UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File No. 1-5137
FIELDCREST CANNON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-0586036
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
326 East Stadium Drive
EDEN, NC 27288
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number (910) 627-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
Common Stock, $1 Par Value New York Stock Exchange
6% Convertible Subordinated
Debentures Due 2012 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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 and (2) has been
subject to such filing requirements for the past 90 days. Yes x .
No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. (x)
The aggregate market value of voting stock held by non-affiliates of
the registrant was $239,582,429 as of March 1, 1994.
NUMBER OF SHARES OUTSTANDING AT MARCH 1, 1994
Common Stock 8,579,767
DOCUMENTS INCORPORATED BY REFERENCE
Part II incorporates information by reference from the annual report
to shareowners for the year ended December 31, 1993. Part III
incorporates information by reference from the proxy statement for the
annual meeting of shareowners to be held on May 16, 1994.
Total pages 156
Page 1
Exhibit Index page 17
<PAGE>
PART I
Item 1. Business
General
The registrant was incorporated under the laws of Delaware in
1953. The registrant operates a single segment business in the
textile industry and is principally involved in the manufacture
and sale of home furnishing products.
On July 30, 1993 the registrant completed the sale of its carpet
and rug division to Mohawk Industries, Inc. for approximately $148
million. The sale resulted in an after-tax net income of $9.2
million. On November 24, 1993 a newly formed and wholly owned
subsidiary of the registrant completed a tender offer for all of
the outstanding shares of Amoskeag Company ("Amoskeag") for a cash
price of $40 per share, or an aggregate of approximately $141.9
million including certain costs. The acquisition has been
accounted for as a purchase by the Company of the net assets of
Amoskeag held for sale at their net realizable values and as the
purchase of treasury stock. Amoskeag owned 3,606,400 shares of
the registrant's common stock which has been assigned a cost of
$117.2 million after a preliminary allocation of $24.7 million to
the net assets of Amoskeag. The registrant is in the process of
selling all of the operating assets of Amoskeag, and the valuation
includes anticipated costs during a one year disposal period.
These assets are primarily the Bangor and Aroostook Railroad and
certain real estate properties.
The registrant and its consolidated subsidiaries design,
manufacture and market a broad range of household textile products
consisting of towels, sheets, blankets, comforters and bath rugs.
The registrant is vertically integrated in that it buys the basic
raw materials consisting principally of cotton and synthetic
fibers and manufactures a finished consumer product. These
products are marketed primarily by the Company's own sales and
marketing staff and distributed nationally to customers for
ultimate retail sale. Customers consist principally of department
stores, chain stores, mass merchants, specialty home furnishing
stores, catalog warehouse clubs and other retail outlets, and
institutional, government and contract accounts.
In 1993 nearly all of the registrant's total sales were comprised
of home furnishings products. Approximately 90% of the Company's
1993 net sales were from sales of products carrying the
registrant's principal brand names of "Fieldcrest," "Royal
Velvet," "Charisma," "St. Marys," "Cannon," "Monticello," and
"Royal Family,"; the remaining 10% were from sales of private
label products.
Page 2
<PAGE>
Raw Materials
The registrant's basic raw materials are cotton and synthetic
fibers. These materials are generally available from a wide
variety of sources, and no significant shortage of such materials
is currently anticipated. The registrant uses significant
quantities of cotton which is subject to ongoing price
fluctuations. The registrant in the ordinary course of business
may arrange for purchase commitments with vendors for future
cotton requirements.
Patents and Licenses
The registrant holds various patents and licenses resulting from
company-sponsored research and development, and others are
obtained that are deemed advantageous to company operations. The
registrant is only partially dependent upon such patents and
licenses in certain product lines, and the loss of any
exclusiveness in these areas would not materially adversely affect
overall profitability.
Seasonality in the Company's Business
Primarily because the Company's retail customers have higher sales
in the second half of the calendar year, the Company also
experiences greater sales volume in the last three quarters of the
calendar year. It is likely that the Company's operating
performance in the first quarter of a given calendar year will be
less favorable than operating performance in the last three
quarters.
The registrant carries normal inventory levels to meet delivery
requirements of customers, and customer returns of merchandise
shipped are not material. Payment terms on customer invoices are
generally 30 to 60 days.
Customers
The registrant's customers consist principally of department
stores, chain stores, specialty stores, mass merchants, warehouse
clubs, other retail outlets and institutional, government and
contract accounts. For the year ended December 31, 1993, the
Company's five largest customers accounted for approximately 35%
of net sales. Sales to one customer (Wal-Mart Stores and its
affiliates) represented 17.4% of total sales of the Company.
Although management of the Company believes that the Company's
relationship with Wal-Mart is excellent and the loss of this
customer is unlikely, the loss of Wal-Mart as a customer would
have a material adverse effect on the Company's business. No
other single customer accounted for more than 10% of net sales in
1993.
Page 3
<PAGE>
Order Backlog
The registrant had normal unfilled order backlogs as of December
31, 1993 and 1992 amounting to approximately $87 million and $73
million, respectively. The majority of these unfilled orders are
shipped during the first quarter of the subsequent fiscal year.
The increase in unfilled orders in 1993 compared to 1992 is
believed to be primarily due to the timing of new orders.
Unfilled orders
have become less of an indicator of future sales as customers have
trended toward placing orders as stock is required. Many orders
are placed using electronic data interchange, and the Company has
filled such orders on a quick response basis.
Government Contracts
No material portion of the business is subject to renegotiation of
profits or termination of contracts or subcontracts at the
election of the Government.
Competition
The home furnishing textile industry continues to be highly
competitive. Among the registrant's competitors are a number of
domestic and foreign companies with significant financial
resources, experience, manufacturing capabilities and brand name
identity.
The registrant competes with numerous other domestic manufacturers
in each of its principal markets. The domestic towel, sheet,
blanket and bath rug markets are each comprised of three to five
principal manufacturers (including the registrant) and several
smaller domestic manufacturers.
The registrant's principal methods of competition are price,
design, service and product quality. The Company believes that
large, low-cost producers with established brand names, efficient
distribution networks and good customer service will profit in
this competitive environment. The Company's ability to operate
profitably in this environment will depend substantially on
continued market acceptance of the Company's products and the
Company's efforts to control costs and produce new and innovative
products in response to competitive pressures and changes in
consumer demand.
Environmental Controls
The registrant does not anticipate that compliance with federal,
state and local provisions that have been enacted or adopted
regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, will have
a material effect upon the capital expenditures, earnings and
competitive position of the registrant and its subsidiaries.
Page 4
<PAGE>
Employees
Total employment of the Company and its subsidiaries was 14,090 as
of December 31, 1993. Approximately 29% of the Company's hourly
employees are subject to collective bargaining agreements with the
Amalgamated Clothing and Textile Workers Union or the United
Textile Workers of America.
Foreign Sales
The registrant is not currently engaged in significant operations
in foreign countries. Approximately 5% of the registrant's
consolidated net sales were exported to foreign customers in 1993
compared to 6% in 1992.
Item 2. Properties
The registrant has 18 principal manufacturing plants, all located
in the United States; 13 are in North Carolina, 1 in South
Carolina, 1 in Georgia, 2 in Alabama and 1 in Virginia. In
addition, there are 18 warehousing and distribution centers located
in the manufacturing states, plus Texas and California. The
manufacturing/warehousing and distribution centers aggregate a
floor area of approximately 16,659,000 square feet. All of the
facilities are owned except: (1) 2 locations totaling approximately
618,000 square feet, which are financed with Industrial Revenue
Bonds; the properties are accounted for as "owned" but Development
Authority holds title to property which will pass to the registrant
upon retirement of Bonds; and (2) 1 location, totaling
approximately 124,000 square feet, where the machinery and
equipment is owned and the building is under a long-term lease.
The registrant owns corporate administrative buildings in Eden,
North Carolina, which contain approximately 96,000 square feet.
The Company also owns one vacant office building in Eden which
contains approximately 48,000 square feet and is currently for
sale. The principal marketing headquarters for the bed and bath
division and certain executive offices (totaling approximately
64,000 square feet) are located in New York City under long-term
leases.
All other properties owned or controlled by the registrant
aggregate approximately 537,000 square feet and are used for
miscellaneous support services or for sales and marketing.
Plants and equipment of the registrant are considered to be in
excellent condition; substantial capital expenditures for new
plants, modernization and improvements have been made in recent
years. The plants generally operate on either a three shift basis
for a five-day week or a four shift basis for a seven-day week
during 50 weeks a year except during periods of curtailment. In
the opinion of the registrant, all plants and properties are
adequately covered by insurance.
Page 5
<PAGE>
Item 3. Legal Proceedings
The registrant is involved in various claims and lawsuits
incidental to its business. In the opinion of the registrant based
in part on the advice of legal counsel, however, the outcome of
these suits will not have a material effect on the registrant's
financial position.
Item 4. Submission of Matters to a Vote of Security Holders
(a). The Company solicitated written consents of stockholders in
lieu of a special meeting on November 4, 1993.
(b). Not applicable.
(c). Holders of Common Stock (one vote per share) and Class B
Common Stock (ten votes per share) voted through written
consent on the following matters, each as described in detail
in the Registrant's consent statement dated November 4, 1993.
I. Amend the Registrant's Certificate of Incorporation to
authorize 10,000,000 shares of undesignated preferred
stock:
Votes (thousands)
Common Stock Class B Common Stock
For 1,313 36,116
Against 1,436 12
Abstain 18 1
II. Authorize the issuance of up to 1,800,000 shares of
preferred stock of the Registrant:
Votes (thousands)
Common Stock Class B Common Stock
For 2,018 36,116
Against 732 12
Abstain 18 1
Page 6
<PAGE>
Identification of Executive Officers of the Registrant
<TABLE>
<CAPTION>
Date from
Which Officers
Age at Have Served in
Name 3/31/94 Positions Held Present Capacities
<S> <C> <C> <C>
James M. Fitzgibbons 59 Chairman of the Board Chairman of the Board and
and Chief Executive Chief Executive Officer: 1990
Officer and Director Director: 1985
Charles G. Horn 54 President and Chief Chief Operating Officer: 1990
Operating Officer and President: 1987
Director Director: 1988
Chris L. Kametches 58 Senior Vice President Senior Vice President: 1990
Robert B. Dale 47 Vice President Vice President: 1989
Robert E. Dellinger 49 Vice President Vice President: 1989
M. Kenneth Doss 54 Vice President Vice President: 1988
and Secretary General Counsel: 1985
Secretary: 1986
Osborne L. Raines 53 Vice President Vice President: 1985
Thomas R. Staab 51 Vice President and Vice President: 1992
Chief Financial Officer Chief Financial Officer: 1994
Lawrence L. Mann 58 Treasurer Treasurer: 1979
Clifford D. Paulsen 50 Controller Controller: 1992
</TABLE>
None of the executive officers are related by blood, marriage or adoption to
any other executive officer of the registrant or any director or executive
officer of a parent, subsidiary, or affiliate of the registrant. With the
exception of Mr. Fitzgibbons each executive officer has been employed by the
registrant for more than five years. Prior to becoming Chief Executive
Officer and Chairman of the Board of Directors of the registrant on October
15, 1990, Mr. Fitzgibbons was President of Amoskeag Company and was
previously an executive officer of Amoskeag Company for more than five years.
Page 7
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
Incorporated by reference from the market and dividend data section of
the 1993 Annual Report to Shareowners, page 14.
Item 6. Selected Financial Data
Selected financial and statistical data for the years 1989 to 1993
appearing under the captions "Net sales", "Income (loss) from
continuing operations", "Per share of common stock", "Total assets"
and "Long-term obligations" are incorporated by reference from the
1993 Annual Report to Shareowners, page 32.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Incorporated by reference from the 1993 Annual Report to Shareowners,
pages 11 through 14.
Item 8. Consolidated Financial Statements and Supplementary Data
Consolidated financial statements and supplementary data of the
registrant are incorporated by reference from the 1993 Annual Report
to Shareowners, pages 15 through 31.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures
None.
Page 8
<PAGE>
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons
of the Registrant
Information regarding the Directors is incorporated herein by
reference from the registrant's proxy statement for the annual meeting
of shareowners to be held on May 16, 1994, pages 2 and 3.
For information regarding the Executive Officers of the registrant,
see Part I at page 7.
Item 11. Executive Compensation
Incorporated herein by reference from sections of the registrant's
proxy statement for the annual meeting of shareowners to be held on
May 16, 1994 entitled Compensation of Directors at page 7 and
Executive Compensation, pages 7 through 10.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Incorporated herein by reference from the Security Ownership section
of the registrant's proxy statement for the annual meeting of
shareowners to be held on May 16, 1994, pages 4 through 6.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference from the registrant's proxy statement
for the annual meeting of shareowners to be held May 16, 1994, pages 7
and 8, Executive Compensation.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a) 1.
and 2. Financial statements and financial statement schedules
The financial statements and schedules listed in the
accompanying index to financial statements are filed as part of
this annual report.
3. Exhibits
The exhibits listed as applicable on the accompanying Exhibit
Index at page 17 are filed as part of this annual report.
Exhibit numbers (10)1. through (10)12. represent management
contracts or compensatory plans or arrangements required to be
filed as an exhibit by Item 601 of Regulation S-K.
(b) Reports on Form 8-K
None.
Page 9
<PAGE>
FIELDCREST CANNON, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a) 1 & 2)
Page Numbers of the
Annual report to
Shareowners
Consolidated statement of financial position at 18
December 31, 1993 and 1992
Consolidated statement of income and retained earnings 17
for each of the three years in the period ended
December 31, 1993
Consolidated statement of cash flows for each of the 19
three years in the period ended December 31, 1993
Notes to consolidated financial statements 20-30
Report of independent auditors 31
Page Numbers to this
Form 10-K
Schedules for each of the three years in the period
ended December 31, 1993:
V - Consolidated plant and equipment 11
VI - Consolidated accumulated depreciation of 12
plant and equipment
IX - Short-term borrowings 13
X - Supplementary income statement information 14
All other schedules are omitted because the required
information is not applicable or is not present in amounts sufficient
to require submission of the schedule, or because the information
required is included in the financial statements and notes thereto.
The consolidated financial statements listed in the above
index which are included in the Annual Report to Shareowners of
Fieldcrest Cannon, Inc. for the year ended December 31, 1993 are
hereby incorporated by reference. With exception of the pages
listed in the above index and the Items referred to in Part II, Items
5, 6, 7 and 8, the 1993 Annual Report to Shareowners is not to be
deemed filed as part of this report.
Page 10
<PAGE>
FIELDCREST CANNON, INC.
SCHEDULE V - CONSOLIDATED PLANT AND EQUIPMENT
(In Thousands)
<TABLE>
<CAPTION>
Balance at Balance at
Beginning of Additions Retirements Close of
Classification Year at Cost or Sales Year
<S> <C> <C> <C> <C>
Year Ended December 31, 1993:
Land $ 8,408 $ 76 $ (2,506) $ 5,978
Buildings 230,491 3,299 (52,381) 181,409
Equipment 447,274 11,558 (92,499) 366,333
Plant Additions in Process 11,931 9,882 (3,106) 18,707
Total $698,104 $24,815 $(150,492) (1) $572,427
Year Ended December 31, 1992:
Land $ 8,408 $ 24 $ (24) $ 8,408
Buildings 225,861 8,779 (4,149) 230,491
Equipment 434,723 23,547 (10,996) 447,274
Plant Additions in Process 19,199 (7,268) - 11,931
Total $688,191 $25,082 $(15,169) $698,104
Year Ended December 31, 1991:
Land $ 8,555 $ 54 $ (201) $ 8,408
Buildings 224,923 6,031 (5,093) 225,861
Equipment 402,670 38,140 (6,087) 434,723
Plant Additions in Process 19,429 (230) - 19,199
Total $655,577 $43,995 $(11,381) $688,191
</TABLE>
(1) In 1993 the Company sold its carpet and rug operations.
Depreciation is provided on a straight-line basis on estimated useful lives;
buildings - 15 to 33 years; equipment - 5 to 15 years.
Page 11
<PAGE>
FIELDCREST CANNON, INC.
SCHEDULE VI - CONSOLIDATED ACCUMULATED DEPRECIATION
OF PLANT AND EQUIPMENT
(In Thousands)
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning of Charged Retirements Close of
Classification Year to Income or Sales Year
<S> <C> <C> <C> <C>
Year Ended December 31, 1993:
Buildings $ 95,170 $ 8,945 $(20,183) $ 83,932
Equipment 230,502 25,093 (61,377) 194,218
Total $325,672 $34,038 $(81,560) (1) $278,150
Year Ended December 31, 1992:
Buildings $ 88,206 $ 9,115 $ (2,151) $ 95,170
Equipment 211,799 27,901 (9,198) 230,502
Total $300,005 $37,016 $(11,349) $325,672
Year Ended December 31, 1991:
Buildings $ 81,871 $ 9,015 $(2,680) $ 88,206
Equipment 190,104 27,136 (5,441) 211,799
Total $271,975 $36,151 $(8,121) $300,005
</TABLE>
(1) In 1993 the Company sold its carpet and rug operations.
Page 12
<PAGE>
FIELDCREST CANNON, INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands)
<TABLE>
<CAPTION>
Maximum
amount Average Weighted
outstanding at amount average
Balance at any month-end outstanding interest
end of during the during the rate during
period period period (2) the period (2)
<S> <C> <C> <C> <C>
(1)
Notes payable to lenders :
1993 $ -0- $174,550 $32,804 6.12%
1992 $ 14,056 $175,638 $57,312 6.46%
1991 $165,564 $165,564 $36,654 8.54%
</TABLE>
(1) Notes payable represent seasonal borrowing requirements during the year
under the Company's revolving credit facility and during 1993 and 1992
bank borrowings to finance the purchase of raw cotton and wool. The
revolving credit facility is also utilized for long-term financing.
Effective May 6, 1992, the Company obtained a new revolving credit
facility which allowed the Company to borrow up to $235 million through
January 3, 1996. The Company elected to reduce the facility to $150
million from $235 million in November 1993 because of reduced borrowing
requirements. The new facility replaced a $235 million bank term debt
agreement that would have matured December 31, 1992. Accordingly,
borrowings under the revolving credit facility were classified as long-
term debt in 1993 and 1992 and as short-term debt in 1991. Interest
rates on the revolving term debt were, at the Company's option, at the
prime rate fixed by The First National Bank of Boston plus 1%, or at a
Euromarket-based rate plus 2.5%. The average interest rate on the
revolving term debt was 6.3% on December 31, 1993.
(2) The average amount outstanding during the period was computed by
averaging the month-end balances during the year. The weighted average
interest rate was computed by dividing the interest expense by the
average daily amount outstanding.
Page 13
<PAGE>
FIELDCREST CANNON, INC.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
(In Thousands)
Charged to Costs and Expenses
1993 1992 1991
Advertising Costs $16,547 $17,652 $17,625
Maintenance and repairs $20,892 $19,555 $16,890
Depreciation and amortization of
intangible assets, preoperating
costs and similar deferrals (1) (1) (1)
Taxes, other than payroll and
income taxes (1) (1) (1)
Royalties (1) (1) (1)
(1) Less than 1% of total sales
Page 14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FIELDCREST CANNON, INC.
March 2, 1994 By:
Charles G. Horn, President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report signed below by the following persons on behalf of the registrant and
in the capacities on the dates indicated.
March 2, 1994
James M. Fitzgibbons
Chairman of the Board of Directors and Chief
Executive Officer (Principal Executive Officer)
March 2, 1994
Charles G. Horn, President and
Chief Operating Officer and Director
March 2, 1994
M. Kenneth Doss
Vice President and Secretary
March 2, 1994
Thomas R. Staab
Vice President and Chief Financial Officer
(Principal Financial Officer)
March 2, 1994
Clifford D. Paulsen
Controller (Principal Accounting Officer)
March 2, 1994
Tom H. Barrett
Director
March 2, 1994
C. R. Charbonnier
Director
Page 15
<PAGE>
March 2, 1994
William E. Ford
Director
March 2, 1994
John C. Harned
Director
March 2, 1994
S. Roger Horchow
Director
March 2, 1994
W. Duke Kimbrell
Director
March 2, 1994
C. J. Kjorlien
Director
Page 16
<PAGE>
EXHIBIT INDEX TO
ANNUAL REPORT ON FORM 10-K FOR
FIELDCREST CANNON, INC.
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Page Number
Exhibit or Incorporation
Number Description by Reference to
<S> <C> <C>
(3) 1. Restated Certificate of Incorporation, Exhibit 3-1 to the
as amended to date. Registrant's Registration
Statement on Form S-3
filed on February 18,
1994.
2. Amended and Restated By-Laws of the Registrant Exhibit 3-1 to Report on
as amended to November 24, 1993. Form 8-K Filed on
December 9, 1993.
(4) 1. Rights Agreement, dated as of November 24, 1993, Exhibit 1 to the
between the Registrant and The First National Registrant's Registration
Bank of Boston, which includes as Exhibit A the Statement on Form 8-A
Form of Rights Certificate of Designations, as filed December 3, 1993.
Exhibit B the Form of Rights Certificate, and as
Exhibit C the Summary of Rights to Purchase
Preferred Stock.
2. Indenture dated as of March 15, 1987, relating to Exhibit 4.9 to the
the Registrant's 6% Convertible Subordinated Registrant's Registration
Debentures Due 2012 between the Registrant and Statement on Form S-3
Wachovia Bank and Trust Company, N.A., (No. 33-12436) filed on
including the form of debenture. March 6, 1987.
3. Indenture dated as of June 1, 1992, relating to Exhibit 4.7 of
the Senior Subordinated Debentures Due 2004, Amendment No. 1 to the
between the Registrant and First Union National Registrant's Registration
Bank, as Trustee, including the form of Statement on Form S-3
debenture. (No. 33-47348) filed on
June 3, 1992.
4. Amended and Restated Revolving Credit 19 - 106
Agreement dated as of March 10, 1994 by and
among the Registrant, The First National Bank of
Boston as agent, Continental Bank N.A., Philadelphia
National Bank, and First Union National Bank of
North Carolina, as lead managers, and certain lenders.
The registrant, by signing this Report, agrees to
furnish the Securities and Exchange Commission
upon its request a copy of any instrument which
defines the rights of holders of long-term debt of the
Registrant and all of its subsidiaries for which
consolidated or unconsolidated financial statements
are required to be filed, and which authorizes a total
amount of securities not in excess of 10% of the
total assets of the Registrant and its subsidiaries on
a consolidated basis.
</TABLE>
Page 17
<PAGE>
<TABLE>
<CAPTION>
Page Number
Exhibit or Incorporation
Number Description by Reference to
<S> <C> <C>
(10) 1. Amended and Restated Director Stock Option Exhibit A to the
Plan of the Registrant approved by the Registrant's proxy
stockholders of the Corporation on April 28, statement for the annual
1992. meeting of shareowners
held on April 28, 1992.
2. Stock Option Agreement between the Registrant Exhibit 4.1 to the
and James M. Fitzgibbons dated as of September Registrant's Registration
11, 1991. Statement on Form S-8
filed on December 23,
1991.
3. Employee Retention Agreement between Registrant Exhibit 10.2 to Report
and James M. Fitzgibbons effective as of on Form 10-Q for the
July 9, 1993. quarter ended September
30, 1993.
4. Employment Agreement between the Registrant Exhibit 10-2 to Report
and Charles G. Horn dated as of January 1, on Form 10-K for fiscal
1988. year ending December
31, 1988.
5. Instrument of Amendment dated October 23, Exhibit 10-3 to Report
1989, between the Registrant and Charles G. on Form 10-K for fiscal
Horn, amending Exhibit 10-4 above. year ending December
31, 1989.
6. Instrument of Amendment dated July 23, 1993 by Exhibit 10.1 to Report
and between the Registrant and Charles G. Horn, on Form 10-Q for the
amending the employment agreement between the quarter ended September
Registrant and Charles G. Horn dated as of 30, 1993.
January 1, 1988.
7. Employee Retention Agreement between the Exhibit 10.4 to Report
Registrant and Chris L. Kametches effective on Form 10-Q for the
as of July 9, 1993. quarter ended September
30, 1993.
8. Instrument of Amendment dated July 29, 1993 Exhibit 10.5 to Report
between the Registrant and Chris L. Kametches, on Form 10-Q for the
amending Exhibit 10.7 above. quarter ended September
30, 1993.
9. Employee Retention Agreement between the 107 - 128
Registrant and Robert E. Dellinger effective
as of July 9, 1993.
10. Instrument of Amendment dated July 29, 1993 129
between the Registrant and Robert E. Dellinger,
amending Exhibit 10.9 above.
11. Form of Employee Retention Agreement between Exhibit 10.6 to Report
the Registrant and other executive officers of on Form 10-Q for the
the Registrant effective as of July 9, 1993. quarter ended September
30, 1993.
12. Form of Instrument of Amendment dated July 29, Exhibit 10.7 to Report
1993 between the Registrant and other executive on Form 10-Q for the
officers of the Registrant, amending Exhibit 10.11 quarter ended September
above. 30, 1993.
(11) Computation of Primary and Fully Diluted Net Income 130 - 132
(Loss) per Share.
(13) 1993 Annual Report to Shareowners. 133 - 154
(21) Subsidiaries of the Registrant. 155
(23) Consent of independent auditors. 156
</TABLE>
Page 18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FIELDCREST CANNON, INC.
March 3, 1993 By: /s/ Charles G. Horn
Charles G. Horn, President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report signed below by the following persons on behalf of the registrant and
in the capacities on the dates indicated.
/s/ James M. Fitzgibbons March 2, 1994
James M. Fitzgibbons
Chairman of the Board of Directors and Chief
Executive Officer (Principal Executive Officer)
/s/ Charles G. Horn March 2, 1994
Charles G. Horn, President and
Chief Operating Officer and Director
/s/ M. Kenneth Doss March 2, 1994
M. Kenneth Doss
Vice President and Secretary
/s/ Thomas R. Staab March 2, 1994
Thomas R. Staab
Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Clifford D. Paulsen March 2, 1994
Clifford D. Paulsen
Controller (Principal Accounting Officer)
/s/ Tom H. Barrett March 2, 1994
Tom H. Barrett
Director
/s/ C. R. Charbonnier March 2, 1994
C. R. Charbonnier
Director
Page 15
<PAGE>
/s/ William E. Ford March 2, 1994
William E. Ford
Director
/s/ John C. Harned March 2, 1994
John C. Harned
Director
/s/ S. Roger Horchow March 2, 1994
S. Roger Horchow
Director
/s/ W. Duke Kimbrell March 2, 1994
W. Duke Kimbrell
Director
/s/ C. J. Kjorlien March 2, 1994
C. J. Kjorlien
Director
Page 16
THIRD
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
dated as of March 10, 1994
among
FIELDCREST CANNON, INC.
CERTAIN LENDERS
CONTINENTAL BANK N.A., as Lead Manager
PHILADELPHIA NATIONAL BANK, as Lead Manager
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as Lead Manager
and
THE FIRST NATIONAL BANK OF BOSTON, as Agent
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . 1
SECTION 2. THE CREDIT . . . . . . . . . . . . . . . . 19
Section 2.1. Commitment to Lend A Loans. . . . . . . 19
Section 2.2. Making the B Loans. . . . . . . . . . .20
Section 2.3. Maturity; Mandatory Repayments. . . . . 20
Section 2.4. Optional Prepayments of Loans. . . . . .21
Section 2.5. Reduction of Commitment. . . . . . . . .21
Section 2.6. Notes. . . . . . . . . . . . . . . . . .22
Section 2.7. Requests for Loans. . . . . . . . . . . 23
Section 2.8. Funds for Loans. . . . . . . . . . . . .24
Section 2.9. Interest on Loans. . . . . . . . . . . .25
Section 2.10 Letters of Credit. . . . . . . . . . . .26
SECTION 3. EURODOLLAR RATE AND ADJUSTED
CD RATE INTEREST . . . . . . . . . . . 30
Section 3.1. Elections. . . . . . . . . . . . . . . .30
Section 3.2. Reserve Charge. . . . . . . . . . . . . 31
Section 3.3. Notices as to Rates. . . . . . . . . . .31
Section 3.4. Substitution of Adjusted CD Rate or
Base Rate. . . . . . . . . . . . . . . 31
Section 3.5. Additional Costs . . . . . . . . . . . .32
Section 3.6. Indemnity. . . . . . . . . . . . . . . .33
Section 3.7. Concerning Interest Periods. . . . . . .33
SECTION 4. CERTAIN COMMON PROVISIONS . . . . . . . . . . 34
Section 4.1. Interest After Default. . . . . . . . . 34
Section 4.2. Payments. . . . . . . . . . . . . . . . 34
Section 4.3. Computations. . . . . . . . . . . . . . 34
Section 4.4. Interest Limitation. . . . . . . . . . 34
Section 4.5. Commitment Fee. . . . . . . . . . . . . 35
Section 4.6. Increased Capital Requirements. . . . . 35
Section 4.7. HLT Classification. . . . . . . . . . . 36
Section 4.8. Closing Fee. . . . . . . . . . . . . . .36
Section 4.9 Agent's Fee. . . . . . . . . . . . . . .36
SECTION 5. SECURITY . . . . . . . . . . . . . . . . . 37
<PAGE>
SECTION 6. REPRESENTATIONS AND WARRANTIES . . . . . . 37
Section 6.1. Corporate Existence. . . . . . . . . . 38
Section 6.2. Corporate Authority. . . . . . . . . . 38
Section 6.3. Binding Effect of Documents. . . . . . 39
Section 6.4. No Events of Defaults. . . . . . . . . 39
Section 6.5. Financial Statements; Projections. . . 39
Section 6.6. Changes; None Adverse. . . . . . . . . 40
Section 6.7. Lines of Business. . . . . . . . . . . 40
Section 6.8. Mortgages and Liens. . . . . . . . . . 40
Section 6.9. Indebtedness. . . . . . . . . . . . . .40
Section 6.10. Litigation. . . . . . . . . . . . . . .40
Section 6.11. No Default. . . . . . . . . . . . . . .40
Section 6.12. Taxes. . . . . . . . . . . . . . . . . 41
Section 6.13. Collateral. . . . . . . . . . . . . . .41
Section 6.14. True Copies of Charter and
Other Documents. . . . . . . . . . . 41
Section 6.15. Employee Benefit Plans. . . . . . . . 41
Section 6.16. Other Representations. . . . . . . . . 42
Section 6.17. Disclosure. . . . . . . . . . . . . . .43
Section 6.18. Holding Company and Investment
Company Acts. . . . . . . . . . . . 43
Section 6.19. Regulations G, T, U and X. . . . . . . 43
Section 6.20. Environmental Compliance. . . . . . . .43
Section 6.21. No Materially Adverse Contracts. . . . 45
Section 6.22. Corporate Name; Location of Office. . .45
Section 6.23. Loans as Senior Indebtedness. . . . . .46
Section 6.24. Brokers and Consultants. . . . . . . . 46
SECTION 7. AFFIRMATIVE COVENANTS OF THE COMPANY . . . . 46
Section 7.1. Punctual Payment. . . . . . . . . . . .46
Section 7.2. Legal Existence; Fiscal Year. . . . . .46
Section 7.3. Use of Loan Proceeds. . . . . . . . . .46
Section 7.4. Deposit Account. . . . . . . . . . . . 46
Section 7.5. Financial Statements. . . . . . . . . .47
Section 7.6. Maintenance of Properties. . . . . . . 49
Section 7.7. Notice of Litigation and Judgment. . . 49
Section 7.8. Notice of Defaults. . . . . . . . . . .50
Section 7.9. Books and Records. . . . . . . . . . . 50
Section 7.10. Insurance. . . . . . . . . . . . . . . 50
Section 7.11. Taxes. . . . . . . . . . . . . . . . . 50
Section 7.12. Conduct of Business; Compliance
with Law. . . . . . . . . . . . . . 51
Section 7.13. Access. . . . . . . . . . . . . . . . .51
Section 7.14. Employee Benefit Plans. . . . . . . . .52
Section 7.15. Reserves. . . . . . . . . . . . . . . .53
<PAGE>
Section 7.16. Further Assurances; Perfection of
Remaining Liens. . . . . . . . . . .53
Section 7.17. Environmental Compliance. . . . . . . .53
Section 7.18. Maintenance of Office, Corporate Name. 53
Section 7.19 Delivery of Pledged Stock . . . . . . 53
SECTION 8. NEGATIVE COVENANTS OF THE COMPANY . . . . . 54
Section 8.1. Restrictions on Indebtedness. . . . . .54
Section 8.2. Restrictions on Liens. . . . . . . . . 57
Section 8.3. Restrictions on Investments. . . . . . 59
Section 8.4. Lines of Business. . . . . . . . . . . 60
Section 8.5. Distributions. . . . . . . . . . . . . 60
Section 8.6. Merger, Consolidation and Sale
of Assets. . . . . . . . . . . . . .61
Section 8.7. Sale and Leaseback. . . . . . . . . . .61
Section 8.8. Guaranties; Subordinated Debt. . . . . 61
Section 8.9. Capital Expenditures. . . . . . . . . .62
Section 8.10. Interest Coverage Ratio. . . . . . . . 62
Section 8.11. Debt Service Coverage Ratio. . . . . . 62
Section 8.12. Liabilities to Tangible Net Worth. . . 63
Section 8.13. Consolidated Tangible Net Worth. . . . 63
Section 8.14. Total Days Inventory. . . . . . . . . 63
Section 8.15. Transactions With Affiliates. . . . . .64
Section 8.16. Compromise of Accounts Receivable. . . 64
SECTION 9. CONDITIONS TO EFFECTIVENESS . . . . . . . . 65
Section 9.1. Loan Documents. . . . . . . . . . . . .65
Section 9.2. Legality of Transactions. . . . . . . .65
Section 9.3. Representations and Warranties. . . . .65
Section 9.4. Performance. . . . . . . . . . . . . . 65
Section 9.5. Certified Copies of Charter Documents. 66
Section 9.6. Proof of Corporate Action. . . . . . . 66
Section 9.7. Incumbency Certificate. . . . . . . . .66
Section 9.8. Proceedings and Documents. . . . . . . 66
Section 9.9. Legal Opinions. . . . . . . . . . . . .66
Section 9.10. Closing Fee; Agent's Fee. . . . . . . .66
Section 9.11. Certain Assignments. . . . . . . . . . 67
Section 9.12 Compliance Certificate. . . . . . . . .67
Section 9.13 Amounts Owing under the Prior
Credit Agreement. . . . . . . . . . 67
SECTION 10. CONDITIONS TO LOANS . . . . . . . . . . . 67
Section 10.1. Legality of Transactions. . . . . . . 67
Section 10.2. Representations and Warranties. . . . 67
Section 10.3. Performance. . . . . . . . . . . . . .67
<PAGE>
Section 10.4. Proceedings and Documents. . . . . . .68
Section 10.5. Legal Opinion. . . . . . . . . . . . .68
SECTION 11. EVENTS OF DEFAULT . . . . . . . . . . . . 68
Section 11.1. Acceleration. . . . . . . . . . . . . 68
Section 11.2. Rights of Lenders. . . . . . . . . . .71
SECTION 12. SETOFF . . . . . . . . . . . . . . . . . . 72
SECTION 13. INDEPENDENT CREDIT DECISION . . . . . . . 72
SECTION 14. THE AGENT . . . . . . . . . . . . . . . . 72
SECTION 15. ASSIGNMENTS AND PARTICIPATIONS . . . . . . 75
SECTION 16. EXPENSES . . . . . . . . . . . . . . . . . 77
SECTION 17. INDEMNIFICATION . . . . . . . . . . . . . 78
SECTION 18. SURVIVAL OF COVENANTS . . . . . . . . . . 78
SECTION 19. PARTIES IN INTEREST . . . . . . . . . . . 79
SECTION 20. NOTICES . . . . . . . . . . . . . . . . . 79
SECTION 21. MISCELLANEOUS . . . . . . . . . . . . . . 79
SECTION 22. ENTIRE AGREEMENT . . . . . . . . . . . . . 79
SECTION 23. CONSENTS, AMENDMENTS, WAIVERS . . . . . . 80
SECTION 24. WAIVER OF JURY TRIAL . . . . . . . . . . . 80
<PAGE>
EXHIBITS:
Exhibit A-1 Form of A Note
Exhibit A-2 Form of B Note
Exhibit B-1 Form of Notice of B Borrowing
Exhibit B-2 Form of Lender Confirmation
Exhibit C Form of Security Agreement
Exhibit D Form of Compliance Certificate
Exhibit E Form of Borrowing Base Report
Exhibit F Form of Intercompany Notes
Exhibit G Form of Legal Opinion
Exhibit H Form of Assignment and Acceptance
SCHEDULES:
Schedule 1.1 Commitments; Commitment Percentages;
Notices
Schedule 6.1 Subsidiaries
Schedule 6.2 Consents of Creditors
Schedule 6.10 Litigation
Schedule 6.20 Environmental Compliance
Schedule 8.1 Indebtedness
Schedule 8.2 Liens
Schedule 8.3 Investments
<PAGE>
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This THIRD AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT, dated as of March 10, 1994, is by and among FIELDCREST CANNON,
INC. (the "Company"), a Delaware corporation having its principal place
of business in Eden, North Carolina, the institutions listed on the
signature pages hereto and such other banks or institutions as may become
parties to this Agreement from time to time in accordance with the
provisions hereof (the "Lenders"), CONTINENTAL BANK N. A., PHILADELPHIA
NATIONAL BANK and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as lead
managers for the Lenders (collectively, the "Lead Managers"), and THE
FIRST NATIONAL BANK OF BOSTON, as agent for the Lenders (the "Agent").
