Page 1 of 174
Index to Exhibits - Pages 25-32
UNITED STATES
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 October 3, 1999
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)
(336) 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 29, 1999:
25,485,717 shares.
<PAGE>
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 October 3,
1999 and September 27, 1998
(Unaudited)..............................................3
Consolidated Condensed Balance Sheets
October 3, 1999 and September 27, 1998 (Unaudited)
and January 3, 1999......................................4
Consolidated Condensed Statements of Cash Flows
Thirty-nine weeks ended October 3, 1999
and September 27, 1998 (Unaudited).......................5
Notes to Consolidated Condensed Financial Statements
(Unaudited)..............................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..............15
Item 3. Quantitative and Qualitative Disclosures about Market Risk.....22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................22
Item 5. Other Information..............................................24
Item 6. Exhibits and Reports on Form 8-K...............................24
<PAGE>
Item 1. Part I
<TABLE>
<S> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
October 3, September October 3, September
1999 27, 1998 1999 27, 1998
-------------- ------------- -------------- --------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $147,197 187,359 478,946 574,834
Cost of Goods Sold 136,521 167,618 438,684 517,810
-------------- ------------- -------------- --------------
Gross Profit 10,676 19,741 40,262 57,024
Selling and Administrative 11,992 14,663 37,022 42,484
Restructuring and Impairment of Assets 3,100 132 16,017 132
-------------- ------------- -------------- --------------
Income (Loss) from Operations (4,416) 4,946 (12,777) 14,408
-------------- ------------- -------------- --------------
Other Income (Expense)
Interest income 400 837 1,276 2,199
Interest expense (3,521) (3,534) (10,678) (11,255)
Other expense (264) - (264) -
-------------- ------------- -------------- --------------
(3,385) (2,697) (9,666) (9,056)
-------------- ------------- -------------- --------------
Income (Loss) before Income Taxes (Benefit),
Equity in Earnings (Losses) of Unconsolidated
Affiliate and Cumulative Effect of Accounting
Change (7,801) 2,249 (22,443) 5,352
Income Taxes (Benefit) (2,808) 742 (7,775) 1,766
-------------- ------------- -------------- --------------
Income (Loss) before Equity in Earnings (Losses)
of Unconsolidated Affiliate and Cumulative
Effect of Accounting Change (4,993) 1,507 (14,668) 3,586
Equity in Earnings (Losses) of Unconsolidated
Affiliate (405) 1,285 1,552 3,801
-------------- ------------- -------------- --------------
Income (Loss) before Cumulative Effect of
Accounting Change (5,398) 2,792 (13,116) 7,387
Cumulative Effect of Accounting Change - - (1,038) -
-------------- ------------- -------------- --------------
Net Income (Loss) $ (5,398) $ 2,792 $ (14,154) $ 7,387
============== ============= ============== ==============
Income (Loss) Available to Common Shareholders
Income (Loss) before Cumulative Effect of
Accounting Change $ (6,188) $ 2,072 $ (15,416) $ 5,194
Cumulative Effect of Accounting Change - - (1,038) -
============== ============= ============== ==============
Net Income (Loss) $ (6,188) $ 2,072 $ (16,454) $ 5,194
============== ============= ============== ==============
Earnings (Loss) Per Share - Basic and Diluted
Income (Loss) before Cumulative Effect of
Accounting Change $ (0.24) $ 0.08 $ (0.61) $ 0.20
Cumulative Effect of Accounting Change - - (0.04) -
============== ============= ============== ==============
Net Income (Loss) $ (0.24) $ 0.08 $ (0.65) $ 0.20
============== ============= ============== ==============
Weighted-Average Common Shares Outstanding
Basic 25,486 25,972 25,453 26,107
============== ============= ============== ==============
Diluted 25,486 25,994 25,453 26,162
============== ============= ============== ==============
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and par value data)
October 3, September 27, January 3,
1999 1998 1999
-------------- -------------- -------------
(Unaudited) (Unaudited) (Note)
ASSETS
Current Assets
Cash $ 3,925 $ 624 $ 639
Accounts receivable, less allowances of $5,050; 1998, $1,500 48,798 29,237 26,010
Subordinated note receivable - 28,515 10,414
Inventories 118,393 118,200 120,430
Other current assets 10,504 15,524 10,253
-------------- -------------- -------------
Total Current Assets 181,620 192,100 167,746
Investments in Unconsolidated Affiliates 46,003 40,582 45,489
Other Assets 36,158 35,848 36,616
Property, Plant and Equipment 222,543 250,104 238,666
-------------- -------------- -------------
$ 486,324 $ 518,634 $ 488,517
============== ============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ - $ 8,500 $ 1,000
Notes payable 67,714 10,714 10,714
Current maturities of long-term debt
41,280 34,317 27,255
Accounts payable
Sundry accounts payable and accrued liabilities 34,688 48,233 42,071
Deferred income taxes 15,158 20,230 22,670
-------------- -------------- -------------
Total Current Liabilities 158,840 121,994 103,710
Long-Term Debt 119,004 146,274 161,385
Deferred Income Taxes 32,588 42,949 30,050
Other Liabilities 11,702 11,315 11,448
Stockholders' Equity
Class A preferred stock - $100 par value; authorized 1,500,000 shares;
issued and outstanding 372,638 shares;
1998, 383,948 shares 37,264 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 25,485,717 shares;
1998, 25,459,433 shares and 25,432,233 shares 2,549 2,546 2,543
Capital in excess of par 57,522 57,418 57,264
Retained earnings 75,761 106,860 92,799
Deferred compensation - restricted stock (448) (617) (579)
Accumulated other comprehensive loss, currency translation
adjustment (8,458) (8,500) (8,498)
-------------- -------------- ------------
Total Stockholders' Equity 164,190 196,102 181,924
-------------- -------------- -------------
$ 486,324 $ 518,634 $ 488,517
============== ============== =============
</TABLE>
Note: The balance sheet at January 3, 1999, has been derived from
the financial statements at that date.
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
<TABLE>
<S> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
October 3, 1999 September 27, 1998
------------------ --------------------
(Unaudited) (Unaudited)
CASH PROVIDED BY OPERATIONS $ 1,327 $ 19,636
------------------ --------------------
INVESTING
Proceeds from sale of property, plant and equipment 2,824 5,495
Capital expenditures (8,040) (21,933)
------------------ --------------------
Cash used in investing (5,216) (16,438)
------------------ --------------------
FINANCING
Net borrowings (payments) under line of credit agreements (1,000) 4,000
Decrease in checks issued in excess of deposits (2,377) (5,945)
Principal payments on long-term debt (10,714) (10,714)
Proceeds from long-term debt borrowings 25,000 17,000
Proceeds from sale of common stock 326 -
Purchase of outstanding common stock (45) (4,795)
Dividends paid - Class A Preferred (87) (2,976)
Redemption of Class A Preferred stock (3,928) -
------------------ -------------------
Cash provided by (used in) financing 7,175 (3,430)
------------------ --------------------
Net change in cash 3,286 (232)
Cash at Beginning of Period 639 856
------------------ --------------------
Cash at End of Period $ 3,925 $ 624
================== ====================
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest $ 13,588 $ 14,376
================== ====================
Income taxes, net of refunds $ 280 $ (7,058)
================== ====================
Supplemental Schedule of Noncash Investing and Financing Activities:
Stock dividend - Class A Preferred Stock $ 2,797 $ -
================== ====================
Purchase of outstanding common stock through incurrence of accounts
payable $ - $ 153
================== ====================
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Basis of Financial Statement Preparation
The Cone Mills Corporation (the "Company") consolidated condensed financial
statements for October 3, 1999 and September 27, 1998 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 October 3, 1999, September 27, 1998, and January 3, 1999, and the related
consolidated condensed statements of operations for the respective thirteen and
thirty-nine weeks ended October 3, 1999 and September 27, 1998 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 year 1998.
Inventories are stated at the lower of cost or market. The last-in, first-out
(LIFO) method is used to determine cost of most domestically produced goods. The
first-in, first-out (FIFO) or average cost methods are used to determine cost of
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 October 3, 1999 and September 27, 1998 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. Inventories
<TABLE>
<S> <C> <C> <C>
(in thousands) 10/03/99 9/27/98 1/03/99
Greige and finished goods $ 86,745 $ 79,820 $ 87,087
Work in process 6,554 10,751 9,810
Raw materials 13,685 15,403 11,508
Supplies and other 11,409 12,226 12,025
$ 118,393 $ 118,200 $ 120,430
Note 3. Long-Term Debt
(in thousands) 10/03/99 9/27/98 1/03/99
Senior Note $ 32,143 $ 42,858 $ 42,858
Revolving Credit Agreement 57,000 17,000 32,000
8 1/8% Debentures 97,575 97,130 97,241
186,718 156,988 172,099
Less current maturities 67,714 10,714 10,714
$ 119,004 $ 146,274 $ 161,385
</TABLE>
<PAGE>
The Senior Note agreement and Revolving Credit Agreement both contain
restrictive covenants that require, among other requirements, the maintenance of
defined levels of tangible net worth and interest coverage. At October 3, 1999,
the Company did not comply with these specific covenant requirements for which
the Company received waivers and amendments on October 3, 1999.
Note 4. Class A Preferred Stock
On February 11, 1999, the Company declared a 7.5% stock dividend on the
Company's Class A Preferred Stock, which was paid on March 31, 1999. The
dividend was charged to retained earnings in the amount of approximately $2.8
million. The 2000 dividend rate for Class A Preferred Stock is 8.0%, payable
March 31, 2000.
Note 5. Depreciation and Amortization
The following table presents depreciation and amortization included in the
consolidated condensed statements of operations.
<TABLE>
<S> <C> <C> <C> <C>
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
10/03/99 9/27/98 10/03/99 9/27/98
Depreciation $ 5,709 $ 7,110 $ 18,801 $ 21,333
Amortization 664 664 2,014 2,013
$ 6,373 $ 7,774 $ 20,815 $ 23,346
</TABLE>
<PAGE>
Note 6. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted earnings
(loss) per common share ("EPS").
<TABLE>
<S> <C> <C>
(in thousands, except Thirteen Thirteen
per share data) Weeks Ended Weeks Ended
10/03/99 9/27/98
Net income (loss) $ (5,398) $ 2,792
Preferred stock dividends (790) (720)
Basic EPS - income (loss) available
to common shareholders (6,188) 2,072
Effect of dilutive securities - -
Diluted EPS - income (loss) available to
common shareholders after assumed
conversions $ (6,188) $ 2,072
Determination of shares:
Basic EPS - weighted-average shares 25,486 25,972
Effect of dilutive securities - 22
Diluted EPS - adjusted weighted-average
shares after assumed conversions 25,486 25,994
Earnings (loss) per share - basic and diluted $ ( 0.24) $ 0.08
<PAGE>
Note 6. Earnings (Loss) Per Share (continued)
The following table sets forth the computation of basic and diluted earnings
(loss) per common share ("EPS").
(in thousands, except Thirty-Nine Thirty-Nine
per share data) Weeks Ended Weeks Ended
10/03/99 9/27/98
Income (loss) before cumulative $ (13,116) $ 7,387
effect of accounting change
Preferred stock dividends (2,300) (2,193)
Income (loss) before cumulative
effect of accounting change
available to common shareholders (15,416) 5,194
Cumulative effect of accounting change (1,038) -
Basis EPS - income (loss) available
to common shareholders (16,454) 5,194
Effect of dilutive securities - -
Diluted EPS - income (loss) available to
common shareholders after assumed
conversions $(16,454) $ 5,194
Determination of shares:
Basis EPS - weighted-average shares 25,453 26,107
Effect of dilutive securities - 55
Diluted EPS - adjusted weighted-average
shares after assumed conversions 25,453 26,162
Earnings (loss) per share - basic and diluted
Income (loss) before cumulative effect
of accounting change $ ( 0.61) $ 0.20
Cumulative effect of accounting change ( 0.04) -
Net income (loss) $ ( 0.65) $ 0.20
Common stock options outstanding at October 3, 1999 were not included in the
computation of diluted earnings per share because to do so would have been
antidilutive.
</TABLE>
<PAGE>
Note 7. Segment Information
The Company has four principal business segments, which are based upon
organizational structure: 1) denim and khaki; 2) yarn-dyed products; 3)
commission finishing; and 4) decorative fabrics.
Operating income (loss) for each segment is total revenue less operating
expenses applicable to the segment. Intersegment revenue relates to the
commission finishing segment. Equity in earnings of unconsolidated affiliate is
included in the denim and khaki segment. Restructuring and impairment of asset
expenses, unallocated expenses, interest and other expenses, income taxes and
cumulative effect of accounting change are not included in segment operating
income (loss).
Net sales and income (loss) from operations for the Company's operating segments
are as follows:
<TABLE>
<S> <C> <C>
(in thousands) Thirteen Thirteen
Weeks Ended Weeks Ended
10/03/99 9/27/98
Net Sales
Denim and Khaki $ 108,493 $ 144,777
Yarn-Dyed Products 1,760 5,130
Commission Finishing 20,453 26,134
Decorative Fabrics 19,689 15,390
Other 348 692
150,743 192,123
Less Intersegment Sales 3,546 4,764
$ 147,197 $ 187,359
Income (Loss) from Operations
Denim and Khaki $ 2,380 $ 15,923
Yarn-Dyed Products (1,290) (3,943)
Commission Finishing (1,993) (3,892)
Decorative Fabrics 422 53
Other (153) (445)
Unallocated Expenses (1,087) (1,465)
(1,721) 6,231
Restructuring and Impairment of Assets (3,100) -
(4,821) 6,231
Less Equity in Earnings (Losses) of
Unconsolidated Affiliate (405) 1,285
(4,416) 4,946
Other Expense, Net (3,385) (2,697)
Income (Loss) before Income Taxes (Benefit),
Equity in Earnings (Losses) of
Unconsolidated Affiliate and Cumulative
Effect of Accounting Change $ (7,801) $ 2,249
</TABLE>
<PAGE>
32
Note 7. Segment Information (continued)
<TABLE>
<S> <C> <C>
(in thousands) Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
10/03/99 9/27/98
Net Sales
Denim and Khaki $ 348,366 $ 432,890
Yarn-Dyed Products 15,831 29,163
Commission Finishing 72,694 81,343
Decorative Fabrics 54,037 41,049
Other 1,248 4,141
492,176 588,586
Less Intersegment Sales 13,230 13,752
$ 478,946 $ 574,834
Income (Loss) from Operations
Denim and Khaki $ 18,947 44,655
Yarn-Dyed Products (5,095) (7,275)
Commission Finishing (5,665) (12,499)
Decorative Fabrics 1,295 (668)
Other (411) (933)
Unallocated Expenses (4,279) (5,071)
4,792 18,209
Restructuring and Impairment of Assets (16,017) -
(11,225) 18,209
Less Equity in Earnings of
Unconsolidated Affiliate 1,552 3,801
(12,777) 14,408
Other Expense, Net (9,666) (9,056)
Income (Loss) before Income Taxes (Benefit),
Equity in Earnings of Unconsolidated
Affiliate and Cumulative Effect of
Accounting Change $ (22,443) $ 5,352
</TABLE>
Note 8. Comprehensive Income (Loss)
Comprehensive income (loss) is the total of net income (loss) and other changes
in equity, except those resulting from investments by owners and distributions
to owners not reflected in net income (loss). Total comprehensive income (loss)
for the periods was as follows:
<TABLE>
<S> <C> <C>
(in thousands) Thirteen Thirteen
Weeks Ended Weeks Ended
10/03/99 9/27/98
Net income (loss) $ (5,398) $ 2,792
Other comprehensive income,
currency translation adjustment 59 38
$ (5,339) $ 2,830
Note 8. Comprehensive Income (Loss) (continued)
(in thousands) Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
10/03/99 9/27/98
Net income (loss) $(14,154) $ 7,387
Other comprehensive income,
currency translation adjustment 40 4
$ (14,114) $ 7,391
</TABLE>
Note 9. Reclassification of Selling and Administrative
In the first quarter of 1999 the Company changed the criteria for items to be
included in selling and administrative expenses to conform to prevailing
industry practices. The Company has restated its prior year consolidated
condensed statement of operations to reflect the new classification criteria.
This resulted in the reclassification of $7.5 million and $22.1 million from
selling and administrative expenses to cost of goods sold for the thirteen and
thirty-nine weeks ended September 27, 1998, respectively.
Note 10. Cumulative Effect of Accounting Change
Beginning in fiscal year 1999, the Company adopted Statement of Position ("SOP")
98-5, "Reporting on the Costs of Start-Up Activities," which requires future
start-up costs to be expensed as incurred and previously capitalized start-up
costs to be expensed when SOP 98-5 is adopted. The Company recognized a charge
of $1.0 million, the Company's 50% portion of Parras Cone's unamortized start-up
costs, as a cumulative effect of an accounting change in the first quarter of
1999. Had SOP 98-5 not been adopted during the first quarter of 1999, net loss
would have been reduced by $0.8 million, or $0.03 per share, for the thirty-nine
weeks ended October 3, 1999.
Note 11. Securitization of Accounts Receivable
Funds generated by the sale of receivables in the U.S. are provided through Cone
Receivables II LLC ("CRIILLC"). CRIILLC's sole business is the ongoing purchase
of certain trade receivables from Cone Mills Corporation. CRIILLC sells an
undivided 100% ownership interest in these receivables under an agreement (the
"Accounts Receivable Facility") with Redwood Receivables Corporation
("Redwood"), whose purchases yield proceeds of up to $50 million at any point in
time. Redwood issues commercial paper backed by, among other things, Redwood's
ownership interest in the receivables. CRIILLC is a separate corporate entity
with its own separate creditors who, in the event of its liquidation, will be
entitled to be satisfied out of CRIILLC's assets prior to any value in CRIILLC
becoming available to the Company. This Accounts Receivable Facility expires in
August 2004.
Under this securitization agreement, the sale price to CRIILLC for the
receivables will be subject to a purchase discount equal to a percentage over
Redwood's commercial paper interest rate, which percentage may vary based upon
the Company's operating performance. At present, the percentage over the
commercial paper rate is 1.00%. As of October 3, 1999, the total amount
outstanding under the Accounts Receivable Facility was $48.7 million. Fees
incurred in connection with the sale of accounts receivable for the three months
ended October 3, 1999, were $264,000 and were recorded as other expense.
Note 12. Subsequent Event - Amendment of the Articles of Incorporation
On October 14, 1999, the Company's Board of Directors amended the Company's
Restated Articles of Incorporation creating a series of Class B Preferred Stock
(the "Class B Preferred Stock (Series A)"). The number of shares constituting
the Class B Preferred Stock (Series A) is 500,000. The Class B Preferred Stock
(Series A) is junior to the Class A Preferred Stock and senior to Common Stock
in dividends or distributions of assets upon liquidation, dissolution or winding
up of the Company. Dividends on the Class B Preferred Stock (Series A) are
cumulative and accrue from the quarterly dividend payment date. Each share of
Class B Preferred Stock (Series A) entitles the holder thereof to 100 votes on
all matters submitted to a vote of shareholders of the Company. Except as
otherwise provided, the holders of shares of Class B Preferred Stock (Series A)
and the holders of shares of the Company's common stock vote together as a
single class on all matters submitted to a vote of shareholders of the Company.
These shares were reserved under the Shareholder Rights Plan. See Note 13 to
Consolidated Condensed Financial Statements.
Note 13. Subsequent Event - Shareholder Rights Plan
On October 14, 1999, the Company's Board of Directors adopted a new Shareholder
Rights Plan (the "Plan"). Under the terms of the Plan, Company common stock
acquired by a person or a group buying 20% or more of the Company's common stock
would be diluted, except in transactions approved by the Board of Directors.
Under the terms of the Plan the Company's Board of Directors declared a dividend
distribution of one right (a "Right") for each outstanding share of the
Company's common stock paid on November 1, 1999, to shareholders of record at
the close of business on October 25, 1999. Each Right entitles the registered
holder to purchase from the Company a unit (a "Unit") consisting of one
one-hundredth of a share of Class B Preferred Stock (Series A) at a purchase
price of $30 per Unit. Under the Plan, the Rights detach and become exercisable
upon the earlier of (i) ten days following public announcement that a person or
group of affiliated or associated persons has acquired, or obtained the right to
acquire, beneficial ownership of 20% or more of the outstanding shares of the
Company's common stock, or (ii) ten business days following the commencement of,
or first public announcement of the intent of a person or group to commence, a
tender offer or exchange offer that would result in a person or group
beneficially owning 20% or more of such outstanding shares of the Company's
common stock. The exercise price, the kind and the number of shares covered by
each right are subject to adjustment upon the occurrence of certain events
described in the Plan.
If the Company is acquired in a merger or consolidation in which the Company is
not the surviving corporation, or the Company engages in a merger or
consolidation in which the Company is the surviving corporation and the
Company's common stock is changed or exchanged, or more than 50% of the
Company's assets or earning power is sold or transferred, the Rights entitle a
holder (other than the acquiring person or group) to buy, at the exercise price,
stock of the acquiring Company having a market value equal to twice the exercise
price. Following an acquisition by any person or group of 20% or more of the
Company's common stock, but prior to the acquisition by such person or group of
50% or more of the outstanding common stock, the Company's Board of Directors
may exchange the Rights (other than the Rights owned by such person or group),
in whole or in part, at an exchange ratio of one share of the Company's common
stock, or one one-hundredth of a share of Preferred Stock, per Right.
The Rights expire on October 13, 2009, and are redeemable upon action by the
Board of Directors at a price of $.01 per right at any time before they become
exercisable.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Third Quarter Ended October 3, 1999 Compared with Third Quarter Ended September
27, 1998.
Cone Mills had sales for the third quarter of 1999 of $147.2 million, down
21.4%, as compared with the third quarter of 1998 sales of $187.4 million. For
the 1999 period, sales of denim and khaki, yarn-dyed products, and commission
finishing decreased, partially offset by increased decorative fabric sales.
Starting in the fourth quarter of 1998, and continuing through the first nine
months of 1999, denim sales slowed significantly, the result of weaker consumer
interest in denims.
Gross profit for the third quarter of 1999 decreased to 7.3% of sales, as
compared with 10.5% for the previous year. Lower volume and pricing in denims
more than offset the improved operating results in commission finishing and
decorative fabrics.
Segment Information. Cone operates in four principal business segments: denim
and khaki, yarn-dyed products, commission finishing and decorative fabrics.
See Note 7 to Notes to Consolidated Condensed Financial Statements (unaudited)
included in Part 1, Item 1.
Denim and Khaki. For the third quarter of 1999, denim and khaki segment
sales were $108.5 million, down 25.1% from the third quarter of 1998 sales
of $144.8 million. Lower sales volume and prices in denim resulted
primarily from the negative impact of weaker consumer interest in denims
and the resulting over-supply conditions, coupled with price pressure
associated with supply and demand, declining cotton prices and inventory
adjustments at the mill and retail level. For the third quarter of 1999,
operating income for the denim and khaki segment was $4.4 million, or 4.0%
of sales before a $2.0 million inventory charge for the exit of piece-dyed
shirting as discussed below in the Commission Finishing segment. This
compared with income of $15.9 million, or 11.0%, for the third quarter of
1998. The reduced margin and income resulted primarily from lower volume
and prices and reduced plant operating schedules. Operating income for the
segment includes the equity in earnings (losses) from the Parras Cone joint
venture.
<PAGE>
Yarn-Dyed Products. As part of the restructuring program, the Company
ceased manufacturing yarn-dyed products in May 1999. For the third quarter
of 1999, sales of yarn-dyed products were $1.8 million, as compared with
$5.1 million in the 1998 period. While most of the operating losses for
this segment were previously reserved under the Company's restructuring
plan, a loss of $1.3 million was included in segment data for the third
quarter of 1999 due primarily to realization of lower than anticipated
prices on inventory. For the 1998 period, the yarn-dyed products segment
had an operating loss of $3.9 million.
Commission Finishing. Outside sales of commission finishing from the
Carlisle and Raytex plants were $16.9 million for the third quarter of
1999, down 20.9% from $21.4 million for the third quarter of 1998. Lower
sales of print home furnishings and over-the-counter fabrics accounted for
the decline. Despite the sharply reduced sales, the segment had improved
operating results. For the third quarter of 1999, the loss was $2.0
million, an improvement of 48.8% from the loss of $3.9 million for the
third quarter of 1998. During the third quarter of 1999 the Company
implemented a substantial restructuring, downsizing and refocusing of the
Carlisle Finishing plant. Refocusing the product line included the exiting
of the piece-dyed shirting (chamois) business. Associated with the Carlisle
restructuring initiative, the Company recognized restructuring charges of
$2.7 million in the quarter for severance pay and related benefits,
consulting expenses and writedown of certain production equipment.
Decorative Fabrics. For the third quarter of 1999, sales of the decorative
fabrics segment were $19.7 million, up 27.9% from sales of $15.4 million
for the third quarter of 1998. Cone Jacquard's sales improved as capacity
expanded and John Wolf decorative fabrics sales were up as the unit
improved its product offering and marketing effort. The decorative fabrics
segment had earnings of $0.4 million for the third quarter of 1999 compared
with $0.1 million for the third quarter of 1998.
Selling and administrative expenses for the third quarter of 1999 were $12.0
million, or 8.1% of sales, as compared with $14.7 million, or 7.8% of sales in
the third quarter of 1998. The lower dollar amount of selling and administrative
expense reflects the cost savings realized from restructuring initiatives.
Selling and administrative expenses for 1998 were restated to conform to
industry practices.
Interest expense for the third quarter of 1999 was $3.5 million, the same as the
third quarter of 1998.
For the third quarter of 1999, the income tax benefit as a percent of the
taxable loss was 36.0%. For the third quarter of 1998, income taxes as a percent
of taxable income were 33%.
Equity in earnings (losses) of Parras Cone, the Company's joint venture plant in
Mexico, was a loss of $0.4 million for the third quarter of 1999, as compared
with income of $1.3 million for the 1998 period. The change represents higher
cotton costs as a percentage of sales and additional marketing and management
fees paid to the joint venture partners.
<PAGE>
For the third quarter of 1999, Cone Mills had net loss of $5.4 million, or $.24
per share after preferred dividends. Included in the quarter were pre-tax
charges of $5.1 million for restructuring and exit inventory charges, resulting
primarily from the implementation of the Company's turnaround plan at Carlisle.
Also, there was a loss of $0.8 million associated with the liquidation of
remaining yarn-dyed shirting inventories. Excluding those charges, the loss was
$.09 per share. For comparison, third quarter 1998 net income was $2.8 million,
or $.08 per share after preferred dividends.
Nine Months Ended October 3, 1999 Compared with Nine Months Ended September 27,
1998
For the first nine months of 1999, Cone Mills had sales of $478.9 million, down
16.7% from sales of $574.8 million for the first nine months of 1998, primarily
due to a sales shortfall in denim. Lower denim sales resulted from weaker
consumer interest in jeans and adjustments to retail and manufacturing
inventories.
Gross profit for the first nine months of 1999 decreased to 8.4% of sales, as
compared with 9.9% for the previous year. Lower volume and pricing in denims and
the aggressive elimination of unprofitable lines and inventories more than
offset the improved operating results in commission finishing and decorative
fabrics.
Segment Information. Cone operates in four principal business segments: denim
and khaki, yarn-dyed products, commission finishing and decorative fabrics.
See Note 7 to Notes to Consolidated Condensed Financial Statements (unaudited)
included in Part 1, Item 1.
Denim and Khaki. For the first nine months of 1999, denim and khaki segment
sales were $348.4 million, down 19.5% from the first nine months of 1998
sales of $432.9 million. Almost all of the sales shortfall resulted from
lower sales volume and prices for denims. Operating income of the denim and
khaki segment for the first nine months of 1999 was $21.2 million excluding
exit inventory charges for piece-dyed shirting and denim yarn
manufacturing, or 6.1% of sales, compared with $44.7 million, or 10.3%, for
the first nine months of 1998. The reduced margin and income resulted
primarily from lower sales volume, lower prices, reduced plant operating
schedules and closeouts on khaki inventories as the Company refocused this
product line. Operating income for the segment includes the equity in
earnings from the Parras Cone joint venture plant.
Yarn-Dyed Products. The Company ceased manufacturing yarn-dyed products in
May 1999. For the first nine months of 1999, sales of yarn-dyed products
were $15.8 million, down from $29.2 million in the 1998 period. For the
first nine months of 1999, the yarn-dyed products segment had an operating
loss of $5.1 million, as compared with a loss of $7.3 million for the first
nine months of 1998.
Commission Finishing. Outside sales of the commission finishing segment,
which consists of the Carlisle and Raytex plants, were $59.5 million for
the first nine months of 1999, down 12.0% from $67.6 million for the first
nine months of 1998. Anticipated recovery in print demand in 1999 has not
materialized. For the 1999 period, the operating loss was $5.7 million, an
improvement of 54.7% from the loss of $12.5 million for the 1998 period. As
discussed earlier, during the third quarter of 1999, the Company
implemented a substantial restructuring, downsizing and refocusing of the
Carlisle Finishing plant.
Decorative Fabrics. For the first nine months of 1999, sales of the
decorative fabrics segment were $54.0 million, up 31.6% from sales of $41.0
million for the 1998 period. Cone Jacquard's sales improved as capacity
expanded and John Wolf decorative fabrics sales improved. The decorative
fabrics segment had earnings of $1.3 million for the 1999 period compared
with a loss of $0.7 million for the first nine months of 1998. Results for
1999 were negatively impacted by higher than expected start-up costs
related to capacity additions at the jacquard plant.
<PAGE>
Selling and administrative expenses for the first nine months of 1999 were $37.0
million, or 7.7% of sales, as compared with $42.5 million, or 7.4% of sales in
the 1998 period. The lower dollar amount of selling and administrative expenses
reflects the cost savings realized from restructuring initiatives. Selling and
administrative expenses for 1998 were restated to conform to industry practices.
Interest expense for the first nine months of 1999 was $10.7 million, down from
$11.3 million for the 1998 period.
For the first nine months of 1999, the income tax benefit as a percent of the
taxable loss was $34.6%. In the 1998 period, income tax as a percent of income
was 33.0%.
Equity in earnings of Parras Cone, the Company's joint venture plant in Mexico,
was $1.6 million for the first nine months of 1999, as compared with $3.8
million for the 1998 period. In the 1999 period, the plant had lower capacity
utilization, higher cotton costs as a percentage of sales, and additional
marketing and management fees paid to the joint venture partners.
For the first nine months of 1999, the Company had a net loss of $14.2 million,
or $.65 per share after preferred dividends. This included a $1.0 million
after-tax charge from the cumulative effect of an accounting change related to
capitalized start-up costs. In the period, the Company also recognized pre-tax
restructuring and related expenses of $19.6 million associated with its
restructuring programs and incurred additional losses of $3.0 million associated
with the sale of yarn-dyed shirtings inventories resulting from the exit of this
business. Excluding those restructuring charges, related exit expenses and the
accounting change, the Company had a loss of $.02 per share after preferred
dividends. For comparison, in the first nine months of 1998, Cone Mills had net
income of $7.4 million, or $.20 per share after preferred dividends.
Liquidity and Capital Resources
The Company's principal long-term capital components consist of debt outstanding
under its Senior Note, its 8 1/8% Debentures and stockholders; equity. Primary
sources of liquidity are internally generated funds, an $80 million Revolving
Credit Facility (under which $23 million was available on October 3, 1999), and
a new $50 million Receivable Purchase and Servicing Agreement (the "Receivables
Agreement") entered into on September 1, 1999 with Cone Receivables II LLC,
Redwood Receivables Corporation, an affiliate of General Electric Capital
Corporation ("Redwood"), and General Electric Capital Corporation. The new
Receivables Agreement will terminate in August 2004 and replaces a similar
facility with Delaware Funding Corporation.
Pursuant to the Receivables Agreement documents, the Company will sell or
contribute to Cone Receivables II LLC certain of their accounts receivable and
Cone Receivables II LLC will in turn sell to Redwood an undivided 100% ownership
interest in such receivables. Redwood will then issue commercial paper backed
by, among other things, Redwood's ownership interest in the receivables. The
sale price to Cone Receivables II LLC for the receivables will be subject to a
purchase discount equal to a percentage over Redwood's commercial paper interest
rate, which percentage may vary based upon the Company's operating performance.
At present, the percentage over the commercial paper rate is 1.00%.
<PAGE>
The Company is currently in negotiation with its banks to amend and restate the
current Revolving Credit Facility. The Company expects the amended and restated
Revolving Credit Facility to be secured by Company assets. Waivers and
amendments for covenant compliance under certain credit agreements at October 3,
1999 are in place. The Company has received commitments from its banks to amend
and restate the Revolving Credit Facility and expects to consummate the credit
facility prior to the expiration of any waivers or amendments.
During the first nine months of 1999, the Company generated cash from
operations, before changes in working capital, of $4.1 million, as compared with
$25.7 million for the first nine months of 1998. In the 1999 period, working
capital increased by $2.8 million. Uses of cash in the 1999 period included $8.0
million for capital expenditures and $3.9 million for the redemption of
preferred stock.
The Company believes that internally generated operating funds and funds
available under its credit facilities will be sufficient to meet its needs for
the foreseeable future. International investments, including the proposed denim
facility discussed below, will require additional long-term financing.
In April 1999, Guilford Mills, Inc. and the Company entered into a 50/50 joint
venture to develop and operate a new textile and apparel industrial park in
Altamira, near Tampico, Tamaulipas, Mexico. It is expected that the investment
for the infrastructures for Cone will range from $6 million to $10 million.
A textile plant planned to be built on the property by Cone will be a ring-spun,
value-added denim plant with a capacity of 20 million yards expandable to 40
million yards. The Company expects to invest $40 million to $75 million in the
initial denim facility depending upon whether it outsources yarn manufacturing,
forms a yarn alliance or produces its own yarn. The Company could invest an
additional $30 million to $45 million for the expansion to 40 million yards. The
funds required for this facility will require debt financing, which the Company
has not arranged at this date.
On October 3, 1999, the Company's long-term capital structure consisted of
$176.0 million of long-term debt and $164.2 million of stockholders' equity. For
comparison, on September 27, 1998, the Company had $146.3 million of long-term
debt and $196.1 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 53% at October 3, 1999, as compared with 44% at
September 27, 1998.
<PAGE>
Accounts and note receivable on October 3, 1999, were $48.8 million, as compared
with $57.8 million at September 27, 1998. Receivables, including those sold
pursuant to the Receivables Purchase Agreement, represented 63 days of sales
outstanding at October 3, 1999 and 53 days at September 27, 1998. The increase
in days of sales outstanding primarily reflects a change in customer sales mix
with fewer customers paying in advance of due date.
Inventories on October 3, 1999, were $118.4 million, essentially the same as
September 27, 1998. The Company continues to curtail operating schedules to
control denim inventories and to liquidate inventories associated with
businesses in which it has exited.
For the first nine months of 1999, capital spending was $8.0 million compared to
$21.9 million for the first nine months of 1998. Domestic capital spending in
1999 is expected to be approximately $12 million. The reduced spending in 1999
is because the Company completed its relooming program of domestic denim
facilities in 1998. In addition to the 1999 domestic capital spending budget,
the Company expects to spend approximately $6 million for investments in
international initiatives.
Other Matters
YEAR 2000 ISSUES
The Company has implemented a comprehensive plan to address possible exposures
to Year 2000 issues. Executive management has reviewed the status of the
Company's Year 2000 compliance efforts on a continuous basis. Critical
financial, operational and manufacturing systems have been inventoried and
assessed and system modifications or replacements have been essentially
completed. As of November 1, 1999, only two systems remain non-compliant. Both
systems will be remediated in time so as not to cause any disruptions for the
century rollover.
Although the Company has received written vendor certification that all new core
business systems are Year 2000 compliant, the Company has completed additional
internal Y2K testing. No major problems were encountered.
The Company is coordinating Year 2000 readiness with other entities with which
it interacts, both domestically and globally, including suppliers, customers and
financial service organizations. Coordination efforts involve communication with
major suppliers and customers to undertake testing of electronic interfaces and
obtaining written certifications of compliance where applicable. Risk
assessments and action plans have been substantially completed. Testing and
certification of electronic interfaces were completed in the third quarter.
The Company has made significant investments to modernize its core business
systems over the past several years. With each system modification or
replacement, Cone has addressed the Year 2000 issue. Therefore, remediation
costs to address the Company's Year 2000 issues are expected to be approximately
$1.0 million.
The Company currently has contingency plans that address core business
system-related interruptions and will further develop such plans related to
manufacturing, operating and control systems to protect the business from
potential Year 2000 interruptions. These plans will be completed during calendar
year 1999 and will include, for example, as a worst case scenario, processing
certain significant business transactions manually. The Company is taking
reasonable steps to prevent major interruptions related to the Year 2000 issue;
however, the potential impact on the Company's financial position, results of
operations, or cash flows if the Company, its suppliers or its customers are not
fully Year 2000 compliant is not reasonably estimable.
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 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
<PAGE>
Except for the historical information presented, the matters disclosed
in the foregoing discussion and analysis and other parts of this report
include forward-looking statements. These statements represent the
Company's current judgment on the future and are subject to risks and
uncertainties that could cause actual results to differ materially.
Such factors include, without limitation: (i) the demand for textile
products, including the Company's products, will vary with the U.S. and
world business cycles, imbalances between consumer demand and
inventories of retailers and manufacturers and changes in fashion
trends, (ii) the highly competitive nature of the textile industry and
the possible effects of reduced import protection and free-trade
initiatives, (iii) the unpredictability of the cost and availability of
cotton, the Company's principal raw material, (iv) the Company's
relationships with Levi Strauss as its major customer, and (v) the
risks associated with unforeseen technological difficulties arising
under the Company's Year 2000 compliance efforts and the potential for
increased costs associated therewith. For a further description of
these risks see the Company's 1998 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 1998 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risks relating to fluctuations in interest
rates, currency exchange rates and commodity prices. There has been no material
change in the Company's market risks that would significantly affect the
disclosures made in the Form 10-K for the year ended January 3, 1999.
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, 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.
<PAGE>
The District Court held a hearing on July 24, 1995 to decide on the merits of
the 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. On August 20, 1999, the dismissal in the District Court of the
Plaintiffs' cause of action was upheld in a per curiam decision. The Plaintiffs'
petition for rehearing and rehearing en banc was denied on September 14, 1999.
The Plaintiffs have 90 days from that date to petition the United States Supreme
Court for discretionary review. 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.
The Company and its subsidiaries are involved in legal proceedings and claims
arising in the ordinary course of business. Although there can be no assurance
as to the ultimate disposition of these matters, management believes that the
probable resolution of such contingencies will not have a material adverse
effect on the financial condition of the Company.
Item 5. Other Information
Notice of a matter to be presented by a shareholder for consideration at the
2000 annual meeting other than pursuant to Rule 14a-8 of the Securities Exchange
Act of 1934 must be received by the Company prior to February 16, 2000. Failure
to give timely notice will result in the proxy statement relating to the meeting
not including information on the matter or the manner in which management's
proxies will vote on the matter and the proxies received by management will have
discretionary authority to vote on such matter.
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>
<TABLE>
<S> <C> <C>
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.
*2.1(c) Amendment to Receivables Purchase
Agreement dated March 24, 1998,
between the Registrant and Delaware
Funding Corporation, filed as Exhibit
2.1(c) to Registrant=s report on
Form 10-Q for the quarter ending
March 29, 1998.
