FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-6922
GUILFORD MILLS, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 13-1995928
-------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) number)
4925 West Market Street, Greensboro, N.C. 27407
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code - (336) 316-4000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Number of shares of common stock outstanding
at July 4, 1999 - 22,187,281
<PAGE>
GUILFORD MILLS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JULY 4, 1999
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Condensed Consolidated Financial Statements
The condensed consolidated financial statements included herein have been
prepared by Guilford Mills, Inc. (the "Company" or "Guilford"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The Condensed Consolidated Balance Sheet as of September 27, 1998 has been taken
from the audited financial statements as of that date. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's latest annual report on Form 10-K for the year ended
September 27, 1998.
The condensed consolidated financial statements included herein reflect all
adjustments (none of which are other than normal recurring accruals) which are,
in the opinion of management, necessary for a fair presentation of the
information included. For comparative purposes, certain amounts have been
reclassified to conform to fiscal 1999 presentation. The following condensed
consolidated financial statements are included:
Consolidated Statements of Income for the thirteen weeks ended July 4,
1999 and June 28, 1998
Consolidated Statements of Income for the forty weeks ended July 4,
1999 and the thirty-nine weeks ended June 28, 1998
Condensed Consolidated Balance Sheets as of July 4, 1999 and
September 27, 1998
Condensed Consolidated Statements of Cash Flows for the forty weeks
ended July 4, 1999 and the thirty-nine weeks ended June 28, 1998
Condensed Notes to Consolidated Financial Statements
<PAGE>
Guilford Mills, Inc.
CONSOLIDATED STATEMENTS OF INCOME
For the Thirteen Weeks Ended July 4, 1999 and June 28, 1998
(In thousands except per share data)
(Unaudited)
------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 4, June 28,
1999 1998
------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 217,923 $ 232,768
-------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of goods sold 186,264 185,790
Selling and administrative 27,715 25,806
-------------------------------------------------------------------------
213,979 211,596
-------------------------------------------------------------------------
OPERATING INCOME 3,944 21,172
INTEREST EXPENSE 4,161 3,216
OTHER INCOME, NET (794) (999)
------------------------------------------------------------------------
INCOME BEFORE INCOME TAX BENEFIT/(PROVISION) 577 18,955
INCOME TAX BENEFIT/(PROVISION) 354 (6,109)
------------------------------------------------------------------------
NET INCOME $ 931 $ 12,846
========================================================================
NET INCOME PER SHARE:
Basic $ 0.04 $ 0.50
Diluted 0.04 0.49
========================================================================
DIVIDENDS PER SHARE $ 0.11 $ 0.11
========================================================================
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Guilford Mills, Inc.
CONSOLIDATED STATEMENTS OF INCOME
For the Forty Weeks Ended July 4,1999 and
the Thirty-Nine Weeks Ended June 28, 1998
(In thousands except per share data)
(Unaudited)
------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 4, June 28,
1999 1998
(40 Weeks) (39 Weeks)
------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 651,106 $ 674,593
------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of goods sold 545,288 546,893
Selling and administrative 81,098 76,638
------------------------------------------------------------------------
626,386 623,531
------------------------------------------------------------------------
OPERATING INCOME 24,720 51,062
INTEREST EXPENSE 12,534 8,825
OTHER EXPENSE/(INCOME), NET 1,913 (755)
------------------------------------------------------------------------
INCOME BEFORE INCOME TAX PROVISION 10,273 42,992
INCOME TAX PROVISION 2,224 14,402
------------------------------------------------------------------------
NET INCOME $ 8,049 $ 28,590
========================================================================
NET INCOME PER SHARE:
Basic $ 0.36 $ 1.12
Diluted 0.36 1.10
========================================================================
DIVIDENDS PER SHARE $ 0.33 $ 0.33
========================================================================
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Guilford Mills, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
July 4, 1999 and September 27, 1998
(In thousands)
------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 4, September 27,
1999 1998
(Unaudited)
------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 13,088 $ 30,447
Accounts receivable, net 170,227 169,598
Inventories 139,968 153,006
Other current assets 12,499 13,901
------------------------------------------------------------------------
Total current assets 335,782 366,952
------------------------------------------------------------------------
Property, net 318,854 326,941
Other assets 102,686 100,607
------------------------------------------------------------------------
Total assets $ 757,322 $ 794,500
========================================================================
LIABILITIES
Short-term borrowings $ 67,965 $ 60,171
Current maturities of long-term debt 603 811
Other current liabilities 83,541 94,692
------------------------------------------------------------------------
Total current liabilities 152,109 155,674
------------------------------------------------------------------------
Long-term debt 176,335 176,872
Other non-current liabilities 59,842 76,777
------------------------------------------------------------------------
Total long-term liabilities 236,177 253,649
------------------------------------------------------------------------
STOCKHOLDERS' INVESTMENT
Common stock 655 655
Capital in excess of par 119,772 119,648
Retained earnings 364,081 363,606
Other comprehensive income (12,617) (7,577)
Other stockholders' investment (102,855) (91,155)
------------------------------------------------------------------------
Total stockholders' investment 369,036 385,177
------------------------------------------------------------------------
Total liabilities and
stockholders' investment $ 757,322 $ 794,500
========================================================================
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Guilford Mills, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Forty Weeks Ended July 4, 1999 and
the Thirty-Nine Weeks Ended June 28, 1998
(In thousands)
(Unaudited)
------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 4, June 28,
1999 1998
(40 Weeks) (39 Weeks)
------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 8,049 $ 28,590
Depreciation and amortization 48,948 47,946
Other adjustments to net income, net 6,990 (678)
Net changes in operating assets and liabilities (5,603) (25,883)
------------------------------------------------------------------------
Net cash provided by operating activities 58,384 49,975
------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property (42,827) (61,478)
Additions to acquisition purchase price -- (35,500)
Other investing activities, net 2,779 4,779
------------------------------------------------------------------------
Net cash used in investing activities (40,048) (92,199)
------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net 7,623 48,224
Payment of long-term debt (145,405) (13,540)
Proceeds from issuance of long-term debt, net of
deferred financing costs paid 140,233 --
Purchase of treasury shares (12,769) (7,516)
Other financing activities, net (24,718) 11,569
------------------------------------------------------------------------
Net cash (used in) provided by financing
activities (35,036) 38,737
========================================================================
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (659) 280
------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (17,359) (3,207)
BEGINNING CASH AND CASH EQUIVALENTS 30,447 24,349
------------------------------------------------------------------------
ENDING CASH AND CASH EQUIVALENTS $ 13,088 $ 21,142
========================================================================
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
GUILFORD MILLS, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 4, 1999
(In thousands except share data)
(Unaudited)
1. Seasonal Fluctuations -- Results for any portion of a year are not
necessarily indicative of the results to be expected for a full year, due to
seasonal aspects of the textile industry.
2. Foreign Currency Translation -- The Company has a majority-owned foreign
subsidiary that operates in Mexico. Effective January 1, 1999, Mexico's economy
was no longer considered highly inflationary for financial reporting purposes
because the cumulative Mexican inflation rate for the immediately preceding
three years fell below 100%. As a result, the functional currency for the
subsidiary returned to the Mexican peso from the U.S. dollar during the
Company's second quarter of fiscal 1999. Translation adjustments appear as Other
Comprehensive Income in the stockholders' investment section of the balance
sheet and not in the results of operations. This change in accounting treatment
was not material to the financial position or results of operations of the
Company for the nine-month period or quarter ended July 4, 1999 and is not
expected to have a material impact on the future financial position or results
of operations of the Company.
3. Per Share Information -- Basic earnings per share information has been
computed by dividing net income by the weighted average number of shares of
common stock, par value $.02 per share, outstanding during the periods
presented. The average shares used in computing basic net income for the
thirteen weeks ended July 4, 1999 and June 28, 1998 were 22,059,000 and
25,472,000, respectively. The average shares used in computing basic net income
per share for the forty weeks ended July 4, 1999 and thirty-nine weeks ended
June 28, 1998 were 22,456,000 and 25,456,000, respectively.
Diluted earnings per share information also considers the dilutive effect of
stock options and restricted stock grants. The average shares used in computing
diluted net income per share for the thirteen weeks ended July 4, 1999 and June
28, 1998 were 22,059,000 and 25,884,000, respectively. The average shares used
in computing diluted net income per share for the forty weeks ended July 4, 1999
and thirty-nine weeks ended June 28, 1998 were 22,467,000 and 25,877,000,
respectively.
The difference between the number of average shares used to calculate basic and
diluted earnings per share is due entirely to the number of outstanding stock
options and restricted stock. During the quarters ended July 4, 1999 and June
28, 1998, outstanding stock options and shares of restricted stock of 1,871,000
and 44,000, respectively, were antidilutive and not included in the calculation
of diluted net income per share. For the nine-month period ended July 4, 1999,
1,593,000 outstanding stock options and shares of restricted stock were
antidilutive and not included in the calculation of diluted net income per
share. For the nine-month period ended June 28, 1998, no outstanding stock
options and shares of restricted stock were antidilutive.
