Page 1 of 87
Index to Exhibits-Pages 23-30
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 September 28, 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 October 31,
1997: 26,112,133 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 and thirty-nine weeks ended
September 28, 1997 and September 29, 1996
(Unaudited). . . . . . . . . . . . . . . . . . .3
Consolidated Condensed Balance Sheets
September 28, 1997 and September 29, 1996
(Unaudited) and December 29, 1996. . . . . . . .4 & 5
Consolidated Condensed Statements of
Stockholders' Equity
Thirty-nine weeks ended September 28, 1997
and September 29, 1996 (Unaudited) . . . . . . .6
Consolidated Condensed Statements of
Cash Flows
Thirty-nine weeks ended September 28, 1997
and September 29, 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. . . . . . . . . . . . . . . .21
Item 6. Exhibits and Reports on Form 8-K . . . . . . . .22
Page 2
<PAGE>
FORM 10-Q
PART I
Item 1.
<TABLE>
<S> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
Sept. 28, 1997 Sept. 29, 1996 Sept. 28, 1997 Sept. 29, 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $ 185,501 $ 180,849 $ 546,007 $ 588,250
Operating Costs and Expenses:
Cost of sales 160,151 152,163 464,496 482,209
Selling and administrative 19,563 20,694 58,645 64,201
Depreciation 6,658 6,994 19,962 21,139
Restructuring 1,314 198 3,123 (4,486)
187,686 180,049 546,226 563,063
Income (Loss) from Operations (2,185) 800 (219) 25,187
Other Income (Expense):
Interest income 834 207 1,653 380
Interest expense (3,365) (3,682) (10,772) (11,634)
(2,531) (3,475) (9,119) (11,254)
Income (Loss) before Income Taxes (Benefit) and Equity
in Earnings (Losses) of Unconsolidated Affiliate (4,716) (2,675) (9,338) 13,933
Income Taxes (Benefit) (1,797) (979) (3,469) 4,540
Income (Loss) before Equity in Earnings (Losses)
of Unconsolidated Affiliate (2,919) (1,696) (5,869) 9,393
Equity in Earnings (Losses) of Unconsolidated Affiliate 1,553 (547) 1,437 (749)
Net Income (Loss) $ (1,366) $ (2,243) $ (4,432) $ 8,644
Income (Loss) Available to Common Shareholders:
Net Income (Loss) $ (2,121) $ (2,963) $ (6,662) $ 6,484
Earnings (Loss) Per Share - Fully Diluted:
Net Income (Loss) $ (.08) $ (.11) $ (.25) $ .24
Weighted Average Common Shares and
Common Share Equivalents Outstanding -
Fully Diluted 26,109 27,416 26,150 27,454
</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>
September 28, September 29, December 29,
ASSETS 1997 1996 1996
(Unaudited) (Unaudited) (Note)
Current Assets:
Cash $ 2,280 $ 2,742 $ 1,018
Accounts receivable - trade, less provision for
doubtful accounts $1,500; $3,000; $3,000 20,910 63,413 49,073
Subordinated note receivable 35,909 - -
Inventories:
Greige and finished goods 85,121 92,742 94,635
Work in process 10,941 11,451 10,793
Raw materials 12,639 9,434 7,231
Supplies and other 12,921 31,851 26,874
121,622 145,478 139,533
Other current assets 11,733 13,823 14,794
Total Current Assets 192,454 225,456 204,418
Investments in Unconsolidated Affiliates 35,581 35,853 34,144
Other Assets 39,110 41,178 40,746
Property, Plant and Equipment:
Land 11,799 18,208 17,880
Buildings 82,679 82,399 83,048
Machinery and equipment 318,442 313,409 319,271
Other 34,409 31,553 34,143
447,329 445,569 454,342
Less accumulated depreciation 207,296 200,817 203,664
Property, Plant and Equipment-Net 240,033 244,752 250,678
$ 507,178 $ 547,239 $ 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>
September 28, September 29, December 29,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996 1996
(Unaudited) (Unaudited) (Note)
Current Liabilities:
Notes payable $ - $ 8,703 $ 5,267
Current maturities of long-term debt 10,714 11,114 10,754
Accounts payable - trade 37,318 26,981 27,113
Sundry accounts payable and accrued expenses 44,439 44,013 52,770
Deferred income taxes 24,695 25,510 23,667
Total Current Liabilities 117,166 116,321 119,571
Long-Term Debt 139,545 150,742 149,968
Deferred Items:
Deferred income taxes 38,211 41,043 40,066
Other deferred items 10,780 10,187 10,130
48,991 51,230 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 26,112,133 shares;
1996, 27,336,333 shares and 26,301,233 shares 2,611 2,734 2,630
Capital in excess of par 61,548 70,687 62,995
Retained earnings 107,423 125,592 114,706
Currency translation adjustment (8,501) (8,462) (8,475)
Total Stockholders' Equity 201,476 228,946 210,251
$ 507,178 $ 547,239 $ 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
THIRTY-NINE WEEKS ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 29, 1996
(amounts in thousands, except share data)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Class A Preferred
Stock Common Stock
Shares Amount Shares Amount
Balance, December 29, 1996 383,948 $ 38,395 26,301,233 $ 2,630
Net loss - - - -
Currency translation adjustment - - - -
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - -
Common Stock:
Options exercised - - 12,600 1
Purchase of common shares - - (201,700) (20)
Balance, September 28, 1997 383,948 $ 38,395 26,112,133 $ 2,611
Class A Preferred
Stock Common Stock
Shares Amount Shares Amount
Balance, December 31, 1995 383,948 $ 38,395 27,380,409 $ 2,738
Net income - - - -
Currency translation adjustment -
Sale of stock of affiliate - - - -
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - -
Common Stock:
Options exercised - - 61,800 6
Purchase of common shares - - (105,876) (10)
Balance, September 29, 1996 383,948 $ 38,395 27,336,333 $ 2,734
</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 STOCKHOLDERS' EQUITY
THIRTY-NINE WEEKS ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 29, 1996
(amounts in thousands, except share data)
(Unaudited)
<TABLE>
<S> <C> <C> <C>
Capital in Currency
Excess Retained Translation
of Par Earnings Adjustment
Balance, December 29, 1996 $ 62,995 $ 114,706 $ (8,475)
Net loss - (4,432) -
Currency translation adjustment - - (26)
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - (2,851) -
Common Stock:
Options exercised 65 - -
Purchase of common shares (1,512) - -
Balance, September 28, 1997 $ 61,548 $ 107,423 $ (8,501)
Capital in Currency
Excess Retained Translation
of Par Earnings Adjustment
Balance, December 31, 1995 $ 71,090 $ 119,825 $ (9,923)
Net income - 8,644 -
Currency translation adjustment -
Sale of stock of affiliate - - 1,461
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - (2,877) -
Common Stock:
Options exercised 515 - -
Purchase of common shares (918) - -
Balance, September 29, 1996 $ 70,687 $ 125,592 $ (8,462)
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
Page 6a
<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>
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
Sept. 28, 1997 Sept. 29, 1996
(Unaudited) (Unaudited)
Cash Flows Provided By Operating Activities $ 19,033 $ 14,921
Cash Flows from Investing Activities:
Proceeds from divestitures (a) 19,529 42,228
Proceeds from sale of property, plant and equipment 4,154 2,600
Capital expenditures (17,651) (21,367)
Other (1,500) 805
Net cash provided by investing activities 4,532 24,266
Cash Flows from Financing Activities:
Net payments - short-term loans (5,267) (172)
Decrease in checks issued in excess of deposits (1,923) (21,829)
Principal payments - long-term debt (10,796) (11,496)
Other (4,317) (3,284)
Net cash used in financing activities (22,303) (36,781)
Net increase in cash 1,262 2,406
Cash at Beginning of Period 1,018 336
Cash at End of Period $ 2,280 $ 2,742
(a)Divestitures:
Inventories $ 12,034 $ 14,926
Property, plant and equipment 6,262 21,516
Other 1,199 1,300
Gain on sale 34 4,486
Proceeds from sale $ 19,529 $ 42,228
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest, net of interest capitalized $ 14,317 $ 15,369
Income taxes, net of refunds $ (3,017) $ 4,929
Supplemental Schedule of Noncash Investing and Financing Activities:
Receivable recorded from divestitures $ 811 $ 2,000
Purchase of outstanding capital stock - common,
through incurrence of accounts payable $ - $ 303
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
Page 7
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 28, 1997
Note 1. Basis of Financial Statement Preparation
The Cone Mills Corporation (the "Company") consolidated
condensed financial statements for September 28, 1997 and
September 29, 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 September 28, 1997,
September 29, 1996, and December 29, 1996, and the
related consolidated condensed statements of operations
for the respective thirteen and thirty-nine weeks ended
September 28, 1997 and September 29, 1996, and
stockholders' equity and cash flows for the thirty-nine
weeks then ended. 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 September 28, 1997 and September 29, 1996
and related consolidated condensed statements of
operations for the thirteen and thirty-nine 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 September 28, 1997, the Company had sold accounts
receivable of $78 million, less a $2 million provision
for doubtful accounts receivable, to Cone Receivables,
LLC. The Company currently has a subordinated note
receivable from Cone Receivables, LLC of $36 million.
Note 3. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<S> <C> <C> <C>
September 28, 1997
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 53,573 $10,714 $ 42,859
8-1/8% Debentures 96,686 - 96,686
Total $150,259 $10,714 $139,545
September 29, 1996
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 64,285 $10,714 $ 53,571
8-1/8% Debentures 96,243 - 96,243
Capital Lease Obligation 1,206 362 844
Other 122 38 84
Total $161,856 $11,114 $150,742
</TABLE>
In August of 1997, the Company signed a new three year
$80 million revolving credit agreement with terms and
conditions not materially different from the previous
revolving credit agreement.
Page 9
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 4. Class A Preferred Stock
The 1998 dividend rate for Class A Preferred Stock is
7.85%, payable March 31, 1998.
Note 5. Earnings (Loss) Per Share
<TABLE>
<S> <C> <C> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
September 28, 1997 September 29, 1996
Fully Fully
Primary Diluted Primary Diluted
(amounts in thousands,
except per share data)
Net income (loss) $(1,366) $(1,366) $(2,243) $(2,243)
Less: Class A Preferred
dividends ( 755) ( 755) ( 720) ( 720)
Adjusted net income (loss) $(2,121) $(2,121) $(2,963) $(2,963)
Weighted average common
shares outstanding 26,109 26,109 27,416 27,416
Common share equivalents
from assumed exercise
of outstanding options,
less shares assumed
repurchased - - - -
Weighted average common
shares and common share
equivalents outstanding 26,109 26,109 27,416 27,416
Earnings (loss) per common
share and common share
equivalent $( .08) $( .08) $( .11) $( .11)
</TABLE>
Page 10
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 5. Earnings (Loss) Per Share (continued)
<TABLE>
<S> <C> <C> <C> <C>
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
September 28, 1997 September 29, 1996
Fully Fully
Primary Diluted Primary Diluted
(amounts in thousands,
except per share data)
Net income (loss) $(4,432) $(4,432) $ 8,644 $ 8,644
Less: Class A Preferred
dividends (2,230) (2,230) (2,160) (2,160)
Adjusted net income (loss)$(6,662) $(6,662) $ 6,484 $ 6,484
Weighted average common
shares outstanding 26,150 26,150 27,401 27,401
Common share equivalents
from assumed exercise
of outstanding options,
less shares assumed
repurchased - - 53 53
Weighted average common
shares and common share
equivalents outstanding 26,150 26,150 27,454 27,454
Earnings (loss) per common
share and common share
equivalent $( .25) $( .25) $ .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. Divestitures
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 $42.2 million
had been received at September 29, 1996. Gain of $4.7
million from disposal of this division was recognized in
the first quarter 1996 financial statements as a
restructuring item.
In May 1997, the Company completed the sale of
substantially all the assets of its real estate
operations, including those of its subsidiary Cornwallis
Development Co. Proceeds of $19.5 million were received
in the second quarter of 1997. A reserve was established
in the Company's fourth quarter 1996 financial statements
to adjust the carrying value of these assets to estimated
net realizable value. The gain recognized upon the
disposition of these assets in the second quarter of 1997
was insignificant.
Note 7. Restructuring Activities
Restructuring costs of $3.1 million were incurred in the
first nine months 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 the fourth quarter of 1997 as
consolidation of the facilities is substantially
completed.
Page 12
<PAGE>
FORM 10-Q
Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
Third Quarter Ended September 28, 1997 Compared with Third
Quarter Ended September 29, 1996.
Sales for the third quarter of 1997 were $185.5 million, up
2.6%, as compared with sales of $180.8 million for the third
quarter of 1996. After eliminating the sales of business units
included in the Company's restructuring plan, sales increased
approximately 5%. Improved sales of denim, specialty
sportswear and jacquard fabrics accounted for the increase.
International sales, primarily denims, were $48.2 million, or
26% of total sales, as compared with $44.1 million, or 24% of
sales, for the third quarter of 1996.
Cone Mills had a net loss for the third quarter of 1997 of
$1.4 million, or $.08 per share after preferred dividends,
which included a pre-tax charge of $1.3 million associated
with the consolidation of Granite Finishing into Carlisle
Finishing operations. For comparison, third quarter 1996 had
a net loss of $2.2 million, or $.11 per share.
Gross profit for the third quarter of 1997 (net sales less
cost of sales and depreciation) was 10.1% of sales, as
compared with 12.0% for the previous year. The decrease was
primarily the result of mix changes to more basic denim
products with lower margins, pricing pressures, operating
disruption due to consolidation of finishing operations and
the increase in sales of product produced by Parras Cone where
a portion of the operating income is reported as equity in
earnings of unconsolidated affiliate.
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.
Page 13
<PAGE>
FORM 10-Q
Item 2. (continued)
<TABLE>
<S> <C> <C> <C> <C>
Third Quarter
1997 1996
(Dollar amounts in millions)
NET SALES
Apparel(1) $ 157.7 85.0% $ 154.2 85.3%
Home Furnishings(2) 27.8 15.0 26.6 14.7
Total $ 185.5 100.0% $ 180.8 100.0%
OPERATING INCOME (LOSS)(3)
Apparel $ 4.4 2.8% $ 6.0 3.9%
Home Furnishings (4.4) (15.9) (4.0) (14.9)
Restructuring (1.3) - (.2) -
</TABLE>
(1) Apparel includes synthetic fabrics net sales of $1.8
million in 1996.
