Page 1 of 58
Index to Exhibits - Pages 17-28
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 April 2, 2000
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 April 28, 2000:
25,479,717 shares.
1
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CONE MILLS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements
Consolidated Condensed Statements of Operations
Thirteen weeks ended April 2, 2000 and April 4, 1999
(Unaudited)..................................................... 3
Consolidated Condensed Balance Sheets
April 2, 2000 and April 4, 1999 (Unaudited)
and January 2, 2000..............................................4
Consolidated Condensed Statements of Cash Flows
Thirteen weeks ended April 2, 2000 and April 4, 1999
(Unaudited) .....................................................5
Notes to Consolidated Condensed Financial Statements
(Unaudited) .....................................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................11
Item 3. Quantitative and Qualitative Disclosures about Market
Risk ..........................................................15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...............................................15
Item 6. Exhibits and Reports on Form 8-K................................16
2
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<S> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
April 2, 2000 April 4, 1999
- -------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Net Sales $ 141,677 $ 157,257
Cost of Goods Sold 124,576 141,914
-----------------------------------
Gross Profit 17,101 15,343
Selling and Administrative 13,426 13,305
Restructuring and Impairment of Assets (332) 12,917
-----------------------------------
Income (Loss) from Operations 4,007 (10,879)
-----------------------------------
Other Income (Expense)
Interest income 370 430
Interest expense (4,671) (3,640)
Other expense (807) -
-----------------------------------
(5,108) (3,210)
-----------------------------------
Loss before Income Tax Benefit, Equity in Earnings of
Unconsolidated Affiliate and Cumulative Effect of
Accounting Change (1,101) (14,089)
Income Tax Benefit (374) (4,790)
-----------------------------------
Loss before Equity in Earnings of Unconsolidated Affiliate
and Cumulative Effect of Accounting Change (727) (9,299)
Equity in Earnings of Unconsolidated Affiliate 450 867
-----------------------------------
Loss before Cumulative Effect of Accounting Change (277) (8,432)
Cumulative Effect of Accounting Change - (1,038)
-----------------------------------
Net Loss $ (277) $ (9,470)
-----------------------------------
Loss Available to Common Shareholders
Loss before Cumulative Effect of Accounting Change $ (984) $ (9,152)
Cumulative Effect of Accounting Change - (1,038)
-----------------------------------
Net Loss $ (984) $ (10,190)
-----------------------------------
Loss Per Share - Basic and Diluted
Loss before Cumulative Effect of Accounting Change $ (0.04) $ (0.36)
Cumulative Effect of Accounting Change - (0.04)
-----------------------------------
Net Loss $ (0.04) $ (0.40)
-----------------------------------
Weighted-Average Common Shares Outstanding
Basic and Diluted 25,480 25,431
-----------------------------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
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CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and par value data)
<TABLE>
<S> <C> <C> <C>
April 2, April 4, January 2,
2000 1999 2000
- -------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Note)
ASSETS
Current Assets
Cash $ 1,025 $ 1,883 $ 1,267
Accounts receivable, less allowances of $5,050;
1999, $3,300 and $5,050 60,589 21,765 47,531
Subordinated note receivable - 30,025 -
Inventories 116,892 132,912 110,613
Other current assets 7,167 14,625 6,149
-----------------------------------------------------
Total CurrentuAssetsAssets 185,673 201,210 165,560
Investments in Unconsolidated Affiliates 47,843 45,318 46,815
Other Assets 38,118 36,127 38,964
Property, Plant and Equipment 215,674 230,211 221,458
-----------------------------------------------------
$ 487,308 $ 512,866 $ 472,797
-----------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ - $ 4,000 $ -
Current maturities of long-term debt 80,714 10,714 79,714
Accounts payable 47,982 41,154 26,849
Sundry accounts payable and accrued liabilities 25,965 43,042 33,866
Deferred income taxes 12,091 18,115 9,894
-----------------------------------------------------
Total Current Liabilities 166,752 117,025 150,323
Long-Term Debt 119,227 181,497 119,115
Deferred Income Taxes 33,289 30,241 33,916
Other Liabilities 11,850 11,651 11,958
Stockholders' Equity
Class A preferred stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 373,660
shares; 1999, 411,916 shares and 355,635 shares 37,366 41,192 35,564
Class B preferred stock - no par value; authorized
5,000,000psharesPlant and Equipment-Net - - -
Common stock - $.10 par value; authorized 42,700,000
shares; issued and outstanding 25,479,717 shares;
1999, 25,431,233 shares and 25,479,717 shares 2,548 2,543 2,548
Capital in excess of par 57,435 57,256 57,435
Retained earnings 67,594 80,494 70,776
Deferred compensation - restricted stock (236) (533) (321)
Accumulated other comprehensive loss, currency
translation adjustment (8,517) (8,500) (8,517)
-----------------------------------------------------
Total Stockholders' Equity 156,190 172,452 157,485
-----------------------------------------------------
$ 487,308 $ 512,866 $ 472,797
-----------------------------------------------------
</TABLE>
Note: The balance sheet at January 2, 2000, has been derived from
the financial statements at that date.
See Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<S> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
April 2, 2000 April 4, 1999
- -------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
CASH PROVIDED BY (USED IN) OPERATIONS $ 1,571 $ (19,542)
-----------------------------------
-----------------------------------
INVESTING
Investments in unconsolidated affiliates (578) -
Proceeds from sale of property, plant and equipment 1,815 450
Capital expenditures (1,025) (1,420)
-----------------------------------
Cash provided by (used in) investing 212 (970)
-----------------------------------
FINANCING
Net borrowings under line of credit agreements 1,000 3,000
Decrease in checks issued in excess of deposits (1,922) (1,206)
Proceeds from long-term debt borrowings - 20,000
Dividends paid - Class A Preferred (60) (38)
Redemption of Class A Preferred stock (1,043) -
-----------------------------------
Cash provided by (used in) financing (2,025) 21,756
-----------------------------------
Net change in cash (242) 1,244
Cash at Beginning of Period 1,267 639
-----------------------------------
Cash at End of Period $ 1,025 $ 1,883
-----------------------------------
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest $ 7,573 $ 6,271
-----------------------------------
Income taxes, net of refunds $ (408) $ 30
-----------------------------------
Supplemental Schedule of Noncash Financing Activities:
Stock dividend - Class A Preferred Stock $ 2,845 $ 2,797
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
5
<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 April 2, 2000 and April 4, 1999 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 April 2, 2000, April 4, 1999, and January 2, 2000, and the related
consolidated condensed statements of operations and cash flows for the thirteen
weeks ended April 2, 2000 and April 4, 1999. 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 1999.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 April 2, 2000 and April 4,
1999 and related consolidated condensed statements of operations for the
thirteen weeks then ended are based on certain estimates relating to quantities
and cost as of the end of the fiscal year.
Note 2. Inventories
(in thousands) 4/2/00 4/4/99 1/2/00
Greige and finished goods $ 80,286 $ 100,206 $ 78,973
Work in process 5,263 9,162 4,821
Raw materials 20,418 13,184 15,523
Supplies and other 10,925 10,360 11,296
$ 116,892 $ 132,912 $ 110,613
6
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Note 3. Long-Term Debt
(in thousands) 4/2/00 4/4/99 1/2/00
Senior Note $ 32,144 $ 42,858 $ 32,144
Revolving Credit Agreement 70,000 52,000 69,000
8 1/8% Debentures 97,797 97,353 97,685
199,941 192,211 198,829
Less current maturities 80,714 10,714 79,714
$ 119,227 $ 181,497 $ 119,115
Note 4. Class A Preferred Stock
On February 11, 2000, the Company declared a 8.0% stock dividend on the
Company's Class A Preferred Stock, which was paid on March 31, 2000. The
dividend was charged to retained earnings in the amount of approximately $2.8
million.
Note 5. Depreciation and Amortization
The following table presents depreciation and amortization included in the
consolidated condensed statements of operations.
(in thousands) Thirteen Thirteen
Weeks Ended Weeks Ended
4/2/00 4/4/99
Depreciation $ 5,966 $ 7,190
Amortization 454 452
$ 6,420 $ 7,642
7
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Note 6. Loss Per Share
The following table sets forth the computation of basic and diluted loss
per common share ("EPS").
(in thousands, except Thirteen Thirteen
per share data) Weeks Ended Weeks Ended
4/2/00 4/4/99
Loss before cumulative effect of
accounting change $ ( 277) $ ( 8,432)
Preferred stock dividends ( 707) ( 720)
Loss before cumulative effect of accounting
change available to common shareholders ( 984) ( 9,152)
Cumulative effect of accounting change - ( 1,038)
Basic EPS - loss available to common
shareholders ( 984) (10,190)
Effect of dilutive securities - -
Diluted EPS - loss available to common
shareholders after assumed conversions $ ( 984) $ (10,190)
Determination of shares:
Basic EPS - weighted-average shares 25,480 25,431
Effect of dilutive securities - -
Diluted EPS - adjusted weighted-average
shares after assumed conversions 25,480 25,431
Loss per share - basic and diluted
Loss before cumulative effect of
accounting change $ ( .04) $ ( .36)
Cumulative effect of accounting change - ( .04)
Net loss $ ( .04) $ ( .40)
Common stock options outstanding at April 2, 2000 and April 4, 1999, were
not included in the computation of diluted loss per share because to do so would
have been antidilutive.
Note 7. Segment Information
The Company has three principal business segments which are based upon
organizational structure: 1) denim and khaki; 2) commission finishing; and 3)
decorative fabrics. The Company ceased manufacturing yarn-dyed products in 1999.
8
<PAGE>
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 assets, unallocated expenses, interest, income tax benefits
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:
(in thousands) Thirteen Thirteen
Weeks Ended Weeks Ended
4/2/00 4/4/99
Net Sales
Denim and Khaki $ 104,262 $ 112,635
Commission Finishing 20,803 25,838
Decorative Fabrics 19,549 16,585
Yarn-Dyed Products 10 7,506
Other 283 472
144,907 163,036
Less Intersegment Sales 3,230 5,779
$ 141,677 $ 157,257
Income (Loss) from Operations
Denim and Khaki $ 5,336 $ 9,316
Commission Finishing ( 839) ( 1,956)
Decorative Fabrics ( 216) 504
Yarn-Dyed Products ( 60) ( 3,277)
Other 692 ( 229)
Unallocated Expenses ( 788) ( 1,453)
4,125 2,905
Restructuring and Impairment of Assets 332 (12,917)
4,457 (10,012)
Less Equity in Earnings of
Unconsolidated Affiliate 450 867
4,007 (10,879)
Other Expense, Net ( 5,108) ( 3,210)
Loss before Income Tax Benefit,
Equity in Earnings of Unconsolidated
Affiliate and Cumulative Effect of
Accounting Change $ ( 1,101) $ (14,089)
9
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Note 8. Comprehensive Loss
Comprehensive loss is the total of net loss and other changes in equity,
except those resulting from investments by owners and distribution to owners not
reflected in net loss. Total comprehensive loss for the periods was as follows:
(in thousands) Thirteen Thirteen
Weeks Ended Weeks Ended
4/2/00 4/4/99
Net loss $( 277) $ (9,470)
Other comprehensive loss,
currency translation adjustment - ( 2)
$ ( 277) $ (9,472)
Note 9. Securitization of Accounts Receivable
On April 24, 2000, the Company amended the securitization agreements to
include certain additional trade receivables related to the ongoing purchase and
subsequent resale by Cone Receivables II LLC. Effective with this amendment,
purchases by Redwood Receivables Corporation may provide proceeds of up to $60
million at any point in time. As of April 2, 2000, the total amount outstanding
under the Accounts Receivable Facility was $45.5 million.
10
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
First Quarter Ended April 2, 2000 Compared with First Quarter Ended April 4,
1999.
For the first quarter of 2000, Cone Mills had sales of $141.7 million, down
10% from sales of $157.3 million for the first quarter of 1999. Lower denim
prices and the exit from yarn-dyed products last year were the primary causes of
the sales decline. Excluding sales of businesses exited in 1999, sales were down
5%.