*2.1(d) Second Amendment to Receivables
Purchase Agreement dated as of
July 16, 1998, between the Registrant
and Delaware Funding Corporation, filed
as Exhibit 2.1(d) to Registrant=s report on
Form 10-Q for the quarter ending
September 27, 1998.
*2.1(e) Third Amendment to Receivables Purchase
Agreement dated as of December 23, 1998,
between the Registrant and Delaware Funding
Corporation, filed as Exhibit 2.1(e) to
Registrant's report on Form 10-K for the
year ending January 3, 1999.
*2.1(f) Fourth Amendment to Receivables Purchase
Agreement dated as of March 23, 1999,
between the Registrant and Delaware
Funding Corporation, filed as Exhibit 2.1(f)
to Registrant's report on Form 10-Q for
the quarter ending April 4, 1999.
2.1(g) Receivables Purchase Termination and
Reassignment Agreement dated as of
September 1, 1999, among Cone Receivables
<PAGE>
Exhibit Sequential
No. Description Page No.
LLC, as Seller, the Registrant in its
individual capacity and as Servicer, and
Delaware Funding Corporation, as Buyer. 34
2.1(h) Receivables Purchase and Servicing
Agreement dated as of September 1, 1999,
by and among Cone Receivables II LLC, as
Seller, Redwood Receivables Corporation,
as Purchaser, the Registrant, as Servicer,
and General Electric Capital Corporation,
as Operating Agent and Collateral Agent. 41
2.1(i) Receivables Transfer Agreement dated as
of September 1, 1999, by and among the
Registrant, any other Originator Party
Hereto, and Cone Receivables II LLC. 115
*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.
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.
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
<PAGE>
the Registrant's report on Form 10-K
for the year ended December 31, 1995.
*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.
4.1(a) Articles of Amendment of the Articles of
Incorporation of the Registrant effective
October 22, 1999, to fix the designation,
preferences, limitations, and relative
rights of a series of its Class B
Preferred Stock. 155
*4.1(b) Rights Agreement dated as of October 14,
1999, between the Registrant and First
Union National Bank, as Rights Agent,
with Form of Articles of Amendment with
respect to the Class B Preferred Stock
(Series A), the Form of Rights Certificate,
and Summary of Rights attached, filed as
Exhibit 1 to the Registrant's report on
Form 8-A dated October 29, 1999.
*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).
Exhibit Sequential
No. Description Page No.
*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.
*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.
Exhibit Sequential
No. Description Page No.
*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
Company of America, filed as Exhibit 4.3(j)
to Registrant's report on Form 10-Q
for the quarter ending March 29, 1998.
4.3(i) Letter Agreement dated September 1, 1999,
amending the Note Agreement dated August
13, 1992, between the Registrant and The
Prudential Insurance Company of America. 163
4.3(j) Letter Agreement dated November 12, 1999,
between the Registrant and The Prudential
Insurance Company of America. 165
4.3(k) Letter Agreement dated November 12, 1999,
between the Registrant and The Prudential
Insurance Company of America superseding
Letter Agreement filed as Exhibit 4.3(j)
herein. 166
*4.4 Credit Agreement dated August 7, 1997, among the Registrant,
various banks and Morgan Guaranty Trust Company of New York as
agent, filed as Exhibit 4.4 to the Registrant's report on Form
10-Q for the quarter ended September 28, 1997.
Sequential
No. Description Page No.
4.4(a) Amendment No. 1 and Waiver to Credit
Agreement dated as of October 3, 1999,
among the Registrant, various banks, and
Morgan Guaranty Trust Company of New York,
as Agent. 167
4.4(b) Waiver to Credit Agreement dated as of
November 12, 1999, to the Credit Agreement
dated August 7, 1997, and amended as of
October 3, 1999, among the Registrant,
various banks, and Morgan Guaranty Trust
Company of New York, as Agent. 171
*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>
*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 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.
*4.7(a) First Amendment to the Cone Mills Corporation 1983 ESOP dated
May 9, 1995, filed as Exhibit 4.9(a) to the Registrant's report
on Form 10-K for year ended December 31, 1995.
*4.7(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.
*4.7(c) Third Amendment to the Cone Mills Corporation 1983 ESOP dated
August 7, 1997, filed as Exhibit 4.8(c) to the Registrant's
report on Form 10-Q for the quarter ended September 28, 1997.
<PAGE>
Exhibit Sequential
No. Description Page No.
*4.7(d) Fourth Amendment to the Cone Mills Corporation 1983 ESOP dated
December 4, 1997, filed as Exhibit 4.8(d) to the Registrant's
report on Form 10-K for the year ended December 28, 1997.
*4.8 Indenture dated as of February 14,
1995, between Cone Mills Corporation
and Wachovia Bank of North Carolina,
N.A. as Trustee (Bank of New York is
successor Trustee), filed as Exhibit 4.1
to Registrant=s Registration Statement
on Form S-3 (File No. 33-57713).
27 Financial Data Schedule 174
</TABLE>
* Incorporated by reference to the statement or report indicated.
The Registrant will provide any Shareholder or participant in the Company
Stock Fund in the 401(k) Programs copies of any of the foregoing exhibits upon
written request addressed to Corporate Secretary, Cone Mills Corporation, 3101
North Elm Street, Greensboro, NC 27408.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONE MILLS CORPORATION
(Registrant)
Date November 17, 1999 /s/ Gary L. Smith
Gary L. Smith
Executive Vice President and
Chief Financial Officer
<PAGE>
40
Exhibit 2.1(g)
RECEIVABLES PURCHASE TERMINATION
AND REASSIGNMENT AGREEMENT
THIS AGREEMENT is made and entered into as of September 1, 1999, among CONE
RECEIVABLES LLC, a Delaware limited liability company (the "Seller"), CONE MILLS
CORPORATION, a North Carolina corporation ("Cone Mills") acting in its
individual capacity and as Servicer under the Receivables Purchase Agreement
described below, and DELAWARE FUNDING CORPORATION, a Delaware corporation (the
"Buyer"). Statement of Facts Pursuant to a Purchase Agreement, dated as of March
25, 1997, as amended (the "Purchase Agreement"), between Cone Mills and the
Seller, the Seller has purchased from time to time from Cone Mills certain trade
receivables resulting from the sale of goods or services to customers of Cone
Mills. Pursuant to a Receivables Purchase Agreement, dated as of March 25, 1997,
as amended (the "Receivables Purchase Agreement"), among the Seller, Cone Mills
(as the Servicer and in its individual capacity), and the Buyer, the Buyer has
purchased from time to time from the Seller certain undivided percentage
ownership interests in such receivables and Cone Mills (as the Servicer) has
serviced and administered or caused to be serviced and administered such
receivables. The parties desire to terminate the Purchase Agreement and the
Receivables Purchase Agreement (collectively, the "Purchase Agreements") and to
provide for the reassignment by the Buyer of such undivided percentage ownership
interests to the Seller and the reassignment by the Seller of such receivables
to Cone Mills, all in accordance with and subject to the terms and conditions of
this Agreement. Statement of Terms NOW, THEREFORE, in consideration of the
mutual covenants herein set forth, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows: 1. Definitions. Unless otherwise expressly defined herein, all
capitalized terms used herein shall have the respective meanings given such
terms in the Purchase Agreements. 2. Reconveyance of Purchased Interest. (a)
Subject to the terms and conditions of this Agreement, the Buyer hereby assigns,
transfers and conveys to the Seller, without recourse, except as specifically
set forth herein, and the Seller hereby purchases and accepts assignment and
transfer from the Buyer of, all of the Buyer's rights, titles and interests in
and to the Purchased Interest. In consideration for such transfer and
assignment, the Seller shall pay to the Buyer at or before 12:00 p.m. (New York
city time) on this date, in immediately available funds, an amount (the
"Reconveyance Amount") equal to the sum of the following: (i) Net Investment $
50,000,000.00 (ii) Accrued but unpaid
Discount.................................... $ 16,393.65 (iii) Accrued but
unpaid fees............................................. $ -0- (iv) Other
Aggregate Unpaids (describe).................................. $-0- (v) Total
Reconveyance Amount (sum of (i) through (iv) above)..$50,016,393.65 (b) Payment
of the Reconveyance Amount shall be made by the Seller to the Buyer by way of a
wire transfer of immediately available funds directed as follows: Bank Name:
Morgan Guaranty Trust Company of New York City and State: New York, New York ABA
Routing No.: 021-000-238 Account Name: Delaware Funding Corporation Account No.:
600-28-005 Ref: Cone Receivables LLC 3. Reconveyance of Purchased Assets.
Subject to the terms and conditions of this Agreement, the Seller hereby sells,
sets over, assigns, transfers, and conveys to Cone Mills, without recourse,
except as specifically set forth herein, and Cone Mills hereby accepts,
purchases and receives, all of the Seller's rights, titles and interests in and
to the Purchased Assets, the Lockbox Accounts, and all monies, instruments,
securities, documents and other property now or hereafter on deposit in or
credited to the Lockbox Accounts (collectively, the "Reconveyed Property"). In
consideration of the Seller's transfer and conveyance hereunder to Cone Mills of
the Reconveyed Property, Cone Mills shall pay a purchase price (the "Purchase
Price") equal to 100% of the Outstanding Balance as of this date of the
Receivables conveyed hereunder by the Seller to Cone Mills, which price shall be
payable by Cone Mills on this date as follows: (i) Cone Mills shall pay to such
account or person as may be directed by the Seller an amount, in immediately
available funds, equal to the Purchase Price less the aggregate outstanding
principal and accrued interest balance as of this date of the Subordinated Loans
and (ii) Cone Mills shall apply in payment of the balance of the Purchase Price
the aggregate outstanding principal and accrued interest balance of the
Subordinated Loans as of this date. 4. Termination of Purchase Agreements. Upon
the effectiveness of this Agreement, the Purchase Agreements shall terminate and
all obligations of the parties thereunder (including without limitation any and
all obligations thereunder to purchase, sell or service the Receivables, the
Related Security and the Collections) shall terminate, except that (i) the
indemnification and payment provisions set forth in Sections 4.11, 8.01, 8.02
and 8.03 of the Receivables Purchase Agreement as well as the agreement set
forth in Section 8.20 of the Receivables Purchase Agreement shall be continuing
and shall survive the execution and delivery of this Agreement and the
termination of the Receivables Purchase Agreement, and (ii) the indemnification
and payment provisions of Article VII of the Purchase Agreement as well as the
agreement set forth in Section 8.10 of the Purchase Agreement shall be
continuing and shall survive the execution and delivery of this Agreement and
the termination of the Purchase Agreement. 5. Mutual Releases. Upon the
effectiveness of this Agreement, each of the Seller, Cone Mills and the Buyer
(each such party being referred to as a "Releasing Party") shall be deemed to
have (a) released and forever discharged each of the other parties hereto and
their respective subsidiaries, agents, employees, officers, directors,
attorneys, affiliates, successors and assigns (collectively, the "Released
Parties") of and from any and all liabilities, claims, suits, obligations,
indebtedness, liens, losses, causes of action , demands, rights, damages, costs
and expenses of any kind, character or nature whatsoever, whether known or
unknown, whether fixed or contingent, and whether liquidated or unliquidated,
that such Releasing Party may have or claim to have against any such Released
Party and which arises out of or is connected in any way with any action of
commission or omission of any Released Party existing or occurring on or prior
to the date of this Agreement, including without limitation any claims,
liabilities or obligations relating to or arising out of or in connection with
any of the Purchase Agreements or any of the transactions contemplated by any of
the Purchase Agreements, from the beginning of time until the execution and
delivery of this Agreement (collectively, the "Released Claims") and (b) agrees
forever to refrain from commencing, instituting or prosecuting any law suit,
action or other proceeding against any of the Released Parties with respect to
any of such Released Claims; provided, however, that the Released Claims do not
include, and the releases and covenants-not-to-sue set forth in this Section 5
shall not apply to, the Released Parties' respective representations,
warranties, covenants and other obligations under this Agreement. 6.
Effectiveness of this Agreement. This Agreement shall be effective as of this
date upon the satisfaction of all of the following conditions precedent: (a) One
or more counterparts of this Agreement shall have been executed and delivered by
the Seller, Cone Mills and the Buyer; and (b) The Buyer shall have received
payment of the Reconveyance Amount in accordance with Section 2(b) above. 7.
Further Assurances. Each of the Seller and Buyer hereby agrees to execute and
deliver such Uniform Commercial Code termination statements, Lockbox Account
transfers or instructions, and such other documents as Cone Mills may reasonably
request from time to time in order to more fully effectuate the transactions
contemplated by this Agreement; provided, however, that any and all such
termination statements, Lockbox Account transfers or instructions, and other
documents shall be prepared and/or recorded at Cone Mills' expense. 8.
Representations and Warranties. (a) Each of the parties hereto represents and
warrants that it has the full corporate or other power and authority to execute
and deliver this Agreement and to perform its obligations hereunder and that
this Agreement has been duly and validly executed and delivered by it (and
assuming the due and valid execution and delivery hereof by all other parties
hereto) constitutes a legal, valid and binding obligation of such party
enforceable against it in accordance with its terms, except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws of general application relating to or affecting the
enforcement of creditors' rights or by general principles of equity. (b) The
Seller hereby represents and warrants that the Reconveyed Property is owned by
the Seller free and clear of all Liens (other than any Permitted Liens) and the
Seller has not sold, pledged, assigned, transferred or subjected to a Lien any
of the Reconveyed Property, other than the conveyance of the Purchased Interest
to the Buyer under the Receivables Purchase Agreement. (c) The Buyer hereby
represents and warrants that the Purchased Interest is owned by the Buyer free
and clear of any Lien (other than any Permitted Liens) and, except as provided
in Section 8.17 of the Receivables Purchase Agreement, the Buyer has not sold,
pledged, assigned, transferred or subjected to a Lien any of the Purchased
Interest. The Buyer further represents and warrants that, upon the effectiveness
of this Agreement and the Buyers receipt of the Reconveyance Amount in
accordance with Section 2(b) above, no Aggregate Unpaids shall be outstanding
and the Seller and Cone Mills will not be indebted to the Buyer for any reason
under the Purchase Agreements or any of the other Purchase Documents (except
with respect to (i) the Seller's and Cone Mills' respective representations,
warranties, covenants and other obligations under this Agreement and (ii) the
provisions of the Receivables Purchase Agreement which shall survive the
termination of the Purchase Agreement as specified in clause (i) of Section 4
above; provided, however, that all or a portion of such indebtedness shall be
reinstated in the event and to the extent that any payment thereof is rescinded
or must otherwise be disgorged or returned by the Buyer upon the insolvency,
dissolution, liquidation, bankruptcy or reorganization of the Seller of Cone
Mills or upon or as a result of the appointment of a trustee, receiver or
conservator or similar officer for the Seller or Cone Mills or any substantial
part of its property). By signing on behalf of the Buyer below, Morgan Guaranty
Trust Company of New York hereby represents and warrants that it is the duly
authorized and existing attorney-in-fact for the Buyer and is authorized and
empowered to execute and deliver this Agreement on behalf of the Buyer and to
bind the Buyer to this Agreement. 9. Parties' Intent. It is the express intent
and understanding of the parties hereto that this Agreement shall vest in the
Seller all the right, title and interest of the Buyer in and to the Purchased
Interest and constitutes a valid sale of the Purchased Interest by the Buyer to
the Seller enforceable against all creditors of and all purchasers from the
Buyer and that this Agreement vests in Cone Mills all the right, title and
interest of the Seller in and to the Reconveyed Property and constitutes a valid
sale of the Reconveyed Property by the Seller to Cone Mills enforceable against
all creditors of and purchasers from the Seller. 10. Third Party Beneficiaries.
The parties hereto acknowledge and agree that this Agreement and the
transactions contemplated hereby will be relied upon by Cone Receivables II LLC
(the "New Seller"), Redwood Receivables Corporation (the "New Buyer") and
General Electric Capital Corporation as Collateral Agent and Operating Agent
("GE Capital") in connection with the transfer from and after this date by Cone
Mills of the Reconveyed Property to the New Seller and the transfer from and
after this date by the New Seller to the New Buyer of certain interests in the
Reconveyed Property, all as contemplated by the Receivables Purchase and
Servicing Agreement, dated as of the date hereof, among Cone Mills (as
Servicer), the New Seller, the New Buyer and GE Capital and the related
Receivables Transfer Agreement, dated as of the date hereof, among the New
Seller, Cone Mills and certain affiliates of the Originator (collectively, the
"New Purchase Agreements"). It is the express understanding and agreement of the
parties that each of the New Seller, the New Buyer and GE Capital is intended to
be a third party beneficiary of (i) all of the representations, warranties and
covenants of the Seller and Cone Mills contained in this Agreement and (ii) all
of the representations and warranties of the Buyer contained in Section 8(c) of
this Agreement. 11. Miscellaneous. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. This Agreement may be executed in any
number of several counterparts, and each such counterpart shall constitute an
original and all such counterparts together shall constitute one and the same
instrument. 12. No Petition. Each of the Seller and Cone Mills agrees (and, by
accepting this Agreement below, each of the New Seller, the New Buyer and GE
Capital also agrees) that, prior to the date which is one year and one day after
the date upon which all obligations of the Seller to the Buyer under the
Receivables Purchase Agreement are paid in full, such person will not institute
against, or join any other person in instituting against, the Buyer any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or
other similar proceeding under the laws of the United States or any state of the
United States. (remainder of page intentionally left blank)
IN WITNESS, each
of the parties hereto, by their respective duly authorized signatories, has
executed and delivered this Agreement as of the date first above written.
DELAWARE FUNDING CORPORATION By: Morgan Guaranty Trust Company of New York, as
Attorney-In-Fact for Delaware Funding Corporation By: /s/ Richard Burke Name:
Richard Burke Title: Vice President CONE RECEIVABLES LLC By: Cone Mills
Corporation, its sole Member By: /s/ David E. Bray Name: David E. Bray Title:
Treasurer CONE MILLS CORPORATION By: /s/ David E. Bray Name: David E. Bray
Title: Treasurer ACCEPTED: CONE RECEIVABLES II LLC By: /s/ Brandon Carrey Name:
Brandon Carrey Title: President REDWOOD RECEIVABLES CORPORATION By: /s/ Denis
Creeden Name: Denis Creeden Title: Assistant Secretary GENERAL ELECTRIC CAPITAL
CORPORATION, as Operating Agent and Collateral Agent By: /s/ Craig Winslow Name:
Craig Winslow Duly Authorized Signatory
COLLATERAL AGENT CONSENT AND RELEASE
In order to induce the Seller, Cone Mills and the Buyer to execute, deliver and
perform the within and foregoing Receivables Purchase Termination and
Reassignment Agreement (the "Agreement"; all capitalized terms used herein, and
not otherwise defined herein, shall have the meanings given such terms in the
Agreement), the undersigned Collateral Agent hereby consents to the Buyer's
reconveyance of the Purchased Interest to the Seller in accordance with the
terms and conditions of the Agreement and releases all of the Collateral Agent's
rights, titles and interests in and to the Purchased Interest. MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Collateral Agent By: /s/ Richard Burke Name:
Richard Burke Title: Vice President
41
Exhibit 2.1(h)
RECEIVABLES PURCHASE AND SERVICING AGREEMENT
Dated as of September 1, 1999,
by and among
CONE RECEIVABLES II LLC,
as Seller,
REDWOOD RECEIVABLES CORPORATION,
as Purchaser,
CONE MILLS CORPORATION,
as Servicer,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Operating Agent and Collateral Agent
47
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INTERPRETATION.....................................1
SECTION 1.01 Definitions............................................1
SECTION 1.02 Rules of Construction....................................1
ARTICLE II AMOUNTS AND TERMS OF PURCHASES.....................................2
SECTION 2.01 Purchases................................................2
SECTION 2.02 Optional Changes in Maximum Purchase Limit...............2
SECTION 2.03 Notices Relating to Purchases and Reductions in Capital
Investment.................3
SECTION 2.04 Conveyance of Receivables................................4
(a) Purchase Assignment......................................4
(b) Funding of Collection Account; Payment of Purchase
Price...........................4
(c) Vesting of Ownership.....................................4
(d) Repurchases of Transferred Receivables...................4
SECTION 2.05 Facility Termination Date................................5
SECTION 2.06 Daily Yield..............................................5
SECTION 2.07 Fees.....................................................5
SECTION 2.08 Time and Method of Payments..............................5
SECTION 2.09 Capital Requirements; Additional Costs...................6
SECTION 2.10 Breakage Costs...........................................7
SECTION 2.11 Purchase Excess..........................................7
ARTICLE III CONDITIONS PRECEDENT..............................................7
SECTION 3.01 Conditions to Effectiveness of Agreement.................7
(a) Purchase Agreement; Other Related Documents..............8
(b) Governmental and Other Approvals.........................8
(c) Compliance with Laws.....................................8
(d) Payment of Fees..........................................8
SECTION 3.02 Conditions Precedent to All Purchases....................8
ARTICLE IV REPRESENTATIONS AND WARRANTIES.....................................9
SECTION 4.01 Representations and Warranties of the Seller.............9
(a) LegalExistence; Compliance with Law......................9
(b) Executive Offices; Collateral Locations; Seller Names;
FEIN........................9
(c) Power, Authorization, Enforceable Obligations...........10
(d) No Litigation...........................................10
(e) Solvency................................................10
(f) Material Adverse Effect.................................10
(g) Ownership of Property; Liens............................11
(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock
and Indebtedness.........11
(i) Taxes...................................................11
(j) Full Disclosure.........................................12
(k) ERISA...................................................12
(l) Brokers.................................................12
(m) Margin Regulations......................................12
(n) Nonapplicability of Bulk Sales..........................12
(o) Securities Act and Investment Company Act Exemptions....12
(p) Government Regulation...................................13
(q) Nonconsolidation, Etc...................................13
(r) Deposit and Disbursement Accounts.......................15
(s) Transferred Receivables.................................15
(t) Representations & Warranties in Other Related Documents.15
(u) Year 2000 Problems......................................15
SECTION 4.02 Representations and Warranties of the Servicer..........16
ARTICLE V GENERAL COVENANTS OF THE SELLER.....................................16
SECTION 5.01 Affirmative Covenants of the Seller.....................16
(a) Compliance with Agreements and Applicable Laws..........16
(b) Maintenance of Existence and Conduct of Business....... 16
(c) Deposit of Collections..................................16
(d) Use of Proceeds.........................................16
(e) Payment, Performance and Discharge of Obligations.......17
(f) ERISA.................................................. 17
(g) Year 2000 Compliance....................................17
SECTION 5.02 Reporting Requirements of the Seller................... 17
SECTION 5.03 Negative Covenants of the Seller........................17
(a) Sale of Stock and Assets................................18
(b) Liens...................................................18
(c) Modifications of Receivables, Contracts or Transfer
Agreement.....................18
(d) Changes in Instructions to Obligors.....................18
(e) Capital Structure and Business..........................18
(f) Mergers, Subsidiaries, Etc..............................18
(g) Sale Characterization; Transfer Agreement...............18
(h) Restricted Payments.....................................19
(i) Debt 19
(j) Prohibited Transactions.................................19
(k) Investments.............................................19
(l) Commingling.............................................19
(m) ERISA...................................................19
ARTICLE VI COLLECTIONS AND DISBURSEMENTS......................................19
SECTION 6.01 Establishment of Deposit Accounts.......................19
(a) The Lockbox Accounts....................................19
(b) Collection Account......................................21
(c) Retention Account.......................................22
(d) Collateral Account......................................22
SECTION 6.02 Funding of Collection Account...........................22
SECTION 6.03 Daily Disbursements From the Collection Account and
Related Sub-Accounts; Revolving Period 23
SECTION 6.04 Disbursements From the Retention Account; Settlement
Date Procedures; Revolving Period 25
SECTION 6.05 Liquidation Settlement Procedures.......................26
SECTION 6.06 Investment of Funds in Accounts.........................29
SECTION 6.07 Termination Procedures..................................29
ARTICLE VII SERVICER PROVISIONS...............................................29
SECTION 7.01 Appointment of the Servicer.............................30
SECTION 7.02 Duties and Responsibilities of the Service..............30
SECTION 7.03 Collections on Receivables..............................30
SECTION 7.04 Authorization of the Servicer...........................31
SECTION 7.05 Servicing Fees..........................................31
SECTION 7.06 Covenants of the Servicer...............................31
(a) Ownership of Transferred Receivables....................31
(b) Compliance with Credit and Collection Policies..........32
(c) Covenants in Other Related Documents....................32
SECTION 7.07 Reporting Requirements of the Servicer..................32
ARTICLE VIII GRANT OF SECURITY INTERESTS......................................32
SECTION 8.01 Seller's Grant of Security Interest.....................32
SECTION 8.02 Seller's Certification..................................33
SECTION 8.03 Consent to Assignment...................................34
SECTION 8.04 Delivery of Collateral..................................34
SECTION 8.05 Seller Remains Liable...................................34
SECTION 8.06 Covenants of the Seller and the Servicer Regarding
the Seller Collateral..........35
(a) Offices and Records.....................................35
(b) Access..................................................35
(c) Communication with Accountants..........................36
(d) Collection of Transferred Receivables...................36
(e) Performance of Seller Assigned Agreements...............37
ARTICLE IX TERMINATION EVENTS.................................................37
SECTION 9.01 Termination Events......................................37
SECTION 9.02 Events of Servicer Termination..........................40
ARTICLE X REMEDIES............................................................41
SECTION 10.01 Actions Upon Termination Event.........................41
SECTION 10.02 Exercise of Remedies...................................42
SECTION 10.03 Power of Attorney......................................43
SECTION 10.04 Continuing Security Interest...........................43
ARTICLE XI SUCCESSOR SERVICER PROVISIONS......................................43
SECTION 11.01 Servicer Not to Resign.................................43
SECTION 11.02 Appointment of the Successor Servicer..................43
SECTION 11.03 Duties of the Servicer.................................44
SECTION 11.04 Effect of Termination or Resignation...................44
ARTICLE XII INDEMNIFICATION...................................................44
SECTION 12.01 Indemnities by the Seller..............................44
SECTION 12.02 Indemnities by the Servicer............................46
SECTION 12.03 Limitation of Damages; Purchaser Indemnified Persons...47
ARTICLE XIII OPERATING AGENT AND COLLATERAL AGENT.............................47
SECTION 13.01 Authorization and Action...............................47
SECTION 13.02 Reliance...............................................47
SECTION 13.03 GE Capital and Affiliates..............................48
ARTICLE XIV MISCELLANEOUS.....................................................48
SECTION 14.01 Notices................................................48
SECTION 14.02 Binding Effect; Assignability..........................49
SECTION 14.03 Termination; Survival of Seller Secured Obligations
Upon Facility Termination Date. 49
SECTION 14.04 Costs, Expenses and Taxes..............................50
SECTION 14.05 Confidentiality........................................51
SECTION 14.06 No Proceedings.........................................52
SECTION 14.07 Complete Agreement; Modification of Agreement..........53
SECTION 14.08 Amendments and Waivers.................................53
SECTION 14.09 No Waiver; Remedies....................................53
SECTION 14.10 Governing Law; Consent to Jurisdiction; Waiver of
Jury Trial.....................53
SECTION 14.11 Counterparts...........................................55
SECTION 14.12 Severability...........................................55
SECTION 14.13 Section Titles.........................................55
SECTION 14.14 Limited Recourse.......................................55
SECTION 14.15 Further Assurances.....................................55
Exhibit 2.02(a).............................Form of Commitment Reduction Notice
Exhibit 2.02(b)...........................Form of Commitment Termination Notice
Exhibit 2.02(c)..............................Form of Commitment Increase Notice
Exhibit 2.03(a).............................Form of Investment Base Certificate
Exhibit 2.03(b)........................................Form of Purchase Request
Exhibit 2.03(c)........................................Form of Repayment Notice
Exhibit 2.04(a).....................................Form of Purchase Assignment
Exhibit 3.01(a)(i).................................Form of Solvency Certificate
Exhibit 3.01(a)(ii)(A)..................Form of Bringdown Certificate (Closing)
Exhibit 3.01(a)(ii)(B).............Form of Bringdown Certificate (Post-Closing)
Exhibit 3.01(a)(iii)(A)................Form of Servicer's Certificate (Closing)
Exhibit 3.01(a)(iii)(B)...........Form of Servicer's Certificate (Post-Closing)
Exhibit 3.01(a)(iv)......................................Form of Monthly Report
Exhibit 3.01(a)(v).....................Form of Quarterly Compliance Certificate
Exhibit 5.03(b).................................Form of Intercreditor Agreement
Exhibit 10.03........................................Form of Power of Attorney
Schedule 4.01(b)........Executive Offices; Collateral Locations; Seller Names;
............................................................. FEIN
Schedule 4.01(d)..................................................Litigation
Schedule 4.01(h)......Ventures, Subsidiaries and Affiliates; Outstanding Stock
.....................................................and Indebtedness
Schedule 4.01(i)..................................................Tax Matters
Schedule 4.01(r)............................Deposit and Disbursement Accounts
Schedule 5.03(b)...............................................Existing Liens
Annex 1 Concentration Limits
Annex 2 Excluded Obligors
Exhibit A to
Annex 2 Form of Amending Letter
Annex 3 Determination of A Redwood Yield @
Annex 4 Yield Discount Amount
Annex G Financial Covenants
Annex 5.02(a)..............................Reporting Requirements of the Seller
Annex 5.02(b)................................................Investment Reports
Annex 7.07...............................Reporting Requirements of the Servicer
Annex X Definitions
Annex Y Schedule of Documents
115
THIS RECEIVABLES PURCHASE AND SERVICING AGREEMENT ("Agreement") is
entered into as of September 1, 1999, by and among CONE RECEIVABLES II LLC, a
North Carolina limited liability company (the "Seller"), REDWOOD RECEIVABLES
CORPORATION, a Delaware corporation (the "Purchaser"), CONE MILLS CORPORATION, a
North Carolina corporation ("Cone Mills"), as servicer hereunder (in such
capacity, the "Servicer"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation, as operating agent for the Purchaser hereunder (in such capacity,
the "Operating Agent") and as collateral agent for the Purchaser and the
Purchaser Secured Parties (in such capacity, the "Collateral Agent"). RECITALS
A............................... The Seller is a special purpose limited
liability company owned by the Independent Member, Cone Mills, and one or more
of Cone Mills's Subsidiaries. B. The Seller has been formed for the purpose of
purchasing, or otherwise acquiring by capital contribution, all or substantially
all of the trade receivables of each Originator pursuant to the Transfer
Agreement. C. ...........................The Seller intends to sell, and the
Purchaser intends to purchase, such trade receivables, from time to time, as
described herein. D. ..............................The Operating Agent has been
requested and is willing to act as operating agent on behalf of the Purchaser in
connection with the making and financing of such purchases. E.
............................In order to effectuate the purposes of this
Agreement, the Seller and the Purchaser desire to appoint Cone Mills to service,
administer and collect the receivables acquired by the Purchaser pursuant to
this Agreement and Cone Mills is willing to act in such capacity as the Servicer
hereunder on the terms and conditions set forth herein. AGREEMENT NOW,
THEREFORE, in consideration of the premises and the mutual covenants hereinafter
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.01 Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to them in Annex X. SECTION 1.02 Rules of Construction. For purposes of
this Agreement, the rules of construction set forth in Annex X shall govern. All
Appendices hereto, or expressly identified to this Agreement, are incorporated
herein by reference and, taken together with this Agreement, shall constitute
but a single agreement. ARTICLE II AMOUNTS AND TERMS OF PURCHASES SECTION 2.01
Purchases. On the Closing Date and each Business Day thereafter until the
Facility Termination Date and subject to the terms and conditions hereof, the
Purchaser agrees to purchase from Seller (each such purchase hereunder, a
"Purchase") all Transferred Receivables acquired on such date by Seller from the
Originators under the Transfer Agreement and the Seller agrees to sell such
Transferred Receivables to the Purchaser. Under no circumstances shall the
Purchaser be obligated to make any Purchase if, after giving effect thereto, a
Purchase Excess would exist. The aggregate purchase price for each such Purchase
shall equal the Cash Purchase Price plus the Deferred Purchase Price for the
related Purchase date. SECTION 2.02 Optional Changes in Maximum Purchase Limit.
(a) So long as no Incipient Termination Event or Termination Event shall have
occurred and be continuing, the Seller may, not more than twice during each
calendar year, reduce the Maximum Purchase Limit permanently; provided, that
(i) the Seller shall give ten Business Days' prior written notice of any such
reduction to the Purchaser and the Operating Agent substantially in the form of
Exhibit 2.02(a) (each such notice, a "Commitment Reduction Notice"), (ii) any
partial reduction of the Maximum Purchase Limit shall be in a minimum amount of
$5,000,000 or an integral multiple thereof and (iii)no such reduction shall
reduce the Maximum Purchase Limit below Capital Investment at such time (and
after giving effect to any concurrent reduction in the Capital Investment made
pursuant to Section 2.03(c)). (b) The Seller may at any time on at least 90 days
prior written notice by the Seller to the Purchaser and the Operating Agent
irrevocably terminate the Maximum Purchase Limit; provided, that (i) such notice
of termination shall be substantially in the form of Exhibit 2.02(b) (the
"Commitment Termination Notice")and (ii) the Seller shall reduce the Capital
Investment to zero and make all payments required by Section 2.03(c) or Section
2.07(c) at the time and in the manner specified therein. Upon such termination,
the Seller's right to request that the Purchaser make Purchases hereunder shall
simultaneously terminate and the Facility Termination Date shall automatically
occur. (c) So long as no Incipient Termination Event or Termination Event shall
have occurred and be continuing, the Seller may, on a one-time basis only,
increase the Maximum Purchase Limit to $65,000,000; provided, that (i) the
Seller shall give ten Business Days prior written notice of such increase to the
Purchaser and the Operating Agent substantially in the form of Exhibit 2.02(c)
(such notice, a "Commitment Increase Notice") and (ii) such increase shall not
become effective unless and until the Foreign Receivable Election Date shall
have occurred. (d) Each written notice required to be delivered pursuant to
Sections 2.02(a), (b) or (c) shall be irrevocable and shall be effective (i) on
the day of receipt if received by the Purchaser and the Operating Agent not
later than 5:00 p.m. (New York time) on any Business Day and (ii) on the
immediately succeeding Business Day if received by the Purchaser or the
Operating Agent after such time on such Business Day or if any such notice is
received on a day other than a Business Day (regardless of the time of day such
notice is received). Each such notice of termination or reduction shall specify,
respectively, the amount of, or the amount of the proposed reduction in, the
Maximum Purchase Limit. SECTION 2.03 Notices Relating to Purchases and
Reductions in Capital Investment. (a) Not later than 11:00 a.m. (New York time)
on the third Business Day of each week, the Seller shall deliver to the
Purchaser and the Operating Agent an Officer's Certificate substantially in the
form of Exhibit 2.03(a) (each an "Investment Base Certificate"); provided, that
if (i) an Incipient Termination Event or a Termination Event shall have occurred
and be continuing or (ii) the Operating Agent, in good faith, believes that an
Incipient Termination Event or a Termination Event is imminent or deems the
Purchaser's rights or interests in the Transferred Receivables or the Seller
Collateral insecure, the Seller shall deliver an Investment Base Certificate to
the Purchaser and the Operating Agent at such more frequent intervals as the
Operating Agent may request from time to time. Capital Investment Available
shall be determined by the Operating Agent based on information related to the
Seller Collateral available to it, including (A) any information obtained in
connection with any audit or reflected in the most recent Investment Base
Certificate or any other Investment Report delivered to the Purchaser and the
Operating Agent or (B) any other information that may be available to the
Purchaser and the Operating Agent. (b) Each Purchase resulting in an increase in
Capital Investment shall be made upon the provision of notice by the Seller to
the Purchaser and the Operating Agent in the manner provided herein. Any such
notice must be given in writing so that it is received no later than 4:00 p.m.
(New York time) on the Business Day immediately preceding the proposed Purchase
Date set forth therein. Each such notice (a "Purchase Request") shall (i) be
substantially in the form of Exhibit 2.03(b), (ii) be irrevocable and (iii)
specify the amount by which the Seller wishes the Capital Investment to be
increased and the proposed Purchase Date (which shall be a Business Day), and
shall include such other information as may be required by the Purchaser and the
Operating Agent. (c) The Seller may at any time reduce the Capital Investment;
provided, that (i) the Seller shall give one Business Day's prior written notice
of any such reduction to the Purchaser and the Operating Agent substantially in
the form of Exhibit 2.03(c) (each such notice, a "Repayment Notice"), (ii) each
such notice shall be irrevocable, (iii) each such notice shall specify the
amount by which the Seller wishes the Capital Investment to be reduced and the
proposed date of such reduction (which shall be a Business Day) and (iv) any
such reduction must be accompanied by payment of (A) all Daily Yield accrued on
the Capital Investment being reduced through but excluding the date of such
reduction and (B) the Breakage Costs, if any, required by Section 2.10. Any such
notice of reduction must be received by the Purchaser and the Operating Agent no
later than 4:00 p.m. (New York time) on the Business Day immediately preceding
the date of the proposed reduction in Capital Investment. SECTION 2.04
Conveyance of Receivables. (a) Purchase Assignment. On or prior to the Closing
Date, the Seller shall complete, execute and deliver to the Purchaser an
assignment substantially in the form of Exhibit 2.04(a) (the
"Purchase Assignment") in order to evidence the Purchases. (b) Funding of
Collection Account; Payment of Purchase Price. (i) Funding of Collection Account
by Purchaser. Following receipt of any Purchase Request, and subject to
satisfaction of the conditions set forth in Section 3.02, the Purchaser shall
make available to or on behalf of the Seller on the Purchase Date specified
therein the lesser of the amount specified in such Purchase Request and the
Capital Investment Available by depositing such amount in same day funds to the
Collection Account. (ii) Payment of Purchase Price. The Purchaser shall, or
shall cause the Operating Agent to, make available to or on behalf of the Seller
on each Business Day during the Revolving Period, in same day funds, all amounts
on deposit in the Collection Account that are to be disbursed to or on behalf of
the Seller as payment for the Transferred Receivables pursuant to Section 6.03;
provided that, if and for so long as the Operating Agent and the Collateral
Agent have not taken exclusive dominion and control over the Lockbox Account
pursuant to Section 6.01(a)(i), such payments for the Transferred Receivables
shall be made by way of the Seller's receipt of transfers from the Lockbox
Accounts of proceeds of Collections on the Transferred Receivables as well as
from amounts on deposit in the Collection Account. (c) Vesting of Ownership.