(2) Home furnishings includes Greeff and real estate net
sales of $2.9 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 third
quarter of 1997 were $157.7 million, up 2.3% from the third
quarter of 1996. Excluding sales of the synthetic fabrics
business, which was sold in January of 1997, apparel fabric
segment sales were up approximately 3%. Both denim and
specialty sportswear sales increased. Denim sales increases
from additional volume were partially offset by lower
average prices, the result of a mix shift to more basic
denims and price pressure.
For the third quarter of 1997, the apparel segment had
operating income of $4.4 million, or 2.8% of sales, as
compared with income of $6.0 million, or 3.9% of sales, in
the third quarter of 1996. All domestic apparel fabric
manufacturing facilities operated at less than capacity as
the Company attempted to control inventory levels. The
Company's Parras Cone joint venture denim plant in Mexico
operated at capacity during the quarter. Cone's portion of
Parras Cone's operating income is reported as equity in
earnings of unconsolidated affiliate and therefore is
excluded from apparel segment operating income.
Page 14
<PAGE>
FORM 10-Q
Item 2. (continued)
Home Furnishings. For the third quarter of 1997, home
furnishings segment sales were $27.8 million as compared
with $26.6 million in the third quarter of 1996. Excluding
sales of Greeff and real estate which were sold, sales of
the home furnishings segment were up 17%, as compared to
the third quarter of 1996. Higher sales of Cone Jacquards
and Raytex finishing services accounted for the increase.
The home furnishings segment had an operating loss of $4.4
million compared with a loss of $4.0 million for the third
quarter of 1996. Home furnishings results were negatively
impacted by the finishing division operating at less than
capacity and the repositioning of the decorative fabrics
product line in the marketplace.
Total Company selling and administrative expenses declined
from $20.7 million for the third quarter of 1996 to $19.6
million in the third quarter of 1997, the result of the sale
of the real estate, 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 third quarter of 1997 as compared
with 11.4% in the third quarter of 1996.
Interest expense for the third quarter of 1997 was $3.4
million, down 9% from the third quarter of 1996, primarily the
result of lower borrowings.
Equity in the income of Parras Cone, the joint venture plant
in Mexico, was $1.6 million, as compared with a loss of $0.5
million in the third quarter of 1996. The increase in income
was primarily the result of improved sales, operating levels
and efficiencies.
Even though the Company has seen some improvement in denim
operations, including Parras Cone, the seasonal slowdown in
sales of home furnishings and specialty sportswear products as
well as the consolidation of finishing facilities will
continue to negatively impact earnings. However, Cone
continues to implement its five-point profitability
improvement program which includes focusing on core
businesses, aggressive marketing, cost reduction, the
reconfiguration of manufacturing operations and capital
conservation. These actions should position the Company for
improved results in 1998.
Page 15
<PAGE>
FORM 10-Q
Item 2. (continued)
The Company's major customer on November 3, 1997 announced the
closure of a number of denim jeans facilities in the United
States. This decision is not expected to have a materially
adverse affect on the Company's ongoing operations. Due to the
uncertainties inherent in the textile business, it is not possible
to predict the ultimate effect of customer actions.
Page 15a
<PAGE>
FORM 10-Q
Item 2. (continued)
Nine Months Ended September 28, 1997 Compared with Nine Months
Ended September 29, 1996.
While U.S. consumer spending in apparel and home furnishings
has been strong for the first nine months of 1997, Cone Mills
continued to experience value-added denim inventory
adjustments by certain customers and weak fashion demand for
decorative prints. For the first nine months of 1996, the
Company experienced good demand for value-added denim apparel
fabrics and weak markets for both specialty sportswear and
home furnishings fabrics.
Sales for the first nine months of 1997 were $546.0 million,
down 7.2%, as compared with sales of $588.3 million for the
first nine months of 1996. After eliminating the sales of
business units included in the Company's restructuring plan,
sales were down approximately 4%. Lower sales in denim
products and decorative prints were partially offset by
increased specialty sportswear and jacquard sales.
International sales, primarily denims, were 25% of total sales
for both periods.
Cone Mills had a net loss for the first nine months of 1997 of
$4.4 million, or $.25 per share after preferred dividends,
which included a pre-tax charge of $3.1 million associated
with the consolidation of the Granite operations into
Carlisle. For comparison, for the first nine months of 1996
net income was $8.6 million, or $.24 per share, including a
pre-tax gain of $4.5 million related to the sale of the
Olympic Products Division.
Gross profit for the first nine months of 1997 (net sales less
cost of sales and depreciation) was 11.3% of sales, as
compared with 14.4% for the comparable 1996 period. The
decrease was primarily the result of lower average denim
prices including mix changes to more basic denim products with
lower prices, cost inefficiencies associated with operating
plants at less than capacity, operating disruption due to
consolidation of finishing operations and the increase in
sales of product produced by Parras Cone where a portion of
the operating income is reported as equity in earnings of
unconsolidated affiliate.
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.
Page 16
<PAGE>
FORM 10-Q
Item 2. (continued)
<TABLE>
<S> <C> <C> <C> <C>
Nine Months
1997 1996
(Dollar amounts in millions)
NET SALES
Apparel(1) $ 465.1 85.2% $ 500.8 85.1%
Home Furnishings(2) 80.9 14.8 87.5 14.9
Total $ 546.0 100.0% $ 588.3 100.0%
OPERATING INCOME (LOSS)(3)
Apparel $ 16.7 3.6% $ 32.1 6.4%
Home Furnishings (11.2) (13.8) (8.1) (9.2)
Restructuring (3.1) - 4.5 -
</TABLE>
(1) Apparel includes synthetic fabrics net sales of $2.5
million and $10.7 million in 1997 and 1996, respectively.
(2) Home furnishings includes Greeff and real estate net
sales of $2.2 million in 1997, and Olympic, Greeff and
real estate net sales of $13.8 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
nine months of 1997 were $465.1 million, down 7.1% from the
first nine months of 1996. Excluding sales of the synthetic
fabrics business, which was sold in January of 1997,
apparel fabric segment sales were down approximately 6%.
Lower denim sales because of lower volume and prices
partially offset by higher specialty sportswear sales
accounted for the decrease. Average denim prices were down
in the first nine months of 1997 as a result of a mix shift
to more basic denims and price pressure from industry
supply and demand imbalances.
For the first nine months of 1997, the apparel segment had
operating income of $16.7 million, or 3.6% of sales, as
compared with income of $32.1 million, or 6.4% of sales, in
the first nine months of 1996.
Home Furnishings. For the first nine months of 1997, home
furnishings segment sales were $78.7 million, excluding
Olympic, Greeff and real estate, as compared with $73.7
million in the first nine months of 1996, an increase of
7%. Increased sales of Cone Jacquards was partially offset
by lower sales in Cone Decorative Fabrics. The home
furnishings segment had an operating loss of $11.2 million
Page 17
<PAGE>
FORM 10-Q
Item 2. (continued)
compared with a loss of $8.1 million for the first nine months
of 1996. Home furnishings results were negatively impacted by
weak decorative fabrics markets and the operating disruption
due to consolidation of finishing operations.
Total Company selling and administrative expenses declined
from $64.2 million for the first nine months of 1996 to $58.6
million in the first nine months of 1997, the result of the
sale of the Olympic, Greeff, real estate and synthetic fabric
operations as well as a cost reduction program to reduce
selling and administrative expenses. Selling and
administrative expenses were 10.7% of sales in the first nine
months of 1997 as compared with 10.9% in the first nine months
of 1996.
Interest expense for the first nine months of 1997 was $10.8
million, down 7% from the first nine months of 1996, primarily
the result of lower borrowing levels.
For the first nine months of 1997, the income tax benefit as
a percent of the taxable loss was 37.1% compared with income
taxes of 32.6% for the first nine months of 1996. Both periods
reflect tax benefits resulting from operation of the Company's
foreign sales corporation.
Liquidity and Capital Resources
The Company's principal long-term capital components consist
of $53.6 million outstanding under a Note Agreement with The
Prudential Insurance Company of America (the "Term Loan"), its
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. The
Company's Revolving Credit Facility was entered into in August
1997 and is a successor facility with terms and conditions not
materially different from the previous facility. On September
28, 1997, the Company had funds available of $80 million under
its Revolving Credit Facility.
Page 18
<PAGE>
FORM 10-Q
Item 2. (continued)
During the first nine months of 1997, the Company generated
cash from operating activities before changes in working
capital of $13.7 million as compared with $28.3 million in the
first nine months of 1996. Working capital reductions in the
first nine months of 1997 were $5.3 million. Other uses of
cash in the first nine months of 1997 included $17.7 million
for capital expenditures, $10.8 million for repayment of long-
term debt, $1.5 million for the repurchase of common stock and
$2.9 million for preferred stock dividends.
The Company believes that the proceeds from the divesture of
non-core businesses and the potential sale of its John Wolf
division (Cone Decorative Fabrics), 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 has
Board authorization to purchase up to an additional 0.8
million shares of common stock.
On September 28, 1997, the Company's long-term capital
structure consisted of $139.5 million of long-term debt and
$201.5 million of stockholders' equity. For comparison, on
September 29, 1996, the Company had $150.7 million of long-
term debt and $228.9 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
43% on September 28, 1997 and 41% on September 29, 1996.
Accounts and note receivable on September 28, 1997, were $56.8
million, down from $63.4 million at September 29, 1996. At
September 28, 1997, the Company had sold accounts receivable
of $78 million to Cone Receivables, LLC, an unconsolidated
subsidiary, which subsequently sold $40 million of these
accounts receivables to an unrelated party. In addition to
the $40 million received for the sale of these receivables,
the Company also has received a $36 million subordinated note
receivable from Cone Receivables, LLC. At September 29, 1996,
the Company had sold $42 million of accounts receivable to an
unrelated party. The decrease in accounts and note receivable
was primarily due to the collection of receivables from
business units sold and a lower number of days of sales
outstanding as certain customers paid in advance of due date.
The Company adopted SFAS 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities" during the first quarter of 1997 (See Note 2 of
Page 19
<PAGE>
FORM 10-Q
Item 2. (continued)
Notes to Consolidated Condensed Financial Statements).
Receivables, including those sold pursuant to the Receivables
Purchase Agreement, represented 48 days of sales outstanding
at September 28, 1997 and 55 days at September 29, 1996.
Inventories on September 28, 1997, were $121.6 million, down
$23.9 million from September 29, 1996 levels. The decrease was
primarily due to the sale of operating units partially offset
by increases in raw material levels.
Capital spending in 1997 is forecast to be approximately $40
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 nine months of 1997 was $17.7 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,
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
Page 20
<PAGE>
FORM 10-Q
Item 2. (continued)
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 1. 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
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,
Page 21
<PAGE>
FORM 10-Q
Item 1. (continued)
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
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 on Form 8-K
(a) The exhibits to this Form 10-Q are listed in the
accompanying Index to Exhibits.
(b) Reports on Form 8-K.
None
Page 22
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.1(a) Purchase Agreement between Registrant
and Cone Receivables LLC dated as of
March 25, 1997, filed as Exhibit 2.1(l)
to Registrant's report on Form 10-Q
for the quarter ended March 30, 1997.
* 2.1(b) 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, filed as Exhibit 2.1(m) to
Registrant's report on Form 10-Q
for the quarter ended March 30, 1997.
* 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 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.
4.3(i) Letter Agreement dated as of
July 31, 1997, between the Registrant
and the Prudential Insurance Company
of America. 32
4.4 Credit Agreement dated August 7, 1997,
among the Registrant, various banks
and Morgan Guaranty Trust Company of
New York as agent. 34
* 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).
Page 28
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 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.
4.7(c) Third Amendment to the 401(k)
Program of Cone Mills Corporation
dated August 7, 1997. 81
* 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.
* 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.
Page 29
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 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.
4.8(c) Third Amendment to the Cone Mills
Corporation 1983 ESOP dated
August 7, 1997. 83
* 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).
10 Fourth Amendment to the Employees'
Retirement Plan of Cone Mills
Corporation dated August 7, 1997. 85
27 Financial Data Schedule 87
* Incorporated by reference to the statement or report
indicated.
Page 30
<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: November 12, 1997 /s/ Anthony L. Furr
Anthony L. Furr
Vice President and
Chief Financial Officer
Page 31
<PAGE>
FORM 10-Q
Exhibit 4.3(i)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
c/o Prudential Capital Group
One Gateway Center - 11th Floor
Newark, New Jersey 07102-5311
As of July 31, 1997
Cone Mills Corporation
3101 North Elm Street
Greensboro, North Carolina 27408
Attn: Mr. David Bray, Treasurer
Ladies and Gentlemen:
Reference is made to the Note Agreement dated as of August 13,
1992, as heretofore amended (the "Note Agreement") between Cone
Mills Corporation (the "Company") and The Prudential Insurance
Company of America ("Prudential"). Capitalized terms used and not
otherwise defined in this letter have the same meanings given those
terms in the Note Agreement. Prudential and the Company hereby
agree that the Note Agreement shall be amended as follows:
1. Clause (2) of paragraph 6C(2) is hereby amended and
restated to read in its entirety as follows:
"'(2) Priority Debt (other than the Cornwallis Debt) to
exceed at any time an amount equal to 17% of Total
Capitalization at such time;"
2. The definition of "Total Capitalization" contained in
paragraph 10B is hereby amended and restated to read in its
entirety as follows:
"'Total Capitalization" shall mean, on any determination
date, the sum of (i) Debt and (ii) consolidated
stockholder's equity of the Company and its Subsidiaries
determined in accordance with generally accepted
accounting principles, plus Minority Interests
attributable to the Company's Subsidiary Parras Cone de
Mexico S.A. de C.V."
3. Paragraph 10B of the Note Agreement is hereby amended by
adding the following definitions in alphabetical order:
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FORM 10-Q
Exhibit 4.3(i) (continued)
"'Minority Interests" shall mean any shares of capital
stock of a Subsidiary (other than directors' qualifying
shares as required by law) that are not owned by the
Company or a Wholly Owned Subsidiary."
"'Wholly Owned Subsidiary" shall mean any corporation,
all of the stock of every class of which is, at the time
as of which any determination is being made, owned by the
Company either directly or through Wholly Owned
Subsidiaries."
4. Except as amended herein, all of the terms, conditions
and obligations of the Note Agreement shall remain in full force
and effect.
