Page 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended January 2, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from to
Commission File Number 1-3634
CONE MILLS CORPORATION
(exact name of registrant as specified in its charter)
North Carolina 56-0367025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 Maple Street, Greensboro, N. C. 27405
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,including area code:910-379-6220
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $ .10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
Aggregate market value of voting stock held by nonaffiliates
of the registrant as of March 1, 1994: $ 380,774,053.
Number of shares of common stock outstanding as of March 1,
1994: 27,747,021 shares.
Documents incorporated by reference: Proxy Statement for
Annual Meeting to be held May 10, 1994. Part III, Items 10,
11, 12 and 13.
Index to Exhibits - pages 79-83
<PAGE>
FORM 10-K Page 2
PART I
Item 1. Business
Overview
Cone Mills Corporation ("Cone", "Cone Mills" or the "Company")
is the largest producer of denim fabrics in the world and is
the largest printer of home furnishings fabrics in North
America. Net sales were $769 million in 1993 and $705 million
in 1992. The Company operates in two business segments:
apparel fabrics and home furnishings products, representing
75% and 25%, respectively, of net sales. All wholly owned
manufacturing is performed in the United States, with sales
and marketing activities conducted through a worldwide
distribution network. The Company is the largest domestic
exporter of denim fabrics and is a major exporter of printed
home furnishings fabrics, with export sales of $132 million
for 1993 and $114 million for 1992.
The Company's business strategy is to focus on products and
services that generate attractive margins and in which the
Company believes it is an efficient international competitor.
To this end, the Company has been engaged in the process of
deemphasizing labor-intensive commodity businesses and in the
first quarter of 1994 will conclude an initiative to
discontinue its corduroy and other bottomweight continuous
piece-dyed fabrics product line, the estimated costs of which
were fully provided for in its 1991 financial statements. The
Company utilizes its styling and development expertise and
management depth and experience, in combination with its
versatile manufacturing facilities and technical capabilities,
to compete effectively in its worldwide markets.
Cone became a private company in 1984 in a leveraged
transaction funded with $445 million of bank debt and other
obligations and $20 million of Common Stock and equivalents.
Prior to its public offering in June 1992 the Company had
reduced its debt and other bank obligations by more than $225
million and had invested more than $160 million in capital
improvements. In 1992 the Company raised $63.6 million in net
proceeds through its public offering and replaced its bank
credit agreement with more flexible facilities. As of January
2, 1994, long-term debt comprised 27% of combined long-term
debt and equity capital.
<PAGE>
FORM 10-K Page 3
Item 1.
(continued)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Business Segments
The following table sets forth information concerning net sales and operating income (excluding
restructuring, plant closing and general corporate expenses) for each of the Company's two business
segments as well as net sales of the principal product groups included therein, for fiscal years
1989 through 1993.
Fiscal Year (1)
1993 1992 1991 1990 1989
NET SALES (dollars in millions)
Apparel
Denim $421.8 54.9% $402.4 57.0% $356.6 56.3% $317.4 53.4% $315.8 51.1%
Specialty Sportswear 154.0 20.0 117.6 16.7 101.4 16.1 104.0 17.4 122.1 19.8
Total 575.8 74.9 520.0 73.7 458.0 72.4 421.4 70.8 437.9 70.9
Home Furnishings
Fabrics 94.4 12.3 93.0 13.2 83.7 13.2 80.4 13.5 78.7 12.7
Foam Products 84.6 11.0 84.1 11.9 83.9 13.3 85.4 14.4 89.7 14.5
Real Estate and other 14.4 1.8 8.3 1.2 7.4 1.1 7.6 1.3 11.6 1.9
Total 193.4 25.1 185.4 26.3 175.0 27.6 173.4 29.2 180.0 29.1
Total net sales $769.2 100.0% $705.4 100.0% $633.0 100.0% $594.8 100.0% $617.9 100.0%
OPERATING INCOME (2)
Apparel $68.8 12.0% $67.4 13.0% $20.4 4.5% $25.5 6.1% $41.2 9.4%
Home Furnishings 19.5 10.1 16.3 8.8 19.2 10.9 19.1 11.0 18.3 10.2
(1) Results from continuing operations. See Note 18 of Notes to Consolidated Financial Statements.
(2) Percentages reflect operating income as a percentage of segment net sales.
</TABLE>
<PAGE>
FORM 10-K Page 4
Item 1. Business (continued)
Market Developments
The Company's domestic apparel markets have been affected by
changing demographics associated with the maturation of the
"baby-boom" generation of consumers born between 1946 and
1964. As the baby-boom generation has matured, product trends
have evolved away from commodity-type products to higher
quality products with more diverse styling. As a result,
denim apparel manufacturers desire better fabric quality and
styling to meet consumer demand, as well as faster service to
reduce the risk of changing fashion trends. The size of the
15-to 24-year-old age category, which accounts for the largest
consumption segment of the U.S. population, has become smaller
in recent years; but this segment is expected to expand
beginning in the mid-1990's when the children of baby boomers
begin to reach these ages. Demand for denims is expected to
increase as this segment of the U.S. population expands. By
virtue of its styling expertise, manufacturing versatility and
service capabilities, the Company believes that it has
positioned itself to take advantage of the market
opportunities presented by these demographic changes.
Internationally, consumption of denims has increased in
industrialized countries, notwithstanding moderate population
growth, as these countries continue to adopt U.S. casual
fashion trends. In less industrialized countries, the
potential market for denim jeans has continued to grow as
youth populations expand. The Company believes that these
international market trends present opportunities for long-
term growth through the Company's international distribution
network. Apparel exports have increased sharply in recent
years as 1993 apparel export sales were $124.9 million as
compared with $105.2 million in 1992 and $81.9 million in
1991. In 1993, the Company entered into agreements with the
largest denim manufacturer in Mexico in order to expand both
market and manufacturing presence into Latin America. See
"Business - International Operations".
The Company believes that the demographic trends applicable to
the U.S. markets for its home furnishings fabrics indicate
continued increases in demand as the baby boomers reach ages
traditionally associated with high levels of spending on home
furnishings. The Company also believes that the outlook for
printed home furnishings fabrics is favorable because these
products provide high fashion appearance at affordable prices.
Additionally, there has been an increased international demand
for U.S. styled home furnishings products. Accordingly, the
Company's strategy is to continue to expand its home
furnishings businesses.
<PAGE>
FORM 10-K Page 5
Item 1. Business (continued)
Products for Apparel Markets
Denims. Cone markets and manufactures a wide variety of denim
apparel fabrics. Denims are generally "yarn-dyed", which
means that the yarn is dyed before the fabric is woven. The
result is a fabric with variations in color that give denim
its distinctive appearance. Fabric styling of denims, which
the Company believes to be critical to this market, is
supported by the Company's experienced stylists and extensive
use of computer-aided design and manufacturing systems.
The Company is a leader in denim styling and development, and
believes that it produces a broader range of fashion denim
than any of its competitors. In 1993, Cone sold approximately
400 different styles of denim. The styling process involves
the creation of a wide array of fabric colors, shades and
patterns in a variety of both traditional and innovative
weaves. After weaving, fabrics are processed further in
finishing operations that produce different textures and other
physical properties. During this process, the Company's
product development specialists and stylists generally work in
collaboration with customers to assure that fabrics meet
customer requirements and can be manufactured efficiently.
This creates a strong working relationship that allows Cone to
react quickly to its customers' rapidly changing needs.
Although the markets and end uses for denim are very diverse,
the Company categorizes the market into heavyweight denims and
specialty weight denims. Heavyweight denim is used primarily
in jeans and is by far the largest segment of the denim
market. Within the heavyweight market, the Company further
classifies its denims as "fashion-forward", "fashion-basic"
and "basic".
Fashion-forward denims include innovative products and
trendsetting styles for use primarily in garments sold through
specialty stores and designer sections of department stores.
Cone's customers in this group include Ralph Lauren (Polo),
Calvin Klein, The Gap, and Stussy.
Cone's fashion-basic denims are stylish but have a broader
market than fashion-forward products. The Company's largest
customer in this category is Levi Strauss, whose 501 jeans
are produced solely from the Company's proprietary fabrics.
Other customers include The Gap, Structure and Wrangler.
<PAGE>
FORM 10-K Page 6
Item 1. Business (continued)
Cone's basic denims, with mass market appeal, are used
primarily in garments sold through retail chains, department
stores and catalogs. Customers for this product include
Wrangler, Sasson, Chic, Faded Glory and Land's End. Although
the Company's basic denims are designed for the upscale
segment of these markets, the Company also produces basic
heavyweight blue denim to service mass market needs of certain
customers. While the Company's profit margins from basic
heavyweight blue denim are less than those generally
applicable to its other denim products, sales of this product
constituted approximately 20% of total denim sales in 1993.
Specialty weight denims include a variety of weave
constructions, stripes, colors and weights, and are used
primarily in women's and children's wear. Although these
fabrics constitute only a small portion of the denim market,
they tend to establish market trends and generally command
higher margins because of their use in higher fashion
garments. Cone's customers in this group include OshKosh,
Oxford, The Gap, Timber Creek, Ruff Hewn, Ralph Lauren (Polo),
Guess, Tanner, Woolridge, and Chic.
Specialty Sportswear Fabrics. The Company is the largest
domestic producer of yarn-dyed plaid flannel and solid shade
chamois shirting fabrics. Distribution channels for garments
using these fabrics are broadening to include mass
merchandising retailers. The Company's manufacturing
capability for producing fabrics with a soft texture is
essential to its success in this product group. These fabrics
are primarily manufactured for use in menswear sold through
catalog stores but recently have been used in lighter-weight
apparel products for women's and children's wear. Customers
in this market include M. Fine, Woolrich, L.L. Bean and
Oxford.
The Company styles and distributes a line of specialty print
fabrics for a wide range of branded apparel customers, which
are printed at the Company's Carlisle plant. The markets for
these products are primarily fashion women's and children's
wear, and Cone's customers for these fabrics include OshKosh,
Oxford, Healthtex, M. Fine, and Wrangler.
Through its Carlisle plant, the Company also provides fabric
printing services to converters of fashion apparel fabrics.
These converters purchase unfinished fabrics from weaving
mills, utilize outside sources to dye the fabrics and print
their designs, and then market the finished fabrics to apparel
<PAGE>
FORM 10-K Page 7
Item 1. Business (continued)
manufacturers. Carlisle is well known for its quality,
service and technical capabilities in roller and screen
printing.
Cone also serves niche markets for two-ply, polyester/rayon
uniform and sportswear fabrics. Major end uses include
uniforms for organizations such as United Parcel Service, the
U. S. Postal Service, and police and fire departments.
Polyester/rayon sportswear fabrics are sold primarily for use
in women's wear.
Marketing and Sales. The Company's marketing focus is to
serve upper-end and brandname apparel manufacturers through
the development of innovative products that are recognized in
the marketplace for their distinctive quality and styling.
The Company has also placed its apparel fabrics marketing and
manufacturing activities under the same management in an
effort designed to assure that manufacturing is market driven.
Styles of the Company's denim and other fabrics vary in color,
finish and fabrication, depending upon fashion trends and the
needs of the specific customer. The Company's stylists
monitor fashion trends by periodically traveling throughout
the United States, Europe and the Far East to attend fashion
and trade shows, meet with garment manufacturers and retailers
and conduct market research. Together with the apparel
marketing group, stylists work directly with Cone's customers
to create fabrics that respond to rapidly changing fashion
trends and customer needs.
The Company employs an apparel marketing and sales staff of
more than 150 persons. The apparel marketing group is
organized around two product lines: denim and specialty
sportswear. The Company believes that it has been able to
achieve more effective customer service and improved
efficiency through the integration of its styling,
manufacturing, marketing and customer service functions. The
Company's apparel fabrics marketing group is headquartered in
Greensboro in proximity to its apparel manufacturing
facilities so that customer requirements can be translated
more effectively into finished products. In order to provide
a more direct working relationship with its customers, the
Company also maintains sales offices located in New York, Los
Angeles, San Francisco and Dallas. In addition, the Company
maintains a marketing support office in Brussels, Belgium.
The Company's marketing professionals, together with its
stylists and product development personnel, work as early as
one year in advance of a retail selling season to develop
fabric styles, colors, constructions and finishes. There are
<PAGE>
FORM 10-K Page 8
Item 1. Business (continued)
three annual retail selling seasons: spring, fall (back-to-
school) and Christmas holiday. The Company's sales for a
particular selling season generally begin six months in
advance of that season. The Company's sales force presents
each season's line to customers in its showrooms as well as in
its customers' offices.
Manufacturing. The Company is the largest manufacturer of
denims in the world. Cone bases this conclusion upon capacity
and sales information obtained from trade sources. The
Company is aware that a large foreign-based competitor is a
substantial minority owner in a foreign manufacturing facility
and, in reaching its conclusion, the Company has attributed to
such competitor only its pro rata ownership in this facility.
Cone believes that it has the most versatile denim
manufacturing capabilities in the world. The Company's denim
facilities are modern, flexible, vertically integrated, and
encompass all manufacturing processes necessary to convert raw
fiber into finished fabrics. The Company has extensive
flexibility in its yarn spinning operations, with open-end,
ring and special stretch-yarn spinning equipment. The
Company's denim weaving facilities, which include
approximately 1,200 weaving machines, utilize all major cotton
weaving technologies, including double-width projectile, air-
jet and rapier machines. The Company's dyeing and finishing
facilities include a wide range of technologies, with six
indigo long-chain dyeing machines, package and beam dyeing,
continuous overdye machinery, and raw cotton dyeing equipment.
Specialty dyeing and printing processes for apparel fabrics
are conducted at the Company's Carlisle plant, which is one of
the largest textile printing facilities in the United States.
Cone is recognized internationally as a leader in quality.
The Company uses a number of methods to support this process,
including classroom training of employees, statistical process
quality controls, computer-aided product testing from raw
fiber to finished fabric and computer-aided manufacturing
control systems.
The Company also believes that it is a leader in customer
service. The Company's five denim manufacturing facilities
are continually scheduled and coordinated to maximize
versatility. Approximately 60% of Cone's apparel volume is
shipped under its just-in-time quality assurance and delivery
<PAGE>
FORM 10-K Page 9
Item 1. Business (continued)
program. Cone also is a member of the Textile Apparel Linkage
Council and offers electronic data interchange (EDI) to its
customers and suppliers.
Product and process development is supported by a special
manufacturing development group, which has specialists located
in each facility. This group works with the Company's
stylists and its customers' stylists to produce new products
for the marketplace. The Company uses on-line computer aided
design systems to increase styling effectiveness.
Raw Materials. The primary raw material for the Company's
fabric manufacturing operations is cotton. In past years,
U.S. cotton prices generally exceeded world price levels,
which created a competitive disadvantage for U.S. textile
manufacturers. Because the Company's customers compete with
foreign producers, the Company cannot always pass through
increased cotton costs to its customers. The Food,
Agriculture, Conservation and Trade Act of 1990 and the
regulations promulgated thereunder, which became effective in
August 1991 and is scheduled to expire on July 31, 1996 unless
extended, established trigger mechanisms to modify the
prohibition on cotton imports that has been in effect since
1933 and to implement increased government supply targets.
This has resulted in declines in U.S. cotton prices, which,
together with certain price equalization payments authorized
under this Act, have reduced the Company's effective cotton
costs to world levels. While management believes that
existing legislation and agricultural policies presently allow
U.S. companies to acquire cotton at prices competitive with
offshore manufacturers, there can be no assurance that these
results will always occur.
Since cotton is an agricultural product, its supply and
quality are subject to the forces of nature. Although the
Company has always been able to acquire sufficient supplies of
cotton for its operations in the past, any shortage in the
cotton supply by reason of weather, disease or other factors
could adversely affect the Company's operations. In late 1993
and early 1994, as a result of less favorable supply and
demand balance, primarily related to smaller world cotton
crops in 1993, cotton prices began to rise throughout the
world. See Item 7. "Management's Discussion and Analysis of
Results of Operations and Financial Condition." In order to
assure a continuous supply of cotton, the Company enters into
cotton purchase contracts for several months in advance of
delivery. Since prices for such purchases are sometimes fixed
in advance of shipment, the Company may benefit from its
investments in cotton if prices thereafter rise, or suffer
losses if prices subsequently fall.
<PAGE>
FORM 10-K Page 10
Item 1. Business (continued)
Cone also purchases "greige goods" (fabrics that have not been
dyed or finished), synthetic fibers and dyes and chemicals.
These raw materials have normally been available in adequate
supplies through a number of suppliers.
Competition. The apparel textile business is highly
competitive. No single company dominates the industry and
domestic and foreign competitors range from large, integrated
enterprises to small niche concerns. There are nine major
denim manufacturers in the United States, of which Cone is the
largest. Foreign competition in domestic markets is
principally in the form of imported garments. Primary
competitive factors include price, product styling and
differentiation, customer service, quality and flexibility,
with the significance of each factor dependent upon the
particular needs of the customer and the product involved.
Increased competition in the form of imported apparel, more
aggressive pricing from domestic companies and the
proliferation of newly styled fabrics competing for fashion
acceptance have been factors affecting the Company's business
environment.
The level of import protection in the U.S. for domestic
producers of textiles is subject to both domestic political
and foreign policy considerations. Proposed rules under GATT
would eliminate quota restrictions on imports of textile and
apparel after a ten-year transition period. Any significant
reduction in import protection for domestic textile
manufacturers could adversely affect the Company.
The ratification of NAFTA by Canada, Mexico and the U.S. in
1993 has created the world's largest free-trade zone. In its
present form, the agreement contains safeguards which were
sought by the U.S. textile industry, including a rule of
origin requirement that products be processed in one of the
three countries in order to benefit from NAFTA. The Company
believes that the removal of tariffs on denim and denim jeans
in the participating countries and improved access to Mexico's
consumer markets are opportunities for growth. However, there
can be no assurance that NAFTA will not adversely affect the
Company.
The Company's domestic strategy is to compete primarily on the
basis of quality, styling and service. The Company believes
that the historically high quality of its products and
manufacturing processes has created a competitive advantage,
which it has enhanced by the extensive use of statistical
quality control and investment in modern equipment, including
manufacturing process controls. The Company also believes
<PAGE>
FORM 10-K Page 11
Item 1. Business (continued)
that its experienced stylists and product development
specialists, its use of computer-aided design systems and its
manufacturing versatility have created a competitive advantage
in styling.
The Company's emphasis on customer service is supported by its
just-in-time and quick response programs and by electronic
data interchange (EDI) with customers.
The Company has focused its operations on the manufacture of
fabrics for use in garments that are less vulnerable to import
penetration. The relatively low labor content of these
fabrics and garments, coupled with high levels of demand for
quality, styling and service, present barriers to foreign
competition. The location of the Company's manufacturing
facilities in the U.S. and its emphasis on shortening
production and delivery times allow the Company to respond
more quickly than foreign producers to changing fashion trends
and to its domestic customers' demands for precise production
schedules and rapid delivery.
The Company believes it effectively competes in foreign
markets through export sales. See "Business - International
Operations".
Seasonality. Demand for the Company's apparel products and
the level of the Company's sales fluctuate moderately during
the year. Generally, there is increased consumer demand for
garments made of denim and the Company's specialty apparel
fabrics during the fall (back-to-school) and Christmas holiday
selling seasons. As a result, demand for the Company's
apparel fabrics is generally higher during the first half of
the calendar year when apparel manufacturers are producing for
these selling seasons.
Home Furnishings Products
Textile Fabrics. Carlisle Finishing Company is the largest
U.S. commission printer of fabrics for decorative upholstery,
drapery and other home furnishings applications. As a
commission printer, Carlisle prints fabrics owned by customers
on a fee basis. Customers for Carlisle's printing services
include Waverly Division of F. Schumacher & Co., Ametex, P.
Kaufman, Anju/Woodridge, Covington, Richloom, and Universal.
<PAGE>
FORM 10-K Page 12
Item 1. Business (continued)
The home furnishings fabrics processed at Carlisle are
generally used for upper-end upholstery and drapery prints.
The Carlisle plant is a modern, one-million square foot
facility specializing in rotary screen printing. In recent
years, the Company has invested heavily in computerized color-
mixing systems and automated process controls in order to
support its competitive strategy of focusing on quality and
service. Carlisle has completed its planned screen printing
building addition and in the first quarter of 1993 added the
third of five planned new screen printing machines. Through
this expansion Carlisle increased its home furnishings print
capacity by approximately 35%.
Carlisle marketing headquarters are located in New York City.
Marketing efforts of the New York sales staff are augmented by
close working relationships between Carlisle's production and
technical staff and customers' designers and stylists.
Carlisle also maintains a customer service center that
utilizes electronic data interchange (EDI) with major
customers.
John Wolf Decorative Fabrics is a major "converter" of printed
and solid woven fabrics for upholstery, draperies and
bedspreads. A converter designs and markets fabrics, which
are manufactured and printed for the converter by others.
John Wolf's lines are printed primarily at the Carlisle plant.
John Wolf's fabrics are marketed domestically and
internationally through the division's sales staff and sales
agents. The division's sales staff handles sales to large
customers such as hotels, institutions and furniture
manufacturers, as well as "jobbers", who resell to decorators,
fabric retailers and certain smaller quantity users.
International sales and sales to other smaller customers are
made primarily through agents.
Carlisle competes primarily with two large commission
printers, the Cherokee division of Spartan Mills and Santee
Print Works. John Wolf competes with a large number of
domestic and foreign suppliers of decorative fabrics. Both
Carlisle and John Wolf compete primarily on the basis of
quality and service.
Foam Products. Olympic Products Company is a supplier of
polyurethane foam and related products, primarily to the home
furnishings industry. Olympic's polyurethane foams are used
in upholstered furniture, mattresses, carpet padding and
specialty patient care applications. Related products and
<PAGE>
FORM 10-K Page 13
Item 1. Business (continued)
services include nonwoven fiber batting, specialty fabricated
cushions marketed under the Prelude brand, quilting services
and distribution of other furniture components. Olympic
supplies foam to the automotive market, for use in interior
headliners and side panels, which has become the fastest
growing portion of its business.
Olympic markets its products through its own sales force.
Customers include Bench Craft, Span America, Henredon, Collins
& Aikman, Guilford Mills, Drexel Heritage, Bassett, Bio Clinic
and Milliken.
Olympic has four manufacturing facilities, which are located
in the two largest upholstered furniture manufacturing areas
in the U.S. Three of these facilities are located near High
Point, North Carolina, and one is located in Tupelo,
Mississippi.
Competition in the foam products market generally occurs on a
regional basis as a result of high shipping costs relative to
price associated with these products. Olympic competes with
several larger and numerous small competitors in its foam
products markets. Olympic's strategy is to compete on the
basis of quality and service and, to this end, it has adopted
statistical process quality control techniques and installed
a computerized customer service system.
Raw materials, which are a significant portion of Olympic's
costs, consist primarily of chemicals, dyes and synthetic
fibers. Adequate supplies at competitive costs are generally
available from a number of large suppliers.
Real Estate Activities. The Company owns more than 1,000
acres of real estate in the Greensboro area that were
purchased originally to support the Company's manufacturing
operations. The Company has determined that the land is no
longer needed for this purpose, and has adopted a strategy to
maximize the value of its real estate holdings through the
systematic development and orderly liquidation of this
property, much of which is considered prime residential real
estate. These activities are conducted through a wholly owned
subsidiary, Cornwallis Development Company. Cornwallis'
activities include residential and commercial lot development
and construction, primarily in the upper-end real estate
market. Net sales from real estate activities generally
account for less than two percent of the Company's total net
revenues and these activities have been profitable.
<PAGE>
FORM 10-K Page 14
Item 1. Business (continued)
International Operations
The Company began development of its international
distribution network almost 40 years ago in response to the
post World War II growth in the popularity of jeans around the
world. Approximately 30% of the Company's current denim
production is exported. Historically, the Company's export
sales have been primarily to Europe; however, the fastest
growing areas of the Company's international sales are now its
non-European markets. The Company has sales agents in Europe,
Japan, Korea, Hong Kong, Africa, and throughout Central and
South America, and it maintains extensive support services in
trade financing, traffic and transportation in order to
support its international presence. The Company's strategy is
to service its international customers with the same degree of
commitment to quality, service and fabric development as its
domestic customers, and the Company believes this philosophy
is responsible for Cone's position as the dominant U.S.
exporter of denims. The Company's international customers
include: Levi International, Super Rifle, Giorgio Armani and
Benetton in Europe; C. Itoh and Shinpo in Japan; licensees for
Guess, Calvin Klein and Wrangler in Korea; Aca Joe in Mexico;
Ellus and Wrangler in South America.
Principal competitive factors in the international markets for
denims are quality, price and styling. The Company believes
it has competitive advantages in quality over foreign
manufacturers resulting primarily from its denim manufacturing
experience and the versatility of its manufacturing
facilities. The Company also believes that it is a cost-
effective producer in comparison with its foreign competitors,
primarily because of the economies of scale resulting from the
size of the Company's operations and the low labor content of
denim. In addition, denim jeans have an image of being
uniquely American products, which complements the Company's
strategy of serving the upper-end "genuine" jeans market.
In 1993 the Company purchased 20% of the voting common stock
of Compania Industrial de Parras, S.A. ("CIPSA"), and entered
into certain commercial marketing agreements as well. The
Company also entered into a 50/50 joint venture arrangement
with CIPSA to build and operate a new world class denim
manufacturing plant in Mexico. The Company believes that
these actions will better position Cone to serve the growing
Latin America markets.
John Wolf exports approximately one-sixth of its sales volume.
Styling and service are the principal competitive factors
affecting John Wolf's position in these markets. The Company
<PAGE>
FORM 10-K Page 15
Item 1. Business (continued)
believes that there is a growing international preference for
U.S. styling and design. This styling and the Company's
technical printing expertise are not easily duplicated by
foreign competitors and have given John Wolf's products a
competitive advantage in international markets.
Trademarks and Patents
The Company owns a registered trademark containing the "Cone"
name and pine cone design, which it uses as its primary
trademark. In addition, the Company holds various other
trademarks and tradenames used in connection with its business
and products, both domestically and internationally. However,
because the Company's business is not dependent upon any
trademark or tradename, the loss of any trademark or tradename
now held by the Company would not have a material adverse
effect upon its business or results of operations.
Customers
The Company has one unaffiliated customer, Levi Strauss
("Levi"), which accounts for more than 10% of consolidated
sales. Sales to this customer amounted to 35.3%, 37.9%, and
38.5% of sales from continuing operations in 1993, 1992,and
1991, respectively.
Levi has been a customer of the Company for more than 75 years
and a close, cooperative supplier/customer relationship has
evolved through the development of the Company's proprietary
fabrics for use in Levi's 501 family of jeans. In addition
to supplying fabrics for Levi's 501 family of jeans, the
Company is increasing its sales of other denim fabrics to
Levi. Because the Company is Levi's major supplier, Levi
initiated discussions with the Company in 1989 concerning ways
to assure the continuity of this relationship. As a result of
these discussions, Cone and Levi entered into an exclusive
Supply Agreement as of March 30, 1992, which confirms that
Levi will continue to use only Cone's proprietary denim
fabrics in manufacturing Levi's 501 family of jeans, and that
Cone will continue to supply such fabrics solely to Levi. The
volume of purchases by Levi and the prices charged by Cone
will continue to be subject to customary negotiations between
the parties.
In addition to formalizing the exclusive relationship between
the Company and Levi relating to the denim fabrics used in
Levi 501 jeans, the Supply Agreement assures Levi of a source
of such fabrics in the event that a change in control of the
<PAGE>
FORM 10-K Page 16
Item 1. Business (continued)
Company adversely affects the long-standing working
relationship between Levi and the Company. The Supply
Agreement provides that, upon a change in control of the
Company and at Levi's election, Cone will enter into a three-
year supply arrangement with Levi pursuant to which Cone will
make available to Levi up to 30 million yards per fiscal
quarter of its proprietary denim fabrics used in Levi's 501
family of jeans, and, so long as Levi purchases at least 10
million yards per fiscal quarter, Cone will sell these fabrics
exclusively to Levi. If the change in control provision
becomes operative, the price for the fabric will be derived
from a formula based upon prevailing denim market prices,
adjusted to reflect the average differential between the price
for the Company's proprietary denim and the market price of
certain other denims in the market over the preceding 16
fiscal quarters, plus an additional 1.5% of the total price
paid during any quarter for which purchases by Levi are less
than 15 million yards. Although the Company believes that the
formula price will not materially vary from the price at which
the Company could have otherwise sold its proprietary denims,
there is no assurance that the formula price will reflect
then-current market prices for such denims.
For purposes of the Supply Agreement, a "change in control" is
deemed to occur upon a change in a majority of the directors
of the Company excluding persons nominated by the current
Board of Directors, or a merger, consolidation or other
transaction pursuant to which a third party obtains 50% or
more of the Company's outstanding voting shares. In the event
of a change in control followed by the Company's failure to
supply fabric to Levi in accordance with the three-year supply
arrangement, Levi will have the option to lease from Cone its
White Oak denim manufacturing plant, which is the Company's
largest denim facility, for a period not to exceed four years
from the time Levi receives notice that a change of control
occurred. The annual rents under such lease would be an
amount equal to 115% of Cone's average operating profit on the
plant for the immediately preceding three fiscal years.
The Supply Agreement expires on March 30, 1998 and is
automatically extended on each March 30, for an additional
year unless either party gives notice otherwise. Following a
change in control, the Supply Agreement would terminate at the
end of the three-year supply arrangement or of the lease term,
as the case may be. Additionally, Levi may terminate the
Supply Agreement upon 30 days' written notice and either party
may terminate the Supply Agreement in the event of the other
party's insolvency, bankruptcy or occurrence of a similar
event.
<PAGE>
FORM 10-K Page 17
Item 1. Business (continued)
Other than Levi, no single customer accounted for more than
10% of the Company's net sales in 1993, 1992, and 1991.
Backlog
The Company's apparel and home furnishings order backlog was
approximately $163 million, or 53 million yards, at January 2,
1994, as compared to approximately $170 million or 55 million
yards at January 3, 1993. Physical deliveries for booked
fabric orders in the apparel industry vary in that some
products are ordered for immediate delivery only while others
are ordered for delivery several months in the future;
therefore, orders on hand are not necessarily indicative of
total future revenues. It is expected that substantially all
of the orders outstanding at January 2, 1994 will be filled
within the next 90 days.
Research and Development
The research and development activities of the Company are
directed primarily toward improving the quality, style and
performance of its apparel fabrics and other products and
services. The Company also is engaged in the development of
computer-aided design and manufacturing systems and other
methods of improving the interaction between the Company's
stylists and its customers. These activities are conducted at
various facilities and expenses related to these activities
are an immaterial portion of the Company's overall operating
costs.
Governmental Regulation
Federal, state and local regulations relating to the work
place and the discharge of materials into the environment are
continually changing; therefore, it is difficult to gauge the
total future impact of such regulations on the Company.
However, existing government regulations are not expected to
have a material effect on the Company's financial position,
operating results or planned capital expenditures. The
Company currently has an active Environmental Protection
Committee and an active work place safety organization.
Discontinued Operations
At the end of 1991, the Company determined that continuation
of its corduroy and other bottomweight continuous piece-dyed
fabrics product line was no longer economically justifiable
due to substantial declines in demand and downward pressures
on prices and margins caused by imported garments and to the
<PAGE>
FORM 10-K Page 18
Item 1. Business (continued)
configuration of its fabric finishing plant, which became
inefficient due to product mix changes. As a result, the
Company implemented a plan to discontinue and dispose of
these operations. The Company experienced after-tax operating
losses of $17.1 million in 1991 from its discontinued product
lines and provided for estimated after-tax costs of $17.9
million in its 1991 Consolidated Financial Statements for
expected future operating losses and losses associated with
disposal of these operations. The discontinuance of these
operations will be completed in first quarter 1994. See Note
18 of Notes to Consolidated Financial Statements. Losses from
discontinued operations for 1993 and 1992 were consistent with
management's assumptions in formulating the provision.
Accordingly, no gain or loss has been recognized on
discontinued operations in the 1993 and 1992 Consolidated
Financial Statements. Management does not expect to incur any
additional loss in 1994 as the discontinuance is completed.
Employees
At January 31, 1994, the Company employed approximately 7,900
persons, of whom approximately 1,500 were salaried and
approximately 6,400 were hourly employees. Of such hourly
employees, approximately 2,400 are represented by collective
bargaining units and are employed under collective bargaining
agreements that provide for annual wage negotiations in the
spring of each year. The Company has not suffered any major
disruptions in its operations due to strikes or similar events
for more than a decade.
<PAGE>
FORM 10-K Page 19
Item 2. Property
The Company operates 11 manufacturing plants - nine in North
Carolina and one each in South Carolina and Mississippi.
There are six apparel and five home furnishings plants. The
Company also operates several distribution centers and
warehouses. All significant manufacturing facilities are held
in fee and are substantially free of any significant liens or
other encumbrances. The Company's manufacturing facilities
total approximately five million square feet of floor space,
with buildings generally constructed of brick, steel, concrete
or concrete block. All such facilities are maintained in good
condition and are suitable for their respective purposes.
Although such facilities are substantially fully utilized, the
Company believes that it is in a position to respond to
opportunities to produce additional higher margin fabrics
through changes in product mix and through acquisition of
greige goods from outside sources for further processing and
finishing by the Company. The Company also has an ongoing
capital expenditure program that will increase its production
capacity. See "Item 7. Management's Discussion and Analysis
of Results of Operations and Financial Condition". The
Company owns an office building in Greensboro where its
executive and administrative offices are located. All of the
Company's sales offices are leased from unrelated parties.
Item 3. Legal Proceedings
In November 1988, William J. Elmore and Wayne Comer (the
"Plaintiffs"), former employees of the Company, instituted a
class action suit against the Company and Wachovia Bank &
Trust Company, N.A. ("Wachovia") and certain current and
former employees of the Company and Wachovia. The suit was
brought on behalf of salaried employees of the Company who
were participants in certain Company retirement plans. The
Plaintiffs asserted a variety of claims related to actions
taken and statements made concerning certain employee benefit
plans maintained by the Company. In May 1990, the United
States District Court in Greenville, South Carolina, certified
a plaintiff class of salaried employees. In August 1990, the
District Court granted partial summary judgment in favor of
the defendants and significantly narrowed the extent of the
Plaintiffs' claims. A trial was held in February 1991, and
supplemental proceedings were held on July 24, 1991. At the
trial, a witness hired by the Plaintiffs estimated the alleged
loss to the Plaintiff class to range from approximately $34
million to approximately $94 million.
<PAGE>
FORM 10-K Page 20
Item 3. (continued)
On March 20, 1992, the District Court entered a judgment
finding that the Company had promised to contribute certain
surplus funds (or their equivalent in Company stock) relating
to the overfunding of the Company's pension plans to the 1983
ESOP by December 23, 1985, that such surplus amounted to $69
million, that the Company's actual contribution totaled
approximately $55 million, and that the Company and its
Chairman, Dewey L. Trogdon, and its Secretary, Lacy G. Baynes,
therefore had breached their fiduciary duties under the
Employee Retirement Income Security Act of 1974 ("ERISA") to
certain participants in the 1983 ESOP. The District Court
ordered the Company to pay to the 1983 ESOP for the benefit of
plan participants, both salaried and hourly, the sum of $14.2
million in cash or the equivalent in Company stock. In
addition, the District Court awarded $3.5 million in
attorneys' fees to the Plaintiffs, $2.2 million of which is to
be paid from the sum awarded to the 1983 ESOP. Judgment was
entered in favor of the defendants on all remaining claims
except for claims relating to the ESOP contribution. In
accordance with and to the extent permitted by the Company's
Articles of Incorporation and Bylaws, the two individual
defendants in this litigation are indemnified by the Company
for any costs incurred by them in connection with this matter.
On March 20, 1992, the Company and the individual defendants
appealed the District Court's judgment against them to the
United States Court of Appeals for the Fourth Circuit. On
April 2, 1992, the Plaintiffs appealed the District Court's
judgment to the Court of Appeals insofar as it dismissed
certain of their claims. To secure the judgment on appeal,
the Company has deposited in escrow with the trustee of the
1983 ESOP an $8 million letter of credit and 75,330 shares of
Class A Preferred Stock valued at $7.5 million which has
subsequently earned dividends of an additional 5,795 shares
valued at $.6 million.
On September 22, 1993 a three-judge panel of the United States
Court of Appeals for the Fourth Circuit in a two-to-one
decision reversed the District Court's decision as to the
obligation to contribute additional funds to the 1983 ESOP and
affirmed the District Court's dismissal of all remaining
claims against the Company and the individual defendants. On
October 4, 1993, Plaintiffs petitioned the fourth Circuit for
rehearing, with a suggestion for rehearing en banc , and on
October 29, 1993 the United States Department of Labor filed
a brief in support of Plaintiffs' petition for rehearing.
Plaintiffs' petition for rehearing en banc was granted on
December 13, 1993, and, consequently, the panel opinion was
vacated. Briefs were filed by the Plaintiffs, Department of
Labor, and the Company, and an en banc oral argument was heard
<PAGE>
FORM 10-K Page 21
Item 3. (continued)
by the Court of Appeals on March 8, 1994. The Company is
awaiting a decision. An attorney for the Plaintiffs has
contended that, if Plaintiffs prevail on appeal, the judgment
could exceed $50 million based on the existing judgment and
additional claims relating to alleged unjust enrichment and
alleged overvaluation of the Class A Preferred Stock initially
contributed to the 1983 ESOP, as well as prejudgment interest.
The Company has received an opinion from its lead counsel on
appeal, Robinson, Bradshaw & Hinson, P.A., a Charlotte, North
Carolina firm, that, while it is not possible to predict the
outcome of this lawsuit with certainty, in the opinion of such
firm the District Court's decision in Plaintiffs' favor is
erroneous and is more likely than not to be reversed or
substantially modified by the Court sitting en banc and the
dismissal of Plaintiffs' claims was proper and is more likely
than not to be affirmed by the en banc Court. However, the
Company has been advised by such counsel that an appellate
court which votes to rehear a case en banc often reaches a
result different from the panel originally designated to hear
the appeal, and further, that ERISA law is rapidly changing
and decisional law on many ERISA issues is neither unanimous
nor fully developed. Because of the foregoing and the
uncertainties inherent in the litigation process, there can be
no assurance as to the ultimate resolution of this lawsuit.
An unfavorable result could have a material adverse effect on
the Company's results of operations and, if Plaintiffs'
judgment (including the attorneys' fees award) is affirmed on
appeal, the Company's management estimates that income, net of
taxes, would be reduced by approximately $10 million. It is
the opinion of the Company's management that this lawsuit,
when finally concluded, will not have a material adverse
effect on the Company's financial condition.
The Company is a party to various other legal claims and
actions incidental to its business. Management believes that
none of these claims or actions, either individually or in the
aggregate, will have a material adverse effect on the
financial condition of the Company.
<PAGE>
FORM 10-K Page 22
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 4A. Executive Officers of the Registrant.
<TABLE>
<S> <C> <C>
Name Age Position with the Company
J. Patrick Danahy 50 Director, President, and
Chief Executive Officer
John L. Bakane 43 Director, Vice President
and Chief Financial
Officer
Richard S. Vetack 57 Director and Senior Vice
President
Bud W. Willis III 51 Director and Vice President
James S. Butner 48 Vice President
Neil W. Koonce 46 Vice President and
General Counsel
Lester J. Smith 64 Vice President
Eugene A. Trout 53 Vice President
David E. Bray 55 Treasurer
J. D. Holder 59 Controller
Terry L. Weatherford 51 Secretary
</TABLE>
All officers of the Registrant are elected or reelected each
year at the Annual Meeting of the Board of Directors or at
other times as necessary. All officers serve at the pleasure
of the Board of Directors and until their successors are
elected and qualified.
J. Patrick Danahy joined the Company in 1971; he was
named General Manager of the Carlisle Plant in 1978 and
President of the Cone Finishing Division in September 1984.
He was elected corporate Vice President in May 1986 and
director in May 1989. He was named President and Chief
Operating Officer in August 1989 and President and Chief
Executive Officer in August 1990.
<PAGE>
FORM 10-K Page 23
Item 4A. (continued)
John L. Bakane joined the Company in 1975 and has served
in various administrative and staff positions involving
planning, financial management and customer service. He was
named corporate Vice President in May 1986, became Chief
Financial Officer in November 1988 and was elected to the
Board of Directors in May 1989.
Richard S. Vetack was employed by Otto B. May Co., a
former subsidiary of the Company, until 1980. He joined the
Company in March 1983 and has served in various management
positions in the Textile Products Division. He was elected
Vice President of the Company in 1985 and Senior Vice
President in May 1987. He was elected to the Board of
Directors in May 1988.
Bud W. Willis III was employed by the Company in August
1970 and has served in various management positions in the
Textile Products Division. In March 1985 he was named
Executive Vice President of the Textile Products Division and
in December 1985 was elected corporate Vice President. He was
elected to the Board of Directors in May 1988. Since July
1992 he has been the President of the Denim Division of the
Textile Products Division.
James S. Butner was employed by Celanese Corporation, a
synthetic fibers and chemical company, from 1979 to 1984, at
which time he became Director of Industrial and Public
Relations for the Company. Effective August 1, 1988, he was
named corporate Vice President for Industrial and Public
Relations.
Neil W. Koonce was employed by the Company in January
1974 as a staff attorney. He was elected Assistant General
Counsel in 1985, General Counsel in August 1987 and Vice
President in May 1989.
Lester J. Smith was named Vice President of the Company
in August 1978, and has executive responsibility for
purchasing, including cotton and synthetic fiber procurement.
Eugene A. Trout was employed by the Company in 1971, and
was appointed Vice President of Cone Mills Marketing Co., a
division of the Company, in 1980. He was elected Vice
President of the Company in December 1985 and also serves as
Group Executive Vice President of the Textile Products
Division.
David E. Bray was employed in 1977 as Director of
Treasury Services. He was elected Assistant Treasurer of the
Company in May 1984 and Treasurer in November 1988.
<PAGE>
FORM 10-K Page 24
Item 4A. (continued)
J. D. Holder was employed by the Company in 1954 as a
Cost Accountant. He became Manager of the corporate Cost
Department in April 1970 and was elected Assistant Controller
in 1984. He was named Controller of the Company in August
1987.
Terry L. Weatherford was Secretary and General Counsel of
Blue Bell, Inc., a manufacturer and distributor of wearing
apparel, from 1981 to 1987. From 1987 to 1993, he was self-
employed as an attorney except for a thirteen month period
from June 1988 when he was employed by Manufactured Homes,
Inc. as its General Counsel. He was employed by the Company
and elected Assistant Secretary in May 1993, and effective
December 1993, was elected Secretary.
<PAGE>
FORM 10-K Page 25
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
The Company's Common Stock has traded on the New York Stock
Exchange under the ticker symbol "COE" since June 18, 1992,
the date of its public offering. The following table sets
forth the high and low sales prices of the Common Stock as
reported on the NYSE Composite Tape for the periods indicated.
<TABLE>
<S> <C> <C> <C> <C>
Quarter Ended
Apr.4,1993 Jul. 4,1993 Oct.3,1993 Jan.2,1994
Common stock
prices
High 19 5/8 19 1/4 18 17 5/8
Low 13 3/8 15 7/8 14 5/8 14 3/8
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Quarter Ended
Mar.29,1992 Jun.28,1992 Sept.27,1992 Jan.3,1993
Common stock
prices
High - 11 5/8 15 7/8 16
Low - 10 10 1/2 13
</TABLE>
The Company has not declared any dividends on its Common Stock
since it became a privately held company in 1984 and
anticipates that its earnings for the foreseeable future will
be retained for use in its business and to finance growth.
Payment of cash dividends in the future will depend upon the
Company's financial condition, results of operations, current
and anticipated capital requirements, and other factors deemed
relevant by the Company's Board of Directors. See Item 7.
"Management's Discussion and Analysis of Results of Operations
and Financial Condition".
The approximate number of holders of record of the Company's
Common Stock as of March 1, 1994 was 574.
<PAGE>
FORM 10-K Page 26
Item 6. Selected Financial Data
<TABLE>
<S> <C> <C> <C> <C> <C>
(dollar amounts in millions, except per share data)
1993 1992(1) 1991 1990 1989
Summary of Operations
Net Sales $ 769.2 $ 705.4 $ 633.0 $ 594.8 $ 617.9
Cost of Sales 589.3 540.8 523.5 481.7 492.4
Depreciation 21.0 18.5 17.1 16.3 16.9
Subtotal 610.3 559.3 540.6 498.0 509.3
Gross Profit 158.9 146.1 92.4 96.8 108.6
Selling and Administrative 73.3 67.6 56.8 56.8 52.2
Restructure/Plant Closing - - 0.8 3.9 -
Income from Operations 85.6 78.5 34.8 36.1 56.4
Other Expense - Net 6.1 8.3 18.4 21.1 20.2
Income from Continuing Operations Before
Income Tax 79.5 70.2 16.4 15.0 36.2
Income Tax 29.9 24.8 6.3 4.1 13.0
Income from Continuing Operations 49.6 45.4 10.1 10.9 23.2
Discontinued Operations - - (34.9) (14.1) (8.4)
Extraordinary Item - (2.0) - - (1.7)
Net Income (Loss) $ 49.6 $ 43.4 $ (24.8) $ (3.2) $ 13.1
Per Share of Common Stock
Income from Continuing Operations $ 1.68 $ 1.67 $ 0.22 $ 0.24 $ 0.76
Net Income (Loss) 1.68 1.59 (1.58) (0.50) 0.26
Segment Information
Net Sales
Apparel $ 575.8 $ 520.0 $ 458.0 $ 421.4 $ 437.9
Home Furnishings 193.4 185.4 175.0 173.4 180.0
Total $ 769.2 $ 705.4 $ 633.0 $ 594.8 $ 617.9
Operating Income
Apparel $ 68.8 $ 67.4 $ 20.4 $ 25.5 $ 41.2
Home Furnishings 19.5 16.3 19.2 19.1 18.3
Statistics and Other Data
Current Ratio 1.9 1.8 1.9 2.1 2.9
Total Assets $ 431.6 $ 401.9 $ 432.7 $ 469.4 $ 517.0
Long-Term Debt 77.9 77.5 188.9 200.9 220.6
Stockholders' Equity 210.0 163.4 82.9 111.0 136.6
Long-Term Debt As a Percent of Stockholders'
Equity and Long-Term Debt 27% 32% 69% 64% 62%
Capital Expenditures-Continuing Operations $ 38.7 $ 25.4 $ 21.0 $ 17.8 $ 13.2
Shares Outstanding (millions) Year End (2)(3) 27.7 27.7 17.9 17.1 17.0
Number of Employees at Year End 7,800 7,600 7,600 8,400 8,900
(1)Fiscal Year 1992 represents a 53 week period
(2)Includes Participating Preferred Shares
(3)Includes 6.9 million shares of Common Stock issued in mid-1992 initial public offering
</TABLE>
<PAGE>
FORM 10-K Page 27
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Overview
The operating results and financial condition of Cone Mills
have been influenced by a number of external factors and
company initiatives. The principal influences have been
domestic cotton costs, the general business cycle, apparel and
fabric imports, and strategic changes in the Company's
business and capital structure.
Cotton Costs. Management believes that the most significant
factor affecting operating margins has been the price of
cotton, the Company's principal raw material. Prices and
supply of domestically grown cotton are influenced by U.S.
agricultural policy and U.S. companies are generally
prohibited by law from importing cotton. Historically, the
risk in operating under these cotton market regulations has
been that U.S. cotton prices could exceed world price levels,
and U.S. companies could, therefore, experience both eroding
competitiveness and margins unlike foreign competitors who
have access to lower-priced cotton. In 1990 through mid-1991,
domestic cotton prices generally exceeded world prices, which
contributed to substantial reductions in the Company's
operating margins. Provisions under the Food, Agriculture,
Conservation and Trade Act of 1990, which became effective in
August 1991, resulted in the reduction of the Company's
effective cotton costs to world levels.
Cotton prices fluctuate with the balance of supply and demand
and, since cotton is an agricultural product its supply and
quality are subject to the forces of nature. World cotton
prices began to rise in late 1993 and early 1994 as a result
of a less favorable balance between supply and demand,
primarily related to a smaller world cotton crop in 1993. See
"Financial Outlook and Strategy."
General Business Cycle. The Company's operating results are
closely related to the general business cycle of the U.S.
economy. In this regard, Cone Mills experienced an unfavorable
cyclical economic retrenchment from late 1989 through mid-
1991. Management believes the U.S. economy is currently in a
more mature phase of the economic cycle where typically, the
demand for home furnishings and consumer durables grows at a
higher rate than demand for apparel products which is usually
strongest in the earlier phases of a recovery. While demand
for denim apparel remains strong at retail, there presently
exists an excess of denim inventories in the softgoods
pipeline, which suppliers are in process of adjusting.
<PAGE>
FORM 10-K Page 28
Item 7. (continued)
These trends are reflected in the Company's recent
quarterly net sales (which are also generally affected by mild
seasonal sales declines in the second half of the year). All
quarters had 13 weeks except the fourth quarter of 1992 which
had 14 weeks.
<TABLE>
<S> <C> <C> <C>
1993 1992 1991
(dollars in millions)
Net Sales:
1st Quarter $ 195.0 $ 174.2 $ 144.2
2nd Quarter 202.5 182.6 162.6
3rd Quarter 192.7 170.5 165.0
4th Quarter 179.0 178.1 161.2
Total $ 769.2 $ 705.4 $ 633.0
</TABLE>
Imports. The Company's operating results have been influenced
by U.S. trade policy, which has allowed gains in market share
by foreign-produced, labor-intensive garments over the past
decade. This has caused U.S. manufacturers of fabrics used in
these labor-intensive garments to have excess capacity, which
has resulted in increased competition and reduced margins for
U.S. manufacturers of commodity-type goods. In response to
this environment, the Company has focused on high-margin and
low-labor content businesses in which it believes it is
internationally competitive. In addition, the Company believes
that the recent passage of the North American Free Trade
Agreement (NAFTA) will strengthen garment manufacturing in
this hemisphere and generate additional opportunities for Cone
Mills.
Strategic Initiatives. Over the past decade, the Company has
been in the process of curtailing its production of low-margin
commodity-type products and terminating or disposing of
unprofitable operations. In 1991, the Company decided to
discontinue its corduroy and other bottomweight continuous
piece-dyed fabrics product line as a result of ongoing losses.
Estimated costs of this discontinuance were provided for in
the Company's 1991 consolidated financial statements. See Note
18 of Notes to Consolidated Financial Statements for a
discussion of the financial impact of these actions. Cone
Mills will complete the liquidation of its corduroy and other
bottomweight continuous piece-dyed fabrics product line in the
first quarter of 1994. Actual losses in 1992 and 1993 have
been consistent with the original estimate. No additional
loss in 1994 is expected as the discontinuance is completed.
<PAGE>
FORM 10-K Page 29
Item 7. (continued)
Management believes that ongoing businesses are interna-
tionally competitive and that the restructuring is now
substantially complete.
In 1992, Cone Mills undertook several initiatives to
strengthen its financial position, improve its financial
flexibility and increase its ability to raise capital. Cone
Mills consummated a public offering of its Common Stock in
mid-1992 and received $63.6 million in net proceeds, which
were used to repay $42.1 million of long-term debt and redeem
$21.5 million of Class A Preferred Stock (including payment of
dividend obligations on shares redeemed). Following the
consummation of the offering, the Company replaced the
existing credit agreement with a $75 million term loan, a $40
million receivables purchase agreement and a $60 million bank
revolving credit facility. See "Liquidity and Capital
Resources."
In 1993, Cone Mills used its strengthened financial
resources to fund a $38.7 million capital spending program
which included the expansion of denim and home furnishings
capacities. In addition, the Company purchased a 20% equity
ownership in CIPSA, the largest denim manufacturer in Mexico
and began the construction of a new joint venture denim plant
in Mexico with CIPSA as its partner. See "Liquidity and
Capital Resources."
Segment Information. Cone Mills operates in two principal
business segments, apparel fabrics and home furnishings
products. The following table sets forth certain net sales and
operating income information (excluding restructuring and
general corporate expenses) regarding these segments for 1993,
1992 and 1991.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year (1)
1993 1992 1991
(dollars in millions)
Net Sales
Apparel $575.8 74.9% $520.0 73.7% $458.0 72.4%
Home Furnishings 193.4 25.1 185.4 26.3 175.0 27.6
Total $769.2 100.0% $705.4 100.0% $633.0 100.0%
Operating Income (2)
Apparel $ 68.8 12.0% $ 67.4 13.0% $ 20.4 4.5%
Home Furnishings 19.5 10.1 16.3 8.8 19.2 10.9
</TABLE>
(1) Fiscal years 1993 and 1991 contained 52 weeks, and 1992
contained 53 weeks.
(2) Percentages reflect operating income as a percentage of
segment net sales.
<PAGE>
FORM 10-K Page 30
Item 7. (continued)
Fifty-two Weeks Ended January 2, 1994 Compared with Fifty-
three Weeks Ended January 3, 1993
Following a U.S. cyclical recovery from mid-1991 through the
end of 1992, the rate of growth in the domestic softgoods
sector began to decline and retailers and softgoods
manufacturers began to report mixed results during 1993.
Despite these general economic conditions, Cone Mills had
record sales and income from continuing operations in 1993. In
the apparel segment, sales were up substantially, primarily as
a result of growth in denims and flannel shirtings. The
Company believes that the strength of these products is
largely a result of favorable perception of value by consumers
and retailers who are seeking fashion and durability at
affordable price points. The Company also benefited from
expanding apparel export sales. Home Furnishings segment sales
increased because of sales growth at Carlisle Finishing,
arising primarily from market share gains, and the Company's
real estate division, Cornwallis Development Co.
Net sales for 1993 were $769.2 million, an increase of $63.8
million, or 9.0% from 1992 net sales of $705.4 million. Gross
profit (net sales less cost of sales and depreciation) as a
percentage of net sales was 20.7% for both 1993 and 1992.
Income from operations increased 9.0% to $85.6 million for
1993. The Company's 1993 net income was $49.6 million, or
$1.68 per share, of Common Stock after preferred dividends.
Net income for 1993 included $2.4 million of increased taxes
resulting from the 1993 change in federal tax rates. The per-
share impact of those increased taxes was $.09.
For comparison, Cone Mills reported net income of $43.4
million or $1.59 per share for 1992, which included an after
tax benefit of $2.2 million related to an income tax refund,
a $2.0 million extraordinary expense related to the early
extinguishment of debt, and for the first six months of 1992,
outstanding shares did not include 6.9 million shares issued
in the Company's mid-1992 initial public offering. On a pro-
forma basis, adjusted for calculating the per share earnings
as if the sale of the new stock in the Company's mid-year
public offering and the application of the net proceeds had
occurred at the beginning of the year, the Company's net
income would have been $1.47 per share for 1992. See Pro Forma
Condensed Consolidated Statement of Operations on Page 71a.
Apparel Fabrics. Apparel fabrics segment net sales were
$575.8 million for 1993, an increase of 10.7% from 1992.
The improved sales resulted from increases in sales
<PAGE>
FORM 10-K Page 31
Item 7. (continued)
volume and, to a lesser extent, higher prices. Average
prices adjusted for product mix changes were up
approximately three percent.
Apparel export sales for 1993 were up 18.7% to $124.9
million, as compared with $105.2 million for 1992.
Operating margins for the apparel fabrics segment were
12.0% of net sales for 1993 as compared with 13.0% for
1992. Margins as a percent of sales were down slightly as
a result of a shift in mix to lower margin specialty
sportswear fabrics and, to a lesser extent, increased
depreciation expense. Average cotton costs were up by
approximately two percent for 1993 as compared with 1992.
Home Furnishings. For 1993, net sales of $193.4 million
for the home furnishings segment increased $8.0 million,
or 4.3.%, and operating income increased $3.2 million, or
19.3% , compared with 1992. All product groups of the
home furnishings segment had higher sales in 1993.
Export sales of home furnishings products were $7.1
million in 1993 compared with $8.6 million in 1992. These
export sales were impacted by poor economic conditions in
European and Japanese markets.
In 1993, operating margins for the home furnishings
segment improved to 10.1% of net sales compared with 8.8%
for 1992. The increase was primarily the result of
improved operating performance at Olympic Products and
higher sales and improved sales mix of real estate
operations.
Total Company selling and administrative expenses increased
from $67.6 million, or 9.6% of sales, for 1992 to $73.3
million, 9.5% of sales, for 1993. The increase in expenses was
primarily the result of the redeployment of people previously
charged to discontinued lines to support expanding sportswear
and denim businesses, increases in salaries and benefits costs
and, to a lesser extent, expenses associated with the
secondary offering in early 1993 of common stock held by
certain institutional shareholders of the Company.
Interest expense for 1993 decreased $4.0 million as compared
with 1992 because of reduced borrowing levels and, to a lesser
extent, lower interest rates. For 1993 interest income was
$2.1 million lower than 1992 levels because of the interest
associated with an income tax refund in the first quarter of
1992. Other income in 1993 of $.3 million represented the
income from the Company's 20% investment in CIPSA.
<PAGE>
FORM 10-K Page 32
Item 7. (continued)
Income taxes as a percent of taxable income were 37.6% in 1993
compared with 35.3% in 1992. The effective tax rate for 1993
was higher than the previous year primarily because of the
1993 increase in federal statutory tax rates. Both periods
reflect tax benefits resulting from operations of the
Company's foreign sales corporation.
Fifty-three Weeks Ended January 3, 1993 Compared with Fifty-
two Weeks Ended December 29, 1991
Cone experienced more favorable market conditions in 1992
compared with 1991 as the industry continued to recover from
the severe U.S. economic cyclical downturn of 1989 through
early 1991. The Company realized improved volume, prices and
operating results because of this cyclical rebound.
Net sales for the fifty-three week fiscal year of 1992 were
$705.4 million, an increase of $72.5 million or 11.4% from net
sales of $633.0 million for the fifty-two week fiscal year of
1991. Operating income for 1992 of $78.5 million and income
from continuing operations before extraordinary expense of
$45.4 million, or $1.67 per share of Common Stock after
preferred dividends, compares favorably with operating income
of $34.8 million and income from continuing operations of
$10.1 million, or $.22 per common share after preferred
dividends for the 1991 period. Gross profit (net sales less
cost of sales and depreciation) as a percent of sales was
20.7% for 1992 compared with 14.6% for 1991.