The Company has authorized 1,000,000 shares of $1 par preferred stock. As of
July 4, 1999 and September 27, 1998, no such shares were issued.
On February 4, 1999, an amendment was approved by the stockholders of the
Company to increase the number of authorized shares of Common Stock from
40,000,000 to 65,000,000.
<PAGE>
4. Inventories -- Inventories are carried at the lower of cost or market. Cost
is determined by using the LIFO (last-in, first-out) method for the majority of
inventories. Cost for all other inventories has been determined principally by
the FIFO (first-in, first-out) method.
Inventories at July 4, 1999 and September 27, 1998 consisted of the
following:
<TABLE>
<CAPTION>
July 4, September 27,
1999 1998
------------------ -----------------
<S> <C> <C>
Finished Goods $ 51,916 $ 48,776
Raw Materials and work in process 92,857 112,275
Manufacturing supplies 8,752 8,811
------------------ -----------------
Total inventories valued at FIFO cost 153,525 169,862
Less - Adjustments to reduce FIFO cost
to LIFO cost, net (13,557) (16,856)
------------------ -----------------
Total inventories $ 139,968 $ 153,006
================== =================
</TABLE>
5. Accumulated Depreciation -- Accumulated depreciation at July 4, 1999 and
September 27, 1998 was $489,042 and $457,232, respectively.
6. Restructuring Charges -- During 1998, the Company recorded $2,962 as an
accrued liability for severance costs, lease exit costs and other obligations as
a result of restructuring two of its operations. During fiscal 1998, costs
totaling $286 were recorded against the reserve. The table below shows the
fiscal 1999 activity.
<TABLE>
<CAPTION>
Severance and Other
<S> <C>
Balance at September 27, 1998 $ 2,676
Fiscal 1999 costs against the reserve 2,082
------
Balance at July 4, 1999 $ 594
=======
</TABLE>
7. Long-term Debt -- On December 18, 1998, the Company issued $145,000 of
unsecured, ten-year notes with a fixed coupon rate of 7.06%. The net proceeds
were used to repay a portion of the Company's outstanding borrowings on its
uncommitted lines of credit and its revolving credit facility. A payment of
$4,366 was made during the first fiscal quarter of 1999 for the termination of
treasury lock agreements, which were used to fix the interest rate on a portion
of the notes. Such payment is being amortized as additional interest expense
over the period of the related debt.
8. Comprehensive Income -- For the thirteen weeks ended July 4, 1999 and June
28, 1998, total comprehensive income/(loss) was ($2,211) and $11,978,
respectively. Included in total comprehensive income for the third quarter was
net income of $931 and $12,846, respectively and foreign currency translation
loss of $3,142 and $868, respectively. For the nine-month periods ended July 4,
1999 and June 28, 1998, comprehensive income was $3,009 and $29,411,
respectively, consisting of net income of $8,049 and $28,590, respectively, and
foreign currency translation gain/(loss) of ($5,040) and $821, respectively.
9. Income Taxes -- The income tax provision as a percentage of pre-tax income
for the nine months ended July 4, 1999 was 21.6% as compared to 33.5% for the
nine months ended June 28, 1998. The estimated effective tax rate for fiscal
1999 has been reduced due to a one-time net benefit derived from a dividend paid
by the Company's United Kingdom subsidiary to the parent under the Advance
Corporation Tax rules and the US-UK Income Tax Treaty.
10. Reclassifications -- For comparative purposes, certain amounts for fiscal
1998 have been reclassified to conform to the fiscal 1999 presentation.
11. Subsequent Event: Capital Stock -- On August 6, 1999, the Company's Board of
Directors authorized and the Company repurchased 3,071,712 shares of the
Company's common stock from a beneficial owner at $9.50 per share for a total
price of $29.2 million.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
The third quarter periods of fiscal 1999 and 1998 each consisted of thirteen
weeks. The nine-month period of fiscal 1999 consisted of forty weeks. The
nine-month period of fiscal 1998 had thirty-nine weeks.
Net sales for the third quarter of fiscal 1999 were $217.9 million, a decrease
of $14.9 million, or 6.4% from net sales of $232.8 million for the comparable
period of the prior year. Net sales for the nine months ended July 4, 1999 were
$651.1 million, a decrease of $23.5 million, or 3.5% from net sales of $674.6
million for the nine months ended June 28, 1998.
Apparel sector sales for the third quarter ended July 4, 1999 declined 5.8% to
$86.4 million from $91.7 million in the third quarter of the previous year.
Sales of elastics/intimate apparel, including lace products, remained strong and
increased during the quarter as a result of the Company's relationship with the
major branded manufacturers who have done well at the retail level. Increased
retail sell-through, due to the warmer weather, drove the sales of swimwear
products up during the third quarter. These increases were more than offset by
the significant decline in mature commodity fabrics (linings, sleepwear and
robewear) due to imported garments from Asia, a decline in consumer demand and
the decline in sales to a major customer experiencing financial difficulty. For
the nine months ended July 4, 1999, net sales in the apparel market were $252.8
million and were flat compared to $252.9 million for the same period of the
prior year. Year over year increases in elastics/intimate, swimwear and
ready-to-wear fabrics were more than offset by the decline in the Company's
commodity fabrics. The decline in commodity fabrics was again due to low cost
Asian imports and the decline in sales of nearly $12.0 million to the major
customer experiencing financial difficulty.
Sales of worldwide automotive fabrics increased 6.2% for the third quarter of
fiscal 1999 to $94.0 million as compared to $88.5 million for the same quarter
of the previous year. The Company experienced strong U.S. automotive fabric
sales increases as a result of increased North American automobile production
during the third quarter. While headliner sales increased this quarter over the
prior year, bodycloth sales showed the most dramatic improvement as the Company
supplied bodycloth for several popular models. Partially offsetting the domestic
growth were foreign sales declines. A shift in European market share away from a
key customer in the U.K. and the temporary loss of business in Mexico accounted
for the foreign sales decline. Sales of worldwide automotive fabrics increased
to $272.5 million for the nine-month period ended July 4, 1999 from $260.6
million for the comparable period of the prior year for the same reasons noted
above.
Home fashions sector sales for the quarter decreased 33.0% to $24.2 million from
$36.1 million in the comparable period of the prior year. The decrease for the
quarter was attributable to the cotton jersey knit sheeting program, which the
Company exited due to below cost imports, and lower demand for window curtains
caused again by low cost imports. Home fashions sales for the first nine months
of fiscal 1999 decreased 18.5% to $90.7 million as compared to $111.3 million in
the prior year due primarily to below cost imports and lower demand for cotton
jersey knit sheets.
Sales of Industrial/Specialty market fabrics for the quarter declined by 19.4%
to $13.3 million as compared to $16.5 million for the third quarter of the
previous year. This decline was primarily attributable to a decrease in the
sales volume of hook and loop closure fabrics in the European market due to a
resourcing to a local supplier. Additionally, sales declined because the Company
ceased production of nylon fiber during fiscal 1999. Sales of
Industrial/Specialty market fabrics for the nine-month period ended July 4, 1999
declined 29.5% to $35.1 million from $49.8 million in the comparable period of
the prior year due to the reasons described above.
Gross margin for the quarter ended July 4, 1999, decreased to $31.7 million, or
14.5% of net sales, from $47.0 million, or 20.2% of net sales, for the same
quarter a year ago. The decrease was predominately attributable to volume
declines, which resulted in operating inefficiencies. Most notably, the sheeting
and window curtains decreases in Home Fashions dramatically affected volume and
operating efficiencies in three of the Company's operations as both of the
products are internally knit, finished and cut and sewn in the Company's
facilities. The volume from vertical integration which contributed significantly
to the Company's growth and performance in fiscal 1998 has not been replaced and
therefore has eroded fiscal 1999 results. In addition, gross margin was
negatively impacted by a $2.7 million charge resulting from a company-wide
inventory reduction effort. To partially offset these declines, fixed costs have
been reduced in several operations. Gross margin for the first nine months of
fiscal 1999 decreased to $105.8 million compared to $127.7 million for the first
nine months of fiscal 1998. This resulted in a lower gross margin percentage of
16.2% of net sales versus 18.9% of net sales for the comparable nine-month
period due mainly for the reasons cited above.