If you agree to these changes, please sign each copy of this
letter enclosed and return one of them to Prudential, at which time
this letter shall become a binding agreement as of the date first
above written.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Kevin J. Kraska
Vice President
Agreed to and accepted
as of July 31, 1997
CONE MILLS CORPORATION
By: /s/ David E. Bray
Treasurer
Page 33
FORM 10-Q CONFORMED COPY
Exhibit 4.4
$80,000,000
CREDIT AGREEMENT
dated as of
August 7, 1997
among
Cone Mills Corporation,
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
Page 34
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TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.1. Definitions.............................................1
Section 1.2. Accounting Terms and Determinations....................16
Section 1.3. Types of Borrowings....................................16
ARTICLE 2
The Credits
Section 2.1. Commitments to Lend....................................17
Section 2.2. Notice of Committed Borrowing..........................17
Section 2.3. Money Market Borrowings................................18
Section 2.4. Notice to Banks; Funding of Loans......................22
Section 2.5. Notes..................................................23
Section 2.6. Maturity of Loans......................................23
Section 2.7. Interest Rates.........................................23
Section 2.8. Fees...................................................27
Section 2.9. Optional Termination or Reduction of Commitments.......27
Section 2.10. Mandatory Termination of Commitments...................28
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Section 2.11. Optional Prepayments...................................28
Section 2.12. General Provisions as to Payments......................28
Section 2.13. Funding Losses.........................................29
Section 2.14. Computation of Interest and Fees.......................29
Section 2.15. Withholding Tax Exemption..............................30
ARTICLE 3
Conditions
Section 3.1. Effectiveness..........................................30
Section 3.2. Borrowings.............................................32
ARTICLE 4
Representations and Warranties
Section 4.1. Existence and Power....................................32
Section 4.2. Corporate and Governmental Authorization; No
Contravention..........................................33
Section 4.3. Binding Effect.........................................33
Section 4.4. Financial Information..................................33
Section 4.5. Litigation.............................................34
Section 4.6. Compliance with ERISA..................................34
Section 4.7. Environmental Matters..................................34
Section 4.8. Taxes..................................................34
Section 4.9. Compliance with Laws...................................35
Section 4.10. Not an Investment Company..............................35
Section 4.11. Title to Properties....................................35
Section 4.12. Full Disclosure........................................35
ARTICLE 5
Covenants
Section 5.1. Information............................................36
Section 5.2. Payment of Obligations.................................38
Section 5.3. Maintenance of Property; Insurance.....................38
Section 5.4. Conduct of Business and Maintenance of Existence.......38
Section 5.5. Compliance with Laws...................................39
Section 5.6. Inspection of Property, Books and Records..............39
Section 5.7. Transactions with Affiliates...........................39
Section 5.8. Debt...................................................40
Section 5.9. Contingent Obligations.................................40
Section 5.10. Minimum Consolidated Tangible Net Worth................40
Section 5.11. Interest Coverage Ratio................................41
Section 5.12. Investments............................................42
Section 5.13. Negative Pledge........................................42
Section 5.14. Consolidations, Mergers and Sales of Assets............43
Section 5.15. Use of Proceeds........................................44
ARTICLE 6
Defaults
Section 6.1. Events of Default......................................44
Section 6.2. Notice of Default......................................46
ARTICLE 7
The Agent
Section 7.1. Appointment and Authorization..........................46
Section 7.2. Agent and Affiliates...................................47
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Section 7.3. Action by Agent........................................47
Section 7.4. Consultation with Experts..............................47
Section 7.5. Liability of Agent.....................................47
Section 7.6. Indemnification........................................47
Section 7.7. Credit Decision........................................48
Section 7.8. Successor Agent........................................48
Section 7.9. Agent's Fee............................................48
ARTICLE 8
Change in Circumstances
Section 8.1. Basis for Determining Interest Rate Inadequate or
Unfair.................................................48
Section 8.2. Illegality.............................................49
Section 8.3. Increased Cost and Reduced Return......................50
Section 8.4. Base Rate Loans Substituted for Affected Fixed Rate
Loans..................................................52
ARTICLE 9
Miscellaneous
Section 9.1. Notices................................................52
Section 9.2. No Waivers.............................................53
Section 9.3. Expenses; Documentary Taxes; Indemnification...........53
Section 9.4. Sharing of Set-offs....................................54
Section 9.5. Amendments and Waivers.................................54
Section 9.6. Successors and Assigns.................................55
Section 9.7. Collateral.............................................56
Section 9.8. Governing Law; Submission to Jurisdiction..............56
Section 9.9. Counterparts; Integration..............................57
Section 9.10. Confidentiality........................................57
Section 9.11. WAIVER OF JURY TRIAL...................................57
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SCHEDULES AND EXHIBITS
COMMITMENT SCHEDULE
PRICING SCHEDULE
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Money Market Quote
Exhibit E - Opinion of General Counsel of the Borrower
Exhibit F - Opinion of Special Counsel for the Agent
Exhibit G - Assignment and Assumption Agreement
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CREDIT AGREEMENT
AGREEMENT dated as of August 7, 1997 among CONE MILLS
CORPORATION, the BANKS listed on the signature pages hereof and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1. Definitions. The following terms, as used
herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market
Quotes setting forth Money Market Absolute Rates pursuant to Section 2.3.
"Acquisition" means the acquisition by the Borrower or any
Subsidiary of (i) any asset of any Person, whether by purchase, merger or
otherwise, which, or which together with other such acquisitions, constitutes
one or more businesses or substantially all of the assets of one or more
businesses or (ii) any shares of capital stock of any Person which,
immediately after such acquisition is made and as a result thereof, becomes a
Subsidiary.
"Adjusted CD Rate" has the meaning set forth in Section 2.7(b).
"Adjusted Debt to Capital Ratio" means as of any date the ratio
of Adjusted Total Consolidated Debt as of such date to Adjusted Total
Consolidated Capitalization as of such date, expressed as a percentage.
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.7(c).
"Adjusted Total Consolidated Capitalization" means as of any
date (i) Total Consolidated Capitalization as of such date plus (ii) eight
times Consolidated Operating Lease Expense for the period of four consecutive
fiscal quarters of the Borrower ended on or most recently prior to such date.
"Adjusted Total Consolidated Debt" means as of any date (i)
Total Consolidated Debt as of such date plus (ii) eight times Consolidated
Operating Lease Expense for the period of four consecutive fiscal quarters of
the Borrower ended on or most recently prior to such date.
"Administrative Questionnaire" means, with respect to each
Bank, an administrative questionnaire in the form prepared by the Agent and
submitted to the Agent (with a copy to the Borrower) duly completed by such
Bank.
"Affiliate" means (i) any Person that directly, or indirectly
through one or more intermediaries, controls the Borrower (a "Controlling
Person") or (ii) any Person (other than the Borrower or a Subsidiary) which is
controlled by or is under common control with a Controlling Person. As used
herein, the term "control" means the possession, directly or indirectly, of
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise and the term "voting securities" means securities or interests
entitling the holder thereof to vote for or designate directors or individuals
performing a similar function.
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"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank,
(i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in
the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in
the case of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.7(b).
"Assignee" has the meaning set forth in Section 9.6(c).
"Bank" means each bank listed on the signature pages hereof,
each Assignee which becomes a Bank pursuant to Section 9.6(c), and their
respective successors.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as
a Base Rate Loan in accordance with the applicable Notice of Committed
Borrowing or pursuant to Article 8.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means Cone Mills Corporation, a North Carolina
corporation, and its successors.
"Borrower's 1996 Form 10-K" means the Borrower's annual report
on Form 10-K for the fiscal year ended December 29, 1996, as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934.
"Borrower's 1997 First Quarter 10-Q" means the Borrower's
quarterly report for the fiscal quarter ended March 30, 1997, as filed with the
Securities and Exchange Commission on Form 10-Q pursuant to the Securities
Exchange Act of 1934.
"CD Base Rate" has the meaning set forth in Section 2.7(b).
"CD Loan" means a Committed Loan to be made by a Bank as a CD
Loan in accordance with the applicable Notice of Committed Borrowing.
"CD Margin" means a rate per annum determined in accordance with
the Pricing Schedule.
"CD Reference Banks" means Wachovia Bank of North Carolina,
N.A., and Morgan Guaranty Trust Company of New York.
"Commitment" means (i) with respect to each Bank listed on the
Commitment Schedule, the amount set forth opposite such Bank's name on the
Commitment Schedule, and (ii) with respect to any Assignee which becomes a
Bank pursuant to Section 9.6(c), the amount of the transferor Bank's
Commitment assigned to it pursuant to Section 9.6(c), in each case as such
amount may be changed from time to time pursuant to Section 2.9, 2.10 or
9.6(c); provided that, if the context so requires, the term "Commitment" means
the obligation of a Bank to extend credit up to such amount to the Borrower
hereunder.
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<PAGE>
"Commitment Schedule" means the Commitment Schedule attached
hereto.
"Committed Loan" means a loan made by a Bank pursuant to
Section 2.1.
"Consolidated EBITDA" means, for any period, the sum of (i)
Consolidated Net Income for such period and (ii) to the extent deducted in
determining Consolidated Net Income for such period, the aggregate amount of
(x) Consolidated Net Interest Expense, (y) income tax expense and (z)
depreciation, amortization and other similar non-cash charges.
"Consolidated Interest Expense" means, for any period, the
interest expense of the Borrower and its Consolidated Subsidiaries, determined
on a consolidated basis, for such period.
"Consolidated Net Income" means, for any period, the net income
of the Borrower and its Consolidated Subsidiaries for such period, excluding
non-cash equity earnings or loses from unconsolidated foreign affiliates and
all other non-recurring items related to reserves or losses for write-downs of
inventory, accounts receivable, fixed assets, and investments outside of the
ordinary course of business.
"Consolidated Net Interest Expense" means, for any period, the
excess of (i) Consolidated Interest Expense for such period over (ii)
consolidated interest income of the Borrower and its Consolidated Subsidiaries
for such period; provided that in no event shall the amount of such
consolidated interest income deducted in arriving at Consolidated Net Interest
Expense for any period exceed $250,000 multiplied by the number of fiscal
quarters in such period.
"Consolidated Net Worth" means at any date the sum of the
consolidated stockholders' equity of the Borrower and its Consolidated
Subsidiaries determined as of such date.
"Consolidated Operating Lease Expense" means, for any period,
the aggregate rental expense of the Borrower and its Consolidated Subsidiaries
(other than with respect to capital leases), determined on a consolidated
basis, for such period.
"Consolidated Subsidiary" means as of any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Borrower in its consolidated financial statements if such statements were
prepared as of such date.
"Consolidated Tangible Net Worth" means at any date Consolidated
Net Worth less the consolidated Intangible Assets of the Borrower and its
Consolidated Subsidiaries, all determined as of such date. As used herein,
"Intangible Assets" means the amount (to the extent reflected in determining
such Consolidated Net Worth) of (i) all write-ups (except write-ups resulting
from foreign currency translations and write-ups of assets of a going concern
business made within twelve months after the acquisition of such business)
after March 30, 1997 in the book value of any asset owned by the Borrower or
a Consolidated Subsidiary and (ii) all unamortized debt discount and expense,
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, anticipated future benefit of tax loss carry-forwards, copyrights,
organization or developmental expenses and other intangible assets.
"Contingent Obligation" of any Person means as of any date any
Debt of such Person, including, without limitation, all Debt of others
Guaranteed by such Person and all Contingent Reimbursement Obligations of such
Person, that is not or would not be set forth in a balance sheet of such
Person as of such date.
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"Contingent Reimbursement Obligation" of any Person means as of
any date any contingent obligation of such Person to reimburse, directly or
indirectly, any bank or other Person in respect of amounts paid under a letter
of credit or similar instrument.
"Debt" of any Person means as of any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all obligations, fixed or contingent, of such Person to reimburse any bank or
other Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person, and (vii) all Debt
of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations
of such Person in respect of any rate swap transaction, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"Domestic Business Day" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City are authorized by law
to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate as its Domestic
Lending Office by notice to the Borrower and the Agent; provided that any Bank
may so designate separate Domestic Lending Offices for its Base Rate Loans, on
the one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer
to either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in
Section 2.7(b).
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 3.1.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements or other governmental restrictions relating to
the environment, or to the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment including, without limitation,
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<PAGE>
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or Hazardous Substances or wastes or
the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or
any Subsidiary, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank
as a Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
"Euro-Dollar Reference Banks" means the principal London
offices of Wachovia Bank of North Carolina, N.A., and Morgan Guaranty Trust
Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.7(c).
"Event of Default" has the meaning set forth in Section 6.1.
"Existing Credit Agreement" means the Amended and Restated
Credit Agreement dated as of November 18, 1994 among the Borrower, the banks
listed therein, and Morgan Guaranty Trust Company of New York, as Agent, as
amended and in effect from time to time prior to the Effective Date.
"Existing Receivables Purchase Agreement" means the receivables
purchase agreement between Cone Receivables LLC and Delaware Funding
Corporation dated as of March 25, 1997, as amended or renewed from time to
time on terms substantially similar to those of such agreement as in effect on
the date hereof.
"Facility Fee Rate" means a rate per annum determined in
accordance with the Pricing Schedule.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the Domestic
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Business Day next succeeding such day; provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to Morgan
Guaranty Trust Company of New York on such day on such transactions as
determined by the Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money
Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base
Rate pursuant to Section 8.1(a)) or any combination of the foregoing.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" means (i) any "hazardous substance" as
defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended from time
to time and regulations promulgated thereunder, (ii) any "hazardous waste" as
defined in the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Sections 6901 et seq.) as amended from time to time, and regulations
promulgated thereunder, (iii) asbestos, (iv) polychlorinated biphenyls, (v)
petroleum, its derivatives, by-products and other hydrocarbons and (vi) any
other toxic, radioactive, caustic or otherwise hazardous substance regulated
under laws relating to the environment.
"Interest Period" means:
(1) with respect to each Euro-Dollar Borrowing, the period
commencing on the date of such Borrowing and ending one, two, three or six
months thereafter, as the Borrower may elect in the applicable Notice of
Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
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(2) with respect to each CD Borrowing, the period commencing on the date of
such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower
may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise
end on a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after
the Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period
commencing on the date of such Borrowing and ending 30 days thereafter;
provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise
end on a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after
the Termination Date shall end on the Termination Date.
(4) with respect to each Money Market LIBOR Borrowing, the
period commencing on the date of such Borrowing and ending such whole number of
months thereafter as the Borrower may elect in accordance with Section 2.3;
provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar
Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall, subject to
clause (c) below, end on the last Euro-Dollar Business Day of a
calendar month; and
(c) any Interest Period which would otherwise end after
the Termination Date shall end on the Termination Date.