Gross profit for the first quarter of 2000 increased to 12.1% of sales, as
compared with 9.8% for the previous year. The improvement was primarily the
result of better operating results in commission finishing and the realization
of savings from the 1999 comprehensive restructuring program. These savings
include savings from yarn outsourcing, reconfiguration of overhead structures in
the denim plants, restructurings at Carlisle and the exit from the yarn-dyed
shirtings product line.
Segment Information. The Company has three principal business segments: 1)
denim and khaki; 2) commission finishing; and 3) decorative fabrics. The Company
ceased manufacturing yarn-dyed products in 1999. (See Note 7 to Notes to
Consolidated Condensed Financial Statements included in Part I, Item 1.)
Denim and Khaki. Denim and khaki segment sales for the first quarter of
2000 were $104.3 million, down 7.4% from the first quarter of 1999 sales of
$112.6 million. While sales yards were marginally higher in the most recent
quarter, revenues were adversely affected by lower denim prices, the result
of industry supply/demand imbalances and declining cotton costs, which were
passed on to customers because of market conditions. Operating income for
the denim and khaki segment was $5.3 million, or 5.1% of sales for the most
recent quarter, as compared with $9.3 million, or 8.3% of sales for the
first quarter of 1999. The decline resulted primarily from lower denim
prices. The khaki product line continued to post an operating loss and was
negatively impacted by quality problems associated with the closing of a
supplier's plant and difficulties in finishing certain products. Operating
income for the segment includes the equity in earnings from the Parras Cone
joint venture plant.
Commission Finishing. Outside sales of the commission finishing division
were $17.6 million for the first quarter of 2000, down 12.4% from the first
quarter of 1999. Lower sales at Raytex, resulting from weaker demand in
11
<PAGE>
top-of-bed prints, accounted for the decline. Carlisle sales to outside
customers increased by approximately 7% in the first quarter of 2000, as
compared with the 1999 period. Operating results for the segment improved
as the Carlisle plant posted a profit, as compared with a significant loss
for the previous year, mitigating the volume shortfall at Raytex. Losses
for this segment were reduced from $2.0 million for the first quarter of
1999 to a loss of $.8 million for the most recent quarter.
Decorative Fabrics. For the first quarter of 2000, sales of the decorative
fabrics segment rose by 17.9% to $19.5 million the result of continued
growth in jacquards. As a result of weak John Wolf sales in January and
February, start-up expenses associated with increasing capacity at the
Jacquard plant and production curtailments because of inclement weather in
January, the decorative fabrics segment reported a loss of $.2 million for
first quarter 2000, as compared with a $.5 million operating profit for the
previous year period.
Yarn-Dyed Products. As part of the 1999 comprehensive restructuring
program, the Company ceased manufacturing yarn-dyed products and exited the
business in 1999. For the first quarter of 1999, sales of yarn-dyed
products were $7.5 million and the operating loss for the segment was $3.3
million.
Selling and administrative expenses for the first quarter of 2000 were
$13.4 million, or 9.5% of sales, as compared with $13.3 million, or 8.5% of
sales in first quarter 1999. Expenses associated with the Company's new credit
facility, certain performance-based compensation accruals and lower denim prices
on essentially the same sales yards resulted in selling and administrative
expenses increasing as a percent of sales.
For the first quarter of 2000, EBITDA, defined as income (loss) from
operations before depreciation and amortization, was $10.4 million. For
comparison, EBITDA for the first quarter of 1999 was a loss of $3.0 million.
However, excluding restructuring charges, related expenses, inventory writedowns
and operating losses associated with businesses exited, the Company had a pro
forma EBITDA in the first quarter of 1999 of $14.2 million.
Interest expense for the first quarter of 2000 was $4.7 million, up 28%
from $3.6 million for the first quarter of 1999. The increase in interest
expense was the result of increased rates charged by financial lenders and
slightly higher borrowing levels. Other expenses of $.8 million recognized in
the first quarter of 2000 were the ongoing expense of the new accounts
receivable securitization program, which began September 1999.
In both first quarters of 2000 and 1999, the income tax benefit as a
percent of the taxable loss was 34%.
12
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Equity in earnings of Parras Cone, the Company's joint venture plant in
Mexico, was $.5 million for the first quarter of 2000, as compared with $.9
million for the first quarter of 1999.
For the first quarter of 2000, the Company had a net loss of $.3 million,
or $.04 per share after preferred dividends. For comparison, for the first
quarter of 1999 the Company reported a net loss of $9.5 million, or $.40 per
share after preferred dividends. Excluding restructuring and related expenses,
and the cumulative effect of an accounting change, the Company had pro forma
earnings of $.02 per share for the first quarter of 1999.
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 ("Revolving Credit Facility")of which $10
million was available on April 2, 2000, and a $60 million Receivables Purchase
and Servicing Agreement (the "Receivables Agreement") entered into on September
1, 1999 and amended on April 24, 2000, with Cone Receivables II LLC, Redwood
Receivables Corporation, an affiliate of General Electric Capital Corporation,
and General Electric Capital Corporation.
On April 24, 2000, the Company amended the Receivables Agreement increasing
the facility from $50 million to $60 million. In addition to increasing the
commitment, the Company modified other provisions of the agreement to allow it
to utilize more fully the entire facility.
During the first quarter of 2000, the Company generated cash from
operations, before changes in working capital, of $6.4 million, as compared with
using $3.3 million of cash during the first quarter of 1999. In the 2000 period,
working capital increased by $4.8 million. Uses of cash in the 2000 period
included $1.6 million for domestic capital expenditures and investment to
develop the Company's joint venture industrial park in Mexico, and $1.0 million
for the redemption of preferred stock.
On January 28, 2000, the Company entered into a new $80 million Revolving
Credit Facility with its existing banks with Bank of America, N.A., as agent.
The Revolving Credit Facility was secured by Company assets and will mature on
August 7, 2000. Interest rates were increased to market levels and new covenants
were set.
At the same time the Company entered into the Revolving Credit Facility,
its Senior Notes and 8-1/8% Debentures were ratably secured with the bank
facility.
13
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The Revolving Credit Facility, the Company's Senior Notes and
8-1/8% Debentures, and the Company's Master Lease for its corporate headquarters
property with Atlantic Financial Group, Ltd. prohibit the Company from paying
dividends on its Common Stock.
The Company believes that internally generated operating funds and funds
available under its credit facilities will be sufficient to meet its needs for
working capital and domestic capital spending permitted under the terms of the
Revolving Credit Facility. Liquidity is predicated on the Company meeting its
operating targets in 2000 and further reductions in inventories. By August 2000,
the Company must either refinance or replace the Revolving Credit Facility. The
Company is in the process of exploring its alternatives related to financing its
business. These alternatives may include the following: (1) the restructuring or
replacing of the Revolving Credit Facility; and (2) funding from nontraditional
sources of capital. While management believes that it will be able to obtain the
appropriate financings, including those for its Mexican initiatives, there is no
assurance that the Company will be able to replace its Revolving Credit Facility
or otherwise obtain financing on terms and conditions acceptable to the Company.
On April 2, 2000, the Company's long-term capital structure consisted of $199.9
million of long-term debt (including current maturities) and $156.2 million of
stockholders' equity. For comparison, on April 4, 1999, the Company had $192.2
million of long-term debt (including current maturities) and $172.5 million of
stockholders' equity. Long-term debt (including current maturities) as a
percentage of long-term debt and stockholders' equity was 56% at April 2, 2000,
as compared with 53% at April 4, 1999.
Accounts and note receivable on April 2, 2000, were $60.6 million, as
compared with $51.8 million at April 4, 1999. Receivables, including those sold
pursuant to the Receivables Purchase Agreement, represented 70 days of sales
outstanding at April 2, 2000 and 55 days at April 4, 1999. 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 April 2, 2000, were $116.9 million, down $16.0 million from
$132.9 million at April 4, 1999. The Company liquidated inventories associated
with businesses in which it has exited.
For the first quarter of 2000, domestic capital spending was $1.0 million
compared to $1.4 million for the 1999 period. Domestic capital spending in 2000
is expected to be approximately $12 million. In addition to the 2000 domestic
capital spending budget, the Company expects to spend approximately $8 million
for investments in international initiatives of which $.6 million was invested
in the first quarter.
14
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OTHER MATTERS
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.
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, (v) the Company's ability to attract and maintain
adequate capital to fund operations and strategic initiatives, (vi)
increases in prevailing interest rates, and (vii) the inability to achieve
the cost savings associated with the Company's restructuring initiatives.
For a further description of these risks see the Company's 1999 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 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 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 2, 2000.
15
<PAGE>
PART II
Item 1. Legal Proceedings
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 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.
A report on Form 8-K was filed on February 11, 2000.
16
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Exhibit Sequential
No. Description Page No.
*2.1(a) 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, filed as Exhibit 2.1(h)
to Registrant's report on Form 10-Q
for the quarter ended October 3, 1999.
*2.1(b) Receivables Transfer Agreement dated as
of September 1, 1999, by and among the
Registrant, any other Originator Party hereto,
and Cone Receivables II LLC, filed as Exhibit
2.1(i) to Registrant's report on Form 10-Q
for the quarter ended October 3, 1999.
*2.1(c) First Amendment and Waiver to Securitization
Agreements dated as of November 16, 1999, by
and between Cone Receivables II LLC, Cone Mills
Corporation, Redwood Receivables Corporation
and General Electric Capital Corporation,
together with all exhibits thereto.
*2.1(d) Second Amendment to Securitization Agreements
dated as of January 28, 2000, by and between
Cone Receivables II LLC, Cone Mills
Corporation, Redwood Receivables Corporation,
and General Electric Capital Corporation,
together with all exhibits thereto.
2.1(e) Third Amendment to Securitization Agreements
dated as of March 31, 2000, by and between
Cone Receivables II LLC, Cone Mills
Corporation, Redwood Receivables Corporation,
and General Electric Capital Corporation,
together with all exhibits thereto. 30
2.1(f) Fourth Amendment to Securitization Agreement
dated as of April 24, 2000 by and between
Cone Receivables II LLC, Cone Mills
Corporation, Redwood Receivables Corporation,
and General Electric Capital Corporation,
together with all exhibits thereto. 35
*2.2(a) Investment Agreement dated as of
June 18, 1993, among Compania Industrial
de Parras, S.A. de C.V., Sr. Rodolfo
17
<PAGE>
Exhibit Sequential
No. Description Page No.
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(c),
(d), (f), (g), and (j) attached.
*2.2(b) Commercial Agreement dated as of July 1,
1999, among Compania Industrial de
Parras, S.A. de C.V., Cone Mills
Corporation and Parras Cone de Mexico,
S.A.
*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.
*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
18
<PAGE>
Exhibit Sequential
No. Description Page No.
2.2(f) to the Registrant's report on Form
10-Q for the quarter ended July 4, 1993.
*2.2(h) 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.
*3.1 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.
*3.1(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, filed as Exhibit 4.1(a) to Registrant's
Report on Form 10-Q for the quarter ended
October 3, 1999.
*3.2 Amended and Restated Bylaws of Registrant,
effective June 18, 1992, filed as Exhibit
3.5 to the Registrant's Registration
Statement on Form S-1 (File No. 33-46907).
*4.1 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.
*4.3 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.
19
<PAGE>
Exhibit Sequential
No. Description Page No.
*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.
*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
20
<PAGE>
Exhibit Sequential
No. Description Page No.
Prudential Insurance Company of
America, filed as Exhibit 4.3(g) to the
Registrant's report on Form 10-Q for
the quarter ended March 31, 1996.
*4.3(h) Letter Agreement dated as of January
31, 1997, between the Registrant and
The Prudential Insurance Company of
America, filed as Exhibit 4.3(h) to
the Registrant's report on Form 10-K
for the year ended December 29, 1996.
*4.3(i) Letter Agreement dated as of July 31,
1997, between the Registrant and The
Prudential Insurance Company of America,
filed as Exhibit 4.3(i) to the
Registrant's report on Form 10-Q for
the quarter ended September 28, 1997.
*4.3(j) Modification to Note Agreement dated
as of February 14, 1998, between the
Registrant and The Prudential
Insurance Company of America, filed as
Exhibit 4.3(j) to Registrant's report on
Form 10-Q for the quarter ended March 29,
1998.