Income before extraordinary expense for 1992 was $45.4 million
compared with a net loss of $24.8 million for 1991. Net income
for 1992, after extraordinary expense, was $43.4 million or
$1.59 per share of Common Stock after preferred dividends, and
includes an income tax refund and related interest income,
received in the first quarter, which together amounted to $.09
per share. The Company recognized an extraordinary expense of
$2.0 million in 1992 as a result of the early termination of
the existing credit agreement. The 1991 net loss was primarily
the result of a $35.0 million after-tax loss associated with
the Company's discontinued corduroy and bottomweight
continuous piece-dyed fabrics product line.
Apparel Fabrics. Apparel fabrics net sales were $520.0
million for the fifty-three week year of 1992, an
increase of 13.5% from 1991. The improved sales resulted
from increases in sales volume, primarily basic denims
and shirtings, of approximately nine percent and
increases in average prices, adjusted for product mix
changes, of approximately six percent.
<PAGE>
FORM 10-K Page 33
Item 7. (continued)
Export sales for 1992 were $105.2 million, or 20.2% of
total apparel fabrics sales, compared with $81.9 million,
or 17.9% in 1991.
Operating margins for the apparel fabrics segment were
13.0% of net sales in 1992 compared with 4.5% in 1991.
The increase in margins as a percent of sales resulted
from reduced cotton costs, increases in volume and
selling prices, and higher operating efficiencies. This
included more fully absorbed overhead costs because
plants were running full schedules in 1992 compared with
curtailed operating schedules in the first half of 1991.
Average cotton prices declined by approximately twenty-
four percent in 1992 as compared with 1991.
Home Furnishings. Net sales for 1992 of the home
furnishings segment increased $10.4 million, or 6.0%,
while operating income was down 14.8% compared with 1991.
The increase in net sales primarily resulted from
increased sales by Carlisle Finishing and John Wolf
Decorative Fabrics. Operating margins in 1992 were
adversely affected by higher bad debt expense, a less
profitable mix of fabrics sales, higher sample and
product development expenses and costs associated with
the expansion of the Carlisle plant.
Export sales of home furnishings products were $8.6
million in 1992 as compared with $9.9 million in 1991,
and consisted primarily of export sales by John Wolf
Decorative Fabrics. Lower exports resulted primarily from
weaker economic conditions in the Company's foreign
markets for these products.
Selling and administrative expense for 1992 was $67.6 million,
an increase of $10.8 million from 1991, and primarily reflects
higher salary and benefit costs, including incentive
compensation associated with improved performance, the
addition of an overseas marketing office and higher sample
expense. Selling and administrative expenses represented 9.6%
of 1992 net sales compared with 9.0% for 1991.
Net interest expense of $8.3 million for 1992 was down $10.1
million or 54.8% from 1991 levels. The decrease represented
lower borrowing levels as a result of the proceeds from the
1992 public offering, cash flow from operations, including the
sale of accounts receivable, and the liquidation of working
capital associated with discontinued product lines and, to a
lesser extent, lower interest rates. Net interest expense for
1992 also included a $2.1 million increase in interest income
<PAGE>
FORM 10-K Page 34
Item 7. (continued)
primarily resulting from interest associated with an income
tax refund received in the first quarter of 1992.
Income taxes as a percent of income from continuing operations
before income taxes were 35.3% in 1992 compared with 38.4% in
1991. The lower effective tax rate in the 1992 period
primarily was caused by the first quarter 1992 tax refund,
which related to a year in which statutory federal tax rates
were higher than 1992 rates.
Earnings per share comparisons for 1992 are affected by Cone's
mid-year public offering of common stock, which increased
outstanding shares by 6.9 million and, through use of the net
proceeds of the offering, reduced debt and preferred stock
outstanding and associated interest expense and preferred
dividends. Adjusting as if the offering and the application of
the net proceeds therefrom had occurred at the beginning of
1992, the Company's 1992 pro-forma earnings per share was
$1.47 after extraordinary item and preferred dividends, which
includes a pro forma amount of $.08 per share related to a
nonrecurring tax refund and associated interest income in the
first quarter of 1992. See Pro Forma Condensed Consolidated
Statement of Operations on Page 71a.
Liquidity and Capital Resources
The Company's principal long-term capital sources are a $75
million Note Agreement with The Prudential Insurance Company
of America (the "Term Loan") and stockholders' equity. Primary
sources of liquidity are internally generated funds, a $60
million Credit Agreement with Morgan Guaranty Trust Company of
New York ("Morgan Guaranty") as Agent Bank (the "Revolving
Credit Facility"), and a $40 million Receivables Purchase
Agreement (the "Receivables Purchase Agreement") with Delaware
Funding Corporation, an affiliate of Morgan Guaranty.
During 1993, Cone Mills generated $57.2 million in funds from
operating activities, including $70.6 million from net income
adjusted for non-cash depreciation expenses, partially offset
by increased working capital requirements, primarily resulting
from reductions of accounts payable and accrued expenses.
Major uses of cash during this period included $38.7 million
for capital expenditures and $3.1 million for preferred stock
dividends. For approximately $24 million, Cone Mills purchased
20% of CIPSA, the largest denim manufacturer in Mexico, and is
in the beginning stages of building a joint venture denim
plant with CIPSA. The investment in the joint venture was $2.3
million for 1993. Funding for these cash uses came primarily
from operating cash flow and cash available at the beginning
of the period.
<PAGE>
FORM 10-K Page 35
Item 7. (continued)
During 1992, Cone Mills generated $115.8 million in funds from
operating activities, including $63.3 million from net income
adjusted for non-cash depreciation expenses and additional
funds resulting from working capital changes which included
$24 million from the sale of accounts receivables. In
addition, the Company raised $63.6 million in cash from the
initial public offering and received $6.4 million in proceeds
from the sale of property, plant and equipment primarily as a
result of entering into an operating lease of $3.9 million on
equipment which had been purchased in December 1991. Major
uses of cash during this period included $25.4 million for
capital investments, $28.5 million for redemption of preferred
stock (including associated dividend obligations) and a net of
$127.4 million of long-term and seasonal borrowing repayments.
On January 2, 1994, the long-term capital structure of Cone
Mills consisted of $77.2 million of long-term debt, including
the $75 million Term Loan, and $210.0 million of stockholders'
equity. For comparison, at year-end 1992 the Company had $76.6
million of long-term debt and $163.4 million of stockholders'
equity. Long-term debt as a percent of long-term debt and
stockholders' equity was 27% on January 2, 1994, compared with
32% at year-end 1992.
On January 2, 1994, Cone Mills had ample liquidity, with only
$.8 million of current maturities of long-term debt and $65.5
million of available liquidity including unused borrowing
capacity and cash. The Company had sold $35 million of
receivables under the Receivables Purchase Agreement.
Accounts receivable on January 2, 1994, were $44.2 million, a
decline of $13.2 million from January 3, 1993. At year-end
1993, the Company had sold $35 million of accounts receivable
compared with $24 million at year-end 1992. In addition, the
decrease in year-end 1993 balances was caused by certain
customers paying in advance of due date. Receivables at year-
end 1993, including those sold pursuant to the Receivables
Purchase Agreement, represented 41 days of sales outstanding
as compared with 47 days at year-end 1992.
Inventories on January 2, 1994, were $152.1 million, up 4.4%
from year-end 1992. The increase resulted from higher greige
and finished goods and real estate inventories.
Capital spending in 1993 was $38.7 million and included an
expansion of denim weaving capacity of approximately nine
percent and the addition of another screen printing machine at
the Carlisle plant. Capital expenditures for 1992 were $25.4
million.
<PAGE>
FORM 10-K Page 36
Item 7. (continued)
Capital spending in 1994 is expected to be $36 million and
includes expansion and upgrading of yarn preparation
facilities, new weaving machines, and a new fiber production
line at Olympic Products. In addition, the Company expects to
invest a total of approximately $25 million in the Mexican
joint venture denim company through 1995. Approximately $5.1
million of the budgeted capital expenditures for 1994 had been
committed at year-end 1993.
Federal, state and local regulations relating to the workplace
and the discharge of materials into the environment are
continually changing; therefore, it is difficult to gauge the
total future impact of such regulations on the Company.
Existing government regulations are not expected to have a
material effect on the Company's competitive position,
operating results or planned capital expenditures. Cone Mills
has an active environmental committee which fosters protection
of the environment and compliance with laws.
In November 1988 certain former employees of the Company
instituted a class action suit against the Company and certain
other defendants in which the plaintiffs ("Plaintiffs")
asserted a variety of claims related to the 1983 ESOP and
certain other employee benefit plans maintained by the
Company. In March 1992 a judgment in the amount of $15.5
million (including an attorneys' fees award) was entered
against the Company with respect to an alleged promise to make
additional company contributions to the 1983 ESOP and all
claims unrelated to the alleged promise were dismissed. The
Company, the individual defendants and the Plaintiffs
appealed. On September 22, 1993, a three-judge panel of the
United States Court of Appeals for the Fourth Circuit in a
two-to-one decision reversed the District Court's decision as
to the obligation to contribute additional funds to the 1983
ESOP and affirmed the District Court's dismissal of all
remaining claims against the Company and individual
defendants. On October 4, 1993, Plaintiffs petitioned the
Fourth Circuit for rehearing, with a suggestion for rehearing
en banc, and on October 29, 1993, the United States Department
of Labor filed a brief in support of Plaintiffs' petition for
rehearing. Plaintiffs' petition for rehearing en banc, was
granted on December 13, 1993, and consequently, the panel
opinion was vacated. Briefs were filed by the Plaintiffs,
Department of Labor, and Cone Mills, and an en banc, oral
argument was heard by the Court of Appeals on March 8, 1994.
The Company is awaiting a decision.
<PAGE>
FORM 10-K Page 37
Item 7. (continued)
Cone Mills has received an opinion from its lead counsel on
appeal that, while it is not possible to predict the outcome
of this lawsuit with certainty, in the opinion of such firm
the District Court's decision in Plaintiffs' favor is
erroneous and is more likely than not to be reversed or
substantially modified by the Court sitting en banc, and the
dismissal of Plaintiffs' claims was proper and is more likely
than not to be affirmed by the en banc Court. Therefore, the
Company's management has concluded that it is not probable
that a liability has been incurred with respect to this suit.
However, the Company has been advised by such counsel that an
appellate court which votes to rehear a case en banc, often
reaches a result different from the panel originally
designated to hear the appeal, and further, that Employee
Retirement Income Security Act (ERISA) law is rapidly changing
and decisional law on many ERISA issues is neither unanimous
nor fully developed. Because of the foregoing and the
uncertainties inherent in the litigation process, there can be
no assurance as to the ultimate resolution of this lawsuit. An
unfavorable result could have a material adverse effect on the
Company's results of operations and, if Plaintiffs' judgment
(including the attorneys' fees award) is affirmed on appeal,
the Company's management estimates that income net of taxes,
would be reduced by approximately $10 million. Management also
believes that the Company's unused borrowing capacity
available under the Revolving Credit Facility and its
internally generated funds are sufficient to meet its
liquidity requirements for the foreseeable future and that it
is unlikely that the Company's operations would be materially
adversely affected by any cash shortage as a result of the
judgement. For these reasons, it is the opinion of the
Company's management that this lawsuit, when finally
concluded, will not have a material adverse effect on the
Company's financial condition. To secure the judgment on
appeal from the District Court to the Court of Appeals, the
Company has deposited in escrow with the trustee of the 1983
ESOP an $8 million letter of credit and 75,330 shares of Class
A Preferred Stock valued at $7.5 million which has
subsequently earned dividends of an additional 5,795 shares
valued at $.6 million. The letter of credit was substituted
for an $8 million cash deposit made in April 1992. To record
these escrow transactions, the Company increased outstanding
Class A Preferred Stock by $8.1 million and established an
offsetting contra stockholders' equity account. These
transactions did not have an effect upon net income or
stockholders' equity of the Company.
<PAGE>
FORM 10-K Page 38
Item 7. (continued)
The Company is a party to various other legal claims and
actions incidental to its business. Management believes that
none of these claims or actions, either individually or in the
aggregate, will have a material adverse effect on the
financial condition of the Company.
Cone Mills adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("FAS 106") in
the first quarter of 1993. The additional noncash charge to
earnings resulting from implementation of FAS 106, including
amortization of the transition obligation, did not have a
material impact on the Company's results of operations. See
Note 8 of Notes to Consolidated Financial Statements.
The Company provides health care benefits and life insurance
benefits for certain disabled employees and health care
continuation coverage for former employees as mandated by law.
The Company pays a portion of the actual costs of these
benefits. SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which is effective in 1994, requires
an accrual method of recognizing these benefits rather than
recording an expense when paid. Based upon preliminary
studies, the Company expects the cumulative effect of this
accounting change will reduce first quarter 1994 net income by
less than $2 million.
Financial Outlook and Strategy
For over two years, Cone Mills has benefited from favorable
apparel fabric markets characterized by increasing prices and
volume in both domestic and international denim markets and
the rapid expansion of sportswear fabrics markets. While the
Company believes that demographic trends and other market
developments continue to present favorable long-term
opportunities for growth, Cone is cautious about the near-term
balance between growing domestic retail denim apparel sales
and domestic, industry-wide denim garment and fabric
inventories which have been increasing at a higher rate of
growth. As inventory levels are adjusted, prices and volumes
could potentially be affected. Sportswear and home furnishings
markets should not be directly impacted and are expected to
grow over the next year.
Since November of 1993, the market price of cotton, the
Company's principal raw material, has increased significantly.
Even though Cone Mills has purchased cotton for future
deliveries at favorable prices, continued high spot and
forward cotton prices could affect the Company's profit margin
<PAGE>
FORM 10-K Page 39
Item 7. (continued)
in 1994, unless prices for denims and specialty sportswear
products can be increased accordingly.
Cone Mills actively seeks possible acquisitions and other
investment opportunities to which it believes it can add value
through application of its manufacturing and marketing
expertise. There can be no assurance that any actual
transaction will ultimately result, but the consummation of
any such transaction could involve a significant financial
commitment.
On June 25, 1993, the Company purchased a 20% ownership in
CIPSA, the largest denim manufacturer in Mexico. This
investment cost approximately $24 million and the Company
accounts for this investment by the equity method. Third-
quarter 1993 earnings from this affiliate were included in the
Company's statement of operations for the fourth quarter of
1993.
Cone Mills has also signed agreements dated June 25, 1993,
with CIPSA, providing for the formation of a joint venture
company to build and operate a world-class denim manufacturing
facility in Parras, Mexico. The partners plan to invest a
total of approximately $50 million, with each partner
providing 50% of this investment. Capital requirements for the
joint venture will primarily occur in 1994 and 1995. The joint
venture has signed a credit agreement with a Mexican bank for
approximately $63 million of debt financing. This debt is not
guaranteed by Cone Mills Corporation or CIPSA.
On February 17, 1994, the Board of Directors of Cone Mills
Corporation authorized the repurchase, from time to time, of
up to 2.5 million shares of the Company's outstanding common
stock in open market transactions. Repurchase decisions will
be based on the Company's expected capital structure, the
market price of the common stock, and alternative investment
opportunities.
The Company believes that its internally generated operating
funds and funds available under its credit facilities are
sufficient to meet its working capital, capital spending,
possible stock repurchases, and financing needs for the
foreseeable future, including the investment in the joint
venture.
<PAGE>
FORM 10-K Page 40
Item 8. Financial Statements and Supplementary Data
McGLADREY & PULLEN
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Cone Mills Corporation
Greensboro, North Carolina
We have audited the accompanying consolidated balance
sheets of Cone Mills Corporation and subsidiaries as of
January 2, 1994 and January 3, 1993 and the related
consolidated statements of operations, stockholders' equity,
and cash flows for each of the three years in the period ended
January 2, 1994. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Cone Mills Corporation and
subsidiaries as of January 2, 1994 and January 3, 1993, and
the results of their operations and their cash flows for each
of the three years in the period ended January 2, 1994 in
conformity with generally accepted accounting principles.
McGladrey & Pullen
Greensboro, North Carolina
February 11, 1994 except for
Note 17 as to which the date
is March 8, 1994
<PAGE>
FORM 10-K Page 41
Item 8. (continued)
<TABLE>
<S> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended January 2, 1994, January 3, 1993 and December 29, 1991
(amounts in thousands, except per share data)
1993 1992 1991
Net Sales (Note 16) $ 769,230 $ 705,430 $ 632,964
Operating Costs and Expenses:
Cost of sales 589,314 540,825 523,454
Selling and administrative 73,326 67,554 56,802
Depreciation 20,991 18,553 17,093
Restructuring cost (Note 14) - - 767
683,631 626,932 598,116
Income from Operations 85,599 78,498 34,848
Other Income (Expense):
Interest income 521 2,621 568
Interest expense (6,950) (10,938) (18,973)
Other income 317 - -
(6,112) (8,317) (18,405)
Income from Continuing Operations
before Income Taxes 79,487 70,181 16,443
Income Taxes (Note 9) 29,884 24,782 6,308
Income from Continuing Operations 49,603 45,399 10,135
Discontinued Operations (Note 18):
(Loss) from operations (net of income tax benefit
of $10,311) - - (17,091)
(Loss) on disposal of discontinued operations
(net of income tax benefit of $10,777) - - (17,860)
(Loss) on Discontinued Operations - - (34,951)
Income (Loss) before Extraordinary Item 49,603 45,399 (24,816)
Extraordinary Item - Expenses Related to
Early Extinguishment of Debt-(Net of
income tax benefit of $1,212) - (2,009) -
Net Income (Loss) $ 49,603 $ 43,390 $ (24,816)
Income (Loss) Available to Common Stockholders (Note 15):
Income from Continuing Operations $ 46,808 $ 40,839 $ 4,324
Income (Loss) before Extraordinary Item $ 46,808 $ 40,839 $ (30,627)
Net Income (Loss) $ 46,808 $ 38,830 $ (30,627)
Earnings (Loss) Per Share (Note 15):
Income from Continuing Operations $ 1.68 $ 1.67 $ .22
Income (Loss) before Extraordinary Item $ 1.68 $ 1.67 $ (1.58)
Net Income (Loss) $ 1.68 $ 1.59 $ (1.58)
Weighted Average Common Shares and
Common Share Equivalents Outstanding -
Fully Diluted (Note 15) 27,894 24,470 19,415
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
FORM 10-K Page 42
Item 8. (continued)
<TABLE>
<S> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 2, 1994 and January 3, 1993
(amounts in thousands, except share and par value data)
ASSETS 1993 1992
Current Assets:
Cash $ 503 $ 7,285
Accounts receivable - trade, less
provision for doubtful accounts $3,000;
$3,228 (Notes 2 and 16) 44,175 57,357
Inventories (Note 3):
Greige and finished goods 84,923 82,444
Work in process 15,968 14,788
Raw materials 20,612 22,469
Supplies and other 30,621 26,060
152,124 145,761
Other current assets 5,542 5,164
Total Current Assets 202,344 215,567
Investments in Unconsolidated Affiliates (Note 4) 26,420 -
Other Assets 3,171 2,105
Property, Plant and Equipment:
Land 20,758 22,744
Buildings 71,942 67,071
Machinery and equipment 239,846 213,388
Other 25,799 21,954
358,345 325,157
Less accumulated depreciation 158,669 140,881
Property, Plant and Equipment-Net 199,676 184,276
$ 431,611 $ 401,948
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
FORM 10-K Page 43
Item 8. (continued)
<TABLE>
<S> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 2, 1994 and January 3, 1993
(amounts in thousands, except share and par value data)
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1992
Current Liabilities:
Notes payable $ 5,099 $ 6,653
Current maturities of long-term debt (Note 6) 767 872
Accounts payable - trade 26,746 31,418
Sundry accounts payable and accrued expenses (Note 5) 44,231 58,858
Income taxes payable - 276
Deferred income taxes (Note 9) 27,295 22,848
Total Current Liabilities 104,138 120,925
Long-Term Debt (Note 6) 77,172 76,628
Deferred Items:
Deferred income taxes (Note 9) 36,652 37,328
Other deferred items 3,615 2,520
40,267 39,848
Contribution to Employee Stock Ownership Plan - 1,196
Stockholders' Equity:
Class A Preferred Stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 465,077
shares; 1992, 459,282 shares - Employee Stock
Ownership Plan (Notes 11 and 17) 46,508 45,928
Class A Preferred Stock held in escrow (81,125 shares;
1992, 75,330 shares) (Notes 11 and 17) (8,113) (7,533)
Class B Preferred Stock - no par value; authorized
5,000,000 shares (Note 11) - -
Nonvoting Common Stock - $.10 par value; 1993, authorized
0 shares; 1992, authorized 8,000,000 shares; issued
and outstanding 1,231,327 shares (Note 11) - 123
Common Stock - $.10 par value; authorized 42,700,000
shares; issued and outstanding 27,744,783 shares;
1992, 26,435,888 shares (Notes 11 and 12) 2,774 2,644
Capital in excess of par 75,397 75,227
Retained earnings 93,468 46,962
Total Stockholders' Equity 210,034 163,351
$ 431,611 $ 401,948
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
FORM 10-K
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES Page 44
Item 8. (continued) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 2, 1994, JANUARY 3, 1993 AND DECEMBER 29, 1991
(amounts in thousands, except share data)
Class A Preferred Class A Preferred Participating
Stock Stock - Escrow Preferred Stock
Shares Amount Shares Amount Shares Amount
Balance, December 30, 1990 607,029 $ 60,703 - $ - 635,000 $ 635
Net income (loss) - - - - - -
Class A Preferred Stock -
Employee Stock Ownership
Plan:
Shares redeemed (72,003) (7,200) - - - -
Cash dividends paid - - - - - -
Shares issued (9.50%
dividend on shares
outstanding) 53,105 5,310 - - - -
Shares issued to fund 1990
contribution to Employee
Stock Ownership Plan 13,743 1,374 - - - -
Common Stock:
Options exercised - - - - - -
Purchase of common shares - - - - - -
Shares issued -
Employee Equity Plan - - - - - -
Balance, December 29, 1991 601,874 $ 60,187 - $ - 635,000 $ 635
Net income - - - - - -
Class A Preferred Stock -
Employee Stock Ownership
Plan:
Shares redeemed (274,425) (27,442) - - - -
Cash dividends paid - - - - - -
Shares issued (9.70%
dividend on shares
outstanding) 56,100 5,610 - - - -
Shares issued for partial
funding of 1991
contribution to Employee
Stock Ownership Plan 403 40 - - - -
Shares issued to Employee
Stock Ownership Plan
Trustee held in Cone
escrow account 75,330 7,533 (75,330) (7,533) - -
Participating Preferred Stock
Converted to CommonStock:
Voting - - - - (511,867) (512)
Nonvoting - - - - (123,133) (123)
Common Stock:
6,900,000 common shares
issued in public offering - - - - - -
Options exercised - - - - - -
Purchase of common shares - - - - - -
Balance, January 3, 1993 459,282 $ 45,928 (75,330)$ (7,533) - $ -
Net income - - - - - -
Class A Preferred Stock -
Employee Stock Ownership
Plan:
Cash dividends paid - - - - - -
Shares issued (8.0%
dividend on shares held
in Cone escrow account) 5,795 580 (5,795) (580) - -
Nonvoting Common Stock -
converted to Voting Common
Stock - - - - - -
Common Stock:
Options exercised - - - - - -
Purchase of common shares - - - - - -
Balance, January 2, 1994 465,077 $ 46,508 (81,125)$ (8,113) - $ -
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
FORM 10-K
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES Page 44a
Item 8.(continued) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 2, 1994, JANUARY 3, 1993 AND DECEMBER 29, 1991
(amounts in thousands, except share data)
Nonvoting Capital in
Common Stock Common Stock Excess Retained
Shares Amount Shares Amount of Par Earnings
Balance, December 30, 1990 - $ - 10,777,268 $ 1,078 $ 7,753 $ 40,784
Net income (loss) - - - - - (24,816)
Class A Preferred Stock -
Employee Stock Ownership
Plan:
Shares redeemed - - - - - (2)
Cash dividends paid - - - - - (460)
Shares issued (9.50%
dividend on shares
outstanding) - - - - - (5,310)
Shares issued to fund 1990
contribution to Employee
Stock Ownership Plan - - - - - -
Common Stock:
Options exercised - - 81,000 8 122 -
Purchase of common shares - - (17,812) (2) (69) -
Shares issued -
Employee Equity Plan - - 750,000 75 2,925 -
Balance, December 29, 1991 - $ - 11,590,456 $ 1,159 $ 10,731 $ 10,196
Net income - - - - - 43,390
Class A Preferred Stock -
Employee Stock Ownership
Plan:
Shares redeemed - - - - - (5)
Cash dividends paid - - - - - (1,009)
Shares issued (9.70%
dividend on shares
outstanding) - - - - - (5,610)
Shares issued for partial
funding of 1991
contribution to Employee
Stock Ownership Plan - - - - - -
Shares issued to Employee
Stock Ownership Plan
Trustee held in Cone
escrow account - - - - - -
Participating Preferred Stock
Converted to CommonStock:
Voting - - 5,118,669 512 - -
Nonvoting 1,231,327 123 - - - -
Common Stock:
6,900,000 common shares
issued in public offering - - 6,900,000 690 62,792 -
Options exercised - - 3,200,550 320 7,084 -
Purchase of common shares - - (373,787) (37) (5,380) -
Balance, January 3, 1993 1,231,327 $ 123 26,435,888 $ 2,644 $ 75,227 $ 46,962
Net income - - - - - 49,603
Class A Preferred Stock -
Employee Stock Ownership
Plan:
Cash dividends paid - - - - - (3,097)
Shares issued (8.0%
dividend on shares held
in Cone escrow account) - - - - - -
Nonvoting Common Stock -
converted to Voting Common
Stock (1,231,327) (123) 1,231,327 123 - -
Common Stock:
Options exercised - - 100,000 10 525 -
Purchase of common shares - - (22,432) (3) (355) -
Balance, January 2, 1994 - $ - 27,744,783 $ 2,774 $ 75,397 $ 93,468
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
FORM 10-K Page 45
Item 8. (continued)
<TABLE>
<S> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended January 2, 1994, January 3, 1993 and December 29, 1991
(amounts in thousands)
1993 1992 1991
Cash Flows from Operating Activities:
Net Income (Loss) $ 49,603 $ 43,390 $ (24,816)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 20,991 19,952 19,287
Employee Stock Ownership Plan expense - 1,250 1,435
Loss(gain) on sale and writedown of property,plant and equipment (1,657) (1,670) 13,995
Amortization 444 959 1,069
Equity in earnings-unconsolidated affiliate (317) - -
Change in assets and liabilities:
Decrease (increase) in trade receivables 13,182 42,050 (17,903)
Decrease (increase) in inventories (6,363) (5,013) 35,431
Decrease (increase) in other assets (2,045) 275 (319)
Increase (decrease) in accounts payable and accrued expenses (19,299) 14,194 25,140
Increase (decrease) in income taxes payable (276) (1,948) 2,031
Increase (decrease) in deferred income taxes 3,771 4,062 (17,083)
Increase (decrease) in other liabilities (835) (1,661) (1,540)
Net cash provided by operating activities 57,199 115,840 36,727
Cash Flows from Investing Activities:
Investments in unconsolidated affiliates (26,103) - -
Proceeds from sale of property, plant and equipment 4,869 6,423 6,222
Capital expenditures (38,712) (25,398) (21,751)
Net cash used in investing activities (59,946) (18,975) (15,529)
Cash Flows from Financing Activities:
Net borrowing (payments) - short-term loans (1,554) 353 (1,303)
Principal payments - long-term debt (77,307) (316,655) (127,866)
Proceeds from long-term debt borrowings 77,746 189,246 111,865
Purchase of outstanding capital stock - Class A Preferred - (27,442) (7,200)
Purchase of outstanding capital stock - Common (358) (5,417) (71)
Proceeds from issuance of capital stock - Common 535 70,886 3,130
Dividends paid - Class A Preferred (3,097) (1,009) (460)
Net cash used in financing activities (4,035) (90,038) (21,905)
Net increase (decrease) in cash (6,782) 6,827 (707)
Cash at Beginning of Period 7,285 458 1,165
Cash at End of Period $ 503 $ 7,285 $ 458
Supplemental Disclosures of Cash Flow Information:
Cash payments for:
Interest, net of interest capitalized $ 7,125 $ 11,100 $ 21,387
Income taxes, net of refunds $ 23,926 $ 25,011 $ (1,553)
Supplemental Schedule of Noncash Investing and Financing Activities:
Stock dividend paid - Class A Preferred Stock $ - $ 5,610 $ 5,310
Contribution to ESOP - Class A Preferred Stock - 40 1,374
Class A Preferred Stock issued $ - $ 5,650 $ 6,684
Class A Preferred Stock issued to ESOP trustee for Cone
escrow account $ - $ 7,533 $ -
Stock Dividend paid to ESOP trustee for escrow account 580 - -
Class A Preferred Stock issued $ 580 $ 7,533 $ -
Nonvoting Common Stock issued $ - $ 123 $ -
Common Stock issued 123 512 -
Participating Preferred Stock converted to common stocks - $ 635 $ -
Nonvoting Common Stock converted to Voting Common Stock $ 123
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
FORM 10-K Page 46
Item 8. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Principles of consolidation:
The consolidated financial statements include
the accounts of the Company and its
subsidiaries. All significant intercompany
accounts have been eliminated.
Fiscal year:
The Company's fiscal year ends on the Sunday
nearest December 31. The years ended January
2, 1994, and December 29, 1991, contained 52
weeks. The year ended January 3, 1993,
contained 53 weeks.
Inventories (amounts in thousands):
Substantially all components of textile
inventories are valued at the lower of cost or
market using the last-in, first-out (LIFO)
method. Nontextile inventories are valued at
the lower of average cost or market. If
current replacement cost had been used for
valuing financial statement inventories, that
portion of the inventories based on the LIFO
method would have been approximately $20,000
higher at January 2, 1994, and $14,000 higher
at January 3, 1993. LIFO inventories valued
for financial statement purposes exceed their
income tax basis by approximately $86,000 at
January 2, 1994, and $84,000 at January 3,
1993.
Investments in Unconsolidated Affiliates:
Investments in unconsolidated affiliated
companies are accounted for by the equity method.
<PAGE>
FORM 10-K Page 47
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property, plant and equipment:
Property, plant and equipment is carried at
cost except for assets related to discontinued
operations, which are carried at estimated net
realizable value. Depreciation is computed by
the straight-line method for financial
reporting purposes.
Capital stock redeemed:
Redemption of capital stock is accounted for
by the par value method. Excess of redemption
price over par value for Class A Preferred
Stock is charged to retained earnings. Excess
of purchase price over par value for common
stock is charged to capital in excess of par
applicable to common shares and to retained
earnings thereafter.
Deferred Income Taxes:
Deferred income taxes are provided on the
difference between the financial reporting and
the income tax basis of assets and
liabilities, principally inventories, and
property, plant and equipment. Balance sheet
classification of these deferred income taxes
is based upon the classification of the
related assets or liabilities that created the
temporary differences and does not necessarily
reflect the expected timing of the reversals.
Postemployment Benefits:
The Company provides health care benefits (in
excess of Medicare) and life insurance
benefits for certain disabled employees and
health care continuation coverage for former
employees as mandated by law. Presently, the
Company pays a portion of the actual costs of
these benefits. SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," which
is effective for fiscal years beginning after
December 15, 1993, requires an accrual method
of recognizing postemployment benefits rather
than recording an expense when paid. Based
<PAGE>
FORM 10-K Page 48
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
upon preliminary studies, the Company expects the
cumulative effect of this accounting change will
reduce first quarter 1994 net income by less than
$2 million.
Note 2. Sale of Accounts Receivables
On August 11, 1992, the Company entered into an
agreement extendable to August 1995, with the
subsidiary of a major financial institution, which
allows the sale without recourse of up to $40
million of an undivided interest in eligible trade
receivables. The Company acts as an agent for the
purchaser by performing record keeping and
collections function of receivables sold. The cost
of receivables sold by the Company is the
commercial paper rate plus 65 basis points
calculated for the period of time from the sale of
a receivable until its payment date. The resulting
cost on the sale of receivables is included in cost
of sales. Accounts receivable is shown net of $35
million sold at January 2, 1994 and net of $24
million sold at January 3, 1993 under this
agreement. Cash flows provided by operating
activities for the years ended January 2, 1994 and
January 3, 1993 include the sale of accounts
receivable of $11 million and $24 million,
respectively.
Note 3. Inventory Liquidations (amounts in thousands):
During 1993, 1992 and 1991, certain inventory
quantities were reduced, resulting in a liquidation
of LIFO inventory layers carried at lower costs
prevailing in prior years. The effect of these
liquidations increased net earnings by $303 in
1993, $1,076 in 1992 and by $2,082 in 1991.
Note 4. Investments In Unconsolidated Affiliates
On June 25, 1993, the Company purchased a 20%
ownership in Compania Industrial de Parras S.A.,
("CIPSA"), the largest denim manufacturer in
Mexico. This investment cost approximately $24
million and the Company accounts for this
investment by the equity method. Third-quarter
1993 earnings from this affiliate were included in
<PAGE>
FORM 10-K Page 49
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the Company's statement of operations for the fourth
quarter of 1993. The Company has not received any
dividends on this investment.
The summarized unaudited financial information of CIPSA
(100% basis), as adjusted for purchase accounting, is set
forth below:
<TABLE>
<S> <C> <C>
Financial Information (amounts in thousands):
Income statement data 1993
(13 weeks ending September 30, 1993)
Net sales $ 23,128
Gross profit 5,669
Net income 1,584
Company's equity in net income 317
Balance sheet data (September 30, 1993)
Current assets $ 70,311
Noncurrent assets 87,657
Current liabilities 13,282
Noncurrent liabilities 24,121
Net assets 120,565
Company's equity in net assets 24,113
</TABLE>
The carrying value of this investment exceeds by
approximately $10.4 million the Company's share in
CIPSA's net assets calculated using U.S. generally
accepted accounting principles before application of
purchase accounting. Approximately $2.9 million of the
excess relates to differences between historical costs
and fair market values of CIPSA's property, plant and
equipment. The remainder is goodwill of approximately
$7.5 million which is being amortized over 25 years by
the straight-line method.
The Company has also signed agreements dated June 25,
1993, with CIPSA providing for the formation of a joint
venture company to build and operate a world-class denim
manufacturing facility in Parras, Mexico. The partners
plan to invest a total of approximately $50 million, with
each partner providing 50% of this investment. The joint
venture has signed a credit agreement with a Mexican bank
for approximately $63 million of debt financing. This
debt is not guaranteed by Cone Mills Corporation or
CIPSA. Expenditures on the joint venture began in the
third quarter of 1993 and as of January 2, 1994 the
Company has invested $2.3 million.
<PAGE>
FORM 10-K Page 50
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Sundry Accounts Payable and Accrued Expenses
Sundry accounts payable and accrued expenses
consist of the following:
<TABLE>
<S> <C> <C>
1993 1992
(amounts in thousands)
Accrued salaries, wages
and commissions $ 15,062 $ 12,158
Checks issued in excess
of deposits 12,185 10,101
Employee withholdings 936 13,768
Other 16,048 22,831
$ 44,231 $ 58,858
</TABLE>
Note 6. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<S> <C> <C> <C> <C>
January 2, 1994
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 75,000 $ - $ 75,000
Revolving Credit Agreement - - -
Industrial Revenue Bonds 1,231 474 757
Other 1,708 293 1,415
$ 77,939 $ 767 $ 77,172
January 3, 1993
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 75,000 $ - $ 75,000
Revolving Credit Agreement - - -
Industrial Revenue Bonds 2,035 804 1,231
Other 465 68 397
$ 77,500 $ 872 $ 76,628
</TABLE>
<PAGE>
FORM 10-K Page 51
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financing arrangements effective August 13, 1992 include
a ten year $75 million 8% Senior Promissory Note and a
three year $60 million Revolving Credit Agreement.
Annual principal payments of $10.7 million are required
by the Senior Note, beginning August 1996, with the
remaining principal amount due August 2002. Borrowings
under the Revolving Credit Agreement are at floating
rates, determined by either the prime rate, CD Rate, or
LIBOR, at the Company's option, plus a margin determined
by the Company's capital structure.
The financing agreements contain certain covenants
regarding the operations and financial condition of the
Company. The Company was in compliance with all loan
covenants at January 2, 1994. The total amount of unused
capacity under the Revolving Credit Agreement at January
2, 1994, was $60 million.
The Company's industrial revenue bond obligations are at
interest rates ranging from 70% to 86% of prime rate and
have maturities through 1999.
The Company's other long-term obligations are $187,000 at
7% per annum and $1,521,000 at lender's prime rate plus
1%. These obligations also have maturities through 1999.
The fair value of the Company's long-term debt
approximates its carrying value.
Annual maturities of long-term debt for each of the next
five fiscal years are:
<TABLE>
<S> <C> <C>
1994 $ 767,000
1995 745,000
1996 11,675,000
1997 10,878,000
1998 10,881,000
</TABLE>
Note 7. Retirement Plans
The Company maintains noncontributory defined benefit
pension plans covering substantially all employees. The
plan covering salaried employees provides pension
benefits based on years of service and average
compensation for the highest five consecutive years
during the last ten years of service. Plans covering
hourly employees and long distance drivers provide
benefits based on compensation for each year of service.
<PAGE>
FORM 10-K Page 52
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pension expense related to these plans was $2,445,000 in
1993, $1,807,000 in 1992 and $1,963,000 in 1991. The
Company's funding policy is to make annual contributions
of amounts that are deductible for income tax purposes.
Assets of the pension plans are primarily invested in
fixed income securities consisting of bond funds and
short-term money market or cash equivalent funds.
Net periodic pension costs for 1993, 1992 and 1991
included the following components:
<TABLE>
<S> <C> <C> <C>
1993 1992 1991
(amounts in thousands)
Service cost, benefits
earned during period $ 1,284 $ 1,194 $ 1,263
Interest cost on projected
benefit obligation 1,180 686 667
Actual return on assets (571) (262) (327)
Net amortization and deferral 552 189 360
$ 2,445 $ 1,807 $ 1,963
</TABLE>
Assumptions used in determining the periodic pension cost
of the pension plans are as follows:
<TABLE>
<S> <C> <C> <C>
1993 1992 1991
Discount rate 8.5% 8.5% 8.5%
Average rate of increase
in compensation levels 4.0 4.5 4.5
Expected long-term rate of
return on assets 9.0 8.0 8.0
</TABLE>
<PAGE>
FORM 10-K Page 53
Item 8(continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C> <C> <C>
The following table sets forth the pension plans' funded status
and amounts recognized in the Company's consolidated balance
sheets at January 2,1994 and January 3, 1993:
1993 1992
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
(amounts in thousands)
Actuarial present value of accumulated
benefit obligation-vested portion $ 5,415 $ 2,472 $ 2,251 $ 1,514
Actuarial present value of accumulated
benefit obligation-nonvested portion 649 20 824 6
Accumulated benefit obligation - total 6,064 2,492 3,075 1,520
Additional amounts related to projected
compensation levels 8,377 133 3,762 -
Total actuarial projected benefit
obligation for service rendered to date 14,441 2,625 6,837 1,520
Less: Plan assets at fair value 8,168 159 5,235 139
Projected benefit obligation in excess of
plan assets (6,273) (2,466) (1,602) (1,381)
Unrecognized net actuarial (gain) loss,
difference in assumptions and actual
experience 7,879 176 425 (963)
Unrecognized prior service income (543) (28) (607) (34)
Initial unrecognized net liability
at date of adoption, being recognized
over 15-16 years 512 756 570 850
Adjustment to recognize minimum liability
through recording an intangible asset - (734) - -
Pension-related assets (liabilities)
included in the consolidated balance
sheets $ 1,575 $ (2,296) $ (1,214) $ (1,528)
Assumptions used in determining the funded status of the pension plans
(shown above) are as follows:
</TABLE>
<TABLE>
<S> <C> <C>
1993 1992
Discount Rate 7.5% 8.5%
Average rate of increase in
compensation levels 4.0 4.5
</TABLE>
<PAGE>
FORM 10-K Page 54
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Listed below are the Company's three defined contribution
plans which cover substantially all employees.
1. The 1983 Employee Stock Ownership Plan ("ESOP")
2. The Supplemental Retirement Plan ("SRP")
3. The Employee Equity Plan ("EEP")
For the years 1990 through 1992, the Company made ESOP
contributions for eligible, nonsalaried employees equal
to 1% of compensation, less forfeitures. Contributions
to the ESOP were made in cash and Class A Preferred Stock
of the Company. The Company discontinued contributions
to the ESOP after 1992. The ESOP is subject to a floor
offset arrangement in conjunction with the Company's
defined benefit plans with respect to pension benefits
earned for service after 1983. Under the floor offset
arrangement, retirement benefits earned after 1983 under
the Company's three defined benefit pension plans are
offset by the actuarial equivalent pension value of
participants' ESOP accounts.
The 401(k) Program ("Program"), formerly known as the
Supplemental Retirement Program, consists of the EEP and
the SRP. Participants of the Program may contribute from
2% to 10% of their annual compensation to the SRP or to
the EEP, or their contributions may be divided between
the two plans. Starting in 1994, employees may
contribute from 2% to 15% of their compensation. The
Company makes matching cash contributions of 25% to the
SRP, and 50% to the EEP. The Company matches employee
contributions up to 6% of the employee's annual
compensation.
Beginning in 1994, there will be two new plans in the
Program, the EEP-Hourly and the SRP-Hourly. Salaried
participants will remain in the EEP and SRP while hourly
participants will go into the two new plans. The two new
hourly plans are identical to the original EEP and SRP,
except for the employment status of the participants.
<PAGE>
FORM 10-K Page 55
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expenses for the three defined contribution plans are
shown below:
<TABLE>
<S> <C> <C> <C>
1993 1992 1991
(amounts in thousands)
ESOP $ - $ 1,250 $ 1,435
EEP 544 1,174 353
SRP 631 1,149 286
</TABLE>
The 1992 EEP and SRP expenses include a special
discretionary contribution made by the Company.
Note 8. Postretirement Benefits Other Than Pensions
(amounts in thousands)
The Company provides postretirement health care benefits
to certain retired employees between the ages of 55 and
65. These employees become eligible for postretirement
health care benefits if they retire after age 55 and have
completed 15 years of service. The plan is contributory,
with retiree contributions and plan design adjusted
annually to reflect changes in health care costs. The
Company funds a portion of the actual health care costs.
The Company adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," ("FAS
106"), as of the beginning of the 1993 fiscal year. FAS
106 requires accrual of the cost of providing
postretirement benefits during the employees' active
service periods. The Company's accumulated
postretirement benefit obligation ("APBO") at the time of
adoption was $4,598 and is being amortized to expense
over a 20-year transition period. Prior to 1993, the
Company recognized retiree health care expense when the
benefits were paid. The effect of the change in
accounting policy was to reduce net income for 1993 by
$405.
<PAGE>
FORM 10-K Page 56
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The periodic expense for postretirement benefits included
the following components for the year ended January 2,
1994:
<TABLE>
<S> <C> <C>
Service cost for benefits
earned during the year $ 188
Interest cost on accumulated benefit
obligation 379
Amortization of transition obligation 230
Total expense $ 797
</TABLE>
Postretirement benefit cost recognized in 1992 under the
Company's prior accounting policy was $277.
The actuarial and recorded liabilities for postretirement
benefits, none of which have been funded, are as follows
at January 2, 1994:
<TABLE>
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 743
Fully eligible active plan participants 967
Other active plan participants 2,242
Total $ 3,952
Plus unrecognized gain 1,080
Less unrecognized transition obligation 4,368
Accrued postretirement benefit cost $ 664
</TABLE>
For measurement purposes, a 15 percent annual rate of
increase in per capita health care costs of covered
benefits was assumed for 1994, with such rate of increase
gradually declining to 5.5 percent in 2003. Increasing
the assumed health care cost trend rate by 1 percentage
point would increase the accumulated postretirement
benefit obligation at January 2, 1994 by $431 and
increase net periodic postretirement benefit expense by
approximately $78 in 1993. The accumulated
postretirement benefit obligation was computed using an
assumed discount rate of 7 percent for 1993.
<PAGE>
FORM 10-K Page 57
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Income Taxes
<TABLE>
<S> <C> <C> <C>
The following tables present the provision for income taxes, the
components of income tax expense from continuing
operations, a reconciliation of the statutory U.S. income tax rate
to the effective income tax rate, and the components and
items comprising net deferred income tax liability.
Provision (Credit) for Income Taxes (in thousands)
1993 1992 1991
Continuing operations $ 29,884 $ 24,782 $ 6,308
Discontinued operations - - (21,088)
Extraordinary item - (1,212) -
Total provision (credit) $ 29,884 $ 23,570 $ (14,780)
</TABLE>
Components of Income Tax Expense from
Continuing Operations (in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993 1992 1991
Current Deferred Total Current Deferred Total Current Deferred Total
Federal $ 22,303 $ 3,470 $ 25,773 $ 17,447 $ 3,511 $ 20,958 $ 10,737 $ (6,406)$ 4,331
State and local 3,810 301 4,111 3,273 551 3,824 1,877 100 1,977
Total provision (credit) $ 26,113 $ 3,771 $ 29,884 $ 20,720 $ 4,062 $ 24,782 $ 12,614 $ (6,306)$ 6,308
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Reconciliation to Effective Tax Rate
from Continuing Operations 1993 1992 1991
Statutory U. S. tax rate 35.0 % 34.0 % 34.0 %
State income taxes, net of federal
benefit 3.4 3.6 7.9
Tax benefit from foreign sales
corporation (1.9) (1.4) (2.9)
Impact on deferred taxes from federal
tax rate increase 2.1 - -
Other (1.0) (0.9) (0.6)
Total effective tax rate 37.6 % 35.3 % 38.4 %
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Components of Net Deferred
Income Tax Liability (in thousands) 1993 1992 1991
Deferred income tax liabilities $ 75,160 $ 73,731 $ 71,745
Deferred income tax assets (11,213) (13,555) (15,631)
Net deferred income tax liability $ 63,947 $ 60,176 $ 56,114
No valuation allowance has been provided due to scheduled reversals of deferred tax liabilities sufficient to offset
scheduled reversals of deferred tax assets.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Items Comprising Net Deferred
Income Tax Liability (in thousands) 1993 1992 1991
Property, plant & equipment
- principally depreciation $ 37,538 $ 37,239 $ 38,771
Inventories 32,853 31,557 27,121
Anticipated future expenses (942) (2,552) (4,673)
Other - net (5,502) (6,068) (5,105)
Net deferred income tax liability $ 63,947 $ 60,176 $ 56,114
In August 1993 the federal statutory income tax rate for the Company was increased to 35%, effective January 4, 1993.
</TABLE>
<PAGE>
FORM 10-K Page 58
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Common Stock Offering and Conversion of
Participating Preferred Stock
On June 25, 1992, the Company received net proceeds of
$55.2 million upon consummation of an underwritten public
offering for 6,000,000 shares of Common Stock. Pursuant
to exercise by the underwriters of a 900,000 share over-
allotment option, the Company received additional net
proceeds of $8.3 million on July 22, 1992.
On June 18, 1992, the effective date of the Company's
registration statement for its public offering, and in
accordance with agreements executed by the Company and
each of the holders of its Participating Preferred Stock,
all outstanding shares of Participating Preferred Stock
were converted into an aggregate of 5,118,669 shares of
Common Stock and 1,231,327 shares of Nonvoting Common
Stock.
Note 11. Capital Stock
All Class A Preferred Stock is held by the Cone Mills
Corporation 1983 ESOP except shares held in escrow and
shares held by former participants who elected to receive
shares in a distribution of account balances. Class A
Preferred Stock is nonvoting, except as otherwise
required by law, and is senior in dividend preference to
all other classes of capital stock. Class A Preferred
Stock has a liquidation preference senior to all other
classes of capital stock of $100 per share plus accrued
and unpaid dividends.
Holders of Class A Preferred Stock are entitled to
receive dividends on the 31st day of March of each year
from funds legally available therefor when, as and if
declared by the Board of Directors. The dividend rate is
established on March 31 for the succeeding dividend
period, and is determined by an independent investment
bank or appraisal firm selected by the Board of
Directors, subject to confirmation by the ESOP trustee.
The dividend rate is determined annually, and is that
rate required to make the fair market value of Class A
Preferred Stock equal to its original par value. The
dividend rate cannot exceed 13% per annum or be less than
7% per annum. Dividends on Class A Preferred Stock are
cumulative, but accumulated dividends do not bear
interest. Dividend rates for Class A Preferred Stock
were 7.0% for 1994, 8.0% for 1993 and 9.7% for 1992.
<PAGE>
FORM 10-K Page 59
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dividends on the Class A Preferred Stock are, at the
option of the Board of Directors, paid in cash or by
delivery of shares of the Company's Class A Preferred
Stock, Common Stock or by delivery of other "qualifying
employer securities" of the Company as that term is used,
on the date of such delivery, in Section 407 of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (or the corresponding section of any
future law) or by a combination of the foregoing;
provided, however, that on the date of delivery the fair
market value of any stock or qualifying employer
securities used to pay dividends shall be equal to or
greater than the amount of dividends paid therewith. All
dividends paid to date on the Class A Preferred Stock
have been paid in additional shares of Class A Preferred
Stock or cash.
Class A Preferred Stock held by the 1983 ESOP may be
redeemed, in whole or in part, at the option of the
Company by a vote of the Board of Directors, at a price
equal to the greater of $100 per share or the fair market
value thereof, plus dividends accrued and unpaid thereon
to the date fixed for redemption. The redemption price
shall be paid in cash or by delivery of shares of the
Company's Class A Preferred Stock, Common Stock or by
delivery of other qualifying employer securities or a
combination of the foregoing, at the Company's option;
provided, however, that on the date of delivery the fair
market value of any stock or other qualifying employer
securities used to pay the redemption price shall be
equal to or greater than the redemption price (or portion
thereof) paid therewith. The fair market value of Class
A Preferred Stock was determined to be $100.10 per share
at January 2, 1994.
Purchases of Class A Preferred Stock by the ESOP may be
necessary to provide all or part of the pension due under
the Company's defined benefit plans pursuant to the floor
offset arrangement in connection with the ESOP and to
make distributions due to retired or terminated
employees. The ESOP is obligated to purchase shares of
Class A Preferred Stock from participants and former
participants of these plans in accordance with the terms
and conditions of the plans, the trust agreements and
liquidity agreements thereunder. To the extent the ESOP
has insufficient liquidity to make these purchases, it
may require the Company to repurchase shares of Class A
<PAGE>
FORM 10-K Page 60
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Preferred Stock. It is within the control of the Company
to satisfy the liquidity needs of the ESOP through cash
contributions, cash dividends or optional repurchases of
the Class A Preferred Stock.
All outstanding shares of Nonvoting Common Stock were
converted to Common Stock during February, 1993. These
shares, owned exclusively by unaffiliated shareholders,
were converted at the rate of one share of Common Stock
for each share of Nonvoting Common Stock. On May 11,
1993, the shareholders approved an amendment to the
Company's Restated Articles of Incorporation which
removed Nonvoting Common Stock as authorized capital
stock. At the same time, Participating Preferred Stock
was removed as authorized capital stock.
The Company is authorized to issue Class B Preferred
Stock but it has no Class B Preferred Stock outstanding
nor does it have present plans to issue such shares. The
Restated Articles of Incorporation provide that the Board
of Directors may determine the preferences, limitations
and relative rights of the Class B Preferred Stock,
including voting rights, which could adversely affect the
voting rights of holders of Common Stock. Any Class B
Preferred Stock which is authorized and issued shall be
junior to Class A Preferred Stock in accordance with the
terms of the Restated Articles of Incorporation.
Holders of Common Stock are entitled ratably, share for
share, to dividends, when, as and if declared by the
Board of Directors, out of funds legally available
therefor. Common Stock is junior to Class A Preferred
Stock with respect to dividend preference and may be
junior to Class B Preferred Stock depending upon the
relative preferences, limitations and relative rights the
Board of Directors may determine upon issuance of such
Class B Preferred Stock.
The Common Stock is junior in liquidation preference to
the Class A Preferred Stock and may be junior to the
Class B Preferred Stock depending upon the relative
preferences, limitations and rights the Board of
Directors may establish upon issuance of Class B
Preferred Stock. After payment in liquidation has been
made to the senior capital stock, the remaining assets of
the Company would be distributed pro rata among the
holders of Common Stock equally on a per share basis.
<PAGE>
FORM 10-K Page 61
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Holders of Common Stock are entitled to one vote per
share on all matters submitted to a vote of holders of
Common Stock.
Note 12. Stock Option Plan
The Company's 1984 Stock Option Plan provides for the
granting of options to purchase 5,000,000 shares of
Common Stock; such options may be incentive stock options
or nonqualified stock options. All of the options
granted have been nonqualified stock options with a term
of ten years, and such grants included income tax
reimbursement in accordance with the terms of the plan.
Options are exercisable on a cumulative basis, at a rate
of 20% per year beginning in the year of grant. No
additional grants will be made under the 1984 Plan.
The Company also has in effect the 1992 Stock Option Plan
that permits the granting of options to purchase up to
2,000,000 shares of Common Stock. This plan is
substantially identical to the 1984 Stock Option Plan.
On February 18, 1993, incentive stock option grants to
purchase 500,000 shares of Common Stock at $15.625 per
share were made. These options have a term of ten years
and are exercisable, on a cumulative basis, at a rate of
20% in each twelve month period, beginning six months
after the date of grant.
A summary of activity under the plans follows:
<TABLE>
<S> <C> <C> <C> <C>
1984 Stock Option Plan:
Option price per share $ 1.31 $ 5.25 $ 6.50
Outstanding at
12/29/91 2,404,800 991,000 -
Canceled - (28,000) -
Granted 2/20/92 - - 134,750
Exercised (2,404,800) (772,800) ( 22,950)
Outstanding at
1/3/93 - 190,200 111,800
Canceled (3,000) -
Exercised (92,000) (8,000)
Outstanding at
1/2/94 95,200 103,800
1992 Stock Option Plan:
Option price per share $15.625
Granted 2/18/93 500,000
Outstanding at 1/2/94 500,000
Options exercisable
at 1/2/94 95,200 22,950 100,000
</TABLE>
<PAGE>
FORM 10-K Page 62
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13. Leases, Commitments and Repairs and Maintenance -
Continuing Operations (amounts in thousands)
The Company has various leases accounted for as operating
leases. Rent expense was $5,053, $4,465, and $4,255, for
1993, 1992 and 1991, respectively. Future minimum rental
payments required under lease agreements are $4,332 for
1994, $3,625 for 1995, $2,698 for 1996, $1,979 for 1997,
$1,077 for 1998, and thereafter $2,217. Aggregate future
minimum rental payments total $15,928. Commitments for
improvements of and additions to property, plant and
equipment approximated $5,105 at January 2, 1994.
Operating costs and expenses include repairs and
maintenance costs of $34,680, $32,239, and $28,738 for
1993, 1992 and 1991, respectively.
Note 14. Restructuring Costs (amounts in thousands)
In 1991 the Company sold the assets of Ragan Hardware
Company, a small wholesale distributor of hardware in the
furniture industry. The loss of $767 relating to this
disposition is shown as restructuring cost in 1991.
<PAGE>
FORM 10-K Page 63
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Note 15. Earnings (Loss) Per Share
1993 1992 1991
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
(amounts in thousands, except per share data)
Income from continuing operations $ 49,603 $ 49,603 $ 45,399 $ 45,399 $ 10,135 $ 10,135
Less: Class A Preferred dividends (2,795) (2,795) (4,560) (4,560) (5,811) (5,811)
Adjusted income from continuing
operations 46,808 46,808 40,839 40,839 4,324 4,324
(Loss) from discontinued operations - - - - (34,951) (34,951)
Adjusted income (loss) before extraordinary
item 46,808 46,808 40,839 40,839 (30,627) (30,627)
Extraordinary Item - - (2,009) (2,009) - -
Adjusted net income (loss) $ 46,808 $ 46,808 $ 38,830 $ 38,830 $ (30,627) $ (30,627)
Weighted average common shares and
common share equivalents outstanding 27,886 27,894 24,285 24,470 19,384 19,415
Earnings (loss) per common share and
common share equivalent:
Income from continuing operations $ 1.68 $ 1.68 $ 1.68 $ 1.67 $ .22 $ .22
Income (loss) before extraordinary item $ 1.68 $ 1.68 $ 1.68 $ 1.67 $ (1.58) $ (1.58)
Net income (loss) $ 1.68 $ 1.68 $ 1.60 $ 1.59 $ (1.58) $ (1.58)
Primary and fully diluted earnings per share have been computed by dividing the net earnings (loss)
available to common stockholders by the sum of the weighted average number of voting and
nonvoting common shares outstanding, plus common share equivalents resulting from the assumed
exercise of stock options using the treasury stock method, and for 1992 and 1991, the conversion
of Participating Preferred Stock.
Common shares issued June 18, 1992 have been included from date of issue.
</TABLE>
<PAGE>
FORM 10-K Page 64
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16. Segment Information and Major Customers
The Company operates in two major segments within the
textile industry: Apparel Fabrics and Home Furnishings.
The Company designs, manufactures and markets Apparel
Fabrics including denim in various styles, finishes and
weights, yarn-dyed and chamois flannel shirting fabrics,
printed fabrics and synthetic sportswear fabrics. The
Home Furnishings segment consists of the design and
distribution of decorative fabrics for the home
furnishings industry, and decorative fabrics commission
dyeing, printing and finishing services. This segment
also includes polyurethane foam products, batting,
cushions, carpet padding, and the distribution of
furniture hardware. For reporting purposes, real estate
operations are included in the Home Furnishings segment.
The Company has no foreign operations. Sales to
unaffiliated foreign customers, principally in Europe,
were 17.2% of sales from continuing operations in 1993,
16.1% in 1992 and 14.5% in 1991. Cone has one
unaffiliated customer which accounted for more than 10%
of consolidated sales from the Apparel Fabrics segment.