(5) with respect to each Money Market Absolute Rate Borrowing,
the period commencing on the date of such Borrowing and ending such number of
days thereafter (but not less than 7 days nor more than 180 days) as the
Borrower may elect in accordance with Section 2.3; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after
the Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, or any successor statute.
"International Subsidiary" means any Subsidiary organized under
the laws of a jurisdiction, and conducting substantially all of its
operations, outside of the United States of America.
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"Investment" means any investment in any Person, whether by
means of share purchase, capital contribution, loan, time deposit or otherwise.
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.3.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, the Borrower or any
Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money
Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money
Market Loans or any combination of the foregoing. Loans hereunder are
distinguished by "Type". The "Type" of a Loan refers to whether such Loan is
a Base Rate Loan, a CD Loan, a Euro-Dollar Loan or a Money Market Loan.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.7(c).
"Material Debt" means Debt (other than the Notes, Trade Letters
of Credit and Non-Recourse International Subsidiary Debt) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal amount exceeding $5,000,000.
"Material Financial Obligations" means a principal or face
amount of Debt (other than the Notes, Trade Letters of Credit and Non-Recourse
International Subsidiary Debt) and/or payment or collateralization obligations
in respect of Derivatives Obligations of the Borrower and/or one or more of
its Subsidiaries, arising in one or more related or unrelated transactions,
exceeding in the aggregate $5,000,000.
"Material Plan" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $10,000,000.
"Money Market Absolute Rate" has the meaning set forth in
Section 2.3(d).
"Money Market Absolute Rate Loan" means a loan to be made by a
Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its
Domestic Lending Office or such other office, branch or affiliate of such Bank
as it may hereafter designate as its Money Market Lending Office by notice to
the Borrower and the Agent; provided that any Bank may from time to time by
notice to the Borrower and the Agent designate separate Money Market Lending
Offices for its Money Market LIBOR Loans, on the one hand, and its Money
Market Absolute Rate Loans, on the other hand, in which case all references
herein to the Money Market Lending Office of such Bank shall be deemed to
refer to either or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the
Base Rate pursuant to Section 8.1(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.3(d).
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"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.3.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the
ERISA Group during such five year period.
"Non-Recourse International Subsidiary Debt" means, with respect
to any International Subsidiary, Debt of such International Subsidiary (x)
incurred in the ordinary course of its business and with respect to which (i)
neither the Borrower nor any other Subsidiary has any liability, absolute or
contingent and (ii) recourse is expressly limited to such Subsidiary and the
tangible assets of such Subsidiary (and no property or assets of the Borrower
or any other Subsidiary) that are the subject of the relevant financing, and
(y) either (A) outstanding or undrawn under a facility existing at such time
such Person becomes an International Subsidiary and not created in
contemplation of such event, (B) incurred or assumed for the purpose of
financing all or any part of the cost of acquiring plant, property or
equipment and working capital needs in connection therewith or (C) any
extensions and refinancings of any such Debt referred to in (A) or (B) above;
provided that the principal amount of such Debt is not increased pursuant to
such extension or refinancing.
"Notes" means promissory notes of the Borrower, substantially
in the form of Exhibit A hereto, evidencing the obligation of the Borrower to
repay the Loans, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.2) or a Notice of Money Market Borrowing (as defined in
Section 2.3(f)).
"Outstanding Receivables Financing Amount" means, as of any
date, the aggregate financing amount with respect to the Receivables Purchase
Agreement, equal to the aggregate amount advanced by third-party purchasers
or lenders with respect thereto for the purchase or financing of assets
transferred pursuant thereto, net of repayments or recoveries by such
purchasers or lenders through liquidation of such assets.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Parras Cone" means Parras Cone de Mexico, S.A. de C.V., a
Mexican company, and its successors.
"Participant" has the meaning set forth in Section 9.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Internal
Revenue Code and either (i) is maintained, or contributed to, by any member of
the ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed to, by
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any Person which was at such time a member of the ERISA Group for employees of
any Person which was at such time a member of the ERISA Group.
"Pricing Schedule" means the Pricing Schedule attached hereto.
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to time
as its Prime Rate.
"Quarterly Date" means each March 31, June 30, September 30 and
December 31.
"Receivables Purchase Agreement" means (i) the Existing
Receivables Purchase Agreement and (ii) if such Agreement is no longer in
effect, any other agreement between the Borrower and/or one or more
Subsidiaries and Delaware Funding Corporation or any other financial
institution providing for the purchase by such Person of accounts receivable
of the Borrower (or interests therein) on terms substantially similar to those
contained in the Existing Purchase Agreement or other terms as may otherwise
be reasonably satisfactory to the Required Banks.
"Reference Banks" means the CD Reference Banks or the
Euro-Dollar Reference Banks, as the context may require, and "Reference Bank"
means any one of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 66 2/3%
of the aggregate amount of the Commitments or, if the Commitments shall have
been terminated, holding Notes evidencing at least 66 2/3% of the aggregate
unpaid principal amount of the Loans.
"Responsible Officer" means any of the chief executive officer,
chief operating officer, chief financial officer, chief accounting officer or
treasurer of the Borrower or any other officer of the Borrower involved
principally in its financial administration or its controllership function.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests (i) having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions, or (ii) otherwise having control over the actions of the corporation
or entity, are at the time directly or indirectly owned by the Borrower.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) time deposits with,
including certificates of deposit issued by, any office located in the United
States of any bank or trust company which is organized under the laws of the
United States or any state thereof and (A) which is a Bank or (B) whose
short-term certificates of deposit are rated at least A-1 by Standard & Poor's
Ratings Services or P-1 by Moody's Investors Service, Inc. and (iii)
investment grade commercial instruments.
"Termination Date" means August 7, 2000, or, if such day is not
a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in which
case the Termination Date shall be the next preceding Euro-Dollar Business Day.
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"Total Consolidated Capitalization" means as of any date the
sum of (i) Total Consolidated Debt, plus (ii) the aggregate amount of the
consolidated long term deferred tax liabilities of the Borrower and its
Consolidated Subsidiaries, plus (iii) stockholders' equity of the Borrower and
its Consolidated Subsidiaries, plus (iv) the aggregate amount deducted in
determining such stockholders' equity with respect to minority interests in
Subsidiaries (other than Parras Cone if Parras Cone has any Non-Recourse
International Subsidiary Debt) that are not Wholly Owned Consolidated
Subsidiaries, in each case determined on a consolidated basis as of such date.
"Total Consolidated Debt" means as of any date the sum of (i)
all Debt of the Borrower and its Consolidated Subsidiaries determined on a
consolidated basis, as of such date, as the same is or would be set forth in a
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
of such date (including without limitation all short-term Debt and the current
portion of all long-term Debt), other than (x) Trade Letters of Credit as of
such date and (y) Non-Recourse International Subsidiary Debt of Parras Cone
as of such date in an aggregate amount not to exceed $87,000,000, plus (ii) the
Outstanding Receivables Financing Amount at such date.
"Trade Letters of Credit" means letters of credit issued for the
account of the Borrower or any of its Consolidated Subsidiaries providing
payment of trade accounts payable arising in the ordinary course of business
(but not including, in any event, any financing or standby letters of credit).
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all benefits under
such Plan exceeds (ii) the fair market value of all Plan assets allocable to
such benefits (excluding any accrued but unpaid contributions), all determined
as of the then most recent valuation date for such Plan, but only to the
extent that such excess represents a potential liability of a member of the
ERISA Group to the PBGC or any other Person under Title IV of ERISA.
"Wholly Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
Section 1.2. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in
by the Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks; provided that, if the Borrower notifies
the Agent that the Borrower wishes to amend any covenant in Article 5 to
eliminate the effect of any change in generally accepted accounting principles
on the operation of such covenant (or if the Agent notifies the Borrower that
the Required Banks wish to amend Article 5 for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant change in generally accepted accounting principles became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks.
Section 1.3. Types of Borrowings. The term "Borrowing" denotes
the aggregation of Loans of one or more Banks to be made to the Borrower
pursuant to Article 2 on a single date and for a single Interest Period.
Borrowings are classified for purposes of this Agreement either by reference to
the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar
Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to
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the provisions of Article 2 under which participation therein is determined
(i.e., a "Committed Borrowing" is a Borrowing under Section 2.1 in which all
Banks participate in proportion to their Commitments, while a "Money Market
Borrowing" is a Borrowing under Section 2.3 in which the Bank participants are
determined on the basis of their bids in accordance therewith).
ARTICLE 2
The Credits
Section 2.1. Commitments to Lend. Each Bank severally agrees,
on the terms and conditions set forth in this Agreement, to lend to the
Borrower pursuant to this Section from time to time amounts not to exceed in
the aggregate at any one time outstanding the amount of its Commitment. Each
Borrowing under this Section shall be in an aggregate principal amount of
$1,000,000 or any larger multiple of $1,000,000 (except that any such
Borrowing may be in the aggregate amount available in accordance with Section
3.2(b)) and shall be made from the several Banks ratably in proportion to
their respective Commitments. Within the foregoing limits, the Borrower may
borrow under this Section, repay, or to the extent permitted by Section 2.11,
prepay Loans and reborrow at any time under this Section.
Section 2.2. Notice of Committed Borrowing. The Borrower shall
give the Agent notice (a "Notice of Committed Borrowing") not later than 11:00
A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y) the
second Domestic Business Day before each CD Borrowing and (z) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day
in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be
CD Loans, Base Rate Loans or Euro-Dollar Loans, and
(iv) in the case of a Fixed Rate Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
Notwithstanding the foregoing, no more than six Fixed Rate
Committed Borrowings shall be outstanding at any one time and any Borrowing
which would exceed such limitation shall be made as a Base Rate Borrowing.
Section 2.3. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.1, the Borrower may, as set forth in this Section,
request the Banks to make offers to make Money Market Loans to the Borrower.
The Banks may, but shall have no obligation to, make such offers and the
Borrower may, but shall have no obligation to, accept any such offers in the
manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to
request offers to make Money Market Loans under this Section, it shall
transmit to the Agent by telex or facsimile transmission a Money Market Quote
Request substantially in the form of Exhibit B hereto so as to be received no
later than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar
Business Day prior to the date of Borrowing proposed therein, in the case of a
LIBOR Auction or (y) the Domestic Business Day next preceding the date of
Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Borrower and the Agent shall have
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mutually agreed and shall have notified to the Banks not later than the date
of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business
Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set
forth a Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for
more than one Interest Period in a single Money Market Quote Request. No
Money Market Quote Request shall be given within five Euro-Dollar Business
Days (or such other number of days as the Borrower and the Agent may agree) of
any other Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon
receipt of a Money Market Quote Request, the Agent shall send to the Banks by
telex or facsimile transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit C hereto, which shall constitute an
invitation by the Borrower to each Bank to submit Money Market Quotes offering
to make the Money Market Loans to which such Money Market Quote Request
relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank
may submit a Money Market Quote containing an offer or offers to make Money
Market Loans in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this subsection (d)
and must be submitted to the Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 9.1 not later than (x) 2:00 P.M.
(New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M.
(New York City time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Agent shall have mutually agreed and shall have notified to
the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective); provided that Money Market Quotes submitted by the Agent (or any
affiliate of the Agent) in the capacity of a Bank may be submitted, and may
only be submitted, if the Agent or such affiliate notifies the Borrower of the
terms of the offer or offers contained therein not later than (x) one hour
prior to the deadline for the other Banks, in the case of a LIBOR Auction or
(y) 15 minutes prior to the deadline for the other Banks, in the case of an
Absolute Rate Auction. Subject to Articles 3 and 6, any Money Market Quote so
made shall be irrevocable except with the written consent of the Agent given
on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the
form of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for
which each such offer is being made, which principal amount (w) may be greater
than or less than the Commitment of the quoting Bank, (x) must be $5,000,000
or a larger multiple of $1,000,000, (y) may not exceed the principal amount of
Money Market Loans for which offers were requested and (z) may be subject to
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an aggregate limitation as to the principal amount of Money Market Loans for
which offers being made by such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above
or below the applicable London Interbank Offered Rate (the "Money Market
Margin") offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted from
such base rate,
(D) in the case of an Absolute Rate Auction, the rate
of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money
Market Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers
by the quoting Bank with respect to each Interest Period specified in the
related Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D
hereto or does not specify all of the information required by subsection
(d)(ii);
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to those
set forth in the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection
(d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the
Borrower of the terms (x) of any Money Market Quote submitted by a Bank that
is in accordance with subsection (d) and (y) of any Money Market Quote that
amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Agent unless such subsequent Money Market Quote is submitted solely to correct
a manifest error in such former Money Market Quote. The Agent's notice to the
Borrower shall specify (A) the aggregate principal amount of Money Market
Loans for which offers have been received for each Interest Period specified
in the related Money Market Quote Request, (B) the respective principal
amounts and Money Market Margins or Money Market Absolute Rates, as the case
may be, so offered and (C) if applicable, limitations on the aggregate
principal amount of Money Market Loans for which offers in any single Money
Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either
case, such other time or date as the Borrower and the Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective), the Borrower shall notify
the Agent of its acceptance or non-acceptance of the offers so notified to it
pursuant to subsection (e). In the case of acceptance, such notice (a "Notice
of Money Market Borrowing") shall specify the aggregate principal amount of
offers for each Interest Period that are accepted. The Borrower may accept
any Money Market Quote in whole or in part; provided that:
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(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related Money
Market Quote Request,
(ii) the principal amount of each Money Market Borrowing must
be $5,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the case may
be, and
(iv) the Borrower may not accept any offer that is described
in subsection (d)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks
with the same Money Market Margins or Money Market Absolute Rates, as the case
may be, for a greater aggregate principal amount than the amount in respect of
which such offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are accepted
shall be allocated by the Agent among such Banks as nearly as possible (in
multiples of $1,000,000, as the Agent may deem appropriate) in proportion to
the aggregate principal amounts of such offers. Determinations by the Agent
of the amounts of Money Market Loans shall be conclusive in the absence of
manifest error.
Section 2.4. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank's share (if
any) of such Borrowing and such Notice of Borrowing shall not thereafter be
revocable by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of
each Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address referred to in Section 9.1. Unless the Agent determines that any
applicable condition specified in Article 3 has not been satisfied, the Agent
will make the funds so received from the Banks available to the Borrower at the
Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank, such
Bank shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Bank to the Agent as
provided in subsection (b), or remitted by the Borrower to the Agent as provided
in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior
to the date of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing in
accordance with subsections (b) and (c) of this Section 2.4 and the Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Agent, such Bank and the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Agent, at (i) in the
case of the Borrower, a rate per annum equal to the higher of the Federal Funds
Rate and the interest rate applicable thereto pursuant to Section 2.7 and (ii)
in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to
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the Agent such corresponding amount, such amount so repaid shall constitute such
Bank's Loan included in such Borrowing for purposes of this Agreement.