Selling and administrative expenses were $27.7 million, or 12.7% of net sales,
compared to $25.8 million, or 11.1% of net sales, for the same quarter a year
ago. A significant increase in selling and administrative expenses in the third
quarter was related to an additional bad debt reserve provision of $1.2 million
associated with the financial difficulties of an apparel customer, who recently
filed for Chapter 11 protection. Starting in the third quarter of fiscal 1999,
sales to this customer were on a cash basis. The bad debt reserve provision
covered consigned inventory not recoverable by the Company and the remaining
accounts receivable balance deemed uncollectible. Selling and administrative
expenses increased to $81.1 million, or 12.5% of net sales, for the nine months
ended July 4, 1999, compared to $76.6 million, or 11.4% of net sales, for the
same period a year ago. The year over year increase was caused by the bad debt
reserve provision of $3.0 million for the apparel customer who filed Chapter 11
along with consulting fees to improve operational efficiencies and professional
fees for the investigation of the accounting irregularity in the Home Fashions
sector.
Interest expense for the quarter ended July 4, 1999, was $4.2 million compared
to $3.2 million for the same prior year quarter. For the nine months ended July
4, 1999, interest expense was $12.5 million compared to $8.8 million for the
same period a year ago. The quarter and year-to-date increases in interest
expense were primarily attributable to additional long-term debt used to fund
the Company's stock repurchase program.
For the quarter ended July 4, 1999, other income, net was $0.8 million compared
to $1.0 million for the same prior year period. This decrease for the quarter
was due to a one-time gain of $0.7 million in the third quarter of fiscal 1998
from the sale of an investment only partially offset by a gain on the sale of
fixed assets of $0.4 million in third quarter 1999. Other (expense)/income, net
for the nine months ended July 4, 1999 was ($1.9) million compared to $0.8
million for the same period a year ago. This decline was due to non-recurring
investment gains and insurance recoveries of $1.5 million in the nine-month
period of fiscal 1998 and equity investment losses of $1.6 million in the
nine-month period of fiscal 1999.
The income tax provision for the first nine months of fiscal 1999 was $2.2
million, or 21.6% of income before income taxes, compared to $14.4 million, or
33.5% of income before income taxes for the same period a year ago. The decrease
in the effective income tax rate was primarily due to a one-time net benefit
derived from a dividend paid by the Company's United Kingdom subsidiary to its
parent company under the Advance Corporation Tax rules and the US-UK Income Tax
Treaty.
For the quarter ended July 4, 1999, net income was $0.9 million, or $.04 per
diluted share, compared to net income of $12.8 million, or $.49 per diluted
share, for the same quarter a year ago. Net income for the nine months ended
July 4, 1999 was $8.0 million, or $.36 per diluted share, compared to $28.6
million, or $1.10 per diluted share, for the comparable period of the previous
year.
Restructuring charges of $6.5 million were recorded during the fourth quarter of
fiscal 1998 for the restructuring of two of the Company's operations. The
restructuring plan provided for the closing of a yarn manufacturing facility,
downsizing of a product line-focused operation, the write-down of impaired
assets and the payment of severance costs, lease exit costs and other
obligations. During fiscal 1998, $3.5 million of impaired assets were
written-down and $0.3 million of severance costs were taken against the reserve.
During fiscal 1999, the Company closed the yarn manufacturing facility,
substantially downsized the operation within the apparel sector and paid the
majority of severance costs. Charges against the reserve during fiscal 1999 were
$1.9 million. The remaining severance costs will be paid out by the end of
fiscal year 1999. The yarn manufacturing facility is expected to be sold in the
fourth quarter.
Liquidity and Capital Requirements
- ----------------------------------
At July 4, 1999, working capital was $183.7 million compared to $211.3 million
at September 27, 1998. The decrease in working capital was primarily due to the
decrease in cash and an increase in short-term borrowings used for the Company's
share repurchase program and the final accelerated contingent payment for the
acquisition of Hofmann Laces, and to the decrease in inventory resulting from
the Company's inventory reduction initiative. Additionally, accrued liabilities
declined primarily related to the income tax benefit. The Company maintains
flexibility with respect to its seasonal working capital needs through a
committed revolving credit facility of $150 million and its continued access to
other traditional sources of funds, including uncommitted lines of credit
aggregating $135 million, and the ability to receive advances against its
factored accounts receivable. At July 4, 1999, borrowing availability against
the Company's revolving credit facility was $100 million and availability under
its uncommitted bank lines of credit was $91.2 million. Management believes that
the Company's financial position and operating performance will continue to
provide the Company with the ability to obtain necessary capital from the
appropriate financial markets.
On December 18, 1998, the Company issued $145 million of unsecured, ten-year
notes with a fixed coupon rate of 7.06%. The net proceeds were used to repay a
portion of the Company's outstanding borrowings on its uncommitted lines of
credit and its revolving credit facility.
During the first nine months of fiscal 1999, the Company repurchased 961,593
shares of the Company's common stock at an average price of $13.36. As of July
4, 1999, the Company had repurchased a total of 3,496,793 shares (of the
authorized 3,500,000 shares) at an average price of $15.58 per share. The
Company's repurchases of shares were recorded as treasury stock and resulted in
a reduction in stockholders' equity. On August 6, 1999, the Company's Board of
Directors authorized and the Company repurchased 3,071,712 shares of the
Company's common stock from a beneficial owner at $9.50 per share for a total
price of $29.2 million.
Contingencies and Future Operations
- -----------------------------------
Since January 1992, the Company has been involved in discussions with the United
States Environmental Protection Agency ("EPA") regarding remedial actions at its
Gold Mills, Inc. ("Gold") facility in Pine Grove, Pennsylvania which was
acquired in October 1986. Between 1988 and 1990, the Company implemented a
number of corrective measures at the facility in conjunction with the
Pennsylvania Department of Environmental Resources and incurred approximately
$3.5 million in costs. Subsequently, through negotiations with the EPA, Gold
entered into a Final Administrative Consent Order with the EPA, effective
October 14, 1992. Pursuant to such order, Gold has performed (i) certain
measures designed to prevent any potential threats to the environment at the
facility and (ii) an investigation to fully determine the nature of any release
of hazardous substances at the facility. The Company has not received a response
to its report filed with the EPA. Upon receipt of EPA comments, Gold will
conduct a study to evaluate alternatives for any corrective action which may be
necessary at the facility. The failure of Gold to comply with the terms of the
Consent Order may result in the imposition of monetary penalties against Gold.
In the fourth quarter of 1992, a pre-tax charge of $8.0 million was provided for
the estimated future cost of the additional remediation.
During the fourth quarter of 1992, the Company also received a Notice of
Violation from the North Carolina Division of Environmental Management
concerning ground water contamination on or near one of its North Carolina
facilities. The Company has voluntarily agreed to allow the installation of
monitoring wells at the site but denies that such contaminants originated from
the Company's operations or property. An additional pre-tax charge of $1.3
million was provided in the fourth quarter of 1992 to reflect the estimated
future costs of monitoring this and other environmental matters including the
removal of underground storage tanks at the Company's facilities. The Company
has removed substantially all underground storage tanks at its facilities. At
July 4, 1999, environmental accruals amounted to $4.4 million of which $3.4
million is non-current and is included in other non-current liabilities in the
balance sheet.
Several purported class action lawsuits have been filed on behalf of purchasers
of the Company's common stock against the Company and certain of its officers
and directors. These lawsuits were consolidated by order of the Court on January
8, 1999. A Consolidated and Amended Class Action Complaint (the "Consolidated
Complaint") was filed on February 8, 1999. The Consolidated Complaint purports
to allege claims under Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934 and Rule 10b-5 promulgated thereunder, in connection with the Company's
public disclosure of accounting irregularities at the Hofmann Laces unit in
fiscal year 1998. Specifically, the Consolidated Complaint alleges that, during
the alleged class period (January 20, 1998 through October 26, 1998), defendants
materially misrepresented the Company's financial condition and overstated the
Company's reported earnings. No specific amount of damages is sought in the
Consolidated Complaint.
On April 9, 1999, defendants filed a motion to dismiss the Consolidated
Complaint. On July 21, 1999, the Court entered an order dismissing all claims
against one of the Company's officers but denied the Company and one of its
director's motion to dismiss. The Company intends to vigorously defend the
lawsuits.
The Securities and Exchange Commission (the "Commission") has issued a formal
Order Directing Private Investigation and Designating Officers To Take Testimony
(the "Formal Order") with respect to accounting irregularities at the Hofmann
Laces Unit which the Company had previously disclosed in press releases in
October and November 1998. Prior to the issuance of the Formal Order, the
Company had voluntarily provided certain information to the Commission
concerning the accounting irregularities at the Hofmann Laces Unit. The Company
has delivered documents to, and intends to continue cooperating fully with, the
Commission.
The Company is also involved in various litigation arising in the ordinary
course of business. Although the final outcome of these legal and environmental
matters cannot be determined, based on the facts presently known, it is
management's opinion that the final resolution of these matters will not have a
material adverse effect on the Company's financial position or future results of
operations.