WHEREAS, pursuant to that certain Amended and Restated
Revolving Credit Agreement, dated as of May 6, 1992, as amended (the
"Prior Credit Agreement") (which agreement amended and restated in its
entirety that certain Amended and Restated Revolving Credit Agreement,
dated as of December 18, 1986, which agreement amended and restated in
its entirety that certain Revolving Credit Agreement, dated as of January
30, 1986), certain Lenders which are parties to this Agreement on the
date hereof have made loans to the Company for the purposes described
therein; and
WHEREAS, the Agent, the Lenders and the Company wish to
amend and restate the Prior Credit Agreement in order to extend the
commitments of the Lenders thereunder and to make certain changes to the
terms and provisions of the Prior Credit Agreement;
NOW, THEREFORE, the Company, the Lenders and the Agent
agree that from and after the Effective Date (as defined below), the
Prior Credit Agreement shall be amended and restated in its entirety as
set forth herein and shall be in full force and effect as provided herein
and the Loans (as defined in the Prior Credit Agreement) shall constitute
A Loans (as defined below) hereunder.
(Section Mark)1. DEFINITIONS. (a) The following terms shall have the
meanings set forth in this (Section Mark)1 or elsewhere in the provisions
of this Agreement referred to below:
A Loan. A loan by a Lender to the Company as part of an A
Borrowing and refers to a Eurodollar Rate Amount, a Base Rate Amount or a
CD Rate Amount, each of which shall be a Type of A Loan.
A Borrowing. A borrowing consisting of simultaneous A
Loans of the same Type made by each of the Lenders pursuant to
(Section Mark)2.1 hereof.
<PAGE>
-2-
A Note. A promissory note of the Company payable to the
order of any Lender, in substantially the form of Exhibit A-1 attached
hereto, evidencing the aggregate amount of A Loans outstanding from the
Company to such Lender.
Accounts Receivable. All rights (provided, however, that
"bill and hold" items as reflected on the Company's books and records
would be included only to the extent of 87.5% thereof and "price load"
items as reflected on the Company's books and records would be eliminated
in their entirety) to payment for goods sold or for services rendered, in
each case in the ordinary course of business by or owing to the Company
which in accordance with Generally Accepted Accounting Principles are
properly classified as accounts receivable; provided, however, that such
rights would be included only if:
(i) they are good and collectible and not subject to setoff,
claims by the account debtor or other offset of any kind all as
determined by the Company in accordance with established practices
consistently applied;
(ii) they are payable and outstanding not more than thirty
(30) days after the date on which payment is required to be made in
accordance with established practices consistently applied; and
(iii) they are rights in which the Agent has a valid and
perfected first priority security interest (unless such security
interest has been released by the Agent pursuant to (Section Mark)5(e)
hereof).
In no event shall there be included in Accounts Receivable any
rights to payment arising from any source or under any circumstances
other than those specified above in this definition. The Company
specifically acknowledges that the receivables carried on its books as
the following do not constitute Accounts Receivable: (A) "other
receivables consisting of product liability and property tax amounts",
(B) "master notes", representing amounts due from finance companies, (C)
"trade note receivables", representing monies due from delinquent
accounts set up on extended payment term notes, and (D) "other
receivables" or "miscellaneous receivables", representing, but not
limited to, unbilled storage, vendor receivables and miscellaneous
non-trade sales.
Adjusted CD Rate. For any interest Period with respect to a CD
Rate Amount, the interest rate per annum determined by the Agent pursuant
to the following formula:
<PAGE>
-3-
Adjusted CD = CD Bid Rate + CD Assessment Rate
Rate 1.00 - CD Reserve Percentage
Adjustment Date. Each date which is the fifth Business Day
immediately following the date of the delivery by the Company to the
Lenders of a Compliance Certificate pursuant to (Section Mark)7.5(d) hereof
or, if any Compliance Certificate is not so delivered by the Company
pursuant to (Section Mark)7.5(d) hereof, the date which is the fifth
Business Day immediately following the date on or before which such
Compliance Certificate was required to be delivered by the Company
to the Lenders pursuant to (Section Mark)7.5(d) hereof.
Affiliate. With respect to any Person, any Person that
controls, is controlled by or is under common control with such Person in
question. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities or by contract or otherwise.
Agency Agreements. The agency agreements (a) which were
entered into by the Company with certain of its collection banks prior to
the date hereof, and (b) which are entered into by the Company with
collection banks selected by the Company after the date hereof and which
are satisfactory in form and substance to the Agent, in each case as such
agreements may be amended and in effect from time to time.
Agent. See the preamble.
Agent's Fee. See (Section Mark)4.9.
Agreement. This Third Amended and Restated Revolving Credit
Agreement, including the Schedules and Exhibits hereto, as originally
executed, or if this Agreement is amended, varied or supplemented from
time to time, as so amended, varied or supplemented.
Amoskeag. Amoskeag Company, a Delaware corporation and a
wholly-owned Subsidiary of the Company.
Amount(s). Singly, any of, and collectively, all of, Base Rate
Amounts, Euro Rate Amounts and CD Rate Amounts (each of which shall be a
Type of Amount).
Applicable Margin. For each period commencing on an Adjustment
Date through the date immediately preceding the next Adjustment Date
(each a "Rate Adjustment Period"), the Applicable Margin shall be the
higher of the applicable percentages set forth below with respect to the
<PAGE>
-4-
Company's Leverage Ratio and the Company's Interest Coverage Ratio, as
determined at the end of the fiscal period of the Company and its
Subsidiaries ending immediately prior to the applicable Rate Adjustment
Period:
Euro Rate C/D Rate Letter of
A. Leverage Ratio Amounts Amounts Credit Fees
Greater than 2.80 1.25% 1.375% 1.25%
to 1.00
Less than or equal 1.00% 1.125% 1.00%
to 2.80 to 1.00 and
greater than 2.00
to 1.00
Less than or equal 0.75% 0.875% 0.75%
to 2.00 to 1.00
Interest Euro Rate C/D Rate Letter of
B. Coverage Ratio Amounts Amounts Credit Fees
Less than 2.00 1.25% 1.375% 1.25%
to 1.00
Greater than or 1.00% 1.125% 1.00%
equal to 2.00 to 1.00
and less than 2.50 to
1.00
Greater than or 0.75% 0.875% 0.75%
equal to 2.50 to
1.00
Notwithstanding the foregoing, (a) for the period commencing on the
Effective Date through the date immediately preceding the first
Adjustment Date to occur after the Effective Date, the Applicable Margin
shall be determined based upon the Compliance Certificate delivered to
the Lenders on the Effective Date based on the financial statements
delivered to the Lenders pursuant to (Section Mark)6.5(a) hereof for
Revolving Credit Loans outstanding and Letters of Credit issued or
renewed during such period, and (b) if the Company fails to
deliver any Compliance Certificate pursuant to (Section Mark)7.5(d) hereof
then, for the period commencing on the next Adjustment Date to occur
subsequent to such failure through the date immediately preceding the
Adjustment Date which occurs immediately following the date on which
such Compliance Certificate is delivered, the Applicable Margin shall be
deemed to be the highest Applicable Margin set forth above.
<PAGE>
-5-
Assignment and Acceptance. See (Section Mark)15(a).
B Loan. A loan by a Lender to the Company as part of a B
Borrowing made by a Lender pursuant to (Section Mark)2.2 hereof.
B Borrowing. A borrowing consisting of simultaneous B Loans
from each of the Lenders whose offer to make one or more B Loans as part
of such borrowing has been accepted by the Company.
B Note. A promissory note of the Company payable to the order
of any Lender, in substantially the form of Exhibit A-2 hereto,
evidencing the outstanding principal amount of the B Loans owing from the
Company to such Lender.
Balance Sheet Date. December 31, 1993.
Base Rate. For any day, a fluctuating rate per annum (rounded
upwards, if necessary, to the next 1/8 of 1%) equal to the greater of (a)
the rate of interest announced from time to time by FNBB at its head
office as its "base rate", as in effect on such day, and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2%. "Federal Funds
Effective Rate" shall mean, for any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or, if such day is not
a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it. For purposes of this
Agreement any change in the Base Rate due to a change in FNBB's "base
rate" or the Federal Funds Effective Rate shall be effective on the
effective day of such change in FNBB's "base rate" or the Federal Funds
Effective Rate, as applicable. If the Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate for any reason,
including, without limitation, the inability or failure of the Agent to
obtain sufficient bids or publications in accordance with the terms
hereof, the Base Rate shall be the FNBB's "base rate" as in effect at the
applicable time until the circumstances giving rise to such inability no
longer exist.
Base Rate Amounts. Any portions of the principal amount of the
A Loans as to which either the Company has not elected pursuant to
(Section Mark)3.1 hereof to pay interest based on either the
Eurodollar Rate or the Adjusted CD Rate or as to which interest
cannot be determined by reference to such requested interest rates.
<PAGE>
-6-
Borrowing Base Amount. On any date of determination, an amount
equal to the sum of (i) eighty percent (80%) of Accounts Receivable, plus
(ii) fifty percent (50%) of Net Security Value of Inventory.
Borrowing Base Report. See (Section Mark)7.5(e).
Business Day. Any day on which banking institutions in Boston,
Massachusetts and Chicago, Illinois are open for the transaction of
banking business, it being recognized that a Business Day relating to
interest calculated or Loans payable by reference to the Eurodollar Rate
shall in addition be any such day on which dealings are carried on in the
Eurodollar interbank market and dollar settlements of such dealings may
be effected in New York City.
Capital Assets. Fixed assets, both tangible (such as land,
buildings, fixtures, machinery and equipment) and intangible (such as
patents, copyrights, trademarks, franchises and good will), provided that
Capital Assets shall not include any item customarily charged directly to
expense or depreciated over a useful life of twelve (12) months or less
in accordance with Generally Accepted Accounting Principles.
CD Assessment Rate. For any Interest Period with respect to a
CD Rate Amount, the annual assessment rate (rounded upward to the nearest
1/16 of 1%) charged by the Federal Deposit Insurance Corporation for such
corporation's insuring Dollar time deposits made at offices of FNBB in
the United States of America during the most recent period for which such
rate has been determined prior to the commencement of such Interest
Period.
CD Bid Rate. With respect to any Interest Period relating to
any CD Rate Amount, the annual rate of interest determined by the Agent
to be the average (rounded upward to the nearest 1/16 of 1%) of
prevailing rates per annum bid at 10:00 a.m., Boston time (or as soon
thereafter as practicable) on the first day of such Interest Period for
the purchase at face value from FNBB of its Dollar certificates of
deposit in an aggregate amount equal (as nearly as may be) to the
principal amount of such CD Rate Amount and having a maturity comparable
to such Interest Period.
CD Rate Amount. Any portions of the principal amount of the A
Loans on which the Company elects pursuant to (Section Mark)3.1 hereof to
pay interest based on the Adjusted CD Rate.
CD Reserve Percentage. As at any date, that percentage
(expressed as a decimal) that is in effect on such date as specified in
Regulation D of the Board of Governors of the Federal Reserve System (or
any successor or similar regulation relating to reserve requirements for
nonpersonal time deposits) for determining the reserve requirements
(including without limitation any basic, supplemental or emergency
reserve requirements) for FNBB in respect of new Dollar nonpersonal time
deposits in Boston, Massachusetts, having a maturity comparable to the
<PAGE>
-7-
relevant Interest Period and in an amount of $100,000 or more. The CD
Reserve Percentage shall be adjusted automatically on and as of the
effective date of any change in the CD Reserve Percentage.
CERCLA. See (Section Mark)6.20(a).
Change of Control. The occurrence of any of the following:
(i) any person or group of persons (within the meaning of Section 13 or
14 of the Securities Exchange Act of 1934, as amended), other than any
employee benefit plan or plans (within the meaning of Section 3(3) of
ERISA), shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under
said Act) of 25% or more in voting power of the outstanding Voting Stock
of the Company, or (ii) during any period of twelve (12) consecutive
calendar months, individuals who were directors of the Company on the
first day of such period shall cease to constitute a majority of the
board of directors of the Company other than because of replacement as a
result of death or disability of one or more such directors.
Closing Fee. See (Section Mark)4.8.
Code. The Internal Revenue Code of 1986, as amended and in
effect from time to time.
Collateral. All of the property, right and interests of the
Company, FCC Canada and Crestfield Cotton that are or are intended to be
subject to the security interests created by the Security Documents.
Commitment. With respect to each Lender, the amount set
forth on Schedule 1.1 hereto as its Commitment to make A Loans to, and
participate in the issuance, extension or renewal of Letters of Credit
for, the Company, as the same may be adjusted or terminated from time to
time in accordance with the provisions hereof.
Commitment Fee. See (Section Mark)4.5.
Commitment Percentage. With respect to each Lender, the
percentage set forth on Schedule 1.1 hereto as its Commitment Percentage,
as the same may be adjusted from time to time in accordance with the
provisions hereof.
Commitment Termination Date. January 6, 1998, or such
earlier date as the Revolving Credit Commitments terminate or are
terminated in accordance with this Agreement.
Company. See the preamble.
Compliance Certificate. See (Section Mark)7.5(d).
<PAGE>
-8-
Consolidated or consolidated. With reference to any term
defined herein, shall mean that term as applied to the accounts of the
Company and all of its Subsidiaries, consolidated in accordance with
Generally Accepted Accounting Principles.
Consolidated Capital Expenditures. With respect to any
fiscal period, an amount equal to the aggregate expenditures of the
Company and its Subsidiaries during such fiscal period for the
acquisition (including the acquisition by capitalized lease) or
improvement of Capital Assets, as determined in accordance with Generally
Accepted Accounting Principles.
Consolidated EBIT. For any fiscal period, the sum of (a)
Consolidated Net Income for such period, but excluding therefrom all
extraordinary non-recurring items of income or loss, plus (b) aggregate
Interest Charges for such period, plus (c) the aggregate amount of all
income taxes reflected on the consolidated statement of income of the
Company and its Subsidiaries for such period.
Consolidated EBITDA. For any fiscal period, the sum of (a)
Consolidated Net Income for such period, but excluding therefrom all
extraordinary non-recurring items of income or loss, plus (b) the
aggregate amount of depreciation and amortization charges made in
calculating Consolidated Net Income for such period, plus (c) aggregate
Interest Charges for such period, plus (d) the aggregate amount of all
income taxes reflected on the consolidated statement of income of the
Company and its Subsidiaries for such period.
Consolidated Funded Debt. All liabilities of the Company and
its Subsidiaries in respect of senior Indebtedness relating to the
borrowing of money or the obtaining of credit, including, without
limitation (i) Indebtedness under industrial revenue bonds, (ii) the
Lender Obligations, and (iii) capitalized lease obligations of the
Company and its Subsidiaries.
Consolidated Net Income. The consolidated net income (or net
deficit) of the Company and its Subsidiaries for any period, after
deduction of all expenses, taxes, and other proper charges, all as
determined in accordance with Generally Accepted Accounting Principles.
In addition, there shall be added to Consolidated Net Income for each
fiscal period an amount equal to the Cotton Writedown Charge, if any, for
such fiscal period, as determined on an after-tax basis, and there shall
be subtracted from Consolidated Net Income for such period an amount
equal to the aggregate amount of reversals of Cotton Writedown Charges
from prior fiscal periods, as determined on an after-tax basis, made in
accordance with Generally Accepted Accounting Principles reflecting the
consumption of the cotton to which the Cotton Writedown Charges from the
prior fiscal periods relate, all as determined in accordance with
Generally Accepted Accounting Principles; provided that
for purposes of determining Consolidated Net Income in order to determine
<PAGE>
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Consolidated EBIT and Consolidated EBITDA, (a) the foregoing
calculations in this sentence pertaining to Cotton Writedown Charges and
reversals of Cotton Writedown Charges from prior periods shall be made
using Cotton Writedown Charges and reversals of Cotton Writedown Charges
from prior periods determined on a pre-tax basis and (b) there
shall be added to Consolidated Net Income, for the fiscal period
in which the Company adopted the accounting standards set forth in
Financial Accounting Standard Board's Statement Nos. 106 and 109, an
aggregate amount equal to the one-time non-cash accounting charges against
Consolidated Net Income taken as a result of the adoption by the
Company of the accounting standards set forth therein.
Consolidated Net Sales. Consolidated net sales of the
Company and its Subsidiaries as reported on a consolidated statement of
operations certified by the Company's Independent Accountant for a full
fiscal year of the Company, determined on a consolidated basis in
accordance with Generally Accepted Accounting Principles.
Consolidated Net Worth. The excess of the consolidated total
assets of the Company and its Subsidiaries, determined in accordance with
Generally Accepted Accounting Principles, less Consolidated Total
Liabilities, less the sum of all amounts representing any write-up in the
book value of any assets of the Company and its Subsidiaries, unless such
write-up was required as a result of purchase accounting, resulting from
a revaluation thereof subsequent to September 29, 1985 (other than (i)
adjustments to translate foreign assets and liabilities for changes in
foreign exchange rates made in accordance with Financial Accounting
Standards Board Statement No. 52 and (ii) in the event that the Company's
accumulated benefit obligations under its pension plans exceeds the
plans' assets, adjustments made in accordance with Financial Accounting
Standards Board Statement No. 87 in recognition of the Company's minimum
pension liability with respect thereto in an amount not to exceed, in the
aggregate, $30,000,000). Notwithstanding the foregoing, there shall be
disregarded in the calculation of consolidated total assets of the
Company and its Subsidiaries the aggregate balance in the consolidated
prepaid income tax account of the Company as reflected in the Company's
consolidated financial statements for the applicable period prepared in
accordance with Generally Accepting Accounting Principles, to the extent
that such balance results from writedowns of cotton purchase contracts to
market value which are required by and made in accordance with Generally
Accepted Accounting Principles and from the reversals of such writedowns
at subsequent dates.
Consolidated Tangible Net Worth. Consolidated Net Worth, less:
(a) the total book value of all assets of the Company
and its Subsidiaries properly classified as intangible assets under
Generally Accepted Accounting Principles, including such items as good
will, the purchase price of acquired assets in excess of the fair market
value thereof, trademarks, trade names,
<PAGE>
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service marks, brand names, copyrights, patents and licenses,
and rights with respect to the foregoing; plus
(b) to the extent otherwise includable in the
computation of Consolidated Tangible Net Worth, any subscriptions
receivable.
Consolidated Total Liabilities. All liabilities of the
Company and its Subsidiaries determined on a consolidated basis in
accordance with Generally AcceptedAccounting Principles.
Notwithstanding the foregoing, there shall be disregarded in the
calculation of Consolidated Total Liabilities the aggregate balance in
the special liability account on the Company's books of account entitled
"Liability for Writedown of Cotton Commitments", as reflected in the
Company's consolidated financial statements for the applicable period
prepared in accordance with Generally Accepted Accounting Principles, to
the extent that such balance results from writedowns of cotton purchase
contracts to market value which are required by and made in accordance
with Generally Accepted Accounting Principles and from the reversals of
such writedowns at subsequent dates.
Cotton Writedown Charge.For any fiscal period, the
aggregate amount of non-cash charges against consolidated net income of
the Company and its Subsidiaries for such fiscal period incurred as a
result of writedowns during such fiscal period of cotton purchase
contracts to market value which are required by and made in accordance
with Generally Accepted Accounting Principles, as such amount is
reflected on an after-tax basis or pre-tax basis, as the case may be and
as the context requires, in the Company's consolidated financial
statements for such fiscal period prepared in accordance with Generally
Accepted Accounting Principles.
Crestfield Cotton. Crestfield Cotton Company, a Tennessee
corporation and a wholly-owned Subsidiary of the Company.
Crestfield Cotton Guaranty. The Guaranty, dated as of the
date hereof, from Crestfield Cotton to the Lenders and the Agent and in
form and substance satisfactory to the Agent and the Lenders, as the same
may be amended and in effect from time to time.
Crestfield Cotton Security Agreement. The Security
Agreement, dated as of the date hereof, between Crestfield Cotton and the
Agent, for the benefit of the Lenders, and in form and substance
satisfactory to the Agent and the Lenders, as the same may be amended and
in effect from time to time.
Current Maturities of Long-Term Debt. At any date of
determination, all obligations of the Company and its Subsidiaries on a
consolidated basis which, in accordance with Generally Accepted
Accounting Principles, are properly classified as current maturities of
long-term debt.
<PAGE>
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Debt Service Coverage Ratio.As at any date of
determination, the ratio of Consolidated EBITDA for the period consisting
of the four consecutive fiscal quarters of the Company ending on such
date (the "Measuring Period") to Current Maturities of Long-Term Debt as
at the last day of the fiscal quarter of the Company immediately
preceding the Measuring Period, excluding all Loans which constitute
Current Maturities of Long-Term Debt as at such date, plus the aggregate
Interest Charges for the Measuring Period.
Default. See (Section Mark)11.1.
Distribution. The declaration or payment of any dividend on
or in respect of any shares of any class of capital stock of the Company;
or the purchase, redemption, or other retirement of any shares of any
class of capital stock of the Company, directly or indirectly, through a
Subsidiary or otherwise; the return of capital by the Company to its
shareholders as such; or any other distribution on or in respect of any
shares of any class of capital stock of the Company, in each case other
than dividends payable solely in shares of common stock of the Company.
Dollar or $. Dollars in lawful currency of the United
States of America.
Drawdown Date. The date on which any Loan is made or is to
be made.
Effective Date. See (Section Mark)9.
Eligible Assignee. Any of the following: (i) any Lender,
(ii) any Affiliate of any Lender, (iii) any bank, finance company or
trust company whose long-term unsecured debt securities (or whose parent
entity's long-term unsecured debt securities, as applicable) have a debt
rating at least equal to BBB- (or its equivalent) by Standard & Poors
Corporation or any successor thereto or Baa3 (or its equivalent) by
Moody's Investors Service, Inc. or any successor thereto, or (iv) any
other financial institution approved in writing (such approval not to be
unreasonably withheld or delayed) by the Company and the Agent.
Employee Benefit Plan. Any employee benefit plan within the
meaning of (Section Mark)3(3) of ERISA maintained or contributed to
by the Company or any ERISA Affiliate, other than a Multiemployer Plan.
Encee.Encee, Inc., a Delaware corporation and a
wholly-owned Subsidiary of the Company.
Environmental Laws. See (Section Mark)6.20(a).
EPA. See (Section Mark)6.20(b).
<PAGE>
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ERISA. The Employee Retirement Income Security Act of 1974,
as amended and in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single
employer with the Company under (Section Mark)414 of the Code.
ERISA Reportable Event. A reportable event with respect to a
Guaranteed Pension Plan within the meaning of (Section Mark)4043 of
ERISA and the regulations promulgated thereunder as to which the
requirement of notice has not been waived.
Eurodollar Rate. With respect to any Interest Period, in the
case of any Euro Rate Amount, the annual rate of interest determined by
the Agent, at or before 11:00 a.m. (Boston time) (or as soon thereafter
as practicable) on the second Business Day prior to the first day of such
Interest Period, to be the annual rate of interest at which deposits of
Dollars are offered to the Reference Lender by prime banks in whatever
Eurodollar interbank market may be selected by the Reference Lender in
its sole discretion, acting in good faith, at the time of determination
and in accordance with the usual practice in such market for delivery on
the first day of such Interest Period in immediately available funds and
having a maturity equal to such Interest Period in an amount equal (as
nearly as may be) to such Euro Rate Amount. Each such determination by
the Agent shall be conclusive in the absence of manifest error.
Euro Rate Amounts. Any portions of the principal amount of
the A Loans on which the Company elects pursuant to (Section Mark)3.1
hereof to pay interest based on the Eurodollar Rate.
Event of Default. See (Section Mark)11.1.
FCC Canada. FCC Canada, Inc. a Delaware corporation and a
wholly-owned Subsidiary of the Company.
FCC Guaranty. The Guaranty, dated as of March 5, 1993, from
FCC Canada to the Lenders and the Agent, as amended as of the date hereof
by an amendment which is satisfactory in form and substance to the Agent
and the Lenders and as the same may be further amended and in effect from
time to time.
FNBB. The First National Bank of Boston.
Fieldcrest International. Fieldcrest Cannon International,
Inc., a Delaware corporation and a wholly-owned Subsidiary of the
Company.
Generally Accepted Accounting Principles. (i) When used in
general, means principles which are (1) consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and
its predecessors, in effect for the
<PAGE>
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period ended on the Balance Sheet
Date and (2) such that certified public accountants would, insofar as the
use of accounting principles is pertinent, be in a position to deliver an
unqualified opinion as to financial statements to the effect that such
principles have been properly applied; and (ii) when used with reference
to the Company and/or any of its Subsidiaries such principles shall
include (to the extent consistent with such principles) the accounting
practice of the Company reflected in its financial statements for the
period ended on the Balance Sheet Date consistently applied.
Guaranteed Pension Plan. Any employee pension benefit plan
within the meaning of (Section Mark)3(2) of ERISA maintained or contributed
to by the Company or any ERISA Affiliate the benefits of which are
guaranteed on termination in full or in part by the PBGC pursuant to
Title IV of ERISA, other than a Multiemployer Plan.
HLT Classification. See (Section Mark)4.7.
Hazardous Substances. See (Section Mark)6.20(b).
Indebtedness. All obligations, contingent and otherwise,
which in accordance with Generally Accepted Accounting Principles should
be classified upon the obligor's balance sheet as liabilities, or to
which reference should be made by footnotes thereto, including, without
limitation, in any event and whether or not so classified: (i) all debt
and similar monetary obligations, including accounts payable, whether
direct or indirect; (ii) all liabilities secured by any mortgage, pledge,
security interest, lien, charge, or other encumbrance existing on
property owned or acquired subject thereto, whether or not the liability
secured thereby shall have been assumed; and (iii) all guarantees,
endorsements and other contingent obligations whether direct or indirect
in respect of Indebtedness of others, including any obligation to supply
funds to or in any manner to invest in, directly or indirectly, the
debtor, to purchase Indebtedness, or to assure the owner of Indebtedness
against loss, through an agreement to purchase goods, supplies, or
services for the purpose of enabling the debtor to make payment of the
Indebtedness held by such owner or otherwise; and (iv) the obligations to
reimburse the issuer in respect of any letters of credit.
Independent Accountant. A firm of independent public
accountants of nationally recognized standing selected by the Board of
Directors of the Company, which is "independent" as that term is defined
in Rule 2-01 of Regulation S-X promulgated by the Securities and Exchange
Commission.
Interest Charges. For any period, (a) the expenses of the
Company and its Subsidiaries for such period for (i) interest on
Indebtedness (including interest accrued on the current portion thereof),
(ii) commitment fees (including the Commitment Fee), and (iii) preferred
stock dividends, and (b) similar expenses of
<PAGE>
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the Company and its Subsidiaries for such period in connection with
the borrowing of money.
Interest Coverage Ratio. See (Section Mark)8.10.
Interest Period. Any period relating to a Euro Rate Amount
or a CD Rate Amount, the commencement and duration of which shall be
determined in accordance with (Section Mark)3.1 hereof.
Investments. All expenditures made and all liabilities
incurred (contingently or otherwise) for the acquisition of stock or
Indebtedness of, or for loans, advances, capital contributions (other
than contributions to any employee pension or benefit plan) or transfers
of property not in the ordinary course of business to, or in respect of
any guaranties (or other commitments as described under Indebtedness),
or obligations of, any Person. In determining the aggregate amount of
Investments outstanding at any particular time, (i) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding;
(ii) there shall be included as an Investment all interest accrued with
respect to Indebtedness constituting an Investment unless and until such
interest is paid; (iii) there shall be deducted in respect of each such
Investment any amount received as a return of capital (but only by
repurchase, redemption, retirement, repayment, liquidating dividend or
liquidating distribution); (iv) there shall not be deducted in respect of
any Investment any amounts received as earnings on such Investment,
whether as dividends, interest or otherwise, except that accrued interest
included as provided in the foregoing clause (iii) may be deducted when
paid; and (v) there shall not be deducted from the aggregate amount of
Investments any decrease in the value thereof.
Lead Managers. See the preamble.
Lender Confirmation. See (Section Mark)2.7.2(b).
Lender Obligations. All indebtedness, obligations and
liabilities of the Company to the Lenders, individually or collectively,
existing on the date of this Agreement or arising thereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract,
operation of law or otherwise, in each case arising or incurred under the
Loan Documents or in respect of Loans made or Reimbursement Obligations
incurred or under other instruments at any time evidencing any thereof.
Lenders. See the preamble.
<PAGE>
- -15-
Lenders' Special Counsel. Bingham, Dana & Gould of Boston,
Massachusetts, or such other counsel as may be approved by the Agent.
Letter of Credit. See (Section Mark)2.10.1(a).
Letter of Credit Application. See (Section Mark)2.10.1(a).
Letter of Credit Participation. See (Section Mark)2.10.1(d).
Leverage Ratio. See (Section Mark)8.12.
Loan Documents. Collectively, this Agreement, the Notes,
the Letters of Credit, the Letter of Credit Applications and the Security
Documents, together with all agreements contemplated thereby and all
schedules, exhibits and annexes thereto.
Loan Request. See (Section Mark)2.7.1.
Loans. Collectively, the A Loans and the B Loans made by the
Lenders to the Company pursuant to this Agreement.
Majority A Lenders. As of any date, Lenders holding at least
66.6% of the outstanding principal amount of the A Notes on such date;
and if no such principal is outstanding, Lenders whose Commitment
Percentages add up to at least 66.6%.
Majority A and B Lenders. As of any date, Lenders holding at
least 66.6% of the then aggregate outstanding principal amount of the A
Notes and the B Notes on such date; and if no such principal is
outstanding, Lenders whose Commitment Percentages add up to at least
66.6%.
Maximum B Loan Amount. $25,000,000.
Maximum Drawing Amount. The maximum aggregate amount from
time to time that the beneficiaries may draw under outstanding Letters of
Credit, as such aggregate amount may be reduced from time to time
pursuant to the terms of the Letters of Credit.
Measuring Period. See Debt Service Coverage Ratio.
Multiemployer Plan. Any multiemployer plan within the
meaning of (Section Mark)3(37) of ERISA maintained or contributed to by the
Company or any ERISA Affiliate.
Net Security Value of Inventory. The net value of inventory
of the Company (but excluding (i) inventory of the Company which is not
located within the United States of America, (ii) inventory as to which
appropriate Uniform Commercial Code
<PAGE>
- -16-
financing statements showing the
Company as debtor and the Agent as secured party have not been filed in
the proper filing office or offices in order to perfect the Agent's
security interest therein (unless such security interests have been
released by the Agent pursuant to (Section Mark)5(e) hereof), and
(iii) inventory of the Company which is held by the Company on property
(other than retail stores) leased by the Company unless the Agent has
received (A) a waiver from the lessor of such leased property and,
if any, any sublessor thereof, in form and substance satisfactory to the
Agent or (B) evidence satisfactory to the Agent that no such waiver is
required to assure the priority of the Agent's lien on such inventory over
any interest of such lessor or sublessor in such inventory) at standard
cost as determined utilizing the "First-in First-out" method of accounting
as reflected on the Company's books and records in accordance with
established practices consistently applied, less 50% of "work-in-process"
as reflected in the Company's books and records, and less 100% of each
of (i) the amount included therein classified as "expense supplies",
(ii) "markdown reserve inventory" and (iii) "manufacturing supplies", in
each case as reflected on the Company's books and records, but in no
event an amount greater than $225,000,000.
Notes. Collectively, the A Notes and the B Notes.
Notice of B Borrowing. See (Section Mark)2.7.2(a).
Outstanding. With respect to the Loans, the unpaid principal
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by
(Section Mark)4002 of ERISA and any successor entity or entities
having similar responsibilities.
Prior Credit Agreement. See the preamble.
Person. Any individual, corporation, partnership, trust,
unincorporated association, business, or other legal entity, and any
government or any governmental agency or political subdivision thereof.
Rate Adjustment Period. See Applicable Margin.
RCRA. See (Section Mark)6.20(a).
Reference Lender. The First National Bank of Boston.
Register. See (Section Mark)15(c).
Reimbursement Obligation. The Company's obligation to
reimburse the Agent and the Lenders on account of any drawing under any
Letter of Credit as provided in (Section Mark)2.10.2. hereof.
<PAGE>
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Rental Obligations. All obligations of any of the Company
and its Subsidiaries under rental agreements or leases of real or
personal property, other than obligations which can be terminated by the
giving of notice without liability to any of the Company and its
Subsidiaries in excess of the liability for rent due as of the date not
more than thirty (30) days after such notice is given and under which no
penalty or premium is paid as a result of any such termination, and other
than obligations in respect of capitalized leases.
Reserve Charge. Subject to revision pursuant to (Section Mark)3.5 hereof,
for any Interest Period, an annual rate determined prior to the first day
of such Interest Period in accordance with the following formula:
( a - a) x 100
((1-b) )
where "a" is the applicable Eurodollar Rate (exclusive of the Reserve
Charge) expressed as a decimal, and "b" is the maximum reserve rate for
Eurocurrency liabilities, expressed as a decimal, determined by the Agent
to be the rate or weighted average rate which would be applicable to such
Interest Period under Regulation D (or any successor or similar rule or
regulation) of the Board of Governors of the Federal Reserve System (or
any successor thereto).
Revolving Credit Commitment. The obligations of the Lenders
to make A Loans to the Company under this Agreement up to an aggregate of
the Revolving Credit Commitment Amount.
Revolving Credit Commitment Amount. $150,000,000, less the
aggregate amount, if any, by which the same has been reduced pursuant to
(Section Mark)2.4 hereof.
SARA. See (Section Mark)6.20(a).
St. Mary's. St. Mary's, Inc., a Delaware corporation and a
wholly-owned Subsidiary of the Company.
Security Agreement. See (Section Mark)5.
Security Documents. The Security Agreement, the Crestfield
Cotton Guaranty, the FCC Canada Guaranty, the Subsidiary Guaranty, the
Crestfield Cotton Security Agreement, the Subsidiary Security Agreement,
the Trademark Assignment and the Agency Agreements, and any and all
instruments and documents required to be delivered pursuant thereto, in
each case as originally executed, or if amended, restated, modified or
supplemented, as so amended, restated, modified or supplemented.
<PAGE>
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Subordinated Debt. The unsecured Indebtedness described in
(Section Mark)(Section Mark)8.1(m) and (n) hereof, and additional
unsecured Indebtedness of the Company which is expressly subordinated
and made junior to the payment and performance in full of the Lender
Obligations, and evidenced as such by a written instrument containing
subordination provisions in form and substance approved by the Majority
A Lenders in writing.
Subsidiary. See (Section Mark)6.1(c).
Subsidiary Guaranty. The Guaranty, dated as of the date
hereof, from each of Encee, Fieldcrest International and St. Mary's to
the Lenders and the Agent and satisfactory to the Lenders and the Agent
in all respects, as the same may be amended and in effect from time to
time.
Subsidiary Security Agreement. The Security Agreement, dated
as of March 5, 1993, between FCC Canada and the Agent, for the benefit of
the Lenders and the Agent, as the same may be amended and in effect from
time to time.
Trademark Assignment. The Trademark Collateral Security and
Pledge Agreement, dated as of March 5, 1993, between FCC Canada and the
Agent, for the benefit of the Lenders and the Agent, as the same may be
amended and in effect from time to time.
Type. See Amount.
Uniform Customs. With respect to any Letter of Credit, the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500 or any successor
version thereto adopted by the Agent in the ordinary course of its
business as a letter of credit issuer and in effect at the time of
issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement
Obligation for which the Company does not reimburse the Agent and the
Lenders on the date specified in, and in accordance with,
(Section Mark)2.10.2 hereof.
Voting Stock. Stock or similar interests, of any class or
classes (however designated), the holders of which are at the time
entitled, as such holders, to vote for the election of a majority of the
directors (or persons performing similar functions) of the corporation,
association, trust or other business entity involved, whether or not the
right so to vote exists by reason of the happening of a contingency.
(b) All terms of an accounting character not specifically
defined herein shall have the meanings assigned thereto by Generally
Accepted Accounting Principles. All terms not specifically defined
herein which are defined in the
<PAGE>
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Uniform Commercial Code as in effect in
the Commonwealth of Massachusetts shall have the same meanings herein as
therein. Each reference herein to a particular Person (including,
without limitation, the Agent and each Lender) shall include a reference
to such Person's successors and permitted assigns. The words "herein",
"hereof", "hereunder" and words of like import shall refer to this
Agreement as a whole and not to any particular Section or subdivision of
this Agreement.
(Section Mark)2. THE CREDIT.
(Section Mark)2.1. Commitment to Lend A Loans. (a) Subject to the terms
and conditions set forth in this Agreement, each of the Lenders severally
agrees to make A Loans to the Company and the Company may borrow and
reborrow from time to time prior to the Commitment Termination Date, upon
notice by the Company to the Agent given in accordance with
(Section Mark)2.7.1 hereof, such amounts as requested by the Company
up to a maximum aggregate principal amount outstanding (after
giving effect to all amounts requested) at any one time equal to such
Lender's Commitment Percentage of the Revolving Credit Commitment Amount
minus such Lender's Commitment Percentage of the sum of the Maximum
Drawing Amount of all Letters of Credit and all Unpaid Reimbursement
Obligations; provided, however, that in no event shall the maximum
aggregate principal amount of all Loans Outstanding plus the Maximum
Drawing Amount of all Letters of Credit plus all Unpaid Reimbursement
Obligations exceed at any time the lesser of the Borrowing Base Amount
and the Revolving Credit Commitment Amount. The A Loans shall be
made pro rata in accordance with each Lender's Commitment Percentage.
Each request for A Loans hereunder shall constitute a representation by
the Company that the applicable conditions set forth in
(Section Mark)(Section Mark)9 and 10 hereof have been satisfied on
the date of such request.