Section 2.5. Notes. (a) The Loans of each Bank shall be
evidenced by a single Note payable to the order of such Bank for the account
of its Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request
that its Loans of a particular Type be evidenced by a separate Note in an
amount equal to the aggregate unpaid principal amount of such Loans. Each
such Note shall be in substantially the form of Exhibit A hereto with
appropriate modifications to reflect the fact that it evidences solely Loans of
the relevant Type. Each reference in this Agreement to the "Note" of such
Bank shall be deemed to refer to and include any or all of such Notes, as the
context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.1(b),
the Agent shall mail such Note to such Bank. Each Bank shall record the date,
amount, Type and maturity of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect thereto, and may,
if such Bank so elects in connection with any transfer or enforcement of its
Note, endorse on the schedule forming a part thereof appropriate notations to
evidence the foregoing information with respect to each such Loan then
outstanding; provided that the failure of any Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Notes. Each Bank is hereby irrevocably authorized by
the Borrower so to endorse its Note and to attach to and make a part of its
Note a continuation of any such schedule as and when required.
Section 2.6. Maturity of Loans. Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
Section 2.7. Interest Rates. (a) Each Base Rate Loan shall
bear interest on the outstanding principal amount thereof, for each day from
the date such Loan is made until it becomes due, at a rate per annum equal to
the Base Rate for such day. Such interest shall be payable quarterly on each
Quarterly Date. Any overdue principal of or interest on any Base Rate Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate
Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during the Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
applicable Adjusted CD Rate; provided that if any CD Loan or any portion
thereof shall, as a result of clause (2)(b) of the definition of Interest
Period, have an Interest Period of less than 30 days, such portion shall bear
interest during such Interest Period at the rate applicable to Base Rate Loans
during such period. Such interest shall be payable for each Interest Period
on the last day thereof and, if such Interest Period is longer than 90 days,
at intervals of 90 days after the first day thereof. Any overdue principal of
or interest on any CD Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the higher of
(i) the sum of the CD Margin plus the Adjusted CD Rate applicable to such Loan
and (ii) the rate applicable to Base Rate Loans for such day.
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The "Adjusted CD Rate" applicable to any Interest Period means a
rate per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if necessary, to
the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the
rate of interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable)
on the first day of such Interest Period by two or more New York certificate
of deposit dealers of recognized standing for the purchase at face value from
each CD Reference Bank of its certificates of deposit in an amount comparable
to the principal amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars
in respect of new non-personal time deposits in dollars in New York City
having a maturity comparable to the related Interest Period and in an amount
of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on
and as of the effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate
in effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the applicable Adjusted London Interbank Offered Rate. Such
interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of
three months after the first day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
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The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher
1/16 of 1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Euro-Dollar Reference Banks in the London interbank
market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days
before the first day of such Interest Period in an amount approximately equal
to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference
Bank to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank
of the Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank Offered
Rate shall be adjusted automatically on and as of the effective date of any
change in the Euro-Dollar Reserve Percentage.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from and including the
date payment thereof was due to but excluding the date of actual payment, at a
rate per annum equal to the sum of 2% plus the higher of (i) the sum of the
Euro-Dollar Margin plus the Adjusted London Interbank Offered Rate applicable
to such Loan and (ii) the Euro-Dollar Margin plus the quotient obtained
(rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x)
the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of
the respective rates per annum at which one day (or, if such amount due
remains unpaid more than three Euro-Dollar Business Days, then for such other
period of time not longer than six months as the Agent may select) deposits in
dollars in an amount approximately equal to such overdue payment due to each
of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference
Bank in the London interbank market for the applicable period determined as
provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if
the circumstances described in clause (a) or (b) of Section 8.1 shall exist,
at a rate per annum equal to the sum of 2% plus the rate applicable to Base
Rate Loans for such day).
(e) Subject to Section 8.1(a), each Money Market LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.7(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.3. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.3. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than
three months, at intervals of three months after the first day thereof. Any
overdue principal of or interest on any Money Market Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
sum of 2% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks by telex or cable of each rate of interest so determined,
and its determination thereof shall be conclusive in the absence of manifest
error.
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(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference
Bank does not furnish a timely quotation, the Agent shall determine the
relevant interest rate on the basis of the quotation or quotations furnished by
the remaining Reference Bank or Banks or, if none of such quotations is
available on a timely basis, the provisions of Section 8.1 shall apply.
Section 2.8. Fees. (a) The Borrower shall pay to the Agent
for the account of the Banks ratably in proportion to their Commitments, not
later than the Effective Date, an upfront fee in the amount of 0.125% of the
aggregate amount of the Commitments.
(b) The Borrower shall pay to the Agent for the account of the
Banks ratably in proportion to their Commitments a facility fee at a rate for
each day equal to the Facility Fee Rate for such day, determined in accordance
with the Pricing Schedule. Such facility fee shall accrue (i) from and
including the Effective Date to but excluding the Termination Date (or earlier
date of termination of the Commitments in their entirety), on the daily
aggregate amount of the Commitments (whether used or unused) and (ii) from and
including the Termination Date or such earlier date of termination to but
excluding the date the Loans shall be repaid in their entirety, on the daily
aggregate outstanding principal amount of the Loans. Such facility fee shall
be payable quarterly on each Quarterly Date, commencing September 30, 1997,
and upon the date of termination of the Commitments in their entirety (and, if
later, the date the Loans shall be repaid in their entirety).
Section 2.9. Optional Termination or Reduction of Commitments.
The Borrower may, upon at least three Domestic Business Days' notice to the
Agent, terminate at any time, or proportionately reduce from time to time by
an aggregate amount of $5,000,000 or any larger multiple of $1,000,000, the
aggregate amount of the Commitments in excess of the aggregate outstanding
principal amount of the Loans.
Section 2.10. Mandatory Termination of Commitments. The
Commitments shall terminate on the Termination Date, and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable
on such date.
Section 2.11. Optional Prepayments. (a) Subject in the case
of CD Loans or Euro-Dollar Loans to Section 2.13, the Borrower may, upon at
least one Domestic Business Day's notice to the Agent, prepay any Base Rate
Borrowing (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 8.1(a)) or, upon at least three Euro-Dollar Business Days'
notice to the Agent, prepay any CD Borrowing or Euro-Dollar Borrowing, in each
case in whole at any time, or from time to time in part in amounts aggregating
$1,000,000 or any larger multiple of $1,000,000, by paying the principal
amount to be prepaid together with accrued interest thereon to the date of
prepayment. Each such optional prepayment shall be applied to prepay ratably
the Loans of the several Banks included in such Borrowing.
(b) Except as provided in subsection (a) above or Sections 8.2 and
8.3(c), the Borrower may not prepay all or any portion of the principal amount
of any Money Market Loan prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share (if any) of such prepayment, and such notice
shall not thereafter be revocable by the Borrower.
Section 2.12. General Provisions as to Payments. (a) The
Borrower shall make each payment of principal of, and interest on, the Loans
and of facility fees hereunder, not later than 12:00 Noon (New York City time)
on the date when due, in Federal or other funds immediately available in New
York City, to the Agent at its address referred to in Section 9.1. The Agent
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will promptly distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks. Whenever any payment of
principal of, or interest on, the Domestic Loans or of facility fees shall be
due on a day which is not a Domestic Business Day, the date for payment
thereof shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, the Euro-Dollar Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding
Euro-Dollar Business Day. Whenever any payment of principal of, or interest
on, the Money Market Loans shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day. If the date for any payment of principal
is extended by operation of law or otherwise, interest thereon shall be
payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
Section 2.13. Funding Losses. If the Borrower makes any
payment of principal with respect to any Fixed Rate Loan (pursuant to Article
2, 6 or 8 or otherwise) on any day other than the last day of the Interest
Period applicable thereto, or the end of an applicable period fixed pursuant
to Section 2.7(d), or if the Borrower fails to borrow or prepay any Fixed Rate
Loans after notice has been given to any Bank in accordance with Section
2.4(a) or 2.11(c), the Borrower shall reimburse each Bank within 15 days after
demand for any resulting loss or expense incurred by it (or by an existing or
prospective Participant in the related Loan), including (without limitation)
any loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment or
failure to borrow or prepay; provided that such Bank shall have delivered to
the Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
Section 2.14. Computation of Interest and Fees. Interest
based on the Prime Rate hereunder shall be computed on the basis of a year of
365 days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest and fees shall be computed on the basis of a year of 360 days and
paid for the actual number of days elapsed (including the first day but
excluding the last day).
Section 2.15. Withholding Tax Exemption. At least five
Domestic Business Days prior to the first date on which interest or fees are
payable hereunder for the account of any Bank, each Bank that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to each of the Borrower and the Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Bank is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any United
States federal income taxes. Each Bank which so delivers a Form 1001 or 4224
further undertakes to deliver to each of the Borrower and the Agent two
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additional copies of such form (or a successor form) on or before the date
that such form expires or becomes obsolete or after the occurrence of any
event requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, in each case certifying that such Bank
is entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation)
has occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form with respect to it and
such Bank advises the Borrower and the Agent that it is not capable of
receiving payments without any deduction or withholding of United States
federal income tax.
ARTICLE 3
Conditions
Section 3.1. Effectiveness. This Agreement shall become
effective on the date that each of the following conditions shall have been
satisfied (or waived in accordance with Section 9.5):
(a) receipt by the Agent of counterparts hereof signed by each of
the parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex, telecopy or other written
confirmation from such party of execution of a counterpart hereof by such
party);
(b) receipt by the Agent for the account of each Bank of a duly
executed Note dated on or before the Effective Date complying with the
provisions of Section 2.5;
(c) receipt by the Agent of an opinion of Neil W. Koonce, General
Counsel for the Borrower, substantially in the form of Exhibit E hereto, and
covering such additional matters relating to the transactions contemplated
hereby as the Required Banks may reasonably request;
(d) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit F hereto
and covering such additional matters relating to the transactions contemplated
hereby as the Required Banks may reasonably request;
(e) receipt by the Agent on the Effective Date of the fee referred
to in Section 2.08(a) and all amounts payable under Section 9.3 of which the
Borrower shall have notice on such date;
(f) receipt by the Agent of evidence satisfactory to it of (i) the
termination, effective on or before the Effective Date, of the commitments
under the Existing Credit Agreement, (ii) the repayment in full, not later than
the Effective Date, of all loans (if any) thereunder, together with interest
accrued thereon to the Effective Date, and (iii) the receipt by Morgan
Guaranty Trust Company of New York, as agent under the Existing Credit
Agreement, of all accrued and unpaid facility fees and all other amounts due
and payable for the account of such agent or any other party under the
Existing Credit Agreement; and
(g) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Borrower and its Subsidiaries, the corporate
authority for and the validity of this Agreement and the Notes, and any other
matters relevant hereto, all in form and substance satisfactory to the Agent;
provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later
than August 13, 1997. The Agent shall promptly notify the Borrower and the
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Banks of the effectiveness of this Agreement, and such notice shall be
conclusive and binding on all parties hereto. The Banks that are parties to
the Existing Credit Agreement and comprising the "Required Banks" thereunder,
Morgan Guaranty Trust Company of New York, as Agent thereunder, and the
Borrower agree that the commitments under the Existing Credit Agreement shall
terminate in their entirety simultaneously with and subject to the
effectiveness of this Agreement and that the Borrower shall be obligated to pay
on the Effective Date the accrued facility fees thereunder to but excluding
such date.
Section 3.2. Borrowings. The obligation of any Bank to make a
Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Agent of notice of such Borrowing as required by
Section 2.2 or 2.3, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate amount
of the Commitments;
(c) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing;
(d) the fact that the representations and warranties of the
Borrower contained in this Agreement (except, in the case of a Refunding
Borrowing, the representations and warranties set forth in Sections 4.4(c) and
4.5 as to any matter which has theretofore been disclosed in writing by the
Borrower to the Banks) shall be true on and as of the date of such Borrowing;
and
(e) the fact that the Adjusted Debt to Capital Ratio as of the
date of such Borrowing, after giving effect thereto, shall not exceed 61%.
Each Borrowing hereunder shall be deemed to be a representation
and warranty by the Borrower on the date of such Borrowing as to the facts
specified in clauses (b), (c), (d), and (e) of this Section.
ARTICLE 4
Representations and Warranties
The Borrower represents and warrants that:
Section 4.1. Existence and Power. Each of the Borrower and its
Subsidiaries is a corporation or other entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization,
and has all necessary powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted, and
is duly qualified as a foreign corporation or other entity in good standing in
each jurisdiction where it is required by applicable law to be so qualified and
the failure so to qualify or be in good standing would have a material adverse
effect on the business, financial condition or operations of the Borrower and
its Subsidiaries, taken as a whole.
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Section 4.2. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of
this Agreement and the Notes are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, require no action by
or in respect of, or filing with, any governmental body, agency or official
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the articles of incorporation or by-laws of
the Borrower or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Borrower or result in the creation or imposition
of any Lien on any asset of the Borrower or any of its Subsidiaries.
Section 4.3. Binding Effect. This Agreement constitutes a
valid and binding agreement of the Borrower and the Notes, when executed and
delivered in accordance with this Agreement, will constitute valid and binding
obligations of the Borrower.
Section 4.4. Financial Information.
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 29, 1996 and the related consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, reported on by McGladrey & Pullen and set forth in the
Borrower's 1996 Form 10-K, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of March 30, 1997 and the related unaudited
consolidated statements of operations, stockholders' equity and cash flows for
the three months then ended, set forth in the Borrower's 1997 First Quarter
10-Q, a copy of which has been delivered to each of the Banks, fairly present,
in conformity with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in subsection (a) of this
Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such three-month period (subject to normal
year-end adjustments).
(c) Since March 30, 1997, there has been no material adverse change
in the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
Section 4.5. Litigation. Except as set forth in the
Borrower's 1997 First Quarter 10-Q, there is no action, suit or proceeding
pending against, or to the knowledge of the Borrower threatened against or
affecting, the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially adversely
affect the business, consolidated financial position or consolidated results
of operations of the Borrower and its Consolidated Subsidiaries or which in
any manner draws into question the validity of this Agreement or the Notes.
