights, title and interest of the Buyer in
and to the Purchased Assets and will pay or cause to be paid when
due any taxes, including without limitation any sales tax, excise
tax or other similar tax or charge, payable in connection with
the Receivables and their creation and satisfaction.
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FORM 10-Q
Exhibit 2.1(l) (continued)
(g) Customer List. The Originator shall at all
times maintain a current list (which may be stored on magnetic
tapes or disks) of all Obligors under Contracts related to
Receivables, including the name, address, telephone number and
account number of each such Obligor. The Originator shall within
five Business Days after the Closing Date deliver a list
containing all of such information as of the Closing Date to the
Buyer and shall in connection with each Monthly Report provide
updated information as provided in the Receivables Purchase
Agreement. The Originator shall also deliver or cause to be
delivered a copy of such list to the Buyer as soon as practicable
following the Buyer's request.
(h) Copies of Reports, Filings, Opinions, etc.
The Originator and the Guarantor shall furnish to the Buyer, as
soon as practicable after the issuance, sending or filing
thereof, copies of all proxy statements, financial statements,
reports and other communications, if any, which the Originator
sends to its security holders, and copies of all regular,
periodic and special reports, if any, which the Originator files
with the Securities and Exchange Commission or with any
securities exchange on Forms 10-K, 10-Q, 8-K or any successor
forms thereto.
(i) Litigation. As soon as possible, and in any
event within ten Business Days of the Originator's knowledge
thereof, the Originator shall give the Buyer notice of (i) any
litigation, investigation or proceeding against the Originator
which may exist at any time which, in the reasonable judgment of
the Originator, could have a material adverse effect on the
financial condition or results of operations of the Originator or
impair the ability of the Originator to perform its obligations
under the Purchase Documents and (ii) any material adverse
development in any such previously disclosed litigation.
(j) Notice of Relocation. The Originator shall
give the Buyer 45 days' prior written notice of any relocation of
its respective Chief Executive Office if, as a result of such
relocation, the applicable provisions of the UCC of any
applicable jurisdiction or other applicable Laws would require
the filing of any amendment of any previously filed financing
statement or continuation statement or of any new financing
statement. The Originator will at all times maintain its Chief
Executive Office within a jurisdiction in the United States in
which Article Nine of the UCC (1972 or later revision) is in
effect as of the date hereof or the date of any such relocation.
(k) Further Information. The Originator shall
furnish or cause to be furnished to the Buyer such other
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FORM 10-Q
Exhibit 2.1(l) (continued)
information as promptly as practicable, and in such form and
detail, as the Buyer may reasonably request.
(l) Treatment of Purchase. For accounting
purposes, the Originator shall treat each Purchase hereunder as a
sale of Purchased Assets. The Originator shall also maintain its
records and books of account in a manner which clearly reflects
each such sale to the Buyer and the Buyer's investment therein.
(m) Fees, Taxes and Expenses. The Originator
shall pay all filing fees, stamp taxes, other taxes (other than
taxes imposed directly on the overall net income of the Buyer)
and expenses, including the fees and expenses set forth in
Section 7.4 hereof, if any, which may be incurred on account of
or arise out of the Purchase Documents and transactions entered
into pursuant to the Purchase Documents.
(n) Administrative and Operating Procedures. The
Originator shall maintain and implement administrative and
operating procedures adequate to permit the identification of the
Receivables and all collections and adjustments attributable
thereto and shall comply in all material respects with the Credit
and Collection Policy in regard to each Receivable and related
Contract.
(o) ERISA Events.
(i) Promptly on becoming aware of the occurrence
of any Event of Termination which together with
all other Events of Termination occurring within
the prior 12 months involve a payment of money by
or a potential aggregate liability of the
Originator or any ERISA Affiliate or any
combination of such entities in excess of
$5,000,000, the Originator shall give the Buyer a
written notice specifying the nature thereof, what
action the Originator or any ERISA Affiliate has
taken and, when known, any action taken or
threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect
thereto.
(ii) Promptly upon receipt thereof, the
Originator shall furnish to the Buyer copies of
(i) all notices received by the Originator or any
ERISA Affiliate of the PBGC's intent to terminate
any Plan or to have a trustee appointed to
administer any Plan; (ii) all notices received by
the Originator or any ERISA Affiliate from the
Page 62
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
sponsor of a Multiemployer Plan pursuant to
Section 4202 of ERISA involving a withdrawal
liability in excess of $5,000,000; and (iii) all
funding waiver requests filed by the Originator or
any ERISA Affiliate with the Internal Revenue
Service with respect to any Plan, the accrued
benefits of which exceed the present value of the
plan assets as of the date the waiver request is
filed by more than $5,000,000, and all
communications received by the Originator or any
ERISA Affiliate from the Internal Revenue Service
with respect to any such funding waiver request.
(p) Collections. The Originator shall instruct
all Obligors to cause all Collections to be mailed to a Permitted
Lockbox.
(q) Notice of Ratings Change. The Originator
shall give the Buyer prompt notice of any change in the ratings
of the Originator's commercial paper or long term debt securities
by Moody's or S&P.
(r) Insurance. The Originator shall, and shall
cause each of its Consolidated Subsidiaries to maintain 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 Originator and its
Consolidated Subsidiaries are engaged.
(s) Compliance with Credit and Collection Policy.
The Originator shall comply in all material respects with the
Credit and Collection Policy with respect to each Receivable and
related Contract.
(t) Software. The Originator shall use its
reasonable efforts to enable each of the Buyer, any agent of the
Buyer and the Servicer (whether by license, sublicense,
assignment or otherwise) to use all of the computer software used
to account for the Receivables to the extent necessary to
administer the Receivables.
(u) Separate Identity. The Originator shall take
all actions required to maintain the Buyer's status as a separate
legal entity, including, without limitation, (i) not holding the
Buyer out to third parties as other than an entity with assets
and liabilities distinct from the Originator and the Originator's
Affiliates; (ii) not holding itself out to be responsible for the
debts of the Buyer or, other than by reason of being the sole
Member of the Buyer, for any decisions or actions relating to the
Page 63
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
Buyer; (iii) prepare separate financial statements for the Buyer
(which shall disclose the effect of the transaction between the
Originator and the Buyer hereunder in accordance with GAAP);
(iv) cause any financial statements consolidated with those of
the Buyer to state that the Buyer is a separate legal entity with
its own separate creditors which, in any liquidation of the
Buyer, will be entitled to be satisfied out of the Buyer's assets
prior to any value in the Buyer becoming available to the Buyer's
equity holders; (v) taking such other actions as are necessary on
its part to ensure that all corporate procedures required by its
certificate of incorporation and by-laws and by the Operating
Agreement of the Buyer are duly and validly taken; (vi) keeping
correct and complete records and books of account; and (vii) not
acting in any other manner that could foreseeable mislead others
with respect to the Buyer's separate identity.
(v) Subordinated Note. The Originator shall not
transfer the Subordinated Note to any Person.
SECTION 5.2. Negative Covenants of the
Originator. During the term of this Agreement, unless the Buyer
shall otherwise consent in writing (which consent the Buyer
agrees will not be unreasonably withheld) the Originator shall
not:
(a) Statement for and Treatment of the Sales.
Prepare any financial statements for financial accounting or
reporting purposes which shall account for the transactions
contemplated hereby in any manner other than as a sale of the
Purchased Assets to the Buyer.
(b) No Rescissions or Modifications. Rescind or
cancel any Receivable or related Contract or modify any terms, or
provisions thereof or grant any Dilution Factors to an Obligor,
except in accordance with the Credit and Collection Policy or
otherwise with the prior written consent of the Buyer.
(c) No Liens. Cause any of the Receivables or
related Contracts, or any inventory or goods the sale of which
may give rise to a Receivable, or any Permitted Lockbox or
Lockbox Account or any right to receive any payments received
therein or deposited thereto, to be sold, pledged, assigned or
transferred or to be subject to a Lien, other than the sale and
assignment of the Purchased Assets therein to the Buyer and the
Liens created in connection with the transactions contemplated by
this Agreement; provided, that the Originator may cause
inventory, the sale of which may give rise to a Receivable, to be
subject to a Lien if (i) the security agreement, related
financing statements and any other related documents specifically
Page 64
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
exclude from such Lien the proceeds of such inventory and
(ii),the Buyer has reviewed such security agreement, financing
statements and related documents and found such documents to be
reasonably satisfactory to exclude from such Lien the proceeds of
any such inventory.
(d) Consolidations, Mergers and Sales of Assets.
(i) Consolidate or merge with or into any other Person or (ii)
sell, lease or otherwise transfer all or substantially all of its
assets to any other Person; provided that the Originator may
merge with another Person if (A) the Originator is the
corporation surviving such merger and (B) immediately after and
giving effect to such merger, no Termination Event or Potential
Termination Event shall have occurred and be continuing.
(e) No Changes. Make any change in the
character of its business or in the Credit and Collection Policy,
which change would, in either case, impair the collectibility of
any Receivable, or make any material change in the Credit and
Collection Policy which would impair the collectibility of any
Receivable or would have a material adverse effect on the
Originator without prior written notification to and consent of
the Buyer, or change its name, identity or corporate structure in
any manner which would make any financing statement or
continuation statement filed in connection with this Agreement or
the transactions contemplated hereby seriously misleading within
the meaning of Section 9-402(7) of the UCC of any applicable
jurisdiction or other applicable Laws unless it shall have given
the Buyer at least 45 days' prior written notice thereof and
unless prior thereto it shall have caused such financing
statement or continuation statement to be amended or a new
financing statement to be filed such that such financing
statement or continuation statement would not be seriously
misleading.
(f) Change in Payments or Deposits of Payments.
Add or terminate any Person as a Permitted Lockbox Bank from
those Persons listed in Schedule 4 of the Disclosure Schedule
attached to the Receivables Purchase Agreement, or permit any
change in the location of any Permitted Lockbox or the location
or account number of any Lockbox Account, or make any change in
the instructions, to its Obligors regarding payments to be made
to the Originator or payments to be made to any Permitted
Lockbox.
(g) ERISA Matters. Permit any event or condition
which is described in any of clauses (i) through (vi), clause
(viii) or clause (x) of the definition of Event of Termination to
occur or exist with respect to any Plan or Multiemployer Plan if
Page 65
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
such event or condition, together with all other events or
conditions described in the definition of Event of Termination
occurring within the prior 12 months involve the payment of money
by or an incurrence of liability of the Originator or any ERISA
Affiliate in an amount in excess of $10,000,000.
(h) No Resignation or Assignment of Membership.
Resign as the Member of the Buyer or assign its interest in the
Buyer or any portion thereof to any other entity or take any
action seeking to amend the Operating Agreement or any of the
Originator's rights, interests or obligations thereunder.
(i) No Action for Dissolution. Take any action
to dissolve the Buyer so long as this Agreement is in effect.
ARTICLE VI
TERMINATION
SECTION 6.1. Term. This Agreement shall commence
as of the date of execution and delivery hereof and shall
continue in full force and effect until the earlier of (a) the
termination of the Receivables Purchase Agreement unless extended
by the Seller in its sole discretion and (b) upon the occurrence
of any of the following events: the Buyer or the Originator
shall (i) become insolvent, (ii) experience an Event of
Bankruptcy, or (iii) become unable for any reason to convey or
reconvey Receivables in accordance with the provisions of this
Agreement (any such date set forth in clause (a) or (b) hereof
being a "Termination Date"); provided, however, that (i) the
termination of this Agreement pursuant to this Section 6.1 shall
not discharge any Person from any obligations incurred prior to
such termination, including, without limitation, any obligations
to repurchase Receivables sold prior to such termination pursuant
to Section 2.6, 2.7 or 2.8 hereof and (ii) the indemnification
and payment provisions set forth in Article VII hereof and the
provisions and agreement set forth in Section 8.10 hereof shall
be continuing and shall survive termination of this Agreement.
Neither the Originator nor the Buyer will extend the term of this
Agreement with an intent to mitigate losses on the Receivables
previously sold by the Originator to the Buyer hereunder.
SECTION 6.2. Effect of Termination. No
termination or rejection or failure to assume the executory
obligations of this Agreement in the Event of Bankruptcy of the
Originator or the Buyer shall be deemed to impair or affect the
obligations pertaining to any executed sale or executed
obligations, including, without limitation, pretermination
breaches of representations and warranties by the Originator or
the Buyer.
Page 66
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. Indemnification. Without limiting
any other rights which the Buyer may have hereunder or under
applicable law, the Originator hereby agrees to indemnify the
Buyer and its officers, directors, agents, successors and assigns
(the "Indemnified Parties"; each, an "Indemnified Party") from
and against any and all damages, losses, claims, liabilities,
costs and expenses (other than in respect of taxes, which shall
be governed by Section 7.2), including reasonable attorneys' fees
and disbursements (all of the foregoing being collectively
referred to as "Indemnified Amounts") awarded against or incurred
by any Indemnified Party arising out of or as a result of any of
the circumstances described below, provided, however, that in no
event shall the Originator indemnify any Indemnified Party for
(i) Indemnified Amounts resulting from the gross negligence or
willful misconduct on the part of such Indemnified Party or (ii)
recourse for uncollectible Receivables. The Originator shall
indemnify the Indemnified Parties for Indemnified Amounts
relating to or resulting from:
(a) reliance on any representation or warranty
made by the Originator (or any officers of the Originator) under
or in connection with this Agreement, any Purchase Document or
any other information or report delivered by the Originator
pursuant hereto, which shall have been false or incorrect in any
material respect when made or deemed made;
(b) any failure of the Originator to perform its
duties or obligations in accordance with the provisions of this
Agreement or the transactions contemplated by this Agreement,
including without limitation, the failure by the Originator to
comply in all material respects with any applicable Law with
respect to any Receivable or the related Contract, or the
nonconformity of any Receivable or the related Contract with any
such applicable Law; or
(c) the failure as a result of acts or failures
to act on the part of the Originator to vest and maintain vested
in the Buyer or its assignee, the Purchased Assets free and clear
of any Adverse Claim, including, without limitation, the failure
to file, or delay in filing, financing statements or other
similar instruments or documents under the Relevant UCC or other
applicable laws with respect to any Receivable; or
(d) the failure to pay when due any taxes
required to be paid by the Originator hereunder, including
Page 67
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
without limitation, any sales tax, excise tax or other similar
tax or charge payable in connection with the creation or
satisfaction of the Receivables; or
(e) any dispute, suit, action, claims, proceeding
or governmental investigation, pending or threatened whether
based on statute, regulation or order, on tort or contract or
otherwise, before any Official Body asserted by an Obligor which
arises out of or relates to obligations of the Originator under
or with respect to the Contracts, or the use of the proceeds of
the sale of the Purchased Assets.
SECTION 7.2. Tax Indemnification.
(a) The Originator hereby agrees to pay, and to
indemnify the Indemnified Parties from and against, any taxes
which may at any time be asserted in respect of this transaction
or the subject matter hereof (including, without limitation, any
sales, gross receipts, general corporation, personal property,
privilege or license taxes, but not including any federal or
(except as provided below) other income or franchise taxes
imposed upon an Indemnified Party, with respect to its net income
or profits arising out of the transactions contemplated hereby
(all such excluded taxes, the "Excluded Taxes")), whether arising
by reason of the acts to be performed by the Originator or the
Buyer hereunder or imposed against the Originator or any
Indemnified Party, the property involved or otherwise. If any
tax, fee or similar charge is imposed or with respect to any
payment for the account of any Indemnified Party provided for in
this Agreement by any state or political subdivision thereof
(other than Excluded Taxes), the Originator shall, upon demand by
such Indemnified Party, pay an amount necessary to make such
Indemnified Party whole, taking into account any tax consequences
to such Indemnified Party of the payment of such tax and the
receipt of the indemnity provided for by this Section 7.2,
including the effect of such tax or refund on the amount of tax
measured by net income or profits which is or was payable by such
Indemnified Party in the jurisdiction in which its principal
executive office is located.
SECTION 7.3. Additional Costs.
(a) The Originator shall pay to the Buyer, from
time to time on demand of the Buyer, such amounts as the Buyer
may reasonably determine to be necessary to compensate it for any
increase in costs which the Buyer determines are attributable to
its acquiring and funding the Receivables under this Agreement or
the Receivables Purchase Agreement, or any reduction in any
amount receivable by the Buyer in respect of any such acquisition
Page 68
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
or funding (such increases in costs, payments and reductions in
amounts receivable being herein called "Additional Costs")
resulting from any Regulatory Change which (i) changes the method
or basis of taxation of any amounts payable to the Buyer under
this Agreement or payable by the Buyer in connection with the
financing of the purchase of the Receivables, or (ii) imposes any
other condition affecting this Agreement (or any such extensions
of credit or liabilities). The Buyer shall notify the Originator
of any event that will entitle Buyer to compensation pursuant to
this Section 7.3(a) no later than fifteen (15) Business Days
after it obtains knowledge thereof.
(b) Determinations and allocations by the Buyer
for purposes of this Section 7.3 shall be conclusive, provided
that such determinations and allocations are made in good faith
and on a reasonable basis, reasonable evidence (including an
explanation of the applicable Regulatory Change and an accounting
for any amounts demanded) of which shall be provided to the
Originator upon request.
(c) The Buyer agrees to promptly notify the
Originator if the Buyer receives notice of any potential tax
liability for which the Originator may be liable pursuant to
Sections 7.2 or 7.3 hereof. The Buyer further agrees that the
Originator shall bear no cost (including costs relating to
penalties and interest) relating to the failure of the Buyer to
file in a timely manner any tax returns required to be filed by
the Buyer in accordance with applicable statutes and regulations.
SECTION 7.4. Other Costs and Expenses. The
Originator shall pay on demand all costs and expenses in
connection with the preparation, execution, delivery and
administration of this Agreement and any other documents
delivered hereunder or contemplated hereby, including, without
limitation, reasonable fees and expenses of legal counsel for the
Buyer (which such counsel may be employees of the Buyer) with
respect thereto and with respect to advising the Buyer as to its
rights and remedies under this Agreement or the Receivables
Purchase Agreement, and all costs and expenses, if any, including
reasonable counsel fees and expenses in connection with the
enforcement or amendment of this Agreement and the other
documents delivered hereunder or contemplated hereby. The
Originator shall reimburse the Buyer on demand for all other
costs and expenses incurred by the Buyer or any agent or assign
of the Buyer ("Other Costs"), including, without limitation, the
cost of the Buyer's auditors auditing the Originator's books,
records and procedures, and the reasonable fees and out-of-pocket
expenses of counsel for the Buyer or any counsel for any agent or
assign of the Buyer with respect to advising the Buyer or such
agent or assign as to matters relating to the Buyer's operation.
Page 69
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Survival. The indemnification and
payment provisions of Article VII shall be continuing and shall
survive any termination of this Agreement, subject to applicable
statutes of limitation; provided, however, that any such
indemnification or payment claim must be presented to the
Originator within ten (10) Business Days after the Buyer receives
notice or otherwise becomes aware of such claim.
SECTION 8.2. Waivers; Amendments. No failure or
delay on the part of the Buyer in exercising any power, right or
remedy under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right
or remedy preclude any other further exercise thereof or the
exercise of any other power, right or remedy. The rights and
remedies herein provided shall be cumulative and nonexclusive of
any rights or remedies provided by law. Any provision of this
Agreement may be waived or amended in writing by the parties
hereto, with the consent of the Delaware Funding Corporation as
Buyer under the terms of the Receivables Purchase Agreement.
SECTION 8.3. Notices. Except as provided below,
all communications and notices provided for hereunder shall be in
writing (including bank wire, telecopy or electronic facsimile
transmission or similar writing) and shall be given to the other
party at its address or telecopy number set forth hereunder or at
such other address or telecopy number as such party may hereafter
specify for the purposes of notice to such party. Each such
notice or other communication shall be effective if given by
facsimile, when such facsimile is transmitted to the facsimile
number specified in this Section 8.3 and the appropriate written
confirmation is received or, if given by any other means, when
received at the address specified in this Section 8.3. The
Originator further agrees to deliver promptly to the Buyer a
written confirmation of each telephonic notice signed by an
authorized officer of the Originator. However, the absence of
such confirmation shall not affect the validity of such notice.
If to the Buyer:
Cone Receivables LLC
3101 North Elm Street
Third Floor
Greensboro, N.C. 27415-6540
Telephone: (910) 282-4047
Attention: David E. Bray
Page 70
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
If to the Originator:
Cone Mills Corporation
3101 North Elm Street
Greensboro, NC 27415-6540
Telephone: (910) 379-6098
Telecopy: (910) 379-6043
Attention: David E. Bray, Treasurer
and, in each case, with a copy to:
Leesa C. Sluder
Director, Treasury Services
Cone Mills Corporation
3101 North Elm Street
Greensboro, N.C. 27415-6540
Telephone: (910) 379-6347
Telecopy: (910) 379-6043
SECTION 8.4. Governing Law; Submission to
Jurisdiction; Integration. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK. The Originator hereby submits to the nonexclusive
jurisdiction of the courts of the State of New York and the
courts of the United States located in the State of New York for
the purpose of adjudicating any claim or controversy arising in
connection with any of the Purchase Documents or any of the
transactions contemplated thereby, and for such purpose, to the
extent it may lawfully do so, waives any objection which it may
now or hereafter have to such jurisdiction or to venue therein
and any claim of inconvenient forum with respect thereto.
Nothing in this Section 8.4 shall affect the right of the Buyer
to bring any action or proceeding against the Originator or the
property of the Originator the courts of other jurisdictions.
SECTION 8.5. Records. All amounts calculated or
due hereunder shall be determined from the records of the Buyer,
which determinations shall be conclusive absent manifest error.
SECTION 8.6. No Implied Waiver; Cumulative
Remedies. No course of dealing and no delay or failure of the
Buyer in exercising any right, power or privilege under the
Purchase Documents shall affect any other or future exercise
thereof or the exercise of any other right, power or privilege;
nor shall any single or partial exercise of any such right, power
or privilege or any abandonment or discontinuance of steps to
enforce such a right, power or privilege preclude any further
exercise thereof or of any other right, power or privilege. The
rights and remedies of the Buyer under the Purchase Documents are
Page 71
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
cumulative and not exclusive of any rights or remedies which the
Buyer would otherwise have.
SECTION 8.7. No Discharge. The obligations of
the Originator under this Agreement shall be absolute and
unconditional and shall remain in full force and effect without
regard to, and shall not be released, discharged or in any way
affected by (a) any exercise or nonexercise of any right, remedy,
power or privilege under or in respect of this Agreement or
applicable law, including, without limitation, any failure to
set-off or release in whole or in part by the Buyer of any
balance of any deposit account or credit on its books in favor of
the Buyer or any waiver, consent, extension, indulgence or other
action or inaction in respect of any thereof, or (b) any other
act or thing or omission or delay to do any other act or thing
which would operate as a discharge of the Buyer as a matter of
law.
SECTION 8.8. Prior Understandings. This
Agreement sets forth the entire understanding of the parties
relating to the subject matter hereof, and supersedes all prior
understandings and agreements, whether written or oral.
SECTION 8.9. Successors and Assigns. This
Agreement shall be binding on the parties hereto and their
respective successors and assigns; provided, however, that the
Originator may not assign any of its rights or delegate any of
its duties hereunder without the prior written consent of the
Buyer and prior written notice to the Administrative Agent. No
provision of this Agreement shall in any manner restrict the
ability of the Buyer to assign, participate, grant security
interests in, or otherwise transfer any portion of the Purchased
Assets owned by the Buyer. The Originator hereby agrees and
consents to the complete assignment by the Buyer of all of its
rights under, interest in, title to and obligations under this
Agreement to the Buyer under and as defined in the Receivables
Purchase Agreement.
SECTION 8.10. No Petition. The Originator agrees
that, prior to the date which is one year and one day after the
date upon which all obligations of the Buyer to the Originator
hereunder and under the Subordinated Note are paid in full and
all other indebtedness of the Buyer are paid in full, it will not
institute against, or join any other Person in instituting
against, the Buyer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other similar proceeding
under the laws of the United States or any state of the United
States.
Page 72
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
SECTION 8.11. No Recourse. The obligations of
the Originator and the Buyer under this Agreement are solely the
obligations of the Originator and the Buyer, each as a separate
legal entity.
SECTION 8.12. Severability; Counterparts, Waiver
of Setoff. This Agreement may be executed in any number. of
counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall
constitute one and the same Agreement. Any provisions of this
Agreement which are prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable any other provision in such
jurisdiction or such provision in any other jurisdiction. The
Originator hereby agrees to waive any right of setoff which it
may have or to which it may be entitled against the Buyer and its
assets.