(b) On and as of the Effective Date (i) all Loans
outstanding under (and as defined in) the Prior Credit Agreement shall
constitute A Loans outstanding under this Agreement, (ii) each Base Rate
Amount outstanding under (and as defined in) the Prior Credit Agreement
shall constitute a Base Rate Amount outstanding hereunder and shall bear
interest from and after the Effective Date at the rate of interest for A
Loans which bear interest based on the Base Rate as set forth in
(Section Mark)2.9(a) hereof and (iii) each Euro Rate Amount outstanding
under (and as defined in) the Prior Credit Agreement shall constitute
a Euro Rate Amount outstanding hereunder with the same Interest Period as
was applicable to such Euro Rate Amount and shall bear interest from
and after the Effective Date at the rate of interest for A Loans
which bear interest based on the Eurodollar Rate as set forth in
(Section Mark)2.9(a) hereof. The obligations of the Company with
respect to all such Loans shall be subject to and governed by the
applicable terms and provisions of this Agreement and the other Loan
Documents. The Company hereby promises to pay to the Agent on the
Effective Date, for the accounts of the Lenders (as defined in the
Prior Credit Agreement), all Commitment Fees (as defined in the Prior Credit
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Agreement) and interest on the Loans under
the Prior Credit Agreement accrued to the Effective Date.
(Section Mark)2.2. Making the B Loans. Subject to the terms and
conditions set forth in this Agreement, the Lenders hereby agree that the
Company shall be permitted to request and receive from any Lender or
Lenders, in each case in such Lender's sole and absolute discretion, B
Borrowings consisting of short term "money market" borrowings at a fixed
rate of interest under this (Section Mark)2.2 from time to time during
the period commencing on the Effective Date until (but not including)
the date occurring fourteen (14) days prior to the Commitment Termination
Date (provided that no B Loan shall be Outstanding after the Commitment
Termination Date) in the manner set forth in (Section Mark)2.7.2 hereof,
provided that (a) the maturity of any such B Borrowing shall not be more
than thirty (30) days from the date of such B Borrowing, (b) the aggregate
principal amount of all B Borrowings from all the Lenders outstanding at
any one time shall not exceed (i) the Maximum B Loan Amount and
(ii) when aggregated with all the A Loans Outstanding plus the
Maximum Drawing Amount of all Letters of Credit plus all Unpaid
Reimbursement Obligations, the lesser of the Revolving Credit Commitment
Amount and the Borrowing Base Amount, (c) the Company has provided the
Agent with a Notice of B Borrowing as required under
(Section Mark)2.7.2(a) hereof and the appropriate Lender or Lenders
have delivered to the Agent a Lender Confirmation with respect to
such B Loans as required by (Section Mark)2.7.2(b)
hereof, and (d) the Revolving Credit Commitment Amount (except for
purposes of calculating the Commitment Fee) shall be reduced by the
aggregate principal amount of all such B Loans outstanding at any one
time. No B Borrowing shall be permitted if (a) the Interest Coverage
Ratio is less than 2.00 to 1.00 (as reflected on the Compliance
Certificate most recently delivered to the Lenders pursuant to
(Section Mark)7.5(d) hereof) or (b) the Leverage Ratio is greater than
2.80 to 1.00 (as reflected on the Compliance Certificate most recently
delivered to the Lenders pursuant to (Section Mark)7.5(d)) hereof or
(c) a Default or Event of Default
has occurred and is continuing on the proposed Drawdown Date of such B
Borrowing or, after giving effect to such B Borrowing, would occur or be
continuing.
(Section Mark)2.3. Maturity; Mandatory Repayments. (a) The A Loans shall
mature and become due and payable in full on the Commitment Termination
Date. Each B Loan shall mature and become due and payable in full on the
maturity date thereof, as set forth in the Notice of B Borrowing and the
Lender Confirmation delivered to the Agent with respect to such B Loan
pursuant to (Section Mark)2.7.2 hereof. If at any time the aggregate
principal amount of all Loans Outstanding plus the Maximum Drawing Amount
of all Letters of Credit plus all Unpaid Reimbursement Obligations shall
exceed the lesser of the then Borrowing Base Amount or the Revolving
Credit Commitment Amount, the Company shall immediately pay to the Agent
(for the accounts of the Lenders as provided below) the amount of such excess.
If, at the time of
<PAGE>
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such repayment, there are only A Loans Outstanding,
the Company shall pay such excess to the Agent for the accounts of the
Lenders to be applied on a pro rata basis in accordance with their
Commitment Percentages. If, at the time of such repayment, there are
both A Loans and B Loans Outstanding or only B Loans Outstanding, the
Company shall pay such excess to the Agent for the accounts of the
Lenders to be applied on a pro rata basis in accordance with such
Lender's percentage of the Loans Outstanding, with such excess to be
applied first to the A Loans Outstanding and then to the B Loans
Outstanding.
(b) The Company hereby agrees to cause all good funds
which are deposited into its accounts with its collection banks to be
transferred to the Agent on a daily basis pursuant to the Agency
Agreements. The Company hereby authorizes the Agent to apply such funds
plus all other funds deposited into the Company's deposit account with
the Agent pursuant to (Section Mark)7.4 hereof on a daily basis to
repay the outstanding amount of the A Loans.
(Section Mark)2.4. Optional Prepayments of Loans. (a) Subject to
(Section Mark)3.6 hereof, the Company shall have the right at any time to
prepay the A Loans prior to the Commitment Termination Date, as a whole,
or in part, without premium or penalty, upon not less than two (2)
Business Days written, telegraphic or telephonic notice to the Agent,
provided that (i) each partial prepayment shall be in the aggregate
principal amount of $1,000,000 or an integral multiple thereof; (ii)
each partial prepayment shall be allocated among all of the Lenders, in
proportion, as nearly as practicable, to the respective unpaid principal
amount of each Lender's A Note, with adjustments to the extent practical
to equalize any prior prepayments not exactly in proportion; and
(iii) that in the event a Lender failed to make its Commitment Percentage
of an A Loan or A Loans hereunder any prepayment or repayments made by
the Company thereafter shall be first applied to pay in full such A
Loan or A Loans to the
Lenders which made such A Loan or A Loans in proportion as nearly as
practicable to the respective unpaid principal account of each such
Lender's A Loan or A Loans with the order of payment for any such Loan
being made on a last made first paid basis. In no event shall payments
made pursuant to (Section Mark)2.3(b) hereof be construed to be optional
prepayments under this (Section Mark)2.4.
(b) The Company shall not have the right at any time to
prepay any B Loan prior to the maturity date thereof as set forth in the
Notice of B Borrowing and Lender Confirmation delivered to the Agent with
respect thereto.
(Section Mark)2.5. Reduction of Commitment. (a) The Company shall have
the right at any time and from time to time upon five (5) Business Days'
written notice to the Agent to reduce by $5,000,000 or an integral
multiple thereof the unborrowed portion of the Revolving Credit
Commitment Amount, or to terminate the Revolving Credit Commitments in
their entirety, whereupon the Commitments of the Lenders shall be reduced
pro rata in accordance with their respective Commitment Percentages of
the amount specified in such notice or, as the case may be, terminated.
Promptly after receiving any notice of the Company delivered pursuant to
this (Section Mark)2.5, the Agent will notify the Lenders of the substance
thereof. Upon the effective date of any such reduction or termination, the
Company shall pay to the
<PAGE>
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Agent for the respective accounts of the Lenders
the amount by which the sum of the aggregate principal amount of the Loans
Outstanding plus the Maximum Drawing Amount of all Letters of Credit plus
all Unpaid Reimbursement Obligations exceeds the then reduced Revolving
Credit Commitment Amount, to be applied to the accounts of the Lenders in
the manner set forth in (Section Mark)2.3 for mandatory repayments, as
well as the full amount of all interest and any Commitment Fee then accrued
on the amount of the reduction. If the Company reduces the Revolving
Credit Commitment Amount hereunder, any Commitment Fee payable thereafter
under (Section Mark)4.5(a) shall be payable with respect to the Revolving
Credit Commitment Amount as so reduced or terminated.
(b) No reduction or termination of the Commitments of the
Lenders may be reinstated.
(Section Mark)2.6. Notes.
(Section Mark)2.6.1. The A Notes. The obligations to repay the A
Loans and to pay interest thereon shall be evidenced by separate amended
and restated promissory notes to each Lender of the Company in
substantially the form of Exhibit A-1 attached hereto (the "A Notes"),
with appropriate insertions, one A Note being payable to the order of
each Lender in a principal amount equal to such Lender's Commitment and
representing the obligations of the Company to pay to such Lender the
amount of such Lender's Commitment or, if less, the aggregate unpaid
principal amount of all A Loans made by such Lender hereunder, plus
interest accrued thereon, as set forth below. The Company irrevocably
authorizes each Lender to make or cause to be made appropriate notations
on its A Note, or on a record pertaining thereto, reflecting A Loans and
repayments thereof. The outstanding amount of the A Loans set forth on
such Lender's A Note or record shall be prima facie evidence of the
principal amount thereof owing and unpaid to such Lender, but the failure
to make such notation or record, or any error in such notation or record
shall not limit or otherwise affect the obligations of the Company
hereunder or under any A Note to make payments of principal of or
interest on any A Note when due.
(Section Mark)2.6.2. The B Notes. The obligations to repay the B
Loans and to pay interest thereon shall be evidenced by separate
promissory notes to each Lender of the Company in substantially the form
of Exhibit A-2 attached hereto (the "B Notes"), with appropriate
insertions, one B Note being payable to the order of each Lender in a
principal amount equal to the Maximum B Loan Amount and representing the
obligations of the Company to pay to such Lender the Maximum B Loan
Amount or, if less, the aggregate unpaid principal amount of the B Loans
made by such Lender hereunder, plus interest accrued thereon, as set
forth below. The Company irrevocably authorizes each Lender to make or
cause to be made appropriate notations on its B Note, or on a record
pertaining thereto, reflecting B Loans and repayments thereof. The
outstanding amount of the B Loans set forth on
<PAGE>
-23-
such Lender's B Note or
record shall be prima facie evidence of the principal amount thereof
owing and unpaid to such Lender, but the failure to make such notation or
record, or any error in such notation or record shall not limit or
otherwise affect the obligations of the Company hereunder or under any B
Note to make payments of principal of or interest on any B Note when due.
(Section Mark)2.7. Requests for Loans.
(Section Mark)2.7.1. Requests for A Loans. The Company shall give
to the Agent a written notice delivered by telegraph, facsimile or
otherwise (or telephonic notice confirmed in writing) of (a) each A Loan
requested hereunder, (b) each election to have all or a portion of the
unpaid principal amount of the A Loans bear interest during any
particular Interest Period calculated by reference to the Eurodollar
Rate, the Adjusted CD Rate, or the Base Rate and (c) each election to
continue any Euro Rate Amount or CD Rate Amount, as the case may be, for
an additional Interest Period (in each case, a "Loan Request") no later
than 12:00 noon (Boston time) on the proposed Drawdown Date in the case
of Base Rate Amounts and no later than 9:30 a.m. (Boston time) two (2)
Business Days prior to the proposed Drawdown Date, date of conversion or
end of expiring Interest Period, as the case may be, in the case of Euro
Rate Amounts and CD Rate Amounts. Each such notice shall specify the
aggregate principal amount of A Loans requested, the Euro Rate Amounts or
CD Rate Amounts, as the case may be, of the A Loans requested or
converted from Base Rate Amounts or continued for an additional Interest
Period, as the case may be, and the duration of the Interest Period(s)
applicable to any such Euro Rate Amounts or CD Rate Amounts. Promptly
upon receipt of any such notice, the Agent shall notify each of the
Lenders thereof. Each such request for an A Loan shall obligate the
Company to accept the A Loans requested from the Lenders on the proposed
Drawdown Date. Subject to the limitations set forth in (Section Mark)3.1
hereof with respect to Euro Rate Amounts and CD Rate Amounts, Loan Requests
may be in any amount requested by the Company.
(Section Mark)2.7.2. Requests for B Loans. (a) The Company may
request one or more B Borrowings hereunder from any of the Lenders. At
such time as the Company and any Lender or Lenders agree to a B
Borrowing, the Company shall notify the Agent by not later than 12:00
noon (Boston time) on the proposed Drawdown Date of such B Borrowing (a
"Notice of B Borrowing"), in substantially the form of Exhibit B-1
attached hereto, specifying (i) the aggregate amount of the proposed B
Borrowing, (b) the rate of interest applicable to such B Borrowing, (c)
the maturity date of such B Borrowing and (d) the Lender or Lenders
making the B Loans. All B Loans shall be in a minimum principal amount
of $1,000,000. The interest payment date for each B Loan shall be the
maturity date for such B Loan. All computations of interest on the B
Loan shall be made on the basis of a year of 360 days for the actual
number of days occurring in the period for which such interest is
payable.
<PAGE>
- -24-
(b) Not later than 1:00 p.m. (Boston time) on the
proposed Drawdown Date of any B Borrowing, each Lender making a B Loan on
such date shall notify the Agent of such B Loan (the "Lender
Confirmation"), in substantially the form of Exhibit B-2 attached hereto,
confirming all the information provided to the Agent in the Notice of B
Borrowing delivered to the Agent by the Company with respect to such B
Borrowing.
(c) Each Notice of B Borrowing shall be
irrevocable and binding on the Company and shall obligate the Company to
accept the B Loans requested on the proposed Drawdown Date.
(Section Mark)2.8. Funds for Loans.
(Section Mark)2.8.1. Funds for A Loans. (a) Not later than 3:00
p.m. (Boston time) on the proposed Drawdown Date of any A Loans, each of
the Lenders will make available to the Agent, at its head office referred
to in (Section Mark)4.2 hereof, in immediately available funds, the
amount to be loaned by it on such Drawdown Date. Upon receipt from each
Lender of the amount of its A Loan, and upon satisfaction of the conditions
precedent under (Section Mark)10 hereof, to the extent applicable, the
Agent will make the
aggregate amount of such A Loans available to the Company by crediting
such amount to the Company's deposit account established under
(Section Mark)7.4 at FNBB. The failure or refusal of any Lender to make
available to the Agent at the aforesaid time on any Drawdown Date the
amount of the Loan to be made by such Lender thereon shall not relieve
the other Lenders from their several obligations hereunder to make
their respective Commitment Percentages of any requested Loans.
(b) The Agent may assume (unless notified to the
contrary by a Lender prior to 3:00 p.m. (Boston time) on a Drawdown Date)
that each Lender has made available to the Agent on such Drawdown Date
such Lender's Commitment Percentage of the A Loans to be made on such
Drawdown Date, and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Company a
corresponding amount. If such amount is made available to the Agent on a
date after such Drawdown Date, such Lender shall pay to the Agent on
demand an amount equal to the product of (i) the average computed for the
period referred to in clause (iii) below, of the weighted average
interest rate paid by the Agent for Federal funds acquired by the Agent
during each day included in such period, times (ii) the amount equal to
such Lender's Commitment Percentage of such borrowing, times (iii) a
fraction, the numerator of which is the number of days that elapse from
and including such Drawdown Date to the date on which such Lender's
Commitment Percentage of such borrowing shall become immediately
available to the Agent, and the denominator of which is 360. A statement
of the Agent submitted to any Lender with respect to any amounts owing
under this paragraph shall be prima facie evidence of the amount due and
owing. If such Lender's Commitment Percentage of such A Loan is not in
fact made available to
<PAGE>
-25-
the Agent by such Lender within three (3) Business
Days of such Drawdown Date, the Agent shall be entitled to recover such
amount from the Company on demand, with interest thereon at the rate per
annum applicable to the A Loans made on such Drawdown Date.
(Section Mark)2.8.2. Funds for B Loans. (a) Not later than 3:00
p.m. (Boston time) on the proposed Drawdown Date of any B Loans, the
Lender or Lenders making the B Loans will make available to the Agent, at
its head office referred to in (Section Mark)4.2 hereof, in immediately
available funds, the amount to be loaned by it on such Drawdown Date. Upon
receipt from each Lender of the amount of its B Loan, and upon satisfaction
of the conditions precedent under (Section Mark)10 hereof, to the extent
applicable, the Agent will make the aggregate amount of such B Loans
available to the Company by crediting such amount to the Company's
deposit account established under (Section Mark)7.4 at FNBB.
(b) The Agent may assume (unless notified to the
contrary by such Lender prior to 3:00 p.m. (Boston time) on the proposed
Drawdown Date) that each Lender that has delivered a Lender Confirmation
to the Agent pursuant to (Section Mark)2.7.2(b) hereof has made available to
the Agent on the Drawdown Date specified in such Lender Confirmation the
amount of the B Loans specified in such Lender Confirmation to be made
on such Drawdown Date, and the Agent may (but it shall not be required to),
in reliance upon such assumption, make available to the Company a
corresponding amount. If such amount is made available to the Agent on a
date after such Drawdown Date, such Lender shall pay to the Agent on
demand an amount equal to the product of (i) the average computed for the
period referred to in clause (iii) below, of the weighted average
interest rate paid by the Agent for Federal funds acquired by the Agent
during each day included in such period, times (ii) the amount of such
borrowing, times (iii) a fraction, the numerator of which is the number
of days that elapse from and including such Drawdown Date to the date on
which the amount of the B Loan shall become immediately available to the
Agent, and the denominator of which is 360. A statement of the Agent
submitted to any Lender with respect to any amounts owing under this
paragraph shall be prima facie evidence of the amount due and owing. If
the amount of such B Loan is not in fact made available to the Agent by
such Lender within three (3) Business Days of such Drawdown Date, the
Agent shall be entitled to recover such amount from the Company on
demand, with interest thereon at the rate per annum applicable to the B
Loans made on such Drawdown Date.
(Section Mark)2.9. Interest on Loans. Except as otherwise provided in
(Section Mark)4.1 hereof,
(a) The Company shall pay interest on the unpaid principal
amount of each A Loan made by the Lenders to the Company from the
Drawdown Date thereof until such principal amount is paid in full, at an
annual rate equal to (i) with respect to any Base Rate Amount, the Base
Rate in effect
<PAGE>
-26-
from time to time, (ii) with respect to any CD Rate
Amount, the Adjusted CD Rate in effect for the Interest Period applicable
thereto plus the Applicable Margin in effect for C/D Rate Amounts, and
(iii) with respect to any Euro Rate Amount, the Eurodollar Rate in effect
for the Interest Period applicable thereto plus the Applicable Margin in
effect for Euro Rate Amounts.
(b) If at any time either the Interest Coverage Ratio or the
Leverage Ratio was actually a ratio other than that ratio on the basis of
which the Agent determined the rate of interest in effect hereunder on
the applicable Adjustment Date, then such interest rate determination
shall be adjusted retroactively to such Adjustment Date on the basis of
such corrected determination of the actual Interest Coverage Ratio or
Leverage Ratio, as the case may be, and within ten (10) Business Days
after notice thereof in reasonable detail requesting a retroactive
adjustment of interest previously paid given by the Company, the Agent or
any Lender, (i) the Company shall pay to the Lenders, or (ii) the Lenders
severally, on a ratable basis, shall credit the Company with, as the case
may be, the amount of the appropriate retroactive adjustment in respect
of such adjusted interest rate for any portion of any Interest Period as
to which interest has been paid.
(c) The Company promises to pay interest on each A Loan as
follows: (i) on each Base Rate Amount quarterly in arrears on the last
Business Day of each March, June, September and December, with a final
payment at the maturity of such A Loan, and (ii) on each CD Rate Amount
and Euro Rate Amount in accordance with (Section Mark)3.1 hereof.
(d) The Company promises to pay interest on each B Loan on the
maturity date thereof as agreed to by the Company and the Lender which
made such B Loan to the Company as set forth in the Notice of B Borrowing
and the Lender Confirmation delivered to the Agent with respect to such B
Loan pursuant to (Section Mark)2.7.2 hereof.
(Section Mark)2.10. LETTERS OF CREDIT.
(Section Mark)2.10.1. Letter of Credit Commitments.
(a) Commitment to Issue Letters of Credit. Subject to
the terms and conditions hereof and the execution and delivery by the
Company of a letter of credit application on the Agent's customary form
(a "Letter of Credit Application"), the Agent on behalf of the Lenders
and in reliance upon the agreement of the Lenders set forth in
(Section Mark)2.10.1(d) and upon the representations and warranties of the
Company contained herein, agrees, in its individual capacity, to issue,
extend and renew for the account of the Company one or more standby letters
of credit (individually, a "Letter of Credit"), in such form as
may be requested from
<PAGE>
-27-
time to time by the Company and agreed to by the Agent;
provided, however, that, after giving effect to such request, (a) the sum
of the aggregate Maximum Drawing Amount of all Letters of Credit and all
Unpaid Reimbursement Obligations shall not exceed $15,000,000 at any one
time and (b) the sum of (i) the Maximum Drawing Amount of all Letters of
Credit, plus (ii) all Unpaid Reimbursement Obligations, plus (iii) the
amount of all Loans outstanding shall not exceed the lesser of (A) the
Revolving Credit Loan Commitment Amount and (B) the Borrowing Base
Amount. Notwithstanding the foregoing, the Agent shall have no
obligation to issue any Letter of Credit to support or secure any
Indebtedness of the Company or any of its Subsidiaries to the extent that
such Indebtedness was incurred prior to the proposed issuance date of
such Letter of Credit, unless in any such case the Company demonstrates
to the satisfaction of the Agent that (x) such prior incurred
Indebtedness was then fully secured by a prior perfected and unavoidable
security interest in collateral provided by the Company or such
Subsidiary to the proposed beneficiary of such Letter of Credit or (y)
such prior incurred Indebtedness was then secured or supported by a
letter of credit issued for the account of the Company or such Subsidiary
and the reimbursement obligation with respect to such letter of credit
was fully secured by a prior perfected and unavoidable security interest
in collateral provided to the issuer of such letter of credit by the
Company or such Subsidiary.
(b) Letter of Credit Applications. Each Letter of
Credit Application shall be completed to the satisfaction of the Agent.
In the event that any provision of any Letter of Credit Application shall
be inconsistent with any provision of this Agreement, then the provisions
of this Agreement shall, to the extent of any such inconsistency, govern.
(c) Terms of Letters of Credit. Each Letter of Credit
issued, extended or renewed hereunder shall, among other things, (a)
provide for the payment of sight drafts for honor thereunder when
presented in accordance with the terms thereof and when accompanied by
the documents described therein, and (b) have an expiry date no later
than the earlier to occur of (i) the first anniversary of its date of
issuance (provided that such Letter of Credit may be automatically
extended if so permitted under the terms thereof) and (ii) the date which
is fourteen (14) days (or, if the beneficiary is located outside of the
United States of America, forty-five (45) days) prior to the Commitment
Termination Date. Each Letter of Credit so issued, extended or renewed
shall be subject to the Uniform Customs.
(d) Reimbursement Obligations of Lenders. Each Lender
severally agrees that it shall be absolutely liable, without regard to
the occurrence of any Default or Event of Default or any other condition
precedent whatsoever, to the extent of such Lender's Commitment
Percentage, to reimburse the Agent on demand for the amount of each draft
paid by the Agent under each Letter of Credit to the extent that such
amount is not reimbursed by the Company pursuant to
<PAGE>
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(Section Mark)2.10.2
hereof (such agreement for a Lender being called herein the "Letter
of Credit Participation" of such Lender).
(e) Participations of Lenders. Each such payment made
by a Lender shall be treated as the purchase by such Lender of a
participating interest in the Company's Reimbursement Obligation under
(Section Mark)2.10.2 hereof in an amount equal to such payment. Each
Lender shall share in accordance with its participating interest in any
interest which accrues pursuant to (Section Mark)2.10.2 hereof.
(Section Mark)2.10.2. Reimbursement Obligation of the Company. In order
to induce the Agent to issue, extend and renew each Letter of Credit and
the Lenders to participate therein, the Company hereby agrees to
reimburse or pay to the Agent, for the account of the Agent or (as the
case may be) the Lenders, with respect to each Letter of Credit issued,
extended or renewed by the Agent hereunder,
(a) except as otherwise expressly provided in
(Section Mark)2.10.2(b) and (c) hereof, on each date that any draft
presented under such Letter of Credit is honored by the Agent, or the
Agent otherwise makes a payment with respect thereto, (i) the amount paid
by the Agent under or with respect to such Letter of Credit, and (ii) the
amount of any taxes, fees, charges or other costs and expenses whatsoever
incurred by the Agent or any Lender in connection with any payment made
by the Agent or any Lender under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not the termination) of the
Revolving Credit Loan Commitment Amount to an amount less than the
Maximum Drawing Amount, an amount equal to such difference, which amount
shall be held by the Agent for the benefit of the Lenders and the Agent
as cash collateral for all Reimbursement Obligations, and
(c) upon the termination of the Revolving Credit Loan
Commitment Amount, or the acceleration of the Reimbursement Obligations
with respect to all Letters of Credit in accordance with (Section Mark)11
hereof, an amount equal to the then Maximum Drawing Amount on all Letters of
Credit, which amount shall be held by the Agent for the benefit of the
Lenders and the Agent as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Agent at it's head office referred
to in (Section Mark)4.2 hereof in immediately available funds. Interest on
any and all amounts remaining unpaid by the Company under this
(Section Mark)2.10.2 at any time from the date such amounts become due and
payable (whether as stated in this (Section Mark)2.10.2 by acceleration
or otherwise) until payment in full (whether before or after judgment)
shall be payable to the Agent or (as the case may be) the Lenders, on
demand at the rate specified in (Section Mark)4.1 hereof for overdue
principal on the Loans.
<PAGE>
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(Section Mark)2.10.3. Letter of Credit Payments. If any draft shall be
presented or other demand for payment shall be made under any Letter of
Credit, the Agent shall notify the Company of the date and amount of the
draft presented or demand for payment and of the date and time when it
expects to pay such draft or honor such demand for payment. If the
Company fails to reimburse the Agent as provided in (Section Mark)2.10.2
hereof on or before the date that such draft is paid or other payment is
made by the Agent, the Agent may at any time thereafter notify the Lenders
of the amount of any such Unpaid Reimbursement Obligation. No later than
3:00 p.m. (Boston time) on the Business Day next following the receipt of such
notice, each Lender shall make available to the Agent, at its head office
referred to in (Section Mark)4.2 hereof, in immediately available funds, such
Lender's Commitment Percentage of such Unpaid Reimbursement Obligation,
together with an amount equal to the product of (a) the average, computed for
the period referred to in clause (c) below, of the weighted average interest
rate paid by the Agent for federal funds acquired by the Agent during
each day included in such period, times (b) the amount equal to such
Lender's Commitment Percentage of such Unpaid Reimbursement Obligation,
times (c) a fraction, the numerator of which is the number of days that
elapse from and including the date the Agent paid the draft presented for
honor or otherwise made payment to the date on which such Lender's
Commitment Percentage of such Unpaid Reimbursement obligation shall
become immediately available to the Agent, and the denominator of which
is 360. The responsibility of the Agent to the Company and the Lenders
shall be only to determine that the documents (including each draft)
delivered under each Letter of Credit in connection with such presentment
shall be in conformity in all material respects with such Letter of
Credit.
(Section Mark)2.10.4. Obligations Absolute. The Company's obligations
under this (Section Mark)2.10 shall be absolute and unconditional under
any and all circumstances and irrespective of the occurrence of any Default
or Event of Default or any condition precedent whatsoever or any
setoff, counterclaim or defense to payment which the Company may have or have
had against the Agent, any Lender or any beneficiary of a Letter of Credit.
The Company further agrees with the Agent and the Lenders that the Agent
and the Lenders shall not be responsible for, and the Company's
Reimbursement Obligations under (Section Mark)2.10.2 hereof shall not be
affected by, among other things, the validity or genuineness of documents
or of any endorsements thereon, even if such documents should in fact prove
to be in any or all respects invalid, fraudulent or forged, or any
dispute between or among the Company, the beneficiary of any Letter of
Credit or any financing institution or other party to which any Letter of
Credit may be transferred or any claims or defenses whatsoever of the
Company against the beneficiary of any Letter of Credit or any such
transferee. The Agent and the Lenders shall not be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with any Letter
of Credit. The Company agrees that any action taken or omitted by the Agent
or any Lender under or in connection with each Letter of Credit and the
related drafts and documents, if done in good
<PAGE>
-30-
faith, shall be binding
upon the Company and shall not result in any liability on the part of the
Agent or any Lender to the Company.
(Section Mark)2.10.5. Reliance by Issuer. To the extent not inconsistent
with (Section Mark)2.10.4 hereof, the Agent shall be entitled to rely, and
shall be fully protected in relying upon, any Letter of Credit, draft,
writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel, independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement unless it shall first
have received such advice or concurrence of the Majority A Lenders as it
reasonably deems appropriate or it shall first be indemnified to its
reasonable satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement in accordance
with a request of the Majority A Lenders, and such request and any action
taken or failure to act pursuant thereto shall be binding upon the
Lenders and all future holders of the A Notes or of a Letter of Credit
Participation.
(Section Mark)2.10.6. Letter of Credit Fees. The Company shall, on the
date of issuance or any extension or renewal of any Letter of Credit, pay
a fee to the Agent at a rate per annum equal to the Applicable Margin in
effect on such date on the face amount of such Letter of Credit, such fee
to be for the accounts of the Lenders in accordance with their respective
Commitment Percentages. In addition, the Company shall pay to the Agent
for its own account, at such time or times as such charges are
customarily made by the Agent, its standard processing, negotiating,
amendment and administrative fees, and all fees in respect of capital
costs incurred by the Agent in connection with such Letters of Credit
(each of the foregoing fees shall be referred to herein, collectively, as
the "Letter of Credit Fees").
(Section Mark)3. EURODOLLAR RATE AND ADJUSTED CD RATE INTEREST.
(Section Mark)3.1. Elections. At the option of the Company, so long as
no Default or Event of Default has occurred and is then continuing, the
Company may elect from time to time to have all or a portion of the
unpaid principal amount of the A Loans to the Company outstanding from
time to time bear interest during any particular Interest Period
calculated by reference to the Eurodollar Rate or the Adjusted CD Rate or
elect to continue any Euro Rate Amount or CD Rate Amount, as the case may
be, for an additional Interest Period, provided that any such portion of
Euro Rate Amount or CD Rate Amount shall be in an amount not less than
$3,000,000 or some greater integral multiple of $1,000,000 with respect
to any single Interest Period. Any election by the Company to have
interest calculated by reference to either the Adjusted CD Rate or the
Eurodollar Rate or to continue any CD Rate
<PAGE>
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Amount or Euro Rate Amount, as
the case may be, for an additional Interest Period shall be made by
notice (which shall be irrevocable) to the Agent as provided in
(Section Mark)2.7.1 hereof, specifying (a) as to Euro Rate Amounts, the
Euro Rate Amount and
the duration of the proposed Interest Period (which must be one, two,
three or six months) and (b) as to CD Rate Amounts, the CD Rate Amount
and the duration of the proposed Interest Period (which must be 30, 60,
90 or 180 days). Any election of either an Adjusted CD Rate or a
Eurodollar Rate basis shall lapse at the end of the expiring Interest
Period unless extended by a further election notice as hereinbefore
provided. Each CD Rate Amount and Euro Rate Amount shall bear interest
during each Interest Period relating thereto at the rate set forth in
(Section Mark)2.9(a) hereof. Interest on each CD Rate Amount and Euro
Rate Amount shall be payable (i) on the last day of each Interest Period
relating thereto, and (ii) with respect to any Euro Rate Amount in
respect of which the Interest Period is more than 3 months, the date
that is 3 months from the first day of such Interest Period and on the last
day of such Interest Period, and (iii) with respect to any CD Rate Amount
in respect of which the Interest Period is 180 days, the date that is 90
days from the first date of such Interest Period and on the last day of
such Interest Period. Upon the expiration of any Interest Period with
respect to a CD Rate Amount or a Euro Rate Amount, unless extended on a
Adjusted CD Rate or Eurodollar Rate basis by a further election notice as
hereinabove provided, such Amount will be automatically converted to a
Base Rate Amount under (Section Mark)2.9 hereof. Any conversion to a Base
Rate Amount, a Euro Rate Amount or a CD Rate Amount or election to continue a
CD Rate Amount or a Euro Rate Amount for an additional Interest Period
shall not be deemed a new A Loan for purposes of (Section Mark)10 hereof.
(Section Mark)3.2. Reserve Charge. The Company will pay to the Agent for
the accounts of the Lenders the Reserve Charge with respect to Euro Rate
Amounts of A Loans outstanding from time to time on the dates interest is
payable on such Euro Rate Amounts pursuant to (Section Mark)3.1 hereof.
(Section Mark)3.3. Notices as to Rates. The Agent shall forthwith upon
determining any Eurodollar Rate or Adjusted CD Rate provide notice
thereof to the Company and each Lender. Each such notice shall, absent
manifest error, be binding upon the Company and each Lender.
(Section Mark)3.4. Substitution of Adjusted CD Rate or Base Rate. If
with respect to any Interest Period, the Agent is unable to determine the
Eurodollar Rate relating thereto, or adverse or unusual conditions in or
changes in applicable law relating to the applicable Eurodollar interbank
market make it illegal or, in the reasonable judgment of the Agent,
impracticable, to fund therein any of the A Loans or make the projected
Eurodollar Rate unreflective of the actual costs of funds therefor to the
Lenders, or if it shall become unlawful for any Lender to charge interest
on the A Loans on a Eurodollar Rate basis, then in any of the foregoing
events the Agent shall so notify the Company and the Lenders and, unless
an Adjusted CD Rate is elected by the Company pursuant to
(Section Mark)3.1 hereof, interest will be calculated and
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payable in respect of such projected Interest Period (and thereafter for so
long as the conditions referred to
in this sentence shall continue) by reference to the Base Rate in
accordance with (Section Mark)2.9 hereof.
(Section Mark)3.5. Additional Costs. If any present or future applicable
law, which expression, as used herein, includes statutes, rules and
regulations thereunder and interpretations thereof by any competent court
or by any governmental or other regulatory body or official charged with
the administration or the interpretation thereof and requests,
directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Lender or the Agent by any
central bank or other fiscal, monetary or other authority (whether or not
having the force of law), shall:
(a) subject any Lender or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect to
this Agreement or the other Loan Documents, any Letters of Credit, such
Lender's Commitment or the Loans (other than taxes based upon or measured
by the income or profits of such Lender or the Agent), or
(b) materially change the basis of taxation (except for changes
in taxes on income or profits) of payments to any Lender of the principal
of or the interest on any Loans or any other amounts payable to any
Lender or the Agent under this Agreement or any of the other Loan
Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other
similar requirements (whether or not having the force of law) against
assets held by, or deposits in or for the account of, or loans by, or
letters of credit issued by, or commitments of an office of any Lender,
or
(d) impose on any Lender or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents,
any Letters of Credit, the Loans, such Lender's Commitment, or any class
of loans or commitments of which any of the Loans or such Lender's
Commitment forms a part, and the result of any of the foregoing is
(i) to increase the cost to any Lender of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such
Lender's Commitment to make A Loans or issue, extend or renew any Letters
of Credit, or
(ii) to reduce the amount of principal, interest or other
amount payable to such Lender or the Agent hereunder on account of such
Lender's Commitment, any Letters of Credit or any of the Loans, or
<PAGE>
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(iii) to require such Lender or the Agent to make any payment
or to forego any interest or Reimbursement Obligations or other sum
payable hereunder, the amount of which payment or foregone interest or
Reimbursement Obligations or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by such Lender or
the Agent from the Company hereunder,
then, and in each such case, the Company will, upon demand made by such
Lender or (as the case may be) the Agent at any time and from time to
time and as often as the occasion therefor may arise, pay to such Lender
or the Agent such additional amounts as will be sufficient to compensate
such Lender or the Agent for such additional cost, reduction, payment or
foregone interest or Reimbursement Obligations or other sum.
(Section Mark)3.6. Indemnity. The Company agrees to indemnify each
Lender and to hold each Lender harmless from and against any loss, cost
or expense (including loss of anticipated profits) that such Lender may
sustain or incur as a consequence of (a) default by the Company in
payment of the principal amount of or any interest on any Euro Rate
Amount or CD Rate Amount as and when due and payable, including any such
loss or expense arising from interest or fees payable by such Lender to
lenders of funds obtained by it in order to maintain its Euro Rate Amount
or CD Rate Amount, (b) default by the Company in making a borrowing or
conversion after the Company has given (or is deemed to have given) a
Loan Request or a conversion request relating thereto or (c) the making
of any payment of a Euro Rate Amount or CD Rate Amount or the making of
any conversion of any such Euro Rate Amount or CD Rate Amount to an
Amount of another Type on a day that is not the last day of the
applicable Interest Period with respect thereto, including interest or
fees payable by such Lender to lenders of funds obtained by it in order
to maintain any such Euro Rate Amounts or CD Rate Amounts. A certificate
as to the amount and calculation of such loss, expense or liability
submitted to the Company by the Agent shall be conclusive and binding for
all purposes, except for manifest error. The Lenders shall in good faith
use reasonable efforts to minimize the amount of any such costs.
BOS-BUS:27095.6BOS-BUS:27095.6
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(Section Mark)3.7. Concerning Interest Periods. No Interest Period may be
selected by the Company if the aggregate amount of all Euro Rate Amounts
and CD Rate Amounts subject to an Interest Period which ends after any
date for a scheduled reduction or an anticipated reduction in the
Revolving Credit Commitment Amount would be in excess of the reduced
Revolving Credit Commitment Amount on such date, and no Interest Period
may be selected in respect to all or any portion of the A Loans which
would expire after the Commitment Termination Date. If any Interest
Period would otherwise end on a day which is not a Business Day for
Adjusted CD Rate or Eurodollar Rate purposes, that Interest Period shall
end on the Business Day next preceding or next succeeding such day
determined by the Agent in
<PAGE>
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accordance with its usual practices. The
Agent will provide the Company and the Lenders with written or telephonic
notice of any such determination by the Agent.