Section 4.6. Compliance with ERISA. Each member of the ERISA
Group has fulfilled its obligations under the minimum funding standards of
ERISA and the Internal Revenue Code with respect to each Plan and each Plan
is being administered in all material respects in compliance with the presently
applicable provisions of ERISA and the Internal Revenue Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the
minimum funding standard under Section 412 of the Internal Revenue Code in
respect of any Plan, (ii) failed to make any contribution or payment to any
Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made
any amendment to any Plan or Benefit Arrangement, which has resulted or could
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result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Internal Revenue Code or (iii) incurred any liability under
Title IV of ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA.
Section 4.7. Environmental Matters. The Borrower has reasonably
concluded that the liabilities and costs to be incurred by the Borrower and its
Subsidiaries in connection with their respective compliance with Environmental
Laws are unlikely to have a material adverse effect on the business, financial
condition, results of operations or prospects of the Borrower and its
Consolidated Subsidiaries, considered as a whole.
Section 4.8. Taxes. United States Federal income tax returns
of the Borrower and its Subsidiaries have been examined and closed through the
fiscal year ended January 2, 1994. The Borrower and its Subsidiaries have
filed all United States Federal income tax returns and all other material tax
returns which are required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment received by the
Borrower or any Subsidiary. The charges, accruals and reserves on the books
of the Borrower and its Subsidiaries in respect of taxes or other governmental
charges are, in the opinion of the Borrower, adequate.
Section 4.9. Compliance with Laws. Each of the Borrower and
its Subsidiaries is in compliance with all applicable laws, ordinances, rules,
regulations and requirements of governmental authorities (including, without
limitation, Environmental Laws and ERISA and the rules and regulations
thereunder) other than such laws, ordinances, rules, regulations or
requirements (i) the validity or applicability of which the Borrower or such
Subsidiary is contesting in good faith by appropriate proceedings diligently
conducted or (ii) the failure to comply with which cannot reasonably be
expected to have consequences which would materially and adversely affect the
business, consolidated financial position, consolidated results of operations
or prospects of the Borrower and its Consolidated Subsidiaries, considered as a
whole.
Section 4.10. Not an Investment Company. The Borrower is not
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 4.11. Title to Properties. The Borrower or a
Subsidiary has good and marketable title to each of the material properties
and assets reflected in the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries delivered pursuant to Section 4.4(b), or thereafter
acquired, other than properties and assets disposed of in the ordinary course
of business since the date of such balance sheet, free and clear of any Lien
other than Liens permitted by Section 5.14.
Section 4.12. Full Disclosure. All information heretofore
furnished by the Borrower to the Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by the Borrower to the Agent or any
Bank will be, true and accurate in all material respects on the date as of
which such information is stated or certified. The Borrower has disclosed to
the Banks in writing any and all facts which materially and adversely affect
or may affect (to the extent the Borrower can now reasonably foresee), the
business, operations or financial condition of the Borrower and its
Consolidated Subsidiaries, taken as a whole, or the ability of the Borrower to
perform its obligations under this Agreement.
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ARTICLE 5
Covenants
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
Section 5.1. Information. The Borrower will mail to each of
the Banks:
(a) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such fiscal year
and the related consolidated statements of operations, stockholders' equity and
cash flows for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, all reported on in accordance with
applicable rules and regulations of the Securities and Exchange Commission by
McGladrey & Pullen or other independent public auditors of nationally
recognized standing and acceptable to the Required Banks;
(b) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
of the end of such quarter and the related consolidated statements of
operations, stockholders' equity and cash flows for such quarter and for the
portion of the Borrower's fiscal year ended at the end of such quarter, setting
forth in each case in comparative form the figures for the corresponding
quarter and the corresponding portion of the Borrower's previous fiscal year,
all certified (subject to normal year-end adjustments) as to fairness of
presentation, preparation in accordance with generally accepted accounting
principles (subject to normal year-end adjustments) and consistency by the
chief financial officer or the chief accounting officer or treasurer of the
Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer or treasurer of the Borrower
(i) setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections 5.8
to 5.13, inclusive, on the date of such financial statements, (ii) setting
forth the Outstanding Receivables Financing Amount as of the date of such
financial statements and (iii) stating whether any Default exists on the date
of such certificate and, if any Default then exists, setting forth the details
thereof and the action which the Borrower is taking or proposes to take with
respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public auditors which reported on such statements (i) whether
anything has come to their attention to cause them to believe that any Default
existed on the date of such statements and (ii) confirming the calculations set
forth in the officer's certificate delivered simultaneously therewith pursuant
to clause (c) above;
(e) within five days after any Responsible Officer of the Borrower
obtains knowledge of any Default, if such Default is then continuing, a
certificate of the chief financial officer, the chief accounting officer, the
treasurer or the controller of the Borrower setting forth the details thereof
and the action which the Borrower is taking or proposes to take with respect
thereto;
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(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Borrower shall have filed with the Securities and
Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan with Unfunded Liabilities at
such time which might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan has given
or is required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under Title IV of
ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent
or has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such notice; (iv) applies
for a waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from
any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii)
fails to make any payment or contribution to any Plan or Multiemployer Plan
or in respect of any Benefit Arrangement or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the chief
financial officer or the chief accounting officer of the Borrower setting
forth details as to such occurrence and action, if any, which the Borrower or
applicable member of the ERISA Group is required or proposes to take;
(i) promptly after any material change to the insurance coverage of
the Borrower and its Subsidiaries from that in effect on the date hereof or
otherwise most recently disclosed to the Banks, a schedule setting forth the
amounts of the insurance coverage of the Borrower and its Subsidiaries and the
risks insured against; and
(j) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably request, as soon as
reasonably practicable after such request.
Section 5.2. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity (or, in the case of ad valorem taxes, on or before the date on which
such taxes are required to be paid pursuant to applicable law), all their
respective obligations and liabilities, including, without limitation, tax
liabilities, except where the same may be contested in good faith by
appropriate proceedings, and except for liabilities which are not material to
the financial position, results of operations or prospects of the Borrower and
its Consolidated Subsidiaries, considered as a whole, and will maintain, and
will cause each Subsidiary to maintain, in accordance with generally accepted
accounting principles, appropriate reserves for the accrual of any of the same.
Section 5.3. Maintenance of Property; Insurance. (a) The
Borrower will keep, and will cause each Subsidiary to keep, all material
property used and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
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(b) The Borrower will maintain, and will cause each Subsidiary to
maintain (either in the name of the Borrower or in such Subsidiary's own
name), insurance with financially sound and reputable insurers on all property,
in such amount and covering such risks, as are adequate and reasonable for the
businesses in which the Borrower is engaged.
Section 5.4. Conduct of Business and Maintenance of Existence.
The Borrower will continue, and will cause each Subsidiary to continue, to
engage in business of the same general type as now conducted by the Borrower
and its Subsidiaries, and will preserve, renew and keep in full force and
effect, and will, except as permitted under Section 5.14, cause each
Subsidiary to preserve, renew and keep in full force and effect, their
respective corporate or other juridical existences and their respective
material rights, privileges and franchises necessary or desirable in the
normal conduct of their respective businesses; provided that nothing in this
Section 5.04 shall prohibit the termination of the corporate or other
juridical existence of any Subsidiary if the Borrower in good faith determines
that such termination is in the best interest of the Borrower and is not
materially disadvantageous to the Banks.
Section 5.5. Compliance with Laws. The Borrower will comply,
and cause each Subsidiary to comply, with all applicable laws, ordinances,
rules, regulations, and requirements of governmental authorities (including,
without limitation, Environmental Laws and ERISA and the rules and regulations
thereunder) except where (i) the necessity of compliance therewith is contested
in good faith by appropriate proceedings diligently conducted or (ii) failure
to comply with such law, ordinance, rule, regulation or requirement cannot
reasonably be expected to have consequences which would materially and
adversely affect the business, consolidated financial position, consolidated
results of operations or prospects of the Borrower and its Consolidated
Subsidiaries, taken as a whole.
Section 5.6. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each Subsidiary to keep, proper books of
record and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities; and will
permit, and will cause each Subsidiary to permit, representatives of any Bank
at such Bank's expense to visit and inspect any of their respective properties,
to examine and make abstracts from any of their respective books and records
and to discuss their respective affairs, finances and accounts with their
respective officers, employees and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
Section 5.7. Transactions with Affiliates. The Borrower will
not, and will not permit any Subsidiary to, engage in any transaction directly
or indirectly with or for the account or benefit of any Affiliate except that:
(a) the Borrower and any Subsidiary may make any Investment
permitted under Section 5.12;
(b) the Borrower may declare or pay any lawful dividend or other
payment ratably in respect of all its capital stock of the relevant class so
long as, after giving effect thereto, no Default shall have occurred and be
continuing, and may, in any event, pay regularly scheduled dividends on
preferred stock issued by the Borrower in accordance with the stated terms
thereof;
(c) the Borrower and any Subsidiary may (i) pay reasonable
compensation, including, but not limited to, stock options and other employee
benefits, which has been approved by the Board of Directors of the Borrower
or any committee thereof to any Affiliate who is an officer, director or
employee of the Borrower or any Subsidiary in such capacity for services
rendered and (ii) afford miscellaneous benefits without approval by the Board
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of Directors of the Borrower to any such Affiliate who is an officer, director
or employee with an aggregate fair value for each such Person in any fiscal
year not exceeding $100,000; and
(d) the Borrower and any Subsidiary may in the ordinary course of
their respective businesses sell assets or provide services to, and purchase
assets or services from, any Affiliate on terms which the Board of Directors of
the Borrower has determined are no less favorable to the Borrower or such
Subsidiary than those available from Persons who are not Affiliates.
Section 5.8. Debt. (a) The Adjusted Debt to Capital Ratio on
the last day of any fiscal quarter of the Borrower ended after the Effective
Date will not exceed 61%.
(b) The Borrower will not permit any Subsidiary to incur,
Guarantee, assume, issue or at any time be liable with respect to any Debt
except that any International Subsidiary may incur, assume or be liable with
respect to any Non-Recourse International Subsidiary Debt.
Section 5.9. Contingent Obligations. The Borrower will not,
and will not permit any Subsidiary to, incur, create, assume, make or at any
time be liable with respect to any Contingent Obligation other than (i) Trade
Letters of Credit, (ii) other Contingent Reimbursement Obligations of the
Borrower incurred in the ordinary course of its business in an aggregate
amount not to exceed $12,000,000 at any time and (iii) Guarantees by the
Borrower of Debt of its Subsidiaries.
Section 5.10. Minimum Consolidated Tangible Net Worth.
Consolidated Tangible Net Worth will at no time be less than an amount equal
to the sum of (i) $136,000,000, (ii) an amount equal to 25% of Consolidated
Net Income for each fiscal quarter ending after March 30, 1997 but before the
date of determination, in each case, for which Consolidate Net Income is
positive (but with no deduction on account of negative Consolidated Net Income
for any fiscal quarter of the Borrower), and (iii) an amount equal to 50% of
the aggregate net proceeds, including the fair market value of property other
than cash (as determined in good faith by the Borrower's Board of Directors),
received by the Borrower from the issuance and sale after the date hereof of
any capital stock of the Borrower (other than the proceeds of any issuance and
sale of any capital stock which capital stock does not result in an increase
to Consolidated Net Worth in the determination thereof at any date) or in
connection with the conversion or exchange of any Debt of the Borrower into
capital stock of the Borrower after March 30, 1997.
Section 5.11. Interest Coverage Ratio. (a) As of the last day
of the fiscal quarter of the Borrower ending most nearly on the last day each
of the periods set forth below, the ratio of Consolidated EBITDA to
Consolidated Net Interest Expense for such period will not be less than the
ratio set forth below opposite such period:
<TABLE>
<S> <C>
Period Ratio
- ---------------------------------------------------- --------
March 31, 1997 - June 30, 1997 1.40:1
March 31, 1997 - September 30, 1997 1.40:1
March 31, 1997 - December 31, 1997 1.40:1
</TABLE>
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(b) As of the last day of each fiscal quarter of the Borrower
ending most nearly on each of the dates set forth below, the ratio of
Consolidated EBITDA to Consolidated Net Interest Expense for the period of four
consecutive fiscal quarters then ended will not be less than the ratio set
forth below:
<TABLE>
<S> <C>
Fiscal Quarter Ending Most Nearly On Ratio
- ------------------------------------------------------- --------
March 31, 1998 1.85:1
June 30, 1998 2.15:1
September 30, 1998 2.40:1
December 31, 1998 2.75:1
March 31, 1999 2.75:1
June 30, 1999 2.75:1
September 30, 1999 3.00:1
December 31, 1999 3.00:1
March 31, 2000 and thereafter 3.25:1
</TABLE>
Section 5.12. Investments. Neither the Borrower nor any
Consolidated Subsidiary will make or acquire any Investment in any Person
other than:
(a) Temporary Cash Investments;
(b) Investments consisting of Acquisitions;
(c) Advances by the Borrower or a Subsidiary to officers, directors
and employees for reasonable moving expenses and business expenses incurred
in the ordinary course of business of the Borrower or any Subsidiary and
consistent with past practice;
(d) Investments by the Borrower in Parras Cone in an aggregate
amount at any time not in excess of the aggregate amount of such Investments
as of the date hereof; and
(e) Investments by the Borrower not permitted by the foregoing
clauses in an aggregate amount (determined at any time in accordance with
GAAP) at any time not to exceed $55,000,000.
Section 5.13. Negative Pledge. Neither the Borrower nor any
Subsidiary will (x) sell, assign or otherwise transfer any accounts receivable
in connection with any financing transaction or (y) create, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal or face
amount not exceeding $5,000,000;
(b) Liens securing Debt incurred in connection with the issuance of
industrial revenue bonds in an aggregate principal amount outstanding at any
time not to exceed $10,000,000;
(c) any Lien existing on any asset of any corporation at the time
such corporation becomes a Subsidiary and not created in contemplation of such
event;
(d) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset;
provided that such Lien attaches to such asset concurrently with or within 90
days after the acquisition thereof;
(e) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into the Borrower or a
Subsidiary and not created in contemplation of such event;
(f) any Lien existing on any asset prior to the acquisition
thereof by the Borrower or a Subsidiary and not created in contemplation of
such acquisition;
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(g) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section; provided that such Debt is not increased and is not
secured by any additional assets;
(h) any Lien for ad valorem taxes not overdue;
(i) Liens arising in the ordinary course of its business or by
operation of law which (i) do not secure Debt, (ii) do not secure any
obligation in an amount exceeding $5,000,000 or any obligation that is overdue
or in default and (iii) do not in the aggregate materially detract from the
value of the assets of the Borrower and its Subsidiaries, taken as a whole, or
materially impair the use thereof in the operation of its business; and
(j) transfers of or Liens on accounts receivable of the Borrower
pursuant to the Receivables Purchase Agreement; provided that the Outstanding
Receivables Financing Amount shall not at any time exceed an aggregate amount
equal to the greater of (i) $65,000,000 and (ii) 30% of Consolidated Net Worth
at such time.