Effective on and as of each Purchase Date, the Purchaser shall own all
Transferred Receivables sold by the Seller hereunder on such Purchase Date. The
Seller shall not take any action inconsistent with such ownership and shall not
claim any ownership interest in such Transferred Receivables. The Seller shall
indicate in its Records that ownership of such Transferred Receivables is vested
in the Purchaser. In addition, the Seller shall respond to any inquiries with
respect to the ownership of any such Transferred Receivable by stating that it
is no longer the owner of such Transferred Receivable and that ownership thereof
is vested in the Purchaser. The Seller and the Servicer shall hold all Contracts
and other documents and incidents relating to such Transferred Receivables in
trust for the benefit of the Purchaser, as the owner thereof, and for the sole
purpose of facilitating the servicing of such Transferred Receivables. The
Seller and the Servicer hereby acknowledge that their retention and possession
of such Contracts and documents shall at all times be at the sole discretion of
the Purchaser and in a custodial capacity for the Purchaser's benefit only. (d)
Repurchases of Transferred Receivables. If any Originator is required to
repurchase Transferred Receivables from the Seller pursuant to Section 4.04 of
the Transfer Agreement, the Purchaser shall sell or reconvey such Transferred
Receivables to the Seller (i) for cash or (ii) in exchange for new Eligible
Receivables, in each case in an amount equal to the Outstanding Balance of such
Transferred Receivables. SECTION 2.05 Facility Termination Date. Notwithstanding
anything to the contrary set forth herein, the Purchaser shall have no
obligation to purchase any additional Transferred Receivables from and after the
Facility Termination Date. SECTION 2.06 Daily Yield. (a) The Seller shall pay
Daily Yield to the Purchaser in the manner and at the times specified in
Sections 6.03, 6.04 and 6.05. (b) Notwithstanding the foregoing, the Seller
shall pay interest at the applicable Daily Yield Rate on unpaid Daily Yield and
on any other amount payable by the Seller hereunder (to the extent permitted by
law) that shall not be paid in full when due (whether at stated maturity, by
acceleration or otherwise) for the period commencing on the due date thereof to
(but excluding) the date the same is indefeasibly paid in full. SECTION 2.07
Fees. (a) The Seller shall pay to the Purchaser the fees set forth in the Fee
Letter. (b) On each Settlement Date, the Seller shall pay to the Servicer or to
the Successor Servicer, as applicable, the Servicing Fee or the Successor
Servicing Fees and Expenses, respectively, in each case to the extent of
available funds therefor as provided in Section 6.04. (c) If the Seller
terminates the Maximum Purchase Limit pursuant to Section 2.02(b) on or prior to
the second anniversary of the Closing Date, the Seller shall pay to the
Operating Agent, for the account of the Purchaser and as liquidated damages and
compensation for the costs of being prepared to make Purchases, on the Facility
Termination Date a prepayment fee (the "Prepayment Fee") in an amount determined
by multiplying the Applicable Percentage (as defined below) by the Maximum
Purchase Limit as in effect immediately prior to such termination. As used
herein, the term "Applicable Percentage" shall mean (i) two percent (2.0%) in
the case of any such termination which occurs on or prior to the first
anniversary of the Closing Date and (ii) one percent (1.0%) in the case of any
such termination which occurs on or prior to the second anniversary of the
Closing Date. The Seller acknowledges and agrees that (x) it would be difficult
or impractical to calculate the Purchaser's actual damages from an early
termination of Purchaser's obligation to make Purchases pursuant to Section
2.02(b), (y) the Prepayment Fee provided above is intended to be a fair and
reasonable approximation of such damages, and (z) the Prepayment Fee provided
above is not intended to be a penalty. SECTION 2.08 Time and Method of Payments.
Subject to the provisions of Sections 6.02, 6.03, 6.04 and 6.05, all payments in
reduction of Capital Investment and all payments of yield, fees and other
amounts payable by the Seller hereunder shall be made in Dollars, in immediately
available funds, to the Purchaser not later than 11:00 a.m. (New York time) on
the due date therefor. Any such payment made on such date but after such time
shall be deemed to have been made on, and Daily Yield shall continue to accrue
and be payable thereon until, the next succeeding Business Day. If any such
payment becomes due on a day other than a Business Day, the maturity thereof
will be extended to the next succeeding Business Day and Daily Yield thereon
shall be payable during such extension. Any and all payments by the Seller
hereunder shall be made in accordance with this Section 2.08 without setoff or
counterclaim and free and clear of and without deduction for any and all present
or future taxes, levies, imposts, deductions, charges or withholdings, excluding
taxes imposed on or measured by the net income of any Affected Party by the
jurisdictions under the laws of which any such Affected Party is organized or by
any political subdivisions thereof. If the Seller shall be required by law to
deduct any taxes from or in respect of any sum payable hereunder, (a) the sum
payable shall be increased as much as shall be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.08) the Affected Party entitled to receive any such
payment receives an amount equal to the sum it would have received had no such
deductions been made, (b) the Seller shall make such deductions, and (c) the
Seller shall pay the full amount deducted to the relevant taxing or other
authority in accordance with applicable law. Within 30 days after the date of
any payment of taxes, the Seller shall furnish to the Operating Agent the
original or a certified copy of a receipt evidencing payment thereof. The Seller
shall indemnify any Affected Party from and against, and, within ten days of
demand therefor, pay any Affected Party for, the full amount of taxes (including
any taxes imposed by any jurisdiction on amounts payable under this
Section 2.08) paid by such Affected Party and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such taxes were correctly or legally asserted. SECTION 2.09
Capital Requirements; Additional Costs. (a) If the Operating Agent on behalf of
any Affected Party shall have determined that the adoption after the date hereof
of any law, treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy, reserve requirements or similar
requirements or compliance by such Affected Party with any request or directive
regarding capital adequacy, reserve requirements or similar requirements
(whether or not having the force of law) from any central bank or other
Governmental Authority increases or would have the effect of increasing the
amount of capital, reserves or other funds required to be maintained by such
Affected Party against commitments made by it under this Agreement, any other
Related Document or any Program Document and thereby reducing the rate of return
on such Affected Party's capital as a consequence of its commitments hereunder
or thereunder, then the Seller shall from time to time upon demand by the
Operating Agent pay to the Collateral Agent on behalf of such Affected Party
additional amounts sufficient to compensate such Affected Party for the Seller's
Share of such reduction together with interest thereon from the date of any such
demand until payment in full at the Daily Yield Rate. A certificate as to the
amount of that reduction and showing the basis of the computation thereof
submitted by the Operating Agent to the Seller shall be final, binding and
conclusive on the parties hereto (absent manifest error) for all purposes. (b)
If, due to any Regulatory Change, there shall be any increase in the cost to any
Affected Party of agreeing to make or making, funding or maintaining any
commitment hereunder, under any other Related Document or under any Program
Document, including with respect to any Purchases, Capital Investment, LOC Draws
or Liquidity Loans, or any reduction in any amount receivable by such Affected
Party hereunder or thereunder, including with respect to any Purchases, Capital
Investment, LOC Draws or Liquidity Loans (any such increase in cost or reduction
in amounts receivable are hereinafter referred to as "Additional Costs"), then
the Seller shall, from time to time upon demand by the Operating Agent, pay to
the Collateral Agent on behalf of such Affected Party additional amounts
sufficient to compensate such Affected Party for the Seller's Share of such
Additional Costs together with interest thereon from the date demanded until
payment in full thereof at the Daily Yield Rate. Such Affected Party agrees
that, as promptly as practicable after it becomes aware of any circumstance
referred to above that would result in any such Additional Costs, it shall, to
the extent not inconsistent with its internal policies of general application,
use reasonable commercial efforts to minimize costs and expenses incurred by it
and payable to it by the Seller pursuant to this Section 2.09(b). (c)
Determinations by any Affected Party for purposes of this Section 2.09 of the
effect of any Regulatory Change on its costs of making, funding or maintaining
any commitments hereunder, under any other Related Document or under any Program
Document or on amounts receivable by it hereunder or thereunder or of the
additional amounts required to compensate such Affected Party in respect of any
Additional Costs shall be set forth in a written notice to the Seller in
reasonable detail and shall be final, binding and conclusive on the Seller
(absent manifest error) for all purposes. SECTION 2.10 Breakage Costs. The
Seller shall pay to the Collateral Agent for the account of the Purchaser, upon
request of the Purchaser, such amount or amounts as shall compensate the
Purchaser for any loss, cost or expense actually incurred by the Purchaser (as
determined by the Purchaser) as a result of any reduction by the Seller in
Capital Investment (and accompanying loss of Daily Yield thereon) other than on
the maturity date of the Commercial Paper (or other financing source) funding
such Capital Investment, which compensation shall include an amount equal to any
loss or expense actually incurred by the Purchaser during the period from the
date of such reduction to (but excluding) the maturity date of such Commercial
Paper (or other financing source) if the rate of interest obtainable by the
Purchaser upon the redeployment of funds in an amount equal to such reduction is
less than the interest rate applicable to such Commercial Paper (or other
financing source) (any such loss, cost or expense referred to collectively
herein as "Breakage Costs"). The determination by the Purchaser of the amount of
any such loss or expense shall be set forth in a written notice to the Seller in
reasonable detail and shall be final, binding and conclusive on the Seller
(absent manifest error) for all purposes. SECTION 2.11 Purchase Excess. On each
Business Day during the Revolving Period and after completion of the
disbursements specified in Section 6.03, the Operating Agent shall notify the
Seller and the Servicer of any Purchase Excess on such day, and the Seller shall
deposit the amount of such Purchase Excess in the Collection Account by 11:00
a.m. (New York time) on the immediately succeeding Business Day. ARTICLE III
CONDITIONS PRECEDENT SECTION 3.01 Conditions to Effectiveness of Agreement. The
Purchaser shall not be obligated to purchase Transferred Receivables hereunder
on the occasion of the initial Purchase, nor shall the Purchaser, the Operating
Agent or the Collateral Agent be obligated to take, fulfill or perform any other
action hereunder, until the following conditions have been satisfied, in the
sole discretion of, or waived in writing by, the Purchaser and the Operating
Agent: (a) Purchase Agreement; Other Related Documents. This Agreement or
counterparts hereof shall have been duly executed by, and delivered to, the
parties hereto and the Purchaser and the Operating Agent shall have received
such other documents, instruments, agreements and legal opinions as the
Purchaser and the Operating Agent shall request in connection with the
transactions contemplated by this Agreement, including all those listed in the
Schedule of Documents, each in form and substance satisfactory to the Purchaser
and the Operating Agent. (b) Governmental and Other Approvals. The Purchaser and
the Operating Agent shall have received (i) satisfactory evidence that the
Seller and the Servicer have obtained all required consents and approvals of all
Persons, including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Related Documents and
the consummation of the transactions contemplated hereby or thereby or (ii) an
Officer's Certificate from each of the Seller and the Servicer in form and
substance satisfactory to the Purchaser and the Operating Agent affirming that
no such consents or approvals are required. (c) Compliance with Laws. The Seller
and the Servicer shall be in compliance in all material respects with all
applicable foreign, federal, state and local laws and regulations, including
those specifically referenced in Section 5.01(a). (d) Payment of Fees. The
Seller shall have paid all fees required to be paid by it on the Closing Date,
including all fees required hereunder and under the Fee Letter, and shall have
reimbursed the Purchaser for all fees, costs and expenses of closing the
transactions contemplated hereunder and under the other Related Documents,
including the Purchaser's reasonable legal and other document preparation costs.
SECTION 3.02 Conditions Precedent to All Purchases. The Purchaser shall not be
obligated to purchase Transferred Receivables hereunder on any Purchase Date if,
as of the date thereof: (a) any representation or warranty of the Seller or the
Servicer contained herein or in any of the other Related Documents shall be
untrue or incorrect as of such date, either before or after giving effect to the
Purchase of Transferred Receivables on such date and to the application of the
proceeds therefrom, except to the extent that such representation or warranty
expressly relates to an earlier date and except for changes therein expressly
permitted by this Agreement; (b) any event shall have occurred, or would result
from the Purchase of Transferred Receivables on such Purchase Date or from the
application of the proceeds therefrom, that constitutes an Incipient Termination
Event, a Termination Event, an Incipient Servicer Termination Event or an Event
of Servicer Termination; (c) the Seller shall not be in compliance with any of
its covenants or other agreements set forth herein; (d) the Facility Termination
Date shall have occurred; (e) either before or after giving effect to such
Purchase and to the application of the proceeds therefrom, a Purchase Excess
would exist; (f) any Originator, the Seller or the Servicer shall fail to have
taken such other action, including delivery of approvals, consents, opinions,
documents and instruments to the Purchaser and the Operating Agent, as the
Purchaser or the Operating Agent may reasonably request or a Rating Agency may
request; or (g) the Operating Agent or the Collateral Agent shall have
determined that any event or condition has occurred that has had, or could
reasonably be expected to have or result in, a Material Adverse Effect. The
delivery by the Seller of a Purchase Request and the acceptance by the Seller of
the purchase price for any Transferred Receivables on any Purchase Date shall be
deemed to constitute, as of any such Purchase Date, a representation and
warranty by the Seller that the conditions in this Section 3.02 have been
satisfied. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01
Representations and Warranties of the Seller. To induce the Purchaser to
purchase the Transferred Receivables and each of the Operating Agent and the
Collateral Agent to take any action hereunder, the Seller makes the following
representations and warranties to the Purchaser, the Operating Agent and the
Collateral Agent, each and all of which shall survive the execution and delivery
of this Agreement. (a) Legal Existence; Compliance with Law. The Seller (i) is a
limited liability company duly organized and validly existing under the laws of
its jurisdiction of formation; (ii) is duly qualified to conduct business in
each other jurisdiction where its ownership or lease of property or the conduct
of its business requires such qualification; (iii) has the requisite power and
authority and the legal right to own, pledge, mortgage or otherwise encumber and
operate its properties, to lease the property it operates under lease, and to
conduct its business as now, heretofore and proposed to be conducted; (iv) has
all licenses, permits, consents or approvals from or by, and has made all
filings with, and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent required for such ownership, operation and conduct;
(v) is in compliance with its articles of organization and operating agreement;
and (vi)subject to specific representations set forth herein regarding ERISA,
tax and other laws, is in compliance with all applicable provisions of law,
except where the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. (b) Executive Offices;
Collateral Locations; Seller Names; FEIN. As of the Closing Date, the current
location of the Seller's chief executive office, principal place of business,
other offices, the warehouses and premises within which any Seller Collateral is
stored or located, and the locations of its records concerning the Seller
Collateral (including originals of the Seller Assigned Agreements) are set forth
in Schedule 4.01(b) and none of such locations has changed within the past 12
months (or such shorter time as the Seller has been in existence). During the
prior five years (or such shorter time as the Seller has been in existence),
except as set forth in Schedule 4.01(b), the Seller has not been known as or
used any name (including without limitation any assumed, fictitious or trade
name or "doing business as" name). In addition, Schedule 4.01(b) lists the
federal employer identification number of the Seller. (c) Power, Authorization,
Enforceable Obligations. The execution, delivery and performance by the Seller
of this Agreement and the other Related Documents to which it is a party, the
creation and perfection of all Liens and ownership interests provided for
therein and, solely with respect to clause (vii) below, the exercise by each of
the Seller, the Purchaser, the Operating Agent or the Collateral Agent of any of
its rights and remedies under any Related Document to which it is a party:
(i) are within the Seller's power; (ii) have been duly authorized by all
necessary or proper manager, member or other action on the Seller's part;
(iii) do not contravene any provision of the Seller's articles of organization
or operating agreement; (iv) do not violate any law or regulation, or any order
or decree of any court or Governmental Authority; (v) do not conflict with or
result in the breach or termination of, constitute a default under or accelerate
or permit the acceleration of any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which the
Seller or any Originator is a party or by which the Seller or any Originator or
any of the property of the Seller or any Originator is bound; (vi) do not result
in the creation or imposition of any Adverse Claim upon any of the property of
the Seller or any Originator; and (vii) do not require the consent or approval
of any Governmental Authority or any other Person, except those referred to in
Section 3.01(b), all of which will have been duly obtained, made or complied
with prior to the Closing Date. On or prior to the Closing Date, each of the
Related Documents to which the Seller is a party shall have been duly executed
and delivered by the Seller and each such Related Document shall then constitute
a legal, valid and binding obligation of the Seller enforceable against it in
accordance with its terms. (d) No Litigation. No Litigation is now pending or,
to the knowledge of the Seller, threatened against the Seller that
(i) challenges the Seller's right or power to enter into or perform any of its
obligations under the Related Documents to which it is a party, or the validity
or enforceability of any Related Document or any action taken thereunder, (ii)
seeks to prevent the transfer, sale, pledge or contribution of any Receivable or
the consummation of any of the transactions contemplated under this Agreement or
the other Related Documents, or (iii) has a reasonable risk of being determined
adversely to the Seller and that, if so determined, could have a Material
Adverse Effect. Except as set forth on Schedule 4.01(d), as of the Closing Date
there is no Litigation pending or threatened that seeks damages in excess of
$500,000 or injunctive relief against, or alleges criminal misconduct by, the
Seller. (e) Solvency. Both before and after giving effect to (i) the
transactions contemplated by this Agreement and the other Related Documents and
(ii) the payment and accrual of all transaction costs in connection with the
foregoing, the Seller is and will be Solvent. (f) Material Adverse Effect.
Between January 3, 1999 and the Closing Date, (i) the Seller has not incurred
any obligations, contingent or non-contingent liabilities, liabilities for
charges, long-term leases or unusual forward or long-term commitments that,
alone or in the aggregate, could reasonably be expected to have a Material
Adverse Effect, (ii) no contract, lease or other agreement or instrument has
been entered into by the Seller or has become binding upon the Seller's assets
and no law or regulation applicable to the Seller has been adopted that has had
or could reasonably be expected to have a Material Adverse Effect and (iii) the
Seller is not in default and no third party is in default under any material
contract, lease or other agreement or instrument to which the Seller is a party
that alone or in the aggregate could reasonably be expected to have a Material
Adverse Effect. Between January 3, 1999 and the Closing Date no event has
occurred that alone or together with other events could reasonably be expected
to have a Material Adverse Effect. (g) Ownership of Property; Liens. As of the
Closing Date, no Transferred Receivable is subject to any Adverse Claim, none of
the other properties and assets of the Seller are subject to any Adverse Claims
other than Permitted Encumbrances, and there are no facts, circumstances or
conditions known to the Seller that may result in (i) with respect to the
Transferred Receivables, any Adverse Claims (including Adverse Claims arising
under Environmental Laws) and (ii) with respect to its other properties and
assets, any Adverse Claims (including Adverse Claims arising under Environmental
Laws) other than Permitted Encumbrances. The Seller has received all
assignments, bills of sale and other documents, and has duly effected all
recordings, filings and other actions necessary to establish, protect and
perfect the Seller's right, title and interest in and to the Transferred
Receivables and its other properties and assets. The Liens granted to the
Purchaser pursuant to Section 8.01 will at all times be fully perfected first
priority Liens in and to the Seller Collateral. (h) Ventures, Subsidiaries and
Affiliates; Outstanding Stock and Indebtedness. Except as set forth in Schedule
4.01(h), the Seller has no Subsidiaries, is not engaged in any joint venture or
partnership with any other Person, and is not an Affiliate of any other Person.
All of the issued and outstanding Stock of the Seller is owned by each of the
Stockholders in the amounts set forth on Schedule 4.01(h). There are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which the Seller may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock or
other equity securities of its Subsidiaries. All outstanding Debt of the Seller
as of the Closing Date is described in Section 5.03(i). (i) Taxes. All tax
returns, reports and statements, including information returns, required by any
Governmental Authority to be filed by the Seller have been filed with the
appropriate Governmental Authority and all charges have been paid prior to the
date on which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof (or any such fine, penalty, interest, late charge or loss
has been paid), excluding charges or other amounts being contested in accordance
with Section 5.01(e). Proper and accurate amounts have been withheld by the
Seller from its respective employees for all periods in full and complete
compliance with all applicable federal, state, local and foreign laws and such
withholdings have been timely paid to the respective Governmental Authorities.
Schedule 4.01(i) sets forth as of the Closing Date (i) those taxable years for
which the Seller's tax returns are currently being audited by the IRS or any
other applicable Governmental Authority and (ii) any assessments or threatened
assessments in connection with any such audit or otherwise currently
outstanding. Except as described on Schedule 4.01(i), the Seller has not
executed or filed with the IRS or any other Governmental Authority any agreement
or other document extending, or having the effect of extending, the period for
assessment or collection of any charges. The Seller is not liable for any
charges: (A) under any agreement (including any tax sharing agreements) or
(B) to the best of the Seller's knowledge, as a transferee. As of the Closing
Date, the Seller has not agreed or been requested to make any adjustment under
IRC Section 481(a), by reason of a change in accounting method or otherwise,
that would have a Material Adverse Effect. (j) Full Disclosure. No information
contained in this Agreement, any Investment Base Certificate or any of the other
Related Documents, or any written statement furnished by or on behalf of the
Seller to the Purchaser, the Operating Agent or the Collateral Agent pursuant to
the terms of this Agreement or any of the other Related Documents (other than
the Projections) contains any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made. The Projections are based on the estimates and assumptions stated
therein, all of which the Seller believes to be reasonable and fair in light of
current conditions and current facts known to Seller and, as of the Closing
Date, reflect Cone Mill's good faith and reasonable estimate of the future
financial condition and performance of Cone Mills and its Subsidiaries and of
the other information projected therein for the period covered thereby. (k)
ERISA. The Seller is in compliance with ERISA and has not incurred and does not
expect to incur any liabilities (except for premium payments arising in the
ordinary course of business) payable to the PBGC under ERISA. (l) Brokers. No
broker or finder acting on behalf of the Seller was employed or utilized in
connection with this Agreement or the other Related Documents or the
transactions contemplated hereby or thereby and the Seller has no obligation to
any Person in respect of any finder's or brokerage fees in connection therewith.
(m) Margin Regulations. The Seller is not engaged in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin security," as
such terms are defined in Regulation U of the Federal Reserve Board as now and
from time to time hereafter in effect (such securities being referred to herein
as "Margin Stock"). The Seller owns no Margin Stock, and no portion of the
proceeds of the purchase price for Transferred Receivables sold hereunder will
be used, directly or indirectly, for the purpose of purchasing or carrying any
Margin Stock, for the purpose of reducing or retiring any Debt that was
originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any portion of such proceeds to be considered a
"purpose credit" within the meaning of Regulations T, U or X of the Federal
Reserve Board. The Seller will not take or permit to be taken any action that
might cause any Related Document to violate any regulation of the Federal
Reserve Board. (n) Nonapplicability of Bulk Sales Laws. No transaction
contemplated by this Agreement or any of the Related Documents requires
compliance with any bulk sales act or similar law. (o) Securities Act and
Investment Company Act Exemptions. Each purchase of Transferred Receivables
under this Agreement will constitute (i) a "current transaction" within the
meaning of Section 3(a)(3) of the Securities Act and (ii) a purchase or other
acquisition of notes, drafts, acceptances, open accounts receivable or other
obligations representing part or all of the sales price of merchandise,
insurance or services within the meaning of Section 3(c)(5) of the Investment
Company Act. (p) Government Regulation. The Seller is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act. The Purchase of the Transferred Receivables by the Purchaser
hereunder, the application of the proceeds thereof and the consummation of the
transactions contemplated by this Agreement and the other Related Documents will
not violate any provision of any such statute or any rule, regulation or order
issued by the Securities and Exchange Commission. (q) Nonconsolidation, Etc. The
Seller is operated in such a manner that the separate legal existence of the
Seller and each member of the Cone Mills Group would not be disregarded in the
event of the bankruptcy or insolvency of any member of the Cone Mills Group and,
without limiting the generality of the foregoing: (i) the Seller is a limited
purpose, limited liability company whose activities are restricted in its
articles of organization to those activities expressly permitted hereunder and
under the other Related Documents and the Seller has not engaged, and does not
presently engage, in any activity other than those activities expressly
permitted hereunder and under the other Related Documents, nor has the Seller
entered into any agreement other than this Agreement, the Management Agreement,
the other Related Documents to which it is a party and, with the prior written
consent of the Purchaser, the Operating Agent and the Collateral Agent, any
other agreement necessary to carry out more effectively the provisions and
purposes hereof or thereof; (ii) no member of the Cone Mills Group or any
individual at the time he or she is acting as an officer or employee of any such
member is or has been involved in the day-to-day management of the Seller; (iii)
other than the purchase and acceptance through capital contribution of
Transferred Receivables, the payment of dividends and the return of capital to
any Stockholder Originator, any lease or sub-lease of office space or equipment
and the payment of Servicing Fees to the Servicer under this Agreement, the
Seller engages and has engaged in no inter-company transactions with any member
of the Cone Mills Group; (iv) the Seller maintains company records and books of
account, holds regular company meetings and otherwise observes company
formalities and has a business office, in each case separate from that of each
member of the Cone Mills Group. (v) the financial statements and books and
records of the Seller and each Originator reflect the separate legal existence
of the Seller; (vi) (A) the Seller maintains its assets separately from the
assets of each member of the Cone Mills Group (including through the maintenance
of separate bank accounts and except for any Records to the extent necessary to
assist the Servicer in connection with the servicing of the Transferred
Receivables), (B) the Seller's funds (including all money, checks and other cash
proceeds) and assets, and records relating thereto, have not been and are not
commingled with those of any member of the Cone Mills Group and (C) the separate
creditors of the Seller will be entitled to be satisfied out of the Seller's
assets prior to any value in the Seller becoming available to the Seller's
Stockholders; (vii) except as otherwise expressly permitted hereunder, under the
other Related Documents and under the Seller's organizational documents, no
member of the Cone Mills Group (A) pays the Seller's expenses, (B) guarantees
the Seller's obligations, or (C) advances funds to the Seller for the payment of
expenses or otherwise; (viii) all business correspondence and other
communications of the Seller are conducted in the Seller's own name, on its own
stationery and business forms and through a separately-listed telephone number;
(ix) the Seller does not act as agent for any member of the Cone Mills Group,
but instead presents itself to the public as a limited liability company
separate from each such member and independently engaged in the business of
purchasing and financing Receivables; (x) if and for so long as Cone Mills is
obligated to comply with Section 3.9 of the Indenture, the Seller is not a
Subsidiary (as defined in the Indenture) of Cone Mills and the Independent
Member owns and controls, directly or indirectly, a majority of the total voting
power of outstanding securities or other interests entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees of the Seller; (xi) the Seller maintains at least two
independent managers each of whom (A) is not a Stockholder, director, officer,
employee or associate, or any relative of the foregoing, of any member of the
Cone Mills Group (other than being a manager of Seller), all as provided in its
articles of organization, and (B) is otherwise acceptable to the Purchaser, the
Operating Agent and the Collateral Agent; (xii) the Seller complies with the
factual assumptions pertaining to it contained in the opinions of Schell Bray
Aycock Abel & Livingston P.L.L.C. pursuant to the Schedule of Documents; and
(xiii) the articles of organization and the operating agreement of the Seller
requires (A) the affirmative vote of (1) a supermajority of all managers and (2)
each independent manager before a voluntary petition under Section 301 of the
Bankruptcy Code may be filed by the Seller, (B) the Seller to maintain (1)
correct and complete books and records of account and (2) minutes of the
meetings and other proceedings of its Stockholders and board of managers. (r)
Deposit and Disbursement Accounts. Schedule 4.01(r) lists all banks and other
financial institutions at which the Seller maintains deposit or other bank
accounts as of the Closing Date, including any Lockbox Accounts, and such
schedule correctly identifies the name, address and telephone number of each
depository, the name in which the account is held, a description of the purpose
of the account, and the complete account number therefor. (s) Transferred
Receivables. (i) Transfers. Each Transferred Receivable was purchased by or
contributed to the Seller on the relevant Transfer Date pursuant to the Transfer
Agreement. (ii) Eligibility. Each Transferred Receivable designated as an
Eligible Receivable in each Investment Base Certificate constitutes an Eligible
Receivable as of the date of such Investment Base Certificate. (iii) No Material
Adverse Effect. The Seller has no knowledge of any fact (including any defaults
by the Obligor thereunder on any other Receivable) that would cause it or should
have caused it to expect that any payments on each Transferred Receivable
designated as an Eligible Receivable in any Investment Base Certificate will not
be paid in full when due or to expect any other Material Adverse Effect. (iv)
Nonavoidability of Transfers. The Seller shall (A) have received each
Contributed Receivable as a contribution to the capital of the Seller by the
Originator thereof and (B) (1) have purchased each Sold Receivable from the
Originator thereof for cash consideration and (2) have accepted assignment of
any Eligible Receivables transferred pursuant to clause (b) of Section 4.04 of
the Transfer Agreement, in each case in an amount that constitutes fair
consideration and reasonably equivalent value therefor. Each Sale of a Sold
Receivable effected pursuant to the terms of the Transfer Agreement shall not
have been made for or on account of an antecedent debt owed by the Originator
thereof to the Seller and no such Sale is or may be avoidable or subject to
avoidance under any bankruptcy laws, rules or regulations. (t) Representations
and Warranties in Other Related Documents. Each of the representations and
warranties of the Seller contained in the Related Documents (other than this
Agreement) is true and correct in all respects and the Seller hereby makes each
such representation and warranty to, and for the benefit of, the Purchaser, the
Operating Agent and the Collateral Agent as if the same were set forth in full
herein. (u) Year 2000 Problems. The Seller has no Year 2000 Problems except any
such problems that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. SECTION 4.02 Representations and
Warranties of the Servicer. To induce the Purchaser to purchase the Transferred
Receivables and each of the Operating Agent and the Collateral Agent to take any
action required to be performed by it hereunder, the Servicer represents and
warrants to the Purchaser, the Operating Agent and the Collateral Agent, which
representation and warranty shall survive the execution and delivery of this
Agreement, that each of the representations and warranties of the Servicer
(whether made by the Servicer in its capacity as an Originator or as the
Servicer) contained in any Related Document is true and correct and, if made by
the Servicer in its capacity as an Originator, applies with equal force to the
Servicer in its capacity as the Servicer, and the Servicer hereby makes each
such representation and warranty to, and for the benefit of, the Purchaser, the
Operating Agent and the Collateral Agent as if the same were set forth in full
herein. ARTICLE V GENERAL COVENANTS OF THE SELLER SECTION 5.01 Affirmative
Covenants of the Seller. The Seller covenants and agrees that from and after the
Closing Date and until the Termination Date: (a) Compliance with Agreements and
Applicable Laws. The Seller shall perform each of its obligations under this
Agreement and the other Related Documents and comply with all federal, state and
local laws and regulations applicable to it and the Transferred Receivables,
including those relating to truth in lending, retail installment sales, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices, privacy, licensing, taxation, ERISA and labor matters and
Environmental Laws and Environmental Permits, except to the extent that the
failure to so comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. (b) Maintenance of Existence and
Conduct of Business. The Seller shall: (i) do or cause to be done all things
necessary to preserve and keep in full force and effect its limited liability
company existence and its rights and franchises; (ii) continue to conduct its
business substantially as now conducted or as otherwise permitted hereunder and
in accordance with the terms of its articles of organization and operating
agreement and Sections 4.01(q) and (r); (iii) at all times maintain, preserve
and protect all of its assets and properties used or useful in the conduct of
its business, including all licenses, permits, charters and registrations, and
keep the same in good repair, working order and condition in all material
respects (taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices; and
(iv) transact business only in such names as are set forth in Schedule 4.01(b).
(c) Deposit of Collections. The Seller shall deposit or cause to be deposited
promptly into a Lockbox Account, and in any event no later than the first
Business Day after receipt thereof, all Collections it may receive with respect
to any Transferred Receivable. (d) Use of Proceeds. The Seller shall utilize the
proceeds of the Purchases made hereunder solely for (i) the purchase of
Receivables from an Originator pursuant to the Transfer Agreement, (ii) the
payment of dividends to the Seller's direct Stockholders, and (iii) the payment
of administrative fees or Servicing Fees or expenses to the Servicer or routine
administrative or operating expenses, in each case only as expressly permitted
by and in accordance with the terms of this Agreement and the other Related
Documents. (e) Payment, Performance and Discharge of Obligations. (i) Subject to
Section 5.01(e)(ii), the Seller shall pay, perform and discharge or cause to be
paid, performed and discharged promptly all charges payable by it, including
(A) charges imposed upon it, its income and profits, or any of its property
(real, personal or mixed) and all charges with respect to tax, social security
and unemployment withholding with respect to its employees (if any), and
(B) lawful claims for labor, materials, supplies and services or otherwise
before any thereof shall become past due. (ii) The Seller may in good faith
contest, by appropriate proceedings, the validity or amount of any charges or
claims described in Section 5.01(e)(i); provided, that (A) adequate reserves
with respect to such contest are maintained on the books of the Seller, in
accordance with GAAP, of and to the extent determined to be material under GAAP,
(B) such contest is maintained and prosecuted continuously and with diligence,
(C) none of the Seller Collateral becomes subject to forfeiture or loss as a
result of such contest, (D) no Lien shall be imposed to secure payment of such
charges or claims other than inchoate tax liens and (E) the Purchaser, the
Operating Agent or the Collateral Agent has not advised the Seller in writing
that such Affected Party reasonably believes that nonpayment or nondischarge
thereof could have or result in a Material Adverse Effect. (f) ERISA. The Seller
shall give the Operating Agent prompt written notice of any event that could
result in the imposition of a Lien under Section 412 of the IRC or Section 302
or 4068 of ERISA. (g) Year 2000 Compliance. The Seller will have no Year 2000
Problems, except any such problems that individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect. SECTION 5.02
Reporting Requirements of the Seller. (a) The Seller hereby agrees that, from
and after the Closing Date and until the Termination Date, it shall deliver or
cause to be delivered to the Purchaser, the Operating Agent, the Collateral
Agent and, in the case of paragraph (f) therein only, to the Rating Agencies,
the financial statements, notices and other information at the times, to the
Persons and in the manner set forth in Annex 5.02(a). (b) The Seller hereby
agrees that, from and after the Closing Date and until the Termination Date, it
shall deliver or cause to be delivered to the Purchaser, the Operating Agent and
the Collateral Agent the Investment Reports (including Investment Base
Certificates) at the times, to the Persons and in the manner set forth in Annex
5.02(b) SECTION 5.03 Negative Covenants of the Seller. The Seller covenants and
agrees that, without the prior written consent of the Purchaser, the Operating
Agent and the Collateral Agent, from and after the Closing Date until the
Termination Date: (a) Sale of Stock and Assets. The Seller shall not sell,
transfer, convey, assign or otherwise dispose of, or assign any right to receive
income in respect of, any of its properties or other assets, including its
capital Stock (whether in a public or a private offering or otherwise), any
Transferred Receivable or Contract therefor or any of its rights with respect to
any Lockbox or any Lockbox Account, the Collection Account, the Retention
Account or any other deposit account in which any Collections of any Transferred
Receivable are deposited except as otherwise expressly permitted by this
Agreement or any of the other Related Documents. (b) Liens. The Seller shall not
create, incur, assume or permit to exist (i) any Adverse Claim on or with
respect to its Transferred Receivables or (ii) any Adverse Claim on or with
respect to its other properties or assets (whether now owned or hereafter
acquired) except for the Liens set forth in Schedule 5.03(b) and other Permitted
Encumbrances. In addition, the Seller shall not become a party to any agreement,
note, indenture or instrument or take any other action that would prohibit the
creation of a Lien on any of its properties or other assets in favor of the
Purchaser as additional collateral for the Seller Secured Obligations, except as
otherwise expressly permitted by this Agreement or any of the other Related
Documents. (c) Modifications of Receivables, Contracts or Transfer Agreement.
The Seller shall not extend, amend, forgive, discharge, compromise, waive,
cancel or otherwise modify the terms of any Transferred Receivable or amend,
modify or waive any term or condition of any Contract related thereto or amend,
modify, waive or terminate any term or condition of the Transfer Agreement, any
Receivables Assignment, or the Parent Agreement; provided, that the Seller may
authorize the Servicer to take such actions as are expressly permitted by the
terms of any Related Document or the Credit and Collection Policies. (d) Changes
in Instructions to Obligors. The Seller shall not make any change in its
instructions to Obligors regarding the deposit of Collections with respect to
the Transferred Receivables. (e) Capital Structure and Business. The Seller
shall not (i) make any changes in any of its business objectives, purposes or
operations that could have or result in a Material Adverse Effect, (ii) make any
change in its capital structure as described on Schedule 4.01(h), including the
issuance of any shares of Stock, warrants or other securities convertible into
Stock or any revision of the terms of its outstanding Stock, (iii) amend its
articles of organization or its operating agreement or be operated in violation
of its articles of organization or operating agreement, or (iv) if and for so
long as Cone Mills is obligated to comply with Section 3.9 of the Indenture, be
or become a Subsidiary (as defined in the Indenture) of Cone Mills. The Seller
shall not engage in any business other than the businesses currently engaged in
by it. (f) Mergers, Subsidiaries, Etc. The Seller shall not directly or
indirectly, by operation of law or otherwise, (i) form or acquire any
Subsidiary, or (ii) merge with, consolidate with, acquire all or substantially
all of the assets or capital Stock of, or otherwise combine with or acquire, any
Person. (g) Sale Characterization; Transfer Agreement. The Seller shall not make
statements or disclosures, prepare any financial statements or in any other
respect account for or treat the transactions contemplated by the Transfer
Agreement (including for accounting, tax and reporting purposes) in any manner
other than (i) with respect to each Sale of each Sold Receivable effected
pursuant to the Transfer Agreement, as a true sale and absolute assignment of
the title to and sole record and beneficial ownership interest of the
Transferred Receivables by the Originators thereof to the Seller and (ii) with
respect to each contribution of Contributed Receivables thereunder, as an
increase in the stated capital of the Seller. (h) Restricted Payments. The
Seller shall not enter into any lending transaction with any other Person. The
Seller shall not at any time (i) advance credit to any Person or (ii) declare
any dividends, repurchase any Stock, return any capital, or make any other
payment or distribution of cash or other property or assets in respect of the
Seller's Stock if, after giving effect to any such advance or distribution, a
Purchase Excess would exist. (i) Debt. The Seller shall not create, incur,
assume or permit to exist any Debt, except (i) Debt of the Seller to any
Affected Party, Purchaser Indemnified Person, the Servicer or any other Person
expressly permitted by this Agreement or any other Related Document,
(ii) deferred taxes, (iii) unfunded pension fund and other employee benefit plan
obligations and liabilities to the extent they are permitted to remain unfunded
under applicable law, and (iv) endorser liability in connection with the
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business. (j) Prohibited Transactions. The Seller shall not enter
into, or be a party to, any transaction with any Person except as expressly
permitted hereunder or under any other Related Document. (k) Investments. Except
as otherwise expressly permitted hereunder or under the other Related Documents,
the Seller shall not make any investment in, or make or accrue loans or advances
of money to, any Person, including any Stockholder, manager, officer or employee
of the Seller or any of Cone Mill's other Subsidiaries, through the direct or
indirect lending of money, holding of securities or otherwise, except with
respect to Transferred Receivables and Permitted Investments. (l) Commingling.