Shortly after the Company's fiscal 1998 Form 10-K filing, the water shortage
situation in the city of Greensboro, North Carolina substantially improved and
did not impact the Company's operations during the first nine months of fiscal
1999. There are currently no voluntary or mandated water restrictions in
Greensboro. However, during fiscal 1999, the Company took steps to improve water
efficiency in the operations should another water shortage arise.
Year 2000
- ---------
The Year 2000 issue affecting most entities, including the Company, results from
the possible inability of internal and external computer systems and
applications to recognize and process data pertaining to years after 1999. Based
upon recently completed Year 2000 compliance assessments of both internal
information technology and embedded systems for the Company's facilities,
equipment and infrastructure, the Company expects to successfully implement any
necessary systems and programming changes prior to the turn of the century in
its domestic and international operations. The planning, inventory, impact
analysis and individual remediation/testing phases have been completed. The
Company is currently in the process of completing a fully integrated testing
phase as the final step in our remediation/testing. An overall contingency plan
and individual contingency plans have been developed for execution throughout
the remainder of 1999. As described in more detail below, contingency plans for
the Company as a whole and for individual locations are being developed.
Suppliers and customers with whom the Company has material relationships have
been contacted to determine their Year 2000 readiness, and, where the responses
are not satisfactory the Company is developing contingency plans.
The Company has spent $1.1 million to date for Year 2000 readiness. Management's
current estimate for the total cost of Year 2000 compliance tasks is $1.7
million. This amount has been included in the Company's operating budget and is
not from the deferral of other information technology projects. The estimated
amount for the Year 2000 compliance project is relatively low due to the
Company's commitment five years ago to reengineer the existing business
processes and information systems. As a result, some costs that otherwise would
have been associated with Year 2000 readiness issues were previously expensed
during the Company's reengineering period.
The Company is developing contingency plans for the Company as a whole and for
individual locations in order to minimize any potential Year 2000 problems,
including internal and external risks such as failures within the operational
systems, financial systems, embedded or plant floor control systems,
spreadsheets, suppliers, customers, financial service providers and other
miscellaneous internal or external risks. Some contingency plans have been
developed for execution throughout the remainder of 1999, including identifying
alternate suppliers, determining appropriate levels of safety stock, contacting
customers to coordinate orders, and printing hard copies of reports that
otherwise would be available only on computer. Other contingency plans have been
developed for execution as necessary if Year 2000 problems are incurred,
including the use of manual intervention and alternate power sources to minimize
disruptions in the operating and financial systems should there be an
interruption in utility services and the availability of personnel in the event
of a quality issue related to a Year 2000 malfunction. The Company will also
develop Contingency Assurance Plans and Contingency Assurance Teams that will
immediately respond and address unforeseen Year 2000 problems during the
transition period between 1999 and 2000.
The reasonably likely worst case scenario that could arise as a result of
service suppliers' Year 2000 problems would be an interruption of normal
business operations. The worst case scenario would include an interruption in
utility services that would halt the manufacturing process. To the Company's
advantage, the majority of the Company's manufacturing facilities normally do
not operate during the few days before and after a new year. Accordingly, if a
Year 2000 problem such as loss of utility service occurs but is resolved during
the first few days of 2000, the interruption to the production process will be
more limited than otherwise would be the case. However, if Year 2000 problems
prevent manufacturing for several days, a loss of revenue might result. The
amount of lost revenue would depend on the duration of the problem and amount of
deliverable goods in inventory. There can be no assurance that there will not be
a delay in, increased costs or a material disruption of business activities
associated with Year 2000 readiness.
Foreign Currency Translation
- ----------------------------
The Company has a majority-owned foreign subsidiary, Grupo Ambar S.A. de C. V.
that operates in Mexico. Effective January 1, 1999, Mexico's economy was no
longer considered "highly inflationary" for financial reporting purposes because
the cumulative Mexican inflation rate for the immediately preceding three years
fell below 100%. As a result, the functional currency for Grupo Ambar S.A. de C.
V. returned to the Mexican peso from the U.S. dollar during the Company's second
quarter of fiscal 1999. Translation adjustments appear as Other Comprehensive
Income in the stockholders' investment section of the balance sheet and not in
the results of operations. This change in accounting treatment was not material
to the results of operations or financial position of the Company as of or for
the nine-month period or quarter ended July 4, 1999 and is not expected to have
a material impact on the future results of operations or financial position of
the Company.
Safe Harbor-Forward-Looking Statements
- --------------------------------------
From time to time, the Company may publish forward-looking statements relative
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development activities
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements.
All statements other than statements of historical fact included in this
document, including, without limitation the statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" are,
or may be deemed to be, forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Important factors that could cause actual results to differ materially
from those discussed in such forward-looking statements include:
1. general economic factors including, but not limited to, changes in
interest rates, foreign currency translation rates, consumer
confidence, housing starts, trends in disposable income, changes in
consumer demand for goods produced, and cyclical or other downturns
2. the overall level of automotive production and the production of
specific car models
3. fashion trends
4. information and technological advances including Year 2000 issues
5. cost and availability of raw materials, labor and natural and other
resources
6. domestic and foreign competition
7. domestic and foreign governmental regulations and trade policies
8. reliance on major customers
9. success of marketing, advertising and promotional campaigns
10. inability to achieve cost reductions through consolidation and
restructuring of acquired companies
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings. Reference is made to Item 3 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 27, 1998, which item is
incorporated herein by reference, as modified by this report on Form 10-Q.
Items 2 - 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit No.
- -----------
3 Restated Certificate of Incorporation of the Company, dated June 8, 1999
(filed herewith)
10(a)First Amendment to Revolving Credit Agreement, dated May 5, 1999, by and
between the Company, as borrower, and Gold Mills, Inc., Raschel Fashion
Interknitting, Ltd and Curtains and Fabrics, Inc., as guarantors, and the
banks listed therein (filed herewith)
10(b)Fifth Amendment to Stockholders' Agreement, dated June 22, 1999, by and
among Charles A. Hayes, Maurice Fishman and the Company (filed herewith)
10(c)Fourth Amendment to Stockholders' Agreement, dated June 22, 1999, by and
among Charles A. Hayes, George Greenberg, Maurice Fishman and the Company
(filed herewith)
10(d)* Amendment to the Company's 1991 Stock Option Plan (filed herewith)
*Represents management contracts or compensatory plans or arrangements.
(b) Reports on Form 8-K. Not Applicable
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GUILFORD MILLS, INC.
(Registrant)
Date: August 17, 1999 By: /s/Terrence E. Geremski
-----------------------
Terrence E. Geremski
Executive Vice President/
Chief Financial Officer
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 17, 1999 By:
-----------------------
Terrence E. Geremski
Executive Vice President/
Chief Financial Officer
EXHIBIT 3
RESTATED CERTIFICATE OF INCORPORATION
OF
GUILFORD MILLS, INC.
This Restated Certificate of Incorporation of Guilford Mills, Inc.
(hereafter called the "Corporation") was duly adopted in accordance with the
provisions of Section 245 of the Delaware General Corporation Law. The original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on August 4, 1971. This Restated Certificate of
Incorporation was adopted by the Board of Directors of the Corporation without a
vote of stockholders and only restates and integrates and does not further amend
the provisions of the Corporation's Certificate of Incorporation as heretofore
amended or supplemented, and there is no discrepancy between those provisions
and the provisions of this Restated Certificate of Incorporation.
FIRST: The name of the Corporation is GUILFORD MILLS, INC.
SECOND: The address, including street number, city and county of the
registered office of the Corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington, County of New Castle; and the name of the registered
agent of the Corporation in the State of Delaware at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business and of the purposes to be conducted
and promoted by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
FOURTH: The Corporation shall be authorized to issue two classes of
stock to be designated, respectively, "Common Stock" and "Preferred Stock"; the
total number of shares of all classes of stock which the corporation shall have
authority to issue shall be sixty-six million (66,000,000); the total number of
shares of Common Stock shall be sixty-five million (65,000,000) and the par
value of each share of Common Stock shall be two cents ($.02); and the total
number of shares of Preferred Stock shall be one million (1,000,000) and the par
value of each share of Preferred Stock shall be one dollar ($1.00).
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby expressly vested with authority to fix
by resolution or resolutions the designations and the powers, preferences and
relative participating, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, including, without
limitation, the voting powers, if any, the dividend rate, conversion rights,
redemption price or liquidation preference, of any series of Preferred Stock,
and to fix the number of shares constituting any such series and to increase or
decrease the number of shares of any such series (but not below the number
shares thereof then outstanding).
FIFTH: The name and the mailing address of the incorporator is as
follows:
Name Mailing Address
---- ----------------
Stephen E. Jacobs c/o Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the Corporation, including the election of the Chairman of the Board
of Directors, if any, the President, the Treasurer, the Secretary, and other
principal officers of the Corporation, shall be vested in its Board of
Directors. The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the By-Laws. The
phrase "whole Board" and the phrase "total number of directors" shall be deemed
to have the same meaning, to wit, the total number of directors which the
Corporation would have if there were no vacancies. No election of directors need
be by written ballot.