Sales to this customer, as a percentage of sales from
continuing operations, were 35.3% in 1993, 37.9% in 1992,
and 38.5% in 1991. At January 2, 1994 this customer had
an outstanding accounts receivable balance with the
Company of approximately $8.6 million. The Company has
not incurred any losses in past years related to this
customer's accounts receivable.
Operating profit for each segment is total revenue less
operating expenses applicable to that segment. General
corporate expenses, interest, income taxes, and losses
from discontinued operations are not included in segment
operating income. General corporate expenses include
certain executive officers salaries, legal expenses, bank
fees and charitable contributions. Intersegment sales
and transfers are considered insignificant. Corporate
assets include cash, administrative facilities, deferred
charges, and miscellaneous receivables.
<PAGE>
FORM 10-K Page 65
Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment Information
<TABLE>
<S> <C> <C> <C>
The Company operates in two major industry segments: products for apparel and home furnishings.
Sales, operating income, identifiable assets, depreciation and capital expenditures for these
segments are as follows:
1993 1992 1991
(amounts in thousands)
Sales
Apparel $ 575,800 $ 520,019 $ 457,994
Home Furnishings 193,430 185,411 174,970
Total $ 769,230 $ 705,430 $ 632,964
Operating income
Apparel $ 68,828 $ 67,382 $ 20,409
Home Furnishings 19,470 16,317 19,157
Restructuring - - (767)
88,298 83,699 38,799
General corporate expenses 2,699 5,201 3,951
Interest expense - net 6,429 8,317 18,405
Other (income) expense (317) - -
8,811 13,518 22,356
Income from continuing operations
before income taxes $ 79,487 $ 70,181 $ 16,443
Operating Margin
Apparel 12.0% 13.0% 4.5%
Home Furnishings 10.1 8.8 10.9
Total 11.5% 11.9% 6.1%
Identifiable Assets
Apparel $ 295,832 $ 268,872 $ 256,751
Home Furnishings 113,780 104,039 112,621
Corporate 16,227 20,888 13,238
Discontinued Operations 5,772 8,149 50,091
Total $ 431,611 $ 401,948 $ 432,701
Depreciation
Apparel $ 16,518 $ 14,634 $ 13,536
Home Furnishings 3,376 2,893 2,622
Corporate 1,097 1,026 935
Total $ 20,991 $ 18,553 $ 17,093
Capital Expenditures
Apparel $ 28,083 $ 17,590 $ 11,762
Home Furnishings 8,927 5,993 8,608
Corporate 1,702 1,815 597
Discontinued Operations - - 784
Total $ 38,712 $ 25,398 $ 21,751
</TABLE>
<PAGE>
FORM 10-K Page 66
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17. Litigation and Contingencies
In November 1988, William J. Elmore and Wayne Comer (the
"Plaintiffs"), former employees of the Company,
instituted a class action suit against the Company and
Wachovia Bank & Trust Company, N.A. ("Wachovia") and
certain current and former employees of the Company and
Wachovia. The suit was brought on behalf of salaried
employees of the Company who were participants in certain
Company retirement plans. The Plaintiffs asserted a
variety of claims related to actions taken and statements
made concerning certain employee benefit plans maintained
by the Company. In May 1990, the United States District
Court in Greenville, South Carolina, certified a
plaintiff class of salaried employees. In August 1990,
the District Court granted partial summary judgment in
favor of the defendants and significantly narrowed the
extent of the Plaintiffs' claims. A trial was held in
February 1991, and supplemental proceedings were held on
July 24, 1991. At the trial, a witness hired by the
Plaintiffs estimated the alleged loss to the Plaintiff
class to range from approximately $34 million to
approximately $94 million.
On March 20, 1992, the District Court entered a judgment
finding that the Company had promised to contribute
certain surplus funds (or their equivalent in Company
stock) relating to the overfunding of the Company's
pension plans to the 1983 ESOP by December 23, 1985, that
such surplus amounted to $69 million, that the Company's
actual contribution totaled approximately $55 million,
and that the Company and its Chairman, Dewey L. Trogdon,
and its Secretary, Lacy G. Baynes, therefore had breached
their fiduciary duties under the Employee Retirement
Income Security Act of 1974 ("ERISA") to certain
participants in the 1983 ESOP. The District Court
ordered the Company to pay to the 1983 ESOP for the
benefit of plan participants, both salaried and hourly,
the sum of $14.2 million in cash or the equivalent in
Company stock. In addition, the District Court awarded
$3.5 million in attorneys' fees to the Plaintiffs, $2.2
million of which is to be paid from the sum awarded to
the 1983 ESOP. Judgment was entered in favor of the
defendants on all remaining claims except for claims
relating to the ESOP contribution. In accordance with
and to the extent permitted by the Company's Articles of
Incorporation and Bylaws, the two individual defendants
in this litigation are indemnified by the Company for any
costs incurred by them in connection with this matter.
<PAGE>
FORM 10-K Page 67
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 20, 1992, the Company and the individual
defendants appealed the District Court's judgment against
them to the United States Court of Appeals for the Fourth
Circuit. On April 2, 1992, the Plaintiffs appealed the
District Court's judgment to the Court of Appeals insofar
as it dismissed certain of their claims. To secure the
judgment on appeal the Company has deposited in escrow
with the trustee of the 1983 ESOP an $8 million letter of
credit and 75,330 shares of Class A Preferred Stock
valued at $7.5 million which has subsequently earned
dividends of an additional 5,795 shares valued at $.6
million. To record these escrow transactions, the
Company increased outstanding Class A Preferred Stock by
$8.1 million. The increase in outstanding Class A
Preferred Stock was offset by a contra stockholders'
equity account labeled "Class A Preferred Stock held in
escrow." These escrow account transactions did not have
an effect upon net income or stockholders' equity of the
Company.
On September 22, 1993 a three-judge panel of the United
States Court of Appeals for the Fourth Circuit in a two-
to-one decision reversed the District Court's decision as
to the obligation to contribute additional funds to the
1983 ESOP and affirmed the District Court's dismissal of
all remaining claims against the Company and the
individual defendants. On October 4, 1993, Plaintiffs
petitioned the Fourth Circuit for rehearing, with a
suggestion for rehearing en banc, and on October 29, 1993
the United States Department of Labor filed a brief in
support of Plaintiffs' petition for rehearing.
Plaintiffs' petition for rehearing en banc was granted on
December 13, 1993, and, consequently, the panel opinion
was vacated. Briefs were filed by the Plaintiffs,
Department of Labor, and the Company, and an en banc oral
argument was heard by the Court of Appeals on March 8,
1994. The Company is awaiting a decision. An attorney
for the Plaintiffs has contended that, if Plaintiffs
prevail on appeal, the judgment could exceed $50 million
based on the existing judgment and additional claims
relating to alleged unjust enrichment and alleged
overvaluation of the Class A Preferred Stock initially
contributed to the 1983 ESOP, as well as prejudgment
interest.
<PAGE>
FORM 10-K Page 68
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has received an opinion from its lead counsel
on appeal, that, while it is not possible to predict the
outcome of this lawsuit with certainty, in the opinion of
such firm the District Court's decision in Plaintiffs'
favor is erroneous and is more likely than not to be
reversed or substantially modified by the Court sitting
en banc and the dismissal of Plaintiffs' claims was
proper and is more likely than not to be affirmed by the
en banc Court. Therefore, the Company has concluded that
it is not probable that a liability has been incurred
with respect to this suit. However, the Company has been
advised by such counsel that an appellate court which
votes to rehear a case en banc often reaches a result
different from the panel originally designated to hear
the appeal, and further, that ERISA law is rapidly
changing and decisional law on many ERISA issues is
neither unanimous nor fully developed. Because of the
foregoing and the uncertainties inherent in the
litigation process, there can be no assurance as to the
ultimate resolution of this lawsuit. If Plaintiffs'
judgment (including the attorneys' fees award) is
affirmed on appeal, the Company's management estimates
that income, net of taxes, would be reduced by
approximately $10 million. It is the opinion of the
Company's management that this lawsuit, when finally
concluded, will not have a material adverse effect on the
Company's financial condition.
Note 18. Discontinued Operations
(amounts in thousands)
As of December 5, 1991, the Company adopted a plan to
discontinue and liquidate its corduroy and other
bottomweight continuous piece-dyed fabrics product line.
Earlier in 1991, the Company closed its last weaving
facility dedicated to corduroy and flat woven fabrics.
The operations to dye and finish these fabrics are
concentrated at Cone's Haw River, North Carolina
facility. The Company began to phase out this product
line in early 1992, and continued to accommodate
customers, liquidate inventory and collect receivables
through the 1993 cutting season and will complete the
liquidation of its corduroy and other bottomweight
continuous piece-dyed fabrics product line in the first
quarter of 1994.
<PAGE>
FORM 10-K Page 69
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
An estimated loss on disposal of these discontinued
operations of $17,860, net of income tax benefits of
$10,777, was recognized in the 1991 fiscal year. This
estimate included anticipated operating losses during the
phase-out period of $6,952, net of income tax benefits of
$4,195. This operating loss included allocated interest
of $765, net of income tax benefits of $462. Actual
losses from discontinued operations in 1992 and 1993 were
consistent with the estimated provision for such years;
therefore, no gain or additional loss has been recognized
on discontinued operations.
<TABLE>
<S> <C> <C> <C>
1993 1992 1991 (1)
(amounts in thousands)
Revenue (Sales) $ 4,814 $ 62,036 $ 87,812
Operating (Loss) from
discontinued operations $ - $ - $ (24,693)
Interest expense allocated
to discontinued operations - - 2,709
Operating (Loss) before
income taxes - - (27,402)
Income tax benefit - - (10,311)
(Loss) from discontinued
operations $ - $ - $ (17,091)
(Loss) on disposal of
discontinued operations $ - $ - $ (27,410)
Interest allocated to
disposal - - 1,227
(Loss) from disposal
before income taxes - - (28,637)
Income tax benefit - - (10,777)
(Loss) from disposal $ - $ - $ (17,860)
(1) Allocable interest expense has been computed based upon
the ratio of net realizable assets of the discontinued
operation as a ratio of the total assets of the Company.
</TABLE>
<PAGE>
FORM 10-K Page 70
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C> <C> <C>
Note 19. Quarterly Financial Data (unaudited)
Summarized quarterly financial data for years 1993 and 1992:
Quarters Ended
Apr. 4, Jul. 4, Oct. 3, Jan. 2,
1993 1993 1993 1994
(in thousands, except per share)
Net sales $ 195,035 $ 202,515 $ 192,644 $ 179,036
Gross profit (1) 41,839 40,320 39,623 37,143
Income from operations 21,593 23,365 21,669 18,972
Net income $ 12,619 $ 13,668 $ 11,809 $ 11,507
Per share data (fully diluted):
Net income $ .42 $ .47 $ .40 $ .39
Weighted average shares outstanding 27,877 27,936 27,889 27,911
Common stock prices*
High 19 5/8 19 1/4 18 17 5/8
Low 13 3/8 15 7/8 14 5/8 14 3/8
Quarters Ended
Mar. 29, Jun. 28, Sept. 27, Jan. 3,
1992 1992 1992 1993
(in thousands, except per share)
Net sales $ 174,246 $ 182,571 $ 170,536 $ 178,077
Gross profit (1) 35,458 36,968 36,003 37,623
Income from operations 19,071 20,020 19,476 19,931
Income before extraordinary item 12,044 10,839 10,937 11,579
Extraordinary item - - (2,009) -
Net income $ 12,044 $ 10,839 $ 8,928 $ 11,579
Per share data (fully diluted):
Income before extraordinary item $ .53 $ .45 $ .35 $ .39
Net income $ .53 $ .45 $ .28 $ .39
Weighted average shares outstanding 20,069 21,342 27,471 27,806
Common stock prices*
High - 11 5/8 15 7/8 16
Low - 10 10 1/2 13
The approximate number of holders of record of the Company's Common Stock as of March 1,
1994 was 574.
*New York Stock Exchange Composite Tape since date of public offering, June 18, 1992.
(1) Net sales less cost of sales and depreciation
No dividends have been declared on Common Stock since 1984 and the Company anticipates
that its earnings for the foreseeable future will be retained for use in its business and to finance
growth. Payment of cash dividends in the future will depend upon the Company's financial
condition, results of operations, current and anticipated capital requirements, and other factors
deemed relevant by the Company's Board of Directors.
</TABLE>
<PAGE>
FORM 10-K Page 71
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
<PAGE>
FORM 10-K Page 71a
PART II - ADDITIONAL DISCLOSURE
<TABLE>
<S> <C> <C> <C>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year ended January 3, 1993
Actual Adjustments Pro Form
(amounts in thousands, except per share)
Net sales $ 705,430 $ $ 705,430
Operating costs and expenses 626,932 626,932
Income from operations 78,498 78,498
Interest expense - net 8,317 (1,054)(1) 7,263
Income from continuing
operations before income taxes 70,181 1,054 71,235
Income taxes 24,782 397 (2) 25,179
Income from continuing operations 45,399 657 46,056
Extraordinary item (2,009) (2,009)
Net Income 43,390 657 44,047
Income from continuing operations $ 45,399 $ 657 $ 46,056
Less: Class A Preferred dividends 4,560 (1,369)(3) 3,191
Income from continuing operations
available to Common Stock 40,839 2,026 42,865
Extraordinary item (2,009) (2,009)
Net income available to Common Stock $ 38,830 $ 2,026 $ 40,856
Earnings per share from continuing operations $ 1.67 $ 1.55
Earnings per share $ 1.59 $ 1.47
Weighted average common shares and
common share equivalents outstanding 24,470 3,273 (4) 27,743
Pro forma adjustments have been made to reflect the following:
(1)Net reduction in interest expense applicable to continuing operations due to $42.1 million reduction of
borrowings resulting from application of a portion of the net proceeds from the 1992 Initial Public Offering
$(1,054).
(2)Provision for income tax expense on interest expense reduction reflected in (1) above at the Company's
marginal tax rate (37.63%) - $397.
(3)Reduction in dividends on Class A Preferred Stock redeemed with a portion of the net proceeds from the
1992 Initial Public Offering - $(1,369).
(4)Issuance of 6,900,000 shares of Common Stock in the 1992 Initial Public Offering at an initial public offering
price of $10 per share.
</TABLE>
<PAGE>
FORM 10-K Page 71b
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information relating to directors of the Company is presented
under the heading "Election of Directors" in the Company's
definitive Proxy Statement dated April 1, 1994, prepared for
the Annual Meeting of Shareholders to be held on May 10, 1994,
and is hereby incorporated by reference. Information
regarding executive officers is included as Item 4A in Part I.
Item 11. Executive Compensation.
Information relating to executive compensation is presented
under the heading "Executive Compensation" in the Company's
definitive Proxy Statement dated April 1, 1994, prepared for
the Annual Meeting of Shareholders to be held on May 10, 1994,
and is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Information with respect to beneficial ownership of the
Company's voting securities by each director and all officers
and directors as a group, and by any person known to
beneficially own more than 5% of any class of voting security
of the Company is presented under the heading "Security
Ownership of Directors, Nominees and Named Executive Officers"
and "Security Ownership of Certain Beneficial Owners" in the
Company's definitive Proxy Statement dated April 1, 1994,
prepared for the Annual Meeting of Shareholders to be held on
May 10, 1994, and is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions.
Information with respect to certain relationships and related
transactions is presented under the headings "Compensation of
Directors" and "Compensation Committee Interlocks and Insider
Participation" in the Company's definitive Proxy Statement
dated April 1, 1994, prepared for the Annual Meeting of
Shareholders to be held on May 10, 1994, and is hereby
incorporated by reference.
<PAGE>
FORM 10-K Page 72
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a)(1) The following financial statements of the
Registrant are presented in Item 8 on pages 40
through 70 hereof.
Report of Independent Auditor
Consolidated Statements of Operations for the Years
Ended January 2, 1994, January 3, 1993 and December
29, 1991
Consolidated Balance Sheets as of January 2, 1994,
and January 3, 1993
Consolidated Statements of Stockholders' Equity for
the Years Ended January 2, 1994, January 3, 1993,
and December 29, 1991
Consolidated Statements of Cash Flows for the Years
Ended January 2, 1994, January 3, 1993, and
December 29, 1991
Notes to Consolidated Financial Statements
(a)(2) The following Financial Statement Schedules are
presented on pages 75 through 78 hereto.
Report of Independent Auditor relating to Schedules
V, VI, VIII and IX
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation of Property,
Plant and Equipment
Schedule VIII - Valuation and Qualifying Accounts
Schedule IX - Short-Term Borrowings
All other schedules specified under Regulation S-X
are omitted because they are not applicable, not
required or the information required appears in the
Consolidated Financial Statements or Notes thereto.
<PAGE>
FORM 10-K Page 73
Item 14. (continued)
(a)(3) Exhibits. Exhibits to this report are listed on
the accompanying Index to Exhibits.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth
quarter of 1994.
<PAGE>
FORM 10-K Page 74
McGLADREY & PULLEN
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT
SCHEDULES
To the Board of Directors
Cone Mills Corporation
Greensboro, North Carolina
Our audit of the consolidated financial statements of
Cone Mills Corporation and subsidiaries included schedules V,
VI, VIII and IX contained herein, for the years ended January
2, 1994, January 3, 1993 and December 29, 1991.
In our opinion, such schedules present fairly the
information required to be set forth therein in conformity
with generally accepted accounting principles.
McGladrey & Pullen
Greensboro, North Carolina
February 11, 1994
<PAGE>
FORM 10-K Page 75
<TABLE>
<S> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Years Ended January 2, 1994, January 3, 1993 and December 29, 1991
(amounts in thousands)
Column A Column B Column C Column D Column E Column F
Balance at Additions Balance
beginning at Other changes at end
Classification of period cost Retirements add(deduct)(a) of period
1993
Land $ 22,744 $ - $ 1,986 $ - $ 20,758
Buildings 67,071 4,410 46 507 71,942
Machinery and equipment 213,388 30,108 3,346 (304) 239,846
Other 21,954 4,194 146 (203) 25,799
$ 325,157 $ 38,712 $ 5,524 $ - $ 358,345
1992
Land $ 24,755 $ - $ 2,011 $ - $ 22,744
Buildings 63,626 4,030 585 - 67,071
Machinery and equipment 202,388 18,912 7,912 - 213,388
Other 19,823 2,456 325 - 21,954
$ 310,592 $ 25,398 $ 10,833 $ - $ 325,157
1991
Land $ 25,205 $ - $ 450 $ - $ 24,755
Buildings 60,494 5,705 2,573 - 63,626
Machinery and equipment 203,075 14,362 15,065 16 202,388
Other 19,700 1,684 1,545 (16) 19,823
$ 308,474 $ 21,751 $ 19,633 $ - $ 310,592
Depreciation is computed on straight line method using the following approximate lives
Buildings 15-32 Years
Machinery and equipment 12-15 Years
Other 3-20 Years
(a) Represents reclassification of assets.
</TABLE>
<PAGE>
FORM 10-K Page 76
<TABLE>
<S> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
Years Ended January 2, 1994, January 3, 1993 and December 29, 1991
(amounts in thousands)
Column A Column B Column C Column D Column E Column F
Balance Additions
at charged to Balance
beginning costs and Other changes at end
Description of period expenses Retirements add(deduct)(a) of period
1993
Buildings $ 19,309 $ 2,925 $ 21 $ - $ 22,213
Machinery and equipment 107,366 16,199 2,682 (372) 120,511
Other 14,206 1,867 127 (1) 15,945
$ 140,881 $ 20,991 $ 2,830 $ (373) $ 158,669
1992
Buildings $ 16,682 $ 2,781 $ 154 $ - $ 19,309
Machinery and equipment 96,808 15,563 3,234 (1,771) 107,366
Other 12,871 1,608 273 - 14,206
$ 126,361 $ 19,952 $ 3,661 $ (1,771) $ 140,881
1991
Buildings $ 14,959 $ 2,681 $ 958 $ - $ 16,682
Machinery and equipment 79,178 14,949 7,659 10,340 96,808
Other 12,408 1,657 1,194 - 12,871
$ 106,545 $ 19,287 $ 9,811 $ 10,340 $ 126,361
(a) Net changes in reserves for assets to be disposed of in subsequent years.
</TABLE>
<PAGE>
FORM 10-K Page 77
<TABLE>
<S> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Years Ended January 2, 1994, January 3, 1993 and December 29, 1991
(amounts in thousands)
Column C
Column A Column B Additions Column D Column E
Balance (1) (2)
at Charged to Charged to Balance
beginning costs and other at end
Description of period expenses accounts Deductions of period
January 2, 1994
Valuation accounts deducted
from the assets to which
they apply:
Provision for doubtful
accounts $ 3,228 $ 246 $ - $ 474 (a) $ 3,000
Inventory reserves (b) 553 - - 160 (c) 393
Reserve for future losses (b) 2,045 - - 818 (c) 1,227
January 3, 1993
Valuation accounts deducted
from the assets to which
they apply:
Provision for doubtful
accounts $ 2,227 $ 2,813 $ - $ 1,812 (a) $ 3,228
Inventory reserves (b) 4,070 - - 3,517 (c) 553
Reserve for future losses (b) 12,598 - - 10,553 (c) 2,045
December 29, 1991
Valuation accounts deducted
from the assets to which
they apply:
Provision for doubtful
accounts $ 2,109 $ 1,247 $ - $ 1,129 (a) $ 2,227
Inventory reserves (b) - 4,070 - - 4,070
Reserve for future losses (b) - 12,598 - - 12,598
(a) Represents bad debts charged off.
(b) Represents reserves for discontinued operations (Note 18).
(c) Represents reserves charged to costs and expenses.
</TABLE>
<PAGE>
FORM 10-K Page 78
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT TERM BORROWINGS
Years Ended January 2, 1994, January 3, 1993 and December 29, 1991
(amounts in thousands)
Column A Column B Column C Column D Column E Column F
Maximum Average Weighted
Category Weighted amount amount average
aggregate Balance average outstanding outstanding interest rate
Short-term at end of interest during the during the during the
Date Borrowings period rate period period(a) period (a)
01/02/94 Bank Loan 5,099 6.00% 6,701 5,788 6.02%
01/03/93 Bank Loan 6,653 6.07 27,563 12,827 6.88
12/29/91 Bank Loans 22,300 9.19 28,115 18,664 9.56
General Terms: Revolving credit line, construction loans, and for 1992 and 1991,
seasonal inventory facility.
(a) Weighted daily average.
</TABLE>
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 79
Exhibit Sequential
No. Description Page No.
* 2.1 Receivables Purchase Agreement dated
as of August 11, 1992, between Cone
Mills Corporation and Delaware Funding
Corporation filed as Exhibit 2.01 to
the Registrant's report on Form 8-K
dated August 13, 1992.
* 2.2(a) Investment Agreement dated as of
June 18, 1993, among Compania Industrial
de Parras, S.A. de C.V., Sr. Rodolfo
Garcia Muriel, and Cone Mills
Corporation, with following exhibits
thereto attached, filed as Exhibit 2.2(a)
to Registrant's report on Form 10-Q for
the quarter ended July 4, 1993:
* 2.2(b) Commercial Agreement dated as of June
25, 1993, among Compania Industrial de
Parras, S.A. de C.V., Cone Mills
Corporation and Parras Cone de Mexico,
S.A., filed as Exhibit 2.2(b) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
* 2.2(c) Guaranty Agreement dated as of June 25,
1993, between Cone Mills Corporation and
Compania Industrial de Parras, S.A. de
C.V., filed as Exhibit 2.2(c) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
* 2.2(d) Joint Venture Agreement dated as of
June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V., and
Cone Mills (Mexico), S.A. de C.V. filed as
Exhibit 2.2(d) to Registrant's report on
Form 10-Q for the quarter ended
July 4, 1993.
* 2.2(e) Joint Venture Registration Rights
Agreement dated as of June 25, 1993,
among Parras Cone de Mexico, S.A.,
Compania Industrial de Parras, S.A. de
C.V. and Cone Mills (Mexico), S.A. de C.V.
filed as Exhibit 2.2(e) to Registrant's
report on Form 10-Q for the quarter ended
July 4, 1993.
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 80
Exhibit Sequential
No. Description Page No.
* 2.2(f) Parras Registration Rights Agreement
dated as of June 25, 1993, between
Compania Industrial de Parras, S.A.
de C.V. and Cone Mills Corporation filed
as Exhibit 2.2(f) to Registrant's report
on Form 10-Q for the quarter ended
July 4, 1993.
* 2.2(g) Support Agreement dated as of June 25,
1993, among Cone Mills Corporation, Sr.
Rodolfo L. Garcia, Sr. Rodolfo Garcia
Muriel and certain other person listed
herein ("private stockholders") filed
as Exhibit 2.2(g) to Registrant's
report on Form 10-Q for the quarter
ended July 4, 1993.
* 3.1 Restated Articles of Incorporation of
the Registrant effective August 25, 1993,
filed as Exhibit 4.1 to Registrant's
report on Form 10-Q for the quarter
ended October 3, 1993.
* 3.2 Amended and Restated Bylaws of Registrant,
Effective June 18, 1992, filed as Exhibit
3.5 to the Registrant's Registration
Statement on Form S-1 (File No. 33-46907).
* 4.3 Note Agreement dated as of August 13, 1992,
between Cone Mills Corporation and The
Prudential Insurance Company of America,
with form of 8% promissory note attached,
filed as Exhibit 4.01 to the Registrant's
report on Form 8-K dated August 13, 1992.
* 4.4 Credit Agreement dated as of August 13,
1992, among Cone Mills Corporation, the
banks listed therein and Morgan Guaranty
Trust Company of New York, as Agent, with
form of note attached, filed as Exhibit
4.02 to the Registrant's report on Form
8-K dated August 13, 1992.
* 4.5 Specimen Class A Preferred Stock
Certificate, filed as Exhibit 4.5 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-46907).
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 81
Exhibit Sequential
No. Description Page No.
* 4.6 Specimen Common Stock Certificate,
effective June 18, 1992, filed as
Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-46907).
* 4.7 Registration rights agreement dated
as of March 30, 1992, among the
Registrant and the shareholders listed
therein, filed as Exhibit 4.8 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-46907).
* 4.8 The 401(k) Program (formerly the
Supplemental Retirement Program) of
Registrant, amended and restated
effective January 1, 1994, filed as
Exhibit 4.9 to the Registrant's
Registration Statement on Form S-8
(File Nos.33-51951 and 33-51953).
4.9 Cone Mills Corporation 1983 ESOP as 84
amended and restated effective March 1,
1993.
Management contract or compensatory plan or arrangement
(Exhibits 10.1 - 10.13)
10.1 Employees' Retirement Plan of Cone Mills 171
Corporation as amended and restated
effective September 1, 1993.
*10.2 Supplemental Executive Retirement Plan
of Registrant filed as Exhibit 10.5 to
the Registrant's Registration
Statement on Form S-1
(File No. 33-28040).
*10.3 Excess Benefit Plan of Registrant filed
as Exhibit 10.6 to the Registrant's
Registration Statement on Form S-1
(File No. 33-28040).
*10.4 1984 Stock Option Plan of Registrant
filed as Exhibit 10.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-28040).
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 82
Exhibit Sequential
No. Description Page No.
*10.5 Form of Nonqualified Stock Option
Agreement under 1984 Stock Option Plan
of Registrant filed as Exhibit 10.8 to
the Registrant's Registration Statement
on Form S-1 (File No. 33-28040).
*10.6 Form of Incentive Stock Option Agreement
under 1984 Stock Option Plan of
Registrant filed as Exhibit 10.9 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-28040).
*10.7 1992 Stock Option Plan of Registrant
filed as Exhibit 10.9 to the Registrant's
Report on Form 10-K for the year ended
December 29, 1991.
*10.8 Form of Incentive Stock Option Agreement
under 1992 Stock Option Plan filed as
Exhibit 10.10 to the Registrant's report
on Form 10-K for the year ended
January 3, 1993.
10.9 1994 Stock Option Plan for Non- 260
Employee Directors of Registrant
10.10 Form of Non-Qualified Stock Option 268
Agreement under 1994 Stock Option
Plan for Non-Employee Directors of
Registrant.
*10.11 Management Incentive Plan of the
Registrant filed as Exhibit 10.11(b) to
Registrant's report on Form 10-K for the
year ended January 3, 1993.
10.12 Consulting Agreement between Dewey L. 271
Trogdon and the Registrant dated
December 3, 1993.
*10.13 Consulting Agreement between Norman
Friedman and the Registrant dated
September 14, 1993, with amendment
dated November 3, 1993, filed as
Exhibit 10 to the Registrant's report
on Form 10-Q for the quarter ended
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 83
Exhibit Sequential
No. Description Page No.
*10.14 Form of Agreement between the Regis-
Registrant and Levi Strauss dated as
of March 30, 1992, filed as Exhibit
10.14 to the Registrant's Registration
Statement on Form S-1 (File No.33-46907).
*10.15 First Amendment to Supply Agreement
dated as of April 15, 1992, between the
Registrant and Levi Strauss dated as of
March 30, 1992, filed as Exhibit 10.15 to
Registrant's Registration Statement on
Form S-1 (No. 33-46907).
21 Subsidiaries of the Registrant. 273
23.l Consent of McGladrey & Pullen, 274
independent auditor, with respect to
the incorporation by reference in the
Registrant's Registration Statements
on Form S-8 (Nos. 33-31977; 33-31979;
33-51951; 33-51953 and 33-67800) of their
reports on the consolidated financial
statements and schedules included in
this Annual Report on Form 10-K.
23.2 Consent of McGladrey & Pullen,
independent auditor, with respect to
the incorporation by reference in the
Registrant's Registration Statements
on Form S-8 (No. 33-31979and 33-51951)
of their report on the financial
statements included in the Form 11-K
Annual Report of Cone Mills Corporation
Employee Equity Plan (to be filed by
amendment).
23.3 Consent of Robinson, Bradshaw and 275
Hinson, P.A.
99.1 Form 11-K Annual Report of Cone Mills
Corporation Employee Equity Plan
(to be filed by amendment).
* Incorporated by reference to the statement or report
indicated.
<PAGE>
FORM 10-K Page 84
Exhibit 4.9
CONE MILLS CORPORATION 1983 ESOP
AS AMENDED AND RESTATED
MARCH 31, 1993
<PAGE>
FORM 10-K Page 85
Exhibit 4.9 (continued)
INTRODUCTION ............................................. 89
ARTICLE I - DEFINITIONS
Section
1.01 Account.......................................... 91
1.02 Advisory Committee............................... 91
1.03 Affiliate........................................ 91
1.04 Alternate Payee.................................. 91
1.05 Annual Additions................................. 91
1.06 Approved Leave................................... 91
1.07 Beneficiary or Beneficiaries..................... 92
1.08 Board of Directors............................... 92
1.09 Break in Service................................. 92
1.10 Code............................................. 92
1.11 Company or Cone.................................. 92
1.12 Company Contributions............................ 92
1.13 Compensation..................................... 93
1.14 Computation Period............................... 93
1.15 Continuous Service............................... 93
1.16 Eligible Employee................................ 94
1.17 Employee......................................... 94
1.18 Employer......................................... 94
1.19 Employment Commencement Date..................... 95
1.20 ERISA............................................ 95
1.20A ESOP A Account................................... 95
1.20B ESOP B Account................................... 95
1.21 Forfeiture....................................... 96
1.22 Hour of Service.................................. 96
1.23 Investment Committee............................. 98
1.24 Investment Earnings.............................. 98
1.25 Investment Manager............................... 98
1.26 Member........................................... 98
1.27 Money-Purchase Pension Account................... 98
1.28 Money-Purchase Pension Contribution.............. 98
1.29 Period of Severance.............................. 99
1.30 Plan............................................. 99
1.31 Plan Year........................................ 99
1.32 Rule of Parity Years............................. 99
1.33 Severance from Service Date...................... 99
1.34 Spouse or Surviving Spouse....................... 100
1.35 SRA.............................................. 100
1.36 Special Retirement Account....................... 100
1.37 Stock-Bonus Account.............................. 100
1.38 Stock-Bonus Contributions........................ 100
1.39 Trust and Trust Fund............................. 100
1.40 Trust Agreement.................................. 101
1.41 Trustee.......................................... 101
<PAGE>
FORM 10-K Page 86
Exhibit 4.9 (continued)
1.42 Valuation Date......................................101
1.43 Year of Service.....................................101
ARTICLE II - PARTICIPATION
Section
2.01 Member..............................................104
2.02 Conditions of Participation.........................104
2.03 Employment and Eligibility Status Changes...........105
2.04 Participation Upon Reemployment.....................105
ARTICLE III - CONTRIBUTIONS
Section
3.01 Stock-Bonus Contributions...........................107
3.02 Money-Purchase-Pension Contributions................107
3.03 Time of Payment of Company Contributions............108
3.04 Return of Contributions if Deduction Disallowed.....108
3.05 Mistake-of-Fact Contributions.......................108
3.06 Cash and Noncash Contributions......................109
ARTICLE IV - ACCOUNTS AND ALLOCATIONS
Section
4.01 Individual Accounts.................................110
4.02 Stock Bonus Contribution and Forfeiture Allocation..110
4.03 Money-Purchase-Pension Contribution Allocation......111
4.04 Allocation of Investment Earnings...................112
4.05 Maximum Annual Additions............................112
4.06 Adjustments for Excessive Annual Additions..........120
4.07 Determination of Top Heavy Status...................121
4.08 Top Heavy Requirements..............................127
ARTICLE V - VESTING
Section
5.01 Vested Accounts.....................................130
5.02 Determination of Years of Service...................131
5.03 Forfeitures.........................................131
<PAGE>
FORM 10-K Page 87
Exhibit 4.9 (continued)
ARTICLE VI - DISTRIBUTION OF BENEFITS
Section
6.01 Claim Procedure...................................133
6.02 Review of Claims..................................133
6.03 Distribution Definitions..........................134
6.04 Lifetime Distributions............................136
6.04-A Transfers to Defined Benefit Plans................138
6.04-B Normal Form of Benefit............................139
6.04-C Other Forms of Benefit............................140
6.05 Death Benefits....................................144
6.06 Commencement of Benefits..........................147
6.07 Special Distribution Provisions...................148
6.08 Limitation on Assignment; Qualified Domestic
Relations Order................................150
6.09 Withholding of Benefits...........................151
6.10 Withholding of Taxes..............................151
6.11 Eligible Rollover Distributions...................151
6.12 Legal Disability of Member or Beneficiary.........152
ARTICLE VII - TRUST FUND AND ADMINISTRATION OF THE PLAN
Section
7.01 Named Fiduciaries and Allocation of Responsibility153a
7.02 Duties and Responsibilities.......................154
7.03 Trust Fund........................................154
7.04 Enforceable Rights................................155
7.05 Impossibility of Diversion........................155
7.06 Advisory Committee and Other Committees...........155
7.07 Officers, Quorums, Expenses.......................156
7.08 Duties of Investment Manager......................156
7.09 Information to Investment Manager.................157
7.10 Notice to Trustee.................................157
7.11 Duties of Advisory Committee......................157
7.12 Notice of Payments Due............................158
7.13 Records and Reports...............................158
7.14 Exoneration of Advisory Committee.................158
7.15 Errors and Omissions..............................159
7.16 Fees and Expenses.................................159
7.17 Voting of Shares..................................159
7.18 Certification of Directions from Members..........160
ARTICLE VIII - AMENDMENT, TERMINATION AND MERGER
Section
8.01 Amendment.........................................161
8.02 Termination.......................................162
<PAGE>
FORM 10-K Page 88
Exhibit 4.9 (continued)
8.03 Discontinuance of Contributions...................163
8.04 Plan Merger or Asset Transfer.....................163
8.05 Continuation of the Plan..........................164
ARTICLE IX - MULTIPLE COMPANIES INCLUDED
Section
9.01 Plan Sponsor and Other Employers................. 165
9.02 Method of Participation...........................165
9.03 Withdrawal by Employer............................165
9.04 Tax Year..........................................166
ARTICLE X - GENERAL
Section
10.01 Plan Creates No Separate Rights...................167
10.02 Delegation of Authority...........................167
10.03 Limitation of Liability...........................167
10.04 Legal Action......................................168
10.05 Benefits Supported Only By Trust..................169
10.06 Discrimination....................................169
10.07 Model Amendment III...............................169
10.08 Entire Plan.......................................169
SIGNATURE PAGE............................................170
<PAGE>
FORM 10-K Page 89
Exhibit 4.9 (continued)
INTRODUCTION
The Cone Mills Corporation 1983 ESOP (the "Plan")
became effective on January 1, 1983. Its principal purposes
have been to enable employees to accumulate funds for
retirement and to promote their interest in the successful
operation of Cone Mills Corporation and its affiliated
companies (Cone Mills). The Plan was amended effective
January 1, 1985 to comply with changes in the Internal Revenue
Code (the "Code") and the Employee Retirement Income Security
Act of 1974 (ERISA), as required by the Deficit Reduction Act
of 1984 and by the Retirement Equity Act of 1984.
The Plan as amended effective January 1, 1985 consisted
of two components - the Stock Bonus Plan (assigned plan number
010) and the Money-Purchase Pension Plan (assigned plan number
011). These two plans constituted an employee stock ownership
plan as defined in ERISA section 407(d)(6). Both plans were
designed to invest primarily in qualifying employer securities
as defined in ERISA section 407(d)(5). Originally the Plan
contained a third component, the profit sharing plan, which
was assigned plan number 012. Cone Mills, however, determined
that the profit sharing plan was not needed and caused
unnecessary administrative responsibilities and costs. The
profit sharing plan had no assets, was not expected to receive
contributions in the future from Cone and was discontinued as
a separate plan as of January 31, 1986. This action did not
affect the benefits of any participant in the Plan.
Effective January 1, 1987, the Plan was amended to
provide that only those employees of Cone Mills compensated on
an hourly, daily, piece-rate or mileage basis are eligible to
participate. Members who were compensated on a salaried basis
were fully vested in their accounts as of December 31, 1986.
At the same time, the Special Retirement Account of the
Supplemental Retirement Plan of Cone Mills Corporation, a
stock bonus plan for salaried employees only (assigned plan
number 015), was frozen and members were fully vested in their
accounts.
Effective December 31, 1989, the Money-Purchase Pension
Plan (plan number 011) and the Special Retirement Account
(plan number 015) were merged into the Stock Bonus Plan (plan
number 010). The Stock Bonus Plan was appropriately amended
and beginning January 1, 1990, constitutes the continuing
Plan. It includes the assets and liabilities of the merged
<PAGE>
FORM 10-K Page 90
Exhibit 4.9 (continued)
plans. Benefits of participants in each of the merged plans
and their rights and responsibilities were not affected by the
merger.
This Plan constitutes the plan document for each of the
Money-Purchase Plan, the Special Retirement Account, and the
Stock Bonus Plan for the Plan Year beginning January 1, 1989,
and the plan document for the Stock Bonus Plan for Plan Years
beginning on and after January 1, 1990.
Effective January 1, 1993, the Plan was amended to
provide that all future contributions would be discretionary
and that all Members with an Account balance greater then zero
on December 31, 1992, became fully vested on that date.
Effective March 31, 1993, the Plan was amended to
provide for ESOP A and ESOP B Accounts and to permit Members
with five or more Years of Service to make in-service
withdrawals from their ESOP B Accounts.
This Plan has been amended and restated to incorporate
all amendments that became effective on or before March 31,
1993. It includes amendments that became effective January 1,
1989, to ensure continued compliance with the Code and ERISA,
as required by the Tax Reform Act of 1986. Accordingly, the
effective date of this amended and restated plan document is
March 31, 1993, except with respect to those provisions that
were required to be effective earlier pursuant to the Tax
Reform Act of 1986 and except as otherwise provided herein.
Cone Mills intends to continue this Plan as a defined
contribution plan by incorporating all amendments described
above and any other changes required by applicable law or
regulation for this Plan to remain a qualified defined
contribution plan under applicable provisions of the Code and
ERISA. Accordingly, Cone Mills will comply fully with all
applicable laws and regulations and if differences exist
between the Plan provisions and the Code or ERISA, as amended
from time to time, the provisions of the Code or ERISA shall
take precedence.
Any word in this Plan with an initial capital not
expected by ordinary capitalization rules is a defined term.
Definitions not found in the Plan are in the Code or ERISA,
both laws as amended to the present time. The masculine
gender where appearing in the Plan includes the feminine
gender unless the context clearly indicates otherwise.
Article and Section headings are included for convenience of
reference and do not affect the Plan terms in any way.
<PAGE>
FORM 10-K Page 91
Exhibit 4.9 (continued)
ARTICLE I
DEFINITIONS
1.01 Account means a Member's interest under the Plan
according to Plan provisions. Prior to January 1,
1990, a Member could have several named accounts in
this Plan. After March 31, 1993, each Member will
have an ESOP A Account and may have an ESOP B
Account. When Account is used without modification,
it means the sum of all the Member's Accounts in
this Plan.
See also: ESOP A Account, ESOP B Account,
Money-Purchase Pension Account, Special Retirement
Account and Stock Bonus Account.
1.02 Advisory Committee means the committee appointed by
Cone Mills Corporation which is responsible for
general administration of the Plan.
1.03 Affiliate means a member of the same controlled
group of corporations, as defined in Code Section
1563(a), as Cone Mills Corporation.
1.04 Alternate Payee means a Member's Spouse, former
Spouse, child or other dependent who is recognized
by a Qualified Domestic Relations Order as having a
right to receive all or a portion of the benefits
payable under the Plan with respect to a Member.
1.05 Annual Additions is defined in Plan Section 4.05.
1.06 Approved Leave means an individual's nonworking
period granted by an Employer for reasons relating
to:
(a) accident, sickness or disability;
(b) job-connected education or training; or
(c) government service, including jury duty, whether
elective or by appointment.
Approved Leaves shall be granted pursuant to
policies that are uniformly applied to all
individuals, with no discrimination in favor of
Highly Compensated Employees as defined in Code
<PAGE>
FORM 10-K Page 92
Exhibit 4.9 (continued)
Section 414(q). Approved leave also means an individual's
nonworking period during which he is absent from work due to
compulsory service in the Armed Forces of the United States,
and such period thereafter as his job rights are protected by
law.
1.07 Beneficiary or Beneficiaries means one or more
individuals or entities so designated by a Member
according to Plan Section 6.05 or, if there is no
effective designation, then as specified in that
Section. Despite the preceding, to the extent
provided in a Qualified Domestic Relations Order as
defined in Code Section 414(p) or to the extent
provided in any domestic relations order entered
before January 1, 1985, under which payments have
begun, Beneficiary means the Spouse, former Spouse,
child or other dependent of a Member who is
recognized by that order as having a right to
receive all or a portion of any benefits payable
under the Plan on behalf of such Member.
1.08 Board of Directors means the Board of Directors of
Cone Mills Corporation.
1.09 Break in Service is defined for Full-Time Employees
in subsection (a) and is defined for Part-Time
Employees in subsection (b).
(a) A Full-Time Employee has a one-year Break in
Service for each twelve-consecutive-month Period
of Severance.
(b) A Part-Time Employee has a one-year Break in
Service during each Plan Year in which he
receives credit for fewer than 501 Hours of
Service after crediting Hours of Service
according to Code Sections 410(a)(3)(E) and
411(a)(6)(E) regarding maternity and paternity
absences.
1.10 Code means the Internal Revenue Code of 1986, as
amended from time to time.
1.11 Company or Cone means Cone Mills Corporation, a
North Carolina corporation, the Plan sponsor.
1.12 Company Contributions means the Employer
Contributions described in Article III and, before
January 1, 1990, included Stock Bonus Contributions
and Money-Purchase Pension Contributions.
<PAGE>
FORM 10-K Page 93
Exhibit 4.9 (continued)
1.13 Compensation means base salary, wages, overtime
earnings, vacation pay, holiday pay, service awards,
severance pay, incentive pay, bonuses, commissions,
supervisors' supplement and other similar
compensation, but does not include pension or profit
sharing benefits or other benefits and contributions
paid by any Employer (other than contributions
caused by the Member's salary-reduction elections
that are not includable in his gross income by
reason of Code Sections 125 or 402(e)(3)), stock
option payments, moving or regular expense
allowances, moving expense reimbursements,
retainers, fees under contract, mortgage interest
differential payments, imputed income resulting from
personal use of company cars or from group term life
insurance coverage, or any other similar
compensation not related to actual earnings as an
employee. Notwithstanding the foregoing, the annual
compensation of each Member taken into account under
the Plan for any Plan Year shall not exceed $200,000
($150,000 for Plan Years beginning on and after
January 1, 1994), as adjusted for increases in
cost-of-living in accordance with Code Sections
401(a)(17) and 415(d). In determining the
compensation of a Member for purposes of this
limitation, the rules of Code Section 414(q)(6)
shall apply, except in applying such rules, the term
"family" shall mean only the spouse of the Member
and any lineal descendants of the Member who have
not attained age 19 before the close of the Plan
Year. If as a result of the application of such
rules the adjusted $200,000 ($150,000) limitation is
exceeded, the limitation shall be prorated among the
affected individuals in proportion to each such
individual's compensation determined under this
Section 1.13 prior to application of the
limitation.
1.14 Computation Period means a consecutive twelve-month
period beginning with an Employee's Employment
Commencement Date and succeeding anniversaries of
such date.
1.15 Continuous Service means an Employee's period of
employment with an Employer or an Affiliate
beginning with his Employment Commencement Date and
continuing until his Severance from Service Date.
If an Employee is reemployed or returns to work
after a Severance from Service and his Continuous
Service completed before his Severance from Service
<PAGE>
FORM 10-K Page 94
Exhibit 4.9 (continued)
is not required to be recognized under this Plan,
his period of employment with an Employer or an
Affiliate is Continuous Service beginning on the
date on which he again is credited with an Hour of
Service for the performance of duties and continuing
until his later Severance from Service Date.
Continuous Service includes all employment even
though as a non-Member. For purposes of eligibility
to participate in the Plan and vesting, the
Continuous Service of an Employee who quits, retires
or is discharged includes his Period of Severance
(up to a maximum of twelve months) if he again
performs an Hour of Service with an Employer or an
Affiliate before the first anniversary of the date
he quit, retired or was discharged, and the
Continuous Service of an Employee who is absent for
any reason other than quit, retirement or discharge
and who has a Severance from Service before the
first anniversary of such absence includes the
period of time between the Severance from
ServiceDate and the first anniversary of the absence
if he again performs an Hour of Service with an
Employer or an Affiliate before the first
anniversary of the absence.
1.16 Eligible Employee is defined in Plan Section 2.02.
1.17 Employee means an individual who renders personal
services for an Employer or an Affiliate, in an
employer-employee relationship, as defined for
Federal Insurance Contribution Act purposes and
Federal Employment Tax purposes, including Code
Section 3401(c). A Full-Time Employee is an
individual who, according to a policy uniformly
applied in similar situations, is scheduled to work
the standard number of hours for his job
classification. A Part-Time Employee is one who,
according to a policy uniformly applied in similar
situations, is scheduled to work less than the
standard number of hours for full-time job
classifications. Employee shall include Leased
Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees
are covered by a plan described in Code Section
414(n)(5) and such Leased Employees do not
constitute more than 20% of the recipient's
non-highly compensated work force.
1.18 Employer means an entity described in Plan Section 9.01.
<PAGE>
FORM 10-K Page 95
Exhibit 4.9 (continued)
1.19 Employment Commencement Date means the first day for
which an Employee is credited with an Hour of
Service. The Employment Commencement Date for any
Employee who has Rule of Parity Years is the first
day after those Rule of Parity Years for which that
Employee is credited with an Hour of Service for the
performance of duties.
1.20 ERISA means the Employee Retirement Income Security
Act of 1974, as amended from time to time.
1.20A ESOP A Account means the subaccount established as
of March 31, 1993, for each Member who then had an
Account balance. The amount credited to each such
Member's ESOP A Account as of March 31, 1993, is the
difference between (a) his total Account balance
under this Plan as of March 31, 1993 (following the
allocation of Company Contributions for Plan Year
1992, investment earnings earned or accrued to
March 31, 1993, and dividends payable by Cone on
March 31, 1993, on Qualifying Employer Securities
held by the Plan, and prior to the establishment of
the ESOP A Account and any ESOP B Account) and (b)
the amount (if any) of his ESOP B Account as of
March 31, 1993, in accordance with Plan Section
1.20B.
1.20B ESOP B Account means the subaccount established as
of March 31, 1993, for each Member who then had an
Account balance and whose total Account balance as
of December 31, 1991 (which included dividends
payable on March 31, 1992) exceeded his Earmarked
Amount (as hereinafter defined). The amount of each
such Member's ESOP B Account as of March 31, 1993,
is the amount by which his Account balance as of
December 31, 1991 (which included dividends payable
on March 31, 1992) exceeded his Earmarked Amount.
For each Member, Earmarked Amount means the product
of (a) the aggregate monthly benefit payable to him
at age 65 (i) that was accrued for Plan Years 1984
through 1991 under any defined benefit plan that is
a floor plan in the floor-offset plan arrangement
incorporated in that defined benefit plan and this
Plan and (ii) that is subject to offset or reduction
under the floor-offset arrangement, multiplied by
(b) $126.1716.
<PAGE>
FORM 10-K Page 96
Exhibit 4.9
1.21 Forfeiture refers to any part of a Member's Account
under this Plan which he is not entitled to receive
by reason of the vesting rules of Plan Article V.
1.22 Hour of Service
(a) An Hour of Service is each hour for which an
Employee is paid or is entitled to payment for
the performance of duties for an Employer or an
Affiliate during the applicable Computation
Period.
(b) An Hour of Service is each hour for which an
Employee is paid or is entitled to payment by
an Employer or an Affiliate in a period during
which no duties are performed (regardless of
whether the relationship has terminated)
because of vacation, holiday, illness,
incapacity, layoff, or Approved Leave, but:
(1) no more than 501 Hours of Service are
credited under this subsection (b) to an
individual for any single continuous
period during which he performs no
duties (whether or not the period occurs
in a single Computation Period);
(2) an hour for which an individual is
directly or indirectly paid, or is
entitled to payment, because of a period
during which no duties are performed, is
not credited to him if that payment is
made or is due under a plan maintained
solely for the purpose of complying with
applicable worker's compensation,
unemployment compensation or disability
insurance laws; and
(3) Hours of Service are not credited for a
payment that solely reimburses an
individual for his medical or medically
related expenses incurred.
For purposes of this subsection (b), a payment
is deemed to be made by or be due from an
Employer or an Affiliate regardless of whether
it is made by or due from that entity directly
or indirectly through a trust fund or insurer
to which that entity contributes or pays
premiums, and regardless of whether
<PAGE>
FORM 10-K Page 97
Exhibit 4.9 (continued)
contributions made or due to the trust fund or
insurer or other funding vehicle are for the
benefit of particular individuals or are on
behalf of a group of individuals.
(c) An Hour of Service is each hour for which back
pay, irrespective of mitigation of damages, is
either awarded or agreed to by an Employer or
an Affiliate. The same Hours of Service must
not be credited both under subsection (a) or
(b) and also under this subsection (c). Thus,
for example, if an individual receives a
back-pay award following a determination that
he was paid at an unlawful rate for Hours of
Service previously credited, he is not entitled
to additional credit for the same Hours of
Service. Crediting of Hours of Service for
back pay awarded or agreed to with respect to
periods described in subsection (b) is subject
to the limitations set forth in that
subsection. For example, no more than 501
Hours of Service are required to be credited
for payments of back pay, to the extent that
the back pay is agreed to or awarded for a
period of time during which an individual did
not or would not have performed duties.
(d) For determining Hours of Service for reasons
other than the performance of duties, the
special rule in 29 C.F.R. section
2530.200b-2(b) is incorporated by reference.
That rule provides that Hours of Service are
credited on the basis of the number of hours in
the individual's regular work schedule or, in
the case of a payment not calculated by units
of time, by dividing the payment in question by
the individual's most recent hourly rate of
pay.
(e) When crediting Hours of Service to Computation
Periods, the special rule in 29 C.F.R. section
2530.200b-2(c) is incorporated by reference.
That rule provides that Hours of Service are
credited to individuals in the Computation
Periods covered by the individual's regular
work schedule during the period of
nonperformance of duties.
<PAGE>
FORM 10-K Page 98
Exhibit 4.9 (continued)
(f) The determination of Hours of Service must be
made from records of hours worked and hours for
which payment is made or due.
(g) For purposes of determining Hours of Service
credited according to the maternity and
paternity absence provisions of Code Section
410(a)(5)(E) and Code Section 411(a)(6)(E),
those provisions are first effective for Plan
Years beginning after 1984.
1.23 Investment Committee means the Committee appointed
by Cone that, prior to August 20, 1992, had
authority to manage, acquire or dispose of the
assets of the Plan in accordance with and subject to
Plan Section 7.08 (as in effect prior to August 20,
1992) or to appoint one or more Investment Managers
for such purpose. The Investment Committee was
discontinued effective August 20, 1992.
1.24 Investment Earnings means the net gain or loss of
the Trust Fund from interest and dividends received
or accrued, realized and unrealized gains and losses
on securities and any other investment transactions,
less expenses paid or charged to the Trust Fund for
a Plan Year or such interim period within a Plan
Year for which the assets of the Trust Fund are
being valued. Investment Earnings shall be
determined on the basis of generally accepted
accounting principles and assets of the Trust Fund
as of any Valuation Date shall be valued on the
basis of their current fair market value.
1.25 Investment Manager means an individual, firm or
other entity appointed by the Board of Directors and
assigned duties as described in Plan Section 7.08.
1.26 Member is defined in Plan Section 2.01.
1.27 Money-Purchase Pension Account means a Member's
Account under this Plan to which Money-Purchase
Pension Contributions were allocated according to
Plan Section 4.03 for Plan Years beginning before
January 1, 1990.
1.28 Money-Purchase Pension Contribution means the
Company Contribution described in Plan Section 3.03
for Plan Years beginning before January 1, 1990.
<PAGE>
FORM 10-K Page 99
Exhibit 4.9 (continued)
1.29 Period of Severance means the period of time
beginning on an Employee's Severance from Service
Date and ending on the date on which he is next
credited with an Hour of Service for the performance
of duties.
1.30 Plan means
(a) For the Plan Year beginning January 1, 1989,
the Cone Mills Corporation 1983 ESOP consisting
of a stock bonus plan (plan number 010) and a
money-purchase pension plan (plan number 011)
and the SRA (plan number 015), each of which
was designed to invest primarily in Qualifying
Employer Securities; and
(b) For Plan Years beginning on and after January
1, 1990, the Cone Mills Corporation 1983 ESOP
consisting of a stock bonus plan (plan number
010) designed to invest primarily in Qualifying
Employer Securities and into which the
money-purchase pension plan (plan number 011)
and the SRA (plan number 015) were merged
effective December 31, 1989.
1.31 Plan Year means a twelve (12) month period beginning
on January 1 and ending on December 31.
1.32 Rule of Parity Years means Years of Service which
are disregarded for eligibility, vesting or other
service credit under the Plan. Rule of Parity Years
are those Years of Service credited to an Employee
as of a Severance from Service Date if he then had
no vested interest in any part of his Account and if
thereafter he has at least five consecutive one-year
Breaks in Service and his total consecutive one-year
Breaks in Service exceed his prior Years of Service.
1.33 Severance from Service Date means the earliest of:
(a) The date an Employee quits, retires, is
discharged or dies; or
(b) The first anniversary of the date from which an
Employee remains absent from work (with or
without pay) for any other reason such as
layoff, disability, or Approved Leave; except
that, for an Employee who is absent from work
by reason of a maternity or paternity absence
described in Code Section 410(a)(5)(i)(E) or
Code Section 411(a)(6)(i)(E) and who continues
to be absent from work beyond the first
<PAGE>
FORM 10-K Page 100
Exhibit 4.9 (continued)
anniversary of the first day of such maternity or
paternity absence, his Severance from Service Date
is the second anniversary of the first day of such
absence and the period between the first and second
anniversaries is neither a period of Continuous
Service nor a Period of Severance; and except that,
for an Employee who is absent from work by reason of
compulsory military service, his Severance from
Service Date is the 91st day following his discharge
from active duty.
An Employee's Severance from Service Date may be
postponed by the Advisory Committee under
established policy uniformly applied in similar
situations.
1.34 Spouse or Surviving Spouse, with respect to each
Member, has the same meaning as in the defined
benefit plan in which he is a member and that is
this Plan's floor plan in the floor-offset plan
arrangement incorporated in that defined benefit
plan.
1.35 SRA means the Special Retirement Account of the
Supplemental Retirement Plan of Cone Mills
Corporation, a stock bonus plan designed to invest
primarily in Qualifying Employer Securities.
1.36 Special Retirement Account means a Member's Account
(if any) to which contributions were allocated under
the Special Retirement Account of the Supplemental
Retirement Plan of Cone Mills Corporation.
1.37 Stock-Bonus Account means a Member's Account to
which Stock-Bonus Contributions are allocated
according to Section 4.02 and, effective January 1,
1990, includes the Member's Money-Purchase-Pension
Account as of December 31, 1989 and his Special
Retirement Account (if any) as of December 31, 1989.
After March 31, 1993, a Member's Stock Bonus Account
will consist of his ESOP A Account and, if
applicable, his ESOP B Account.
1.38 Stock-Bonus Contributions means the Company's
Contributions described in Section 3.01.
1.39 Trust and Trust Fund refers to the Trust Fund
established for this Plan and the Trust Agreement
executed under this Plan.
<PAGE>
FORM 10-K Page 101
Exhibit 4.9 (continued)
1.40 Trust Agreement means any agreement including
amendments executed by a Trustee or Co-Trustee with
the Company to be used in connection with this Plan.
1.41 Trustee means one or more individuals or entities or
their successors so designated in the Trust
Agreement. A Co-Trustee is one of several Trustees
so designated under a Trust Agreement. Unless the
context clearly indicates otherwise, the term
Trustee also means Co-Trustees.
1.42 Valuation Date for this Plan means March 31, June
30, September 30, and December 31 of each Plan Year
and any other date on which a valuation is made in
connection with the payment of benefits.
1.43 Year of Service is defined in subsection (a) for a
Part-Time Employee and in subsection (b) for a
Full-Time Employee, but Years of Service do not
include: (1) service with an Employer before any
termination of employment that occurred before
January 1, 1976; and (2) Rule of Parity Years.