The Seller shall not deposit or permit the deposit of any funds that do not
constitute Collections of Transferred Receivables into any Lockbox Account. (m)
ERISA. The Seller shall not, and shall not cause or permit any of its ERISA
Affiliates to, cause or permit to occur an event that could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA. ARTICLE VI COLLECTIONS AND DISBURSEMENTS SECTION 6.01 Establishment of
Deposit Accounts. (a) The Lockbox Accounts. (i) The Seller has established with
each Lockbox Bank one or more Lockbox Accounts. If (i) an Incipient Termination
Event or a Termination Event shall have occurred and be continuing or (ii) the
Operating Agent, in good faith, believes that a Termination Event is imminent,
the Operating Agent (and from and after the Facility Termination Date, the
Collateral Agent) may, without prior notice to the Seller, take exclusive
dominion and control of each Lockbox Account and all monies, instruments and
other property then or thereafter on deposit therein, and the Seller thereafter
shall not make or cause to be made, nor shall the Seller thereafter have any
ability to make or cause to be made, any withdrawals from any Lockbox Account
except as provided in Section 6.01(b)(ii). (ii) The Seller and the Servicer have
instructed all existing Obligors of Transferred Receivables, and shall instruct
all future Obligors of such Receivables, to make payments in respect thereof
only (A) by check or money order mailed to one or more lockboxes or post office
boxes under the control of the Operating Agent (each a "Lockbox" and
collectively the "Lockboxes") or (B) by wire transfer or moneygram directly to a
Lockbox Account. Schedule 4.01(r) lists all Lockboxes and all Lockbox Banks at
which the Seller maintains Lockbox Accounts as of the Closing Date, and such
schedule correctly identifies (1) with respect to each such Lockbox Bank, the
name, address and telephone number thereof, (2) with respect to each Lockbox
Account, the name in which such account is held and the complete account number
therefor, and (3) with respect to each Lockbox, the lockbox number and address
thereof. The Seller and the Servicer shall endorse, to the extent necessary, all
checks or other instruments received in any Lockbox so that the same can be
deposited in the Lockbox Account, in the form so received (with all necessary
endorsements), on the first Business Day after the date of receipt thereof. In
addition, each of the Seller and the Servicer shall deposit or cause to be
deposited into a Lockbox Account all cash, checks, money orders or other
proceeds of Transferred Receivables or Seller Collateral received by it other
than in a Lockbox or a Lockbox Account, in the form so received (with all
necessary endorsements), not later than the close of business on the first
Business Day following the date of receipt thereof, and until so deposited all
such items or other proceeds shall be held in trust for the benefit of the
Collateral Agent. Neither the Seller nor the Servicer shall make any deposits
into a Lockbox or any Lockbox Account except in accordance with the terms of
this Agreement or any other Related Document. (iii) If, for any reason, a
Lockbox Agreement terminates or any Lockbox Bank fails to comply with its
obligations under the Lockbox Agreement to which it is a party, then the Seller
shall promptly notify all Obligors of Transferred Receivables who had previously
been instructed to make wire payments to a Lockbox Account maintained at any
such Lockbox Bank to make all future payments to a new Lockbox Account in
accordance with this Section 6.01(a)(iii). The Seller shall not close any such
Lockbox Account unless it shall have (A) received the prior written consent of
the Operating Agent and the Collateral Agent, (B) established a new account with
the same Lockbox Bank or with a new depositary institution satisfactory to the
Operating Agent and the Collateral Agent, (C) entered into an agreement covering
such new account with such Lockbox Bank or with such new depositary institution
substantially in the form of such Lockbox Agreement or that is satisfactory in
all respects to the Operating Agent and the Collateral Agent (whereupon, for all
purposes of this Agreement and the other Related Documents, such new account
shall become a Lockbox Account, such new agreement shall become a Lockbox
Agreement and any new depositary institution shall become a Lockbox Bank), and
(D) taken all such action as the Collateral Agent shall require to grant and
perfect a first priority Lien in such new Lockbox Account to the Purchaser under
Section 8.01 of this Agreement. Except as permitted by this Section 6.01(a),
neither the Seller nor the Servicer shall open any new Lockbox or Lockbox
Account without the prior written consent of the Operating Agent and the
Collateral Agent. (b) Collection Account. (i) The Purchaser has established and
shall maintain the Collection Account with the Depositary. The Seller and the
Purchaser agree that prior to the Facility Termination Date the Operating Agent,
and from and after the Facility Termination Date the Collateral Agent, shall
have exclusive dominion and control of the Collection Account and all monies,
instruments and other property from time to time on deposit therein. (ii) From
and after the Operating Agents or the Collateral Agents taking exclusive
dominion and control over the Lockbox Accounts pursuant to Section 6.01(a)(i),
the Operating Agent or the Collateral Agent (as the case may be) shall instruct
each Lockbox Bank to transfer, on each Business Day and in same day funds, all
available funds in each Lockbox Account to the Collection Account, and the
Seller shall cause each Lockbox Bank to make such transfer. The Purchaser, the
Operating Agent and the Collateral Agent may deposit into the Collection Account
from time to time all monies, instruments and other property received by any of
them as proceeds of the Transferred Receivables. On each Business Day prior to
the Facility Termination Date the Operating Agent shall instruct and cause the
Depositary (which instruction may be in writing or by telephone confirmed
promptly thereafter in writing) to release funds on deposit in the Collection
Account in the order of priority set forth in Section 6.03. On each Business Day
from and after the Facility Termination Date the Collateral Agent shall apply
all amounts when received in the Collection Account in the order of priority set
forth in Section 6.05. (iii) If, for any reason, the Depositary wishes to resign
as depositary of the Collection Account or fails to carry out the instructions
of the Operating Agent or the Collateral Agent, then the Operating Agent or the
Collateral Agent shall promptly notify the Purchaser Secured Parties. The
Purchaser shall not close the Collection Account unless it shall have (A)
received the prior written consent of the Operating Agent and the Collateral
Agent, (B) established a new deposit account with the Depositary or with a new
depositary institution satisfactory to the Operating Agent and the Collateral
Agent, (C) entered into an agreement covering such new account with such new
depositary institution satisfactory in all respects to the Operating Agent and
the Collateral Agent (whereupon such new account shall become the Collection
Account for all purposes of this Agreement and the other Related Documents), and
(D) taken all such action as the Collateral Agent shall require to grant and
perfect a first priority Lien in such new Collection Account to the Collateral
Agent under the Collateral Agent Agreement. (c) Retention Account. The Purchaser
has established and shall maintain the Retention Account with the Depositary.
The Seller and the Purchaser agree that prior to the Facility Termination Date
the Operating Agent, and from and after the Facility Termination Date the
Collateral Agent, shall have exclusive dominion and control of the Retention
Account and all monies, instruments and other property from time to time on
deposit therein. (d) Collateral Account. The Purchaser has established and shall
maintain the Collateral Account with the Depositary. The Seller and the
Purchaser agree that the Operating Agent shall have exclusive dominion and
control of the Collateral Account and all monies, instruments and other property
from time to time on deposit therein. SECTION 6.02 Funding of Collection
Account. (a) As soon as practicable, and in any event no later than 11:00 a.m.
(New York time) on each Business Day: (i) if the Operating Agent or the
Collateral Agent has taken exclusive dominion and control over the Lockbox
Accounts pursuant to Section 6.01(a)(i), the Operating Agent, the Collateral
Agent, the Seller and the Servicer shall cause the Lockbox Bank to make the
transfer to the Collection Account required to be made on such Business Day
pursuant to Section 6.01(b)(ii); (ii) the Purchaser or the Operating Agent
shall, or shall cause the Collateral Agent to, deposit in the Collection Account
the amount, if any, required pursuant to Section 2.04(b)(i); (iii) the Purchaser
or the Operating Agent shall, or shall cause the Collateral Agent to, deposit in
the Collection Account any Seller LOC Draws or Insurance Draws made on such
Business Day; (iv) if, on the immediately preceding Business Day, the Operating
Agent shall have notified the Seller of any Purchase Excess pursuant to Section
2.11, then the Seller shall deposit cash in the amount of such Purchase Excess
in the Collection Account; (v) if on such Business Day the Seller is required to
make other payments under this Agreement not previously retained out of
Collections (including Additional Amounts and Indemnified Amounts not previously
paid), then the Seller shall deposit an amount equal to such payments in the
Collection Account; (vi) if, on the immediately preceding Business Day, any
Originator made a capital contribution or repurchased a Transferred Receivable
pursuant to Section 4.04 of the Transfer Agreement, or made a payment as a
result of any Dilution Factors pursuant to Section 4.02(o) of the Transfer
Agreement, then the Seller shall deposit cash in the amount so received from
such Originator for such contribution, repurchase or payment in the Collection
Account; (vii) the Servicer shall deposit in the Collection Account the
Outstanding Balance of any Transferred Receivable it elects to pay pursuant to
Section 7.04; and (viii) if the Operating Agent and the Collateral Agent have
not taken dominion and control over the Lockbox Account Agreement pursuant to
Section 6.01(a)(i), the Seller shall deposit in the Collection Account an amount
equal to the following for such Business Day and any immediately preceding
non-Business Days; (A) the Daily Yield (B) the Servicing Fee; and (C) the Unused
Facility Fee. (b) If, on or before the second Business Day immediately preceding
any Settlement Date, the Operating Agent shall have notified the Seller of any
Retention Account Deficiency pursuant to Section 6.04(b), then the Seller shall
deposit cash in the amount of such deficiency in the Collection Account no later
than 11:00 a.m. (New York time) on such Settlement Date. (c) From and after the
Facility Termination Date, the Collateral Agent shall transfer all amounts on
deposit in the Retention Account as of that date to the Collection Account.
SECTION 6.03 Daily Disbursements From the Collection Account and Related
Sub-Accounts; Revolving Period. On each Business Day during the Revolving
Period, and following the transfers made pursuant to Section 6.02, the Operating
Agent shall disburse all amounts then on deposit in the Collection Account and
its related subaccounts in the following priority: (a) with respect to amounts
on deposit in the Collection Account: (i) to the Retention Account for the
account of the Purchaser, the amount of any Retention Account Deficiency
deposited pursuant to Section 6.02(b); (ii) to the Deferred Purchase Price
Sub-Account, the amount of all Deferred Purchase Price Collections deposited in
the Collection Account on that day; (iii) to the Capital Investment Sub-Account,
the balance of any amounts remaining after making the foregoing disbursements;
(b) with respect to amounts on deposit in the Deferred Purchase Price
Sub-Account after making the transfers required by Section 6.03(a): (i) to the
Retention Account for the account of the Purchaser, an amount equal to the sum
of (A) Daily Yield; (B) the Yield Shortfall as of the immediately preceding
Business Day; (C) the Servicing Fee; (D) the Servicing Fee Shortfall as of the
immediately preceding Business Day; (E) the Unused Facility Fee; and (F) the
Unused Facility Fee Shortfall as of the immediately preceding Business Day; (ii)
to the Capital Investment Sub-Account, an amount equal to the Dilution Funded
Amount; (iii) if the Deferred Purchase Price Adjustment is less than zero, then
to the Capital Investment Sub-Account an amount equal to the absolute value of
the Deferred Purchase Price Adjustment; (iv) to an account previously designated
by the Seller, in partial payment of the Deferred Purchase Price, the balance of
any amounts remaining after making the foregoing disbursements; and (c) with
respect to amounts on deposit in the Capital Investment Sub-Account after making
the transfers required by Section 6.03(a): (i) to the Retention Account for the
account of the Purchaser, an amount equal to the sum of any Yield Shortfall, any
Servicing Fee Shortfall and any Unused Facility Fee Shortfall following the
transfer made pursuant to Section 6.03(b)(i); (ii) to the Collateral Account for
the account of the Purchaser (or, in the case of Indemnified Amounts or
Additional Amounts for the account of the applicable Purchaser Indemnified
Person or Affected Party, respectively), an amount equal to the deposits made in
the Collection Account pursuant to Section 6.02(a)(v) and not otherwise
disbursed pursuant to Section 6.03(a)(i); (iii) to the Collateral Account for
the account of the Purchaser, an amount equal to any Purchase Excess; (iv) if
the Deferred Purchase Price Adjustment is greater than zero, then to the Seller
an amount equal to the Deferred Purchase Price Adjustment as partial payment of
the Deferred Purchase Price; and (v) the balance of any amounts remaining after
making the foregoing disbursements, at the Seller's option, (A) to an account
previously designated by the Seller as payment of the Cash Purchase Price for
Purchases made on such day or (B) if, pursuant to a Repayment Notice, the Seller
has requested to reduce the Capital Investment of the Purchaser, then to the
Collateral Account for the account of the Purchaser, the lesser of (1) the
amount of such requested reduction of Capital Investment and (2) such balance.
SECTION 6.04 Disbursements From the Retention Account; Settlement Date
Procedures; Revolving Period. (a) On each Settlement Date during the Revolving
Period, the amounts on deposit in the Retention Account shall be disbursed or
retained by the Operating Agent in the following priority: (i) to the Collateral
Account for the account of the Purchaser (or, if applicable, any Purchaser
Indemnified Person), an amount equal to: (A) the accrued and unpaid Daily Yield
minus the Margin as of the end of the immediately preceding Settlement Period;
(B) all Additional Amounts incurred and payable to any Affected Party as of the
end of the immediately preceding Settlement Period; (C) all other amounts
accrued and payable under this Agreement (including Indemnified Amounts incurred
and payable to any Purchaser Indemnified Person) as of the end of the
immediately preceding Settlement Period to the extent not already transferred
pursuant to Section 6.03(c)(ii); and (D) if a Purchase Excess exists on such
date, an amount equal to such excess; (ii) to the Operating Agent, the accrued
and unpaid Margin as of the end of the immediately preceding Settlement Period
for distribution to the applicable parties; (iii) to the Servicer on behalf of
the Seller, an amount equal to its accrued and unpaid Servicing Fee as of the
end of the immediately preceding Settlement Period; (iv) retained in the
Retention Account, an amount equal to the Accrued Monthly Yield, Accrued Unused
Facility Fee and Accrued Servicing Fee as of such date; and (v) the balance
remaining after retaining or disbursing the foregoing amounts to an account
previously designated by the Seller. (b) No later than the second Business Day
immediately preceding each Settlement Date, the Operating Agent shall determine
and notify the Seller of any Retention Account Deficiency for the preceding
Settlement Period, and the Seller shall deposit cash in the amount of such
Retention Account Deficiency to the Collection Account pursuant to
Section 6.02(b). SECTION 6.05 Liquidation Settlement Procedures. On each
Business Day from and after the Facility Termination Date until the Termination
Date, the Collateral Agent shall: (a) as soon as practicable, transfer all
amounts then on deposit in the Retention Account to the Collection Account; (b)
transfer all amounts in the Collection Account (including amounts transferred
from the Retention Account pursuant to Section 6.02(c)) in the following
priority: (i) to the Deferred Purchase Price Sub-Account, an amount equal to all
Deferred Purchase Price Collections deposited in the Collection Account on such
day; and (ii) to the Capital Investment Sub-Account, the balance of any amounts
remaining after making the foregoing disbursement; (c) transfer all amounts in
the Deferred Purchase Price Sub-Account (after making the transfers required by
Section 6.05(b)), in the following priority: (i) if an Event of Servicer
Termination has occurred and a Successor Servicer has assumed the
responsibilities and obligations of the Servicer in accordance with Section
11.02, then to the Successor Servicer an amount equal to its accrued and unpaid
Successor Servicing Fees and Expenses; (ii) if on such Business Day Capital
Investment is being maintained through the issuance of Commercial Paper (to the
extent such Capital Investment exceeds Liquidity Loans then outstanding), to the
Collateral Account for the account of the Purchaser, an amount equal to accrued
and unpaid CP Interest Amount through and including the date of maturity of the
Commercial Paper maintaining such Capital Investment; (iii) to the Insurer, an
amount equal to any unpaid premiums then owing to the Insurer under the
Insurance Agreement (but only to the extent that the Seller is responsible for
paying such premiums under the Fee Letter); (iv) if there are Insurance Draws
then outstanding, to the Insurer an amount equal to accrued and unpaid interest
on the Insurance Draws to the extent amounts on deposit in the Deferred Purchase
Price Sub-Account are allocated to this subparagraph (c)(iv) pursuant to the
terms of the Insurance Agreement; (v) if Liquidity Loans are then outstanding,
to the Liquidity Agent on behalf of the Liquidity Lenders, an amount equal to
accrued and unpaid interest on the Liquidity Loans; (vi) to the Capital
Investment Sub-Account: (A) an amount equal to the Dilution Funded Amount; and
(B) if Liquidity Loans or Seller LOC Draws are then outstanding or if Capital
Investment is being maintained through the issuance of Commercial Paper, the
balance of any amounts remaining after making the disbursements set forth in
Sections 6.05(c)(i)-(vi)(A); (vii) to the Letter of Credit Agent, an amount
equal to any accrued and unpaid interest on Seller LOC Draws; (viii) to the
Collateral Account, an amount equal to (A) accrued and unpaid Daily Yield plus
any Prepayment Fee then due and unpaid minus (B) the aggregate amounts paid
pursuant to Sections 6.05(c)(ii), (iv), (v) and (vii); (ix) if an Event of
Servicer Termination shall not have occurred, to the Servicer in an amount equal
to its accrued and unpaid Servicing Fee; and (x) upon payment in full of all
amounts set forth in Sections 6.05(d)(i) through (d)(viii) below, the balance of
any amounts remaining to an account previously designated by the Seller as
partial payment of the Deferred Purchase Price; and (d) transfer all amounts in
the Capital Investment Sub-Account, in the following priority: (i) to the
Collateral Account for the account of the Purchaser, an amount equal to: (A) if
on such Business Day Capital Investment is being maintained through the issuance
of Commercial Paper (to the extent such Capital Investment exceeds Liquidity
Loans then outstanding), accrued and unpaid CP Interest Amount through and
including such date to the extent not paid under Sections 6.05(c)(ii) and
6.05(c)(viii); and (B) if on such Business Day Capital Investment is being
maintained through the issuance of Commercial Paper (to the extent such Capital
Investment exceeds Liquidity Loans then outstanding), the principal of all
Capital Investment in excess of such Liquidity Loans; (ii) to the Insurer, to
the extent amounts on deposit in the Capital Investment Sub-Account are
allocated to this subparagraph (d)(ii) pursuant to the terms of the Insurance
Agreement, an amount equal to any unpaid premiums of the Insurer under the
Insurance Agreement to the extent not paid under Section 6.05(c)(iii) (but only
to the extent that the Seller is responsible for paying such premiums under the
Fee Letter); (iii) if Insurance Draws are then outstanding, to the Insurer, to
the extent amounts on deposit in the Capital Investment Sub-Account are
allocated to this subparagraph (d)(iii) pursuant to the terms of the Insurance
Agreement, an amount equal to: (A) accrued and unpaid interest on the Insurance
Draws to the extent not paid under Section 6.05(c)(iv); (B) the outstanding
amount of Insurance Draws; and (C) any other amounts owing to the Insurer
pursuant to the Insurance Policy or the Insurance Agreement, including, without
limitation, any fees and expenses of the Insurer other than Additional Amounts
and Indemnified Amounts; (iv) if Liquidity Loans are then outstanding, to the
Liquidity Agent on behalf of the Liquidity Lenders, an amount equal to: (A)
accrued and unpaid interest on the Liquidity Loans to the extent not paid under
Section 6.05(c)(v); (B) the principal of outstanding Liquidity Loans; and (C)
any other unpaid amounts, including any fees, owing to the Liquidity Agent or
Liquidity Lenders in connection with the Liquidity Loans; (v) to the Collateral
Account for the account of the Purchaser, an amount equal to: (A) all Additional
Amounts incurred and payable to any Affected Party; and (B) all Indemnified
Amounts incurred and payable to any Purchaser Indemnified Person; (vi) to the
Letter of Credit Agent, if there are any outstanding Seller LOC Draws, an amount
equal to: (A) accrued and unpaid interest on such outstanding Seller LOC Draws
to the extent not paid pursuant to Section 6.05(c)(vii); (B) the principal of
such outstanding Seller LOC Draws; and (C) any other amounts, including fees,
owing to the Letter of Credit Agent in connection with such outstanding Seller
LOC Draws; and (vii) to the Collateral Account, an amount equal to (A) accrued
and unpaid Daily Yield plus any Prepayment Fee then due and unpaid, minus (B)
the aggregate amounts paid pursuant to Sections 6.05(c)(ii), 6.05(c)(iv),
6.05(c)(v), 6.05(c)(vii), 6.05(c)(viii), 6.05(d)(i)(A), 6.05(d)(iii)(A),
6.05(d)(iv)(A) and 6.05(d)(vi)(A); (viii) If an Event of Servicer Termination
shall not have occurred, to the Servicer in an amount equal to its accrued and
unpaid Servicing Fee; and (ix) to an account previously designated by the
Seller, the balance of any funds remaining after payment in full of all amounts
set forth in Sections 6.05(d)(i)-(d)(viii). SECTION 6.06 Investment of Funds in
Accounts. To the extent uninvested amounts are on deposit in the Collateral
Account or the Retention Account on any given day during the Revolving Period,
the Operating Agent shall invest all such amounts in Permitted Investments
selected by the Operating Agent that mature no later than (a) the immediately
succeeding Business Day, in the case of the Collateral Account, and (b) the
immediately succeeding Settlement Date, in the case of the Retention Account.
From and after the Facility Termination Date, any investment of such amounts
shall be solely at the discretion of the Operating Agent, subject to the
restrictions described above. SECTION 6.07 Termination Procedures. (a) On the
earlier of (i) the first Business Day after the Facility Termination Date on
which the Capital Investment has been reduced to zero or (ii) the Final Purchase
Date, if the obligations to be paid pursuant to Section 6.05 have not been paid
in full, the Seller shall immediately deposit in the Collection Account an
amount sufficient to make such payments in full. (b) On the Termination Date,
all amounts on deposit in the Collection Account and the Retention Account shall
be disbursed to the Seller. Such disbursement shall constitute the final payment
to which the Seller is entitled pursuant to the terms of this Agreement. ARTICLE
VII SERVICER PROVISIONS SECTION 7.01 Appointment of the Servicer. Each of the
Seller and the Purchaser hereby appoints the Servicer as its agent to service
the Transferred Receivables and enforce its rights and interests in and under
each Transferred Receivable and Contract therefor and to serve in such capacity
until the termination of its responsibilities pursuant to Sections 9.02 or
11.01. In connection therewith, the Servicer hereby accepts such appointment and
agrees to perform the duties and obligations set forth herein. If and for so
long as Cone Mills is the Servicer, Cone Mills may delegate its duties as
Servicer in respect of any Transferred Receivables to the Originator of such
Transferred Receivables and, to the extent of such delegation, all references to
the Servicer in any Related Document shall be deemed to include such Originator
in such capacity, but Cone Mills shall remain liable for the performance by such
Originator of such delegated duties. The Servicer may, with the prior written
consent of the Purchaser, the Operating Agent and the Collateral Agent,
subcontract with a Sub-Servicer (other than another Originator as provided
above) for the collection, servicing or administration of the Transferred
Receivables; provided, that (a) the Servicer shall remain liable for the
performance of the duties and obligations of the Sub-Servicer pursuant to the
terms hereof and (b) any Sub-Servicing Agreement that may be entered into and
any other transactions or services relating to the Transferred Receivables
involving a Sub-Servicer shall be deemed to be between the Sub-Servicer and the
Servicer alone, and the Purchaser, the Operating Agent and the Collateral Agent
shall not be deemed parties thereto and shall have no obligations, duties or
liabilities with respect to the Sub-Servicer. SECTION 7.02 Duties and
Responsibilities of the Servicer. Subject to the provisions of this Agreement,
the Servicer shall conduct the servicing, administration and collection of the
Transferred Receivables and shall take, or cause to be taken, all actions that
(i) may be necessary or advisable to service, administer and collect each
Transferred Receivable from time to time, (ii) the Servicer would take if the
Transferred Receivables were owned by the Servicer, and (iii) are consistent
with industry practice for the servicing of such Transferred Receivables.
SECTION 7.03 Collections on Receivables. (a) In the event that the Servicer is
unable to determine the specific Transferred Receivables on which Collections
have been received from the Obligor thereunder, the parties agree for purposes
of this Agreement only that such Collections shall be deemed to have been
received on such Receivables in the order in which they were originated with
respect to such Obligor. In the event that the Servicer is unable to determine
the specific Transferred Receivables on which discounts, offsets or other
non-cash reductions have been granted or made with respect to the Obligor
thereunder, the parties agree for purposes of this Agreement only that such
reductions shall be deemed to have been granted or made on such Receivables (i)
prior to the occurrence of a Termination Event, as determined by the Servicer
and (ii) from and after the occurrence of a Termination Event, in the reverse
order in which they were originated with respect to such Obligor. (b) If the
Servicer determines that amounts unrelated to the Transferred Receivables (the
"Unrelated Amounts") have been deposited in the Collection Account, then the
Servicer shall provide written evidence thereof to the Purchaser, the Operating
Agent and the Collateral Agent no later than the first Business Day following
the day on which the Servicer had actual knowledge thereof, which evidence shall
be provided in writing and shall be otherwise satisfactory to each such Affected
Party. Upon receipt of any such notice, the Seller, the Servicer and Operating
Agent shall segregate the Unrelated Amounts and return the same to the
appropriate Originator and the same shall not be deemed to constitute
Collections on Transferred Receivables and shall not be subject to the
provisions of Article VI. SECTION 7.04 Authorization of the Servicer. Each of
the Seller and the Purchaser hereby authorizes the Servicer to take any and all
reasonable steps in its name and on its behalf necessary or desirable and not
inconsistent with the ownership of the Transferred Receivables purchased by the
Purchaser hereunder and the pledge thereof by the Purchaser to the Collateral
Agent pursuant to the Collateral Agent Agreement, in the determination of the
Servicer, to (a) collect all amounts due under any Transferred Receivable,
including endorsing its name on checks and other instruments representing
Collections on such Receivable, and execute and deliver any and all instruments
of satisfaction or cancellation or of partial or full release or discharge and
all other comparable instruments with respect to any such Receivable and (b)
after any Transferred Receivable becomes a Delinquent Receivable and to the
extent permitted under and in compliance with applicable law and regulations,
commence proceedings with respect to the enforcement of payment of any such
Receivable and the Contract therefor and adjust, settle or compromise any
payments due thereunder, in each case to the same extent as the Originator
thereof could have done if it had continued to own such Receivable. Each
Originator, the Seller and the Purchaser shall furnish the Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder, and
shall cooperate with the Servicer to the fullest extent to collect the
Transferred Receivables and to assist the Servicer in the discharge of its
duties hereunder and under the other Related Documents. Notwithstanding anything
to the contrary contained herein, the Purchaser, the Operating Agent and the
Collateral Agent shall have the absolute and unlimited right to direct the
Servicer (whether the Servicer is Cone Mills or otherwise) to commence or settle
any legal action to enforce collection of any Transferred Receivable or to
foreclose upon, repossess or take any other action that the Operating Agent or
the Collateral Agent deems necessary or advisable with respect thereto;
provided, that in lieu of commencing any such action or taking other enforcement
action, the Servicer may, at its option, elect to pay to the Purchaser the
Outstanding Balance of such Transferred Receivable. In no event shall the
Servicer be entitled to make any Affected Party a party to any Litigation
without such Affected Party's express prior written consent, or to make the
Seller a party to any Litigation without the Operating Agent's consent. SECTION
7.05 Servicing Fees. As compensation for its servicing activities and as
reimbursement for its reasonable expenses in connection therewith, the Servicer
shall be entitled to receive the Servicing Fees in accordance with Sections 6.04
and 6.05. The Servicer shall be required to pay for all expenses incurred by it
in connection with its activities hereunder (including any payments to
accountants, counsel or any other Person) and shall not be entitled to any
payment therefor other than the Servicing Fees. SECTION 7.06 Covenants of the
Servicer. The Servicer covenants and agrees that from and after the Closing Date
and until the Termination Date: (a) Ownership of Transferred Receivables. The
Servicer shall identify the Transferred Receivables clearly and unambiguously in
its Servicing Records to reflect that such Transferred Receivables have been
sold or contributed to the Seller and, following the Purchase thereof under this
Agreement, are owned by the Purchaser. (b) Compliance with Credit and Collection
Policies. The Servicer shall comply in all respects with the Credit and
Collection Policies with respect to each Transferred Receivable and the Contract
therefor. (c) Covenants in Other Related Documents. The Servicer shall perform,
keep and observe all covenants applicable to it in its capacity as an Originator
under the Transfer Agreement and the other Related Documents (including those
covenants set forth in Sections 4.02 and 4.03 of the Transfer Agreement) and the
Servicer hereby agrees to be bound by such covenants in its capacity as the
Servicer hereunder for the benefit of the Purchaser, the Operating Agent and the
Collateral Agent as if the same were set forth in full herein. SECTION 7.07
Reporting Requirements of the Servicer. The Servicer hereby agrees that, from
and after the Closing Date and until the Termination Date, it shall deliver or
cause to be delivered to the Purchaser, the Operating Agent and the Collateral
Agent the financial statements, notices, Projections and other information at
the times, to the Persons and in the manner set forth in Annex 7.07 (except if
the Servicer is Cone Mills, in which case the Servicer shall not be required to
furnish the information required in paragraphs (a) and (b) therein). ARTICLE
VIII GRANT OF SECURITY INTERESTS SECTION 8.01 Seller's Grant of Security
Interest. The parties hereto intend that each Purchase of Transferred
Receivables to be made hereunder shall constitute a purchase and sale of such
Transferred Receivables and not a loan. If, however, a court of competent
jurisdiction determines that any transaction provided for herein constitutes a
loan and not a purchase and sale, then the parties hereto intend that this
Agreement shall constitute a security agreement under applicable law. In such
regard and, in any event, to secure the prompt and complete payment, performance
and observance of all Seller Secured Obligations, and to induce the Purchaser to
enter into this Agreement and perform the obligations required to be performed
by it hereunder in accordance with the terms and conditions thereof, the Seller
hereby grants, assigns, conveys, pledges, hypothecates and transfers to the
Purchaser a Lien upon all of its right, title and interest in, to and under the
following property, whether now owned by or owing to, or hereafter acquired by
or arising in favor of, the Seller (including under any trade names, styles or
derivations of the Seller), and regardless of where located (all of which being
hereinafter collectively referred to as the "Seller Collateral"): (a) all
Transferred Receivables, Contracts therefor and Collections thereon; (b) this
Agreement, the Transfer Agreement, all Lockbox Agreements and all other Related
Documents now or hereafter in effect relating to the purchase, servicing or
processing of Transferred Receivables (collectively, the "Seller Assigned
Agreements"), including (i) all rights of the Seller to receive moneys due and
to become due thereunder or pursuant thereto, (ii) all rights of the Seller to
receive proceeds of any insurance, indemnity, warranty or guaranty with respect
thereto, (iii) all claims of the Seller for damages or breach with respect
thereto or for default thereunder and (iv) the right of the Seller to amend,
waive or terminate the same and to perform and to compel performance and
otherwise exercise all remedies thereunder; (c) all of the following
(collectively, the "Seller Deposit Account Collateral"): (i) the Lockbox
Accounts, the Lockboxes and all funds on deposit therein and all certificates
and instruments, if any, from time to time representing or evidencing the
Lockbox Accounts, the Lockboxes or such funds, (ii) the Collection Account, the
Retention Account and all funds on deposit therein and all certificates and
instruments, if any, from time to time representing or evidencing the Collection
Account, the Retention Account or such funds, (iii) all Investments from time to
time of amounts in the Collection Account and the Retention Account, and all
certificates, instruments and investment property, if any, from time to time
representing or evidencing such Investments, (iv) all notes, certificates of
deposit and other instruments from time to time delivered to or otherwise
possessed by the Purchaser or any assignee or agent on behalf of the Purchaser
in substitution for or in addition to any of the then existing Seller Deposit
Account Collateral, and (v) all interest, dividends, cash, instruments,
investment property and other property from time to time received, receivable or
otherwise distributed with respect to or in exchange for any or all of the then
existing Seller Deposit Account Collateral; (d) all other property that may from
time to time hereafter be granted and pledged by the Seller or by any Person on
its behalf under this Agreement, including any deposit with the Purchaser, the
Operating Agent or the Collateral Agent of additional funds by the Seller; and
(e) to the extent not otherwise included, all proceeds and products of the
foregoing and all accessions to, substitutions and replacements for, and profits
of, each of the foregoing Seller Collateral (including proceeds that constitute
property of the types described in Sections 8.01(a) through (d). SECTION 8.02
Seller's Certification. The Seller hereby certifies that (a) the benefits of the
representations and warranties of each Originator made to the Seller under the
Transfer Agreement have been assigned by the Seller to the Purchaser hereunder
and by the Purchaser to the Collateral Agent under the Collateral Agent
Agreement; (b) the rights of the Seller under the Transfer Agreement to require
a capital contribution or payment of a Rejected Amount from an Originator may be
enforced by the Purchaser and the Collateral Agent; and (c) the Transfer
Agreement provides that the representations, warranties and covenants described
in Sections 4.01 and 4.02 and 4.03 thereof, the indemnification and payment
provisions of Article V thereof and the provisions of Sections 4.03(j), 8.03 and
8.14 thereof shall survive the sale of the Transferred Receivables and the
termination of the Transfer Agreement and this Agreement. SECTION 8.03 Consent
to Assignment. Each of the Seller and the Servicer acknowledges and consents to
the grant by the Purchaser to the Collateral Agent pursuant to the Collateral
Agent Agreement of a Lien upon all of the Purchaser's right, title and interest
in, to and under the Seller Collateral and acknowledges the rights of the
Collateral Agent thereunder and the covenants made by the Purchaser in favor of
the Collateral Agent set forth therein, and further acknowledges and consents
that, upon the occurrence and during the continuance of an Incipient Termination
Event or a Termination Event, the Collateral Agent shall be entitled to enforce
the provisions of the Seller Assigned Agreements and shall be entitled to all
the rights and remedies of the Purchaser thereunder. In addition, each of the
Seller and the Servicer hereby authorizes the Collateral Agent to rely on the
representations and warranties made by it in the Seller Assigned Agreements to
which it is a party and in any other certificates or documents furnished by it
to any party in connection therewith. SECTION 8.04 Delivery of Collateral. All
certificates or instruments representing or evidencing the Seller Collateral
shall be delivered to and held by or on behalf of the Collateral Agent pursuant
to the terms of the Collateral Agent Agreement and shall be in suitable form for
transfer by delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Collateral Agent. The Collateral Agent shall have the right, at any time in its
discretion following the occurrence and during the continuation of a Termination
Event and without notice to the Seller or the Purchaser, to transfer to or to
register in the name of the Collateral Agent or any of its nominees any or all
of the Seller Collateral. In addition, the Collateral Agent shall have the right
at any time to exchange certificates or instruments representing or evidencing
Seller Collateral for certificates or instruments of smaller or larger
denominations. SECTION 8.05 Seller Remains Liable. It is expressly agreed by the
Seller that, anything herein to the contrary notwithstanding, the Seller shall
remain liable under any and all of the Transferred Receivables, the Contracts
therefor, the Seller Assigned Agreements and any other agreements constituting
the Seller Collateral to which it is a party to observe and perform all the
conditions and obligations to be observed and performed by it thereunder. The
Purchaser, the Operating Agent, the Collateral Agent and the other Purchaser
Secured Parties shall not have any obligation or liability under any such
Receivables, Contracts or agreements by reason of or arising out of this
Agreement or the Collateral Agent Agreement or the granting herein or therein of
a Lien thereon or the receipt by the Purchaser, the Collateral Agent or any
Purchaser Secured Party of any payment relating thereto pursuant hereto or
thereto. The exercise by the Purchaser or the Collateral Agent of any of its
respective rights under this Agreement or the Collateral Agent Agreement shall
not release any Originator, the Seller or the Servicer from any of their
respective duties or obligations under any such Receivables, Contracts or
agreements. None of the Purchaser, the Operating Agent, the Collateral Agent or
any of the Purchaser Secured Parties shall be required or obligated in any
manner to perform or fulfill any of the obligations of any Originator, the
Seller or the Servicer under or pursuant to any such Receivable, Contract or
agreement, or to make any payment, or to make any inquiry as to the nature or
the sufficiency of any payment received by it or the sufficiency of any
performance by any party under any such Receivable, Contract or agreement, or to
present or file any claims, or to take any action to collect or enforce any
performance or the payment of any amounts that may have been assigned to it or
to which it may be entitled at any time or times. SECTION 8.06 Covenants of the
Seller and the Servicer Regarding the Seller Collateral. (a) Offices and
Records. The Seller shall maintain its principal place of business and chief
executive office and the office at which it stores its Records at the respective
locations specified in Schedule 4.01(b) or, upon 30 days prior written notice to
the Purchaser, the Operating Agent and the Collateral Agent, at such other
location in a jurisdiction where all action requested by the Purchaser, the
Operating Agent or the Collateral Agent pursuant to Section 14.15 shall have
been taken with respect to the Seller Collateral. Each of the Seller and the
Servicer shall, at its own cost and expense, maintain adequate and complete
records of the Transferred Receivables and the Seller Collateral, including
records of any and all payments received, credits granted and merchandise
returned with respect thereto and all other dealings therewith. Each of the
Seller and the Servicer shall mark conspicuously with a legend, in form and
substance satisfactory to the Collateral Agent, its books and records, computer
tapes, computer disks and credit files pertaining to the Seller Collateral, and
its file cabinets or other storage facilities where it maintains information
pertaining thereto, to evidence this Agreement and the assignment and Liens
granted pursuant to this Article VIII. Upon the occurrence and during the
continuance of a Termination Event, the Seller and Servicer shall deliver and
turn over such books and records to the Collateral Agent or its representatives
at any time on demand of the Collateral Agent. Prior to the occurrence of a
Termination Event and upon notice from the Collateral Agent, the Seller and the
Servicer shall permit any representative of the Operating Agent or the
Collateral Agent to inspect such books and records and shall provide photocopies
thereof to the Operating Agent and the Collateral Agent as more specifically set
forth in Section 8.06(b). (b) Access. Each of the Seller and the Servicer shall,
during normal business hours, from time to time upon five Business Day's prior
notice as frequently as the Operating Agent or the Collateral Agent determines
to be appropriate: (i) provide the Purchaser, the Operating Agent or the
Collateral Agent and any of their respective officers, employees and agents
access to its properties (including properties utilized in connection with the
collection, processing or servicing of the Transferred Receivables), facilities,
advisors and employees (including officers) and to the Seller Collateral,
(ii) permit the Purchaser, the Operating Agent or the Collateral Agent and any
of their respective officers, employees and agents to inspect, audit and make
extracts from its books and records, including all Records, (iii) permit the
Purchaser, the Operating Agent or the Collateral Agent and their respective
officers, employees and agents to inspect, review and evaluate the Transferred
Receivables and the Seller Collateral and (iv) permit the Purchaser, the
Operating Agent or the Collateral Agent and their respective officers, employees
and agents to discuss matters relating to the Transferred Receivables or its
performance under this Agreement or the other Related Documents or its affairs,
finances and accounts with any of its officers, directors, managers, employees,
representatives or agents (in each case, with those persons having knowledge of
such matters) and with its independent certified public accountants. If (A) an
Incipient Termination Event or a Termination Event shall have occurred and be
continuing or (B) the Operating Agent, in good faith, believes that an Incipient
Termination Event or a Termination Event is imminent or deems the Purchaser's
rights or interests in the Transferred Receivables, the Seller Assigned
Agreements or any other Seller Collateral insecure, then each of the Seller and
the Servicer shall provide such access at all times and without advance notice
and shall provide the Purchaser, the Operating Agent or the Collateral Agent
with access to its suppliers and customers. Each of the Seller and the Servicer
shall make available to the Operating Agent or the Collateral Agent and their
respective counsel, as quickly as is possible under the circumstances, originals
or copies of all books and records, including Records, that the Operating Agent
or the Collateral Agent may request. Each of the Seller and the Servicer shall
deliver any document or instrument necessary for the Operating Agent or the
Collateral Agent, as they may from time to time request, to obtain records from
any service bureau or other Person that maintains records for the Seller or the
Servicer, and shall maintain duplicate records or supporting documentation on
media, including computer tapes and discs owned by the Seller or the Servicer.