*4.3(k) Letter Agreement dated as of
September 1, 1999, amending the Note
Agreement dated August 13, 1992,
between the Registrant and The Prudential
Insurance Company of America, filed as
Exhibit 4.3(i) on Form 10-Q for the
quarter ended October 3, 1999.
*4.3(l) Amendment of 1992 Note Agreement dated as
of January 28, 2000, by and among Cone Mills
Corporation and The Prudential Insurance
Company of America, together with all
exhibits thereto, filed as Exhibit 9 to the
Registrant's report on Form 8-K dated
February 11, 2000.
*4.4 Credit Agreement dated as of January 28, 2000,
by and among Cone Mills Corporation, as
Borrower, Bank of America, N.A., as Agent
and as Lender and the Lenders party thereto
from time to time, together with all exhibits
21
<PAGE>
Exhibit Sequential
No. Description Page No.
thereto, filed as Exhibit 1 to the
Registrant's report on Form 8-K dated
February 11, 2000.
*4.4(a) Guaranty Agreement dated as of January 28,
2000, made by Cone Global Finance Corporation,
CIPCO S.C., Inc. and Cone Foreign Trading
LLC in favor of Bank of America, N.A.
as Revolving Credit Agent for the Lenders,
The Prudential Insurance Company of America,
SunTrust Bank, Morgan Guaranty Trust
Company of New York, Wilmington Trust
Company, as General Collateral Agent,
Bank of America, N.A., as Priority
Collateral Agent, and Atlantic Financial
Group, Ltd., together with all exhibits
thereto, filed as Exhibit 2 to the
Registrant's report on Form 8-K dated
February 11, 2000.
*4.4(b) Priority Security Agreement dated as of
January 28, 2000, by Cone Mills Corporation
and certain of its subsidiaries, as Grantors,
and Bank of America, N.A., as Priority
Collateral Agent, together with all exhibits
thereto, filed as Exhibit 3 to the Registrant's
report on Form 8-K dated February 11, 2000.
*4.4(c) General Security Agreement dated as of January
28,2000, by Cone Mills Corporation and certain
of its subsidiaries, as Grantors, and
Wilmington Trust Company, as General Collateral
Agent, together with all exhibits thereto,
filed as Exhibit 4 to the Registrant's
report on Form 8-K dated February 11, 2000.
*4.4(d) Securities Pledge Agreement dated as of
January 28, 2000, by Cone Mills Corporation in
favor of Wilmington Trust Company, as General
Collateral Agent, together with all exhibits
thereto, filed as Exhibit 5 to the Registrant's
report on Form 8-K dated February 11, 2000.
*4.4(e) CMM Pledge Agreement dated as of January 28,
2000, by Cone Mills Corporation in favor of
Wilmington Trust Company, as General Collateral
Agent, together with all exhibits thereto,
filed as Exhibit 6 to the Registrant's
Report on Form 8-K dated February 11, 2000.
22
<PAGE>
Exhibit Sequential
No. Description Page No.
*4.4(f) Deed of Trust, Security Agreement, Fixture
Filing, Assignment of Leases and Rents and
Financing Statement dated as of January 28,
2000, between Cone Mills Corporation, as Grantor,
TIM, Inc., as Trustee, Wilmington Trust
Company, as General Collateral Agent, and
Bank of America, N.A., as Designated
Collateral Subagent, together with all
exhibits thereto, filed as Exhibit 7 to
the Registrant's report on Form 8-K dated
February 11, 2000.
*4.4(g) Deed of Trust, Security Agreement, Fixture
Filing, Assignment of Leases and Rents and
Financing Statement dated as of January 28,
2000, between Cone Mills Corporation, as
Grantor, TIM, Inc., as Trustee, and Bank of
America, N.A., as Priority Collateral Agent,
together with all exhibits thereto, filed as
Exhibit 8 to the Registrant's report on Form
8-K dated February 11.
*4.4(h) Termination Agreement dated as of January
28, 2000, between the Registrant and Morgan
Guaranty Trust Company of New York, as
Agent for various banks terminating the
Credit Agent dated August 7, 1997.
*4.5 Specimen Class A Preferred Stock
Certificate, filed as Exhibit 4.5
to the Registrant's Registration
Statement on Form S-1(File No. 33-46907).
*4.6 Specimen Common Stock Certificate,
effective June 18, 1992, filed as
Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-46907).
*4.7 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
23
<PAGE>
Exhibit Sequential
No. Description Page No.
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.
*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).
Management contract or compensatory plan or arrangement
(Exhibits 10.1 - 10.13)
*10.1 Employees' Retirement Plan of Cone
Mills Corporation as amended and
restated effective December 1, 1994,
filed as Exhibit 10.1 to the
Registrant's report on Form 10-K for
the year ended January 1, 1995.
*10.1(a) First Amendment to the Employees'
Retirement Plan of Cone Mills
Corporation dated May 9,1995,
filed as Exhibit 10.1(a) to the
Registrant's report on Form 10-K
for the year ended December 31, 1995.
24
<PAGE>
Exhibit Sequential
No. Description Page No.
*10.1(b) Second Amendment to the Employees'
Retirement Plan of Cone Mills
Corporation dated December 5, 1995,
filed as Exhibit 10.1(b) to the
Registrant's report on Form 10-K
for the year ended December 31, 1995.
*10.1(c) Third Amendment to the Employees'
Retirement Plan of Cone Mills
Corporation dated August 16, 1996,
filed as Exhibit 10.1(c) to the
Registrant's report on Form 10-K
for the year ended December 29, 1996
*10.1(d) Fourth Amendment to the Employees'
Retirement Plan of Cone Mills
Corporation, filed as Exhibit 10
to the Registrant's report on
Form 10-Q for the quarter ended
September 28, 1997.
*10.1(e) Fifth Amendment to Employees'
Retirement Plan of Cone Mills
Corporation dated December 4, 1997,
filed as Exhibit 10.1(e) to the
Registrant's report on Form 10-K
or the year ended December 28, 1997.
*10.2 Cone Mills Corporation SERP as amended
and restated as of December 5, 1995,
filed as Exhibit 10.2 to the
Registrant's report on Form 10-K
for the year ended December 31, 1995.
*10.3 Excess Benefit Plan of Cone Mills
Corporation as amended and restated
as of December 5, 1995, filed as
Exhibit 10.3 to the Registrant's
report on Form 10-K for the year ended
December 31, 1995.
*10.4 1984 Stock Option Plan of Registrant
filed as Exhibit 10.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-28040).
*10.5 Form of Nonqualified Stock Option
Agreement under 1984 Stock Option Plan
25
<PAGE>
Exhibit Sequential
No. Description Page No.
of Registrant, filed as Exhibit 10.8 to
the Registrant's Registration Statement
on Form S-1 (File No. 33-28040).
*10.6 Form of Incentive Stock Option Agreement
under 1984 Stock Option Plan of
Registrant, filed as Exhibit 10.9 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-28040).
*10.7 1992 Stock Option Plan of Registrant,
filed as Exhibit 10.9 to the Registrant's
Report on Form 10-K for the year ended
December 29, 1991.
*10.7(a) Amended and Restated 1992 Stock Plan,
filed as Exhibit 10.1 to
Registrant's report on Form 10-Q
for the quarter ended March 31, 1996.
*10.8 Form of Incentive Stock Option Agreement
under 1992 Stock Option Plan, filed as
Exhibit 10.10 to the Registrant's report on
Form 10-K for the year ended January 3, 1993.
*10.8(a) Form of Nonqualified Stock Option
Agreement under 1992 Stock Option
Plan, filed as Exhibit 10.8(a) to
the Registrant's report on Form
10-K for the year ended
December 29,1996.
*10.8(b) Form of Nonqualified Stock Option
Agreement under 1992 Amended and
Restated Stock Plan, filed as
Exhibit 10.8(b) to the Registrant's
report on Form 10-K for the year
ended December 29, 1996.
*10.8(c) Form of Restricted Stock Award
Agreement under 1992 Amended and
Restated Stock Plan, filed as
Exhibit 10.8(c) to the Registrant's
report on Form 10-K for the year
ended December 28, 1997.
*10.9 1994 Stock Option Plan for Non-
Employee Directors of Registrant, filed
as Exhibit 10.9 to Registrant's report
26
<PAGE>
Exhibit Sequential
No. Description Page No.
on Form 10-K for the year ended
January 2,1994.
*10.10 Form of Non-Qualified Stock Option
Agreement under 1994 Stock Option
Plan for Non-Employee Directors of
Registrant, filed as Exhibit 10.10 to
Registrant's report on Form 10-K for
the year ended January 2, 1994.
*10.11 Management Incentive Plan of the
Registrant, filed as Exhibit 10.11(b)
to Registrant's report on Form 10-K
for the year ended January 3, 1993.
*10.12 1997 Senior Management Incentive
Compensation Plan, filed as Exhibit 10.2
to Registrant's report on Form 10-Q
for the quarter ended March 31, 1996.
*10.13 1997 Senior Management Discretionary
Bonus Plan, filed as Exhibit 10.13 to
the Registrant's report on Form 10-K
for the year ended December 29, 1996.
*10.14 Form of Agreement between the Registrant
and Levi Strauss dated as of March 30,
1992, filed as Exhibit 10.14 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-46907).
*10.15 First Amendment to Supply Agreement
dated as of April 15, 1992, between the
Registrant and Levi Strauss dated as of
March 30, 1992, filed as Exhibit 10.15
to Registrant's Registration Statement
on Form S-1 (No. 33-469007).
*10.16 Agreement dated January 1, 1999, between
the Registrant and Parkdale Mills, Inc.,
filed as Exhibit 10.17 to Registrant's
Report on Form 10-K for the year ending
January 2, 2000.
*10.17 Tenth Amendment to Master Lease dated as
of January 28, 2000, between Atlantic
Financial Group, Ltd. and Cone Mills
Corporation, together with all exhibits
thereto, filed as Exhibit 10 to Registrant's
27
<PAGE>
Exhibit Sequential
No. Description Page No.
Report on Form 8-K dated February 11, 2000.
10.18 2000 Stock Compensation Plan for Non-Employee
Directors of Registrant dated as of May 9,
2000. 51
27 Financial Data Schedule 58
__________________________________________
* 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.
28
<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: May 15, 2000 /s/ Gary L. Smith
Gary L. Smith
Executive Vice President and
Chief Financial Officer
29
<PAGE>
Exhibit 2.1(e)
THIRD AMENDMENT TO SECURITIZATION AGREEMENTS
THIS THIRD AMENDMENT TO SECURITIZATION AGREEMENTS (this "Amendment"), made
and entered into as of March 31, 2000 (the "Effective Date"), by and between
CONE RECEIVABLES II LLC, a North Carolina limited liability company ("CRLLC"),
CONE MILLS CORPORATION, a North Carolina corporation ("Cone Mills"; each of
CRLLC and Cone Mills a "Company" and, collectively, the "Companies"), REDWOOD
RECEIVABLES CORPORATION, a Delaware corporation ("Redwood"), and GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("GECC"), in its capacities
as Operating Agent and Collateral Agent.