SECTION 8.13. Confidentiality. The Buyer and
the Originator shall hold all non-public information obtained
pursuant to this Agreement and the transactions contemplated
hereby or effected in connection herewith in accordance with
customary procedures for handling confidential information of
this nature and in any event may make disclosure (a) reasonably
required by a bona fide transferee, (b) necessary in order to
obtain any consents, approvals, waivers or other arrangements
required to permit the execution, delivery and performance by the
Originator of this Agreement, or (c) as required or requested by
any governmental body, agency or instrumentality, regulatory
authority, court, tribunal or arbitrator or pursuant to legal
process or required by applicable Law.
Page 73
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed and delivered by their duly
authorized officers as of the date first above set forth.
CONE RECEIVABLES LLC,
as Buyer
By: CONE MILLS CORPORATION,
its sole Member
By:/s/ Neil W. Koonce
Title: Vice President
CONE MILLS CORPORATION,
as Originator
By: /s/ David E. Bray
Title: Treasurer
Page 74
<PAGE>
FORM 10-Q
Exhibit 2.1(l) (continued)
ADDENDUM TO PURCHASE AGREEMENT
AS FILED WITH FORM 10-Q DATED MARCH 30, 1997
The following exhibits and schedules to the Purchase
Agreement have been omitted from the filed document pursuant to
Regulation S-K (17 CFR 229), Item 601(b)(2):
Exhibits
Exhibit A Form of Subordinated Note
Exhibit B The Description of Qualifying Receivables
Exhibit C Officer's Certificate pursuant to Section 4.1(m)
Schedules
Schedule A Calculation of Minimum Initial Capital
Contribution
The Registrant does hereby agree to furnish supplementally a
copy of any omitted exhibit or schedule to the Commission upon
request.
CONE MILLS CORPORATION
By:/s/ Terry L. Weatherford
Title: Secretary
Page 75
FORM 10-Q EXECUTION COPY
Exhibit 2.1(m)
RECEIVABLES PURCHASE AGREEMENT
dated as of March 25, 1997
Among
CONE RECEIVABLES LLC,
as Seller
and
CONE MILLS CORPORATION,
as Servicer
and
DELAWARE FUNDING CORPORATION,
as Buyer
Page 76
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
Table of Contents
Page
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. . . . . . . . . . . . . . . . . 1
1.02. Interpretation and Construction. . . . . . . . . . . 21
1.03. Obligor Classification . . . . . . . . . . . . . . . 22
ARTICLE II
PURCHASES AND SETTLEMENTS
2.01. General Assignment and Conveyance. . . . . . . . . . 22
2.02. Purchase Limits. . . . . . . . . . . . . . . . . . . 22
2.03. Purchase Price . . . . . . . . . . . . . . . . . . . 23
2.04. Deferred Purchase Price. . . . . . . . . . . . . . . 23
2.05. Reinvestment Purchases . . . . . . . . . . . . . . . 23
2.06. Funding of the Net Investment. . . . . . . . . . . . 24
2.07. Discount . . . . . . . . . . . . . . . . . . . . . . 25
2.08. Non-Liquidation Settlements and Other Payment
Procedures . . . . . . . . . . . . . . . . . . . . . 25
2.09. Liquidation Settlement Procedures. . . . . . . . . . 27
2.10. Fees . . . . . . . . . . . . . . . . . . . . . . . . 27
2.11. Optional Reduction of Maximum Net Investment;
Optional Reduction of Net Investment . . . . . . . . 27
2.12. Mandatory Repurchase Under Certain
Circumstances. . . . . . . . . . . . . . . . . . . . 28
2.13. Payments and Computations, Etc.; Allocation of
Collections. . . . . . . . . . . . . . . . . . . . . 28
2.14. Reports. . . . . . . . . . . . . . . . . . . . . . . 29
2.15. Expiration Date. . . . . . . . . . . . . . . . . . . 29
ARTICLE III
CLOSING PROCEDURES
3.01. Purchase and Sale Procedures . . . . . . . . . . . . 29
3.02. Conditions to Closing. . . . . . . . . . . . . . . . 30
3.03. Conditions to Reinvestment and Incremental
Purchases. . . . . . . . . . . . . . . . . . . . . . 32
Page 77
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
ARTICLE IV
PROTECTION OF THE BUYER;
ADMINISTRATION AND COLLECTIONS
4.01. Acceptance of Appointment and Other Matters
Relating to the Servicer . . . . . . . . . . . . . . 33
4.02. Maintenance of Information and Computer Records. . . 33
4.03. Protection of the Interests of the Buyer . . . . . . 34
4.04. Maintenance of Writings and Records. . . . . . . . . 35
4.05. Information. . . . . . . . . . . . . . . . . . . . . 35
4.06. Performance of Undertakings Under the
Receivables. . . . . . . . . . . . . . . . . . . . . 35
4.07. Administration and Collections . . . . . . . . . . . 35
4.08. Complete Servicing Transfer. . . . . . . . . . . . . 37
4.09. Lockboxes. . . . . . . . . . . . . . . . . . . . . . 38
4.10. Servicer Default . . . . . . . . . . . . . . . . . . 40
4.11. Servicer Indemnification of Affected Parties . . . . 40
4.12. Servicer Not to Resign . . . . . . . . . . . . . . . 41
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. General Representations and Warranties of the
Seller . . . . . . . . . . . . . . . . . . . . . . . 42
5.02. Representations and Warranties of the Seller
With Respect to Each Sale of Receivables . . . . . . 45
5.03. General Representations and Warranties of the
Corporation. . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VI
COVENANTS
6.01. Affirmative Covenants. . . . . . . . . . . . . . . . 49
6.02. Negative Covenants . . . . . . . . . . . . . . . . . 55
ARTICLE VII
TERMINATION
7.01. Termination Events . . . . . . . . . . . . . . . . . 57
7.02. Consequences of a Termination Event. . . . . . . . . 59
Page 78
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
ARTICLE VIII
MISCELLANEOUS
8.01. Expenses . . . . . . . . . . . . . . . . . . . . . . 60
8.02. Indemnity for Taxes, Reserves and Expenses . . . . . 61
8.03. Indemnity. . . . . . . . . . . . . . . . . . . . . . 62
8.04. Holidays . . . . . . . . . . . . . . . . . . . . . . 63
8.05. Records. . . . . . . . . . . . . . . . . . . . . . . 64
8.06. Amendments and Waivers . . . . . . . . . . . . . . . 64
8.07. Term of Agreement. . . . . . . . . . . . . . . . . . 64
8.08. No Implied Waiver; Cumulative Remedies . . . . . . . 64
8.09. No Discharge . . . . . . . . . . . . . . . . . . . . 64
8.10. Notices. . . . . . . . . . . . . . . . . . . . . . . 65
8.11. Severability . . . . . . . . . . . . . . . . . . . . 65
8.12. Governing Law; Submission to Jurisdiction. . . . . . 65
8.13. Prior Understandings . . . . . . . . . . . . . . . . 66
8.14. Survival . . . . . . . . . . . . . . . . . . . . . . 66
8.15. Counterparts . . . . . . . . . . . . . . . . . . . . 66
8.16. Set-Off. . . . . . . . . . . . . . . . . . . . . . . 66
8.17. Successors and Assigns . . . . . . . . . . . . . . . 66
8.18. Waiver of Confidentiality. . . . . . . . . . . . . . 67
8.19. Payments Set Aside . . . . . . . . . . . . . . . . . 67
8.20. No Petition. . . . . . . . . . . . . . . . . . . . . 67
8.21. No Recourse. . . . . . . . . . . . . . . . . . . . . 67
Exhibits
Exhibit A (Intentionally Omitted)
Exhibit B Description of Qualifying Receivables
Exhibit C Form of Purchase Notice for Incremental Purchase
Exhibit D Form of Tranche Selection Notice
Exhibit E Form of Report Showing Discount
Exhibit F (Intentionally Omitted)
Exhibit G Form of Monthly Report
Exhibit H Form of Lockbox Transfer Letter
Exhibit I (Intentionally Omitted)
Exhibit J (Intentionally Omitted)
Exhibit K (Intentionally Omitted)
Exhibit L Information regarding Chief Executive Office, Etc.
pursuant to Section 5.03(f)
Page 79
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
Schedules to Disclosure Schedule
Schedule 1 Credit and Collections Policy
Schedule 2 Information regarding Material Adverse Changes
pursuant to Section 5.03(k)
Schedule 3 Information regarding Litigation, etc. pursuant to
Sections 5.01(k) and 5.03(l)
Schedule 4 Permitted Lockbox Banks, Lockbox Account Numbers
and Permitted Lockboxes
Schedule 5 Persons that may not be Successor Servicers
Page 80
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
RECEIVABLES PURCHASE AGREEMENT
RECEIVABLES PURCHASE AGREEMENT, dated as of March 25, 1997,
among CONE RECEIVABLES LLC, a Delaware limited liability company
(the Seller"), CONE MILLS CORPORATION, a North Carolina
corporation ("the "Corporation") as Servicer (the "Servicer") and
in its individual capacity, and DELAWARE FUNDING CORPORATION, a
Delaware corporation (with its successors and assigns, the
"Buyer").
RECITALS
WHEREAS, pursuant to the Purchase Agreement, the Seller
purchases from the Corporation, as Originator, trade receivables
resulting from the sale of goods or services to customers of the
Corporation; and
WHEREAS, the Buyer may from time to time purchase from the
Seller undivided percentage ownership interests in such
receivables pursuant to and in accordance with the terms hereof;
and
WHEREAS, the Servicer has agreed to service and administer
or cause to be serviced and administered the receivables in
accordance with the terms hereof;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Affected Party" shall mean each of the Buyer, any assignee
of the Buyer, the Collateral Agent, the Banks, the LOC Bank, any
assignee of any of the Buyer's obligations to the Banks or the
LOC Bank under the Credit Agreement or the Letter of Credit
Reimbursement Agreement, respectively, and the Agent.
"Affiliate" shall mean, with respect to a Person, any other
Person which directly or indirectly controls, is controlled by or
is under common control with, such Person. The term "control"
means the possession, directly or indirectly, of the 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.
Page 81
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
"Agent" shall mean Morgan Guaranty Trust Company of New
York, together with its successors and assigns, in its capacity
as agent for the Banks.
"Aggregate Unpaids" shall mean, at any time, an amount equal
to the sum of (i) the aggregate accrued and unpaid Discount with
respect to all Tranche Periods for all Tranches at such time,
(ii) the Net Investment at such time, (iii) all fees accrued and
unpaid hereunder at such time and (iv) all other amounts owed
(whether due or accrued) hereunder by the Seller to the Buyer at
such time.
"Agreement" shall mean this Receivables Purchase Agreement,
as the same may from time to time be amended, supplemented or
otherwise modified.
"Allowance for Collection Delays" shall mean 10 days.
"Average Collection Period" shall mean, at any time, the
Days' Sales Outstanding.
"Banks" shall mean the banks which are party to the Credit
Agreement.
"Base Rate" shall mean, for any day, the higher of (i) the
prime rate announced from time to time by Morgan Guaranty Trust
Company of New York in effect on such day, and (ii) (x) the rate
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, as published for such day (or,
if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day,
the average of the quotations for such day for such transactions
received by Morgan Guaranty Trust Company of New York from three
Federal funds brokers of recognized standing selected by it, plus
(y) one-half of one percent (1/2%).
"Business Day" shall mean any day other than a Saturday,
Sunday, public holiday under the Laws of the State of Delaware or
the State of New York or any other day on which banking
institutions are authorized or obligated to close in the State of
Delaware or the State of New York.
"Buyer's Discount" shall mean, at any time, an amount equal
to the following:
NI x (((TR + PF) x RV) + SC) x (D)
WAP
Page 82
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
Where:
NI = the Net Investment at such time;
TR = the highest Tranche Rate applicable to any outstanding
Tranche at such time;
PF = the Program Fee;
RV = the Rate Variance Factor;
SC = the Servicer's Compensation;
D = the greater of (i) the sum of the Average Collection
Period and the Allowance for Collection Delays and (ii)
the number of days remaining in the last expiring
outstanding Tranche Period; and
WAP the weighted average number of days in the annual
period of all Tranches then outstanding, with Tranches
having Tranche Rates calculated by reference to a
rating other than Base Rate having a 360-day annual
period and Tranches having Tranche Rates calculated by
reference to the Base Rate having a 365-day or 366-day,
as the case may be, annual period.
"Buyer's Percentage Interest" shall mean, at any time
of determination, a percentage equal to the following:
NI + DPP + BD
NRB
Where:
NI = the Net Investment at the time of such determination;
DPP = the Deferred Purchase Price at the time of such
determination;
BD = the Buyer's Discount at the time of such determination;
and
NRB = the Net Receivables Balance at the time of such
determination.
Notwithstanding the foregoing computation, the Buyer's
Percentage Interest shall not exceed 100%. The Buyer's
Page 83
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
Percentage Interest shall be calculated as of the end of the
immediately preceding month by the Servicer on the closing date
of the initial Incremental Purchase hereunder. Thereafter, until
the Expiration Date, the Buyer's Percentage Interest shall be
recomputed in Monthly Reports delivered pursuant to Section 2.14
hereof, in Purchase Notices delivered pursuant to Section 2.03
hereof and otherwise in writing upon request of the Buyer made to
the Servicer. Absent any error in calculation, the Buyer's
Percentage Interest shall remain constant from the time as of
which any such computation or recomputation is made until the
time as of which the next such recomputation shall be made,
notwithstanding any additional Receivables arising or any
reinvestment Purchase made pursuant to Sections 2.05 and 2.08(a)
hereof during any period between computations of the Buyer's
Percentage Interest; provided, however, that on and after the
Expiration Date, the Buyer's Percentage Interest shall be equal
to the greater of (i) the Buyer's Percentage Interest on the
first Business Day preceding the occurrence of the Expiration
Date, and (ii) the Buyer's Percentage Interest on each Business
Day after the occurrence of the Expiration Date. If the Servicer
shall fail to promptly calculate the Buyer's Percentage Interest
as required herein, the Buyer may compute the Buyer's Percentage
Interest, which computation shall be conclusive absent manifest
error.
"Capitalized Lease" of a Person shall mean any lease of
property by such Person as lessee which would be capitalized on a
balance sheet of such Person prepared in accordance with GAAP.
"Charge-Off" shall mean a Receivable (or any portion
thereof): (i) which has been identified by the Servicer as
uncollectible, or (ii) which, in accordance with the Credit and
Collection Policy, should be written off the Seller's books as
uncollectible.
"Charge-Off Ratio" shall mean, for any period of
determination, the ratio (expressed as a percentage) of (i) the
aggregate Outstanding Balance of all Receivables which became
Charge-Offs during such period (after giving effect to any
recoveries during such period), to (ii) the aggregate amount of
Collections during the period for which such ratio is being
determined.
"Chief Executive Office" shall mean, with respect to the
Seller or the Originator, the place where the Seller or the
Originator is located, within the meaning of Section 9-103(3)(d),
or any analogous provision, of the UCC, in effect in the
Page 84
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
jurisdiction whose Law governs the perfection of the Buyer's
ownership interest in any Receivables.
"Closing Date" shall mean March 26, 1997.
"Collateral Agent" shall mean Morgan Guaranty Trust Company
of New York, together with its successors and assigns, as
collateral agent under the Security Agreement.
"Collections" shall mean, for any Receivable as of any date,
(i) the sum of all amounts, whether in the form of wire
transfers, cash, checks, drafts, or other instruments, received
by the Seller or the Servicer or in a Permitted Lockbox or
directly by the Buyer in payment of, or applied to, any amount
owed by an Obligor on account of such Receivable (including but
not limited to all amounts received on account of any Defaulted
Receivable) on or before such date, including, without
limitation, all amounts received on account of such Receivable,
all Finance Charges, if any, and other fees and charges (ii) cash
proceeds of Related Security with respect to such Receivable, and
(iii) all amounts deemed to have been received by the Seller or
the Servicer as a Collection pursuant to Section 2.08(c) hereof.
"Commercial Paper" shall mean promissory notes of the Buyer
issued by the Buyer in the commercial paper market.
"Complete Servicing Transfer" shall have the meaning
ascribed to such term in Section 4.08 hereof.
"Concentration Factor" shall mean (i) for any Group A
Obligor and its Subsidiaries, 13% of an amount equal to the
Outstanding Balances of all Eligible Receivables, (ii) for any
Group B Obligor and its Subsidiaries, other than VF Corporation
and its Subsidiaries, 6% of an amount equal to the Outstanding
Balances of all Eligible Receivables, (iii) for any Group C
Obligor and its Subsidiaries, 4% of an amount equal to the
Outstanding Balance of all Eligible Receivables, (iv) for any
Group D Obligor and its Subsidiaries, 2% of an amount equal to
the Outstanding Balance of all Eligible Receivables and (v) for
VF Corporation and its Subsidiaries, 7% of an amount equal to the
Outstanding Balance of all Eligible Receivables; provided that if
the implied senior unsecured long-term debt or senior unsecured
long-term debt (in each case disregarding any debt based upon
third party credit enhancement or collateral) of VF Corporation
shall be rated below "BBB-" by S&P or "Baa3" by Moody's, the
"Concentration Factor" for VF Corporation and its Subsidiaries
shall be 2% of an amount equal to the Outstanding Balances of all
Eligible Receivables.
Page 85
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
"Concentration Percentage" shall mean, for any Obligor, a
fraction, expressed as a percentage, the numerator of which is an
amount equal to the aggregate Outstanding Balances of the
Eligible Receivables of the related Obligor and its Subsidiaries
and the denominator of which is an amount equal to the
Outstanding Balances of all Eligible Receivables reduced by the
aggregate amount of the reserve for all Dilution Factors as shown
on the most recent Monthly Report.
"Consolidated Subsidiary" shall mean, at any date, any
Subsidiary or other entity the accounts of which would be
consolidated under GAAP with those of the Corporation in its
consolidated financial statements as of such date.
"Contract" shall mean a binding contract (including a
binding invoice) between the Originator and an Obligor which
gives rise to a short-term trade receivable with a maturity of
not greater than one year arising from the sale by the Originator
of goods or services in the ordinary course of the Originator's
business.
"Corporation" shall mean Cone Mills Corporation, a North
Carolina corporation and its successors and assigns.
"Credit Agreement" shall mean the Amended and Restated
Credit Agreement (Asset Group I) dated as of December 6, 1995
among the Buyer, the Banks and the Agent, as the same may from
time to time be amended, supplemented or otherwise modified, or
such other agreement providing liquidity support for the
Receivables.
"Credit and Collection Policy" shall mean the Originator's
credit, collection, enforcement and other policies and practices
relating to Contracts and Receivables existing on the date hereof
and as set forth on Schedule 1 of the Disclosure Schedule as the
same may be modified from time to time in compliance with Section
6.02(e) hereof.
"Days' Sales Outstanding" shall mean at any time, the "Days'
Sales Outstanding" as set forth in the most recent Monthly
Report.
"Dealers" shall have the meaning ascribed to such term in
Section 8.21 hereof.
"Debt" of a Person shall mean such Person's (i) obligations
for borrowed money, (ii) obligations representing the deferred
Page 86
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
purchase price of property, (iii) obligations, whether or not
assumed, which are secured by liens or payable out of the
proceeds or production from property now or hereafter owned or
acquired by such Person, (iv) obligations which are evidenced by
notes acceptances or other instruments which, in accordance with
GAAP, should be included as a liability on such Person's
financial statements, (v) Capitalized Lease obligations, (vi)
obligations pursuant to a Guarantee and (vii) liabilities in
respect of unfunded vested benefits under plans covered by Title
IV Of ERISA.
"Default Ratio" shall mean, for any period of determination,
the ratio (expressed as a percentage) of (i) the aggregate
Outstanding Balance of all Receivables which are Defaulted
Receivables as of the last day of such period of determination to
(ii) the aggregate Outstanding Balance of all Receivables as of
the last day of such period of determination.
"Defaulted Receivable" shall mean a Receivable (i) in
respect of which the Obligor is not entitled to any further
extensions of credit, by reason of any default or nonperformance
by such Obligor, under the terms of the Credit and Collection
Policy, (ii) which has become uncollectible by reason of such
Obligor's inability to pay, as determined by the Buyer or the
Servicer, in either case in accordance with the Credit and
Collection Policy, (iii) in respect of which an Event of
Bankruptcy has occurred with respect to the related Obligor, (iv)
as to which the Obligor thereof is deceased, or (v) in respect of
which the Obligor is more than 90 days past due, except that
portion of the Outstanding Balance of the Receivables of such
Obligor which is the subject of a good faith Dispute between the
Originator and the Obligor as to the amount due on the related
Contract.
"Deferred Purchase Price" shall mean, at any time, the Loss
Percentage at such time multiplied by the Investment at such
time.
"Delayed Receivables" shall mean a Receivable in respect of
which the Obligor is more than 60 days but less than 91 days past
due, except that portion of the Outstanding Balance of the
Receivables of such Obligor which is the subject of a good faith
Dispute between the Seller and the Obligor as to the amount due
on the related Contract.
"Delayed Receivables Ratio" shall mean, for any period of
determination, the ratio (expressed as a percentage) of (i) the
Page 87
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
aggregate Outstanding Balance of Receivables that became Delayed
Receivables during such period of determination and (ii) the
aggregate Outstanding Balance of all Receivables as of the last
day of such period of determination.
"Dilution Factors" shall mean credits, cancellations, cash
discounts, warranties, allowances, disputes, rebates, charge
backs, returned or repossessed goods, and other allowances,
adjustments and deductions (including, without limitation, any
special or other discounts or any reconciliations) that are given
to an Obligor in accordance with the Credit and Collection
Policy.
"Dilution Ratio" shall mean, for any period of
determination, the ratio (expressed as a percentage) of (i) the
aggregate reduction in the original balance of all Receivables
which have been reduced by Dilution Factors during such period of
determination to (ii) the aggregate amount of Collections during
the period for which such ratio is being determined.
"Disclosure Schedule" shall mean the disclosure schedules
delivered by the Seller and the Corporation to the Buyer
simultaneously with the execution of this Agreement.
"Discount" shall mean with respect to any Tranche Period for
any Tranche:
(TR + PF) x TNI x AD
AP
Where:
TR = the Tranche Rate applicable to such Tranche Period
for such Tranche;
PF = the Program Fee if the Tranche Rate applicable to
such Tranche Period is based on commercial paper;
TNI = the amount of such Tranche; and
AD = the actual number of days (including the first but
excluding the last day) during such Tranche
Period;
AP = the number of days in the annual period on the
basis of which Discount for such Tranche Period is
calculated, being 360 if the Tranche Rate for such
Page 88
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
Tranche period is calculated by reference to any
rate other than Base Rate, and 365 or 366, as the
case may be, if the Tranche Rate for such Tranche
Period is calculated by reference to Base Rate.
provided, however, that no provision of this Agreement shall
require the payment or permit the collection of Discount in
excess of the maximum permitted by applicable Law; and provided,
further, that Discount shall not be considered paid by any
distribution if at any time such distribution is rescinded or
must be returned for any reason.
"Dispute" shall mean any dispute, deduction, claim, offset,
defense, counterclaim, set-off or obligation of any kind,
contingent or otherwise, relating to a Receivable, including,
without limitation, any dispute relating to goods or services
already paid for.
"Dollar" and "$" shall mean lawful currency of the United
States of America.