(a) For a Part-Time Employee, a Plan Year following
a Part-Time Employee's Employment Commencement
Date during which he is credited with at least
1,000 Hours of Service. A Part-Time Employee
will be credited with one Year of Service for
his first full Plan Year if he is credited with
at least 1,000 Hours of Service during his
initial Computation Period, regardless of
whether he is credited with at least 1,000
Hours of Service during such first full Plan
Year, provided, however, a Year of Service
shall not be given for both the initial
Computation Period and the first full Plan
Year.
(b) For a Full-Time Employee, twelve months of
Continuous Service (whether or not
consecutive). Months of Continuous Service are
aggregated to yield Years of Service.
If a Part-Time Employee becomes a Full-Time Employee
during his initial Computation Period and had been
credited with at least 1,000 Hours of Service in
such Computation Period, he is granted a Year of
Service and his Continuous Service shall begin on
<PAGE>
FORM 10-K Page 102
Exhibit 4.9 (continued)
the first day of the Computation Period after which
the change to Full-Time status occurred. If he had
not been credited with at least 1000 Hours of
Service as of the date the change in status
occurred, then he is credited with service as if he
had been a Full-Time Employee during the entire
initial Computation Period.
After completing his initial Computation Period a
Part-Time Employee who becomes a Full-Time Employee
and who had been credited with at least 1,000 Hours
of Service for the Plan Year during which the change
occurs, retains his Years of Service for pre-change
Plan Years is credited with a Year of Service for
the Plan Year in which the change occurs, and is
credited with Continuous Service beginning on the
first day of the Plan Year following the date on
which the change occurs. If a Part-Time Employee
becomes a Full-Time Employee after completing one
Computation Period, and had not been credited with
at least 1,000 Hours of Service for the Plan Year
during which the change occurs, his Continuous
Service is credited from the beginning of the Plan
Year in which the change occurs.
If a Full-Time Employee becomes a Part-Time
Employee, he shall receive credit for the number of
full years of Continuous Service completed as of the
date the change occurred and will be deemed to
become a Part-Time Employee on the first day of the
Plan Year in which the date of change occurs. For
the Plan Year in which the change occurs, he shall
receive credit, on the basis of 190 Hours of Service
per month or fraction thereof, for the period from
the end of his last full year of Continuous
Serviceto the date of his change in status.
A Full-Time Employee who quits, retires, is
discharged or is otherwise absent from work and who
returns as a Part-Time Employee within 12 months is
treated as if he had changed from a Full-Time
Employee to a Part-Time Employee on the date of his
reemployment.
A Full-Time Employee who quits, retires, is
discharged or is otherwise absent from work and who
returns after the first anniversary of the date on
which he quit, retired, was discharged or otherwise
absent from work as a Part-Time Employee shall have
an initial Computation Period begin on the date of
return.
<PAGE>
FORM 10-K Page 103
Exhibit 4.9 (continued)
A Part-Time Employee who quits, retires, is
discharged or is otherwise absent from work and who
returns as a Full-Time Employee before the end of
the Plan Year in which such event occurs is treated
as if he had been a Part-Time Employee for the
entire Plan Year and is credited with 190 Hours of
Service for each month in which he is a Full-Time
Employee; his Continuous Service as a Full-Time
Employee begins on the first day of the next Plan
Year.
<PAGE>
FORM 10-K Page 104
Exhibit 4.9 (continued)
ARTICLE II
PARTICIPATION
2.01 Member.
A Member is an Employee or former Employee who has
begun participation in this Plan in accordance with
Plan Section 2.02. An individual whose Account
balance is greater than zero continues to be a
Member for purposes of provisions relating to
allocations of earnings and losses to his Account
and to distributions from his Account, but is a
Member for purposes of allocations of Company
Contributions and Forfeitures only if he was an
Eligible Employee at any time during the Plan Year
with respect to which such allocations are made. An
individual who has begun participation in the Plan
(including an individual who was a Member on
December 31, 1986 but who thereafter ceased to be an
Eligible Employee by reason of his being compensated
on a salaried basis) continues as a Member until his
Account balance has been paid, transferred or
forfeited in full.
2.02 Conditions of Participation.
(a) Employees who are Leased Employees within the
meaning of Code Sections 414(n)(2) and
414(o)(2) cannot be Eligible Employees.
(b) After December 31, 1986, only Employees who are
compensated on an hourly, daily, piece-rate or
mileage basis can be Eligible Employees;
provided, however, that an Employee cannot be
an Eligible Employee if he is a member of a
collective-bargaining unit that has a
collective-bargaining agent, unless the
Employees in that collective-bargaining unit
have been made eligible to participate in this
Plan by affirmative action of an Employer.
(c) An Employee who was an Eligible Employee on
December 31, 1986 continues to be an Eligible
Employee so long as he is compensated on an
hourly, daily, piece-rate or mileage basis.
(d) An Employee who was not an Eligible Employee on
December 31, 1986 and who is compensated on an
hourly, daily, piece-rate or mileage basis
<PAGE>
FORM 10-K Page 105
Exhibit 4.9 (continued)
becomes an Eligible Employee and a Member on
the earlier of the January 1 or July 1 next
following the date on which he has attained age
twenty-one (21) and completed one (1) Year of
Service. For purposes of Plan Articles III and
IV, an Employee who becomes an Eligible
Employee and Member on July 1 of a Plan Year
shall be treated as a Member for the entire
Plan Year.
2.03 Employment and Eligibility Status Changes.
(a) If an Eligible Employee transfers to (1) a
salaried basis of compensation or (2) part-time
status and is not credited with 1,000 Hours of
Service during the Plan Year in which the
transfer occurs or if he becomes an Employee of
an Affiliate that does not participate in the
Plan, he shall cease to be an Eligible Employee
at the end of the pay period the change in
status occurs, but shall continue to be a
Member as provided in Plan Section 2.01.
(b) If an Employee has attained age twenty-one (21)
and has at least one (1) Year of Service and
becomes an Eligible Employee due to a transfer
from a salaried basis of compensation to an
hourly, daily, piece-rate or mileage basis of
compensation, or due to transfer from an
Affiliate not participating in the Plan to an
Employer, he shall become an Eligible Employee
immediately following such transfer. If he is
not an Eligible Employee at the time of such
transfer, he shall become an Eligible Employee
according to Plan Section 2.02.
2.04 Participation Upon Reemployment.
(a) If a Member or Eligible Employee terminates
employment and is reemployed on an hourly,
daily, piece-rate or mileage basis of
compensation, he shall again become an Eligible
Employee when he first performs an Hour of
Service unless all of his Prior Years of
Service are disregarded as Rule of Parity
Years.
(b) A Member or Eligible Employee who terminates
employment and whose prior Years of Service are
all disregarded as Rule of Parity Years is
<PAGE>
FORM 10-K Page 106
Exhibit 4.9 (continued)
treated as a new Employee for all purposes under the
Plan and participates according to Plan Section
2.02.
(c) An Employee who is not a Member or Eligible
Employee when he terminates employment and who
is reemployed shall participate according to
Plan Section 2.02 and Treasury Regulation
1.410(a)-7(c)(3).
<PAGE>
FORM 10-K Page 107
Exhibit 4.9 (continued)
ARTICLE III
CONTRIBUTIONS
3.01 Stock-Bonus Contributions.
Stock-Bonus Contributions are made at each
Employer's discretion, but for the Plan Years
beginning January 1, 1990, January 1, 1991, and
January 1, 1992, each Employer's Stock-Bonus
Contribution for such Plan Year shall be not less
than the amount necessary so that the Stock-Bonus
Contribution plus Forfeitures for such Plan Year
equal 1% of the Compensation of Eligible Employees
for such Plan Year, reduced by any amounts
contributed under the qualified plan covering
members of the Machine Printers' and Engravers'
Union by an Employer on behalf of an Eligible
Employee who is covered by such plan. For Plan
Years beginning on and after January 1, 1993, no
minimum Stock-Bonus Contributions shall be required.
Current or accumulated profits of an Employer are
not contribution limits for determining the amount
of its Stock-Bonus Contribution for a Plan Year.
3.02 Money-Purchase-Pension Contributions.
No Money-Purchase-Pension Contributions shall be
made for any Plan Year beginning after December 31,
1989. Accordingly, this Section 3.02 applies only
to Plan Years beginning before January 1, 1990.
(a) The Money-Purchase-Pension Contribution for all
Employers for each Plan Year is an amount equal
to one percent of the Compensation of Eligible
Employees for such Plan Year, reduced by all
Forfeitures attributable to the
money-purchase-pension portion of this Plan
during the Plan Year and, with respect to each
Eligible Employee who is covered under a
qualified plan covering members of the Machine
Printers' and Engravers' Union, reduced by the
amount of any Employer contribution to such
plan on his behalf.
(b) Because this document covers a pension plan as
well as a stock bonus plan, it is necessary to
identify assets attributable to the separate
plans. The Advisory Committee is responsible
<PAGE>
FORM 10-K Page 108
Exhibit 4.9 (continued)
for this identification unless the Trustee is
requested and agrees to perform the necessary
accounting segregations. In addition, no
Money-Purchase-Pension Accounts may ever be
subject to distribution to a Member who has not
experienced Severance from Service.
Forfeitures attributable to one part of the
Plan must not be allocated or otherwise
credited under another part of the Plan.
3.03 Time of Payment of Company Contributions.
Each Employer may pay each Plan Year's contributions
to the Trust Fund in installments and on the dates
it elects, but it must designate the Plan Year for
which each contribution is to be attributable and
all contributions shall be paid to the Trust Fund
not later than the time prescribed in the Code for
filing the federal income tax return of the Employer
for that Plan Year, including extensions which have
been granted for the filing of such return. The
Trustee is not required to collect Company
Contributions or payments required for an Employer
and is responsible only for assets received as
Trustee.
3.04 Return of Contributions if Deduction Disallowed.
All contributions to the Trust Fund are conditioned
on their being deductible under Code section 404(a).
If any deduction for any contribution is not allowed
in whole or in part under Code section 404(a), then
that disallowed portion must be returned to the
contributor, but repayment must be made no later
than one year after the disallowance. For purposes
of this Section 3.04, the disallowance may be by the
opinion of any court whose decision has become final
or by any disallowance asserted by the Internal
Revenue Service to which the Company agrees.
3.05 Mistake-of-fact Contributions.
If any excess contribution is made by an Employer
because of a mistake-of-fact, then the portion of
the contribution due to the mistake-of-fact must be
returned to the contributor. The repayment must be
made no later than one year after the contribution.
Earnings of the Trust Fund attributable to the
excess contribution may not be returned but any
losses attributable thereto must reduce the amount returned.
<PAGE>
FORM 10-K Page 109
Exhibit 4.9 (continued)
3.06 Cash and Noncash Contributions.
(a) All noncash property contributed to the Trustee
must be valued at its fair-market value on the
actual date of acceptance of the property by
the Trustee.
(b) An Employer may contribute to the Trust Fund in
the form of either cash or any noncash
property, including but not limited to stock,
whether common or preferred, or options to
purchase stock, whether common or preferred, of
an Employer or an Affiliate; other securities
(including bonds, debentures, and secured
notes) of an Employer or an Affiliate; or
interests or options to purchase other
interests (including joint venture,
partnership, or limited partnership interests)
in Affiliates.
<PAGE>
FORM 10-K Page 110
Exhibit 4.9 (continued)
ARTICLE IV
ACCOUNTS AND ALLOCATIONS
4.01 Individual Accounts.
The Advisory Committee shall maintain one or more
individual accounts or subaccounts for each Member
in which all amounts allocated to such Member shall
be credited and all distributions and other
withdrawals shall be charged in accordance with
applicable provisions of this Plan. Prior to
January 1, 1990, individual accounts contained the
following components or subaccounts as applicable:
Stock Bonus Account, Money-Purchase Pension Account
and Special Retirement Account. After March 31,
1993, each Member will have an ESOP A Account and
may have an ESOP B Account.
4.02 Stock Bonus Contribution and Forfeiture Allocation.
(a) As of the last day of each Plan Year for which
an Employer makes a Stock Bonus Contribution or
for which there are Forfeitures from Stock
Bonus Accounts, the Advisory Committee shall
allocate and credit to the Stock Bonus Account
of each individual who was an Eligible Employee
at any time during the Plan Year such part of
that Stock Bonus Contribution and/or Forfeiture
as such Eligible Employee's Compensation for
the Plan Year bears to the total Compensation
of all such Eligible Employees for the same
Plan Year.
(b) For purposes of subsection (a), if the
contribution is made in the form of stock of an
Employer or an Affiliate, an allocation of that
stock is accomplished by taking the value
thereof, including fractional shares, and
allocating it to the Stock Bonus Account of
each Eligible Employee in the same proportion
to the total value of that stock contribution
as each such Eligible Employee's Compensation
for the Plan Year bears to the total
Compensation of all such Eligible Employees for
the same Plan Year.
(c) A Member's allocation of the Stock Bonus
Contribution for any Plan Year beginning on or
<PAGE>
FORM 10-K Page 111
Exhibit 4.9 (continued)
after January 1, 1990, as determined pursuant
to subsections (a) and (b), will be reduced by
the amount of any Employer contribution on his
behalf for such Plan Year to any qualified plan
covering members of the Machine Printers' and
Engravers' Union.
(d) Notwithstanding any other provision of the
Plan, any contributions received by the Plan
after March 31, 1993, and any payments in lieu
of contributions received by the Plan after
March 31, 1993, shall be credited to the ESOP
A Accounts of those individuals to whom any
such contribution or payment is allocated.
4.03 Money-Purchase-Pension Contribution Allocation.
(Applicable to Plan Years beginning before January
1, 1990)
(a) As of the last day of each Plan Year for which
an Employer makes a Money-Purchase-Pension
Contribution or for which there are Forfeitures
from Money-Purchase-Pension Accounts, the
Advisory Committee shall allocate and credit to
the Money-Purchase-Pension Account of each
individual who was an Eligible Employee at any
time during the Plan Year such part of that
Money-Purchase Pension Contribution and/or
Forfeitures as such Eligible Employee's
Compensation for the Plan Year bears to the
total Compensation of all such Eligible
Employees for the same Plan Year.
(b) For purposes of subsection (a), if the
Money-Purchase Pension Contribution is made in
the form of stock of an Employer or an
Affiliate, an allocation of that stock is
accomplished by taking the value thereof,
including fractional shares, and allocating it
to the Money-Purchase-Pension Account of each
Eligible Employee in the same proportion to the
total value of that stock contribution as each
such Eligible Employee's Compensation for the
Plan Year bears to the total Compensation of
all such Eligible Employees for the same Plan
Year.
(c) A Member's allocation of the Money-Purchase
Pension Contribution for any Plan Year, as
determined pursuant to subsections (a) and (b),
<PAGE>
FORM 10-K Page 112
Exhibit 4.9 (continued)
will be reduced by the amount of any Employer
contribution on his behalf for such Plan Year to any
qualified plan covering members of the Machine
Printers' and Engravers' Union.
4.04 Allocation of Investment Earnings.
Investment Earnings as of each Valuation Date that
are not attributable to dividends on Qualifying
Employer Securities shall be allocated among the
individual accounts and subaccounts of Members as of
such Valuation Date in the same proportion that the
dollar value of investments other than Qualifying
Employer Securities in each individual account or
subaccount bears to the total dollar value of
investments other than Qualifying Employer
Securities in all individual accounts and
subaccounts. The dollar value eligible to share in
the allocation of such Investment Earnings shall be
determined by deducting from the value of
investments other than Qualifying Employer
Securities in each individual account or subaccount
as of the preceding Valuation Date the total amount
of all single sum payments or withdrawals and
one-half (1/2) the amount of all installment
payments out of investments other than Qualifying
Employer Securities in such individual account or
subaccount; provided however, that the total amount
of all installment payments shall be deducted if the
total amount in an individual account or subaccount
as of the preceding Valuation Date was paid out.
Dividends on Qualifying Employer Securities
allocated to an individual account or subaccount
shall be credited to the account or subaccount as of
each dividend payment date and as of the Valuation
Date immediately preceding the date on which the
account or subaccount is distributed in accordance
with Article VI.
4.05 Maximum Annual Additions.
(a) Notwithstanding any other provision of this
Plan, the maximum "annual additions" credited
to a Member's individual Account for any
"limitation year" shall equal the lesser of:
(1) $30,000 (or, if greater, one-fourth of the
dollar limitation in effect under Code Section
415(b)(1)(A)) or (2) twenty-five percent (25%)
of the Member's "415 Compensation" for such
"limitation year."
<PAGE>
FORM 10-K Page 113
Exhibit 4.9 (continued)
(b) For purposes of applying the limitations of
Code Section 415, "annual additions" means the
sum credited to a Member's individual account
for any "limitation year" of (1) Employer
contributions, (2) Employee contributions, (3)
Forfeitures, (4) amounts allocated, after March
31, 1984, to an individual medical account, as
defined in Code Section 415(1)(2) which is part
of a pension or annuity plan maintained by the
Employer and (5) amounts derived from
contributions paid or accrued after December
31, 1985, in taxable years ending after such
date, which are attributable to post-retirement
medical benefits allocated to the separate
account of a key employee (as defined in Code
Section 419A(d)(3)) under a welfare benefit
plan (as defined in Code Section 419(e))
maintained by the Employer. Except, however,
the "415 Compensation" percentage limitation
referred to in paragraph (a)(2) above shall not
apply to: (1) any contribution for medical
benefits (within the meaning of Code
Section419A(f)(2)) after separation from
service which is otherwise treated as an
"annual addition," or (2) any amount otherwise
treated as an "annual addition" under Code
Section 415(1)(1).
(c) For purposes of applying the limitations of
Code Section 415, the transfer of funds from
one qualified plan to another is not an "annual
addition." In addition, the following are not
Employee contributions for the purposes of Plan
Section 4.05(b)(2): (1) rollover contributions
(as defined in Code Sections 402(a)(5),
403(a)(4), 403(b)(8) and 408(d)(3)); (2)
repayments of loans made to a Member from the
Plan; (3) repayments of distributions received
by an Employee pursuant to Code Section
411(a)(7)(B) (cash-outs); (4) repayments of
distributions received by an Employee pursuant
to Code Section 411(a)(3)(D) (mandatory
contributions); and (5) Employee contributions
to a simplified employee pension excludable
from gross income under Code Section 408(k)(6).
(d) For purposes of applying the limitations of
Code Section 415, "415 Compensation shall
include the Member's wages, salaries, fees for
professional service and other amounts for
<PAGE>
FORM 10-K Page 114
Exhibit 4.9 (continued)
personal services actually rendered in the
course of employment with an Employer
maintaining the Plan (including, but not
limited to, commissions paid salesmen,
compensation for services on the basis of a
percentage of profits, commissions on insurance
premiums, tips and bonuses and in the case of
a Member who is an Employee within the meaning
of Code Section 401(c)(1) and the regulations
thereunder, the Member's earned income (as
described in Code Section 401(c)(2) and the
regulations thereunder)) paid during the
"limitation year."
"415 Compensation" shall exclude (1)(A)
contributions made by the Employer to a plan of
deferred compensation to the extent that,
before the application of the Code Section 415
limitations to the Plan, the contributions are
not includable in the gross income of the
Employee for the taxable year in which
contributed (including contributions not
includable in gross income under Code Section
402(e)(3)), (B) contributions made by the
Employer to a plan of deferred compensation to
the extent that all or a portion of such
contributions are recharacterized as a
voluntary Employee contribution, (C) Employer
contributions made on behalf of an Employee to
a simplified employee pension plan described in
Code Section 408(k) to the extent such
contributions are excludable from the
Employee's gross income, (D) any distributions
from a plan of deferred compensation regardless
of whether such amounts are includable in the
gross income of the Employee when distributed
except any amounts received by an Employee
pursuant to an unfunded non-qualified plan to
the extent such amounts are includable in the
gross income of the Employee; (2) amounts
realized from the exercise of a non-qualified
stock option or when restricted stock (or
property) held by an Employee either becomes
freely transferable or is no longer subject to
a substantial risk of forfeiture; (3) amounts
realized from the sale, exchange or other
disposition of stock acquired under a qualified
stock option; and (4) other amounts which
receive special tax benefits, such as premiums
for group term life insurance (but only to the
<PAGE>
FORM 10-K Page 115
Exhibit 4.9 (continued)
extent that the premiums are not includable in
the gross income of the Employee),
contributions not includable in gross income
under Code Section 125, and contributions made
by the Employer (whether or not under a salary
reduction agreement) towards the purchase of
any annuity contract described in Code Section
403(b) (whether or not the contributions are
excludable from the gross income of the
Employee). "415 Compensation" shall be limited
to $200,000 ($150,000 for Plan Years beginning
on or after January 1, 1994), unless adjusted
in the same manner as permitted under Code
Sections 401(a)(17) and 415(d).
(e) For purposes of applying the limitations of
Code Section 415, the "limitation year" shall
be the Plan Year.
(f) The dollar limitation under Code Section
415(b)(1)(A) stated in paragraph (a)(1) above
shall be adjusted annually as provided in Code
Section 415(d) pursuant to the Regulations.
The adjusted limitation is effective as of
January 1st of each calendar year and is
applicable to "limitation years" ending with or
within that calendar year.
(g) For the purpose of this Section, all qualified
defined benefit plans (whether terminated or
not) ever maintained by the Employer shall be
treated as one defined benefit plan, and all
qualified defined contribution plans (whether
terminated or not) ever maintained by the
Employer shall be treated as one defined
contribution plan.
(h) For the purpose of this Section, if the
Employer is a member of a controlled group of
corporations, trades or businesses under common
control (as defined by Code Section 1563(a) or
Code Section 414(b) and (c) as modified by Code
Section 415(h)) or is a member of an affiliated
service group (as defined by Code Section
414(m)), all Employees of such Employers shall
be considered to be employed by a single
Employer.
(i) For the purpose of this Section, if this Plan
is a Code Section 413(c) plan, all Employers of
<PAGE>
FORM 10-K Page 116
Exhibit 4.9 (continued)
a Member who maintain this Plan will be
considered to be a single Employer.
(j) (1) If a Member participates in more than
one defined contribution plan maintained
by the Employer which have different
Anniversary Dates, the maximum "annual
additions" under this Plan shall equal
the maximum "annual additions" for the
"limitation year" minus any "annual
additions" previously credited to such
Member's accounts during the "limitation
year."
(2) If a Member participates in both a
defined contribution plan subject to
Code Section 412 and a defined
contribution plan not subject to Code
Section 412 maintained by the Employer
which have the same Anniversary Date,
"annual additions" will be credited to
the Member's accounts under the defined
contribution plan subject to Code
Section 412 prior to crediting "annual
additions" to the Member's accounts
under the defined contribution plan not
subject to Code Section 412.
(3) If a Member participates in more than
one defined contribution plan not
subject to Code Section 412 maintained
by the Employer which have the same
Anniversary Date, the maximum "annual
additions" under this Plan shall equal
the product of (A) the maximum "annual
additions" for the "limitation year"
minus any "annual additions" previously
credited under subparagraphs (1) or (2)
above, multiplied by (B) a fraction (i)
the numerator of which is the "annual
additions" which would be credited to
such Member's accounts under this Plan
without regard to the limitations of
Code Section 415 and (ii) the
denominator of which is such "annual
additions" for all plans described in
this subparagraph.
(k) Subject to the exception in Section 4.05(p)
below, if an Employee is (or has been) a Member
<PAGE>
FORM 10-K Page 117
Exhibit 4.9 (continued)
in one or more defined benefit plans and one or
more defined contribution plans maintained by
the Employer, the sum of the defined benefit
plan fraction and the defined contribution plan
fraction for any "limitation year" may not
exceed 1.0.
(l) (1) The defined benefit plan fraction for
any "limitation year' is a fraction (A)
the numerator of which is the "projected
annual benefit" of the Member under the
Plan (determined as of the close of the
"limitation year"), and (B) the
denominator of which is the greater of
the product of 1.25 multiplied by the
"protected current accrued benefit" or
the lesser of: (i) the product of 1.25
multiplied by the maximum dollar
limitation provided under Code Section
415(b)(1)(A) for such "limitation year,"
or (ii) the product of 1.4 multiplied by
the amount which may be taken into
account under Code Section 415(b)(1)(B)
for such "limitation year."
(2) For purposes of applying the limitations
of Code Section 415, the "projected
annual benefit" for any Member is the
benefit, payable annually, under the
terms of the Plan determined pursuant to
Regulation 1.415-7(b)(3).
(3) For purposes of applying the limitations
of Code Section 415, "protected current
accrued benefit" for any Member in a
defined benefit plan in existence on
July 1, 1982, shall be the accrued
benefit, payable annually, provided for
under question T-3 of Internal Revenue
Service Notice 83-10.
(m) (1) The defined contribution plan fraction
for any "limitation year" is a fraction
(A) the numerator of which is the sum of
the "annual additions" to the Member's
accounts as of the close of the
"limitation year" and (B) the
denominator of which is the sum of the
lesser of the following amounts
<PAGE>
FORM 10-K Page 118
Exhibit 4.9 (continued)
determined for such year and each prior
year of service with the Employer: (i)
the product of 1.25 multiplied by the
dollar limitation in effect under Code
Section 415(c)(1)(A) for such
"limitation year" (determined without
regard to Code Section 415(c)(6)), or
(ii) the product of 1.4 multiplied by
the amount which may be taken into
account under Code Section 415(c)(1)(B)
for such "limitation year."
(2) Notwithstanding the foregoing, the
numerator of the defined contribution
plan fraction shall be adjusted pursuant
to Regulation 1.415-7(d)(1) and
questions T-6 and T-7 of Internal
Revenue Service Notice 83-10.
(3) For defined contribution plans in effect
on or before July 1, 1982, the
Administrator may elect, for any
"limitation year" ending after December
31, 1982, that the amount taken into
account in the denominator for every
Member for all "limitation years" ending
before January 1, 1983 shall be an
amount equal to the product of (A) the
denominator for the "limitation year"
ending in 1982 determined under the law
in effect for the "limitation year"
ending in 1982 multiplied by (B) the
"transition fraction."
(4) For purposes of the preceding paragraph,
the term "transition fraction" shall
mean a fraction (A) the numerator of
which is the lesser of (i) $51,875 or
(ii) 1.4 multiplied by twenty-five
percent (25%) of the Member's "415
Compensation" for the "limitation year'
ending in 1981, and (B) the denominator
of which is the lesser of (i) $41,500 or
(ii) twenty-five percent (25%) of the
Member's "415 Compensation" for the
"limitation year" ending in 1981.
(5) Notwithstanding the foregoing, for any
"limitation year" in which the Plan is
a Top Heavy Plan, $41,500 shall be
<PAGE>
FORM 10-K Page 119
Exhibit 4.9 (continued)
substituted for $51,875 in determining
the "transition fraction."
(n) Notwithstanding the foregoing, for any
"limitation year" in which the Plan is a Top
Heavy Plan, 1.0 shall be substituted for 1.25
in paragraph l(1) and m(1).
(o) If the sum of the defined benefit plan fraction
and the defined contribution plan fraction
shall exceed 1.0 in any "limitation year" for
any Member in this Plan for reasons other than
described in Section 4.06(p), the Advisory
Committee shall limit, to the extent necessary,
the "annual additions" to such Member's
accounts for such "limitation year." If, after
limiting the "annual additions" to such
Member's accounts for the "limitation year,"
the sum of the defined benefit plan fraction
and the defined contribution plan fraction
still exceed 1.0, the Advisory Committee shall
then adjust the numerator of the defined
benefit plan fraction so that the sum of both
fractions shall not exceed 1.0 in any
"limitation year" for such Member.
(p) If (1) the substitution of 1.00 for 1.25 and
$41,500 for $51,875 above or (2) the excess
benefit accruals or "annual additions" provided
for in Internal Revenue Service Notice 82-19
cause the 1.0 limitation to be exceeded for any
Member in any "limitation year," such Member
shall be subject to the following restrictions
for each future "limitation year" until the 1.0
limitation is satisfied: (A) the Member's
accrued benefit under the defined benefit plan
shall not increase, (B) no "annual additions"
may be credited to a Member's accounts and (C)
no Employee contributions (voluntary or
mandatory) shall be made under any defined
benefit plan or any defined contribution plan
of the Employer.
(q) Notwithstanding anything contained in this
Section to the contrary, the limitations,
adjustments and other requirements prescribed
in this Section shall at all times comply with
the provisions of Code Section 415 and the
Regulations thereunder, the terms of which are
specifically incorporated herein by reference.
<PAGE>
FORM 10-K Page 120
Exhibit 4.9 (continued)
4.06 Adjustments for Excessive Annual Additions.
(a) If, as a result of the allocation of
Forfeitures, a reasonable error in estimating
a Member's Compensation or other facts and
circumstances to which Regulation 1.415-6(b)(6)
shall be applicable, the "annual additions"
under this Plan would cause the maximum "annual
additions" to be exceeded for any Member, the
Advisory Committee shall (1) return any
voluntary Employee contributions credited for
the "limitation year" to the extent that the
return would reduce the "excess amount" in the
Member's accounts (2) hold any "excess amount"
remaining after the return of any voluntary
Employee contributions in a "Section 415
suspense account" (3) use the "Section 415
suspense account" in the next "limitation year"
(and succeeding "limitation years" if
necessary) to reduce Employer contributions for
that Member if that Member is covered by the
Plan as of the end of the "limitation year," or
if the Member is not so covered, allocate and
reallocate the "Section 415 suspense account"
in the next "limitation year" (and succeeding
"limitation years" if necessary) to all Members
in the Plan before any Employer or Employee
contributions which would constitute "annual
additions" are made to the Plan for such
"limitation year" (4) reduce Employer
contributions to the Plan for such "limitation
year" by the amount of the "Section 415
suspense account" allocated and reallocated
during such "limitation year."
(b) For purposes of this Section, "excess amount"
for any Member for a "limitation year" shall
mean the excess, if any, of (1) the "annual
additions" which would be credited to his
account under the terms of the Plan without
regard to the limitations of Code Section 415
over (2) the maximum "annual additions"
determined pursuant to Section 4.05.
(c) For purposes of this Section, "Section 415
suspense account" shall mean an unallocated
account equal to the sum of "excess amounts"
for all Members in the Plan during the
"limitation year." The "Section 415 suspense
<PAGE>
FORM 10-K Page 121
Exhibit 4.9 (continued)
account" shall not share in any earnings or
losses of the Trust Fund.
(d) The Plan may not distribute "excess amounts,"
other than voluntary Employee contributions, to
Members or Former Members.
4.07 Determination of Top Heavy Status.
This Plan shall be a Top Heavy Plan for any Plan
Year in which, as of the Determination Date, (1) the
Present Value of Accrued Benefits of Key Employees
and (2) the sum of the Aggregate Accounts of Key
Employees under this Plan and all plans of an
Aggregation Group, exceeds sixty percent (60%) of
the Present Value of Accrued Benefits and the
Aggregate Accounts of all Key and Non-Key Employees
under this Plan and all plans of an Aggregation
Group.
This Plan shall be a Super Top Heavy Plan for any
Plan Year in which, as of the Determination Date,
(1) the Present Value of Accrued Benefits of Key
Employees and (2) the sum of the Aggregate Accounts
of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds ninety percent (90%) of
the Present Value of Accrued Benefits and the
Aggregate Accounts of all Key and Non-Key Employees
under this Plan and all plans of an Aggregation
Group.
If any Member is a Non-Key Employee for any Plan
Year, but such Member was a Key Employee for any
prior Plan Year, such Member's Present Value of
Accrued Benefit and/or Aggregate Account balance
shall not be taken into account for purposes of
determining whether this Plan is a Top Heavy or
Super Top Heavy Plan (or whether any Aggregation
Group which includes this Plan is a Top Heavy
Group). In addition, if a Member or Former Member
has not performed any services for any Employer
maintaining the Plan at any time during the five
year period ending on the Determination Date, any
accrued benefit for such Member or Former Member
shall not be taken into account for the purposes of
determining whether this Plan is a Top Heavy or
Super Top Heavy Plan.
The following definitions apply in determining
whether the Plan is a Top Heavy Plan or a Super Top
<PAGE>
FORM 10-K Page 122
Exhibit 4.9 (continued)
Heavy Plan:
(a) Aggregate Account: A Member's Aggregate
Account as of the Determination Date is the sum
of:
(1) his Member's Account balance as of the
most recent valuation occurring within
a twelve (12) month period ending on the
Determination Date;
(2) an adjustment for any contributions due
as of the Determination Date. Such
adjustment shall be the amount of any
contributions actually made after the
valuation date but due on or before the
Determination date, except for the first
Plan Year when such adjustment shall
also reflect the amount of any
contributions made after the
Determination Date that are allocated as
of a date in that first Plan Year;
(3) any Plan distributions made within the
Plan Year that includes the
Determination Date or within the four
(4) preceding Plan Years. However, in
the case of distributions made after the
valuation date and prior to the
Determination Date, such distributions
are not included as distributions for
top heavy purposes to the extent that
such distributions are already included
in the Member's Aggregate Account
balance as of the valuation date.
Notwithstanding anything herein to the
contrary, all distributions, including
distributions made prior to January 1,
1984, and distributions under a
terminated plan which if it had not been
terminated would have been required to
be included in an Aggregation Group,
will be counted. Further, distributions
from the Plan (including the cash value
of life insurance policies) of a
Member's account balance because of
death shall be treated as a distribution
for the purposes of this paragraph.
<PAGE>
FORM 10-K Page 123
Exhibit 4.9 (continued)
(4) any Employee contributions, whether
voluntary or mandatory. However,
amounts attributable to tax deductible
qualified deductible employee
contributions shall not be considered to
be a part of the Member's Aggregate
Account balance.
(5) with respect to unrelated rollovers and
plan-to-plan transfers (ones which are
both initiated by the Employee and made
from a plan maintained by one employer
to a plan maintained by another
employer), if this Plan provides the
rollovers or plan-to-plan transfers, it
shall always consider such rollovers or
plan-to-plan transfers as a distribution
for the purposes of this Section.
(6) with respect to related rollovers and
plan-to-plan transfers (ones either not
initiated by the Employee or made to a
plan maintained by the same employer),
if this Plan provides the rollover or
plan-to-plan transfer, it shall not be
counted as a distribution for purposes
of this Section. If this Plan is the
plan accepting such rollover or
plan-to-plan transfer, it shall consider
such rollover or plan-to-plan transfer
as part of the Member's Aggregate
Account balance, irrespective of the
date on which such rollover or
plan-to-plan transfer is accepted.
(7) For the purposes of determining whether
two employers are to be treated as the
same employer in (5) and (6) above, all
employers aggregated under Code Section
414(b), (c), (m) and (o) are treated as
the same employer.
(b) Aggregation Group means either a Required
Aggregation Group or a Permissive Aggregation
Group as hereinafter determined.
(1) Required Aggregation Group: In
determining a Required Aggregation Group
hereunder, each plan of the Employer in
which a Key Employee is a member in the
<PAGE>
FORM 10-K Page 124
Exhibit 4.9 (continued)
Plan Year containing the Determination
Date or any of the four preceding Plan
Years, and each other plan of the
Employer which enables any plan in which
a Key Employee participates to meet the
requirements of Code Sections 401(a)(4)
or 410, will be required to be
aggregated. Such group shall be known
as a Required Aggregation Group.
In the case of a Required Aggregation Group,
each plan in the group will be considered a Top
Heavy Plan if the Required Aggregation Group is
a Top Heavy Group. No plan in the Required
Aggregation Group will be considered a Top
Heavy Plan if the Required Aggregation Group is
not a Top Heavy Group.
(2) Permissive Aggregation Group: The
Employer may also include any other plan
not required to be included in the
Required Aggregation Group, provided the
resulting group, taken as a whole, would
continue to satisfy the provisions of
Code Sections 401(a)(4) and 410. Such
group shall be known as a Permissive
Aggregation Group.
In the case of a Permissive Aggregation
Group, only a plan that is part of the
Required Aggregation Group will be
considered a Top Heavy Plan if the
Permissive Aggregation Group is a Top
Heavy Group. No plan in the Permissive
Aggregation Group will be considered a
Top Heavy Plan if the Permissive
Aggregation Group is not a Top Heavy
Group.
(3) Only those plans of the Employer in
which the Determination Dates fall
within the same calendar year shall be
aggregated in order to determine whether
such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any
terminated plan of the Employer if it
was maintained within the last five (5)
years ending on the Determination Date.
<PAGE>
FORM 10-K Page 125
Exhibit 4.9 (continued)
(c) Determination Date means (a) the last day of
the preceding Plan Year, or (b) in the case of
the first Plan Year, the last day of such Plan
Year.
(d) Key Employee means an Employee as defined in
Code Section 416(i) and the Regulations
thereunder. Generally, any Employee or former
Employee (as well as each of his Beneficiaries)
is considered a Key Employee if he, at any time
during the Plan Year that contains the
"Determination Date" or any of the preceding
four (4) Plan Years, has been included in one
of the following categories:
(i) an officer of the Employer (as that term
is defined within the meaning of the
Regulations under Code Section 416)
having annual "415 Compensation" greater
than 50 percent of the amount in effect
under Code Section 415(b)(1)(A) for any
such Plan Year.
(ii) one of the ten employees having annual
"415 Compensation" from the Employer for
a Plan Year greater than the dollar
limitation in effect under Code Section
415(c)(1)(A) for the calendar year in
which such Plan Year ends and owning (or
considered as owning within the meaning
of Code Section 318) both more than
one-half percent interest and the
largest interests in the Employer.
(iii) a "five percent owner" of the Employer.
"Five percent owner" means any person
who owns (or is considered as owning
within the meaning of Code Section 318)
more than five percent (5%) of the
outstanding stock of the Employer or
stock possessing more than five percent
(5%) of the total combined voting power
of all stock of the Employer or, in the
case of an unincorporated business, any
person who owns more than five percent
(5%) of the capital or profits interest
in the Employer. In determining
percentage ownership hereunder,
employers that would otherwise be
aggregated under Code Sections 414(b),
<PAGE>
FORM 10-K Page 126
Exhibit 4.9 (continued)
(c), (m) and (o) shall be treated as separate
employers.
(iv) a "one percent owner" of the Employer having
an annual "415 Compensation" from the Employer
of more than $150,000. "One percent owner"
means any person who owns (or is considered as
owning within the meaning of Code Section 318)
more than one percent (1%) of the outstanding
stock of the Employer or stock possessing more
than one percent (1%) of the total combined
voting power of all stock of the Employer or,
in the case of an unincorporated business, any
person who owns more than one percent (1%) of
the capital or profits interest in the
Employer. In determining percentage ownership
hereunder, employers that would otherwise be
aggregated under Code Sections 414(b), (c),
(m) and (o) shall be treated as separate
employers. However, in determining whether an
individual has "415 Compensation" of more than
$150,000, "415 Compensation" from each
employer required to be aggregated under Code
Sections 414(b), (c), (m) and (o) shall be
taken into account.
For purposes of this Section, "415
Compensation" means compensation as defined in
Plan Section 4.05(d), except that the
determination of "415 Compensation" shall be
made without regard to Code Sections 125,
402(a)(8), 402(h)(1)(B) and, in the case of
Employer contributions made pursuant to a
salary reduction agreement, without regard to
Code Section 403(b).
(e) Non-Key Employee means any Employee or former
Employee (and his Beneficiaries) who is not a
Key Employee.
(f) Present Value of Accrued Benefit: In the case
of a defined benefit plan, the Present Value
of Accrued Benefit for a Member other than a
Key Employee, shall be as determined using the
single accrual method used for all plans of
the Employer and Affiliated Employers, or if
no such single method exists, using a method
which results in benefits accruing not more
rapidly than the slowest accrual rate
<PAGE>
FORM 10-K Page 127
Exhibit 4.9 (continued)
permitted under Code Section 411(b)(1)(C).
(g) Top Heavy Group means an Aggregation Group in
which, as of the Determination Date, the sum
of:
(1) the Present Value of Accrued Benefits of
Key Employees under all defined benefit
plans included in the group, and
(2) the Aggregate Accounts of Key Employees
under all defined contribution plans
included in the group, exceeds sixty
percent (60%) of a similar sum
determined for all Members.
4.08 Top Heavy Requirements.
(a) Minimum Allocations Required for Top Heavy Plan
Years. For any Top Heavy Plan Year, the sum of
the Employer's contributions and Forfeitures
allocated to the Account of each Non-Key
Employee shall be equal to at least three
percent (3% of such Non-Key Employee's "415
Compensation" (reduced by contributions and
forfeitures, if any, allocated to each Non-Key
Employee in any defined contribution plan
included with this plan in a Required
Aggregation Group). However, if (i) the sum of
the Employer's contributions and Forfeitures
allocated to the Account of each Key Employee
for such Top Heavy Plan Year is less than three
percent (3%) of each Key Employee's "415
Compensation" and (ii) this Plan is not
required to be included in an Aggregation Group
to enable a defined benefit plan to meet the
requirements of Code Section 401(a)(4) or 410,
the sum of the Employer's contributions and
Forfeitures allocated to the Account of each
Non-Key Employee shall be equal to the largest
percentage allocated to the Account of any Key
Employee. For the purposes of this Section,
"415 Compensation" shall be limited to $200,000
($150,000 for Plan Years beginning on and after
January 1, 1994), unless adjusted in such
manner as permitted under Code Sections
401(a)(17) and 415(d).
For purposes of the minimum allocations set
<PAGE>
FORM 10-K Page 128
Exhibit 4.9 (continued)
forth above, the percentage allocated to the
Account of any Key Employee shall be equal to
the ratio of the sum of the Employer's
contributions and Forfeitures allocated on
behalf of such Key Employee divided by the "415
Compensation" for such Key Employee. For any
Top Heavy Plan Year, the minimum allocations
set forth above shall be allocated to the
Accounts of all Non-Key Employees who are
Members and who are employed by the Employer on
the last day of the Plan Year. In lieu of the
above, in any Plan Year in which a Non-Key
Employee is a Member in both this Plan and a
defined benefit pension plan included in a
Required Aggregation Group which is top heavy,
the Employer shall not be required to provide
such Non-Key Employee with both the full
separate defined benefit plan minimum benefit
and the full separate defined contribution plan
minimum allocation.
(b) Minimum Vesting: Notwithstanding the
provisions of Plan Section 5.01, if a Member's
termination of employment occurs while the Plan
is a Top-Heavy Plan, such Member's vested
percentage in his Account shall not be less
than the percentage determined in accordance
with the following table:
<TABLE>
<S> <C> <C> <C>
Vested Forfeited
Years of Service Percentage Percentage
Less than 3 0% 100%
3 or more 100% 0%
</TABLE>
If the Plan becomes a Top-Heavy Plan and
subsequently ceases to be such, the vesting
schedule in paragraph (b) of this Section 4.08
shall continue to apply in determining the
vested percentage of any Member who had at
least three Years of Service as of December 31
in the last Plan Year of top-heaviness. For
other Members, said schedule shall only apply
to their Account balances as of such December
31.
(c) Impact on Maximum Benefits: For any Plan Year
in which the Plan is a Top-Heavy Plan, Plan
Section 4.05 shall be applied by substituting
<PAGE>
FORM 10-K Page 129
Exhibit 4.9 (continued)
the number "1.00" for the number "1.25"
wherever it appears therein except such
substitution shall not have the effect of
reducing any benefit accrued under a defined
benefit plan prior to the first day of the Plan
Year in which this provision becomes
applicable.
(d) Notwithstanding anything contained herein to
the contrary, the requirements prescribed in
this Section shall at all times comply with the
provisions of Code Section 416 and the
Regulations thereunder, the terms of which are
specifically incorporated herein by reference.
<PAGE>
FORM 10-K Page 130
Exhibit 4.9 (continued)
ARTICLE V
VESTING
5.01 Vested Accounts.
(a) A Member's Account is fully vested
(nonforfeitable) upon the earliest of:
(1) his death before a Severance from
Service;
(2) his retirement at age 65 or later;
(3) his attainment of age 65 (Normal
Retirement Date) before a Severance from
Service;
(4) his Total and Permanent Disability
before a Severance from Service;
(5) his being credited with five Years of
Service after age 18 (ten Years of
Service if he did not perform an Hour of
Service after December 31, 1988); or
(6) an involuntary termination of his
employment.
Otherwise, except as provided in Plan Section
5.01(c), his entire Account is subject to
Forfeiture as provided in Plan Section 5.03.
(b) For purposes of Plan Section 5.01(a), total and
permanent disability is a medically
determinable physical or mental impairment that
can be expected to be either of indefinite
duration or result in death and that renders
the Member unable to engage in substantial
gainful activity that could be assigned to him
by his Employer.
(c) Notwithstanding any other provision of this
Article V, a Member on December 31, 1986 became
fully vested in his individual accounts if he
was then employed by an Employer or an
Affiliate and compensated on a salaried basis
or if he had then terminated employment and was
compensated on a salaried basis on the date of
his latest termination of employment, and each
<PAGE>
FORM 10-K Page 131
Exhibit 4.9 (continued)
other Member with an Account balance greater
than zero on December 31, 1992, become fully
vested in his Account on that date.
5.02 Determination of Years of Service.
An Employee is credited with Years of Service for
vesting purposes pursuant to Plan Section 1.43,
except that Years of Service for vesting purposes
shall not be given for:
(1) Service with an Affiliate before it became an
Affiliate unless credit is specifically granted
by the Board of Directors for such prior
service.
(2) In the case of an Employee who does not have a
vested right to any part of the balance in his
Account, service before five consecutive
one-year Breaks in Service.
(3) Rule of Parity Years.
5.03 Forfeitures.
(a) Forfeitures occur when a Member terminates
employment and is not entitled to receive the
entire balance in his Account by reason of the
vesting rules of Plan Section 5.01.
(b) The portion of a Member's Account that is
subject to Forfeiture is forfeited as of the
end of the Plan Year in which the Member
completes a one-year Break in Service. If the
Member is subsequently reemployed before having
Rule of Parity Years, the amount of his Account
that was forfeited will be reinstated.
(c) Forfeitures for a Plan Year shall be
reallocated as of the end of the Plan Year,
first to any reinstatements required under
subparagraph (b) above and then to the Accounts
of remaining Members as provided in Plan
Sections 4.02 and 4.03 for Plan Years beginning
before January 1, 1990, and as provided in Plan
Section 4.02 for Plan Years beginning on and
after January 1, 1990, subject to the
requirement that for Plan Years beginning
before January 1, 1990, Forfeitures from Stock
Bonus Accounts shall be reallocated only to
<PAGE>
FORM 10-K Page 132
Exhibit 4.9 (continued)
Stock Bonus Accounts and Forfeitures from
Money-Purchase Pension Accounts shall be
reallocated only to Money-Purchase Pension
Accounts.
<PAGE>
FORM 10-K Page 133
Exhibit 4.9 (continued)
ARTICLE VI
DISTRIBUTION OF BENEFITS
6.01 Claim Procedure.
The Advisory Committee may require any person
entitled to benefits to complete an application for
payment and to select the method under which he
wants the benefits to be paid. If a claim is wholly
or partially denied, the Advisory Committee will
furnish the claimant a written explanation within
ninety days unless special circumstances require an
extension of time. If an extension is needed, the
Advisory Committee will notify the claimant before
the ninety-day period expires informing him that the
written explanation will be sent within the second
ninety-day period. The written explanation will
include: (1) the specific reason or reasons for the
denial; (2) a specific reference to pertinent Plan
provisions on which the denial is based; (3) a
description of any additional material or
information necessary for the claimant to perfect
the claim and an explanation of why such material or
information is necessary; and (4) appropriate
information as to the steps to be taken if the
claimant wishes to submit the claim for review.
6.02 Review of Claims.
The claimant or a duly authorized representative
may, within sixty days after receipt by the claimant
of a written notification of denial of a claim: (1)
request a review by the Advisory Committee upon
written application to the Committee; (2) review
pertinent documents; and (3) submit issues and
comments in writing. A decision by the Advisory
Committee shall be made promptly but in any event
not later than sixty days after receipt of a request
for review unless special circumstances require an
extension of time, in which event a decision shall
be rendered not later than one hundred twenty days
after receipt of such request. Written notice of
any such extension shall be furnished to the
claimant prior to the commencement of the extension.
The decision on review shall be in writing, shall
include specific reasons for the decision and shall
be furnished to the claimant within the appropriate
time described in this Section 6.02.
<PAGE>
FORM 10-K Page 134
Exhibit 4.9 (continued)
6.03 Distribution Definitions.
(a) Actuarial Equivalent means a benefit of equal
value computed in accordance with the actuarial
assumptions and principles used in the defined
benefit plan that is this Plan's floor plan in
the floor-offset plan arrangement incorporated
in that defined benefit plan. An annuity form
of benefit distributed under this Plan shall be
the Actuarial Equivalent of the vested portion
of a Member's Account (after deducting
therefrom any amount transferred pursuant to
Plan Section 6.04-A or Plan Section 6.05(b)) if
the purchase price of the annuity equals the
amount of such vested portion as of the
applicable Valuation Date.
(b) Annuity Starting Date means (i) for benefits
paid in the form of an annuity, the first day
of the first period for which an amount is paid
as an annuity, regardless of when payment is
actually made, and (ii) for benefits not paid
in the form of an annuity, the first day on
which all events have occurred which entitle
the Member to those benefits.
(c) Offset Amount means, with respect to each
Member, that portion of his ESOP A Account
balance that would have to be transferred to
the defined benefit plan that is this Plan's
floor plan in the floor-offset plan arrangement
incorporated in that defined benefit plan so
that there would be no reduction in the
Member's pension benefit under such defined
benefit plan by reason of the floor-offset
arrangement. The Offset Amount shall be
determined by the Advisory Committee and shall
be: (1) the cost of purchasing an annuity,
payable in the form elected by the Member under
the defined benefit plan, from an insurance
company, if payment is to be made by that
insurance company; or (2) if direct payment is
to be made by the trustee of the defined
benefit plan, a single sum amount computed on
the basis of tables provided by the Actuary and
adopted by the Pension Committee for the
defined benefit plan, said tables to reflect
the PBGC immediate and/or deferred annuity
interest rates, as appropriate, as of the
January 1 of the year in which the calculation
<PAGE>
FORM 10-K Page 135
Exhibit 4.9 (continued)
is made. Notwithstanding the foregoing, the
Offset Amount of a Member who has a Severance
from Service by reason of a total and permanent
disability and who participates in the Group
Insurance Long Term Disability Plan for
Salaried Employees of Cone Mills Corporation
shall be determined as of the last day of the
period for which compensation by reason of
disability is directly paid by an Employer
(which is immediately before the date on which
the long term disability insurance carrier
becomes obligated for payment of disability
benefits) and shall be that portion of his ESOP
A Account balance that would have to be
transferred to the Employees' Retirement Plan
of Cone Mills Corporation (ERP) so that, by
reason of the floor-offset arrangement
incorporated therein, there would be no
reduction in the Member's accrued benefit under
the ERP for the period January 1, 1984, through
such determination date.
(d) Qualified Joint and Survivor Annuity means an
annuity for the life of the Member with a
survivor annuity for the life of his Spouse
that is 50% (or such greater percentage not to
exceed 100% otherwise specified in the defined
benefit plan that is this Plan's floor plan in
the floor-offset plan arrangement) of the
amount of the annuity payable during the joint
lives of the Member and his Spouse and that is
the Actuarial Equivalent of the vested portion
of the Member's Account (after deducting
therefrom any amount transferred pursuant to
Plan Section 6.04-A).
(e) Qualified Preretirement Survivor Annuity means
an annuity for the life of the Member's
Surviving Spouse that is the Actuarial
Equivalent of the vested portion of the
Member's Account (after deducting therefrom any
amount transferred pursuant to Plan Section
6.05(b)).
(f) Single Life Annuity means an annuity for the
life of the Member that is the Actuarial
Equivalent of the vested portion of the
Member's Account (after deducting therefrom any
amount transferred pursuant to Plan Section
6.04-A).
<PAGE>
FORM 10-K Page 136
Exhibit 4.9 (continued)
(g) Spousal Consent means
(1) with respect to a Member's election to
waive the Qualified Joint and Survivor
Annuity form of benefit, the Spouse's
written consent to such waiver and to
the form of benefit selected by the
Member, which form of benefit may not be
changed without a further Spousal
Consent (unless the Spousal Consent
expressly permits changes without a
further Spousal Consent) and
(2) with respect to a Member's election to
waive the Qualified Preretirement
Survivor Annuity form of death benefit
by designating a Beneficiary other than
his Spouse, the Spouse's written consent
to such waiver and to the Beneficiary or
Beneficiaries designated, which
Beneficiary or Beneficiaries may not be
changed without a further Spousal
Consent (unless the Spousal Consent
expressly permits changes without a
further Spousal Consent).
In either case, the Spousal Consent must
acknowledge the effect of the Member's election
and be witnessed by a Plan representative or a
notary public. A Spousal Consent is
irrevocable. Notwithstanding the foregoing,
without Spousal Consent a Member may revoke his
election to waive the Qualified Joint and
Survivor Annuity form of benefit or the
Qualified Preretirement Survivor Annuity form
of death benefit, and no Spousal Consent to an
election shall be required if it is established
to the satisfaction of the Advisory Committee
that there is no Spouse or that the Spouse
cannot be located.
(h) Spouse or Surviving Spouse is defined in Plan
Section 1.34.
6.04 Lifetime Distributions.
(a) After a Member has a Severance from Service by
reason of retirement at age 65 or later or
total and permanent disability (as defined in
Plan Section 5.01) and submits the appropriate
<PAGE>
FORM 10-K Page 137
Exhibit 4.9 (continued)
claim, election, and income tax withholding
forms, the Advisory Committee shall direct the
Trustee to distribute the Member's Accounts in
accordance with Sections 6.04-A, 6.04-B and
6.04-C as soon as practicable after all
appropriate allocations are completed.
(b) After a Member has a Severance from Service for
any reason other than death, retirement at age
65 or later or total and permanent disability
and submits the appropriate claim, election,
and income tax withholding forms, the Advisory
Committee shall direct the Trustee to
distribute the vested portion of the Member's
Accounts in accordance with Sections 6.04-A,
6.04-B and 6.04-C as soon as practicable after
all appropriate allocations are completed;
provided, however, that, except as otherwise
expressly provided in Section 6.04-A with
respect to transfers to defined benefit plans
and in Section 6.04-C with respect to emergency
payments, no distribution may be made to such
a Member before the earliest of (1) January 1,
1990, (2) what would have been the Member's
Normal Retirement Date, (3) the Member's total
and permanent disability, or (4) the Member's
death.
(c) Within 30 days after each March 31 (beginning
March 31, 1993), a Member with five or more
Years of Service may request a distribution of
all of his ESOP B Account (if any). Upon
submission of the appropriate claim, election,
and income tax withholding forms, the Advisory
Committee shall direct the Trustee to make the
distribution in accordance with Sections 6.04-B
and 6.04-C as soon as practicable after all
appropriate allocations are completed.
(d) By written designation delivered to the
Advisory Committee, a Member may indicate a
preference from among the methods of payment
provided in Sections 6.04-A, 6.04-B and 6.04-C,
and subject to the provisions hereof and to the
rights of any Alternate Payee under a Qualified
Domestic Relations Order, the Advisory
Committee must direct distribution accordingly,
unless it would jeopardize the tax-qualified
status of this Plan. When any Account (or
subaccount) has been completely distributed, it
<PAGE>
FORM 10-K Page 138
Exhibit 4.9 (continued)
is cancelled.
(e) Notwithstanding anything in this Plan to the
contrary, no distributions shall commence to a
Member prior to age 65, without the written
consent of the Member and his spouse, unless
his total Account balance does not exceed
$3,500 and did not exceed $3,500 at the time of
any prior distribution.
6.04-A Transfers to Defined Benefit Plans.
(a) The purpose of this Section 6.04-A is to
provide each Member with the opportunity to
receive the same pension benefit in the same
form and amount as he would have received if
his pension benefits under the defined benefit
plan that is this Plan's floor plan in the
floor-offset plan arrangement were not offset
by the value of his vested Account balance
under this Plan.
(b) Each Member may direct the transfer of all or
any part of his Offset Amount to the defined
benefit plan that is this Plan's floor plan in
the floor-offset plan arrangement for
distribution in the same form as elected by the
Member for his pension under such defined
benefit plan. For transfers before January 1,
1990, that portion of a Member's Offset Amount
which was transferred was segregated from his
Account under this Plan by first reducing his
Money-Purchase-Pension Account, then, if
necessary, his Stock Bonus Account and then, if
necessary, his Special Retirement Account.
(c) If the lump sum value of the pension under the
Employer-maintained defined benefit plan linked
to this Plan under the floor-offset arrangement
is $3,500 or less, the Offset Amount may be
transferred to the defined benefit plan and
paid as a part of such lump sum distribution.
(d) The transfer of all or any part of a Member's
Offset Amount pursuant to this Section 6.04-A
shall constitute a distribution from the
Member's Account under this Plan, and none of
the other distribution methods provided for in
this Article VI shall be available with respect
to the amount transferred.
<PAGE>
FORM 10-K Page 139
Exhibit 4.9 (continued)
(e) Any portion of a Member's vested Account
balance under this Plan that is not transferred
pursuant to this Section 6.04-A shall be
distributed in accordance with Plan Section
6.04-B, unless the normal form of benefit
provided therein is effectively waived, in
which case such portion shall be distributed in
accordance with Plan Section 6.04-C.
6.04-B Normal Form of Benefit.
(a) Unless a Member has made an effective election
pursuant to subsection (b) to waive the normal
form of benefit described in this subsection
(a), the vested portion of his Account under
this Plan that is not transferred pursuant to
Plan Section 6.04-A shall be distributed in the
form of a Qualified Joint and Survivor Annuity
if the Member has a Spouse on his Annuity
Starting Date or in the form of a Single Life
Annuity if he does not have a Spouse on his
Annuity Starting Date.
(b) A Member may elect to waive the normal form of
benefit described in subsection (a) during the
period beginning 90 days before his Annuity
Starting Date and ending on the later of (i)
the date on which the distribution of his
benefit actually begins and (ii) the 90th day
after he receives the information required by
subsection (c); provided, however, that no
election to waive the Qualified Joint and
Survivor Annuity form of benefit shall be
effective unless accompanied by a Spousal
Consent. During the aforesaid election period,
a Member may revoke any election to waive the
normal form of benefit described in subsection
(a) and, subject to any required Spousal
Consent, may elect, revoke and elect again
during the election period. If a Member
effectively waives the normal form of benefit
described in subsection (a), then the vested
portion of his Account that is not transferred
pursuant to Section 6.04-A shall be distributed
in accordance with Section 6.04-C.