W I T N E S E T H:
WHEREAS, Cone Mills, any other Originators that are or may hereafter become
a party thereto and CRLLC are parties to a certain Receivables Transfer
Agreement, dated as of September 1, 1999 (as amended to the date hereof, the
"Transfer Agreement"; capitalized terms used herein and not otherwise defined
herein shall have the meanings given such terms in Annex X to the Transfer
Agreement as amended by this Amendment), whereby Cone Mills has agreed (and each
Subsidiary of Cone Mills which thereafter becomes an Originator will agree) to
sell, contribute or otherwise transfer to CRLLC, and CRLLC has agreed to
purchase or otherwise acquire from such Originators, all of the right, title and
interest of such Originators in the Receivables; and
WHEREAS, CRLLC, as Seller, Redwood, as Purchaser, Cone Mills, as Servicer,
and GECC, as Operating Agent and as Collateral Agent, are parties to a certain
Receivables Purchasing and Servicing Agreement, dated as of September 1, 1999
(as amended to the date hereof, the "Purchase Agreement"; the Transfer Agreement
and the Purchase Agreement, collectively, the "Securitization Agreements"),
whereby Purchaser has agreed, among other things, to purchase from CRLLC from
time to time the Receivables sold or contributed to CRLLC pursuant to the
Transfer Agreement; and
WHEREAS, the Securitization Agreements were amended pursuant to that
certain First Amendment and Waiver to Securitization Agreements, dated as of
November 16, 1999, among the parties hereto, and that certain Second Amendment
to Securitization Agreements, dated as of January 28, 2000, among the parties
hereto; and
WHEREAS, Cone Mills has requested that the Securitization Agreements be
further amended in certain respects as set forth in this Amendment, and the
parties hereto are willing to agree to such amendments subject to the terms and
conditions of this Amendment.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
30
<PAGE>
1. Amendments of Securitization Agreements. Subject to the terms and
conditions of this Amendment, the Securitization Agreements shall be amended as
follows:
(a) The definition of the term "Applicable Margin" set forth in Annex 3 to
the Purchase Agreement shall be deleted in its entirety and the following
revised definition of such term shall be substituted in lieu thereof:
"Applicable Margin" shall mean 2.0% as of the Third Amendment Effective
Date, but the Applicable Margin shall be subject to adjustment (upwards or
downwards) prospectively on a quarterly basis as determined by Cone Mills' Fixed
Charge Coverage Ratio (as defined in Annex G) for the Rolling Period (as defined
in Annex G) for the immediately preceding fiscal quarter of Cone Mills, with the
initial adjustment (if needed) to be effective on the fifth (5th) Business Day
after the Operating Agent's receipt of Cone Mills' quarterly financial
statements and Compliance Certificate (as defined in Annex G) meeting the
requirements of paragraph (c) of Annex G for Cone Mills' fiscal quarter ending
July 2, 2000 and with each succeeding adjustment (if needed) to be effective on
the fifth (5th) Business Day after Operating Agent's receipt of such quarterly
financial statements and Compliance Certificate for each succeeding fiscal
quarter of Cone Mills. Each quarterly adjustment in the Applicable Margin will
be determined by reference to the Fixed Charge Coverage Ratio of Cone Mills and
its Subsidiaries for the Rolling Period ending with such fiscal quarter as shown
in such financial statements and Compliance Certificate as follows:
If such Fixed Charge Then the Applicable
Coverage Ratio is: Margin will be:
greater than or equal to 1.0:1.0 0.50%
greater than or equal to 0.75:1.0 but less than 1.0:1.0 1.00%
greater than or equal to 0.50:1.0 but less than 0.75:1.0 1.50%
greater than or equal to 0.31:1.0 but less than 0.50:1.0 2.00%
less than 0.31:1.0 2.50%
If the Operating Agent does not receive delivery of Cone Mills' quarterly
financial statements and Compliance Certificate for any fiscal quarter ending on
or after October 3, 1999 in accordance with and by the deadline specified in
Annex 5.02(a), such failure shall (in addition to any other remedy provided in
the Related Documents) result in an increase in the Applicable Margin to the
highest rate specified above until the fifth (5th) Business Day following the
date on which the Operating Agent receives such financial statements and
Certificate of Compliance (at which time such adjustment in the Applicable
Margin shall become effective). If a Termination Event or Incipient Termination
Event shall have occurred and be continuing at any time, the Applicable Margin
may, in the Purchaser's discretion, be increased to the highest rate specified
above until the fifth (5th) Business Day after the date on which such
Termination Event or Incipient Termination Event is waived, cured or otherwise
ceases to exist.
31
<PAGE>
(b) Annex G to the Purchase Agreement shall be deleted in its entirety and
the revised Annex G attached to this Amendment shall be substituted in lieu
thereof.
(c) Annex X to the Securitization Agreements shall be further amended by
adding the following new definition thereto:
"Third Amendment Effective Date" shall mean March 31, 2000.
(d) Annex X to the Securitization Agreements shall be further amended by
deleting therefrom the definition of the term "Fee Letter" and by substituting
the following new definition of such term in lieu thereof:
"Fee Letter" shall mean that certain letter agreement dated March 31,
2000 among the Seller, Cone Mills and the Purchaser.
2. No Other Amendments. Except for the amendments expressly set forth and
referred to in Section 1 above, the Securitization Agreements shall remain
unchanged and in full force and effect.
3. Representations and Warranties. Each Company hereby represents and
warrants to Redwood, the Operating Agent and the Collateral Agent that (a) this
Amendment has been duly authorized, executed and delivered by each Company, (b)
after giving effect to this Amendment, no Termination Event, Incipient
Termination Event, Event of Servicer Termination or Incipient Servicer
Termination Event has occurred and is continuing as of this date, and (c) all of
the representations and warranties made by each Company in the Securitization
Agreements are true and correct in all material respects on and as of the date
of this Amendment (except to the extent that any such representations or
warranties expressly referred to a specific prior date). Any breach in any
material respect by either Company of any of its representations and warranties
contained in this Section 3 shall be a Termination Event and an Event of
Servicer Termination for all purposes of the Securitization Agreements.
4. Ratification. Each Company hereby ratifies and reaffirms each and every
term, covenant and condition set forth in the Securitization Agreements and all
other documents delivered by such Company in connection therewith (including
without limitation the other Related Documents to which each Company is a
party), effective as of the date hereof.
5. Waiver by the Seller and Cone Mills. Each of the Seller and Cone Mills
hereby waives any claim, defense, demand, action or suit of any kind or nature
whatsoever against the Purchaser, the Operating Agent or the Collateral Agent
arising on or prior to the date hereof in connection with any of the
Securitization Agreements or the transactions contemplated thereunder.
32
<PAGE>
6. Conditions to Effectiveness. This Amendment shall become effective, upon
the Effective Date, subject to the satisfaction of the following conditions on
or prior to such date: (a) the receipt by the Operating Agent of this Amendment,
duly executed, completed and delivered by each of the Companies, Redwood, the
Collateral Agent and the Operating Agent; (b) the receipt by the Operating Agent
of all fees and expenses payable to Redwood, the Collateral Agent or the
Operating Agent, respectively, in connection with this Amendment including
without limitation the reasonable legal fees and other reasonable out of pocket
expenses of Redwood, the Collateral Agent or the Operating Agent incurred in
connection with this Amendment; and (c) the receipt by the Operating Agent of
the amendment fee due in connection with this Amendment under the Fee Letter.
7. Reimbursement of Expenses. Each Company hereby agrees that it shall
reimburse Redwood, the Collateral Agent and the Operating Agent on demand for
all reasonable costs and expenses (including without limitation reasonable
attorney's fees) incurred by such parties in connection with the negotiation,
documentation and consummation of this Amendment and the other documents
executed in connection herewith and therewith and the transactions contemplated
hereby and thereby.
8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK FOR CONTRACTS TO BE PERFORMED
ENTIRELY WITHIN SAID STATE.
9. Severability of Provisions. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. To the extent
permitted by Applicable Law, each Company hereby waives any provision of law
that renders any provision hereof prohibited or unenforceable in any respect.
10. Counterparts. This Amendment may be executed in any number of several
counterparts, all of which shall be deemed to constitute but one original and
shall be binding upon all parties, their successors and permitted assigns.
11. Entire Agreement. The Securitization Agreements as amended by this
Amendment embody the entire agreement between the parties hereto relating to the
subject matter hereof and supersede all prior agreements, representations and
understandings, if any, relating to the subject matter hereof.
12. Cone Mills' and GECC's Capacities. Cone Mills is executing and
delivering this Amendment both in its capacity as an Originator under the
Transfer Agreement and as the Servicer under the Purchase Agreement and all
references herein to "Cone Mills" shall be deemed to include it in both such
capacities unless otherwise expressly indicated. GECC is executing and
delivering this Amendment both in its capacity as the Operating Agent for
Redwood and as the Collateral Agent for Redwood and the Purchaser Secured
Parties, and all references herein to "GECC" shall be deemed to include it in
both such capacities unless otherwise expressly indicated.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CONE RECEIVABLES II LLC
By /s/ Samir M. Gabriel
Name: Samir M. Gabriel
Title: President
REDWOOD RECEIVABLES CORPORATION
By: /s/Joe Wiles
Name: Joe Wiles
Title: Assistant Secretary
CONE MILLS CORPORATION, as an
Originator and as Servicer
By: /s/ Gary L. Smith
Name: Gary L. Smith
Title: EVP and CFO
GENERAL ELECTRIC CAPITAL
CORPORATION as Operating Agent
and as Collateral Agent
By: /s/ Craig Winslow
Name: Craig Winslow
Duly Authorized Signatory
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Exhibit 2.1(f)
FOURTH AMENDMENT TO SECURITIZATION AGREEMENTS
AND ADDITIONAL ORIGINATOR JOINDER AGREEMENT
THIS FOURTH AMENDMENT TO SECURITIZATION AGREEMENTS AND ADDITIONAL
ORIGINATOR JOINDER AGREEMENT (this "Amendment"), made and entered into as of
April 24, 2000, by and between CONE RECEIVABLES II LLC, a North Carolina limited
liability company ("CRLLC"), CONE MILLS CORPORATION, a North Carolina
corporation ("Cone Mills"), CONE FOREIGN TRADING LLC, a North Carolina limited
liability company ("CFT"; each of CRLLC, Cone Mills and CFT a "Company" and,
collectively, the "Companies"), REDWOOD RECEIVABLES CORPORATION, a Delaware
corporation ("Redwood"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation ("GECC"), in its capacities as Operating Agent, Collateral Agent,
Letter of Credit Provider and Letter of Credit Agent.
W I T N E S E T H:
WHEREAS, Cone Mills and CRLLC are parties to a certain Receivables Transfer
Agreement, dated as of September 1, 1999 (as amended to the date hereof, the
"Transfer Agreement"; capitalized terms used herein and not otherwise defined
herein shall have the meanings given such terms in Annex X to the Transfer
Agreement as amended through this Amendment), whereby Cone Mills has agreed (and
each Subsidiary of Cone Mills which thereafter becomes an Originator will agree)
to sell, contribute or otherwise transfer to CRLLC, and CRLLC has agreed to
purchase or otherwise acquire from such Originators, all of the right, title and
interest of such Originators in the Receivables; and
WHEREAS, CRLLC, as Seller, Redwood, as Purchaser, Cone Mills, as Servicer,
and GECC, as Operating Agent and as Collateral Agent, are parties to a certain
Receivables Purchasing and Servicing Agreement, dated as of September 1, 1999
(as amended to the date hereof, the "Purchase Agreement"), whereby Purchaser has
agreed, among other things, to purchase from CRLLC from time to time the
Receivables sold or contributed to CRLLC pursuant to the Transfer Agreement; and
WHEREAS, Redwood and GECC, as Liquidity Agent and the sole Liquidity
Lender, are parties to that certain Liquidity Loan Agreement, dated as of
September 1, 1999 (the "Liquidity Loan Agreement"); and
WHEREAS, Redwood and GECC, as Letter of Credit Provider and Letter of
Credit Agent, are parties to that certain Reimbursement Agreement Supplement,
dated as of September 1, 1999 (the "RFC Supplement"; the Transfer Agreements,
the Liquidity Loan Agreement and the RFC Supplement, collectively, the
"Securitization Agreements"); and
WHEREAS, the Transfer Agreement and the Purchase Agreement were amended
pursuant to that certain First Amendment and Waiver to Securitization
Agreements, dated as of November 16, 1999, among the parties hereto, that
certain Second Amendment to Securitization Agreements, dated as of January 28,
2000, among the parties thereto, and that certain Third Amendment to
Securitization Agreements, dated as of March 31, 2000, among the parties
thereto; and
35
<PAGE>
WHEREAS, Cone Mills has requested that CFT, a Subsidiary of Cone Mills,
become an Originator under the Transfer Agreement, and the parties are willing
to allow CFT to become an Originator subject to the terms and conditions of this
Amendment; and
WHEREAS, Cone Mills has also requested that the Securitization Agreements
be further amended in certain respects as set forth in this Amendment, and the
parties hereto are willing to agree to such amendments subject to the terms and
conditions of this Amendment.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Joinder of CFT as an Additional Originator. Subject to the terms and
conditions of this Amendment, including without limitation the fulfillment of
the conditions precedent specified in Section 7 below, CFT is hereby made an
Originator under the Transfer Agreement with the same force and effect as if CFT
were originally named therein as an Originator. CRLLC and the Operating Agent
hereby waive the requirement in Section 2.03 of the Transfer Agreement that Cone
Mills give CRLLC and the Operating Agent prior written notice of the addition of
CFT as an Originator. Subject to the terms and conditions of this Amendment
(including without limitation the fulfillment of the conditions precedent
specified in Section 7 below), CRLLC and the Operating Agent hereby consent to
such addition. From and after the Fourth Amendment Effective Date, any reference
to an "Originator" in the Transfer Agreement or any other Related Document shall
include CFT in such capacity. CFT hereby agrees to all of the terms and
conditions of the Transfer Agreement applicable to it as an Originator and
agrees to be bound thereby. CFT hereby represents and warrants that all
representations and warranties in the Transfer Agreement applicable to it as an
Originator are true and correct on and as of the Fourth Amendment Effective Date
and are hereby deemed made on and as of such date (except to the extent that any
such representation or warranty expressly referred to a specific prior date).