"Eligible Receivable" shall mean, at the time, any
Receivable:
(a) which together with the related Contract complies with
all applicable Laws and other legal requirements, whether
Federal, state or local, including, without limitation, to the
extent applicable, usury laws, the Federal Consumer Credit
Protection Act, the Fair Credit Billing Act, the Federal Truth in
Lending Act, and Regulation Z of the Board of Governors of the
Federal Reserve System;
(b) which constitutes an "account" or a "general
intangible" or is evidenced by "chattel paper", in each case as
defined in the UCC as in effect in the State of New York and the
jurisdiction whose Law governs the perfection of the Buyer's
ownership interest therein, or is evidenced by an "instrument",
as defined in the UCC as so in effect, which is in the possession
of the Buyer;
(c) which was originated in connection with a sale of goods
or the provision of services by the Originator in the ordinary
course of the Originator's business to an Obligor who was
approved by the Originator in accordance with the Credit and
Collection Policy, and which Obligor is not an Affiliate of the
Originator;
Page 89
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
(d) which (i) arises from a Contract and has been billed,
or will be billed to the related Obligor, or in respect of which
the related Obligor is otherwise liable, in accordance with the
terms of such Contract and (ii) arises from a Contract that (A)
does not require the Obligor under such Contract to consent to
the transfer, sale or assignment of the rights and duties of the
Originator under such Contract and (B) does not contain any
provision that restricts the ability of the Buyer to exercise its
rights under this Agreement, including, without limitation, its
right to review the Contract;
(e) which constitutes a legal, valid, binding and
irrevocable payment obligation of the related Obligor,
enforceable in accordance with its terms, subject to no offset,
counterclaim or other defense;
(f) which provides for payment in Dollars by the related
Obligor;
(g) which directs payment thereof to be sent to a Permitted
Lockbox;
(h) which has not been repurchased by the Seller pursuant
to the repurchase provisions of this Agreement;
(i) which is not a Defaulted Receivable;
(j) which was not originated in or subject to the Laws of a
jurisdiction whose Laws would make such Receivable, the related
Contract or the sale of the Purchased Interest to the Buyer
hereunder unlawful, invalid or unenforceable and is not subject
to any legal limitation on transfer;
(k) which is owned solely by the Seller free and clear of
all Liens, except for the Lien arising in connection with this
Agreement and the Security Agreement;
(1) for which there has been no rejection or return of, or
other Dispute (known to any Responsible Officer) having risen
with respect to, the goods or services which gave rise to such
Receivable and all goods and services in connection therewith
have been finally performed or delivered to and accepted by the
Obligor without Dispute;
(m) which is not an obligation of the United States of
America, any State or any agency or instrumentality or political
subdivision thereof, unless otherwise agreed to in writing by the
Seller, the Buyer and the other Affected Parties;
Page 90
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
(n) which does not provide the Obligor with the right to
obtain any cash advance thereunder;
(o) which is not a Receivable as to which the Buyer has
notified the Seller that the Buyer has determined that such
Receivable or class of Receivables is not acceptable for purchase
hereunder because of the nature of the business of the Obligor or
otherwise; provided, however, if the Buyer has not so notified
the Seller prior to the Purchase by the Buyer of such Receivable,
such Receivable shall continue to be an Eligible Receivable for
the purpose of this clause "(o)" notwithstanding any subsequent
notice, pursuant to this clause "(o)", from the Buyer to the
Seller;
(p) which, if such Receivable is not interest bearing, by
its terms requires the first payment in respect thereof to be
made no later than 120 days after the date of the original
invoice with respect thereto;
(q) which is owed by an Obligor not more than 25% of whose
aggregate Outstanding Balances of Receivables are more than 90
days past due, except that portion of the Outstanding Balance of
the Receivables of such Obligor which is the subject of a good
faith Dispute between the Originator and the Obligor as to the
amount due on the related Contract; provided, however, that all
Eligible Receivables of an Obligor purchased by the Buyer prior
to the date on which more than 25% of the aggregate Outstanding
Balances of Receivables of such Obligor are more than 90 days
past due, shall continue to be Eligible Receivables for the
purpose of this clause "(q)";
(r) which has an Obligor which is a Person domiciled in the
United States of America;
(s) which is an account receivable constituting all or a
part of the sales price of merchandise, insurance and services
within the meaning of Section 3(c)(5) of the Investment Company
Act of 1940, as amended from time to time; and
(t) the purchase of which with the proceeds of Commercial
Paper would constitute a "current transaction" within the meaning
of Section 3(a)(3) of the Securities Act of 1933 as amended from
time to time.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time and any successor
thereto, and the regulations promulgated and rulings issued
thereunder.
Page 91
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
"ERISA Affiliate" shall mean any corporation or person which
is a member of any group of organizations (i) described in
Section 4.14(b) or (c) of the Internal Revenue Code of which the
Corporation is a member, or (ii) solely for purposes of potential
liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Internal Revenue Code and the lien created
under Section 302(f) of ERISA and Section 412(n) of the Internal
Revenue Code, described in Section 414(m) or (o) of the Internal
Revenue Code of which the Corporation is a member.
"Event of Bankruptcy" shall mean, for any Person:
(a) that such Person shall fail generally to, or admit in
writing its inability to, pay its debts as they become due; or
(b) a proceeding shall have been instituted in a court
having jurisdiction in the premises seeking a decree or order for
relief in respect of such Person in an involuntary case under any
applicable bankruptcy, insolvency or other similar Law now or
hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator,
conservator (under the Bank Conservation Act, as amended from
time to time, or otherwise) or other similar official of such
Person or for any substantial part of its property, or for the
winding-up or liquidation of its affairs and, if instituted
against the Seller or the Corporation, any such proceeding shall
continue undismissed or unstayed and in effect for a period of 60
consecutive days, or any of the actions sought in such proceeding
shall occur; or
(c) the commencement by such Person of a voluntary case
under any applicable bankruptcy, insolvency or other similar Law
now or hereafter in effect, or such Person's consent to the entry
of an order for relief in an involuntary case under any such Law,
or consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator,
conservator (under the Bank Conservation Act, as amended from
time to time, or otherwise) or other similar official of such
Person or for any substantial part of its property, or any
general assignment for the benefit of creditors; or
(d) such Person or any Subsidiary of such Person shall take
any action in furtherance of any of the actions set forth in the
preceding clause (a), (b) or (c).
"Event of Termination" shall mean with respect to any Plan,
a reportable event, as defined in Section 4043(b) of ERISA, as to
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FORM 10-Q
Exhibit 2.1(m) (continued)
which the PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, or the withdrawal of the
Corporation or any ERISA Affiliate from a Plan during a plan year
in which it is a substantial employer, as defined in Section
4043(b) of ERISA, or the failure by the Corporation or any ERISA
Affiliate to meet the minimum funding standard of Section 412 of
the Internal Revenue Code or Section 302 of ERISA with respect to
any Plan, including, without limitation, the failure to make on
or before its due date a required installment under Section
412(m) of the Internal Revenue Code or Section 302(e) of ERISA,
or (iv) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by the
Corporation or any ERISA Affiliate to terminate any Plan, or (v)
the adoption of an amendment to any Plan that pursuant to Section
401(a)(29) of the Internal Revenue Code or Section 307 of ERISA
would result in the loss of tax- exempt status of the trust of
which such Plan is a part if the Corporation or an ERISA
Affiliate fails to timely provide security to the Plan in
accordance with the provisions of said Sections, or (vi) the
institution by the PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or (vii) the receipt by the Corporation or
any ERISA Affiliate of a notice from a Multiemployer Plan that
action of the type described in the previous clause (vi) has been
taken by the PBGC with respect to such Multiemployer Plan, or
(viii) the complete or partial withdrawal from a Multiemployer
Plan by the Corporation or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a
purchaser default), or (ix) the receipt by the Corporation or any
ERISA Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under
Section 4041A of ERISA, or (x) any event or circumstance exists
which may reasonably be expected to constitute grounds for the
Corporation or any ERISA Affiliate to incur liability under Title
IV of ERISA (other than the liability for the payment of
premiums) or liability for failing timely to make required
contributions to meet the minimum funding standards of Section
412 of the Internal Revenue Code.
"Expiration Date" shall mean the earliest of (i) March 24,
1998 (ii) the date of termination of the commitment of the LOC
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FORM 10-Q
Exhibit 2.1(m) (continued)
Bank under the Letter of Credit Reimbursement Agreement, (iii)
the date of termination of the commitment of the Banks under the
Credit Agreement or (iv) the day on which the Buyer delivers a
Notice of Termination pursuant to Section 7.02 hereof or a
Termination Event described in Section 7.01(k) hereof occurs.
"Finance Charges" shall mean, with respect to a Contract,
any finance, interest, late or similar charges owing by an
Obligor pursuant to such Contract.
"Fiscal Year" shall mean the Monday following the Sunday
nearest December 31 through the Sunday nearest December 31 which
is the fiscal year of the Corporation and the Seller for
accounting purposes.
"Foreign Receivable" shall mean all receivables arising from
the sale by the Originator of goods or services to Obligors
located outside of the United States. For the purposes of this
definition, a sale of goods or services shall be deemed to have
been made to an Obligor located outside of the United States if
(i) the goods are shipped by the Originator or at the
Originator's direction to a facility of such Obligor which is not
located within the fifty states of the United States or (ii) such
Obligor is an entity existing under the laws of a jurisdiction
other than the fifty states of the United States and the
principal place of business of such Obligor is not located in any
of the fifty states of the United States.
"GAAP" shall mean generally accepted accounting principles
in the United States of America, applied on a consistent basis
and applied to both classification of items and amounts, and
shall include, without limitation, the official interpretations
thereof by the Financial Accounting Standards Board, its
predecessors and successors.
"Goldman" shall have the meaning ascribed to such term in
Section 8.21 hereof.
"Group A Obligor" shall mean any Obligor whose short-term
debt is rated at least "A-1" by S&P, and at least "P-1" by
Moody's, or, in the case of an Obligor with long-term ratings
only, at least "A" by S&P and at least "A2" by Moody's.
"Group B Obligor" shall mean any Obligor (i) who is not a
Group A Obligor and (ii) whose short-term debt is rated at least
"A-2" by S&P, and at least "P-2" by Moody's, or in the case of an
Obligor with long-term debt ratings only, at least "BBB+" by S&P
and at least "Baa1" by Moody's.
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FORM 10-Q
Exhibit 2.1(m) (continued)
"Group C Obligor" shall mean any Obligor (i) who is not a
Group A Obligor or a Group B Obligor and (ii) whose short-term
debt is rated at least "A-3" by S&P, and at least "P-3" by
Moody's, or in the case of an Obligor with long-term debt ratings
only, at least "BBB-" by S&P and at least "Baa3" by Moody's.
"Group D Obligor" shall mean any Obligor who is not a Group
A Obligor, Group B Obligor or Group C Obligor who is not
specifically referenced in the definition of "Concentration
Factor."
"Guarantee" shall mean, as applied to any Debt, (i) a
guarantee (other than by endorsement for collection in the
ordinary course of business), direct or indirect, in any manner,
of any part or all of such Debt or (ii) an agreement, direct or
indirect, contingent or otherwise, providing assurance of the
payment or performance (or payment of damages in the event of
non-performance) of any part or all of such Debt, including,
without limiting the foregoing, the payment of amounts drawn down
by letters of credit. The amount of any Guarantee shall be
deemed to be the maximum amount of the Debt guaranteed for which
the guarantor could be held liable under such Guarantee.
"Incremental Purchase" shall have the meaning ascribed to
such term in Section 2.02 hereof.
"Indemnified Parties" shall have the meaning ascribed to
such term in Section 8.02(a) hereof.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time and any successor thereto,
and the regulations promulgated and rulings issued thereunder.
"Investment" shall mean, at any time, the sum of the Net
Investment plus the Deferred Purchase Price, which amount can
also be computed as follows:
I = NI
1 - LP
Where:
NI = the Net Investment at such time; and
LP = the Loss Percentage at such time.
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FORM 10-Q
Exhibit 2.1(m) (continued)
"Investment Percentage" shall mean, at any time, the
Investment at such time divided by the Net Receivables Balance at
such time.
"JPM" shall have the meaning ascribed to such term in
Section 7.01(m) hereof.
"Law" shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance,
order, injunction, writ, decree or award of any official Body.
"Letter Agreement" shall mean the agreement dated the date
of this Agreement, as amended from time to time, between the
Seller and the Buyer setting forth, among other things, certain
fees payable to the Buyer by the Seller in connection with the
Buyer's investment in the Seller's Receivables.
"Letter of Credit" shall mean the letter of credit issued by
the LOC Bank under the Letter of Credit Reimbursement Agreement.
"Letter of Credit Reimbursement Agreement" shall mean the
Amended and Restated Program Letter of Credit Agreement dated as
of December 6, 1995 between the Buyer and the LOC Bank, as the
same may from time to time be amended, supplemented or otherwise
modified.
"Lien", in respect of the property of any Person, shall mean
any ownership interest of any other Person, any mortgage, deed of
trust, hypothecation, pledge, lien, security interest, grant of a
power to confess judgment, filing of any financing statement,
charge or other encumbrance or security arrangement of any nature
whatsoever, including, without limitation, any conditional sale
or title retention arrangement, and any assignment, deposit
arrangement, consignment or lease intended as, or having the
effect of, security.
"LOC Bank" shall mean Morgan Guaranty Trust Company of New
York, together with its successors or assigns, as the party to
the Letter of Credit Reimbursement Agreement issuing the Letter
of Credit.
"Lockbox Account" shall mean a demand deposit account
identified on Schedule 4 of the Disclosure Schedule maintained
with a Permitted Lockbox Bank pursuant to the Lockbox Servicing
Instructions for the purpose of depositing payments made by the
Obligors or such other account as the Servicer and the Buyer may
agree upon from time to time.
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FORM 10-Q
Exhibit 2.1(m) (continued)
"Lockbox Servicing Instructions" shall mean the instructions
relating to lockbox services in connection with a Permitted
Lockbox and related Lockbox Account which are in compliance with
Section 4.09 hereof and otherwise in form and substance
satisfactory to the Buyer, which have been executed and delivered
by the Seller to a Permitted Lockbox Bank.
"Lockbox Transfer Letter" shall have the meaning ascribed to
such term in Section 3.02(i) hereof.
"Loss Percentage" shall mean, at any time, the greatest of:
(i) 13%; or
(ii) 5 x DR;
Where:
DR = the average of the Delayed Receivables Ratios for each of
the three months immediately preceding the date of
computation.
"Maximum Net Investment" shall mean $40,000,000, unless,
otherwise increased with the consent of the Buyer or reduced as
provided in Section 2.11(a) hereof; provided, however, that at all
times on and after the Expiration Date, the "Maximum Net
Investment" shall mean the Net Investment.
"Member" shall have the meaning assigned to such term in the
Delaware Limited Liability Company Act.
"Merrill" shall have the meaning ascribed to such term in
Section 8.21 hereof.
"Monthly Report" shall have the meaning ascribed to such term
in Section 2.14 hereof.
"Moody's" shall mean Moody's Investors Service, Inc., together
with its successors.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is or was at any time
during the current year or the immediately preceding five years
contributed to by the Corporation or any ERISA Affiliate on behalf
of its employees and which is covered by Title V of ERISA.
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FORM 10-Q
Exhibit 2.1(m) (continued)
"Net Investment" shall mean, at any time, the sum of the
amounts of Purchase Price paid to the Seller for each Incremental
Purchase less the aggregate amount of Collections received and
applied by Buyer to reduce such Net Investment pursuant to Sections
2.08(b), 2.08(e), 2.09, 2.11(b) and 2.12 hereof (which shall not
include any amounts paid to the Buyer as Discount hereunder);
provided that the Net Investment shall be increased by the amount
of any Collections so received and applied if at any time the
distribution of such Collections is rescinded or must otherwise be
returned or restored for any reason.
"Net Investment Percentage" shall mean, at any time, the Net
Investment at such time divided by the Net Receivables Balance at
such time.
"Net Receivables Balance" shall mean, at any time, the
Outstanding Balances of the Eligible Receivables at such time
reduced by the aggregate amount by which the Outstanding Balances
of all Receivables of each Obligor at such time exceeds the
Concentration Factor for such Obligor at such time.
"Notice of Termination" shall have the meaning ascribed to
such term in Section 7.02 hereof.
"Obligor" shall mean, for any Receivable, each and every
Person who purchased goods or services on credit under a Contract
and who is obligated to make payments to the Originator or the
Seller, as assignee of the Originator, pursuant to such Contract.
"Office" shall mean, when used in connection with the Buyer,
the Seller, the Servicer or the Corporation, their respective
offices as set forth on the signature pages hereto, or at such
other office or offices of the Buyer, the Seller, the Servicer or
the Corporation, or branch, Subsidiary or Affiliate of any thereof
as may be designated in writing from time to time by the Buyer, the
Seller, the Servicer or the Corporation, to the other parties
hereto, as appropriate.
"Official Body" shall mean any government or political
subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or
domestic.
"Operating Agreement" shall mean that Limited Liability
Company Agreement dated the date of this Agreement relating to the
Seller and executed by the Corporation as the sole Member of the
Seller.
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FORM 10-Q
Exhibit 2.1(m) (continued)
"Originator" shall mean the Corporation.
"Outstanding Balance" of any Receivable shall mean, at any
time, the then outstanding amount thereof, including any accrued
and outstanding Finance Charges related thereto
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Permitted Lockbox" shall mean a post office box or other
mailing location identified on Schedule 4 of the Disclosure
Schedule maintained by a Permitted Lockbox Bank pursuant to the
Lockbox Servicing Instructions for the purpose of receiving
payments made by the Obligors for subsequent deposit into a related
Lockbox Account, or such other post office box or mailing location
as the Buyer and the Servicer may agree upon from time to time.
"Permitted Lockbox Bank" shall mean a bank identified on
Schedule 4 of the Disclosure Schedule or such other bank as the
Servicer and the Buyer may agree upon from time to time.
"Person" shall mean an individual, corporation, partnership
(general or limited), trust, business trust, unincorporated
association, joint venture, joint-stock company, Official Body or
any other entity of whatever nature.
"Plan" shall mean any employee benefit or other plan which is
or was at any time during the current year or immediately preceding
five years established or maintained by the Corporation or any
ERISA Affiliate and which is covered by Title IV of ERISA, other
than a Multiemployer Plan.
"Potential Termination Event" shall mean an event or condition
which with the giving of notice, the passage of time or any
combination of the foregoing, would constitute a Termination Event.
"Proceeds" shall mean "proceeds", as defined in Section
9-306(1) of the Uniform Commercial Code as in effect in the State
of New York and the jurisdiction whose Law governs the perfection
of the Buyer's ownership interest therein.
"Program Fee" shall have the meaning ascribed to such term in
the Letter Agreement.
"Purchase" shall mean a purchase by the Buyer of an undivided
percentage ownership interest in Receivables hereunder, together
with the Related Security and Collections with respect thereto.
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FORM 10-Q
Exhibit 2.1(m) (continued)
"Purchase Agreement" shall mean the Purchase Agreement, dated
as of March 25, 1997, by and between the Seller, as purchaser under
such Purchase Agreement, and the Originator, as seller, of the
Receivables, as the same may from time to time be amended,
supplemented or otherwise modified.
"Purchase Availability Amount" shall mean, as of any date, an
amount equal to the excess, if any, of (i) the Maximum Net
Investment as of such date over (ii) the Net Investment as of such
date.
"Purchase Availability Fee" shall have the meaning ascribed to
such term in the Letter Agreement.
"Purchase Documents" shall mean this Agreement, the Lockbox
Servicing Instructions, the Lockbox Transfer Letters, the Purchase
Agreement and the Subordinated Note issued thereunder and such
other agreements, documents and instruments entered into and
delivered by Seller, the Servicer or the Corporation in connection
with the transactions contemplated by this Agreement.
"Purchase Loan" shall have the meaning ascribed to such term
in Section 2.06(c) hereof.
"Purchase Notice" shall have the meaning ascribed to such term
in Section 2.03 hereof.
"Purchase Price" shall mean with respect to any Incremental
Purchase, the amount agreed to by the Seller and the Buyer and paid
to the Seller by the Buyer as set forth in the Purchase Notice
related to such Incremental Purchase. Purchase Price refers to an
amount actually paid and does not include any amount of Deferred
Purchase Price.
"Purchased Interest" shall mean (a) at any time prior to the
close of business on the Expiration Date, an undivided percentage
ownership interest in (i) each and every then outstanding
Receivable, (ii) all Related Security with respect to each such
Receivable, (iii) all Collections with respect thereto, and (iv)
other Proceeds of the foregoing, equal to the Buyer's Percentage
Interest at such time, and only at such time (without regard to
prior calculations) and (b) at any time after the close of
business on the Expiration Date, an ownership interest in (i) each
and every Receivable outstanding as of the close of business on the
Expiration Date, (ii) all Related Security with respect to each
such Receivable (iii) all Collections with respect thereto and (iv)
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FORM 10-Q
Exhibit 2.1(m) (continued)
other Proceeds of the foregoing, equal to the Buyer's Percentage
Interest at such time (without regard to prior calculations). The
Purchased Interest in each Receivable, together with Related
Security and Collections with respect thereto, shall at all times
be equal to the Purchased Interest in each other Receivable,
together with Related Security and Collections. To the extent that
the Purchased Interest shall decrease as a result of a
recalculation of the Buyer's Percentage Interest, the Buyer shall
be deemed to have reconveyed to the Seller an undivided percentage
ownership interest in each Receivable, together with Related
Security and Collections, in an amount equal to such decrease such
that in each case the Purchased Interest in each Receivable shall
be equal to the Purchased Interest in each other Receivable.
"Rate Variance Factor" shall mean a variance factor, not to
exceed 110%, as the Buyer shall select from time, to time in its
sole discretion.
"Receivable" shall mean, all indebtedness owed to the Seller
or the Originator by any Obligor (without giving effect to any
purchase hereunder by the Buyer at any time) under a Contract,
whether or not constituting an account or a general intangible and
whether or not evidenced by chattel paper or an instrument, whether
now existing or hereafter arising and wherever located, arising in
connection with the sale of goods or the rendering of services by
the Originator and satisfying the description set forth on Exhibit
B hereto, all monies due or to become due under such Contracts and
including the right to payment of any Finance Charges and other
obligations of such Obligor with respect thereto, but excluding any
amount of sales tax, excise tax or other similar tax or charge
incurred in connection with the sale of the goods or services which
gave rise to such indebtedness; provided that the term Receivable
shall not mean and shall not include any Foreign Receivables and
shall not mean and shall not include receivables arising from the
sale of goods or services to Levi Strauss & Co. Notwithstanding
the foregoing, once a Receivable has been deemed collected pursuant
to Section 2.08(c) hereof and the Seller has complied with all of
its obligations in respect of such deemed Collections pursuant to
Section 2.08(e) hereof, it shall no longer constitute a Receivable
hereunder.
"Records" shall mean correspondence, memoranda, computer
programs, tapes, discs, papers, books or other documents or
transcribed information of any type whether expressed in ordinary
or machine readable language.
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FORM 10-Q
Exhibit 2.1(m) (continued)
"Referral Agent" shall mean Morgan Guaranty Trust Company of
New York together with its successors or assigns, in its capacity
as referral agent for the Buyer under the Amended and Restated
Referral Agreement dated as of December 6, 1995 between the Buyer
and the Referral Agent, as the same may from time to time be
amended, supplemented or otherwise modified.
"Related Security" shall mean with respect to any Receivable:
(a) all of the Seller's interest, if any, in the goods,
merchandise (including returned merchandise) or equipment, if any,
the sale of which by the Originator gave rise to such Receivable;
(b) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure
payment of such Receivable, whether pursuant to the Contract
related to such Receivable or otherwise, together with all
financing statements signed by an Obligor describing any collateral
securing such Receivable;
(c) all guarantees, insurance or other agreements or
arrangements of any kind from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related
to such Receivable or otherwise;
(d) all Records retaking to, and all service contracts and
any other contracts associated with, the Receivables, the Contracts
or the Obligors; and
(e) all of the Seller's right, title and interest in and to
the Purchase Agreement.
"Remainder" shall have the meaning ascribed to such term in
Section 2.08(a) hereof.
"Responsible Officer" shall mean the chief executive officer,
president, chief financial officer, treasurer or any assistant
treasurer of the Seller or the Corporation.
"Security Agreement" shall mean the Amended and Restated
Security Agreement dated as of December 6, 1995 between the Buyer
and Morgan Guaranty Trust Company of New York as collateral agent
for the Banks, the Agent, the LOC Bank and the holders from time to
time of the Commercial Paper, as the same may from time to time be
amended, supplemented or otherwise modified.
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FORM 10-Q
Exhibit 2.1(m) (continued)
"Servicer" shall mean the Corporation or any Person other than
the Corporation or any of its Affiliates, which upon the
termination of the Corporation as the Servicer succeeds to the
functions performed by the Corporation as the Servicer of the
Receivables pursuant to a Complete Servicing Transfer and a
Servicing Agreement.
"Servicer's Compensation" shall have the meaning ascribed to
such term in Section 4.07(e) hereof.
"Servicing Agreement" shall mean any agreement between the
Buyer and any Person, other than Cone Mills Corporation or any of
its Affiliates, which contains provisions concerning the servicing
of the Receivables substantially similar to the provisions
contained herein, including Sections 2.04, 2.08, 2.09, 4.01, 4.02,
4.03, 4.04, 4.05, 4.07 and 4.08 hereof, pursuant to which such
Person performs servicing functions for the Receivables, and all
agreements, instruments and documents attached thereto or delivered
in connection therewith, as any of the same may from time to time
be amended, supplemented or otherwise modified.