2. The Board of Directors shall be divided into three classes,
as nearly equal in number as possible, with the term of office of one class
expiring each year. At the 1983 annual meeting of stockholders, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected to
hold office for a term expiring at the second succeeding annual meeting and
directors of the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. At each annual meeting of stockholders
following such initial classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election.
NINTH: Special Meetings of stockholders of the Corporation may be
called only by the Board of Directors pursuant to a resolution approved by a
majority of the whole Board of Directors.
TENTH: 1. (A) In addition to any affirmative vote required by law or
this Certificate of Incorporation, and except as otherwise expressly provided in
paragraph 2 of this Article Tenth:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested Stockholder (as
hereinafter defined) or (b) any other corporation (whether or not itself an
Interested Stockholder) which is, or after such merger or consolidation would
be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder or any Affiliate of any Interested Stockholder of any
assets of the Corporation or any Subsidiary having an aggregate Fair Market
Value (as hereinafter defined) of $2,000,000 or more; or
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate
of any Interested Stockholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market Value of $2,000,000
or more; or
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested Stockholder; or
(v) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Stockholder or any Affiliate of any
Interested Stockholder; shall require the affirmative vote of the holders of at
least eighty percent (80%) of the then outstanding shares of capital stock
entitled to vote for the election of directors of the Corporation authorized to
be issued from time to time under Article Fourth of this Certificate of
Incorporation (the "Voting Stock"), voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise. Notwithstanding
any other provision of this Certificate of Incorporation to the contrary, for
purposes of this Article Tenth, each share of the Voting Stock shall have one
vote.
(B) The term "Business Combination" as used in this Article Tenth
shall mean any transaction which is referred to in any one or more of clauses
(i) through (v) of subparagraph (A) of this paragraph 1.
2. The provisions of paragraph 1 of this Article Tenth shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of this Certificate of Incorporation, if all of the conditions
specified in either of the following subparagraphs (A) and (B) are met:
(A) The Business Combination shall have been approved by a
majority of the Continuing Directors (as hereinafter defined); provided,
however, that such approval shall only be effective if obtained at a meeting at
which a Continuing Director Quorum (as hereinafter defined) is present.
(B) All of the following conditions shall have been met:
(i) the aggregate amount of (x) cash and (y) Fair Market
Value as of the date of the consummation of the Business Combination of
consideration other than cash, to be received per share by holders of Common
Stock in such Business Combination shall be at least equal to the highest amount
determined under sub-clauses (a), (b) and (c) below:
(a) (if applicable) the highest per share price
(including) any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any share of Common Stock acquired
by it (1) within the two year period immediately prior to the first public
announcement of the proposal of the Business Combination (the "Announcement
Date") or (2) in the transaction in which it became an Interested Stockholder,
whichever is higher;
(b) the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the Interested Stockholder became
an Interested Stockholder (such latter date is referred to in this Article Tenth
as the "Determination Date"), whichever is higher; and
(c) (if applicable) the price per share equal to the
Fair Market Value per share of Common Stock determined pursuant to sub-paragraph
(B)(i)(b) above, multiplied by the ratio of (1) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of Common Stock acquired
by it within the two year period immediately prior to the Announcement Date to
(2) the Fair Market Value per share of Common Stock on the first day in such two
year period on which the Interested Stockholder acquired any shares of Common
Stock.
(ii) the aggregate amount of (x) cash and (y) Fair Market
Value as of the date of the consummation of the Business Combination of
consideration other than cash, to be received per share by holders of shares of
any class of outstanding Preferred Stock (as hereinafter defined) shall be at
least equal to the highest amount determined under sub-clauses (a), (b), (c) and
(d) below:
(a) (if applicable) the highest per share price
including any brokerage commissions, transfer taxes and soliciting dealers' fees
paid by the Interested Stockholder for any shares of such class of Preferred
Stock acquired by it (1) within the two year period immediately prior to the
Announcement Date or (2) in the transaction in which it became an Interested
Stockholder, whichever is higher;
(b) the highest preferential amount per share to which
the holders of shares of such class of Preferred Stock would be entitled in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation, regardless of whether the Business Combination
to be consummated constitutes such an event;
(c) the Fair Market Value per share of such class of
Preferred Stock on the Announcement Date or on the Determination Date, whichever
is higher; and
(d) (if applicable) the price per share equal to the
Fair Market Value per share of such class of Preferred Stock determined pursuant
to subparagraph (B)(ii)(c) above, multiplied by the ratio of (1) the highest per
share price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Stockholder for any shares of such class
of Preferred Stock acquired by it within the two year period immediately prior
to the Announcement Date to (2) the Fair Market Value per share of such class of
Preferred Stock on the first day in such two year period upon which the
Interested Stockholder acquired any shares of such class of Preferred Stock.
The provisions of this subparagraph (B)(ii) shall be required
to be met with respect to every class of outstanding Preferred Stock, whether or
not the Interested Stockholder has previously acquired any shares of a
particular class of Preferred Stock.
(iii) the consideration to be received by holders of a
particular class of outstanding Voting Stock shall be in cash or in the same
form as the Interested Stockholder has previously paid for shares of such class
of Voting Stock. If the Interested Stockholder has paid for shares of any class
of Voting Stock with varying forms of consideration, the form of consideration
for such class of Voting Stock shall be either cash or the form used to acquire
the largest number of shares of such class of Voting Stock previously acquired
by it.
(iv) after such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such Business
Combination:
(a) except as approved by a majority of the
Continuing Directors, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not cumulative)
on the outstanding Preferred Stock;
(b) there shall have been (1) no reduction in the
annual rate of dividends paid on the Common Stock (except as necessary to
reflect any subdivision of the Common Stock), except as approved by a majority
of the Continuing Directors, and (2) an increase in such annual rate of
dividends as necessary to reflect any reclassification (including any reverse
stock split), recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of the Common Stock,
unless the failure to so increase such annual rate is approved by a majority of
the Continuing Directors; and
(c) such Interested Stockholder shall not have become
the beneficial owner of any additional shares of Voting Stock except as part of
the transaction which results in such Interested Stockholder becoming an
Interested Stockholder. The approval by a majority of the Continuing Directors
of any exception to the requirements set forth in clauses (a) and (b) above
shall only be effective if obtained at a meeting at which a Continuing Director
Quorum is present.
(v) after such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a stockholder), of
any loans, advances, guarantees, pledges or other financial assistance or any
tax credits or other advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise.
(vi) a proxy or information statement describing the
proposed Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to public stockholders of the Corporation at least
30 days prior to the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed pursuant to such
Act or subsequent provisions).
3. For the purposes of this Article Tenth:
(A) The term "person" shall mean any individual, firm,
corporation or other entity.
(B) The term "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the Corporation or
any Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who or which:
(i) is the beneficial owner (as hereinafter defined) of more
than ten percent (10%) of the Voting Stock; or
(ii) is an Affiliate (as hereinafter defined) of the
Corporation and at any time within the two year period immediately prior to the
date in question was the beneficial owner of ten percent (10%) or more of the
Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the two year period
immediately prior to the date in question beneficially owned by any Interested
Stockholder, if such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933, as amended.
(C) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or
Associates has, directly or indirectly, (a) the right to acquire (whether such
right is exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b) the right to
vote pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly,
by any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Voting Stock.
(D) For the purposes of determining whether a person is an
Interested Stockholder pursuant to subparagraph (B) of this paragraph 3, the
number of shares of Voting Stock deemed to be outstanding shall include shares
deemed owned through subparagraph (C) of this paragraph 3 but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
(E) The terms "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect on
August 1, 1983.
(F) The term "Subsidiary" means any Corporation of which a
majority of any class of equity security is owned directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in subparagraph (B) of this paragraph 3, the
term "Subsidiary" shall mean only a Corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the Corporation.
(G) The term "Continuing Director" means any member of the Board
of Directors of the Corporation (the "Board") who is unaffiliated with the
Interested Stockholder and who was either serving on the Board on September 30,
1983 or who was a member of the Board prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a Continuing
Director who is unaffiliated with the Interested Stockholder and is recommended
or elected to succeed a Continuing Director by a majority of Continuing
Directors, provided that such recommendation or election shall only be effective
if made at a meeting at which a Continuing Director Quorum is present.
(H) The term "Continuing Director Quorum" means sixty-six and
two-thirds percent (66 2/3%) of all Continuing Directors capable of exercising
the powers conferred upon them under the provisions of the Certificate of
Incorporation or By-Laws of the Corporation or by law.