Without limiting the generality of the foregoing, CFT agrees to instruct all
existing and future Obligors on its Transferred Receivables to make payments
thereof only by wire transfer directly to one of the Lockbox Accounts or by way
of a check mailed to one of the Lockboxes. Within 60 days after the Fourth
Amendment Effective Date, CFT shall either (i) close any and all lockboxes and
lockbox deposit accounts used by CFT for the collection of its Receivables
(other than the Lockboxes and the Lockbox Accounts) or (ii) take such actions
and execute such documents as the Operating Agent may request to cause such
lockboxes and lockbox deposit accounts to be transferred to CRLLC and to become
Lockboxes and Lockbox Accounts, respectively.
2. Amendments of Securitization Agreements. Subject to the terms and
conditions of this Amendment, including without limitation the fulfillment of
the conditions precedent specified in Section 7 below, the Securitization
Agreements shall be amended as follows:
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<PAGE>
(A) Annex 1 to the Purchase Agreement shall be deleted in its entirety.
(B) Annex G to the Purchase Agreement shall be amended by deleting subpart
(iv) of part (c) thereof and by substituting the following new subpart (iv) in
lieu thereof:tituting the following new subpart (iv) in lieu thereof:
(iv) Receivables Collection Turnover shall be less than 65 days; and
(C) Annex G to the Purchase Agreement shall be further amended by deleting
therefrom the definition of the term "Interest Expense" and by substituting the
following new definition of such term in lieu thereof:
"Interest Expense" shall mean, with respect to any Person for any fiscal
period, interest expense (whether cash or non-cash) of such Person determined on
a consolidated basis in accordance with GAAP for the relevant period ended on
such date, including (a) amortization of original issue discount on any Debt and
of all fees payable in connection with the incurrence of such Debt (to the
extent included in interest expense), (b) the interest component of any Capital
Lease Obligation, (c) with respect to Cone Mills and Seller only, Redwood Yield
and fees (other than servicing fees), (d) with respect to Cone Mills only,
amounts paid or payable by Cone Mills under the Morgan Swap Agreement, and (e)
with respect to Cone Mills only, net cash paid with respect to interest,
discount, yield, and fees owed by Cone Mills or any of its Subsidiaries under
the Existing Receivables Purchase Facility.
(D) Annex X to the Transfer Agreement and the Purchase Agreement shall be
amended by deleting therefrom the definitions of the terms "Concentration
Discount Amount", "Defaulted Receivable" "Excluded Obligor", "Foreign Receivable
Election Date", "Maximum Purchase Limit", and "Non-Transferred Receivable" and
by substituting the following new respective definitions of such terms in lieu
thereof:
"Concentration Discount Amount" means, with respect to any Obligor and its
Affiliates and as of any date of determination thereof, the greater of (i) the
percentage of the aggregate Outstanding Balance at such time of all Eligible
Receivables set forth in the table below based upon the Senior Unsecured
Short-Term Debt Rating (or, in the absence of such rating, the equivalent Senior
Unsecured Long-Term Debt Rating) assigned to such Obligor at such time by S&P
and Moody's (and, if such Obligor is rated by both agencies and has a split
rating, the applicable rating will be the lower of the two) and (ii) the Special
Limit, if any, applicable to such Obligor:
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<PAGE>
<TABLE>
<S> <C> <C>
- ---------------------------------- ------------------------------- ----------------------
MINIMUM S&P RATING MINIMUM MOODY'S RATING APPLICABLE PERCENTAGE
- ---------------------------------- ------------------------------- ----------------------
- ---------------------------------- ------------------------------- ----------------------
A-1+ or AA- P-1 or Aa3 15.0%
- ---------------------------------- ------------------------------- ----------------------
- ---------------------------------- ------------------------------- ----------------------
A-1 or A+ P-1 or A1 15.0%
- ---------------------------------- ------------------------------- ----------------------
- ---------------------------------- ------------------------------- ----------------------
A-2 or BBB+ P-2 or Baa1 10.0%
- ---------------------------------- ------------------------------- ----------------------
- ---------------------------------- ------------------------------- ----------------------
A-3 or BBB- P-3 or Baa3 5.0%
- ---------------------------------- ------------------------------- ----------------------
- ---------------------------------- ------------------------------- ----------------------
Below A-3 or BBB- or not rated Below P-3 or Baa3 or not 3.0%
by either S&P or Moody's rated by either S&P or Moody's
- ---------------------------------- ------------------------------- ----------------------
</TABLE>
If an Obligor has neither a Senior Unsecured Short-Term Debt Rating or a
Senior Unsecured Long-Term Debt Rating by either S&P or Moody's, then such
Obligor's Concentration Discount Amount will be 3% of the aggregate Outstanding
Balance at such time of all Eligible Receivables. The percentages referenced
above may be changed with respect to any or all Obligors at any time at the sole
discretion of the Operating Agent and, in the case of an increase only, upon
satisfaction of the Rating Agency Condition with respect thereto.
"Defaulted Receivable" shall mean any Receivable (a) with respect to which
any payment, or part thereof, remains unpaid for more than 90 days (or 30 days
in the case of any Receivable owed by Levi Strauss or any Affiliate thereof)
after its Maturity Date or 180 days (or 90 days in the case of any Receivable
owed by Levi Strauss or any Affiliate thereof) from its original invoice date,
(b) with respect to which the Obligor thereunder has taken any action, or
suffered any event to occur, of the type described in Sections 9.01(c) or
9.01(d) of the Purchase Agreement or (c) that otherwise is determined to be
uncollectible and is written off in accordance with the Credit and Collection
Policies.
"Excluded Obligor" shall mean any Obligor (a that is an Affiliate of any
Originator or the Seller, (b) that is a Governmental Authority, (c) with respect
to which 50% (or 25% in the case of Levi Strauss, VF Corporation or Springs
Industries) or more of the aggregate Outstanding Balance of all Receivables
owing by such Obligor and its Affiliates are Defaulted Receivables (but solely
for purposes of this definition a Receivable owed by Springs Industries or VF
Corporation or any Affiliate of Springs Industries or VF Corporation shall be
considered a Defaulted Receivable if such Receivable or any part thereof remains
unpaid for more than (i) 60 days after its Maturity Date in the case of Springs
Industries or VF Corporation or any Affiliate of Springs Industries or VF
Corporation, (ii) 90 days from its original invoice date in the case of Springs
Industries or any Affiliate thereof or (iii) 120 days after its original invoice
date in the case of VF Corporation or any Affiliate thereof), or (d) listed on
Annex 2 to the Purchase Agreement as revised from time to time pursuant to a
letter in the form of Exhibit A thereto.
"Foreign Receivable Election Date" shall mean the Fourth Amendment
Effective Date.
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"Maximum Purchase Limit" shall mean $65,000,000, as such amount may be
reduced in accordance with Section 2.02(a) of the Purchase Agreement; provided
that for purposes of the Purchase Agreement and the other Related Documents, the
Maximum Purchase Limit shall be $60,000,000 unless and until it is increased to
$65,000,000 pursuant to Section 2.02(c).
"Non-Transferred Receivable" shall mean either (1) any Receivable on which
the Obligor is Prentiss Manufacturing Company LLC or (2) any Receivable which is
the liability of an Obligor (i) organized under the laws of any jurisdiction
outside of the United States of America or (ii) having its principal place of
business outside of the United States of America, except for (x) Levi Strauss
Canada (but only if and for so long as Levi Strauss Canada is organized under
the laws of a province of Canada other than Quebec and has its principal place
of business in a province of Canada other than Quebec) and (y) Levi Strauss
Europe (but only if and for so long as Levi Strauss Europe is organized under
the laws of Belgium and has its principal place of business in Belgium).
(E) Annex X to the Transfer Agreement and the Purchase Agreement shall be
further amended by adding the following new definitions thereto:
"Fourth Amendment Effective Date" shall mean April 24, 2000. "Levi Strauss
EBITDA" shall mean with respect to Levi Strauss and its Subsidiaries and for any
period, on a consolidated basis and in accordance with GAAP, the sum of (without
duplication) (a) net income plus (b) income tax expense or benefit plus (c)
interest expense plus (d) depreciation expense plus (e) amortization expense
plus (f) Levi Strauss Restructuring Charges, plus (g) any other non-cash
charges.
"Levi Strauss Fixed Charge Coverage Ratio" shall mean with respect to Levi
Strauss and its Subsidiaries and as of any date of determination thereof, on a
consolidated basis and in accordance with GAAP, for the most recent four full
fiscal quarters ending prior to such date, the ratio of (a) Levi Strauss EBITDA
minus the Capital Expenditures (as defined in Annex G) of Levi Strauss and its
Subsidiaries divided by (b) Levi Strauss Fixed Charges; provided that this
definition (and the definitions of the defined terms used in this definition)
may be changed in a manner which increases the Levi Strauss Fixed Charge
Coverage Ratio from time to time by the Operating Agent in its discretion by
written notice to the Seller and the Purchaser.
"Levi Strauss Fixed Charges" shall mean, with respect to Levi Strauss and
its Subsidiaries and for any period, on a consolidated basis and in accordance
with GAAP, the sum of (a) all interest expense paid or accrued during such
period, plus (b) all cash income taxes paid during such period, plus (c)
scheduled payments of principal with respect to Debt made during such period,
plus (d) cash dividends or other cash distributions on such Person's Stock
(common or preferred) made or paid during such period.
"Levi Strauss Restructuring Charges" shall mean, with respect to Levi
Strauss and its Subsidiaries on a consolidated basis and for each period of four
consecutive fiscal quarters shown below, the amount set forth below for such
period:
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Fourth-Quarter Period Ending: Levi Strauss Restructuring Charge:
March 31, 2000 $720,700,000
June 30, 2000 $720,700,000
September 30, 2000 $740,400,000
December 31, 2000 $497,700,000
March 31, 2001 or thereafter -0-
"Morgan Swap Agreement" shall mean the ISDA Master Agreement, dated as of
July 20, 1998, as supplemented pursuant to that certain letter agreement, dated
as of July 20, 1998, both between Cone Mills and Morgan Guaranty Trust Company
of New York, as amended, modified, supplemented, restated or replaced from time
to time.