"Subordinated Note" shall mean the Subordinated Note dated the
Closing Date and delivered by the Seller to the Originator pursuant
to the Purchase Agreement.
"Subsidiary" shall mean any corporation or other entity of
which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or
indirectly owned by the Corporation.
"S&P" shall mean Standard & Poor's Ratings Service, together
with its successors.
"Termination Event" shall have the meaning ascribed to such
term in Section 7.01 hereof.
"Tranche" shall have the meaning ascribed to such term in
Section 2.06(b) hereof.
"Tranche Period" shall mean, with respect to any Tranche,
prior to the Expiration Date, a period of up to 120 days requested
by the Seller and determined by the Buyer commencing on the
Business Day requested by the Seller and determined by the Buyer,
and after the Expiration Date, a period of one day (unless the
Buyer, in any case other than the occurrence of the Expiration Date
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FORM 10-Q
Exhibit 2.1(m) (continued)
due to a Termination Event described in Section 7.01(f), (i), (j),
(k) or (l) hereof, agrees in its sole discretion at such time to a
longer period). If such Tranche Period would end on a day which is
not a Business Day, such Tranche Period shall end on the next
succeeding Business Day provided, that for any Tranche funded by a
Eurodollar Loan (as defined in the Credit Agreement) obtained by
the Buyer under the Credit Agreement, if the next succeeding
Business Day is in the next calendar month, such Tranche Period
shall end on the next preceding Business Day).
"Tranche Rate" shall mean, for any Tranche Period for any
Tranche, a rate per annum equal to the rate of interest (or if more
than one rate, the weighted average of the rates) at which funds
are borrowed or obtained during such Tranche Period, in connection
with the issuance of Commercial Paper, the provision of loans under
the Credit Agreement, drawing under the Letter of Credit or
otherwise, by the Buyer for the purpose of making or maintaining
its investment in such Tranche, excluding from the computation of
such rates any dealer's discount or fees and excluding any and all
other fees directly attributable to such funding. In the case of
the issuance of Commercial Paper, such rate of interest shall equal
the rate of interest of Commercial Paper issued by the Buyer. In
the case of borrowings under the Credit Agreement or drawings under
the Letter of Credit, such rate of interest, at the option of the
Buyer, may be determined by the weighted average of such interest
rates as applicable to all sellers of receivables to the Buyer. At
all times on and after the Expiration Date occurring for the reason
set forth in clause (iv) of the definition of such term (other than
due to a Termination Event described in Section 7.01(m) hereof),
the Buyer may in its sole discretion declare the "Tranche Rate" for
any Tranche Period to be equal to the Base Rate plus 1% per annum.
"Tranche Rejection Notice" shall have the meaning ascribed to
such term in Section 2.06(b) hereof.
"Transaction Costs" shall have the meaning ascribed to such
term in Section 8.01 hereof.
"UCC" shall mean, with respect to any jurisdiction, the
Uniform Commercial Code, or any successor statute, or any
comparable law, as the same may from time to time be
amended,supplemented or otherwise modified and in effect in such
jurisdiction.
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FORM 10-Q
Exhibit 2.1(m) (continued)
1.02. Interpretation and Construction. Unless the context of
this Agreement otherwise clearly requires, references to the plural
include the singular, the singular the plural and the part the
whole. References in this Agreement to "determination" by the
Buyer shall be conclusive absent manifest error and include good
faith estimates by the Buyer (in the case of quantitative
determinations) and good faith beliefs by the Buyer (in the case of
qualitative determinations). The words "hereof", "herein",
"hereunder" and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise stated in this Agreement, in the
computation of a period of time from a specified date to a later
specified date, the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding." The section
and other headings contained in this Agreement are for reference
purposes only and shall not control or affect the construction of
this Agreement or the interpretation hereof in any respect.
Section, subsection and exhibit references are to this Agreement
unless otherwise specified. As used in this Agreement, the
masculine, feminine or neuter gender shall each be deemed to
include the others whenever the context so indicates. All
accounting terms not specifically defined herein shall be construed
in accordance with GAAP. Terms not otherwise defined herein which
are defined in the UCC as in effect in the State of New York on the
date hereof shall have the respective meanings ascribed to such
terms therein unless the context otherwise clearly requires.
1.03. Obligor Classification. In determining whether an
Obligor is a Group A Obligor, a Group B Obligor, a Group C Obligor
or a Group D Obligor:
(i) any debt rating of an Obligor which is based upon credit
enhancement provided by a third party or based upon collateral
shall be disregarded; and
(ii) if more than one rating agency provides a rating of any
type of the Obligor's debt, the lowest rating for such type of debt
shall be utilized.
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FORM 10-Q
Exhibit 2.1(m) (continued)
ARTICLE II
PURCHASES AND SETTLEMENTS
2.01. General Assignment and Conveyance. At the time of each
Incremental Purchase pursuant to Sections 2.02 and 2.03 hereof and
each reinvestment Purchase pursuant to Section 2.05 hereof, the
Seller hereby bargains, grants, assigns, transfers and conveys to
the Buyer, without recourse, except as specifically set forth
herein and the Buyer hereby purchases and accepts assignment and
transfer from the Seller of, all of the Seller's right, title and
interest in and to the Purchased Interest in the Receivables then
existing as well as any additional Receivables thereafter arising
through the close of business on the Expiration Date.
2.02. Purchase Limits. Subject to the terms and conditions
hereof, the Seller may at any time and from time to time at its
option sell to the Buyer, and the Buyer agrees to purchase from the
Seller, without recourse, except as specifically set forth herein
undivided percentage ownership interests in each and every
Receivable (including any additional Receivables thereafter arising
through the close of business on the Expiration Date), together
with the Related Security and Collections with respect thereto
(each an "Incremental Purchase"). The Buyer shall have no
obligation to make an Incremental Purchase on any day, to the
extent that the amount of such purchase shall exceed the Purchase
Availability Amount, or shall cause the Investment Percentage
(after giving effect to such purchase) to exceed 95%. The Buyer
shall not be obligated to increase the Maximum Net Investment. The
Buyer shall have no obligation to make an Incremental Purchase (x)
if the Buyer determines that it is not practicable to issue
Commercial Paper or otherwise borrow in order to fund the purchase
or (y) to make any such purchase at or after the earlier to occur
of (i) the Expiration Date and (ii) the reduction of the Maximum
Net Investment to zero pursuant to Section 2.11(a) hereof. Each
Incremental Purchase shall be in an amount of $2,000,000 or any
higher multiple of $1,000,000.
2.03. Purchase Price. The Seller shall provide the Buyer
with a notice in substantially the form of Exhibit C hereto (a
"Purchase Notice") at least three Business Days prior to each
Incremental Purchase (including the initial Incremental Purchase).
On the closing date for each Incremental Purchase, the Buyer shall
deposit to the Seller's account at the location indicated on the
signature page hereof, in immediately available funds, an amount
equal to the Purchase Price for such Incremental Purchase. The
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Exhibit 2.1(m) (continued)
Purchase Price of the initial Incremental Purchase shall equal the
Buyer's initial Net Investment. Each Purchase Notice shall be
irrevocable and binding on the Seller and the Seller shall
indemnify the Buyer against any loss or expense incurred by the
Buyer, either directly or through the Credit Agreement or the
Letter of Credit Reimbursement Agreement or otherwise, as a result
of any failure by the Seller to complete such Incremental Purchase
including, without limitation, any loss (including loss of
anticipated profits) or expense incurred by the Buyer, either
directly or pursuant to the Credit Agreement or the Letter of
Credit Reimbursement Agreement or otherwise, by reason of the
liquidation or reemployment of funds acquired by the Buyer or any
Bank (including, without limitation, funds obtained by issuing
commercial paper or promissory notes or obtaining deposits as loans
from third parties) for the Buyer to fund such Incremental
Purchase. The Buyer shall notify the Seller of the amount
determined by the Buyer to be necessary to compensate the Buyer for
such loss or expense. Such amount shall be due and payable by the
Seller to the Buyer ten Business Days after such notice is given.
2.04. Deferred Purchase Price. The Buyer shall defer from
paying to the Seller with respect to its purchase of ownership
interests in the Receivables an amount equal to the Deferred
Purchase Price. The Seller shall calculate the Deferred Purchase
Price as of the closing date for each Incremental Purchase and the
Servicer shall calculate the Deferred Purchase Price as of the date
of each Monthly Report and at such other times as the Buyer shall
request in writing.
2.05. Reinvestment Purchases. On each Business Day occurring
after the initial Incremental Purchase hereunder and prior to the
Expiration Date, the Seller hereby bargains, grants, sells,
assigns, transfers and conveys to the Buyer, and, subject to
Section 3.03 hereof, the Buyer hereby purchases from the Seller
undivided percentage ownership interests in each and every
Receivable (including any additional Receivables arising through
the close of business on the Expiration Date), together with
Related Security and Collections with respect thereto, to the
extent that Collections are available for such Purchase in
accordance with Section 2.08(a) hereof, such that after giving
effect to such Purchase, (i) the amount of the Net Investment at
the close of the Buyer's business on such Business Day shall be
equal to the amount of the Net Investment at the close of the
Buyer's business on the Business Day immediately preceding such
Business Day, plus the Purchase Price paid with respect to any
Incremental Purchase made on such day, if any, minus the reduction
in Net Investment pursuant to Section 2.08(b) or 2.11(b) hereof
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FORM 10-Q
Exhibit 2.1(m) (continued)
made on such day, if any and (ii) the Buyer's Purchased Interest in
each Receivable, together with Related Security and Collections
with respect thereto, shall be equal to its Purchased Interest in
each other Receivable, together with Related Security and
Collections with respect thereto.
2.06. Funding of the Net Investment.
(a) At all times hereafter, but prior to the Expiration Date,
the Buyer shall utilize its best efforts to issue Commercial Paper
prior to obtaining a loan under the Credit Agreement to fund the
Net Investment; provided, however, that nothing herein shall
require the Buyer to issue Commercial Paper or limit the rights of
the Buyer to obtain a loan under the Credit Agreement or a drawing
under the Letter of Credit to fund the Net Investment.
(b) At all times hereafter, but prior to the occurrence of
the Expiration Date, the Seller shall, subject to the Buyer's
approval and the limitations described below, request Tranche
Periods and allocate a portion of the Net Investment to each
selected Tranche Period (each such portion so allocated being
herein called a "Tranche"), so that the aggregate amount of all
Tranches shall at all times equal the Net Investment. The Tranche
Period corresponds to the funding term for each Tranche and the
Seller shall not request a Tranche Period whose final day would be
a day on or after the third Business Day prior to the Expiration
Date. The Seller shall give the Buyer notice of a requested
initial Tranche Period or Periods for each Incremental Purchase at
least three Business Days prior to each Incremental Purchase and
notice of each new requested Tranche Period for any Tranche at
least three Business Days prior to the expiration of any then
existing Tranche Period for such Tranche (each such notice shall be
irrevocable, shall be in the form of Exhibit D hereto and shall be
referred to as a "Tranche Selection Notice"); provided, however,
that the Buyer may select, in its sole discretion, any such Tranche
Period if (i) the Seller fails to provide such notice on a timely
basis or (ii) the Buyer determines, in its sole discretion, that
the Tranche Period requested by the Seller is unavailable or for
any reason undesirable. The Buyer may, in its sole discretion, at
any time or from time to time, by written notice to the Seller,
declare any Tranche Period to be terminated and allocate the amount
of Net Investment allocated to the Tranche for such Tranche Period
to one or more other Tranches and Tranche Periods as the Buyer
shall select. In the case of any Tranche Period ending after the
Expiration Date, such Tranche Period shall end on the Expiration
Date and thereafter, all such Tranche Periods shall be a period of
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FORM 10-Q
Exhibit 2.1(m) (continued)
one day (unless the Buyer, in any case other than the occurrence of
the Expiration Date due to a Termination Event described in Section
7.01(f), (i), (j), (k) or (l) hereof, agrees in its sole discretion
at such time to a longer period).
(c) At all times hereafter, but prior to the Expiration Date,
if the Buyer shall fund any Incremental Purchase with a borrowing
under Section 3.02 of the Credit Agreement (a "Purchase Loan"), the
Seller shall, subject to the Buyer's approval, request that such
Purchase Loan be a CD Rate Loan, a Eurodollar Loan or a Base Rate
Loan (each as defined in the Credit Agreement); provided, however,
that the Buyer may, in its sole discretion, select the type of
Purchase Loan if the Seller shall fail to make such request at
least four Business Days prior to such Incremental Purchase.
(d) At all times on and after the Expiration Date occurring
for the reason set forth in clause (iv) of the definition of such
term (other than due to a Termination Event described in Section
7.01(m) hereof), the Buyer shall in its sole discretion be
permitted to declare the Tranche Rates applicable to the Net
Investment to be equal to the Base Rate plus: 1%.
2.07. Discount. The Buyer will provide the Seller and the
Servicer with a report in substantially the form of Exhibit E
hereto showing the Discount attributable to each Tranche for its
then current Tranche Period prior to the third Business Day of each
month and otherwise upon the reasonable request of the Seller and
setting forth the Rate Variance Factor then in effect. The Tranche
Rate and the Program Fee with respect to each Tranche shall accrue
on each day occurring during the Tranche Period related thereto and
the related Discount shall be payable by the Seller on the last day
of the applicable Tranche Period. If any amount hereunder shall be
payable on a day which is not a Business Day, such amount shall be
payable on the next succeeding Business Day (unless the amount is
payable in respect of a Eurodollar Loan (as defined in the Credit
Agreement) obtained by the Buyer under the Credit Agreement, and
the next succeeding Business Day is in the next calendar month, in
which event the amount shall be payable on the next preceding
Business Day). Nothing in this Agreement shall limit in any way
the obligations of Seller to pay the amounts set forth in this
Section 2.07.
2.08. Non-Liquidation Settlements and Other Payment
Procedures.
(a) On each day after the day of any Incremental Purchase but
prior to the Expiration Date the Servicer shall allocate to the
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FORM 10-Q
Exhibit 2.1(m) (continued)
Buyer an amount of Collections equal to the product of (i) the
Buyer's Percentage Interest, expressed as a decimal, and (ii)
Collections, if any, received on or prior to such day and not
previously applied or accounted for and after the Expiration Date
the provisions of Section 2.09 hereof shall apply. The Servicer
shall set aside and hold in trust for the benefit of the Buyer out
of such amount in respect of the Buyer's Percentage Interest an
amount equal to all Discount accrued through such day and not
previously so held or paid. The remainder of such amount (the
"Remainder") in respect of such Buyer's Percentage Interest shall,
subject to the terms and conditions of this Agreement, be utilized
by the Servicer to make for the benefit of the Buyer a reinvestment
Purchase of additional undivided percentage interests in each
Receivable pursuant to Section 2.05 hereof. On the last day of
each Tranche Period, from the amounts set aside, the Servicer shall
deposit to the Buyer's account, an amount equal to the accrued and
unpaid Discount for such Tranche Period.
(b) If and for so long as any of the Remainder cannot be
reinvested in additional undivided percentage interests in
Receivables pursuant to Sections 2.05 and 2.08(a) hereof, the
Servicer shall set aside and hold in trust for the Buyer such
Collections and shall use any such Collections not reinvested and
not set aside to pay Discount pursuant to Section 208(a) hereof to
the Buyer on the next date on which Discount is payable or on such
other date as specified by the Buyer The receipt of such payment
by the Buyer shall result in a reduction of the Net Investment
(c) If on any day the Outstanding Balance of a Receivable is
(w) reduced or canceled as a result of any defective or rejected
goods or services, any cash discount or any adjustment by the
Seller, or (x) reduced or canceled as a result of a set-off in
respect of any claim by any Person (whether such claim arises out
of the same or a related transaction or an unrelated transaction),
or (y) reduced or canceled as a result of any forgiveness of the
obligation or of any adjustment by the Seller, or (z) otherwise
reduced or canceled as a result of any Dilution Factor with respect
to such Receivable, the Servicer shall be deemed to have received
on such day a Collection of such Receivable in the amount of such
reduction or cancellation If on any day any of the representations
or warranties in Section 5.02 hereof is no longer true or was not
true when made with respect to a Receivable, the Seller shall be
deemed to have received on such day a Collection of such Receivable
in full.
(d) If any Receivable was, on the date of any Purchase,
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FORM 10-Q
Exhibit 2.1(m) (continued)
included in the calculation of Net Receivables Balance but was
not, at such time an Eligible Receivable, the Seller shall, on the
date of discovery by or notice to the Seller of such fact, be
deemed to have received on such day a Collection of such Receivable
in full.
(e) Any Collections deemed to be received by the Seller
pursuant to Section 2.08(c) or (d) hereof shall be paid by the
Seller to the Servicer on the next date on which Discount is
payable or on such other day as specified by the Buyer. The
Servicer shall hold or distribute all Collections deemed received
pursuant to Section 2.08(c) or (d) hereof to the same extent as if
such Collections had actually been received. All collections
actually received by the Seller which are not mailed directly to a
Permitted Lockbox for deposit by a Permitted Lockbox Bank into a
Lockbox Account shall be transferred by the Seller to a Lockbox
Account not later than two Business Days after such receipt. So
long as the Seller or the Servicer shall hold any Collections or
deemed Collections required to be paid to the Buyer, it shall hold
such Collections in trust for the Buyer.
2.09. Liquidation Settlement Procedures. On the Expiration
Date and on each day thereafter, the Servicer shall set aside and
hold in trust for the Buyer, an amount equal to the product of the
Buyer's Percentage Interest, expressed as a decimal, and
Collections, if any, received on such day. On the last day of the
Tranche Period for each Tranche to occur on or after the Expiration
Date, the Servicer shall deposit into the Buyer's account the
amounts set aside pursuant to the preceding sentence, together with
any remaining amounts set aside pursuant to Section 2.08(a) hereof
prior to the Expiration Date, but not to exceed the sum of the
Discount due for such Tranche Period, the amount of such Tranche,
and all other Aggregate Unpaids (whether due or accrued). If there
shall be insufficient funds on deposit for the Servicer to
distribute funds in payment in full of the aforementioned amounts,
the Servicer shall distribute funds first, in payment of all fees
and expenses payable to the Buyer, second, in payment of the
Discount due, third, in reduction of the Net Investment allocated
to such Tranche Period, and fourth, in payment of all other
Aggregate Unpaids (whether due or accrued). Following the date on
which the Net Investment has been reduced to zero and all Discount
due and all other Aggregate Unpaids have been indefeasibly paid in
full, the Deferred Purchase Price shall be deemed to have been paid
in full, the Servicer shall recompute the Buyer's Percentage
Interest, the Buyer shall be deemed to have reconveyed to the
Seller any interest in the Receivables (including the Purchased
Interest), (iv) the Servicer shall pay to the Seller any remaining
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FORM 10-Q
Exhibit 2.1(m) (continued)
Collections set aside and held by the Servicer pursuant to the
first sentence of this Section 2.09 and (v) the Buyer shall execute
and deliver to the Seller, at Seller's expense, such documents or
instruments as are reasonably necessary to terminate its interest
in the Receivables.
2.10. Fees. (a) Notwithstanding any limitation on recourse
contained in this Agreement, the Seller shall pay in arrears, on
the last Business Day of each calendar quarter, to the Buyer, the
accrued Purchase Availability Fee, which fee shall be
nonrefundable.
(b) The Seller shall pay to the Buyer the fees as and when
set forth in the Letter Agreement.
2.11. Optional Reduction of Maximum Net Investment; Optional
Reduction of Net Investment.
(a) The Seller may reduce in whole or in part the Maximum Net
Investment (but not below the Net Investment) by giving the Buyer
written notice thereof at least three Business Days before such
reduction is to take place; provided, however, that any partial
reduction shall be in an amount of $2,000,000 or any higher
multiple of $1,000,000. The Seller shall pay the Buyer any accrued
and unpaid Purchase Availability Fee on the date of such reduction
with respect to the reduction amount.
(b) The Seller may reduce the Net Investment in whole or in
part with respect to any Tranche on the last day of the related
Tranche Period by giving the Buyer at least three Business Days'
written notice. If the Seller delivers such a notice of reduction,
the Seller shall pay to the Buyer (or cause the Servicer to pay to
the Buyer) on the last day of such Tranche Period an amount equal
to (i) the amount of the proposed reduction, (ii) any Discount
otherwise payable on such date and (iii) if such reduction reduces
the Net Investment to zero, all other Aggregate Unpaids; provided,
however, that any partial reduction shall be in an amount of
$2,000,000 or any higher multiple of $1,000,000. Such reduction
shall become effective upon payment of the amounts in the preceding
clauses (i), (ii) and, if applicable, (iii).
2.12. Mandatory Repurchase Under Certain Circumstances. The
Seller agrees to repurchase from the Buyer the Purchased Interest
if at any time the Buyer shall cease to have a perfected ownership
interest, or a first priority perfected security interest, in the
Receivables, free and clear of any Lien (except as provided
herein), within five days of notice thereof by the Buyer. The
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FORM 10-Q
Exhibit 2.1(m) (continued)
repurchase price shall be paid by the Seller to the Buyer on such
fifth day in an amount equal to the Aggregate Unpaids.
2.13. Payments and Computations, Etc.; Allocation of
Collections.
(a) All per annum fees payable under this Agreement shall be
calculated for the actual days elapsed on the basis of a 360-day
year. All amounts to be paid or deposited by the Seller or the
Servicer hereunder shall be paid or deposited in accordance with
the terms hereof no later than 11:00 a.m. (New York City time) on
the day when due in immediately available funds; if such amounts
are payable to the Buyer they shall be paid or deposited in the
account indicated on the signature page hereof, until otherwise
notified by the Buyer. The Seller shall, to the extent permitted
by Law, pay to the Buyer upon demand, interest on all amounts not
paid or deposited when due to the Buyer hereunder at a rate equal
to 2% per annum plus the Base Rate. All computations of interest
hereunder shall be made on the basis of a year of 360 days for the
actual number of days (including the first but excluding the last
day) elapsed. Any computations of amounts payable by the Seller
hereunder made by the Buyer, the Agent or the LOC Bank shall be
binding absent manifest error.
(b) Any payment by an Obligor in respect of any indebtedness
owed by it to the Seller shall, except as otherwise specified by
such Obligor or otherwise required by Contract or Law and unless
otherwise instructed by the Buyer, be applied as a Collection,
allocated in accordance with Sections 2.08 and 2.09 hereof, as the
case may be, of any Receivable of such Obligor included in the
Purchased Interest (starting with the oldest such Receivable) to
the extent of any amounts then due and payable thereunder before
being applied to any other receivable or other indebtedness of such
Obligor.
2.14. Reports.
(a) Prior to the fifteenth Business Day of each month, the
Servicer shall prepare and forward to the Buyer (i) a monthly
report, substantially in the form of Exhibit G (a "Monthly
Report"), as of the close of business of the Servicer on the last
day of the immediately preceding month and (ii) if requested by the
Buyer, a listing by Obligor of all Receivables together with an
aging of such Receivables and such other information concerning
actual and historical collections experience and other matters as
the Buyer may reasonably request.
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FORM 10-Q
Exhibit 2.1(m) (continued)
(b) In connection with each Monthly Report, the Servicer
shall provide in writing to the Buyer a listing of all changes to
the list of Obligors under Contracts related to the Receivables
including, for each Obligor added to the list, the name, address,
telephone number and account number of such Obligor and if there
have been changes in the name, address, telephone number or account
number of any existing Obligor, the revisions shall be provided.
(c) The Seller shall or shall cause the Servicer to, furnish
to the Buyer at any time and from time to time, such other or
further information in respect of the Receivables, the Seller and
the Obligors as the Buyer may reasonably request.
2.15. Expiration Date. Subject to other provisions of this
Agreement requiring earlier termination, this Agreement shall
terminate on March 24, 1998.
ARTICLE III
CLOSING PROCEDURES
3.01. Purchase and Sale Procedures.
(a) General. Each Purchase hereunder shall constitute a
purchase of, and shall transfer ownership to the Buyer of,
undivided percentage ownership interests in each and every
Receivable, together with Related Security and Collections with
respect thereto, then existing as well as each and every
Receivable, together with Related Security and Collections, which
may arise at any time after the date of such Purchase through the
close of business on the Expiration Date.
(b) Maximum Net Investment. If, on any closing date for an
Incremental Purchase, the Purchase Price to be paid on such date
for such Incremental Purchase would cause the Net Investment to
exceed the Maximum Net Investment, the Buyer may, at its option,
either refuse to make such Incremental Purchase or make a smaller
Incremental Purchase such that, immediately after the payment of
the smaller Purchase Price, the Net Investment would not exceed the
Maximum Net Investment.