Section 5.14. Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other Person or
(ii) sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Borrower and its Subsidiaries, taken as
a whole, to any other Person; provided that the Borrower may sell accounts
receivable pursuant to the terms of the Receivables Purchase Agreement to the
extent permitted by Section 5.13(j); and provided further that the Borrower may
merge with another Person if (A) the Borrower is the corporation surviving
such merger and (B) immediately after giving effect to such merger, no Default
shall have occurred and be continuing.
Section 5.15. Use of Proceeds. The proceeds of the Loans made
under this Agreement will be used by the Borrower for general corporate
purposes. None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of buying or carrying any
"margin stock" within the meaning of Regulation U.
ARTICLE 6
Defaults
Section 6.1. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of or
interest on any Loan, any fees or any other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.7 to 5.15, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause (a)
or (b) above) for 10 days after written notice thereof has been given to the
Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made
by the Borrower in this Agreement or in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment
in respect of any Material Financing Obligation when due or within any
applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Debt or any Person acting on such holder's behalf to accelerate the maturity
thereof, except for Debt in respect of industrial revenue bonds that is
accelerated, or with the giving of notice or lapse of time or both may be
accelerated, by reason of changes in tax laws or any interpretation thereof;
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(g) the Borrower or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to
the appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action to authorize any
of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Subsidiary under the
federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $5,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to terminate
a Material Plan shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate, to
impose liability (other than for premiums under Section 4007 of ERISA) in
respect of, or to cause a trustee to be appointed to administer any Material
Plan; or a condition shall exist by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any Material Plan must be terminated; or
there shall occur a complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more members of the ERISA Group
to incur a current payment obligation in excess of $5,000,000;
(j) a judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against the Borrower or any Subsidiary and such
judgment or order shall continue unsatisfied and unstayed for a period of 30
days; or
(k) any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under said Act) of 35% or more of the
outstanding shares of common stock of the Borrower; or, at any time during any
period of twelve consecutive calendar months, a majority of the Board of
Directors of the Borrower shall not consist of individuals who were either
directors of the Borrower on the first day of such period ("original
directors") or appointed as or nominated to be directors by individuals
including a majority of those of the original directors who have not, prior to
such appointment or nomination, resigned by reason of disability or died;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the
Borrower terminate the Commitments and they shall thereupon terminate, and
(ii) if requested by Banks holding Notes evidencing more than 50% in aggregate
principal amount of the Loans, by notice to the Borrower declare the Notes
(together with accrued interest thereon) to be, and the Notes shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower;
provided that in the case of any of the Events of Default specified in clause
(g) or (h) above with respect to the Borrower, without any notice to the
Borrower or any other act by the Agent or the Banks, the Commitments shall
thereupon terminate and the Notes (together with accrued interest thereon)
shall become immediately due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower.
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Section 6.2. Notice of Default. The Agent shall give notice
to the Borrower under Section 6.1(c) promptly upon being requested to do so by
any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
The Agent
Section 7.1. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the Notes as
are delegated to the Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto.
Section 7.2. Agent and Affiliates. Morgan Guaranty Trust
Company of New York shall have the same rights and powers under this Agreement
as any other Bank and may exercise or refrain from exercising the same as
though it were not the Agent, and Morgan Guaranty Trust Company of New York
and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower or any Subsidiary or affiliate
of the Borrower as if it were not the Agent hereunder.
Section 7.3. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article 6.
Section 7.4. Consultation with Experts. The Agent may consult
with legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
Section 7.5. Liability of Agent. Neither the Agent nor any of
its affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Agent nor any of its affiliates nor any of their
respective directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this Agreement or any
borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Article 3, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, the Notes or any other instrument or writing furnished in
connection herewith. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile transmission or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.
Section 7.6. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this Agreement or any
action taken or omitted by such indemnitees hereunder.
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Section 7.7. Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent
or any other Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under this Agreement.
Section 7.8. Successor Agent. The Agent may resign at any
time by giving notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of America or
of any State thereof and having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
Section 7.9. Agent's Fee. The Borrower shall pay to the Agent
for its own account fees in the amounts and at the times previously agreed upon
between the Borrower and the Agent.
ARTICLE 8
Change in Circumstances
Section 8.1. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having 50% or more of
the aggregate amount of the Commitments advise the Agent that the Adjusted CD
Rate or the Adjusted London Interbank Offered Rate, as the case may be, as
determined by the Agent will not adequately and fairly reflect the cost to such
Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for
such Interest Period, the Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Agent notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, the obligations of
the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, shall be
suspended. Unless the Borrower notifies the Agent at least two Domestic Business
Day before the date of any Fixed Rate Borrowing for which a Notice of Borrowing
has previously been given that it elects not to borrow on such date, (i) if such
Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be
made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money
Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing
shall bear interest for each day from and including the first day to but
excluding the last day of the Interest Period applicable thereto at the Base
Rate for such day.
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Section 8.2. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Bank (or
its Euro-Dollar Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar
Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank
shall so notify the Agent, the Agent shall forthwith give notice thereof to
the other Banks and the Borrower, whereupon until such Bank notifies the
Borrower and the Agent that the circumstances giving rise to such suspension
no longer exist, the obligation of such Bank to make Euro-Dollar Loans shall
be suspended. Before giving any notice to the Agent pursuant to this Section,
such Bank shall designate a different Euro-Dollar Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such
Bank shall determine that it may not lawfully continue to maintain and fund
any of its outstanding Euro-Dollar Loans to maturity and shall so specify in
such notice, the Borrower shall immediately prepay in full the then
outstanding principal amount of each such Euro-Dollar Loan, together with
accrued interest thereon. Concurrently with prepaying each such Euro-Dollar
Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks), and
such Bank shall make such a Base Rate Loan.
Section 8.3. Increased Cost and Reduced Return. (a) If on or
after (x) the date of this Agreement, in the case of any Committed Loan or any
obligation to make Committed Loans or (y) the date of the related Money Market
Quote, in the case of any Money Market Loan, the adoption of any applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending Office)
to any tax, duty or other charge with respect to its Fixed Rate Loans, its
Note or its obligation to make Fixed Rate Loans, or shall change the basis of
taxation of payments to any Bank (or its Applicable Lending Office) of the
principal of or interest on its Fixed Rate Loans or any other amounts due
under this Agreement in respect of its Fixed Rate Loans or its obligation to
make Fixed Rate Loans (except for changes in the rate of tax on the overall
net income of such Bank or its Applicable Lending Office imposed by the
jurisdiction in which such Bank's principal executive office or Applicable
Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding (A) with respect to any
CD Loan any such requirement included in an applicable Domestic Reserve
Percentage and (B) with respect to any Euro-Dollar Loan any such requirement
included in an applicable Euro-Dollar Reserve Percentage), special deposit,
insurance assessment (excluding, with respect to any CD Loan, any such
requirement reflected in an applicable Assessment Rate) or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
any Bank (or its Applicable Lending Office) or shall impose on any Bank (or
its Applicable Lending Office) or on the United States market for certificates
of deposit or the London interbank market any other condition affecting its
Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans;
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and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Fixed Rate Loan,
or to reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Note with respect
thereto, by an amount deemed by such Bank to be material, then, within 15 days
after demand by such Bank (with a copy to the Agent), the Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank
for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date of
this Agreement, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank
or comparable agency, has or would have the effect of reducing the rate of
return on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by
an amount deemed by such Bank to be material, then from time to time, within
15 days after demand by such Bank (with a copy to the Agent), the Borrower
shall pay to such Bank such additional amount or amounts as will compensate
such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of
any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount, such
Bank may use any reasonable averaging and attribution methods. If any Bank
demands compensation under Section 8.3(a), the Borrower may at any time, upon
at least five Euro-Dollar Business Days' prior notice to such Bank through the
Agent, prepay in full the then outstanding CD Loans or Euro-Dollar Loans, as
the case may be, of such Bank, together with accrued interest thereon to the
date of prepayment. Concurrently with prepaying each such Fixed Rate Loan,
the Borrower shall borrow a Base Rate Loan in an equal principal amount from
such Bank (on which interest and principal shall be payable contemporaneously
with the related CD Loans or Euro-Dollar Loans, as the case may be, of the
other Banks), and such Bank shall make such a Base Rate Loan.
Section 8.4. Base Rate Loans Substituted for Affected Fixed
Rate Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has
been suspended pursuant to Section 8.2 or (ii) any Bank has demanded
compensation under Section 8.3(a) and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through the Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as CD
Loans or Euro-Dollar Loans, as the case may be, shall be made instead as Base
Rate Loans (on which interest and principal shall be payable contemporaneously
with the related Fixed Rate Loans of the other Banks), and
Page 73
<PAGE>
(b) after each of its CD Loans or Euro-Dollar Loans, as the case
may be, has been repaid, all payments of principal which would otherwise be
applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate
Loans instead.
ARTICLE 9
Miscellaneous
Section 9.1. Notices. (a) Except as provided in subsection
(b) of this Section, all notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given to such party: (x) in the
case of the Borrower or the Agent, at its address or telex number set forth on
the signature pages hereof, (y) in the case of any Bank, at its address or
telex number set forth in its Administrative Questionnaire or (z) in the case
of any party, such other address or telex number as such party may hereafter
specify for the purpose by notice to the Agent and the Borrower. Each such
notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (ii) if given by mail in
connection with Section 2.12, 6.1, 6.2, 8.1, 8.3 or 9.3, when received, (iii)
if given by mail in connection with any other Section of this Agreement, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iv) if given by any other means,
when delivered at the address specified in this Section; provided that notices
to the Agent under Article 2 or Article 8 shall not be effective until
received.
(b) The Borrower hereby authorizes (i) the Agent to accept
telephonic Notices of Borrowing to the Agent made by any Person or Persons
whom the Agent in good faith believes to be an authorized officer acting on
behalf of the Borrower and (ii) each of the Banks to extend Loans based on
such Notices of Borrowing. The Borrower agrees to confirm promptly in writing
(including bank wire, telefax, facsimile transmission or similar writing) to
the Agent any telephonic Notice of Borrowing. If the written confirmation
differs in any material respect from the action taken by the Agent, the
records of the Agent shall govern absent manifest error. The Borrower hereby
agrees to indemnify and hold the Agent and the Banks harmless from any loss or
expense they might incur in acting in good faith on the request of any
unauthorized Person.
Section 9.2. No Waivers. No failure or delay by the Agent or
any Bank in exercising any right, power or privilege hereunder or under any
Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 9.3. Expenses; Documentary Taxes; Indemnification. (a)
The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agent,
including reasonable fees and disbursements of special counsel for the Agent,
in connection with the preparation of this Agreement, any waiver or consent
hereunder or any amendment hereof, except for any such waiver, consent or
amendment given or made expressly and solely at the written request of the
Banks, or any Default or alleged Default hereunder and (ii) if an Event of
Default occurs, all out-of-pocket expenses incurred by the Agent and each
Bank, including fees and disbursements of counsel, in connection with such
Event of Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom. The Borrower shall indemnify each Bank
against any transfer taxes, documentary taxes, assessments or charges made by
any governmental authority by reason of the execution and delivery of this
Agreement or the Notes.
Page 74
<PAGE>
(b) The Borrower agrees to indemnify each Bank and hold each Bank
harmless from and against any and all liabilities, losses, damages, costs
(including without limitation, settlement costs) and expenses of any kind,
including, without limitation, the reasonable fees and disbursements of counsel
(including but not limited to allocated time and other reasonable charges of
attorneys who are employees of such Bank) which may be incurred by any Bank
(or by the Agent in connection with its actions as Agent hereunder) in
connection with any investigative, administrative or judicial proceeding
(whether or not such Bank shall be designated a party thereto) relating to or
arising out of this Agreement or any actual or proposed use of proceeds of
Loans hereunder; provided that no Bank shall have the right to be indemnified
hereunder for its own gross negligence or willful misconduct as determined by
a court of competent jurisdiction.
Section 9.4. Sharing of Set-offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to any Note held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to any Note held by such other Bank,
the Bank receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other
adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Notes held by the Banks shall be
shared by the Banks pro rata; provided that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or counterclaim
it may have and to apply the amount subject to such exercise to the payment of
indebtedness of the Borrower other than its indebtedness under the Notes. The
Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Note, whether or not
acquired pursuant to the foregoing arrangements, may exercise rights of
set-off or counterclaim and other rights with respect to such participation as
fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation.
Section 9.5. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of the Agent are affected thereby,
by the Agent); provided that no such amendment or waiver shall, unless signed
by all the Banks, (i) increase or decrease the Commitment of any Bank (except
for a ratable decrease in the Commitments of all Banks) or subject any Bank to
any additional obligation, (ii) reduce the principal of or rate of interest on
any Loan or any fees hereunder, (iii) postpone the date fixed for any payment
of principal of or interest on any Loan or any fees hereunder or for any
reduction or termination of any Commitment, or (iv) change the percentage of
the Commitments or of the aggregate unpaid principal amount of the Notes, or
the number of Banks, which shall be required for the Banks or any of them to
take any action under this Section or any other provision of this Agreement.
Section 9.6. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Borrower
may not assign or otherwise transfer any of its rights under this Agreement
without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
or any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement pursuant to which any
Page 75
<PAGE>
Bank may grant such a participating interest shall provide that such Bank
shall retain the sole right and responsibility to enforce the obligations of
the Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause
(i), (ii), or (iii) of Section 9.5 without the consent of the Participant.
The Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article 8 with respect
to its participating interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes, and such Assignee
shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit G hereto executed
by such Assignee and such transferor Bank, with (and subject to) the
subscribed consent (which consent shall not be unreasonably withheld) of the
Borrower and the Agent; provided that (A) if an Assignee is an affiliate of
such transferor Bank or a Bank, no such consent shall be required, but the
transferor Bank agrees promptly upon such assignment to notify the Borrower
thereof, (B) each assignment hereunder to any Person other than a Bank shall
be in an amount of at least $5,000,000 unless such assignment constitutes an
assignment of all of the transferor Bank's Commitment and Loans hereunder and
(C) such assignment may, but need not, include rights of the transferor Bank
in respect of outstanding Money Market Loans. Upon execution and delivery of
such instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and
such Assignee, such Assignee shall be a Bank party to this Agreement and shall
have all the rights and obligations of a Bank with a Commitment as set forth
in such instrument of assumption, and the transferor Bank shall be released
from its obligations hereunder to a corresponding extent, and no further
consent or action by any party shall be required. Upon the consummation of
any assignment pursuant to this subsection (c), the transferor Bank, the Agent
and the Borrower shall make appropriate arrangements so that, if required, a
new Note is issued to the Assignee. In connection with any such assignment,
the transferor Bank shall pay to the Agent an administrative fee for
processing such assignment in the amount of $3,000. If the Assignee is not
incorporated under the laws of the United States of America or a state
thereof, it shall, prior to the first date on which interest or fees are
payable hereunder for its account, deliver to the Borrower and the Agent
certification as to exemption from deduction or withholding of any United
States federal income taxes in accordance with Section 2.15.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.3 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.2 or 8.3 requiring such
Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
Section 9.7. Collateral. Each of the Banks represents to the
Agent and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
Page 76
<PAGE>
Section 9.8. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court
has been brought in an inconvenient forum.
Section 9.9. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
Section 9.10. Confidentiality. The Agent and each Bank agree
that they will maintain the confidentiality of, and will not use for any
commercial purpose (other than exercising its rights and enforcing its
remedies hereunder and under its Note), any written or oral information
provided under this Agreement by or on behalf of the Borrower that has been
identified by its source as confidential, including any information provided
pursuant to Section 5.6 (hereinafter collectively called "Confidential
Information"), subject to the Agent's and each Bank's (a) obligation to
disclose any such Confidential Information pursuant to a request or order
under applicable laws and regulations or pursuant to a subpoena or other legal
process, (b) right to disclose any such Confidential Information to its bank
examiners, affiliates, auditors, counsel and other professional advisors and
to other Banks, (c) right to disclose any such Confidential Information in
connection with any litigation or dispute involving the Banks and the Borrower
or any of its Subsidiaries and affiliates and (d) right to provide such
information to participants, prospective participants or prospective assignees
pursuant to Section 9.6 if such participant, prospective participant or
prospective assignee agrees to maintain the confidentiality of such
information on terms substantially similar to those of this Section as if it
were a "Bank" party hereto. Notwithstanding the foregoing, any such
information supplied to a Bank, participant, prospective participant or
prospective assignee under this Agreement shall cease to be Confidential
Information if it is or becomes known to such Person by other than
unauthorized disclosure, or if it is, at the time of disclosure, or becomes a
matter of public knowledge.
Section 9.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
Page 77
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
CONE MILLS CORPORATION
By: /s/ Anthony L. Furr
-----------------------
Title: Vice President and
Chief Financial Officer
Address: 3101 North Elm Street
Greensboro, NC 27408
Telex number: 5109251120
Telecopy number: (910) 379-6287
Attention: David E. Bray
Treasurer
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ Christopher C. Kunhardt
-------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ Roger Pelz
------------------
Title: Senior Vice President
NATIONSBANK, N.A.
By: /s/ E. Phifer Helms
-----------------------
Title: Senior Vice President
WACHOVIA BANK, N.A.
By: /s/ W. Stanton Laight
-------------------------
Title: Senior Vice President
Page 78
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By: /s/ Christopher C. Kunhardt
-------------------------------
Title: Vice President
Address: 60 Wall Street
New York, NY 10260-0060
Telex number: 177615
Telecopy number: (212) 648-5336
Attention: Loan Department
Page 79
<PAGE>
Notice Pursuant to Regulation S-K, Item 601(b)(2)
The following schedules and exhibits to the Credit Agreement
dated as of August 7, 1997 have been omitted:
Commitment Schedule
Pricing Schedule
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Mondy Market Quote
Exhibit E - Opinion of General Counsel of the Borrower
Exhibit F - Opinion of Davis Polk & Wardwell, Special Counsel
For The Agent
Exhibit G - Assignment and Assumption Agreement
Registrant hereby agrees to furnish to the Commission
supplementally a copy of any omitted schedule or exhibit upon
request.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Vice President and Secretary
Page 80
<PAGE>
FORM 10-Q
Exhibit 4.7(c)
THIRD AMENDMENT TO THE 401(K) PROGRAM
OF
CONE MILLS CORPORATION
(As Amended and Restated December 1, 1994)
THIRD AMENDMENT, dated August 7, 1997, to The 401(k) Program
of Cone Mills Corporation, as Amended and Restated December 1,
1994, (the "Plan").
RECITALS
The Board of Directors desires to clarify certain provisions
of the Plan and thereby to facilitate plan administration.
NOW, THEREFORE, the Plan be and hereby is amended, effective
January 1, 1997, as follows:
(1) By deleting the last two sentences of Plan Section
6.10(a) and inserting in lieu thereof the following:
"Amounts withdrawn shall be in the following order: (1)
a portion or all of the SRP Voluntary Contribution
Account; (2) a portion or all of the other SRP Accounts;
(3) a portion or all of the EEP Voluntary Contributions
Account; (4) a portion or all of the other EEP Accounts.
Subject to paragraph (b), the maximum amount subject to
withdrawal is the vested balance in the Member's Accounts
as of the Valuation Date immediately preceding the date
of application, but in no event shall a withdrawal be in
excess of the amount necessary to meet the immediate and
heavy financial need of the Member, and a withdrawal of
less than $300 shall not be permitted."
(2) By deleting the heading and text of Plan Section 7.03 and
inserting in lieu thereof the following:
7.03 Investment of Account Pending Distribution
"The respective accounts of a terminated Member or a
Beneficiary who has not elected to take a distribution or
is receiving a distribution in installments may be
invested in any funds set forth in Section 7.01 above
subject to all rights and limitations provided in Section
7.02."
Page 81
<PAGE>
FORM 10-Q
Exhibit 4.7(c) (continued)
IN WITNESS WHEREOF, this Third Amendment, having been approved
by the Board of Directors of Cone Mills Corporation at a meeting
duly held on August 7, 1997 is signed by the Vice President and
Secretary of the Corporation on the 7th day of August, 1997.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Vice President and Secretary
Page 82
FORM 10-Q
Exhibit 4.8(c)
THIRD AMENDMENT TO THE
CONE MILLS CORPORATION 1983 ESOP
(As Amended and Restated December 1, 1994)
THIRD AMENDMENT, dated August 7, 1997, to the Cone Mills
Corporation 1983 ESOP, As Amended and Restated December 1, 1994
(the "1983 ESOP").
RECITALS
A. Certain benefits under the 1983 ESOP are coordinated with
the Corporation's defined benefit pension plans (the "Pension
Plans") through use of a floor offset arrangement. As a result, in
administering the 1983 ESOP, it is necessary for the Advisory
Committee to convert all or part of the annuities payable under the
Pension Plans to lump sum amounts.
B. For purposes of converting the annuities to lump sum
amounts and pursuant to the terms of the 1983 ESOP, the Advisory
Committee has used information provided by Prudential Insurance
Company of America ("Prudential") or another insurance company with
respect to the cost of purchasing a commercial annuity from
Prudential or such other insurance company.
C. Prudential has notified the Advisory Committee that it is
no longer willing to provide the information necessary to convert
annuities to lump sum amounts. However, Prudential has agreed to
continue providing the necessary information through December 31,
1997, provided the 1983 ESOP is amended to delete all references to
Prudential.
D. The Advisory Committee has been unable to obtain an
alternative source of reliable and consistent information with
respect to the cost of purchasing commercial annuities.
E. The Actuary for the Pension Plans has recommended that
the 1983 ESOP be amended to provide that annuities shall be
converted to lump sum amounts by using the mortality table
prescribed under Section 417(e)(3) of the Internal Revenue Code and
an annual rate of interest based on 30-year Treasury securities
(GATT rate), as incorporated in the Pension Plans.
Page 83
<PAGE>
FORM 10-Q
Exhibit 4.8(c) (continued)
F. The Board of Directors desires to amend the 1983 ESOP to
adopt the recommendations of the Actuary and thereby to enable the
Advisory Committee to continue administering the 1983 ESOP
efficiently and in a manner that will expedite the calculation and
distribution of benefits.
NOW, THEREFORE, the 1983 ESOP shall be amended as follows:
(1) Effective August 7, 1997, by deleting from the second
sentence of Plan Section 6.03(c) the phrase "the cost of purchasing
from Prudential Insurance Company of America (or another legal
reserve life insurance company selected by the Advisory Committee
for this purpose)" and inserting in lieu thereof the following:
"the cost of purchasing from a legal reserve life insurance company
selected by the Advisory Committee for this purpose...."
(2) Effective January 1, 1998, subject to the issuance of a
favorable determination letter with respect thereto by the Internal
Revenue Service, by deleting the first three sentences of Plan
Section 6.03(c) in their entirety and inserting in lieu thereof the
following:
"(c) Offset Amount means, with respect to each Member, that
portion of his ESOP A Account balance that would have to
be transferred to the defined benefit plan that is this
Plan's floor plan in the floor-offset plan arrangement
incorported in that defined benefit plan (the "floor
plan") so that there would be no reduction in the
Member's pension benefit under the floor plan by reason
of the floor-offset arrangement. The Offset Amount shall
be the amount determined by using the actuarial
assumptions set forth in the floor plan and converting to
a lump sum that portion of the pension benefit under the
floor plan which is subject to offset by reason of the
floor-offset arrangement."
IN WITNESS WHEREOF, this Third Amendment, having been duly
authorized by the Board of Directors of Cone Mills Corporation at
a meeting duly held on August 7, 1997, is signed by the Vice
President and Secretary of the Corporation on this 7th day of
August, 1997.
CONE MILLS CORPORATION
By: /s/Terry L. Weatherford
Title: Vice President and Secretary
Page 84
FORM 10-Q
Exhibit 10
FOURTH AMENDMENT TO THE
EMPLOYEES' RETIREMENT PLAN
OF
CONE MILLS CORPORATION
(As Amended and Restated December 1, 1994)
FOURTH AMENDMENT, dated August 7, 1997, to the Employees'
Retirement Plan of Cone Mills Corporation, As Amended and
Restated December 1, 1994 (the "Plan").
RECITALS
A. Certain benefits under the Plan are coordinated with
the Cone Mills Corporation 1983 ESOP (the "1983 ESOP") through
use of a floor offset arrangement. As a result, in administering
the Plan, it is necessary for the Pension Committee to convert
all or part of Members' ESOP-A Accounts under the 1983 ESOP (the
"ESOF Accounts") to annuities.
B. For purposes of converting ESOP Accounts to annuities
and pursuant to the terms of the Plan, the Pension Committee has
used information provided by Prudential Insurance Company of
America("Prudential") or another insurance company with respect
to the cost of purchasing a commercial annuity from Prudential or
such other insurance company.
C. Prudential has notified the Pension Committee that it
is no longer willing to provide the information necessary to
convert ESOP Accounts to annuities. However, Prudential has
agreed to continue providing the necessary information through
December 31, 1997, provided the Plan is amended to delete all
references to Prudential.
D. The Pension Committee has been unable to obtain an
alternative source of reliable and consistent information with
respect to the cost of purchasing commercial annuities.
E. The Plan Actuary has recommended to the Pension
Committee that the Plan be amended to provide that ESOP Accounts
shall be converted to annuities by using the mortality table
prescribed under Section 417(e)(3) of the Internal Revenue Code
and an annual rate of interest based on 30-year Treasury
securities (GATT rate).
Page 85
<PAGE>
FORM 10-Q
Exhibit 10 (continued)
F. The Board of Directors desires to amend the Plan to
incorporate the recommendations of the Plan Actuary and thereby
to enable the Pension Committee to continue administering the
Plan efficiently and in a manner that will expedite the
calculation and distribution of benefits.
NOW, THEREFORE, the Plan shall be amended as follows:
(1) Effective August 7, 1997, by deleting from Plan
Sections 1.03(a) and 1.03(b) the phrase "that could then be
purchased from Prudential Insurance Company of America (or
another legal reserve life insurance company selected by the
Pension Committee for this purpose)" and inserting in lieu
thereof the following: "that could then be purchased from a legal
reserve life insurance company selected by the Pension Committee
for this purpose...."
(2) Effective January 1, 1998, subject to the issuance of a
favorable determination letter with respect thereto by the
Internal Revenue Service, by deleting Plan Sections 1.03(a) and
1.03(b) in their entirety and inserting in lieu thereof the
following:
"(a) The Offset Value shall be the amount of the annuity,
payable under the method of payment described in
Article V as elected by the Member or as otherwise
provided in the Plan, that is determined by converting
the Member's ESOP-A Account under the Cone Mills
Corporation 1983 ESOP to that form of annuity using the
assumptions set forth in paragraph 1 of Appendix A.
(b) The Actuarial Equivalent of any Transfer Contribution
shall be the amount of the annuity, payable under the
method of payment described in Article V as elected by
the Member or as otherwise provided in the Plan, that
is determined by converting the Transfer Contribution
to that form of annuity using the assumptions set forth
in paragraph 1 of Appendix A."
IN WITNESS WHEREOF, this Fourth Amendment, having been duly
authorized by the Board of Directors of Cone Mills Corporation at
a meeting duly held on August 7, 1997, is signed by the Vice
President and Secretary of the Corporation on this 7th day of
August, 1997.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Vice President and Secretary
Page 86
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cone Mills
Corporation Consolidated Condensed Financial Statements dated September 28, 1997
and is qualified in its entirety by reference to such financial statements.
(amounts in thousands, except earnings per share data).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-28-1997
<CASH> 2,280
<SECURITIES> 0
<RECEIVABLES> 58,319
<ALLOWANCES> 1,500
<INVENTORY> 121,622
<CURRENT-ASSETS> 192,454
<PP&E> 447,329
<DEPRECIATION> 207,296
<TOTAL-ASSETS> 507,178
<CURRENT-LIABILITIES> 117,166
<BONDS> 139,545
0
38,395
<COMMON> 2,611
<OTHER-SE> 160,470
<TOTAL-LIABILITY-AND-EQUITY> 507,178
<SALES> 546,007
<TOTAL-REVENUES> 546,007
<CGS> 484,458
<TOTAL-COSTS> 484,458
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (9,119)
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