"Special Limit" means collectively for Levi Strauss, Levi Strauss Canada,
and Levi Strauss Europe (collectively, the "Levi Strauss Obligors") and as of
any date of determination thereof, (i) 15% if the Levi Strauss Fixed Charge
Coverage Ratio at such time is greater than 1.75:1.00, (ii) 10% if the Levi
Strauss Fixed Charge Coverage Ratio at such time is greater than 1.25:1.00 but
less than or equal to 1.75:1.00, or (iii) 5% if the Levi Strauss Fixed Charge
Coverage Ratio at such time is less than or equal to 1.25:1.00. Notwithstanding
any of the foregoing, (i) if and for so long as more than 50% in aggregate
Outstanding Balance at any one time of the aggregate Receivables owed by the
Levi Strauss Obligors are greater than 60 days past their respective Maturity
Dates or 90 days past their respective original invoice dates, the Special Limit
shall not exceed 10%, (ii) the maximum Special Limit for the Levi Strauss
Obligors shall not exceed 10% until either (a) the Credit Facility as in effect
on the Fourth Amendment Effective Date has been extended for a period of not
less than 364 days or for a shorter period acceptable to Purchaser, the
Operating Agent and the Collateral Agent or refinanced on terms acceptable to
the Purchaser, the Operating Agent, and the Collateral Agent or (b) Cone Mills
shall have obtained a legally binding written commitment for such refinancing or
extension on terms acceptable to the Purchaser, the Operating Agent, and the
Collateral Agent, and in either such case with the Credit Facility Lenders or
with another lender or lenders acceptable to the Purchaser, the Operating Agent
and the Collateral Agent, and (iii) assuming that the condition specified in
clause (ii) above is satisfied, the Special Limit for the Levi Strauss Obligors
thereafter shall not exceed 12.5% from and after the 90th day (and 10% from and
after the 60th day) prior to the expiration date of the Credit Facility as then
in effect unless and until (a) the Credit Facility as then in effect has been
extended for a period acceptable to the Purchaser, the Operating Agent and the
Collateral Agent or refinanced on terms acceptable to the Purchaser, the
Operating Agent and the Collateral Agent or (b) Cone Mills shall have obtained a
legally binding written commitment for such refinancing or extension on terms
acceptable to the Purchaser, the Operating Agent and the Collateral Agent, and
in either such case with the Credit Facility Lenders or with another lender or
lenders acceptable to the Purchaser, the Operating Agent and the Collateral
Agent. The Special Limit may be changed at any time at the sole discretion of
the Operating Agent and, in the case of an increase only, upon satisfaction of
the Rating Agency Condition with respect thereto.
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(F) Annex 5.02(a) to the Purchase Agreement shall be amended by deleting
the reference to "each fiscal quarter" which appears in the second line of
paragraph (c) of such annex and by substituting in lieu thereof a reference to
"each of the first three (3) fiscal quarters of each fiscal year."
(G) Annex 5.02(a) to the Purchase Agreement shall be further amended by
adding thereto the following new paragraphs (k) and (l):
(k) Annual Audited Levi Strauss Financials. As soon as available,and in
any event within 100 days after the end of each fiscal year, a copy of the
audited consolidated financial statements for such year for Levi Strauss and its
Subsidiaries, certified in each case by nationally recognized independent public
accountants, with such financial statements being prepared in accordance with
GAAP applied consistently throughout the period involved (except as approved by
such accountants and disclosed therein).
(l) Quarterly Unaudited Levi Strauss Financials. As soon as available, and
in any event within 50 days after the end of each of the first three (3) fiscal
quarters of each fiscal year, financial information regarding Levi Strauss and
its Subsidiaries, consisting of consolidated (i) unaudited balance sheets as of
the close of such fiscal year and the related statements of income and cash
flows for that portion of the fiscal year ending as of the close of such fiscal
quarter and (ii) unaudited statements of income and cash flows for such fiscal
quarter, setting forth in comparative form the figures for the corresponding
period in the prior year, all prepared in accordance with GAAP.
(H) Schedules 4.01(b) and 4.01(t) to the Transfer Agreement shall be
deleted in their entireties and the revised Schedules 4.01(b) and 4.01(t)
attached to this Amendment shall be substituted in lieu thereof, respectively.
(I) The RFC Supplement shall be amended by deleting the reference to "5.0%"
which appears in part (x)(a) of Annex 1 thereto and by substituting a reference
to "12.5%" in lieu thereof.
(J) The RFC Supplement shall be further amended by deleting the references
to "12.5%" which appear in part (x)(b)(ii) and part (y) of Annex 1 thereto and
by substituting references to "20.0%" in lieu thereof.
(K) The Liquidity Loan Agreement shall be amended by adding the following
proviso to the parenthetical clause which follows the words "Defaulted
Receivable" in clause (b)(ii) of the definition of the term "CRLLC Collateral
Base" in Section 1.01 of the Liquidity Loan Agreement:
; provided, however,that for purposes of this definition only, a Receivable
owed by Levi Strauss or any Affiliate thereof shall not be considered a
Defaulted Receivable under part (a) of the definition of such term in Annex
X to the Purchase Agreement unless such Receivable or any part thereof
remains unpaid for more than 90 days after its Maturity Date or 180 days
from its original invoice date
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(L) The Liquidity Loan Agreement shall be further amended by adding the
following new definition to Section 1.01 thereof:
"Liquidity Transfer Date" means the date on which any of the events set
forth in Section 9.01 or Section 9.02 of the Purchase Agreement shall have
occurred.
(M) The Liquidity Loan Agreement shall be further amended by adding the
following new Section 2.05 thereto:
SECTION 2.05 Liquidity Transfer.
(a) On or after any Liquidity Transfer Date, if the Company ( or the
Operating Agent on its behalf) so elects, by notice to the Liquidity Agent, the
Collateral Agent and each of the Liquidity Lenders (the date of the receipt by
the Liquidity Agent of any such notice being the "Transfer Date", provided that
if such date is not a Business Day the Transfer Date shall be the Business Day
immediately following such date), the Company does hereby transfer and assign,
effective as of the Transfer Date, all of its interests in the Transferred
Receivables and the Company Collateral at such time (including the Company's
interests in the Purchase Agreement and the other Related Documents in
accordance with Section 14.02 of the Purchase Agreement) to the Liquidity
Lenders; provided however, that no such assignment shall take place pursuant to
this Section 2.05(a) at any time when any of the events set forth in Sections
7.01(h), 7.01(i) or 7.01(k) shall have occurred. Each Liquidity Lender hereby
agrees, unconditionally and irrevocably and under all circumstances, without
setoff, counterclaim or defense of any kind, to pay on such Transfer Date to the
Company in immediately available funds to an account designated by the Company
an amount (up to the unused amount of such Liquidity Lender's Percentage of the
Liquidity Commitment on the Transfer Date) equal to such Liquidity Lender's
Percentage of an amount (such amount being such Liquidity Lender's "Transfer
Price") equal to (A) on each Transfer Date on or after the Facility Termination
Date, the positive difference (if any) of (i) the Allocated CP Face Amount as of
the Transfer Date minus (ii) the aggregate amount, if any, applied or to be
applied on the Transfer Date from amounts transferred on that day from the
Collection Account to the Collateral Account, in accordance with Section 6.05 of
the Purchase Agreement to the Commercial Paper Account in accordance with
Section 6.02(i) of the Collateral Agent Agreement minus (iii) without
duplication of amounts specified in clause (ii) above, CRLLC LOC Draws
Outstanding plus (iv) Outstanding Liquidity Loans minus (v) CRLLC Liquidity
Deposits plus (vi) CRLLC LOC Deposits, or (B) on each Transfer Date before a
Facility Termination Date, the positive difference (if any) of (i) the Allocated
CP Face Amount as of the Transfer Date minus (ii) the aggregate amount, if any,
applied or to be applied on the Transfer Date from amounts transferred on that
day from the Collection Account in accordance with Section 6.03 of the Purchase
Agreement, to the Commercial Paper Account in accordance with Section 6.02(i) of
the Collateral Agent Agreement minus (iii) without duplication of amounts
specified in clause (ii) above, CRLLC LOC Draws Outstanding plus (iv)
Outstanding Liquidity Loans minus (v) CRLLC Liquidity Deposits plus (vi) CRLLC
LOC Deposits. Upon payment of the Transfer Price, each Liquidity Lender shall
acquire an interest in the Transferred Receivables and the Company Collateral
(including the Company's interests in the Purchase Agreement and other Related
Documents pursuant to Section 14.02 of the Purchase Agreement) equal to its
Percentage thereof. Upon any transfer as contemplated hereunder, the Company
shall cease to make any additional purchases under the Purchase Agreement.
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(b) Upon request by the Company (or the Operating Agent on its behalf)
given upon or after any transfer described in Section 2.05(a), the Liquidity
Lenders shall, at their own expense, promptly execute and deliver such
instruments of transfer and other documents and take such other actions as may
be necessary to effect a transfer by the Company to, and acceptance and
assumption by, the Liquidity Lenders, ratably in accordance with their
respective Percentages, of all of the Company's rights, titles, interests and
obligations under the Purchase Agreement and the other Program Documents, so
that the Company shall no longer be a party to the Purchase Agreement and the
other Program Documents. Any such transfer shall be without representation,
warranty or recourse to the Company, except that the Company shall represent and
warrant to the Liquidity Lenders that the Company has not created any Liens on
the transferred interests other than as described in Section 8.03 of the
Purchase Agreement, which the Collateral Agent hereby releases upon such
transfer. Upon the request of the Liquidity Agent, the Collateral Agent shall
deliver all instruments and documents and take such other actions as may be
necessary to evidence the release of its security interest in accordance with
the preceding sentence. The Liquidity Commitment shall be terminated immediately
after giving effect to the transfer pursuant to Section 2.05(a).
(c) Notwithstanding any other provision herein or in any Program Document
to the contrary, immediately upon given effect to any transfer pursuant to
Section 2.05(a), each Liquidity Lender and the Liquidity Agent hereby expressly
waives, releases and relinquishes (i) any and all rights and benefits it may
have pursuant to the Collateral Agent Agreement, whether in respect of the
Seller Collateral provided thereunder or otherwise and (ii) any and all rights
it may have pursuant to the Collateral Agent Agreement or any other Program
Document with respect to the proceeds of any Letter of Credit and pursuant to
the Collateral Agent Agreement or any other Program Document, such Liquidity
Lender shall immediately return such proceeds to the Collateral Agent for
application to the Seller Secured Obligations.
(N) The first sentence of each of Sections 2.02(a), 2.02(b) and 2.02(c) of
the Liquidity Loan Agreement shall be amended to begin with the following
language: "So long as no notice has been given pursuant to Section 2.05,".
(O) The following subsection (c) shall be added at the end of Section 4.03
of the Liquidity Loan Agreement:
(c) Notwithstanding the provisions of clauses (a) or (b) above and to the
extent that the Company has available funds, (A) on each Transfer Date on or
after on the Facility Termination Date, the Company shall repay in full any
Outstanding Liquidity Loans and such repayment shall be applied in accordance
with Section 6.05 of the Purchase Agreement and (B) on each Transfer Date before
a Facility Termination Date, the Company shall repay in full any Outstanding
Liquidity Loans and such repayment shall be applied in accordance with Section
6.02 of the Collateral Agent Agreement.
3. No Other Amendments. Except for the addition of CFT as an Originator
pursuant to Section 1 above and the amendments of the Securitization Agreements
expressly set forth and referred to in Section 2 above, the Securitization
Agreements shall remain unchanged and in full force and effect.
43
<PAGE>
4. Representations and Warranties. Each Company hereby represents and
warrants to Redwood, the Operating Agent and the Collateral Agent that (i) this
Amendment has been duly authorized, executed and delivered by each Company, (ii)
after giving effect to this Amendment, no Termination Event, Incipient
Termination Event, Event of Servicer Termination or Incipient Servicer
Termination Event has occurred and is continuing as of the Fourth Amendment
Effective Date, and (iii) all of the representations and warranties made by each
Company in the Securitization Agreements are true and correct in all material
respects on and as of the Fourth Amendment Effective Date (except to the extent
that any such representation or warranty expressly referred to a specific prior
date). Any breach in any material respect by any Company of any of its
representations and warranties contained in Section 1 above or in this Section 4
shall be a Termination Event and an Event of Servicer Termination for all
purposes of the Securitization Agreements.
5. Ratification. Each Company hereby ratifies and reaffirms each and every
term, covenant and condition set forth in the Securitization Agreements and all
other documents delivered by such Company in connection therewith (including
without limitation the other Related Documents to which each Company is a
party), effective as of the Fourth Amendment Effective Date hereof.
6. Waiver by the Companies. Each of the Companies hereby waives any claim,
defense, demand, action or suit of any kind or nature whatsoever against the
Purchaser, the Operating Agent or the Collateral Agent arising on or prior to
the Fourth Amendment Effective Date in connection with any of the Securitization
Agreements or the transactions contemplated thereunder.