(c) Communication with Accountants. Each of the Seller and the Servicer
authorizes the Purchaser, the Operating Agent and the Collateral Agent to
communicate directly with its independent certified public accountants and
authorizes and shall instruct those accountants and advisors to disclose and
make available to the Purchaser, the Operating Agent and the Collateral Agent
any and all financial statements and other supporting financial documents,
schedules and information relating to the Seller or the Servicer (including
copies of any issued management letters) with respect to its business, financial
condition and other affairs. (d) Collection of Transferred Receivables. Except
as otherwise provided in this Section 8.06(d), the Seller shall continue to
collect or cause to be collected, at its sole cost and expense, all amounts due
or to become due to the Seller under the Transferred Receivables, the Seller
Assigned Agreements and any other Seller Collateral. In connection therewith,
the Seller shall take such action as it, and from and after the occurrence and
during the continuance of a Termination Event, the Collateral Agent, may deem
necessary or desirable to enforce collection of the Transferred Receivables, the
Seller Assigned Agreements and the other Seller Collateral; provided, that the
Seller may, rather than commencing any such action or taking any other
enforcement action, at its option, elect to pay to the Purchaser the Outstanding
Balance of any such Transferred Receivable; provided further, that if (i) an
Incipient Termination Event or a Termination Event shall have occurred and be
continuing or (ii) the Operating Agent, in good faith, believes that an
Incipient Termination Event or a Termination Event is imminent or deems the
Purchaser's rights or interests in the Transferred Receivables, the Seller
Assigned Agreements or any other Seller Collateral insecure, then the Collateral
Agent may, without prior notice to the Seller, (x) exercise its rights and
remedies with respect to the Lockbox Accounts under Section 6.01 and Section
6.02 and/or (y) notify any Obligor under any Transferred Receivable or obligors
under the Seller Assigned Agreements of the assignment of such Transferred
Receivables or Seller Assigned Agreements, as the case may be, to the Purchaser
hereunder and direct that payments of all amounts due or to become due to the
Seller thereunder be made directly to the Collateral Agent or any servicer,
collection agent or lockbox or other account designated by the Collateral Agent
and, upon such notification and at the sole cost and expense of the Seller, the
Collateral Agent may enforce collection of any such Transferred Receivable or
the Seller Assigned Agreements and adjust, settle or compromise the amount or
payment thereof. (e) Performance of Seller Assigned Agreements. Each of the
Seller and the Servicer shall (i) perform and observe all the terms and
provisions of the Seller Assigned Agreements to be performed or observed by it,
maintain the Seller Assigned Agreements in full force and effect, enforce the
Seller Assigned Agreements in accordance with their terms and take all action as
may from time to time be requested by the Collateral Agent in order to
accomplish the foregoing, and (ii) upon the request of and as directed by the
Operating Agent or the Collateral Agent, make such demands and requests to any
other party to the Seller Assigned Agreements as are permitted to be made by the
Seller or the Servicer thereunder. ARTICLE IX TERMINATION EVENTS SECTION 9.01
Termination Events. If any of the following events (each, a "Termination Event")
shall occur (regardless of the reason therefor): (a) the Seller shall (i) fail
to make any payment of any Seller Secured Obligation when due and payable and
the same shall remain unremedied for one Business Day or more, or (ii) fail or
neglect to perform, keep or observe any other provision of this Agreement or the
other Related Documents (other than any provision embodied in or covered by any
other clause of this Section 9.01) and the same shall remain unremedied for
three Business Days or more after written notice thereof shall have been given
by the Operating Agent or the Collateral Agent to the Seller; (b) any other
agreement, document or instrument to which any Originator, any Originator's
Subsidiary, the Seller or the Servicer is a party or by which any such Person or
its property is bound that involves the failure to make any payment when due in
respect of any Debt (other than the Seller Secured Obligations) of any such
Person in excess of $1,000,000 in the aggregate, or (ii) any other default or
breach shall occur with respect to any such Debt in excess of $1,000,000 in the
aggregate and such default or breach causes, or permits any holder of such Debt
or a trustee or agent to cause, such Debt or a portion thereof to become due
prior to its stated maturity or prior to its regularly scheduled dates of
payment, regardless of whether such default is waived, or such right is
exercised, by such holder, trustee or agent, and such default or breach remains
uncured and unwaived for 15 days; (c) a case or proceeding shall have been
commenced against any Originator, the Seller or the Servicer seeking a decree or
order in respect of any such Person (i) under the Bankruptcy Code or any other
applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for any such Person or for any substantial
part of such Person's assets, or (iii) ordering the winding-up or liquidation of
the affairs of any such Person; (d) Servicer shall (i) file a petition seeking
relief under the Bankruptcy Code or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) consent or fail to object in a
timely and appropriate manner to the institution of proceedings thereunder or to
the filing of any such petition or to the appointment of or taking possession by
a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for any such Person or for any substantial part of such Person's
assets, (iii) make an assignment for the benefit of creditors, or (iv) take any
corporate action in furtherance of any of the foregoing; (e) any Originator, the
Seller or the Servicer is not Solvent or admits in writing its inability to, or
is generally unable to, pay its Debts as such Debts become due; (f) final
judgment or judgments in excess f $5,000,000 (less the amount, if any, of any
such judgment which is covered by insurance as to which the insurer has
confirmed coverage in writing) in the aggregate at any time outstanding shall be
rendered against any Originator or the Servicer and the same shall not, within
60 days after the entry thereof, have been discharged or execution thereof
stayed or bonded pending appeal, or shall not have been discharged prior to the
expiration of any such stay; (g) a final judgment shall be rendered against the
Seller; (h) any information contained in any Investment Base Certificate is
untrue or incorrect in any respect or any representation or warranty of any
Originator or the Seller herein or in any other Related Document or in any
written statement, report, financial statement or certificate (other than an
Investment Base Certificate) made or delivered by any Originator or the Seller
to any Affected Party is untrue or incorrect in any material respect as of the
date when made or deemed made; (i) any Governmental Authority (including the IRS
or the PBGC) shall file notice of a Lien with regard to any assets of any
Originator (other than a Lien (i) limited by its terms to assets other than
Receivables and (ii) not materially adversely affecting the financial condition
of such Originator or Cone Mill's ability to perform as Servicer hereunder); (j)
any Governmental Authority (including the IRS or the PBGC) shall file notice of
a Lien with regard to any of the assets of the Seller; (k) the Operating Agent
or the Collateral Agent shall have determined that any event or condition that
has had or could reasonably be expected to have or result in a Material Adverse
Effect has occurred; (l) (i) a default or breach shall occur under any provision
of Sections 4.02(o), 4.04, 5.01 or 8.14 of the Transfer Agreement and the same
shall remain unremedied for one Business Day or more after the occurrence
thereof, (ii) a default or breach shall occur under any other provision of the
Transfer Agreement and the same shall remain unremedied for five Business Days
or more after written notice thereof shall have been given by the Operating
Agent or the Collateral Agent to the Seller or (iii) the Transfer Agreement
shall for any reason cease to evidence the transfer to the Seller of the legal
and equitable title to, and ownership of, the Transferred Receivables; (m)
except as otherwise expressly provided herein, any Lockbox Agreement or the
Transfer Agreement shall have been modified, amended or terminated without the
prior written consent of the Purchaser, the Operating Agent and the Collateral
Agent; (n) an Event of Servicer Termination shall have occurred; (o) the
Operating Agent shall have determined that the funding of Transferred
Receivables hereunder is impracticable for any reason whatsoever, including as a
result of (i) a drop in or withdrawal of any of the ratings assigned to the
Commercial Paper, (ii) the imposition of Additional Amounts, (iii) restrictions
on the amount of Transferred Receivables the Purchaser may finance or (iv) the
inability of Redwood to issue Commercial Paper; (p) (i) with respect to the
Transferred Receivables, (A) prior to their Purchase hereunder, (1) the Seller
shall cease to hold valid and properly perfected title to and sole record and
beneficial ownership in such Transferred Receivables or (2) the Purchaser shall
cease to hold a first priority, perfected Lien in such Transferred Receivables
or (B) after their Purchase hereunder, (1) the Purchaser shall cease to hold
either (a) valid and properly perfected title to and sole record and beneficial
ownership in such Transferred Receivables or (b) a first priority, perfected
Lien in such Transferred Receivables; or (ii) the Purchaser and the Collateral
Agent shall cease to hold a first priority, perfected Lien in the Seller
Collateral; (q) a Seller LOC Draw shall have occurred; (r) the obligations of
the Liquidity Lenders to make Liquidity Loans shall have terminated and not
otherwise been replaced; (s) a default or breach of any of the covenants set
forth in Annex G shall have occurred; (t) an event of default under the
Collateral Agent Agreement or any other Program Document shall have occurred;
(u) the short term debt rating of a Liquidity Lender shall have been downgraded
by a Rating Agency and such Liquidity Lender shall not have been replaced in
accordance with the terms of the Liquidity Agreement within 30 days thereafter;
(v) the Purchase Discount Rate shall be less than 50% for two consecutive
Settlement Periods; (w) the Seller shall amend its articles of organization or
operating agreement without the express prior written consent of the Purchaser,
the Operating Agent and the Collateral Agent; (x) CRLLC shall have received an
Election Notice pursuant to Section 2.01(d) of the Transfer Agreement; (y) the
Credit Facility shall be terminated or an event of default shall have occurred
thereunder; (z) a Change of Control shall have occurred; or (aa)a material
adverse change shall occur after the Closing Originator, the Seller or the
Servicer or in the collectibility of the Transferred Receivables. then, and in
any such event, the Operating Agent shall, at the request of, or may, with the
consent of, the Purchaser or the Collateral Agent, by notice to the Seller,
declare the Facility Termination Date to have occurred without demand, protest
or further notice of any kind, all of which are hereby expressly waived by the
Seller; provided, that the Facility Termination Date shall automatically occur
(i) upon the occurrence of any of the Termination Events described in Sections
9.01(c), (d), (e), (q), (r), (t), (u) or (x) or (ii) four days after the
occurrence of the Termination Event described in Section 9.01(a)(i) if the same
shall not have been remedied by such time, in each case without demand, protest
or any notice of any kind, all of which are hereby expressly waived by the
Seller. SECTION 9.02 Events of Servicer Termination. If any of the following
events (each, an "Event of Servicer Termination") shall occur (regardless of the
reason therefor): (a) the Servicer shall fail or neglect to perform, keep or
observe any provision of this Agreement or the other Related Documents (whether
in its capacity as an Originator or the Servicer) and the same shall remain
unremedied for five Business Days or more after written notice thereof shall
have been given by the Purchaser, the Operating Agent or the Collateral Agent to
the Servicer; (b) any representation or warranty of the Servicer herein or in
any other Related Document or in any written statement, report, financial
statement or certificate made or delivered by the Servicer to the Purchaser, the
Operating Agent or the Collateral Agent hereto or thereto is untrue or incorrect
in any material respect as of the date when made or deemed made; (c) a default
or breach of any of the covenants set forth in Annex G shall have occurred; (d)
the Operating Agent or the Collateral Agent shall have determined that any event
or condition that materially adversely affects the ability of the Servicer to
collect the Transferred Receivables or to otherwise perform hereunder has
occurred; (e) a Termination Event shall have occurred or this Agreement shall
have been terminated; (f) a deterioration has taken place in the quality of
servicing of Transferred Receivables or other Receivables serviced by the
Servicer that either the Operating Agent or the Collateral Agent, each in its
sole discretion, determines to be material, and such material deterioration has
not been remedied to the satisfaction of the Operating Agent and the Collateral
Agent within 30 days after written notice thereof shall have been given by the
Operating Agent or the Collateral Agent to the Servicer; (g) the Servicer shall
assign or purport to assign any of its obligations hereunder or under the
Transfer Agreement without the prior written consent of the Operating Agent and
the Collateral Agent; or (h) the Seller's board of managers shall have
determined that it is in the best interests of the Seller to terminate the
duties of the Servicer hereunder and shall have given the Servicer, the
Purchaser, the Operating Agent and the Collateral Agent at least 30 days written
notice thereof; then, and in any such event, the Operating Agent shall, at the
request of, or may, with the consent of, the Purchaser or the Collateral Agent,
by delivery of a Servicer Termination Notice to the Seller and the Servicer,
terminate the servicing responsibilities of the Servicer hereunder, without
demand, protest or further notice of any kind, all of which are hereby waived by
the Servicer. Upon the delivery of any such notice, all authority and power of
the Servicer under this Agreement and the Transfer Agreement shall pass to and
be vested in the Successor Servicer acting pursuant to Section 11.02; provided,
that notwithstanding anything to the contrary herein, the Servicer agrees to
continue to follow the procedures set forth in Section 7.02 with respect to
Collections on the Transferred Receivables until a Successor Servicer has
assumed the responsibilities and obligations of the Servicer in accordance with
Section 11.02. ARTICLE X REMEDIES SECTION 10.01 Actions Upon Termination Event.
If any Termination Event shall have occurred and be continuing and the Operating
Agent shall have declared the Facility Termination Date to have occurred or the
Facility Termination Date shall be deemed to have occurred pursuant to Section
9.01, then the Collateral Agent may exercise in respect of the Seller
Collateral, in addition to any and all other rights and remedies granted to it
hereunder, under any other Related Document or under any other instrument or
agreement securing, evidencing or relating to the Seller Secured Obligations or
otherwise available to it, all of the rights and remedies of a secured party
upon default under the UCC (such rights and remedies to be cumulative and
nonexclusive), and, in addition, may take the following actions: (a) The
Collateral Agent may, without notice to the Seller except as required by law and
at any time or from time to time, charge, offset or otherwise apply amounts
payable to the Seller from the Collection Account, any Lockbox Account, the
Retention Account or any part of such accounts in accordance with the priorities
set forth in Sections 6.05 and 6.07 against all or any part of the Seller
Secured Obligations. (b) The Collateral Agent may, without notice except as
specified below, solicit and accept bids for and sell the Seller Collateral or
any part thereof in one or more parcels at public or private sale, at any
exchange, broker's board or any of the Purchaser's, Operating Agent's or
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Collateral Agent may deem
commercially reasonable. The Collateral Agent shall have the right to conduct
such sales on the Seller's premises or elsewhere and shall have the right to use
any of the Seller's premises without charge for such sales at such time or times
as the Collateral Agent deems necessary or advisable. The Seller agrees that, to
the extent notice of sale shall be required by law, at least ten Business Days
notice to the Seller of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
The Collateral Agent shall not be obligated to make any sale of Seller
Collateral regardless of notice of sale having been given. The Collateral Agent
may adjourn any public or private sale from time to time by announcement at the
time and place fixed for such sale, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Every such sale
shall operate to divest all right, title, interest, claim and demand whatsoever
of the Seller in and to the Seller Collateral so sold, and shall be a perpetual
bar, both at law and in equity, against any Originator, the Seller, any Person
claiming the Seller Collateral sold through any Originator or the Seller, and
their respective successors or assigns. The Collateral Agent shall deposit the
net proceeds of any such sale in the Collection Account and such proceeds shall
be disbursed in accordance with Section 6.05. (c) Upon the completion of any
sale under Section 10.01(b), the Seller or the Servicer shall deliver or cause
to be delivered to the purchaser or purchasers at such sale on the date thereof,
or within a reasonable time thereafter if it shall be impracticable to make
immediate delivery, all of the Seller Collateral sold on such date, but in any
event full title and right of possession to such property shall vest in such
purchaser or purchasers upon the completion of such sale. Nevertheless, if so
requested by the Collateral Agent or by any such purchaser, the Seller shall
confirm any such sale or transfer by executing and delivering to such purchaser
all proper instruments of conveyance and transfer and releases as may be
designated in any such request. (d) At any sale under Section 10.01(b), the
Purchaser, the Operating Agent, the Collateral Agent or any other Purchaser
Secured Party may bid for and purchase the property offered for sale and, upon
compliance with the terms of sale, may hold, retain and dispose of such property
without further accountability therefor. (e) The Collateral Agent may exercise,
at the sole cost and expense of the Seller, any and all rights and remedies of
the Seller under or in connection with the Seller Assigned Agreements or the
other Seller Collateral, including any and all rights of the Seller to demand or
otherwise require payment of any amount under, or performance of any provisions
of, the Seller Assigned Agreements. SECTION 10.02 Exercise of Remedies. No
failure or delay on the part of the Collateral Agent in exercising any right,
power or privilege under this Agreement and no course of dealing between any
Originator, the Seller, the Servicer or the Operating Agent, on the one hand,
and the Collateral Agent, on the other hand, shall operate as a waiver of such
right, power or privilege, nor shall any single or partial exercise of any
right, power or privilege under this Agreement preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. The rights and remedies under this Agreement are cumulative,
may be exercised singly or concurrently, and are not exclusive of any rights or
remedies that the Collateral Agent would otherwise have at law or in equity. No
notice to or demand on any party hereto shall entitle such party to any other or
further notice or demand in similar or other circumstances, or constitute a
waiver of the right of the party providing such notice or making such demand to
any other or further action in any circumstances without notice or demand.
SECTION 10.03 Power of Attorney. On the Closing Date, each of the Seller and the
Servicer shall execute and deliver a power of attorney substantially in the form
attached hereto as Exhibit 10.03 (each, a "Power of Attorney"). The power of
attorney granted pursuant to each Power of Attorney is a power coupled with an
interest and shall be irrevocable until all of the Seller Secured Obligations
are indefeasibly paid or otherwise satisfied in full. The powers conferred on
the Collateral Agent under each Power of Attorney are solely to protect the
Purchaser's Liens upon and interests in the Seller Collateral and shall not
impose any duty upon the Collateral Agent to exercise any such powers. The
Collateral Agent shall not be accountable for any amount other than amounts that
it actually receives as a result of the exercise of such powers and none of the
Collateral Agent's officers, directors, employees, agents or representatives
shall be responsible to the Seller or the Servicer for any act or failure to
act, except in respect of damages to the extent attributable to their own gross
negligence or willful misconduct as finally determined by a court of competent
jurisdiction. SECTION 10.04 Continuing Security Interest. This Agreement shall
create a continuing Lien in the Seller Collateral until the conditions to the
release of the Liens of the Purchaser and the Collateral Agent thereon set forth
in Section 6.07(b) have been satisfied. ARTICLE XI SUCCESSOR SERVICER PROVISIONS
SECTION 11.01 Servicer Not to Resign. The Servicer shall not resign from the
obligations and duties hereby imposed on it except upon a determination that (a)
the performance of its duties hereunder has become impermissible under
applicable law or regulation and (b) there is no reasonable action that the
Servicer could take to make the performance of its duties hereunder become
permissible under applicable law. Any such determination shall (i) with respect
to clause (a) above, be evidenced by an opinion of counsel to such effect and
(ii) with respect to clause (b) above, be evidenced by an Officer's Certificate
to such effect, in each case delivered to the Purchaser, the Collateral Agent
and the Operating Agent. No such resignation shall become effective until a
Successor Servicer shall have assumed the responsibilities and obligations of
the Servicer in accordance with Section 11.02. SECTION 11.02 Appointment of the
Successor Servicer. In connection with the termination of the Servicer's
responsibilities or the resignation by the Servicer under this Agreement
pursuant to Sections 9.02 or 11.01, the Operating Agent shall (a) succeed to and
assume all of the Servicer's responsibilities, rights, duties and obligations as
Servicer (but not in any other capacity, including specifically not the
obligations of the Servicer set forth in Section 12.02) under this Agreement
(and except that the Operating Agent makes no representations and warranties
pursuant to Section 4.02) and (b) may at any time appoint a successor servicer
to the Servicer that shall be acceptable to the Collateral Agent and shall
succeed to all rights and assume all of the responsibilities, duties and
liabilities of the Servicer under this Agreement (the Operating Agent, in such
capacity, or such successor servicer being referred to as the "Successor
Servicer"); provided, that the Successor Servicer shall have no responsibility
for any actions of the Servicer prior to the date of its appointment or
assumption of duties as Successor Servicer. In selecting a Successor Servicer,
the Operating Agent may obtain bids from any potential Successor Servicer and
may agree to any bid it deems appropriate. The Successor Servicer shall accept
its appointment by executing, acknowledging and delivering to the Operating
Agent and the Collateral Agent an instrument in form and substance acceptable to
the Operating Agent and the Collateral Agent. SECTION 11.03 Duties of the
Servicer. The Servicer covenants and agrees that, following the appointment of,
or assumption of duties by, a Successor Servicer: (a) The Servicer shall
terminate its activities as Servicer hereunder in a manner that facilitates the
transfer of servicing duties to the Successor Servicer and is otherwise
acceptable to the Purchaser and the Collateral Agent and, without limiting the
generality of the foregoing, shall timely deliver (i) any funds to the
Collateral Agent that were required to be remitted to the Collateral Agent for
deposit in the Collection Account and (ii) all Servicing Records and other
information with respect to the Transferred Receivables to the Successor
Servicer at a place selected by the Successor Servicer. The Servicer shall
account for all funds and shall execute and deliver such instruments and do such
other things as may be required to vest and confirm in the Successor Servicer
all rights, powers, duties, responsibilities, obligations and liabilities of the
Servicer. (b) The Servicer shall terminate each existing Sub-Servicing Agreement
and the Successor Servicer shall not be deemed to have assumed any of the
Servicer's interests therein or to have replaced the Servicer as a party
thereto. SECTION 11.04 Effect of Termination or Resignation. Any termination of
or resignation by the Servicer hereunder shall not affect any claims that the
Seller, the Purchaser, the Operating Agent or the Collateral Agent may have
against the Servicer for events or actions taken or not taken by the Servicer
arising prior to any such termination or resignation. ARTICLE XII
INDEMNIFICATION SECTION 12.01 Indemnities by the Seller. (a) Without limiting
any other rights that the Purchaser, the Operating Agent, the Collateral Agent,
the Liquidity Agent, any Liquidity Lender, the Letter of Credit Agent, the
Insurer or any Letter of Credit Provider or any of their respective officers,
directors, employees, attorneys, agents or representatives (each, a "Purchaser
Indemnified Person") may have hereunder or under applicable law, the Seller
hereby agrees to indemnify and hold harmless each Purchaser Indemnified Person
from and against any and all Indemnified Amounts that may be claimed or asserted
against or incurred by any such Purchaser Indemnified Person in connection with
or arising out of the transactions contemplated under this Agreement or under
any other Related Document or any actions or failures to act in connection
therewith, including any and all reasonable legal costs and expenses arising out
of or incurred in connection with disputes between or among any parties to any
of the Related Documents; provided, that the Seller shall not be liable for any
indemnification to a Purchaser Indemnified Person to the extent that any such
Indemnified Amount results from (i) with respect to any Purchaser Indemnified
Person other than the Purchaser, such Purchaser Indemnified Person's gross
negligence or (ii) with respect to any Purchaser Indemnified Person, such
Purchaser Indemnified Person's willful misconduct, in each case as finally
determined by a court of competent jurisdiction. Without limiting the generality
of the foregoing, the Seller shall pay on demand to each Purchaser Indemnified
Person any and all Indemnified Amounts relating to or resulting from: (A)
reliance on any representation or warranty made or deemed made by the Seller (or
any of its officers) under or in connection with this Agreement or any other
Related Document or on any other information delivered by the Seller pursuant
hereto or thereto that shall have been incorrect in any material respect when
made or deemed made or delivered; (B) the failure by the Seller to comply with
any term, provision or covenant contained in this Agreement, any other Related
Document or any agreement executed in connection herewith or therewith, any
applicable law, rule or regulation with respect to any Transferred Receivable or
the Contract therefor, or the nonconformity of any Transferred Receivable or the
Contract therefor with any such applicable law, rule or regulation; or (C)(1)
the failure to vest and maintain vested in the Seller or the Purchaser valid and
properly perfected title to and sole record and beneficial ownership of the
Receivables that constitute Transferred Receivables, together with all
Collections in respect thereof, free and clear of any Adverse Claim, (2) the
failure to maintain or transfer to the Purchaser a first priority and perfected
Lien in the Seller Collateral and (3) the failure to maintain or transfer to the
Collateral Agent a first priority, perfected Lien therein; (D) any dispute,
claim, offset or defense of any Obligor (other than its discharge in bankruptcy)
to the payment of any Transferred Receivable that is the subject of a Purchase
hereunder (including a defense based on such Receivable or the Contract therefor
not being a legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim resulting from the
sale of the merchandise or services giving rise to such Receivable or the
furnishing of or failure to furnish such merchandise or services or relating to
collection activities with respect to such Receivable (if such collection
activities were performed by Cone Mills or any of its Affiliates acting as the
Servicer), except to the extent that such dispute, claim, offset or defense
results solely from any action or inaction on the part of any Purchaser
Indemnified Person; (E) any products liability claim or other claim arising out
of or in connection with merchandise, insurance or services that is the subject
of any Contract with respect to any Transferred Receivable; (F) the commingling
of Collections with respect to Transferred Receivables by the Seller at any time
with its other funds or the funds of any other Person; or (G) any failure by the
Seller to cause the filing of, or any delay in filing, financing statements or
other similar instruments or documents under the UCC of any applicable
jurisdiction or any other applicable laws with respect to any Transferred
Receivable that is the subject of a Purchase hereunder, whether at the time of
any such Purchase or at any subsequent time. (b) Any Indemnified Amounts subject
to the indemnification provisions of this Section 12.01 not paid in accordance
with Article VI shall be paid by the Seller to the Purchaser Indemnified Person
entitled thereto within five Business Days following demand therefor. SECTION
12.02 Indemnities by the Servicer. (a) Without limiting any other rights that a
Purchaser Indemnified Person may have hereunder or under applicable law, the
Servicer hereby agrees to indemnify and hold harmless each Purchaser Indemnified
Person from and against any and all Indemnified Amounts that may be claimed or
asserted against or incurred by any such Purchaser Indemnified Person in
connection with or arising out of any breach by the Servicer of its obligations
hereunder or under any other Related Document; provided, that the Servicer shall
not be liable for any indemnification to a Purchaser Indemnified Person to the
extent that any such Indemnified Amount results from (i) such Purchaser
Indemnified Person's gross negligence or willful misconduct, in each case as
finally determined by a court of competent jurisdiction, or (ii) recourse for
uncollectible or uncollected Transferred Receivables. Without limiting the
generality of the foregoing, the Servicer shall pay on demand to each Purchaser
Indemnified Person any and all Indemnified Amounts relating to or resulting
from: (A) reliance on any representation or warranty made or deemed made by the
Servicer (or any of its officers) under or in connection with this Agreement or
any other Related Document or on any other information delivered by the Servicer
pursuant hereto or thereto that shall have been incorrect in any material
respect when made or deemed made or delivered; (B) the failure by the Servicer
to comply with any term, provision or covenant contained in this Agreement, any
other Related Document or any agreement executed in connection herewith or
therewith, any applicable law, rule or regulation with respect to any
Transferred Receivable or the Contract therefor, or the nonconformity of any
Transferred Receivable or the Contract therefor with any such applicable law,
rule or regulation; (C) the imposition of any Adverse Claim with respect to any
Transferred Receivable or the Seller Collateral as a result of any action taken
by the Servicer hereunder; or (D) the commingling of Collections with respect to
Transferred Receivables by the Servicer at any time with its other funds or the
funds of any other Person. (b) Any Indemnified Amounts subject to the
indemnification provisions of this Section 12.02 not paid in accordance with
Article VI shall be paid by the Servicer to the Purchaser Indemnified Person
entitled thereto within five Business Days following demand therefor. SECTION
12.03 Limitation of Damages; Purchaser Indemnified Persons. NO PURCHASER
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO THIS
AGREEMENT OR ANY OTHER RELATED DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
THAT MAY BE ALLEGED AS A RESULT OF ANY TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER. ARTICLE XIII OPERATING AGENT AND COLLATERAL AGENT SECTION 13.01
Authorization and Action. (a) The Operating Agent may take such action and carry
out such functions under this Agreement as are authorized to be performed by it
pursuant to the terms of this Agreement, any other Related Document or the
Operating Agent Agreement or otherwise contemplated hereby or thereby or are
reasonably incidental thereto; provided, that the duties of the Operating Agent
hereunder shall be determined solely by the express provisions of this
Agreement, and, other than the duties set forth in Section 13.02, any permissive
right of the Operating Agent hereunder shall not be construed as a duty.(b)The
Collateral Agent may take such action and carry out such functions under this
Agreement as are authorized to be performed by it pursuant to the terms of this
Agreement, any other Related Document or the Collateral Agent Agreement or
otherwise contemplated hereby or thereby or are reasonably incidental thereto;
provided, that the duties of the Collateral Agent hereunder shall be determined
solely by the express provisions of this Agreement, and, other than the duties
set forth in Section 13.02, any permissive right of the Collateral Agent
hereunder shall not be construed as a duty. SECTION 13.02 Reliance. None of the
Operating Agent, the Collateral Agent, any of their respective Affiliates or any
of their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by any of them under or in connection
with this Agreement, the other Related Documents or the Program Documents,
except for damages to the extent caused by its or their own gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction.
Without limiting the generality of the foregoing, and notwithstanding any term
or provision hereof to the contrary, the Seller, the Servicer and the Purchaser
hereby acknowledge and agree that each of the Operating Agent and the Collateral
Agent (a) acts as agent hereunder for the Purchaser (and, with respect to the
Collateral Agent, the Affected Parties) and has no duties or obligations to,
shall incur no liabilities or obligations to, and does not act as an agent in
any capacity for, the Seller (other than, with respect to the Collateral Agent,
under the Power of Attorney with respect to remedial actions) or any Originator,
(b) may consult with legal counsel, 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, (c) makes no representation or warranty hereunder to any
Affected Party and shall not be responsible to any such Person for any
statements, representations or warranties made in or in connection with this
Agreement, the other Related Documents or the Program Documents, (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement, the other Related
Documents or the Program Documents on the part of the Seller, the Servicer or
the Purchaser or to inspect the property (including the books and records) of
the Seller, the Servicer or the Purchaser, (e) shall not be responsible to the
Seller, the Servicer or the Purchaser for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Related Documents or any other instrument or document furnished pursuant hereto
or thereto, (f) shall incur no liability under or in respect of this Agreement,
the other Related Documents or the Program Documents by acting upon any notice,
consent, certificate or other instrument or writing believed by it to be genuine
and signed, sent or communicated by the proper party or parties and (g) shall
not be bound to make any investigation into the facts or matters stated in any
notice or other communication hereunder and may rely on the accuracy of such
facts or matters. Notwithstanding the foregoing, each of the Operating Agent and
the Collateral Agent acknowledges that it has a duty to transfer funds between
and among the Lockbox Accounts and the Collection Account, and make investments
of funds on deposit in the Retention Account and the Collateral Account, in
accordance with Article VI and the instructions of the Servicer. SECTION 13.03
GE Capital and Affiliates. GE Capital and its Affiliates may generally engage in
any kind of business with any Obligor, any Originator, the Seller, the Servicer
or the Purchaser, any of their respective Affiliates and any Person who may do
business with or own securities of such Persons or any of their respective
Affiliates, all as if GE Capital were not the Operating Agent or the Collateral
Agent and without the duty to account therefor to any Obligor, any Originator,
the Seller, the Servicer, the Purchaser or any other Person. ARTICLE XIV
MISCELLANEOUS SECTION 14.01 Notices. Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request, consent,
approval, declaration or other communication shall or may be given to or served
upon any of the parties by any other parties, or whenever any of the parties
desires to give or serve upon any other parties any communication with respect
to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be deemed to
have been validly served, given or delivered (a) upon the earlier of actual
receipt and three Business Days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper postage
prepaid, (b)upon transmission, when sent by telecopy or other similar facsimile
transmission (with such telecopy or facsimile promptly confirmed by delivery of
a copy by personal delivery or United States Mail as otherwise provided in this
Section 14.01), (c) one Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number set forth under its name on the signature
page hereof or to such other address (or facsimile number) as may be substituted
by notice given as herein provided; provided, that each such declaration or
other communication shall be deemed to have been validly delivered to the
Collateral Agent hereunder upon delivery to the Operating Agent in accordance
with the terms of this Section 14.01. The giving of any notice required
hereunder may be waived in writing by the party entitled to receive such notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to any Person (other than the
Purchaser, the Operating Agent and the Collateral Agent) designated in any
written notice provided hereunder to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication. Notwithstanding the foregoing, whenever it
is provided herein that a notice is to be given to any other party hereto by a
specific time, such notice shall only be effective if actually received by such
party prior to such time, and if such notice is received after such time or on a
day other than a Business Day, such notice shall only be effective on the
immediately succeeding Business Day. SECTION 14.02 Binding Effect; Assignability
This Agreement shall be binding upon and inure to the benefit of the Seller, the
Servicer, the Purchaser, the Operating Agent and the Collateral Agent and their
respective successors and permitted assigns. Neither the Seller nor the Servicer
may assign, transfer, hypothecate or otherwise convey any of their respective
rights or obligations hereunder or interests herein without the express prior
written consent of the Purchaser, the Operating Agent and the Collateral Agent
and unless the Rating Agency Condition shall have been satisfied with respect to
any such assignment. Any such purported assignment, transfer, hypothecation or
other conveyance by the Seller or the Servicer without the prior express written
consent of the Purchaser, the Operating Agent and the Collateral Agent shall be
void. The Purchaser, the Operating Agent or the Collateral Agent may, at any
time, assign any of its rights and obligations hereunder or interests herein to
any Eligible Assignee and any such assignee may further assign at any time its
rights and obligations hereunder or interests herein (including any rights it
may have in and to the Transferred Receivables and the Seller Collateral and any
rights it may have to exercise remedies hereunder), in each case without the
consent of any Originator, the Seller or the Servicer. The Seller acknowledges
and agrees that, upon any such assignment, the assignee thereof may enforce
directly, without joinder of the Purchaser, all of the obligations of the Seller
hereunder. SECTION 14.03 Termination; Survival of Seller Secured Obligations
Upon Facility Termination Date. (a) This Agreement shall create and constitute
the continuing obligations of the parties hereto in accordance with its terms,
and shall remain in full force and effect until the Termination Date. (b) Except
as otherwise expressly provided herein or in any other Related Document, no
termination or cancellation (regardless of cause or procedure) of any commitment
made by any Affected Party under this Agreement shall in any way affect or
impair the obligations, duties and liabilities of the Seller or the rights of
any Affected Party relating to any unpaid portion of the Seller Secured
Obligations, due or not due, liquidated, contingent or unliquidated or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Facility Termination Date.
Except as otherwise expressly provided herein or in any other Related Document,
all undertakings, agreements, covenants, warranties and representations of or
binding upon the Seller or the Servicer, and all rights of any Affected Party
hereunder, all as contained in the Related Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date. On the Termination
Date, this Agreement and the other Related Documents shall terminate (except to
the extent otherwise expressly provided herein or therein), all ownership
interests or Liens of the Purchaser in and to all Transferred Receivables and
all Liens of the Purchaser and the Collateral Agent in and to the Seller
Collateral shall be released by the Purchaser and the Collateral Agent and the
Purchaser and the Collateral Agent shall promptly return any and all of the
Seller Collateral then in their possession to Seller and shall execute such
documents (including without limitation UCC-3=s) as the Seller may reasonably
request to evidence such releases and terminations (provided that such documents
shall be prepared and recorded at the Seller's expenses); provided, that the
rights and remedies provided for herein with respect to any breach of any
representation or warranty made by the Seller or the Servicer pursuant to
Article IV, the indemnification and payment provisions of Article XII and
Sections 14.04, 14.05 and 14.06 shall be continuing and shall survive the
Termination Date and any termination of this Agreement. SECTION 14.04 Costs,
Expenses and Taxes. (a) The Seller shall reimburse the Purchaser, the Operating
Agent and the Collateral Agent for all out-of-pocket expenses incurred in
connection with the negotiation and preparation of this Agreement and the other
Related Documents (including the reasonable fees and expenses of all of its
special counsel, advisors, consultants and auditors retained in connection with
the transactions contemplated thereby and advice in connection therewith). The
Seller shall reimburse the Purchaser, the Operating Agent and the Collateral
Agent for all reasonable fees, costs and expenses, including the fees, costs and
expenses of counsel or other advisors (including environmental and management
consultants and appraisers) for advice, assistance, or other representation in
connection with: (i) the forwarding to the Seller or any other Person on behalf
of the Seller by the Purchaser of any payments for Purchases made by it
hereunder; (ii) any amendment, modification or waiver of, consent with respect
to, or termination of this Agreement or any of the other Related Documents or
advice in connection with the administration thereof or their respective rights
hereunder or thereunder; (iii) any Litigation, contest or dispute (whether
instituted by the Seller, the Purchaser, the Operating Agent, the Collateral
Agent or any other Person as a party, witness, or otherwise) in any way relating
to the Seller Collateral, any of the Related Documents or any other agreement to
be executed or delivered in connection herewith or therewith, including any
Litigation, contest, dispute, suit, case, proceeding or action, and any appeal
or review thereof, in connection with a case commenced by or against the Seller
or any other Person that may be obligated to the Purchaser, the Operating Agent
or the Collateral Agent by virtue of the Related Documents, including any such
Litigation, contest, dispute, suit, proceeding or action arising in connection
with any work-out or restructuring of the transactions contemplated hereby
during the pendency of one or more Termination Events; (iv) any attempt to
enforce any remedies of the Purchaser, the Operating Agent or the Collateral
Agent against the Seller or any other Person that may be obligated to them by
virtue of any of the Related Documents, including any such attempt to enforce
any such remedies in the course of any work-out or restructuring of the
transactions contemplated hereby during the pendency of one or more Termination
Events; (v) any work-out or restructuring of the transactions contemplated
hereby during the pendency of one or more Termination Events; and (vi) efforts
to (A) monitor the Purchases or any of the Seller Secured Obligations,
(B) evaluate, observe or assess any Originator, the Seller or the Servicer or
their respective affairs, and (C) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Seller Collateral;
including all reasonable attorneys and other professional and service providers
fees arising from such services, including those in connection with any
appellate proceedings, and all reasonable expenses, costs, charges and other
fees incurred by such counsel and others in connection with or relating to any
of the events or actions described in this Section 14.04, all of which shall be
payable, on demand, by the Seller to the Purchaser, the Operating Agent or the
Collateral Agent, as applicable. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: fees, costs and
expenses of accountants, environmental advisors, appraisers, investment bankers,
management and other consultants and paralegals; court costs and expenses;
photocopying and duplication expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram or telecopy
charges; secretarial overtime charges; and expenses for travel, lodging and food
paid or incurred in connection with the performance of such legal or other
advisory services. (b) In addition, the Seller shall pay on demand any and all
stamp, sales, excise and other taxes (excluding income taxes) and fees payable
or determined to be payable in connection with the execution, delivery, filing
or recording of this Agreement or any other Related Document, and the Seller
agrees to indemnify and save each Purchaser Indemnified Person harmless from and
against any and all liabilities with respect to or resulting from any delay or
failure to pay such taxes and fees. SECTION 14.05 Confidentiality. (a) Except to
the extent otherwise required by applicable law, as required to be filed
publicly with the Securities and Exchange Commission, or unless the Operating
Agent shall otherwise consent in writing, the Seller and the Servicer agree to
maintain the confidentiality of this Agreement (and all drafts hereof and
documents ancillary hereto) in its communications with third parties other than
any Affected Party or any Purchaser Indemnified Person and otherwise and not to
disclose, deliver or otherwise make available to any third party (other than its
directors, managers, officers, employees, accountants or counsel) the original
or any copy of all or any part of this Agreement (or any draft hereof and
documents ancillary hereto) except to an Affected Party or a Purchaser
Indemnified Person. (b) The Seller and the Servicer each agree that it shall not
(and shall not permit any of its Subsidiaries to) issue any news release or make
any public announcement pertaining to the transactions contemplated by this
Agreement and the other Related Documents without the prior written consent of
the Purchaser and the Operating Agent (which consent shall not be unreasonably
withheld) unless such news release or public announcement is required by law, in
which case the Seller or the Servicer, as applicable, shall consult with the
Purchaser and the Operating Agent prior to the issuance of such news release or
public announcement. The Seller may, however, disclose the general terms of the
transactions contemplated by this Agreement and the other Related Documents to
trade creditors, suppliers and other similarly-situated Persons so long as such
disclosure is not in the form of a news release or public announcement. (c) The
Purchaser, the Operating Agent and the Collateral Agent each agrees to use
commercially reasonable efforts (equivalent to the efforts such Person applies
to maintaining the confidentiality of its own confidential information) to
maintain as confidential for a period of two (2) years following receipt thereof
all confidential information provided to them by the Seller or the Servicer and
designated by the Seller or the Servicer (as the case may be) as confidential
except, that the Purchaser, the Operating Agent and the Collateral Agent may
disclose such information (a) to Persons employed or engaged by the Purchaser,
the Operating Agent or the Collateral Agent in evaluating, approving,
structuring or administering the Purchases and the other transactions
contemplated by the Related Documents; (b) to any bona fide assignee or
participant or potential assignee or participant of the Purchaser that has
agreed to comply with the covenant contained in this paragraph (c) (and any such
bona fide assignee or participant or potential assignee or participant may
disclose such information to Persons employed or engaged by them as described in
clause (a) above); (c) as required or requested by any Governmental Authority or
reasonably believed by the Purchaser, the Operating Agent or the Collateral
Agent to be compelled by any court decree, subpoena or legal or administrative
order or process; (d) as, on the advice of the Purchaser's, the Operating Agents
or the Collateral Agent's counsel, required by law; (e) in connection with the
exercise of any right or remedy under the Related Documents or in connection
with any Litigation to which the Purchaser, the Operating Agent or the
Collateral Agent is a party; or (f) which ceases to be confidential through no
fault of the Purchaser, the Operating Agent or the Collateral Agent. SECTION
14.06 No Proceedings. Each of the Seller and the Servicer hereby agrees that,
from and after the Closing Date and until the date one year plus one day
following the date on which the Commercial Paper with the latest maturity has
been indefeasibly paid in full in cash, it will not, directly or indirectly,
institute or cause to be instituted against the Seller or the Purchaser any
proceeding of the type referred to in Sections 9.01(c) and 9.01(d). SECTION
14.07 Complete Agreement; Modification of Agreement. This Agreement and the
other Related Documents constitute the complete agreement among the parties
hereto with respect to the subject matter hereof and thereof, supersede all
prior agreements and understandings relating to the subject matter hereof and
thereof, and may not be modified, altered or amended except as set forth in
Section 14.08. SECTION 14.08 Amendments and Waivers. No amendment, modification,
termination or waiver of any provision of this Agreement or any of the other
Related Documents, or any consent to any departure by the Seller or the Servicer
therefrom, shall in any event be effective unless the same shall be in writing
and signed by each of the parties hereto or thereto. SECTION 14.09 No Waiver;
Remedies. The failure by the Purchaser, the Operating Agent or the Collateral
Agent, at any time or times, to require strict performance by the Seller or the
Servicer of any provision of this Agreement or the Purchase Assignment shall not
waive, affect or diminish any right of the Purchaser, the Operating Agent or the
Collateral Agent thereafter to demand strict compliance and performance herewith
or therewith. Any suspension or waiver of any breach or default hereunder shall
not suspend, waive or affect any other breach or default whether the same is
prior or subsequent thereto and whether the same or of a different type. None of
the undertakings, agreements, warranties, covenants and representations of the
Seller or the Servicer contained in this Agreement or any Purchase Assignment,
and no breach or default by the Seller or the Servicer hereunder or thereunder,
shall be deemed to have been suspended or waived by the Purchaser, the Operating
Agent or the Collateral Agent unless such waiver or suspension is by an
instrument in writing signed by an officer of or other duly authorized signatory
of the Purchaser, the Operating Agent and the Collateral Agent and directed to
the Seller or the Servicer, as applicable, specifying such suspension or waiver.