(c) Sale Without Recourse. The sale of the Purchased
Interest by the Seller hereunder shall be made without recourse
except as specifically provided herein.
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FORM 10-Q
Exhibit 2.1(m) (continued)
(d) Grant of Security Interest. This Agreement also
constitutes a security agreement under the UCC. The Seller hereby
grants to the Buyer a first priority perfected security interest in
and against all of the Seller's right, title and interest in and to
each and every Receivable (together with Related Security,
Collections and other Proceeds), whether now existing or hereafter
arising through the close of business on the Expiration Date, for
the purpose of securing the rights of the Buyer under this
Agreement.
(e) Non-Assumption by the Buyer of Obligations. No
obligation or liability of the Seller to any Obligor or any third
party under any Receivable or Contract which is part of the
Receivables in which the Buyer has a Purchased Interest shall be
assumed by the Buyer, and any such assumption is hereby expressly
disclaimed. The Buyer shall be indemnified by the Seller in
accordance with Section 8.03 hereof in respect of any losses,
claims, damages, liabilities, costs or expenses arising out of or
incurred in connection with any obligor's assertion of such
obligation or liability against the Buyer.
3.02. Conditions to Closing. On or prior to the Closing
Date, the Seller shall deliver to the Buyer the following documents
and instruments, all of which shall be in a form and substance
acceptable to the Buyer, and the following fee:
(a) A copy of the resolution of the Board of Directors of the
Corporation certified by the Corporation's secretary authorizing
the formation of the Seller and the execution, delivery and
performance of this Agreement and the other documents to be
delivered by the Corporation hereunder and approving the
transactions contemplated hereby and thereby;
(b) The Articles of Incorporation of the Corporation
certified as of a date reasonably near the date hereof by the
Secretary of State or other similar official of the Corporation's
jurisdiction of incorporation, and a certified copy of the
Certificate of Formation of the Seller and a fully executed copy of
the Operating Agreement;
(c) A good standing certificate for the Corporation issued by
the Secretary of State or other similar official of the
Corporation's jurisdiction of incorporation, certificates of
qualification as a foreign corporation issued by the Secretaries of
State or other similar officials of each jurisdiction where such
qualification is material to the transactions contemplated by this
Agreement and certificates of the appropriate state official in
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FORM 10-Q
Exhibit 2.1(m) (continued)
each jurisdiction specified by the Buyer as to the absence of any
tax Liens against such Person under the Laws of such jurisdiction,
each such certificate to be dated a date reasonably near the date
hereof;
(d) A certificate of the secretary of the Corporation
certifying (i) the names and signatures of the officers authorized
to execute, and the officers and other employees authorized to
perform, on behalf of the Corporation both in its individual
capacity and as sole member of the Seller, this Agreement, the
Purchase Agreement, the Operating Agreement and any other documents
to be delivered by such Person hereunder (on which certificate the
Buyer may conclusively rely until such time as the Buyer shall
receive from such Person a revised certificate meeting the
requirements of this clause (d)(i)) and (ii) a copy of the
Corporation's By-laws;
(e) Evidence of filing by the Seller of a Certificate of
Authority with the Secretary of State of the State of North
Carolina;
(f) Acknowledgment copies of proper financing statements
(Form UCC-1) dated a date reasonably near to the date of the
initial Incremental Purchase naming (i) the Seller as the debtor of
Receivables and the Buyer as the secured party or other similar
instruments or documents as may be necessary or, in the opinion of
the Buyer, desirable under the UCC of all appropriate jurisdictions
to evidence or perfect the Buyer's ownership interest in all
Receivables and (ii) naming the Originator as the debtor of the
Receivables and the Seller as the secured party, or other similar
instruments or documents as may be necessary or, in the opinion of
the Buyer, desirable under the UCC of all appropriate jurisdictions
to evidence or perfect the Seller's ownership interest in all
Receivables;
(g) Acknowledgment copies of proper financing statements
(Form UCC-3) necessary to release all security interests and other
rights of any person in Receivables previously granted by the
Seller or the Originator;
(h) Certified copies of requests for information or copies
(Form UCC-11) (or a similar search report certified by parties
acceptable to Buyer) dated a date reasonably near the date of the
initial Incremental Purchase listing all effective financing
statements which name the Seller or the Originator (under their
respective present names and any previous names) as debtor and
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FORM 10-Q
Exhibit 2.1(m) (continued)
which are filed in jurisdictions in which the filings were made
pursuant to item (e) above, together with copies of such financing
statements;
(i) Copies of Lockbox Servicing Instructions (to the extent
available) and all other agreements previously given or entered
into with each of the Permitted Lockbox Banks;
(j) Undated duly executed letters (a "Lockbox-Transfer
Letter") from the Servicer addressed to each Permitted Lockbox Bank
substantially in the form of Exhibit H hereto;
(k) A favorable opinion of Lindy Bode Aucoin, counsel for the
Seller, the Servicer, the Originator and the Corporation dated the
Closing Date in form and substance acceptable to the Buyer;
(l) An opinion of counsel acceptable to the Corporation and
the Seller and which specifically allows reliance thereon by the
Corporation's outside auditors with respect to the treatment of the
transfer of the Receivables from the Corporation to the Seller as
provided in the Purchase Agreement as a true sale;
(m) Officer's certificates executed by a Responsible Officer
of the Seller and of the Corporation, respectively, and in form and
substance acceptable to the Buyer;
(n) The arrangement fee described in the Letter Agreement;
(o) A Monthly Report for the immediately preceding month
(Part I, Schedule 3 to Part II, and Part III, Items A. through D.
only);
(p) The Purchase Notice and the Tranche Selection Notice for
the initial Incremental Purchase hereunder;
(q) A form of Contract or Contracts;
(r) An executed copy of the Purchase Agreement;
(s) An executed copy of the Omnibus Termination and Release
and Reconveyance dated the Closing Date by and between the
Corporation and the Buyer;
(t) Creditor Approvals; and
(u) Such other documents as the Buyer shall reasonably
request.
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FORM 10-Q
Exhibit 2.1(m) (continued)
3.03. Conditions to Reinvestment and Incremental Purchases.
The truth and correctness of the representations and warranties in
Article V hereof as of the date of the Incremental Purchase or
reinvestment Purchase referred to below as though made on and as of
such date, compliance with the covenants and agreements in Articles
II, IV and VI hereof, the requirement that no Termination Event or
Potential Termination Event shall occur as a result of such
Incremental Purchase or reinvestment Purchase, in the case of an
Incremental Purchase, the satisfactory completion of any due
diligence conducted by the Buyer with respect to the Receivables
and the related Obligors and Contracts which are the subject of
such Purchase and the receipt by the Buyer of any approvals,
opinions or other documents as the Buyer shall have reasonably
requested shall be conditions precedent to any Incremental Purchase
under Sections 2.02 and 2.03 hereof and any reinvestment Purchase
under Section 2.05 hereof.
ARTICLE IV
PROTECTION OF THE BUYER;
ADMINISTRATION AND COLLECTIONS
4.01. Acceptance of Appointment and Other Matters Relating to
the Servicer.
(a) Cone Mills Corporation agrees to act, and is hereby
appointed by the Buyer to act, subject to the terms hereof, as the
Servicer under this Agreement. The Servicer shall collect payments
due under the Receivables in accordance with its customary and
usual servicing procedures for servicing receivables owned by it
and comparable to the Receivables and in accordance with its Credit
and Collection Policy and shall have full power and authority,
acting alone or through any party properly designated by it
hereunder, to do any and all things in connection with such
servicing and administration which it may deem necessary or
desirable; provided, however, that if any Person succeeds the
Corporation as the Servicer, such Servicer shall service the
Receivables in accordance with the standards that would be employed
by a prudent institution in servicing comparable receivables for
its own account. Without limiting the generality of the foregoing
and subject to Sections 4.09 and 4.10 hereof, the Servicer is
hereby authorized and empowered (i) to receive and hold in trust
for the Buyer Collections received from Receivables as set forth in
Article II and elsewhere in this Agreement and (ii) to execute and
deliver, on behalf of the Buyer (for the benefit of the Buyer), any
and all instruments of satisfaction or cancellation, or of partial
or full release or discharge, and all other comparable instruments,
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FORM 10-Q
Exhibit 2.1(m) (continued)
with respect to the Receivables permitted under and in compliance
with applicable Law and regulations.
(b) Subject to the rights retained by the Buyer pursuant to
Section 4.09 hereof, each of the Seller and the Buyer hereby
appoints the Servicer to enforce its respective rights and
interests in and to the Purchased Interest and the Receivables. If
any Person succeeds the Corporation as the Servicer, the
Corporation shall promptly deliver to such Successor Servicer, and
the Servicer shall hold in trust for the Buyer and the Seller, in
accordance with their respective interests, all documents
instruments and records (including computer tapes or disks) that
are reasonably necessary to service or collect the Receivables.
4.02. Maintenance of Information and Computer Records. The
Seller will, or will cause the Servicer to, hold in trust and keep
safely for the Buyer all evidence of the Buyer's right, title and
interest in and to the Purchased Interest in the Receivables. The
Seller will, or will cause the Servicer to, on or prior to each
Incremental Purchase, and with respect to all Receivables that are
added to the pool of Receivables in which the Buyer has a Purchased
Interest after the initial Incremental Purchase, on each respective
date such Receivables are added, place an appropriate code or
notation in its Records to indicate that the Buyer has a Purchased
Interest in each and every Receivable.
4.03. Protection of the Interests of the Buyer.
(a) The Seller will, or will cause the Servicer to, from time
to time and at Seller's sole expense do and perform any and all
acts and execute any and all documents (including, without
limitation, the obtaining of additional search reports, the
delivery of further opinions of counsel, the execution, amendment
or supplementation of any financing statements, continuation
statements and other instruments and documents for filing under the
provisions of the UCC of any applicable jurisdiction, the
execution, amendment or supplementation of any instrument of
transfer and the making of notations on the Records of the Seller)
as may be reasonably requested by the Buyer in order to effect the
purposes of this Agreement and the sale of Purchased Interest
hereunder, to protect or perfect the Buyer's right, title and
interest in the Purchased Interest in the Receivables, together
with Related Security and all Collections with respect thereto,
against all Persons whomsoever or to enable the Buyer to exercise
or enforce any of its rights hereunder.
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FORM 10-Q
Exhibit 2.1(m) (continued)
(b) To the fullest extent permitted by applicable Law, the
Seller hereby irrevocably grants to the Buyer and the Referral
Agent an irrevocable power of attorney, with full power of
substitution, coupled with an interest, to sign and file in the
name of the Seller, or in its own name, such financing statements
and continuation statements and amendments thereto or assignments
thereof as the Buyer deems necessary to protect or perfect the
Purchased Interest.
(c) At any reasonable time and from time to time at the
Buyer's reasonable request upon notice to the Seller, the Servicer
or the Corporation, the Seller, the Servicer or the Corporation, as
the case may be, shall permit such Person as the Buyer may
designate (other than the Persons listed on Schedule 5 of the
Disclosure Schedule and such other Persons as the Seller may
designate in writing based on such business considerations as the
Seller reasonably believes to be applicable) to conduct audits or
visit and inspect any of the properties of the Seller, the Servicer
or the Corporation, as the case may be, to examine the Records,
internal controls and procedures maintained by the Seller, the
Servicer or the Corporation, as the case may be, and take copies
and extracts therefrom, and to discuss the Seller's, the Servicer's
or the Corporation's, as the case may be, affairs with its
officers, employees and independent accountants. The Seller, the
Servicer or the Corporation, as the case may be, hereby authorizes
such officers, employees and independent accountants to discuss
with the Buyer the affairs of the Seller, the Servicer or the
Corporation, as the case may be. The Seller shall reimburse the
Buyer for all reasonable fees, costs and expenses incurred by or on
behalf of the Buyer in connection with the foregoing actions
promptly upon receipt of a written invoice therefor.
(d) The Buyer shall have the right to do all such acts and
things as it may deem necessary to protect its interests,
including, without limitation, confirmation and verification of the
existence, amount and status of the Receivables.
4.04. Maintenance of Writings and Records. The Servicer will
at all times until completion of a Complete Servicing Transfer keep
or cause to be kept at its Chief Executive Office or at an office
of the Servicer designated in advance to the Buyer, each writing or
Record which evidences, and which is necessary or desirable to
establish or protect, including such books of account and other
Records as will enable the Buyer or its designee to determine at
any time the status of, the Purchased Interest of the Buyer in each
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FORM 10-Q
Exhibit 2.1(m) (continued)
Receivable. The Servicer shall at its own expense prepare and
maintain machine-readable magnetic tapes in such format as the
Servicer customarily maintains its records; provided, however, that
upon a Complete Servicing Transfer, the Servicer shall within 15
days of such Complete Servicing Transfer prepare such records in
such format as may be required to permit or facilitate the transfer
of such records to the successor Servicer.
4.05. Information. The Servicer will, or will cause the
Seller to, furnish to the Buyer such additional information with
respect to the Receivables (including but not limited to the
Seller's or the Originator's procedures for selecting Receivables
for sale and the Seller's or the Originator's standards and
procedures for selling goods or services on credit) as the Buyer
may reasonably request. The Servicer will also furnish to the
Buyer all modifications, adjustments or supplements to the Credit
and Collection Policy; provided, however, the Servicer shall not,
without the Buyer's prior written consent, alter the Credit and
Collection Policy as in effect from time to time unless such
alteration is in compliance with Section 6.02(e) hereof.
4.06. Performance of Undertakings Under the Receivables. The
Servicer will at all times observe and perform, or cause to be
observed and performed, all material obligations and undertakings
to the Obligors arising in connection with each Receivable or
related Contract and will not take any action or cause any action
to be taken to impair the rights of the Buyer to its Purchased
Interest in the Receivables.
4.07. Administration and Collections.
(a) General. Until a Complete Servicing Transfer shall have
occurred, the Servicer will be responsible for the administration,
servicing and collection of the Receivables; provided, however,
that upon written approval by the Buyer such duties may be
delegated by the Servicer to any of the Servicer's Affiliates or a
third party (without impairment of the Servicer's obligations as
Servicer). The Servicer agrees to exercise or cause such Affiliate
or third party to exercise the same degree of skill and care and
apply the same standards, policies, procedures and diligence that
it applies to the performance of the same functions with respect to
accounts owned by the Servicer.
(b) Administration. The Servicer shall, to the full extent
permitted by Law, have the power and authority, on behalf of the
Buyer, to take such action in respect of any such Receivable as the
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FORM 10-Q
Exhibit 2.1(m) (continued)
Servicer may deem advisable, including the resale of any
repossessed, returned or rejected goods; provided, however, that
the Servicer may not under any circumstances compromise, rescind,
cancel, adjust or modify (including by extension of time for
payment or granting any discounts, allowances or credits) the
Outstanding Balance of the related Contract for any Receivable,
except in accordance with the Credit and Collection Policy or
otherwise with the Buyer's prior written consent.
(c) Enforcement Proceedings. In the event of a default under
any Receivable before a Termination Event, the Servicer shall, at
the Seller's sole expense, to the full extent permitted by Law,
have the power and authority, on behalf of the Buyer, to take any
action in respect of any such Receivable as the Servicer may deem
advisable; provided, however, that the Servicer or the Seller, as
the case may be shall take no enforcement action (judicial or
otherwise) with respect to such Receivable, except in accordance
with the Credit and Collection Policy or otherwise with the written
consent of the Buyer. The Servicer or the Seller, as the case may
be, will apply or will cause to be applied at all times before a
Termination Event the same standards and follow the same procedures
with respect to deciding to commence, and in prosecuting,
litigation on such Receivable as is applied and followed with
respect to like accounts not owned by the Buyer. In no event shall
the Servicer or the Seller, as the case may be, be entitled to make
or authorize any Person to make the Buyer a party to any litigation
without the Buyer's express prior written consent.
(d) Obligations of the Buyer. The Buyer may, but shall have
no obligation to, take any action or commence any proceeding to
realize upon any Receivable, any such action or commencement of
proceeding to be at the sole expense of the Seller. At such time
as the Servicer or the Seller, as the case may be, has any
obligation to pursue the collection of Receivables and the Buyer
possesses any documents necessary therefor, the Buyer agrees to
furnish such documents to the Servicer or the Seller, as the case
may be, to the extent and for the period necessary for the Servicer
or the Seller, as the case may be, to comply with its obligations
hereunder.
(e) Servicer's Compensation. The servicer's compensation
(the "Servicer's Compensation") for performing its responsibility
as the Servicer with respect to any Receivable on any day shall be
equal to the quotient of (A) the product of (1) 0.75%, expressed as
a decimal, and (2) the Outstanding Balances of all Receivables on
such day, divided by (B) 360. Subject to Section 4.08(a) hereof,
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FORM 10-Q
Exhibit 2.1(m) (continued)
the Servicer's Compensation shall be paid to the Servicer by the
Seller in arrears on the last Business Day of each month; provided,
however, that if the Seller is the Servicer, the Servicer shall not
be entitled to any compensation on or after the date of the
Complete Servicing Termination.
4.08. Complete Servicing Transfer.
(a) General. If at any time a Termination Event or a
Potential Termination Event shall have occurred and be continuing,
the Buyer may by notice in writing to the Seller and the Servicer,
terminate the Servicer's capacity as Servicer in respect of the
Receivables (such termination referred to herein as a "Complete
Servicing Transfer"). After a Complete Servicing Transfer, the
Buyer may administer, service and collect the Receivables itself
and in such event, may retain the Servicer's Compensation for its
own account, in any manner it sees fit, including, without
limitation, by compromise, extension or settlement of such
Receivables. Alternatively, the Buyer may engage affiliated or
unaffiliated contractors (other than the Persons listed on Schedule
5 of the Disclosure Schedule and such other Persons as the Seller
may designate in writing based on such business considerations as
the Seller reasonably believes to be applicable) to perform all or
any part of the administration, servicing and collection of the
Receivables and require the Seller to pay to such contractors all
or a portion of the Servicer's Compensation in consideration
thereof. The Buyer shall give S&P and Moody's prompt notice of the
occurrence of a Complete Servicing Transfer; provided, however,
that failure to give such notice shall not affect the effectiveness
of the notice delivered with respect to, or the rights of the Buyer
resulting from, such Complete Servicing Transfer.
(b) Transition. The Servicer, within ten Business Days after
receiving a notice pursuant to Section 4.08(a) hereof, shall, at
the Servicer's sole expense, (x) deliver to the Buyer or its
designated agent a schedule of the Receivables in which the Buyer
has a Purchased Interest indicating as to each such Receivable
information as to the related Obligor, the Outstanding Balance as
of such date of the related Contract and the location of the
evidences of such Receivable and related Contract, together with
such other information as the Buyer may reasonably request and all
evidence of such Receivables and related Contracts and such other
Records related thereto (including, without limitation, true copies
of any computer tapes and data in computer memories), and (y)
permit the Buyer access to the Servicer's premises, equipment and
files and other Records, in each case as the Buyer may reasonably
deem necessary to enable it to protect and enforce its rights to,
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FORM 10-Q
Exhibit 2.1(m) (continued)
or its position as owner of, the Purchased Interest therein. After
any such delivery, the Servicer will not hold or retain any
executed counterpart or any document evidencing such Receivables or
related Contracts without clearly marking the same to indicate
conspicuously that the same is not the original and that transfer
thereof does not transfer any rights against the related Obligor or
any other Person.
(c) Collections. If at any time there shall be a Complete
Servicing Transfer, the Servicer will cause to be transmitted and
delivered directly to the Buyer or its designated agent, for the
Buyer's own account, forthwith upon receipt and in the exact form
received, all Collections (properly endorsed, where required, so
that such items may be collected by the Buyer) on account of its
Purchased Interest in any Receivables. All such Collections
consisting of cash shall not be commingled with other items or
monies of the Servicer for a period longer than two Business Days.
If the Buyer or its designated agent receives items or monies that
are not payments on account of its interest in any Receivables,
such items or monies shall be delivered promptly to the Seller
after being so identified by the Buyer or its designated agent.
Each of the Seller and the terminated Servicer hereby irrevocably
grants the Buyer or its designated agent, if any, an irrevocable
power of attorney, with full power of substitution, coupled with an
interest, to take in the name of the Seller or the terminated
Servicer, as the case may be, all steps with respect to any
Receivable which the Buyer, in its sole discretion, may deem
necessary or advisable to negotiate or otherwise realize on any
right of any kind held or owned by the Seller or transmitted to or
received by the Buyer or its designated agent (whether or not from
the Seller or any Obligor) in connection with its Purchased
Interest in any Receivable. The Buyer will provide such periodic
accountings and other information related to the disposition of
funds so collected as the Seller may reasonably request.
(d) Collection and Administration at Expense of the Seller.
The Seller agrees that in the event of a Complete Servicing
Transfer, it will reimburse the Buyer for all reasonable out-of-
pocket expenses (including, without limitation, attorneys' and
accountants' and other third parties' fees and expenses, expenses
incurred by the Buyer's credit recovery group (or any successor),
expenses of litigation or preparation therefor, and expenses of
audits and visits to the offices of the Seller) incurred by the
Buyer in connection with and following the transfer of functions
following a Complete Servicing Transfer.
Page 124
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FORM 10-Q
Exhibit 2.1(m) (continued)
(e) Payments by Obligors. At any time, and from time to time
following a Complete Servicing Transfer, or if a Termination Event
or Potential Termination Event shall have occurred and be
continuing, the Seller and the Servicer shall permit such Persons
as the Buyer may designate to open and inspect all mail received by
the Seller or the terminated Servicer, as the case may be, at any
of its offices, and to remove therefrom any and all Collections or
other correspondence from Obligors or the Servicer in respect of
Receivables. All Collections received by the Buyer shall be
applied in accordance with Section 2.13(b) hereof. The Buyer shall
be entitled to notify the Obligors of Receivables to make payments
directly to the Buyer of amounts due thereunder at any time and
from time to time following the occurrence of (i) a Termination
Event, (ii) a Complete Servicing Transfer or (iii) a violation by
the Servicer of the provisions of Section 4.09 hereof.
4.09. Lockboxes. The Servicer hereby agrees (i) to instruct
all Obligors to cause all Collections on account of Receivables to
be mailed directly to a Permitted Lockbox; (ii) not to suffer or
permit any funds other than such Collections to be mailed to
Permitted Lockboxes or deposited into related Lockbox Accounts;
(iii) to make the necessary bookkeeping entries to reflect such
Collections on the Records pertaining to such Receivables; (iv) to
apply all such Collections as provided in this Agreement; (v) not
to amend or modify any term of any Lockbox Servicing Instructions
without the prior written consent of the Buyer to such amendment or
modification; and (vi) not to amend or modify any term, with
respect to the disposition of such Collections or any other amounts
received by the Seller or the Servicer or any Permitted Lockbox
Bank, of this Agreement or any other agreement (other than Lockbox
Servicing Instructions) without the prior written consent of the
Buyer to such amendment or modification. The Seller and the
Servicer further represent, warrant, covenant and agree as follows:
each Lockbox Account shall be maintained with a Permitted Lockbox
Bank; each Lockbox Account shall be a segregated account and the
funds deposited in such Lockbox Account from time to time shall not
be commingled with any other funds of the Seller or the Servicer;
each Lockbox Account shall be in the name of the Seller; the
location of each Permitted Lockbox and each related Lockbox Account
shall not be changed without the consent of the Buyer; funds
deposited in each Lockbox Account shall be transferred to the
Servicer not later than the next Business Day after such funds are
deposited in each such Lockbox Account; it shall cause each
Permitted Lockbox Bank listed on Schedule 4 to the Disclosure
Schedule, to the extent that any such Permitted Lockbox Bank has
not previously done so, within 30 days of the date of this
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<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
Agreement, to waive any deductions, set-off, banker's lien or any
other right in favor of any person other than the Agent; it shall
cause any bank, prior to such bank becoming a Permitted Lockbox
Bank, to waive any deductions, set-off, banker's lien or any other
right in favor of any person other than the Agent; each Lockbox
Account shall be insured by the Federal Deposit Insurance
Corporation to, the full extent permitted by law; the Buyer or the
Collateral Agent shall have the right to obtain control over each
Permitted Lockbox and each related Lockbox Account, or appoint a
successor servicer, and, in either case, direct the Permitted
Lockbox Bank not to transfer funds in such Lockbox Account to the
Seller or the Servicer, and direct the Permitted Lockbox Bank to
transfer the funds in such Lockbox Account to an account designated
by the Buyer or the Collateral Agent, as the case may be, if an
event or circumstance arises which would permit a Complete
Servicing Transfer under this Agreement (whether or not the Buyer
exercises its right to terminate the Servicer) by dating and
delivering the Lockbox Transfer Letter with respect to such
Permitted Lockbox, and the Seller and the Servicer hereby
irrevocably authorize the Buyer to date and deliver a Lockbox
Transfer Letter to each Permitted Lockbox Bank; the Seller and the
Servicer have not given and shall not give any instructions to any
Permitted Lockbox Bank inconsistent with the Lockbox Transfer
Letter; and the Seller and the Servicer shall cooperate fully with
the Buyer in effecting any such transfer of control. Neither the
Seller nor the Servicer shall enter into any Lockbox Servicing
Instructions or other lockbox servicing agreement which does not
contain the foregoing provisions and terms, unless such deviation
is consented to by the Affected Parties.