(c) The Advisory Committee must provide each Member
with a general written explanation of (i) the
terms and conditions of his normal form of
benefit under subsection (a); (ii) the Member's
<PAGE>
FORM 10-K Page 140
Exhibit 4.9 (continued)
right to make, and the effect of, an election
not to receive benefits in the normal form;
(iii) any required Spousal Consent; and (iv)
the right to make, and the effect of, a
revocation under subsection (b). The
explanation must be provided to the Member not
less than 30 and not more than 90 days before
his Annuity Starting Date.
(d) Notwithstanding the foregoing, if the aggregate
amount of that portion of a Member's Account
distributable under this Section 6.04-B (or
Section 6.04-C) does not exceed $3,500 and if
such Member's total Account balance did not
exceed $3,500 at the time of any prior
distribution from this Plan, that aggregate
amount will be distributed to the Member in a
single lump-sum payment and no Spousal Consent
shall be required, except that no such lump-sum
distribution may be made after the Annuity
Starting Date unless the Member (and, if
applicable, his Spouse) consents in writing to
the distribution. If the aggregate amount
distributable under this Section 6.04-B exceeds
$3,500 or if the Member's total Account balance
at the time of any prior distribution exceeded
$3,500, the distribution cannot begin before
the Member's attainment of age 65 unless he has
consented thereto in writing and, if the Member
has a Spouse, distribution cannot be in a form
other than the Qualified Joint and Survivor
Annuity without Spousal Consent.
6.04-C Other Forms of Benefit.
(a) Subject to the stock distribution rules in
subsection (b), to any required Spousal Consent
and to the other terms of this Plan,
distribution of the vested portion of a
Member's Account that is not transferred
pursuant to Section 6.04-A or distributed
pursuant to Section 6.04-B shall be made in one
of the following methods, as elected by the
Member:
(1) In a single, lump-sum distribution;
(2) In monthly installments of a specified
amount over a fixed period not to
<PAGE>
FORM 10-K Page 141
Exhibit 4.9 (continued)
exceed the life expectancy of the Member
or the joint life expectancies of the
Member and his Spouse or other
Beneficiary designated pursuant to Plan
Section 6.05;
(3) By a combination of the methods set
forth in (1) and (2) above.
The Advisory Committee may adjust installment
elections so as not to be administratively
burdensome. Any installment payments becoming
due after the Member's death shall be paid to
his surviving Spouse or other Beneficiary
designated pursuant to Section 6.05(e).
Plan Section 6.11 shall apply to any
distribution made on or after January 1, 1993,
that constitutes an eligible rollover
distribution (as defined in Code Section
402(f)(2)(A)).
If a Member has a Severance from Service and
that portion of his Account distributable under
this Section 6.04-C (or Section 6.04-B) is
$3,500 or less and if such Member's total
Account balance did not exceed $3,500 at the
time of any prior distribution from this Plan,
distribution will be made in a single lump-sum
payment or direct trustee-to-trustee transfer,
and the Member shall not be entitled to elect
any other method of payment, except that no
such lump-sum distribution may be made after
the Annuity Starting Date unless the Member
(and, if applicable, his Spouse) consents in
writing to the distribution. If the Member's
Account exceeds $3,500 or exceeded $3,500 at
the time of any prior distribution,
distribution to the Member under this Section
6.04-C cannot begin before his attainment of
age 65 unless he (and, if applicable, his
Spouse) consents thereto in writing.
If a Member's Beneficiary is not the Member's
Spouse, a monthly installment distribution
method may not be elected if it provides for
payments during the Member's life expectancy
that are less than 50% of the present value of
the total payments to be made to the Member and
his Beneficiary. Life expectancy shall be
<PAGE>
FORM 10-K Page 142
Exhibit 4.9 (continued)
determined by use of tables, prepared on a
unisex basis, and contained in U. S. Treasury
Department Regulations.
(b) Distributions from the Plan pursuant to this
Section 6.04-C must be in cash, but the
receiving Member may elect to receive
Qualifying Employer Securities unless such a
distribution is restricted according to the
Employer's bylaws or articles of incorporation.
If a Member entitled to a distribution has
assets other than Qualifying Employer
Securities forming part of the vested portion
of his Account, and if he exercises his right
to elect to receive such Qualifying Employer
Securities, those other assets must be
converted at fair market value (as of the
Valuation Date immediately before distribution)
into any Qualifying Employer Securities to
which he may be entitled by Code Sections
401(a)(23) or 409(h), as selected by the
Advisory Committee, and then distributed.
Balances representing fractional shares may be
paid in cash. The Advisory Committee may
direct the Trustee to obtain Qualifying
Employer Securities necessary for distribution
from whatever source might be available to the
Trustee. If the Trustee cannot find other
Qualifying Employer Securities available for
conversion, the Advisory Committee may direct
the Trustee to purchase Qualifying Employer
Securities from the Accounts of other Members.
The issuer of a security to be distributed may
impose any transfer restrictions allowable
under state or federal securities laws on any
stock distributed pursuant to this subsection.
(c) In the case of a distribution of Qualifying
Employer Securities which are not readily
tradeable on an established securities market,
the Plan shall provide the Member with a put
option that complies with the requirements of
Code Section 409(h). Such put option shall
provide that if a Member exercises the put
option, the Employer, or the Plan if the Plan
elects to assume the Employer's obligation,
shall repurchase the Qualifying Employer
Securities as follows:
(1) If the distribution constitutes a total
<PAGE>
FORM 10-K Page 143
Exhibit 4.9 (continued)
distribution of the vested portion of a
Member's Account, payment of the fair
market value of the Member's account
balance shall be made in a lump sum or
in annual installments over a period not
exceeding five years. If paid in
installments, the first installment
shall be paid not later than 30 days
after the Member exercises the put
option. The purchaser will pay a
reasonable rate of interest and provide
adequate security on amounts not paid
after 30 days.
(2) If the distribution does not constitute
a total distribution of the vested
portion of a Member's Account, the
purchaser shall pay the Member an amount
equal to the fair market value of the
Qualifying Employer Securities
repurchased no later than 30 days after
the Member exercises the put option.
(d) Shares of Qualifying Employer Securities
distributed by the Plan shall be subject to the
"right of first refusal" described in this
Section 6.04(d) so long as they are not readily
tradable on an established securities market.
Prior to any transfer of such shares, the
shares must first be offered in writing to the
Trustee and then if refused by the Trustee, to
Cone at a price equal to the purchase price
offered by a third-party buyer (other than the
Trustee or Cone) making a good faith (as
determined by the Advisory Committee) offer to
purchase such shares; provided, however, that
the Trustee shall in no event purchase shares
at a price in excess of their fair market
value. The Trustee or Cone, as the case may
be, may accept the offer as to part or all of
the Qualifying Employer Securities at any time
during the period not exceeding 14 days after
receipt of such offer by the Trustee, on terms
and conditions no less favorable to the
shareholder than those offered by the
third-party buyer. Any installment purchase
shall be made pursuant to a note secured by the
shares purchased and shall bear a reasonable
rate of interest. If the offer is not accepted
by the Trustee, Cone, or both, then the
<PAGE>
FORM 10-K Page 144
Exhibit 4.9 (continued)
proposed transfer may be completed within a
30-day period following the end of the
aforementioned 14-day period, but only upon
terms and conditions no less favorable than the
terms and conditions of the third-party buyer's
original offer. If the proposed transfer is
not completed within the aforementioned 30-day
period, then the shares will again be subject
to the right of first refusal described in this
Section 6.04(d).
6.05 Death Benefits.
(a) Subject to the rights of any Alternate Payee
under a Qualified Domestic Relations Order, if
a Member having a vested interest in the Plan
dies before his Annuity Starting Date with a
Surviving Spouse, his vested Account balance,
valued not later than the end of the Plan Year
during which death occurs, shall be distributed
to the Surviving Spouse in accordance with
subsection (b), unless the Member had made an
effective waiver election pursuant to
subsection (c).
(b) At the election of the Surviving Spouse, all or
any part of the Member's vested Account balance
shall be transferred to the defined benefit
plan that is this Plan's floor plan in the
floor-offset plan arrangement incorporated in
that defined benefit plan so that there will be
no reduction in the Surviving Spouse's pension
benefit under such defined benefit plan by
reason of the floor-offset arrangement. Any
such transfer shall constitute a distribution
from the Member's Account under this Plan, and
none of the other distribution methods provided
for in this Section 6.05 shall be available
with respect to the amount transferred. Any
portion of the Member's vested Account balance
that is not transferred to a defined benefit
plan in accordance with the foregoing
provisions of this subsection (b) shall be
distributed to the Surviving Spouse in the form
of a Qualified Preretirement Survivor Annuity,
unless the Surviving Spouse elects to have the
distribution made in one of the forms described
in Plan Section 6.04-C. Unless the Surviving
Spouse elects a later date, distribution of the
portion of the Member's vested Account balance
<PAGE>
FORM 10-K Page 145
Exhibit 4.9 (continued)
that is not transferred to a defined benefit
plan shall be made or begin no later than 60
days after the end of the Plan Year in which
death occurs, except as permitted under Plan
Section 6.06(c). Notwithstanding the
foregoing, if the aggregate amount of the
Member's vested Account balance that is not
transferred to a defined benefit plan is $3,500
or less, such amount shall be distributed to
the Surviving Spouse in a single lump-sum
payment and not in the form of a Qualified
Preretirement Survivor Annuity. No transfer or
distribution shall be made pursuant to this
subsection (b) until the Advisory Committee has
received proof of the Member's death and
appropriate claim, election and tax withholding
forms.
(c) A Member may elect to waive the Qualified
Preretirement Survivor Annuity and other
spousal benefits described in subsection (b) by
designating a Beneficiary or Beneficiaries
(other than his Spouse) in accordance with
subsection (e) to receive death benefits under
this Plan. A Member's election period begins
on the first day of the Plan Year in which he
attains age 35 (or the date he terminated
employment, if earlier) and ends on the date of
his death; provided, however, that no election
to waive the Qualified Preretirement Survivor
Annuity and other spousal benefits described in
subsection (b) and no Beneficiary designation
in accordance with subsection (e) shall be
effective unless accompanied by a Spousal
Consent. Subject to Spousal Consent, a Member
may also waive the Qualified Preretirement
Survivor Annuity and other spousal benefits
described in subsection (b) prior to the first
day of the Plan Year in which he attains age
35; provided, however, that any such waiver
shall become invalid on the first day of the
Plan Year in which the Member attains age 35
and, if there is no new waiver after such date,
the Member's Spouse shall be entitled to the
benefits described in subsection (b) in the
event of the Member's death before his Annuity
Starting Date. During the election periods
described above, a Member may revoke any
election to waive the Qualified Preretirement
Survivor Annuity and other spousal benefits
<PAGE>
FORM 10-K Page 146
Exhibit 4.9 (continued)
described in subsection (b) and, subject to any
required Spousal Consent, may elect, revoke and
elect again during such election periods.
(d) The Advisory Committee must provide each Member
with a general written explanation of the terms
and conditions of (i) the Qualified
Preretirement Survivor Annuity and other
spousal benefits described in subsection (b);
(ii) the Member's right to make, and the effect
of, an election not to receive survivor
benefits in accordance with subsection (b);
(iii) any required Spousal Consent; and (iv)
the right to make, and the effect of, a
revocation under subsection (c). The
explanation must be provided to each Member no
later than during the period that begins on the
first day of the Plan Year in which he attains
age 32 and ends with the close of the Plan Year
preceding the Plan Year in which the Member
attains age 35. If a Member enters the Plan
after the Plan Year in which he attains age 32,
the explanation must be provided to him no
later than the close of the second Plan Year
following his entry into the Plan.
(e) On forms provided by the Advisory Committee,
each Member without a Spouse and, subject to
Spousal Consent, each Member with a Spouse may
designate or change a Beneficiary or
Beneficiaries to receive death benefits under
the Plan. A Beneficiary designation is
effective when received by the Advisory
Committee. Any designation of a Beneficiary by
a Member without a Spouse shall become void and
of no further force and effect if the Member
later marries. If a Beneficiary or
Beneficiaries are designated in accordance with
this subsection (e), and if distribution of
benefits under this Plan has not begun before
a Member's death, then, after the Advisory
Committee receives proof of the Member's death,
it shall request his Beneficiary or
Beneficiaries to submit claim, election and tax
withholding forms. Subject to the rights of
any Alternate Payee under a Qualified Domestic
Relations Order, the Advisory Committee, upon
receiving these forms, shall direct the Trustee
to distribute the Member's Account, valued no
later than the end of the Plan Year during
<PAGE>
FORM 10-K Page 147
Exhibit 4.9 (continued)
which death occurs, to his Beneficiary or
Beneficiaries. Distribution will be made or
begin no later than 60 days after the end of
the Plan Year in which death occurs, except as
permitted under Plan Section 6.06(c), and,
subject to Plan Section 6.07(b), shall be made
by one of the methods described in Plan Section
6.04-C, as elected by the Beneficiary or
Beneficiaries. Notwithstanding the foregoing,
if the amount distributable under this
subsection (e) is $3,500 or less, such amount
shall be distributed in a single lump-sum
payment. If a Member had elected installment
payments pursuant to Plan Section 6.04-C and
had designated a Beneficiary or Beneficiaries
in accordance with this subsection (e), then
any installment payments becoming due after his
death shall be made to the Beneficiary or
Beneficiaries so designated, unless they elect
to accelerate payment thereof. If there is no
effective beneficiary designation in effect at
the time of a Member's death, then subject to
any required Spousal Consent and to the rights
of any Alternate Payee, the Member's estate
shall be entitled to receive his vested Account
balance.
6.06 Commencement of Benefits.
(a) The valuation of a Member's Account for
purposes of determining the amount of benefit
payments is made not later than the last day of
the Plan Year in which he becomes eligible for
such payments pursuant to Plan Sections 6.04 or
6.05, provided however, that dividends or other
investment earnings on Qualifying Employer
Securities held in a Member's Account shall be
accrued beyond such Plan Year end as provided
in the charter, indenture or other instrument
governing such Qualifying Employer Securities.
Except as provided in Plan Section 6.04-A,
benefit payments shall begin by April 1 of the
following Plan Year.
(b) Notwithstanding any other provision of this
Article VI, a Member's benefit payments must
begin no later than 60 days after the close of
the Plan Year in which occurs the latest of:
(1) his 65th birthday;
<PAGE>
FORM 10-K Page 148
Exhibit 4.9 (continued)
(2) the 10th anniversary of the date he
became a Member of the Plan; or
(3) his termination of employment.
(c) If for any reason the benefit amount cannot be
accurately determined before payment is
required, or if it is not possible to pay when
required because the Advisory Committee has
been unable to locate the Member, after making
reasonable efforts to do so, a payment
retroactive to the required date may be made no
later than 60 days after the earliest date on
which the amount of that payment can be
determined, or the date on which the Member is
located (whichever is applicable).
6.07 Special Distribution Provisions.
(a) Distribution of the entire interest of a Member
must be made or begin no later than April 1 of
the calendar year following the calendar year
in which he attains age 70-1/2 whether or not
he has terminated employment. If distribution
has not been made by the required beginning
date described in the preceding sentence, it
must begin not later than that required
beginning date and be payable over a period not
exceeding the life of the Member, or the life
expectancy of the Member, or the lives of the
Member and a designated Beneficiary, or the
life expectancies of the Member and a
designated Beneficiary. Life expectancy shall
be determined in accordance with U. S. Treasury
Department regulations and may be redetermined
annually.
(b) If the distribution of a Member's Account has
begun in accordance with paragraph (a) and the
Member dies before his entire Account balance
has been distributed, the remaining portion of
his Account balance must be distributed at
least as rapidly as under the method of
distribution being used as of the date of the
Member's death. If a Member dies before the
distribution of his Account balance has begun,
his entire Account balance must be distributed
within five years after his death.
(c) Notwithstanding any other provision of the
<PAGE>
FORM 10-K Page 149
Exhibit 4.9 (continued)
Plan, other than those provisions that require
the consent of a Member and a Member's Spouse
to a distribution in excess of $3,500, a Member
may elect to have his Stock Bonus Account
distributed as follows:
(1) If the Member has a Severance from
Service by reason of the attainment of
normal retirement age under the Plan,
death, or disability, the distribution
of such portion of the Member's account
balance must begin not later than one
year after the close of the Plan Year in
which his Severance from Service occurs
unless the Member otherwise elects under
the provisions of the Plan other than
this Section 6.07(c).
(2) If the Member terminates employment for
any reason other than those enumerated
in subparagraph (1) above, and is not
reemployed by an Employer before the end
of the fifth Plan Year following the
Plan Year of such termination,
distribution of such portion of the
Member's account balance must begin not
later than one year after the close of
the fifth Plan Year following the Plan
Year in which the Member terminated
employment unless the Member otherwise
elects under the provisions of this Plan
other than this Section 6.07(c).
(3) If the Member terminates employment for
a reason other than those described in
paragraph (1) above, and is employed by
an Employer before the last day of the
fifth Plan Year following the Plan Year
of such termination, distribution to the
Member, prior to any subsequent
termination of employment, shall be in
accordance with terms of the Plan other
than this Section 6.07(c).
Distributions required under this Section
6.07(c) shall be made over a period not
exceeding five years unless the Member
otherwise elects under provisions of the Plan
other than this Section 6.07(c). In no event
shall such distribution period exceed the
<PAGE>
FORM 10-K Page 150
Exhibit 4.9 (continued)
period permitted in Code Section 401(a)(9).
6.08 Limitation on Assignment; Qualified Domestic
Relations Order.
Except as provided in this Section 6.08, Plan
benefits may not be assigned, alienated or in any
other way made subject to debts or other obligations
of Members or Beneficiaries. Notwithstanding the
above, the Advisory Committee must comply with the
terms of a Qualified Domestic Relations Order which
is a judgment, decree or order (including approval
of a property settlement agreement) made pursuant to
a state domestic relations law (including community
property law) that relates to the provision of child
support, alimony payments or marital property rights
of a Spouse, former Spouse, child or other dependent
("Alternate Payee") of a Member. A Qualified
Domestic Relations Order creates or recognizes the
existence of an Alternate Payee's right to, or
assigns to an Alternate Payee the right to, receive
all or a portion of the benefits payable to a Member
under this Plan and specifies the following:
(1) the name and last known mailing address of the
Member and each Alternate Payee;
(2) the amount or percentage of the Member's Plan
benefits to be paid to any Alternate Payee, or
the manner in which such amount or percentage
is to be determined; and
(3) the number of payments or the period to which
the Order applies and the name of the plan(s)
to which the Order relates.
Plan benefits will be paid pursuant to a Qualified
Domestic Relations Order to such Alternative
Payee(s) at such times and in such amounts as are
stated therein, provided however, that such
Qualified Domestic Relations Order may not require
the Plan to provide any type or form of benefit, or
any option not otherwise provided. It also may not
require the Plan to provide increased benefits and
may not require the payment of benefits to an
Alternate Payee prior to the Member's "earliest
retirement age" as defined in Code Section 414(p).
The Advisory Committee shall establish reasonable
procedures to determine the qualified status of
domestic relations orders and to administer
<PAGE>
FORM 10-K Page 151
Exhibit 4.9 (continued)
distributions under such Orders.
6.09 Withholding of Benefits.
If a Member receiving benefits under the Plan
returns to regular employment of an Employer, the
Advisory Committee may suspend payment of any
benefit which such Member would have received from
the Plan during any such period of reemployment.
6.10 Withholding of Taxes.
Notwithstanding any other term or provision of this
Article VI, the Advisory Committee will direct the
Trustee to deduct from any distribution made to a
Member such amount as is required to be withheld
under Code Section 3405 and the corresponding
provision of any applicable state law.
6.11 Eligible Rollover Distributions.
(a) This Section 6.11 applies to distributions made
on or after January 1, 1993. Notwithstanding
any provision of the Plan to the contrary that
would otherwise limit a distributee's election
under this Section, a distributee may elect, at
the time and in the manner prescribed by the
Advisory Committee, to have any portion of an
eligible rollover distribution paid directly to
an eligible retirement plan specified by the
distributee in a direct rollover.
(b) Definitions.
(1) Eligible rollover distribution: An
eligible rollover distribution is any
distribution of all or any portion of
the balance to the credit of the
distributee, except that an eligible
rollover distribution does not include:
any distribution that is one of a series
of substantially equal periodic payments
(not less frequently than annually) made
for the life (or life expectancy) of the
distributee or the joint lives (or joint
life expectancies) of the distributee
and the distributee's designated
beneficiary, or for a specified period
of ten years or more; any distribution
to the extent such distribution is
required under section 401(a)(9) of the
<PAGE>
FORM 10-K Page 152
Exhibit 4.9 (continued)
Code; and the portion of any
distribution that is not includible in
gross income (determined without regard
to the exclusion for net unrealized
appreciation with respect to employer
securities).
(2) Eligible retirement plan: An eligible
retirement plan is an individual
retirement account described in section
408(a) of the Code, an individual
retirement annuity described in section
408(b) of the Code, an annuity plan
described in section 403(a) of the Code,
or a qualified trust described in
section 401(a) of the Code, that accepts
the distributee's eligible rollover
distribution. However, in the case of
an eligible rollover distribution to the
surviving spouse, an eligible retirement
plan is an individual retirement account
or individual retirement annuity.
(3) Distributee: A distributee includes an
employee or former employee. In
addition, the employee's or former
employee's surviving spouse and the
employee's or former employee's spouse
or former spouse who is the alternate
payee under a qualified domestic
relations order, as defined in section
414(p) of the Code, are distributees
with regard to the interest of the
spouse or former spouse.
(4) Direct rollover: A direct rollover is
a payment by the plan to the eligible
retirement plan specified by the
distributee.
6.12 Legal Disability of Member or Beneficiary.
If any Member, former Member or Beneficiary entitled
to any payment under the Plan shall be under a legal
disability, whether due to incompetency, being a
minor, or otherwise, the Advisory Committee, upon
the receipt of satisfactory evidence of such legal
disability, may cause any payment otherwise payable
to be paid (i) to the guardian of the person or
property of such Member or Beneficiary, (ii) to any
<PAGE>
FORM 10-K Page 153
Exhibit 4.9 (continued)
other person, firm or institution for the benefit of
such Member or Beneficiary, or (iii) if the
Beneficiary is a minor, to a custodian for such
Beneficiary under a Uniform Gifts to or Transfer to
Minors Act, and the receipt of any of the foregoing
shall constitute a full acquittance of the Advisory
Committee to the extent of the distribution so made.
<PAGE>
FORM 10-K Page 153a
Exhibit 4.9 (continued)
ARTICLE VII
TRUST FUND AND ADMINISTRATION OF THE PLAN
7.01 Named Fiduciaries and Allocation of Responsibility.
(a) Plan Fiduciaries are Cone (acting through the
Board of Directors), each Trustee or
Co-Trustee, the Advisory Committee and any
other Committee appointed pursuant to Plan
Section 8.06. Each Fiduciary shall have only
those powers, duties, responsibilities and
obligations that are specifically assigned
under the Plan or Trust Agreement. A Fiduciary
may serve in more than one capacity with
respect to the Plan. The Board of Directors
shall appoint the Advisory Committee and any
Trustee or successor Trustees or Co-Trustees
and any other Fiduciaries.
(b) The Trustee has custody and sole responsibility
for administration of the Trust Fund, but the
Trustee's authority to manage, acquire or
dispose of assets of the Plan is subject to
such investment policies and guidelines as may
be adopted from time to time by the Board of
Directors and communicated to the Trustee. If
an Investment Manager is appointed according to
a Trust Agreement, the Trustee or each
Co-Trustee under that Trust Agreement is
released from any obligation or liability for
the investment of the assets for which the
appointment is made.
(c) The Advisory Committee has only the
responsibilities described in this Plan and
those delegated by Cone. The Advisory
Committee has no responsibility for the control
or management of the Trust Fund.
(d) Other Committees appointed pursuant to Plan
Section 7.06 shall have such authority and
responsibilities as may be delegated by the
Board of Directors.
(e) All responsibilities not specifically delegated
to a Fiduciary remain with Cone, including
designating other Fiduciaries not named in this
<PAGE>
FORM 10-K Page 154
Exhibit 4.9 (continued)
Plan or the Trust Agreement. A Fiduciary
serves at the pleasure of Cone and may employ
one or more persons to render advice with
regard to any responsibility such Fiduciary has
under the Plan. Each Fiduciary may rely upon
any direction, information or action of another
Fiduciary as being proper under the Plan or
Trust Agreement and shall not be required to
inquire into the propriety of any such
direction, information or action. It is
intended that each Fiduciary be responsible for
the proper exercise of its own power, duties,
responsibilities and obligations and shall not
be responsible for any act or omission of
another Fiduciary except to the extent that he
has knowledge of a breach of Fiduciary
responsibility by another Fiduciary and fails
to make reasonable effort to remedy the breach.
7.02 Duties and Responsibilities.
Each Fiduciary shall discharge his duties with
respect to the Plan solely in the interest of
Members and Beneficiaries for the exclusive purpose
of providing benefits to Members and Beneficiaries
and for defraying reasonable expenses in
administering the Plan, with the care, skill,
prudence and diligence under the circumstances then
prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in
the conduct of an enterprise of a like character and
with like aims, and in accordance with the documents
and instruments governing the Plan insofar as such
documents and instruments are consistent with the
provisions of applicable law or regulation.
Notwithstanding the foregoing, the diversification
requirement of ERISA Section 404(a)(1)(C) and the
prudence requirement of ERISA Section 404(a)(1)(B)
(to the extent it requires diversification) shall
not apply to the acquisition and holding by the Plan
of Qualifying Employer Securities as defined in
ERISA Section 407(d), in which the Plan is designed
to invest.
7.03 Trust Fund.
All of the assets of the Plan shall be held in a
Trust Fund or Funds under a Trust Agreement which
shall be a part of the Plan. Such Trust Agreement
may provide for a master trust containing assets of
<PAGE>
FORM 10-K Page 155
Exhibit 4.9 (continued)
more than one plan if the portion or percentage
attributable to each plan is clearly established and
discernible. Each Trustee or Co-Trustee shall be
appointed by the Board of Directors, and the Board
of Directors shall have the sole authority to
appoint and remove any Trustee, Co-Trustee or
successor Trustee or Co-Trustee. All Company
Contributions shall be paid into the Trust Fund.
Benefits provided by the Plan shall be payable from
the Trust Fund; if the Advisory Committee deems it
advisable, benefits under the Plan may be provided
through the purchase of annuities from a legal
reserve life insurance company in accordance with
rules uniformly applied to all employees similarly
situated. The Trustee or Co-Trustee shall execute
such documents and take any other action necessary
to carry out the instructions of any Investment
Manager or the Advisory Committee.
7.04 Enforceable Rights.
Cone does not guarantee payment of any benefits
provided for under the Plan. All rights of Members
and Beneficiaries shall be enforceable only against
the Trust Fund except to the extent otherwise
guaranteed by applicable law or regulation. No
person shall have any interest in or right to any
part of the corpus or income of the Trust Fund
except as provided in the Plan.
7.05 Impossibility of Diversion.
Except as provided in Sections 3.04 and 3.05, the
assets of the Plan and Trust Fund shall not inure to
the benefit of Cone and shall be held for the
exclusive purposes of providing benefits to Members
and Beneficiaries and defraying reasonable expenses
of administering the Plan.
7.06 Advisory Committee and Other Committees.
The Board of Directors shall appoint an Advisory
Committee and may appoint other Committees from time
to time, each Committee to consist of at least three
(3) persons who may, but need not be, officers,
directors or employees of Cone. The members of each
Committee shall hold office at the pleasure of the
Board of Directors and shall serve without
compensation. Each Committee member shall file his
written acceptance with the Board of Directors and
<PAGE>
FORM 10-K Page 156
Exhibit 4.9 (continued)
acknowledge that he is a Fiduciary under the Plan.
Any Committee member may resign at any time by
delivering his written resignation to the Board of
Directors. Any vacancy which reduces Committee
membership to less than three shall be filled by the
Board of Directors as soon as practicable.
7.07 Officers, Quorums, Expenses.
Each Committee may authorize one or more of its
members to execute or deliver any instrument or act
on its behalf. Each Committee shall hold meetings
upon such notice and at such place and times as it
may determine. A majority of the members of each
Committee in office at the time shall constitute a
quorum for the transaction of business. All
resolutions or other actions taken by a Committee
shall be by the vote of a majority of those present
at a meeting or without a meeting by an instrument
in writing signed by a majority of the members. If
a Committee member registers his dissent in writing
with respect to any act or omission by the majority,
delivered to the remaining Committee members within
a reasonable time, such member shall not be
responsible for such act or omission. The expenses
of each Committee in performing its duties and the
compensation of its agent shall be paid by Cone.
7.08 Duties of Investment Manager.
Cone shall have authority to appoint in writing and
obtain the services of one or more Investment
Managers (as defined in ERISA Section 3 (38)) whose
duties and responsibilities shall be to manage the
investment and reinvestment of such portion of the
Trust Fund as shall be determined from time to time
by the Board of Directors. Each duly appointed
Investment Manager shall, with respect to the
portion of any Trust Fund for which it is
responsible, have the sole authority, without prior
consultation with the Trustee or Cone, to manage,
acquire and dispose of assets of the Trust Fund but
shall not, except to the extent permitted in the
Trust Agreement, have physical custody or indicia of
ownership of any such assets. The appointment of an
Investment Manager shall become effective as of the
date he delivers to Cone a written statement
acknowledging that it is Fiduciary as defined in
ERISA Section 3(21)(A) and that it has the
responsibility of acquisition and disposition of
<PAGE>
FORM 10-K Page 157
Exhibit 4.9 (continued)
that portion of Trust Fund assets assigned to it.
The Investment Manager shall exercise its power
through written directions to the Trustee signed by
an individual whose name and signature appears on a
list furnished by such Investment Manager to Cone.
The Investment Manager shall periodically deliver to
Cone a report describing all Trust Fund asset
transactions for each agreed upon reporting period.
Any compensation or fee due to the Investment
Manager for services rendered shall be paid out of
the Trust Fund, unless paid by Cone in its
discretion.
7.09 Information to Investment Manager.
Cone shall advise each Investment Manager of the
amount of that portion of any Trust Fund which he is
to manage, the amount of Company Contributions to be
added to the Fund and the expected future benefits
to be payable from the Fund in order that the
Investment Manager may establish a funding policy
consistent with current and long-term needs of the
Plan and compatible with the investment policies and
guidelines determined by the Board of Directors.
7.10 Notice to Trustee.
Cone shall notify the Trustee of each Trust Fund for
which an Investment Manager has been appointed of
the name of such Investment Manager and the portion
of the Trust Fund for which such Manager is
responsible. Until notified in writing by Cone that
there has been a change in the appointment of an
Investment Manager, the Trustee shall be fully
protected in relying upon the instructions received
from such Investment Manager with respect to the
portions of the Fund for which such Manager has
Investment responsibilities.
7.11 Duties of the Advisory Committee.
The Advisory Committee shall be responsible for and
have discretionary authority with respect to
interpretation of the provisions of the Plan, the
determination of benefits and the right of any
person to benefits, and such other functions
including without limitation the promulgation of
rules and regulations as may be necessary for proper
administration of the Plan and not hereunder
delegated to the Trustee, Investment Manager or
<PAGE>
FORM 10-K Page 158
Exhibit 4.9 (continued)
other Fiduciary appointed by the Board of Directors.
The Advisory Committee's rules, interpretations,
computations and actions will be conclusive and
binding on all persons.
7.12 Notice of Payments Due.
The Advisory Committee shall notify the Trustee in
writing of the amounts payable under the Plan and
the date of such payments.
7.13 Records and Reports.
The Advisory Committee shall maintain accounts
showing the fiscal transactions of the Plan and
shall keep in convenient form such data as may be
necessary for the valuation of the assets and
liabilities, contingent or otherwise, of the Plan.
The Committee shall exercise such authority as it
deems appropriate in order to comply with the
reporting requirements of any applicable law or
regulation affecting the Plan and shall prepare
annually a report showing in reasonable detail such
assets and liabilities of the Plan and any other
information which the Board of Directors may require
and which the Committee can reasonably furnish or
obtain from the Trustee. Such report shall be
submitted to the Board of Directors.
7.14 Exoneration of Advisory Committee.
The members of the Advisory Committee, Employers,
and their officers, directors and employees shall be
entitled to rely upon the reports furnished by the
Trustee or by any accountant approved by a Committee
or the Board of Directors, and upon all opinions
given by any legal counsel selected or approved by
a Committee or the Board of Directors. Except as
contrary to law, the members of the Committee,
Employers, and their officers, directors and
employees shall be fully protected and exonerated
from liability with respect to any action taken or
suffered by them in good faith in reliance upon such
reports, opinions or other advice received from any
such Trustee, accountant or legal counsel. The fact
that any member of the Committee is a director,
officer or shareholder of the Employer, or a Member
of the Plan, shall not disqualify him from
performing any duties which the Plan or the Trust
Agreement authorizes or requires him to do as a
<PAGE>
FORM 10-K Page 159
Exhibit 4.9 (continued)
member of the Committee or render him accountable
for any benefits received by him under the Plan.
All directors, officers and employees who are deemed
to be Fiduciaries of this Plan are entitled to
indemnification to the full extent provided for by
law and by the Charter and Bylaws of Cone in effect
on January 1, 1987, and as thereafter amended.
7.15 Errors and Omissions.
Individuals and entities charged with the
administration of the Plan must see that it is
administered in accordance with its terms as long as
it is not in conflict with the Code or ERISA. If an
innocent error or omission is discovered in the
Plan's operation or administration, and if the
Advisory Committee determines that it would cost
more to correct the error than is warranted, and if
the Advisory Committee determines that the error did
not result in discrimination prohibited by Plan
Section 10.06 or cause a qualification or excise-tax
problem, then, to the extent that an adjustment will
not in the Advisory Committee's judgment result in
discrimination prohibited by Plan Section 10.06, the
Advisory Committee may authorize any equitable
adjustment it deems necessary or desirable to
correct the error or omission, including but not
limited to the authorization of additional Cone
Contributions designed, in a manner consistent with
the goodwill intended to be engendered by the Plan,
to put Members in the same relative position they
would have enjoyed if there had been no error or
omission. Any contribution made pursuant to this
section is an additional discretionary contribution.
7.16 Fees and Expenses.
Any fees or expenses incurred in connection with the
operation of the Plan shall be paid out of the Trust
Fund, unless paid by Cone in its discretion.
7.17 Voting of Shares.
(a) A Member shall be entitled to direct the
Trustee as to the manner in which voting rights
will be exercised with respect to any corporate
matter which involves the voting of Qualified
Employer Securities allocated to his Account.
(b) The Advisory Committee must see that the
Members receive all proxies and proxy
<PAGE>
FORM 10-K Page 160
Exhibit 4.9 (continued)
solicitation materials related to the voting of
Qualifying Employer Securities held for their
Accounts.
7.18 Certification of Directions from Members.
Any Members' rights contained in this Plan or in the
Trust Agreement to direct any action may be
exercised only by directions communicated to the
Advisory Committee. The Advisory Committee must
communicate those directions to the Trustee or other
appropriate persons. Any Members' directions
communicated by the Advisory Committee are deemed to
be true and accurate, and each recipient of
directions is entitled to rely conclusively upon the
directions.
FORM 10-K Page 161
Exhibit 4.9 (continued)
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGER
8.01 Amendment.
(a) The Board of Directors retains the right at any
time:
(1) to amend this Plan and any Trust
Agreement to qualify or retain
qualification of this Plan and the Trust
under the applicable provisions of the
Code or under any other laws;
(2) to amend this Plan and any Trust
Agreement in any other manner; and
(3) to amend this Plan and liquidate the
Trust by transferring all assets to a
new trust qualified under the Code.
(b) No amendment to the Plan or any Trust Agreement
and no transfer of liabilities or assets of the
Trust Fund shall permit any part of the Trust
Fund to be used for or diverted to purposes
other than for the exclusive benefit of Members
and Beneficiaries and for defraying reasonable
expenses of administering the Plan. An
amendment may not cause any reduction in
benefits accrued by any Member or cause or
permit any portion of the Trust Fund to revert
to or become the property of an Employer. An
amendment that affects the rights, duties or
responsibilities of any Fiduciary may not be
made without that Fiduciary's written consent.
Except as permitted by Regulations, no Plan
amendment or transaction having the effect of
a Plan amendment (such as a merger, plan
transfer or similar transaction) shall be
effective to the extent it eliminates or
reduces any "Section 411(d)(6) protected
benefit" or adds or modifies conditions
relating to "Section 411(d)(6) protected
benefits" the result of which is a further
restriction on such benefit unless such
protected benefits are preserved with respect
to benefits accrued as of the later of the
adoption date or effective date of the
<PAGE>
FORM 10-K Page 162
Exhibit 4.9 (continued)
amendment. "Section 411(d)(6) protected
benefits" are benefits described in Code
Section 411(d)(6)(A), early retirement benefits
and retirement-type subsidies, and optional
forms of benefit. An amendment is effective on
the date indicated in any written instrument
that is identified as an amendment to the Plan,
that is approved or authorized by the Board of
Directors of Cone Mills Corporation and that is
signed by an officer of the Corporation.
(c) As allowed by law, a transfer of liabilities or
Trust Fund assets or an amendment to the Plan
or a Trust Agreement may authorize or permit
part of the Trust Fund to be used for or
diverted to payment of taxes owed or to payment
of reasonable administrative expenses. To the
extent allowed by Code Section 401(a), Trust
Fund assets may be used for or diverted to
purposes that benefit Employees other than
Members or their Beneficiaries or estates.
(d) The allocation provisions of Article IV of the
Plan shall not be amended more than once every
six months, other than to comport with changes
in the Code, ERISA or the rules thereunder.
8.02 Termination.
(a) The Board of Directors has the right at any
time to terminate this Plan and any Trust
Agreement. Notice of a termination must be
given to the Members, the Advisory Committee,
the affected Trustees or Co-Trustees and all
necessary authorities. If any authority's
approval is necessary, termination is effective
according to that approval; otherwise, the date
of the notice or a later date contained in the
notice is the termination date for purposes of
this Plan.
(b) If the Plan terminates, all Accounts are then
nonforfeitable (100% vested). If the Plan
partially terminates (determined in a manner
consistent with legal authorities), all
Accounts of affected Members are fully
nonforfeitable and may then be treated by the
Advisory Committee as if the Plan had
terminated.
<PAGE>
FORM 10-K Page 163
Exhibit 4.9 (continued)
(c) On the Plan's termination, the Advisory
Committee must direct the Trustee to allocate
the assets of the Trust Fund among the Members
and Beneficiaries according to the rules
contained in Article IV. Members have no
recourse toward satisfaction of their Accounts
other than from the Trust Fund.
(d) After providing for payment of any expenses
properly chargeable against the Trust Fund and
compliance with all other requirements of law,
the Advisory Committee may direct the Trustees
and Co-Trustees to distribute assets remaining
in the Trust Fund. Distributions according to
this Section 8.02 are not subject to the
regular distribution provisions of this Plan,
but must be in the manner the Advisory
Committee determines consistent with statutory
requirements and the purposes of the Plan.
Except as specifically provided by law, the
Advisory Committee's determination is
conclusive.
(e) Each Trustee and Co-Trustee must transfer or
deliver property to Members according to the
Advisory Committee's directions. A Trustee or
Co-Trustee will have no further right, title or
interest in property distributed. After all
distributions, each Trustee and Co-Trustee is
discharged from all obligations under the Trust
Agreements. Except by statute, no Member or
Beneficiary has any further right or claim.
8.03 Discontinuance of Contributions.
(a) Each Employer has the right at any time to
reduce or discontinue its contributions to this
Plan. If there is a complete discontinuance of
contributions from all Employers, all Accounts
become fully nonforfeitable.
(b) A discontinuance of Employer contributions is
not a termination of the Plan unless Cone gives
the notice described in Plan Section 8.02(a).
8.04 Plan Merger or Asset Transfer.
(a) The merger or consolidation of this Plan with,
or the transfer of assets or liabilities of
this Plan to another employee benefit plan or
<PAGE>
FORM 10-K Page 164
Exhibit 4.9 (continued)
the transfer of assets or liabilities of
another plan to this Plan is not allowed unless
each Member's benefit entitlement immediately
after the merger, consolidation, or transfer,
is (when computed as if the surviving or
receiving plan had immediately terminated)
equal to or greater than the benefit to which
the Member would have been entitled if this
Plan had terminated immediately before the
merger, consolidation, or transfer.
(b) Subject to subsection (a), on written direction
from Cone or the Advisory Committee, any
Trustee or Co-Trustee so directed must take all
necessary steps to transfer assets held in the
Trust Fund to another qualified plan.
(c) In accordance with and subject to the
limitations and restrictions of the foregoing
provisions, the Money Purchase Pension Plan
component of the Cone Mills Corporation 1983
ESOP and the Special Retirement Account of the
Supplemental Retirement Plan of Cone Mills
Corporation were merged into the Stock Bonus
Plan component of the Cone Mills Corporation
1983 ESOP, effective December 31, 1989.
8.05 Continuation of the Plan.
If an Employer is merged or consolidated with any
other business, or is succeeded by a corporation or
any other legal entity that acquires substantially
all of the Employer's assets, the surviving or
purchasing corporation or legal entity, subject to
approval of the Board of Directors, may elect to
continue this Plan as to that Employer's Members but
shall not be required to do so.
<PAGE>
FORM 10-K Page 165
Exhibit 4.9 (continued)
ARTICLE IX
MULTIPLE COMPANIES INCLUDED
9.01 Plan Sponsor and Other Employers.
(a) This Plan's sponsor is Cone Mills Corporation,
or its successor.
(b) This Plan is designed to allow the sponsor's
Affiliates to participate. Employers are Cone
Mills Corporation and any Affiliate that was
participating in this Plan before January 1,
1991, and any Affiliate that adopts this Plan
in accordance with Section 9.02.
9.02 Method of Participation.
With approval of the Board of Directors, any other
business that is an Affiliate of Cone may take
appropriate action through its board and become a
party to the Plan as an Employer. To become an
Employer, a business must adopt this Plan as a
Qualified Plan for its employees. A business that
becomes an Employer must promptly deliver to the
Trustee or Co-Trustees designated by Cone a copy of
the resolutions or other documents evidencing its
adoption of the Plan and also a written instrument
showing Cone's Board's approval of the adopting
entity's status as a party to the Plan and an
Employer.
9.03 Withdrawal by Employer.
(a) An Employer may withdraw from the Plan at any
time by giving the Advisory Committee and the
Board of Directors six months advance notice in
writing of its intention to withdraw unless a
shorter notice is agreed to by the Board of
Directors.
(b) Upon receipt of an Employer's notice of
withdrawal, the Advisory Committee must certify
to the appropriate Trustee or Co-Trustees the
withdrawing Employer's equitable share in the
Trust Fund. The Advisory Committee may rely
conclusively on the determination made by
counsel and advisors then employed on behalf of
the Plan. The Trustee or Co-Trustees must then
set aside from the Trust Fund such securities
<PAGE>
FORM 10-K Page 166
Exhibit 4.9 (continued)
and other property as each deems, in its sole
discretion, to be equal in value to that amount
directed by the Advisory Committee. If the
Plan is to be terminated with respect to the
Employer, then the amount set aside must be
dealt with according to the provisions of Plan
Article VIII. If the Plan is not to be
terminated with respect to the Employer, the
Trustee or Co-Trustees must either transfer the
assets set aside to another trust governed by
an agreement between a Trustee or Co-Trustees
and the withdrawing Employer or to a successor
trustee, according to the Advisory Committee's
directions.
(c) The segregation of the Trust Fund assets upon
an Employer's withdrawal, or the execution of
a new agreement and declaration of trust
pursuant to any of the provisions of this
section, must not operate to permit any part of
the Trust Fund's principal or income to be used
for or diverted to purposes other than for the
benefit of Members and Beneficiaries or for the
payment of reasonable expenses of administering
the Plan.
9.04 Tax Year.
Although the Employers may have different tax years,
the Plan Year, which is the calendar year, is the
tax year for this Plan and Trust Fund.
<PAGE>
FORM 10-K Page 167
Exhibit 4.9 (continued)
ARTICLE X
GENERAL
10.01 Plan Creates No Separate Rights.
The establishment and existence of the Plan, Trust
Agreement and the Trust Fund does not give a person
any legal or equitable right against:
(a) an Employer;
(b) any officer, director, employee or other agent
of an Employer;
(c) any Trustee or any Co-Trustee; or
(d) the Advisory Committee or any member of the
Advisory Committee.
The Plan and Trust Agreement create no employment
rights and do not modify the terms of an Employee's
or a Member's employment. The Plan and Trust
Agreement are not contracts between an Employer and
any Employee, and the Plan is not an inducement for
anyone's employment.
10.02 Delegation of Authority.
Cone's acts may be accomplished by any person with
authorization from the Board of Directors. Any
other Employer's acts may be accomplished by any
person with authorization from that Employer's
board.
10.03 Limitation of Liability.
(a) A Fiduciary is not subject to suit or liability
in connection with this Plan or the Trust
Agreement or their operation, except according
to this Section 10.03.
(b) Each member of the Advisory Committee, each
Trustee and Co-Trustee and any person employed
by an Employer is liable only for that person's
own acts or omissions.
(c) Each member of the Advisory Committee, each
<PAGE>
FORM 10-K Page 168
Exhibit 4.9 (continued)
Trustee and Co-Trustee, or any person employed
by an Employer is not liable for the acts or
omissions of another without knowing
participation in the acts or omissions, except
by action to conceal an action or omission of
another while knowing the act or omission is a
breach, or by a failure to properly perform
duties that enables the breach to occur, or
with knowledge of the breach, failure to make
reasonable efforts to remedy the breach.
(d) One Trustee or Co-Trustee must use reasonable
care to prevent another from committing a
breach; but all Trustees and Co-Trustees need
not jointly manage or control the assets,
because specific duties have been allocated
among them in this Plan or the Trust
Agreements. A Trustee or Co-Trustee is not
liable for actions or omissions when following
the specific directions of the Advisory
Committee or a duly authorized and appointed
Investment Manager unless such directions are
improper on their face. If an Investment
Manager has been properly appointed, subject to
subsection (c), a Trustee or Co-Trustee is not
liable for the acts of the Investment Manager
and does not have any investment responsibility
for assets under the management of the
Investment Manager.
(e) A Fiduciary is not liable for the actions of
another to whom responsibility has been
allocated or delegated according to this Plan
and the Trust Agreements, unless as the
allocating or delegating Fiduciary it was
imprudent in making the allocation or
delegation or in continuing the allocation or
delegation.
(f) Each Employee releases all members of the
Advisory Committee, each Trustee and
Co-Trustee, each Employer, all officers and
agents of each Employer, and all agents of
Fiduciaries from any and all liability or
obligation, to the extent release is consistent
with the provisions of this Section.
10.04 Legal Action.
Except as explicitly permitted by statute, in any
<PAGE>
FORM 10-K Page 169
Exhibit 4.9 (continued)
action or proceeding involving the Plan, the Trust
Agreement, the Trust Fund, any property held as part
of the Trust Fund, or the administration of the Plan
or Trust Fund, the Advisory Committee, the
appropriate Trustee or Co-Trustees and Cone are the
only necessary parties. No Employees or former
Employees or their Beneficiaries or any person
having or claiming to have an interest in the Trust
Fund or under the Plan is entitled to notice of
process. Any final judgment that is not appealed or
appealable that may be entered in an action or
proceeding is binding and conclusive on the parties
to this Plan and all persons having or claiming to
have any interest in the Trust Fund or under the
Plan.
10.05 Benefits Supported Only By Trust.
Except as otherwise provided by statute, a person
having any claim under the Plan must look solely to
the assets of the Trust Fund for satisfaction.
10.06 Discrimination.
The Advisory Committee must administer the Plan in
a uniform and consistent manner for all Members and
may not permit discrimination in favor of Highly
Compensated Employees.
10.07 Model Amendment III.
The following sections of Model Amendment III (IRS
Notice 87-2) are hereby incorporated in the Cone
Mills Corporation 1983 ESOP and the Special
Retirement Account of the Supplemental Retirement
Plan of Cone Mills Corporation for the Plan Years
beginning January 1, 1987 and January 1, 1988: I,
II, III, IV, VI, VII (other than Sections 7.4 and
7.6), and VIII.
10.08 Entire Plan.
This document incorporates in its entirety the Cone
Mills Corporation 1983 ESOP and supersedes and
replaces all prior plan documents. It may not be
amended, modified or supplemented except by a
written instrument that is identified as an
amendment to the Plan, that is approved or
authorized by the Board of Directors of Cone Mills
Corporation and that is signed by an officer of the
Corporation.
<PAGE>
FORM 10-K Page 170
Exhibit 4.9 (continued)
SIGNATURE PAGE
As evidence of the adoption of this Amended and Restated
1983 ESOP, for itself and by all Affiliated Companies, Cone
Mills Corporation has caused this document to be signed by its
duly authorized officer on December 8, 1993.
CONE MILLS CORPORATION
By: /S/ Lacy G. Baynes
Lacy G. Baynes
Title: Vice President and Secretary
<PAGE>
FORM 10-K Page 171
Exhibit 10.1
EMPLOYEES' RETIREMENT PLAN
OF
CONE MILLS CORPORATION
As Amended and Restated September 1, 1993
<PAGE>
FORM 10-K Page 172
Exhibit 10.1 (continued)
TABLE OF CONTENTS
Page
INTRODUCTION 176
ARTICLE I. DEFINITIONS
1.01 Accredited Service 179
1.02 Accrued Benefit 179
1.03 Actuarial Equivalent 180
1.04 Actuary 182
1.05 Affiliate 182
1.06 Annuity Starting Date 182
1.07 Approved Leave 183
1.08 Average Monthly Compensation 183
1.09 Average Monthly Covered Compensation 185
1.10 Beneficiar 186
1.11 Board of Directors 186
1.12 Code 186
1.13 Companies or Cone 186
1.14 Computation Period 186
1.15 Continuous Service 186
1.16 Disability Leave 187
1.17 Effective Date 187
1.18 Eligible Employee 187
1.19 Employee 188
1.20 Employer 189
1.21 Employment Commencement Date 189
1.22 ERISA 189
1.23 Hour(s) of Service 189
1.24 Investment Manager 191
1.25 Member 191
1.26 Normal Retirement Date 191
1.27 Offset Value 191
1.28 One-Year Break in Service 192
1.29 Participation Date 192
1.30 Part-Time Employee 193
1.31 Pension Committee 193
1.32 Period of Service 193
1.33 Period of Severance 193
1.34 Plan 193
1.35 Plan Year 193
1.36 Retirement, Retired 193
1.37 Rule of Parity Years 193
1.38 Severance from Service Date 194
1.39 Spouse or Surviving Spouse 194
<PAGE>
FORM 10-K Page 173
Exhibit 10.1 (continued)
Page
1.40 Suspended Member 194
1.41 Termination of Employment 195
1.42 Total Years of Service 195
1.43 Transfer Contribution 195
1.44 Trust and Trust Fund 196
1.45 Trust Agreement 196
1.46 Trustee 196
1.47 Year of Service 196
ARTICLE II. MEMBERSHIP IN PLAN
2.01 Automatic Membership 199
2.02 Irrevocable Membership 199
2.03 Suspended Membership 199
2.04 Termination of Membership 199
ARTICLE III. FUNDING POLICY AND CONTRIBUTIONS
3.01 Members 200
3.02 Company Contributions 200
3.03 Contribution Conditioned on Deductibility 200
3.04 Transfer Contributions 200
ARTICLE IV. RETIREMENT
4.01 Normal Retirement 201
4.02 Early Retirement 201
4.03 Notice to Pension Committee 201
4.04 Postponed Retirement 201
4.05 Date of First Payment 201
4.06 Date of Last Payment 201
4.07 Re-employment of Retired Member 201
ARTICLE V. METHODS OF PAYMENT
5.01 Method 1. Life Income with 120 Months Certain 203
5.02 Method 2. Life Income with no Death Benefit 203
5.03 Method 3. Qualified Joint and Survivor Annuity 203
5.04 Group Annuity Contract 204
5.05 Special Distribution Provisions 204
5.06 Normal Form of Benefit 205
5.07 Eligible Rollover Distributions 206
5.08 Commencement of Benefits 208
5.09 Qualified Domestic Relations Order 208
<PAGE>
FORM 10-K Page 174
Exhibit 10.1 (continued)
ARTICLE VI. COMPUTATION OF PENSION Page
6.01 Retirement Benefits 210
6.02 Early Retirement 212
6.03 Disability Retirement 213
6.04 Maximum Pension 213
6.05 Determination of Top-Heavy Status 218
6.06 Top-Heavy Definitions 219
6.07 Top-Heavy Requirements 224
ARTICLE VII. BENEFITS UPON TERMINATION OF EMPLOYMENT OTHER
THAN AT RETIREMENT
7.01 Vested Benefits/Termination of Employment
with Less than Five Years of Service 226
7.02 Termination of Employment with at Least Five
Years of Service 226
7.03 Accrued Benefit of Reemployed Members 227
7.04 Involuntary Termination of Employment 227
ARTICLE VIII. BENEFITS PAYABLE BY REASON OF DEATH
8.01 Death of a Member without a Surviving Spouse 229
8.02 Death of a Member with a Surviving Spouse 230
8.03 Qualified Preretirement Survivor Annuity 231
8.04 Designation of Beneficiaries 232
8.05 Legal Disability of Beneficiary 233
ARTICLE IX. TRUST FUND AND ADMINISTRATION OF THE PLAN
9.01 Named Fiduciaries & Allocation of
Responsibility 234
9.02 Duties and Responsibilities 235
9.03 Trust Fund 235
9.04 Enforceable Rights 236
9.05 Impossibility of Diversion 236
9.06 Pension Committee 236
9.07 Officers, Quorums, Expenses 236
9.08 Investment Power 237
9.09 Duties of Investment Manager 237
9.10 Information to Investment Manager 237
9.11 Notice to Trustee 238
9.12 Duties of the Pension Committee 238
9.13 Notice of Payments Due 238
9.14 Records and Reports 238
9.15 Exoneration of Pension Committee 239
9.16 Errors and Omissions 239
9.17 Fees and Expenses 240
9.18 Voting and Tendering of Shares 240
9.19 Claim Procedure 240
<PAGE>
FORM 10-K Page 175
Exhibit 10.1 (continued)
ARTICLE X. AMENDMENT, TERMINATION AND MERGER
Page
10.01 Amendment 241
10.02 Termination 242
10.03 Limitation of Benefits on Plan Termintation 243
10.04 Discontinuance of Contributions 244
10.05 Plan Merger or Asset Transfer 244
10.06 Continuation of the Plan 245
ARTICLE XI. MULTIPLE COMPANIES INCLUDED
11.01 Plan Sponsor and Other Employers 246
11.02 Method of Participation 246
11.03 Withdrawal by Employer 246
11.04 Tax Year 247
ARTICLE XII. GENERAL
12.01 Plan Creates No Separate Rights 248
12.02 Delegation of Authority 248
12.03 Limitation of Liability 248
12.04 Legal Action 249
12.05 Benefits Supported Only by Trust 250
12.06 Discrimination 250
12.07 Model Amendment IV 250
12.08 Entire Plan 250
SIGNATURE PAGE 251
APPENDIX A 252
Table I Early Retirement Factors Plan Percentages 253
For Early Payment of Method I: Life with
120 Months Certain
Table II Method 2: Life Income Only 254
Table III Joint and 50PC Survivor Option Factors 255-256
Table IV Actuarial Equivalent Factors to convert 257
a monthly Life Annuity with 120 payments
certain Payable at age 65
Table V Factors to Convert a 10 Year Certain and 258
Life Annuity to a Straight Life Annuity
at Ages Shown
Table VI Factors to Convert Monthly Payments of a 259
10-Year Certain and Life Benefit Beginning
at a Stated Age to its Actuarial Equivalent
Beginning at a later Age
<PAGE>
FORM 10-K Page 176
Exhibit 10.1 (continued)
EMPLOYEES' RETIREMENT PLAN
OF
CONE MILLS CORPORATION
INTRODUCTION
The Employees' Retirement Plan of Cone Mills Corporation
(the "Original Plan") became effective on December 1, 1946.
Its principal purposes have been to promote financial security
of retired, salaried employees by providing a monthly pension
income and to encourage the interest of salaried employees in
the successful business operations of Cone Mills. In
conjunction with the adoption of the Cone Mills Corporation
1983 ESOP (the "1983 ESOP"), the Original Plan was amended to
suspend benefits accrued after December 31, 1983, for a period
of six months. The Original Plan was terminated as of June
30, 1984 with respect to retired and terminated participants,
and benefits accrued through December 31, 1983, for all
participants were fully vested and funded through the purchase
of a group annuity contract with the Prudential Insurance
Company of America.
On July 1, 1984, a second Employees' Retirement Plan of
Cone Mills Corporation was adopted (the "Spin-Off Plan") as a
continuation of the Original Plan for active participants and
to provide for the same level of benefits to eligible salaried
employees as the Original Plan. From July 1 through December
31, 1984, benefit accruals were at a doubled rate so that
salaried employees who worked throughout 1984 would accrue
pension benefits under the Spin-Off Plan in the amount that
would have accrued had the six months suspension not occurred.
Benefits provided under the Spin-Off Plan are coordinated with
the 1983 ESOP through use of a floor offset arrangement in
accordance with Rev. Rul. 76-259. Pursuant to the floor
offset arrangement, if a participant is to receive the full
pension benefit from the Spin-Off Plan attributable to service
after 1983, he must elect to transfer to the trustee of the
Spin-Off Plan from his ESOP-A Account in the 1983 ESOP an
amount equal to the actuarial equivalent of that pension
benefit. As explained below, prior to March 31, 1993, a
participant's total account balance in the 1983 ESOP was
subject to the floor offset rules. Alternatively, the
participant may elect to receive a distribution of his ESOP-A
Account under the terms of the 1983 ESOP and his pension
benefit attributable to service after 1983 under the Spin-Off
Plan will be reduced by the actuarial equivalent of the ESOP
account.