(Section Mark)4. CERTAIN COMMON PROVISIONS.
(Section Mark)4.1. Interest After Default. (a) Overdue principal and
(to the extent permitted by applicable law) interest on the Loans and all
other overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest at a rate per annum equal to three percent
(3%) plus the rate which would be applicable under
(Section Mark)2.9 hereof, compounded daily and payable on demand, to
accrue from the due date thereof until the obligations of the Company with
respect to the payment thereof shall be discharged, whether before or after
judgment.
(b) During the continuance of an Event of Default under
(Section Mark)(Section Mark)ll.l (a) or (b) hereof, the principal of the
Loans not overdue shall, until such Event of Default has been cured,
remedied or waived, bear interest at the rate of interest applicable to
overdue amounts pursuant to (Section Mark)4.1(a) hereof.
(Section Mark)4.2. Payments. All payments of principal of and
interest on the A Loans, Commitment Fee, any Letter of Credit Fee, Agent's
Fee and any other amounts due hereunder and under any of the other Loan
Documents shall be made by the Company to the Agent for the pro rata account
of the Lenders in Dollars in immediately available funds at the Agent's
head office at 100 Federal Street, Boston, Massachusetts 02110 or such other
place as the Company shall be notified in writing by the Agent prior to
making such payment. All payments of principal of and interest on the B
Loans shall be made by the Company to the Agent for the account of the
Lender to which such B Loan is owing, in Dollars in immediately available
funds at the Agent's head office specified in the preceding sentence.
All payments by the Company hereunder and under any of the other Loan
Documents shall be made without setoff, deduction or counterclaim no
later than ll:00 a.m. (Boston time). The Agent shall promptly remit to
each Lender its share of payments received by the Agent from the Company
for the account of such Lender.
(Section Mark)4.3. Computations. All computations of interest on the
Loans and of Commitment Fees, Letter of Credit Fees and Agent's Fee shall be
based on a 360-day year and paid for the actual number of days elapsed.
Subject to (Section Mark)3.7 hereof with respect to Euro Rate Amounts and
CD Rate Amounts, whenever a payment hereunder or under the Notes becomes due
on a day which is not a Business Day, the due date for such payment shall
be rescheduled to the next succeeding Business Day, and interest and
Commitment Fees shall accrue during any such extension.
(Section Mark)4.4. Interest Limitation. Notwithstanding any other term of
this Agreement or any Note or any other document referred to herein or
therein, the maximum amount of interest which may be charged to or
collected from any person liable hereunder or under any Note by any
Lender shall be absolutely limited to,
<PAGE>
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and shall in no event exceed, the
maximum amount of interest which could lawfully be charged or collected
under applicable law (including, to the extent applicable, the provisions
of Section 5197 of the Revised Statutes of the United States of America,
as amended, 12 U.S.C. Section 85, as amended), so that the maximum of
all amounts constituting interest under applicable law, howsoever
computed, shall never exceed as to any Person liable therefor such lawful
maximum, and any term of this Agreement or any Note or any other document
referred to herein or therein which could be construed as providing for
interest in excess of such lawful maximum shall be and hereby is made
expressly subject to and modified by the provisions of this paragraph.
(Section Mark)4.5. Commitment Fee. The Company agrees to pay to the Agent
for the accounts of the Lenders in accordance with their Commitment
Percentages a commitment fee (the "Commitment Fee") at the rate of .375%
per annum on the amount during each fiscal quarter or portion thereof
from the Effective Date through the Commitment Termination Date, by which
each Lender's Commitment (without regard to any reduction in the maximum
aggregate principal amount of all Loans under (Section Mark)2.1 in
respect of the Borrowing Base Amount in that quarter) exceeds its Commitment
Percentage of the sum of the aggregate outstanding principal amount of the
A Loans plus the Maximum Drawing Amount of all Letters of Credit plus all
Unpaid Reimbursement Obligations hereunder during such fiscal quarter or
portion thereof. The Commitment Fee payable hereinabove shall be payable
quarterly in arrears on the last Business Day of each March, June,
September and December, commencing on the first such date following the
Effective Date, with a final payment on the Commitment Termination Date,
except as otherwise provided herein.
(Section Mark)4.6. Increased Capital Requirements. If any change in law or
any governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law) or the interpretation thereof by
a court or governmental authority with appropriate jurisdiction affects
the amount of capital required or expected to be maintained by any Lender
or any corporation controlling any Lender and such Lender determines that
the amount of capital required is increased by or based upon the
existence of the credit facility established hereunder or any Loans made
pursuant hereto then such Lender may notify the Company of such fact. To
the extent that the costs of such increased capital requirements are not
reflected in the Base Rate, Adjusted CD Rate or Eurodollar Rate, the
Company and such Lender shall thereafter attempt to negotiate in good
faith an adjustment to the compensation payable hereunder which will
adequately compensate such Lender in light of these circumstances. If
the Company and such Lender are unable to agree to such adjustment within
thirty (30) days of the day on which the Company receives such notice,
then commencing on the date of such notice (but not earlier than the
effective date of any such change), the fees payable hereunder shall
increase by an amount which will, in such Lender's reasonable
determination,
<PAGE>
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provide adequate compensation. The Lenders shall allocate
such cost increases among its customers in good faith and on an
equitable basis.
(Section Mark)4.7. HLT Classification. In the event that after the date
hereof the Loans, Commitments, Letters of Credit or Letter of Credit
Participations are classified on the Agent's or on any Lender's books as
a "highly leveraged transaction" (an "HLT Classification") by the Agent,
such Lender or any governmental authority, central bank or comparable
agency having jurisdiction over the Agent or such Lender, pursuant to any
existing regulations regarding "highly leveraged transactions" or any
modification, amendment or interpretation thereof, or the adoption of new
regulations regarding "highly leveraged transactions" after the date
hereof by any governmental authority, the Agent or such Lender, as the
case may be, shall promptly give notice of such HLT Classification to the
Company and the Lenders or the Company, the other Lenders and the Agent,
as the case may be, whereupon the Agent, the Lenders and the Company
shall commence negotiations in good faith to agree on a revised
Commitment Fee, interest rates and/or margins hereunder reflecting such
HLT Classification. In the event that the parties hereto fail to agree
on such revised commitment fee, interest rates and/or margins within
sixty (60) days of the notice given by the Agent or any Lender referred
to above, then the Agent shall (i) if requested by the Lenders
constituting the Majority A Lenders, by sixty (60) days' notice to the
Company, terminate the unused portions of the Commitments and they shall
thereupon terminate, and (ii) if requested by the Lenders constituting
the Majority A Lenders, by sixty (60) days' notice to the Company,
declare all amounts outstanding under the Notes (together with accrued
interest thereon and any other amounts payable hereunder) to be, and all
such amounts shall thereupon become, absolutely and immediately due and
payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Company. The Company hereby
absolutely and unconditionally agrees to pay to the Agent for the
accounts of the Lenders on the date of any such acceleration all amounts
payable hereunder and under the Notes.
(Section Mark)4.8. Closing Fee. In consideration of the Lenders' agreement
to amend and restate the Prior Credit Agreement, the Company hereby
agrees to pay to the Agent, for the accounts of the institutions which
are Lenders on the date of this Agreement, in accordance with their
Commitment Percentages, a closing fee (the "Closing Fee") in the amount
of $281,250.
(Section Mark)4.9. Agent's Fee. The Company shall pay to the Agent
annually in advance, for the Agent's own account, on the Effective Date
and on each anniversary of the Effective Date, an Agent's fee (the
"Agent's Fee") in an amount equal to $75,000 for the first year, and
$50,000 for each year thereafter.
<PAGE>
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(Section Mark)5. SECURITY.
(a) The Lender Obligations are and shall continue to be secured
by a blanket first perfected lien on all personal property of the Company
consisting of inventory, accounts receivables, general intangibles
(including patents, copyrights and trademarks) of the Company and by a
pledge by the Company to the Agent, for the benefit of itself and the
Lenders, of all of the capital stock of each of its Subsidiaries (other
than Amoskeag), in each case, whether now owned or hereafter acquired by
the Company, and all proceeds and products of the foregoing, pursuant to
the terms of an amended and restated security agreement in the form of
Exhibit C attached hereto (the "Security Agreement").
(b) The Lender Obligations shall also continue to be guaranteed
by FCC Canada pursuant to the terms of the FCC Canada Guaranty. The
obligations of FCC Canada under the FCC Canada Guaranty shall continue to
be secured by a blanket first perfected lien on all personal property of
FCC Canada, whether now owned or hereafter acquired by FCC Canada,
pursuant to the terms of the Subsidiary Security Agreement and the
Trademark Assignment.
(c) The Lender Obligations shall also be guaranteed by
Crestfield Cotton pursuant to the Crestfield Cotton Guaranty. The
obligations of Crestfield Cotton under the Crestfield Cotton Guaranty
shall be secured by a blanket first lien on all personal property of
Crestfield Cotton, whether now owned or hereafter acquired by Crestfield
Cotton, pursuant to the terms of the Crestfield Cotton Security
Agreement.
(d) The Lender Obligations shall also be guaranteed by each of
Encee, Fieldcrest International and St. Mary's pursuant to the Subsidiary
Guaranty.
(e) The Agent and the Lenders hereby agree that the Agent
shall, upon the written request of the Company and at the sole cost and
expense of the Company, release its security interest in the Collateral
if, and only if, each of the following conditions is satisfied: (i) the
Interest Coverage Ratio as at the end of the two most recently ended
fiscal quarters of the Company (in each case for the period of the four
fiscal quarters ending on such date) shall be greater than 2.50 to 1.00,
(ii) the Leverage Ratio as at the end of the two most recently ended
fiscal quarters of the Company shall be less than 2.25 to 1.00, (iii) no
Default or Event of Default shall have occurred or be continuing on the
date of such request, and (iv) the Company shall have delivered to the
Agent and the Lenders on the date of such request a certificate signed by
an authorized officer of the Company and evidence satisfactory to the
Agent and the Lenders showing compliance with the provisions of clauses
(i) through (iii) hereof.
(Section Mark)6. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Lenders as follows:
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(Section Mark)6.1. Corporate Existence. (a) Each of the Company and its
Subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of the state of its respective
incorporation, and (ii) has adequate corporate power and authority and
full legal right to own or to hold under lease its properties and to
carry on the business in which it is presently engaged. Each of the
Company and its Subsidiaries is qualified as a foreign corporation and is
licensed, admitted or approved to do business as a foreign corporation
in each jurisdiction wherein the character of the properties owned or
held under lease by it, or the nature of the business conducted by it,
makes such qualification necessary, except where such failure to qualify
would not have a material adverse effect on the Company and would not
have any effect on the enforceability against the Company of the Loan
Documents or any material contract to which the Company is a party.
(b) The Company and each of its Subsidiaries has adequate
corporate power and authority and has full legal right to enter into the
Loan Documents to which such Person is a party, to perform, observe and
comply with all of its agreements and obligations under each of such
documents, and, with respect to the Company, to make all of the
borrowings contemplated by this Agreement.
(c) Set forth on Schedule 6.1 hereto is a list of all
corporations, associations, trusts or other business entities of which
the Company owns of record or beneficially directly or indirectly all or
a majority of the outstanding capital stock of all classes or other
equity interests therein ("Subsidiaries").
(Section Mark)6.2. Corporate Authority. The execution and delivery by the
Company and each of its Subsidiaries of each of the Loan Documents to
which such Person is a party, the performance by the Company and each of
its Subsidiaries of all of its agreements and obligations under each of
such documents, and the making by the Company of all of the borrowings
contemplated by this Agreement, have been duly authorized by all
necessary corporate action on the part of the such Person and its
stockholders and do not and will not (i) contravene any provision of such
Person's charter or by-laws (each as from time to time in effect), (ii)
conflict with, or result in a breach of any material term, condition or
provision of, or constitute a default under or (other than pursuant to
the Loan Documents) result in the creation of any mortgage, lien, pledge,
charge, security interest or other encumbrance upon any of such Person's
property under, any agreement, trust deed, indenture, mortgage or other
instrument to which such Person is or may become a party or by which such
Person or any of the property of such Person is or may become bound or
affected, (iii) violate or contravene any provision of any law,
regulation, order, ruling or interpretation thereunder, which violation
is material in respect of the business or financial condition of the
Company or any of its Subsidiaries, or any decree, order or judgment of
any court or government or regulatory authority, bureau, agency or
official (all as from time to time in effect and applicable to the
Company and its Subsidiaries), (iv) require any waivers, consents or
approvals by any of the creditors
<PAGE>
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of such Person, other than as set forth
on Schedule 6.2 hereto (all of which waivers, consents and approvals are
in full force and effect), (v) require any consents or approvals by any
stockholders of such Person, or (vi) require any approval, consent,
order, authorization or license by, or giving notice to, or taking any
other action with respect to, any governmental or regulatory authority or
agency, including the Federal Trade Commission, under any provision of
any applicable law.
(Section Mark)6.3. Binding Effect of Documents. The Company and each of
its Subsidiaries has duly executed and delivered each of the Loan
Documents to which such Person is a party and each of such documents is
in full force and effect. The agreements and obligations of the Company
and each of its Subsidiaries contained in each of the Loan Documents to
which such Person is a party constitute legal, valid and binding
obligations of such Person enforceable against it in accordance with
their respective terms, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or affecting generally the enforcement of creditors' rights and except
to the extent that the availability of the remedy of specific performance
or injunctive relief is subject to the discretion of the court before
which any proceeding therefor may be brought.
(Section Mark)6.4. No Events of Default. No Event of Default has occurred
and is continuing. No event has occurred and is continuing, and no
condition exists which would, with notice or the lapse of time, or both,
constitute an Event of Default.
(Section Mark)6.5. Financial Statements; Projections. (a) The Company has
furnished to the Agent and each Lender a consolidated balance sheet of
the Company and its Subsidiaries as of the Balance Sheet Date, and a
consolidated statement of income and changes in financial position for
the fiscal year then ended, certified by the Company's Independent
Accountant. Each such balance sheet and statement of income has been
prepared in accordance with Generally Accepted Accounting Principles and
presents fairly the financial condition of the Company and its
Subsidiaries as of the close of business on the date thereof and the
results of operations for the fiscal year then ended. There are no
contingent liabilities of the Company or any of its Subsidiaries as of
such date involving material amounts, not disclosed in such balance sheet
and the related notes thereto.
(b) The projections of the income statements of the Company
and its Subsidiaries on a consolidated basis, the consolidated balance
sheets and cash flow statements of the Company and its Subsidiaries for
the 1994 to 1996 fiscal years, copies of which have been delivered to
each Lender, disclose all assumptions made with respect to general
economic, financial and market conditions used in formulating such
projections. To the knowledge of the Company, no facts exist on the date
of this Agreement that (individually or in the aggregate) would result in
any material change in any of such projections. The projections are
based upon reasonable estimates and assumptions as of the date of this
Agreement, have been prepared on the basis of the assumptions stated
therein and reflect as of the date of
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this Agreement the reasonable
estimates of the Company and its Subsidiaries of the results of
operations and other information projected therein.
(Section Mark)6.6. Changes; None Adverse. Since the Balance Sheet Date
there has not been any materially adverse change in the financial
condition or business of the Company and its Subsidiaries as shown on or
reflected in the consolidated balance sheet as of such date of the
Company and its Subsidiaries or the consolidated statement of income and
changes in financial position for the Company and its Subsidiaries for
the fiscal year then ended.
(Section Mark)6.7. Lines of Business. Except for the assets of the Company
and its Subsidiaries which are held for sale on the Effective Date (as
disclosed to the Lenders prior to the Effective Date), the Company and
its Subsidiaries are engaged exclusively in the design, manufacture and
marketing of blankets, throws, bedspreads, sheets, comforters, towels,
bath rugs, shower curtains, bed accessories, bath accessories, kitchen
textile products, sales yarn, greige goods, finished goods, promotional
textile products and material handling and storage products and
commission finishing of textile goods and in operating retail stores with
respect to the foregoing and other businesses directly related thereto.
Each of the Company and its Subsidiaries possesses all franchises,
patents, copyrights, trademarks, trade names, licenses and permits, and
rights with respect of the foregoing, adequate for the conduct of its
business as now conducted without known conflict with any rights of
others.
(Section Mark)6.8. Mortgages and Liens. None of the property, assets,
income or revenues of any character of the Company or its Subsidiaries is
subject to any mortgage, lien, pledge, charge, security interest or other
encumbrance of any kind, other than mortgages, liens, pledges, charges,
security interests and other encumbrances of the kind expressly permitted
by the provisions contained in (Section Mark)8.2 of this Agreement.
(Section Mark)6.9. Indebtedness. Neither the Company nor any of its
Subsidiaries has any Indebtedness other than Indebtedness of the kind
expressly permitted by the provisions contained in (Section Mark)8.1
of this Agreement.
(Section Mark)6.10. Litigation. There is no pending or, to the knowledge
of the Company, threatened, action, suit or proceeding before any court,
governmental or regulatory authority, agency, commission, or board of
arbitration except as described in Schedule 6.10 hereto, against the
Company or any Subsidiary which if adversely determined, could materially
adversely affect the financial condition or assets or operations of the
Company.
(Section Mark)6.11. No Default. Neither the Company nor any of its
Subsidiaries is in default in any material respect under any contract,
agreement or instrument to which it is a party or by which it or any of
its properties are bound, the consequence
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of which default could
materially adversely affect the financial condition, assets, or
operations of the Company or its Subsidiaries.
(Section Mark)6.12. Taxes. The Company and its Subsidiaries have each
filed all federal, state and other tax returns required to be filed by
each of them. The Company and its Subsidiaries have paid, or have made
reasonable provision for payment of, all material taxes (if any) which
have or may become due and payable pursuant to any of the said returns or
pursuant to any matters raised by audits or for other reasons known to
it, except for taxes the amount, applicability, or validity of which are
currently being contested by it in good faith by appropriate proceedings
and with respect to which it has set aside on its books reserves
(segregated to the extent required by Generally Accepted Accounting
Principles and practices) reasonably deemed by it to be adequate with
respect thereto.
(Section Mark)6.13. Collateral. (a) All of the Lender Obligations are and
at all times (unless released by the Agent and the Lenders pursuant to
the provisions of this Agreement) will be entitled to all of the benefits
of and be secured by the Security Documents.
(b) No effective financing statement which names the Company as
a debtor has been filed in any jurisdiction in the United States or any
other State thereof pursuant to Article 9 of the Uniform Commercial Code
of any State, and the Company has not signed any financing statement or
any security agreement authorizing any secured party thereunder to file
any such financing statement in any such jurisdiction, other than as
permitted by (Section Mark)8.2 hereof.
(c) No mortgages, chattel mortgages, assignments, statement of
assignment, security agreements or deeds of trust have been filed by any
Person or Persons with respect to any part of the property or assets of
the Company, except for mortgages and security agreements permitted by
the provisions of (Section Mark)8.2 hereof.
(Section Mark)6.14. True Copies of Charter and Other Documents. The
Company and each of its Subsidiaries (to the extent requested by the
Agent) has furnished or caused to be furnished to the Agent and each
Lender true and complete copies of (a) all of its charter and other
incorporation documents (together with any amendments thereto) and (b)
its by-laws (together with any amendments thereto), in each case as in
effect on the date hereof.
(Section Mark)6.15. Employee Benefit Plans.
(a) In General. Each Employee Benefit Plan has been
maintained and operated in compliance in all material respects with the
provisions of ERISA and, to the extent applicable, the Code, including
but not limited to the provisions thereunder respecting prohibited
transactions. The Company has heretofore delivered to the Agent the most
recently completed annual report, Form 5500, with
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all required
attachments, and actuarial statement required to be submitted under
(Section Mark)103(d) of ERISA, with respect to each Guaranteed Pension Plan.
(b) Terminability of Welfare Plans. Under the express
terms of each Employee Benefit Plan which is an employee welfare benefit
plan within the meaning of (Section Mark)3(1) or (Section Mark)3(2)(B) of
ERISA, no benefits are due unless the event giving rise to the benefit
entitlement occurs prior to plan termination (except as required by Title
I, Part 6 of ERISA). Under the express terms of each such Plan, the
Company or ERISA Affiliate, as appropriate, may terminate each such Plan
at any time (or at any time subsequent to the expiration of any applicable
bargaining agreement) in the discretion of the Company or ERISA Affiliate
without liability to any Person.
(c) Guaranteed Pension Plans. Each contribution required
to be made to a Guaranteed Pension Plan, whether required to be made to
avoid the incurrence of an accumulated funding deficiency, the notice or
lien provisions of (Section Mark)302(f) of ERISA, or otherwise, has been
timely made. No waiver of an accumulated funding deficiency or
extension of amortization periods has been received with respect to any
Guaranteed Pension Plan. No liability to the PBGC (other than required
insurance premiums, all of which have been paid) has been incurred by the
Company or any ERISA Affiliate with respect to any Guaranteed Pension Plan,
and there has not been any ERISA Reportable Event (other than an Event as to
which the requirement of 30 days notice has been waived), or any other
event or condition which presents a material risk of termination of any
Guaranteed Pension Plan by the PBGC. Based on the latest valuation of
each Guaranteed Pension Plan (which in each case occurred within twelve
months of the date of this representation) and on the actuarial methods
and assumptions employed for that valuation, as of the respective date of
each such valuation the aggregate benefit liabilities of each such
Guaranteed Pension Plan within the meaning of (Section Mark)4001 of ERISA
did not exceed the aggregate value of the assets of each such Plan,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
(d) Multiemployer Plans. Neither the Company nor any
ERISA Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under (Section Mark)4201 of ERISA
or as a result of a sale of assets described in (Section Mark)4204 of
ERISA. Neither the Company nor any ERISA Affiliate has been notified that
any Multiemployer Plan is in reorganization or insolvent under any
Multiemployer Plan intends to terminate or has been terminated under
(Section Mark)4041A of ERISA.
(Section Mark)6.16. Other Representations. Each of the representations and
warranties made by the Company and each of its Subsidiaries in any of
the Loan Documents to which such Person is a party was true and correct
in all material
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respects when made and continues to be true and correct
in all material respects, except to the extent that any of such
representations and warranties relate, by the express terms thereof,
solely to a date falling prior thereto, and except to the extent that any
of such representations and warranties may have been affected by the
consummation of the transactions contemplated and permitted or required
by the Loan Documents.
(Section Mark)6.17. Disclosure. No representations or warranties made by
the Company or any of its Subsidiaries in any Loan Document to which such
Person is a party or in any agreement, instrument, document, certificate,
statement or letter furnished to the Agent or the Lenders by or on behalf
of such Person in connection with any of the transactions contemplated by
any of the Loan Documents contains any untrue statement of material fact
or omits to state a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances
in which they are made. Except as disclosed herein, there is no fact
known to the Company which materially adversely affects, or which would
in the future materially adversely affect, the financial position,
business, operations, or affairs of the Company.
(Section Mark)6.18. Holding Company and Investment Company Acts. Neither
the Company nor any of its Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company", as such terms are defined in the Public Utility
Holding Company Act of 1935; nor is it an "investment company", or an
"affiliated company" or a "principal underwriter" of a "investment
company", as such terms are defined in the Investment Company Act of
1940, as amended.
(Section Mark)6.19. Regulations G, T, U and X. The proceeds of the Loans
shall be used as described in (Section Mark)7.3. No portion of any Loan is
to be used (directly or indirectly) for the purpose of purchasing or
carrying, or the extension of credit to any Person or Persons for the
purpose of purchasing or carrying, any "margin security" or "margin stock"
as such terms are used in Regulations G, T, U and X of the Board of Governors
of the Federal Reserve System.
(Section Mark)6.20. Environmental Compliance. The Company has taken
reasonable steps to investigate the past and present condition and usage
of its and its Subsidiaries' properties and the operations conducted
thereon and, based upon such investigation, has determined that:
(a) to the best knowledge of the Company, none of the Company,
its Subsidiaries or any operator of its properties is in violation, or
alleged violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including, without
limitation, those arising under the Resource Conservation and Recovery
Act ("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of
<PAGE>
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1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, or any state or
local statute, regulation, ordinance, order or decree relating to health,
safety or the environment (hereinafter "Environmental Laws"), which
violation could reasonably be expected (taking into account anticipated
contributions of other parties involved in proceedings, or factually
implicated in the subject matter or circumstances, to which such
judgment, decree, order, law, license, rule or regulation relates or is
applicable) to have a material adverse effect on the consolidated
business, assets or financial condition of the Company and its
Subsidiaries, considered as a whole;
(b) except as set forth in Schedule 6.20 attached hereto,
none of the Company or its Subsidiaries has received notice from any
third party including without limitation any federal, state or local
governmental authority, (i) that any one of them has been identified by
the United States Environmental Protection Agency ("EPA") as a
potentially responsible party under CERCLA with respect to a site listed
on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986);
(ii) that any hazardous waste as defined by 42 U.S.C.
(Section Mark)6903(5), any hazardous substances as defined by 42 U.S.C.
(Section Mark)9601(14), any pollutant or contaminant as defined by 42 U.S.C.
(Section Mark)9601(33) and any toxic substance, oil or hazardous materials
or other chemicals or substances regulated by any Environmental Laws
("Hazardous Substances") which any one of them has generated, transported
or disposed of has been found at any site at which
a federal, state or local agency or other third party has conducted or
has ordered that the Company or any of its Subsidiaries conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law; or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint (contingent or otherwise) legal
or administrative proceeding arising out of any third party's incurrence
of costs, expenses, losses or damages of any kind whatsoever in
connection with the release of Hazardous Substances;
(c) except as set forth on Schedule 6.20 attached hereto: (i)
to the best knowledge of the Company, no portion of the property of the
Company or its Subsidiaries has been used for the handling,
manufacturing, processing, storage or disposal of Hazardous Substances
except in accordance with applicable Environmental Laws; and to the best
knowledge of the Company, no underground tank or other underground
storage receptacle for Hazardous Substances is located on such
properties, except as is maintained in accordance with applicable
Environmental Laws; (ii) to the best knowledge of the Company, in the
course of any activities conducted by the Company, its Subsidiaries or
operators of its properties operating under the supervision or control of
the Company or its Subsidiaries, no Hazardous Substances have been
generated or are being used on such properties except in accordance
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with applicable Environmental Laws; (iii) to the best knowledge of the
Company, there have been no releases (i.e. any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping) or threatened releases by the
Company, its Subsidiaries or by any operator of such properties, acting
under the control or supervision of the Company or any such Subsidiary,
of Hazardous Substances on, upon, into or from the properties of the
Company or its Subsidiaries, which releases could reasonably be expected
to have a material adverse effect on the aggregate consolidated value of
such properties or adjacent properties or the environment; (iv) the
Company has received no actual notice, and otherwise the Company has no
actual knowledge, that there have been releases on, upon, from or into
any real property in the vicinity of the real properties of the Company
or any of its Subsidiaries which, through soil or groundwater
contamination, may have come to be located on, and which could reasonably
be expected to have a material adverse effect on the consolidated value
of, the properties of the Company and its Subsidiaries, considered as a
whole; and (v) in addition, to the best knowledge of the Company, any
Hazardous Substances that have been generated by the Company, its
Subsidiaries or by any operator of such properties, acting under the
control or supervision of the Company or any such Subsidiary, on the
properties of the Company or any of its Subsidiaries have been
transported offsite only by carriers having an identification number
issued by the EPA and treated or disposed of only by treatment or
disposal facilities maintaining valid permits as required under
applicable Environmental Laws, which transporters and facilities have
been and are, to the best of the Company's knowledge, operating in
compliance with such permits and applicable Environmental Laws; and
(d) none of the properties of the Company or any of its
Subsidiaries are or shall be subject to any applicable environmental
cleanup responsibility law or environmental restrictive transfer law or
regulation by virtue of the transactions set forth herein and
contemplated hereby.
(Section Mark)6.21. No Materially Adverse Contracts. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other
legal restriction, or any judgment, decree, order, rule or regulation
that has or is expected in the future to have a materially adverse effect
on the business, assets or financial condition of the Company or any of
its Subsidiaries. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement that has or is expected, in the
judgment of the Company's officers, to have any materially adverse effect
on the business of the Company or any of its Subsidiaries.
(Section Mark)6.22. Corporate Name; Location of Office. The Company's
legal name is Fieldcrest Cannon, Inc.The Company's principal
administrative office (which constitutes its "chief executive office" for
purposes of the UCC) and the location
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where its books and records are
kept is 326 East Stadium Drive, Eden, North Carolina.
(Section Mark)6.23. Loans as Senior Indebtedness. All Indebtedness of the
Company to the Lenders and Agent in respect of the principal of and
interest on the Loans and all fees and other amounts payable hereunder or
under any other Loan Document constitutes and will constitute "Senior
Indebtedness" or "Senior Debt" under the terms of the indentures and all
other instruments evidencing Subordinated Debt.
(Section Mark)6.24. Brokers and Consultants.No broker, finder or
consultant acting on behalf of the Company or any of its Subsidiaries
brought about the obtaining or making of the Loans or the closing under
this Agreement and neither the Company nor any Subsidiary thereof has any
obligation to any Person in respect of any finder's, consulting or
brokerage fees in connection with the Loans.
(Section Mark)7. AFFIRMATIVE COVENANTS OF THE COMPANY.The Company
covenants and agrees that, so long as any Loan, Unpaid Reimbursement
Obligation, Letter of Credit or Note is outstanding or any Lender has any
obligation to make any A Loans hereunder or to issue, extend or renew any
Letter of Credit:
(Section Mark)7.1. Punctual Payment. The Company will duly and punctually
pay or cause to be paid the principal of and interest on the Loans, the
Reimbursement Obligations, the Letter of Credit Fees, the Agent's Fee and
the Commitment Fee and all other sums due hereunder, all in accordance
with the terms of this Agreement and the Notes.
(Section Mark)7.2. Legal Existence; Fiscal Year. The Company will and will
cause the Subsidiaries listed on Schedule 6.1 hereto to maintain their
respective legal existence and good standing under the laws of their
respective jurisdictions of incorporation, maintain their respective
qualifications to do business in each jurisdiction in which the failure
to do so would have a material adverse effect on the condition, financial
or otherwise, of the Company and its Subsidiaries as a whole and maintain
all of its rights and franchises reasonably necessary to the conduct of
its business, except as permitted by (Section Mark)8.6 hereof. Each of the
Company and its Subsidiaries will not change the date of their fiscal year
end without the prior written consent of the Majority A Lenders.
(Section Mark)7.3. Use of Loan Proceeds. The Company shall use the
proceeds of the Loans and obtain Letters of Credit solely for general
corporate purposes.
(Section Mark)7.4. Deposit Account. The Company shall maintain at all
times a deposit account in the name of the Company with the Agent at its
head office in Boston, Massachusetts and shall not permit the aggregate
amount of deposits at institutions which are not Lenders hereunder to
exceed $10,000,000 at any time,
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provided that, notwithstanding the
foregoing, the Company shall be permitted to maintain deposits with
institutions which are not Lenders hereunder solely to the extent that
such deposits are required under interest rate futures contracts to which
the Company is a party. The Company will use its best efforts to cause
all of its debtors on accounts receivable and all lessees and conditional
vendees to make all payments on accounts receivable and contracts to
accounts at the collection banks which are parties to the Agency
Agreements. Pursuant to the Agency Agreements, the Company will require
its collection banks to transfer to the Agent on a daily basis all good
funds collected on such day. The Company will not permit any Agency
Agreement to be terminated except with the prior written consent of the
Agent and except for the express purpose of substituting a different
collection bank thereunder. Such termination shall be permitted only
after a replacement Agency Agreement with such replacement collection
bank is in full force and effect and no further payments on accounts
receivable or contracts are being made to the former collection bank. To
the extent that the Company receives gross operating revenues from its
businesses, promptly after receipt thereof the Company shall deposit such
revenues into its deposit account with the Agent. The Agent shall apply
all funds deposited into the Company's deposit account with the Agent to
repay the outstanding amount of the Loans pursuant to (Section Mark)2.3(b)
hereof.
(Section Mark)7.5. Financial Statements. The Company will furnish
financial statements and other reports to each of the Lenders as follows:
(a) within ninety (90) days after the close of the fiscal year
of the Company, the consolidated balance sheets and statements of income
and retained earnings and of changes in cash flow of the Company and its
Subsidiaries, for such year, accompanied by a divisional operating income
analysis, each in reasonable detail, each setting forth in comparative
form the corresponding figures for the preceding year, prepared in
accordance with Generally Accepted Accounting Principles, and accompanied
by a report and unqualified opinion of Ernst & Young or other Independent
Accountant selected by the Company and approved by the Majority A
Lenders;
(b) within forty-five (45) days after the end of each fiscal
quarter of the Company other than the final fiscal quarter, unaudited
consolidated financial statements and divisional operating income
analyses similar to those required by clause (a) above as of the end of
such period and for such period then ended and for the period from the
beginning of the current fiscal year to the end of such period, setting
forth in comparative form the corresponding figures for the comparable
period in the preceding fiscal year, prepared in accordance with
Generally Accepted Accounting Principles (except that such quarterly
statements need not include footnotes) and certified by any two of the
officers described in paragraph (d) below;
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(c) within thirty (30) days after the end of each fiscal month
of the Company other than the final month, unaudited consolidated
financial statements and divisional operating income analyses similar to
those required by clause (a) above as of the end of such period and for
such period then ended and for the period from the beginning of the
current fiscal year to the end of such period, setting forth in
comparative form the corresponding figures for the comparable period in
the preceding fiscal year, prepared in accordance with Generally Accepted
Accounting Principles (except that such monthly statements need not
include footnotes) and certified by any two of the officers described in
paragraph (d) below;
(d) at the time of delivery of each monthly, quarterly and
annual statement, a certificate, executed by the Chief Financial Officer,
Controller or Treasurer and by the Chief Executive or Chief Operating
Officer of the Company (provided that in the case of any monthly
statement, such certificate may be certified by any two of such
officers), in substantially the form of Exhibit D attached hereto (the
"Compliance Certificate") and stating that such officers have caused this
Agreement to be reviewed and have no knowledge of any default by the
Company in the performance or observance of any of the provisions of this
Agreement, during such month or quarter or at the end of such year, or,
if such officers have such knowledge, specifying each default and the
nature thereof, and showing compliance by the Company as of the date of
such statement with the applicable covenants set forth in Exhibit D
attached hereto;
(e) a report on the Borrowing Base (a "Borrowing Base Report")
substantially in the form of Exhibit E attached hereto (or in such other
form containing similar information as the Company and the Agent or the
Majority A Lenders may agree) (i) on or before the 25th day after the end
of each month, as of the last day of such month, along with a certificate
setting forth the amount of Loans outstanding as at the end of such
month, and (ii) promptly as of any of other date requested by the Agent,
together in each case with such other supporting data as may reasonably
be requested by the Agent;
(f) promptly upon receipt thereof, copies of all management
letters and other material reports which are submitted to the Company by
its Independent Accountant in connection with any annual or interim audit
of the books of the Company made by such accountants;
(g) as soon as practicable but, in any event, within ten (10)
Business Days after the issuance thereof, copies of such other financial
statements and reports as the Company shall send to its stockholders as
such, and copies of all regular and periodic reports which the Company
may be required to file with the Securities and Exchange Commission or any
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similar or corresponding governmental commission, department or
agency substituted therefor, or any similar or corresponding governmental
commission, department, board, bureau, or agency, federal or state;
(h) no later than the last Business Day of February during each
year when this Agreement is in effect, a business plan for such fiscal
year of the Company which includes a projected consolidated balance sheet
and statement of income for such fiscal year and a projected consolidated
statement of cash flows for such fiscal year and, no later than the last
Business Day of March during each year when this Agreement is in effect,
a business plan for such fiscal year of the Company which includes
projected consolidated balance sheets and statements of income on a
monthly basis for such fiscal year and projected consolidated statements
of cash flows on a quarterly basis for such fiscal year;
(i) promptly upon receipt thereof, copies of all notices
delivered to the Company or sent by the Company with respect to
Subordinated Debt, including, without limitation, any notice of default
(the Company expressly agreeing to furnish all such notices by telecopy);
and
(j) with reasonable promptness, such other data as the Agent or
any of the Lenders may reasonably request.
(Section Mark)7.6. Maintenance of Properties. The Company will cause all
of its properties and those of its Subsidiaries used or useful in the
conduct of its business or the business of its Subsidiaries to be
maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times in accordance with the terms and
conditions of this Agreement and the Security Documents, and will and
will cause each of its Subsidiaries to continue to engage primarily in
the businesses now conducted by them and in related businesses; provided,
however, that nothing in this (Section Mark)7.6 shall prevent the
Company from discontinuing the operation and maintenance of any of its
properties or those of its Subsidiaries if such discontinuance is, in
the reasonable judgment of the Company, desirable in the conduct of its
business and which discontinuance does not in the aggregate materially
adversely affect the business of the Company and its Subsidiaries on a
consolidated basis.
(Section Mark)7.7. Notice of Litigation and Judgment. The Company will
and will cause its Subsidiaries to give notice in writing, in form
and detail satisfactory to the Agent, within ten (10) days of becoming
aware of any litigation or proceedings threatened in writing or any pending
litigation and proceedings affecting the Company or any of its
Subsidiaries or to which the Company or any of
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its Subsidiaries is or becomes a party involving an uninsured claim of more
than $5,000,000 against the Company and its Subsidiaries, as the case may be,
and stating the nature and status of such litigation or proceedings. The
Company will and will cause each of its Subsidiaries to give notice, in
writing, in form and detail satisfactory to the Lender, within five (5)
days of any judgment, final or otherwise, against the Company or any of its
Subsidiaries, in an amount in excess of $1,000,000.