4.10. Servicer Default. A "Servicer Default" shall mean
the occurrence and continuance of one or more of the following
events or conditions:
(a) the Servicer shall fail to remit or fail to cause to
be remitted to the Buyer on any day any Collections or Discount
required to be remitted to the Buyer on such day and, with respect
to failure to remit Collections or Discount, such failure shall
continue for three Business Days after the date on which such
Collections or Discount became due; or
(b) the Servicer shall fail to deposit, or pay or fail
to cause to be deposited or paid when due any other amount due
hereunder and such failure shall continue for three Business Days
after the date when such amount became due; or
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FORM 10-Q
Exhibit 2.1(m) (continued)
(c) any material representation, warranty, certification
or statement made by the Servicer under this Agreement or in any
agreement, certificate, report, appendix, schedule or document
furnished by the Servicer to the Buyer pursuant to or in connection
with this Agreement shall prove to have been false or misleading in
any respect material to this Agreement or the transactions
contemplated hereby as of the time made (including by omission of
material information necessary to make such representation,
warranty, certification or statement not misleading); or
(d) the Servicer (if not the Buyer) shall default or
fail in the performance or observance of any other material
covenant, agreement or duty applicable to it contained herein and
such default or failure shall continue for seven Business Days
after either (i) any Responsible Officer of the Servicer becomes
aware thereof or (ii) notice thereof to such Person by the Buyer;
or
(e) there shall be pending any litigation, investigation
or proceeding, or any material adverse development in any such
litigation shall have occurred, which is likely to materially
adversely affect the financial position or results of operations of
the Servicer or impair the ability of the Servicer to perform its
respective obligations under this Agreement; or
(f) there shall have occurred any event which materially
adversely affects the ability of the Servicer to collect
Receivables or the ability of the Servicer to perform hereunder; or
(g) an Event of Bankruptcy shall occur with respect to
the Servicer.
4.11. Servicer Indemnification of Affected Parties.
(a) The Servicer agrees to indemnify and hold harmless
the Buyer and its assigns (and its respective directors, officers,
employees and agents), from and against any loss (other than any
losses relating to defaults or collectibility of the Receivables),
liability, expense, damage or injury suffered or sustained by
reason of any material breach by the Servicer of any of its
representations, warranties or covenants contained in this
Agreement, including any judgment, award, settlement, reasonable
attorneys fees and other costs or expenses incurred in connection
with the defense of any actual action, proceeding or claim;
provided, however, that the Servicer shall not indemnify the Buyer
and its assigns if such acts or omissions were attributable to
fraud, negligence, breach of fiduciary duty or willful misconduct
by the Buyer.
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FORM 10-Q
Exhibit 2.1(m) (continued)
(b) Promptly upon receipt by the Buyer under this
Section 4.11 of notice of the commencement of any suit, action,
claim, proceeding or governmental investigation against the Buyer,
the Buyer shall, if a claim in respect thereof is to be made
against the Servicer hereunder, notify the Servicer in writing of
the commencement thereof. The Servicer may participate in and
assume the defense of any such suit, action, claim, proceeding or
investigation at its expense, and no settlement thereof shall be
made without the approval of the Servicer and the Buyer. The
approval of the Servicer and the Buyer will not be unreasonably
withheld or delayed. After notice from the Servicer to the Buyer
of its intention to assume the defense thereof with counsel
reasonably satisfactory to the Buyer, and so long as the Servicer
so assumes the defense thereof in a manner reasonably satisfactory
to the Buyer, the Servicer shall not be liable for any legal
expenses of counsel unless there shall be a conflict between the
interests of the Servicer and the Buyer.
(c) Any indemnification pursuant to this Section 4.11
shall be had only from the assets of the Servicer. The provisions
of such indemnity shall run directly to and be enforceable by an
injured party subject to the limitations hereof. The provisions of
this Section 4.11 shall survive the termination of this Agreement.
4.12. Servicer Not to Resign. (a) Subject to Section
4.12(b) hereof, the Servicer shall not resign from the obligations
and duties hereby imposed on it except upon its reasonable
determination that (i) the performance of its duties hereunder is
no longer permissible under applicable law, regulation or order and
(ii) there is no reasonable action which the Servicer could take to
make the performance of its duties hereunder permissible under
applicable law, regulation or order. No such resignation shall
become effective until the Buyer or a successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in
accordance with Section 4.08 hereof. The Buyer shall promptly
notify S&P and Moody's of receipt of the Servicer's notice of
resignation and of the appointment of a successor Servicer.
(b) The Corporation may resign from the obligations and
duties imposed on it as Servicer pursuant to the terms of this
Agreement if (i) a successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with
Section 4.08 hereof, and (ii) if such successor Servicer is not an
Affiliate of the Corporation (x) such successor Servicer shall
agree to establish a Permitted Lockbox and Lockbox Account with a
Permitted Lockbox Bank and comply with the other requirements of
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FORM 10-Q
Exhibit 2.1(m) (continued)
Section 4.09(b) hereof and (y) such successor Servicer shall be
acceptable to Buyer in its reasonable judgment and acceptable to
the Rating Agencies.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. General Representations and Warranties of the Seller.
The Seller, in addition to its other representations and warranties
contained herein or made pursuant hereto, hereby represents and
warrants to the Buyer on and as of the date hereof and on and as of
the date of each Incremental Purchase and each reinvestment
Purchase that:
(a) Organization and Qualification. The Seller is a limited
liability company, validly formed and existing and in good standing
under the Laws of its jurisdiction of formation. The Seller is
duly qualified or authorized to do business as a foreign limited
liability company in good standing in North Carolina and each other
jurisdiction, if any, in which the ownership of its properties or
the nature of its activities (including transactions giving rise to
Receivables), or both, requires it to be so qualified or authorized
or, if not so qualified, the failure to so qualify would not have
a material adverse effect on its financial condition or results of
operations.
(b) Authorization. The Seller has the power and authority to
execute and deliver the Purchase Documents, to make the sales
provided for herein and to perform its obligations hereunder and
thereunder.
(c) Execution and Binding Effect. Each of the Purchase
Documents to which the Seller is a party has been duly and validly
executed and delivered by the Seller and (assuming the due and
valid execution and delivery thereof by the other parties thereto),
constitutes a legal, valid and binding obligation of the Seller
enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or other similar Laws of general application
relating to or affecting the enforcement of creditors, rights or by
general principles of equity, and will vest absolutely and
unconditionally in the Buyer a valid undivided ownership interest
in the Receivables purported to be assigned thereby, subject to no
Liens whatsoever. Upon the filing of the necessary financing
statements under the UCC as in effect in the jurisdiction whose Law
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FORM 10-Q
Exhibit 2.1(m) (continued)
governs the perfection of the Buyer's ownership interest in the
Receivables, the Buyer's ownership interest in the Receivables will
be perfected under Article Nine of such UCC, prior to and
enforceable against all creditors of and purchasers from the Seller
and all other Persons whatsoever (other than the Buyer and its
successors and assigns).
(d) Authorizations and Filings. No authorization, consent,
approval, license, exemption or other action by, and no
registration, qualification, designation, declaration or filing
with, any Official Body is or will be necessary or, in the opinion
of the Seller, advisable in connection with the execution and
delivery by the Seller of the Purchase Documents, the consummation
by the Seller of the transactions herein or therein contemplated or
the performance by the Seller of or the compliance by the Seller
with the terms and conditions hereof or thereof, to ensure the
legality, validity or enforceability hereof or thereof, or to
ensure that the Buyer will have an undivided ownership interest in
and to the Receivables which is perfected and prior to all other
Liens (including competing ownership interests), other than the
filing of financing statements under the UCC in the jurisdiction of
the Seller's Chief Executive office.
(e) Absence of Conflicts. Neither the execution and delivery
by the Seller of the Purchase Documents, nor the consummation by
the Seller of the transactions herein or therein contemplated, nor
the performance by the Seller of or the compliance by the Seller
with the terms and conditions hereof or thereof, will (i) violate
any Law or (ii) conflict with or result in a breach of or a default
under (A) the Operating Agreement of the Seller or (B) any
agreement or instrument, including, without limitation, any and all
indentures, debentures, loans or other agreements to which the
Seller is a party or by which it or any of its properties (now
owned or hereafter acquired) may be subject or bound, which would
have a material adverse effect on the financial position or results
of operations of the Seller or result in rendering any Debt
evidenced thereby due and payable prior to its maturity or result
in the creation or imposition of any Lien pursuant to the terms of
any such instrument or agreement upon any property (now owned or
hereafter acquired) of the Seller. The Seller has not entered into
any agreement with any Obligor prohibiting, restricting or
conditioning the assignment of any portion of the Receivables.
(f) Location of Chief Executive Office, etc. As of the date
hereof: (i) the Seller's Chief Executive Office is located at the
address for notices set forth on the signature page hereof; (ii)
the Seller has only the Subsidiaries and divisions listed on
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FORM 10-Q
Exhibit 2.1(m) (continued)
Exhibit L hereto; (iii) the offices where the Seller keeps all of
its Records are listed on Exhibit L hereto; and (iv) the Seller
has, since its incorporation, operated only under the trade names
identified in Exhibit L hereto, and has not changed its name,
merged or consolidated with any other corporation or been the
subject of any proceeding under Title 11, United States Code
(Bankruptcy).
(g) No Termination Event. No event has occurred and is
continuing and no condition exists which constitutes a Termination
Event or a Potential Termination Event.
(h) Accurate and Complete Disclosure. No information
furnished in writing by the Seller to the Buyer pursuant to or in
connection with this Agreement or any transaction contemplated
hereby is false or misleading in any material respect as of the
date as of which such information was furnished (including by
omission of material information necessary to make such information
not misleading).
(i) No Proceedings. There are no proceedings or
investigations pending, or to the knowledge of the Seller,
threatened, before any Official Body (A) asserting the invalidity
of the Purchase Documents, (B) seeking to prevent the consummation
of any of the transactions contemplated by the Purchase Documents,
or (C) seeking any determination or ruling that might materially
and adversely affect (i) the performance by the Seller or the
Servicer of its obligations under the Purchase Documents or (ii)
the validity or enforceability of the Purchase Documents, the
Contracts or any material amount of the Receivables.
(j) Bulk Sales Act. No transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
(k) Litigation. No injunction, decree or other decision has
been issued or made by any Official Body that prevents, and to the
knowledge of the Seller, no threat by any Person has been made to
attempt to obtain any such decision that would have a material
adverse impact on, the conduct by the Seller of a significant
portion of the Seller's business operations or any portion of its
business operations affecting the Receivables, and no litigation,
investigation or proceeding of the type referred to in Section
6.01(j) exists except as set forth on Schedule 3 of the Disclosure
Schedule.
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FORM 10-Q
Exhibit 2.1(m) (continued)
(l) Margin Regulations. The use of all funds acquired by the
Seller under this Agreement will not conflict with or contravene
any of Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System, as the same may from time to time be
amended, supplemented or otherwise modified.
(m) ERISA. No event or condition is occurring or exists with
respect to any Plan or Multiemployer Plan concerning which the
Seller would be under an obligation to furnish a report to the
Buyer in accordance with Section 6.01(q).
(n) Taxes. The Seller is a newly created entity and as of
the date hereof has not been required to file any income tax
returns.
(o) Creditor Approval. The Seller has obtained from its
creditors, if any, (i) all approvals necessary to sell and assign
the Receivables and (ii) release of any security interests in the
Receivables.
(p) Investment Company. The Seller is not an "investment
company" or a company "controlled by an investment company" within
the meaning of the Investment Company Act of 1940, as amended.
5.02. Representations and Warranties of the Seller With
Respect to Each Sale of Receivables. By selling undivided
ownership interests in Receivables to the Buyer either by
Incremental Purchase or reinvestment Purchase, the Seller
represents and warrants to the Buyer as of the date of such sale of
an Incremental Purchase or reinvestment Purchase (in addition to
its other representations and warranties contained herein or made
pursuant hereto) that:
(a) Purchase Notice. If such sale is a sale of an
Incremental Purchase, all information set forth on the related
Purchase Notice is true and correct as of the date of such
Incremental Purchase.
(b) Assignment. This Agreement vests in the Buyer all the
right, title and interest of the Seller in and to the Purchased
Interest in the Receivables, and the Related Security and
Collections with respect thereto, and constitutes a valid sale of
the Purchased Interest enforceable against all creditors of and
purchasers from the Seller.
(c) No Liens. Each Receivable, together with the related
Contract and all purchase orders and other agreements related to
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FORM 10-Q
Exhibit 2.1(m) (continued)
such Receivable, is owned by the Seller free and clear of any Lien,
except as provided herein, and when the Buyer makes a purchase of
a Purchased Interest in such Receivable it shall have acquired and
shall continue to have maintained an undivided percentage ownership
interest to the extent of its Buyer's Percentage Interest in such
Receivable and in the Related Security and the Collections with
respect thereto free and clear of any Lien, except as provided
herein. The Seller has not and will not have sold, pledged,
assigned, transferred or subjected to a Lien any of the
Receivables, other than (i) the assignment of a Purchased Interest
therein to the Buyer in accordance with the terms of this
Agreement.
(d) Filings. On or prior to each Purchase and each
recomputation of the Purchased Interest, all financing statements
and other documents required to be recorded or filed in order to
perfect and protect the Purchased Interest against all creditors of
and purchasers from the seller and all other Persons whatsoever
will have been duly filed in each filing office necessary for such
purpose and all filing fees and taxes, if any, payable in
connection with such filings shall have been paid in full.
(e) Credit and Collection Policy. The Seller has complied in
all material respects with the Credit and Collection Policy in
regard to each Receivable and related Contract.
(f) Permitted Lockbox Banks and Lockbox Accounts. The names
and addresses of all Permitted Lockbox Banks, together with the
numbers of all Lockbox Accounts at such Permitted Lockbox Banks and
the addresses of all related Permitted Lockboxes, are specified in
Schedule 4 of the Disclosure Schedule (or such other Permitted
Lockbox Banks, Lockbox Accounts and/or Permitted Lockboxes as have
been notified by the Servicer to the Buyer and have been consented
to by the Buyer in accordance with Section 6.02(f)).
(g) Nature of Receivables. Each Receivable is, or will be,
an account receivable or other obligation representing all or part
of the sales price of merchandise, insurance and, services within
the meaning of Section 3(c)(5)(A) of the Investment Company Act of
1940, as amended from time to time, and a purchase of each
Receivable with the proceeds of Commercial Paper would constitute
a "current transaction" within the meaning of Section 3(a)(3) of
the Securities Act of 1933, as amended from time to time.
(h) Eligible Receivables. Each Receivable included in the
calculation of Net Receivables Balance conforms to the definition
of "Eligible Receivables" set forth in Section 1.01 hereof, without
regard to clause (i) of such definition.
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FORM 10-Q
Exhibit 2.1(m) (continued)
5.03. General Representations and Warranties of the
Corporation. Cone Mills Corporation, as the initial Servicer and
in its individual capacity, in addition to its other
representations and warranties contained herein or made pursuant
hereto, hereby represents and warrants to the Buyer on and as of
the date hereof and on and as of the date of each Incremental
Purchase and each reinvestment Purchase that:
(a) Organization and Qualification. The Corporation is a
corporation duly organized, validly existing and in good standing
under the Laws of its jurisdiction of incorporation. The
Corporation is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which the
ownership of its properties or the nature of its activities
(including transactions giving rise to Receivables), or both,
requires it to be so qualified or, if not so qualified, the failure
to so qualify would not have a material adverse effect on its
financial condition or results of operations.
(b) Authorization. The Corporation has the corporate power
and authority to execute and deliver the Purchase Documents to
which it is a party and to perform its obligations hereunder and
thereunder.
(c) Execution and Binding Effect. Each of the Purchase
Documents has been duly and validly executed and delivered by the
Corporation and (assuming the due and valid execution and delivery
thereof by the other parties to such documents), constitutes a
legal, valid and binding obligation of the Corporation enforceable
in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or other
similar Laws of general application relating to or affecting the
enforcement of creditors' rights or by general principles of
equity.
(d) Authorizations and Filings. No authorization, consent,
approval, license, exemption or other action by, and no
registration, qualification, designation, declaration or filing
with, any Official Body is or will be necessary or, in the opinion
of the Corporation, advisable in connection with the execution and
delivery by the Corporation of the Purchase Documents, the
consummation by the Corporation of the transactions herein or
therein contemplated or the performance by the Corporation of or
the compliance by the Corporation with the terms and conditions
hereof or thereof, to ensure the legality, validity or
enforceability hereof or thereof.
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FORM 10-Q
Exhibit 2.1(m) (continued)
(e) Absence of Conflicts. Neither the execution and delivery
by the Corporation of the Purchase Documents, nor the consummation
by the Corporation of the transactions herein or therein
contemplated, nor the performance by the Corporation of or the
compliance by the Corporation with the terms and conditions hereof
or thereof, will (i) violate any Law or (ii) conflict with or
result in a breach of or a default under (A) the Articles of
Incorporation or By-laws of the Corporation or (B) any agreement or
instrument, including, without limitation, any and all indentures,
debentures, loans or other agreements to which the Corporation is
a party or by which it or any of its properties (now owned or
hereafter acquired) may be subject or bound, which would have a
material adverse effect on the financial position or results of
operations of the Corporation or result in rendering any Debt
evidenced thereby due and payable prior to its maturity or result
in the creation or imposition of any Lien pursuant to the terms of
any such instrument or agreement upon any property (now owned or
hereafter acquired) of the Corporation. The Corporation has not
entered into any agreement with any Obligor prohibiting,
restricting or conditioning the assignment of any portion of the
Receivables.
(f) Location of Chief Executive Office, etc. As of the date
hereof: (i) the Corporation's Chief Executive Office is located at
the address for notices set forth on the signature page hereof;
(ii) the Corporation has only the Subsidiaries and divisions listed
on Exhibit L hereto; (iii) the offices where the Corporation keeps
all of its Records are listed on Exhibit L hereto; and (iv) the
Corporation has, within the last 5 years, operated only under the
trade names identified in Exhibit L hereto, and, within the last 5
years, has not changed its name, merged or consolidated with any
other corporation or been the subject of any proceeding under Title
11, United States Code (Bankruptcy), except as disclosed in Exhibit
L hereto.
(g) No Termination Event. No event has occurred and is
continuing and no condition exists which constitutes a Termination
Event or a Potential Termination Event.
(h) Accurate and Complete Disclosure. No information
furnished in writing by the Corporation to the Buyer pursuant to or
in connection with this Agreement, the Purchase Agreement or any
transaction contemplated hereby or thereby is false or misleading
in any material respect as of the date as of which such information
was furnished (including by omission of material information
necessary to make such information not misleading).
Page 135
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FORM 10-Q
Exhibit 2.1(m) (continued)
(i) No Proceedings. There are no proceedings or
investigations pending, or to the knowledge of the Corporation,
threatened, before any Official Body (A) asserting the invalidity
of the Purchase Documents, (B) seeking to prevent the consummation
of any of the transactions contemplated by the Purchase Documents,
or (C) seeking any determination or ruling that might materially
and adversely affect (i) the performance by the Corporation or the
Seller of its obligations under the Purchase Documents or (ii) the
validity or enforceability of the Purchase Documents, the Contracts
or any material amount of the Receivables.
(j) Bulk Sales Act. No transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
(k) Financial Condition. (x) The consolidated balance sheet
of the Corporation and its Consolidated Subsidiaries as at
December 29, 1996 and the related statements of operations and cash
flows of the Corporation and its Consolidated Subsidiaries for the
Fiscal Year then ended, certified by McGladrey & Pullen LLP,
independent accountants, copies of which have been furnished to the
Buyer, fairly present the consolidated financial position of the
Corporation and its Consolidated Subsidiaries as at such date and
the consolidated results of the operations of and changes in
consolidated cash flows of the Corporation and its Consolidated
Subsidiaries for the period ended on such date, all in accordance
with GAAP, and (y) since December 29, 1996 there has been no
material adverse change in any such financial condition or results
of operations or in the Corporation's ability to perform its
obligations under the Purchase Documents, except as set forth on
Schedule 2 of the Disclosure Schedule.
(l) Litigation. No injunction, decree or other decision has
been issued or made by any Official Body that prevents, and to the
knowledge of the Corporation, no threat by any Person has been made
to attempt to obtain any such decision that would have a material
adverse impact on, the conduct by the Corporation of a significant
portion of the Corporation's business operations or any portion of
its business operations affecting the Receivables, and no
litigation, investigation or proceeding of the type referred to in
Section 6.01(j) exists except as set forth on Schedule 3 of the
Disclosure Schedule.
(m) Margin Regulations. The use of all funds acquired by the
Corporation under this Agreement will not conflict with or
contravene any of Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, as the same may from time
to time be amended, supplemented or otherwise modified.
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FORM 10-Q
Exhibit 2.1(m) (continued)
(n) ERISA. No event or condition is occurring or exists with
respect to any Plan or Multiemployer Plan concerning which the
Corporation would be under an obligation to furnish a report to the
Buyer in accordance with Section 6.01(q).
(o) Taxes. All United States Federal income tax returns of
the Corporation and its Consolidated Subsidiaries have been
examined and closed through the Fiscal Year ended January 2, 1994.
The Corporation and its Consolidated 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 Corporation or any of its Consolidated
Subsidiaries. The charges, accruals and reserves on the books of
the Corporation and its Consolidated Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of the
Corporation, adequate.
ARTICLE VI
COVENANTS
6.01. Affirmative Covenants. In addition to its other
covenants contained herein or made pursuant hereto, the Seller and
the Corporation as Servicer and the Corporation in its individual
capacity, each covenants to the Buyer as follows:
(a) Notice of Termination Event. Promptly upon becoming
aware of any Termination Event or Potential Termination Event, the
Seller shall give the Buyer notice thereof, together with a written
statement of a Responsible Officer setting forth the details
thereof and any action with respect thereto taken or contemplated
to be taken by the Seller.
(b) Notice of Material Adverse Change. Promptly upon
becoming aware thereof, the Seller or the Corporation shall give
the Buyer notice of any material adverse change in the business,
operations or financial condition of the Seller or the Corporation,
as the case may be, which reasonably could affect adversely the
collectibility of the Receivables or the ability to service such
Receivables; in order to verify compliance with this Section
6.01(b) and otherwise verify compliance with this Agreement, the
Corporation shall mail the following to the Buyer:
(i) as soon as practicable and in any event within 45
days following the close of each fiscal quarter, excluding the
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FORM 10-Q
Exhibit 2.1(m) (continued)
last fiscal quarter, of each Fiscal Year during the term of
this Agreement, an unaudited consolidated balance sheet of the
Corporation as at the end of such quarter and unaudited
consolidated statements of income and cash flows of the
Corporation for such quarter and for the fiscal year through
such quarter, setting forth in comparative form the
corresponding figures for the corresponding quarter of the
preceding fiscal year, together with notes thereto as are
required to be included therein in accordance with GAAP or
applicable Securities and Exchange Commission requirements,
all in reasonable detail and certified by the chief financial
officer of the Corporation, subject to adjustments of the type
which would occur as a result of a year-end audit, as having
been prepared in accordance with GAAP;
(ii) as soon as practicable and in any event within 90
days after the close of each Fiscal Year during the term of
this Agreement, a consolidated balance sheet of the
Corporation as at the close of such fiscal year and
consolidated statements of income and cash flows of the
Corporation for such fiscal year, setting forth in comparative
form the corresponding figures for the preceding fiscal year,
all in reasonable detail and certified (with respect to the
consolidated financial statements) by independent certified
public accountants of recognized standing selected by the
Corporation and reasonably satisfactory to the Buyer (which
shall include McGladrey & Pullen LLP), whose certificate or
opinion accompanying such financial statements shall not
contain any qualification, exception or scope limitation not
satisfactory to the Buyer; and
(iii) together with the financial statements required in
clauses (i) and (ii) above, a certificate of the chief
financial officer of the Corporation stating that no
Termination Event or Potential Termination Event exists, or if
any Termination Event or Potential Termination Event exists,
stating the nature and status thereof.