<PAGE>
FORM 10-K Page 177
Exhibit 10.1 (continued)
The Spin-Off Plan has been amended at various times
primarily to comply with applicable provisions of the Internal
Revenue Code and the Employee Retirement Income Security Act
of 1974. Effective January 1, 1985, the Spin-Off Plan was
amended and restated to incorporate the provisions of the
Retirement Equity Act. Amendments effective in 1988, 1989,
and 1991 redefined Average Monthly Compensation, Average
Monthly Covered Compensation, and the methods by which pension
benefits are paid.
On January 17, 1989, pursuant to Internal Revenue Service
Notice 88-133, Cone Mills adopted Alternative IID for the
purpose of deferring the application of certain proposed
regulations issued under the Tax Reform Act of 1986. The
Board of Directors on November 16, 1989, authorized an
extension of the Alternative IID amendment to the 1990 Plan
Year in accordance with Internal Revenue Service Notice 89-92.
Subsequent amendments to the Spin-Off Plan and further
regulatory action by the Internal Revenue Service have made
Alternative IID relief unnecessary after 1990; accordingly,
the amendments described above are effectively revoked by this
amended and restated plan document.
Effective March 31, 1993, an amendment to the Spin-Off
Plan redefined Offset Value to apply only to a participant's
ESOP-A Account. This amendment reflected a corresponding
amendment to the 1983 ESOP which restated account balances in
that plan into ESOP-A and ESOP-B Accounts. The amount
credited to each Member's ESOP-A Account as of March 31, 1993,
was the difference between his total Account balance on that
date, including the allocation of Company Contributions for
1992 and dividends and other investment earnings paid or
accrued, and his ESOP-B Account. A Member's ESOP-B Account as
of March 31, 1993, represented the excess, if any, of his
total ESOP Account as of December 31, 1991, which included
dividends payable on March 31, 1992, over the calculated
single sum value of his aggregate monthly pension benefit
payable at age 65. After March 31, 1993, investment earnings
will be credited to ESOP-A and ESOP-B Accounts in proportion
to the assets held in the respective Accounts. Accordingly,
each participant's ESOP-A Account after March 31, 1993, will
be subject to transfer to the trustee of the Spin-Off Plan
pursuant to the floor offset arrangement and his ESOP-B
Account will be eligible for distribution to the participant
(or his Beneficiary) under the terms and conditions of the
1983 ESOP.
<PAGE>
FORM 10-K Page 178
Exhibit 10.1 (continued)
On August 19, 1993, the Board of Directors approved an
amendment to allow participation in the Spin-Off Plan by
United States Expatriates who are employed by foreign
affiliates of Cone Mills Corporation.
This Spin-Off Plan has been amended and restated to
incorporate all amendments that became effective through
September 1, 1993. Cone Mills intends to continue this Spin-
Off Plan as a defined benefit plan by incorporating all
amendments described above and any other changes required by
applicable law or regulations which are necessary for this
Spin-Off Plan to remain a qualified defined benefit plan under
applicable provisions of the Internal Revenue Code and ERISA.
Accordingly, Cone Mills will comply fully with all applicable
laws and regulations and if differences exist between the
Spin-Off Plan provisions and the Code or ERISA, as amended
from time to time, the provisions of the Code or ERISA shall
take precedence.
Any word in this Plan with an initial capital not
expected by ordinary capitalization rules is a defined term.
Definitions not found in this Spin-Off Plan are in the Code or
ERISA, both laws as amended to the present time. The
masculine gender where appearing in the Spin-Off Plan includes
the feminine gender unless the context clearly indicates
otherwise. Article and Section headings are included for
convenience of reference and do not affect the Spin-Off Plan
terms in any way.
CONE MILLS CORPORATION
<PAGE>
FORM 10-K Page 179
Exhibit 10.1 (continued)
ARTICLE I
DEFINITIONS
1.01 Accredited Service for benefit accrual means the
years and months of a Member's service on and after
his Participation Date excluding the following:
(a) any period of suspended membership;
(b) any period of ineligibility under Section
1.18(a);
(c) any period excluded under Section 1.42;
(d) any period of absence following an Employee's
Severance from Service Date and prior to his
next Employment Commencement Date;
(e) any period for which such Member receives
benefit credits under any other pension plan
of any of the Companies.
Accredited Service shall include service with a
previous employer to the extent determined under
Section 1.18(b). Benefits shall be computed
separately for each period of employment.
1.02 Accrued Benefit. The total Accrued Benefit
computed for a Member as of any applicable date and
payable beginning the first of the month after his
Normal Retirement Date shall be a fraction (not
exceeding 1) of the annual benefit to which such
Member would be entitled at Normal Retirement Date
under Method 1 if he had continued his active
participation in the Plan from the date he
firstbecame a Member or from the date he first
became a Member after one or more One-Year Breaks
in Service (if Years of Service before such
One-Year Breaks in Service would be disregarded
under Subsection 1.42(d)) until his Normal
Retirement Date, determined as a life annuity with
120 months certain at Normal Retirement Date (but
without ancillary benefits in the event of death
prior to the date payments begin), based on his
Average Monthly Compensation and on provisions of
the Plan as in effect on the date of his
Termination of Employment (or other applicable
determination date) and treating social security
benefits and all other relevant factors as
remaining constant from the date of his Termination
of Employment (or other applicable determination
date) to his Normal Retirement Date. The numerator
of such fraction shall be the total number of
months of his active participation in the Plan
<PAGE>
FORM 10-K Page 180
Exhibit 10.1 (continued)
during such period of membership and the
denominator shall be the number of months he would
have participated had he continued his active
participation from the date he first became a
Member in the circumstances stated above until his
Normal Retirement Date. The amount computed for
such Member under Section 6.01 before giving effect
to paragraphs (b), (c), or (f) shall be multiplied
by such fraction and paragraphs (b), (c), and (f)
shall be applied to the product of that
calculation. In no event shall an amendment to the
Plan decrease the Accrued Benefit of any Member.
The frozen Accrued Benefit for each Member as of
December 31, 1993, shall be the pension payable
under Method 1 for purposes of Article VI or
Article VII of the Plan, and such Accrued Benefit
shall be subject to increase under the fresh start
formula with extended wear-away as described in
Regulation 1.401(a)(4)-13(c). Accordingly, a
Member's Accrued Benefit as of any date after
December 31, 1993, shall be equal to the greater
of:
(a) the frozen Accrued Benefit as of December 31,
1993, plus the Accrued Benefit determined
under the formula applicable to benefit
accruals in the current Plan Year as applied
to the Member's Accredited Service after
December 31, 1993; or
(b) the Member's Accrued Benefit determined under
the formula applicable to benefit accruals in
the current Plan Year as applied to the
Member's total Accredited Service before and
after December 31, 1993.
1.03 Actuarial Equivalent means a form of benefit
different in time, period, or manner of payment
from a specific benefit provided under the Plan but
having equivalent value when computed under the
tables contained in Appendix A or as otherwise
provided in this Section 1.03.
(a) If the pension benefit payable to any Member
is to be provided through purchase of an
annuity from a legal reserve life insurance
company, then the Offset Value shall be the
amount of the annuity, payable under the
Method of Payment described in Article V as
elected by the Member, commencing at the time
<PAGE>
FORM 10-K Page 181
Exhibit 10.1 (continued)
elected by the Member or as otherwise
determined in accordance with the Plan, that
could then be purchased from that insurance
company if the value of the Member's ESOP-A
Account under the Cone Mills Corporation 1983
ESOP (or, for determinations of Offset Value
prior to March 31, 1983, his total Account
balance in the Cone Mills Corporation 1983
ESOP) were used to purchase such an annuity
and to pay all fees and expenses that would be
charged by the insurance company in connection
with the issuance thereof. If the pension
benefit payable to any Member is to be
provided directly from the Trust Fund, then
the Offset Value shall be the amount of the
annuity, payable under the Method of Payment
described in Article V as elected by the
Member, commencing at the time elected by the
Member or as otherwise determined in
accordance with the Plan, the present value of
which, computed in accordance with paragraph
(c) below, would be equal to the value of the
Member's ESOP-A Account under the Cone Mills
Corporation 1983 ESOP (or, for determinations
of Offset Value prior to March 31, 1983, the
Member's total Account balance in the Cone
Mills Corporation 1983 ESOP).
(b) If the pension benefit payable to any Member
is to be provided through purchase of an
annuity from a legal reserve life insurance
company, then the Actuarial Equivalent of any
Transfer Contribution pursuant to Plan Section
3.04 shall be the amount of the annuity
payable under the Method of Payment described
in Article V as elected by the Member,
commencing at the time elected by the Member
or as otherwise determined in accordance with
the Plan, that could then be purchased from
that insurance company if the amount of the
Transfer Contribution were used to purchase
such an annuity and to pay all fees and
expenses that would be charged by the
insurance company in connection with the
issuance thereof. If the pension benefit
payable to any Member is to be provided
directly from the Trust Fund, then the
Actuarial Equivalent of any Transfer
Contribution pursuant to Plan Section 3.04
shall be the amount of the annuity, payable
under the Method of Payment described in
<PAGE>
FORM 10-K Page 182
Exhibit 10.1 (continued)
Article V as elected by the Member, commencing
at the time elected by the Member or as
otherwise determined in accordance with the
Plan, the present value of which, computed in
accordance with paragraph (c) below, would be
equal to the amount of the Transfer
Contribution.
(c) The present value of an Accrued Benefit shall
be calculated in the following manner:
(i) by using the "applicable interest rate"
if the present value of the Accrued
Benefit using such rate is not greater
than $25,000; and
(ii)by using 120% of the "applicable interest
rate" if the present value of the Accrued
Benefit exceeds $25,000 as determined
under subparagraph (i) above, but in no
event shall the present value calculated
under this subparagraph (ii) be less than
$25,000.
For this purpose, the "applicable interest
rate" shall mean the interest rate which would
be used, determined as of the first day of the
Plan Year in which a distribution occurs, by
the Pension Benefit Guaranty Corporation for
the purpose of determining the present value
of a lump-sum distribution on plan
termination.
(d) In the event this Section 1.03 is amended, the
Actuarial Equivalent of a Member's Accrued
Benefit on or after the date of change shall
be determined as the greater of (1) the
Actuarial Equivalent of the Accrued Benefit as
of the date of change computed on the old
basis, or (2) the Actuarial Equivalent of the
total Accrued Benefit computed on the new
basis.
1.04 Actuary means the Actuary from time to time
employed to make actuarial studies of the assets
and liabilities of the Plan.
1.05 Affiliate means a member of the same control group
of corporations, as defined in Code Section
1563(a), as Cone Mills Corporation.
1.06 Annuity Starting Date means the first day of the
first period for which an amount is paid as an
annuity regardless of when payment is actually
made.
<PAGE>
FORM 10-K Page 183
Exhibit 10.1 (continued)
1.07 Approved Leave means an individual's nonworking
period granted by an Employer for reasons related
to: (a) accident, sickness or disability; (b) job
connected educational training; (c) government
service, including jury duty, whether elective or
by appointment; or (d) terminal leave, with or
without pay. Approved Leave shall be granted
pursuant to policies that are uniformly applied to
all individuals, with no discrimination in favor of
Highly Compensated Employees as defined in Code
Section 414(q). Approved Leave also means an
individual's nonworking period during which he is
absent from work due to compulsory service in the
Armed Forces of the United States, and such period
thereafter as his job rights are protected by law.
1.08 Average Monthly Compensation means the Member's
monthly compensation from the Companies averaged
over the five consecutive years which produces the
highest average out of the last ten calendar years
during which he was compensated on a salaried
basis, subject to the following:
(a) Compensation includes base salary, overtime
earnings, vacation pay, holiday pay, service
awards, severance pay, commissions, incentive
pay, bonuses, supervisors' supplements and
other similar compensation, but does not
include pension or profit sharing benefits or
other benefits and contributions paid by any
Employer (other than contributions caused by a
Member's salary reduction elections that are
not includable in gross income by reason of
Code Sections 125 or 402(a)(8)), stock option
payments, moving or regular expense
allowances, moving expense reimbursements,
retainers, fees under contract, mortgage
interest differential payments, imputed income
resulting from personal use of company cars or
group term life insurance coverage, or any
other similar compensation not related to
actual earnings as an Employee. The
compensation of an Employee described in the
last sentence of Section 1.19 of the Plan
shall be determined in accordance with the
special rules set forth in Code Section
406(b)(2). Notwithstanding the foregoing, the
annual compensation of each Member taken into
account under the Plan for any Plan Year shall
not exceed $200,000 ($150,000, effective for
<PAGE>
FORM 10-K Page 184
Exhibit 10.1 (continued)
Plan Years beginning January 1, 1994) as
adjusted for increases in cost-of-living in
accordance with Code Sections 401(a)(17) and
415(d). In determining the compensation of a
Member for purposes of this limitation, the
rules of Code Section 414(q)(6) shall apply,
except in applying such rules, the term
"family" shall mean only the Spouse of the
Member and any lineal descendants of the
member who have not attained age 19 before the
close of the Plan Year. If as a result of the
application of such rules the adjusted
$200,000 (or $150,000) limitation is exceeded,
the limitation shall be prorated among the
affected individuals in proportion to each
such individual's Compensation determined
under this Section 1.08 prior to the
application of the limitation;
(b) Compensation hereunder shall not be annualized
because of temporary absences from work nor
shall the divisor used in determining Average
Monthly Compensation be changed because of
such absences;
(c) Compensation paid to an Employee during any
period in which he is not an active Member of
the Plan shall not be taken into account
except as otherwise provided herein;
(d) If a Member is on full-time Military Leave or
on a Disability Leave, he shall be deemed to
have received compensation during such leave
equal to his regular fixed Salary immediately
preceding such leave whether or not his Salary
is continued, reduced or discontinued;
(e) If a Member does not have five consecutive
years in which he received salaried
compensation during the last ten calendar
years, his Average Monthly Compensation shall
be computed by using the five latest calendar
years during which he received or was deemed
to have received compensation from the
Companies on a salaried basis, or the total of
such years if less than five;
(f) In determining Average Monthly Compensation
for a Member whose Accredited Service ends on
a date other than December 31, calendar years
of compensation shall be used except that if
it would produce a higher average, or if the
number of months he was compensated on a
salaried basis during the calendar years used
in determining his average is less than sixty,
<PAGE>
FORM 10-K Page 185
Exhibit 10.1 (continued)
compensation for his final fraction of a year
shall be added to the total compensation which
would otherwise have been used to determine
his average, and to the extent that the
compensation used in determining his Average
Monthly Compensation would then represent a
period exceeding sixty months, compensation
for the first calendar year or part thereof
used in determining his Average Monthly
Compensation shall be reduced by an amount
determined by multiplying such compensation by
the number of months included in the final
fraction of a year, in excess of 60 months,
and dividing the result by the number of
months for which he was compensated on a
salaried basis during such first calendar
year.
1.09 Average Monthly Covered Compensation means, for
each Member, 1/12th of the average (without
indexing) of the taxable wage bases in effect,
under Section 230 of the Social Security Act, for
each calendar year during the 35-year period ending
with the last day of the calendar year in which the
Member attains (or will attain) Social Security
Retirement Age (as defined in Code Section
415(b)(8). Notwithstanding the preceding sentence,
with respect to the determination of Accrued
Benefits after December 31, 1987, for a member who
had attained age 60 on or before December 31, 1987,
Average Monthly Covered Compensation shall be one-
twelfth of the average (without indexing) of the
taxable wage bases in effect under Section 230 of
the Social Security Act for persons who reach
Social Security Retirement Age in calendar year
1977. The Average Monthly Covered Compensation for
each Member who had not attained age 60 on or
before December 31, 1987, is automatically adjusted
for each Plan Year. In determining a Member's
Average Monthly Covered Compensation for a Plan
Year, the taxable wage base for the current Plan
Year and any subsequent Plan Year shall be assumed
to be the same as the taxable wage base in effect
as of the beginning of the Plan Year for which the
determination is being made. A Member's Average
Monthly Covered Compensation for a Plan Year after
the 35-year period described above is the Member's
Average Monthly Covered Compensation for the Plan
Year during which the Member attained Social
Security Retirement Age. A Member's Average
<PAGE>
FORM 10-K Page 186
Exhibit 10.1 (continued)
Monthly Covered Compensation for a Plan Year before
the 35-year period described above is the taxable
wage base in effect as of the beginning of the Plan
Year.
1.10 Beneficiary means the person designated or
determined pursuant to Plan Sections 8.01 and 8.04
to receive any benefits payable under the Plan
after the death of such Member or former Member.
Despite the preceding, to the extent provided in a
Qualified Domestic Relations Order as defined in
Section 5.09 and Code Section 414(p)(1),
Beneficiary means the Spouse, former Spouse, child,
or other dependent of a Member who is recognized by
such order as having a right to receive all or a
portion of any benefits payable under the Plan to
such Member.
1.11 Board of Directors means the Board of Directors of
Cone Mills Corporation.
1.12 Code means the Internal Revenue Code of 1986, as
amended from time to time.
1.13 Companies or Cone means Cone Mills Corporation , a
North Carolina corporation, the Plan sponsor and
its Affiliates.
1.14 Computation Period means a consecutive twelve-month
period beginning with an Employee's Employment
Commencement Date and succeeding anniversaries of
such date and in addition, for Part-Time Employees,
a Plan Year.
1.15 Continuous Service means an Employee's period of
employment with an Employer or an Affiliate
beginning with his Employment Commencement Date and
continuing until his Severance from Service Date.
If an Employee is reemployed or returns to work
after a Severance from Service and his Continuous
Service completed before his Severance from Service
is not required to be recognized under this Plan,
his period of employment with an Employer or an
Affiliate is Continuous Service beginning on the
date on which he again is credited with an Hour of
Service for the performance of duties and
continuing until his later Severance from Service
Date. Continuous Service includes all employment
even though as a non-Member. For purposes of
eligibility to participate in the Plan and vesting,
<PAGE>
FORM 10-K Page 187
Exhibit 10.1 (continued)
the Continuous Service of an employee who
voluntarily terminates employment, retires or is
discharged includes his Period of Severance (up to
a maximum of 12 months) if he again performs an
Hour of Service with an Employer or an Affiliate
before the first anniversary of the date of his
termination, retirement or discharge, and the
Continuous Service of an Employee who is absent for
any reason other than Termination of Employment,
and who has a Severance from Service before the
first anniversary of such absence, includes the
period of time between the Severance from Service
Date and the first anniversary of the absence if he
again performs an Hour of Service with an Employer
or an Affiliate before the first anniversary of the
absence.
1.16 Disability Leave means an Approved Leave because of
a medically determinable physical or mental
impairment which can be expected to be either of
indefinite duration or result in death and which
renders the Member unable to engage in substantial
gainful activity which could be assigned to him by
the employer.
1.17 Effective Date of the Original Plan means December
1, 1946; the effective date of this amended and
restated plan is September 1, 1993, except with
respect to those provisions that were required to
be effective earlier pursuant to the Tax Reform Act
of 1986.
1.18 Eligible Employee means an Employee who is
compensated on a salaried basis, who has attained
age twenty-one and who has completed at least one
Year of Service, subject to the following:
(a) Employees of any plant, office or division of
the Company at the time having another pension
plan in effect for its salaried paid
Employees, or Employees in any group of
Employees for whom the Company is at the time
obligated to contribute to another defined
benefit plan qualified under the Code shall
not be eligible.
(b) The Board of Directors shall determine whether
or not Employees of any plant, division,
subsidiary or other employing unit acquired by
or becoming affiliated with any of the
<PAGE>
FORM 10-K Page 188
Exhibit 10.1 (continued)
Companies shall be eligible to participate in
the Plan and to what extent service with such
employing unit shall be deemed employment for
determining Years of Service and Accredited
Service under the Plan;
(c) Service for eligibility shall be determined in
accordance with Section 1.42;
(d) Except as provided in Section 1.42, Periods of
Service of less than one year determined under
Section 1.14 shall be aggregated and if an
Employee other than a Part-time Employee is
reemployed within twelve months after his
Termination of Employment or within twelve
months after the beginning of an Approved
Leave during which he terminated employment,
his Period of Severance shall be counted as
service for determining eligibility.
(e) Employees who are Leased Employees cannot be
Eligible Employees.
1.19 Employee is an individual who renders personal
services and is compensated on a salaried basis by
an Employer or an Affiliate, in an
Employer/Employee relationship, as defined for
Federal Insurance Contribution Act purposes and
Federal Employment Tax purposes including Code
Section 3401(c). A Part-Time Employee is an
individual who, according to a policy uniformly
applied in similar situations, is scheduled to work
less than the standard number of hours for full-
time job classifications. Employee shall include
Leased Employees within the meaning of Code
Sections 414(n)(2) and 414(o)(2) unless such Leased
Employees are covered by a Plan described in Code
Section 414(n)(5) and such Leased Employees do not
constitute more than 20% of the recipient's
nonhighly compensated work force. For purposes of
the Plan, a citizen or resident of the United
States who is an employee of a foreign entity in
which the Corporation directly or through other
entities has not less than a ten percent (10%)
interest in the voting stock thereof (or, in the
case of an entity other than a corporation, in the
profits thereof) shall be treated as an Employee of
the Corporation if the Corporation has entered into
an agreement under Code Section 3121(1) with
respect to such foreign entity and if no
contributions under a funded plan of deferred
compensation are provided by any person other than
<PAGE>
FORM 10-K Page 189
Exhibit 10.1 (continued)
the Corporation with respect to the remuneration
paid to such individual by the foreign entity.
1.20 Employer means an entity described in Plan Section
11.01.
1.21 Employment Commencement Date means the first day
for which an Employee is credited with an Hour of
Service. The Employment Commencement Date for any
Employee who has Rule of Parity Years is the first
day after those Rule of Parity Years for which that
Employee is credited with an Hour of Service for
the performance of duties.
1.22 ERISA means Employee Retirement Income Security Act
of 1974, as amended from time to time.
1.23 Hour(s) of Service.
(a) An Hour of Service is each hour for which an
Employee is paid or is entitled to payment for
the performance of duties for an Employer or
an Affiliate during the applicable Computation
Period.
(b) An Hour of Service is each hour for which an
Employee is paid or is entitled to payment by
an Employer or an Affiliate in a period during
which no duties are performed (regardless of
whether the relationship has terminated)
because of vacation, holiday, illness,
incapacity, layoff or Approved Leave, but:
(1) no more than 501 Hours of Service are
credited under this paragraph (b) to an
individual for any single continuous
period during which he performs no duties
(whether or not the period occurs in a
single Computation Period);
(2) an hour for which an individual is
directly or indirectly paid, or is
entitled to payment, because of a period
during which no duties are performed, is
not credited to him if that payment is
made or is due under a plan maintained
solely for the purpose of complying with
applicable worker's compensation,
unemployment compensation or disability
insurance laws; and
(3) Hours of Service are not credited for a
payment that solely reimburses an
individual for his medical or medically
related expenses incurred.
<PAGE>
FORM 10-K Page 190
Exhibit 10.1 (continued)
For purposes of this paragraph (b), a payment
is deemed to be made by or be due from an
Employer or an Affiliate regardless of whether
it is made by or due from that entity directly
or indirectly through a trust fund or insurer
to which that entity contributes or pays
premiums, and regardless of whether
contributions made or due to the trust fund or
insurer or other funding vehicle are for the
benefit of particular individuals or are on
behalf of a group of individuals.
(c) An Hour of Service is each hour for which back
pay, irrespective of mitigation of damages, is
either awarded or agreed to by an Employer or
an Affiliate. The same Hours of Service must
not be credited both under paragraph (a) or
(b) and also under this paragraph (c). Thus,
for example, if an individual receives a back-
pay award following a determination that he
was paid at an unlawful rate for Hours of
Service previously credited, he is not
entitled to additional credit for the same
Hours of Service. Crediting of Hours of
Service for back pay awarded or agreed to with
respect to periods described in paragraph (b)
is subject to the limitations set forth in
that paragraph. For example, no more than 501
Hours of Service are required to be credited
for payments of back pay, to the extent that
the back pay is agreed to or awarded for a
period of time during which an individual did
not or would not have performed duties.
(d) For determining Hours of Service for reasons
other than the performance of duties, the
special rule in 29 C.F.R. section 2530.200b-
2(b) is incorporated by reference. That rule
provides that Hours of Service are credited on
the basis of the number of hours in the
individual's regular work schedule or, in the
case of a payment not calculated by units of
time, by dividing the payment in question by
the individual's most recent hourly rate of
pay.
(e) When crediting Hours of Service to Computation
Periods, the special rule in 29 C.F.R. section
2530.200b-2(c) is incorporated by reference.
That rule provides that Hours of Service are
credited to individuals in the Computation
Periods covered by the individual's regular
<PAGE>
FORM 10-K Page 191
Exhibit 10.1 (continued)
work schedule during the period of
nonperformance of duties.
(f) The determination of Hours of Service must be
made from records of hours worked and hours
for which payment is made or due.
(g) For purposes of determining Hours of Service
credited according to the maternity and
paternity absence provisions of Code Section
410(a)(5)(E) and Code Section 411(a)(6)(E),
those provisions are first effective for Plan
Years beginning after 1984.
1.24 Investment Manager means an individual, firm or
other entity appointed by the Board of Directors
and assigned duties as described in Plan Section
9.09.
1.25 Member means any Eligible Employee who becomes a
Member as provided in Article II of the Plan and
includes former Employees or their Beneficiaries
who are entitled to benefits under the Plan,
provided, however, that a former Employee or a
Beneficiary whose benefit has become an irrevocable
obligation of an insurance company is no longer
considered a Member.
1.26 Normal Retirement Date means the date on which a
Member attains age sixty-five.
1.27 Offset Value means the Actuarial Equivalent of the
value of a Member's ESOP-A Account under the Cone
Mills Corporation 1983 ESOP. The value of the
ESOP-A Account is deemed to be its value on the
Valuation Date coinciding with or immediately
preceding the date on which the Offset Value is
calculated and is also deemed to include the value
of all prior distributions from that Account, or
any predecessor account. For determinations of
Offset Value prior to March 31, 1993, the
applicable amount was the Member's total Account
balance in the Cone Mills Corporation 1983 ESOP.
Notwithstanding the foregoing, the Offset Amount of
a disabled Member who participates in the Group
Insurance Long Term Disability Plan for Salaried
Employees of Cone Mills Corporation shall be
determined as of the last day of the period for
which compensation by reason of disability is
directly paid by an Employer (which is immediately
before the date on which the long term disability
insurance carrier becomes obligated for payment
<PAGE>
FORM 10-K Page 192
Exhibit 10.1 (continued)
of disability benefits) and shall be that portion
of his ESOP Account balance that would have to be
transferred to this Plan so that, by reason of the
floor-offset arrangement incorporated herein, there
would be no reduction in the benefit payable to the
Member under this Plan for the period January 1,
1984, through such determination date.
1.28 One-Year Break in Service is defined for Full-Time
Employees in paragraph (a) and is defined for Part-
Time Employees in paragraph (b).
(a) A Full-Time Employee has a one-year Break in
Service for each twelve-consecutive-month
Period of Severance.
(b) A Part-Time Employee has a one-year Break in
Service during each Plan Year in which he
receives credit for fewer than 501 Hours of
Service after crediting Hours of Service
according to Code Sections 410(a)(3)(E) and
411(a)(6)(E) regarding maternity and paternity
absences.
1.29 Participation Date means the date an Eligible
Employee enters the Plan. An Employee who becomes
eligible for the first time or who is transferred
from an hourly or piece-rate basis of compensation
to a salaried basis shall participate from the
first of the month coinciding with or next
succeeding the date he fulfills the eligibility
requirements of Section 1.18. Retired Members and
former Employees who have a nonforfeitable right to
any Accrued Benefit derived from Company
contributions to the Plan shall, if re-employed on
a salaried basis of compensation by any of the
Companies, participate as of the date of their re-
employment. Each other Member who is re-employed
on a salaried basis of compensation by any of the
Companies without incurring one or more One-year
Breaks in Service, or after one or more One-Year
Breaks in Service if his previous service is not
excluded under Section 1.42(d), shall participate
as of the date of his re-employment. Any other
former Employee who is re-employed by any of the
Companies shall participate on the first of the
month coinciding with or next succeeding the date
he fulfills the eligibility requirements of Section
1.18.
<PAGE>
FORM 10-K Page 193
Exhibit 10.1 (continued)
1.30 Part-time Employee means an Employee who in
accordance with established policy uniformly
applied in similar situations is scheduled to work
less than the standard number of hours for his job
classification.
1.31 Pension Committee means the committee charged with
the general administration of the Plan.
1.32 Period of Service means the period of time
beginning on an Employee's Employment Commencement
Date and ending on his Severance from Service Date.
1.33 Period of Severance means the period of time
beginning on an Employee's Severance from Service
Date and ending on the date on which he is next
credited with an Hour of Service for the
performance of duties.
1.34 Plan means the Employees' Retirement Plan of Cone
Mills Corporation as described in this document
which was renumbered 013 after the spin-off and
amendment and restatement, effective July 1, 1984.
Original Plan refers to the Plan with respect to
which this Plan was designated as the Spin-Off
Plan.
1.35 Plan Year means a twelve (12) month period
beginning on January 1 and ending on December 31
and shall be the "limitation year" for purposes of
Code Section 415.
1.36 Retirement, Retired and all variants means
Termination of Employment by the Company at age 55
or later in circumstances which entitle the Member
to Retirement benefits from the Plan under Articles
IV and VI.
1.37 Rule of Parity Years means Years of Service which
are disregarded for eligibility, vesting or other
service credit under the Plan. Rule of Parity
Years only apply to an Employee: (1) who has no
vested interest in any part of his Accrued Benefit
under the Plan, (2) who has at least five
consecutive One-Year Breaks in Service, and (3)
whose consecutive One-Year Breaks in Service exceed
prior Years of Service.
<PAGE>
FORM 10-K Page 194
Exhibit 10.1 (continued)
1.38 Severance from Service Date means the earliest of:
(a) The date an Employee quits, Retires, is
discharged or dies; or
(b) The first anniversary of the date from which
an Employee remains absent from work (with or
without pay) for any other reason such as
layoff, disability, or Approved Leave; except
that, (i) for an Employee who is absent from
work by reason of a maternity or paternity
absence described in Code Section
410(a)(5)(i)(E) or Code Section
411(a)(6)(i)(E) and who continues to be absent
from work beyond the first anniversary of the
first day of such maternity or paternity
absence, his Severance from Service Date is
the second anniversary of the first day of
such absence and the period between the first
and second anniversaries is neither a period
of Continuous Service nor a Period of
Severance; (ii) for an Employee who is absent
from work by reason of compulsory military
service, his Severance from Service Date is
the 91st day following his discharge from
active duty; and (iii) for an Employee who is
disabled and who is receiving benefits under
the Group Insurance Long-Term Disability Plan
for Salaried Employees of Cone Mills
Corporation, his Severance from Service Date
is the date as of which he ceases receiving
benefits under the Long-Term Disability Plan
or Retires, whichever is earlier.
1.39 Spouse or Surviving Spouse means the person to whom
a Member is legally married on the earlier of his
Annuity Starting Date or the date of his death. To
the extent provided in any Qualified Domestic
Relations Order, as defined in Plan Section 5.09
and Code Section 414(d), a former spouse will be
treated as the Member's Spouse or Surviving Spouse.
1.40 Suspended Member means a Member who is not at the
time eligible to actively participate in the Plan
because of his transfer to an hourly or piece-rate
basis of compensation or to a part-time basis of
less than 1,000 Hours of Service in a Computation
Period or because of his transfer to a plant,
office, division, or other job of any of the
Companies at the time having another retirement
<PAGE>
FORM 10-K Page 195
Exhibit 10.1 (continued)
plan in effect for its Employees paid on a salaried
basis of Compensation or to an Affiliate not
participating in the Plan.
1.41 Termination of Employment means cessation of
regular employment by the Companies upon
resignation by the Employee, Retirement, discharge,
or if later, an Employee's Severance from Service
Date.
1.42 Total Years of Service for eligibility and vesting
means all of an Employee's Years of Service,
whether or not consecutive, determined under
Sections 1.14 and 1.47, excluding the following:
(a) Employment prior to any Termination of
Employment which occurred before January l,
1976;
(b) Service while not a Member of the Plan if
before age eighteen or before the Computation
Period in which the Employee attains age
eighteen, whichever is applicable;
(c) Any One-Year Break in Service occurring after
December 31, 1975, except as provided in
paragraph (e);
(d) Rule of Parity Years as defined in Plan
Section 1.37.
(e) In the case of a Member who is not a Part-Time
Employee, the twelve-consecutive (12) month
period beginning on the first anniversary of
the first date of such maternity or paternity
leave of absence that began on or after
January 1, 1985, shall not constitute a One-
Year Break in Service for eligibility or
vesting purposes. Maternity or paternity
leave of absence means an absence by reason of
the pregnancy of the Member, by reason of the
birth of a child of the Member, by reason of
the placement of a child with the Member in
connection with the adoption of such child by
such Member or for purposes of caring for such
child for a period beginning immediately
following such birth or placement.
1.43 Transfer Contribution means a Member's elective
transfer of assets to the Plan from the Cone Mills
Corporation 1983 ESOP as provided in Plan Section
3.04, or from any other plan or account designated
by Cone as part of a floor-offset arrangement that
offsets this Plan's benefits.
<PAGE>
FORM 10-K Page 196
Exhibit 10.1 (continued)
1.44 Trust and Trust Fund refers to a Trust Fund or
Trust Funds established for this Plan and the Trust
Agreement(s) executed under this Plan.
1.45 Trust Agreement means any agreement including
amendments executed by a Trustee or Co-Trustee with
Cone to be used in connection with this Plan.
1.46 Trustee means one or more individuals or entities
or their successors so designated in the Trust
Agreement. A Co-Trustee is one of several trustees
so designated under a Trust Agreement. Unless the
context clearly indicates otherwise, the term
Trustee also means Co-Trustees.
1.47 Year of Service is defined in (a) for a Part-Time
Employee and in (b) for a Full-Time Employee.
(a) For a Part-Time Employee, a Plan Year
following a Part-Time Employee's Employment
Commencement Date during which he is credited
with a least 1,000 Hours of Service. A Part-
Time Employee will be credited with one Year
of Service for his first full Plan Year if he
is credited with at least
1,000 Hours of Service during his initial
Computation Period, regardless of whether he
is credited with at least 1,000 Hours of
Service during such first full Plan Year,
provided however, a Year of Service shall not
be given for both the initial Computation
Period and the first full Plan Year of
employment.
(b) For a Full-Time Employee, twelve (12) months
of Continuous Service (whether or not
consecutive). Months of Continuous Service
are aggregated to yield Years of Service.
If a Part-Time Employee becomes a Full-Time
Employee during his initial Computation Period and
is credited with at least 1,000 Hours of Service in
such Computation Period, as of the date his change
of status occurred, he is granted a Year of Service
and his Continuous Service shall begin on the first
day of the Computation Period after which the
change to Full-Time status occurred. If he is not
credited with at least 1,000 Hours of Service as of
the date the change in status occurred, then he is
<PAGE>
FORM 10-K Page 197
Exhibit 10.1 (continued)
credited with service as if he had been a Full-Time
Employee during the entire Computation Period.
After completing his initial Computation Period, a
Part-Time Employee who becomes a Full-Time Employee
and who had been credited with at least 1,000 Hours
of Service for the Plan Year during which the
change occurs, retains his Years of Service for
pre-change Plan Years, is credited with a Year of
Service for the Plan Year in which the change
occurs, and is credited with Continuous Service
beginning on the first day of the Plan Year
following the date on which the change occurs. If
a Part-Time Employee becomes a Full-Time Employee,
after completing one Computation Period, and had
not been credited with at least 1,000 Hours of
Service for the Plan Year during which the change
occurs, his Continuous Service is credited from the
beginning of the Plan Year in which the change
occurs. If a Full-Time Employee becomes a Part-
Time Employee, he shall receive credit for the
number of full years of Continuous Service
completed as of the date the change occurred and
will be deemed to become a Part-Time Employee on
the first day of the Plan Year in which the date of
change occurs. For the Plan Year in which the
change occurs, he shall receive credit, on the
basis of 190 Hours of Service per month or fraction
thereof, for the period from the end of his last
full year of Continuous Service to the date of his
change in status.
A Full-Time Employee who quits, retires, is
discharged or is otherwise absent from work and who
returns as a Part Time Employee within twelve (12)
months is treated as if he had changed from a Full-
Time Employee to a Part-Time Employee on the date
of his reemployment. A Full-Time Employee who
quits, retires, is discharged or is otherwise
absent from work and who returns after the first
anniversary of the date on which he quit, retired,
was discharged or otherwise absent from work as a
Part-Time Employee shall have an initial
Computation Period begin on the date of return. A
Part-Time Employee who quits, retires, is
discharged or is otherwise absent from work and who
returns as a Full-Time Employee before the end of
the Plan Year in which such event occurred is
treated as if he had been a Part-Time Employee for
the entire Plan Year and is credited with 190 Hours
of Service for each month in which he is a Full
<PAGE>
FORM 10-K Page 198
Exhibit 10.1 (continued)
Time Employee; his Continuous Service as a Full-
Time Employee begins on the first day of the next
Plan Year.
<PAGE>
FORM 10-K Page 199
Exhibit 10.1 (continued)
ARTICLE II
MEMBERSHIP IN THE PLAN
2.01 Automatic Membership. Each Eligible Employee shall
automatically become a Member on his Participation
Date and such Member shall promptly file with the
Pension Committee such statistical information
concerning himself and his Beneficiary as the
Pension Committee may request.
2.02 Irrevocable Membership. A Member may not terminate
his membership in the Plan while he continues to be
an active or Suspended Member.
2.03 Suspended Membership. If a Member becomes
ineligible to continue active participation in the
Plan in circumstances described in Section 1.40,
his membership shall not terminate but be
suspended. A Member shall not receive Accredited
Service from the Plan for employment during such
period. If a Suspended Member again becomes
eligible to participate on an active basis, his
membership shall be automatically resumed.
2.04 Termination of Membership. If a Member has a
Termination of Employment, his membership shall be
terminated unless he is entitled to a benefit under
the Plan, which has not become an irrevocable
obligation of an insurance company. The Surviving
Spouse or other Beneficiary of a deceased Member
who is entitled to a benefit under the Plan by
reason of the Member's death, or any individual who
is entitled to a benefit under the Plan pursuant to
a Qualified Domestic Relations Order shall be
considered a Member unless and until such benefit
has become an irrevocable obligation of an
insurance company.
<PAGE>
FORM 10-K Page 200
Exhibit 10.1 (continued)
ARTICLE III
FUNDING POLICY AND CONTRIBUTIONS
3.01 Members. Members make no contributions to the
Plan.
3.02 Company Contributions. Cone intends to make annual
contributions which equal or exceed the minimum
funding standards of the Code or ERISA and which
together with the net increment from operations of
the Trust Fund will provide the benefits payable
under the Plan. The amount of contributions
allocable to each Affiliate which participates in
the Plan shall be determined by the Pension
Committee based upon advice from the Actuary.
3.03 Contribution Conditioned on Deductibility. Each
contribution by Cone is conditioned upon the
deduction of such contribution for income tax
purposes under the Code and to the extent that a
deduction is disallowed, such contribution shall,
upon request, be returned to Cone within one year
after the disallowance of a deduction.
3.04 Transfer Contributions. Upon the direction of the
administrator of the Cone Mills Corporation 1983
ESOP, pursuant to an election in writing by a
Member of this Plan and the 1983 ESOP, all or any
portion of the vested interest of such Member in
the assets held in his ESOP-A Account under the
Cone Mills Corporation 1983 ESOP may be transferred
to the Trust Fund of this Plan. Prior to March 31,
1993, the Member's entire vested interest in the
assets held in his Account under the Cone Mills
Corporation 1983 ESOP was subject to the elective
transfer provided in this Section 3.04.
Transferred interests are at all times fully
vested. Despite the preceding sentence, to the
extent necessary to preserve the exempt status of
this Plan and the Trust Fund, the Pension Committee
may prevent any transfer of funds or interests
under this Section, and the amount transferred by
any Member may not exceed the amount required so
that, by reason of the floor-offset arrangement
incorporated herein, there is no reduction in the
benefit payable to the Member under this Plan for
the period after December 31, 1983. The Trustee
must value all non-cash property transferred at its
fair market value on the effective date of
transfer.
<PAGE>
FORM 10-K Page 201
Exhibit 10.1 (continued)
ARTICLE IV
RETIREMENT
4.01 Normal Retirement. Except as otherwise provided in
this ARTICLE IV, a Member shall Retire on the day
he attains age sixty-five (65), or at his election,
as of any date prior to the first of the next
month.
4.02 Early Retirement. If a Member's Total Years of
Service amount to ten (10) years or more, he may
elect to Retire at any time after reaching age
fifty-five (55).
4.03 Notice to Pension Committee. Unless waived by the
Pension Committee, a Member shall give at least
thirty-one (31) days notice of his intention to
Retire.
4.04 Postponed Retirement. If a Member continues his
employment by the Companies after age sixty-five
(65), such Member shall receive credit for service
because of such employment and the percentages and
other factors used in determining his benefits
under any of the available options shall include
his service, compensation, age and other
appropriate factors applicable to his employment
after age sixty-five (65). The payment of such
Member's Retirement allowance shall be subject to
the provisions of Sections 4.06 and 5.05.
4.05 Date of First Payment. A Member who Retires in
accordance with this ARTICLE IV shall have a
nonforfeitable right to a pension from the Plan
computed in accordance with the provisions of
ARTICLE VI and payable beginning the first of the
month next following his actual Retirement.
4.06 Date of Last Payment. Except as otherwise provided
herein, a Retired Member's pension under this Plan
shall continue to be payable on and including the
first day of the month in which death occurs
irrespective of the method under which his benefits
are being paid.
4.07 Re-employment of Retired Member. If a Retired
Member returns to regular, full-time employment by
any of the Companies, the Pension Committee may,
but is not required to suspend payment of the
pension, if any, which such Member otherwise would
<PAGE>
FORM 10-K Page 202
Exhibit 10.1 (continued)
have received during any such period of employment
and his benefits upon subsequent Termination of
Employment whether for death or Retirement shall be
recomputed subject to the following:
(a) The pension previously payable to such Member
shall upon resumption be recomputed taking
into account the increase in such Member's age
during any period his benefits are suspended.
If Method 3 is in effect for any previous
period of membership the increase in the
Spouse's age shall be taken into account on
the same basis as the increase in such
Member's age;
(b) Such Member shall be eligible to rejoin the
Plan as of the date he performs an Hour of
Service under the Plan and the amount payable
for any subsequent period of membership shall
be determined by aggregating all of his
Accredited Service and by adjusting the
benefit derived therefrom by the Actuarial
Equivalent of any benefits previously paid and
by the Actuarial Equivalent of the recomputed
pension payable pursuant to paragraph (a)
above. A Member may have a separate
Beneficiary for any period of membership in
the circumstances provided herein but Section
6.01 shall apply to the total of his benefits
from all periods of membership.
In no event, however, shall the payment of a
Member's monthly pension be withheld or suspended
prior to his receiving notification in accordance
with Labor Reg. Section 2530.203-3(b)(4).
If the Pension Committee does not elect to suspend
the reemployed Member's pension, or if the Member
received a lump-sum payment from the Plan with
respect to his prior Termination of Employment upon
his subsequent Termination of Employment, an
additional Retirement benefit will be paid to such
Member calculated in accordance with Articles V and
VI and based on all of his Accredited Service, but
reduced, but not below zero, by the Accrued Benefit
which gave rise to a prior lump sum distribution,
or if monthly pension payments have been received,
reduced, but not below zero, by application of
Table VI to reflect the Actuarial Equivalent of the
benefits previously paid.
<PAGE>
FORM 10-K Page 203
Exhibit 10.1 (continued)
ARTICLE V
METHODS OF PAYMENT
5.01 Method 1. Life Income with 120 Months Certain. A
Retired Member's pension under Method 1 shall
consist of a monthly income for his lifetime, with
the provision that if such Member dies before
having received 120 installments of his monthly
pension under the Plan, his Beneficiary shall be
entitled to monthly payments equal to the amount
which would have been payable to such Member
beginning as of the first of the month next
following the date of his death and continuing
until a total of 120 monthly installments have been
made to the Member and his Beneficiary together.
The amount payable to a Retired Member shall be
determined by multiplying his pension basis
computed in accordance with ARTICLE VI by the
percentage shown in Table I according to his
attained age as of the date his payments actually
begin.
5.02 Method 2. Life Income with No Death Benefits. A
Retired Member's pension under Method 2 shall
consist of a monthly income for his lifetime only,
with no payments to be made to any Beneficiary of
such Retired Member after his death. The amount
payable under Method 2 to a Retired Member shall be
the Actuarial Equivalent of the amount that would
have been paid under Method 1 and shall be
determined by multiplying his pension basis
computed in accordance with ARTICLE VI by the
percentage shown in Table II according to his
attained age as of the date his payments actually
begin.
5.03 Method 3. Qualified Joint and Survivor Annuity. A
Retired Member's pension under Method 3 shall
consist of an adjusted monthly income for his
lifetime, with the provision that if the Member is
survived by his Spouse, an amount equal to 50% of
his pension shall be continued to such Spouse
beginning as of the first of the next month
following the date of such Member's death and
continuing until and including the first of the
month in which the Spouse dies. The adjusted
amount payable to the Member shall be determined by
the percentage shown in Table III based on the
attained age of the Member and his Spouse so that
the aggregate of the payments expected to be made
<PAGE>
FORM 10-K Page 204
Exhibit 10.1 (continued)
to the Member and his Spouse shall be the Actuarial
Equivalent of the amount which would have been
payable under Method 2.
5.04 Group Annuity Contract. For Members with
Accredited Service before January 1, 1984, benefits
payable under this Plan are paid in part under the
group annuity contract with Prudential Insurance
Company of America that was purchased in connection
with the termination of the Original Plan and the
adoption of this Plan.
5.05 Special Distribution Provisions.
(a) Distribution of the entire interest of a
Member must be made or payments must begin no
later than April 1 of the calendar year
following the calendar year in which he
attains age 70 1/2 whether or not he has a
Severance from Service. If distribution has
not started by the required beginning date
described in the preceding sentence, it must
begin not later than that required beginning
date and be payable over a period not
exceeding the life of the Member, or the life
expectancy of the Member, or over a period not
exceeding the lives of the Member and a
designated Beneficiary, or the life
expectancies of the Member and a designated
Beneficiary. Life expectancy shall be
determined in accordance with U. S. Treasury
Department regulations and may be redetermined
annually.
(b) If a Member dies after distribution of his
interest has begun in accordance with
paragraph (a), then any part of that interest
payable to his Beneficiary must be distributed
at least as rapidly as under the method of
distribution being used as of the date of his
death. If a Member dies before a distribution
of his interest has begun in accordance with
paragraph (a), and has not made the election
described in 8.02(c), then a pre-retirement
survivor annuity shall be distributed to his
Surviving Spouse in accordance with Article
VIII. The preretirement survivor annuity or,
if applicable, payments pursuant to the
election under Section 8.02(c) shall begin not
later than the date on which the deceased
Member would have attained age 70 1/2.
<PAGE>
FORM 10-K Page 205
Exhibit 10.1 (continued)
If a Member's Beneficiary or Spouse fails to elect
a distribution method that complies with these
requirements, the Pension Committee may, in its
sole discretion, direct distribution by any method
authorized or required by the Plan that meets these
distribution requirements.
5.06 Normal Form of Benefit.
(a) Unless a Member has made an effective election
pursuant to paragraph (b) to waive the normal
form of benefit described in this paragraph
(a), the vested portion of his Accrued Benefit
under this Plan shall be distributed in the
form of a Qualified Joint and Survivor Annuity
under Method 3 if the Member has a Spouse on
his Annuity Starting Date or in the form of a
Single Life Annuity under Method 2 if he does
not have a Spouse on his Annuity Starting
Date.
(b) A Member may elect to waive the normal form of
benefit described in paragraph (a) during the
period beginning 90 days before his Annuity
Starting Date and ending on the latter of (i)
the date on which the distribution of his
benefit actually begins and (ii) the ninetieth
day after he receives the information required
by paragraph (c); provided, however, that no
election to waive the Qualified Joint and
Survivor Annuity form of benefit shall be
effective unless accompanied by a spousal
consent as described in paragraph (e) below.
During the aforesaid election period, a Member
may revoke any election to waive the normal
form of benefit described in paragraph (a)
and, subject to any required spousal consent,
may elect, revoke and elect again during the
election period. If a Member effectively
waives the normal form of benefit described in
paragraph (a) he may elect to have the vested
portion of his Accrued Benefit, subject to any
required spousal consent, distributed in
accordance with plan Sections 5.01 and 5.02.
(c) The Pension Committee must provide each Member
with a general written explanation of (i) the
terms and conditions of his normal form of
benefit under paragraph (a); (ii) the Member's
right to make, and the effect of, an election
not to receive benefits in the normal form;
(iii) any required spousal consent; and (iv)
<PAGE>
FORM 10-K Page 206
Exhibit 10.1 (continued)
the right to make and the effect of, a
revocation under paragraph (b). The
explanation must be provided to the Member not
less than 30 and not more than 90 days before
his Annuity Starting Date.
(d) Notwithstanding the foregoing, if the present
value of the vested portion of a Member's
Accrued Benefit determined in accordance with
Plan Sections 1.03 and 7.02(a) does not exceed
$3500, that present value will be distributed
to the Member in a single lump sum payment and
no spousal consent shall be required. If the
amount distributable under this paragraph (d)
exceeds $3500 a single sum payment shall not
be made.
(e) A Member's election not to take the Qualified
Joint and Survivor Annuity provided in Section
5.03 is not effective as of his Annuity
Starting Date unless his Spouse has consented
in writing to such election. The Spouse's
consent must acknowledge the effect of the
Member's election and must be witnessed by a
Plan Representative or Notary Public. Despite
the preceding sentence, spousal consent is not
required if the Member establishes to the
satisfaction of the Plan Representative that
such written consent cannot be obtained
because there is no Spouse, because the Spouse
cannot be located, or because of such
circumstances as applicable Treasury
regulations prescribe. Any consent under this
Section is valid only with respect to the
Spouse who signed the consent. Any evidence
that a Spouse's consent cannot be obtained is
valid only with respect to that designated
Spouse.
5.07 Eligible Rollover Distributions.
(a) This Section 5.07 applies to distributions
made on or after January 1, 1993.
Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a
distributee's election under this Section, a
distributee may elect, at the time and in the
manner prescribed by the Pension Committee, to
have any portion of an eligible rollover
distribution paid directly to an eligible
retirement plan specified by the distributee
in a direct rollover.
<PAGE>
FORM 10-K Page 207
Exhibit 10.1 (continued)
(b) Definitions.
(1) Eligible rollover distribution: An
eligible rollover distribution is any
distribution of all or any portion of the
balance to the credit of the distributee,
except that an eligible rollover
distribution does not include: any
distribution that is one of a series of
substantially equal periodic payments
(not less frequently than annually) made
for the life (or life expectancy) of the
distributee or the joint lives (or joint
life expectancies) of the distributee and
the distributee's designated beneficiary,
or for a specified period of ten (10)
years or more; any distribution to the
extent such distribution is required
under Section 401(a)(9) of the Code; and
the portion of any distribution that is
not includable in gross income
(determined without regard to the
exclusion for net unrealized appreciation
with respect to employer securities).
(2) Eligible retirement plan: An eligible
retirement plan is an individual
retirement account described in Section
408(a) of the Code, an individual
retirement annuity described in Section
408(b) of the Code, an annuity plan
described in Section 403(a) of the Code,
or a qualified trust described in Section
401(a) of the Code, that accepts the
distributee's eligible rollover
distribution. However, in the case of an
eligible rollover distribution to the
Surviving Spouse, an eligible retirement
plan is an individual retirement account
or individual retirement annuity.
(3) Distributee: A distributee includes an
Employee or former Employee. In
addition, the Employee's or former
Employee's Surviving Spouse and the
Employee's or former Employee's Spouse or
former Spouse who is the alternate payee
under a Qualified Domestic Relations
Order, as defined in section 414(p) of
the Code, are distributees with regard to
the interest of the Spouse or former
Spouse.
<PAGE>
FORM 10-K Page 208
Exhibit 10.1 (continued)
(4) Direct rollover: A direct rollover is a
payment by the Plan to the eligible
retirement plan specified by the
distributee.
5.08 Commencement of Benefits.
(a) Notwithstanding any other provision of
Articles IV, V or VII, a Member's benefit
payment must begin no later than 60 days after
the close of the Plan Year in which occurs the
latest of:
(1) his 65th birthday;
(2) the 10th anniversary of the date he
became a Member of the Plan; or
(3) his Termination of Employment.
(b) If for any reason the benefit amount cannot be
accurately determined before payment is
required, or if it is not possible to pay when
required because the Pension Committee has
been unable to locate the Member, after making
reasonable efforts to do so, a payment
retroactive to the requireddate may be made no
later than 60 days after the earliest date on
which the amount of that payment can be
determined, or the date on which the Member is
located (whichever is applicable).
5.09 Qualified Domestic Relations Order. Except as
provided in this Section 5.09 Plan benefits may not
be assigned, alienated or in any other way made
subject to debts or other obligations of Members or
Beneficiaries. Notwithstanding the above, the
Pension Committee must comply with the terms of a
Qualified Domestic Relations Order which is a
judgment, decree or order (including approval of a
property settlement agreement) made pursuant to a
state domestic relations law (including community
property law), that relates to the provision of
child support, alimony payments or marital property
rights of a Spouse, former Spouse, child or other
dependent ("Alternate Payee") of a Member. A
Qualified Domestic Relations Order creates or
recognizes the existence of an Alternate Payee's
right to or assigns to an Alternate Payee the right
to receive all or a portion of the benefits payable
to the Member under this Plan and specifies the
following: (1) name and last known mailing address
of the Member and each Alternate Payee; (2) the
<PAGE>
FORM 10-K Page 209
Exhibit 10.1 (continued)
amount of percentage of the Member's Plan benefits
to be paid to any Alternate Payee, or the manner in
which such amount or percentage is to be
determined; and (3) the number of payment or the
period to which the Order applies and the name of
the plan(s) to which the Order relates.
Plan benefits will be paid pursuant to a Qualified
Domestic Relations Order to such Alternate Payee(s)
at such time and in such amounts as is stated
therein, provided however, that such Qualified
Domestic Relations Order may not require the Plan
to provide any type or form of benefit, or any
option not otherwise provided. It also may not
require the Plan to provide increased benefits and
may not require the payment of benefits to an
Alternate Payee prior to the Member's earliest
Retirement age as defined in Code Section 414(p).
The Pension Committee shall establish reasonable
procedures to determine the qualified status of
such Domestic Relations Orders and to administer
distributions under such Orders.
<PAGE>
FORM 10-K Page 210
Exhibit 10.1 (continued)
ARTICLE VI
COMPUTATION OF PENSION
6.01 Retirement Benefits. Subject to Section 1.02 and
the adjustments required by the remainder of this
ARTICLE VI and otherwise under this Plan, the
pension payable under Method 1 to a Member who
Retires on or after his Normal Retirement Date
shall be computed under paragraphs (a) through (e),
as applicable, reduced as described in paragraph
(f), with credit for any fraction of a year being
determined by interpolation:
(a) By multiplying his Average Monthly
Compensation at Retirement by the accumulated
percentage determined from Column 1 of the
table below according to his total Accredited
Service plus an amount computed by multiplying
that part of his Average Monthly Compensation,
if any, which exceeds his Average Monthly
Covered Compensation by the accumulated
percentage determined by Column 2 of the table
below according to his total Accredited
Service:
<TABLE>
<S> <C> <C> <C>
ACCREDITED SERVICE COLUMN 1 COLUMN 2
For each year up to 10 inclusive 1.40% .70%
For each year from 11 through 20 1.10% .70%
For each year from 21 through 30 .70% .40%
For each year thereafter .40% .20%
</TABLE>
provided, however, that if the amount computed
for a Retiring member pursuant to this
paragraph (a) produces a total Accrued Benefit
(as defined in Section 1.02) that is less than
his total Accrued Benefit as of December 31,
1988, then there shall be substituted for the
amount computed pursuant to this paragraph (a)
the amount necessary to produce the Retiring
Member's total Accrued Benefit as of December
31, 1988.
For purposes of this paragraph (a), a Member
shall not accrue Accredited Service for
periods of active participation from January
1, 1984, through June 30, 1984. A Member
shall be deemed to accrue two months of
Accredited Service for each one month of
Accredited Service completed from July 1,
1984, through December 31, 1984.
<PAGE>
FORM 10-K Page 211
Exhibit 10.1 (continued)
(b) If any part of a Member's Accredited Service
was based on his employment by Cone Mills,
Inc. prior to May 1, 1962, his pension basis
as computed above shall be reduced by that
part of his monthly benefits at Normal
Retirement payable from the Metropolitan
Retirement Plan and attributable to membership
in such plan on and after the date his
Accredited Service began under this Plan;
(c) If a Member was a participant in the John Wolf
Textiles, Inc. Pension Trust as of December
31, 1962, the basis for determining his
pension shall be increased by an amount equal
to the deferred annuity determined for him by
the Massachusetts Mutual Insurance Company on
a monthly life income with ten years certain
basis at his Normal Retirement Date under all
contracts in force for such Member under the
John Wolf Textiles, Inc. Pension Trust as of
December 31, 1962;
(d) If a Member who is not entitled to Retirement
benefits under Article IV or to vested
benefits under Section 7.02 has a Termination
of Employment but is reemployed before he
incurs Rule of Parity Years, at his subsequent
Termination of Employment or Retirement, the
percentages used in determining the pension
payable shall be equal to the percentages
which would be applicable under Section
6.01(a) if his total Accredited Service during
all periods of employment were combined. If a
Member who is not entitled to Retirement
benefits under Article IV or to vested
benefits under Section 7.02 has a Termination
of Employment and is reemployed after having
five (5) consecutive One-Year-Breaks-in-
Service, at his subsequent Retirement or
Termination of Employment, the percentages
used in determining the pension payable shall
be the percentages which are applicable to
Accredited Service during the period(s) of
employment subsequent to the five (5)
consecutive One-Year Breaks-in-Service.