(I) The term "Fair Market Value" means: (i) in the case of stock,
the highest closing sale price during the 30 day period immediately preceding
the date in question of a share of such stock on the Composite Tape for New York
Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30 day period preceding the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available the fair market value on the date in question of a share of such stock
as determined by the Board in good faith; and (ii) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined in good faith by a majority of Continuing Directors,
provided that such determination shall only be effective if made at a meeting at
which a Continuing Director Quorum is present.
(J) The term "Preferred Stock" shall mean any class of preferred
stock which may from time to time be authorized in or by the Certificate of
Incorporation of the Corporation and which by the terms of its issuance is
specifically designated "Preferred Stock" for purposes of this Article Tenth.
(K) In the event of any Business Combination in which the
Corporation survives, the phrase "other consideration to be received" as used in
subparagraphs (B)(i) and (ii) of paragraph 2 of this Article Tenth shall include
the shares of Common Stock and/or the shares of any other class of Voting Stock
retained by the holders of such shares.
4. Nothing contained in this Article Tenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
5. Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this Certificate of
Incorporation or the By-Laws of the Corporation), the affirmative vote of the
holders of eighty percent (80%) or more of the shares of Voting Stock, voting
together as a single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with, this Article Tenth.
ELEVENTH: Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the Corporation to the contrary, no action
required to be taken or which may be taken at any annual or special meeting of
stockholders of the Corporation may be taken by written consent without a
meeting, except (1) any action which may be taken solely upon the vote or
consent of holders of Preferred Stock or (2) any action taken upon the signing
of a consent in writing, setting forth the action so taken, by all the
stockholders of the Corporation entitled to vote thereon. Notwithstanding any
other provisions of this Certificate of Incorporation or the By-Laws of the
Corporation to the contrary (and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of Incorporation or the
By-Laws of the Corporation), the affirmative vote of the holders of eighty
percent (80%) or more of the outstanding shares of capital stock entitled to
vote for the election of directors, voting together as a single class, shall be
required to amend or repeal, or adopt any provisions inconsistent with, this
Article Eleventh.
TWELFTH: The power to make, alter, or repeal the By-Laws, and to adopt
any new By-Law, shall be vested in the Board of Directors. Notwithstanding any
other provisions of this Certificate of Incorporation or the By-Laws of the
Corporation to the contrary, the stockholders of the Corporation may exercise
their power to alter, amend, repeal or adopt By-Laws of the Corporation only by
the affirmative vote of the holders of sixty-six and two-thirds percent (66
2/3%) or more of the outstanding shares of capital stock entitled to vote for
the election of directors, provided that notice of such proposed alteration,
amendment, repeal or adoption is included in the notice of the meeting called
for the taking of such action. Notwithstanding any other provisions of this
Certificate of Incorporation or the By-Laws of the Corporation to the contrary
(and notwithstanding the fact that a lesser percentage may be specified by law,
this Certificate of Incorporation or the By-Laws of the Corporation), the
affirmative vote of the holders of eighty percent (80%) or more of the
outstanding shares of capital stock entitled to vote for the election of
directors, voting together as a single class shall be required to amend or
repeal, or adopt any provisions inconsistent with, this Article Twelfth.
THIRTEENTH: Except as otherwise provided herein, from time to time any
of the provisions of this Certificate of Incorporation may be amended, altered
or repealed by the vote of holders of sixty-six and two-thirds percent (66 2/3%)
or more of the outstanding shares of capital stock entitled to vote for the
election of directors, provided that notice of such alteration, amendment,
repeal or adoption is included in the notice of the meeting called for the
taking of such action.
FOURTEENTH: A director shall not be personally liable to the
Corporation or any stockholder for monetary damages for breach of fiduciary duty
as a director, except for any matter in respect of which such director shall be
liable under Section 174 of Title 8 of the Delaware Code (relating to the
Delaware General Corporation Law) or shall be liable by reason that, in addition
to any and all other requirements for such liability, he (i) shall have breached
his duty of loyalty to the Corporation or its stockholders, (ii) shall not have
acted in good faith or, in failing to act, shall not have acted in good faith,
(iii) shall have acted in a manner involving intentional misconduct or a knowing
violation of law or, in failing to act, shall have acted in a manner involving
intentional misconduct or a knowing violation of law or (iv) shall have derived
an improper personal benefit. Neither the amendment nor repeal of this Article
Fourteenth, nor the adoption of any provision of the Certificate of
Incorporation inconsistent with this Article Fourteenth, shall eliminate or
reduce the effect of this Article Fourteenth in respect of any matter occurring,
or any cause of action, suit or claim that, but for this Article Fourteenth
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
IN WITNESS WHEREOF, Guilford Mills, Inc. has caused this Certificate to
be signed by Terrence E. Geremski, its Executive Vice President and Chief
Financial Officer, and attested by Robert A. Emken, Jr., its Assistant
Secretary, this 8th day of June, 1999.
GUILFORD MILLS, INC.
By: /s/ Terrence E. Geremski
------------------------
Name: Terrence E. Geremski
Title: Executive Vice President and
Chief Financial Officer
ATTEST:
/s/ Robert A. Emken, Jr
- ------------------------
Robert A. Emken, Jr.
Assistant Secretary
Exhibit 10(a)
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is
dated as May 5, 1999 among GUILFORD MILLS, INC. (the "Borrower"), WACHOVIA BANK,
N.A. (successor by merger to Wachovia Bank of Georgia, N.A.), as Agent (the
"Agent"), and WACHOVIA BANK, N.A. (successor by merger to Wachovia Bank of North
Carolina, N.A.), BANK OF TOKYO-MITSUBISHI, LTD. (successor by merger to Bank of
Tokyo, Ltd.), FIRST UNION NATIONAL BANK (successor by merger to First Union
National Bank of North Carolina), SUNTRUST BANK, ATLANTA, NATIONSBANK, N.A.
(successor by merger to NationsBank, N.A. (Carolinas)), THE FIRST NATIONAL BANK
OF CHICAGO (assignee of NBD BANK) and ABN AMRO BANK, N.V. (collectively, the
"Banks");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Agent and the Banks executed and delivered
that certain Credit Agreement, dated as of September 26, 1995 (the "Credit
Agreement");
WHEREAS, the Borrower has requested and the Agent and the Banks have
agreed to certain amendments to the Credit Agreement, subject to the terms and
conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Agent and the
Banks hereby covenant and agree as follows:
1.DEFINITIONS. Unless otherwise specifically defined herein, each term used
herein which is defined in the Credit Agreement shall have the meaning assigned
to such term in the Credit Agreement. Each reference to "hereof", "hereunder",
"herein" and "hereby" and each other similar reference and each reference to
"this Agreement" and each other similar reference contained in the Credit
Agreement shall from and after the date hereof refer to the Credit Agreement as
amended hereby.
2. AMENDMENT TO SECTION 1.01. Section 1.01 hereby is amended by adding the
following definition in the appropriate alphabetical sequence:
"First Amendment Date" means the date of the First Amendment
to Credit Agreement among the parties hereto, which is May 5,
1999.
3. AMENDMENT TO SECTION 5.15. Section 5.15 of the Credit Agreement hereby
is deleted and the following is substituted therefor:
SECTION 5.15. LOANS OR ADVANCES. Neither the Borrower
nor any of its Subsidiaries shall make loans or advances to any Person
except as permitted by Section 5.16 and except: (i) loans or advances
to employees not exceeding $1,000,000 in the aggregate principal amount
outstanding at any time, in each case made in the ordinary course of
business and consistent with practices existing on July 2, 1995; (ii)
deposits required by landlords, government agencies or public
utilities; (iii) loans or advances to the Borrower or any Guarantor or
permitted pursuant to the Consent and Waiver dated as of March 31, 1999
among the Borrower, the Agent and the Banks pertaining to "UK
Intercompany Loans" (as defined therein); and (iv) other loans or
advances in an aggregate outstanding amount which, together with
Investments permitted by clause (viii) of Section 5.16, do not exceed
(x) for the period from the First Amendment Date through and including
November 30, 1999, 20% of Consolidated Tangible Net Worth, and (y) at
all other times, 10% of Consolidated Tangible Net Worth; PROVIDED that
after giving effect to the making of any loans or advances permitted by
clause (iv) of this Section, if there are any Loans outstanding at that
time, no Default shall be in existence or be created thereby.