(c) Preservation of Existence; No Changes of Member or
Operating Agreement. The Corporation shall preserve and maintain
its corporate existence and the Seller shall preserve and maintain
its status as a limited liability company and each will maintain
its rights, franchises and privileges in the jurisdiction of its
organization, and qualify and remain qualified in good standing as
a foreign corporation or limited liability company in each
jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification would
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<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
materially adversely affect (i) the interests of the Buyer
hereunder or (ii) the ability of the Seller, the Servicer or the
Corporation to perform their respective obligations under the
Purchase Documents or under the Servicing Agreement. The
Corporation will not resign as the Member of the Seller and will
not assign its interest in the Seller or any portion thereof to any
other entity without the prior written consent of the Buyer which
consent shall not be unreasonably withheld. Neither the Seller nor
the Corporation shall take any action seeking to amend the
Operating Agreement or any of its rights, interests or obligations
thereunder without the prior written consent of the Buyer which
consent shall not be unreasonably withheld.
(d) Compliance with Laws. The Seller and the Corporation
shall comply in all material respects with all Laws applicable to
it, its business and properties, and all Receivables related to the
Purchased Interest.
(e) Enforceability Obligations. The Seller and the
Corporation shall each take such actions as are reasonable and
within its power to ensure that, with respect to each Receivable,
the obligation of any related Obligor to pay the unpaid balance of
such Receivable in accordance with the terms of the related
Contract remains legal, valid, binding and enforceable against such
Obligor except as otherwise permitted by Section 4.07(b) hereof.
(f) Books and Records. The Servicer shall, to the extent
practicable, maintain and implement administrative and operating
procedures (including, without limitation, the ability to recreate
Records evidencing the Receivables in the event of the destruction
of the originals thereof), and keep and maintain all documents,
books, Records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without
limitation, Records adequate to permit the identification of all
Related Security and Collections and adjustments to each existing
Receivable).
(g) Fulfillment of Obligations. The Seller and the Servicer
will each duly observe and perform, or cause to be observed or
performed, all material obligations and undertakings on its part to
be observed and performed under or in connection with the
Receivables, will duly observe and perform all material provisions,
covenants and other promises required to be observed by it under
the Contracts related to the Receivables, will do nothing to impair
the rights, title and interest of the Buyer in and to the Purchased
Interest and will pay or cause to be paid when due any taxes,
including without limitation any sales tax, excise tax or other
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FORM 10-Q
Exhibit 2.1(m) (continued)
similar tax or charge, payable in connection with the Receivables
and their creation and satisfaction.
(h) Obligor List. The Seller shall at all times maintain (or
cause the Servicer to maintain) a current list (which may be stored
on magnetic tapes or disks) of all Obligors under Contracts related
to Receivables, including the name, address, telephone number and
account number of each such Obligor. A list of all Obligors under
Contracts related to Receivables as of the Closing Date including
the name, address, telephone number and account number of such
Obligors shall be provided to the Buyer within five Business Days
of the Closing Date. In addition, the list shall be updated as
provided in Section 2.14(c) and, the Seller shall deliver or cause
to be delivered a copy of such list to the Buyer as soon as
practicable following the Buyer's request.
(i) Copies of Reports, Filings, Opinions, etc. The Seller
and the Corporation shall furnish to the Buyer, as soon as
practicable after the issuance, sending or filing thereof, copies
of all proxy statements, financial statements, reports and other
communications, if any, which the Seller or the Corporation sends
to its security holders, and copies of all regular, periodic and
special reports, if any, which the Seller or the Corporation files
with the Securities and Exchange Commission or with any securities
exchange on Forms 10-K, 10-Q, 8-K or any successor forms thereto.
(j) Litigation. As soon as possible, and in any event within
ten Business Days of the Seller's or the Corporation's knowledge
thereof, the Seller, or the Corporation, as the case may be, shall
give the Buyer notice of (i) any litigation, investigation or
proceeding against such entity which may exist at any time which,
in the reasonable judgment of the Seller or the Corporation, could
have a material adverse effect on the financial condition or
results of operations of the Seller or the Corporation or impair
the ability of the Seller, the Servicer or the Corporation to
perform their respective obligations under this Agreement, under
the Purchase Agreement or under the Servicing Agreement and (ii)
any material adverse development in any such previously disclosed
litigation.
(k) Total Systems Failure. The Servicer shall promptly
notify the Buyer of any total systems failure and shall advise the
Buyer of the estimated time required to remedy such total systems
failure and of the estimated date on which a Monthly Report can be
delivered until a total systems failure is remedied, the Servicer
(i) will furnish to the Buyer such periodic status reports and
other information relating to such total systems failure as the
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FORM 10-Q
Exhibit 2.1(m) (continued)
Buyer may reasonably request and (ii) will promptly notify the
Buyer if the Servicer believes that such total systems failure
cannot be remedied by the estimated date, which notice shall
include a description of the circumstances which gave rise to such
delay, the action proposed to be taken in response thereto, and a
revised estimate of the date on which a Monthly Report can be
delivered. The Servicer shall promptly notify the Buyer when a
total systems failure has been remedied.
(l) Notice of Relocation. The Seller and the Corporation,
respectively, shall give the Buyer 45 days' prior written notice of
any relocation of its respective Chief Executive Office if, as a
result of such relocation, the applicable provisions of the UCC of
any applicable jurisdiction or other applicable Laws would require
the filing of any amendment of any previously filed financing
statement or continuation statement or of any new financing
statement. The Seller and the Corporation will at all times
maintain its Chief Executive Office within a jurisdiction in the
United States in which Article Nine of the UCC (1972 or later
revision) is in effect as of the date hereof or the date of any
such relocation.
(m) Further Information. The Seller and the Corporation
shall furnish or cause to be furnished to the Buyer such other
information as promptly as practicable, and in such form and
detail, as the Buyer may reasonably request.
(n) Treatment of Purchase. For accounting purposes, the
Seller shall treat each Incremental Purchase and each reinvestment
Purchase made hereunder as a sale of a Purchased Interest in the
underlying Receivables. The Seller shall also maintain its records
and books of account in a manner which clearly reflects each such
sale of a Purchased Interest to the Buyer and the Buyer's
Investment therein.
(o) Fees, Taxes and Expenses. The Seller shall pay all
filing fees, stamp taxes, other taxes (other than taxes imposed
directly on the overall net income of the Buyer) and expenses,
including the fees and expenses set forth in Section 8.01 hereof,
if any, which may be incurred on account of or arise out of this
Agreement and the documents and transactions entered into pursuant
to this Agreement.
(p) Administrative and Operating Procedures. The Servicer
shall maintain and implement administrative and operating
procedures adequate to permit the identification of the Receivables
and all collections and adjustments attributable thereto and shall
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FORM 10-Q
Exhibit 2.1(m) (continued)
comply in all material respects with the Credit and Collection
Policy in regard to each Receivable and related Contract.
(q) ERISA Events.
(i) Promptly on becoming aware of the occurrence of any
Event of Termination which together with all other Events of
Termination occurring within the prior 12 months involve a
payment of money by or a potential aggregate liability of the
Corporation or any ERISA Affiliate or any combination of such
entities in excess of $5,000,000, the Corporation shall give
the Buyer a written notice specifying the nature thereof, what
action the Corporation or any ERISA Affiliate has taken and,
when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with
respect thereto.
(ii) Promptly upon receipt thereof, the Corporation shall
furnish to the Buyer copies of (i) all notices received by the
Corporation or any ERISA Affiliate of the PBGC's intent to
terminate any Plan or to have a trustee appointed to
administer any Plan; (ii) all notices received by the
Corporation or any ERISA Affiliate from the sponsor of a
Multiemployer Plan pursuant to Section 4202 of ERISA involving
a withdrawal liability in excess of $5,000,000; and (iii) all
funding waiver requests filed by the Corporation or any ERISA
Affiliate with the Internal Revenue Service with respect to
any Plan, the accrued benefits of which exceed the present
value of the plan assets as of the date the waiver request is
filed by more than $5,000,000, and all communications received
by the Corporation or any ERISA Affiliate from the Internal
Revenue Service with respect to any such funding waiver
request.
(r) Collections. The Servicer shall instruct all Obligors to
cause all Collections to be mailed to a Permitted Lockbox excluding
Collections of Defaulted Receivables or Receivables which are the
subject of a Dispute or are collected directly by the Seller or the
Servicer to assure payment in accordance with the Credit and
Collections Policy, provided such Collections are mailed to the
Seller or an agent of the Seller and deposited in a Lockbox Bank
within two Business Days of receipt.
(s) Insurance. The Corporation shall, and shall cause each
of its Consolidated Subsidiaries to maintain insurance with
financially sound and reputable insurers on all property, in such
amount and covering such risks, as are adequate and reasonable for
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FORM 10-Q
Exhibit 2.1(m) (continued)
the businesses in which the Corporation and its Consolidated
Subsidiaries are engaged.
(t) Ratings. The Corporation shall give the Buyer prompt
notice of any change in the ratings of the Corporation's commercial
paper or long term debt securities by S&P or Moody's.
(u) Separate Existence. The Seller and the Corporation each
agree to maintain its separate legal identity. In addition, the
Seller shall:
(i) Maintain in full effect its existence, rights and
franchises as a limited liability company under the laws of
the state of its formation and will obtain and preserve its
qualification or authorization to do business in each
jurisdiction in which such qualification or authorization is
or shall be necessary to protect the validity and
enforceability of this Agreement and each other instrument or
agreement necessary or appropriate to proper administration
hereof and permit and effectuate the transactions contemplated
hereby.
(ii) Maintain its own deposit account or accounts,
separate from those of any of its Affiliates, with commercial
banking institutions. The funds of the Seller will not be
diverted to any other Person or for other than the use of the
Seller and, except as may be expressly permitted by this
Agreement, the funds of the Seller shall not be commingled
with those of any of its Affiliates.
(iii) To the extent that the Seller contracts or does
business with vendors or service providers where the goods and
services provided are partially for the benefit of any other
Person, the costs incurred in so doing shall be fairly
allocated to or among the Seller and such entities for whose
benefit the goods and services are provided, and the Seller
and each such entity shall bear its fair share of such costs.
All material transactions between the Seller and any of its
Affiliates shall be only on an arm's-length basis.
(iv) Maintain a principal executive and administrative
office through which its business is conducted and a telephone
number separate from those of its member or members and
Affiliates.
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FORM 10-Q
Exhibit 2.1(m) (continued)
(v) Conduct its affairs strictly in accordance with its
Operating Agreement and observe all necessary, appropriate and
customary formalities of a limited liability company,
including, but not limited to keeping separate and accurate
minutes of any acts taken by the Seller, maintaining accurate
and separate books, records and accounts, including, but not
limited to, intercompany transaction accounts.
(vi) Ensure that decisions with respect to its business
and daily operations shall be independently made by the Seller
(although the officer making any particular decision may also
be an employee, officer or director of an Affiliate of the
Seller) and shall not be dictated by an Affiliate of the
Seller.
(vii) Act solely in its own name and through its member
or members and agents, and no Affiliate of the Seller shall be
appointed to act as its agent, except as expressly
contemplated by this Agreement and the Operating Agreement.
The Seller shall use its own stationery.
(viii) Ensure that no Affiliate of the Seller shall
advance funds to the Seller, other than (i) capital
contributions from the Corporation, made in the Corporation's
sole discretion to enable the Seller to pay the purchase price
of Receivables or (ii) as is otherwise provided herein or in
the Purchase Agreement, and no Affiliate of the Seller will
otherwise supply funds to, or guaranty debts of, the Seller;
provided, however, that an Affiliate of the Seller may provide
funds to the Seller in connection with the capitalization of
the Seller.
(ix) Other than organizational expenses and as expressly
provided herein, pay all expenses, indebtedness and other
obligations incurred by it.
(x) Not enter into any guaranty, or otherwise become
liable, with respect to any obligation of any of its
Affiliates.
(xi) Ensure that any financial reports required of the
Seller shall comply with generally accepted accounting
principles and shall be issued separately from, but may be
consolidated with, any reports prepared for any of its
Affiliates.
(xii) Ensure that at all times it is adequately
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FORM 10-Q
Exhibit 2.1(m) (continued)
capitalized to engage in the transactions contemplated in the
Operating Agreement, the Purchase Agreement and in the Seller's
Certificate attached as Exhibit C to the Purchase Agreement.
(v) Support of Obligations. The Corporation shall take
whatever actions are necessary to cause the Seller to fulfill all
of its obligations to the Buyer hereunder.
(w) Confirming Resolution. The Board of Directors of the
Corporation shall, not later than 45 days after the Closing Date,
adopt a resolution confirming the Corporation's right and power to
act as the sole member of the Seller and the authorization of the
officers of the Corporation to execute documents on behalf of the
Corporation as member of the Seller.
6.02. Negative Covenants. The Seller and the Corporation, as
Servicer and in its individual capacity, each covenants that it
will not, without the prior written consent of the Buyer which the
Buyer agrees will not be unreasonably withheld:
(a) Statement for and Treatment of the Sales. Prepare any
financial statements for financial accounting or reporting purposes
which shall account for the transactions contemplated hereby in any
manner other than as a sale of the Purchased Interest to the Buyer.
(b) No Rescissions or Modifications. Rescind or cancel any
Receivable or related Contract or modify any terms, or provisions
thereof or grant any Dilution Factors to an Obligor, except in
accordance with the Credit and Collection Policy or otherwise with
the prior written consent of the Buyer.
(c) No Liens. Cause any of the Receivables or related
Contracts, or any inventory or goods the sale of which may give
rise to a Receivable, or any Permitted Lockbox or Lockbox Account
or any right to receive any payments received therein or deposited
thereto, to be sold, pledged, assigned or transferred or to be
subject to a Lien, other than the sale and assignment of the
Purchased Interest therein to the Buyer and the Liens created in
connection with the transactions contemplated by this Agreement;
provided, that the Seller or the Corporation may cause inventory,
the sale of which may give rise to a Receivable, to be subject to
a Lien if (i) the security agreement, related financing statements
and any other related documents specifically exclude from such Lien
the proceeds of such inventory and (ii) the Buyer has reviewed such
security agreement, financing statements and related documents and
found such documents to be reasonably satisfactory to exclude from
such Lien the proceeds of any such inventory.
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FORM 10-Q
Exhibit 2.1(m) (continued)
(d) Consolidations, Mergers and Sales of Assets. (i)
Consolidate or merge with or into any other Person or (ii) sell,
lease or otherwise transfer all or substantially all of its assets
to any other Person; provided that the Seller or the Corporation
may merge with another Person if (A) the Seller or the Corporation,
respectively, is the entity surviving such merger and (B)
immediately after and giving effect to such merger, no Termination
Event or Potential Termination Event shall have occurred and be
continuing.
(e) No Changes. Make any change in the character of its
business or in the Credit and Collection Policy, which change
would, in either case, impair the collectibility of any Receivable,
or make any material change in the Credit and Collection Policy
which would impair the collectibility of any Receivable or would
have a material adverse effect on the Seller or the Corporation
without prior written notification to and consent of the Buyer, or
change its name, identity or structure in any manner which would
make any financing statement or continuation statement filed in
connection with this Agreement or the transactions contemplated
hereby seriously misleading within the meaning of Section 9-402(7)
of the UCC of any applicable jurisdiction or other applicable Laws
unless it shall have given the Buyer at least 45 days' prior
written notice thereof and unless prior thereto it shall have
caused such financing statement or continuation statement to be
amended or a new financing statement to be filed such that such
financing statement or continuation statement would not be
seriously misleading.
(f) Change in Payments or Deposits of Payments. Add or
terminate any Person as a Permitted Lockbox Bank from those Persons
listed in Schedule 4 of the Disclosure Schedule, make, or permit
any change in the location of any Permitted Lockbox or the location
or account number of any Lockbox Account, or make any change in the
instructions, to its Obligors regarding payments to be made to the
Seller or payments to be made to any Permitted Lockbox.
(g) ERISA Matters. Permit any event or condition which is
described in any of clauses (i) through (vi), clause (viii) or
clause (x) of the definition of Event of Termination to occur or
exist with respect to any Plan or Multiemployer Plan if such event
or condition, together with all other events or conditions
described in the definition of Event of Termination occurring
within the prior 12 months involve the payment of money by or an
incurrence of liability of the Corporation or any ERISA Affiliate
in an amount in excess of $10,000,000.
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FORM 10-Q
Exhibit 2.1(m) (continued)
ARTICLE VII
TERMINATION
7.01. Termination Events. A "Termination Event" shall mean
the occurrence and continuance of one or more of the following
events or conditions:
(a) either the Seller or Servicer, as the case may be, shall
fail to remit or fail to cause to be remitted to the Buyer on any
day any Collections or other amounts required to be remitted to the
Buyer on such day; or
(b) the Seller shall fail to deposit, or pay or fail to cause
to be deposited or paid when due any other amount due hereunder; or
(c) any representation, warranty, certification or statement
made by the Seller or the Corporation under this Agreement or in
any agreement, certificate, report, appendix, schedule or document
furnished by the Seller or the Corporation to the Buyer pursuant to
or in connection with this Agreement shall prove to have been false
or misleading in any respect material to this Agreement or the
transactions contemplated hereby as of the time made or deemed
made (including by omission of material information necessary to
make such representation, warranty, certification or statement not
misleading); or
(d) the Seller or the Corporation shall fail to obtain the
prior consent of the Buyer to any action or provision as to which
such consent is required by the terms of this Agreement; or
(e) the Seller, the Servicer (if not the Buyer) or the
Corporation shall default or fail in the performance or observance
of any other covenant, agreement or duty applicable to it contained
herein and such default or failure shall continue for seven
Business Days after either (i) any Responsible officer of the
Seller, the Servicer or the Corporation becomes aware thereof or
(ii) notice thereof to such Person by the Buyer; or
(f) the Corporation or any of its Consolidated Subsidiaries
shall fail to pay any Debt in excess of $5,000,000 of the
Corporation or any of its Consolidated Subsidiaries, as the case
may be, or any interest or premium on such Debt, in either case,
when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt; or any other default
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FORM 10-Q
Exhibit 2.1(m) (continued)
under any agreement or instrument relating to any such Debt or any
other event, shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or instrument if
the effect of such default or event is to accelerate, or to permit
the acceleration of, the maturity of such Debt; or any such Debt
shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled required prepayment) prior to
the stated maturity thereof; or
(g) the average of the Default Ratio, computed for each of
the three immediately preceding months, shall exceed 5.5%; or the
average of the Charge-Off Ratio, computed for each of the three
immediately preceding months, shall exceed .75%; or the average of
the Dilution Ratio, computed for each of the three immediately
preceding months, shall exceed 4.5%; or
(h) a Permitted Lockbox Bank shall default or fail in the
performance or observance of any agreement or duty applicable to it
in respect of the Permitted Lockbox or the Lockbox Servicing
Instructions executed by the Seller or the Servicer or the Seller
or Servicer shall default or fail in the performance or observance
of any covenant, agreement or duty set forth in Section 4.09 hereof
and such default or failure shall continue for two Business Days
after notice thereof to such Permitted Lockbox Bank and within such
period another Permitted Lockbox with another Permitted Lockbox
Bank is not established by the Servicer, if so requested by the
Buyer; or
(i) there shall be pending any litigation, investigation or
proceeding, or any material adverse development in any such
litigation shall have occurred, which the Seller or the Corporation
is required to disclose pursuant to Section 6.01(j) hereof, which
in the opinion of the Buyer is likely to materially adversely
affect the financial position or results of operations of the
Seller or any Affiliate thereof or impair the ability of the Seller
or the Servicer to perform its respective obligations under this
Agreement or under the Servicing Agreement; or
(j) there shall have occurred any event which materially
adversely affects the collectibility of a material amount of the
Receivables or there shall have occurred any other event which
materially adversely affects the ability of the Servicer to collect
Receivables or the ability of the Servicer to perform hereunder or
the warranty in Section 5.03(k)(z) hereof shall not be true at any
time; or
(k) an Event of Bankruptcy shall occur with respect to the
Seller or the Corporation; or
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FORM 10-Q
Exhibit 2.1(m) (continued)
(l) the Buyer's Percentage Interest shall at any time exceed
100% (but for the limitation set forth in the first sentence of the
second paragraph of the definition of such term) and shall
continue to exceed 100% for five calendar days; or
(m) 60 days following the date on which (i) the Securities
and Exchange Commission, any banking regulatory authority or any
other Official Body having jurisdiction over J.P. Morgan & Co.
Incorporated ("JPM") or any of its subsidiaries, shall require the
consolidation of the assets and liabilities of the Buyer on the
balance sheet of JPM or any of its subsidiaries (including, without
limitation, Morgan Guaranty Trust Company of New York) or shall
require that capital be maintained with respect thereto under any
capital requirements as if such assets were owned by JPM or any of
its subsidiaries, (ii) the independent auditors for JPM shall have
advised JPM or any of its subsidiaries in writing that in their
opinion such consolidation is required by GAAP or applicable Law,
rule or regulations, (iii) any Affected Party shall determine that
any arrangement or transaction contemplated by this Agreement, the
Purchase Agreement, the Credit Agreement, the Security Agreement or
the Letter of Credit Reimbursement Agreement will impose an adverse
regulatory impact on such Affected Party, including without
limitation, any Transaction Cost described in Section 8.02 hereof;
or (iv) the Buyer shall determine that the Buyer may be required to
register as an investment company under the Investment Company Act
of 1940, as amended;
(n) the unsecured long-term debt rating of the Corporation
shall be downgraded below BB or Ba2 by S&P or Moody's,
respectively;
(o) 100% of the Seller's capital stock is not owned by the
Corporation; or
(p) the occurrence of a Servicing Default.
7.02. Consequences of a Termination Event.
(a) If a Termination Event specified in Section 7.01 hereof
shall occur and be continuing, the Buyer may, by notice to the
Seller and the Servicer (a "Notice of Termination"), terminate its
obligation to purchase any interest in any Receivables (including
by reinvestment) hereunder and declare all outstanding Tranche
Periods to be ended; provided that, in the case of a Termination
Event under Section 7.01(k) hereof, such obligation of the Buyer
hereunder shall be automatically terminated without any action on
the part of the Buyer and all outstanding Tranche Periods shall be
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FORM 10-Q
Exhibit 2.1(m) (continued)
ended. Any such termination shall reduce the Maximum Net
Investment in effect from time to time thereafter to the amount of
the aggregate Net Investment at such time and the Buyer may,
pursuant to Section 2.06(d) hereof and in any case other than a
termination due to a Termination Event described in Section 7.01(m)
hereof, declare the Tranche Rates applicable to the Net Investment
to be the Base Rate plus 1% per annum. The Buyer shall give S&P
and Moody's prompt notice of the Buyer's delivery of a Notice of
Termination to the Seller and the Servicer; provided, however, that
failure to give such notice shall not affect the effectiveness of,
or the rights of the Buyer resulting from the delivery of,such
Notice of Termination.
(b) Upon any termination of the Buyer's obligations pursuant
to this Section 7.02, the Buyer shall have, in addition to all
rights and remedies under this Agreement or otherwise, all other
rights and remedies provided under the UCC of the applicable
jurisdiction and under other applicable Laws, which rights shall be
cumulative.
(c) The parties hereto acknowledge that this Agreement is,
and is intended to be, a contract to extend financial
accommodations to the Seller within the meaning of Section
365(e)(2)(B) of the Federal Bankruptcy Code (11 U.S.C.
362(e)(2)(B)) (or any amended or successor provision thereof or any
amended or successor code).
ARTICLE VIII
MISCELLANEOUS
8.01. Expenses. The Seller agrees, upon receipt of a written
invoice, to pay or cause to be paid, and to save the, Buyer and the
Referral Agent harmless against liability for the payment of, all
reasonable out-of-pocket expenses (including, without limitation,
attorneys', accountant's and other third parties' fees and
expenses, any filing fees and expenses incurred by officers or
employees of tho Buyer, but excluding salaries and similar overhead
costs of the Buyer and the Referral Agent which are incurred
notwithstanding the execution and performance of this Agreement)
incurred by or on behalf of the Buyer and the Referral Agent (i) in
connection with the negotiation, execution, delivery and
preparation of the Purchase Documents and the transactions
contemplated by or undertaken pursuant to or in connection herewith
or therewith (including, without limitation, the perfection or
protection of the Purchased Interest in the Receivables) and (ii)
from time to time (a) relating to any requested amendments, waivers
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FORM 10-Q
Exhibit 2.1(m) (continued)
or consents under the Purchase Documents, (b) arising in connection
with the Buyer's or its agent's enforcement or preservation of
rights (including, without limitation, the perfection and
protection of the Purchased Interest in the Receivables) under the
Purchase Documents, or (c) arising in connection with any audit,
dispute, disagreement, litigation or preparation for litigation
involving the Purchase Documents, which, including all amounts
payable under Section 8.02 hereof, shall be referred to in this
Agreement as "Transaction Costs".