The rights and remedies of the Purchaser, the Operating Agent and the Collateral
Agent under this Agreement shall be cumulative and nonexclusive of any other
rights and remedies that the Purchaser, the Operating Agent and the Collateral
Agent may have under any other agreement, including the other Related Documents,
by operation of law or otherwise. Recourse to the Seller Collateral shall not be
required. SECTION 14.10 Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial. (a) this agreement and each other related document (except to the extent
that any related document expressly provides to the contrary) and the
obligations arising hereunder and thereunder shall in all respects, including
all matters of construction, validity and performance, be governed by, and
construed and enforced in accordance with, the internal laws of the state of New
York (without regard to the conflict of law provisions thereof) and any
applicable laws of the United States of America. (b) each party hereto hereby
consents and agrees that the state or federal courts located in the borough of
Manhattan in New York city shall have exclusive jurisdiction to hear and
determine any claims or disputes between them pertaining to this agreement or to
any matter arising out of or relating to this agreement or any other related
document; provided, that each party hereto acknowledges that any appeals from
those courts may have to be heard by a court located outside of the borough of
Manhattan in New York city; provided further, that nothing in this agreement
shall be deemed or operate to preclude the purchaser, the operating agent or the
collateral agent from bringing suit or taking other legal action in any other
jurisdiction to realize on the seller collateral or any other security for the
seller secured obligations, or to enforce a judgment or other court order in
favor of the purchaser, the operating agent or the collateral agent. Each party
hereto submits and consents in advance to such jurisdiction in any action or
suit commenced in any such court, and each party hereto hereby waives any
objection that such party may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens and hereby consents to the granting of
such legal or equitable relief as is deemed appropriate by such court. Each
party hereto hereby waives personal service of the summons, complaint and other
process issued in any such action or suit and agrees that service of such
summons, complaint and other process may be made by registered or certified mail
addressed to such party at the address set forth beneath its name on the
signature pages hereof and that service so made shall be deemed completed upon
the earlier of such party's actual receipt thereof or three days after deposit
in the United States mail, proper postage prepaid. Nothing in this section shall
affect the right of any party hereto to serve legal process in any other manner
permitted by law. (c) because disputes arising in connection with complex
financial transactions are most quickly and economically resolved by an
experienced and expert person and the parties wish applicable state and federal
laws to apply (rather than arbitration rules), the parties desire that their
disputes be resolved by a judge applying such applicable laws. Therefore, to
achieve the best combination of the benefits of the judicial system and of
arbitration, the parties hereto waive all right to trial by jury in any action,
suit, or proceeding brought to resolve any dispute, whether sounding in
contract, tort or otherwise, arising out of, connected with, related to, or
incidental to the relationship established among them in connection with this
agreement or any other related document or the transactions contemplated hereby
or thereby. SECTION 14.11 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement. SECTION 14.12 Severability. Wherever possible, each
provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. SECTION 14.13 Section Titles. The section titles and table of
contents contained in this Agreement are and shall be without substantive
meaning or content of any kind whatsoever and are not a part of the agreement
between the parties hereto. SECTION 14.14 Limited Recourse. The obligations of
the Purchaser under this Agreement and all Related Documents are solely the
corporate obligations of the Purchaser. No recourse shall be had for the payment
of any amount owing in respect of Purchases or for the payment of any fee
hereunder or any other obligation or claim arising out of or based upon this
Agreement or any other Related Document against any Stockholder, employee,
officer, director, agent or incorporator of the Purchaser. Any accrued
obligations owing by the Purchaser under this Agreement shall be payable by the
Purchaser solely to the extent that funds are available therefor from time to
time in accordance with the provisions of Article VI of the Collateral Agent
Agreement and Article VI of this Agreement (and such accrued obligations shall
not be extinguished until paid in full). SECTION 14.15 Further Assurances. (a)
Each of the Seller and the Servicer shall, at its sole cost and expense, upon
request of the Purchaser, the Operating Agent or the Collateral Agent, promptly
and duly execute and deliver any and all further instruments and documents and
take such further action that may be necessary or desirable or that the
Purchaser, the Operating Agent or the Collateral Agent may request to (i)
perfect, protect, preserve, continue and maintain fully the Purchases made and
the right, title and interests (including Liens) granted to the Purchaser under
this Agreement, (ii) enable the Purchaser, the Operating Agent or the Collateral
Agent to exercise and enforce its rights under this Agreement, any of the other
Related Documents or the Collateral Agent Agreement or (iii) otherwise carry out
more effectively the provisions and purposes of this Agreement or any other
Related Document. Without limiting the generality of the foregoing, the Seller
shall, upon request of the Purchaser, the Operating Agent or the Collateral
Agent, (A) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or notices
that may be necessary or desirable or that the Purchaser, the Operating Agent or
the Collateral Agent may request to perfect, protect and preserve the Purchases
made and the Liens granted pursuant to this Agreement, free and clear of all
Adverse Claims, (B) mark, or cause the Servicer to mark, each Contract
evidencing each Transferred Receivable with a legend, acceptable to the
Purchaser, the Operating Agent and the Collateral Agent evidencing that the
Purchaser has purchased all right and title thereto and interest therein as
provided herein, (C) mark, or cause the Servicer to mark, its master data
processing records evidencing such Transferred Receivables with such a legend
and (D) notify or cause the Servicer to notify Obligors of the transfer of
Transferred Receivables effected hereunder. (b) Without limiting the generality
of the foregoing, the Seller hereby authorizes the Purchaser and the Collateral
Agent, and the Purchaser hereby authorizes the Collateral Agent, to file one or
more financing or continuation statements, or amendments thereto or assignments
thereof, relating to all or any part of the Transferred Receivables, including
Collections with respect thereto, or the Seller Collateral without the signature
of the Seller or, as applicable, the Purchaser to the extent permitted by
applicable law. A carbon, photographic or other reproduction of this Agreement
or of any notice or financing statement covering the Transferred Receivables,
the Seller Collateral or any part thereof shall be sufficient as a notice or
financing statement where permitted by law.
IN WITNESS WHEREOF, the parties have caused this Receivables Purchase and
Servicing Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
CONE RECEIVABLES II LLC
By /s/ Brandon Carrey
Name: Brandon Carrey
Title: President
c/o AMACAR Group, L.L.C.
6525 Morrison Boulevard
Suite 318
Charlotte, North Carolina 28210
Attention: Treasurer
Telecopy: (706) 365-1362
with a copy to:
3101 North Elm Street, Third Floor
Greensboro, North Carolina27415-6540
Attention: Treasurer
Telecopy: (336) 379-6043
REDWOOD RECEIVABLES CORPORATION
By /s/ Denis Creeden
Name: Denis Creeden
Title: Assistant Secretary
3001 Summer Street
Stamford, Connecticut 06927
Attention: Redwood Administrator
Telecopy: (203) 961-2953
CONE MILLS CORPORATION
By /s/ David E. Bray
Name: David E. Bray
Title: Treasurer
3101 North Elm Street
Greensboro, NC 27415-6540
Attention: Treasurer
Telecopy: (336) 379-6043
GENERAL ELECTRIC CAPITAL CORPORATION
As Operating Agent&Collateral Agent
By /s/s Craig Winslow
Name: Craig Winslow
Duly Authorized Signatory
1201 High Ridge Road
Stamford, Connecticut 06927
Attention: VP-Portfolio/Cone
Receivables II LLC
Telecopy: (203) 316-7821
115
Exhibit 2.1(i)
RECEIVABLES TRANSFER AGREEMENT
Dated as of September 1, 1999,
by and among
CONE MILLS CORPORATION,
ANY OTHER ORIGINATORS PARTY HERETO,
and
CONE RECEIVABLES II LLC
118
117
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INTERPRETATION......................................1
SECTION 1.01 Definitions.......................................................1
SECTION 1.02 Rules of Construction.............................................1
ARTICLE II TRANSFERS OF RECEIVABLES...........................................2
SECTION 2.01 Agreement to Transfers............................................2
(a) Receivables Transfers....................................................2
(b) Determination of Sold Receivables........................................2
(c) Payment of Purchase Price................................................2
(d) Determination of Contributed Receivables.................................2
(e) Ownership of Transferred Receivables......................................2
(f) Reconstruction of General Trial Balance...................................3
(g) Servicing of Receivables..................................................3
SECTION 2.02 Grant of Security Interest........................................3
SECTION 2.03 Parent Agreement; Addition of Originators.........................3
SECTION 2.04 Termination of Status as an Originator............................4
SECTION 2.05 Transfers of Levi Strauss Europe Receivables......................5
ARTICLE III CONDITIONS PRECEDENT..............................................5
SECTION 3.01 Conditions to Initial Transfer...................................5
(a) Transfer Agreement; Other Documents........................................5
(b) Governmental and Other Approvals...........................................5
(c) Compliance with Laws.......................................................5
(d) Purchase Agreement Conditions..............................................5
SECTION 3.02 Conditions to all Transfers.......................................6
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS..........................6
SECTION 4.01 Representations and Warranties of the Originators.................6
(a) Corporate Existence; Compliance with Law...................................6
(b) Executive Offices; Collateral Locations; Corporate or Other Names; FEIN....7
(c) Corporate Power, Authorization, Enforceable Obligations....................7
(d) No Litigation..............................................................7
(e) Solvency...................................................................7
(f) Material Adverse Effect....................................................8
(g) Ownership of Receivables; Liens............................................8
(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock...................8
(i) Taxes......................................................................8
(j) Intellectual Property......................................................9
(k) Full Disclosure...........................................................9
(l) Notices to Obligors.......................................................9
(m) ERISA.....................................................................9
(n) Brokers..................................................................10
(o) Margin Regulations.......................................................10
(p) Nonapplicability of Bulk Sales Laws......................................10
(q) Securities Act and Investment Company Act Exemptions.....................10
(r) Government Regulation....................................................10
(s) Books and Records; Minutes...............................................11
(t) Deposit and Disbursement Accounts........................................11
(u) Representations and Warranties in Other Related Documents................11
(v) Receivables..............................................................11
(w) Nonavoidability of Transfers.............................................12
(x) Years 2000 Problems.....................................................12
SECTION 4.02 Affirmative Covenants of the Originators........................12
(a) Offices and Records......................................................12
(b) Access...................................................................12
(c) Communication with Accountants...........................................13
(d) Compliance With Credit and Collection Policies...........................13
(e) Assignment...............................................................13
(f) Compliance with Agreements and Applicable Laws...........................14
(g) Maintenance of Existence and Conduct of Business.........................14
(h) Notice of Material Event.................................................14
(i) Use of Proceeds..........................................................15
(j) Separate Identity........................................................15
(k) ERISA....................................................................16
(l) Payment, Performance and Discharge of Obligations........................16
(m) Deposit of Collections...................................................16
(n) Accounting Changes.......................................................16
(o) Adjustments to Sale Price................................................17
(p) Year 2000 Compliance.....................................................17
SECTION 4.03 Negative Covenants of the Originators...........................17
(a) Sale of Assets...........................................................17
(b) Liens....................................................................17
(c) Modifications of Receivables or Contracts................................17
(d) Sale Characterization....................................................17
(e) Capital Structure and Business...........................................18
(f) Actions Affecting Rights.................................................18
(g) ERISA....................................................................18
(h) Change to Credit and Collection Policies.................................18
(i) Adverse Tax Consequences.................................................18
(j) No Proceedings...........................................................18
(k) Debt 18
(l) Mergers, Acquisitions, Etc...............................................19
4.04 Breach of Representations, Warranties or Covenants......................20
ARTICLE V INDEMNIFICATION....................................................21
SECTION 5.01 Indemnification..................................................21
ARTICLE VI [Intentionally Omitted]...........................................23
ARTICLE VII [Intentionally Omitted]..........................................23
ARTICLE VIII MISCELLANEOUS...................................................23
SECTION 8.01 Notices..........................................................23
SECTION 8.02 No Waiver; Remedies..............................................24
SECTION 8.03 Successors and Assigns...........................................24
SECTION 8.04 Termination; Survival of Obligations.............................24
SECTION 8.05 Complete Agreement; Modification of Agreement....................25
SECTION 8.06 Amendments and Waivers...........................................25
SECTION 8.07 Governing Law; Consent To Jurisdiction;Waiver Of Jury Trial......25
SECTION 8.08 Counterparts.....................................................27
SECTION 8.09 Severability.....................................................27
SECTION 8.10 Section Titles...................................................27
SECTION 8.11 No Setoff........................................................27
SECTION 8.12 Confidentiality..................................................27
SECTION 8.13 Further Assurances..............................................28
SECTION 8.14 Fees and Expenses................................................28
119
INDEX OF APPENDICES
Exhibit 2.01(a) Form of Receivables Assignment
Exhibit 2.03 Form of Parent Agreement
Exhibit 2.05 Form of Levi Strauss Europe Notice and Acknowledgment
Exhibit 3.01(a) Form of Officer' Certificate to Solvency (Originator)
Schedule 2.01(c) Originator Accounts
Schedule 4.01(b)Executive Offices; Collateral Locations;Corporate or other Names
Schedule 4.01(d) Litigation
Schedule 4.01(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock
Schedule 4.01(i) Tax Matters
Schedule 4.01(j) Intellectual Property Infringements
Schedule 4.01(m) ERISA Plans
Schedule 4.01(t) Deposit and Disbursement Accounts
Schedule 4.03(b) Existing Liens
Schedule 4.03(k) Existing Debt
Annex X Definitions
Annex Y Schedule of Documents
122
121
THIS RECEIVABLES TRANSFER AGREEMENT ("Agreement") is entered into as of
September 1, 1999, by and among Cone Mills Corporation, a North Carolina
corporation ("Cone Mills"), any other Originators that are or may hereafter
become a party to this Agreement (Cone Mills and such other Originators herein
individually called an "Originator" and collectively the "originators"), and
Cone Receivables II LLC, a North Carolina limited liability company ("CRLLC").
RECITALS
A. CRLLC is a special purpose limited liability company owned by the
Independent Member, Cone Mills and one or more Subsidiaries of Cone Mills.
B. CRLLC has been formed for the sole purpose of purchasing, or otherwise
acquiring by capital contribution, and reselling to the Purchaser, all or
substantially all of the trade receivables originated by each Originator.
C. Each Originator intends to sell, and CRLLC intends to purchase, such
trade receivables, from time to time, as described herein.
D. In addition, Cone Mills or any other Originator that is a Stockholder of
CRLLC (Cone Mills and any such Originator individually a "Stockholder
Originator" and collectively the "Stockholder Originators") may, from time to
time, contribute capital to CRLLC in the form of Contributed Receivables or
cash.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01 Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to them in Annex X.
SECTION 1.02 Rules of Construction. For purposes of this Agreement, the
rules of construction set forth in Annex X shall govern. All Appendices hereto,
or expressly identified to this Agreement, are incorporated herein by reference
and, taken together with this Agreement, shall constitute but a single
agreement.
ARTICLE II
TRANSFERS OF RECEIVABLES
SECTION 2.01 Agreement to Transfer.
(a) Receivables Transfers. Subject to the terms and conditions hereof, each
Originator agrees to sell (without recourse except to the extent specifically
provided herein) or, in the case of any Stockholder Originator, sell or
contribute, to CRLLC on the Closing Date and on each Business Day thereafter
(each such date, a "Transfer Date") all Approved Receivables owned by it on each
such Transfer Date, and CRLLC agrees to purchase or acquire as a capital
contribution all such Approved Receivables on each such Transfer Date. All such
Transfers by any Originator shall be evidenced by a certificate of assignment
from such Originator to CRLLC substantially in the form of Exhibit 2.01(a)
(each, a "Receivables Assignment," and collectively, the "Receivables
Assignments"), and each Originator and CRLLC shall execute and deliver a
Receivables Assignment on or before the Closing Date.
(b) Determination of Sold Receivables. On and as of each Transfer Date,
those Approved Receivables sold to, and purchased by, CRLLC shall consist of (i)
all Approved Receivables owned by each Restricted Originator and (ii) those
Approved Receivables owned by each Stockholder Originator and identified by the
Servicer for sale to CRLLC (each such Receivable individually, a "Sold
Receivable," and collectively, the "Sold Receivables"). The Sale Price of all
Sold Receivables shall not exceed the amount of cash available to CRLLC for the
payment thereof.
(c) Payment of Purchase Price. In consideration for each Sale of Sold
Receivables hereunder, CRLLC shall pay to the Originator thereof on the Transfer
Date therefor the Sale Price therefor in Dollars in immediately available funds.
Each payment by CRLLC under this Section 2.01(c) shall be effected by means of a
wire transfer not later than 12:00 p.m. (New York time) on the day when due to
the Originator Account or Accounts specified by Cone Mills to CRLLC for such
payment.
(d) Determination of Contributed Receivables. With respect to any
Stockholder Originator and on and as of any Transfer Date, those Approved
Receivables contributed to CRLLC as a capital contribution shall consist of all
Approved Receivables owned by such Stockholder Originator as of such Transfer
Date (i) that have not been identified as Sold Receivables pursuant to Section
2.01(b) and (ii) with respect to which an Election Notice has not been delivered
to CRLLC (each such contributed Receivable individually, a "Contributed
Receivable," and collectively, the "Contributed Receivables"). Any Stockholder
Originator electing not to contribute Receivables to CRLLC on any Transfer Date
shall deliver to CRLLC not later than 5:00 p.m. (New York time) on the Business
Day immediately preceding such Transfer Date a notice of such election (each
such notice, an "Election Notice").
(e) Ownership of Transferred Receivables. On and after each Transfer Date
and after giving effect to the Transfers to be made on each such date, CRLLC
shall own the Transferred Receivables and no Originator shall take any action
inconsistent with such ownership nor shall any Originator claim any ownership
interest in such Transferred Receivables.
(f) Reconstruction of General Trial Balance. If at any time any Originator
fails to generate its General Trial Balance, CRLLC shall have the right to
reconstruct such General Trial Balance so that a determination of the Sold
Receivables and Contributed Receivables can be made pursuant to Sections 2.01(b)
and 2.01(d). Each Originator agrees to cooperate with such reconstruction,
including by delivery to CRLLC, upon CRLLC's request, of copies of all Contracts
and Records.
(g) Servicing of Receivables. So long as no Event of Servicer Termination
shall have occurred and be continuing and no Successor Servicer has assumed the
responsibilities and obligations of the Servicer pursuant to Section 11.02 of
the Purchase Agreement, the Servicer shall (i) conduct the servicing,
administration and collection of the Transferred Receivables and shall take, or
cause to be taken, all such actions as may be necessary or advisable to service,
administer and collect the Transferred Receivables, all in accordance with (A)
the terms of the Purchase Agreement, (B) customary and prudent servicing
procedures for trade receivables of a similar type and (C) all applicable laws,
rules and regulations, and (ii) hold all Contracts and other documents and
incidents relating to the Transferred Receivables in trust for the benefit of
CRLLC, as the owner thereof, and for the sole purpose of facilitating the
servicing of the Transferred Receivables in accordance with the terms of the
Purchase Agreement.
SECTION 2.02 Grant of Security Interest. The parties hereto intend that
each Transfer shall constitute a purchase and sale or capital contribution, as
applicable, and not a loan. Notwithstanding anything to the contrary set forth
in this Section 2.02, if a court of competent jurisdiction determines that any
transaction provided for herein constitutes a loan and not a purchase and sale
or capital contribution, as applicable, then the parties hereto intend that this
Agreement shall constitute a security agreement under applicable law and that
each Originator shall be deemed to have granted, and each Originator does hereby
grant, to CRLLC a first priority Lien in and to all of such Originator's right,
title and interest in, to and under all Transferred Receivables.
SECTION 2.03 Parent Agreement; Addition of Originators. Cone Mills hereby
undertakes and agrees, to and for the benefit of CRLLC, to cause the due and
punctual performance and observance by each Selling Subsidiary of all of the
terms, conditions, agreements and undertakings on the part of such Selling
Subsidiary to be performed or observed by it hereunder or under any other
Related Document and, prior to or concurrently with the first Selling Subsidiary
becoming an Originator, shall execute and deliver to CRLLC an agreement
substantially in the form of Exhibit 2.03 (the "Parent Agreement") to more fully
evidence such undertaking. Any Subsidiary or Affiliate of Cone Mills may become
an Originator hereunder upon satisfaction of the Rating Agency Condition with
respect thereto. Cone Mills and any such Subsidiary or Affiliate shall give
prior written notice of any such proposed addition to CRLLC and the Operating
Agent. Upon provision of such notice, any addition of a Subsidiary or Affiliate
of Cone Mills as an Originator pursuant to this section shall become effective
on the first Business Day following the date on which (a) the Rating Agency
Condition has been satisfied with respect thereto, (b) such new Originator and
the parties hereto shall have executed and delivered, at such new Originator's
sole cost and expense, such further agreements, instruments and other documents,
each in form and substance satisfactory to CRLLC and the Operating Agent, that
CRLLC or the Operating Agent reasonably determines are necessary or appropriate
to effect such addition, and (c) CRLLC and the Operating Agent shall have given
their prior written consent to any such proposed addition. From and after the
effective date of any such addition, any reference to an "Originator" in this
Agreement shall include any Subsidiary or Affiliate of Cone Mills added as an
Originator pursuant to this Section 2.03.
SECTION 2.04 Termination of Status as an Originator.
(a) At any time when two or more Originators are parties hereto, an
Originator may terminate its obligations as an Originator hereunder (each such
Originator, a "Terminating Originator") if:
(i) such Terminating Originator shall have given CRLLC and the Operating
Agent not less than 60 days' prior written notice of its intention to terminate;
(ii) (A) an Authorized Officer of the Terminating Originator shall have
certified to CRLLC, and (B) an Authorized Officer of CRLLC shall have certified
to the Operating Agent, that the termination by the Terminating Originator of
its status as an Originator will not have a Material Adverse Effect;
(iii) both immediately before and after giving effect to the termination by
the Terminating Originator, no Incipient Termination Event or Termination Event
shall have occurred and be continuing or shall reasonably be expected to occur
as a result of such termination;
(iv) both immediately before and after giving effect to the termination by
the Terminating Originator, no Purchase Excess shall exist; and
(v) CRLLC shall have consented, in writing, to the termination of the
obligations of such Terminating Originator hereunder and delivered to the
Operating Agent the Officer's Certificate of such Terminating Originator
identified in clause (a)(ii)(A) above.
Any termination by a Terminating Originator shall become effective on the
first Business Day following the day on which the requirements of clauses (a)(i)
through (a)(v) above shall have been satisfied (or such later date specified in
any notice or certificate referred to in such clauses). Any termination by a
Terminating Originator shall terminate its rights and obligations hereunder;
provided, that any such termination shall not relieve such Terminating
Originator of obligations that relate to Transferred Receivables originated by,
or obligations of, such Terminating Originator prior to the effective date of
such termination, including any and all obligations of such Terminating
Originator to CRLLC under Sections 4.02(o), 4.04, 5.01 and 8.14.
(b) An Originator's right and obligation to sell its Receivables to CRLLC
shall terminate immediately if such Originator ceases to be a Subsidiary or
Affiliate of Cone Mills; provided, that any such termination shall not relieve
such Originator of obligations that relate to Transferred Receivables originated
by, or obligations of, such Originator prior to the effective date of such
termination, including any and all obligations of such Originator to CRLLC under
Sections 4.02(o), 4.04, 5.01 and 8.14.
SECTION 2.05 Transfers of Levi Strauss Europe Receivables. Receivables owed
by Levi Strauss Europe shall not be transferred hereunder unless and until the
Foreign Receivable Election Date has occurred and the owner of such Receivables
(if not already an Originator) becomes an Originator pursuant to Section 2.03
hereof. In addition, prior to any Receivable owed by Levi Strauss Europe to any
Originator becoming an Eligible Foreign Receivable, such Originator shall send
to Levi Strauss Europe a one-time written notice of such Originator's transfer
of such Receivable to CRLLC and of CRLLC's re-transfer of such Receivable to
Purchaser and such Originator shall obtain Levi Strauss' written acknowledgment
of its receipt of such notice. Each such notice shall be in the form of Exhibit
2.05 (properly completed). No later than the fifteenth (15th) Business Day of
each fiscal month, each such Originator shall provide the Operating Agent with a
detailed report of all Receivables owed by Levi Strauss Europe that were
outstanding as of the end of the immediately preceding fiscal month (including
invoice numbers).
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01 Conditions to Initial Transfer. The initial Transfer hereunder
shall be subject to satisfaction of each of the following conditions precedent
(any one or more of which may be waived in writing by each of CRLLC and the
Operating Agent):
(a) Transfer Agreement; Other Documents. This Agreement or counterparts
hereof shall have been duly executed by, and delivered to, each Originator and
CRLLC, and CRLLC shall have received such documents, instruments, agreements and
legal opinions as CRLLC shall request in connection with the transactions
contemplated by this Agreement, including all those identified in the Schedule
of Documents, each in form and substance satisfactory to CRLLC.
(b) Governmental and Other Approvals. CRLLC shall have received
(i)satisfactory evidence that the Originators have obtained all required
consents and approvals of all Persons, including the Credit Facility Lender and
all requisite Governmental Authorities, to the execution, delivery and
performance of this Agreement and the other Related Documents and the
consummation of the transactions contemplated hereby and thereby or (ii)an
Officer's Certificate from each Originator in form and substance satisfactory to
CRLLC affirming that no such consents or approvals are required.
(c) Compliance with Laws. Each Originator shall be in compliance in all
material respects with all applicable foreign, federal, state and local laws and
regulations, including those specifically referenced in Section 4.02(f).
(d) Purchase Agreement Conditions. Each of those conditions precedent set
forth in Article III of the Purchase Agreement shall have been satisfied or
waived in writing as provided therein.
SECTION 3.02 Conditions to all Transfers. Each Transfer hereunder
(including the initial Transfer) shall be subject to satisfaction of the
following further conditions precedent as of the Transfer Date therefor:
(a) the representations and warranties of each Originator contained herein
or in any other Related Document shall be true and correct as of such Transfer
Date, both before and after giving effect to such Transfer and to the
application of the Sale Price therefor, except to the extent that any such
representation or warranty expressly relates to an earlier date and except for
changes therein expressly permitted by this Agreement;
(b) no Incipient Termination Event or Termination Event shall have occurred
and be continuing or would result after giving effect to such Transfer or the
application of the Sale Price therefor;
(c) each Originator shall be in compliance with each of its covenants and
other agreements set forth herein; and
(d) each Originator shall have taken such other action, including delivery
of approvals, consents, opinions, documents and instruments to CRLLC as CRLLC
may request.
The contribution by any Originator of any Contributed Receivable or the
acceptance by any Originator of the Sale Price for any Sold Receivables on any
Transfer Date shall be deemed to constitute, as of any such Transfer Date, a
representation and warranty by such Originator that the conditions in this
Section 3.02 have been satisfied.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.01 Representations and Warranties of the Originators. To induce
CRLLC to purchase the Sold Receivables and to acquire the Contributed
Receivables, each Originator makes the following representations and warranties
to CRLLC, each and all of which shall survive the execution and delivery of this
Agreement.
(a) Corporate Existence; Compliance with Law. Each Originator (i) is a
corporation or limited liability company duly organized and validly existing
under the laws of its jurisdiction of incorporation or organization; (ii) is
duly qualified to conduct business in each other jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification; (iii) has the requisite corporate or other power and authority
and the legal right to own, pledge, mortgage or otherwise encumber and operate
its properties, to lease the property it operates under lease, and to conduct
its business as now, heretofore and proposed to be conducted; (iv) has all
licenses, permits, consents or approvals from or by, and has made all filings
with, and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent required for such ownership, operation and conduct;
(v) is in compliance with its charter and its bylaws or operating agreement (as
the case may be); and (vi) subject to specific representations set forth herein
regarding ERISA, Environmental Laws, tax laws and other laws, is in compliance
with all applicable provisions of law, except where the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(b) Executive Offices; Collateral Locations; Corporate or Other Names;
FEIN. As of the Closing Date, the current location of each Originator's chief
executive office, principal place of business, and other offices are set forth
in Schedule 4.01(b) and none of such locations have changed within the past 12
months. During the prior five years (or such shorter time as such Originator has
been in existence), except as set forth in Schedule 4.01(b), no Originator has
been known as or used any corporate, fictitious or trade name. In addition,
Schedule 4.01(b) lists the federal employer identification number of each
Originator.
(c) Corporate Power, Authorization, Enforceable Obligations. The execution,
delivery and performance by each Originator of this Agreement and the other
Related Documents to which it is a party and the creation of all Liens provided
for herein and therein and, solely with respect to clause (vii) below, the
exercise by CRLLC, the Purchaser, the Operating Agent or the Collateral Agent of
any of its rights and remedies under any Related Document to which it is a
party: (i)are within such Person's corporate or other power; (ii) have been
duly authorized by all necessary or proper corporate or other action; (iii) do
not contravene any provision of such Person's charter, bylaws or operating
agreement (as the case may be); (iv)do not violate any law or regulation, or
any order or decree of any court or Governmental Authority; (v) do not conflict
with or result in the breach or termination of, constitute a default under or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Person is a party or by which such Person or any of its property is
bound; (vi)do not result in the creation or imposition of any Adverse Claim
upon any of the property of such Person; and (vii)do not require the consent or
approval of any Governmental Authority or any other Person, except those
referred to in Section 3.01(b), all of which will have been duly obtained, made
or complied with prior to the Closing Date. On or prior to the Closing Date,
each of the Related Documents shall have been duly executed and delivered by
each Originator that is a party thereto and each such Related Document shall
then constitute a legal, valid and binding obligation of such Originator
enforceable against it in accordance with its terms.
(d) No Litigation. No Litigation is now pending or, to the knowledge of any
Originator, threatened against any Originator that (i)challenges any
Originator's right or power to enter into or perform any of its obligations
under the Related Documents to which it is a party, or the validity or
enforceability of any Related Document or any action taken thereunder, (ii)
seeks to prevent the Transfer, Purchase or pledge of any Receivable or the
consummation of any of the transactions contemplated under this Agreement or the
other Related Documents or (iii)has a reasonable risk of being determined
adversely to any Originator and that, if so determined, could have a Material
Adverse Effect. Except as set forth on Schedule 4.01(d), as of the Closing Date
there is no Litigation pending or threatened that seeks damages in excess of
$500,000 or injunctive relief against, or alleges criminal misconduct by, any
Originator.
(e) Solvency. Both before and after giving effect to (i) the transactions
contemplated by this Agreement and the other Related Documents and (ii) the
payment and accrual of all transaction costs in connection with the foregoing,
each Originator is and will be Solvent.
(f) Material Adverse Effect. Between January 3, 1999 and the Closing Date,
(i)no Originator has incurred any obligations, contingent or non-contingent
liabilities, liabilities for charges, long-term leases or unusual forward or
long-term commitments that, alone or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, (ii) no contract, lease or other
agreement or instrument has been entered into by any Originator or has become
binding upon any Originator's assets and no law or regulation applicable to any
Originator has been adopted that has had or could reasonably be expected to have
a Material Adverse Effect on such Originator, and (iii) no Originator is in
default and no third party is in default under any material contract, lease or
other agreement or instrument to which any Originator is a party that alone or
in the aggregate could reasonably be expected to have a Material Adverse Effect.
Between January 3, 1999 and the Closing Date no event has occurred that alone or
together with other events could reasonably be expected to have a Material
Adverse Effect.
(g) Ownership of Receivables; Liens. Each Originator owns each Receivable
originated by it free and clear of any Adverse Claim (other than Permitted
Encumbrances) and, from and after each Transfer Date, CRLLC will acquire valid
and properly perfected title to and the sole record and beneficial ownership
interest in each Transferred Receivable purchased or otherwise acquired on such
date, free and clear of any Adverse Claim or restrictions on transferability. As
of the Closing Date, none of the properties and assets of any Originator are
subject to any Adverse Claims other than Permitted Encumbrances, and there are
no facts, circumstances or conditions known to any Originator that may result in
any Adverse Claims (including Adverse Claims arising under Environmental Laws)
other than Permitted Encumbrances. Each Originator has received all assignments,
bills of sale and other documents, and has duly effected all recordings, filings
and other actions necessary to establish, protect and perfect such Originator's
right, title and interest in and to the Receivables originated by it and its
other properties and assets.
(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock. Except as set
forth in Schedule 4.01(h), no Originator has any Subsidiaries, is engaged in any
joint venture or partnership with any other Person, or is an Affiliate of any
other Person. All of the issued and outstanding Stock of each Originator which
is a Subsidiary of Cone Mills is owned by Cone Mills in the amounts set forth on
Schedule 4.01(h). Except as set forth on Schedule 4.01(h), there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Originator may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock or
other equity securities of its Subsidiaries.
(i) Taxes. All tax returns, reports and statements, including information
returns, required by any Governmental Authority to be filed by any Originator
have been filed with the appropriate Governmental Authority and all charges have
been paid prior to the date on which any fine, penalty, interest or late charge
may be added thereto for nonpayment thereof (or any such fine, penalty,
interest, late charge or loss has been paid), excluding charges or other amounts
being contested in accordance with Section 4.02(l). Proper and accurate amounts
have been withheld by each Originator from its respective employees for all
periods in full and complete compliance with all applicable federal, state,
local and foreign laws and such withholdings have been timely paid to the
respective Governmental Authorities. Schedule 4.01(i) sets forth as of the
Closing Date (i) those taxable years for which any Originator's tax returns are
currently being audited by the IRS or any other applicable Governmental
Authority and (ii) any assessments or threatened assessments in connection with
such audit or otherwise currently outstanding. Except as described on Schedule
4.01(i), no Originator has executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any charges.
None of the Originators and their respective predecessors are liable for any
charges: (A) under any agreement (including any tax sharing agreements) or
(B) to the best of each Originator's knowledge, as a transferee. As of the
Closing Date, no Originator has agreed or been requested to make any adjustment
under IRC Section 481(a), by reason of a change in accounting method or
otherwise, that would have a Material Adverse Effect.
(j) Intellectual Property. As of the Closing Date, each Originator owns or
has rights to use all intellectual property necessary to continue to conduct its
business as now or heretofore conducted by it or proposed to be conducted by it.
Each Originator conducts its business and affairs without infringement of or
interference with any intellectual property of any other Person. Except as set
forth in Schedule 4.01(j), no Originator is aware of any infringement or claim
of infringement by others of any intellectual property of any Originator.
(k) Full Disclosure. No information contained in this Agreement, any of the
other Related Documents, or any written statement furnished by or on behalf of
any Originator to CRLLC, the Purchaser, the Operating Agent or the Collateral
Agent pursuant to the terms of this Agreement or any of the other Related
Documents (other than Projections) contains any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Projections are based upon the
estimates and assumptions stated therein, all of which Cone Mills believes to be
reasonable and fair in light of current conditions and current facts known to
Cone Mills and, as of the Closing Date, reflect Cone Mills' good faith and
reasonable estimate of the future financial condition and performance of Cone
Mills and its Subsidiaries and of the other information projected therein for
the period covered thereby.