4. AMENDMENT TO SECTION 5.16. Section 5.16 of the Credit Agreement hereby
is deleted and the following is substituted therefor:
SECTION 5.16. INVESTMENTS. Neither the Borrower nor
any of its Subsidiaries shall make Investments in any Person except as
permitted by Section 5.15 and except (i) Investments in direct
obligations of the United States Government maturing within one year,
(ii) Investments in certificates of deposit issued by a commercial bank
whose credit is satisfactory to the Agent, (iii) Investments in
commercial paper rated A1 or the equivalent thereof by Standard &
Poor's Rating Group, a division of McGraw-Hill, Inc. or P1 or the
equivalent thereof by Moody's Investors Service, Inc. and in either
case maturing within 6 months after the date of acquisition, (iv)
Investments in tender bonds the payment of the principal of and
interest on which is fully supported by a letter of credit issued by a
United States bank whose long-term certificates of deposit are rated at
least AA or the equivalent thereof by Standard & Poor's Corporation and
Aa or the equivalent thereof by Moody's Investors Service, Inc., (v)
Investments in the Borrower or any Guarantor, (vi) Investments
consisting of acquisitions of stock or assets of any Person which is in
the same or a similar line of business to that of the Borrower
(including, without limitation, manufacturing, sales, marketing,
distribution or other activities relating to components or end-products
used or produced in the textile, fabric, garment or apparel industries)
and which, as a result of such acquisition, becomes a Subsidiary, (vii)
Investments in Persons which are not Subsidiaries of the Borrower and
which are in the same or a similar line of business to that of the
Borrower (including those lines of business described in clause (vi)
above) in an aggregate amount not to exceed 10% of Consolidated Total
Assets and (viii) other Investments in an aggregate which, together
with loans and advances permitted by clause (iv) of Section 5.15, do
not exceed (x) for the period from the First Amendment Date through and
including November 30, 1999, 20% of Consolidated Tangible Net Worth,
and (y) at all other times, 10% of Consolidated Tangible Net Worth;
PROVIDED that after giving effect to the making of any Investments
permitted by clauses (vi) or (vii) of this Section, if there are any
Loans outstanding at that time, no Default shall be in existence or be
created thereby.
5. AMENDMENT TO EXHIBIT F (COMPLIANCE CERTIFICATE). EXHIBIT F hereby is
amended by deleting paragraphs 1 and 2 thereof and substituting the following
therefor:
1. Loans and Advances (Section 5.15)
Neither the Borrower nor any of its Subsidiaries shall make
loans or advances to any Person except as permitted by Section
5.16 and except: (i) loans or advances to employees not
exceeding $1,000,000 in the aggregate principal amount
outstanding at any time, in each case made in the ordinary
course of business and consistent with practices existing on
July 2, 1995; (ii) deposits required by landlords, government
agencies or public utilities; (iii) loans or advances to the
Borrower or any Guarantor or permitted pursuant to the Consent
and Waiver dated as of March 31, 1999 among the Borrower, the
Agent and the Banks pertaining to "UK Intercompany Loans" (as
defined therein); and (iv) other loans or advances in an
aggregate outstanding amount which, together with Investments
permitted by clause (viii) of Section 5.16, do not exceed (x)
for the period from the First Amendment Date through and
including November 30, 1999, 20% of Consolidated Tangible Net
Worth, and (y) at all other times, 10% of Consolidated
Tangible Net Worth; PROVIDED that after giving effect to the
making of any loans or advances permitted by clause (iv) of
this Section, if there are any Loans outstanding at that time,
no Default shall be in existence or be created thereby.
(a) To Employees $
--------------
Limitation $1,000,000
(b) other loans and advances
pursuant to clause (iv) $
--------------
(c) sum of (b) and amount in line (c)
of paragraph 2 below $
---------------
(d) [10%] [20%] of Consolidated Tangible
Net Worth $
---------------
Limitation (c) may not exceed (d)
2. Investments (Section 5.16)
Neither the Borrower nor any of its Subsidiaries shall make
Investments in any Person except as permitted by Section 5.15
and except (i) Investments in direct obligations of the United
States Government maturing within one year, (ii) Investments
in certificates of deposit issued by a commercial bank whose
credit is satisfactory to the Agent, (iii) Investments in
commercial paper rated A1 or the equivalent thereof by
Standard & Poor's Rating Group, a division of McGraw-Hill,
Inc. or P1 or the equivalent thereof by Moody's Investors
Service, Inc. and in either case maturing within 6 months
after the date of acquisition, (iv) Investments in tender
bonds the payment of the principal of and interest on which is
fully supported by a letter of credit issued by a United
States bank whose long-term certificates of deposit are rated
at least AA or the equivalent thereof by Standard & Poor's
Corporation and Aa or the equivalent thereof by Moody's
Investors Service, Inc., (v) Investments in the Borrower or
any Guarantor, (vi) Investments consisting of acquisitions of
stock or assets of any Person which is in the same or a
similar line of business to that of the Borrower (including,
without limitation, manufacturing, sales, marketing,
distribution or other activities relating to components or
end-products used or produced in the textile, fabric, garment
or apparel industries) and which, as a result of such
acquisition, becomes a Subsidiary, (vii) Investments in
Persons which are not Subsidiaries of the Borrower and which
are in the same or a similar line of business to that of the
Borrower (including those lines of business described in
clause (vi) above) in an aggregate amount not to exceed 10% of
Consolidated Total Assets and (viii) other Investments in an
aggregate which, together with loans and advances permitted by
clause (iv) of Section 5.15, do not exceed (x) for the period
from the First Amendment Date through and including November
30, 1999, 20% of Consolidated Tangible Net Worth, and (y) at
all other times, 10% of Consolidated Tangible Net Worth;
PROVIDED that after giving effect to the making of any
Investments permitted by clauses (vi) or (vii) of this
Section, if there are any Loans outstanding at that time, no
Default shall be in existence or be created thereby.
(a) Investments in persons who are not
yet Subsidiaries pursuant to
clause (vii) $
--------------
(b) 10% of Consolidated Total Assets $
--------------
Limitation (a) may not exceed (b)
(c) other Investments
pursuant to clause (viii) $
--------------
(d) sum of (c) and amount in line (b)
of paragraph 1 above $
--------------
(e) [10%] [20%] of Consolidated Tangible
Net Worth $
--------------
Limitation (d) may not exceed (e)
6. RESTATEMENT OF REPRESENTATIONS AND WARRANTIES. The Borrower hereby
restates and renews each and every representation and warranty heretofore made
by it in the Credit Agreement and the other Loan Documents as fully as if made
on the date hereof and with specific reference to this First Amendment and all
other loan documents executed and/or delivered in connection herewith.
7. EFFECT OF AMENDMENT. Except as set forth expressly hereinabove, all
terms of the Credit Agreement and the other Loan Documents shall be and remain
in full force and effect, and shall constitute the legal, valid, binding and
enforceable obligations of the Borrower. The amendments contained herein shall
be deemed to have prospective application only, unless otherwise specifically
stated herein.
8. RATIFICATION. The Borrower hereby restates, ratifies and reaffirms each
and every term, covenant and condition set forth in the Credit Agreement and the
other Loan Documents effective as of the date hereof, except that in about May,
1999, Altimira Centro de la Confeccion, S.A. de C.V. will become a joint venture
50% owned by the Borrower, rather than a Subsidiary.
9. COUNTERPARTS. This First Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
10. SECTION REFERENCES. Section titles and references used in this First
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.
11. NO DEFAULT. To induce the Agent and the Banks to enter into this First
Amendment and to continue to make advances pursuant to the Credit Agreement, the
Borrower hereby acknowledges and agrees that, as of the date hereof, and after
giving effect to the terms hereof, there exists (i) no Default or Event of
Default and (ii) no right of offset, defense, counterclaim, claim or objection
in favor of the Borrower arising out of or with respect to any of the Loans or
other obligations of the Borrower owed to the Banks under the Credit Agreement.
12. FURTHER ASSURANCES. The Borrower agrees to take such further actions as
the Agent shall reasonably request in connection herewith to evidence the
amendments herein contained to the Borrower.
13. GOVERNING LAW. This First Amendment shall be governed by and construed
and interpreted in accordance with, the laws of the State of North Carolina.
14. CONDITIONS PRECEDENT. This First Amendment shall become effective only
upon execution and delivery (i) of this First Amendment by the Borrower, the
Agent and the Required Banks and (ii) of the Consent and Reaffirmation of
Guarantors at the end hereof by each of the Guarantors.
[SIGNATURES CONTAINED ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this First Amendment to be duly executed, under seal, by its duly
authorized officer as of the day and year first above written.
GUILFORD MILLS, INC., (SEAL) WACHOVIA BANK, N.A., (SEAL)
as Borrower as Agent and as a Bank
By:/s/ Terrence E. Geremski By:/s/ Haywood Edmundson, V
----------------------- ---------------------
Title: Chief Financial Officer Title: Senior Vice President
BANK OF TOKYO-MITSUBISHI,(SEAL) FIRST UNION NATIONAL BANK, (SEAL)
LTD., as a Bank as a Bank
By: By: /s/ Richard J. Rizzo Jr.