<PAGE>
FORM 10-K Page 212
Exhibit 10.1 (continued)
(e) If a Member who has become entitled to
Retirement under Article IV or to vested
benefits under Section 7.02 has a Termination
of Employment and is reemployed, the
percentages used in determining benefits at a
subsequent Termination of Employment or
Retirement shall be equal to the
percentages which would be applicable under
Section 6.01(a) if his total Accredited
Service during all periods of membership to
the Termination of Employment or Retirement
shall be equal to the percentages which would
be applicable under Section 6.01(a) if his
total Accredited Service during all periods of
membership to the Termination of Employment or
Retirement date were combined; provided,
however, that the pension benefit so
determined shall be reduced by the Actuarial
Equivalent value of any lump sum distribution
or monthly payments received with respect to
prior period(s) of employment in accordance
with Section 4.07.
(f) A Member's total pension basis under this Plan
is equal to the allowances provided in the
preceding paragraphs, or the Actuarial
Equivalent of such allowances under Method 2
of Method 3, reduced by the Offset Value, but
not reduced below the benefit accrued as of
December 31, 1983, and increased by the amount
that is the Actuarial Equivalent of the value
of the Member's Transfer Contribution. In no
event may this reduction be applied against a
Member's benefit determined under Sections
6.01(a) through (e) based on Average Monthly
Compensation and Accredited Service up to
December 31, 1983, or against any ancillary
benefits attributable to such accrued benefit.
6.02 Early Retirement. The pension payable under Method
1 to a Member who Retires earlier than his Normal
Retirement Date in accordance with Section 4.02
shall be the amount computed in Section 6.01 based
on his Accredited Service on his early Retirement
date. Such pension shall be payable beginning the
first of the month following his Normal Retirement
Date. At such Member's election, his pension may
begin the first of any month following his early
Retirement but, if so, shall be reduced by the
factors contained in Tables I, II or III according
to the attained age of the Member (and Spouse) as
<PAGE>
FORM 10-K Page 213
Exhibit 10.1 (continued)
of the date his payments actually begin and the
method of payment determined in accordance with
Article V.
6.03 Disability Retirement. A Member who becomes
disabled within the meaning of Section 1.16 and who
also is a participant in the Group Insurance Long
Term Disability Plan for Salaried Employees (the
"LTD Plan") shall be deemed to be on Disability
Leave and shall receive Accredited Service for the
duration of benefit payments under said LTD Plan.
For purposes of pension and Average Monthly
Compensation computations, the disabled Members who
participate in the LTD Plan shall be eligible for
Retirement on the earlier of their Normal
Retirement Date or the first of the month following
the final monthly payment under the LTD Plan;
provided, however, if a Member ceases to be
disabled, regardless of whether he resumes
employment, his eligibility for Retirement will be
determined pursuant to Article IV and his
eligibility for vested benefits will be determined
by Article VII. A Member, who becomes disabled
within the meaning of Section 1.16, but who does
not participate in the LTD Plan, will be eligible
for Retirement benefits or vested benefits
determined in accordance with Articles IV and VII,
respectively at the later of end of his Disability
Leave or his Severance from Service Date.
6.04 Maximum Pension. The maximum pension payable to a
Member must not exceed the limitations of Code
Section 415 as set forth in this Plan Section 6.04.
(a) Notwithstanding any other provision of this
Plan, the maximum annual pension payable to
any Member shall not exceed the lesser of (1)
$90,000 (the "Dollar Limitation") or (2) 100%
of the Member's average annual Compensation
during the three consecutive Plan Years when
the total Compensation paid to him was the
highest (the "Compensation Limitation")
subject to the following:
(i) the maximum shall apply to the pension
payable as a life annuity under Method 2
or as a Qualified Joint and Survivor
Annuity under Method 3 as described in
Plan Sections 5.02 and 5.03 respectively.
The maximum pension under Method 1 shall
be the Actuarial Equivalent of the
<PAGE>
FORM 10-K Page 214
Exhibit 10.1 (continued)
maximum pension payable as a life annuity
under Method 2.
(ii)If benefits begin prior to a Member's
Social Security Retirement age (as
defined in Section 415(b)(8)), the Dollar
Limitation applicable to such pension
shall be equal to the Actuarial
Equivalent of the Dollar Limitation where
such Dollar Limitation is deemed to be a
pension beginning at the Member's Social
Security Retirement age.
(iii)If a pension begins after age 65, the
maximum Dollar Limitation shall be the
Actuarial Equivalent of the Dollar
Limitation where such Dollar Limitation
is deemed to be a pension beginning at
Social Security Retirement age. For
purposes of subparagraphs (ii) and (iii)
Actuarial Equivalency shall be based upon
an interest rate assumption of 5%, or
such other rates as may be required by
the Code, ERISA or regulations
thereunder,
(iv)If a Member has fewer than ten years of
Plan participation, the Dollar Limitation
shall be multiplied by a fraction, the
numerator of which is the number of years
(computed to fractional parts of a year)
of participation in the Plan, and the
denominator of which is 10. If the Plan
Member has fewer than ten Years of
Service, the Compensation Limitation
shall be multiplied by a fraction the
numerator being the Member's Years of
Service computed to fractional parts of a
year divided by a denominator of 10.
(v) For all purposes of this Plan, the
maximum Dollar Limitation of $90,000
shall be automatically increased as
permitted by Treasury Department
regulations to reflect cost of living
adjustments. As a result of such an
adjustment, a pension which had been
limited by provisions of this Section
6.04 in a previous Plan Year(s) may be
increased with respect to future payments
to the lesser of the adjusted Dollar
Limitation amount or the amount of
pension which would have been payable
under this Plan without regard to the
<PAGE>
FORM 10-K Page 215
Exhibit 10.1 (continued)
provisions of this Section 6.04. The
adjusted limitation is effective as of
January 1 of each calendar year and is
applicable to Plan Years ending with or
within that calendar year. For purposes
of Plan Sections 6.04 and 6.07
Compensation and "415 compensation" shall
constitute Compensation as defined in
Section 1.08 less deferrals and
contributions pursuant to Members' salary
reduction elections that are not
includable in gross income by reason of
Code Sections 125 and 402(e)(3).
(b) For purpose of this Section 6.04, all
qualified defined benefit plans (whether
terminated or not) ever maintained by the
Employer shall be treated as one defined
benefit plan, and all qualified defined
contribution plans (whether terminated or not)
ever maintained by the Employer shall be
treated as one defined contribution plan.
(c) For purposes of this Section 6.04, if the
Employer is a member of a controlled group of
Corporations, trades or businesses under
common control (as defined by Code Section
1563(a) or Code Section 415(b) and (c) as
modified by Code Section 415(h)) or if a
Member of an Affiliate Service group (as
defined by Code Section 414(m)) all Employees
of such Employers shall be considered to be
employed by a single Employer.
(d) For purposes of this Section 6.04, if this
Plan is a Code Section 413(c) Plan, all
Employers of a Member who maintained this Plan
will be considered to be a single Employer.
(e) Notwithstanding any other provisions of this
Section 6.04, the otherwise permissible annual
benefits for any Member under this Plan may be
reduced to the extent necessary to assure
compliance with Code Section 415 which imposes
additional limitations on the benefits payable
to members who also participate in other tax
qualified plans of the Employer. Subject to
the exception in Section 6.04(i) below, if an
employee is (or has been) a Member in one or
more defined contribution plans and one or
more defined benefit plans maintained by the
Employer, the sum of the defined benefit plan
fraction and the defined contribution plan
fraction for any Plan Year may not exceed 1.0.
<PAGE>
FORM 10-K Page 216
Exhibit 10.1 (continued)
The defined benefit plan fraction for any Plan
Year is a fraction, the numerator of which is
the Member's projected annual benefit under
the Plan (determined at the close of the Plan
Year) and the denominator of which is the
greater of the product of 1.25 multiplied by
the "protected current accrued benefit" or the
lesser of: (i) the product of 1.25 multiplied
by the maximum Dollar Limitation provided
under Code Section 415(b)(1)(A) for such Plan
Year, or (ii) the product of 1.4 multiplied by
the amount which may be taken into account
under Code Section 415(b)(1)(B) for such Plan
Year.
The defined contribution plan fraction for any
Plan Year is a fraction the numerator of which
is the sum of the Annual Additions to the
Member's accounts as of the close of the Plan
Year and the denominator of which is the sum
of the lesser of the following amounts
determined for such Plan Year in each prior
Year of Service with the Employer:
(i) the product of 1.25 multiplied by the
dollar limitation in effect under Code
Section 415(c)(1)(A) for such Plan Year
(determined without regard to Code
Section 415(c)(6); or
(ii)the product of 1.4 multiplied by the
amount which may be taken into account
under Code Section 415(c)(1)(B) for such
Plan Year. Notwithstanding the
foregoing, the numerator of the defined
contribution plan fraction shall be
adjusted pursuant to Regulation 1.415-
7(d)(1) and questions T-6 and T-7 of
Internal Revenue Service Notice 83-10.
(f) For defined contribution plans in effect on or
before July 1, 1982, the Plan Administrator
may elect for any Plan Year ending after
December 31, 1982, that the amount taken into
account in the denominator for every Member
for all Plan Years ending before January 1,
1983, shall be an amount equal to the product
of: (1) the denominator for the Plan Year
ending in 1982 determined under the law in
effect for the Plan Year ending in 1982;
multiplied by (2) the "transition fraction."
<PAGE>
FORM 10-K Page 217
Exhibit 10.1 (continued)
For purposes of the preceding paragraph the
transition fraction shall mean a
fraction: (1) the numerator which is the
lesser of (i) $51,875, or (ii) 1.4 multiplied
by twenty-five percent (25%) of the Member's
"415 compensation" for the Plan Year ending in
1981; and (2) the denominator of which is the
lesser of (i) $41,500, or (ii) twenty-five
percent (25%) of the Member's "415
compensation" for the limitation year ending
in 1981. Notwithstanding the foregoing, for
any limitation year in which the Plan is a Top
Heavy Plan $41,500 shall be substituted for
$51,875 in determining the transition
fraction.
(g) Notwithstanding the foregoing, for any
limitation year in which the Plan is a Top
Heavy Plan 1.0 shall be substituted for 1.25
in determining the defined benefit plan
fraction and defined contribution plan
fraction.
(h) If the sum of the defined benefit plan
fraction and defined contribution plan
fraction shall exceed 1.0 in any Plan Year for
any Member in this Plan for reasons other than
described in Section 6.04(i), the Pension
Committee shall adjust the defined benefit
plan fraction so that the sum of both
fractions shall not exceed 1.0 in any Plan
Year for such Member.
(i) If (1) the substitution of 1.00 for 1.25 and
$41,500 for $51,785 above, or (2) the excess
benefit accruals or "Annual Additions"
provided for in Internal Revenue Service
Notice 82-19 cause the 1.0 limitation to be
exceeded for any Member in any "limitation
year", such Member shall be subject to the
following restrictions for each future
"limitation year" until the 1.0 limitation is
satisfied: (a) The Member's Accrued Benefit
under the defined benefit plan shall not
increase, (2) no "Annual Additions" may be
credited to a Member's account and (3) no
Employee contributions (voluntary or
mandatory) shall be made under any defined
benefit plan or any defined contribution plan
of the Employer.
<PAGE>
FORM 10-K Page 218
Exhibit 10.1 (continued)
(j) Notwithstanding anything contained in this
Section 6.04 to the contrary, the limitations,
adjustments and other requirements described
in this shall at all times comply with the
provisions of Code Section 415 and the
Regulations thereunder, the terms of which are
specifically incorporated herein by reference.
6.05 Determination of Top Heavy Status. The following
provisions shall become effective in any Plan Year
commencing after the 1983 Plan Year in which the
Plan is determined to be a Top Heavy Plan.
(a) This Plan shall be a Top Heavy Plan for any
Plan Year in which, as of the Determination
Date, (1) the Present Value of Accrued
Benefits of Key Employees under this Plan and
all plans of an Aggregation Group, and (2) the
sum of the Aggregate Accounts of Key Employees
under all plans of an Aggregation Group,
exceed sixty percent (60%) of the Present
Value of Accrued Benefits and the Aggregate
Accounts of all Key and Non-Key Employees
under this Plan and all plans of an
Aggregation Group.
(b) This Plan shall be a Super Top Heavy Plan for
any Plan Year in which, as of the
Determination Date, (1) the Present Value of
Accrued Benefits of Key Employees under this
Plan and all Plans of an Aggregation Group and
(2) the sum of the Aggregate Aggregation
Group, exceed ninety percent (90%) of the
Present Value of Accrued Benefits and the
Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an
Aggregation Group.
(c) If any Member is a Non-Key Employee for any
Plan Year, but such Member was a Key Employee
for any prior Plan Year, such Member's Present
Value of Accrued Benefits and/or Aggregate
Account balance shall not be taken into
account for purposes of determining whether
this Plan is a Top Heavy or Super Top Heavy
Plan (or whether any Aggregation Group which
includes this Plan is a Top Heavy Group). In
addition, if a Member or former Accounts of
Key Employees under all Plans of an has not
performed any services for any Employer
maintaining the Plan at any time during the
<PAGE>
FORM 10-K Page 219
Exhibit 10.1 (continued)
five year period ending on the Determination
Date, any Accrued Benefit or Aggregate Account
for such Member or former Member shall not be
taken into account for the purposes of
determining whether this Plan is a Top Heavy
or Super Top Heavy Plan.
6.06 Top Heavy Definitions.
The following definitions apply in determining
whether the Plan is a Top Heavy Plan or a Super Top
Heavy Plan:
(a) Aggregate Account: A Member's Aggregate
Account as of the Determination Date is the
sum of the amounts and adjustments described
below:
(1) his Member's Account balance as of the
most recent valuation occurring within a
twelve (12) month period ending on the
Determination Date;
(2) an adjustment for any contributions due
as of the Determination Date. Such
adjustment shall be the amount of any
contributions actually made after the
applicable Plan valuation date but due on
or before the Determination Date, except
for the first Plan Year when such
adjustment shall also reflect the amount
of any contributions made after the
Determination Date that are allocated as
of a date in that first Plan Year;
(3) any Plan distributions made within the
Plan Year that includes the Determination
Date or within the four (4) preceding
Plan Years. However, in the case of
distributions made after the valuation
date and prior to the Determination Date,
such distributions are not included as
distributions for top heavy purposes to
the extent that such distributions are
already included in the Member's
Aggregate Account balance as of the
valuation date. Notwithstanding anything
herein to the contrary, all
distributions, including distributions
made prior to January 1, 1984, and
distributions under a terminated plan
which if it had not been terminated would
have been required to be included in an
<PAGE>
FORM 10-K Page 220
Exhibit 10.1 (continued)
Aggregation Group, will be counted.
Further, distributions from the Plan
(including the cash value of life
insurance policies) of a Member's account
balance because of death shall be treated
as a distribution for the purposes of
this paragraph.
(4) any Employee contributions, whether
voluntary or mandatory. However, amounts
attributable to tax deductible qualified
voluntary employee contributions shall
not be considered to be a part of the
Member's Aggregate Account balance.
(5) with respect to unrelated rollovers and
plan-to-plan transfers (ones which are
both initiated by the Employee and made
from a plan maintained by one employer to
a plan maintained by another employer),
if this Plan provides the rollovers or
plan-to-plan transfers, it shall always
consider such rollovers or plan-to-plan
transfers as a distribution for the
purposes of this Section.
(6) with respect to related rollovers and
plan-to-plan transfers (ones either not
initiated by the Employee or made to a
plan maintained by the same employer), if
this Plan provides for a rollover or
plan-to-plan transfer, it shall not be
counted as a distribution for purposes of
this Section. If this Plan is the Plan
accepting such rollover or plan-to-plan
transfer, it shall consider such rollover
or plan-to-plan transfer as part of the
Member's Aggregate Account balance,
irrespective of the date on which such
rollover or plan-to-plan transfer is
accepted.
(7) For the purposes of determining whether
two employers are to be treated as the
same employer in (5) and (6) above, all
employers aggregated under Code Section
414(b), (c), (m) and (o) are treated as
the same employer.
(b) Aggregation Group means either a Required
Aggregation Group or a Permissive Aggregation
Group as hereinafter determined.
(1) Required Aggregation Group: In
determining a Required Aggregation Group
<PAGE>
FORM 10-K Page 221
Exhibit 10.1 (continued)
hereunder, each plan of the Employer in which
a Key Employee is a member in the Plan Year
containing the Determination Date or any of
the four preceding Plan Years, and each other
plan of the Employer which enables any plan in
which a Key Employee participates to meet the
requirements of Code Sections 401(a)(4) or
410, will be required to be aggregated. Such
group shall be known as a Required Aggregation
Group. In the case of a Required Aggregation
Group, each plan in the group will be
considered a Top Heavy Plan if the Required
Aggregation Group is a Top Heavy Group. No
plan in the Required Aggregation Group will be
considered a Top Heavy Plan if the Required
Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The
Employer may also include any other plan
not required to be included in the
Required Aggregation Group, provided the
resulting group, taken as a whole, would
continue to satisfy the provisions of
Code Sections 401(a)(4) and 410. Such
group shall be known as a Permissive
Aggregation Group. In the case of a
Permissive Aggregation Group, only a plan
that is part of the Required Aggregation
Group will be considered a Top Heavy Plan
if the Permissive Aggregation Group is a
Top Heavy Group. No plan in the
Permissive Aggregation Group will be
considered a Top Heavy Plan if the
Permissive Aggregation Group is not a Top
Heavy Group.
(3) Only those plans of the Employer in which
the Determination Dates fall within the
same calendar year shall be aggregated in
order to determine whether such plans are
Top Heavy Plans.
(4) An Aggregation Group shall include any
terminated plan of the Employer if it was
maintained within the last five (5) years
ending on the Determination Date.
(c) Determination Date means (a) the last day of
the preceding Plan Year, or (b) in the case of
the first Plan Year, the last day of such Plan
Year.
(d) Key Employee means an Employee as defined in
Code Section 416(i) and the Regulations
<PAGE>
FORM 10-K Page 222
Exhibit 10.1 (continued)
thereunder. Generally, any Employee or former
Employee (as well as each of his
Beneficiaries) is considered a Key Employee if
he, at any time during the Plan Year that
contains the "Determination Date" or any of
the preceding four (4) Plan Years, has been
included in one of the following categories:
(1) an officer of the Employer (as that term
is defined within the meaning of the
Regulations under Code Section 416)
having annual "415 Compensation" greater
than 50 percent (50%) of the amount in
effect under Code Section 415(b)(1)(A)
for any such Plan Year.
(2) one of the ten employees having annual
"415 Compensation" from the Employer for
a Plan Year greater than the dollar
limitation in effect under Code Section
415(c)(1)(A) for the calendar year in
which such Plan Year ends and owning (or
considered as owning within the meaning
of Code Section 318) both more than one-
half percent (0.5%) interest and the
largest interests in the Employer.
(3) a "five percent owner" of the Employer.
"Five percent owner" means any person who
owns (or is considered as owning within
the meaning of Code Section 318) more
than five percent (5%) of the outstanding
stock of the Employer or stock possessing
more than five percent (5%) of the total
combined voting power of all stock of the
Employer or, in the case of an
unincorporated business, any person who
owns more than five percent (5%) of the
capital or profits interest in the
Employer. In determining percentage
ownership hereunder, employers that would
otherwise be aggregated under Code
Sections 414(b), (c), (m) and (o) shall
be treated as separate employers.
(4) a "one percent owner" of the Employer
having an annual "415 Compensation" from
the Employer of more than $150,000. "One
percent owner" means any person who owns
(or is considered as owning within the
meaning of Code Section 318) more than
one percent (1%) of the outstanding stock
<PAGE>
FORM 10-K Page 223
Exhibit 10.1 (continued)
of the Employer or stock possessing more
than one percent (1%) of the total
combined voting power of all stock of the
Employer or, in the case of an
unincorporated business, any person who
owns more than one percent (1%) of the
capital or profits interest in the
Employer. In determining percentage
ownership hereunder, employers that would
otherwise be aggregated under Code
Sections 414(b), (c), (m) and (o) shall
be treated as separate employers.
However, in determining whether an
individual has "415 Compensation" of more
than $150,000, "415 Compensation" from
each employer required to be aggregated
under Code Sections 414(b), (c), (m) and
(o) shall be taken into account. For
purposes of this Section, "415
Compensation" means compensation as
defined in Plan Section 1.08, except that
the determination of "415 Compensation"
shall be made without regard to Code
Sections 125, 402(a)(8), 402(h)(1)(B)
and, in the case of Employer
contributions made pursuant to a salary
reduction agreement, without regard to
Code Section 403(b).
(e) Non-Key Employee means any Employee or former
Employee (and his Beneficiaries) who is not a
Key Employee.
(f) Present Value of Accrued Benefit: In the case
of a defined benefit plan, the Present Value
of Accrued Benefit for a Member other than a
Key Employee, shall be as determined using the
single accrual method used for all plans of
the Employer and Affiliated Employers, or if
no such single method exists, using a method
which results in benefits accruing not more
rapidly than the slowest accrual rate
permitted under Code Section 411(b)(1)(C).
(g) Top Heavy Group means an Aggregation Group in
which as of the Determination Date, the sum
of: (1) the Present Value of Accrued Benefits
of Key Employees under all defined benefit
plans included in the group, and (2) the
Aggregate Accounts of Key Employees under all
defined contribution plans included in
thegroup, exceeds sixty percent (60%) of a
similar sum determined for all Members.
<PAGE>
FORM 10-K Page 224
Exhibit 10.1 (continued)
6.07 Top Heavy Requirements.
(a) Minimum Benefit Required for Top Heavy Plan
Years. The minimum pension benefit at Normal
Retirement Age for a Member terminating
employment at or after age 65, and the Minimum
Accrued Benefit, payable at Normal Retirement
Age for a Member who terminates employment
prior thereto with entitlement to a
nonforfeitable Accrued Benefit, shall be equal
to the product of: (1) 2% of his average
monthly compensation as defined in Section
1.415-2(d) of the income tax regulations,
during his five highest-paid consecutive
calendar Years of Service (or during his
period of Employment, if less than five
years); multiplied by (2) each of his first
ten Years of Service after December 31, 1983,
in which the Plan is a Top Heavy Plan. In any
Plan Year in which a Non-Key Employee is a
Member in both this Plan and a defined
contribution plan included in a Required
Aggregation Group which is top heavy, the
Employer shall not be required to provide such
Non-Key Employee with both the full separate
defined benefit plan minimum benefit and the
full separate defined contribution plan
minimum allocation.
(b) Minimum Vesting: Notwithstanding the
provisions of Plan Section 7.01; if a Member's
termination of employment occurs while the
Plan is a Top-Heavy Plan, such Member's vested
percentage in his Accrued Benefit shall not be
less than the percentage determined in
accordance with the following table:
<TABLE>
<S> <C> <C> <C>
Vested Forfeited
Years of Service Percentage Percentage
Less than 3 0% 100%
3 or more 100% 0%
</TABLE>
<PAGE>
FORM 10-K Page 225
Exhibit 10.1 (continued)
If the Plan becomes a Top-Heavy Plan and
subsequently ceases to be such, the vesting
schedule in paragraph (b) of this Section 6.07
shall continue to apply in determining the
vested percentage of any Member who had at
least three Years of Service as of December
31, in the last Plan Year of top-heaviness.
For other Members, said schedule shall only
apply to their Accrued Benefit balances as of
such December 31.
(c) Impact on Maximum Benefits: For any Plan Year
in which the Plan is a Top-Heavy Plan, Plan
Section 6.04 shall be applied by substituting
the number "l.00" for the number "1.25"
wherever it appears therein except such
substitution shall not have the effect of
reducing any benefit accrued under a defined
benefit plan prior to the first day of the
Plan Year in which this provision becomes
applicable.
(d) Notwithstanding anything contained herein to
the contrary, the requirements prescribed in
this Section 6.07 shall at all times comply
with the provisions of Code Section 416 and
the Regulations thereunder, the terms of which
are specifically incorporated herein by
reference.
<PAGE>
FORM 10-K Page 226
Exhibit 10.1 (continued)
ARTICLE VII
BENEFITS UPON TERMINATION OF EMPLOYMENT
OTHER THAN AT RETIREMENT
7.01 Vested Benefits/Termination of Employment with Less
than Five Years of Service. Each Member's Accrued
Benefit under the Plan is nonforfeitable (100%
vested) at the earlier of: (1) attaining age 65
(Normal Retirement Age) while a Member, or (2)
completion of five Total Years of Service after age
18. If a Member's employment is terminated for any
reason and at the time his Total Years of Service
hereunder is less than five (5) years and he does
not qualify for Retirement under the provisions of
ARTICLE IV, no benefits shall be payable under this
Plan on his behalf.
7.02 Termination of Employment with at Least Five Years
of Service. If a Member's employment is terminated
for any reason and at the time his Total Years of
Service hereunder is five (5) years or more but he
does not qualify for Retirement under the
provisions of ARTICLE IV or Section 7.04, he shall,
if he survives to the date of payment determined
herein, be entitled to all of his Accrued Benefit,
as defined in Section 1.02, and adjusted for his
age at the date payment is to be made or begin, and
payable as follows:
(a) If the present value of the Member's
nonforfeitable Accru Benefit determined in
accordance with Plan Section 1.02 does not
exceed $3,500, that present value shall be
payable in a single sum as soon as
practicable;
(b) If the present value of the Member's
nonforfeitable Accrued Benefit determined in
accordance with Plan Section 1.02 exceeds
$3,500, payment shall be made in accordance
with paragraph (c);
(c) That portion of such Member's benefits not
payable under Section 7.02(a) shall be payable
beginning the first of the month after he
attains age 65, or at his election, at any
time within the ten-year period immediately
preceding as though he were a Retired Member,
and for the purpose of this paragraph the
pension basis shall be the Actuarial
Equivalent of the Accrued Benefit as defined
<PAGE>
FORM 10-K Page 227
Exhibit 10.1 (continued)
in Plan Section 1.02 determined by application
of Tables III, IV and V contained in Appendix
A based on the attained age of the Member (and
Spouse) as of the date payments actually begin
and the method of payment determined in
accordance with Article V.
(d) A distribution pursuant to paragraph (c)
cannot be made unless the Member's Spouse
consents to the distribution in the manner
provided in Section 5.06.
7.03 Accrued Benefit of Reemployed Member. Benefits for
a terminated or Suspended Member who resumes
employment covered by the Plan shall be determined
as follows:
(a) If such Member has received no benefits from
the Plan, his total Accrued Benefit as defined
in Section 1.02 shall be restored to the
extent that his previous service is taken into
account under Section 1.42 and shall be
subject to the vesting and forfeiture
provisions of the Plan according to his Total
Years of Service hereunder determined at his
eventual Termination of Employment.
(b) If such Member has received a distribution of
his nonforfeitable benefit either in a lump
sum or in monthly payments, the benefits
determined with respect to his eventual
Termination of Employment shall be reduced by
the Actuarial Equivalent of the amount(s)
previously received as provided in Section
4.07 and Table VI.
7.04 Involuntary Termination of Employment. If a
Member's employment is involuntarily terminated for
reasons other than death and he has at least
fifteen (15) Total Years of Service and five (5)
years of membership in the Plan but at the time has
not attained age 55, and if he survives to age 55,
he shall then be entitled to a monthly pension
based on his Accredited Service to the date of his
involuntary Termination of Employment computed in
accordance with Article VI as though he had Retired
under Article IV. For purposes of this pension
calculation, Average Monthly Compensation,
provisions of the plan as in effect on the date of
Termination of Employment, and all other relevant
factors shall be treated as remaining constant from
<PAGE>
FORM 10-K Page 228
Exhibit 10.1 (continued)
the date of Termination of Employment to the
Retirement date. Benefits under this Section 7.04,
payable in accordance with Article V, shall begin
as of the first of the month coinciding with or
following the Member's attaining age 55 or at his
election the first of any subsequent month.
<PAGE>
FORM 10-K Page 229
Exhibit 10.1 (continued)
ARTICLE VIII
BENEFITS PAYABLE BY REASON OF DEATH
8.01 Death of a Member without a Surviving Spouse.
(a) Death before Early Retirement Age: If an
active or Suspended Member dies before the
date on which he would have met the age and
service requirements for early Retirement
under Section 4.02 and he does not have a
Surviving Spouse, no benefit shall be payable
under the Plan on his behalf.
(b) Death after Early Retirement Age But Before
Annuity Starting Date: If an active or
Suspended Member who at the time has met the
age and service requirements for early
Retirement under Section 4.02 dies before his
Annuity Starting Date and he does not have a
Surviving Spouse, his Beneficiary shall be
entitled to 120 installments equal to fifty
percent of the monthly pension to which such
Member would have been entitled had he Retired
as of the date of his death and had elected to
receive his pension under Method 1 beginning
as of the first day of the next month.
(c) Death after Involuntary Termination of
Employment: If a Member's employment is
involuntarily terminated and his is entitled
to benefits under Section 7.04, and if such
Member survives more than thirty (30) days
after his Termination of Employment but dies
before his Annuity Starting Date, and does not
have a Surviving Spouse, his Beneficiary shall
be entitled to 120 installments of the monthly
pension which would have been payable to such
Member under Section 5.01 beginning the first
of the month following the date he would have
attained age fifty-five or the first of the
month following the date of his death,
whichever is later.
(d) If a Member dies after his Annuity Starting
Date, subject to the rights of an Alternate
Payee under a Qualified Domestic Relations
Order, any pension benefit payable under the
Plan will be paid in accordance with the
method of payment elected under Article V.
<PAGE>
FORM 10-K Page 230
Exhibit 10.1 (continued)
8.02 Death of a Member with a Surviving Spouse.
(a) If a Member dies before his Annuity Starting
Date and before completing five Total Years of
Service, no benefit shall be payable under
this Plan on his behalf.
(b) If a Member dies before his Annuity Starting
Date after completing five Total Years of
Service, but before the earliest date on which
he could have elected to receive a pension
benefit under the Plan, either as an early
Retirement benefit under Section 4.02 or a
deferred pension under Section 7.02(c) or
7.04, subject to the rights of any Alternate
Payee under a Qualified Domestic Relations
Order, his Spouse shall be entitled to a
Qualified Preretirement Survivor Annuity in
accordance with Section 8.03(b).
(c) If a Member dies before his Annuity Starting
Date and on or after the earliest date on
which he could have elected to begin receiving
a pension under the Plan, either as an early
Retirement benefit under Section 4.02 or a
deferred pension under Section 7.02(c) or
7.04, subject to the rights of any Alternate
Payee under a Qualified Domestic Relations
Order, his Spouse shall be entitled to a
Qualified Preretirement Survivor Annuity
provided in Section 8.03(a). Notwithstanding
the preceding sentence, if a Member who could
begin receiving an early Retirement benefit
under Section 4.02 so elects on forms provided
by the Pension Committee, subject to any
required spousal consent, his Beneficiary
shall be entitled to 120 installments equal to
fifty percent of the monthly pension such
Member would have been entitled to had he
retired as of the date of his death and
elected to receive his pension under Method 1
beginning as of the first day of the next
month.
(d) If a Member dies after his Annuity Starting
Date, subject to the rights of an Alternate
Payee under a Qualified Domestic Relations
Order, any pension benefit payable under the
Plan will be paid in accordance with the
method of payment elected under Article V.
<PAGE>
FORM 10-K Page 231
Exhibit 10.1 (continued)
8.03 Qualified Preretirement Survivor Annuity.
In the event a Member with a vested right to his
Accrued Benefit under the Plan dies before his
Annuity Starting Date and has not made the election
provided for in Section 8.02 (c), benefits shall be
payable to the Member's Spouse as follows:
(a) If the Member at the date of death was then
eligible to receive a benefit under the Plan
under Article IV or Plan Section 7.02(c) or
7.04, his Surviving Spouse shall be entitled
to receive a death benefit commencing as of
the first day of the month coinciding with or
next following the date of the Member's death,
in an amount equal to one-half of the amount
of the retirement benefit which would have
been payable to the Member if he had retired
on the day preceding his death and received a
benefit in the form of a Joint and Survivor
Annuity as defined in Plan Section 5.03.
(b) If the Member at the date of death was at that
time not eligible to receive a benefit under
the Plan, then the Member's Surviving Spouse
shall be entitled to a death benefit in an
amount equal to the amount that would have
been payable to the Spouse under Section
7.02(c) or 7.04 assuming:
(1) the Member had Separated from Service on
the earlier of his Termination of
Employment or date of his death;
(2) the Member had survived to the earliest
date he would be entitled to receive a
benefit under the Plan pursuant to
Section 7.02(c) or 7.04;
(3) on that date the Member began receiving
his Accrued Benefit in the form of a
Qualified Joint and Survivor Annuity as
described in Plan Section 5.03; and
(4) the Member died on the day after the date
described in subsection (2).
The preretirement spousal death benefit under
this Section 8.03 shall commence unless the
Spouse elects otherwise, as of the first day
of the month coinciding with or next following
the earliest date the Member could have begun
receiving a benefit under the Plan pursuant to
Article IV, Section 7.02(c) or Section 7.04
had he not died, and shall be paid to and
including the month in which such Spouse dies.
<PAGE>
FORM 10-K Page 232
Exhibit 10.1 (continued)
Notwithstanding the foregoing, if the present
value of the preretirement spousal death
benefit with respect to a Member who dies
before becoming eligible to receive a benefit
pursuant to Section 8.03(b) does not exceed
$3,500, his Spouse shall be entitled to
receive such present value as soon as
practicable.
8.04 Designation of Beneficiaries.
(a) A Member may designate a Beneficiary or
Beneficiaries in accordance with this Section
8.04 to receive benefits payable under the
method described in Section 5.01 after the
Member's death after Retirement, and benefits
payable by reason of the Member's death before
his Annuity Starting Date pursuant to Section
8.01. In the case of benefits payable as
described in Section 5.01 no Beneficiary
designation in accordance with this Section
8.04 shall be effective unless accompanied by
a spousal consent described in paragraph (c)
below, and received by the Pension Committee
before the first monthly payment. A Member
may revoke any Beneficiary designation, and
subject to any required spousal consent may
designate another Beneficiary or
Beneficiaries.
(b) On forms provided by the Pension Committee,
each Member may designate or change a
Beneficiary or Beneficiaries to receive
Retirement benefits calculated under Plan
Section 5.01 by reason of the Member's death
and benefits payable by reason of the Member's
death before his Annuity Starting Date
pursuant to Section 8.01. A Beneficiary
designation is effective when received by the
Pension Committee. Any designation of a
Beneficiary by a Member without a Spouse shall
become void and of no further force and effect
if the Member marries prior to his Annuity
Starting Date. If a Beneficiary or
Beneficiaries are designated in accordance
with this Section 8.04, then after the Pension
Committee receives proof of the Member's
death, it shall request his Beneficiary or
Beneficiaries to submit claim, election and
tax withholding forms. Subject to the rights
<PAGE>
FORM 10-K Page 233
Exhibit 10.1 (continued)
of any Alternate Payee under a Qualified
Domestic Relations Order, the Pension
Committee upon receiving these forms, shall
direct the Trustee to pay the deceased
Member's retirement benefits to his
Beneficiary or Beneficiaries for the remainder
of the 120 month period as provided in Section
5.01 or for the 120 month period required
pursuant to Section 8.01. If there is no
effective Beneficiary designation in effect at
the time of the Retired Member's death, then
subject to any required Spousal consent and to
the rights of any Alternate Payee, the
Member's estate shall be entitled to receive
any remaining pension payments due.
(c) Notwithstanding the Member's right to
designate a Beneficiary as provided in Section
8.04(a), the Member's Beneficiary shall be the
Member's Spouse unless the Member's Spouse
consents in writing to the Member's election
of payment under Method 1 and of a different
Beneficiary. This Spouse's consent must
acknowledge the effect of the Member's
election and must be witnessed by a Plan
Representative or Notary Public. With this
spousal consent, the provisions of this
Section 8.04 shall apply.
8.05 Legal Disability of Beneficiary. If any Member,
former Member or Beneficiary entitled to any
payment under the Plan shall be under a legal
disability whether due to incompetency, being a
minor, or otherwise, the Pension Committee, upon
the receipt of satisfactory evidence of such legal
disability may cause any payment otherwise payable
to be paid, (i) to the guardian of the person or
property of such Member or Beneficiary, or (ii) to
any other person, firm or institution for the
benefit of such Member or Beneficiary, or, if the
Beneficiary is a minor, to a custodian for such
Beneficiary under a Uniform Gifts or Transfers to
Minors Act, and the receipt of any of the foregoing
shall constitute a full acquittance of the Pension
Committee to the extent of the distribution so
made.
<PAGE>
FORM 10-K Page 234
Exhibit 10.1 (continued)
ARTICLE IX
TRUST FUND AND ADMINISTRATION OF THE PLAN
9.01 Named Fiduciaries and Allocation of Responsibility.
(a) Plan Fiduciaries are Cone, the Pension
Committee and each Trustee or Co-Trustee.
Each Fiduciary shall have only those powers,
duties, responsibilities and obligations that
are specifically assigned under the Plan or
Trust Agreement. A Fiduciary may serve in
more than one capacity with respect to the
Plan. The Board of Directors shall appoint
the Pension Committee and any Trustee or
successor Trustees or Co-Trustees and any
other Fiduciaries.
(b) The Trustee has custody and sole
responsibility for administration of the Trust
Fund, but the Trustee's authority to manage,
acquire or dispose of assets of the Plan is
subject to the direction of Cone in accordance
with Section 9.08. If an Investment Manager
is appointed, the Trustee or each Co-Trustee
under that Trust Agreement is released from
any obligation or liability for the investment
of the assets for which the appointment is
made.
(c) The Pension Committee has only the
responsibilities described in this Plan and
those delegated by Cone. The Pension
Committee has no responsibility for the
control or management of the Trust Fund.
(d) All responsibilities not specifically
delegated to a Fiduciary remain with Cone,
including designating other Fiduciaries not
named in this Plan or the Trust Agreement. A
Fiduciary serves at the pleasure of Cone and
may employ one or more persons to render
advice with regard to any responsibility such
Fiduciary has under the Plan. Each Fiduciary
may rely upon any direction, information or
action of another Fiduciary as being proper
under the Plan or Trust Agreement and shall
not be required to inquire into the propriety
of any such direction, information or action.
It is intended that each Fiduciary be
responsible for the proper exercise of its own
power, duties, responsibilities and
obligations and shall not be responsible for
any act or omission of another Fiduciary
except to the extent that it has knowledge of
<PAGE>
FORM 10-K Page 235
Exhibit 10.1 (continued)
a breach of Fiduciary responsibility by
another Fiduciary and fails to make reasonable
effort to remedy the breach.
9.02 Duties and Responsibilities. Each Fiduciary shall
discharge his duties with respect to the Plan
solely in the interest of Members and Beneficiaries
for the exclusive purpose of providing benefits to
Members and Beneficiaries and for defraying
reasonable expenses in administering the Plan, with
the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man
acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise
of a like character and with like aims, and in
accordance with the documents and instruments
governing the Plan insofar as such documents and
instruments are consistent with the provisions of
applicable law or regulation.
9.03 Trust Fund. All of the assets of the Plan shall be
held in a Trust Fund or Funds under a Trust
Agreement or Agreements which shall be a part of
the Plan except for the group annuity contract
described in Section 5.04. Such Trust Agreement or
Agreements may provide for a master trust
containing assets of more than one plan if the
portion or percentage attributable to each plan is
clearly established and discernible. Each Trustee
or Co-Trustee shall be appointed by the Board of
Directors, and the Board of Directors shall have
the sole authority to appoint and remove any
Trustee, Co-Trustee or successor Trustee or Co-
Trustee. All contributions shall be paid into a
Trust Fund. To the extent not provided by the
group annuity contract with Prudential Insurance
Company of America benefits provided by the Plan
shall be payable from the Trust Fund, except that
pensions under the Plan may be provided through the
purchase of annuities from a legal reserve life
insurance company which comply with the payment
options described in ARTICLE V of the Plan. The
Trustee or Co-Trustee shall execute such documents
and take any other action necessary to carry out
the instructions of the Investment Manager and
Pension Committee.
<PAGE>
FORM 10-K Page 236
Exhibit 10.1 (continued)
9.04 Enforceable Rights. Cone does not guarantee
payment of any benefits provided for under the
Plan. No person shall have any interest in or
right to any part of the corpus or income of the
Trust Fund except as provided in the Plan.
9.05 Impossibility of Diversion. The assets of the Plan
and the Trust Fund shall not inure to the benefit
of the Employer and shall be held for the exclusive
purposes of providing benefits to Members and
Beneficiaries and defraying reasonable expenses of
administering the Plan.
9.06 Pension Committee. The Board of Directors shall
appoint a Pension Committee consisting of at least
three (3) persons who may, but need not be,
officers, directors or Employees of Cone. The
members of each Committee shall hold office at the
pleasure of the Board of Directors and shall serve
without compensation. Each Committee member shall
file his written acceptance with the Board of
Directors and acknowledge that he is a Fiduciary
under the Plan. Any Committee member may resign at
any time by delivering his written resignation to
the Board of Directors. Any vacancy which reduces
Committee membership to less than three shall be
filled by the Board of Directors as soon as
practicable.
9.07 Officers, Quorums, Expenses. The Pension Committee
or any other committee appointed or designated by
Cone pursuant to Section 9.01(a) may authorize one
or more of its members to execute or deliver any
instrument or act on its behalf. Each Committee
shall hold meetings upon such notice and at such
place and times as it may determine. A majority of
the members of each Committee in office at the time
shall constitute a quorum for the transaction of
business. All resolutions or other actions taken
by a Committee shall be by the vote of a majority
of those present at a meeting or without a meeting
by an instrument in writing signed by a majority of
the members. If a Committee member registers his
dissent in writing with respect to any act or
omission by the majority, delivered to the
remaining Committee members within a reasonable
time, such member shall not be responsible for such
act or omission. The expenses of each Committee in
<PAGE>
FORM 10-K Page 237
Exhibit 10.1 (continued)
performing its duties and the compensation of its
agents shall be paid by Cone.
9.08 Investment Powers. Except to the extent delegated
to an Investment Manager, Cone shall have all the
powers, duties, responsibilities and obligations
contained in Section 9.09 with respect to
investments under the Plan. The Company shall have
authority to appoint in writing and obtain the
services of one or more Investment Managers (as
defined in ERISA Section 3(38)) whose duties and
responsibilities shall be to manage the investment
and reinvestment of such portion of the Trust Fund
as shall be determined from time to time by the
Committee. Cone may appoint the Trustee to serve
as Investment Manager with respect to all or a
portion of the Trust Fund.
9.09 Duties of Investment Manager. Each duly appointed
Investment Manager shall, with respect to the
portion of any Trust Fund for which it is
responsible, have the sole authority, without prior
consultation with the Trustee or Cone to manage,
acquire and dispose of assets of the Trust Fund but
shall not, except to the extent permitted in the
Trust Agreement, have physical custody or indicia
of ownership of any such assets. The appointment
of an Investment Manager shall become effective as
of the date he delivers to Cone a written statement
acknowledging that it is Fiduciary as defined in
ERISA Section 3(21)(a) and that it has the
responsibility for acquisition and disposition of
that portion of Trust Fund assets assigned to it.
The Investment Manager shall exercise its power
through written directions to the Trustee. The
Investment Manager shall periodically deliver to
Cone a report describing all Trust Fund asset
transactions for each agreed upon reporting period.
Any compensation or fee due to the Investment
Manager for services rendered shall be paid out of
the Trust Fund, unless paid by Cone in its discretion.
9.10 Information to Investment Manager. Cone or the
Pension Committee shall advise each Investment
Manager of the amount of that portion of any Trust
Fund which he is to manage, the amount of Cone
contributions to be added to the Fund and the
expected future benefits to be payable from the
<PAGE>
FORM 10-K Page 238
Exhibit 10.1 (continued)
Fund in order that the Investment Manager may
establish a funding policy consistent with current
and long-term needs of the Plan and compatible with
guidelines determined by Cone.
9.11 Notice to Trustee. Cone shall notify the Trustee
of each Trust Fund for which an Investment Manager
has been appointed of the name of such Investment
Manager and the portion of the Trust Fund for which
such Manager is responsible. Until notified in
writing by Cone that there has been a change in the
appointment of an Investment Manager, the Trustee
shall be fully protected in relying upon the
instructions received from such Investment Manager
with respect to the portion of the fund for which
such Manager has investment responsibilities.
9.12 Duties of the Pension Committee. The Pension
Committee shall be responsible for and have
discretionary authority with respect to
interpretation of the provisions of the Plan, the
determination of benefits and the right of any
person to benefits, and such other functions
including without limitation the promulgation of
rules and regulations as may be necessary for
proper administration of the Plan and not hereunder
delegated to the Trustee, Investment Manager or
other Fiduciary appointed by the Board of
Directors. The Pension Committee's rules,
interpretations, computations and actions will be
conclusive and binding on all persons.
9.13 Notice of Payments Due. The Pension Committee
shall notify the Trustees in writing of the amounts
payable under the Plan and the date of such
payments.
9.14 Records and Reports. The Pension Committee shall
maintain accounts showing the fiscal transactions
of the Plan and shall keep in convenient form such
data as may be necessary for the valuation of the
assets and liabilities, contingent or otherwise, of
the Plan. The Committee shall exercise such
authority as it deems appropriate in order to
comply with the reporting requirements of any
applicable law or regulation affecting the Plan and
shall prepare annually a report showing in
reasonable detail such assets and liabilities of
the Plan and any other information which the Board
<PAGE>
FORM 10-K Page 239
Exhibit 10.1 (continued)
of Directors may require and which the Committee
can reasonably furnish or obtain from the Trustees.
Such report shall be submitted to the Board of
Directors.
9.15 Exoneration of Pension Committee. The members of
the Pension Committee, Employers and their
officers, directors and Employees shall be entitled
to rely upon the reports furnished by any Trustee
or by any accountant approved by the Committee or
the Board of Directors, and upon all opinions given
by any legal counsel selected or approved by the
Committee or the Board of Directors. Except as
contrary to law, the members of the Committee,
Employers and their officers, directors and
Employees shall be fully protected and exonerated
from liability with respect to any action taken or
suffered by them in good faith in reliance upon
such reports, opinions or other advice received
from any such Trustee, accountant or legal counsel.
The fact that any member of the Committee is a
director, officer or shareholder of the Employer,
or a Member of the Plan, shall not disqualify him
from performing any duties which the Plan or the
Trust Agreement authorizes or requires him to do as
a member of the Committee or render him accountable
for any benefits received by him under the Plan.
All directors, officers and Employees who are
deemed to be Fiduciaries of this Plan are entitled
to indemnification to the full extent provided for
by law and by the Articles of Incorporation and
Bylaws of Cone in effect on January 1, 1987, or as,
thereafter amended.
9.16 Errors and Omissions. Individuals and entities
charged with the administration of the Plan must
see that it is administered in accordance with its
terms as long as it is not in conflict with the
Code of ERISA. If an innocent error or omission is
discovered in the Plan's operation or
administration, and if the Pension Committee
determines that it would cost more to correct the
error than is warranted, and if the Pension
Committee determines that the error did not result
in discrimination prohibited by the Code, ERISA or
by Plan Section 12.06 or cause a qualification of
excise-tax problem, then, to the extent that an
adjustment will not in the Pension Committee's
judgment result in discrimination prohibited by the
<PAGE>
FORM 10-K Page 240
Exhibit 10.1 (continued)
Code, ERISA or Plan Section 12.06, the Pension
Committee may authorize any equitable adjustment it
deems necessary or desirable to correct the error
or omission, including but not limited to the
authorization of additional Cone contributions
designed, in a manner consistent with the goodwill
intended to be engendered by the Plan, to put
Members in the same relative position they would
have enjoyed if there had been no error or
omission.
9.17 Fees and Expenses. Any fees or expenses incurred
in connection with the operation of the Plan shall
be paid out of the Trust Fund, unless paid by Cone
in its discretion.
9.18 Voting and Tendering of Shares. Securities held in
the Trust Fund shall be voted by the Trustee or
other Investment Manager in its sole discretion and
in accordance with its fiduciary duties and
responsibilities described in Section 9.02. The
Trustee or Investment Manager shall advise Cone or
the Pension Committee annually of its policies with
respect to voting of proxies and in such detail as
is requested, the nature of its voting practice.
9.19 Claim Procedure. As a condition precedent to the
payment of benefits, the Pension Committee may
require any Member or Beneficiary entitled to
benefits to complete an application for payment and
a form for selection of the method of payment under
which benefits are to be paid and to provide
information with respect to withholding of income
taxes. Any denial by the Pension Committee of a
claim for benefits under the Plan shall be stated
in writing by the Pension Committee and shall be
delivered or mailed to the Member or his
Beneficiary. Such notices shall state the specific
reason for denial and provide a reasonable
opportunity for a joint review of the decision by
the Member or his Beneficiary and the Pension
Committee.
<PAGE>
FORM 10-K Page 241
Exhibit 10.1 (continued)
ARTICLE X
AMENDMENT, TERMINATION AND MERGER
10.01 Amendment.
(a) The Board of Directors retains the right at
any time: (1) to amend this Plan and any
Trust Agreement to qualify or retain
qualification of this Plan and the Trust under
the applicable provisions of the Code or under
any other laws; (2) to amend this Plan and any
Trust Agreement in any other manner; and (3)
to amend this Plan and liquidate any Trust
Fund by transferring all assets to a new trust
qualified under the Code.
(b) Except as permitted by Section 10.02, no
amendment to the Plan or any Trust Agreement
and no transfer of liabilities or assets of
any Trust Fund shall permit any part of the
Trust Fund to be used for or diverted to the
purposes other than for the exclusive benefit
of Members and Beneficiaries and for defraying
reasonable expenses of administering the Plan.
An amendment may not cause any reduction in
benefits accrued by any Member or cause or
permit any portion of the Trust Fund to revert
to or become the property of an Employer. An
amendment that affects the rights, duties or
responsibilities of any Fiduciary may not be
made without that Fiduciary's written consent.
Except as permitted by Treasury regulations,
no Plan amendment or transaction having the
effect of a Plan amendment (such as a merger,
plan transfer or similar transaction) shall be
effective to the extent it eliminates or
reduces any "Section 411(d)(6) protected
benefit" or adds or modifies conditions
relating to "Section 411(d)(6) protected
benefits" the result of which is a further
restriction on such benefit unless such
protected benefits are preserved with respect
to benefits accrued as of the later of the
adoption date or effective date of the
amendment. "Section 411(d)(6) protected
benefits" are benefits described in Code
Section 411(d)(6)(A), early retirement
benefits and retirement-type subsidies, and
optional forms of benefit. An amendment is
effective on the date indicated in any written
instrument that is identified as an amendment
<PAGE>
FORM 10-K Page 242
Exhibit 10.1 (continued)
to the Plan, that is approved or authorized by
the Board of Directors and signed by an
officer of the Corporation.
(c) As allowed by law, a transfer of liabilities
or Trust Fund assets, or any amendment to the
Plan or a Trust Agreement, may authorize or
permit part of the Trust Fund to be used for
or diverted to payment of taxes owed, or to
payment of reasonable administrative expenses.
To the extent allowed by Code Section 401(a),
Trust Fund assets may be used for or diverted
to purposes that benefit Employees other than
Members or their Beneficiaries or estates.
10.02 Termination.
(a) The Board of Directors has the right at any
time to terminate this Plan and any Trust
Agreement. Notice of a termination must be
given to the Members, the Pension Committee,
the affected Trustees or Co-Trustees and all
necessary authorities. If any authority's
approval is necessary, termination is
effective according to that approval;
otherwise, the date of the notice or a later
date contained in the notice is the
termination date for purposes of this Plan.
(b) If the Plan is terminated the rights of
Members and Beneficiaries to benefits accrued
to the date of termination, or partial
termination, to the extent then funded shall
be nonforfeitable (100% vested). If the Plan
is partially terminated (determined in a
manner consistent with legal authorities), the
rights to benefits accrued to the date of
partial termination of affected Members and
Beneficiaries are fully nonforfeitable and may
then be treated by the Pension Committee as if
the Plan had terminated.
(c) In the event the Plan shall be terminated as
provided in this Section 10.02, the then
present value of Retirement benefits vested in
each Member shall be determined as of the
termination date, and the assets then held
under this Plan shall, subject to any
necessary approval by the Pension Benefit
Guaranty Corporation, be allocated, to the
extent that they shall be sufficient, after
providing for expenses of administration, in
the order of precedence provided for under
<PAGE>
FORM 10-K Page 243
Exhibit 10.1 (continued)
Section 4044 of ERISA. The Retirement
benefits for which funds have been allocated
in accordance with Section 4044 of ERISA shall
be provided through the continuance of the
existing funding arrangements or through a new
instrument entered into for that purpose and,
as directed by the Pension Committee, shall be
paid either in a lump sum or through the
purchase of a nontransferable annuity
contract(s). After all liabilities of the
Plan have been satisfied with respect to all
Members so affected by the Plan's termination,
the Employer shall be entitled to any balance
of Plan assets which shall remain.
10.03 Limitation of Benefits on Plan Termination.
(a) In the event of Plan termination, the benefit
of any Highly Compensated Employee or any
Highly Compensated Former Employee (each as
defined in Code Section 414(q)) shall be
limited to a benefit that is nondiscriminatory
under Code Section 401(a)(4). Notwithstanding
the foregoing, with respect to Plan Years
beginning prior to January 1, 1994, compliance
with Treasury regulations then in effect shall
be deemed to be compliance with this
paragraph.
(b) Upon Plan termination, the monthly payments to
a Highly Compensated Employee or a Highly
Compensated Former Employee who is one of the
twenty five (25) highest paid Highly
Compensated Employees and Highly Compensated
Former Employees shall be limited to an amount
equal to the monthly payments that would be
made on behalf of such individual under a
straight life annuity that is the Actuarial
Equivalent of the sum of such individual's
Accrued Benefit and any other benefits under
the Plan. However the limitation of Section
10.03(b) shall not apply if:
(1) after payment to an individual
described above of all benefits
payable to such individual under the
Plan, including, but not limited to,
any periodic income, any withdrawal
values payable to a living Employee
and any death benefits not provided
for by insurance on the Employee's
life, the value of Plan assets
<PAGE>
FORM 10-K Page 244
Exhibit 10.1 (continued)
equals or exceeds 110% of the value
of current liabilities, as defined
in Code Section 412(l)(7), or
(2) the value of the benefits described
in subparagraph (1) above for such
individual described above is less
than one (1) percent of the value of
current liabilities before
distribution, or
(3) the present value of benefits
described in subparagraph (1) above
for such individual described above
does not exceed $3,500 and has never
exceeded $3,500 at the time of any
prior distribution.
10.04 Discontinuance of Contributions.
(a) Each Employer has the right at any time to
reduce or discontinue its contributions to
this Plan subject to any funding requirements
under Code Section 412.
b) A discontinuance of Employer contributions is
not a termination of the Plan unless Cone
gives the notice described in Plan Section
10.02(a).
10.05 Plan Merger or Asset Transfer.
(a) The merger or consolidation of the Plan with,
or the transfer of assets or liabilities of
this Plan to another employee benefit plan, or
the transfer of assets or liabilities of
another plan to this Plan is allowed provided
each Member's benefit entitlement immediately
after the merger, consolidation, or transfer,
is (when computed as if the surviving or
receiving plan had immediately terminated)
equal to or greater than the benefit to which
the Member would have been entitled if this
Plan had terminated immediately before the
merger, consolidation, or transfer.
(b) Subject to paragraph (a), on written direction
from Cone, the Pension Committee and any
Trustee or Co-Trustee so directed must take
all necessary steps to transfer assets held in
any Trust Fund, in whole or in part, to
another qualified plan.
<PAGE>
FORM 10-K Page 245
Exhibit 10.1 (continued)
10.06 Continuation of the Plan. If an Employer is merged
or consolidated with any other business or is
succeeded by a corporation or any other legal
entity that acquires substantially all of the
Employer's assets, the surviving or purchasing
corporation or legal entity, subject to approval of
the Board of Directors, may elect to continue this
Plan as to that Employer's Members but shall not be
required to do so.
<PAGE>
FORM 10-K Page 246
Exhibit 10.1 (continued)
ARTICLE XI
MULTIPLE COMPANIES INCLUDED
11.01 Plan Sponsor and Other Employers.
(a) This Plan's sponsor is Cone Mills Corporation,
or its successor.
(b) This Plan is designed to allow the sponsor's
Affiliates to participate. Employers are Cone
Mills Corporation and Affiliates that are
permitted to adopt this Plan in accordance
with Section 11.02.
11.02 Method of Participation. With approval of the
Board of Directors, any other business that is an
Affiliate of Cone may take appropriate action
through its board and become a party to the Plan as
an Employer. To become an Employer, a business
must adopt this Plan as a Qualified Plan for its
Employees. A business that becomes an Employer
must promptly deliver to the Trustee or Co-Trustees
designated by Cone a copy of the resolutions or
other documents evidencing its adoption of the Plan
and also a written instrument showing Cone's
Board's approval of the adopting entity's status as
a party to the Plan and an Employer.
11.03 Withdrawal by Employer.
(a) An Employer may withdraw from the Plan at any
time by giving the Pension Committee and the
Board of Directors six months advance notice
in writing of its intention to withdraw unless
a shorter notice is agreed to by the Board of
Directors.
(b) Upon receipt of an Employer's notice of
withdrawal, the Pension Committee must certify
to the appropriate Trustees or Co-Trustees the
withdrawing Employer's equitable share in the
Trust Fund as determined by the Actuary. The
Pension Committee may rely conclusively on the
determination made by counsel and advisors
then employed on behalf of the Plan. The
Trustees or Co-Trustees must then set aside
from the Trust Fund such securities and other
property as each deems, in its sole
discretion, to be equal in value to that
amount directed by the Pension Committee. If
the Plan is to be terminated with respect to
the Employer, then the amount set aside must
be dealt with according to the provisions of
<PAGE>
FORM 10-K Page 247
Exhibit 10.1 (continued)
Plan Article X. If the Plan is not to be
terminated with respect to the Employer, the
Trustee or Co-Trustees must either transfer
the assets set aside to another trust governed
by an agreement between a Trustee or Co-
Trustees and the withdrawing Employer or to a
successor trustee, according to the Pension
Committee's directions.