(Section Mark)7.8. Notice of Defaults. The Company will and will cause
its Subsidiaries to give notice in writing to the Agent and each Lender
as promptly as possible and no later than five (5) days after becoming
aware of the occurrence of any Default or Event of Default under this
Agreement.
(Section Mark)7.9. Books and Records. The books and records relating
to the financial affairs of the Company and each of its Subsidiaries shall
at all times be maintained in accordance with, and all financial
statements provided for herein, shall be prepared in accordance with
Generally Accepted Accounting Principles.
(Section Mark)7.10. Insurance. The Company will and will cause its
Subsidiaries to maintain with financially sound and reputable insurers
insurance with respect to its properties and business and against such
casualties and contingencies and in such types and such amounts as shall
be in accordance with sound business practices, provided that the Company
and its Subsidiaries may self-insure their properties and business
against such casualties and contingencies and at such levels as shall be
in accordance with sound business practices and reasonable and customary
in their industry, such insurance to be payable to the Company and to the
Agent, for the benefit of the Lenders, as its interests may appear. The
Agent, for the benefit of the Lenders, shall be named as loss payee and
additional insured under all insurance policies. Without limiting the
foregoing, the Company will and will cause each of its Subsidiaries to
(i) keep all of its physical property insured against fire and extended
coverage risks in amounts and with deductibles equal to those generally
maintained by businesses engaged in similar activities in similar
geographic areas and as required under the terms and conditions of the
Security Documents, (ii) maintain all such workers' compensation or
similar insurance as may be required by law, and (iii) maintain, in
amounts and with deductibles equal to those generally maintained by
businesses engaged in similar activities in similar geographic areas,
general public liability insurance against claims for bodily injury,
death or property damage occurring on, in or about the properties of the
Company or its Subsidiaries, business interruption insurance and product
liability insurance.
(Section Mark)7.11. Taxes. The Company will and will cause each of
its Subsidiaries to pay all taxes or other assessments or governmental
charges or levies imposed upon it or upon its income or profits or upon
property belonging to it prior to the time when any penalties or interest
(except interest during extensions of time for filing of federal income
tax returns not in excess of six months) accrue with respect thereto,
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unless, in any such case, the same is being contested in good faith by
appropriate proceedings and an adequate reserve therefor has been
established and is maintained in accordance with Generally Accepted
Accounting Principles.
(Section Mark)7.12. Conduct of Business; Compliance with Law. The Company
will and will cause each of its Subsidiaries to: (i) comply in all
material respects with all federal, state and local laws, regulations,
rules and ordinances applicable to it or its properties, but it shall not
be a breach of this (Section Mark)7.12 if the Company or any Subsidiary
fails to comply with such laws, rules and regulations during any period in
which such Company or such Subsidiary is in good faith diligently contesting
the validity thereof by appropriate proceedings reasonably satisfactory
to the Agent; (ii) comply with all orders, writs, judgments, injunctions,
decrees or awards to which it may be subject, noncompliance with which
would have a material adverse effect on the business, operations or
financial condition of the Company and its Subsidiaries or the ability of
the Company to fulfill its obligations under this Agreement or the other
Loan Documents; and (iii) promptly obtain, maintain, apply for renewal,
and not allow to lapse, any authorization, consent, approval, license or
order, and accomplish any filing or registration with, any court or
judicial, administrative or governmental authority which may be or may
become necessary in order that it perform in all material respects all of
its obligations under this Agreement or the other Loan Documents and in
order that the same may be valid and binding and effective in accordance
with their terms and in order that the Lenders may be able freely to
exercise and enforce any and all of their rights under this Agreement or
the other Loan Documents.
(Section Mark)7.13. Access. The Company will and will cause each of its
Subsidiaries to permit each Lender, through the Agent or any of such
Lender's representatives and agents, at reasonable times and on
reasonable notice, to inspect any of the properties, including, without
limitation, corporate books, computer files and tapes and financial
records of the Company and each such Subsidiary, to examine and make
copies of the books of accounts and other financial records of the
Company and each such Subsidiary, and to discuss the affairs, finances
and accounts of the Company and each the Subsidiary with, and to be
advised as to the same by, their respective officers and employees at
such reasonable times and intervals as the Lenders may designate. The
Company authorizes the Agent (with prior notification to the Company) to
communicate directly with the Company's independent certified public
accountants and authorizes such accountants to disclose to the Agent and
the Lenders any and all financial statements and other supporting
financial documents and schedules including copies of management letters
with respect to the business, financial condition or other affairs of the
Company or any of its Subsidiaries. The Lenders agree that they will
treat in confidence the information obtained during such inspections and
discussions which is designated by the Company as confidential and will
not, without the consent of the Company, disclose such information to any
third party and, if any representative or agent of any Lender shall not
be an employee of such Lender or any affiliate of such Lender, such
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designee shall be reputable and of recognized standing and shall agree in
writing to treat in confidence the information obtained during any such
inspections and discussions and, without the prior written consent of the
Company, not to disclose such information to any third party or make use
of such information for personal gain. Notwithstanding the foregoing,
any Lender may disclose information obtained pursuant to this Agreement
(a) to other banks or financial institutions who are participants or
potential participants in the Loans made or to be made hereunder upon
notice to the Company with the Company's consent not to be unreasonably
withheld, (b) to governmental or regulatory authorities where required by
such authorities, and (c) where required by law.
(Section Mark)7.14. Employee Benefit Plans. Neither the Company nor any
ERISA Affiliate will
(a) engage in any "prohibited transaction" within the meaning
of (Section Mark)406 of ERISA or (Section Mark)4975 of the Code which could
result in a material liability for the Company; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in (Section Mark)302 of
ERISA, unless each such deficiency has been waived in writing by the
Internal Revenue Service and unless the aggregate amount of all such
deficiencies does not exceed $1,000,000; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner which,
could result in the imposition of a lien or encumbrance on the assets of
the Company pursuant to (Section Mark)302(f) or (Section Mark)4068 of
ERISA; or
(d) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of (Section Mark)4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the aggregate
assets of such Plans, disregarding for this purpose the benefit
liabilities and assets of any such Plan with assets in excess of benefit
liabilities.
The Company will (i) promptly upon filing the same with the
Department of Labor or Internal Revenue Service, furnish to the Agent a
copy of the most recent actuarial statement required to be submitted
under (Section Mark)103(d) of ERISA and Annual Report, Form 5500, with all
required attachments, in respect of each Guaranteed Pension Plan and (ii)
promptly upon receipt or dispatch, furnish to the Agent any notice,
report or demand sent or received in respect of a Guaranteed Pension Plan
under (Section Mark)(Section Mark)302, 4041, 4042, 4043, 4063, 4065, 4066
and 4068 of ERISA, or in respect of a Multiemployer Plan, under
(Section Mark)(Section Mark)4041A, 4202, 4219, 4242, or 4245
of ERISA. The Company will, within ten days of the date of such request,
notify the Agent and each Lender of any request from the PBGC for any
lien on, or security interest in,
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any property of the Company or any
Affiliate of the Company or for any other agreement from the Company or
any Affiliate of the Company relating to any liability of the Company or
any Affiliate of the Company to the PBGC or with respect to any
Guaranteed Pension Plan.
(Section Mark)7.15. Reserves. The Company will and will cause each of its
Subsidiaries to maintain appropriate reserves for depreciation, taxes
(other than taxes payable by a corporation the stock of which was
acquired by the Company with respect to periods prior to the effective
date of any of such acquisitions) and other contingent expenses or
liabilities in accordance with Generally Accepted Accounting Principles.
(Section Mark)7.16. Further Assurances; Perfection of Remaining Liens. The
Company shall at any time or from time to time execute and deliver such
further instruments and take such further action as may reasonably be
requested by the Agent or the Lenders, in each case further and more
perfectly to effect the purposes of this Agreement and the other Loan
Documents. Without limiting the foregoing, the Company will and will
cause its Subsidiaries to upon the written request of the Agent or the
Lenders, take all actions and do all things necessary and appropriate to
grant and perfect the Lenders' liens on any Collateral.
(Section Mark)7.17. Environmental Compliance. The Company will, and will
cause each of its Subsidiaries to, comply with all Environmental Laws,
except where non-compliance with such Environmental Laws could not
reasonably be expected to have a material adverse effect on the business,
assets or financial condition of the Company and its Subsidiaries,
considered as a whole, and will promptly notify the Agent of the
occurrence of any event(s) of material non-compliance or event(s) which
with the passage of time or giving of notice or receipt of notice from a
governmental agency would result in such material non-compliance.
(Section Mark)7.18. Maintenance of Office, Corporate Name. The Company
will maintain its principal administrative office (which constitutes its
"chief executive office" for purposes of the UCC) and the location where
its books and records are kept at the location specified in
(Section Mark)6.22 hereof
unless it shall have (a) given the Agent at least thirty (30) days' prior
written notice of such change, and (b) filed in all necessary
jurisdictions such UCC-3 financing statements or other documents as may
be necessary to continue without impairment or interruption the
perfection and priority of the liens on the Collateral granted pursuant
to the Security Documents. The Company will retain its present name
unless it shall have complied with the provisions of clauses (a) and (b)
of the immediately preceding sentence.
(Section Mark)7.19. Delivery of Pledged Stock. The Company will, on or
prior to the Effective Date, deliver to the Agent in pledge, for the
benefit of the Lenders, certificates for all shares of the capital stock
of its Subsidiaries (other than Amoskeag) which has not previously been
delivered to the Agent.
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(Section Mark)8. NEGATIVE COVENANTS OF THE COMPANY. The Company agrees
that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of
Credit or Note is outstanding or any Lender has any obligation to make
any Loans hereunder or issue, extend or renew any Letter of Credit:
(Section Mark)8.1. Restrictions on Indebtedness. The Company will not, and
will not permit any Subsidiary of it to, create, incur, assume, guarantee
or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:
(a) Indebtedness to the Lenders with respect to the Loans and
pursuant to the Loan Documents;
(b) current liabilities of the Company incurred in the ordinary
course of business not incurred through (i) the borrowing of money, or
(ii) the obtaining of credit except for credit on an open account basis
customarily extended and in fact extended in connection with normal
purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of (Section Mark)7.11;
(d) Indebtedness in respect of judgments or awards which have
been in force for less than the applicable period for taking an appeal so
long as execution is not levied thereunder or in respect of which the
Company shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review;
(e) Endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary
course of business;
(f) Indebtedness existing on the Effective Date hereof as
listed and described, but only to the extent so listed and described, on
Schedule 8.1 attached hereto, and any renewals, extensions or
refinancings of such Indebtedness, provided that such renewals,
extensions or refinancings shall not increase the aggregate amount of
such Indebtedness or materially change the terms thereof;
(g) Indebtedness of a Subsidiary of the Company to the Company,
evidenced by promissory notes in the form of Exhibit F attached hereto
pledged to the Agent pursuant to the Security Agreement or pursuant to
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(Section Mark)(Section Mark)8.3(d) or (h) hereof, provided that the sum of
the aggregate principal amount of Indebtedness of Amoskeag to the Company
under this (Section Mark)8.1(g) plus, without duplication, the aggregate
amount of Investments made by the Company in Amoskeag pursuant to
(Section Mark)(Section Mark)8.3(d) and (h) hereof shall not
exceed $5,000,000 at any time;
(h) Documentary letters of credit of the Company not exceeding
$10,000,000 of reimbursement obligations in the aggregate and, in
addition to the Letters of Credit issued pursuant to (Section Mark)2.10
hereof, standby letters of credit of the Company not exceeding $10,000,000
of reimbursement obligations in the aggregate, provided, however, the
issuing bank for each such standby letter of credit shall be a Lender;
(i) Surety and appeal bonds of the Company, and performance
bonds of the Company guaranteeing performance of obligations of the
Subsidiaries, incurred in the ordinary course of business not exceeding
$10,000,000 in the aggregate;
(j) Capital leases and purchase money security interests and
mortgages of the Company representing obligations not exceeding
$10,000,000 in the aggregate;
(k) Indebtedness in respect of obligations incurred pursuant to
interest rate swaps, provided that the other party to such swap is a
Lender, and Indebtedness in respect of obligations incurred pursuant to
interest rate protection arrangements (other than interest rate swaps),
including options, futures, caps or collars entered into from time to
time by the Company;
(l) Indebtedness consisting of Rental Obligations with respect
to any fiscal year not exceeding the lesser of $40,000,000 or four and
one-half percent (4-1/2%) of Consolidated Net Sales as at the end of such
fiscal year;
(m) Subordinated Debt consisting of not more than $125,000,000
in aggregate principal amount of 6% Convertible Subordinated Debentures
Due 2012 issued pursuant to the Indenture dated as of March 15, 1987
between Fieldcrest Cannon, Inc. and Wachovia Bank and Trust Company,
N.A., as Trustee;
(n) Subordinated Debt consisting of not more than $85,000,000
in aggregate principal amount of 11-1/4% Senior Subordinated Debentures
Due 2004 issued pursuant to the Indenture dated as of June 1, 1992
between Fieldcrest Cannon, Inc. and First Union National Bank of North
Carolina, as Trustee;
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(o) Indebtedness of the Company not to exceed $15,000,000 in
the aggregate at any time incurred with respect to industrial development
revenue bonds issued by the State Industrial Development Authority of the
State of Alabama or its designee under the applicable laws of the State
of Alabama for the benefit of the Company to finance the construction of
improvements, additions, and extensions to and the purchase of equipment
for the Company's facilities in Phoenix City, Alabama, provided that the
interest rate on such industrial revenue bonds does not exceed 12% per
annum;
(p) Indebtedness of the Company not to exceed $90,000,000 in
the aggregate at any time incurred with respect to industrial development
revenue bonds issued by the Industrial Development Board for the City of
Phoenix City, Alabama for the benefit of the Company to finance the
construction of improvements, additions, and extensions to and the
purchase of equipment for the Company's facilities in Phoenix City,
Alabama, provided that (i) such industrial development revenue bonds are,
simultaneously with the issuance thereof, purchased and retained by the
Company, and (ii) such Indebtedness, in accordance with Generally
Accepted Accounting Principles, is not classified upon the Company's
consolidated balance sheet as a liability or referred to in the footnotes
thereto;
(q) unsecured Indebtedness consisting of (i) guarantees of the
performance of obligations of its Subsidiaries (other than Amoskeag) or
third parties, provided that the obligations guaranteed and the
guarantees themselves are entered into in the ordinary course of business
and do not consist of the borrowing of money or the obtaining of credit,
and (ii) guarantees of the performance of obligations of its customers
with respect to short term notes, provided that the aggregate amount of
Indebtedness outstanding pursuant to this subsection (ii) shall not
exceed $3,000,000 at any time, and provided further that the aggregate
amount of Indebtedness outstanding pursuant to this clause (q) shall not
exceed $5,000,000 at any time; and
(r) so long as no Default or Event of Default exists or is
continuing or would exist as a result thereof, unsecured Indebtedness of
the Company not otherwise included in this (Section Mark)8.1 in an
aggregate amount not at any time to exceed the sum of (i) $20,000,000
plus (ii) if positive, the amount by which Consolidated Tangible Net
Worth exceeds $195,000,000 (as reflected in the financial statements and
Compliance Certificate most recently delivered to the Lenders pursuant
to (Section Mark)7.5 hereof) plus (iii) if positive, the amount by
which the aggregate principal amount of all Indebtedness of the Company
outstanding on the Balance Sheet Date (as reflected in the financial
statements delivered by the Company pursuant to (Section Mark)6.5(a)
hereof), other than Indebtedness in respect of the aggregate principal
amount of Loans
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outstanding as at such date under and as defined in the
Prior Credit Agreement, exceeds the aggregate principal amount of
Indebtedness of the Company outstanding as at the date of the financial
statements most recently delivered to the Lenders pursuant to
(Section Mark)7.5 hereof (as reflected in such financial statements),
other than Indebtedness in respect of the aggregate principal amount
of Loans outstanding hereunder.
(Section Mark)8.2. Restrictions on Liens. The Company will not and will
not permit any Subsidiary to create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its
property or assets of any character whether now owned or hereafter
acquired, or upon the income or profits therefrom; or transfer any of
such property or assets or the income or profits therefrom for the
purpose of subjecting the same to the payment of Indebtedness or
performance of any other obligation in priority to payment of its general
creditors; or acquire, or agree or have an option to acquire, any
property or assets upon conditional sale or other title retention or
purchase money security agreement, device or arrangement; or suffer to
exist for a period of more than thirty (30) days after the same shall
have been incurred any Indebtedness or claim or demand against it which
if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be
given any priority whatsoever over its general creditors; or sell,
assign, pledge or otherwise transfer any accounts, contract rights,
general intangibles or chattel paper, with or without recourse; provided,
however, that the Company and any Subsidiary may create or incur or
suffer to be created or incurred or to exist:
(a) Liens in favor of the Company on all or part of the assets
of Subsidiaries securing Indebtedness owing by Subsidiaries to the
Company permitted under (Section Mark)8.1(g) hereof;
(b) Liens to secure taxes, assessments and other government
charges or claims for labor, material or supplies in respect of
obligations not overdue or, if overdue, if the same is being contested in
good faith;
(c) Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(d) Liens in respect of judgments or awards, the Indebtedness
with respect to which is permitted by (Section Mark)8.1(d) hereof and not
exceeding $1,000,000 in the aggregate;
(e) Liens of carriers, warehousemen, mechanics and materialmen,
and other like liens, in existence less than 120 days from the date of
creation thereof in respect of obligations not overdue or, if overdue, if
the same is being contested in good faith;
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(f) Encumbrances consisting of easements, rights of way, zoning
restrictions, restrictions on the use of real property and defects and
irregularities in the title thereto, landlord's or lessor's liens under
leases to which the Company or a Subsidiary is a party, and other minor
liens or encumbrances none of which in the opinion of the Company
interferes materially with the use of the property affected in the
ordinary conduct of the business of the Company and its Subsidiaries,
which defects do not individually or in the aggregate have a material
adverse effect on the business of the Company individually or of the
Company and its Subsidiaries on a consolidated basis;
(g) Liens described on Schedule 8.2 attached hereto;
(h) Liens described on Schedule 8.2 attached hereto which are
being contested in good faith by the Company and for which the Company
has provided a reserve in accordance with Generally Accepted Accounting
Principles;
(i) Liens in respect of documentary letters of credit, surety,
appeal and performance bonds in an amount not to exceed $5,000,000 in the
aggregate at any time, the Indebtedness with respect to which is
permitted by (Section Mark)(Section Mark)8.1(h) and (i) hereof;
(j) Liens in respect of capital leases, operating leases and
purchase money security interests and mortgages, the Indebtedness with
respect to which is permitted by (Section Mark)(Section Mark)8.1(j) and (l)
hereof;
(k) Liens on cash and cash equivalents to secure Indebtedness
permitted by (Section Mark)8.1(k) hereof and cotton futures contracts, and
liens to secure state and federal obligations in an amount not to
exceed $2,500,000 in the aggregate at any time;
(l) Liens in favor of the Agent and the Lenders arising under
the Security Documents; and
(m) Liens on certain fixed assets of the Company in favor of
the PBGC to secure the Company's obligations to the PBGC in respect of
the Company's Hourly and Salaried Pension Plans (the "Plans"), provided
that (i) the appraised value (on an assembled orderly disposition basis
acceptable to the Agent) of all such assets (as determined no more than
30 days prior to the date on which the security interest is granted by a
nationally recognized appraisal company which is satisfactory to the
Agent in all respects) does not exceed $35,000,000 in the aggregate, (ii)
no Default or Event of Default has occurred and is continuing at the time
the security interest is granted in such
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assets, and no Default or Event
of Default will result therefrom, (iii) the Company and the PBGC shall
have executed and delivered an agreement which incorporates the terms set
forth in that certain Preliminary Agreement between the PBGC and the
Company and which is satisfactory to the Agent, on behalf of the Lenders,
in all respects and such agreement shall be in full force and effect,
(iv) the security interest is granted to the PBGC on or before March 31,
1994, (v) the liens can only be foreclosed upon by the PBGC upon
termination of the Plans pursuant to Title IV of ERISA and the failure by
the Company to pay to the PBGC when due the full amount of the
liabilities of the Company to the PBGC under 29 U.S.C. 1362(b) for
unfunded benefit liabilities of the Plans, and (vi) the Company shall
have delivered to the Agent, on the date on which the security interest
is granted in such assets, a certificate signed by an authorized officer
of the Company and evidence satisfactory to the Agent showing compliance
with the provisions of clauses (i) through (v) above.
(Section Mark)8.3. Restrictions on Investments. The Company will not and
will not permit any Subsidiary to make or permit to exist or to remain
outstanding any Investment except Investments in:
(a) Marketable direct or guaranteed obligations of the United
States of America which mature within one year from the date of purchase
by the Company;
(b) Demand deposits, certificates of deposit, bankers'
acceptances and time deposits of United States banks having total capital
in excess of $100,000,000 United States Dollars with maturities of no
more than 180 days;
(c) Securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof which at the time of purchase have been
rated by either or both of Moody's Investor Services, Inc. and Standard
and Poor's and the ratings for which are not less than "P-1" if rated by
Moody's Investors Services, Inc., and not less than "A-1" if rated by
Standard and Poor's;
(d) Investments existing on the Effective Date in any Person
which is a Subsidiary of the Company or future Investments in any such
Person, provided that any such future Investments shall be limited to
loans to a Subsidiary evidenced by a promissory note of such Subsidiary,
that the aggregate of such future Investments at any one time shall not
exceed $20,000,000 and that such promissory note shall be pledged to the
Agent on behalf of the Lenders and, provided, further, that the sum of
the aggregate principal amount of Indebtedness of Amoskeag to the Company
under (Section Mark)8.1(g) hereof plus, without duplication, the aggregate
amount of Investments made
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by the Company in Amoskeag pursuant to
(Section Mark)(Section Mark)8.3(d) and (h) hereof shall not exceed
$5,000,000 at any time;
(e) so long as no Default or Event of Default exists or is
continuing or would exist as a result thereof, an Investment by the
Company in an amount not to exceed $25,000,000 in the aggregate solely
for the purpose of repurchasing the Company's 11-1/4% Senior Subordinated
Debentures Due 2004;
(f) Investments by the Company for the purpose of purchasing
the industrial development revenue bonds as described in
(Section Mark)8.1(p) hereof, to the extent permitted therein;
(g) Investments existing on the Effective Date and set forth on
Schedule 8.3 attached hereto; and
(h) so long as no Default or Event of Default exists or is
continuing, Investments of the Company not otherwise included in this
(Section Mark)8.3 in an aggregate amount not at any time to exceed the
sum of (i) $20,000,000 plus (ii) if positive, the amount by which
Consolidated Tangible Net Worth exceeds $195,000,000 (as reflected in the
financial statements and Compliance Certificate most recently delivered
to the Lenders pursuant to (Section Mark)7.5 hereof), provided that any
Investment by the Company in any Subsidiary of the Company pursuant to this
(Section Mark)8.3(h) shall be limited to loans to such Subsidiary evidenced
by a promissory note of such Subsidiary and that such promissory note shall
be pledged to the Agent on behalf of the Lenders.
(Section Mark)8.4. Lines of Business. The Company will not and will not
permit its Subsidiaries to engage in any business other than those
described in (Section Mark)6.7 hereof, or any business directly related
thereto.
(Section Mark)8.5. Distributions. The Company shall not make any
Distributions except as provided in this (Section Mark)8.5. The Company may
declare and pay cash dividends subject to all of the following restrictions:
(a) the aggregate amount of cash dividends paid in any fiscal
year of the Company shall not exceed $15,000,000;
(b) the aggregate amount of cash dividends paid in any four
consecutive fiscal quarters of the Company shall not exceed an amount
equal to forty percent (40%) of Consolidated Net Income for such period,
excluding therefrom all extraordinary non-recurring items of income but
not extraordinary non-recurring items of loss;
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(c) no Default or Event of Default shall have occurred and be
continuing at the time of declaration or payment of any cash dividend,
and no Default or Event of Default will exist after giving effect to the
payment of any cash dividend; and
(d) the Company shall have delivered to the Agent no later than
one Business Day after the declaration of such cash dividend (but prior
to payment thereof) a certificate signed by an authorized officer of the
Company and evidence satisfactory to the Agent showing compliance with
the provisions of clauses (a) through (c) hereof.
(Section Mark)8.6. Merger, Consolidation and Sale of Assets. The
Company will not and will not permit any Subsidiary to become a party to any
merger or consolidation, or agree to or effect any asset acquisition or
stock acquisition (other than the acquisition of assets in the ordinary
course of business) except the merger or consolidation of (i) one or more
of the Subsidiaries of the Company with and into the Company (so long as
the Company is the surviving corporation) or (ii) two or more
Subsidiaries of the Company, provided that the Agent shall be notified of
any such transaction which would result in the change of the corporate
name of the Company or any of its Subsidiaries at least thirty (30) days
prior to the effective date of any such event. Except for assets of the
Company's Subsidiaries which are held for sale, as disclosed to the
Lenders prior to the Effective Date, the Company will not permit its
Subsidiaries to sell, lease or otherwise dispose of assets of any such
Person except for the sale of assets (other than Collateral) in the
ordinary course of business for fair and reasonable value. The Company
will not sell, lease or otherwise dispose of assets except for (i) sales
of inventory in the ordinary course of business, and (ii) sales of assets
(other than Collateral) in arms-length transactions for cash and for fair
and reasonable value.
(Section Mark)8.7. Sale and Leaseback. The Company will not and will
not permit any Subsidiary to enter into any arrangement, directly or
indirectly, whereby the Company or any Subsidiary shall sell or transfer
any property owned by it in order then or thereafter to lease such
property or lease other property which the Company or any Subsidiary
intends to use for substantially the same purpose as the property being
sold or transferred. Notwithstanding the foregoing provisions of this
(Section Mark)8.7, the Company may sell or transfer any property owned
by it as described in the preceding sentence provided that the aggregate
current market value of all assets so sold or transferred (in each
case determined at the time of such sale or transfer) shall not at any time
exceed $25,000,000.
(Section Mark)8.8. Guaranties; Subordinated Debt. (a) The Company and its
Subsidiaries will not become or remain liable in respect to any guaranty
of the Indebtedness of any other Person, except for guaranties of
Indebtedness permitted under (Section Mark)8.1(i) and (p) hereof and
guaranties of Indebtedness pursuant to the Security Documents.
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(b) The Company will not and will not permit its Subsidiaries
to effect or permit any change in or amendment to any document or
instrument pertaining to the covenants, subordination, events of default,
terms of payment or required prepayments of any Subordinated Debt, give
any notice of optional redemption or optional prepayment or offer to
repurchase under any such document or instrument, or, directly or
indirectly, make any payment of principal of or interest on or in
redemption, retirement or repurchase of any Subordinated Debt, except for
the scheduled payments required by the terms of the documents and
instruments evidencing Subordinated Debt and permitted by the
subordination provisions of the documents and instruments evidencing
Subordinated Debt and except as permitted under (Section Mark)8.3(e) hereof.
(Section Mark)8.9. Capital Expenditures. The Company and its
Subsidiaries will not make Consolidated Capital Expenditures in any fiscal
year that exceed, in the aggregate, $60,000,000 for such fiscal year; provided,
however, that, if during any fiscal year the amount of Consolidated
Capital Expenditures permitted for that fiscal year is not so utilized,
such unutilized amount may be utilized in any succeeding fiscal year.
(Section Mark)8.10. Interest Coverage Ratio. (a) As at each of the dates
set forth below, the ratio of (i) Consolidated EBIT for the period
consisting of the four fiscal quarters of the Company ending on each of
the dates set forth below, to (ii) aggregate Interest Charges for the
period consisting of such four fiscal quarters (the "Interest Coverage
Ratio"), shall not be less than the ratio opposite such dates set forth
below:
Quarter Ending Ratio
December 31, 1993 1.60 to 1.00
March 31, 1994 1.60 to 1.00
June 30, 1994 1.60 to 1.00
September 30, 1994 1.60 to 1.00
December 31, 1994 1.60 to 1.00
March 31, 1995 1.80 to 1.00
June 30, 1995 1.80 to 1.00
September 30, 1995 1.80 to 1.00
December 31, 1995 1.80 to 1.00
March 31, 1996 and thereafter 2.00 to 1.00
(Section Mark)8.11. Debt Service Coverage Ratio. The Debt Service Coverage
Ratio as at each of the dates set forth below shall not be less than the
ratio set forth opposite such dates set forth below:
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Quarter Ending Ratio
December 31, 1993 1.80 to 1.00
March 31, 1994 2.00 to 1.00
June 30, 1994 2.00 to 1.00
September 30, 1994 2.00 to 1.00
December 31, 1994 2.00 to 1.00
March 31, 1995 2.20 to 1.00
June 30, 1995 2.20 to 1.00
September 30, 1995 2.20 to 1.00
December 31, 1995 2.20 to 1.00
March 31, 1996 and thereafter 2.40 to 1.00
(Section Mark)8.12. Liabilities to Tangible Net Worth. The ratio of
Consolidated Total Liabilities to Consolidated Tangible Net Worth (the
"Leverage Ratio") shall not exceed as at the end of any month during the
periods set forth in the following chart the ratio set forth opposite the
applicable period:
Period Ratio
12/15/93 through 12/15/94 3.00 to 1.00
12/16/94 through 12/15/95 2.75 to 1.00
12/16/95 through 12/16/96 2.50 to 1.00
Each month thereafter 2.25 to 1.00
(Section Mark)8.13. Consolidated Tangible Net Worth. Consolidated
Tangible Net Worth shall not be at any time less than the sum of $175,000,000,
plus, on a cumulative basis, fifty percent (50%) of all positive
Consolidated Net Income for each fiscal quarter (with no deductions for
losses) earned after December 31, 1993 plus seventy-five percent (75%) of
the aggregate proceeds to the Company from each issuance of the Company's
capital stock after the Effective Date (but excluding any 401(K) and
restricted stock issuance), as reflected on the Company's balance sheet
prepared in accordance with Generally Accepted Accounting Principles.
(Section Mark)8.14. Total Days Inventory. At the end of each fiscal
quarter set forth below for the period consisting of the four fiscal
quarters of the Company then ended, the product obtained by multiplying
365 by a fraction, the numerator of which is the net book value of the
Company's inventory as determined utilizing the "Last-in First-out"
method of accounting, as reflected on the Company's books and records in
accordance with established practices consistently applied as at the end
of such fiscal period, and the denominator of which is the sum of (i) the
"cost of sales" with respect to such fiscal period (which shall be the
cost of sales disclosed in the financial statements filed with the
Securities and Exchange Commission minus
<PAGE>
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warehousing and shipping costs
as reflected in the Company's internal management reports), minus, (ii)
the Cotton Writedown Charge, if any, for such fiscal period, as
determined on an pre-tax basis, plus (iii) the aggregate amount of
reversals of Cotton Writedown Charges from prior fiscal periods made in
accordance with Generally Accepted Accounting Principles reflecting the
consumption of the cotton to which the Cotton Writedown Charges from the
prior fiscal periods relate, as determined on a pre-tax basis, all as
determined in accordance with established practices consistently applied,
shall not exceed the number set forth opposite such dates set forth
below:
Quarter Ending D a y s
December
3 1 ,
1993110
d a y s
March 31,
1994125
d a y s
June 30, 1994125
d a y s
September
3 0 ,
1994125
d a y s
December
3 1 ,
1994110
d a y s
March 31,
1995125
d a y s
June 30,
1995125
d a y s
September
3 0 ,
1995125
d a y s
December
3 1 ,
1995110
d a y s
March 31,
1996125
d a y s
June 30,
1996125
d a y s
September
3 0 ,
1996125
d a y s
December
3 1 ,
1996110
d a y s
March 31,
1997125
d a y s
June 30,
1997125
d a y s
September
3 0 ,
1997125
d a y s
December
3 1 ,
1997110
d a y s
(Section Mark)8.15. Transactions With Affiliates. The Company will not,
and will not permit any of its Subsidiaries to, engage in any transaction
with an Affiliate of the Company or any of its Subsidiaries on terms less
favorable to the Company or such Subsidiary (as the case may be) than
would have been obtainable in an arms-length transaction with unrelated
third parties.
(Section Mark)8.16. Compromise of Accounts Receivable. The Company shall
not compromise or adjust any Accounts Receivable or other accounts
receivable (or extend the time for payment thereof) or grant any
discounts, allowances or credit thereon, provided, however, that so long
as no Default or Event of Default has occurred and is continuing, the
Company may compromise or adjust any Accounts Receivable or other
accounts receivable (or extend the time for payment thereof) or grant any
discount, allowances or credits thereon in the ordinary course of
business.
<PAGE>
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(Section Mark)9. CONDITIONS TO EFFECTIVENESS. The Lenders shall
have no obligation to enter into this Agreement and to convert their claims
against the Company under the Prior Credit Agreement into claims under
this Agreement, unless and until the date (the "Effective Date") on which
each of the conditions precedent specified in this (Section Mark)9
have been satisfied.
(Section Mark)9.1. Loan Documents. (a) Each of this Agreement and the
Notes shall have been duly and properly authorized, executed and
delivered by the respective party or parties thereto and shall be in
full force and effect.
(b) The Company shall have duly authorized, executed and
delivered to the Agent the Security Documents and such agreements shall
be in full force and effect. All UCC-1 financing statements, UCC-3
financing statements and other documents required to be filed to perfect
or continue the perfection of the Agent's liens on the Collateral shall
have been filed or recorded, as applicable, in all appropriate filing
offices or other locations necessary to perfect or continue the
perfection of such security interest (or other arrangements satisfactory
to the Lenders shall have been made for such filing or recording), and
all other action necessary to perfect or continue the perfection of such
security interests shall have been taken. The Company shall have
delivered to the Agent certificates for all shares of the capital stock
of its Subsidiaries (other than Amoskeag), accompanied by stock powers
duly executed in blank.
(c) Executed original counterparts of each of the Loan
Documents shall have been furnished to the Agent.
(Section Mark)9.2. Legality of Transactions. No change in applicable
law shall have occurred as a consequence of which it shall have become and
continue to be unlawful (a) for the Lenders to perform any of their
agreements or obligations under any of the Loan Documents to which they
are a party, or (b) for the Company to perform any of its material
agreements or obligations under any of the Loan Documents to which it is
a party.
(Section Mark)9.3.Representations and Warranties.Each of the
representations and warranties made by or on behalf of the Company to the
Lenders in this Agreement or the other Loan Documents shall be true and
correct in all material respects when made, shall, for all purposes of
this Agreement, be deemed to be repeated on and as of the Effective Date,
and shall be true and correct in all material respects on and as of such
date.
(Section Mark)9.4. Performance. The Company shall have duly and
properly performed, complied with and observed each of its covenants,
agreements and obligations contained in any of the Loan Documents to which
it is a party or by which it is bound which are required to be performed as of
the Effective Date. After giving effect to this Agreement, no event
shall have occurred on or prior to the Effective
<PAGE>
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Date and be continuing on such date, and no condition shall exist on such date,
which constitutes an Event of Default or which would, with notice or the lapse
of time, or both, constitute an Event of Default.
(Section Mark)9.5. Certified Copies of Charter Documents. The Agent
shall have received from the Company and from each of its Subsidiaries (to the
extent requested by the Agent) a copy, certified by a duly authorized
officer of such Person to be true and complete as of the Effective Date
of (a) its charter or other incorporation documents as in effect on such
date of certification, and (b) its by-laws as in effect on such date.
(Section Mark)9.6. Proof of Corporate Action. The Agent shall have
received from the Company and each of its Subsidiaries which are parties
to the Loan Documents copies, certified by a duly authorized officer of
such Person to be true and complete as of the Effective Date, of records
of all corporate action taken by it to authorize (a) its execution and
delivery of each of the Loan Documents to which it is a party, (b) its
performance of all of its agreements and obligations under each of such
documents, and (c) with respect to the Company, any borrowings and other
transactions contemplated by this Agreement.
(Section Mark)9.7. Incumbency Certificate. The Agent shall have
received from the Company and each of its Subsidiaries which are parties to the
Loan Documents an incumbency certificate, dated as of the Effective Date,
signed by a duly authorized officer of such Person, and giving the name
and bearing a specimen signature of each individual who shall be
authorized: (i) to sign, in the name and on behalf of such Person, each
of the Loan Documents to which such Person is a party; (ii) in the case
of the Company, to make application for the Loans; and (iii) to give
notices and to take other action on such Person's behalf under the Loan
Documents.
(Section Mark)9.8. Proceedings and Documents. All corporate, governmental
and other proceedings in connection with the transactions contemplated by
the Loan Documents shall be in form and substance reasonably satisfactory
to the Agent and the Agent shall have received all such counterpart
originals or certified or other copies of all such instruments and
documents as the Agent shall have reasonably requested.
(Section Mark)9.9. Legal Opinions. The Lenders shall have received a
written opinion, addressed to the Lenders, from M. K. Doss, General
Counsel to the Company, substantially in the form of Exhibit G hereto and
such other written opinions addressed to the Lenders as the Agent may
reasonably request, such opinions to be satisfactory to the Agent in all
respects.
(Section Mark)9.10. Closing Fee; Agent's Fee. The Agent shall have
received the Closing Fee as provided in (Section Mark)4.8 hereof and the
Agent's Fee as provided in (Section Mark)4.9 hereof.
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(Section Mark)9.11. Certain Assignments. The Lenders (as defined in
the Prior Credit Agreement) shall have assigned such interests, rights and
obligations under the Prior Credit Agreement to the Lenders hereunder as
shall be necessary to achieve the Commitment Percentages and Commitments
set forth herein.
(Section Mark)9.12. Compliance Certificate. The Company shall have
delivered to the Lenders a Compliance Certificate dated as of the Balance
Sheet Date.
(Section Mark)9.13. Amounts Owing under the Prior Credit Agreement.