(l) Notices to Obligors. Each Originator has directed all Obligors of
Transferred Receivables originated by it to remit all payments with respect to
such Receivables for deposit in a Lockbox or Lockbox Account. (m) ERISA. (i)
Schedule 4.01(m) lists all Plans and separately identifies all Pension Plans,
including all Title IV Plans, Multi-employer Plans, ESOPs and Welfare Plans,
including all Retiree Welfare Plans. Each Qualified Plan has been determined by
the IRS to qualify under Section 401 of the IRC, the trusts created thereunder
have been determined to be exempt from tax under the provisions of Section 501
of the IRC, and nothing has occurred that would cause the loss of such
qualification or tax-exempt status. Each Plan is in compliance with the
applicable provisions of ERISA and the IRC, including the timely filing of all
reports required under the IRC or ERISA. No Originator or ERISA Affiliate has
failed to make any contribution or pay any amount due as required by either
Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan. No
Originator or ERISA Affiliate has engaged in a "prohibited transaction," as
defined in Section 4975 of the IRC, in connection with any Plan that would
subject any Originator to a material tax on prohibited transactions imposed by
Section 4975 of the IRC. (ii) Except as set forth in Schedule 4.01(m): (A) no
Title IV Plan has any Unfunded Pension Liability; (B) no ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan has
occurred or is reasonably expected to occur; (C) there are no pending or, to the
knowledge of any Originator, threatened claims (other than claims for benefits
in the normal course), sanctions, actions or lawsuits, asserted or instituted
against any Plan or any Person as fiduciary or sponsor of any Plan which if
adversely determined could have a Material Adverse Effect; (D) no Originator or
ERISA Affiliate has incurred or reasonably expects to incur any liability as a
result of a complete or partial withdrawal from a Multi-employer Plan;
(E) within the last five years no Title IV Plan with Unfunded Pension
Liabilities has been transferred outside of the "controlled group" (within the
meaning of Section 4001(a)(14) of ERISA) of any Originator or ERISA Affiliate;
(F) Stock of all Originators and their ERISA Affiliates makes up, in the
aggregate, no more than 10% of the assets of any Plan, measured on the basis of
fair market value as of the last valuation date of any Plan; and (G) no
liability under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that is not rated AAA by S&P or an equivalent
rating by another nationally recognized rating agency. (n) Brokers. No broker or
finder acting on behalf of any Originator was employed or utilized in connection
with this Agreement or the other Related Documents or the transactions
contemplated hereby or thereby and no Originator has any obligation to any
Person in respect of any finder's or brokerage fees in connection therewith. (o)
Margin Regulations. No Originator is engaged, nor will it engage, principally or
as one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin security" as such terms are
defined in Regulation U of the Federal Reserve Board as now and from time to
time hereafter in effect (such securities being referred to herein as "Margin
Stock"). No Originator owns any Margin Stock, and no portion of the proceeds of
the Sale Price for any Sale will be used, directly or indirectly, for the
purpose of purchasing or carrying any Margin Stock, for the purpose of reducing
or retiring any Debt that was originally incurred to purchase or carry any
Margin Stock or for any other purpose that might cause any portion of such
proceeds to be considered a "purpose credit" within the meaning of Regulations
T, U or X of the Federal Reserve Board. No Originator will take or permit to be
taken any action that might cause any Related Document to violate any regulation
of the Federal Reserve Board. (p) Nonapplicability of Bulk Sales Laws. No
transaction contemplated by this Agreement or any of the other Related Documents
requires compliance with any bulk sales act or similar law. (q) Securities Act
and Investment Company Act Exemptions. Each purchase of Transferred Receivables
under this Agreement will constitute (i) a "current transaction" within the
meaning of Section 3(a)(3) of the Securities Act and (ii) a purchase or other
acquisition of notes, drafts, acceptances, open accounts receivable or other
obligations representing part or all of the sales price of merchandise,
insurance or services within the meaning of Section 3(c)(5) of the Investment
Company Act. (r) Government Regulation. No Originator is an "investment company"
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act.
No Originator is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, or any other federal or state statute that
restricts or limits its ability to incur Debt or to perform its obligations
hereunder. The purchase or acquisition of the Transferred Receivables by CRLLC
hereunder, the application of the Sale Price therefor and the consummation of
the transactions contemplated by this Agreement and the other Related Documents
will not violate any provision of any such statute or any rule, regulation or
order issued by the Securities and Exchange Commission. (s) Books and Records;
Minutes. The bylaws or the certificate or articles of incorporation of each
Originator require it to maintain (i) books and records of account and
(ii) minutes of the meetings and other proceedings of its Stockholders and board
of directors. (t) Deposit and Disbursement Accounts. Schedule 4.01(t) lists all
banks and other financial institutions at which each Originator maintains
deposit or other bank accounts as of the Closing Date, including any Lockbox
Accounts, and such schedule correctly identifies the name, address and telephone
number of each depository, the name in which the account is held, a description
of the purpose of the account, and the complete account number therefor. (u)
Representations and Warranties in Other Related Documents. Each of the
representations and warranties of each Originator contained in the Related
Documents (other than this Agreement) is true and correct in all material
respects and such Originator hereby makes each such representation and warranty
to, and for the benefit of, the Purchaser, the Operating Agent and the
Collateral Agent as if the same were set forth in full herein. (v) Receivables.
With respect to each Transferred Receivable designated as an Eligible Receivable
in any Investment Base Certificate delivered on or after the Transfer Date of
such Transferred Receivable: (i) such Receivable satisfies the criteria for an
Eligible Receivable; (ii) prior to its Transfer to CRLLC such Receivable was
owned by the Originator thereof free and clear of any Adverse Claim (other than
Permitted Encumbrances), and such Originator had the full right, power and
authority to sell, contribute, assign, transfer and pledge its interest therein
as contemplated under this Agreement and the other Related Documents and, upon
such Transfer, CRLLC will acquire valid and properly perfected title to and the
sole record and beneficial ownership interest in such Receivable, free and clear
of any Adverse Claim and, following such Transfer, such Receivable will not be
subject to any Adverse Claim as a result of any action or inaction on the part
of such Originator; (iii) the Transfer of each such Receivable by the Originator
thereof pursuant to the Receivables Assignment executed by such Originator and
this Agreement constitutes, as applicable, a valid sale, contribution, transfer,
assignment, setover and conveyance to CRLLC of all right, title and interest of
such Originator in and to such Receivable; and (iv) the Originator of such
Receivable has no knowledge of any fact (including any defaults by the Obligor
thereunder on any other Receivable) that would cause it or should have caused it
to expect that any payments on such Receivable will not be paid in full when due
or to expect any other Material Adverse Effect. (w) Nonavoidability of
Transfers. Each Originator shall, as applicable, (i) have transferred each
Contributed Receivable originated by it as a contribution to the capital of
CRLLC and (ii) (A) have sold each Sold Receivable originated by it for cash
consideration and (B) have transferred any Eligible Receivables pursuant to
clause (b) of Section 4.04, in each case in an amount that constitutes fair
consideration and reasonably equivalent value therefor. Each Sale of a Sold
Receivable effected pursuant to the terms of this Agreement shall not have been
made for or on account of an antecedent debt owed by the Originator thereof to
CRLLC and no such Sale is or may be avoidable or subject to avoidance under any
bankruptcy laws, rules or regulations. (x) Year 2000 Problems. Each Originator
has completed a Year 2000 Assessment and has prepared a Year 2000 Corrective
Plan, and on or before October 31, 1999 each Originator shall have completed all
Year 2000 Corrective Actions and Year 2000 Implementation Testing and shall have
eliminated all Year 2000 Problems except where the failure to eliminate the same
could not reasonably be expected to have a Material Adverse Effect. The
representations and warranties described in this Section 4.01 shall survive the
Transfer of the Transferred Receivables to CRLLC, any subsequent assignment of
the Transferred Receivables by CRLLC, and the termination of this Agreement and
the other Related Documents and shall continue until the indefeasible payment in
full of all Transferred Receivables. SECTION 4.02 Affirmative Covenants of the
Originators. Each Originator covenants and agrees that, unless otherwise
consented to by CRLLC and the Operating Agent, from and after the Closing Date
and until the Termination Date: (a) Offices and Records. Each Originator shall
maintain its principal place of business and chief executive office and the
office at which it keeps its Records at the respective locations specified in
Schedule 4.01(b) or, upon 30 days' prior written notice to CRLLC, at such other
location in a jurisdiction where all action requested by CRLLC, the Purchaser,
the Operating Agent or the Collateral Agent pursuant to Section 8.13 shall have
been taken with respect to the Transferred Receivables. Each Originator shall at
its own cost and expense, for not less than three years from the date on which
each Transferred Receivable was originated, or for such longer period as may be
required by law, maintain adequate Records with respect to such Transferred
Receivable, including records of all payments received, credits granted and
merchandise returned with respect thereto. (b) Access. Each Originator shall,
during normal business hours, from time to time upon five Business Day's prior
notice and as frequently as CRLLC or the Servicer determines to be appropriate:
(i) provide CRLLC or the Servicer and any of their respective officers,
employees and agents access to its properties (including properties of such
Originator utilized in connection with the collection, processing or servicing
of the Transferred Receivables), facilities, advisors and employees (including
officers) of each Originator, (ii) permit CRLLC or the Servicer and any of their
respective officers, employees and agents, to inspect, audit and make extracts
from such Originator's books and records, including all Records maintained by
such Originator, (iii) permit CRLLC or the Servicer and their respective
officers, employees and agents, to inspect, review and evaluate the Transferred
Receivables of any Originator, and (iv) permit CRLLC or the Servicer and their
respective officers, employees and agents to discuss matters relating to the
Transferred Receivables or such Originator's performance under this Agreement or
the affairs, finances and accounts of such Originator with any of its officers,
directors, employees, representatives or agents (in each case, with those
Persons having knowledge of such matters) and with its independent certified
public accountants. If (A) an Incipient Termination Event or a Termination Event
shall have occurred and be continuing, or (B) the Operating Agent, in good
faith, believes that an Incipient Termination Event or a Termination Event is
imminent or deems the Purchaser's rights or interests in the Transferred
Receivables or the Seller Collateral insecure, each such Originator shall
provide such access to CRLLC, the Servicer, the Operating Agent or the
Collateral Agent and their respective officers, employees and agents at all
times and without advance notice and shall provide CRLLC, the Servicer, the
Operating Agent or the Collateral Agent with access to its suppliers and
customers. Each Originator shall make available to CRLLC or the Servicer, and,
if an Incipient Termination Event or a Termination Event shall have occurred and
be continuing, or the Operating Agent, in good faith, believes that an Incipient
Termination Event or a Termination Event is imminent or deems the Purchaser's
rights or interests in the Transferred Receivables or the Seller Collateral
insecure, the Operating Agent or the Collateral Agent, and their respective
counsel, as quickly as is possible under the circumstances, originals or copies
of all books and records, including Records maintained by such Originator, that
CRLLC, the Servicer, the Operating Agent or the Collateral Agent, as applicable,
may request. Each Originator shall deliver any document or instrument necessary
for CRLLC, the Servicer, the Operating Agent or the Collateral Agent, as they
may from time to time request, to obtain records from any service bureau or
other Person that maintains records for such Originator, and shall maintain
duplicate records or supporting documentation on media, including computer tapes
and discs owned by such Originator. (c) Communication with Accountants. Each
Originator authorizes CRLLC, the Servicer, the Operating Agent and the
Collateral Agent to communicate directly with its independent certified public
accountants, and authorizes and shall instruct those accountants and advisors to
disclose and make available to CRLLC, the Servicer, the Operating Agent and the
Collateral Agent any and all financial statements and other supporting financial
documents, schedules and information relating to any Originator (including
copies of any issued management letters) with respect to the business, financial
condition and other affairs of any Originator. Each Originator agrees to render
to CRLLC, the Servicer, the Operating Agent and the Collateral Agent at such
Originator's own cost and expense, such clerical and other assistance as may be
reasonably requested with regard to the foregoing. If any Termination Event
shall have occurred and be continuing, each Originator shall, promptly upon
request therefor, assist CRLLC in delivering to the Operating Agent and the
Collateral Agent Records reflecting activity through the close of business on
the Business Day immediately preceding the date of such request. (d) Compliance
With Credit and Collection Policies. Each Originator shall comply in all
material respects with the Credit and Collection Policies applicable to each
Transferred Receivable and the Contracts therefor, and with the terms of such
Receivables and Contracts. (e) Assignment. Each Originator agrees that, to the
extent permitted under the Purchase Agreement, CRLLC may assign all of its
right, title and interest in, to and under the Transferred Receivables and this
Agreement, including its right to exercise the remedies set forth in Section
4.04. Each Originator agrees that, upon any such assignment, the assignee
thereof may enforce directly, without joinder of CRLLC, all of the obligations
of such Originator hereunder, including any obligations of such Originator set
forth in Sections 4.02(o), 4.04, 5.01 and 8.14. (f) Compliance with Agreements
and Applicable Laws. Each Originator shall perform each of its obligations under
this Agreement and the other Related Documents and comply with all federal,
state and local laws and regulations applicable to it and the Receivables,
including those relating to truth in lending, retail installment sales, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices, privacy, licensing, securities, margin regulations,
taxation, ERISA and labor matters and Environmental Laws and Environmental
Permits, except to the extent that the failure to so comply, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect. (g) Maintenance of Existence and Conduct of Business. Each Originator
shall: (i) do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its rights and franchises;
(ii) continue to conduct its business substantially as now conducted or as
otherwise permitted hereunder and in accordance with the terms of its
certificate or articles of incorporation and bylaws; (iii) at all times
maintain, preserve and protect all of its assets and properties used or useful
in the conduct of its business, including all licenses, permits, charters and
registrations, and keep the same in good repair, working order and condition in
all material respects (taking into consideration ordinary wear and tear) and
from time to time make, or cause to be made, all necessary or appropriate
repairs, replacements and improvements thereto consistent with industry
practices; and (iv) transact business only in such corporate and trade names as
are set forth in Schedule 4.01(b). (h) Notice of Material Event. Each Originator
shall promptly inform CRLLC in writing of the occurrence of any of the
following, in each case setting forth the details thereof and what action, if
any, such Originator proposes to take with respect thereto: (i) any Litigation
commenced or threatened against any Originator or with respect to or in
connection with all or any portion of the Transferred Receivables that (A) seeks
damages or penalties in an uninsured amount in excess of $500,000, (B) seeks
injunctive relief, (C) is asserted or instituted against any Plan, its
fiduciaries or its assets or against any Originator or ERISA Affiliate in
connection with any Plan, (D) alleges criminal misconduct by any Originator, or
(E) would, if determined adversely, have a Material Adverse Effect; (ii) the
commencement of a case or proceeding by or against any Originator seeking a
decree or order in respect of any Originator (A) under the Bankruptcy Code or
any other applicable federal, state or foreign bankruptcy or other similar law,
(B) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for any Originator or for any substantial
part of such Person's assets, or (C) ordering the winding-up or liquidation of
the affairs of any Originator; (iii) the receipt of notice that (A) such
Originator is being placed under regulatory supervision, (B) any license,
permit, charter, registration or approval necessary for the conduct of such
Originator's business is to be, or may be, suspended or revoked, or (C) such
Originator is to cease and desist any practice, procedure or policy employed by
such Originator in the conduct of its business if such cessation may have a
Material Adverse Effect; (iv) (A) any Adverse Claim made or asserted against any
of the Transferred Receivables of which it becomes aware or (B) any
determination that a Transferred Receivable designated as an Eligible Receivable
in an Investment Base Certificate or otherwise was not an Eligible Receivable at
the time of such designation; or (v) any other event, circumstance or condition
that has had or could reasonably be expected to have a Material Adverse Effect.
(i) Use of Proceeds. Each Originator shall utilize the proceeds of the Sale
Price obtained by it for each Sale made by it hereunder solely for general
corporate purposes (including the retirement or repayment of third party debt)
and to pay any related expenses payable by such Originator under this Agreement
and the other Related Documents in connection with the transactions contemplated
hereby and thereby and for no other purpose. (j) Separate Identity. (i) Each
Originator shall maintain corporate records and books of account separate from
those of CRLLC. (ii) The financial statements of Cone Mills and its consolidated
Subsidiaries shall disclose the effects of each Originator's transactions in
accordance with GAAP and, in addition, disclose that (A) CRLLC's sole business
consists of the purchase or acceptance through capital contribution of the
Receivables from the Originators and the subsequent resale of such Receivables
to the Purchaser, (B) CRLLC is a separate business entity with its own separate
creditors who will be entitled, upon its liquidation, to be satisfied out of
CRLLC's assets prior to any value in CRLLC becoming available to CRLLC's
equityholders and (C) the assets of CRLLC are not available to pay creditors of
any Originator or any other Affiliate of such Originator. (iii) The resolutions,
agreements and other instruments underlying the transactions described in this
Agreement shall be continuously maintained by each Originator as official
records. (iv) Each Originator shall maintain an arm's-length relationship with
CRLLC and shall not hold itself out as being liable for the Debts of CRLLC. (v)
Each Originator shall keep its assets and its liabilities wholly separate from
those of CRLLC. (vi) Each Originator shall conduct its business solely in its
own name through its duly Authorized Officers or agents and in a manner designed
not to mislead third parties as to the separate identity of such Originator.
(vii) Each Originator shall not mislead third parties by conducting or appearing
to conduct business on behalf of CRLLC or expressly or impliedly representing or
suggesting that such Originator is liable or responsible for the Debts of CRLLC
or that the assets of such Originator are available to pay the creditors of
CRLLC. (viii) Each Originator shall cause operating expenses and liabilities of
CRLLC to be paid from CRLLC's own funds. (ix) Each Originator shall at all times
have stationery and other business forms and a mailing address and telephone
number separate from those of CRLLC. (x) Each Originator shall at all times
limit its transactions with CRLLC only to those expressly permitted hereunder or
under any other Related Document. (xi) Each Originator shall comply with (and
cause to be true and correct) each of the facts and assumptions pertaining to
such Originator contained in the opinion of Schell Bray Aycock Abel & Livingston
P.L.L.C. delivered pursuant to the Schedule of Documents. (k) ERISA. Each
Originator shall give CRLLC and the Operating Agent prompt written notice of any
event that could result in the imposition of a Lien under Section 412 of the IRC
or Section 302 or 4068 of ERISA. (l) Payment, Performance and Discharge of
Obligations. (i) Subject to Section 4.02(l)(ii), each Originator shall pay,
perform and discharge or cause to be paid, performed and discharged all of its
obligations and liabilities, including all taxes, assessments and governmental
charges upon its income and properties and all lawful claims for labor,
materials, supplies and services, promptly when due. (ii) Each Originator may in
good faith contest, by appropriate proceedings, the validity or amount of any
charges or claims described in Section 4.02(l)(i); provided, that (A) adequate
reserves with respect to such contest are maintained on the books of such
Originator in accordance with GAAP if and to the extent determined to be
material under GAAP, (B) such contest is maintained and prosecuted continuously
and with diligence, (C) no Lien may be imposed to secure payment of such charges
or claims other than inchoate tax liens and (D) CRLLC has advised Originators in
writing that CRLLC reasonably believes that nonpayment or nondischarge thereof
could not reasonably be expected to have or result in a Material Adverse Effect.
(m) Deposit of Collections. Each Originator shall deposit and cause its
Subsidiaries to deposit or cause to be deposited promptly into a Lockbox
Account, and in any event no later than the first Business Day after receipt
thereof, all Collections it may receive in respect of Transferred Receivables.
(n) Accounting Changes. If any Accounting Changes occur and such changes result
in a change in the standards or terms used herein, then the parties hereto agree
to enter into negotiations in order to amend such provisions so as to equitably
reflect such Accounting Changes with the desired result that the criteria for
evaluating the financial condition of such Persons and their Subsidiaries shall
be the same after such Accounting Changes as if such Accounting Changes had not
been made. If the parties hereto agree upon the required amendments to this
Agreement, then after appropriate amendments have been executed and the
underlying Accounting Change with respect thereto has been implemented, any
reference to GAAP contained herein shall, only to the extent of such Accounting
Change, refer to GAAP consistently applied after giving effect to the
implementation of such Accounting Change. If such parties cannot agree upon the
required amendments within 30 days following the date of implementation of any
Accounting Change, then all financial statements delivered and all standards and
terms used herein shall be prepared, delivered and used without regard to the
underlying Accounting Change. (o) Adjustments to Sale Price. If on any day the
Billed Amount of any Transferred Receivable is reduced as a result of any
Dilution Factors, and the amount of such reduction exceeds the amount, if any,
of Dilution Factors taken into account in the calculation of the Sale Price for
such Transferred Receivable, the Originator thereof shall make a cash payment to
CRLLC in the amount of such excess by remitting such amount to the Collection
Account in accordance with the terms of the Purchase Agreement. (p) Year 2000
Compliance. On or prior to October 31, 1999, each Originator shall complete Year
2000 Corrective Actions and Year 2000 Implementation Testing and shall eliminate
all Year 2000 Problems except where the failure to eliminate the same could not
reasonably be reported to have a Material Adverse Effect. SECTION 4.03 Negative
Covenants of the Originators. Each Originator covenants and agrees that, without
the prior written consent of CRLLC and the Operating Agent, from and after the
Closing Date and until the Termination Date: (a) Sale of Assets. No Originator
shall sell, transfer, convey, assign (by operation of law or otherwise) or
otherwise dispose of, or assign any right to receive income in respect of, any
of its properties or other assets, including any Transferred Receivable or
Contract therefor, any of its rights with respect to any Lockbox or Lockbox
Account (except (i) the sale or other disposition of properties or assets (other
than any Transferred Receivables or Contract therefor) in the ordinary course of
business and (ii) as otherwise expressly permitted by this Agreement or any of
the other Related Documents). (b) Liens. No Originator shall create, incur,
assume or permit to exist any Adverse Claim on or with respect to its
Receivables or any of its other properties or assets (whether now owned or
hereafter acquired) except for (i) the Liens set forth in Schedule 4.03(b), (ii)
other Permitted Encumbrances, and (iii) other Liens permitted by Section
4.03(l)(5)(y). (c) Modifications of Receivables or Contracts. No Originator
shall extend, amend, forgive, discharge, compromise, cancel or otherwise modify
the terms of any Transferred Receivable, or amend, modify or waive any term or
condition of any Contract therefor. (d) Sale Characterization. No Originator
shall make statements or disclosures or prepare any financial statements for any
purpose, including for federal income tax, reporting or accounting purposes,
that shall account for the transactions contemplated by this Agreement in any
manner other than (i) with respect to the Sale of each Sold Receivable
originated by it, as a true sale or absolute assignment of its full right, title
and ownership interest in such Transferred Receivable to CRLLC and (ii) with
respect to the Transfer of each Contributed Receivable originated by it, as a
contribution to the stated capital of CRLLC. (e) Capital Structure and Business.
No Originator shall (i) make any changes in any of its business objectives,
purposes or operations that could have or result in a Material Adverse Effect,
(ii) make any change in its capital structure as described on Schedule 4.01(h),
including the issuance of any shares of Stock, warrants or other securities
convertible into Stock or any revision of the terms of its outstanding Stock, in
any or all such cases that could have or result in a Material Adverse Effect or
(iii) amend, supplement or otherwise modify its certificate or articles of
incorporation or bylaws in a manner that could have or result in a Material
Adverse Effect. No Originator shall engage in any business other than the
businesses currently engaged in by it. (f) Actions Affecting Rights. No
Originator shall (i) take any action, or fail to take any action, if such action
or failure to take action may interfere with the enforcement of any rights
hereunder or under the other Related Documents, including rights with respect to
the Transferred Receivables; (ii) waive or alter any rights with respect to the
Transferred Receivables (or any agreement or instrument relating thereto); or
(iii) fail to pay any tax, assessment, charge, fee or other obligation of such
Originator with respect to the Transferred Receivables, or fail to defend any
action, if such failure to pay or defend may adversely affect the priority or
enforceability of the perfected title of CRLLC to and the sole record and
beneficial ownership interest of CRLLC in the Transferred Receivables or, prior
to their Transfer hereunder, such Originator's right, title or interest therein.
(g) ERISA. No Originator shall, or shall cause or permit any ERISA Affiliate to,
cause or permit to occur an event that could result in the imposition of a Lien
under Section 412 of the IRC or Section 302 or 4068 of ERISA. (h) Change to
Credit and Collection Policies. No Originator shall fail to comply with, and no
material change shall be made to, the Credit and Collection Policies without the
prior written consent of CRLLC and the Operating Agent. (i) Adverse Tax
Consequences. No Originator shall take or permit to be taken any action (other
than with respect to actions taken or to be taken solely by a Governmental
Authority), or fail or neglect to perform, keep or observe any of its
obligations hereunder or under the other Related Documents, that would have the
effect directly or indirectly of subjecting any payment to CRLLC, the Purchaser
or holders of the Commercial Paper who are residents of the United States of
America to withholding taxation. (j) No Proceedings. From and after the Closing
Date and until the date one year plus one day following the date on which the
Commercial Paper allocable to CRLLC with the latest maturity has been
indefeasibly paid in full in cash, no Originator shall, directly or indirectly,
institute or cause to be instituted against CRLLC any proceeding of the type
referred to in Sections 9.01(c) and 9.01(d) of the Purchase Agreement. (k) Debt.
No Originator shall create, incur, assume or permit to exist any Debt (other
than Debt of a type described in parts (f) or (g) of the definition of such term
in Annex X) except (i) Debt of such Originator to CRLLC, any Affected Party, any
Purchaser Indemnified Person, or any other Person expressly permitted by this
Agreement or any other Related Document, (ii) deferred taxes, (iii) unfunded
pension fund and other employee benefit plan obligations and liabilities to the
extent permitted under applicable law, (iv) endorser liability in connection
with the endorsement of negotiable instruments for deposit or collection in the
ordinary course of business, (v) unsecured Debt arising out of the Credit
Facility, (vi) existing Debt described on Schedule 4.03(k), (vii) Debt incurred
or assumed for the purpose of financing all or any part of such Originator's
cost of acquiring any fixed asset provided that the aggregate outstanding
principal amount of all such Debt for any and all Originator's combined shall
not exceed $1,000,000 at any one time; (viii) any other unsecured Debt,
non-recourse Debt and Capital Lease Obligations (all such unsecured Debt,
non-recourse Debt and Capital Lease Obligations being herein collectively
referred to as the "New Debt") provided that (x) the aggregate allocated
principal amount of such Capital Lease Obligations does not exceed $10,000,000
at any one time and (y) after giving effect to the incurrence of any New Debt,
the ratio (expressed as a percentage) of (1) the total consolidated Debt
(including without limitation New Debt) of Cone Mills and its Subsidiaries to
(2) the sum of the total consolidated Debt (including without limitation New
Debt) of Cone Mills and its Subsidiaries plus the consolidated Net Worth of Cone
Mills and its Subsidiaries shall not exceed 65%, and (ix) any refinancings,
amendments or modifications of any of the Debt permitted pursuant to clause (vi)
or (vii) above which does not have the effect of increasing the principal amount
thereof (other than to add accrued interest, fees or related expenses to such
principal amount). (l) Mergers, Acquisitions, Etc. No Originator shall merge or
consolidate with or into, convey, transfer, lease or otherwise dispose of all or
substantially all of its assets (whether now owed or hereafter acquired) to, or
acquire all or substantially all of the assets or Stock of, any other Person
(whether in one transaction or in a series of transactions), except that (i) any
Originator may merge or consolidate with another Originator (ii) any Subsidiary
of Cone Mills may merge or consolidate with any Originator so long as such
Originator is the surviving entity from such transaction, (iii) any Originator
may convey, lease, transfer or otherwise dispose of any of its assets to any
other Originator, (iv) any Originator may acquire all or substantially all of
the assets or Stock of any other Person which is a Subsidiary of Cone Mills
immediately prior to such acquisition, and (v) any Originator may acquire all or
substantially all of the assets or Stock of any other Person (the "Target") in
any transaction (a "Permitted Acquisition") which satisfies each and every of
the following conditions: (1) The Operating Agent shall have received not less
than ten (10) days' prior written notice of such Permitted Acquisition; (2) The
Target shall be engaged in a business of the same type as is engaged in by such
Originator; (3) Such Permitted Acquisition shall be consensual and shall have
been approved by the Target's Board of Directors (or other comparable governing
body); (4) The aggregate consideration paid or payable in connection with all
Permitted Acquisitions consummated during any particular Fiscal Year shall not
exceed $30,000,000; (5) Upon the consummation of such Permitted Acquisition, the
business and assets being acquired in such Permitted Acquisition shall be free
and clear of all Liens other than (x) Permitted Encumbrances and (y) other Liens
on assets (other than Receivables) of the Target granted to secure Debt having
an aggregate outstanding principal balance of not more than $5,000,000; (6) Such
Originator shall be the surviving entity from the Permitted Acquisition; (7) Not
less than ten (10) days prior to the consummation of such Permitted Acquisition,
(x) the Operating Agent shall have received a pro forma balance sheet, income
statement and cash flow statement of Cone Mills and its Subsidiaries
(collectively, the "Acquisition Pro Forma") based on the most recent quarterly
financial statements of Cone Mills and its Subsidiaries delivered to the
Operating Agent pursuant to Annex 5.02(a) of the Purchase Agreement, which
Acquisition Pro Forma shall be complete and shall fairly present the financial
condition of Cone Mills and its Subsidiaries after giving effect to such
Permitted Acquisition and the Acquisition Pro Forma for such Permitted
Acquisition shall reflect that the Seller's and the Originators' average daily
aggregate borrowing or other credit availability under the Purchase Agreement
and the Credit Facility for the 90-day period immediately preceding the
consummation of such Permitted Acquisition would have exceeded $25,000,000 on a
pro forma basis taking into account such Permitted Acquisition, and (y) the
Operating Agent also shall have received balance sheet, income statement and
cash flow statement projections for Cone Mills and its Subsidiaries for the
12-month period immediately following such Permitted Acquisition (collectively,
the "Acquisition Projections"), which Acquisition Projections shall be based on
reasonable assumptions and shall reflect that the Seller's and the Originators'
average daily aggregate borrowing or other credit availability under the
Purchase Agreement and the Credit Facility for the 90-day period immediately
following the consummation of such Permitted Acquisition shall not be less than
$25,000,000; (8) Prior to the consummation of such Permitted Acquisition, the
Operating Agent shall have received a copy of all of the final definitive
agreements for such Permitted Acquisition; and (9) At the time of and after
giving effect to the consummation of such Permitted Acquisition, no Termination
Event or Incipient Termination Event shall have occurred and be continuing;
provided that, in the case of any Permitted Acquisition in which the aggregate
consideration paid or payable by the applicable Originator is less than
$2,500,000, the conditions specified in items (1) and (7) above shall not apply
and the conditions specified in item (8) above may be satisfied within a
reasonable time after such Permitted Acquisition is consummated. SECTION 4.04
Breach of Representations, Warranties or Covenants. Upon discovery by any
Originator or CRLLC of any breach of any representation, warranty or covenant
described in Sections 4.01, 4.02 or 4.03 (other than a representation, warranty
or covenant relating to the absence of Dilution Factors), which breach is
reasonably likely to have a material adverse effect on the value of a
Transferred Receivable or the interests of CRLLC therein, the party discovering
the same shall give prompt written notice thereof to the other parties hereto.
The Originator that breached such representation, warranty or covenant shall, if
requested by notice from CRLLC, on the first Business Day following receipt of
such notice, take one of the following actions with respect to such Transferred
Receivable (it being specifically understood and agreed that, while such
Originator shall be obligated to take one of the following actions if requested
by notice from CRLLC, such Originator shall have the right to elect which of
such actions shall be taken by such Originator) (a) repurchase such Transferred
Receivable from CRLLC for cash, (b) transfer ownership of a new Eligible
Receivable or new Eligible Receivables to CRLLC on such Business Day, or (c) in
the case of any Stockholder Originator, make a capital contribution in cash to
CRLLC by remitting the amount (the "Rejected Amount") of such capital
contribution to the Collection Account in accordance with the terms of the
Purchase Agreement, in each case in an amount equal to the Billed Amount of such
Transferred Receivable minus the sum of (A) Collections received in respect
thereof and (B) the amount of any Dilution Factors taken into account in the
calculation of the Sale Price therefor. Notwithstanding the foregoing, if any
Receivable is not paid in full on account of any Dilution Factors, the
Originator's repurchase obligation under this Section 4.04 with respect to such
Receivable shall be reduced by the amount of any such Dilution Factors taken
into account in the calculation of the Sale Price therefor. ARTICLE V
INDEMNIFICATION SECTION 5.01 Indemnification. Without limiting any other rights
that CRLLC, any of its assigns, or any of their respective Stockholders
(excluding Stockholder Originators), officers, directors, employees, attorneys,
agents or representatives (each, an "CRLLC Indemnified Person") may have
hereunder or under applicable law, each Originator hereby agrees to indemnify
and hold harmless each CRLLC Indemnified Person from and against any and all
Indemnified Amounts that may be claimed or asserted against or incurred by any
such CRLLC Indemnified Person in connection with or arising out of the
transactions contemplated under this Agreement or under any other Related
Document, any actions or failures to act in connection therewith, including any
and all reasonable legal costs and expenses arising out of or incurred in
connection with disputes between or among any parties to any of the Related
Documents, or in respect of any Transferred Receivable or any Contract therefor
or the use by such Originator of the Sale Price therefor; provided, that no
Originator shall be liable for any indemnification to an CRLLC Indemnified
Person to the extent that any such Indemnified Amounts result from (a) such
CRLLC Indemnified Person's gross negligence or willful misconduct, as finally
determined by a court of competent jurisdiction, (b) recourse for uncollectible
or uncollected Transferred Receivables, or (c) any income tax or franchise tax
incurred by any CRLLC Indemnified Person, except to the extent that the
incurrence of any such tax results from a breach of or default under this
Agreement or any other Related Document. Without limiting the generality of the
foregoing, each Originator shall pay on demand to each CRLLC Indemnified Person
any and all Indemnified Amounts relating to or resulting from: (a) reliance on
any representation or warranty made or deemed made by such Originator (or any of
its officers) under or in connection with this Agreement or any other Related
Document or on any other information delivered by such Originator pursuant
hereto or thereto that shall have been incorrect in any material respect when
made or deemed made or delivered; (b) the failure by such Originator to comply
with any term, provision or covenant contained in this Agreement, any other
Related Document or any agreement executed in connection herewith or therewith,
any applicable law, rule or regulation with respect to any Transferred
Receivable or Contract therefor, or the nonconformity of any Transferred
Receivable or the Contract therefor with any such applicable law, rule or
regulation; (c) the failure to vest and maintain vested in CRLLC, or to Transfer
to CRLLC, valid and properly perfected title to and sole record and beneficial
ownership of the Receivables that constitute Transferred Receivables, together
with all Collections in respect thereof, free and clear of any Adverse Claim;
(d) any dispute, claim, offset or defense of any Obligor (other than its
discharge in bankruptcy) to the payment of any Receivable that is the subject of
a Transfer hereunder (including a defense based on such Receivable or the
Contract therefor not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms but excluding
discounts to, or other Dilution Factors that reduce, the Billed Amount thereof),
or any other claim resulting from the sale of the merchandise or services giving
rise to such Receivable or the furnishing or failure to furnish such merchandise
or services or relating to collection activities with respect to such Receivable
(if such collection activities were performed by Cone Mills acting as the
Servicer), except to the extent that such dispute, claim, offset or defense
results solely from any action or inaction on the part of CRLLC; (e) any
products liability claim or other claim arising out of or in connection with
merchandise, insurance or services that is the subject of any Contract; (f) any
failure by such Originator to cause the filing of, or any delay in filing,
financing statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or any other applicable laws with respect to any
Receivable that is the subject of a Transfer hereunder, whether at the time of
any such Transfer or at any subsequent time; (g) any failure by any Originator
or the Servicer to perform, keep or observe any of their respective duties or
obligations hereunder, under any other Related Document or under any Contract
related to a Transferred Receivable, including the commingling of Collections
with respect to Transferred Receivables by any Originator or the Servicer at any
time with the funds of any other Person; (h) any investigation, Litigation or
proceeding related to this Agreement or the use of the Sale Price obtained in
connection with any Sale or the ownership of Receivables or Collections with
respect thereto or in respect of any Receivable or Contract, except to the
extent any such investigation, Litigation or proceeding relates to a matter
involving an CRLLC Indemnified Person for which neither such Originator nor any
of its Affiliates is at fault, as finally determined by a court of competent
jurisdiction; or (i) any claim brought by any Person other than an CRLLC
Indemnified Person arising from any activity by such Originator or any of its
Affiliates in servicing, administering or collecting any Transferred
Receivables. NO CRLLC INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY
OTHER PARTY TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT, ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING
CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF ANY TRANSACTION
CONTEMPLATED HEREUNDER OR THEREUNDER. ARTICLE VI [Intentionally Omitted] ARTICLE
VII [Intentionally Omitted] ARTICLE VIII MISCELLANEOUS SECTION 8.01 Notices.
Except as otherwise provided herein, whenever it is provided herein that any
notice, demand, request, consent, approval, declaration or other communication
shall or may be given to or served upon any of the parties by any other parties,
or whenever any of the parties desires to give or serve upon any other parties
any communication with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other communication shall be in
writing and shall be deemed to have been validly served, given or delivered
(a)upon the earlier of actual receipt and three Business Days after deposit in
the United States Mail, registered or certified mail, return receipt requested,
with proper postage prepaid, (b) upon transmission, when sent by telecopy or
other similar facsimile transmission (with such telecopy or facsimile promptly
confirmed by delivery of a copy by personal delivery or United States Mail as
otherwise provided in this Section 8.01), (c) one Business Day after deposit
with a reputable overnight courier with all charges prepaid or (d) when
delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number set forth
under its name on the signature page hereof or to such other address (or
facsimile number) as may be substituted by notice given as herein provided;
provided, that each such declaration or other communication shall be deemed to
have been validly delivered to the Collateral Agent under this Agreement upon
delivery to the Operating Agent in accordance with the terms of this Section
8.01. The giving of any notice required hereunder may be waived in writing by
the party entitled to receive such notice. Failure or delay in delivering copies
of any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than CRLLC) designated in any written
communication provided hereunder to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication. Notwithstanding the foregoing, whenever it
is provided herein that a notice is to be given to any other party hereto by a
specific time, such notice shall only be effective if actually received by such
party prior to such time, and if such notice is received after such time or on a
day other than a Business Day, such notice shall only be effective on the
immediately succeeding Business Day. SECTION 8.02 No Waiver; Remedies. CRLLC's
failure, at any time or times, to require strict performance by the Originators
of any provision of this Agreement or any Receivables Assignment shall not
waive, affect or diminish any right of CRLLC thereafter to demand strict
compliance and performance herewith or therewith. Any suspension or waiver of
any breach or default hereunder shall not suspend, waive or affect any other
breach or default whether the same is prior or subsequent thereto and whether
the same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of any Originator contained in this
Agreement or any Receivables Assignment, and no breach or default by any
Originator hereunder or thereunder, shall be deemed to have been suspended or
waived by CRLLC unless such waiver or suspension is by an instrument in writing
signed by an officer of or other duly authorized signatory of CRLLC and directed
to such Originator specifying such suspension or waiver. CRLLC's rights and
remedies under this Agreement shall be cumulative and nonexclusive of any other
rights and remedies that CRLLC may have under any other agreement, including the
other Related Documents, by operation of law or otherwise. SECTION 8.03
Successors and Assigns. This Agreement shall be binding upon and shall inure to
the benefit of each Originator and CRLLC and their respective successors and
permitted assigns, except as otherwise provided herein. No Originator may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder without the prior express written consent of
CRLLC, the Purchaser, the Operating Agent and the Collateral Agent. Any such
purported assignment, transfer, hypothecation or other conveyance by any
Originator without the prior express written consent of CRLLC, the Purchaser,
the Operating Agent and the Collateral Agent shall be void. Each Originator
acknowledges that, to the extent permitted under the Purchase Agreement, CRLLC
may assign its rights granted hereunder, including the benefit of any
indemnities under Article V, and upon such assignment, such assignee shall have,
to the extent of such assignment, all rights of CRLLC hereunder and, to the
extent permitted under the Purchase Agreement, may in turn assign such rights.