7. Conditions Precedent to Effectiveness. This Amendment shall become
effective, upon the Fourth Amendment Effective Date, subject to the satisfaction
of the following conditions on or prior to such date:
(A) the receipt by the Operating Agent of this Amendment, duly executed,
completed and delivered by each of the Companies, Redwood, the Collateral
Agent and the Operating Agent;
(B) the receipt by the Operating Agent of the other documents, instruments,
agreements, certificates, financing statements, and legal opinions listed
on Annex Y attached to this Amendment, each in form and substance
satisfactory to the Operating Agent and Redwood; and
(C) the receipt by the Operating Agent of all fees and expenses payable to
Redwood, the Collateral Agent or the Operating Agent, respectively, in
connection with this Amendment including without limitation the reasonable
legal fees and other reasonable out of pocket expenses of Redwood, the
Collateral Agent or the Operating Agent incurred in connection with this
Amendment.
44
<PAGE>
8. Reimbursement of Expenses. Each Company hereby agrees that it shall
reimburse Redwood, the Collateral Agent and the Operating Agent on demand for
all reasonable costs and expenses (including without limitation reasonable
attorney's fees) incurred by such parties in connection with the negotiation,
documentation and consummation of this Amendment and the other documents
executed in connection herewith and therewith and the transactions contemplated
hereby and thereby.
9. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK FOR CONTRACTS TO BE PERFORMED
ENTIRELY WITHIN SAID STATE.
10. Severability of Provisions. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. To the extent
permitted by Applicable Law, each Company hereby waives any provision of law
that renders any provision hereof prohibited or unenforceable in any respect.
11. Counterparts. This Amendment may be executed in any number of several
counterparts, all of which shall be deemed to constitute but one original and
shall be binding upon all parties, their successors and permitted assigns.
12. Entire Agreement. The Securitization Agreements as amended and
supplemented by this Amendment embody the entire agreement between the parties
hereto relating to the subject matter hereof and supersede all prior agreements,
representations and understandings, if any, relating to the subject matter
hereof.
13. Cone Mills' and GECC's Capacities. Cone Mills is executing and
delivering this Amendment both in its capacity as an Originator under the
Transfer Agreement and as the Servicer under the Purchase Agreement and all
references herein to "Cone Mills" shall be deemed to include it in both such
capacities unless otherwise expressly indicated. GECC is executing and
delivering this Amendment both in its capacity as the Operating Agent for
Redwood and as the Collateral Agent for Redwood and the Purchaser Secured
Parties, and all references herein to "GECC" shall be deemed to include it in
both such capacities unless otherwise expressly indicated.
45
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CONE RECEIVABLES II LLC
By /s/ Samir M. Gabriel
Name: Samir M. Gabriel
Title: President
REDWOOD RECEIVABLES CORPORATION
By /s/ Joe Wiles
Name: Joe Wiles
Title: Assistant Secretary
CONE MILLS CORPORATION, as an
Originator and as Servicer
By: /s/ David E. Bray
Name: David E. Bray
Title: Treasurer
CONE FOREIGN TRADING LLC
By: /s/ David E. Bray
Name: David E. Bray
Title: Treasurer
GENERAL ELECTRIC CAPITAL CORPORATION,
as Operating Agent and as
Collateral Agent
By: /s/ Craig Winslow
Name: Craig Winslow
Duly Authorized Signatory
46
<PAGE>
FOURTH AMENDMENT TO SECURITIZATION AGREEMENTS AND
ADDITIONAL ORIGINATOR JOINDER AGREEMENT
dated as of
April 24, 2000
Schedule of Documents
In addition to, and not in limitation of, the conditions specified in
Section 7 of the Amendment described below, the following documents must be
received by the Operating Agent in form and substance satisfactory to the
Purchaser and the Operating Agent on or prior to the Fourth Amendment Effective
Date:
A. Receivables Purchase and Transfer Documents
1. Fourth Amendment to Securitization Agreements and Additional Originator
Joinder Agreement, dated as of April 24, 2000 (the "Amendment"), among Cone
Mills Corporation, a North Carolina corporation ("Cone Mills"), as an originator
and servicer (the "Servicer"), Cone Foreign Trading LLC, a North Carolina
limited liability company ("CFT"), as additional originator (the "Additional
Originator"), Cone Receivables II LLC, a North Carolina limited liability
company ("CRLLC"), as seller (the "Seller"), Redwood Receivables Corporation
("Redwood"), as purchaser (the "Purchaser"), and General Electric Capital
Corporation ("GE Capital"), as operating agent (the "Operating Agent") and as
collateral agent (the "Collateral Agent").
2. Receivable Assignment, dated as of April 24, 2000 (the "Additional
Originator Assignment"), executed by the Additional Originator.
3. Consent to Appointment of Sub-Servicer of CFT Receivables, dated as of
April 24, 2000, from the Purchaser, the Operating Agent and the Collateral
Agent.
4. Sub-Servicing Agreement, dated as of April 24, 2000 (the "Sub-Servicing
Agreement"), between the Servicer and CFT as Sub-Servicer (the "Sub-Servicer").
5. Power of Attorney executed by the Additional Originator to GE Capital in
its capacity as Collateral Agent.
6. Bringdown Certificate, dated as of April 24, 2000, executed by an
authorized officer of the Seller.
7. Bringdown Certificate, dated as of April 24, 2000, executed by an
authorized officer of the Servicer.
8. Bringdown Certificate, dated as of April 24, 2000, executed by an
authorized officer of the Sub-Servicer.
9. Officer's Certificate as to Solvency, dated as of April 24, 2000,
executed by an authorized officer of the Additional Originator.
47
<PAGE>
10. Additional Originator Acknowledgment, Consent and Agreement dated as of
April 24, 2000 (the "Intercreditor Agreement Supplement"), executed by the
Additional Originator and consented to by Cone Mills, the Seller, the Purchaser,
the Operating Agent, the Collateral Agent and the Credit Facility Agents.
11. Parent Agreement, dated as of April 24, 2000, executed by an authorized
officer of Cone Mills (the "Parent Agreement").
12. Notice of Transfer, dated as of April 24, 2000, from the Additional
Originator to Levi Strauss Europe.
B. Legal Opinions
13. Opinion of Schell, Bray, Aycock, Abel & Livingston, P.L.L.C., counsel
for Cone Mills, the Additional Originator, the Servicer and the Seller,
regarding, among other things, enforceability and perfection of security
interests in respect of the Amendment and the transactions contemplated thereby.
14. Opinion of Schell, Bray, Aycock, Abel & Livingston, P.L.L.C., counsel
for Cone Mills, the Additional Originator, the Servicer, and the Seller,
regarding true sale.
15. Opinion of Schell, Bray, Aycock, Abel & Livingston, P.L.L.C., counsel
for Cone Mills, the Additional Originator, the Servicer and the Seller,
regarding substantive consolidation.
16. Opinion of Kilpatrick Stockton, LLP, special counsel to the Purchaser
and the Operating Agent, regarding creation of security interests.
17. Opinion of Ashurst, Morris, Crisp, special counsel to the Purchaser and
the Operating Agent, regarding certain Belgian law matters.
C. Corporate Documents
Cone Mills
18. Articles of Incorporation for Cone Mills, certified by the Secretary of
State of North Carolina.
19. Good standing certificate for Cone Mills issued by the Secretary of
State of North Carolina.
20. A certificate of the Secretary of Cone Mills certifying copies of (a)
the articles of incorporation of Cone Mills; (b) the by-laws of Cone Mills; (c)
the resolutions of Cone Mills's Board of Directors approving the Amendment, the
Sub-Servicing Agreement, the Intercreditor Agreement Supplement, the Parent
Agreement, and the other instruments, documents and agreements to be executed
and/or delivered by it in connection therewith and the transactions contemplated
thereby; and (d) the names and true signatures of the incumbent officers of Cone
Mills authorized to sign such documents; and certifying such other matters as
may be requested by the Purchaser or the Operating Agent.
48
<PAGE>
CRLLC
21. Articles of Organization for CRLLC certified by the Secretary of State
of North Carolina.
22. Good standing certificate for CRLLC issued by the Secretary of State of
North Carolina.
23. A certificate of the Secretary of CRLLC, certifying copies of (a) the
articles of organization of CRLLC; (b) the operating agreement of CRLLC; (c) the
resolutions of CRLLC's managers approving the Amendment, the Intercreditor
Agreement Supplement and the other instruments, documents and agreements to be
executed and/or delivered by it in connection therewith and the transactions
contemplated thereby; and (d) the names and true signatures of the incumbent
officers of CRLLC authorized to sign the transaction documents; and certifying
such other matters as may be requested by the Purchaser or the Operating Agent.
CFT
24. Articles of Origination for CFT, certified by the Secretary of State of
North Carolina.
25. Good standing certificate for CFT issued by the Secretary of State of
North Carolina.
26. A certificate of the Secretary of CFT, certifying copies of (a) the
articles of organization of CFT; (b) the operating agreement of CFT; (c) the
resolutions of CFT's sole member approving the Amendment, the Sub-Servicing
Agreement, the Additional Originator Assignment, the Intercreditor Agreement
Supplement and the other instruments, documents and agreements to be executed
and/or delivered by it in connection therewith and the transactions contemplated
thereby; and (d) the names and true signatures of the incumbent officers of CFT
authorized to sign such documents; and certifying such other matters as may be
requested by the Purchaser or the Operating Agent.
D. Lien Searches and Filings
Pre-Closing Searches
27. Pre-Closing UCC Lien Search Reports under the Additional Originator's
corporate and trade names listed on Annex I attached hereto in each of the
offices of the Secretary of State of North Carolina and the Register of Deeds of
Guilford County, North Carolina.
28. Pre-Closing Tax Lien, Pending Suit and Judgment Searches under the
Additional Originator's corporate and trade names listed on Annex II attached
hereto in each of the offices of the Secretary of State of North Carolina and
the Register of Deeds of Guilford County, North Carolina.
49
<PAGE>
CFT
29. Copies of UCC-1 Financing Statements in respect of the Transferred
Receivables naming CFT as debtor/seller and the Seller as secured
party/purchaser and the Collateral Agent as assignee as filed with the Secretary
of State of North Carolina and the Register of Deeds of Guilford County, North
Carolina.
30. Post-Filing UCC Lien Search Reports against Cone Mills confirming that
each of the UCC-1 Financing Statements described in the preceding item has been
filed and is of record in the jurisdiction in which it was filed.
E. Rating Confirmation
31. Confirmation that the Rating Agency Condition will be satisfied after
giving effect to the execution, delivery and consummation of the Amendment by
Redwood.
F. Other Documents
32. Such other consents, opinions, documents or instruments as the
Purchaser or the Operating Agent may request.
50
<PAGE>
Exhibit 10.18 May 9, 2000
CONE MILLS CORPORATION
2000 STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purpose. The purpose of the 2000 Stock Compensation Plan For
Non-Employee Directors (the "Plan") of Cone Mills Corporation (the "Company") is
(a) to provide for the payment of directors' fees in Stock of the Company in
order to conserve the Company's cash and more closely to align the interests of
the directors and the Company's shareholders and (b) to permit nonemployee
directors to defer payment of such fees.
2. Definitions. Whenever used in this Plan, the following capitalized terms
shall mean the following:
"Account" shall mean the bookkeeping account established by the Company to
record a Participant's Deferred Stock Units.
"Act" shall mean the Securities Act of 1933, as amended.
"Administrator" shall mean a director other than an Eligible Director,
appointed by the Board of Directors to administer the Plan. The Administrator
shall not be eligible to participate in the Plan.
"Beneficiary" shall mean the person(s) to receive the Stock following a
Participant's death, as most recently designated by the Participant in a written
instrument delivered to the Administrator or, absent such designation, the
Participant's estate. If more than one person is named as Beneficiary,
distributions shall be made pro rata to such persons, except when otherwise
indicated by the Participant.
"Deferred Feature" shall mean the provisions of the Plan that permit an
Eligible Director to defer payment of his Director's Fees on the terms and
conditions of the Plan.
"Deferred Stock Unit" shall mean the equivalent of one share of Stock and
shall evidence an unsecured, unfunded right to receive from the Company one
share of Stock, subject to the conditions contained in the Plan.
"Determination Date" shall mean the Trading Day that is five business days
following the date on which the Company announces its earnings for the most
recently ended fiscal quarter through a generally disseminated press release.