All interest accrued on the Loans (as defined in the Prior Credit Agreement)
under the Prior Credit Agreement and all fees, including the Commitment
Fee (as defined in the Prior Credit Agreement) expenses and other amounts
payable pursuant to the Prior Credit Agreement, excluding the principal
amount of all outstanding Loans (as defined in the Prior Credit
Agreement), shall have been paid in full.
(Section Mark)10. CONDITIONS TO LOANS. The obligations of the Lenders
to make any Loans subsequent to the closing hereunder or to issue, extend or
renew any Letters of Credit shall be subject to the satisfaction of the
following conditions precedent:
(Section Mark)10.1. Legality of Transactions. It shall not be unlawful
(a) for the Company to perform any of its material agreements or obligations
under any of the Loan Documents to which the Company is a party on such
date or (b) with respect to the obligation of each Lender to make any
Loans subsequent to the first such Loan (without affecting the
obligations of the other Lenders), for such Lender to perform any of its
agreements or obligations under any of such Loan Documents to which the
Lender is a party on the Drawdown Date of such Loan.
(Section Mark)10.2.Representations and Warranties.Each of the
representations and warranties made by or on behalf of the Company or any
of its Subsidiaries to the Lenders in this Agreement or any other Loan
Document shall be true and correct in all material respects when made and
shall, for all purposes of this Agreement, be deemed to be repeated on
and as of the date of the Company's notice of borrowing for such Loan and
on and as of the Drawdown Date of such Loan, and shall be true and
correct in all material respects on and as of each of such dates, except,
in each case, as affected by the consummation of the transactions
contemplated by the Loan Documents and except to the extent that such
representations and warranties relate solely to a prior date.
(Section Mark)10.3. Performance. The Company shall have duly and
properly performed, complied with and observed in all material respects each
of its covenants, agreements and obligations contained in
(Section Mark)(Section Mark)7 and 8 hereof, and shall have duly and properly
performed, complied with and observed in all material respects its
covenants, agreements, and obligations in all other articles of this
<PAGE>
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Agreement and any of the other Loan Documents to which it is a party or by
which it is bound on the Drawdown Date for such Loan. No event shall have
occurred on or prior to such date and be continuing on such date,
and no condition shall exist on such date, which constitutes an Event
of Default or which would, with notice or the lapse of time, or both,
constitute an Event of Default.
(Section Mark)10.4. Proceedings and Documents. All corporate,
governmental and other proceedings in connection with the transactions
contemplated by the Loan Documents and all instruments and documents
incidental thereto shall be in form and substance reasonably satisfactory
to the Lenders and the Lenders shall have received all such counterpart
originals or certified or other copies of all such instruments and documents
as the Lenders shall have reasonably requested.
(Section Mark)10.5. Legal Opinion. In addition to the conditions
precedent set forth in (Section Mark)(Section Mark)10.1 through 10.4, the
obligations of the Lenders to make any Loan subsequent to the Effective Date
shall be further subject, at the option of the Agent, to the receipt of a
written opinion, addressed to the Lenders, from counsel to the Company, in
form and substance satisfactory to the Agent.
(Section Mark)11. EVENTS OF DEFAULT.
(Section Mark)11.1. Acceleration. If any of the following events
("Events of Default" or, if the giving of notice or the lapse of time or both
is required, then, prior to such notice and/or lapse of time, "Defaults")
shall occur:
(a) if the Company shall fail to pay any principal of the Loans
or any Reimbursement Obligations when the same shall become due and
payable, whether at the stated date of maturity or any accelerated date
of maturity or at any other date fixed for payment;
(b) if the Company shall fail to pay any interest on the Loans,
Commitment Fee, any Letter of Credit Fees, the Agent's Fee or other sums
due hereunder (except for sums due under (Section Mark)16 hereof or under the
Security Agreement), when the same shall become due and payable whether
at the stated date of maturity or any accelerated date of maturity or at
any other date fixed for payment;
(c) if the Company shall fail to comply with its covenants
contained in (Section Mark)(Section Mark)7.6, 7.9, 7.10 or 7.16 and the
continuance of such failure for thirty (30) days after written notice of
such failure has been given to the Company by the Agent, or if the Company
or any of its Subsidiaries shall fail to comply with the covenants
contained in (Section Mark)(Section Mark)7 or 8 hereof
(other than those specified above) or in the Security Documents;
<PAGE>
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(d) if the Company shall fail to perform any term, covenant or
agreement herein contained (other than those specified in subsections
(a), (b) and (c) above) for thirty (30) days after written notice of such
failure has been given to the Company by the Agent;
(e) if any representation or warranty of the Company or any of
its Subsidiaries in this Agreement or in any of the other Loan Documents
or in any document or instrument delivered pursuant to or in connection
with this Agreement or any of the other Loan Documents shall prove to
have been false in any material respect upon the date when made;
(f) if the Company or any of its Subsidiaries shall default (as
principal or guarantor or other surety) in the payment or performance of
any obligation contained in any agreement or instrument evidencing (i)
any other Indebtedness in respect of money borrowed (including without
limitation unwaived defaults under Subordinated Debt), or (ii) any other
Indebtedness in excess of $100,000 in respect of credit received (other
than accounts payable which arose in the ordinary course of business and
which the Company or Subsidiary is contesting in good faith), in either
case whether at maturity or upon declaration or acceleration, or with
respect to any of the terms of any guaranties or any mortgage, pledge,
assignment, indenture or other agreement relating thereto, and such
default shall continue for such period of time as would permit, or would
have permitted (assuming the giving of appropriate notice, if required)
the holder or holders thereof or of any obligations issued thereunder to
accelerate the maturity thereof, or if any default or event of default
shall occur under any such agreement or instrument which continues beyond
the period of grace, if any, specified therein;
(g) if the Company or any of its Subsidiaries makes an
assignment for the benefit of creditors, or admits in writing its
inability to pay or generally fails to pay its debts as they mature or
become due, or petitions or applies for the appointment of a trustee or
other custodian, liquidator or receiver of the Company or any of its
Subsidiaries or of any substantial part of the assets of the Company or
any of its Subsidiaries or commences any case or other proceeding
relating to the Company or any of its Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, now or
hereafter in effect, or takes any action to authorize or in furtherance
of any of the foregoing, or if any such petition or application is filed
or any such case or other proceeding is commenced against the Company or
any of its Subsidiaries and the Company or any of its Subsidiaries
indicates its approval thereof, consent thereto or acquiescence therein;
<PAGE>
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(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Company or any of
its Subsidiaries bankrupt or insolvent, or approving a petition in any
such case or other proceeding, or a decree or order for relief is entered
in respect of the Company or any Subsidiary in an involuntary case under
Federal bankruptcy laws as now or hereafter constituted which remains
undischarged or unstayed for more than forty-five (45) days;
(i) if there shall remain in force, undischarged, unsatisfied
and unstayed, for more than thirty days, whether or not consecutive, any
final judgment against the Company or any of its Subsidiaries which, with
other outstanding final judgments, undischarged, against such Person(s)
exceeds in the aggregate $100,000;
(j) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event Shall have occurred and the Majority A Lenders shall
have determined in their reasonable discretion that such event reasonably
could be expected to result in liability of the Company to the PBGC or
the Plan in an aggregate amount exceeding $500,000 and such event in the
circumstances occurring reasonably could constitute grounds for the
termination of such Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such
Plan; or a trustee shall have been appointed by the United States
District Court to administer such Plan; or the PBGC shall have instituted
proceedings to terminate such Plan;
(k) if a Change of Control shall occur; or
(l) if any Loan Document (other than an Agency Agreement which
is terminated in accordance with (Section Mark)7.4 hereof) shall be
cancelled, terminated, revoked or rescinded otherwise than in accordance
with the express prior written agreement, consent or approval of all
of the Lenders, or any action at law, suit in equity or other legal
proceeding to cancel, revoke or rescind any Loan Document shall be
commenced by or on behalf of the Company or any of its Subsidiaries; or
any court or any other governmental or regulatory authority or agency
of competent jurisdiction shall make a determination that, or shall issue
a judgment, order, decree or ruling to the effect that any one or more of
the Loan Documents or any one or more of the obligations of the Company or
any of its Subsidiaries under any one or more of the Loan Documents are
illegal, invalid or unenforceable in accordance with the terms thereof;
then, and in any such event, so long as the same may be continuing, the
Agent may, and upon the request of the Majority A and B Lenders the Agent
shall, by notice in writing to the Company declare all amounts owing with
respect to this Agreement and the Notes and the other Loan Documents and
all Reimbursement Obligations
<PAGE>
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to be, and they shall thereupon forthwith
become, immediately due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived by
the Company; provided that in the event of any Event of Default specified
in (Section Mark)(Section Mark)11.1(g) or 11.1(h) hereof, all such amounts
shall become immediately due and payable automatically and without any
requirement of notice from the Agent or any Lender.
(Section Mark)11.2 Rights of Lenders. In case any one or more of the
Events of Default shall have occurred and be continuing, and whether or
not the Lenders shall have accelerated the maturity of the Loans pursuant
to the foregoing, (a) each Lender, if owed any amount with respect to the
Loans or the Reimbursement Obligations may proceed to protect and enforce
its rights by suit in equity, action at law and/or other appropriate
proceeding, whether for the specific performance of any covenant or
agreement contained in this Agreement or any instrument pursuant to which
the obligations of the Company to such Lender hereunder are evidenced,
including as permitted by applicable law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of such Lender; and (b) to the extent any
Lender holds an A Note or unpaid obligations of the Company under the
Loan Documents (other than with respect to B Loans outstanding) exceeding
in the aggregate principal amount such Lender's Commitment Percentage of
the then outstanding aggregate principal amount of A Notes or such other
obligations held by the Lenders (other than with respect to B Loans
outstanding), the other Lenders shall purchase such participations in
such Lender's A Note and such other obligations (other than with respect
to B Loans outstanding) as to result in the outstanding aggregate
principal amount of the A Notes and such other obligations (other than
with respect to B Loans outstanding) held by each Lender to equal each
such Lender's Commitment Percentage of the then outstanding aggregate
principal amount thereof. The Company hereby agrees that any Lender so
purchasing a participation from another Lender pursuant to this
(Section Mark)11.2 may, to the fullest extent permitted by law, exercise
all its right of payment (including the right of setoff) with
respect to such participation as fully as if such Lender were the direct
creditor of the Company in the amount of such participation. No remedy
herein conferred upon any Lender or holder of the Notes is intended to be
exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by
statute or any other provision of law.
If any one or more of the Events of Default specified in
(Section Mark)11.1(a), (b), (c), (f), (g), (h) or (l) shall occur, any
unused portion of the Revolving Credit Commitment shall forthwith terminate
and each of the Lenders shall be relieved of all obligations to make A
Loans to or issue, extend or renew any Letters of Credit for the Company;
or if any other Event of Default shall have occurred and be continuing,
or if on any Drawdown
<PAGE>
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Date the conditions precedent to the making of the
Loans or issuing, extending or renewing any Letters of Credit to be made
on such Drawdown Date are not satisfied, the Agent, upon the request
of the Majority A Lenders, shall, by notice to the Company, terminate the
unused portion of the Revolving Credit Commitment, and upon such notice
being given such unused portion of the Revolving Credit Commitment shall
terminate immediately and each of the Lenders shall be relieved of all
further obligations to make A Loans to and issue, extend and renew
Letters of Credit for the Company hereunder. If any such notice is given
to the Company, the Agent will forthwith furnish a copy thereof to each
of the Lenders. No termination of the Revolving Credit Commitment shall
relieve the Company of any of its existing Lender Obligations to the
Lenders hereunder or elsewhere.
(Section Mark)12. SETOFF. Regardless of the adequacy of any
collateral, during the continuance of an Event of Default, any deposits or
other sums credited by or due from any of the Lenders to the Company and any
securities or other property of the Company in the possession of such
Lender may be applied to or set off against the payment of obligations of
the Company hereunder and under the Notes and any and all other
liabilities, direct, or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, of the Company to such
Lender. Each of the Lenders agrees with the other Lenders that (a) if an
amount to be set off is applied to Indebtedness of the Company to such
Lender other than Indebtedness evidenced by the Notes held by such
Lender, such amount shall be applied ratably to such other Indebtedness
and to the Indebtedness evidenced by all such Notes held by such Lender,
and (b) if a Lender shall receive from the Company, whether by voluntary
payment, exercise of the right of set-off, counterclaim, cross action,
enforcement of the claim evidenced by the A Note held by a Lender or
constituting a Reimbursement Obligation owed to a Lender by proceedings
against the Company at law or in equity or by proof thereof in
bankruptcy, reorganization, liquidation, receivership or similar
proceedings, or otherwise, any amount, such Lender will make such
disposition and arrangements with the other Lenders with respect to such
amount, either by way of distribution, pro tanto assignment of claims,
subrogation or otherwise as shall result in each Lender receiving in
respect of the A Note held by it its proportionate payment as
contemplated by this Agreement; provided, however, that if all or any
part of such excess payment is thereafter recovered from such Lender,
such disposition and arrangements shall be rescinded and the amount
restored to the extent of such recovery, but without interest.
(Section Mark)13. INDEPENDENT CREDIT DECISION. Each Lender
acknowledges that it has, independently and without reliance upon the Agent
or any other Lender, and based upon such information and documents as it has
deemed appropriate, made its own independent credit analysis and decision
to enter into this Agreement.
(Section Mark)14. THE AGENT. The Agent is authorized to take such
action on behalf of each of the Lenders and to exercise all such powers as are
hereunder and in each
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of the Security Documents and in related documents
delegated to the Agent, together with such powers as are appropriate and
reasonably incident thereto.
The Agent is authorized to deliver any notice to commence a
payment blockage pursuant to any instrument evidencing Subordinated Debt
upon the direction of the Majority A Lenders, provided however if any
Subordinated Debt is accelerated, the Agent is authorized to deliver a
notice to commence payment blockage pursuant to any instrument evidencing
such Subordinated Debt without the consent of the Majority A Lenders.
In case one or more Events of Default have occurred and shall
be continuing, and whether or not acceleration of all amounts owing with
respect to this Agreement and the Notes shall have occurred, the Agent
shall, if (a) so requested by the Majority A Lenders and (b) the Lenders
have provided to the Agent such additional indemnities and assurances
against expenses and liabilities as the Agent may reasonably request,
proceed to enforce the provisions of the Security Documents authorizing
the sale or other disposition of all or any part of the Collateral and
exercise all or any such other legal and equitable and other rights or
remedies as it may have in respect of such Collateral. The Majority A
Lenders may direct the Agent in writing as to the method and the extent
of any such sale or other disposition, the Lenders hereby agreeing to
indemnify and hold the Agent harmless from all liabilities incurred in
respect of all actions taken or omitted in accordance with such
directions, provided that the Agent need not comply with any such
direction to the extent that the Agent reasonably believes the Agent's
compliance with such direction to be unlawful or commercially
unreasonable in any applicable jurisdiction.
The Agent may exercise its powers and execute its duties by or
through employees or agents and shall be entitled to take, and to rely
on, advice of counsel concerning all matters pertaining to its rights and
duties under this Agreement and the Notes. The Agent may utilize the
services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such
Persons shall be paid by the Company.
Neither the Agent nor any of its shareholders, directors,
officers or employees nor any other Person assisting them in their duties
nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in
good faith by it or them hereunder or under the Notes, or in connection
herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such
other Person, as the case may be, may be liable for losses due to its
willful misconduct or gross negligence.
The Agent shall not be responsible for the execution or validity or
enforceability of this Agreement, the Notes, the Security Documents, or any
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instrument at any time constituting, or intended to
constitute, collateral security for the Notes, or for the value of any
such collateral security or for the validity, enforceability or
collectibility of any such amounts owing with respect to the Notes, or
for any recitals or statements, warranties or representations herein or
made in any certificate or instrument hereafter furnished to it by or on
behalf of the Company, or be bound to ascertain or inquire as to the
performance or observance of any of the terms, conditions, covenants or
agreements herein or in any instrument at any time constituting, or
intended to constitute, collateral security for the Notes. The Agent
shall not be bound to ascertain whether any notice, consent, waiver or
request delivered to it by the Company or any holder of any of the Notes
shall have been duly authorized or is true, accurate and complete. The
Agent has not made nor does it now make any representations or
warranties, express or implied, nor does it assume any liability to the
Lenders with respect to the credit worthiness or financial conditions of
the Company or any of its Subsidiaries.
If in the reasonable opinion of the Agent the distribution of
any amount received by it in such capacity hereunder or under the Notes
might involve it in liability, it may refrain from making distribution
until its right to make distribution shall have been adjudicated by a
court of competent jurisdiction. If a court of competent jurisdiction
shall adjudge that any amount received and distributed by the Agent is to
be repaid, each Person to whom any such distribution shall have been made
shall either repay to the Agent its proportionate share of the amount so
adjudged to be repaid or shall pay over the same in such manner and to
such Persons as shall be determined by such court. With respect to
obligations of the Company hereunder, a payment to the Agent shall be
deemed to be a payment to the Lenders.
The Agent may deem and treat the payee of any Note or the
purchaser of any Letter of Credit Participation as the absolute owner
thereof for all purposes hereof until it shall have been furnished in
writing with a different name by such payee or by a subsequent holder.
The Lenders jointly and severally agree hereby to indemnify
and hold harmless the Agent from and against any and all claims, actions
and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including, without limitation, any expenses for which the Agent
has not been reimbursed by the Company as required by (Section Mark)14
hereof), and liabilities of every nature and character arising out of or
related to this Agreement, the Notes, the Letters of Credit, the Security
Documents, or the transactions contemplated or evidenced hereby or thereby,
or the Agent's actions taken hereunder or thereunder, except to the extent
that any of the same shall be directly caused by the Agent's willful
misconduct or gross negligence.
In its individual capacity, FNBB shall have the same obligations
and the same rights, powers and privileges in respect to its commitment and
the Loans
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made by it and as the purchaser of any Letter of Credit Participations
hereunder, and as the holder of any of the Notes, as it would have were it
not also the Agent.
The Agent may resign as Agent upon ten (10) days' notice to the
Lenders and the Company. Upon such resignation or removal, the Majority
A Lenders shall appoint from among the Lenders a successor agent for the
Lenders, which successor agent shall consent to serve as the agent
hereunder and shall be approved by the Company (such approval not to be
unreasonably withheld), whereupon such successor agent shall succeed to
the rights, powers and duties of the Agent, and the term "Agent" shall
mean such successor agent effective upon its appointment, and the former
Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of the former Agent or any
of the parties to this Agreement, the Security Documents or any holders
of the Notes. After any retiring Agent's resignation hereunder as Agent,
the provisions of this (Section Mark)14 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
(Section Mark)15. ASSIGNMENTS AND PARTICIPATIONS.
(a) Except as provided herein, each Lender may, at its own
expense, assign to one or more Eligible Assignees a portion of its
interests, rights and obligations under this Agreement (including,
without limitation, a portion of its Commitment Percentage hereunder and
the same portion of the Loans at the time owing to it, the Notes held by
it and its participating interest in the risk relating to any Letters of
Credit); provided, however, that (i) the amount of the assigning Lender's
portion of its Commitment subject to each such assignment (other than
with respect to assignments to an Affiliate of the assigning Lender)
(determined as of the date of the Assignment and Acceptance with respect
to such assignment) shall in no event be less than the lesser of (A)
$10,000,000, or (B) fifty percent (50%) of its Commitment as in effect on
the Effective Date, or if a Lender becomes a party to this Agreement
after the Effective Date, fifty percent (50%) of its Commitment as in
effect on the date such Lender becomes a party to this Agreement, (ii)
the assigning Lender shall not assign more than fifty percent (50%) of
its Commitment as in effect on the Effective Date, or if a Lender becomes
a party to this Agreement after the Effective Date, more than fifty
percent (50%) of its Commitment as in effect on the date such Lender
becomes a party to this Agreement (other than to an Affiliate of the
assigning Lender) unless the assigning Lender assigns 100% of its
Commitment, (iii) each such assignment shall be of a constant, and not a
varying, percentage of all of the assigning Lender's rights and
obligations (and shall be the same percentage as to the Commitment
Percentage) under this Agreement, and (iv) the parties to such assignment
shall execute and deliver to the Agent, for recording in the Register, an
Assignment and Acceptance, substantially in the form of Exhibit H hereto
(the "Assignment and Acceptance"), together with any Note or Notes
subject to such assignment and together with an assignment administration
fee for the account of the Agent of $2,500. Upon such execution,
delivery, acceptance and
<PAGE>
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recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall
be at least five Business Days after the execution thereof, (x) the
assignee thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a
Lender hereunder, and (y) the assigning Lender shall, to the extent
provided in such assignment, be released from its obligations under this
Agreement.
(b) By executing and delivering an Assignment and Acceptance,
the parties to such assignment thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim,
the assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or any other instrument or document furnished
pursuant hereto; (ii) the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Company or its Subsidiaries or any other Person
primarily or secondarily liable in respect of any of the Lender
Obligations, or the performance or observance by the Company of any of
its obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in (Section Mark)6.5 and the financial statements most
recently delivered pursuant to (Section Mark)7.5 hereof and such
other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance
upon the assigning Lender, the Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that as at
the date of its execution of its Assignment and Acceptance, it is an
Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms hereof, together
with such powers as are reasonably incidental thereto; (vii) such assignee
agrees that it will perform in accordance with their terms all of
the obligations which by the terms of this Agreement are required to be
performed by it as a Lender; and (viii) such assignee represents and
warrants that it is legally authorized to enter into such Assignment and
Acceptance.
(c) The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the
names and addresses of the Lenders and the Commitment Percentage and
Commitment of, and principal amount of the Loans owing to, the Lenders
from time to time (the "Register"). The entries in the Register shall be
conclusive, in the absence of manifest error, and the Company, the Agent
and the Lenders may treat each person whose name is
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recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Company
or the Lenders at any reasonable time and from time to time upon reasonable
prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by the parties to such assignment, together with any Note or Notes
subject to such assignment, the Agent shall, (i) record the information
contained therein in the Register, and (ii) give prompt notice thereof to
the Company and the Lenders. Within five Business Days after receipt of
such notice, the Company, at its own expense, shall execute and deliver
to the Agent, in exchange for the surrendered Note or Notes, a new Note
or Notes to the order of such Eligible Assignee(s) in an amount equal to
the amount assumed by such Eligible Assignee(s) pursuant to such
Assignment and Acceptance and a new Note or Notes to the order of the
assigning Lender in an amount equal to the amount retained by it
hereunder. Such new Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of the surrendered Note or Notes,
shall be dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of the assigned Notes.
Within five (5) days of issuance of a new Note(s) pursuant to this
(Section Mark)15(d), the Company shall deliver an opinion of its counsel,
addressed to the applicable assigning and assignee Lenders, relating to
the due authorization, execution and delivery of such new Note(s) and
the legality, validity and binding effect thereof, in form and substance
reasonably satisfactory to such Lenders. The surrendered Note or Notes
shall be cancelled and returned to the Company.
(e) Each Lender may sell participations to one or more banks or
other entities of such Lender's rights and obligations under this
Agreement and the other Loan Documents; provided that (i) any such sale
or participation shall not affect the rights and duties of the selling
Lender hereunder to the Company and (ii) the only rights granted to the
participant pursuant to such participation arrangements with respect to
waivers, amendments or modifications of the Loan Documents shall be the
rights to approve waivers, amendments or modifications which require the
approval of all of the Lenders, as provided in (Section Mark)23 hereof.
(Section Mark)16. EXPENSES. The Company will reimburse the Agent
for all its reasonable out-of-pocket expenses, including but not limited to the
reasonable attorney's fees and disbursements of the Lenders' Special
Counsel and other reasonable attorneys' fees and disbursements, incurred
or expended in connection with the preparation, interpretation,
restructuring or termination of this Agreement, the Notes or any
amendment hereof or thereof, or with the enforcement of any obligations
or the satisfaction of any indebtedness of the Company hereunder or
thereunder, or in connection with any litigation, proceeding or dispute
hereunder in any way related to the credit hereunder. The Company also
agrees to pay promptly the Agent's reasonable costs of conducting
commercial finance examinations of the Company's properties, including
the applicable daily time charges of such Persons' commercial finance
examiners, agents, consultants and
<PAGE>
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representatives engaged in such
examinations as in effect from time to time, and reasonable out-of-pocket
travel and other related expenses, provided that the aggregate amount for
which the Company shall be liable with respect to commercial finance
examinations in each calendar year shall be $15,000. The Company will
pay any taxes (including any interest and penalties in respect thereof),
payable on or with respect to the transactions contemplated by this
Agreement (the Company hereby agreeing to indemnify the Lenders with
respect thereto), other than taxes incurred by the Lenders with respect
to any income realized by the Lenders hereunder.
(Section Mark)17. INDEMNIFICATION. (a) The Company agrees to
indemnify and hold harmless the Agent and the Lenders from and against any
and all claims, actions and suits whether groundless or otherwise, and from
and against any and all liabilities, losses, damages and expenses of every
nature and character arising out of, or related to, this Agreement or the
transactions evidenced or contemplated hereby.
(b) In addition, the Company covenants and agrees to indemnify
and hold harmless the Agent and each of the Lenders as well as the
Agent's and each Lender's shareholders, directors, agents, officers,
subsidiaries and affiliates, and each of their respective successors and
assigns, from and against all damages, losses, settlement payments,
obligations, liabilities, claims, suits, penalties, assessments,
citations, directives, demands, judgments, actions, causes of action,
costs and expenses (including without limitation the fees and
disbursements of counsel and environmental consultants) incurred,
suffered, sustained or required to be paid by an indemnified party and
arising under any Environmental Law, or otherwise related to
environmental or Hazardous Substance matters, except (i) any of the
foregoing which result from the gross negligence or willful misconduct of
the indemnified party, or (ii) insofar as a matter otherwise to be
indemnified hereunder relates to a particular property of the Company or
its Subsidiaries and with respect to all indemnified parties, which
arises from the action or inaction of an indemnified party after such
party obtains possession, control or ownership of such property. The
Agent and each of the Lenders shall have the right to employ separate
counsel and to participate in the defense and investigation of any claim,
action or proceedings, and the Company shall bear the expense of such
counsel.
(Section Mark)18. SURVIVAL OF COVENANTS. All covenants, agreements,
representations and warranties made herein, in the Notes or in any
documents or other papers delivered by or on behalf of the Company
pursuant hereto shall be deemed to have been relied upon by the Lenders,
notwithstanding any investigation heretofore or hereafter made by it, and
shall survive the making by the Lenders of the Loans, as herein
contemplated, and shall continue in full force and effect so long as any
amount due under this Agreement or the Notes remains outstanding and
unpaid or any Lender has any obligation to make any Loans hereunder.
Notwithstanding the foregoing, the covenants set forth in
(Section Mark)17 hereof shall
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survive the termination of this
Agreement, the payment or satisfaction of payment of amounts owing with
respect to the Note or any other Loan Document and any realization of
Collateral under the Security Agreement. All statements contained in any
certificate or other paper delivered to any Lender at any time by or
on behalf of the Company pursuant hereto or in connection with the
transactions contemplated hereby shall constitute representations and
warranties by the Company hereunder.
(Section Mark)19. PARTIES IN INTEREST. All the terms of this
Agreement and the Notes shall be binding upon and inure to the benefit of and
be enforceable by the respective successors and assigns of the parties
hereto and thereto; provided, that the Company may not assign or transfer
its rights hereunder without the prior written consent of each of the
Lenders. Nothing in this Agreement shall limit the right of any Lender
to assign or transfer participations in the Lender Obligations held by it
as provided for in (Section Mark)15.
(Section Mark)20. NOTICES. Except as otherwise expressly provided
in this Agreement, all notices and other communications made or required
to be given pursuant to this Agreement or the Notes shall be in writing and
shall be delivered in hand, mailed by United States first-class mail,
postage prepaid, or sent by telegraph or telex and confirmed by letter,
addressed to the party's address set forth on Schedule 1.1 hereto, or
such other address for notice as the party shall have last furnished in
writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly
given or made and to have become effective (a) if delivered by hand to a
responsible officer of the party to which it is directed, at the time of
the receipt thereof by such officer, (b) if sent by registered or
certified first-class mail, postage prepaid, when mailed.
(Section Mark)21.MISCELLANEOUS. This Agreement and the Notes are
contracts under the laws of the Commonwealth of Massachusetts and shall
for all purposes be construed in accordance with and governed by the laws
of said Commonwealth. The captions in this Agreement are for convenience
of reference only and shall not define or limit the provisions hereof.
This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which
when so executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this Agreement it
shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
(Section Mark)22. ENTIRE AGREEMENT. This Agreement, together with the
Notes, Security Agreement and any other documents executed in connection
herewith or therewith, express the entire understanding of the parties
with respect to the transactions contemplated hereby. Neither this
Agreement nor any term hereof may be changed, waived, discharged or
terminated, except as provided in (Section Mark)23.
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(Section Mark)23. CONSENTS, AMENDMENTS, WAIVERS. Except as otherwise
expressly provided in this Agreement and the Security Documents, any
consent or approval required or permitted by this Agreement and any
Security Document to be given by the Lenders or the Collateral Agent, as
that term is used in the Security Agreement, may be given, and any sale
of Collateral, and any term of this Agreement or of any other instrument
related hereto or mentioned herein may be amended, and the performance or
observance by the Company of any terms of this Agreement or such other
instrument or the continuance of any Default or Event of Default may,
subject to the limitation set forth below, be waived (either generally or
in a particular instance and either retroactively or prospectively) with,
but only with, the written consent of the Company and the written consent
of the Majority A Lenders. Notwithstanding the foregoing, the written
consent of all of the Lenders and the Company shall be required to do any
of the following: (a) increase the principal amount of the A Loans (or
subject the Lenders to any additional obligations), (b) reduce the
principal (other than by prepayments or repayments permitted or required
by the provisions hereof) of or interest on the A Notes or any fees
payable hereunder, (c) extend or postpone any date fixed for any payment
in respect of principal of, or interest on, the A Loans, or any fees
payable hereunder, (d) amend this (Section Mark)23, (e) change the
Commitment Percentage of any Lender except pursuant to (Section Mark)15
hereof, (f) release the Agent's lien on Collateral except as provided in
(Section Mark)5 hereof, (g) amend the definition of Borrowing Base Amount,
Accounts Receivable or Net Security Value of Inventory, or (h)
waive any conditions precedent. The definition of Majority A Lenders
and of Majority A and B Lenders may not be amended without the written
consent of all of the Lenders. Section 16 hereof may not be amended
without the written consent of the Agent. No waiver shall extend to or
affect any obligation not expressly waived or
impair any right consequent thereon. No course of dealing or delay or
omission on the part of any Lender in exercising any right shall operate
as a waiver thereof or otherwise be prejudicial thereto. No notice to or
demand upon the Company shall entitle the Company to other or further
notice or demand in similar or other circumstances.
(Section Mark)24. WAIVER OF JURY TRIAL. The Company hereby waives its
right to a jury trial with respect to any action or claim arising out of
any dispute in connection with this Agreement, the Notes or any of the
other Loan Documents, any rights or obligations hereunder or thereunder
or the performance of such rights and obligations.
<PAGE>
-81-
IN WITNESS WHEREOF, the undersigned have duly executed this
Third Amended and Restated Credit Agreement under seal as of the date set
forth above.
(Corporate Seal) FIELDCREST CANNON, INC.
By:/s/ Clifford D. Paulsen
Title: Controller
THE FIRST NATIONAL BANK OF BOSTON,
as Agent
By:/s/ Mitchell B. Feldman
Title: Director
THE FIRST NATIONAL BANK OF BOSTON
By:/s/ Mitchell B. Feldman
Title: Director
CONTINENTAL BANK N.A., individually and
as Lead Manager
By:/s/ Margaret A. Detrick
Title: Vice President
PHILADELPHIA NATIONAL BANK,
individually and asLead Manager (incorporated
as CoreStates Bank, N. A.)
By:/s/ James P. Richards
Title: Vice President
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FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, individually and as
Lead Manager
By:/s/ Richard J. Rizzo
Title: Vice President
BANK OF MONTREAL
By:/s/ Michael Love
Title: Director
MELLON BANK, N.A.
By:/s/ James W. Emison
Title: Vice President
FIELDCREST CANNON, INC.
Inter-Office Correspondence
July 12, 1993
PERSONAL & CONFIDENTIAL
Mr. R. E. Dellinger
New York
RE: Employee Retention Agreement
Dear Bob:
Fieldcrest Cannon, Inc. (the "Company") recognizes that, as
is the case with many publicly-held corporations, the possibility
of a change in control may exist and that such possibility, and
the uncertainty and questions which it may raise among key
personnel, may result in the departure or distraction of key
personnel to the detriment of the Company, its stockholders and
its customers.
The Board of Directors of the Company (the "Board") has
determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of the
Company's key personnel, including yourself, to their assigned
duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control
of the Company.
In order to induce you to remain in its employ, the Company
agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement") in the event your
employment with the Company is terminated under the circumstances
described below subsequent to a "Change in Control" of the
Company (as defined below).
<PAGE>
1. Change in Control.
As used herein, the following terms shall have the
following respective meanings:
(a) A "Change in Control" shall occur or be deemed to
have occurred only if any of the following events occur:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (other than Dumaines Trust, Amoskeag
Company, a Delaware corporation ("Amoskeag"), or any
majority owned subsidiary thereof, the Company, any trustee
or other fiduciary holding securities under an employee
benefit plan of the Company, any trustee or other fiduciary
of a trust treated for federal income tax purposes as a
grantor trust of which the Company is the grantor, or any
corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportion as their
ownership of stock of the Company) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting
power of the Company's then outstanding securities or any
matter which could come before its stockholders for
approval; (ii) any "person" (other than the Dumaines Trust,
the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company,
any trustee or other fiduciary of a trust treated for
federal income tax purposes as a grantor trust of which
2
<PAGE>
the Company is the grantor, or any corporation owned directly
or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of
stock of the Company) is or becomes the "beneficial owner,"
directly or indirectly, of securities of Amoskeag
representing 30% or more of the combined voting power of
Amoskeag's then outstanding securities on any matter which
could come before its stockholders for approval, at any time
at which Amoskeag is the "beneficial owner," directly or
indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then
outstanding securities on any matter which could come before
the stockholders for approval; (iii) individuals who, as of
the date hereof, constitute the Board (as of the date
hereof, the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that
any person becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board (other
than an election or nomination of an individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of
the directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) shall be,
for purposes of this Agreement, considered as though such
person were a member of the
3
<PAGE>
Incumbent Board; (iv) the stockholders of the Company approve
a merger or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the
combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately
after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no "person"
(as hereinabove defined) acquires more than 30% of the
combined voting power of the Company's then outstanding
securities; or (v) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(b) A "Potential Change in Control" shall be deemed to
have occurred if:
(i) the Company enters in an agreement, the
consummation of which would result in the occurrence of
a Change in Control of the Company,
(ii) any person (including the Company) publicly
announces an intention to take or to consider taking
actions which, if consummated, would constitute a Change
4
<PAGE>
in Control of the Company; or
(iii) the Board of Directors of the Company adopts
a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control of the Company
has occurred.
2. Term of the Agreement.
The term of this Agreement (the "Term") shall commence
on July 9, 1993 and shall continue in effect through December 31,
1994; provided, however, that commencing on January 1, 1995 and
each January 1 thereafter, the Term shall be automatically
extended for one additional year unless, not later than September
30 of the preceding calendar year, the Company shall have given
you written notice that the Term will not be extended; and
provided further that, if a Change in Control of the Company
shall have occurred during the original or extended Term, this
Agreement shall continue in effect for a period of not less than
24 months beyond the month in which such Change in Control
occurred.
3. Change in Control; Potential Change in Control.
(a) No benefits shall be payable under this Agreement
unless there has been a Change in Control of the Company
during the Term.
(b) You agree that, notwithstanding any provision to
the contrary in this Agreement, in the event of a Potential
Change in Control of the Company, you will not voluntarily
resign as an employee of the Company until the earliest of
(A) a date which is six (6) months after the occurrence of
such Potential
5
<PAGE>
Change in Control of the Company or (B) the
termination by you of your employment by reason of
Disability as defined in Section 4(b)(i) or for Good Reason
as defined in Section 4(b)(iii).
4. Employment Status; Termination Following Change in
Control.
(a) You acknowledge that this Agreement does not
constitute a contract of employment or impose on the Company
any obligation to retain you as an employee and this
Agreement does not prevent you from terminating your
employment at any time except as provided in Section 3(b).
If your employment with the Company terminates for any
reason and subsequently a Change in Control shall have
occurred, you shall not be entitled to any benefits
hereunder. Any termination of your employment by the
Company or by you following a Change in Control of the
Company during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other
party hereto in accordance with Section 10. The "Date of
Termination" shall mean the effective date of such
termination as specified in the Notice of Termination
(provided that no such Notice of Termination shall specify
an effective date more than 180 days after the date of such
Notice of Termination).
(b) Notwithstanding anything to the contrary herein,
you shall be entitled to the benefits provided in Section 5
only if a Change in Control shall have occurred during the
Term and
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<PAGE>
your employment with the Company is subsequently
terminated or terminates within 24 months after such Change
in Control, unless such termination is (A) because of your
death, (B) by the Company for Disability [as defined in
Section 4(b)(i)] or Cause [as defined in Section 4(b)(ii)],
or (C) by you other than for Good Reason [as defined in
Section 4(b)(iii)].
(i) Disability. If, as a result of incapacity
due to physical or mental illness, you shall have been
absent from the full-time performance of your duties
with the Company for six (6) consecutive months and,
within thirty (30) days after written notice of
termination is given to you, you shall not have
returned to the full-time performance of your duties,
your employment may be terminated for "Disability."
Any termination for Disability under this Agreement
shall not affect any rights you may otherwise have
under the Company's Long-Term Disability Plan.