(c) The segregation of the Trust Fund assets upon
an Employer's withdrawal, or the execution of
a new agreement and declaration of trust
pursuant to any of the provisions of this
Section, must not operate to permit any part
of the Trust Fund's principal or income to be
used for or diverted to purposes other than
for the benefit of Members and Beneficiaries
or for the payment of reasonable expenses of
administering the Plan.
11.04 Tax Year. Although the Employers may have
different tax years, the Plan Year which is the
calendar year, is the tax year for this Plan and
any Trust Fund.
<PAGE>
FORM 10-K Page 248
Exhibit 10.1 (continued)
ARTICLE XII
GENERAL
12.01 Plan Creates No Separate Rights. The establishment
and existence of the Plan, Trust Agreements and
Trust Fund does not give a person any legal or
equitable right against:
(a) am Employer;
(b) any officer, director, Employee or other agent
of an Employer;
(c) any Trustee or any Co-Trustee;
(d) any Investment Manager; or
(e) the Pension Committee or any member of the
Pension Committee.
The Plan and Trust Agreements create no employment
rights and do not modify the terms of an Employee's
or a Member's employment. The Plan and Trust
Agreements are not contracts between an Employer
and any Employee, and the Plan is not an inducement
for anyone's Employment.
12.02 Delegation of Authority. Cone's acts may be
accomplished by any person with authorization from
the Board of Directors. Any other Employer's acts
may be accomplished by any person with
authorization from that Employer's board.
12.03 Limitation of Liability.
(a) A Fiduciary is not subject to suit or
liability in connection wit this Plan or the
Trust Agreement or their operation, except
according to this Section 12.03.
(b) Each member of the Pension Committee, each
Trustee and Co-Trustee and any person employed
by an Employer is liable only for that
person's own acts or omissions.
(c) Each member of the Pension Committee, each
Trustee and Co-Trustee, or any person employed
by an Employer is not liable for the acts or
omissions of another without knowing
participation in the acts or omissions, except
by action to conceal an action or omission of
another while knowing the act or omission is a
breach, or by a failure to properly perform
duties that enables the breach to occur, or
with knowledge of the breach, failure to make
reasonable efforts to remedy the breach.
<PAGE>
FORM 10-K Page 249
Exhibit 10.1 (continued)
(d) One Trustee or Co-Trustee must use reasonable
care to prevent another from committing a
breach, but all Trustees and Co-Trustees need
not jointly manage or control the assets,
because specific duties have been allocated
among them in this Plan or the Trust
Agreements. A Trustee or Co-Trustee is not
liable for actions or omissions when following
the specific directions of the Pension
Committee or a duly authorized and appointed
Investment Manager unless such directions are
improper on their face. If an Investment
Manager has been properly appointed, subject
to paragraph (c), a Trustee or Co-Trustee is
not liable for the acts of the Investment
Manager and does not have any investment
responsibility for assets under the management
of the Investment Manager.
(e) A Fiduciary is not liable for the actions of
another to whom responsibility has been
allocated or delegated according to this Plan
and the Trust Agreements, unless as the
allocating or delegating Fiduciary it was
imprudent in making the allocation or
delegation or in continuing the allocation or
delegation.
(f) Each Employee releases all members of the
Pension Committee, each Trustee and Co-
Trustee, each Employer, all officers and
agents of each Employer, and all agents of
Fiduciaries from any and all liability or
obligation, to the extent release is
consistent with the provisions of this
Section.
12.04 Legal Action. Except as explicitly permitted by
statute, in any action or proceeding involving the
Plan, a Trust Agreement, a Trust Fund, any property
held as part of a Trust Fund, or the administration
of the Plan or Trust Fund, the Pension Committee,
the appropriate Trustee or Co-Trustees and Cone are
the only necessary parties. No Employees or former
Employees or their Beneficiaries or any person
having or claiming to have an interest in any Trust
Fund, or under the Plan is entitled to notice of
process. Any final judgment that is not appealed
or appealable that may be entered in an action or
proceeding is binding and conclusive on the parties
to this Plan and all persons having or claiming to
have any interest in any Trust Fund or under the
Plan.
<PAGE>
FORM 10-K Page 250
Exhibit 10.1 (continued)
12.05 Benefits Supported only by Trust. Except as
otherwise provided by statute, a person having any
claim under the Plan must look solely to the assets
of the Trust Fund for satisfaction, or to the
extent his benefit has become an invocable
obligation of an insurance company, solely to that
insurance company.
12.06 Discrimination. The Pension Committee must
administer the Plan in a uniform and consistent
manner for all Members and may not permit
discrimination in favor of highly compensated
Employees.
12.07 Model Amendment I. The following sections of Model
Amendment I (IRS Notice 87-2) are hereby
incorporated in the Employee's Retirement Plan of
Cone Mills Corporation for the Plan Years beginning
January 1, 1987, and January 1, 1988: I, II, III,
IV, V, VI, VIII, and IX.
12.08 Entire Plan. This document incorporates in its
entirety the Employee's Retirement Plan of Cone
Mills Corporation and supersedes and replaces all
prior Plan documents. The Plan may not be amended,
modified or supplemented except by a written
instrument that is identified as amendment to the
Plan that is approved or authorized by the Board of
Directors of Cone Mills Corporation and signed by
an officer of the Corporation.
<PAGE>
FORM 10-K Page 251
Exhibit 10.1 (continued)
SIGNATURE PAGE
As evidence of the adoption of the Plan, as amended and
restated, for itself and by all Affiliated Companies, Cone
Mills Corporation has caused this document to be signed by its
duly authorized officer on December 21, 1993.
CONE MILLS CORPORATION
By: /S/ Terry L. Weatherford
Terry L. Weatherford
Title: Secretary
<PAGE>
FORM 10-K Page 252
Exhibit 10.1 (continued)
Employees' Retirement Plan
Appendix A - Actuarial Equivalence Assumptions, Methods and
Tables
1. Lump Sums - for purposes of determining single lump sums
pursuant to Sections 7.02 and 8.03 of the Plan:
(a) Mortality: The UP-1984 Mortality Table.
(b) Interest: The "applicable interest rate."
For this purpose, the "applicable interest rate"
shall mean the interest rate which would be used,
determined as of the first day of the Plan Year in
which the termination of employment giving rise to
such distribution occurs, by the Pension Benefit
Guaranty Corporation for the purpose of determining
the present value of a lump-sum distribution on
plan termination.
Factors for computations under this Section shall be
redetermined annually and set forth in tables provided by
the Actuary.
2. Commencement before Normal Retirement Date of Early
Retirement Benefit
The Early Retirement benefit payable at Normal Retirement
Date under Method 1 is reduced by .25% for each month by
which the Annuity Starting Date precedes Normal
Retirement Date. Factors for such amounts are set forth
in Table I. Factors reflecting such early reduction,
combined with a conversion to Method 2 per item 4, below,
are set forth in Table II.
3. Commencement before Normal Retirement Date of Terminated
Vested Benefit
The early commencement benefit payable under Method 1
prior to Normal Retirement Date pursuant to Section
7.02(c) or 8.03 shall equal the Accrued Benefit payable
at age 65 multiplied by the early commencement factors as
of the Annuity Starting Date set forth in Table IV, based
on the following assumptions:
(a) Mortality: The UP-1984 Mortality Table
(b) Interest: 7.75% per annum
<PAGE>
FORM 10-K Page 252a
Exhibit 10.1 (continued)
4. Annuity Conversion Factors
For purposes of converting a benefit payable under Method
1 to a benefit payable under Method 2 or Method 3;
(a) Mortality: The UP-1984 Mortality Table
(b) Interest: 9.5% per annum
Factors reflecting such conversions are set forth in
Tables II, III and V.
Appendix A - Actuarial Equivalence Assumptions, Methods and
Tables
5. Reduction for Distributions on or after Annuity Starting
Dates per Sections 4.07 and 7.03
If, as of a particular Annuity Starting Date, prior
distributions with respect to periods of Accredited
Service recognized under this Plan as of such ASD have
been made, then the new benefits payable under the Plan
as of such Annuity Starting Date shall be reduced in
accordance with the following methods and assumptions:
(a) If the prior distribution was a lump sum, then the
Accrued Benefit under the Plan shall be reduced by
the Accrued Benefit which gave rise to the prior
lump sum.
(b) If the prior distribution is being distributed in a
form other than a lump sum, then the Accrued
Benefit under the Plan shall be reduced by the
Actuarial Equivalent of the prior distribution
(determined as follows) with such prior
distribution continuing in force without
interruption:
i. If necessary, convert the amount of the prior
distribution into the amount that would have
been payable under Method 1 at that time,
based on factors in Tables 3 and 5.
ii. Convert (i) to an actuarially equivalent
amount starting at the new Annuity Starting
Date under Method 1, based on (v) and (vi),
below and Table VI.
<PAGE>
FORM 10-K Page 252b
Exhibit 10.1 (continued)
iii. Subtract the amount determined in (ii) from
the benefit otherwise payable under Method 1
at the new Annuity Starting date without
regard to such prior distributions (result
cannot be less than $0).
iv. Convert the amount determined in (iii) to the
form of benefit (if other than Method 1)
elected by the Member as of the new Annuity
Starting Date.
v. Interest: 5% per annum
vi. Mortality: The UP-1984 Mortality Table.
6. Adjusting Maximum Retirement Benefits Payable under
Optional Forms Pursuant to Section 415
(a) Mortality: The UP-1984 Mortality Table
(b) Interest: 5% per annum
Appendix A - Actuarial Equivalence Assumptions, Methods and
Tables
7. Adjusting Maximum Retirement Benefits for commencement
before age 62 or after Social Security Normal Retirement
Age pursuant to IRC Section 415
Applicable tables are furnished annually by the Actuary;
amounts vary by year of commencement, and are based on
the following:
(a) Mortality: UP-1984 Mortality Table
(b) Interest: 5% prior to age 62,0% after Social
Security Normal Retirement Age.
<PAGE>
FORM 10-K Page 253
Exhibit 10.1 (continued)
<TABLE> Table I
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARLY RETIREMENT FACTORS
PLAN PERCENTAGES FOR EARLY PAYMENT OF METHOD 1:
LIFE ANNUITY WITH 120 MONTHS CERTAIN
Attained Age Plus Additional Months As Indicated
Attained Benefit ----------------------------------------------------------------------------
Age % 1 2 3 4 5 6 7 8 9 10 11
- -------- ------------------------------------------------------------------------------------
55 0.7000 0.7025 0.7050 0.7075 0.7100 0.7125 0.7150 0.7175 0.7200 0.7225 0.7250 0.7275
56 0.7300 0.7325 0.7350 0.7375 0.7400 0.7425 0.7450 0.7475 0.7500 0.7525 0.7550 0.7575
57 0.7600 0.7625 0.7650 0.7675 0.7700 0.7725 0.7750 0.7775 0.7800 0.7825 0.7850 0.7875
58 0.7900 0.7925 0.7950 0.7975 0.8000 0.8025 0.8050 0.8075 0.8100 0.8125 0.8150 0.8175
59 0.8200 0.8225 0.8250 0.8275 0.8300 0.8325 0.8350 0.8375 0.8400 0.8425 0.8450 0.8475
60 0.8500 0.8525 0.8550 0.8575 0.8600 0.8625 0.8650 0.8675 0.8700 0.8725 0.8750 0.8775
61 0.8800 0.8825 0.8850 0.8875 0.8900 0.8925 0.8950 0.8975 0.9000 0.9025 0.9050 0.9075
62 0.9100 0.9125 0.9150 0.9175 0.9200 0.9225 0.9250 0.9275 0.9300 0.9325 0.9350 0.9375
63 0.9400 0.9425 0.9450 0.9475 0.9500 0.9525 0.9550 0.9575 0.9600 0.9625 0.9650 0.9675
64 0.9700 0.9725 0.9750 0.9775 0.9800 0.9825 0.9850 0.9875 0.9900 0.9925 0.9950 0.9975
65 1.0000
</TABLE>
<PAGE>
FORM 10-K Page 254
Exhibit 10.1 (continued) Table II
EARLY RETIREMENT FACTORS
PLAN PERCENTAGES FOR EARLY PAYMENT OF METHOD 2:
LIFE INCOME ONLY
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Attained Age Plus Additional Months As Indicated
Attained Benefit ----------------------------------------------------------------------------
Age % 1 2 3 4 5 6 7 8 9 10 11
- -------- ------------------------------------------------------------------------------------
55 0.7242 0.7269 0.7297 0.7325 0.7353 0.7382 0.7410 0.7438 0.7466 0.7494 0.7523 0.7551
56 0.7579 0.7608 0.7636 0.7665 0.7693 0.7722 0.7750 0.7779 0.7808 0.7837 0.7865 0.7894
57 0.7922 0.7951 0.7980 0.8010 0.8038 0.8067 0.8096 0.8126 0.8155 0.8184 0.8213 0.8242
58 0.8271 0.8301 0.8331 0.8360 0.8390 0.8420 0.8449 0.8479 0.8509 0.8539 0.8568 0.8598
59 0.8628 0.8658 0.8689 0.8719 0.8749 0.8780 0.8810 0.8841 0.8871 0.8902 0.8932 0.8962
60 0.8993 0.9024 0.9055 0.9086 0.9117 0.9149 0.9179 0.9210 0.9242 0.9273 0.9304 0.9336
61 0.9367 0.9399 0.9431 0.9463 0.9495 0.9527 0.9559 0.9591 0.9623 0.9655 0.9687 0.9719
62 0.9752 0.9785 0.9817 0.9850 0.9883 0.9916 0.9949 0.9982 1.0015 1.0048 1.0081 1.0114
63 1.0147 1.0181 1.0215 1.0249 1.0283 1.0317 1.0351 1.0385 1.0420 1.0454 1.0488 1.0523
64 1.0557 1.0591 1.0627 1.0662 1.0697 1.0732 1.0767 1.0802 1.0838 1.0873 1.0908 1.0944
65 1.0979
Actuarial Basis: The UP84 (0,0) Table at 9.5%
</TABLE>
<PAGE>
FORM 10-K Page 255
Exhibit 10.1 (continued)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Table III
JOINT AND 50PC SURVIVOR OPTION FACTORS
FACTORS TO CONVERT A 10 YEAR C AND C ANNUITY AT RETIREMENT AGE SHOWN INTO
A JOINT AND SURVIVOR ANNUITY PAYABLE TO RETIRED EMPLOYEE FOR LIFE AND, AFTER HIS
DEATH, 50PC CONTINUATION DURING REMAINING LIFETIME OF SURVIVING CONTINGENT ANNUITANT
Age of Age of Employee at Retirement
Contingent ----------------------------------------------------------------------
Annuitant 55 56 57 58 59 60 61 62
-------- -------- -------- -------- -------- -------- -------- -------- --------
35 0.9426 0.9394 0.9362 0.9329 0.9297 0.9264 0.9232 0.9200
36 0.9438 0.9407 0.9375 0.9343 0.9310 0.9278 0.9247 0.9215
37 0.9451 0.9420 0.9388 0.9357 0.9325 0.9293 0.9262 0.9231
38 0.9464 0.9433 0.9402 0.9371 0.9340 0.9309 0.9278 0.9248
39 0.9478 0.9448 0.9417 0.9387 0.9356 0.9325 0.9295 0.9266
40 0.9492 0.9462 0.9433 0.9403 0.9373 0.9343 0.9313 0.9284
41 0.9507 0.9478 0.9449 0.9419 0.9390 0.9361 0.9332 0.9304
42 0.9522 0.9494 0.9466 0.9437 0.9408 0.9380 0.9352 0.9324
43 0.9538 0.9511 0.9483 0.9455 0.9427 0.9400 0.9372 0.9345
44 0.9555 0.9528 0.9501 0.9474 0.9447 0.9420 0.9394 0.9368
45 0.9572 0.9546 0.9520 0.9494 0.9468 0.9442 0.9416 0.9391
46 0.9589 0.9564 0.9539 0.9514 0.9489 0.9464 0.9439 0.9415
47 0.9607 0.9584 0.9559 0.9535 0.9511 0.9487 0.9463 0.9440
48 0.9626 0.9603 0.9580 0.9557 0.9533 0.9510 0.9488 0.9466
49 0.9645 0.9623 0.9601 0.9579 0.9557 0.9535 0.9514 0.9493
50 0.9664 0.9644 0.9623 0.9602 0.9581 0.9560 0.9540 0.9520
51 0.9684 0.9664 0.9645 0.9625 0.9605 0.9586 0.9567 0.9549
52 0.9704 0.9686 0.9667 0.9649 0.9630 0.9612 0.9595 0.9578
53 0.9724 0.9707 0.9690 0.9673 0.9656 0.9639 0.9624 0.9608
54 0.9745 0.9729 0.9713 0.9698 0.9682 0.9667 0.9653 0.9639
55 0.9766 0.9751 0.9737 0.9723 0.9709 0.9695 0.9683 0.9671
56 0.9787 0.9774 0.9761 0.9748 0.9736 0.9724 0.9713 0.9703
57 0.9808 0.9797 0.9785 0.9774 0.9763 0.9753 0.9744 0.9735
58 0.9829 0.9819 0.9809 0.9800 0.9791 0.9783 0.9775 0.9769
59 0.9851 0.9842 0.9834 0.9826 0.9819 0.9812 0.9807 0.9802
60 0.9872 0.9865 0.9858 0.9852 0.9847 0.9842 0.9839 0.9836
61 0.9893 0.9888 0.9883 0.9879 0.9875 0.9872 0.9871 0.9871
62 0.9914 0.9911 0.9907 0.9905 0.9903 0.9903 0.9903 0.9905
63 0.9935 0.9933 0.9932 0.9931 0.9931 0.9933 0.9936 0.9940
64 0.9956 0.9955 0.9956 0.9957 0.9959 0.9963 0.9968 0.9974
65 0.9976 0.9977 0.9979 0.9982 0.9987 0.9992 1.0000 1.0009
66 0.9996 0.9999 1.0003 1.0007 1.0014 1.0022 1.0031 1.0043
67 1.0015 1.0020 1.0025 1.0032 1.0040 1.0051 1.0063 1.0077
68 1.0034 1.0040 1.0048 1.0056 1.0067 1.0079 1.0093 1.0110
69 1.0053 1.0060 1.0069 1.0080 1.0092 1.0107 1.0124 1.0142
70 1.0071 1.0080 1.0091 1.0103 1.0118 1.0134 1.0153 1.0175
71 1.0088 1.0099 1.0112 1.0126 1.0143 1.0161 1.0183 1.0207
72 1.0105 1.0118 1.0132 1.0148 1.0167 1.0188 1.0211 1.0238
73 1.0122 1.0136 1.0152 1.0170 1.0190 1.0213 1.0239 1.0268
74 1.0138 1.0153 1.0171 1.0191 1.0213 1.0238 1.0266 1.0298
Actuarial Basis: The UP84 (0,0) Table at 9.5%
</TABLE>
FORM 10-K Page 256
Exhibit 10.1 (continued) Table III
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JOINT AND 50PC SURVIVOR OPTION FACTORS
FACTORS TO CONVERT A 10 YEAR C AND C ANNUITY AT RETIREMENT AGE SHOWN INTO
A JOINT AND SURVIVOR ANNUITY PAYABLE TO RETIRED EMPLOYEE FOR LIFE AND, AFTER HIS
DEATH, 50PC CONTINUATION DURING REMAINING LIFETIME OF SURVIVING CONTINGENT ANNUITANT
Age of Age of Employee at Retirement
Contingent ----------------------------------------------------------------------
Annuitant 63 64 65 66 67 68 69 70
-------- -------- -------- -------- -------- -------- -------- -------- --------
35 0.9169 0.9139 0.9110 0.9081 0.9054 0.9029 0.9006 0.8987
36 0.9185 0.9155 0.9126 0.9098 0.9072 0.9047 0.9024 0.9005
37 0.9201 0.9172 0.9143 0.9116 0.9090 0.9066 0.9044 0.9025
38 0.9219 0.9190 0.9162 0.9135 0.9109 0.9086 0.9064 0.9046
39 0.9237 0.9208 0.9181 0.9155 0.9130 0.9107 0.9086 0.9068
40 0.9256 0.9228 0.9201 0.9176 0.9151 0.9129 0.9109 0.9092
41 0.9276 0.9249 0.9223 0.9198 0.9174 0.9152 0.9133 0.9117
42 0.9297 0.9271 0.9246 0.9221 0.9198 0.9177 0.9158 0.9143
43 0.9319 0.9294 0.9269 0.9246 0.9224 0.9203 0.9185 0.9171
44 0.9342 0.9318 0.9294 0.9272 0.9250 0.9231 0.9214 0.9200
45 0.9366 0.9343 0.9320 0.9298 0.9278 0.9259 0.9243 0.9231
46 0.9392 0.9369 0.9347 0.9327 0.9307 0.9290 0.9274 0.9263
47 0.9418 0.9396 0.9375 0.9356 0.9338 0.9321 0.9307 0.9297
48 0.9445 0.9424 0.9405 0.9386 0.9369 0.9354 0.9341 0.9332
49 0.9473 0.9453 0.9435 0.9418 0.9402 0.9388 0.9377 0.9369
50 0.9502 0.9484 0.9467 0.9451 0.9437 0.9424 0.9414 0.9407
51 0.9532 0.9515 0.9499 0.9485 0.9472 0.9461 0.9452 0.9447
52 0.9562 0.9547 0.9533 0.9520 0.9509 0.9499 0.9492 0.9489
53 0.9594 0.9580 0.9568 0.9557 0.9547 0.9539 0.9534 0.9532
54 0.9626 0.9614 0.9604 0.9594 0.9586 0.9580 0.9576 0.9577
55 0.9659 0.9649 0.9641 0.9633 0.9627 0.9622 0.9621 0.9623
56 0.9693 0.9685 0.9678 0.9673 0.9668 0.9666 0.9666 0.9671
57 0.9728 0.9722 0.9717 0.9713 0.9711 0.9711 0.9714 0.9720
58 0.9763 0.9759 0.9756 0.9755 0.9755 0.9757 0.9762 0.9771
59 0.9799 0.9797 0.9796 0.9797 0.9800 0.9804 0.9812 0.9823
60 0.9835 0.9836 0.9837 0.9840 0.9845 0.9852 0.9863 0.9877
61 0.9872 0.9875 0.9879 0.9884 0.9892 0.9902 0.9914 0.9932
62 0.9909 0.9914 0.9920 0.9929 0.9939 0.9951 0.9967 0.9988
63 0.9946 0.9953 0.9963 0.9974 0.9987 1.0002 1.0021 1.0044
64 0.9983 0.9993 1.0005 1.0019 1.0035 1.0053 1.0075 1.0102
65 1.0020 1.0032 1.0047 1.0064 1.0083 1.0104 1.0130 1.0160
66 1.0056 1.0072 1.0089 1.0109 1.0131 1.0156 1.0185 1.0218
67 1.0093 1.0111 1.0131 1.0154 1.0179 1.0207 1.0240 1.0277
68 1.0128 1.0149 1.0173 1.0199 1.0227 1.0259 1.0294 1.0336
69 1.0164 1.0187 1.0214 1.0243 1.0275 1.0310 1.0349 1.0395
70 1.0199 1.0225 1.0255 1.0287 1.0322 1.0361 1.0404 1.0454
71 1.0233 1.0263 1.0295 1.0331 1.0369 1.0412 1.0459 1.0513
72 1.0267 1.0300 1.0335 1.0374 1.0416 1.0462 1.0513 1.0571
73 1.0300 1.0336 1.0374 1.0417 1.0462 1.0512 1.0567 1.0630
74 1.0333 1.0371 1.0413 1.0458 1.0507 1.0561 1.0620 1.0687
Actuarial Basis: The UP84 (0,0) Table at 9.5%
</TABLE>
<PAGE>
FORM 10-K Page 257
Exhibit 10.1 (continued) Table IV
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ACTUARIAL EQUIVALENT FACTORS TO CONVERT A
MONTHLY LIFE ANNUITY WITH 120 PAYMENTS CERTAIN PAYABLE AT AGE 65
TO AN IMMEDIATE MONTHLY LIFE ANNUITY WITH 120 PAYMENTS CERTAIN
Attained Age Plus Additional Months As Indicated
Attained Acct. ---------------------------------------------------------------------------
Age Equiv. 1 2 3 4 5 6 7 8 9 10 11
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
55 0.3584 0.3614 0.3644 0.3674 0.3704 0.3734 0.3765 0.3795 0.3825 0.3855 0.3885 0.3915
56 0.3945 0.3979 0.4012 0.4046 0.4080 0.4113 0.4147 0.4181 0.4214 0.4248 0.4282 0.4315
57 0.4349 0.4387 0.4424 0.4462 0.4499 0.4537 0.4575 0.4612 0.4650 0.4687 0.4725 0.4762
58 0.4800 0.4842 0.4884 0.4926 0.4968 0.5010 0.5053 0.5095 0.5137 0.5179 0.5221 0.5263
59 0.5305 0.5352 0.5399 0.5447 0.5494 0.5541 0.5588 0.5635 0.5682 0.5730 0.5777 0.5824
60 0.5871 0.5924 0.5977 0.6030 0.6083 0.6136 0.6190 0.6243 0.6296 0.6349 0.6402 0.6455
61 0.6508 0.6568 0.6628 0.6688 0.6747 0.6807 0.6867 0.6927 0.6987 0.7047 0.7106 0.7166
62 0.7226 0.7294 0.7361 0.7429 0.7496 0.7564 0.7632 0.7699 0.7767 0.7834 0.7902 0.7969
63 0.8037 0.8114 0.8190 0.8267 0.8343 0.8420 0.8497 0.8573 0.8650 0.8726 0.8803 0.8879
64 0.8956 0.9043 0.9130 0.9217 0.9304 0.9391 0.9478 0.9565 0.9652 0.9739 0.9826 0.9913
65 1.0000
Actuarial Basis: The UP84 (0,0) Table at 7.75%
</TABLE>
<PAGE>
FORM 10-K Page 258
Exhibit 10.1 (continued) Table V
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FACTORS TO CONVERT A 10 YEAR CERTAIN AND LIFE ANNUITY
TO A STRAIGHT LIFE ANNUITY AT AGES SHOWN
Attained Age Plus Additional Months As Indicated
Attained Benefit --------------------------------------------------------------------------
Age % 1 2 3 4 5 6 7 8 9 10 11
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
55 1.0345 1.0348 1.0351 1.0354 1.0357 1.0360 1.0364 1.0367 1.0370 1.0373 1.0376 1.0379
56 1.0382 1.0386 1.0389 1.0393 1.0396 1.0400 1.0403 1.0407 1.0410 1.0414 1.0417 1.0421
57 1.0424 1.0428 1.0432 1.0436 1.0439 1.0443 1.0447 1.0451 1.0455 1.0459 1.0462 1.0466
58 1.0470 1.0474 1.0479 1.0483 1.0487 1.0492 1.0496 1.0500 1.0505 1.0509 1.0513 1.0518
59 1.0522 1.0527 1.0532 1.0537 1.0541 1.0546 1.0551 1.0556 1.0561 1.0566 1.0570 1.0575
60 1.0580 1.0585 1.0591 1.0596 1.0601 1.0607 1.0612 1.0617 1.0623 1.0628 1.0633 1.0639
61 1.0644 1.0650 1.0656 1.0662 1.0668 1.0674 1.0680 1.0686 1.0692 1.0698 1.0704 1.0710
62 1.0716 1.0723 1.0729 1.0736 1.0742 1.0749 1.0756 1.0762 1.0769 1.0775 1.0782 1.0788
63 1.0795 1.0802 1.0810 1.0817 1.0824 1.0832 1.0839 1.0846 1.0854 1.0861 1.0868 1.0876
64 1.0883 1.0891 1.0899 1.0907 1.0915 1.0923 1.0931 1.0939 1.0947 1.0955 1.0963 1.0971
65 1.0979 1.0988 1.0996 1.1005 1.1014 1.1022 1.1031 1.1040 1.1048 1.1057 1.1066 1.1074
66 1.1083 1.1093 1.1102 1.1112 1.1121 1.1131 1.1140 1.1150 1.1159 1.1169 1.1178 1.1188
67 1.1197 1.1207 1.1218 1.1228 1.1238 1.1249 1.1259 1.1269 1.1280 1.1290 1.1300 1.1311
68 1.1321 1.1332 1.1344 1.1355 1.1367 1.1378 1.1390 1.1401 1.1412 1.1424 1.1435 1.1447
69 1.1458 1.1471 1.1484 1.1497 1.1509 1.1522 1.1535 1.1548 1.1561 1.1574 1.1586 1.1599
70 1.1612 1.1626 1.1641 1.1655 1.1669 1.1684 1.1698 1.1712 1.1727 1.1741 1.1755 1.1770
71 1.1784 1.1800 1.1816 1.1832 1.1848 1.1864 1.1881 1.1897 1.1913 1.1929 1.1945 1.1961
72 1.1977 1.1995 1.2013 1.2031 1.2049 1.2067 1.2086 1.2104 1.2122 1.2140 1.2158 1.2176
73 1.2194 1.2214 1.2234 1.2254 1.2274 1.2294 1.2314 1.2334 1.2354 1.2374 1.2394 1.2414
74 1.2434 1.2456 1.2478 1.2501 1.2523 1.2545 1.2568 1.2590 1.2612 1.2634 1.2657 1.2679
75 1.2701 1.2726 1.2750 1.2775 1.2800 1.2824 1.2849 1.2874 1.2898 1.2923 1.2948 1.2972
76 1.2997 1.3024 1.3051 1.3078 1.3105 1.3132 1.3159 1.3186 1.3213 1.3240 1.3267 1.3294
77 1.3321 1.3351 1.3380 1.3410 1.3439 1.3469 1.3499 1.3528 1.3558 1.3587 1.3617 1.3646
78 1.3676 1.3709 1.3742 1.3774 1.3807 1.3840 1.3873 1.3905 1.3938 1.3971 1.4004 1.4036
79 1.4069 1.4105 1.4141 1.4177 1.4213 1.4249 1.4285 1.4321 1.4357 1.4393 1.4429 1.4465
80 1.4501 1.4541 1.4580 1.4620 1.4659 1.4699 1.4738 1.4778 1.4817 1.4857 1.4896 1.4936
81 1.4975 1.5018 1.5061 1.5105 1.5148 1.5191 1.5234 1.5277 1.5320 1.5364 1.5407 1.5450
82 1.5493 1.5540 1.5587 1.5634 1.5681 1.5728 1.5776 1.5823 1.5870 1.5917 1.5964 1.6011
83 1.6058 1.6110 1.6162 1.6214 1.6265 1.6317 1.6369 1.6421 1.6473 1.6525 1.6576 1.6628
84 1.6680 1.6737 1.6795 1.6852 1.6909 1.6966 1.7024 1.7081 1.7138 1.7195 1.7253 1.7310
85 1.7367
Actuarial Basis: The UP84 (0,0) Table at 9.5%
</TABLE>
<PAGE>
FORM 10-K Page 259
Exhibit 10.1 (continued) Table VI
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FACTORS TO CONVERT MONTHLY PAYMENTS OF A 10 YEAR CERTAIN AND LIFE BENEFIT
BEGINNING AT A STATED AGE TO ITS ACTUARIAL EQUIVALENT BEGINNING AT A LATER AGE
Age at
Subsequent
Annuity Age at Original Annuity Starting Date
Starting ---------------------------------------------------------------------------------------------------------------------
Age 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71
- ---------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
55 1.0000
56 1.0819 1.0000
57 1.1725 1.0837 1.0000
58 1.2730 1.1766 1.0857 1.0000
59 1.3847 1.2799 1.1810 1.0878 1.0000
60 1.5093 1.3951 1.2873 1.1857 1.0900 1.0000
61 1.6487 1.5239 1.4062 1.2952 1.1907 1.0924 1.0000
62 1.8052 1.6685 1.5396 1.4181 1.3036 1.1960 1.0949 1.0000
63 1.9813 1.8313 1.6898 1.5565 1.4309 1.3127 1.2017 1.0976 1.0000
64 2.1803 2.0153 1.8596 1.7128 1.5746 1.4446 1.3225 1.2078 1.1005 1.0000
65 2.4061 2.2239 2.0521 1.8901 1.7376 1.5942 1.4594 1.3329 1.2144 1.1035 1.0000
66 2.6630 2.4614 2.2712 2.0920 1.9232 1.7644 1.6152 1.4752 1.3441 1.2214 1.1068 1.0000
67 2.9566 2.7328 2.5216 2.3226 2.1352 1.9589 1.7933 1.6379 1.4922 1.3560 1.2288 1.1103 1.0000
68 3.2934 3.0441 2.8089 2.5872 2.3785 2.1821 1.9976 1.8245 1.6623 1.5105 1.3688 1.2367 1.1139 1.0000
69 3.6816 3.4029 3.1400 2.8922 2.6588 2.4393 2.2330 2.0395 1.8582 1.6886 1.5301 1.3825 1.2452 1.1179 1.0000
70 4.1311 3.8184 3.5234 3.2453 2.9834 2.7371 2.5057 2.2885 2.0850 1.8947 1.7170 1.5513 1.3973 1.2543 1.1221 1.0000
71 4.6543 4.3020 3.9696 3.6563 3.3613 3.0837 2.8230 2.5784 2.3491 2.1347 1.9344 1.7478 1.5742 1.4132 1.2642 1.1266 1.0000
Actuarial Basis: The UP84 (0,0) Table at 5%
</TABLE>
<PAGE>
FORM 10-K Page 260
Exhibit 10.9
CONE MILLS CORPORATION
1994 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
SECTION 1.
General Purpose of Plan; Definitions.
The name of this plan is the CONE MILLS CORPORATION 1994
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS (THE "PLAN").
The purpose of the Plan is to enable CONE MILLS CORPORATION
(the "Company") to compensate non-employee members of its
Board of Directors and to provide incentives to such members
which are linked directly to increases in shareholder value
and will therefore inure to the benefit of all shareholders of
the Company.
For the purposes of the Plan, the following terms shall
be defined as set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor thereto.
(c) "Company" or "Corporation" means CONE MILLS
CORPORATION,a corporation organized under the laws
of the State of North Carolina (or any successor
corporation).
(d) The Fair Market Value per share of the Common Stock
onany given date shall mean the last reported sale
price on the New York Stock Exchange composite tape
or, if no sale takes place on any day, the average
of the reported closing bid and asked prices on
that day.
(e) "Common Stock" means the Common Stock, $.10 par
value, of the Company.
(f) "Stock Option" means any option to purchase shares
of Common Stock granted pursuant to Section 5.
SECTION 2.
Administration
The Plan shall be administered by the Board of Directors
of the Corporation. The Board may in its discretion designate
or appoint a committee to administer the Plan and shall have
the right to remove members from, or add members to, the
Committee. Vacancies on the Committee, howsoever caused,
shall be filled by the Board of Directors.
<PAGE>
FORM 10-K Page 261
Exhibit 10.9 (continued)
Such Committee shall select one of its members as
Chairman and shall hold meetings at such times and places as
it may determine. Acts by a majority of the members of the
Committee at a meeting at which a quorum is present, or acts
reduced to or approved in writing by all of the members of the
Committee, shall be the valid acts of the Committee. Subject
to the provisions of the Plan, such Committee's authority
shall be limited to those powers granted to it by the Board.
Any function referenced herein as to be performed by the
Committee shall mean the Board if a Committee has not been
designated.
SECTION 3.
Shares Subject to Plan.
Shares of the Common Stock will be subject to options
granted under the Plan. Shares deliverable under the Plan
will be shares of the Corporation's authorized but unissued
Common Stock. Shares deliverable upon exercise of options
granted under the Plan will be issued or transferred on the
date that payment in full for such option shares is made.
The aggregate number of shares that may be purchased upon the
exercise of options granted under the Plan shall not exceed
100,000 shares of Common Stock, subject to adjustment as
provided in Section 5(f) of the Plan.
In the event that any outstanding option under the Plan
for any reason expires or is terminated, the shares of Common
Stock allocable to the unexercised portion of such option may
again be subject to an option under the Plan.
SECTION 4.
Eligibility.
Each Eligible Director shall receive Stock Options in
accordance with the provisions of Section 5. An Eligible
Director is defined as a director who at the time of the grant
is not an employee of the Corporation or its subsidiaries.
SECTION 5.
Stock Options.
Recipients of Stock Options shall enter into a stock
option agreement with the Company, which agreement shall set
forth, among other things, the exercise price of the option,
the term of the option and provisions regarding exercisability
of the option granted thereunder, and any restrictions on the
sale of shares received upon exercise of the option.
<PAGE>
FORM 10-K Page 262
Exhibit 10.9 (continued)
The Stock Options granted under the Plan are Non-
Qualified Stock Options.
Stock Options granted under the Plan shall be subject to
the following terms and conditions:
(a) Terms of the Grant. On the fifth business day after the
1994 Annual Meeting of Shareholders, each Eligible
Director shall be granted a Stock Option to purchase
1,000 shares of stock, and on the fifth business day
after each Annual Shareholders' Meeting of the Company
thereafter during the term of the Plan, each Eligible
Director shall be granted a Stock Option to purchase
1,000 shares of stock; provided, however, that such
options shall not be granted unless the Plan is approved
by the Company's shareholders at the Company's 1994
Annual Shareholders' Meeting. The option price per share
of stock purchasable under such Stock Options shall be
equal to the Fair Market Value of the stock on the date
of grant. The term of such option shall be seven years
from the date of grant unless terminated earlier pursuant
to Section 5(c).
(b) Non-transferability of Options. No Stock Options shall
be transferrable by the optionee otherwise than by will
or by the laws of descent and distribution.
(c) Exercise of Options. Subject to the provisions of
Section 5(e) with respect to an optionee's death, options
granted under the Plan may be exercised only while the
optionee is a director; provided, however, that the
optionee may exercise his or her options prior to their
expiration, in whole or in part, for a period of three
months after termination of directorship. Except as so
exercised, such options shall expire at the end of such
three-month period.
Options granted under the Plan shall be exercised by
the optionee's delivery to the Secretary of the
Corporation of written notice, which notice shall specify
the number of shares to be purchased. The date of actual
receipt by the Corporation of such notice shall be deemed
the date of exercise of the option. If the optionee
makes full payment for option shares in cash or by check,
such full payment shall accompany the notice of exercise
of the option.
<PAGE>
FORM 10-K Page 263
Exhibit 10.9 (continued)
If the optionee makes payment for option shares, in
whole or in part, by delivery of Common Stock, as
provided in Section 5(d) of the Plan, the optionee shall
deliver with the notice of exercise the duly endorsed
certificates evidencing such delivered shares. Upon
receipt of such notice and certificates, the Corporation
shall there upon determine the Fair Market Value of the
delivered shares as of the date of delivery of such
shares to the Corporation. If the Fair Market Value of
such delivered shares is equal to the option price for
the option shares, payment in full shall be deemed to
have been made. If the Fair Market Value of such
delivered shares is less than the option price for the
option shares, the Corporation shall promptly advise the
optionee of the balance due on the option price, which
amount shall then be promptly paid by the optionee. If
the Fair Market Value of such delivered shares is greater
than the option price for the option shares, the
Corporation shall promptly return to the optionee a
certificate (which may be a certificate delivered by the
optionee or, if necessary, a new certificate) evidencing
the smallest whole number of delivered shares which is
sufficient to reduce the Fair Market Value of the
remaining delivered shares to an amount equal to or less
than the option price of the option shares. Such
returned certificate shall be accompanied by a statement
of the balance due, if any, on the option price, which
amount shall then be promptly paid by the optionee. No
optionee shall be entitled to issuance of a certificate
evidencing option shares until payment in full for such
shares has been made as provided in this Section 5(c).
(d) Medium of Payment. The option price may be paid in cash
or by check or, in whole or in part by delivery to the
Corporation of duly endorsed certificates evidencing
shares of Common Stock.
(e) Death of Optionee. In the event of the death of an
optionee before the date of expiration of the options,
the optionee's personal representatives, or any person or
persons who shall have acquired the options by bequest or
inheritance from the optionee, shall have the right to
exercise the optionee's options prior to their
expiration, in whole or in part for a a period of one
year from and after the optionee's death. Except as so
exercised, such options shall expire at the end of such
one-year period.
<PAGE>
FORM 10-K Page 264
Exhibit 10.9 (continued)
(f) Merger, Consolidation or Sale of Assets;
Recapitalization. If the Corporation shall be a party to
any merger or consolidation in which it is not the
surviving corporationor pursuant to which the
shareholders of the Corporation exchange their Common
Stock, or if the Corporation shall dissolve or liquidate
or sell all or substantially all of its assets, all
options outstanding under this Plan shall terminate on
the effective date of such merger, consolidation,
dissolution, liquidation or sale; provided, however,
that, prior to such effective date, the Committee, in its
discretion, may authorize a payment to each optionee that
approximates the economic benefit that he would realize
if his option were exercised immediately before such
effective date, may authorize a payment in such other
amount as it deems appropriate to compensate each
optionee for the termination of his option, or may
arrange for the granting of a substitute option to each
optionee. Subject to any required action by the
shareholders of the Corporation, the number of shares of
Common Stock covered by each outstanding option, and the
option price per share, shall be proportionately adjusted
for any increase or decrease in the number of issued
shares of Common Stock of the Corporation resulting from
a subdivision or consolidation of shares or the payment
of a stock dividend (but only on the Common Stock) or any
other increase or decrease in the number of such shares
effected without receipt of consideration by the
Corporation. Such adjustments shall be made by the
Committee, whose determination in that respect shall be
final, binding and conclusive.
In the event of a change in the Common Stock of the
Corporation as presently constituted, which is limited to
a change of all of its authorized shares with par value
into the same number of shares with a different par value
or without par value, the shares resulting from any such
change shall be deemed to be Common Stock within the
meaning of the Plan.
The grant of an option under the Plan shall not
affectin any way the right or power of the Corporation to
make adjustments, reclassifications, reorganizations or
changes in its capital or business structure.
<PAGE>
FORM 10-K Page 265
Exhibit 10.9 (continued)
(g) Rights as a Shareholder. An optionee or a permitted
transferee of an option shall have no rights as a
shareholder with respect to any shares issuable or
deliverable pursuant to this Plan until the date of the
issuance of a stock certificate for such shares. No
adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the
record date is prior to the date such stock certificate
is issued, except as provided in Section 5(f) above.
(h) Compliance with Securities Laws. The options granted
under the Plan and the shares issuable pursuant to the
Plan may, at the option of the Corporation, be registered
under applicable federal and state securities laws, but
the Corporation shall have no obligation to undertake
such registrations and may, in lieu thereof, issue
options and shares hereunder only pursuant to applicable
exemptions from such registrations. In connection with
the granting of any option or the issuance of any shares,
the Corporation may require appropriate representations
from the optionee, including a representation that the
shares are being acquired for investment and not resale,
and take such other action as the Committee deems
necessary to assure compliance with such exemptions from
registration, including but not limited to placing
restrictive legends on certificates evidencing such
shares and delivering stop transfer instructions to the
Corporation's transfer agent. Notwithstanding any other
provision of the Plan, no shares will be issued pursuant
to this Plan unless said shares have been registered
under all applicable federal and state securities laws or
unless, in the opinion of counsel satisfactory to the
Corporation, exemptions from such registrations are
available. Awards granted hereunder shall be subject to
all conditions required under Rule 16b-3 to qualify the
Stock Option grant for any exception from the provisions
of Section 16(b) of the Securities Exchange Act of 1934
available under that Rule. Such conditions shall be set
forth in the Stock Option Agreement with the optionee.
SECTION 6.
Amendment and Termination.
The Board may at any time terminate, and from time to
time may amend or modify the Plan provided, however, (a) that
no amendment or modification may become effective without
approval of the amendment or modification by the shareholders
<PAGE>
FORM 10-K Page 266
Exhibit 10.9 (continued)
if shareholder approval is required to enable the Plan to
satisfy any applicable statutory or regulatory requirements,
or if the Board, on the advice of counsel, determines that
shareholder approval is otherwise necessary or desirable; (b)
that no amendment or modification shall be made more than once
every six months, other than to comport with changes in the
Internal Revenue Code or the rules promulgated thereunder; and
(c) that no amendment or modification shall increase the
number of shares subject to the Plan except to the extent
permitted by Section 5(f), change the individuals eligible to
receive options, or reduce the minimum option price.
No amendment, modification or termination of the Plan
shall in any manner adversely affect any Stock Options
theretofore granted under the Plan without the consent of the
Director holding such Stock Options.
SECTION 7.
General Provisions.
(a) Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation
arrangements, subject to shareholder approval if such
approval is required; and such arrangements may be either
generally applicable or applicable only in specific
cases. The adoption of the Plan shall not confer upon
any member of the Board any right to continued membership
on such Board.
(b) If required by applicable law and regulation, each
optionee must arrange with the company for the payment of
any federal, state or local income tax withholdings
applicable to the grant or exercise of the option before
the company shall be required to deliver a certificate
evidencing such shares purchased.
(c) No member of the Board or a Committee designated by the
Board, r any officer or employee of the Company acting on
behalf of the Board or such Committee, shall be
personally liable for any action, determination, or
interpretation taken or made in good faith with respect
to the Plan, and all members of the Board or Committee
and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in
respect of any such action, determination or
interpretation.
<PAGE>
FORM 10-K Page 267
Exhibit 10.9 (continued)
SECTION 8
Effective Date of Plan.
The plan shall be effective on the date it is adopted by
the Board, subject to the approval by the Company's
shareholders.
SECTION 9
Term of Plan.
No Stock Option shall be granted pursuant to the Plan on
or after the tenth anniversary of the date of the adoption of
the Plan by the Board of Directors, but awards theretofore
granted may extend beyond that date.
<PAGE>
FORM 10-K Page 268
Exhibit 10.10
CONE MILLS CORPORATION
1994 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of the day of ,
between Cone Mills Corporation, a North Carolina corporation
having its principal office at 1201 Maple Street, Greensboro,
North Carolina (hereinafter called the "Company"), and
, a non-employee director of the Company
(hereinafter called the "Option Holder").
WITNESSETH:
WHEREAS, the Board of Directors of the Company adopted on
August 19, 1993, and the shareholders approved on May ,
19 , the 1994 Stock Option Plan for Non-Employee Directors,
a copy of which is annexed hereto as Exhibit A (hereinafter
called the "Plan"); and
WHEREAS, the Plan provides that each Director who is not
an employee of the Company on the date of the grant shall be
granted on the fifth business day after each Annual
Shareholders' Meeting of the Company an option to purchase one
thousand (l,000) shares of Common Stock of the Company at the
option price per share equal to the fair market value of a
share of Common Stock as defined in the Plan on that date;
NOW, THEREFORE, in consideration of the mutual promises
and representations herein contained and other good and
valuable consideration, it is agreed by and between the
parties hereto as follows:
1. Subject to the Plan, the terms and provisions of which
are incorporated herein by reference, the Company hereby
grants to the Option Holder a Nonqualified Option to purchase,
on the terms and subject to the conditions hereinafter set
forth, all or any part of an aggregate of one thousand (1,000)
shares of the Common Stock ($0.10 par value) of the Company at
the purchase price of $ per share (the "Option"),
exercisable in the amounts and at the times set forth in this
paragraph 1. Unless sooner terminated as provided in Section
5(c) of the Plan or in this Agreement, the Option shall
terminate, and all rights of the Option Holder hereunder shall
expire, on May , 2001.
<PAGE>
FORM 10-K Page 269
Exhibit 10.10 (continued)
2. Subject to Section 6 of this Agreement, the option or any
part thereof may be exercised in the manner provided in
Section 5(c) of the Plan. Payment of the aggregate option
price for the number of shares purchased shall be made in the
manner provided in Section 5(d) of the Plan.
3. The Option or any part thereof may be exercised only
while the Option Holder is a director of the Company or during
the three month period after of the directorship, except as
provided in Section 5(e) of the Plan pertaining to exercise
rights upon the death of the Option Holder.
4. Except as provided in Section 5(e) of the Plan with
respect to transfers upon the death of the Option Holder, the
Option shall not be transferred, assigned, pledged or
hypothecated in any way, whether by operation of law or
otherwise. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of the Option or any right of
privilege confirmed hereby contrary to the provisions hereof,
the Option and the rights and privileges confirmed hereby
shall immediately become null and void.
5. If the Company shall be a party to any merger of
consolidation in which it is not the surviving corporation or
pursuant to which the shareholders of the Company exchange
their Common Stock, or if the Company shall dissolve or
liquidate or sell all or substantially all of its assets, all
options outstanding under this Plan shall terminate on the
effective date of such merger, consolidation, dissolution,
liquidation or sale; provided, however, that the Board of
Directors, in its discretion, may authorize a payment to each
optionee that approximates the economic benefit that the
optionee would realize if the option were exercised
immediately before such effective date, may authorize a
payment in such other amount as it deems appropriate to
compensate each optionee for the termination of this option,
or may arrange for the granting of a substitute option to each
optionee.
6. The Option Holder acknowledges that, upon exercise of the
option, he or she will recognize ordinary income for federal
and state income tax purposes (generally in an amount equal to
the difference between the fair market value of the purchased
shares on the date of exercise and the option price therefor)
and the company will be entitled to a corresponding deduction
and that, consequently, no exercise of the option will be
effective until he or she has paid, or made arrangements for
payment, to the company at an amount equal to the income and
<PAGE>
FORM 10-K Page 270
Exhibit 10.10 (continued)
other taxes that the company is required to withhold, if any,
from the Option Holder as a result of his or her exercise of
the option.
7. The Option Holder agrees that the shares issued upon the
exercise of the option shall not be sold prior to six (6)
months after the date of the grant of the option and if the
shares are issued prior to such date, the share certificates
will be issued with a restrictive legend barring such transfer
prior to the expiration of such time period.
8. Any notice to be given to the Company shall be addressed
to the Secretary of the Company at 1201 Maple Street,
Greensboro, North Carolina 27405.
9. Nothing herein contained shall affect the right of the
Option Holder to participate in and receive benefits under and
in accordance with the provisions of any benefit plan or
program of the Company as in effect from time to time and for
which the director is otherwise eligible.
10. This Agreement shall be binding upon and inure to the
benefit of the Option Holder, his personal representatives,
heirs and legatees, but neither this Agreement nor any rights
hereunder shall be assignable or otherwise transferable by the
Option Holder except as expressly set forth in this Agreement
or in the Plan.
11. Other terms and conditions:
CONE MILLS CORPORATION
By
<PAGE>
FORM 10-K Page 271
Exhibit 10.12
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated December 3, 1993, by and
between Dewey L. Trogdon ("Trogdon") and Cone Mills
Corporation (the "Company").
RECITAL
Trogdon retired from active service as an employee of the
Company, effective March 31, 1992. Because of his familiarity
with the business and affairs of the Company, Trogdon was in
a position to provide valuable consultation and advice to the
Company and the Company desired to obtain such consultation
and advice. Accordingly, the Company agreed to retain Trogdon
as a consultant, and Trogdon agreed to provide consulting
services, during the period beginning April 1, 1992, and
ending December 31, 1992, pursuant to a Consulting Agreement
dated December 19, 1991. The Company and Trogdon agreed to an
extension of the consulting arrangement through 1993 pursuant
to a Consulting Agreement dated November 19, 1992. The
Company and Trogdon have agreed to continue the consulting
arrangement during the period beginning January 1, 1994, and
ending December 31, 1994 (the "Consulting Period").
NOW, THEREFORE, Trogdon and the Company agree as follows:
1. Consulting Services. Subject to the terms and
provisions of this Agreement, the Company hereby engages
Trogdon to perform consulting services during the Consulting
Period. Trogdon hereby accepts such engagement and agrees to
render such consulting services pertaining to the business of
the Company as the Chief Executive Officer of Cone shall
request from time to time during the Consulting Period.
2. Fees. During the Consulting Period, the Company
shall pay to Trogdon a consulting fee of $15,000 per calendar
quarter (payable on March 31, 1994, June 30, 1994, September
30, 1994, and December 31, 1994) and, in addition, shall
reimburse Trogdon for any travel and entertainment expenses
reasonably incurred by him in connection with rendering
consulting services hereunder upon submission of appropriate
documentation therefor.
<PAGE>
FORM 10-K Page 272
Exhibit 10.12 (continued)
3. Independent Contractor. During the Consulting
Period, Trogdon shall be an independent contractor and not an
employee of the Company. Accordingly, Trogdon shall determine
when, where and how the consulting services required of him
under this Agreement will be performed, shall be responsible
for the payment of all employment, income and other taxes
payable by reason of his receipt of consulting fees under this
Agreement, and shall not be eligible to participate in any
pension, profit sharing, health, disability, life, or other
employee benefit plan or program maintained by the Company.
4. Termination by Death. If Trogdon dies during the
Consulting Period, this Agreement shall thereupon terminate,
but the Company shall pay to Trogdon's estate all consulting
fees and unremibursed expenses to which he would otherwise
have been entitled under this Agreement through the end of the
Consulting Period.
5. Entire Contract. This Agreement constitutes the
entire contract and agreement of the parties and supersedes
and replaces all other prior agreements and understandings,
both written and
oral, with respect to the performance of personal services by
Trogdon for the Company during the Consulting Period.
6. Miscellaneous. This Agreement may not be amended or
modified except by an instrument in writing signed by the
party against whom any such modification or amendment is
sought to be enforced. No waier of any breach of this
Agreement shall operate or be construed as a waiver of any
subsequent breach. This Agreement shall be construed in
accordance with the laws and judicial decisions of the State
of North Carolina.
IN WITNESS WHEREOF, Trogdon and the Company have signed
this Agreement on the day and year first above written.
/S/ Dewey L. Trogdon
Dewey L. Trogdon
CONE MILLS CORPORATION
By: /S/ J. Patrick Danahy
J. Patrick Danahy,
President
<PAGE>
FORM 10-K Page 273
CONE MILLS CORPORATION AND SUBSIDIARIES
EXHIBIT 21 - SUBSIDIARIES
Percentage
State or of Voting
Jurisdiction of Securities
Name Address Incorporation Owned
Boelas Pipeline Greensboro, NC North Carolina 100 %
Corporation
Cliffside Railroad Cliffside, NC North Carolina 98
Company
Cornwallis Development Greensboro, NC North Carolina 100
Company
House 'N Home New York, NY New York 100
Fabrics and
Draperies, Inc.
Cone Mills International Greensboro, NC North Carolina 100
Corporation
Cone Foreign Sales Greensboro, NC U.S. Virgin Islands 100
Corporation
Cone Mills (Mexico), S.A. Mexico City Mexico, D. F. 99
de C.V.
<PAGE>
FORM 10-K Page 274
Exhibit 23.1
McGLADREY & PULLEN
Certified Public Accountants and Consultants
CONSENT OF McGLADREY & PULLEN, INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in
Cone Mills Corporation's Registration Statements on Form S-8
(Nos. 33-31977; 33-31979; 33-51951; 33-51953 and 33-67800)
of our reports, dated February 11, 1994, except for Note 17
as to which the date is March 8, 1994, with respect to the
consolidated financial statements and schedules included in
the Annual Report on Form 10-K of Cone Mills Corporation for
the fiscal year ended January 2, 1994.
McGLADREY & PULLEN
Greensboro, North Carolina
March 21, 1994
<PAGE>
FORM 10-K Page 275
Exhibit 23.3
CONSENT OF ROBINSON, BRADSHAW & HINSON, P.A.
We hereby consent to the incorporation by reference into
Cone Mills Corporation's Registration Statements on Form S-8
(Nos. 33-31977, 33-31979, 33-67800, 33-51951 and 33-51953) of
the references to our firm and opinion with respect to the
litigation between Elmore et al. and Cone Mills Corporation et
al. as described in this Form 10-K under Item 3-Legal
Proceedings, Item 7-Management's Discussion and Analysis of
Results of Operations and Financial Condition and Item 8-
Financial Statements and Supplementary Data.
ROBINSON, BRADSHAW & HINSON, P.A.
Charlotte, North Carolina
March 22, 1994
<PAGE>
FORM 10-K Page 276
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant had duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CONE MILLS CORPORATION
Date: March 23, 1994 By: /s/ J. Patrick Danahy
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/Dewey L. Trogdon Chairman of the March 23, 1994
(Dewey L. Trogdon) Board
/s/J. Patrick Danahy Director, President March 23, 1994
(J. Patrick Danahy) and Chief Executive
Officer (Principal
Executive Officer)
/s/John L. Bakane Director, March 23, 1994
(John L. Bakane) Vice President and
Chief Financial
Officer (Principal
Financial Officer)
/s/Doris R. Bray Director March 23, 1994
(Doris R. Bray)
/s/Leslie W. Gaulden Director March 23, 1994
(Leslie W. Gaulden)
<PAGE>
FORM 10-K Page 277
Signature Title Date
/s/Jeanette C. Kimmel Director March 23, 1994
(Jeanette C. Kimmel)
/s/Charles M. Reid Director March 23, 1994
(Charles M. Reid)
/s/John W. Rosenblum Director March 23, 1994
(John W. Rosenblum)
/s/Richard S. Vetack Director March 23, 1994
(Richard S. Vetack)
/s/Bud W. Willis III Director March 23, 1994
(Bud W. Willis III)
/s/J. D. Holder Controller March 23, 1994
(J. D. Holder) (Principal Accounting
Officer)
<PAGE>
March 23, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Cone Mills Corporation
Annual Report on Form 10-K
File No. 1-3634
Gentlemen:
On behalf of Cone Mills Corporation (the "Corporation")
and pursuant to requirements of the Commission's Regulation
S-T, I am hereby transmitting by EDGAR the Annual Report on
Form 10-K of the Corporation for the fiscal year ended
January 2, 1994 (the "Form 10-K").
The filing fee of $250.00 has been remitted to the U.S.
Treasury designated lockbox depository at the Mellon Bank in
Pittsburgh, Pennsylvania, by wire transfer, as provided in
Rule 202.3a of the Commission's Rules of Practice.
Please be advised that the financial statements in the
Annual Report do not reflect any change from the preceding
year in any accounting principles or practices or in the
method of applying such principles or practices.
A conforming paper copy of the Form 10-K will be sent
by mail to the Commission, pursuant to Rule 901(d) of
Regulation S-T.
Very truly yours,
CONE MILLS CORPORATION
J. D. Holder
Controller
JDH/bt
<PAGE>