"Director's Fees" shall mean for any period the sum of the amounts payable
in Stock to an Eligible Director as a retainer for serving as a director in that
period and as fees for attendance at regular or special meetings of the Board of
Directors or any committee of the Board for that period. For this purpose, an
annual retainer shall be deemed earned in equal daily increments.
51
<PAGE>
"Distribution Date" shall mean the first Trading Day on or after the date
upon which the Participant ceases to be a director of the Company.
"Eligible Director" shall mean a member of the Board of Directors of the
Company who is not a full-time, salaried employee of the Company or any of its
affiliates or subsidiaries.
"Fair Market Value" for any date shall mean the average of the highest and
lowest prices of the Stock as reported for the New York Stock Exchange Composite
Transactions on that date.
"Participant" shall mean any Eligible Director who has elected, in
accordance with paragraph 5 below, to participate in the Deferred Feature of
this Plan.
"Plan Year" shall mean the fiscal year of the Company, except that the
initial Plan Year shall be the period beginning April 3, 2000, and ending
December 31, 2000.
"Stock" shall mean the Common Stock, par value $0.10 per share, of the
Company.
"Trading Day" shall mean a day on which the Common Stock is traded on the
New York Stock Exchange.
3. Payment of Director's Fees. All Director's Fees shall be payable by the
Company by the issuance to the Directors of certificates evidencing the Stock
issuable in payment of such Director's Fees on the Determination Date or the
Distribution Date if the Eligible Director elects to be a Participant, except
that for the first Plan Year, the payment will be made the later of (i) the
applicable Determination Date or the Distribution Date if the Eligible Director
elects to be a Participant or (ii) within five business days following
shareholder approval of the Plan. The number of shares of Stock issuable in
payment of Director's Fees (or, in the case of a Participant in the Deferred
Feature, the number of Deferred Stock Units credited to his Account) shall be,
as to each Eligible Director, (i) the Director's Fees of that Eligible Director
during the previous fiscal quarter (or, if applicable, during the current fiscal
quarter through the date the Eligible Director ceased to be a director of the
Company) divided by (ii) the Fair Market Value of the Stock on the Determination
Date immediately following the end of such fiscal quarter (or, if applicable, on
the Distribution Date for an Eligible Director who ceased to be a director of
the Company). Any fractional share of Stock (or fractional Deferred Stock Unit)
shall be rounded up to the next whole share (or Unit).
52
<PAGE>
4. Administration. The Plan shall be administered by the Administrator. The
interpretation and construction by the Administrator of the Plan shall be final.
The Administrator shall not be liable for any action or determination made in
good faith with respect to the Plan.
5. Participation. To participate in the Deferred Feature of the Plan during
the initial Plan Year, an Eligible Director must elect to become a Participant
within 30 days after the Plan is adopted by the Board of Directors and, to begin
participating in the Deferred Feature of the Plan for any other Plan Year, an
Eligible Director must elect to become a Participant prior to the beginning of
that Plan Year. An Eligible Director may elect to become a Participant by
completing the election form attached as Exhibit A and delivering it to the
Administrator. An Eligible Director who assumes office during a Plan Year may
elect to participate in the Deferred Feature of the Plan for the remaining
fiscal quarter(s) of that Plan Year by filing a completed election form with the
Administrator prior to the first day of the next full fiscal quarter but no
later than 29 days following his becoming a director. Once made, an election to
participate in the Deferred Feature of the Plan shall continue to be effective
for each successive Plan Year until terminated as provided herein. The
Participant shall have no right to receive any Director's Fees for any Plan Year
for which his election to participate in the Deferred Feature of the Plan is in
effect, regardless of any subsequent termination of such participation, except
for distributions provided for under the Plan. A Participant may elect to
terminate his participation in Deferred Feature by written notice to the
Administrator, effective for the first Plan Year beginning following receipt of
the notice by the Administrator. A Participant who terminates his participation
effective for any Plan Year may participate in the Plan for later Plan Year(s)
by making the above-described election.
6. Deferred Stock Units. Deferred Stock Units shall be credited to the
Account of each Participant automatically as of each Determination Date on which
the number of Deferred Stock Units to be credited is determined pursuant to
paragraph 3 of this Plan and as provided in paragraphs 8 and 9 below. The
Company shall prepare and send to each Participant a statement of his Account as
of the end of each Plan Year, as soon as practicable after that date.
7. Payment of Deferred Stock Units. No Participant shall have any rights to
receive a distribution of the Deferred Stock Units credited to his Account until
his Distribution Date. The distribution shall be made solely in shares of Stock
and shall consist of one share of Stock for each Deferred Stock Unit credited to
the Participant's Account. Distribution of the shares of Stock shall be to the
Participant, if then living; otherwise, the shares shall be distributed to the
Beneficiary.
53
<PAGE>
8. Cash Dividends. In the event of any cash dividends paid by the Company
on the Stock, each Participant's Account shall be adjusted as of the payment
date for the dividend by adding to his account the number of Deferred Stock
Units (rounded up to the next whole Unit) equal to the quotient of (i) the
dividend per share of Stock times the number of Deferred Stock Units credited to
the Account on the record date of the dividend, divided by (ii) the Fair Market
Value of the Stock as of the record date of the dividend.
9. Changes in Stock. In the event of a stock dividend, split-up or
combination of shares, recapitalization or merger in which the Company is the
surviving corporation or other similar capital change (other than a transaction
in which the shareholders of the Company exchange their shares of stock in the
Company), an appropriate and proportionate adjustment shall be made in the
maximum number and kind of shares as to which Deferred Stock Units may be
credited under the Plan. A corresponding adjustment shall likewise be made
changing the number of Deferred Stock Units credited to Accounts and the number
or kind of shares distributable with respect to such Deferred Stock Units. In
the event of a consolidation, merger or other reorganization in which the
Company is not the surviving corporation, or any other such transaction in which
the shareholders of the Company exchange their shares of stock in the Company,
or in the event of complete liquidation of the Company, or in the case of a
tender offer recommended by the Board of Directors, each Participant shall be
entitled to receive the consideration he would have been entitled to had his
Account been distributed immediately prior to the effective date of any such
event.
10. Effective Date. The Plan shall be effective beginning April 3, 2000,
and subject to approval by the Company's shareholders present, or represented,
and eligible to vote at the Company's annual meeting of shareholders to be held
in 2000. The Plan shall be submitted for approval at such meeting. Until the
Plan is approved by the Company's shareholders as required above, no Stock shall
be issued to any Eligible Director under this Plan and all Deferred Stock Units
shall be credited subject to such approval and no distribution of Stock shall be
made with respect to any Participant's Account. If not approved as required
above, the Plan shall be void and all Directors' Fees deferred shall be promptly
disbursed in cash to each Eligible Director or his Beneficiary.
11. Shares Subject to Plan. The maximum aggregate number of shares of Stock
available pursuant to the Plan, subject to adjustment as provided in paragraph 9
above, shall be 300,000 shares of Stock. Shares distributed pursuant to the Plan
may be authorized and unissued shares.
54
<PAGE>
12. Compliance With Securities Laws. The Company shall cause to be filed
and maintained an effective Registration Statement on Form S-8, or a comparable
successor form, to register the shares issuable pursuant to this Plan under the
Act for so long as the Company is eligible to do so, and it shall do all acts
required under applicable state securities laws to permit the issuance of the
shares in compliance with those laws; provided, that in no event shall the
Company be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action that would subject it to general
service of process in any jurisdiction where it is not so subject. If the Stock
is listed upon any stock exchange when shares of Stock are issued pursuant to
this Plan, the Company shall take all action necessary to comply with the
requirements of such exchange relating to the issuance of those shares. Shares
of Stock may be issued under this Plan only if the issuance and delivery of
those shares shall comply with all relevant provisions of state and federal law
including, without limitation, the Act, the rules and regulations promulgated
requirements of any stock exchange upon which the shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance. Each Eligible Director shall consent to the imposition of a
legend on the certificate representing the shares of Stock distributed to him or
her, restricting his or her transferability as required by law or by this Plan.
13. Units Not Transferable. Deferred Stock Units credited pursuant to this
Plan may not be sold, pledged, assigned, or transferred in any manner other than
by will or the laws of descent and distribution and no rights under this Plan
may be exercised during an Eligible Director's lifetime except by him or his
guardian or legal representative.
14. No Shareholder Rights; No Trust. No Participant shall have any rights
as a shareholder with respect to Deferred Stock Units credited to his Account.
Nothing in this Plan shall be deemed to create a trust of any kind or create any
fiduciary relationship. To the extent that any person acquires a right to
receive Stock from the Company under this Plan, that right shall be no greater
than the right of any unsecured general creditor of the Company.
15. Termination and Amendment of Plan. Subject to termination, modification
or amendment as hereinafter provided, the Plan shall continue until
April 2, 2005. No Deferred Stock Units shall be credited under the Plan after
the Plan is terminated (except for adjustments as provided in paragraphs 8 and 9
above), but Stock may be distributed after that date as provided in paragraph 7
above. This Plan may at any time be terminated by the Board of Directors and may
be modified or amended from time to time by the Board of Directors, provided,
however, that no modification or amendment to the Plan shall
55
<PAGE>
become effective unless and until is approved by the Company's
shareholders. The amendment, suspension, or termination of the Plan shall not
alter or impair any of a Participant's rights under the Plan prior to such
amendment, suspension, or termination, without the consent of the Participant.
16. Notices. Any notice under the Plan shall be in writing and shall be
effective when received. Notices to the Participants, and the certificates for
shares issued under the Plan, shall be sent to the applicable address indicated
on the most recently filed election to participate in the Plan, or on the most
recent written notice by the Participant subsequently delivered to the
Administrator. Notices to the Administrator shall be sent to the Administrator
for the Directors' Deferred Stock Compensation Plan, Cone Mills Corporation,
3101 N. Elm Street, Greensboro, North Carolina 27415-6540.
17. Miscellaneous. Nothing in the Plan shall confer upon any Eligible
Director any right to be retained as a director. As used in the Plan, words in
the singular include the plural, and the masculine includes the feminine
genders, as appropriate.
56
<PAGE>
EXHIBIT A
ELECTION
To: Administrator for the
2000 Stock Compensation Plan for Non-Employee Directors
Cone Mills Corporation
Greensboro, North Carolina
I hereby elect to participate in, and agree to be bound by the terms and
conditions of, the Deferred Feature of the Cone Mills Corporation 2000 Stock
Compensation Plan For Non-Employee Directors ("Plan"), a copy of which is
attached hereto. I understand the Plan is unfunded and that this election shall
be effective for the next Plan Year (as defined in the Plan) and for each
successive Plan Year until my participation is terminated as provided in the
Plan.
In the event of my death, I hereby designate as my Beneficiary (as defined
in the Plan) to receive distributions of my Account in accordance with the terms
of the Plan, the following person(s):
Name Name
Address Address
City State Zip City State Zip
Witness Date Director Date
Address
City State Zip
RECEIPT ACKNOWLEDGED
CONE MILLS CORPORATION
By:
Date:
57
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cone
Mills Corporation Consolidated Financial Statements Dated April 2, 2000, and is
qualified in its entirety by reference to such.
</LEGEND>
<CIK> 0000023304
<NAME> Cone Mills Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-2-2000
<PERIOD-START> JAN-3-2000
<PERIOD-END> APR-2-2000
<CASH> 1,025
<SECURITIES> 0
<RECEIVABLES> 65,639
<ALLOWANCES> 5,050
<INVENTORY> 116,892
<CURRENT-ASSETS> 185,673
<PP&E> 464,861
<DEPRECIATION> 249,187
<TOTAL-ASSETS> 487,308
<CURRENT-LIABILITIES> 166,752
<BONDS> 119,227
0
37,366
<COMMON> 2,548
<OTHER-SE> 116,276
<TOTAL-LIABILITY-AND-EQUITY> 487,308
<SALES> 141,677
<TOTAL-REVENUES> 141,677
<CGS> 124,576
<TOTAL-COSTS> 138,002
<OTHER-EXPENSES> (332)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,108)
<INCOME-PRETAX> (1,101)
<INCOME-TAX> (374)
<INCOME-CONTINUING> (277)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (277)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