(ii) Cause. Termination by the Company of your
employment for "Cause" shall mean termination (A) upon
your willful and continued failure to substantially
perform your duties with the Company [other than any
such failure resulting from your incapacity due to
physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of
Termination by you for Good Reason as defined in
Section 4(b)(iii)], provided that a written demand for
substantial performance has
7
<PAGE>
been delivered to you by
the Company specifically identifying the manner in
which the Company believes that you have not
substantially performed your duties and you have not
cured such failure within 30 days after such demand,
(B) by reason of your willful misconduct which is
demonstrably and materially injurious to the Company or
(c) your conviction of a felony from which no appeal is
taken (or which is affirmed upon appeal). For purposes
of this subsection, no act or failure to act on your
part shall be deemed "willful" unless done or omitted
to be done by you not in good faith and without
reasonable belief that your action or omission was in
the best interest of the Company.
(iii) Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your written consent,
the occurrence after a Change in Control of the Company
of any of the following circumstances unless, in the
case of paragraphs (A), (C), (D), (F) or (G), such
circumstances are fully corrected prior to the Date of
Termination [as defined in Section 4(a)] specified in
the Notice of Termination [as defined in Section 4(a)]
given in respect thereof:
(A) the failure of the Company to continue
your employment in a senior executive position
which, in your reasonable judgment, has authority
and
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<PAGE>
responsibility comparable to your authority
and responsibility with the Company immediately
preceding the date of a Change in Control or at
any time thereafter; the assignment to you of any
duties or responsibilities which, in your
reasonable judgment are inconsistent with your
authority or responsibility with the Company
preceding the date of a Change in Control or at
any time thereafter; or any removal of you from
such authority or responsibility, except in
connection with the termination of your employment
for Disability, Cause, as a result of your death
or by you other than for Good Reason;
(B) any reduction in your annual base salary
as in effect on the date hereof or as the same may
be increased from time to time;
(C) the failure of the Company to continue
in effect any material compensation or benefit
plan in which you participate immediately prior to
the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to
such plan, or the failure by the Company to
continue your participation therein (or in such
substitute or alternative plan) on a basis not
materially less favorable, both in terms of the
amount of benefits provided and the level of your
participation
9
<PAGE>
relative to other participants, as
existed at the time of the Change in Control or
the failure by the Company to award cash bonuses
to its executives in amounts substantially
consistent with past practice in light of the
Company's financial performance;
(D) the failure by the Company to continue
to provide you with benefits substantially similar
to those enjoyed by you under any of the Company's
life insurance, medical, health and accident, or
disability plans in which you were participating
at the time of the Change in Control, the taking
of any action by the Company which would directly
or indirectly materially reduce any of such
benefits, or the failure by the Company to provide
you with the number of paid vacation days to which
you are entitled on the basis of years of service
with the Company in accordance with the Company's
normal vacation policy in effect at the time of
the Change in Control;
(E) the failure of the Company to obtain a
satisfactory agreement from any successor to
assume and agree to perform the Agreement, as
contemplated in Section 8; or
(F) any purported termination of your
employment which is not effected pursuant to a
Notice of Termination satisfying the requirements
10
<PAGE>
of Section 10, which purported termination shall
not be effective for purposes of this Agreement.
5. Compensation Upon Termination; Vesting of Stock.
Following a Change in Control of the Company, you shall
be entitled to the following benefits during a period of
disability, or upon termination of your employment, as the case
may be, provided that such period or termination occurs during
the Term; provided, however, that the vesting set forth in
Subsection 5(d) shall be required as of the occurrence of a
Change in Control regardless of whether your employment
terminates during the Term and regardless of the reason for the
termination of employment:
(a) During any period that you fail to perform your
full-time duties with the Company as a result of incapacity
due to physical or mental illness, you shall continue to
receive base salary and all other earned compensation at the
rate in effect at the commencement of any such period
(offset by all compensation payable to you under the
Company's disability plan or program or other similar plan
during such period) until your employment is terminated
pursuant to Section 4(b)(i) hereof. Thereafter, or in the
event your employment is terminated by reason of death, your
benefits shall be determined under the Company's long-term
disability, retirement, insurance and other compensation
programs then in effect in accordance with the terms of such
programs.
(b) If your employment shall be terminated by the
Company for Cause or by you other than for Good Reason
11
<PAGE>
following Change in Control, the Company shall pay you your
full base salary and all other compensation through the Date
of Termination at the rate in effect at the time the Notice
of Termination is given, plus all other amounts to which you
are entitled under any employment contract with the Company
or under any compensation plan of the Company at the time
such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(c) If your employment with the Company is terminated
by the Company (other than for Cause, Disability or your
death) or by you for Good Reason within 24 months after
Change in Control, then you shall be entitled to the
benefits below:
(i) the Company shall pay to you (A) your full
base salary and all other compensation through the Date
of Termination at the rate in effect at the time the
Notice of Termination is given, no later than the full
fifth day following the Date of Termination, plus all
other amounts to which you are entitled under any
compensation plan of the Company at the time such
payments are due, (B) if you so elect, in lieu of your
right to continue to receive deferred compensation
under any deferred compensation plan of the Company
then in effect, no later than the fifth full day
following the Date of Termination, a lump-
12
<PAGE>
sum amount,
in cash, equal to the deferred amounts together with
any earnings credited on such amounts under such plan
and (C) if you so elect, in lieu of your right to
continued payments under any employment contract with
the Company, no later than the fifth full day following
the Date of Termination, a lump-sum amount, in cash,
equal to the total of such continued payments;
(ii) the Company shall pay as severance pay to
you, at the time specified in Subsection (e) below, a
lump-sum severance payment (together with the payments
provided in paragraph (iv) below) (the "Severance
Payments") in an amount equal to 300% of your highest
annual base salary in effect during the three-year
period ending the Date of Termination, offset by the
amount, if any, which you are entitled to receive as
severance benefits under any employment contract
between the Company and you;
(iii) the Company shall pay to you all legal fees
and expenses incurred by you as a result of such
termination (including all such fees and expenses, if
any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement or in
connection with any tax audit or proceeding to the
extent attributable to the application of Section 4999
of the Internal Revenue Code of 1986, as amended (the
"Code") to any payment or benefit provided hereunder);
13
<PAGE>
(iv) for a period of twelve (12) months after your
Date of Termination, the Company shall arrange to
provide you with life, disability, dental, accident and
group health insurance benefits substantially similar
to those which you were receiving immediately prior to
the Notice of Termination. Notwithstanding the
foregoing, the Company shall not provide any benefit
otherwise receivable by you pursuant to this paragraph
(iv) if an equivalent benefit is actually received by
you prior to the end of such 12 month period, and any
such benefit actually received by you shall be reported
to the Company; and
(v) you shall be entitled to any benefits or
payments to which you may be entitled under any other
plan or program of the Company in which you are a
participant at the time of your termination.
(d) As of the occurrence of the Change in Control you
shall become vested in any shares of the Company awarded to
you under the Long-Term Incentive Plan of the Company and
not previously vested, or in any additional shares or
substitute shares issued to reflect a change in the shares
of Common Stock of the Company or a stock dividend or stock
split distributable in shares of common stock of the Company
or a change in capital structure of the Company, all as
provided in Section 16 of the Long-Term Incentive Plan.
(e) The payments provided for in Subsections 5(b) and
14
<PAGE>
(c) shall be made not later than the fifth day following the
Date of Termination; provided, however, that, if the amounts
of such payments cannot be finally determined on or before
such day, the Company shall pay to you on such day an
estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder
of such payments (together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code)
as soon as the amount thereof can be determined but in no
event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company
to you, payable on the fifth day after demand by the Company
(together with interest at the applicable federal rate
provided in Section 7872(f)(2) of the Code).
(f) Except as provided in the second sentence of
Subsection 5(c)(iv) hereof, you shall not be required to
mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in
this Section 5 be reduced by any compensation earned by you
as a result of employment by another employer, by retirement
benefits or by offset against any amount claimed to be owed
by you to the Company or otherwise.
15
<PAGE>
6. Excise Tax Limitation.
(a) Notwithstanding anything in this Agreement to the
contrary, in the event it shall be determined that any
payment or distribution by the Company to or for your
benefit (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be nondeductible by the
Company for federal income tax purposes because of Section
280G of the Code, then the aggregate present value of
amounts payable or distributable to you or for your benefit
pursuant to this Agreement (such payments or distributions
pursuant to this Agreement are hereinafter referred to as
"Total Payments") shall be reduced to the Reduced Amount.
The "Reduced Amount" shall be an amount expressed in present
value which maximizes the aggregate present value of Total
Payments without causing any Payment to be nondeductible by
the Company because of Section 280G of the Code. For
purposes of this Section 6, present value shall be
determined in accordance with Section 280G(d)(4) of the
Code.
(b) All determinations required to be made under this
Section 6 shall be made by the Company's independent public
accountants (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the
employee. Any such determination by the Accounting Firm
shall be binding upon the Company and the employee.
(c) As a result of the uncertainty in the application of
16
<PAGE>
Section 280G of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is
possible that Payments will have been made by the Company
which should not have been made ("Overpayment") or that the
additional Payments which will not have been made by the
Company could have been made ("Underpayment"), in each case,
consistent with the calculations required to be made
hereunder. In the event that the Accounting Firm, based
upon the assertion of a deficiency by the Internal Revenue
Service against the employee which the Accounting Firm
believes has a high probability of success determines that
an Overpayment has been made, any such Overpayment paid or
distributed by the Company to or for the benefit of the
employee shall be treated for all purposes as a loan ab
initio to the employee which the employee shall repay to the
Company together with interest at the applicable federal
rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have
been made and no amount shall be payable by the employee to
the Company if and to the extent such deemed loan and
payment would not either reduce the amount on which the
employee is subject to tax under Section 1 and Section 4999
of the Code or generate a refund of such taxes. In the
event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
employee together
17
<PAGE>
with interest at the applicable federal
rate provided for in Section 7872(f)(2) of the Code.
7. Sale of Division.
If the Company sells substantially all of its business
assets to an entity (the "Purchaser") which is not controlled by
Dumaines Trust or Amoskeag, you will be entitled to receive the
Change in Control Severance Benefits on the effective date of
such sale. In determining such benefits, the hospitalization or
medical reimbursement plan in effect immediately preceding such
effective date shall be continued in effect without change
(except any change that may be mandated by law) for the period
for which you are entitled to coverage. Notwithstanding the
foregoing, the Change in Control Severance Benefits shall not be
payable if you enter the employment of the Purchaser, or if you
fail to enter such employment but the Purchaser offers you the
following: (i) employment in a senior executive position having
authority and responsibility comparable to your authority and
responsibility with the Company immediately preceding the sale,
and (ii) compensation and benefits at least as great as provided
to you by the Company immediately preceding the sale, including
without limitation severance benefits in the event of your
termination of employment with the Purchaser at least as great as
herein provided (but not conditioned on a change in control of
the Purchaser). Notwithstanding the preceding sentence, the
vesting set forth in Subsection 5(d) shall be required on the
effective date of the sale, regardless of any subsequent events.
For the purpose of
18
<PAGE>
determining whether the Purchaser is
controlled by Dumaines Trust or Amoskeag, control shall mean the
ownership of voting rights sufficient to elect at least a
majority of the members of the Board of Directors of the
Purchaser.
8. Waiver of Claims
Notwithstanding any provisions of this Agreement to the
contrary, no payments shall be made to you under Section 5(c)
unless and until you shall have waived and released all claims
which you may have against the Company as of the date of
execution of the waiver and release, including, without
limitation, claims under the Age Discrimination in Employment
Act, but excluding claims for benefits under this Agreement or
claims under any employee benefit plan maintained by the Company.
9. Successors; Binding Agreement.
(a) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or
assets of the Company expressly to assume and agree to
perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had
taken place. Failure of the Company to obtain an assumption
of this Agreement prior to the effectiveness of any
succession shall be a breach of this Agreement and shall
entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled
hereunder if you had terminated your employment for Good
Reason immediately after
19
<PAGE>
a Change in Control of the Company,
except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(b) This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or if there is no
such designee, to your estate.
10. Notice.
For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in
writing and shall be duly given when delivered or when mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the General Counsel of
the Company, at 326 East Stadium Drive, Eden, North Carolina, and
to you at the address shown below or to such other address as
either the Company or you may have furnished to the other in
writing in accordance herewith, except that notice of change of
address shall be
20
<PAGE>
effective only upon receipt.
11. Miscellaneous.
(a) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
(b) The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws
of the State of North Carolina.
(c) No waiver by you at any time of any breach of, or
compliance with, any provision of this Agreement to be
performed by the Company shall be deemed a waiver of that or
any other provision at any subsequent time.
(d) This Agreement may be executed in several
counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and
the same instrument.
(e) Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal,
state or local law.
(f) This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto;
and any prior agreement
21
<PAGE>
of the parties hereto in respect of
the subject matter contained herein is hereby terminated and
cancelled.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company this letter,
which will then constitute our agreement on this subject.
Sincerely,
FIELDCREST CANNON, INC.
By: /s/ James M. Fitzgibbons
James M. Fitzgibbons
Chairman and Chief
Executive Officer
Agreed to this 13th day
of July, 1993.
/s/ Robert E. Dellinger
(Signature)
Robert E. Dellinger
Print Name
Address:
14 Joanna Way
Summit, NJ 07901
22
FIELDCREST CANNON, INC.
KANNAPOLIS, NORTH CAROLINA 28081
July 29, 1993
Mr. R. E. Dellinger
New York
RE: Amendment to Employee Retention Agreement
Dear Bob:
You and Fieldcrest Cannon, Inc. (the "Company") entered into
an Employee Retention Agreement effective July 9, 1993. The
Company now deems it appropriate to amend Subsection 5(c) of the
Employee Retention Agreement by deleting the phrase "or if your
employment with the Company is terminated by you or the Company
for any reason (other than your death, Disability or Retirement)
within six (6) months after a Change in Control" therefrom. For
good and adequate consideration, the receipt of which is hereby
acknowledged, you agree to the foregoing amendment. Kindly sign
and return to the Company this letter, which will then constitute
our agreement on this subject.
Sincerely,
FIELDCREST CANNON, INC.
By: /s/ James M. Fitzgibbons
Chairman and Chief
Executive Officer
Agreed to this 30th day of
July, 1993:
/s/ R. E. Dellinger
Signature
R. E. Dellinger
Print Name
Address:
14 Joanna Way
Summit, NJ 07901
Exhibit 11
Computation of Primary and Fully Diluted Net Income (Loss) Per Share
For the three months For the twelve months
ended December 31 ended December 31
1993 1992 1993 1992
Average shares outstanding 10,665,320 11,974,055 11,709,355 11,233,615
Add shares assuming exercise of
options reduced by the number
of shares which could have been
purchased with the proceeds from
exercise of such options 20,779 11,823 23,150 11,846
Average shares and equivalents
outstanding, primary 10,686,099 11,985,878 11,732,505 11,256,461
Average shares outstanding 10,665,320 11,974,055 11,709,355 11,244,615
Add shares giving effect to
the conversion of the
convertible subordinated
debentures 2,824,859 2,824,859 (1) 2,824,859
Add shares giving effect to the
conversion of the convertible
preferred stock 1,054,131 - (1) -
Add shares assuming exercise of
options reduced by the number of
shares which could have been
purchased with the proceeds from
exercise of such option 20,111 12,741 23,921 13,204
Average shares and equivalents
outstanding, assuming full
dilution 14,564,421 14,811,655 11,733,276 14,082,678
Primary Earnings
Income from continuing operations
before extraordinary charge
and accounting changes $ 8,670,000 $ 5,801,000 $14,966,000 $15,690,000
Income from discontinued
operations - 2,026,000 3,201,000 4,739,000
Gain from disposition of
discontinued operations - - 9,207,000 -
Extraordinary charge - - - (5,179,000)
Cumulative effect of accounting
changes - - (70,305,000) -
Net income (loss) $ 8,670,000 $ 7,827,000 $(42,931,000) $15,250,000
Preferred dividends (463,000) - (463,000) -
Earnings (loss) on Common $ 8,207,000 $ 7,827,000 $(43,394,000) $15,250,000
Page 130
<PAGE>
Computation of Primary and Fully Diluted Net Income (Loss) Per Share
(continued)
For the three months For the twelve months
ended December 31 ended December 31
1993 1992 1993 1992
Primary earnings (loss) per share
Income from continuing operations
before extraordinary charge
and accounting changes $ .77 $ .48 $ 1.24 $ 1.39
Income from discontinued
operations - .17 .27 .42
Gain from disposition of
discontinued operations - - .78 -
Extraordinary charge - - - (.46)
Cumulative effect of accounting
changes - - (5.99) -
Net income (loss) $ .77 $ .65 $ (3.70) $ 1.35
Fully Diluted Earnings
Income from continuing operations
before extraordinary charge
and accounting change $ 8,207,000 $ 7,827,000 $ 14,503,000 $15,690,000
Add convertible subordinated
debenture interest, net of
taxes 1,144,000 1,163,000 (1) 4,650,000
Add convertible preferred
dividends 463,000 - (1) -
Income from continuing operations
before extraordinary charge and
accounting changes as
adjusted 9,814,000 6,964,000 14,503,000 20,340,000
Income from discontinued
operations - 2,026,000 3,201,000 4,739,000
Gain from disposition of
discontinued operations - - 9,207,000 -
Income before extraordinary charge
and accounting changes 9,814,000 8,990,000 26,911,000 25,079,000
Extraordinary charge - - - (5,179,000)
Cumulative effect of accounting
changes - - (70,305,000) -
Net income (loss) $ 9,814,000 $ 8,990,000 $(43,394,000) $19,900,000
Page 131
<PAGE>
Exhibit 11
Computation of Primary and Fully Diluted Net Income (Loss) Per Share
(continued)
For the three months For the twelve months
ended December 31 ended December 31
1993 1992 1993 1992
Fully diluted earnings (loss)
per share
Income before extraordinary charge
and accounting change $ .67 $ .61 (2) $ 1.78
Extraordinary charge - - - (2)
Cumulative effect of accounting
change - - (2) -
Net income (loss) $ .67 $ .61 (2) $ (2)
(1) The assumed conversion of the Registrant's Convertible Subordinated
Debentures and Convertible Preferred Stock for the twelve months ended
December 31, 1993 would have an anti-dilutive effect for the computation
of earnings per share; therefore conversion has not been assumed for these
periods.
(2) Fully diluted net income per share for the twelve months ended December
31, 1993 and 1992 are not presented as effects are anti-dilutive.
Page 132
<PAGE>
Fieldcrest Cannon, Inc.
Management's discussion and analysis
Results of
operations
The following summary income statement from continuing operations sets forth the
percentage relationship that certain costs and expenses and other items in the
income statement bear to net sales (dollars in millions).
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,000.1 100.0 % $981.8 100.0 % $960.6 100.0 %
Cost of sales 834.7 83.5 818.7 83.4 828.6 86.3
Selling, general and administrative 101.8 10.2 102.2 10.4 92.4 9.6
Restructuring charges 10.0 1.0 -- -- -- --
Operating income 53.6 5.3 60.9 6.2 39.6 4.1
Interest expense 27.7 2.7 34.1 3.5 37.0 3.8
Other (income) expense, net (1.0) (.1) .2 -- (1.0 ) (.1)
Income from continuing operations before
income taxes, extraordinary charge and
accounting changes 26.9 2.7 26.6 2.7 3.6 .4
Federal and state income taxes 11.9 1.2 10.9 1.1 2.2 .3
Income from continuing operations before
extraordinary charge and accounting
changes $ 15.0 1.5 % $15.7 1.6 % $ 1.4 .1 %
</TABLE>
1993 compared
to 1992
Net sales from continuing operations in 1993 increased to $1,000.1 million in
1993, compared to $981.8 million in 1992. The 1.9% increase was due primarily to
increased volume. Although there were some improvements in sales mix, average
selling prices in 1993 were lower than 1992.
Operating income as a percent of sales was 5.3% in 1993 compared to 6.2% in
1992. Operating income was reduced 1.0% in 1993 due to $10 million of
restructuring charges and .2% in 1992 by $2 million of nonrecurring items (see
Note 4 of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS). Before these
adjustments operating income as a percent of sales was 6.3% in 1993 compared to
6.4% in 1992. Despite the increase in sales volume, operating income has not
risen due to continued competitive pressures on selling prices.
Selling, general and administrative expenses as a percent of sales decreased
from 10.4% in 1992 to 10.2% in 1993. The 1992 expenses include $2 million of
costs related to the consolidation of certain sales offices in New York City.
Without these costs, selling, general and administrative expenses as a percent
of sales during 1992 and 1993 would have been approximately the same.
Interest expense decreased $6.4 million in 1993 due primarily to a reduction of
debt with the proceeds from the sale of the carpet and rug division in July 1993
and the redemption of the 13.5% Debentures in July 1992 with the proceeds from
the sale of 1.5 million shares of Common Stock and $85 million of 11.25%
Debentures.
11
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Management's discussion and analysis
1993 compared
to 1992
continued
The effective income tax rate was 44.3% in 1993, compared to 41.0% in 1992. The
increase in the effective income tax rate is due primarily to the increase in
the federal statutory income tax rate from 34% to 35% and a related $1.4 million
non-cash expense to adjust existing deferred tax balances arising from
differences in the book and tax bases of the Company's assets and liabilities.
See Note 14 of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Income from continuing operations before accounting changes was $15.0 million or
$1.24 per share in 1993 compared to $15.7 million or $1.39 per share in 1992.
Income from the discontinued carpet and rug division was $3.2 million or $.27
per share in 1993 compared to $4.7 million or $.42 per share in 1992. The carpet
and rug division was sold in July 1993 and a $15.1 pre-tax gain on the
disposition increased net income $9.2 million or $.78 per share. The Company
adopted FAS 106, "Employers' Accounting for Postretirement Benefits other than
Pensions" and FAS 109, "Accounting for Income Taxes", effective January 1, 1993.
The cumulative effect of these accounting changes reduced 1993 net income by
$70.3 million or $5.99 per share. After the effect of accounting changes a net
loss of $42.9 million, or $3.70 per share, was incurred in 1993.
Significant changes in the Company's capital structure occurred during 1993 as a
result of the sale of the carpet and rug division, the issuance of 1.5 million
shares of convertible preferred stock and the acquisition of 3.6 million shares
of the Company's common stock with the purchase of Amoskeag Company. Assuming
that all of these transactions had occurred as of the beginning of 1993 and
excluding the nonrecurring restructuring charges and income tax adjustment
referred to above, proforma 1993 income from continuing operations was $2.15 per
common share. For additional information see Note 11 of the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
1992 compared
to 1991
Net sales from continuing operations in 1992 increased to $981.8 million,
compared to $960.6 million in 1991. This improvement in bed and bath product
sales represents a 2.2% increase over 1991 sales.
Operating income as a percent of sales increased to 6.2% compared to 4.1% in
1991.
Higher operating income in the bed and bath division resulted principally from
lower cotton costs, increased sales volume and related higher mill activity
levels. Results for 1992 includes a $3.5 million pre-tax charge to provide for
the cost of closing and disposing of a towel manufacturing facility in York,
South Carolina. Production from this facility has been transferred to other
Company towel plants without a reduction in overall towel production capacity.
The Company also recognized a $1.5 million pre-tax credit in 1992 from the
adjustment of reserves established in 1990 for discontinuing the automatic
blanket operations which were no longer required. The combined effect of the two
non-recurring items reduced operating income by $2.0 million and net income by
$1.2 million, or $.11 per share. An increase in wages and other cost increases
were partially offset by savings realized from the Company's cost reduction
efforts.
Selling, general and administrative expenses as a percent of sales increased
from 9.6% in 1991 to 10.4% in 1992. The increase was due primarily to higher
selling expenses experienced during 1992 including $2 million of costs related
to the consolidation of certain sales offices in New York City.
Interest expense decreased $2.8 million in 1992 due primarily to the redemption
of the 13.5% Debentures on July 10, 1992 with the proceeds from the sale of both
1.5 million shares of Common Stock at $17.75 per share and $85 million of 11.25%
Debentures. Interest expense was also reduced by the repayment of other debt
with cash flows from operating activities.
The effective income tax rate was 41.0% in 1992, compared to 61.0% in 1991. The
decrease in the effective income tax rate is due primarily to basis adjustments
in acquired companies which do not change with increases or decreases in pre-tax
income. For additional information see Note 14 of the NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
Income from continuing operations before extraordinary charge was $15.7 million
or $1.39 per share in 1992 compared to $1.4 million or $.13 per share in 1991.
Income from the discontinued carpet and rug division was $4.7 million or $.42
per share in 1992 compared to $1.8 million or $.17 per share in 1991. A
prepayment premium of $5.4 million on the early retirement of the Company's
13.5% Debentures and the write-off of approximately $3.0 million of deferred
financing
12
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Management's discussion and analysis
1992 compared
to 1991
continued
costs related to the Debentures and the old revolving credit facility resulted
in an after-tax extraordinary charge of $5.2 million, or $.46 per share. Net
income after discontinued operations and the extraordinary charge was $15.2
million, or $1.35 per share.
Liquidity and
capital resources
The Company's primary capital requirements
are for working capital, principally inventory and accounts receivable, and
capital expenditures. The Company historically has financed these requirements,
including its working capital requirements which follow a seasonal pattern, with
funds generated from its operations and through borrowings under its revolving
credit agreements.
The table below summarizes for the continuing business of the Company cash
provided by operating and financing activities and cash used for additions to
plant and equipment.
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
<S> <C> <C>
Cash provided by:
Net income (loss) $ (42,931) $ 15,250
Cumulative effect of
accounting changes 70,305 --
Extraordinary charge from
early retirement of debt -- 5,179
(Income) from discontinued
operations (12,408) (4,739)
Depreciation and
amortization 31,539 31,370
Deferred income taxes 2,329 4,826
Working capital (53,300) 6,306
Other 1,726 (2,348)
Financing activities (119,309) (55,907)
Total cash provided (used) (122,049) (63)
Cash used for:
Additions to plant and
equipment 21,594 20,687
Other, including sale of
plant and equipment (12,621) (3,955)
Total cash used 8,973 16,732
Increase (decrease)
in cash from continuing
operations (131,022) (16,795)
Cash provided by
discontinued operations 130,222 12,122
Increase (decrease)
in cash $ (800) $ (4,673)
</TABLE>
Working capital requirements increased in 1993 primarily because accounts
receivables increased $13.1 million, inventories increased by $10.6 million and
the $32.5 million of assets held for sale acquired with Amoskeag. Cash provided
by working capital increased in 1992 primarily because accounts receivables
decreased $10.8 million and accounts payable and accrued liabilities increased
by $1.0 million.
On November 24, 1993 the Company completed a tender offer for all of the
outstanding shares of Amoskeag Company ("Amoskeag") for an aggregate of
approximately $141.7 million. The purchase was financed with $72.4 million of
net proceeds from the issuance of 1.5 million shares of $3.00 Convertible
Preferred Stock and the balance with borrowings under the Company's revolving
credit facility. The preferred stock has an annual dividend requirement of $4.5
million. Amoskeag owned 3,606,400 shares of the Company's common stock which has
been assigned a cost of $117.2 million and treated as the purchase of treasury
stock. The remaining assets of Amoskeag have been valued at their net realizable
value. At December 31, 1993, such assets held for sale totalled $32.5 million
and are expected to be a source of cash during 1994.
Total debt as a percent of total capitalization (long-term debt, short-term debt
and shareowners' equity) was 61% at December 31, 1993, compared to 57% at the
end of 1992.
Capital expenditures totalled $21.6 million in 1993 compared to $20.7 million
spent in 1992. The Company also entered into operating lease agreements with a
financial institution for certain new manufacturing and warehouse equipment
having a fair market value of approximately $8 million in 1993 and $9 million in
1992. Capital expenditures for 1994 are expected to be approximately $50
million. Included in the 1994 expenditures is the start of a three-year $90
million capital project for a new weaving plant at the Company's Columbus,
Ga./Phoenix City, Ala. towel mill. It is anticipated that financing of future
capital expenditures will be provided by cash flows from operations, borrowings
under the Company's revolving credit facility, and, possibly, the sale of
long-term debt or equity securities.
13
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Management's discussion and analysis
Liquidity and
capital resources
continued
The Company's revolving credit facility allows the Company to borrow up to $150
million through January 3, 1996. The Company elected to reduce the facility to
$150 million from $235 million in November 1993 because of reduced borrowing
requirements. The Company uses its revolving credit facility for long-term debt
purposes and its seasonal borrowing requirements during the year. Short-term
borrowings are required during the year to finance seasonal increases in
inventories and receivables. The Company has a program to hedge a portion of its
exposure to changes in the cost of its variable rate debt with the use of
interest rate instruments. For additional information, see Note 8 of the NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
At December 31, 1993, the revolving credit facility was secured by a first lien
on substantially all of the Company's assets and bore interest, at the Company's
option, at the prime rate fixed by The First National Bank of Boston plus 1%, or
at a Euromarket-based rate plus 2.5%. In March 1994 the revolving credit
facility was amended to reduce the interest rate on borrowings, at the Company's
option, to the prime rate fixed by the First National Bank of Boston, or at a
Euromarket-based rate plus 1%. The amendment also extended the facility through
January 6, 1998 and removed the lien on the Company's plant and equipment.
The revolving credit facility requires, among other things, that the Company
maintain certain financial ratios with regard to working capital, interest
coverage, funded debt and net worth. It also limits the amount of dividends that
may be paid by the Company during any twelve-month period to the lesser of 40%
of the Company's net income during the immediately preceding twelve months or
$15 million and contains additional financial covenants which may further
restrict the ability of the Company to pay dividends. The agreement places
restrictions on the Company's ability to incur debt or liens, to make certain
investments and to effect certain mergers, consolidations or sales of assets or
changes in control.
At December 31, 1993, borrowings under the $150 million revolving term debt
agreement totalled $76.4 million and $73.6 million of the facility was available
and unused.
As of December 31, 1993 the Company lowered its discount rate from 8.25% to
7.25% for valuing its accumulated pension benefit obligations under FAS 87,
"Employers' Accounting for Pensions" and its accumulated postretirement health
care and life insurance benefit obligations under FAS 106, "Employers'
Accounting for Postretirement Benefits other than Pensions". The lower discount
rate of 7.25% results in a higher value for the calculated obligations and will
result in higher expenses in 1994 than would have been provided with the
previous 8.25% discount rate. The increase in expense is not expected to
materially effect the Company's future operating results or financial condition.
Market and
dividend data
The Company's Common Stock is listed on the New York Stock Exchange (trading
symbol: FLD). At December 31, 1993, there were 2,401 shareholders of record of
Common Stock. See Note 8 of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
regarding restrictions on the payment of dividends. No dividends were paid
during the last two years. The high and low sale prices on the New York Stock
Exchange composite tape for the last two years were as shown:
<TABLE>
<CAPTION>
Market price Common Stock
Quarter, 1993 High Low
<S> <C> <C>
1st $27 $ 18 1/8
2nd 29 1/8 22
3rd 27 5/8 19 1/2
4th 27 1/2 23 3/4
Quarter, 1992
1st $20 $ 11 7/8
2nd 22 1/8 16 3/4
3rd 20 1/2 17
4th 19 3/8 15 5/8
</TABLE>
14
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Management's discussion and analysis
Quarterly data
(Unaudited)
Data in millions, except per share information
<TABLE>
<CAPTION>
1993 quarter ended March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Net sales $203.9 $256.5 $256.7 $282.9
Gross profit 36.9 39.3 43.0 46.3
Operating income 11.9 14.0 7.5 20.2
Income (loss) from continuing operations before
accounting changes 2.7 4.1 (.5) 8.7
Income and gain on sale from discontinued operations 1.0 3.0 8.4 --
Cumulative effect of accounting changes (70.3) -- -- --
Net income (loss) (66.6) 7.1 7.9 8.7
Primary earnings (loss) per share from continuing
operations before accounting changes .22 .34 (.04) .77
Primary earnings per share from discontinued
operations .09 .25 .69 --
Primary earnings (loss) per share from cumulative
effect of accounting changes (5.86) -- -- --
Primary earnings per share (5.55) .59 .65 .77
Fully diluted earnings per share -- .55 .60 .67
<CAPTION>
1992 quarter ended March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Net sales $212.4 $255.3 $243.2 $270.9
Gross profit 33.9 40.0 43.8 45.3
Operating income 8.8 16.3 18.3 17.5
Income (loss) from continuing operations before
extraordinary charge (.1) 4.2 5.8 5.8
Income from discontinued operations .7 1.2 .8 2.0
Extraordinary charge-early retirement of debt -- (5.2 ) -- --
Net income .6 .2 6.6 7.8
Primary earnings per share from continuing operations
before extraordinary charge -- .39 .48 .48
Primary earnings per share from discontinued
operations .06 .12 .07 .17
Primary earnings per share from extraordinary
charge-early retirement of debt -- (.49 ) -- --
Primary earnings per share .06 .02 .55 .65
Fully diluted earnings per share .06 -- .52 .61
</TABLE>
Quarterly earnings per share amounts presented do not equal the annual earnings
per share amount due to the purchase of treasury shares during 1993 and the
issuance of shares during 1992.
The first quarter of 1993 includes the cumulative effect of the changes in
accounting principles related to the Company's accounting for income taxes and
post-retirement benefits other than pensions, effective January 1, 1993, which
reduced net income by $70.3 million or $5.86 per share. Fully diluted earnings
per share are not presented for the quarter as the effects are anti-dilutive.
15
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Management's discussion and analysis
Quarterly data
(Unaudited)
continued
The third quarter of 1993 includes restructuring charges of $10 million which
reduced after-tax income from continuing operations by $6.1 million and $1.4
million of additional income taxes due to the increase in the statutory federal
income tax rate. These items reduced income from continuing operations and net
income by $7.5 million, or $.62 per share. Discontinued operations for the third
quarter of 1993 includes a gain from disposition of the carpet and rug division
which increased income by $9.2 million, or $.76 per primary share.
The second quarter of 1992 included an extraordinary charge for early retirement
of debt which reduced net income for the quarter by $5.2 million, or $.49 per
primary share. Fully diluted earnings per share for the quarter are not
presented as effects are anti-dilutive.
The fourth quarter of 1992 included a $3.5 million pre-tax charge for closing
and disposing of a towel manufacturing facility and a $1.5 million pre-tax
credit from adjustment of reserves established in 1990 for discontinuing the
automatic blanket operations which were no longer required. The combined effect
of the two non-recurring items reduced net income for the quarter by $1.2
million, or $.10 per share.