Each Originator agrees that, upon any such assignment, such assignee may enforce
directly, without joinder of CRLLC, the rights set forth in this Agreement. All
such assignees, including parties to the Purchase Agreement in the case of any
assignment to such parties, shall be third party beneficiaries of, and shall be
entitled to enforce CRLLC's rights and remedies under, this Agreement to the
same extent as if they were parties hereto. The terms and provisions of this
Agreement are for the purpose of defining the relative rights and obligations of
each Originator and CRLLC with respect to the transactions contemplated hereby
and, except for the Purchaser, the Operating Agent and the Collateral Agent, no
Person shall be a third party beneficiary of any of the terms and provisions of
this Agreement. SECTION 8.04 Termination; Survival of Obligations. (a)This
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until the Termination Date. (b)Except as otherwise expressly provided herein or
in any other Related Document, no termination or cancellation (regardless of
cause or procedure) of any commitment made by CRLLC under this Agreement shall
in any way affect or impair the obligations, duties and liabilities of any
Originator or the rights of CRLLC relating to any unpaid portion of any and all
recourse and indemnity obligations of such Originator to CRLLC, including those
set forth in Sections 4.02(o), 4.04, 5.01 and 8.14, due or not due, liquidated,
contingent or unliquidated or any transaction or event occurring prior to such
termination, or any transaction or event, the performance of which is required
after the Facility Termination Date. Except as otherwise expressly provided
herein or in any other Related Document, all undertakings, agreements,
covenants, warranties and representations of or binding upon each Originator,
and all rights of CRLLC hereunder, all as contained in the Related Documents,
shall not terminate or expire, but rather shall survive any such termination or
cancellation and shall continue in full force and effect until the Termination
Date. On the Termination Date, this Agreement shall terminate (except to the
extent otherwise expressly provided herein), all ownership interests or Liens of
CRLLC in and to all Transferred Receivables shall be released by CRLLC and CRLLC
shall promptly return any and all of the Transferred Receivables then in its
possession to the appropriate Originators and shall execute such documents
(including without limitation UCC-3=s) as the Originator may reasonably request
to evidence such releases and terminations (provided that such documents shall
be prepared and recorded at the Originator's expense); provided, that the rights
and remedies pursuant to Sections 4.02(o), 4.04, the indemnification and payment
provisions of Article V, and the provisions of Sections 4.03(j), 8.03, 8.12 and
8.14 shall be continuing and shall survive the Termination Date and any
termination of this Agreement. SECTION 8.05 Complete Agreement; Modification of
Agreement. This Agreement and the other Related Documents constitute the
complete agreement between the parties with respect to the subject matter hereof
and thereof, supersede all prior agreements and understandings relating to the
subject matter hereof and thereof, and may not be modified, altered or amended
except as set forth in Section 8.06. SECTION 8.06 Amendments and Waivers. No
amendment, modification, termination or waiver of any provision of this
Agreement or any of the other Related Documents, or any consent to any departure
by any Originator therefrom, shall in any event be effective unless the same
shall be in writing and signed by each of the parties hereto and the Purchaser,
the Operating Agent and the Collateral Agent. No consent or demand in any case
shall, in itself, entitle any party to any other consent or further notice or
demand in similar or other circumstances. SECTION 8.07GOVERNING LAW; CONSENT TO
JURISDICTION; WAIVER OF JURY TRIAL. (a)THIS AGREEMENT AND EACH RELATED DOCUMENT
(EXCEPT TO THE EXTENT THAT ANY RELATED DOCUMENT EXPRESSLY PROVIDES TO THE
CONTRARY) AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF)
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. (b)EACH PARTY HERETO
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE
BOROUGH OF MANHATTAN IN NEW YORK CITY SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THEM PERTAINING TO THIS AGREEMENT
OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED
DOCUMENT; PROVIDED, THAT EACH PARTY HERETO ACKNOWLEDGES THAT ANY APPEALS FROM
THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE BOROUGH OF
MANHATTAN IN NEW YORK CITY; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR OPERATE TO PRECLUDE CRLLC FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON ANY SECURITY FOR THE
OBLIGATIONS OF THE ORIGINATORS ARISING HEREUNDER, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF CRLLC. EACH PARTY HERETO SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION THAT SUCH PARTY MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH
BENEATH ITS NAME ON THE SIGNATURE PAGES HEREOF AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF SUCH PARTY'S ACTUAL RECEIPT THEREOF OR
THREE DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL, PROPER POSTAGE PREPAID.
NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. (c)BECAUSE DISPUTES ARISING
IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY RELATED DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. SECTION 8.08 Counterparts. This Agreement may be
executed in any number of separate counterparts, each of which shall
collectively and separately constitute one agreement. SECTION 8.09 Severability.
Wherever possible, each provision of this Agreement shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Agreement. SECTION 8.10 Section Titles. The section titles
and table of contents contained in this Agreement are provided for ease of
reference only and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
SECTION 8.11 No Setoff. Each Originator's obligations under this Agreement shall
not be affected by any right of setoff, counterclaim, recoupment, defense or
other right such Originator might have against CRLLC, the Purchaser, the
Operating Agent or the Collateral Agent, all of which rights are hereby
expressly waived by such Originator. SECTION 8.12 Confidentiality. (a)Except to
the extent otherwise required by applicable law, as required to be filed
publicly with the Securities and Exchange Commission, or unless each Affected
Party shall otherwise consent in writing, each Originator and CRLLC agree to
maintain the confidentiality of this Agreement (and all drafts hereof and
documents ancillary hereto) in its communications with third parties other than
any Affected Party or any CRLLC Indemnified Person and otherwise and not to
disclose, deliver or otherwise make available to any third party (other than its
directors, officers, employees, accountants or counsel) the original or any copy
of all or any part of this Agreement (or any draft hereof and documents
ancillary hereto) except to an Affected Party or an CRLLC Indemnified Person.
(b)Each Originator agrees that it shall not (and shall not permit any of its
Subsidiaries to) issue any news release or make any public announcement
pertaining to the transactions contemplated by this Agreement and the Related
Documents without the prior written consent of CRLLC and each Affected Party
(which consent shall not be unreasonably withheld) unless such news release or
public announcement is required by law, in which case such Originator shall
consult with CRLLC and each Affected Party prior to the issuance of such news
release or public announcement. Any Originator may, however, disclose the
general terms of the transactions contemplated by this Agreement and the Related
Documents to trade creditors, suppliers and other similarly-situated Persons so
long as such disclosure is not in the form of a news release or public
announcement. (c)CRLLC agrees to use commercially reasonable efforts (equivalent
to the efforts CRLLC applies to maintaining the confidentiality of its own
confidential information) to maintain as confidential for a period of two (2)
years following receipt thereof all confidential information provided to it by
the Originators and designated as confidential, except that CRLLC may disclose
such information (a) to Persons employed or engaged by CRLLC in evaluating,
approving, structuring or administering the transactions contemplated by this
Agreement; (b) to the Purchaser, the Operating Agent, the Collateral Agent or
any other bona fide assignee or participant or potential assignee or participant
of CRLLC that has agreed to comply with the covenant contained in this paragraph
(c) (and the Purchaser, the Operating Agent, the Collateral Agent and any such
bona fide assignee or participant or potential assignee or participant may
disclose such information to Persons employed or engaged by them as described in
clause (a) above); (c) as required or requested by any Governmental Authority or
reasonably believed by CRLLC to be compelled by any court decree, subpoena or
legal or administrative order or process; (d) as, on the advice of CRLLC's
counsel, required by law; (e) in connection with the exercise of any right or
remedy under the Related Documents or in connection with any Litigation to which
CRLLC is a party; or (f) which ceases to be confidential through no fault of
CRLLC. SECTION 8.13 Further Assurances. (a)Each Originator shall, at its sole
cost and expense, upon request of CRLLC, the Purchaser, the Operating Agent or
the Collateral Agent, promptly and duly execute and deliver any and all further
instruments and documents and take such further actions that may be necessary or
desirable or that CRLLC, the Purchaser, the Operating Agent or the Collateral
Agent may request to carry out more effectively the provisions and purposes of
this Agreement or any other Related Document or to obtain the full benefits of
this Agreement and of the rights and powers herein granted, including (i) using
its best efforts to secure all consents and approvals necessary or appropriate
for the assignment to or for the benefit of CRLLC of any Transferred Receivable
held by such Originator or in which such Originator has any rights not
heretofore assigned and (ii) filing any financing or continuation statements
under the UCC with respect to the ownership interests or Liens granted hereunder
or under any other Related Document. Each Originator hereby authorizes CRLLC,
the Purchaser, the Operating Agent or the Collateral Agent to file any such
financing or continuation statements without the signature of such Originator to
the extent permitted by applicable law. A carbon, photographic or other
reproduction of this Agreement or of any notice or financing statement covering
the Transferred Receivables or any part thereof shall be sufficient as a notice
or financing statement where permitted by law. (b)If any Originator fails to
perform any agreement or obligation under this Section 8.13, CRLLC, the
Purchaser, the Operating Agent or the Collateral Agent may (but shall not be
required to) itself perform, or cause performance of, such agreement or
obligation, and the reasonable expenses of CRLLC, the Purchaser, the Operating
Agent or the Collateral Agent incurred in connection therewith shall be payable
by such Originator upon demand of CRLLC, the Purchaser, the Operating Agent or
the Collateral Agent. SECTION 8.14 Fees and Expenses. In addition to its
indemnification obligations pursuant to Article V, Each Originator agrees,
jointly and severally, to pay on demand all costs and expenses incurred by CRLLC
in connection with the negotiation, preparation, execution and delivery of this
Agreement and the other Related Documents, including the reasonable fees and
out-of-pocket expenses of CRLLC's counsel, advisors, consultants and auditors
retained in connection with the transactions contemplated thereby and advice in
connection therewith, and each Originator agrees, jointly and severally, to pay
all costs and expenses of CRLLC, if any (including reasonable attorneys' fees
and expenses but excluding any costs of enforcement or collection of the
Transferred Receivables), in connection with the enforcement of this Agreement
and the other Related Documents. (remainder of page intentionally left blank)
54 1 IN WITNESS WHEREOF, the parties have caused this Receivables Transfer
Agreement to be executed by their respective duly authorized representatives, as
of the date first above written.executed by their respective duly
authorized representatives, as of the date first above written.
Cone Mills Corporation
By ___/s/ David E. Bray____
Name: David E. Bray
Title: Treasurer
3101 North Elm Street
Greensboro, North Carolina 27415-6540
Attention: Treasurer
Facsimile No.: (336) 379-6043
Cone Receivables II LLC
By __Brandon Carrey__
Name: Brandon Carrey
Title: President
c/o AMACAR Group, L.L.C.
6525 Morrison Boulevard
Suite 318
Charlotte, North Carolina 28210
Attention: Treasurer
Telecopy: (706) 365-1362
with a copy to:
3101 North Elm Street, Third Floor
Greensboro, North Carolina 27415-6540
Attention: Treasurer
Facsimile No.: (336) 379-6043
162
Exhibit 4.1(a)
ARTICLES OF AMENDMENT
of
CONE MILLS CORPORATION
The undersigned corporation hereby submits these Articles of Amendment for
the purpose of amending its Articles of Incorporation to fix the designation,
preferences, limitations, and relative rights of a series of its Class B
Preferred Stock: 1. The name of the corporation is Cone Mills Corporation. 2.
The following resolution relating to the fixing of the designation, preferences,
limitations, and relative rights of the Class B Preferred Stock (Series A) of
the Corporation was duly adopted by the Board of Directors of the Corporation at
a meeting held on the 14th day of October, 1999, without shareholder approval,
which was not required because the Restated Articles of Incorporation of the
Corporation provide that the Board of Directors may determine the preferences,
limitations, and relative rights of that class: RESOLVED, that pursuant to the
authority granted to and vested in the Board of Directors of the Corporation
(the "Board of Directors") by the Restated Articles of Incorporation, the Board
of Directors hereby creates a series of Class B Preferred Stock (the "Class B
Preferred Stock (Series A"), of the Corporation and hereby states the
designation and number of shares, and fixes the preferences, limitations, and
relative rights thereof as follows: 1. Designation and Amount. The shares of
such series shall be designated as "Class B Preferred Stock (Series A)", and the
number of shares constituting the Class B Preferred Stock (Series A) shall be
500,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors; provided that no decrease shall reduce the number of
shares of Class B Preferred Stock (Series A) to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Class B
Preferred Stock (Series A). 2. Dividends and Distributions.
(a) Subject to the
rights of the holders of any shares of any series of capital stock ranking prior
and superior to the Class B Preferred Stock (Series A) with respect to
dividends, the holders of shares of Class B Preferred Stock (Series A), in
preference to the holders of Common Stock (as defined in paragraph 12 below),
and of any Junior Stock (as defined in paragraph 12 below), shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day
of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Class B Preferred Stock (Series A), in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b)
subject to the provision for adjustment hereinafter set forth 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all noncash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Class B Preferred Stock (Series A). If the Corporation shall at any time after
October 14, 1999 (the "Rights Declaration Date") declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of Class B Preferred Stock
(Series A) were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) The Board of Directors shall declare a dividend or distribution on the Class
B Preferred Stock (Series A) as provided in subparagraph (a) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Class B
Preferred Stock (Series A) shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be
cumulative on outstanding shares of Class B Preferred Stock (Series A) from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Class B Preferred Stock (Series A), unless the date of issue of such shares
is on or before the record date for the first Quarterly Dividend Payment Date,
in which case dividends on such shares shall begin to accrue and be cumulative
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Class B Preferred Stock (Series A)
entitled to receive a quarterly dividend and on or before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of Class
B Preferred Stock (Series A) in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Class B Preferred Stock (Series A) entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 60 days prior to the date fixed for the payment thereof. 3. Voting Rights.
In addition to any other voting rights required by law, the holders of shares of
Class B Preferred Stock (Series A) shall have the following voting rights: (a)
Subject to the provision for adjustment hereinafter set forth, each share of
Class B Preferred Stock (Series A) shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of shareholders of the Corporation. If the
Corporation shall at any time after the Rights Declaration Date pay any dividend
on Common Stock payable in shares of Common Stock or effect a subdivision or
combination of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the number of votes per share to which holders of shares of Class
B Preferred Stock (Series A) were entitled immediately prior to such event shall
be adjusted by multiplying such number by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. (b) Except as otherwise provided
herein or by law, the holders of shares of Class B Preferred Stock (Series A)
and the holders of shares of Common Stock shall vote together as a single class
on all matters submitted to a vote of shareholders of the Corporation. (c) (i)
If at any time dividends on any Class B Preferred Stock (Series A) shall be in
arrears in an amount equal to six quarterly dividends thereon, the occurrence of
such contingency shall mark the beginning of a period (a "default period") that
shall extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly dividend
period on all shares of Class B Preferred Stock (Series A) then outstanding
shall have been declared and paid or set apart for payment. During each default
period, all holders of shares of Class B Preferred Stock (Series A), voting
separately as a class, shall have the right to elect two Directors.
(ii)
During any default period, such voting right of the holders of Class B Preferred
Stock (Series A) may be exercised initially at a special meeting called pursuant
to subparagraph (c)(iii) below or at any annual meeting of shareholders, and
thereafter at annual meetings of shareholders; provided that neither such voting
right nor the right of the holders of Class B Preferred Stock (Series A) to
increase the authorized number of Directors may be exercised at any meeting
unless the holders of 20% in number of shares of Class B Preferred Stock (Series
A) outstanding shall be present in person or by proxy. The absence of a quorum
of the holders of Common Stock shall not affect the exercise by the holders of
Class B Preferred Stock (Series A) of such voting right. At any meeting at which
the holders of Class B Preferred Stock (Series A) shall exercise such voting
right initially during an existing default period, they shall have the right,
voting separately as a class, to elect Directors to fill up to two vacancies in
the Board of Directors, if any such vacancies may then exist, or, if such right
is exercised at an annual meeting, to elect two Directors. If the number that
may be so elected at any special meeting does not amount to the required number,
the holders of shares of Class B Preferred Stock (Series A) shall have the right
to make such increase in the number of Directors as shall be necessary to permit
the election by them of the required number. After the holders of Class B
Preferred Stock (Series A) shall have exercised their right to elect Directors
during any default period, the number of Directors shall not be increased or
decreased except as approved by a vote of the holders of Class B Preferred Stock
(Series A) as herein provided or pursuant to the rights of any equity securities
ranking senior to or pari passu with the Class B Preferred Stock (Series A).
(iii) Unless the holders of Class B Preferred Stock (Series A) shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any shareholder or shareholders
owning in the aggregate not less than 10% of the total number of shares of Class
B Preferred Stock (Series A) outstanding may request, the calling of a special
meeting of the holders of Class B Preferred Stock (Series A), which meeting
shall thereupon be called by the President, a Vice President or the Secretary of
the Corporation. Notice of such meeting and of any annual meeting at which
holders of Class B Preferred Stock (Series A) are entitled to vote pursuant to
this subparagraph (c)(iii) shall be given to each holder of record of Class B
Preferred Stock (Series A) by mailing a copy of such notice to him at his last
address as the same appears on the books of the Corporation. Such meeting shall
be called for a time not earlier than 10 days and not later than 60 days after
such order or request or in default of the calling of such meeting within 60
days after such order or request, such meeting may be called on similar notice
by any shareholder or shareholders owning in the aggregate not less than 10% of
the total number of outstanding shares of Class B Preferred Stock (Series A).
Notwithstanding the provisions of this subparagraph (c)(iii), no such special
meeting shall be called during the 60 days immediately preceding the date fixed
for the next annual meeting of the shareholders.
(iv) In any default period,
the holders of Common Stock, and any other classes of stock of the Corporation
if applicable, shall continue to be entitled to elect the whole number of
Directors until the holders of Class B Preferred Stock (Series A) shall have
exercised their right to elect two Directors voting as a class, after the
exercise of which right (x) the Directors so elected by the holders of Class B
Preferred Stock (Series A) shall continue in office until their successors shall
have been elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided in
subparagraph (c)(ii) above) be filled by vote of a majority of the remaining
Directors theretofore elected by the class which elected the Director whose
office shall have become vacant. References in this subparagraph (c)(iv) to
Directors elected by a particular class shall include Directors elected by such
Directors to fill vacancies as provided in clause (y) of the preceding sentence.
(v) Immediately upon the expiration of a default period, (x) the right of the
holders of Class B Preferred Stock (Series A), as a separate class, to elect
Directors shall cease, (y) the term of any Directors elected by the holders of
Class B Preferred Stock (Series A), as a separate class, shall terminate, and
(z) the number of Directors shall be such number as may be provided for in, or
pursuant to, the Restated Articles of Incorporation or Bylaws of the Corporation
irrespective of any increase made pursuant to the provisions of subparagraph
(c)(ii) above (such number being subject, however, to change thereafter in any
manner provided by law or in the Restated Articles of Incorporation or Bylaws).
Any vacancies in the Board of Directors effected by the provisions of clauses
(x) and (y) in the preceding sentence may be filled by a majority of the
remaining Directors. (d) Except as set forth herein or as otherwise provided in
the Restated Articles of Incorporation, holders of Class B Preferred Stock
(Series A) shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action. 4. Certain
Restrictions. (a) Whenever quarterly dividends or other dividends or
distributions payable on the Class B Preferred Stock (Series A) as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on outstanding shares of Class B
Preferred Stock (Series A) shall have been paid in full, the Corporation shall
not: (i) declare or pay dividends on, or make any other distributions on, or
redeem or repurchase or otherwise acquire for consideration, any shares of
Junior Stock; (ii) declare or pay dividends on or make any other distributions
on any shares of Parity Stock (as defined in paragraph 12 below), except
dividends paid ratably on the Class B Preferred Stock (Series A) and all such
Parity Stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled; (iii)
redeem or repurchase or otherwise acquire for consideration shares of any Parity
Stock; provided, however, that the Corporation may at any time redeem,
repurchase or otherwise acquire shares of any such Parity Stock in exchange for
shares of any Junior Stock; or
(iv) repurchase or otherwise acquire for
consideration any shares of Class B Preferred Stock (Series A), or any shares of
Parity Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes. (b) The
Corporation shall not permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of stock of the Corporation
unless the Corporation could, under subparagraph (a) above, purchase or
otherwise acquire such shares at such time and in such manner. 5. Reacquired
Shares. Any shares of Class B Preferred Stock (Series A) purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Class B Preferred
Stock and may be reissued as part of a new series of Class B Preferred Stock
subject to the conditions and restrictions on issuance set forth in this
resolution, in the Restated Articles of Incorporation, or in any other Articles
of Amendment creating a series of Preferred Stock or any similar stock or as
otherwise required by law. 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (a) to the holders of shares of Junior Stock unless, prior thereto, the
holders of shares of Class B Preferred Stock (Series A) shall have received
$1.00 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment;
provided that the holders of shares of Class B Preferred Stock (Series A) shall
be entitled to receive an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate amount to
be distributed per share to holders of Common Stock, or (b) to the holders of
Parity Stock, except distributions made ratably on the Class B Preferred Stock
(Series A) and all such other Parity Stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. If the Corporation shall at any time after the Rights
Declaration Date pay any dividend on Common Stock payable in shares of Common
Stock or effect a subdivision or combination of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Class B Preferred Stock (Series A) were entitled
immediately prior to such event under the proviso set forth in (a) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
7. Consolidation, Merger, etc. If the Corporation shall enter into any
consolidation, merger, share exchange, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, or any combination of the foregoing,
then in any such case each share of Class B Preferred Stock (Series A) shall at
the same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of stock, securities, cash or any other property, as
the case may be, into which or for which each share of Common Stock is changed
or exchanged. If the Corporation shall at any time after the Rights Declaration
Date pay any dividend on Common Stock payable in shares of Common Stock or
effect a subdivision or combination of the outstanding shares of Common Stock
(by reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Class B Preferred
Stock (Series A) shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event. 8.
No Redemption. The Class B Preferred Stock (Series A) shall not be redeemable.
9. Rank. The Class B Preferred Stock (Series A) shall rank junior to all other
series and classes of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series or
class shall provide otherwise. 10. Amendment. The Restated Articles of
Incorporation of the Corporation, including, without limitation, this
resolution, shall not be amended in any manner (whether by merger, consolidation
or otherwise) so as to adversely affect the powers, preferences or special
rights of the Class B Preferred Stock (Series A) without the affirmative vote of
the holders of a majority of the outstanding shares of Class B Preferred Stock
(Series A), voting separately as a class. 11. Fractional Shares. Class B
Preferred Stock (Series A) may be issued in fractions of a share which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Class B Preferred Stock
(Series A). 12. Certain Definitions. As used herein with respect to the Class B
Preferred Stock (Series A), the following terms shall have the following
meanings: (a) "Common Stock" means the common stock, par value $0.10 per share,
of the Corporation at the date hereof or any other stock resulting from
successive changes or reclassification of the common stock.
(b) "Junior Stock"
means the Common Stock and any other class or series of capital stock of the
Corporation hereafter authorized or issued over which the Class B Preferred
Stock (Series A) has preference or priority as to the payment of dividends or
distributions of assets upon any liquidation, dissolution or winding up of the
Corporation. (c) "Parity Stock" means any class or series of capital stock of
the Corporation hereafter authorized or issued ranking pari passu with the Class
B Preferred Stock (Series A) as to the payment of dividends or distributions of
assets upon any liquidation, dissolution or winding up of the Corporation. IN
WITNESS WHEREOF, Cone Mills Corporation has caused these Articles of Amendment,
which were duly adopted by the Board of Directors of the Corporation on October
14, 1999, to be signed by its President on this 20th day of October, 1999.
(c) "Parity Stock" means any class or series of capital stock of the Corporation
hereafter authorized or issued ranking pari passu with the Class B Preferred
Stock (Series A) as to the payment of dividends or distributions of assets upon
any liquidation, dissolution or winding up of the Corporation. IN WITNESS
WHEREOF, Cone Mills Corporation has caused these Articles of Amendment, which
were duly adopted by the Board of Directors of the Corporation on October 14,
1999, to be signed by its President on this 20th day of October, 1999.
CONE MILLS CORPORATION
By /s/ John L. Bakane
John L. Bakane
163
Exhibit 4.3(i)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
c/o Prudential Capital Group
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
September 1, 1999
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. Pursuant to the Company's
request, and subject to its written acceptance hereof, Prudential hereby agrees
with the Company as follows: 1. The definition of "Funded Debt" appearing in
paragraph 10B of the Note Agreement is hereby amended by substituting the term
"Capital Investment" for the term "Net Investment." 2. The definition of
"Purchase Agreement" appearing in paragraph 10B of the Note Agreement is hereby
amended to read in its entirety as follows: "Purchase Agreement" shall mean that
certain Receivables Purchase and Servicing Agreement dated September 1, 1999 by
and among Cone Receivables II LLC, as Seller, Redwood Receivables Corporation,
as Purchaser, the Company, as Servicer and General Electric Capital Corporation,
as Operating Agent and Collateral Agent, as it may be amended, modified,
restated or supplemented from time to time in accordance with its terms and
herewith. 3. Clause (iv) of paragraph 6C(2) of the Note Agreement is hereby
amended to read in its entirety as follows: "(iv) other Funded Debt of (1) any
Subsidiary pursuant to the Purchase Agreement, (2) the Company or (3) Cornwallis
(in each case whether Secured or Unsecured) other than Current Debt owing by the
Company to any Subsidiary; and" 4. Paragraph 6C(4) of the Note Agreement is
hereby amended by adding a new clause (iv), immediately following clause (iii)
thereof, to read as follows: "(iv) sales of accounts receivable pursuant to the
Purchase Agreement." 5. The definition of "Receivables Financing" appearing in
paragraph 10B of the Note Agreement is hereby amended to read in its entirety as
follows: "Receivables Financing" shall mean the transactions contemplated by the
Purchase Agreement and the Transfer Agreement (as defined in the Purchase
Agreement) pursuant to such Agreements. 6. Paragraph 6H of the Note Agreement is
hereby amended to read in its entirety as follows: 6H. Purchase Agreement. The
Company convenants that it will not (i) amend, waive or modify Article I, Annex
X, or Sections 6.03, 6.04 or 6.05 of the Purchase Agreement without the consent
of the Required Holder(s); (ii) allow the Capital Investment (as defined in the
Purchase Agreement) to exceed $75,000,000; or (iii) allow the Maximum Purchase
Limit (as defined in the Purchase Agreement) to exceed $75,000,000. 7.
Prudential hereby waives the Company's and its Subsidiaries' compliance with
paragraph 5E and paragraph 6C(3) of the Note Agreement with respect to (i) the
Lien granted to Redwood Receivables Corporation pursuant to the Purchase
Agreement and (ii) the Company's guarantee of the obligations of each Selling
Subsidiary (as defined in the Transfer Agreement) under the Transfer Agreement
or any other documents delivered in connection therewith. Except as amended
herein, all of the terms, conditions and obligations of the Note Agreement shall
remain in full force and effect. If you are in agreement with the foregoing,
please sign in the space provided below and this letter shall become a binding
agreement between the Company and Prudential.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:/s/ Robert R. Derrick
Vice President
Agreed and accepted as of
the date first above written:
CONE MILLS CORPORATION
By:/s/ David E. Bray
Title: Treasurer
165
Exhibit 4.3(j)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
c/o Prudential Capital Group
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
October 3, 1999
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. At the request of the Company,
Prudential hereby waives any Default which may exist under Section 6A(2) or
6A(3) of the Note Agreement, such waiver to be effective solely for the period
commencing on the date hereof and ending on November 30, 1999. This waiver shall
be limited precisely as written, and shall not extend to any Default under any
other provision of the Note Agreement or to any Default under Section 6A(2) or
6A(3) of the Note Agreement which may exist after the expiration of this waiver
(including, for avoidance of doubt, any Default which may exist at October 3,
1999 but for this waiver). Except as amended herein, all of the terms,
conditions and obligations of the Note Agreement shall remain in full force and
effect. If you are in agreement with the foregoing, please sign in the space
provided below and this letter shall become a binding agreement between the
Company and Prudential.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:/s/ Robert R. Derrick
Title: Vice President
Agreed and accepted as of
the date first above written:
CONE MILLS CORPORATION
By:/s/ David E. Bray
Title: Treasurer
166
Exhibit 4.3(k)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
c/o Prudential Capital Group
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
November 12, 1999
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. At the request of the Company,
Prudential hereby waives any Default which may exist under Section 6A(2) or
6A(3) of the Note Agreement, such waiver to be effective solely for the period
commencing on the date hereof and ending on January 15, 2000. This waiver shall
be limited precisely as written, and shall not extend to any Default under any
other provision of the Note Agreement or to any Default under Section 6A(2) or
6A(3) of the Note Agreement which may exist after the expiration of this waiver
(including, for avoidance of doubt, any Default which may exist at November 12,
1999 but for this waiver). Except as amended herein, all of the terms,
conditions and obligations of the Note Agreement shall remain in full force and
effect. If you are in agreement with the foregoing, please sign in the space
provided below and this letter shall become a binding agreement between the
Company and Prudential.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:/s/ Robert R. Derrick
Title: Vice President
Agreed and accepted as of
the date first above written:
CONE MILLS CORPORATION
By:/s/ David E. Bray
Title: Treasurer
167
Exhibit 4.4(a) [CONFORMED COPY]
AMENDMENT NO. 1 AND WAIVER TO CREDIT AGREEMENT
AMENDMENT NO. 1 AND WAIVER (this "Amendment") dated as of October 3, 1999
to the Credit Agreement dated as of August 7, 1997 (the "Credit Agreement")
among CONE MILLS CORPORATION, the BANKS listed therein and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent. The parties hereto agree as follows: Section 1.
Defined Terms; References. Unless otherwise specifically defined herein, each
term used herein which is defined in the Credit Agreement has the meaning
assigned to such term in the Credit Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Credit Agreement shall, after this Amendment becomes effective, refer to the
Credit Agreement as amended hereby. As used herein, the term "Redwood Purchase
Agreement" refers to the Receivables Purchase and Servicing Agreement dated as
of September 1, 1999 among Cone Receivables II LLC, the Borrower, Redwood
Receivables Corporation and General Electric Capital Corporation, as Operating
Agent and Collateral Agent. Section 2. Limited Waiver. At the request of the
Borrower, the Banks hereby waive any Default which may exist under Section 5.10
or Section 5.11 of the Credit Agreement, such waiver to be effective solely for
the period commencing on the date hereof and ending on November 30, 1999. The
waiver granted pursuant to this Section 2 shall be limited precisely as written,
and shall not extend to any Default under any other provision of the Credit
Agreement or to any Default under Section 5.10 or 5.11 of the Credit Agreement
which may exist after the expiration of this waiver (including, for avoidance of
doubt, any Default which may exist at October 3, 1999 but for this waiver).
Section 3. Amendments Relating to Receivables Purchase Agreement . The following
conforming amendments are made to reflect the form of the Redwood Purchase
Agreement: (a) Section 1.01 of the Credit Agreement is amended by inserting the
following definition in appropriate alphabetical order:
169
"Special Purpose Company" means the special purpose entity created to
purchase accounts receivable from the Borrower and otherwise consummate the
transactions contemplated by the Receivables Purchase Agreement, which entity is
Cone Receivables II LLC on September 1, 1999. (b) The definitions of
"Consolidated Subsidiary" and "Subsidiary" in Section 1.01 of the Credit
Agreement are each amended by inserting immediately at the end thereof the
phrase, "and, including in any event, the Special Purpose Company". (c) Section
5.08(b) of the Credit Agreement is amended by (i) inserting immediately after
the words "except that" the clause number "(i)" and (ii) inserting at the end of
such Section the phrase A and (ii) the Special Purpose Company may incur or be
liable with respect to Debt in accordance with the terms of the Receivables
Purchase Agreement". (d) Section 5.13(j) of the Credit Agreement is amended by
(i) inserting immediately after the word "Borrower" the phrase "pursuant to the
Transfer Agreement (as defined in the Receivables Purchase Agreement) or the
Special Purpose Company" and (ii) deleting the amount "$65,000,000" in clause
(i) of the proviso and substituting therefor the amount "$50,000,000". (e) The
first proviso in Section 5.14 of the Credit Agreement is amended by (i)
inserting immediately after the word "Borrower" the phrase "and the Special
Purpose Company" and (ii) inserting immediately before the phrase "Receivables
Purchase Agreement" the phrase "Transfer Agreement (as defined in the
Receivables Purchase Agreement) and the". Section 4. Pricing Schedule. The
Pricing Schedule is amended in its entirety and replaced by the Pricing Schedule
attached hereto. Section 5. Representations of the Borrower. The Borrower
represents and warrants that after giving effect to the waiver granted pursuant
to Section 2 above and the amendments set forth in Sections 3 and 4 above, (i)
the representations and warranties of the Borrower set forth in Article 4 of the
Agreement will be true on and as of the date hereof and (ii) no Default will
have occurred and be continuing on such date. Section 6. Costs, Fees and
Expenses. On or before the Amendment Effective Date referred to below, the
Borrower shall pay of all costs, fees and expenses (including, without
limitation, reasonable legal fees and expenses) and other compensation payable
to the Agent on or prior to such date in connection with this Amendment.
Section 7. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York. Section 8. Counterparts.
This Amendment may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. Section 9. Effectiveness. This Amendment shall
become effective on the first date (the "Amendment Effective Date") on which the
Agent shall have received (i) counterparts hereof signed by each of the Required
Banks and the Borrower (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 or other written confirmation from such
party of execution of a counterpart hereof by such party) and (ii) evidence
satisfactory to the Agent that the Borrower shall have received waivers on no
less favorable terms of the corresponding covenants in Paragraphs 6A(2) and
6A(3) its Note Agreement dated as of August 13, 1992, as amended, with The
Prudential Insurance Company of America and in Section 32 of the Master Lease
dated as of October 24, 1994, as amended, between TBC Realty II Corporation, as
lessor, and the Borrower, as lessee.
170
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
CONE MILLS CORPORATION
By: /s/ David E. Bray
Title: Treasurer
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Bank and as Agent
By: /s/ Kimberly L. Turner
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ Roger Pelz
Title: Senior Vice President
BANK OF AMERICA, N.A.
(successor to NationsBank, N.A.)
By: /s/ E. Phifer Helms
Title: Managing Director
WACHOVIA BANK, N.A.
By: /s/ Haywood Edmundson, V
Title: Senior Vice President
SUNTRUST BANK
By: /s/ David W. Penter
Title: Vice President
171
Exhibit 4.4(b) [CONFORMED COPY]
WAIVER TO CREDIT AGREEMENT
WAIVER (this "Waiver") dated as of November 12, 1999 to the Credit
Agreement dated as of August 7, 1997 and amended as of October 3, 1999 (the
"Credit Agreement") among CONE MILLS CORPORATION, the BANKS listed therein and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent. WHEREAS, the parties hereto
previously entered into an Amendment No. 1 and Waiver to the Credit Agreement
dated as of October 3, 1999 pursuant to which, among other things, the Banks
granted to the Borrower a limited waiver of any Default which may exist under
Section 5.10 and 5.11 of the Credit Agreement for a period commencing on the
date thereof and ending on November 30, 1999, on the terms and subject to the
conditions more fully set forth therein (the "First Waiver"); WHEREAS, the Banks
have agreed to extend the period of effectiveness of the First Waiver to January
15, 1999 on the terms and subject to the conditions more fully set forth herein;
NOW, THEREFORE, the parties hereto agree as follows: Section 1. Defined Terms.
Unless otherwise specifically defined herein, each term used herein which is
defined in the Credit Agreement has the meaning assigned to such term in the
Credit Agreement. Section 2. Limited Waiver. At the request of the Borrower, the
Banks hereby waive any Default which may exist under Section 5.10 or Section
5.11 of the Credit Agreement, such waiver to be effective solely for the period
commencing on October 3, 1999 and ending on January 15, 2000. The waiver granted
pursuant to this Section 2 shall be limited precisely as written, and shall not
extend to any Default under any other provision of the Credit Agreement or to
any Default under Section 5.10 or 5.11 of the Credit Agreement which may exist
after the expiration of this waiver (including, for avoidance of doubt, any
Default which may exist at October 3, 1999 but for this waiver and/or the First
Waiver).
172
Section 3. Covenant of the Borrower. The Borrower covenants that
it will not make or acquire any Investment in respect of the Mexico II project
except infrastructure capital expenditures scheduled in Addendum I hereto.
Failure to observe this covenant shall be deemed to be an Event of Default under
the Credit Agreement. Section 4. Representations of the Borrower. The Borrower
represents and warrants that after giving effect to the waiver granted pursuant
to Section 2 above, (i) the representations and warranties of the Borrower set
forth in Article 4 of the Agreement will be true on and as of the date hereof
and (ii) no Default will have occurred and be continuing on such date. Section
5. Governing Law. This Waiver shall be governed by and construed in accordance
with the laws of the State of New York. Section 6. Counterparts. This Waiver 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. Section 7. Effectiveness. This Waiver shall become effective on the
first date on which the Agent shall have received (i) counterparts hereof signed
by each of the Required Banks and the Borrower (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 or other written
confirmation from such party of execution of a counterpart hereof by such party)
and (ii) evidence satisfactory to the Agent that the Borrower shall have
received waivers on no less favorable terms of the corresponding covenants in
Paragraphs 6A(2) and 6A(3) its Note Agreement dated as of August 13, 1992, as
amended, with The Prudential Insurance Company of America and in Section 32 of
the Master Lease dated as of October 24, 1994, as amended, between TBC Realty II
Corporation, as lessor, and the Borrower, as lessee.
173
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly
executed as of the date first above written.
CONE MILLS CORPORATION
By: /s/ David E. Bray
Name: David E. Bray
Title: Treasurer
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Bank and as Agent
By: /s/ Kimberly L. Turner
Name: Kimberly L. Turner
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ Roger Pelz
Name: Roger Pelz
Title: Senior Vice President
BANK OF AMERICA, N.A.
(successor to NationsBank, N.A.)
By: /s/ E. Phifer Helms
Name: E. Phifer Helms
Title: Managing Director
WACHOVIA BANK, N.A.
By: /s/ Haywood Edmundson, V
Name: Haywood Edmundson, V
Title: Senior Vice President
SUNTRUST BANK
By: /s/ David W. Penter
Name: David W. Penter
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cone
Mills Corporation Consolidated Financial Statements dated October 3, 1999,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000023304
<NAME> CONE MILLS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-END> OCT-03-1999
<EXCHANGE-RATE> 1
<CASH> 3,925
<SECURITIES> 0
<RECEIVABLES> 53,848
<ALLOWANCES> 5,050
<INVENTORY> 118,393
<CURRENT-ASSETS> 181,620
<PP&E> 467,601
<DEPRECIATION> 245,058
<TOTAL-ASSETS> 486,324
<CURRENT-LIABILITIES> 158,840
<BONDS> 119,004
0
37,264
<COMMON> 2,549
<OTHER-SE> 124,377
<TOTAL-LIABILITY-AND-EQUITY> 486,324
<SALES> 478,946
<TOTAL-REVENUES> 478,946
<CGS> 438,684
<TOTAL-COSTS> 473,824
<OTHER-EXPENSES> 16,017
<LOSS-PROVISION> 1,887
<INTEREST-EXPENSE> (9,666)
<INCOME-PRETAX> (22,443)
<INCOME-TAX> (7,775)
<INCOME-CONTINUING> (13,116)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,038)
<NET-INCOME> (14,154)
<EPS-BASIC> (.65)
<EPS-DILUTED> (.65)
</TABLE>