8.02. Indemnity for Taxes, Reserves and Expenses.
(a) If after the date hereof, the adoption of any Law or bank
regulatory guideline or any amendment or change in the
interpretation of any existing or future Law or bank regulatory
guideline by any Official Body charged with the administration,
interpretation or application thereof, or the compliance with any
directive of any Official Body (in the case of any bank regulatory
guideline, whether or not having the force of Law):
(i) shall subject any Affected Party and any permitted
assigns and participants (collectively, the "Indemnified
Parties") to any tax, duty or other charge with respect to the
Purchase Documents, the Purchased Interest, the Receivables or
payments of amounts due thereunder, or shall change the basis
of taxation of payments to any Indemnified Party of amounts
payable in respect of the Purchase Documents, the Purchased
Interest, the Receivables or payments of amounts due
thereunder or its obligation to advance funds in respect of
the Purchase Documents, the Purchased Interest or the
Receivables (except for changes in the rate of general
corporate, franchise, net income or other income tax imposed
on such Indemnified Party by the jurisdiction in which such
Indemnified Party's principal executive office is located); or
(ii) shall impose, modify or deem applicable,any
reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the Board
of Governors of the Federal Reserve System) against assets of,
deposits with or for the account of, or credit extended by,
any Indemnified Party or shall impose on any Indemnified Party
or on the United States market for certificates of deposit or
the London interbank market any other condition affecting the
Purchase Documents, the Purchased Interest, the Receivables or
payments of amounts due thereunder or its obligation to
advance funds in respect of the Purchase Documents, the
Purchased Interest or the Receivables; or
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FORM 10-Q
Exhibit 2.1(m) (continued)
(iii) imposes upon any Indemnified Party any other
expense (including, without limitation, reasonable attorneys'
fees and expenses, and expenses of litigation or preparation
therefor in contesting any of the foregoing) with respect to
the Purchase Documents, the Purchased Interest, the
Receivables or payments of amounts due thereunder or its
obligation to advance funds in respect of the Purchase
Documents, the Purchased Interest or the Receivables;
and the result of any of the foregoing is to increase the cost to
such Indemnified Party with respect to the Purchase Documents, the
Purchased Interest, the Receivables, the obligations thereunder,
the funding of any purchases thereunder, the Credit Agreement or
the Letter of Credit Reimbursement Agreement, by an amount deemed
by such Indemnified Party to be material, then, within 10 days
after demand by the Buyer, the Seller shall pay to the Buyer such
additional amount or amounts as will compensate such Indemnified
Party for such increased cost.
(b) if any Indemnified Party shall have determined that,
after the date hereof, the adoption of any applicable Law or bank
regulatory guideline regarding capital adequacy, or any change
therein, or any change in the interpretation thereof by any
Official Body, or any directive regarding capital adequacy (in the
case of any bank regulatory guideline, whether or not having the
force of law) of any such Official Body, has or would have the
effect of reducing the rate of return on capital of such
Indemnified Party (or its parent) as a consequence of such
Indemnified Party's obligations hereunder or with respect hereto to
a level below that which such Indemnified Party (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 Indemnified Party to
be material, then from time to time, within 10 days after demand by
the Buyer, the Seller shall pay to such Indemnified Party such
additional amount or amounts as will compensate such Indemnified
Party (or its parent) for such reduction.
(c) The Buyer will promptly notify the Seller of any event of
which it has knowledge, occurring after the date hereof, which will
entitle an Indemnified Party to compensation pursuant to this
Section 8.02. A notice by the Buyer 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, the Buyer may use any
reasonable averaging and attributing methods.
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FORM 10-Q
Exhibit 2.1(m) (continued)
8.03. Indemnity.
(a) The Seller and the Corporation each respectively with
respect to any action taken or failure to take action or any breach
or event or other cause relating to it, but not jointly, agree to
indemnify, defend and save harmless the Buyer, its directors,
officers, shareholders, employees, agents and each legal entity, if
any, who controls the Buyer, other than for the indemnitee's own
gross negligence or willful misconduct, forthwith on demand, from
and against any and all losses, claims, damages, liabilities, costs
and expenses (including, without limitation, all reasonable
attorneys' fees and expenses, expenses incurred by their respective
credit recovery groups (or any successors thereto) and expenses of
settlement, litigation or preparation therefor) which the Buyer may
incur or which may be asserted against the Buyer by any Person
(including, without limitation, any Obligor or any other Person
whether on its own behalf or derivatively on behalf of the Seller
or the Corporation) arising from or incurred in connection with (i)
any breach of a representation, warranty or covenant by the Seller
or the Corporation (in any of its capacities hereunder) made or
deemed made hereunder or in connection herewith or the transactions
contemplated hereby, or any statement made by any Responsible
Officer of the Seller or the Corporation in connection herewith or
the transactions contemplated hereby which shall have been
incorrect in any material respect when made, or (ii) any action
taken or, if the Seller or the Corporation is otherwise obligated
to take action, failed to be taken, by the Seller or the
Corporation with respect to the Purchased Interest or any of its
respective obligations hereunder including, without limitation, the
failure to comply with an applicable law, rule or regulation, (iii)
any failure to vest and maintain vested in the Buyer an undivided
ownership interest in the Receivables included in the Purchased
Interest, free and clear of any Lien or other adverse claim,
whether existing at the time of Purchase of such Receivables or at
any time thereafter, (iv) any failure to pay when due any taxes,
including without limitation any sales tax, excise tax or other
similar tax or charge payable in connection with the Receivables
and their creation or satisfaction, (v) any products liability
claim arising out of or relating to the Purchased Interest in the
Receivables or related Contracts, or (vi) any dispute, suit,
actions, claim, proceeding or governmental investigation, pending
or threatened, whether based on statute, regulation of order, on
tort, on contract or otherwise, before any Official Body which
arises out of or relates to the obligations of such Person under or
with respect to the Contracts.
(b) Promptly upon receipt by any indemnified party under this
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FORM 10-Q
Exhibit 2.1(m) (continued)
Section 8.03 of notice of the commencement of any suit, action,
claim, proceeding or governmental investigation against such
indemnified party, such indemnified party shall, if a claim in
respect thereof is to be made against the Seller or the Corporation
hereunder, notify the Seller or the Corporation in writing of the
commencement thereof. The Seller or the Corporation may
participate in and assume the defense of any such suit, action,
claim proceeding or investigation at its expense, and no settlement
thereof shall be made without the approval of the Seller or the
Corporation, as the case may be, and the indemnified party.
Neither the approval of the Seller nor the Corporation will be
unreasonably withheld or delayed. After notice from the Seller or
the Corporation to the indemnified party of its intention to assume
the defense thereof with counsel reasonably satisfactory to the
Buyer, and so long as the Seller or the Corporation so assumes the
defense thereof in a manner reasonably satisfactory to the Buyer,
neither the Seller nor the Corporation shall be liable for any
legal expenses of counsel unless there shall be a conflict between
the interests of the Seller and/or the Corporation and the
indemnified party.
8.04. Holidays. Except as may be provided in this Agreement
to the contrary, if any payment due hereunder shall be due on a day
which is not a Business Day, such payment shall instead be due the
next succeeding Business Day.
8.05. Records. All amounts calculated or due hereunder shall
be determined from the records of the Buyer, which determinations
shall be conclusive absent manifest error.
8.06. Amendments and Waivers. The Buyer, the Seller, the
Servicer and the Corporation may from time to time enter into
agreements amending, modifying or supplementing this Agreement, and
the Buyer, in its sole discretion, may from time to time grant
waivers of the provisions of this Agreement or consents to a
departure from the due performance of the obligations of the
Seller, the Servicer or the Corporation under this Agreement. Any
such agreement, waiver or consent must be in writing and shall be
effective only to the extent specifically set forth in such
writing. An waiver of any provision hereof, and any consent to a
departure by the Seller, the Servicer or the Corporation from any
of the terms of this Agreement, shall be effective only in the
specific instance and for the specific purpose for which given and
if such amendment, waiver or departure would have a material
adverse effect on the rights or obligations of the Agent, the
Collateral Agent or the LOC Bank, such amendment, departure or
waiver shall not be effective until consented to by the Affected
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FORM 10-Q
Exhibit 2.1(m) (continued)
Party. The Buyer shall deliver to S&P and Moody's copies of all
agreements, waivers and consents relating to this Agreement;
provided, however, that failure to deliver any such agreement,
waiver or consent shall not affect the effectiveness of any such
instrument.
8.07. Term of Agreement. This Agreement shall terminate
following the Expiration Date when the Net Investment has been
reduced to zero and all Discount and all other Aggregate Unpaids
have been indefeasibly paid in full; provided, however, that (i)
the rights and remedies of the Buyer with respect to any
representation and warranty made or deemed to be made by the
Seller, the Servicer or the Corporation pursuant to this Agreement,
(ii) the indemnification and payment provisions set forth in
Sections 4.11, 8.01, 8.02 and 8.03 hereof and (iii) the agreement
set forth in Section 8.20 hereof shall be continuing and shall
survive any termination of this Agreement.
8.08. No Implied Waiver; Cumulative Remedies. No course of
dealing and no delay or failure of the Buyer in exercising any
right, power or privilege under the Purchase Documents shall affect
any other or future exercise thereof or the exercise of any other
right, power or privilege; nor shall any single or partial exercise
of any such right, power or privilege or any abandonment or
discontinuance of steps to enforce such a right, power or privilege
preclude any further exercise thereof or of any other right, power
or privilege. The rights and remedies of the Buyer under the
Purchase Documents are cumulative and not exclusive of any rights
or remedies which the Buyer would otherwise have.
8.09. No Discharge. The respective obligations of the
Seller, the Servicer and the Corporation under the Purchase
Documents shall be absolute and unconditional and shall remain in
full force and effect without regard to, and shall not be released,
discharged or in any way affected by (a) any exercise or non-
exercise of any right, remedy, power or privilege under or in
respect of the Purchase Documents or applicable Law, including,
without limitation, any failure to set-off or release in whole of
in part by the Buyer of any balance of any deposit account or
credit on its books in favor of the Seller, the Servicer, the
Corporation, as the case may be, or any waiver, consent, extension,
indulgence or other action or inaction in respect of any thereof,
or (b) any other act or thing or omission or delay to do any other
act or thing which would operate as a discharge of the Seller, the
Servicer or the Corporation as a matter of Law.
8.10. Notices. All notices under Section 7.02 hereof shall
Page 155
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
be given to the Seller, the Servicer and the Corporation by
telephone or facsimile, confirmed by first-class mail, first-class
express mail or courier, in all cases with charges prepaid. All
other notices, requests, demands, directions and other
communications (collectively "Notices") under the provisions of
this Agreement shall be in writing (including telexed or facsimile
communication) unless otherwise expressly permitted hereunder and
shall be sent by first-class mail, first-class express mail, or by
telex or facsimile with confirmation in writing mailed first-class
mail, in all cases with charges prepaid. Any such properly given
notice shall be effective when received. All notices shall be sent
to the applicable party at the office stated on the signature page
hereof or in accordance with the last unrevoked written direction
from such party to the other parties hereto.
8.11. Severability. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement shall
be held invalid or unenforceable in whole or in part in any
jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability
without in any manner affecting the validity or enforceability of
such provision in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.
8.12. Governing Law; Submission to Jurisdiction. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. The Seller, the Servicer and the
Corporation hereby submit to the nonexclusive jurisdiction of the
courts of the State of New York and the courts of the United States
located in the State of New York for the purpose of adjudicating
any claim or controversy arising in connection with any of the
Purchase Documents or any of the transactions contemplated thereby,
and for such purpose, to the extent it may lawfully do so, waives
any objection which it may now or hereafter have to such
jurisdiction or to venue therein and any claim of inconvenient
forum with respect thereto. Nothing in this Section 8.12 shall
affect the right of the Buyer to bring any action or proceeding
against the Seller, the Servicer or the Corporation or the property
of the Seller, the Servicer or the Corporation in the courts of
other jurisdictions.
8.13. Prior Understandings. This Agreement sets forth the
entire understanding of the parties relating to the subject matter
hereof, and supersedes all prior understandings and agreements,
whether written or oral.
8.14. Survival. All representations and warranties of the
Page 156
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
Seller, the Servicer and the Corporation contained herein or made
in connection herewith shall survive the making thereof, and shall
not be waived by the execution and delivery of this Agreement, any
investigation by the Buyer, the purchase, repurchase or payment of
any Purchased Interest in any Receivable, or any other event or
condition whatsoever (other than a written waiver complying with
Section 8.06 hereof). The covenants and agreements contained in or
given pursuant to this Agreement (including, without limitation,
those contained in Articles IV and VI hereof) shall continue in
full force and effect until the termination of the obligation to
make Purchases hereunder, the reduction of the Net Investment to
zero and the payment in full of all Discount and all other
Aggregate Unpaids.
8.15. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on
separate counterparts each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute but
one and the same instrument.
8.16. Set-Off. In case a Termination Event shall occur and
be continuing, the Buyer and, to the fullest extent permitted by
Law, the holder of any assignment of the Buyer's rights hereunder
pursuant to the Security Agreement, shall each have the right, in
addition to all other rights and remedies available to it, without
notice to the Seller, to set-off against and to appropriate and
apply to any amount owing by the Seller hereunder which has become
due and payable, any debt owing to, and any other funds held in any
manner for the account of, the Seller by the Buyer or by any holder
of any assignment, including, without limitation, all funds in all
deposit accounts (whether time or demand, general or special,
provisionally credited or finally credited, or otherwise) now or
hereafter maintained by the Seller with the Buyer or the Collateral
Agent under the Security Agreement. Such right shall exist whether
or not such debt owing to, or funds held for the account of, the
Seller is or are matured other than by operation of this Section
8.16 and regardless of the existence or adequacy of any collateral,
guaranty or any other security, right or remedy available to the
Buyer or any holder. Nothing in this Agreement shall be deemed a
waiver or prohibition or restriction of the Buyer's or any holder's
rights of set-off or other rights under applicable Law.
8.17. Successors and Assigns. This Agreement shall be
binding on the parties hereto and their respective successors and
assigns; provided, however, that neither the Seller nor the
Servicer nor the Corporation may assign any of its rights or
delegate any of its duties hereunder without the prior written
Page 157
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
consent of the Buyer. No provision of this Agreement shall in any
manner restrict the ability of the Buyer to assign, participate,
grant security interests in, or otherwise transfer any portion of
the Purchased Interest. The Seller and the Corporation hereby
agree and consent to the complete assignment by the Buyer of all of
its rights under, interest in, title to and obligations under the
Purchase Documents to the Collateral Agent.
8.18. Waiver of Confidentiality. Subject to the requirements
of applicable Laws, the Buyer agrees to use reasonable precautions
to keep confidential, in accordance with its customary procedures
for handling confidential information, any non-public information
supplied to it by the Seller or the Corporation pursuant to this
Agreement which is identified by such Seller as being confidential
at the time the same is delivered to the Buyer. Notwithstanding
the foregoing subject to applicable laws, the Seller and the
Corporation hereby consent to the disclosure of any non-public
information supplied by it to any of the Affected Parties.
8.19. Payments Set Aside. To the extent that the Seller, the
Corporation or any Obligor makes a payment to the Buyer or the
Buyer exercises its rights of set-off and such payment or set-off
or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged
by, or is required to be refunded, rescinded, returned, repaid or
otherwise restored to the Seller, the Corporation or such Obligor,
a trustee, a receiver or any other Person under any Law, including,
without limitation, any bankruptcy law, any state or federal law,
common law or equitable cause, the obligation or part thereof
originally intended to be satisfied shall, to the extent of any
such restoration, be reinstated, revived and continued in full
force and effect as if such payment had not been made or such set-
off had not occurred. The provisions of this Section 8.19 shall
survive the termination of this Agreement.
8.20. No Petition. The Seller, the Corporation and the
Servicer agree that, prior to the date which is one year and one
day after the date upon which all obligations of the Seller to the
Buyer hereunder are paid in full and all outstanding Commercial
Paper and other indebtedness of the Buyer are paid in full, neither
will institute against, or join any other Person in instituting
against, the Buyer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other similar proceeding
under the laws of the United States or any state of the United
States.
8.21. No Recourse. The obligations of the Buyer under this
Page 158
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
Agreement are solely the corporate obligations of the Buyer. No
recourse shall be had for the payment of any amount owing in
respect of this Agreement or for the payment of any fee hereunder
or for any other obligation or claim arising out of or based upon
this Agreement against Merrill Lynch Money Markets Inc.("Merrill"),
Goldman Sachs Money Markets, L.P. ("Goldman", and collectively with
Merrill, the "Dealers"), any Affected Party or the Referral Agent,
any Affiliate of any of the foregoing, or any stockholder,
employee, officer, director, incorporator or beneficial owner of
any of the foregoing. For purposes of this paragraph, the term
"Dealers" shall mean and include Merrill, Goldman and all
Affiliates thereof and any stockholder, employee, officer,
director, incorporator or beneficial owner of any of them;
provided, however, that the Buyer shall not be considered to be an
Affiliate of either Dealer, the Referral Agent or any other
Affected Party for the purposes of this Section.
Page 159
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
IN WITNESS WHEREOF, the parties hereto, by the
authorized signatories, have executed and delivered this Agreement
as of the date first above written.
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company of New
York, as attorney-in-fact for
Delaware Funding Corporation
By:/s/ Richard A. Burke
Authorized Signatory
Title: Vice President
Address for Notices: Delaware Funding Corporation
c/o J H Holdings Corporation Ropes
& Gray
One International Place
Boston, MA 02110-2464
Attention: David Donaldson
Tel. No.: (617) 951-7000
Fax: (617) 951-7050
With a copy to
the Referral Agent: Morgan Guaranty Trust Company of New
York
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Attention: Structured Finance
Group
Tel. No.: (302) 634-5486
Fax: (302) 634-5490
Address for Funds Transfer: Morgan Guaranty Trust Company of New
York
Commercial Paper Account
Morgan Guaranty Trust Company of New
York,
as Collateral Agent and Assignee -
Account No. 230-46-104
Morgan Guaranty Trust Company of New
York
500 Stanton Christiana Road
Newark, Delaware 19713-2107
[Receivables Purchase Agreement Signature Page]
Page 160
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
CONE RECEIVABLES LLC
By: Cone Mills Corporation,
its sole Member
By:/s/ Neil W. Koonce
Authorized Signatory
Title: Vice President
Address for Notices: David E. Bray, Treasurer
3101 North Elm Street
Third Floor
Greensboro, NC 27415-6540
With a copy to: Leesa C. Sluder
Director
Treasury Services
Cone Mills Corporation
3101 North Elm Street
Greensboro, NC 27415-6540
Address for Funds Transfer: MORGAN GUARANTY TRUST COMPANY,
NEW YORK
Account No. 013-05-858
CONE MILLS CORPORATION
By:/s/ David E. Bray
Authorized Signatory
Title: Treasurer
Address for Notices: David E. Bray, Treasurer
3101 North Elm Street
Greensboro, NC 27415-6540
With a copy to: Leesa C. Sluder
Director
Treasury Services
Cone Mills Corporation
3101 North Elm Street
Greensboro, NC 27415-6540
[Receivables Purchase Agreement Signature Page]
Page 161
<PAGE>
FORM 10-Q
Exhibit 2.1(m) (continued)
ADDENDUM TO RECEIVABLES PURCHASE AGREEMENT
AS FILED WITH FORM 10-Q DATED MARCH 30, 1997
The following exhibits and schedules to the Receivables
Purchase Agreement have been omitted from the filed document
pursuant to Regulation S-K(17 CFR 229), Item 601(b)(2):
Exhibits
Exhibit A (Not used)
Exhibit B Description of Qualifying Receivables
Exhibit C Form of Purchase Notice for Incremental Purchase
Exhibit D Form of Tranche Selection Notice
Exhibit E Form of Report Showing Discount
Exhibit F (Not used)
Exhibit G Form of Monthly Report
Exhibit H Form of Lockbox Transfer Letter
Exhibit I (Not used)
Exhibit J (Not used)
Exhibit K (Not used)
Exhibit L Information regarding Chief Executive Office, Etc.
pursuant to Section 5.03(f)
Schedules
Schedule 1 Credit and Collections Policy
Schedule 2 Information regarding Material Adverse Changes
pursuant to Section 5.03(k)
Schedule 3 Information regarding Litigation, etc. pursuant to
Sections 5.01(k) and 5.03(l)
Schedule 4 Permitted Lockbox Banks, Lockbox Account Numbers
and Permitted Lockboxes
Schedule 5 Persons that may not be Successor Servicers
The Registrant does hereby agree to furnish supplementally a
copy of any omitted exhibit or schedule to the Commission upon
request.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Secretary
Page 162
FORM 10-Q
Exhibit 4.4(f)
AMENDMENT NO. 5 TO CREDIT AGREEMENT
AMENDMENT dated as of March 30, 1997 to the
Amended and Restated Credit Agreement dated as of November
18, 1994 (as heretofore amended, the "Agreement") among Cone
Mills Corporation, the banks listed on the signature pages
thereof (the "Banks") and Morgan Guaranty Trust Company of
New York, as Agent (the "Agent").
The parties hereto agree as follows with respect
to the Agreement:
SECTION 1. Definitions; References. Unless
otherwise specifically defined herein, each term used herein
which is defined in the Agreement shall have the meaning
assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and
each other similar reference contained in the Agreement
shall from and after the date hereof refer to the Agreement
as amended hereby.
SECTION 2. Amendment of Section 5.10 of the
Agreement. Section 5.10 of the Agreement is amended to read
in full as follows:
SECTION 5.10. Debt Ratio. As of the last
day of each fiscal quarter ended after March 30, 1997, 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 3. Amendment of Section 5.11 of the
Agreement. Section 5.11 of the Agreement is amended to read
in full as follows:
SECTION 5.11. Interest Coverage Ratio. As of
the last day of the following fiscal quarters, the ratio of
EBIT to Consolidated Interest Expense in each case for the
period of four consecutive fiscal quarters then ended, will
not be less than the following amounts:
Fiscal Quarter Ending Ratio
Prior to June 30, 1996 2.3:1
June 30, 1996 1.8:1
September 29, 1996 1.4:1
December 29, 1996 1.0:1
March 30, 1997 0.1:1
After March 30, 1997 2.3:1
Page 163
<PAGE>
FORM 10-Q
Exhibit 4.4(f) (continued)
SECTION 4. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the
State of New York.
SECTION 5. Counterparts; Effectiveness. This
Amendment 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 Amendment shall become effective as of the
date first written above when the Agent shall have received
duly executed counterparts hereof signed by the Borrower and
the Required Banks.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed as of the date first
above written.
CONE MILLS CORPORATION
By /s/ David E. Bray
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Glenda L. Irving
Title: Vice President
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By /s/ S. C. Patrick McCormick
Title: Senior Vice President
NATIONSBANK, N. A.
By /s/ E. Phifer Helms
Title: Senior Vice President
WACHOVIA BANK OF NORTH
CAROLINA, N. A .
By /s/ W. Stanton Laight
Title: Senior Vice President
Page 164
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cone Mills
Corporation Consolidated Financial Statements dated March 30, 1997, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> MAR-30-1997
<CASH> 1,148
<SECURITIES> 0
<RECEIVABLES> 60,404
<ALLOWANCES> 1,250
<INVENTORY> 145,491
<CURRENT-ASSETS> 218,509
<PP&E> 455,558
<DEPRECIATION> 205,869
<TOTAL-ASSETS> 541,648
<CURRENT-LIABILITIES> 136,714
<BONDS> 150,079
0
38,395
<COMMON> 2,612
<OTHER-SE> 163,021
<TOTAL-LIABILITY-AND-EQUITY> 541,648
<SALES> 174,714
<TOTAL-REVENUES> 174,714
<CGS> 154,730
<TOTAL-COSTS> 154,730
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,495)
<INCOME-PRETAX> (2,470)
<INCOME-TAX> (988)
<INCOME-CONTINUING> (1,995)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,995)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