16
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Consolidated statement of income and retained earnings
For the years ended December 31
Dollars in thousands, except per share data
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C> <C>
Revenues
Net sales $ 1,000,107 $ 981,773 $ 960,663
Cost of sales (notes 4, 5) 834,701 818,729 828,634
Selling, general and administrative 101,843 102,189 92,416
Restructuring charges (note 4) 10,000 -- --
Total operating costs and expenses 946,544 920,918 921,050
Operating income 53,563 60,855 39,613
Other deductions (income)
Interest expense 27,659 34,149 36,998
Other, net (975) 130 (959)
Total other deductions 26,684 34,279 36,039
Income before income taxes 26,879 26,576 3,574
Federal and state income taxes (note 14) 11,913 10,886 2,179
Net income (loss)
and retained
earnings Income from continuing operations before extraordinary
charge and accounting changes 14,966 15,690 1,395
Income from discontinued operations 3,201 4,739 1,770
Gain from disposition of discontinued operations 9,207 -- --
Extraordinary charge -- early retirement of debt -- (5,179) --
Cumulative effect of accounting changes (70,305) -- --
Net income (loss) (42,931) 15,250 3,165
Preferred dividends (463) -- --
Earnings (loss) on common $ (43,394) $ 15,250 $ 3,165
Amount added to (subtracted from) retained earnings (43,394) 15,250 3,165
Retained earnings, January 1 136,429 121,179 118,014
Retained earnings, December 31 $ 93,035 $ 136,429 $ 121,179
Income (loss) per common
share Primary from continuing operations before
extraordinary charge and accounting changes $ 1.24 $ 1.39 $ .13
Income from discontinued operations .27 .42 .17
Gain from disposition of discontinued operations .78 -- --
Extraordinary charge -- (.46) --
Cumulative effect of accounting changes (5.99) -- --
Primary earnings per common share $ (3.70) $ 1.35 $ .30
Fully diluted before extraordinary charge (note 1) $ -- $ 1.78 $ .30
Fully diluted after extraordinary charge and accounting
changes (note 1) $ -- $ -- $ .30
Average primary shares outstanding (note 1) 11,732,505 11,256,461 10,422,810
Average fully diluted shares outstanding (note 1) 11,733,276 14,082,678 10,423,490
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
17
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Consolidated statement of financial position
At December 31,
Dollars in thousands
<TABLE>
<CAPTION>
1993
<S> <C> <C>
Assets
Current assets
Cash $ 3,865
Accounts receivable less allowances of $12,161 in 1993 and
$15,942 in 1992, principally trade 164,419
Inventories (note 5) 209,834
Deferred tax assets --
Net assets held for sale 32,536
Other prepaid expenses and current assets 2,491
Total current assets 413,145
Other assets
Plant and equipment, net (notes 6, 9) 294,277
Deferred charges and other assets 33,024
Total assets $ 740,446
Liabilities and shareowners' equity
Current liabilities
Accounts and drafts payable $ 61,365
Federal and state income taxes 262
Deferred income taxes 14,799
Accrued liabilities (note 7) 65,996
Short-term debt (note 8) --
Current portion of long-term debt 8,397
Total current liabilities 150,819
Non-current
liabilities
Senior long-term debt (note 8) 84,611
Subordinated long-term debt (note 8) 210,000
Total long-term debt 294,611
Deferred income taxes 35,182
Other non-current liabilities 66,504
Total non-current liabilities 396,297
Total liabilities 547,116
Commitments (notes 9, 12, 13)
Shareowners' equity
Preferred Stock, $.01 par value (note 10)
Shares authorized: 10,000,000
Shares issued, 1993: 1,500,000
(aggregate liquidation preference of $75,000) 15
Common Stock, $1 par value (note 10)
Shares authorized: 25,000,000
Shares issued, 1993: 12,186,167 12,186
Shares issued, 1992: 8,338,941
Class B Common Stock, $1 par value (note 10)
Shares authorized: 15,000,000
Shares issued, 1992: 3,635,114 --
Additional paid in capital 212,799
Minimum pension liability adjustment (7,480)
Retained earnings 93,035
Excess purchase price for Common Stock acquired
and held in treasury -- 3,606,400 shares (117,225)
Total shareowners' equity 193,330
Total liabilities and shareowners' equity $ 740,446
<CAPTION>
1992
<S> <<C>
$ 4,665
Current assets
181,056
244,321
23,202
--
7,303
460,547
372,432
Other assets
31,012
$863,991
$ 69,399
Current liabilities
3,627
--
66,592
14,056
10,293
163,967
143,419
Non-current
liabilities 210,000
353,419
41,484
20,643
415,546
579,513
Shareowners' equity
--
8,339
3,635
136,075
--
136,429
--
284,478
$863,991
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
18
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Consolidated statement of cash flows
For the years ended December 31,
Dollars in thousands
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from
operating activities
Net income (loss) $ (42,931) $ 15,250
Adjustments to reconcile net income to net cash provided by operating
activities:
Cumulative effect of accounting changes for FAS 106 and 109 70,305 --
Extraordinary charge for early retirement of debt -- 5,179
Income and gain on sale from discontinued operations (12,408) (4,739)
Depreciation and amortization 31,539 31,370
Deferred income taxes 2,329 4,826
Change in current assets and liabilities:
Accounts receivable (13,132) 10,821
Inventory (10,637) (8,614)
Current deferred income taxes (3,971) (1,699)
Other prepaid expenses and current assets 1,638 1,737
Accounts payable and accrued liabilities 8,700 984
Federal and state income taxes (3,362) 3,077
Net assets held for sale (32,536) --
(53,300) 6,306
Other 1,726 (2,348)
Net cash provided by (used in) operating activities (2,740) 55,844
Cash flows from
investing activities
Additions to plant and equipment (21,594) (20,687)
Proceeds from disposals of plant and equipment 12,621 3,955
Proceeds from disposition of discontinued operations 147,627 --
Net cash provided by (used in) investing activities 138,654 (16,732)
Cash flows from
financing activities
Increase (decrease) in revolving debt and other
short-term debt (59,899) (46,684)
Proceeds from issuance of other long-term debt -- 82,450
Payments on long-term debt (14,811) (111,497)
Premium paid on early retirement of debt -- (5,400)
Proceeds from issuance of common stock 339 25,224
Purchase of treasury stock (117,225) --
Proceeds from issuance of preferred stock 72,375 --
Dividends paid (88) --
Net cash provided by (used in) financing activities (119,309) (55,907)
Net increase
(decrease) in cash
Cash provided by (used in) discontinued operations (17,405) 12,122
Net decrease in cash (800) (4,673)
Cash at beginning of year 4,665 9,338
Cash at end of year $ 3,865 $ 4,665
Supplemental disclosures of cash flow information
Cash paid during
the year for
Interest expense $ 30,163 $ 44,266
Income tax payments 23,239 5,559
Noncash investing
and financing
activities
Vendor financing for equipment purchases -- --
<CAPTION>
1991
<S> <<C>
$ 3,165
Cash flows from
operating activities
--
--
(1,770)
29,982
3,156
(3,697)
(31,902)
(895)
(5,647)
(4,853)
550
--
(46,444)
(1,977)
(13,888)
(32,541)
Cash flows from
investing activities 3,554
--
(28,987)
Cash flows from
financing activities 35,727
--
(10,346)
--
--
--
--
--
25,381
13,700
Net increase
(decrease) in cash
(3,794)
13,132
$ 9,338
$ 44,225
Cash paid during
the year for 1,431
8,459
Noncash investing
and financing
activities
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
19
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 1:
Significant accounting policies
BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. Certain prior
year items have been reclassified to conform to the 1993 presentation.
The Company operates in the textile industry and is principally involved in the
manufacture and sale of home furnishings products. These sales are primarily to
department stores, mass retailers, specialty stores and large chain stores.
Sales to one customer (Wal-Mart Stores and its affiliates) represented 17.4%,
16.0% and 15.5% of total sales of the Company in 1993, 1992 and 1991,
respectively.
INVENTORIES -- Inventories are valued at the lower of cost, determined
principally on a last-in, first-out basis, or market.
DEPRECIATION -- Buildings, machinery and equipment are depreciated for financial
reporting purposes on the straight line method over the estimated useful lives
of these assets. Depreciation for tax purposes is provided on an accelerated
basis.
DEFERRED FINANCING FEES -- Debt financing fees are amortized over the term of
the related debt.
INTEREST RATE CAPS -- The Company has a program to reduce its exposure to
changes in the cost of its variable rate borrowings by the use of interest rate
cap agreements. The cost of the interest rate cap agreement is deferred and
amortized as interest expense over the periods covered by the agreement.
INCOME TAXES -- The Company adopted Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes" (FAS 109), effective January 1,
1993. Under FAS 109, deferred income taxes are recognized, at enacted tax rates,
to reflect the future income tax effect of reported differences between the book
and tax bases of the Company's assets and liabilities, assuming they will be
realized and settled, respectively, at the amount reported in the Company's
financial statements. See Note 14 for additional information.
INCOME PER COMMON SHARE -- Primary earnings per common share is based on net
income after preferred dividend requirements and the weighted average number of
shares of Common Stock and Class B Common Stock outstanding during the year and
common stock equivalents attributable to outstanding stock options. Fully
diluted earnings per common share are calculated assuming conversion, when
dilutive, of the 6% convertible subordinated sinking fund debentures and the $3
Series A Convertible Preferred Stock. Fully diluted income from continuing
operations and net income per common share for 1993 and 1992 are not presented
as effects are anti-dilutive.
Note 2:
Discontinued operations
On July 30, 1993 the Company completed the sale of its carpet and rug operations
to Mohawk Industries, Inc. Accordingly, the carpet and rug results have been
classified as discontinued operations in the Statement of Income for all periods
presented. Results of operations for the carpet and rug operations include an
allocation of corporate interest based on net assets. The sale resulted in a
$15.1 million pre-tax gain which increased after-tax net income by $9.2 million,
or $.78 per share, in 1993. Summary financial results for the discontinued
operations are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Net sales $ 144,301 $ 235,506 $ 251,773
Operating income 9,957 16,214 12,692
Interest expense 3,688 7,184 8,479
Income before income taxes 5,964 9,031 4,231
Income from discontinued operations 3,201 4,739 1,770
</TABLE>
20
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 3:
Acquisition and merger with Amoskeag Company
On November 24, 1993 a newly formed and wholly owned subsidiary of the Company
completed a tender offer for all of the outstanding shares of Amoskeag Company
("Amoskeag") for a cash price of $40 per share, or an aggregate of approximately
$141.9 million including certain costs. The acquisition has been accounted for
as a purchase by the Company of the net assets of Amoskeag held for sale at
their net realizable values and as the purchase of treasury stock. Amoskeag
owned 3,606,400 shares of the Company's common stock which has been assigned a
cost of $117.2 million after a preliminary allocation of $24.7 million to the
net assets of Amoskeag. The Company is in the process of selling all of the
operating assets of Amoskeag and the valuation includes anticipated costs during
a one year disposal period. These assets are primarily the Bangor and Aroostook
Railroad and certain real estate properties.
Note 4:
Restructuring charges
Concurrent with the purchase of the capital stock of Amoskeag Company the
Company implemented a number of programs to reduce overhead and cut costs in
1993. As a result of this process, restructuring charges were incurred in 1993
which reduced pre-tax operating income by $10 million. The restructuring charges
include $8 million for the cost of a voluntary early retirement program which
was accepted by 184 employees and severance for additional staff reductions, and
$2 million for certain corporate reorganization costs incurred by the Company.
These charges reduced net income by $6.1 million, or $.52 per share.
Results for 1992 include a $3.5 million pre-tax charge to provide for the cost
of closing and disposing of a towel manufacturing facility in York, South
Carolina. Production from this facility has been transferred to other Company
towel plants without a reduction in overall towel production capacity. The
Company also reduced the reserves it established in 1990 to provide for
discontinuing its automatic blanket facility by recognizing a pre-tax credit of
$1.5 million in 1992. The combined effect of the non-recurring items reduced net
income for the year by $1.2 million, or $.11 per share.
Note 5:
Inventories
Inventories are valued at the lower of cost or market and consisted of the
following at December 31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Finished goods $ 110,223 $ 120,274
Work in progress 65,025 82,509
Raw materials and supplies 34,586 41,538
Total $ 209,834 $ 244,321
</TABLE>
Approximately 76% of the inventories at year-end 1993 and 79% at year-end 1992
were valued on the last-in, first-out method (LIFO). If the first-in, first-out
method of accounting had been used, inventories would have been greater by
approximately $33 million and $39 million at December 31, 1993 and 1992,
respectively. The LIFO reserve for continuing operations increased $2.8 million
in 1993 and decreased $9.6 million in 1992.
Note 6:
Plant and equipment
Plant and equipment is stated at cost and consisted of the following at December
31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Land $ 5,978 $ 8,408
Buildings 181,409 230,491
Equipment 366,333 447,274
Plant additions in progress 18,707 11,931
Total 572,427 698,104
Accumulated depreciation (278,150) (325,672)
Net plant and equipment $ 294,277 $ 372,432
</TABLE>
21
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 7:
Accrued liabilities
Accrued liabilities were as follows at December 31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Salaries and other compensation $14,177 $16,241
Pension, medical and other
employee benefit plans 22,058 16,256
Advertising expense 1,987 3,071
Interest expense 3,375 3,954
Other 24,399 27,070
Total $65,996 $66,592
</TABLE>
Note 8:
Debt
Short-term debt at December 31, 1992, of $14.1 million was borrowed under a $25
million bank credit facility for the purpose of financing the purchase of raw
cotton and wool. The facility was repaid and cancelled during 1993.
Long-term debt at December 31 was as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Senior long-term debt:
Revolving term debt $ 76,426 $ 122,269
Industrial revenue bonds, due
in installments through
2002 11,085 14,485
10.5% promissory note, due in
installments and repaid
in January 1994 5,497 10,962
9.65% vendor financing -- 5,996
Total senior long-term debt 93,008 153,712
Less current portion 8,397 10,293
Net senior long-term debt 84,611 143,419
Subordinated long-term debt:
6% convertible subordinated
sinking fund debentures
due 1997 to 2012 125,000 125,000
11.25% senior subordinated
debentures due 2002 to
2004 85,000 85,000
Total subordinated
long-term debt 210,000 210,000
Total long-term debt $ 294,611 $ 353,419
</TABLE>
The Company's revolving credit facility allows the Company to borrow up to $150
million through January 3, 1996. Accordingly, borrowings under the revolving
credit facility are classified as long-term debt. The Company elected to reduce
the facility to $150 million from $235 million in November 1993 because of
reduced borrowing requirements. Interest rates on the revolving term debt are,
at the Company's option, at the prime rate fixed by The First National Bank of
Boston plus 1%, or at a Euromarket-based rate plus 2.5%. The average interest
rate on the revolving term debt was 6.3% on December 31, 1993.
The Company has a program to reduce its exposure to changes in the cost of its
variable rate borrowings by the use of interest rate cap agreements. At December
31, 1993 the Company has an interest rate cap covering a total notional
principal amount of $50 million.
The revolving credit facility is secured by a first lien on substantially all of
the Company's assets and requires, among other things, that the Company maintain
certain financial ratios with regard to working capital, interest coverage,
funded debt and net worth. It also limits the amount of dividends that may be
paid by the Company to the lesser of 40% of the Company's net income during the
immediately preceding twelve months or $15 million and contains additional
financial covenants which may further restrict the ability of the Company to pay
dividends. The revolving term debt agreement also places restrictions on the
Company's ability to incur debt or liens, to make certain investments and to
effect certain mergers, consolidations or sales of assets or changes in control.
On June 25, 1992, the Company sold $85 million of 11.25% Senior Subordinated
Debentures due
22
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 8:
Debt
continued
2004. The proceeds of this offering plus additional amounts from a Common Stock
offering were used to redeem the $100 million 13.5% Senior Subordinated
Debentures due 2001. A prepayment premium of $5.4 million on the early
retirement of the 13.5% debentures and the write-off of approximately $3.0
million of deferred financing costs related to the debentures and the old
revolving credit facility resulted in an after-tax extraordinary charge of $5.2
million, or $.46 per share.
The Company's 6% Convertible Subordinated Sinking Fund Debentures are
convertible into shares of Common Stock of the Company at a conversion price of
$44.25 per share.
At December 31, 1993, the fair value of the Company's 6% Convertible
Subordinated Debentures was $103.4 million compared to a carrying value of $125
million and the fair value of the 11.25% Subordinated Debentures was $94.4
million compared to a carrying value of $85 million. The fair value of the
debentures is based on quoted market prices. Differences between fair value and
carrying value of the Company's other debt were not significant.
The aggregate principal and sinking fund payments required to be made on
long-term debt during each of the five years subsequent to December 31, 1993
are: 1994, $8.4 million; 1995, $2.3 million; 1996, $78.0 million; 1997, $7.8
million and 1998, $7.8 million.
Note 9:
Lease obligations
The Company leases certain real estate and equipment under various operating
leases. Listed below are the future minimum rental payments required under these
operating leases with noncancelable terms in excess of one year at December 31,
1993.
<TABLE>
<CAPTION>
Real Equip-
Estate ment Total
<S> <C> <C> <C>
1994 $ 4,334 $ 8,535 $ 12,869
1995 4,588 7,546 12,134
1996 4,132 5,942 10,074
1997 3,655 5,387 9,042
1998 3,194 4,920 8,114
Subsequent years 25,936 7,588 33,524
Net minimum lease payments $ 45,839 $ 39,918 $ 85,757
</TABLE>
Total continuing operations rental expense for all operating leases was $18.9
million, $17.5 million, and $16.0 million for 1993, 1992 and 1991, respectively.
Note 10:
Shareowners' equity
In November 1993 the Company's shareowners authorized 10 million shares of
undesignated preferred stock and the issuance of up to 1.8 million shares of
preferred stock. On November 24, 1993, the Company sold 1.5 million shares of
$3.00 Series A Convertible Preferred Stock ("$3.00 Preferred Stock ") in a
private offering and received net proceeds of $72.4 million. Each $3.00
Preferred Stock share is convertible into 1.7094 shares of Common Stock,
equivalent to a conversion price of $29.25 on the $50 offering price. Annual
dividends are $3.00 per share and are cumulative. The $3.00 Preferred Stock may
be redeemed at the Company's option on or after September 1, 2004, in whole or
in part, at $50 per share plus accrued and unpaid dividends. In the event the
Company's 11.25% Senior Subordinated Debentures are not outstanding or have been
defeased the $3.00 Preferred Stock may be redeemed, in whole or in part, at the
option of the Company, at a redemption price of $51.50 per share beginning as of
September 10, 1998 and at premiums declining to the $50 liquidation preference
by September 2004.
On November 24, 1993, the Board of Directors adopted a Stockholder Rights Plan
and declared a dividend of one preferred stock purchase right ("right") for each
outstanding share of the Company's Common Stock. Similar rights have been, and
generally will be, issued in respect of Common Stock subsequently issued. Each
right becomes exercisable, upon the occurrence of certain events, for one
one-hundredth of a share of Series B Junior Participating Preferred Stock, $.01
par value, at
23
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 10:
Shareowners' equity
a purchase price of $80 or, in certain circumstances, Common Stock or other
securities, cash or other assets having a then current market price (as defined
and subject to adjustment) equal to twice such purchase price. Under the
Stockholder Rights Plan, 500,000 shares of Series B Junior Participating
Preferred Stock have been reserved. The rights currently are not exercisable and
will be exercisable only if a person or group acquires beneficial ownership of
15% or more of the Company's outstanding shares of Common Stock. The rights,
which expire on December 6, 2003, are redeemable in whole, but not in part, at
the Company's option at any time for a price of $.02 per right.
continued
Following the acquisition of Amoskeag the Company converted all shares of Class
B Common Stock held by Amoskeag into an equivalent number of shares of Common
Stock. Under the Company's Certificate of Incorporation, all remaining shares of
Class B Common Stock were automatically converted into an equivalent number of
shares of Common Stock, and no additional shares of Class B Common Stock may be
issued in the future without the prior approval of the holders of Common Stock.
The Company has a Director Stock Option Plan which was adopted by the Board of
Directors and approved by the shareowners. Under the option plan, an annual
grant of an option for 1,000 shares of Common Stock is awarded to each person
who is a Director on the fifth business day after the annual meeting of
shareowners. Options to Directors who are also employees of the Company are
incentive stock options and to all others are nonqualified options. The price
per share is the fair market value on the date each option is granted. Options
may be exercised up to seven years from the date of grant, but no option may be
exercised during the six-month period following its grant except in the case of
death or disability. Prior to an amendment and restatement of the plan in 1992,
options were granted with a one-year life and for 3,000 shares. The amendment
also extended the life of the options granted in 1991 to an expiration date of
1998. Under the option plan, 500,000 shares of Common Stock have been reserved
for awards. The following is an analysis of options under the Director Stock
Option Plan:
<TABLE>
<CAPTION>
Number of Option
Shares Price
<S> <C> <C>
Outstanding, January 1,
1991 36,000 $19.00
Awarded 36,000 13.00
Cancelled (39,000) $19.00-13.00
Outstanding, January 1,
1992 33,000 13.00
Awarded 12,000 17.625
Exercised (3,000) 13.00
Outstanding, January 1,
1993 42,000 17.625-13.00
Awarded 12,000 23.625
Exercised (21,000) 23.625-13.00
Cancelled (6,000) 23.625-13.00
Outstanding and
exercisable at
December 31, 1993 27,000 $23.625-13.00
Available for grant at
December 31, 1993 449,000
</TABLE>
On September 11, 1991, the Board of Directors approved the grant of a
nonqualified stock option to purchase 20,000 shares of Common Stock to the
Company's chief executive officer. The per share price is $14.875, the fair
market value on that date. This option became exercisable on January 1, 1992,
and expires on September 10, 1998.
The Company has a Long-Term Incentive Plan (the Plan) which was adopted by the
Board of Directors and approved by the shareowners in 1988. Under the Plan,
employees who are senior executives of the Company may be awarded shares of
Common Stock without cost to the employee. The fair market value of the shares
at the date of award is accounted for as deferred compensation and is amortized
over the restricted period. At December 31, 1993, unamortized deferred
compensation of $.6 million is included in shareowners' equity as a
24
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 10:
Shareowners' equity
continued
reduction of additional paid in capital. Awards under the Plan are vested after
the employee completes four years of continuous employment beginning with the
year for which the award is made. Vesting occurs prior to completion of four
years of employment if the employee dies while employed, reaches normal
retirement or becomes disabled. Under the Plan, 650,000 shares of Common Stock
have been reserved for awards. The following is an analysis of shares of
restricted stock under the Long-term Incentive Plan:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Number of Shares:
Outstanding at
beginning of year 156,526 145,877 165,600
Awarded 75,000 50,000 35,000
Cancelled (4,450) (2,430) (7,583)
Issued (115,402) (36,921) (47,140)
Outstanding at end of
year 111,674 156,526 145,877
Available for grant
at end of year 324,548 45,098 92,668
Market value on date
of grant for
shares granted
during year $18.75 $15.375 $6.00
</TABLE>
Awards under the Plan will be 70,000 shares in 1994.
Transactions with respect to common stock and additional paid in capital during
the three years ended December 31, 1993, were as follows:
<TABLE>
<CAPTION>
Additional
Class B Paid in
Common Stock Common Stock Capital
Shares Amount Shares Amount Amount
<S> <C> <C> <C> <C> <C>
Balance 12/31/90 6,753,486 $ 6,753 3,642,582 $3,643 $110,830
Restricted shares awarded 35,000 35 -- -- (35)
Restricted shares cancelled (7,583) (8) -- -- 8
Earned compensation, restricted stock -- -- -- -- 768
Exchange of shares 7,184 8 (7,184) (8) --
Balance 12/31/91 6,788,087 6,788 3,635,398 3,635 111,571
Restricted shares awarded 50,000 50 -- -- (50)
Restricted shares cancelled (2,430) (2) -- -- 2
Earned compensation, restricted stock -- -- -- -- 831
Director stock option exercised 3,000 3 -- -- 36
Sale of stock 1,500,000 1,500 -- -- 23,685
Exchange of shares 284 -- (284) -- --
Balance 12/31/92 8,338,941 8,339 3,635,114 3,635 136,075
Shares issued to employee savings plans 120,562 120 -- -- 2,883
Restricted shares awarded 75,000 75 -- -- (75)
Restricted shares cancelled (4,450) (4) -- -- 4
Earned compensation, restricted stock -- -- -- -- 1,126
Director Stock options exercised 21,000 21 -- -- 426
Net proceeds from sale of preferred stock
in excess of par value -- -- -- -- 72,360
Exchange or conversion of shares 3,635,114 3,635 (3,635,114) (3,635) --
Balance 12/31/93 12,186,167 $12,186 -- $ -- $212,799
</TABLE>
25
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 10:
Shareowners' equity
continued
Total shares of Common Stock outstanding as of December 31, 1993 are reduced to
8,579,767 shares by 3,606,400 shares of treasury stock acquired with the
acquisition of Amoskeag. The $117.2 million cost of the treasury stock reduces
total shareowners' equity.
Note 11:
Pro-forma earnings information (unaudited)
On November 24, 1993 the Company acquired 3,606,400 shares of common stock as
treasury shares with the acquisition of Amoskeag and sold 1.5 million shares of
$3 Series A Convertible Preferred Stock in a private offering for $72.4 million.
On July 30, 1993 the Company sold its carpet and rug operations for
approximately $120 million after income taxes and expenses. Income from
continuing operations was reduced $6.1 million in 1993 by a $10 million pre-tax
restructuring charge and $1.4 million by an income tax adjustment for the
increase in federal income tax rates. Set forth below are unaudited proforma
earnings per share assuming the transactions had occurred as of the beginning of
1993 and excluding the non-recurring items incurred during 1993:
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Income from continuing operations
before accounting changes $2.15 $1.97
Average common shares outstanding
(thousands) 8,477 13,866
</TABLE>
The computation of proforma income per share includes dividends on the 1.5
million shares of preferred stock, reduced interest expense from reducing the
revolving credit facility by $120 million from the net proceeds from the sale of
the carpet and rug operations, and increased interest from additional borrowings
under the revolving credit facility of $68 million for the acquisition of
Amoskeag. Historical income from continuing operations before the non-recurring
items was $22.5 million, or $1.88 per primary share and $1.82 on a fully diluted
basis.
Note 12:
Employee pension and savings plans
The Company has trusteed pension plans covering essentially all employees. The
plans provide pension benefits that are based on the employees' compensation and
service. The Company's policy is to fund amounts required by applicable
regulations.
Pension expense amounted to $13.2 million in 1993, $6.1 million in 1992 and $7.6
million in 1991. Net pension expense for 1993, 1992 and 1991 consisted of the
following components:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Service cost (benefits
earned during the
period) $ 8,802 $ 8,631 $ 8,781
Interest cost on
projected benefit
obligation 15,124 13,938 12,674
Actual return on
assets (20,985) (5,161) (32,091)
Net amortization and
deferral 4,023 (11,293) 18,194
Curtailment and
special
termination
benefits 6,263 -- --
Net pension cost $ 13,227 $ 6,115 $ 7,558
</TABLE>
During 1993 the Company recognized a curtailment loss with the sale of its
carpet and rug division and special termination benefits from a voluntary early
retirement program.
26
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 12:
Employee pension
and savings plans
continued
The table below sets forth the plans' funded status at December 31:
<TABLE>
<CAPTION>
1993 1992
Assets Exceed Accumulated Assets Exceed
Accumulated Benefits Accumulated
Benefits Exceed Assets Benefits
<S> <C> <C> <C>
Projected benefit obligation:
Vested benefits $64,460 $148,022 $167,235
Non-vested benefits 2,559 6,255 7,599
Accumulated benefit obligation 67,019 154,277 174,834
Additional amounts related to projected compensation
levels -- 6,801 11,352
Total projected benefit obligation 67,019 161,078 186,186
Plan assets at fair value, primarily publicly traded
stocks and bonds 69,266 144,164 184,057
Plan assets over (under) projected benefit obligation 2,247 (16,914) (2,129)
Unrecognized net (gain) loss 13,293 19,917 15,346
Unrecognized net transition assets (2,747) (854) (4,624)
Unrecognized prior service cost 158 3,552 5,198
Adjustment required to recognize minimum liability -- (15,814) --
Net pension asset (liability) recognized in the
Consolidated Statement of Financial Position $12,951 $(10,113) $13,791
</TABLE>
Assumptions used in determining the funded status of the pension plans were as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Discount rate 7.25% 8.25% 8.5%
Increase in compensation
levels 4.5% 5.5% 5.5%
Expected long-term rate of
return on assets 9% 9% 9%
</TABLE>
For the pension plan with accumulated benefits in excess of assets at December
31, 1993, the Consolidated Statement of Financial Position reflects an
additional pension liability of $15.8 million, a long-term intangible asset of
$3.6 million and a reduction of shareowners' equity of $7.5 million, net of
deferred tax benefits.
The Company also sponsors employee savings plans which cover substantially all
employees. The Company amended the plans for 1993 to provide a Company match of
70% of employee contributions up to two percent of compensation and a match of
20% of employee contributions for the next two percent of compensation. The
matching formula may be changed yearly at the discretion of the Company. The
match is contributed quarterly in Common Stock of the Company. Expense of the
Company match was $3.0 million in 1993.
27
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 13:
Postretirement health care and life insurance benefits
The Company adopted FAS 106, "Employers' Accounting for Postretirement Benefits
other than Pensions", effective January 1, 1993. The cumulative effect on prior
years of the accounting change was charged to income in 1993 which resulted in a
pre-tax charge of $35.1 million and reduced net income by $21.8 million, or
$1.86 per share.
The Company provides medical insurance premium assistance and life insurance
benefits to retired employees. The medical premium assistance payments are at a
fixed dollar amount based on the retiree's years of service. Essentially all of
the Company's employees become eligible for these benefits when they reach
retirement age while working for the Company. The Company's policy is to fund
the plans as benefits are paid.
The table below sets forth the plans' combined status at December 31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Accumulated postretirement
benefit obligation --
Retirees $ 24,224 $ 23,452
Fully eligible active
participants 9,897 10,273
Other active participants 6,298 6,477
Total 40,419 40,202
Plan assets -- --
Accumulated postretirement
benefit obligations in
excess of plan assets at
December 31 40,419 40,202
Unrecognized net gain (loss) (2,163) --
Transition obligation
recognized January 1, 1993
as a cumulative effect of
an accounting change -- (35,123)
Accrued postretirement benefit
cost recognized in the
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION at
December 31 $ 38,256 $ 5,079
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.25% as of December 31, 1993 and 8.25% as of December 31, 1992.
Medical premium assistance payments are at a fixed dollar amount based on the
retiree's years of service and, therefore, the plan is not affected by a health
care cost trend rate assumption.
Net periodic postretirement benefit cost for 1993 included the following
components:
<TABLE>
<S> <C>
Service Cost (benefits earned during the
period) $ 974
Interest cost on projected benefit
obligation 3,033
Net amortization and deferral (93)
Curtailment gain (1,850)
Net periodic postretirement benefit cost $ 2,064
</TABLE>
During 1993 the Company recognized a curtailment gain with the sale of its
carpet and rug division.
Prior to 1993, the expense associated with these benefits was recognized on a
cash basis when the benefits were paid. The payments amounted to $6.2 million in
1992 and $5.0 million in 1991.
28
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 14:
Income taxes
The Company adopted FAS 109, "Accounting for Income Taxes", effective January 1,
1993. The cumulative effect on prior years of the accounting change was charged
to net income in 1993 which reduced net income by $48.5 million, or $4.13 per
share.
The adoption of FAS 109 changes the Company's
method of accounting for income taxes from the
deferred method (APB 11) to an asset and liability
approach. Previously, the Company deferred the
past income tax effects of timing differences
between financial reporting and taxable income.
The asset and liability approach requires the
recognition of deferred income tax liabilities and assets
for the expected future tax consequences of
temporary differences between the carrying amounts and
the tax bases of assets and liabilities.
Under FAS 109, assets and liabilities acquired in
purchase business combinations are assigned their
fair values, and deferred taxes are provided for the
lower or higher tax bases. Under APB 11, values
were assigned net-of-tax. In adopting FAS 109, the
Company adjusted the carrying amounts of assets
and liabilities acquired in the Cannon and Bigelow
acquisitions in 1986 and reduced deferred income
tax liabilities to reflect the then current federal tax
rate of 34% as opposed to the higher federal tax
rates that were in effect when the deferred taxes
originated. The carrying amounts have subsequently
been adjusted to reflect the increase in the federal
tax rate to 35%.
At December 31, 1993, the Company had $51.3
million of deferred tax assets and $101.3 million of
deferred income tax liabilities which have been
netted for presentation purposes. The significant
components of these amounts as shown on the balance
sheet are as follows:
<TABLE>
<CAPTION>
12/31/93
Current Noncurrent
Liability Liability
<S> <C> <C>
Depreciation $ -- $ 51,805
Inventory Valuation 35,961
Deferred compensation 95 (1,659)
Accruals and allowances (16,952) (12,294)
Operating loss and tax
credit carryover (4,305) --
Other -- (2,670)
Total deferred tax
liabilities $ 14,799 $ 35,182
</TABLE>
The provision for income taxes for continuing operations included in the
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS consisted of the
following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Current
Federal $ 5,483 $ 7,408 $1,000
State 1,130 952 --
Deferred
Federal 4,605 1,741 818
State 695 785 361
Total income taxes on income from continuing operations before
extraordinary charge and accounting charges $11,913 $10,886 $2,179
</TABLE>
29
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 14:
Income taxes
continued
A tax benefit of $3.2 million was recognized on the $8.4 million pre-tax charge
for early retirement of debt occurring in 1992.
The income tax effect of items which altered the Company's effective income tax
rate from the statutory federal rate were as follows:
<TABLE>
<CAPTION>
Amount1993Percent Amount1992Percent Amount1991Percent
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory rate $ 9,408 35.0% $ 9,035 34.0% $1,215 34.0%
State taxes, net 1,186 4.4 1,147 4.3 82 2.3
Basis adjustments in acquired companies -- -- 612 2.3 612 17.1
Effect of tax rate change 1,400 5.2 -- -- -- --
Other (81) (.3) 92 .4 270 7.6
Net taxes $11,913 44.3% $10,886 41.0% $2,179 61.0%
</TABLE>
Prior to the adoption of FAS 109, the tax effects of timing differences were as
follows:
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Depreciation $ 2,515 $ 2,808
Deferred compensation (129) 327
Accruals and allowances (1,339) 2,132
Accruals related to acquisitions -- 1,227
Increase (reduction) in deferred taxes due to net operating loss and tax credit
carryovers 586 (867)
Alternative minimum tax -- (4,526)
Other 893 78
Total deferred tax provision $ 2,526 $ 1,179
</TABLE>
The Company has an alternative minimum tax credit carryforward of $4.3 million
which may be carried forward indefinitely.
30
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Report of Management
The management of Fieldcrest Cannon, Inc. is responsible for the preparation and
integrity of the financial statements and other information in this Annual
Report. The financial statements were prepared in conformity with generally
accepted accounting principles applying estimates and management's best judgment
as required.
Management maintains a system of internal accounting controls which provides
reasonable assurance, at an appropriate cost, that assets are safeguarded
against loss or unauthorized use and that financial records are reliable for
preparing financial statements. The control system is augmented by written
policies and procedures, internal audits and employment of trained, qualified
personnel.
Ernst & Young, independent auditors, is engaged to audit the financial
statements of the Company. Their audit includes evaluation of the Company's
accounting systems, procedures and internal controls, and tests and other
auditing procedures sufficient to render an opinion on the Company's financial
statements.
The Board of Directors, through its Audit Review Committee, composed of
non-employee Directors, is responsible for reviewing and monitoring the
accounting and auditing procedures and financial practices of the Company. The
Board recommends independent auditors who are selected by the shareholders at
the annual meeting. The Audit Review Committee meets periodically with
management, internal auditors and independent auditors to review the work of
each and satisfy itself that they are properly discharging their
responsibilities. Both the independent auditors and the internal auditors have
access to the Audit Review Committee, with and without the presence of
management, to discuss their opinions on the adequacy of internal controls and
to review the quality of financial reporting.
Thomas R. Staab
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Report of
independent
auditors
The Shareowners and Board of Directors of Fieldcrest Cannon, Inc.
We have audited the accompanying consolidated statement of financial position of
Fieldcrest Cannon, Inc. as of December 31, 1993 and 1992, and the related
consolidated statements of income and retained earnings, and cash flows for each
of the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Fieldcrest Cannon, Inc. at December 31, 1993 and 1992, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted accounting
principles.
As explained in Notes 13 and 14 to the consolidated financial statements,
effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," and Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."
Greensboro, North Carolina
January 28, 1994
31
<PAGE>
<PAGE>
Fieldcrest Cannon, Inc.
Selected financial and statistical data
In thousands of dollars, except per share data
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Summary of
continuing
operations (a)
Net sales $1,000,107 $981,773 $960,663 $927,034 $1,038,727
Depreciation $ 29,524 $ 29,480 $ 28,473 $ 26,118 $ 21,879
Operating income (loss) 53,563 60,855 39,613 (13,385) 78,876
Income (loss) from continuing
operations 14,966-b 15,690-c 1,395 (30,818)-d 31,503
Dividends on common stock -- -- -- 4,980 7,643
Per share of common stock:
Primary income (loss) from continuing
operations $ 1.24-b $ 1.39-c $ 0.13 $ (2.97) -d $ 3.06
Fully diluted income (loss) ---b ---c 0.13 (2.97) -d 2.76
Dividends -- -- -- 0.50 0.77
Shareowners' equity 13.79 23.76 23.33 23.01 27.24
Number of employees 14,090 14,636 14,935 15,873 16,962
Number of shareowners 2,401 2,735 2,980 3,099 2,805
Summary of financial
position
Capital expenditures $ 21,594 $ 20,687 $ 41,000 $ 80,706 $ 41,698
Working capital 262,326 296,580 138,227 286,707 327,772
Total assets 740,446 863,991 882,662 855,576 860,730
Long-term obligations 294,611 353,419 253,493 403,627 341,747
Shareowners' equity 193,330 284,478 243,173 239,240 280,568
Financial ratios
Return on net sales 1.5% -b 1.6% -c 0.1% (3.3)% 3.0 %
Return on average shareowners' equity 6.8-b 6.0-c 0.6 (11.9) 11.6
Return on average total assets 1.9-b 1.8-c 0.2 (3.6) 3.8
</TABLE>
a On July 30, 1993 the Company completed the sale of its carpet and rug
operations. Accordingly, the summary of continuing operations excludes the
discontinued carpet and rug operations for all periods presented.
b Reflects pre-tax restructuring charges of $10 million and income tax
adjustments of $1.4 million which reduced 1993 income from continuing
operations before accounting changes by $7.5 million, or $.64 per common
share. The Company adopted FAS 106, "Employers' Accounting for Postretirement
Benefits other than Pensions" and FAS 109, "Accounting for Income Taxes",
effective January 1, 1993. The cumulative effect of these accounting changes
reduced 1993 net income by $70.3 million, or $5.99 per common share. Fully
diluted income per share is not presented as effects are anti-dilutive.
Financial ratios for 1993 are based on income from continuing operations
before accounting changes.
c Before extraordinary charge for early retirement of debt which reduced 1992
net income by $5.2 million ($.46 per share). Fully diluted income per share is
not presented as effects are anti-dilutive. Financial ratios for 1992 are
based on income from continuing operations before the extraordinary charge.
d Reflects pre-tax charge of $31.5 million for discontinuing the automatic
blanket business which reduced 1990 net income by $19.5 million or $1.88 per
common share.
32
<PAGE>
Exhibit 21
Subsidiaries of the Registrant
All of the subsidiaries of the Registrant, considered in the
aggregate as a single subsidiary, would not constitute a
significant subsidiary as of the end of the year covered by this
report.
Page 155
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Fieldcrest Cannon, Inc. of our report dated
January 28, 1994, included in the 1993 Annual Report to
Shareholders of Fieldcrest Cannon, Inc.
Our audits also included the financial statement schedules of
Fieldcrest Cannon, Inc. listed in Item 14(a). These schedules
are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the
information set forth therein.
We also consent to the incorporation by reference in the
Registration Statements (Form S-8, Nos. 33-44703 and 33-44705 and
Form S-3, No. 33-52325) pertaining to the Director Stock Option
Plan of Fieldcrest Cannon, Inc., the Stock Option Agreement
between Fieldcrest Cannon, Inc. and James M. Fitzgibbons and the
$3.00 Series A Convertible Preferred Stock, respectively, and in
the related Prospectuses of our report dated January 28, 1994,
with respect to the consolidated financial statements
incorporated herein by reference and our report included in the
preceding paragraph with respect to the financial statement
schedules included in this Annual Report (Form 10-K) for the year
ended December 31, 1993.
ERNST & YOUNG
Greensboro, North Carolina
March 29, 1994
Page 156