--------------------- -------------------------
Title: Title: Vice President
SUNTRUST BANK, ATLANTA, (SEAL) NATIONSBANK, N.A., (SEAL)
as a Bank as a Bank
By:/s/ Bradley J. Staples By: /s/ Leesa C. Sluder
---------------------- ---------------------
Title: Vice President Title: Senior Vice President
By:/s/ Kelley E. Brunson
---------------------
Title: Banking Officer
THE FIRST NATIONAL BANK (SEAL) ABN AMRO BANK, N.V., (SEAL)
OF CHICAGO, as a Bank as a Bank
By:/s/ James F. Gable By:/s/G. Mark Clegg, Jr.
--------------------- ----------------------
Title: Customer Service Officer Title: Vice President
By: By:/s/ Larry K Kelley
--------------------- -----------------------
Title: Title: Vice President
<PAGE>
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of the foregoing First
Amendment to Credit Agreement (the "First Amendment"), (ii) consents to the
execution and delivery of the First Amendment by the parties thereto and (iii)
reaffirms all of its obligations and covenants under the Guaranty Agreement
dated as of September 26, 1995 executed by Gold Mills, Inc., as supplemented by
First Supplement to Guaranty entered into by Raschel Fashion Interknitting, Ltd.
and Curtains and Fabrics, Inc., as additional Guarantors, and agrees that none
of such obligations and covenants shall be affected by the execution and
delivery of the First Amendment. This Consent and Reaffirmation may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument.
GOLD MILLS, INC. (SEAL)
By:/s/ Terrence E. Geremski
-------------------------
Title: Chief Financial Officer
RASCHEL FASHION INTERKNITTING,
LTD. (SEAL)
By:/s/ Terrence E. Geremski
-------------------------
Title: Chief Financial Officer
CURTAINS AND FABRICS, INC. (SEAL)
By:/s/ Terrence E. Geremski
-------------------------
Title: Chief Financial Officer
EXHBIT 10(b)
FIFTH AMENDMENT TO STOCKHOLDERS' AGREEMENT
------------------------------------------
THIS FIFTH AMENDMENT TO STOCKHOLDERS' AGREEMENT is entered into this
22nd day of June, 1999, by and among CHARLES A. HAYES ("Hayes"), MAURICE FISHMAN
("Fishman") and GUILFORD MILLS, INC., a Delaware corporation (the "Company").
WITNESSETH:
-----------
WHEREAS, Messrs. Hayes and Fishman and the Company entered into a
Stockholders' Agreement, dated April 30, 1991, as amended, pursuant to which the
Company is required to purchase, upon the death of either Hayes or Fishman, such
number of shares of his Company common stock as equals $5,000,000 and
$4,000,000, respectively (the "1991 Stockholders' Agreement")(capitalized terms
which are not otherwise expressly defined herein shall have the meanings set
forth in the 1991 Stockholders' Agreement); and
WHEREAS, the 1991 Stockholders' Agreement is scheduled to expire on
June 22, 1999; and
WHEREAS, Mr. Hayes and the Company desire to extend the term of the
1991 Stockholders' Agreement beyond such date according to the provisions herein
and Fishman does not desire to be a party to, or subject to the restrictions
under, the 1991 Stockholders' Agreement, beyond June 22, 1999.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Section 7(c) of the 1991 Stockholders' Agreement is hereby deleted
in its entirety and the following section is inserted in its place:
(c) June 22, 2001; provided, however, that the parties hereto
acknowledge and agree that from and after June 22, 1999 this Agreement shall
have no force or effect with respect to Fishman (or his heirs, executors,
administrators, personal representatives, successors, assigns, Estate or Legal
Representative (collectively, the "Fishman Representatives")) or any shares of
Common Stock owned by Fishman or the Fishman Representatives and that none of
Fishman, the Fishman Representatives or the Company shall have any obligation to
one another under, or by virtue of , this Agreement from and after June 22, 1999
(it being acknowledged and understood that this Agreement shall continue in
effect beyond June 22, 1999 according to its terms with respect to the Company
and Mr. Hayes and their respective heirs, executors, adminstrators, personal
representatives, successors and assigns).
2. Except as otherwise expressly set forth above, the 1991
Stockholders' Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as of the day
and year first above written.
GUILFORD MILLS, INC.
By: /s/ Terrence E. Geremski /s/ Charles A. Hayes
------------------------ ---------------------
Terrence E. Geremski Charles A. Hayes
Executive Vice President and
Chief Financial Officer /s/ Maurice Fishman
----------------------
Maurice Fishman
EXHIBIT 10(c)
FOURTH AMENDMENT TO STOCKHOLDERS' AGREEMENT
-------------------------------------------
THIS FOURTH AMENDMENT TO STOCKHOLDERS' AGREEMENT is entered into this
22nd day of June, 1999, by and among CHARLES A. HAYES and GEORGE GREENBERG
(Messrs. Hayes and Greenberg being collectively hereinafter referred to as the
"Stockholders"), MAURICE FISHMAN ("Fishman") and GUILFORD MILLS, INC., a
Delaware corporation (the "Company").
WITNESSETH:
-----------
WHEREAS, the Stockholders, the Company and Fishman entered into a
Stockholders' Agreement, dated June 22, 1990, as amended, pursuant to which the
Company has a right of first refusal in the event any Stockholder or Fishman
transfers his shares of Company common stock under certain circumstances (the
"1990 Stockholders' Agreement")(capitalized terms which are not otherwise
expressly defined herein shall have the meanings set forth in the 1990
Stockholders' Agreement); and
WHEREAS, the 1990 Stockholders' Agreement is scheduled to expire on
June 22, 1999; and
WHEREAS, the Stockholders and the Company desire to extend the term for
the restrictions set forth in the 1990 Stockholders' Agreement beyond such date
according to the provisions herein and Fishman does not desire to be a party to,
or subject to the restrictions under, the 1990 Stockholders' Agreement, beyond
June 22, 1999.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
l. Section 1(d) of the 1990 Stockholders' Agreement is hereby deleted
in its entirety and the following section is inserted in its place:
(d) upon June 22, 2001; provided, however, that the parties
hereto acknowledge and agree that from and after June 22, 1999 this Agreement
shall have no force or effect with respect to Fishman (or his heirs, executors,
administrators, personal representatives, successors and assigns (collectively,
the "Fishman Representatives")) or any shares of Common Stock owned by Fishman
or the Fishman Representatives and that none of Fishman, the Fishman
Representatives or the Company shall have any obligation to one another under,
or by virtue of, this Agreement from and after June 22, 1999 (it being
acknowledged and understood that this Agreement shall continue in effect beyond
June 22, 1999 according to its terms with respect to the Company and Messrs.
Greenberg and Hayes and their respective heirs, successors, representatives and
assigns).
2. Except as otherwise expressly set forth above, the 1990
Stockholders' Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Fourth Amendment as
of the day and year first above written.
GUILFORD MILLS, INC.
By:/s/ Terrence E. Geremski /s/ Charles A. Hayes
------------------------- ---------------------
Terrence E. Geremski Charles A. Hayes
Executive Vice President and
Chief Financial Officer /s/ Maurice Fishman
---------------------
Maurice Fishman
/s/ George Greenberg
---------------------
George Greenberg
EXHIBIT 10(d)
AMENDMENT TO THE GUILFORD MILLS, INC.
1991 STOCK OPTION PLAN
The first paragraph of Article II of the Option Plan is deleted in its
entirety and the following is substituted in its place in order to reflect the
increase in the number of shares authorized to be issued under the Option Plan
from 2,500,000 to 2,750,000:
The total number of shares of common stock of the Company
which may be purchased or acquired pursuant to the exercise of
Options or Rights granted under the Plan shall not exceed, in
the aggregate, Two Million Seven Hundred Fifty Thousand
(2,750,000) shares of the authorized common stock, $.02 par
value per share, of the Company (the "Shares"), such number to
be subject to adjustment as provided in Article XVIII hereof.
Shares that are the subject of Rights and related Options
shall be counted only once in determining whether the maximum
number of Shares that may be purchased or awarded under the
Plan has been exceeded.
<TABLE> <S> <C>
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<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-3-1999
<PERIOD-END> JUL-4-1999
<EXCHANGE-RATE> 1.00
<CASH> 13,088
<SECURITIES> 0
<RECEIVABLES> 170,227
<ALLOWANCES> 0
<INVENTORY> 139,968
<CURRENT-ASSETS> 335,782
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 757,322
<CURRENT-LIABILITIES> 152,109
<BONDS> 0
0
0
<COMMON> 655
<OTHER-SE> 368,381
<TOTAL-LIABILITY-AND-EQUITY> 369,036
<SALES> 651,106
<TOTAL-REVENUES> 651,106
<CGS> 545,288
<TOTAL-COSTS> 545,288
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,534
<INCOME-PRETAX> 10,273
<INCOME-TAX> 2,224
<INCOME-CONTINUING> 8,049
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 8,049
<EPS-BASIC> 0.36
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